- Same store sales growth in 4Q15 and
FY2015 of 3.5% and 2.9%, respectively
- 4Q15 net sales up 2.1% to $964 million;
FY2015 net sales up 2.2% to $3.8 billion
- GAAP and Adjusted 4Q15 net earnings of
$56.2 million and $59.2 million, respectively
- GAAP and Adjusted 4Q15 diluted earnings
per share of $0.36 and $0.38, respectively
- GAAP and Adjusted FY2015 net earnings
of $235 million and $242 million, respectively
- GAAP and Adjusted FY2015 diluted
earnings per share of $1.49 and $1.53, respectively
- During fiscal 2015, repurchased $228
million, or 8.1 million shares of common stock
Sally Beauty Holdings, Inc. (NYSE: SBH) (the “Company”) today
announced financial results for the fourth quarter and fiscal year
ended September 30, 2015. The Company will hold a conference call
today at 10:00 a.m. (Central) to discuss these results and its
business.
“We finished the year with solid consolidated same store sales
growth of 3.5% in the fourth quarter,” stated Chris Brickman,
President and Chief Executive Officer. “In addition, we generated
$301 million in operating cash flow in fiscal 2015 and repurchased
approximately $228 million, or 8.1 million shares of our common
stock.”
“In the back half of fiscal 2015, we implemented sales and
profit improvement initiatives that we now expect will largely
offset anticipated cost headwinds and allow for steady profit
growth for SBH in fiscal 2016,” Brickman added. “In addition, we
are excited about the pipeline of sales growth initiatives for the
coming fiscal year, including the completion of owned-brand
packaging upgrades, the reset of haircare and hair color
categories, as well as the introduction of local TV and radio
advertising. These new investments, combined with all of the
projects and upgrades completed during fiscal 2015, will create
significant points of difference and a modern image for Sally. As a
result, we believe we are well on our way to reframing and
repositioning the Sally brand to be more meaningful to the next
generation of consumers.”
Fiscal 2015 Fourth Quarter and Full Year 2015 Financial
Highlights
Net Sales: For the fiscal 2015 fourth quarter,
consolidated net sales were $964.2 million, an increase of 2.1%
from the fiscal 2014 fourth quarter. The fiscal 2015 fourth quarter
sales increase is primarily attributed to same store sales growth
and the addition of new stores. The impact from unfavorable changes
in foreign currency exchange rates in the fiscal 2015 fourth
quarter was $27.6 million, or 2.9%. Consolidated same store sales
growth in the fiscal 2015 fourth quarter was 3.5% compared to 2.6%
in the fiscal 2014 fourth quarter.
Consolidated net sales for fiscal year 2015 were $3.8 billion,
an increase of 2.2% from fiscal year 2014. Fiscal 2015 sales
increased primarily due to same store sales growth and the addition
of new stores. The impact from unfavorable foreign currency
exchange in the 2015 fiscal year was $87.3 million, or 2.3%.
Consolidated same store sales growth in fiscal year 2015 was 2.9%
compared to 2.0% in fiscal year 2014.
GAAP and Adjusted Gross Profit: Consolidated GAAP gross
profit for the fiscal 2015 fourth quarter was $475.3 million, an
increase of 1.7% over gross profit of $467.5 million for the fiscal
2014 fourth quarter. Gross profit, as a percentage of sales (gross
profit margin), was 49.3%, a 20 basis point decline from the fiscal
2014 fourth quarter.
Adjusted consolidated gross profit for the fiscal 2015 fourth
quarter, excluding a $1.4 million impact from the Germany
restructuring, was $476.7 million, an increase of 2.0%. Gross
profit as a percentage of sales was 49.4%, a 10 basis point decline
from the fiscal 2014 fourth quarter.
For fiscal year 2015, consolidated gross profit was $1.9
billion, an increase of 2.0% over fiscal 2014 gross profit.
Adjusted gross profit as a percentage of sales was 49.5%, down 10
basis points when compared to fiscal year 2014.
