- Same store sales growth of 4.0%
- Consolidated gross margin 49.7%
- GAAP and Adjusted net earnings of $60.2
million and $61.3 million, respectively
- Diluted earnings per share of
$0.41
- Adjusted EBITDA of $151 million
- Repurchased 3.8 million shares of
common stock for $100.0 million
Sally Beauty Holdings, Inc. (NYSE: SBH) (the “Company”) today
announced financial results for the fiscal 2016 second quarter. The
Company will hold a conference call today at 10:00 a.m. (Central)
to discuss these results and its business.
“Our second quarter results were consistent with our
expectations,” stated Chris Brickman, President and Chief Executive
Officer. “Our BSG business continued to deliver strong results,
and, as expected, Sally experienced some modest sales headwinds
during the quarter. The transition to a solution-based
offering in our second largest category in all 3,000 Sally stores
was a major undertaking, and the team did an excellent job of
executing on this initiative in a short period of time. I believe
the changes we implemented, combined with the additional
investments made in TV advertising during March, will further our
efforts to drive traffic and sales growth from the retail
customer.
“Looking ahead to the third quarter, we will continue to bring
more innovation to our business; re-merchandising our brush and
comb section in all Sally stores, introducing a color education
center into approx. 1,600 stores, launching the BITZY cosmetic
brand at our cash wrap, and releasing
a mobile application for stylists through our
BSG business to help enable stylists to run their
business via their smart phone. As a result of our
combined initiatives, we believe steady sales improvement will
continue and we remain confident that we can deliver on our full
year guidance."
FISCAL 2016 SECOND QUARTER FINANCIAL HIGHLIGHTS
Net Sales: For the fiscal 2016 second quarter,
consolidated net sales were $980.1 million, an increase of 4.5%
from the fiscal 2015 second quarter. The fiscal 2016 second quarter
sales increase is attributed to same store sales growth and the
addition of new stores. The unfavorable impact from changes in
foreign currency exchange rates in the fiscal 2016 second quarter
was $12.3 million, or 1.3% of sales. Consolidated same store sales
growth in the fiscal 2016 second quarter was 4.0%.
Gross Profit: Consolidated gross profit for the fiscal
2016 second quarter was $487.5 million, an increase of 4.3% over
gross profit of $467.5 million for the fiscal 2015 second quarter.
Gross profit as a percentage of sales was 49.7%, a 10 basis point
decline from the fiscal 2015 second quarter. On a segment basis,
gross profit margin was flat in Sally Beauty and up 10 basis points
in BSG when compared to the prior year quarter; however,
consolidated gross margin was down 10 basis points primarily due to
a change in the gross profit mix when compared to the prior year
quarter.
Selling, General and Administrative Expenses: For the
fiscal 2016 second quarter, GAAP consolidated selling, general and
administrative (SG&A) expenses, including unallocated corporate
expenses and share-based compensation, were $341.3 million, or
34.8% of sales, a 90 basis point increase from the fiscal 2015
second quarter metric of 33.9% of sales and total SG&A expenses
of $317.5 million. Excluding $1.8 million, pre-tax, of charges
associated with asset impairment (U.K. Salon Success trade name),
management transition costs and charges related to the data
security incident, adjusted SG&A expenses in the fiscal 2016
second quarter, were $339.5 million or 34.6% of sales.
Fiscal 2016 second quarter adjusted SG&A expenses increased
7.5% or $23.6 million, primarily due to expenses associated with
the opening of new stores, higher expenses related to on-going
upgrades to our information technology systems, higher recruitment
and compensation-related expenses, increased advertising expense
and higher credit card fees.
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 2016
second quarter was $27.0 million, down from the fiscal 2015 second
quarter of $29.2 million. This decrease resulted from the Company’s
December 2015 redemption in full of its $750 million of 6.875%
senior notes due 2019 which were replaced by the issuance and sale
of $750 million of 5.625% senior notes due 2025.
Provision for GAAP Income Taxes: GAAP income taxes were
$35.3 million for the fiscal 2016 second quarter versus $38.2
million in the fiscal 2015 second quarter. The Company’s effective
tax rate in the fiscal 2016 second quarter was 37.0%, down 130
basis points when compared to the fiscal 2015 second quarter.
