Item 7. Management’s Discussion and Analysis
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following section discusses management’s view of Sally Beauty’s financial condition and results of operations for fiscal year 2021 compared to fiscal year 2020. See Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II of our Annual Report on Form 10-K for the fiscal year ended September 30, 2020, for a discussion of the financial condition and results of operations for fiscal year 2020 compared to fiscal year 2019. This section should be read in conjunction with the audited consolidated financial statements of Sally Beauty and the related notes included elsewhere in this Annual Report. This Management’s Discussion and Analysis of Financial Condition and Results of Operations section may contain forward-looking statements. See “Cautionary Notice Regarding Forward-Looking Statements” and “Risk Factors” for a discussion of the uncertainties, risks and assumptions associated with these forward-looking statements that could cause results to differ materially from those reflected in such forward-looking statements.
Highlights of the Fiscal Year Ended September 30, 2021:
•
Consolidated net sales for the fiscal year increased $360.7 million, or 10.3%, to $3,875.0 million and included a positive impact from changes in foreign currency exchange rates of $32.9 million, or 0.9% of consolidated net sales;
•
Consolidated same store sales for the fiscal year increased 10.2%, compared to the prior fiscal year;
•
Consolidated gross profit increased by $237.7 million, or 13.9%, to $1,953.3 million. Gross margin increased 160 basis points to 50.4% compared to the prior fiscal year;
•
Consolidated operating earnings for the fiscal year increased $159.7 million, or 61.7%, to $418.4 million. Operating margin increased 340 basis points to 10.8% compared to the prior fiscal year;
•
Consolidated net earnings for the fiscal year increased $126.6 million, or 111.8%, to $239.9 million;
•
Diluted earnings per share for the fiscal year were $2.10 compared to $0.99 for the prior fiscal year;
•
Cash provided by operations was $381.9 million for the fiscal year compared to $426.9 million for the prior fiscal year;
Impact of COVID-19 on Our Business and Business Strategy Update
COVID-19 restrictions on our global store operations continued to ease over the fiscal year. 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 will likely continue into fiscal year 2022 and possibly beyond, and it may be material.
Furthermore, we made substantial 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.
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Results of Operations
Key Operating Metrics
The following table sets forth, for the periods indicated, information concerning key measures we rely on to assess our operating performance (dollars in thousands):
2021 vs 2020
Fiscal Year Ended September 30,
Amount
%
2021
2020
Change
Change
Net sales:
SBS
$
2,278,382
$
2,080,703
$
197,679
9.5
%
BSG
1,596,615
1,433,627
162,988
11.4
%
Consolidated
$
3,874,997
$
3,514,330
$
360,667
10.3
%
Gross profit:
SBS
$
1,318,473
$
1,132,436
$
186,037
16.4
%
BSG
634,861
583,158
51,703
8.9
%
Consolidated
$
1,953,334
$
1,715,594
$
237,740
13.9
%
Segment gross margin:
SBS
57.9
%
54.4
%
350
bps
BSG
39.8
%
40.7
%
(90
)
bps
Consolidated
50.4
%
48.8
%
160
bps
Net earnings:
Segment operating earnings:
SBS
$
417,658
$
237,588
$
180,070
75.8
%
BSG
205,078
194,206
10,872
5.6
%
Segment operating earnings
622,736
431,794
190,942
44.2
%
Unallocated expenses and restructuring (a) (b)
204,293
173,034
31,259
18.1
%
Consolidated operating earnings
418,443
258,760
159,683
61.7
%
Interest expense
93,509
98,793
(5,284
)
(5.3
)%
Earnings before provision for income taxes
324,934
159,967
164,967
103.1
%
Provision for income taxes
85,076
46,722
38,354
82.1
%
Net earnings
$
239,858
$
113,245
$
126,613
111.8
%
Number of stores at end-of-period (including franchises):
SBS
3,549
3,653
(104
)
(2.8
)%
BSG
1,362
1,385
(23
)
(1.7
)%
Consolidated
4,911
5,038
(127
)
(2.5
)%
Same store sales growth (decline)
SBS
9.7
%
(8.1
)%
1,780
bps
BSG
11.0
%
(8.3
)%
1,930
bps
Consolidated
10.2
%
(8.1
)%
1,830
bps
(a)
Unallocated expenses represent certain corporate costs (such as payroll, share-based compensation, employee benefits and travel expense for corporate staff, certain professional fees and corporate governance expenses) that have not been charged to our segments and are included in selling, general and administrative expenses in our consolidated statements of earnings.
