Minnesota | 1-12725 | 41-0749934 | ||
(State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No) |
EXHIBIT NUMBER | ||
99 | Regis Corporation News Release dated April 30, 2014. |
REGIS CORPORATION | |||
Dated: April 30, 2014 | By: | /s/ Eric Bakken | |
Name: Eric Bakken, Title: Secretary |
EXHIBIT NUMBER | ||
99 | Regis Corporation News Release dated April 30, 2014. |
Exhibit No. 99 | |
![]() | CONTACT: REGIS CORPORATION: Mark Fosland – SVP, Finance and Investor |
Relations, 952-806-1707 |
• | Sales of $471.6 million, a decrease of $33.4 million. Same-store sales declined 5.7%. |
◦ | Same-store service and product sales declined 4.9% and 8.9%, respectively. |
• | GAAP net loss of $(9.5) million or $(0.17) per diluted share; includes $(0.08) per share impact of not recording a tax benefit. |
• | EBITDA, as adjusted, of $26.0 million compared to $26.8 million in the prior year quarter. |
◦ | Same-store sales declines of 5.7% negatively impacted EBITDA, as adjusted, by approximately $11.1 million. |
◦ | Partly offsetting these impacts were approximately $10.3 million mainly from cost savings initiatives, reduced bonuses, improved cost of product, and lower marketing costs net of increased salon labor costs relative to lower sales volumes. |
• | Diluted EPS, as adjusted, was $(0.15) compared to $0.01 in the prior year quarter. |
◦ | Diluted EPS, as adjusted, includes $(0.07) per share impact of not recording a tax benefit. |
◦ | Same-store sales declines of 5.7% reduced Diluted EPS, as adjusted, by $(0.12) per share. |
◦ | Increased depreciation, due primarily to accelerated depreciation in underperforming salons, reduced Diluted EPS, as adjusted, by $(0.07) per share. |
◦ | Partly offsetting these impacts were decreased expenses approximating $0.10 per share, mainly from cost savings initiatives, reduced bonuses, improved cost of product, and lower marketing costs. These were reduced by increased labor costs relative to lower sales volumes and reduced equity earnings in Empire Education Group. |
• | The current quarter includes net discrete expense of $(1.3) million. The prior year quarter includes net discrete after-tax income of $1.7 million. See non-GAAP reconciliations. |
Comparable Profitability Measures (1) | ||||||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||||||
Three Months Ended March 31, | Nine Months Ended March 31, | Fiscal Years Ended June 30, | ||||||||||||||||||||||
2014 | 2013 | 2014 | 2013 | 2013 | 2012 | |||||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||||||
Revenue | $ | 471.6 | $ | 504.9 | $ | 1,408.5 | $ | 1,516.5 | $ | 2,018.7 | $ | 2,122.2 | ||||||||||||
Revenue decline % | (6.6 | ) | (5.8 | ) | (7.1 | ) | (4.8 | ) | (4.9 | ) | (2.7 | ) | ||||||||||||
Same-Store Sales % | (5.7 | ) | (1.4 | ) | (5.8 | ) | (2.1 | ) | (2.4 | ) | (3.5 | ) | ||||||||||||
Same-Store Average Ticket % Change | 1.0 | 1.0 | 1.3 | 0.6 | 0.6 | (0.1 | ) | |||||||||||||||||
Same-Store Guest Count % Change | (6.7 | ) | (2.4 | ) | (7.1 | ) | (2.7 | ) | (3.0 | ) | (3.4 | ) | ||||||||||||
Cost of Service and Product % (2) | 59.0 | 58.1 | 59.1 | 58.0 | 58.6 | 55.8 | ||||||||||||||||||
Cost of Service and Product %, as re-casted (2) (3) | N/A | 59.2 | N/A | 59.1 | 59.6 | 57.0 | ||||||||||||||||||
Cost of Service and Product %, as adjusted (2) | 59.0 | 59.2 | 59.1 | 59.1 | 59.0 | 57.0 | ||||||||||||||||||
Cost of Service % (2) | 61.6 | 59.8 | 61.3 | 59.7 | 59.5 | 57.3 | ||||||||||||||||||
Cost of Service %, as re-casted (2) (3) | N/A | 61.1 | N/A | 61.1 | 60.9 | 58.7 | ||||||||||||||||||
