What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-05-06 compared with 2021-02-04 · 120 added, 62 removed, 84 unchanged (68% of the section changed)

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The results of operations for any interim period may not necessarily be indicative of the results that may be expected for any future interim period or the entire fiscal year, in particular as a result of the uncertainty of the continued effects of the COVID-19 pandemic on future periods.

Highlights for the Three Months Ended December 31, 2020

During the three months ended December 31, 2020, we experienced further disruption to sales from COVID-19, including temporary store closures in international markets, government-mandated store capacity restrictions and salon shut-downs in California and parts of Canada for part of the quarter;

Consolidated net sales for the three months ended December 31, 2020, decreased $44.2 million, or 4.5%, to $936.0 million, compared to the three months ended December 31, 2019;

Consolidated same store sales decreased 3.7% for the three months ended December 31, 2020, while our global e-commerce sales increased 48.0%, compared to the three months ended December 31, 2019;

Consolidated gross profit for the three months ended December 31, 2020, decreased $4.1 million, or 0.9%, to $470.7 million, compared to the three months ended December 31, 2019.

Gross margin increased 190 basis points to 50.3% for the three months ended December 31, 2020, compared to the three months ended December 31, 2019;

Consolidated operating earnings for the three months ended December 31, 2020, increased $9.9 million, or 10.5%, to $104.3 million, compared to the three months ended December 31, 2019.

Operating margin increased 150 basis points to 11.1% for the three months ended December 31, 2020, compared to the three months ended December 31, 2019;

Consolidated net earnings for the three months ended December 31, 2020 increased $4.0 million, or 7.5%, to $57.2 million, compared to the three months ended December 31, 2019;

For the three months ended December 31, 2020, we had diluted earnings per share of $0.50, compared to $0.45 for the three months ended December 31, 2019;

Cash provided by operations was $37.4 million for the three months ended December 31, 2020, compared to $62.3 million for the three months ended December 31, 2019.

Highlights for the Three Months Ended March 31, 2021

During the three months ended March 31, 2021, we experienced further disruption to sales from COVID-19, including mandated store closures in international markets and salon closures in California in January;

Consolidated net sales for the three months ended March 31, 2021, increased $55.3 million, or 6.3%, to $926.3 million, compared to the three months ended March 31, 2020;

Consolidated same store sales increased 6.5% for the three months ended March 31, 2021, while our global e-commerce sales increased 56%, compared to the three months ended March 31, 2020;

Consolidated gross profit for the three months ended March 31, 2021, increased $37.5 million, or 8.7%, to $467.2 million, compared to the three months ended March 31, 2020.

Gross margin increased 110 basis points to 50.4% for the three months ended March 31, 2021, compared to the three months ended March 31, 2020;

Consolidated operating earnings for the three months ended March 31, 2021, increased $32.2 million, or 74.5%, to $75.5 million, compared to the three months ended March 31, 2020.

Operating margin increased 320 basis points to 8.2% for the three months ended March 31, 2021, compared to the three months ended March 31, 2020;

Consolidated net earnings for the three months ended March 31, 2021, increased $24.9 million, or 186.6%, to $38.3 million, compared to the three months ended March 31, 2020;

For the three months ended March 31, 2021, we had diluted earnings per share of $0.34, compared to $0.12 for the three months ended March 31, 2020;

Cash provided by operations was $92.6 million for the three months ended March 31, 2021, compared to $13.8 million for the three months ended March 31, 2020.

Impact of COVID-19 on Our Business and Business Strategy Update

As mentioned above, we continued to see the impact of COVID-19 on our sales into our first fiscal quarter as we had temporary store closures in international markets, restricted store capacity in certain markets and salon shut-downs in California and parts of Canada for part of the quarter.

However, we continued to make progress against our key business initiatives, which include leveraging and optimizing our elevated digital capabilities, growing customer engagement and loyalty, and completing the final steps in our successful transformation journey.

The effects of the COVID-19 pandemic and related responses had a noticeable impact on our first quarter fiscal year 2021 results of operations and cash flows.

Furthermore, due to the uncertainty over the duration and severity of the economic and operational impacts of COVID-19, the adverse impact of the pandemic may continue further into our fiscal year 2021 and possibly beyond, and it may be material.

