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

12 Months Ended

Sep. 30, 2016

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

Schedule of Condensed Consolidating Balance Sheet

Condensed Consolidating Balance Sheet
September 30, 2016
(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	$	—		$	28,372	$	22,368		$	35,882	$	—		$	86,622
Trade and other accounts receivable, less allowance for doubtful accounts		16			—		55,989			27,978		—			83,983
Due from affiliates		—			—		1,966,505			—		(1,966,505	)		—
Inventory		—			—		709,523			197,814		—			907,337
Other current assets		14,816			30		23,864			16,151		—			54,861
Deferred income tax assets		50			—		35,740			4,234		—			40,024
Property and equipment, net		15			—		239,791			79,752		—			319,558
Investment in subsidiaries		870,907			3,395,436		359,193			—		(4,625,536	)		—
Goodwill and other intangible assets, net		—			—		479,682			145,995		—			625,677
Other assets		1,515			2,158		(8,090	)		18,418		—			14,001
Total assets	$	887,319		$	3,425,996	$	3,884,565		$	526,224	$	(6,592,041	)	$	2,132,063
Liabilities and Stockholders' (Deficit) Equity
Accounts payable	$	116		$	1	$	215,552		$	55,707	$	—		$	271,376
Due to affiliates		1,162,045			736,373		—			68,087		(1,966,505	)		—
Accrued liabilities		1,324			35,320		145,661			32,279		—			214,584
Income taxes payable		—			1,508		—			481		—			1,989
Long-term debt		—			1,781,887		17			2,106		—			1,784,010
Other liabilities		—			—		17,852			3,762		—			21,614
Deferred income tax liabilities		—			—		110,047			4,609		—			114,656
Total liabilities		1,163,485			2,555,089		489,129			167,031		(1,966,505	)		2,408,229
Total stockholders' (deficit) equity		(276,166	)		870,907		3,395,436			359,193		(4,625,536	)		(276,166	)
Total liabilities and stockholders' (deficit) equity	$	887,319		$	3,425,996	$	3,884,565		$	526,224	$	(6,592,041	)	$	2,132,063

Condensed Consolidating Balance Sheet
September 30, 2015
(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	$	—		$	46,003	$	58,851		$	35,184	$	—		$	140,038
Trade and other accounts receivable, less allowance for doubtful accounts		—			—		60,744			30,348		—			91,092
Due from affiliates		—			—		1,687,325			35		(1,687,360	)		—
Inventory		—			—		687,884			197,330		—			885,214
Other current assets		2,308			27		17,803			16,911		—			37,049
Deferred income tax assets		—			11		30,565			3,133		—			33,709
Property and equipment, net		2			—		195,271			75,574		—			270,847
Investment in subsidiaries		663,045			3,099,141		360,416			—		(4,122,602	)		—
Goodwill and other intangible assets, net		—			—		468,342			154,875		—			623,217
Other assets		1,384			2,894		(6,949	)		15,856		—			13,185
Total assets	$	666,739		$	3,148,076	$	3,560,252		$	529,246	$	(5,809,962	)	$	2,094,351
Liabilities and Stockholders' (Deficit) Equity
Accounts payable	$	—		$	—	$	217,964		$	57,953	$	—		$	275,917
Due to affiliates		962,264			658,106		35			66,955		(1,687,360	)		—
Accrued liabilities		771			40,768		136,688			30,490		—			208,717
Income taxes payable		1,525			1,337		—			3,448		—			6,310
Long-term debt		—			1,784,724		109			2,761		—			1,787,594
Other liabilities		—			—		24,686			3,048		—			27,734
Deferred income tax liabilities		—			96		81,629			4,175		—			85,900
Total liabilities		964,560			2,485,031		461,111			168,830		(1,687,360	)		2,392,172
Total stockholders' (deficit) equity		(297,821	)		663,045		3,099,141			360,416		(4,122,602	)		(297,821	)
Total liabilities and stockholders' (deficit) equity	$	666,739		$	3,148,076	$	3,560,252		$	529,246	$	(5,809,962	)	$	2,094,351

Schedule of Condensed Consolidating Statement of Earnings and Comprehensive Income

Condensed Consolidating Statement of Earnings and Comprehensive Income
Fiscal Year Ended September 30, 2016
(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	$	—		$	—		$	3,219,812		$	732,806		$	—		$	3,952,618
Related party sales		—			—			2,666			—			(2,666	)		—
Cost of products sold and distribution expenses		—			—			1,595,187			396,157			(2,666	)		1,988,678
Gross profit		—			—			1,627,291			336,649			—			1,963,940
Selling, general and administrative expenses		11,902			364			1,074,821			278,899			—			1,365,986
Depreciation and amortization		3			—			76,250			23,404			—			99,657
Operating earnings (loss)		(11,905	)		(364	)		476,220			34,346			—			498,297
Interest expense (income)		—			144,229			(6	)		14			—			144,237
Earnings (loss) before provision for income taxes		(11,905	)		(144,593	)		476,226			34,332			—			354,060
Provision (benefit) for income taxes		(4,638	)		(56,161	)		181,932			9,985			—			131,118
Equity in earnings of subsidiaries, net of tax		230,209			318,641			24,347			—			(573,197	)		—
Net earnings		222,942			230,209			318,641			24,347			(573,197	)		222,942
Other comprehensive income (loss), net of tax		—			—			—			(22,346	)		—			(22,346	)
Total comprehensive income	$	222,942		$	230,209		$	318,641		$	2,001		$	(573,197	)	$	200,596

