- Consolidated sales of $998 million,
growth of 3.1%
- Consolidated gross margin 50.0%, up 30
bps over prior year
- GAAP and adjusted net earnings of $67.9
million and $68.8 million, respectively
- GAAP diluted earnings per share of
$0.46, growth of 17.9%
- Adjusted diluted earnings per share of
$0.47, growth of 14.6%
Sally Beauty Holdings, Inc. (NYSE: SBH) (the “Company”) today
announced financial results for the fiscal 2016 third quarter. The
Company will hold a conference call today at 10:00 a.m. (Central)
to discuss these results and its business.
“In the fiscal 2016 third quarter we delivered solid
consolidated results including gross margin expansion and mid-teens
earnings per share growth,” said Chris Brickman, CEO. “At a segment
level, BSG had another terrific quarter with same store sales
growth of 5.4% however, our Sally North American business did not
meet our expectations. Sally’s retail traffic is clearly taking
longer to return to historical levels than we anticipated. We do
believe there were a couple of tactical marketing changes in the
quarter that negatively impacted traffic growth and we have moved
quickly to address these issues. Going forward, we remain
optimistic that Sally can get back to steady, sequential sales
improvement.”
“During the quarter, we also completed several of our Sally
initiatives such as the brush category reset, the color education
center rollout and the completion of owned-brand repackaging. We
are now ready to slow down the pace of in-store change at Sally and
focus our team on marketing, product merchandising and sales
initiatives designed to leverage the improvements we’ve made to
transform the customer experience.”
FISCAL 2016 THIRD QUARTER FINANCIAL HIGHLIGHTS
Net Sales: For the fiscal 2016 third quarter,
consolidated net sales were $998.2 million, an increase of 3.1%
from the fiscal 2015 third quarter. The fiscal 2016 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 2016 third quarter
was $9.1 million, or 0.9% of sales. Consolidated same store sales
growth in the fiscal 2016 third quarter was 2.5%.
Gross Profit: Consolidated gross profit for the fiscal
2016 third quarter was $499.0 million, an increase of 3.7% over
gross profit of $481.3 million for the fiscal 2015 third quarter.
Gross profit as a percentage of sales was 50.0%, a 30 basis point
increase from the fiscal 2015 third quarter. On a segment basis,
gross profit margin was up 40 basis points in Sally Beauty and up
30 basis points in BSG when compared to the prior year quarter.
Gross margin expansion for fiscal 2016 is now expected to finish
the fiscal year slightly below the low end of the previously stated
guidance range of 35 basis points to 45 basis points expansion over
the prior year.
Selling, General and Administrative Expenses: For the
fiscal 2016 third quarter, GAAP consolidated selling, general and
administrative (SG&A) expenses, including unallocated corporate
expenses and share-based compensation, were $339.5 million, or
34.0% of sales, a 10 basis point increase from the fiscal 2015
third quarter metric of 33.9% of sales and total SG&A expenses
of $327.9 million. Excluding $1.4 million pre-tax of charges
related to the data security incidents, adjusted SG&A expenses
in the fiscal 2016 third quarter were $338.1 million or 33.9% of
sales.
Fiscal 2016 third quarter adjusted SG&A expenses increased
4.5% or $14.5 million, primarily due to expenses associated with
the opening of new stores, higher expenses related to on-going
upgrades to our information technology systems and higher credit
card fees.
Unallocated expenses, excluding share-based compensation, was
$33.2 million in the fiscal 2016 third quarter, down $1.5 million,
or 4.2%, from the prior year quarter. This decrease is primarily
due to favorable expense adjustments resulting from a decrease in
estimated future cash payments in connection with the Company’s
self-insurance programs and lower expenses related to the data
security incidents than in the prior year. This decrease was
partially offset by higher compensation and health benefits,
ongoing upgrades to our information technology systems and
professional fees.
Note: SG&A expenses include unallocated corporate expenses,
as detailed in the Company’s segment information on schedule B.
Interest Expense: Interest expense for the fiscal 2016
third quarter was $26.7 million, down $2.5 million from the fiscal
2015 third quarter of $29.2 million. This decrease resulted from
the Company’s December 2015 redemption in full of its $750 million
of 6.875% senior notes due 2019 which were replaced by the issuance
and sale of $750 million of 5.625% senior notes due 2025.
