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, 2015 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.
- Sales of $462.9 million, a decline
of $(21.0) million. Same-store sales decreased 0.8%.
- Same-store service and product sales
decreased 0.6% and 1.8%, respectively.
- GAAP net loss of $(2.6) million or
$(0.05) per diluted share.
- Includes $0.04 per diluted share
benefit due to the non-cash impact of the deferred tax valuation
allowance on income tax expense.
- Includes $(0.06) per diluted share
of discrete charges.
- EBITDA, as adjusted, of $24.4
million compared to $25.8 million in the prior year quarter.
- Decrease of $(1.6) million from
same-store sales declines.
- Increase of $0.2 million, mainly
from improved salon productivity and inventory management, lower
self-insurance reserves, cost savings, and higher franchise
royalties and fees, was partly offset by higher incentives as we
lap an incentive-lite year, minimum wage increases, planned
strategic investments, and higher health insurance costs.
- Diluted EPS, as adjusted, was $0.01
compared to $(0.10) in the prior year quarter.
- Excluding the impact of the deferred
tax valuation allowance, Diluted EPS, as adjusted, increased $0.05
per share compared to the prior year quarter.
- Reduced interest expense, improved
salon productivity and inventory management, lower self-insurance
reserves, cost savings, lower depreciation, higher franchise
royalties and fees and lower non-cash equity in losses of Empire
Education Group, were partly offset by higher incentives as we lap
an incentive-lite year, minimum wage increases, same-store sales
declines, planned strategic investments, higher health insurance
costs and tax expense.
- The current quarter GAAP net loss
includes net discrete expense of $3.1 million. The prior year
quarter GAAP net loss includes net discrete expense of $11.5
million. See non-GAAP reconciliations.
Dan Hanrahan, President and Chief Executive Officer, commented,
“Fiscal 2015 has been a year where we began to stabilize the
business and we have seen change beginning to add value in many of
our salons and districts. Our overall business reported same-store
sales of minus 80 and 30 basis points for the fourth quarter and
full year, respectively. We’ve made significant progress against
our fiscal 2015 initiatives focused around Leadership Development,
Asset Protection and Technical Education. Our strong leaders are
driving sustainable improvement by using the tools, processes and
metrics we provide to drive growth in their districts and salons
quarter after quarter. They are becoming better at leading their
salons and hiring and retaining top stylists and salon managers. To
date, they continue to represent slightly over half our business.
We are focused on those leaders who have yet to show progress by
providing ongoing training and development and we continue to
upgrade our field talent.”
The Company provided an update on the three key priorities to
improve execution and performance in fiscal 2015. These areas
follow the theme of people, process and metrics enabled by
real-time information to make good business decisions and drive
improved execution.
Leadership Development. As part of our ongoing effort to
build a culture that provides an environment for stylists to
succeed, we continued our work to develop, and where necessary,
upgrade field leadership capabilities. We continued to train
Regional Vice Presidents and Regional Directors, delivering on our
commitment to offer important foundational development, focused on
positive leadership, operational excellence, salon-level execution,
presentation, coaching and training skills, strategic thinking,
business planning and multi-unit oversight. In the back half of
2015, we rolled out training to all of our District Leaders,
integrating technical education with positive leadership. In the
fourth quarter, we continued our Salon Manager training pilot,
focused on stylist recruitment, onboarding and retention, guest
retention and basic salon operations. The pilot identified key
developmental needs and helped us understand the pace and vehicles
in which to deliver this type of training. As a result, we will
introduce our new Salon Manager curriculum in fiscal 2016. This is
a comprehensive program that helps Salon Managers become more
confident and competent in their roles as teacher, leader and coach
to stylists and focuses them on stylist retention and salon
staffing. As designed, Salon Managers will review short bursts of
online training tailored to key operational, leadership and
revenue-generating programs with knowledge tests, applicable
scenarios, and reinforcement and coaching by their District
Leaders.
Technical Education. Providing meaningful technical
education to our stylists is critical to satisfy their desire to
develop their craft and make Regis their career destination. We are
working to become more localized in the way we deliver and execute
technical and experiential training and are nearly 50% complete in
our efforts to recruit and align 92 Artistic Directors with our
Regional Directors. These programs will provide our stylists with
opportunities to receive several technical training sessions each
year. When fully implemented, the program will ensure all salons
receive in-salon technical training and provide regional cluster
classes for our stylists to leverage based on specific needs.
