8-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of Report:August 1, 2013

(Date of earliest event reported)

SALLY BEAUTY HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

Delaware	1-33145	36-2257936
(State or other jurisdiction of  incorporation)	(Commission file number)	(I.R.S. Employer Identification Number)

3001 Colorado Boulevard
Denton, Texas 76210

(Address of principal executive offices)

(940) 898-7500

(Registrant’s telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o       Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o       Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o       Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o       Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

ITEM 1.01.  ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT

On July 26, 2013, Sally Beauty Holdings, Inc. (the “Company”), and certain of the Company’s indirect and direct subsidiaries that are borrowers or guarantors (the “Loan Parties”) under that certain Credit Agreement dated as of November 12, 2010 among the Loan Parties, the administrative, collateral and Canadian agent and the lenders named therein, as amended by that certain Amendment No. 1 dated as of June 8, 2012 (the “ABL facility”), entered into a second amendment (the “Second Amendment”) to the ABL facility which, among other things, increased the maximum availability under the ABL facility from $400.0 million to $500.0 million (subject to borrowing base limitations), reduced pricing, relaxed the restrictions on the Company’s and the other Loan Parties’ ability to make Restricted Payments (as such term is defined in the ABL facility), extended the maturity to July 26, 2018 and improved certain other covenant terms. The remaining terms of the amended ABL facility are substantially the same as those of the ABL facility prior to the Second Amendment.

ITEM 2.02.  RESULTS OF OPERATIONS AND FINANCIAL CONDITION

On August 1, 2013, Sally Beauty Holdings, Inc. (the “Company”) issued the news release attached hereto as Exhibit 99.1 reporting the financial results of the Company for the quarter ended June 30, 2013 (the “Earnings Release”).  In the Earnings Release, the Company utilized the non-GAAP financial measures and other items discussed in the attached Appendix A, which is incorporated herein by this reference.  Appendix A also contains statements of the Company’s management regarding the use and purposes of the non-GAAP financial measures utilized in the Earnings Release.  A reconciliation of the non-GAAP financial measures discussed in the Earnings Release to the most directly comparable GAAP financial measures is attached to the Earnings Release.

ITEM 5.02.  DEPARTURE OF DIRECTORS OR CERTAIN OFFICERS; ELECTION OF DIRECTORS; APPOINTMENT OF CERTAIN OFFICERS; COMPENSATORY ARRANGEMENTS OF CERTAIN OFFICERS

On July 26, 2013, Michael G. Spinozzi, President of Sally Beauty Supply, notified the Company of his retirement from the Company with an anticipated effective date of November 8, 2013.  Mr. Spinozzi has served as President of Sally Beauty Supply since 2006 and the Company is grateful for Mr. Spinozzi’s leadership and commitment to the success of the Company during his tenure as an officer of the Company.  The Company has not yet selected a replacement for Mr. Spinozzi, but intends to announce a replacement prior to Mr. Spinozzi’s effective retirement date.

ITEM 7.01.  REGULATION FD DISCLOSURE

The Earnings Release also provides an update on the Company’s strategy and business outlook.

2

ITEM 9.01.  FINANCIAL STATEMENTS AND EXHIBITS

(d)           See exhibit index.

All of the information furnished in Items 2.02, 7.01 and 9.01 of this report and the accompanying appendix and exhibit shall not be deemed to be “filed” for the purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, and shall not be incorporated by reference in any filing under the Securities Act of 1933, as amended, unless expressly incorporated by reference therein.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date:  August 1, 2013
	SALLY BEAUTY HOLDINGS, INC.
	By:	/s/ Matthew O. Haltom
	Name:	Matthew O. Haltom
	Title:	Senior Vice President, General Counsel and Secretary

3

EXHIBIT INDEX

Exhibit Number	Description
Exhibit 99.1	News release reporting financial results for the quarter ended June 30, 2013, issued by Sally Beauty Holdings, Inc. on August 1, 2013.