Provision for GAAP Income Taxes: GAAP income taxes were
$39.5 million for the fiscal 2016 third quarter versus $39.2
million in the fiscal 2015 third quarter. The Company’s effective
tax rate in the fiscal 2016 third quarter was 36.7%, down 180 basis
points when compared to the fiscal 2015 third quarter. This year
over year change was primarily due to a decrease in the losses
subject to a valuation allowance in the fiscal 2016 third
quarter.
Net Earnings and Diluted Net Earnings per Share (EPS):
For the fiscal 2016 third quarter, GAAP net earnings were up 8.7%
to $67.9 million, or $0.46 diluted earnings per share, from net
earnings of $62.5 million, or $0.39 diluted earnings per share in
the year ago quarter.
Adjusted net earnings for the fiscal 2016 third quarter were up
5.5% to $68.8 million or $0.47 per diluted earnings per share when
compared to fiscal 2015 third quarter adjusted net earnings of
$65.2 million or $0.41 per diluted earnings per share. Adjusted net
earnings for the fiscal 2016 third quarter excludes $0.9 million,
net of tax, of charges associated with charges related to the data
security incidents.
Adjusted (Non-GAAP) EBITDA(1): Adjusted
EBITDA for the fiscal 2016 third quarter was $163.7 million, an
increase of 1.9% from $160.6 million for the fiscal 2015 third
quarter.
Financial Position, Capital Expenditures and Working
Capital: Cash and cash equivalents as of June 30, 2016 were
$91.0 million. The Company’s asset-based loan (ABL) revolving
credit facility ended the fiscal 2016 third quarter with no
outstanding borrowings. The Company’s debt, excluding capital
leases, totaled $1.8 billion as of June 30, 2016.
For fiscal 2016 year-to-date, the Company’s capital expenditures
totaled $106.1 million. Capital expenditures for the fiscal year
2016 are projected to be at the high end of the previously stated
range of $125 million to $135 million, excluding acquisitions.
Working capital (current assets less current liabilities)
decreased $4.9 million to $690.6 million at June 30, 2016 compared
to $695.4 million at September 30, 2015. Borrowing capacity on the
ABL facility was approximately $478 million at the end of the
fiscal 2016 third quarter. The ratio of current assets to current
liabilities was 2.47 to 1.00 at June 30, 2016 compared to 2.41 to
1.00 at September 30, 2015.
Inventory as of June 30, 2016 was $909.3 million, an increase of
$34.7 million or growth of 4.0% from June 30, 2015 inventory. This
increase is primarily due to sales growth from existing stores,
additional inventory from new store openings and the introduction
of new brands in the BSG and Sally businesses.
Business Segment Results:
Sally Beauty Supply
Fiscal 2016 Third Quarter Results for Sally Beauty
Supply
- Sales of $597.1 million, up 1.4% from
$588.6 million in the fiscal 2015 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 $7.4
million, or 1.3%.
- Same store sales growth of 1.3% versus
growth of 2.0% in the fiscal 2015 third quarter.
- Gross margin of 55.3%, expansion of 40
basis points when compared to the prior year quarter.
- Segment earnings of $104.8 million,
down 2.3% from $107.3 million in the fiscal 2015 third
quarter.
- Segment operating margin was 17.6%,
down 60 basis points when compared to the fiscal 2015 third
quarter.
- Net store count increased by 95 over
the fiscal 2015 third quarter for total store count of 3,750.
Sales growth in the fiscal 2016 third quarter was driven by net
new store openings and same store sales growth; this growth was
partially offset by the unfavorable impact of foreign currency
exchange. Gross profit margin in the quarter was up primarily as a
result of selective price increases in certain geographical areas
of the U.S., fewer promotions than the prior year and a favorable
shift in product mix.
Segment operating earnings and margin were negatively impacted
by higher SG&A expenses including compensation related
expenses, higher depreciation expense (principally associated with
recent store openings and remodels) and higher expenses related to
on-going upgrades to our information technology systems.
Beauty Systems Group
Fiscal 2016 Third Quarter Results for Beauty Systems
Group
- Sales of $401.1 million, up 5.7% from
$379.3 million in the fiscal 2015 third quarter. Sales growth was
primarily from same store sales growth, sales growth from the sales
consultant business and new store openings. The unfavorable impact
of foreign currency exchange on sales was $1.8 million, or
0.5%.