Asset Protection. Our Asset Protection team continued
helping our stylists and salons improve their sales performance and
salon profitability. Through our stylist asset awareness program
and salon visits, they are encouraging field leaders and stylists
to make the right choices to optimize their individual success and
revenues of Regis. During the fourth quarter, the Asset Protection
team conducted approximately 800 awareness training sessions and
salon visits, bringing our year to date total to approximately
3,500. Sales improvements from these visits were maintained in the
fourth quarter, as our field leaders hold salons accountable for
acceptable asset protection behaviors.
Mr. Hanrahan concluded, “Heading into fiscal 2016, I am
confident we are following the right strategies to make Regis the
place where stylists can have successful and satisfying careers.
Doing so will drive improved stylist retention, salon staffing,
salon-level execution, and in turn, great guest experiences that
lead to consistent, profitable growth. We have significantly
strengthened our field leadership and execution capabilities,
improved our understanding of what drives successful results and
developed reporting and analytics to measure our progress on
stylist retention and salon staffing. That said, it is important to
remember we are transforming our culture into one that is focused
on realizing the potential of each of our salons. It takes time for
cultural shifts to occur and is difficult to predict the pace at
which our organization can change. We have significant work ahead
of us, but I am proud of the foundational work already in place to
help us drive long-term growth and shareholder value.”
Comparable Profitability Measures
(Unaudited)
Three Months Ended
Twelve Months Ended June 30, June 30,
2015 2014(2) 2015(2)
2014(2) (Dollars in millions) Revenue $ 462.9 $ 483.9
$ 1,837.3 $ 1,892.4 Revenue decline % (4.3 ) (3.6 ) (2.9 )
(6.3 ) Same-Store Sales % (0.8 ) (1.8 ) (0.3 ) (4.8 )
Same-Store Average Ticket % Change 1.5 1.3 1.6 1.3 Same-Store Guest
Count % Change (2.3 ) (3.1 ) (1.9 ) (6.1 ) Cost of Service
and Product % (1) 58.7 59.0 59.3 59.1 Cost of Service and Product
%, as adjusted (1) 58.7 59.0 59.3 59.1 Cost of Service % (1) 61.5
61.2 61.8 61.3 Cost of Product % (1) 47.0 50.3 49.7 50.3 Cost of
Product %, as adjusted (1) 47.0 50.3 49.7 50.1 Site
operating expense as % of total revenues, U.S. GAAP reported 10.5
10.5 10.5 10.8 Site operating expense as % of total revenues, as
adjusted 10.0 10.8 10.6 10.9 General and administrative as %
of total revenues, U.S. GAAP reported 10.8 9.3 10.1 9.1 General and
administrative as % of total revenues, as adjusted 10.8 9.1 10.1
9.1 Operating income (loss) as % of total revenues, U.S.
GAAP reported (0.1 ) 0.5 0.2 (1.8 ) Operating income as % of total
revenues, as adjusted 0.4 0.4 0.1 0.0 EBITDA 19.6 10.5 73.8
56.5 EBITDA, as adjusted 24.4 25.8 86.5 100.8
1) Excludes depreciation and amortization. 2)
Amounts for fiscal years 2015 and 2014 have been revised; see
discussion in Rent section below.
Fourth Quarter Results:
Revenues. Revenue in the quarter of $462.9 million
declined $(21.0) million, or 4.3%, compared to the prior year
quarter. Same-store sales decreased 0.8% compared to the prior year
quarter.
Service revenues were $362.3 million, a $(17.9) million decline,
or 4.7%, compared to the prior year quarter. During this period,
same-store service sales decreased 0.6%, driven by a decline in
guest traffic of 1.7%, partly offset by an increase in average
ticket of 1.1%. The remaining 410 basis point decline in service
revenues compared to the prior year quarter was primarily due to a
net reduction of 252 salons and foreign currency.
Product revenues were $88.6 million, a decrease of $(4.0)
million, or 4.3%, compared to the prior year quarter. Product
same-store sales for the quarter decreased 1.8%, driven by a
decrease in average ticket of 2.6%, partly offset by an increase in
guest traffic of 0.8%. The remaining 250 basis point decline in
product revenues compared to the prior year quarter was primarily
due to a net reduction of 252 salons and foreign currency.
