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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
FOR THE QUARTERLY PERIOD ENDED:
-OR-
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission File No.
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of incorporation or organization) |
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(I.R.S. Employer Identification No.) |
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(Address of principal executive offices) |
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(Zip Code) |
(
(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 class Trading Symbol Name of each exchange on which registered
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.
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).
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.
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☒ |
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Accelerated filer |
☐ |
Non-accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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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
As of April 28, 2023, there were
TABLE OF CONTENTS
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Page |
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8 |
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9 |
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Item 2. Management’s Discussion And Analysis Of Financial Condition And Results Of Operations |
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Item 3. Quantitative And Qualitative Disclosures About Market Risk |
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25 |
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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.
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, 2022, 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
PART I — FINANCIAL INFORMATION
Item 1. Financial Statements.
SALLY BEAUTY HOLDINGS, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In thousands, except par value data)
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March 31, 2023 |
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September 30, 2022 |
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(Unaudited) |
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Assets |
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Current assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Trade accounts receivable, net |
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Accounts receivable, other |
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Inventory |
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Other current assets |
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Total current assets |
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Property and equipment, net of accumulated depreciation of $
March 31, 2023, and $
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Operating lease assets |
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Goodwill |
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Intangible assets, excluding goodwill, net of accumulated amortization of
$
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Other assets |
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Total assets |
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$ |
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$ |
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Liabilities and Stockholders’ Equity |
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Current liabilities: |
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Current maturities of long-term debt |
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$ |
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$ |
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Accounts payable |
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Accrued liabilities |
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Current operating lease liabilities |
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Income taxes payable |
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Total current liabilities |
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Long-term debt |
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Long-term operating lease liabilities |
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Other liabilities |
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Deferred income tax liabilities, net |
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Total liabilities |
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Stockholders’ equity: |
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Common stock, $
March 31, 2023, and September 30, 2022, respectively |
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Preferred stock, $
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Additional paid-in capital |
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Accumulated earnings |
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Accumulated other comprehensive loss, net of tax |
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(
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(
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Total stockholders’ equity |
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Total liabilities and stockholders’ equity |
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$ |
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$ |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
4
SALLY BEAUTY HOLDINGS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Earnings
(In thousands, except per share data)
(Unaudited)
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Three Months Ended |
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Six Months Ended |
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March 31, |
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March 31, |
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2023 |
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2022 |
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2023 |
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2022 |
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Net sales |
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$ |
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$ |
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$ |
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$ |
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Cost of goods sold |
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Gross profit |
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Selling, general and administrative expenses |
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Restructuring |
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— |
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Operating earnings |
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Interest expense |
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Earnings before provision for income taxes |
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Provision for income taxes |
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Net earnings |
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$ |
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$ |
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$ |
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$ |
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Earnings per share: |
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Basic |
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$ |
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$ |
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$ |
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$ |
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Diluted |
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$ |
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$ |
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$ |
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$ |
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Weighted-average shares: |
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Basic |
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Diluted |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
5
SALLY BEAUTY HOLDINGS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Comprehensive Income
(In thousands)
(Unaudited)
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Three Months Ended |
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Six Months Ended |
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March 31, |
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March 31, |
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2023 |
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2022 |
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2023 |
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2022 |
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Net earnings |
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$ |
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$ |
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$ |
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$ |
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Other comprehensive income (loss): |
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Foreign currency translation adjustments |
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(
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) |
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(
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Interest rate caps, net of tax |
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(
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) |
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— |
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(
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Foreign exchange contracts, net of tax |
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(
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) |
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(
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) |
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(
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Other comprehensive income (loss), net of tax |
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(
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) |
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(
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|
Total comprehensive income |
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$ |
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$ |
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$ |
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$ |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
6
SALLY BEAUTY HOLDINGS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Stockholders’ Equity
(In thousands)
(Unaudited)
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Accumulated |
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Additional |
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Other |
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Total |
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|||
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Common Stock |
Paid-in |
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Accumulated |
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Comprehensive |
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Stockholders’ |
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|||||||||||
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Shares |
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Amount |
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Capital |
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Earnings |
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Loss |
|
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Equity |
|
||||||
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Balance at September 30, 2022 |
|
|
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$ |
|
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$ |
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$ |
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$ |
(
|
) |
|
$ |
|
|
|
Net earnings |
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— |
|
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— |
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— |
|
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— |
|
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Other comprehensive income |
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— |
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— |
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— |
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— |
