MINNEAPOLIS--(BUSINESS WIRE)--Regis Corporation (NYSE:RGS), the global leader in the $160 billion haircare industry, today reported a second quarter net loss of $1.01 per share. These results include non-operational after-tax items of $77.0 million primarily related to the non-cash write-down of goodwill in its Hair Restoration Centers segment. Absent non-operational items, second quarter operational earnings increased to $0.32 per diluted share.
Randy L. Pearce, President, commented, “Our second quarter operational earnings of $0.32 per share were the result of Regis’ commitment to improving financial performance while continuing to develop and implement our strategy to drive new traffic and increase customer retention rates by enhancing the salon experience.
“Our entire organization is focused on improving the salon experience and we are confident that our long-term plan will deliver improved financial results. However, the sales environment remains challenging and it will take time for our strategies to have a material impact on our top-line performance. As a result, we now believe that fiscal 2012 same-store sales will be in the range of negative 3.5% to negative 2.5%. At these lower same-store sales levels, our operational EBITDA should be in a range of $210 million to $220 million. We expect benefits from our previously announced cost saving initiatives to offset a significant portion of the impact from the decline in sales expectations. We continue to work hard to ensure Regis grows profitably and operates efficiently in order to enhance shareholder value.”
FISCAL 2012 SECOND QUARTER FINANCIAL HIGHLIGHTS
Consolidated Highlights
- Sales of $563.3 million, down 1.9% from $574.4 million in the second quarter of fiscal 2011.
- Same-store sales declined 3.0% versus a decline of 1.3% in the second quarter of fiscal 2011.
- Same-store customer counts for our salon businesses declined 2.4% in the second quarter of fiscal 2012.
- Gross margin increased 30 basis points to 44.8% of sales from 44.5% in the second quarter of fiscal 2011.
- Operational operating margins increased 20 basis points to 4.4% of sales from 4.2% in the second quarter of fiscal 2011. Operational net income of $19.6 million increased 28.4%, from $15.3 million in the second quarter of fiscal 2011.
- Operational diluted earnings per share of $0.32 increased 24.8%, from $0.25 in the second quarter of fiscal 2011
- Operational EBITDA of $51.9 million decreased 2.0%, from $52.9 million in the second quarter of fiscal 2011.
- Net store base increased by 33 over the same period a year ago for a total store count of 12,777. This increase is primarily driven by growth in the number of franchise and affiliate locations.
- The reported income tax rate was 5.2%, which includes the impact of the non-operational charges. The operational income tax rate was 25.8%.
- As of December 31, 2011 the cash balance was $83.1 million, a decrease of $13.2 million since June 30, 2011.
- Debt on the balance sheet was $292.9 million, a decrease of $20.5 million since June 30, 2011.
Segment Results:
North America Salons
Revenues: Second quarter 2012 revenues were $492.1 million, a decrease of 1.9% from the fiscal 2011 second quarter. Service revenues were $379.7 million, a decrease of 2.3% compared to the same period a year ago. Same-store service sales for the quarter declined 3.2%. Same-store service customer counts declined 2.1% and average ticket declined 1.1%. Retail product revenues were $103.2 million, a decrease of 0.6%. Retail product same-store sales declined 1.5%.
Service Margins: Service margin rate for the second quarter of fiscal 2012 was 42.4%, an improvement of 80 basis points over the second quarter of fiscal 2011. The improvement in service margin was driven largely by reduced service commissions. Labor costs improved due to increased hourly productivity in our salons, as well as the recently implemented leveraged pay plans for new salon employees.
Retail Product Margins: Product margin rate for the second quarter of fiscal 2012 was 49.8%, a decline of 50 basis points compared to the second quarter of fiscal 2011. Product margins were impacted by a shift in sales mix during the holiday season to slightly lower margin nail care and salon accessories.
Site Operating Expense: Site operating expense for the second quarter of 2012 was 30 basis points, or $2.3 million lower than the second quarter of 2011, coming in at $44.5 million or 9.0% of revenue. Several cost savings initiatives account for a large portion of this improvement, including reduced insurance and workers’ compensation costs. We experienced lower salon claims this year and as a result, we recorded a favorable actuarial adjustment to our insurance reserves.
General and Administrative Expense: General and administrative expense for the second quarter of 2012 was 70 basis points, or $3.9 million lower than the second quarter of 2011, coming in at $28.6 million or 5.8% of North American revenue. A large portion of the decline in expense relates to the implementation of new portable technology for our field staff, which contributed to a decrease in travel. Additionally, last year’s expenses were higher than normal due to a national salon manager meeting in our Regis Salon Division which was not conducted this year.
Rent Expense: Rent expense was $73.7 million, or 15.0% of North American revenue. The increase of 40 basis points over the same period a year ago was primarily the result of deleveraging due to negative same-store sales.
Depreciation and Amortization Expense: Depreciation and amortization was $17.7 million, or 3.6% of North American revenues; which included non-operational charges of $0.8 million related to the accelerated depreciation on our point-of-sale system. Operational depreciation and amortization was $16.9 million, or 3.4% of North American revenues, a decrease of 10 basis points over the second quarter of fiscal 2011.
Operating Margins: Second quarter 2012 GAAP operating margins were 11.7% of North American revenues. Excluding non-operational items, operational operating margins were 11.8% of North American revenues, an increase of 120 basis points over the second quarter of fiscal 2011.
International Salons
Revenues: Second quarter 2012 revenues were $34.1 million, a decrease of 8.1% from the fiscal 2011 second quarter. Service revenues were $24.3 million, a decrease of 5.1% compared to the same period a year ago. Same-store service sales for the quarter declined 6.7%. Retail product revenues were $9.7 million, a decrease of 14.9%. Retail product same-store sales declined 16.1%.
Service Margins: Service margin rate for the second quarter of fiscal 2012 was 46.1%, a decline of 200 basis points over the second quarter of fiscal 2011. The decline in service margin was primarily driven by lower salon productivity due to reduced sales levels.
Retail Product Margins: Product margin rate for the second quarter of fiscal 2012 was 46.0%, an increase of 80 basis points compared to the fiscal 2011 second quarter. The increase in product margins was the result of a shift in the mix of product sales away from lower margin salon appliances.
Rent Expense: Rent expense was $9.1 million, or 26.6% of International revenue. The increase of 260 basis points over the same period a year ago was primarily the result of deleveraging due to negative same-store sales.
Operating Margins: Second quarter 2012 GAAP operating margins were $0.2 million, or 0.6% of International revenues; which includes non-operational depreciation expense of $0.1 million related to the accelerated depreciation on our point-of-sale system. Operational operating margins were $0.3 million, or 0.9% of International revenues, a decrease of 340 basis points compared to the second quarter of fiscal 2011.
Hair Restoration Centers
Revenues: Second quarter 2012 revenues were $37.1 million, an increase of 3.6% from the second quarter of fiscal year 2011. Same-store sales for the quarter increased 1.7%.
Gross Margins: Gross margin rate for the second quarter of fiscal 2012 was 53.2%, a decline of 230 basis points over the second quarter of fiscal 2011. The decline in gross margin was primarily driven by labor costs in acquired and new stores, as well as increased hair system costs due to wage pressure in China.
Operating Margins: Second quarter 2012 GAAP operating margins were a loss of $73.6 million, or -198.0% of Hair Club revenues, which includes non-operational expense related to the write-down of goodwill of $78.4 million. Operational operating margins were $4.9 million, or 13.1% of Hair Club revenues, a decrease of 120 basis points compared to the second quarter of fiscal 2011.
