x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Minnesota | 41-0749934 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
7201 Metro Boulevard, Edina, Minnesota | 55439 | |
(Address of principal executive offices) | (Zip Code) |
Large accelerated filer x | Accelerated filer ¨ | |
Non-accelerated filer ¨ | Smaller reporting company ¨ | |
(Do not check if a smaller reporting company) | ||
Emerging growth company ¨ |
Common Stock, $.05 par value | 46,582,257 | |
Class | Number of Shares |
September 30, 2017 | June 30, 2017 | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 176,312 | $ | 171,044 | ||||
Receivables, net | 43,276 | 19,683 | ||||||
Inventories | 92,914 | 98,392 | ||||||
Other current assets | 44,043 | 48,114 | ||||||
Current assets held for sale (Note 1) | 34,743 | 32,914 | ||||||
Total current assets | 391,288 | 370,147 | ||||||
Property and equipment, net | 118,629 | 123,281 | ||||||
Goodwill | 418,209 | 416,987 | ||||||
Other intangibles, net | 11,805 | 11,965 | ||||||
Other assets | 52,544 | 61,756 | ||||||
Noncurrent assets held for sale (Note 1) | 24,443 | 27,352 | ||||||
Total assets | $ | 1,016,918 | $ | 1,011,488 | ||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 51,769 | $ | 54,501 | ||||
Accrued expenses | 102,727 | 110,435 | ||||||
Current liabilities related to assets held for sale (Note 1) | 46,786 | 13,126 | ||||||
Total current liabilities | 201,282 | 178,062 | ||||||
Long-term debt, net | 120,847 | 120,599 | ||||||
Other noncurrent liabilities | 198,304 | 197,374 | ||||||
Noncurrent liabilities related to assets held for sale (Note 1) | 8,018 | 7,232 | ||||||
Total liabilities | 528,451 | 503,267 | ||||||
Commitments and contingencies (Note 6) | ||||||||
Shareholders’ equity: | ||||||||
Common stock, $0.05 par value; issued and outstanding 46,580,068 and 46,400,367 common shares at September 30, 2017 and June 30, 2017, respectively | 2,329 | 2,320 | ||||||
Additional paid-in capital | 214,597 | 214,109 | ||||||
Accumulated other comprehensive income | 6,018 | 3,336 | ||||||
Retained earnings | 265,523 | 288,456 | ||||||
Total shareholders’ equity | 488,467 | 508,221 | ||||||
Total liabilities and shareholders’ equity | $ | 1,016,918 | $ | 1,011,488 |
Three Months Ended September 30, | ||||||||
2017 | 2016 | |||||||
Revenues: | ||||||||
Service | $ | 235,559 | $ | 243,091 | ||||
Product | 60,940 | 63,716 | ||||||
Royalties and fees | 13,374 | 12,024 | ||||||
309,873 | 318,831 | |||||||
Operating expenses: | ||||||||
Cost of service | 139,836 | 150,797 | ||||||
Cost of product | 30,162 | 30,815 | ||||||
Site operating expenses | 33,303 | 32,645 | ||||||
General and administrative | 35,165 | 35,916 | ||||||
Rent | 42,416 | 46,233 | ||||||
Depreciation and amortization | 12,255 | 12,109 | ||||||
Total operating expenses | 293,137 | 308,515 | ||||||
Operating income | 16,736 | 10,316 | ||||||
Other (expense) income: | ||||||||
Interest expense | (2,138 | ) | (2,163 | ) | ||||
Interest income and other, net | 1,027 | 327 | ||||||
Income from continuing operations before income taxes | 15,625 | 8,480 | ||||||
Income tax expense | (4,832 | ) | (2,740 | ) | ||||
Income from continuing operations | 10,793 | 5,740 | ||||||
Loss from discontinued operations (Note 1) | (33,768 | ) | (2,459 | ) | ||||
Net (loss) income | $ | (22,975 | ) | $ | 3,281 | |||
Net (loss) income per share: | ||||||||
Basic and diluted: | ||||||||
Income from continuing operations | 0.23 | 0.12 | ||||||
Loss from discontinued operations | (0.72 | ) | (0.05 | ) | ||||
Net (loss) income per share, basic and diluted (1) | $ | (0.49 | ) | $ | 0.07 | |||
Weighted average common and common equivalent shares outstanding: | ||||||||
Basic | 46,677 | 46,227 | ||||||
Diluted | 46,900 | 46,622 |
(1) | Total is a recalculation; line items calculated individually may not sum to total due to rounding. |
Three Months Ended September 30, | ||||||||
2017 | 2016 | |||||||
Net (loss) income | $ | (22,975 | ) | $ | 3,281 | |||
Foreign currency translation adjustments | 2,682 | (2,516 | ) | |||||
Comprehensive (loss) income | $ | (20,293 | ) | $ | 765 |
