Sally Beauty Supply 2006 Annual Report Download - page 52

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Table of Contents
maturities, were $31.8 million at September 30, 2005, a decrease of $6.5 million compared to $38.3 million at September 30, 2004.
All notes receivable from affiliated companies and notes payable to affiliated companies were fully repaid in the first quarter of fiscal
year 2006.
Net property and equipment was $149.4 million at September 30, 2005, an increase of $23.5 million compared to September 30,
2004. The increase resulted primarily from capital expenditures for additional Sally Beauty Supply and BSG stores and the
remodeling of existing stores, a new corporate support facility, warehouse expansions, fixed assets of acquired companies and
additional leasehold improvements resulting from the lease accounting adjustment described in “—Overview—Other Significant
Items—Lease Accounting.” These increases were partially offset by depreciation and asset retirements during the year ended
September 30, 2005.
Goodwill was $353.5 million at September 30, 2005, an increase of $48.7 million compared to September 30, 2004. This increase
was primarily due to the acquisition of CosmoProf, partially offset by a reduction in goodwill related to the finalization of the
valuation of certain intangibles related to the acquisition of West Coast.
Net intangible assets were $48.3 million at September 30, 2005, an increase of $30.8 million compared to September 30, 2004. This
increase was primarily due to the acquisition of CosmoProf and the recording of trade names and other intangible assets upon the
finalization of the purchase price allocation related to the acquisition of West Coast.
Deferred income tax liabilities (net of deferred income tax assets) were $8.4 million at September 30, 2005, an increase of
$8.3 million compared to September 30, 2004. This increase was mainly due to the timing of tax deductions related to depreciation
and inventory.
Accumulated other comprehensive income—foreign currency translation was $13.4 million at September 30, 2005, an increase of
$4.2 million compared to September 30, 2004. The increase was primarily attributable to the weakening of the U.S. dollar versus
certain foreign currencies, primarily the Canadian dollar and the Mexican peso.
Liquidity and Capital Resources
We broadly define liquidity as our ability to generate sufficient cash flow from operating activities to meet our obligations and
commitments. In addition, liquidity includes the ability to obtain appropriate debt and equity financing and to convert into cash those
assets that are no longer required to meet existing strategic and financial objectives. Therefore, liquidity cannot be considered
separately from capital resources that consist of current or potentially available funds for use in achieving long-range business
objectives and meeting debt service commitments.
Our primary source of cash over the past three years has been from funds provided by operating activities. The primary uses of cash
during the past three years were for acquisitions and capital expenditures. The following table shows our sources and uses of funds for
the fiscal years ended September 30, 2006, 2005 and 2004 (in thousands):
Year Ended September 30, 2006
2006 2005 2004
Cash provided by operating activities $ 156,721 $ 115,455 $ 159,228
Cash used by investing activities (52,158 ) (126,045 ) (139,919 )
Cash provided (used) by financing activities (32,205 ) 3,737 (34,000 )
Effect of foreign exchange rates (3,399 ) 12 (570 )
Net increase (decrease) in cash and cash equivalents $ 68,959 $ (6,841 ) $ (15,261 )
Cash Provided by Operating Activities
Net cash provided by operating activities during the year ended September 30, 2006 increased by $41.2 million to $156.7 million
compared to $115.5 million during the year ended September 30, 2005. The increase was primarily due to the timing of payments of
amounts due to Alberto-Culver and to vendors and improved collections of other receivable balances, partially offset by lower net
earnings adjusted for non-cash items and for increased amounts paid for inventories.
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