- SBH reports fiscal 2016 GAAP EPS of
$1.50, up 1% to the prior year
- SBH reports fiscal 2016 Adjusted EPS of
$1.72, growth of 12%
- Consolidated same store sales growth
approximately 3%
- Delivered 2016 cash flow from
operations of $351 million
- Repurchased 7.8 million shares during
the year totaling $207 million
- Donald T. Grimes appointed as CFO and
COO
Sally Beauty Holdings, Inc. (NYSE: SBH) (the “Company”) today
announced financial results for the fourth quarter and fiscal year
ended September 30, 2016. The Company will hold a conference call
today at 10:00 a.m. (Central) to discuss these results and its
business.
“We achieved solid results with full-year adjusted EPS growth of
12%,” said Chris Brickman, President and CEO. “Consolidated same
store sales grew almost 3% percent and gross margin expanded 20
basis points despite the unfavorable impact from foreign currency.
Cash from operations of $351 million enabled us to invest in the
business and return a substantial portion to our shareholders.
During the year, we opened 152 net new stores and continued to buy
our stock, acquiring 7.8 million shares totaling $207 million.
“Looking ahead to 2017, we are excited about our sales driving
initiatives in both businesses,” Brickman added. “In Sally, our
in-store investments are mostly behind us and the Sally team is
focused on the next phase of customer conversion and engagement. We
believe our BSG business will continue to gain channel share and
work towards becoming the indisputable partner of choice for
stylists and manufacturers. Our 2017 financial goals are
straightforward. We expect revenue improvement from consolidated
same store sales growth of approximately 3% and organic store
openings of 2% to 3%. Gross margin expansion is anticipated to be
30 to 40 basis points and should offset higher SG&A expenses
resulting from the headwinds in labor and IT investments. We
believe the combination of sales growth and gross margin expansion
will lead to mid-single digit operating earnings growth.
“Our focus is on delivering these straightforward targets in
2017 and building on that momentum as labor cost inflation and IT
spending tapers off in future years. This should allow for SG&A
leverage and higher operating earnings growth over time,” Brickman
concluded.
Fiscal 2016 Fourth Quarter and Full Year 2016 Financial
Highlights
Net Sales: For the fiscal 2016 fourth quarter,
consolidated net sales were $976.4 million, an increase of 1.3%
from the fiscal 2015 fourth quarter. The fiscal 2016 fourth quarter
sales increase is primarily attributed to same store sales growth
and the addition of new stores. The impact from unfavorable changes
in foreign currency exchange rates in the fiscal 2016 fourth
quarter was $12.7 million, or 1.3%. Consolidated same store sales
growth in the fiscal 2016 fourth quarter was 1.2% compared to 3.5%
in the fiscal 2015 fourth quarter.
Consolidated net sales for fiscal year 2016 were $3.95 billion,
an increase of 3.1% from fiscal year 2015. Fiscal 2016 sales
increased primarily due to same store sales growth and the addition
of new stores. The impact from unfavorable foreign currency
exchange in the 2016 fiscal year was $56.4 million, or 1.5%.
Consolidated same store sales growth in fiscal year 2016 was 2.9%,
flat when compared to fiscal year 2015.
Gross Profit: Consolidated gross profit for the fiscal
2016 fourth quarter was $483.4 million, an increase of 1.7% over
gross profit of $475.3 million for the fiscal 2015 fourth quarter.
Gross profit, as a percentage of sales (gross profit margin), was
49.5%, a 20 basis point improvement from the fiscal 2015 fourth
quarter.
For fiscal year 2016, consolidated gross profit was $1.96
billion, an increase of 3.5% over fiscal 2015 gross profit. Gross
profit as a percentage of sales was 49.7%, an increase of 20 basis
points when compared to fiscal year 2015.
GAAP and Adjusted Selling, General and Administrative
Expenses: For the fiscal 2016 fourth quarter, consolidated GAAP
selling, general and administrative (SG&A) expenses, including
charges from the previously disclosed data security incidents of
$12.0 million and executive separation expenses of $0.7 million,
pre-tax, were $345.5 million or 35.4% of sales, a 110 basis point
increase from the fiscal 2015 fourth quarter metric of 34.3% of
sales and total SG&A expenses of $330.9 million.
Excluding expenses associated with the previously disclosed data
security incidents of $12.0 million, pre-tax, and charges for the
executive separation of $0.7 million, pre-tax, adjusted SG&A
expenses in the fiscal 2016 fourth quarter were $332.8 million, or
34.1% of sales.
For fiscal year 2016, GAAP SG&A expenses were $1.37 billion,
which includes $153.4 million of unallocated corporate expenses and
share-based compensation expenses of $12.6 million. SG&A
expenses as a percentage of sales was 34.6%, compared to fiscal
year 2015 metric of 34.2% of sales and total SG&A expenses of
$1.31 billion.
Excluding expenses associated with the data security incidents,
management transition expenses, executive separation expenses and
an asset impairment charge, adjusted SG&A expenses in fiscal
year 2016 were $1.35 billion or 34.1% of sales compared to $1.30
billion or 34.0% in fiscal 2015.
Interest Expense: Interest expense, net of interest
income, for the fiscal 2016 fourth quarter was $26.6 million, down
$2.5 million from the fiscal 2015 fourth quarter of $29.2 million.
This decrease resulted from the Company’s December 2015 redemption
in full of its $750 million of 6.875% senior notes due 2019 which
were replaced by the issuance and sale of $750 million of 5.625%
senior notes due 2025.
For fiscal year 2016, interest expense, net of interest income,
was $144.2 million, up $27.4 million from the fiscal year 2015
interest expense of $116.8 million. This increase is due to a $33.3
million charge from a loss on extinguishment of debt in connection
with the Company’s December 2015 long-term debt refinancing and was
partially offset by a reduction in interest expense due to lower
interest rate from the refinancing.