GAAP and Adjusted Selling, General and Administrative
Expenses: For the fiscal 2015 fourth quarter, consolidated GAAP
selling, general and administrative (SG&A) expenses, including
unallocated corporate expenses and share-based compensation, were
$330.9 million, or 34.3% of sales, a 40 basis point increase from
the fiscal 2014 fourth quarter metric of 33.9% of sales and total
SG&A expenses of $320.5 million. Excluding expenses associated
with the previously disclosed data security incidents of $0.6
million, pre-tax, and charges for the Sally Germany restructure of
$2.8 million, pre-tax, adjusted SG&A expenses in the fiscal
2015 fourth quarter were $327.5 million, or 34.0% of sales.
For fiscal year 2015, GAAP SG&A expenses were $1.31 billion,
which includes $148.2 million of unallocated corporate expenses and
share-based expenses and $9.5 million, pre-tax, of charges from the
data security incidents and the Sally Germany restructure. SG&A
expenses as a percentage of sales was 34.2%, compared to fiscal
year 2014 metric of 33.9% of sales and total SG&A expenses of
$1.27 billion.
Excluding expenses associated with the data security incidents
and Sally Germany restructure initiative, adjusted SG&A
expenses in fiscal year 2015 were $1.30 billion or 34.0% of
sales.
Interest Expense: Interest expense, net of interest
income, for the fiscal 2015 fourth quarter was $29.2 million, down
$0.1 million from the fiscal 2014 fourth quarter of $29.3
million.
For fiscal year 2015, interest expense, net of interest income,
was $116.8 million, up $0.5 million from the fiscal year 2014
interest expense of $116.3 million.
Provision for Income Taxes: For the fiscal 2015 fourth
quarter, income taxes were $33.9 million. The effective tax rate
for the fiscal 2015 fourth quarter was 37.6% compared to 36.2% for
the fiscal 2014 fourth quarter.
For fiscal year 2015, income taxes were $143.4 million versus
$144.7 million in fiscal 2014. The Company’s effective tax rate for
fiscal year 2015 was 37.9% compared to 37.0% for fiscal 2014.
In fiscal year 2016, the Company anticipates the effective tax
rate to be in the range of 37.5% to 38.5%.
GAAP and Adjusted Net Earnings and Diluted Net Earnings Per
Share (EPS) (1): GAAP net earnings were $56.2
million in the fiscal 2015 fourth quarter, compared to fiscal 2014
fourth quarter net earnings of $61.8 million, down 9.0%. Excluding
expenses from the Sally Germany restructure of $2.6 million, net of
tax, and the data security incident of $0.4 million, net of tax,
adjusted net earnings for the fiscal 2015 fourth quarter were $59.2
million, down 4.6% from adjusted net earnings of $62.1 in the
fiscal 2014 fourth quarter.
GAAP and Adjusted diluted earnings per share for the fiscal 2015
fourth quarter were $0.36 and $0.38, respectively, compared to GAAP
and adjusted fiscal 2014 fourth quarter diluted earnings per share
of $0.39.
In fiscal year 2015, GAAP net earnings were $235.1 million
compared to fiscal year 2014 net earnings of $246.0 million, down
4.4% from the prior year. Excluding charges from the Germany
restructuring and expenses from the Company’s data security
incidents of $6.8 million, net of tax, adjusted net earnings in
fiscal year 2015 were $241.9 million, a decrease of 3.1% from the
prior year.
GAAP diluted earnings per share in fiscal year 2015 were $1.49
compared to fiscal year 2014 diluted earnings per share of $1.51, a
decrease of 1.3%. Adjusted diluted earnings per share in fiscal
2015 were $1.53, flat when compared to the prior year.
Fiscal year 2015 adjusted net earnings includes adjustments of
$6.8 million, net of tax, and are described in detail on Schedule
E.
Adjusted (Non-GAAP) EBITDA(1): Adjusted
EBITDA for the fiscal 2015 fourth quarter was $152.6 million, an
increase of 0.8% from $151.4 million for the fiscal 2014 fourth
quarter.
Fiscal year 2015 Adjusted EBITDA was $612.4 million, an increase
of 0.2% from $611.3 million in fiscal 2014.
(1)See Supplemental Schedule C, D and E for a reconciliation of
these non-GAAP financial measures.
Financial Position, Capital Expenditures and Working
Capital: Cash and cash equivalents as of September 30, 2015,
were $140.0 million. The Company ended fiscal year 2015 with no
outstanding borrowings on its asset-based loan (ABL) revolving
credit facility. Borrowing capacity on the ABL facility was
approximately $476.9 million at the end of fiscal year 2015.
