Sally Beauty Supply 2007 Annual Report Download - page 66

expenditures to (B) fixed charges (as included in the definition of the fixed-charge coverage ratio in the agreement governing the ABL facility). The ABL facility
uses fixed amounts for Credit Agreement EBITDA for periods preceding the Separation Transactions.
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 consolidated secured leverage ratio covenant under the Term Loans would result in a default under such facilities. Failure to comply
with the fixed-charge coverage ratio covenant (if and when applicable) under the ABL facility would result in a default under such facility. Either such 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 facility, the Term Loans 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.
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. 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. See "Risk Factors—Risks Relating to Our Substantial Indebtedness."
Capital Requirements
For fiscal year 2008, we anticipate total capital expenditures of approximately $60.0 million. Capital expenditures will be primarily for the addition of new
stores, our BSG distribution project, the remodel, expansion or relocation of existing facilities and various corporate projects.
Contractual Obligations
The following table is a summary of our contractual cash obligations and commitments outstanding by future payment dates at September 30, 2007 (dollars in
thousands):
Payments Due by Period
Less than 1
year 1-3 years 3-5 years
More than 5
years Total
Long-term debt, including interest
obligations(a) $ 174,607 $ 355,672 $ 426,633 $ 1,858,891 $ 2,815,803
Operating leases(b) 110,561 169,323 92,863 56,881 429,628
Purchase obligations(c) 34,629 68,274 58,858 1,684 163,445
Other long-term obligations(d) 5,092 7,781 2,284 1,411 16,568
Total $ 324,889 $ 601,050 $ 580,638 $ 1,918,867 $ 3,425,444
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Source: Sally Beauty Holding, 10-K, November 29, 2007