Condensed Consolidating Statement of Earnings and Comprehensive Income
Fiscal Year Ended September 30, 2015
(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	$	—		$	—		$	3,102,406	$	731,937		$	—		$	3,834,343
Related party sales		—			—			2,733		—			(2,733	)		—
Cost of products sold and distribution expenses		—			—			1,545,873		393,352			(2,733	)		1,936,492
Gross profit		—			—			1,559,266		338,585			—			1,897,851
Selling, general and administrative expenses		9,473			475			1,012,810		290,376			—			1,313,134
Depreciation and amortization		1			—			66,093		23,297			—			89,391
Operating earnings (loss)		(9,474	)		(475	)		480,363		24,912			—			495,326
Interest expense		—			116,753			2		87			—			116,842
Earnings (loss) before provision for income taxes		(9,474	)		(117,228	)		480,361		24,825			—			378,484
Provision (benefit) for income taxes		(3,679	)		(45,532	)		185,388		7,220			—			143,397
Equity in earnings of subsidiaries, net of tax		240,882			312,578			17,605		—			(571,065	)		—
Net earnings		235,087			240,882			312,578		17,605			(571,065	)		235,087
Other comprehensive income (loss), net of tax		—			—			—		(49,157	)		—			(49,157	)
Total comprehensive income (loss)	$	235,087		$	240,882		$	312,578	$	(31,552	)	$	(571,065	)	$	185,930

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

Schedule of Condensed Consolidating Statement of Cash Flows

Condensed Consolidating Statement of Cash Flows
Fiscal Year Ended September 30, 2016
(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	$	189,761		$	20,902		$	107,289		$	33,053		$	—	$	351,005
Cash Flows from Investing Activities:
Capital expenditures, net of proceeds from sale of property and equipment		(16	)		—			(117,539	)		(31,134	)		—		(148,689	)
Acquisitions, net of cash acquired		—			—			(26,141	)		—			—		(26,141	)
Net cash used by investing activities		(16	)		—			(143,680	)		(31,134	)		—		(174,830	)
Cash Flows from Financing Activities:
Proceeds from issuance of long-term debt		—			912,000			—			—			—		912,000
Repayments of long-term debt		—			(937,785	)		(92	)		(660	)		—		(938,537	)
Debt issuance costs		—			(12,748	)		—			—			—		(12,748	)
Repurchases of common stock		(207,312	)		—			—			—			—		(207,312	)
Proceeds from exercises of stock options		16,220			—			—			—			—		16,220
Excess tax benefit from share-based compensation		1,347			—			—			—			—		1,347
Net cash used by financing activities		(189,745	)		(38,533	)		(92	)		(660	)		—		(229,030	)
Effect of foreign exchange rate changes on cash and cash equivalents		—			—			—			(561	)		—		(561	)
Net increase (decrease) in cash and cash equivalents		—			(17,631	)		(36,483	)		698			—		(53,416	)
Cash and cash equivalents, beginning of period		—			46,003			58,851			35,184			—		140,038
Cash and cash equivalents, end of period	$	—		$	28,372		$	22,368		$	35,882		$	—	$	86,622

Condensed Consolidating Statement of Cash Flows
Fiscal Year Ended September 30, 2015
(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	$	151,126		$	19,003	$	104,239		$	26,419		$	—	$	300,787
Cash Flows from Investing Activities:
Capital expenditures, net of proceeds from sale of property and equipment		(2	)		—		(79,541	)		(26,807	)		—		(106,350	)
Acquisitions, net of cash acquired		—			—		(5,731	)		(737	)		—		(6,468	)
Net cash used by investing activities		(2	)		—		(85,272	)		(27,544	)		—		(112,818	)
Cash Flows from Financing Activities:
Proceeds from issuance of long-term debt		—			—		14			969			—		983
Repayments of long-term debt		—			—		(172	)		(1,642	)		—		(1,814	)
Repurchases of common stock		(227,559	)		—		—			—			—		(227,559	)
Proceeds from exercises of stock options		54,351			—		—			—			—		54,351
Excess tax benefit from share-based compensation		22,084			—		—			—			—		22,084
Net cash used by financing activities		(151,124	)		—		(158	)		(673	)		—		(151,955	)
Effect of foreign exchange rate changes on cash and cash equivalents		—			—		—			(2,551	)		—		(2,551	)
Net increase (decrease) in cash and cash equivalents		—			19,003		18,809			(4,349	)		—		33,463
Cash and cash equivalents, beginning of period		—			27,000		40,042			39,533			—		106,575
Cash and cash equivalents, end of period	$	—		$	46,003	$	58,851		$	35,184		$	—	$	140,038

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