The Company’s debt, excluding capital leases, totaled $1.8 billion
as of September 30, 2015. Net cash provided by operating activities
for fiscal year 2015 was $300.8 million.
During the fiscal 2015 fourth quarter, the Company repurchased
(and subsequently retired) a total of 5.8 million shares of its
common stock at an aggregate cost of $153.3 million under the
Company’s $1 billion share repurchase program.
For the 2015 fiscal year, the Company repurchased (and
subsequently retired) a total of 8.1 million shares of its common
stock at an aggregate cost of $227.6 million under the Company’s $1
billion share repurchase program.
For the full year ended September 30, 2015, the Company’s
capital expenditures, excluding acquisitions, totaled $106.5
million.
Working capital (current assets less current liabilities)
increased $54.8 million to $695.4 million at September 30, 2015,
compared to $640.6 million at September 30, 2014. The ratio of
current assets to current liabilities was 2.41 to 1.00 at September
30, 2015, compared to 2.38 to 1.00 at September 30, 2014.
Inventory as of September 30, 2015 was $885.2 million, an
increase of $56.8 million or growth of 6.9% from September 30, 2014
inventory of $828.4 million. This increase is primarily due to
sales growth from new store openings and the introduction of new
brands in the Beauty Systems Group segment.
Business Segment Results:
Sally Beauty Supply
Fiscal 2015 Fourth Quarter Results for Sally Beauty
Supply
- Sales of $582.3 million, up 0.2% from
$581.3 million in the fiscal 2014 fourth quarter. The unfavorable
impact of foreign currency exchange on net sales was $21.7 million,
or 3.7% of sales.
- Same store sales grew 1.8% versus 2.1%
growth in the fiscal 2014 fourth quarter.
- Gross margin of 54.6%, a 20 basis point
decline from 54.8% in the fiscal 2014 fourth quarter. Gross profit
includes an unfavorable charge of $1.4 million, pre-tax, from the
Germany restructuring
- Segment operating earnings of $97.9
million, down 9.3% from $107.9 million in the fiscal 2014 fourth
quarter. Segment operating margins declined 180 basis points to
16.8% of sales from 18.6% of sales in the fiscal 2014 fourth
quarter. Segment operating earnings and margin were negatively
impacted by $4.2 million, pre-tax, of charges associated with the
Germany restructuring.
Sales growth in the fiscal 2015 fourth quarter was driven by new
store openings and same store sales growth. This growth was offset
by the unfavorable impact of foreign currency exchange of $21.7
million, or 3.7% of sales. Gross profit margin declined by 20 basis
points due to the restructuring charge of $1.4 million. Segment
operating margin decline was primarily due to higher SG&A
expenses and the Germany restructuring charge of $4.2 million,
pre-tax.
Fiscal 2015 Results for Sally Beauty Supply
- Sales of $2.3 billion, up 0.9% over
fiscal year 2014. The unfavorable impact of foreign currency
exchange was $70.9 million, or 3.1% of sales.
- Same store sales grew 1.7% versus 1.3%
growth in fiscal year 2014.
- Sales, on a USD basis, from
international locations (Mexico, Canada, the United Kingdom,
Ireland, Belgium, the Netherlands, France, Germany, Spain, Chile,
Peru and Colombia) represented 24% of segment sales versus 25% in
fiscal 2014.
- Gross margin of 54.8% was flat when
compared to fiscal 2014. Gross profit includes an unfavorable
charge of $1.4 million, pre-tax, from the Germany
restructuring.
- Segment operating earnings of $412.4
million, down 4.5% from $431.7 million in fiscal 2014. Segment
operating margins decreased 100 basis points to 17.7% of sales from
18.7% in fiscal 2014. Segment operating earnings and margin were
negatively impacted by $5.3 million, pre-tax, of charges associated
with the Germany restructuring.
- Net store base increased by 110 or 3.1%
for total store count of 3,673. Store growth in the U.S. business
was 2.7% while store growth in the international business was
4.5%.
Sales growth in fiscal 2015 was driven by new store openings and
same store sales growth. This growth was offset by the impact of
unfavorable foreign currency exchange of $70.9 million, or 3.1% of
sales. Gross profit margin and operating margin were negatively
impacted by the Germany restructure.
