Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Jun. 30, 2017 | Jul. 28, 2017 | |
Document and Entity Information | ||
Entity Registrant Name | Sally Beauty Holdings, Inc. | |
Entity Central Index Key | 1,368,458 | |
Document Type | 10-Q | |
Document Period End Date | Jun. 30, 2017 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --09-30 | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 131,373,713 | |
Document Fiscal Year Focus | 2,017 | |
Document Fiscal Period Focus | Q3 |
Consolidated Statements of Earn
Consolidated Statements of Earnings - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | 6 Months Ended | 9 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2017 | Jun. 30, 2016 | |
Consolidated Statements of Earnings | |||||
Net sales | $ 998,043 | $ 998,161 | $ 2,964,122 | $ 2,976,260 | |
Cost of products sold and distribution expenses | 495,404 | 499,185 | 1,481,669 | 1,495,761 | |
Gross profit | 502,639 | 498,976 | 1,482,453 | 1,480,499 | |
Selling, general and administrative expenses | 337,992 | 339,459 | 1,017,383 | 1,020,497 | |
Depreciation and amortization | 29,255 | 25,433 | 83,972 | 72,524 | |
Restructuring charges | 5,054 | $ 14,265 | 14,265 | ||
Operating earnings | 130,338 | 134,084 | 366,833 | 387,478 | |
Interest expense | 26,969 | 26,703 | 80,616 | 117,617 | |
Earnings before provision for income taxes | 103,369 | 107,381 | 286,217 | 269,861 | |
Provision for income taxes | 36,830 | 39,462 | 106,860 | 99,540 | |
Net earnings | $ 66,539 | $ 67,919 | $ 179,357 | $ 170,321 | |
Earnings per share: | |||||
Basic (in dollars per share) | $ 0.49 | $ 0.47 | $ 1.28 | $ 1.15 | |
Diluted (in dollars per share) | $ 0.49 | $ 0.46 | $ 1.28 | $ 1.14 | |
Weighted average shares: | |||||
Basic (in shares) | 135,450 | 145,957 | 139,888 | 147,741 | |
Diluted (in shares) | 136,159 | 147,837 | 140,634 | 149,476 |
Consolidated Statements of Comp
Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | |
Consolidated Statements of Comprehensive Income | ||||
Net earnings | $ 66,539 | $ 67,919 | $ 179,357 | $ 170,321 |
Other comprehensive income (loss): | ||||
Foreign currency translation adjustments | 17,686 | (14,119) | 7,044 | (16,191) |
Total other comprehensive income (loss), before tax | 17,686 | (14,119) | 7,044 | (16,191) |
Other comprehensive income (loss), net of tax | 17,686 | (14,119) | 7,044 | (16,191) |
Total comprehensive income | $ 84,225 | $ 53,800 | $ 186,401 | $ 154,130 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) $ in Thousands | Jun. 30, 2017 | Sep. 30, 2016 |
Current assets: | ||
Cash and cash equivalents | $ 54,100 | $ 86,622 |
Trade accounts receivable, less allowance for doubtful accounts of $1,130 at June 30, 2017 and $1,407 at September 30, 2016 | 46,994 | 46,942 |
Accounts receivable, other | 41,413 | 37,041 |
Inventory | 947,623 | 907,337 |
Other current assets | 49,984 | 54,861 |
Deferred income tax assets | 40,126 | 40,024 |
Total current assets | 1,180,240 | 1,172,827 |
Property and equipment, net of accumulated depreciation of $531,890 at June 30, 2017 and $467,865 at September 30, 2016 | 310,176 | 319,558 |
Goodwill | 533,950 | 532,714 |
Intangible assets, excluding goodwill, net of accumulated amortization of $120,970 at June 30, 2017 and $110,713 at September 30, 2016 | 83,305 | 92,963 |
Other assets | 12,808 | 14,001 |
Total assets | 2,120,479 | 2,132,063 |
Current liabilities: | ||
Current maturities of long-term debt | 82,246 | 716 |
Accounts payable | 291,878 | 271,376 |
Accrued liabilities | 166,484 | 214,584 |
Income taxes payable | 1,413 | 1,989 |
Total current liabilities | 542,021 | 488,665 |
Long-term debt | 1,784,480 | 1,783,294 |
Other liabilities | 19,012 | 21,614 |
Deferred income tax liabilities, net | 127,242 | 114,656 |
Total liabilities | 2,472,755 | 2,408,229 |
Stockholders' deficit: | ||
Common stock, $0.01 par value. Authorized 500,000 shares; 132,694 and 144,842 shares issued and 132,505 and 144,571 shares outstanding at June 30, 2017 and September 30, 2016, respectively | 1,325 | 1,446 |
Preferred stock, $0.01 par value. Authorized 50,000 shares; none issued | ||
Accumulated deficit | (260,594) | (177,561) |
Accumulated other comprehensive loss, net of tax | (93,007) | (100,051) |
Total stockholders' deficit | (352,276) | (276,166) |
Total liabilities and stockholders' deficit | $ 2,120,479 | $ 2,132,063 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - USD ($) shares in Thousands, $ in Thousands | Jun. 30, 2017 | Sep. 30, 2016 |
Consolidated Balance Sheets | ||
Trade accounts receivable, allowance for doubtful accounts (in dollars) | $ 1,130 | $ 1,407 |
Property and equipment, accumulated depreciation (in dollars) | 531,890 | 467,865 |
Intangible assets, excluding goodwill, accumulated amortization (in dollars) | $ 120,970 | $ 110,713 |
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, Authorized shares | 500,000 | 500,000 |
Common stock, shares issued | 132,694 | 144,842 |
Common stock, shares outstanding | 132,505 | 144,571 |
Preferred stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Preferred stock, Authorized shares | 50,000 | 50,000 |
Preferred stock, shares issued | 0 | 0 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 9 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | ||
Cash Flows from Operating Activities: | |||
Net earnings | $ 179,357 | $ 170,321 | |
Adjustments to reconcile net earnings to net cash provided by operating activities: | |||
Depreciation and amortization | 83,972 | 72,524 | |
Share-based compensation expense | 8,590 | 10,011 | |
Amortization of deferred financing costs | 2,364 | 2,467 | |
Excess tax (benefit) shortfall from share-based compensation | 1,060 | (1,296) | |
Loss on extinguishment of debt | 33,296 | ||
Deferred income taxes | 11,325 | 12,787 | |
Changes in (exclusive of effects of acquisitions): | |||
Trade accounts receivable | 90 | (956) | |
Accounts receivable, other | (4,185) | 6,338 | |
Inventory | (36,221) | (32,759) | |
Other current assets | 5,355 | (4,403) | |
Other assets | 622 | (923) | |
Accounts payable and accrued liabilities | (27,177) | (11,182) | |
Income taxes payable | 886 | (1,851) | |
Other liabilities | (2,623) | (5,561) | |
Net cash provided by operating activities | 223,415 | 248,813 | |
Cash Flows from Investing Activities: | |||
Capital expenditures | (66,565) | (110,798) | |
Proceeds from disposal of property and equipment | 36 | 2,528 | |
Acquisitions, net of cash acquired | (2,250) | ||
Net cash used by investing activities | (66,529) | (110,520) | |
Cash Flows from Financing Activities: | |||
Proceeds from issuance of long-term debt | 296,500 | 912,000 | |
Repayments of long-term debt | (215,519) | (938,346) | |
Repurchases of common stock | (286,503) | (162,367) | |
Debt issuance costs | (12,748) | ||
Proceeds from exercises of stock options | 16,941 | 13,072 | |
Excess tax benefit (shortfall) from share-based compensation | (1,060) | 1,296 | |
Net cash used by financing activities | (189,641) | (187,093) | |
Effect of foreign exchange rate changes on cash and cash equivalents | 233 | (241) | |
Net decrease in cash and cash equivalents | (32,522) | (49,041) | |
Cash and cash equivalents, beginning of period | 86,622 | 140,038 | |
Cash and cash equivalents, end of period | 54,100 | 90,997 | |
Supplemental Cash Flow Information: | |||
Interest paid | 103,493 | 138,563 | [1] |
Income taxes paid | 84,319 | 86,916 | |
Capital expenditures incurred but not paid | $ 1,200 | $ 6,848 | |
[1] | For the nine months ended June 30, 2016, interest paid includes $25.8 million in call premiums paid in connection with the Company’s December 2015 redemption in full of its senior notes due 2019. |
Consolidated Statements of Cas7
Consolidated Statements of Cash Flows (Parenthetical) $ in Millions | 9 Months Ended |
Jun. 30, 2016USD ($) | |
Senior notes due Nov. 2019 | |
Consolidated Statements of Cash Flows (Parenthetical) | |
Call premiums paid upon the redemption of certain notes | $ 25.8 |
Description of Business and Bas
Description of Business and Basis of Presentation | 9 Months Ended |
Jun. 30, 2017 | |
Description of Business and Basis of Presentation | |
Description of Business and Basis of Presentation | 1. Description of Business and Basis of Presentation Description of Business Sally Beauty Holdings, Inc. and its consolidated subsidiaries (“Sally Beauty” or “the Company”) sell professional beauty products and supplies through its Sally Beauty Supply (“SBS”) retail store and online operations in the U.S., Puerto Rico, Canada, Mexico, Chile, Colombia, Peru, the United Kingdom, Ireland, Belgium, France, Germany, the Netherlands and Spain. In addition, the Company distributes professional beauty products and supplies to salons and salon professionals through its Beauty Systems Group (“BSG”) professional-only store and online operations and through a commissioned direct sales force that services salons in the U.S. and Canada, and to franchisees in the southern and southwestern regions of the U.S. and in Mexico through the operations of its subsidiary Armstrong McCall, L.P. (“Armstrong McCall”). A significant number of the Company’s products are available through a number of Sally Beauty Supply and BSG-operated websites. Certain beauty products sold by BSG and Armstrong McCall are sold under exclusive territory agreements with the third-party manufacturers. Basis of Presentation The accompanying condensed consolidated interim financial statements 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. 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 the Company believes that the disclosures made are adequate to make the information not misleading. These consolidated interim financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2016. All significant intercompany accounts and transactions have been eliminated in consolidation. In the opinion of management, these condensed consolidated financial statements reflect all adjustments that are of a normal recurring nature and which are necessary to present fairly the Company’s consolidated financial position as of June 30, 2017 and September 30, 2016, its consolidated results of operations and consolidated comprehensive income for the three and nine months ended June 30, 2017 and 2016, and its consolidated cash flows for the nine months ended June 30, 2017 and 2016. Certain amounts for the prior fiscal periods have been reclassified to conform to the current fiscal period presentation, in connection with realignment of a business component from our BSG segment to our Sally Beauty Supply segment. All references in these notes to “management” are to the management of Sally Beauty. |
Significant Accounting Policies
Significant Accounting Policies | 9 Months Ended |
Jun. 30, 2017 | |
Significant Accounting Policies | |
Significant Accounting Policies | 2. Significant Accounting Policies The Company adheres to the same accounting policies in the preparation of its interim financial statements as it adheres to in the preparation of its full-year financial statements. As permitted under GAAP, interim accounting for certain expenses, including income taxes, is based on full-year assumptions. Such amounts are expensed in full in the year incurred. For interim financial reporting purposes, income taxes are recorded based upon estimated annual effective income tax rates. |
Recent Accounting Pronouncement
Recent Accounting Pronouncements and Accounting Changes | 9 Months Ended |
Jun. 30, 2017 | |
Recent Accounting Pronouncements and Accounting Changes | |
Recent Accounting Pronouncements and Accounting Changes | 3. Recent Accounting Pronouncements and Accounting Changes Recent Accounting Pronouncements The Company has not yet adopted and is currently assessing the potential effect of the following pronouncements on its consolidated financial statements: In November 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Income Taxes (“ASU 2015-17”) which aims to simplify the classification of deferred taxes on the balance sheet. More specifically, ASU 2015-17 will require that all deferred tax assets and liabilities, and any related valuation allowance, be reported as noncurrent in a classified balance sheet. The new guidance will replace the existing practice of reporting deferred taxes for each tax jurisdiction (or taxing component of a jurisdiction) as (a) a net current asset or liability and (b) a net noncurrent asset or liability. The new guidance does not change the existing requirement that only permits offsetting assets and liabilities within the same jurisdiction. For public companies, this amendment is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. Early adoption is permitted. In February 2016, the FASB issued ASU No. 2016-02, Leases , which will require lessees to report on their balance sheets a right-of-use asset and a lease liability in connection with most lease agreements classified as operating leases under the current guidance. Under the new guidance, the lease liability will be measured initially based on the present value of future lease payments, subject to certain conditions. The right-of-use asset will be measured initially based on the amount of the liability, plus certain initial direct costs. The new guidance will further require that leases be classified at inception as either (a) operating leases or (b) finance leases. For operating leases, periodic expense will generally be flat (straight-line) throughout the life of the lease. For finance leases, periodic expense will decline (similar to capital leases under current rules) over the life of the lease. The new standard must be adopted using a modified retrospective transition method. For public companies, this amendment is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted. In March 2016, the FASB issued ASU No. 2016-09, Improvements to Employee Share-Based Payment Accounting , intended to simplify various aspects of how share-based payments are recorded and presented on the financial statements. For example, the new guidance will require that all the income tax effect related to share-based payments be recorded in income tax expense. The new guidance further removes the current requirement to delay recognition of a windfall tax benefit until it reduces current taxes payable. In addition, the new standard will require that excess tax benefits and shortfalls from share-based compensation awards be reported in operating activities in the statement of cash flows. For public companies, these amendments are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. Early adoption is permitted. In addition, the Company has not yet adopted the following recent accounting pronouncement and does not believe, based on the Company’s preliminary assessment, that its adoption will have a material effect on its consolidated financial statements: In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers which will supersede Accounting Standards Codification (“ASC”) Topic 605, Revenue Recognition . A core principle of the new guidance is that an entity should measure revenue in connection with its sale of goods and services to a customer based on the consideration to which the entity expects to be entitled in exchange for each of those goods and services. The new standard must be adopted using either the retrospective or cumulative effect transition method. For public companies, this amendment is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. Early adoption is permitted. The Company has not yet selected a transition method. Accounting Changes In April 2015, the FASB issued ASU No. 2015-05, Customer’s Accounting for Fees Paid in Cloud Computing Arrangement . This pronouncement provides guidance to determine whether a cloud-based computing arrangement includes a software license. If a cloud-based computing arrangement includes a software license, the customer must account for the software element of the arrangement consistent with the acquisition of other software licenses. Otherwise, the customer must account for the arrangement as a service contract. The new standard permits the use of either the prospective or retrospective transition method. As required, the Company adopted the provisions of ASU No. 2015-05, prospectively, in the first quarter of its fiscal year ending September 30, 2017 and its adoption did not have a material impact on the Company’s consolidated financial statements. In September 2015, the FASB issued ASU No. 2015-16, Business Combinations (Topic 805): Simplifying the Accounting for Measurement-Period Adjustments (“ASU 2015-16”) which eliminates the prior requirement to recognize measurement-period adjustments to provisional amounts retrospectively. Instead, ASU 2015-16 requires the acquirer to recognize measurement-period adjustments, as well as the impact on earnings of changes in depreciation, amortization and similar items (if any) resulting from the change to the provisional amounts, in the period when the amount of each measurement-period adjustment is determined. As required, the Company adopted the provisions of ASU 2015-16 in the first quarter of its fiscal year ending September 30, 2017 and its adoption did not have a material impact on the Company’s consolidated financial statements. In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business (“ASU 2017-01”). ASU 2017-01 must be applied prospectively and provides a narrower framework to be used to determine if a set of assets and activities constitutes a business compared to the framework under the prior guidance and is generally expected to result in greater consistency in the application of ASC Topic 805, Business Combinations . As permitted, the Company adopted ASU 2017-01 in the second quarter of its fiscal year ending September 30, 2017 and its adoption did not have a material impact on the Company’s consolidated financial statements. In January 2017, the FASB issued ASU No. 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment (“ASU 2017-04”), which eliminates step two of the two-step quantitative goodwill impairment test. ASU 2017-04 applies to an entity that elects to use the quantitative method to test goodwill for impairment, but ASU 2017-04 does not eliminate the option to use instead the qualitative method to test goodwill for impairment. Step two of the quantitative impairment test guidance measures the amount of impairment loss and is performed when an entity concludes, as a result of performing step one of the quantitative test, that potential impairment exists. As permitted, the Company adopted ASU 2017-04 in the second quarter of its fiscal year ending September 30, 2017 and its adoption did not have a material impact on the Company’s consolidated financial statements. |
