Attached files
| file | filename |
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| 8-K - 8-K - REGIS CORP | pressrelease8-k63016.htm |
Exhibit No. 99 | |
 | CONTACT: REGIS CORPORATION: Mark Fosland – SVP, Finance and Investor Relations, 952-806-1707 |
For Immediate Release
REGIS REPORTS $11.0 MILLION INCREASE IN
FOURTH QUARTER 2016 OPERATING INCOME
MINNEAPOLIS, August 23, 2016 -- Regis Corporation (NYSE: RGS), a leader in the haircare industry, whose primary business is owning, operating and franchising hair salons, today reported results for its fiscal fourth quarter ended June 30, 2016 versus the prior year as noted below.
As a result of the Company's valuation allowance against most of its deferred tax assets, associated reported and as adjusted, after-tax results are not comparable to prior periods.
Fiscal 2016 Highlights:
•Same-store sales increased 0.2%.
•Franchise revenue increased 6.5%.
•Repurchased 7.6 million shares of common stock for $101 million.
•Generated $55 million of operating cash flow.
Fourth Quarter 2016 Results:
•Sales of $447.7 million, a decline of ($15.2) million. Same-store sales decreased (1.4%).
◦ | Same-store service sales decreased (1.6%) and same-store product sales decreased (0.8%). |
•GAAP operating income of $10.6 million compared to ($0.4) million in the prior year quarter.
• | GAAP net income of $5.6 million or $0.12 per diluted share. |
◦ | Includes ($0.06) per diluted share unfavorable impact due to the deferred tax valuation allowance on income tax expense. |
• | EBITDA, as adjusted, of $27.4 million compared to $24.4 million in the prior year quarter. |
◦ | Decrease of ($2.5) million from same-store sales declines. |
◦ | Increase of $5.5 million mainly from lower incentives, cost savings, timing of certain costs throughout the year, reduced salon counts, lapping certain costs in the prior year quarter, and higher franchise royalties and fees, partly offset by minimum wage and |
inflation, increased health insurance costs, lapping of one-time inventory improvements, and planned strategic investments.
• | Diluted EPS, as adjusted, was $0.12 compared to $0.01 in the prior year quarter. |
◦ | Excluding the impact of the deferred tax valuation allowance, Diluted EPS, as adjusted, improved $0.24 per share compared to the prior year quarter. |
◦ | Primary drivers of this improvement were lower depreciation, income tax credits, lower non-cash equity in losses of Empire Education Group, and the EBITDA impacts listed above. |
• | The prior year quarter GAAP net loss includes net discrete expense of $3.1 million. See non-GAAP reconciliations. |
Dan Hanrahan, President and Chief Executive Officer, commented, “I am proud of the work our organization has put forth to deliver our first positive full year sales comp since fiscal 2007. This could not have been achieved without improved execution in the organization around our key strategies focused on Leadership Development, Technical Education and Asset Protection. I am also pleased by the fact we expanded our EBITDA, as adjusted, by $3.8 and $3.0 million for the full year and the fourth quarter, respectively. This reflects our continued efforts to contain our cost structure while we are fixing our business. During the year, we aggressively grew our franchising business, strengthened our balance sheet, and returned $101 million to shareholders in the form of share repurchases. That said, I end the year with mixed emotions. We still need to reverse guest traffic declines that have persisted for many years and fourth quarter same-store sales declined by 1.4%. This demonstrates the opportunity we have to continue to improve our execution capabilities and a key reason why I have said over the past three years our improvement would not be linear.”
Mr. Hanrahan concluded, “As I look toward fiscal 2017, I recognize the path to sustainable growth is in the quality of our field leadership and execution capabilities. Transforming a culture comprised of 45,000 stylists, 1,000 field leaders and 7,000 salons requires strong execution, an ongoing commitment and time. I am confident our strategies will make Regis the place where stylists can have successful and satisfying careers that, in turn, will deliver sustainable growth in guest traffic and profitability.”
