10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED: DECEMBER 31, 2017

-OR-

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File No. 1-33145

SALLY BEAUTY HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

Delaware	36-2257936
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
3001 Colorado Boulevard
Denton, Texas	76210
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (940) 898-7500

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  ☒   No  ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes  ☒   No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
(Do not check if a smaller reporting company)		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.)  Yes  ☐     No  ☒

As of February 2, 2018, there were 125,102,746 shares of the issuer’s common stock outstanding.

TABLE OF CONTENTS

	Page
PART I — FINANCIAL INFORMATION
Item 1. Financial Statements	6
Item 2. Management’s Discussion And Analysis Of Financial Condition And Results Of Operations	26
Item 3. Quantitative And Qualitative Disclosures About Market Risk	33
Item 4. Controls And Procedures	33
PART II — OTHER INFORMATION
Item 1. Legal Proceedings	34
Item 1a. Risk Factors	34
Item 2. Unregistered Sales Of Equity Securities And Use Of Proceeds	34
Item 3. Defaults Upon Senior Securities	34
Item 4. Mine Safety Disclosures	34
Item 5. Other Information	34
Item 6. Exhibits	35

2

In this Quarterly Report, references to “the Company,” “Sally Beauty,” “our company,” “we,” “our,” “ours” and “us” refer to Sally Beauty Holdings, Inc. and its consolidated subsidiaries unless otherwise indicated or the context otherwise requires.

cautionary notice regarding forward-looking statements

Statements in this Quarterly Report on Form 10-Q and in the documents incorporated by reference herein which are not purely historical facts or which depend upon future events may constitute forward-looking 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, which we refer to as the Exchange Act. 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:

• anticipating and effectively responding to changes in consumer and professional stylist preferences and buying trends in a timely manner;

• the success of our strategic initiatives, including our store refresh program and increased marketing efforts, to enhance the customer experience, attract new customers, drive brand awareness and improve customer loyalty;

• our ability to efficiently manage and control our costs and the success of our cost control plans, including our recently implemented restructuring plans;

• our ability to implement our restructuring plans in various jurisdictions;

• our ability to manage the effects of our cost-reduction plans on our employees and other operations costs;

• charges related to the restructuring plans;

• possible changes in the size and components of the expected costs and charges associated with the restructuring plans;

• our ability to realize the anticipated cost savings from the restructuring plans within the anticipated time frame, if at all;

• the highly competitive nature of, and the increasing consolidation of, the beauty products distribution industry;

• the timing and acceptance of new product introductions;

• shifts in the mix of products sold during any period;

• 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;

• our dependence upon manufacturers who have developed or could develop their own distribution businesses which compete directly with ours;

• the possibility of material interruptions in the supply of products by our third‑party manufacturers or distributors or increases in the prices of the products we purchase from our third‑party manufacturers or distributors;

• products sold by us being found to be defective in labeling or content;

• compliance with current laws and regulations or becoming subject to additional or more stringent laws and regulations;

• the success of our e-commerce businesses;

• diversion of professional products sold by Beauty Systems Group to mass retailers or other unauthorized resellers;

• the operational and financial performance of our Armstrong McCall, L.P. franchise‑based business, which we refer to as Armstrong McCall;

• successfully identifying acquisition candidates and successfully completing desirable acquisitions;

• integrating acquired businesses;

• the success of our initiatives to expand into new geographies;

• the success of our existing stores, and our ability to increase sales at existing stores;

• opening and operating new stores profitably;

• the volume of traffic to our stores;

• the impact of the general economic conditions upon our business;

• the challenges of conducting business outside the United States;

• the impact of Britain’s decision to leave the European Union and related or other disruptive events in the United Kingdom, the European Union or other geographies in which we conduct business;

• rising labor and rental costs;

• protecting our intellectual property rights, particularly our trademarks;

3

• the risk that our products may infringe on the intellectual property rights of others;

• successfully updating and integrating our information technology systems;

• disruption in our information technology systems;

• a significant data security breach, including misappropriation of our customers’, employees’ or suppliers’ confidential information, and the potential costs related thereto;

• the negative impact on our reputation and loss of confidence of our customers, suppliers and others arising from a significant data security breach;

• the costs and diversion of management’s attention required to investigate and remediate a data security breach and to continuously upgrade our information technology security systems to address evolving cyber-security threats;

• the ultimate determination of the extent or scope of the potential liabilities relating to our past or any future data security incidents;

• our ability to attract and retain highly skilled management and other personnel;

• severe weather, natural disasters or acts of violence or terrorism;

• the preparedness of our accounting and other management systems to meet financial reporting and other requirements and the upgrade of our existing financial reporting system;

• being a holding company, with no operations of our own, and depending on our subsidiaries for our liquidity needs;

• our ability to execute and implement our share repurchase program;

• our substantial indebtedness;

• the possibility that we may incur substantial additional debt, including secured debt, in the future;

• 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 or refinancing our debt; and

• the costs and effects of litigation.

The events described in the forward-looking statements might not occur or might occur to a different extent or at a different time than we have described. As a result, our actual results may differ materially from the results contemplated by these forward-looking statements. We assume no obligation to publicly update or revise any forward-looking statements.

4

WHERE YOU CAN FIND MORE INFORMATION

Our quarterly financial results and other important information are available by calling our Investor Relations Department at (940) 297-3877.

We maintain a website at www.sallybeautyholdings.com where investors and other interested parties may obtain, free of charge, press releases and other information as well as gain access to our periodic filings with the Securities and Exchange Commission (“SEC”). The information contained on this website should not be considered to be a part of this or any other report filed with or furnished to the SEC.

5

PART I — FINANCIAL INFORMATION

Item 1.  Financial Statements.

The following consolidated balance sheets as of December 31, 2017 and September 30, 2017, and the consolidated statements of earnings, consolidated statements of comprehensive income and consolidated statements of cash flows for the three months ended December 31, 2017 and 2016 are those of Sally Beauty Holdings, Inc. and its subsidiaries.

6

SALLY BEAUTY HOLDINGS, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

(In thousands, except par value data)

	December 31, 2017			September 30, 2017
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	79,312		$	63,759
Trade accounts receivable, net		49,580			46,986
Accounts receivable, other		47,378			45,255
Inventory		941,146			930,855
Other current assets		46,259			55,223
Total current assets		1,163,675			1,142,078
Property and equipment, net of accumulated depreciation of $563,001 at    December 31, 2017 and $546,061 at September 30, 2017		306,421			313,717
Goodwill		544,418			537,791
Intangible assets, excluding goodwill, net of accumulated amortization of    $124,818 at December 31, 2017 and $121,550 at September 30, 2017		77,740			80,305
Other assets		21,067			25,116
Total assets	$	2,113,321		$	2,099,007
Liabilities and Stockholders’ Deficit
Current liabilities:
Current maturities of long-term debt	$	104,900		$	96,082
Accounts payable		306,270			307,752
Accrued liabilities		166,501			166,527
Income taxes payable		12,331			2,233
Total current liabilities		590,002			572,594
Long-term debt		1,771,299			1,771,853
Other liabilities		31,147			20,140
Deferred income tax liabilities, net		63,508			98,036
Total liabilities		2,455,956			2,462,623
Stockholders’ deficit:
Common stock, $0.01 par value. Authorized 500,000 shares; 126,166 and    129,710 shares issued and 125,799 and 129,585 shares outstanding at    December 31, 2017 and September 30, 2017, respectively		1,258			1,296
Preferred stock, $0.01 par value. Authorized 50,000 shares; none issued		—			—
Additional paid-in capital		—			—
Accumulated deficit		(260,999	)		(283,076	)
Accumulated other comprehensive loss, net of tax		(82,894	)		(81,836	)
Total stockholders’ deficit		(342,635	)		(363,616	)
Total liabilities and stockholders’ deficit	$	2,113,321		$	2,099,007

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

7

SALLY BEAUTY HOLDINGS, INC. AND SUBSIDIARIES

Consolidated Statements of Earnings

(In thousands, except per share data)

(Unaudited)

	Three Months Ended
	December 31,
	2017		2016
Net sales	$	994,964	$	999,609
Cost of goods sold		508,335		507,901
Gross profit		486,629		491,708
Selling, general and administrative expenses		371,286		374,251
Restructuring charges		5,210		—
Operating earnings		110,133		117,457
Interest expense		24,016		26,799
Earnings before provision for income taxes		86,117		90,658
Provision for income taxes		2,853		34,832
Net earnings	$	83,264	$	55,826
Earnings per share:
Basic	$	0.65	$	0.39
Diluted	$	0.65	$	0.39
Weighted average shares:
Basic		127,784		143,631
Diluted		128,645		144,860

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

8

SALLY BEAUTY HOLDINGS, INC. AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income

(In thousands)

(Unaudited)

	Three Months Ended
	December 31,
	2017			2016
Net earnings	$	83,264		$	55,826
Other comprehensive income (loss):
Foreign currency translation adjustments, net of tax		(255	)		(18,668	)
Interest rate caps:
Changes in fair value		(1,130	)		—
Income taxes related to changes in fair value		327			—
Other comprehensive income (loss), net of tax		(1,058	)		(18,668	)
Total comprehensive income	$	82,206		$	37,158

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

9

SALLY BEAUTY HOLDINGS, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

	Three Months Ended December 31,
	2017			2016
Cash Flows from Operating Activities:
Net earnings	$	83,264		$	55,826
Adjustments to reconcile net earnings to net cash provided by operating    activities:
Depreciation and amortization		27,090			26,839
Share-based compensation expense		3,111			3,814
Amortization of deferred financing costs		921			789
Deferred income taxes		(31,350	)		3,000
Changes in (exclusive of effects of acquisitions):
Trade accounts receivable		(2,427	)		2,181
Accounts receivable, other		(2,008	)		1,727
Inventory		(8,055	)		(9,358	)
Other current assets		9,105			12,255
Other assets		(290	)		(592	)
Accounts payable and accrued liabilities		3,764			(19,375	)
Income taxes payable		10,069			13,151
Other liabilities		11,010			(463	)
Net cash provided by operating activities		104,204			89,794
Cash Flows from Investing Activities:
Payments for property and equipment, net		(22,499	)		(28,008	)
Acquisitions, net of cash acquired		(9,175	)		—
Net cash used by investing activities		(31,674	)		(28,008	)
Cash Flows from Financing Activities:
Proceeds from issuance of long-term debt		126,505			58,500
Repayments of long-term debt		(119,067	)		(58,674	)
Payments for common stock repurchased		(64,612	)		(67,183	)
Proceeds from exercises of stock options		275			14,280
Net cash used by financing activities		(56,899	)		(53,077	)
Effect of foreign exchange rate changes on cash and cash equivalents		(78	)		(921	)
Net increase in cash and cash equivalents		15,553			7,788
Cash and cash equivalents, beginning of period		63,759			86,622
Cash and cash equivalents, end of period	$	79,312		$	94,410
Supplemental Cash Flow Information:
Interest paid	$	36,331		$	51,451
Income taxes paid	$	3,607		$	3,882
Capital expenditures incurred but not paid	$	2,486		$	1,672

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

10

Sally Beauty Holdings, Inc. and Subsidiaries

Condensed Notes to Consolidated Financial Statements

(Unaudited)

1.   Description of Business and Basis of Presentation

Description of Business

Sally Beauty Holdings, Inc. and its consolidated subsidiaries (“Sally Beauty” or “the Company” or “we”) sell professional beauty supplies through its Sally Beauty Supply (“SBS”) retail stores located in the U.S., Puerto Rico, Canada, Mexico, the United Kingdom, Ireland, Belgium, France, Germany, the Netherlands, Spain, Chile and Peru. Additionally, we distribute professional beauty products to salons and salon professionals through our Beauty Systems Group (“BSG”) store operations and a commissioned direct sales force that calls on salons primarily in the U.S. and Canada, and to franchises in the southern and southwestern regions of the U.S. and in Mexico through the operations of its subsidiary Armstrong McCall. A significant number of our products are also available through a number of SBS and BSG-operated websites. Certain beauty products sold by BSG and Armstrong McCall are sold under exclusive territory agreements with the third-party manufacturers.

Basis of Presentation

The accompanying condensed consolidated interim financial statements included herein have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) and pursuant to the rules and regulations of the SEC. Certain information and note disclosures normally included in annual financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to the rules and regulations of the SEC, although we believe that the disclosures made are adequate to make the information not misleading. These 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, 2017. All significant intercompany accounts and transactions have been eliminated in consolidation. In the opinion of management, these condensed consolidated 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, 2017 and September 30, 2017, and our consolidated results of operations, consolidated comprehensive income and consolidated cash flows for the three months ended December 31, 2017 and 2016.

The condensed consolidated interim financial statements included herein have been prepared on a going concern basis of accounting. Each quarter, management evaluates, based on relevant conditions and events, our ability to continue as a going concern for at least one year from the date our financial statements are issued. Based on management’s assessment, we have concluded that substantial doubt about our ability to continue as a going concern does not exist as of the date the condensed consolidated interim financial statements included herein were issued.

Certain amounts for the prior fiscal periods have been reclassified to conform to the current fiscal period presentation, in connection with the retroactive adoption of two new accounting pronouncements in the current interim period. Please see Note 3 below for additional information.

2.   Significant Accounting Policies

We adhere to the same accounting policies in the preparation of our interim consolidated financial statements as we do in the preparation of our full-year consolidated financial statements. As permitted under GAAP, interim accounting for certain expenses, including income taxes, is based on full-year assumptions. For interim financial reporting purposes, income taxes are recorded based upon estimated annual effective income tax rates.

3.   Accounting Changes and Recent Accounting Pronouncements

Accounting Changes

In November 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Income Taxes, which requires that deferred tax assets, net of related valuation allowances, and deferred tax liabilities be reported as noncurrent in a classified balance sheet. We adopted the new standard retrospectively effective October 1, 2017. Accordingly, the adoption of ASU No. 2015-17 resulted in a decrease in current deferred income tax assets of $28.4 million, a decrease in current deferred income tax liabilities, included in accrued liabilities, of $2.0 million, a net increase in noncurrent deferred income tax assets, included in other assets, of $4.3 million and a net decrease in noncurrent deferred income tax liabilities of $22.1 million in our consolidated balance sheet as of September 30, 2017.

In March 2016, the FASB issued ASU No. 2016-09, Improvements to Employee Share-Based Payment Accounting, which amended several aspects of how share-based compensation is recorded and reported on the financial statements. For example, the new guidance will require that all the income tax effect related to share-based payments be recorded in income tax expense. We adopted these amendments effective October 1, 2017. In connection with this accounting change, we have elected to recognize share-based

11

Sally Beauty Holdings, Inc. and Subsidiaries

Condensed Notes to Consolidated Financial Statements

(Unaudited)

compensation award forfeitures when they occur. Prior to the change, we recognized forfeitures based on the estimated number of awards expected to vest. As allowed, we elected to adopt retrospectively the amendment requiring that excess tax benefits (shortfalls) be reported in cash flows from operating activities in our consolidated statements of cash flows. The adoption of the amendments contained in ASU No. 2016-09 did not have a material impact on our consolidated financial statements.

Recent Accounting Pronouncements

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, which will supersede Accounting Standards Codification (“ASC”) Topic 605, Revenue Recognition. A core principle of the new guidance is that an entity should measure revenue in connection with its sale of goods and services to a customer based on the consideration to which the entity expects to be entitled in exchange for each of those goods and services. The new standard must be adopted using either the retrospective or cumulative effect transition method. For public companies, this amendment is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. Early adoption is permitted. We have not yet selected a transition method. We have not yet adopted this accounting pronouncement and we do not believe, based on our assessment, that adoption will have a material effect on our consolidated results of operations and consolidated financial position. We are currently assessing the disclosure requirements contained in the new standard and anticipate being compliant with the additional disclosures about our revenue recognition practices required by the new standard.

In February 2016, the FASB issued ASU No. 2016-02, Leases, which will require most leases to be reported on the balance sheet as a right-of-use asset and a lease liability. Under the new guidance, the lease liability must be measured initially based on the present value of future lease payments, subject to certain conditions. The right-of-use asset must be measured initially based on the amount of the liability, plus certain initial direct costs. The new guidance further requires that leases be classified at inception as either (a) operating leases or (b) finance leases. For operating leases, periodic expense will generally be flat (straight-line) throughout the life of the lease. For finance leases, periodic expense will decline (similar to capital leases under prior rules) over the life of the lease. The new standard must be adopted using a modified retrospective transition method. For public companies, this standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted. We have not yet adopted this accounting pronouncement. We have completed a preliminary assessment of the potential impact of adopting ASU No. 2016-02 on our consolidated financial statements. At December 31, 2017, adoption of ASU No. 2016-02 would have resulted in recognition of a right-of-use asset in the estimated amount of approximately $600.0 million and a lease liability for a similar amount in our consolidated balance sheet. We do not believe adoption of ASU No. 2016-02 will have a material impact on our earnings or cash flows. The amount of the right-of-use asset and the lease liability we ultimately recognize may materially differ from this preliminary estimate, including as a result of future organic growth in our business and potential acquisitions.

In August 2017, the FASB issued ASU No. 2017-12, Derivatives and Hedging (Topic 815), Targeted Improvements to Accounting for Hedging Activities, which is intended to better align an entity’s risk management activities and its financial reporting for hedging relationships. ASU No. 2017-12 will change both the designation and measurement guidance for a qualifying hedging relationship and the presentation of the impact of the hedging relationship on the entity’s financial statements. In addition, ASU No. 2017-12 contains targeted improvements to ease the application of current guidance related to the assessment of hedge effectiveness and eliminates the requirement for an entity to separately measure and report hedge ineffectiveness. For public companies, these amendments are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted. We have not yet adopted the accounting pronouncement and do not believe, based on our preliminary assessment, that adoption will have a material effect on our consolidated financial statements.

4.   Fair Value Measurements

Our financial instruments consist of cash equivalents, if any, trade and other accounts receivable, accounts payable, derivative instruments, including foreign exchange contracts and interest rate caps, and debt. The carrying amounts of cash equivalents, if any, trade and other accounts receivable and accounts payable approximate their respective fair values due to the short-term nature of these financial instruments.

We measure on a recurring basis and disclose the fair value of our financial instruments under the provisions of ASC Topic 820, Fair Value Measurement, as amended (“ASC 820”). We define “fair value” as the price that would be received to sell an asset or paid to transfer a liability (i.e., the exit price) in an orderly transaction between market participants at the measurement date. ASC 820 establishes a three-level hierarchy for measuring fair value. This valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability on the measurement date.

12

Sally Beauty Holdings, Inc. and Subsidiaries

Condensed Notes to Consolidated Financial Statements

(Unaudited)

Consistent withthis hierarchy, we categorized our financial assets and liabilities as follows (in thousands):

	As of December 31, 2017
	Total		Level 1		Level 2		Level 3
Assets
Foreign exchange contracts	$	572	$	—	$	572	$	—
Interest rate caps		4,048		—		4,048		—
Total assets	$	4,620	$	—	$	4,620	$	—
Liabilities
Long-term debt	$	1,893,765	$	946,300	$	947,465	$	—
Foreign exchange contracts		—		—		—		—
Total liabilities	$	1,893,765	$	946,300	$	947,465	$	—

	As of September 30, 2017
	Total		Level 1		Level 2		Level 3
Assets
Foreign exchange contracts	$	779	$	—	$	779	$	—
Interest rate caps		5,178		—		5,178		—
Total assets	$	5,957	$	—	$	5,957	$	—
Liabilities
Long-term debt	$	1,919,930	$	973,750	$	946,180	$	—
Foreign exchange contracts		207		—		207		—
Total liabilities	$	1,920,137	$	973,750	$	946,387	$	—

Long-term debt, including current maturities and borrowings under the asset-based senior secured loan facility (the “ABL facility”), if any, is carried in our consolidated financial statements at amortized cost of $1,895.0 million at December 31, 2017 and $1,887.4 million at September 30, 2017, less unamortized debt issuance costs of $18.8 million at December 31, 2017 and $19.4 million at September 30, 2017. Our senior notes are valued for purposes of the disclosure above using unadjusted quoted market prices for such debt securities. Our term loan B is generally valued for purposes of the disclosure above using quoted market prices for similar debt securities in active markets. Other long-term debt (consisting primarily of borrowings under the ABL facility, if any, and capital lease obligations) is generally valued for purposes of the disclosure above using widely accepted valuation techniques, such as discounted cash flow analyses, using observable inputs, such as market interest rates.

5.   Accumulated Stockholders’ Deficit

In August 2017, we announced that our Board of Directors approved a share repurchase program authorizing the Company to repurchase up to $1.0 billion of its common stock over an approximate four-year period expiring on September 30, 2021 (the “2017 Share Repurchase Program”) and terminated our similar share repurchase program approved by our Board in 2014 (the “2014 Share Repurchase Program”). During the three months ended December 31, 2017 and 2016, we repurchased and subsequently retired approximately 3.8 million and 2.5 million shares of our common stock at an aggregate cost of $64.5 million and $67.0 million under the 2017 Share Repurchase Program and the 2014 Share Repurchase Program, respectively. We reduced common stock and additional paid-in capital, in the aggregate, by these amounts. However, as required by GAAP, to the extent that share repurchase amounts exceeded the balance of additional paid-in capital prior to our recording of such repurchases, we recorded the excess in accumulated deficit. We funded these share repurchases with cash from operations and borrowings under the ABL facility.

