Exhibit 99.1 |
1 Table of Contents Transaction Overview Company Overview Industry and Market Position Financial Review Growth Strategy Appendix (EBITDA Reconciliation) |
2 Cautionary Language Concerning Forward-Looking Statements This presentation includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical information are forward- looking statements. Forward-looking statements are subject to known and unknown risks and uncertainties, many of which may be beyond our control. A number of important factors could cause actual results to differ materially from those in the forward-looking statements. Factors that could cause actual results to differ from those in the forward-looking statements include: the effects of our substantial debt; loss of our distributorship rights; competition within relevant product markets; sales by unauthorized distributors in our exclusive markets; dependence on certain suppliers of manufactured products and termination of distribution agreements with key suppliers that cover exclusive territories; the effect of consolidation in the beauty supply industry; the risk that the benefits from the separation transaction with Alberto-Culver Company may not be fully realized or may take longer to realize than expected; the impact of certain events on the tax-free treatment of our spinoff; our ability to maintain and/or improve sales and earnings performance; our ability to attract and retain qualified personnel and key employees; risks inherent in acquisitions, dispositions and strategic alliances; foreign currency exchange and interest rate fluctuations; general economic, political and business conditions that would adversely affect us or our suppliers, distributors or customers; adverse weather conditions, natural disasters and acts of terrorism; changes in costs, including changes in labor costs, raw material prices or advertising and marketing expenses; the costs and effects of unanticipated legal or administrative proceedings; and disruption from the separation transaction with Alberto-Culver Company making it more difficult for us to maintain relationships with our customers, employees or suppliers. Forward-looking statements are made only as of the date of this presentation, and we do not undertake any obligation, other than as may be required by law, to update or revise any forward-looking statements to reflect changes in assumptions, the occurrence of unanticipated events, changes in future operating results over time or otherwise. |
Transaction Overview |
4 Company: Sally Beauty Holdings, Inc. Listing: New York Stock Exchange Began regular trading November 17, 2006 Symbol: SBH Shares Issued & Outstanding as of 11/17/06: 180,050,492 CD&R - Managed Funds (CD&R), Direct and Indirect Ownership: 48.0% on a primary basis CD&R Lock-up: From 11/06 - one year 48%; two years 35% Introduction __________________ (1) CD&R ownership of Sally Beauty Holdings is required to remain greater than 35% through the second anniversary of the closing date, subject to exceptions. |
5 Transaction Overview CD&R acquired approximately 48.0% of SBH in connection with a comprehensive restructuring of Alberto-Culver: CD&R invested $575 million in exchange for approximately 48.0% economic and voting interest in Sally Beauty Holdings Sally Holdings LLC and its subsidiaries incurred approximately $1,850 million of indebtedness $2,349 million ($25.00 per ACV share) dividend paid to ACV shareholders ACV’s legacy consumer products business spun-off 100% to ACV shareholders (NYSE: ACV) Sally Beauty Holdings became an independent publicly traded company owned approximately 52.0% by ACV shareholders and approximately 48.0% by CD&R at closing (NYSE: SBH) Represents an implied purchase price multiple of 10.3x 2006 Adjusted EBITDA of $296.2 million (1) Transaction capitalized with approximately $1.85 billion of debt and approximately $1.2 billion of equity 52.0% Alberto-Culver – Pre- Transaction Alberto - Culver Consumer Products Sally Beauty Holdings Sally Beauty Holdings – At Closing Consumer Products Sally Beauty Holdings ACV Shareholders CD&R 100% 48.0% ACV Shareholders 100% __________________ (1) Adjusted EBITDA for fiscal year ended September 30, 2006. Represents Credit Agreement EBITDA adjusted for cost savings management believes it can realize when operating SBH on a stand-alone basis. See attached appendix for reconciliation of non-GAAP financial measures. |
