CompUSA 2014 Annual Report Download - page 25

On June 12, 2014, the Company acquired SCC Services B.V. (“SCC”) (renamed Misco Solutions B.V.), a supplier of business-to-
business IT
products and services with operations in the Netherlands. The purchase price (after giving effect to the conversion of Euros to U.S. dollars)
was approximately $7.3 million in cash (5.4 million Euro), $0.6 million (0.4 million Euro) of which was placed into an escrow account for one
year to secure the sellers
’ indemnification obligations under the purchase agreement. This acquisition expands the Company’
s business in the
Netherlands.
In 2013, the Company opened a shared services center in Budapest, Hungary to facilitate the continued growth of its European Technology
Products business. This new facility provides administrative and back office services for the existing European business, will help drive
operational efficiencies and better serve the Company’s pan-
European operating strategy, and will serve as the sales location for future business
in Eastern Europe. As an incentive to locate in Hungary, the Hungarian Investment and Trade Agency (“HITA”)
agreed to reimburse the
Company for approximately 8% of payroll costs, up to a maximum of approximately $3.1 million, for the first 505 employees hired at the shared
service center. The reimbursement is limited to the first twenty four months of employment for employees hired by December 2015 with all such
reimbursements being completed by December 2017. In return for this incentive, the Company has committed to maintaining certain
employment levels through 2020. Failure by the Company to maintain these employment levels will result in pro rata repayment of related
reimbursements with interest.
In the fourth quarter of 2013, certain subsidiaries of the Company sold CompUSA intellectual property assets (primarily domain names,
trademarks and certain historical customer information) and accordingly the Company discontinued using the CompUSA brand in Puerto Rico.
The Company wrote off approximately $2.9 million, pre-tax, related to the intangible assets of the CompUSA brand in Puerto Rico.
In the fourth quarter of 2012, the Company conducted an evaluation, in 2012, of its Technology Products multi-
brand United States consumer
strategy and the intangible assets used in that strategy and concluded that the Company’
s future North American consumer business would be
optimized by consolidating its United States consumer operations under TigerDirect, its leading and largest brand. This consolidation resulted in
a write off of the intangible assets and goodwill of CompUSA and Circuit City of approximately $35.3 million.
In the fourth quarter of 2012, the Company exited the PC manufacturing operations after conducting an evaluation of its operations and
concluded that the Company’
s North American technology results would be enhanced by exiting the computer manufacturing business. The exit
resulted in a write down of the carrying cost of the Company’
s computer manufacturing facilities, related equipment and inventory of
approximately $4.6 million. An additional asset write down of the Company’s computer manufacturing facilities of approximately
$1.2 million
was made during 2013. The computer manufacturing facility was sold in the second quarter of 2014.
Industrial Products
Our Industrial Products segment sells a wide array of MRO products which are marketed in North and Central America. Most of these products
are manufactured by other companies; however, the Company does offer a selection of products that are manufactured for our own design and
marketed under the trademarks Global™ , GlobalIndustrial.com™ and Nexel™. Industrial products accounted for 16%, 14% and
11% of our
net sales in 2014, 2013 and 2012, respectively. In both of these product groups, we offer our customers a broad selection of products, prompt
order fulfillment and extensive customer service.
On January 30, 2015, the Company announced that its Industrial Products Group had completed its previously announced acquisition of the
Plant Equipment Group, a business-to-business direct marketer of maintenance, repair and operations (“MRO”)
products, from TAKKT America
for $25.9 million in cash; post-
closing working capital adjustments were de minimis. Integration of this acquired business is in process and
proceeding timely and efficiently. This acquisition expands the Company’s regional footprint and its market share.
Discontinued Operations
We exited the Software Solutions segment in June 2009. One customer remained being serviced by the Company until the second quarter of
2012. The termination of this customer has resulted in all current and prior period results for this business segment to be classified as
discontinued operations. See Note 12 to the Consolidated Financial Statements included in Item 15 of this Form 10-
K for additional financial
information about our business segments as well as information about our geographic operations.
Operating Conditions
The market for computer products and consumer electronics is subject to intense price competition and is characterized by narrow gross profit
margins. The North American industrial products market is highly fragmented and we compete against multiple distribution channels.
Distribution is working capital intensive, requiring us to incur significant costs associated with the warehousing of many products, including the
costs of maintaining inventory, leasing warehouse space, inventory management systems, and employing personnel to perform the associated
tasks. We supplement our on-
hand product availability by maintaining relationships with major distributors and manufacturers, utilizing a
combination of stock and drop-shipment fulfillment.
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