- 3Q15 same store sales growth of 3.1%
versus 2.1% in 3Q14
- 3Q15 GAAP net earnings of $62.5 million
with earnings per share of $0.39
- 3Q15 Adjusted net earnings of $65.2
million with earnings per share of $0.41
- Adjusted EBITDA of $161 million
Sally Beauty Holdings, Inc. (NYSE: SBH) (the “Company”) today
announced financial results for the fiscal 2015 third quarter. The
Company will hold a conference call today at 10:00 a.m. (Central)
to discuss these results and its business.
“We are disappointed in the Q3 results for our Sally business,
but not discouraged,” stated President & CEO Christian
Brickman. “It is taking longer than we expected for traffic from
the non-Beauty Club Card customer to recover, but we still have
great confidence that we are moving in the right direction. Over
the next several quarters, we expect continued progression in our
consolidated Sally same store sales back to historical trend levels
of 3% to 4% as we plan to complete the execution of our planned
initiatives and our customers have the chance to experience these
changes in our stores.
“As we enter Q4, we believe the disruption caused by the recent
data security incident is now behind us. We intend to further
enhance our systems and culture to ensure the security of our
networks and customer data, and our Sally team continues to be
laser focused on driving sales progression. To deliver on this
objective, we will invest in national TV for the Sally brand
through our sponsorship of Project Runway® which will begin to air
early August. We expect to complete the reset of our cash-wrap
area, upgrade our channel leading eyelash studio, and significantly
improve the look and shopability of the cosmetics section in the
stores. Finally, we plan to continue our store refresh program and
refine our recently launched CRM model,” Brickman added.
“Looking forward to fiscal 2016, we now expect that Sally Beauty
segment same store sales will continue to improve sequentially and
reach historical growth levels of 3% to 4% in the back half of next
year. On the expense side, we anticipate significant labor and
rental cost inflation to affect our business as we compete for
talent and real estate with other retailers. We plan to offset the
bulk of these increases through cost reductions and tactical
pricing measures. However, we now believe that this cost inflation
will be a moderate drag on operating earnings growth for next
year.”
FISCAL 2015 THIRD QUARTER FINANCIAL HIGHLIGHTS
Net Sales: For the fiscal 2015 third quarter,
consolidated net sales were $967.9 million, an increase of 2.0%
from the fiscal 2014 third quarter. The fiscal 2015 third 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 2015 third quarter
was $26.2 million, or 2.8% of sales. Consolidated same store sales
growth in the fiscal 2015 third quarter was 3.1% versus 2.1% in the
prior year quarter. Consolidated same store sales for fiscal 2015
are now expected to be in the range of 2.5% to 3.0% versus previous
expectations of consolidated same store sales growth of slightly
above 3%.
Gross Profit: Consolidated gross profit for the fiscal
2015 third quarter was $481.3 million, an increase of 1.2% over
gross profit of $475.7 million for the fiscal 2014 third quarter.
Gross profit as a percentage of sales was 49.7%, a 40 basis point
decline from the fiscal 2014 third quarter. Consolidated gross
profit margin for fiscal year 2015 is now expected to be flat when
compared to fiscal year 2014 consolidated gross profit margin of
49.6%. This differs from previous expectations of fiscal year 2015
consolidated gross profit margin expansion of 20 to 30 basis points
over the prior year.
Selling, General and Administrative Expenses: For the
fiscal 2015 third quarter, GAAP consolidated selling, general and
administrative (SG&A) expenses, including unallocated corporate
expenses and share-based compensation, were $327.9 million, or
33.9% of sales, a 10 basis point increase from the fiscal 2014
third quarter GAAP metric of 33.8% of sales and total SG&A
expenses of $320.7 million.
Excluding the pre-tax charges from the 2014 and 2015 data
security incidents of $3.2 million as well as charges for a
restructuring of the Sally Germany business of $1.1 million,
adjusted SG&A expenses in the fiscal 2015 third quarter were
$323.5 million or 33.4% of sales. This represented a 10 basis point
increase from fiscal 2014 third quarter adjusted metric of 33.3% of
sales and total adjusted SG&A expenses of $316.4 million.
