Sally Beauty Supply 2007 Annual Report Download - page 53

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restricted stock awards under share-based compensation plans of Alberto-Culver. The Separation Transactions constituted a change in control for purposes of
Alberto-Culver's stock option and stock award plans. As a result, in accordance with the terms of these plans, all outstanding stock options and stock awards of
Alberto-Culver, including those held by our employees, became fully vested upon completion of the Separation Transactions on November 16, 2006. For fiscal
year 2007, we recorded a charge equal to the amount of future compensation expense of approximately $5.3 million that would have been recognized in
subsequent periods had these stock options and stock awards for our employees vested over the original vesting periods. Upon completion of the Separation
Transactions, all outstanding Alberto-Culver stock options held by our employees became options to purchase shares of our common stock.
Effective October 1, 2005, we adopted SFAS No. 123(R) using the modified prospective method. Under this method, compensation expense related to
Alberto-Culver stock options granted to employees of our business is recognized for new stock option grants beginning in fiscal year 2006 and for the unvested
portion of outstanding stock options that were granted prior to the adoption of SFAS No. 123(R). In accordance with the modified prospective method, the
financial statements for fiscal year 2005 have not been restated.
Results of Operations
The following table shows the condensed results of operations of our business for the fiscal years ended September 30, 2007, 2006 and 2005 (amounts in
millions):
Year Ended September 30,
2007
2006
2005
Net sales $ 2,513.8 $ 2,373.1 $ 2,254.3
Cost of products sold and distribution expenses 1,360.0 1,286.3 1,227.3
Gross profit 1,153.8 1,086.8 1,027.0
Total other costs and expenses 925.2 906.6 834.4
Operating earnings 228.6 180.2 192.6
Interest expense, net(a) 146.0 0.1 3.0
Earnings before provision for income taxes 82.6 180.1 189.6
Provision for income taxes 38.1 69.9 73.1
Net earnings $ 44.5 $ 110.2 $ 116.5
(a)
For the fiscal year 2007, net interest expense is primarily associated with debt incurred in connection with the Separation Transactions. See
Note 12 of the "Notes to Consolidated Financial Statements" in "Item 8—Financial Statements and Supplementary Data."
45
Source: Sally Beauty Holding, 10-K, November 29, 2007