Regis Reports Second Quarter 2014 Results |
Regis Corporation (NYSE:RGS), a leader in the haircare industry, whose
primary business is owning, operating and franchising hair salons, today
reported results for its fiscal second quarter ended December 31, 2013
versus the prior year as noted below.
- Sales of $468.4 million, a decrease of 7.5%. Same-store sales
declined 6.2%.
- Same-store service and product sales declined 5.5% and 9.2%,
respectively.
- GAAP net loss of $110.0 million or ($1.95) per diluted share.
- Includes certain discrete non-cash charges of $112.1 million.
- Diluted EPS, as adjusted, was ($0.04) compared to $0.03 in the
prior year quarter.
- Same-store sales declines of 6.2% reduced current quarter
adjusted earnings approximately $0.13 per share.
- Offsetting this were benefits approximating $0.06 per share,
mainly from cost savings initiatives, reduced bonuses, lower
interest and tax credits. These benefits were reduced by higher
labor costs, increased salon connectivity, higher retail
promotions, increased health insurance costs, and higher
depreciation expense.
- EBITDA, as adjusted, of $21.6 million compared to $31.1 million
in the prior year quarter.
- Same-store sales declines of 6.2% negatively impacted
adjusted EBITDA approximately $12 million.
- Offsetting this were benefits approximating $2.5 million,
mainly from cost savings initiatives and reduced bonuses. These
benefits were reduced by higher labor costs, increased salon
connectivity, higher retail promotions, and increased health
insurance costs.
- The current and prior year quarters include net discrete
after-tax expense of $107.5 million and $14.0 million, respectively.
Dan Hanrahan, President and Chief Executive Officer commented, "To
become a best-in-class operator, we continue to execute on three key
foundational initiatives I discussed last quarter. These are the new
point-of-sale system, a reorganized field structure and standardized
retail plan-o-grams. These initiatives have triggered increased turnover
as well as a steep learning curve within the field that negatively
impacted our revenue and current operating results. However, some of our
leaders, while admittedly too few, have adapted well and are
consistently reporting improved results. Our opportunity is to replicate
this performance across our entire field organization. I have seen
enough positive results within our field organization to recognize we
have in place the right structure and tools to generate increased
revenue, guest retention and profitability. Our top priority will
continue to be leadership development and improved execution at all
levels of our field organization. To reach the full performance of each
and every one of our salons, Regis must become an organization that
excels at developing our field and salon leaders. The performance of our
best operators assures me, as we develop a culture focused on talent
development and execution, we will realize increased growth and
profitability throughout our entire organization.
"While I would normally not address technical accounting matters, it is
important for me to comment on the $112.1 million of non-cash charges we
reported during the quarter to impair goodwill and establish a valuation
allowance against our deferred tax assets. These non-cash charges are
highly technical in nature and do not have any economic impact on our
business model. Our business model is sound, our balance sheet is strong
and our business continues to generate positive cash flow. In fact, our
business generated $21.6 million in EBITDA, as adjusted, for the
quarter. I am confident in our ability to restore Regis to sustainable
growth and improved profitability."
The Company provided additional context in the areas of focus cited by
Mr. Hanrahan:
Organization. As a result of the field reorganization, the
Company moved from a branded to a geographic management structure,
resulting in many of our field leaders taking on new roles and
responsibilities. Ascending the learning curve has been a challenge for
many. Today our field leadership team can be divided into three
categories – early adaptors and succeeding, learning and improving, and
challenged and struggling with their new responsibility.
Our leadership training will continue to focus on developing good
leaders who can drive execution at the salon level and grow guest
traffic. While in the minority, early adaptors are achieving the kind of
results Regis can expect as the entire organization develops. To
accelerate the pace of adoption, our Regional Directors are leading
efforts to improve underperforming salons. We have equipped them with
operational tools, like salon training and execution guides, salon
performance reporting and leadership standards. These tasks will assist
them in standardizing operating processes across our salons and using
consistent performance metrics to diagnose their businesses more
effectively. Early results indicate this work is improving trends in
these salons. Our opportunity is to sustain these improvements with
ongoing training and development across all salons.
While the salon business has always been a high turnover business,
employee attraction and retention have proven to be more challenging
during this period of change. As we create a culture of accountability,
stylist turnover remains skewed towards our lower producers, and the
Company's hiring has not kept pace with this turnover. The organization
is focused on staffing and our field leadership has been given new tools
to help them identify and capitalize on staffing opportunities. We
prioritized our greatest opportunities and our Regional Directors are
leading our efforts to improve staffing.
In the past few months we staffed two critical positions, a Chief
Operating Officer, Jim Lain, and our first ever Chief Human Resources
Officer, Carmen Thiede. These roles will drive leadership development
and execution. Leveraging their experience, talent assessments and
development programs are underway across our field organization. Jim and
Carmen have also begun to evaluate how we can standardize and enhance
operating procedures across all brands to support our field leaders to
efficiently and effectively manage their areas of responsibility.
Merchandising. During the second quarter retail sales trends
remained challenging. A number of actions have been taken to optimize
our merchandising and promotional strategy. First, we have begun a
search for a new Chief Merchandising Officer. Second, we incorporated
retail traffic within our executional training to ensure focus on
selling retail. Last, we are modifying monthly stylist retail contests
to generate greater excitement among our stylists to drive retail sales.
Technology. We continue to focus on optimizing our SuperSalon
point-of-sale system. Our emphasis is on enhancing performance by
improving performance speeds, providing on-going training, and
simplifying user interfaces. Dedicated resources are working in these
areas to leverage the benefits of this standardized platform. We expect
to report progress in this area next quarter.