Provision for Income Taxes: For the fiscal 2016 fourth
quarter, income taxes were $31.6 million. The effective tax rate
for the fiscal 2016 fourth quarter was 37.5% compared to 37.6% for
the fiscal 2015 fourth quarter.
For fiscal year 2016, income taxes were $131.1 million versus
$143.4 million in fiscal 2015. The Company’s effective tax rate for
fiscal year 2016 was 37.0% compared to 37.9% for fiscal 2015.
In fiscal year 2017, the Company anticipates the effective tax
rate to be in the range of 37.5% to 38.5%.
GAAP and Adjusted Net Earnings and Diluted Net Earnings Per
Share (EPS) (1): GAAP net earnings were $52.6
million in the fiscal 2016 fourth quarter, compared to fiscal 2015
fourth quarter net earnings of $56.2 million, down 6.3%. Excluding
charges from data security incidents of $7.4 million, net of tax,
and executive separation expenses of $0.4 million, net of tax,
adjusted net earnings for the fiscal 2016 fourth quarter were $60.5
million, up 2.2% from adjusted net earnings of $59.2 in the fiscal
2015 fourth quarter.
GAAP and adjusted diluted earnings per share for the fiscal 2016
fourth quarter were $0.36 and $0.41, respectively, compared to GAAP
and adjusted fiscal 2015 fourth quarter diluted earnings per share
of $0.36 and $0.38, respectively.
In fiscal year 2016, GAAP net earnings were $222.9 million
compared to fiscal year 2015 net earnings of $235.1 million, down
5.2% from the prior year. Excluding special items of $32.6 million,
net of tax, adjusted net earnings in fiscal year 2016 were $255.6
million, an increase of 5.6% from the prior year.
GAAP diluted earnings per share in fiscal year 2016 were $1.50
compared to fiscal year 2015 GAAP diluted earnings per share of
$1.49, an increase of 0.7%. Adjusted diluted earnings per share in
fiscal 2016 were $1.72, up 12.4% when compared to fiscal year 2015
adjusted diluted earnings per share of $1.53.
Fiscal year 2016 adjusted net earnings includes adjustments of
$32.6 million, net of tax, and are described in detail on Schedule
E.
Adjusted (Non-GAAP) EBITDA(1): Adjusted
EBITDA for the fiscal 2016 fourth quarter was $153.2 million, an
increase of 0.4% from $152.6 million for the fiscal 2015 fourth
quarter.
Fiscal year 2016 Adjusted EBITDA was $627.7 million, an increase
of 2.5% from $612.4 million in fiscal 2015.
(1)See Supplemental Schedule C, D and E for a reconciliation of
these non-GAAP financial measures.
Financial Position, Capital Expenditures and Working
Capital: Cash and cash equivalents as of September 30, 2016,
were $86.6 million. The Company ended fiscal year 2016 with no
outstanding borrowings on its asset-based loan (ABL) revolving
credit facility. Borrowing capacity on the ABL facility was
approximately $478.4 million at the end of fiscal year 2016.
The Company’s debt, excluding capital leases and unamortized debt
issuance costs, totaled $1.8 billion as of September 30, 2016. Net
cash provided by operating activities for fiscal year 2016 was
$351.0 million.
During the fiscal 2016 fourth quarter, the Company repurchased
(and subsequently retired) a total of 1.7 million shares of its
common stock at an aggregate cost of $44.9 million under the
Company’s $1 billion share repurchase program.
For the 2016 fiscal year, the Company repurchased (and
subsequently retired) a total of 7.8 million shares of its common
stock at an aggregate cost of $207.3 million under the Company’s $1
billion share repurchase program.
For the full year ended September 30, 2016, the Company’s
capital expenditures, excluding acquisitions, totaled $151.2
million. Capital expenditures for fiscal 2016 exceeded the
previously reported guidance range of $125 million to $135 million
primarily due to additional store remodels and merchandise resets
in the Sally U.S. business.
Working capital (current assets less current liabilities)
decreased $11.2 million to $684.2 million at September 30, 2016,
compared to $695.4 million at September 30, 2015. The ratio of
current assets to current liabilities was 2.40 to 1.00 at September
30, 2016, compared to 2.41 to 1.00 at September 30, 2015.
Inventory as of September 30, 2016 was $907.3 million, an
increase of $22.1 million or growth of 2.5% from September 30, 2015
inventory of $885.2 million. This increase is primarily due to
sales growth from new store openings and the introduction of new
brands in Beauty Systems Group.
Business Segment Results:
Sally Beauty Supply
Fiscal 2016 Fourth Quarter Results for Sally Beauty
- Sales of $583.9 million, up 0.3% from
$582.3 million in the fiscal 2015 fourth quarter. The unfavorable
impact of foreign currency exchange on net sales was $11.8 million,
or 2.0% of sales.
- Same store sales grew 0.8% versus 1.8%
growth in the fiscal 2015 fourth quarter.
- Gross margin of 55.0%, a 40 basis point
increase from 54.6% in the fiscal 2015 fourth quarter.
- Segment operating earnings of $96.9
million, down 0.9% from $97.9 million in the fiscal 2015 fourth
quarter. Segment operating margins declined 20 basis points to
16.6% of sales from 16.8% of sales in the fiscal 2015 fourth
quarter.
Sales growth in the fiscal 2016 fourth quarter was driven by new
store openings and same store sales growth. This growth was offset
by the unfavorable impact of foreign currency exchange of $11.8
million, or 2.0% of sales. Gross profit margin in the quarter was
up as a result of selective price increases in certain geographical
areas of the U.S.