4

Appendix A

USE OF NON-GAAP FINANCIAL MEASURES

Sally Beauty Holdings, Inc. (the “Company”) occasionally utilizes financial measures and terms not calculated in accordance with generally accepted accounting principles in the United States (“GAAP”) in order to provide investors with an alternative method for assessing our operating results in a manner that enables investors to more thoroughly evaluate our current performance as compared to past performance.  We also believe these non-GAAP measures provide investors with a more informed baseline for modeling the Company’s future financial performance.  Our management uses these non-GAAP measures for the same purpose.  We believe that our investors should have access to, and that we are obligated to provide, the same set of tools that we use in analyzing our results.  These non-GAAP measures should be considered in addition to results prepared in accordance with GAAP, but should not be considered a substitute for or superior to GAAP results.  We have provided definitions below for certain non-GAAP financial measures, together with an explanation of why management uses these measures and why management believes that these non-GAAP financial measures are useful to investors.  In addition, in our Earnings Release we have provided tables to reconcile the non-GAAP financial measures utilized to GAAP financial measures.  We have provided adjusted net earnings and adjusted EPS metrics for 2012 and 2013 solely for the purpose of adjusting for non-cash interest expense.  Excluding this non-cash interest expense provides investors with a better depiction of the Company’s core operating results and provides a more informed baseline for modeling future earnings expectations. We intend to adjust for all share-based compensation expense recognized in accordance with FAS 123R, including stock option expense and expense related to restricted shares, when calculating certain cash flow measures such as Adjusted EBITDA.  The Company believes adjusting for all share-based compensation expense is appropriate, as it is a non-cash expense, and adjusting is consistent with how a number of debt and equity analysts track that measure.

ADJUSTED EBITDA

We define the measure Adjusted EBITDA as GAAP Net Earnings before depreciation and amortization, share-based compensation, interest expense (which includes the loss on extinguishment of indebtedness), and income taxes.  Our management uses Adjusted EBITDA as a supplemental measure in the evaluation of our businesses and believes that Adjusted EBITDA provides a meaningful measure of our ability to meet our future debt service, capital expenditures and working capital requirements.  Adjusted EBITDA is not a financial measure under GAAP.  Accordingly, it should not be considered in isolation or as a substitute for net income, operating income, cash flow provided by (used in) operating activities or other income or cash flow data prepared in accordance with GAAP.  When evaluating Adjusted EBITDA, investors should consider, among other

5

factors, (i) increasing or decreasing trends in Adjusted EBITDA, (ii) whether Adjusted EBITDA has remained at positive levels historically, and (iii) how Adjusted EBITDA compares to levels of interest expense. We provide a reconciliation of Adjusted EBITDA to GAAP Net Earnings.  Because Adjusted EBITDA excludes some, but not all, items that affect net earnings and may vary among companies, the Adjusted EBITDA presented by the Company may not be comparable to similarly titled measures of other companies. Although we believe that Adjusted EBITDA may provide additional information with respect to our ability to meet our future debt service, capital expenditures and working capital requirements, our functional or legal requirements may require us to utilize available funds for other purposes.

ADJUSTED NET EARNINGS

This measure consists of GAAP Net Earnings, which is then adjusted solely for the purpose of adjusting for non-cash interest expense (which includes the loss on extinguishment of indebtedness).  Excluding this non-cash adjustment provides investors with a better depiction of the Company’s core operating results and provides a more informed baseline for modeling future earnings expectations.  Adjusted Net Earnings does not provide a complete position of our results of operations, as the historical items excluded in the related reconciliation are included in net earnings presented under GAAP.  We recommend a review of net earnings on both a non-GAAP basis and GAAP basis be performed to get a comprehensive view of our results.  We provide a reconciliation of Adjusted Net Earnings to GAAP Net Earnings.

ADJUSTED EARNINGS PER SHARE (ADJUSTED EPS)

We define this non-GAAP financial measure as the portion of the Company’s GAAP Net Earnings assigned to each share of stock, excluding non-cash interest expense (which includes the loss on extinguishment of indebtedness).  Excluding these non-cash adjustments provides investors with a better depiction of the Company’s core operating results and provides a more informed baseline for modeling future earnings expectations.  We recommend a review of diluted EPS on both a non-GAAP basis and GAAP basis be performed to get a comprehensive view of our results.  We provide a reconciliation of Adjusted Net Earnings to GAAP Net Earnings, as well as information on how these share calculations are made.