(b)
Restructuring relates to Project Surge and our Transformation Plan.
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The Fiscal Year Ended September 30, 2021 compared to the Fiscal Year Ended September 30, 2020
Net Sales
SBS . The increase in net sales for SBS was primarily driven by the following (in thousands):
Same store sales
$
193,101
Stores outside same store sales
(14,487
)
Other (a)
(7,354
)
Foreign currency exchange
26,419
Total
$
197,679
(a)
Other consists of non-store sales, which include catalog and internet sales of our Sinelco Group subsidiaries.
The increase in SBS net sales was attributable to improving consumer confidence in the U.S. and the easing of COVID-19 restrictions across international territories compared to the negative impact COVID-19 had on operations in fiscal year 2020, which included the temporary closure of customer-facing store operations during part of the year. Additionally, SBS experienced an increase in its average unit prices as a result of a reduction in promotional activity and increased sales of higher-priced products . SBS total unit volume was slightly down due to fewer units sold in the styling tools and salon supplies and accessories categories, partially offset by growth in our core hair color category.
BSG . The increase in net sales for BSG was driven by the following (in thousands):
Same store sales
$
107,158
Distributor sales consultants
20,412
Sales to franchisees
16,911
Stores outside same store sales
11,994
Foreign currency exchange
6,513
Total
$
162,988
The increase in BSG net sales was attributable to the easing of COVID-19 restrictions in the U.S. and Canadian fiscal year 2021, including the reopening of salons in parts of California and Canada compared to the negative impact COVID-19 had on operations in fiscal year 2020, which included the temporary closure of customer-facing store operations during part of the year. Additionally, BSG had 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. and Canada. The increase in the average unit price was driven primarily by category mix shift and lower promotional activity.
Gross Profit
SBS . SBS’s gross profit increased as a result of increased net sales and a higher gross margin. SBS’s higher gross margin was primarily a result of fewer promotions and the write down of inventory that occurred in the prior year resulting from aggressive inventory clearance actions.
BSG . BSG’s gross profit increased as a result of higher net sales, partially offset by a lower gross margin. BSG’s gross margin decreased primarily as a result of sales mix shift towards large volume/lower margin full service customers, which have rebounded from the prior year’s impact from COVID-19 disruptions.
Selling, General and Administrative Expenses
SBS . SBS’s selling, general and administrative expenses increased $6.0 million, or 0.7%. This increase was driven by higher compensation and compensation-related expense of $42.0 million, primarily as a result of the reemployment of a significant number of employees that were furloughed in the prior year and an increase in bonus expenses as a result of improved operating result. This increase was partially offset by lower delivery expense of $22.6 million due to lower e-commerce volume as stores reopened, lower supplies expense of $6.4 million primarily from a decrease in personal protective equipment purchases, lower advertising expenses of $3.5 million and fewer implementation costs in connection with our private label rewards credit card of $3.3 million.
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BSG . BSG’s selling, general and administrative expenses increased $40.8 million, or 10.5%. This increase reflects higher compensation and compensation-related expense of $18.8 million, primarily as a result of the reemployment of a significant number of employees that were furloughed in the prior year. Additionally, this increase was driven by incremental expenses associated with prior year acquisitions and rent expense of $6.2 million, due to rent abatements in the prior year.
Unallocated. Unallocated selling, general and administrative expenses, which represent certain corporate costs that have not been charged to our reporting segments, increased $40.7 million, or 25.6%. This increase was primarily due to higher compensation and compensation-related expenses of $35.3 million, primarily as a result of the reemployment of a significant number of employees that were furloughed in the prior year and an increase in bonus expenses as a result of improved operating result . Additionally, COVID-19 expense was higher in the current year driven by expenses from the donation of personal protective equipment.