The change in accumulated other comprehensive loss (“AOCL”) was as follows (in thousands):

	Foreign Currency Translation Adjustments			Interest Rate Caps			Total
Balance at September 30, 2017	$	(80,752	)	$	(1,084	)	$	(81,836	)
Other comprehensive loss before reclassification, net of tax		(255	)		(803	)		(1,058	)
Balance at December 31, 2017	$	(81,007	)	$	(1,887	)	$	(82,894	)

13

Sally Beauty Holdings, Inc. and Subsidiaries

Condensed Notes to Consolidated Financial Statements

(Unaudited)

6.   Earnings Per Share

The following table sets forth the computations of basic and diluted earnings per share (in thousands, except per share data):

	Three Months Ended December 31,
	2017		2016
Net earnings	$	83,264	$	55,826
Weighted average basic shares		127,784		143,631
Dilutive securities:
Stock option and stock award programs		861		1,229
Weighted average diluted shares		128,645		144,860
Earnings per share:
Basic	$	0.65	$	0.39
Diluted	$	0.65	$	0.39

At December 31, 2017 and 2016, options to purchase 5,802,107 shares and 2,457,972 shares, respectively, of our common stock were outstanding but not included in our computations of diluted earnings per share, because these options were anti-dilutive. An anti-dilutive option is an option that is: (a) out-of-the-money (an option with an exercise price which is greater than the average price per share of our common stock during the period), and (b) in-the-money (an option with an exercise price which is less than the average price per share of our common stock during the period) for which the sum of assumed proceeds, including any unrecognized compensation expense related to such option, exceeds the average price per share for the period.

7.   Share-Based Payments

Performance-Based Awards

The following table presents a summary of the activity for our performance unit awards assuming 100% payout:

Performance Unit Awards	Number of Shares (inThousands)			Weighted AverageFair Value Per Share		Weighted Average Remaining Vesting Term (in Years)
Unvested at September 30, 2017		197		$	24.50		1.5
Granted		215			17.42
Vested		—			—
Forfeited		(6	)		24.55
Unvested at December 31, 2017		406		$	20.76		2.0

14

Sally Beauty Holdings, Inc. and Subsidiaries

Condensed Notes to Consolidated Financial Statements

(Unaudited)

Service-Based Awards

The following table presents a summary of the activity for our stock option awards:

	Number of Outstanding Options (inThousands)			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in Years)		Aggregate Intrinsic Value (in Thousands)
Outstanding at September 30, 2017		5,211		$	24.12		5.6	$	3,867
Granted		1,122			17.42
Exercised		(26	)		10.52
Forfeited or expired		(145	)		24.73
Outstanding at December 31, 2017		6,162		$	22.94		6.1	$	4,732
Exercisable at December 31, 2017		3,658		$	23.61		4.6	$	3,229

The following table presents a summary of the activity for our Restricted Stock Awards:

Restricted Stock Awards	Number of Shares (in Thousands)			Weighted Average Fair Value Per Share		Weighted Average Remaining Vesting Term (in Years)
Unvested at September 30, 2017		125		$	26.00		1.3
Granted		264			17.42
Vested		(23	)		24.18
Forfeited		—			—
Unvested at December 31, 2017		366		$	19.94		2.7

The following table presents a summary of the activity for our Restricted Stock Units:

Restricted Stock Units	Number of Shares (in Thousands)			Weighted Average Fair Value Per Share		Weighted Average Remaining Vesting Term (in Years)
Unvested at September 30, 2017		—		$	—		—
Granted		72			17.42
Vested		—			—
Forfeited		(7	)		17.42
Unvested at December 31, 2017		65		$	17.42		0.7

8.   Commitments and Contingencies

During the fiscal year 2014, we disclosed that we had experienced a data security incident (the “2014 data security incident”). During the fiscal year 2015, we disclosed that we had experienced a second data security incident (the “2015 data security incident” and, together with the 2014 data security incident, the “data security incidents”). The costs that we have incurred to date in connection with the data security incidents include assessments by payment card networks, professional advisory fees and legal fees relating to investigating and remediating the data security incidents. In April 2017, we entered into agreements pursuant to which all existing claims and assessments by certain payment card networks were settled. We cannot provide any assurances regarding whether assessments by other payment card networks will be received.

We expect to incur additional costs and expenses related to the data security incidents in the future. These costs and expenses may result from potential additional liabilities to other payment card networks, governmental or third party investigations, proceedings or litigation and legal and other fees necessary to defend against any potential liabilities or claims, and further investigatory and

15

Sally Beauty Holdings, Inc. and Subsidiaries

Condensed Notes to Consolidated Financial Statements

(Unaudited)

remediation costs. While we do not anticipate these additional costs and expenses or liabilities would have a material adverse impact on our business, financial condition and operating results, these additional costs and expenses could be significant.

9.   Short-term Borrowings and Long-term Debt

Our debt outstanding at December 31, 2017 was not materially different from that at September 31, 2017. At December 31, 2017, we have $381.3 million available for borrowing under the ABL facility, including the Canadian sub-facility. At December 31, 2017, we are in compliance with the agreements and instruments governing our debt, including our financial covenants.

10.    Derivative Instruments and Hedging Activities

During the three months ended December 31, 2017, we did not purchase or hold any derivative instruments for trading or speculative purposes.

Designated Cash Flow Hedges

In July 2017, we purchased two interest rate caps with an initial aggregate notional amount of $550 million (the “interest rate caps”). The interest rate caps expire on June 30, 2023 and are designated and qualifying as cash flow hedges.

Non-designated Cash Flow Hedges

At December 31, 2017, we held foreign currency forward contracts with an aggregate notional amount of $100.6 million based upon exchange rates at December 31, 2017. These derivative instruments expire at various dates though September 30, 2018.

The table below presents the fair value of our derivative financial instruments as well as their classification on our consolidated balance sheets (in thousands):

	Asset Derivatives					Liability Derivatives
	Classification	December 31, 2017		September 30, 2017		Classification	December 31, 2017		September 30, 2017
Derivatives designated as hedging   instruments:
Interest rate caps	Other current assets	$	4,048	$	5,178	N/A	$	—	$	—
Derivatives not designated as hedging    instruments:
Foreign exchange contracts	Other current assets		572		779	Accrued liabilities		—		207
		$	4,620	$	5,957		$	—	$	207

The effect of our derivative financial instruments on our consolidated statements of earnings was not material for the three months ended December 31, 2017 and 2016.

11. Income Taxes

On December 22, 2017, the U.S. enacted comprehensive amendments to the Internal Revenue Code of 1986 (“U.S. Tax Reform”). Among other things, U.S. Tax Reform (a) reduces the federal statutory tax rate for corporate taxpayers, (b) provides for a deemed repatriation of undistributed foreign earnings by U.S. taxpayers and makes other fundamental changes on how foreign earnings will be taxed by the U.S. and (c) otherwise modifies corporate tax rules in significant ways. In accordance with ASC Topic No. 740, Income Taxes, entities must revalue their deferred income taxes considering the new tax rates and recognize any impact of the deemed repatriation of undistributed foreign earnings on their financial statements based on the enacted tax law.

In December 2017, the SEC provided guidance allowing registrants to record provisional amounts, during a specified measurement period, when the necessary information is not available, prepared or analyzed in reasonable detail to account for the impact of U.S. Tax Reform. Accordingly, we have reported the revaluation of deferred income taxes and the impact of the deemed repatriation on our consolidated financial statements based on provisional amounts. Specifically, in the three months ended December 31, 2017, we recognized a provisional income tax benefit of $33.6 million in connection with the revaluation of our deferred income tax assets and

16

Sally Beauty Holdings, Inc. and Subsidiaries

Condensed Notes to Consolidated Financial Statements

(Unaudited)

liabilities, and a provisional income tax charge of $11.4 million for federal and state income taxes, including $10.4 million payable beyond one year,related to accumulated but undistributed earnings of our foreign operations.

For the fiscal year ending September 30, 2018, our U.S. federal statutory tax rate will be 24.5% and, for fiscal years after that, 21.0%. Among the factors that could affect the accuracy of our provisional amounts is uncertainty about the statutory tax rate applicable to our deferred income tax assets and liabilities, since the actual rate will be dependent on the timing of realization or settlement of such assets and liabilities. At December 31, 2017, we estimated the dates when such realization or settlement would occur. The actual dates when such realization or settlement occurs may be significantly different from our estimates, which could result in the ultimate revaluation of our deferred income taxes to be different from our provisional amounts. In addition, there is uncertainty about the impact of expected Internal Revenue Service (IRS) guidance intended to interpret the most complex provisions of U.S. Tax Reform. Our liability for federal and state income taxes applicable to undistributed earnings of our foreign operations may be materially different from our provisional amount as a result of such future IRS guidance and interpretation and in connection with estimates related to the amount of undistributed foreign earnings and cash balances.

We are currently assessing the potential additional impact of U.S. Tax Reform on our business and consolidated financial statements, and expect to complete such assessment on or before September 30, 2018.

The difference between our U.S. federal statutory income tax rate and our effective income tax rate is summarized below:

	Three Months Ended December 31, 2017
U.S. federal statutory income tax rate	24.5	%
State income taxes, net of federal tax benefit	3.2
Effect of foreign operations	0.8
Deferred tax revaluation	(39.1)
Deemed repatriation tax	13.3
Other, net	0.6
Effective tax rate	3.3	%

12.   Business Segments

Our business is organized into two operating and reporting segments: (i) SBS, a domestic and international chain of retail stores and a consumer-facing e-commerce website that offers professional beauty supplies to both salon professionals and retail customers in North America, Puerto Rico, and parts of Europe and South America and (ii) BSG, including its franchise-based business Armstrong McCall, a full service distributor of beauty products and supplies that offers professional beauty products directly to salons and salon professionals through its professional-only stores, e-commerce websites and its own sales force in partially exclusive geographical territories in North America.

The accounting policies of both of our reportable segments are the same as described in the summary of significant accounting policies contained in Note 2 of the “Notes to Consolidated Financial Statements” in “Item 8 - Financial Statements and Supplementary Data” contained in our Annual Report on Form 10-K for the fiscal year ended September 30, 2017. Sales between segments, which are eliminated in consolidation, were not material during the three months ended December 31, 2017 and 2016.

17

Sally Beauty Holdings, Inc. and Subsidiaries

Condensed Notes to Consolidated Financial Statements

(Unaudited)

Segment data for the three months ended December 31, 2017 and 2016 is as follows (in thousands):

	Three Months Ended December 31,
	2017			2016
Net sales:
SBS	$	585,574		$	589,859
BSG		409,390			409,750
Total	$	994,964		$	999,609
Earnings before provision for income taxes:
Segment operating earnings:
SBS	$	86,594		$	92,526
BSG		64,565			63,600
Segment operating earnings		151,159			156,126
Unallocated expenses		(35,816	)		(38,669	)
Restructuring charges		(5,210	)		—
Consolidated operating earnings		110,133			117,457
Interest expense		(24,016	)		(26,799	)
Earnings before provision for income taxes	$	86,117		$	90,658

13.   Parent, Issuers, Guarantor and Non-Guarantor Condensed Consolidating Financial Statements

The following consolidating financial information presents the condensed consolidating balance sheets as of December 31, 2017 and September 30, 2017, the related condensed consolidating statements of earnings and comprehensive income and the condensed consolidating statements of cash flows for the three months ended December 31, 2017 and 2016 of: (i) Sally Beauty Holdings, Inc., or the “Parent;” (ii) Sally Holdings and Sally Capital Inc. (iii) the guarantor subsidiaries; (iv) the non-guarantor subsidiaries; (v) elimination entries necessary for consolidation purposes; and (vi) Sally Beauty on a condensed consolidated basis.

Investments in subsidiaries are accounted for using the equity method for purposes of the consolidating presentation. The principal elimination entries relate to investments in subsidiaries and intercompany balances and transactions. Separate financial statements and other disclosures with respect to the subsidiary guarantors have not been provided because we believe the following information is sufficient since the guarantor subsidiaries are 100% indirectly owned by the Parent and all guarantees are full and unconditional.

18

Sally Beauty Holdings, Inc. and Subsidiaries

Condensed Notes to Consolidated Financial Statements

(Unaudited)

Condensed Consolidating Balance Sheet

December 31, 2017

(In thousands)

	Parent			Sally HoldingsLLC and Sally Capital Inc.		Guarantor Subsidiaries			Non- Guarantor Subsidiaries		Consolidating Eliminations			SallyBeauty Holdings, Inc. and Subsidiaries
Assets
Cash and cash equivalents	$	—		$	10	$	31,839		$	47,463	$	—		$	79,312
Trade and other accounts receivable, net		—			—		64,152			32,806		—			96,958
Due from affiliates		—			—		2,360,280			—		(2,360,280	)		—
Inventory		—			—		714,682			226,464		—			941,146
Other current assets		1,280			817		27,856			16,306		—			46,259
Property and equipment, net		11			—		225,891			80,519		—			306,421
Investment in subsidiaries		1,195,373			3,820,552		374,002			—		(5,389,927	)		—
Goodwill and other intangible assets, net		—			—		465,755			156,403		—			622,158
Other assets		1,050			7,171		(7,852	)		20,698		—			21,067
Total assets	$	1,197,714		$	3,828,550	$	4,256,605		$	580,659	$	(7,750,207	)	$	2,113,321
Liabilities and Stockholders’ (Deficit) Equity
Accounts payable	$	36		$	—	$	234,878		$	71,356	$	—		$	306,270
Due to affiliates		1,519,033			750,442		—			90,805		(2,360,280	)		—
Accrued liabilities		362			6,170		125,852			34,117		—			166,501
Income taxes payable		10,566			1,678		—			87		—			12,331
Long-term debt		—			1,874,887		4			1,308		—			1,876,199
Other liabilities		10,371			—		17,027			3,749		—			31,147
Deferred income tax liabilities, net		(19	)		—		58,292			5,235		—			63,508
Total liabilities		1,540,349			2,633,177		436,053			206,657		(2,360,280	)		2,455,956
Total stockholders’ (deficit) equity		(342,635	)		1,195,373		3,820,552			374,002		(5,389,927	)		(342,635	)
Total liabilities and stockholders’ (deficit) equity	$	1,197,714		$	3,828,550	$	4,256,605		$	580,659	$	(7,750,207	)	$	2,113,321

19

Sally Beauty Holdings, Inc. and Subsidiaries

Condensed Notes to Consolidated Financial Statements

(Unaudited)

Condensed Consolidating Balance Sheet

September 30, 2017

(In thousands)

	Parent			Sally Holdings LLC and Sally Capital Inc.		Guarantor Subsidiaries			Non- Guarantor Subsidiaries		Consolidating Eliminations			Sally Beauty Holdings, Inc. and Subsidiaries
Assets
Cash and cash equivalents	$	—		$	10	$	22,090		$	41,659	$	—		$	63,759
Trade and other accounts receivable, net		200			—		59,992			32,049		—			92,241
Due from affiliates		—			—		2,289,371			—		(2,289,371	)		—
Inventory		—			—		709,890			220,965		—			930,855
Other current assets		11,763			813		26,144			16,503		—			55,223
Property and equipment, net		12			—		230,069			83,636		—			313,717
Investment in subsidiaries		1,110,891			3,717,999		386,681			—		(5,215,571	)		—
Goodwill and other intangible assets, net		—			—		468,118			149,978		—			618,096
Other assets		1,538			8,116		(7,837	)		23,299		—			25,116
Total assets	$	1,124,404		$	3,726,938	$	4,184,518		$	568,089	$	(7,504,942	)	$	2,099,007
Liabilities and Stockholders’ (Deficit) Equity
Accounts payable	$	251		$	4	$	243,818		$	63,679	$	—		$	307,752
Due to affiliates		1,487,484			727,856		—			74,031		(2,289,371	)		—
Accrued liabilities		285			20,108		113,628			32,506		—			166,527
Income taxes payable		—			1,624		—			609		—			2,233
Long-term debt		—			1,866,455		1			1,479		—			1,867,935
Other liabilities		—			—		16,008			4,132		—			20,140
Deferred income tax liabilities, net		—			—		93,064			4,972		—			98,036
Total liabilities		1,488,020			2,616,047		466,519			181,408		(2,289,371	)		2,462,623
Total stockholders’ (deficit) equity		(363,616	)		1,110,891		3,717,999			386,681		(5,215,571	)		(363,616	)
Total liabilities and stockholders’ (deficit) equity	$	1,124,404		$	3,726,938	$	4,184,518		$	568,089	$	(7,504,942	)	$	2,099,007

20

Sally Beauty Holdings, Inc. and Subsidiaries

Condensed Notes to Consolidated Financial Statements

(Unaudited)

Condensed Consolidating Statement of Earnings and Comprehensive Income

Three Months Ended December 31, 2017

(In thousands)

	Parent			Sally Holdings LLC and Sally Capital Inc.			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Consolidating Eliminations			Sally Beauty Holdings, Inc. and Subsidiaries
Net sales	$	—		$	—		$	796,532		$	198,432		$	—		$	994,964
Related party sales		—			—			446			—			(446	)		—
Cost of products sold and distribution expenses		—			—			403,810			104,971			(446	)		508,335
Gross profit		—			—			393,168			93,461			—			486,629
Selling, general and administrative expenses		2,606			179			284,467			84,034			—			371,286
Restructuring charges		—			—			5,210			—			—			5,210
Operating earnings (loss)		(2,606	)		(179	)		103,491			9,427			—			110,133
Interest expense		—			24,014			—			2			—			24,016
Earnings (loss) before provision for income taxes		(2,606	)		(24,193	)		103,491			9,425			—			86,117
Provision (benefit) for income taxes		(251	)		(6,925	)		(7,915	)		17,944			—			2,853
Equity in earnings of subsidiaries, net of tax		85,619			102,887			(8,519	)		—			(179,987	)		—
Net earnings (loss)		83,264			85,619			102,887			(8,519	)		(179,987	)		83,264
Other comprehensive loss, net of tax		—			(803	)		—			(255	)		—			(1,058	)
Total comprehensive income (loss)	$	83,264		$	84,816		$	102,887		$	(8,774	)	$	(179,987	)	$	82,206

21

Sally Beauty Holdings, Inc. and Subsidiaries

Condensed Notes to Consolidated Financial Statements

(Unaudited)

Condensed Consolidating Statement of Earnings and Comprehensive Income

Three Months Ended December 31, 2016

(In thousands)

	Parent			Sally Holdings LLC and Sally Capital Inc.			Guarantor Subsidiaries		Non- Guarantor Subsidiaries			Consolidating Eliminations			Sally Beauty Holdings, Inc. and Subsidiaries
Net sales	$	—		$	—		$	816,051	$	183,558		$	—		$	999,609
Related party sales		—			—			748		—			(748	)		—
Cost of products sold and distribution expenses		—			—			411,323		97,326			(748	)		507,901
Gross profit		—			—			405,476		86,232			—			491,708
Selling, general and administrative expenses		2,549			137			296,724		74,841			—			374,251
Operating earnings (loss)		(2,549	)		(137	)		108,752		11,391			—			117,457
Interest expense		—			26,749			—		50			—			26,799
Earnings (loss) before provision for income taxes		(2,549	)		(26,886	)		108,752		11,341			—			90,658
Provision (benefit) for income taxes		(990	)		(10,443	)		41,998		4,267			—			34,832
Equity in earnings of subsidiaries, net of tax		57,385			73,828			7,074		—			(138,287	)		—
Net earnings		55,826			57,385			73,828		7,074			(138,287	)		55,826
Other comprehensive loss, net of tax		—			—			—		(18,668	)		—			(18,668	)
Total comprehensive income (loss)	$	55,826		$	57,385		$	73,828	$	(11,594	)	$	(138,287	)	$	37,158

22

Sally Beauty Holdings, Inc. and Subsidiaries

Condensed Notes to Consolidated Financial Statements

(Unaudited)

Condensed Consolidating Statement of Cash Flows

Three Months Ended December 31, 2017

(In thousands)

	Parent			Sally Holdings LLC and Sally Capital Inc.			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Consolidating Eliminations			Sally Beauty Holdings, Inc. and Subsidiaries
Net cash provided (used) by operating activities	$	32,788		$	(30,211	)	$	100,319		$	1,308		$	—		$	104,204
Cash Flows from Investing Activities:
Payments for property and equipment, net		—			—			(19,664	)		(2,835	)		—			(22,499	)
Acquisitions, net of cash acquired		—			—			—			(9,175	)		—			(9,175	)
Due from affiliates		—			—			(70,909	)		—			70,909			—
Net cash used by investing activities		—			—			(90,573	)		(12,010	)		70,909			(31,674	)
Cash Flows from Financing Activities:
Proceeds from issuance of long-term debt		—			126,500			5			—			—			126,505
Repayments of long-term debt		—			(118,875	)		(2	)		(190	)		—			(119,067	)
Repurchases of common stock		(64,612	)		—			—			—			—			(64,612	)
Proceeds from exercises of stock options		275			—			—			—			—			275
Due to affiliates		31,549			22,586			—			16,774			(70,909	)		—
Net cash (used) provided by financing activities		(32,788	)		30,211			3			16,584			(70,909	)		(56,899	)
Effect of foreign exchange rate changes on cash and    cash equivalents		—			—			—			(78	)		—			(78	)
Net increase in cash and cash equivalents		—			—			9,749			5,804			—			15,553
Cash and cash equivalents, beginning of period		—			10			22,090			41,659			—			63,759
Cash and cash equivalents, end of period	$	—		$	10		$	31,839		$	47,463		$	—		$	79,312

23

Sally Beauty Holdings, Inc. and Subsidiaries

Condensed Notes to Consolidated Financial Statements

(Unaudited)

Condensed Consolidating Statement of Cash Flows

Three Months Ended December 31, 2016

(In thousands)

	Parent			Sally Holdings LLC and Sally Capital Inc.			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Consolidating Eliminations			Sally Beauty Holdings, Inc. and Subsidiaries
Net cash provided (used) by operating activities	$	27,303		$	(41,347	)	$	104,449		$	(611	)	$	—		$	89,794
Cash Flows from Investing Activities:
Payments for property and equipment, net		—			—			(20,883	)		(7,125	)		—			(28,008	)
Due from affiliates		—			—			(68,741	)		—			68,741			—
Net cash used by investing activities		—			—			(89,624	)		(7,125	)		68,741			(28,008	)
Cash Flows from Financing Activities:
Proceeds from issuance of long-term debt		—			58,500			—			—			—			58,500
Repayments of long-term debt		—			(58,500	)		(4	)		(170	)		—			(58,674	)
Repurchases of common stock		(67,183	)		—			—			—			—			(67,183	)
Proceeds from exercises of stock options		14,280			—			—			—			—			14,280
Due to affiliates		25,600			31,418			—			11,723			(68,741	)		—
Net cash (used) provided by financing activities		(27,303	)		31,418			(4	)		11,553			(68,741	)		(53,077	)
Effect of foreign exchange rate changes on cash and    cash equivalents		—			—			—			(921	)		—			(921	)
Net (decrease) increase in cash and cash equivalents		—			(9,929	)		14,821			2,896			—			7,788
Cash and cash equivalents, beginning of period		—			28,372			22,368			35,882			—			86,622
Cash and cash equivalents, end of period	$	—		$	18,443		$	37,189		$	38,778		$	—		$	94,410

24

Sally Beauty Holdings, Inc. and Subsidiaries

Condensed Notes to Consolidated Financial Statements

(Unaudited)

14.   Restructuring Plans

2017 Restructuring Plan

In January 2017, our Board of Directors approved a comprehensive restructuring plan (the “2017 Restructuring Plan”) for our businesses that included a number of organizational efficiency initiatives and other cost reduction opportunities. The 2017 Restructuring Plan comprised the closure of four administrative offices in the U.S. and Canada, reductions in both salaried and hourly workforce and certain other cost reduction activities. At September 30, 2017, the initiatives contemplated by the 2017 Restructuring Plan were substantially completed.