Net Earnings and Diluted Net Earnings per Share (EPS):
For the fiscal 2016 second quarter, GAAP net earnings were down
2.2% to $60.2 million, or $0.41 per diluted earnings per share,
from net earnings of $61.5 million, or $0.39 per diluted earnings
per share in the year ago quarter.
Adjusted net earnings for the fiscal 2016 second quarter were
down 2.0% to $61.3 million or $0.41 per diluted earnings per share
when compared to fiscal 2015 adjusted net earnings of $62.5 million
or $0.39 per diluted earnings per share. Adjusted net earnings for
the fiscal 2016 second quarter excludes $1.1 million, net of tax,
of charges associated with an asset impairment charge, management
transition costs and charges related to the data security
incident.
Adjusted (Non-GAAP) EBITDA(1): Adjusted
EBITDA for the fiscal 2016 second quarter was $150.9 million, a
decrease of 2.2% from $154.4 million for the fiscal 2015 second
quarter.
Financial Position, Capital Expenditures and Working
Capital: Cash and cash equivalents as of March 31, 2016, were
$88.5 million. The Company’s asset-based loan (ABL) revolving
credit facility ended the fiscal 2016 second quarter with no
outstanding borrowings. The Company’s debt, excluding capital
leases, totaled $1.8 billion as of March 31, 2016.
For fiscal 2016 year-to-date, the Company’s capital expenditures
totaled $73.7 million. Capital expenditures for the fiscal year
2016 are projected to be in the previously stated range of $125
million to $135 million, excluding acquisitions.
Working capital (current assets less current liabilities)
decreased $52.0 million to $643.4 million at March 31, 2016
compared to $695.4 million at September 30, 2015. Borrowing
capacity on the ABL facility was approximately $478.4 million at
the end of the fiscal 2016 second quarter. The ratio of current
assets to current liabilities was 2.28 to 1.00 at March 31, 2016
compared to 2.41 to 1.00 at September 30, 2015.
Inventory as of March 31, 2016 was $901.2 million, an increase
of $63.1 million or growth of 7.5% from March 31, 2015 inventory.
This increase is primarily due to sales growth from existing
stores, additional inventory from new store openings and the
introduction of new brands in the BSG and Sally businesses.
During the period of January 1, 2016 through March 31, 2016, the
Company repurchased (and subsequently retired) 3.8 million shares
of its common stock at an aggregate cost of $100.0 million and have
approximately $610.1 million of additional share repurchase
authorization remaining. On a year-to-date basis for fiscal 2016,
the Company has repurchased 6.2 million shares of its common stock
for an aggregate cost of $162.4 million. The Company remains
committed to using cash flow to grow the business and using excess
cash flow for share repurchases.
Business Segment Results:
Sally Beauty Supply
Fiscal 2016 Second Quarter Results for Sally Beauty
Supply
- Sales of $587.6 million, up 2.7% from
$572.1 million in the fiscal 2015 second quarter. Sales growth was
from same store sales growth and net new store openings. The
unfavorable impact of foreign currency exchange on sales was $9.5
million, or 1.7%.
- Same store sales growth of 2.3% versus
growth of 1.4% in the fiscal 2015 second quarter.
- Gross margin of 55.3%, flat when
compared to the prior year quarter.
- Segment earnings of $102.0 million,
down 3.9% from $106.1 million in the fiscal 2015 second
quarter.
- Segment operating margin was 17.4%,
down 110 basis points when compared to the fiscal 2015 second
quarter.
- Net store count increased by 101 over
the fiscal 2015 second quarter for total store count of 3,732.
Sales growth in the fiscal 2016 second quarter was driven by
same store sales growth and net new store openings; this growth was
partially offset by the unfavorable impact of foreign currency
exchange. Gross profit margin in the U.S. business was up over the
prior year primarily due to selective price increases in certain
geographical areas; however, this increase was offset by lower
gross margin performance in Canada, Mexico and the U.K. Segment
operating earnings and margin were unfavorably impacted by higher
SG&A expenses associated with higher recruitment and
compensation-related expenses, increased TV advertising and higher
depreciation expense.
