It documents our industry’s most miserable year in memory.

You don’t need a weatherman to tell you it’s raining outside, and by the same token you don’t need statistics to know that 2009 was this industry’s most miserable year anyone can remember. Empty warehouse shelves and office cubicles provide plenty of anecdotal evidence. Nonetheless, the American Supply Association’s recently released 2010 Operating Performance Report (OPR) sheds light on details of the devastation.

Cumulatively, the 172 ASA members participating in the exhaustive survey reported a median sales decline of -17.2% during 2009. That followed a -2.2% drop the previous year and a flat 2007, when OPR-responding distributors reported 0.0% sales performance compared with the previous year. Prior to this prolonged slump, you had to go all the way back to 1991 to find a year when the industry did not realize a sales gain. That long ago decline (-3.5%) was barely a fifth the size of last year’s unprecedented free fall.

Net sales per employee dropped last year to $363,000 from $406,000 in 2008, which computes to a smaller -10.5% decrease, bespeaking large numbers of people let go by PHCP distributors. When adjusted for inflation based on 1982 dollars, the number computes to $186,000, down from $210,000 the prior year and the lowest tally since 2001’s $181,000 per employee.

As for profitability, the latest OPR paints an equally bleak picture. Pre-tax net profit on sales for all reporting members came in at a pitiful 1.1% last year. OPR tracks profitability with two other key metrics: after tax return on net worth, which came in last year at 2.3%, and after tax return on assets, 1.1% in 2009. Both stats were no more than half the previous lowest gains realized over the last 20 years.

Another eye-opener was the figure for operating expenses. Total operating expenses as a percent of sales came in at 26.2% last year for reporting members as a whole. That was up from 23.9% in 2008 and almost two percentage points higher than the previous 20-year high of 24.3% recorded in a sluggish 2002. Payroll and fringe benefits as a percent of sales last year rose to a 20-year high of 16.4%. These figures show that despite widespread cost cutting and layoffs, PHCP distributors couldn’t completely overcome the impact of sales falling off a cliff.

Surprisingly, gross margins held up pretty well last year. At 24.4%, the median margin percentage dropped .5% from 2008 but was generally in line with or even higher than most of the preceding 15 years. Commodity inflation may have had something to do with that. Another possible explanation is that with residential and commercial bid markets all but dried up, distributors derived a higher proportion of business from less price-sensitive markets.

It’s common knowledge that PHCP distributors pared inventory drastically last year, and the data reflects that. Cost of warehouse goods sold to average inventory dropped last year from 3.7 to 3.3, the lowest level in the last 20 years. Warehouse gross margin return on inventory dropped precipitously from 131% in 2008 all the way to a minuscule 103% in 2009 - compared with a previous 20-year low of 119% back in 1991.

Total debt to net worth for PHCP distributors shows a steady decline to 20-year lows in each of the last three years: 92.4% in 2007, 78.2% in 2008, all the way down to 73.5% in 2009. Although low debt in some business contexts is desirable, this data mostly reflects steep declines in inventory purchases and capital spending for expansion.

Average days receivable rose to 47 from an all-time low of 43 days in 2008, but that was in line with the otherwise steady average of 46-49 days reported throughout the last 20 years. A more troubling signal is that invoices over 90 days jumped from the previous 20-year high of 13.3% in 2008 to 15.0% last year.

ASA’s OPR spans more than 100 pages and includes detailed breakdowns of performance metrics for plumbing, PVF, HVAC and hybrid plumbing/PVF distributors.  (See “PVF Beat” on page 8 for a summary of PVF distributor performance extracted from the 2010 OPR.)

The 2010 OPR includes data aggregation by number of branches for the first time. Several other new ratios have been added to the study in recent years, including data on employee training costs and customer returns.

ASA’s Operating Performance Report can be purchased from the association at You’ll find details under the “Benchmarking” pull-down menu.