Cost of Product % (2) | 48.9 | 51.6 | 50.4 | 51.5 | 55.0 | 50.4 | ||||||||||||||||||
Cost of Product %, as adjusted (2) | 48.9 | 51.6 | 50.1 | 51.5 | 52.0 | 50.4 | ||||||||||||||||||
Site operating expense as % of total revenues, U.S. GAAP reported | 10.6 | 10.6 | 10.7 | 10.3 | 10.1 | 9.8 | ||||||||||||||||||
Site operating expense as % of total revenues, as re-casted (3) | N/A | 11.1 | N/A | 10.8 | 10.5 | 10.3 | ||||||||||||||||||
Site operating expense as % of total revenues, as adjusted | 10.6 | 11.1 | 10.8 | 10.8 | 10.6 | 10.2 | ||||||||||||||||||
General and administrative as % of total revenues, U.S. GAAP reported | 9.1 | 11.2 | 9.1 | 11.1 | 11.2 | 11.8 | ||||||||||||||||||
General and administrative as % of total revenues, as re-casted (3) | N/A | 9.7 | N/A | 9.6 | 9.8 | 10.2 | ||||||||||||||||||
General and administrative as % of total revenues, as adjusted | 9.0 | 9.5 | 9.1 | 9.5 | 9.4 | 9.4 | ||||||||||||||||||
Operating (loss) income as % of total revenues, U.S. GAAP reported | (0.7 | ) | 0.7 | (2.6 | ) | 1.4 | 0.6 | (0.1 | ) | |||||||||||||||
Operating (loss) income as % of total revenues, as adjusted | (0.5 | ) | 1.0 | (0.1 | ) | 1.5 | 1.7 | 4.6 | ||||||||||||||||
EBITDA | 26.0 | 28.6 | 46.9 | 114.9 | 148.5 | 14.7 | ||||||||||||||||||
EBITDA, as adjusted | 26.0 | 26.8 | 76.0 | 88.3 | 125.4 | 191.4 |
1) | As of September 30, 2012, the Company classified the results of operations of the Hair Restoration Centers segment as discontinued operations. |
2) | Excludes depreciation and amortization. |
3) | During the fourth quarter of fiscal year 2013, the Company reorganized its field organization, excluding salons within the North American Premium segment. Beginning in the first quarter of fiscal year 2014, costs associated with field leaders that were previously recorded within General and Administrative expenses are now reported within Cost of Service and Site Operating expenses. |
• | Deferred tax asset valuation allowance of $1.3 million. |
• | Legal fees of $0.8 million. |
• | Professional fees of $0.2 million. |
• | Tax benefit of $0.6 million associated with a discontinued operation. |
March 31, 2014 | June 30, 2013 | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 360,800 | $ | 200,488 | ||||
Receivables, net | 24,312 | 33,062 | ||||||
Inventories | 143,742 | 139,607 | ||||||
Deferred income taxes | 388 | 24,145 | ||||||
Income tax receivable | 19,113 | 33,346 | ||||||
Other current assets | 55,973 | 57,898 | ||||||
Total current assets | 604,328 | 488,546 | ||||||
Property and equipment, net | 273,168 | 313,460 | ||||||
Goodwill | 423,704 | 460,885 | ||||||
Other intangibles, net | 19,959 | 21,496 | ||||||
Investment in affiliates | 44,995 | 43,319 | ||||||
Other assets | 61,185 | 62,786 | ||||||
Total assets | $ | 1,427,339 | $ | 1,390,492 | ||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
Current liabilities: | ||||||||
Long-term debt, current portion | $ | 173,828 | $ | 173,515 | ||||
Accounts payable | 62,400 | 66,071 | ||||||
Accrued expenses | 138,065 | 137,226 | ||||||
Total current liabilities | 374,293 | 376,812 | ||||||
Long-term debt and capital lease obligations | 120,005 | 1,255 | ||||||
Other noncurrent liabilities | 199,814 | 155,011 | ||||||
Total liabilities | 694,112 | 533,078 | ||||||
Shareholders’ equity: | ||||||||
Common stock, $0.05 par value; issued and outstanding 56,677,617 and 56,630,926 common shares at March 31, 2014 and June 30, 2013, respectively | 2,834 | 2,832 | ||||||
Additional paid-in capital | 336,645 | 334,266 | ||||||
