Regis Reports $11.0 Million Increase in Fourth Quarter 2016 Operating Income |
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 fourth quarter ended June 30, 2016
versus the prior year as noted below.
As a result of the Company's valuation allowance against most of its
deferred tax assets, associated reported and as adjusted, after-tax
results are not comparable to prior periods.
Fiscal 2016 Highlights: - Same-store sales increased 0.2%.
- Franchise revenue increased 6.5%.
- Repurchased 7.6 million shares of common stock for $101 million.
- Generated $55 million of operating cash flow.
Fourth Quarter 2016 Results: - Sales of $447.7 million, a decline of ($15.2) million.
Same-store sales decreased (1.4%).
- Same-store service sales decreased (1.6%) and same-store
product sales decreased (0.8%).
- GAAP operating income of $10.6 million compared to ($0.4)
million in the prior year quarter.
- GAAP net income of $5.6 million or $0.12 per diluted share.
- Includes ($0.06) per diluted share unfavorable impact due to
the deferred tax valuation allowance on income tax expense.
- EBITDA, as adjusted, of $27.4 million compared to $24.4 million
in the prior year quarter.
- Decrease of ($2.5) million from same-store sales declines.
- Increase of $5.5 million mainly from lower incentives, cost
savings, timing of certain costs throughout the year, reduced
salon counts, lapping certain costs in the prior year quarter, and
higher franchise royalties and fees, partly offset by minimum wage
and inflation, increased health insurance costs, lapping of
one-time inventory improvements, and planned strategic investments.
- Diluted EPS, as adjusted, was $0.12 compared to $0.01 in the
prior year quarter.
- Excluding the impact of the deferred tax valuation
allowance, Diluted EPS, as adjusted, improved $0.24 per share
compared to the prior year quarter.
- Primary drivers of this improvement were lower depreciation,
income tax credits, lower non-cash equity in losses of Empire
Education Group, and the EBITDA impacts listed above.
- The prior year quarter GAAP net loss includes net discrete
expense of $3.1 million. See non-GAAP reconciliations.
Dan Hanrahan, President and Chief Executive Officer, commented, "I am
proud of the work our organization has put forth to deliver our first
positive full year sales comp since fiscal 2007. This could not have
been achieved without improved execution in the organization around our
key strategies focused on Leadership Development, Technical Education
and Asset Protection. I am also pleased by the fact we expanded our
EBITDA, as adjusted, by $3.8 and $3.0 million for the full year and the
fourth quarter, respectively. This reflects our continued efforts to
contain our cost structure while we are fixing our business. During the
year, we aggressively grew our franchising business, strengthened our
balance sheet, and returned $101 million to shareholders in the form of
share repurchases. That said, I end the year with mixed emotions. We
still need to reverse guest traffic declines that have persisted for
many years and fourth quarter same-store sales declined by 1.4%.
This demonstrates the opportunity we have to continue to improve our
execution capabilities and a key reason why I have said over the past
three years our improvement would not be linear."
Mr. Hanrahan concluded, "As I look toward fiscal 2017, I recognize the
path to sustainable growth is in the quality of our field leadership and
execution capabilities. Transforming a culture comprised of 45,000
stylists, 1,000 field leaders and 7,000 salons requires strong
execution, an ongoing commitment and time. I am confident our
strategies will make Regis the place where stylists can have successful
and satisfying careers that, in turn, will deliver sustainable growth in
guest traffic and profitability."
| Comparable Profitability Measures | |
|
|
(Unaudited)
|
|
| |
|
| | | | | Three Months Ended | | | Twelve Months | | | | June 30, | | | Ended June 30, | | | | 2016 |
|
| 2015 | | | 2016 | | | 2015 | | | | (Dollars in millions) |
Revenue
| | |
$
|
447.7
| | | |
$
|
462.9
| | | |
$
|
1,790.9
| | | |
$
|
1,837.3
| | | | | | | | | | | | | |
|
Revenue decline %
| | | |
(3.3
|
)
| | | |
(4.3
|
)
| | | |
(2.5
|
)
| | | |
(2.9
|
)
| | | | | | | | | | | | |
|
Same-Store Sales %
| | | |
(1.4
|
)
| | | |
(0.8
|
)
| | | |
0.2
| | | | |
(0.3
|
)
|
Same-Store Average Ticket % Change
| | | |
3.7
| | | | |
1.5
| | | | |
3.1
| | | | |
1.6
| |
Same-Store Guest Count % Change
| | | |
(5.1
|
)
| | | |
(2.3
|
)
| | | |
(2.9
|
)
| | | |
(1.9
|
)
| | | | | | | | | | | | |
|
Cost of Service and Product % (1)
| | | |
59.6
| | | | |
58.7
| | | | |
60.1
| | | | |
59.3
| |
Cost of Service % (1)
| | | |
62.1
| | | | |
61.5
| | | | |
62.7
| | | | |
61.8
| |
Cost of Product % (1)
| | | |
49.5
| | | | |
47.0
| | | | |
49.9
| | | | |
49.7
| | | | | | | | | | | | | |
|
Site operating expense as % of total revenues, U.S. GAAP reported
| | | |
10.0
| | | | |
10.5
| | | | |
10.2
| | | | |
10.5
| |
Site operating expense as % of total revenues, as adjusted
| | | |
10.0
| | | | |
10.0
| | | | |
10.2
| | | | |
10.6
| | | | | | | | | | | | | |
|
General and administrative as % of total revenues
| | | |
9.7
| | | | |
10.8
| | | | |
9.9
| | | | |
10.1
| | | | | | | | | | | | | |
|
Operating income (loss) as % of total revenues, U.S. GAAP reported
| | | |
2.4
| | | | |
(0.1
|
)
| | | |
1.0
| | | | |
0.2
| |
Operating income as % of total revenues, as adjusted
| | | |
2.4
| | | | |
0.4
| | | | |
1.0
| | | | |
0.1
| | | | | | | | | | | | | |
|
EBITDA
| | | |
27.5
| | | | |
19.6
| | | | |
74.5
| | | | |
73.8
| |
EBITDA, as adjusted
| | | |
27.4
| | | | |
24.4
| | | | |
90.3
| | | | |
86.5
| |
| | | | | | | | | | | | |
1) Excludes depreciation and amortization.
