UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

 

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

 

FOR THE QUARTERLY PERIOD ENDED: JUNE 30, 2021MARCH 31, 2022

-OR-

 

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

 

Commission File No. 1-33145

 

SALLY BEAUTY HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

 

 

 

Delaware

 

36-2257936

(State or other jurisdiction of incorporation or organization)

 

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

 

 

 

3001 Colorado Boulevard

 

 

Denton, Texas

 

76210

(Address of principal executive offices)

 

(Zip Code)

 

(940) 898-7500

(Registrant’s telephone number, including area code)

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

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

Title of each classTrading SymbolName of each exchange on which registered

Common Stock, $0.01 par valueSBHThe New York Stock Exchange

 

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

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

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

 

 

Large accelerated filer

 

Accelerated filer

Non-accelerated filer

Smaller reporting company

 

Emerging growth company

 

 

 

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

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

As of July 23, 2021,April 29, 2022, there were 113,033,420107,000,985 shares of the issuer’s common stock outstanding.

 

 

 

 


 

TABLE OF CONTENTS

 

 

Page

PART I — FINANCIAL INFORMATION

 

 

 

Item 1. Financial Statements

4

Condensed Consolidated Balance Sheets

4

Condensed Consolidated Statements of Earnings

5

Condensed Consolidated Statements of Comprehensive Income

6

Condensed Consolidated Statements of Stockholders’ Equity

7

Condensed Consolidated Statements of Cash Flows

8

Notes to Condensed Consolidated Financial Statements

9

Item 2. Management’s Discussion And Analysis Of Financial Condition And Results Of Operations

1715

Item 3. Quantitative And Qualitative Disclosures About Market Risk

2321

Item 4. Controls And Procedures

2322

 

 

PART II — OTHER INFORMATION

 

 

 

Item 1. Legal Proceedings

2523

Item 1A. Risk Factors

2523

Item 2.Unregistered Sales Of Equity Securities And Use Of Proceeds

23

Item 6. Exhibits

2524

 

 



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

cautionary notice regarding forward-looking statements

Statements in this Quarterly Report on Form 10-Q and in the documents incorporated by reference herein which are not purely historical facts or which depend upon future events may constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which we refer to as the Exchange Act. Words such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan,” “project,” “target,” “can,” “could,” “may,” “should,” “will,” “would” or similar expressions may also identify such forward-looking statements. Forward-looking statements may relate to, among other things, the impact on our business, operations and financial results of the novel coronavirus (“COVID-19”) pandemic.

Readers are cautioned not to place undue reliance on forward-looking statements as such statements speak only as of the date they were made and involve risks and uncertainties that could cause actual events or results to differ materially from the events or results described in the forward-looking statements. The most important factors which could cause our actual results to differ from our forward-looking statements are set forth in our description of risk factors in Item 1A contained in our Annual Report on Form 10-K for the fiscal year ended September 30, 2020,2021, 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.

 


WHERE YOU CAN FIND MORE INFORMATION

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

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


PART I — FINANCIAL INFORMATION

Item 1.  Financial Statements.

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

5


SALLY BEAUTY HOLDINGS, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(In thousands, except par value data)

 

 

 

June 30,

2021

 

 

September 30,

2020

 

 

March 31,

2022

 

 

September 30,

2021

 

 

(Unaudited)

 

 

 

 

 

 

(Unaudited)

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

270,317

 

 

$

514,151

 

 

$

227,413

 

 

$

400,959

 

Trade accounts receivable, net

 

 

44,660

 

 

 

35,590

 

 

 

28,615

 

 

 

32,623

 

Accounts receivable, other

 

 

31,779

 

 

 

20,839

 

 

 

32,100

 

 

 

33,958

 

Inventory

 

 

935,427

 

 

 

814,503

 

 

 

962,563

 

 

 

871,349

 

Other current assets

 

 

46,928

 

 

 

48,014

 

 

 

50,990

 

 

 

44,686

 

Total current assets

 

 

1,329,111

 

 

 

1,433,097

 

 

 

1,301,681

 

 

 

1,383,575

 

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

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

 

 

283,033

 

 

 

315,029

 

Property and equipment, net of accumulated depreciation of $800,715 at

March 31, 2022, and $767,403 at September 30, 2021

 

 

287,855

 

 

 

307,377

 

Operating lease assets

 

 

540,480

 

 

 

525,634

 

 

 

540,801

 

 

 

537,673

 

Goodwill

 

 

546,284

 

 

 

540,038

 

 

 

539,682

 

 

 

541,209

 

Intangible assets, excluding goodwill, net of accumulated amortization of

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

 

 

55,651

 

 

 

58,283

 

Intangible assets, excluding goodwill, net of accumulated amortization of

$40,528 at March 31, 2022, and $38,957 at September 30, 2021

 

 

52,994

 

 

 

55,532

 

Other assets

 

 

23,623

 

 

 

23,066

 

 

 

19,990

 

 

 

21,766

 

Total assets

 

$

2,778,182

 

 

$

2,895,147

 

 

$

2,743,003

 

 

$

2,847,132

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current maturities of long-term debt

 

$

181

 

 

$

180

 

 

$

182

 

 

$

194

 

Accounts payable

 

 

268,868

 

 

 

236,333

 

 

 

240,594

 

 

 

291,632

 

Accrued liabilities

 

 

213,099

 

 

 

170,665

 

 

 

170,540

 

 

 

206,155

 

Current operating lease liabilities

 

 

159,094

 

 

 

153,267

 

 

 

160,549

 

 

 

156,234

 

Income taxes payable

 

 

8,963

 

 

 

2,917

 

 

 

2,404

 

 

 

10,666

 

Total current liabilities

 

 

650,205

 

 

 

563,362

 

 

 

574,269

 

 

 

664,881

 

Long-term debt

 

 

1,383,145

 

 

 

1,796,897

 

 

 

1,381,385

 

 

 

1,382,530

 

Long-term operating lease liabilities

 

 

401,706

 

 

 

394,375

 

 

 

406,658

 

 

 

404,147

 

Other liabilities

 

 

30,008

 

 

 

32,976

 

 

 

16,547

 

 

 

29,056

 

Deferred income tax liabilities, net

 

 

90,848

 

 

 

92,094

 

 

 

92,278

 

 

 

85,777

 

Total liabilities

 

 

2,555,912

 

 

 

2,879,704

 

 

 

2,471,137

 

 

 

2,566,391

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

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

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

 

 

1,128

 

 

 

1,124

 

Common stock, $0.01 par value. Authorized 500,000 shares; 107,003 and

113,138 shares issued and 106,930 and 112,913 shares outstanding at

March 31, 2022, and September 30, 2021, respectively

 

 

1,069

 

 

 

1,129

 

Preferred stock, $0.01 par value. Authorized 50,000 shares; NaN issued

 

 

 

 

 

 

 

 

 

 

 

 

Additional paid-in capital

 

 

13,858

 

 

 

1,913

 

 

 

 

 

 

17,286

 

Accumulated earnings

 

 

288,818

 

 

 

117,109

 

 

 

372,265

 

 

 

356,967

 

Accumulated other comprehensive loss, net of tax

 

 

(81,534

)

 

 

(104,703

)

 

 

(101,468

)

 

 

(94,641

)

Total stockholders’ equity

 

 

222,270

 

 

 

15,443

 

 

 

271,866

 

 

 

280,741

 

Total liabilities and stockholders’ equity

 

$

2,778,182

 

 

$

2,895,147

 

 

$

2,743,003

 

 

$

2,847,132

 

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

 


SALLY BEAUTY HOLDINGS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Earnings (Loss)

(In thousands, except per share data)

(Unaudited)

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

Three Months Ended

 

 

Six Months Ended

 

 

June 30,

 

 

June 30,

 

 

March 31,

 

 

March 31,

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Net sales

 

$

1,022,387

 

 

$

705,287

 

 

$

2,884,737

 

 

$

2,556,518

 

 

$

911,387

 

 

$

926,328

 

 

$

1,891,638

 

 

$

1,862,350

 

Cost of goods sold

 

 

507,981

 

 

 

383,441

 

 

 

1,432,378

 

 

 

1,330,067

 

 

 

446,055

 

 

 

459,099

 

 

 

926,177

 

 

 

924,397

 

Gross profit

 

 

514,406

 

 

 

321,846

 

 

 

1,452,359

 

 

 

1,226,451

 

 

 

465,332

 

 

 

467,229

 

 

 

965,461

 

 

 

937,953

 

Selling, general and administrative expenses

 

 

386,481

 

 

 

314,599

 

��

 

1,143,738

 

 

 

1,075,827

 

 

 

378,871

 

 

 

391,087

 

 

 

765,121

 

 

 

757,257

 

Restructuring

 

 

508

 

 

 

5,816

 

 

 

1,371

 

 

 

11,541

 

 

 

 

 

 

631

 

 

 

1,099

 

 

 

863

 

Operating earnings

 

 

127,417

 

 

 

1,431

 

 

 

307,250

 

 

 

139,083

 

 

 

86,461

 

 

 

75,511

 

 

 

199,241

 

 

 

179,833

 

Interest expense

 

 

23,452

 

 

 

27,298

 

 

 

73,313

 

 

 

70,483

 

 

 

19,896

 

 

 

23,883

 

 

 

40,137

 

 

 

49,861

 

Earnings (loss) before provision for income taxes

 

 

103,965

 

 

 

(25,867

)

 

 

233,937

 

 

 

68,600

 

Provision (benefit) for income taxes

 

 

27,759

 

 

 

(2,341

)

 

 

62,228

 

 

 

25,543

 

Net earnings (loss)

 

$

76,206

 

 

$

(23,526

)

 

$

171,709

 

 

$

43,057

 

Earnings (loss) per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings before provision for income taxes

 

 

66,565

 

 

 

51,628

 

 

 

159,104

 

 

 

129,972

 

Provision for income taxes

 

 

19,757

 

 

 

13,316

 

 

 

43,458

 

 

 

34,469

 

Net earnings

 

$

46,808

 

 

$

38,312

 

 

$

115,646

 

 

$

95,503

 

Earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.68

 

 

$

(0.21

)

 

$

1.52

 

 

$

0.38

 

 

$

0.43

 

 

$

0.34

 

 

$

1.05

 

 

$

0.85

 

Diluted

 

$

0.66

 

 

$

(0.21

)

 

$

1.50

 

 

$

0.37

 

 

$

0.42

 

 

$

0.34

 

 

$

1.03

 

 

$

0.84

 

Weighted-average shares:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

112,739

 

 

 

112,271

 

 

 

112,605

 

 

 

114,413

 

 

 

108,743

 

 

 

112,603

 

 

 

110,387

 

 

 

112,538

 

Diluted

 

 

114,927

 

 

 

112,271

 

 

 

114,274

 

 

 

115,370

 

 

 

110,540

 

 

 

114,342

 

 

 

112,207

 

 

 

114,028

 

 

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)

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

March 31,

 

 

March 31,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Net earnings

 

$

46,808

 

 

$

38,312

 

 

$

115,646

 

 

$

95,503

 

Other comprehensive (loss) income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

(2,752

)

 

 

(7,890

)

 

 

(7,261

)

 

 

17,117

 

Interest rate caps, net of tax

 

 

-

 

 

 

-

 

 

 

278

 

 

 

175

 

Foreign exchange contracts, net of tax

 

 

(324

)

 

 

574

 

 

 

156

 

 

 

(1,020

)

Other comprehensive (loss) income, net of tax

 

 

(3,076

)

 

 

(7,316

)

 

 

(6,827

)

 

 

16,272

 

Total comprehensive income

 

$

43,732

 

 

$

30,996

 

 

$

108,819

 

 

$

111,775

 

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)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

Other

 

 

Total

 

 

Common Stock

Paid-in

 

 

Accumulated

 

 

Comprehensive

 

 

Stockholders’

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Earnings

 

 

Loss

 

 

Equity

 

Balance at September 30, 2021

 

112,913

 

 

$

1,129

 

 

$

17,286

 

 

$

356,967

 

 

$

(94,641

)

 

$

280,741

 

Net earnings

 

 

 

 

 

 

 

 

 

 

68,838

 

 

 

 

 

 

68,838

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

(3,751

)

 

 

(3,751

)

Share-based compensation

 

 

 

 

 

 

 

3,958

 

 

 

 

 

 

 

 

 

3,958

 

Stock issued for equity awards

 

795

 

 

 

8

 

 

 

7,364

 

 

 

 

 

 

 

 

 

7,372

 

Employee withholding taxes paid

   related to net share settlement

 

