Sally Beauty Supply 2013 Annual Report Download - page 83

The ABL facility also restricts the making of Restricted Payments. More specifically, under the ABL
facility, Sally Holdings may make Restricted Payments if availability under the ABL facility equals or
exceeds certain thresholds, and no default then exists under the facility. For Restricted Payments up to
$30.0 million during each fiscal year, borrowing availability must equal or exceed the lesser of $75.0 million
or 15% of the borrowing base for 45 days prior to such Restricted Payment. For Restricted Payments in
excess of that amount, borrowing availability must equal or exceed the lesser of $100.0 million or 20% of
the borrowing base for 45 days prior to such Restricted Payment and the Consolidated Fixed Charge
Coverage Ratio (as defined below) must equal or exceed 1.1 to 1.0. Further, if borrowing availability equals
or exceeds the lesser of $150.0 million or 30% of the borrowing base, Restricted Payments are not limited
by the Consolidated Fixed Charge Coverage Ratio test. The Consolidated Fixed Charge Coverage Ratio is
defined as the ratio of (i) Consolidated EBITDA (as defined in the ABL facility) during the trailing twelve-
month period preceding such proposed Restricted Payment minus certain unfinanced capital expenditures
made during such period and income tax payments paid in cash during such period to (ii) fixed charges (as
defined in the ABL facility). In addition, during any period that borrowing availability under the ABL
facility is less than the greater of $40.0 million or 10% of the borrowing base, the level of the Consolidated
Fixed Charge Coverage Ratio that the Company must satisfy is 1.0 to 1.0. As of September 30, 2013, the
Consolidated Fixed Charge Coverage Ratio was approximately 3.9 to 1.0.
When used in this Annual Report, the phrase ‘‘Consolidated EBITDA’’ is intended to have the meaning
ascribed to such phrase in the ABL facility or the indentures governing the senior notes due 2019-2022, as
appropriate. EBITDA is not a recognized measurement under accounting principles generally accepted in
the United States of America (‘‘GAAP’’) and should not be considered a substitute for financial
performance and liquidity measures determined in accordance with GAAP, such as net earnings, operating
earnings and operating cash flows.
We are currently in compliance with the agreements and instruments governing our debt, including our
financial covenants. Our ability to comply with these covenants in future periods will depend on our
ongoing financial and operating performance, which in turn will be subject to economic conditions and to
financial, market and competitive factors, many of which are beyond our control. Further, our ability to
comply with these covenants in future periods will also depend substantially on the pricing of our products,
our success at implementing cost reduction initiatives and our ability to successfully implement our overall
business strategy. Please see ‘‘Risk Factors—Risks Relating to Our Substantial Indebtedness.’’
Capital Requirements
During the fiscal year ended September 30, 2013, we had total capital expenditures of approximately
$84.9 million which were primarily to fund the addition of new stores and remodeling, expansion or
relocation of existing stores in the ordinary course of our business as well as corporate projects. For the
fiscal year 2014, we anticipate capital expenditures in the range of approximately $85.0 million to
$90.0 million, excluding acquisitions. Capital expenditures will be primarily to fund the addition of new
stores and remodeling, expansion or relocation of existing stores in the ordinary course of our business as
well as corporate projects.
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