Comparable Profitability Measures | ||||||||||||||||
(Unaudited) | ||||||||||||||||
Three Months Ended June 30, | Twelve Months Ended June 30, | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
(Dollars in millions) | ||||||||||||||||
Revenue | $ | 447.7 | $ | 462.9 | $ | 1,790.9 | $ | 1,837.3 | ||||||||
Revenue decline % | (3.3 | ) | (4.3 | ) | (2.5 | ) | (2.9 | ) | ||||||||
Same-Store Sales % | (1.4 | ) | (0.8 | ) | 0.2 | (0.3 | ) | |||||||||
Same-Store Average Ticket % Change | 3.7 | 1.5 | 3.1 | 1.6 | ||||||||||||
Same-Store Guest Count % Change | (5.1 | ) | (2.3 | ) | (2.9 | ) | (1.9 | ) | ||||||||
Cost of Service and Product % (1) | 59.6 | 58.7 | 60.1 | 59.3 | ||||||||||||
Cost of Service % (1) | 62.1 | 61.5 | 62.7 | 61.8 | ||||||||||||
Cost of Product % (1) | 49.5 | 47.0 | 49.9 | 49.7 | ||||||||||||
Site operating expense as % of total revenues, U.S. GAAP reported | 10.0 | 10.5 | 10.2 | 10.5 | ||||||||||||
Site operating expense as % of total revenues, as adjusted | 10.0 | 10.0 | 10.2 | 10.6 | ||||||||||||
General and administrative as % of total revenues | 9.7 | 10.8 | 9.9 | 10.1 | ||||||||||||
Operating income (loss) as % of total revenues, U.S. GAAP reported | 2.4 | (0.1 | ) | 1.0 | 0.2 | |||||||||||
Operating income as % of total revenues, as adjusted | 2.4 | 0.4 | 1.0 | 0.1 | ||||||||||||
EBITDA | 27.5 | 19.6 | 74.5 | 73.8 | ||||||||||||
EBITDA, as adjusted | 27.4 | 24.4 | 90.3 | 86.5 | ||||||||||||
____________________________________
1) | Excludes depreciation and amortization. |
Fourth Quarter Results:
Revenues. Revenue in the quarter of $447.7 million declined $15.2 million, or 3.3%, compared to the prior year quarter. Same-store sales decreased 1.4% compared to the prior year quarter. Management estimates the shift of Easter from April of last year to March of this year negatively impacted same-store sales by approximately 40 basis points during the fourth quarter of the current year. The remaining 190 basis point, or $9.2 million, decline in revenue, compared to the prior year quarter, was primarily due to the closing of unprofitable salons and foreign currency, partly offset by one more calendar day in the quarter and growth from royalties and fees.
Service revenues were $348.9 million, a $13.4 million, or 3.7% decrease, compared to the prior year quarter. Same-store service sales decreased 1.6%, driven by a decline in guest traffic of 5.1%, partly offset by an increase in average ticket of 3.5%. The remaining 210 basis point, or $7.9 million, decline in service revenues, compared to the prior year quarter, was primarily due to the closing of unprofitable salons and foreign currency, partly offset by one more calendar day in the quarter.
Product revenues were $86.7 million, a decrease of $1.9 million, or 2.2%, compared to the prior year quarter. Product same-store sales for the quarter decreased 0.8%, driven by a decrease in traffic of 0.9%, partly offset by a 0.1% increase in average ticket. The other 140 basis point, or $1.3 million, decline in product revenues, compared to the prior year quarter, was primarily due to the closing of unprofitable salons and foreign currency, partly offset by one more calendar day in the quarter.
Royalties and fees were $12.1 million, an increase of $0.2 million, or 1.4% compared to the prior year quarter. Franchisees posted positive same-store sales during the quarter. The timing of new franchised-salon openings impacted results in the quarter. The Company added a net 42, or 1.7%, and a net 172, or 7.4%, new franchised locations during the quarter and year, respectively.
Cost of Service and Product. Cost of service and product, as a percent of service and product revenues, increased 90 basis points to 59.6% compared to the prior year quarter.
Cost of service as a percent of service revenues for the quarter increased 60 basis points versus the prior year quarter, to 62.1%. The primary drivers were state minimum wage increases and higher health insurance costs, partly offset by the timing of Easter Sunday pay and lower salon incentives.
In the fourth quarter, the Company issued a press release stating new U.S. Department of Labor overtime rules, effective December 1, 2016, could increase its costs from $0 to $5 million per year. After considering alternatives to mitigate these cost increases, the Company now believes the annualized impact will be on the lower end of this range.
Cost of product as a percent of product revenues was 49.5%. The increase of 250 basis points when compared to the prior year quarter was mainly the result of lapping one-time inventory improvements.
Site Operating Expenses. Site operating expenses of $44.8 million decreased $3.6 million compared to the prior year quarter. Excluding the impact of discrete items in the prior year period, site operating expenses decreased $1.3 million. This was primarily driven by a net reduction of 233 salons, the timing of marketing expenses, cost savings, and foreign currency, partly offset by lapping favorable self-insurance costs and certain tax refunds.
General and Administrative. General and administrative expenses of $43.5 million decreased $6.6 million compared to the prior year quarter. Excluding the impact of discrete items in the current and prior periods, general and administrative expenses decreased $6.4 million compared to the prior year quarter. The decrease was mainly due to lower incentive costs, lapping certain costs in the prior year quarter, timing of expenses throughout the year, cost savings and foreign currency, partly offset by planned strategic investments.
Rent. Rent expense of $73.6 million decreased $4.6 million compared to the prior year quarter. This decrease was primarily the result of a net reduction of 233 salons, lapping certain lease renewal costs in the prior year quarter, receipt of a one-time landlord credit, and foreign exchange, partly offset by rent inflation.
Depreciation and Amortization. Depreciation and amortization was $15.6 million compared to $22.0 million in the prior year quarter, a decrease of $6.5 million. This decrease was primarily due to a net reduction of 233 salons and lower non-cash salon fixed asset impairments.
Income Taxes. During the three months ended June 30, 2016 and 2015, the Company recognized income tax expense of $4.1 million and tax benefit of $2.2 million, at effective tax rates of 42.6% and 92.6%, respectively.
