Sally Beauty Supply 2011 Annual Report Download - page 60

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intercompany balances not permanently invested. At September 30, 2011, we held a foreign currency
forward which enabled us to sell approximately A19.9 million ($26.7 million, at the September 30, 2011
exchange rate) at the contractual exchange rate of 1.3610, a foreign currency forward which enabled us to
buy approximately $18.3 million Canadian dollars ($17.5 million, at the September 30, 2011 exchange rate)
at the contractual exchange rate of 1.01855, and a foreign currency forward which enabled us to buy
approximately £5.6 million ($8.7 million, at the September 30, 2011 exchange rate) at the contractual
exchange rate of 1.5630. All the foreign currency forwards held by the Company at September 30, 2011
expired in October 2011.
The Company’s foreign currency option, collar and forward agreements are not designated as hedges and
do not currently meet the requirements for hedge accounting. Accordingly, the changes in the fair value
(i.e., marked-to-market adjustments) of these derivative instruments (which are adjusted quarterly) are
recorded in selling, general and administrative expenses in our consolidated statements of earnings. During
the fiscal year ended September 30, 2011, selling general and administrative expenses included $0.2 million
in net gains from all of the Company’s foreign currency option, collar and forward agreements. Please see
‘‘Item 7A—Quantitative and Qualitative Disclosures about Market Risk—Foreign currency exchange rate
risk’’ and Note 16 of the ‘‘Notes to Consolidated Financial Statements’’ in Item 8—‘‘Financial Statements
and Supplementary Data’’ contained elsewhere in this Annual Report.
Share-Based Compensation Plans
For the fiscal years 2011, 2010 and 2009, total share-based compensation cost charged against earnings was
$15.6 million, $12.8 million and $8.6 million, respectively, and resulted in an increase in additional paid-in
capital by the same amounts. Share-based compensation for the fiscal years 2011, 2010 and 2009 included
$5.0 million, $2.5 million and $2.0 million, respectively, of accelerated expense related to certain
retirement eligible employees who are eligible to continue vesting awards upon retirement under the terms
of the Sally Beauty Holdings, Inc. 2010 Omnibus Incentive Plan (the ‘‘2010 Plan’’) and certain predecessor
plans, such as the Sally Beauty Holdings 2007 Omnibus Incentive Plan. For the fiscal years 2011, 2010 and
2009, the total income tax benefit recognized in the consolidated statements of earnings from all
share-based compensation plans in which our employees participate or participated was $6.0 million,
$5.0 million and $3.0 million, respectively, and resulted in the recognition of deferred tax assets by the
same amount. Our consolidated statements of cash flows reflect, for the fiscal years 2011 and 2010, excess
tax benefits of $3.7 million and $0.2 million, respectively, and, for the fiscal year 2009, an excess tax
shortfall of $0.2 million, from employee exercises of stock options as financing cash flows. As of
September 30, 2011, we had $11.3 million of unrecognized compensation expense related to non-vested
stock option awards that is expected to be charged to expense over the weighted average period of
2.6 years, and $2.3 million of unrecognized compensation expense related to non-vested restricted stock
awards that is expected to be charged to expense over the weighted average period of 3.1 years.
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