Three Months Ended September 30, | ||||||||
2017 | 2016 | |||||||
Cash flows from operating activities: | ||||||||
Net (loss) income | $ | (22,975 | ) | $ | 3,281 | |||
Adjustments to reconcile net loss to net cash provided by operating activities: | ||||||||
Non-cash impairment related to discontinued operations | 29,169 | — | ||||||
Depreciation and amortization | 9,975 | 10,200 | ||||||
Depreciation related to discontinued operations | 2,129 | 3,840 | ||||||
Deferred income taxes | 3,777 | 1,969 | ||||||
Gain on life insurance | (7,986 | ) | — | |||||
Gain from sale of salon assets to franchisees, net(1) | (122 | ) | (32 | ) | ||||
Salon asset impairments | 2,280 | 1,909 | ||||||
Stock-based compensation | 2,030 | 1,865 | ||||||
Amortization of debt discount and financing costs | 351 | 351 | ||||||
Other non-cash items affecting earnings | 76 | 14 | ||||||
Changes in operating assets and liabilities, excluding the effects of asset sales | (7,805 | ) | (11,067 | ) | ||||
Net cash provided by operating activities | 10,899 | 12,330 | ||||||
Cash flows from investing activities: | ||||||||
Capital expenditures | (6,127 | ) | (9,776 | ) | ||||
Capital expenditures related to discontinued operations | (1,007 | ) | (1,157 | ) | ||||
Proceeds from sale of assets to franchisees(1) | 1,472 | 163 | ||||||
Change in restricted cash | (471 | ) | 1,133 | |||||
Net cash used in investing activities | (6,133 | ) | (9,637 | ) | ||||
Cash flows from financing activities: | ||||||||
Taxes paid for shares withheld | (1,530 | ) | (1,054 | ) | ||||
Net cash used in financing activities | (1,530 | ) | (1,054 | ) | ||||
Effect of exchange rate changes on cash and cash equivalents | 680 | (454 | ) | |||||
Increase in cash and cash equivalents | 3,916 | 1,185 | ||||||
Cash and cash equivalents: | ||||||||
Beginning of period | 171,044 | 147,346 | ||||||
Cash and cash equivalents included in current assets held for sale | 1,352 | — | ||||||
Beginning of period, total cash and cash equivalents | 172,396 | 147,346 | ||||||
End of period | $ | 176,312 | $ | 148,531 |
1. | BASIS OF PRESENTATION OF UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: |
September 30, 2017 | June 30, 2017 | |||||||
(Dollars in thousands) | ||||||||
Current assets held for sale | ||||||||
Cash and cash equivalents | $ | 1,298 | $ | 1,352 | ||||
Receivables, net | 4,674 | 3,792 | ||||||
Inventories | 24,310 | 23,712 | ||||||
Other current assets | 4,461 | 4,058 | ||||||
Total current assets held for sale | $ | 34,743 | $ | 32,914 | ||||
Noncurrent assets held for sale | ||||||||
Property and equipment, net | $ | 22,435 | $ | 23,713 | ||||
Other intangibles, net | 1,676 | 1,669 | ||||||
Other assets | 332 | 1,970 | ||||||
Total noncurrent assets held for sale | $ | 24,443 | $ | 27,352 | ||||
Current liabilities related to assets held for sale | ||||||||
Accounts payable | $ | 2,283 | $ | 1,548 | ||||
Accrued expenses | 14,036 | 11,578 | ||||||
Accrued loss on assets held for sale | 30,467 | — | ||||||
Total current liabilities related to assets held for sale | $ | 46,786 | $ | 13,126 | ||||
Noncurrent liabilities related to assets held for sale | ||||||||
Other noncurrent liabilities | $ | 8,018 | $ | 7,232 | ||||
Total noncurrent liabilities related to assets held for sale | $ | 8,018 | $ | 7,232 |
For the Three Months Ended September 30, | ||||||||
2017 | 2016 | |||||||
(Dollars in thousands) | ||||||||
Revenues | $ | 93,366 | $ | 112,212 | ||||
Loss from discontinued operations | (33,768 | ) | (2,459 | ) |
For the Three Months Ended September 30, | ||||||||
2017 | 2016 | |||||||
(Unaudited) | (Dollars in thousands) | |||||||
Gross revenues | $ | 32,637 | $ | 30,036 | ||||
Gross profit | 9,679 | 8,110 | ||||||
Operating loss | (192 | ) | (707 | ) | ||||
Net loss | (344 | ) | (830 | ) |
3. | EARNINGS PER SHARE: |
4. | SHAREHOLDERS’ EQUITY: |
5. | INCOME TAXES: |
6. | COMMITMENTS AND CONTINGENCIES: |
Company-owned | Franchise | Consolidated | ||||||||||
(Dollars in thousands) | ||||||||||||
Goodwill, net at June 30, 2017 | $ | 188,888 | $ | 228,099 | $ | 416,987 | ||||||