The recorded tax expense and effective tax rates for the three and twelve months ended June 30, 2016 and 2015 were different than what would normally be expected due to the impact of the deferred tax valuation allowance. The majority of the tax expense relates to a non-cash tax expense for tax benefits on certain indefinite-lived assets the Company cannot recognize for reporting purposes. Income tax expense for the
three and twelve months ended June 30, 2016 includes non-cash expense of $4.5 and $7.9 million, respectively, related to this matter. This non-cash impact will continue as long as the Company has a valuation allowance against most of its deferred tax assets and is expected to approximate $7.8 million of expense for the year ending June 30, 2017.
Equity in Affiliates. Income from equity method investments and affiliated companies was flat compared to a loss of $1.8 million in the prior year quarter. The prior year loss of $1.8 million represented the Company's portion of EEG's loss.
EBITDA, as Adjusted. EBITDA, as adjusted, which excludes the impact of equity in earnings of affiliated companies and discrete items in both periods, was $27.4 million, an improvement of $3.0 million compared to the prior year quarter.
Capital Allocation. During the fourth quarter, the Company repurchased 0.3 million shares for $4.0 million at an average price of $13.65 per share, excluding transaction costs. For the full year, the Company repurchased 7.6 million shares for $101.0 million at an average price of $13.19 per share, excluding transaction costs. At June 30, 2016, approximately $60 million remained outstanding under the Company's existing share repurchase authorization.
A complete reconciliation of reported earnings to adjusted earnings is included in this press release and is available on the Company’s website at www.regiscorp.com.
Regis Corporation will host a conference call via webcast discussing fourth quarter results today, August 23, 2016, at 9 a.m., Central time. Interested parties are invited to participate in the live webcast by logging on to www.regiscorp.com or participate by phone by dialing (877) 852-6561. A replay of the presentation will be available later that day. The replay phone number is (888) 203-1112, access code 8618174.
About Regis Corporation
Regis Corporation (NYSE:RGS) is the leader in beauty salons and cosmetology education. As of June 30, 2016, the Company owned, franchised or held ownership interests in 9,483 worldwide locations. Regis’ corporate and franchised locations operate under concepts such as Supercuts, SmartStyle, MasterCuts, Regis Salons, Sassoon Salon, Cost Cutters and First Choice Haircutters. Regis maintains ownership interests in Empire Education Group in the U.S. and the MY Style concepts in Japan. For additional information about the Company, including a reconciliation of certain non-GAAP financial information and certain supplemental financial information, please visit the Investor Information section of the corporate website at www.regiscorp.com. To join Regis Corporation’s email alert list, click on this link:
http://www.b2i.us/irpass.asp?BzID=913&to=ea&Nav=1&S=0&L=1
This press release may contain “forward-looking statements” within the meaning of the federal securities laws, including statements concerning anticipated future events and expectations that are not historical facts. These forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The forward-looking statements in this document reflect management's best judgment at the time they are made, but all such statements are subject to numerous risks and uncertainties, which could cause actual results to differ materially from those expressed in or implied by the statements herein. Such forward-looking statements are often identified herein by use of words including, but not limited to, "may," "believe," "project," "forecast," "expect," "estimate," "anticipate," and "plan." In addition, the following factors could affect the Company's actual results and cause such results to differ materially from those expressed in forward-looking statements. These factors include the continued ability of the Company to execute on our strategy and build on the foundational initiatives that we have implemented; the success of our stylists and our ability to attract, train and retain talented stylists; changes in regulatory and statutory laws; our ability to manage cyber threats and protect the security of sensitive information about our guests, employees, vendors or Company information; changes in tax exposure; the effect of changes to healthcare laws; reliance on management information
systems; financial performance of Empire Education Group; reliance on external vendors; consumer shopping trends and changes in manufacturer distribution channels; financial performance of our franchisees; competition within the personal hair care industry; changes in interest rates and foreign currency exchange rates; failure to standardize operating processes across brands; the ability of the Company to maintain satisfactory relationships with certain companies and suppliers; the continued ability of the Company to implement cost reduction initiatives; compliance with debt covenants; changes in economic conditions; changes in consumer tastes and fashion trends; or other factors not listed above. Additional information concerning potential factors that could affect future financial results is set forth under Item 1A of this Form 10-K. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. However, your attention is directed to any further disclosures made in our subsequent annual and periodic reports filed or furnished with the SEC on Forms 10-Q and 8-K and Proxy Statements on Schedule 14A.