Fiscal 2015 third quarter GAAP SG&A expenses increased 2.2%
or $7.1 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 advertising costs in
the Sally Beauty Supply segment, charges related to the data
security incidents and a charge for the restructuring of the Sally
Germany business, which included store closures.
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 2015
third quarter was $29.2 million, slightly down from the fiscal 2014
third quarter of $29.3 million.
Provision for Income Taxes: Income taxes were $39.2
million for the fiscal 2015 third quarter versus $37.9 million in
the fiscal 2014 third quarter. The Company’s effective tax rate in
the fiscal 2015 third quarter was 38.5% versus 35.9% in the fiscal
2014 third quarter. The lower effective tax rate for the three
months ended June 30, 2014, when compared to the three months ended
June 30, 2015, was primarily due to the reduction of uncertain tax
position reserves during the fiscal 2014 third quarter.
Net Earnings and Diluted Net Earnings per Share (EPS):
For the fiscal 2015 third quarter, GAAP net earnings were down 7.8%
to $62.5 million, or $0.39 diluted earnings per share, from net
earnings of $67.8 million, or $0.42 diluted earnings per share in
the year ago quarter.
Adjusted net earnings for the fiscal 2015 third quarter were
down 7.4% to $65.2 million or $0.41 diluted earnings per share when
compared to fiscal 2014 adjusted net earnings of $70.4 million or
$0.43 diluted earnings per share. Adjusted net earnings for the
fiscal 2015 third quarter excludes $2.0 million, net of tax,
related to the data security incidents and $0.7 million, net of
tax, for charges related to the restructuring of the Sally Germany
business.
Adjusted (Non-GAAP) EBITDA(1): Adjusted
EBITDA for the fiscal 2015 third quarter was $160.6 million, a
decrease of 1.1% from $162.4 million for the fiscal 2014 third
quarter.
Financial Position, Capital Expenditures and Working
Capital: Cash and cash equivalents as of June 30, 2015, were
$239.0 million. The Company’s asset-based loan (ABL) revolving
credit facility ended the fiscal 2015 third quarter with no
outstanding borrowings. The Company’s debt, excluding capital
leases, totaled $1.8 billion as of June 30, 2015.
For fiscal 2015 year-to-date, the Company’s capital expenditures
totaled $72.1 million. Capital expenditures for the fiscal year
2015 are projected to be in the previously stated range of $95
million to $100 million, excluding acquisitions.
Working capital (current assets less current liabilities)
increased $179.0 million to $819.6 million at June 30, 2015
compared to $640.6 million at September 30, 2014. Borrowing
capacity on the ABL facility was approximately $476.9 million at
the end of the fiscal 2015 third quarter. The ratio of current
assets to current liabilities was 2.79 to 1.00 at June 30, 2015
compared to 2.38 to 1.00 at September 30, 2014.
Inventory as of June 30, 2015 was $874.5 million, an increase of
$34.7 million or growth of 4.1% from June 30, 2014 inventory. This
increase is primarily due to sales growth from existing stores,
additional inventory from new store openings, and the addition of
new brands at the Beauty Systems Group segment.
During the period of April 1, 2015 through June 30, 2015, the
Company repurchased (and subsequently retired) 219 thousand shares
of its common stock at an aggregate cost of $6.8 million under the
repurchase authorization announced on August 20, 2014. The Board of
Directors remains committed to deploying excess cash flow, after
investments to grow the business, in the form of stock
repurchases.
Business Segment Results:
Sally Beauty Supply
Fiscal 2015 Third Quarter Results for Sally Beauty
Supply
- Sales of $588.6 million, up 0.7% from
$584.5 million in the fiscal 2014 third quarter. Sales growth was
from net new store openings and same store sales growth. The
unfavorable impact of foreign currency exchange on sales was $22.0
million, or 3.8%.
- Same store sales growth of 2.0% versus
growth of 1.8% in the fiscal 2014 third quarter.
- Gross margin of 54.9%, a 50 basis point
decline from 55.4% in the fiscal 2014 third quarter.
