Ladies and gentlemen, thank you for standing by and welcome to the Sally Beauty Holdings fiscal 2012 first quarter earnings results. At this time, all lines are in a listen-only mode. Later, we will conduct a question-and-answer session. Instructions will be given at that time. I would now like to turn the conference over to your host, Ms. Karen Fugate. Please go ahead.

Thank you. Before we begin, I would like to remind you that certain comments including matters such as forecasted financial information, contracts or business and trend information made during this call may contain forward-looking statements within the meaning of Section 21-E of the Securities Exchange Act of 1934. Many of these forward-looking statements can be identified by use of words such as may, will, should, expect, anticipate, estimate, assume, continue, project, plan, believe and similar words or phrases. These matters are subject to a number of factors that could cause actual results to differ materially from expectations. Those factors are described in Sally Holdings’ SEC filings, including its most recent Annual Report on Form 10-K for the fiscal year ended September 30, 2011. The company does not undertake any obligation to publicly update or revise its forward-looking statements. The company has provided a detailed explanation and reconciliations of its adjusting items and non-GAAP financial measures in its earnings press release and on its website. With me on the call today are Gary Winterhalter, President and Chief Executive Officer; and Mark Flaherty, Senior Vice President and Chief Financial Officer. Now, I would like to turn the call over to Gary.

Thank you, Karen, and good morning everyone. Thank you for joining us for our fiscal 2012 first quarter earnings call. I will begin today’s discussion with a high-level review of our financial results followed by a review of our business initiatives. Mark will then take you through the fiscal 2012 first quarter in more detail. As you may have seen from our press release this morning, fiscal 2012 is up to a terrific start with strong performance from each of our business segments. We delivered consolidated sales growth of 9% and record same-store sales growth of 7.1%. Gross profit margin expanded a 100 basis points to reach 48.8%. We achieved SG&A leverage in the quarter which contributed to our 20% EBITDA growth. Adjusted net earnings in the first quarter increased by 36% to $55.7 million or $0.29 per share after adjusting for an aftertax charge of $25.6 million. This charge is due to the issuance of our new senior notes and the reduction of our 2014 senior and 2016 senior sub notes. Including this $25.6 million charge, GAAP net earnings were down 26.4% to $30.1 million or $0.16 per diluted share. We ended the quarter with a store count of 4363, an increase of 185 or growth of 4.4% over last year of which 4% was organic growth. Turning to our segment performance. Starting with the Sally Beauty supply. Same-store sales growth for Sally Beauty hit a record high of 8% versus 6.4% in the prior year. Net sales reached $536.4 million for a strong growth of 11.5%. The primary contributors of this strong sales performance include higher transactions and higher ticket in Sally North America driven by our CRM program as well as improvement in our international businesses . Gross profit margin at Sally Beauty ended the quarter at…

Thanks Gary. Consolidated net sales for the first quarter were $864.8 million, an increase of 9%. This increase was primarily driven by 7.1% growth in same-store sales and 2.1% in new store growth. Consolidated gross profit was $421.9 million or 48.8% of sales, a 100 basis point improvement from the fiscal 2011 first quarter. First quarter SG&A expenses were $293 million and represented 33.9% of sales, a 50 basis point improvement from the 2011 first quarter. Unallocated corporate expenses including share-based compensation were $31.1 million or 3.6% of sales versus the fiscal 2011 first quarter expenses of $26.3 million and 3.3% of sales. For the fiscal year 2012, unallocated corporate expenses, including approximately $18 million in share-based compensation are expected to be in the range of $105 million to $110 million. Consolidated operating earnings in the first quarter increased 22.6% to reach $113.3 million. Operating margin was up 150 basis points to 13.1%. The first quarter strong performance was positively impacted by SG&A leverage and higher gross margins in both of our businesses. Interest expense during the quarter totaled $64 million, a year-over-year increase of $34.4 million. During the quarter we closed on our offering of $750 million related to new senior notes priced at six and [seven eights]. We used the proceeds to redeem our high interest rate senior and senior sub notes as well as paid the redemption premiums and unpaid interest. As a result of these transactions, we incurred pretax charges of $39.9 million which is the primary increase included in our interest expense for the first quarter. For the fiscal 2012 first quarter our effective tax rate was 38.9% versus 34.8% of fiscal 2011 first quarter. The tax rate was higher in the fiscal 2012 first quarter due to non-recurring tax benefits recorded in the fiscal…

Thanks Mark. In summary, we had another very strong quarter and set the tone for fiscal 2012. We believe we have the leverage in place to drive top and bottom line growth for the longer term. As always thank you for your interest is Sally Beauty Holdings and now we will turn it back to the operator to take your questions.

