- Operating Earnings in Line with
Company Expectations
- Earnings per Share Benefits from
U.S. Tax Reform
- Beauty Systems Group Completes
Canadian Acquisition
- Restructuring of International
Operations
- Strategic Investments to Drive
Growth
Sally Beauty Holdings, Inc. (NYSE: SBH) (“the Company”) today
announced financial results for its fiscal 2018 first quarter ended
December 31, 2017. The Company will hold a conference call today at
7:30 a.m. Central Time to discuss these results and its
business.
Fiscal 2018 First Quarter Overview
Consolidated net sales were $995.0 million in the first quarter,
a decrease of 0.5% compared to the prior year. Foreign currency
translation had a favorable impact of approximately 120 basis
points on reported sales growth. Same store sales decreased 2.2% in
the quarter. The hurricanes that disrupted operations in the fourth
quarter of fiscal 2017 continued to have a lingering effect on
business in Puerto Rico, particularly in the first half of the
fiscal quarter. The negative impact of the hurricanes on both sales
growth and same store sales growth was approximately 40 basis
points.
Reported diluted earnings per share in the first quarter were
$0.65 compared to $0.39 in the prior year, an increase of 66.7%,
driven primarily by lower income tax expense as a result of
significant changes to U.S. federal tax law (“U.S. Tax Reform”),
reduced share count from share repurchases and lower interest
expense resulting from the Company’s debt refinancing in the fiscal
fourth quarter of the prior year, partially offset by charges from
the restructuring plan announced this past November (“2018
Restructuring Plan”). Adjusted diluted earnings per share,
excluding $5.2 million in charges related to the 2018 Restructuring
Plan, were $0.68 in the first quarter compared to $0.39 in the
prior year, an increase of 74.4%. The net benefit from U.S. Tax
Reform boosted both reported and adjusted diluted earnings per
share by approximately $0.24, of which $0.17 per share was
attributed to the net impact of one-time adjustments (the
revaluation of deferred income taxes partially offset by a deemed
repatriation tax on previously undistributed foreign earnings) and
$0.07 per share was attributed to the application of the lower
statutory federal tax rate to the Company’s pretax income.
“Consistent with our expectations, this was a challenging
quarter in terms of revenue growth. Business in the first quarter
was impacted by a continuation of disappointing traffic trends in
our U.S. Sally Beauty stores, an additional day of store closures
versus the prior year for our Beauty Systems Group CosmoProf stores
due to the holiday calendar and the residual impact of Hurricane
Maria in Puerto Rico. However, we were pleased to have exceeded our
expectations for both reported and adjusted diluted earnings per
share, even after excluding the net benefits from U.S. Tax Reform,”
said Chris Brickman, President and Chief Executive Officer. “Modest
declines in consolidated net sales and gross margin were offset by
benefits from our 2017 Restructuring Plan, tight control of
discretionary expenses and lower interest expense. We also
continued to strategically return cash to shareholders via stock
repurchases totaling approximately $65 million in the quarter.
“Our focus remains on initiatives and opportunities to drive
profitable revenue growth. Related to that, we expanded the
Canadian footprint of our Beauty Systems Group segment in the
quarter by acquiring a profitable distributor in the province of
Quebec. Additionally, we accelerated investments in our e-commerce
fulfillment capabilities to allow us to offer two-day delivery to
more than 90% of U.S. households – a service level we attained last
month, well ahead of the original schedule. In addition to
continuing to test and refine the new Sally loyalty program, we
successfully launched col◦lab in Sally stores in the U.S. and
Canada, a new exclusive cosmetics line. Beyond this, we are
designing and testing a number of in-store initiatives that seek to
reinforce what Sally is best known for amongst its core consumer
base – hair color and care. And, finally, we successfully completed
several of the initiatives contemplated by our 2018 Restructuring
Plan, the primary goal of which is to leverage the full scale of
our consolidated European business and deliver additional cost
savings.
“We believe that these strategic investments, combined with the
strength and stability of our large and growing BSG distribution
business and the on-going benefits from U.S. Tax Reform, will keep
us on the path to long-term earnings growth,” Brickman
concluded.