Corporate
General and Administrative Expense: Corporate general and administrative expense for the second quarter of 2012 was $35.5 million, or 6.3% of consolidated revenues, which includes non-operational charges of $1.8 million. Operational general and administrative expense for the second quarter of 2012 was $33.7 million or 6.0% of consolidated revenue, an increase of 70 basis points over the second quarter of 2011. Contributing to the planned increase in this expense category were higher professional fees, largely due to the timing of costs incurred for tax, legal and other corporate initiatives. We continue to expect general and administrative expenses to be lower in the second half of the fiscal year than that incurred in the first six months.
Income Taxes
During the three months ended December 31, 2011, the Company recognized a tax benefit of $3.5 million with a corresponding effective tax rate of 5.2% utilizing the year-to-date method rather than utilizing its historical method of calculating an estimated annual effective tax rate. The Company’s operational tax rate of 25.8% came in better than expected due to larger than planned job tax credits and the release of state income tax reserves.
Equity in Income of Affiliates
Income from equity method investments and affiliated companies was $5.3 million in the second quarter of 2012, an increase of $2.2 million over the second quarter of 2011. The majority of the improvement in this category relates to the increase in Regis’ ownership percentage in Provalliance. In March 2011, Regis acquired an additional 17% percent of Provalliance and now owns 47% of the joint venture.
Updated Fiscal 2012 Outlook
- The Company expects fiscal 2012 same-store sales to be in the range of negative 3.5% to negative 2.5%.
- At these same-store levels, EBITDA is expected to be in a range of $210 million to $220 million and operational earnings are forecasted to be in a range of $1.11 to $1.21 per share.
- Regis plans to spend approximately $100 million for salon and corporate capital expenditures and up to $15 million for acquisitions.
- The Company expects to generate free cash flow of approximately $70 million to $80 million.
- As previously announced, the Company has identified a new third party point-of-sale software alternative, which it is now planning to implement in all of its company-owned salons over the next year. The new point-of-sale system will replace the current point-of-sale system and enable the Company to accelerate its strategies and initiatives. As a result, the Company expects to incur in the remainder of fiscal 2012 pre-tax, non-operational expense of approximately $2 million related to the acceleration of depreciation on the current point-of-sale system.
Second Quarter Non-Operational Items
Second quarter non-operational items, which netted to $77.0 million on an after-tax basis, consisted of the following items:
- As previously disclosed, the Company is reviewing alternatives for non-core assets and has retained an independent financial advisor. In connection with this review, the Company updated the Hair Restoration Centers projections used in the fiscal 2011 annual impairment test to reflect the impact of more recent industry developments including a slow down in revenue growth and increasing supply costs. As a result, the Company recorded a non-cash, after-tax goodwill impairment of $72.6 million.
- Accelerated depreciation expense of $4.0 million after-tax related the replacement of the current point-of-sale system with a new third party point-of-sale software system.
- $0.7 million of after-tax advisory fees and other costs related to the recent proxy contest.
- Senior management restructuring costs of $0.4 million after-tax.
- Legal settlement resulting in income of $0.7 million, after-tax.
A complete reconciliation of reported earnings to operational earnings is included in today’s press release and is available on the Company’s website at www.regiscorp.com.
Regis Corporation will host a conference call discussing second quarter results today, January 26, 2012 at 10 a.m., Central time. Interested parties are invited to listen by logging on to www.regiscorp.com or dialing 877-941-0843. A replay of the call will be available later that day. The replay phone number is 800-406-7325, access code 4504728#.
As of December 31, 2011 Regis Corporation owned, franchised, or held ownership interest in 12,777 worldwide locations.
About Regis Corporation
Regis Corporation (NYSE:RGS) is the beauty industry’s global leader in beauty salons, hair restoration centers and cosmetology education. As of December 31, 2011, the Company owned, franchised or held ownership interests in approximately 12,800 worldwide locations. Regis’ corporate and franchised locations operate under concepts such as Supercuts, Sassoon Salon, Regis Salons, MasterCuts, SmartStyle, Cost Cutters, Cool Cuts 4 Kids and Hair Club for Men and Women. In addition, Regis maintains an ownership interest in Provalliance, which operates salons primarily in Europe, under the brands of Jean Louis David, Franck Provost and Saint Algue. Regis also maintains ownership interests in Empire Education Group in the U.S. and the MY Style concepts in Japan. System-wide, these and other concepts are located in the U.S. and in over 30 other countries in North America, South America, Europe, Africa and Asia. 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. 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, competition within the personal hair care industry, which remains strong, both domestically and internationally, price sensitivity; changes in economic conditions; changes in consumer tastes and fashion trends; the ability of the Company to implement its planned spending and cost reduction plan and to continue to maintain compliance with financial covenants in its credit agreements; labor and benefit costs; legal claims; risk inherent to international development (including currency fluctuations); the continued ability of the Company and its franchisees to obtain suitable locations and financing for new salon development and to maintain satisfactory relationships with landlords and other licensors with respect to existing locations; governmental initiatives such as minimum wage rates, taxes and possible franchise legislation; the ability of the Company to successfully identify, acquire and integrate salons that support its growth objectives; the ability of the Company to maintain satisfactory relationships with suppliers; or other factors not listed above. The ability of the Company to meet its expected revenue target is dependent on salon acquisitions, new salon construction and same-store sales increases, all of which are affected by many of the aforementioned risks. 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, 2011. 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.