Royalties and fees were $11.9 million, an increase of $0.8
million, or 7.3% compared to the prior year quarter. Franchisees
posted positive same-store sales during the quarter and the Company
added 145 net franchised locations in the last twelve months.
Cost of Service and Product. Cost of service and product,
as a percent of service and product revenues, decreased to 58.7%,
or 30 basis points, compared to the prior year quarter.
Cost of service as a percent of service revenues for the quarter
was 61.5%, an increase of 30 basis points compared to the prior
year quarter. State minimum wage increases, lapping of certain
benefits in the prior year, increased healthcare and benefit costs
and higher field incentives, as we lap an incentive-lite year, were
partly offset by improved stylist productivity.
Cost of product as a percent of product revenues was 47.0%, an
improvement of 330 basis points when compared to the prior year
quarter. This is mainly the result of a favorable book-to-physical
inventory adjustment, reflecting improved salon level inventory
management and compliance throughout the year.
Site Operating Expenses. Site operating expenses of $48.4
million decreased $(2.7) million compared to the prior year
quarter. Excluding the impact of discrete items in the current and
prior year quarters, site operating expenses decreased $(6.2)
million compared to the prior year quarter. The decrease was
primarily driven by lower self-insurance reserves, a one-time
refund of sales and use taxes, a net reduction of 252 salons, cost
savings and lapping of certain costs in the prior year quarter.
General and Administrative. General and administrative
expenses (G&A expense) for the year ended June 30, 2015 was
$186.1 million. Due to the timing of certain expenses, fourth
quarter G&A expense was disproportionately higher than the
run-rate for the first three quarters of the current fiscal year.
As a result, general & administrative expenses for the full
fiscal year of $186.1 million is more reflective of the overall
run-rate. We remain focused on simplifying and driving further cost
efficiencies.
In the fourth quarter, general and administrative expenses of
$50.1 million increased $5.1 million compared to the prior year
quarter. Excluding the impact of discrete items in both periods,
general and administrative expenses increased $5.9 million compared
to the prior year quarter. The increase was driven by higher
incentives as we lap an incentive-lite year, and planned strategic
investments in Asset Protection and Human Resource initiatives,
partly offset by reduced professional fees.
Rent. Rent expense was $78.2 million, or 16.9% of
revenues. As a percentage of revenues, rent decreased 30 basis
points versus the prior year quarter. The net reduction of 252
salons was partly offset by negative leverage from same-store sales
declines.
In the fourth quarter, the Company identified a $5.3 million
understatement of its deferred rent liability. This did not have a
material impact on adjusted earnings in any fiscal year from 2011
through 2015. Non-cash rent expense increased $63,000, $157,000 and
$471,000 in fiscal 2015, 2014 and 2013, respectively, and $4.3
million of this understatement related to fiscal 2010 and prior.
Cash flows were not impacted in any year because the understatement
relates to non-cash impacts of deferred rent and deferred tax.
Because the overall understatement was deemed to be material to the
fourth quarter and fiscal year earnings, the Company revised its
annual financial statements for fiscal years 2011 through 2015 and
quarterly financial statements for fiscal years 2014 and 2015 to
reflect the revised accounting treatment for deferred rent.
Accordingly, the Company concluded a material weakness existed in
its internal controls related to the accounting for leases, and is
the process of remediating this weakness.
Depreciation and Amortization. Depreciation and
amortization was $22.0 million compared to $22.9 million in the
prior year quarter, a decrease of $(0.9) million. This decrease was
primarily driven by lower depreciation expense on a reduced salon
asset base, partly offset by higher non-cash impairment
charges.
Income Taxes. Income tax benefit of $2.2 million
primarily represents a $2.0 million non-cash reversal of previously
recorded charges relating to tax benefits on certain
indefinite-lived assets the Company cannot recognize for reporting
purposes. While the total non-cash expense related to this matter
for the year ended June 30, 2015 was $8.9 million, there is
variation from quarter to quarter as a result of how the effective
tax rate is computed at interim periods.
The presence of a valuation allowance, including the non-cash
tax effect on certain indefinite-lived assets, affects
comparability of income taxes, as adjusted.