6 Key Investment Highlights Largest distributor of professional beauty supplies in the U.S. based on store count Only national distribution network Leading Market Position Leading Market Position Market CAGR of 5% since 1990 with no single year below 3% Highly fragmented market with over 236,000 salons Many SKUs not available in mass channel Attractive and Consistent Industry Fundamentals Attractive and Consistent Industry Fundamentals High profitability with limited cash outlay – strong ROIC Strong free cash flows Attractive free cash flow yield Strong Historical Financial Performance and Cash Flows Strong Historical Financial Performance and Cash Flows Tenured management team with Sally Beauty and industry experience New President of Sally Beauty from Borders, CRM expertise Seeking new CFO experienced in leveraged, public companies Seasoned and Experienced Management Team Seasoned and Experienced Management Team Geographic expansion and store fill-in strategy Increased customer traffic Potential entrance into new beauty store formats Margin Improvement Opportunities Margin Improvement Opportunities Procurement, private/control label and low-cost country sourcing opportunities Significant operating improvement opportunities at BSG High operating leverage Attractive Growth Opportunities Attractive Growth Opportunities |
Company Overview |
8 The Company Company Overview Company Overview The largest distributor of professional beauty supplies in the U.S. based on store count 3,169 company owned stores worldwide 170 franchised stores worldwide Approximately 1,200 distributor sales consultants Operations in: U.S., U.K., Canada, Puerto Rico, Mexico, Japan, Ireland, Germany, Spain and the Netherlands Sally Beauty Supply (Salon Professionals and General Consumers) Sally Beauty Supply (Salon Professionals and General Consumers) The largest specialty retailer of professional beauty supplies in the U.S. based on store count 2,511 retail outlets worldwide ~90% of stores located in U.S. Average size of 1,700 sq. ft. Beauty Systems Group (Salon Professionals Only) Beauty Systems Group (Salon Professionals Only) Largest full-service distributor of professional beauty supplies in the U.S. 658 company-owned / 170 franchised retail outlets worldwide Approximately 1,200 distributor sales consultants Twice the size of the next largest full-service competitor Many products are sold under exclusive distribution agreements Average size of 2,800 sq. ft. 2006 Net Sales: $2,373 mm 40% 60% Sally $1,419 mm BSG $954 mm 2006 Segment Operating Profit: $252 27% 73% Sally $185 mm BSG $67 mm 2006 Net Sales 2006 Segment Operating Profit ____________________ Note: As of September 30, 2006. |
9 BSG Geographic Footprint Sally Beauty Supply 50 22 63 213 41 24 4 35 180 80 21 9 90 43 19 31 51 39 5 61 18 43 33 5 83 2 15 9 1 38 18 21 61 98 39 21 85 7 45 1 59 241 20 66 34 25 12 2 International Operations Country Stores Entry U.K. 186 Acquisition Mexico 40 Acquisition Japan 32 Joint Venture Puerto Rico 32 Organic Germany 27 Acquisition Canada 9 Organic Ireland 2 Acquisition 1 3 8 14 103 19 1 18 3 19 5 7 35 28 21 15 11 1 4 2 1 6 20 3 2 1 6 8 48 50 15 14 3 10 2 19 73 12 32 26 6 6 3 10 12 2 3 4 3 Company-Owned Stores (658) Franchise Stores (170) Total Stores: 2,511 International Operations Country Owned Stores Franchise Stores Canada 70 --- Mexico --- 32 Total Stores: 828 ____________________ Note: As of September 30, 2006. |
10 BSG Merchandise Offering 16% 20% 21% 14% 4% 11% 14% Sally Beauty Supply Electrical Appliances Hair Care Hair Color Skin and Nail Care Brushes, Cutlery and Accessories Ethnic Products Other Beauty Items Clairol L’Oreal Revlon Conair Helen of Troy Oster Ion Beauty Secrets Heel to Toe Silk Elements Matrix Redken Paul Mitchell Graham Webb TIGI Wella / Sebastian Hair Color 39% 23% 14% 10% 1% 3% 4% 6% Hair Care Electrical Appliances Brushes, Cutlery and Accessories Other Beauty Items Skin and Nail Care Ethnic Products Promotional Items Select Leading Third-Party Brands Select Private Label/Control Brands¹ We offer a diversified mix of beauty products Fusion Energy of Beauty ____________________ Note: Estimate as of September 30, 2006. |