Beauty Systems Group
Fiscal 2015 Fourth Quarter Results for Beauty Systems
Group
- Sales of $381.9 million, up 5.2% from
$363.0 million in the fiscal 2014 fourth quarter. The impact of
unfavorable foreign currency exchange on net sales was $5.9
million, or 1.6% of sales.
- Same store sales growth of 7.4% versus
3.8% in the fiscal 2014 fourth quarter.
- Gross margin of 41.2%, up 10 basis
points when compared to the fiscal 2014 fourth quarter of
41.1%.
- Segment operating earnings of $57.9
million, up 7.1% from $54.0 million in the fiscal 2014 fourth
quarter.
- Segment operating margins increased by
20 basis points to 15.1% of sales from 14.9% in the fiscal 2014
fourth quarter.
Sales growth for Beauty Systems Group was driven by growth in
same store sales, the full service business and new store openings.
Segment operating earnings growth is primarily due to sales growth,
gross margin expansion and favorable SG&A leverage.
Fiscal 2015 Results for Beauty Systems Group
- Sales of $1.5 billion, up 4.2% from
$1.4 billion in fiscal 2014. The unfavorable impact of foreign
currency exchange on net sales was $16.5 million, or 1.1% of sales.
Sales growth in the store business was 5.5% and sales growth in the
full service business was 1.7%.
- Same store sales growth of 5.7% versus
3.5% in fiscal 2014.
- Gross margin of 41.3%, up 20 basis
points from 41.1% in fiscal 2014.
- Segment operating earnings of $231.2
million, up 6.5% from $217.0 million in fiscal 2014.
- Segment operating margins increased to
15.4% of sales from 15.0% in fiscal 2014, a 40 basis point
improvement.
- Net store base increased by 29 or 2.3%
for total store count of 1,294, including 157 franchised
locations.
- Total BSG distributor sales consultants
at the end of fiscal 2015 were 958 versus 981 at the end of fiscal
2014.
Sales growth in fiscal year 2015 for the Beauty Systems Group
was primarily due to growth in same store sales, the full service
business and new store openings. This growth was partially offset
by the unfavorable impact of foreign currency exchange of $16.5
million. Segment earnings growth is primarily due to sales growth,
gross margin expansion and favorable SG&A leverage.
Fiscal Year 2016 Outlook
- Consolidated same store sales growth
for fiscal 2016 is expected to be in the low 3% range. Sequential
improvement is expected throughout the year in Sally with slower
growth in BSG than the prior fiscal year as they anniversary a very
strong year.
- Consolidated gross profit margin
expansion is expected to be in the range of 35 bps to 45 bps.
- Fiscal year 2016 unallocated corporate
expenses, including approximately $16 million in share-based
compensation, are expected to be in the range of $150 million to
$155 million.
- Consolidated SG&A as a percent to
sales, including unallocated expenses, is expected to be up 10 bps
to 20 bps from fiscal 2015 GAAP metric of 34.2%. SG&A includes
approximately $16 million in new business development including
initiatives in South America and Loxa Beauty.
- The effective tax rate for fiscal year
2016 is expected to be in the range of 37.5% to 38.5%.
- Capital expenditures for fiscal year
2016 are projected to be in the range of $125 million to $135
million. Capital expenditure projects include investments in new
payment terminals for Sally U.S., merchandise resets in the Sally
U.S. stores, as well as the continuation of refreshing stores and
upgrades to the U.S. distribution centers.
- Consolidated organic store growth is
expected to be approximately 3.0%.
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 800-230-1096 (International: (612)
288-0329). 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 in
to this conference call, the replay will be available at about
12:00 p.m. (Central) November 12, 2015 through November 26, 2015 by
dialing 800-475-6701 or if international dial 320-365-3844 and
reference the conference ID number 371967. 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 approximately 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: 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 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 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 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; 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, 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; (3) Adjusted Gross Profit and (4)
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.