Equity in Affiliates. Loss from equity method investments
and affiliated companies was $(1.8) million, compared to a $(16.4)
million loss in the prior year quarter. Excluding the impact of
discrete items in the prior year, equity in losses of affiliates
improved $2.0 million compared to the prior year quarter, primarily
due to lower non-cash charges recorded by Empire Education Group in
the current year quarter.
EBITDA, as Adjusted. EBITDA, as adjusted, which excludes
the impact of equity in earnings of affiliated companies and
discrete items in both periods, was $24.4 million, a decrease
of $(1.4) million compared to the prior year quarter.
Discrete Items. Discrete items for the current quarter
netted to $3.1 million of expense, comprised of the following
items:
Expense:
• Legal fees of $0.2 million.
• Trade Secret discontinued operations of
$0.6 million.
• Insurance reserve adjustments of $2.2
million.
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 28, 2015, 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 800-967-7134. A replay of the
presentation will be available later that day. The replay phone
number is 888-203-1112, access code 9656366.
About Regis Corporation
Regis Corporation (NYSE:RGS) is the leader in beauty salons and
cosmetology education. As of June 30, 2015, the Company owned,
franchised or held ownership interests in 9,556 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; changes in tax rates; the
effect of changes to healthcare laws; our ability to manage cyber
threats and protect the security of sensitive information about our
guests, employees, vendors or Company information; reliance on
management information systems; reliance on external vendors;
changes in distribution channels of manufacturers; financial
performance of our franchisees; internal control over the
accounting for leases; 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; financial
performance of our investment with Empire Education Group; 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 in the Company’s
Annual Report on Form 10-K for the year ended June 30,
2015. 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) June 30, 2015 June
30, 2014(1) ASSETS Current assets: Cash and cash
equivalents $ 212,279 $ 378,627 Receivables, net 24,631 25,808
Inventories 128,610 137,151 Income tax receivable 993 6,461 Other
current assets 61,769 65,219 Total current assets 428,282
613,266 Property and equipment, net 218,157 266,538 Goodwill
418,953 425,264 Other intangibles, net 17,069 19,812 Investment in
affiliates 15,321 28,611 Other assets 64,233 62,458 Total
assets $ 1,162,015 $ 1,415,949
LIABILITIES AND
SHAREHOLDERS’ EQUITY Current liabilities: Long-term debt,
current portion $ 2 $ 173,501 Accounts payable 63,302 68,491
Accrued expenses 153,362 144,544 Total current liabilities
216,666 386,536 Long-term debt and capital lease obligations
120,000 120,002 Other noncurrent liabilities 197,905 195,419
Total liabilities 534,571 701,957 Shareholders’
equity: Common stock, $0.05 par value; issued and outstanding,
53,664,366 and 56,651,166 common shares at June 30, 2015 and 2014,
respectively 2,683 2,833 Additional paid-in capital 298,396 337,837
Accumulated other comprehensive income 9,506 22,651 Retained
earnings 316,859 350,671 Total shareholders’ equity 627,444
713,992 Total liabilities and shareholders’ equity $
1,162,015 $ 1,415,949
1) Amounts
for fiscal year 2014 have been revised.