The liability related to the 2017 Restructuring Plan, which is included in accrued liabilities in our consolidated balance sheets, is as follows (in thousands):

Restructuring Activity	Liability at September 30, 2017		Expenses		Expenses Paid or Otherwise Settled		Adjustments		Liability at December 31, 2017
Workforce reductions	$	1,860	$	—	$	1,072	$	—	$	788
Facility closures		1,747		—		781		—		966
Other		235		—		235		—		—
Total	$	3,842	$	—	$	2,088	$	—	$	1,754

2018 Restructuring Plan

In November 2017, our Board approved a restructuring plan (the “2018 Restructuring Plan”) focused primarily on significantly improving the profitability of our international businesses, with particular focus on our European operations. We estimate that we will incur total aggregate charges of approximately $13 million to $14 million related primarily to potential employee separation costs. We anticipate substantially completing the 2018 Restructuring Plan in the fiscal year 2018.

The liability related to the 2018 Restructuring Plan, which is included in accrued liabilities in our consolidated balance sheets, is as follows (in thousands):

Restructuring Activity	Liability at September 30, 2017		Expenses		Expenses Paid or Otherwise Settled		Adjustments		Liability at December 31, 2017
Workforce reductions	$	—	$	4,260	$	3,376	$	—	$	884
Other		—		950		328		—		622
Total	$	—	$	5,210	$	3,704	$	—	$	1,506

Expenses incurred in the three months ended December 31, 2017 represent costs incurred by SBS ($4.5 million) and corporate ($0.7 million).

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Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

This section discusses management’s view of the financial condition, results of operations and cash flows of Sally Beauty. This section should be read in conjunction with the information contained in our Annual Report on Form 10-K for the fiscal year ended September 30, 2017, including the Risk Factors section, and information contained elsewhere in this Quarterly Report, including the interim condensed consolidated financial statements and condensed notes to those financial statements. 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,” included at the beginning of this Quarterly Report 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.

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.

Highlights for the Three Months Ended December 31, 2017:

• Consolidated net sales for the three months ended December 31, 2017, decreased $4.6 million, or 0.5%, to $995.0 million, compared to the three months ended December 31, 2016;

• Consolidated net sales from company-operated stores that have been open for 14 months or longer, which we refer to as same store sales, decreased 2.2% for the three months ended December 31, 2017, compared to an increase of 0.4% for the three months ended December 31, 2016;

• Consolidated gross profit for the three months ended December 31, 2017 decreased $5.1 million, or 1.0%, to $486.6 million compared to the three months ended December 31, 2016. Gross margin decreased 30 basis points to 48.9% for the three months ended December 31, 2017, compared to the three months ended December 31, 2016;

• During the three months ended December 31, 2017, we incurred approximately $5.2 million in expenses, including severance and related expenses of $4.3 million and other costs of $0.9 million, in connection with the 2018 Restructuring Plan announced in November 2017;

• Consolidated operating earnings for the three months ended December 31, 2017 decreased $7.3 million, or 6.2%, to $110.1 million compared to the three months ended December 31, 2016. Operating margin decreased 70 basis points to 11.1% for the three months ended December 31, 2017, compared to the three months ended December 31, 2016;

• Consolidated net earnings increased $27.4 million, or 49.1%, to $83.3 million for the three months ended December 31, 2017 compared to the three months ended December 31, 2016. As a percentage of net sales, net earnings increased 280 basis points to 8.4% for the three months ended December 31, 2017, compared to the three months ended December 31, 2017;

• In December 2017, the United States enacted comprehensive amendments to the Internal Revenue Code of 1986 (“U.S. Tax Reform”). In connection therewith, we recorded a net provisional benefit of approximately $22.2 million and our U.S. federal statutory tax rate decreased to 24.5%;

• Diluted earnings per share for the three months ended December 31, 2017, were $0.65, compared to $0.39 for the three months ended December 31, 2016;

• Cash provided by operations was $104.2 million for the three months ended December 31, 2017, compared to $89.8 million for the three months ended December 31, 2016;

• During the three months ended December 31, 2017, we repurchased and subsequently retired approximately 3.8 million shares of our common stock at an aggregate cost of approximately $64.5 million; and

• In December 2017, we acquired certain assets and business operations of H. Chalut Ltee, a 21-store professional-only distributor of beauty supplies operating in Quebec, Canada, for approximately $8.8 million.

Overview

Description of Business

We operate primarily through two reportable segments: Sally Beauty Supply (“SBS”) and Beauty Systems Group (“BSG”). We believe we are the largest open-line distributor of professional beauty supplies in the U.S. based on store count. As of December 31, 2017, through SBS and BSG, we had 4,993 company-operated stores and supplied 184 franchised stores in North America and select South American and European countries. Within BSG, we also have one of the largest networks of distributor sales consultants for professional beauty products in North America. We offer a wide variety of leading third-party branded and exclusive-label professional beauty supplies, including hair color products, hair care products, styling tools, skin and nail care products and other

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beauty items. SBS targets retail consumers and salon professionals, while BSG exclusively targets salons and salonprofessionals. Neither the sales nor the product assortment for SBS or BSG are generally seasonal in nature.

Restructuring Plans

During the three months ended December 31, 2017, we recognized restructuring charges of approximately $5.2 million in connection with the 2018 Restructuring Plan, including severance and related expenses of approximately $4.3 million and expenses related to other cost-reduction initiatives of $0.9 million. We anticipate substantially completing the 2018 Restructuring Plan in fiscal year 2018. We expect to realize annualized pre-tax benefits in the range of $12 million to $14 million from the 2018 Restructuring Plan, with an estimated benefit of approximately $8 million realized in fiscal year 2018. See Note 14 of the Condensed Notes to Consolidated Financial Statements included in Item 1 of this Quarterly Report for more information about our restructuring plans.

U.S. Tax Reform

On December 22, 2017, the U.S. enacted comprehensive amendments to the Internal Revenue Code of 1986 (“U.S. Tax Reform”). See Note 11 of the Condensed Notes to Consolidated Financial Statements included in Item 1 of this Quarterly Report for more information about the impact of the US. Tax Reform on our financial statements.

Data Security Incidents

As previously disclosed, we experienced a data security incident during fiscal year 2014 and a second data security incident during fiscal year 2015 (together, the “data security incidents”). In the fiscal years 2016 and 2015, we incurred $14.6 million and $5.6 million, respectively, of expenses in connection with the data security incidents. In the fiscal year 2017, we settled prior assessments by two payment card networks for $9.3 million. We expect to incur additional costs and expenses related to the data security incidents in future periods. These costs and expenses may result from potential additional liabilities to other payment card networks, governmental or third party investigations, proceedings or litigation and legal and other fees necessary to defend against any potential liabilities or claims, and further investigatory and remediation costs. As of December 31, 2017, the scope of these additional costs and expenses, or a range thereof, beyond amounts management has determined to be probable, cannot be reasonably estimated and, while we do not anticipate these additional costs and expenses or liabilities would have a material adverse impact on our business, financial condition and operating results, these additional costs and expenses could be significant.

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Key Operating Metrics

The following table sets forth, for the periods indicated, information concerning key measures we rely on to evaluate our operating performance (dollars in thousands):

	Three Months Ended December 31,
	2017			2016			Increase (Decrease)
Net sales:
SBS	$	585,574		$	589,859		$	(4,285	)	(0.7	)%
BSG		409,390			409,750			(360	)	(0.1	)%
Consolidated	$	994,964		$	999,609		$	(4,645	)	(0.5	)%
Gross profit:
SBS	$	319,785		$	324,183		$	(4,398	)	(1.4	)%
BSG		166,844			167,525			(681	)	(0.4	)%
Consolidated	$	486,629		$	491,708		$	(5,079	)	(1.0	)%
Segment gross margin:
SBS		54.6	%		55.0	%	(40) bps
BSG		40.8	%		40.9	%	(10) bps
Consolidated		48.9	%		49.2	%	(30) bps
Selling, general and administrative expenses	$	371,286		$	374,251		$	(2,965	)	(0.8	)%
Restructuring charges	$	5,210		$	—		$	5,210		100.0	%
Operating earnings:
Segment operating earnings:
SBS	$	86,594		$	92,526		$	(5,932	)	(6.4	)%
BSG		64,565			63,600			965		1.5	%
Segment operating earnings		151,159			156,126			(4,967	)	(3.2	)%
Unallocated expenses and restructuring charges (a)		(41,026	)		(38,669	)		2,357		6.1	%
Consolidated operating earnings	$	110,133		$	117,457		$	(7,324	)	(6.2	)%
Segment operating margin:
SBS		14.8	%		15.7	%	(90) bps
BSG		15.8	%		15.5	%	30 bps
Consolidated		11.1	%		11.8	%	(70) bps
Number of stores at end-of-period (including franchises):
SBS		3,787			3,815			(28	)	(0.7	)%
BSG		1,390			1,340			50		3.7	%
Consolidated		5,177			5,155			22		0.4	%
Same store sales growth (decline) (b)
SBS		(2.6	)%		(0.6	)%	(200) bps
BSG		(1.3	)%		2.6	%	(390) bps
Consolidated		(2.2	)%		0.4	%	(260) bps

(a) Unallocated expenses consist of corporate and shared costs and are included in selling, general and administrative expenses in our consolidated statements of earnings. Restructuring charges relate to the 2018 Restructuring Plan announced in November 2017.

(b) For the purpose of calculating our same store sales metrics, we compare the current period sales for stores open for 14 months or longer as of the last day of a month with the sales for these stores for the comparable period in the prior fiscal year. Our same store sales are calculated in constant dollars and include internet-based sales (which are not material for each of the periods presented) and the effect of store expansions, if applicable, but do not generally include the sales from stores that have been relocated until 14 months after the relocation. The sales from stores acquired are excluded from our same store sales calculation until 14 months after the acquisition.

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Results of Operations

The Three Months Ended December 31, 2017 compared to the Three Months Ended December 31, 2016

Net Sales

Consolidated. Consolidated net sales decreased $4.6 million, or 0.5% for the three months ended December 31, 2017, compared to the three months ended December 31, 2016. Consolidated net sales for the three months ended December 31, 2017, are inclusive of a positive impact from changes in foreign currency exchange rates of $11.8 million, or 1.2% of consolidated net sales.

Sally Beauty Supply. Net sales for SBS decreased $4.3 million, or 0.7%, for the three months ended December 31, 2017, compared to the three months ended December 31, 2016. Net sales for SBS for the three months ended December 31, 2017, are inclusive of a positive impact from changes in foreign currency exchange rates of approximately $10.3 million, or 1.7% of the segment’s net sales.

In the SBS segment, sales of company-operated stores that have been open for 14 months or longer decreased approximately $5.1 million and net sales from stores that have been open for less than 14 months decreased approximately $1.8 million. Net sales from other sales channels, which include catalog and internet sales of our Sinelco Group subsidiaries and incremental sales from businesses acquired in the preceding 12 months, increased $2.6 million compared to the three months ended December 31, 2016.

The decrease in SBS’s net sales reflects lower unit volume, including as a result of lower customer traffic primarily in the U.S., partially offset by the positive impact from changes in foreign currency exchange rates and an increase in average unit prices, resulting primarily from selective price increases in certain geographical areas of the U.S. and a change in product mix (to higher-priced products) resulting from shifts in customer preferences.

Beauty Systems Group. Net sales for BSG decreased $0.4 million, or 0.1%, for the three months ended December 31, 2017, compared to the three months ended December 31, 2016. BSG’s net sales for the three months ended December 31, 2017, are inclusive of a positive impact from changes in foreign currency exchange rates of approximately $1.5 million, or 0.4% of the segment’s net sales.

In the BSG segment, sales by our distributor sales consultants decreased approximately $2.6 million compared to three months ended December 31, 2016, while sales from stores that have been open for less than 14 months increased approximately $1.9 million. Net sales from other BSG sales channels, which include sales of company-operated stores that have been open for 14 months or longer, sales to our franchisees and incremental sales from businesses acquired in the preceding 12 months, in the aggregate increased approximately $0.3 million compared to the three months ended December 31, 2016.

The decrease in BSG’s net sales is primarily the result of a decrease in unit volume (notwithstanding the impact of incremental sales from 46 company-operated stores opened or acquired during the last 12 months), partially offset by an increase in average unit prices (resulting primarily from the introduction of certain third-party brands with higher average unit prices in the preceding 12 months).

Gross Profit

Consolidated. Consolidated gross profit decreased $5.1 million, or 1.0%, for the three months ended December 31, 2017, compared to the three months ended December 31, 2016, due principally to lower net sales and lower gross margins in both reportable segments, as more fully described below. Consolidated gross margin decreased 30 basis points to 48.9% for the three months ended December 31, 2017, compared to 49.2% for the three months ended December 31, 2016.

Sally Beauty Supply. SBS’s gross profit decreased $4.4 million, or 1.4%, for the three months ended December 31, 2017, compared to the three months ended December 31, 2016, principally as a result of lower net sales and a lower gross margin. SBS’s gross margin decreased 40 basis points to 54.6% for the three months ended December 31, 2017, compared to 55.0% for the three months ended December 31, 2016. This decrease reflects a change in geographic sales mix, as a result of lower-margin non-U.S. sales making up a greater portion of total segment sales and the net impact of prior year price increases offset by selective price reductions in the three months ended December 31, 2017, compared to the three months ended December 31, 2016.

Beauty Systems Group. BSG’s gross profit decreased $0.7 million, or 0.4%, for the three months ended December 31, 2017, compared to the three months ended December 31, 2016, principally as a result of lower net sales and lower gross margin. BSG’s gross margin decreased 10 basis points to 40.8% for of the three months ended December 31, 2017, compared to 40.9% for the three months ended December 31, 2016, primarily as a result of higher distribution, shipping and handling expenses.

Selling, General and Administrative Expenses

Consolidated. Consolidated selling, general and administrative expenses decreased $3.0 million, or 0.8%, for the three months ended December 31, 2017, compared to the three months ended December 31, 2016, primarily as a result of cost-reduction initiatives, as discussed below. Consolidated selling, general and administrative expenses, as a percentage of net sales, were 37.3% for the three months ended December 31, 2017, compared to 37.4% for the three months ended December 31, 2016.

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Sally Beauty Supply. SBS’s selling and general and administrative expenses increased $1.5 million, or 0.7%, for the three months ended December 31, 2017, compared to the three months ended December 31, 2016. This increase reflects higher compensation and compensation-related expenses of $2.8 million (including the impact of wage increases for sales staff at existing stores), higher rent expense of $1.4 million and higher depreciation of $0.8 million resulting from capital expenditures mainly in connection with store refreshes and information technology upgrades made in the prior 12 months. These increases were partially offset by lower advertising expense of $2.0 million and a reduction of estimated casualty lossesof $1.3 million in connection with natural disasters that occurred in the fourth quarter of our fiscal year 2017.

Beauty Systems Group. BSG’s selling and general and administrative expenses decreased $1.6 million, or 1.6%, for the three months ended December 31, 2017, compared to the three months ended December 31, 2016, primarily as a result of cost-reduction initiatives, partially offset by the incremental operating expenses associated with 46 net additional company-operated stores (including 21 stores acquired in December 2017).

Unallocated Selling, General and Administrative Expenses. Unallocated selling, general and administrative expenses, which 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 reporting segments, decreased $2.9 million, or 7.4%, for the three months ended December 31, 2017, compared to the three months ended December 31, 2016. This decrease reflects lower corporate compensation and compensation-related expenses of $1.7 million and lower share-based compensation expenses of $0.7 million.

Restructuring Charges

During the three months ended December 31, 2017, we incurred restructuring charges of approximately $5.2 million in connection with the 2018 Restructuring Plan, including $4.3 million in severance and related expenses and other costs of $0.9 million. See Note 14 of the Condensed Notes to Consolidated Financial Statements included in Item 1 of this Quarterly Report for more information about our restructuring plans.

Interest Expense

Interest expense decreased $2.8 million to $24.0 million for the three months ended December 31, 2017, compared to the three months ended December 31, 2016, primarily from our redemption of certain senior notes in July 2017 with the proceeds from a new term loan B with lower interest rates. The decrease was offset in part by incremental interest expense of $0.7 million in connection with borrowings under the ABL facility. See “Liquidity and Capital Resources” below for additional information.

Provision for Income Taxes

The provision for income taxes was $2.9 million and $34.8 million, resulting in an effective tax rate of 3.3% and 38.4%, for the three months ended December 31, 2017 and 2016, respectively. The decrease in the effective tax rate was due primarily to the impact of U.S. Tax Reform. More specifically, in connection therewith, we recognized a provisional income tax benefit of $33.6 million resulting from the revaluation of our deferred income tax assets and liabilities and a provisional income tax charge of $11.4 million for federal and state income taxes applicable to accumulated but undistributed earnings of our foreign operations. See Note 11 of the Condensed Notes to Consolidated Financial Statements included in Item 1 of this Quarterly Report for more information about the impact of U.S. Tax Reform on our financial statements.

Net Earnings and Diluted Earnings per Share

As a result of the foregoing, consolidated net earnings increased $27.4 million, or 49.1%, to $83.3 million for the three months ended December 31, 2017, compared to $55.8 million for the three months ended December 31, 2016. Diluted earnings per share for the three months ended December 31, 2017 were $0.65 compared to $0.39 for the three months ended December 31, 2016.

Liquidity and Capital Resources

We broadly define liquidity as our ability to generate sufficient cash, from internal and external sources, to meet our contractual obligations and commitments. In addition, liquidity includes the ability to obtain appropriate debt and equity financing and to convert into cash those assets that are no longer required to meet existing strategic and financial objectives. Therefore, liquidity cannot be considered separately from capital resources that consist of current or potentially available funds for use in achieving long-range business objectives and meeting debt service commitments.

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 and share repurchases. Working capital (current assets less current liabilities) increased $4.2 million, to $573.7 million at December 31, 2017, compared to $569.5 million at September 30, 2017, resulting primarily from increases in cash and cash equivalents and inventory, partially offset by a decrease in other current

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assets and an increase in income taxes payable. As a holding company, Sally Beauty depends on its subsidiaries, including Sally Holdings, to distribute funds to it so that it may pay its obligations and expenses. The ability of Sally Beauty’s subsidiaries to make such distributions will be subject to their operating results, cash requirements and financial condition and their compliance with relevant laws, and covenants and financial ratios related to their existing or future indebtedness, including covenants restricting Sally Holdings’ ability to pay dividends to Sally Beauty. If, as a consequence of these limitations, the Company cannot receive sufficient distributions from its subsidiaries, it may not be able to meet its obligations to fund general corporate expenses.

