Sally Beauty Earnings 2020-06-30

Balance Sheet	Income Statement	Cash Flow
Assets, Equity	Rev, G Profit, Net Income	Ops, Inv, Fin

sbh-10q_20200630.htm

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, 2020

-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 24, 2020, there were 112,852,369 shares of the issuer’s common stock outstanding.

TABLE OF CONTENTS

	Page
PART I — FINANCIAL INFORMATION

Item 1. Financial Statements	5
Item 2. Management’s Discussion And Analysis Of Financial Condition And Results Of Operations	29
Item 3. Quantitative And Qualitative Disclosures About Market Risk	36
Item 4. Controls And Procedures	36

PART II — OTHER INFORMATION

Item 1. Legal Proceedings	38
Item 1A. Risk Factors	38
Item 6. Exhibits	38

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, 2019, and in our Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2020, which should be read in conjunction with the forward-looking statements in this report. Forward-looking statements speak only as of the date they are made, and we do not undertake any obligation to update any forward-looking statement.

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

WHERE YOU CAN FIND MORE INFORMATION

Our quarterly 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, 2020, and September 30, 2019, the condensed consolidated statements of earnings (loss), condensed consolidated statements of comprehensive income (loss) and the condensed statements of stockholders’ deficit for the three and nine months ended June 30, 2020 and 2019, and the condensed consolidated statements of cash flows for the nine months ended June 30, 2020 and 2019, are those of Sally Beauty Holdings, Inc. and its subsidiaries.

SALLY BEAUTY HOLDINGS, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(In thousands, except par value data)

	June 30, 2020			September 30, 2019
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	838,811		$	71,495
Trade accounts receivable, net		42,818			43,136
Accounts receivable, other		17,485			61,403
Inventory		815,632			952,907
Other current assets		48,596			34,612
Total current assets		1,763,342			1,163,553
Property and equipment, net of accumulated depreciation of $688,798 at June 30, 2020, and $659,285 at September 30, 2019		311,063			319,628
Operating lease assets		514,415			—
Goodwill		530,681			530,786
Intangible assets, excluding goodwill, net of accumulated amortization of $65,791 at June 30, 2020, and $64,615 at September 30, 2019		56,859			62,051
Other assets		21,734			22,428
Total assets	$	3,198,094		$	2,098,446
Liabilities and Stockholders’ Deficit
Current liabilities:
Current maturities of long-term debt	$	395,673		$	1
Accounts payable		239,905			278,688
Accrued liabilities		148,197			169,054
Current operating lease liabilities		152,650			—
Income taxes payable		1,307			8,336
Total current liabilities		937,732			456,079
Long-term debt		1,845,594			1,594,542
Long-term operating lease liabilities		377,930			—
Other liabilities		26,433			27,757
Deferred income tax liabilities, net		79,538			80,391
Total liabilities		3,267,227			2,158,769
Stockholders’ deficit:
Common stock, $0.01 par value. Authorized 500,000 shares; 112,848 and 116,986 shares issued and 112,280 and 116,725 shares outstanding at June 30, 2020, and September 30, 2019, respectively		1,123			1,167
Preferred stock, $0.01 par value. Authorized 50,000 shares; none issued		—			—
Additional paid-in capital		2,513			—
Accumulated earnings		46,399			55,797
Accumulated other comprehensive loss, net of tax		(119,168	)		(117,287	)
Total stockholders’ deficit		(69,133	)		(60,323	)
Total liabilities and stockholders’ deficit	$	3,198,094		$	2,098,446