6

EX-99.1

Exhibit 99.1

	Contact: Karen Fugate
		Investor Relations
		940-297-3877

Sally Beauty Holdings, Inc. Announces Fiscal 2013 Third Quarter Results

·Consolidated net sales of $912.1 million, up 2.8%

·Same store sales growth of  0.7% vs. growth of 5.2% in 3Q12

·Consolidated gross margin of 50.1%

·3Q13 net earnings of $72.5 million with earnings per share of $0.42, growth of 13.5%

·Repurchased $93.8 million, or 3.1 million shares of stock in 3Q13

DENTON, Texas, August 1, 2013 — Sally Beauty Holdings, Inc. (NYSE: SBH) (the “Company”) today announced financial results for the fiscal 2013 third quarter.  The Company will hold a conference call today at 10:00 a.m. (Central) to discuss these results and its business.

“Our fundamental businesses drivers are solid and we remain confident in the long term health of our business” stated Gary Winterhalter, Chairman, President and Chief Executive Officer. “During the third quarter, customer traffic at our BSG and Sally International businesses was healthy; however, store traffic from the non-Beauty Club Card customer in the Sally U.S. stores was soft.  We’ve launched several initiatives specifically to address this customer and remain optimistic that traffic will recover over the next few months.  On a consolidated basis, we improved SG&A leverage by 50 basis points and grew earnings per share by 13.5%.  During the third quarter, we purchased $94 million or 3.1 million shares of our stock. As of the end of June we had $559 million remaining on our current authorization.”

FISCAL 2013 THIRD QUARTER FINANCIAL HIGHLIGHTS

Net Sales:  For the fiscal 2013 third quarter, consolidated net sales were $912.1 million, an increase of 2.8% from the fiscal 2012 third quarter.  The fiscal 2013 third quarter sales increase is primarily attributed to the addition of new stores, which contributed 150 bps of sales growth.  The impact from changes in foreign currency exchange rates in the fiscal 2013 third quarter was not material.  Consolidated same store sales in the fiscal 2013 third quarter grew by 0.7% compared to growth of 5.2% in the fiscal 2012 third quarter.  Same store sales growth was negatively impacted by lower non-Beauty Club Card traffic in the Sally U.S. stores and difficult comparisons against strong growth in certain product categories in the Sally U.S. business.

Gross Profit:  Consolidated gross profit for the fiscal 2013 third quarter was $457.1 million, an increase of 2.9% over gross profit of $444.4 million for the fiscal 2012 third quarter.  Gross profit as a percentage of sales was 50.1%, flat when compared to the fiscal 2012 third quarter.

Selling, General and Administrative Expenses:  For the fiscal 2013 third quarter, consolidated selling, general and administrative (SG&A) expenses, including unallocated corporate expenses and share-based compensation, were $295.7 million, or 32.4% of sales, a 50 basis point improvement from the fiscal 2012 third quarter metric of 32.9% of sales and total SG&A expenses of $291.5 million.  Fiscal 2013 third

1

quarter SG&A expenses increased 1.4% or $4.2 million. This increase is primarily due to expenses associated with the opening of new stores, the Sally Beauty Supply point-of-sale system conversion and the implementation of our International ERP system.

Note: SG&A expenses include unallocated corporate expenses, as detailed in the Company’s segment information on schedule B.

Interest Expense: Interest expense for the fiscal 2013 third quarter was $27.0 million compared to the fiscal 2012 third quarter of $26.9 million.

Provision for Income Taxes:  Income taxes were $43.1 million for the fiscal 2013 third quarter versus $40.1 million in the fiscal 2012 third quarter.  The Company’s effective tax rate in the fiscal 2013 third quarter was 37.3% versus 36.6% in the fiscal 2012 third quarter.

Net Earnings and Diluted Net Earnings per Share (EPS): In the fiscal 2013 third quarter, net earnings were $72.5 million, an increase of 4.3% over fiscal 2012 third quarter GAAP net earnings of $69.5 million.  Diluted earnings per share in the fiscal 2013 third quarter were $0.42, growth of 13.5% when compared to GAAP diluted earnings per share of $0.37 in the fiscal 2012 third quarter.

Adjusted (Non-GAAP) EBITDA(1): Adjusted EBITDA for the fiscal 2013 third quarter was $164.6 million, an increase of 5.7% from $155.7 million in the fiscal 2012 third quarter.

Financial Position, Capital Expenditures and Working Capital:  Cash and cash equivalents as of June 30, 2013, were $53.4 million.  The Company ended the fiscal 2013 third quarter with $75.5 million of loans outstanding on its asset-based loan (ABL) revolving credit facility.  The Company’s debt, excluding capital leases, totaled $1.69 billion as of June 30, 2013.

