Sally Beauty Supply 2006 Annual Report Download - page 16

Table of Contents
between us and our suppliers through, among other things, the development of new or expanded supplier relationships.
On December 19, 2006, we announced that (1) BSG, other than its Armstrong-McCall division, will not retain its rights to distribute
the professional products of L’ Oreal through its distributor sales consultants (effective January 30, 2007, with exclusivity ending
December 31, 2006) or in its stores on an exclusive basis (effective January 1, 2007) in those geographic areas within the U.S. in
which BSG currently has distribution rights, and (2) BSG’ s Armstrong McCall division will not retain the rights to distribute Redken
professional products through distributor sales consultants or its stores. In replacement of these rights, BSG entered into long-term
agreements with L’ Oreal under which, as of January 1, 2007, BSG will have non-exclusive rights to distribute the same L’ Oreal
professional products in its stores that it previously had exclusive rights to in its stores and through its sales consultants. Armstrong
McCall will retain its exclusive rights to distribute Matrix professional products in its territories.
Distribution
As of September 30, 2006, we operated 22 distribution centers, 6 of which serviced Sally Beauty Supply and 16 of which serviced
BSG. Our purchasing and distribution system is designed to minimize the delivered cost of merchandise and maximize the level of
merchandise in-stock in stores. This distribution system also allows for monitoring of delivery times and maintenance of appropriate
inventory levels. Product deliveries are typically made to our stores on a weekly basis. Each distribution center has a quality control
department that monitors products received from suppliers. We utilize proprietary software systems to provide computerized
warehouse locator and inventory support.
Management Information Systems
Our management information systems provide order processing, accounting and management information for the marketing,
distribution and store operations functions of our business. Most of these systems have been developed internally. The information
gathered by the management information systems supports automatic replenishment of in-store inventory and provides support for
product purchase decisions.
Employees
In our domestic and foreign operations, we had approximately 15,800 full-time equivalent employees as of September 30, 2006
consisting of approximately 10,500 hourly personnel and 5,300 salaried employees. At September 30, 2005, we had approximately
15,000 full-time equivalent employees.
Certain subsidiaries in Mexico have collective bargaining agreements, covering warehouse and store personnel, which expire at
various times over the next several years. We believe we have good relationships with our employees.
Management
For information concerning our directors and executive officers, see “Directors and Executive Officers of the Registrant” in Item 10
of this report.
Regulation
We are subject to a wide variety of laws and regulations, which historically have not had a material effect on our business. For
example, in the United States, most of the products sold and the content and methods of advertising and marketing utilized are
regulated by a host of federal agencies, including, in each case, one of more of the following: the Food and Drug Administration, the
Federal Trade Commission and the Consumer Products Safety Commission. The transportation and disposal of many of our products
are also subject to federal regulation. State
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