|
|
Fourth Quarter Results: Revenues. Revenue in the quarter of $447.7 million declined $15.2
million, or 3.3%, compared to the prior year quarter. Same-store sales
decreased 1.4% compared to the prior year quarter. Management estimates
the shift of Easter from April of last year to March of this year
negatively impacted same-store sales by approximately 40 basis points
during the fourth quarter of the current year. The remaining 190 basis
point, or $9.2 million, decline in revenue, compared to the prior year
quarter, was primarily due to the closing of unprofitable salons and
foreign currency, partly offset by one more calendar day in the quarter
and growth from royalties and fees.
Service revenues were $348.9 million, a $13.4 million, or 3.7% decrease,
compared to the prior year quarter. Same-store service sales decreased
1.6%, driven by a decline in guest traffic of 5.1%, partly offset by an
increase in average ticket of 3.5%. The remaining 210 basis point, or
$7.9 million, decline in service revenues, compared to the prior year
quarter, was primarily due to the closing of unprofitable salons and
foreign currency, partly offset by one more calendar day in the quarter.
Product revenues were $86.7 million, a decrease of $1.9 million, or
2.2%, compared to the prior year quarter. Product same-store sales for
the quarter decreased 0.8%, driven by a decrease in traffic of 0.9%,
partly offset by a 0.1% increase in average ticket. The other 140 basis
point, or $1.3 million, decline in product revenues, compared to the
prior year quarter, was primarily due to the closing of unprofitable
salons and foreign currency, partly offset by one more calendar day in
the quarter.
Royalties and fees were $12.1 million, an increase of $0.2 million, or
1.4% compared to the prior year quarter. Franchisees posted positive
same-store sales during the quarter. The timing of new franchised-salon
openings impacted results in the quarter. The Company added a net 42, or
1.7%, and a net 172, or 7.4%, new franchised locations during the
quarter and year, respectively.
Cost of Service and Product. Cost of service and product, as a
percent of service and product revenues, increased 90 basis points to
59.6% compared to the prior year quarter.
Cost of service as a percent of service revenues for the quarter
increased 60 basis points versus the prior year quarter, to 62.1%. The
primary drivers were state minimum wage increases and higher health
insurance costs, partly offset by the timing of Easter Sunday pay and
lower salon incentives.
In the fourth quarter, the Company issued a press release stating new
U.S. Department of Labor overtime rules, effective December 1, 2016,
could increase its costs from $0 to $5 million per year. After
considering alternatives to mitigate these cost increases, the Company
now believes the annualized impact will be on the lower end of this
range.
Cost of product as a percent of product revenues was 49.5%. The increase
of 250 basis points when compared to the prior year quarter was mainly
the result of lapping one-time inventory improvements.
Site Operating Expenses. Site operating expenses of $44.8 million
decreased $3.6 million compared to the prior year quarter. Excluding the
impact of discrete items in the prior year period, site operating
expenses decreased $1.3 million. This was primarily driven by a net
reduction of 233 salons, the timing of marketing expenses, cost savings,
and foreign currency, partly offset by lapping favorable self-insurance
costs and certain tax refunds.
General and Administrative. General and administrative expenses
of $43.5 million decreased $6.6 million compared to the prior year
quarter. Excluding the impact of discrete items in the current and prior
periods, general and administrative expenses decreased $6.4 million
compared to the prior year quarter. The decrease was mainly due to lower
incentive costs, lapping certain costs in the prior year quarter, timing
of expenses throughout the year, cost savings and foreign currency,
partly offset by planned strategic investments.
Rent. Rent expense of $73.6 million decreased $4.6 million
compared to the prior year quarter. This decrease was primarily the
result of a net reduction of 233 salons, lapping certain lease renewal
costs in the prior year quarter, receipt of a one-time landlord credit,
and foreign exchange, partly offset by rent inflation.
Depreciation and Amortization. Depreciation and amortization was
$15.6 million compared to $22.0 million in the prior year quarter, a
decrease of $6.5 million. This decrease was primarily due to a net
reduction of 233 salons and lower non-cash salon fixed asset impairments.
Income Taxes. During the three months ended June 30, 2016 and
2015, the Company recognized income tax expense of $4.1 million and tax
benefit of $2.2 million, at effective tax rates of 42.6% and 92.6%,
respectively.
The recorded tax expense and effective tax rates for the three and
twelve months ended June 30, 2016 and 2015 were different than what
would normally be expected due to the impact of the deferred tax
valuation allowance. The majority of the tax expense relates to a
non-cash tax expense for tax benefits on certain indefinite-lived assets
the Company cannot recognize for reporting purposes. Income tax expense
for the three and twelve months ended June 30, 2016 includes non-cash
expense of $4.5 and $7.9 million, respectively, related to this matter.