On July 26, 2013, the Company, Sally Holdings and other parties to the ABL facility entered into the Second Amendment to the ABL facility which, among other things, increased the maximum availability to $500.0 million (subject to borrowing base limitations), reduced pricing, relaxed the restrictions regarding the making of Restricted Payments, extended the maturity to July 26, 2018 and improved certain other covenant terms. The remaining terms of the amended ABL facility are substantially the same as those of the ABL facility prior to the Second Amendment.

For the first nine months of fiscal 2013, the Company’s capital expenditures totaled $64.6 million.  Capital expenditures for the fiscal year 2013 are projected to be in the range of $85 million to $90 million, excluding acquisitions.

Working capital (current assets less current liabilities) decreased $183.1 million to $503.5 million at June 30, 2013 compared to $686.5 million at September 30, 2012. The ratio of current assets to current liabilities was 1.99 to 1.00 at June 30, 2013 compared to 2.44 to 1.00 at September 30, 2012.

Inventory as of June 30, 2013 was $780.2 million, an increase of $61.2 million or growth of 8.5% from June 30, 2012 inventory.  This increase is primarily due to additional inventory from net new store openings and new product offerings.

During the three months ended June 30, 2013, the Company repurchased (and subsequently retired) a total of 3.1 million shares of its common stock at an aggregate cost of $93.8 million.  As of June 30, 2013, the

2

Company has approximately $559.2 million remaining under its $700 million authorization announced on March 5, 2013.

Business Segment Results:

Sally Beauty Supply

Fiscal 2013 Third Quarter Results for Sally Beauty Supply

·Sales of $559.2 million, up 1.0% from $553.4 million in the fiscal 2012 third quarter.  Sales growth is attributed to net new store openings and strong performance in the international businesses and was partially offset by a decline in same store sales in the U.S. business.

·Same store sales declined by 0.8% compared to growth of 5.2% in the fiscal 2012 third quarter.  Same store sales performance in the fiscal 2013 third quarter was negatively impacted by lower traffic from the U.S. non-Beauty Club Card customers compared to fiscal 2012 third quarter and difficult comparisons against growth in certain categories in the prior year.

·Gross margin of 55.6% improved 20 basis points from 55.4% in the fiscal 2012 third quarter.

·SG&A as a percent of sales was 32.7% compared to 32.7% in the year ago quarter.

·Segment earnings of $117.7 million, flat when compared to $117.6 million in the fiscal 2012 third quarter.

·Segment operating margins were 21.0% of sales, a decline of 30 basis points from 21.3% in the fiscal 2012 third quarter.

·Net store base increased by 121 over the fiscal 2012 third quarter for a total store count of 3,379.

Sales growth in the fiscal 2013 third quarter is attributed to net new store openings and strong sales growth in the international businesses but was partially offset by a decline in U.S. same store sales. Same store sales growth for the three months ended June 30, 2013 was adversely impacted by lower non-Beauty Club Card traffic in the U.S. and a difficult comparison against strong growth in certain product categories (such as nail care and hair extensions)  in the third quarter of fiscal 2012.  Gross profit margin expansion of 20 basis points resulted from improvement in the international businesses and a shift in product mix and low-cost sourcing initiatives.  Segment operating earnings and margin were negatively impacted by softer sales growth than in the prior year quarter.

Beauty Systems Group

Fiscal 2013 Third Quarter Results for Beauty Systems Group

·Sales of $353.0 million, up 5.8% from $333.6 million in the fiscal 2012 third quarter.

·Same store sales growth of 4.6% versus growth of 5.3% in the fiscal 2012 third quarter.

·Gross margin of 41.5%, a 10 basis point improvement from 41.4% in the fiscal 2012 third quarter.

·SG&A as a percent of sales was 24.8% compared to 25.4% in the prior year quarter.

·Segment earnings of $52.7 million, up 13.0% from $46.7 million in the fiscal 2012 third quarter.

·Segment operating margins increased by 90 basis points to 14.9% of sales from 14.0% in the fiscal 2012 third quarter.

·Net store count was 1,223, an increase of 47 stores over the fiscal 2012 third quarter.

·Total BSG distributor sales consultants at the end of the fiscal 2013 third quarter were 995 versus 1,110 at the end of the fiscal 2012 third quarter.

3

Sales growth in the fiscal 2013 third quarter was driven by same store sales growth and net new stores.  Segment operating earnings and margin growth was primarily due to improvement in gross margin and SG&A leverage.