The Company may from time to time repurchase or otherwise retire or refinance its debt (through its subsidiaries or otherwise) and take other steps to reduce or refinance its debt. These actions may include open market repurchases of its notes or other retirements of outstanding debt. The amount of debt that may be repurchased, or refinanced or otherwise retired, if any, will be determined in the sole discretion of our Board of Directors and will depend on market conditions, trading levels of the Company’s debt from time to time, the Company’s cash position and other considerations.

At December 31, 2017, cash and cash equivalents were $79.3 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 meet working capital requirements, fund share repurchases and potential acquisitions, and finance anticipated capital expenditures, including information technology upgrades and store openings, over the next 12 months.

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 and share repurchases. During the three months ended December 31, 2017, total borrowings outstanding have ranged from $77.5 million up to $133.0 million and the average daily balance outstanding was $100.5 million. During the three months ended December 31, 2017, the weighted average interest rate on our borrowings under the ABL facility was 3.0%. The amounts drawn are generally paid down with cash provided by our operating activities. As of December 31, 2017, Sally Holdings had $381.3 million available for borrowings under the ABL facility, subject to borrowing base limitations, as reduced by outstanding letters of credit.

We are a holding company and do not have any material assets or operations other than ownership of equity interests in our subsidiaries. The agreements and instruments governing the debt of Sally Holdings and its subsidiaries contain material limitations on their ability to pay dividends and other restricted payments to us which, in turn, constitute material limitations on our ability to pay dividends and other payments to our stockholders.

Share Repurchase Programs

During the three months ended December 31, 2017 and 2016, we repurchased and subsequently retired approximately 3.8 million shares and 2.5 million shares of our common stock under Board approved share repurchase programs at an aggregate cost of $64.5 million and $67.0 million, respectively. We funded these share repurchases with existing cash balances, cash from operations and borrowings under the ABL facility. As of December 31, 2017, we had authorization of approximately $935.5 million of additional potential share repurchases remaining under the 2017 Share Repurchase Program. Future share repurchases of our common stock are expected to be funded with existing cash balances, funds generated by operations and funds available under the ABL facility.

Historical Cash Flows

Historically, our primary source of cash has been funds provided by operating activities and, when necessary, borrowings under our ABL facility. The primary uses of cash have been for share repurchases, capital expenditures, repayments and servicing of long-term debt and acquisitions.

Net Cash Provided by Operating Activities

Net cash provided by operating activities during the three months ended December 31, 2017 increased $14.4 million to $104.2 million, compared to the three months ended December 31, 2016, mainly due to net changes in the components of working capital of $9.9 million and a favorable impact of $9.8 million on our provision for income taxes resulting primarily from a lower U.S. federal statutory tax rate, partially offset by a decrease in earnings before provision for income taxes. As a result of U.S. Tax Reform, our U.S. federal statutory tax rate will be 24.5% for fiscal year 2018.

Net Cash Used by Investing Activities

Net cash used by investing activities during the three months ended December 31, 2017 increased $3.7 million to $31.7 million, compared to the three months ended December 31, 2016. This increase reflects cash used for acquisitions, net of cash acquired, in the three months ended December 31, 2017 of $9.2 million, partially offset by lower capital expenditures of $5.5 million related primarily

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to SBS store openings and lower investments in information technology upgrades in the three months ended December 31, 2017, compared to three months ended December 31, 2016, as information technology upgrade projects were completed.

Net Cash Used by Financing Activities

Net cash used by financing activities during the three months ended December 31, 2017 increased $3.8 million to $56.9 million, compared to the three months ended December 31, 2016, due primarily to a decrease in proceeds from exercises of stock options of $14.0 million. This decrease was partially offset by higher net debt proceeds, primarily from borrowings under the ABL facility, and by a decrease in cash paid for share repurchases of $2.6 million.

U.S. Tax Reform

On December 22, 2017, U.S. Tax Reform was signed into law. U.S. Tax Reform, among other things, (a) reduces the federal statutory tax rate for corporate taxpayers, (b) provides for a deemed repatriation of undistributed foreign earnings by U.S. taxpayers and makes other fundamental changes on how foreign earnings will be taxed by the U.S. and (c) otherwise modifies corporate tax rules in significant ways. We are currently assessing the potential additional impact of U.S. Tax Reform on our business and liquidity.

Long-Term Debt

At December 31, 2017, we had borrowings of $99.0 million outstanding under our ABL facility. In addition, we had $950.0 million of senior notes outstanding and a term loan B with an outstanding principal balance of $848.6 million. See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources - Long-term Debt” and Note 12 of the “Notes to Consolidated Financial Statements” in “Item 8. Financial Statements and Supplementary Data” contained in our Annual Report on Form 10-K for the fiscal year ended September 30, 2017 for more information about our debt obligations.

We are currently in compliance with the agreements and instruments governing our debt, including our financial covenants. Our ability to comply with these covenants in future periods will depend on our ongoing financial and operating performance, which in turn will be subject to economic conditions and to financial, market and competitive factors, many of which are beyond our control. Further, our ability to comply with these covenants in future periods will also depend substantially on the pricing of our products, our success at implementing cost-reduction initiatives and our ability to successfully implement our overall business strategy.

Capital Requirements

During the three months ended December 31, 2017, capital expenditures were approximately $16.6 million, including amounts incurred but not paid at December 31, 2017 (approximately $2.5 million).

Contractual Obligations

There have been no material changes outside the ordinary course of our business in any of our contractual obligations since September 30, 2017.

Off-Balance Sheet Financing Arrangements

At December 31, 2017 and September 30, 2017, we had no off-balance sheet financing arrangements other than operating leases incurred in the ordinary course of our business, and outstanding letters of credit related to inventory purchases and self-insurance programs.

Inflation

We do not believe inflation has had a material effect on our results of operations. However, during the past few years, we have experienced and an increase in labor and real estate costs in the U.S. Employee compensation and rent expenses represent our two most significant operating expense categories. A material increase in labor or real estate costs in the future, particularly for an extended period of time, could have a material adverse effect on our results of operations.

Critical Accounting Estimates

The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and disclosure of contingent assets and liabilities in the financial statements. Actual results may differ from these estimates. We believe these estimates and assumptions are reasonable. We consider accounting policies to be critical when they require us to make assumptions about matters that are highly uncertain at the time the accounting estimate is made and when different estimates that our management reasonably could have used have a material effect on the presentation of our financial condition, changes in financial condition or results of operations.

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Our critical accounting estimates, as described in our Annual Report on Form 10-K for the fiscal year ended September 30, 2017, include the valuation of inventory, vendor rebates and concessions, retention of risk, income taxes, assessment of long-lived assets and intangible assets for impairment and share-based payments. There have been no material changes to our critical accounting estimates or assumptions since September 30, 2017.

Accounting Changes and Recent Accounting Pronouncements

See Note 3 of the Condensed Notes to Consolidated Financial Statements in Item 1 – “Financial Statements” in Part I – Financial Information.

Item 3.  Quantitative and Qualitative Disclosures About Market Risk

As a multinational corporation, we are subject to certain market risks including foreign currency fluctuations, interest rates and government actions. There have been no material changes to our market risks from September 30, 2017. See “Item 7A. Quantitative and Qualitative Disclosures About Market Risk” contained in our Annual Report on Form 10-K for the fiscal year ended September 30, 2017 for more information.

Item 4.  Controls and Procedures

Controls Evaluation and Related CEO and CFO Certifications.   Our management, with the participation of our principal executive officer (“CEO”) and principal financial officer (“CFO”), conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2017. The controls evaluation was conducted by our Disclosure Committee, comprised of senior representatives from our finance, accounting, internal audit, and legal departments under the supervision of our CEO and CFO.

Certifications of our CEO and our CFO, which are required in accordance with Rule 13a-14 of the Exchange Act, are attached as exhibits to this report. This “Controls and Procedures” section includes the information concerning the controls evaluation referred to in the certifications and it should be read in conjunction with the certifications for a more complete understanding of the topics presented.

Limitations on the Effectiveness of Controls.   We do not expect that our disclosure controls and procedures will prevent all errors and all fraud. A system of controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the system are met. Because of the limitations in all such systems, no evaluation can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. Furthermore, the design of any system of controls and procedures is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how unlikely. Because of these inherent limitations in a cost-effective system of controls and procedures, misstatements or omissions due to error or fraud may occur and not be detected.

Scope of the Controls Evaluation.   The evaluation of our disclosure controls and procedures included a review of their objectives and design, our implementation of the controls and procedures and the effect of the controls and procedures on the information generated for use in this report. In the course of the evaluation, we sought to identify whether we had any data errors, control problems or acts of fraud and to confirm that appropriate corrective action, including process improvements, was being undertaken if needed. This type of evaluation is performed on a quarterly basis so that conclusions concerning the effectiveness of our disclosure controls and procedures can be reported in our Quarterly Reports on Form 10-Q and our Annual Reports on Form 10-K. Many of the components of our disclosure controls and procedures are also evaluated by our internal audit department, by our legal department and by personnel in our finance organization. The overall goals of these various evaluation activities are to monitor our disclosure controls and procedures on an ongoing basis and to maintain them as dynamic systems that change as conditions warrant.

Conclusions regarding Disclosure Controls.  Based on the required evaluation of our disclosure controls and procedures, our CEO and CFO have concluded that, as of December 31, 2017, we maintain disclosure controls and procedures that are effective in providing reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting.   During our most recent fiscal quarter, there have been no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II — OTHER INFORMATION

Item 1.  Legal Proceedings

We are involved, from time to time, in various claims and lawsuits incidental to the conduct of our business in the ordinary course. We carry insurance coverage in such amounts in excess of our self-insured retention as we believe to be reasonable under the circumstances and that may or may not cover any or all of our liabilities in respect of these matters. We do not believe that the ultimate resolution of these matters will have a material adverse impact on our consolidated financial position, cash flows or results of operations.

We are subject to a number of U.S., federal, state and local laws and regulations, as well as the laws and regulations applicable in each foreign country or jurisdiction in which we do business. These laws and regulations govern, among other things, the composition, packaging, labeling and safety of the products we sell, the methods we use to sell these products and the methods we use to import these products. We believe that we are in material compliance with such laws and regulations, although no assurance can be provided that this will remain true going forward.

Item 1A.  Risk Factors

In addition to the other information set forth in this report, you should carefully consider the factors contained in Item 1A. “Risk Factors” in Part I of our Annual Report on Form 10-K for the fiscal year ended September 30, 2017, which could materially affect our business, financial condition or future results. There have been no material changes from the risk factors disclosed in such Annual Report. The risks described in such Annual Report and herein are not the only risks facing our company.

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds

(a) Not applicable

(b) Not applicable

(c) Purchases of Equity Securities by the Issuer and Affiliated Purchasers

The following table provides information about the Company’s repurchases of shares of its common stock during the three months ended December 31, 2017:

Fiscal Period	Total Number of Shares Purchased (1)		Average Price Paid per Share		TotalNumber of Shares Purchased as Part of Publicly Announced Plans or Programs (1)(2)		Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs
October 1 through October 31, 2017		869,116	$	18.14		869,116	$	984,238,464
November 1 through November 30, 2017		2,060,928		16.13		2,060,928		950,994,895
December 1 through December 31, 2017		917,519		16.87		917,519		935,520,250
Total this quarter		3,847,563	$	16.76		3,847,563	$	935,520,250

(1) The table above does not include 7,403 shares of the Company’s common stock surrendered by grantees during the three months ended December 31, 2017 to satisfy tax withholding obligations due upon the vesting of equity-based awards under the Company’s share-based compensation plans.

(2) In August 2017, we announced that our Board of Directors approved a share repurchase program authorizing us to repurchase up to $1.0 billion of our common stock over an approximate four-year period expiring on September 30, 2021.

Item 3.  Defaults Upon Senior Securities

Not applicable

Item 4.  Mine Safety Disclosures

Not applicable

Item 5.  Other Information

(a) Not applicable

(b) Not applicable

34

Item 6.  Exhibits

Exhibit No.	Description
3.1	Third Restated Certificate of Incorporation of Sally Beauty Holdings, Inc., dated January 30, 2014, which is incorporated herein by reference from Exhibit 3.3 to the Company’s Current Report on Form 8-K filed on January 30, 2014
3.2	Amended and Restated Bylaws of Sally Beauty Holdings, Inc., dated April 26, 2017, which is incorporated herein by reference from Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on April 28, 2017
10.1	Separation Agreement dated January 26, 2018 between Sally Beauty Holdings, Inc. and Matthew O. Haltom, which is incorporated herein by reference from Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on January 26, 2018
31.1	Rule 13a-14(a)/15d-14(a) Certification of Christian A. Brickman*
31.2	Rule 13a-14(a)/15d-14(a) Certification of Donald T. Grimes*
32.1	Section 1350 Certification of Christian A. Brickman*
32.2	Section 1350 Certification of Donald T. Grimes*
101	The following financial information from our Quarterly Report on Form 10-Q for the fiscal quarter ended December 31, 2017, formatted in XBRL (Extensible Business Reporting Language): (i) the Consolidated Balance Sheets; (ii) the Consolidated Statements of Earnings; (iii) the Consolidated Statements of Comprehensive Income; (iv) the Consolidated Statements of Cash Flows; and (v) the Condensed Notes to Consolidated Financial Statements.

* Included herewith

35

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		SALLY BEAUTY HOLDINGS, INC.
		(Registrant)
Date:  February 8, 2018
	By:	/s/ Donald T. Grimes
		Donald T. Grimes
		Senior Vice President, Chief Financial Officer and Chief Operations Officer
		For the Registrant and as its Principal Financial Officer

36

EX-31.1

Exhibit 31.1

CERTIFICATION
PURSUANT TO EXCHANGE ACT RULES 13a-14(a) AND 15d-14(a),
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Christian A. Brickman, certify that:

(1) I have reviewed this Quarterly Report on Form 10-Q for the quarterly period ended December 31, 2017 of Sally Beauty Holdings, Inc.;

(2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

(3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

(4) The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

(5) The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:     February 8, 2018
	By:	/s/ Christian A. Brickman
		Christian A. Brickman
		Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION
PURSUANT TO EXCHANGE ACT RULES 13a-14(a) AND 15d-14(a),
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Donald T. Grimes, certify that:

(1) I have reviewed this Quarterly Report on Form 10-Q for the quarterly period ended December 31, 2017 of Sally Beauty Holdings, Inc.;

(2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

(3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

(4) The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

(5) The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:      February 8, 2018
	By:	/s/ Donald T. Grimes
		Donald T. Grimes
		Senior Vice President, Chief Financial Officer
		and Chief Operations Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Sally Beauty Holdings, Inc. (the “Company”) on Form 10-Q for the quarterly period ended December 31, 2017 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Christian A. Brickman, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

	By:	/s/ Christian A. Brickman
		Christian A. Brickman
		Chief Executive Officer
Date:        February 8, 2018

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Sally Beauty Holdings, Inc. (the “Company”) on Form 10-Q for the quarterly period ended December 31, 2017 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Donald T. Grimes, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

	By:	/s/ Donald T. Grimes
		Donald T. Grimes
		Senior Vice President, Chief Financial Officer
		and Chief Operations Officer
Date:        February 8, 2018

XML

Document and Entity Information - shares	3 Months Ended
	Dec. 31, 2017	Feb. 02, 2018
Document And Entity Information [Abstract]
Entity Registrant Name	Sally Beauty Holdings, Inc.
Entity Central Index Key	0001368458
Document Type	10-Q
Document Period End Date	Dec. 31, 2017
Amendment Flag	false
Current Fiscal Year End Date	--09-30
Entity Current Reporting Status	Yes
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		125,102,746
Document Fiscal Year Focus	2018
Document Fiscal Period Focus	Q1

XML

Consolidated Balance Sheets - USD ($) $ in Thousands	Dec. 31, 2017	Sep. 30, 2017
Current assets:
Cash and cash equivalents	$ 79,312	$ 63,759
Trade accounts receivable, net	49,580	46,986
Accounts receivable, other	47,378	45,255
Inventory	941,146	930,855
Other current assets	46,259	55,223
Total current assets	1,163,675	1,142,078
Property and equipment, net of accumulated depreciation of $563,001 at December 31, 2017 and $546,061 at September 30, 2017	306,421	313,717
Goodwill	544,418	537,791
Intangible assets, excluding goodwill, net of accumulated amortization of $124,818 at December 31, 2017 and $121,550 at September 30, 2017	77,740	80,305
Other assets	21,067	25,116
Total assets	2,113,321	2,099,007
Current liabilities:
Current maturities of long-term debt	104,900	96,082
Accounts payable	306,270	307,752
Accrued liabilities	166,501	166,527
Income taxes payable	12,331	2,233
Total current liabilities	590,002	572,594
Long-term debt	1,771,299	1,771,853
Other liabilities	31,147	20,140
Deferred income tax liabilities, net	63,508	98,036
Total liabilities	2,455,956	2,462,623
Stockholders’ deficit:
Common stock, $0.01 par value. Authorized 500,000 shares; 126,166 and 129,710 shares issued and 125,799 and 129,585 shares outstanding at December 31, 2017 and September 30, 2017, respectively	1,258	1,296
Preferred stock, $0.01 par value. Authorized 50,000 shares; none issued
Accumulated deficit	(260,999)	(283,076)
Accumulated other comprehensive loss, net of tax	(82,894)	(81,836)
Total stockholders’ deficit	(342,635)	(363,616)
Total liabilities and stockholders’ deficit	$ 2,113,321	$ 2,099,007

XML

Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Dec. 31, 2017	Sep. 30, 2017
Statement Of Financial Position [Abstract]
Property and equipment, accumulated depreciation (in dollars)	$ 563,001	$ 546,061
Intangible assets, excluding goodwill, accumulated amortization (in dollars)	$ 124,818	$ 121,550
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, Authorized shares	500,000,000	500,000,000
Common stock, shares issued	126,166,000	129,710,000
Common stock, shares outstanding	125,799,000	129,585,000
Preferred stock, par value (in dollars per share)	$ 0.01	$ 0.01
Preferred stock, Authorized shares	50,000,000	50,000,000
Preferred stock, shares issued	0	0

XML

Consolidated Statements of Earnings - USD ($) shares in Thousands, $ in Thousands	3 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Income Statement [Abstract]
Net sales	$ 994,964	$ 999,609
Cost of goods sold	508,335	507,901
Gross profit	486,629	491,708
Selling, general and administrative expenses	371,286	374,251
Restructuring charges	5,210
Operating earnings	110,133	117,457
Interest expense	24,016	26,799
Earnings before provision for income taxes	86,117	90,658
Provision for income taxes	2,853	34,832
Net earnings	$ 83,264	$ 55,826
Earnings per share:
Basic	$ 0.65	$ 0.39
Diluted	$ 0.65	$ 0.39
Weighted average shares:
Basic	127,784	143,631
Diluted	128,645	144,860

XML

Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands	3 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Statement Of Income And Comprehensive Income [Abstract]
Net earnings	$ 83,264	$ 55,826
Other comprehensive income (loss):
Foreign currency translation adjustments, net of tax	(255)	(18,668)
Interest rate caps:
Changes in fair value	(1,130)
Income taxes related to changes in fair value	327
Other comprehensive income (loss), net of tax	(1,058)	(18,668)
Total comprehensive income	$ 82,206	$ 37,158

XML

Consolidated Statements of Cash Flows - USD ($) $ in Thousands	3 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Cash Flows from Operating Activities:
Net earnings	$ 83,264	$ 55,826
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization	27,090	26,839
Share-based compensation expense	3,111	3,814
Amortization of deferred financing costs	921	789
Deferred income taxes	(31,350)	3,000
Changes in (exclusive of effects of acquisitions):
Trade accounts receivable	(2,427)	2,181
Accounts receivable, other	(2,008)	1,727
Inventory	(8,055)	(9,358)
Other current assets	9,105	12,255
Other assets	(290)	(592)
Accounts payable and accrued liabilities	3,764	(19,375)
Income taxes payable	10,069	13,151
Other liabilities	11,010	(463)
Net cash provided by operating activities	104,204	89,794
Cash Flows from Investing Activities:
Payments for property and equipment, net	(22,499)	(28,008)
Acquisitions, net of cash acquired	(9,175)
Net cash used by investing activities	(31,674)	(28,008)
Cash Flows from Financing Activities:
Proceeds from issuance of long-term debt	126,505	58,500
Repayments of long-term debt	(119,067)	(58,674)
Payments for common stock repurchased	(64,612)	(67,183)
Proceeds from exercises of stock options	275	14,280
Net cash used by financing activities	(56,899)	(53,077)
Effect of foreign exchange rate changes on cash and cash equivalents	(78)	(921)
Net increase in cash and cash equivalents	15,553	7,788
Cash and cash equivalents, beginning of period	63,759	86,622
Cash and cash equivalents, end of period	79,312	94,410
Supplemental Cash Flow Information:
Interest paid	36,331	51,451
Income taxes paid	3,607	3,882
Capital expenditures incurred but not paid	$ 2,486	$ 1,672

XML

Description of Business and Basis of Presentation

3 Months Ended

Dec. 31, 2017

Organization Consolidation And Presentation Of Financial Statements [Abstract]

Description of Business and Basis of Presentation

1.   Description of Business and Basis of Presentation

Description of Business

Sally Beauty Holdings, Inc. and its consolidated subsidiaries (“Sally Beauty” or “the Company” or “we”) sell professional beauty supplies through its Sally Beauty Supply (“SBS”) retail stores located in the U.S., Puerto Rico, Canada, Mexico, the United Kingdom, Ireland, Belgium, France, Germany, the Netherlands, Spain, Chile and Peru. Additionally, we distribute professional beauty products to salons and salon professionals through our Beauty Systems Group (“BSG”) store operations and a commissioned direct sales force that calls on salons primarily in the U.S. and Canada, and to franchises in the southern and southwestern regions of the U.S. and in Mexico through the operations of its subsidiary Armstrong McCall. A significant number of our products are also available through a number of SBS and BSG-operated websites. Certain beauty products sold by BSG and Armstrong McCall are sold under exclusive territory agreements with the third-party manufacturers.