(Operator Instructions) And we’ll go to the first question to the line of Michelle Tan from Goldman Sachs. Please go ahead.

Great, thanks. I apologize in advance for any background noise, because I am on a train. So a couple of questions for you guys as far as the upside that you’re seeing to gross margin from mix etcetera, really seems to be kind of increasing the benefit that you expect to see in kind of a typical year. So can you talk about what’s driving that upside, is it faster shift, mixed shift thing you’ve factored to the P&L or is it a private label and to retail or is there other incremental drivers in there that we should be thinking about?

Michelle I would on the Sally side it’s a little more aggressively retail growth than we normally expect. It’s also significant growth in our Beauty Club card membership and sales to that customer. On the BSG side the market growth in this particular quarter some of that had to do with not repeating some of the Aerial promotions that they did and were already in place, last years first quarter, which has the little bit of effect on top line but its helps the margin a lot when repeating promotions that we really didn’t think were necessary and also on the BSG side there is the continued shift to booth renting and not to play down the additional margin and the growth in margin that we are seeing in our international business.

Great, that’s helpful. On the promotional compare, is that a future opportunity in the coming quarters as well or is that unique to this quarter?

Ah, most of it is unique to this quarter. I don’t want to overplay that. It wasn’t huge but it did help BSG’s margins in this quarter.

Okay, perfect. And then just thinking longer term about this mixture, I know you guys have talked about the core. But anything that is making you think differently about kind of the long-term opportunity, do you think it is sort of perpetual dynamic given the quality that you are offering within private label and just kind of ongoing trend within the so on base or do you think it is something where there is a target level where you kind of reach stasis on these dynamics?

We don’t really have target levels for it. I think the customer kind of determines that when it comes to home brand versus name brands. And it also is somewhat determined by us acquiring brands from within the industry, then just get changed to the side of the ledger the fall on. But also as far as the booth renting movement, I think that that continues to accelerate partly because of the economy and we are seeing it really accelerate in Europe right now.

Great. And then similarly my last one on comp, it is great to see the few acceleration this quarter, can you give any more kind of color on what seems sequentially that stronger in your businesses versus last quarter?

While as I mentioned on the Sally side, we had a great holiday season. The weather has helped us this year December versus last year particularly in Europe but also here in the US. And on the BSG side, we do have, we continue to have more brands coming in the BSG distribution and I just think we’re kind of hitting on all cylinders right now. And, there is also the shift in the holiday season this year, it helps us relative to where Thanksgiving falls in Christmas, and I think for any retail business in particular, when Christmas falls on a Sunday, it’s a very good thing calendar wise.

Next, we will go to line of Meredith Adler, Barclays Capital. Please go ahead.

Thanks and congratulations on a great quarter. I think, my little first impression was not positive enough. So, I wandered, if you could talk about better margins in international. Can we talk a little bit about what’s driving that and maybe related to that as you’re seeing an increase in booth renting in Europe, but maybe talk about, whether that helps margin or whether that’s something separate?

Well, yes it does help margins because that business becomes a store business, whether it’s coming from a manufacturer’s direct sales force or even from our sales force in Europe. When the customer visits the store, it’s just a more profitable sale for us wherever that happens. The other thing that I believe is its helping margins. It’s a lot of little things, Meredith, but also over there, our control label brands are growing very nicely. We also, with some of the acquisitions that we’ve made, particularly the one in the Netherlands, Floral that we just made during the first quarter. They help us going forward because we have more buying power with the supplier now. Typically Europe as I had mentioned before there really aren’t any suppliers such as ourselves at cross-country lines and we find that when we make these acquisitions their costs are significantly higher than what ours are just based on our size versus their size. So obviously when we make acquisition we go to the suppliers and say look it is all part of the same company now and we expect the same the same kind of pricing in this country that we are getting all along in the other countries. So that health that we acquired businesses very nicely in margin and when that all rolls up to the total it is just a benefit to the overall margin a true purchasing power.