Comparable Profitability Measures (1) |
| |
| Three Months Ended December 31, | | Six Months Ended December 31, | | Fiscal Years Ended June 30, | | | | 2013 | | 2012 | | 2013 | | 2012 | | 2013 | | 2012 | | | | (Dollars in Millions) | |
Revenue
| |
$
|
468.4
| |
$
|
506.2
| |
$
|
937.0
| |
$
|
1,011.5
| |
$
|
2,018.7
| |
$
|
2,122.2
| | | | | | | | | | | | | | |
|
Revenue decline %
| | |
(7.5
|
)
| |
(3.8
|
)
| |
(7.4
|
)
| |
(4.3
|
)
| |
(4.9
|
)
| |
(2.7
|
)
| | | | | | | | | | | | | |
|
Same-Store Sales %
| | |
(6.2
|
)
| |
(1.9
|
)
| |
(5.8
|
)
| |
(2.5
|
)
| |
(2.4
|
)
| |
(3.5
|
)
|
Same-Store Average Ticket % Change
| | |
1.2
| | |
1.1
| | |
1.5
| | |
0.3
| | |
0.6
| | |
(0.1
|
)
|
Same-Store Guest Count % Change
| | |
(7.4
|
)
| |
(3.0
|
)
| |
(7.3
|
)
| |
(2.8
|
)
| |
(3.0
|
)
| |
(3.4
|
)
| | | | | | | | | | | | | |
|
Cost of Service and Product % (2)
| | |
59.9
| | |
58.3
| | |
59.3
| | |
57.9
| | |
58.6
| | |
55.8
| |
Cost of Service and Product %, as re-casted (2) (3)
| | |
N/A
| | |
59.4
| | |
N/A
| | |
59.1
| | |
59.6
| | |
57.0
| |
Cost of Service and Product %, as adjusted (2)
| | |
59.9
| | |
59.4
| | |
59.2
| | |
59.1
| | |
59.0
| | |
57.0
| |
Cost of Service % (2)
| | |
62.1
| | |
60.3
| | |
61.3
| | |
59.7
| | |
59.5
| | |
57.3
| |
Cost of Service %, as re-casted (2) (3)
| | |
N/A
| | |
61.7
| | |
N/A
| | |
61.1
| | |
60.9
| | |
58.7
| |
Cost of Product % (2)
| | |
51.6
| | |
50.9
| | |
51.2
| | |
51.4
| | |
55.0
| | |
50.4
| |
Cost of Product %, as adjusted (2)
| | |
51.6
| | |
50.9
| | |
50.7
| | |
51.4
| | |
52.0
| | |
50.4
| | | | | | | | | | | | | | |
|
Site operating expense as % of total revenues, U.S. GAAP reported
| | |
10.7
| | |
9.9
| | |
10.8
| | |
10.1
| | |
10.1
| | |
9.8
| |
Site operating expense as % of total revenues, as re-casted (3)
| | |
N/A
| | |
10.3
| | |
N/A
| | |
10.6
| | |
10.5
| | |
10.3
| |
Site operating expense as % of total revenues, as adjusted
| | |
10.9
| | |
10.5
| | |
10.9
| | |
10.7
| | |
10.6
| | |
10.2
| | | | | | | | | | | | | | |
|
General and administrative as % of total revenues, U.S. GAAP reported
| | |
8.6
| | |
11.0
| | |
9.0
| | |
11.0
| | |
11.2
| | |
11.8
| |
General and administrative as % of total revenues, as re-casted (3)
| | |
N/A
| | |
9.5
| | |
N/A
| | |
9.5
| | |
9.8
| | |
10.2
| |
General and administrative as % of total revenues, as adjusted
| | |
9.0
| | |
9.3
| | |
9.2
| | |
9.4
| | |
9.4
| | |
9.4
| | | | | | | | | | | | | | |
|
Operating (loss) income as % of total revenues, U.S. GAAP reported
| | |
(7.6
|
)
| |
1.7
| | |
(3.6
|
)
| |
1.8
| | |
0.6
| | |
(0.1
|
)
|
Operating (loss) income as % of total revenues, as adjusted
| | |
(0.7
|
)
| |
1.7
| | |
0.0
| | |
1.7
| | |
1.7
| | |
4.6
| | | | | | | | | | | | | | |
|
EBITDA
| | |
(7.8
|
)
| |
17.4
| | |
20.0
| | |
86.3
| | |
148.5
| | |
14.7
| |
EBITDA, as adjusted
| | |
21.6
| | |
31.1
| | |
49.1
| | |
61.5
| | |
125.4
| | |
191.4
| |
|
1) As of September 30, 2012, the Company classified the results of
operations of the Hair Restoration Centers segment as discontinued
operations.
|
2) Excludes depreciation and amortization.
|
3) During the fourth quarter of fiscal year 2013, the Company
reorganized its field organization, excluding salons within the
mass premium category. Beginning in the first quarter of fiscal
year 2014, costs associated with field leaders that were
previously recorded within General and Administrative expenses are
now reported within Cost of Service and Site Operating expenses.
|
Second Quarter Results:
As a reminder, beginning in the first quarter of fiscal year 2014, costs
associated with field leaders, excluding salons within the mass premium
category, that were previously recorded within General and
Administrative expense are now categorized to Cost of Service and Site
Operating expense as a result of the field reorganization that took
place in the fourth quarter of fiscal year 2013. Previously, field
leaders did not work on the salon floor daily. As reorganized, field
leaders now spend their time on the salon floor leading and mentoring
stylists, and serving guests. Accordingly, field leader costs, including
labor and travel costs, now directly arise from the management of salon
operations. As a result, district and senior district leader labor costs
are reported within Cost of Service rather than General and
Administrative expenses, and their travel costs are reported within Site
Operating expenses rather than General and Administrative expenses. This
expense classification does not have a financial impact on the Company's
reported operating income (loss), reported net income (loss) or cash
flows from operations. Re-casted historical annual and quarterly
financial statements can be found on the Company's website.
Beginning in the second quarter of fiscal year 2014, the Company
redefined its operating segments to reflect how the chief operating
decision maker evaluates the business. These segments relate to the
restructuring of the North American field organization that took place
in the fourth quarter of fiscal year 2013 and was completed during the
second quarter of fiscal year 2014.
Revenues. Revenues declined $37.8 million, or 7.5%, compared to
the prior year quarter.
Service revenues were $361.0 million, a decrease of $27.3 million, or
7.0%, from the prior year quarter, mainly driven by declines in North
American salon revenues. Compared to the prior year quarter, same-store
service sales declined 5.5%, comprised of a 6.6% decrease in guest
counts, partly offset by a 1.1% increase in average ticket price. Net
changes in store counts drove the remaining 1.5% decrease compared to
the prior year quarter.
Product revenues were $97.8 million, a decrease of $10.5 million, or
9.7%, versus the prior year quarter. Product same-store sales declined
9.2%, representing 560 basis points of trend improvement since last
quarter.
Royalties and fees of $9.6 million were flat to the prior year quarter.
Cost of Service and Product. Cost of service and product, as a
percent of service and product revenues, increased 160 basis points to
59.9% compared to the prior year quarter. Excluding the impact of the
prior year change in expense categorization as a result of the field
reorganization, cost of service and product as a percent of service and
product revenues increased 50 basis points compared to the prior year
quarter.
Cost of service as a percent of service revenues was 62.1%, an increase
of 180 basis points compared to the prior year quarter. Excluding the
impact of the prior year change in expense categorization as a result of
the field reorganization, cost of service as a percent of service
revenues increased 40 basis points compared to the prior year quarter.
Negative leverage of stylist hours caused by same-store service sales
declines and increased health care costs were partly offset by cost
reductions due to our field reorganization and reduced bonus expense.
Last year's results also included disaster pay related to Hurricane
Sandy and a full commission coupon event that was not repeated this year.
Cost of product as a percent of product revenues was 51.6%, an increase
of 70 basis points when compared to the prior year quarter. This
increase was mainly driven by higher promotional activity in the
quarter, partly offset by reduced sales commissions and bonus expense
due to lower product sales.
Site Operating Expenses. Site operating expenses of $50.2 million
increased $0.3 million compared to the prior year quarter. Excluding
impacts of discrete items in both periods and the prior year change in
expense categorization as a result of our field reorganization, site
operating expenses decreased $2.5 million compared to the prior year
quarter. The decrease was primarily driven by cost savings initiatives
to lower utilities and repairs and maintenance expenses, lower travel
expense, and reduced freight and self-insurance expenses, partly offset
by increased connectivity costs to support SuperSalon and salon
workstations.
