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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

FOR THE QUARTERLY PERIOD ENDED: JUNE 30, 2021

-OR-

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

Commission File No. 1-33145

 

SALLY BEAUTY HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

 

 

 

Delaware

 

36-2257936

(State or other jurisdiction of incorporation or organization)

 

(I.R.S. Employer Identification No.)

 

 

 

3001 Colorado Boulevard

 

 

Denton, Texas

 

76210

(Address of principal executive offices)

 

(Zip Code)

 

(940) 898-7500

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report): N/A

Securities registered pursuant to Section 12(b) of the Act:

Title of each classTrading SymbolName of each exchange on which registered

Common Stock, $0.01 par valueSBHThe New York Stock Exchange

 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes    No 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes    No 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

 

Large accelerated filer

 

Accelerated filer

Non-accelerated filer

Smaller reporting company

 

Emerging growth company

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes      No 

As of July 23, 2021, there were 113,033,420 shares of the issuer’s common stock outstanding.

 

 

 

 


 

TABLE OF CONTENTS

 

 

 


2


 

In this Quarterly Report, references to “the Company,” “Sally Beauty,” “our company,” “we,” “our,” “ours” and “us” refer to Sally Beauty Holdings, Inc. and its consolidated subsidiaries unless otherwise indicated or the context otherwise requires.

cautionary notice regarding forward-looking statements

Statements in this Quarterly Report on Form 10-Q and in the documents incorporated by reference herein which are not purely historical facts or which depend upon future events may constitute 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, which we refer to as the Exchange Act. 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. Forward-looking statements may relate to, among other things, the impact on our business, operations and financial results of the novel coronavirus (“COVID-19”) pandemic.

Readers are cautioned not to place undue reliance on forward-looking statements as such statements speak only as of the date they were made and 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. The most important factors which could cause our actual results to differ from our forward-looking statements are set forth in our description of risk factors in Item 1A contained in our Annual Report on Form 10-K for the fiscal year ended September 30, 2020, which should be read in conjunction with the forward-looking statements in this report. Forward-looking statements speak only as of the date they are made, and we do not undertake any obligation to update any forward-looking statement.

The events described in the forward-looking statements might not occur or might occur to a different extent or at a different time than we have described. As a result, our actual results may differ materially from the results contemplated by these forward-looking statements.

 

3


 

WHERE YOU CAN FIND MORE INFORMATION

Our quarterly and annual financial results and other important information are available by calling our Investor Relations Department at (940) 297-3877.

We maintain a website at www.sallybeautyholdings.com where investors and other interested parties may obtain, free of charge, press releases and other information as well as gain access to our periodic filings with the Securities and Exchange Commission (“SEC”). The information contained on this website should not be considered to be a part of this or any other report filed with or furnished to the SEC.

 

4


 

PART I — FINANCIAL INFORMATION

Item 1.  Financial Statements.

The following condensed consolidated balance sheets as of June 30, 2021, and September 30, 2020, the condensed consolidated statements of earnings (loss), condensed consolidated statements of comprehensive income (loss) and the condensed consolidated statements of stockholders’ equity (deficit) for the three and nine months ended June 30, 2021 and 2020, and the condensed consolidated statements of cash flows for the nine months ended June 30, 2021 and 2020, are those of Sally Beauty Holdings, Inc. and its subsidiaries.

5


SALLY BEAUTY HOLDINGS, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(In thousands, except par value data)

 

 

 

 

June 30,

2021

 

 

September 30,

2020

 

 

 

(Unaudited)

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

270,317

 

 

$

514,151

 

Trade accounts receivable, net

 

 

44,660

 

 

 

35,590

 

Accounts receivable, other

 

 

31,779

 

 

 

20,839

 

Inventory

 

 

935,427

 

 

 

814,503

 

Other current assets

 

 

46,928

 

 

 

48,014

 

Total current assets

 

 

1,329,111

 

 

 

1,433,097

 

Property and equipment, net of accumulated depreciation of $764,875 at

   June 30, 2021, and $694,709 at September 30, 2020

 

 

283,033

 

 

 

315,029

 

Operating lease assets

 

 

540,480

 

 

 

525,634

 

Goodwill

 

 

546,284

 

 

 

540,038

 