Fiscal 2016 Results for Sally Beauty Supply
- Sales of $2.36 billion, up 1.5% over
fiscal year 2015. The unfavorable impact of foreign currency
exchange was $45.7 million, or 2.0% of sales.
- Same store sales grew 1.7%, flat when
compared to fiscal year 2015.
- Gross margin of 55.2% was up 40 basis
points when compared to fiscal 2015.
- Segment operating earnings of $409.8
million, down 0.6% from $412.4 million in fiscal 2015. Segment
operating margins decreased 40 basis points to 17.3% of sales from
17.7% in fiscal 2015.
- Net store base increased by 108 or 2.9%
for total store count of 3,781. Store growth in the U.S. business
was 1.7% while store growth in the international business was
7.0%.
Sales growth in fiscal 2016 was driven by same store sales
growth and new store openings. This growth was offset by the impact
of unfavorable foreign currency exchange of $45.7 million, or 2.0%
of sales. Gross profit margin in the year was up as a result of
selective price increases in certain geographical areas of the
U.S.
Beauty Systems Group
Fiscal 2016 Fourth Quarter Results for Beauty Systems
Group
- Sales of $392.5 million, up 2.8% from
$381.9 million in the fiscal 2015 fourth quarter. The impact of
unfavorable foreign currency exchange on net sales was $0.9
million, or 20 basis points of sales.
- Same store sales growth of 1.9% versus
7.4% in the fiscal 2015 fourth quarter.
- Gross margin of 41.3%, up 10 basis
points when compared to the fiscal 2015 fourth quarter of
41.2%.
- Segment operating earnings of $61.9
million, up 7.0% from $57.9 million in the fiscal 2015 fourth
quarter.
- Segment operating margins increased by
70 basis points to 15.8% of sales from 15.1% in the fiscal 2015
fourth quarter.
Sales growth for the Beauty Systems Group was primarily driven
by growth in same store sales, new store openings and the full
service business. Growth in segment operating earnings and margin
expansion was primarily due to favorable SG&A leverage and
gross margin expansion.
Fiscal 2016 Results for Beauty Systems Group
- Sales of $1.59 billion, up 5.5% from
$1.50 billion in fiscal 2015. The unfavorable impact of foreign
currency exchange on net sales was $10.7 million, or 70 basis
points of sales. Sales growth in the store business was 6.6% and
sales growth in the full service business was 3.4%.
- Same store sales growth of 5.5% versus
5.7% in fiscal 2015.
- Gross margin of 41.5%, up 20 basis
points from 41.3% in fiscal 2015.
- Segment operating earnings of $254.5
million, up 10.1% from $231.2 million in fiscal 2015.
- Segment operating margins increased to
16.0% of sales from 15.4% in fiscal 2015, a 60 basis point
improvement.
- Net store base increased by 44 or 3.4%
for total store count of 1,338, including 164 franchised
locations.
- Total BSG distributor sales consultants
at the end of fiscal 2016 were 936 versus 958 at the end of fiscal
2015.
Sales growth in fiscal year 2016 for the Beauty Systems Group
was primarily due to growth in same store sales, the full service
business and new store openings. This growth was partially offset
by the unfavorable impact of foreign currency exchange of $10.7
million. Segment earnings growth is primarily due to gross margin
expansion and favorable SG&A leverage.
Fiscal Year 2017 Outlook
- Consolidated same store sales growth
for fiscal 2017 is expected to be approximately 3%.
- Consolidated gross profit margin
expansion is expected to be in the range of 30 bps to 40 bps.
- Consolidated SG&A as a percent to
sales, including unallocated expenses, is expected to be slightly
down from fiscal 2016 GAAP metric of 34.6%.
- The effective tax rate for fiscal year
2017 is expected to be in the range of 37.5% to 38.5%.
- Capital expenditures for fiscal year
2017 are projected to be under $135 million.
- Consolidated organic store growth is
expected to be in the range of 2.0% to 3.0%.
Executive Appointment
Donald T. Grimes has been appointed as Senior Vice President,
Chief Financial Officer (CFO) and Chief Operations Officer (COO)
effective December 12, 2016. Don joins Sally Beauty Holdings from
Neiman Marcus, a luxury retailer, where he was CFO and COO. He was
responsible for legal, treasury, financial planning and analysis,
investor relations, accounting, distribution, real estate, loss
prevention, customer care, credit and collections, internal audit
and risk management. Prior to Neiman Marcus, he was with Wolverine
Worldwide, Inc. as senior vice president, CFO from 2008 – 2015.
"After a thorough and deliberate search, we are thrilled to have
Don join our team as CFO and COO," said Chris Brickman, President
and Chief Executive Officer. "Don is an accomplished executive with
significant financial and operational expertise in the retail
industry. His broad experience will be an asset to us as we build
upon our strategy and prioritize our opportunities for long-term
growth."
Conference Call and Where You Can Find Additional
Information
As previously announced, at approximately 10:00 a.m. (Central)
today the Company will hold a conference call and audio webcast to
discuss its financial results and its business. During the
conference call, the Company may discuss and answer one or more
questions concerning business and financial matters and trends
affecting the Company. The Company’s responses to these questions,
as well as other matters discussed during the conference call, may
contain or constitute material information that has not been
previously disclosed. Simultaneous to the conference call, an audio
webcast of the call will be available via a link on the Company’s
website, investor.sallybeautyholdings.com. The conference call can
be accessed by dialing 800-230-1074 (International: (612)
234-9960). The teleconference will be held in a “listen-only” mode
for all participants other than the Company’s current sell-side and
buy-side investment professionals. If you are unable to listen in
to this conference call, the replay will be available at about
12:00 p.m. (Central) November 15, 2016 through November 26, 2016 by
dialing 800-475-6701 or if international dial 320-365-3844 and
reference the conference ID number 405301. Also, a website replay
will be available on investor.sallybeautyholdings.com.