11 Frequent re-stocking needs Undercapitalized stylists Just-in-time purchases Lack of warehouse and shelf space Growing trend toward booth renting The fragmented nature of the salon industry enables distributors to play an important role in the supply chain 2% 76% 16% 6% 1 - 4 Employees 5 - 9 Employees 10 - 19 Employees 20+ Employees Total Number of Salons: 236,674 ____________________ Source: Professional Consultants and Resources, 2005 Study. U.S. Salon Market Attractive, Highly Fragmented Customer Base |
12 Stores 2,511 828 U.S. States 48 42 Int’l. Countries 7 5 (1) SKUs 5,300 - 7,400 3,700 - 9,500 --- Differentiated Customer Value Proposition Convenient store locations / national coverage Comprehensive product selection High in-stock positions Educated salespeople Competitive pricing Widely recognized – destination for customers Customer loyalty program The Company’s value proposition has created strong customer loyalty and barriers to entry, reinforcing its power in the channel (1) Store locations in 2 countries outside the U.S. and non-store based distribution in 3 additional countries. |
Industry & Market Position |
14 Consistent Market Growth U.S. Beauty Supply Industry has experienced steady growth with no single year below 3% (1) Y-o-Y % Growth N/A 5.5% 5.8% 6.8% 6.4% 6.1% 4.3% 5.2% 6.1% 5.7% 4.7% 3.0% 3.7% 3.1% 3.5% 3.6% $3.4 $3.3 $3.1 $3.0 $2.9 $2.9 $2.7 $2.6 $2.3 $2.2 $2.1 $2.0 $1.8 $1.7 $1.6 $2.4 0.0 1.0 2.0 3.0 $4.0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 ($ bn) ____________________ Source: Professional Consultants & Resources, 2005 Study. (1) Based on manufacturer sales of professional beauty supplies. |
15 Beauty Supply Products $3.4 billion in Manufacturer Sales Exclusive / Full Service Open Line Direct Mega Channel Description Serves salons and salon professionals Distributes “professional- only” products Cash and carry stores and sales force Retail consumers and salon professionals Small retail formats Channel for high-end products Large-format salons supplied directly by manufacturers Manufacturing $ Size (mm) $1,482 $1,111 $404 $370 % of Total 44% 33% 12% 11% Key Players BSG Beauty Alliance/State Maly’s Sally Local and Regional Operators Estée Lauder: Aveda Bumble & Bumble L’Oréal: Kérastase P&G: Wella Sebastian Regis Hair Cuttery Ulta Beauty Brands Beauty First Professional Beauty Supply Channel Overview Current Focus ____________________ Source: Professional Consultants & Resources, 2005 Study. (1) Wholesale professional beauty supply market size is a management estimate, based upon a 2005 study of manufacturer-level sales conducted by Professional Consultants & Resources. The study estimates that 2005 manufacturer-level sales for professional beauty supplies were approximately $3.4 billion. Large addressable market with approximately $6.3 billion of wholesale sales in 2005 (1) |
16 Leading Market Position ____________________ (1) Wholesale professional beauty supply market size is a management estimate, based upon a 2005 study of manufacturer-level sales conducted by Professional Consultants & Resources. The study estimates that 2005 manufacturer-level sales for professional beauty supplies were approximately $3.4 billion. (2) Estimated market share calculated as follows: (i) Sally Beauty Supply’s net sales for the fiscal year ended September 30, 2005 of $1.4 billion divided by estimated wholesale market size of $6.3 billion and (ii) BSG’s net sales for the fiscal year ended September 30, 2005 of $0.9 billion divided by estimated wholesale market size of $6.3 billion. Other Players Sally Beauty Supply (2) Market Size: $6.3 billion (1) Beauty Systems Group (2) Sally – estimated 22% share (2) Leading open-line retailer / distributor in U.S., based on store count Competition limited to local and regional operators BSG – estimated 14% share (2) Leading full-service / exclusive distributor in U.S. 2x sales of next competitor Wholesale Professional Beauty Supply Market (1) 22% 14% 64% Only retailer / distributor with a national distribution footprint |
Financial Review |