REGIS CORPORATION (NYSE: RGS)
CONSOLIDATED BALANCE SHEET (Unaudited)
(Dollars in thousands, except per share data)
June 30, 2016 | June 30, 2015 | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 147,346 | $ | 212,279 | ||||
Receivables, net | 24,691 | 24,631 | ||||||
Inventories | 134,212 | 128,610 | ||||||
Other current assets | 51,765 | 62,762 | ||||||
Total current assets | 358,014 | 428,282 | ||||||
Property and equipment, net | 183,321 | 218,157 | ||||||
Goodwill | 417,393 | 418,953 | ||||||
Other intangibles, net | 15,185 | 17,069 | ||||||
Investment in affiliates | 520 | 15,321 | ||||||
Other assets | 62,328 | 64,233 | ||||||
Total assets | $ | 1,036,761 | $ | 1,162,015 | ||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 59,884 | $ | 63,302 | ||||
Accrued expenses | 135,431 | 153,364 | ||||||
Total current liabilities | 195,315 | 216,666 | ||||||
Long-term debt | 120,435 | 120,000 | ||||||
Other noncurrent liabilities | 201,610 | 197,905 | ||||||
Total liabilities | 517,360 | 534,571 | ||||||
Shareholders’ equity: | ||||||||
Common stock, $0.05 par value; issued and outstanding, 46,154,410 and 53,664,366 common shares at June 30, 2016 and 2015, respectively | 2,308 | 2,683 | ||||||
Additional paid-in capital | 207,475 | 298,396 | ||||||
Accumulated other comprehensive income | 5,068 | 9,506 | ||||||
Retained earnings | 304,550 | 316,859 | ||||||
Total shareholders’ equity | 519,401 | 627,444 | ||||||
Total liabilities and shareholders’ equity | $ | 1,036,761 | $ | 1,162,015 | ||||
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REGIS CORPORATION (NYSE: RGS)
CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited)
(Dollars in thousands, except per share data)
Three Months Ended June 30, | Twelve Months Ended June 30, | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
Revenues: | ||||||||||||||||
Service | $ | 348,912 | $ | 362,329 | $ | 1,383,663 | $ | 1,429,408 | ||||||||
Product | 86,706 | 88,640 | 359,683 | 363,236 | ||||||||||||
Royalties and fees | 12,089 | 11,920 | 47,523 | 44,643 | ||||||||||||
447,707 | 462,889 | 1,790,869 | 1,837,287 | |||||||||||||
Operating expenses: | ||||||||||||||||
Cost of service | 216,702 | 222,981 | 868,188 | 882,717 | ||||||||||||
Cost of product | 42,921 | 41,634 | 179,341 | 180,558 | ||||||||||||
Site operating expenses | 44,807 | 48,385 | 182,952 | 192,442 | ||||||||||||
General and administrative | 43,479 | 50,117 | 178,033 | 186,051 | ||||||||||||
Rent | 73,605 | 78,170 | 297,271 | 309,125 | ||||||||||||
Depreciation and amortization | 15,593 | 22,048 | 67,470 | 82,863 | ||||||||||||
Total operating expenses | 437,107 | 463,335 | 1,773,255 | 1,833,756 | ||||||||||||
Operating income (loss) | 10,600 | (446 | ) | 17,614 | 3,531 | |||||||||||
Other (expense) income: | ||||||||||||||||
Interest expense | (2,176 | ) | (2,363 | ) | (9,317 | ) | (10,206 | ) | ||||||||
Interest income and other, net | 1,261 | 390 | 4,219 | 1,697 | ||||||||||||
Income (loss) before income taxes and equity in loss of affiliated companies | 9,685 | (2,419 | ) | 12,516 | (4,978 | ) | ||||||||||
Income taxes | (4,123 | ) | 2,240 | (9,049 | ) | (14,605 | ) | |||||||||
Equity in loss of affiliated companies, net of income taxes | — | (1,764 | ) | (14,783 | ) | (13,629 | ) | |||||||||
Income (loss) from continuing operations | 5,562 | (1,943 | ) | (11,316 | ) | (33,212 | ) | |||||||||
Loss from discontinued operations, net of income taxes | — | (630 | ) | — | (630 | ) | ||||||||||
Net income (loss) | $ | 5,562 | $ | (2,573 | ) | $ | (11,316 | ) | $ | (33,842 | ) | |||||
Net income (loss) per share: | ||||||||||||||||
Basic and diluted: | ||||||||||||||||
Income (loss) from continuing operations | $ | 0.12 | $ | (0.04 | ) | $ | (0.23 | ) | $ | (0.60 | ) | |||||
Loss from discontinued operations | — | (0.01 | ) | — | (0.01 | ) | ||||||||||
Net income (loss) per share, basic and diluted(1) | $ | 0.12 | $ | (0.05 | ) | $ | (0.23 | ) | $ | (0.62 | ) | |||||
Weighted average common and common equivalent shares outstanding: | ||||||||||||||||
Basic | 46,289 | 54,222 | 48,542 | 54,992 | ||||||||||||
Diluted | 46,706 | 54,222 | 48,542 | 54,992 | ||||||||||||
____________________________________
(1) | Total is a recalculation; line items calculated individually may not sum to total due to rounding. |
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REGIS CORPORATION (NYSE: RGS)
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS) (Unaudited)
(Dollars in thousands)
Three Months Ended June 30, | Twelve Months Ended June 30, | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
Net income (loss) | $ | 5,562 | $ | (2,573 | ) | $ | (11,316 | ) | $ | (33,842 | ) | |||||
Other comprehensive income (loss): | ||||||||||||||||
Foreign currency translation adjustments during the period | 525 | 2,182 | (4,276 | ) | (13,515 | ) | ||||||||||
Recognition of deferred compensation | (162 | ) | 370 | (162 | ) | 370 | ||||||||||
Other comprehensive income (loss) | 363 | 2,552 | (4,438 | ) | (13,145 | ) | ||||||||||