And would you say that benefitted this most recent quarter or is that something that is still to come?

In the case of Floral its still to come but we can’t look at a comp because we didn’t have them last year, but for that particular business where it helps us is if we get a better price overall because of our increased size by the acquisition of Floral, then that does help our margin comps.

Okay all right and I guess I would still like to just go back to the thing about booth renting in Europe, maybe because I don’t understand it fully but I think you have said that your store business has historically been more professional than individuals.

That’s correct.

Right. But it sounds like what you are seeing is you don’t have direct distribution for professional business in Europe, so you are taking share from others who are now moving into your stores. Is that it?

We do have some sales consultants in Europe, but nowhere near the degree that we have them at BSG in the US; we are primarily a store based business in Europe. And because of the cost of putting a sales force on the road for the major suppliers that we deal with over there, they are backing off of that and finding that they can't economically call on smaller salons themselves and in many cases they are partnering with us now to try and transition that business to our stores, they want to keep it in their brands, but they are finding that its just not economical to call on small salons. So we’re working very hard on actually doing some experimenting with some of the larger brands over there on how we can transition that business into the stores and not loose it for that work for us.

And then my final question would be just about the UK and you had done a pretty comprehensive remodeling of those locations. Are you still seeing a benefit or are you happy with what that's giving you?

Yeah we’re very happy with it. We are approximately two-thirds done with that project now. We hope to be I would say 90% done with it by the end of this fiscal year. So our CapEx over there should come down nicely starting next year and we hope to continue to see the benefits of these remodels well into the future.

Just one more question about acquisitions. In Europe or Latin America anything is the environment there at all?

I think we are finding the acquisitions much easier and more plentiful in Europe right now than in South America. In South America, we’re finding it a little bit difficult to actually get the acquisitions done; we identified targets but its very difficult in some of those countries to get a seller to give you the proper indemnifications going back after you buy the business and for lots of tax reasons these private companies are sometimes difficult to tie down or who is going to be responsible for what actually acquisition is.

Next we to the line of Gary Balter from Credit Suisse.

Just first thing is, not to criticize the quarter, because its absolutely great quarter, but you didn’t, you know a few clients we talked this morning were saying, hey they didn’t get as much expense leverage and which is hard to complain in the quarter you had. But where is that expense going; its look like you are building, you are making investments obviously for the future, could you talk about some of the investments and where its going?

Well, we continue to have some expense regarding our international IT, our ERP program that we’re in the process of putting in there; that’s not a great deal of expense, but it is I guess more than a little of what we would have normally we were doing that.

Gary, I think from a core business standpoint we saw expense leverage and if you look at just our overall expense structure, 80% of our expense structure is in three categories, its rents, advertising and payroll and benefits. And in each of those categories, we definitely saw a very positive leverage in all those categories. Now in terms of when you take it on an individual segment basis and you look at some of the start-up costs related the international business or the assimilation of acquisitions during the quarter, particularly with the Floral acquisition certainly it will have a little bit of drag but overall we’ve been very encouraged with the leverage that we got.

We did get 50 basis points.

Second thing is there has been talk in the industry about TG trying to build its own sales force and I don’t know if you want to comment on specific brand, but just, is that a trend you are seeing that for or could you comment kind of what’s going on in the sector?

Sure. We don’t see a lot of that, because I think most of the brands have looked at others that have tried that and have not been successful. I don’t want to comment on TG’s move in particular, however those moves tend to be good for us, because again, a sales force of less than 200 people which is what they will have covering United States is a lot less effective than when they were in our sales force of 1,100 sales consultants plus some of SalonCentric’s sales force. So what happens is just as we’re seeing in Europe, they will tend to focus on the larger salons with those 190 people or whatever they are hiring. And the smaller salon business and the booth runner business ends up coming into the stores. Now when P&G did this many years ago, we saw and continue to see with their brands a very nice growth in our store business, while I am not so sure they are seeing the same kind of growth with their direct sales force; very, very similar to what’s happening in Europe right now.