General and Administrative. General and administrative expenses
of $40.3 million decreased $15.5 million compared to the prior year
quarter. Excluding the impact of discrete items in both periods and the
change in expense categorization as a result of our field
reorganization, general and administrative expenses, as adjusted,
decreased $4.7 million compared to the prior year quarter. Almost half
of this improvement relates to cost savings initiatives and benefits
from the field reorganization. The remaining benefit is primarily driven
by reduced bonus expense resulting from lower sales and profits and
reduced corporate health insurance costs. We continue to focus on ways
to simplify and drive further cost efficiencies.
Rent. Rent expense was $79.2 million, or 16.9% of revenues,
representing an increase of 100 basis points over the prior year
quarter, primarily the result of negative leverage due to same-store
sales declines. Rent expense declined by $1.4 million compared to the
prior year quarter, mainly due to salon closures.
Depreciation and Amortization. Depreciation and amortization was
$24.6 million compared to $21.9 million in the prior year quarter, an
increase of $2.8 million. This increase was primarily the result of
asset impairments within the Regis salon concept.
Equity in Affiliates. Income from equity method investments and
affiliated companies was $2.7 million. Excluding the impact of discrete
items in both periods, income from equity method investments and
affiliated companies, as adjusted, increased $0.5 million compared to
the prior year quarter. This increase was driven by increased earnings
in Empire Education Group.
EBITDA. EBITDA of ($7.8) million declined $25.2 million compared
to the prior year quarter. Excluding the impact of discrete items in
both periods, EBITDA, as adjusted, totaled $21.6 million, a decrease of
$9.5 million compared to the prior year quarter.
Discrete Items. Discrete items for the current quarter netted to
$107.5 million of after-tax expense, comprised of the following items:
Expense:
-
Deferred tax asset valuation allowance, and other, of $83.2 million.
-
Regis salon concept goodwill impairment of $28.6 million.
-
Professional and legal fees of $1.0 million.
Income:
-
Deferred compensation and insurance benefit of $3.2 million.
-
Recovery of a previously impaired investment in an affiliate of $2.1
million.
During the second quarter, the Company incurred a non-cash charge of
$83.5 million to establish a valuation allowance against the Company's
United States deferred tax assets, which generally expire many years
into the future, or have no definite expiration period. On a quarterly
basis, the Company is required to assess the likelihood that deferred
tax assets will be recovered. While the determination of whether or not
to record a valuation allowance is not fully governed by a specific
objective test, accounting guidance places significant weight on recent
financial performance. During the second quarter of fiscal year 2014,
the impacts from strategic initiatives implemented late in fiscal year
2013 were continuing to negatively impact the Company's financial
performance. Accordingly, the Company incurred this non-cash charge to
establish a valuation allowance against its United States deferred tax
assets. A large portion of the Company's recent losses have included
material discrete charges, mainly non-cash in nature. We are focused on
restoring the Company to sustainable growth and profitability. Should
this occur, the Company will reverse this allowance.
The goodwill impairment is a non-cash charge related to the Regis salon
concept reporting unit. As a result of redefining our operating segments
during the quarter, and our recent performance trends, we were required
to perform an interim goodwill assessment. As a result of this non-cash
charge, we have no further goodwill on our books associated with the
Regis salon concept. We remain focused on improving the performance of
this segment as we stabilize and turn around our overall business.
A complete reconciliation of reported earnings to adjusted earnings is
included in this press release and is available on the Company's website
at www.regiscorp.com.
Regis Corporation will host a conference call and presentation via
webcast discussing second quarter results today, January 27, 2014, at 10
a.m., Central time. Interested parties are invited to participate in the
live webcast by logging on to www.regiscorp.com
or participate by phone by dialing 877-941-6009. A replay of the
presentation will be available later that day. The replay phone number
is 800-406-7325, access code 4662033#.
About Regis Corporation
Regis Corporation (NYSE:RGS) is a leader in beauty salons and
cosmetology education. As of December 31, 2013, the Company owned,
franchised or held ownership interests in 9,757 worldwide locations.
Regis' corporate and franchised locations operate under concepts such as
Supercuts, SmartStyle, MasterCuts, Regis Salons, Sassoon Salon, Cost
Cutters and Cool Cuts 4 Kids. Regis maintains ownership interests in
Empire Education Group in the U.S. and the MY Style concepts in Japan.
For additional information about the Company, including a reconciliation
of certain non-GAAP financial information and certain supplemental
financial information, please visit the Investor Information section of
the corporate website at www.regiscorp.com.
To join Regis Corporation's email alert list, click on this link: http://www.b2i.us/irpass.asp?BzID=913&to=ea&Nav=1&S=0&L=1 This press release may contain "forward-looking statements" within
the meaning of the federal securities laws, including statements
concerning anticipated future events and expectations that are not
historical facts. These forward-looking statements are made pursuant to
the safe harbor provisions of the Private Securities Litigation Reform
Act of 1995. The forward-looking statements in this document reflect
management's best judgment at the time they are made, but all such
statements are subject to numerous risks and uncertainties, which could
cause actual results to differ materially from those expressed in or
implied by the statements herein. Such forward-looking statements are
often identified herein by use of words including, but not limited to,
"may," "believe," "project," "forecast," "expect," "estimate,"
"anticipate," and "plan." In addition, the following factors could
affect the Company's actual results and cause such results to differ
materially from those expressed in forward-looking statements. These
factors include the impact of significant initiatives and changes in our
management and organizational structure; negative same-store sales; the
success of our stylists and our ability to attract and retain talented
stylists; the effect of changes to healthcare laws; changes in
regulatory and statutory laws; the Company's reliance on management
information systems; competition within the personal hair care industry,
which remains strong, both domestically and internationally; changes in
economic conditions; the continued ability of the Company to implement
cost reduction initiatives; certain of the terms and provisions of the
outstanding convertible notes; failure to optimize our brand portfolio;
the ability of the Company to maintain satisfactory relationships with
certain companies and suppliers; financial performance of our joint
ventures; changes in interest rates and foreign currency exchange rates;
changes in consumer tastes and fashion trends; our ability to protect
the security of personal information about our guests; or other factors
not listed above. Additional information concerning potential factors
that could affect future financial results is set forth in the Company's
Annual Report on Form 10-K for the year ended June 30, 2013. We
undertake no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or
otherwise. However, your attention is directed to any further
disclosures made in our subsequent annual and periodic reports filed or
furnished with the SEC on Forms 10-K, 10-Q and 8-K and Proxy Statements
on Schedule 14A.