Translation rate adjustments | 676 | 816 | 1,492 | |||||||||
Derecognition related to sale of salon assets to franchisees (1) | (270 | ) | — | (270 | ) | |||||||
Goodwill, net at September 30, 2017 | $ | 189,294 | $ | 228,915 | $ | 418,209 |
(1) | Goodwill is derecognized for salons sold to franchisees with positive cash flows (excluding the salons sold to The Beautiful Group). The amount of goodwill derecognized is determined by a fraction (the numerator of which is the EBITDA of the salon being sold and the denominator of which is the EBITDA of the Company-owned reporting unit) that is applied to the total goodwill balance of the Company-owned reporting unit. |
September 30, 2017 | June 30, 2017 | |||||||||||||||||||||||
Cost (1) | Accumulated Amortization (1) | Net | Cost (1) | Accumulated Amortization (1) | Net | |||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||
Amortized intangible assets: | ||||||||||||||||||||||||
Brand assets and trade names | $ | 8,387 | $ | (4,173 | ) | $ | 4,214 | $ | 8,187 | $ | (4,013 | ) | $ | 4,174 | ||||||||||
Franchise agreements | 10,061 | (7,685 | ) | 2,376 | 9,832 | (7,433 | ) | 2,399 | ||||||||||||||||
Lease intangibles | 14,041 | (9,277 | ) | 4,764 | 14,007 | (9,077 | ) | 4,930 | ||||||||||||||||
Other | 2,036 | (1,585 | ) | 451 | 1,994 | (1,532 | ) | 462 | ||||||||||||||||
$ | 34,525 | $ | (22,720 | ) | $ | 11,805 | $ | 34,020 | $ | (22,055 | ) | $ | 11,965 |
(1) | The change in the gross carrying value and accumulated amortization of other intangible assets is impacted by foreign currency. |
8. | FINANCING ARRANGEMENTS: |
Maturity Dates | Interest Rate | September 30, 2017 | June 30, 2017 | |||||||||
(fiscal year) | (Dollars in thousands) | |||||||||||
Senior Term Notes, net | 2020 | 5.50% | $ | 120,847 | $ | 120,599 | ||||||
Revolving credit facility | 2018 | — | — | — | ||||||||
$ | 120,847 | $ | 120,599 |
September 30, 2017 | June 30, 2017 | |||||||
(Dollars in thousands) | ||||||||
Principal amount on the Senior Term Notes | $ | 123,000 | $ | 123,000 | ||||
Unamortized debt discount | (1,627 | ) | (1,815 | ) | ||||
Unamortized debt issuance costs | (526 | ) | (586 | ) | ||||
Senior Term Notes, net | $ | 120,847 | $ | 120,599 |
9. | FAIR VALUE MEASUREMENTS: |
For the Three Months Ended September 30, | ||||||||
2017 | 2016 | |||||||
(Dollars in thousands) | ||||||||
Long-lived assets (1) | $ | (2,280 | ) | $ | (1,909 | ) |
(1) | See Note 1 to the unaudited Condensed Consolidated Financial Statements. |
Company-owned (1) | 6,112 | ||
Franchise (1) | 2,743 | ||
Total | 8,855 |
(1) | In October 2017, the Company sold substantially all of its mall-based salon business in North America, representing 858 company-owned salons, and substantially all of its International segment, representing approximately 250 company-owned salons, to The Beautiful Group, who will operate these locations as franchise locations. As a result, company-owned salons will decrease and franchise salons will increase by approximately 1,108 salons in October 2017. |
For the Three Months Ended September 30, 2017 | ||||||||||||||||
Company-owned | Franchise | Corporate | Consolidated | |||||||||||||
(Dollars in thousands) | ||||||||||||||||
Revenues: | ||||||||||||||||
Service | $ | 235,559 | $ | — | $ | — | $ | 235,559 | ||||||||
Product | 53,218 | 7,722 | — | 60,940 | ||||||||||||
Royalties and fees | — | 13,374 | — | 13,374 | ||||||||||||
288,777 | 21,096 | — | 309,873 | |||||||||||||
Operating expenses: | ||||||||||||||||
Cost of service | 139,836 | — | — | 139,836 | ||||||||||||
Cost of product | 24,447 | 5,715 | — | 30,162 | ||||||||||||
Site operating expenses | 33,302 | 1 | — | 33,303 | ||||||||||||
General and administrative | 15,824 | 5,546 | 13,795 | 35,165 | ||||||||||||
Rent | 42,123 | 47 | 246 | 42,416 | ||||||||||||
Depreciation and amortization | 9,894 | 92 | 2,269 | 12,255 | ||||||||||||
Total operating expenses | 265,426 | 11,401 | 16,310 | 293,137 | ||||||||||||
Operating income (loss) | 23,351 | 9,695 | (16,310 | ) | 16,736 | |||||||||||
Other (expense) income: | ||||||||||||||||
Interest expense | — | — | (2,138 | ) | (2,138 | ) | ||||||||||