Basis of Presentation

The accompanying condensed consolidated interim financial statements included herein have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) and pursuant to the rules and regulations of the SEC. Certain information and note disclosures normally included in annual financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to the rules and regulations of the SEC, although we believe that the disclosures made are adequate to make the information not misleading. These 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, 2017. All significant intercompany accounts and transactions have been eliminated in consolidation. In the opinion of management, these condensed consolidated 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, 2017 and September 30, 2017, and our consolidated results of operations, consolidated comprehensive income and consolidated cash flows for the three months ended December 31, 2017 and 2016.

The condensed consolidated interim financial statements included herein have been prepared on a going concern basis of accounting. Each quarter, management evaluates, based on relevant conditions and events, our ability to continue as a going concern for at least one year from the date our financial statements are issued. Based on management’s assessment, we have concluded that substantial doubt about our ability to continue as a going concern does not exist as of the date the condensed consolidated interim financial statements included herein were issued.

Certain amounts for the prior fiscal periods have been reclassified to conform to the current fiscal period presentation, in connection with the retroactive adoption of two new accounting pronouncements in the current interim period. Please see Note 3 below for additional information.

XML

Significant Accounting Policies

3 Months Ended

Dec. 31, 2017

Accounting Policies [Abstract]

Significant Accounting Policies

2.   Significant Accounting Policies

We adhere to the same accounting policies in the preparation of our interim consolidated financial statements as we do in the preparation of our full-year consolidated financial statements. As permitted under GAAP, interim accounting for certain expenses, including income taxes, is based on full-year assumptions. For interim financial reporting purposes, income taxes are recorded based upon estimated annual effective income tax rates.

XML

Accounting Changes and Recent Accounting Pronouncements

3 Months Ended

Dec. 31, 2017

New Accounting Pronouncements And Changes In Accounting Principles [Abstract]

Accounting Changes and Recent Accounting Pronouncements

3.   Accounting Changes and Recent Accounting Pronouncements

Accounting Changes

In November 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Income Taxes, which requires that deferred tax assets, net of related valuation allowances, and deferred tax liabilities be reported as noncurrent in a classified balance sheet. We adopted the new standard retrospectively effective October 1, 2017. Accordingly, the adoption of ASU No. 2015-17 resulted in a decrease in current deferred income tax assets of $28.4 million, a decrease in current deferred income tax liabilities, included in accrued liabilities, of $2.0 million, a net increase in noncurrent deferred income tax assets, included in other assets, of $4.3 million and a net decrease in noncurrent deferred income tax liabilities of $22.1 million in our consolidated balance sheet as of September 30, 2017.

In March 2016, the FASB issued ASU No. 2016-09, Improvements to Employee Share-Based Payment Accounting, which amended several aspects of how share-based compensation is recorded and reported on the financial statements. For example, the new guidance will require that all the income tax effect related to share-based payments be recorded in income tax expense. We adopted these amendments effective October 1, 2017. In connection with this accounting change, we have elected to recognize share-based compensation award forfeitures when they occur. Prior to the change, we recognized forfeitures based on the estimated number of awards expected to vest. As allowed, we elected to adopt retrospectively the amendment requiring that excess tax benefits (shortfalls) be reported in cash flows from operating activities in our consolidated statements of cash flows. The adoption of the amendments contained in ASU No. 2016-09 did not have a material impact on our consolidated financial statements.

Recent Accounting Pronouncements

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, which will supersede Accounting Standards Codification (“ASC”) Topic 605, Revenue Recognition. A core principle of the new guidance is that an entity should measure revenue in connection with its sale of goods and services to a customer based on the consideration to which the entity expects to be entitled in exchange for each of those goods and services. The new standard must be adopted using either the retrospective or cumulative effect transition method. For public companies, this amendment is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. Early adoption is permitted. We have not yet selected a transition method. We have not yet adopted this accounting pronouncement and we do not believe, based on our assessment, that adoption will have a material effect on our consolidated results of operations and consolidated financial position. We are currently assessing the disclosure requirements contained in the new standard and anticipate being compliant with the additional disclosures about our revenue recognition practices required by the new standard.

In February 2016, the FASB issued ASU No. 2016-02, Leases, which will require most leases to be reported on the balance sheet as a right-of-use asset and a lease liability. Under the new guidance, the lease liability must be measured initially based on the present value of future lease payments, subject to certain conditions. The right-of-use asset must be measured initially based on the amount of the liability, plus certain initial direct costs. The new guidance further requires that leases be classified at inception as either (a) operating leases or (b) finance leases. For operating leases, periodic expense will generally be flat (straight-line) throughout the life of the lease. For finance leases, periodic expense will decline (similar to capital leases under prior rules) over the life of the lease. The new standard must be adopted using a modified retrospective transition method. For public companies, this standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted. We have not yet adopted this accounting pronouncement. We have completed a preliminary assessment of the potential impact of adopting ASU No. 2016-02 on our consolidated financial statements. At December 31, 2017, adoption of ASU No. 2016-02 would have resulted in recognition of a right-of-use asset in the estimated amount of approximately $600.0 million and a lease liability for a similar amount in our consolidated balance sheet. We do not believe adoption of ASU No. 2016-02 will have a material impact on our earnings or cash flows. The amount of the right-of-use asset and the lease liability we ultimately recognize may materially differ from this preliminary estimate, including as a result of future organic growth in our business and potential acquisitions.

In August 2017, the FASB issued ASU No. 2017-12, Derivatives and Hedging (Topic 815), Targeted Improvements to Accounting for Hedging Activities, which is intended to better align an entity’s risk management activities and its financial reporting for hedging relationships. ASU No. 2017-12 will change both the designation and measurement guidance for a qualifying hedging relationship and the presentation of the impact of the hedging relationship on the entity’s financial statements. In addition, ASU No. 2017-12 contains targeted improvements to ease the application of current guidance related to the assessment of hedge effectiveness and eliminates the requirement for an entity to separately measure and report hedge ineffectiveness. For public companies, these amendments are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted. We have not yet adopted the accounting pronouncement and do not believe, based on our preliminary assessment, that adoption will have a material effect on our consolidated financial statements.

XML

Fair Value Measurements

3 Months Ended

Dec. 31, 2017

Fair Value Disclosures [Abstract]

Fair Value Measurements

4.   Fair Value Measurements

Our financial instruments consist of cash equivalents, if any, trade and other accounts receivable, accounts payable, derivative instruments, including foreign exchange contracts and interest rate caps, and debt. The carrying amounts of cash equivalents, if any, trade and other accounts receivable and accounts payable approximate their respective fair values due to the short-term nature of these financial instruments.

We measure on a recurring basis and disclose the fair value of our financial instruments under the provisions of ASC Topic 820, Fair Value Measurement, as amended (“ASC 820”). We define “fair value” as the price that would be received to sell an asset or paid to transfer a liability (i.e., the exit price) in an orderly transaction between market participants at the measurement date. ASC 820 establishes a three-level hierarchy for measuring fair value. This valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability on the measurement date.

Consistent with this hierarchy, we categorized our financial assets and liabilities as follows (in thousands):

	As of December 31, 2017
	Total		Level 1		Level 2		Level 3
Assets
Foreign exchange contracts	$	572	$	—	$	572	$	—
Interest rate caps		4,048		—		4,048		—
Total assets	$	4,620	$	—	$	4,620	$	—
Liabilities
Long-term debt	$	1,893,765	$	946,300	$	947,465	$	—
Foreign exchange contracts		—		—		—		—
Total liabilities	$	1,893,765	$	946,300	$	947,465	$	—

	As of September 30, 2017
	Total		Level 1		Level 2		Level 3
Assets
Foreign exchange contracts	$	779	$	—	$	779	$	—
Interest rate caps		5,178		—		5,178		—
Total assets	$	5,957	$	—	$	5,957	$	—
Liabilities
Long-term debt	$	1,919,930	$	973,750	$	946,180	$	—
Foreign exchange contracts		207		—		207		—
Total liabilities	$	1,920,137	$	973,750	$	946,387	$	—

Long-term debt, including current maturities and borrowings under the asset-based senior secured loan facility (the “ABL facility”), if any, is carried in our consolidated financial statements at amortized cost of $1,895.0 million at December 31, 2017 and $1,887.4 million at September 30, 2017, less unamortized debt issuance costs of $18.8 million at December 31, 2017 and $19.4 million at September 30, 2017. Our senior notes are valued for purposes of the disclosure above using unadjusted quoted market prices for such debt securities. Our term loan B is generally valued for purposes of the disclosure above using quoted market prices for similar debt securities in active markets. Other long-term debt (consisting primarily of borrowings under the ABL facility, if any, and capital lease obligations) is generally valued for purposes of the disclosure above using widely accepted valuation techniques, such as discounted cash flow analyses, using observable inputs, such as market interest rates.

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Accumulated Stockholders' Deficit

3 Months Ended

Dec. 31, 2017

Stockholders Equity Note [Abstract]

Accumulated Stockholders' Deficit

5.   Accumulated Stockholders’ Deficit

In August 2017, we announced that our Board of Directors approved a share repurchase program authorizing the Company to repurchase up to $1.0 billion of its common stock over an approximate four-year period expiring on September 30, 2021 (the “2017 Share Repurchase Program”) and terminated our similar share repurchase program approved by our Board in 2014 (the “2014 Share Repurchase Program”). During the three months ended December 31, 2017 and 2016, we repurchased and subsequently retired approximately 3.8 million and 2.5 million shares of our common stock at an aggregate cost of $64.5 million and $67.0 million under the 2017 Share Repurchase Program and the 2014 Share Repurchase Program, respectively. We reduced common stock and additional paid-in capital, in the aggregate, by these amounts. However, as required by GAAP, to the extent that share repurchase amounts exceeded the balance of additional paid-in capital prior to our recording of such repurchases, we recorded the excess in accumulated deficit. We funded these share repurchases with cash from operations and borrowings under the ABL facility.

The change in accumulated other comprehensive loss (“AOCL”) was as follows (in thousands):

	Foreign Currency Translation Adjustments			Interest Rate Caps			Total
Balance at September 30, 2017	$	(80,752	)	$	(1,084	)	$	(81,836	)
Other comprehensive loss before reclassification, net of tax		(255	)		(803	)		(1,058	)
Balance at December 31, 2017	$	(81,007	)	$	(1,887	)	$	(82,894	)

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Earnings Per Share

3 Months Ended

Dec. 31, 2017

Earnings Per Share [Abstract]

Earnings Per Share

6.   Earnings Per Share

The following table sets forth the computations of basic and diluted earnings per share (in thousands, except per share data):

	Three Months Ended December 31,
	2017		2016
Net earnings	$	83,264	$	55,826
Weighted average basic shares		127,784		143,631
Dilutive securities:
Stock option and stock award programs		861		1,229
Weighted average diluted shares		128,645		144,860
Earnings per share:
Basic	$	0.65	$	0.39
Diluted	$	0.65	$	0.39

At December 31, 2017 and 2016, options to purchase 5,802,107 shares and 2,457,972 shares, respectively, of our common stock were outstanding but not included in our computations of diluted earnings per share, because these options were anti-dilutive. An anti-dilutive option is an option that is: (a) out-of-the-money (an option with an exercise price which is greater than the average price per share of our common stock during the period), and (b) in-the-money (an option with an exercise price which is less than the average price per share of our common stock during the period) for which the sum of assumed proceeds, including any unrecognized compensation expense related to such option, exceeds the average price per share for the period.

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Share-Based Payments

3 Months Ended

Dec. 31, 2017

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Share-Based Payments

7.   Share-Based Payments

Performance-Based Awards

The following table presents a summary of the activity for our performance unit awards assuming 100% payout:

Performance Unit Awards	Number of Shares (inThousands)			Weighted AverageFair Value Per Share		Weighted Average Remaining Vesting Term (in Years)
Unvested at September 30, 2017		197		$	24.50		1.5
Granted		215			17.42
Vested		—			—
Forfeited		(6	)		24.55
Unvested at December 31, 2017		406		$	20.76		2.0

Service-Based Awards

The following table presents a summary of the activity for our stock option awards:

	Number of Outstanding Options (inThousands)			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in Years)		Aggregate Intrinsic Value (in Thousands)
Outstanding at September 30, 2017		5,211		$	24.12		5.6	$	3,867
Granted		1,122			17.42
Exercised		(26	)		10.52
Forfeited or expired		(145	)		24.73
Outstanding at December 31, 2017		6,162		$	22.94		6.1	$	4,732
Exercisable at December 31, 2017		3,658		$	23.61		4.6	$	3,229

The following table presents a summary of the activity for our Restricted Stock Awards:

Restricted Stock Awards	Number of Shares (in Thousands)			Weighted Average Fair Value Per Share		Weighted Average Remaining Vesting Term (in Years)
Unvested at September 30, 2017		125		$	26.00		1.3
Granted		264			17.42
Vested		(23	)		24.18
Forfeited		—			—
Unvested at December 31, 2017		366		$	19.94		2.7

The following table presents a summary of the activity for our Restricted Stock Units:

Restricted Stock Units	Number of Shares (in Thousands)			Weighted Average Fair Value Per Share		Weighted Average Remaining Vesting Term (in Years)
Unvested at September 30, 2017		—		$	—		—
Granted		72			17.42
Vested		—			—
Forfeited		(7	)		17.42
Unvested at December 31, 2017		65		$	17.42		0.7

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Commitments and Contingencies

3 Months Ended

Dec. 31, 2017

Commitments And Contingencies Disclosure [Abstract]

Commitments and Contingencies

8.   Commitments and Contingencies

During the fiscal year 2014, we disclosed that we had experienced a data security incident (the “2014 data security incident”). During the fiscal year 2015, we disclosed that we had experienced a second data security incident (the “2015 data security incident” and, together with the 2014 data security incident, the “data security incidents”). The costs that we have incurred to date in connection with the data security incidents include assessments by payment card networks, professional advisory fees and legal fees relating to investigating and remediating the data security incidents. In April 2017, we entered into agreements pursuant to which all existing claims and assessments by certain payment card networks were settled. We cannot provide any assurances regarding whether assessments by other payment card networks will be received.

We expect to incur additional costs and expenses related to the data security incidents in the future. These costs and expenses may result from potential additional liabilities to other payment card networks, governmental or third party investigations, proceedings or litigation and legal and other fees necessary to defend against any potential liabilities or claims, and further investigatory and remediation costs. While we do not anticipate these additional costs and expenses or liabilities would have a material adverse impact on our business, financial condition and operating results, these additional costs and expenses could be significant.

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Short-term Borrowings and Long-term Debt

3 Months Ended

Dec. 31, 2017

Debt Disclosure [Abstract]

Short-term Borrowings and Long-term Debt

9.   Short-term Borrowings and Long-term Debt

Our debt outstanding at December 31, 2017 was not materially different from that at September 31, 2017. At December 31, 2017, we have $381.3 million available for borrowing under the ABL facility, including the Canadian sub-facility. At December 31, 2017, we are in compliance with the agreements and instruments governing our debt, including our financial covenants.

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Derivative Instruments and Hedging Activities

3 Months Ended

Dec. 31, 2017

Derivative Instruments And Hedging Activities Disclosure [Abstract]

Derivative Instruments and Hedging Activities

10.    Derivative Instruments and Hedging Activities

During the three months ended December 31, 2017, we did not purchase or hold any derivative instruments for trading or speculative purposes.

Designated Cash Flow Hedges

In July 2017, we purchased two interest rate caps with an initial aggregate notional amount of $550 million (the “interest rate caps”). The interest rate caps expire on June 30, 2023 and are designated and qualifying as cash flow hedges.

Non-designated Cash Flow Hedges

At December 31, 2017, we held foreign currency forward contracts with an aggregate notional amount of $100.6 million based upon exchange rates at December 31, 2017. These derivative instruments expire at various dates though September 30, 2018.

The table below presents the fair value of our derivative financial instruments as well as their classification on our consolidated balance sheets (in thousands):

	Asset Derivatives					Liability Derivatives
	Classification	December 31, 2017		September 30, 2017		Classification	December 31, 2017		September 30, 2017
Derivatives designated as hedging   instruments:
Interest rate caps	Other current assets	$	4,048	$	5,178	N/A	$	—	$	—
Derivatives not designated as hedging    instruments:
Foreign exchange contracts	Other current assets		572		779	Accrued liabilities		—		207
		$	4,620	$	5,957		$	—	$	207

The effect of our derivative financial instruments on our consolidated statements of earnings was not material for the three months ended December 31, 2017 and 2016.

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Income Taxes

3 Months Ended

Dec. 31, 2017

Income Tax Disclosure [Abstract]

Income Taxes

11. Income Taxes

On December 22, 2017, the U.S. enacted comprehensive amendments to the Internal Revenue Code of 1986 (“U.S. Tax Reform”). Among other things, U.S. Tax Reform (a) reduces the federal statutory tax rate for corporate taxpayers, (b) provides for a deemed repatriation of undistributed foreign earnings by U.S. taxpayers and makes other fundamental changes on how foreign earnings will be taxed by the U.S. and (c) otherwise modifies corporate tax rules in significant ways. In accordance with ASC Topic No. 740, Income Taxes, entities must revalue their deferred income taxes considering the new tax rates and recognize any impact of the deemed repatriation of undistributed foreign earnings on their financial statements based on the enacted tax law.

In December 2017, the SEC provided guidance allowing registrants to record provisional amounts, during a specified measurement period, when the necessary information is not available, prepared or analyzed in reasonable detail to account for the impact of U.S. Tax Reform. Accordingly, we have reported the revaluation of deferred income taxes and the impact of the deemed repatriation on our consolidated financial statements based on provisional amounts. Specifically, in the three months ended December 31, 2017, we recognized a provisional income tax benefit of $33.6 million in connection with the revaluation of our deferred income tax assets and liabilities, and a provisional income tax charge of $11.4 million for federal and state income taxes, including $10.4 million payable beyond one year, related to accumulated but undistributed earnings of our foreign operations.

For the fiscal year ending September 30, 2018, our U.S. federal statutory tax rate will be 24.5% and, for fiscal years after that, 21.0%. Among the factors that could affect the accuracy of our provisional amounts is uncertainty about the statutory tax rate applicable to our deferred income tax assets and liabilities, since the actual rate will be dependent on the timing of realization or settlement of such assets and liabilities. At December 31, 2017, we estimated the dates when such realization or settlement would occur. The actual dates when such realization or settlement occurs may be significantly different from our estimates, which could result in the ultimate revaluation of our deferred income taxes to be different from our provisional amounts. In addition, there is uncertainty about the impact of expected Internal Revenue Service (IRS) guidance intended to interpret the most complex provisions of U.S. Tax Reform. Our liability for federal and state income taxes applicable to undistributed earnings of our foreign operations may be materially different from our provisional amount as a result of such future IRS guidance and interpretation and in connection with estimates related to the amount of undistributed foreign earnings and cash balances.

We are currently assessing the potential additional impact of U.S. Tax Reform on our business and consolidated financial statements, and expect to complete such assessment on or before September 30, 2018.

The difference between our U.S. federal statutory income tax rate and our effective income tax rate is summarized below:

	Three Months Ended December 31, 2017
U.S. federal statutory income tax rate	24.5	%
State income taxes, net of federal tax benefit	3.2
Effect of foreign operations	0.8
Deferred tax revaluation	(39.1)
Deemed repatriation tax	13.3
Other, net	0.6
Effective tax rate	3.3	%

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Business Segments

3 Months Ended

Dec. 31, 2017

Segment Reporting [Abstract]

Business Segments

12.   Business Segments

Our business is organized into two operating and reporting segments: (i) SBS, a domestic and international chain of retail stores and a consumer-facing e-commerce website that offers professional beauty supplies to both salon professionals and retail customers in North America, Puerto Rico, and parts of Europe and South America and (ii) BSG, including its franchise-based business Armstrong McCall, a full service distributor of beauty products and supplies that offers professional beauty products directly to salons and salon professionals through its professional-only stores, e-commerce websites and its own sales force in partially exclusive geographical territories in North America.

The accounting policies of both of our reportable segments are the same as described in the summary of significant accounting policies contained in Note 2 of the “Notes to Consolidated Financial Statements” in “Item 8 - Financial Statements and Supplementary Data” contained in our Annual Report on Form 10-K for the fiscal year ended September 30, 2017. Sales between segments, which are eliminated in consolidation, were not material during the three months ended December 31, 2017 and 2016.