Can we talk a little bit more on Q4 in the past; we’ve described it as not being such a seasonal quarter. And if you look at some of the retailers we follow that have pretty steady businesses. You know, Q4 usually you don’t see an acceleration. So curious about the category, if there is maybe more seasonal products being targeted in your stores. You obviously have more retail shoppers than you did, that percentage keeps ticking up, that helps. So anything to attribute by the nature of the industry that’s helping drive that pickup?

You are referring to our first quarter being….

Yeah, this quarter exactly.

As I mentioned, we did get a nice boost from weather in December, in particularly this year. But I think, particularly, again on the Sally side, our merchants are doing a great job of trying to get a little more seasonal business around the holidays. We had some terrific promotions on electrical appliances and some other bank promotions, where the customer purchase x-amount of dollars worth of product, they get a very nice hand bag to go with it. So we’re trying to develop a little more and I guess, look a little more, if you would of the traffic that comes by our door during those holidays. It just, for us to do things that are very detrimental to our margin through those holidays doesn’t make a lot of sense and we have it in the past and I doubt that we will going forward do that. But we’re trying to take whatever advantage we can of the traffic being generated by some of the other retailers that that are dropping their margins significantly and generating a lot of traffic.

And you mentioned the ticket was up; I mean was it up dramatically or pretty steady balancing in?

It’s been a pretty steady balance and I think it was up slightly more in the quarter and again I think that is primarily driven why we did some improvement in electrical category which is a nice rein for us.

Next we got to line of Erika Maschmeyer from Robert W. Baird.

On the BSG side, could you just give a little bit more detail on where you were able to obtain the greatest synergies through renovating your acquisitions like Aerial and give us a sense of what’s remaining on that front?

Well, on the Aerial front there is a little bit of distribution synergy left; we still operate both the distribution centers that we had when we acquired Aerial. But the synergies from Aerial or most of the other BSG acquisitions come in back office. They come in advertising synergies, they come in combining sales forces where there is overlap, they come in product wise, they come in being able to be a little bit more cohesive in those geographies with the brands that we represent. So the biggest ones typically are distribution and as far as the Aerial acquisitions goes that still ahead of us. But I don’t know that we will see it this fiscal year. We are just trying to determine what the best answer to those two distribution centers is at this point.

That makes sense and then I know you've benefited from the mix shift to retail sales from professional sales and that's something you've been seeing internationally and it seems like there maybe some competing forces happening out there with both the remodels bringing in more retail consumers and then you mentioned earlier in response to a question that you were experimenting with some of the larger brands over there to transition some of those sales into your stores. Should we expect to continue to see that mix shift to retail in international, kind of similar work that you are doing on the professional side slow that down at all?

Well, I don't want to overplay the increase in the retail business internationally. My comment on that really referred to our US or North American business. We are seeing increases in our retail business particularly in the UK where we've done all the remodeling. We have not done remodeling in Western Europe where we operate at least to any large degree and yes you are right, as we do things to kind of increase the professional business and as the booth renting trend accelerates, I think that you will see our mix customer shift in Europe be a bit deluded by the increases we are seeing in the professional business. We will see increases in the retail business, but as you are suggesting some of that will be offset by the professional business growth. However, the growth in the professional business because by getting those customers into our stores, it does stimulate our controlled label business, the margins on our professional business are improving nicely in Europe.

And did you tell on the professional side you see a greater proportion of controlled label sales to those customers?

Yeah, absolutely.

Okay, that’s interesting. And do you have the kind of the rough proportion of professional retail in the UK versus Western Europe?

Well, in all of that part of the world, Europe and the UK we are approximately 80% professional. Now when you look at it on a store-by-store basis, there are certain stores in the UK for example that are located on high streets, that could be the complete opposite of that, even more retail than Sally. But when you roll it all up and you throw in Europe, it’s still about 80:20 professional.