| REGIS CORPORATION (NYSE: RGS) | CONSOLIDATED BALANCE SHEET (Unaudited) | (Dollars in thousands, except per share data) | |
| |
| | | | December 31, 2013 | | June 30, 2013 | ASSETS | | | | |
Current assets:
| | | | |
Cash and cash equivalents
| |
$
|
339,418
| |
$
|
200,488
|
Receivables, net
| | |
24,584
| | |
33,062
|
Inventories
| | |
147,188
| | |
139,607
|
Deferred income taxes
| | |
381
| | |
24,145
|
Income tax receivable
| | |
19,765
| | |
33,346
|
Other current assets
| |
|
57,189
| |
|
57,898
|
Total current assets
| | |
588,525
| | |
488,546
| | | | |
|
Property and equipment, net
| | |
290,378
| | |
313,460
|
Goodwill
| | |
425,332
| | |
460,885
|
Other intangibles, net
| | |
20,642
| | |
21,496
|
Investment in affiliates
| | |
44,967
| | |
43,319
|
Other assets
| |
|
64,219
| |
|
62,786
| | | | |
|
Total assets
| |
$
|
1,434,063
| |
$
|
1,390,492
| | | | |
| LIABILITIES AND SHAREHOLDERS' EQUITY | | | | |
Current liabilities:
| | | | |
Long-term debt, current portion
| |
$
|
174,143
| |
$
|
173,515
|
Accounts payable
| | |
54,348
| | |
66,071
|
Accrued expenses
| |
|
141,984
| |
|
137,226
|
Total current liabilities
| | |
370,475
| | |
376,812
| | | | |
|
Long-term debt and capital lease obligations
| | |
120,010
| | |
1,255
|
Other noncurrent liabilities
| |
|
200,832
| |
|
155,011
|
Total liabilities
| |
|
691,317
| |
|
533,078
| | | | |
|
Shareholders' equity:
| | | | |
Common stock, $0.05 par value; issued and outstanding 56,698,587 and
56,630,926 common shares at December 31, 2013 and June 30, 2013,
respectively
| | |
2,835
| | |
2,832
|
Additional paid-in capital
| | |
335,379
| | |
334,266
|
Accumulated other comprehensive income
| | |
21,539
| | |
20,556
|
Retained earnings
| |
|
382,993
| |
|
499,760
| | | | |
|
Total shareholders' equity
| |
|
742,746
| |
|
857,414
| | | | |
|
Total liabilities and shareholders' equity
| |
$
|
1,434,063
| |
$
|
1,390,492
|
| REGIS CORPORATION (NYSE: RGS) | CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited) | (Dollars in thousands, except per share data) |
| |
| Three Months Ended December 31, | | Six Months Ended December 31, | | | | 2013 | | 2012 | | 2013 | | 2012 | |
Revenues:
| | | | | | | | | |
Service
| |
$
|
360,959
| |
$
|
388,286
| |
$
|
732,686
| |
$
|
781,702
| |
Product
| |
97,769
| |
108,236
| |
184,512
| |
210,520
| |
Royalties and fees
| |
9,639
| |
9,643
| |
19,752
| |
19,303
| | | |
468,367
| |
506,165
| |
936,950
| |
1,011,525
| |
Operating expenses:
| | | | | | | | | |
Cost of service
| |
224,238
| |
234,265
| |
449,253
| |
466,793
| |
Cost of product
| |
50,461
| |
55,064
| |
94,485
| |
108,196
| |
Site operating expenses
| |
50,204
| |
49,872
| |
101,045
| |
102,219
| |
General and administrative
| |
40,269
| |
55,795
| |
84,702
| |
111,667
| |
Rent
| |
79,164
| |
80,555
| |
158,174
| |
162,054
| |
Depreciation and amortization
| |
24,641
| |
21,891
| |
48,472
| |
42,600
| |
Goodwill impairment
| |
34,939
| |
-
| |
34,939
| |
-
| |
Total operating expenses
| |
503,916
| |
497,442
| |
971,070
| |
993,529
| | | | | | | | | | |
|
Operating (loss) income
| |
(35,549
|
)
|
8,723
| |
(34,120
|
)
|
17,996
| | | | | | | | | | |
|
Other income (expense):
| | | | | | | | | |
Interest expense
| |
(5,166
|
)
|
(6,649
|
)
|
(9,657
|
)
|
(13,478
|
)
|
Interest income and other, net
| |
339
| |
601
| |
883
| |
35,213
| | | | | | | | | | |
|
(Loss) income before income taxes and equity in income (loss) of
affiliated companies
| |
(40,376
|
)
|
2,675
| |
(42,894
|
)
|
39,731
| | | | | | | | | | |
|
Income taxes
| |
(72,341
|
)
|
(1,085
|
)
|
(71,958
|
)
|
(4,071
|
)
|
Equity in income (loss) of affiliated companies, net of income taxes
| |
2,740
| |
(17,709
|
)
|
4,739
| |
(17,132
|
)
| | | | | | | | | |
|
(Loss) income from continuing operations
| |
(109,977
|
)
|
(16,119
|
)
|
(110,113
|
)
|
18,528
| | | | | | | | | | |
|
Income from discontinued operations, net of taxes
| |
-
| |
3,853
| |
-
| |
7,630
| | | | | | | | | | |
|
Net (loss) income
| |
$
|
(109,977
|
)
|
$
|
(12,266
|
)
|
$
|
(110,113
|
)
|
$
|
26,158
| | | | | | | | | | |
|
Net (loss) income per share:
| | | | | | | | | |
Basic:
| | | | | | | | | |
(Loss) income from continuing operations
| |
(1.95
|
)
|
(0.28
|
)
|
(1.95
|
)
|
0.32
| |
Income from discontinued operations
| |
-
| |
0.07
| |
-
| |
0.13
| |
Net (loss) income per share, basic (1)
| |
$
|
(1.95
|
)
|
$
|
(0.22
|
)
|
$
|
(1.95
|
)
|
$
|
0.46
| |
Diluted:
| | | | | | | | | |
(Loss) income from continuing operations
| |
(1.95
|
)
|
(0.28
|
)
|
(1.95
|
)
|
0.32
| |
Income from discontinued operations
| |
-
| |
0.07
| |
-
| |
0.13
| |
Net (loss) income per share, diluted (1)
| |
$
|
(1.95
|
)
|
$
|
(0.22
|
)
|
$
|
(1.95
|
)
|
$
|
0.46
| | | | | | | | | | |
|
Weighted average common and common equivalent shares outstanding:
| | | | | | | | | |
Basic
| |
56,437
| |
56,794
| |
56,427
| |
57,043
| |
Diluted
| |
56,437
| |
56,794
| |
56,427
| |
57,125
| | | | | | | | | | |
|
Cash dividends declared per common share (2)
| |
$
|
0.06
| |
$
|
0.06
| |
$
|
0.12
| |
$
|
0.12
| |
|
(1) Total is a recalculation; line items calculated individually may
not sum to total due to rounding
|
(2) In December 2013, the Board of Directors elected to discontinue
paying regular quarterly dividends
|
| REGIS CORPORATION (NYSE: RGS) | CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE LOSS (Unaudited) | (Dollars in thousands) |
| |
| Three Months Ended December 31, | | Six Months Ended December 31, | | | | 2013 | | 2012 | | 2013 | | 2012 | |
Net (loss) income:
| |
$
|
(109,977
|
)
|
$
|
(12,266
|
)
|
$
|
(110,113
|
)
|
$
|
26,158
| |
Other comprehensive (loss) income, net of tax:
| | | | | | | | | |
Foreign currency translation adjustments:
| | | | | | | | | |
Foreign currency translation adjustments during the period
| |
(2,052
|
)
|
(2,178
|
)
|
983
| |
4,860
| |
Reclassification adjustments for gains included in net income
| |
-
| |
-
| |
-
| |
(33,842
|
)
|
Net current period foreign currency translation adjustments
| |
(2,052
|
)
|
(2,178
|
)
|
983
| |
(28,982
|
)
|
Change in fair market value of financial instruments designated as
cash flow hedges
| |
-
| |
-
| |
-
| |
(23
|
)
|
Other comprehensive (loss) income:
| |
(2,052
|
)
|
(2,178
|
)
|
983
| |
(29,005
|
)
|
Comprehensive loss:
| |
$
|
(112,029
|
)
|
$
|
(14,444
|
)
|
$
|
(109,130
|
)
|
$
|
(2,847
|
)
|
| REGIS CORPORATION (NYSE: RGS) | CONSOLIDATED STATEMENT OF CASH FLOW (Unaudited) | (Dollars in thousands) |
| |
| Six Months Ended December 31, | | | | 2013 | | 2012 | |
Cash flows from operating activities:
| | | | | |
Net (loss) income
| |
$
|
(110,113
|
)
|
$
|
26,158
| |
Adjustments to reconcile net (loss) income to net cash provided by
operating activities:
| | | | | |
Depreciation and amortization
| |
42,119
| |
39,730
| |
Equity in (income) loss of affiliated companies
| |
(4,739
|
)
|
16,692
| |
Deferred income taxes
| |
67,741
| |
11,352
| |
Salon asset impairment
| |
6,353
| |
3,359
| |
Loss on write down of inventories
| |
854
| |
-
| |
Goodwill impairment
| |
34,939
| |
-
| |
Accumulated other comprehensive income reclassification adjustments
| |
-
| |
(33,842
|
)
|
Stock-based compensation
| |
3,557
| |
3,307
| |
Amortization of debt discount and financing costs
| |
3,933
| |
3,527
| |
Other non-cash items affecting earnings
| |
136
| |
593
| |
Changes in operating assets and liabilities, excluding the effects
of acquisitions
| |
4,449
| |
(11,907
|
)
|
Net cash provided by operating activities
| |
49,229
| |
58,969
| | | | | | |
|
Cash flows from investing activities:
| | | | | |
Capital expenditures
| |
(23,913
|
)
|
(43,200
|
)
|
Proceeds from sale of assets
| |
8
| |
152
| |
Asset acquisitions, net of cash acquired
| |
(15
|
)
|
-
| |
Proceeds from loans and investments
| |
5,056
| |
131,054
| |
Net cash (used in) provided by investing activities
| |
(18,864
|
)
|
88,006
| | | | | | |
|
Cash flows from financing activities:
| | | | | |
Borrowings on revolving credit facilities
| |
-
| |
5,200
| |
Payments on revolving credit facilities
| |
-
| |
(5,200
|
)
|
Proceeds from issuance of long-term debt, net of fees
| |
118,058
| |
-
| |
Repayments of long-term debt and capital lease obligations
| |
(3,452
|
)
|
(21,298
|
)
|
Repurchase of common stock
| |
-
| |
(14,868
|
)
|
Dividends paid
| |
(6,793
|
)
|
(6,905
|
)
|
Net cash provided by (used in) financing activities
| |
107,813
| |
(43,071
|
)
| | | | | |
|
Effect of exchange rate changes on cash and cash equivalents
| |
752
| |
2,496
| | | | | | |
|
Increase in cash and cash equivalents
| |
138,930
| |
106,400
| | | | | | |
|
Cash and cash equivalents:
| | | | | |
Beginning of period
| |
200,488
| |
111,943
| |
End of period
| |
$
|
339,418
| |
$
|
218,343
| |
| SAME-STORE SALES (1): |
| |
| For the Three Months Ended | | | | December 31, 2013 | | December 31, 2012 | | | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | Service | | Retail | | Total | | Service | | Retail | | Total | |
SmartStyle
| |
(6.6
|
)
|
(10.2
|
)
|
(7.9
|
)
|
0.8
| |
(0.2
|
)
|
0.5
| |
Supercuts
| |
(0.5
|
)
|
(10.6
|
)
|
(1.6
|
)
|
0.5
| |
(1.2
|
)
|
0.3
| |
MasterCuts
| |
(10.0
|
)
|
(11.2
|
)
|
(10.3
|
)
|
(4.0
|
)
|
(4.8
|
)
|
(4.2
|
)
|
Promenade
| |
(6.6
|
)
|
(10.1
|
)
|
(7.0
|
)
|
(2.6
|
)
|
(5.6
|
)
|
(2.9
|
)
|
North American Value
| |
(5.5
|
)%
|
(10.4
|
)%
|
(6.5
|
)%
|
(1.0
|
)%
|
(1.8
|
)%
|
(1.1
|
)%
| | | | | | | | | | | | | |
|
North American Premium
| |
(6.3
|
)%
|
(7.0
|
)%
|
(6.4
|
)%
|
(3.3
|
)%
|
(5.1
|
)%
|
(3.6
|
)%
| | | | | | | | | | | | | |
|
International
| |
(0.4
|
)%
|
(2.6
|
)%
|
(1.1
|
)%
|
(2.5
|
)%
|
(14.3
|
)%
|
(6.6
|
)%
| | | | | | | | | | | | | |
|
Consolidated
| |
(5.5
|
)%
|
(9.2
|
)%
|
(6.2
|
)%
|
(1.5
|
)%
|
(3.6
|
)%
|
(1.9
|
)%
| | | |
|
| | For the Six Months Ended | | | | December 31, 2013 | | December 31, 2012 | | | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | Service | | Retail | | Total | | Service | | Retail | | Total | |
SmartStyle
| |
(3.7
|
)
|
(12.4
|
)
|
(6.7
|
)
|
(1.9
|
)
|
(1.8
|
)
|
(1.9
|
)
|
Supercuts
| |
(0.3
|
)
|
(13.6
|
)
|
(1.7
|
)
|
0.9
| |
(0.9
|
)
|
0.7
| |
MasterCuts
| |
(9.3
|
)
|
(18.7
|
)
|
(11.1
|
)
|
(4.5
|
)
|
(3.3
|
)
|
(4.2
|
)
|
Promenade
| |
(5.2
|
)
|
(13.0
|
)
|
(6.0
|
)
|
(2.8
|
)
|
(4.9
|
)
|
(3.0
|
)
|
North American Value
| |
(4.0
|
)%
|
(13.4
|
)%
|
(5.9
|
)%
|
(1.8
|
)%
|
(2.4
|
)%
|
(1.9
|
)%
| | | | | | | | | | | | | |
|
North American Premium
| |
(6.1
|
)%
|
(9.5
|
)%
|
(6.8
|
)%
|
(3.8
|
)%
|
(3.4
|
)%
|
(3.8
|
)%
| | | | | | | | | | | | | |
|
International
| |
(0.3
|
)%
|
(3.4
|
)%
|
(1.3
|
)%
|
(2.8
|
)%
|
(11.8
|
)%
|
(5.8
|
)%
| | | | | | | | | | | | | |
|
Consolidated
| |
(4.3
|
)%
|
(11.9
|
)%
|
(5.8
|
)%
|
(2.3
|
)%
|
(3.4
|
)%
|
(2.5
|
)%
|
|
(1) Same-store sales are calculated on a daily basis as the total
change in sales for company-owned locations that were open on a
specific day of the week during the current period and the
corresponding prior period. Quarterly same-store sales are the sum
of the same-store sales computed on a daily basis. Locations
relocated within a one-mile radius are included in same-store
sales as they are considered to have been open in the prior
period. International same-store sales are calculated in local
currencies to remove foreign currency fluctuations from the
calculation.