Fair Value Measurements
Fair Value Measurements | 9 Months Ended |
Jun. 30, 2017 | |
Fair Value Measurements | |
Fair Value Measurements | 4. Fair Value Measurements The Company’s financial instruments consist of cash equivalents, if any, trade and other accounts receivable, accounts payable, foreign currency derivative instruments and debt. The carrying amounts of cash equivalents, if any, trade and other accounts receivable and accounts payable approximate their respective fair values due to the short-term nature of these financial instruments. The Company measures on a recurring basis and discloses the fair value of its financial instruments under the provisions of ASC Topic 820, Fair Value Measurement , as amended (“ASC 820”). The Company defines “fair value” as the price that would be received to sell an asset or paid to transfer a liability (i.e., the exit price) in an orderly transaction between market participants at the measurement date. ASC 820 establishes a three-level hierarchy for measuring fair value. This valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability on the measurement date. Consistent with the hierarchy contained in ASC 820, the Company categorized certain of its financial assets and liabilities as follows at June 30, 2017 and September 30, 2016 (in thousands): As of June 30, 2017 Total Level 1 Level 2 Level 3 Assets Foreign exchange contracts (a) $ $ — $ $ — Total assets $ $ — $ $ — Liabilities Long-term debt (b) $ $ $ $ — Foreign exchange contracts (a) — — Total liabilities $ $ $ $ — As of September 30, 2016 Total Level 1 Level 2 Level 3 Assets Foreign exchange contracts (a) $ — $ — $ — $ — Total assets $ — $ — $ — $ — Liabilities Long-term debt (b) $ $ $ $ — Foreign exchange contracts (a) — — Total liabilities $ $ $ $ — (a) Foreign exchange contracts (including foreign currency forwards) are valued for purposes of this disclosure using widely accepted valuation techniques, such as discounted cash flow analyses, and observable inputs, such as market foreign currency exchange rates. Please see Note 11 for more information about the Company’s foreign exchange contracts. (b) Long-term debt (including current maturities and borrowings under the asset-based senior secured loan facility (the “ABL facility”), if any, is carried in the Company’s consolidated financial statements at amortized cost of $1,888.0 million at June 30, 2017 and $1,807.7 million at September 30, 2016, less unamortized debt issuance costs of $21.2 million at June 30, 2017 and $23.7 million at September 30, 2016. The Company’s senior notes are valued for purposes of this disclosure using unadjusted quoted market prices for such debt securities. Other long-term debt (consisting primarily of borrowings under the ABL facility, if any, and capital lease obligations) is generally valued for purposes of this disclosure using widely accepted valuation techniques, such as discounted cash flow analyses, and observable inputs, such as market interest rates. Please see Note 10 and Note 15 for more information about the Company’s debt. |
Accumulated Stockholders' Defic
Accumulated Stockholders' Deficit | 9 Months Ended |
Jun. 30, 2017 | |
Accumulated Stockholders' Deficit | |
Accumulated Stockholders' Deficit | 5. Accumulated Stockholders’ Deficit In August 2014, the Company announced that its Board of Directors (the “Board”) approved a share repurchase program authorizing it to repurchase up to $1.0 billion of its common stock over an approximate three-year period expiring on September 30, 2017 (the “2014 Share Repurchase Program”). During the nine months ended June 30, 2017 and 2016, the Company repurchased and subsequently retired approximately 13.1 million and 6.2 million shares, respectively, of its common stock under the 2014 Share Repurchase Program at an aggregate cost of $286.5 million and $162.4 million, respectively. The Company funded these share repurchases with existing cash balances, cash from operations and borrowings under the ABL facility. The Company reduced common stock and additional paid-in capital, in the aggregate, by these amounts. However, as required by GAAP, to the extent that share repurchase amounts exceeded the balance of additional paid-in capital prior to the Company recording such repurchases, the Company recorded the excess in accumulated deficit. At June 30, 2017 and September 30, 2016, accumulated other comprehensive loss consists of cumulative foreign currency translation adjustments of $93.0 million and $100.1 million, respectively, net of income taxes of $2.3 million at both dates. At June 30, 2017, the Company’s only component of comprehensive income, other than net earnings, is foreign currency translation adjustments, net of income tax. |
Earnings Per Share
Earnings Per Share | 9 Months Ended |
Jun. 30, 2017 | |
Earnings Per Share | |
Earnings Per Share | 6. Earnings Per Share The following table sets forth the computations of basic and diluted earnings per share (in thousands, except per share data): Three Months Ended Nine Months Ended 2017 2016 2017 2016 Net earnings $ $ $ $ Weighted average basic shares Dilutive securities: Stock option and stock award programs Weighted average diluted shares Earnings per share: Basic $ $ $ $ Diluted $ $ $ $ At June 30, 2017 and 2016, options to purchase 4,792,717 shares and 66,573 shares, respectively, of the Company’s common stock were outstanding but not included in the computations of diluted earnings per share for the three months ended June 30, 2017 and 2016, respectively, since these options were anti-dilutive. At June 30, 2017 and 2016, options to purchase 4,792,717 shares and 1,094,343 shares, respectively, of the Company’s common stock were outstanding but not included in the computations of diluted earnings per share for the nine months ended June 30, 2017 and 2016, respectively, since these options were anti-dilutive. An anti-dilutive option is an option that is: (a) out-of-the-money (an option with an exercise price which is greater than the average price per share of the Company’s common stock during the period), or (b) in-the-money (an option with an exercise price which is less than the average price per share of the Company’s common stock during the period) for which the sum of assumed proceeds, including any unrecognized compensation expense related to such option, exceeds the average price per share for the Company’s common stock during the period. |
Share-Based Payments
Share-Based Payments | 9 Months Ended |
Jun. 30, 2017 | |
Share-Based Payments | |
Share-Based Payments | 7. Share-Based Payments The Company from time to time may grant, subject to approval by the Board, performance-based awards and service-based awards to its employees under the Sally Beauty Holdings, Inc. Amended and Restated 2010 Omnibus Incentive Plan (the “2010 Plan”), a stockholder-approved share-based compensation plan. The following table presents the total compensation cost included in selling, general and administrative expenses for all share-based compensation arrangements, and the related income tax benefits recognized in our consolidated statements of earnings (in thousands): Three Months Ended Nine Months Ended 2017 2016 2017 2016 Share-based compensation expense $ $ $ $ Income tax benefit related to share-based compensation expense $ $ $ $ Performance-Based Awards The Company from time to time grants performance-based restricted stock units (“performance units”) pursuant to the 2010 Plan. The Company’s performance units represent unsecured obligations of the Company to issue shares of its common stock. The number of shares, if any, which will be issued in connection with these awards, is contingent upon both (a) employee service conditions and (b) the Company’s level of achievement with respect to specified performance targets over a specified period of time. The Company measures the cost of services received from employees in exchange for an award of performance units based on the fair value of the award on the date of grant and it recognizes expense over the requisite service period (generally three years). The fair value of a performance unit is determined based on the closing market price of the Company’s common stock on the date of grant. During the nine months ended June 30, 2017 and 2016, the Company granted approximately 146,000 and 152,000 performance units (“target shares”), respectively, to its employees. Under the terms of these awards, a grantee may earn from 0% to 200% of his or her target shares, with the ultimate number of units earned upon settlement (and expense recognized) dependent on the Company’s level of achievement with respect to certain specified cumulative performance targets during the three-year period specified in each award (the “performance period”) and satisfaction of the employee service condition. Periodic expense for performance unit awards, which is estimated quarterly, is based on the Company’s projected performance during the performance period compared to the performance targets contained in the award. As such, for the nine months ended June 30, 2017 and 2016, the Company has estimated and recognized compensation expense for each award based on the percentage of the performance targets that the Company deems probable of achievement. The Company’s assessment of the compensation expense, if any, to be ultimately recognized in connection with its performance unit awards is based on currently available information. The compensation expense, if any, ultimately recognized may be significantly different from such estimates. To date, the Company has only granted performance units subject to the Company’s achievement of two performance targets: consolidated sales growth (as defined in the award documents) and return on invested capital (as defined in the award documents), in addition to service conditions. The following table presents a summary of the activity for the Company’s performance unit awards for the nine months ended June 30, 2017: Performance Unit Awards Number of Shares Weighted Average Weighted Average Unvested at September 30, 2016 $ Granted Vested — — Forfeited ) Unvested at June 30, 2017 $ The maximum compensation expense to be potentially recognized in connection with all outstanding performance unit awards is approximately $10.4 million, including $1.5 million of cumulative expense recognized on or prior to June 30, 2017. Service-Based Awards The Company measures the cost of services received from employees and directors in exchange for a service-based award of equity instruments based on the fair value of the award on the date of grant, and recognizes compensation expense on a straight-line basis over the vesting period or over the period ending on the date a recipient becomes eligible for retirement, if earlier, in connection with employees eligible to continue vesting awards upon retirement (“retirement-eligible”) under the provisions of the 2010 Plan. During the nine months ended June 30, 2017 and 2016, the Company recognized accelerated share-based compensation expense of $1.1 million and $1.3 million, respectively, in connection with service-based awards to retirement-eligible employees. Stock Option Awards The Company granted approximately 1.5 million service-based stock options to employees during both the nine months ended June 30, 2017 and 2016. Each option has an exercise price equal to the closing market price of the Company’s common stock on the date of grant and has a maximum term of 10 years. Options generally vest ratably over a three or four year period and are generally subject to forfeiture if employment terminates prior to completion of the vesting period, subject to certain retirement provisions contained in the 2010 Plan. The following table presents a summary of the activity for the Company’s service-based stock option awards for the nine months ended June 30, 2017: Number of Weighted Weighted Aggregate Outstanding at September 30, 2016 $ $ Granted Exercised ) Forfeited or expired ) Outstanding at June 30, 2017 $ $ Exercisable at June 30, 2017 $ $ The following table summarizes additional information about service-based stock options outstanding at June 30, 2017 under the Company’s share-based compensation plans: Options Outstanding Options Exercisable Range of Number of Weighted Weighted Number of Weighted $5.24 – 19.99 $ $ $20.00 – 24.99 $25.00 – 31.58 Total $ $ The Company uses the Black-Scholes option pricing model to value the Company’s stock options for each stock option award. Using the Black-Scholes model, the fair value of each stock option award is estimated on the date of grant. The fair value of the Company’s stock option awards is expensed on a straight-line basis over the vesting period (generally three or four years) of the stock options or over a period ending on the date a recipient becomes retirement-eligible, if earlier. The weighted average assumptions relating to the valuation of the Company’s stock options using the Black-Scholes option pricing model are as follows: Nine months ended 2017 2016 Expected life (in years) Expected volatility for the Company’s common stock % % Risk-free interest rate % % Dividend yield % % The expected life of options represents the period of time that the options granted are expected to be outstanding and is based on historical experience of employees of the Company who have been granted stock options. The risk-free interest rate is based on the zero-coupon U.S. Treasury notes with a comparable term as of the date of the grant. Since the Company does not currently expect to pay dividends, the assumed dividend yield is 0%. The weighted average fair value at the date of grant of the stock options issued by the Company in the nine months ended June 30, 2017 and 2016 was $6.37 and $6.32 per option, respectively. The aggregate intrinsic value of options exercised during the nine months ended June 30, 2017 was $7.4 million. The cash proceeds from these option exercises were $16.9 million and the tax benefit realized from these option exercises was $2.8 million. At June 30, 2017, unrecognized compensation expense related to unvested stock option awards is approximately $9.3 million and is expected to be recognized over the weighted average period of 1.8 years. Restricted Stock Awards The Company granted approximately 35,000 and 40,000 service-based restricted share awards to its employees during the nine months