Accumulated other comprehensive income | 19,331 | 20,556 | ||||||
Retained earnings | 374,417 | 499,760 | ||||||
Total shareholders’ equity | 733,227 | 857,414 | ||||||
Total liabilities and shareholders’ equity | $ | 1,427,339 | $ | 1,390,492 |
Three Months Ended March 31, | Nine Months Ended March 31, | |||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||
Revenues: | ||||||||||||||||
Service | $ | 367,230 | $ | 392,149 | $ | 1,099,916 | $ | 1,173,851 | ||||||||
Product | 94,309 | 103,222 | 278,821 | 313,742 | ||||||||||||
Royalties and fees | 10,022 | 9,566 | 29,774 | 28,869 | ||||||||||||
471,561 | 504,937 | 1,408,511 | 1,516,462 | |||||||||||||
Operating expenses: | ||||||||||||||||
Cost of service | 226,344 | 234,321 | 674,772 | 701,114 | ||||||||||||
Cost of product | 46,146 | 53,276 | 140,631 | 161,472 | ||||||||||||
Site operating expenses | 50,215 | 53,737 | 151,260 | 155,956 | ||||||||||||
General and administrative | 43,120 | 56,800 | 127,758 | 168,467 | ||||||||||||
Rent | 80,614 | 80,761 | 238,788 | 242,815 | ||||||||||||
Depreciation and amortization | 28,343 | 22,734 | 76,815 | 65,334 | ||||||||||||
Goodwill impairment | — | — | 34,939 | — | ||||||||||||
Total operating expenses | 474,782 | 501,629 | 1,444,963 | 1,495,158 | ||||||||||||
Operating (loss) income | (3,221 | ) | 3,308 | (36,452 | ) | 21,304 | ||||||||||
Other (expense) income: | ||||||||||||||||
Interest expense | (6,299 | ) | (6,356 | ) | (15,956 | ) | (19,834 | ) | ||||||||
Interest income and other, net | 261 | (62 | ) | 1,144 | 35,151 | |||||||||||
(Loss) income before income taxes and equity in income (loss) of affiliated companies | (9,259 | ) | (3,110 | ) | (51,264 | ) | 36,621 | |||||||||
Income taxes | (857 | ) | 2,850 | (72,812 | ) | (1,221 | ) | |||||||||
Equity in income (loss) of affiliated companies, net of income taxes | 23 | 1,156 | 4,762 | (15,976 | ) | |||||||||||
(Loss) income from continuing operations | (10,093 | ) | 896 | (119,314 | ) | 19,424 | ||||||||||
Income from discontinued operations, net of taxes | 609 | 1,465 | 609 | 9,095 | ||||||||||||
Net (loss) income | $ | (9,484 | ) | $ | 2,361 | $ | (118,705 | ) | $ | 28,519 | ||||||
Net (loss) income per share: | ||||||||||||||||
Basic: | ||||||||||||||||
(Loss) income from continuing operations | (0.18 | ) | 0.02 | (2.11 | ) | 0.34 | ||||||||||
Income from discontinued operations | 0.01 | 0.03 | 0.01 | 0.16 | ||||||||||||
Net (loss) income per share, basic (1) | $ | (0.17 | ) | $ | 0.04 | $ | (2.10 | ) | $ | 0.50 | ||||||
Diluted: | ||||||||||||||||
(Loss) income from continuing operations | (0.18 | ) | 0.02 | (2.11 | ) | 0.34 | ||||||||||
Income from discontinued operations | 0.01 | 0.03 | 0.01 | 0.16 | ||||||||||||
Net (loss) income per share, diluted (1) | $ | (0.17 | ) | $ | 0.04 | $ | (2.10 | ) | $ | 0.50 | ||||||
Weighted average common and common equivalent shares outstanding: | ||||||||||||||||
Basic | 56,473 | 56,345 | 56,450 | 56,816 | ||||||||||||
Diluted | 56,473 | 56,500 | 56,450 | 56,928 | ||||||||||||
Cash dividends declared per common share (2) | $ | — | $ | 0.06 | $ | 0.12 | $ | 0.18 |
(1) | Total is a recalculation; line items calculated individually may not sum to total due to rounding |
(2) | In December 2013, the Board of Directors elected to discontinue paying regular quarterly dividends |
Three Months Ended March 31, | Nine Months Ended March 31, | |||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||
Net (loss) income | $ | (9,484 | ) | $ | 2,361 | $ | (118,705 | ) | $ | 28,519 | ||||||