Additional First Quarter Financial Detail
Gross margin for the first quarter was 48.9%, a decrease of 30
basis points compared to the prior year. Benefits in the quarter
from prior year pricing initiatives in both segments were offset by
a geographic revenue mix shift in the Sally segment towards the
lower margin international businesses, a segment revenue mix shift
towards the lower margin BSG segment and strategic pricing
reductions in the Sally segment.
Reported and adjusted operating earnings in the first quarter
were $110.1 million and $115.3 million, respectively, compared to
operating earnings of $117.5 million in the prior year. Reported
and adjusted operating margin in the first quarter were 11.1% and
11.6%, respectively, compared to operating margin of 11.8% in the
prior year.
The Company’s effective tax rate for the first quarter was 3.3%
compared to 38.4% in the prior year, with the significant reduction
driven by the impact in the quarter of U.S. Tax Reform.
Reported net earnings in the first quarter were $83.3 million,
an increase of $27.4 million, or 49.1% from the prior year.
Adjusted EBITDA in the first quarter was $145.5 million, a decrease
of $2.6 million, or 1.7%, from the prior year, and Adjusted EBITDA
margin was 14.6%, a decline of approximately 20 basis points from
the prior year.
At the end of the quarter, inventory was $941.1 million, up 1.1%
from the prior year. The increase was driven by inventory related
to the Canadian acquisition that closed in the quarter, the
addition of new brands and foreign currency translation.
Capital expenditures in the quarter were $22.5 million,
primarily for information technology projects, store remodels and
maintenance, and distribution facility upgrades.
The Company repurchased (and subsequently retired) a total of
3.8 million shares of common stock during the first quarter at an
aggregate cost of $64.5 million.
U.S. Tax Reform
On December 22, 2017, the U.S. Congress enacted sweeping new tax
legislation. Among other things, U.S. Tax Reform reduces the
federal statutory tax rate for corporate taxpayers from 35% to 21%,
provides for a deemed repatriation of undistributed foreign
earnings by U.S. taxpayers at low rates, makes other fundamental
changes on how foreign earnings will be taxed by the U.S., and
otherwise modifies corporate tax rules in significant ways. The
provisions of U.S. Tax Reform are generally effective for taxable
periods beginning after December 31, 2017. However, at December 31,
2017, the Company had to revalue the deferred income tax accounts
on the balance sheet considering the new rates and recognize any
impact of the deemed repatriation of undistributed foreign earnings
on the financial statements based on the enacted tax law.
For the first quarter, the Company recorded an income tax
benefit of approximately $33.6 million in connection with the
revaluation of deferred income tax assets and liabilities to the
new rates, partially offset by a charge of $11.4 million for
federal and state income taxes related to the deemed repatriation
of accumulated but undistributed earnings of foreign operations. In
accordance with recent SEC guidance, these are provisional amounts
that are subject to change as forecasted estimates become actuals
and further guidance is released by the Internal Revenue
Service.
Beauty Systems Group Completes Canadian Acquisition
In early December 2017, the Company’s Beauty Systems Group
(“BSG”) acquired certain assets of H. Chalut Ltée, a distributor of
professional beauty products in the province of Quebec, Canada. The
acquisition included 21 stores, 40 distributor sales consultants,
one warehouse and distribution rights for certain professional
brands in Quebec. Additionally, this transaction provides Sally
Beauty Holdings its first presence in the Quebec province and now
provides BSG with a national footprint in Canada.
2018 Restructuring Plan Update
During the first quarter, the Company announced and successfully
completed several of the initiatives of the 2018 Restructuring Plan
focused on significantly improving the profitability of its
international businesses, with particular focus on its European
operations. Restructuring charges of approximately $5.2 million,
related primarily to employee separation costs, were recorded in
the first quarter. The Company still expects total charges related
to the 2018 Restructuring Plan in the range of $13 million to $14
million, with approximately $12 million to be recorded in fiscal
2018. The Company still expects to realize annualized benefits in
the range of approximately $12 million to $14 million from the
initiative, with a benefit of approximately $8 million to be
realized in fiscal 2018.