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Share-based compensation |
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— |
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— |
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— |
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— |
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Stock issued for equity awards |
|
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— |
|
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— |
|
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Employee withholding taxes paid related to net share settlement |
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
|
— |
|
|
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— |
|
|
|
(
|
) |
|
Balance at December 31, 2022 |
|
|
|
|
$ |
|
|
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$ |
|
|
|
$ |
|
|
|
$ |
(
|
) |
|
$ |
|
|
|
Net earnings |
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— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
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|
Other comprehensive income |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
Share-based compensation |
|
— |
|
|
|
— |
|
|
|
|
|
|
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— |
|
|
|
— |
|
|
|
|
|
|
Stock issued for equity awards |
|
|
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|
|
|
|
|
|
|
|
|
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— |
|
|
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— |
|
|
|
|
|
|
Employee withholding taxes paid related to net share settlement |
|
(
|
) |
|
|
— |
|
|
|
(
|
) |
|
|
— |
|
|
|
— |
|
|
|
(
|
) |
|
Balance at March 31, 2023 |
|
|
|
|
$ |
|
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$ |
|
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|
$ |
|
|
|
$ |
(
|
) |
|
$ |
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Accumulated |
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Additional |
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Other |
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Total |
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|||
|
|
Common Stock |
|
Paid-in |
|
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Accumulated |
|
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|
Comprehensive |
|
|
|
|
Stockholders’ |
|
||||||||||||||
|
|
Shares |
|
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|
Amount |
|
|
|
|
Capital |
|
|
|
|
Earnings |
|
|
|
|
Loss |
|
|
|
|
Equity |
|
||||||
|
Balance at September 30, 2021 |
|
|
|
|
|
|
$ |
|
|
|
|
|
$ |
|
|
|
|
|
$ |
|
|
|
|
|
$ |
(
|
) |
|
|
|
$ |
|
|
|
Net earnings |
|
— |
|
|
|
|
|
— |
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
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|
— |
|
|
|
|
|
|
|
|
Other comprehensive loss |
|
— |
|
|
|
|
|
— |
|
|
|
|
|
— |
|
|
|
|
|
— |
|
|
|
|
|
(
|
) |
|
|
|
|
(
|
) |
|
Share-based compensation |
|
— |
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
Stock issued for equity awards |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
Employee withholding taxes paid related to net share settlement |
|
(
|
) |
|
|
|
|
(
|
) |
|
|
|
|
(
|
) |
|
|
|
|
— |
|
|
|
|
|
— |
|
|
|
|
|
(
|
) |
|
Repurchases and cancellations of common stock |
|
(
|
) |
|
|
|
|
(
|
) |
|
|
|
|
(
|
) |
|
|
|
|
(
|
) |
|
|
|
|
— |
|
|
|
|
|
(
|
) |
|
Balance at December 31, 2021 |
|
|
|
|
|
|
$ |
|
|
|
|
|
$ |
— |
|
|
|
|
$ |
|
|
|
|
|
$ |
(
|
) |
|
|
|
$ |
|
|
|
Net earnings |
|
— |
|
|
|
|
|
— |
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
Other comprehensive loss |
|
— |
|
|
|
|
|
— |
|
|
|
|
|
— |
|
|
|
|
|
— |
|
|
|
|
|
(
|
) |
|
|
|
|
(
|
) |
|
Share-based compensation |
|
— |
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
Stock issued for equity awards |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
Employee withholding taxes paid related to net share settlement |
|
(
|
) |
|
|
|
|
— |
|
|
|
|
|
(
|
) |
|
|
|
|
— |
|
|
|
|
|
— |
|
|
|
|
|
(
|
) |
|
Repurchases and cancellations of common stock |
|
(
|
) |
|
|
|
|
(
|
) |
|
|
|
|
(
|
) |
|
|
|
|
(
|
) |
|
|
|
|
— |
|
|
|
|
|
(
|
) |
|
Balance at March 31, 2022 |
|
|
|
|
|
|
$ |
|
|
|
|
|
$ |
— |
|
|
|
|
$ |
|
|
|
|
|
$ |
(
|
) |
|
|
|
$ |
|
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
7
SALLY BEAUTY HOLDINGS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
|
|
|
Six Months Ended March 31, |
|
|||||
|
|
|
2023 |
|
|
2022 |
|
||
|
Cash Flows from Operating Activities: |
|
|
|
|
|
|
|
|
|
Net earnings |
|
$ |
|
|
|
$ |
|
|
|
Adjustments to reconcile net earnings to net cash provided (used) by operating activities: |
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
Share-based compensation expense |
|
|
|
|
|
|
|
|
|
Amortization of deferred financing costs |
|
|
|
|
|
|
|
|
|
Loss on early extinguishment of debt |
|
|
|
|
|
|
— |
|
|
Impairment of long-lived assets, including operating lease assets |
|
|
|
|
|
|
— |
|
|
Loss on disposal of equipment and other property |
|
|
|
|
|
|
|
|
|
Deferred income taxes |
|
|
|
|
|
|
|
|
|
Changes in (exclusive of effects of acquisitions): |
|
|
|
|
|
|
|
|
|
Trade accounts receivable |
|
|
|
|
|
|
|
|
|
Accounts receivable, other |
|
|
(
|
) |
|
|
|
|
|
Inventory |
|
|
(
|
) |
|
|
(
|
) |
|
Other current assets |
|
|
|
|
|
|
(
|
) |
|
Other assets |
|
|
|
|
|
|
|
|
|
Operating leases, net |
|
|
(
|
) |
|
|
|
|
|
Accounts payable and accrued liabilities |
|
|
|
|
|
|
(
|
) |
|
Income taxes payable |
|
|
|
|
|
|
(
|
) |
|
Other liabilities |
|
|
(
|
) |
|
|
(
|
) |
|
Net cash provided (used) by operating activities |
|
|
|
|
|
|
(
|
) |
|
Cash Flows from Investing Activities: |
|
|
|
|
|
|
|
|
|
Payments for property and equipment, net of proceeds |
|
|
(
|
) |
|
|
(
|
) |
|
Acquisitions, net of cash acquired |
|
|
— |
|
|
|
(
|
) |
|
Net cash used by investing activities |
|
|
(
|
) |
|
|
(
|
) |
|
Cash Flows from Financing Activities: |
|
|
|
|
|
|
|
|
|
Proceeds from issuance of long-term debt |
|
|
|
|
|
|
— |
|
|
Repayments of long-term debt |
|
|
(
|
) |
|
|
(
|
) |
|
Payments for common stock repurchased |
|
|
— |
|
|
|
(
|
) |
|
Proceeds from equity awards |
|
|
|
|
|
|
|
|
|
Debt issuance costs |
|
|
(
|
) |
|
|
— |
|
|
Employee withholding taxes paid related to net share settlement of equity awards |
|
|
(
|
) |
|
|
(
|
) |
|
Net cash used by financing activities |
|
|
(
|
) |
|
|
(
|
) |
|
Effect of foreign exchange rate changes on cash and cash equivalents |
|
|
|
|
|
|
|
|
|
Net decrease in cash and cash equivalents |
|
|
(
|
) |
|
|
(
|
) |
|
Cash and cash equivalents, beginning of period |
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of period |
|
$ |
|
|
|
$ |
|
|
|
Supplemental Cash Flow Information: |
|
|
|
|
|
|
|
|
|
Interest paid |
|
$ |
|
|
|
$ |
|
|
|
Income taxes paid |
|
$ |
|
|
|
$ |
|
|
|
Capital expenditures incurred but not paid |
|
$ |
|
|
|
$ |
|
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
8
Sally Beauty Holdings, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
|
1. |
Significant Accounting Policies |
Basis of Presentation
The unaudited condensed consolidated interim financial statements of Sally Beauty Holdings, Inc. and its subsidiaries included herein have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) and pursuant to the rules and regulations of the SEC. Accordingly, certain information and note disclosures normally included in annual financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to the rules and regulations of the SEC, although we believe that the disclosures included herein are adequate for the interim period presented. These condensed consolidated interim financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended September 30, 2022. In the opinion of management, these unaudited condensed consolidated interim financial statements reflect all adjustments that are of a normal recurring nature and which are necessary to present fairly our consolidated financial position as of March 31, 2023, and September 30, 2022, our consolidated results of operations, consolidated comprehensive income and consolidated statements of stockholders’ equity for the three and six months ended March 31, 2023 and 2022 and our consolidated cash flows for the for the six months ended March 31, 2023 and 2022 .
Principles of Consolidation
The unaudited condensed consolidated interim financial statements include all accounts of Sally Beauty Holdings, Inc. and its subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. All amounts are in U.S. Dollars.
Accounting Policies
We adhere to the same accounting policies in the preparation of our condensed consolidated interim financial statements as we do in the preparation of our full year consolidated financial statements. As permitted under GAAP, interim accounting for certain expenses, including income taxes, is based on full-year assumptions. For interim financial reporting purposes, income taxes are recorded based upon our estimated annual effective income tax.
Use of Estimates
In order to present our financial statements in conformity with GAAP, we are required to make certain estimates and assumptions that impact our interim financial statements and supplementary disclosures. These estimates may use forecasted financial information based on reasonable information available, however are subject to change in the future. Significant estimates and assumptions are part of our accounting for sales allowances, deferred revenue, valuation of inventory, amortization and depreciation, intangibles and goodwill, and other reserves. We believe these estimates and assumptions are reasonable; however, they are based on management’s current knowledge of events and actions, and changes in facts and circumstances may result in revised estimates and impact actual results.
|
2. |
Revenue Recognition |
Substantially all of our revenue is derived through the sale of merchandise at the point-of-sale. Revenue is recognized net of estimated sales returns and sales taxes. We estimate sales returns based on historical data.
Changes to our contract liabilities, which are included in accrued liabilities in our condensed consolidated balance sheets, for the periods were as follows (in thousands):
|
|
|
|
|
|
|
Six Months Ended March 31, |
|
|||||
|
|
|
|
|
|
|
2023 |
|
|
2022 |
|
||
|
Beginning Balance |
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
Loyalty points and gift cards issued but not redeemed, net of estimated breakage |
|
|
|
|
|
|
|
|
||||
|
Revenue recognized from beginning liability |
|
|
(
|
) |
|
|
(
|
) |
||||
|
Ending Balance |
|
|
|
|
|
$ |
|
|
|
$ |
|
|
See Note 10, Segment Reporting , for additional information regarding the disaggregation of our sales revenue.
9
|
3. |
Fair Value Measurements |
We measure on a recurring basis and disclose the fair value of our financial instruments under the provisions of ASC Topic 820, Fair Value Measurement, as amended (“ASC 820”). We define “fair value” as the price that would be received to sell an asset or paid to transfer a liability (i.e., the exit price) in an orderly transaction between market participants at the measurement date. ASC 820 establishes a three-level hierarchy for measuring fair value and requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. This valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability on the measurement date.
The three levels of that hierarchy are defined as follows:
Level 1 - Quoted prices are available in active markets for identical assets or liabilities;
Level 2 - Pricing inputs are other than quoted prices in active markets, included in Level 1, that are either directly or indirectly observable; and
Level 3 - Unobservable pricing inputs in which little or no market activity exists, therefore requiring an entity to develop its own model with estimates and assumptions.
Financial instruments measured at fair value on recurring basis
Consistent with the fair value hierarchy, we categorized our financial assets and liabilities as follow:
|
(in thousands) |
|
Classification |
|
Fair Value Hierarchy Level |
|
March 31, 2023 |
|
|
September 30, 2022 |
|
||
|
Financial Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange contracts |
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-designated cash flow hedges |
|
Other current assets |
|
Level 2 |
|
$ |
|
|
|
$ |
|
|
|
Interest rate caps |
|
Other current assets |
|
Level 2 |
|
|
— |
|
|
|
|
|
|
Total assets |
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
. |
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange contracts |
|
|
|
|
|
|
|
|
|
|
|
|
|
Designated cash flow hedges |
|
Accrued liabilities |
|
Level 2 |
|
$ |
|
|
|
$ |
— |
|
|
Non-designated cash flow hedges |
|
Accrued liabilities |
|
Level 2 |
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
|
|
|
$ |
|
|
|
$ |
|
|
The fair value for interest rate caps and foreign exchange contracts were measured using widely accepted valuation techniques, such as discounted cash flow analyses and observable inputs, such as market interest rates and foreign exchange rates.