Restructuring
For fiscal years 2021 and 2020, we incurred restructuring charges in connection with Project Surge and the Transformation Plan. As of the end of fiscal year 2021, these restructuring plans have been substantially completed.
Interest Expense
Interest expense was lower due to the impact of the repayments of our term loan B fixed tranche in January 2021 of $9.9 million and the senior notes due 2023 in April 2021 of $5.4 million, partially offset by the incremental interest on the senior notes issued in April 2020 of $14.8 million and incremental debt extinguishment costs of $4.1 million. Additionally, the lower outstanding principal balance on our ABL facility resulted in lower interest expense of $5.4 million and the lower interest rates on our term loan B variable tranche of $4.1 million.
Provision for Income Taxes
For fiscal year 2021 and 2020, our effective tax rate was 26.2% and 29.2%, respectively. The decrease in the effective tax rate was primarily due to greater losses in the prior year from foreign subsidiaries for which a tax benefit could not be recognized and the establishment of a valuation allowance in a foreign subsidiary in the prior year. See Note 15, Income Tax , for more information on our effective tax rate.
Our effective tax rate may fluctuate on a quarterly and/or annual basis due to various factors, including but not limited to, total earnings and the mix of earnings by jurisdiction, new tax laws, as well as changes in valuation allowances and uncertain tax positions.
Liquidity and Capital Resources
At September 30, 2021, cash and cash equivalents were $401.0 million. Based upon the current level of operations and anticipated growth, we anticipate 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, finance anticipated capital expenditures, including information technology upgrades and store remodels and debt repayments over the next 12 months.
Working capital (current assets less current liabilities) decreased $151.0 million to $718.7 million at September 30, 2021, compared to $869.7 million at September 30, 2020, resulting primarily from the decrease in our cash and cash equivalents and the increases in accounts payable and accrued liabilities, partially offset by an increase in inventory. The increase in inventory and accounts payable is a result of improving COVID-19 conditions. The ratio of current assets to current liabilities was 2.08 to 1.00 at September 30, 2021, compared to 2.54 to 1.00 at September 30, 2020.
We utilize our ABL facility for the issuance of letters of credit, for 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 fiscal year ended September 30, 2021, we did not borrow on our ABL facility. The amounts drawn are generally paid down with cash provided by our operating activities. As of September 30, 2021, we had $468.5 million available for borrowings under the ABL facility, subject to borrowing base limitations and outstanding letters of credit of $18.3 million.
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Share Repurchase Programs
During the fiscal year 2021, we did not repurchase any of our common stock. During the fiscal years 2020 and 2019, we repurchased and subsequently retired approximately 4.7 million shares and 3.6 million shares, respectively, of our common stock under a share repurchase program a cost of $61.4 million and $46.6 million, respectively. We funded these share repurchases with cash from operations and borrowings under the ABL facility. As of September 30, 2021, we had approximately $726.1 million of additional share repurchase authorization remaining under our Share Repurchase Program . In July 2021, the Board approved a term extension of the program through September 30, 2025.
Historical Cash Flows
For the fiscal years 2021, 2020 and 2019, our primary sources of cash have been funds provided by operating activities and, when necessary, borrowings under our ABL facility, as appropriate. The primary non-operating uses of cash during the past three years were for share repurchases, debt service and capital expenditures.
The following table shows our sources and uses of cash for the periods presented (in thousands):
Fiscal Year Ended September 30,
2021
2020
Change
Net cash provided by operating activities
$
381,860
$
426,889
$
(45,029
)
Net cash used by investing activities
(76,019
)
(123,775
)
47,756
Net cash (used) provided by financing activities
(419,968
)
139,761
(559,729
)
Effect of foreign currency exchange rate changes on cash and cash equivalents
935
(219
)
1,154
Net (decrease) increase in cash and cash equivalents
$
(113,192
)
$
442,656
$
(555,848
)
Net Cash Provided by Operating Activities
Net cash provided by operating activities decreased for fiscal year 2021, compared to fiscal year 2020, primarily due to increased inventory as a result of restocking to new levels of demand and an increase in vendor co-op receivables driven by the increase in net sales. These were partially offset by higher net income for the fiscal year and an increase in accounts payable resulting from the increased inventory purchases.