Segment data for the three months ended December 31, 2017 and 2016 is as follows (in thousands):

	Three Months Ended December 31,
	2017			2016
Net sales:
SBS	$	585,574		$	589,859
BSG		409,390			409,750
Total	$	994,964		$	999,609
Earnings before provision for income taxes:
Segment operating earnings:
SBS	$	86,594		$	92,526
BSG		64,565			63,600
Segment operating earnings		151,159			156,126
Unallocated expenses		(35,816	)		(38,669	)
Restructuring charges		(5,210	)		—
Consolidated operating earnings		110,133			117,457
Interest expense		(24,016	)		(26,799	)
Earnings before provision for income taxes	$	86,117		$	90,658

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Parent, Issuers, Guarantor and Non-Guarantor Condensed Consolidated Financial Statements

3 Months Ended

Dec. 31, 2017

Guarantor And Non Guarantor Condensed Consolidated Financial Statements [Abstract]

Parent, Issuers, Guarantor and Non-Guarantor Condensed Consolidated Financial Statements

13.   Parent, Issuers, Guarantor and Non-Guarantor Condensed Consolidating Financial Statements

The following consolidating financial information presents the condensed consolidating balance sheets as of December 31, 2017 and September 30, 2017, the related condensed consolidating statements of earnings and comprehensive income and the condensed consolidating statements of cash flows for the three months ended December 31, 2017 and 2016 of: (i) Sally Beauty Holdings, Inc., or the “Parent;” (ii) Sally Holdings and Sally Capital Inc. (iii) the guarantor subsidiaries; (iv) the non-guarantor subsidiaries; (v) elimination entries necessary for consolidation purposes; and (vi) Sally Beauty on a condensed consolidated basis.

Investments in subsidiaries are accounted for using the equity method for purposes of the consolidating presentation. The principal elimination entries relate to investments in subsidiaries and intercompany balances and transactions. Separate financial statements and other disclosures with respect to the subsidiary guarantors have not been provided because we believe the following information is sufficient since the guarantor subsidiaries are 100% indirectly owned by the Parent and all guarantees are full and unconditional.

Condensed Consolidating Balance Sheet

December 31, 2017

(In thousands)

	Parent			Sally HoldingsLLC and Sally Capital Inc.		Guarantor Subsidiaries			Non- Guarantor Subsidiaries		Consolidating Eliminations			SallyBeauty Holdings, Inc. and Subsidiaries
Assets
Cash and cash equivalents	$	—		$	10	$	31,839		$	47,463	$	—		$	79,312
Trade and other accounts receivable, net		—			—		64,152			32,806		—			96,958
Due from affiliates		—			—		2,360,280			—		(2,360,280	)		—
Inventory		—			—		714,682			226,464		—			941,146
Other current assets		1,280			817		27,856			16,306		—			46,259
Property and equipment, net		11			—		225,891			80,519		—			306,421
Investment in subsidiaries		1,195,373			3,820,552		374,002			—		(5,389,927	)		—
Goodwill and other intangible assets, net		—			—		465,755			156,403		—			622,158
Other assets		1,050			7,171		(7,852	)		20,698		—			21,067
Total assets	$	1,197,714		$	3,828,550	$	4,256,605		$	580,659	$	(7,750,207	)	$	2,113,321
Liabilities and Stockholders’ (Deficit) Equity
Accounts payable	$	36		$	—	$	234,878		$	71,356	$	—		$	306,270
Due to affiliates		1,519,033			750,442		—			90,805		(2,360,280	)		—
Accrued liabilities		362			6,170		125,852			34,117		—			166,501
Income taxes payable		10,566			1,678		—			87		—			12,331
Long-term debt		—			1,874,887		4			1,308		—			1,876,199
Other liabilities		10,371			—		17,027			3,749		—			31,147
Deferred income tax liabilities, net		(19	)		—		58,292			5,235		—			63,508
Total liabilities		1,540,349			2,633,177		436,053			206,657		(2,360,280	)		2,455,956
Total stockholders’ (deficit) equity		(342,635	)		1,195,373		3,820,552			374,002		(5,389,927	)		(342,635	)
Total liabilities and stockholders’ (deficit) equity	$	1,197,714		$	3,828,550	$	4,256,605		$	580,659	$	(7,750,207	)	$	2,113,321

Condensed Consolidating Balance Sheet

September 30, 2017

(In thousands)

	Parent			Sally Holdings LLC and Sally Capital Inc.		Guarantor Subsidiaries			Non- Guarantor Subsidiaries		Consolidating Eliminations			Sally Beauty Holdings, Inc. and Subsidiaries
Assets
Cash and cash equivalents	$	—		$	10	$	22,090		$	41,659	$	—		$	63,759
Trade and other accounts receivable, net		200			—		59,992			32,049		—			92,241
Due from affiliates		—			—		2,289,371			—		(2,289,371	)		—
Inventory		—			—		709,890			220,965		—			930,855
Other current assets		11,763			813		26,144			16,503		—			55,223
Property and equipment, net		12			—		230,069			83,636		—			313,717
Investment in subsidiaries		1,110,891			3,717,999		386,681			—		(5,215,571	)		—
Goodwill and other intangible assets, net		—			—		468,118			149,978		—			618,096
Other assets		1,538			8,116		(7,837	)		23,299		—			25,116
Total assets	$	1,124,404		$	3,726,938	$	4,184,518		$	568,089	$	(7,504,942	)	$	2,099,007
Liabilities and Stockholders’ (Deficit) Equity
Accounts payable	$	251		$	4	$	243,818		$	63,679	$	—		$	307,752
Due to affiliates		1,487,484			727,856		—			74,031		(2,289,371	)		—
Accrued liabilities		285			20,108		113,628			32,506		—			166,527
Income taxes payable		—			1,624		—			609		—			2,233
Long-term debt		—			1,866,455		1			1,479		—			1,867,935
Other liabilities		—			—		16,008			4,132		—			20,140
Deferred income tax liabilities, net		—			—		93,064			4,972		—			98,036
Total liabilities		1,488,020			2,616,047		466,519			181,408		(2,289,371	)		2,462,623
Total stockholders’ (deficit) equity		(363,616	)		1,110,891		3,717,999			386,681		(5,215,571	)		(363,616	)
Total liabilities and stockholders’ (deficit) equity	$	1,124,404		$	3,726,938	$	4,184,518		$	568,089	$	(7,504,942	)	$	2,099,007

Condensed Consolidating Statement of Earnings and Comprehensive Income

Three Months Ended December 31, 2017

(In thousands)

	Parent			Sally Holdings LLC and Sally Capital Inc.			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Consolidating Eliminations			Sally Beauty Holdings, Inc. and Subsidiaries
Net sales	$	—		$	—		$	796,532		$	198,432		$	—		$	994,964
Related party sales		—			—			446			—			(446	)		—
Cost of products sold and distribution expenses		—			—			403,810			104,971			(446	)		508,335
Gross profit		—			—			393,168			93,461			—			486,629
Selling, general and administrative expenses		2,606			179			284,467			84,034			—			371,286
Restructuring charges		—			—			5,210			—			—			5,210
Operating earnings (loss)		(2,606	)		(179	)		103,491			9,427			—			110,133
Interest expense		—			24,014			—			2			—			24,016
Earnings (loss) before provision for income taxes		(2,606	)		(24,193	)		103,491			9,425			—			86,117
Provision (benefit) for income taxes		(251	)		(6,925	)		(7,915	)		17,944			—			2,853
Equity in earnings of subsidiaries, net of tax		85,619			102,887			(8,519	)		—			(179,987	)		—
Net earnings (loss)		83,264			85,619			102,887			(8,519	)		(179,987	)		83,264
Other comprehensive loss, net of tax		—			(803	)		—			(255	)		—			(1,058	)
Total comprehensive income (loss)	$	83,264		$	84,816		$	102,887		$	(8,774	)	$	(179,987	)	$	82,206

Condensed Consolidating Statement of Earnings and Comprehensive Income

Three Months Ended December 31, 2016

(In thousands)

	Parent			Sally Holdings LLC and Sally Capital Inc.			Guarantor Subsidiaries		Non- Guarantor Subsidiaries			Consolidating Eliminations			Sally Beauty Holdings, Inc. and Subsidiaries
Net sales	$	—		$	—		$	816,051	$	183,558		$	—		$	999,609
Related party sales		—			—			748		—			(748	)		—
Cost of products sold and distribution expenses		—			—			411,323		97,326			(748	)		507,901
Gross profit		—			—			405,476		86,232			—			491,708
Selling, general and administrative expenses		2,549			137			296,724		74,841			—			374,251
Operating earnings (loss)		(2,549	)		(137	)		108,752		11,391			—			117,457
Interest expense		—			26,749			—		50			—			26,799
Earnings (loss) before provision for income taxes		(2,549	)		(26,886	)		108,752		11,341			—			90,658
Provision (benefit) for income taxes		(990	)		(10,443	)		41,998		4,267			—			34,832
Equity in earnings of subsidiaries, net of tax		57,385			73,828			7,074		—			(138,287	)		—
Net earnings		55,826			57,385			73,828		7,074			(138,287	)		55,826
Other comprehensive loss, net of tax		—			—			—		(18,668	)		—			(18,668	)
Total comprehensive income (loss)	$	55,826		$	57,385		$	73,828	$	(11,594	)	$	(138,287	)	$	37,158

Condensed Consolidating Statement of Cash Flows

Three Months Ended December 31, 2017

(In thousands)

	Parent			Sally Holdings LLC and Sally Capital Inc.			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Consolidating Eliminations			Sally Beauty Holdings, Inc. and Subsidiaries
Net cash provided (used) by operating activities	$	32,788		$	(30,211	)	$	100,319		$	1,308		$	—		$	104,204
Cash Flows from Investing Activities:
Payments for property and equipment, net		—			—			(19,664	)		(2,835	)		—			(22,499	)
Acquisitions, net of cash acquired		—			—			—			(9,175	)		—			(9,175	)
Due from affiliates		—			—			(70,909	)		—			70,909			—
Net cash used by investing activities		—			—			(90,573	)		(12,010	)		70,909			(31,674	)
Cash Flows from Financing Activities:
Proceeds from issuance of long-term debt		—			126,500			5			—			—			126,505
Repayments of long-term debt		—			(118,875	)		(2	)		(190	)		—			(119,067	)
Repurchases of common stock		(64,612	)		—			—			—			—			(64,612	)
Proceeds from exercises of stock options		275			—			—			—			—			275
Due to affiliates		31,549			22,586			—			16,774			(70,909	)		—
Net cash (used) provided by financing activities		(32,788	)		30,211			3			16,584			(70,909	)		(56,899	)
Effect of foreign exchange rate changes on cash and    cash equivalents		—			—			—			(78	)		—			(78	)
Net increase in cash and cash equivalents		—			—			9,749			5,804			—			15,553
Cash and cash equivalents, beginning of period		—			10			22,090			41,659			—			63,759
Cash and cash equivalents, end of period	$	—		$	10		$	31,839		$	47,463		$	—		$	79,312

Condensed Consolidating Statement of Cash Flows

Three Months Ended December 31, 2016

(In thousands)

	Parent			Sally Holdings LLC and Sally Capital Inc.			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Consolidating Eliminations			Sally Beauty Holdings, Inc. and Subsidiaries
Net cash provided (used) by operating activities	$	27,303		$	(41,347	)	$	104,449		$	(611	)	$	—		$	89,794
Cash Flows from Investing Activities:
Payments for property and equipment, net		—			—			(20,883	)		(7,125	)		—			(28,008	)
Due from affiliates		—			—			(68,741	)		—			68,741			—
Net cash used by investing activities		—			—			(89,624	)		(7,125	)		68,741			(28,008	)
Cash Flows from Financing Activities:
Proceeds from issuance of long-term debt		—			58,500			—			—			—			58,500
Repayments of long-term debt		—			(58,500	)		(4	)		(170	)		—			(58,674	)
Repurchases of common stock		(67,183	)		—			—			—			—			(67,183	)
Proceeds from exercises of stock options		14,280			—			—			—			—			14,280
Due to affiliates		25,600			31,418			—			11,723			(68,741	)		—
Net cash (used) provided by financing activities		(27,303	)		31,418			(4	)		11,553			(68,741	)		(53,077	)
Effect of foreign exchange rate changes on cash and    cash equivalents		—			—			—			(921	)		—			(921	)
Net (decrease) increase in cash and cash equivalents		—			(9,929	)		14,821			2,896			—			7,788
Cash and cash equivalents, beginning of period		—			28,372			22,368			35,882			—			86,622
Cash and cash equivalents, end of period	$	—		$	18,443		$	37,189		$	38,778		$	—		$	94,410

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Restructuring Plans

3 Months Ended

Dec. 31, 2017

Restructuring And Related Activities [Abstract]

Restructuring Plans

14.   Restructuring Plans

2017 Restructuring Plan

In January 2017, our Board of Directors approved a comprehensive restructuring plan (the “2017 Restructuring Plan”) for our businesses that included a number of organizational efficiency initiatives and other cost reduction opportunities. The 2017 Restructuring Plan comprised the closure of four administrative offices in the U.S. and Canada, reductions in both salaried and hourly workforce and certain other cost reduction activities. At September 30, 2017, the initiatives contemplated by the 2017 Restructuring Plan were substantially completed.

The liability related to the 2017 Restructuring Plan, which is included in accrued liabilities in our consolidated balance sheets, is as follows (in thousands):

Restructuring Activity	Liability at September 30, 2017		Expenses		Expenses Paid or Otherwise Settled		Adjustments		Liability at December 31, 2017
Workforce reductions	$	1,860	$	—	$	1,072	$	—	$	788
Facility closures		1,747		—		781		—		966
Other		235		—		235		—		—
Total	$	3,842	$	—	$	2,088	$	—	$	1,754

2018 Restructuring Plan

In November 2017, our Board approved a restructuring plan (the “2018 Restructuring Plan”) focused primarily on significantly improving the profitability of our international businesses, with particular focus on our European operations. We estimate that we will incur total aggregate charges of approximately $13 million to $14 million related primarily to potential employee separation costs. We anticipate substantially completing the 2018 Restructuring Plan in the fiscal year 2018.

The liability related to the 2018 Restructuring Plan, which is included in accrued liabilities in our consolidated balance sheets, is as follows (in thousands):

Restructuring Activity	Liability at September 30, 2017		Expenses		Expenses Paid or Otherwise Settled		Adjustments		Liability at December 31, 2017
Workforce reductions	$	—	$	4,260	$	3,376	$	—	$	884
Other		—		950		328		—		622
Total	$	—	$	5,210	$	3,704	$	—	$	1,506

Expenses incurred in the three months ended December 31, 2017 represent costs incurred by SBS ($4.5 million) and corporate ($0.7 million).

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Accounting Changes and Recent Accounting Pronouncements (Policies)

3 Months Ended

Dec. 31, 2017

New Accounting Pronouncements And Changes In Accounting Principles [Abstract]

Accounting Changes

Accounting Changes

In November 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Income Taxes, which requires that deferred tax assets, net of related valuation allowances, and deferred tax liabilities be reported as noncurrent in a classified balance sheet. We adopted the new standard retrospectively effective October 1, 2017. Accordingly, the adoption of ASU No. 2015-17 resulted in a decrease in current deferred income tax assets of $28.4 million, a decrease in current deferred income tax liabilities, included in accrued liabilities, of $2.0 million, a net increase in noncurrent deferred income tax assets, included in other assets, of $4.3 million and a net decrease in noncurrent deferred income tax liabilities of $22.1 million in our consolidated balance sheet as of September 30, 2017.

In March 2016, the FASB issued ASU No. 2016-09, Improvements to Employee Share-Based Payment Accounting, which amended several aspects of how share-based compensation is recorded and reported on the financial statements. For example, the new guidance will require that all the income tax effect related to share-based payments be recorded in income tax expense. We adopted these amendments effective October 1, 2017. In connection with this accounting change, we have elected to recognize share-based compensation award forfeitures when they occur. Prior to the change, we recognized forfeitures based on the estimated number of awards expected to vest. As allowed, we elected to adopt retrospectively the amendment requiring that excess tax benefits (shortfalls) be reported in cash flows from operating activities in our consolidated statements of cash flows. The adoption of the amendments contained in ASU No. 2016-09 did not have a material impact on our consolidated financial statements.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, which will supersede Accounting Standards Codification (“ASC”) Topic 605, Revenue Recognition. A core principle of the new guidance is that an entity should measure revenue in connection with its sale of goods and services to a customer based on the consideration to which the entity expects to be entitled in exchange for each of those goods and services. The new standard must be adopted using either the retrospective or cumulative effect transition method. For public companies, this amendment is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. Early adoption is permitted. We have not yet selected a transition method. We have not yet adopted this accounting pronouncement and we do not believe, based on our assessment, that adoption will have a material effect on our consolidated results of operations and consolidated financial position. We are currently assessing the disclosure requirements contained in the new standard and anticipate being compliant with the additional disclosures about our revenue recognition practices required by the new standard.

In February 2016, the FASB issued ASU No. 2016-02, Leases, which will require most leases to be reported on the balance sheet as a right-of-use asset and a lease liability. Under the new guidance, the lease liability must be measured initially based on the present value of future lease payments, subject to certain conditions. The right-of-use asset must be measured initially based on the amount of the liability, plus certain initial direct costs. The new guidance further requires that leases be classified at inception as either (a) operating leases or (b) finance leases. For operating leases, periodic expense will generally be flat (straight-line) throughout the life of the lease. For finance leases, periodic expense will decline (similar to capital leases under prior rules) over the life of the lease. The new standard must be adopted using a modified retrospective transition method. For public companies, this standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted. We have not yet adopted this accounting pronouncement. We have completed a preliminary assessment of the potential impact of adopting ASU No. 2016-02 on our consolidated financial statements. At December 31, 2017, adoption of ASU No. 2016-02 would have resulted in recognition of a right-of-use asset in the estimated amount of approximately $600.0 million and a lease liability for a similar amount in our consolidated balance sheet. We do not believe adoption of ASU No. 2016-02 will have a material impact on our earnings or cash flows. The amount of the right-of-use asset and the lease liability we ultimately recognize may materially differ from this preliminary estimate, including as a result of future organic growth in our business and potential acquisitions.

In August 2017, the FASB issued ASU No. 2017-12, Derivatives and Hedging (Topic 815), Targeted Improvements to Accounting for Hedging Activities, which is intended to better align an entity’s risk management activities and its financial reporting for hedging relationships. ASU No. 2017-12 will change both the designation and measurement guidance for a qualifying hedging relationship and the presentation of the impact of the hedging relationship on the entity’s financial statements. In addition, ASU No. 2017-12 contains targeted improvements to ease the application of current guidance related to the assessment of hedge effectiveness and eliminates the requirement for an entity to separately measure and report hedge ineffectiveness. For public companies, these amendments are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted. We have not yet adopted the accounting pronouncement and do not believe, based on our preliminary assessment, that adoption will have a material effect on our consolidated financial statements.

