REGIS CORPORATION (NYSE: RGS) CONSOLIDATED BALANCE SHEET (Unaudited) (Dollars in thousands, except per share data) |
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June 30, | ||||||
2013 | 2012 | |||||
ASSETS | ||||||
Current assets: | ||||||
Cash and cash equivalents | $ | 200,488 | $ | 111,943 | ||
Receivables, net | 33,062 | 28,954 | ||||
Inventories | 139,607 | 142,276 | ||||
Deferred income taxes | 24,145 | 14,503 | ||||
Income tax receivable | 33,346 | 14,098 | ||||
Other current assets | 57,898 | 55,903 | ||||
Current assets held for sale | — | 17,000 | ||||
Total current assets | 488,546 | 384,677 | ||||
Property and equipment, net | 313,460 | 305,799 | ||||
Goodwill | 460,885 | 462,279 | ||||
Other intangibles, net | 21,496 | 23,395 | ||||
Investment in and loans to affiliates | 43,319 | 160,987 | ||||
Other assets | 62,786 | 59,488 | ||||
Long-term assets held for sale | — | 175,221 | ||||
Total assets | $ | 1,390,492 | $ | 1,571,846 | ||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||
Current liabilities: | ||||||
Long-term debt, current portion | $ | 173,515 | $ | 28,937 | ||
Accounts payable | 66,071 | 47,890 | ||||
Accrued expenses | 137,226 | 157,026 | ||||
Current liabilities related to assets held for sale | — | 18,120 | ||||
Total current liabilities | 376,812 | 251,973 | ||||
Long-term debt and capital lease obligations | 1,255 | 258,737 | ||||
Other noncurrent liabilities | 155,011 | 143,972 | ||||
Long-term liabilities related to assets held for sale | — | 28,007 | ||||
Total liabilities | 533,078 | 682,689 | ||||
Shareholders’ equity: | ||||||
Common stock, $0.05 par value; issued and outstanding 56,630,926 and 57,415,241 common shares at June 30, 2013 and 2012, respectively | 2,832 | 2,871 | ||||
Additional paid-in capital | 334,266 | 346,943 | ||||
Accumulated other comprehensive income | 20,556 | 55,114 | ||||
Retained earnings | 499,760 | 484,229 | ||||
Total shareholders’ equity | 857,414 | 889,157 | ||||
Total liabilities and shareholders’ equity | $ | 1,390,492 | $ | 1,571,846 | ||
REGIS CORPORATION (NYSE: RGS) CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited) (Dollars and shares in thousands, except per share data amounts) |
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Three Months Ended
June 30, |
Twelve Months Ended
June 30, |
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2013 | 2012 | 2013 | 2012 | ||||||||||
Revenues: | |||||||||||||
Service | $ | 390,039 | $ | 411,876 | $ | 1,563,890 | $ | 1,643,891 | |||||
Product | 101,965 | 107,222 | 415,707 | 440,048 | |||||||||
Royalties and fees | 10,247 | 9,744 | 39,116 | 38,288 | |||||||||
502,251 | 528,842 | 2,018,713 | 2,122,227 | ||||||||||
Operating expenses: | |||||||||||||
Cost of service | 229,573 | 235,201 | 930,687 | 941,671 | |||||||||
Cost of product | 67,105 | 54,741 | 228,577 | 221,635 | |||||||||
Site operating expenses | 47,956 | 49,971 | 203,912 | 207,031 | |||||||||
General and administrative | 58,273 | 60,866 | 226,740 | 249,634 | |||||||||
Rent | 81,901 | 84,174 | 324,716 | 331,769 | |||||||||
Depreciation and amortization | 26,421 | 22,262 | 91,755 | 104,970 | |||||||||
Goodwill impairment | — | 67,684 | — | 67,684 | |||||||||
Total operating expenses | 511,229 | 574,899 | 2,006,387 | 2,124,394 | |||||||||
Operating (loss) income | (8,978 | ) | (46,057 | ) | 12,326 | (2,167 | ) | ||||||
Other income (expense): | |||||||||||||
Interest expense | (17,760 | ) | (6,892 | ) | (37,594 | ) | (28,245 | ) | |||||
Interest income and other, net | 215 | 1,008 | 35,366 | 5,098 | |||||||||
(Loss) income from continuing operations before income taxes and equity in income (loss) of affiliated companies | (26,523 | ) | (51,941 | ) | 10,098 | (25,314 | ) | ||||||