ended June 30, 2017 and 2016, respectively. A restricted stock award is an award of shares of the Company’s common stock (which have full voting and dividend rights but are restricted with regard to sale or transfer), the restrictions over which lapse ratably over a specified period of time (generally three to five years). Restricted stock awards are generally subject to forfeiture if employment terminates prior to these restrictions lapsing, subject to certain retirement provisions of the 2010 Plan. The fair value of the Company’s restricted stock awards is expensed on a straight-line basis over the period (generally three to five years) in which the restrictions on these stock awards lapse (“vesting”) or over the period ending on the date a recipient becomes retirement-eligible, if earlier. The fair value of a service-based restricted stock award is determined based on the closing market price of the Company’s common stock on the date of grant. The following table presents a summary of the activity for the Company’s service-based restricted stock awards for the nine months ended June 30, 2017: Restricted Stock Awards Number of Shares Weighted Average Weighted Average Unvested at September 30, 2016 $ Granted Vested ) Forfeited ) Unvested at June 30, 2017 $ At June 30, 2017, unrecognized compensation expense related to unvested restricted stock awards is approximately $2.0 million and is expected to be recognized over the weighted average period of 1.5 years. Restricted Stock Units The Company from time to time grants service-based restricted stock unit (“RSU” or “RSUs”) awards, which generally vest within one year from the date of grant, pursuant to the 2010 Plan. To date, the Company has only granted service-based RSU awards to its non-employee directors. RSUs represent an unsecured promise of the Company to issue shares of the Company’s common stock. Unless forfeited prior to the vesting date, RSUs are converted into shares of the Company’s common stock generally on the vesting date. An independent director who receives an RSU award may elect, upon receipt of such award, to defer until a later date delivery of the shares of common stock of the Company that would otherwise be issued to such director on the vesting date. RSUs granted prior to the fiscal year 2012 are generally retained by the Company as deferred stock units that are not settled until six months after the independent director’s service as a director terminates. RSUs are generally subject to forfeiture if service terminates prior to the vesting of the units. Recipients have no voting rights with respect to unvested RSUs. Under the 2010 Plan, the Company may settle some or all of the vested deferred stock units with shares of the Company’s common stock or in cash. The Company granted approximately 42,000 and 27,000 service-based RSUs to its non-employee directors during the nine months ended June 30, 2017 and 2016, respectively. The Company expenses the cost of a service-based RSU, which is determined to be the fair value of the RSU at the date of grant, on a straight-line basis over the vesting period (generally one year). For these purposes, the fair value of the RSU is determined based on the closing market price of the Company’s common stock on the date of grant. The following table presents a summary of the activity for the Company’s service-based RSUs for the nine months ended June 30, 2017: Restricted Stock Units Number of Shares Weighted Average Weighted Average Unvested at September 30, 2016 — $ — — Granted Vested — — Forfeited — — Unvested at June 30, 2017 $ At June 30, 2017, unrecognized compensation expense related to unvested RSUs is approximately $0.3 million and is expected to be recognized over the weighted average period of 0.2 years. |
Goodwill and Intangible Assets
Goodwill and Intangible Assets | 9 Months Ended |
Jun. 30, 2017 | |
Goodwill and Intangible Assets | |
Goodwill and Intangible Assets | 8. Goodwill and Intangible Assets During the three months ended March 31, 2017, the Company completed its annual assessment for impairment of goodwill and other intangible assets. No material impairment losses were recognized in the current or prior periods presented in connection with the Company’s goodwill and other intangible assets. For the three months ended June 30, 2017 and 2016, amortization expense related to other intangible assets was $3.2 million and $3.4 million, respectively, and, for the nine months ended June 30, 2017 and 2016, amortization expense was $9.9 million and $10.3 million, respectively. |
Commitments and Contingencies
Commitments and Contingencies | 9 Months Ended |
Jun. 30, 2017 | |
Commitments and Contingencies | |
Commitments and Contingencies | 9. Commitments and Contingencies During the fiscal year 2014, the Company disclosed that it had experienced a data security incident (the “2014 data security incident”). During the fiscal year 2015, the Company disclosed that it had experienced a second data security incident (the “2015 data security incident” and, together with the 2014 data security incident, the “data security incidents”). The data security incidents involved the unauthorized installation of malicious software (“malware”) on our information technology systems, including our point-of-sale systems that the Company believes may have placed at risk certain payment card data for some transactions. The costs that the Company has incurred to date in connection with the data security incidents include assessments by payment card networks, professional advisory fees and legal fees relating to investigating and remediating the data security incidents. In April 2017, the Company entered into agreements pursuant to which all existing claims and assessments by certain payment card networks were settled. The Company cannot provide any assurances regarding whether additional assessments by payment card networks will be received. Selling, general and administrative expenses for the nine months ended June 30, 2016 reflect expenses of $2.6 million related to the data security incidents. The table that follows summarizes the activity for the Company’s loss contingency obligation for the nine months ended June 30, 2017 (in thousands): Contingency Liability at Expense Payments, net Liability at Data security incidents $ $ — $ ) $ (1) Unpaid costs are included in Accrued liabilities in the Company’s consolidated balance sheet. The Company expects to incur additional costs and expenses related to the data security incidents in the future. These costs and expenses may result from potential additional liabilities to other payment card networks, governmental or third party investigations, proceedings or litigation and legal and other fees necessary to defend against any potential liabilities or claims, and further investigatory and remediation costs. As of June 30, 2017, the scope of these additional costs and expenses, or a range thereof, beyond amounts management has determined to be probable, cannot be reasonably estimated. While the Company does not anticipate these additional costs and expenses or liabilities would have a material adverse impact on its business, financial condition and operating results, these additional costs and expenses could be significant. |
Short-term Borrowings and Long-
Short-term Borrowings and Long-term Debt | 9 Months Ended |
Jun. 30, 2017 | |
Short-term Borrowings and Long-term Debt | |
Short-term Borrowings and Long-term Debt | 10. Short-term Borrowings and Long-term Debt At June 30, 2017, the Company, through its subsidiary (Sally Holdings LLC, hereafter “Sally Holdings”) had a $500 million, five-year asset-based senior secured loan facility (the “ABL facility”), including a $25.0 million Canadian sub-facility for its Canadian operations. At June 30, 2017, the Company had borrowings of $81.5 million outstanding under the ABL facility and the Company had $398.3 million available for borrowing under the ABL facility, including the Canadian sub-facility. In addition, at June 30, 2017, the Company, through its subsidiaries Sally Holdings and Sally Capital Inc. (collectively, the “Issuers”) had $1,800.0 million of senior notes outstanding, as summarized in the table below. Please see Note 13 of the “Notes to Consolidated Financial Statements” in “Item 8 - Financial Statements and Supplementary Data” contained in our Annual Report on Form 10-K for the fiscal year ended September 30, 2016 and Notes 4 and 15 in Item 1 of this Quarterly Report for more information about these debt obligations. Details of long-term debt as of June 30, 2017 and September 30, 2016 are as follows (dollars in thousands): June 30, September 30, Interest Rates(a) ABL facility(b) $ $ — (i) Prime plus (0.50% to 0.75%) or; (ii) LIBOR(b) plus (1.50% to 1.75%) Senior notes due Jun. 2022 5.750% Senior notes due Nov. 2023 5.500% Senior notes due Dec. 2025 5.625% Total $ $ Plus: capital lease obligations Less: unamortized debt issuance costs and premium, net(c) Total debt $ $ Less: current maturities Total long-term debt $ $ (a) Interest rates shown represent the coupon or contractual rate or rates related to each debt instrument listed. (b) When used in this Quarterly Report, LIBOR means the London Interbank Offered Rate. At June 30, 2017 and September 30, 2016, unamortized debt issuance costs of $0.9 million and $1.6 million, respectively, related to the ABL facility are reported in other assets in the Company’s consolidated balance sheets. (c) Amounts are net of unamortized premium of $4.8 million and $5.6 million as of June 30, 2017 and September 30, 2016, respectively, related to notes with an aggregate principal amount of $150.0 million of the 5.750% senior notes due 2022 (the “senior notes due 2022”). Maturities of the Company’s long-term debt are as follows as of June 30, 2017 (in thousands): Twelve months ending June 30: 2018-2021 $ 2022 Thereafter $ Plus: capital lease obligations Less: unamortized debt issuance costs and premium, net Less: current maturities Total long-term debt $ As further described in Note 15, on July 6, 2017, the Company announced that it had amended and restated its ABL facility (as defined below), entered into a new Term Loan B (as defined below), and completed its previously-announced redemption of all $850.0 million in aggregate principal amount of its Senior Notes due 2022 primarily with the proceeds of the new Term Loan B as well as existing cash balances and borrowings under the its new ABL facility. Please see Note 15 in Item 1 of this Quarterly Report for more information on the Term Loan B and the new ABL facility. |
Derivative Instruments and Hedg
Derivative Instruments and Hedging Activities | 9 Months Ended |
Jun. 30, 2017 | |
Derivative Instruments and Hedging Activities | |
Derivative Instruments and Hedging Activities | 11. Derivative Instruments and Hedging Activities Risk Management Objectives of Using Derivative Instruments The Company is exposed to a wide variety of risks, including risks arising from changing economic conditions. The Company manages its exposure to certain economic risks (including liquidity, credit risk, and changes in foreign currency exchange rates and in interest rates) primarily: (a) by closely managing its cash flows from operating and investing activities and the amounts and sources of its debt obligations; (b) by assessing periodically the creditworthiness of its business partners; and (c) through the use of derivative instruments (including foreign exchange contracts and interest rate swaps or caps) by Sally Holdings and its subsidiaries. The Company uses foreign exchange contracts (including foreign currency forwards) as part of its overall economic risk management strategy to effectively fix the amount of certain foreign assets and obligations relative to its functional and reporting currency (the U.S. dollar) or relative to the functional currency of certain of its consolidated subsidiaries, or to add stability to cash flows resulting from its net investments (including intercompany notes not permanently invested) and earnings denominated in foreign currencies. The Company’s foreign currency exposures at times offset each other, sometimes providing a natural hedge against foreign currency risk. In connection with the remaining foreign currency risk, the Company uses foreign exchange contracts to effectively fix the foreign currency exchange rate applicable to specific anticipated foreign currency-denominated cash flows, thus limiting the potential fluctuations in such cash flows as a result of foreign currency market movements. The Company from time to time uses interest rate derivatives (including interest rate swaps or caps) as part of its overall economic risk management strategy to add stability to the interest payments due in connection with its debt obligations. At June 30, 2017, the Company’s exposure to interest rate fluctuations relates to interest payments, if any, under the ABL facility and the Company held no derivative instruments in connection therewith. During the nine months ended June 30, 2017, the Company did not purchase or hold any derivative instruments for trading or speculative purposes. Designated Cash Flow Hedges The Company may use from time to time derivative instruments designated as hedges to manage its exposure to interest rate or foreign currency exchange rate movements, as appropriate. During the nine months ended June 30, 2017, the Company did not purchased or hold any such derivatives. Please see Note 15 for more information. Non-designated Cash Flow Hedges The Company may use from time to time derivative instruments (such as foreign exchange contracts and interest rate swaps or caps) not designated as hedges or that do not meet the requirements for hedge accounting to manage its exposure to foreign currency exchange rate or interest rate movements, as appropriate. The Company uses foreign exchange contracts to manage the exposure to the U.S. dollar resulting from certain of its Sinelco Group subsidiaries’ purchases of merchandise from third-party suppliers. Sinelco’s functional currency is the Euro. As such, at June 30, 2017, the Company holds foreign currency forward contracts that enable it to sell approximately €4.0 million ($4.6 million, at the June 30, 2017 exchange rate) at a weighted average contractual EUR-USD exchange rate of 1.1291. The foreign currency forward contracts discussed in this paragraph are with a single counterparty and expire ratably through September 15, 2017. The Company also uses foreign exchange contracts to manage the exposure to the U.S. dollar resulting from purchases of merchandise, primarily from third-party suppliers, by the Company’s subsidiary in Mexico. Such subsidiary’s functional currency is the Mexican Peso. As such, at June 30, 2017, the Company holds foreign currency forward contracts that enable it to sell approximately MXN155.9 million ($8.7 million, at the June 30, 2017 exchange rate) at a weighted average contractual USD-MXN exchange rate of 21.9557. The foreign currency forward contracts discussed in this paragraph are with a single counterparty (not the same counterparty as that on the forward contracts discussed in the preceding paragraph) and expire ratably through September 29, 2017. In addition, the Company uses foreign exchange contracts to mitigate its exposure to changes in foreign currency exchange rates in connection with certain intercompany balances not permanently invested. As such, at June 30, 2017, the Company holds: (a) a foreign currency forward contract that enables it to sell approximately €8.4 million ($9.6 million, at the June 30, 2017 exchange rate) at a contractual EUR-USD exchange rate of 1.1432, (b) a foreign currency forward contract that enables it to sell approximately C$8.9 million ($6.8 million, at the June 30, 2017 exchange rate) at a contractual USD-CAD exchange rate of 1.2987, (c) a foreign currency forward contract that enables it to buy approximately C$6.5 million ($5.0 million, at the June 30, 2017 exchange rate) at a contractual USD-CAD exchange rate of 1.3007 and (d) a foreign currency forward contract that enables it to buy approximately £0.2 million ($0.3 million, at the June 30, 2017 exchange rate) at a contractual GBP-USD exchange rate of 1.2966. All the foreign currency forward contracts discussed in this paragraph are with a single counterparty (not the same counterparty as that on the forward contracts discussed in the two preceding paragraphs) and expire on or before September 29, 2017. At June 30, 2017, the Company’s foreign