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, 2015
2014(1) 2015(1) 2014(1)
Revenues: Service $ 362,329 $ 380,187 $ 1,429,408 $ 1,480,103
Product 88,640 92,633 363,236 371,454 Royalties and fees 11,920
11,106 44,643 40,880 462,889
483,926 1,837,287 1,892,437 Operating
expenses: Cost of service 222,981 232,522 882,717 907,294 Cost of
product 41,634 46,573 180,558 186,924 Site operating expenses
48,385 51,044 192,442 203,450 General and administrative 50,117
45,035 186,051 172,793 Rent 78,170 83,376 309,125 322,262
Depreciation and amortization 22,048 22,918 82,863 99,733 Goodwill
impairment — — — 34,939 Total operating
expenses 463,335 481,468 1,833,756 1,927,395
Operating (loss) income (446 ) 2,458 3,531 (34,958 ) Other
(expense) income: Interest expense (2,363 ) (6,334 ) (10,206 )
(22,290 ) Interest income and other, net 390 808
1,697 1,952 Loss before income taxes and equity in
loss of affiliated companies (2,419 ) (3,068 ) (4,978 ) (55,296 )
Income taxes 2,240 1,711 (14,605 ) (72,955 ) Equity in loss of
affiliated companies, net of income taxes (1,764 ) (16,385 )
(13,629 ) (11,623 ) Loss from continuing operations (1,943 )
(17,742 ) (33,212 ) (139,874 ) (Loss) income from discontinued
operations, net of income taxes (630 ) 744 (630 ) 1,353
Net loss $ (2,573 ) $ (16,998 ) $ (33,842 ) $ (138,521 ) Net
loss per share: Basic and diluted: Loss from continuing operations
(0.04 ) (0.31 ) (0.60 ) (2.48 ) (Loss) income from discontinued
operations (0.01 ) 0.01 (0.01 ) 0.02 Net loss per
share, basic and diluted (2) $ (0.05 ) $ (0.30 ) $ (0.62 ) $ (2.45
) Weighted average common and common equivalent shares outstanding:
Basic and diluted 54,222 56,524 54,992 56,482
Cash dividends declared per common share $ — $ —
$ — $ 0.12 (1)
Amounts for fiscal years 2015 and 2014 have been
revised. (2) Total is a recalculation; line items calculated
individually may not sum to total due to rounding.
REGIS CORPORATION (NYSE: RGS) CONSOLIDATED STATEMENT OF
COMPREHENSIVE LOSS (Unaudited) (Dollars in thousands)
Three Months Ended June 30,
Twelve Months Ended June 30, 2015
2014(1) 2015(1) 2014(1) Net loss
$ (2,573 ) $ (16,998 ) $ (33,842 ) $ (138,521 ) Other comprehensive
income (loss), net of tax: Foreign currency translation adjustments
during the period 2,182 3,155 (13,515 ) 1,930 Recognition of
deferred compensation and other 370 165 370
165 Other comprehensive income (loss) 2,552 3,320
(13,145 ) 2,095 Comprehensive loss $ (21 ) $ (13,678
) $ (46,987 ) $ (136,426 )
1) Amounts
for fiscal years 2015 and 2014 have been revised.
REGIS CORPORATION (NYSE: RGS) CONSOLIDATED STATEMENT OF
CASH FLOW (Unaudited) (Dollars in thousands)
Twelve Months Ended June 30, 2015(1)
2014(1) Cash flows from operating activities: Net
loss $ (33,842 ) $ (138,521 ) Adjustments to reconcile net loss to
net cash provided by operating activities: Depreciation and
amortization 68,259 81,406 Equity in loss of affiliated companies
13,629 11,623 Deferred income taxes 11,154 70,635 Gain from sale of
salon assets (1,210 ) — Loss on write down of inventories — 854
Goodwill impairment — 34,939 Salon asset impairments 14,604 18,327
Stock-based compensation 8,647 6,400 Amortization of debt discount
and financing costs 1,722 8,152 Other non-cash items affecting
earnings 257 224 Changes in operating assets and liabilities,
excluding the effects of acquisitions Receivables 446 5,681
Inventories 6,197 2,275 Income tax receivable 5,298 26,884 Other
current assets 3,049 (5,979 ) Other assets (4,480 ) (88 ) Accounts
payable (3,261 ) 1,907 Accrued expenses 8,249 3,955 Other
noncurrent liabilities (4,756 ) (11,919 ) Net cash provided by
operating activities 93,962 116,755 Cash flows
from investing activities: Capital expenditures (38,257 ) (49,439 )
Proceeds from sale of assets 2,986 14 Salon acquisitions, net of
cash acquired — (15 ) Proceeds from loans and investments — 5,056
Change in restricted cash (312 ) — Net cash used in
investing activities (35,583 ) (44,384 ) Cash flows from
financing activities: Proceeds from issuance of long-term debt, net
of fees — 118,058 Repayments of long-term debt and capital lease
obligations (173,751 ) (7,059 ) Repurchase of common stock (47,888
) — Dividends paid — (6,793 ) Net cash (used in) provided by
financing activities (221,639 ) 104,206 Effect of
exchange rate changes on cash and cash equivalents (3,088 ) 914
Decrease (increase) in cash and cash equivalents
(166,348 ) 177,491 Cash and cash equivalents: Beginning of
period 378,627 201,136 End of period $ 212,279
$ 378,627
1) Amounts for fiscal
years 2015 and 2014 have been revised.