Income taxes | 11,245 | 11,128 | 10,024 | 4,430 | |||||||||
Equity in income (loss) of affiliated companies, net of income taxes | 20 | (24,574 | ) | (15,956 | ) | (30,859 | ) | ||||||
(Loss) income from continuing operations | (15,258 | ) | (65,387 | ) | 4,166 | (51,743 | ) | ||||||
Income (loss) from discontinued operations, net of taxes | 15,933 | 1,753 | 25,028 | (62,350 | ) | ||||||||
Net income (loss) | $ | 675 | $ | (63,634 | ) | $ | 29,194 | $ | (114,093 | ) | |||
Net income (loss) per share: | |||||||||||||
Basic: | |||||||||||||
(Loss) income from continuing operations | (0.27 | ) | (1.14 | ) | 0.07 | (0.91 | ) | ||||||
Income (loss) from discontinued operations | 0.28 | 0.03 | 0.44 | (1.09 | ) | ||||||||
Net income (loss) per share, basic | $ | 0.01 | $ | (1.11 | ) | $ | 0.51 | $ | (2.00 | ) | |||
Diluted: | |||||||||||||
(Loss) income from continuing operations | (0.27 | ) | (1.14 | ) | 0.07 | (0.91 | ) | ||||||
Income (loss) from discontinued operations | 0.28 | 0.03 | 0.44 | (1.09 | ) | ||||||||
Net income (loss) per share, diluted | $ | 0.01 | $ | (1.11 | ) | $ | 0.51 | $ | (2.00 | ) | |||
Weighted average common and common equivalent shares outstanding: | |||||||||||||
Basic | 56,360 | 57,229 | 56,704 | 57,137 | |||||||||
Diluted | 56,360 | 57,229 | 56,846 | 57,137 | |||||||||
Cash dividends declared per common share | $ | 0.06 | $ | 0.06 | $ | 0.24 | $ | 0.24 | |||||
REGIS CORPORATION (NYSE: RGS) CONSOLIDATED STATEMENT OF COMPREHENSIVE (LOSS) INCOME (Unaudited) (Dollars in thousands) |
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Three Months Ended
June 30, |
Twelve Months Ended
June 30, |
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2013 | 2012 | 2013 | 2012 | ||||||||||||
Net income (loss): | $ | 675 | $ | (63,634 | ) | $ | 29,194 | $ | (114,093 | ) | |||||
Other comprehensive (loss) income, net of tax: | |||||||||||||||
Foreign currency translation adjustments: | |||||||||||||||
Foreign currency translation adjustments during the period | (1,950 | ) | (8,579 | ) | (1,349 | ) | (24,254 | ) | |||||||
Reclassification adjustments for gains included in net income (loss) | — | — | (33,842 | ) | — | ||||||||||
Net current period foreign currency translation adjustments | (1,950 | ) | (8,579 | ) | (35,191 | ) | (24,254 | ) | |||||||
Recognition of deferred compensation and other | 656 | 1,029 | 656 | 1,029 | |||||||||||
Change in fair market value of financial instruments designated as cash flow hedges | — | 52 | (23 | ) | 393 | ||||||||||
Other comprehensive loss: | (1,294 | ) | (7,498 | ) | (34,558 | ) | (22,832 | ) | |||||||
Comprehensive loss: | $ | (619 | ) | $ | (71,132 | ) | $ | (5,364 | ) | $ | (136,925 | ) | |||
REGIS CORPORATION (NYSE: RGS) CONSOLIDATED STATEMENT OF CASH FLOW (Unaudited) (Dollars in thousands) |
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|
Twelve Months Ended June 30, | ||||||
2013 | 2012 | ||||||
Cash flows from operating activities: | |||||||
Net income (loss) | $ | 29,194 | $ | (114,093 | ) | ||
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | |||||||
Depreciation and amortization | 84,018 | 111,435 | |||||
Equity in loss of affiliated companies | 15,328 | 30,043 | |||||
Dividends received from affiliated companies | 1,095 | 4,047 | |||||
Deferred income taxes | 10,322 | (14,171 | ) | ||||
Accumulated other comprehensive income reclassification adjustments | (33,842 | ) | — | ||||
Gain resulting from sale of discontinued operations | (17,827 | ) | — | ||||
Loss on write down of inventories | 12,557 | — | |||||
Goodwill impairment | — | 146,110 | |||||