This non-cash impact will continue as long as the Company has a
valuation allowance against most of its deferred tax assets and is
expected to approximate $7.8 million of expense for the year ending June
30, 2017.
Equity in Affiliates. Income from equity method investments and
affiliated companies was flat compared to a loss of $1.8 million in the
prior year quarter. The prior year loss of $1.8 million represented the
Company's portion of EEG's loss.
EBITDA, as Adjusted. EBITDA, as adjusted, which excludes the
impact of equity in earnings of affiliated companies and discrete items
in both periods, was $27.4 million, an improvement of $3.0 million
compared to the prior year quarter.
Capital Allocation. During the fourth quarter, the Company
repurchased 0.3 million shares for $4.0 million at an average price of
$13.65 per share, excluding transaction costs. For the full year, the
Company repurchased 7.6 million shares for $101.0 million at an average
price of $13.19 per share, excluding transaction costs. At June 30,
2016, approximately $60 million remained outstanding under the Company's
existing share repurchase authorization.
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 via webcast discussing
fourth quarter results today, August 23, 2016, at 9 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) 852-6561. A replay of the
presentation will be available later that day. The replay phone number
is (888) 203-1112, access code 8618174.
About Regis Corporation
Regis Corporation (NYSE:RGS) is the leader in beauty salons and
cosmetology education. As of June 30, 2016, the Company owned,
franchised or held ownership interests in 9,483 worldwide locations.
Regis' corporate and franchised locations operate under concepts such as
Supercuts, SmartStyle, MasterCuts, Regis Salons, Sassoon Salon, Cost
Cutters and First Choice Haircutters. 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 continued ability of the Company to execute on our
strategy and build on the foundational initiatives that we have
implemented; the success of our stylists and our ability to attract,
train and retain talented stylists; changes in regulatory and statutory
laws; our ability to manage cyber threats and protect the security of
sensitive information about our guests, employees, vendors or Company
information; changes in tax exposure; the effect of changes to
healthcare laws; reliance on management information systems; financial
performance of Empire Education Group; reliance on external vendors;
consumer shopping trends and changes in manufacturer distribution
channels; financial performance of our franchisees; competition within
the personal hair care industry; changes in interest rates and foreign
currency exchange rates; failure to standardize operating processes
across brands; the ability of the Company to maintain satisfactory
relationships with certain companies and suppliers; the continued
ability of the Company to implement cost reduction initiatives;
compliance with debt covenants; changes in economic conditions; changes
in consumer tastes and fashion trends; or other factors not listed
above. Additional information concerning potential factors that could
affect future financial results is set forth under Item 1A of this
Form 10-K. 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-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) |
| |
|
| |
|
| | | | | June 30, 2016 | | | June 30, 2015 | ASSETS | | | | | | |
Current assets:
| | | | | | |
Cash and cash equivalents
| | |
$
|
147,346
| | |
$
|
212,279
|
Receivables, net
| | | |
24,691
| | | |
24,631
|
Inventories
| | | |
134,212
| | | |
128,610
|
Other current assets
| | |
|
51,765
| | |
|
62,762
|
Total current assets
| | | |
358,014
| | | |
428,282
| | | | | | |
|
Property and equipment, net
| | | |
183,321
| | | |
218,157
|
Goodwill
| | | |
417,393
| | | |
418,953
|
Other intangibles, net
| | | |
15,185
| | | |
17,069
|
Investment in affiliates
| | | |
520
| | | |
15,321
|
Other assets
| | |
|
62,328
| | |
|
64,233
|
Total assets
| | |
$
|
1,036,761
| | |
$
|
1,162,015
| | | | | | |
| LIABILITIES AND SHAREHOLDERS' EQUITY | | | | | | |
