Henry Schein 2009 Annual Report Download - page 96

HENRY SCHEIN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(In thousands, except share and per share data)
84
Note 10 – Income Taxes – (Continued)
The tax provisions attributable to continuing operations differ from the amount computed using the
federal statutory income tax rate as follows:
December 26,
2009
December 27,
2008 (1) (2)
December 29,
2007 (1)(2)
Income tax provision at federal statutory rate ............................. 158,452$ 138,407$ 132,479$
State income tax provision, net of federal income tax effect ...... 10,078 9,426 15,031
Foreign income tax benefit ......................................................... (16,743) (11,902) (6,503)
Valuation allowance .................................................................... (19,467) 3,090 (551)
Interest expense related to loans ................................................. (7,014) (7,254) (8,855)
Other ........................................................................................... 2,215 (557) (3,045)
Total income tax provision .................................................... 127,521$ 131,210$ 128,556$
Years ended
(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.”
For the year ended December 26, 2009, our effective tax rate from continuing operations was 28.2%
compared to 33.2% for the prior year period. The difference resulted primarily from the reduction of a
valuation allowance which is explained below, additional tax planning, settlements of tax audits and higher
income from lower taxing countries. In addition, the difference between our effective tax rate and the
federal statutory tax rate for both periods related primarily to foreign and state income taxes. Without the
effect of the reduction of the valuation allowance described below, our effective tax rate from continuing
operations for the year ended December 26, 2009 would have been 32.8%.
During the third quarter of 2009, we substantially completed a plan of reorganization outside the
United States that will allow us to utilize tax loss carryforwards to offset taxable income beginning in 2010
in certain foreign tax jurisdictions. As a result, we have determined that it is more likely than not that a
portion of deferred tax assets previously fully reserved will be realized. Therefore, the provision for
income taxes includes a $20.9 million reduction of the valuation allowance which is based on an estimate
of future taxable income available to be offset by the tax loss carryforwards.
Provision has not been made for U.S. or additional foreign taxes on undistributed earnings of foreign
subsidiaries, which have been, and will continue to be, reinvested. These earnings could become subject to
additional tax if they were remitted as dividends, if foreign earnings were loaned to us or a U.S. affiliate,
or if we should sell our stock in the foreign subsidiaries. It is not practicable to determine the amount of
additional tax, if any, that might be payable on such foreign earnings. As of December 26, 2009, the
cumulative amount of reinvested earnings was approximately $243.0 million.
In July 2006, the FASB issued guidance within ASC Topic 740, “Income Taxes,” which we adopted
effective December 31, 2006. ASC Topic 740 clarifies the accounting for uncertainty in income taxes
recognized in the financial statements in accordance with other provisions contained within this guidance.