Net Cash Used by Investing Activities
Net cash used by investing activities was lower for fiscal year 2021, compared to fiscal year 2020, primarily due to our focus on reduced capital expenditures and the impact of opening our North Texas warehouse in the prior fiscal year.
Net Cash (Used) Provided by Financing Activities
For fiscal year 2021, we had a concerted effort to reduce our outstanding debt as conditions around COVID-19 improved. As a result, we repaid our term loan B fixed tranche, senior notes due 2023 and a portion of the term loan B variable tranche. For fiscal year 2020, our focus was on maintaining cash flexibility and liquidity needs as a result of COVID-19 and issued $300.0 million in senior notes .
Long-Term Debt
At September 30, 2021, we have $1,393.0 million in outstanding principal under a term loan B and senior notes, not including capital leases, unamortized debt issuance costs or debt discounts, in the aggregate, of $11.6 million. There were no outstanding balances under the ABL facility at September 30, 2021. See Note 12 of the Notes to Consolidated Financial Statements in Item 8 contained in this Annual Report for additional information about our debt.
We are currently in compliance with the agreements and instruments governing our debt, including our financial covenants.
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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. This debt instrument was issued by our wholly-owned subsidiaries, Sally Holdings LLC and Sally Capital Inc. (the “Issuers”), under a shelf registration statement.
The notes are unsecured debt instruments guaranteed by us and certain of our wholly-owned domestic subsidiaries (together, the “Guarantors”) and have certain restrictions on the ability to pay restrictive payments to Sally Beauty. The guarantees are joint and several, and full and unconditional. Certain other subsidiaries, including our foreign subsidiaries, do not serve as guarantors.
The following summarized consolidating financial information represents financial information for the Issuers and the Guarantors on a combined basis. All transactions and intercompany balances between these combined entities has been eliminated.
The following table presents the summarized balance sheets information for the Issuers and the Guarantors as of September 30, 2021 and 2020 (in thousands):
September 30, 2021
September 30, 2020
Inventory
$
662,802
$
615,092
Intercompany receivable
$
67,337
$
75,892
Current assets
$
1,069,266
$
1,166,250
Total assets
$
2,198,990
$
2,281,896
Current liabilities
$
422,137
$
325,380
Total liabilities
$
2,343,946
$
2,657,033
The following table presents the summarized statement of income information for fiscal year 2021 (in thousands):
Net sales
$
3,188,839
Gross profit
$
1,624,019
Earnings before provision for income taxes
$
275,907
Net Earnings
$
205,886
Capital Requirements
During fiscal year ended 2021, we had total capital expenditures of approximately $84.1 million, excluding amounts paid in connection with the prior year, primarily in connection with information technology projects, new store openings and store maintenance.
Contractual Obligations
The following table summarizes our contractual obligations at September 30, 2021 (in thousands):
Payments Due by Period
Less than
1 year
1-3 years
3-5 years
More than
5 years
Total
Long-term debt obligations, including interest (a)
$
74,358
$
561,712
$
1,047,600
$
—
$
1,683,670
Obligations under operating leases (b)
173,990
234,845
117,896
100,415
627,146
Purchase obligations (c)
4,387
5,730
—
—
10,117
Other long-term obligations (d)(e)
17,770
19,106
5,161
882
42,919
Total
$
270,505
$
821,393
$
1,170,657
$
101,297
$
2,363,852
(a)
Long-term debt obligations include obligations under capital leases and future interest payments on our debt outstanding as of September 30, 2021. The amounts shown above do not include unamortized discount or deferred debt issuance costs reflected in our consolidated balance sheets since those amounts do not represent contractual obligations.
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(b)
The amounts reported for operating leases do not include common area maintenance (CAM), property taxes or other executory costs. The amounts shown above do not include immaterial contingent liabilities for operating leases for which we are liable in the event of default by a franchisee.