Other comprehensive (loss) income, net of tax: | ||||||||||||||||
Foreign currency translation adjustments: | ||||||||||||||||
Foreign currency translation adjustments during the period | (2,208 | ) | (4,259 | ) | (1,225 | ) | 601 | |||||||||
Reclassification adjustments for gains included in net (loss) income | — | — | — | (33,842 | ) | |||||||||||
Net current period foreign currency translation adjustments | (2,208 | ) | (4,259 | ) | (1,225 | ) | (33,241 | ) | ||||||||
Change in fair market value of financial instruments designated as cash flow hedges | — | — | — | (23 | ) | |||||||||||
Other comprehensive loss | (2,208 | ) | (4,259 | ) | (1,225 | ) | (33,264 | ) | ||||||||
Comprehensive loss | $ | (11,692 | ) | $ | (1,898 | ) | $ | (119,930 | ) | $ | (4,745 | ) |
Nine Months Ended March 31, | ||||||||
2014 | 2013 | |||||||
Cash flows from operating activities: | ||||||||
Net (loss) income | $ | (118,705 | ) | $ | 28,519 | |||
Adjustments to reconcile net (loss) income to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 61,540 | 60,788 | ||||||
Equity in (income) loss of affiliated companies | (4,762 | ) | 15,348 | |||||
Deferred income taxes | 68,669 | 14,855 | ||||||
Salon asset impairment | 15,275 | 5,035 | ||||||
Loss on write down of inventories | 854 | — | ||||||
Goodwill impairment | 34,939 | — | ||||||
Accumulated other comprehensive income reclassification adjustments | — | (33,842 | ) | |||||
Stock-based compensation | 4,899 | 4,723 | ||||||
Amortization of debt discount and financing costs | 6,027 | 5,336 | ||||||
Other non-cash items affecting earnings | 177 | 1,500 | ||||||
Changes in operating assets and liabilities, excluding the effects of acquisitions | 14,801 | (20,522 | ) | |||||
Net cash provided by operating activities | 83,714 | 81,740 | ||||||
Cash flows from investing activities: | ||||||||
Capital expenditures | (34,977 | ) | (72,554 | ) | ||||
Asset acquisitions, net of cash acquired and proceeds from sale of assets | (1 | ) | 220 | |||||
Proceeds from loans and investments | 5,056 | 131,054 | ||||||
Restricted cash used to collateralize insurance reserves | — | (24,500 | ) | |||||
Net cash (used in) provided by investing activities | (29,922 | ) | 34,220 | |||||
Cash flows from financing activities: | ||||||||
Borrowings on revolving credit facilities | — | 5,200 | ||||||
Payments on revolving credit facilities | — | (5,200 | ) | |||||
Proceeds from issuance of long-term debt, net of fees | 118,058 | — | ||||||
Repayments of long-term debt and capital lease obligations | (5,234 | ) | (22,985 | ) | ||||
Repurchase of common stock | — | (14,868 | ) | |||||
Dividends paid | (6,793 | ) | (10,310 | ) | ||||
Net cash provided by (used in) financing activities | 106,031 | (48,163 | ) | |||||
Effect of exchange rate changes on cash and cash equivalents | 489 | 569 | ||||||
Increase in cash and cash equivalents | 160,312 | 68,366 | ||||||
Cash and cash equivalents: | ||||||||
Beginning of period | 200,488 | 111,943 | ||||||
End of period | $ | 360,800 | $ | 180,309 |
For the Three Months Ended | ||||||||||||||||||
March 31, 2014 | March 31, 2013 | |||||||||||||||||
Service | Retail | Total | Service | Retail | Total | |||||||||||||
SmartStyle | (4.7 | ) | (9.1 | ) | (6.1 | ) | 2.6 | (4.2 | ) | 0.3 | ||||||||
Supercuts | 0.3 | (10.0 | ) | (0.7 | ) | 1.3 | (3.7 | ) | 0.7 | |||||||||
MasterCuts | (8.5 | ) | (10.0 | ) | (8.7 | ) | (3.1 | ) | (11.7 | ) | (4.7 | ) | ||||||
Promenade | (6.5 | ) | (7.2 | ) | (6.6 | ) | (1.4 | ) | (3.4 | ) | (1.7 | ) | ||||||