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Fair Value Measurements (Tables)

3 Months Ended

Dec. 31, 2017

Fair Value Disclosures [Abstract]

Schedule of financial assets and liabilities by fair value hierarchy

Consistent with this hierarchy, we categorized our financial assets and liabilities as follows (in thousands):

	As of December 31, 2017
	Total		Level 1		Level 2		Level 3
Assets
Foreign exchange contracts	$	572	$	—	$	572	$	—
Interest rate caps		4,048		—		4,048		—
Total assets	$	4,620	$	—	$	4,620	$	—
Liabilities
Long-term debt	$	1,893,765	$	946,300	$	947,465	$	—
Foreign exchange contracts		—		—		—		—
Total liabilities	$	1,893,765	$	946,300	$	947,465	$	—

	As of September 30, 2017
	Total		Level 1		Level 2		Level 3
Assets
Foreign exchange contracts	$	779	$	—	$	779	$	—
Interest rate caps		5,178		—		5,178		—
Total assets	$	5,957	$	—	$	5,957	$	—
Liabilities
Long-term debt	$	1,919,930	$	973,750	$	946,180	$	—
Foreign exchange contracts		207		—		207		—
Total liabilities	$	1,920,137	$	973,750	$	946,387	$	—

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Accumulated Stockholders' Deficit (Tables)

3 Months Ended

Dec. 31, 2017

Stockholders Equity Note [Abstract]

Schedule of changes in accumulated other comprehensive loss

The change in accumulated other comprehensive loss (“AOCL”) was as follows (in thousands):

	Foreign Currency Translation Adjustments			Interest Rate Caps			Total
Balance at September 30, 2017	$	(80,752	)	$	(1,084	)	$	(81,836	)
Other comprehensive loss before reclassification, net of tax		(255	)		(803	)		(1,058	)
Balance at December 31, 2017	$	(81,007	)	$	(1,887	)	$	(82,894	)

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Earnings Per Share (Tables)

3 Months Ended

Dec. 31, 2017

Earnings Per Share [Abstract]

Schedule of computations of basic and diluted earnings per share

The following table sets forth the computations of basic and diluted earnings per share (in thousands, except per share data):

	Three Months Ended December 31,
	2017		2016
Net earnings	$	83,264	$	55,826
Weighted average basic shares		127,784		143,631
Dilutive securities:
Stock option and stock award programs		861		1,229
Weighted average diluted shares		128,645		144,860
Earnings per share:
Basic	$	0.65	$	0.39
Diluted	$	0.65	$	0.39

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Share-Based Payments (Tables)

3 Months Ended

Dec. 31, 2017

Share-Based Payments

Summary of activity for performance based unit awards assuming 100% payout

Performance Unit Awards	Number of Shares (inThousands)			Weighted AverageFair Value Per Share		Weighted Average Remaining Vesting Term (in Years)
Unvested at September 30, 2017		197		$	24.50		1.5
Granted		215			17.42
Vested		—			—
Forfeited		(6	)		24.55
Unvested at December 31, 2017		406		$	20.76		2.0

Summary of activity for stock option awards

	Number of Outstanding Options (inThousands)			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in Years)		Aggregate Intrinsic Value (in Thousands)
Outstanding at September 30, 2017		5,211		$	24.12		5.6	$	3,867
Granted		1,122			17.42
Exercised		(26	)		10.52
Forfeited or expired		(145	)		24.73
Outstanding at December 31, 2017		6,162		$	22.94		6.1	$	4,732
Exercisable at December 31, 2017		3,658		$	23.61		4.6	$	3,229

Restricted Stock

Share-Based Payments

Summary of the activity for restricted stock awards/units

Restricted Stock Awards	Number of Shares (in Thousands)			Weighted Average Fair Value Per Share		Weighted Average Remaining Vesting Term (in Years)
Unvested at September 30, 2017		125		$	26.00		1.3
Granted		264			17.42
Vested		(23	)		24.18
Forfeited		—			—
Unvested at December 31, 2017		366		$	19.94		2.7

Restricted Stock Units

Share-Based Payments

Summary of the activity for restricted stock awards/units

Restricted Stock Units	Number of Shares (in Thousands)			Weighted Average Fair Value Per Share		Weighted Average Remaining Vesting Term (in Years)
Unvested at September 30, 2017		—		$	—		—
Granted		72			17.42
Vested		—			—
Forfeited		(7	)		17.42
Unvested at December 31, 2017		65		$	17.42		0.7

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Derivative Instruments and Hedging Activities (Tables)

3 Months Ended

Dec. 31, 2017

Derivative Instruments And Hedging Activities Disclosure [Abstract]

Schedule of fair value of derivative financial instruments and their classification on consolidated balance sheets

The table below presents the fair value of our derivative financial instruments as well as their classification on our consolidated balance sheets (in thousands):

	Asset Derivatives					Liability Derivatives
	Classification	December 31, 2017		September 30, 2017		Classification	December 31, 2017		September 30, 2017
Derivatives designated as hedging   instruments:
Interest rate caps	Other current assets	$	4,048	$	5,178	N/A	$	—	$	—
Derivatives not designated as hedging    instruments:
Foreign exchange contracts	Other current assets		572		779	Accrued liabilities		—		207
		$	4,620	$	5,957		$	—	$	207

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Income Taxes (Tables)

3 Months Ended

Dec. 31, 2017

Income Tax Disclosure [Abstract]

Schedule of Difference Between US Federal Statutory Income Tax Rate and Effective Income Tax Rate

The difference between our U.S. federal statutory income tax rate and our effective income tax rate is summarized below:

	Three Months Ended December 31, 2017
U.S. federal statutory income tax rate	24.5	%
State income taxes, net of federal tax benefit	3.2
Effect of foreign operations	0.8
Deferred tax revaluation	(39.1)
Deemed repatriation tax	13.3
Other, net	0.6
Effective tax rate	3.3	%

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Business Segments (Tables)

3 Months Ended

Dec. 31, 2017

Segment Reporting [Abstract]

Schedule of segment data

Segment data for the three months ended December 31, 2017 and 2016 is as follows (in thousands):

	Three Months Ended December 31,
	2017			2016
Net sales:
SBS	$	585,574		$	589,859
BSG		409,390			409,750
Total	$	994,964		$	999,609
Earnings before provision for income taxes:
Segment operating earnings:
SBS	$	86,594		$	92,526
BSG		64,565			63,600
Segment operating earnings		151,159			156,126
Unallocated expenses		(35,816	)		(38,669	)
Restructuring charges		(5,210	)		—
Consolidated operating earnings		110,133			117,457
Interest expense		(24,016	)		(26,799	)
Earnings before provision for income taxes	$	86,117		$	90,658

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Parent, Issuers, Guarantor and Non-Guarantor Condensed Consolidated Financial Statements (Tables)

3 Months Ended

Dec. 31, 2017

Guarantor And Non Guarantor Condensed Consolidated Financial Statements [Abstract]

Schedule of Condensed Consolidating Balance Sheet

Condensed Consolidating Balance Sheet

December 31, 2017

(In thousands)

	Parent			Sally HoldingsLLC and Sally Capital Inc.		Guarantor Subsidiaries			Non- Guarantor Subsidiaries		Consolidating Eliminations			SallyBeauty Holdings, Inc. and Subsidiaries
Assets
Cash and cash equivalents	$	—		$	10	$	31,839		$	47,463	$	—		$	79,312
Trade and other accounts receivable, net		—			—		64,152			32,806		—			96,958
Due from affiliates		—			—		2,360,280			—		(2,360,280	)		—
Inventory		—			—		714,682			226,464		—			941,146
Other current assets		1,280			817		27,856			16,306		—			46,259
Property and equipment, net		11			—		225,891			80,519		—			306,421
Investment in subsidiaries		1,195,373			3,820,552		374,002			—		(5,389,927	)		—
Goodwill and other intangible assets, net		—			—		465,755			156,403		—			622,158
Other assets		1,050			7,171		(7,852	)		20,698		—			21,067
Total assets	$	1,197,714		$	3,828,550	$	4,256,605		$	580,659	$	(7,750,207	)	$	2,113,321
Liabilities and Stockholders’ (Deficit) Equity
Accounts payable	$	36		$	—	$	234,878		$	71,356	$	—		$	306,270
Due to affiliates		1,519,033			750,442		—			90,805		(2,360,280	)		—
Accrued liabilities		362			6,170		125,852			34,117		—			166,501
Income taxes payable		10,566			1,678		—			87		—			12,331
Long-term debt		—			1,874,887		4			1,308		—			1,876,199
Other liabilities		10,371			—		17,027			3,749		—			31,147
Deferred income tax liabilities, net		(19	)		—		58,292			5,235		—			63,508
Total liabilities		1,540,349			2,633,177		436,053			206,657		(2,360,280	)		2,455,956
Total stockholders’ (deficit) equity		(342,635	)		1,195,373		3,820,552			374,002		(5,389,927	)		(342,635	)
Total liabilities and stockholders’ (deficit) equity	$	1,197,714		$	3,828,550	$	4,256,605		$	580,659	$	(7,750,207	)	$	2,113,321

Condensed Consolidating Balance Sheet

September 30, 2017

(In thousands)

	Parent			Sally Holdings LLC and Sally Capital Inc.		Guarantor Subsidiaries			Non- Guarantor Subsidiaries		Consolidating Eliminations			Sally Beauty Holdings, Inc. and Subsidiaries
Assets
Cash and cash equivalents	$	—		$	10	$	22,090		$	41,659	$	—		$	63,759
Trade and other accounts receivable, net		200			—		59,992			32,049		—			92,241
Due from affiliates		—			—		2,289,371			—		(2,289,371	)		—
Inventory		—			—		709,890			220,965		—			930,855
Other current assets		11,763			813		26,144			16,503		—			55,223
Property and equipment, net		12			—		230,069			83,636		—			313,717
Investment in subsidiaries		1,110,891			3,717,999		386,681			—		(5,215,571	)		—
Goodwill and other intangible assets, net		—			—		468,118			149,978		—			618,096
Other assets		1,538			8,116		(7,837	)		23,299		—			25,116
Total assets	$	1,124,404		$	3,726,938	$	4,184,518		$	568,089	$	(7,504,942	)	$	2,099,007
Liabilities and Stockholders’ (Deficit) Equity
Accounts payable	$	251		$	4	$	243,818		$	63,679	$	—		$	307,752
Due to affiliates		1,487,484			727,856		—			74,031		(2,289,371	)		—
Accrued liabilities		285			20,108		113,628			32,506		—			166,527
Income taxes payable		—			1,624		—			609		—			2,233
Long-term debt		—			1,866,455		1			1,479		—			1,867,935
Other liabilities		—			—		16,008			4,132		—			20,140
Deferred income tax liabilities, net		—			—		93,064			4,972		—			98,036
Total liabilities		1,488,020			2,616,047		466,519			181,408		(2,289,371	)		2,462,623
Total stockholders’ (deficit) equity		(363,616	)		1,110,891		3,717,999			386,681		(5,215,571	)		(363,616	)
Total liabilities and stockholders’ (deficit) equity	$	1,124,404		$	3,726,938	$	4,184,518		$	568,089	$	(7,504,942	)	$	2,099,007

Schedule of Condensed Consolidating Statement of Earnings and Comprehensive Income

Condensed Consolidating Statement of Earnings and Comprehensive Income

Three Months Ended December 31, 2017

(In thousands)

	Parent			Sally Holdings LLC and Sally Capital Inc.			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Consolidating Eliminations			Sally Beauty Holdings, Inc. and Subsidiaries
Net sales	$	—		$	—		$	796,532		$	198,432		$	—		$	994,964
Related party sales		—			—			446			—			(446	)		—
Cost of products sold and distribution expenses		—			—			403,810			104,971			(446	)		508,335
Gross profit		—			—			393,168			93,461			—			486,629
Selling, general and administrative expenses		2,606			179			284,467			84,034			—			371,286
Restructuring charges		—			—			5,210			—			—			5,210
Operating earnings (loss)		(2,606	)		(179	)		103,491			9,427			—			110,133
Interest expense		—			24,014			—			2			—			24,016
Earnings (loss) before provision for income taxes		(2,606	)		(24,193	)		103,491			9,425			—			86,117
Provision (benefit) for income taxes		(251	)		(6,925	)		(7,915	)		17,944			—			2,853
Equity in earnings of subsidiaries, net of tax		85,619			102,887			(8,519	)		—			(179,987	)		—
Net earnings (loss)		83,264			85,619			102,887			(8,519	)		(179,987	)		83,264
Other comprehensive loss, net of tax		—			(803	)		—			(255	)		—			(1,058	)
Total comprehensive income (loss)	$	83,264		$	84,816		$	102,887		$	(8,774	)	$	(179,987	)	$	82,206

Condensed Consolidating Statement of Earnings and Comprehensive Income

Three Months Ended December 31, 2016

(In thousands)

	Parent			Sally Holdings LLC and Sally Capital Inc.			Guarantor Subsidiaries		Non- Guarantor Subsidiaries			Consolidating Eliminations			Sally Beauty Holdings, Inc. and Subsidiaries
Net sales	$	—		$	—		$	816,051	$	183,558		$	—		$	999,609
Related party sales		—			—			748		—			(748	)		—
Cost of products sold and distribution expenses		—			—			411,323		97,326			(748	)		507,901
Gross profit		—			—			405,476		86,232			—			491,708
Selling, general and administrative expenses		2,549			137			296,724		74,841			—			374,251
Operating earnings (loss)		(2,549	)		(137	)		108,752		11,391			—			117,457
Interest expense		—			26,749			—		50			—			26,799
Earnings (loss) before provision for income taxes		(2,549	)		(26,886	)		108,752		11,341			—			90,658
Provision (benefit) for income taxes		(990	)		(10,443	)		41,998		4,267			—			34,832
Equity in earnings of subsidiaries, net of tax		57,385			73,828			7,074		—			(138,287	)		—
Net earnings		55,826			57,385			73,828		7,074			(138,287	)		55,826
Other comprehensive loss, net of tax		—			—			—		(18,668	)		—			(18,668	)
Total comprehensive income (loss)	$	55,826		$	57,385		$	73,828	$	(11,594	)	$	(138,287	)	$	37,158

Schedule of Condensed Consolidating Statement of Cash Flows

Condensed Consolidating Statement of Cash Flows

Three Months Ended December 31, 2017

(In thousands)

	Parent			Sally Holdings LLC and Sally Capital Inc.			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Consolidating Eliminations			Sally Beauty Holdings, Inc. and Subsidiaries
Net cash provided (used) by operating activities	$	32,788		$	(30,211	)	$	100,319		$	1,308		$	—		$	104,204
Cash Flows from Investing Activities:
Payments for property and equipment, net		—			—			(19,664	)		(2,835	)		—			(22,499	)
Acquisitions, net of cash acquired		—			—			—			(9,175	)		—			(9,175	)
Due from affiliates		—			—			(70,909	)		—			70,909			—
Net cash used by investing activities		—			—			(90,573	)		(12,010	)		70,909			(31,674	)
Cash Flows from Financing Activities:
Proceeds from issuance of long-term debt		—			126,500			5			—			—			126,505
Repayments of long-term debt		—			(118,875	)		(2	)		(190	)		—			(119,067	)
Repurchases of common stock		(64,612	)		—			—			—			—			(64,612	)
Proceeds from exercises of stock options		275			—			—			—			—			275
Due to affiliates		31,549			22,586			—			16,774			(70,909	)		—
Net cash (used) provided by financing activities		(32,788	)		30,211			3			16,584			(70,909	)		(56,899	)
Effect of foreign exchange rate changes on cash and    cash equivalents		—			—			—			(78	)		—			(78	)
Net increase in cash and cash equivalents		—			—			9,749			5,804			—			15,553
Cash and cash equivalents, beginning of period		—			10			22,090			41,659			—			63,759
Cash and cash equivalents, end of period	$	—		$	10		$	31,839		$	47,463		$	—		$	79,312

Condensed Consolidating Statement of Cash Flows

Three Months Ended December 31, 2016

(In thousands)

	Parent			Sally Holdings LLC and Sally Capital Inc.			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Consolidating Eliminations			Sally Beauty Holdings, Inc. and Subsidiaries
Net cash provided (used) by operating activities	$	27,303		$	(41,347	)	$	104,449		$	(611	)	$	—		$	89,794
Cash Flows from Investing Activities:
Payments for property and equipment, net		—			—			(20,883	)		(7,125	)		—			(28,008	)
Due from affiliates		—			—			(68,741	)		—			68,741			—
Net cash used by investing activities		—			—			(89,624	)		(7,125	)		68,741			(28,008	)
Cash Flows from Financing Activities:
Proceeds from issuance of long-term debt		—			58,500			—			—			—			58,500
Repayments of long-term debt		—			(58,500	)		(4	)		(170	)		—			(58,674	)
Repurchases of common stock		(67,183	)		—			—			—			—			(67,183	)
Proceeds from exercises of stock options		14,280			—			—			—			—			14,280
Due to affiliates		25,600			31,418			—			11,723			(68,741	)		—
Net cash (used) provided by financing activities		(27,303	)		31,418			(4	)		11,553			(68,741	)		(53,077	)
Effect of foreign exchange rate changes on cash and    cash equivalents		—			—			—			(921	)		—			(921	)
Net (decrease) increase in cash and cash equivalents		—			(9,929	)		14,821			2,896			—			7,788
Cash and cash equivalents, beginning of period		—			28,372			22,368			35,882			—			86,622
Cash and cash equivalents, end of period	$	—		$	18,443		$	37,189		$	38,778		$	—		$	94,410

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Restructuring Plans (Tables)

3 Months Ended

Dec. 31, 2017

2017 Restructuring Plan

Schedule of restructuring plan

The liability related to the 2017 Restructuring Plan, which is included in accrued liabilities in our consolidated balance sheets, is as follows (in thousands):

Restructuring Activity	Liability at September 30, 2017		Expenses		Expenses Paid or Otherwise Settled		Adjustments		Liability at December 31, 2017
Workforce reductions	$	1,860	$	—	$	1,072	$	—	$	788
Facility closures		1,747		—		781		—		966
Other		235		—		235		—		—
Total	$	3,842	$	—	$	2,088	$	—	$	1,754

2018 Restructuring Plan

Schedule of restructuring plan

The liability related to the 2018 Restructuring Plan, which is included in accrued liabilities in our consolidated balance sheets, is as follows (in thousands):

Restructuring Activity	Liability at September 30, 2017		Expenses		Expenses Paid or Otherwise Settled		Adjustments		Liability at December 31, 2017
Workforce reductions	$	—	$	4,260	$	3,376	$	—	$	884
Other		—		950		328		—		622
Total	$	—	$	5,210	$	3,704	$	—	$	1,506

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Accounting Changes and Recent Accounting Pronouncements (Details) - USD ($) $ in Thousands	Dec. 31, 2017	Sep. 30, 2017
New Accounting Pronouncements Or Change In Accounting Principle [Line Items]
Net decrease in noncurrent deferred income tax liabilities	$ (63,508)	$ (98,036)
ASU 2015-17
New Accounting Pronouncements Or Change In Accounting Principle [Line Items]
Decrease in current deferred income tax assets		(28,400)
Net decrease in noncurrent deferred income tax liabilities		(22,100)
ASU 2015-17 | Other Assets
New Accounting Pronouncements Or Change In Accounting Principle [Line Items]
Net increase in noncurrent deferred income tax assets		4,300
ASU 2015-17 | Accrued Liabilities
New Accounting Pronouncements Or Change In Accounting Principle [Line Items]
Decrease in current deferred income tax liabilities		$ (2,000)
ASU 16-02
New Accounting Pronouncements Or Change In Accounting Principle [Line Items]
Estimated amount of Right of use asset	600,000
Lease liability	$ 600,000

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Fair Value Measurements (Details) - USD ($) $ in Thousands	Dec. 31, 2017	Sep. 30, 2017
ABL facility
Liabilities
Long term debt carrying amount	$ 1,895,000	$ 1,887,400
Unamortized debt issuance costs	18,800	19,400
Fair value measurement on recurring basis
Assets
Foreign exchange contracts	572	779
Interest rate caps	4,048	5,178
Total assets	4,620	5,957
Liabilities
Long-term debt	1,893,765	1,919,930
Foreign exchange contracts		207
Total liabilities	1,893,765	1,920,137
Fair value measurement on recurring basis | Level 1
Liabilities
Long-term debt	946,300	973,750
Total liabilities	946,300	973,750
Fair value measurement on recurring basis | Level 2
Assets
Foreign exchange contracts	572	779
Interest rate caps	4,048	5,178
Total assets	4,620	5,957
Liabilities
Long-term debt	947,465	946,180
Foreign exchange contracts		207
Total liabilities	$ 947,465	$ 946,387

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Accumulated Stockholders' Deficit - Share Repurchase Program (Details) - USD ($) shares in Millions	1 Months Ended	3 Months Ended
	Aug. 31, 2017	Dec. 31, 2017	Dec. 31, 2016
2017 Share Repurchase program
Share Repurchase Program
Amount of shares authorized to be repurchased	$ 1,000,000,000
Term of share repurchase program	4 years
Common stock shares repurchased and retired (in shares)		3.8
Cost of repurchase and retirement of common stock		$ 64,500,000
2014 Share Repurchase Program
Share Repurchase Program
Common stock shares repurchased and retired (in shares)			2.5
Cost of repurchase and retirement of common stock			$ 67,000,000

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Accumulated stock holders' Deficit - Change in AOCL (Details) $ in Thousands	3 Months Ended
	Dec. 31, 2017 USD ($)
Accumulated Other Comprehensive Income Loss [Line Items]
Accumulated other comprehensive loss, Beginning Balance	$ (363,616)
Accumulated other comprehensive loss, Ending Balance	(342,635)
Interest rate caps
Accumulated Other Comprehensive Income Loss [Line Items]
Accumulated other comprehensive loss, Beginning Balance	(1,084)
Other comprehensive loss before reclassification, net of tax	(803)
Accumulated other comprehensive loss, Ending Balance	(1,887)
Foreign currency translation adjustments
Accumulated Other Comprehensive Income Loss [Line Items]
Accumulated other comprehensive loss, Beginning Balance	(80,752)
Other comprehensive loss before reclassification, net of tax	(255)
Accumulated other comprehensive loss, Ending Balance	(81,007)
AOCI attributable to parent
Accumulated Other Comprehensive Income Loss [Line Items]
Accumulated other comprehensive loss, Beginning Balance	(81,836)
Other comprehensive loss before reclassification, net of tax	(1,058)
Accumulated other comprehensive loss, Ending Balance	$ (82,894)

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Earnings Per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Earnings Per Share Reconciliation:
Net earnings	$ 83,264	$ 55,826
Weighted average basic shares	127,784	143,631
Dilutive securities:
Stock option and stock award programs (in shares)	861	1,229
Weighted average diluted shares	128,645	144,860
Earnings per share:
Basic	$ 0.65	$ 0.39
Diluted	$ 0.65	$ 0.39
Common stock potentially outstanding but not included in the computation of diluted earnings per share
Options to purchase shares not included in the computation of diluted earnings per share since the options were anti-dilutive (in shares)	5,802,107	2,457,972