- Segment earnings of $107.3 million,
down 6.5% from $114.8 million in the fiscal 2014 third
quarter.
- Segment operating margin was 18.2%,
down 140 basis points when compared to the fiscal 2014 third
quarter.
- Net store count increased by 135 over
the fiscal 2014 third quarter for total store count of 3,655.
Sales growth in the fiscal 2015 third quarter was driven by new
store openings and same store sales; this growth was largely offset
by the unfavorable impact of foreign currency exchange. Gross
profit margin declined by 50 basis points primarily due to strong
promotional activity in the U.S. in the fiscal 2015 third quarter
compared to the positive margin impact of vendor allowances
directly linked to promotional activity in the prior year quarter.
Segment operating earnings and margin were unfavorably impacted by
lower gross margin and higher SG&A expenses associated with new
store openings, higher advertising costs and higher
depreciation.
The restructuring of Sally Beauty Supply operations in Germany
will include the closing of 16 underperforming retail stores and
two supporting administrative offices and is designed to increase
the profitability of certain of the Company’s German operations.
The Company will continue to operate 17 retail stores in Germany
after the completion of the restructuring, which the Company
expects to complete by September 30, 2015. The Company expects to
incur estimated pre-tax charges of approximately $7.0 million by
the end of fiscal year 2015, of which $1.1 million were incurred in
the fiscal 2015 third quarter.
Beauty Systems Group
Fiscal 2015 Third Quarter Results for Beauty Systems
Group
- Sales of $379.3 million, up 4.0% from
$364.8 million in the fiscal 2014 third quarter. The unfavorable
impact of foreign currency exchange on sales was $4.2 million, or
1.1%.
- Same store sales growth of 5.6% versus
2.7% in the fiscal 2014 third quarter.
- Gross margin of 41.8%, a 10 basis point
increase from 41.7% in the fiscal 2014 third quarter.
- Segment earnings of $61.1 million, up
6.7% from $57.2 million in the fiscal 2014 third quarter.
- Segment operating margin increased by
40 basis points to 16.1% of sales from 15.7% in the fiscal 2014
third quarter.
- Net store count was 1,286, an increase
of 27 stores over the fiscal 2014 third quarter.
- Total BSG distributor sales consultants
at the end of the fiscal 2015 third quarter were 952 versus 980 at
the end of the fiscal 2014 third quarter.
Sales growth for the Beauty Systems Group was primarily driven
by growth in same store sales and new store openings; this growth
was partially 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 2015 and 2014 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)
288-0337). 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) August 6, 2015 through August 20, 2015 by dialing
1-800-475-6701 or if international dial 320-365-3844 and reference
the conference ID number 365399. 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 4,900 stores, including approximately 200
franchised units, throughout the United States, the United Kingdom,
Belgium, Chile, Colombia, Peru, 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: the highly competitive nature of, and
the increasing consolidation of, the beauty products distribution
industry; anticipating and effectively responding to changes in
consumer preferences and buying trends in a timely manner;
potential fluctuation in our same store sales and quarterly
financial performance; our dependence upon manufacturers who may be
unwilling or unable to continue to supply products to us; the
possibility of material interruptions in the supply of products by
our 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 strategic
initiatives including our store refresh program and increased
marketing efforts, to enhance the customer experience, drive brand
awareness and improve customer loyalty; 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; opening and
operating new stores profitably; the impact of the health of the
economy upon our business; the success of our cost control plans;
protecting our intellectual property rights, particularly our
trademarks; 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; disruption in our information technology
systems; a significant data security breach, including
misappropriation of our customers’ or employees’ 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 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
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; the
potential impact on us if the financial institutions we deal with
become impaired; and the costs and effects of litigation.
Additional factors that could cause actual events or results to
differ materially from the events or results described in the
forward-looking statements can be found in our filings with the
Securities and Exchange Commission, including our most recent
Annual Report on Form 10-K for the year ended September 30, 2014,
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 and restructuring of the Sally Germany
business.
