Henry Schein 2009 Annual Report Download - page 51

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39
As a component of total selling, general and administrative expenses, general and administrative expenses
increased $25.5 million, or 5.9%, for the year ended December 27, 2008 from the prior year period. As a
percentage of net sales, general and administrative expenses decreased to 7.2% from 7.4% for the comparable
prior year period.
Other Expense, Net
Other expense, net for the years ended 2008 and 2007 was as follows (in thousands):
2008 (1) (2) 2007 (1) (2) $
Interest income ................................................. 16,355$ 16,531$ (176)$ (1.1) %
Interest expense ................................................ (34,605) (29,607) (4,998) (16.9)
Other, net ......................................................... (5,587) 4,646 (10,233) (220.3)
Other expense, net .................................... (23,837)$ (8,430)$ (15,407)$ (182.8)
Increase / (Decrease)
%
(1) Adjusted to reflect the effects of discontinued operations.
(2) Adjusted to reflect the effects of the adoption of provisions contained within ASC Topic 470-20, “Debt with
Conversion and Other Options.”
Other expense, net increased $15.4 million to $23.8 million for the year ended December 27, 2008 from
the comparable prior year period. As a component of Other expense, net, Interest income was substantially
unchanged from the prior year. Interest expense increased $5.0 million primarily due to forward points
related to foreign currency hedging transactions and the impact of the adoption of provisions contained within
ASC Topic 470-20, “Debt with Conversion and Other Options,” partially offset by lower interest rates on our
floating rate debt. The change in Other, net resulted from a reserve for losses of $3.7 million for foreign
exchange contracts for hedging intercompany loans with Lehman Brothers Special Financing, Inc., whose
parent, Lehman Brothers Holdings, Inc., filed for Chapter 11 bankruptcy on September 15, 2008. An
additional $0.8 million was attributable to a reserve for losses in our investment in the Reserve Primary Fund,
a money market fund that decreased its net asset value from $1.00 to $0.97 due to investments in Lehman
Brothers debt. The impact of fluctuations in foreign exchange rates also contributed to the increase in Other,
net. The prior period’s Other, net included a gain from the divestiture of certain non-core businesses related
to the acquisition of a dental supply company in 2007.
Income Taxes
For the year ended December 27, 2008, our effective tax rate from continuing operations was 33.2%
compared to 34.0% for the prior year period. The difference was impacted by additional tax planning
initiatives, settlements of tax audits and higher income from lower taxing countries. The difference between
our effective tax rate and the federal statutory tax rate for both periods related primarily to foreign and state
income taxes.
Loss from Discontinued Operations
During the years ended December 27, 2008 and December 29, 2007, respectively, we recognized
aggregate losses of $7.9 million and $20.7 million, net of tax, related to discontinued operations (see Note 7
in the accompanying annual consolidated financial statements for further discussion).
Net Income
Net income increased $32.2 million, or 14.0%, for the year ended December 27, 2008 compared to the
prior year period. The increase in net income is primarily due to an increase in income from continuing
operations. In 2007, net income included a gain on the sale of discontinued operations of $0.7 million, net of
taxes.