SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 


 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

 

Date of Report: February 2, 2016

(Date of earliest event reported)

 

SALLY BEAUTY HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

 

Delaware
(State or other jurisdiction of
incorporation)

 

1-33145
(Commission file number)

 

36-2257936
(I.R.S. Employer
Identification Number)

 

3001 Colorado Boulevard
Denton, Texas 76210
(Address of principal executive offices)

 

(940) 898-7500
(Registrant’s telephone number, including area code)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

o            Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

o            Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

o            Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

o            Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 



 

Item 2.02                   Results of Operations and Financial Condition

 

On February 4, 2016, Sally Beauty Holdings, Inc. (the “Company”) issued the news release attached hereto as Exhibit 99.1 reporting the financial results of the Company for the quarter ended December 31, 2015 (the “Earnings Release”).

 

Item 5.07                   Submission of Matters to a Vote of Security Holders

 

On February 2, 2016, Sally Beauty Holdings, Inc. (the “Company”) held its 2016 Annual Meeting of Stockholders (the “Annual Meeting”).  The number of shares of the Company’s common stock entitled to vote at the Annual Meeting was 150,952,353 and each share of common stock was entitled to one vote.  The holders of 140,765,372 shares of common stock were present at the Annual Meeting, either in person or by proxy, constituting a quorum.

 

At the Annual Meeting, the Company’s stockholders acted upon the following matters:

 

(i)                                    the election of seven directors to the Board of Directors to hold office until the 2017 Annual Meeting of Stockholders; and

 

(ii)                                the ratification of the selection of KPMG LLP as the Company’s independent registered public accounting firm for the 2016 fiscal year.

 

The voting results reported below are final.

 

Proposal 1 — Election of Directors

 

Each of the individuals listed below was duly elected as a director of the Company to serve until the 2017 Annual Meeting of Stockholders or until his or her successor is duly elected and qualified.  The results of the election were as follows:

 

Nominee

 

For

 

Withheld

 

Broker Non-Votes

 

Christian A. Brickman

 

135,491,936

 

1,327,256

 

3,946,180

 

Katherine Button Bell

 

135,459,948

 

1,359,244

 

3,946,180

 

Marshall E. Eisenberg

 

135,301,253

 

1,517,939

 

3,946,180

 

Robert R. McMaster

 

135,302,650

 

1,516,542

 

3,946,180

 

John A. Miller

 

135,306,629

 

1,512,563

 

3,946,180

 

Susan R. Mulder

 

135,490,596

 

1,328,596

 

3,946,180

 

Edward W. Rabin

 

135,355,767

 

1,463,425

 

3,946,180

 

 

Proposal 2 — Ratification of Selection of Auditors

 

The Board of Director’s selection of KPMG LLP as the Company’s independent registered public accounting firm for the 2016 fiscal year was ratified.  The results of the ratification were as follows:

 

For

 

Against

 

Abstain

 

138,996,537

 

1,565,578

 

203,257

 

 

2



 

Item 7.01                   Regulation FD Disclosure

 

The Earnings Release also provides an update on the Company’s strategy and business outlook.

 

Item 8.01                   Other Events

 

Appointment of Mr. McMaster as Chairman of the Board

 

In connection with Gary G. Winterhalter’s previously announced retirement as the Company’s Executive Chairman, the Company’s Board of Directors (the “Board”) appointed Robert R. McMaster as the non-executive Chairman of the Board effective February 2, 2016.  Mr. McMaster has served on the Board and as the Chairman of the Audit Committee since 2006. Mr. McMaster has also served as the Company’s Lead Independent Director since 2012. Mr. McMaster is an independent director and, as a result, the Company will no longer have a Lead Independent Director.

 

In connection with Mr. McMaster’s appointment as Chairman of the Board, the Board approved an amendment to the Company’s Amended and Restated Independent Director Compensation Policy to provide for an annual cash retainer of $100,000 for an independent director serving as the Chairman of the Board.

 

Executive Committee Composition

 

Also in connection with Mr. Winterhalter’s retirement from the Board, the Board appointed Christian A. Brickman as a member of the Board’s Executive Committee and appointed John A. Miller as the Chairman of the Executive Committee, in each case effective February 2, 2016.  Mr. McMaster and Marshall E. Eisenberg will continue to serve as the remaining two members of the Executive Committee.

 

3



 

Item 9.01                   Financial Statement and Exhibits

 

(d)                                 See exhibit index.