Interest income and other, net | — | — | 1,027 | 1,027 | ||||||||||||
Income (loss) from continuing operations before income taxes | $ | 23,351 | $ | 9,695 | $ | (17,421 | ) | $ | 15,625 |
For the Three Months Ended September 30, 2016 | ||||||||||||||||
Company-owned | Franchise | Corporate | Consolidated | |||||||||||||
(Dollars in thousands) | ||||||||||||||||
Revenues: | ||||||||||||||||
Service | $ | 243,091 | $ | — | $ | — | $ | 243,091 | ||||||||
Product | 56,313 | 7,403 | — | 63,716 | ||||||||||||
Royalties and fees | — | 12,024 | — | 12,024 | ||||||||||||
299,404 | 19,427 | — | 318,831 | |||||||||||||
Operating expenses: | ||||||||||||||||
Cost of service | 150,797 | — | — | 150,797 | ||||||||||||
Cost of product | 25,347 | 5,468 | — | 30,815 | ||||||||||||
Site operating expenses | 32,645 | — | — | 32,645 | ||||||||||||
General and administrative | 11,542 | 5,397 | 18,977 | 35,916 | ||||||||||||
Rent | 46,012 | 42 | 179 | 46,233 | ||||||||||||
Depreciation and amortization | 9,595 | 90 | 2,424 | 12,109 | ||||||||||||
Total operating expenses | 275,938 | 10,997 | 21,580 | 308,515 | ||||||||||||
Operating income (loss) | 23,466 | 8,430 | (21,580 | ) | 10,316 | |||||||||||
Other (expense) income: | ||||||||||||||||
Interest expense | — | — | (2,163 | ) | (2,163 | ) | ||||||||||
Interest income and other, net | — | — | 327 | 327 | ||||||||||||
Income (loss) from continuing operations before income taxes | $ | 23,466 | $ | 8,430 | $ | (23,416 | ) | $ | 8,480 |
For the Periods Ended September 30, | |||||||||||||||||||
Three Months | |||||||||||||||||||
2017 | 2016 | 2017 | 2016 | 2017 | 2016 | ||||||||||||||
($ in millions) | % of Total Revenues (1) | Basis Point (Decrease) Increase | |||||||||||||||||
Service revenues | $ | 235.6 | $ | 243.1 | 76.0 | % | 76.2 | % | (20 | ) | (10 | ) | |||||||
Product revenues | 60.9 | 63.7 | 19.7 | 20.0 | (30 | ) | — | ||||||||||||
Franchise royalties and fees | 13.4 | 12.0 | 4.3 | 3.8 | 50 | 10 | |||||||||||||
Cost of service (2) | 139.8 | 150.8 | 59.4 | 62.0 | (260 | ) | 10 | ||||||||||||
Cost of product (2) | 30.2 | 30.8 | 49.5 | 48.4 | 110 | 40 | |||||||||||||
Site operating expenses | 33.3 | 32.6 | 10.7 | 10.2 | 50 | (70 | ) | ||||||||||||
General and administrative | 35.2 | 35.9 | 11.3 | 11.3 | — | (60 | ) | ||||||||||||
Rent | 42.4 | 46.2 | 13.7 | 14.5 | (80 | ) | 10 | ||||||||||||
Depreciation and amortization | 12.3 | 12.1 | 4.0 | 3.8 | 20 | (60 | ) | ||||||||||||
Operating income | 16.7 | 10.3 | 5.4 | 3.2 | 220 | 160 | |||||||||||||
Interest expense | 2.1 | 2.2 | 0.7 | 0.7 | — | — | |||||||||||||
Interest income and other, net | 1.0 | 0.3 | 0.3 | 0.1 | 20 | (20 | ) | ||||||||||||
Income taxes (3) | (4.8 | ) | (2.7 | ) | 30.9 | 32.3 | N/A | N/A | |||||||||||
Loss from discontinued operations, net of taxes | (33.8 | ) | (2.5 | ) | 10.9 | 0.8 | 1,010 | 60 |
(1) | Cost of service is computed as a percent of service revenues. Cost of product is computed as a percent of product revenues. |
(2) | Excludes depreciation and amortization expense. |
(3) | Computed as a percent of income (loss) before income taxes and equity in loss of affiliated companies. The income taxes basis point change is noted as not applicable (N/A) as the discussion within MD&A is related to the effective income tax rate. |
For the Three Months Ended September 30, | ||||||||
2017 | 2016 | |||||||
(Dollars in thousands) | ||||||||
Company-owned salons: | ||||||||
SmartStyle | $ | 126,202 | $ | 128,949 | ||||
Supercuts | 71,432 | 73,642 | ||||||
Signature Style | 91,143 | 96,813 | ||||||
Total Company-owned salons | 288,777 | 299,404 | ||||||
Franchise salons: | ||||||||
Product | 7,722 | 7,403 | ||||||
Royalties and fees | 13,374 | 12,024 | ||||||
Total Franchise salons | 21,096 | 19,427 | ||||||
Consolidated revenues | $ | 309,873 | $ | 318,831 | ||||
Percent change from prior year | (2.8 | )% | (1.1 | )% | ||||
Salon same-store sales increase (1) | 0.4 | % | 0.3 | % |
