What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-07-29 compared with 2021-05-06 · 115 added, 109 removed, 95 unchanged (70% 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 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.

Highlights for the Three Months Ended June 30, 2021

Consolidated net sales for the three months ended June 30, 2021, increased $317.1 million, or 45.0%, to $1,022.4 million, compared to the three months ended June 30, 2020;

Consolidated same store sales increased 44.7% for the three months ended June 30, 2021, compared to the three months ended June 30, 2020;

Consolidated gross profit for the three months ended June 30, 2021, increased $192.6 million, or 59.8%, to $514.4 million, compared to the three months ended June 30, 2020.

Gross margin increased 470 basis points to 50.3% for the three months ended June 30, 2021, compared to the three months ended June 30, 2020;

Consolidated operating earnings for the three months ended June 30, 2021, increased $126.0 million, or 8,804.1%, to $127.4 million, compared to the three months ended June 30, 2020.

Operating margin increased 1,230 basis points to 12.5% for the three months ended June 30, 2021, compared to the three months ended June 30, 2020;

For the three months ended June 30, 2021, we had consolidated net earnings of $76.2 million compared to consolidated net loss of $23.5 million for the three months ended June 30, 2020;

For the three months ended June 30, 2021, we had diluted earnings per share of $0.66, compared to diluted loss per share of $0.21 for the three months ended June 30, 2020;

Cash provided by operations was $86.2 million for the three months ended June 30, 2021, compared to $198.3 million for the three months ended June 30, 2020.

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

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.

COVID-19 restrictions on our global store operations continued to ease in the current quarter.

However, 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 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

Nine Months Ended

Increase (Decrease)

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Segment gross margin:

Net earnings:

Net earnings (loss):

Segment operating earnings:

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Interest expense

Earnings before provision for income taxes

Provision for income taxes

Earnings (loss) before provision for income taxes

Provision (benefit) for income taxes

Net earnings (loss)

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

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Results of Operations

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

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

Consolidated .

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Foreign currency exchange

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

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.

Other consists of stores outside same store sales and non-store sales, including catalog and internet sales of our Sinelco Group subsidiaries.

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

and Canada, improving consumer confidence in the U.S.

and the easing of COVID-19 restrictions across international territories.

For the three months ended June 30, 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.

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Distributor sales consultants

Sales to franchisees

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.

Other consists of stores outside same store sales, included recently acquired businesses.

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

and Canada and higher operating capacities in salons from the easing of COVID-19 restrictions.

This was partially offset by a decrease in average unit price primarily due to increased promotions and customer discounts.

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.

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

SBS’s gross profit increased for the three months ended June 30, 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 the impact of the prior year’s non-cash inventory write down and inventory clearance efforts, partially offset by higher sales volume from the lower margin European operations as a percentage of total segment sales compared to the prior year.

BSG’s gross profit increased for the three months ended June 30, 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 higher sales volume from large volume/lower margin full service customers that rebounded from the COVID-19 impact in the prior year.

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.

Consolidated selling, general and administrative expenses increased primarily as a result of higher compensation and compensation-related expenses, rent expense and advertising expenses.

These increases were driven by the impact of COVID-19 in the prior year.

Consolidated selling, general and administrative expenses, as a percentage of net sales, decreased 680 basis points to 37.8% for the three months ended June 30, 2021, due to the increase in sales.

SBS’s selling, general and administrative expenses increased $33.0 million, or 16.6%, for the three months ended June 30, 2021.

The increase was driven primarily by higher compensation and compensation-related expenses of $49.7 million, resulting from furloughs due to COVID-19 in the prior year.

Additionally, rent expense increased $6.9 million, due to rent abatements in the prior year.

These expenses were partially offset by lower delivery expense of $21.5 million due to lower e-commerce volume compared to the three months ended June 30, 2020.

BSG’s selling, general and administrative expenses increased $ 30.7 million , or 38.7% , for the three months ended June 30, 2021 .

The increase was driven primarily by higher compensation and compensation-related expenses of $23.3 million, resulting from furloughs due to COVID-19 in the prior year.

Additionally, rent expense increased $3.9 million, due to rent abatements in the prior year, and advertising expenses increased $1.7 million.

Unallocated selling, general and administrative expenses, which represent certain corporate costs that have not been charged to our reporting segments, increased $8.2 million, or 22.8%, for the three months ended June 30, 2021, primarily due to higher compensation and compensation-related expenses of $14.9 million as a result of employees furloughed in the prior year.