exchange contracts are not designated as hedges and do not meet the requirements for hedge accounting. Accordingly, the changes in the fair value (i.e., marked-to-market adjustments) of these derivative instruments, which are adjusted quarterly, are recorded in selling, general and administrative expenses in our consolidated statements of earnings. Selling, general and administrative expenses reflect a net loss of $0.8 million and a net gain of $0.2 million for the three months ended June 30, 2017 and 2016, respectively, and a net loss of $1.4 million and $0.4 million for the nine months ended June 30, 2017 and 2016, respectively, in connection with all of the Company’s foreign currency derivative instruments, including marked-to-market adjustments. The table below presents the fair value of the Company’s derivative financial instruments and their classification on the Company’s consolidated balance sheets as of June 30, 2017 and September 30, 2016 (in thousands): Asset Derivatives Liability Derivatives Classification June 30, September 30, Classification June 30, September 30, 2016 Derivatives designated as hedging instruments: None Derivatives not designated as hedging instruments: Foreign exchange contracts Other current assets $ $ — Accrued liabilities $ $ $ $ — $ $ The table below presents the effect of the Company’s derivative financial instruments on the Company’s consolidated statements of earnings for the three months ended June 30, 2017 and 2016 (in thousands): Derivatives Designated as Hedging Amount of Gain or (Loss) Recognized Amount of Gain or (Loss) Reclassified from None Derivatives Not Designated as Hedging Classification of Gain or Amount of Gain or (Loss) Recognized in Income Three Months Ended June 30, 2017 2016 Foreign exchange contracts Selling, general and administrative expenses $ ) $ The table below presents the effect of the Company’s derivative financial instruments on the Company’s consolidated statements of earnings for the nine months ended June 30, 2017 and 2016 (in thousands): Derivatives Designated as Hedging Amount of Gain or (Loss) Recognized Amount of Gain or (Loss) Reclassified from None Derivatives Not Designated as Hedging Classification of Gain or Amount of Gain or (Loss) Recognized in Income Nine Months Ended June 30, 2017 2016 Foreign exchange contracts Selling, general and administrative expenses $ ) $ ) Credit-risk-related Contingent Features At June 30, 2017, the aggregate fair value of all foreign exchange contracts held which consisted of derivative instruments in a liability position was $1.5 million. The Company was under no obligation to post and had not posted any collateral related to the derivative instruments in a liability position. The counterparties to our derivative instruments are deemed by the Company to be of substantial resources and strong creditworthiness. However, these transactions result in exposure to credit risk in the event of default by a counterparty. In the event that a counterparty defaults in its obligation under our derivative instruments, the Company could incur material financial losses. However, at the present time, no such losses are deemed probable. |
Business Segments
Business Segments | 9 Months Ended |
Jun. 30, 2017 | |
Business Segments | |
Business Segments | 12. Business Segments The Company’s business is organized into two operating and reporting segments: (i) Sally Beauty Supply, a domestic and international chain of retail stores and a consumer-facing e-commerce website that offers professional beauty products and supplies to both retail customers and salon professionals primarily in North America, Puerto Rico, and parts of Europe and South America and (ii) Beauty Systems Group, including its franchise-based business Armstrong McCall, a full service distributor of beauty products and supplies that offers professional beauty products directly to salons and salon professionals through its professional-only stores, e-commerce websites and its own sales force in partially exclusive geographical territories primarily in North America. The accounting policies of both of our business segments are the same as described in the summary of significant accounting policies contained in Note 2 of the “Notes to Consolidated Financial Statements” in “Item 8 - Financial Statements and Supplementary Data” contained in our Annual Report on Form 10-K for the fiscal year ended September 30, 2016. Sales between segments, which were eliminated in consolidation, were not material during the three and nine months ended June 30, 2017 and 2016. Segment data for the three and nine months ended June 30, 2017 and 2016 is as follows (in thousands): Three Months Ended Nine Months Ended 2017 2016 (a) 2017 2016 (a) Net sales: Sally Beauty Supply $ $ $ $ BSG Total $ $ $ $ Earnings before provision for income taxes: Segment operating earnings: Sally Beauty Supply $ $ $ $ BSG Segment operating earnings Unallocated corporate expenses (b) ) ) ) ) Restructuring charges ) — ) — Share-based compensation expense ) ) ) ) Interest expense (c) ) ) ) ) Earnings before provision for income taxes $ $ $ $ (a) Certain amounts for the prior fiscal periods have been reclassified to conform to the current fiscal period presentation, in connection with realignment of a business component from our BSG segment to our Sally Beauty Supply segment. (b) Unallocated corporate expenses consist of corporate and shared costs. (c) For the nine months ended June 30, 2016, interest expense includes a loss on extinguishment of debt of $33.3 million in connection with the Company’s December 2015 redemption of its senior notes due 2019. |
Parent, Issuers, Guarantor and
Parent, Issuers, Guarantor and Non-Guarantor Condensed Consolidated Financial Statements | 9 Months Ended |
Jun. 30, 2017 | |
Parent, Issuers, Guarantor and Non-Guarantor Condensed Consolidated Financial Statements | |
Parent, Issuers, Guarantor and Non-Guarantor Condensed Consolidated Financial Statements | 13. Parent, Issuers, Guarantor and Non-Guarantor Condensed Consolidating Financial Statements The following consolidating financial information presents the condensed consolidating balance sheets as of June 30, 2017 and September 30, 2016, the related condensed consolidating statements of earnings and comprehensive income for the three and nine months ended June 30, 2017 and 2016, and the condensed consolidating statements of cash flows for the nine months ended June 30, 2017 and 2016 of: (i) Sally Beauty Holdings, Inc., or the “Parent;” (ii) Sally Holdings and Sally Capital Inc. (iii) the guarantor subsidiaries; (iv) the non-guarantor subsidiaries; (v) elimination entries necessary for consolidation purposes; and (vi) Sally Beauty on a condensed consolidated basis. Separate financial statements and other disclosures with respect to the subsidiary guarantors have not been provided because management believes the following information is sufficient since the guarantor subsidiaries are 100% indirectly owned by the Parent and all guarantees are full and unconditional. The accounts, inventory, credit card receivables, deposit accounts, certain intercompany notes and certain other personal property of the guarantor subsidiaries relating to the inventory and accounts are pledged under the ABL facility and consequently may not be available to satisfy the claims of general creditors. Please see Note 15 for more information. Condensed Consolidating Balance Sheet June 30, 2017 (In thousands) Parent Sally Guarantor Non- Consolidating Sally Beauty Assets Cash and cash equivalents $ — $ $ $ $ — $ Trade and other accounts receivable, less allowance for doubtful accounts — — Due from affiliates — — — ) — Inventory — — — Other current assets — Deferred income tax assets — — Property and equipment, net — — Investment in subsidiaries — ) — Goodwill and other intangible assets, net — — — Other assets ) — Total assets $ $ $ $ $ ) $ Liabilities and Stockholders’ (Deficit) Equity Accounts payable $ $ — $ $ $ — $ Due to affiliates — ) — Accrued liabilities — Income taxes payable — ) — Long-term debt — — Other liabilities — — — Deferred income tax liabilities ) — Total liabilities ) Total stockholders’ (deficit) equity ) ) ) Total liabilities and stockholders’ (deficit) equity $ $ $ $ $ ) $ Condensed Consolidating Balance Sheet September 30, 2016 (In thousands) Parent Sally Guarantor Non- Consolidating Sally Beauty Assets Cash and cash equivalents $ — $ $ $ $ — $ Trade and other accounts receivable, less allowance for doubtful accounts — — Due from affiliates — — — ) — Inventory — — — Other current assets — Deferred income tax assets — — Property and equipment, net — — Investment in subsidiaries — ) — Goodwill and other intangible assets, net — — — Other assets ) — Total assets $ $ $ $ $ ) $ Liabilities and Stockholders’ (Deficit) Equity Accounts payable $ $ $ $ $ — $ Due to affiliates — ) — Accrued liabilities — Income taxes payable — — — Long-term debt — — Other liabilities — — — Deferred income tax liabilities — — — Total liabilities ) Total stockholders’ (deficit) equity ) ) ) Total liabilities and stockholders’ (deficit) equity $ $ $ $ $ ) $ Condensed Consolidating Statement of Earnings and Comprehensive Income (In thousands) Parent Sally Holdings Guarantor Non- Consolidating Sally Beauty Net sales $ — $ — $ $ $ — $ Related party sales — — — ) — Cost of products sold and distribution expenses — — ) Gross profit — — — Selling, general and administrative expenses — Depreciation and amortization — — Restructuring charges — — — — Operating earnings (loss) ) ) — Interest expense (income) — ) — Earnings (loss) before provision for income taxes ) ) — Provision (benefit) for income taxes ) ) — Equity in earnings of subsidiaries, net of tax — ) — Net earnings ) Other comprehensive income, net of tax — — — — Total comprehensive income $ $ $ $ $ ) $ Condensed Consolidating Statement of Earnings and Comprehensive Income (In thousands) Parent Sally Holdings Guarantor Non- Consolidating Sally Beauty Net sales $ — $ — $ $ $ — $ Related party sales — — — ) — Cost of products sold and distribution expenses — — ) Gross profit — — — Selling, general and administrative expenses — Depreciation and amortization — — Operating earnings (loss) ) ) — Interest expense — ) — Earnings (loss) before provision for income taxes ) ) — Provision (benefit) for income taxes ) ) — Equity in earnings of subsidiaries, net of tax — ) — Net earnings ) Other comprehensive income, net of tax — — — ) — ) Total comprehensive income (loss) $ $ $ $ ) $ ) $ Condensed Consolidating Statement of Earnings and Comprehensive Income (In thousands) Parent Sally Holdings Guarantor Non- Consolidating Sally Beauty Net sales $ — $ — $ $ $ — $ Related party sales — — — ) — Cost of products sold and distribution expenses — — ) Gross profit — — — Selling, general and administrative expenses — Depreciation and amortization — — Restructuring charges — — — — Operating earnings (loss) ) ) — Interest expense (income) — ) — Earnings (loss) before provision for income taxes ) ) — Provision (benefit) for income taxes ) ) — Equity in earnings of subsidiaries, net of tax — ) — Net earnings ) Other comprehensive income, net of tax — — — — Total comprehensive income $ $ $ $ $ ) $ Condensed Consolidating Statement of Earnings and Comprehensive Income (In thousands) Parent Sally Holdings Guarantor Non- Consolidating Sally Beauty Net sales $ — $ — $ $ $ — $ Related party sales — — — ) — Cost of products sold and distribution expenses — — ) Gross profit — — — Selling, general and administrative expenses — Depreciation and amortization — — Operating earnings (loss) ) ) — Interest expense — ) — Earnings (loss) before provision for income taxes ) ) — Provision (benefit) for income taxes ) ) — Equity in earnings of subsidiaries, net of tax — ) — Net earnings ) Other comprehensive income (loss), net of tax — — — ) — ) Total comprehensive income (loss) $ $ $ $ ) $ ) $ Condensed Consolidating Statement of Cash Flows (In thousands) Parent Sally Holdings Guarantor Non- Consolidating Sally Beauty Net cash provided (used) by operating activities $ $ ) $ $ $ — $ Cash Flows from Investing Activities: Capital expenditures, net of proceeds from sale of property and equipment — — ) ) — ) Due from affiliates — — ) — — Net cash used by investing activities — — ) ) ) Cash Flows from Financing Activities: Proceeds from issuance of long-term debt — — — — Repayments of long-term debt — ) ) ) — ) Repurchases of common stock ) — — — — ) Proceeds from exercises of stock options — — — — Due to affiliates ) — ) — Excess tax benefit/shortfall from share-based compensation ) — — — — ) Net cash (used) provided by financing activities ) ) ) ) Effect of foreign exchange rate changes on cash and cash equivalents — — — — Net decrease in cash and cash equivalents — ) ) — ) Cash and cash equivalents, beginning of period — — Cash and cash equivalents, end of period $ — $ $ $ $ — $ Condensed Consolidating Statement of Cash Flows (In thousands) Parent Sally Holdings Guarantor Non- Consolidating Sally Beauty Net cash provided (used) by operating activities $ $ ) $ $ $ — $ Cash Flows from Investing Activities: Capital expenditures, net of proceeds from sale of property and equipment ) — ) ) — ) Acquisitions, net of cash acquired — — ) — — ) Net cash used by investing activities ) — ) ) — ) Cash Flows from Financing Activities: Proceeds from issuance of long-term debt — — — — Repayments of long-term debt — ) ) ) — ) Repurchases of common stock ) — — — — ) Debt issuance costs — ) — — — ) Proceeds from exercises of stock options — — — — Excess tax benefit from share-based compensation — — — — Net cash used by financing activities ) ) ) ) — ) Effect of foreign exchange rate changes on cash and cash equivalents — — — ) — ) Net decrease in cash and cash equivalents — ) ) ) — ) Cash and cash equivalents, beginning of period — — Cash and cash equivalents, end of period $ — $ — $ $ $ — $ |
Restructuring Plan
Restructuring Plan | 9 Months Ended |
Jun. 30, 2017 | |
Restructuring Plan | |
Restructuring Plan | 14. Restructuring Plan In January 2017, the Board approved a comprehensive restructuring plan (the “Restructuring Plan”) for the Company’s businesses that included a number of organizational efficiency initiatives and other cost reduction opportunities. The Restructuring Plan comprises the closure of four administrative offices in the U.S. and Canada, reductions in both salaried and hourly workforce and certain other cost reduction activities. The Company had initially estimated that it would incur total aggregate charges of approximately $12 million to $14 million in connection with the Restructuring Plan. Subsequently, the Company expanded the restructuring initiatives contemplated by the Restructuring Plan and estimated that it would incur total charges of up to $17 million. The remaining costs relate to the planned facility closures and to other cost reduction activities, and are expected to be recognized during the quarter ending September 30, 2017. Certain information about the Restructuring Plan as of June 30, 2017 is as follows (in thousands): Restructuring Activity Liability at Expenses (1) Cost Paid Liability at Workforce reductions $ — $ $ $ Facility closures — Other — Total $ — $ $ $ (1) Expenses include costs incurred in connection with Sally Beauty Supply ($8.4 million), BSG ($4.1 million) and corporate ($1.8 million) activities. (2) Unpaid costs are included in accrued liabilities in the Company’s consolidated balance sheet at June 30, 2017. |
Subsequent Events
Subsequent Events | 9 Months Ended |
Jun. 30, 2017 | |
Subsequent Events | |