As mentioned above, we continued to see disruption resulting from COVID-19 due to mandated store closures in parts of our international markets and salon closures in California in January.

However, we did experience an increase in sales driven primarily by the favorable impact in the U.S.

from improving consumer confidence, government stimulus payments and the easing of COVID-19 restrictions in the U.S.

The effects of the COVID-19 pandemic and related responses continued to impact our first two quarters of fiscal year 2021 results of operations and cash flows.

Additionally, due to the continued uncertainty over the duration and severity of the economic and operational impacts of COVID-19, the adverse impact of the pandemic may continue further into our fiscal year 2021 and possibly beyond, and it may be material.

Furthermore, we continue to make progress against our key business initiatives, which includes leveraging and optimizing our elevated digital capabilities, growing our customer engagement and loyalty, and implementing the final steps in our successful transformation journey, which is remains on track to be substantially completed by the end of the year.

Key Operating Metrics

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Three Months Ended

Six Months Ended

Increase (Decrease)

Gross profit:

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Unallocated expenses consist of corporate and shared costs and are included in selling, general and administrative expenses in our consolidated statements of earnings.

See Note 12, Restructuring , of the Notes to Condensed Consolidated Financial Statements for details on our restructuring charges.

For the purpose of calculating our same store sales metrics, we compare the current period sales for stores open for 14 months or longer as of the last day of a month with the sales for these stores for the comparable period in the prior fiscal year.

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Results of Operations

The Three Months Ended December 31, 2020, compared to the Three Months Ended December 31, 2019

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

Consolidated .

Consolidated net sales include a positive impact from changes in foreign currency exchange rates of $7.5 million, or 0.9% of consolidated net sales.

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

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

Same store sales

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Other consists of non-store sales, which include catalog and internet sales of our Sinelco Group subsidiaries.

SBS experienced lower unit volume caused primarily by the impact of the temporary closure of certain customer-facing store operations in various markets globally due to the effects of COVID-19 and fewer company-operated stores.

The challenges faced by lower unit volume were partially offset by an increase in average unit prices, resulting from a change in product mix to higher-priced products and the cancellation of most promotional activity.

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

SBS experienced higher unit volume primarily due to temporary closure of all of our customer-facing store operations in the U.S.

and Canada due to the effects of COVID-19 in the prior year, the expansion of our digital commerce capabilities and the favorable impact in the U.S.

from improving consumer confidence.

For the three months ended March 31, 2021, there was minimal impact from temporary closures of certain customer-facing store operations as a result of COVID-19.

Additionally, SBS experienced an increase in average unit prices, resulting from a change in product mix to higher-priced products.

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

Same store sales

Distributor sales consultants

Foreign currency exchange

Other consists of stores outside same store sales, included recently acquired businesses, and sales to our franchisees.

BSG experienced an increase in average unit prices and higher unit volume.

The increase in average unit price was driven primarily from a decrease in promotional activity.

The higher unit volume was primarily due to temporary closure of all of our customer-facing store operations in the U.S.

and Canada due to the effects of COVID-19 in the prior year and higher operating capacities in salons.

During the three months ended March 31, 2021, we experienced minimal temporary store closures and restricted capacity of certain customer-facing store operations in various markets in the U.S.

and Canada due to the effects of COVID-19.

Consolidated .

Consolidated gross profit increased for the three months ended March 31, 2021, due to higher net sales in both segments and a higher gross margin in SBS, partially offset by a lower gross margin in BSG.

SBS’s gross profit increased for the three months ended March 31, 2021, as a result of an increase in net sales and a higher gross margin.

SBS’s gross margin increased primarily as a result of fewer promotions, partially offset by the write-down of personal-protective equipment inventory.

BSG’s gross profit increased for the three months ended March 31, 2021, as a result of an increase in net sales, partially offset by a lower gross margin.

BSG’s gross margin decreased primarily as a result of the write-down of personal-protective equipment inventory.

Selling, General and Administrative Expenses

Consolidated .

Consolidated selling, general and administrative expenses increased primarily as a result of donation expense related to personal-protective equipment inventory and incremental costs from businesses acquired in the past 12 months.

