MINNEAPOLIS - Jan. 31, 2013 - (BUSINESS WIRE) - Regis Corporation (NYSE: RGS), a leader in the haircare industry, whose primary business is owning, operating and franchising hair salons, today reported results for its fiscal second quarter ended December 31, 2012 versus the prior year as noted below. References made to discrete items were formerly referred to as non-operational items in previous earnings releases, and references made to financial measures, as adjusted, were formerly referred to as operational measures in previous earnings releases.
Second quarter results reflect conscious decisions we've made to invest in our business to drive traffic, said Dan Hanrahan, President and Chief Executive Officer. We made the decision to increase salon hours, primarily in our SmartStyle salons located in Walmart and our Supercuts salons. We knew this decision would impact gross margins, but we believed increasing hours would help stem continued declines in guest traffic. By adding hours, we are beginning to see improvements in guest traffic, especially in our SmartStyle and Supercuts businesses. Service traffic in SmartStyle was up over 4% for the quarter compared to the same period last year, and for the first time in thirteen consecutive quarters, SmartStyle posted positive same-store service sales. Overall, same-store sales trends improved 120 basis points compared to the first quarter of this fiscal year.
Mr. Hanrahan continued, While this investment currently reduced gross margins, we are continuing to focus on scheduling optimization, so that in the back half of this year our margins will be less impacted by increased hours. Scheduling optimization is in its early stages, and we are working diligently to strike the proper balance between staffing and guest traffic. Preliminary January findings indicate this gap may be narrowing in a number of our Supercuts salons, giving me confidence we can and will continue to improve during the remainder of our fiscal year.
On a positive note, we continued to drive expense out of the business. General and administrative expenses, as adjusted, were reduced by over $6 million compared to the same quarter last year. While we expect our general and administrative run rate to continue in the second half, we continue to focus on areas of the business that can drive further cost efficiencies.
Mr. Hanrahan concluded, We are in the early stages on several initiatives focused on creating an ideal guest experience that drives loyalty and repeat business, developing, retaining and attracting the best stylists and optimizing our brand portfolio. Changing the strategic direction of any established business requires investment, execution and time. After six months in this role, I remain extremely confident about our ability to improve Regis performance and the entire organization shares my sense of urgency to achieve that goal.
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Revenues. Revenues for the quarter declined $20.0 million, or 3.8%, compared to the prior year quarter.
Salon revenues during the quarter were $496.5 million, a decrease of $20.4 million, or 3.9%, from the prior year quarter, mainly driven by declines in North American salons. North American service revenues for the quarter were $364.5 million, a decrease of $15.2 million, or 4.0%, compared to the same period last year. Compared to the prior year quarter, North American same-store service sales declined 1.5%, comprised of a 2.2% decrease in guest counts and 0.7 % increase in average ticket price. Management estimates that lost business from Hurricane Sandy negatively impacted same-store service sales by approximately 30 basis points. Net changes in store counts drove the remaining 2.5% decrease compared to the prior year quarter.
Product revenues for the quarter were $108.2 million, a decrease of $4.7 million, or 4.1% versus the same period last year. Product same-store sales declined 3.6%.
Royalties and fees for the quarter of $9.6 million increased $0.4 million, or 4.7%, versus the prior year quarter.
Gross Margin. Gross margin as a percent of service and product revenues for the second quarter decreased 250 basis points to 41.7% compared to the prior year quarter.
Service margin as a percent of service revenues for the quarter was 39.7%, a decline of 300 basis points compared the prior year quarter, primarily related to increased salon labor costs in North American salons. The increase in salon labor costs was due the Company’s decision to increase stylist hours to drive traffic. Hours increased at a faster rate than same-store service sales. The Company is in the early stages of implementing a scheduling optimization tool which will help align changes to salon hours with changes in guest traffic. Product margin as a percent of product revenues for the quarter was 49.1%, a decline of 40 basis points compared to the prior year quarter, in part, driven by product donations for Hurricane Sandy relief efforts.
Site Operating Expenses. Site operating expenses for the quarter of $49.9 million, or 9.9% of revenues, declined by $1.6 million or 3.1% compared to the same quarter last year. Excluding the impact of discrete items, site operating expenses, as adjusted, for the quarter of $51.0 million, or 10.1% of revenues, a decrease of $0.5 million, or 0.9%, compared to the same quarter last year. The decrease in expense was primarily driven by the fact that we were lapping a marketing event in the prior year that was not repeated in the current year, partly offset by increased communication and insurance costs.