Fiscal Year 2018 Guidance
For fiscal year 2018, the Company is maintaining its guidance of
full year consolidated same store sales to be approximately flat,
with more challenging comparisons in the first half of the fiscal
year than the second half of the fiscal year. With the addition of
new stores from the H. Chalut Ltée acquisition, the Company now
expects consolidated year-end store count to increase slightly
compared to the prior year.
The Company now expects full year gross margin to be
approximately flat compared to the prior year.
Full year selling, general and administrative expenses
(including depreciation and
amortization expense) are now expected to be approximately 37.5% of
sales versus 37.2% of sales in the prior year.
Due to the benefits of U.S. Tax Reform, the Company’s expects
the consolidated effective tax rate for fiscal 2018 to be in the
range of 22% to 24%, including the net benefit from the revaluation
of deferred income taxes and the repatriation tax described above.
At this time, the Company expects a significant portion of the
benefits from U.S. Tax Reform will flow through directly to net
earnings as the Company is still evaluating potential investment
opportunities afforded by U.S. Tax Reform. In addition, the Company
expects incremental cash flow which will allow for the continued
strategy of returning capital to shareholders while maintaining
appropriate leverage.
Full year reported operating earnings are still expected to
increase slightly, due primarily to lower restructuring costs in
fiscal year 2018. Full year adjusted operating earnings, including
the impact of the hurricanes in both years and the strategic
investments to drive future growth, are still expected to decline
slightly. However, the Company expects full year benefits from its
debt refinancing, lower average share count and the benefits of
U.S. Tax Reform to result in strong double digit growth in both
full year reported and adjusted diluted earnings per share.
Fiscal 2018 First Quarter Segment Results
Sally Beauty Supply
- Net sales were $585.6 million in the
quarter, a decrease of 0.7% compared to the prior year. Foreign
currency translation boosted the segment’s revenue growth in the
quarter by 170 basis points. Same store sales decreased 2.6%,
with the lingering impact of the hurricanes late in the prior
fiscal year contributing approximately 50 basis points of the
decline.
- At the end of the quarter, net store
count was 3,787, a decrease of 28 from the prior year.
- Gross margin decreased 40 basis points
to 54.6% in the quarter. Benefits in the quarter from prior year
pricing initiatives were offset by strategic pricing reductions and
a geographic revenue mix shift towards the lower margin
international business.
- Reported operating earnings were $86.6
million in the quarter, a decrease of 6.4% versus the prior year,
driven by lower revenue and gross margin, partially offset by the
benefits from the 2017 Restructuring Plan. Reported operating
margin was 14.8%, a 90 basis point decrease from the prior
year.
Beauty Systems Group
- Net sales were $409.4 million in the
quarter, a decrease of 0.1% vs. the prior year. BSG was negatively
impacted from having one less selling day this quarter compared to
the prior year due to its stores being closed this year on both
Christmas Eve and Christmas Day versus being closed only Christmas
Day last year. Foreign currency translation increased BSG’s revenue
growth by approximately 40 basis points. Same store sales declined
1.3%, with a 10 basis point negative impact from the prior year’s
hurricanes.
- At the end of the quarter, net store
count was 1,390, up 50 from the prior year, driven by the H. Chalut
Ltée acquisition and the net increase in CosmoProf stores.
- Gross margin decreased 10 basis points
to 40.8% in the quarter. Gross margin benefitted from prior year
pricing initiatives but was offset by higher distribution and
freight costs.
- Reported operating earnings were $64.6
million in the quarter, an increase of 1.5% versus the prior year,
driven by savings from the 2017 Restructuring Plan. Reported
operating margin in the quarter was 15.8%, a 30 basis point
increase from the prior year.
- At the end of the quarter, total
distributor sales consultants were 875 compared to 900 in the prior
year. This decrease is due primarily to a decline in the number of
distributor sales consultants employed by BSG’s Armstrong McCall
franchise business.
Conference Call and Where You Can Find Additional
Information
The Company will hold a conference call and audio webcast today
to discuss its financial results and its business at approximately
7:30 a.m. Central Time. 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) 288-8960 (International: (612) 234-9960).
