Sally Beauty Holdings, Inc.

We are involved, from time to time, in various claims, administrative proceedings and lawsuits incidental to or arising from the conduct of our business, which may range from individual claims to class action litigation. We carry insurance coverage above our self-insured retention levels in amounts we believe are reasonable under the circumstances, although such coverage may not fully cover our liabilities related to these matters. Although the ultimate disposition of these claims and proceedings cannot be predicted with certainty, we do not currently believe the ultimate resolution of these matters will have a material adverse impact on our consolidated financial position, cash flows, or results of operations. However, there can be no assurance that future adverse judgments or associated costs will not be material to our financial position, cash flows, or results of operations for a particular period. See Note 15 in the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report for additional information on legal proceedings.