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

The following consolidating financial information presents the condensed consolidating balance sheets as of September 30, 2014 and 2013, the related condensed consolidating statements of earnings and comprehensive income, and the condensed consolidating statements of cash flows for each of the three fiscal years in the period ended September 30, 2014 of: (i) Sally Beauty Holdings, Inc., or the "Parent;" (ii) Sally Holdings LLC and Sally Capital Inc., or the "Issuers;" (iii) the guarantor subsidiaries; (iv) the non-guarantor subsidiaries; (v) elimination entries necessary for consolidation purposes; and (vi) Sally Beauty on a consolidated basis.

Investments in subsidiaries are accounted for using the equity method for purposes of the consolidating presentation. The principal elimination entries relate to investments in subsidiaries and intercompany balances and transactions. Separate financial statements and other disclosures with respect to the subsidiary guarantors have not been provided as management believes the following information is sufficient, as guarantor subsidiaries are 100% indirectly owned by the Parent and all guarantees are full and unconditional. Additionally, the accounts, inventory, credit card receivables, deposit accounts, certain intercompany notes and certain other personal property of the guarantor subsidiaries relating to the inventory and accounts are pledged under the ABL facility and consequently may not be available to satisfy the claims of general creditors.

Condensed Consolidating Balance Sheet
September 30, 2014
(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	$	—		$	27,000		$	40,042	$	39,533		$	—		$	106,575
Trade and other accounts receivable, less allowance for doubtful accounts		2			—			63,009		35,489			—			98,500
Due from affiliates		—			—			1,464,752		27			(1,464,779	)		—
Inventory		—			—			631,786		196,643			—			828,429
Other current assets		7,935			452			15,016		15,592			—			38,995
Deferred income tax assets, net		(213	)		1			30,527		1,335			—			31,650
Property and equipment, net		1			—			158,402		79,708			—			238,111
Investment in subsidiaries		471,320			2,835,722			392,270		—			(3,699,312	)		—
Goodwill and other intangible assets, net		—			—			476,113		174,972			—			651,085
Other assets		—			28,931			1,625		6,072			—			36,628

Total assets	$	479,045		$	2,892,106		$	3,273,542	$	549,371		$	(5,164,091	)	$	2,029,973


Liabilities and Stockholders' (Deficit) Equity
Accounts payable	$	—		$	—		$	202,743	$	56,720		$	—		$	259,463
Due to affiliates		826,819			571,847			27		66,086			(1,464,779	)		—
Accrued liabilities		691			40,751			129,791		27,536			—			198,769
Income taxes payable		—			1,051			1		3,279			—			4,331
Long-term debt		—			1,807,447			267		3,927			—			1,811,641
Other liabilities		—			—			25,020		2,828			—			27,848
Deferred income tax liabilities, net		(1,412	)		(310	)		79,971		(3,275	)		—			74,974

Total liabilities		826,098			2,420,786			437,820		157,101			(1,464,779	)		2,377,026
Total stockholders' (deficit) equity		(347,053	)		471,320			2,835,722		392,270			(3,699,312	)		(347,053	)

Total liabilities and stockholders' (deficit) equity	$	479,045		$	2,892,106		$	3,273,542	$	549,371		$	(5,164,091	)	$	2,029,973

Condensed Consolidating Balance Sheet
September 30, 2013
(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	$	—		$	—		$	16,337	$	30,778		$	—		$	47,115
Trade and other accounts receivable, less allowance for doubtful accounts		137			—			56,432		39,676			—			96,245
Due from affiliates		—			—			1,215,625		813			(1,216,438	)		—
Inventory		—			—			605,727		202,586			—			808,313
Other current assets		3,375			380			13,253		14,650			—			31,658
Deferred income tax assets, net		(391	)		(379	)		31,504		1,752			—			32,486
Property and equipment, net		2			—			152,982		76,556			—			229,540
Investment in subsidiaries		237,696			2,530,825			388,569		—			(3,157,090	)		—
Goodwill and other intangible assets, net		—			—			483,583		184,792			—			668,375
Other assets		—			29,725			1,254		5,375			—			36,354