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. A replay of the earnings
conference call will be available starting at 9:30 a.m. Central
Time, February 8, 2018, through February 15, 2018, by dialing (800)
475-6701 or if international dial (320) 365-3844 and reference the
conference ID number 439133. 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 approximately $3.9 billion annually. Through the
Sally Beauty Supply and Beauty Systems Group businesses, the
Company sells and distributes through 5,177 stores, including
approximately 184 franchised units, and has operations 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
8,000 products for hair, skin, and nails through professional lines
such as OPI®, China Glaze®, Wella®, Clairol®, Conair® and Hot Shot
Tools®, 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 10,500 professionally branded products including Paul
Mitchell®, Wella®, Matrix®, Schwarzkopf®, Kenra®, Goldwell®, Joico®
and Aquage®, intended for use in salons and for resale by salons to
retail consumers. 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; our ability to efficiently manage and control our costs
and the success of our cost control plans, including our recently
announced restructuring plans; our ability to implement our
restructuring plans in various jurisdictions; our ability to manage
the effects of our cost reduction plans on our employees and other
operations costs; charges related to the restructuring plans;
possible changes in the size and components of the expected costs
and charges associated with the restructuring plans; our ability to
realize the anticipated cost savings from the restructuring plans
within the anticipated time frame, if at all; 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 the mix of product 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 general economic conditions upon our business; the
challenges of conducting business outside the United States; the
impact of Britain’s decision to leave the European Union and
related or other disruptive events in the United Kingdom, the
European Union or other geographies in which we conduct business;
rising labor and rental costs; protecting our intellectual property
rights, particularly our trademarks; the risk that our products may
infringe on the intellectual property rights of others;
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 our
liquidity needs; 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, 2017,
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 United States, or
GAAP, and are therefore referred to as non-GAAP financial measures:
(1) Adjusted EBITDA and EBITDA margin; (2) adjusted operating
earnings and operating margin; (3) adjusted diluted earnings per
share and (4) operating free cash flow. 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 and EBITDA Margin - We define the measure
Adjusted EBITDA as GAAP net earnings before depreciation and
amortization, interest expense, income taxes, share-based
compensation, and costs related to the Company’s previously
announced Restructuring Plans for the relevant time periods as
indicated in the accompanying non-GAAP reconciliations to the
comparable GAAP financial measures. Adjusted EBITDA Margin is
Adjusted EBITDA as a percentage of net sales.
Adjusted Operating Earnings and Operating Margin – Adjusted
operating earnings are GAAP operating earnings that excludes costs
related to the Company’s previously announced Restructuring Plans
for the relevant time periods as indicated in the accompanying
non-GAAP reconciliations to the comparable GAAP financial measures.
Adjusted Operating Margin is Adjusted Operating Earnings as a
percentage of net sales.
Adjusted Diluted Net Earnings Per Share – Adjusted diluted net
earnings per share is GAAP diluted earnings per share that exclude
costs related to the Company’s previously announced Restructuring
Plans as indicated in the accompanying non-GAAP reconciliations to
the comparable GAAP financial measures.
Operating Free Cash Flow – We define the measure Operating Free
Cash Flow as GAAP net cash provided by operating activities less
capital expenditures. We believe Operating Free Cash Flow is an
important liquidity measure that provides useful information to
investors about the amount of cash generated from operations after
taking into account capital expenditures.
We believe that these non-GAAP financial measures provide
valuable information regarding our earnings and business trends by
excluding specific items that we believe are not indicative of the
ongoing operating results of our businesses; providing a useful way
for investors to make a comparison of our performance over time and
against other companies in our industry.
