What changed in this filing

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Item 1. Financial Statements

2022-05-05 compared with 2022-02-02 · 63 added, 32 removed, 274 unchanged (26% of the section changed)

12 unchanged sentences

Property and equipment, net of accumulated depreciation of $ 800,715 at

December 31, 2021, and $ 767,403 at September 30, 2021

March 31, 2022, and $ 767,403 at September 30, 2021

Operating lease assets

Intangible assets, excluding goodwill, net of accumulated amortization of

$ 39,670 at December 31, 2021, and $ 38,957 at September 30, 2021

$ 40,528 at March 31, 2022, and $ 38,957 at September 30, 2021

Liabilities and Stockholders’ Equity

15 unchanged sentences

113,138 shares issued and 106,930 and 112,913 shares outstanding at

December 31, 2021, and September 30, 2021, respectively

March 31, 2022, and September 30, 2021, respectively

Preferred stock, $ 0.01 par value.

11 unchanged sentences

Three Months Ended

Six Months Ended

Cost of goods sold

13 unchanged sentences

Three Months Ended

Six Months Ended

Other comprehensive (loss) income:

12 unchanged sentences

Balance at September 30, 2021

Other comprehensive income

Other comprehensive loss

Share-based compensation

Stock issued for equity awards

Employee withholding taxes paid related to net share settlement

Employee withholding taxes paid

related to net share settlement

Repurchases and cancellations of

Balance at December 31, 2021

Other comprehensive loss

Share-based compensation

Stock issued for equity awards

Employee withholding taxes paid

related to net share settlement

Repurchases and cancellations of

Balance at March 31, 2022

Comprehensive

4 unchanged sentences

Stock issued for equity awards

Employee withholding taxes paid related to net share settlement

Employee withholding taxes paid

related to net share settlement

Balance at December 31, 2020

Other comprehensive loss

Share-based compensation

Stock issued for equity awards

Balance at March 31, 2021

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

3 unchanged sentences

(In thousands)

Three Months Ended December 31,

Six Months Ended March 31,

Cash Flows from Operating Activities:

3 unchanged sentences

Amortization of deferred financing costs

Loss on early extinguishment of debt

Loss on disposal of equipment and other property

20 unchanged sentences

Effect of foreign exchange rate changes on cash and cash equivalents

Net (decrease) increase in cash and cash equivalents

Net decrease in cash and cash equivalents

Cash and cash equivalents, beginning of period

20 unchanged sentences

These condensed consolidated interim financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended September 30, 2021.

In the opinion of management, these condensed consolidated interim financial statements reflect all adjustments that are of a normal recurring nature and which are necessary to present fairly our consolidated financial position as of December 31, 2021 and September 30, 2021, and our consolidated results of operations, consolidated comprehensive income, consolidated statements of stockholders’ equity and our consolidated cash flows for the for the three months ended December 31, 2021 and 2020.

In the opinion of management, these condensed consolidated interim financial statements reflect all adjustments that are of a normal recurring nature and which are necessary to present fairly our consolidated financial position as of March 31, 2022 and September 30, 2021, and our consolidated results of operations, consolidated comprehensive income, consolidated statements of stockholders’ equity for the three and six months ended March 31, 2022 and 2021 and our consolidated cash flows for the for the six months ended March 31, 2022 and 2021.

Principles of Consolidation

14 unchanged sentences

Impact of COVID-19

Our operating results for the three months ended December 31, 2021, may not be indicative of the results that may be expected for the full fiscal year ending September 30, 2022, in particular as a result of the uncertainty around the continuing effects of the COVID-19 pandemic and its variants on future periods.

While trends have been improving, we cannot reasonably predict the effects of the pandemic or expect these positive trends to continue.

If we become negatively impacted, we may have to consider adjustments to our strategic plans, inventory, liquidity, operational and capital expenditure plans.

Additionally, as the uncertainty of the economy as a result of COVID-19 continues to be prolonged, it may have an impact on our net sales and operations, and may require changes to our reserves including adjustments, write-downs and restructuring charges.

Our operating results for the three and six months ended March 31, 2022, were adversely impacted by the COVID-19 pandemic and its continuing effects on the economy, including inflationary pressures, continued supply chain disruptions, increased freight costs, labor shortages and increased labor costs.

Given the uncertainty around the continuing effects of the COVID-19 pandemic and its economic impact we cannot reasonably predict the effect they will have on future periods.

If we become materially and adversely impacted, we may have to consider adjustments to our strategic plans, inventory, liquidity, operational and capital expenditure plans.

Revenue Recognition

3 unchanged sentences

Changes to our contract liabilities, which are included in accrued liabilities in our condensed balance sheets, for the periods were as follows (in thousands):

Three Months Ended December 31,

Six Months Ended March 31,

Beginning Balance

19 unchanged sentences

Carrying amounts and the related estimated fair value of our long-term debt, excluding capital lease obligations and debt issuance costs, are as follows:

December 31, 2021

March 31, 2022

September 30, 2021

12 unchanged sentences

In July 2021, our Board of Directors approved a term extension of the share repurchase program for the four-year period ending September 30, 2025 .

As of March 31, 2022, we had authorization of approximately $ 595.8 million of additional potential share repurchases remaining under our share repurchase program.

Information related to our shares repurchased and subsequently retired were as follows (in thousands):

Three Months Ended

Six Months Ended

Number of shares repurchased

6 unchanged sentences

Balance at September 30, 2021

Other comprehensive income (loss) before

Other comprehensive loss before

reclassification, net of tax

Reclassification to net earnings, net of tax

Balance at December 31, 2021

The tax impact for the changes in other comprehensive (loss) income and the reclassifications to net earnings was not material.