Beauty Systems Group
Fiscal 2016 Second Quarter Results for Beauty Systems
Group
- Sales of $392.4 million, up 7.3% from
$365.6 million in the fiscal 2015 second quarter. Sales growth was
primarily from same store sales growth, sales growth from the sales
consultant business and net new store openings. The unfavorable
impact of foreign currency exchange on sales was $2.9 million, or
0.8%.
- Same store sales growth of 7.7% versus
5.9% in the fiscal 2015 second quarter.
- Gross margin of 41.4%, a 10 basis point
increase from 41.3% in the fiscal 2015 second quarter.
- Segment earnings of $61.4 million, up
10.4% from $55.6 million in the fiscal 2015 second quarter.
- Segment operating margin increased by
40 basis points to 15.6% of sales from 15.2% in the fiscal 2015
second quarter.
- Net store count was 1,312, an increase
of 34 stores over the fiscal 2015 second quarter.
- Total BSG distributor sales consultants
at the end of the fiscal 2016 second quarter were 944 versus 971 at
the end of the fiscal 2015 second quarter.
Sales growth for the Beauty Systems Group was primarily driven
by growth in same store sales, improvement in the sales consultant
business and new store openings; this growth was slightly offset by
the unfavorable impact of foreign currency exchange. Growth in
segment operating earnings and margin expansion was primarily due
to SG&A leverage improvement and gross margin expansion.
(1)A detailed table reconciling 2016 and 2015 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 800-230-1074 (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 to
this conference call, the replay will be available at about 12:00
p.m. (Central) May 5, 2016 through May 22, 2016 by dialing
1-800-475-6701 or if international dial 320-365-3844 and reference
the conference ID number 391960. 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 $3.8 billion annually. Through the Sally Beauty
Supply and Beauty Systems Group businesses, the Company sells and
distributes through over 5,000 stores, including approximately 175
franchised units, throughout the United States, the United Kingdom,
Belgium, Chile, Peru, Colombia, France, the Netherlands, Canada,
Puerto Rico, Mexico, Ireland, Spain and Germany. Sally Beauty
Supply stores offer up to 10,000 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 10,000 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.
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: anticipating and effectively
responding to changes in consumer and professional stylist
preferences and buying trends in a timely manner; the success of
our strategic initiatives including our store refresh program and
increased marketing efforts, to enhance the customer experience,
attract new customers, drive brand awareness and improve customer
loyalty; the highly competitive nature of, and the increasing
consolidation of, the beauty products distribution industry; the
timing and acceptance of new product introductions; shifts in
product mix sold during any period; 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; our dependence upon
manufacturers who have developed or could develop their own
distribution businesses which compete directly with ours; the
possibility of material interruptions in the supply of products by
our third-party manufacturers or distributors or increases in the
prices of products we purchase from our third-party manufacturers
or distributors; products sold by us being found to be defective in
labeling or content; compliance with current laws and regulations
or becoming subject to additional or more stringent laws and
regulations; the success of our e-commerce businesses; product
diversion to mass retailers or other unauthorized resellers; the
operational and financial performance of our franchise-based
business; successfully identifying acquisition candidates and
successfully completing desirable acquisitions; integrating
acquired businesses; the success of our existing stores, and our
ability to increase sales at existing stores; opening and operating
new stores profitably; the volume of traffic to our stores; the
impact of the health of the economy upon our business; the success
of our cost control plans; rising labor and rental costs;
protecting our intellectual property rights, particularly our
trademarks; the risk that our products may infringe on the
intellectual property of others or that we may be required to
defend our intellectual property rights; conducting business
outside the United States; successfully updating and integrating
our information technology systems; disruption in our information
technology systems; a significant data security breach, including
misappropriation of our customers’, or employees’ or suppliers’
confidential information, and the potential costs related thereto;
the negative impact on our reputation and loss of confidence of our
customers, suppliers and others arising from a significant data
security breach; the costs and diversion of management’s attention
required to investigate and remediate a data security breach and to
continuously upgrade our information technology security systems to
address evolving cyber security threats; the ultimate determination
of the extent or scope of the potential liabilities relating to our
past data security incidents; our ability to attract or retain
highly skilled management and other personnel; 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
existing financial reporting system; being a holding company, with
no operations of our own, and depending on our subsidiaries for
cash; our ability to execute and implement our common stock
repurchase program; our substantial indebtedness; the possibility
that we may incur substantial additional debt, including secured
debt, in the future; restrictions and limitations in the agreements
and instruments governing our debt; generating the significant
amount of cash needed to service all of our debt and refinancing
all or a portion of our indebtedness or obtaining additional
financing; changes in interest rates increasing the cost of
servicing our debt; 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 filings with the
Securities and Exchange Commission, including our most recent
Annual Report on Form 10-K for the year ended September 30, 2015,
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.