(1) | Same-store sales are calculated on a daily basis as the total change in sales for company-owned locations that were open on a specific day of the week during the current period and the corresponding prior period. Quarterly and year-to-date same-store sales are the sum of the same-store sales computed on a daily basis. Locations relocated within a one-mile radius are included in same-store sales as they are considered to have been open in the prior period. International same-store sales are calculated in local currencies to remove foreign currency fluctuations from the calculation. |
For the Three Months Ended September 30, | ||||||
Factor | 2017 | 2016 | ||||
Same-store sales | 0.4 | % | 0.3 | % | ||
Closed salons | (3.6 | ) | (1.8 | ) | ||
New stores and conversions | 0.6 | 0.5 | ||||
Foreign currency | 0.3 | — | ||||
Other | (0.5 | ) | (0.1 | ) | ||
(2.8 | )% | (1.1 | )% |
For the Three Months Ended September 30, | ||||||
2017 | 2016 | |||||
SmartStyle | 0.6 | % | 0.1 | % | ||
Supercuts | 1.8 | 1.1 | ||||
Signature Style | (0.8 | ) | (0.1 | ) | ||
Consolidated same-store sales | 0.4 | % | 0.3 | % |
For the Three Months Ended September 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
(Dollars in millions) | Increase (Decrease) | ||||||||||||||
Total revenue | $ | 288.8 | $ | 299.4 | $ | (10.6 | ) | $ | (3.7 | ) | |||||
Same-store sales | 0.4 | % | 0.3 | % | 10 bps | (170 bps) | |||||||||
Operating income | $ | 23.4 | $ | 23.5 | $ | (0.1 | ) | $ | 3.2 |
For the Three Months Ended September 30, | ||||||
Factor | 2017 | 2016 | ||||
Same-store sales | 0.4 | % | 0.3 | % | ||
Closed salons | (3.8 | ) | (2.0 | ) | ||
New stores and conversions | 0.4 | 0.5 | ||||
Foreign currency | 0.3 | — | ||||
Other | (0.8 | ) | — | |||
(3.5 | )% | (1.2 | )% |
For the Three Months Ended September 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
(Dollars in millions) | Increase (Decrease) | ||||||||||||||
Franchise salons: | |||||||||||||||
Product | $ | 7.7 | $ | 7.4 | $ | 0.3 | $ | (0.1 | ) | ||||||
Royalties and fees | 13.4 | 12.0 | 1.4 | — | |||||||||||
Total Franchise salons | $ | 21.1 | $ | 19.4 | $ | 1.7 | $ | (0.1 | ) | ||||||
Operating income | $ | 9.7 | $ | 8.4 | $ | 1.3 | $ | 0.5 |
As of | Debt to Capitalization | Basis Point Increase (1) | ||||
September 30, 2017 | 20.1 | % | 60 | |||
June 30, 2017 | 19.5 | % | 40 |
Asset Purchase Agreement, dated as of October 1, 2017, by and among Regis Corp., Regis, Inc. and The Beautiful Group Management, LLC. (Incorporated by reference to Exhibit 2.1 of the Company’s Current Report on Form 8-K filed on October 5, 2017) | ||
Share Purchase Agreement, dated as of October 1, 2017, by and among Haircare Limited, Regis UK Limited and International Beauty Limited. (Incorporated by reference to Exhibit 2.2 of the Company’s Current Report on Form 8-K filed on October 5, 2017) | ||
President and Chief Executive Officer of Regis Corporation: Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | ||
Executive Vice President and Chief Financial Officer of Regis Corporation: Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | ||
Chief Executive Officer and Chief Financial Officer of Regis Corporation: Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | ||
Exhibit 101 | The following financial information from Regis Corporation's Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2017, formatted in Extensible Business Reporting Language (XBRL) and filed electronically herewith: (i) the Condensed Consolidated Balance Sheets; (ii) the Condensed Consolidated Statements of Earnings; (iii) the Condensed Consolidated Statements of Comprehensive Income; (iv) the Condensed Consolidated Statements of Cash Flows; and (v) the Notes to the Consolidated Financial Statements. |
REGIS CORPORATION | ||
Date: October 31, 2017 | By: | /s/ Andrew H. Lacko |
Andrew H. Lacko | ||
Executive Vice President and Chief Financial Officer | ||
(Signing on behalf of the registrant and as Principal Financial Officer) | ||
Date: October 31, 2017 | By: | /s/ Kersten D. Zupfer |
Kersten D. Zupfer | ||
Vice President, Controller and Chief Accounting Officer | ||
(Principal Accounting Officer) | ||
1. | I have reviewed this quarterly report on Form 10-Q of Regis Corporation; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report; |