(c)
Purchase obligations reflect legally binding non-cancellable agreements that are entered into by us to purchase goods or services, that specify minimum quantities to be purchased and with fixed or variable price provisions. Amounts shown do not reflect open purchase orders, mainly for merchandise, to be fulfilled within one year, which are generally cancellable or contracts that tend to be reoccurring in nature and similar in amount year over year.
(d)
Other long-term obligations, including current portion, principally represent obligations under insurance and self-insurance programs and deferral of social security taxes in connection with the Coronavirus Aid, Relief, and Economic Security Act. These obligations are included in accrued liabilities and other liabilities, as appropriate, in our consolidated balance sheets.
(e)
The table above does not include an estimated $2.1 million of unrecognized tax benefits due to uncertainty regarding the realization and timing of the related future cash flows, if any.
The information contained in the table above with regards to our long-term debt obligations is based on the current terms of such debt obligations and does not reflect any assumptions about our ability or intent to refinance any of our debt either on or before their maturity. In the event we refinance some or all of debt either on or before their maturity, actual payments for some of the periods shown may differ materially from the amounts reported herein. In addition, other future events, including potential increases in interest rates, could cause actual payments to differ materially from these amounts.
Off-Balance Sheet Financing Arrangements
At September 30, 2021, we did not have any off-balance sheet financing arrangements other than obligations under letters of credit, as discussed above.
Critical Accounting Estimates
The preparation of our consolidated financial statements in accordance with generally accepted accounting principles in the United States (“GAAP”) requires us to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses and disclosure. Actual results could differ from the estimates and assumptions used, which could have a material impact to financial statements. We believe the following are our most critical accounting estimates that require subjective judgments, estimates and assumptions:
Valuation of Inventory
Our inventory is stated at the lower of weighted average cost or net realizable value. In assessing the net realizable value of inventory, we will adjust the carrying value of inventory for estimated shrinkage, damage and obsolescence using several key factors including estimates of the future demand for our products, historical turn-over rates, the age and sales history of the inventory, and historic as well as anticipated changes in SKUs.
We estimate inventory shrinkage between physical counts and product damage based upon our historical experience. Actual results differing from these estimates could significantly affect our carrying value of inventory and cost of goods sold. Inventory shrinkage, in the aggregate, averaged less than 1.0% of consolidated net sales in fiscal years 2021, 2020 and 2019. A 10% increase or decrease in our estimate of inventory shrinkage and obsolescence reserves at September 30, 2021, would impact net earnings by approximately $3.1 million.
Vendor Rebates and Concessions
We deem cash consideration received from a vendor to be a reduction of the cost of goods sold unless it is in exchange for an asset or service or a reimbursement of a specific, incremental, identifiable cost incurred by us in selling the vendor’s products. The majority of cash consideration we receive is considered to be a reduction of inventory and a subsequent reduction in cost of goods sold as the related products are sold. We consider the facts and circumstances of the various contractual agreements with vendors in order to determine the appropriate classification of amounts received in our consolidated statements of earnings. We record cash consideration expected to be received from vendors in accounts receivables, other at the amount we believe will be collected. These receivables could be significantly affected if the actual amounts subsequently collected differ from our expectations. Historically, adjustments between the amount recorded and the amount collected have not had a material impact to our results of operations.
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Insurance
We retain a substantial portion of the risk related to employee health (primarily in the U.S.), workers’ compensation, general and product liability. However, we maintain stop-loss coverage to limit the exposure related to certain insurance risks. We base our health insurance liability estimate on trends in claim payment history, historical trends in claims incurred but not yet reported, and other components such as expected increases in medical costs, projected premium costs and the number of plan participants. Additionally, we base our estimates for workers’ compensation, general and product liability on an actuarial analysis performed by an independent third-party actuary. We review our insurance liability on a regular basis and adjust our accruals accordingly.
Changes in facts and circumstances may lead to a change in the estimated liability due to revisions of the estimated ultimate costs that affect our liability insurance coverage. Our liabilities could be significantly affected if actual results differ from our expectations or prior actuarial analyses. A 10% increase or decrease in our insurance liabilities at September 30, 2021, would impact net earnings by approximately $1.5 million.