Balance at March 31, 2022

The tax impact for the changes in other comprehensive loss and the reclassifications to net earnings was not material.

Weighted-Average Shares

1 unchanged sentence

Three Months Ended

Six Months Ended

Weighted-average basic shares

4 unchanged sentences

Goodwill and Intangible Assets

We considered potential triggering events and determined there were none during the three months ended December 31, 2021.

During the three months ended March 31, 2022, we completed our annual assessment for impairment of goodwill and other intangible assets.

For goodwill, we used a qualitative analysis and our actual and forecasted results are exceeding the estimates from the last quantitative test.

No material impairment losses were recognized in the current or prior periods presented in connection with our goodwill and other intangible assets.

Three Months Ended

Six Months Ended

(in thousands)

Intangible assets amortization expense

Additionally, during the three months ended December 31, 2021, the decrease in goodwill was primarily from the effects of foreign currency exchange rates of $ 0.9 million.

Additionally, during the six months ended March 31, 2022, the decrease in goodwill was primarily from the effects of foreign currency exchange rates of $ 1.5 million.

Accrued Liabilities

2 unchanged sentences

Compensation and benefits

Interest payable

Deferred revenue

Rental obligations

Interest payable

Insurance reserves

3 unchanged sentences

Derivative Instruments and Hedging Activities

During the three months ended December 31, 2021, we did no t purchase or hold any derivative instruments for trading or speculative purposes.

During the six months ended March 31, 2022, we did no t purchase or hold any derivative instruments for trading or speculative purposes.

See Note 3, Fair Value Measurements , for the classification and fair value of our derivative instruments.

3 unchanged sentences

dollars by our foreign subsidiaries.

At December 31, 2021, the notional amount we held through these forwards, based upon exchange rates at December 31, 2021, was as follows (in thousands):

At March 31, 2022, we held forwards, which expire ratably through September 30, 2022 , with a notional amount, based upon exchange rates at March 31, 2022, as follows (in thousands):

Notional Currency

1 unchanged sentence

Canadian Dollar

We record quarterly, net of income tax, the changes in fair value related to the foreign currency forwards into AOCL.

As the forwards are exercised, the realized value is recognized into cost of goods sold based on inventory turns.

For the three months ended December 31, 2021 and 2020, we recognized a loss of $ 0.3 million and a gain of $ 0.4 million, respectively, into cost of goods sold on our condensed consolidated statements of earnings.

Based on December 31, 2021 valuations and exchange rates, we expect to reclassify losses of approximately $ 0.6 million into cost of goods sold over the next 12 months.

Quarterly, the changes in fair value related to the foreign currency forwards are recorded into AOCL.

As the forwards are exercised, the realized value is recognized into cost of goods sold, based on inventory turns, in our condensed consolidated statements of earnings.

For the six months ended March 31, 2022 and 2021, we recognized a loss of $ 0.4 million and a gain of $ 0.4 million, respectively.

The effects of our foreign currency forwards were not material for the three months ended March 31, 2022 and 2021.

Based on March 31, 2022 valuations and exchange rates, we expect to reclassify losses of approximately $ 0.1 million into cost of goods sold over the next 12 months.

Interest Rate Caps

2 unchanged sentences

Accordingly, changes in fair value of the interest rate caps are recorded quarterly, net of income tax, and are included in AOCL.

For the six months ended March 31, 2022 and 2021, we recognized expense of $ 0.4 million and $ 0.2 million, respectively, into interest expense on our condensed consolidated statements of earnings.

The effects of our interest rate caps on our condensed consolidated statements of earnings were not material for the three months ended March 31, 2022 and 2021.

Over the next 12 months, we expect to reclassify approximately $ 1.9 million into interest expense, which represents the original value of the expiring caplets.

For the three months ended December 31, 2021, we recognized expense of approximately $ 0.4 million into interest expense on our condensed consolidated statements of earnings.

The effects of our interest rate caps on our condensed consolidated statements of earnings were not material for the three months ended December 31, 2020.

Segment Reporting

Segment data for the three months ended December 31, 2021 and 2020, is as follows (in thousands):

Segment data for the three and six months ended March 31, 2022 and 2021, is as follows (in thousands):

Three Months Ended

Six Months Ended

Sally Beauty Supply ("SBS")

7 unchanged sentences

Interest expense

Earnings before provision for income taxes

Sales between segments, which are eliminated in consolidation, were not material during the three months ended December 31, 2021 and 2020.

Earnings before provision

for income taxes

Sales between segments, which are eliminated in consolidation, were not material during the three and six months ended March 31, 2022 and 2021.

Disaggregation of net sales by segment

2 unchanged sentences

Three Months Ended

Six Months Ended

Styling tools and supplies

2 unchanged sentences

Three Months Ended

Six Months Ended

Styling tools and supplies

3 unchanged sentences

Three Months Ended

Six Months Ended

Company-operated stores

1 unchanged sentence

Three Months Ended

Six Months Ended

Company-operated stores

1 unchanged sentence

Franchise stores

Subsequent Event

On April 29, 2022, we announced that our wholly-owned subsidiaries, Sally Holdings LLC (“Holdings”) and Sally Capital Inc.

(together with Holdings, the “Issuers”), issued a notice of redemption (the “Redemption Notice”), to redeem on May 31, 2022, the entire $ 300.00 million aggregate principal amount of the 8.750 % Senior Secured Second Lien Notes due 2025 (“Notes”) which remain outstanding.

The redemption is being made pursuant to the terms of the Indenture dated April 24, 2020, at a redemption price equal to 104.375 % of the principal amount of the Notes plus accrued but unpaid interest to, but not including, the redemption date.

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 1. Financial Statements