Current liabilities:
| | | | | | |
Accounts payable
| | |
$
|
59,884
| | |
$
|
63,302
|
Accrued expenses
| | |
|
135,431
| | |
|
153,364
|
Total current liabilities
| | | |
195,315
| | | |
216,666
| | | | | | |
|
Long-term debt
| | | |
120,435
| | | |
120,000
|
Other noncurrent liabilities
| | |
|
201,610
| | |
|
197,905
|
Total liabilities
| | |
|
517,360
| | |
|
534,571
| | | | | | |
|
Shareholders' equity:
| | | | | | |
Common stock, $0.05 par value; issued and outstanding, 46,154,410
and 53,664,366 common shares at June 30, 2016 and 2015, respectively
| | | |
2,308
| | | |
2,683
|
Additional paid-in capital
| | | |
207,475
| | | |
298,396
|
Accumulated other comprehensive income
| | | |
5,068
| | | |
9,506
|
Retained earnings
| | |
|
304,550
| | |
|
316,859
|
Total shareholders' equity
| | |
|
519,401
| | |
|
627,444
|
Total liabilities and shareholders' equity
| | |
$
|
1,036,761
| | |
$
|
1,162,015
| | | | | | | | |
|
| REGIS CORPORATION (NYSE: RGS) | CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited) | (Dollars in thousands, except per share data) | |
|
| |
|
| | | | | Three Months Ended June 30, | | | Twelve Months Ended June 30, | | | | 2016 |
|
| 2015 | | | 2016 |
|
| 2015 |
Revenues:
| | | | | | | | | | | | |
Service
| | |
$
|
348,912
| | | |
$
|
362,329
| | | |
$
|
1,383,663
| | | |
$
|
1,429,408
| |
Product
| | | |
86,706
| | | | |
88,640
| | | | |
359,683
| | | | |
363,236
| |
Royalties and fees
| | |
|
12,089
|
| | |
|
11,920
|
| | |
|
47,523
|
| | |
|
44,643
|
| | | |
|
447,707
|
| | |
|
462,889
|
| | |
|
1,790,869
|
| | |
|
1,837,287
|
|
Operating expenses:
| | | | | | | | | | | | |
Cost of service
| | | |
216,702
| | | | |
222,981
| | | | |
868,188
| | | | |
882,717
| |
Cost of product
| | | |
42,921
| | | | |
41,634
| | | | |
179,341
| | | | |
180,558
| |
Site operating expenses
| | | |
44,807
| | | | |
48,385
| | | | |
182,952
| | | | |
192,442
| |
General and administrative
| | | |
43,479
| | | | |
50,117
| | | | |
178,033
| | | | |
186,051
| |
Rent
| | | |
73,605
| | | | |
78,170
| | | | |
297,271
| | | | |
309,125
| |
Depreciation and amortization
| | |
|
15,593
|
| | |
|
22,048
|
| | |
|
67,470
|
| | |
|
82,863
|
|
Total operating expenses
| | |
|
437,107
|
| | |
|
463,335
|
| | |
|
1,773,255
|
| | |
|
1,833,756
|
|
Operating income (loss)
| | | |
10,600
| | | | |
(446
|
)
| | | |
17,614
| | | | |
3,531
| |
Other (expense) income:
| | | | | | | | | | | | |
Interest expense
| | | |
(2,176
|
)
| | | |
(2,363
|
)
| | | |
(9,317
|
)
| | | |
(10,206
|
)
|
Interest income and other, net
| | |
|
1,261
|
| | |
|
390
|
| | |
|
4,219
|
| | |
|
1,697
|
|
Income (loss) before income taxes and equity in loss of affiliated
companies
| | | |
9,685
| | | | |
(2,419
|
)
| | | |
12,516
| | | | |
(4,978
|
)
|
Income taxes
| | | |
(4,123
|
)
| | | |
2,240
| | | | |
(9,049
|
)
| | | |
(14,605
|
)
|
Equity in loss of affiliated companies, net of income taxes
| | |
|
-
|
| | |
|
(1,764
|
)
| | |
|
(14,783
|
)
| | |
|
(13,629
|
)
|
Income (loss) from continuing operations
| | |
|
5,562
|
| | |
|
(1,943
|
)
| | |
|
(11,316
|
)
| | |
|
(33,212
|
)
|
Loss from discontinued operations, net of income taxes
| | |
|
-
|
| | |
|
(630
|
)
| | |
|
-
|
| | |
|
(630
|
)
|
Net income (loss)
| | |
$
|
5,562
|
| | |
$
|
(2,573
|
)
| | |
$
|
(11,316
|
)
| | |
$
|
(33,842
|
)
|
Net income (loss) per share:
| | | | | | | | | | | | |
Basic and diluted:
| | | | | | | | | | | | |
Income (loss) from continuing operations
| | |
$
|
0.12
| | | |
$
|
(0.04
|
)
| | |
$
|
(0.23
|
)
| | |
$
|
(0.60
|
)
|
Loss from discontinued operations
| | |
|
-
|
| | |
|
(0.01
|
)
| | |
|
-
|
| | |
|
(0.01
|
)
|
Net income (loss) per share, basic and diluted(1)
| | |
$
|
0.12
|
| | |
$
|
(0.05
|
)
| | |
$
|
(0.23
|
)
| | |
$
|
(0.62
|
)
|
Weighted average common and common equivalent shares outstanding:
| | | | | | | | | | | | |
Basic
| | |
|
46,289
|
| | |
|
54,222
|
| | |
|
48,542
|
| | |
|
54,992
|
|
Diluted
| | |
|
46,706
|
| | |
|
54,222
|
| | |
|
48,542
|
| | |
|
54,992
|
|
| | | | | | | | | | | | | | | | | | | | |
(1) Total is a recalculation; line items calculated individually
may not sum to total due to rounding.