Salon asset impairments | 8,224 | 6,636 | |||||
Note receivable bad debt recovery | (333 | ) | (805 | ) | |||
Stock-based compensation | 5,881 | 7,597 | |||||
Amortization of debt discount and financing costs | 7,346 | 6,696 | |||||
Other noncash items affecting earnings | 394 | 31 | |||||
Changes in operating assets and liabilities(1): | |||||||
Receivables | (4,332 | ) | (4,502 | ) | |||
Inventories | (10,745 | ) | 2,644 | ||||
Income tax receivable | (23,421 | ) | 2,809 | ||||
Other current assets | (8,064 | ) | (5,272 | ) | |||
Other assets | 239 | (841 | ) | ||||
Accounts payable | 19,086 | (4,856 | ) | ||||
Accrued expenses | (26,431 | ) | (8,657 | ) | |||
Other noncurrent liabilities | 459 | (11,151 | ) | ||||
Net cash provided by operating activities | 69,148 | 153,700 | |||||
Cash flows from investing activities: | |||||||
Capital expenditures | (105,857 | ) | (85,769 | ) | |||
Proceeds from sale of assets | 163,916 | 502 | |||||
Asset acquisitions, net of cash acquired | — | (2,587 | ) | ||||
Proceeds from loans and investments | 131,581 | 11,995 | |||||
Disbursements for loans and investments | — | (15,000 | ) | ||||
Change in restricted cash | (24,500 | ) | — | ||||
Net cash provided by (used in) investing activities | 165,140 | (90,859 | ) | ||||
Cash flows from financing activities: | |||||||
Borrowings on revolving credit facilities | 5,200 | 471,500 | |||||
Payments on revolving credit facilities | (5,200 | ) | (471,500 | ) | |||
Repayments of long-term debt and capital lease obligations | (118,223 | ) | (29,693 | ) | |||
Repurchase of common stock | (14,868 | ) | — | ||||
Dividends paid | (13,708 | ) | (13,855 | ) | |||
Net cash used in financing activities | (146,799 | ) | (43,548 | ) | |||
Effect of exchange rate changes on cash and cash equivalents | 1,056 | (3,613 | ) | ||||
Increase in cash and cash equivalents | 88,545 | 15,680 | |||||
Cash and cash equivalents: | |||||||
Beginning of period | 111,943 | 96,263 | |||||
End of period | $ | 200,488 | $ | 111,943 |
(1) | Changes in operating assets and liabilities exclude assets acquired and liabilities assumed through acquisitions. |
SAME-STORE SALES (1): |
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For the Three Months Ended | |||||||||||||
June 30, 2013 | June 30, 2012 | ||||||||||||
Service | Product | Total | Service | Product | Total | ||||||||
SmartStyle | 0.6 | % | (4.4 | )% | (1.1 | )% | (6.3 | )% | (1.2 | )% | (4.6 | )% | |
Supercuts | (4.9 | ) | (4.0 | ) | (4.8 | ) | 0.5 | 0.4 | 0.5 | ||||
MasterCuts | (7.5 | ) | (5.6 | ) | (7.1 | ) | (4.9 | ) | 2.9 | (3.5 | ) | ||
Regis Salons | (3.0 | ) | (2.4 | ) | (2.9 | ) | (6.4 | ) | 1.3 | (5.1 | ) | ||
Promenade | (4.3 | ) | 4.0 | (3.5 | ) | (2.6 | ) | (3.0 | ) | (2.7 | ) | ||
North America Same-Store Sales | (3.3 | )% | (2.8 | )% | (3.2 | )% | (4.0 | )% | (0.5 | )% | (3.3 | )% | |
International Same-Store Sales | 1.1 | % | (8.4 | )% | (1.7 | )% | (5.2 | )% | (10.0 | )% | (6.6 | )% | |
Consolidated Same-Store Sales | (3.1 | )% | (3.3 | )% | (3.1 | )% | (4.0 | )% | (1.4 | )% | (3.5 | )% | |
For the Twelve Months Ended | |||||||||||||
June 30, 2013 | June 30, 2012 | ||||||||||||
Service | Product | Total | Service | Product | Total | ||||||||
SmartStyle | (0.1 | )% | (3.1 | )% | (1.1 | )% | (5.0 | )% | (3.1 | )% | (4.3 | )% | |
Supercuts | (0.5 | ) | (2.4 | ) | (0.7 | ) | (0.2 | ) | (1.2 | ) | (0.3 | ) | |
MasterCuts | (4.8 | ) | (6.0 | ) | (5.1 | ) | (4.6 | ) | 2.3 | (3.3 | ) | ||
Regis Salons | (3.1 | ) | (3.0 | ) | (3.1 | ) | (5.4 | ) | 1.8 | (4.2 | ) | ||
Promenade | (2.9 | ) | (2.4 | ) | (2.8 | ) | (2.7 | ) | (3.2 | ) | (2.7 | ) | |