Great, then any sense of the timing around your royalty program rollout out there?

Out where?

Okay, sorry in Europe. UK.

UK will come first because we have a partner identified that is in that business there as we have here in the US. So I hope to have that at least started yet this fiscal year. Now you have to keep in mind that it takes a long time to build the database before it becomes useful in driving sales. So I would not be looking for any significant increases in our business due to our royalty program in the UK this year or probably even next year.

Okay and then just one last quick one. Are you seeing any kind of trade down or women trying to dye their hair themselves in Europe given the economy?

Well, I think we’ve always seen that. It is a big part of our retail business over there. Hair color is a larger percentage of our business there than it even is in the US. So the answer to that is yes, but obviously with only roughly 20% of our business being retail, it doesn’t have the same dynamics that it does here in the US.

Next, we will go to line of Karru Martinson from Deutsche Bank. Please go ahead.

When we look at the European remodels, can you give us a little more color in kind of exactly what you are doing there, I know part of the selling point here in the US has always been the barebones look, that you are getting the exclusive deal, is that kind of what you still have there or are you changing that model?

No, I would say where we kind of call it barebones in the US here, over there it was disintegrated. No, you have to keep in mind that the original acquisition that we made in the UK was a company that was a 150 years old when we bought it. The second acquisition that we made, the second large one that we made over there in the spring of 2007 was also a very old company. So we have some stores there that were very, very rough and we are bringing them up for the most part, I would tell you to probably a notch above our average store here in the US, but when you look at some of the newer stores in the US, they are along those lines.

Okay. And when we look at the store growth organically ex-acquisitions, you guys are still looking for kind of a 4% to 5% store growth, correct?

Yeah we would say that organic growth, we are looking at 4% or 4.5% store growth, yeah.

Okay. And is that, any kind of concentration in terms of where in the US or internationally where you want to see that growth coming from?

Yes, I believe on a percentage basis, it will be disproportionately favoring Europe right now.

And then when you look at the kind of 6 million Beauty Club memberships right now, obviously recognizing that it takes time to build those databases, but where do you think that that program can go let’s say over the next two to three years?

Well, I think that a goal over that time period of close to 10 million is not out of the realm of possibility and as you suggested these programs do become a lot more effective with the data that you gathered over the first couple of years in particular. So, as that builds the 2 million that we’ve added over the last couple of years, I believe will continue to perform very well into the future as we learn more and more about them as customers.

And just lastly you guys you referenced the term loan and wanting to come to market. Is there anything in particular that you’re looking for from the market, whether it’s providing another quarter of strong numbers or looking for any kind of triggers on that and what’s the hold up I guess, I should say?

I don’t think, Karru, there is really no hold up right now. It’s purely pricing and opportunity at this point. Even the swap that we have that expires in May, in our view today that isn’t really a barrier. The liability on that swap is now at about $4 million. So, if we’re going to trade a good yield to maturity, that’s opportunistic for us right now, we certainly would do it sooner than later.

Next we will go to line of William Writers from Bank of America/Merrill Lynch

This is actually [Bob Spencer] in for Bill. Thanks for taking the question guys. I was wondering about the gross margin expansion was obviously a little faster or more than what you guys were talking about for the year. I was wondering if you guys can talk all about your expectations for the remainder of the year and if you are thinking may be that the gross margin can expand more than 40 to 50.

Bob, usually from this quarter that is always possible however I would continue if I was trying to give you a little bit guidance there to stick with what we have historically done in this quarter was driven by nice increase in the retail business, which is a much higher margin for us and I hope that continues. All signs are with the Beauty Club Card program and it will but I still may be being a little conservative would stick with what we have historically done. And it will vary from quarter-to- quarter. Fortunately for us the last several quarters it varied to the high side.

Okay great I was wondering that if you guys can also talk about your low cost initiative and how that is going and if you see any further opportunity there as well?