General and Administrative. General and administrative expenses for the quarter of $55.8 million, or 11.0% of revenues, decreased $6.8 million, or 90 basis points, compared to the same quarter last year. Excluding the impact of discrete items, general and administrative expenses, as adjusted, for the quarter decreased $6.1 million, or 9.9%, compared to the same quarter last year, representing an 80 basis point decline as a percent of revenues. This reduction was driven by cost saving initiatives the Company put in place to simplify and become efficient in supporting salon operations. We expect general and administrative run rates to continue in the second half and we continue to focus on simplification to drive further cost efficiencies.
Rent. Rent expense for the quarter was $80.6 million, or 15.9% of revenues, representing an increase of 10 basis points over the same quarter last year, primarily the result of negative leverage due to decreases in same-store sales. Rent expense actually declined by $2.7 million, or 3.2%, compared to the same quarter last year, due to store closures.
Depreciation and Amortization. Depreciation and amortization for the quarter was $21.9 million, or 4.3% of revenues, compared to $28.4 million, or 5.4% of revenues in the prior quarter. Excluding the impact of discrete items in the prior year quarter, depreciation and amortization was essentially flat versus the prior year quarter.
Income Taxes. During the three months ended December 31, 2012, the Company recognized tax expense of $1.1 million at an effective tax rate, as adjusted, of 40.6%. The Company’s tax rate, as adjusted, came in higher than the rate of 21.6% for the prior year quarter primarily due to the prior year rate benefiting from employment tax credits.
Equity in Affiliates. Loss from equity method investments and affiliated companies was $17.7 million in the second quarter of fiscal 2013, which included a net discrete impairment charge of $17.9 million related to Empire Education Group. Income from equity method investments and affiliated companies, as adjusted, was $0.2 million, a decrease of $4.9 million over the second quarter of fiscal 2012. The reduction in earnings, as adjusted, is the result of the Company’s sale of its investment in Provalliance and reduced earnings at Empire Education Group due to declining student enrollment.
EBITDA. EBITDA for the quarter of $17.4 million increased by $38.6 million, or 181.7%, compared to the prior year quarter. Excluding the impact of discrete items, EBITDA, as adjusted, for the quarter of $31.1 million decreased by $12.6 million, or 28.9% compared to the prior year quarter.
Discrete Items. Discrete expense for the current quarter netted to $14.0 million on an after-tax basis, and consisted of the following after-tax items:
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 discussing second quarter results today, January 31, 2013, at 10 a.m., Central time. Interested parties are invited to listen by logging on to www.regiscorp.com or dialing 877-941-8609. A replay of the call will be available later that day. The replay phone number is 800-406-7325, access code 4590684#.
Regis Corporation (NYSE:RGS) is the beauty industry’s global leader in beauty salons, hair restoration centers and cosmetology education. As of December 31, 2012, the Company owned, franchised or held ownership interests in approximately 10,000 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. 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. The forward-looking statements in this document reflect management’s best judgment at the time they are made, but all such statements are subject to numerous risks and uncertainties, which could cause actual results to differ materially from those expressed in or implied by the statements herein. Such forward-looking statements are often identified herein by use of words including, but not limited to, may,” believe,” project,” forecast,” expect,” estimate,” anticipate,” and plan.” In addition, the following factors could affect the Company’s actual results and cause such results to differ materially from those expressed in forward-looking statements. These factors include the impact of management and organizational changes; the Company’s dependence on same-store sales increases to increase revenue; the impact on the Company of healthcare reform legislation; 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; the Company’s reliance on management information systems; successful deployment of point-of-sale and guest relationship management systems; the ability of the Company to retain and attract stylists; labor and benefit costs; legal claims; 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 optimize its brand portfolio and integrate salons that support its growth objectives; the ability of the Company to maintain satisfactory relationships with suppliers; financial performance of our joint ventures; risk inherent to international developments (including currency fluctuations); or other factors not listed above. Additional information concerning potential factors that could affect future financial results is set forth in the Company’s Annual Report on Form 10-K for the year ended June 30, 2012. 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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(1) Total is a recalculation; line items calculated individually may not sum to total due to rounding.
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REVENUES BY CONCEPT:
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SAME-STORE SALES (1):
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SAME-STORE SALES (1):
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FINANCIAL INFORMATION BY SEGMENT:
Financial information concerning the Company’s salon businesses is shown in the following tables.
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References made to discrete items were formerly referred to as non-operational items in previous earnings releases, and references made to financial measures, as adjusted, were formerly referred to as operational measures in previous earnings releases.