Use of Non-GAAP Financial Measures
This news release and the schedules hereto include the following
financial measures that have not been calculated in accordance with
accounting principles generally accepted in the U.S., or GAAP, and
are therefore referred to as non-GAAP financial measures: (1)
Adjusted EBITDA; (2) Adjusted net earnings, earnings per share and
diluted earnings per share; and (3) Adjusted SG&A expenses. We
have provided definitions below for these non-GAAP financial
measures and have provided tables in the schedules hereto to
reconcile these non-GAAP financial measures to the comparable GAAP
financial measures.
Adjusted EBITDA - We define the measure Adjusted EBITDA as GAAP
net earnings before depreciation and amortization, interest
expense, income taxes, share-based compensation, costs related to
the Company’s previously disclosed data security incidents,
management transition plan, an asset impairment charge and expenses
from the loss on extinguishment of debt and overlapping interest
expense.
Adjusted Net Earnings, Earnings Per Share, Diluted Earnings Per
Share and SG&A Expenses – Adjusted net earnings, earnings per
share, diluted earnings per share and SG&A expenses are GAAP
net earnings, earnings per share, diluted earnings per share and
SG&A expenses that exclude costs related to the Company’s
previously disclosed management transition plan, data security
incidents, an asset impairment charge and the loss on
extinguishment of debt and overlapping interest expense for the
relevant time periods as indicated in the accompanying non-GAAP
reconciliations to the comparable GAAP financial measures.
We have provided these non-GAAP financial measures as
supplemental information to our GAAP financial measures and believe
these non-GAAP measures provide investors with additional
meaningful financial information regarding our operating
performance. Our management and Board of Directors also use these
non-GAAP measures as supplemental measures in the evaluation of our
businesses and believe that these non-GAAP measures provide a
meaningful measure to evaluate our historical and prospective
financial performance. These non-GAAP measures should not be
considered a substitute for or superior to GAAP results.
Furthermore, the non-GAAP measures presented by us may not be
comparable to similarly titled measures of other companies.
Supplemental Schedules
Consolidated Statement of Earnings A Segment Information B Non-GAAP
Financial Measures Reconciliations (Adjusted EBITDA) C Non-GAAP
Financial Measures Reconciliations (Continued) D, E Store Count and
Same Store Sales F Selected Financial Data and Debt G
Supplemental Schedule A
SALLY BEAUTY HOLDINGS, INC. AND
SUBSIDIARIES Consolidated Statements of Earnings (In thousands,
except per share data) (Unaudited) Three
Months Ended Six Months Ended March 31, March 31,
2016 2015
% CHG 2016
2015 % CHG
Net sales $ 980,067 $ 937,755
4.5 % $ 1,978,099 $ 1,902,222 4.0 % Cost of products sold and
distribution expenses 492,593
470,303 4.7 %
996,576 961,001
3.7 % Gross profit 487,474 467,452 4.3 % 981,523 941,221 4.3
% Selling, general and administrative expenses (1) 341,311 317,456
7.5 % 681,039 654,410 4.1 % Depreciation and amortization
23,705 20,989
12.9 % 47,091
41,567 13.3 % Operating
earnings 122,458 129,007 -5.1 % 253,393 245,244 3.3 % Interest
expense (2) 26,971
29,228 -7.7 % 90,914
58,469 55.5 %
Earnings before provision for income taxes 95,487 99,779 -4.3 %
162,479 186,775 -13.0 % Provision for income taxes