The changes in our insurance liabilities were as follows (in thousands):
Fiscal Year Ended September 30,
2021
2020
Balance at beginning of period
$
21,436
$
20,294
Self-insurance expense
61,388
59,963
Payments, net of employee contributions
(62,228
)
(58,821
)
Balance at end of period
$
20,596
$
21,436
Income Taxes
We record income tax provisions in our consolidated financial statements based on an estimate of current income tax liabilities. The development of these provisions requires judgments about tax positions, potential outcomes and timing. If we prevail in tax matters for which provisions have been established or are required to settle matters in excess of established provisions, our effective tax rate for a particular period could be significantly affected.
Additionally, deferred income taxes are recognized for the future tax consequences attributable to differences between our financial statement carrying amounts of assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which temporary differences are estimated to be recovered or settled. We believe it is more-likely-than-not that our results of operations in the future will generate sufficient taxable income to realize our deferred tax assets, net of the valuation allowance currently recorded. We have recorded a valuation allowance to account for uncertainties regarding the recoverability of certain deferred tax assets, primarily foreign loss carryforwards. In the future, if we determine certain deferred tax assets will not be realizable, the related adjustments could significantly affect our effective tax rate at that time. An estimated tax benefit related to an uncertain tax position is recorded in our consolidated financial statements only after determining a more-likely-than-not probability that the uncertain tax position will withstand challenge, if any, from applicable taxing authorities.
Assessment of Long-Lived Assets for Impairment
We review long-lived assets for impairment whenever events or circumstances indicate the carrying amount of an asset may not be fully recoverable based on estimated undiscounted future cash flows. Long-lived assets are reviewed at the lowest level of identifiable cash flows, which is at the store level. In assessing for impairment, we determine the fair value of each individual store by discounting projected future cash flows over the remaining lease term. There are significant estimates and assumptions used to arrive at estimated future cash flows, including local market conditions and growth rates. If the carrying amount of the store asset, which includes the operating lease asset, exceeds the sum of its undiscounted future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the estimated fair value of the store.
No material impairment losses were recognized in fiscal years 2021 or 2019. For fiscal year 2020, we recognized an impairment loss of $4.1 million, due to the impact of COVID-19.
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Assessment of Goodwill and Intangible Assets for Impairment
We review goodwill and intangible assets for impairment annually, or when events or circumstances indicate it is more-likely-than-not that the value of the asset may be impaired. In assessing these types of assets for impairment, there are significant estimates and assumptions used to determine the fair value, including relevant market and economic conditions, anticipated future revenues and cash flows, royalty rates and discount rates .
When assessing goodwill for impairment, we may perform a qualitative assessment which evaluates macro-economic conditions, current and projected cash flows, and other events or changes in circumstances to determine if a quantitative assessment is necessary. If we need to complete a quantitative assessment, which last occurred in fiscal year 2020 as a result of COVID-19, we use a discounted cash flow model to determine an estimated fair value. If it is determined that the fair value of a reporting unit is less than its carrying value, an impairment charge will be recorded to bring the carrying value down to its fair value. As of the date of our last quantitative impairment test, March 31, 2020, a 10% decrease in either reporting unit’s fair value would not have resulted in an impairment. For fiscal year 2021, we completed a qualitative assessment and determined that while COVID-19 had a macro-economic impact, there were no material impacts to the reporting units to require a quantitative assessment.
Like goodwill, our indefinite-lived intangible assets are tested for impairment by comparing the fair value of each asset to its carrying value. As of September 30, 2021, our indefinite-lived assets were comprised of only trade names. To determine the fair value of each trade name, we use the relief-from-royalty method, which estimates what a third-party would be willing to pay in royalties to receive a benefit from the use of the asset. If it is determined the asset’s fair value is less than its carrying value, then an impairment charge is recorded to reduce the carrying value down to its fair value. No impairment losses were recognized in fiscal years 2021, 2020 or 2019.
Recent Accounting Pronouncements
See Note 3 of the Notes to Consolidated Financial Statements in Item 8 contained in this Annual Report for information about recent accounting pronouncements.
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