|
|
| REGIS CORPORATION (NYSE: RGS) | CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS) (Unaudited) | (Dollars in thousands) | |
|
| |
|
| | | | | Three Months Ended June 30, | | | Twelve Months Ended June 30, | | | | 2016 |
|
| 2015 | | | 2016 |
|
| 2015 |
Net income (loss)
| | |
$
|
5,562
| | | |
$
|
(2,573
|
)
| | |
$
|
(11,316
|
)
| | |
$
|
(33,842
|
)
|
Other comprehensive income (loss):
| | | | | | | | | | | | |
Foreign currency translation adjustments during the period
| | | |
525
| | | | |
2,182
| | | | |
(4,276
|
)
| | | |
(13,515
|
)
|
Recognition of deferred compensation
| | |
|
(162
|
)
| | |
|
370
|
| | |
|
(162
|
)
| | |
|
370
|
|
Other comprehensive income (loss)
| | |
|
363
|
| | |
|
2,552
|
| | |
|
(4,438
|
)
| | |
|
(13,145
|
)
|
Comprehensive income (loss)
| | |
$
|
5,925
|
| | |
$
|
(21
|
)
| | |
$
|
(15,754
|
)
| | |
$
|
(46,987
|
)
| | | | | | | | | | | | | | | | | | | | |
|
| REGIS CORPORATION (NYSE: RGS) | CONSOLIDATED STATEMENT OF CASH FLOW (Unaudited) | (Dollars in thousands) | |
| | | | Twelve Months Ended June 30, | | | 2016 |
| 2015 |
Cash flows from operating activities:
| | | | |
Net loss
| |
$
|
(11,316
|
)
| |
$
|
(33,842
|
)
|
Adjustments to reconcile net loss to net cash provided by operating
activities:
| | | | |
Depreciation and amortization
| | |
56,992
| | | |
68,259
| |
Equity in loss of affiliated companies
| | |
14,783
| | | |
13,629
| |
Deferred income taxes
| | |
7,023
| | | |
11,154
| |
Gain from sale of salon assets, net
| | |
(1,000
|
)
| | |
(1,210
|
)
|
Salon asset impairments
| | |
10,478
| | | |
14,604
| |
Stock-based compensation
| | |
9,797
| | | |
8,647
| |
Amortization of debt discount and financing costs
| | |
1,514
| | | |
1,722
| |
Other non-cash items affecting earnings
| | |
310
| | | |
257
| |
Changes in operating assets and liabilities(1):
| | | | |
Receivables
| | |
(577
|
)
| | |
446
| |
Inventories
| | |
(7,109
|
)
| | |
6,197
| |
Income tax receivable
| | |
501
| | | |
5,298
| |
Other current assets
| | |
(460
|
)
| | |
3,049
| |
Other assets
| | |
(1,133
|
)
| | |
(4,480
|
)
|
Accounts payable
| | |
(4,624
|
)
| | |
(3,261
|
)
|
Accrued expenses
| | |
(15,034
|
)
| | |
8,249
| |
Other noncurrent liabilities
| |
|
(5,113
|
)
| |
|
(4,756
|
)
|
Net cash provided by operating activities
| |
|
55,032
|
| |
|
93,962
|
| | | | |
|
Cash flows from investing activities:
| | | | |
Capital expenditures
| | |
(31,117
|
)
| | |
(38,257
|
)
|
Proceeds from sale of assets
| | |
1,740
| | | |
2,986
| |
Change in restricted cash
| | |
9,042
| | | |
(312
|
)
|
Proceeds from company-owned life insurance policies
| |
|
2,948
|
| |
|
-
|
|
Net cash used in investing activities
| |
|
(17,387
|
)
| |
|
(35,583
|
)
| | | | |
|
Cash flows from financing activities:
| | | | |
Repayments of long-term debt and capital lease obligations
| | |
(2
|
)
| | |
(173,751
|
)
|
Repurchase of common stock
| | |
(101,035
|
)
| | |
(47,888
|
)
|
Purchase of noncontrolling interest
| |
|
(760
|
)
| |
|
-
|
|
Net cash used in financing activities
| |
|
(101,797
|
)
| |
|
(221,639
|
)
| | | | |
|
Effect of exchange rate changes on cash and cash equivalents
| |
|
(781
|
)
| |
|
(3,088
|
)
| | | | |
|
Decrease in cash and cash equivalents
| | |
(64,933
|
)
| | |
(166,348
|
)
| | | | |
|
Cash and cash equivalents:
| | | | |
Beginning of period
| |
|
212,279
|
| |
|
378,627
|
|
End of period
| |
$
|
147,346
|
| |
$
|
212,279
|
|
| | | | | | | | |
(1) Changes in operating assets and liabilities exclude assets and
liabilities sold or acquired.
|
|
| SAME-STORE SALES (1): | |
|
| | | | | For the Three Months Ended | | | | June 30, 2016 |
|
| June 30, 2015 | | | | Service |
|
| Retail |
|
| Total | | | Service |
|
| Retail |
|
| Total |
SmartStyle
| | |
0.8
|
%
| | |
3.8
|
%
| | |
1.7
|
%
| | |
1.2
|
%
| | |
(1.4
|
)%
| | |
0.5
|
%
|
Supercuts
| | |
-
| | | |
(0.9
|
)
| | |
(0.1
|
)
| | |
1.4
| | | |
(1.1
|
)
| | |
1.1
| |
MasterCuts
| | |
(5.6
|
)
| | |
(8.9
|
)
| | |
(6.2
|
)
| | |
(4.8
|
)
| | |
(3.9
|
)
| | |
(4.7
|
)
|
Other Value
| | |
(1.6
|
)
| | |
(3.5
|
)
| | |
(1.8
|
)
| | |
(1.2
|
)
| | |
(2.1
|
)
| | |
(1.3
|
)
|
North American Value
| | |
(0.7
|
)%
| | |
1.0
|
%
| | |
(0.4
|
)%
| | |
(0.1
|
)%
| | |
(1.7
|
)%
| | |
(0.4
|
)%
| | | | | | | | | | | | | | | | | | |
|
North American Premium
| | |
(4.9
|
)%
| | |
(7.5
|
)%
| | |
(5.3
|
)%
| | |
(3.4
|
)%
| | |
(3.9
|
)%
| | |
(3.4
|
)%
| | | | | | | | | | | | | | | | | | |
|
International
| | |
(3.3
|
)%
| | |
(5.4
|
)%
| | |
(3.8
|
)%
| | |
1.3
|
%
| | |
1.2
|
%
| | |
1.3
|
%
| | | | | | | | | | | | | | | | | | |
|
Consolidated