About Sally Beauty Holdings, Inc.
Sally Beauty Holdings, Inc. (NYSE: SBH) is an international
specialty retailer and distributor of professional beauty supplies
with revenues of 4.0 billion annually. Through the Sally Beauty
Supply and Beauty Systems Group businesses, the Company sells and
distributes through over 5,000 stores, including approximately 182
franchised units, throughout the United States, the United Kingdom,
Belgium, Chile, Peru, Colombia, France, the Netherlands, Canada,
Puerto Rico, Mexico, Ireland, Spain and Germany. Sally Beauty
Supply stores offer up to 9,000 products for hair, skin, and nails
through professional lines such as Clairol, L’Oreal, OPI and
Conair, as well as an extensive selection of proprietary
merchandise. Beauty Systems Group stores, branded as CosmoProf or
Armstrong McCall stores, along with its outside sales consultants,
sell up to 10,000 professionally branded products including Paul
Mitchell, Wella, Sebastian, Goldwell, Joico, and Aquage which are
targeted exclusively for professional and salon use and resale to
their customers. For more information about Sally Beauty Holdings,
Inc., please visit sallybeautyholdings.com.
Cautionary Notice Regarding Forward-Looking
Statements
Statements in this news release and the schedules hereto which
are not purely historical facts or which depend upon future events
may be forward-looking statements within the meaning of Section 27A
of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. Words such as
“anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan,”
“project,” “target,” “can,” “could,” “may,” “should,” “will,”
“would,” or similar expressions may also identify such
forward-looking statements.
Readers are cautioned not to place undue reliance on
forward-looking statements as such statements speak only as of the
date they were made. Any forward-looking statements involve risks
and uncertainties that could cause actual events or results to
differ materially from the events or results described in the
forward-looking statements, including, but not limited to, risks
and uncertainties related to: anticipating and effectively
responding to changes in consumer and professional stylist
preferences and buying trends in a timely manner; the success of
our strategic initiatives, including our store refresh program and
increased marketing efforts, to enhance the customer experience,
attract new customers, drive brand awareness and improve customer
loyalty; our ability to efficiently manage and control our costs
and the success of our cost control plans; the highly competitive
nature of, and the increasing consolidation of, the beauty products
distribution industry; the timing and acceptance of new product
introductions; shifts in product mix sold during any period;
potential fluctuation in our same store sales and quarterly
financial performance; our dependence upon manufacturers who may be
unwilling or unable to continue to supply products to us; our
dependence upon manufacturers who have developed or could develop
their own distribution businesses which compete directly with ours;
the possibility of material interruptions in the supply of products
by our third-party manufacturers or distributors or increases in
the prices of products we purchase from our third-party
manufacturers or distributors; products sold by us being found to
be defective in labeling or content; compliance with current laws
and regulations or becoming subject to additional or more stringent
laws and regulations; the success of our e-commerce businesses;
diversion of professional products sold by Beauty Systems Group to
mass retailers or other unauthorized resellers; the operational and
financial performance of our franchise-based business; successfully
identifying acquisition candidates and successfully completing
desirable acquisitions; integrating acquired businesses; the
success of our initiatives to expand into new geographies; the
success of our existing stores, and our ability to increase sales
at existing stores; opening and operating new stores profitably;
the volume of traffic to our stores; the impact of the health of
the economy upon our business; conducting business outside the
United States; the impact of Britain’s vote to leave the European
Union and related or other disruptive events in the European Union
or other geographies in which we conduct business; rising labor and
rental costs; protecting our intellectual property rights,
particularly our trademarks; the risk that our products may
infringe on the intellectual property rights of others;
successfully updating and integrating our information technology
systems; disruption in our information technology systems; a
significant data security breach, including misappropriation of our
customers’ or employees’ or suppliers’ confidential information,
and the potential costs related thereto; the negative impact on our
reputation and loss of confidence of our customers, suppliers and
others arising from a significant data security breach; the costs
and diversion of management’s attention required to investigate and
remediate a data security breach and to continuously upgrade our
information technology security systems to address evolving
cyber-security threats; the ultimate determination of the extent or
scope of the potential liabilities relating to our past or any
future data security incidents; our ability to attract or retain
highly skilled management and other personnel; severe weather,
natural disasters or acts of violence or terrorism; the
preparedness of our accounting and other management systems to meet
financial reporting and other requirements and the upgrade of our
existing financial reporting system; being a holding company, with
no operations of our own, and depending on our subsidiaries for our
liquidity needs; our ability to execute and implement our common
stock repurchase program; our substantial indebtedness; the
possibility that we may incur substantial additional debt,
including secured debt, in the future; restrictions and limitations
in the agreements and instruments governing our debt; generating
the significant amount of cash needed to service all of our debt
and refinancing all or a portion of our indebtedness or obtaining
additional financing; changes in interest rates increasing the cost
of servicing our debt; and the costs and effects of litigation.
Additional factors that could cause actual events or results to
differ materially from the events or results described in the
forward-looking statements can be found in our filings with the
Securities and Exchange Commission, including our most recent
Annual Report on Form 10-K for the year ended September 30, 2016,
as filed with the Securities and Exchange Commission. Consequently,
all forward-looking statements in this release are qualified by the
factors, risks and uncertainties contained therein. We assume no
obligation to publicly update or revise any forward-looking
statements.