Other fair value disclosures
The carrying amounts of cash equivalents, trade and other accounts receivable and accounts payable and borrowing under our ABL facility approximate their respective fair values due to the short-term nature of these financial instruments. Carrying amounts and the related estimated fair value of our long-term debt, excluding finance lease obligations, debt issuance costs and original issue discounts, are as follows:
|
|
|
|
|
March 31, 2023 |
|
|
September 30, 2022 |
|
||||||||||
|
(in thousands) |
|
Fair Value Hierarchy Level |
|
Carrying Value |
|
|
Fair Value |
|
|
Carrying Value |
|
|
Fair Value |
|
||||
|
Long-term debt, excluding capital leases |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior notes |
|
Level 1 |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Term loan B due 2024 |
|
Level 2 |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
Term loan B due 2030 |
|
Level 2 |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
Total long-term debt |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
The fair value of the term loan B was measured using quoted market prices for similar debt securities in active markets or widely accepted valuation techniques, such as discounted cash flow analyses, using observable inputs, such as market interest rates.
10
|
4. |
Stockholders’ Equity |
Share Repurchases
In August 2017, our Board of Directors (“Board”) approved a share repurchase program authorizing us to repurchase up to $
Accumulated Other Comprehensive Income (Loss)
The change in accumulated other comprehensive loss (“AOCL”) was as follows (in thousands):
|
|
|
Foreign Currency Translation Adjustments |
|
|
Interest Rate Caps |
|
|
Foreign Exchange Contracts |
|
|
Total |
|
|
||||
|
Balance at September 30, 2022 |
|
$ |
(
|
) |
|
$ |
|
|
|
$ |
(
|
) |
|
$ |
(
|
) |
|
|
Other comprehensive loss before reclassification, net of tax |
|
|
|
|
|
|
|
|
|
|
(
|
) |
|
|
|
|
|
|
Reclassification to net earnings, net of tax |
|
|
— |
|
|
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
|
Balance at March 31, 2023 |
|
$ |
(
|
) |
|
$ |
— |
|
|
$ |
(
|
) |
|
$ |
(
|
) |
|
The tax impact for the changes in other comprehensive loss and the reclassifications to net earnings was not material.
|
5. |
Weighted-Average Shares |
The following table sets forth the reconciliation of basic and diluted weighted-average shares (in thousands):
|
|
|
Three Months Ended March 31, |
|
|
Six Months Ended March 31, |
|
||||||||||
|
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
|
Weighted-average basic shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dilutive securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock option and stock award programs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average diluted shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Anti-dilutive options excluded from our computation of diluted shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6. |
Goodwill and Intangible Assets |
During the three months ended March 31, 2023, we completed our annual assessments for impairment of goodwill and indefinite-lived intangible assets. For our goodwill testing, we performed a qualitative analysis and determined that there was no indication of impairment requiring further quantitative testing.
|
|
|
Three Months Ended March 31, |
|
|
Six Months Ended March 31, |
|
||||||||||
|
(in thousands) |
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
|
Intangible assets amortization expense |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Additionally, during the six months ended March 31, 2023, the changes in goodwill and other intangibles included effects of foreign currency exchange rates of $
11
|
7. |
Accrued Liabilities |
Accrued liabilities consist of the following (in thousands):
|
|
|
March 31, 2023 |
|
|
September 30, 2022 |
|
||
|
Compensation and benefits |
|
$ |
|
|
|
$ |
|
|
|
Deferred revenue |
|
|
|
|
|
|
|
|
|
Rental obligations |
|
|
|
|
|
|
|
|
|
Insurance reserves |
|
|
|
|
|
|
|
|
|
Property and other taxes |
|
|
|
|
|
|
|
|
|
Interest payable |
|
|
|
|
|
|
|
|
|
Operating accruals and other |
|
|
|
|
|
|
|
|
|
Total accrued liabilities |
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
8. |
Short-term Borrowings and Long-term Debt |
At March 31, 2023, our ABL facility had $
On February 28, 2023, we announced that our wholly-owned subsidiaries, Sally Holdings LLC (“Sally Holdings”) and Sally Capital, Inc. (“Sally Capital” and, together with Sally Holdings, the “Borrowers”), and certain of our other direct and indirect subsidiaries entered into a credit agreement with Bank of America, N.A., as Administrative Agent and Collateral Agent, and the lenders and other parties thereto providing for a term loan B facility (“TLB 2030”) in an aggregate principal amount equal to $
The TLB 2030 is secured by a first-priority lien in and upon substantially all of the assets of the Company and its domestic subsidiaries other than the accounts, inventory (and the proceeds thereof) and other assets that secure Sally Holdings’ existing ABL facility on a first-priority basis (the “ABL Priority Collateral”). Additionally, the TLB 2030 is secured by a second-priority lien in and upon the ABL Priority Collateral. The TLB 2030 does not contain any financial maintenance covenants and is subject to a covenant package that is substantially consistent with the covenant package governing the 2025 Senior Unsecured Notes. The TLB 2030 is subject to customary asset sale mandatory prepayment provisions and excess cash flow mandatory prepayment provisions. The TLB 2030 is subject to a prepayment premium of
The repayment of our TLB 2024, in the aggregate outstanding principal amount of $
12
|
9. |
Derivative Instruments and Hedging Activities |
During the six months ended March 31, 2023, we did
Designated Cash Flow Hedges
Foreign Currency Forwards
We regularly enter into foreign currency forwards to mitigate our exposure to exchange rate changes on forecasted inventory purchases in U.S. dollars by our foreign subsidiaries.
|
Notional Currency |
|
Notional Amount |
|
|
|
Mexican Peso |
|
$ |
|
|
|
Euro |
|
|
|
|
|
Canadian Dollar |
|
|
|
|
|
Total |
|
$ |
|
|
Quarterly, the changes in fair value related to these foreign currency forwards are recorded into AOCL. As the forwards are exercised, the realized value is recognized into cost of goods sold, based on inventory turns, in our condensed consolidated statements of earnings. For the three months ended March 31, 2023 and 2022, we recognized losses of $
Interest Rate Caps
In July 2017, we purchased
During the three months ended March 31, 2023, we early settled both interest rate caps due to the forecasted transactions being hedged no longer occurring as a result of the repayment of our TLB 2024. In connection with the early settlement, we received approximately $
Non-Designated Derivative Instruments
We also use foreign exchange contracts to mitigate our exposure to exchange rate changes in connection with certain intercompany balances not permanently invested.
|
Notional Currency |
|
Notional Amount |
|
|
|
British Pound |
|
$ |
|
|
|
Canadian Dollar |
|
|
|
|
|
Euro |
|
|
|
|
|
Mexican Peso |
|
|
|
|
|
Total |
|
$ |
|
|
We record changes in fair value and realized gains or losses related to these foreign currency forwards into selling, general and administrative expenses. For the three months ended March 31, 2023 and 2022, the effects of these foreign exchange contracts on our condensed consolidated financial statements were losses of $
13
|
10. |
Segment Reporting |
Segment data for the three and six months ended March 31, 2023 and 2022, is as follows (in thousands):
|
|
|
Three Months Ended March 31, |
|
|
Six Months Ended March 31, |
|
||||||||||
|
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
|
Net sales: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sally Beauty Supply ("SBS") |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Beauty Systems Group ("BSG") |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Earnings before provision for income taxes: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment operating earnings: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SBS |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
BSG |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment operating earnings |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unallocated expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
Consolidated operating earnings |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings before provision for income taxes |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Sales between segments, which are eliminated in consolidation, were not material during the three and six months ended March 31, 2023 and 2022.