North American Value | (4.6 | )% | (8.9 | )% | (5.4 | )% | 0.2 | % | (4.8 | )% | (0.8 | )% | ||||||
North American Premium | (7.4 | )% | (10.9 | )% | (8.1 | )% | (2.6 | )% | (3.4 | )% | (2.7 | )% | ||||||
International | 0.1 | % | (3.6 | )% | (1.1 | )% | 0.6 | % | (13.7 | )% | (4.3 | )% | ||||||
Consolidated | (4.9 | )% | (8.9 | )% | (5.7 | )% | (0.3 | )% | (5.2 | )% | (1.4 | )% |
For the Nine Months Ended | ||||||||||||||||||
March 31, 2014 | March 31, 2013 | |||||||||||||||||
Service | Retail | Total | Service | Retail | Total | |||||||||||||
SmartStyle | (4.0 | ) | (11.4 | ) | (6.5 | ) | (0.3 | ) | (2.7 | ) | (1.1 | ) | ||||||
Supercuts | (0.1 | ) | (12.4 | ) | (1.4 | ) | 1.1 | (1.9 | ) | 0.7 | ||||||||
MasterCuts | (9.0 | ) | (16.0 | ) | (10.3 | ) | (4.0 | ) | (6.1 | ) | (4.4 | ) | ||||||
Promenade | (5.6 | ) | (11.0 | ) | (6.2 | ) | (2.3 | ) | (4.4 | ) | (2.6 | ) | ||||||
North American Value | (4.2 | )% | (11.9 | )% | (5.7 | )% | (1.2 | )% | (3.3 | )% | (1.6 | )% | ||||||
North American Premium | (6.6 | )% | (10.0 | )% | (7.2 | )% | (3.2 | )% | (3.2 | )% | (3.2 | )% | ||||||
International | (0.2 | )% | (3.4 | )% | (1.2 | )% | (1.6 | )% | (12.3 | )% | (5.2 | )% | ||||||
Consolidated | (4.5 | )% | (10.9 | )% | (5.8 | )% | (1.6 | )% | (4.0 | )% | (2.1 | )% |
March 31, 2014 | June 30, 2013 | |||||
COMPANY-OWNED SALONS: | ||||||
SmartStyle/Cost Cutters in Walmart Stores | 2,556 | 2,490 | ||||
Supercuts | 1,182 | 1,210 | ||||
MasterCuts | 512 | 532 | ||||
Promenade | 1,882 | 1,990 | ||||
Regis salons | 827 | 862 | ||||
Total North American Salons (1) | 6,959 | 7,084 | ||||
Total International Salons (2) | 358 | 351 | ||||
Total Company-owned Salons | 7,317 | 7,435 | ||||
FRANCHISE SALONS: | ||||||
SmartStyle/Cost Cutters in Walmart Stores | 126 | 123 | ||||
Supercuts | 1,170 | 1,116 | ||||
Promenade | 847 | 843 | ||||
Total North American Salons (1) | 2,143 | 2,082 | ||||
Total International Salons (2) | — | — | ||||
Total Franchise Salons | 2,143 | 2,082 | ||||
OWNERSHIP INTEREST LOCATIONS: | ||||||
Equity ownership interest locations | 219 | 246 | ||||
Grand Total, System-wide | 9,679 | 9,763 |
• | Inventory reserves attributed to our inventory simplification program. |
• | Self-insurance reserve adjustments. |
• | Deferred compensation adjustments. |
• | Expense associated with legal cases. |
• | Professional fees associated with the evaluation and sale of non-core assets. |
• | Expenses associated with senior management restructuring. |
• | Recovery of bad debt expense associated with the outstanding note receivable with Pure Beauty. |
• | Accelerated depreciation related to our corporate office consolidation. |
• | Goodwill impairment charge related to our Regis salon concept reporting unit. |
• | 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 related to the sale of its investment in Provalliance. |
• | Recovery of previously impaired investments in an affiliate. |
• | Impairment recorded on our investment in 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. |
• | Operations of our Hair Restoration Centers and professional fees associated with the disposition of our Hair Restoration Centers on April 9, 2013. |
• | Tax benefit associated with a discontinued operation. |
• | Tax benefit associated with prior year Work Opportunity Tax Credits. |
Reconciliation of U.S. GAAP operating (loss) income and net (loss) income to equivalent non-GAAP measures | ||||||||||||||||||
Three Months Ended March 31, 2014 | Nine Months Ended March 31, 2014 | |||||||||||||||||
U.S. GAAP financial line item | 2014 | 2013 | 2014 | 2013 | ||||||||||||||