Use of Non-GAAP Financial Measures
This news release and the schedules hereto include the following
financial measures that have not been calculated in accordance with
accounting principles generally accepted in the U.S., or GAAP, and
are therefore referred to as non-GAAP financial measures: (1)
Adjusted EBITDA; (2) Adjusted net earnings, basic and diluted
earnings per share; and (3) Adjusted SG&A expenses. We have
provided definitions below for these non-GAAP financial measures
and have provided tables in the schedules hereto to reconcile these
non-GAAP financial measures to the comparable GAAP financial
measures.
Adjusted EBITDA – We define the measure Adjusted EBITDA as GAAP
net earnings before depreciation and amortization, interest
expense, income taxes, share-based compensation, costs related to
the Company’s previously disclosed data security incidents,
management transition plan, executive separation expenses and asset
impairment charges.
Adjusted Net Earnings, Basic and Diluted Earnings Per Share and
SG&A Expenses – Adjusted net earnings, basic and diluted
earnings per share and SG&A expenses are GAAP net earnings,
earnings per share, diluted earnings per share and SG&A
expenses that exclude costs related to the Company’s previously
disclosed management transition plan, executive separation
expenses, data security incidents, asset impairment charges and the
loss on extinguishment of debt and overlapping interest expense for
the relevant time periods as indicated in the accompanying non-GAAP
reconciliations to the comparable GAAP financial measures.
We have provided these non-GAAP financial measures as
supplemental information to our GAAP financial measures and believe
these non-GAAP measures provide investors with additional
meaningful financial information regarding our operating
performance. Our management and Board of Directors also use these
non-GAAP measures as supplemental measures in the evaluation of our
businesses and believe that these non-GAAP measures provide a
meaningful measure to evaluate our historical and prospective
financial performance. These non-GAAP measures should not be
considered a substitute for or superior to GAAP results.
Furthermore, the non-GAAP measures presented by us may not be
comparable to similarly titled measures of other companies.
Supplemental Schedules Consolidated Statements of
Earnings A Segment Information B Non-GAAP
Financial Measures Reconciliations (Adjusted EBITDA) C Non-GAAP
Financial Measures Reconciliations (Continued) D, E Store Count and
Same Store Sales F Selected Financial Data and Debt G
Supplemental Schedule A
SALLY BEAUTY HOLDINGS, INC. AND
SUBSIDIARIES Consolidated Statements of Earnings (In thousands,
except per share data) (Unaudited)
Three Months Ended
Twelve Months Ended September 30, September 30,
2016 2015 %
CHG 2016 2015
% CHG Net sales $ 976,358 $ 964,230 1.3
% $ 3,952,618 $ 3,834,343 3.1 % Cost of products sold and
distribution expenses 492,917
488,919 0.8 %
1,988,678 1,936,492
2.7 % Gross profit 483,441 475,311 1.7 % 1,963,940 1,897,851
3.5 % Selling, general and administrative expenses (1) 345,489
330,855 4.4 % 1,365,986 1,313,134 4.0 % Depreciation and
amortization 27,133
25,223 7.6 % 99,657
89,391 11.5 %
Operating earnings 110,819 119,233 -7.1 % 498,297 495,326 0.6 %
Interest expense (2) 26,620
29,152 -8.7 %
144,237 116,842
23.4 % Earnings before provision for income taxes 84,199 90,081
-6.5 % 354,060 378,484 -6.5 % Provision for income taxes
31,578 33,901
-6.9 % 131,118
143,397 -8.6 % Net earnings $
52,621 $ 56,180 -6.3 %
$ 222,942 $ 235,087
-5.2 % Earnings per share: Basic $ 0.36 $ 0.36
0.0 % $ 1.51 $ 1.50 0.7 % Diluted $ 0.36 $ 0.36 0.0 % $ 1.50 $ 1.49
0.7 % Weighted average shares: Basic 145,504 154,725 147,179
156,353 Diluted 147,118
156,457 148,803
158,226
Basis Pt Chg Basis Pt Chg
Comparison as a % of
Net sales
Sally Beauty Supply Segment Gross Profit Margin 55.0 % 54.6 % 40
55.2 % 54.8 % 40 BSG Segment Gross Profit Margin 41.3 % 41.2 % 10
41.5 % 41.3 % 20 Consolidated Gross Profit Margin 49.5 % 49.3 % 20
49.7 % 49.5 % 20 Selling, general and administrative expenses 35.4
% 34.3 % 110 34.6 % 34.2 % 40 Consolidated Operating Profit Margin
11.4 % 12.4 % (100 ) 12.6 % 12.9 % (30 ) Net Earnings Margin 5.4 %
5.8 % (40 ) 5.6 % 6.1 % (50 )
Effective Tax
Rate
37.5 % 37.6 % (10 ) 37.0 % 37.9 % (90 )
(1) For the three months
ended September 30, 2016 and 2015, selling, general and
administrative expenses include share-based compensation expense of
$2.6 million and $3.3 million, respectively, and expenses incurred
in connection with the data security incidents disclosed earlier of
$12.0 million and $0.6 million (net of related insurance recovery),
respectively. For the twelve months ended September 30, 2016 and
2015, selling, general and administrative expenses include
share-based compensation expense of $12.6 million and $16.8
million, respectively, and expenses incurred in connection with the
data security incidents disclosed earlier of $14.6 million and $5.6
million (net of related insurance recovery), respectively. In
addition, for the three and twelve months ended September 30, 2016,
selling, general and administrative expenses include $0.7 million
of pre-tax expenses incurred in connection with the departure of
our CFO in September 2016 and, for the twelve months ended
September 30, 2016, $1.3 million of pre-tax expenses incurred in
connection with management transition plans disclosed earlier.
