Sally Beauty Supply 2013 Annual Report Download - page 77

Holdings LLC (which we refer to as ‘‘Sally Holdings’’), to distribute funds to us so that we may pay our
obligations and expenses. The ability of our subsidiaries to make such distributions will be subject to their
operating results, cash requirements and financial condition and their compliance with relevant laws, and
covenants and financial ratios related to their existing or future indebtedness, including covenants
restricting Sally Holdings’ ability to pay dividends to us. If, as a consequence of these limitations, we cannot
receive sufficient distributions from our subsidiaries, we may not be able to meet our obligations to fund
general corporate expenses. Please see ‘‘Risk Factors—Risks Relating to Our Business,’’ and ‘‘—Risks
Relating to Our Substantial Indebtedness.’’
We may from time to time repurchase or otherwise retire or refinance our debt (through our subsidiaries
or otherwise) and take other steps to reduce or refinance our debt. These actions may include open market
repurchases of our notes or other retirements of outstanding debt. The amount of debt that may be
repurchased, or refinanced or otherwise retired, if any, will be determined in the sole discretion of our
Board of Directors and will depend on market conditions, trading levels of the Company’s debt from time
to time, the Company’s cash position and other considerations.
At September 30, 2013, cash and cash equivalents were $47.1 million. Based upon the current level of
operations and anticipated growth, we anticipate that existing cash balances, funds expected to be
generated by operations and funds available under the ABL facility will be sufficient to meet our working
capital requirements, share repurchases and potential acquisitions and to finance anticipated capital
expenditures over the next twelve months.
However, there can be no assurance that our business will generate sufficient cash flows from operations,
that anticipated net sales and operating improvements will be realized, or that future borrowings will be
available under our ABL facility in an amount sufficient to enable us to service our indebtedness or to fund
our other liquidity needs. In addition, our ability to meet our debt service obligations and liquidity needs
are subject to certain risks, which include, but are not limited to, increases in competitive activity, the loss
of key suppliers, rising interest rates, the loss of key personnel, the ability to execute our business strategy
and general economic conditions. Please see ‘‘Risk Factors’’ in Item 1A of this Annual Report.
We utilize our ABL facility for the issuance of letters of credit, for certain working capital and liquidity
needs and to manage normal fluctuations in our operational cash flow. In that regard, we may from time to
time draw funds under the ABL facility for general corporate purposes including funding of capital
expenditures, acquisitions, interest payments due on our indebtedness and share repurchases. The funds
drawn on an individual occasion during the fiscal year ended September 30, 2013 have varied in amounts
up to $35.5 million, total amounts outstanding have ranged from zero up to $110.0 million and the average
daily balance outstanding was $32.8 million. During the fiscal year ended September 30, 2013, the weighted
average interest rate on our borrowings under the ABL facility was 2.9%. The amounts drawn are
generally paid down with cash provided by our operating activities.
As of September 30, 2013, borrowings outstanding under the ABL facility were $76.0 million (which were
subsequently repaid) and Sally Holdings had $382.3 million available for borrowings under the ABL
facility, subject to borrowing base limitations, as reduced by outstanding letters of credit.
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 their 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. Please see ‘‘Long-Term Debt Covenant’’ below.
During the fiscal year 2013, we completed several acquisitions at an aggregate cost of $22.5 million,
including the May 2013 acquisition of certain assets and business operations of Essential Salon, a
professional-only distributor of beauty products operating in the northeastern region of the U.S., for
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