Parent, Issuers, Guarantor and Non-Guarantor Condensed Consolidated Financial Statements (Tables)

12 Months Ended

Sep. 30, 2012

Parent, Issuers, Guarantor and Non-Guarantor Condensed Consolidated Financial Statements

Schedule of Condensed Consolidating Balance Sheet

Condensed Consolidating Balance Sheet
September 30, 2012
(In thousands)

	Parent			Sally Holdings LLC and Sally Capital Inc.			Guarantor Subsidiaries		Non- Guarantor Subsidiaries			Consolidating Eliminations			Sally Beauty Holdings, Inc. and Subsidiaries
Assets
Cash and cash equivalents	$	—		$	155,000		$	48,582	$	36,638		$	—		$	240,220
Trade, income taxes and other accounts receivable, less allowance for doubtful accounts		23,734			—			63,964		37,792			—			125,490
Due from affiliates		—			2			934,268		3,637			(937,907	)		—
Inventory		—			—			551,017		184,339			—			735,356
Prepaid expenses		1,181			24			12,189		15,982			—			29,376
Deferred income tax assets, net		(408	)		(423	)		38,805		(4,509	)		—			33,465
Property and equipment, net		—			—			140,238		62,423			—			202,661
Investment in subsidiaries		(30,403	)		2,194,771			367,435		—			(2,531,803	)		—
Goodwill and other intangible assets, net		—			—			475,623		185,145			—			660,768
Other assets		—			32,445			1,069		4,950			—			38,464
Total assets	$	(5,896	)	$	2,381,819		$	2,633,190	$	526,397		$	(3,469,710	)	$	2,065,800
Liabilities and Stockholders' (Deficit) Equity
Accounts payable	$	—		$	—		$	202,560	$	59,649		$	—		$	262,209
Due to affiliates		110,512			761,262			3,637		62,496			(937,907	)		—
Accrued liabilities		141			38,171			134,387		27,568			—			200,267
Income taxes payable		—			4,136			4,596		4,272			—			13,004
Long-term debt		—			1,609,308			265		7,657			—			1,617,230
Other liabilities		—			—			21,060		3,172			—			24,232
Deferred income tax liabilities, net		(1,464	)		(655	)		71,914		(5,852	)		—			63,943
Total liabilities		109,189			2,412,222			438,419		158,962			(937,907	)		2,180,885
Total stockholders' (deficit) equity		(115,085	)		(30,403	)		2,194,771		367,435			(2,531,803	)		(115,085	)
Total liabilities and stockholders' (deficit) equity	$	(5,896	)	$	2,381,819		$	2,633,190	$	526,397		$	(3,469,710	)	$	2,065,800

Condensed Consolidating Balance Sheet
September 30, 2011
(In thousands)

	Parent			Sally Holdings LLC and Sally Capital Inc.			Guarantor Subsidiaries		Non- Guarantor Subsidiaries			Consolidating Eliminations			Sally Beauty Holdings, Inc. and Subsidiaries
Assets
Cash and cash equivalents	$	—		$	—		$	22,583	$	40,898		$	—		$	63,481
Trade accounts and accounts receivable, other, less allowance for doubtful accounts		—			—			62,749		32,777			—			95,526
Due from affiliates		59,249			3			763,741		3,597			(826,590	)		—
Inventory		—			—			505,893		159,353			—			665,246
Prepaid expenses		1,233			63			11,397		13,667			—			26,360
Deferred income tax assets, net		(346	)		—			31,661		(2,780	)		—			28,535
Property and equipment, net		1			—			130,165		52,323			—			182,489
Investment in subsidiaries		(281,690	)		1,862,684			331,346		—			(1,912,340	)		—
Goodwill and other intangible assets, net		—			—			476,206		159,325			—			635,531
Other assets		—			20,411			5,650		5,371			—			31,432
Total assets	$	(221,553	)	$	1,883,161		$	2,341,391	$	464,531		$	(2,738,930	)	$	1,728,600
Liabilities and Stockholders' (Deficit) Equity
Accounts payable	$	2		$	—		$	204,300	$	57,812		$	—		$	262,114
Due to affiliates		—			728,546			62,846		35,198			(826,590	)		—
Accrued liabilities		380			33,165			124,888		27,076			—			185,509
Income taxes payable		(1,679	)		4,438			2,453		4,167			—			9,379
Long-term debt		—			1,401,855			340		10,920			—			1,413,115
Other liabilities		—			—			24,975		1,179			—			26,154
Deferred income tax liabilities, net		(1,274	)		(3,153	)		58,905		(3,167	)		—			51,311
Total liabilities		(2,571	)		2,164,851			478,707		133,185			(826,590	)		1,947,582
Total stockholders' (deficit) equity		(218,982	)		(281,690	)		1,862,684		331,346			(1,912,340	)		(218,982	)
Total liabilities and stockholders' (deficit) equity	$	(221,553	)	$	1,883,161		$	2,341,391	$	464,531		$	(2,738,930	)	$	1,728,600