35,328 38,244
-7.6 % 60,077
70,331 -14.6 % Net earnings
$ 60,159 $ 61,535
-2.2 % $ 102,402 $ 116,444
-12.1 % Earnings per share: Basic $
0.41 $ 0.39 5.1 % $ 0.69 $ 0.74 -6.8 % Diluted $ 0.41 $ 0.39 5.1 %
$ 0.68 $ 0.73 -6.8 % Weighted average shares: Basic 146,447
157,504 148,628 156,797 Diluted 148,360
159,620
150,353 158,845
Basis Pt Chg
Basis Pt Chg
Comparison as a % of
Net sales
Sally Beauty Supply Segment Gross Profit Margin 55.3 % 55.3 % 0
55.2 % 54.9 % 30 BSG Segment Gross Profit Margin 41.4 % 41.3 % 10
41.3 % 41.1 % 20 Consolidated Gross Profit Margin 49.7 % 49.8 % (10
) 49.6 % 49.5 % 10 Selling, general and administrative expenses
34.8 % 33.9 % 90 34.4 % 34.4 % 0 Consolidated Operating Profit
Margin 12.5 % 13.8 % (130 ) 12.8 % 12.9 % (10 ) Net Earnings Margin
6.1 % 6.6 % (50 ) 5.2 % 6.1 % (90 )
Effective Tax
Rate
37.0 % 38.3 % (130 ) 37.0 % 37.7 % (70 )
(1) For the
three months ended March 31, 2016 and 2015, selling, general and
administrative expenses include share-based compensation expenses
of $3.0 million and $2.8 million, respectively, and expenses
incurred in connection with the data security incidents disclosed
earlier of $0.8 million and $1.5 million, respectively; and, for
the three months ended March 31, 2016, $0.4 million of expenses in
connection with the management transition plan disclosed earlier
and an intangible asset impairment charge of $0.6 million. For the
six months ended March 31, 2016 and 2015, selling, general and
administrative expenses include share-based compensation expenses
of $7.2 million and $10.6 million, respectively, expenses incurred
in connection with the data security incidents disclosed earlier of
$1.2 million and $1.8 million, respectively; and, for the six
months ended March 31, 2016, $1.3 million of expenses in connection
with the management transition plan disclosed earlier and an
intangible asset impairment charge of $0.6 million. (2) For
the six months ended March 31, 2016, interest expense includes loss
on extinguishment of debt of $33.3 million in connection with the
Company's December 2015 redemption of its senior notes due 2019.
Supplemental Schedule B
SALLY BEAUTY
HOLDINGS, INC. AND SUBSIDIARIES Segment Information (In
thousands) (Unaudited) Three Months Ended
Six Months Ended March 31, March 31,
2016 2015
% CHG 2016
2015 % CHG Net sales:
Sally Beauty Supply $ 587,622 $
572,110 2.7 % $ 1,183,588 $ 1,158,629 2.2 % Beauty Systems Group
392,445 365,645
7.3 % 794,511
743,593 6.8 % Total net
sales $ 980,067 $ 937,755
4.5 % $ 1,978,099
$ 1,902,222 4.0 % Operating earnings:
Sally Beauty Supply $ 101,975 $ 106,089 -3.9 % $ 208,052 $ 207,268
0.4 % Beauty Systems Group 61,404
55,607 10.4 %
127,284 112,197
13.4 % Segment operating earnings
163,379 161,696
1.0 % 335,336
319,465 5.0 % Unallocated
expenses (1) (37,936 ) (29,849 ) 27.1 % (74,770 ) (63,621 ) 17.5 %
Share-based compensation (2,985 ) (2,840 ) 5.1 % (7,173 ) (10,600 )
-32.3 % Interest expense (2) (26,971 )
(29,228 ) -7.7 %
(90,914 ) (58,469 ) 55.5 %
Earnings before provision for income taxes $ 95,487
$ 99,779 -4.3 %
$ 162,479 $ 186,775
-13.0 %
Segment operating profit margin:
Basis Pt Chg
Basis Pt Chg
Sally Beauty Supply 17.4 % 18.5 % (110 ) 17.6 % 17.9 % (30 ) Beauty
Systems Group 15.6 % 15.2 % 40 16.0 % 15.1 % 90 Consolidated
operating profit margin 12.5 %
13.8 % (130 ) 12.8 %
12.9 % (10 )
(1)
Unallocated expenses consist of corporate and shared costs
and are included in selling, general and administrative expenses.