Disaggregation of net sales by segment
The following tables disaggregate our segment revenues by merchandise category. We have reclassified certain prior year amounts within BSG to conform to current year presentation.
|
|
|
Three Months Ended March 31, |
|
|
Six Months Ended March 31, |
|
||||||||||
|
SBS |
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
|
Hair color |
|
|
|
% |
|
|
|
% |
|
|
|
% |
|
|
|
% |
|
Hair care |
|
|
|
% |
|
|
|
% |
|
|
|
% |
|
|
|
% |
|
Styling tools and supplies |
|
|
|
% |
|
|
|
% |
|
|
|
% |
|
|
|
% |
|
Nail |
|
|
|
% |
|
|
|
% |
|
|
|
% |
|
|
|
% |
|
Skin and cosmetics |
|
|
|
% |
|
|
|
% |
|
|
|
% |
|
|
|
% |
|
Other beauty items |
|
|
|
% |
|
|
|
% |
|
|
|
% |
|
|
|
% |
|
Total |
|
|
|
% |
|
|
|
% |
|
|
|
% |
|
|
|
% |
|
|
|
Three Months Ended March 31, |
|
|
Six Months Ended March 31, |
|
||||||||||
|
BSG |
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
|
Hair care |
|
|
|
% |
|
|
|
% |
|
|
|
% |
|
|
|
% |
|
Hair color |
|
|
|
% |
|
|
|
% |
|
|
|
% |
|
|
|
% |
|
Styling tools and supplies |
|
|
|
% |
|
|
|
% |
|
|
|
% |
|
|
|
% |
|
Skin and cosmetics |
|
|
|
% |
|
|
|
% |
|
|
|
% |
|
|
|
% |
|
Nail |
|
|
|
% |
|
|
|
% |
|
|
|
% |
|
|
|
% |
|
Other beauty items |
|
|
|
% |
|
|
|
% |
|
|
|
% |
|
|
|
% |
|
Total |
|
|
|
% |
|
|
|
% |
|
|
|
% |
|
|
|
% |
14
The following tables disaggregate our segment revenue by sales channels:
|
|
|
Three Months Ended March 31, |
|
|
Six Months Ended March 31, |
|
||||||||||
|
SBS |
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
|
Company-operated stores |
|
|
|
% |
|
|
|
% |
|
|
|
% |
|
|
|
% |
|
E-commerce |
|
|
|
% |
|
|
|
% |
|
|
|
% |
|
|
|
% |
|
Total |
|
|
|
% |
|
|
|
% |
|
|
|
% |
|
|
|
% |
|
|
|
Three Months Ended March 31, |
|
|
Six Months Ended March 31, |
|
||||||||||
|
BSG |
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
|
Company-operated stores |
|
|
|
% |
|
|
|
% |
|
|
|
% |
|
|
|
% |
|
E-commerce |
|
|
|
% |
|
|
|
% |
|
|
|
% |
|
|
|
% |
|
Distributor sales consultants |
|
|
|
% |
|
|
|
% |
|
|
|
% |
|
|
|
% |
|
Franchise stores |
|
|
|
% |
|
|
|
% |
|
|
|
% |
|
|
|
% |
|
Total |
|
|
|
% |
|
|
|
% |
|
|
|
% |
|
|
|
% |
|
11. |
Restructuring |
Restructuring expenses, included in Cost of Goods Sold (“COGS”) and Restructuring for the three and six months ended March 31, 2023 and 2022 are as follows (in thousands):
|
|
|
Three Months Ended March 31, |
|
|
Six Months Ended March 31, |
|
||||||||||
|
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
|
Included in COGS (a) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distribution Center Consolidation and Store Optimization Plan |
|
$ |
(
|
) |
|
$ |
— |
|
|
$ |
(
|
) |
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Included in Restructuring (b) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distribution Center Consolidation and Store Optimization Plan |
|
$ |
|
|
|
$ |
— |
|
|
$ |
|
|
|
$ |
— |
|
|
Transformation Plan |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
Total in Restructuring |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
Total Restructuring Expenses |
|
$ |
|
|
|
$ |
— |
|
|
$ |
|
|
|
$ |
|
|
|
|
(a) |
Amounts included within COGS are related to adjustments to our expected obsolescence reserve related to the Plan (as defined below). |
|
|
(b) |
Amounts included within Restructuring for the current year are related to stores and distribution centers closed during the period in accordance with the Plan (as defined below). |
Distribution Center Consolidation and Store Optimization Plan
In the fourth quarter of fiscal year 2022, our Board approved the Distribution Center Consolidation and Store Optimization Plan (“the Plan”) authorizing the closure of 330 SBS stores and 35 BSG stores, and the closure of two BSG distribution centers in Clackamas, Oregon and Pottsville, Pennsylvania.
We believe that consolidating the operation of these two distribution centers into our larger distribution centers will increase product availability, shorten delivery times and reduce overall costs. Stores identified for early closure were part of a strategic evaluation which included a market analysis of certain locations where we believe we will be able to recapture demand at other nearby store locations and improve overall profitability. By optimizing our store base, we are further focusing on our customers’ shopping experience and our product offerings.
As of March 31, 2023, we have closed 329 SBS stores and 28 BSG stores as part of the Plan and closed the two BSG distributions centers. The Plan will continue to be executed throughout fiscal year 2023 and into the first half of fiscal year 2024, and therefore it may include future charges related to store closures such as exit costs, lease negotiation penalties, termination benefits and adjustments to estimates.
15
The liability related to the Plan, which is included in accounts payable and accrued liabilities on our consolidated balance sheets, is as follows:
|
(in thousands) |
|
Liability at September 30, 2022 |
|
|
SBS Expense |
|
|
BSG Expense |
|
|
Cash Payments |
|
|
Non-Cash Amounts |
|
|
Liability at March 31, 2023 |
|
||||||
|
Closing costs - leases (a) |
|
$ |
— |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
(
|
) |
|
$ |
(
|
) |
|
$ |
|
|
|
Closing costs - payroll expenses (b) |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
(
|
) |
|
|
— |
|
|
|
|
|
|
Impairment - property and equipment (c) |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
(
|
) |
|
|
— |
|
|
Inventory transfer costs |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
(
|
) |
|
|
— |
|
|
|
|
|
|
Impairment - operating lease assets (c) |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
(
|
) |
|
|
— |
|
|
Other closure costs (d) |
|
|
|
|
|
|
|
|
|
|
(
|
) |
|
|
(
|
) |
|
|
— |
|
|
|
|
|
|
Total |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
(
|
) |
|
$ |
(
|
) |
|
$ |
|
|
|
|
(a) |
Lease-related closing costs include contract terminations costs, repairs, maintenance, and other rental obligations associated with closing stores. |
|
|
(b) |
Payroll-related closing costs include one-time termination benefits related to the closure of our distribution centers as well as other payroll expenses associated with closing stores. |
|
|
(c) |
Remaining carrying value for the long-lived assets, including operating lease assets, were not material and approximate their fair value. |
|
|
(d) |
Other closure costs predominantly consist of exit costs associated with shutting down of operations at various locations. |
|
12. |
Subsequent Event |
In April 2023, we entered into an interest rate swap transaction to help mitigate the risk of our floating rate debt. The notional amount of the swap is $
16
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
This section discusses management’s view of the financial condition, results of operations and cash flows of Sally Beauty for the periods covered by this Quarterly Report. This section should be read in conjunction with the information contained in our Annual Report on Form 10-K for the fiscal year ended September 30, 2022, including the Risk Factors sections therein, and information contained elsewhere in this Quarterly Report, including the condensed consolidated interim financial statements and notes to those financial statements.
Executive Overview
For fiscal 2023, we are focusing on three key strategic initiatives to drive growth and profitability:
|
|
• |
Enhancing our customer centricity; |
|
|
• |
Growing high margin owned brands at Sally Beauty and amplifying innovation; and |
|
|
• |
Increasing the efficiency of our operations and optimizing our capabilities. |
We believe focusing in these areas will position our company for future growth and further enhance our ability to meet our customers where they are.
Enhancing our customer centricity
During the fiscal year, SBS launched its first Studio by Sally pilot store in Denton, Texas and has identified other locations for its additional pilot stores expected to open this fiscal year. The Studio by Sally pilot store program will have a digital-first focus, from digital check-in to digital education throughout the store and beyond, including personalized appointments at our in-store salons with licensed stylists who will train and educate consumers on how to personally achieve their desired results. We believe that we will be able to expand the Studio by Sally concept to 100 locations throughout the U.S. over the next three to four fiscal years if successful.