Schedule of Condensed Consolidating Statement of Earnings

Condensed Consolidating Statement of Earnings
Fiscal Year Ended September 30, 2012
(In thousands)

	Parent			Sally Holdings LLC and Sally Capital Inc.			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Consolidating Eliminations			Sally Beauty Holdings, Inc. and Subsidiaries
Net sales	$	—		$	—		$	2,837,214		$	686,430		$	—		$	3,523,644
Related party sales		—			—			2,899			—			(2,899	)		—
Cost of products sold and distribution expenses		—			—			1,406,817			376,467			(2,899	)		1,780,385
Gross profit		—			—			1,433,296			309,963			—			1,743,259
Selling, general and administrative expenses		10,391			674			908,964			259,177			—			1,179,206
Depreciation and amortization		1			—			46,159			18,538			—			64,698
Operating earnings (loss)		(10,392	)		(674	)		478,173			32,248			—			499,355
Interest income		—			—			(26	)		(124	)		—			(150	)
Interest expense		—			137,876			92			594			—			138,562
Earnings (loss) before provision for income taxes		(10,392	)		(138,550	)		478,107			31,778			—			360,943
Provision (benefit) for income taxes		(4,186	)		(53,802	)		187,788			(1,921	)		—			127,879
Equity in earnings of subsidiaries, net of tax		239,270			324,018			33,699			—			(596,987	)		—
Net earnings	$	233,064		$	239,270		$	324,018		$	33,699		$	(596,987	)	$	233,064

Condensed Consolidating Statement of Earnings
Fiscal Year Ended September 30, 2011
(In thousands)

	Parent			Sally Holdings LLC and Sally Capital Inc.			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Consolidating Eliminations			Sally Beauty Holdings, Inc. and Subsidiaries
Net sales	$	—		$	—		$	2,639,741		$	629,390		$	—		$	3,269,131
Related party sales		—			—			2,894			—			(2,894	)		—
Cost of products sold and distribution expenses		—			—			1,335,030			342,390			(2,894	)		1,674,526
Gross profit		—			—			1,307,605			287,000			—			1,594,605
Selling, general and administrative expenses		7,812			560			845,732			232,310			—			1,086,414
Depreciation and amortization		1			—			43,111			16,610			—			59,722
Operating earnings (loss)		(7,813	)		(560	)		418,762			38,080			—			448,469
Interest income		—			—			(72	)		(208	)		—			(280	)
Interest expense		—			111,894			60			856			—			112,810
Earnings (loss) before provision for income taxes		(7,813	)		(112,454	)		418,774			37,432			—			335,939
Provision (benefit) for income taxes		(2,945	)		(43,613	)		161,647			7,125			—			122,214
Equity in earnings of subsidiaries, net of tax		218,593			287,434			30,307			—			(536,334	)		—
Net earnings	$	213,725		$	218,593		$	287,434		$	30,307		$	(536,334	)	$	213,725

Condensed Consolidating Statement of Earnings
Fiscal Year Ended September 30, 2010
(In thousands)

	Parent			Sally Holdings LLC and Sally Capital Inc.			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Consolidating Eliminations			Sally Beauty Holdings, Inc. and Subsidiaries
Net sales	$	—		$	—		$	2,365,838		$	550,252		$	—		$	2,916,090
Related party sales		—			—			2,881			—			(2,881	)		—
Cost of products sold and distribution expenses		—			—			1,211,220			303,377			(2,881	)		1,511,716
Gross profit		—			—			1,157,499			246,875			—			1,404,374
Selling, general and administrative expenses		7,661			659			787,828			216,173			—			1,012,321
Depreciation and amortization		1			—			36,414			14,708			—			51,123
Operating earnings (loss)		(7,662	)		(659	)		333,257			15,994			—			340,930
Interest income		—			—			(74	)		(84	)		—			(158	)
Interest expense		29			112,278			93			740			—			113,140
Earnings (loss) before provision for income taxes		(7,691	)		(112,937	)		333,238			15,338			—			227,948
Provision (benefit) for income taxes		(2,890	)		(43,829	)		128,463			2,376			—			84,120
Equity in earnings of subsidiaries, net of tax		148,629			217,737			12,962			—			(379,328	)		—
Net earnings	$	143,828		$	148,629		$	217,737		$	12,962		$	(379,328	)	$	143,828

Schedule of Condensed Consolidating Statement of Cash Flows

Condensed Consolidating Statement of Cash Flows
Fiscal Year Ended September 30, 2012
(In thousands)