These increases were partially offset by a decrease in advertising and field labor expenses.

Consolidated selling, general and administrative expenses, as a percentage of net sales, decreased 180 basis points to 42.2% for the three months ended March 31, 2021, due to the increase in sales.

SBS’s selling, general and administrative expenses decreased $15.6 million, or 6.7%, for the three months ended March 31, 2021.

The decrease was driven by lower compensation and compensation-related expenses of $8.4 million and lower advertising expenses of $8.3 million.

BSG’s selling, general and administrative expenses increased $2.6 million, or 2.6%, for the three months ended March 31, 2021.

The increase was driven primarily by an increase in shipping costs of $1.8 million, resulting primarily from increased e-commerce

volume, and incremental expenses from recently acquired businesses in the past twelve months.

These increases were partially offset by lower compensation and compensation-related expenses of $1.3 million.

Unallocated selling, general and administrative expenses, which represent certain corporate costs that have not been charged to our reporting segments, increased $20.8 million, or 40.8%, for the three months ended March 31, 2021, primarily due to higher COVID-19 expense in the current period mainly from the donation expense related to personal-protective equipment inventory of $31.2 million, compared to COVID-19 expense of $14.7 million last year, and higher compensation and compensation-related expenses of $7.9 million as a result of employees furloughed in the prior year.

Restructuring

For the three months ended March 31, 2021, we incurred restructuring charges of $0.6 million primarily in connection with our previously communicated Project Surge and the Transformation Plan.

For the three months ended March 31, 2020, we recognized charges of $3.2 million in connection with our previously communicated Project Surge and the Transformation Plan.

Interest Expense

The increase in interest expense is primarily from incremental interest on the senior notes issued in April 2020 of $6.6 million, partially offset by the impact of lower interest rates on our term loan B variable tranche of $1.7 million and the repayment of our term loan B fixed tranche in January 2021 of $3.1 million.

See “Liquidity and Capital Resources” below for additional information.

Provision for Income Taxes

The effective tax rates were 25.8% and 38.2%, for the three months ended March 31, 2021, and 2020, respectively.

The higher effective tax rate in the prior year period was primarily driven by the establishment of a valuation allowance for a foreign subsidiary and increased foreign losses, as compared to the current period.

The Six Months Ended March 31, 2021, compared to the Six Months Ended March 31, 2020

Consolidated .

Consolidated net sales include a positive impact from changes in foreign currency exchange rates of $11.0 million, or 0.6% of consolidated net sales.

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

Same store sales

Foreign currency exchange

Other consists of non-store sales, which include catalog and internet sales of our Sinelco Group subsidiaries.

SBS experienced an increase in average unit prices, resulting from a reduction in promotional activity and consumers selecting higher-priced products.

The increase in average unit prices was partially offset by lower unit volume primarily due to the impact of the restrictions in the U.S.

and Canada due to the effects of COVID-19 along with fewer company-operated stores.

For the six months ended March 31, 2021, various markets globally where impacted by temporary closures of certain customer-facing store operations and reduced capacity.

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

Same store sales

Distributor sales consultants

Foreign currency exchange

Other consists of stores outside same store sales, included recently acquired businesses, and sales to our franchisees.

BSG experienced lower unit volume primarily as a result of the temporary closure and restricted capacity of certain customer-facing store operations in various markets in the U.S.

BSG experienced an increase in average unit prices and a higher unit volume.

The increase in the average unit price was primarily driven by lower promotional activity.

The higher unit volume was primarily due to the impact of the temporary closure of certain customer-facing store operations in the U.S.

and Canada due to the effects of COVID-19 in the prior period.

For the six months ended March 31, 2021, we experienced additional temporary closures and restricted capacity of certain customer-facing store operations in various markets in the U.S.

and Canada, as well as salon closures in parts of California and Canada due to the effects of COVID-19.

These negative impacts were partially offset by an increase in average unit prices resulting primarily from lower promotional activity.

Consolidated .

Consolidated gross profit decreased for the three months ended December 31, 2020, due to lower net sales in both segments and a lower gross margin in BSG, partially offset by a higher gross margin in SBS.