|
| REGIS CORPORATION (NYSE: RGS) | System-wide location counts |
| COMPANY-OWNED SALONS: |
| December 31, 2013 |
| June 30, 2013 | | | | |
|
SmartStyle/Cost Cutters in Walmart Stores
| |
2,533
| |
2,490
|
Supercuts
| |
1,188
| |
1,210
|
MasterCuts
| |
523
| |
532
|
Promenade
| |
1,930
| |
1,990
|
Regis salons
| |
849
| |
862
|
Total North American Salons (1)
| |
7,023
| |
7,084
|
Total International Salons (2)
| |
365
| |
351
|
Total Company-owned Salons
| |
7,388
| |
7,435
| |
| | | | FRANCHISE SALONS: | | | | | | | | |
|
SmartStyle/Cost Cutters in Walmart Stores
| |
125
| |
123
|
Supercuts
| |
1,151
| |
1,116
|
Promenade
| |
847
| |
843
|
Total North American Salons (1)
| |
2,123
| |
2,082
|
Total International Salons (2)
| |
-
| |
-
|
Total Franchise Salons
| |
2,123
| |
2,082
| | | | |
| OWNERSHIP INTEREST LOCATIONS: | | | | | | | | |
|
Equity ownership interest locations
| |
246
| |
246
| | |
| |
|
Grand Total, System-wide
| |
9,757
| |
9,763
| | | | |
|
(1) The North American Value operating segment is comprised
primarily of the SmartStyle, Supercuts, MasterCuts and Promenade
salon brands. The North American Premium operating segment is
comprised primarily of the Regis salon brands.
|
(2) Canadian and Puerto Rican salons are included in the North
American salon totals.
| | | | |
|
Non-GAAP Reconciliations
We believe our presentation of non-GAAP operating income, net income,
net income per diluted share, and other non-GAAP financial measures
provides meaningful insight into our ongoing operating performance and
an alternative perspective of our results of operations. Presentation of
the non-GAAP measures allows investors to review our core ongoing
operating performance from the same perspective as management and the
Board of Directors. These non-GAAP financial measures provide investors
an enhanced understanding of our operations, facilitate investors'
analyses and comparisons of our current and past results of operations
and provide insight into the prospects of our future performance. We
also believe that the non-GAAP measures are useful to investors because
they provide supplemental information that research analysts frequently
use to analyze financial performance.
The method we use to produce non-GAAP results is not in accordance with
U.S. GAAP and may differ from methods used by other companies. These
non-GAAP results should not be regarded as a substitute for the
corresponding U.S. GAAP measures but instead should be utilized as a
supplemental measure of operating performance in evaluating our
business. Non-GAAP measures do have limitations in that they do not
reflect certain items that may have a material impact upon our reported
financial results. As such, these non-GAAP measures should be viewed in
conjunction with both our financial statements prepared in accordance
with U.S. GAAP and the reconciliation of the selected U.S. GAAP to
non-GAAP financial measures, which are located in the Investor
Information section of the corporate website at www.regiscorp.com.
Non-GAAP reconciling items for the three and six months ended
December 31, 2013 and 2012:
The following information is provided to give qualitative and
quantitative information related to items impacting comparability. Items
impacting comparability are not defined terms within U.S. GAAP.
Therefore, our non-GAAP financial information may not be comparable to
similarly titled measures reported by other companies. We determine
which items to consider as "items impacting comparability" based on how
management views our business, makes financial, operating and planning
decisions and evaluates the Company's ongoing performance. The following
items have been excluded from our non-GAAP results:
-
Inventory reserves attributed to our inventory simplification program.
-
Self-insurance reserve adjustments.
-
Deferred compensation adjustments.
-
Expense associated with legal cases.
-
Professional fees associated with the evaluation and sale of non-core
assets.
-
Expenses associated with senior management restructuring.
-
Recovery of bad debt expense associated with the outstanding note
receivable with Pure Beauty.
-
Accelerated depreciation related to our corporate office consolidation.
-
Goodwill impairment charge related to our Regis salon concept
reporting unit.
-
Recognition in earnings of amounts previously classified within
accumulated other comprehensive income (AOCI) that were associated
with the liquidation of foreign entities denominated in the Euro
related to the sale of its investment in Provalliance.
-
Recovery of previously impaired investments in an affiliate.
-
Impairment recorded on our investment in Empire Education Group.
-
Other than temporary impairment recorded on our investment in
Provalliance, partially offset by a gain recorded for the reduction in
the fair value of the equity put option associated with our investment
in Provalliance.
-
Operations of our Hair Restoration Centers and professional fees
associated with the disposition of our Hair Restoration Centers on
April 9, 2013.
The non-GAAP tax provision adjustments related to the amounts excluded
from our non-GAAP results are due to the change in non-GAAP taxable
income as compared to U.S. GAAP taxable income or loss, resulting from
the non-GAAP reconciling items addressed herein. The non-GAAP tax
provision adjustments are made to reflect the year-to-date non-GAAP tax
rate for each period. The non-GAAP weighted average shares adjustments
are due to the change in non-GAAP net income (loss) as compared to the
U.S. GAAP net income (loss), resulting from the non-GAAP reconciling
items addressed herein. Non-GAAP net income (loss) per share reflects
the weighted average shares associated with non-GAAP net income, which
may include the dilutive effect of common stock and convertible share
equivalents.