18 $769 $876 $1,092 $1,276 $1,453 $1,667 $1,824 $2,098 $2,373 $2,254 $969 0 500 1000 1500 2000 $2,500 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Strong Historical Financial Performance ____________________ Note: Fiscal Year-end September 30. (1) Refers to Credit Agreement EBITDA. See attached appendix for reconciliation of non-GAAP financial measures. Consolidated EBITDA (1) Consolidated Net Sales ($ mm) Comparable Store Sales: NA NA 3% 3% 7% 6% 6% 4% 5% 2% 3% $91 $104 $117 $129 $146 $167 $195 $215 $247 $260 $290 $0 $50 $100 $150 $200 $250 $300 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 EBITDA (1) Margin: 11.9% 11.8% 12.1% 11.8% 11.5% 11.5% 11.7% 11.8% 11.8% 11.5% 12.2% ($ in Millions) Strong and consistent historical sales and profitability growth |
19 Consolidated: Historical Financials ($ in millions) ____________________ (1) See attached appendix for reconciliation of non-GAAP financial measures. Fiscal Year Ended September 30, CAGR 2001 2002 2003 2004 2005 2006 2001 – 2006 Net Sales $1,452.5 $1,667.0 $1,824.0 $2,097.7 $2,254.3 $2,373.1 10.3% % Growth 13.9% 14.8% 9.4% 15.0% 7.5% 5.3% Gross Profit $615.1 $715.0 $807.1 $950.9 $1,027.0 % Margin 42.3% 42.9% 44.2% 45.3% 45.6% Adjusted EBITDA (1) $170.6 $202.2 $224.7 $256.8 $265.8 $296.2 11.7% % Margin 11.7% 12.1% 12.3% 12.2% 11.8% 12.5% Capital Expenditures $17.7 $23.1 $34.2 $52.0 $52.2 $30.3 11.3% % of Sales 1.2% 1.4% 1.9% 2.5% 2.3% 1.3% Adjusted EBITDA (1) – Capex $152.9 $179.0 $190.5 $204.8 $213.6 $265.9 11.7% As % of Adjusted EBITDA (1) 89.6% 88.6% 84.8% 79.8% 80.4% 89.8% |
20 Sally Beauty Supply: Historical Sales Comparable Store Sales Net Sales ($ in Millions) $1,047 $1,132 $1,208 $1,296 $1,359 $1,419 700 950 1,200 $1,450 2001 2002 2003 2004 2005 2006 2.6% 2.7% 6.8% 6.0% 5.7% 2.7% 3.8% 2.4% 2.4% 0.0% 2.0% 4.0% 6.0% 8.0% 1998 1999 2000 2001 2002 2003 2004 2005 2006 __________________ Note: Fiscal Year-end September 30. |
21 BSG: Historical Sales Comparable Store Sales Net Sales ($ in Millions) $405 $535 $616 $802 $895 $954 0 200 400 600 800 $1,000 2001 2002 2003 2004 2005 2006 __________________ Note: Fiscal Year-end September 30. 5.8% 15.5% 14.4% 8.3% 4.4% 4.6% 8.5% (0.6%) 4.1% (5.0%) 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 1998 1999 2000 2001 2002 2003 2004 2005 2006 |
22 Current Debt Structure Amount Rate Ratings ABL ($400mm) $70.0 Floating Ba2 / BB- Term Loan A 150.0 Floating B2 / B+ Term Loan B 920.0 Floating B2 / B+ Senior Notes 430.0 9.25% B2 / CCC+ Senior Sub. Notes 280.0 10.50% Caa1 / CCC Total Debt $1,850.0 ($ In Millions) Corporate Ratings: B2 (Stable) / B (Positive) LIBOR Spot Rate as of November 30, 2006: 5.37% Moody’s Standard & Poors Investment Grade Baa3 BBB - High Yield: Ba1 BB + Ba2 BB Ba3 BB - B1 B + B2 B B3 B - Caa1 CCC + Caa2 CCC |
Growth Strategy |
24 Segment Growth and Profitability Initiatives Expand store base Drive gross margins Increase private/control label Customer mix shift Drive customer traffic Loyalty programs and customer relationship management Expand store base Further penetrate existing geographies Enter new territories Improve profitability Optimize distribution network Consolidate procurement Capitalize on Opportunities Continue Executing |
25 Store Growth Potential Low required capital of $66k, inventory $70k Positive contribution margins within 3 months 2 year cash payback Minimal staffing requirements and low rent expense Low required capital of $68k, inventory $95k Positive contribution margins within 4 months 2 year cash payback Minimal staffing requirements and low rent expense 26 37 123 93 8 149 130 6 0 50 100 150 2003 2004 2005 2006 Organic Acquisition Store Count: 543 692 822 828 Store Count: 2,272 2,355 2,419 2,511 Net New Stores We believe there is significant domestic and international potential for continued store growth 95 83 64 92 0 25 50 75 100 2003 2004 2005 2006 Net New Stores |
26 Seasoned and Experienced Management Team Name Title Years of Sally Experience Years of Beauty Industry Experience Gary Winterhalter President, CEO 19 36 John Golliher President, Beauty Systems Group 7 31 Neil Riemer President, Armstrong McCall 6 21 Michael Spinozzi (1) President, Sally Beauty Supply --- --- Gary Robinson SVP, CFO and Treasurer 11 11 W. Richard Dowd SVP, Distribution and Chief Information Officer 20 20 Bennie Lowery SVP, General Merchandise Manager, Beauty Systems Group 18 35 Raal Roos SVP, General Counsel, Secretary 11 11 Proven management team with an average of 21 years of industry experience ____________________ (1) Joined Sally Beauty Holdings in May 2006. Prior to that time, Mr. Spinozzi served as Executive Vice President of Borders Group, Inc. 12 years 21 years Team Average |