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 and restructuring of the Sally Germany business 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
Statements 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 Nine Months Ended June 30, June 30,
2015 2014
% CHG 2015
2014 % CHG Net sales $ 967,890 $
949,275 2.0 % $ 2,870,112 $ 2,809,210 2.2 % Cost of products sold
and distribution expenses 486,571
473,564 2.7 %
1,447,572 1,416,578
2.2 % Gross profit 481,319 475,711 1.2 %
1,422,540 1,392,632 2.1 % Selling, general and administrative
expenses (1)(2) 327,870 320,726 2.2 % 982,279 953,016 3.1 %
Depreciation and amortization 22,600
19,989 13.1 %
64,168 58,739
9.2 % Operating earnings 130,849 134,996 -3.1
% 376,093 380,877 -1.3 % Interest expense
29,221 29,308 -0.3
% 87,690 87,055
0.7 % Earnings before provision for income
taxes 101,628 105,688 -3.8 % 288,403 293,822 -1.8 % Provision for
income taxes 39,165
37,932 3.3 %
109,496 109,579
-0.1 % Net earnings $ 62,463 $
67,756 -7.8 % $ 178,907
$ 184,243 -2.9 % Earnings
per share: Basic $ 0.40 $ 0.43 -7.0 % $ 1.14 $ 1.14 0.0 % Diluted $
0.39 $ 0.42 -7.1 % $ 1.13 $ 1.11 1.8 % Weighted average
shares: Basic 157,110 158,950 156,901 161,700 Diluted
159,120 162,524
158,875
165,389
Basis Pt Chg
Basis Pt Chg
Comparison as a % of
Net sales
Sally Beauty Supply Segment Gross Profit Margin 54.9 % 55.4 % (50 )
54.9 % 54.8 % 10 BSG Segment Gross Profit Margin 41.8 % 41.7 % 10
41.3 % 41.2 % 10 Consolidated Gross Profit Margin 49.7 % 50.1 % (40
) 49.6 % 49.6 % 0 Selling, general and administrative expenses 33.9
% 33.8 % 10 34.2 % 33.9 % 30 Consolidated Operating Profit Margin
13.5 % 14.2 % (70 ) 13.1 % 13.6 % (50 ) Net Earnings Margin 6.5 %
7.1 % (60 ) 6.2 % 6.6 % (40 )
Effective Tax
Rate
38.5 % 35.9 % 260 38.0 % 37.3 % 70
(1) Selling,
general and administrative expenses include share-based
compensation of $2.9 million and $6.5 million for the three months
ended June 30, 2015 and 2014, respectively; and, for the nine
months ended June 30, 2015 and 2014, $13.5 million and $18.3
million, respectively. Amounts for the three and nine months ended
June 30, 2014 include a charge of $3.5 million in connection with
the executive management transition plan disclosed in May 2014.
(2)
Selling, general and administrative
expenses include charges of $3.2 million and $0.9 million for the
three months ended June 30, 2015 and 2014, respectively; and, for
the nine months ended June 30, 2015 and 2014, $5.0 million and $2.0
million, respectively, in connection with the data security
incidents disclosed earlier. Amounts for the nine months ended June
30, 2015 reflect a contingent liability of $2.9 million recorded in
connection with the data security incident disclosed in March
2014.