SAME-STORE SALES (1):
For the Three Months Ended June 30,
2015 June 30, 2014 Service
Retail Total Service
Retail Total SmartStyle
1.2 % (1.4 )% 0.5 % 1.9 % (9.8 )% (2.0 )% Supercuts 1.4 (1.1 ) 1.1
7.0 (0.7 ) 6.2 MasterCuts (4.8 ) (3.9 ) (4.7 ) (3.5 ) (17.5 ) (6.2
) Other Value (1.2 ) (2.1 ) (1.3 ) (2.6 ) (6.3 ) (3.0 ) North
American Value (0.1 )% (1.7 )% (0.4 )% 0.9 % (8.8 )% (1.0 )%
North American Premium (3.4 )% (3.9 )% (3.4 )% (4.3 )% (7.8 )% (4.9
)% International 1.3 % 1.2 % 1.3 % (0.7 )% (6.2 )% (2.2 )%
Consolidated (0.6 )% (1.8 )% (0.8 )% (0.2 )% (8.4 )% (1.8 )%
For the Twelve Months Ended June 30, 2015
June 30, 2014 Service Retail Total
Service Retail Total SmartStyle 2.4 % (0.3 )%
1.6 % (2.6 )% (11.0 )% (5.4 )% Supercuts 1.1 2.9 1.3 1.7 (9.4 ) 0.5
MasterCuts (4.2 ) (3.2 ) (4.0 ) (7.7 ) (16.3 ) (9.4 ) Other Value
(1.1 ) 3.1 (0.7 ) (4.9 ) (9.8 ) (5.4 ) North American Value 0.2 %
0.4 % 0.3 % (2.9 )% (11.1 )% (4.5 )% North American Premium
(3.3 )% (1.6 )% (3.0 )% (6.0 )% (9.5 )% (6.7 )%
International 1.1 % (0.8 )% 0.6 % (0.3 )% (4.2 )% (1.5 )%
Consolidated (0.4 )% — % (0.3 )% (3.4 )% (10.3 )% (4.8 )%
(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, 2015 June 30, 2014 COMPANY-OWNED
SALONS: SmartStyle/Cost Cutters in Walmart Stores 2,639
2,574 Supercuts 1,092 1,176 MasterCuts 466 505 Other Value 1,711
1,846 Regis salons 761 816 Total North American Salons (1) 6,669
6,917 Total International Salons (2) 356 360 Total Company-owned
Salons 7,025 7,277
FRANCHISE SALONS:
SmartStyle/Cost Cutters in Walmart Stores 127 126 Supercuts 1,393
1,213 Other Value 804 840 Total North American Salons (1) 2,324
2,179 Total International Salons (2) — — Total Franchise Salons
2,324 2,179
OWNERSHIP INTEREST LOCATIONS:
Equity ownership interest locations 207 218 Grand
Total, System-wide 9,556 9,674 (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, 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 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, 2015 and 2014:
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.
- Expense associated with legal
cases.
- Professional fees associated with the
evaluation and sale of non-core assets.
- Deferred compensation adjustments.
- Accelerated depreciation related to our
corporate office consolidation.
- Goodwill impairment charge related to
our Regis salon concept reporting unit.
- Establishment of deferred tax valuation
allowances.
- Recovery of previously impaired
investment in an affiliate.
- Our portion of a deferred tax asset
valuation allowance established by Empire Education Group (EEG) and
other than temporary impairment associated with our investment in
EEG.
- Discontinued operations.
Non-GAAP tax provision adjustments primarily relate to changes
in taxable income or loss resulting from the non-GAAP reconciling
items addressed above. During the three months ended December 31,
2013, the Company established a valuation allowance against the
majority of its deferred tax assets. Any non-GAAP adjustments
identified after the establishment of the valuation allowance were
not tax effected in the Non-GAAP tables.