We believe our presentation of non-GAAP operating income, net income, net income per diluted share, and other non-GAAP financial measures provides meaningful insight into our ongoing operating performance and an alternative perspective of our results of operations. Presentation of the non-GAAP measures allows investors to review our core ongoing operating performance 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.
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.
Self-insurance reserves adjustments – We have excluded the self-insurance reserves adjustments associated with our prior year reserves from our non-GAAP results. During the three and six months ended December 31, 2012, we recorded a benefit of $1.1 million.
Senior management restructure charges – We have excluded expense associated with senior management restructuring charges from our non-GAAP results. During the three and six months ended December 31, 2012 we incurred expense of $1.0 million associated with senior management restructuring. 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.
Pure Beauty note receivable recovery – We have excluded the bad debt recovery associated with the outstanding note receivable with Pure Beauty from our non-GAAP results. During the six months ended December 31, 2012, we recorded $0.3 million for the recovery of bad debt previously recorded on the outstanding note receivable with Pure Beauty.
Proxy fees – We have excluded the advisory fees and other costs associated with the fiscal year 2011 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 fiscal year 2011 contested proxy.
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.
Legal settlements – We have excluded income associated with legal settlements 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.
Recognition in earnings of amounts within accumulated other comprehensive income – We have excluded the recognition in earnings of amounts previously classified within accumulated other comprehensive income (AOCI) that were associated with the liquidation of foreign entities denominated in the Euro. The Company completed the sale of its investment in Provalliance during the three months ended September 30, 2012 and subsequently liquidated all foreign entities with Euro denominated operations. During the six months ended December 31, 2012, amounts previously classified within AOCI that were recognized in earnings were foreign currency translation rate gain adjustments of $43.4 million, a cumulative tax-effected net loss of $7.9 million associated with a cross-currency swap that was settled in fiscal year 2007 that hedged the Company’s European operations, and a $1.7 million net loss from cash repatriation with the Company’s European operations.
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.
Empire Education Group (EEG”) impairment– We have excluded the impairment recorded on our investment in EEG from our non-GAAP results. The Company recorded an other than temporary impairment charge of approximately $17.9 million during the three and six months ended December 31, 2012 as a result of a decrease in the fair value of the Company’s investment in EEG.
Provalliance impairment and equity put liability adjustment– We have excluded the $2.7 million other than temporary impairment recorded on our investment in Provalliance, partially offset by the $0.6 million gain recorded for the reduction in the fair value of the equity put option associated with our investment in Provalliance during the six months ended December 31, 2012 from our non-GAAP results.
Hair Restoration Centers discontinued operations – We have excluded the operations of our Hair Restoration Centers operations and professional fees associated with the disposition of our Hair Restoration Centers from our non-GAAP results. On July 13, 2012, the Company entered into an agreement to sell its Hair Restoration Centers operations. The Company recorded income from discontinued operations, net of taxes of approximately $3.9 and $7.6 million during the three and six months ended December 31, 2012, respectively. The Company recorded loss from discontinued operations, net of taxes of approximately $69.3 and $66.6 million during the three and six months ended December 31, 2011, respectively.
Weighted average shares adjustments – The non-GAAP weighted average shares adjustments are due to the change in non-GAAP net income as compared to the U.S. GAAP net income or loss, resulting from the non-GAAP reconciling items addressed herein. Non-GAAP net income per share reflects the weighted average shares associated with non-GAAP net income, which may included the dilutive effect of common stock and convertible share equivalents.