| | |
(1.6
|
)%
| | |
(0.8
|
)%
| | |
(1.4
|
)%
| | |
(0.6
|
)%
| | |
(1.8
|
)%
| | |
(0.8
|
)%
| | | |
| | | | For the Twelve Months Ended | | | | June 30, 2016 | | | June 30, 2015 | | | | Service | | | Retail | | | Total | | | Service | | | Retail | | | Total |
SmartStyle
| | |
3.0
|
%
| | |
4.4
|
%
| | |
3.4
|
%
| | |
2.4
|
%
| | |
(0.3
|
)%
| | |
1.6
|
%
|
Supercuts
| | |
1.6
| | | |
5.7
| | | |
2.0
| | | |
1.1
| | | |
2.9
| | | |
1.3
| |
MasterCuts
| | |
(4.5
|
)
| | |
(3.7
|
)
| | |
(4.4
|
)
| | |
(4.2
|
)
| | |
(3.2
|
)
| | |
(4.0
|
)
|
Other Value
| | |
(0.4
|
)
| | |
1.8
| | | |
(0.2
|
)
| | |
(1.1
|
)
| | |
3.1
| | | |
(0.7
|
)
|
North American Value
| | |
0.8
|
%
| | |
3.4
|
%
| | |
1.3
|
%
| | |
0.2
|
%
| | |
0.4
|
%
| | |
0.3
|
%
| | | | | | | | | | | | | | | | | | |
|
North American Premium
| | |
(3.5
|
)%
| | |
(5.4
|
)%
| | |
(3.8
|
)%
| | |
(3.3
|
)%
| | |
(1.6
|
)%
| | |
(3.0
|
)%
| | | | | | | | | | | | | | | | | | |
|
International
| | |
(1.3
|
)%
| | |
(4.7
|
)%
| | |
(2.3
|
)%
| | |
1.1
|
%
| | |
(0.8
|
)%
| | |
0.6
|
%
| | | | | | | | | | | | | | | | | | |
|
Consolidated
| | |
-
|
%
| | |
1.3
|
%
| | |
0.2
|
%
| | |
(0.4
|
)%
| | |
-
|
%
| | |
(0.3
|
)%
|
| | | | | | | | | | | | | | | | | | |
(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 and fiscal year 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 | |
| |
| | | | June 30, 2016 | | June 30, 2015 | COMPANY-OWNED SALONS: | | | | | | | | |
|
SmartStyle/Cost Cutters in Walmart Stores
| |
2,683
| |
2,639
|
Supercuts
| |
1,053
| |
1,092
|
MasterCuts
| |
430
| |
466
|
Other Value
| |
1,604
| |
1,711
|
Regis salons
| |
694
| |
761
|
Total North American Salons (1)
| |
6,464
| |
6,669
|
Total International Salons (2)
| |
328
| |
356
|
Total Company-owned Salons
| |
6,792
| |
7,025
| | | | |
| FRANCHISE SALONS: | | | | | | | | |
|
SmartStyle/Cost Cutters in Walmart Stores
| |
125
| |
127
|
Supercuts
| |
1,579
| |
1,393
|
Other Value
| |
792
| |
804
|
Total North American Salons (1)
| |
2,496
| |
2,324
|
Total International Salons (2)
| |
-
| |
-
|
Total Franchise Salons
| |
2,496
| |
2,324
| | | | |
| OWNERSHIP INTEREST LOCATIONS: | | | | | | | | |
|
Equity ownership interest locations
| |
195
| |
207
| | |
| |
|
Grand Total, System-wide
| |
9,483
| |
9,556
|
| | | | |
(1) The North American Value operating segment is comprised
primarily of the SmartStyle, Supercuts, MasterCuts and Other Value
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
(loss), net income (loss) 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 the non-GAAP measures are useful to
investors because they provide supplemental information 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
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 twelve months ended
June 30, 2016 and 2015:
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:
-
Self-insurance reserve adjustments*
-
Expense associated with legal cases
-
Gain on life insurance proceeds
-
Expenses associated with financing arrangements
-
Professional fees
-
Deferred compensation adjustments
-
Establishment of deferred tax valuation allowances
-
Other than temporary impairment associated with our investment in
Empire Education Group (EEG) and our portion of a deferred tax asset
valuation allowance established by EEG
-
Discontinued operations
* In the three month period ended June 30, 2016, the Company did not
adjust results for self-insurance reserves.
| REGIS CORPORATION | Reconciliation of selected U.S. GAAP to non-GAAP financial
measures (Unaudited) | (Dollars in thousands, except per share data) |
| Reconciliation of U.S. GAAP operating income (loss) and net
income (loss) to equivalent non-GAAP measures | |
| |
| Three Months Ended June 30, |
| Twelve Months Ended June 30, | | | U.S. GAAP financial line item | | 2016 |
| 2015 | | 2016 |
| 2015 | U.S. GAAP revenue | | | | $ | 447,707 | | | $ | 462,889 | | | $ | 1,790,869 | | | $ | 1,837,287 | | | | | | | | | | | |
| U.S. GAAP operating income (loss) | | | | $ | 10,600 | | | $ | (446 | ) | | $ | 17,614 | | | $ | 3,531 | | | | | | | | | | | |
| Non-GAAP operating expense adjustments (1): | | | | | | | | | | |
Self-insurance reserve adjustments (2)
| |
Site operating expense
| | |
-
| | | |
2,249
| | | |
(261
|
)
| | |
(1,477
|
)
|
Legal fees
| |
General and administrative
| | |
(21
|
)
| | |
187
| | | |
1,561
| | | |
88
| |
Gain on life insurance proceeds
| |
General and administrative
| | |
-
| | | |
-
| | | |
(1,220
|
)
| | |
-
| |
Financing arrangements expense
| |
General and administrative
| | |
-
| | | |
-
| | | |
801
| | | |
-
| |