For the three months ended March 31, 2016 and 2015, unallocated
expenses include $0.8 million and $1.5 million, respectively, in
expenses incurred in connection with the data security incidents
disclosed earlier and, for the three months ended March 31, 2016,
$0.4 million of expenses in connection with the management
transition plan disclosed earlier and an intangible asset
impairment charge of $0.6 million. For the six months ended March
31, 2016 and 2015, unallocated expenses include $1.2 million and
$1.8 million, respectively, in expenses incurred in connection with
such data security incidents and, for the six months ended March
31, 2016, $1.3 million of expenses in connection with the
management transition plan disclosed earlier and an intangible
asset impairment charge of $0.6 million.
(2)
For the six months ended March 31, 2016, interest expense includes
loss on extinguishment of debt of $33.3 million in connection with
the Company's December 2015 redemption of its senior notes due
2019. Supplemental Schedule C
SALLY BEAUTY
HOLDINGS, INC. AND SUBSIDIARIES Non-GAAP Financial Measures
Reconciliations (In thousands) (Unaudited)
Three Months Ended Six Months Ended March 31, March
31, 2016 2015 %
CHG 2016 2015 % CHG
Adjusted EBITDA:
Net earnings (per GAAP) $ 60,159 $ 61,535 -2.2 % $ 102,402 $
116,444 -12.1 % Add: Depreciation and amortization 23,705 20,989
12.9 % 47,091 41,567 13.3 % Share-based compensation (1) 2,985
2,840 5.1 % 7,173 10,600 -32.3 % Asset impairment charge 571 -
100.0 % 571 - 100.0 % Loss from data security incidents (2) 768
1,515 -49.3 % 1,246 1,756 -29.0 % Management transition expenses
(2) 439 - 100.0 % 1,318 - 100.0 % Interest expense (3) 26,971
29,228 -7.7 % 90,914 58,469 55.5 % Provision for income taxes
35,328 38,244
-7.6 % 60,077
70,331 -14.6 % Adjusted EBITDA (Non-GAAP)
$ 150,926 $ 154,351 -2.2 %
$ 310,792 $ 299,167 3.9 %
(1)
For the six months ended March 31, 2016 and 2015,
share-based compensation includes $1.3 million and $4.8 million,
respectively, of accelerated expense related to certain
retirement-eligible employees who are eligible to continue vesting
awards upon retirement.
(2)
For the three months ended March 31, 2016 and 2015, selling,
general and administrative expenses include $0.8 million and $1.5
million, respectively, in expenses incurred in connection with the
data security incidents disclosed earlier and, for the three months
ended March 31, 2016, $0.4 million of expenses in connection with
the management transition plan disclosed earlier and an intangible
asset impairment charge of $0.6 million. For the six months ended
March 31, 2016 and 2015, selling, general and administrative
expenses include $1.2 million and $1.8 million, respectively, in
expenses incurred in connection with such data security incidents
and, for the six months ended March 31, 2016, $1.3 million of
expenses in connection with the management transition plan
disclosed earlier and an intangible asset impairment charge of $0.6
million.