North America Same-Store Sales | (2.0 | )% | (3.2 | )% | (2.3 | )% | (3.6 | )% | (1.5 | )% | (3.2 | )% | |
International Same-Store Sales | (1.0 | )% | (11.4 | )% | (4.3 | )% | (6.7 | )% | (13.5 | )% | (9.1 | )% | |
Consolidated Same-Store Sales | (2.0 | )% | (3.9 | )% | (2.4 | )% | (3.7 | )% | (2.7 | )% | (3.5 | )% |
(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 same-store sales are the sum of the same-store sales computed on a daily basis. Locations relocated within a one mile radius are included in same-store sales as they are considered to have been open in the prior period. International same-store sales are calculated in local currencies to remove foreign currency fluctuations from the calculation. |
REGIS CORPORATION (NYSE: RGS) System-wide location counts |
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COMPANY-OWNED SALONS: | June 30,
2013 |
June 30,
2012 |
||
SmartStyle/Cost Cutters in Walmart Stores | 2,490 | 2,441 | ||
Supercuts | 1,210 | 1,228 | ||
MasterCuts | 532 | 569 | ||
Regis salons | 862 | 953 | ||
Promenade | 1,990 | 2,133 | ||
Total North American Salons | 7,084 | 7,324 | ||
Total International Salons (1) | 351 | 398 | ||
Total, Company-owned salons | 7,435 | 7,722 | ||
FRANCHISE SALONS: | ||||
SmartStyle/Cost Cutters in Walmart Stores | 123 | 122 | ||
Supercuts | 1,116 | 1,040 | ||
Promenade | 843 | 854 | ||
Total North American Salons | 2,082 | 2,016 | ||
Total International Salons (1) | — | — | ||
Total, Franchise salons | 2,082 | 2,016 | ||
HAIR RESTORATION CENTERS (2): | ||||
Company-owned hair restoration centers | — | 69 | ||
Franchise hair restoration centers | — | 29 | ||
OWNERSHIP INTEREST LOCATIONS: | ||||
Equity ownership interest locations (3) | 246 | 2,811 | ||
Grand Total, System-wide | 9,763 | 12,647 |
(1) | Canadian and Puerto Rican salons are included in the North American salon totals. |
(2) | On April 9, 2013 the Company sold its 71 company-owned hair restoration centers and 29 franchise hair restoration centers. The Hair Restoration Centers results of operations are reported as discontinued operations for all periods presented. |
(3) | On September 27, 2012, the Company sold its equity interest in Provalliance. |
Non-GAAP Reconciliations
We believe our presentation of non-GAAP operating income, net income, net income per diluted share, and other non-GAAP financial measures provides meaningful insight into our ongoing operating performance and an alternative perspective of our results of operations. Presentation of the non-GAAP measures allows investors to review our core ongoing operating performance from the same perspective as management and the Board of Directors. These non-GAAP financial measures provide investors an enhanced understanding of our operations, facilitate investors’ analyses and comparisons of our current and past results of operations and provide insight into the prospects of our future performance. We also believe 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 twelve months ended June 30, 2013 and 2012:
The following information is provided to give qualitative and quantitative information related to items impacting comparability. Items impacting comparability are not defined terms within U.S. GAAP. Therefore, our non-GAAP financial information may not be comparable to similarly titled measures reported by other companies. We determine which items to consider as “items impacting comparability” based on how management views our business, makes financial, operating and planning decisions and evaluates the Company’s ongoing performance. The following items have been excluded from our non-GAAP results:
- Inventory reserves attributed to our inventory simplification program.
