Sally Beauty Supply 2011 Annual Report Download - page 129

Sally Beauty Holdings, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
Fiscal Years ended September 30, 2011, 2010 and 2009
option to redeem the notes before November 15, 2011 at par plus a premium, plus accrued and unpaid
interest; and on or after November 15, 2011 at par plus a premium declining ratably to par, plus accrued
and unpaid interest. Furthermore, the agreements underlying the Company’s credit facilities contain terms
which significantly restrict the ability of Sally Beauty’s subsidiaries to pay dividends or otherwise transfer
assets to Sally Beauty.
Maturities of the Company’s long-term debt are as follows at September 30, 2011 (in thousands):
Fiscal Year:
2012 ................................................ $ 2,240
2013 ................................................ 8,652
2014 ................................................ 690,638
2015 ................................................ 430,100
2016 ................................................ —
Thereafter ............................................ 275,000
$1,406,630
Capital lease obligations ................................... 6,485
Less: current portion ...................................... (3,004)
Total ................................................ $1,410,111
We are a holding company and do not have any material assets or operations other than ownership of
equity interests of our subsidiaries. The agreements and instruments governing the debt of Sally Holdings
and its subsidiaries contain material limitations on our subsidiaries’ ability to pay dividends and other
restricted payments to us which, in turn, constitute material limitations on our ability to pay dividends and
other payments to our stockholders.
Under the agreements and indentures governing the term loan facilities and the notes, Sally Holdings may
not make certain restricted payments to us if a default then exists under the credit agreement or the
indentures or if its consolidated interest coverage ratio is less than 2.0 to 1.0 at the time of the making of
such restricted payment. As of September 30, 2011, its consolidated interest coverage ratio exceeded 2.0 to
1.0. Further, the aggregate amount of restricted payments Sally Holdings is able to make is limited
pursuant to various baskets as calculated pursuant to the credit agreement and indentures. Under the
terms of our new ABL credit facility, Sally Holdings may pay dividends and make other equity distributions
to us if availability under the ABL credit facility exceeds certain thresholds. For dividends and distributions
up to $30.0 million during each fiscal year, borrowing availability must exceed the lesser of $80.0 million or
20% of the borrowing base for the 45-day period immediately prior to such dividend and distribution. For
dividends in excess of that amount, Sally Holdings must maintain that same availability and its fixed-charge
coverage ratio must exceed 1.10 to 1.00. The fixed-charge coverage ratio is defined as the ratio of EBITDA
(as defined in the agreement underlying the ABL credit facility) less unfinanced capital expenditures to
fixed charges (as included in the definition of the fixed-charge coverage ratio in the agreement governing
the ABL credit facility). As of September 30, 2011, Sally Holdings met all of these conditions. In addition,
as of September 30, 2011, the net assets of our consolidated subsidiaries that were unrestricted from
transfer under our credit arrangements totaled $483.2 million, subject to certain adjustments. The ABL
credit facility and the senior term loan facilities, as well as the Company’s 9.25% Senior Notes indenture
and its 10.5% Senior Subordinated Notes indenture contain customary cross-default and/or cross-
acceleration provisions.
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