Comprehensive income (loss) | $ | 5,925 | $ | (21 | ) | $ | (15,754 | ) | $ | (46,987 | ) | |||||
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REGIS CORPORATION (NYSE: RGS)
CONSOLIDATED STATEMENT OF CASH FLOW (Unaudited)
(Dollars in thousands)
Twelve Months Ended June 30, | ||||||||
2016 | 2015 | |||||||
Cash flows from operating activities: | ||||||||
Net loss | $ | (11,316 | ) | $ | (33,842 | ) | ||
Adjustments to reconcile net loss to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 56,992 | 68,259 | ||||||
Equity in loss of affiliated companies | 14,783 | 13,629 | ||||||
Deferred income taxes | 7,023 | 11,154 | ||||||
Gain from sale of salon assets, net | (1,000 | ) | (1,210 | ) | ||||
Salon asset impairments | 10,478 | 14,604 | ||||||
Stock-based compensation | 9,797 | 8,647 | ||||||
Amortization of debt discount and financing costs | 1,514 | 1,722 | ||||||
Other non-cash items affecting earnings | 310 | 257 | ||||||
Changes in operating assets and liabilities(1): | ||||||||
Receivables | (577 | ) | 446 | |||||
Inventories | (7,109 | ) | 6,197 | |||||
Income tax receivable | 501 | 5,298 | ||||||
Other current assets | (460 | ) | 3,049 | |||||
Other assets | (1,133 | ) | (4,480 | ) | ||||
Accounts payable | (4,624 | ) | (3,261 | ) | ||||
Accrued expenses | (15,034 | ) | 8,249 | |||||
Other noncurrent liabilities | (5,113 | ) | (4,756 | ) | ||||
Net cash provided by operating activities | 55,032 | 93,962 | ||||||
Cash flows from investing activities: | ||||||||
Capital expenditures | (31,117 | ) | (38,257 | ) | ||||
Proceeds from sale of assets | 1,740 | 2,986 | ||||||
Change in restricted cash | 9,042 | (312 | ) | |||||
Proceeds from company-owned life insurance policies | 2,948 | — | ||||||
Net cash used in investing activities | (17,387 | ) | (35,583 | ) | ||||
Cash flows from financing activities: | ||||||||
Repayments of long-term debt and capital lease obligations | (2 | ) | (173,751 | ) | ||||
Repurchase of common stock | (101,035 | ) | (47,888 | ) | ||||
Purchase of noncontrolling interest | (760 | ) | — | |||||
Net cash used in financing activities | (101,797 | ) | (221,639 | ) | ||||
Effect of exchange rate changes on cash and cash equivalents | (781 | ) | (3,088 | ) | ||||
Decrease in cash and cash equivalents | (64,933 | ) | (166,348 | ) | ||||
Cash and cash equivalents: | ||||||||
Beginning of period | 212,279 | 378,627 | ||||||
End of period | $ | 147,346 | $ | 212,279 | ||||
____________________________________
(1) | Changes in operating assets and liabilities exclude assets and liabilities sold or acquired. |
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SAME-STORE SALES (1):
For the Three Months Ended | ||||||||||||||||||
June 30, 2016 | June 30, 2015 | |||||||||||||||||
Service | Retail | Total | Service | Retail | Total | |||||||||||||
SmartStyle | 0.8 | % | 3.8 | % | 1.7 | % | 1.2 | % | (1.4 | )% | 0.5 | % | ||||||
Supercuts | — | (0.9 | ) | (0.1 | ) | 1.4 | (1.1 | ) | 1.1 | |||||||||
MasterCuts | (5.6 | ) | (8.9 | ) | (6.2 | ) | (4.8 | ) | (3.9 | ) | (4.7 | ) | ||||||
Other Value | (1.6 | ) | (3.5 | ) | (1.8 | ) | (1.2 | ) | (2.1 | ) | (1.3 | ) | ||||||
North American Value | (0.7 | )% | 1.0 | % | (0.4 | )% | (0.1 | )% | (1.7 | )% | (0.4 | )% | ||||||
North American Premium | (4.9 | )% | (7.5 | )% | (5.3 | )% | (3.4 | )% | (3.9 | )% | (3.4 | )% | ||||||
International | (3.3 | )% | (5.4 | )% | (3.8 | )% | 1.3 | % | 1.2 | % | 1.3 | % | ||||||
Consolidated | (1.6 | )% | (0.8 | )% | (1.4 | )% | (0.6 | )% | (1.8 | )% | (0.8 | )% | ||||||
For the Twelve Months Ended | ||||||||||||||||||
June 30, 2016 | June 30, 2015 | |||||||||||||||||
Service | Retail | Total | Service | Retail | Total | |||||||||||||
SmartStyle | 3.0 | % | 4.4 | % | 3.4 | % | 2.4 | % | (0.3 | )% | 1.6 | % | ||||||
Supercuts | 1.6 | 5.7 | 2.0 | 1.1 | 2.9 | 1.3 | ||||||||||||
MasterCuts | (4.5 | ) | (3.7 | ) | (4.4 | ) | (4.2 | ) | (3.2 | ) | (4.0 | ) | ||||||
Other Value | (0.4 | ) | 1.8 | (0.2 | ) | (1.1 | ) | 3.1 | (0.7 | ) | ||||||||
North American Value | 0.8 | % | 3.4 | % | 1.3 | % | 0.2 | % | 0.4 | % | 0.3 | % | ||||||
North American Premium | (3.5 | )% | (5.4 | )% | (3.8 | )% | (3.3 | )% | (1.6 | )% | (3.0 | )% | ||||||
International | (1.3 | )% | (4.7 | )% | (2.3 | )% | 1.1 | % | (0.8 | )% | 0.6 | % | ||||||
Consolidated | — | % | 1.3 | % | 0.2 | % | (0.4 | )% | — | % | (0.3 | )% | ||||||
____________________________________
(1) Same-store sales are calculated on a daily basis as the total change in sales for company-owned locations that were open on a specific day of the week during the current period and the corresponding prior period. Quarterly and fiscal year same-store sales are the sum of the same-store sales computed on a daily basis. Locations relocated within a one-mile radius are included in same-store sales as they are considered to have been open in the prior period. International same-store sales are calculated in local currencies to remove foreign currency fluctuations from the calculation.