Additionally, earlier this fiscal year, BSG launched a new strategic partnership with Salon HQ to help its professional stylist customers grow their business. Salon HQ is a customizable digital storefront platform that gives stylists the ability to curate a product selection from thousands of BSG merchandise choices, and enables their clients to purchase directly from their shops without the stylists having to finance and carry inventory.
Growing high margin owned brands at Sally Beauty and amplifying innovation
We believe growing our SBS owned brands, through innovation and marketing, will provide improved margins, strengthen our long-term relationships with existing customers and help attract new customers. During the fiscal year, we have invested more into marketing of our owned brands and launched the first and second phases of our new owned branded vegan hair repair product line – bondbar – that’s SLS/SLES-free, paraben-free, phthalate-free and cruelty-free. These initiatives delivered an increase in our owned brands sales penetration, resulting in increased SBS profit margins.
Furthermore during the second quarter, some of our BSG vendors began launching new and exciting product lines, including Paul Mitchell’s new permanent hair color line for gray coverage – the color 10 – that is a formulated using sustainably sourced beeswax, and Wella’s new hair care line – Ultimate Repair – which helps nourish and repair damaged hair. We are thrilled to be able to provide these new innovative products to salons and stylists, and look forward to providing more of our BSG vendor’s new innovative products in our third quarter.
Increasing the efficiency of our operations and optimizing our capabilities
At the end of fiscal year 2022, we announced our plan to close 330 SBS stores, 35 BSG stores and two BSG distribution centers. Based on our strategic evaluation, we believe that we will able to recapture approximately half of the demand of closed stores in other nearby store locations and improve overall profitability. During the first quarter, we completed the closure of our two BSG distributions centers and the majority of our planned store closures. Additionally, we have re-optimized our store supply chain network based on our new store fleet. As of March 31, 2023, we have closed 329 SBS stores and 28 BSG stores as part of the Plan and are currently meeting our sales recapture expectations.
See Note 11, Restructuring , in Item 1 of this quarterly report for more information on the Plan.
Financial Summary for the Three Months Ended March 31, 2023
|
|
• |
Consolidated net sales for the three months ended March 31, 2023, increased $7.3 million, or 0.8%, to $918.7 million, compared to the three months ended March 31, 2022. Consolidated net sales included a negative impact from changes in foreign currency exchange rates of $7.0 million; |
|
|
• |
Consolidated comparable sales increased 5.7% for the three months ended March 31, 2023; |
17
|
|
• |
Consolidated gross profit for the three months ended March 31, 2023, increased $3.0 million, or 0.6%, to $468.3 million, compared to the three months ended March 31, 2022. Consolidated gross margin decreased 10 bps to 51.0% for the three months ended March 31, 2023, compared to the three months ended March 31, 2022; |
|
|
• |
Consolidated operating earnings for the three months ended March 31, 2023, decreased $15.1 million, or 17.4%, to $71.4 million, compared to the three months ended March 31, 2022. Operating margin decreased 170 bps to 7.8% for the three months ended March 31, 2023, compared to the three months ended March 31, 2022; |
|
|
• |
For the three months ended March 31, 2023, our consolidated net earnings decreased $5.9 million, or 12.7%, to $40.9 million, compared to the three months ended March 31, 2022; |
|
|
• |
For the three months ended March 31, 2023, our diluted earnings per share was $0.37 compared to $0.42 for the three months ended March 31, 2022; |
|
|
• |
Cash provided by operations was $24.7 million for the three months ended March 31, 2023, compared to $2.9 million for the three months ended March 31, 2022; and |
|
|
• |
On February 28, 2023, we entered into a seven-year term loan B facility agreement, with an aggregate principal amount equal to $400.0 million, and used the funds to repay our previously existing term loan B facility. |
Trends Impacting Our Business
Global inflationary pressures continue to influence consumer and stylist behavior along with the cost for products and services. In the U.S. and Canada, we are seeing our SBS customers color their hair less frequently and reduce the size of their basket when they shop with us, while at BSG we are seeing stylists purchasing closer to the time they use products. Additionally, inflationary pressures have impacted wages, especially among retail and hourly employees, as we have experienced an increase in our labor costs in order to attract and retain associates. During the current year, these headwinds have resulted in lower traffic and conversion in our business and increases in certain operating costs. We continue to monitor these challenges and implement measures to help mitigate their impacts, including managing our inventory levels to reduce out-of-stock items, adjusting our promotional activities, optimizing our store base and expanding our partnerships with delivery service providers. Although these initiatives have helped mitigate ongoing macro-headwinds, we cannot reasonably predict the long-term effects of inflation.
Furthermore, in a measure to curb inflation, the U.S. Federal Reserve has increased the federal funds effective rate. In turn, these increases have raised the cost of debt borrowings. We currently have $434.0 million in variable rate debt outstanding and future increases in the federal funds effective rate could have a material adverse impact to our cost of borrowing, including any future changes in our debt structure.
Comparable Sales
We believe that comparable sales is an appropriate performance indicator to measure our sales growth compared to the prior period. O ur comparable sales include sales from stores that have been operating for 14 months or longer as of the last day of a month and e-commerce revenue. Additionally, comparable sales include sales to franchisees and full service sales. Our comparable sales excludes the effect of changes in foreign exchange rates and sales from stores relocated until 14 months after the relocation. Revenue from acquisitions are excluded from our comparable sales calculation until 14 months after the acquisition. Our calculation of comparable sales might not be the same as other retailers as the calculation varies across the retail industry.
18
Overview
Key Operating Metrics
The following table sets forth, for the periods indicated, information concerning key measures we rely on to evaluate our operating performance (dollars in thousands):
|
|
|
Three Months Ended March 31, |
|
|
Six Months Ended March 31, |
|
||||||||||||||||||||||||||
|
|
|
2023 |
|
|
2022 |
|
|
Increase (Decrease) |
|
|
2023 |
|
|
2022 |
|
|
Increase (Decrease) |
|
||||||||||||||
|
Net sales: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SBS |
|
$ |
530,246 |
|
|
$ |
525,785 |
|
|
$ |
4,461 |
|
|
|
0.8 |
% |
|
$ |
1,079,718 |
|
|
$ |
1,087,315 |
|
|
$ |
(7,597 |
) |
|
|
(0.7 |
)% |
|
BSG |
|
|
388,466 |
|
|
|
385,602 |
|
|
|
2,864 |
|
|
|
0.7 |
% |
|
|
796,049 |
|
|
|
804,323 |
|
|
|
(8,274 |
) |
|
|
(1.0 |
)% |
|
Consolidated |
|
$ |
918,712 |
|
|
$ |
911,387 |
|
|
$ |
7,325 |
|
|
|
0.8 |
% |
|
$ |
1,875,767 |
|
|
$ |
1,891,638 |
|
|
$ |
(15,871 |
) |
|
|
(0.8 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SBS |
|
$ |
317,117 |
|
|
$ |
309,262 |
|
|
$ |
7,855 |
|
|
|
2.5 |
% |
|
$ |
640,592 |
|
|
$ |
637,434 |
|
|
$ |
3,158 |
|
|
|
0.5 |
% |
|
BSG |
|
|
151,222 |
|
|
|
156,070 |
|
|
|
(4,848 |
) |
|
|
(3.1 |
)% |
|
|
316,321 |
|
|
|
328,027 |
|
|
|
(11,706 |
) |
|
|
(3.6 |