(3)
For the six months ended March 31, 2016, interest expense includes
loss on extinguishment of debt of $33.3 million in connection with
the Company's December 2015 redemption of its senior notes due
2019. Supplemental Schedule D
SALLY BEAUTY
HOLDINGS, INC. AND SUBSIDIARIES Non-GAAP Financial Measures
Reconciliations, Continued (In thousands) (Unaudited)
Three Months Ended
March 31, 2016 As Reported
AssetImpairmentCharge (1)
ManagementTransitionExpenses (1)
Charges fromData SecurityIncidents (1)
As Adjusted(Non-GAAP)
Selling,
general and administrative expenses $ 341,311 $ (571 ) $ (439 ) $
(768 ) $ 339,533 SG&A expenses, as a percentage of sales 34.8 %
34.6 % Operating earnings 122,458 571 439 768 124,236 Operating
Profit Margin 12.5 % 12.7 % - Earnings before provision for income
taxes 95,487 571 439 768 97,265 Provision for income taxes (2)
35,328 217
167 292
36,004 Net earnings $
60,159 $ 354 $ 272
$ 476 $ 61,261
Earnings per share: Basic $ 0.41 $ 0.002 $ 0.002 $ 0.003 $ 0.42
Diluted $ 0.41 $ 0.002 $ 0.002 $ 0.003 $ 0.41
Three Months Ended March 31, 2015
As Reported
Charges fromData SecurityIncidents (1)
As Adjusted(Non-GAAP)
Selling, general and administrative expenses $ 317,456 $
(1,515 ) $ 315,941 SG&A expenses, as a percentage of sales 33.9
% 33.7 % Operating earnings 129,007 1,515 130,522 Operating Profit
Margin 13.8 % 13.9 % - Earnings before provision for income taxes
99,779 1,515 101,294 Provision for income taxes (2)
38,244
561 38,805
Net earnings $ 61,535
$ 954 $
62,489 Earnings per share: Basic $ 0.39 $ 0.01 $ 0.40
Diluted $ 0.39 $ 0.01 $ 0.39
(1)
For the three months ended March 31, 2016 and 2015, selling,
general and administrative expenses include $0.8 million and $1.5
million, respectively, in expenses incurred in connection with the
data security incidents disclosed earlier and, for the three months
ended March 31, 2016, $0.4 million of expenses in connection with
the management transition plan disclosed earlier and an intangible
asset impairment charge of $0.6 million.
(2)
The tax provision for the adjustments to net earnings was
calculated using an effective tax rate of 38.0% and 37.0% for the
three months ended March 31, 2016 and 2015, respectively.
Supplemental Schedule E
SALLY BEAUTY HOLDINGS,
INC. AND SUBSIDIARIES Non-GAAP Financial Measures
Reconciliations, Continued (In thousands) (Unaudited)
Six Months Ended March 31, 2016
As Reported
Loss onExtinguishmentof Debt (1)
OverlappingInterestExpense (1)
AssetImpairmentCharge (2)
ManagementTransitionExpenses (2)
Charges fromData SecurityIncidents (2)
As Adjusted(Non-GAAP)
Selling, general and administrative expenses $
681,039 $ (571 ) $ (1,318 ) $ (1,246 ) $ 677,904 SG&A expenses,
as a percentage of sales 34.4 % 34.3 % Operating earnings 253,393
571 1,318 1,246 256,528 Operating Profit Margin 12.8 % 13.0 % -
Earnings before provision for income taxes 162,479 $ 33,296 $ 2,148
571 1,318 1,246 201,058 Provision for income taxes (3)
60,077 12,652
816 217
501 473
74,736 Net earnings $ 102,402
$ 20,644 $ 1,332 $ 354
$ 817 $ 773
$ 126,322 Earnings per share: Basic $ 0.69 $
0.14 $ 0.01 $ 0.00 $ 0.01 $ 0.01 $ 0.85 Diluted $ 0.68 $ 0.14 $
0.01 $ 0.00 $ 0.01 $ 0.01 $ 0.84
Six Months
Ended March 31, 2015 As Reported
Charges fromData SecurityIncidents (2)
As Adjusted(Non-GAAP)
Selling, general and administrative expenses $ 654,410 $
(1,756 ) $ 652,654 SG&A expenses, as a percentage of sales 34.4
% 34.3 % Operating earnings 245,244 1,756 247,000 Operating Profit
Margin 12.9 % 13.0 % - Earnings before provision for income taxes
186,775 1,756 188,531 Provision for income taxes (3)
70,331
650
70,981 Net earnings
$ 116,444
$ 1,106
$ 117,550 Earnings per share:
Basic $ 0.74 $ 0.01 $ 0.75 Diluted $ 0.73 $ 0.01 $ 0.74
(1)
For the six months ended March 31, 2016, interest expense
includes loss on extinguishment of debt of $33.3 million in
connection with the Company's December 2015 redemption of its
senior notes due 2019 and interest in the amount of $2.1 million on
such senior notes after December 3, 2015 and until their
redemption, as well as interest on the Company's senior notes due
2025 issued on December 3. This pro-forma adjustment assumes the
senior notes due 2019 were redeemed on December 3, 2015.
