Sally Beauty Supply 2007 Annual Report Download - page 98

connection with the Separation Transactions); (ii) an amount determined pursuant to a formula intended to reflect the limitations placed on the number of shares
of Sally Beauty that CDRS may acquire in order not to jeopardize the intended tax-free nature of the share distribution; and (iii) unpaid balances on certain
specified liabilities of the Company, minus other specified transaction costs. In fiscal year 2007, the Company made adjustments in connection with the
reconciliation of tax balances transferred to the Company in connection with the Separations Transactions. This amount was included in the settlement of
intercompany agreements with Alberto-Culver, as an adjustment to the Company's retained deficit.
In connection with the Separation Transactions, the Company became the parent company for all U.S. tax returns filed under the employer identification number
of Alberto-Culver prior to the completion of the Separation Transactions. All intercompany receivables, payables and loans (other than trade payables and the
Company's portion of the transaction expenses described above) between the Company or any of its subsidiaries, on the one hand, and Alberto-Culver or any of
its subsidiaries (other than the Company and its subsidiaries), on the other hand, were canceled prior to completion of the Separation Transactions. In addition,
prior thereto, all intercompany agreements between the Company or any of its subsidiaries and Alberto-Culver or any of its subsidiaries were terminated, other
than certain agreements specifically designated in the Separation Agreement to survive following the transactions.
In addition, upon completion of the transaction separating us from Alberto-Culver, Michael H. Renzulli, former Chairman of Sally Holdings, Inc., terminated his
employment with Alberto-Culver and the Company. The Company 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 transactions. The Company expensed the cash payment at the time of completion of the transactions.
Alberto-Culver treated the transactions as though they constituted a change in control for purposes of Alberto-Culver's stock option and restricted stock plans. As
a result, in accordance with the terms of these plans, all outstanding stock options and restricted shares of Alberto-Culver, including those held by the Company's
employees, became fully vested upon completion of the Separation Transactions. Due to the Separation Transactions, the Company recorded a charge at that time
equal to the amount of future compensation expense of approximately $5.3 million that would have been recognized in subsequent periods as the stock options
and restricted shares for the Company's employees vested over the original vesting periods. Upon completion of the Separation Transactions all outstanding
Alberto-Culver stock options held by employees of the Company became options to purchase shares of Sally Beauty common stock.
4. Stockholders' (Deficit) Equity
The Company is authorized to issue up to 400.0 million shares of common stock with a par value of $0.01 per share. On November 17, 2006, the Company had
approximately 180.1 million shares of stock issued and outstanding, and commenced regular-way trading on the New York Stock Exchange ("NYSE") as an
independent company under the symbol "SBH." The Company had approximately 181.3 million shares issued and approximately 180.9 million shares
outstanding as of September 30, 2007.
The change in common stock resulted from the issuance of stock in connection with the Separation Transactions and the Investment Agreement with CDRS. See
the Note 3 for additional information about the Separation Transactions.
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Source: Sally Beauty Holding, 10-K, November 29, 2007