- Self-insurance reserves adjustments associated with our prior year reserves.
- Expenses associated with senior management and field restructuring charges.
- Bad debt expense and recovery associated with the outstanding note receivable with Pure Beauty.
- Advisory fees and other costs associated with the fiscal year 2011 contested proxy.
- Accelerated depreciation we recorded related to our corporate office consolidation and point-of-sale system.
- Expense and income associated with legal cases and settlements.
- Expense associated with make-whole payments and other fees associated with the prepayment of debt.
- 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.
- Impairment recorded on our investment in Empire Education Group and intangible asset impairment recorded by Empire Education Group.
- Other than temporary impairment recorded on our investment in Provalliance, partially offset by a gain recorded for the reduction in the fair value of the equity put option associated with our investment in Provalliance, and discrete charges recorded by Provalliance.
- Operations of our Hair Restoration Centers and professional fees associated with the disposition of our Hair Restoration Centers on April 9, 2013.
- Goodwill impairment charges related to our Regis salon concept.
- Tax benefits associated with prior year Work Opportunity Tax Credits, a cumulative translation adjustment and the release of income tax reserves related to our previous ownership in Trade Secret, Inc.
The non-GAAP tax provision adjustments related to the amounts excluded from our non-GAAP results 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. 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 include the dilutive effect of common stock and convertible share equivalents.
REGIS CORPORATION Reconciliation of selected U.S. GAAP to non-GAAP financial measures (Dollars in thousands, except per share data) (unaudited) |
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Reconciliation of U.S. GAAP operating (loss) income and net income (loss) to equivalent non-GAAP measures | |||||||||||||||
Three Months Ended
June 30, |
Twelve Months Ended June 30, |
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U.S. GAAP financial line item | 2013 | 2012 |
|
2013 | 2012 | ||||||||||
U.S. GAAP revenue | $ | 502,251 | $ | 528,842 | $ | 2,018,713 | $ | 2,122,227 | |||||||
U.S. GAAP operating (loss) income | $ | (8,978 | ) | $ | (46,057 | ) | $ | 12,326 | $ | (2,167 | ) | ||||
Non-GAAP operating expense adjustments: | |||||||||||||||
Inventory reserve | Cost of product | 12,557 | — | 12,557 | — | ||||||||||
Self-insurance reserves adjustments | Site operating expense | — | 840 | (1,127 | ) | 840 | |||||||||
Restructuring costs | General and administrative | 5,556 | 6,481 | 7,407 | 14,425 | ||||||||||
Legal fees | General and administrative | 1,244 | — | 1,244 | — | ||||||||||
Costs associated with contested proxy | General and administrative | — | 188 | — | 2,413 | ||||||||||
Self-insurance reserves adjustments | General and administrative | — | 22 | 5 | 22 | ||||||||||
Pure Beauty note receivable recovery | General and administrative | — | (805 | ) | (333 | ) | (805 | ) | |||||||
Corporate office consolidation accelerated depreciation | Depreciation and amortization | 1,119 | — | 1,865 | — | ||||||||||
Point-of-sale accelerated depreciation | Depreciation and amortization | — | — | — | 16,149 | ||||||||||
Goodwill impairment | Goodwill impairment | — | 67,684 | — | 67,684 | ||||||||||
Total non-GAAP operating expense adjustments | 20,476 | 74,410 | 21,618 | 100,728 | |||||||||||
Non-GAAP operating income (1) | $ | 11,498 | $ | 28,353 | $ | 33,944 | $ | 98,561 | |||||||