We see further opportunity there. We are approximately 6.5% as we stated in the past that we believe we can get to about 15%, which would be half of the product that is manufactured in Asia would be under our label and that percentage in total is about 30% of the Sally business we believe we can get half of that to be 15 and we are about half of that 6.5 to 7. So there is more opportunity there. We are continuing to work on different categories. We were trying to be very diligent on quality and we are not in a hurry to push that program along. We want to make sure that we have the right packaging, the right quality of product and the right cost.

Okay. And then one last one. Just kind of as we see the warmer weather continuing can you talk at all about traffic trends that you guys are seeing?

Well, I can tell you that this January is a lot nicer than last year was all over the country and in Europe. So I think we are very pleased with what we are seeing weather wise so far in January and I can only hope it continues through February and with the extra calendar day we get in February we are looking forward to a nice quarter.

Next we will go to the line of [Chris Farah] from Bank of America.

I guess can we just start with the capital allocation piece. And conceptually what are the pros and cons as you think about it to dividend versus buyback. Of course understanding you guys are not committing to any of the stuff right now but as you think about it, I understand the stock price is probably one way you think about it but conceptually how do you guys think about dividend versus buyback if you are thinking about those two against each other.

Chris without getting into real specifics I think the best way to put it is we are not agnostic to one or the other but a lot of it has to do with just how Management, the Board views our future and what our acceptable levels of leverage are and then what are some of the investments that are out there in the horizon for us that we would like to target our use of funds toward growing the business not only organically but through acquisition. So there is a lot of play in that our process beyond just the text book pros and con kinds of dividend versus share repurchase. Hello.

He has disconnected.

Okay.

We’ll go to line of Jill Caruthers of Johnson Rice. Please go ahead.

Hi, as you continue to aggressively add your brand awareness to retail customers on the Sally side. Could you maybe update us on kind of your unit growth potential on Sally on the US side?

Sure, our expectations there haven’t really changed. We believe in the US, Sally can have 3100 stores and we’re approximately 2400 at this point. Canada has been very, very good to us we believe we can have 250 stores there we are about 70 and Mexico has also been great for us we are probably about half way to what are original expectations of 250 in Mexico is, we are right around 135.

Okay. and then just a comment on BSG, I know its not comp store given its distributor but you really put up some sizeable year-over-year growth could you just talk about what’s driving that given you are having there is less sizeable acquisitions out there and maybe any changes in the salon industry good or bad that’s blowing in the business?

Well, actually this morning, I just saw a press release that came from the company that does the analytics on the industry growth and their comment was that the industry grew in 2011 at 6% and the hair care part of that growth, which is where we primarily play was 3.8%. So I think the industry is growing. I know that the hair color industry is growing, not only at the salon service level but at the distributor level. It is also a growth category in retail. So I believe that we are participating in that growth. When you speak to BSG in particular, we continue to add brands that are valuable brands to the industry which is I guess taking share. We continue to see a shift in booth running and anytime you get that customer in the store, you do get some impulse purchasing, which I think is helping BSG’s comps and I am glad, you pointed that comps in BSG are a little difficult to use as a measure of success. One point there is what I mentioned earlier about Aerial, we took out quite a bit of revenue from Aerial’s 80 stores by not repeating some of the promotions that they did in our first quarter last year. And as I mentioned there were promotions that were already in place and advertising that was already set when we closed the deal. But when you are selling exclusive brands primarily, there really isn’t a lot of reason to give away a lot of margin and all you end up doing is stocking shelves in the salon. You are really not getting any more business in the long-term. So we would rather put those promotional dollars in education and things that will further salon business long-term rather than generate a lot of short-term, low margin sales, just to get the comps looking better. So I think as you started up saying that BSG’s comps are very good, I believe in an industry that’s not growing quite as fast when you look at hair care, again some of the 6% are categories that we don’t get real involved with. So we kind of focus on the hair care pieces of our industry and when that’s growing at 3.8% and BSG’s business is growing over 5%, we’re pretty pleased with that.

And let me open [Chris Fehrer’s] line one more time. Please go ahead.