)% |
|
Consolidated |
|
$ |
468,339 |
|
|
$ |
465,332 |
|
|
$ |
3,007 |
|
|
|
0.6 |
% |
|
$ |
956,913 |
|
|
$ |
965,461 |
|
|
$ |
(8,548 |
) |
|
|
(0.9 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment gross margin: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SBS |
|
|
59.8 |
% |
|
|
58.8 |
% |
|
100 |
|
|
bps |
|
|
|
59.3 |
% |
|
|
58.6 |
% |
|
70 |
|
|
bps |
|
||||
|
BSG |
|
|
38.9 |
% |
|
|
40.5 |
% |
|
(160) |
|
|
bps |
|
|
|
39.7 |
% |
|
|
40.8 |
% |
|
(110) |
|
|
bps |
|
||||
|
Consolidated |
|
|
51.0 |
% |
|
|
51.1 |
% |
|
(10) |
|
|
bps |
|
|
|
51.0 |
% |
|
|
51.0 |
% |
|
— |
|
|
bps |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment operating earnings: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SBS |
|
$ |
92,134 |
|
|
$ |
80,940 |
|
|
$ |
11,194 |
|
|
|
13.8 |
% |
|
$ |
191,308 |
|
|
$ |
181,563 |
|
|
$ |
9,745 |
|
|
|
5.4 |
% |
|
BSG |
|
|
37,260 |
|
|
|
46,008 |
|
|
|
(8,748 |
) |
|
|
(19.0 |
)% |
|
|
86,907 |
|
|
|
104,554 |
|
|
|
(17,647 |
) |
|
|
(16.9 |
)% |
|
Segment operating earnings |
|
|
129,394 |
|
|
|
126,948 |
|
|
|
2,446 |
|
|
|
1.9 |
% |
|
|
278,215 |
|
|
|
286,117 |
|
|
|
(7,902 |
) |
|
|
(2.8 |
)% |
|
Unallocated expenses and restructuring (a) |
|
|
57,986 |
|
|
|
40,487 |
|
|
|
17,499 |
|
|
|
43.2 |
% |
|
|
120,219 |
|
|
|
86,876 |
|
|
|
33,343 |
|
|
|
38.4 |
% |
|
Consolidated operating earnings |
|
|
71,408 |
|
|
|
86,461 |
|
|
|
(15,053 |
) |
|
|
(17.4 |
)% |
|
|
157,996 |
|
|
|
199,241 |
|
|
|
(41,245 |
) |
|
|
(20.7 |
)% |
|
Interest expense |
|
|
16,685 |
|
|
|
19,896 |
|
|
|
(3,211 |
) |
|
|
(16.1 |
)% |
|
|
34,608 |
|
|
|
40,137 |
|
|
|
(5,529 |
) |
|
|
(13.8 |
)% |
|
Earnings before provision for income taxes |
|
|
54,723 |
|
|
|
66,565 |
|
|
|
(11,842 |
) |
|
|
(17.8 |
)% |
|
|
123,388 |
|
|
|
159,104 |
|
|
|
(35,716 |
) |
|
|
(22.4 |
)% |
|
Provision for income taxes |
|
|
13,862 |
|
|
|
19,757 |
|
|
|
(5,895 |
) |
|
|
(29.8 |
)% |
|
|
32,190 |
|
|
|
43,458 |
|
|
|
(11,268 |
) |
|
|
(25.9 |
)% |
|
Net earnings |
|
$ |
40,861 |
|
|
$ |
46,808 |
|
|
$ |
(5,947 |
) |
|
|
(12.7 |
)% |
|
$ |
91,198 |
|
|
$ |
115,646 |
|
|
$ |
(24,448 |
) |
|
|
(21.1 |
)% |
|
|
|
. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of stores at end-of-period (including franchises) (b) : |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
|
SBS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,143 |
|
|
|
3,499 |
|
|
|
(356 |
) |
|
|
(10.2 |
)% |
|
BSG |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,341 |
|
|
|
1,363 |
|
|
|
(22 |
) |
|
|
(1.6 |
)% |
|
Consolidated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,484 |
|
|
|
4,862 |
|
|
|
(378 |
) |
|
|
(7.8 |
)% |
|
Comparable sales growth (decline): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
SBS |
|
|
9.1 |
% |
|
|
(0.5 |
)% |
|
960 |
|
|
bps |
|
|
|
6.0 |
% |
|
|
2.0 |
% |
|
400 |
|
|
bps |
|
||||
|
BSG |
|
|
1.3 |
% |
|
|
1.3 |
% |
|
— |
|
|
bps |
|
|
|
(0.2 |
)% |
|
|
4.9 |
% |
|
(510) |
|
|
bps |
|
||||
|
Consolidated |
|
|
5.7 |
% |
|
|
0.2 |
% |
|
550 |
|
|
bps |
|
|
|
3.3 |
% |
|
|
3.2 |
% |
|
10 |
|
|
bps |
|
||||
|
|
(a) |
Unallocated expenses consist of corporate and shared costs and are included in selling, general and administrative expenses in our condensed consolidated statements of earnings. |
|
|
(b) |
Our March 31, 2023 store count was impacted by store closure in connection with the Plan. See Note 11, Restructuring , in Item 1 of this quarterly report for more information on the Plan. |
19
Results of Operations
The Three Months Ended March 31, 2023, compared to the Three Months Ended March 31, 2022
Net Sales
SBS . The increase in net sales for SBS was primarily driven by the following (in thousands):
|
Comparable sales |
|
$ |
43,868 |
|
|
Sales outside comparable sales (a) |
|
|
(34,456 |
) |
|
Foreign currency exchange |
|
|
(4,951 |
) |
|
Total |
|
$ |
4,461 |
|
|
|
(a) |
Includes closed stores, including stores closed under the Plan, net of stores opened for less than 14 months |
The increase in SBS’s comparable sales was a result of a growth in our average unit retail, primarily from inflationary impacts and pricing leverage, and an increase in transactions, driven by recapturing approximately half of the sales from stores closed in connection with the Plan and the lapping of the prior year’s impact from Omicron and supply chain challenges .
BSG . The increase in net sales for BSG was primarily driven by the following (in thousands):
|
Comparable sales |
|
$ |
4,769 |
|
|
Sales outside comparable sales (a) |
|
|
171 |
|
|
Foreign currency exchange |
|
|
(2,076 |
) |
|
Total |
|
$ |
2,864 |
|
|
|
(a) |
Includes stores opened for less than 14 months, net of stores closures, including stores closed under the Plan |
BSG’s comparable sales reflected the lapping of the prior year’s impact from supply challenges and Omicron, partially offset by the impacts of the current economic environment on stylist shopping behaviors . These impacts resulted in an increase in our average unit retail and fewer units per transaction.
Gross Profit
SBS . SBS’s gross profit increased for the three months ended March 31, 2023, as a result of an increase in net sales and a higher gross margin. SBS’s gross margin grew as a result of pricing leverage, increased penetration of our owned brand products and adjustments to our expected obsolescence reserve related to the Plan.
BSG . BSG’s gross profit decreased for the three months ended March 31, 2023, as a result of a lower gross margin, partially offset by an increase in net sales. BSG’s gross margin decline was driven by lower product margin resulting from an unfavorable sales channel mix, between stores and lower-margin Regis e-commerce sales, and a shift in some distribution center costs from selling, general and administrative expenses into gross margin.
Selling, General and Administrative Expenses
SBS . SBS’s selling, general and administrative expenses decreased $3.3 million, or 1.5%, for the three months ended March 31, 2023 and included a favorable impact from foreign exchange rates of $2.2 million. As a percentage of SBS net sales, SG&A for the three months ended March 31, 2023 was 42.4% compared to 43.4% for the three months ended March 31, 2022. The decrease as a percentage of sales was primarily driven by cost savings from the closure of stores as part of the Plan, partially offset by increased labor and personnel costs and higher advertising expense.
BSG . BSG’s selling, general and administrative expenses increased $3.9 million, or 3.5%, for the three months ended March 31, 2023. As a percentage of BSG net sales, SG&A for the three months ended March 31, 2023 was 29.3% compared to 28.5% for the three months ended March 31, 2022. The increase as a percentage of sales was driven primarily by increases in labor and personnel costs.
Unallocated. Unallocated selling, general and administrative expenses, which represent certain corporate costs that have not been charged to our reporting segments, increased $10.2 million, or 25.3%, for the three months ended March 31, 2023, primarily due to increased labor and personnel costs and information technology expense .
Restructuring
For the three months ended March 31, 2023, we incurred $7.3 million in restructuring charges related to our Distribution Center Consolidation and Store Optimization Plan. See Note 11, Restructuring , in Item 1 of this quarterly report for more information on the Plan.
20
Interest Expense
The decrease in interest expense is due to the interest savings from the repayment of our 8.75% Senior Notes due 2025 in fiscal year 2022, partially offset by higher interest expense on our variable rate debt resulting from the increase in borrowing rates and outstanding amounts under our ABL facility . Additionally, we released the $2.2 million in net gains held in AOCL related to our interest rate caps due to the early settlement of the derivatives driven by the repayment of our TLB 2024.