(2) For the twelve months ended September 30, 2016, interest
expense includes loss on extinguishment of debt of $33.3 million in
connection with the Company's December 2015 redemption of its
senior notes due 2019. Supplemental Schedule B
SALLY BEAUTY HOLDINGS, INC. AND SUBSIDIARIES Segment
Information (In thousands) (Unaudited)
Three
Months Ended Twelve Months Ended September 30, September 30,
2016 2015
% CHG 2016
2015 % CHG Net sales: Sally Beauty
Supply $ 583,857 $ 582,301 0.3 % $ 2,364,531 $ 2,329,523 1.5 %
Beauty Systems Group 392,501
381,929 2.8 %
1,588,087 1,504,820
5.5 % Total net sales $ 976,358
$ 964,230 1.3 % $
3,952,618 $ 3,834,343 3.1
% Operating earnings: Sally Beauty Supply (1) $ 96,939 $
97,860 -0.9 % $ 409,787 $ 412,393 -0.6 % Beauty Systems Group
61,887 57,862
7.0 % 254,479
231,151 10.1 % Segment
operating earnings 158,826
155,722 2.0 %
664,266 643,544
3.2 % Unallocated expenses (2) (45,437 ) (33,177 )
37.0 % (153,389 ) (131,440 ) 16.7 % Share-based compensation (2,570
) (3,312 ) -22.4 % (12,580 ) (16,778 ) -25.0 % Interest expense (3)
(26,620 ) (29,152 )
-8.7 % (144,237 )
(116,842 ) 23.4 % Earnings before provision
for income taxes $ 84,199 $
90,081 -6.5 % $ 354,060
$ 378,484 -6.5 % Segment
operating profit margin:
Basis Pt Chg Basis Pt Chg
Sally Beauty Supply 16.6 % 16.8 % (20 ) 17.3 % 17.7 % (40 ) Beauty
Systems Group 15.8 % 15.1 % 70 16.0 % 15.4 % 60 Consolidated
operating profit margin 11.4 %
12.4 % (100 ) 12.6 %
12.9 % (30 )
(1)
For the three and twelve months ended September 30, 2015,
Sally Beauty Supply reflects $4.2 million and $5.3 million,
respectively, in expenses resulting from a restructuring of the its
operations in Germany. These amounts include $1.4 million reported
in cost of products sold and distribution expenses for the three
and twelve months ended September 30, 2015, with the remaining
expenses reported in selling, general and administrative expenses.
(2)
Unallocated expenses consist of corporate and shared costs, and are
included in selling, general and administrative expenses. For the
three months ended September 30, 2016 and 2015, unallocated
expenses include $12.0 million and $0.6 million (net of related
insurance recovery), respectively, of expenses incurred in
connection with the data security incidents disclosed earlier. For
the twelve months ended September 30, 2016 and 2015, unallocated
expenses include $14.6 million and $5.6 million (net of related
insurance recovery), respectively, of expenses incurred in
connection with such data security incidents. In addition, for the
three and twelve months ended September 30, 2016, selling, general
and administrative expenses include $0.7 million of pre-tax
expenses incurred in connection with the departure of our CFO in
September 2016 and, for the twelve months ended September 30, 2016,
$1.3 million of pre-tax expenses incurred in connection with
management transition plans disclosed earlier.
(3)
For the twelve months ended September 30, 2016, interest expense
includes loss on extinguishment of debt of $33.3 million in
connection with the Company's December 2015 redemption of its
senior notes due 2019. Supplemental Schedule C
SALLY BEAUTY HOLDINGS, INC. AND SUBSIDIARIES Non-GAAP
Financial Measures Reconciliations (In thousands) (Unaudited)
Three Months Ended Twelve Months
Ended September 30, September 30, 2016
2015 % CHG 2016
2015 % CHG Adjusted EBITDA:
Net earnings (per GAAP) $ 52,621
$ 56,180 -6.3 % $ 222,942 $ 235,087 -5.2 % Add: Depreciation and
amortization 27,133 25,223 7.6 % 99,657 89,391 11.5 % Share-based
compensation (1) 2,570 3,312 -22.4 % 12,580 16,778 -25.0 % Loss
from data security incidents (2) 11,995 604 1885.9 % 14,615 5,564
162.7 % Management transition expenses (3) - - 0.0 % 1,318 - 100.0
% Executive separation expenses (3) 679 - 100.0 % 679 - 100.0 %
Asset impairment charges (4) - 4,190 -100.0 % 571 5,307 -89.2 %
Interest expense (5) 26,620 29,152 -8.7 % 144,237 116,842 23.4 %
Provision for income taxes 31,578
33,901 -6.9 %
131,118 143,397 -8.6 % Adjusted
EBITDA (Non-GAAP) $ 153,196 $ 152,562
0.4 % $ 627,717 $ 612,366
2.5 %
(1)
For the twelve months ended September 30, 2016 and 2015,
share-based compensation includes $1.3 million and $4.8 million,
respectively, of accelerated expense related to certain
retirement-eligible employees who are eligible to continue vesting
awards upon retirement.
(2)
Results for the three months ended September 30, 2016 and 2015
reflect $12.0 million and $0.6 million (net of related insurance
recovery), respectively, of pre-tax expenses incurred in connection
with the data security incidents disclosed earlier. Results for the
twelve months ended September 30, 2016 and 2015 reflect $14.6
million and $5.6 million (net of related insurance recovery),
respectively, of pre-tax expenses incurred in connection with such
data security incidents.
(3)
Results for the twelve months ended September 30, 2016 reflect $1.3
million of pre-tax expenses incurred in connection with the
management transition plan disclosed earlier. In addition, results
for the three and twelve months ended September 30, 2016, reflect
$0.7 million of pre-tax expenses incurred in connection with the
departure of our CFO in September 2016.
