Gary Winterhalter, President and CEO May 10, 2011 SALLYBEAUTY HOLDINGS, INC. 1

Transcription

1 Gary Winterhalter, President and CEO May 10, 2011 HOLDINGS, INC. 1

2 Cautionary Notice Regarding Forward-Looking Statements Cautionary Notice Regarding Forward-Looking Statements Statements in this presentation and the schedules hereto which are not purely historical facts or which depend upon future events may be forwardlooking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Words such as anticipate, believe, estimate, expect, intend, plan, project, target, can, could, may, should, will, would, or similar expressions may also identify such forward-looking statements. Readers are cautioned not to place undue reliance on forward-looking statements as such statements speak only as of the date they were made. Any forward-looking statements involve risks and uncertainties that could cause actual events or results to differ materially from the events or results described in the forward-looking statements, including, but not limited to, risks and uncertainties related to: the highly competitive nature of, and the increasing consolidation of, the beauty products distribution industry; anticipating changes in consumer preferences and buying trends or and managing our product lines and inventory; potential fluctuation in our same store sales and quarterly financial performance; our dependence upon manufacturers who may be unwilling or unable to continue to supply products to us; the possibility of material interruptions in the supply of beauty supply products by our manufacturers; products sold by us being found to be defective in labeling or content; compliance with laws and regulations or becoming subject to additional or more stringent laws and regulations; product diversion; the operational and financial performance of our Armstrong McCall, L.P. business; the success of our Internet-based business; successfully identifying acquisition candidates or successfully completing desirable acquisitions; integrating businesses acquired in the future; opening and operating new stores profitably; the impact of a continued downturn in the economy upon our business; the success of our cost control plans; protecting our intellectual property rights, specifically our trademarks; conducting business outside the United States; disruption in our information technology systems; natural disasters or acts of terrorism; the preparedness of our accounting and other management systems to meet financial reporting and other requirements; being a holding company, with no operations of our own, and depending on our subsidiaries for cash; our substantial indebtedness; the possibility that we may incur substantial additional debt; restrictions and limitations in the agreements and instruments governing our debt; generating the significant amount of cash needed to service all of our debt and refinancing all or a portion of our indebtedness or obtaining additional financing; changes in interest rates increasing the cost of servicing our debt ; the potential impact on us if the financial institutions we deal with become impaired; the representativeness of our historical consolidated financial information with respect to our future financial position, results of operations or cash flows; our reliance upon Alberto-Culver for the accuracy of certain historical services and information; the share distribution of Alberto-Culver common stock in our separation from Alberto-Culver not constituting a tax-free distribution; actions taken by certain large shareholders adversely affecting the tax-free nature of the share distribution of Alberto-Culver common stock; the voting power of our largest stockholder discouraging third party acquisitions of us at a premium; and the interests of our largest stockholder differing from the interests of other holders of our common stock. Additional factors that could cause actual events or results to differ materially from the events or results described in the forward-looking statements can be found in our most recent Annual Report on Form 10-K for the year ended September 30, 2010, as filed with the Securities and Exchange Commission. Consequently, all forward-looking statements in this presentation are qualified by the factors, risks and uncertainties contained therein. We assume no obligation to publicly update or revise any forward-looking statements. HOLDINGS, INC. 2

3 Company Highlights Sally Beauty Holdings is a leading international specialty retailer and distributor of professional beauty products Sally Beauty Supply in business for 50 years Annual revenue of $2.9 billion Strong cash flow generation 4,207 stores located in 10 countries (1) Experienced and motivated leadership team Industry leading position with ~31% channel share Proven resilience in recessionary cycles Well-positioned for long-term growth (1) As of March 31, 2011 HOLDINGS, INC. 3

4 Overview Who We Are Fiscal Year 2010 In millions ($) YoY Sales $2, % Gross Profit Margin 48.2% 100 bps EPS $ % Adjusted EBITDA $ % Year to Date 2011 In millions ($) YoY Sales $1, % Gross Profit Margin 48.3% 80 bps EPS $ % Adjusted EBITDA $ % Segments Distribution Channel Customers 3,083 stores (1) Retail consumers (73% of sales) Professional stylists (27% of sales) 1,124 stores (1) 1,119 sales consultants (1) Stores - booth renting stylists (65% of sales) Full Service sales small to medium sized salons (35% of sales) 2010 Financial Highlights Sales SSS growth Operating income Profit margin Note: Financial results from Fiscal Year End 2010, September 30, 2010.(1) As of March 31, 2011 (fiscal 2011 second quarter) (2) Operating income is net Unallocated Expenses and Share Based Compensation $1, % $ % Sales SSS growth Operating income Profit margin $1, % $ % HOLDINGS, INC. 4