Provision for Income Taxes
The effective tax rates were 25.3% and 29.7%, for the three months ended March 31, 2023, and 2022, respectively. The decrease in the effective tax rate was primarily due to the tax impact of share-based compensation which was beneficial this quarter, but detrimental in the prior year quarter, and greater losses in the prior year quarter for which a tax benefit could not be recognized.
The Six Months Ended March 31, 2023, compared to the Six Months Ended March 31, 2022
Net Sales
SBS . The decrease in net sales for SBS was primarily driven by the following (in thousands):
|
Comparable sales |
|
$ |
59,822 |
|
|
Sales outside comparable sales (a) |
|
|
(50,676 |
) |
|
Foreign currency exchange |
|
|
(16,743 |
) |
|
Total |
|
$ |
(7,597 |
) |
|
|
(a) |
Includes closed stores, including stores closed under the Plan, net of stores opened for less than 14 months |
SBS’s comparable sales increase was driven by a growth in our average unit retail, primarily from inflationary impacts, pricing leverage and the lapping of Omicron and supply chain challenges. Comparable sales were also positively impacted by recapturing of approximately half of the sales from stores closed in connection with the Plan.
BSG . The decrease in net sales for BSG was primarily driven by the following (in thousands):
|
Comparable sales |
|
$ |
(1,340 |
) |
|
Sales outside comparable sales (a) |
|
|
(2,225 |
) |
|
Foreign currency exchange |
|
|
(4,709 |
) |
|
Total |
|
$ |
(8,274 |
) |
|
|
(a) |
Includes closed stores, including stores closed under the Plan, net of stores opened for less than 14 months |
BSG’s comparable sales faced headwinds from elevated demand in the prior year from the easing of COVID-19 restrictions and the impacts of the current economic environment which resulted in fewer transactions and units per transaction, partially offset by an increase in our average unit retail.
Gross Profit
SBS . SBS’s gross profit increased for the six months ended March 31, 2023, as a result of a higher gross margin, partially offset by lower net sales. SBS’s gross margin grew as a result of pricing leverage, increased penetration of our owned brand products and adjustments to our expected obsolescence reserve related to the Plan.
BSG . BSG’s gross profit decreased for the six months ended March 31, 2023, as a result of lower net sales and a lower gross margin. BSG’s gross margin decline was driven by lower product margin resulting from an unfavorable sales channel mix, between stores and lower-margin Regis e-commerce sales, and a shift in some distribution center costs from selling, general and administrative expenses into gross margin, partially offset by adjustments to our expected obsolescence reserve related to the Plan.
Selling, General and Administrative Expenses
SBS . SBS’s selling, general and administrative expenses decreased $6.6 million, or 1.4%, for the six months ended March 31, 2023 and included a favorable impact from foreign exchange rates of $6.8 million. As a percentage of SBS net sales, SG&A for the six months ended March 31, 2023 was 41.6% compared to 41.9% for the six months ended March 31, 2022. The decrease as a percentage of sales was primarily driven by cost savings from the closure of stores in connection with the Plan, partially offset by an increase in labor and personnel costs.
BSG . BSG’s selling, general and administrative expenses increased $5.9 million, or 2.7%, for the six months ended March 31, 2023. As a percentage of BSG net sales, SG&A for the six months ended March 31, 2023 was 28.8% compared to 27.8% for the six months ended March 31, 2022. The increase as a percentage of sales was driven primarily by deleveraging as a result of lower net sales as well as increases in labor and personnel costs.
21
Unallocated. Unallocated selling, general and administrative expenses, which represent certain corporate costs that have not been charged to our reporting segments, increased $16.8 million , or 19.5% , for the six months ended March 31, 2023 , primarily due to increased labor and personnel costs and information technology expenses .
Restructuring
For the six months ended March 31, 2023, we incurred $17.7 million in restructuring charges related to the Plan. For the six months ended March 31, 2022, restructuring charges in connection with our prior transformation plan were immaterial . See Note 11, Restructuring , in Item 1 of this quarterly report for more information on the Plan.
Interest Expense
The decrease in interest expense is due to interest savings from the repayment of our 8.75% Senior Notes due 2025 in fiscal year 2022, partially offset by higher interest expense on our variable rate debt resulting from the increase in borrowing rates and outstanding amounts under our ABL facility . Additionally, we released the $2.2 million in net gains held in AOCL related to our interest rate caps due to the early settlement of the derivatives driven by the repayment of our TLB 2024 in our second fiscal quarter.
Provision for Income Taxes
The effective tax rates were 26.1% and 27.3%, for the six months ended March 31, 2023, and 2022, respectively. The decrease in the effective tax rate was primarily due to greater losses in the prior year for which a tax benefit could not be recognized.
Liquidity and Capital Resources
Overview
Our principal sources of liquidity are from cash and cash equivalents, cash from operations and our ABL facility. A substantial portion of our liquidity needs arise from funding the costs of our operations, working capital, capital expenditures, debt interest and principal payment. Additionally, under our share repurchase program, see below for more details, we will from time-to-time repurchase shares of our common stock on the open market to return value to our shareholders. At March 31, 2023, we had $510.3 million in our liquidity pool, which includes $448.7 million available for borrowings under our ABL facility and cash and cash equivalents of $61.6 million.
Working capital (current assets less current liabilities) increased $113.9 million, to $578.4 million at March 31, 2023, compared to $464.5 million at September 30, 2022. This increase was driven by higher inventory balances, resulting from inflationary cost increases and the impact of foreign exchange rates of $21.7 million, and a decrease in borrowing outstanding under our ABL facility.
We anticipate that existing cash balances (excluding certain amounts permanently invested in connection with foreign operations), cash expected to be generated by operations, and funds available under our ABL facility will be sufficient to fund our working capital and capital expenditure requirements over the next twelve months.
Cash Flows
|
|
|
Six Months Ended March 31, |
|
|||||
|
(in thousands) |
|
2023 |
|
|
2022 |
|
||
|
Net cash provided (used) by operating activities |
|
$ |
79,648 |
|
|
$ |
(2,773 |
) |
|
Net cash used by investing activities |
|
|
(42,181 |
) |
|
|
(44,427 |
) |
|
Net cash used by financing activities |
|
|
(49,237 |
) |
|
|
(126,524 |
) |
Net Cash Provided (Used) by Operating Activities
The change in net cash provided by operating activities for the six months ended March 31, 2023, compared to the net cash used by operating activities for the six months ended March 31, 2022, was driven by the timing of inventory purchases and vendor payments, primarily from the impact of global supply chain issues in the prior year, and the decrease in net sales.
Net Cash Used by Investing Activities
The decrease in net cash used by investing activities for the six months ended March 31, 2023, compared to the six months ended March 31, 2022, was driven by fewer capital expenditures related to store improvements and information technology.
Net Cash Used by Financing Activities
The decrease in net cash used by financing activities for the six months ended March 31, 2023, compared to the six months ended March 31, 2022, was primarily a result of no share repurchases in the current year and the net reduction in our outstanding debt principal.
22
Debt and Guarantor Financial Information
On February 28, 2023, we entered into a seven-year term loan facility agreement in the aggregate principal amount of $400.0 million and used the proceeds to subsequently repay our previously existing term loan facility. See Note 8, Short-term Borrowings and Long-term Debt , in Item 1 of this quarterly report for more information.
At March 31, 2023, we had $1,114.0 million in outstanding debt, not including capital leases, unamortized debt issuance costs and debt discounts, in the aggregate, of $10.7 million. Our debt consists of $680.0 million in 2025 Senior Notes outstanding, $400.0 million remaining on our term loan and $34.0 million in outstanding borrowings under our ABL facility.
We utilize our ABL facility for the issuance of letters of credit, certain working capital and liquidity needs, and to manage normal fluctuations in our operational cash flow. In that regard, we may from time to time draw funds under the ABL facility for general corporate purposes including funding of capital expenditures, acquisitions, paying down other debt and share repurchases. Amounts drawn on our ABL facility are generally paid down with cash provided by our operating activities. During the six months ended March 31, 2023, the weighted average interest rate on our borrowings under the ABL facility was 5.5%.
We are currently in compliance with the agreements and instruments governing our debt, including our financial covenants.