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REGIS CORPORATION (NYSE: RGS) |
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CONDENSED CONSOLIDATED BALANCE SHEET (Unaudited) |
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as of December 31, 2011 and June 30, 2011 |
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(In thousands, except per share data) |
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| December 31, 2011 | June 30, 2011 | |||||
| ASSETS | ||||||
| Current assets: | ||||||
| Cash and cash equivalents | $ | 83,099 | $ | 96,263 | ||
| Receivables, net | 31,944 | 27,149 | ||||
| Inventories | 170,551 | 150,804 | ||||
| Deferred income taxes | 15,082 | 17,887 | ||||
| Income tax receivable | 17,322 | 22,341 | ||||
| Other current assets | 29,681 | 32,118 | ||||
| Total current assets | 347,679 | 346,562 | ||||
| Property and equipment, net | 327,381 | 347,811 | ||||
| Goodwill | 604,097 | 680,512 | ||||
| Other intangibles, net | 106,411 | 111,328 | ||||
| Investment in and loans to affiliates | 251,573 | 261,140 | ||||
| Other assets | 59,820 | 58,400 | ||||
| Total assets | $ | 1,696,961 | $ | 1,805,753 | ||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||
| Current liabilities: | ||||||
| Long-term debt, current portion | $ | 28,999 | $ | 32,252 | ||
| Accounts payable | 52,541 | 55,107 | ||||
| Accrued expenses | 175,105 | 167,321 | ||||
| Total current liabilities | 256,645 | 254,680 | ||||
| Long-term debt and capital lease obligations | 263,882 | 281,159 | ||||
| Other noncurrent liabilities | 216,077 | 237,295 | ||||
| Total liabilities | 736,604 | 773,134 | ||||
| Commitments and contingencies | ||||||
| Shareholders’ equity: | ||||||
| Common stock, $0.05 par value; issued and outstanding 57,650,228 and 57,710,811 common shares at December 31, 2011 and June 30, 2011, respectively | 2,883 | 2,886 | ||||
| Additional paid-in capital | 345,827 | 341,190 | ||||
| Accumulated other comprehensive income | 55,661 | 77,946 | ||||
| Retained earnings | 555,986 | 610,597 | ||||
| Total shareholders’ equity | 960,357 | 1,032,619 | ||||
| Total liabilities and shareholders’ equity | $ | 1,696,961 | $ | 1,805,753 | ||
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REGIS CORPORATION (NYSE: RGS) |
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CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited) |
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(In thousands, except per share data) |
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Three Months Ended |
Six Months Ended |
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| 2011 | 2010 | 2011 | 2010 | |||||||||||||
| Revenues: | ||||||||||||||||
| Service | $ | 421,299 | $ | 430,939 | $ | 852,999 | $ | 870,468 | ||||||||
| Product | 132,208 | 133,824 | 259,125 | 262,429 | ||||||||||||
| Royalties and fees | 9,771 | 9,609 | 19,903 | 19,720 | ||||||||||||
| 563,278 | 574,372 | 1,132,027 | 1,152,617 | |||||||||||||
| Operating expenses: | ||||||||||||||||
| Cost of service | 242,341 | 249,705 | 488,352 | 499,206 | ||||||||||||
| Cost of product | 63,469 | 63,926 | 123,448 | 125,001 | ||||||||||||
| Site operating expenses | 48,425 | 50,597 | 100,880 | 99,606 | ||||||||||||
| General and administrative | 75,066 | 75,848 | 153,745 | 149,922 | ||||||||||||
| Rent | 85,473 | 85,235 | 169,920 | 170,343 | ||||||||||||
| Depreciation and amortization | 31,695 | 26,197 | 65,801 | 52,241 | ||||||||||||
| Goodwill impairment | 78,426 | — | 78,426 | — | ||||||||||||
| Total operating expenses | 624,895 | 551,508 | 1,180,572 | 1,096,319 | ||||||||||||
| Operating (loss) income | (61,617 | ) | 22,864 | (48,545 | ) | 56,298 | ||||||||||
| Other income (expense): | ||||||||||||||||
| Interest expense | (7,203 | ) | (8,738 | ) | (14,563 | ) | (17,661 | ) | ||||||||
| Interest income and other, net | 2,659 | 2,604 | 3,975 | 3,381 | ||||||||||||
| (Loss) income before income taxes and equity in income of affiliated companies | (66,161 | ) | 16,730 | (59,133 | ) | 42,018 | ||||||||||
| Income taxes | 3,453 | (5,345 | ) | 730 | (14,992 | ) | ||||||||||
| Equity in income of affiliated companies, net of income taxes | 5,281 | 3,120 | 9,313 | 5,799 | ||||||||||||
| Net (loss) income | $ | (57,427 | ) | $ | 14,505 | $ | (49,090 | ) | $ | 32,825 | ||||||
| Net (loss) income per share: | ||||||||||||||||
| Basic | $ | (1.01 | ) | $ | 0.26 | $ | (0.86 | ) | $ | 0.58 | ||||||
| Diluted | $ | (1.01 | ) | $ | 0.24 | $ | (0.86 | ) | $ | 0.54 | ||||||
| Weighted average common and common equivalent shares outstanding: | ||||||||||||||||
| Basic | 56,857 | 56,684 | 56,853 | 56,657 | ||||||||||||
| Diluted | 56,857 | 68,136 | 56,853 | 68,053 | ||||||||||||
| Cash dividends declared per common share | $ | 0.06 | $ | 0.04 | $ | 0.12 | $ | 0.08 | ||||||||
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REGIS CORPORATION (NYSE: RGS) |
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SELECTED CASH FLOW DATA (Unaudited) |
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(In thousands) |
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Six Months Ended
December 31, |
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| 2011 | 2010 | |||||||
| Net cash provided by operating activities | $ | 61,947 | $ | 102,833 | ||||
| Net cash used in investing activities | (42,877 | ) | (38,750 | ) | ||||
| Net cash used in financing activities | (28,942 | ) | (46,433 | ) | ||||
| Effect of exchange rate changes on cash and cash equivalents | (3,292 | ) | 4,769 | |||||
| (Decrease) increase in cash and cash equivalents | (13,164 | ) | 22,419 | |||||
| Cash and cash equivalents: | ||||||||
| Beginning of year | 96,263 | 151,871 | ||||||
| End of year | $ | 83,099 |
$ |
174,290 | ||||
| REGIS CORPORATION (NYSE: RGS) | ||||||
| Salon and Hair Restoration Center Counts and Revenues | ||||||
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SYSTEM-WIDE LOCATIONS: |
December 31, |
June 30, |
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| Company-owned salons | 7,851 | 7,883 | ||||
| Franchise salons | 2,007 | 1,936 | ||||
| Company-owned hair restoration centers | 68 | 67 | ||||
| Franchise hair restoration centers | 29 | 29 | ||||
| Ownership interest locations | 2,822 | 2,786 | ||||
| Total, system-wide | 12,777 | 12,701 | ||||
| SALON LOCATION SUMMARY | ||||||
| NORTH AMERICAN SALONS: |
December 31, |
June 30, |
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| REGIS SALONS | ||||||
| Open at beginning of period | 1,023 | 1,049 | ||||
| Salons constructed | 4 | 12 | ||||
| Acquired |
― |
9 | ||||
| Less relocations | (4 | ) | (10 | ) | ||
| Salon openings | ― | 11 | ||||
| Conversions | ― | (1 | ) | |||
| Salons closed | (21 | ) | (36 | ) | ||
| Total, Regis Salons | 1,002 | 1,023 | ||||
| MASTERCUTS | ||||||
| Open at beginning of period | 588 | 600 | ||||
| Salons constructed | 6 | 6 | ||||
| Acquired | ― | ― | ||||
| Less relocations | (4 | ) | (5 | ) | ||
| Salon openings | 2 | 1 | ||||
| Conversions | ― | 1 | ||||
| Salons closed | (3 | ) | (14 | ) | ||
| Total, MasterCuts Salons | 587 | 588 | ||||
| SMARTSTYLE/COST CUTTERS IN WALMART | ||||||
| Company-owned salons: | ||||||
| Open at beginning of period | 2,393 | 2,374 | ||||
| Salons constructed | 32 | 65 | ||||
| Acquired | ― | ― | ||||
| Franchise buybacks | ― | ― | ||||