U.S. GAAP revenue | $ | 471,561 | $ | 504,937 | $ | 1,408,511 | $ | 1,516,462 | ||||||||||
U.S. GAAP operating (loss) income | $ | (3,221 | ) | $ | 3,308 | $ | (36,452 | ) | $ | 21,304 | ||||||||
Non-GAAP operating expense adjustments: | ||||||||||||||||||
Inventory reserves | Cost of product | — | — | 854 | — | |||||||||||||
Self-insurance reserves adjustments | Site operating expense | — | — | (673 | ) | (1,127 | ) | |||||||||||
Deferred compensation adjustments | General and administrative | — | — | (3,703 | ) | — | ||||||||||||
Legal fees | General and administrative | 780 | — | 2,693 | — | |||||||||||||
Professional fees | General and administrative | (150 | ) | — | 339 | — | ||||||||||||
Senior management restructure | General and administrative | — | 859 | — | 1,851 | |||||||||||||
Self-insurance reserves adjustments | General and administrative | — | — | — | 5 | |||||||||||||
Pure Beauty note receivable recovery | General and administrative | — | — | — | (333 | ) | ||||||||||||
Corporate office consolidation accelerated depreciation | Depreciation and amortization | — | 746 | 746 | 746 | |||||||||||||
Goodwill impairment | Goodwill impairment | — | — | 34,939 | — | |||||||||||||
Total non-GAAP operating expense adjustments | 630 | 1,605 | 35,195 | 1,142 | ||||||||||||||
Non-GAAP operating (loss) income (1) | $ | (2,591 | ) | $ | 4,913 | $ | (1,257 | ) | $ | 22,446 | ||||||||
U.S. GAAP net (loss) income | $ | (9,484 | ) | $ | 2,361 | $ | (118,705 | ) | $ | 28,519 | ||||||||
Non-GAAP net (loss) income adjustments: | ||||||||||||||||||
Non-GAAP operating expense adjustments | 630 | 1,605 | 35,195 | 1,142 | ||||||||||||||
AOCI adjustments | Interest income and other, net | — | — | — | (33,842 | ) | ||||||||||||
Tax provision adjustments (2) | Income taxes | 1,251 | (1,821 | ) | 77,663 | 41 | ||||||||||||
Recovery of previously impaired investments in affiliate | Equity in income (loss) of affiliated companies, net of taxes | — | — | (3,077 | ) | — | ||||||||||||
Empire Education Group impairment | Equity in income (loss) of affiliated companies, net of taxes | — | — | — | 17,899 | |||||||||||||
Provalliance impairment and equity put liability adjustment | Equity in income (loss) of affiliated companies, net of taxes | — | — | — | 2,048 | |||||||||||||
Hair Restoration Center discontinued operations | Income from discontinued operations, net of taxes | — | (1,465 | ) | — | (9,095 | ) | |||||||||||
Tax benefit associated with a discontinued operation | Income from discontinued operations, net of taxes | (609 | ) | — | (609 | ) | — | |||||||||||
Total non-GAAP net (loss) income adjustments | 1,272 | (1,681 | ) | 109,172 | (21,807 | ) | ||||||||||||
Non-GAAP net (loss) income | $ | (8,212 | ) | $ | 680 | $ | (9,533 | ) | $ | 6,712 |
(1) | Adjusted operating margins for the three months ended March 31, 2014, and 2013, were (0.5%) and 1.0%, respectively, and were (0.1%) and 1.5% for the nine months ended March 31, 2014 and 2013, respectively, and are calculated as non-GAAP operating (loss) income divided by U.S. GAAP revenue for each respective period. |