On May 31, 2013, Beauty Systems Group purchased certain assets of Essential Salon Products, Inc. for $15.7 million.  This transaction included the acquisition of twelve Essential Salon stores and store team members, the addition of several direct sales consultants and exclusive distribution rights to prominent professional hair care brands.  Essential Salon stores are located in Massachusetts, Rhode Island, Maine and New Hampshire.

(1)A detailed table reconciling 2013 and 2012 GAAP net earnings to adjusted net earnings, adjusted EPS and adjusted EBITDA is included in Supplemental Schedule C.

Conference Call and Where You Can Find Additional Information

As previously announced, at approximately 10:00 a.m. (Central) today the Company will hold a conference call and audio webcast to discuss its financial results and its business.  During the conference call, the Company may discuss and answer one or more questions concerning business and financial matters and trends affecting the Company.  The Company’s responses to these questions, as well as other matters discussed during the conference call, may contain or constitute material information that has not been previously disclosed.  Simultaneous to the conference call, an audio webcast of the call will be available via a link on the Company’s website, investor.sallybeautyholdings.com.  The conference call can be accessed by dialing 800-288-8960 (International:  612-332-0107).  The teleconference will be held in a “listen-only” mode for all participants other than the Company’s current sell-side and buy-side investment professionals.  If you are unable to listen in this conference call, the replay will be available at about 12:00 p.m. (Central) August 1, 2013 through August 8, 2013 by dialing 1-800-475-6701 or if international dial 320-365-3844 and reference the conference ID number 298475.  Also, a website replay will be available on investor.sallybeautyholdings.com.

About Sally Beauty Holdings, Inc.

Sally Beauty Holdings, Inc. (NYSE: SBH) is an international specialty retailer and distributor of professional beauty supplies with revenues of $3.5 billion annually.  Through the Sally Beauty Supply and Beauty Systems Group businesses, the Company sells and distributes through 4,500 stores, including approximately 200 franchised units, throughout the United States, the United Kingdom, Belgium, Chile, France, the Netherlands, Canada, Puerto Rico, Mexico, Ireland, Spain and Germany.  Sally Beauty Supply stores offer more than 6,000 products for hair, skin, and nails through professional lines such as Clairol, L’Oreal, Wella and Conair, as well as an extensive selection of proprietary merchandise. Beauty Systems Group stores, branded as CosmoProf or Armstrong McCall stores, along with its outside sales consultants, sell up to 9,800 professionally branded products including Paul Mitchell, Wella, Sebastian, Goldwell, Joico, and Aquage which are targeted exclusively for professional and salon use and resale to their customers.  For more information about Sally Beauty Holdings, Inc., please visit sallybeautyholdings.com.

4

Cautionary Notice Regarding Forward-Looking Statements

Statements in this news release and the schedules hereto which are not purely historical facts or which depend upon future events may be forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.  Words such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan,” “project,” “target,” “can,” “could,” “may,” “should,” “will,” “would,” or similar expressions may also identify such forward-looking statements.

Readers are cautioned not to place undue reliance on forward-looking statements as such statements speak only as of the date they were made.  Any forward-looking statements involve risks and uncertainties that could cause actual events or results to differ materially from the events or results described in the forward-looking statements, including, but not limited to, risks and uncertainties related to: the highly competitive nature of, and the increasing consolidation of, the beauty products distribution industry; anticipating changes in consumer preferences and buying trends and managing our product lines and inventory; potential fluctuation in our same store sales and quarterly financial performance; our dependence upon manufacturers who may be unwilling or unable to continue to supply products to us; the possibility of material interruptions in the supply of products by our manufacturers; products sold by us being found to be defective in labeling or content; compliance with laws and regulations or becoming subject to additional or more stringent laws and regulations; product diversion to mass retailers or other unauthorized resellers; the operational and financial performance of our franchise-based business; the success of our internet and catalogue-based businesses; successfully identifying acquisition candidates and successfully completing desirable acquisitions; integrating acquired businesses in the future; opening and operating new stores profitably; the impact of the health of the economy upon our business; the success of our cost control plans; protecting our intellectual property rights, particularly our trademarks; conducting business outside the United States; disruption in our information technology systems; severe weather, natural disasters or acts of violence or terrorism; the preparedness of our accounting and other management systems to meet financial reporting and other requirements and the upgrade of our financial reporting system; being a holding company, with no operations of our own, and depending on our subsidiaries for cash; our substantial indebtedness; the possibility that we may incur substantial additional debt in the future; restrictions and limitations in the agreements and instruments governing our debt; generating the significant amount of cash needed to service our debt and refinancing all or a portion of our indebtedness or obtaining additional financing on favorable terms, if at all; changes in interest rates increasing the cost of servicing our debt; the potential impact on us if the financial institutions we deal with become impaired and the costs and effects of litigation.