Adjusted Gross Profit – Adjusted gross profit is GAAP gross
profit that excludes costs related to the Company’s 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 Twelve Months Ended September 30, September 30,
2015 2014 % CHG
2015 2014 % CHG
Net sales $ 964,230 $ 944,288 2.1 % $ 3,834,343 $ 3,753,498
2.2 % Cost of products sold and distribution expenses (3)
488,919 476,748
2.6 % 1,936,492
1,893,326 2.3 % Gross
profit 475,311 467,540 1.7 % 1,897,851 1,860,172 2.0 % Selling,
general and administrative expenses (1)(2)(3) 330,855 320,496 3.2 %
1,313,134 1,273,513 3.1 % Depreciation and amortization
25,223 20,924
20.5 % 89,391
79,663 12.2 % Operating
earnings 119,233 126,120 -5.5 % 495,326 506,996 -2.3 % Interest
expense 29,152
29,263 -0.4 %
116,842 116,317
0.5 % Earnings before provision for income taxes 90,081 96,857 -7.0
% 378,484 390,679 -3.1 % Provision for income taxes
33,901 35,107
-3.4 % 143,397
144,686 -0.9 % Net earnings
$ 56,180 $ 61,750
-9.0 % $ 235,087 $
245,993 -4.4 % Earnings per share:
Basic $ 0.36 $ 0.40 -10.0 % $ 1.50 $ 1.54 -2.6 % Diluted $ 0.36 $
0.39 -7.7 % $ 1.49 $ 1.51 -1.3 % Weighted average shares:
Basic 154,725 154,690 156,353 159,933 Diluted
156,457 158,124
158,226
163,419
Basis Pt Chg
Basis Pt Chg
Comparison as a % of
Net sales
Sally Beauty Supply Segment Gross Profit Margin 54.6 % 54.8 % (20 )
54.8 % 54.8 % 0 BSG Segment Gross Profit Margin 41.2 % 41.1 % 10
41.3 % 41.1 % 20 Consolidated Gross Profit Margin 49.3 % 49.5 % (20
) 49.5 % 49.6 % (10 ) Selling, general and administrative expenses
34.3 % 33.9 % 40 34.2 % 33.9 % 30 Consolidated Operating Profit
Margin 12.4 % 13.4 % (100 ) 12.9 % 13.5 % (60 ) Net Earnings Margin
5.8 % 6.5 % (70 ) 6.1 % 6.6 % (50 )
Effective Tax
Rate
37.6 % 36.2 % 140 37.9 % 37.0 % 90
(1)
Selling, general and administrative expenses include share-based
compensation expenses of $3.3 million and $3.8 million for the
three months ended September 30, 2015 and 2014, respectively; and
$16.8 million and $22.1 million for the twelve months ended
September 30, 2015 and 2014, respectively, including, for the
twelve months ended September 30, 2014, expense of $3.5 million in
connection with the executive management transition plan disclosed
earlier. (2) For the three months ended September 30, 2015
and 2014, selling, general and administrative expenses include
expenses of $0.6 million (net of related insurance recovery) and
$0.5 million, respectively; and for the twelve months ended
September 30, 2015 and 2014, expenses of $5.6 million (net of
related insurance recovery) and $2.5 million, respectively,
incurred in connection with the data security incidents disclosed
earlier. (3) Results for the three and twelve months ended
September 30, 2015, reflect $4.2 million and $5.3 million,
respectively, in expenses resulting from a restructuring of the
Company's operations in Germany that was approved by our Board of
Directors in June 2015. These amounts include $1.4 million reported
in cost of products sold and distribution expenses for the three
and twelve months ended September 30, 2015, with the remaining
expenses reported in selling, general and administrative expenses.