So I guess the other thing I wanted to ask was around SG&A. So you guys, I guess, pretty consistently it seems to be you’re adding $20 million bucks a quarter, between $20 million and $25 million on a year-over-year basis. The new store count seems to be up generally in the 50 range, 60 range on average per quarter. But is it fair that that is the biggest incremental driver of incremental SG&A meaning new store openings and I guess small acquisitions. And is that ratio, you know, that 20 million incremental a quarter, it’s just been so consistent over the last few quarters. Is it a fair measuring stick for how much SG&A will grow on certain store assumptions or there is other stuff in there that might kind of be throwing us off the trail?

It is fair that so much of the increase in SG&A is related to store rents and payroll that yeah I would say that you can probably use that as a pretty good indicator. Also keep in mind, I mentioned a few minutes ago that on percentage basis our growth will be much stronger outside the US going forward than in the US and I have also mentioned in the past that that’s a more expensive store to open, not only in CapEx but just the expense of getting the store open, the rents are higher, they take a little longer to breakeven and a little longer to get it cash payback. So as we move forward, that will probably shift a little, I don’t it will be hugely significant and when you look SBH in total we continue to add somewhere around 50 basis points to our operating margins in spite of so much of this growth being international and in higher cost countries.

I guess on another note, is there any chance that you would take a shot at quantifying what you think the weather did for you this quarter; in order of magnitude I am just trying to understand if it’s a point, six points, I imagine its not six points from the comp base. Is there any way you can take shot at that?

You know all of our divisions take their shots at it, but it’s always when there is bad weather. They are a lot related to weather; if I know that it affects our business, I think it’s extremely difficult to quantify that with any accuracy, so I wouldn’t even want to take a shot at that.

And maybe just last one and I am sorry if you said it when I fell off but, just Europe in general, we know what the macro looks like, can you characterize the effect or a lack of effect on your businesses across the international portfolio.

Well, I believe that for the most part the economies are not greatly affecting in a negative way our business. I think there is some macro pressure as you are suggesting. I think it is affecting some of the larger suppliers as I mentioned earlier in their ability to keep a sales force on the road. I think it is impacting some of the higher-end salons who may not be seeing the spa and service business that they do in a better economy. But the bottom line to all that is, it is forcing more booth runners into the market. I know that a couple of our largest competitors in Western Europe are having a very difficult time right now and I think we’re benefiting from that; I think in those two particular cases they are operating with a very old business model in Europe and we have the advantage of kind of starting fresh in a lot of these countries either by acquisition and we’re trying to buy companies that look a little bit like us that we can expand rapidly or we’re Green-fielding, France in particular where we've added a lot of stores and its all been Greenfield for us.

And our final question will come from the line of Kevin Coyne from Goldman Sachs. Please go ahead.

Just one, most of my questions have been answered, but just with regards to a potential dividend or share buyback program. Leverage is below three now, net leverage closer to mid two’s where would you feel comfortable, let's say if you wanted to bring it up to pursue some of those programs or would you envision leverage staying neutral as you go through those?

Well, its interest Kevin, we’ve talked along that this business model handles leverage very nicely and you know we’re comfortable pretty much at any level right now. But specifically, you know what really maximizes kind of our overall weighted average cost to capital certainly in our view is between 2.5 times and that’s pretty much been a fairly constantly pieces that we’ve seen and we’ve tested internally. But certainly, if we’re looking at maintaining a level of leverage for the long-term, certainly we may have to be a little bit variable to that, but not to a large degree in terms of maintaining you know an acceptable level of leverage in that band. Meaning that you could see it go up slightly and then moderate back within those levels. But overall, I would say its just that 2 to 2.5 times is really the sweet-spot you know; we’re 2.6, 2.7 and you know if you look just our historical cash flow projections you know it certainly, it will be there sooner then later.

Thank you. And I will turn it back to Mr. Gary Winterhalter. Please go ahead.

Thank you operator. To summarize, fiscal 2012 is off to a terrific start. We delivered consolidated sales growth of 9% and same store sales growth of 7.1%. Gross profit margin expanded 100 basis points and we achieved SG&A leverage which contributed to our 20% EBITDA growth. I anticipate this strong performance will continue and lead us to another great year. Thanks again for your interest in Sally Beauty Holdings and we look forward to seeing you soon.

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