 

All of the information furnished in Items 2.02 and 7.01 of this report and the accompanying exhibit shall not be deemed to be “filed” for the purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, and shall not be incorporated by reference in any filing under the Securities Act of 1933, as amended, unless expressly incorporated by reference therein.

 

4



 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

 

SALLY BEAUTY HOLDINGS, INC.

 

 

 

 

February 4, 2016

By:

/s/ Matthew O. Haltom

 

 

Name: Matthew O. Haltom

 

 

Title: Senior Vice President,

 

 

General Counsel and Secretary

 

5



 

EXHIBIT INDEX

 

Exhibit Number

 

Description

 

 

 

Exhibit 99.1

 

News release reporting financial results for the quarter ended December 31, 2015, issued by Sally Beauty Holdings, Inc. on February 4, 2016

 

6




Exhibit 99.1

 

GRAPHIC

Contact: Karen Fugate

 

 

Investor Relations

 

 

940-297-3877

 

Sally Beauty Holdings, Inc. Announces Fiscal 2016 First Quarter Results

 

·                  Consolidated net sales of $998.0 million, up 3.5%

·                  1Q16 same store sales growth of 3.9% versus 2.3% in 1Q15

·                  Consolidated gross margin expansion of 40 basis points

·                  1Q16 GAAP net earnings of $42.2 million with diluted earnings per share of $0.28

·                  1Q16 Adjusted net earnings of $65.1 million with diluted earnings per share of $0.43

·                  Repurchased $62.4 million, or 2.4 million shares, of common stock

 

DENTON, Texas, February 4, 2016 — Sally Beauty Holdings, Inc. (NYSE: SBH) (the “Company”) today announced financial results for the fiscal 2016 first quarter.  The Company will hold a conference call today at 10:00 a.m. (Central) to discuss these results and its business.

 

“We are off to a solid start for fiscal year 2016,” stated Chris Brickman, President and CEO. “We drove same store sales improvement in our Sally business, and our BSG business continued to grow sales and gain channel share.  In addition, implementation of our pricing and margin improvement initiatives resulted in gross profit margin expansion consistent with our previously stated guidance.”

 

“Looking forward, we are confident that we can deliver on our full year guidance. However, we anticipate the business may confront modest headwinds in Q2 as we launch our hair care solutions center in almost 3,000 Sally U.S. stores, invest in a significant TV campaign to re-engage retail consumers at Sally and ramp up new business development programs globally.  Despite these short term challenges, we are excited about the upcoming initiatives and believe that they will help us accelerate growth in our Sally business and deliver on our full-year earnings objectives.”

 

FISCAL 2016 FIRST QUARTER FINANCIAL HIGHLIGHTS

 

Net Sales:  For the fiscal 2016 first quarter, consolidated net sales were $998.0 million, an increase of 3.5% from the fiscal 2015 first quarter.  The sales increase in our fiscal 2016 first quarter is attributable to same store sales growth and incremental sales from our new stores.  The unfavorable impact from changes in foreign currency exchange rates in the fiscal 2016 first quarter was $22.1 million, or 2.3% of sales.  Consolidated same store sales growth in the fiscal 2016 first quarter was 3.9%.

 

Gross Profit:  Consolidated gross profit for the fiscal 2016 first quarter was $494.0 million, an increase of 4.3% over gross profit of $473.8 million for the fiscal 2015 first quarter.  Gross profit as a percentage of sales was 49.5%, a 40 basis point improvement from the fiscal 2015 first quarter.

 

1



 

GAAP and Adjusted Selling, General and Administrative Expenses:  For the fiscal 2016 first quarter, consolidated GAAP selling, general and administrative (SG&A) expenses, including unallocated corporate expenses and share-based compensation, were $339.7 million, or 34.0% of sales, a 90 basis point improvement from the fiscal 2015 first quarter metric of 34.9% of sales and total SG&A expenses of $337.0 million.  Excluding expenses associated with the previously disclosed data security incidents of $0.5 million and management transition expenses of $0.9 million, pre-tax, adjusted SG&A expenses in the fiscal 2016 first quarter were $338.4 million, or 33.9% of sales.

 

Note: SG&A expenses include unallocated corporate expenses, as detailed in the Company’s segment information on schedule B.

 

GAAP Interest Expense: GAAP interest expense for the fiscal 2016 first quarter was $63.9 million, up $34.7 million from the fiscal 2015 first quarter.  This increase is due to the loss on the extinguishment of debt of $33.3 million, pre-tax, in connection with the Company’s December 2015 redemption in full of its $750 million of 6.875% senior notes due 2019 and overlapping interest expense on such senior notes of $2.1 million, pre-tax.   On December 3, 2015, the Company completed the issuance and sale of $750 million of 5.625 % senior notes due 2025.

