Sally Beauty Supply 2006 Annual Report Download - page 39

Table of Contents
In addition, upon completion of the separation, Michael H. Renzulli, former Chairman of Sally Holdings, terminated his employment
with Alberto-Culver and us. We provided Mr. Renzulli with certain benefits primarily consisting of a lump-sum cash payment of
$3.6 million within 30 days after completion of the separation. We are expensing the cash payment during the quarter ending
December 31, 2006.
The senior term loan facilities are secured by substantially all of the assets of Sally Holdings and its subsidiaries. The senior term loan
facilities may be prepaid at Sally Holdings’ option at any time without premium or penalty and are subject to mandatory prepayment
in an amount equal to 50% excess cash flow for any fiscal year unless a specified leverage ratio is met and 100% of the proceeds of
specified asset sales that are not reinvested in the business or applied to repay borrowings under the asset-based lending credit facility.
The notes are unsecured obligations of Sally Holdings and its co-issuers and are guaranteed on a senior basis (in the case of the senior
notes) and on a senior subordinated basis (in the case of the senior subordinated notes) by each domestic subsidiary of Sally Holdings
(other than the co-issuer), issuer of the notes. The senior notes and the senior subordinated notes carry optional redemption features
whereby Sally Holdings has the option to redeem the notes on or before November 15, 2010 and November 15, 2011, respectively, at
par plus a premium, plus accrued and unpaid interest, and on or after November 15, 2010 and November 15, 2011, respectively, at par
plus a premium declining ratably to par, plus accrued and unpaid interest.
Details of the debt issued on November 16, 2006 are as follows (dollars in thousands):
Maturity dates Interest
Amount (fiscal year) rates
Revolving credit facilities $ 70,000 2011 (i ) PRIME and up to 0.50%
or;
(ii ) LIBOR plus (1.0% to
1.50%)
Term loan A 150,000 2012 (i ) PRIME plus (1.00% to
1.50%) or;
(ii ) LIBOR plus (2.00% to
2.50%)
Term loan B 920,000 2013 (i ) PRIME plus (1.25% to
1.50%) or;
(ii ) LIBOR plus (2.25% to
2.50%)
Total $ 1,140,000
Senior notes $ 430,000 2014 9.25%
Senior subordinated notes 280,000 2016 10.50%
Total $ 710,000
On November 17, 2006, and after giving effect to the conversion of the Class A common stock issued to the CDR investors into our
common stock, we had 180,050,492 shares of common stock issued and outstanding, and our common stock commenced regular way
trading on the NYSE under the symbol “SBH.”
On November 24, 2006, Sally Holdings entered into two interest rate swap agreements. See “Quantitative and Qualitative Disclosures
about Market Risk—Interest rate risk.”
References to our historical assets, liabilities, products, businesses or activities are generally intended to refer to the historical assets,
liabilities, products, businesses or activities of Sally Holdings as a wholly-owned subsidiary of Alberto-Culver prior to the separation.
The historical financial results of Sally Holdings as part of Alberto-Culver contained herein do not reflect what the financial results of
Sally Holdings would have been had it been operated as a subsidiary of our company during the periods presented. See “Risk
Factors—Risks Relating to Our Business.”
Other Significant Items
Termination of Spin/Merge Transaction with Regis Corporation
On January 10, 2006, Alberto-Culver entered into an agreement with Regis Corporation or Regis to merge Sally Holdings with a
subsidiary of Regis in a tax-free transaction. Pursuant to the terms and conditions of the merger agreement, the business of Sally
Holdings was to be spun off to Alberto-Culver’ s stockholders by way of a tax-free distribution and, immediately thereafter, combined
with Regis in a tax-free stock-for-stock merger.
On April 5, 2006, Alberto-Culver provided notice to Regis that its board of directors had withdrawn its recommendation for
stockholders to approve the transaction. Following Alberto-Culver’ s notice to Regis, also
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