| Less relocations | (1 | ) | (1 | ) | ||
| Salon openings | 31 | 64 | ||||
| Conversions | ― | ― | ||||
| Salons closed | (1 | ) | (45 | ) | ||
| Total company-owned salons | 2,423 | 2,393 | ||||
| Franchise salons: | ||||||
| Open at beginning of period | 120 | 119 | ||||
| Salons constructed | 2 | 3 | ||||
| Acquired |
― |
― | ||||
| Less relocations | ― | ― | ||||
| Salon openings | 2 | 3 | ||||
| Conversions | ― | ― | ||||
| Franchise buybacks | ― | ― | ||||
| Salons closed | ― | (2 | ) | |||
| Total franchise salons | 122 | 120 | ||||
| Total, SmartStyle/Cost Cutters Salons in Walmart | 2,545 | 2,513 | ||||
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December 31, |
June 30, |
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| SUPERCUTS | ||||||
| Company-owned salons: | ||||||
| Open at beginning of period | 1,158 | 1,100 | ||||
| Salons constructed | 26 | 24 | ||||
| Acquired | 1 | ― | ||||
| Franchise buybacks | 2 | 73 | ||||
| Less relocations | (5 | ) | (3 | ) | ||
| Salon openings | 24 | 94 | ||||
| Conversions | 56 | 13 | ||||
| Salons closed | (26 | ) | (49 | ) | ||
| Total company-owned salons | 1,212 | 1,158 | ||||
| Franchise salons: | ||||||
| Open at beginning of period | 987 | 1,034 | ||||
| Salons constructed | 37 | 43 | ||||
| Acquired | ― | ― | ||||
| Less relocations | (1 | ) | (7 | ) | ||
| Salon openings | 36 | 36 | ||||
| Conversions | 5 | 10 | ||||
| Franchise buybacks | (2 | ) | (73 | ) | ||
| Salons closed | (3 | ) | (20 | ) | ||
| Total franchise salons | 1,023 | 987 | ||||
| Total, Supercuts Salons | 2,235 | 2,145 | ||||
| PROMENADE | ||||||
| Company-owned salons: | ||||||
| Open at beginning of period | 2,321 | 2,382 | ||||
| Salons constructed | 20 | 26 | ||||
| Acquired | ― | 18 | ||||
| Franchise buybacks | 6 | 5 | ||||
| Less relocations | (7 | ) | (10 | ) | ||
| Salon openings | 19 | 39 | ||||
| Conversions | (56 | ) | (14 | ) | ||
| Salons sold to franchisees | (5 | ) | ― | |||
| Salons closed | (57 | ) | (86 | ) | ||
| Total company-owned salons | 2,222 | 2,321 | ||||
| Franchise salons: | ||||||
| Open at beginning of period | 829 | 867 | ||||
| Salons constructed | 19 | 21 | ||||
| Acquired (2) | 31 | ― | ||||
| Salons purchased from the Company | 5 | ― | ||||
| Less relocations | (2 | ) | (7 | ) | ||
| Salon openings | 53 | 14 | ||||
| Conversions | (5 | ) | (9 | ) | ||
| Franchise buybacks | (6 | ) | (5 | ) | ||
| Salons closed | (9 | ) | (38 | ) | ||
| Total franchise salons | 862 | 829 | ||||
| Total, Promenade Salons | 3,084 | 3,150 | ||||
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December 31, |
June 30, |
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| INTERNATIONAL SALONS (1): | ||||||
| Company-owned salons: | ||||||
| Open at beginning of period | 400 | 404 | ||||
| Salons constructed | 12 | 13 | ||||
| Acquired | ― | ― | ||||
| Franchise buybacks | ― | ― | ||||
| Less relocations | (1 | ) | (2 | ) | ||
| Salon openings | 11 | 11 | ||||
| Conversions | ― | ― | ||||
| Salons closed | (6 | ) | (15 | ) | ||
| Total company-owned salons | 405 | 400 | ||||
| Total franchise salons | ― | ― | ||||
| Total, International Salons | 405 | 400 | ||||
| TOTAL SYSTEM-WIDE SALONS: | ||||||
| Company-owned salons: | ||||||
| Open at beginning of period | 7,883 | 7,909 | ||||
| Salons constructed | 100 | 146 | ||||
| Acquired | 1 | 27 | ||||
| Franchise buybacks | 8 | 78 | ||||
| Less relocations | (22 | ) | (31 | ) | ||
| Salon openings | 87 | 220 | ||||
| Conversions | ― | (1 | ) | |||
| Salons sold to franchisees | (5 | ) | ― | |||
| Salons closed | (114 | ) | (245 | ) | ||
| Total company-owned salons | 7,851 | 7,883 | ||||
| Franchise salons: | ||||||
| Open at beginning of period | 1,936 | 2,020 | ||||
| Salons constructed | 58 | 67 | ||||
| Acquired (2) | 31 | ― | ||||
| Salons purchased from the Company | 5 | ― | ||||
| Less relocations | (3 | ) | (14 | ) | ||
| Salon openings | 91 | 53 | ||||
| Conversions | ― | 1 | ||||
| Franchise buybacks | (8 | ) | (78 | ) | ||
| Salons sold | ― | ― | ||||
| Salons closed | (12 | ) | (60 | ) | ||
| Total franchise salons | 2,007 | 1,936 | ||||
| Total, Salons | 9,858 | 9,819 | ||||
| HAIR RESTORATION CENTERS: | ||||||
| Company-owned hair restoration centers: | ||||||
| Open at beginning of period | 67 | 62 | ||||
| Salons constructed | 3 | 3 | ||||
| Acquired | ― | ― | ||||
| Franchise buybacks | ― | 4 | ||||
| Less relocations | (2 | ) | (1 | ) | ||
| Salon openings | 1 | 6 | ||||
| Conversions | ― | ― | ||||
| Sites closed | ― | (1 | ) | |||
| Total company-owned hair restoration centers | 68 | 67 | ||||
|
|
||||||
|
December 31, |
June 30, |
|||||
| Franchise hair restoration centers: | ||||||
| Open at beginning of period | 29 | 33 | ||||
| Salons constructed | ― | ― | ||||
| Acquired | ― | ― | ||||
| Less relocations | ― | ― | ||||
| Salon openings | ― | ― | ||||
| Franchise buybacks | ― | (4 | ) | |||
| Sites closed | ― | — | ||||
| Total franchise hair restoration centers | 29 | 29 | ||||
| Total, Hair Restoration Centers | 97 | 96 | ||||
| Ownership interest locations | 2,822 | 2,786 | ||||
| Grand Total, System-wide | 12,777 | 12,701 | ||||
| (1) Canadian and Puerto Rican salons are included in the Regis, MasterCuts, SmartStyle, Supercuts, and Promenade salon totals and not included in the International salon totals. | ||||||
| (2) Represents the acquisition of a franchise network. | ||||||
| Relocations represent a transfer of location by the same salon concept. | ||||||
| Conversions represent the transfer of one salon concept to another concept. | ||||||
|
REVENUES BY CONCEPT: |
||||||||||||||||
|
Three Months Ended |
Six Months Ended |
|||||||||||||||
| (Dollars in thousands) | 2011 | 2010 | 2011 | 2010 | ||||||||||||
| North American salons: | ||||||||||||||||
| Regis | $ | 104,629 | $ | 108,928 | $ | 209,496 | $ | 216,433 | ||||||||
| MasterCuts | 40,293 | 41,295 | 80,751 | 83,335 | ||||||||||||
| SmartStyle | 125,980 | 129,671 | 254,464 | 262,224 | ||||||||||||
| Supercuts | 85,031 | 78,310 | 168,634 | 157,633 | ||||||||||||
| Promenade | 136,136 | 143,245 | 276,581 | 288,757 | ||||||||||||
| Total North American salons | 492,069 | 501,449 | 989,926 | 1,008,382 | ||||||||||||
| International salons | 34,069 | 37,077 | 67,558 | 72,135 | ||||||||||||
| Hair restoration centers | 37,140 | 35,846 | 74,543 | 72,100 | ||||||||||||
| Consolidated revenues | $ | 563,278 | $ | 574,372 | $ | 1,132,027 | $ | 1,152,617 | ||||||||
| Percentage change from prior year | (1.9 |
)% |
(0.2 | )% | (1.8 | )% | (2.4 | )% | ||||||||
| Same-store sales decrease (1) | (3.0 | )% | (1.3 | )% | (3.1 | )% | (1.4 | )% | ||||||||
|
(1) |
Same-store sales are calculated on a daily basis as the total change in sales for company-owned locations which were open on a specific day of the week during the current period and the corresponding prior period. Quarterly and year-to-date 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. Management believes that same-store sales, a component of organic growth, are useful in order to help determine the increase in revenues attributable to its organic growth (new locations construction and same-store sales growth) versus growth from acquisitions. |
|
FINANCIAL INFORMATION BY SEGMENT:
Financial information concerning the Company’s salon and hair restoration businesses is shown in the following tables.