(2) | The non-GAAP tax provision was based on a projected statutory effective tax rate analysis to be approximately 37% for the six months ended December 31, 2013, for all non-GAAP operating expense adjustments except the goodwill impairment. The goodwill impairment had a tax benefit of approximately $6.3 million for the nine months ended March 31, 2014, as the charge was only partly deductible for income tax purposes. During the three and nine months ended March 31, 2014, the Company recorded $1.3 and $84.4 million, respectively, for valuation reserves against the Company’s deferred tax assets. As a result of the valuation reserves, the Company did not record any tax effect for the non-GAAP adjustments during the three months ended March 31, 2014. Based on projected statutory effective tax rate analyses, the non-GAAP tax provision was calculated to be approximately 38% for the three and nine months ended March 31, 2013, respectively, for all non-GAAP operating expense adjustments, except the AOCI adjustments during the nine months ended March 31, 2013. The AOCI adjustments were primarily non-taxable. The tax provision adjustment for three and nine months ended March 31, 2013 also includes a $1.2 million benefit for prior year Work Opportunity Tax Credits. |
Reconciliation of U.S. GAAP net (loss) income per diluted share to non-GAAP net (loss) income per diluted share | ||||||||||||||||
Three Months Ended March 31, | Nine Months Ended March 31, | |||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||
U.S. GAAP net (loss) income per diluted share | $ | (0.168 | ) | $ | 0.042 | $ | (2.103 | ) | $ | 0.501 | ||||||
Inventory reserves (1) (2) | — | — | 0.009 | — | ||||||||||||
Self-insurance reserves adjustments (1) (2) | — | — | (0.008 | ) | (0.012 | ) | ||||||||||
Deferred compensation adjustments (1) (2) | — | — | (0.049 | ) | — | |||||||||||
Legal fees (1) (2) | 0.014 | — | 0.035 | — | ||||||||||||
Professional fees (1) (2) | (0.003 | ) | — | 0.003 | — | |||||||||||
Senior management restructure (1) (2) | — | 0.010 | — | 0.020 | ||||||||||||
Pure Beauty note receivable recovery (1) (2) | — | — | — | (0.004 | ) | |||||||||||
Corporate office consolidation accelerated depreciation (1) (2) | — | 0.008 | 0.008 | 0.008 | ||||||||||||
Goodwill impairment (1) (2) | — | — | 0.507 | — | ||||||||||||
AOCI adjustments (1) (2) | — | — | — | (0.565 | ) | |||||||||||
Deferred tax asset valuation (1) (2) | 0.022 | — | 1.495 | — | ||||||||||||
Impact of income tax rate difference (1) (2) | — | — | (0.002 | ) | — | |||||||||||
Work opportunity tax credits (1) (2) | — | (0.022 | ) | — | (0.021 | ) | ||||||||||
Recovery of previously impaired investments in affiliate (1) (2) | — | — | (0.055 | ) | — | |||||||||||
Empire Education Group impairment (1) (2) | — | — | — | 0.314 | ||||||||||||
Provalliance impairment and equity put liability adjustment (1) (2) | — | — | — | 0.036 | ||||||||||||
Hair Restoration Center discontinued operations (1) (2) | — | (0.026 | ) | — | (0.160 | ) | ||||||||||
Tax benefit associated with a discontinued operation (1) (2) | (0.011 | ) | — | (0.011 | ) | — | ||||||||||
Non-GAAP net (loss) income per diluted share (2) (3) | $ | (0.145 | ) | $ | 0.012 | $ | (0.169 | ) | $ | 0.118 | ||||||
U.S. GAAP Weighted average shares - basic | 56,473 | 56,345 | 56,450 | 56,816 | ||||||||||||
U.S. GAAP Weighted average shares - diluted | 56,473 | 56,500 | 56,450 | 56,928 | ||||||||||||
Non-GAAP Weighted average shares - diluted (2) | 56,473 | 56,500 | 56,450 | 56,928 |
