Sally Beauty Supply 2011 Annual Report Download - page 57

2010, we 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 valuation of the assets acquired and
liabilities assumed in connection with all the acquisitions completed during the fiscal year 2010 was based
on their fair values at the acquisition date. We funded these acquisitions generally with cash from
operations as well as borrowings under our ABL credit facility.
The purchase prices of certain acquisitions completed during the fiscal year 2009 (including the acquisition
of Schoeneman on September 30, 2009) 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. Accordingly, in the fiscal year
2010, we recorded intangible assets subject to amortization of $24.9 million and intangible assets with
indefinite lives of $0.8 million in connection with certain of the acquisitions completed during the fiscal
year 2009. These amounts were previously reported in Goodwill pending the valuation of the assets
acquired.
During the fiscal year 2009, we acquired Schoeneman, a 43-store beauty supply chain located in the central
northeastern United States, at a cost of approximately $71.0 million, subject to certain adjustments. We
currently expect 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, we 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 expected to
be deductible for tax purposes). Generally, we funded these acquisitions with cash from operations.
Our Separation from Alberto-Culver
Prior to 2006, Sally Holdings, Inc. was a wholly-owned subsidiary of Alberto-Culver. In November 2006,
Sally Holdings, Inc. was converted to a Delaware limited liability company, was renamed ‘‘Sally
Holdings LLC,’’ which we refer to as Sally Holdings, and became an indirect wholly-owned subsidiary of
Sally Beauty in connection with our separation from Alberto-Culver. We refer to our separation from
Alberto-Culver as the Separation Transactions. Sally Beauty is a Delaware corporation formed in
June 2006 and became the accounting successor company to Sally Holdings, Inc. upon the completion of
the Separation Transactions. Sally Beauty is a holding company and does not have any material assets or
operations other than its ownership of equity interests of its subsidiaries.
In connection with the Separation Transactions, the CDR Investors invested an aggregate of $575.0 million
in Sally Beauty. Currently, the CDR Investors own an aggregate equity interest representing approximately
35.5% of the outstanding common stock of the Company on an undiluted basis. Also in connection with
the Separation Transactions, the Company, through subsidiaries Sally Investment Holdings LLC (‘‘Sally
Investment’’) and Sally Holdings incurred approximately $1,850.0 million of indebtedness. Please see
Note 14 of the ‘‘Notes to Consolidated Financial Statements’’ in ‘‘Item 8—Financial Statements and
Supplementary Data’’ contained elsewhere in this Annual Report.
Credit Facilities
Borrowings under the term loan facilities and the ABL credit facility are secured by substantially all of our
assets, those of Sally Investment, those of our domestic subsidiaries and, in the case of the ABL credit
facility, those of our Canadian subsidiaries and a pledge of certain intercompany notes. Borrowings under
the term loan A facility were paid in full in the fiscal year 2010. Borrowings under the term loan B facility
may be prepaid at our option at any time without premium or penalty and are subject to mandatory
repayment in an amount equal to 50% of excess cash flow (as defined in the agreement governing the term
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