| For the Three Months Ended December 31, 2011 | ||||||||||||||||
| Salons |
Hair Restoration |
Unallocated | ||||||||||||||
| (Dollars in thousands) | North America | International | Centers | Corporate | Consolidated | |||||||||||
| Revenues: | ||||||||||||||||
| Service | $ | 379,694 | $ | 24,331 | $ | 17,274 | $ ― | $ | 421,299 | |||||||
| Product | 103,162 | 9,738 | 19,308 | ― | 132,208 | |||||||||||
| Royalties and fees | 9,213 | ― | 558 | ― | 9,771 | |||||||||||
| 492,069 | 34,069 | 37,140 | ― | 563,278 | ||||||||||||
| Operating expenses: | ||||||||||||||||
| Cost of service | 218,547 | 13,122 | 10,672 | ― | 242,341 | |||||||||||
| Cost of product | 51,753 | 5,254 | 6,462 | ― | 63,469 | |||||||||||
| Site operating expenses | 44,466 | 2,359 | 1,600 | ― | 48,425 | |||||||||||
| General and administrative | 28,584 | 2,956 | 8,060 | 35,466 | 75,066 | |||||||||||
| Rent | 73,686 | 9,060 | 2,224 | 503 | 85,473 | |||||||||||
| Depreciation and amortization | 17,692 | 1,112 | 3,249 | 9,642 | 31,695 | |||||||||||
| Goodwill impairment | ― | ― | 78,426 | ― | 78,426 | |||||||||||
| Total operating expenses | 434,728 | 33,863 | 110,693 | 45,611 | 624,895 | |||||||||||
| Operating income (loss) | 57,341 | 206 | (73,553 | ) | (45,611 | ) | (61,617 | ) | ||||||||
| Other income (expense): | ||||||||||||||||
| Interest expense | ― | ― | ― | (7,203 | ) | (7,203 | ) | |||||||||
| Interest income and other, net | ― | ― | ― | 2,659 | 2,659 | |||||||||||
| Income (loss) before income taxes and equity in income of affiliated companies | $ | 57,341 | $ | 206 | $ | (73,553 | ) | $ | (50,155 | ) | $ | (66,161 | ) | |||
| For the Three Months Ended December 31, 2010 | ||||||||||||||||
| Salons |
Hair Restoration |
Unallocated | ||||||||||||||
| (Dollars in thousands) | North America | International | Centers | Corporate | Consolidated | |||||||||||
| Revenues: | ||||||||||||||||
| Service | $ | 388,656 | $ | 25,634 | $ | 16,649 |
$ |
― |
$ 430,939 | |||||||
| Product | 103,775 | 11,443 | 18,606 |
― |
133,824 | |||||||||||
| Royalties and fees | 9,018 | ― | 591 | ― | 9,609 | |||||||||||
| 501,449 | 37,077 | 35,846 | ― | 574,372 |
|
|||||||||||
| Operating expenses: | ||||||||||||||||
| Cost of service | 226,739 | 13,314 | 9,652 | ― | 249,705 | |||||||||||
| Cost of product | 51,622 | 6,266 | 6,038 | ― | 63,926 | |||||||||||
| Site operating expenses | 46,739 | 2,593 | 1,265 | ― | 50,597 | |||||||||||
| General and administrative | 32,485 | 3,259 | 8,276 | 31,828 | 75,848 | |||||||||||
| Rent | 73,454 | 8,903 | 2,314 | 564 | 85,235 | |||||||||||
| Depreciation and amortization | 17,423 | 1,161 | 3,169 | 4,444 | 26,197 | |||||||||||
| Total operating expenses | 448,462 | 35,496 | 30,714 | 36,836 | 551,508 | |||||||||||
| Operating income (loss) | 52,987 | 1,581 | 5,132 | (36,836 | ) | 22,864 | ||||||||||
| Other income (expense): | ||||||||||||||||
| Interest expense | ― | ― | ― | (8,738 | ) | (8,738 |
) |
|||||||||
| Interest income and other, net | ― | ― | ― | 2,604 | 2,604 | |||||||||||
| Income (loss) before income taxes and equity in income of affiliated companies | $ | 52,987 | $ | 1,581 | $ | 5,132 | $ | (42,970 | ) | $ 16,730 | ||||||
| For the Six Months Ended December 31, 2011 | ||||||||||||||||
| Salons |
Hair Restoration |
Unallocated | ||||||||||||||
| (Dollars in thousands) | North America | International | Centers | Corporate | Consolidated | |||||||||||
| Revenues: | ||||||||||||||||
| Service | $ | 769,858 | $ | 49,184 | $ | 33,957 |
$ |
― |
$ | 852,999 | ||||||
| Product | 201,299 | 18,374 | 39,452 | ― | 259,125 | |||||||||||
| Royalties and fees | 18,769 | — | 1,134 |
― |
19,903 | |||||||||||
| 989,926 | 67,558 | 74,543 | ― | 1,132,027 | ||||||||||||
| Operating expenses: | ||||||||||||||||
| Cost of service | 441,826 | 25,812 | 20,714 | ― | 488,352 | |||||||||||
| Cost of product | 100,197 | 9,833 | 13,418 | ― | 123,448 | |||||||||||
| Site operating expenses | 92,762 | 5,034 | 3,084 | ― | 100,880 | |||||||||||
| General and administrative | 58,290 | 5,881 | 17,333 | 72,241 | 153,745 | |||||||||||
| Rent | 146,901 | 17,824 | 4,495 | 700 | 169,920 | |||||||||||
| Depreciation and amortization | 35,662 | 2,418 | 6,558 | 21,163 | 65,801 | |||||||||||
| Goodwill impairment | ― | ― | 78,426 | ― | 78,426 | |||||||||||
| Total operating expenses | 875,638 | 66,802 | 144,028 | 94,104 | 1,180,572 | |||||||||||
| Operating income (loss) | 114,288 | 756 | (69,485 | ) | (94,104 | ) | (48,545 | ) | ||||||||
| Other income (expense): | ||||||||||||||||
| Interest expense | ― | ― | ― | (14,563 | ) | (14,563 | ) | |||||||||
| Interest income and other, net | ― | ― | ― | 3,975 | 3,975 | |||||||||||
| Income (loss) before income taxes and equity in income of affiliated companies | $ | 114,288 | $ | 756 | $ | (69,485 | ) | $ | (104,692 | ) | $ | (59,133 | ) | |||
| For the Six Months Ended December 31, 2010 | |||||||||||||||
| Salons |
Hair Restoration |
Unallocated | |||||||||||||
| (Dollars in thousands) | North America | International | Centers | Corporate | Consolidated | ||||||||||
| Revenues: | |||||||||||||||
| Service | $ | 785,977 | $ | 50,997 | $ | 33,494 |
$ |
― |
$ 870,468 | ||||||
| Product | 203,895 | 21,138 | 37,396 |
― |
262,429 | ||||||||||
| Royalties and fees | 18,510 | — | 1,210 | ― | 19,720 | ||||||||||
| 1,008,382 | 72,135 | 72,100 | ― | 1,152,617 | |||||||||||
| Operating expenses: | |||||||||||||||
| Cost of service | 454,036 | 26,042 | 19,128 | ― | 499,206 | ||||||||||
| Cost of product | 101,355 | 11,511 | 12,135 | ― | 125,001 | ||||||||||
| Site operating expenses | 93,068 | 4,783 | 1,755 | ― | 99,606 | ||||||||||
| General and administrative | 62,363 | 6,211 | 16,855 | 64,493 | 149,922 | ||||||||||
| Rent | 147,072 | 17,573 | 4,578 | 1,120 | 170,343 | ||||||||||
| Depreciation and amortization | 34,655 | 2,248 | 6,312 | 9,026 | 52,241 | ||||||||||
| Total operating expenses | 892,549 | 68,368 | 60,763 | 74,639 | 1,096,319 | ||||||||||
| Operating income (loss) | 115,833 | 3,767 | 11,337 | (74,639 | ) | 56,298 | |||||||||
| Other income (expense): | |||||||||||||||
| Interest expense | ― | ― | ― | (17,661 |
) |
(17,661 | ) | ||||||||
| Interest income and other, net | ― | ― | ― | 3,381 | 3,381 | ||||||||||
| Income (loss) before income taxes and equity in income of affiliated companies | $ | 115,833 | $ | 3,767 | $ | 11,337 | $ | (88,919 | ) | $ 42,018 | |||||
Non-GAAP Reconciliations
We believe our presentation of non-GAAP operating income, net income and net income per diluted share 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 business from the same perspective as management and Board of Directors. These non-GAAP financial measures provide investors an enhanced understanding of our operations, facilitate investors’ analysis 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, 2011 and 2010:
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.
