Sally Beauty Supply 2013 Annual Report Download - page 139

Sally Beauty Holdings, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
Fiscal Years ended September 30, 2013, 2012 and 2011
subject to amortization of $4.0 million in connection with these acquisitions. We funded the acquisitions
completed in the fiscal year 2013 with cash from operations and borrowing under the ABL facility.
In November 2011, the Company acquired the Floral Group for approximately A22.8 million
(approximately $31.2 million). The Floral Group is a distributor of professional beauty products then with
19 stores located in the Netherlands. The results of operations of the Floral Group are included in the
Company’s consolidated financial statements subsequent to the acquisition date. The assets acquired and
liabilities assumed were recorded at their respective fair values at the acquisition date. Goodwill of
$15.0 million (which is not expected to be deductible for tax purposes) and intangible assets subject to
amortization of $11.8 million were recorded as a result of this acquisition based on their estimated fair
values. The acquisition was funded with cash from operations and with borrowings on our ABL facility in
the amount of approximately $17.0 million. In addition, during the fiscal year 2012, the Company
completed several other individually immaterial acquisitions at an aggregate cost of approximately
$12.8 million and recorded additional goodwill in the amount of $9.4 million (the majority of which is
expected to be deductible for tax purposes) in connection with these acquisitions. Generally, we funded
these acquisitions with cash from operations. The assets acquired and liabilities assumed in connection
with these acquisitions were recorded based on their respective fair values at the acquisition date.
In October 2010, the Company acquired Aerial, an 82-store professional-only distributor of beauty
products operating in 11 states in the midwestern region of the United States, for approximately
$81.8 million. The assets acquired and liabilities assumed, including intangible assets subject to
amortization of $34.7 million, were recorded at their respective fair values at the acquisition date. In
addition, goodwill of $25.3 million (which is expected to be deductible for tax purposes) was recorded as a
result of this acquisition. The acquisition of Aerial was funded with borrowings in the amount of
$78.0 million under the ABL facility (which were later paid in full) and with cash from operations. In
addition, during the fiscal year 2011, the Company completed several other individually immaterial
acquisitions at an aggregate cost of approximately $5.0 million and recorded additional goodwill in the
amount of $4.3 million (the majority of which is expected to be deductible for tax purposes) in connection
with such acquisitions. Generally, we funded these acquisitions with cash from operations. The valuation of
the assets acquired and liabilities assumed in connection with these acquisitions was based on their fair
values at the acquisition date.
These business combinations have been accounted for using the purchase method of accounting and,
accordingly, the results of operations of the entities acquired have been included in the Company’s
consolidated financial statements since their respective dates of acquisition.
18. Business Segments and Geographic Area Information
The Company’s business is organized into two separate segments: (i) Sally Beauty Supply, a domestic and
international chain of cash and carry retail stores which offers professional beauty supplies to both salon
professionals and retail customers primarily in North America, Puerto Rico, and parts of South America
and Europe and (ii) BSG, including its franchise-based business Armstrong McCall, a full service beauty
supply distributor which offers professional brands of beauty products directly to salons and salon
professionals through its own sales force and professional-only stores (including franchise stores) in
partially exclusive geographical territories in North America, Puerto Rico and parts of Europe.
The accounting policies of both of our business segments are the same as described in the summary of
significant accounting policies contained in Note 2. Sales between segments, which were eliminated in
consolidation, were not material for the fiscal years ended September 30, 2013, 2012 and 2011.
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