Intangible assets, excluding goodwill, net of accumulated amortization of

   $37,847 at June 30, 2021, and $63,491 at September 30, 2020

 

 

55,651

 

 

 

58,283

 

Other assets

 

 

23,623

 

 

 

23,066

 

Total assets

 

$

2,778,182

 

 

$

2,895,147

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Current maturities of long-term debt

 

$

181

 

 

$

180

 

Accounts payable

 

 

268,868

 

 

 

236,333

 

Accrued liabilities

 

 

213,099

 

 

 

170,665

 

Current operating lease liabilities

 

 

159,094

 

 

 

153,267

 

Income taxes payable

 

 

8,963

 

 

 

2,917

 

Total current liabilities

 

 

650,205

 

 

 

563,362

 

Long-term debt

 

 

1,383,145

 

 

 

1,796,897

 

Long-term operating lease liabilities

 

 

401,706

 

 

 

394,375

 

Other liabilities

 

 

30,008

 

 

 

32,976

 

Deferred income tax liabilities, net

 

 

90,848

 

 

 

92,094

 

Total liabilities

 

 

2,555,912

 

 

 

2,879,704

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

Common stock, $0.01 par value. Authorized 500,000 shares; 113,033 and

   112,824 shares issued and 112,780 and 112,405 shares outstanding at

   June 30, 2021, and September 30, 2020, respectively

 

 

1,128

 

 

 

1,124

 

Preferred stock, $0.01 par value. Authorized 50,000 shares; none issued

 

 

 

 

 

 

Additional paid-in capital

 

 

13,858

 

 

 

1,913

 

Accumulated earnings

 

 

288,818

 

 

 

117,109

 

Accumulated other comprehensive loss, net of tax

 

 

(81,534

)

 

 

(104,703

)

Total stockholders’ equity

 

 

222,270

 

 

 

15,443

 

Total liabilities and stockholders’ equity

 

$

2,778,182

 

 

$

2,895,147

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

6


 

SALLY BEAUTY HOLDINGS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Earnings (Loss)

(In thousands, except per share data)

(Unaudited)

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Net sales

 

$

1,022,387

 

 

$

705,287

 

 

$

2,884,737

 

 

$

2,556,518

 

Cost of goods sold

 

 

507,981

 

 

 

383,441

 

 

 

1,432,378

 

 

 

1,330,067

 

Gross profit

 

 

514,406

 

 

 

321,846

 

 

 

1,452,359

 

 

 

1,226,451

 

Selling, general and administrative expenses

 

 

386,481

 

 

 

314,599

 

 

 

1,143,738

 

 

 

1,075,827

 

Restructuring

 

 

508

 

 

 

5,816

 

 

 

1,371

 

 

 

11,541

 

Operating earnings

 

 

127,417

 

 

 

1,431

 

 

 

307,250

 

 

 

139,083

 

Interest expense

 

 

23,452

 

 

 

27,298

 

 

 

73,313

 

 

 

70,483

 

Earnings (loss) before provision for income taxes

 

 

103,965

 

 

 

(25,867

)

 

 

233,937

 

 

 

68,600

 

Provision (benefit) for income taxes

 

 

27,759

 

 

 

(2,341

)

 

 

62,228

 

 

 

25,543

 

Net earnings (loss)

 

$

76,206

 

 

$

(23,526

)

 

$

171,709

 

 

$

43,057

 

Earnings (loss) per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.68

 

 

$

(0.21

)

 

$

1.52

 

 

$

0.38

 

Diluted

 

$

0.66

 

 

$

(0.21

)

 

$

1.50

 

 

$

0.37

 

Weighted-average shares:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

112,739

 

 

 

112,271

 

 

 

112,605

 

 

 

114,413

 

Diluted

 

 

114,927

 

 

 

112,271

 

 

 

114,274

 

 

 

115,370

 

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

7


SALLY BEAUTY HOLDINGS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Income (Loss)

(In thousands)

(Unaudited)

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Net earnings (loss)

 

$

76,206

 

 

$

(23,526

)

 

$

171,709

 

 

$

43,057

 

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

6,617

 

 

 

5,116

 

 

 

23,734

 

 

 

(3,707

)

Interest rate caps, net of tax

 

 

471

 

 

 

245

 

 

 

646

 

 

 

274

 

Foreign exchange contracts, net of tax

 