This increase was partially offset by lower COVID-19 expense in the current period.

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.

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

Interest Expense

The 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.

The decrease in interest expense is primarily due to the lower outstanding debt principal for the three months ended June 30, 2021 compared to the three months ended June 30, 2020.

We recognized lower interest expense as a result of the repayments of our term loan B fixed tranche of $3.0 million and senior notes due 2023 of $2.7 million.

Additionally, the lower outstanding principal balance on our ABL facility resulted in lower interest expense of $2.6 million.

These decreases were partially offset by debt extinguishment costs of $2.9 million and incremental interest on the senior notes issued in April 2020 of $1.7 million.

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

The effective tax rates were 26.7% and 9.1%, for the three months ended June 30, 2021, and 2020, respectively.

The effective tax rate for the three months ended June 30, 2020 was negatively impacted by foreign losses which cannot be tax benefitted.

For the three months ended June 30, 2020, the impact of these and certain other tax impacting items is opposite the customary relationship due to the loss before the provision for income taxes that was incurred.

A lower effective tax rate is not beneficial in situations where a pre-tax book loss has been incurred.

See Note 12, Income Tax , for more information on our effective tax rate.

The Nine Months Ended June 30, 2021, compared to the Nine Months Ended June 30, 2020

Consolidated .

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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.

Other consists of stores outside same store sales, which were negatively impacted by net store closures, and non-store sales, including catalog and internet sales of our Sinelco Group subsidiaries.

SBS experienced an increase in average unit prices as a result of a reduction in promotional activity and increased sales of higher-priced products.

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

and Canada , improving consumer confidence in the U.S.

and the easing of COVID-19 restrictions across international territories.

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

Same store sales

Sales to franchisees

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 a higher unit volume.

Other consists of stores outside same store sales, included recently acquired businesses.

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

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

For the nine months ended June 30, 2021, we experienced additional temporary closures and restricted capacity of certain customer-facing store operations in various markets in the U.S.

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

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

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.

Consolidated .

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.

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

SBS’s gross profit increased for the nine months ended June 30, 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.

BSG’s gross profit decreased for the nine months ended June 30, 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, partially offset by fewer promotions.

Selling, General and Administrative Expenses

Consolidated .

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 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 $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, 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.

Consolidated selling, general and administrative expenses increased primarily as a result of the impact of prior year cost saving initiatives in response to COVID-19, including furloughs and the suspension or elimination of all non-critical projects and non-essential spend.

Additionally, the increase was due to higher COVID-19 expenses, primarily from donation expense related to personal-protective equipment inventory, rent expense and incremental costs from businesses acquired in the past 12 months.

Consolidated selling, general and administrative expenses, as a percentage of net sales, decreased 250 basis points to 39.6% for the nine months ended June 30, 2021, due to the increase in sales.

SBS’s selling, general and administrative expenses increased $3.3 million, or 0.5%, for the nine months ended June 30, 2021.

The increase was driven primarily by higher compensation and compensation-related expenses of $33.5 million, resulting from furloughs due to COVID-19 in the prior year.

The increase was partially offset by lower delivery expense of $17.3 million due to lower e-commerce volume compared to the nine months ended June 30, 2020, advertising expenses of $7.0 million and incremental store expense for personal protective equipment in the prior year .

BSG’s selling, general and administrative expenses increased $36.2 million, or 12.8%, for the nine months ended June 30, 2021.

The increase was driven primarily by higher compensation and compensation-related expenses of $20.5 million, resulting from furloughs due to COVID-19 in the prior year.

Additionally, the increase was due to higher rent expense of $5.6 million, primarily due to rent abatements in the prior year, shipping costs and incremental costs from businesses acquired in the past 12 months.

Unallocated selling, general and administrative expenses, which represent certain corporate costs that have not been charged to our reporting segments, increased $28.4 million, or 22.4%, for the nine months ended June 30, 2021, primarily due to higher compensation and compensation-related expenses of $24.9 million as a result of employees furloughed in the prior year, and higher COVID-19 expense in the current period primarily from donation expense related to personal-protective equipment inventory of $29.8 million, compared to COVID-19 expense of $23.4 million in the prior year.

Restructuring

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.

