Henry Schein 2003 Annual Report Download - page 40

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HENRY SCHEIN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(In thousands, except share and per share data)
Note 1–Significant Accounting Policies (Continued)
Cash and Cash Equivalents
We consider all highly-liquid debt instruments and other short-term investments with an original maturity of three months or less to be cash
equivalents. Book overdrafts representing outstanding checks in excess of funds on deposit, which are primarily related to payments for
inventory, were classified as accounts payable. Such amounts were $0 and $27.0 million at December 27, 2003 and December 28, 2002.
Marketable Securities
Marketable securities are classified as available-for-sale and are recorded at fair value. The fair value of substantially all securities is
determined by quoted market prices. Unrealized gains and losses, net of related taxes, are included as a separate component of
stockholders’ equity.
Accounts Receivable and Reserves
The carrying amount of accounts receivable is reduced by a valuation allowance that reflects our best estimate of the amounts that will
not be collected. The reserve for accounts receivable is comprised of allowance for doubtful accounts and sales returns. In addition to
reviewing delinquent accounts receivable, we consider many factors in estimating our general allowance, including historical data,
experience, customer types, credit worthiness and economic trends. From time to time, we may adjust our assumptions for anticipated
changes in any of these or other factors expected to affect collectability.
Direct Shipping and Handling Costs
Freight and other direct shipping costs are included in cost of sales. Direct handling costs, which represent primarily direct compensation
costs of employees who pick, pack and otherwise prepare, if necessary, merchandise for shipment to our customers are reflected in
selling, general and administrative expenses. These costs were $25.7 million, $23.2 million and $21.2 million for each of the three years
ended December 27, 2003.
Advertising and Promotional Costs
We generally expense advertising and promotional costs as incurred. Total advertising and promotional expenses were $18.6 million,
$13.9 million and $14.3 million for each of the three years ended December 27, 2003.
Inventories
Inventories consist substantially of finished goods and are valued at the lower of cost or market. Cost is determined primarily by the first-
in, first-out ("FIFO") method.
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