SBS’s gross profit increased for the three months ended December 31, 2020, as a result of a higher gross margin, partially offset by lower net sales.

SBS’s gross margin increased primarily as a result of fewer promotions.

BSG’s gross profit decreased for the three months ended December 31, 2020, as a result of lower net sales and a lower gross margin.

BSG’s gross margin decreased primarily as a result of higher capitalized inventory costs from lower inventory purchases.

Consolidated gross profit increased for the six months ended March 31, 2021, due to higher net sales in both segments and a higher gross margin in SBS, partially offset by a lower gross margin in BSG.

SBS’s gross profit increased for the six months ended March 31, 2021, as a result of increased net sales and a higher gross margin.

SBS’s gross margin increased primarily as a result of fewer promotions, partially offset by the write-down of personal-protective equipment inventory.

BSG’s gross profit decreased for the six months ended March 31, 2021, as a result of a lower gross margin, partially offset by increased net sales.

BSG’s gross margin decreased primarily as a result of the write-down of personal-protective equipment inventory during our second fiscal quarter, partially offset by fewer promotions.

Selling, General and Administrative Expenses

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Consolidated selling, general and administrative expenses decreased primarily as a result of cost saving initiatives in response to COVID-19, including savings associated with lower compensation and compensation-related expenses and advertising expenses, and the suspension or elimination of all non-critical projects and non-essential spend.

These decreases were partially offset by increased shipping costs resulting from increased e-commerce volume and incremental costs from businesses acquired in the past 12 months.

Consolidated selling, general and administrative expenses, as a percentage of net sales, increased 50 basis points to 39.1% for the three months ended December 31, 2020, due to the decrease in sales.

SBS’s selling, general and administrative expenses decreased $14.1 million, or 6.0%, for the three months ended December 31, 2020, primarily due to our response to COVID-19.

These decreases were partially offset by donation expense related to personal-protective equipment inventory, increased shipping costs resulting from increased e-commerce volume and incremental costs from businesses acquired in the past 12 months.

Consolidated selling, general and administrative expenses, as a percentage of net sales, increased 40 basis points to 40.7% for the six months ended March 31, 2021, due to the increase in sales.

SBS’s selling, general and administrative expenses decreased $29.7 million, or 6.3%, for the six months ended March 31, 2021.

The decrease was driven by lower compensation and compensation-related expenses of $19.2 million and lower advertising expenses of $13.2 million.

These decreases were partially offset by an increase in shipping costs of $3.0 million, resulting primarily from increased e-commerce volume, and incremental store expense for personal protective equipment and cleaning protocols related to COVID-19 safety procedures.

BSG’s selling, general and administrative expenses increased $2.9 million, or 2.8%, for the three months ended December 31, 2020.

The increase was driven primarily by an increase in shipping costs of $3.0 million, resulting primarily from increased e-

commerce volume, and incremental expenses from recently acquired businesses in the past 12 months.

These decreases were partially offset by an increase in shipping costs of $4.2 million, resulting primarily from increased e-commerce volume.

BSG’s selling, general and administrative expenses increased $5.5 million, or 2.7%, for the six months ended March 31, 2021.

The increase was driven primarily by an increase in shipping costs of $4.7 million, resulting primarily from increased e-commerce volume, and incremental expenses from recently acquired businesses in the past 12 months.

These increases were partially offset by lower compensation and compensation-related expenses of $2.5 million.

Unallocated selling, general and administrative expenses, which represent certain corporate costs that have not been charged to our reporting segments, decreased $0.6 million, or 1.5%, for the three months ended December 31, 2020, primarily from lower costs associated with travel in response to COVID-19.

Unallocated selling, general and administrative expenses, which represent certain corporate costs that have not been charged to our reporting segments, increased $20.2 million, or 22.3%, for the six months ended March 31, 2021, primarily due to higher COVID-19 expense in the current period mainly from the donation expense related to personal-protective equipment inventory of $31.2 million, compared to COVID-19 expense of $14.7 million last year, and higher compensation and compensation-related expenses of $10.5 million as a result of employees furloughed in the prior year.

