Sally Beauty Supply 2011 Annual Report Download - page 66

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Depreciation and Amortization
Consolidated depreciation and amortization increased to $59.7 million for the fiscal year ended
September 30, 2011, compared to $51.1 million for the fiscal year ended September 30, 2010. This increase
reflects the incremental depreciation and amortization expenses associated with businesses acquired in the
last 12 months and with capital expenditures made in the fiscal year 2011 (mainly in connection with store
openings in both operating segments and with ongoing information technology upgrades), partially offset
by the impact of assets that became fully depreciated in the preceding 12 months.
Operating Earnings
The following table sets forth, for the periods indicated, information concerning our operating earnings for
each reportable segment (dollars in thousands):
Fiscal Year Ended September 30,
2011 2010 Increase
Operating Earnings:
Segment operating profit:
Sally Beauty Supply ...................... $380,963 $320,456 $ 60,507 18.9%
BSG................................. 164,660 112,495 52,165 46.4%
Segment operating profit .................. 545,623 432,951 112,672 26.0%
Unallocated expenses ........................ (81,594) (79,203) 2,391 3.0%
Share-based compensation expense .............. (15,560) (12,818) 2,742 21.4%
Operating earnings ........................ $448,469 $340,930 $107,539 31.5%
Consolidated operating earnings increased by $107.5 million, or 31.5%, to $448.5 million for the fiscal year
ended September 30, 2011, compared to the fiscal year ended September 30, 2010. The increase in
consolidated operating earnings was due primarily to an increase in the operating profits of both segments,
partially offset by slightly higher unallocated corporate expenses and higher share-based compensation
expense, as more fully discussed below. In addition, for the fiscal year ended September 30, 2011,
consolidated operating earnings reflect a credit resulting from a litigation settlement ($27.0 million),
partially offset by certain non-recurring charges ($5.7 million) that include costs related to the closure of a
BSG warehouse. The credit resulting from the litigation settlement is reflected in the BSG segment’s
results and in unallocated expenses in the amount of $24.7 million and $2.3 million, respectively. Operating
earnings, as a percentage of net sales, increased to 13.7% for the fiscal year ended September 30, 2011,
compared to 11.7% for the fiscal year ended September 30, 2010. This increase reflects the growth in
consolidated gross margin described above, as well as a lower growth rate in consolidated operating
expenses compared to the growth rate in consolidated gross profit.
Sally Beauty Supply. Sally Beauty Supply’s segment operating earnings increased by $60.5 million, or
18.9%, to $381.0 million for the fiscal year ended September 30, 2011, compared to the fiscal year ended
September 30, 2010. The increase in Sally Beauty Supply’s operating earnings was primarily a result of
increased sales volume and improved gross margins, partially offset by higher advertising costs of
approximately $5.5 million and the incremental costs related to approximately 127 net additional company-
operated stores (stores opened or acquired during the past 12 months) operating during the fiscal year
ended September 30, 2011. Segment operating earnings, as a percentage of net sales, increased to 18.9%
for the fiscal year ended September 30, 2011, compared to 17.5% for the fiscal year ended September 30,
2010. This increase reflects the growth in the segment’s gross margin described above, as well as a lower
growth rate in the segment’s operating expenses compared to the growth rate in the segment’s gross profit.
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