Senior management restructure – We have excluded expense associated with senior management restructuring from our non-GAAP results. During the three and six months ended December 31, 2011, we incurred expense of $0.7 and $2.3 million, respectively, associated with senior management restructuring.
Proxy fees - We have excluded the advisory fees and other costs associated with the recent contested proxy from our non-GAAP results. During the three and six months ended December 31, 2011, we incurred $1.1 and $2.2 million, respectively, of advisory fees and other costs associated with the recent contested proxy.
Strategic alternative costs - We have excluded the fees associated our exploration of strategic alternatives during our second quarter of fiscal year 2011 from our non-GAAP results. During the three and six months ended December 31, 2010, we incurred $1.3 million, respectively, of expense related to the exploration of strategic alternatives.
Point-of-sale system accelerated depreciation – We have excluded the accelerated depreciation we recorded related to our point-of-sale system from our non-GAAP results. During the three and six months ended December 31, 2011, we recorded $6.3 and $15.0 million, respectively, in accelerated depreciation related to our point-of-sale system.
Goodwill impairment – We have excluded the goodwill impairment charge we recorded related to our Hair Restoration Centers reportable segment from our non-GAAP results. The Company recorded a goodwill impairment charge of $78.4 million related to our Hair Restoration Centers’ reportable segment during the three and six months ended December 31, 2011.
Legal settlement – We have excluded income associated with a legal settlement from our non-GAAP results. During the three and six months ended December 31, 2011 we recorded income of $1.1 million associated with a legal settlement.
Tax provision adjustments – The non-GAAP tax provision adjustments 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.
Weighted average shares adjustments – The non-GAAP weighted average shares adjustments are due to the change in non-GAAP net income as compared to the U.S. GAAP net income or loss, resulting from the non-GAAP reconciling items addressed herein. Non-GAAP net income per share reflects the weighted average shares associated with non-GAAP net income, which includes the dilutive effect of common stock and convertible share equivalents.
|
REGIS CORPORATION |
||||||||||||||||||
|
Reconciliation of selected U.S. GAAP to non-GAAP financial measures |
||||||||||||||||||
|
(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 | Six Months Ended | |||||||||||||||||
| December 31, | December 31, | |||||||||||||||||
| U.S. GAAP financial line item | 2011 | 2010 | 2011 | 2010 | ||||||||||||||
| U.S. GAAP revenue | $ | 563,278 | $ | 574,372 | $ | 1,132,027 | $ | 1,152,617 | ||||||||||
| U.S. GAAP operating (loss) income | $ | (61,617 | ) | $ | 22,864 | $ | (48,545 | ) | $ | 56,298 | ||||||||
| Non-GAAP operating expense adjustments: | ||||||||||||||||||
| Senior management restructure | General and administrative |
|
696 |
|
— |
|
2,349 |
|
— |
|||||||||
| Proxy fees | General and administrative |
|
1,096 |
|
— |
|
2,225 |
|
— |
|||||||||
| Strategic alternative costs | General and administrative |
|
— |
|
1,253 |
|
— |
|
1,253 |
|||||||||
| Point-of-sale accelerated depreciation | Depreciation and amortization |
|
6,338 |
|
— |
|
15,037 |
|
— |
|||||||||
| Goodwill impairment | Goodwill impairment |
|
78,426 |
|
— |
|
78,426 |
|
— |
|||||||||
| Total non-GAAP operating expense adjustments |
|
86,556 |
|
1,253 |
|
98,037 |
|
1,253 |
||||||||||
| Non-GAAP operating income (5) | $ | 24,939 | $ | 24,117 | $ | 49,492 | $ | 57,551 | ||||||||||
| U.S. GAAP net (loss) income | $ | (57,427 | ) | $ | 14,505 | $ | (49,090 | ) | $ | 32,825 | ||||||||
| Non-GAAP net (loss) income adjustments: | ||||||||||||||||||
| Non-GAAP operating expense adjustments |
|
86,556 |
|
1,253 |
|
98,037 |
|
1,253 |
||||||||||
| Legal settlement | Interest income and other, net |
|
(1,098 |
) |
|
— |
|
(1,098 |
) |
|
— |
|||||||
| Tax provision adjustments (1) | Income taxes |
|
(8,422 |
) |
|
(481 |
) |
|
(12,654 |
) |
|
(481 |
) | |||||
| Total non-GAAP net income adjustments |
|
77,036 |
|
772 |
|
84,285 |
|
772 |
||||||||||
| Non-GAAP net income |
$ |
19,609 | $ | 15,277 | $ | 35,195 | $ | 33,597 | ||||||||||
| Reconciliation of U.S. GAAP net (loss) income per diluted share to non-GAAP net income per diluted share | ||||||||||||||||||
| Three Months Ended | Six Months Ended | |||||||||||||||||
| December 31, | December 31, | |||||||||||||||||
| 2011 | 2010 | 2011 | 2010 | |||||||||||||||
| U.S. GAAP net (loss) income per diluted share (2) | $ | (1.010 | ) | $ | 0.242 | $ | (0.863 |
) |
$ |
0.542 |
|
|||||||
| Senior management restructure (1) |
|
0.006 |
|
— |
|
0.022 |
— |
|
||||||||||
| Proxy fees (1) |
|
0.01 |
|
— |
|
0.021 |
— | |||||||||||
| Strategic alternative costs (1) |
|
— |
|
0.011 |
|
— |
0.011 |
|||||||||||
| Point-of-sale accelerated depreciation (1) |
|
0.059 |
|
— |
|
0.139 |
— |
|||||||||||
| Goodwill impairment (1) |
|
1.061 |
|
— |
|
1.062 |
— | |||||||||||
| Legal settlement (1) |
|
(0.010 |
) |
|
— |
|
(0.010 |
) |
|
— | ||||||||
| Dilutive effect under if-converted method (4) |
|
0.201 |
|
— |
|
0.204 |
— | |||||||||||
| Non-GAAP net income per diluted share (3) (6) |
$ |
0.317 | $ | 0.254 | $ |
0.575 |
|
$ |
0.553 |
|
||||||||
| U.S. GAAP Weighted average shares - basic |
|
56,857 |
|
56,684 |
|
56,853 |
56,657 | |||||||||||
| U.S. GAAP Weighted average shares - diluted |
|
56,857 |
|
68,136 |
|
56,853 |
68,053 | |||||||||||
| Non-GAAP Weighted average shares - diluted (4) |
|
68,417 |
|
68,136 |
|
68,354 |
68,053 | |||||||||||
|
Notes: |
|
|||
|
(1) |
Based on a year-to-date tax rate analysis, the non-GAAP tax provision was calculated to be approximately 37% for the three and six months ended December 31, 2011 for all non-GAAP operating expense adjustments, except the goodwill impairment. The goodwill impairment had a tax benefit of approximately $5.9 million for both the three and six months ended December 31, 2011, as the charge is only partially deductible for income tax purposes. The non-GAAP tax rate for the three months ended December 31, 2011 was 25.8%. The difference between the non-GAAP effective tax rate of 25.8% for the three months ended December 31, 2011 and the rate used for the tax provision adjustments is primarily the result of application of work opportunity tax credits and the release of state tax reserves during the three months ended December 31, 2011. Based on a projected statutory effective tax rate analysis, the non-GAAP tax provision was calculated to be approximately 38% for the three and six months ended December 31, 2010 for all non-GAAP operating expense adjustments. |
