No. 02-16, ‘‘Accounting for Consideration Received from a Vendor by a Customer (Including a Reseller of the Vendor’s Products).’’ In April 2003, the FASB issued SFAS No. 149, ‘‘Amendment of Statement 133 on Derivative Instruments and Hedging Activities.’’ In May 2003, the FASB issued SFAS No. 150, ‘‘Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity.’’ A discussion of these new standards is included in Note 1 to the Consolidated Financial Statements. The Company has not yet determined the impact of these accounting standards on its financial position and results of operations. Results of operations Fiscal Year Ended March 31 (Dollars in Thousands) 2003 2002 2001 Consolidated Net Sales $1,171,631 100.0% $1,294,322 100.0% $1,431,838 100.0% Cost of goods sold 1,022,378 87.3% 1,123,839 86.8% 1,253,631 87.6% Gross Margin 149,253 12.7% 170,483 13.2% 178,207 12.4% Warehouse, selling and administrative expenses 135,899 11.6% 154,682 12.0% 163,182 11.4% Restructuring charges 20,697 1.8% 473 — — — Write-down of IT system assets — — — — 14,200 1.0% Operating Income $ (7,343) (0.6%) $ 15,328 1.2% $ 825 0.1% Fiscal 2003 consolidated net sales decreased approximately $122.7 million or 9.5% from consolidated net sales in 2002 as a result of depressed corporate capital spending, as well as the decision to discontinue certain products and customer relationships that did not fit the Company’s long-term strategic plan. Overall sales were impacted by customers taking advantage of price reductions and promotions offered by manufacturers, as well as taking longer to evaluate purchasing decisions and deferring additional capital investments because of the uncertain economy. Fiscal 2002 consolidated net sales decreased 9.6% from 2001 primarily due to the weak U.S. economy, manifested by a slowdown in information technology spending. Management expects sales to grow slightly in Fiscal 2004 and expects the continuing business to be less cyclical, although more seasonal than the business mix prior to the divestiture of the Company’s electronic components business. Consolidated gross margin, as a percent of sales, decreased to 12.7% for Fiscal 2003 from 13.2% in Fiscal 2002 due to pricing pressures, product and customer mix and lower supplier sales incentives. Consolidated gross margin increased to 13.2% in 2002 from 12.4% in 2001, as a result of improved product mix, coupled with a slight increase in supplier sales incentives. Management anticipates that gross margin will be comparable in Fiscal 2004. Warehouse, selling and administrative expenses decreased $18.8 million, or 12.1%, in Fiscal 2003 from $154.7 million in Fiscal 2002. The decrease resulted primarily from the elimination of goodwill amortization under SFAS No. 142 combined with lower bad debt expense in the current year. In addition, the effects of the restructurings announced in the fourth quarters of Fiscal 2003 and Fiscal 2002 and the initiatives to reduce discretionary spending contributed to the decline in operating expenses. In Fiscal 2002, warehouse, selling and administrative expenses decreased $8.5 million, or 5.2%, from $163.2 million in Fiscal 2001. The decrease in operating expenses can primarily be attributed to expense reduction initiatives implemented in the fourth quarter of Fiscal 2001 and in the third quarter of Fiscal 2002 in order to improve operating margins in the difficult sales environment. In addition, lower compensation and benefits due to personnel reductions and lower incentives associated with current financial performance contrib- uted to this decline. The overall decrease in operating expenses was slightly offset by an increase in bad debt expense needed due to two customer bankruptcies that occurred in Fiscal 2002. In the fourth quarter of Fiscal 2003, resulting from the sale of the Industrial Electronics Division, the Company announced that it would restructure its remaining business and facilities to reduce overhead and eliminate assets Restructuring and impairment charges Operating expenses Gross margin 12 Net sales