 

Provision for GAAP Income Taxes:  GAAP income taxes were $24.7 million for the fiscal 2016 first quarter versus $32.1 million in the fiscal 2015 first quarter.  The Company’s effective tax rate in the fiscal 2016 first quarter was 36.9%, flat when compared to the effective tax rate in the fiscal 2015 first quarter.

 

In fiscal year 2016, the Company’s effective tax rate is expected to be in the previously stated range of 37.5% to 38.5%.

 

GAAP and Adjusted Net Earnings and Diluted Net Earnings Per Share (EPS) (1):   GAAP net earnings were $42.2 million in the fiscal 2016 first quarter, compared to fiscal 2015 first quarter GAAP net earnings of $54.9 million, down 23.1%.  Excluding expenses from the loss on extinguishment of debt and overlapping interest expense of $22.0 million, net of tax, and expenses from the data security incident and management transition expenses or $0.8 million, net of tax, adjusted net earnings for the fiscal 2016 first quarter were $65.1 million, up 18.2% from adjusted net earnings of $55.1 million in the fiscal 2015 first quarter.

 

GAAP and adjusted diluted earnings per share for the fiscal 2016 first quarter were $0.28 and $0.43, respectively, compared to GAAP and adjusted fiscal 2015 first quarter diluted earnings per share of $0.35.

 

Adjusted EBITDA(1): Adjusted EBITDA for the fiscal 2016 first quarter was $159.9 million, an increase of 10.4% from $144.8 million for the fiscal 2015 first quarter.

 

Financial Position, Capital Expenditures and Working Capital:  Cash and cash equivalents as of December 31, 2015, were $67.4 million.  The Company’s asset-based loan (ABL) revolving credit facility ended the fiscal 2016 first quarter with no outstanding borrowings.  The Company’s debt, excluding capital leases, totaled $1.8 billion as of December 31, 2015.

 

For the fiscal 2016 first quarter, the Company’s capital expenditures totaled $32.4 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.

 

2



 

Working capital (current assets less current liabilities) decreased $20.5 million to $674.9 million at December 31, 2015 compared to $695.4 million at September 30, 2015.  Borrowing capacity on the ABL facility was approximately $478.5 million at the end of fiscal 2016 fist quarter.    The ratio of current assets to current liabilities was 2.48 to 1.00 at December 31, 2015 compared to 2.41 to 1.00 at September 30, 2015.

 

Inventory as of December 31, 2015 was $912.4 million, an increase of $74.6 million or growth of 8.9% from December 31, 2014 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 October 1, 2015 through December 31, 2015, the Company repurchased (and subsequently retired) 2.4 million shares of its common stock at an aggregate cost of $62.4 million and had approximately $710 million of additional share repurchase authorization remaining under its $1 billion share repurchase authorization.

 

Business Segment Results:

 

Sally Beauty Supply

 

Fiscal 2016 First Quarter Results for Sally Beauty Supply

 

·                  Sales of $596.0 million, up 1.6% from $586.5 million in the fiscal 2015 first quarter.  Sales growth was driven by same store sales growth and net new store openings.  The unfavorable impact of foreign currency exchange on sales was $16.9 million, or 2.9%.

·                  Same store sales growth of 2.4% versus growth of 1.6% in the fiscal 2015 first quarter. Same store sales growth rate was positively impacted by selective price increases in certain geographical areas of the U.S.

·                  Gross margin of 55.0%, a 60 basis point increase from 54.4% in the fiscal 2015 first quarter.

·                  Segment operating earnings of $106.1 million, up 4.8% from $101.2 million in the fiscal 2015 first quarter.

·                  Segment operating margins increased 50 basis points to 17.8% of sales from 17.3% in the fiscal 2015 first quarter.

·                  Net store count increased by 106 over the fiscal 2015 first quarter for total store count of 3,711.

 

Sales growth in the fiscal 2016 first quarter was driven by same store sales growth and new store openings; this growth was partially offset by the unfavorable impact of foreign currency exchange.  Gross profit margin improvement of 60 basis points was primarily the result of selective price increases in certain geographical areas of the U.S. and fewer promotions in the quarter versus the prior year quarter.  Segment operating earnings and margin were positively impacted by gross margin improvement and SG&A leverage.