(56

)

 

 

(1

)

 

 

(1,136

)

 

 

 

 

 

 

 

 

(1,137

)

Repurchases and cancellations of

   common stock

 

(3,675

)

 

 

(36

)

 

 

(27,472

)

 

 

(47,492

)

 

 

 

 

 

(75,000

)

Balance at December 31, 2021

 

109,977

 

 

$

1,100

 

 

$

 

 

$

378,313

 

 

$

(98,392

)

 

$

281,021

 

Net earnings

 

 

 

 

 

 

 

 

 

 

46,808

 

 

 

 

 

 

46,808

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

(3,076

)

 

 

(3,076

)

Share-based compensation

 

 

 

 

 

 

 

2,032

 

 

 

 

 

 

 

 

 

2,032

 

Stock issued for equity awards

 

111

 

 

 

1

 

 

 

423

 

 

 

 

 

 

 

 

 

424

 

Employee withholding taxes paid

   related to net share settlement

 

(1

)

 

 

 

 

 

(15

)

 

 

 

 

 

 

 

 

(15

)

Repurchases and cancellations of

   common stock

 

(3,157

)

 

 

(32

)

 

 

(2,440

)

 

 

(52,856

)

 

 

 

 

 

(55,328

)

Balance at March 31, 2022

 

106,930

 

 

$

1,069

 

 

$

 

 

$

372,265

 

 

$

(101,468

)

 

$

271,866

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

 

 

 

 

Other

 

 

 

 

Total

 

 

Common Stock

 

Paid-in

 

 

 

 

Accumulated

 

 

 

 

Comprehensive

 

 

 

 

Stockholders’

 

 

Shares

 

 

 

 

Amount

 

 

 

 

Capital

 

 

 

 

Earnings

 

 

 

 

Loss

 

 

 

 

Equity

 

Balance at September 30, 2020

 

112,405

 

 

 

 

$

1,124

 

 

 

 

$

1,913

 

 

 

 

$

117,109

 

 

 

 

$

(104,703

)

 

 

 

$

15,443

 

Net earnings

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

57,191

 

 

 

 

 

 

 

 

 

 

57,191

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

23,588

 

 

 

 

 

23,588

 

Share-based compensation

 

 

 

 

 

 

 

 

 

 

 

2,893

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,893

 

Stock issued for equity awards

 

158

 

 

 

 

 

2

 

 

 

 

 

(2

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Employee withholding taxes paid

   related to net share settlement

 

(25

)

 

 

 

 

(1

)

 

 

 

 

(248

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(249

)

Balance at December 31, 2020

 

112,538

 

 

 

 

$

1,125

 

 

 

 

$

4,556

 

 

 

 

$

174,300

 

 

 

 

$

(81,115

)

 

 

 

$

98,866

 

Net earnings

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

38,312

 

 

 

 

 

 

 

 

 

 

38,312

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(7,316

)

 

 

 

 

(7,316

)

Share-based compensation

 

 

 

 

 

 

 

 

 

 

 

2,648

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,648

 

Stock issued for equity awards

 

141

 

 

 

 

 

2

 

 

 

 

 

2,321

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,323

 

Balance at March 31, 2021

 

112,679

 

 

 

 

$

1,127

 

 

 

 

$

9,525

 

 

 

 

$

212,612

 

 

 

 

$

(88,431

)

 

 

 

$

134,833

 

 

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

7


SALLY BEAUTY HOLDINGS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Income (Loss)

(In thousands)

(Unaudited)

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Net earnings (loss)

 

$

76,206

 

 

$

(23,526

)

 

$

171,709

 

 

$

43,057

 

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

6,617

 

 

 

5,116

 

 

 

23,734

 

 

 

(3,707

)

Interest rate caps, net of tax

 

 

471

 

 

 

245

 

 

 

646

 

 

 

274

 

Foreign exchange contracts, net of tax

 

 

(191

)

 

 

(286

)

 

 

(1,211

)

 

 

1,552

 

Other comprehensive income (loss), net of tax

 

 

6,897

 

 

 

5,075

 

 

 

23,169

 

 

 

(1,881

)

Total comprehensive income (loss)

 

$

83,103

 

 

$

(18,451

)

 

$

194,878

 

 

$

41,176

 

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

8


SALLY BEAUTY HOLDINGS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Stockholders’ Equity (Deficit)

(In thousands)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

Other

 

 

Total

 

 

Common Stock

Paid-in

 

 

Accumulated

 

 

Comprehensive

 

 

Stockholders’

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Earnings

 

 

Loss

 

 

Equity

 

Balance at September 30, 2020

 

112,405

 

 

$

1,124

 

 

$

1,913

 

 

$

117,109

 

 

$

(104,703

)

 

$

15,443

 

Net earnings

 

 

 

 

 

 

 

 

 

 

57,191

 

 

 

 

 

 

57,191

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

23,588

 

 

 

23,588

 

Share-based compensation

 

 

 

 

 

 

 

2,893

 

 

 

 

 

 

 

 

 

2,893

 

Stock issued for equity awards

 

133

 

 

 

1

 

 

 

(250

)

 

 

 

 

 

 

 

 

(249

)

Balance at December 31, 2020

 

112,538

 

 

$

1,125

 

 

$

4,556

 

 

$

174,300

 

 

$

(81,115

)

 

$

98,866

 

Net earnings

 

 

 

 

 

 

 

 

 

 

38,312

 

 

 

 

 

 

38,312

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

(7,316

)

 

 

(7,316

)

Share-based compensation

 

 

 

 

 

 

 

2,648

 

 

 

 

 

 

 

 

 

2,648

 

Stock issued for equity awards

 

141

 

 

 

2

 

 

 

2,321

 

 

 

 

 

 

 

 

 

2,323

 

Balance at March 31, 2021

 

112,679

 

 

$

1,127

 

 

$

9,525

 

 

$

212,612

 

 

$

(88,431

)

 

$

134,833

 

Net earnings

 

 

 

 

 

 

 

 

 

 

76,206

 

 

 

 

 

 

76,206

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

6,897

 

 

 

6,897

 

Share-based compensation

 

 

 

 

 

 

 

2,617

 

 

 

 

 

 

 

 

 

2,617

 

Stock issued for equity awards

 

101

 

 

 

1

 

 

 

1,716

 

 

 

 

 

 

 

 

 

1,717

 

Balance at June 30, 2021

 

112,780

 

 

$

1,128

 

 

$

13,858

 

 

$

288,818

 

 

$

(81,534

)

 

$

222,270

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

 

 

 

 

Other

 

 

 

 

Stockholders’

 

 

Common Stock

 

Paid-in

 

 

 

 

Accumulated

 

 

 

 

Comprehensive

 

 

 

 

Equity

 

 

Shares

 

 

 

 

Amount

 

 

 

 

Capital

 

 

 

 

Earnings

 

 

 

 

Loss

 

 

 

 

(Deficit)

 

Balance at September 30, 2019

 

116,725

 

 

 

 

$

1,167

 

 

 

 

$

 

 

 

 

$

55,797

 

 

 

 

$

(117,287

)

 

 

 

$

(60,323

)

Cumulative effect of ASC 842

   adoption

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(445

)

 

 

 

 

 

 

 

 

 

(445

)

Net earnings

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

53,215

 

 

 

 

 

 

 

 

 

 

53,215

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

14,870

 

 

 

 

 

14,870

 

Repurchases and cancellations of

   common stock

 

(766

)

 

 

 

 

(7

)

 

 

 

 

(6,237

)

 

 

 

 

(5,113

)

 

 

 

 

 

 

 

 

 

(11,357

)

Share-based compensation

 

 

 

 

 

 

 

 

 

 

 

3,473

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,473

 

Stock issued for equity awards

 

206

 

 

 

 

 

2

 

 

 

 

 

2,764

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,766

 

Balance at December 31, 2019

 

116,165

 

 

 

 

$

1,162

 

 

 

 

$

 

 

 

 

$

103,454

 

 

 

 

$

(102,417

)

 

 

 

$

2,199

 

Net earnings

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

13,368

 

 

 

 

 

 

 

 

 

 

13,368

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(21,826

)

 

 

 

 

(21,826

)

Repurchases and cancellations of

   common stock

 

(3,936

)

 

 

 

 

(39

)

 

 

 

 

(3,064

)

 

 

 

 

(46,897

)

 

 

 

 

 

 

 

 

 

(50,000

)

Share-based compensation

 

 

 

 

 

 

 

 

 

 

 

3,059

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,059

 

Stock issued for equity awards

 

35

 

 

 

 

 

 

 

 

 

 

5

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5

 

Balance at March 31, 2020

 

112,264

 

 

 

 

$

1,123

 

 

 

 

$

 

 

 

 

$

69,925

 

 

 

 

$

(124,243

)

 

 

 

$

(53,195

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(23,526

)

 

 

 

 

 

 

 

 

 

(23,526

)

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5,075

 

 

 

 

 

5,075

 

Share-based compensation

 

 

 

 

 

 

 

 

 

 

 

2,562

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,562

 

Stock issued for stock options

 

16

 

 

 

 

 

 

 

 

 

 

(49

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(49

)

Balance at June 30, 2020

 

112,280

 

 

 

 

$

1,123

 

 

 

 

$

2,513

 

 

 

 

$

46,399

 

 

 

 

$

(119,168

)

 

 

 

$

(69,133

)

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

9


SALLY BEAUTY HOLDINGS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

 

 

Nine Months Ended June 30,

 

 

Six Months Ended March 31,

 

 

2021

 

 

2020

 

 

2022

 

 

2021

 

Cash Flows from Operating Activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earnings

 

$

171,709

 

 

$

43,057

 

 

$

115,646

 

 

$

95,503

 

Adjustments to reconcile net earnings to net cash provided by operating

activities:

 

 

 

 

 

 

 

 

Adjustments to reconcile net earnings to net cash (used) provided by operating

activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

78,090

 

 

 

80,829

 

 

 

48,471

 

 

 

52,945

 

Share-based compensation expense

 

 

8,158

 

 

 

9,094

 

 

 

5,990

 

 

 

5,541

 

Amortization of deferred financing costs

 

 

3,280

 

 

 

2,965

 

 

 

1,865

 

 

 

2,326

 

Loss (gain) on early extinguishment of debt

 

 

2,449

 

 

 

(357

)

Loss on early extinguishment of debt

 

 

 

 

 

1,390

 

Loss on disposal of equipment and other property

 

 

1,638

 

 

 

2,910

 

 

 

80

 

 

 

1,741

 

Deferred income taxes

 

 

(998

)

 

 

600

 

 

 

6,507

 

 

 

(365

)

Changes in (exclusive of effects of acquisitions):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Trade accounts receivable

 

 

(8,612

)

 

 

495

 

 

 

3,800

 

 

 

(3,437

)

Accounts receivable, other

 

 

(10,363

)

 

 

45,888

 

 

 

2,108

 

 

 

(5,544

)

Inventory

 

 

(108,317

)

 

 

134,824

 

 

 

(95,468

)

 

 

(127,324

)

Other current assets

 

 

(931

)

 

 

(15,840

)

 

 

(6,273

)

 

 

3,588

 

Other assets

 

 

1,578

 

 

 

(691

)

 

 

1,979

 

 

 

(4,307

)

Operating leases, net

 

 

(1,595

)

 

 

 

 

 

3,657

 

 

 

(2,420

)

Accounts payable and accrued liabilities

 

 

78,250

 

 

 

(35,572

)

 

 

(70,217

)

 

 

101,331

 

Income taxes payable

 

 

6,372

 

 

 

(7,154

)

 

 

(8,393

)

 

 

13,447

 

Other liabilities

 

 

(2,980

)

 

 

13,336

 

 

 

(12,525

)

 

 

(2,859

)

Net cash provided by operating activities

 

 

217,728

 

 

 

274,384

 

Net cash (used) provided by operating activities

 

 

(2,773

)

 

 

131,556

 

Cash Flows from Investing Activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Payments for property and equipment, net of proceeds

 

 

(44,888

)

 

 

(89,702

)

 

 

(44,109

)

 

 

(27,095

)

Acquisitions, net of cash acquired

 

 

(2,351

)

 

 

(1,944

)

 

 

(318

)

 

 

(2,245

)

Net cash used by investing activities

 

 

(47,239

)

 

 

(91,646

)

 

 

(44,427

)

 

 

(29,340

)

Cash Flows from Financing Activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Proceeds from issuance of long-term debt

 

 

 

 

 

1,087,504

 

Repayments of long-term debt

 

 

(418,986

)

 

 

(437,391

)

 

 

(2,841

)

 

 

(213,271

)

Debt issuance costs

 

 

(1,300

)

 

 

(6,257

)

Payments for common stock repurchased

 

 

 

 

 

(61,357

)

 

 

(130,328

)

 

 

 

Proceeds from equity awards

 

 

3,790

 

 

 

2,722

 

 

 

7,796

 

 

 

2,322

 

Net cash (used) provided by financing activities

 

 

(416,496

)

 

 

585,221

 

Employee withholding taxes paid related to net share settlement of equity awards

 

 

(1,151

)

 

 

(249

)

Net cash used by financing activities

 

 

(126,524

)

 

 

(211,198

)

Effect of foreign exchange rate changes on cash and cash equivalents

 

 

2,173

 

 

 

(643

)

 

 

178

 

 

 

3,152

 

Net (decrease) increase in cash and cash equivalents

 

 

(243,834

)

 

 

767,316

 

Net decrease in cash and cash equivalents

 

 

(173,546

)

 

 

(105,830

)

Cash and cash equivalents, beginning of period

 

 

514,151

 

 

 

71,495

 

 

 

400,959

 

 

 

514,151

 

Cash and cash equivalents, end of period

 

$

270,317

 

 

$

838,811

 

 

$

227,413

 

 

$

408,321

 

Supplemental Cash Flow Information:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest paid

 

$

86,293

 

 

$

74,046

 

 

$

37,809

 

 

$

46,445

 

Income taxes paid

 

$

53,764

 

 

$

45,292

 

 

$

56,701

 

 

$

20,791

 

Capital expenditures incurred but not paid

 

$

2,098

 

 

$

4,469

 

 

$

3,205

 

 

$

3,255

 

 

 

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

 

 

 


 


Sally Beauty Holdings, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1.   Significant Accounting Policies

Business Operations

Sally Beauty Holdings is an international specialty retailer and distributor of professional beauty supplies with operations in North America, South America and Europe. We are one of the largest distributers of professional beauty supplies in the U.S. based on store count, operating under 2 segments, Sally Beauty Supply (“SBS”) and Beauty Systems Group (“BSG”). Our operations consist of company-operated stores, franchise stores and several e-commerce platforms. Within BSG, we also have one of the largest networks of distributor sales consultants (“DSCs”) for professional beauty products in North America, who sell directly to salons and salon professionals. SBS targets retail consumers, salons and salon professionals, while BSG targets salons and salons professionals.

Basis of Presentation

The condensed consolidated interim financial statements 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 to makefor the information not misleading.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, 2020.2021. In the opinion of management, these 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 June 30, 2021March 31, 2022 and September 30, 2020,2021, and our consolidated results of operations, consolidated comprehensive income, and consolidated statements of stockholders’ equity for the three and ninesix months ended June 30,March 31, 2022 and 2021 and 2020, our consolidated cash flows for the ninefor the six months ended June 30, 2021March 31, 2022 and 2020.2021.

Our operating results for the threePrinciples of Consolidation

The condensed consolidated interim financial statements include all accounts of Sally Beauty Holdings, Inc. and nine months ended June 30, 2021, may not be indicative of the results that may be expected for the full fiscal year ending September 30, 2021,its subsidiaries. All intercompany accounts and transactions have been eliminated in particular as a result of the uncertainty around the continuing effects of the COVID-19 pandemic on future periods. Due to the uncertainty over the duration and severity of the economic and operational impacts of COVID-19, the adverse impact of the pandemic may continue further into our fiscal year 2021 and possibly beyond, and it may be material.consolidation. All amounts are in U.S. Dollars.

2.   Significant 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 rates.tax.

3.   Recent Accounting PronouncementsUse of Estimates

In December 2019,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 FASB issued ASU No. 2019-12 which simplifies thefuture. Additionally, unknown future impacts of COVID-19 may impact those estimates and assumptions as well. Significant estimates and assumptions are part of our accounting for income taxessales 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.

Impact of COVID-19

Our operating results for the three and six months ended March 31, 2022, were adversely impacted by removing an exception related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period with year to date lossesCOVID-19 pandemic and the recognition of deferred tax liabilities for outside basis differences. Additionally, the update clarifies and simplifies other areas of ASC 740, Income Taxes. For public companies, the amendments in the update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. Early adoption is permitted, but all amendments must be adopted at once. The amendments in this update have different adoption methods including prospective basis, retrospective basis, and a modified retrospective basis dependentits continuing effects on the specific change. We are currently evaluatingeconomy, including inflationary pressures, continued supply chain disruptions, increased freight costs, labor shortages and increased labor costs. Given the uncertainty around the continuing effects of the COVID-19 pandemic and its economic impact of this update, but based on our preliminary assessment we do not believe that adoption of this updatecannot reasonably predict the effect they will have a material impact on future periods. If we become materially and adversely impacted, we may have to consider adjustments to our results of operations or financial position.strategic plans, inventory, liquidity, operational and capital expenditure plans.

4.2.   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 balance sheets, for the periodperiods were as follows (in thousands):

September 30, 2020

 

 

 

 

 

$

13,947

 

 

 

 

 

 

Six Months Ended March 31,

 

 

 

 

 

 

2022

 

 

2021

 

Beginning Balance

 

 

 

 

 

$

16,744

 

 

$

13,947

 

Loyalty points and gift cards issued but not redeemed, net of estimated breakage

Loyalty points and gift cards issued but not redeemed, net of estimated breakage

 

 

11,950

 

Loyalty points and gift cards issued but not redeemed, net of estimated breakage

 

 

6,214

 

 

 

7,998

 

Revenue recognized from beginning liability

Revenue recognized from beginning liability

 

 

(9,391

)

Revenue recognized from beginning liability

 

 

(6,316

)

 

 

(6,729

)

June 30, 2021

 

 

 

 

 

$

16,506

 

Ending Balance

 

 

 

 

 

$

16,642

 

 

$

15,216

 

See Note 11,9, Business SegmentsSegment Reporting, for additional information regarding the disaggregation of our sales revenue.


5.3.   Fair Value Measurements

Fair valueFinancial instruments measured on recurring basis

Consistent with the three-level hierarchy defined in ASC Topic 820, Fair Value Measurement, as amended, we categorize our financial assets and liabilities as follows (in thousands):follows:

 

Classification

 

Fair Value Hierarchy Level

 

June 30,

2021

 

 

September 30,

2020

 

(in thousands)

 

Classification

 

Fair Value Hierarchy Level

 

March 31,

2022

 

 

September 30,

2021

 

Financial Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents

 

Cash and cash equivalents

 

Level 1

 

$

 

 

$

194,612

 

Foreign exchange contracts

 

Other current assets

 

Level 2

 

 

1

 

 

 

 

 

Other current assets

 

Level 2

 

$

329

 

 

$

 

Interest rate caps

 

Other assets

 

Level 2

 

 

54

 

 

 

27

 

 

Other assets

 

Level 2

 

 

133

 

 

 

35

 

Total assets

 

 

 

 

 

$

55

 

 

$

194,639

 

 

 

 

 

 

$

462

 

 

$

35

 

.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign exchange contracts

 

Accrued liabilities

 

Level 2

 

$

535

 

 

$

 

 

Accrued liabilities

 

Level 2

 

$

612

 

 

$

 

 

OtherFinancial instruments not measured at fair value disclosures

Carrying amounts and the related estimated fair value of our long-term debt, excluding capital lease obligations and debt issuance costs, are as follows:

 

 

 

June 30, 2021

 

 

September 30, 2020

 

 

 

 

March 31, 2022

 

 

September 30, 2021

 

 

Fair Value Hierarchy Level

 

Carrying Value

 

 

Fair Value

 

 

Carrying Value

 

 

Fair Value

 

(in thousands)

 

Fair Value Hierarchy Level

 

Carrying Value

 

 

Fair Value

 

 

Carrying Value

 

 

Fair Value

 

Long-term debt, excluding capital leases

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Senior notes

 

Level 1

 

$

979,961

 

 

$

1,029,810

 

 

$

1,177,380

 

 

$

1,217,707

 

 

Level 1

 

$

979,961

 

 

$

1,000,636

 

 

$

979,961

 

 

$

1,019,635

 

Term loan B

 

Level 2

 

 

414,375

 

 

 

413,339

 

 

 

635,788

 

 

 

619,397

 

 

Level 2

 

 

410,250

 

 

 

405,122

 

 

 

413,000

 

 

 

411,451

 

Total long-term debt

 

 

 

$

1,394,336

 

 

$

1,443,149

 

 

$

1,813,168

 

 

$

1,837,104

 

 

 

 

$

1,390,211

 

 

$

1,405,758

 

 

$

1,392,961

 

 

$

1,431,086

 

 

The table above excludes amounts, if any, related to our ABL facility as the balance approximates fair value due to the short-term nature of our borrowings.The fair value of the senior notes was measured using unadjusted quoted market prices. The fair value of other long-term debt 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.

6.4.   Stockholders’ Equity

Share Repurchases

In August 2017, our Board of Directors approved a share repurchase program authorizing the Company to repurchase up to $1.0 billion of its common stock, subject to certain limitations governed by our debt agreements, over an approximateagreements. In July 2021, our Board of Directors approved a term extension of the share repurchase program for the four-year period expiring onending September 30, 2021. See Note 13, Subsequent Event, for more information on2025. As of March 31, 2022, we had authorization of approximately $595.8 million of additional potential share repurchases remaining under our share repurchase program.

Information related to our shares repurchased and subsequently retired were as follows (in thousands):

 

Three Months Ended

June 30,

 

 

Nine Months Ended

June 30,

 

 

Three Months Ended

March 31,

 

 

Six Months Ended

March 31,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

 

Number of shares repurchased

 

 

 

 

 

 

 

 

 

 

 

4,702

 

 

 

3,157

 

 

 

 

 

 

6,832

 

 

 

 

 

Total cost of share repurchased

 

$

 

 

$

 

 

$

 

 

$

61,357

 

 

$

55,328

 

 

$

 

 

$

130,328

 

 

$

 

 


Accumulated Other Comprehensive 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, 2020

 

$

(102,111

)

 

$

(3,003

)

 

$

411

 

 

$

(104,703

)

 

Other comprehensive income (loss) before

    reclassification, net of tax

 

 

23,734

 

 

 

(196

)

 

 

(1,072

)

 

 

22,466

 

 

Reclassification to net earnings, net of tax

 

 

 

 

 

842

 

 

 

(139

)

 

 

703

 

 

Balance at June 30, 2021

 

$

(78,377

)

 

$

(2,357

)

 

$

(800

)

 

$

(81,534

)

 

 

 

Foreign Currency Translation Adjustments

 

 

Interest Rate Caps

 

 

Foreign Exchange Contracts

 

 

Total

 

 

Balance at September 30, 2021

 

$

(92,154

)

 

$

(2,085

)

 

$

(402

)

 

$

(94,641

)

 

Other comprehensive loss before

    reclassification, net of tax

 

 

(7,261

)

 

 

(114

)

 

 

(212

)

 

 

(7,587

)

 

Reclassification to net earnings, net of tax

 

 

 

 

 

392

 

 

 

368

 

 

 

760

 

 

Balance at March 31, 2022

 

$

(99,415

)

 

$

(1,807

)

 

$

(246

)

 

$

(101,468

)

 

The tax impact for the changes in other comprehensive loss and the reclassifications to net earnings was not material.


7.5.   Weighted-Average Shares

The following table sets forth the reconciliation of basic and diluted weighted-average shares (in thousands):

 

 

Three Months Ended

June 30,

 

 

Nine Months Ended

June 30,

 

 

Three Months Ended

March 31,

 

 

Six Months Ended

March 31,

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Weighted-average basic shares

 

 

112,739

 

 

 

112,271

 

 

 

112,605

 

 

 

114,413

 

 

 

108,743

 

 

 

112,603

 

 

 

110,387

 

 

 

112,538

 

Dilutive securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock option and stock award programs

 

 

2,188

 

 

 

 

 

 

1,669

 

 

 

957

 

 

 

1,797

 

 

 

1,739

 

 

 

1,820

 

 

 

1,490

 

Weighted-average diluted shares

 

 

114,927

 

 

 

112,271

 

 

 

114,274

 

 

 

115,370

 

 

 

110,540

 

 

 

114,342

 

 

 

112,207

 

 

 

114,028

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Anti-dilutive options excluded from our computation of diluted shares

 

 

2,188

 

 

 

4,976

 

 

 

1,670

 

 

 

4,887

 

 

 

2,534

 

 

 

4,197

 

 

 

2,169

 

 

 

4,222

 

Potentially dilutive stock option and stock award programs excluded from our computation of diluted shares

 

 

 

 

 

941

 

 

 

 

 

 

 

 

8.6. Goodwill and Intangible Assets

During the three months ended March 31, 2021,2022, we completed our annual assessment for impairment of goodwill and other intangible assets. For goodwill, we used a qualitative analysis and our actual and forecasted results are exceeding the estimates from the last quantitative test.test. NaN material impairment losses were recognized in the current or prior periods presented in connection with our goodwill and other intangible assets.

For the three months ended June 30, 2021 and 2020, amortization expense related to other intangible assets was $1.6 million and $2.2 million, respectively, and for the nine months ended June 30, 2021 and 2020, amortization expense was $5.0 million and $6.8 million, respectively.

 

 

Three Months Ended

March 31,

 

 

Six Months Ended

March 31,

 

(in thousands)

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Intangible assets amortization expense

 

$

999

 

 

$

1,609

 

 

$

2,070

 

 

$

3,307

 

Additionally, during the ninesix months ended June 30, 2021,March 31, 2022, the increasedecrease in goodwill was primarily from the effects of foreign currency exchange rates of $6.1$1.5 million.

9.   Short-term Borrowings and Long-term Debt7. Accrued Liabilities

At June 30, 2021, there were 0 outstanding borrowings under our ABL facilityand we had $481.7 million available for borrowing, thereunder, including our Canadian sub-facility, subject to the conditions contained therein. During the three months ended June 30, 2021, we entered into a third amendment to our ABL facility which extended the maturity to May 11, 2026. In connection with the amendment, we incurred $1.3 million in debt issuance costs that will be amortized over the lifeAccrued liabilities consist of the ABL facility.following (in thousands):

 

 

March 31,

2022

 

 

September 30,

2021

 

Compensation and benefits

 

$

55,300

 

 

$

73,344

 

Interest payable

 

 

24,103

 

 

 

24,101

 

Deferred revenue

 

 

18,410

 

 

 

18,543

 

Rental obligations

 

 

10,754

 

 

 

10,501

 

Insurance reserves

 

 

5,962

 

 

 

5,934

 

Property and other taxes

 

 

2,293

 

 

 

3,853

 

Operating accruals and other

 

 

53,718

 

 

 

69,879

 

Total accrued liabilities

 

$

170,540

 

 

$

206,155

 

 

 

 

 

 

 

 

 

 

During the three months ended March 31, 2021, we paid the remaining $213.2 million of aggregate outstanding principal on our term loan B fixed tranche at par, excluding accrued interest. In connection with the debt repayment, we recognized a $1.4 million loss on the extinguishment of debt from the write-off of unamortized deferred financing costs.

On April 1, 2021, we called the entire outstanding balance of $197.4 million of our 5.50% senior notes due 2023 at par plus a premium. In connection with the repayment, we recognized losses on extinguishment of debt in the aggregate amount of $2.8 million, which included a $1.8 million call premium and the write-off of $1.0 million in unamortized deferred financing costs.

On June 30, 2021, we elected to repay $8.3 million of aggregate outstanding principal on our term loan B variable tranche. This optional prepayment did not have any early prepayment penalties. In connection with the prepayment, we recognized a loss on extinguishment of debt of $0.1 million from the write-off of unamortized deferred financing costs. As of June 30, 2021, we still have $414.4 million remaining on our term loan B variable tranche.

Covenants

The agreements governing our ABL facility, term loan B and the senior notes contain a customary covenant package that places restrictions on the disposition of assets, the granting of liens and security interests, the prepayment of certain indebtedness, and other matters with customary events of default, including customary cross-default and/or cross-acceleration provisions. As of June 30, 2021, we were in compliance with all debt covenants, and all the net assets of our consolidated subsidiaries were unrestricted from transfer.


10.

8.    Derivative Instruments and Hedging Activities

During the ninesix months ended June 30, 2021,March 31, 2022, we did 0t purchase or hold any derivative instruments for trading or speculative purposes. See Note 5,3, Fair Value Measurements, for the classification and fair value of our derivative instruments.

Designated Cash Flow Hedges

Foreign Currency Forwards

We regularly enter into foreign currency forwards to mitigate our exposure to exchange rate changes on inventory purchases in U.S. dollars by our foreign subsidiaries. At June 30, 2021, the notional amountMarch 31, 2022, we held forwards, which expire ratably through these forwards,September 30, 2022, with a notional amount, based upon exchange rates at June 30, 2021, wasMarch 31, 2022, as follows (in thousands):

Notional Currency

 

Notional Amount

 

 

Notional Amount

 

Mexican Peso

 

$

13,013

 

Euro

 

$

4,558

 

 

 

8,551

 

Mexican Peso

 

 

3,698

 

Canadian Dollar

 

 

1,393

 

 

 

5,804

 

Total

 

$

9,649

 

 

$

27,368

 

 

We record quarterly, net of income tax,Quarterly, the changes in fair value related to the 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.turns, in our condensed consolidated statements of earnings. For the three and ninesix months ended June 30,March 31, 2022 and 2021, we recognized a loss of $0.3$0.4 million and a gain of $0.1$0.4 million, respectively, into costrespectively. The effects of goods sold on our condensed consolidated statements of earnings.foreign currency forwards were not material for the three months ended March 31, 2022 and 2021. Based on June 30, 2021March 31, 2022 valuations and exchange rates, we expect to reclassify losses of approximately $1.0$0.1 million into cost of goods sold over the next 12 months.

Interest Rate Caps

In July 2017, we purchased 2 interest rate caps with an initial aggregate notional amount of $550 million (the “interest rate caps”) to mitigate the exposure to higher interest rates in connection with our term loan B. The interest rate caps are comprised of individual caplets that expire ratably through June 30, 2023, and are designated as cash flow hedges. Accordingly, changes in fair value of the interest rate caps are recorded quarterly, net of income tax, and are included in AOCL. Over

For the next 12six months ended March 31, 2022 and 2021, we expect to reclassify approximately $1.6recognized expense of $0.4 million and $0.2 million, respectively, into interest expense which represents the original valueon our condensed consolidated statements of the expiring caplets.

earnings. The effects of our interest rate caps on our condensed consolidated statements of earnings were not material for the three and nine months ended June 30,March 31, 2022 and 2021. Over the next 12 months, we expect to reclassify approximately $1.9 million into interest expense, which represents the original value of the expiring caplets.

11.   Business Segments


9.   Segment Reporting

Segment data for the three and ninesix months ended June 30,March 31, 2022 and 2021, and 2020, is as follows (in thousands):

 

 

Three Months Ended

June 30,

 

 

Nine Months Ended

June 30,

 

 

Three Months Ended

March 31,

 

 

Six Months Ended

March 31,

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Net sales:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sally Beauty Supply ("SBS")

 

$

602,681

 

 

$

415,468

 

 

$

1,693,015

 

 

$

1,504,125

 

 

$

525,785

 

 

$

542,664

 

 

$

1,087,315

 

 

$

1,090,334

 

Beauty Systems Group ("BSG")

 

 

419,706

 

 

 

289,819

 

 

 

1,191,722

 

 

 

1,052,393

 

 

 

385,602

 

 

 

383,664

 

 

 

804,323

 

 

 

772,016

 

Total

 

$

1,022,387

 

 

$

705,287

 

 

$

2,884,737

 

 

$

2,556,518

 

 

$

911,387

 

 

$

926,328

 

 

$

1,891,638

 

 

$

1,862,350

 

Earnings (loss) before provision for income taxes:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings before provision for income taxes:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Segment operating earnings:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SBS

 

$

116,784

 

 

$

3,087

 

 

$

311,975

 

 

$

133,684

 

 

$

80,940

 

 

$

100,063

 

 

$

181,563

 

 

$

195,191

 

BSG

 

 

55,265

 

 

 

40,084

 

 

 

151,680

 

 

 

143,557

 

 

 

46,008

 

 

 

47,843

 

 

 

104,554

 

 

 

96,415

 

Segment operating earnings

 

 

172,049

 

 

 

43,171

 

 

 

463,655

 

 

 

277,241

 

 

 

126,948

 

 

 

147,906

 

 

 

286,117

 

 

 

291,606

 

Unallocated expenses

 

 

44,124

 

 

 

35,924

 

 

 

155,034

 

 

 

126,617

 

 

 

40,487

 

 

 

71,764

 

 

 

85,777

 

 

 

110,910

 

Restructuring

 

 

508

 

 

 

5,816

 

 

 

1,371

 

 

 

11,541

 

 

 

 

 

 

631

 

 

 

1,099

 

 

 

863

 

Consolidated operating earnings

 

 

127,417

 

 

 

1,431

 

 

 

307,250

 

 

 

139,083

 

 

 

86,461

 

 

 

75,511

 

 

 

199,241

 

 

 

179,833

 

Interest expense

 

 

23,452

 

 

 

27,298

 

 

 

73,313

 

 

 

70,483

 

 

 

19,896

 

 

 

23,883

 

 

 

40,137

 

 

 

49,861

 

Earnings (loss) before provision for income taxes

 

$

103,965

 

 

$

(25,867

)

 

$

233,937

 

 

$

68,600

 

Earnings before provision

for income taxes

 

$

66,565

 

 

$

51,628

 

 

$

159,104

 

 

$

129,972

 

 

Sales between segments, which are eliminated in consolidation, were not material during the three and ninesix months ended June 30, 2021March 31, 2022 and 2020.2021.


Disaggregation of net sales by segment

The following tables disaggregate our segment revenues by merchandise category. We have reclassified certain prior year amounts to conform to current year presentation.

 

Three Months Ended

June 30,

 

 

Nine Months Ended

June 30,

 

 

Three Months Ended

March 31,

 

 

Six Months Ended

March 31,

 

SBS

 

2021

 

 

2020

 

 

2021

 

 

2020

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Hair color

 

 

35.6

%

 

 

36.6

%

 

 

35.3

%

 

 

33.8

%

 

 

38.1

%

 

 

35.8

%

 

 

37.4

%

 

 

35.9

%

Hair care

 

 

18.9

%

 

 

16.3

%

 

 

18.8

%

 

 

19.0

%

 

 

24.1

%

 

 

21.7

%

 

 

24.0

%

 

 

21.4

%

Skin and nail care

 

 

14.6

%

 

 

13.3

%

 

 

12.2

%

 

 

13.8

%

Styling tools

 

 

11.6

%

 

 

13.6

%

 

 

14.3

%

 

 

13.0

%

Salon supplies and accessories

 

 

7.6

%

 

 

9.1

%

 

 

7.7

%

 

 

7.5

%

Textured hair products

 

 

5.8

%

 

 

4.7

%

 

 

5.9

%

 

 

5.1

%

Styling tools and supplies

 

 

19.2

%

 

 

22.8

%

 

 

19.7

%

 

 

22.9

%

Nail

 

 

10.6

%

 

 

10.7

%

 

 

10.5

%

 

 

10.8

%

Skin and cosmetics

 

 

7.4

%

 

 

8.3

%

 

 

7.7

%

 

 

8.3

%

Other beauty items

 

 

5.9

%

 

 

6.4

%

 

 

5.8

%

 

 

7.8

%

 

 

0.6

%

 

 

0.7

%

 

 

0.7

%

 

 

0.7

%

Total

 

 

100.0

%

 

 

100.0

%

 

 

100.0

%

 

 

100.0

%

 

 

100.0

%

 

 

100.0

%

 

 

100.0

%

 

 

100.0

%

 

 

Three Months Ended

June 30,

 

 

Nine Months Ended

June 30,

 

 

Three Months Ended

March 31,

 

 

Six Months Ended

March 31,

 

BSG

 

2021

 

 

2020

 

 

2021

 

 

2020

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Hair color

 

 

45.1

%

 

 

42.2

%

 

 

43.2

%

 

 

39.7

%

 

 

42.7

%

 

 

42.6

%

 

 

42.4

%

 

 

41.4

%

Hair care

 

 

36.6

%

 

 

32.5

%

 

 

36.5

%

 

 

34.2

%

 

 

39.9

%

 

 

38.8

%

 

 

39.9

%

 

 

39.0

%

Skin and nail care

 

 

6.8

%

 

 

8.2

%

 

 

7.3

%

 

 

8.2

%

Styling tools

 

 

6.3

%

 

 

6.2

%

 

 

6.5

%

 

 

6.4

%

Styling tools and supplies

 

 

11.2

%

 

 

11.2

%

 

 

11.3

%

 

 

11.8

%

Skin and cosmetics

 

 

3.5

%

 

 

4.0

%

 

 

4.0

%

 

 

4.3

%

Nail

 

 

2.3

%

 

 

2.9

%

 

 

2.1

%

 

 

3.1

%

Other beauty items

 

 

2.6

%

 

 

7.0

%

 

 

2.5

%

 

 

3.9

%

 

 

0.4

%

 

 

0.5

%

 

 

0.3

%

 

 

0.4

%

Promotional items

 

 

2.6

%

 

 

3.9

%

 

 

4.0

%

 

 

7.6

%

Total

 

 

100.0

%

 

 

100.0

%

 

 

100.0

%

 

 

100.0

%

 

 

100.0

%

 

 

100.0

%

 

 

100.0

%

 

 

100.0

%


The following tables disaggregate our segment revenue by sales channels:

 

Three Months Ended

June 30,

 

 

Nine Months Ended

June 30,

 

 

Three Months Ended

March 31,

 

 

Six Months Ended

March 31,

 

SBS

 

2021

 

 

2020

 

 

2021

 

 

2020

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Company-operated stores

 

 

94.2

%

 

 

79.1

%

 

 

93.7

%

 

 

90.9

%

 

 

93.7

%

 

 

93.0

%

 

 

94.0

%

 

 

93.5

%

E-commerce

 

 

5.7

%

 

 

20.8

%

 

 

6.2

%

 

 

8.9

%

 

 

6.3

%

 

 

6.9

%

 

 

6.0

%

 

 

6.5

%

Franchise stores

 

 

0.1

%

 

 

0.1

%

 

 

0.1

%

 

 

0.2

%

 

 

0.0

%

 

 

0.1

%

 

 

0.0

%

 

 

0.0

%

Total

 

 

100.0

%

 

 

100.0

%

 

 

100.0

%

 

 

100.0

%

 

 

100.0

%

 

 

100.0

%

 

 

100.0

%

 

 

100.0

%

 

 

Three Months Ended

June 30,

 

 

Nine Months Ended

June 30,

 

 

Three Months Ended

March 31,

 

 

Six Months Ended

March 31,

 

BSG

 

2021

 

 

2020

 

 

2021

 

 

2020

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Company-operated stores

 

 

69.2

%

 

 

63.9

%

 

 

69.7

%

 

 

68.2

%

 

 

66.6

%

 

 

70.2

%

 

 

67.1

%

 

 

69.9

%

Distributor sales consultants

 

 

14.1

%

 

 

10.8

%

 

 

14.0

%

 

 

15.5

%

 

 

14.0

%

 

 

13.7

%

 

 

13.8

%

 

 

14.0

%

E-commerce

 

 

8.8

%

 

 

17.4

%

 

 

8.8

%

 

 

8.9

%

 

 

12.4

%

 

 

9.1

%

 

 

12.0

%

 

 

8.8

%

Franchise stores

 

 

7.9

%

 

 

7.9

%

 

 

7.5

%

 

 

7.4

%

 

 

7.0

%

 

 

7.0

%

 

 

7.1

%

 

 

7.3

%

Total

 

 

100.0

%

 

 

100.0

%

 

 

100.0

%

 

 

100.0

%

 

 

100.0

%

 

 

100.0

%

 

 

100.0

%

 

 

100.0

%

 

12.   Income Tax10. Subsequent Event

ForOn April 29, 2022, we announced that our wholly-owned subsidiaries, Sally Holdings LLC (“Holdings”) and Sally Capital Inc. (together with Holdings, the three months ended June 30, 2021 and 2020, our effective tax rates were 26.7% and 9.1%“Issuers”), respectively. The effective tax rate forissued a notice of redemption (the “Redemption Notice”), to redeem on May 31, 2022, the third quarterentire $300.00 million aggregate principal amount of the prior year was negatively impacted by foreign losses for8.750% Senior Secured Second Lien Notes due 2025 (“Notes”) which remain outstanding. The redemption is being made pursuant to the terms of the Indenture dated April 24, 2020, at a tax benefit couldredemption price equal to 104.375% of the principal amount of the Notes plus accrued but unpaid interest to, but not be recognized. Forincluding, the nine months ended June 30, 2021 and 2020, our effective tax rates were 26.6% and 37.2%, respectively. The decrease in the effective tax rate was primarily due to greater losses in the prior year from foreign subsidiaries for which a tax benefit could not be recognized and the establishment of a valuation allowance in a foreign subsidiary in the prior year.


redemption date.


Refer to the following rate reconciliation for more details relating to the period over period differences in the effective tax rate:

 

Three Months Ended

 

 

Nine Months Ended

 

 

June 30,

 

 

June 30,

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

U.S. federal statutory income tax rate

 

21.0

%

 

 

21.0

%

 

 

21.0

%

 

 

21.0

%

State income taxes, net of federal tax benefit

 

3.2

 

 

 

2.9

 

 

 

3.3

 

 

 

3.9

 

Effect of foreign operations

 

1.1

 

 

 

4.6

 

 

 

0.9

 

 

 

(0.5

)

Foreign valuation allowances (1)

 

0.5

 

 

 

(13.0

)

 

 

0.3

 

 

 

10.2

 

Deemed repatriation tax (1)

 

 

 

 

(1.1

)

 

 

 

 

 

0.4

 

Other, net (1)

 

0.9

 

 

 

(5.3

)

 

 

1.1

 

 

 

2.2

 

Effective tax rate

 

26.7

%

 

 

9.1

%

 

 

26.6

%

 

 

37.2

%

(1)

For the three months ended June 30, 2020, the impact of these and certain other tax impacting items is opposite the customary relationship due to the loss before the provision for income taxes that was incurred. A lower effective tax rate is not beneficial in situations where a pre-tax book loss has been incurred.

13.   Subsequent Event

In 2017 the Board of Directors approved a share repurchase program authorizing us to repurchase up to $1.0 billion of our common stock through September 30, 2021. On July 22, 2021, the Board approved a term extension of the share repurchase program for the four-year period ending September 30, 2025. Under the extension we are authorized to purchase our common stock up to the amount remaining under the Board’s 2017 authorization, which is currently $726.1 million.


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. 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, 2020,2021.

Executive Overview

Our results in the second quarter of 2022 delivered a solid financial performance with increases in gross margin, net earnings and our other filings withdiluted earnings per share, compared to the Securities and Exchange Commission, includingsame period last year. We achieved all of this despite 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. The results of operations for any interim period may not necessarily be indicative of the results that may be expected for any future interim period or the entire fiscal year, in particular as a result of the uncertainty of the continued effects ofongoing macro-environment challenges surrounding the COVID-19 pandemicOmicron variant, supply chain, and inflationary pressures, which have impacted customer behavior and purchasing power. However, by continuing to focus on future periods.our four strategic pillars; leveraging our digital platform, driving loyalty and personalization, delivering product innovation and optimizing our supply chain, we believe we are well-positioned to navigate these macro headwinds and continue to drive growth in both of our businesses, retail and professional.

Highlights for the Three Months Ended June 30, 2021March 31, 2022

 

Consolidated net sales for the three months ended June 30, 2021, increased $317.1March 31, 2022, decreased $14.9 million, or 45.0%1.6%, to $1,022.4$911.4 million, compared to the three months ended June 30, 2020;March 31, 2021;

 

Consolidated same storecomparable sales increased 44.7%0.2% for the three months ended June 30, 2021,March 31, 2022, compared to the three months ended June 30, 2020;March 31, 2021;

 

Consolidated gross profit for the three months ended June 30, 2021, increased $192.6March 31, 2022, decreased $1.9 million, or 59.8%0.4%, to $514.4$465.3 million, compared to the three months ended June 30, 2020.March 31, 2021. Gross margin increased 47070 basis points to 50.3%51.1% for the three months ended June 30, 2021,March 31, 2022, compared to the three months ended June 30, 2020;March 31, 2021;

 

Consolidated operating earnings for the three months ended June 30, 2021,March 31, 2022, increased $126.0$11.0 million, or 8,804.1%14.5%, to $127.4$86.5 million, compared to the three months ended June 30, 2020.March 31, 2021. Operating margin increased 1,230 basis points130 bps to 12.5%9.5% for the three months ended June 30, 2021,March 31, 2022, compared to the three months ended June 30, 2020;March 31, 2021;

 

For the three months ended June 30, 2021, we hadMarch 31, 2022, our consolidated net earnings of $76.2increased $8.5 million, or 22.2%, to $46.8 million, compared to consolidated net loss of $23.5 million for the three months ended June 30, 2020;March 31, 2021;

 

For the three months ended June 30, 2021, we hadMarch 31, 2022, our diluted earnings per share of $0.66,was $0.42 compared to diluted loss per share of $0.21$0.34 for the three months ended June 30, 2020;March 31, 2021; and

 

Cash provided by operations was $86.2$2.8 million for the three months ended June 30, 2021,March 31, 2022, compared to $198.3cash provided by operations of $92.6 million for the three months ended June 30, 2020.March 31, 2021.

Impact of COVID-19 on Our Business

Throughout the current quarter and Business Strategy Update

year we continued to experience disruptions to our business as a result of the COVID-19 restrictions onpandemic and continued to take certain actions in order to protect our globalcustomers and associates. In particular, our store operations were disrupted by the Omicron variant due to employee illnesses primarily in December and January and we continued to easeincur additional costs associated with testing and vaccinations, disinfectant cleanings in connection with positive cases in stores and support centers, and the write-down of obsolete personal-protective equipment inventory.

Due to general labor shortages in the U.S., especially among retail and hourly employees, we have also experienced staffing shortages at our U.S. stores and an increase in our compensation costs in order to attract and retain associates.  While the situation has been improving, we cannot reasonably predict the effects of new variants or expect these positive trends to continue. Therefore, our future performance may partially depend on impacts of COVID-19 such as decreased customer in-store traffic, new waves of infection, labor and supply chain disruptions, developing variants, changes in guidance from international and domestic authorities, and availability and timing of vaccines.

Refer to Item 1A. “Risk Factors” in our Form 10-K for the fiscal year ended September 30, 2021, for further discussion on the risks and uncertainties created by COVID-19.


Global Supply Chain and Inflationary Impact

There continues to be volatility in the global supply chain as shipment delays continue to impact ports, inflationary pressures are exacerbated by global political instability, and consumer demand continues to evolve as a lingering effect from the COVID-19 pandemic. In the current quarter we continued to experience elevated distribution costs as these shifts in demand and supply have led to longer lead times and delays, and carriers are faced with increased costs associated with capacity imbalances between ports as well as overall prolonged transportation challenges. Moreover, the war in Ukraine has created additional uncertainty in the global markets, which have seen a rise in fuel prices, and is another factor impacting distribution costs. Due to these events, we have seen an increase in our inbound freight costs and extended inventory in transit times. Inflationary pressures also impacted customer behavior which resulted in lower traffic and conversion in the current quarter. However, due

Comparable Sales

We have recently launched many digital initiatives to support our omni-channel strategies to provide customers an enhanced shopping experience. As such, we believe that comparable sales is an appropriate performance indicator to measure our sales growth compared to the continued uncertainty over the duration and severityprior period. Our comparable sales include sales from stores that have been operating for 14 months or longer as of the economiclast day of a month and operational impactse-commerce revenue. Additionally, our comparable sales include sales to franchisees and full service sales. Our comparable sales excludes the effect of COVID-19,changes in foreign exchange rates and sales from stores relocated until 14 months after the adverse impactrelocation. 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 pandemic may continue further into our fiscal year 2021 and possibly beyond, and it may be material.

Furthermore, we continue to make progress against our key business initiatives, which includes leveraging and optimizing our elevated digital capabilities, growing our customer engagement and loyalty, and implementingsame as other retailers as the final steps in our successful transformation journey, which remains on track to be substantially completed bycalculation varies across the end of the year.retail industry.



 

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

June 30,

 

 

Nine Months Ended

June 30,

 

 

Three Months Ended

March 31,

 

 

Six Months Ended

March 31,

 

 

2021

 

 

2020

 

 

Increase (Decrease)

 

 

2021

 

 

2020

 

 

Increase (Decrease)

 

 

2022

 

 

2021

 

 

Increase (Decrease)

 

 

2022

 

 

2021

 

 

Increase (Decrease)

 

Net sales:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SBS

 

$

602,681

 

 

$

415,468

 

 

$

187,213

 

 

 

45.1

%

 

$

1,693,015

 

 

$

1,504,125

 

 

$

188,890

 

 

 

12.6

%

 

$

525,785

 

 

$

542,664

 

 

$

(16,879

)

 

 

(3.1

)%

 

$

1,087,315

 

 

$

1,090,334

 

 

$

(3,019

)

 

 

(0.3

)%

BSG

 

 

419,706

 

 

 

289,819

 

 

 

129,887

 

 

 

44.8

%

 

 

1,191,722

 

 

 

1,052,393

 

 

 

139,329

 

 

 

13.2

%

 

 

385,602

 

 

 

383,664

 

 

 

1,938

 

 

 

0.5

%

 

 

804,323

 

 

 

772,016

 

 

 

32,307

 

 

 

4.2

%

Consolidated

 

$

1,022,387

 

 

$

705,287

 

 

$

317,100

 

 

 

45.0

%

 

$

2,884,737

 

 

$

2,556,518

 

 

$

328,219

 

 

 

12.8

%

 

$

911,387

 

 

$

926,328

 

 

$

(14,941

)

 

 

(1.6

)%

 

$

1,891,638

 

 

$

1,862,350

 

 

$

29,288

 

 

 

1.6

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross profit:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SBS

 

$

349,167

 

 

$

202,460

 

 

$

146,707

 

 

 

72.5

%

 

$

982,139

 

 

$

800,517

 

 

$

181,622

 

 

 

22.7

%

 

$

309,262

 

 

$

317,161

 

 

$

(7,899

)

 

 

(2.5

)%

 

$

637,434

 

 

$

632,973

 

 

$

4,461

 

 

 

0.7

%

BSG

 

 

165,239

 

 

 

119,386

 

 

 

45,853

 

 

 

38.4

%

 

 

470,220

 

 

 

425,934

 

 

 

44,286

 

 

 

10.4

%

 

 

156,070

 

 

 

150,068

 

 

 

6,002

 

 

 

4.0

%

 

 

328,027

 

 

 

304,980

 

 

 

23,047

 

 

 

7.6

%

Consolidated

 

$

514,406

 

 

$

321,846

 

 

$

192,560

 

 

 

59.8

%

 

$

1,452,359

 

 

$

1,226,451

 

 

$

225,908

 

 

 

18.4

%

 

$

465,332

 

 

$

467,229

 

 

$

(1,897

)

 

 

(0.4

)%

 

$

965,461

 

 

$

937,953

 

 

$

27,508

 

 

 

2.9

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Segment gross margin:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SBS

 

 

57.9

%

 

 

48.7

%

 

920

 

 

bps

 

 

 

58.0

%

 

 

53.2

%

 

480

 

 

bps

 

 

 

58.8

%

 

 

58.4

%

 

40

 

 

bps

 

 

 

58.6

%

 

 

58.1

%

 

50

 

 

bps

 

BSG

 

 

39.4

%

 

 

41.2

%

 

(180)

 

 

bps

 

 

 

39.5

%

 

 

40.5

%

 

(100)

 

 

bps

 

 

 

40.5

%

 

 

39.1

%

 

140

 

 

bps

 

 

 

40.8

%

 

 

39.5

%

 

130

 

 

bps

 

Consolidated

 

 

50.3

%

 

 

45.6

%

 

470

 

 

bps

 

 

 

50.3

%

 

 

48.0

%

 

230

 

 

bps

 

 

 

51.1

%

 

 

50.4

%

 

70

 

 

bps

 

 

 

51.0

%

 

 

50.4

%

 

60

 

 

bps

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earnings (loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earnings:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Segment operating earnings:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SBS

 

$

116,784

 

 

$

3,087

 

 

$

113,697

 

 

 

3683.1

%

 

$

311,975

 

 

$

133,684

 

 

$

178,291

 

 

 

133.4

%

 

$

80,940

 

 

$

100,063

 

 

$

(19,123

)

 

 

(19.1

)%

 

$

181,563

 

 

$

195,191

 

 

$

(13,628

)

 

 

(7.0

)%

BSG

 

 

55,265

 

 

 

40,084

 

 

 

15,181

 

 

 

37.9

%

 

 

151,680

 

 

 

143,557

 

 

 

8,123

 

 

 

5.7

%

 

 

46,008

 

 

 

47,843

 

 

 

(1,835

)

 

 

(3.8

)%

 

 

104,554

 

 

 

96,415

 

 

 

8,139

 

 

 

8.4

%

Segment operating earnings

 

 

172,049

 

 

 

43,171

 

 

 

128,878

 

 

 

298.5

%

 

 

463,655

 

 

 

277,241

 

 

 

186,414

 

 

 

67.2

%

 

 

126,948

 

 

 

147,906

 

 

 

(20,958

)

 

 

(14.2

)%

 

 

286,117

 

 

 

291,606

 

 

 

(5,489

)

 

 

(1.9

)%

Unallocated expenses and restructuring (a)

 

 

44,632

 

 

 

41,740

 

 

 

2,892

 

 

 

6.9

%

 

 

156,405

 

 

 

138,158

 

 

 

18,247

 

 

 

13.2

%

 

 

40,487

 

 

 

72,395

 

 

 

(31,908

)

 

 

(44.1

)%

 

 

86,876

 

 

 

111,773

 

 

 

(24,897

)

 

 

(22.3

)%

Consolidated operating earnings

 

 

127,417

 

 

 

1,431

 

 

 

125,986

 

 

 

8804.1

%

 

 

307,250

 

 

 

139,083

 

 

 

168,167

 

 

 

120.9

%

 

 

86,461

 

 

 

75,511

 

 

 

10,950

 

 

 

14.5

%

 

 

199,241

 

 

 

179,833

 

 

 

19,408

 

 

 

10.8

%

Interest expense

 

 

23,452

 

 

 

27,298

 

 

 

(3,846

)

 

 

(14.1

)%

 

 

73,313

 

 

 

70,483

 

 

 

2,830

 

 

 

4.0

%

 

 

19,896

 

 

 

23,883

 

 

 

(3,987

)

 

 

(16.7

)%

 

 

40,137

 

 

 

49,861

 

 

 

(9,724

)

 

 

(19.5

)%

Earnings (loss) before provision for income taxes

 

 

103,965

 

 

 

(25,867

)

 

 

129,832

 

 

 

(501.9

)%

 

 

233,937

 

 

 

68,600

 

 

 

165,337

 

 

 

241.0

%

Provision (benefit) for income taxes

 

 

27,759

 

 

 

(2,341

)

 

 

30,100

 

 

 

(1285.8

)%

 

 

62,228

 

 

 

25,543

 

 

 

36,685

 

 

 

143.6

%

Net earnings (loss)

 

$

76,206

 

 

$

(23,526

)

 

$

99,732

 

 

 

(423.9

)%

 

$

171,709

 

 

$

43,057

 

 

$

128,652

 

 

 

298.8

%

Earnings before provision for income taxes

 

 

66,565

 

 

 

51,628

 

 

 

14,937

 

 

 

28.9

%

 

 

159,104

 

 

 

129,972

 

 

 

29,132

 

 

 

22.4

%

Provision for income taxes

 

 

19,757

 

 

 

13,316

 

 

 

6,441

 

 

 

48.4

%

 

 

43,458

 

 

 

34,469

 

 

 

8,989

 

 

 

26.1

%

Net earnings

 

$

46,808

 

 

$

38,312

 

 

$

8,496

 

 

 

22.2

%

 

$

115,646

 

 

$

95,503

 

 

$

20,143

 

 

 

21.1

%

 

.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Number of stores at end-of-period (including franchises):

Number of stores at end-of-period (including franchises):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Number of stores at end-of-period (including franchises):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SBS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,611

 

 

 

3,691

 

 

 

(80

)

 

 

(2.2

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,499

 

 

 

3,625

 

 

 

(126

)

 

 

(3.5

)%

BSG

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,367

 

 

 

1,371

 

 

 

(4

)

 

 

(0.3

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,363

 

 

 

1,379

 

 

 

(16

)

 

 

(1.2

)%

Consolidated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,978

 

 

 

5,062

 

 

 

(84

)

 

 

(1.7

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,862

 

 

 

5,004

 

 

 

(142

)

 

 

(2.8

)%

Same store sales growth (decline) (b):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comparable sales growth (decline) (b):

Comparable sales growth (decline) (b):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SBS

 

 

43.3

%

 

 

(25.9

)%

 

6,920

 

 

bps

 

 

 

12.6

%

 

 

(11.3

)%

 

2,390

 

 

bps

 

 

 

(0.5

)%

 

 

3.7

%

 

(420)

 

 

bps

 

 

 

2.0

%

 

 

(0.2

)%

 

220

 

 

bps

 

BSG

 

 

47.8

%

 

 

(27.9

)%

 

7,570

 

 

bps

 

 

 

14.5

%

 

 

(11.2

)%

 

2,570

 

 

bps

 

 

 

1.3

%

 

 

8.0

%

 

(670)

 

 

bps

 

 

 

4.9

%

 

 

0.2

%

 

470

 

 

bps

 

Consolidated

 

 

44.7

%

 

 

(26.6

)%

 

7,130

 

 

bps

 

 

 

13.2

%

 

 

(11.3

)%

 

2,450

 

 

bps

 

 

 

0.2

%

 

 

5.4

%

 

(520)

 

 

bps

 

 

 

3.2

%

 

 

(0.1

)%

 

330

 

 

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)

For the purpose of calculating our same storeOur comparable sales metrics, we compare the current periodinclude sales forfrom stores openthat have been operating for 14 months or longer as of the last day of a month withand e-commerce revenue. Additionally, our comparable sales include sales to franchisees and full service sales. Our comparable sales excludes the sales for these stores for the comparable periodeffect of changes in the prior fiscal year. Our same store sales are calculated in constant dollarsforeign exchange rates and include e-commerce sales from certain digital platforms, but do not generally include the sales from stores relocated until 14 months after the relocation. The salesRevenue from stores acquiredacquisitions are excluded from our same storecomparable sales calculation until 14 months after the acquisition. Prior to fiscal year 2022, we reported Same Store Sales. For fiscal year 2022, we are reporting Comparable Sales, which includes sales to franchisees and full service sales. We have recast prior year amounts to conform to the change. See “Comparable Sales” discussion above for further information.



 

Results of Operations

The Three Months Ended June 30, 2021,March 31, 2022, compared to the Three Months Ended June 30, 2020March 31, 2021

Net Sales

Consolidated. Consolidated net sales include a positive impact from changes in foreign currency exchange rates of $18.7 million, or 2.6% of consolidated net sales.

SBS. The increasedecrease in net sales for SBS was primarily driven by the following (in thousands):

Same store sales

 

$

173,984

 

Other (a)

 

 

(1,986

)

Comparable sales

 

$

(2,580

)

Sales outside comparable sales (a)

 

 

(10,409

)

Foreign currency exchange

 

 

15,215

 

 

 

(3,890

)

Total

 

$

187,213

 

 

$

(16,879

)

 

(a)

Other consistsIncludes stores opened for less than 14 months, net of stores outside same store sales and non-store sales, including catalog and internet sales of our Sinelco Group subsidiaries.closures

SBS experienced higherThe decrease in net sales was driven by lower unit volume, primarily due to operating fewer stores compared to the reopeningsame period last year, lower traffic and conversion due to the impact of allCOVID-19, supply chaindisruptions, the lapping of our customer-facing store operationsstimulus gains in the U.S.prior year, and Canada, improvinginflationary pressures impacting consumer confidence inbehavior, along with the U.S. and the easingnegative impact of COVID-19 restrictions across international territories. For the three months ended June 30, 2021, thereforeign exchange rates. This decrease was minimal impact from temporary closures of certain customer-facing store operations as a result of COVID-19. Additionally, SBS experiencedpartially offset by an increase in average unit prices, resulting from a change in product mix to higher-priced products.led by our color and care categories.

BSG. The increase in net sales for BSG was primarily driven by the following (in thousands):

Same store sales

 

$

91,644

 

Distributor sales consultants

 

 

16,230

 

Sales to franchisees

 

 

10,133

 

Other (a)

 

 

8,419

 

Foreign currency exchange

 

 

3,461

 

Total

 

$

129,887

 

Comparable sales

 

$

4,737

 

Sales outside comparable sales (a)

 

 

(2,741

)

Foreign currency exchange

 

 

(58

)

Total

 

$

1,938

 

 

(a)

Other consistsIncludes stores opened for less than 14 months, net of stores outside same store sales, included recently acquired businesses.closures

BSG experienced higher unit volumeThe increase in net sales was driven by an increase in comparable sales, primarily due to reopening of all of our customer-facing store operationsan increase in the U.S.average unit prices and Canada and higher operating capacities in salons from the easing of COVID-19 restrictions. This was partiallystrong e-commerce growth. These increases were offset by a decrease in averageoverall unit price primarilyvolume due to increased promotions and customer discounts.operating fewer stores compared to the same period last year.

Gross Profit

Consolidated. Consolidated gross profit increased for the three months ended June 30, 2021, due to higher net sales in both segments and a higher gross margin in SBS, partially offset by a lower gross margin in BSG.  

SBS. SBS’s gross profit increaseddecreased for the three months ended June 30, 2021,March 31, 2022, as a result of an increasea decrease in net sales, andpartially offset by a higher gross margin. SBS’s gross margin increased primarily as a result of the impactpricing leverage and a decrease in write-downs of the prior year’s non-cash inventory write down and inventory clearance efforts,obsolete personal-protective equipment, partially offset by higher distribution and freight costs and an unfavorable sales volume frommix shift between the lower margin European operations as a percentage of total segment sales compared to the prior year.U.S. and international markets.

BSG. BSG’s gross profit increased for the three months ended June 30, 2021, asMarch 31, 2022, driven by an improvement in pricing leverage and a resultdecrease in write-downs of an increase in net sales,obsolete personal-protective equipment, partially offset by a lower gross margin. BSG’s gross margin decreased primarily as a result of higher sales volume from large volume/lower margin full service customers that rebounded from the COVID-19 impact in the prior year.distribution and freight costs.

Selling, General and Administrative Expenses

Consolidated. Consolidated selling, general and administrative expenses increased primarily as a result of higher compensation and compensation-related expenses, rent expense and advertising expenses. These increases were driven by the impact of COVID-19 in the prior year. Consolidated selling, general and administrative expenses, as a percentage of net sales, decreased 680 basis points to 37.8% for the three months ended June 30, 2021, due to the increase in sales.

SBS. SBS’s selling, general and administrative expenses increased $33.0$11.2 million, or 16.6%5.2%, for the three months ended June 30, 2021.March 31, 2022. The increase was driven primarily by higher compensation and compensation-related expenses of $49.7$8.9 million, resulting from furloughs duedriven by general economic inflationary conditions and to COVID-19store re-openings in the prior year. Additionally, rent expense increased $6.9 million, due to rent abatements in the prior year. These expenses were partially offset by lower delivery expense of $21.5 million due to lower e-commerce volume compared to the three months ended June 30, 2020.certain international markets, as well as higher store facility costs associated with those re-openings.


BSG. BSG’s selling, general and administrative expenses increased $30.7$7.8 million, or 38.7%7.7%, for the three months ended June 30, 2021.March 31, 2022. The increase was driven primarily by higher compensationdelivery expense of $1.9 million as a result of supply chain disruptions and compensation-related expensesthe cost of $23.3fuel. Additionally, there were increases in depreciation expense of $1.0 million, resulting from furloughs due to COVID-19credit card fees of $0.9 million and other increases in the prior year. Additionally, rent expense increased $3.9 million, due to rent abatements in the prior year, and advertising expenses increased $1.7 million.variable operating expenses.

Unallocated. Unallocated selling, general and administrative expenses, which represent certain corporate costs that have not been charged to our reporting segments, increased $8.2decreased $31.3 million, or 22.8%43.6%, for the three months ended June 30, 2021,March 31, 2022, primarily due to higher compensation and compensation-related expensesthe recognition of $14.9$31.2 million as a result of employees furlougheddonation expense related to personal-protective equipment inventory in the prior year. This increase was partially offset by lower COVID-19 expense in the current period.

Restructuring

For the three months ended June 30, 2021, restructuring charges in connection with our previously communicated Project Surge and the Transformation Plan decreased $5.3 million to $0.5 million as we have substantially completed these restructuring plans.

Interest Expense

The decrease in interest expense is primarily due to the lower outstanding debt principal for the three months ended June 30, 2021 compared to the three months ended June 30, 2020. We recognized lower interest expenseMarch 31, 2022, as a result of the repaymentspay-down of our senior notes due 2023 and our term loan B fixed tranche during fiscal year 2021. Additionally, we recognized $1.4 million of loss on debt extinguishment in connection with the pay-down of our term loan B fixed tranche of $3.0 million and senior notes due 2023 of $2.7 million. Additionally,in the lower outstanding principal balance on our ABL facility resultedprior period with no comparable amounts in lower interest expense of $2.6 million. These decreases were partially offset by debt extinguishment costs of $2.9 million and incremental interest on the senior notes issued in April 2020 of $1.7 million.current period. See “Liquidity and Capital Resources” below for additional information.


Provision for Income Taxes

The effective tax rates were 26.7%29.7% and 9.1%25.8%, for the three months ended June 30,March 31, 2022, and 2021, and 2020, respectively. The increase in the effective tax rate for the three months ended June 30, 2020 was negatively impacted by foreign losses which cannot be tax benefitted. For the three months ended June 30, 2020,primarily due to the impact of these and certain otherthe write-off of deferred tax impacting items is opposite the customary relationship dueassets related to the loss before the provision for income taxes that was incurred. A lower effective tax rate is not beneficialshare-based compensation in situations where a pre-tax book loss has been incurred. See Note 12, Income Tax, for more information on our effective tax rate.connection with expired stock options.

The NineSix Months Ended June 30, 2021,March 31, 2022, compared to the NineSix Months Ended June 30, 2020March 31, 2021

Net Sales

Consolidated. Consolidated net sales include a positive impact from changes in foreign currency exchange rates of $29.6 million, or 1.2% of consolidated net sales.

SBS. The increasedecrease in net sales for SBS was primarily driven by the following (in thousands):

Same store sales

 

$

180,779

 

Other (a)

 

 

(15,803

)

Comparable sales

 

$

20,704

 

Sales outside comparable sales (a)

 

 

(18,791

)

Foreign currency exchange

 

 

23,914

 

 

 

(4,932

)

Total

 

$

188,890

 

 

$

(3,019

)

 

(a)

Other consistsIncludes stores opened for less than 14 months, net of stores outside same store sales, which were negatively impacted by net store closures and non-store sales, including catalog and internet sales of our Sinelco Group subsidiaries.

SBS experienced an increaseThe decrease in average unit prices as a result of a reduction in promotional activity and increasednet sales of higher-priced products. Additionally, SBS experienced higherwas driven by lower unit volume, primarily due to operating fewer stores compared to the reopeningsame period last year, and the negative impact of all of our customer-facing store operationsforeign exchange rates. This decrease was partially offset by an increase in comparable sales, reflecting stronger customer demand in the U.S.first fiscal quarter, and Canada, improving consumer confidence in the U.S.higher average unit prices, led by our color and the easing of COVID-19 restrictions across international territories.care categories.

BSG. The increase in net sales for BSG was primarily driven by the following (in thousands):

Same store sales

 

$

102,694

 

Sales to franchisees

 

 

11,094

 

Distributor sales consultants

 

 

6,372

 

Other (a)

 

 

13,452

 

Foreign currency exchange

 

 

5,717

 

Total

 

$

139,329

 

Comparable sales

 

$

36,394

 

Sales outside comparable sales (a)

 

 

(5,283

)

Foreign currency exchange

 

 

1,196

 

Total

 

$

32,307

 

 

(a)

Other consistsIncludes stores opened for less than 14 months, net of stores outside same store sales, included recently acquired businesses.closures


BSG experienced higher unit volume andThe increase in net sales was driven by an increase in comparable sales, primarily due to an increase in average unit prices. The higher unit volume was primarily due to the impact of reopening of customer-facing store operations in the U.S.prices and Canada. For the nine months ended June 30, 2021, we experienced additional temporary closures and restricted capacity of certain customer-facing store operations in various markets in the U.S. and Canada, as well as salon closures in parts of California and Canada due to the effects of COVID-19 during the fiscal year. The increase in the average unit price was primarily driven by lower promotional activity.

Gross Profit

Consolidated. Consolidated gross profit increased for the nine months ended June 30, 2021, due to higher net sales in both segments and a higher gross margin in SBS, partiallyfrom strong e-commerce growth. These increases were offset by a lower gross margindecrease in BSG.  overall unit volume due to operating fewer stores compared to the same period last year.

Gross Profit

SBS. SBS’s gross profit increased for the ninesix months ended June 30, 2021,March 31, 2022, as a result of increased net sales and a higher gross margin. SBS’s gross margin, increased primarily asdue to pricing leverage and a result of fewer promotions,decrease in obsolete personal-protective equipment write-downs, partially offset by the write-down of personal-protective equipment inventory.higher distribution and freight costs.

BSG. BSG’s gross profit decreasedincreased for the ninesix months ended June 30, 2021, asMarch 31, 2022, driven by an increase in sales, and improvement of pricing leverage, coupled with a result of a lower gross margin, partially offset by increased net sales. BSG’s gross margin decreased primarily as a result of the write-down ofdecrease in personal-protective equipment inventory, partially offset by fewer promotions.write-downs.

Selling, General and Administrative Expenses

Consolidated. Consolidated selling, general and administrative expenses increased primarily as a result of the impact of prior year cost saving initiatives in response to COVID-19, including furloughs and the suspension or elimination of all non-critical projects and non-essential spend. Additionally, the increase was due to higher COVID-19 expenses, primarily from donation expense related to personal-protective equipment inventory, rent expense and incremental costs from businesses acquired in the past 12 months. Consolidated selling, general and administrative expenses, as a percentage of net sales, decreased 250 basis points to 39.6% for the nine months ended June 30, 2021, due to the increase in sales.

SBS. SBS’s selling, general and administrative expenses increased $3.3$18.1 million, or 0.5%4.1%, for the ninesix months ended June 30, 2021.March 31, 2022. The increase was driven primarily by higher compensation and compensation-related expenses of $33.5$18.6 million, resulting from furloughs due to COVID-19as a result of general economic inflationary conditions and store re-openings in the prior year. The increase was partially offset by lower delivery expense of $17.3 million due to lower e-commerce volume compared to the nine months ended June 30, 2020, advertising expenses of $7.0 million and incremental store expense for personal protective equipment in the prior year.certain international markets.

BSG. BSG’s selling, general and administrative expenses increased $36.2$14.9 million, or 12.8%7.1%, for the ninesix months ended June 30, 2021.March 31, 2022. The increase was driven primarily by higheran increase in delivery expense of $2.5 million, compensation and compensation-related expenses of $20.5$2.3 million, resulting from furloughs due to COVID-19 in the prior year. Additionally, the increase was due to higher rentdepreciation expense of $5.6$1.9 million, primarily due to rent abatementsadvertising expense of $1.6 million, technology expense of $1.1 million and other increases in the prior year, shipping costs and incremental costs from businesses acquired in the past 12 months.variable operating expenses.

Unallocated. Unallocated selling, general and administrative expenses, which represent certain corporate costs that have not been charged to our reporting segments, increased $28.4decreased $25.1 million, or 22.4%22.7%, for the ninesix months ended June 30, 2021, primarily due to higher compensation and compensation-related expensesMarch 31, 2022, driven by the recognition of $24.9$31.2 million as a result of employees furloughed in the prior year, and higher COVID-19 expense in the current period primarily from donation expense related to personal-protective equipment inventory of $29.8 million, compared to COVID-19 expense of $23.4 million in the prior year.period, partially offset by an increase in information technology expense of $2.7 million.  

Restructuring

For the ninesix months ended June 30, 2021,March 31, 2022, restructuring charges in connection with our previously communicated Project Surge and the Transformation Plan decreased $10.2increased $0.2 million, to $1.4$1.1 million as we have substantially completed these restructuring plans.for the current year.


Interest Expense

The increasedecrease in interest expense is primarily due to incremental interest on the lower outstanding debt principal for the six months ended March 31, 2022, as a result of the pay-down of our senior notes issued in April 2020due 2023 and our term loan B fixed tranche during fiscal year 2021. Additionally, we recognized $1.4 million of $14.8 million andloss on debt extinguishment costs of $4.5 million, partially offset byin connection with the impact of the repaymentspay-down of our term loan B fixed tranche in January 2021 of $7.0 million and the senior notes due 2023prior period with no comparable amounts in April 2021 of $2.7 million. Additionally, the lower outstanding principal balance on our ABL facility resulted in lower interest expense of $3.3 million and the lower interest rates on our term loan B variable tranche of $4.0 million.current period. See “Liquidity and Capital Resources” below for additional information.

Provision for Income Taxes

The effective tax rates were 26.6%27.3% and 37.2%26.5%, for the ninesix months ended June 30,March 31, 2022 and 2021, and 2020, respectively. The decreaseincrease in the effective tax rate was primarily due to greateran increase in foreign losses, in the prior year from foreign subsidiaries for which we do not receive a tax benefit, could not be recognized and the establishmentwrite-off of a valuation allowancedeferred tax assets related to share-based compensation in a foreign subsidiary in the prior year. See Note 12, Income Tax, for more information on our effective tax rate.connection with expired stock option awards.


Liquidity and Capital Resources

Overview

We are highly leveraged and a substantial portion of our liquidity needs arise from debt service on our outstanding indebtedness and from funding the costs of our operations, working capital, capital expenditures, debt repayment and share repurchases. Working capital (current assets less current liabilities) decreased $190.8increased $8.7 million, to $678.9$727.4 million at June 30, 2021,March 31, 2022, compared to $869.7$718.7 million at September 30, 2020, resulting2021, primarily from increased inventory as a result of restocking to normal levels of demand following prior year shipping delays, and our risk mitigation strategy to protect against potential, continued supply chain disruptions, and the reduction in accounts payable and accrued liabilities, due to the timing of payments. These increases were partially offset by a decrease in cash and cash equivalents from the repayments of outstanding long-term debt and increased inventory as a result of improving COVID-19 conditions.equivalents.

At June 30, 2021,March 31, 2022, cash and cash equivalents were $270.3$227.4 million. Based upon the current level of operations and anticipated growth, we anticipate that existing cash balances (excluding certain amounts permanently invested in connection with foreign operations), fundscash expected to be generated by operations and funds available under our ABL facility will be sufficient to fund working capital requirements, potential acquisitions, anticipated capital expenditures, including information technology upgrades and store remodels, and debt repayments over the next 12twelve months. DueWe have continued to the improving COVID-19 conditions, we have shifted our focus toon reducing our debt levels and shares outstanding through repurchases, while also being proactive in maintaining our financial flexibility.

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, interest payments due on our indebtedness, paying down other debt and opportunistic share repurchases. During the ninesix months ended June 30, 2021,March 31, 2022, we did not borrowdraw funds under our ABL facility. As of June 30, 2021,March 31, 2022, we had $481.7$481.1 million available for borrowings under our ABL facility, subject to borrowing base limitations, as reduced by outstanding letters of credit. Amounts drawn on our ABL facility are generally paid down with cash provided by our operating activities. During the three months ended June 30, 2021, we entered into a third amendment to our ABL facility which extended the maturity date to May 11, 2026.

Share Repurchase Programs

During the ninesix months ended June 30, 2021,March 31, 2022, we did not repurchase anyrepurchased 6.8 million shares of our common stock.stock for $130.3 million with existing cash balances. As of June 30, 2021,March 31, 2022, we had authorization of approximately $726.1$595.8 million of additional potential share repurchases remaining under the 2017 Share Repurchase Program. See Note 13, Subsequent Event, for additional information on our share repurchase program.

Historical Cash Flows

Historically, our primary source of cash has been net funds provided by operating activities and, when necessary, borrowings under our ABL facility. While historically,Historically, the primary uses of cash have been for share repurchases, capital expenditures, repayments and servicing of long-term debt and acquisitions, we have shifted our focus in the short-term to reduce cash expenditures.acquisitions.

Net Cash (Used) Provided by Operating Activities

Net cash provided byThe $134.3 million decrease in operating activities during the nine months ended June 30, 2021, decreased $56.7 million to $217.7 million, compared to the nine months ended June 30, 2020, mainly due to increases in vendor receivables and inventory, partially offset by increased net income and higher accounts payable. The increase in inventory and accounts payable was driven by the reduction in accounts payable and accrued liabilities primarily due to the timing of payments, partially offset by lower inventory purchases compared to the six months ended March 31, 2021 and payments as we restock to new levels of demand. Additionally, thean increase in vendor receivables was driven by higher sales in the three months ended June 30, 2021.net earnings.

Net Cash Used by Investing Activities

Net cash used by investing activities during the ninesix months ended June 30, 2021, decreased $44.4March 31, 2022, increased $15.1 million to $47.2$44.4 million, compared to the ninesix months ended June 30, 2020.March 31, 2021. This change was primarily a result of our focus on reduced capital expenditures.additional investments in information technology and store improvements.


Net Cash (Used) ProvidedUsed by Financing Activities

Net cash used by financing activities for the six months ended March 31, 2022, decreased $84.7 million to $126.5 million, as a result of the debt pay-down during the ninesix months ended June 30,March 31, 2021 resulted primarily from the repayments on our term loan B fixed tranche, the senior notes due 2023 and term loan B variable tranche. During the nine months ended June 30, 2020, we had a source of cash from financing activities primarily from the borrowings on our ABL and the issuance of senior notes as a response to COVID-19,an increase in stock options exercised, partially offset by share repurchases.repurchases during the six months ended March 31, 2022.  

Long-Term Debt and Guarantor Financial Information

At June 30, 2021,March 31, 2022, we had $1,394.3$1,390.2 million in debt, not including capital leases, unamortized debt issuance costs and debt discounts, in the aggregate, of $11.7$8.6 million. Our debt consisted of $980.0 million of senior notes outstanding and a term loan with an outstanding principal balance of $414.4$410.3 million. As of June 30, 2021,March 31, 2022, there were no outstanding borrowings under our ABL facility.

During the fiscal year, we paid the remaining $213.2 million of aggregate outstanding principal on our term loan B fixed tranche, the $197.4 million outstanding on our senior notes due 2023 and $8.3 million on our term loan B variable tranche.

We are currently in compliance with the agreements and instruments governing our debt, including our financial covenants.


See Note 9, Short-term Borrowings and Long-term Debt, for more information on our debt.

Guarantor Financial Information

We are providing the following information in compliance with Rule 13-01 of Regulation S-X for guaranteed issued securities thatcurrently have been registered under such regulation. Currently, our issued securities consist of the 5.625% Senior Notes due 2025 outstanding. This debt instrument wasThese notes were issued by our wholly-owned subsidiaries, Sally Holdings LLC and Sally Capital Inc. (the “Issuers”), and registered with the Securities and Exchange Commission under a shelf registration statement.

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 to pay 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 June 30, 2021March 31, 2022 and September 30, 20202021 (in thousands):

 

June 30, 2021

 

 

September 30, 2020

 

 

March 31, 2022

 

 

September 30, 2021

 

Inventory

 

$

711,847

 

 

$

615,092

 

 

$

735,272

 

 

$

662,802

 

Intercompany receivable

 

$

80,114

 

 

$

75,892

 

 

$

-

 

 

$

67,337

 

Current assets

 

$

995,974

 

 

$

1,166,250

 

 

$

976,855

 

 

$

1,069,266

 

Total assets

 

$

2,101,376

 

 

$

2,281,896

 

 

$

2,098,588

 

 

$

2,198,990

 

Intercompany payable

 

$

13,531

 

 

$

-

 

Current liabilities

 

$

384,423

 

 

$

325,380

 

 

$

331,459

 

 

$

422,137

 

Total liabilities

 

$

2,311,335

 

 

$

2,657,033

 

 

$

2,258,947

 

 

$

2,343,946

 

The following table presents the summarized statement of income information for ninesix months ended June 30, 2021March 31, 2022 (in thousands):

Net sales

 

 

 

$

2,391,586

 

 

 

 

$

1,532,316

 

Gross profit

 

 

 

$

1,212,180

 

 

 

 

$

787,970

 

Earnings before provision for income taxes

 

 

 

$

201,462

 

 

 

 

$

132,691

 

Net Earnings

 

 

 

$

149,269

 

 

 

 

$

98,176

 

Contractual Obligations

There have been no material changes outside the ordinary course of our business in any of our contractual obligations since September 30, 2020, other than the extinguishment of our term loan B fixed tranche, as discussed above.2021.

Off-Balance Sheet Financing Arrangements

At June 30, 2021,March 31, 2022, and September 30, 2020,2021, we had no off-balance sheet financing arrangements other than outstanding letters of credit related to inventory purchases and self-insurance programs.

Critical Accounting Estimates

There have been no material changes to our critical accounting estimates or assumptions since September 30, 2020.2021.

Recent Accounting Pronouncements

See Note 3, Recent Accounting Pronouncements, of the NotesThere have been no recent accounting pronouncements issued that will have a material impact to Condensed Consolidated Financial Statements in Item 1 – “Financial Statements” in Part I – Financial Information.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. There have been no material changes to our market risks from September 30, 2020.2021. 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, 2020.2021.

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 June 30, 2021.March 31, 2022. 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 June 30, 2021,March 31, 2022, 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.


PART II — OTHER INFORMATION

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.

The District Attorney’s office for the County of San Joaquin together with District Attorneys for other counties in California (together, the “District Attorneys”), recently concluded an investigation regarding our hazardous waste handling and disposal practices in California. On May 26, 2021, we and the District Attorneys agreed on a stipulated judgment of approximately $1.6 million in civil penalties to resolve the matter in California state court. We also agreed to spend $25,000 on a supplemental environment project and reimburse approximately $0.3 million in costs. The resolution of this matter did not have a material impact to our operations.

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, 2020,2021, 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.

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds

(c) Purchases of Equity Securities by the Issuer and Affiliated Purchasers

Fiscal Period

 

Total Number of Shares Purchased (1)

 

 

Average Price Paid per Share

 

 

Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1)(2)

 

 

Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs

 

January 1 - January 30, 2022

 

 

-

 

 

$

-

 

 

 

-

 

 

$

651,120,625

 

February 1 - February 28, 2022

 

 

2,234,514

 

 

 

17.68

 

 

 

2,234,514

 

 

 

611,606,688

 

March 1 - March 31, 2022

 

 

922,460

 

 

 

17.14

 

 

 

922,460

 

 

 

595,792,425

 

Total this quarter

 

 

3,156,974

 

 

$

17.53

 

 

 

3,156,974

 

 

$

595,792,425

 

(1)

The table above does not include 808 shares of the Company’s common stock surrendered by grantees during the quarter to satisfy tax withholding obligations due upon the vesting of equity-based awards under the Company’s share-based compensation plans.

(2)

In July 2021, we announced that our Board of Directors had approved a term extension our a share repurchase program authorizing us to repurchase up to $1.0 billion of our common stock over an approximate four-year period expiring on September 30, 2025.  



Item 6.  Exhibits

 

 

Exhibit No.

 

Description

 

 

 

3.1

 

Third Restated Certificate of Incorporation of Sally Beauty Holdings, Inc., dated January 30, 2014, which is incorporated herein by reference from Exhibit 3.3 to the Company’s Current Report on Form 8-K filed on January 30, 2014

 

 

 

3.2

 

Amended and Restated Bylaws of Sally Beauty Holdings, Inc., dated April 26, 2017, which is incorporated herein by reference from Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on April 28, 2017

 

 

 

22

 

List of Subsidiary Guarantors*

 

 

 

31.1

 

Rule 13a-14(a)/15d-14(a) Certification of Christian A. Brickman*Denise Paulonis*

 

 

 

31.2

 

Rule 13a-14(a)/15d-14(a) Certification of Marlo M. Cormier*

 

 

 

32.1

 

Section 1350 Certification of Christian A. Brickman*Denise Paulonis*

 

 

 

32.2

 

Section 1350 Certification of Marlo M. Cormier*

 

 

 

101

 

The following financial information from our Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2021,March 31, 2022, formatted in iXBRL (Inline Extensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheets; (ii) the Condensed Consolidated Statements of Earnings (Loss);Earnings; (iii) the Condensed Consolidated Statements of Comprehensive Income (Loss);Income; (iv) the Condensed Consolidated Statements of Stockholders’ Equity (Deficit);Equity; (v) the Condensed Consolidated Statements of Cash Flows; and (vi) the Notes to Condensed Consolidated Financial Statements.

 

 

 

104

 

The cover page from our Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2021,March 31, 2022, formatted in Inline XBRL (contained in Exhibit 101).

 

* Included herewith


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.

 

 

 

 

SALLY BEAUTY HOLDINGS, INC.

 

 

 

(Registrant)

 

 

 

 

Date:  July 29, 2021May 5, 2022

 

 

 

 

 

 

 

 

By:

 

/s/ Marlo M. Cormier

 

 

 

Marlo M. Cormier

 

 

 

Senior Vice President, Chief Financial Officer

 

 

 

For the Registrant and as its Principal Financial Officer

 

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