Sally Beauty Supply 2011 Annual Report Download - page 70

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Depreciation and Amortization
Consolidated depreciation and amortization increased to $51.1 million for the fiscal year ended
September 30, 2010, compared to $47.1 million for the fiscal year ended September 30, 2009, due to the
incremental expenses associated with businesses acquired in the last 12 months and depreciation related to
capital expenditures mainly in connection with store openings in both operating segments, 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,
2010 2009 Increase
Operating Earnings:
Segment operating profit:
Sally Beauty Supply ................ $320,456 $283,872 $36,584 12.9%
BSG........................... 112,495 91,604 20,891 22.8%
Segment operating profit ............ 432,951 375,476 57,475 15.3%
Unallocated expenses .................. (79,203) (70,022) 9,181 13.1%
Share-based compensation expense ........ (12,818) (8,618) 4,200 48.7%
Operating earnings .................. $340,930 $296,836 $44,094 14.9%
Consolidated operating earnings increased by $44.1 million, or 14.9%, to $340.9 million for the fiscal year
ended September 30, 2010, compared to the fiscal year ended September 30, 2009. The increase in
consolidated operating earnings was due primarily to an increase in the operating profits of both segments,
partially offset by higher unallocated corporate expenses and share-based compensation expense, as
discussed below. Operating earnings, as a percentage of net sales, increased to 11.7% for the fiscal year
ended September 30, 2010, compared to 11.3% for the fiscal year ended September 30, 2009.
Sally Beauty Supply. Sally Beauty Supply’s segment operating earnings increased by $36.6 million, or
12.9%, to $320.5 million for the fiscal year ended September 30, 2010, compared to the fiscal year ended
September 30, 2009. The increase in Sally Beauty Supply’s segment operating earnings was primarily a
result of increased sales volume and improved gross margins, partially offset by higher advertising costs of
approximately $7.1 million and the incremental costs related to approximately 108 net additional company-
operated stores (stores opened or acquired during the past 12 months) operating during the fiscal year
ended September 30, 2010. Segment operating earnings, as a percentage of net sales, increased to 17.5%
for the fiscal year ended September 30, 2010, compared to 16.7% for the fiscal year ended September 30,
2009. The increase in Sally Beauty Supply’s operating earnings, as a percentage of segment net sales, was
primarily a result of gross margin improvements.
Beauty Systems Group. BSG’s segment operating earnings increased by $20.9 million, or 22.8%, to
$112.5 million for the fiscal year ended September 30, 2010, compared to the fiscal year ended
September 30, 2009. Segment operating earnings, as a percentage of net sales, increased to 10.4% for the
fiscal year ended September 30, 2010, compared to 9.7% for the fiscal year ended September 30, 2009. The
increase in BSG operating earnings was primarily a result of gross margin improvements, the incremental
operating earnings of businesses acquired and stores opened during the past 12 months, and to ongoing
cost reduction initiatives (including cost savings realized from the warehouse optimization program that
began in the fiscal year 2007).
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