(1) | The non-GAAP tax provision was based on a projected statutory effective tax rate analysis to be approximately 37% for the six months ended December 31, 2013, for all non-GAAP operating expense adjustments except the goodwill impairment. The goodwill impairment had a tax benefit of approximately $6.3 million for the nine months ended March 31, 2014, as the charge was only partly deductible for income tax purposes. During the three and nine months ended March 31, 2014, the Company recorded $1.3 and $84.4 million, respectively, for a valuation reserves against the Company’s deferred tax assets. As a result of the valuation reserves, the Company did not record any tax effect for the non-GAAP adjustments during the three months ended March 31, 2014. Based on projected statutory effective tax rate analyses, the non-GAAP tax provision was calculated to be approximately 38% for the three and nine months ended March 31, 2013, respectively, for all non-GAAP operating expense adjustments, except the AOCI adjustments during the nine months ended March 31, 2013. The AOCI adjustments were primarily non-taxable. The tax provision adjustment for three and nine months ended March 31, 2013 also includes a $1.2 million benefit for prior year Work Opportunity Tax Credits. |
(2) | Non-GAAP net (loss) income per share reflects the weighted average shares associated with non-GAAP net (loss) income, which includes the dilutive effect of common stock and convertible share equivalents. |
(3) | Total is a recalculation; line items calculated individually may not sum to total due to rounding. |
Pre-Tax | Income Taxes | Net Income | |||||||||
Legal fees | $ | 780 | $ | — | $ | 780 | |||||
Professional fees | (150 | ) | — | (150 | ) | ||||||
Deferred tax asset valuation | — | 1,251 | 1,251 | ||||||||
Release of income tax reserves related to discontinued operations | — | (609 | ) | (609 | ) | ||||||
Total | $ | 630 | $ | 642 | $ | 1,272 |
Three Months Ended March 31, | Nine Months Ended March 31, | |||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||
Consolidated reported net (loss) income, as reported (U.S. GAAP) | $ | (9,484 | ) | $ | 2,361 | $ | (118,705 | ) | $ | 28,519 | ||||||
Interest expense, as reported | 6,299 | 6,356 | 15,956 | 19,834 | ||||||||||||
Income taxes, as reported | 857 | (2,850 | ) | 72,812 | 1,221 | |||||||||||
Depreciation and amortization, as reported | 28,343 | 22,734 | 76,815 | 65,334 | ||||||||||||
EBITDA (as defined above) | $ | 26,015 | $ | 28,601 | $ | 46,878 | $ | 114,908 | ||||||||
Equity in (income) loss of affiliated companies, net of income taxes, as reported | (23 | ) | (1,156 | ) | (4,762 | ) | 15,976 | |||||||||
Inventory reserves | — | — | 854 | — | ||||||||||||
Self-insurance reserves adjustments | — | — | (673 | ) | (1,122 | ) | ||||||||||
Deferred compensation adjustment | — | — | (3,703 | ) | — | |||||||||||
Legal fees | 780 | — | 2,693 | — | ||||||||||||
Professional fees | (150 | ) | — | 339 | — | |||||||||||
Senior management restructure | — | 859 | — | 1,851 | ||||||||||||
Pure Beauty note receivable recovery | — | — | — | (333 | ) | |||||||||||
Goodwill impairment | — | — | 34,939 | — | ||||||||||||
AOCI adjustments | — | — | — | (33,842 | ) | |||||||||||
Income from discontinued operations, net of taxes, as reported | (609 | ) | (1,465 | ) | (609 | ) | (9,095 | ) | ||||||||
Adjusted EBITDA, non-GAAP financial measure | $ | 26,013 | $ | 26,839 | $ | 75,956 | $ | 88,343 | ||||||||
Three Months Ended March 31, | Nine Months Ended March 31, | |||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||
Revenue decline, as reported (U.S. GAAP) | (6.6 | )% | (5.8 | )% | (7.1 | )% | (4.8 | )% | ||||
Effect of new stores and conversions | (0.7 | ) | (1.2 | ) | (0.8 | ) | (1.3 | ) | ||||
Effect of closed salons | 2.3 | 3.3 | 2.7 | 3.2 | ||||||||
Other | (0.7 | ) | 2.3 | (0.6 | ) | 0.8 | ||||||
Same-store sales, non-GAAP | (5.7 | )% | (1.4 | )% | (5.8 | )% | (2.1 | )% |
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