 

(191

)

 

 

(286

)

 

 

(1,211

)

 

 

1,552

 

Other comprehensive income (loss), net of tax

 

 

6,897

 

 

 

5,075

 

 

 

23,169

 

 

 

(1,881

)

Total comprehensive income (loss)

 

$

83,103

 

 

$

(18,451

)

 

$

194,878

 

 

$

41,176

 

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

8


SALLY BEAUTY HOLDINGS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Stockholders’ Equity (Deficit)

(In thousands)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

Other

 

 

Total

 

 

Common Stock

Paid-in

 

 

Accumulated

 

 

Comprehensive

 

 

Stockholders’

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Earnings

 

 

Loss

 

 

Equity

 

Balance at September 30, 2020

 

112,405

 

 

$

1,124

 

 

$

1,913

 

 

$

117,109

 

 

$

(104,703

)

 

$

15,443

 

Net earnings

 

 

 

 

 

 

 

 

 

 

57,191

 

 

 

 

 

 

57,191

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

23,588

 

 

 

23,588

 

Share-based compensation

 

 

 

 

 

 

 

2,893

 

 

 

 

 

 

 

 

 

2,893

 

Stock issued for equity awards

 

133

 

 

 

1

 

 

 

(250

)

 

 

 

 

 

 

 

 

(249

)

Balance at December 31, 2020

 

112,538

 

 

$

1,125

 

 

$

4,556

 

 

$

174,300

 

 

$

(81,115

)

 

$

98,866

 

Net earnings

 

 

 

 

 

 

 

 

 

 

38,312

 

 

 

 

 

 

38,312

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

(7,316

)

 

 

(7,316

)

Share-based compensation

 

 

 

 

 

 

 

2,648

 

 

 

 

 

 

 

 

 

2,648

 

Stock issued for equity awards

 

141

 

 

 

2

 

 

 

2,321

 

 

 

 

 

 

 

 

 

2,323

 

Balance at March 31, 2021

 

112,679

 

 

$

1,127

 

 

$

9,525

 

 

$

212,612

 

 

$

(88,431

)

 

$

134,833

 

Net earnings

 

 

 

 

 

 

 

 

 

 

76,206

 

 

 

 

 

 

76,206

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

6,897

 

 

 

6,897

 

Share-based compensation

 

 

 

 

 

 

 

2,617

 

 

 

 

 

 

 

 

 

2,617

 

Stock issued for equity awards

 

101

 

 

 

1

 

 

 

1,716

 

 

 

 

 

 

 

 

 

1,717

 

Balance at June 30, 2021

 

112,780

 

 

$

1,128

 

 

$

13,858

 

 

$

288,818

 

 

$

(81,534

)

 

$

222,270

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

 

 

 

 

Other

 

 

 

 

Stockholders’

 

 

Common Stock

 

Paid-in

 

 

 

 

Accumulated

 

 

 

 

Comprehensive

 

 

 

 

Equity

 

 

Shares

 

 

 

 

Amount

 

 

 

 

Capital

 

 

 

 

Earnings

 

 

 

 

Loss

 

 

 

 

(Deficit)

 

Balance at September 30, 2019

 

116,725

 

 

 

 

$

1,167

 

 

 

 

$

 

 

 

 

$

55,797

 

 

 

 

$

(117,287

)

 

 

 

$

(60,323

)

Cumulative effect of ASC 842

   adoption

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(445

)

 

 

 

 

 

 

 

 

 

(445

)

Net earnings

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

53,215

 

 

 

 

 

 

 

 

 

 

53,215

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

14,870

 

 

 

 

 

14,870

 

Repurchases and cancellations of

   common stock

 

(766

)

 

 

 

 

(7

)

 

 

 

 

(6,237

)

 

 

 

 

(5,113

)

 

 

 

 

 

 

 

 

 

(11,357

)

Share-based compensation

 

 

 

 

 

 

 

 

 

 

 

3,473

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,473

 

Stock issued for equity awards

 

206

 

 

 

 

 

2

 

 

 

 

 

2,764

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,766

 

Balance at December 31, 2019

 

116,165

 

 

 

 

$

1,162

 

 

 

 

$

 

 

 

 

$

103,454

 

 

 

 

$

(102,417

)

 

 

 

$

2,199

 