 

Beauty Systems Group

 

Fiscal 2016 First Quarter Results for Beauty Systems Group

 

·                  Sales of $402.1 million, up 6.4% from $377.9 million in the fiscal 2015 first quarter.  The unfavorable impact of foreign currency exchange on sales was $5.2 million, or 1.4%.

 

3



 

·                  Same store sales growth of 7.2% versus 3.9% in the fiscal 2015 first quarter.

·                  Gross margin of 41.3%, up 40 basis points when compared to the fiscal 2015 first quarter of 40.9%.

·                  Segment earnings of $65.9 million, up 16.4% from $56.6 million in the fiscal 2015 first quarter.

·                  Segment operating margins increased by 140 basis points to 16.4% of sales from 15.0% in the fiscal 2015 first quarter.

·                  Net store count was 1,303, an increase of 28 stores over the fiscal 2015 first quarter.

·                  Total BSG distributor sales consultants at the end of the fiscal 2016 first quarter were 951 versus 967 at the end of the fiscal 2015 first quarter.

 

Sales growth for the Beauty Systems Group was primarily driven by growth in same store sales, sales growth in the full service business and net new store openings; this growth was partially offset by the unfavorable impact of foreign currency exchange.

 

Growth in segment operating earnings was primarily due to gross margin expansion and SG&A leverage improvement.

 


(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:  612-288-0337).  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) February 4, 2016 through February 18, 2016 by dialing 1-800-475-6701 or if international dial 320-365-3844 and reference the conference ID number 384524.  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.

 

4



 

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

 

5



 

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; 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 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 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 Statements of Earnings

 

A

Segment Information

 

B

Non-GAAP Financial Measures Reconciliations (Adjusted EBITDA)

 

C

Non-GAAP Financial Measures Reconciliations (Continued)

 

D

Store Count and Same Store Sales

 

E

Selected Financial Data and Debt

 

F

 

6



 

Supplemental Schedule A

 

SALLY BEAUTY HOLDINGS, INC. AND SUBSIDIARIES

Consolidated Statements of Earnings

(In thousands, except per share data)

(Unaudited)

 

 

 

Three Months Ended

 

 

 

 

 

December 31,

 

 

 

 

 

2015

 

2014

 

% CHG

 

 

 

 

 

 

 

 

 

Net sales

 

$

998,032

 

$

964,468

 

3.5

%

Cost of products sold and distribution expenses

 

503,983

 

490,699

 

2.7

%

Gross profit

 

494,049

 

473,769

 

4.3

%

Selling, general and administrative expenses (1)

 

339,728

 

336,954

 

0.8

%

Depreciation and amortization

 

23,386

 

20,579

 

13.6

%

 

 

 

 

 

 

 

 

Operating earnings

 

130,935

 

116,236

 

12.6

%

Interest expense (2)

 

63,943

 

29,241

 

118.7

%

Earnings before provision for income taxes

 

66,992

 

86,995

 

-23.0

%

Provision for income taxes

 

24,749

 

32,086

 

-22.9

%

Net earnings

 

$

42,243

 

$

54,909

 

-23.1

%

 

 

 

 

 

 

 

 

Earnings per share:

 

 

 

 

 

 

 

Basic

 

$

0.28

 

$

0.35

 

-20.0

%

Diluted

 

$

0.28

 

$

0.35

 

-20.0

%

 

 

 

 

 

 

 

 

Weighted average shares:

 

 

 

 

 

 

 

Basic

 

150,786

 

156,104

 

 

 

Diluted

 

152,426

 

158,545

 

 

 

 

 

 

 

 

 

 

Basis Pt Chg

 

Comparison as a % of Net sales

 

 

 

 

 

 

 

Sally Beauty Supply Segment Gross Profit Margin

 

55.0

%

54.4

%

60

 

BSG Segment Gross Profit Margin

 

41.3

%

40.9

%

40

 

Consolidated Gross Profit Margin

 

49.5

%

49.1

%

40

 

Selling, general and administrative expenses

 

34.0

%

34.9

%

(90

)

Consolidated Operating Profit Margin

 

13.1

%

12.1

%

100

 

Net Earnings Margin

 

4.2

%

5.7

%

(150

)

 

 

 

 

 

 

 

 

Effective Tax Rate

 

36.9

%

36.9

%

0

 

 


(1)    For the three months ended December 31, 2015 and 2014, selling, general and administrative expenses include share-based compensation expenses of $4.2 million and $7.8 million, respectively, and pre-tax expenses incurred in connection with the data security incidents disclosed earlier of $0.5 million and $0.2 million, respectively; and, for the three months ended December 31, 2015, $0.9 million of pre-tax expenses in connection with the management transition plan disclosed earlier.

