Sally Beauty Supply 2007 Annual Report Download - page 32

Download and view the complete annual report

Please find page 32 of the 2007 Sally Beauty Supply annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 133

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133

•
limit our flexibility to adjust to changing market conditions and ability to withstand competitive pressures, or prevent us from carrying out
capital spending that is necessary or important to our growth strategy and efforts to improve operating margins or our business.
Any of the foregoing impacts of our substantial indebtedness could have a material adverse effect on our business, financial condition and results of operations.
Despite our current indebtedness levels, we and our subsidiaries may be able to incur substantially more debt, including secured debt, which could further
exacerbate the risks associated with our substantial indebtedness.
We and our subsidiaries may incur substantial additional indebtedness in the future. The terms of the instruments governing our indebtedness do not fully
prohibit us or our subsidiaries from doing so. As of September 30, 2007, our senior credit facilities provided us commitments for additional borrowings of up to
approximately $334.6 million under the asset-backed senior secured loan, or ABL, facility, subject to borrowing base limitations. If new debt is added to our
current debt levels, the related risks that we now face would increase and we may not be able to meet all our debt obligations. In addition, the agreements
governing our senior credit facilities as well as the indentures governing our senior notes and senior subordinated notes, which we refer to collectively as the
Notes, do not prevent us from incurring obligations that do not constitute indebtedness.
The agreements and instruments governing our debt contain restrictions and limitations that could significantly impact our ability to operate our business.
The senior secured term loan facilities, which we refer to as the Term Loans, contain covenants that, among other things, restrict Sally Holdings' and its
subsidiaries' ability to:
•
dispose of assets;
•
incur additional indebtedness (including guarantees of additional indebtedness);
•
pay dividends, repurchase stock or make other distributions;
•
make voluntary prepayments on the Notes or make amendments to the terms thereof;
•
prepay certain other debt or amend specific debt agreements;
•
create liens on assets;
•
make investments (including joint ventures);
•
engage in mergers, consolidations or sales of all or substantially all of Sally Holdings' assets;
•
engage in certain transactions with affiliates; and
•
permit restrictions on Sally Holdings' subsidiaries ability to pay dividends.
The ABL facility contains covenants that, among other things, restrict Sally Holdings' and its subsidiaries' ability to:
•
change their line of business;
•
engage in certain mergers, consolidations and transfers of all or substantially all of their assets;
•
make certain dividends, stock repurchases and other distributions;
•
make acquisitions of all of the business or assets of, or stock representing beneficial ownership of, any person;
•
dispose of certain assets;
•
make voluntary prepayments on the Notes or make amendments to the terms thereof;
25
Source: Sally Beauty Holding, 10-K, November 29, 2007