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REGIS CORPORATION
Reconciliation of reported U.S. GAAP net (loss) income to Adjusted EBITDA, a non-GAAP financial measure
($ In thousands)
(unaudited)
Adjusted EBITDA
EBITDA represents U.S. GAAP net (loss) income for the respective period excluding interest expense, income taxes and depreciation and amortization expense. The Company defines adjusted EBITDA, as EBITDA excluding equity in (loss) income of affiliated companies, and identified items impacting comparability for each respective period. For the three and six months ended December 31, 2012, the items impacting comparability consisted of $1.1 and $1.1 million, respectively, of pre-tax benefit associated with our self-insurance adjustments for prior year reserves, $1.0 and $1.0 million, respectively, of pre-tax expense associated with senior management restructuring and $3.9 and $7.6 million, respectively, of after-tax income from discontinued operations. For the six months ended December 31, 2012 the items impacting comparability consisted of $0.3 million of income associated with the recovery of bad debt on the Pure Beauty note receivable, $33.8 million of net pre-tax income associated with the recognition in earnings of amounts previously classified within AOCI that were related to the liquidation of foreign entities denominated in the Euro. The impact of the income tax provision adjustments associated with the above items are already included in the U.S. GAAP reported net (loss) income to EBITDA reconciliation, therefore there is no adjustment needed for the reconciliation from EBITDA to operational EBITDA. The impact of the net $17.9 and $2.0 million impairments of Empire Education Group and Provalliance, respectively, is already included by excluding the impact of the Company’s equity in (loss) income of affiliated companies, net of taxes, as reported. For the three and six months ended December 31, 2011, the items impacting comparability consisted $0.7 and $2.3 million, respectively, of pre-tax expense associated with senior management restructuring, $1.1 and $2.2 million, respectively, of pre-tax expense associated with the fiscal year 2011 contested proxy, $1.1 million, for both periods, of income associated with legal settlements and $69.3 and $66.6 million of after-tax loss from discontinued operations. The impact of the $6.3 and $15.0 million, respectively, accelerated depreciation expense associated with the point-of-sale system and income tax provision adjustments associated with the above items are already included in the U.S. GAAP reported net (loss) income to EBITDA reconciliation, therefore there are no adjustments needed for the reconciliation from EBITDA to adjusted EBITDA.
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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.
Self-insurance reserves adjustments – We have excluded the self-insurance reserves adjustments associated with our prior year reserves from our non-GAAP results. During the twelve months ended June 30, 2012, we incurred expense of $0.9 million. During the twelve months ended June 30, 2011, we incurred expense of $1.2 million.
Sales and use tax audit accrual adjustment – We have excluded a sales and use tax audit accrual adjustment from our non-GAAP results. During the twelve months ended June 30, 2011, we recorded a benefit of $1.7 million.
Senior management restructure and severance charges – We have excluded expense associated with senior management restructuring and other related severance charges from our non-GAAP results. During the twelve months ended June 30, 2012 and 2011, we incurred expense of $9.8 and $4.3 million, respectively, associated with senior management restructuring and other severance charges.
Professional fees – We have excluded expenses associated with our fiscal year 2011 contested proxy from our non-GAAP results. During the twelve months ended June 30, 2012, we incurred $2.4 million of expense for advisory fees and other costs associated with the fiscal year 2011 contested proxy.
Field restructure and other – We have excluded expenses associated with other one-time field restructuring charges from our non-GAAP results. During the twelve months ended June 30, 2012, we incurred expense of $2.8 million associated with our field restructuring.
Deferred compensation – We have excluded expense associated with amending our deferred compensation plan from our non-GAAP results. During the twelve months ended June 30, 2012, we incurred expense of $1.8 million associated with amending our deferred compensation plan such that the benefits are based on years of service and the employees’ compensation as of June 30, 2012.
Pure Beauty note receivable (recovery) reserve – We have excluded the bad debt recovery and valuation reserve associated with the outstanding note receivable with Pure Beauty from our non-GAAP results. During the twelve months ended June 30, 2012, we recorded $0.8 million for the recovery of bad debt previously recorded on the outstanding note receivable with Pure Beauty. We recorded valuation reserves of $31.2 million during the twelve months ended June 30, 2011.
Legal settlements – We have excluded income and expense associated with legal settlements from our non-GAAP results. During the twelve months ended June 30, 2012 we recorded income of $1.1 million associated with a legal settlement. During the twelve months ended June 30, 2011, we incurred expense of $2.4 million associated with a legal settlement.
Strategic alternative costs – We have excluded the fees associated with our exploration of strategic alternatives during fiscal year 2011 from our non-GAAP results. During the twelve months ended June 30, 2011, we incurred $1.3 million 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 twelve months ended June 30, 2012, we recorded $16.1 million in accelerated depreciation related to our point-of-sale system.
Goodwill impairment – We have excluded the goodwill impairment charges we recorded related our Regis salon concept and our Promenade salon concept from our non-GAAP results. The Company recorded goodwill impairment charges of $67.7 million related to our Regis salon concept during the twelve months ended June 30, 2012. The Company recorded a goodwill impairment charge of $74.1 million related to our Promenade salon concept during the twelve months ended June 30, 2011.
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.
Empire Education Group (EEG”) impairment and non-operational charges recorded by EEG– We have excluded the impairment recorded on our investment in EEG and non-operational charges recorded by EEG from our non-GAAP results. The Company recorded an other than temporary impairment charge of approximately $19.4 million during the twelve months ended June 30, 2012 as a result of a decrease in the fair value of the Company’s investment in EEG. In addition, the Company recorded an additional $8.7 million of expense primarily related to non-operational charges recorded by EEG for intangible asset impairments.