 

(2)    For the three months ended December 31, 2015, 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

 

 

 

 

 

December 31,

 

 

 

 

 

2015

 

2014

 

% CHG

 

Net sales:

 

 

 

 

 

 

 

Sally Beauty Supply

 

$

595,966

 

$

586,519

 

1.6

%

Beauty Systems Group

 

402,066

 

377,949

 

6.4

%

Total net sales

 

$

998,032

 

$

964,468

 

3.5

%

 

 

 

 

 

 

 

 

Operating earnings:

 

 

 

 

 

 

 

Sally Beauty Supply

 

$

106,077

 

$

101,179

 

4.8

%

Beauty Systems Group

 

65,880

 

56,589

 

16.4

%

Segment operating earnings

 

171,957

 

157,768

 

9.0

%

 

 

 

 

 

 

 

 

Unallocated expenses (1) 

 

(36,834

)

(33,772

)

9.1

%

Share-based compensation

 

(4,188

)

(7,760

)

-46.0

%

Interest expense (2)

 

(63,943

)

(29,241

)

118.7

%

Earnings before provision for income taxes

 

$

66,992

 

$

86,995

 

-23.0

%

 

 

 

 

 

 

 

Basis Pt Chg

 

Segment operating profit margin:

 

 

 

 

 

 

 

Sally Beauty Supply

 

17.8

%

17.3

%

50

 

Beauty Systems Group

 

16.4

%

15.0

%

140

 

Consolidated operating profit margin

 

13.1

%

12.1

%

100

 

 


(1)  For the three months ended December 31, 2015 and 2014, selling, general and administrative expenses include $0.5 million and $0.2 million, respectively, in pre-tax expenses incurred in connection with the data security incidents disclosed earlier and, for the three months ended December 31, 2015, $0.9 million of pre-tax expenses in connection with the management transition plan disclosed earlier.

 

(2)    For the three months ended December 31, 2015, 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

 

 

 

 

 

December 31,

 

 

 

 

 

2015

 

2014

 

% CHG

 

Adjusted EBITDA:

 

 

 

 

 

 

 

Net earnings (per GAAP)

 

$

42,243

 

$

54,909

 

-23.1

%

Add:

 

 

 

 

 

 

 

Depreciation and amortization

 

23,386

 

20,579

 

13.6

%

Share-based compensation (1)

 

4,188

 

7,760

 

-46.0

%

Loss from data security incidents (2)

 

478

 

241

 

98.3

%

Management transition expenses (2)

 

879

 

 

100.0

%

Interest expense (3)

 

63,943

 

29,241

 

118.7

%

Provision for income taxes

 

24,749

 

32,086

 

-22.9

%

Adjusted EBITDA (Non-GAAP)

 

$

159,866

 

$

144,816

 

10.4

%

 


(1)                                 For the three months ended December 31, 2015 and 2014, 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 December 31, 2015 and 2014, selling, general and administrative expenses include $0.5 million and $0.2 million, respectively, in pre-tax expenses incurred in connection with the data security incidents disclosed earlier and, for the three months ended December 31, 2015, $0.9 million of pre-tax expenses in connection with the management transition plan disclosed earlier.

 

(3)                                 For the three months ended December 31, 2015, 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 December 31, 2015

 

 

 

As Reported

 

Loss on
Extinguishment
of Debt (1)

 

Overlapping Interest
Expense (1)

 

Management
Transition
Expenses (2)

 

Charges from
Data Security
Incidents (2)

 

As Adjusted
(Non-GAAP)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative expenses

 

$

339,728

 

 

 

 

 

$

(879

)

$

(478

)

$

338,371

 

SG&A expenses, as a percentage of sales

 

34.0

%

 

 

 

 

 

 

 

 

33.9

%

Operating earnings

 

130,935

 

 

 

 

 

879

 

478

 

132,292

 

Operating Profit Margin

 

13.1

%

 

 

 

 

 

 

 

 

13.3

%

Earnings before provision for income taxes

 

66,992

 

$

33,296

 

$

2,148

 

879

 

478

 

103,793

 

Provision for income taxes (3)

 

24,749

 

12,652

 

816

 

334

 

182

 

38,733

 

Net earnings

 

$

42,243

 

$

20,644

 