Subsequent Events | 15. Subsequent Events On July 6, 2017, Sally Holdings and Sally Capital Inc. (collectively, the “Borrowers”), both indirect wholly-owned subsidiaries of the Company, entered into a seven-year term loan credit facility pursuant to which the Borrowers borrowed $850 million (the “Term Loan B”). The Term Loan B consists of a variable-rate tranche in the amount of $550 million which bears interest at LIBOR plus 2.50% or, at the option of the Borrowers, at an alternate base rate plus 1.50%, and a fixed-rate tranche in the amount of $300 million which bears interest at 4.50%. The initial interest rate on the variable-rate tranche is 3.75%. The agreement governing the Term Loan B contains a customary covenant package substantially consistent with the indentures governing the Company’s existing senior notes. Borrowings under the Term Loan B are secured by a first-priority lien in and upon substantially all of the assets of the Company and its domestic subsidiaries other than the accounts, inventory (and the proceeds thereof) and other assets that secure the ABL facility on a first-priority basis. In addition, the variable-rate tranche contains provisions requiring quarterly repayments of principal in an amount equal to 0.25% of the original amount for the variable-rate tranche. The Term Loan B matures on July 5, 2024. Simultaneously with the entry into the Term Loan B, the Company and certain of the Company’s indirect and direct subsidiaries that are borrowers or guarantors entered into an amended and restated $500 million, asset-based senior secured loan facility (the “new ABL facility”). After the refinancing of certain of our debt in July 2017 and payment of certain expenses related to the refinancing, there were $118.0 million in borrowings outstanding under the new ABL facility, including the amount drawn in connection with the Company’s redemption of the senior notes due 2022 described below. The terms of the new ABL facility are substantially the same as those of the previous ABL facility (which are described in our Annual Report on Form 10-K for the fiscal year ended September 30, 2016), except for an extension of the maturity to July 6, 2022, improved pricing, a relaxation of the restrictions on Sally Holdings’ ability to make Restricted Payments, as defined in the new ABL facility, and certain other improved terms. After the refinancing of certain of our debt in July 2017, the Company had approximately $362 million available for borrowing under the new ABL facility, including the Canadian sub-facility. In connection with the Company’s modification of the ABL facility, the Company will record a loss on extinguishment of debt in the amount of approximately $0.4 million. The Company used the net proceeds from the Term Loan B (approximately $845.8 million), as well as existing cash balances and borrowings under the new ABL facility in the amount of $33.5 million (i) to redeem $850.0 million aggregate outstanding principal amount of its senior notes due 2022 at a premium equal to 102.875%, plus accrued and unpaid interest up to, but not including, July 6, 2017 and (ii) to pay fees and expenses incurred in connection with the origination of the Term Loan B and redemption of the senior notes due 2022. In connection with the Company’s redemption of its senior notes due 2022, the Company will record a loss on extinguishment of debt in the amount of approximately $27.6 million, including a redemption premium in the amount of approximately $24.4 million and unamortized deferred financing costs of approximately $8.0 million, partially offset by the write-off of unamortized premium of $4.8 million. The Company has exposure to interest rate fluctuations in connection with the above-described variable-rate tranche of its Term Loan B. In order to in part mitigate this exposure, on July 6, 2017, the Company entered into two interest rate caps with an initial aggregate notional amount of $550 million (the “interest rate caps”). The interest rate caps expire on June 30, 2023 and limit the Company’s maximum interest rate in connection with the variable-rate tranche of its Term Loan B (the “hedged cash flows”) to 5.5%. The Company intends to designate the interest rate caps as effective cash flow hedges in accordance with GAAP. |
Fair Value Measurements (Tables
Fair Value Measurements (Tables) | 9 Months Ended |
Jun. 30, 2017 | |
Fair Value Measurements | |
Schedule of financial assets and liabilities by fair value hierarchy | Consistent with the hierarchy contained in ASC 820, the Company categorized certain of its financial assets and liabilities as follows at June 30, 2017 and September 30, 2016 (in thousands): As of June 30, 2017 Total Level 1 Level 2 Level 3 Assets Foreign exchange contracts (a) $ $ — $ $ — Total assets $ $ — $ $ — Liabilities Long-term debt (b) $ $ $ $ — Foreign exchange contracts (a) — — Total liabilities $ $ $ $ — As of September 30, 2016 Total Level 1 Level 2 Level 3 Assets Foreign exchange contracts (a) $ — $ — $ — $ — Total assets $ — $ — $ — $ — Liabilities Long-term debt (b) $ $ $ $ — Foreign exchange contracts (a) — — Total liabilities $ $ $ $ — (a) Foreign exchange contracts (including foreign currency forwards) are valued for purposes of this disclosure using widely accepted valuation techniques, such as discounted cash flow analyses, and observable inputs, such as market foreign currency exchange rates. Please see Note 11 for more information about the Company’s foreign exchange contracts. (b) Long-term debt (including current maturities and borrowings under the asset-based senior secured loan facility (the “ABL facility”), if any, is carried in the Company’s consolidated financial statements at amortized cost of $1,888.0 million at June 30, 2017 and $1,807.7 million at September 30, 2016, less unamortized debt issuance costs of $21.2 million at June 30, 2017 and $23.7 million at September 30, 2016. The Company’s senior notes are valued for purposes of this disclosure using unadjusted quoted market prices for such debt securities. Other long-term debt (consisting primarily of borrowings under the ABL facility, if any, and capital lease obligations) is generally valued for purposes of this disclosure using widely accepted valuation techniques, such as discounted cash flow analyses, and observable inputs, such as market interest rates. Please see Note 10 and Note 15 for more information about the Company’s debt. |
Earnings Per Share (Tables)
Earnings Per Share (Tables) | 9 Months Ended |
Jun. 30, 2017 | |
Earnings Per Share | |
Schedule of computations of basic and diluted earnings per share | The following table sets forth the computations of basic and diluted earnings per share (in thousands, except per share data): Three Months Ended Nine Months Ended 2017 2016 2017 2016 Net earnings $ $ $ $ Weighted average basic shares Dilutive securities: Stock option and stock award programs Weighted average diluted shares Earnings per share: Basic $ $ $ $ Diluted $ $ $ $ |
Share-Based Payments (Tables)
Share-Based Payments (Tables) | 9 Months Ended |
Jun. 30, 2017 | |
Share-Based Payments | |
Schedule of total compensation cost charged against income | The following table presents the total compensation cost included in selling, general and administrative expenses for all share-based compensation arrangements, and the related income tax benefits recognized in our consolidated statements of earnings (in thousands): Three Months Ended Nine Months Ended 2017 2016 2017 2016 Share-based compensation expense $ $ $ $ Income tax benefit related to share-based compensation expense $ $ $ $ |
Summary of activity for performance based unit awards | Performance Unit Awards Number of Shares Weighted Average Weighted Average Unvested at September 30, 2016 $ Granted Vested — — Forfeited ) Unvested at June 30, 2017 $ |
Summary of activity for stock option awards | Number of Weighted Weighted Aggregate Outstanding at September 30, 2016 $ $ Granted Exercised ) Forfeited or expired ) Outstanding at June 30, 2017 $ $ Exercisable at June 30, 2017 $ $ |
Summary of stock options by range of exercise prices | Options Outstanding Options Exercisable Range of Number of Weighted Weighted Number of Weighted $5.24 – 19.99 $ $ $20.00 – 24.99 $25.00 – 31.58 Total $ $ |
Schedule of weighted average assumptions for valuation of stock options using the Black-Scholes option pricing model | Nine months ended 2017 2016 Expected life (in years) Expected volatility for the Company’s common stock % % Risk-free interest rate % % Dividend yield % % |
Restricted Stock Awards | |
Share-Based Payments | |
Summary of the activity for restricted stock awards/units | Restricted Stock Awards Number of Shares Weighted Average Weighted Average Unvested at September 30, 2016 $ Granted Vested ) Forfeited ) Unvested at June 30, 2017 $ |
Restricted Stock Units | |
Share-Based Payments | |
Summary of the activity for restricted stock awards/units | Restricted Stock Units Number of Shares Weighted Average Weighted Average Unvested at September 30, 2016 — $ — — Granted Vested — — Forfeited — — Unvested at June 30, 2017 $ |
Commitments and Contingencies (
Commitments and Contingencies (Tables) | 9 Months Ended |
Jun. 30, 2017 | |
Commitments and Contingencies | |
Schedule of activity for the loss contingency obligation | The table that follows summarizes the activity for the Company’s loss contingency obligation for the nine months ended June 30, 2017 (in thousands): Contingency Liability at Expense Payments, net Liability at Data security incidents $ $ — $ ) $ (1) Unpaid costs are included in Accrued liabilities in the Company’s consolidated balance sheet. |
Short-term Borrowings and Lon27
Short-term Borrowings and Long-term Debt (Tables) | 9 Months Ended |
Jun. 30, 2017 | |
Short-term Borrowings and Long-term Debt | |
Summary of long-term debt | Details of long-term debt as of June 30, 2017 and September 30, 2016 are as follows (dollars in thousands): June 30, September 30, Interest Rates(a) ABL facility(b) $ $ — (i) Prime plus (0.50% to 0.75%) or; (ii) LIBOR(b) plus (1.50% to 1.75%) Senior notes due Jun. 2022 5.750% Senior notes due Nov. 2023 5.500% Senior notes due Dec. 2025 5.625% Total $ $ Plus: capital lease obligations Less: unamortized debt issuance costs and premium, net(c) Total debt $ $ Less: current maturities Total long-term debt $ $ (a) Interest rates shown represent the coupon or contractual rate or rates related to each debt instrument listed. (b) When used in this Quarterly Report, LIBOR means the London Interbank Offered Rate. At June 30, 2017 and September 30, 2016, unamortized debt issuance costs of $0.9 million and $1.6 million, respectively, related to the ABL facility are reported in other assets in the Company’s consolidated balance sheets. (c) Amounts are net of unamortized premium of $4.8 million and $5.6 million as of June 30, 2017 and September 30, 2016, respectively, related to notes with an aggregate principal amount of $150.0 million of the 5.750% senior notes due 2022 (the “senior notes due 2022”). |
Schedule of maturities of long-term debt | Maturities of the Company’s long-term debt are as follows as of June 30, 2017 (in thousands): Twelve months ending June 30: 2018-2021 $ 2022 Thereafter $ Plus: capital lease obligations Less: unamortized debt issuance costs and premium, net Less: current maturities Total long-term debt $ |
Derivative Instruments and He28
Derivative Instruments and Hedging Activities (Tables) | 9 Months Ended |
Jun. 30, 2017 | |
Derivative Instruments and Hedging Activities | |
Schedule of fair value of derivative financial instruments and their classification on consolidated balance sheets | The table below presents the fair value of the Company’s derivative financial instruments and their classification on the Company’s consolidated balance sheets as of June 30, 2017 and September 30, 2016 (in thousands): Asset Derivatives Liability Derivatives Classification June 30, September 30, Classification June 30, September 30, 2016 Derivatives designated as hedging instruments: None Derivatives not designated as hedging instruments: Foreign exchange contracts Other current assets $ $ — Accrued liabilities $ $ $ $ — $ $ |
Schedule of derivative financial instruments on consolidated statements of earnings | The table below presents the effect of the Company’s derivative financial instruments on the Company’s consolidated statements of earnings for the three months ended June 30, 2017 and 2016 (in thousands): Derivatives Designated as Hedging Amount of Gain or (Loss) Recognized Amount of Gain or (Loss) Reclassified from None Derivatives Not Designated as Hedging Classification of Gain or Amount of Gain or (Loss) Recognized in Income Three Months Ended June 30, 2017 2016 Foreign exchange contracts Selling, general and administrative expenses $ ) $ The table below presents the effect of the Company’s derivative financial instruments on the Company’s consolidated statements of earnings for the nine months ended June 30, 2017 and 2016 (in thousands): Derivatives Designated as Hedging Amount of Gain or (Loss) Recognized Amount of Gain or (Loss) Reclassified from None Derivatives Not Designated as Hedging Classification of Gain or Amount of Gain or (Loss) Recognized in Income Nine Months Ended June 30, 2017 2016 Foreign exchange contracts Selling, general and administrative expenses $ ) $ ) |
Business Segments (Tables)
Business Segments (Tables) | 9 Months Ended |
Jun. 30, 2017 | |
Business Segments | |
Schedule of segment data | Segment data for the three and nine months ended June 30, 2017 and 2016 is as follows (in thousands): Three Months Ended Nine Months Ended 2017 2016 (a) 2017 2016 (a) Net sales: Sally Beauty Supply $ $ $ $ BSG Total $ $ $ $ Earnings before provision for income taxes: Segment operating earnings: Sally Beauty Supply $ $ $ $ BSG Segment operating earnings Unallocated corporate expenses (b) ) ) ) ) Restructuring charges ) — ) — Share-based compensation expense ) ) ) ) Interest expense (c) ) ) ) ) Earnings before provision for income taxes $ $ $ $ (a) Certain amounts for the prior fiscal periods have been reclassified to conform to the current fiscal period presentation, in connection with realignment of a business component from our BSG segment to our Sally Beauty Supply segment. (b) Unallocated corporate expenses consist of corporate and shared costs. (c) For the nine months ended June 30, 2016, interest expense includes a loss on extinguishment of debt of $33.3 million in connection with the Company’s December 2015 redemption of its senior notes due 2019. |
Parent, Issuers, Guarantor an30
Parent, Issuers, Guarantor and Non-Guarantor Condensed Consolidated Financial Statements (Tables) | 9 Months Ended |
Jun. 30, 2017 | |
Parent, Issuers, Guarantor and Non-Guarantor Condensed Consolidated Financial Statements | |
Schedule of Condensed Consolidating Balance Sheet | Condensed Consolidating Balance Sheet June 30, 2017 (In thousands) Parent Sally Guarantor Non- Consolidating Sally Beauty Assets Cash and cash equivalents $ — $ $ $ $ — $ Trade and other accounts receivable, less allowance for doubtful accounts — — Due from affiliates — — — ) — Inventory — — — Other current assets — Deferred income tax assets — — Property and equipment, net — — Investment in subsidiaries — ) — Goodwill and other intangible assets, net — — — Other assets ) — Total assets $ $ $ $ $ ) $ Liabilities and Stockholders’ (Deficit) Equity Accounts payable $ $ — $ $ $ — $ Due to affiliates — ) — Accrued liabilities — Income taxes payable — ) — Long-term debt — — Other liabilities — — — Deferred income tax liabilities ) — Total liabilities ) Total stockholders’ (deficit) equity ) ) ) Total liabilities and stockholders’ (deficit) equity $ $ $ $ $ ) $ Condensed Consolidating Balance Sheet September 30, 2016 (In thousands) Parent Sally Guarantor Non- Consolidating Sally Beauty Assets Cash and cash equivalents $ — $ $ $ $ — $ Trade and other accounts receivable, less allowance for doubtful accounts — — Due from affiliates — — — ) — Inventory — — — Other current assets — Deferred income tax assets — — Property and equipment, net — — Investment in subsidiaries — ) — Goodwill and other intangible assets, net — — — Other assets ) — Total assets $ $ $ $ $ ) $ Liabilities and Stockholders’ (Deficit) Equity Accounts payable $ $ $ $ $ — $ Due to affiliates — ) — Accrued liabilities — Income taxes payable — — — Long-term debt — — Other liabilities — — — Deferred income tax liabilities — — — Total liabilities ) Total stockholders’ (deficit) equity ) ) ) Total liabilities and stockholders’ (deficit) equity $ $ $ $ $ ) $ |