- Same store sales growth of 5.4% versus
5.6% in the fiscal 2015 third quarter.
- Gross margin of 42.1%, a 30 basis point
increase from 41.8% in the fiscal 2015 third quarter.
- Segment earnings of $65.3 million, up
6.9% from $61.1 million in the fiscal 2015 third quarter.
- Segment operating margin increased by
20 basis points to 16.3% of sales from 16.1% in the fiscal 2015
third quarter.
- Net store count was 1,322, an increase
of 36 stores over the fiscal 2015 third quarter.
- Total BSG distributor sales consultants
at the end of the fiscal 2016 third quarter were 947 versus 952 at
the end of the fiscal 2015 third quarter.
Sales growth for the Beauty Systems Group was primarily driven
by growth in same store sales, growth in the sales consultant
business and new store openings; this growth was slightly offset by
the unfavorable impact of foreign currency exchange. Growth in
segment operating earnings and margin expansion was primarily due
to gross margin expansion.
(1)A detailed table reconciling 2016 and 2015 adjusted EBITDA is
included in Supplemental Schedule C.
Conference Call and Where You Can Find Additional
Information
As previously announced, at approximately 10:00 a.m. (Central)
today the Company will hold a conference call and audio webcast to
discuss its financial results and its business. During the
conference call, the Company may discuss and answer one or more
questions concerning business and financial matters and trends
affecting the Company. The Company’s responses to these questions,
as well as other matters discussed during the conference call, may
contain or constitute material information that has not been
previously disclosed. Simultaneous to the conference call, an audio
webcast of the call will be available via a link on the Company’s
website, investor.sallybeautyholdings.com. The conference call can
be accessed by dialing (800) 230-1096 (International: (612)
332-0345). 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 4, 2016 through August 18, 2016 by dialing
1-800-475-6701 or if international dial 320-365-3844 and reference
the conference ID number 398712. 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 180
franchised units throughout the United States, the United Kingdom,
Belgium, Chile, Peru, Colombia, France, the Netherlands, Canada,
Puerto Rico, Mexico, Ireland, Spain and Germany. Sally Beauty
Supply stores offer up to 10,000 products for hair, skin, and nails
through professional lines such as Clairol, L’Oreal, Wella and
Conair, as well as an extensive selection of proprietary
merchandise. Beauty Systems Group stores, branded as CosmoProf or
Armstrong McCall stores, along with its outside sales consultants,
sell up to 10,000 professionally branded products including Paul
Mitchell, Wella, Sebastian, Goldwell, Joico, and Aquage which are
targeted exclusively for professional and salon use and resale to
their customers. For more information about Sally Beauty Holdings,
Inc., please visit sallybeautyholdings.com.
Cautionary Notice Regarding Forward-Looking
Statements
Statements in this news release and the schedules hereto which
are not purely historical facts or which depend upon future events
may be forward-looking statements within the meaning of Section 27A
of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. Words such as
“anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan,”
“project,” “target,” “can,” “could,” “may,” “should,” “will,”
“would,” or similar expressions may also identify such
forward-looking statements.
