Sally Beauty Supply 2011 Annual Report Download - page 78

agreement underlying the ABL credit facility, or Credit Agreement EBITDA) less unfinanced capital
expenditures to (B) fixed charges (as included in the definition of the fixed-charge coverage ratio in the
agreement governing the ABL credit facility).
For purposes of calculating either the consolidated secured leverage ratio or the fixed-charge coverage
ratio, Consolidated EBITDA and Credit Agreement EBITDA are measured on a last-four-quarters basis.
Accordingly, the calculation can be disproportionately affected by a particularly strong or weak quarter
and may not be comparable to the measure for any previous or subsequent four-quarter period.
Failure to comply with the fixed-charge coverage ratio covenant (if and when applicable) under the ABL
credit facility would result in a default under such facility. A default could also result in a default under the
other facility or facilities, as the case may be, and the Notes. Absent a waiver or an amendment from our
lenders and note holders, such defaults could permit the acceleration of all indebtedness under the ABL
credit facility, the term loan facilities and the Notes, which would have a material adverse effect on our
results of operations, financial position and cash flows.
Consolidated EBITDA and Credit Agreement EBITDA are not recognized measurements under
accounting principles generally accepted in the United States of America, or GAAP, and should not be
considered as a substitute for financial performance and liquidity measures determined in accordance with
GAAP, such as net earnings, operating income or operating cash flow. In addition, because other
companies may calculate EBITDA differently, Consolidated EBITDA and Credit Agreement EBITDA
likely will not be comparable to EBITDA or similarly titled measures reported by other companies or
reported by us in our quarterly earnings releases.
We believe that we are currently in compliance with the agreements and instruments governing our debt,
including our financial covenants. Our ability to comply with these covenants in future periods will depend
on our ongoing financial and operating performance, which in turn will be subject to economic conditions
and to financial, market and competitive factors, many of which are beyond our control. Further, our
ability to comply with these covenants in future periods will also depend substantially on the pricing of our
products, our success at implementing cost reduction initiatives and our ability to successfully implement
our overall business strategy. Please see ‘‘Risk Factors—Risks Relating to Our Substantial Indebtedness.’’
Capital Requirements
During the fiscal year 2011, we had total capital expenditures of approximately $60.0 million which were
primarily to fund the addition of new stores; the remodel, expansion or relocation of existing stores in the
ordinary course of our business; and corporate projects. For the fiscal year 2012, we anticipate capital
expenditures in the range of approximately $65.0 million to $70.0 million, excluding acquisitions. Capital
expenditures will be primarily for the addition of new stores; the remodel, expansion or relocation of
existing stores in the ordinary course of our business; and corporate projects.
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