(4)
Results for the three and twelve months ended September 30, 2015,
reflect $4.2 million and $5.3 million, respectively, in pre-tax
expenses resulting from a restructuring of the Company's operations
in Germany. These amounts include $1.4 million reported in cost of
products sold and distribution expenses for the three and twelve
months ended September 30, 2015, with the remaining expenses
reported in selling, general and administrative expenses.
(5)
For the twelve months ended September 30, 2016, interest expense
includes loss on extinguishment of debt of $33.3 million in
connection with the Company's December 2015 redemption of its
senior notes due 2019. Supplemental Schedule D
SALLY BEAUTY HOLDINGS, INC. AND SUBSIDIARIES Non-GAAP
Financial Measures Reconciliations, Continued (In thousands)
(Unaudited) Three Months Ended September 30,
2016 As Reported
ExecutiveSeparationExpenses (1)
Charges fromData SecurityIncidents (2)
As Adjusted(Non-GAAP)
Consolidated Gross Profit $ 483,441 $ 483,441 Consolidated Gross
Profit margin 49.5 % 49.5 % Selling, general and administrative
expenses 345,489 $ (679 ) $ (11,995 ) 332,815 SG&A expenses, as
a percentage of sales 35.4 % 34.1 % Operating earnings 110,819 679
11,995 123,493 Operating Profit Margin 11.4 % 12.6 % Earnings
before provision for income taxes 84,199 679 11,995 96,873
Provision for income taxes (4) 31,578
258 4,558
36,394 Net
earnings $ 52,621 $ 421
$ 7,437 $
60,479 Earnings per share: Basic $ 0.36 $ 0.003 $
0.05 $ 0.42 Diluted $ 0.36 $ 0.003 $ 0.05 $ 0.41
Three Months Ended September 30,
2015 As Reported
Charges fromData SecurityIncidents (2)
AssetImpairmentCharges (3)
As Adjusted(Non-GAAP)
Consolidated Gross Profit $ 475,311 $ 1,404 $ 476,715
Consolidated Gross Profit margin 49.3 % 49.4 % Selling, general and
administrative expenses 330,855 $ (604 ) (2,786 ) 327,465 SG&A
expenses, as a percentage of sales 34.3 % 34.0 % Operating earnings
119,233 604 4,190 124,027 Operating Profit Margin 12.4 % 12.9 %
Earnings before provision for income taxes 90,081 604 4,190 94,875
Provision for income taxes (4) 33,901
223
1,550 35,674 Net earnings
$ 56,180 $
381 $ 2,640 $ 59,201
Earnings per share: Basic $ 0.36 $ 0.00 $ 0.02 $ 0.38
Diluted $ 0.36 $ 0.00 $ 0.02 $ 0.38
(1)
For the three months ended September 30, 2016, selling,
general and administrative expenses include $0.7 million of
expenses incurred in connection with the departure of our CFO in
September 2016.
(2)
For the three months ended September 30, 2016 and 2015, selling,
general and administrative expenses include $12.0 million and $0.6
million (net of related insurance recovery), respectively, of
expenses incurred in connection with the data security incidents
disclosed earlier.
(3)
Results for the three months ended September 30, 2015 reflect $4.2
million in expenses resulting from a restructuring of the Company's
operations in Germany. This amount includes $1.4 million reported
in cost of products sold and distribution expenses, with the
remaining expenses reported in selling, general and administrative
expenses.
(4)
The tax provision associated with the adjustments to net earnings
was calculated using an effective tax rate of 38.0% and 37.0% for
the three months ended September 30, 2016 and 2015, respectively.
Supplemental Schedule E
SALLY BEAUTY
HOLDINGS, INC. AND SUBSIDIARIES Non-GAAP Financial Measures
Reconciliations, Continued (In thousands) (Unaudited)
Twelve Months Ended September 30, 2016
As Reported
Loss onExtinguishmentof Debt (1)
OverlappingInterestExpense (1)
ManagementTransitionExpenses (2)
ExecutiveSeparationExpenses (2)
Charges fromData SecurityIncidents (3)
AssetImpairmentCharges (4)
As Adjusted(Non-GAAP)
Consolidated Gross Profit $
1,963,940 $ 1,963,940 Consolidated Gross Profit margin 49.7 % 49.7
% Selling, general and administrative expenses 1,365,986 $ (1,318 )
$ (679 ) $ (14,615 ) $ (571 ) 1,348,803 SG&A expenses, as a
percentage of sales 34.6 % 34.1 % Operating earnings 498,297 1,318
679 14,615 571 515,480 Operating Profit Margin 12.6 % 13.0 %
Earnings before provision for income taxes 354,060 $ 33,296 $ 2,148
1,318 679 14,615 571 406,687 Provision for income taxes (5)
131,118 12,652
816 501
258 5,554
217 151,116 Net earnings
$ 222,942 $ 20,644
$ 1,332 $ 817 $ 421
$ 9,061 $ 354
$ 255,571 Earnings per share: Basic $ 1.515 $
0.14 $ 0.01 $ 0.01 $ 0.003 $ 0.06 $ 0.002 $ 1.74 Diluted $ 1.498 $
0.14 $ 0.01 $ 0.01 $ 0.003 $ 0.06 $ 0.002 $ 1.72
Twelve Months Ended September
30, 2015 As Reported
Charges fromData SecurityIncidents (3)
AssetImpairmentCharges (4)
As Adjusted(Non-GAAP)
Consolidated Gross Profit $ 1,897,851 $ 1,404 $ 1,899,255
Consolidated Gross Profit margin 49.5 % 49.5 % Selling, general and
administrative expenses 1,313,134 $ (5,564 ) (3,903 ) 1,303,667
SG&A expenses, as a percentage of sales 34.2 % 34.0 % Operating
earnings 495,326 5,564 5,307 506,197 Operating Profit Margin 12.9 %
13.2 % Earnings before provision for income taxes 378,484 5,564
5,307 389,355 Provision for income taxes (5)
143,397
2,059
1,964
147,420 Net earnings $ 235,087
$ 3,505 $ 3,343
$ 241,935 Earnings per share:
Basic $ 1.504 $ 0.022 $ 0.021 $ 1.55 Diluted $ 1.486 $ 0.022 $
0.021 $ 1.53
(1)
For the twelve months ended September 30, 2016, interest
expense includes loss on extinguishment of debt of $33.3 million in
connection with the Company's December 2015 redemption of its
senior notes due 2019 and interest in the amount of $2.1 million on
such senior notes after December 3, 2015 and until their
redemption, as well as interest on the Company's senior notes due
2025 issued on December 3. This pro-forma adjustment assumes the
senior notes due 2019 were redeemed on December 3, 2015.