(2)
For the six months ended March 31, 2016 and 2015, selling, general
and administrative expenses include $1.2 million and $1.8 million,
respectively, in expenses incurred in connection with the data
security incidents disclosed earlier and, for the six months ended
March 31, 2016, $1.3 million of expenses in connection with the
management transition plan disclosed earlier and an intangible
asset impairment charge of $0.6 million.
(3)
The tax provision for the adjustments to net earnings was
calculated using an effective tax rate of 38.0% and 37.0% for the
six months ended March 31, 2016 and 2015, respectively.
Supplemental Schedule F
SALLY BEAUTY HOLDINGS,
INC. AND SUBSIDIARIES Store Count and Same Store Sales
(Unaudited) As of March
31, 2016 2015 CHG
Number of stores (at end of period): Sally Beauty Supply:
Company-operated stores 3,714 3,612 102 Franchise stores 18
19 (1 ) Total Sally Beauty Supply 3,732 3,631 101 Beauty
Systems Group: Company-operated stores 1,148 1,112 36 Franchise
stores 164 166 (2 ) Total Beauty System Group 1,312
1,278 34 Total 5,044 4,909 135
BSG distributor sales consultants (end of period) (1)
944 971 (27 )
2016 2015 Second quarter
company-operated same store sales growth (2)
Basis Pt
Chg
Sally Beauty Supply 2.3 % 1.4 % 90 Beauty Systems Group 7.7 % 5.9 %
180 Consolidated 4.0 % 2.8 % 120 Six months ended March 31
company-operated same store sales growth (2) Sally Beauty Supply
2.4 % 1.5 % 90 Beauty Systems Group 7.4 % 4.9 % 250 Consolidated
3.9 % 2.5 % 140 (1) Includes 316 and 329 distributor sales
consultants as reported by our franchisees at March 31, 2016 and
2015, 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 G
SALLY BEAUTY HOLDINGS, INC. AND
SUBSIDIARIES Selected Financial Data and Debt (In thousands)
(Unaudited) As of March 31, 2016 As of
September 30, 2015 Financial condition information (at period end):
Working capital $ 643,384 $ 695,403 Cash and cash equivalents
88,548 140,038 Property and equipment, net 293,445 270,847 Total
assets 2,069,350 2,094,351 Total debt, including capital leases (1)
1,783,279 1,787,594 Total stockholders' (deficit) equity ($341,432
) ($297,821 )
As of March 31, 2016 Interest Rates (2) Debt
position, excluding capital leases: Revolving ABL facility $ -
(i) Prime + 0.50-0.75% or(ii) LIBOR +
1.50-1.75%
Senior notes due 2022 850,000 5.750 % Senior notes due 2023 200,000
5.500 % Senior notes due 2025 750,000 5.625 % Total debt,
excluding capital leases (3) $ 1,800,000
Debt maturities,
excluding capital leases: Twelve months ending March 31,
2017-2021
$ - Thereafter 1,800,000 Total debt, excluding
capital leases (3) $ 1,800,000 (1) Total debt,
including capital leases, is net of unamortized debt issuance costs
of $25.3 million at March 31, 2016 and $21.8 million at September
30, 2015. (2) Interest rates shown represent the coupon or
contractual rates related to each indebtedness. (3) Amounts
do not reflect capital lease obligations of $2.5 million,
unamortized premium of $6.0 million related to senior notes due
2022 in an aggregate principal amount of $150.0 million, or
unamortized debt issuance costs in the aggregate amount of $25.3
million in connection with the senior notes due 2022, 2023 and
2025.
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Sally Beauty Holdings, Inc.Karen Fugate, 940-297-3877Investor
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