Sally Beauty Supply 2013 Annual Report Download - page 127

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Sally Beauty Holdings, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
Fiscal Years ended September 30, 2013, 2012 and 2011
12. Commitments and Contingencies
Lease Commitments
The Company’s principal leases relate to retail stores and warehousing properties. At September 30, 2013,
future minimum payments under non-cancelable operating leases, net of sublease income, are as follows
(in thousands):
Fiscal Year:
2014 ................................................... $156,415
2015 ................................................... 131,540
2016 ................................................... 105,820
2017 ................................................... 75,858
2018 ................................................... 46,440
Thereafter ............................................... 68,405
$584,478
Certain of the Company’s leases require the Company to pay a portion of real estate taxes, insurance,
maintenance and special assessments assessed by the lessor. Also, certain of the Company’s leases include
renewal options and escalation clauses. Aggregate rental expense for all operating leases amounted to
$206.2 million, $194.9 million and $192.6 million for the fiscal years 2013, 2012 and 2011, respectively, and
is included in selling, general and administrative expenses in our consolidated statements of earnings.
Contingencies
Legal Proceedings
The Company is, from time to time, involved in various claims and lawsuits incidental to the conduct of its
business in the ordinary course. The Company does not believe that the ultimate resolution of these
matters will have a material adverse impact on its consolidated financial position, statements of earnings or
cash flows.
Based upon an unfavorable verdict rendered in November 2012 in certain actions brought against the
Company in March 2011, we recorded $10.2 million in legal settlement costs as of September 30, 2012,
which we believed to be our best estimate of the potential loss. During the fiscal year ended September 30,
2013, the parties continued to engage in negotiations aimed at resolving the matter and, in November
2012, entered into a settlement agreement whereby the Company agreed to pay the plaintiff the one-time
cash sum of $8.5 million and agreed to certain other terms of settlement in exchange for a full release of
claims.
Other Contingencies
The Company provides healthcare benefits to most of its full-time employees. The Company is largely
self-funded for the cost of the healthcare plan (including healthcare claims), other than certain fees and
out-of-pocket amounts paid by the employees. In addition, the Company retains a substantial portion of
the risk related to certain workers’ compensation, general liability, and automobile and property insurance.
The Company records an estimated liability for the ultimate cost of claims incurred and unpaid as of the
balance sheet date. The estimated liability is included in accrued liabilities (current portion) and other
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