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Share-Based Payments - Performance-Based Awards (Details) - Performance Unit Awards - $ / shares shares in Thousands	3 Months Ended	12 Months Ended
	Dec. 31, 2017	Sep. 30, 2017
Share-Based Payments
Payout percentage (in percentage)	100.00%
Performance Unit Awards (in shares)
Unvested at the beginning of the period (in shares)	197
Granted (in shares)	215
Forfeited (in shares)	(6)
Unvested at the end of the period (in shares)	406	197
Performance Unit Awards (in dollars per share)
Unvested at the beginning of the period (in dollars per share)	$ 24.50
Granted (in dollars per share)	17.42
Forfeited (in dollars per share)	24.55
Unvested at the end of the period (in dollars per share)	$ 20.76	$ 24.50
Performance Unit Awards (in years)
Weighted Average Remaining Vesting Term (in Years)	2 years	1 year 6 months

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Share-Based Payments - Service-Based Awards and Stock Option Awards (Details) - Stock Option Awards - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended	12 Months Ended
	Dec. 31, 2017	Sep. 30, 2017
Stock Options, Number of Outstanding Options
Outstanding at the beginning of the period (in shares)	5,211
Granted (in shares)	1,122
Exercised (in shares)	(26)
Forfeited or expired (in shares)	(145)
Outstanding at the end of the period (in shares)	6,162	5,211
Exercisable at the end of the period (in shares)	3,658
Stock Options, Weighted Average Exercise Price
Outstanding at the beginning of the period (in dollars per share)	$ 24.12
Granted (in dollars per share)	17.42
Exercised (in dollars per share)	10.52
Forfeited or expired (in dollars per share)	24.73
Outstanding at the end of the period (in dollars per share)	22.94	$ 24.12
Exercisable at the end of the period (in dollars per share)	$ 23.61
Stock Options, Weighted Average Remaining Contractual Term
Weighted average remaining contractual term (in years)	6 years 1 month 6 days	5 years 7 months 6 days
Exercisable at December 31, 2017	4 years 7 months 6 days
Stock Options, Aggregate Intrinsic Value
Outstanding balance at period end (in dollars)	$ 4,732	$ 3,867
Exercisable at the end of the period (in dollars)	$ 3,229

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Share-Based Payments - Restricted Stock Awards (Details) - Restricted Stock Awards - $ / shares	3 Months Ended	12 Months Ended
	Dec. 31, 2017	Sep. 30, 2017
Restricted stock (in shares)
Unvested at the beginning of the period (in shares)	125,000
Granted (in shares)	264,000
Vested (in shares)	(23,000)
Unvested at the end of the period (in shares)	366,000	125,000
Restricted Stock (in dollars per share)
Unvested at the beginning of the period (in dollars per share)	$ 26.00
Granted (in dollars per share)	17.42
Vested (in dollar per share)	24.18
Unvested at the end of the period (in dollars per share)	$ 19.94	$ 26.00
Restricted stock (in years)
Weighted Average Remaining Vesting Term (in Years)	2 years 8 months 12 days	1 year 3 months 18 days

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Share-Based Payments - Restricted Stock Units (Details) - Restricted Stock Units - $ / shares	3 Months Ended	12 Months Ended
	Dec. 31, 2017	Sep. 30, 2017
Restricted stock (in shares)
Granted (in shares)	72,000
Forfeited (in shares)	(7,000)
Unvested at the end of the period (in shares)	65,000
Restricted Stock (in dollars per share)
Granted (in dollars per share)	$ 17.42
Forfeited (in dollars per share)	17.42
Unvested at the end of the period (in dollars per share)	$ 17.42
Restricted stock (in years)
Weighted Average Remaining Vesting Term (in Years)	8 months 12 days	0 years

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Short-term Borrowings and Long-term Debt - ABL Facility and Canadian sub-facility (Details) $ in Millions	Dec. 31, 2017 USD ($)
Sally Holdings, LLC | ABL facility
Debt Instruments
Revolving credit facility	$ 381.3

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Derivative Instruments and Hedging Activities - (Details)	3 Months Ended
	Dec. 31, 2017 USD ($) instrument	Jul. 31, 2017 USD ($) derivative
Derivative Instruments
Number of derivative instruments held | instrument	0
Foreign exchange contracts
Derivative Instruments
Notional Amount	$ 100,600,000
Foreign exchange contracts | Maximum
Derivative Instruments
Derivative instruments, expiration date	Sep. 30, 2018
Variable-rate tranche | Interest rate caps | Sally Holdings, LLC
Derivative Instruments
Notional Amount		$ 550,000,000
Derivative instruments, expiration date	Jun. 30, 2023
Designated Cash Flow Hedges
Number of interest rate caps | derivative		2

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Derivative Instruments and Hedging Activities - Non-designated Cash Flow Hedges (Details) - USD ($) $ in Thousands	Dec. 31, 2017	Sep. 30, 2017
Derivatives Not Designated as Hedging Instruments
Total derivatives not designated as hedging instruments, Asset	$ 4,620	$ 5,957
Total derivatives not designated as hedging instruments, Liability		207
Other current assets
Derivatives Not Designated as Hedging Instruments
Interest rate caps	4,048	5,178
Foreign exchange contracts	$ 572	779
Accrued Liabilities
Credit-risk-related Contingent Features
Foreign exchange contracts		$ 207

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Income Taxes (Details) $ in Millions	3 Months Ended
	Dec. 31, 2017 USD ($)
Income Tax Disclosure [Abstract]
Provisional income tax benefit recognized related to revaluation of deferred income tax assets and liabilities	$ 33.6
Provisional income tax charge recognized for federal and state income taxes	11.4
Undistributed earnings of foreign operations	$ 10.4
Federal statutory tax rate for fiscal year September 30, 2018	24.50%
Federal statutory tax rate thereafter	21.00%

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Income Taxes - Schedule of Difference Between US Federal Statutory Income Tax Rate and Effective Income Tax Rate (Details)	3 Months Ended
	Dec. 31, 2017
Income Tax Disclosure [Abstract]
U.S. federal statutory income tax rate	24.50%
State income taxes, net of federal tax benefit	3.20%
Effect of foreign operations	0.80%
Deferred tax revaluation	(39.10%)
Deemed repatriation tax	13.30%
Other, net	0.60%
Effective tax rate	3.30%

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Business Segments (Details) $ in Thousands	3 Months Ended
	Dec. 31, 2017 USD ($) segment	Dec. 31, 2016 USD ($)
Segments
Number of reportable segments | segment	2
Net sales:
Total net sales	$ 994,964	$ 999,609
Segment operating earnings:
Segment operating earnings	110,133	117,457
Restructuring charges	(5,210)
Interest expense	(24,016)	(26,799)
Earnings before provision for income taxes	86,117	90,658
Operating segments
Segment operating earnings:
Segment operating earnings	151,159	156,126
Corporate
Segment operating earnings:
Unallocated expenses	(35,816)	(38,669)
Restructuring charges	(700)
Sally Beauty Supply
Net sales:
Total net sales	585,574	589,859
Segment operating earnings:
Restructuring charges	(4,500)
Sally Beauty Supply | Operating segments
Segment operating earnings:
Segment operating earnings	86,594	92,526
Beauty Systems Group
Net sales:
Total net sales	409,390	409,750
Beauty Systems Group | Operating segments
Segment operating earnings:
Segment operating earnings	$ 64,565	$ 63,600

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Parent, Issuers, Guarantor and Non Guarantor Condensed Consolidated Financial Statements - (Details)	Dec. 31, 2017
Guarantor Subsidiaries
Condensed Balance Sheet Statements Captions [Line Items]
Percentage of guarantor subsidiaries owned by parent	100.00%

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Parent, Issuers, Guarantor and Non Guarantor Condensed Consolidated Financial Statements - Condensed Consolidating Balance Sheet (Details) - USD ($) $ in Thousands	Dec. 31, 2017	Sep. 30, 2017	Dec. 31, 2016	Sep. 30, 2016
Assets
Cash and cash equivalents	$ 79,312	$ 63,759	$ 94,410	$ 86,622
Trade and other accounts receivable, net	96,958	92,241
Inventory	941,146	930,855
Other current assets	46,259	55,223
Property and equipment, net	306,421	313,717
Goodwill and other intangible assets, net	622,158	618,096
Other assets	21,067	25,116
Total assets	2,113,321	2,099,007
Liabilities and Stockholders’ (Deficit) Equity
Accounts payable	306,270	307,752
Accrued liabilities	166,501	166,527
Income taxes payable	12,331	2,233
Long-term debt	1,876,199	1,867,935
Other liabilities	31,147	20,140
Deferred income tax liabilities, net	63,508	98,036
Total liabilities	2,455,956	2,462,623
Total stockholders’ (deficit) equity	(342,635)	(363,616)
Total liabilities and stockholders’ deficit	2,113,321	2,099,007
Parent
Assets
Trade and other accounts receivable, net		200
Other current assets	1,280	11,763
Property and equipment, net	11	12
Investment in subsidiaries	1,195,373	1,110,891
Other assets	1,050	1,538
Total assets	1,197,714	1,124,404
Liabilities and Stockholders’ (Deficit) Equity
Accounts payable	36	251
Due to affiliates	1,519,033	1,487,484
Accrued liabilities	362	285
Income taxes payable	10,566
Other liabilities	10,371
Deferred income tax liabilities, net	(19)
Total liabilities	1,540,349	1,488,020
Total stockholders’ (deficit) equity	(342,635)	(363,616)
Total liabilities and stockholders’ deficit	1,197,714	1,124,404
Sally Holdings And Sally Capital
Assets
Cash and cash equivalents	10	10	18,443	28,372
Other current assets	817	813
Investment in subsidiaries	3,820,552	3,717,999
Other assets	7,171	8,116
Total assets	3,828,550	3,726,938
Liabilities and Stockholders’ (Deficit) Equity
Accounts payable		4
Due to affiliates	750,442	727,856
Accrued liabilities	6,170	20,108
Income taxes payable	1,678	1,624
Long-term debt	1,874,887	1,866,455
Total liabilities	2,633,177	2,616,047
Total stockholders’ (deficit) equity	1,195,373	1,110,891
Total liabilities and stockholders’ deficit	3,828,550	3,726,938
Guarantor Subsidiaries
Assets
Cash and cash equivalents	31,839	22,090	37,189	22,368
Trade and other accounts receivable, net	64,152	59,992
Due from affiliates	2,360,280	2,289,371
Inventory	714,682	709,890
Other current assets	27,856	26,144
Property and equipment, net	225,891	230,069
Investment in subsidiaries	374,002	386,681
Goodwill and other intangible assets, net	465,755	468,118
Other assets	(7,852)	(7,837)
Total assets	4,256,605	4,184,518
Liabilities and Stockholders’ (Deficit) Equity
Accounts payable	234,878	243,818
Accrued liabilities	125,852	113,628
Long-term debt	4	1
Other liabilities	17,027	16,008
Deferred income tax liabilities, net	58,292	93,064
Total liabilities	436,053	466,519
Total stockholders’ (deficit) equity	3,820,552	3,717,999
Total liabilities and stockholders’ deficit	4,256,605	4,184,518
Non-Guarantor Subsidiaries
Assets
Cash and cash equivalents	47,463	41,659	$ 38,778	$ 35,882
Trade and other accounts receivable, net	32,806	32,049
Inventory	226,464	220,965
Other current assets	16,306	16,503
Property and equipment, net	80,519	83,636
Goodwill and other intangible assets, net	156,403	149,978
Other assets	20,698	23,299
Total assets	580,659	568,089
Liabilities and Stockholders’ (Deficit) Equity
Accounts payable	71,356	63,679
Due to affiliates	90,805	74,031
Accrued liabilities	34,117	32,506
Income taxes payable	87	609
Long-term debt	1,308	1,479
Other liabilities	3,749	4,132
Deferred income tax liabilities, net	5,235	4,972
Total liabilities	206,657	181,408
Total stockholders’ (deficit) equity	374,002	386,681
Total liabilities and stockholders’ deficit	580,659	568,089
Consolidating Eliminations
Assets
Due from affiliates	(2,360,280)	(2,289,371)
Investment in subsidiaries	(5,389,927)	(5,215,571)
Total assets	(7,750,207)	(7,504,942)
Liabilities and Stockholders’ (Deficit) Equity
Due to affiliates	(2,360,280)	(2,289,371)
Total liabilities	(2,360,280)	(2,289,371)
Total stockholders’ (deficit) equity	(5,389,927)	(5,215,571)
Total liabilities and stockholders’ deficit	$ (7,750,207)	$ (7,504,942)

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Parent, Issuers, Guarantor and Non-Guarantor Condensed Consolidated Financial Statements - Condensed Consolidating Statement of Earnings and Comprehensive Income (Details) - USD ($) $ in Thousands	3 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Condensed Income Statements Captions [Line Items]
Net sales	$ 994,964	$ 999,609
Cost of products sold and distribution expenses	508,335	507,901
Gross profit	486,629	491,708
Selling, general and administrative expenses	371,286	374,251
Restructuring charges	5,210
Operating earnings	110,133	117,457
Interest expense	24,016	26,799
Earnings before provision for income taxes	86,117	90,658
Provision (benefit) for income taxes	2,853	34,832
Net earnings	83,264	55,826
Other comprehensive loss, net of tax	(1,058)	(18,668)
Total comprehensive income	82,206	37,158
Parent
Condensed Income Statements Captions [Line Items]
Selling, general and administrative expenses	2,606	2,549
Operating earnings	(2,606)	(2,549)
Earnings before provision for income taxes	(2,606)	(2,549)
Provision (benefit) for income taxes	(251)	(990)
Equity in earnings of subsidiaries, net of tax	85,619	57,385
Net earnings	83,264	55,826
Total comprehensive income	83,264	55,826
Sally Holdings And Sally Capital
Condensed Income Statements Captions [Line Items]
Selling, general and administrative expenses	179	137
Operating earnings	(179)	(137)
Interest expense	24,014	26,749
Earnings before provision for income taxes	(24,193)	(26,886)
Provision (benefit) for income taxes	(6,925)	(10,443)
Equity in earnings of subsidiaries, net of tax	102,887	73,828
Net earnings	85,619	57,385
Other comprehensive loss, net of tax	(803)
Total comprehensive income	84,816	57,385
Guarantor Subsidiaries
Condensed Income Statements Captions [Line Items]
Net sales	796,532	816,051
Related party sales	446	748
Cost of products sold and distribution expenses	403,810	411,323
Gross profit	393,168	405,476
Selling, general and administrative expenses	284,467	296,724
Restructuring charges	5,210
Operating earnings	103,491	108,752
Earnings before provision for income taxes	103,491	108,752
Provision (benefit) for income taxes	(7,915)	41,998
Equity in earnings of subsidiaries, net of tax	(8,519)	7,074
Net earnings	102,887	73,828
Total comprehensive income	102,887	73,828
Non-Guarantor Subsidiaries
Condensed Income Statements Captions [Line Items]
Net sales	198,432	183,558
Cost of products sold and distribution expenses	104,971	97,326
Gross profit	93,461	86,232
Selling, general and administrative expenses	84,034	74,841
Operating earnings	9,427	11,391
Interest expense	2	50
Earnings before provision for income taxes	9,425	11,341
Provision (benefit) for income taxes	17,944	4,267
Net earnings	(8,519)	7,074
Other comprehensive loss, net of tax	(255)	(18,668)
Total comprehensive income	(8,774)	(11,594)
Consolidating Eliminations
Condensed Income Statements Captions [Line Items]
Related party sales	(446)	(748)
Cost of products sold and distribution expenses	(446)	(748)
Equity in earnings of subsidiaries, net of tax	(179,987)	(138,287)
Net earnings	(179,987)	(138,287)
Total comprehensive income	$ (179,987)	$ (138,287)

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Parent, Issuers, Guarantor and Non-Guarantor Condensed Consolidated Financial Statements - Condensed Consolidating Statement of Cash Flows (Details) - USD ($) $ in Thousands	3 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Condensed Cash Flow Statements Captions [Line Items]
Net cash provided (used) by operating activities	$ 104,204	$ 89,794
Cash Flows from Investing Activities:
Payments for property and equipment, net	(22,499)	(28,008)
Acquisitions, net of cash acquired	(9,175)
Net cash used by investing activities	(31,674)	(28,008)
Cash Flows from Financing Activities:
Proceeds from issuance of long-term debt	126,505	58,500
Repayments of long-term debt	(119,067)	(58,674)
Repurchases of common stock	(64,612)	(67,183)
Proceeds from exercises of stock options	275	14,280
Net cash used by financing activities	(56,899)	(53,077)
Effect of foreign exchange rate changes on cash and cash equivalents	(78)	(921)
Net increase in cash and cash equivalents	15,553	7,788
Cash and cash equivalents, beginning of period	63,759	86,622
Cash and cash equivalents, end of period	79,312	94,410
Parent
Condensed Cash Flow Statements Captions [Line Items]
Net cash provided (used) by operating activities	32,788	27,303
Cash Flows from Financing Activities:
Repurchases of common stock	(64,612)	(67,183)
Proceeds from exercises of stock options	275	14,280
Due to affiliates	31,549	25,600
Net cash used by financing activities	(32,788)	(27,303)
Sally Holdings And Sally Capital
Condensed Cash Flow Statements Captions [Line Items]
Net cash provided (used) by operating activities	(30,211)	(41,347)
Cash Flows from Financing Activities:
Proceeds from issuance of long-term debt	126,500	58,500
Repayments of long-term debt	(118,875)	(58,500)
Due to affiliates	22,586	31,418
Net cash used by financing activities	30,211	31,418
Net increase in cash and cash equivalents		(9,929)
Cash and cash equivalents, beginning of period	10	28,372
Cash and cash equivalents, end of period	10	18,443
Guarantor Subsidiaries
Condensed Cash Flow Statements Captions [Line Items]
Net cash provided (used) by operating activities	100,319	104,449
Cash Flows from Investing Activities:
Payments for property and equipment, net	(19,664)	(20,883)
Due from affiliates	(70,909)	(68,741)
Net cash used by investing activities	(90,573)	(89,624)
Cash Flows from Financing Activities:
Proceeds from issuance of long-term debt	5
Repayments of long-term debt	(2)	(4)
Net cash used by financing activities	3	(4)
Net increase in cash and cash equivalents	9,749	14,821
Cash and cash equivalents, beginning of period	22,090	22,368
Cash and cash equivalents, end of period	31,839	37,189
Non-Guarantor Subsidiaries
Condensed Cash Flow Statements Captions [Line Items]
Net cash provided (used) by operating activities	1,308	(611)
Cash Flows from Investing Activities:
Payments for property and equipment, net	(2,835)	(7,125)
Acquisitions, net of cash acquired	(9,175)
Net cash used by investing activities	(12,010)	(7,125)
Cash Flows from Financing Activities:
Repayments of long-term debt	(190)	(170)
Due to affiliates	16,774	11,723
Net cash used by financing activities	16,584	11,553
Effect of foreign exchange rate changes on cash and cash equivalents	(78)	(921)
Net increase in cash and cash equivalents	5,804	2,896
Cash and cash equivalents, beginning of period	41,659	35,882
Cash and cash equivalents, end of period	47,463	38,778
Consolidating Eliminations
Cash Flows from Investing Activities:
Due from affiliates	70,909	68,741
Net cash used by investing activities	70,909	68,741
Cash Flows from Financing Activities:
Due to affiliates	(70,909)	(68,741)
Net cash used by financing activities	$ (70,909)	$ (68,741)

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Restructuring Plans (Details) $ in Thousands	1 Months Ended	3 Months Ended
	Jan. 31, 2017 Office	Dec. 31, 2017 USD ($)	Nov. 30, 2017 USD ($)
Changes in restructuring reserve
Restructuring charges		$ 5,210
Corporate
Changes in restructuring reserve
Restructuring charges		700
Sally Beauty Supply
Changes in restructuring reserve
Restructuring charges		4,500
2017 Restructuring Plan
Restructuring Plan
Number of administrative offices closed | Office	4
Changes in restructuring reserve
Restructuring reserve, beginning balance		3,842
Expenses Paid or Otherwise Settled		2,088
Restructuring reserve, ending balance		1,754
2017 Restructuring Plan | Workforce reductions
Changes in restructuring reserve
Restructuring reserve, beginning balance		1,860
Expenses Paid or Otherwise Settled		1,072
Restructuring reserve, ending balance		788
2017 Restructuring Plan | Facility closures
Changes in restructuring reserve
Restructuring reserve, beginning balance		1,747
Expenses Paid or Otherwise Settled		781
Restructuring reserve, ending balance		966
2017 Restructuring Plan | Other
Changes in restructuring reserve
Restructuring reserve, beginning balance		235
Expenses Paid or Otherwise Settled		235
2018 Restructuring Plan
Changes in restructuring reserve
Restructuring charges		5,210
Expenses Paid or Otherwise Settled		3,704
Restructuring reserve, ending balance		1,506
2018 Restructuring Plan | Minimum
Changes in restructuring reserve
Total estimated aggregate charges			$ 13,000
2018 Restructuring Plan | Maximum
Changes in restructuring reserve
Total estimated aggregate charges			$ 14,000
2018 Restructuring Plan | Workforce reductions
Changes in restructuring reserve
Restructuring charges		4,260
Expenses Paid or Otherwise Settled		3,376
Restructuring reserve, ending balance		884
2018 Restructuring Plan | Other
Changes in restructuring reserve
Restructuring charges		950
Expenses Paid or Otherwise Settled		328
Restructuring reserve, ending balance		$ 622