U.S. GAAP net income (loss) | $ | 675 | $ | (63,634 | ) | $ | 29,194 | $ | (114,093 | ) | |||||
Non-GAAP net income adjustments: | |||||||||||||||
Non-GAAP operating expense adjustments | 20,476 | 74,410 | 21,618 | 100,728 | |||||||||||
Make-whole and other fees associated with debt prepayment | Interest expense | 10,607 | — | 10,607 |
- |
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Legal settlement | Interest income and other, net | — | — | — | (1,098 | ) | |||||||||
AOCI adjustments | Interest income and other, net | — | — | (33,842 | ) | — | |||||||||
Tax provision adjustments (2) | Income taxes | (12,375 | ) | (14,986 | ) | (12,335 | ) | (24,259 | ) | ||||||
Empire Education Group impairment | Equity in income (loss) of affiliated companies, net of tax | — | 28,157 | 17,899 | 28,157 | ||||||||||
Provalliance impairment, equity put liability adjustment and discrete charges recorded by Provalliance | Equity in income (loss) of affiliated companies, net of tax | — | 338 | 2,048 | 17,927 | ||||||||||
Hair Restoration Center discontinued operations | Income (loss) from discontinued operations, net of taxes | (15,933 | ) | (1,753 | ) | (25,028 | ) | 63,449 | |||||||
Release of income tax reserve related to discontinued operations | Income (loss) from discontinued operations, net of taxes | — | — | — | (1,099 | ) | |||||||||
Total non-GAAP net income adjustments | 2,775 | 86,166 | (19,033 | ) | 183,805 | ||||||||||
Non-GAAP net income | $ | 3,450 | $ | 22,532 | $ | 10,161 | $ | 69,712 |
Notes: |
|
(1) |
Adjusted operating margins for the three and twelve months ended June 30, 2013, were 2.3% and 1.7%, respectively, and are calculated as non-GAAP operating income divided by U.S. GAAP revenue for each respective period. Adjusted operating margins for the three and twelve months ended June 30, 2012, were 5.4% and 4.6%, respectively, and are calculated as non-GAAP operating income divided by U.S. GAAP revenue for each respective period. |
(2) |
Based on a projected statutory effective tax rate analysis, the non-GAAP tax provision was calculated to be approximately 38% for the three and twelve months ended June 30, 2013 for all non-GAAP operating expense adjustments, except the AOCI adjustments during the twelve months ended June 30, 2013. The AOCI adjustments are primarily non-taxable. For the three months ended June 30, 2013, the tax provision adjustment includes a $0.6 million benefit related to the AOCI adjustments recognized during the first quarter of fiscal year 2013. For the twelve months ended June 30, 2013, the tax provision adjustment also includes the exclusion of a $1.2 million benefit for prior year Work Opportunity Tax Credits. Based on a year-to-date tax rate analysis, the non-GAAP tax provision was calculated to be approximately 37% for the three and twelve months ended June 30, 2012 for all non-GAAP operating expense adjustments, except the goodwill impairment. The goodwill impairment had a tax benefit of approximately $12.5 million for the three and twelve months ended June 30, 2012, as the charge is only partially deductible for income tax purposes. |
REGIS CORPORATION Reconciliation of selected U.S. GAAP to non-GAAP financial measures (Dollars and shares in thousands, except per share data) (unaudited) |
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Reconciliation of U.S. GAAP net income (loss) per diluted share to non-GAAP net income per diluted share | |||||||||||||
Three Months Ended June 30, |
Twelve Months Ended June 30, |
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2013 | 2012 (2) | 2013 | 2012 (2) | ||||||||||