Readers are cautioned not to place undue reliance on
forward-looking statements as such statements speak only as of the
date they were made. Any forward-looking statements involve risks
and uncertainties that could cause actual events or results to
differ materially from the events or results described in the
forward-looking statements, including, but not limited to, risks
and uncertainties related to: anticipating and effectively
responding to changes in consumer and professional stylist
preferences and buying trends in a timely manner; the success of
our strategic initiatives including our store refresh program and
increased marketing efforts, to enhance the customer experience,
attract new customers, drive brand awareness and improve customer
loyalty; the highly competitive nature of, and the increasing
consolidation of, the beauty products distribution industry; the
timing and acceptance of new product introductions; shifts in
product mix sold during any period; potential fluctuation in our
same store sales and quarterly financial performance; our
dependence upon manufacturers who may be unwilling or unable to
continue to supply products to us; our dependence upon
manufacturers who have developed or could develop their own
distribution businesses which compete directly with ours; the
possibility of material interruptions in the supply of products by
our third-party manufacturers or distributors or increases in the
prices of products we purchase from our third-party manufacturers
or distributors; products sold by us being found to be defective in
labeling or content; compliance with current laws and regulations
or becoming subject to additional or more stringent laws and
regulations; the success of our e-commerce businesses; diversion of
professional products sold by Beauty Systems Group 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 initiatives to expand into new geographies; 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; conducting business outside the
United States; the impact of Britain’s vote to leave the European
Union and related or other disruptive events in the European Union
or other geographies in which we conduct 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; 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 or any future data security incidents; our ability to attract
or retain highly skilled management and other personnel; severe
weather, natural disasters or acts of violence or terrorism; the
preparedness of our accounting and other management systems to meet
financial reporting and other requirements and the upgrade of our
existing financial reporting system; being a holding company, with
no operations of our own, and depending on our subsidiaries for
cash; our ability to execute and implement our common stock
repurchase program; our substantial indebtedness; the possibility
that we may incur substantial additional debt, including secured
debt, in the future; restrictions and limitations in the agreements
and instruments governing our debt; generating the significant
amount of cash needed to service all of our debt and refinancing
all or a portion of our indebtedness or obtaining additional
financing; changes in interest rates increasing the cost of
servicing our debt; and the costs and effects of litigation.
Additional factors that could cause actual events or results to
differ materially from the events or results described in the
forward-looking statements can be found in our filings with the
Securities and Exchange Commission, including our most recent
Annual Report on Form 10-K for the year ended September 30, 2015,
as filed with the Securities and Exchange Commission. Consequently,
all forward-looking statements in this release are qualified by the
factors, risks and uncertainties contained therein. We assume no
obligation to publicly update or revise any forward-looking
statements.
Use of Non-GAAP Financial Measures
This news release and the schedules hereto include the following
financial measures that have not been calculated in accordance with
accounting principles generally accepted in the U.S., or GAAP, and
are therefore referred to as non-GAAP financial measures: (1)
Adjusted EBITDA; (2) Adjusted net earnings, earnings per share and
diluted earnings per share; and (3) Adjusted SG&A expenses. We
have provided definitions below for these non-GAAP financial
measures and have provided tables in the schedules hereto to
reconcile these non-GAAP financial measures to the comparable GAAP
financial measures.
Adjusted EBITDA - We define the measure Adjusted EBITDA as GAAP
net earnings before depreciation and amortization, interest
expense, income taxes, share-based compensation, costs related to
the Company’s previously disclosed data security incidents,
management transition plan, asset impairment charges 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, asset impairment charges and the loss on extinguishment
of debt and overlapping interest expense for the relevant time
periods as indicated in the accompanying non-GAAP reconciliations
to the comparable GAAP financial measures.
We have provided these non-GAAP financial measures as
supplemental information to our GAAP financial measures and believe
these non-GAAP measures provide investors with additional
meaningful financial information regarding our operating
performance. Our management and Board of Directors also use these
non-GAAP measures as supplemental measures in the evaluation of our
businesses and believe that these non-GAAP measures provide a
meaningful measure to evaluate our historical and prospective
financial performance. These non-GAAP measures should not be
considered a substitute for or superior to GAAP results.
Furthermore, the non-GAAP measures presented by us may not be
comparable to similarly titled measures of other companies.