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 and cash flows. Our management and Board of Directors
also use these non-GAAP measures as supplemental measures to
evaluate our businesses and the performance of management,
including the determination of performance-based compensation, to
make operating and strategic decisions, and to allocate financial
resources. We believe that these non-GAAP measures also provide
meaningful information for investors and securities analysts 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
Segment Information 1 Non-GAAP Financial Measures Reconciliations 2
Non-GAAP Financial Measures Reconciliations Continued; Adjusted
EBITDA and Operating Free Cash Flow 3 Store Count and Same Store
Sales 4
SALLY BEAUTY HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Statements of Earnings (In thousands, except per share
data) (Unaudited)
Three Months Ended December
31, 2017 2016
PercentageChange
Net sales $ 994,964 $ 999,609 -0.5 % Cost of products sold
508,335 507,901 0.1 %
Gross profit 486,629 491,708 -1.0 % Selling, general and
administrative expenses 371,286 374,251 -0.8 % Restructuring
charges 5,210 - 100.0 %
Operating earnings 110,133 117,457 -6.2 % Interest expense
24,016 26,799 -10.4 % Earnings
before provision for income taxes 86,117 90,658 -5.0 % Provision
for income taxes 2,853 34,832
-91.8 % Net earnings $ 83,264 $ 55,826
49.1 % Earnings per share: Basic $ 0.65 $ 0.39 66.7 %
Diluted $ 0.65 $ 0.39 66.7 %
Weighted average shares: Basic 127,784 143,631 Diluted
128,645 144,860
Basis PointChange
Comparison as a
percentage of net sales
Consolidated gross margin 48.9 % 49.2 % (30 ) Selling, general and
administrative expenses 37.3 % 37.4 % (10 ) Consolidated operating
margin 11.1 % 11.8 % (70 )
Effective tax
rate
3.3 % 38.4 % (3,510 )
SALLY BEAUTY HOLDINGS, INC. AND
SUBSIDIARIES Condensed Consolidated Balance Sheets (In
thousands) (Unaudited)
December 31,2017
September 30,2017
Cash and cash equivalents $ 79,312 $ 63,759 Trade and other
accounts receivable 96,958 92,241 Inventory 941,146 930,855 Other
current assets 46,259 55,223
Total current assets 1,163,675 1,142,078 Property and equipment,
net 306,421 313,717 Goodwill and other intangible assets 622,158
618,096 Other assets 21,067 25,116
Total assets $ 2,113,321 $ 2,099,007
Current maturities of long-term debt $ 104,900 $ 96,082
Accounts payable 306,270 307,752 Accrued liabilities 166,501
166,527 Income taxes payable 12,331
2,233 Total current liabilities 590,002 572,594 Long-term
debt, including capital leases 1,771,299 1,771,853 Other
liabilities 31,147 20,140 Deferred income tax liabilities
63,508 98,036 Total liabilities
2,455,956 2,462,623 Total stockholders' deficit (342,635 )
(363,616 ) Total liabilities and stockholders'
deficit $ 2,113,321 $ 2,099,007
Supplemental Schedule 1
SALLY BEAUTY HOLDINGS, INC. AND SUBSIDIARIES Segment
Information (In thousands) (Unaudited)
Three
Months Ended December 31, 2017
2016
PercentageChange
Net sales: Sally Beauty Supply ("SBS") $ 585,574 $ 589,859 -0.7 %
Beauty Systems Group ("BSG") 409,390
409,750 -0.1 % Total net sales $ 994,964
$ 999,609 -0.5 % Operating earnings:
SBS $ 86,594 $ 92,526 -6.4 % BSG 64,565
63,600 1.5 % Segment operating earnings 151,159
156,126 -3.2 % Unallocated expenses (1) (35,816 ) (38,669 )
-7.4 % Restructuring charges (5,210 ) - 100.0 % Interest expense
(24,016 ) (26,799 ) -10.4 % Earnings
before provision for income taxes $ 86,117 $ 90,658
-5.0 % Segment gross margin:
2017 2016
Basis PointChange
SBS 54.6 % 55.0 % (40 ) BSG 40.8 % 40.9 % (10 ) Segment
operating margin: SBS 14.8 % 15.7 % (90 ) BSG 15.8 % 15.5 % 30
Consolidated operating margin 11.1 % 11.8 %
(70 ) (1) Unallocated expenses, including share-based
compensation expenses, consist of corporate and shared costs and
are included in selling, general and administrative expenses.