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
	June 30,					June 30,
	2020			2019		2020		2019
Net sales	$	705,287		$	975,169	$	2,556,518	$	2,910,474
Cost of goods sold		383,441			492,947		1,330,067		1,479,222
Gross profit		321,846			482,222		1,226,451		1,431,252
Selling, general and administrative expenses		314,599			360,183		1,075,827		1,088,797
Restructuring		5,816			1,908		11,541		74
Operating earnings		1,431			120,131		139,083		342,381
Interest expense		27,298			25,781		70,483		74,092
Earnings (loss) before provision for income taxes		(25,867	)		94,350		68,600		268,289
Provision (benefit) for income taxes		(2,341	)		23,186		25,543		65,673
Net earnings (loss)	$	(23,526	)	$	71,164	$	43,057	$	202,616
Earnings (loss) per share:
Basic	$	(0.21	)	$	0.59	$	0.38	$	1.69
Diluted	$	(0.21	)	$	0.59	$	0.37	$	1.68
Weighted-average shares:
Basic		112,271			120,119		114,413		120,062
Diluted		112,271			120,977		115,370		120,928

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

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,
	2020			2019		2020			2019
Net earnings (loss)	$	(23,526	)	$	71,164	$	43,057		$	202,616
Other comprehensive income (loss):
Foreign currency translation adjustments		5,116			834		(3,707	)		(9,591	)
Interest rate caps, net of tax		245			586		274			(4,384	)
Foreign exchange contracts, net of tax		(286	)		103		1,552			(65	)
Other comprehensive income (loss), net of tax		5,075			1,523		(1,881	)		(14,040	)
Total comprehensive income (loss)	$	(18,451	)	$	72,687	$	41,176		$	188,576

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

SALLY BEAUTY HOLDINGS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

	Nine Months Ended June 30,
	2020			2019
Cash Flows from Operating Activities:
Net earnings	$	43,057		$	202,616
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization		80,829			80,425
Share-based compensation expense		9,094			7,728
Amortization of deferred financing costs		2,965			2,894
Loss (gain) on early extinguishment of debt		(357	)		951
Loss (gain) on disposal of equipment and other property		2,910			(6,557	)
Deferred income taxes		600			12,095
Changes in (exclusive of effects of acquisitions):
Trade accounts receivable		495			3,361
Accounts receivable, other		45,888			(10,641	)
Inventory		134,824			(28,283	)
Other current assets		(15,840	)		4,687
Other assets		(691	)		(1,195	)
Accounts payable and accrued liabilities		(35,572	)		(59,105	)
Income taxes payable		(7,154	)		(926	)
Other liabilities		13,336			(4,227	)
Net cash provided by operating activities		274,384			203,823
Cash Flows from Investing Activities:
Payments for property and equipment		(89,740	)		(66,763	)
Proceeds from sale of property and equipment		38			12,021
Acquisitions, net of cash acquired		(1,944	)		(2,763	)
Net cash used by investing activities		(91,646	)		(57,505	)
Cash Flows from Financing Activities:
Proceeds from issuance of long-term debt		1,087,504			394,004
Repayments of long-term debt		(437,391	)		(561,162	)
Debt issuance costs		(6,257	)		—
Payments for common stock repurchased		(61,357	)		—
Proceeds from exercises of stock options		2,722			1,787
Net cash provided (used) by financing activities		585,221			(165,371	)
Effect of foreign exchange rate changes on cash and cash equivalents		(643	)		(387	)
Net increase (decrease) in cash and cash equivalents		767,316			(19,440	)
Cash and cash equivalents, beginning of period		71,495			77,295
Cash and cash equivalents, end of period	$	838,811		$	57,855
Supplemental Cash Flow Information:
Interest paid	$	74,046		$	82,903
Income taxes paid	$	45,292		$	62,852
Capital expenditures incurred but not paid	$	4,469		$	3,116

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

SALLY BEAUTY HOLDINGS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Stockholders’ Deficit

(In thousands)

(Unaudited)

													Accumulated
							Additional						Other			Total
	Common Stock						Paid-in			Accumulated			Comprehensive			Stockholders’
	Shares			Amount			Capital			Earnings			Loss			Equity (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 stock options		206			2			2,764			—

Price	15.16	EPS	2
Shares	120	P/E	7
MCap	1,823	P/FCF	6
Net Debt	1,538	EBIT	471
TEV	3,361	TEV/EBIT	7
TTM 2019-09-30, in MM, except price, ratios