Restructuring

For the three months ended December 31, 2020, we incurred restructuring charges of $0.2 million primarily in connection with the Project Surge.

For the three months ended December 31, 2019, we recognized charges of $2.5 million in connection with Project Surge and the Transformation Plan.

See Note 12, Restructuring , of the Notes to Condensed Consolidated Financial Statements included in Item 1 of this Quarterly Report for more information about our restructuring plans.

For the six months ended March 31, 2021, we incurred restructuring charges of $0.9 million primarily in connection with the Project Surge and Transformation Plan.

For the six months ended March 31, 2020, we recognized charges of $5.7 million in connection with Project Surge and the Transformation Plan.

Interest Expense

The increase in interest expense is primarily from incremental interest on the senior notes issued in April 2020 of $6.6 million, partially offset by the impact of lower interest rates on our term loan B variable tranche of $1.8 million and a lower outstanding balance on our term loan B fixed tranche of $0.9 million.

The increase in interest expense is primarily from incremental interest on the senior notes issued in April 2020 of $13.1 million, partially offset by the impact of the repayment of our term loan B fixed tranche in January 2021 of $4.0 million and lower interest rates on our term loan B variable tranche of $3.5 million.

See “Liquidity and Capital Resources” below for additional information.

Provision for Income Taxes

The effective tax rates were 27.0% and 26.9%, for the three months ended December 31, 2020, and 2019, respectively.

The effective tax rates were 26.5% and 29.5%, for the six months ended March 31, 2021, and 2020, respectively.

Liquidity and Capital Resources

We are highly leveraged and a substantial portion of our liquidity needs will arise from debt service on our outstanding indebtedness and from funding the costs of operations, working capital, capital expenditures, debt repayment and share repurchases.

Working capital (current assets less current liabilities) increased $85.8 million, to $955.5 million at December 31, 2020, compared to $869.7 million at September 30, 2020, resulting primarily from an increase in inventory.

The increase in inventory resulted from investments in key products to reach desired inventory levels.

At December 31, 2020, cash and cash equivalents were $537.6 million.

Working capital (current assets less current liabilities) decreased $278.3 million, to $591.4 million at March 31, 2021, compared to $869.7 million at September 30, 2020, resulting primarily from the reclassification of our 5.50% Senior Notes due 2023 (“2023 Senior Notes”) to current maturities of long-term debt.

At March 31, 2021 , cash and cash equivalents were $408.3 million .

Based upon the current level of operations and anticipated growth, we anticipate that existing cash balances (excluding certain amounts permanently invested in connection with foreign operations), funds expected to be generated by operations and funds available under the ABL facility will be sufficient to fund working capital requirements, potential acquisitions, anticipated capital expenditures, including information technology upgrades and store remodels, and debt repayments over the next 12 months.

Due to the impact of COVID-19, we have shifted our focus to being proactive in maintaining our financial flexibility.

Due to the improving COVID-19 conditions, we have shifted our focus to reducing our debt levels while also being proactive in maintaining our financial flexibility.

We utilize our ABL facility for the issuance of letters of credit, certain working capital and liquidity needs, and to manage normal fluctuations in our operational cash flow.

In that regard, we may from time to time draw funds under the ABL facility for general corporate purposes including funding of capital expenditures, acquisitions, interest payments due on our indebtedness, paying down other debt and opportunistic share repurchases.

During the three months ended December 31, 2020, we did not borrow on our ABL facility.

As of December 31, 2020, we had $461.0 million available for borrowings under our ABL facility, subject to borrowing base limitations, as reduced by outstanding letters of credit.

During the six months ended March 31, 2021, we did not borrow on our ABL facility.

As of March 31, 2021, we had $496.9 million available for borrowings under our ABL facility, subject to borrowing base limitations, as reduced by outstanding letters of credit.

Amounts drawn on our ABL facility are generally paid down with cash provided by our operating activities.

Share Repurchase Programs

During the three months ended December 31, 2020, we did not repurchase any common stock.

As of December 31, 2020, we had authorization of approximately $726.1 million of additional potential share repurchases remaining under the 2017 Share Repurchase Program.

During the six months ended March 31, 2021, we did not repurchase any common stock.