Supplemental Schedules Consolidated Statement of
Earnings A Segment Information B Non-GAAP Financial
Measures Reconciliations (Adjusted EBITDA) C Non-GAAP Financial
Measures Reconciliations (Continued) D, E Store Count and Same
Store Sales F Selected Financial Data and Debt G
Supplemental Schedule A
SALLY BEAUTY HOLDINGS, INC. AND SUBSIDIARIES Consolidated
Statements of Earnings (In thousands, except per share data)
(Unaudited) Three Months Ended Nine Months Ended June 30,
June 30,
2016 2015 % CHG
2016 2015 % CHG Net sales $
998,161 $ 967,890 3.1 % $ 2,976,260 $ 2,870,112 3.7 % Cost of
products sold and distribution expenses
499,185 486,571
2.6 % 1,495,761
1,447,572 3.3 % Gross profit 498,976 481,319
3.7 % 1,480,499 1,422,540 4.1 % Selling, general and administrative
expenses (1) 339,459 327,870 3.5 % 1,020,497 982,279 3.9 %
Depreciation and amortization 25,433
22,600 12.5 %
72,524 64,168
13.0 % Operating earnings 134,084
130,849 2.5 % 387,478 376,093 3.0 % Interest expense (2)
26,703 29,221
-8.6 % 117,617
87,690 34.1 % Earnings
before provision for income taxes 107,381 101,628 5.7 % 269,861
288,403 -6.4 % Provision for income taxes
39,462 39,165
0.8 % 99,540
109,496 -9.1 % Net earnings
$ 67,919 $ 62,463
8.7 % $ 170,321 $ 178,907
-4.8 % Earnings per share: Basic
$ 0.47 $ 0.40 17.5 % $ 1.15 $ 1.14 0.9 % Diluted $ 0.46 $ 0.39 17.9
% $ 1.14 $ 1.13 0.9 % Weighted average shares: Basic 145,957
157,110 147,741 156,901 Diluted
147,837 159,120
149,476
158,875
Basis PtChg
Basis PtChg
Comparison as a % of
Net sales
Sally Beauty Supply Segment Gross Profit Margin 55.3 % 54.9 % 40
55.2 % 54.9 % 30 BSG Segment Gross Profit Margin 42.1 % 41.8 % 30
41.6 % 41.3 % 30 Consolidated Gross Profit Margin 50.0 % 49.7 % 30
49.7 % 49.6 % 10 Selling, general and administrative expenses 34.0
% 33.9 % 10 34.3 % 34.2 % 10 Consolidated Operating Profit Margin
13.4 % 13.5 % (10 ) 13.0 % 13.1 % (10 ) Net Earnings Margin 6.8 %
6.5 % 30 5.7 % 6.2 % (50 )
Effective Tax
Rate
36.7 % 38.5 % (180 ) 36.9 % 38.0 % (110 )
(1)
For the three months ended June 30, 2016 and 2015, selling,
general and administrative expenses include share-based
compensation expenses of $2.8 million and $2.9 million,
respectively, and expenses incurred in connection with the data
security incidents disclosed earlier of $1.4 million and $3.2
million, respectively. For the nine months ended June 30, 2016 and
2015, selling, general and administrative expenses include
share-based compensation expenses of $10.0 million and $13.5
million, respectively, and expenses incurred in connection with the
data security incidents disclosed earlier of $2.6 million and $5.0
million, respectively; and, for the nine months ended June 30,
2016, $1.3 million of expenses incurred in connection with the
management transition plan disclosed earlier. (2) For the
nine months ended June 30, 2016, interest expense includes loss on
extinguishment of debt of $33.3 million in connection with the
Company's December 2015 redemption of its senior notes due 2019.
Supplemental Schedule B
SALLY BEAUTY
HOLDINGS, INC. AND SUBSIDIARIES Segment Information (In
thousands) (Unaudited) Three Months Ended Nine Months Ended
June 30, June 30, 2016
2015 % CHG 2016 2015
% CHG Net sales: Sally Beauty Supply $ 597,086 $
588,593 1.4 % $ 1,780,674 $ 1,747,222 1.9 % Beauty Systems Group
401,075
379,297 5.7 % 1,195,586
1,122,890 6.5 %
Total net sales $ 998,161
$ 967,890 3.1 % $ 2,976,260
$ 2,870,112 3.7 %
Operating earnings: Sally Beauty Supply $ 104,797 $ 107,264 -2.3 %
$ 312,849 $ 314,532 -0.5 % Beauty Systems Group
65,307 61,094
6.9 % 192,592
173,290 11.1 % Segment operating
earnings
$
170,104
$
168,358 1.0 % $ 505,441
$
487,822 3.6 % Unallocated expenses (1)
(33,182 ) (34,643 ) -4.2 % (107,952 ) (98,263 ) 9.9 % Share-based
compensation (2,838 ) (2,866 ) -1.0 % (10,011 ) (13,466 ) -25.7 %
Interest expense (2) (26,703 )
(29,221 ) -8.6 %
(117,617 ) (87,690 ) 34.1 %
Earnings before provision for income taxes $
107,381 $ 101,628 5.7 %
$ 269,861 $ 288,403
-6.4 % Segment operating profit margin:
Basis Pt Chg Basis Pt Chg Sally Beauty Supply 17.6 %
18.2 % (60 ) 17.6 % 18.0 % (40 ) Beauty Systems Group 16.3 % 16.1 %
20 16.1 % 15.4 % 70 Consolidated operating profit margin
13.4 % 13.5 %
(10 ) 13.0 % 13.1
% (10 ) (1) Unallocated expenses
consist of corporate and shared costs, and are included in selling,
general and administrative expenses. For the three months ended
June 30, 2016 and 2015, unallocated expenses include $1.4 million
and $3.2 million, respectively, of expenses incurred in connection
with the data security incidents disclosed earlier. For the nine
months ended June 30, 2016 and 2015, unallocated expenses include
$2.6 million and $5.0 million, respectively, of expenses incurred
in connection with such data security incidents and, for the nine
months ended June 30, 2016, $1.3 million of expenses incurred in
connection with the management transition plan disclosed earlier.
(2) For the nine months ended June 30, 2016, interest
expense includes loss on extinguishment of debt of $33.3 million in
connection with the Company's December 2015 redemption of its
senior notes due 2019.
Supplemental
Schedule C
SALLY BEAUTY HOLDINGS, INC. AND
SUBSIDIARIES Non-GAAP Financial Measures Reconciliations (In
thousands) (Unaudited) Three Months Ended Nine Months Ended
June 30, June 30, 2016
2015 % CHG 2016
2015 % CHG Adjusted EBITDA: Net earnings (per GAAP) $
67,919 $ 62,463 8.7 % $ 170,321 $ 178,907 -4.8 % Add: Depreciation
and amortization 25,433 22,600 12.5 % 72,524 64,168 13.0 %
Share-based compensation (1) 2,838 2,866 -1.0 % 10,011 13,466 -25.7
% Loss from data security incidents (2) 1,375 3,204 -57.1 % 2,621
4,960 -47.2 % Management transition expenses (2) - - 0.0 % 1,318 -
100.0 % Asset impairment charges (3) - 1,118 -100.0 % 571 1,118
-48.9 % Interest expense (4) 26,703 29,221 -8.6 % 117,617 87,690
34.1 % Provision for income taxes
39,462 39,165 0.8 %
99,540 109,496
-9.1 % Adjusted EBITDA (Non-GAAP) $ 163,730
$ 160,637 1.9 % $ 474,523
$ 459,805 3.2 % (1) For
the nine months ended June 30, 2016 and 2015, share-based
compensation includes $1.3 million and $4.8 million, respectively,
of accelerated expense related to certain retirement-eligible
employees who are eligible to continue vesting awards upon
retirement. (2) For the three months ended June 30, 2016 and
2015, selling, general and administrative expenses include $1.4
million and $3.2 million, respectively, of expenses incurred in
connection with the data security incidents disclosed earlier. For
the nine months ended June 30, 2016 and 2015, selling, general and
administrative expenses include $2.6 million and $5.0 million,
respectively, of expenses incurred in connection with such data
security incidents and, for the nine months ended June 30, 2016,
$1.3 million of expenses incurred in connection with the management
transition plan disclosed earlier. (3) For the nine months
ended June 30, 2016, selling, general and administrative expenses
reflect an intangible asset impairment charge of $0.6 million. For
the three and nine months ended June 30, 2015, selling, general and
administrative expenses reflect $1.1 million of expenses
(principally asset impairment charges) resulting from a
restructuring of the Company's operations in Germany. (4)
For the nine months ended June 30, 2016, interest expense includes
loss on extinguishment of debt of $33.3 million in connection with
the Company's December 2015 redemption of its senior notes due
2019. Supplemental
Schedule D
SALLY BEAUTY HOLDINGS, INC. AND
SUBSIDIARIES Non-GAAP Financial Measures Reconciliations,
Continued (In thousands) (Unaudited)
Three
Months Ended June 30, 2016 As Reported
Charges fromData SecurityIncidents (1)
As Adjusted(Non-GAAP)
Selling, general and administrative expenses $ 339,459 $
(1,375 ) $ 338,084 SG&A expenses, as a percentage of sales 34.0
% 33.9 % Operating earnings 134,084 1,375 135,459 Operating Profit
Margin 13.4 % 13.6 % - Earnings before provision for income taxes
107,381 1,375 108,756 Provision for income taxes (3)
39,462 523
39,985 Net earnings
$ 67,919 $ 852
$ 68,771 Earnings per share: Basic $ 0.47 $
0.01 $ 0.47 Diluted $ 0.46 $ 0.01 $ 0.47
Three Months Ended June 30, 2015 As
Reported
Charges fromData SecurityIncidents (1)
AssetImpairmentCharges (2)
As Adjusted(Non-GAAP)
Selling, general and administrative expenses $ 327,870 $
(3,204 ) $ (1,118 ) $ 323,548 SG&A expenses, as a percentage of
sales 33.9 % 33.4 % Operating earnings 130,849 3,204 1,118 135,171
Operating Profit Margin 13.5 % 14.0 % - Earnings before provision
for income taxes 101,628 3,204 1,118 105,950 Provision for income
taxes (3) 39,165
1,185 414 40,764
Net earnings $ 62,463