Professional fees
| |
General and administrative
| | |
-
| | | |
-
| | | |
145
| | | |
-
| |
Self-insurance reserve adjustments
| |
General and administrative
| | |
-
| | | |
-
| | | |
(17
|
)
| | |
-
| |
Deferred compensation adjustments
| |
General and administrative
| |
|
-
|
| |
|
-
|
| |
|
-
|
| |
|
(184
|
)
| Total non-GAAP operating expense adjustments | | | |
|
(21
|
)
| |
|
2,436
|
| |
|
1,009
|
| |
|
(1,573
|
)
| Non-GAAP operating income (2)(3) | | | | $ | 10,579 |
| | $ | 1,990 |
| | $ | 18,623 |
| | $ | 1,958 |
| | | | | | | | | | |
| U.S. GAAP net income (loss) | | | | $ | 5,562 | | | $ | (2,573 | ) | | $ | (11,316 | ) | | $ | (33,842 | ) | | | | | | | | | | |
|
Non-GAAP net income (loss) adjustments:
| | | | | | | | | | |
Non-GAAP operating expense adjustments
| | | | |
(21
|
)
| | |
2,436
| | | |
1,009
| | | |
(1,573
|
)
|
Financing arrangements expense
| |
Interest expense
| | |
-
| | | |
-
| | | |
164
| | | |
-
| |
Deferred tax valuation allowances
| |
Income taxes
| | |
-
| | | |
-
| | | |
-
| | | |
2,115
| |
EEG impairment and deferred tax asset valuation allowance
| |
Equity in loss of affiliated companies, net of income taxes
| | |
-
| | | |
-
| | | |
12,954
| | | |
11,510
| |
Discontinued operations
| |
Loss from discontinued operations, net of income taxes
| |
|
-
|
| |
|
630
|
| |
|
-
|
| |
|
630
|
|
Total non-GAAP net income (loss) adjustments
| | | |
|
(21
|
)
| |
|
3,066
|
| |
|
14,127
|
| |
|
12,682
|
| Non-GAAP net income (loss) (2) | | | | $ | 5,541 |
| | $ | 493 |
| | $ | 2,811 |
| | $ | (21,160 | ) |
| | | | | | | | | | | | | | | | | | | Notes: |
(1) As a result of the valuation allowance, non-GAAP adjustments
are not tax effected.
|
|
(2) The self-insurance reserve adjustment of ($0.5) million for
the three months ended June 30, 2016 was not included in the
Company's calculation of non-GAAP operating income and non-GAAP
net income (loss).
|
|
(3) Adjusted operating margins for the three months ended June 30,
2016, and 2015, were 2.4% and 0.4%, respectively, and were 1.0%
and 0.1% for the twelve months ended June 30, 2016 and 2015,
respectively, and are calculated as non-GAAP operating income
divided by U.S. GAAP revenue for each respective period.
|
|
| 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 net income (loss) per diluted share
to non-GAAP net income (loss) per diluted share | |
|
| Three Months Ended June 30, |
|
| Twelve Months Ended June 30, | | | | 2016 |
|
| 2015 | | | 2016 |
|
| 2015 | U.S. GAAP net income (loss) per diluted share (1) | | | $ | 0.119 | | | $ | (0.047 | ) | | | $ | (0.233 | ) | | | $ | (0.615 | ) |
Self-insurance reserve adjustments (2)
| | | |
-
| | | |
0.041
| | | | |
(0.006
|
)
| | | |
(0.027
|
)
|
Legal fees
| | | |
-
| | | |
0.003
| | | | |
0.032
| | | | |
0.002
| |
Gain on life insurance proceeds
| | | |
-
| | | |
-
| | | | |
(0.025
|
)
| | | |
-
| |
Financing arrangements expense
| | | |
-
| | | |
-
| | | | |
0.020
| | | | |
-
| |
Professional fees
| | | |
-
| | | |
-
| | | | |
0.003
| | | | |
-
| |
Deferred compensation adjustments
| | | |
-
| | | |
-
| | | | |
-
| | | | |
(0.003
|
)
|
Deferred tax asset valuation allowances
| | | |
-
| | | |
-
| | | | |
-
| | | | |
0.038
| |
EEG impairment and deferred tax asset valuation allowance
| | | |
-
| | | |
-
| | | | |
0.264
| | | | |
0.209
| |
Discontinued operations
| | | |
-
| | | |
0.012
| | | | |
-
| | | | |
0.011
| |
Impact of change in weighted average shares
| | |
|
-
| | |
|
-
|
| | |
|
0.002
|
| | |
|
-
|
| Non-GAAP net income (loss) per diluted share (2)(3) | | | $ | 0.119 | | | $ | 0.009 |
| | | $ | 0.057 |
| | | $ | (0.385 | ) | | | | | | | | | | | | |
|
U.S. GAAP Weighted average shares - basic
| | | | 46,289 | | | | 54,222 | | | | | 48,542 | | | | | 54,992 | |
U.S. GAAP Weighted average shares - diluted
| | | | 46,706 | | | | 54,222 | | | | | 48,542 | | | | | 54,992 | |
Non-GAAP Weighted average shares - diluted (4)
| | | | 46,706 | | | | 54,494 | | | | | 48,989 | | | | | 54,992 | |
| | | | | | | | | | | | | | | | | | | | Notes: | (1) For the three and twelve months ended June 30, 2016,
the Company recorded $4.1 and $9.0 million, respectively, of
income tax expense. The presence of a valuation allowance,
including the non-cash tax expense on certain indefinite-lived
assets, affects comparability of income tax expense, as adjusted
and will cause our effective tax rate to fluctuate from quarter to
quarter. For the three months ended June 30, 2016, the Company
evaluated GAAP diluted EPS with and without the presence of the
valuation allowance and calculated an impact of $0.06 per share.