U.S. GAAP net income (loss) per diluted share | $ | 0.012 | $ | (1.112 | ) | $ | 0.514 | $ | (1.997 | ) | |||
Inventory reserve (1) | 0.136 | — | 0.136 | — | |||||||||
Self-insurance reserves adjustments (1) | — | 0.008 | (0.012 | ) | 0.008 | ||||||||
Restructuring costs (1) | 0.061 | 0.060 | 0.081 | 0.133 | |||||||||
Legal fees (settlements) (1) | 0.014 | — | 0.014 | (0.010 | ) | ||||||||
Costs associated with contested proxy (1) | — | 0.002 | — | 0.022 | |||||||||
Pure Beauty note receivable recovery (1) | — | (0.007 | ) | (0.004 | ) | (0.007 | ) | ||||||
Corporate office consolidation accelerated depreciation (1) | 0.012 | — | 0.020 | — | |||||||||
Point-of-sale accelerated depreciation (1) | — | — | — | 0.149 | |||||||||
Goodwill impairment (1) | — | 0.805 | — | 0.805 | |||||||||
Make-whole and other fees associated with debt prepayment (1) | 0.118 | — | 0.118 | — | |||||||||
AOCI adjustments (1) | (0.011 | ) | — | (0.577 | ) | — | |||||||
Work Opportunity Tax Credits | — | — | (0.021 | ) | — | ||||||||
Empire Education Group impairment (1) | — | 0.411 | 0.315 | 0.411 | |||||||||
Provalliance impairment, equity put liability adjustment, and discrete charges recorded by Provalliance (1) | — | 0.005 | 0.036 | 0.262 | |||||||||
Hair Restoration Center discontinued operations | (0.282 | ) | (0.026 | ) | (0.440 | ) | 0.926 | ||||||
Release of income tax reserve related to discontinued operations | — | — | — | (0.016 | ) | ||||||||
Dilutive effect under if-converted method (2) (3) | — | 0.213 | — | 0.453 | |||||||||
Non-GAAP net income per diluted share (2) (3) (4) | $ | 0.061 | $ | 0.359 | $ | 0.179 | $ | 1.139 | |||||
U.S. GAAP Weighted average shares - basic | 56,360 | 57,229 | 56,704 | 57,137 | |||||||||
U.S. GAAP Weighted average shares - diluted | 56,360 | 57,229 | 56,846 | 57,137 | |||||||||
Non-GAAP Weighted average shares - diluted (2) | 56,505 | 68,562 | 56,846 | 68,528 |
Notes: |
|
(1) |
Based on a projected statutory effective tax rate analysis, the non-GAAP tax provision was calculated to be approximately 38% for the three and twelve months ended June 30, 2013 for all non-GAAP operating expense adjustments, except the AOCI adjustments during the twelve months ended June 30, 2013. The AOCI adjustments are primarily non-taxable. Based on a year-to-date tax rate analysis, the non-GAAP tax provision was calculated to be approximately 37% for the three and twelve months ended June 30, 2012 for all non-GAAP operating expense adjustments, except the goodwill impairment. The goodwill impairment had a tax benefit of approximately $12.5 million for the three and twelve months ended June 30, 2012, as the charge is only partially deductible for income tax purposes. |
(2) |
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 months ended June 30, 2012 included additional shares for common stock equivalents of 0.1 million and 11.2 million of convertible shares under the if-converted method. The earnings per share impact of the adjustments for the twelve months ended June 30, 2012 included additional shares for common stock equivalents of 0.2 million and convertible share equivalents of 11.2 million 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. |
(3) |
For the three and twelve months ended June 30, 2012 non-GAAP net income per diluted share, has been calculated under the if-converted method. For the three and twelve months ended June 30, 2012, $2.1 and $8.3 million 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) |
Total is a recalculation; line items calculated individually may not sum to total due to rounding. |
Summary of Pre-Tax, Income Taxes, and Net Income Impact for Q4 FY13 Discrete Items |
