Sally Beauty Supply 2006 Annual Report Download - page 58

Table of Contents
In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements”, which defines fair value, establishes a framework
for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements.
SFAS 157 is effective in fiscal years beginning after November 15, 2007. We are currently assessing the effect of this pronouncement
on our consolidated financial statements.
In September 2006, the SEC issued Staff Accounting Bulletin No. 108 (“SAB 108”) which provides interpretive guidance on how the
effects of the carryover or reversal of prior year misstatements should be considered in quantifying a current year misstatement.
SAB 108 is effective for fiscal years ending after November 15, 2006. We are currently assessing the effect of this pronouncement on
our consolidated financial statements.
Forward Looking Statements
This Annual Report on Form 10-K and the documents incorporated by reference herein include certain forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All
statements other than statements of historical information are forward-looking statements. Forward-looking statements are subject to
known and unknown risks and uncertainties, many of which may be beyond our control. A number of important factors could cause
actual results to differ materially from those in the forward-looking statements. Factors that could cause actual results to differ from
those in the forward-looking statements include: the effects of our substantial debt; loss of our distributorship rights; competition
within relevant product markets; sales by unauthorized distributors in our exclusive markets; dependence on certain suppliers of
manufactured products and termination of distribution agreements with key suppliers that cover exclusive territories; the effect of
consolidation in the beauty supply industry; the risk that the benefits from the separation from Alberto-Culver may not be fully
realized or may take longer to realize than expected; our ability to maintain and/or improve sales and earnings performance; our ability
to attract and retain qualified personnel and key employees; risks inherent in acquisitions, dispositions and strategic alliances; foreign
currency exchange and interest rate fluctuations; general economic, political and business conditions that would adversely affect us or
our suppliers, distributors or customers; adverse weather conditions, natural disasters and acts of terrorism; changes in costs, including
changes in labor costs, raw material prices or advertising and marketing expenses; the costs and effects of unanticipated legal or
administrative proceedings; and disruption from the separation from Alberto-Culver making it more difficult for us to maintain
relationships with our customers, employees or suppliers. There are many factors—many beyond our control—that could cause results
to differ significantly from our expectations. Some of these factors are described in “Item 1A. Risk Factors” of this report.
Forward-looking statements discuss matters that are not historical facts. Because they discuss future events or conditions, forward-
looking statements often include words such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan,” “project,” “target,”
“can,” “could,” “may,” “should,” “will,” “would,” or similar expressions. Forward-looking statements are made only as of the date of
this report, and we do not undertake any obligation, other than as may be required by law, to update or revise any forward-looking
statements to reflect changes in assumptions, the occurrence of unanticipated events, changes in future operating results over time or
otherwise.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As a multinational corporation, we are subject to certain market risks including foreign currency fluctuations, interest rates and
government actions. We consider a variety of practices to manage these market risks, including, when deemed appropriate, the
occasional use of derivative financial instruments.
Foreign currency exchange rate risk
We are exposed to potential gains or losses from foreign currency fluctuations affecting net investments and earnings denominated in
foreign currencies. Our primary exposures are to changes in exchange rates for the U.S. dollar versus the British pound sterling,
Canadian dollar, Euro and Mexican peso. Our various currency exposures at times offset each other providing a natural hedge against
currency risk. In fiscal 2006, approximately 11% of our sales were made in currencies other than the U.S. dollar. Fluctuations in
U.S. dollar exchange rates within the range of the rates for fiscal years 2006, 2005, and 2004 did not have a material effect on our
financial condition and results of operations.
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