$

1,332

 

$

545

 

$

296

 

$

65,060

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.28

 

$

0.14

 

$

0.01

 

$

0.00

 

$

0.00

 

$

0.43

 

Diluted

 

$

0.28

 

$

0.14

 

$

0.01

 

$

0.00

 

$

0.00

 

$

0.43

 

 

 

 

Three Months Ended December 31, 2014

 

 

 

As Reported

 

Charges from
Data Security
Incidents (2)

 

As Adjusted
(Non-GAAP)

 

 

 

 

 

 

 

 

 

Selling, general and administrative expenses

 

$

336,954

 

$

(241

)

$

336,713

 

SG&A expenses, as a percentage of sales

 

34.9

%

 

 

34.9

%

Operating earnings

 

116,236

 

241

 

116,477

 

Operating Profit Margin

 

12.1

%

 

 

12.1

%

Earnings before provision for income taxes

 

86,995

 

241

 

87,236

 

Provision for income taxes (3)

 

32,086

 

89

 

32,175

 

Net earnings

 

$

54,909

 

$

152

 

$

55,061

 

 

 

 

 

 

 

 

 

Earnings per share:

 

 

 

 

 

 

 

Basic

 

$

0.35

 

$

0.00

 

$

0.35

 

Diluted

 

$

0.35

 

$

0.00

 

$

0.35

 

 


(1)                                 For the three months ended December 31, 2015, 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 on such senior notes of $2.1 million after December 3, 2015 and until their redemption, as well as interest on the Company’s new 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 three months ended December 31, 2015 and 2014, selling, general and administrative expenses include $0.5 million and $0.2 million, respectively, in pre-tax expenses incurred in connection with the data security incidents disclosed earlier and, for the three months ended December 31, 2015, $0.9 million of expenses in connection with the management transition plan disclosed earlier.

 

(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 three months ended December 31, 2015 and 2014, respectively.

 



 

Supplemental Schedule E

 

SALLY BEAUTY HOLDINGS, INC. AND SUBSIDIARIES

Store Count and Same Store Sales

(Unaudited)

 

 

 

As of December 31,

 

 

 

 

 

2015

 

2014

 

CHG

 

 

 

 

 

 

 

 

 

Number of stores (at end of period):

 

 

 

 

 

 

 

Sally Beauty Supply:

 

 

 

 

 

 

 

Company-operated stores

 

3,693

 

3,586

 

107

 

Franchise stores

 

18

 

19

 

(1

)

Total Sally Beauty Supply

 

3,711

 

3,605

 

106

 

 

 

 

 

 

 

 

 

Beauty Systems Group:

 

 

 

 

 

 

 

Company-operated stores

 

1,141

 

1,109

 

32

 

Franchise stores

 

162

 

166

 

(4

)

Total Beauty System Group

 

1,303

 

1,275

 

28

 

Total

 

5,014

 

4,880

 

134

 

 

 

 

 

 

 

 

 

BSG distributor sales consultants (end of period) (1)

 

951

 

967

 

(16

)

 

 

 

2015

 

2014

 

Basis Pt Chg

 

First quarter company-operated same store sales growth (2)

 

 

 

 

 

 

 

Sally Beauty Supply

 

2.4

%

1.6

%

80

 

Beauty Systems Group

 

7.2

%

3.9

%

330

 

Consolidated

 

3.9

%

2.3

%

160

 

 


(1)         Includes 316 and 333 distributor sales consultants as reported by our franchisees at December 31, 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 F

 

SALLY BEAUTY HOLDINGS, INC. AND SUBSIDIARIES

 Selected Financial Data and Debt

(In thousands)

(Unaudited)

 

 

 

As of December 31,
2015

 

As of September 30,
2015

 

Financial condition information (at period end):

 

 

 

 

 

Working capital

 

$

674,945

 

$

695,403

 

Cash and cash equivalents

 

67,447

 

140,038

 

Property and equipment, net

 

281,278

 

270,847

 

Total assets

 

2,043,126

 

2,094,351

 

Total debt, including capital leases (1)

 

1,782,832

 

1,787,594

 

Total stockholders’ (deficit) equity

 

$

(321,666

)

$

(297,821

)

 

 

 

As of December 31,
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 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 December 31, 2016-2020

 

$

 

 

 

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 $26.1 million at December 31, 2015 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 include capital lease obligations of $2.6 million, unamortized premium of $6.3 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 $26.1 million in connection with the senior notes due 2022, 2023 and 2025.

 


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