4. | The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and |
5. | The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s Board of Directors or persons performing the equivalent functions: |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting. |
October 31, 2017 | ||
/s/ Hugh E. Sawyer | ||
Hugh E. Sawyer, President and Chief Executive Officer |
1. | I have reviewed this quarterly report on Form 10-Q of Regis Corporation; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report; |
4. | The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and |
5. | The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s Board of Directors or persons performing the equivalent functions: |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting. |
October 31, 2017 | ||
/s/ Andrew H. Lacko | ||
Andrew H. Lacko, Executive Vice President and Chief Financial Officer |
(1) | The Quarterly Report on Form 10-Q complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) | The information contained in the Quarter Report on Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Registrant. |
October 31, 2017 | ||
/s/ Hugh E. Sawyer | ||
Hugh E. Sawyer, President and Chief Executive Officer | ||
October 31, 2017 | ||
/s/ Andrew H. Lacko | ||
Andrew H. Lacko, Executive Vice President and Chief Financial Officer |
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Document and Entity Information - shares |
3 Months Ended | |
---|---|---|
Sep. 30, 2017 |
Oct. 24, 2017 |
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Document and Entity Information | ||
Entity Registrant Name | REGIS CORP | |
Entity Central Index Key | 0000716643 | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2017 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --06-30 | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 46,582,257 | |
Document Fiscal Year Focus | 2018 | |
Document Fiscal Period Focus | Q1 |
CONDENSED CONSOLIDATED BALANCE SHEET (Unaudited) (Parenthetical) - $ / shares |
Sep. 30, 2017 |
Jun. 30, 2017 |
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Statement of Financial Position [Abstract] | ||
Common stock par value (in dollars per share) | $ 0.05 | $ 0.05 |
Common stock issued (in shares) | 46,580,068 | 46,400,367 |
Common stock outstanding (in shares) | 46,580,068 | 46,400,367 |
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE LOSS (Unaudited) - USD ($) $ in Thousands |
3 Months Ended | |
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Sep. 30, 2017 |
Sep. 30, 2016 |
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Statement of Comprehensive Income [Abstract] | ||
Net (loss) income | $ (22,975) | $ 3,281 |
Foreign currency translation adjustments | 2,682 | (2,516) |
Comprehensive (loss) income | $ (20,293) | $ 765 |
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited) - USD ($) $ in Thousands |
3 Months Ended | ||||
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Sep. 30, 2017 |
Sep. 30, 2016 |
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Cash flows from operating activities: | |||||
Net (loss) income | $ (22,975) | $ 3,281 | |||
Adjustments to reconcile net loss to net cash provided by operating activities: | |||||
Non-cash impairment related to discontinued operations | 29,169 | 0 | |||
Depreciation and amortization | 9,975 | 10,200 | |||
Depreciation related to discontinued operations | 2,129 | 3,840 | |||
Deferred income taxes | 3,777 | 1,969 | |||
Gain on life insurance | (7,986) | 0 | |||
Gain from sale of salon assets to franchisees, net | [1] | (122) | (32) | ||
Salon asset impairments | 2,280 | 1,909 | |||
Stock-based compensation | 2,030 | 1,865 | |||
Amortization of debt discount and financing costs | 351 | 351 | |||
Other non-cash items affecting earnings | 76 | 14 | |||
Changes in operating assets and liabilities, excluding the effects of asset sales | (7,805) | (11,067) | |||
Net cash provided by operating activities | 10,899 | 12,330 | |||
Cash flows from investing activities: | |||||
Capital expenditures | (6,127) | (9,776) | |||