Diluted EPS, as adjusted, without the presence of the valuation
allowance, was $0.18 and ($0.05) for the three months ended June
30, 2016 and 2015, respectively, representing an improvement of
$0.24 per diluted share, including $0.01 related to the impact of
share count changes. As a result of the valuation allowance,
non-GAAP adjustments are not tax effected.
|
| (2) The self-insurance reserve adjustment of ($0.010) for
the three months ended June 30, 2016 was not included in the
Company's calculation of non-GAAP net income (loss) per diluted
share.
|
| (3) Total is a recalculation; line items calculated
individually may not sum to total due to rounding.
|
| (4) Non-GAAP net income (loss) per share reflects the
weighted average shares associated with non-GAAP net income
(loss), which may include the dilutive effect of common stock and
convertible share equivalents.
|
|
REGIS CORPORATION Reconciliation of reported U.S. GAAP
net income (loss) to adjusted EBITDA, a non-GAAP financial measure (Dollars
in thousands) (Unaudited) Adjusted EBITDA EBITDA represents U.S. GAAP net income
(loss) for the respective period excluding interest expense, income
taxes and depreciation and amortization expense. The Company defines
adjusted EBITDA, as EBITDA excluding equity in loss of affiliated
companies, and identified items impacting comparability for each
respective period. For the three and twelve months ended June 30, 2016
and 2015, 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 and accelerated depreciation related to the corporate office
consolidation are already included in the U.S. GAAP reported net income
(loss) to EBITDA reconciliation, therefore there is no adjustment needed
for the reconciliation from EBITDA to adjusted EBITDA. The impacts of
the Company's portion of the deferred tax asset valuation allowance
established by EEG, the impairment on the Company's investment in EEG
and the recovery of previously impaired investments in an affiliate, are
already included by excluding the impact of the Company's equity in loss
of affiliated companies, net of taxes, as reported.
|
| |
| | | | Three Months Ended June 30, | | Twelve Months Ended June 30, | | | 2016 |
| 2015 | | 2016 |
| 2015 | Consolidated reported net income (loss), as reported (U.S. GAAP) | | $ | 5,562 | | | $ | (2,573 | ) | | $ | (11,316 | ) | | $ | (33,842 | ) |
Interest expense, as reported
| | |
2,176
| | | |
2,363
| | | |
9,317
| | | |
10,206
| |
Income taxes, as reported
| | |
4,123
| | | |
(2,240
|
)
| | |
9,049
| | | |
14,605
| |
Depreciation and amortization, as reported
| |
|
15,593
|
| |
|
22,048
|
| |
|
67,470
|
| |
|
82,863
|
|
EBITDA (as defined above)
| | $ | 27,454 |
| | $ | 19,598 |
| | $ | 74,520 |
| | $ | 73,832 |
| | | | | | | | |
|
Equity in loss of affiliated companies, net of income taxes, as
reported
| | |
-
| | | |
1,764
| | | |
14,783
| | | |
13,629
| |
Self-insurance reserve adjustments (1)
| | |
-
| | | |
2,249
| | | |
(278
|
)
| | |
(1,477
|
)
|
Legal fees
| | |
(21
|
)
| | |
187
| | | |
1,561
| | | |
88
| |
Gain on life insurance proceeds
| | |
-
| | | |
-
| | | |
(1,220
|
)
| | |
-
| |
Financing arrangements expense
| | |
-
| | | |
-
| | | |
801
| | | |
-
| |
Professional fees
| | |
-
| | | |
-
| | | |
145
| | | |
-
| |
Deferred compensation adjustment
| | |
-
| | | |
-
| | | |
-
| | | |
(184
|
)
|
Loss from discontinued operations, net of income taxes, as reported
| |
|
-
|
| |
|
630
|
| |
|
-
|
| |
|
630
|
| Adjusted EBITDA, non-GAAP financial measure (1) | | $ | 27,433 |
| | $ | 24,428 |
| | $ | 90,312 |
| | $ | 86,518 |
|
| | | | | | | | | Notes: | (1) The self-insurance reserve adjustment of ($0.5) million
for the three months ended June 30, 2016 was not included in the
Company's calculation of adjusted EBITDA.
|
|
| REGIS CORPORATION | Reconciliation of reported U.S. GAAP revenue change to same-store
sales (Unaudited) | |
|
| |
|
| | | | Three Months Ended June 30, | | Twelve Months Ended June 30, | | | | 2016 |
| 2015 | | 2016 |
| 2015 | Revenue decline, as reported (U.S. GAAP) | | | (3.3 | )% | | (4.3 | )% | | (2.5 | )% | | (2.9 | )% |
Effect of new stores and conversions
| | |
(0.5
|
)
| |
(0.5
|
)
| |
(0.5
|
)
| |
(0.6
|
)
|
Effect of closed salons
| | |
2.6
| | |
2.8
| | |
2.7
| | |
2.7
| |
Foreign currency
| | |
0.7
| | |
1.5
| | |
1.2
| | |
0.8
| |
Other
| | |
(0.9
|
)
| |
(0.3
|
)
| |
(0.7
|
)
| |
(0.3
|
)
| Same-store sales, non-GAAP | | | (1.4 | )% | | (0.8 | )% | | 0.2 | % | | (0.3 | )% | | | | | | | | | | | | | |
|
View source version on businesswire.com: http://www.businesswire.com/news/home/20160823005438/en/ Regis Corporation Mark Fosland, 952-806-1707 SVP,
Finance and Investor Relations
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