Guarantor Financial Information
Our 2025 Senior Notes were issued by our wholly-owned subsidiaries, Sally Holdings LLC and Sally Capital Inc. (the “Issuers”). The notes are unsecured debt instruments guaranteed by us and certain of our wholly-owned domestic subsidiaries (together, the “Guarantors”) and have certain restrictions on the ability of our subsidiaries to make certain restrictive payments to Sally Beauty. The guarantees are joint and several, and full and unconditional. Certain other subsidiaries, including our foreign subsidiaries, do not serve as guarantors.
The following summarized consolidating financial information represents financial information for the Issuers and the Guarantors on a combined basis. All transactions and intercompany balances between these combined entities has been eliminated.
The following table presents the summarized balance sheets information for the Issuers and the Guarantors as of March 31, 2023, and September 30, 2022:
|
(in thousands) |
|
March 31, 2023 |
|
|
September 30, 2022 |
|
||
|
Inventory |
|
$ |
768,531 |
|
|
$ |
714,477 |
|
|
Intercompany receivable |
|
$ |
5,287 |
|
|
$ |
— |
|
|
Current assets |
|
$ |
879,479 |
|
|
$ |
827,155 |
|
|
Total assets |
|
$ |
2,032,568 |
|
|
$ |
1,982,982 |
|
|
Current liabilities |
|
$ |
517,349 |
|
|
$ |
549,415 |
|
|
Intercompany payable |
|
$ |
— |
|
|
$ |
4,431 |
|
|
Total liabilities |
|
$ |
2,046,853 |
|
|
$ |
2,085,169 |
|
The following table presents the summarized statement of earnings information for the Issuers and the Guarantors for six months ended March 31, 2023 (in thousands):
|
Net sales |
|
|
|
$ |
1,523,975 |
|
|
Gross profit |
|
|
|
$ |
784,446 |
|
|
Earnings before provision for income taxes |
|
|
|
$ |
96,854 |
|
|
Net Earnings |
|
|
|
$ |
72,906 |
|
Share Repurchase Programs
Under our current share repurchase program, we may from time-to-time repurchase our common stock on the open market. During the six months ended March 31, 2023, no shares were repurchased in connection with our share repurchase program. During the six months ended March 31, 2022, we repurchased 6.8 million shares of our common stock for $130.3 million under our share repurchase program. See Note 4, Stockholders’ Equity , for more information about our share repurchase program.
Contractual Obligations
Other than the repayment of our TLB 2024 and entering into the TLB 2030 as discussed above, there have been no material changes outside the ordinary course of our business in any of our contractual obligations since September 30, 2022.
Off-Balance Sheet Financing Arrangements
At March 31, 2023 and September 30, 2022, we had no off-balance sheet financing arrangements other than outstanding letters of credit related to inventory purchases and self-insurance programs.
23
Critical Accounting Estimates
There have been no material changes to our critical accounting estimates or assumptions since September 30, 2022.
Recent Accounting Pronouncements
There have been no recent accounting pronouncements issued that will have a material impact to our business.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
As a multinational corporation, we are subject to certain market risks including foreign currency fluctuations, interest rates and government actions. Since September 30, 2022, the only material change in our market risks relates to interest rate risks resulting from the early settlement of our interest rate caps which previously helped mitigate our exposure to interest rates changes on our prior term loan B. In April 2023, we entered into an interest rate swap. See Note 12, Subsequent Event , for more information. At March 31, 2023, we had $434.0 million in outstanding floating interest rate debt, and a 1.0 percentage point interest rate increase would negatively impact our annual interest expense and cash flows by $4.3 million.
See our disclosures about market risks contained in Item 7A. “Quantitative and Qualitative Disclosures about Market Risk” in Part II of our Annual Report on Form 10-K for the fiscal year ended September 30, 2022.
Item 4. Controls and Procedures
Controls Evaluation and Related CEO and CFO Certifications. Our management, with the participation of our principal executive officer (“CEO”) and principal financial officer (“CFO”), conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of March 31, 2023. The controls evaluation was conducted by our Disclosure Committee, comprised of senior representatives from our finance, accounting, internal audit, and legal departments under the supervision of our CEO and CFO.
Certifications of our CEO and our CFO, which are required in accordance with Rule 13a-14 of the Exchange Act, are attached as exhibits to this Quarterly Report. This “Controls and Procedures” section includes the information concerning the controls evaluation referred to in the certifications and it should be read in conjunction with the certifications for a more complete understanding of the topics presented.
Limitations on the Effectiveness of Controls. We do not expect that our disclosure controls and procedures will prevent all errors and all fraud. A system of controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the system are met. Because of the limitations in all such systems, no evaluation can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. Furthermore, the design of any system of controls and procedures is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how unlikely. Because of these inherent limitations in a cost-effective system of controls and procedures, misstatements or omissions due to error or fraud may occur and not be detected.
Scope of the Controls Evaluation. The evaluation of our disclosure controls and procedures included a review of their objectives and design, our implementation of the controls and procedures and the effect of the controls and procedures on the information generated for use in this Quarterly Report. In the course of the evaluation, we sought to identify whether we had any data errors, control problems or acts of fraud and to confirm that appropriate corrective action, including process improvements, was being undertaken if needed. This type of evaluation is performed on a quarterly basis so that conclusions concerning the effectiveness of our disclosure controls and procedures can be reported in our Quarterly Reports on Form 10-Q and our Annual Reports on Form 10-K. Many of the components of our disclosure controls and procedures are also evaluated by our internal audit department, by our legal department and by personnel in our finance organization. The overall goals of these various evaluation activities are to monitor our disclosure controls and procedures on an ongoing basis and to maintain them as dynamic systems that change as conditions warrant.
Conclusions regarding Disclosure Controls. Based on the required evaluation of our disclosure controls and procedures, our CEO and CFO have concluded that, as of March 31, 2023, we maintain disclosure controls and procedures that are effective in providing reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting. During our most recent fiscal quarter, there have been no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
24
PART II — OTHER INFORMATION
Item 1. Legal Proceedings
We are involved, from time to time, in various claims and lawsuits incidental to the conduct of our business in the ordinary course. We carry insurance coverage in such amounts in excess of our self-insured retention as we believe to be reasonable under the circumstances and that may or may not cover any or all of our liabilities in respect of these matters. We do not believe that the ultimate resolution of these matters will have a material adverse impact on our consolidated financial position, cash flows or results of operations.
We are subject to a number of U.S., federal, state and local laws and regulations, as well as the laws and regulations applicable in each foreign country or jurisdiction in which we do business. These laws and regulations govern, among other things, the composition, packaging, labeling and safety of the products we sell, the methods we use to sell these products and the methods we use to import these products. We believe that we are in material compliance with such laws and regulations, although no assurance can be provided that this will remain true going forward.
Item 1A. Risk Factors
In addition to the other information set forth in this Quarterly Report, you should carefully consider the factors contained in Item 1A. “Risk Factors” in Part I of our Annual Report on Form 10-K for the fiscal year ended September 30, 2022, which could materially affect our business, financial condition or future results. There have been no material changes from the risk factors disclosed in such Annual Report. The risks described in such Annual Report and herein are not the only risks facing our company.
25
Item 6. Exhibits
|
Exhibit No. |
|
Description |
|
|
|
|
|
3.1 |
|
|
|
|
|
|
|
3.2 |
|
|
|
|
|
|
|
10.1 |
|
|
|
|
|
|
|
22 |
|
|
|
|
|
|
|
31.1 |
|
|
|
|
|
|
|
31.2 |
|
|
|
|
|
|
|
32.1 |
|
|
|
|
|
|
|
32.2 |
|
|
|
|
|
|
|
101 |
|
The following financial information from our Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2023, formatted in iXBRL (Inline Extensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheets; (ii) the Condensed Consolidated Statements of Earnings; (iii) the Condensed Consolidated Statements of Comprehensive Income; (iv) the Condensed Consolidated Statements of Stockholders’ Equity; (v) the Condensed Consolidated Statements of Cash Flows; and (vi) the Notes to Condensed Consolidated Financial Statements. |
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104 |
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The cover page from our Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2023, formatted in Inline XBRL (contained in Exhibit 101). |
* Included herewith
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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 thereunto duly authorized.
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SALLY BEAUTY HOLDINGS, INC. |
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(Registrant) |
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Date: May 4, 2023 |
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By: |
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/s/ Marlo M. Cormier |
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Marlo M. Cormier |
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Senior Vice President, Chief Financial Officer |
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For the Registrant and as its Principal Financial Officer |
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