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 (loss) income and net loss to equivalent
non-GAAP measures Three Months
Ended Twelve Months Ended June 30,
June 30, U.S. GAAP financial line item 2015
2014(4) 2015(4)
2014(4) U.S. GAAP revenue $ 462,889
$ 483,926 $ 1,837,287 $
1,892,437 U.S. GAAP operating (loss) income
$ (446 ) $ 2,458 $
3,531 $ (34,958 ) Non-GAAP
operating expense adjustments: Inventory reserves Cost of
product — — — 854 Self-insurance reserve adjustments Site operating
expense 2,249 (1,334 ) (1,477 ) (2,007 ) Legal fees General and
administrative 187 978 88 3,671 Professional fees General and
administrative — 21 — 360 Deferred compensation adjustments General
and administrative — — (184 ) (3,703 ) Corporate office
consolidation accelerated depreciation Depreciation and
amortization — — — 746 Goodwill impairment Goodwill impairment —
— — 34,939
Total non-GAAP operating
expense adjustments 2,436 (335 ) (1,573 ) 34,860
Non-GAAP operating income (1) $ 1,990
$ 2,123 $ 1,958 $
(98 ) U.S. GAAP net loss (2) $
(2,573 ) $ (16,998 ) $
(33,842 ) $ (138,521 )
Non-GAAP net loss adjustments: Non-GAAP operating expense
adjustments 2,436 (335 ) (1,573 ) 34,860 Deferred tax valuation
allowances Income taxes — — 2,115 86,616 Tax provision
adjustments(3) Income taxes — — — (6,705 ) Recovery of previously
impaired investment in affiliate Equity in loss of affiliated
companies, net of income taxes — — — (3,077 ) Empire Education
Group impairments Equity in loss of affiliated companies, net of
income taxes — 12,590 11,510 12,590 Discontinued operations (Loss)
income from discontinued operations, net of income taxes 630
(744 ) 630 (1,353 ) Total non-GAAP net loss adjustments
3,066 11,511 12,682 122,931
Non-GAAP
net income (loss) $ 493 $
(5,487 ) $ (21,160 ) $
(15,590 )
Notes:
(1) Adjusted operating margins for the three months
ended June 30, 2015, and 2014, were 0.4% and 0.4%, respectively,
and were 0.1% and 0.0% for the twelve months ended June 30, 2015
and 2014, respectively, and are calculated as non-GAAP operating
income divided by U.S. GAAP revenue for each respective period.
(2) For the three and twelve months ended June 30, 2015,
income tax benefit (expense) of $2.2 million and $(14.6) million
relates primarily to a $2.0 million non-cash benefit and $8.9
million non-cash charge relating to tax benefits on certain
indefinite-lived assets that the Company cannot recognize for
reporting purposes. The twelve months ended June 30, 2015, also
includes a discrete, non-cash charge of $2.1 million to establish a
valuation allowance against the majority of Canadian deferred tax
assets. 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. (3)
During the three months ended December 31, 2013, the Company
recorded a valuation allowance against the majority of its deferred
tax assets. Any non-GAAP adjustments identified after the
establishment of the valuation allowance were not tax effected in
the table. For the twelve months ended June 30, 2014, non-GAAP
operating expense adjustments identified prior to the valuation
allowance, except the goodwill impairment, were tax effected using
37%. The goodwill impairment had a tax benefit of approximately
$6.3 million for the twelve months ended June 30, 2014 as the
charge was only partly deductible for income tax purposes.
(4) Amounts for fiscal years 2015 and 2014 have been revised.