Supplemental Schedule B
SALLY BEAUTY
HOLDINGS, INC. AND SUBSIDIARIES Segment Information (In
thousands) (Unaudited)
Three Months Ended Nine
Months Ended June 30, June 30, 2015
2014 % CHG
2015 2014
% CHG Net sales: Sally Beauty Supply $ 588,593 $ 584,500 0.7
% $ 1,747,222 $ 1,727,473 1.1 % Beauty Systems Group
379,297 364,775
4.0 % 1,122,890
1,081,737 3.8 % Total net sales
$ 967,890 $ 949,275
2.0 % $ 2,870,112 $
2,809,210 2.2 % Operating earnings:
Sally Beauty Supply (1) $ 107,264 $ 114,773 -6.5 % $ 314,532 $
323,790 -2.9 % Beauty Systems Group 61,094
57,247 6.7 %
173,290 162,964
6.3 % Segment operating earnings
$ 168,358 $ 172,020 -2.1
% $ 487,822 $ 486,754
0.2 % Unallocated corporate expenses (2)
(34,643 ) (30,517 ) 13.5 % (98,263 ) (87,580 ) 12.2 % Share-based
compensation (3) (2,866 ) (6,507 ) -56.0 % (13,466 ) (18,297 )
-26.4 % Interest expense (29,221 )
(29,308 ) -0.3 %
(87,690 ) (87,055 ) 0.7 %
Earnings before provision for income taxes $ 101,628
$ 105,688 -3.8 %
$ 288,403 $ 293,822
-1.8 % Segment operating profit margin:
Basis Pt
Chg Basis Pt Chg Sally Beauty Supply 18.2 % 19.6 % (140
) 18.0 % 18.7 % (70 ) Beauty Systems Group 16.1 % 15.7 % 40 15.4 %
15.1 % 30 Consolidated operating profit margin
13.5 % 14.2 % (70 )
13.1 % 13.6 % (50
)
(1)
For the three and nine months ended June 30, 2015, Sally
Beauty Supply's operating profit reflects a charge of $1.1 million
in connection with a restructuring of its operations in Germany
that was approved by our Board of Directors in June 2015.
(2)
Unallocated expenses consist of corporate and shared costs.
(3)
For the three and the nine months ended June 30, 2014, share-based
compensation expense include a charge of $3.5 million in connection
with the executive management transition plan disclosed in May
2014. Supplemental Schedule C
SALLY BEAUTY
HOLDINGS, INC. AND SUBSIDIARIES Non-GAAP Financial Measures
Reconciliations (In thousands) (Unaudited)
Three Months Ended Nine Months Ended June 30, June
30, 2015 2014 %
CHG 2015 2014 % CHG
Adjusted EBITDA:
Net earnings (per GAAP) $ 62,463 $ 67,756 -7.8 % $ 178,907 $
184,243 -2.9 % Add: Depreciation and amortization 22,600 19,989
13.1 % 64,168 58,739 9.2 % Share-based compensation (1) 2,866 6,507
-56.0 % 13,466 18,297 -26.4 % Germany business restructure charges
(2) 1,118 - 100.0 % 1,118 - 100.0 % Loss from data security
incidents (3) 3,204 864 270.8 % 4,960 1,974 151.3 % Interest
expense 29,221 29,308 -0.3 % 87,690 87,055 0.7 % Provision for
income taxes 39,165
37,932 3.3 % 109,496
109,579 -0.1 % Adjusted EBITDA
(Non-GAAP) $ 160,637 $ 162,356
-1.1 % $ 459,805 $ 459,887
0.0 %
(1)
For the three months ended June 30, 2015 and 2014,
share-based compensation includes $0.0 million and $3.5 million,
respectively; and, for the nine months ended June 30, 2015 and
2014, $4.8 million and $8.8 million, respectively, of accelerated
expense related to certain retirement-eligible employees who are
eligible to continue vesting awards upon retirement. Amounts for
the three and nine months ended June 30, 2014 include a charge of
$3.5 million in connection with the executive management transition
plan disclosed in May 2014.
(2)
For the three and nine months ended June 30, 2015, selling, general
and administrative expenses include a charge of $1.1 million in
connection with a restructuring of the Company's operations in
Germany that was approved by our Board of Directors in June 2015.
(3)
Selling, general and administrative
expenses include charges of $3.2 million and $0.9 million for the
three months ended June 30, 2015 and 2014, respectively; and, for
the nine months ended June 30, 2015 and 2014, $5.0 million and $2.0
million, respectively, in connection with the data security
incidents disclosed earlier. Amounts for the nine months ended June
30, 2015 reflect a contingent liability of $2.9 million recorded in
connection with the data security incident disclosed in March
2014.