Supplemental Schedule 2
SALLY BEAUTY HOLDINGS,
INC. AND SUBSIDIARIES Non-GAAP Financial Measures
Reconciliations, Continued (In thousands, except per share data)
(Unaudited)
Three Months Ended December 31,
2017 As Reported
RestructuringCharges (1)
As Adjusted(Non-GAAP)
Selling, general and administrative expenses $ 371,286 $
371,286 SG&A expenses, as a percentage of net sales 37.3 % 37.3
% Operating earnings 110,133 $ 5,210 115,343 Operating margin 11.1
% 11.6 % Earnings before provision for income taxes 86,117 5,210
91,327 Provision for income taxes (2) 2,853
781 3,634
Net earnings $ 83,264 $ 4,429
$ 87,693 Earnings per
share: Basic $ 0.65 $ 0.03 $ 0.69 Diluted $ 0.65 $
0.03 $ 0.68
Three Months Ended December 31, 2016 As Reported
As Adjusted(Non-GAAP)
Selling, general and administrative expenses $ 374,251 $
374,251 SG&A expenses, as a percentage of net sales 37.4 % 37.4
% Operating earnings 117,457 117,457 Operating margin 11.8 % 11.8 %
Earnings before provision for income taxes 90,658 90,658 Provision
for income taxes 34,832
34,832 Net earnings $
55,826
$ 55,826 Earnings per share: Basic $ 0.39 $
0.39 Diluted $ 0.39
$ 0.39 (1) Restructuring charges
represent costs and expenses incurred in connection with the 2018
restructuring plan disclosed in November 2017. (2) The
income tax provision associated with the fiscal year 2018
restructuring charges was calculated using a 15% tax rate since
realization of a tax benefit for portions of this expense is
currently not deemed probable.
Supplemental Schedule 3
SALLY BEAUTY
HOLDINGS, INC. AND SUBSIDIARIES Non-GAAP Financial Measures
Reconciliations, Continued (In thousands) (Unaudited)
Three Months Ended December 31, Adjusted EBITDA:
2017 2016
PercentageChange
Net earnings $ 83,264 $ 55,826 49.1 % Add: Depreciation and
amortization 27,090 26,839 0.9 % Interest expense (1) 24,016 26,799
-10.4 % Provision for income taxes 2,853
34,832 -91.8 % EBITDA (non-GAAP) 137,223
144,296 -4.9 % Share-based compensation 3,111 3,814 -18.4 %
Restructuring charges 5,210 -
100.0 % Adjusted EBITDA (non-GAAP) $ 145,544 $
148,110 -1.7 %
Basis PointChange
Adjusted EBITDA as a
percentage of net sales
Adjusted EBITDA margin 14.6 % 14.8 %
(20 )
Operating Free Cash Flow:
2017 2016
PercentageChange
Net cash provided by operating activities $ 104,204 $ 89,794 16.0 %
Less: Payments for property and equipment, net (22,499 )
(28,008 ) -19.7 % Operating free cash flow
(non-GAAP) $ 81,705 $ 61,786 32.2 %
Supplemental Schedule 4
SALLY BEAUTY HOLDINGS, INC. AND
SUBSIDIARIES Store Count and Same Store Sales (Unaudited)
As of December 31, 2017
2016 Change Number of stores: SBS:
Company-operated stores 3,770 3,797 (27 ) Franchise stores 17 18 (1
) Total SBS 3,787 3,815 (28 ) BSG: Company-operated stores 1,223
1,177 46 Franchise stores 167 163 4 Total BSG 1,390 1,340 50
Total consolidated 5,177 5,155 22 Number of
BSG distributor sales consultants 875 900 (25 ) BSG
distributor sales consultants (DSC) include 261 and 301 sales
consultants employed by our franchisees at December 31, 2017 and
2016, respectively. In addition, at December 31, 2017, DSC count
includes 40 sales consultants employed by Chalut, a Canadian
distributor of professional beauty products, prior to the Company's
acquisition of Chalut.
Three Months Ended December 31, 2017
2016
Basis PointChange
Same store sales growth (decline): SBS -2.6 % -0.6 %
(200 ) BSG -1.3 % 2.6 % (390 ) Consolidated -2.2 % 0.4 % (260 )
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 from stores
relocated until 14 months after the relocation. The sales from
stores acquired are excluded from our same store sales calculation
until 14 months after the acquisition.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20180208005170/en/
Sally Beauty Holdings, Inc.Jeff Harkins, 940-297-3877Investor
Relations
Sally Beauty (NYSE:SBH)
Historical Stock Chart
From Mar 2024 to Apr 2024
Sally Beauty (NYSE:SBH)
Historical Stock Chart
From Apr 2023 to Apr 2024