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 loss per diluted share to
non-GAAP net income (loss) per diluted share Three
Months Ended Twelve Months Ended June
30, June 30, 2015 2014(4)
2015(4) 2014(4) U.S. GAAP net loss
per diluted share (1) $ (0.047 )
$ (0.301 ) $ (0.615 )
$ (2.452 ) Non-GAAP adjustments (2):
Inventory reserves — — — 0.009 Self-insurance reserve adjustments
0.041 (0.024 ) (0.027 ) (0.031 ) Legal fees 0.003 0.017 0.002 0.052
Professional fees — — — 0.003 Deferred compensation adjustments — —
(0.003 ) (0.049 ) Corporate office consolidation accelerated
depreciation — — — 0.008 Goodwill impairment — — — 0.506 Deferred
tax asset valuation allowances — — 0.038 1.534 Impact of income tax
rate difference — — — (0.001 ) Recovery of previously impaired
investment in affiliate — — — (0.054 ) Empire Education Group
impairments — 0.223 0.209 0.223 Discontinued operations 0.012
(0.013 ) 0.011 (0.024 )
Non-GAAP net income (loss)
per diluted share (1) (3) $ 0.009 $
(0.097 ) $ (0.385 ) $
(0.276 ) U.S. GAAP Weighted average shares -
basic and diluted
54,222 56,524 54,992
56,482 Non-GAAP Weighted average shares - diluted
54,494 56,524 54,992 56,482
Notes:
(1)
For the three and twelve months ended June 30, 2015,
income tax benefit (expense) of $2.2 million and $(14.6) million
relates primarily to a $2.0 million non-cash benefit and $8.9
million non-cash charge relating to tax benefits on certain
indefinite-lived assets that the Company cannot recognize for
reporting purposes. The twelve months ended June 30, 2015, also
includes a discrete, non-cash charge of $2.1 million to establish a
valuation allowance against the majority of Canadian deferred tax
assets. 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, 2015, the Company evaluated GAAP
diluted EPS with and without the full effects of the valuation
allowance and calculated an impact of $0.04. Diluted EPS, as
adjusted, without the presence of the valuation allowance, was
($0.05) and ($0.10) for the three months ended June 30, 2015 and
2014, respectively, representing an improvement of $0.05.
(2)
During the three months ended December 31, 2013, the Company
recorded a valuation allowance against the majority of its deferred
tax assets. Any non-GAAP adjustments identified after the
establishment of the valuation allowance were not tax effected in
the table. For the twelve months ended June 30, 2014, non-GAAP
operating expense adjustments identified prior to the valuation
allowance, except the goodwill impairment, were tax effected using
37%. The goodwill impairment had a tax benefit of approximately
$6.3 million for the twelve months ended June 30, 2014 as the
charge was only partly deductible for income tax purposes.
(3)
Total is a recalculation; line items calculated individually may
not sum to total due to rounding.
(4)
Amounts for fiscal years 2015 and 2014 have been revised.
REGIS CORPORATION
Reconciliation of reported U.S. GAAP
net loss to adjusted EBITDA, a non-GAAP financial measure
(Dollars in thousands)
(Unaudited)
Adjusted EBITDA
EBITDA represents U.S. GAAP net 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, 2015
and 2014, 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 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
Twelve Months Ended June 30, June 30,
2015 2014(1) 2015(1)
2014(1) Consolidated reported net loss, as
reported (U.S. GAAP) $ (2,573 ) $
(16,998 ) $ (33,842 ) $
(138,521 ) Interest expense, as reported 2,363 6,334
10,206 22,290 Income taxes, as reported (2,240 ) (1,711 ) 14,605
72,955 Depreciation and amortization, as reported 22,048
22,918 82,863 99,733 EBITDA (as defined above)
$ 19,598 $ 10,543
$ 73,832 $ 56,457
Equity in loss of affiliated companies, net of income taxes, as
reported 1,764 16,385 13,629 11,623 Inventory reserves — — — 854
Self-insurance reserve adjustments 2,249 (1,334 ) (1,477 ) (2,007 )
Legal fees 187 978 88 3,671 Professional fees — 21 — 360 Deferred
compensation adjustment — — (184 ) (3,703 ) Goodwill impairment — —
— 34,939 Loss (income) from discontinued operations, net of income
taxes, as reported 630 (744 ) 630 (1,353 )
Adjusted EBITDA, non-GAAP financial measure $
24,428 $ 25,849 $
86,518 $ 100,841
(1) Amounts for fiscal years 2015 and
2014 have been revised.
REGIS CORPORATION
Reconciliation of reported U.S. GAAP revenue change to
same-store sales (Unaudited) Three
Months Ended Twelve Months Ended June 30, June
30, 2015 2014 2015
2014 Revenue decline, as reported (U.S. GAAP)
(4.3 )% (3.6 )% (2.9
)% (6.3 )% Effect of new stores and
conversions (0.5 ) (0.7 ) (0.6 ) (0.8 ) Effect of closed salons 2.8
2.3 2.7 2.6 Other 1.2 0.2 0.5 (0.3 )
Same-store sales, non-GAAP (0.8 )% (1.8
)% (0.3 )% (4.8 )%
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version on businesswire.com: http://www.businesswire.com/news/home/20150828005079/en/
Regis Corporation:Mark Fosland, 952-806-1707SVP, Finance and
Investor Relations
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