Supplemental Schedule B
SALLY BEAUTY HOLDINGS, INC. AND SUBSIDIARIES Segment
Information (In thousands) (Unaudited) Three Months Ended
Twelve Months Ended September 30, September 30,
2015 2014 % CHG
2015 2014 % CHG Net sales: Sally
Beauty Supply $ 582,301 $ 581,270 0.2 % $ 2,329,523 $ 2,308,743 0.9
% Beauty Systems Group 381,929
363,018 5.2 %
1,504,820 1,444,755
4.2 % Total net sales $ 964,230
$ 944,288 2.1 %
$ 3,834,343 $ 3,753,498
2.2 % Operating earnings: Sally Beauty Supply
(1) $ 97,860 $ 107,865 -9.3 % $ 412,393 $ 431,655 -4.5 % Beauty
Systems Group 57,862
54,007 7.1 %
231,151 216,971
6.5 % Segment operating earnings
155,722 161,872
-3.8 % 643,544
648,626 -0.8 % Unallocated
expenses (2) (33,177 ) (31,942 ) 3.9 % (131,440 ) (119,523 ) 10.0 %
Share-based compensation (3) (3,312 ) (3,810 ) -13.1 % (16,778 )
(22,107 ) -24.1 % Interest expense (29,152 )
(29,263 ) -0.4 %
(116,842 ) (116,317 )
0.5 % Earnings before provision for income taxes
$ 90,081 $ 96,857
-7.0 % $ 378,484 $
390,679 -3.1 % Segment operating profit
margin:
Basis Pt Chg Basis Pt Chg Sally Beauty Supply
16.8 % 18.6 % (180 ) 17.7 % 18.7 % (100 ) Beauty Systems Group 15.1
% 14.9 % 20 15.4 % 15.0 % 40 Consolidated operating profit margin
12.4 % 13.4 %
(100 ) 12.9 %
13.5 % (60 )
(1)
For the three and twelve months ended September 30, 2015, Sally
Beauty Supply reflects $4.2 million and $5.3 million, respectively,
in expenses resulting from a restructuring of the its operations in
Germany that was approved by our Board of Directors in June 2015.
These amounts include $1.4 million reported in cost of products
sold and distribution expenses for the three and twelve months
ended September 30, 2015, with the remaining expenses reported in
selling, general and administrative expenses.
(2)
Unallocated expenses consist of corporate and shared costs, and are
included in selling, general and administrative expenses. For the
three months ended September 30, 2015 and 2014, unallocated
expenses include $0.6 million (net of related insurance recovery)
and $0.5 million, respectively. For the twelve months ended
September 30, 2015 and 2014, $5.6 million (net of related insurance
recovery) and $2.5 million, respectively, in expenses incurred in
connection with the data security incidents disclosed earlier.
(3)
For the twelve months ended September 30, 2014, share-based
compensation expense includes $3.5 million in connection with the
executive management transition plan disclosed earlier.
Supplemental Schedule C
SALLY
BEAUTY HOLDINGS, INC. AND SUBSIDIARIES Non-GAAP Financial
Measures Reconciliations (In thousands) (Unaudited) Three
Months Ended Twelve Months Ended September 30, September 30,
2015 2014 % CHG
2015 2014 % CHG Adjusted
EBITDA: Net earnings (per GAAP) $ 56,180 $ 61,750 -9.0 % $ 235,087
$ 245,993 -4.4 % Add: Depreciation and amortization 25,223 20,924
20.5 % 89,391 79,663 12.2 % Share-based compensation (1) 3,312
3,810 -13.1 % 16,778 22,107 -24.1 % Germany business restructure
charges (2) 4,190 - 100.0 % 5,307 - 100.0 % Loss from data security
incidents (3) 604 529 14.2 % 5,564 2,504 122.2 % Interest expense
29,152 29,263 -0.4 % 116,842 116,317 0.5 % Provision for income
taxes 33,901 35,107
-3.4 % 143,397
144,686 -0.9 % Adjusted EBITDA
(Non-GAAP) $ 152,562 $ 151,383
0.8 % $ 612,366 $ 611,270
0.2 %
(1)
For the twelve months ended September 30, 2015 and 2014,
share-based compensation includes $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, including, for the twelve months ended
September 30, 2014, expense of $3.5 million in connection with the
executive management transition plan disclosed earlier.
(2)
Results for the three and twelve months ended September 30, 2015,
reflect $4.2 million and $5.3 million, respectively, in pre-tax
expenses resulting from a restructuring of the Company's operations
in Germany that was approved by our Board of Directors in June
2015. These amounts include $1.4 million reported in cost of
products sold and distribution expenses for the three and twelve
months ended September 30, 2015, with the remaining expenses
reported in selling, general and administrative expenses.
(3)
For the three months ended September 30, 2015 and 2014, selling,
general and administrative expenses include $0.6 million (net of
related insurance recovery) and $0.5 million, respectively; and for
the twelve months ended September 30, 2015 and 2014, $5.6 million
(net of related insurance recovery) and $2.5 million, respectively,
in pre-tax expenses incurred in connection with the data security
incidents disclosed earlier.
