Sally Beauty Supply 2006 Annual Report Download - page 51

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Table of Contents
The amount due from Alberto-Culver was $0.5 million at September 30, 2006 compared to an amount due from Alberto-Culver of
$11.3 million at September 30, 2005. This change was primarily a result of the transaction expenses paid by Alberto-Culver and
allocated to us in connection with the terminated spin/merge transaction with Regis and the transaction separating us from Alberto-
Culver.
Accounts payable increased by $25.5 million to $176.6 million at September 30, 2006 from $151.1 million at September 30, 2005 due
to the timing of payments and outstanding payables resulting from increased inventory levels.
Accrued expenses increased by $10.1 million to $114.1 million at September 30, 2006 compared to $104.0 at September 30, 2005.
This increase was a result of the classification from long-term liabilities of certain deferred compensation that will be paid as a result
of the transaction separating us from Alberto-Culver, rent related accruals, and the Salon Success acquisition. Other liabilities at
September 30, 2006 were $12.0 million compared to $21.3 million at September 30, 2005, representing a decrease of $9.3 million.
The decrease was mainly due to an escrow payment by BSG to the former owners of West Coast.
Stock options subject to redemption of $7.5 million as of September 30, 2006 represent the intrinsic value as of November 5, 2003 of
currently outstanding Alberto-Culver stock options held by our employees which were modified on that date as a result of Alberto-
Culver’ s conversion to one class of common stock. This amount was reclassified from additional paid-in capital because Alberto-
Culver’ s stock option plans, through which certain of our employees have been granted stock options, contain a contingent cash
settlement provision upon the occurrence of certain change in control events which are not solely in our control. While we believe the
possibility of occurrence of any such change in control event is remote, the reclassification was required because neither we nor
Alberto-Culver has sole control over such events. Our separation from Alberto-Culver, which was treated as a change in control for
other employee related agreements, does not constitute a change in control under the provisions of the stock option agreements.
Additional paid-in capital decreased $1.7 million to $62.2 million at September 30, 2006 compared to September 30, 2005, primarily
due to the reclassification to stock options subject to redemption discussed in the preceding paragraph, partially offset by paid-in
capital recorded for stock option expense.
Accumulated other comprehensive income—foreign currency translation increased $2.9 million to $16.3 million at September 30,
2006 compared to $13.4 million at September 30, 2005. The increase was primarily due to the weakening of the U.S. dollar versus
certain foreign currencies, primarily the British pound and Canadian dollar.
September 30, 2005 Versus September 30, 2004
Working capital (current assets less current liabilities) at September 30, 2005 was $382.5 million, an increase of $4.8 million
compared to working capital of $377.7 million at September 30, 2004. The resulting ratio of current assets to current liabilities was
2.42 to 1.00 at September 30, 2005 compared to 2.52 to 1.00 at September 30, 2004. The increase in working capital at September 30,
2005 was primarily related to working capital generated from operations, partially offset by cash outlays for acquisitions and capital
expenditures.
Cash, cash equivalents and short-term investments at September 30, 2005 were $38.6 million, compared to $68.0 million at
September 30, 2004. Cash, cash equivalents and short-term investments decreased $29.4 million during fiscal year 2005 primarily due
to cash outlays of $96.9 million for acquisitions and $52.2 million for capital expenditures, partially offset by cash inflows from
operating activities of $115.5 million.
Other receivables were $19.3 million at September 30, 2005, an increase of $5.4 million compared to September 30, 2004. This
increase was primarily due to the growth and timing of collections related to vendor advertising and volume purchase programs and
receivables for insurance proceeds associated with hurricanes Katrina and Rita.
Inventories were $525.1 million at September 30, 2005, an increase of $41.6 million compared to September 30, 2004. This increase
was primarily due to the acquisition of CosmoProf, inventories related to new stores and strategic inventory purchases related to
favorable pricing from vendors.
Notes receivable from affiliated companies were $15.2 million at September 30, 2005, a decrease of $7.6 million compared to
$22.8 million at September 30, 2004. Notes payable to affiliated companies, including current
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