Sally Beauty Supply 2013 Annual Report Download - page 68

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Supply segment of $3.9 million, higher expenses related primarily to on-going upgrades to our information
technology systems (including certain expenses associated with the Sally Beauty Supply point-of-sale
system conversion and the international ERP system implementation) of approximately $2.6 million, and
higher share-based compensation expense of $2.3 million, as described below. For the fiscal year ended
September 30, 2012, selling, general and administrative expenses reflect a $10.2 million charge resulting
from a loss contingency settled in November 2012 without a comparable amount in the current fiscal year.
Selling, general and administrative expenses, as a percentage of net sales, decreased to 33.2% for the fiscal
year ended September 30, 2013 compared to 33.5% for the fiscal year ended September 30, 2012. This
decrease was due to a lower growth rate in selling, general and administrative expenses compared to the
growth rate in net sales described above, principally the result of our current efforts to further control
expenses in light of the softer sales growth experienced in our Sally Beauty Supply segment in the fiscal
year ended September 30, 2013, partially offset by the expense increases mentioned earlier in this
paragraph.
Depreciation and Amortization
Consolidated depreciation and amortization was $72.2 million for the fiscal year ended September 30,
2013, compared to $64.7 million for the fiscal year ended September 30, 2012. This increase reflects the
incremental depreciation and amortization expenses associated with capital expenditures (mainly in
connection with store openings in both operating segments and ongoing information technology upgrades
in the Sally Beauty Supply segment) made in the preceding 12 months and, to a lesser extent, with
businesses acquired in that period, 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,
2013 2012 Increase
Operating Earnings:
Segment operating profit:
Sally Beauty Supply ..................... $437,018 $429,520 $ 7,498 1.7%
BSG................................ 200,492 182,699 17,793 9.7%
Segment operating profit ................. 637,510 612,219 25,291 4.1%
Unallocated expenses ....................... (97,947) (96,012) 1,935 2.0%
Share-based compensation expense ............. (19,201) (16,852) 2,349 13.9%
Operating earnings ....................... $520,362 $499,355 $21,007 4.2%
Consolidated operating earnings increased by $21.0 million, or 4.2%, to $520.4 million for the fiscal year
ended September 30, 2013, compared to the fiscal year ended September 30, 2012. The increase in
consolidated operating earnings was due primarily to an increase in the operating profits of both segments,
partially offset by higher unallocated expenses and share-based compensation expense, as more fully
discussed below. Operating earnings, as a percentage of net sales, increased to 14.4% for the fiscal year
ended September 30, 2013, compared to 14.2% for the fiscal year ended September 30, 2012. This increase
reflects the increase in consolidated gross profit margin described above, as well as a reduction in
consolidated operating expenses as a percentage of consolidated net sales.
Sally Beauty Supply. Sally Beauty Supply’s segment operating earnings increased by $7.5 million, or 1.7%,
to $437.0 million for the fiscal year ended September 30, 2013, compared to the fiscal year ended
51