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REGIS CORPORATION (NYSE: RGS)
System-wide location counts
June 30, 2016 | June 30, 2015 | |||||
COMPANY-OWNED SALONS: | ||||||
SmartStyle/Cost Cutters in Walmart Stores | 2,683 | 2,639 | ||||
Supercuts | 1,053 | 1,092 | ||||
MasterCuts | 430 | 466 | ||||
Other Value | 1,604 | 1,711 | ||||
Regis salons | 694 | 761 | ||||
Total North American Salons (1) | 6,464 | 6,669 | ||||
Total International Salons (2) | 328 | 356 | ||||
Total Company-owned Salons | 6,792 | 7,025 | ||||
FRANCHISE SALONS: | ||||||
SmartStyle/Cost Cutters in Walmart Stores | 125 | 127 | ||||
Supercuts | 1,579 | 1,393 | ||||
Other Value | 792 | 804 | ||||
Total North American Salons (1) | 2,496 | 2,324 | ||||
Total International Salons (2) | — | — | ||||
Total Franchise Salons | 2,496 | 2,324 | ||||
OWNERSHIP INTEREST LOCATIONS: | ||||||
Equity ownership interest locations | 195 | 207 | ||||
Grand Total, System-wide | 9,483 | 9,556 | ||||
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(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.
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Non-GAAP Reconciliations
We believe our presentation of non-GAAP operating income, net income (loss), net income (loss) per diluted share, and other non-GAAP financial measures provides meaningful insight into our ongoing operating performance and an alternative perspective of our results of operations. Presentation of the non-GAAP measures allows investors to review our core ongoing operating performance from the same perspective as management and the Board of Directors. These non-GAAP financial measures provide investors an enhanced understanding of our operations, facilitate investors’ analyses and comparisons of our current and past results of operations and provide insight into the prospects of our future performance. We also believe the non-GAAP measures are useful to investors because they provide supplemental information research analysts frequently use to analyze financial performance.
The method we use to produce non-GAAP results is not in accordance with U.S. GAAP and may differ from methods used by other companies. These non-GAAP results should not be regarded as a substitute for corresponding U.S. GAAP measures but instead should be utilized as a supplemental measure of operating performance in evaluating our business. Non-GAAP measures do have limitations in that they do not reflect certain items that may have a material impact upon our reported financial results. As such, these non-GAAP measures should be viewed in conjunction with both our financial statements prepared in accordance with U.S. GAAP and the reconciliation of the selected U.S. GAAP to non-GAAP financial measures, which are located in the Investor Information section of the corporate website at www.regiscorp.com.
Non-GAAP reconciling items for the three and twelve months ended June 30, 2016 and 2015:
The following information is provided to give qualitative and quantitative information related to items impacting comparability. Items impacting comparability are not defined terms within U.S. GAAP. Therefore, our non-GAAP financial information may not be comparable to similarly titled measures reported by other companies. We determine which items to consider as “items impacting comparability” based on how management views our business, makes financial, operating and planning decisions and evaluates the Company’s ongoing performance. The following items have been excluded from our non-GAAP results:
• | Self-insurance reserve adjustments* |
• | Expense associated with legal cases |
• | Gain on life insurance proceeds |
• | Expenses associated with financing arrangements |
• | Professional fees |
• | Deferred compensation adjustments |
• | Establishment of deferred tax valuation allowances |
• | Other than temporary impairment associated with our investment in Empire Education Group (EEG) and our portion of a deferred tax asset valuation allowance established by EEG |
• | Discontinued operations |
* In the three month period ended June 30, 2016, the Company did not adjust results for self-insurance reserves.