Supplemental Schedule D
SALLY BEAUTY HOLDINGS, INC. AND SUBSIDIARIES Non-GAAP
Financial Measures Reconciliations, Continued (In thousands)
(Unaudited)
Three Months Ended
September 30, 2015 As Reported
Charges forGermanyRestructure (1)
Charges fromData SecurityIncidents (2)
As Adjusted(Non-GAAP)
Consolidated Gross profit (1) $ 475,311 $ 1,404 $ - $
476,715 Consolidated Gross Profit Margin 49.3 % 49.4 % Selling,
general and administrative expenses 330,855 (2,786 ) (604 ) 327,465
SG&A expenses, as a percentage of sales 34.3 % 34.0 % Operating
earnings 119,233 4,190 604 124,027 Operating Profit Margin 12.4 %
12.9 % Earnings before provision for income taxes 90,081 4,190 604
94,875 Provision for income taxes (3) 33,901
1,550
223 35,674 Net earnings
$ 56,180 $ 2,640
$ 381 $ 59,201
Earnings per share: Basic $ 0.36 $ 0.02 $ 0.00 $ 0.38 Diluted $
0.36 $ 0.02 $ 0.00 $ 0.38
Three
Months Ended September 30, 2014 As Reported
Charges fromData SecurityIncidents (2)
As Adjusted(Non-GAAP)
Consolidated Gross profit (1) $ 467,540 $ - $ 467,540
Consolidated Gross Profit Margin 49.5 % 49.5 % Selling, general and
administrative expenses 320,496 (529 ) 319,967 SG&A expenses,
as a percentage of sales 33.9 % 33.9 % Operating earnings 126,120
529 126,649 Operating Profit Margin 13.4 % 13.4 % Earnings before
provision for income taxes 96,857 529 97,386 Provision for income
taxes (3) 35,107
206 35,313
Net earnings $ 61,750
$ 323 $ 62,073
Earnings per share: Basic $ 0.40 $ 0.00 $ 0.40
Diluted $ 0.39 $ 0.00 $ 0.39
(1)
Results for the three months ended September 30, 2015, reflect $4.2
million in expenses resulting from a restructuring of the Company's
operations in Germany that was approved by our Board of Directors
in June 2015. This amount includes $1.4 million reported in cost of
products sold and distribution expenses, with the remaining
expenses reported in selling, general and administrative expenses.
(2)
For the three months ended September 30, 2015 and 2014, selling,
general and administrative expenses include expenses of $0.6
million (net of related insurance recovery) and $0.5 million,
respectively, incurred in connection with the data security
incidents disclosed earlier.
(3)
The tax provision for the adjustments to net earnings was
calculated using an effective tax rate of 37.0% and 39.0% for the
three months ended September 30, 2015 and 2014, respectively.
Supplemental Schedule E
SALLY BEAUTY
HOLDINGS, INC. AND SUBSIDIARIES Non-GAAP Financial Measures
Reconciliations, Continued (In thousands) (Unaudited)
Twelve
Months Ended September 30, 2015 As Reported
Charges forGermanyRestructure (2)
Charges fromData SecurityIncidents (3)
As Adjusted(Non-GAAP)
Consolidated Gross profit (2) $ 1,897,851 $ 1,404 $ - $
1,899,255 Consolidated Gross Profit Margin 49.5 % 49.5 % Selling,
general and administrative expenses 1,313,134 (3,903 ) (5,564 )
1,303,667 SG&A expenses, as a percentage of sales 34.2 % 34.0 %
Operating earnings 495,326 5,307 5,564 506,197 Operating Profit
Margin 12.9 % 13.2 % Earnings before provision for income taxes
378,484 5,307 5,564 389,355 Provision for income taxes (4)
143,397
1,964 2,059
147,420 Net earnings $ 235,087
$ 3,343
$ 3,505 $ 241,935
Earnings per share: Basic $ 1.504 $ 0.021 $ 0.022 $ 1.55 Diluted $
1.486 $ 0.021 $ 0.022 $ 1.53
Twelve Months Ended September 30, 2014
As Reported
ManagementTransition Costs (1)
Charges fromData SecurityIncidents (3)
As Adjusted(Non-GAAP)
Consolidated Gross profit (2) $ 1,860,172 $ - $ - $
1,860,172
Consolidated Gross Profit Margin
49.6 % 49.6 % Selling, general and administrative expenses
1,273,513 (3,500 ) (2,504 ) 1,267,509 SG&A expenses, as a
percentage of sales 33.9 % 33.8 % Operating earnings 506,996 3,500
2,504 513,000 Operating Profit Margin 13.5 % 13.7 % Earnings before
provision for income taxes 390,679 3,500 2,504 396,683 Provision
for income taxes (4) 144,686
1,365
977 147,028 Net
earnings $ 245,993 $
2,135 $ 1,527
$ 249,655 Earnings per share: Basic $
1.54 $ 0.01 $ 0.01 $ 1.56 Diluted $ 1.51 $ 0.01 $ 0.01 $ 1.53
(1)
For the twelve months ended September 30, 2014, selling, general
and administrative expenses include share-based compensation
expense of $3.5 million in connection with the executive management
transition plan disclosed earlier.