$ 2,019 $ 704 $ 65,186
Earnings per share: Basic $ 0.40 $ 0.01 $ 0.00 $ 0.41
Diluted $ 0.39 $ 0.01 $ 0.00 $ 0.41
(1)
For the three months ended June 30, 2016 and 2015, selling,
general and administrative expenses include $1.4 million and $3.2
million, respectively, of expenses incurred in connection with the
data security incidents disclosed earlier. (2) For the three
months ended June 30, 2015, selling, general and administrative
expenses reflect $1.1 million of expenses (principally asset
impairment charges) resulting from a restructuring of the Company's
operations in Germany. (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 June 30, 2016
and 2015, respectively.
Supplemental Schedule E
SALLY BEAUTY HOLDINGS, INC. AND
SUBSIDIARIES Non-GAAP Financial Measures Reconciliations,
Continued (In thousands) (Unaudited)
Nine Months Ended June 30, 2016
As Reported
Loss onExtinguishmentof Debt (1)
OverlappingInterestExpense (1)
ManagementTransitionExpenses (2)
Charges fromData SecurityIncidents (2)
AssetImpairmentCharges (3)
As Adjusted(Non-GAAP)
Selling, general and administrative expenses $ 1,020,497 $
(1,318 ) $ (2,621 ) $ (571 ) $ 1,015,987 SG&A expenses, as a
percentage of sales 34.3 % 34.1 % Operating earnings 387,478 1,318
2,621 571 391,988 Operating Profit Margin 13.0 % 13.2 % - Earnings
before provision for income taxes 269,861 $ 33,296 $ 2,148 1,318
2,621 571 309,815 Provision for income taxes (4)
99,540 12,652
816 501
996 217
114,722 Net earnings $ 170,321
$ 20,644 $ 1,332 $
817 $ 1,625 $ 354
$ 195,093 Earnings per share: Basic $
1.15 $ 0.14 $ 0.01 $ 0.01 $ 0.01 $ 0.00 $ 1.32 Diluted $ 1.14 $
0.14 $ 0.01 $ 0.01 $ 0.01 $ 0.00 $ 1.31
Nine Months Ended June 30, 2015
As Reported
Charges fromData SecurityIncidents (2)
AssetImpairmentCharges (3)
As Adjusted(Non-GAAP)
Selling, general and administrative expenses $ 982,279 $
(4,960 ) $ (1,118 ) $ 976,201 SG&A expenses, as a percentage of
sales 34.2 % 34.0 % Operating earnings 376,093 4,960 1,118 382,171
Operating Profit Margin 13.1 % 13.3 % - Earnings before provision
for income taxes 288,403 4,960 1,118 294,481 Provision for income
taxes (4) 109,496
1,835 414
111,745 Net earnings $ 178,907
$ 3,125 $ 704
$ 182,736 Earnings per share: Basic $
1.14 $ 0.02 $ 0.00 $ 1.16 Diluted $ 1.13 $ 0.02 $ 0.00 $ 1.15
(1) For the nine
months ended June 30, 2016, interest expense includes loss on
extinguishment of debt of $33.3 million in connection with the
Company's December 2015 redemption of its senior notes due 2019 and
interest in the amount of $2.1 million on such senior notes after
December 3, 2015 and until their redemption, as well as interest on
the Company's senior notes due 2025 issued on December 3. This
pro-forma adjustment assumes the senior notes due 2019 were
redeemed on December 3, 2015. (2) For the nine months ended
June 30, 2016 and 2015, selling, general and administrative
expenses include $2.6 million and $5.0 million, respectively, of
expenses incurred in connection with the data security incidents
disclosed earlier and, for the nine months ended June 30, 2016,
$1.3 million of expenses incurred in connection with the management
transition plan disclosed earlier. (3) For the nine months
ended June 30, 2016, selling, general and administrative expenses
reflect an intangible asset impairment charge of $0.6 million. For
the nine months ended June 30, 2015, selling, general and
administrative expenses reflect $1.1 million of expenses
(principally asset impairment charges) resulting from a
restructuring of the Company's operations in Germany. (4)
The tax provision for the adjustments to net earnings was
calculated using an effective tax rate of 38.0% and 37.0% for the
nine months ended June 30, 2016 and 2015, respectively.