5 Industry Channels of Distribution (U.S.) 33% Direct Manufacturer direct to manufacturer owned salons or high-end salons. Open Line Distributes professional product to the public via retail stores Mega-Salon Manufacturer direct to large format salons. 13% (2) $0.5B 12% Professional (2) $0.5B Beauty Products ~$4.0 billion (1) Distribution Channels 34% (2) $1.4B 41% (2) $1.6B Exclusive/Full Service Third party distribution to salons and beauty professionals via sales force and professional only stores Competition: L Oreal s Competition: Local and regional operators Source: Professional Consultants & Resources, 2010 Study. (1) Professional beauty supply channel size based upon a 2010 study of manufacturer-level sales conducted by Professional Consultants & Resources. The study estimates that 2010 manufacturer-level sales for professional beauty supplies were approximately $4.0 billion. (2) Represents an estimated breakdown of salon haircare product sales in 2010 by channel of distribution.

6 Stable & Consistent Industry Growth ($ bn) $ $1.6 $1.7 $1.8 Recession Resistant Industry $2.0 $2.1 $2.2 $2.3 $3.3 $2.9 $2.9 $3.0 $3.1 $2.6 $2.7 $2.4 At manufacturer dollars $ growth of 1.5% growth of 4.4% $4.0 $3.8 $3.8 $3.7 $ U.S. Beauty Supply Industry has experienced steady growth with a CAGR of ~5% (1) Source: Professional Consultants & Resources, 2010 Study. (1) Based on manufacturer sales of professional beauty supplies in the U.S. HOLDINGS, INC. 6

7 Our Leading U.S. Industry Position U.S. professional beauty supply marketplace, in retail dollars, was roughly $7.8 billion in 2010 (1) Sally Beauty Holdings estimated channel share 31% Estimated 12% channel share (2) Leading full service/exclusive distributor in North America 1.2x sales of next largest competitor Estimated 19% channel share (2) Largest open-line retailer/distributor in U.S. based on store count Competition is limited (1) Professional beauty supply channel size is a management estimate, based upon a 2010 study of manufacturer-level sales conducted by Professional Consultants & Resources. The study estimates that 2010 manufacturer-level sales for professional beauty supplies were over $4.0 billion. Retail sales of $7.7 billion is calculated using gross margin of 48.9% (from SBH s actual gross margin in the U.S. for FY2010) as the spread between manufacturer cost and retail sales. (2) Estimated U.S. channel share calculated as follows: (i) Sally Beauty Supply s U.S. net sales for the fiscal year ended September 30, 2010 divided by estimated marketplace size of $7.8 billion and (ii) BSG s U.S. net sales for the fiscal year ended September 30, 2010 divided by estimated marketplace size of $7.8 billion. HOLDINGS, INC. 7

8 Drivers of Stable, Positive Comp Trends for SBH Sally Beauty Supply Customer Mix Increasing percentage of retail customers Control brands Higher margin products Increasing as a percent of sales CRM initiative Driving more retail traffic and higher average ticket Beauty Systems Group Customer Mix Increasing percentage of stylists shopping in the stores Higher margin sale Diversification and growth of product portfolio Additional brands Expansion of distribution rights in new geographies HOLDINGS, INC. 8

9 Sales and EBITDA growth Sales/Gross Margin Adjusted EBITDA Sales ($ in millions) $3,500 $3,000 $2,500 $2,000 $1,500 $1,000 $500 $2,514 $2,648 $2,637 $2,916 $1, % YoY 48.5% 48.0% 47.5% 47.0% 46.5% 46.0% 45.5% 45.0% Gross Margin Sales ($ in millions) $450 $400 $350 $300 $250 $200 $150 $100 $50 $310 $342 $353 $405 $ % YoY +14.9% $0 FY07 FY08 FY09 FY10 YTD11 (1) 44.5% $0 FY07 FY08 FY09 FY10 YTD11 (1) Includes a negative impact from unfavorable foreign currency exchange of $86 million or 3.2% of sales. HOLDINGS, INC. 9