(2)
Results for the twelve months ended September 30, 2015, reflect
$5.3 million in expenses resulting from a restructuring of the
Company's operations in Germany that was approved by our Board of
Directors in June 2015. This amount includes $1.4 million reported
in cost of products sold and distribution expenses, with the
remaining expenses reported in selling, general and administrative
expenses.
(3)
For the twelve months ended September 30, 2015 and 2014, selling,
general and administrative expenses include expenses of $5.6
million (net of related insurance recovery) and $2.5 million,
respectively, incurred in connection with the data security
incidents disclosed earlier.
(4)
The tax provision for the adjustments to net earnings was
calculated using an effective tax rate of 37.0% and 39.0% for the
twelve months ended September 30, 2015 and 2014, respectively.
Supplemental
Schedule F
SALLY BEAUTY HOLDINGS, INC. AND
SUBSIDIARIES Store Count and Same Store Sales (Unaudited)
As of September 30, 2015
2014 CHG Number of retail stores (end of
period): Sally Beauty Supply: Company-operated stores 3,655 3,544
111 Franchise stores 18 19 (1 ) Total Sally
Beauty Supply 3,673 3,563 110 Beauty Systems Group:
Company-operated stores 1,137 1,103 34 Franchise stores 157
162 (5 ) Total Beauty System Group 1,294
1,265 29 Total 4,967 4,828 139
BSG distributor sales consultants (end of period) (1)
958 981 (23 )
2015 2014 Fourth quarter
company-operated same store sales growth (2)
Basis Pt
Chg
Sally Beauty Supply 1.8 % 2.1 % (30 ) Beauty Systems Group 7.4 %
3.8 % 360 Consolidated 3.5 % 2.6 % 90 Twelve months ended
September 30 company-operated same store sales growth (2)
Basis Pt
Chg
Sally Beauty Supply 1.7 % 1.3 % 40 Beauty Systems Group 5.7 % 3.5 %
220 Consolidated 2.9 % 2.0 % 90 (1) Includes 318 and 339
distributor sales consultants as reported by our franchisees at
September 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 (In thousands) (Unaudited) As of
September 30, 2015 2014 Financial condition information (at period
end): Working capital $ 695,403 $ 640,612 Cash and cash equivalents
140,038 106,575 Property and equipment, net 270,847 238,111 Total
assets 2,094,351 2,029,973 Total debt, including capital leases (1)
1,787,594 1,785,987 Total stockholders' (deficit) equity ($297,821
) ($347,053 )
As of September 30, 2015 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 2019 750,000 6.875 % Senior notes due 2022 850,000
5.750 % Senior notes due 2023 200,000 5.500 % Total debt,
excluding capital leases (3) $ 1,800,000
Debt maturities,
excluding capital leases: Twelve months ending September 30,
2016-2019 $ - 2020 750,000 Thereafter 1,050,000 Total
debt, excluding capital leases (3) $ 1,800,000 (1)
Total debt, including capital leases, is net of unamortized debt
issuance costs of $21.8 million and $25.7 million at September 30,
2015 and 2014, respectively. (2) Interest rates represent
the coupon or contractual rates related to each indebtedness shown.
(3) Amounts do not include capital lease obligations,
unamortized premium of $6.5 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 $21.8
million in connection with the senior notes due 2019, 2022 and
2023.
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Sally Beauty Holdings, Inc.Karen Fugate, 940-297-3877Investor
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