For the nine months ended June 30, 2021, restructuring charges in connection with our previously communicated Project Surge and the Transformation Plan decreased $10.2 million to $1.4 million as we have substantially completed these restructuring plans.

Interest Expense

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.

The increase in interest expense is primarily due to incremental interest on the senior notes issued in April 2020 of $14.8 million and debt extinguishment costs of $4.5 million, partially offset by the impact of the repayments of our term loan B fixed tranche in January 2021 of $7.0 million and the senior notes due 2023 in April 2021 of $2.7 million.

Additionally, the lower outstanding principal balance on our ABL facility resulted in lower interest expense of $3.3 million and the lower interest rates on our term loan B variable tranche of $4.0 million.

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

Provision for Income Taxes

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

The effective tax rates were 26.6% and 37.2%, for the nine months ended June 30, 2021, and 2020, respectively.

The decrease in the effective tax rate was primarily due to greater losses in the prior year from foreign subsidiaries for which a tax benefit could not be recognized and the establishment of a valuation allowance in a foreign subsidiary in the prior year.

See Note 12, Income Tax , for more information on our effective tax rate.

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) 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.

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

Working capital (current assets less current liabilities) decreased $190.8 million, to $678.9 million at June 30, 2021, compared to $869.7 million at September 30, 2020, resulting primarily from a decrease in cash and cash equivalents from the repayments of outstanding long-term debt and increased inventory as a result of improving COVID-19 conditions.

At June 30, 2021, cash and cash equivalents were $270.3 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 our ABL facility will be sufficient to fund working capital requirements, potential acquisitions, anticipated capital expenditures, including information technology upgrades and store remodels, and debt repayments over the next 12 months.

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.

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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 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.

During the nine months ended June 30, 2021, we did not borrow under our ABL facility.

As of June 30, 2021, we had $481.7 million available for borrowings under our ABL facility, subject to borrowing base limitations, as reduced by outstanding letters of credit.

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

During the three months ended June 30, 2021, we entered into a third amendment to our ABL facility which extended the maturity date to May 11, 2026.

Share Repurchase Programs

During the 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.

During the nine months ended June 30, 2021, we did not repurchase any common stock.

As of June 30, 2021, we had authorization of approximately $726.1 million of additional potential share repurchases remaining under the 2017 Share Repurchase Program.

See Note 13, Subsequent Event , for additional information on our share repurchase program.

Historical Cash Flows

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Net Cash Provided by Operating Activities

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 provided by operating activities during the nine months ended June 30, 2021, decreased $56.7 million to $217.7 million, compared to the nine months ended June 30, 2020, mainly due to increases in vendor receivables and inventory, partially offset by increased net income and higher accounts payable.

The increase in inventory and accounts payable was driven by the timing of inventory purchases and payments as we restock to new levels of demand.

Additionally, the increase in vendor receivables was driven by higher sales in the three months ended June 30, 2021.

Net Cash Used by Investing Activities

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.

Net cash used by investing activities during the nine months ended June 30, 2021, decreased $44.4 million to $47.2 million, compared to the nine months ended June 30, 2020.

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

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.

Net cash used by financing activities during the nine months ended June 30, 2021 resulted primarily from the repayments on our term loan B fixed tranche, the senior notes due 2023 and term loan B variable tranche.

During the nine months ended June 30, 2020, we had a source of cash from financing activities primarily from the borrowings on our ABL and the issuance of senior notes as a response to COVID-19, partially offset by share repurchases.

Long-Term Debt and Guarantor Financial Information

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.

At June 30, 2021, we had $1,394.3 million in debt, not including capital leases, unamortized debt issuance costs and debt discounts, in the aggregate, of $11.7 million.

Our debt consisted of $980.0 million of senior notes outstanding and a term loan with an outstanding principal balance of $414.4 million.

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.

As of June 30, 2021, there were no outstanding borrowings under our ABL facility.

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

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

See Note 9, Short-term Borrowings and Long-term Debt , and Note 13, Subsequent Event , for more information on our debt.

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

Guarantor Financial Information

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

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.

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

This debt instrument was 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.

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

The guarantees are joint and several, and full and unconditional.

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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 March 31, 2021 and September 30, 2020 (in thousands):

March 31, 2021

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

June 30, 2021

September 30, 2020

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Total liabilities

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

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

Earnings before provision for income taxes

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Off-Balance Sheet Financing Arrangements

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.

At June 30, 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

3 unchanged sentences

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