10-Q	2020-06-30	Filed 2020-07-31
10-Q	2020-03-31	Filed 2020-05-07
10-Q	2019-12-31	Filed 2020-02-06
10-K	2019-09-30	Filed 2019-11-25
10-Q	2019-06-30	Filed 2019-07-31
10-Q	2019-03-31	Filed 2019-05-01
10-Q	2018-12-31	Filed 2019-02-05
10-K	2018-09-30	Filed 2018-11-14
10-Q	2018-06-30	Filed 2018-08-02
10-Q	2018-03-31	Filed 2018-05-03
10-Q	2017-12-31	Filed 2018-02-08
10-K	2017-09-30	Filed 2017-11-15
10-Q	2017-06-30	Filed 2017-08-03
10-Q	2017-03-31	Filed 2017-05-04
10-Q	2016-12-31	Filed 2017-02-02
10-K	2016-09-30	Filed 2016-11-15
10-Q	2016-06-30	Filed 2016-08-04
10-Q	2016-03-31	Filed 2016-05-05
10-Q	2015-12-31	Filed 2016-02-04
10-K	2015-09-30	Filed 2015-11-12
10-Q	2015-06-30	Filed 2015-08-06
10-Q	2015-03-31	Filed 2015-05-05
10-Q	2014-12-31	Filed 2015-02-05
10-K	2014-09-30	Filed 2014-11-13
10-Q	2014-06-30	Filed 2014-07-31
10-Q	2014-03-31	Filed 2014-05-01
10-Q	2013-12-31	Filed 2014-02-06
10-K	2013-09-30	Filed 2013-11-14
10-Q	2013-06-30	Filed 2013-08-01
10-Q	2013-03-31	Filed 2013-05-02
10-Q	2012-12-31	Filed 2013-02-07
10-K	2012-09-30	Filed 2012-11-15
10-Q	2012-06-30	Filed 2012-08-02
10-Q	2012-03-31	Filed 2012-05-03
10-Q	2011-12-31	Filed 2012-02-02
10-K	2011-09-30	Filed 2011-11-16
10-Q	2011-06-30	Filed 2011-08-04
10-Q	2011-03-31	Filed 2011-05-05
10-Q	2010-12-31	Filed 2011-02-03
10-K	2010-09-30	Filed 2010-11-18
10-Q	2010-06-30	Filed 2010-08-04
10-Q	2010-03-31	Filed 2010-05-04
10-Q	2009-12-31	Filed 2010-02-04

8-K	2020-09-02	Regulation FD, Exhibits
8-K	2020-07-30	Earnings, Regulation FD, Exhibits
8-K	2020-07-06	Regulation FD, Exhibits
8-K	2020-06-02
8-K	2020-05-06
8-K	2020-04-24
8-K	2020-04-20
8-K	2020-04-15
8-K	2020-03-31
8-K	2020-03-23
8-K	2020-02-06
8-K	2020-01-30
8-K	2020-01-30
8-K	2019-12-02
8-K	2019-11-07
8-K	2019-10-03
8-K	2019-09-16
8-K	2019-09-03
8-K	2019-07-31
8-K	2019-05-01
8-K	2019-04-03
8-K	2019-03-19
8-K	2019-03-05
8-K	2019-02-19
8-K	2019-02-05
8-K	2019-01-31
8-K	2019-01-31
8-K	2019-01-31
8-K	2018-11-08
8-K	2018-10-12
8-K	2018-08-29
8-K	2018-08-02
8-K	2018-05-23
8-K	2018-05-03
8-K	2018-04-30
8-K	2018-04-03
8-K	2018-02-08
8-K	2018-02-01
8-K	2018-01-25

EX-31.1	sbh-ex311_8.htm
EX-31.2	sbh-ex312_6.htm
EX-32.1	sbh-ex321_9.htm
EX-32.2	sbh-ex322_7.htm

SBH 10Q Quarterly Report

Sally Beauty Earnings 2020-06-30