Total assets	$	240,819		$	2,560,551		$	2,965,266	$	556,978		$	(4,373,528	)	$	1,950,086


Liabilities and Stockholders' (Deficit) Equity
Accounts payable	$	—		$	—		$	210,661	$	62,795		$	—		$	273,456
Due to affiliates		545,658			599,246			813		70,721			(1,216,438	)		—
Accrued liabilities		191			36,341			121,426		26,804			—			184,762
Income taxes payable		—			3,319			1		3,097			—			6,417
Long-term debt		—			1,684,381			181		6,141			—			1,690,703
Other liabilities		—			—			22,043		2,243			—			24,286
Deferred income tax liabilities, net		(1,551	)		(432	)		79,316		(3,392	)		—			73,941

Total liabilities		544,298			2,322,855			434,441		168,409			(1,216,438	)		2,253,565
Total stockholders' (deficit) equity		(303,479	)		237,696			2,530,825		388,569			(3,157,090	)		(303,479	)

Total liabilities and stockholders' (deficit) equity	$	240,819		$	2,560,551		$	2,965,266	$	556,978		$	(4,373,528	)	$	1,950,086

Condensed Consolidating Statement of Earnings and Comprehensive Income
Fiscal Year Ended September 30, 2014
(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	$	—		$	—		$	2,986,026	$	767,472		$	—		$	3,753,498
Related party sales		—			—			2,854		—			(2,854	)		—
Cost of products sold and distribution expenses		—			—			1,486,048		410,132			(2,854	)		1,893,326

Gross profit		—			—			1,502,832		357,340			—			1,860,172
Selling, general and administrative expenses		10,396			474			969,026		293,617			—			1,273,513
Depreciation and amortization		1			—			56,682		22,980			—			79,663

Operating earnings (loss)		(10,397	)		(474	)		477,124		40,743			—			506,996
Interest expense		—			116,063			13		241			—			116,317

Earnings (loss) before provision for income taxes		(10,397	)		(116,537	)		477,111		40,502			—			390,679
Provision (benefit) for income taxes		(4,037	)		(45,264	)		181,741		12,246			—			144,686
Equity in earnings of subsidiaries, net of tax		252,353			323,626			28,256		—			(604,235	)		—

Net earnings		245,993			252,353			323,626		28,256			(604,235	)		245,993


Other comprehensive income (loss), net of tax		—			—			—		(18,730	)		—			(18,730	)

Total comprehensive income (loss)	$	245,993		$	252,353		$	323,626	$	9,526		$	(604,235	)	$	227,263

Condensed Consolidating Statement of Earnings and Comprehensive Income
Fiscal Year Ended September 30, 2013
(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	$	—		$	—		$	2,896,990	$	725,226	$	—		$	3,622,216
Related party sales		—			—			2,890		—		(2,890	)		—
Cost of products sold and distribution expenses		—			—			1,437,620		392,223		(2,890	)		1,826,953

Gross profit		—			—			1,462,260		333,003		—			1,795,263
Selling, general and administrative expenses		9,951			434			912,262		280,062		—			1,202,709
Depreciation and amortization		—			—			52,284		19,908		—			72,192

Operating earnings (loss)		(9,951	)		(434	)		497,714		33,033		—			520,362
Interest expense		—			107,265			32		398		—			107,695

Earnings (loss) before provision for income taxes		(9,951	)		(107,699	)		497,682		32,635		—			412,667
Provision (benefit) for income taxes		(3,838	)		(41,832	)		190,753		6,433		—			151,516
Equity in earnings of subsidiaries, net of tax		267,264			333,131			26,202		—		(626,597	)		—

Net earnings		261,151			267,264			333,131		26,202		(626,597	)		261,151


Other comprehensive income (loss), net of tax		—			—			—		835		—			835

Total comprehensive income (loss)	$	261,151		$	267,264		$	333,131	$	27,037	$	(626,597	)	$	261,986