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Pre-Tax | Income Taxes | Net Income | ||||||||
Inventory reserve | $ | 12,557 | $ | (4,853 | ) | $ | 7,704 | |||
Restructuring costs | 5,556 | (2,083 | ) | 3,473 | ||||||
Legal fees | 1,244 | (466 | ) | 778 | ||||||
Corporate office consolidation accelerated depreciation | 1,119 | (420 | ) | 699 | ||||||
Make-whole and other fees associated with debt prepayment | 10,607 | (3,925 | ) | 6,682 | ||||||
AOCI adjustments | — | (628 | ) | (628 | ) | |||||
Hair Restoration Center discontinued operations | (14,538 | ) | (1,395 | ) | (15,933 | ) | ||||
Total | $ | 16,545 | $ | (13,770 | ) | $ | 2,775 | |||
REGIS CORPORATION |
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 income (loss) of affiliated companies, and identified items impacting comparability for each respective period. For the three and twelve months ended June 30, 2013 and 2012, 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, the make-whole payments related to the prepayment of debt and the accelerated depreciation related to Corporate office consolidation and our point-of-sale system 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 operational EBITDA. The impact of the impairment EEG and the net Provalliance impairment and 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 income (loss) of affiliated companies, net of taxes, as reported. |
Three Months Ended June 30, |
Twelve Months Ended June 30, |
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2013 | 2012 | 2013 | 2012 | ||||||||||
Consolidated reported net income (loss), as reported (U.S. GAAP) | $ | 675 | $ | (63,634 | ) | $ | 29,194 | $ | (114,093 | ) | |||
Interest expense, as reported | 17,760 | 6,892 | 37,594 | 28,245 | |||||||||
Income taxes, as reported | (11,245 | ) | (11,128 | ) | (10,024 | ) | (4,430 | ) | |||||
Depreciation and amortization, as reported | 26,421 | 22,262 | 91,755 | 104,970 | |||||||||
EBITDA (as defined above) | $ | 33,611 | $ | (45,608 | ) | $ | 148,519 | $ | 14,692 | ||||
Equity in (income) loss of affiliated companies, net of income taxes, as reported | (20 | ) | 24,575 | 15,956 | 30,859 | ||||||||
Inventory reserve | 12,557 | — | 12,557 | — | |||||||||
Self-insurance reserves adjustments | — | 862 | (1,122 | ) | 862 | ||||||||
Restructuring costs | 5,556 | 6,481 | 7,407 | 14,425 | |||||||||
Legal fees (settlements) | 1,244 | — | 1,244 | (1,098 | ) | ||||||||
Costs associated with contested proxy | — | 188 | — | 2,413 | |||||||||
Pure Beauty note receivable recovery | — | (805 | ) | (333 | ) | (805 | ) | ||||||
Goodwill impairment | — | 67,684 | — | 67,684 | |||||||||
AOCI adjustments | — | — | (33,842 | ) | — | ||||||||
(Income) loss from discontinued operations, net of taxes, as reported | (15,933 | ) | (1,753 | ) | (25,028 | ) | 62,350 | ||||||
Adjusted EBITDA, non-GAAP financial measure | $ | 37,015 | $ | 51,624 | $ | 125,358 | $ | 191,382 | |||||
REGIS CORPORATION Reconciliation of reported U.S. GAAP revenue change to same-store sales (unaudited) |
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Three Months Ended June 30, |
Twelve Months Ended June 30, |
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2013 | 2012 | 2013 | 2012 | ||||||
Revenue decline, as reported (U.S. GAAP) | (5.0 | )% | (4.6 | )% | (4.9 | )% | (2.7 | )% | |
Effect of acquisitions | — | (0.2 | ) | — | (0.7 | ) | |||
Effect of new stores and conversions | (1.1 | ) | (1.6 | ) | (1.3 | ) | (1.3 | ) | |
Effect of closed salons | 3.4 | 2.9 | 3.3 | 2.3 | |||||
Other | (0.4 | ) | — | 0.5 | (1.1 | ) | |||
Same-store sales, non-GAAP | (3.1 | )% | (3.5 | )% | (2.4 | )% | (3.5 | )% |