Sally Beauty Supply 2013 Annual Report Download - page 110

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Sally Beauty Holdings, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Fiscal Years ended September 30, 2013, 2012 and 2011
1. Description of Business and Basis of Presentation
Description of Business
Sally Beauty Holdings, Inc. and its consolidated subsidiaries (‘‘Sally Beauty’’ or ‘‘the Company’’) sell
professional beauty supplies, through its Sally Beauty Supply retail stores primarily in the U.S., Puerto
Rico, Canada, Mexico, Chile, the United Kingdom, Ireland, Belgium, France, Germany, the Netherlands
and Spain. Additionally, the Company distributes professional beauty products to salons and salon
professionals through its Beauty Systems Group (‘‘BSG’’) store operations and a commissioned direct sales
force that calls on salons primarily in the U.S., Puerto Rico, Canada, the United Kingdom and certain
other countries in Europe, and to franchises in the southern and southwestern regions of the U.S., and in
Mexico through the operations of its subsidiary Armstrong McCall, L.P. (‘‘Armstrong McCall’’). Certain
beauty products sold by BSG and Armstrong McCall are sold under exclusive territory agreements with the
manufacturers of the products.
Sally Beauty Supply began operations with a single store in New Orleans in 1964 and was acquired in 1969
by our former parent company, The Alberto-Culver Company, which we refer to as Alberto-Culver. BSG
became a subsidiary of Sally Beauty in 1995. In November 2006, Sally Beauty separated from Alberto-
Culver and became an independent company listed on the New York Stock Exchange. In November 2006,
Sally Beauty incurred approximately $1,850.0 million of long-term debt in connection with its separation
into an independent company.
Basis of Presentation
The consolidated financial statements included herein have been prepared in accordance with accounting
principles generally accepted in the United States of America (‘‘GAAP’’). These consolidated financial
statements include the operations of the Company and its subsidiaries. All significant intercompany
balances and transactions have been eliminated in consolidation.
All references in these notes to ‘‘management’’ are to the management of Sally Beauty.
2. Significant Accounting Policies
The preparation of financial statements in conformity with GAAP requires us to interpret and apply
accounting standards and to develop and follow accounting policies consistent with such standards. The
following is a summary of the significant accounting policies used in preparing the Company’s consolidated
financial statements.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates
and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and
disclosures of contingent liabilities in the financial statements. Our most significant estimates relate to: the
valuation of inventory, vendor concessions, retention of risk, income taxes, the assessment of long-lived
assets and intangible assets for impairment, and share-based payments. The level of uncertainty in
estimates and assumptions increases with the length of time until the underlying transactions are
completed. Actual results may differ from these estimates in amounts that may be material to the financial
statements. Management believes that the estimates and assumptions used in the preparation of the
Company’s consolidated financial statements are reasonable.
F-8