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REGIS CORPORATION
Reconciliation of selected U.S. GAAP to non-GAAP financial measures (Unaudited)
(Dollars in thousands, except per share data)
Reconciliation of U.S. GAAP operating income (loss) and net income (loss) to equivalent non-GAAP measures | ||||||||||||||||||
Three Months Ended June 30, | Twelve Months Ended June 30, | |||||||||||||||||
U.S. GAAP financial line item | 2016 | 2015 | 2016 | 2015 | ||||||||||||||
U.S. GAAP revenue | $ | 447,707 | $ | 462,889 | $ | 1,790,869 | $ | 1,837,287 | ||||||||||
U.S. GAAP operating income (loss) | $ | 10,600 | $ | (446 | ) | $ | 17,614 | $ | 3,531 | |||||||||
Non-GAAP operating expense adjustments (1): | ||||||||||||||||||
Self-insurance reserve adjustments (2) | Site operating expense | — | 2,249 | (261 | ) | (1,477 | ) | |||||||||||
Legal fees | General and administrative | (21 | ) | 187 | 1,561 | 88 | ||||||||||||
Gain on life insurance proceeds | General and administrative | — | — | (1,220 | ) | — | ||||||||||||
Financing arrangements expense | General and administrative | — | — | 801 | — | |||||||||||||
Professional fees | General and administrative | — | — | 145 | — | |||||||||||||
Self-insurance reserve adjustments | General and administrative | — | — | (17 | ) | — | ||||||||||||
Deferred compensation adjustments | General and administrative | — | — | — | (184 | ) | ||||||||||||
Total non-GAAP operating expense adjustments | (21 | ) | 2,436 | 1,009 | (1,573 | ) | ||||||||||||
Non-GAAP operating income (2)(3) | $ | 10,579 | $ | 1,990 | $ | 18,623 | $ | 1,958 | ||||||||||
U.S. GAAP net income (loss) | $ | 5,562 | $ | (2,573 | ) | $ | (11,316 | ) | $ | (33,842 | ) | |||||||
Non-GAAP net income (loss) adjustments: | ||||||||||||||||||
Non-GAAP operating expense adjustments | (21 | ) | 2,436 | 1,009 | (1,573 | ) | ||||||||||||
Financing arrangements expense | Interest expense | — | — | 164 | — | |||||||||||||
Deferred tax valuation allowances | Income taxes | — | — | — | 2,115 | |||||||||||||
EEG impairment and deferred tax asset valuation allowance | Equity in loss of affiliated companies, net of income taxes | — | — | 12,954 | 11,510 | |||||||||||||
Discontinued operations | Loss from discontinued operations, net of income taxes | — | 630 | — | 630 | |||||||||||||
Total non-GAAP net income (loss) adjustments | (21 | ) | 3,066 | 14,127 | 12,682 | |||||||||||||
Non-GAAP net income (loss) (2) | $ | 5,541 | $ | 493 | $ | 2,811 | $ | (21,160 | ) | |||||||||
____________________________________
Notes:
(1) | As a result of the valuation allowance, non-GAAP adjustments are not tax effected. |
(2) | The self-insurance reserve adjustment of ($0.5) million for the three months ended June 30, 2016 was not included in the Company's calculation of non-GAAP operating income and non-GAAP net income (loss). |
(3) | Adjusted operating margins for the three months ended June 30, 2016, and 2015, were 2.4% and 0.4%, respectively, and were 1.0% and 0.1% for the twelve months ended June 30, 2016 and 2015, respectively, and are calculated as non-GAAP operating income divided by U.S. GAAP revenue for each respective period. |
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REGIS CORPORATION
Reconciliation of selected U.S. GAAP to non-GAAP financial measures
(Dollars in thousands, except per share data)
(Unaudited)
Reconciliation of U.S. GAAP net income (loss) per diluted share to non-GAAP net income (loss) per diluted share | ||||||||||||||||
Three Months Ended June 30, | Twelve Months Ended June 30, | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
U.S. GAAP net income (loss) per diluted share (1) | $ | 0.119 | $ | (0.047 | ) | $ | (0.233 | ) | $ | (0.615 | ) | |||||
Self-insurance reserve adjustments (2) | — | 0.041 | (0.006 | ) | (0.027 | ) | ||||||||||
Legal fees | — | 0.003 | 0.032 | 0.002 | ||||||||||||
Gain on life insurance proceeds | — | — | (0.025 | ) | — | |||||||||||
Financing arrangements expense | — | — | 0.020 | — | ||||||||||||
Professional fees | — | — | 0.003 | — | ||||||||||||
Deferred compensation adjustments | — | — | — | (0.003 | ) | |||||||||||
Deferred tax asset valuation allowances | — | — | — | 0.038 | ||||||||||||
EEG impairment and deferred tax asset valuation allowance | — | — | 0.264 | 0.209 | ||||||||||||
Discontinued operations | — | 0.012 | — | 0.011 | ||||||||||||
Impact of change in weighted average shares | — | — | 0.002 | — | ||||||||||||
Non-GAAP net income (loss) per diluted share (2)(3) | $ | 0.119 | $ | 0.009 | $ | 0.057 | $ | (0.385 | ) | |||||||
U.S. GAAP Weighted average shares - basic | 46,289 | 54,222 | 48,542 | 54,992 | ||||||||||||
U.S. GAAP Weighted average shares - diluted | 46,706 | 54,222 | 48,542 | 54,992 | ||||||||||||
Non-GAAP Weighted average shares - diluted (4) | 46,706 | 54,494 | 48,989 | 54,992 | ||||||||||||
____________________________________
Notes:
(1) | For the three and twelve months ended June 30, 2016, the Company recorded $4.1 and $9.0 million, respectively, of income tax expense. The presence of a valuation allowance, including the non-cash tax expense on certain indefinite-lived assets, affects comparability of income tax expense, as adjusted and will cause our effective tax rate to fluctuate from quarter to quarter. For the three months ended June 30, 2016, the Company evaluated GAAP diluted EPS with and without the presence of the valuation allowance and calculated an impact of $0.06 per share. Diluted EPS, as adjusted, without the presence of the valuation allowance, was $0.18 and ($0.05) for the three months ended June 30, 2016 and 2015, respectively, representing an improvement of $0.24 per diluted share, including $0.01 related to the impact of share count changes. As a result of the valuation allowance, non-GAAP adjustments are not tax effected. |
(2) | The self-insurance reserve adjustment of ($0.010) for the three months ended June 30, 2016 was not included in the Company's calculation of non-GAAP net income (loss) per diluted share. |
(3) | Total is a recalculation; line items calculated individually may not sum to total due to rounding. |
(4) | Non-GAAP net income (loss) per share reflects the weighted average shares associated with non-GAAP net income (loss), which may include the dilutive effect of common stock and convertible share equivalents. |
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REGIS CORPORATION
Reconciliation of reported U.S. GAAP net income (loss) to adjusted EBITDA, a non-GAAP financial measure
(Dollars in thousands)
(Unaudited)
Adjusted EBITDA
EBITDA represents U.S. GAAP net income (loss) for the respective period excluding interest expense, income taxes and depreciation and amortization expense. The Company defines adjusted EBITDA, as EBITDA excluding equity in loss of affiliated companies, and identified items impacting comparability for each respective period. For the three and twelve months ended June 30, 2016 and 2015, the items impacting comparability consisted of the items identified in the non-GAAP reconciling items for the respective periods. The impact of the income tax provision adjustments associated with the above items and accelerated depreciation related to the corporate office consolidation are already included in the U.S. GAAP reported net income (loss) to EBITDA reconciliation, therefore there is no adjustment needed for the reconciliation from EBITDA to adjusted EBITDA. The impacts of the Company's portion of the deferred tax asset valuation allowance established by EEG, the impairment on the Company's investment in EEG and the recovery of previously impaired investments in an affiliate, are already included by excluding the impact of the Company’s equity in loss of affiliated companies, net of taxes, as reported.
Three Months Ended June 30, | Twelve Months Ended June 30, | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
Consolidated reported net income (loss), as reported (U.S. GAAP) | $ | 5,562 | $ | (2,573 | ) | $ | (11,316 | ) | $ | (33,842 | ) | |||||
Interest expense, as reported | 2,176 | 2,363 | 9,317 | 10,206 | ||||||||||||
Income taxes, as reported | 4,123 | (2,240 | ) | 9,049 | 14,605 | |||||||||||
Depreciation and amortization, as reported | 15,593 | 22,048 | 67,470 | 82,863 | ||||||||||||
EBITDA (as defined above) | $ | 27,454 | $ | 19,598 | $ | 74,520 | $ | 73,832 | ||||||||
Equity in loss of affiliated companies, net of income taxes, as reported | — | 1,764 | 14,783 | 13,629 | ||||||||||||
Self-insurance reserve adjustments (1) | — | 2,249 | (278 | ) | (1,477 | ) | ||||||||||
Legal fees | (21 | ) | 187 | 1,561 | 88 | |||||||||||
Gain on life insurance proceeds | — | — | (1,220 | ) | — | |||||||||||
Financing arrangements expense | — | — | 801 | — | ||||||||||||
Professional fees | — | — | 145 | — | ||||||||||||
Deferred compensation adjustment | — | — | — | (184 | ) | |||||||||||
Loss from discontinued operations, net of income taxes, as reported | — | 630 | — | 630 | ||||||||||||
Adjusted EBITDA, non-GAAP financial measure (1) | $ | 27,433 | $ | 24,428 | $ | 90,312 | $ | 86,518 | ||||||||
____________________________________
Notes:
(1) | The self-insurance reserve adjustment of ($0.5) million for the three months ended June 30, 2016 was not included in the Company's calculation of adjusted EBITDA. |
REGIS CORPORATION
Reconciliation of reported U.S. GAAP revenue change to same-store sales (Unaudited)
Three Months Ended June 30, | Twelve Months Ended June 30, | |||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||
Revenue decline, as reported (U.S. GAAP) | (3.3 | )% | (4.3 | )% | (2.5 | )% | (2.9 | )% | ||||
Effect of new stores and conversions | (0.5 | ) | (0.5 | ) | (0.5 | ) | (0.6 | ) | ||||
Effect of closed salons | 2.6 | 2.8 | 2.7 | 2.7 | ||||||||
Foreign currency | 0.7 | 1.5 | 1.2 | 0.8 | ||||||||
Other | (0.9 | ) | (0.3 | ) | (0.7 | ) | (0.3 | ) | ||||
Same-store sales, non-GAAP | (1.4 | )% | (0.8 | )% | 0.2 | % | (0.3 | )% | ||||
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