Henry Schein 2013 Annual Report Download - page 54

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As a component of total selling, general and administrative expenses, selling expenses increased $70.4 million,
or 5.9%, for the year ended December 28, 2013 from the comparable prior year period. As a percentage of net
sales, selling expenses decreased to 13.3% from 13.5% for the comparable prior year period.
As a component of total selling, general and administrative expenses, general and administrative expenses
increased $35.2 million, or 5.2%, for the year ended December 28, 2013 from the comparable prior year period. As
a percentage of net sales, general and administrative expenses decreased to 7.4% from 7.5% for the comparable
prior year period.
Other Expense, Net
Other expense, net for the years ended 2013 and 2012 was as follows (in thousands):
Variance
2013 2012 $ %
Interest income .................................................................... $ 12,853 $ 13,394 $ (541) (4.0)%
Interest expense ................................................................... (27,538) (30,902) 3,364 10.9
Other, net ............................................................................. 2,325 2,735 (410) (15.0)
Other expense, net ....................................................... $ (12,360) $ (14,773) $ 2,413 16.3
Other expense, net decreased $2.4 million to $12.4 million for the year ended December 28, 2013 from the
comparable prior year period. Interest income decreased $0.5 million primarily due to lower investment income.
Interest expense decreased $3.4 million primarily due to a reduction in borrowings under our Henry Schein Animal
Health (“HSAH”) debt, partially offset by an increase in borrowings under our private placement facilities and
increased borrowings based on the securitization of our U.S. trade accounts receivable. Other, net decreased by
$0.4 million due primarily to the impact of foreign currency exchange.
Income Taxes
For the year ended December 28, 2013, our effective tax rate was 28.7% compared to 31.1% for the prior year
period. During the third quarter of 2013, we concluded that it is more likely than not that certain deferred tax assets
related to tax loss carryforwards originating outside the United States, which had been previously reserved, will be
realized. As a result, our provision for income taxes includes a $13.4 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.
Absent the effects of the reduction of this valuation allowance in the third quarter of 2013, our effective tax rate
for the year ended December 28, 2013 would have been 30.7% as compared to our actual effective tax rate of
28.7%. The remaining difference between our effective tax rates and the federal statutory tax rates for both periods
primarily relates to state and foreign income taxes and interest expense. For 2014, we expect our effective tax rate
to be in the range of 30%.
Loss on Sale of Equity Investment
On July 10, 2013, we divested our investment in a dental wholesale distributor in the Middle East that had
primarily served as an importer that distributed products largely to other distributors. The divestiture resulted in a
one-time loss of $12.5 million, or $0.14 per diluted share, in the third quarter of 2013. Pursuant to the terms of this
divestiture, we made cash payments to this distributor in the aggregate amount of $13.4 million, which it was
required to use to reduce its debt, pay certain trade payables and provide working capital. The investment in this
distributor had been fully impaired as of the end of 2012. There is no tax benefit related to the loss on this
divestiture.
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Net Income
Net income increased $48.1 million, or 11.4%, for the year ended December 28, 2013, compared to the prior
year period due to the factors noted above.