Sally Beauty Supply 2006 Annual Report Download - page 50

Download and view the complete annual report

Please find page 50 of the 2006 Sally Beauty Supply annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 135

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135

Table of Contents
primarily due to higher outstanding balances of notes payable to affiliated companies during fiscal year 2004. These expenses were
partially offset by interest income of $1.2 million for each of the years ended September 30, 2004 and 2003.
Provision for Income Taxes
Provision for income taxes was $62.1 million during the year ended September 30, 2004 compared to $62.2 million for the same
period of 2003. The effective tax rate was 37.1% in fiscal 2004 and 36.7% in fiscal 2003. The increase in the effective tax rate was
primarily related to a change in the mix of earnings from foreign operations.
Net Earnings
As a result of the foregoing, consolidated net earnings decreased $2.2 million, or 2.0%, to $105.3 million for the year ended
September 30, 2004 compared to $107.5 million for the same period in 2003. Net earnings, as a percentage of net sales, were 5.0% for
the year ended September 30, 2004 compared to 5.9% for the year ended September 30, 2003. The non-cash charge from Alberto-
Culver’ s conversion to one class of common stock reduced net earnings by $17.6 million in fiscal year 2004. See “—Overview—
Other Significant Items—Alberto-Culver’ s Conversion to One Class of Common Stock”.
Financial Condition
September 30, 2006 Compared to September 30, 2005
Working capital (current assets less current liabilities) at September 30, 2006 was $479.1 million compared to $382.5 million at
September 30, 2005, representing an increase of $96.6 million. The resulting ratio of current assets to current liabilities was 2.65 to
1.00 at September 30, 2006 compared to 2.42 to 1.00 at September 30, 2005. The increase in working capital was primarily due to
working capital generated from operations, partially offset by capital expenditures, the net repayment of notes with affiliated
companies and the acquisition of Salon Success in June 2006.
Cash and cash equivalents at September 30, 2006 was $107.6 million compared to $38.6 million at September 30, 2005, representing
an increase of $69.0 million. The increase primarily resulted from cash generated by operations, partially offset by capital
expenditures, the net repayment of notes with affiliated companies and the acquisition of Salon Success in June 2006. Trade accounts
receivable increased $5.2 million to $45.5 million for the fiscal year 2006 primarily due to the acquisition of Salon Success and the
timing of collections from increased sales.
Inventories increased $49.9 million to $575.0 million at September 30, 2006 compared to $525.1 at September 30, 2005. The increase
was primarily due to an increase in the number of Sally Beauty Supply stores, the introduction of new lines for fragrances, hair color
and electrical products, as well as strategic inventory purchases related to favorable pricing from vendors, the acquisition of Salon
Success and the effects of changes in foreign exchange rates.
Net property and equipment was $142.7 million at September 30, 2006 compared to $149.4 million at September 30, 2005 resulting
in a decrease of $6.7 million. While approximately $22.0 million was invested in new stores and remodels, the decrease from
September 30, 2005 was primarily a result of declining overall capital expenditures with the conclusion of the construction of the new
corporate facility along with the customary depreciation and retirements, primarily in the stores.
Goodwill increased $11.2 million to $364.7 million at September 30, 2006 compared to $353.5 million at September 30, 2005. The
increase was due to the acquisition of Salon Success and the effects of changes in foreign exchange rates.
Intangible assets increased $4.9 million to $53.2 million at September 30, 2006 compared to $48.3 at September 30, 2005 as a result
of the acquisition of Salon Success.
Notes receivable from affiliated companies and notes payable to affiliated companies, which totaled $15.2 million and $31.8 million,
respectively, at September 30, 2005, were fully repaid during the first quarter of fiscal year 2006.
44