|||
|
(2) |
For the three and six months ended December 31, 2010 U.S. GAAP net income per diluted share is calculated under the if-converted method. Under the if-converted method for the three and six months ended December 31, 2010, $2.0 and $4.0 million, respectively, of after tax interest expense on the convertible debt is added to net income to determine the net income for diluted earnings per share. |
|||
|
(3) |
For the three and six months ended December 31, 2011 and 2010 non-GAAP net income per diluted share, has been calculated under the if-converted method. For the three and six months ended December 31, 2011 and 2010, $2.1, $4.1, $2.0 and $4.0 million, respectively, of after tax interest on the convertible debt is added to the non-GAAP net income to determine the non-GAAP net income per diluted earnings per share. |
|||
|
(4) |
Non-GAAP net income per share reflects the weighted average shares associated with non-GAAP net income, which includes the dilutive effect of common stock and convertible share equivalents. The earnings per share impact of the adjustments for the three and six months ended December 31, 2011 included 0.4 and 0.3 million, respectively of common stock equivalents and convertible share equivalents of 11.2 million, for both periods, of additional shares under the if-converted method. The impact of the adjustments described above result in the effect of the common stock equivalents and convertible share equivalents to be dilutive to the non-GAAP net income per share. |
|||
|
(5) |
Operational operating margins for the three months ended December 31, 2011, and 2010, was 4.4% and 4.2 %, respectively, and is calculated as non-GAAP operating income divided by U.S. GAAP revenue for each respective period. |
|||
|
(6) |
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 for Q2 FY12 Non-Operational Items |
||||||||||||
| Pre-Tax | Income Taxes | Net Income | ||||||||||
| Senior management restructuring | $ | 696 | $ | (254 | ) | $ | 442 | |||||
| Proxy fees | 1,096 | (404 | ) | 692 | ||||||||
| Point-of-sale accelerated depreciation | 6,338 | (2,315 | ) | 4,023 | ||||||||
| Goodwill impairment | 78,426 | (5,854 | ) | 72,572 | ||||||||
| Legal settlement | (1,098 | ) | 405 | (693 | ) | |||||||
| Total | $ | 85,458 | $ | (8,422 | ) | $ | 77,036 | |||||
| REGIS CORPORATION | |||||||||
| Reconciliation of reported U.S. GAAP net loss to operational EBITDA, a non-GAAP financial measure | |||||||||
| ($ In thousands) | |||||||||
| (unaudited) | |||||||||
|
Operational 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 operational EBITDA, as EBITDA excluding equity in income of affiliated companies, and identified items impacting comparability for each respective period. For the three months ended December 31, 2011, the items impacting comparability consisted of $0.7 million of pre-tax expense associated with our senior management restructuring, $1.1 million of pre-tax expense for advisory fees and other costs associated with the recent contested proxy, $78.4 million goodwill impairment charge related to our Hair Restoration Centers reportable segment, and $1.1 million of income associated with a legal settlement. The impact of the $6.3 million of pre-tax accelerated depreciation related to the point-of-sale system and the income tax provision adjustment is 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 operational EBITDA. For the three months ended December 31, 2010, the items impacting comparability consisted $1.3 million of pre-tax expense for fees associated our exploration of strategic alternatives. The impact of the income tax provision adjustment is 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 operational EBITDA. |
|||||||||
| Three Months Ended | |||||||||
|
December 31, 2011 |
December 31, 2010 |
||||||||
| (Dollars in thousands) | |||||||||
|
Consolidated reported net (loss) income, as reported (U.S. GAAP) |
$ |
(57,427 |
) |
$ | 14,505 | ||||
| Interest expense, as reported |
|
7,203 |
|
8,738 |
|||||
| Income taxes, as reported |
|
(3,453 |
) |
|
5,345 |
||||
| Depreciation and amortization, as reported |
|
31,695 |
|
26,197 |
|||||
| EBITDA (as defined above) |
$ |
(21,982 |
) |
$ | 54,785 | ||||
| Equity in income of affiliated companies, net of income taxes, as reported |
|
(5,281 |
) |
|
(3,120 |
) | |||
| Senior management restructuring |
|
696 |
|
— |
|||||
| Proxy fees |
|
1,096 |
|
— |
|||||
| Strategic alternatives costs |
|
— |
|
1,253 |
|||||
| Goodwill impairment, as reported |
|
78,426 |
|
— |
|||||
| Legal settlement |
|
(1,098 |
) |
|
— |
||||
| Operational EBITDA, non-GAAP financial measure | $ | 51,857 |
$ |
52,918 | |||||
|
REGIS CORPORATION’S NORTH AMERICA REPORTABLE SEGMENT |
||||||||||||||||
|
Reconciliation of selected U.S. GAAP to non-GAAP financial measures |
||||||||||||||||
|
($ In thousands) |
||||||||||||||||
|
(unaudited) |
||||||||||||||||
| As Reported |
Non-Operational |
Non-GAAP | ||||||||||||||
|
Three
31, |
% of |
Three |
% of |
|||||||||||||
| Service | $ | 379,694 | 77.1 | % | $ | — | ||||||||||
| Product | 103,162 | 21.0 | — | |||||||||||||
| Royalties and fees | 9,213 | 1.9 | — | |||||||||||||
| Total revenues | $ | 492,069 | 100.0 | $ | — | $ | 492,069 | 100.0 | % | |||||||
| Cost of service (2) | 218,547 | 57.6 | — | |||||||||||||
| Cost of product (3) | 51,753 | 50.2 | — | |||||||||||||
| Site operating expenses | 44,466 | 9.0 | — | |||||||||||||
| General and administrative | 28,584 | 5.8 | — | |||||||||||||
| Rent | 73,686 | 15.0 | — | |||||||||||||
| Depreciation and amortization | 17,692 | 3.6 | (828 | ) | 16,864 | 3.4 | ||||||||||
| Goodwill impairment | — | — | — | |||||||||||||
| Total operating expenses | $ | 434,728 | 88.3 | $ | (828 | ) | $ | 433,900 | 88.2 | |||||||
| Operating income | $ | 57,341 | 11.7 | $ | 828 | $ | 58,169 | 11.8 | ||||||||
|
(1) |
The three months ended December 31, 2011 included $0.8 million pre-tax expense for the accelerated depreciation related to our point-of-sale system. |