Schedule of Condensed Consolidating Statement of Earnings and Comprehensive Income | Condensed Consolidating Statement of Earnings and Comprehensive Income (In thousands) Parent Sally Holdings Guarantor Non- Consolidating Sally Beauty Net sales $ — $ — $ $ $ — $ Related party sales — — — ) — Cost of products sold and distribution expenses — — ) Gross profit — — — Selling, general and administrative expenses — Depreciation and amortization — — Restructuring charges — — — — Operating earnings (loss) ) ) — Interest expense (income) — ) — Earnings (loss) before provision for income taxes ) ) — Provision (benefit) for income taxes ) ) — Equity in earnings of subsidiaries, net of tax — ) — Net earnings ) Other comprehensive income, net of tax — — — — Total comprehensive income $ $ $ $ $ ) $ Condensed Consolidating Statement of Earnings and Comprehensive Income (In thousands) Parent Sally Holdings Guarantor Non- Consolidating Sally Beauty Net sales $ — $ — $ $ $ — $ Related party sales — — — ) — Cost of products sold and distribution expenses — — ) Gross profit — — — Selling, general and administrative expenses — Depreciation and amortization — — Operating earnings (loss) ) ) — Interest expense — ) — Earnings (loss) before provision for income taxes ) ) — Provision (benefit) for income taxes ) ) — Equity in earnings of subsidiaries, net of tax — ) — Net earnings ) Other comprehensive income, net of tax — — — ) — ) Total comprehensive income (loss) $ $ $ $ ) $ ) $ Condensed Consolidating Statement of Earnings and Comprehensive Income (In thousands) Parent Sally Holdings Guarantor Non- Consolidating Sally Beauty Net sales $ — $ — $ $ $ — $ Related party sales — — — ) — Cost of products sold and distribution expenses — — ) Gross profit — — — Selling, general and administrative expenses — Depreciation and amortization — — Restructuring charges — — — — Operating earnings (loss) ) ) — Interest expense (income) — ) — Earnings (loss) before provision for income taxes ) ) — Provision (benefit) for income taxes ) ) — Equity in earnings of subsidiaries, net of tax — ) — Net earnings ) Other comprehensive income, net of tax — — — — Total comprehensive income $ $ $ $ $ ) $ Condensed Consolidating Statement of Earnings and Comprehensive Income (In thousands) Parent Sally Holdings Guarantor Non- Consolidating Sally Beauty Net sales $ — $ — $ $ $ — $ Related party sales — — — ) — Cost of products sold and distribution expenses — — ) Gross profit — — — Selling, general and administrative expenses — Depreciation and amortization — — Operating earnings (loss) ) ) — Interest expense — ) — Earnings (loss) before provision for income taxes ) ) — Provision (benefit) for income taxes ) ) — Equity in earnings of subsidiaries, net of tax — ) — Net earnings ) Other comprehensive income (loss), net of tax — — — ) — ) Total comprehensive income (loss) $ $ $ $ ) $ ) $ |
Schedule of Condensed Consolidating Statement of Cash Flows | Condensed Consolidating Statement of Cash Flows (In thousands) Parent Sally Holdings Guarantor Non- Consolidating Sally Beauty Net cash provided (used) by operating activities $ $ ) $ $ $ — $ Cash Flows from Investing Activities: Capital expenditures, net of proceeds from sale of property and equipment — — ) ) — ) Due from affiliates — — ) — — Net cash used by investing activities — — ) ) ) Cash Flows from Financing Activities: Proceeds from issuance of long-term debt — — — — Repayments of long-term debt — ) ) ) — ) Repurchases of common stock ) — — — — ) Proceeds from exercises of stock options — — — — Due to affiliates ) — ) — Excess tax benefit/shortfall from share-based compensation ) — — — — ) Net cash (used) provided by financing activities ) ) ) ) Effect of foreign exchange rate changes on cash and cash equivalents — — — — Net decrease in cash and cash equivalents — ) ) — ) Cash and cash equivalents, beginning of period — — Cash and cash equivalents, end of period $ — $ $ $ $ — $ Condensed Consolidating Statement of Cash Flows (In thousands) Parent Sally Holdings Guarantor Non- Consolidating Sally Beauty Net cash provided (used) by operating activities $ $ ) $ $ $ — $ Cash Flows from Investing Activities: Capital expenditures, net of proceeds from sale of property and equipment ) — ) ) — ) Acquisitions, net of cash acquired — — ) — — ) Net cash used by investing activities ) — ) ) — ) Cash Flows from Financing Activities: Proceeds from issuance of long-term debt — — — — Repayments of long-term debt — ) ) ) — ) Repurchases of common stock ) — — — — ) Debt issuance costs — ) — — — ) Proceeds from exercises of stock options — — — — Excess tax benefit from share-based compensation — — — — Net cash used by financing activities ) ) ) ) — ) Effect of foreign exchange rate changes on cash and cash equivalents — — — ) — ) Net decrease in cash and cash equivalents — ) ) ) — ) Cash and cash equivalents, beginning of period — — Cash and cash equivalents, end of period $ — $ — $ $ $ — $ |
Restructuring Plan (Tables)
Restructuring Plan (Tables) | 9 Months Ended |
Jun. 30, 2017 | |
Restructuring Plan | |
Schedule of restructuring plan | Certain information about the Restructuring Plan as of June 30, 2017 is as follows (in thousands): Restructuring Activity Liability at Expenses (1) Cost Paid Liability at Workforce reductions $ — $ $ $ Facility closures — Other — Total $ — $ $ $ (1) Expenses include costs incurred in connection with Sally Beauty Supply ($8.4 million), BSG ($4.1 million) and corporate ($1.8 million) activities. (2) Unpaid costs are included in accrued liabilities in the Company’s consolidated balance sheet at June 30, 2017. |
Fair Value Measurements (Detail
Fair Value Measurements (Details) - USD ($) $ in Thousands | Jun. 30, 2017 | Sep. 30, 2016 |
Liabilities | ||
Unamortized debt issuance costs | $ 16,390 | $ 18,113 |
Fair value measurement on recurring basis | Total | ||
Assets | ||
Total assets | 25 | |
Liabilities | ||
Long-term debt (b) | 1,922,179 | 1,899,748 |
Total liabilities | 1,923,700 | 1,900,020 |
Foreign exchange contracts | Fair value measurement on recurring basis | Total | ||
Assets | ||
Foreign exchange contracts (a) | 25 | |
Liabilities | ||
Foreign exchange contracts (a) | 1,521 | 272 |
Level 1 | Fair value measurement on recurring basis | ||
Liabilities | ||
Long-term debt (b) | 1,839,063 | 1,897,625 |
Total liabilities | 1,839,063 | 1,897,625 |
Level 2 | Fair value measurement on recurring basis | ||
Assets | ||
Total assets | 25 | |
Liabilities | ||
Long-term debt (b) | 83,116 | 2,123 |
Total liabilities | 84,637 | 2,395 |
Level 2 | Foreign exchange contracts | Fair value measurement on recurring basis | ||
Assets | ||
Foreign exchange contracts (a) | 25 | |
Liabilities | ||
Foreign exchange contracts (a) | 1,521 | 272 |
ABL facility | ||
Liabilities | ||
Long-term debt (b) | 1,888,000 | 1,807,700 |
Unamortized debt issuance costs | $ 21,200 | $ 23,700 |
Accumulated Stockholders' Def33
Accumulated Stockholders' Deficit - Share Repurchase Program (Details) - 2014 Share Repurchase Program - USD ($) shares in Millions, $ in Millions | 1 Months Ended | 9 Months Ended | |
Aug. 31, 2014 | Jun. 30, 2017 | Jun. 30, 2016 | |
Share repurchase program | |||
Amount of shares authorized to be repurchased | $ 1,000 | ||
Term of share repurchase program | 3 years | ||
Common stock shares repurchased and retired (in shares) | 13.1 | 6.2 | |
Cost of repurchase and retirement of common stock | $ 286.5 | $ 162.4 |
Accumulated Stockholders' Def34
Accumulated Stockholders' Deficit - Accumulated other comprehensive loss (Details) - USD ($) $ in Thousands | Jun. 30, 2017 | Sep. 30, 2016 |
Accumulated Stockholders' Equity (Deficit) | ||
Accumulated other comprehensive loss | $ 93,007 | $ 100,051 |
Foreign currency translation adjustments | ||
Accumulated Stockholders' Equity (Deficit) | ||
Accumulated other comprehensive loss | 93,000 | 100,100 |
Income taxes on accumulated other comprehensive loss | $ 2,300 | $ 2,300 |
Earnings Per Share (Details)
Earnings Per Share (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | |
Earnings Per Share Reconciliation: | ||||
Net earnings | $ 66,539 | $ 67,919 | $ 179,357 | $ 170,321 |
Weighted average basic shares | 135,450,000 | 145,957,000 | 139,888,000 | 147,741,000 |
Dilutive securities: | ||||
Stock option and stock award programs (in shares) | 709,000 | 1,880,000 | 746,000 | 1,735,000 |
Weighted average diluted shares | 136,159,000 | 147,837,000 | 140,634,000 | 149,476,000 |
Earnings per share: | ||||
Basic (in dollars per share) | $ 0.49 | $ 0.47 | $ 1.28 | $ 1.15 |
Diluted (in dollars per share) | $ 0.49 | $ 0.46 | $ 1.28 | $ 1.14 |
Common stock potentially outstanding but not included in the computation of diluted earnings per share | ||||
Options to purchase shares not included in the computation of diluted earnings per share since the options were anti-dilutive (in shares) | 4,792,717 | 66,573 | 4,792,717 | 1,094,343 |
Share-Based Payments (Details)
Share-Based Payments (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | |
Share-Based Payments | ||||
Share-based compensation expense (in dollars) | $ 2,378 | $ 2,838 | $ 8,590 | $ 10,011 |
Income tax benefit related to share-based compensation expense | $ 884 | $ 1,062 | $ 3,210 | $ 3,769 |
Share-Based Payments - Performa
Share-Based Payments - Performance-Based Awards (Details) - performance units $ / shares in Units, $ in Millions | 9 Months Ended | 12 Months Ended | |
Jun. 30, 2017USD ($)item$ / sharesshares | Jun. 30, 2016shares | Sep. 30, 2016$ / sharesshares | |
Share-Based Payments | |||
Expected life (in years) | 3 years | ||
Number of performance targets | item | 2 | ||
Performance Unit Awards (in shares) | |||
Unvested at the beginning of the period (in shares) | shares | 132,000 | ||
Granted (in shares) | shares | 146,000 | 152,000 | |
Forfeited (in shares) | shares | (66,000) | ||
Unvested at the end of the period (in shares) | shares | 212,000 | 132,000 | |
Performance Unit Awards (in dollars per share) | |||
Unvested at the beginning of the period (in dollars per share) | $ / shares | $ 23.45 | ||
Granted (in dollars per share) | $ / shares | 25.53 | ||
Forfeited (in dollars per share) | $ / shares | 24.62 | ||
Unvested at the end of the period (in dollars per share) | $ / shares | $ 24.52 | $ 23.45 | |
Performance Unit Awards (in years) | |||
Weighted Average Remaining Vesting Term (in Years) | 1 year 9 months 18 days | 2 years | |
Compensation expense Potentially recognized | $ | $ 10.4 | ||
Cumulative compensation expense recognized prior to period | $ | $ 1.5 | ||
Minimum | |||
Share-Based Payments | |||
Percentage of target shares | 0.00% | ||
Maximum | |||
Share-Based Payments | |||
Percentage of target shares | 200.00% |
Share-Based Payments - Service-
Share-Based Payments - Service-Based Awards and Stock Option Awards (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | Sep. 30, 2016 | |
Service-based stock options | |||||
Share-Based Payments | |||||
Accelerated expense related to certain retirement eligible employees (in dollars) | $ 1,100 | $ 1,300 | |||
Stock Option Awards | |||||
Stock Options, Number of Outstanding Options | |||||
Outstanding at the beginning of the period (in shares) | 5,584 | ||||
Granted (in shares) | 1,457 | 1,500 | |||
Exercised (in shares) | (919) | ||||
Forfeited or expired (in shares) | (604) | ||||
Outstanding at the end of the period (in shares) | 5,518 | 5,518 | 5,584 | ||
Exercisable at the end of the period (in shares) | 2,742 | 2,742 | |||
Stock Options, Weighted Average Exercise Price | |||||
Outstanding at the beginning of the period (in dollars per share) | $ 22.95 | ||||
Granted (in dollars per share) | 25.60 | ||||
Exercised (in dollars per share) | 18.44 | ||||
Forfeited or expired (in dollars per share) | 25.82 | ||||
Outstanding at the end of the period (in dollars per share) | $ 24.09 | 24.09 | $ 22.95 | ||
Exercisable at the end of the period (in dollars per share) | $ 22.48 | $ 22.48 | |||
Stock Options, Weighted Average Remaining Contractual Term | |||||
Weighted average remaining contractual term (in years) | 6 years | 6 years 1 month 6 days | |||
Exercisable at the end of the period (in years) | 4 years 7 months 6 days | ||||
Stock Options, Aggregate Intrinsic Value | |||||
Outstanding at the beginning of the period (in dollars) | $ 19,615 | ||||
Outstanding at the end of the period (in dollars) | $ 4,649 | 4,649 | $ 19,615 | ||
Exercisable at the end of the period (in dollars) | $ 4,649 | $ 4,649 | |||
Stock Option Awards | Minimum | |||||
Share-Based Payments | |||||
Vesting period | 3 years | ||||
Stock Option Awards | Maximum | |||||
Share-Based Payments | |||||
Term of stock options | 10 years | ||||
Vesting period | 4 years |
Share-Based Payments - Summary
Share-Based Payments - Summary of stock options by range of exercise prices (Details) shares in Thousands | 9 Months Ended |
Jun. 30, 2017$ / sharesshares | |
Options Outstanding | |
Range of Exercise Prices, Number of Options Outstanding (in shares) | shares | 5,518 |
Range of Exercise Prices, Weighted Average Remaining Contractual Term | 6 years |
Range of Exercise Prices, Weighted Average Exercise Price (in dollars per share) | $ 24.09 |
Options Exercisable | |
Range of Exercise Prices, Number of Options Exercisable (in shares) | shares | 2,742 |
Range of Exercise Prices, Weighted Average Exercise Price (in dollars per share) | $ 22.48 |
Range of Exercise Prices $5.24 - 19.99 | |
Information about stock options under option plans | |
Lower Range of Exercise Prices (in dollars per share) | 5.24 |
Upper Range of Exercise Prices (in dollars per share) | $ 19.99 |
Options Outstanding | |
Range of Exercise Prices, Number of Options Outstanding (in shares) | shares | 726 |
Range of Exercise Prices, Weighted Average Remaining Contractual Term | 2 years 10 months 24 days |
Range of Exercise Prices, Weighted Average Exercise Price (in dollars per share) | $ 13.84 |
Options Exercisable | |
Range of Exercise Prices, Number of Options Exercisable (in shares) | shares | 726 |
Range of Exercise Prices, Weighted Average Exercise Price (in dollars per share) | $ 13.84 |
Range of Exercise Prices $20.00 - 24.99 | |
Information about stock options under option plans | |
Lower Range of Exercise Prices (in dollars per share) | 20 |
Upper Range of Exercise Prices (in dollars per share) | $ 24.99 |
Options Outstanding | |
Range of Exercise Prices, Number of Options Outstanding (in shares) | shares | 1,678 |
Range of Exercise Prices, Weighted Average Remaining Contractual Term | 6 years 4 months 24 days |
Range of Exercise Prices, Weighted Average Exercise Price (in dollars per share) | $ 23.46 |
Options Exercisable | |
Range of Exercise Prices, Number of Options Exercisable (in shares) | shares | 933 |
Range of Exercise Prices, Weighted Average Exercise Price (in dollars per share) | $ 23.47 |
Range of Exercise Prices $25.00 - 31.58 | |
Information about stock options under option plans | |
Lower Range of Exercise Prices (in dollars per share) | 25 |
Upper Range of Exercise Prices (in dollars per share) | $ 31.58 |
Options Outstanding | |
Range of Exercise Prices, Number of Options Outstanding (in shares) | shares | 3,114 |
Range of Exercise Prices, Weighted Average Remaining Contractual Term | 6 years 6 months |
Range of Exercise Prices, Weighted Average Exercise Price (in dollars per share) | $ 26.81 |
Options Exercisable | |
Range of Exercise Prices, Number of Options Exercisable (in shares) | shares | 1,083 |
Range of Exercise Prices, Weighted Average Exercise Price (in dollars per share) | $ 27.41 |
Share-Based Payments - Schedule
Share-Based Payments - Schedule of weighted average assumptions for valuation of stock options (Details) - USD ($) $ / shares in Units, $ in Thousands | 9 Months Ended | |
Jun. 30, 2017 | Jun. 30, 2016 | |
Stock option disclosures | ||
Proceeds from exercises of stock options | $ 16,941 | $ 13,072 |
Stock Option Awards | ||
Weighted average assumptions relating to the valuation of stock options | ||
Expected life (in years) | 5 years | 5 years |
Expected volatility for the Company's common stock (as a percent) | 25.30% | 27.20% |
Risk-free interest rate (as a percent) | 1.30% | 1.50% |
Dividend yield (as a percent) | 0.00% | 0.00% |
Stock option disclosures | ||
Weighted average fair value of the stock options issued (in dollars per share) | $ 6.37 | $ 6.32 |
Aggregate intrinsic value of options exercised | $ 7,400 | |
Proceeds from exercises of stock options | 16,900 | |
Tax benefit realized for the tax deductions of stock option exercises | 2,800 | |
Total unrecognized compensation expenses related to unvested awards | $ 9,300 | |
Weighted average period for recognition of unvested awards | 1 year 9 months 18 days |
Share-Based Payments - Restrict
Share-Based Payments - Restricted Stock Awards (Details) - Restricted Stock Awards - USD ($) $ / shares in Units, $ in Millions | 9 Months Ended | 12 Months Ended | |
Jun. 30, 2017 | Jun. 30, 2016 | Sep. 30, 2016 | |
Restricted stock (in shares) | |||
Unvested at the beginning of the period (in shares) | 271,000 | ||
Granted (in shares) | 35,000 | 40,000 | |
Vested (in shares) | (94,000) | ||
Forfeited (in shares) | (23,000) | ||
Unvested at the end of the period (in shares) | 189,000 | 271,000 | |
Restricted Stock (in dollars per share) | |||
Unvested at the beginning of the period (in dollars per share) | $ 26.80 | ||
Granted (in dollars per share) | 23.79 | ||
Vested (in dollars per share) | 25.66 | ||