Additional factors that could cause actual events or results to differ materially from the events or results described in the forward-looking statements can be found in our most recent Annual Report on Form 10-K for the year ended September 30, 2012, as filed with the Securities and Exchange Commission.  Consequently, all forward-looking statements in this release are qualified by the factors, risks and uncertainties contained therein.  We assume no obligation to publicly update or revise any forward-looking statements.

5

Note Concerning Non-GAAP Measurement Tools

We have provided detailed explanations of our non-GAAP financial measures in our Form 8-K filed this morning, which is available on our website.

Supplemental Schedules

Consolidated Statement of Earnings	A
Segment Information	B
Non-GAAP Financial Measures Reconciliations	C
Store Count and Same Store Sales	D
Selected Financial Data and Debt	E

6

Supplemental Schedule A

SALLY BEAUTY HOLDINGS, INC. AND SUBSIDIARIES

Consolidated Statements of Earnings

(In thousands, except per share data)

(Unaudited)

	Three Months Ended						Nine Months Ended
	June 30,						June 30,
	2013		2012		% CHG		2013		2012		% CHG
Net sales	$	912,101	$	886,991	2.8	%	$	2,715,781	$	2,641,087	2.8	%
Cost of products sold and distribution expenses	455,018		442,612		2.8	%	1,369,876		1,338,065		2.4	%
Gross profit	457,083		444,379		2.9	%	1,345,905		1,303,022		3.3	%
Selling, general and administrative expenses (1)	295,719		291,533		1.4	%	900,778		873,736		3.1	%
Depreciation and amortization	18,798		16,299		15.3	%	52,853		47,792		10.6	%
Operating earnings	142,566		136,547		4.4	%	392,274		381,494		2.8	%
Interest expense (2)	27,006		26,925		0.3	%	80,510		113,240		-28.9	%
Earnings before provision for income taxes	115,560		109,622		5.4	%	311,764		268,254		16.2	%
Provision for income taxes	43,094		40,135		7.4	%	115,426		100,820		14.5	%
Net earnings	$	72,466	$	69,487	4.3	%	$	196,338	$	167,434	17.3	%
Earnings per share:
Basic	$	0.43	$	0.38	13.2	%	$	1.13	$	0.91	24.2	%
Diluted	$	0.42	$	0.37	13.5	%	$	1.10	$	0.88	25.0	%
Weighted average shares:
Basic	168,725		182,756				173,528		184,598
Diluted	173,762		188,496				178,278		189,901

					Basis Pt Chg						Basis Pt Chg
Comparison as a % of Net sales
Sally Beauty Supply Segment Gross Profit Margin	55.6	%	55.4	%	20		54.8	%	54.5	%	30
BSG Segment Gross Profit Margin	41.5	%	41.4	%	10		41.1	%	40.9	%	20
Consolidated Gross Profit Margin	50.1	%	50.1	%	0		49.6	%	49.3	%	30
Selling, general and administrative expenses	32.4	%	32.9	%	(50	)	33.2	%	33.1	%	10
Consolidated Operating Profit Margin	15.6	%	15.4	%	20		14.4	%	14.4	%	0
Net Earnings Margin	7.9	%	7.8	%	10		7.2	%	6.3	%	90
Effective Tax Rate	37.3	%	36.6	%	70		37.0	%	37.6	%	(60	)

(1)

Selling, general and administrative expenses include share-based compensation of $3.2 million and $2.8 million for the three months ended June 30, 2013 and 2012; and $15.5 million and $13.8 million for the nine months ended June 30, 2013 and 2012, respectively.

(2)

For the three and nine months ended June 30, 2012, interest expense includes $3.2 million in unamortized deferred financing costs expensed in connection with the Company’s repayment in full of a senior term loan. For the nine months ended June 30, 2012, interest expense also includes a loss on extinguishment of debt of $34.6 million in connection with the Company’s redemption of outstanding notes with the proceeds of the Company’s senior notes due 2019.