| REGIS CORPORATION | Reconciliation of selected U.S. GAAP to non-GAAP financial
measures | (Dollars in thousands, except per share data) | (unaudited) |
| Reconciliation of U.S. GAAP operating (loss) income and net
(loss) income to equivalent non-GAAP measures | |
| |
| Three Months Ended December 31, | | Six Months Ended December 31, | | | | U.S. GAAP financial line item | | 2013 | | 2012 |
| 2013 | | 2012 | | U.S. GAAP revenue | | | | $ | 468,367 | | $ | 506,165 | $ | 936,950 | | $ | 1,011,525 | | | | | | | | | | | | |
| U.S. GAAP operating (loss) income | | | | $ | (35,549 |
)
| $ | 8,723 | | $ | (34,120 |
)
| $ | 17,996 | | | | | | | | | | | | |
|
Non-GAAP operating expense adjustments:
| | | | | | | | | | | |
Inventory reserves
| |
Cost of product
| |
-
| |
-
| |
854
| |
-
| |
Self-insurance reserves adjustments
| |
Site operating expense
| |
(673
|
)
|
(1,127
|
)
|
(673
|
)
|
(1,127
|
)
|
Deferred compensation adjustments
| |
General and administrative
| |
(3,703
|
)
|
-
| |
(3,703
|
)
|
-
| |
Legal fees
| |
General and administrative
| |
1,590
| |
-
| |
1,913
| |
-
| |
Professional fees
| |
General and administrative
| |
37
| |
-
| |
489
| |
-
| |
Senior management restructure
| |
General and administrative
| |
-
| |
992
| |
-
| |
992
| |
Self-insurance reserves adjustments
| |
General and administrative
| |
-
| |
5
| |
-
| |
5
| |
Pure Beauty note receivable recovery
| |
General and administrative
| |
-
| |
-
| |
-
| |
(333
|
)
|
Corporate office consolidation accelerated depreciation
| |
Depreciation and amortization
| |
-
| |
-
| |
746
| |
-
| |
Goodwill impairment
| |
Goodwill impairment
| |
34,939
| |
-
| |
34,939
| |
-
| |
Total non-GAAP operating expense adjustments
| | | |
32,190
| |
(130
|
)
|
34,565
| |
(463
|
)
| Non-GAAP operating (loss) income (1) | | | | $ | (3,359 |
)
| $ | 8,593 | | $ | 445 | | $ | 17,533 | | | | | | | | | | | | |
| U.S. GAAP net (loss) income | | | | $ | (109,977 | ) | $ | (12,266 | ) | $ | (110,113 |
)
| $ | 26,158 | | | | | | | | | | | | |
|
Non-GAAP net (loss) income adjustments:
| | | | | | | | | | | |
Non-GAAP operating expense adjustments
| | | |
32,190
| |
(130
|
)
|
34,565
| |
(463
|
)
|
AOCI adjustments
| |
Interest income and other, net
| |
-
| |
-
| |
-
| |
(33,842
|
)
|
Tax provision adjustments (2)
| |
Income taxes
| |
77,442
| |
51
| |
76,774
| |
1,862
| |
Recovery of previously impaired investments in affiliates
| |
Equity in income (loss) of affiliated companies, net of taxes
| |
(2,088
|
)
|
-
| |
(3,077
|
)
|
-
| |
Empire Education Group impairment
| |
Equity in income (loss) of affiliated companies, net of tax
| |
-
| |
17,899
| |
-
| |
17,899
| |
Provalliance impairment and equity put liability adjustment
| |
Equity in income (loss) of affiliated companies, net of taxes
| |
-
| |
-
| |
-
| |
2,048
| |
Hair Restoration Center discontinued operations
| |
Income from discontinued operations, net of taxes
| |
-
| |
(3,853
|
)
|
-
| |
(7,630
|
)
|
Total non-GAAP net (loss) income adjustments
| | | | 107,544 | | 13,967 | | 108,262 | | (20,126 | ) | Non-GAAP net (loss) income | | | | $ | (2,433 | ) | $ | 1,701 | | $ | (1,851 | ) | $ | 6,032 | |
| Notes: |
(1) Adjusted operating margins for the three months ended December
31, 2013, and 2012, were (0.7) and 1.7 percent, respectively, and
were 0.0 and 1.7 percent for the six months ended December 31,
2013 and 2012, respectively, and are calculated as non-GAAP
operating income divided by U.S. GAAP revenue for each respective
period.
|
|
(2) Based on projected statutory effective tax rate analyses, the
non-GAAP tax provision was calculated to be approximately 37
percent for the three and six months ended December 31, 2013,
respectively, for all non-GAAP operating expense adjustments
except the goodwill impairment. The goodwill impairment had a tax
benefit of approximately $6.3 million for the three and six months
ended December 31, 2013, as the charge was only partly deductible
for income tax purposes. In addition, during the three and six
months ended December 31, 2013, the Company recorded a $83.5
million valuation reserve against the Company's United States
deferred tax assets. The three months ended December 31, 2013,
also includes $0.3 million benefit for the impact of the discrete
income tax rate. Based on projected statutory effective tax rate
analyses, the non-GAAP tax provision was calculated to be
approximately 39 percent for the three and six months ended
December 31, 2012, respectively, for all non-GAAP operating
expense adjustments, except the AOCI adjustments during the six
months ended December 31, 2012. The AOCI adjustments were
primarily non-taxable.
|
| REGIS CORPORATION | Reconciliation of selected U.S. GAAP to non-GAAP financial
measures | (Dollars in thousands, except per share data) |
| Reconciliation of U.S. GAAP net (loss) income per diluted share
to non-GAAP net income per diluted share |
| Three Months Ended December 31, | | Six Months Ended December 31, | | | 2013 | | 2012 | | 2013 | | 2012 | | U.S. GAAP net (loss) income per diluted share | | $ | (1.949 | ) | $ | (0.216 |
)
| $ | (1.951 |
)
| $ | 0.458 | |
Inventory reserves (1) (2)
| |
-
| |
-
| |
0.009
| |
-
| |
Self-insurance reserves adjustments (1) (2)
| |
(0.008
|
)
|
(0.012
|
)
|
(0.008
|
)
|
(0.012
|
)
|
Deferred compensation adjustments (1) (2)
| |
(0.049
|
)
|
-
| |
(0.049
|
)
|
-
| |
Legal fees (1) (2)
| |
0.018
| |
-
| |
0.021
| |
-
| |
Professional fees (1) (2)
| |
-
| |
-
| |
0.006
| |
-
| |
Senior management restructure (1) (2)
| |
-
| |
0.011
| |
-
| |
0.011
| |
Pure Beauty note receivable recovery (1) (2)
| |
-
| |
-
| |
-
| |
(0.004
|
)
|
Corporate office consolidation accelerated depreciation (1) (2)
| |
-
| |
-
| |
0.008
| |
-
| |
Goodwill impairment (1) (2)
| |
0.507
| |
-
| |
0.507
| |
-
| |
AOCI adjustments (1) (2)
| |
-
| |
-
| |
-
| |
(0.563
|
)
|
Deferred tax asset valuation (1) (2)
| |
1.479
| |
-
| |
1.480
| |
-
| |
Impact of income tax rate difference (1) (2)
| |
(0.005
|
)
|
-
| |
(0.001
|
)
|
-
| |
Recovery of previously impaired investments in affiliates (1) (2)
| |
(0.037
|
)
|
-
| |
(0.055
|
)
|
-
| |
Empire Education Group impairment (1) (2)
| |
-
| |
0.315
| |
-
| |
0.313
| |
Provalliance impairment and equity put liability adjustment (1) (2)
| |
-
| |
-
| |
-
| |
0.036
| |
Hair Restoration Center discontinued operations
| |
-
| |
(0.068
|
)
|
-
| |
(0.134
|
)
| Non-GAAP net income per diluted share (2) (3) | | $ | (0.043 |
)
| $ | 0.030 | | $ | (0.033 |
)
| $ | 0.106 | | | | | | | | | | |
|
U.S. GAAP Weighted average shares - basic
| | 56,437 | | 56,794 | | 56,427 | | 57,043 | |
U.S. GAAP Weighted average shares - diluted
| | 56,437 | | 56,794 | | 56,427 | | 57,125 | |
Non-GAAP Weighted average shares - diluted (2)
| | 56,437 | | 56,893 | | 56,427 | | 57,125 | |
| Notes: | (1) Based on projected statutory effective tax rate
analyses, the non-GAAP tax provision was calculated to be
approximately 37 percent for the three and six months ended
December 31, 2013, respectively, for all non-GAAP operating
expense adjustments except the goodwill impairment. The goodwill
impairment had a tax benefit of approximately $6.3 million for the
three and six months ended December 31, 2013, as the charge was
only partly deductible for income tax purposes. In addition,
during the three and six months ended December 31, 2013, the
Company recorded a $83.5 million valuation reserve against the
Company's United States deferred tax assets. The three months
ended December 31, 2013, also includes $0.3 million benefit for
the impact of the discrete income tax rate. Based on projected
statutory effective tax rate analyses, the non-GAAP tax provision
was calculated to be approximately 39 percent for the three and
six months ended December 31, 2012, respectively, for all non-GAAP
operating expense adjustments, except the AOCI adjustments during
the six months ended December 31, 2012. The AOCI adjustments were
primarily non-taxable.