Forfeited (in dollars per share) | 27.48 | ||
Unvested at the end of the period (in dollars per share) | $ 26.72 | $ 26.80 | |
Restricted stock (in years) | |||
Weighted Average Remaining Vesting Term (in Years) | 1 year 6 months | 1 year 10 months 24 days | |
Total unrecognized compensation expenses related to unvested awards | $ 2 | ||
Weighted average period for recognition of unvested awards | 1 year 6 months | ||
Minimum | |||
Stock Awards | |||
Vesting period | 3 years | ||
Maximum | |||
Stock Awards | |||
Vesting period | 5 years |
Share-Based Payments - Restri42
Share-Based Payments - Restricted Stock Units (Details) - Restricted Stock Units - USD ($) $ / shares in Units, $ in Millions | 9 Months Ended | |
Jun. 30, 2017 | Jun. 30, 2016 | |
Stock Awards | ||
Restricted stock units, retention period | 6 months | |
Restricted stock (in shares) | ||
Granted (in shares) | 42,000 | 27,000 |
Unvested at the end of the period (in shares) | 42,000 | |
Restricted Stock (in dollars per share) | ||
Granted (in dollars per share) | $ 25.18 | |
Unvested at the end of the period (in dollars per share) | $ 25.18 | |
Restricted stock (in years) | ||
Weighted Average Remaining Vesting Term (in Years) | 2 months 12 days | |
Total unrecognized compensation expenses related to unvested awards | $ 0.3 | |
Weighted average period for recognition of unvested awards | 2 months 12 days | |
Maximum | ||
Stock Awards | ||
Vesting period | 1 year |
Goodwill and Intangible Assets
Goodwill and Intangible Assets (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | |
Goodwill and Intangible Assets | ||||
Impairment losses in connection with the goodwill | $ 0 | $ 0 | $ 0 | $ 0 |
Impairment losses in connection with the intangible assets | 0 | 0 | 0 | 0 |
Amortization expense | $ 3.2 | $ 3.4 | $ 9.9 | $ 10.3 |
Commitments and Contingencies -
Commitments and Contingencies - Other Contingencies (Details) - Data security incidents - USD ($) $ in Thousands | 9 Months Ended | |
Jun. 30, 2017 | Jun. 30, 2016 | |
Loss contingency obligation | ||
Liability, beginning balance | $ 15,644 | |
Payments, net of recovery | (9,285) | |
Liability, end balance | $ 6,359 | |
Selling, general and administrative expenses | ||
Commitments and contingencies | ||
Data security incident expenses | $ 2,600 |
Short-term Borrowings and Lon45
Short-term Borrowings and Long-term Debt - ABL Facility and Canadian sub-facility (Details) $ in Millions | 9 Months Ended |
Jun. 30, 2017USD ($) | |
ABL facility | |
Debt Instruments | |
Outstanding borrowings | $ 81.5 |
Remaining credit facility available | 398.3 |
ABL facility | Sally Holdings, LLC | |
Debt Instruments | |
Revolving credit facility | $ 500 |
Line of credit facility term | 5 years |
Canadian sub-facility | |
Debt Instruments | |
Revolving credit facility | $ 25 |
Short-term Borrowings and Lon46
Short-term Borrowings and Long-term Debt - Details of Long-term Debt Table (Details) - USD ($) $ in Thousands | 9 Months Ended | |
Jun. 30, 2017 | Sep. 30, 2016 | |
Debt Instruments | ||
Total | $ 1,881,500 | $ 1,800,000 |
ABL facility | ||
Debt Instruments | ||
Total | $ 81,500 | |
ABL facility | Prime | Minimum | ||
Debt Instruments | ||
Percentage points added to the reference rate | 0.50% | |
ABL facility | Prime | Maximum | ||
Debt Instruments | ||
Percentage points added to the reference rate | 0.75% | |
ABL facility | LIBOR | Minimum | ||
Debt Instruments | ||
Percentage points added to the reference rate | 1.50% | |
ABL facility | LIBOR | Maximum | ||
Debt Instruments | ||
Percentage points added to the reference rate | 1.75% | |
Senior notes due Jun. 2022 | ||
Debt Instruments | ||
Total | $ 850,000 | 850,000 |
Interest rate (as a percent) | 5.75% | |
Senior notes due Nov. 2023 | ||
Debt Instruments | ||
Total | $ 200,000 | 200,000 |
Interest rate (as a percent) | 5.50% | |
Senior notes due Dec. 2025 | ||
Debt Instruments | ||
Total | $ 750,000 | $ 750,000 |
Interest rate (as a percent) | 5.625% |
Short-term Borrowings and Lon47
Short-term Borrowings and Long-term Debt - Details of Long-term Debt Table - Total debt (Details) - USD ($) $ in Thousands | Jun. 30, 2017 | Sep. 30, 2016 |
Short-term Borrowings and Long-term Debt | ||
Total | $ 1,881,500 | $ 1,800,000 |
Plus: capital lease obligations | 1,616 | 2,123 |
Less: unamortized debt issuance costs and premium, net | 16,390 | 18,113 |
Total debt | $ 1,866,726 | $ 1,784,010 |
Short-term Borrowings and Lon48
Short-term Borrowings and Long-term Debt - Details of Long-term Debt Table - Total long-term debt (Details) - USD ($) $ in Thousands | Jun. 30, 2017 | Sep. 30, 2016 |
Short-term Borrowings and Long-term Debt | ||
Total debt | $ 1,866,726 | $ 1,784,010 |
Less: current maturities | 82,246 | 716 |
Total long-term debt | $ 1,784,480 | $ 1,783,294 |
Short-term Borrowings and Lon49
Short-term Borrowings and Long-term Debt - Details of Long-term Debt Table - Subscript Details (Details) - USD ($) $ in Millions | Jun. 30, 2017 | Sep. 30, 2016 |
Debt Instruments | ||
Unamortized premium related to certain notes | $ 4.8 | $ 5.6 |
ABL facility | Other assets | ||
Debt Instruments | ||
Unamortized deferred financing costs | 0.9 | $ 1.6 |
Senior notes due Jun. 2022 | ||
Debt Instruments | ||
Aggregate principal amount related to certain notes | $ 150 |
Short-term Borrowings and Lon50
Short-term Borrowings and Long-term Debt - Maturities of the Company's long-term debt (Details) - USD ($) $ in Thousands | Jul. 06, 2017 | Jun. 30, 2017 | Sep. 30, 2016 |
Fiscal Year | |||
2018-2021 | $ 81,500 | ||
2,022 | 850,000 | ||
Thereafter | 950,000 | ||
Total | 1,881,500 | $ 1,800,000 | |
Plus: capital lease obligations | 1,616 | 2,123 | |
Less: unamortized debt issuance costs and premium, net | 16,390 | ||
Less: current maturities | 82,246 | 716 | |
Total long-term debt | 1,784,480 | 1,783,294 | |
Senior notes due Jun. 2022 | |||
Fiscal Year | |||
Total | $ 850,000 | $ 850,000 | |
Subsequent Event | Term Loan B | Senior notes due Jun. 2022 | |||
Fiscal Year | |||
Debt instrument, face amount | $ 850,000 |
Derivative Instruments and He51
Derivative Instruments and Hedging Activities - (Details) - Jun. 30, 2017 € in Millions, £ in Millions, MXN in Millions, CAD in Millions, $ in Millions | MXNderivative | EUR (€)derivative | GBP (£)derivative | USD ($)derivative | CADderivative |
Designated Cash Flow Hedges | |||||
Number of derivative instruments held | 0 | 0 | 0 | 0 | 0 |
USD:EUR | Sale | Derivatives not designated as hedging instruments | Cash Flow Hedges To Manage Exposure Of International Subsidiaries Purchases Of Merchandise From Third Party Suppliers | |||||
Derivative Instruments | |||||
Notional amount | € 4 | $ 4.6 | |||
USD:EUR | Sale | Derivatives not designated as hedging instruments | Cash Flow Hedges In Connection With Intercompany Balances | |||||
Derivative Instruments | |||||
Notional amount | € 8.4 | $ 9.6 | |||
EUR:USD | Sale | Derivatives not designated as hedging instruments | Cash Flow Hedges To Manage Exposure Of International Subsidiaries Purchases Of Merchandise From Third Party Suppliers | |||||
Non-designated Cash Flow Hedges | |||||
Weighted average contractual exchange rate (as a percent) | 1.1291 | 1.1291 | 1.1291 | 1.1291 | 1.1291 |
EUR:USD | Sale | Derivatives not designated as hedging instruments | Cash Flow Hedges In Connection With Intercompany Balances | |||||
Non-designated Cash Flow Hedges | |||||
Contractual exchange rate (as a percent) | 1.1432 | 1.1432 | 1.1432 | 1.1432 | 1.1432 |
USD:CAD | Sale | Derivatives not designated as hedging instruments | Cash Flow Hedges In Connection With Intercompany Balances | |||||
Derivative Instruments | |||||
Notional amount | $ 6.8 | CAD 8.9 | |||
Non-designated Cash Flow Hedges | |||||
Contractual exchange rate (as a percent) | 1.2987 | 1.2987 | 1.2987 | 1.2987 | 1.2987 |
USD:CAD | Purchase | Derivatives not designated as hedging instruments | Cash Flow Hedges In Connection With Intercompany Balances | |||||
Non-designated Cash Flow Hedges | |||||
Contractual exchange rate (as a percent) | 1.3007 | 1.3007 | 1.3007 | 1.3007 | 1.3007 |
CAD:USD | Purchase | Derivatives not designated as hedging instruments | Cash Flow Hedges In Connection With Intercompany Balances | |||||
Derivative Instruments | |||||
Notional amount | $ 5 | CAD 6.5 | |||
USD:MXN | Sale | Derivatives not designated as hedging instruments | Cash Flow Hedges To Manage Exposure Of International Subsidiaries Purchases Of Merchandise From Third Party Suppliers | |||||
Derivative Instruments | |||||
Notional amount | MXN 155.9 | $ 8.7 | |||
Non-designated Cash Flow Hedges | |||||
Weighted average contractual exchange rate (as a percent) | 21.9557 | 21.9557 | 21.9557 | 21.9557 | 21.9557 |
GBP:USD | Purchase | Derivatives not designated as hedging instruments | Cash Flow Hedges In Connection With Intercompany Balances | |||||
Derivative Instruments | |||||
Notional amount | £ 0.2 | $ 0.3 | |||
Non-designated Cash Flow Hedges | |||||
Contractual exchange rate (as a percent) | 1.2966 | 1.2966 | 1.2966 | 1.2966 | 1.2966 |
Derivative Instruments and He52
Derivative Instruments and Hedging Activities - Non-designated Cash Flow Hedges (Details) - USD ($) $ in Thousands | Jun. 30, 2017 | Sep. 30, 2016 |
Derivatives Not Designated as Hedging Instruments | ||
Total derivatives not designated as hedging instruments, Asset | $ 25 | |
Total derivatives not designated as hedging instruments, Liability | 1,521 | $ 272 |
Other current assets | ||
Derivatives Not Designated as Hedging Instruments | ||
Foreign Exchange Contracts, Asset | 25 | |
Accrued liabilities | ||
Credit-risk-related Contingent Features | ||
Foreign Exchange Contracts, Liability | $ 1,521 | $ 272 |
Derivative Instruments and He53
Derivative Instruments and Hedging Activities - Derivatives Designated as Hedging Instruments (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | |
Derivatives Designated as Hedging Instruments | ||||
Probable loss on counterparty defaults | $ 0 | |||
Selling, general and administrative expenses | ||||
Derivatives Designated as Hedging Instruments | ||||
Amount of Gain or (Loss) Recognized in Income on Derivatives, Foreign Exchange Contracts | $ (800) | $ 200 | (1,400) | $ (400) |
Foreign exchange contracts | Maximum | ||||
Credit-risk-related Contingent Features | ||||
Aggregate fair value of all foreign exchange contracts held in a liability position | 1,500 | 1,500 | ||
Foreign exchange contracts | Selling, general and administrative expenses | ||||
Derivatives Designated as Hedging Instruments | ||||
Amount of Gain or (Loss) Recognized in Income on Derivatives, Foreign Exchange Contracts | $ (817) | $ 165 | $ (1,449) | $ (434) |
Business Segments (Details)
Business Segments (Details) $ in Thousands | 3 Months Ended | 6 Months Ended | 9 Months Ended | |||
Jun. 30, 2017USD ($) | Jun. 30, 2016USD ($) | Jun. 30, 2017USD ($) | Jun. 30, 2017USD ($)segment | Jun. 30, 2016USD ($) | ||
Segments | ||||||
Number of operating segments | segment | 2 | |||||
Net sales: | ||||||
Total net sales | $ 998,043 | $ 998,161 | $ 2,964,122 | $ 2,976,260 | ||
Segment operating earnings: | ||||||
Segment operating earnings | 130,338 | 134,084 | 366,833 | 387,478 | ||
Restructuring charges | (5,054) | $ (14,265) | (14,265) | |||
Share-based compensation expense | (2,378) | (2,838) | (8,590) | (10,011) | ||
Interest expense (c) | [1] | (26,969) | (26,703) | (80,616) | (117,617) | |
Earnings before provision for income taxes | 103,369 | 107,381 | 286,217 | 269,861 | ||
Loss on extinguishment of debt | ||||||
Loss on extinguishment of debt | 33,296 | |||||
Senior notes due Nov. 2019 | ||||||
Loss on extinguishment of debt | ||||||
Loss on extinguishment of debt | 33,300 | |||||
Operating segments | ||||||
Segment operating earnings: | ||||||
Segment operating earnings | 172,207 | 170,104 | 487,875 | 505,441 | ||
Corporate | ||||||
Segment operating earnings: | ||||||
Unallocated corporate expenses (b) | [2] | (34,437) | (33,182) | (98,187) | (107,952) | |
Sally Beauty Supply | ||||||
Net sales: | ||||||
Total net sales | 594,880 | 602,632 | 1,760,732 | 1,797,068 | ||
Segment operating earnings: | ||||||
Restructuring charges | (8,400) | |||||
Sally Beauty Supply | Operating segments | ||||||
Segment operating earnings: | ||||||
Segment operating earnings | 104,880 | 104,908 | 294,245 | 313,792 | ||
Beauty Systems Group | ||||||
Net sales: | ||||||
Total net sales | 403,163 | 395,529 | 1,203,390 | 1,179,192 | ||
Segment operating earnings: | ||||||
Restructuring charges | (4,100) | |||||
Beauty Systems Group | Operating segments | ||||||
Segment operating earnings: | ||||||
Segment operating earnings | $ 67,327 | $ 65,196 | $ 193,630 | $ 191,649 | ||
[1] | For the nine months ended June 30, 2016, interest expense includes a loss on extinguishment of debt of $33.3 million in connection with the Company’s December 2015 redemption of its senior notes due 2019. | |||||
[2] | Unallocated corporate expenses consist of corporate and shared costs. |
Parent, Issuers, Guarantor an55
Parent, Issuers, Guarantor and Non Guarantor Condensed Consolidated Financial Statements - Condensed Consolidating Balance Sheet (Details) - USD ($) $ in Thousands | Jun. 30, 2017 | Sep. 30, 2016 | Jun. 30, 2016 | Sep. 30, 2015 |
Condensed Consolidating Balance Sheet | ||||
Percentage of guarantor subsidiaries owned by parent | 100.00% | |||
Assets | ||||
Cash and cash equivalents | $ 54,100 | $ 86,622 | $ 90,997 | $ 140,038 |
Trade and other accounts receivable, less allowance for doubtful accounts | 88,407 | 83,983 | ||
Inventory | 947,623 | 907,337 | ||
Other current assets | 49,984 | 54,861 | ||
Deferred income tax assets | 40,126 | 40,024 | ||
Property and equipment, net | 310,176 | 319,558 | ||
Goodwill and other intangible assets, net | 617,255 | 625,677 | ||
Other assets | 12,808 | 14,001 | ||
Total assets | 2,120,479 | 2,132,063 | ||
Liabilities and Stockholders' (Deficit) Equity | ||||
Accounts payable | 291,878 | 271,376 | ||
Accrued liabilities | 166,484 | 214,584 | ||
Income taxes payable | 1,413 | 1,989 | ||
Long-term debt | 1,866,726 | 1,784,010 | ||
Other liabilities | 19,012 | 21,614 | ||
Deferred income tax liabilities | 127,242 | 114,656 | ||
Total liabilities | 2,472,755 | 2,408,229 | ||
Total stockholders' (deficit) equity | (352,276) | (276,166) | ||
Total liabilities and stockholders' deficit | 2,120,479 | 2,132,063 | ||
Reportable Legal Entities | Parent | ||||
Assets | ||||
Trade and other accounts receivable, less allowance for doubtful accounts | 14 | 16 | ||
Other current assets | 4,304 | 14,816 | ||
Deferred income tax assets | 50 | 50 | ||
Property and equipment, net | 11 | 15 | ||
Investment in subsidiaries | 1,062,261 | 870,907 | ||
Other assets | 1,515 | 1,515 | ||
Total assets | 1,068,155 | 887,319 | ||
Liabilities and Stockholders' (Deficit) Equity | ||||
Accounts payable | 209 | 116 | ||
Due to affiliates | 1,420,179 | 1,162,045 | ||
Accrued liabilities | 259 | 1,324 | ||
Income taxes payable | 66 | |||
Deferred income tax liabilities | (282) | |||
Total liabilities | 1,420,431 | 1,163,485 | ||
Total stockholders' (deficit) equity | (352,276) | (276,166) | ||
Total liabilities and stockholders' deficit | 1,068,155 | 887,319 | ||
Reportable Legal Entities | Sally Holdings LLC and Sally Capital Inc. | ||||
Assets | ||||
Cash and cash equivalents | 10 | 28,372 | 46,003 | |
Other current assets | 83 | 30 | ||
Investment in subsidiaries | 3,636,311 | 3,395,436 | ||
Other assets | 1,938 | 2,158 | ||
Total assets | 3,638,342 | 3,425,996 | ||
Liabilities and Stockholders' (Deficit) Equity | ||||
Accounts payable | 1 | |||
Due to affiliates | 697,816 | 736,373 | ||
Accrued liabilities | 11,484 | 35,320 | ||
Income taxes payable | 1,619 | 1,508 | ||
Long-term debt | 1,865,110 | 1,781,887 | ||
Deferred income tax liabilities | 52 | |||
Total liabilities | 2,576,081 | 2,555,089 | ||
Total stockholders' (deficit) equity | 1,062,261 | 870,907 | ||
Total liabilities and stockholders' deficit | 3,638,342 | 3,425,996 | ||
Reportable Legal Entities | Guarantor Subsidiaries | ||||
Assets | ||||
Cash and cash equivalents | 15,684 | 22,368 | 56,395 | 58,851 |
Trade and other accounts receivable, less allowance for doubtful accounts | 59,917 | 55,989 | ||
Due from affiliates | 2,198,096 | 1,966,505 | ||
Inventory | 725,638 | 709,523 | ||
Other current assets | 27,956 | 23,864 | ||
Deferred income tax assets | 35,740 | 35,740 | ||
Property and equipment, net | 229,895 | 239,791 | ||
Investment in subsidiaries | 372,778 | 359,193 | ||
Goodwill and other intangible assets, net | 471,429 | 479,682 | ||