	Parent			Sally Holdings LLC and Sally Capital Inc.			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Consolidating Eliminations		Sally Beauty Holdings, Inc. and Subsidiaries
Net cash provided by operating activities	$	171,980		$	3,161		$	69,049		$	53,392		$	—	$	297,582
Cash Flows from Investing Activities:
Capital expenditures		—			—			(45,942	)		(23,036	)		—		(68,978	)
Acquisitions, net of cash acquired		—			—			(10,607	)		(32,928	)		—		(43,535	)
Net cash used by investing activities		—			—			(56,549	)		(55,964	)		—		(112,513	)
Cash Flows from Financing Activities:
Proceeds from issuance of long-term debt		—			2,101,475			14			—			—		2,101,489
Repayments of long-term debt		—			(1,918,339	)		(89	)		(2,856	)		—		(1,921,284	)
Debt issuance costs		—			(31,297	)		—			—			—		(31,297	)
Repurchase of common stock		(200,000	)		—			—			—			—		(200,000	)
Proceeds from exercises of stock options		28,020			—			—			—			—		28,020
Excess tax benefit from share-based compensation		—			—			13,574			816			—		14,390
Net cash (used) provided by financing activities		(171,980	)		151,839			13,499			(2,040	)		—		(8,682	)
Effect of foreign exchange rate changes on cash and cash equivalents		—			—			—			352			—		352
Net increase (decrease) in cash and cash equivalents		—			155,000			25,999			(4,260	)		—		176,739
Cash and cash equivalents, beginning of period		—			—			22,583			40,898			—		63,481
Cash and cash equivalents, end of period	$	—		$	155,000		$	48,582		$	36,638		$	—	$	240,220

Condensed Consolidating Statement of Cash Flows
Fiscal Year Ended September 30, 2011
(In thousands)

	Parent			Sally Holdings LLC and Sally Capital Inc.			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Consolidating Eliminations		Sally Beauty Holdings, Inc. and Subsidiaries
Net cash (used) provided by operating activities	$	(10,942	)	$	152,377		$	112,035		$	38,371		$	—	$	291,841
Cash Flows from Investing Activities:
Capital expenditures		—			—			(41,478	)		(18,093	)		—		(59,571	)
Acquisitions, net of cash acquired		—			—			(84,924	)		(2,240	)		—		(87,164	)
Net cash used by investing activities		—			—			(126,402	)		(20,333	)		—		(146,735	)
Cash Flows from Financing Activities:
Proceeds from issuance of long-term debt		—			421,300			404			6,901			—		428,605
Repayments of long-term debt		—			(568,300	)		(141	)		(9,470	)		—		(577,911	)
Debt issuance costs		—			(5,397	)		—			—			—		(5,397	)
Proceeds from exercises of stock options		10,942			—			—			—			—		10,942
Excess tax benefit from share-based compensation		—			—			3,712			—			—		3,712
Net cash provided (used) by financing activities		10,942			(152,397	)		3,975			(2,569	)		—		(140,049	)
Effect of foreign exchange rate changes on cash and cash equivalents		—			—			—			(1,070	)		—		(1,070	)
Net increase (decrease) in cash and cash equivalents		—			(20	)		(10,392	)		14,399			—		3,987
Cash and cash equivalents, beginning of period		—			20			32,975			26,499			—		59,494
Cash and cash equivalents, end of period	$	—		$	—		$	22,583		$	40,898		$	—	$	63,481

Condensed Consolidating Statement of Cash Flows
Fiscal Year Ended September 30, 2010
(In thousands)

	Parent			Sally Holdings LLC and Sally Capital Inc.			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Consolidating Eliminations		Sally Beauty Holdings, Inc. and Subsidiaries
Net cash (used) provided by operating activities	$	(808	)	$	125,000		$	31,148		$	61,906		$	—	$	217,246
Cash Flows from Investing Activities:
Capital expenditures		—			—			(32,070	)		(16,489	)		—		(48,559	)
Acquisitions, net of cash acquired		—			—			(3,830	)		(32,633	)		—		(36,463	)
Net cash used by investing activities		—			—			(35,900	)		(49,122	)		—		(85,022	)
Cash Flows from Financing Activities:
Proceeds from issuance of long-term debt		—			334,000			—			—			—		334,000
Repayments of long-term debt		—			(459,000	)		(114	)		(2,453	)		—		(461,567	)
Repurchases of common stock		(70	)		—			—			—			—		(70	)
Proceeds from exercises of stock options		878			—			—			—			—		878
Excess tax benefit from share-based compensation		—			—			248			—			—		248
Net cash provided (used) by financing activities		808			(125,000	)		134			(2,453	)		—		(126,511	)
Effect of foreign exchange rate changes on cash and cash equivalents		—			—			—			(666	)		—		(666	)
Net increase (decrease) in cash and cash equivalents		—			—			(4,618	)		9,665			—		5,047
Cash and cash equivalents, beginning of period		—			20			37,593			16,834			—		54,447
Cash and cash equivalents, end of period	$	—		$	20		$	32,975		$	26,499		$	—	$	59,494