Henry Schein 2009 Annual Report Download - page 50

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38
Gross Profit
Gross profit and gross margins for 2008 and 2007 by segment and in total were as follows (in thousands):
2008 (1) 2007 (1) $
Healthcare distribution ................ 1,753,655$ 28.2 % 1,607,967$ 27.9 % 145,688$ 9.1 %
Technology .................................. 120,640 73.9 98,125 74.4 22,515 22.9
Total ................................... 1,874,295$ 29.4 1,706,092$ 29.0 168,203$ 9.9
Gross Gross Increase / (Decrease)
Margin % Margin % %
(1) Adjusted to reflect the effects of discontinued operations.
Gross profit increased $168.2 million, or 9.9%, for the year ended December 27, 2008 compared to the
prior year period. As a result of different practices of categorizing costs associated with distribution networks
throughout our industry, our gross margins may not necessarily be comparable to other distribution
companies. Additionally, we realize substantially higher gross margin percentages in our technology segment
than in our healthcare distribution segment. These higher gross margins result from being both the developer
and seller of software products, as well as certain financial services. For a number of reasons, the software
industry typically realizes higher gross margins to recover investments in research and development.
Healthcare distribution gross profit increased $145.7 million, or 9.1%, for the year ended December 27,
2008 compared to the prior year period. Healthcare distribution gross profit margin increased to 28.2% for
the year ended December 27, 2008 from 27.9% for the comparable prior year period.
Technology gross profit increased $22.5 million, or 22.9%, for the year ended December 27, 2008
compared to the prior year period. Technology gross profit margin decreased to 73.9% for the year ended
December 27, 2008 from 74.4% for the comparable prior year period, primarily due to changes in the product
sales mix.
Selling, General and Administrative
Selling, general and administrative expenses by segment and in total for 2008 and 2007 were as follows
(in thousands):
2008 (1) 2007 (1) $
Healthcare distribution .............. 1,368,108$ 22.0 % 1,268,030$ 22.0 % 100,078$ 7.9 %
Technology ............................... 63,661 39.0 51,123 38.8 12,538 24.5
Total ................................. 1,431,769$ 22.4 1,319,153$ 22.4 112,616$ 8.5
Net Sales Net Sales %
% of % of
Respective Respective Increase / (Decrease)
(1) Adjusted to reflect the effects of discontinued operations.
Selling, general and administrative expenses increased by $112.6 million, or 8.5%, for the year ended
December 27, 2008 compared to the prior year period. As a percentage of net sales, selling, general and
administrative expenses remained constant at 22.4% compared with the comparable prior year period.
As a component of total selling, general and administrative expenses, selling expenses increased $87.1
million, or 9.8%, for the year ended December 27, 2008 from the prior year period. This increase was
primarily due to payroll, as well as other expenses related to recent acquisitions. As a percentage of net sales,
selling expenses increased to 15.2% from 15.0% for the comparable prior year period.