Business Segments and Geographic Area Information

12 Months Ended

Sep. 30, 2016

Business Segments and Geographic Area Information

Business Segments and Geographic Area Information

18. 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 primarily in North America, Puerto Rico, and parts of Europe and South America 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 and salon professionals through its own sales force and professional-only stores (including franchise stores) in partially exclusive geographical territories in North America and parts of Europe.

The accounting policies of both of our business segments are the same as described in the summary of significant accounting policies contained in Note 2. Sales between segments, which were eliminated in consolidation, were not material for the fiscal years ended September 30, 2016, 2015 and 2014.

Business Segments Information

Segment data for the fiscal years ended September 30, 2016, 2015 and 2014 are as follows (in thousands):

		Year Ended September 30,
		2016			2015			2014
Net sales:
Sally Beauty Supply		$	2,364,531		$	2,329,523		$	2,308,743
BSG			1,588,087			1,504,820			1,444,755
Total		$	3,952,618		$	3,834,343		$	3,753,498
Earnings before provision for income taxes:
Segment operating earnings:
Sally Beauty Supply(a)		$	409,787		$	412,393		$	431,655
BSG			254,479			231,151			216,971
Segment operating earnings			664,266			643,544			648,626
Unallocated expenses(b)			(153,389	)		(131,440	)		(119,523	)
Share-based compensation expense(c)			(12,580	)		(16,778	)		(22,107	)
Interest expense(d)			(144,237	)		(116,842	)		(116,317	)
Earnings before provision for income taxes		$	354,060		$	378,484		$	390,679
Identifiable assets:
Sally Beauty Supply		$	972,441		$	976,152		$	959,210
BSG			1,020,987			976,169			969,674
Sub-total			1,993,428			1,952,321			1,928,884
Corporate			138,635			142,030			75,435
Total		$	2,132,063		$	2,094,351		$	2,004,319
Depreciation and amortization:
Sally Beauty Supply		$	55,460		$	45,572		$	41,019
BSG			29,971			28,678			26,782
Corporate			14,226			15,141			11,862
Total		$	99,657		$	89,391		$	79,663
Capital expenditures:(e)
Sally Beauty Supply		$	95,587		$	65,983		$	43,114
BSG			24,026			16,755			19,179
Corporate			31,607			23,794			14,521
Total		$	151,220		$	106,532		$	76,814
(a)	For the fiscal year 2015, Sally Beauty Supply's operating earnings reflects $5.3 million in expenses related to a restructuring of its operations in Germany.
(b)	Unallocated expenses consist of corporate and shared costs and are included in selling, general and administrative expenses in our consolidated statements of earnings. For the fiscal year 2016, 2015 and 2014, unallocated expenses reflect $14.6 million, $5.6 million (net of related insurance recovery of $0.6 million) and $2.5 million, respectively, related to the data security incidents.
(c)	For the fiscal year 2014, share-based compensation expenses reflect $3.5 million in expense in connection with the executive management transition plan disclosed in May 2014. Share-based compensation expenses are included in selling, general and administrative expenses in our consolidated statements of earnings.
(d)	For the fiscal year ended September 30, 2016, interest expense includes a loss on extinguishment of debt of $33.3 million in connection with the Company's December 2015 redemption of its senior notes due 2019.
(e)	Capital expenditures exclude amounts incurred but not paid at September 30, 2016 and 2015 of $3.8 million and $11.6 million, respectively. At September 30, 2014, such amounts were not material.

Geographic Area Information

Geographic data for the fiscal years ended September 30, 2016, 2015 and 2014 are as follows (in thousands):

		Year Ended September 30,
		2016		2015		2014
Net sales:(a)
United States		$	3,261,648	$	3,145,894	$	3,031,000
Other Countries			690,970		688,449		722,498
Total		$	3,952,618	$	3,834,343	$	3,753,498
Identifiable assets:
United States		$	1,505,237	$	1,460,413	$	1,405,671
Other Countries			488,191		491,908		523,213
Corporate			138,635		142,030		75,435
Total		$	2,132,063	$	2,094,351	$	2,004,319
(a)	Net sales are attributable to individual countries based on the location of the customer. For the fiscal year 2016 and 2015, net sales outside the U.S. include a net negative impact from changes in foreign currency exchange rates of $56.4 million and $87.3 million, respectively. For the fiscal year 2014, changes in foreign currency exchange rates did not have a material impact on sales.