Other assets | (8,114) | (8,090) | ||
Total assets | 4,129,019 | 3,884,565 | ||
Liabilities and Stockholders' (Deficit) Equity | ||||
Accounts payable | 230,426 | 215,552 | ||
Accrued liabilities | 123,219 | 145,661 | ||
Long-term debt | 2 | 17 | ||
Other liabilities | 15,174 | 17,852 | ||
Deferred income tax liabilities | 123,887 | 110,047 | ||
Total liabilities | 492,708 | 489,129 | ||
Total stockholders' (deficit) equity | 3,636,311 | 3,395,436 | ||
Total liabilities and stockholders' deficit | 4,129,019 | 3,884,565 | ||
Reportable Legal Entities | Non-Guarantor Subsidiaries | ||||
Assets | ||||
Cash and cash equivalents | 38,406 | 35,882 | $ 34,602 | $ 35,184 |
Trade and other accounts receivable, less allowance for doubtful accounts | 28,476 | 27,978 | ||
Inventory | 221,985 | 197,814 | ||
Other current assets | 17,641 | 16,151 | ||
Deferred income tax assets | 4,336 | 4,234 | ||
Property and equipment, net | 80,270 | 79,752 | ||
Goodwill and other intangible assets, net | 145,826 | 145,995 | ||
Other assets | 17,469 | 18,418 | ||
Total assets | 554,409 | 526,224 | ||
Liabilities and Stockholders' (Deficit) Equity | ||||
Accounts payable | 61,243 | 55,707 | ||
Due to affiliates | 80,101 | 68,087 | ||
Accrued liabilities | 31,522 | 32,279 | ||
Income taxes payable | (272) | 481 | ||
Long-term debt | 1,614 | 2,106 | ||
Other liabilities | 3,838 | 3,762 | ||
Deferred income tax liabilities | 3,585 | 4,609 | ||
Total liabilities | 181,631 | 167,031 | ||
Total stockholders' (deficit) equity | 372,778 | 359,193 | ||
Total liabilities and stockholders' deficit | 554,409 | 526,224 | ||
Consolidating Eliminations | ||||
Assets | ||||
Due from affiliates | (2,198,096) | (1,966,505) | ||
Investment in subsidiaries | (5,071,350) | (4,625,536) | ||
Total assets | (7,269,446) | (6,592,041) | ||
Liabilities and Stockholders' (Deficit) Equity | ||||
Due to affiliates | (2,198,096) | (1,966,505) | ||
Total liabilities | (2,198,096) | (1,966,505) | ||
Total stockholders' (deficit) equity | (5,071,350) | (4,625,536) | ||
Total liabilities and stockholders' deficit | $ (7,269,446) | $ (6,592,041) |
Parent, Issuers, Guarantor an56
Parent, Issuers, Guarantor and Non-Guarantor Condensed Consolidated Financial Statements - Condensed Consolidating Statement of Earnings and Comprehensive Income (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | 9 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2017 | Jun. 30, 2016 | |
Condensed Consolidating Statement of Earnings and Comprehensive Income | |||||
Net sales | $ 998,043 | $ 998,161 | $ 2,964,122 | $ 2,976,260 | |
Cost of products sold and distribution expenses | 495,404 | 499,185 | 1,481,669 | 1,495,761 | |
Gross profit | 502,639 | 498,976 | 1,482,453 | 1,480,499 | |
Selling, general and administrative expenses | 337,992 | 339,459 | 1,017,383 | 1,020,497 | |
Depreciation and amortization | 29,255 | 25,433 | 83,972 | 72,524 | |
Restructuring charges | 5,054 | $ 14,265 | 14,265 | ||
Operating earnings | 130,338 | 134,084 | 366,833 | 387,478 | |
Interest expense (income) | 26,969 | 26,703 | 80,616 | 117,617 | |
Earnings before provision for income taxes | 103,369 | 107,381 | 286,217 | 269,861 | |
Provision (benefit) for income taxes | 36,830 | 39,462 | 106,860 | 99,540 | |
Net earnings | 66,539 | 67,919 | 179,357 | 170,321 | |
Other comprehensive income (loss), net of tax | 17,686 | (14,119) | 7,044 | (16,191) | |
Total comprehensive income | 84,225 | 53,800 | 186,401 | 154,130 | |
Reportable Legal Entities | Parent | |||||
Condensed Consolidating Statement of Earnings and Comprehensive Income | |||||
Selling, general and administrative expenses | 2,725 | 2,799 | 8,095 | 8,375 | |
Depreciation and amortization | 1 | 1 | 3 | 2 | |
Operating earnings | (2,726) | (2,800) | (8,098) | (8,377) | |
Earnings before provision for income taxes | (2,726) | (2,800) | (8,098) | (8,377) | |
Provision (benefit) for income taxes | (1,058) | (1,088) | (3,145) | (3,254) | |
Equity in earnings of subsidiaries, net of tax | 68,207 | 69,631 | 184,310 | 175,444 | |
Net earnings | 66,539 | 67,919 | 179,357 | 170,321 | |
Total comprehensive income | 66,539 | 67,919 | 179,357 | 170,321 | |
Reportable Legal Entities | Sally Holdings LLC and Sally Capital Inc. | |||||
Condensed Consolidating Statement of Earnings and Comprehensive Income | |||||
Selling, general and administrative expenses | 81 | 93 | 412 | 263 | |
Operating earnings | (81) | (93) | (412) | (263) | |
Interest expense (income) | 26,952 | 26,681 | 80,560 | 117,547 | |
Earnings before provision for income taxes | (27,033) | (26,774) | (80,972) | (117,810) | |
Provision (benefit) for income taxes | (10,500) | (10,399) | (31,451) | (45,758) | |
Equity in earnings of subsidiaries, net of tax | 84,740 | 86,006 | 233,831 | 247,496 | |
Net earnings | 68,207 | 69,631 | 184,310 | 175,444 | |
Total comprehensive income | 68,207 | 69,631 | 184,310 | 175,444 | |
Reportable Legal Entities | Guarantor Subsidiaries | |||||
Condensed Consolidating Statement of Earnings and Comprehensive Income | |||||
Net sales | 814,423 | 811,657 | 2,429,104 | 2,427,585 | |
Related party sales | 648 | 678 | 1,991 | 2,060 | |
Cost of products sold and distribution expenses | 398,707 | 399,317 | 1,201,427 | 1,201,276 | |
Gross profit | 416,364 | 413,018 | 1,229,668 | 1,228,369 | |
Selling, general and administrative expenses | 263,021 | 265,887 | 794,360 | 801,954 | |
Depreciation and amortization | 22,412 | 19,488 | 65,431 | 55,139 | |
Restructuring charges | 5,054 | 14,265 | |||
Operating earnings | 125,877 | 127,643 | 355,612 | 371,276 | |
Interest expense (income) | (1) | (8) | (1) | (4) | |
Earnings before provision for income taxes | 125,878 | 127,651 | 355,613 | 371,280 | |
Provision (benefit) for income taxes | 44,929 | 48,037 | 132,727 | 139,860 | |
Equity in earnings of subsidiaries, net of tax | 3,791 | 6,392 | 10,945 | 16,076 | |
Net earnings | 84,740 | 86,006 | 233,831 | 247,496 | |
Total comprehensive income | 84,740 | 86,006 | 233,831 | 247,496 | |
Reportable Legal Entities | Non-Guarantor Subsidiaries | |||||
Condensed Consolidating Statement of Earnings and Comprehensive Income | |||||
Net sales | 183,620 | 186,504 | 535,018 | 548,675 | |
Cost of products sold and distribution expenses | 97,345 | 100,546 | 282,233 | 296,545 | |
Gross profit | 86,275 | 85,958 | 252,785 | 252,130 | |
Selling, general and administrative expenses | 72,165 | 70,680 | 214,516 | 209,905 | |
Depreciation and amortization | 6,842 | 5,944 | 18,538 | 17,383 | |
Operating earnings | 7,268 | 9,334 | 19,731 | 24,842 | |
Interest expense (income) | 18 | 30 | 57 | 74 | |
Earnings before provision for income taxes | 7,250 | 9,304 | 19,674 | 24,768 | |
Provision (benefit) for income taxes | 3,459 | 2,912 | 8,729 | 8,692 | |
Net earnings | 3,791 | 6,392 | 10,945 | 16,076 | |
Other comprehensive income (loss), net of tax | 17,686 | (14,119) | 7,044 | (16,191) | |
Total comprehensive income | 21,477 | (7,727) | 17,989 | (115) | |
Consolidating Eliminations | |||||
Condensed Consolidating Statement of Earnings and Comprehensive Income | |||||
Related party sales | (648) | (678) | (1,991) | (2,060) | |
Cost of products sold and distribution expenses | (648) | (678) | (1,991) | (2,060) | |
Equity in earnings of subsidiaries, net of tax | (156,738) | (162,029) | (429,086) | (439,016) | |
Net earnings | (156,738) | (162,029) | (429,086) | (439,016) | |
Total comprehensive income | $ (156,738) | $ (162,029) | $ (429,086) | $ (439,016) |
Parent, Issuers, Guarantor an57
Parent, Issuers, Guarantor and Non-Guarantor Condensed Consolidated Financial Statements - Condensed Consolidating Statement of Cash Flows (Details) - USD ($) $ in Thousands | 9 Months Ended | |
Jun. 30, 2017 | Jun. 30, 2016 | |
Condensed Consolidating Statement of Cash Flows | ||
Net cash provided (used) by operating activities | $ 223,415 | $ 248,813 |
Cash Flows from Investing Activities: | ||
Capital expenditures, net of proceeds from sale of property and equipment | (66,529) | (108,270) |
Acquisitions, net of cash acquired | (2,250) | |
Net cash used by investing activities | (66,529) | (110,520) |
Cash Flows from Financing Activities: | ||
Proceeds from issuance of long-term debt | 296,500 | 912,000 |
Repayments of long-term debt | (215,519) | (938,346) |
Repurchases of common stock | (286,503) | (162,367) |
Debt issuance costs | (12,748) | |
Proceeds from exercises of stock options | 16,941 | 13,072 |
Excess tax benefit/shortfall from share-based compensation | (1,060) | 1,296 |
Net cash used by financing activities | (189,641) | (187,093) |
Effect of foreign exchange rate changes on cash and cash equivalents | 233 | (241) |
Net decrease in cash and cash equivalents | (32,522) | (49,041) |
Cash and cash equivalents, beginning of period | 86,622 | 140,038 |
Cash and cash equivalents, end of period | 54,100 | 90,997 |
Reportable Legal Entities | Parent | ||
Condensed Consolidating Statement of Cash Flows | ||
Net cash provided (used) by operating activities | 12,488 | 148,015 |
Cash Flows from Investing Activities: | ||
Capital expenditures, net of proceeds from sale of property and equipment | (16) | |
Net cash used by investing activities | (16) | |
Cash Flows from Financing Activities: | ||
Repurchases of common stock | (286,503) | (162,367) |
Proceeds from exercises of stock options | 16,941 | 13,072 |
Due to affiliates | 258,134 | |
Excess tax benefit/shortfall from share-based compensation | (1,060) | 1,296 |
Net cash used by financing activities | (12,488) | (147,999) |
Reportable Legal Entities | Sally Holdings LLC and Sally Capital Inc. | ||
Condensed Consolidating Statement of Cash Flows | ||
Net cash provided (used) by operating activities | (71,305) | (7,470) |
Cash Flows from Financing Activities: | ||
Proceeds from issuance of long-term debt | 296,500 | 912,000 |
Repayments of long-term debt | (215,000) | (937,785) |
Debt issuance costs | (12,748) | |
Due to affiliates | (38,557) | |
Net cash used by financing activities | 42,943 | (38,533) |
Net decrease in cash and cash equivalents | (28,362) | (46,003) |
Cash and cash equivalents, beginning of period | 28,372 | 46,003 |
Cash and cash equivalents, end of period | 10 | |
Reportable Legal Entities | Guarantor Subsidiaries | ||
Condensed Consolidating Statement of Cash Flows | ||
Net cash provided (used) by operating activities | 275,021 | 89,972 |
Cash Flows from Investing Activities: | ||
Capital expenditures, net of proceeds from sale of property and equipment | (50,099) | (90,109) |
Acquisitions, net of cash acquired | (2,250) | |
Due from affiliates | (231,591) | |
Net cash used by investing activities | (281,690) | (92,359) |
Cash Flows from Financing Activities: | ||
Repayments of long-term debt | (15) | (69) |
Net cash used by financing activities | (15) | (69) |
Net decrease in cash and cash equivalents | (6,684) | (2,456) |
Cash and cash equivalents, beginning of period | 22,368 | 58,851 |
Cash and cash equivalents, end of period | 15,684 | 56,395 |
Reportable Legal Entities | Non-Guarantor Subsidiaries | ||
Condensed Consolidating Statement of Cash Flows | ||
Net cash provided (used) by operating activities | 7,211 | 18,296 |
Cash Flows from Investing Activities: | ||
Capital expenditures, net of proceeds from sale of property and equipment | (16,430) | (18,145) |
Net cash used by investing activities | (16,430) | (18,145) |
Cash Flows from Financing Activities: | ||
Repayments of long-term debt | (504) | (492) |
Due to affiliates | 12,014 | |
Net cash used by financing activities | 11,510 | (492) |
Effect of foreign exchange rate changes on cash and cash equivalents | 233 | (241) |
Net decrease in cash and cash equivalents | 2,524 | (582) |
Cash and cash equivalents, beginning of period | 35,882 | 35,184 |
Cash and cash equivalents, end of period | 38,406 | $ 34,602 |
Consolidating Eliminations | ||
Cash Flows from Investing Activities: | ||
Due from affiliates | 231,591 | |
Net cash used by investing activities | 231,591 | |
Cash Flows from Financing Activities: | ||
Due to affiliates | (231,591) | |
Net cash used by financing activities | $ (231,591) |
Restructuring Plan (Details)
Restructuring Plan (Details) $ in Thousands | 1 Months Ended | 3 Months Ended | 6 Months Ended | 9 Months Ended |
Jan. 31, 2017USD ($)Office | Jun. 30, 2017USD ($) | Jun. 30, 2017USD ($) | Jun. 30, 2017USD ($) | |
Restructuring Plan | ||||
Number of administrative offices closed | Office | 4 | |||
Changes in restructuring reserve | ||||
Expenses | $ 5,054 | $ 14,265 | $ 14,265 | |
Cost Paid and Other | 12,352 | |||
Restructuring reserve, ending balance | 1,913 | 1,913 | 1,913 | |
Minimum | ||||
Restructuring Plan | ||||
Total estimated aggregate charges | $ 12,000 | |||
Maximum | ||||
Restructuring Plan | ||||
Total estimated aggregate charges | $ 14,000 | 17,000 | 17,000 | 17,000 |
Workforce reductions | ||||
Changes in restructuring reserve | ||||
Expenses | 9,962 | |||
Cost Paid and Other | 8,559 | |||
Restructuring reserve, ending balance | 1,403 | 1,403 | 1,403 | |
Facility closures | ||||
Changes in restructuring reserve | ||||
Expenses | 2,748 | |||
Cost Paid and Other | 2,293 | |||
Restructuring reserve, ending balance | 455 | 455 | 455 | |
Other | ||||
Changes in restructuring reserve | ||||
Expenses | 1,555 | |||
Cost Paid and Other | 1,500 | |||
Restructuring reserve, ending balance | 55 | $ 55 | $ 55 | |
Sally Beauty Supply | ||||
Changes in restructuring reserve | ||||
Expenses | 8,400 | |||
Beauty Systems Group | ||||
Changes in restructuring reserve | ||||
Expenses | 4,100 | |||
Corporate | ||||
Changes in restructuring reserve | ||||
Expenses | $ 1,800 |
Subsequent Events (Details)
Subsequent Events (Details) $ in Thousands | Jul. 06, 2017USD ($)derivative | Jun. 30, 2017USD ($) | Jun. 30, 2016USD ($) | Sep. 30, 2016USD ($) |
Subsequent Event [Line Items] | ||||
Unamortized premium | $ 4,800 | $ 5,600 | ||
Loss on extinguishment of debt | $ 33,296 | |||
Term Loan B | Sally Holdings, LLC | Subsequent Event | ||||
Subsequent Event [Line Items] | ||||
Debt instrument, face amount | $ 850,000 | |||
Debt instrument term | 7 years | |||
Proceeds from term loan B | $ 845,800 | |||
Fixed-rate tranche | Sally Holdings, LLC | Subsequent Event | ||||
Subsequent Event [Line Items] | ||||
Debt instrument, face amount | $ 300,000 | |||
Debt instrument, stated percentage | 4.50% | |||
Variable-rate tranche | Sally Holdings, LLC | Subsequent Event | ||||
Subsequent Event [Line Items] | ||||
Debt instrument, face amount | $ 550,000 | |||
Debt instrument, annual rate on original amount | 0.25 | |||
Variable-rate tranche | Sally Holdings, LLC | Interest rate caps | Subsequent Event | ||||
Subsequent Event [Line Items] | ||||
Number of interest rate caps | derivative | 2 | |||
Interest rate caps, notional amount | $ 550,000 | |||
Interest rate caps, variable rate | 5.50% | |||
LIBOR | Variable-rate tranche | Sally Holdings, LLC | Subsequent Event | ||||
Subsequent Event [Line Items] | ||||
Debt instrument, variable percentage | 2.50% | |||
Alternate base rate | Variable-rate tranche | Sally Holdings, LLC | Subsequent Event | ||||
Subsequent Event [Line Items] | ||||
Debt instrument, variable percentage | 1.50% | |||
Initial rate | Variable-rate tranche | Sally Holdings, LLC | Subsequent Event | ||||
Subsequent Event [Line Items] | ||||
Debt instrument, variable percentage | 3.75% | |||
ABL facility | ||||
Subsequent Event [Line Items] | ||||
Outstanding borrowings | 81,500 | |||
Remaining credit facility available | $ 398,300 | |||
ABL facility | Sally Holdings, LLC | ||||
Subsequent Event [Line Items] | ||||
Debt instrument term | 5 years | |||
Revolving credit facility | $ 500,000 | |||
ABL facility | Sally Holdings, LLC | Subsequent Event | ||||
Subsequent Event [Line Items] | ||||
Proceeds from revolving credit facility | $ 33,500 | |||
Loss on extinguishment of debt | 400 | |||
Revolving credit facility | 500,000 | |||
Outstanding borrowings | 118,000 | |||
Remaining credit facility available | $ 362,000 | |||
Senior notes due Jun. 2022 | ||||
Subsequent Event [Line Items] | ||||
Debt instrument, stated percentage | 5.75% | |||
Senior notes due Jun. 2022 | Sally Holdings, LLC | Subsequent Event | ||||
Subsequent Event [Line Items] | ||||
Redemption price | 102.875% | |||
Redemption premium of debt | $ 24,400 | |||
Unamortized deferred financing costs | 8,000 | |||
Unamortized premium | 4,800 | |||
Loss on extinguishment of debt | 27,600 | |||
Senior notes due Jun. 2022 | Term Loan B | Subsequent Event | ||||
Subsequent Event [Line Items] | ||||
Debt instrument, face amount | $ 850,000 |