Supplemental Schedule B

SALLY BEAUTY HOLDINGS, INC. AND SUBSIDIARIES

Segment Information

(In thousands)

(Unaudited)

	Three Months Ended								Nine Months Ended
	June 30,								June 30,
	2013			2012			% CHG		2013			2012			% CHG
Net sales:
Sally Beauty Supply	$	559,150		$	553,419		1.0	%	$	1,673,942		$	1,643,749		1.8	%
Beauty Systems Group	352,951			333,572			5.8	%	1,041,839			997,338			4.5	%
Total net sales	$	912,101		$	886,991		2.8	%	$	2,715,781		$	2,641,087		2.8	%
Operating earnings:
Sally Beauty Supply	$	117,672		$	117,622		0.0	%	$	329,715		$	330,023		-0.1	%
Beauty Systems Group	52,734			46,667			13.0	%	151,307			135,590			11.6	%
Segment operating earnings	$	170,406		$	164,289		3.7	%	$	481,022		$	465,613		3.3	%
Unallocated corporate expenses (1)	(24,650		)	(24,917		)	-1.1	%	(73,245		)	(70,318		)	4.2	%
Share-based compensation	(3,190		)	(2,825		)	12.9	%	(15,503		)	(13,801		)	12.3	%
Interest expense (2)	(27,006		)	(26,925		)	0.3	%	(80,510		)	(113,240		)	-28.9	%
Earnings before provision for income taxes	$	115,560		$	109,622		5.4	%	$	311,764		$	268,254		16.2	%

					Basis Pt Chg						Basis Pt Chg
Segment operating profit margin:
Sally Beauty Supply	21.0	%	21.3	%	(30	)	19.7	%	20.1	%	(40	)
Beauty Systems Group	14.9	%	14.0	%	90		14.5	%	13.6	%	90
Consolidated operating profit margin	15.6	%	15.4	%	20		14.4	%	14.4	%	0

(1)

Unallocated expenses consist of corporate and shared costs.

(2)

For the three and nine months ended June 30, 2012, interest expense includes $3.2 million in unamortized deferred financing costs expensed in connection with the Company’s repayment in full of a senior term loan. For the nine months ended June 30, 2012, interest expense also includes a loss on extinguishment of debt of $34.6 million in connection with the Company’s redemption of outstanding notes with the proceeds of the Company’s senior notes due 2019.

Supplemental Schedule C

SALLY BEAUTY HOLDINGS, INC. AND SUBSIDIARIES

Non-GAAP Financial Measures Reconciliations

(In thousands, except per share data)

(Unaudited)

	Three Months Ended							Nine Months Ended
	June 30,							June 30,
	2013		2012			% CHG		2013		2012			% CHG
Adjusted EBITDA:
Net earnings (per GAAP)	$	72,466	$	69,487		4.3	%	$	196,338	$	167,434		17.3	%
Add:
Depreciation and amortization	18,798		16,299			15.3	%	52,853		47,792			10.6	%
Share-based compensation (1)	3,190		2,825			12.9	%	15,503		13,801			12.3	%
Interest expense (2)(3)	27,006		26,925			0.3	%	80,510		113,240			-28.9	%
Provision for income taxes	43,094		40,135			7.4	%	115,426		100,820			14.5	%
Adjusted EBITDA (Non-GAAP)	$	164,554	$	155,671		5.7	%	$	460,630	$	443,087		4.0	%
Net earnings (per GAAP)	$	72,466	$	69,487				$	196,338	$	167,434
Add (Less):
Loss on extinguishment of debt (2)	—		3,231					—		37,789
Interest expense on redeemed debt (3)	—		—					—		5,149
Amortization of deferred financing costs	—		—					—		229
Tax provision for the adjustments to net earnings (4)	—		(1,163		)			—		(15,540		)
Adjusted net earnings, excluding non-recurring items (Non-GAAP)	$	72,466	$	71,555		1.3	%	$	196,338	$	195,061		0.7	%
Adjusted earnings per share (Non-GAAP):
Basic	$	0.43	$	0.39		10.3	%	$	1.13	$	1.06		6.6	%
Diluted	$	0.42	$	0.38		10.5	%	$	1.10	$	1.03		6.8	%
Weighted average shares:
Basic	168,725		182,756					173,528		184,598
Diluted	173,762		188,496					178,278		189,901

