Sally Beauty Supply 2011 Annual Report Download - page 142

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Sally Beauty Holdings, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
Fiscal Years ended September 30, 2011, 2010 and 2009
In December 2009, the Company acquired Sinelco, a wholesale distributor of professional beauty products
based in Ronse, Belgium, for approximately A25.2 million (approximately $36.6 million). We also assumed
A4.0 million (approximately $5.8 million) of pre-acquisition debt, excluding capital lease obligations, of
Sinelco in connection with the acquisition. Sinelco serves over 1,500 customers through a product catalog
and website and has sales throughout Europe. Goodwill of $5.2 million (which is not expected to be
deductible for tax purposes) and other intangible assets of $14.0 million, including intangible assets subject
to amortization of $5.8 million, were recorded as a result of this acquisition. In addition, during the fiscal
year 2010, the Company completed several other individually immaterial acquisitions at an aggregate cost
of $9.0 million and recorded additional goodwill in the amount of $5.4 million (the majority of which is not
expected to be deductible for tax purposes) in connection with such acquisitions. The assets acquired and
liabilities assumed in connection with all acquisitions completed during the fiscal year 2010 were recorded
at fair values at the acquisition date in accordance with ASC 805. We funded these acquisitions with cash
from operations and borrowings on our ABL credit facility. In addition, during the fiscal year 2010, the
Company recorded intangible assets subject to amortization in the amount of $24.9 million and intangible
assets with indefinite lives in the amount of $0.8 million in connection with certain 2009 acquisitions,
including the acquisition of Schoeneman. These amounts were previously reported in Goodwill pending
completion of the final valuations of the assets acquired and liabilities assumed, as discussed in the
following paragraph.
In September 2009, the Company acquired Schoeneman, a 43-store beauty supply chain located in the
central northeast United States, at a cost of approximately $71.0 million, subject to certain adjustments.
The Company currently expects to realize approximately $10 million in present value of future tax savings
as a result of anticipated incremental depreciation and amortization tax deductions relating to the assets
acquired in this transaction. In the fiscal year 2009, goodwill of approximately $61.0 million (which is
expected to be deductible for tax purposes) was initially recorded as a result of this acquisition. In addition,
during the fiscal year 2009, the Company completed several other individually immaterial acquisitions at
an aggregate cost of $11.3 million of which a significant portion was allocated to goodwill (the majority of
which is not expected to be deductible for tax purposes). The purchase prices of certain acquisitions
completed during the fiscal year 2009 (including the acquisition of Schoeneman) were initially allocated to
assets acquired and liabilities assumed based on their preliminary estimated fair values at the date of
acquisition. The final valuations of the assets acquired and liabilities assumed were completed during the
fiscal year 2010. Generally, we funded these acquisitions with cash from operations.
These business combinations have been accounted for using the purchase method of accounting and,
accordingly, the results of operations of the entities acquired have been included in the Company’s
consolidated financial statements since their respective dates of acquisition.
20. Business Segments and Geographic Area Information
The Company’s business is organized into two separate segments: (i) Sally Beauty Supply, a domestic and
international chain of cash and carry retail stores which offers professional beauty supplies to both salon
professionals and retail customers in North America and parts of South America and Europe and (ii) BSG
(including its franchise-based business, Armstrong McCall), a full service beauty supply distributor which
offers professional brands of beauty products directly to salons through its own sales force and professional
only stores (including franchise stores) in generally exclusive geographic territories in North America and
parts of Europe.
F-42