(2)
For the twelve months ended September 30,
2016, selling, general and administrative expenses include $1.3
million of expenses incurred in connection with management
transition plans disclosed earlier and $0.7 million of expenses
incurred in connection with the departure of our CFO in September
2016.
(3)
For the twelve months ended September 30, 2016 and 2015, selling,
general and administrative expenses include $14.6 million and $5.6
million (net of related insurance recovery), respectively, of
expenses incurred in connection with the data security incidents.
(4)
Results for the twelve months ended September 30, 2016, selling,
general and administrative expenses reflect an intangible asset
impairment charge of $0.6 million. Results for the twelve months
ended September 30, 2015 reflect $5.3 million in expenses resulting
from a restructuring of the Company's operations in Germany. This
amount includes $1.4 million reported in cost of products sold and
distribution expenses, with the remaining expenses reported in
selling, general and administrative expenses.
(5)
The tax provision associated with the adjustments to net earnings
was calculated using an effective tax rate of 38.0% and 37.0% for
the twelve months ended September 30, 2016 and 2015, respectively.
Supplemental Schedule F
SALLY BEAUTY
HOLDINGS, INC. AND SUBSIDIARIES Store Count and Same Store
Sales (Unaudited)
As of September 30, 2016 2015 CHG
Number of stores (at end of period): Sally Beauty Supply:
Company-operated stores 3,763 3,655 108 Franchise stores 18
18 - Total Sally Beauty Supply 3,781 3,673 108 Beauty
Systems Group: Company-operated stores 1,174 1,137 37 Franchise
stores 164 157 7 Total Beauty System Group
1,338 1,294 44 Total 5,119 4,967
152 BSG distributor sales consultants (end of period)
(1) 936 958 (22 )
2016 2015 Fourth quarter
company-operated same store sales growth (2)
Basis Pt
Chg Sally Beauty Supply 0.8 % 1.8 % (100 ) Beauty
Systems Group 1.9 % 7.4 % (550 ) Consolidated 1.2 % 3.5 % (230 )
Twelve months ended September 30 company-operated same store
sales growth (2) Sally Beauty Supply 1.7 % 1.7 % 0 Beauty Systems
Group 5.5 % 5.7 % (20 ) Consolidated 2.9 % 2.9 % 0 (1)
Includes 311 and 318 distributor sales consultants as reported by
our franchisees at September 30, 2016 and 2015, respectively.
(2) For the purpose of calculating our same store sales
metrics, we compare the current period sales for stores open for 14
months or longer as of the last day of a month with the sales for
these stores for the comparable period in the prior fiscal year.
Our same store sales are calculated in constant U.S. dollars and
include internet-based sales and the effect of store expansions, if
applicable, but do not generally include the sales of stores
relocated until 14 months after the relocation. The sales of stores
acquired are excluded from our same store sales calculation until
14 months after the acquisition. Supplemental
Schedule G
SALLY BEAUTY HOLDINGS, INC. AND
SUBSIDIARIES Selected Financial Data and Debt (In thousands)
(Unaudited) As of September 30, 2016
2015 Financial condition
information (at period end): Working capital $ 684,162 $ 695,403
Cash and cash equivalents 86,622 140,038 Property and equipment,
net 319,558 270,847 Total assets 2,132,063 2,094,351 Total debt,
including capital leases (1) 1,784,010 1,787,594 Total
stockholders' (deficit) equity ($276,166 ) ($297,821 )
As of September
30, 2016 Interest Rates (2) Debt position, excluding capital
leases: Revolving ABL facility $ -
(i) Prime + 0.50-0.75%or (ii) LIBOR +
1.50-1.75%
Senior notes due 2022 850,000 5.750 % Senior notes due 2023 200,000
5.500 % Senior notes due 2025 750,000 5.625 % Total debt,
excluding capital leases (3) $ 1,800,000
Debt maturities,
excluding capital leases: Twelve months ending September 30,
2017-2021
$ - Thereafter 1,800,000 Total debt, excluding
capital leases (3) $ 1,800,000 (1) Total debt,
including capital leases, is net of unamortized debt issuance costs
of $23.7 million and $21.8 million at September 30, 2016 and 2015,
respectively. (2) Interest rates shown represent the coupon
or contractual rates related to each indebtedness. (3)
Amounts do not include capital lease obligations of $2.1 million,
unamortized premium of $5.6 million related to senior notes due
2022 in an aggregate principal amount of $150.0 million, or
unamortized debt issuance costs in the aggregate amount of $23.7
million in connection with the senior notes due 2022, 2023 and
2025.
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version on businesswire.com: http://www.businesswire.com/news/home/20161115005441/en/
Sally Beauty Holdings, Inc.Investor RelationsKaren Fugate,
940-297-3877
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