Condensed Consolidating Statement of Earnings and Comprehensive Income
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 expense		—			137,876			66		470			—			138,412

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


Other comprehensive income (loss), net of tax		—			3,947			—		8,071			—			12,018

Total comprehensive income (loss)	$	233,064		$	243,217		$	324,018	$	41,770		$	(596,987	)	$	245,082

Condensed Consolidating Statement of Cash Flows
Fiscal Year Ended September 30, 2014
(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 (used) by operating activities	$	291,982		$	(93,104	)	$	78,699		$	38,395		$	—	$	315,972

Cash Flows from Investing Activities:
Capital expenditures, net of proceeds from sale of property and equipment		—			—			(50,315	)		(26,241	)		—		(76,556	)
Acquisitions, net of cash acquired		—			—			(4,765	)		(433	)		—		(5,198	)

Net cash used by investing activities		—			—			(55,080	)		(26,674	)		—		(81,754	)

Cash Flows from Financing Activities:
Proceeds from issuance of long-term debt		—			356,000			247			—			—		356,247
Repayments of long-term debt		—			(232,000	)		(161	)		(1,942	)		—		(234,103	)
Debt issuance costs		—			(3,896	)		—			—			—		(3,896	)
Repurchases of common stock		(333,291	)		—			—			—			—		(333,291	)
Proceeds from exercises of stock options		26,663			—			—			—			—		26,663
Excess tax benefit from share-based compensation		14,646			—			—			—			—		14,646

Net cash (used) provided by financing activities		(291,982	)		120,104			86			(1,942	)		—		(173,734	)

Effect of foreign exchange rate changes on cash and cash equivalents		—			—			—			(1,024	)		—		(1,024	)

Net increase in cash and cash equivalents		—			27,000			23,705			8,755			—		59,460
Cash and cash equivalents, beginning of period		—			—			16,337			30,778			—		47,115

Cash and cash equivalents, end of period	$	—		$	27,000		$	40,042		$	39,533		$	—	$	106,575

Condensed Consolidating Statement of Cash Flows
Fiscal Year Ended September 30, 2013
(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 (used) by operating activities	$	468,828		$	(229,002	)	$	43,790		$	26,838		$	—	$	310,454

Cash Flows from Investing Activities:
Capital expenditures, net of proceeds from sale of property and equipment		(2	)		—			(54,358	)		(30,399	)		—		(84,759	)
Acquisitions, net of cash acquired		—			—			(21,594	)		(624	)		—		(22,218	)

Net cash used by investing activities		(2	)		—			(75,952	)		(31,023	)		—		(106,977	)

Cash Flows from Financing Activities:
Proceeds from issuance of long-term debt		—			365,500			—			—			—		365,500
Repayments of long-term debt		—			(289,500	)		(83	)		(1,868	)		—		(291,451	)
Debt issuance costs		—			(1,998	)		—			—			—		(1,998	)
Repurchases of common stock		(509,704	)		—			—			—			—		(509,704	)
Proceeds from exercises of stock options		25,493			—			—			—			—		25,493
Excess tax benefit from share-based compensation		15,385			—			—			—			—		15,385

Net cash (used) provided by financing activities		(468,826	)		74,002			(83	)		(1,868	)		—		(396,775	)

Effect of foreign exchange rate changes on cash and cash equivalents		—			—			—			193			—		193

Net decrease in cash and cash equivalents		—			(155,000	)		(32,245	)		(5,860	)		—		(193,105	)
Cash and cash equivalents, beginning of period		—			155,000			48,582			36,638			—		240,220

Cash and cash equivalents, end of period	$	—		$	—		$	16,337		$	30,778		$	—	$	47,115

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	$	157,590		$	3,161		$	82,623		$	54,208		$	—	$	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		14,390			—			—			—			—		14,390

Net cash (used) provided by financing activities		(157,590	)		151,839			(75	)		(2,856	)		—		(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