As of March 31, 2021, we had authorization of approximately $726.1 million of additional potential share repurchases remaining under the 2017 Share Repurchase Program.

Historical Cash Flows

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Net Cash Provided by Operating Activities

Net cash provided by operating activities during the three months ended December 31, 2020, decreased $23.3 million to $39.0 million, compared to the three months ended December 31, 2019, mainly due to increased inventory purchases, in connection with inventory investments to improve stock levels for key products, and the timing of our vendor receivables, partially offset by an increase in our accounts payable in connection with increased inventory purchases.

Net cash provided by operating activities during the six months ended March 31, 2021, increased $55.4 million to $131.6 million, compared to the six months ended March 31, 2020, mainly due to increased net income and the timing of inventory purchases and payments as we restock to new levels of demand.

Net Cash Used by Investing Activities

Net cash used by investing activities during the three months ended December 31, 2020, decreased $25.3 million to $17.5 million, compared to the three months ended December 31, 2019.

Net cash used by investing activities during the six months ended March 31, 2021, decreased $44.6 million to $29.3 million, compared to the six months ended March 31, 2020.

This change was primarily a result of our focus on reduced capital expenditures.

Net Cash Used by Financing Activities

Net cash used by financing activities during the three months ended December 31, 2020, decreased $24.1 million to $0.3 million, compared to the three months ended December 31, 2019.

The decrease was driven by the absence of debt borrowings and minimal repayments during the current quarter and not repurchasing our common stock under our share repurchase program.

Net Cash (Used) Provided by Financing Activities

Net cash used by financing activities during the six months ended March 31, 2021 resulted from the paydown of our term loan B fixed tranche.

During the six months ended March 31, 2020, we had a source of cash from financing activities primarily from the borrowings on our ABL and the issuance of senior notes as a response to COVID-19.

Long-Term Debt and Guarantor Financial Information

At December 31, 2020, we had $1,813.2 million in debt, not including capital leases, unamortized debt issuance costs and debt discounts, in the aggregate, of $14.8 million.

At March 31, 2021, we had $1,600.0 million in debt, not including capital leases, unamortized debt issuance costs and debt discounts, in the aggregate, of $13.0 million.

Our debt consisted of $1,177.4 million of senior notes outstanding and a term loan with an outstanding principal balance of $422.6 million.

As of December 31, 2020, there were no outstanding principal borrowings under our ABL facility.

As of March 31, 2021, there were no outstanding borrowings under our ABL facility.

During the three months ended March 31, 2021, we paid the remaining $213.2 million of aggregate outstanding principal on our term loan B fixed tranche at par.

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

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We are providing the following information in compliance with Rule 13-01 of Regulation S-X for guaranteed issued securities that have been registered under such regulation.

Currently, our issued securities consist of the 5.625% Senior Notes due 2025 and the 5.50% Senior Notes due 2023.

Currently, our issued securities consist of the 5.625% Senior Notes due 2025 and the 2023 Senior Notes.

These debt instruments were issued by our wholly-owned subsidiaries, Sally Holdings LLC and Sally Capital Inc.

(the “Issuers”), under a shelf registration statement.

See and Note 13, Subsequent Event , for more information on our 2023 Senior Notes.

These notes are unsecured debt instruments guaranteed by us and certain of our wholly-owned domestic subsidiaries (together, the “Guarantors”) and have certain restrictions on the ability to pay restrictive payments to Sally Beauty.

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All transactions and intercompany balances between these combined entities has been eliminated.

The following table presents the summarized balance sheets information for the Issuers and the Guarantors as of December 31, 2020 and September 30, 2020 (in thousands):

December 31, 2020

The following table presents the summarized balance sheets information for the Issuers and the Guarantors as of March 31, 2021 and September 30, 2020 (in thousands):

March 31, 2021

September 30, 2020

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Total liabilities

The following table presents the summarized statement of income information for three months ended December 31, 2020 (in thousands):

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

Earnings before provision for income taxes

Contractual Obligations

There have been no material changes outside the ordinary course of our business in any of our contractual obligations since September 30, 2020.

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

Off-Balance Sheet Financing Arrangements

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

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

Critical Accounting Estimates

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis