Henry Schein 2009 Annual Report Download - page 53

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41
Our cash and cash equivalents consist of bank balances and investments in money market funds
representing overnight investments with a high degree of liquidity.
As of December 26, 2009, we have approximately $21.1 million ($18.9 million net of temporary
impairments) invested in auction-rate securities (“ARS”). ARS are publicly issued securities that represent
long-term investments, typically 10-30 years, in which interest rates had reset periodically (typically every 7,
28 or 35 days) through a “dutch auction” process. Approximately $18.7 million ($16.5 million net of
temporary impairments) of our ARS are backed by student loans that are backed by the federal government
and the remaining $2.4 million are invested in closed-end municipal bond funds. Our ARS portfolio is
comprised of investments that are rated AAA by major independent rating agencies. Since the middle of
February 2008, these auctions have failed to settle due to an excess number of sellers compared to buyers.
The failure of these auctions has resulted in our inability to liquidate our ARS in the near term. We are
currently not aware of any defaults or financial conditions that would negatively affect the issuers’ ability to
continue to pay interest and principal on our ARS. We continue to earn and receive interest at contractually
agreed upon rates. We believe that the current lack of liquidity related to our ARS investments will have no
impact on our ability to fund our ongoing operations and growth opportunities. As of December 26, 2009, we
have classified ARS holdings as long-term, available-for-sale and they are included in the Investments and
other line within our consolidated balance sheets.
Our business requires a substantial investment in working capital, which is susceptible to fluctuations
during the year as a result of inventory purchase patterns and seasonal demands. Inventory purchase activity
is a function of sales activity, special inventory forward buy-in opportunities and our desired level of
inventory. We anticipate future increases in our working capital requirements.
Our accounts receivable days sales outstanding from continuing operations decreased to 40.4 days as of
December 26, 2009 from 41.4 days as of December 27, 2008. During the years ended December 26, 2009
and December 27, 2008, we wrote off approximately $6.1 million and $6.5 million, respectively, of fully
reserved accounts receivable against our trade receivable reserve. Our inventory turns from continuing
operations decreased to 6.2 for the year ended December 26, 2009 from 6.5 for the year ended December 27,
2008. Our working capital accounts may be impacted by current and future economic conditions.
The following table summarizes our contractual obligations related to fixed and variable rate long-term
debt, including interest (assuming an average long-term rate of interest of 3.2%), as well as operating and
capital lease obligations, capital expenditure obligations and inventory purchase commitments as of
December 26, 2009:
Payments due by period (in thousands)
< 1 year 1 - 3 years 4 - 5 years > 5 years Total
Contractual obligations:
Long-term debt, including interest ......................... 29,402$ 15,920$ 17,106$ 384,000$ 446,428$
Inventory purchase commitments ........................... 162,505 273,282 78,634 145,479 659,900
Operating lease obligations .................................... 59,611 77,453 33,259 41,355 211,678
Capital lease obligations, including interest ........... 2,320 2,683 1,115 - 6,118
Total ....................................................................... 253,838$ 369,338$ 130,114$ 570,834$ 1,324,124$
Inventory purchase commitments include obligations to purchase influenza vaccine from a manufacturer
through 2012, which require us to pay an amount per dose based on the prevailing market price or formula
price in each respective year. The amounts included in the above table related to these purchase commitments
were determined using current market conditions. We also have obligations to purchase influenza vaccine
from another manufacturer. Actual amounts may differ.