|
| (2) Non-GAAP net (loss) income per share reflects the
weighted average shares associated with non-GAAP net (loss)
income, which includes the dilutive effect of common stock and
convertible share equivalents. The earnings per share impact of
the adjustments for the three months ended December 31, 2012,
included 0.1 million common stock equivalents in the weighted
average shares.
|
| (3) Total is a recalculation; line items calculated
individually may not sum to total due to rounding.
|
| REGIS CORPORATION | Summary of Pre-Tax, Income Taxes, and Net Income Impact for Q2
FY14 Discrete Items |
| | Pre-Tax | | Income Taxes | | Net Income | | | | | | | |
|
Self-insurance reserves adjustments
|
$
|
(673
|
)
|
$
|
249
| |
$
|
(424
|
)
|
Deferred compensation adjustment
|
(3,703
|
)
|
949
| |
(2,754
|
)
|
Legal fees
|
1,590
| |
(588
|
)
|
1,002
| |
Professional fees
|
37
| |
(14
|
)
|
23
| |
Goodwill impairment
|
34,939
| |
(6,341
|
)
|
28,598
| |
Deferred tax asset valuation
|
-
| |
83,484
| |
83,484
| |
Impact of income tax rate difference
|
-
| |
(297
|
)
|
(297
|
)
|
Recovery of previously impaired investments in affiliates
|
(2,088
|
)
|
-
| |
(2,088
|
)
|
Total
|
$
|
30,102
| |
$
|
77,442
| |
$
|
107,544
| | | | | | | | | | |
|
REGIS CORPORATION | Reconciliation of reported U.S. GAAP net (loss) income to
adjusted EBITDA, a non-GAAP financial measure | (Dollars in thousands) | (unaudited) |
Adjusted EBITDA
EBITDA represents U.S. GAAP net (loss) income for the respective period
excluding interest expense, income taxes and depreciation and
amortization expense. The Company defines adjusted EBITDA, as EBITDA
excluding equity in income (loss) of affiliated companies, and
identified items impacting comparability for each respective period. For
the three and six months ended December 31, 2013 and 2012, the items
impacting comparability consisted of the items identified in the
non-GAAP reconciling items for the respective periods. The impact of the
income tax provision adjustments associated with the above items, the
deferred tax valuation and accelerated depreciation related to the
corporate office consolidation are already included in the U.S. GAAP
reported net (loss) income to EBITDA reconciliation, therefore there is
no adjustment needed for the reconciliation from EBITDA to adjusted
EBITDA. The impacts of the recovery of a previously impaired investment
in an affiliate, impairment of Empire Education Group and net
Provalliance impairment and gain for the settlement of a portion of the
Provalliance equity put are already included by excluding the impact of
the Company's equity in income (loss) of affiliated companies, net of
taxes, as reported.
|
| Three Months Ended December 31, | | Six Months Ended December 31, | | | | 2013 | | 2012 |
| 2013 | | 2012 | | | | (Dollars in thousands) | | Consolidated reported net (loss) income, as reported (U.S. GAAP) | | $ | (109,977 | ) | $ | (12,266 | ) | $ | (110,113 | ) | $ | 26,158 | |
Interest expense, as reported
| |
5,166
| |
6,649
| |
9,657
| |
13,478
| |
Income taxes, as reported
| |
72,341
| |
1,085
| |
71,958
| |
4,071
| |
Depreciation and amortization, as reported
| |
24,641
| |
21,891
| |
48,472
| |
42,600
| |
EBITDA (as defined above)
| | $ | (7,829 |
)
| $ | 17,359 | | $ | 19,974 | | $ | 86,307 | | | | | | | | | | |
|
Equity in (income) loss of affiliated companies, net of income
taxes, as reported
| |
(2,740
|
)
|
17,709
| |
(4,739
|
)
|
17,132
| |
Inventory reserves
| |
-
| |
-
| |
854
| |
-
| |
Self-insurance reserves adjustments
| |
(673
|
)
|
(1,122
|
)
|
(673
|
)
|
(1,122
|
)
|
Deferred compensation adjustment
| |
(3,703
|
)
|
-
| |
(3,703
|
)
|
-
| |
Legal fees
| |
1,590
| |
-
| |
1,913
| |
-
| |
Professional fees
| |
37
| |
-
| |
489
| |
-
| |
Senior management restructure
| |
-
| |
992
| |
-
| |
992
| |
Pure Beauty note receivable recovery
| |
-
| |
-
| |
-
| |
(333
|
)
|
Goodwill impairment
| |
34,939
| |
-
| |
34,939
| |
-
| |
AOCI adjustments
| |
-
| |
-
| |
-
| |
(33,842
|
)
|
Income from discontinued operations, net of taxes, as reported
| |
-
| |
(3,853
|
)
|
-
| |
(7,630
| ) | Adjusted EBITDA, non-GAAP financial measure | | $ | 21,621 | | $ | 31,085 | | $ | 49,054 | | $ | 61,504 | |
| REGIS CORPORATION | Reconciliation of reported U.S. GAAP revenue change to same-store
sales | (unaudited) |
|
| Three Months Ended December 31, | | Six Months Ended December 31, | | | 2013 | | 2012 | | 2013 | | 2012 | | Revenue decline, as reported (U.S. GAAP) | | (7.5 | )% | (3.8 | )% | (7.4 | )% | (4.3 | )% |
Effect of new stores and conversions
| |
(0.7
|
)
|
(1.2
|
)
|
(0.8
|
)
|
(1.4
|
)
|
Effect of closed salons
| |
2.7
| |
3.4
| |
2.9
| |
3.2
| |
Other
| |
(0.7
|
)
|
(0.3
|
)
|
(0.5
|
)
|
-
| | Same-store sales, non-GAAP | | (6.2 | )% | (1.9 | )% | (5.8 | )% | (2.5 | )% |
REGIS CORPORATION: SVP, Finance and Investor Relations Mark
Fosland, 952-806-1707
|
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