Supplemental Schedule D
SALLY BEAUTY
HOLDINGS, INC. AND SUBSIDIARIES Non-GAAP Financial Measures
Reconciliations, Continued
Three Months Ended June 30, 2015
As Reported
ManagementTransitionCosts (1)
Charges forGermanyRestructure (2)
Charges fromData SecurityIncidents (3)
As Adjusted(Non-GAAP)
Selling, general and administrative expenses $ 327,870 $ - $
(1,118 ) $ (3,204 ) $ 323,548 SG&A expenses, as a percentage of
sales 33.9 % 33.4 % Operating earnings 130,849 - 1,118 3,204
135,171 Operating Profit Margin 13.5 % 14.0 % Earnings
before provision for income taxes 101,628 - 1,118 3,204 105,950
Provision for income taxes (4) 39,165
- 414
1,185 40,764
Net earnings $ 62,463 $ -
$ 704 $ 2,019
$ 65,186 Earnings per share: Basic $
0.40 $ 0.004 $ 0.013 $ 0.41 Diluted $ 0.39 $ 0.004 $ 0.013 $ 0.41
Three Months Ended
June 30, 2014 As Reported
ManagementTransitionCosts (1)
Charges forGermanyRestructure (2)
Charges fromData SecurityIncidents (3)
As Adjusted(Non-GAAP)
Selling, general and administrative expenses $ 320,726 $
(3,500 ) $ - $ (864 ) $ 316,362 SG&A expenses, as a percentage
of sales 33.8 % 33.3 % Operating earnings 134,996 3,500 - 864
139,360 Operating Profit Margin 14.2 % 14.7 % Earnings before
provision for income taxes 105,688 3,500 - 864 110,052 Provision
for income taxes (4) 37,932
1,365 -
337 39,634 Net
earnings $ 67,756 $ 2,135
$ - $ 527 $
70,418 Earnings per share: Basic $ 0.43 $ 0.01 $ 0.00
$ 0.44 Diluted $ 0.42 $ 0.01 $ 0.00 $ 0.43
(1)
For the three months ended June 30, 2014, selling, general
and administrative expenses include a share-based compensation
charge of $3.5 million in connection with the executive management
transition plan disclosed in May 2014.
(2)
For the three months ended June 30, 2015, selling, general and
administrative expenses include a charge of $1.1 million in
connection with a restructuring of the Company's operations in
Germany that was approved by our Board of Directors in June 2015.
(3)
For the three months ended June 30, 2015 and 2014, selling, general
and administrative expenses include charges of $3.2 million and
$0.9 million, respectively, in connection with the data security
incidents disclosed earlier.
(4)
The tax provision for the adjustments to net earnings was
calculated using an estimated effective tax rate of 37.0% and 39.0%
for the three months ended June 30, 2015 and 2014, respectively.
Supplemental Schedule E
SALLY BEAUTY
HOLDINGS, INC. AND SUBSIDIARIES Non-GAAP Financial Measures
Reconciliations, Continued
Nine Months Ended June 30, 2015
As Reported
ManagementTransitionCosts (1)
Charges forGermanyRestructure (2)
Charges fromData SecurityIncidents (3)
As Adjusted(Non-GAAP)
Selling, general and administrative expenses $ 982,279 $ - $
(1,118 ) $ (4,960 ) $ 976,201 SG&A expenses, as a percentage of
sales 34.2 % 34.0 % Operating earnings 376,093 - 1,118 4,960
382,171 Operating Profit Margin 13.1 % 13.3 % Earnings
before provision for income taxes 288,403 - 1,118 4,960 294,481
Provision for income taxes (4) 109,496
- 414
1,835 111,745
Net earnings $ 178,907 $
- $ 704 $ 3,125
$ 182,736 Earnings per share: Basic $
1.14 $ 0.00 $ 0.02 $ 1.16 Diluted $ 1.13 $ 0.00 $ 0.02 $ 1.15
Nine Months Ended
June 30, 2014 As Reported
ManagementTransition Costs (1)
Charges forGermanyRestructure (2)
Charges fromData SecurityIncidents (3)
As Adjusted(Non-GAAP)
Selling, general and administrative expenses $ 953,016 $
(3,500 ) $ - $ (1,974 ) $ 947,542 SG&A expenses, as a
percentage of sales 33.9 % 33.7 % Operating earnings 380,877 3,500
- 1,974 386,351 Operating Profit Margin 13.6 % 13.8 % Earnings
before provision for income taxes 293,822 3,500 - 1,974 299,296
Provision for income taxes (4) 109,579
1,365 -
770 111,714
Net earnings $ 184,243 $ 2,135
$ - $ 1,204
$ 187,582 Earnings per share: Basic $ 1.14 $
0.01 $ 0.01 $ 1.16 Diluted $ 1.11 $ 0.01 $ 0.01 $ 1.13
(1)
For the nine months ended June 30, 2014, selling, general
and administrative expenses include a share-based compensation
charge of $3.5 million in connection with the executive management
transition plan disclosed in May 2014.