Net earnings

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

13,368

 

 

 

 

 

 

 

 

 

 

13,368

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(21,826

)

 

 

 

 

(21,826

)

Repurchases and cancellations of

   common stock

 

(3,936

)

 

 

 

 

(39

)

 

 

 

 

(3,064

)

 

 

 

 

(46,897

)

 

 

 

 

 

 

 

 

 

(50,000

)

Share-based compensation

 

 

 

 

 

 

 

 

 

 

 

3,059

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,059

 

Stock issued for equity awards

 

35

 

 

 

 

 

 

 

 

 

 

5

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5

 

Balance at March 31, 2020

 

112,264

 

 

 

 

$

1,123

 

 

 

 

$

 

 

 

 

$

69,925

 

 

 

 

$

(124,243

)

 

 

 

$

(53,195

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(23,526

)

 

 

 

 

 

 

 

 

 

(23,526

)

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5,075

 

 

 

 

 

5,075

 

Share-based compensation

 

 

 

 

 

 

 

 

 

 

 

2,562

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,562

 

Stock issued for stock options

 

16

 

 

 

 

 

 

 

 

 

 

(49

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(49

)

Balance at June 30, 2020

 

112,280

 

 

 

 

$

1,123

 

 

 

 

$

2,513

 

 

 

 

$

46,399

 

 

 

 

$

(119,168

)

 

 

 

$

(69,133

)

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

9


SALLY BEAUTY HOLDINGS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

 

 

 

Nine Months Ended June 30,

 

 

 

2021

 

 

2020

 

Cash Flows from Operating Activities:

 

 

 

 

 

 

 

 

Net earnings

 

$

171,709

 

 

$

43,057

 

Adjustments to reconcile net earnings to net cash provided by operating

   activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

78,090

 

 

 

80,829

 

Share-based compensation expense

 

 

8,158

 

 

 

9,094

 

Amortization of deferred financing costs

 

 

3,280

 

 

 

2,965

 

Loss (gain) on early extinguishment of debt

 

 

2,449

 

 

 

(357

)

Loss on disposal of equipment and other property

 

 

1,638

 

 

 

2,910

 

Deferred income taxes

 

 

(998

)

 

 

600

 

Changes in (exclusive of effects of acquisitions):

 

 

 

 

 

 

 

 

Trade accounts receivable

 

 

(8,612

)

 

 

495

 

Accounts receivable, other

 

 

(10,363

)

 

 

45,888

 

Inventory

 

 

(108,317

)

 

 

134,824

 

Other current assets

 

 

(931

)

 

 

(15,840

)

Other assets

 

 

1,578

 

 

 

(691

)

Operating leases, net

 

 

(1,595

)

 

 

 

Accounts payable and accrued liabilities

 

 

78,250

 

 

 

(35,572

)

Income taxes payable

 

 

6,372

 

 

 

(7,154

)

Other liabilities

 

 

(2,980

)

 

 

13,336

 

Net cash provided by operating activities

 

 

217,728

 

 

 

274,384

 

Cash Flows from Investing Activities:

 

 

 

 

 

 

 

 

Payments for property and equipment, net of proceeds

 

 

(44,888

)

 

 

(89,702

)

Acquisitions, net of cash acquired

 

 

(2,351

)

 

 

(1,944

)

Net cash used by investing activities

 

 

(47,239

)

 

 

(91,646

)

Cash Flows from Financing Activities:

 

 

 

 

 

 

 

 

Proceeds from issuance of long-term debt

 

 

 

 

 

1,087,504

 

Repayments of long-term debt

 

 

(418,986

)

 

 

(437,391

)

Debt issuance costs

 

 

(1,300

)

 

 

(6,257

)

Payments for common stock repurchased

 

 

 

 

 

(61,357

)

Proceeds from equity awards

 

 

3,790

 

 

 

2,722

 

Net cash (used) provided by financing activities

 

 

(416,496

)

 

 

585,221

 

Effect of foreign exchange rate changes on cash and cash equivalents

 

 

2,173

 

 

 

(643

)

Net (decrease) increase in cash and cash equivalents

 

 

(243,834

)

 

 

767,316

 

Cash and cash equivalents, beginning of period

 

 

514,151

 

 

 

71,495

 

Cash and cash equivalents, end of period

 

$

270,317