10 Drivers of Earnings Growth Revenue Organic growth Same store sales growth Acquisitions Gross Margin Expansion Sally s exclusive label sales growing as a % of sales Customer mix shifting in both businesses Low cost sourcing (brushes, electricals, etc) Debt Reduction Historically paid down debt Consistently use portion of cash flow to pay down debt Taken leverage ratio down 3 turns since going public (1) Calculated over 3 year period HOLDINGS, INC. 10

11 Strong Earnings Growth Strong performance since going public in late Operating Income (in millions) EPS (GAAP) $0.78 $229 $283 $297 $341 28% growth $198 $0.42 $ % growth $0.48 $ YTD YTD

12 Strong Performance in FY 2010 Fiscal Year 2010, ending September 30, 2010 FY2010 % Change Same Store Sales +4.6% +280 bps Sales $2,916.1m 10.6% Gross Profit Margin 48.2% 100 bps Operating Earnings $340.9m 14.9% GAAP EPS $ % Adjusted EBITDA $404.9m 14.9% HOLDINGS, INC. 12

13 Fiscal Second Quarter 2011 Results Strong YoY performance across the Company Consolidated net sales of $802 million, up 11.3% YoY Same store sales growth of 6.0% compared to 4.8% in 2Q10 Traffic and average ticket up in both segments, including International Gross profit margin of 48.9%, expansion of 110 bps over prior year Sally Beauty Supply +130 bps; Beauty Systems Group +140 bps Operating margin expansion of 150 bps, to 13.2% Sally Beauty Supply +130 bps; Beauty Systems Group +140 bps Realized SG&A leverage and acquisition synergies Net earnings of $49 million, up 43% YoY EPS of $0.26 vs. $0.19 in the fiscal 2010 second quarter HOLDINGS, INC. 13

14 Solid Balance Sheet No near-term maturities Completed prepayment of Term loan A in 3Q10 November, 2010 refinanced the ABL with market-leading terms Term loan B matures FY 2014 Covenant light Consolidated leverage ratio ~3.2x s (as 3/31/11) Lowered by almost 3 turns in four years Proven ability to operate with leverage Ample liquidity Strong cash flow ABL of $400 million (refinanced 11/10) HOLDINGS, INC. 14

15 Current Debt Structure Debt As of March 31, 2011 ($ In Millions) Amount 66% fixed / 34% variable Maturity Rate (Fiscal Year) ABL ($400mm) $0 Prime +1.25% to 1.75% or LIBOR +2.25% to 2.75% 2015 (1) Other % to 7% 2010 to 2014 Term Loan B Prime to 1.5% or Libor to 2.5% (2) 2014 Senior Notes % 2015 Senior Sub. Notes % 2017 Total Debt, excl cap leases $1,538.1 In Q211, paid down $60 million in debt (1) In November 2010 (fiscal year 2011) the Company replaced the ABL facility with a new ABL facility which has a 5-year maturity, contains substantially the same commitments for additional borrowing as the previous ABL facility and provides for interest at Prime plus 1.25% to 1.75% or LIBOR plus 2.25% to 2.75%. (2) $300 million fixed by Interest Rate Swaps which expire May 2012 HOLDINGS, INC. 15

16 Strategies for long-term growth Continue to build out organically Acquisitions both domestic and international Use capital & liquidity to build long-term shareholder value HOLDINGS, INC. 16

17 Appendix HOLDINGS, INC.

18 Reconciliations to non- GAAP Financial Measures HOLDINGS, INC.

19 Non-GAAP Financial Measures Reconciliations ($ in Millions) FY04 FY05 FY06 FY07 FY08 FY09 FY10 1Q11 2Q11 YTD11 Net Earnings $105.3 $116.5 $110.2 $44.5 $77.7 $99.1 $143.8 $40.9 $49.3 $90.2 Interest expense, net of interest income Provision for income taxes Depreciation and amortization Non-cash charge related to Alberto- Culver stock conversion Share-based compensation Transaction expenses 41.5 (1) 21.5 (2) Sales-based service fee charged by Alberto-Culver Adjusted EBITDA $247.3 $258.2 $293.8 $309.5 $341.7 $352.5 $404.9 $114.3 $122.9 $237.2 (1) Transaction expenses of $41.5 for termination of the Regis transaction. (2) Transaction expenses of $21.5 for separation of the Company from Alberto-Culver in November See Notes to Consolidated Financial Statements in the Company s annual report on Form 10-K for the fiscal years ended September 30, 2007 and HOLDINGS, INC. 19