Supplemental Schedule F
SALLY BEAUTY HOLDINGS, INC. AND SUBSIDIARIES Store
Count and Same Store Sales (Unaudited) As of June 30,
2016 2015 CHG
Number of stores (at end of period): Sally Beauty Supply:
Company-operated stores 3,732 3,636 96 Franchise stores 18
19 (1 ) Total Sally Beauty Supply 3,750 3,655 95 Beauty
Systems Group: Company-operated stores 1,157 1,118 39 Franchise
stores 165 168 (3 ) Total Beauty System Group 1,322
1,286 36 Total 5,072 4,941 131
BSG distributor sales consultants (end of period) (1)
947 952 (5 )
2016 2015 Third quarter
company-operated same store sales growth (2)
Basis Pt
Chg Sally Beauty Supply 1.3 % 2.0 % (70 ) Beauty Systems
Group 5.4 % 5.6 % (20 ) Consolidated 2.5 % 3.1 % (60 ) Nine
months ended June 30 company-operated same store sales growth (2)
Sally Beauty Supply 2.0 % 1.7 % 30 Beauty Systems Group 6.8 % 5.1 %
170 Consolidated 3.5 % 2.7 % 80 (1) Includes 318 and
320 distributor sales consultants as reported by our franchisees at
June 30, 2016 and 2015, respectively. (2) For the purpose of
calculating our same store sales metrics, we compare the current
period sales for stores open for 14 months or longer as of the last
day of a month with the sales for these stores for the comparable
period in the prior fiscal year. Our same store sales are
calculated in constant U.S. dollars and include internet-based
sales and the effect of store expansions, if applicable, but do not
generally include the sales of stores relocated until 14 months
after the relocation. The sales of stores acquired are excluded
from our same store sales calculation until 14 months after the
acquisition. Supplemental Schedule G
SALLY BEAUTY HOLDINGS, INC. AND SUBSIDIARIES
Selected Financial Data and Debt (In thousands) (Unaudited)
As of June 30,2016
As of September 30,2015
Financial condition information (at period end): Working capital $
690,553 $ 695,403 Cash and cash equivalents 90,997 140,038 Property
and equipment, net 307,823 270,847 Total assets 2,091,096 2,094,351
Total debt, including capital leases (1) 1,783,604 1,787,594 Total
stockholders' (deficit) equity ($282,905 ) ($297,821)
As of June 30,2016
Interest Rates (2) Debt position, excluding capital leases:
Revolving ABL facility
$ -
(i) Prime + 0.50-0.75% or(ii) LIBOR +
1.50-1.75%
Senior notes due 2022 850,000 5.750% Senior notes due 2023 200,000
5.500% Senior notes due 2025 750,000 5.625% Total debt,
excluding capital leases (3) $ 1,800,000
Debt maturities,
excluding capital leases: Twelve months ending June 30,
2017-2021
$ - Thereafter 1,800,000 Total debt, excluding
capital leases (3) $ 1,800,000 (1) Total debt,
including capital leases, is net of unamortized debt issuance costs
of $24.5 million at June 30, 2016 and $21.8 million at September
30, 2015. (2) Interest rates shown represent the coupon or
contractual rates related to each indebtedness. (3) Amounts
do not reflect capital lease obligations of $2.3 million,
unamortized premium of $5.8 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 $24.5
million in connection with the senior notes due 2022, 2023 and
2025.
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Sally Beauty Holdings, Inc.Karen Fugate, 940-297-3877Investor
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