(2)
For the nine months ended June 30, 2015, selling, general and
administrative expenses include a charge of $1.1 million in
connection with a restructuring of the Company's operations in
Germany that was approved by our Board of Directors in June 2015.
(3)
For the nine months ended June 30, 2015 and 2014, selling, general
and administrative expenses include charges of $5.0 million and
$2.0 million, respectively, in connection with the data security
incidents disclosed earlier.
(4)
The tax provision for the adjustments to net earnings was
calculated using an estimated effective tax rate of 37.0% and 39.0%
for the nine months ended June 30, 2015 and 2014, respectively.
Supplemental Schedule F
SALLY BEAUTY
HOLDINGS, INC. AND SUBSIDIARIES Store Count and Same Store
Sales (Unaudited) As of
June 30, 2015 2014
CHG Number of retail stores (end of period): Sally Beauty
Supply: Company-operated stores 3,636 3,499 137 Franchise stores 19
21 (2 ) Total Sally Beauty Supply 3,655 3,520 135
Beauty Systems Group: Company-operated stores 1,118 1,098 20
Franchise stores 168 161 7 Total Beauty System
Group 1,286 1,259 27 Total 4,941 4,779
162 BSG distributor sales consultants (end of
period) (1) 952 980 (28 )
2015 2014 Third quarter
company-operated same store sales growth (2)
Basis Pt
Chg Sally Beauty Supply 2.0 % 1.8 % 20 Beauty Systems
Group 5.6 % 2.7 % 290 Consolidated 3.1 % 2.1 % 100 Nine
months ended June 30 company-operated same store sales growth (2)
Basis Pt Chg Sally Beauty Supply 1.7 % 1.1 % 60
Beauty Systems Group 5.1 % 3.4 % 170 Consolidated 2.7 % 1.7 % 100
(1) Includes 320 and 335 distributor sales consultants as
reported by our franchisees at June 30, 2015 and 2014,
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 (Amounts in
thousands) (Unaudited) June 30, 2015
September 30, 2014 Financial condition information (at period end):
Working capital $ 819,587 $ 640,612 Cash and cash equivalents
239,145 106,575 Property and equipment, net 249,733 238,111 Total
assets $ 2,189,595 2,029,973 Total debt, including capital leases
1,809,802 1,811,641 Total stockholders' (deficit) equity ($190,164
) ($347,053 )
As of June 30, 2015 Interest Rates Debt position excluding
capital leases (at period end): Revolving ABL facility $ -
(i) Prime + 0.50-0.75% or(ii) LIBOR +
1.50-1.75%
Senior notes due 2019 750,000 6.875 % Senior notes due 2022 (1)
856,743 5.750 % Senior notes due 2023 200,000 5.500 % Total
debt $ 1,806,743
Debt maturities, excluding capital leases Twelve
months ending June 30,
2016-2019
$ -
2020
750,000 Thereafter (1) 1,056,743 Total debt $
1,806,743 (1) Amount includes unamortized premium of
$6.7 million related to notes in an aggregate principal amount of
$150.0 million issued in September 2012. The 5.75% interest rate
relates to notes in an aggregate principal amount of $850.0
million.
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Sally Beauty Holdings, Inc.Karen Fugate, 940-297-3877Investor
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