27 Key Investment Highlights Leading Market Position Leading Market Position Attractive and Consistent Industry Fundamentals Attractive and Consistent Industry Fundamentals Strong Historical Financial Performance and Cash Flows Strong Historical Financial Performance and Cash Flows Seasoned and Experienced Management Team Seasoned and Experienced Management Team Margin Improvement Opportunities Margin Improvement Opportunities Attractive Growth Opportunities Attractive Growth Opportunities |
Appendix |
29 EBITDA Reconciliation EBITDA Reconciliation to Net Earnings _______________ (1) On October 22, 2003, Alberto-Culver converted all issued shares of its Class A common stock into Class B common stock on a one-for-one basis. The conversion required to Alberto-Culver recognize non-cash charges from the re-measurement of the intrinsic value of all Class A stock options outstanding on the conversion date that were issued to SBH employees. A portion of the charge was recognized on the date of the conversion while the remaining amount was incurred over the remaining vesting periods. (2) Alberto-Culver adopted SFAS No. 123 (R) on October 1, 2005 using the modified prospective method. Consequently, compensation expense related to Alberto-Culver stock options granted to SBH employees is recognized for new stock option grants beginning in fiscal year 2006 and for the unvested portion of outstanding stock options that were granted prior to the adoption of SFAS No. 123 (R). In accordance with the modified perspective, the financial statements for prior periods have not been restated. (3) In connection with the terminated spin/merge between Alberto-Culver and Regis, Alberto-Culver incurred fees and expenses related to the termination fee paid to Regis and legal and investment banking fees. (4) As result of the SEC’s interpretation regarding certain lease accounting issues, Alberto-Culver identified certain deviations to these interpretations which resulted in a non-cash charge in the second quarter 2005 of $1.9 million. (5) Reflects pro forma adjustments to eliminate the sales-based service fees charged by Alberto-Culver and reflected on Alberto-Culver’s historical consolidated statements of earnings associated with consulting, business development and advisory services agreements between Alberto-Culver and certain subsidiaries of SBH, less an adjustments for consulting services with Mr. Michael Renzulli, former Chairman of Sally Holdings, pursuant to his termination and consulting agreement in connection with the transaction. (6) Pro forma for the separation from Alberto-Culver, management believes that it can realize cost savings that could reduce stand-alone costs to as little as $7.5 million on an annual basis. (7) Represents a pro forma adjustment for consulting services with Mr. Renzulli pursuant to his termination and consulting arrangement. This adjustment reduces the pro forma operating earnings adjustment included in the calculation of Credit Agreement EBITDA and is included in the estimated pro forma stand-alone corporate expenses adjustment. This adjustment eliminates double-counting of the adjustment in the calculation of Adjusted EBITDA. ($ in Millions) (1) (Unaudited) Fiscal Year Ended September 30, 2001 2002 2003 2004 2005 2006 Net Earnings $89.3 $97.8 $107.5 $105.3 $116.5 $107.9 Interest expense, net of interest income 2.3 1.3 0.3 2.3 3.0 0.1 Provision for income taxes 53.1 57.0 62.2 62.1 73.2 68.7 Depreciation and amortization 22.7 22.7 22.3 24.6 33.9 38.0 Non-cash charge related to Alberto-Culver conversion to one class of common stock – – – 27.0 4.1 – Stock option expense (2) – – – – – 5.2 Expenses related to terminated spin/merge (3) – – – – – 41.5 Lease accounting adjustment (4) – – – – 1.9 – Pro forma operating earnings adjustments (5) (0.5) 16.2 22.9 25.6 27.1 28.3 Credit Agreement EBITDA $166.9 $195.0 $215.3 $246.8 $259.6 $289.7 Adjustments: Add-back of allocated corporate expenses from Alberto-Culver (6) 10.8 14.2 16.5 16.9 13.3 13.5 Estimated pro forma stand-alone corporate expenses (6) (7.5) (7.5) (7.5) (7.5) (7.5) (7.5) Adjustment to reflect double-counting of outside consulting expenses (7) 0.5 0.5 0.5 0.5 0.5 0.5 Adjusted EBITDA $170.6 $202.2 $224.7 $256.8 $265.8 $296.2 |