|||||
|
(2) |
Computed as a percent of service revenues and excludes depreciation expense. |
|||||
|
(3) |
Computed as a percent of product revenues and excludes depreciation expense. |
|
REGIS CORPORATION’S INTERNATIONAL REPORTABLE SEGMENT |
||||||||||||||||
|
Reconciliation of selected U.S. GAAP to non-GAAP financial measures |
||||||||||||||||
|
($ In thousands) |
||||||||||||||||
|
(unaudited) |
||||||||||||||||
| As Reported |
Non-Operational |
Non-GAAP | ||||||||||||||
|
Three |
% of |
Three |
% of |
|||||||||||||
| Service | $ | 24,331 | 71.4 | % | $ | — | ||||||||||
| Product | 9,738 | 28.6 | — | |||||||||||||
| Royalties and fees | — | — | — | |||||||||||||
| Total revenues | $ | 34,069 | 100.0 | $ | — | $ | 34,069 | 100.0 | % | |||||||
| Cost of service (2) | 13,122 | 53.9 | — | |||||||||||||
| Cost of product (3) | 5,254 | 54.0 | — | |||||||||||||
| Site operating expenses | 2,359 | 6.9 | — | |||||||||||||
| General and administrative | 2,956 | 8.7 | — | |||||||||||||
| Rent | 9,060 | 26.6 | — | |||||||||||||
| Depreciation and amortization | 1,112 | 3.3 | (95 | ) | 1,017 | 3.0 | ||||||||||
| Goodwill impairment | — | — | — | |||||||||||||
| Total operating expenses | $ | 33,863 | 99.4 | $ | (95 | ) | $ | 33,768 | 99.1 | |||||||
| Operating income | $ | 206 | 0.6 | $ | 95 | $ | 301 | 0.9 | ||||||||
|
(1) |
The three months ended December 31, 2011 included $0.1 million pre-tax expense for the accelerated depreciation related to our point-of-sale system. |
|||||
|
(2) |
Computed as a percent of service revenues and excludes depreciation expense. |
|||||
|
(3) |
Computed as a percent of product revenues and excludes depreciation expense. |
|
REGIS CORPORATION’S HAIR RESTORATION CENTERS REPORTABLE SEGMENT |
||||||||||||||||
|
Reconciliation of selected U.S. GAAP to non-GAAP financial measures |
||||||||||||||||
|
($ In thousands) |
||||||||||||||||
|
(unaudited) |
||||||||||||||||
| As Reported |
Non-Operational |
Non-GAAP | ||||||||||||||
|
Three |
% of |
Three |
% of |
|||||||||||||
| Service | $ | 17,274 | 46.5 | % | $ | — | ||||||||||
| Product | 19,308 | 52.0 | — | |||||||||||||
| Royalties and fees | 558 | 1.5 | — | |||||||||||||
| Total revenues | $ | 37,140 | 100.0 | $ | — | $ | 37,140 | 100.0 | % | |||||||
| Cost of service (2) | 10,672 | 61.8 | — | |||||||||||||
| Cost of product (3) | 6,462 | 33.5 | — | |||||||||||||
| Site operating expenses | 1,600 | 4.3 | — | |||||||||||||
| General and administrative | 8,060 | 21.7 | — | |||||||||||||
| Rent | 2,224 | 6.0 | — | |||||||||||||
| Depreciation and amortization | 3,249 | 8.7 | — | |||||||||||||
| Goodwill impairment | 78,426 | 211.2 | (78,426 | ) | — | — | ||||||||||
| Total operating expenses | $ | 110,693 | 298.0 | $ | (78,426 | ) | $ | 32,267 | 86.9 | |||||||
| Operating (loss) income | $ | (73,553 | ) | (198.0 | ) | $ | 78,426 | $ | 4,873 | 13.1 | ||||||
|
(1) |
The three months ended December 31, 2011 included $78.4 million pre-tax expense for the goodwill impairment related to the Company’s Hair Restoration Centers’ reportable segment. |
|||||
|
(2) |
Computed as a percent of service revenues and excludes depreciation expense. |
|||||
|
(3) |
Computed as a percent of product revenues and excludes depreciation expense. |
|
REGIS CORPORATION’S UNALLOCATED CORPORATE REPORTABLE SEGMENT |
||||||||||||||||||
|
Reconciliation of selected U.S. GAAP to non-GAAP financial measures |
||||||||||||||||||
|
($ In thousands) |
||||||||||||||||||
|
(unaudited) |
||||||||||||||||||
|
As Reported |
Non-Operational |
Non-GAAP | ||||||||||||||||
|
Three |
% of |
Three |
% of |
|||||||||||||||
| Service | $ | — | — | % | $ | — | ||||||||||||
| Product | — | — | — | |||||||||||||||
| Royalties and fees | — | — | — | |||||||||||||||
| Total revenues | $ | — | — | $ | — | $ | — | — | % | |||||||||
| Cost of service (3) | — | — | — | |||||||||||||||
| Cost of product (4) | — | — | — | |||||||||||||||
| Site operating expenses | — | — | — | |||||||||||||||
| General and administrative | 35,466 | 6.3 | (1,792 | ) | 33,674 | 6.0 | ||||||||||||
| Rent | 503 | 0.1 | — | |||||||||||||||
| Depreciation and amortization | 9,642 | 1.7 | (5,415 | ) | 4,227 | 0.8 | ||||||||||||
| Goodwill impairment | — | — | — | |||||||||||||||
| Total operating expenses | $ | 45,611 | 8.1 | $ | (7,207 | ) | $ | 38,404 | 6.8 | |||||||||
| Operating loss | $ | (45,611 | ) | (8.1 | ) | $ | 7,207 | $ | (38,404 | ) | (6.8 | ) | ||||||
|
(1) |
Computed as a percent of consolidated revenues. |
|||||
|
(2) |
The three months ended December 31, 2011 included $0.7 million of pre-tax expense associated with senior management restructuring, $1.1 million of pre-tax expense associated with advisory fees and other costs associated with the recent contested proxy, and $5.4 million pre-tax expense for the accelerated depreciation related to our point-of-sale system. |
|||||
|
(3) |
Computed as a percent of service revenues and excludes depreciation expense. |
|||||
|
(4) |
Computed as a percent of product revenues and excludes depreciation expense. |
| As Reported |
Non-Operational |
Non-GAAP | ||||||||||||||||
|
Three |
% of |
Three |
% of |
|||||||||||||||
| Service | $ | — | — | % | $ | — | ||||||||||||
| Product | — | — | — | |||||||||||||||
| Royalties and fees | — | — | — | |||||||||||||||
| Total revenues | $ | — | — | $ | — | $ | — | — | % | |||||||||
| Cost of service (3) | — | — | — | |||||||||||||||
| Cost of product (4) | — | — | — | |||||||||||||||
| Site operating expenses | — | — | — | |||||||||||||||
| General and administrative | 31,828 | 5.5 | (1,253 | ) | 30,575 | 5.3 | ||||||||||||
| Rent | 564 | 0.1 | — | |||||||||||||||
| Depreciation and amortization | 4,444 | 0.8 | — | |||||||||||||||
| Goodwill impairment | — | — | — | |||||||||||||||
| Total operating expenses | $ | 36,836 | 6.4 | $ | (1,253 | ) | $ | 35,583 | 6.2 | |||||||||
| Operating loss | $ | (36,836 | ) | (6.4 | ) | $ | 1,253 | $ | (35,583 | ) | (6.2 | ) | ||||||
|
(1) |
Computed as a percent of consolidated revenues. |
|||||
|
(2) |
The three months ended December 31, 2010 included $1.3 million of pre-tax expense associated our exploration of strategic alternatives. |
|||||
|
(3) |
Computed as a percent of service revenues and excludes depreciation expense. |
|||||
|
(4) |
Computed as a percent of product revenues and excludes depreciation expense. |