(1)	Share-based compensation for the nine months ended June 30, 2013 and 2012 includes $5.9 million and $5.3 million, respectively, of accelerated expense related to certain retirement-eligible employees who are eligible to continue vesting awards upon retirement.
(2)	For the three and nine months ended June 30, 2012, interest expense includes $3.2 million in unamortized deferred financing costs expensed in connection with the Company’s repayment in full of a senior term loan. For the nine months ended June 30, 2012, interest expense also includes a loss on extinguishment of debt of $34.6 million in connection with the Company’s redemption of outstanding notes with the proceeds of the Company’s senior notes due 2019.
(3)	For the nine months ended June 30, 2012, interest expense includes interest on certain notes after November 8, 2011 and until their December 2011 redemption of $5.1 million, as well as interest on the Company’s senior notes due 2019 issued on that date. This pro-forma adjustment assumes that the redemption of such notes occured on November 8, 2011.
(4)	The tax provision for the adjustments to net earnings were calculated using an estimated effective tax rate of 36.0%.

Supplemental Schedule D

SALLY BEAUTY HOLDINGS, INC. AND SUBSIDIARIES

Store Count and Same Store Sales

(Unaudited)

	As of June 30,
	2013	2012	CHG
Number of retail stores (end of period):
Sally Beauty Supply:
Company-operated stores	3,358	3,234	124
Franchise stores	21	24	(3	)
Total Sally Beauty Supply	3,379	3,258	121
Beauty Systems Group:
Company-operated stores	1,063	1,017	46
Franchise stores	160	159	1
Total Beauty System Group	1,223	1,176	47
Total	4,602	4,434	168
BSG distributor sales consultants (end of period) (1)	995	1,110	(115	)

	2013		2012		Basis Pt Chg
Third quarter company-operated same store sales growth (decline) (2)
Sally Beauty Supply	-0.8	%	5.2	%	(600	)
Beauty Systems Group	4.6	%	5.3	%	(70	)
Consolidated	0.7	%	5.2	%	(450	)

					Basis Pt Chg
Nine months ended June 30 company-operated same store sales growth (decline) (2)
Sally Beauty Supply	-0.3	%	7.5	%	(780	)
Beauty Systems Group	3.8	%	6.3	%	(250	)
Consolidated	0.9	%	7.1	%	(620	)

(1)

Includes 329 and 403 distributor sales consultants as reported by our franchisees at June 30, 2013 and 2012, respectively.

(2)

For the purpose of calculating our same store sales metrics, we compare the current period sales for stores open for 14 months or longer as of the last day of a month with the sales for these stores for the comparable period in the prior fiscal year. Our same store sales are calculated in constant U.S. dollars and include internet-based sales and the effect of store expansions, if applicable, but do not generally include the sales of stores relocated until 14 months after the relocation. The sales of stores acquired are excluded from our same store sales calculation until 14 months after the acquisition.

Supplemental Schedule E

SALLY BEAUTY HOLDINGS, INC. AND SUBSIDIARIES

Selected Financial Data and Debt

(In thousands)

(Unaudited)

	June 30, 2013			September 30, 2012
Financial condition information (at period end):
Working capital	$	503,455		$	686,519
Cash and cash equivalents	53,444			240,220
Property and equipment, net	222,355			202,661
Total assets	1,925,847			2,065,800
Total debt, including capital leases	1,690,761			1,617,230
Total stockholders’ (deficit) equity	$	(294,383	)	$	(115,085	)
	As of
	June 30, 2013			Interest Rates
Debt position excluding capital leases (at period end):
Revolving ABL facility	$	75,500		(i) Prime + 1.25-1.75% or (ii) LIBOR + 2.25-2.75%
Senior notes due 2019	750,000			6.875%
Senior notes due 2022 (1)	858,613			5.750%
Other (2)	1,627			4.93% to 5.79%
Total debt	$	1,685,740
Debt maturities, excluding capital leases
Twelve months ending June 30,
2014	$	76,734
2015	393
2016-2019	—
Thereafter (1)	1,608,613
Total debt	$	1,685,740

(1)	Amount, at June 30, 2013, includes unamortized premium of $8.6 million related to notes in an aggregate principal amount of $150.0 million issued in September 2012. The 5.75% interest rate relates to notes in an aggregate principal amount of $850.0 million.
(2)	Represents pre-acquisition debt of businesses acquired.