Provalliance impairment, equity put liability, and non-operational charges recorded by Provalliance – We have excluded the impairment recorded on our investment in Provalliance, partially offset by the gain recorded for the reduction in the fair value of the equity put option associated with our Provalliance equity method investment and non-operational charges recorded by Provalliance from our non-GAAP results. The Company recorded an other than temporary impairment charge of approximately $37.4 million during the twelve months ended June 30, 2012, as a result of the Company entering into an agreement to sell its 46.7 percent interest in Provalliance for EUR 80 million. As a result of the expected sale, the Company recorded a gain of approximately $20.2 million during the twelve months ended June 30, 2012 for the decrease in the fair value of the equity put option associated with the Provalliance. In addition, the Company recorded an additional $0.8 million of expense primarily related to non-operational charges recorded by Provalliance. The Company recorded a gain of approximately $3.6 million during the twelve months ended June 30, 2011 for the settlement of a portion of an equity put option associated with our Provalliance equity method investment from our non-GAAP results.
MY Style impairment – We have excluded the impairment recorded for our investment in MY Style from our non-GAAP results. Due to the natural disasters in Japan that occurred in March 2011, we recorded an other than temporary impairment for our investment in MY Style of $9.2 million during the twelve months ended June 30, 2011.
Discontinued Operations – We have excluded the operations of our Hair Restoration Centers operations and a tax benefit for the release of income tax reserves related to our previous ownership in Trade Secret, Inc. operations from our non-GAAP results. The Company recorded (loss) income of approximately ($62.4) and $12.0 million during the twelve months ended June 30, 2012 and 2011, respectively.
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REGIS CORPORATION
Reconciliation of reported U.S. GAAP net loss to Adjusted EBITDA, a non-GAAP financial measure
($ In thousands)
(unaudited)
Adjusted EBITDA
EBITDA represents U.S. GAAP net loss for the respective period excluding interest expense, income taxes and depreciation and amortization expense. The Company defines adjusted EBITDA, as EBITDA excluding equity in (loss) income of affiliated companies, and identified items impacting comparability for each respective period. For the twelve months ended June 30, 2012, the items impacting comparability consisted of $9.8 million of pre-tax expense associated with senior management restructuring and severance charges, $2.4 million of pre-tax professional fees expense associated our fiscal year 2011 contested proxy, $2.8 million of pre-tax expense associated our field restructuring, $1.8 million pre-tax expense associated with amending our deferred compensation contracts, $0.9 million of pre-tax expense associated with prior year’s self-insurance reserves adjustments, $67.7 million goodwill impairment charges related to our Regis salon concept, $0.8 million of income associated with the recovery of bad debt on the Pure Beauty note receivable, $1.1 million of income associated with a legal settlement, and $62.4 million after-tax loss for discontinued operations. The impact of the income tax provision adjustments associated with the above items and the $16.1 million of accelerated depreciation related to our point-of-sale system are already included in the U.S. GAAP reported net loss income to EBITDA reconciliation, therefore there is no adjustment needed for the reconciliation from EBITDA to operational EBITDA. The impact of the $28.2 million impairment and non-operational charges recorded by EEG and the net $17.9 million Provalliance impairment is already included by excluding the impact of the Company’s equity in (loss) income of affiliated companies, net of taxes, as reported. For the twelve months ended June 30, 2011, the items impacting comparability consisted $4.3 million of pre-tax expense associated with senior management restructuring and severance charges, $1.2 million of million of pre-tax expense associated with prior year’s self-insurance reserves adjustments, $31.2 million of pre-tax expense associated with the Pure Beauty note receivable reserve, $2.4 million of pre-tax expense associated with a legal settlement, $74.1 million goodwill impairment charge related to our Promenade salon concept, $1.7 million benefit for a sales and use tax audit accrual adjustment, $1.3 million of expense associated with our exploration of strategic alternative and $12.0 million after-tax income for discontinued operations. The impact of the income tax provision adjustments associated with the above items 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. The impact of the $9.2 million MY Style impairment and $3.6 million gain for the settlement of a portion of the Provalliance equity put is already included by excluding the impact of the Company’s equity in (loss) income of affiliated companies, net of taxes, as reported.
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Mark Fosland – SVP
Finance and Investor Relations
952-806-1707
Andy Larew – Director
Finance-Investor Relations,
952-806-1425
Regis Corporation is the beauty industry's global leader in beauty salons, hair restoration centers and cosmetology education.