Henry Schein 2003 Annual Report Download - page 43

HENRY SCHEIN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(In thousands, except share and per share data)
Note 1–Significant Accounting Policies (Continued)
Under the accounting provisions of FAS 123, our net income and net income per common share would have been adjusted to the pro
forma amounts indicated in the table below. The following assumptions were used in determining the fair values: weighted-average risk-
free interest rates of 3.0%, 4.0% and 4.7% for the years ended December 27, 2003, December 28, 2002 and December 29, 2001, stock
price volatility of 45.0%, dividend yield of 0.0% and weighted-average expected option life of five years for each of the three years ended
December 27, 2003.
Years ended
December 27, December 28, December 29,
2003 2002 2001
Net income as reported $137,510 $117,987 $87,373
Deduct: Total tax affected stock-based compensation
expense determined under fair value method (7,413) (5,725) (5,782)
Pro forma net income $130,097 $112,262 $81,591
Net income per common share, as reported:
Basic $ 3.15 $ 2.71 $ 2.06
Diluted $ 3.06 $ 2.63 $ 2.01
Net income per common share, pro forma:
Basic $ 2.98 $ 2.58 $ 1.93
Diluted $ 2.89 $ 2.50 $ 1.87
Earnings Per Share
Basic earnings per share is computed by dividing net income by the weighted-average number of common shares outstanding for the
period. Diluted earnings per common share is computed similarly to basic, except it reflects, in periods in which they have a dilutive
effect, the effect of common shares issuable upon exercise of stock options using the treasury stock method.
Comprehensive Income
Comprehensive income includes certain gains and losses that, under generally accepted accounting principles, are excluded from net
income as these amounts are recorded directly as an adjustment to stockholders’ equity. Our comprehensive income is primarily
comprised of net income and foreign currency translation adjustments, but also includes unrealized gains (losses) on hedging activity and
marketable securities and a pension adjustment loss in 2003.
New Accounting Pronouncements
In December 2003, the FASB issued a revision to FAS No. 132, "Employers’ Disclosures about Pensions and Other Postretirement
Benefits." This statement does not change the measurement or recognition aspects for pensions and other postretirement benefit plans;
however, it does revise employers’ disclosures to include more information about the plan assets, obligations to pay benefits and funding
obligations. FAS 132, as revised, was effective for our 2003 consolidated financial statements. The adoption of FAS 132 did not have a
material effect on our consolidated financial statements.
In May 2003, the FASB issued FAS No. 150, "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and
Equity." FAS No. 150 clarifies the definition of a liability as currently defined in FASB Concepts Statement No. 6, "Elements of Financial
Statements," as well as other planned revisions. This statement requires a financial instrument that embodies an obligation of an issuer
to be classified as a liability. In addition, the statement establishes standards for the initial and subsequent measurement of these financial
instruments and disclosure requirements. FAS 150 was effective for financial instruments entered into or modified after May 31, 2003. For
all instruments entered into or last modified prior to May 31, 2003, FAS 150 was effective at the beginning of our third quarter of 2003.
The adoption of FAS 150 did not have a material effect on our financial position or results of operations.
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