Capital expenditures related to discontinued operations | (1,007) | (1,157) | |||
Proceeds from sale of assets to franchisees | [1] | 1,472 | 163 | ||
Change in restricted cash | (471) | 1,133 | |||
Net cash used in investing activities | (6,133) | (9,637) | |||
Cash flows from financing activities: | |||||
Taxes paid for shares withheld | (1,530) | (1,054) | |||
Net cash used in financing activities | (1,530) | (1,054) | |||
Effect of exchange rate changes on cash and cash equivalents | 680 | (454) | |||
Increase in cash and cash equivalents | 3,916 | 1,185 | |||
Cash and cash equivalents: | |||||
Beginning of period | 176,312 | ||||
Beginning of period, total cash and cash equivalents | 172,396 | 147,346 | |||
End of period | $ 176,312 | $ 148,531 | |||
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BASIS OF PRESENTATION OF UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: |
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Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
BASIS OF PRESENTATION OF UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | BASIS OF PRESENTATION OF UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: The unaudited interim Condensed Consolidated Financial Statements of Regis Corporation (the Company) as of September 30, 2017 and for the three months ended September 30, 2017 and 2016, reflect, in the opinion of management, all adjustments necessary to fairly state the consolidated financial position of the Company as of September 30, 2017 and its consolidated results of operations, comprehensive (loss) income and cash flows for the interim periods. Adjustments consist only of normal recurring items, except for any discussed in the notes below. The results of operations and cash flows for any interim period are not necessarily indicative of results of operations and cash flows for the full year. The Condensed Consolidated Balance Sheet data for June 30, 2017 was derived from audited Consolidated Financial Statements, but includes unaudited adjustments for assets and liabilities held for sale and does not include all disclosures required by accounting principles generally accepted in the United States of America (GAAP). The unaudited interim Condensed Consolidated Financial Statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended June 30, 2017 and other documents filed or furnished with the Securities and Exchange Commission (SEC) during the current fiscal year. Discontinued Operations In October 2017, the Company sold substantially all of its mall-based salon business in North America, representing 858 salons, and substantially all of its International segment, representing approximately 250 salons in the UK, to The Beautiful Group, an affiliate of Regent, a private equity firm based in Los Angeles, California, who will operate these locations as franchise locations. As part of the sale of the mall-based business, The Beautiful Group agreed to pay for the value of certain inventory and assume specific liabilities, including lease liabilities. For the International segment, the Company agreed to a share purchase agreement with The Beautiful Group for minimal consideration. As of September 30, 2017, the Company classified the results of its mall-based business and its International segment as discontinued operations for all periods presented in the Condensed Consolidated Statement of Operations. Included within discontinued operations are the impairment charge, results of operations for the three months ended September 30, 2017 and the professional fees associated with the transaction. The assets and liabilities of these businesses to be sold met the criteria to be classified as held for sale and have been aggregated and reported as current assets held for sale, noncurrent assets held for sale, current liabilities related to assets held for sale and noncurrent liabilities related to assets held for sale in the Condensed Consolidated Balance Sheet for all periods presented. The classification was based on the Company's Board of Directors' approval to sell its mall-based business and International segment, the salons being available for sale in present condition, and the sale being probable as of September 30, 2017. The operations of the mall-based business and International segment, which were previously recorded in the North American Value, North American Premium and International reporting segments, will be eliminated from ongoing operations of the Company. The following summarizes the assets and liabilities of our mall-based business and International segment as of September 30, 2017 and June 30, 2017:
In connection with the sale of the mall-based business and the International segment as part of our held for sale assessment at September 30, 2017, the Company performed an impairment assessment of the asset groups. The Company recognized net impairment charges within discontinued operations during the three months ended September 30, 2017 based on the difference between the expected sale prices and the carrying value of the asset groups. The following summarizes the results of our discontinued operations for the periods presented:
Included within the $33.8 million loss from discontinued operations are $30.5 million of loss on assets held for sale, $1.7 million of loss from operations and $1.6 million of professional fees associated with the transaction. No income taxes have been allocated to discontinued operations due to the valuation allowance in place on all deferred tax assets associated with the mall-based business and the International segment. Within salon asset impairments presented in the Consolidated Statement of Cash Flows for the three months ended September 30, 2016, $0.9 million of salon asset impairments were related to discontinued operations. Other than the salon asset impairments and the other items presented in the Consolidated Statement of Cash Flows, there were no other significant noncash operating activities or any significant noncash investing activities related to discontinued operations for the three months ended September 30, 2017 and 2016. Stock-Based Employee Compensation: During the three months ended September 30, 2017, the Company granted 259,158 restricted stock units (RSUs). Total compensation cost for stock-based payment arrangements totaled $2.0 and $1.9 million for the three months ended September 30, 2017 and 2016, respectively, recorded within general and administrative expense on the unaudited Condensed Consolidated Statement of Operations. Long-Lived Asset Impairment Assessments, Excluding Goodwill: The Company assesses impairment of long-lived assets at the individual salon level, as this is the lowest level for which identifiable cash flows are largely independent of other groups of assets and liabilities, when events or changes in circumstances indicate the carrying value of the assets or the asset grouping may not be recoverable. Factors considered in deciding when to perform an impairment review include significant under-performance of an individual salon in relation to expectations, significant economic or geographic trends, and significant changes or planned changes in our use of the assets. Impairment is evaluated based on the sum of undiscounted estimated future cash flows expected to result from use of the long-lived assets. If the undiscounted estimated cash flows are less than the carrying value of the assets, the Company calculates an impairment charge based on the estimated fair value of the assets. The fair value of the long-lived assets is estimated using a discounted cash flow model based on the best information available, including salon level revenues and expenses. Long-lived asset impairment charges of $2.3 and $1.9 million have been recorded within depreciation and amortization in the Consolidated Statement of Operations for the three months ended September 30, 2017 and 2016, respectively. Accounting Standards Recently Issued But Not Yet Adopted by the Company: Leases In February 2016, the FASB issued updated guidance requiring organizations that lease assets to recognize the rights and obligations created by those leases on the consolidated balance sheet. The new standard is effective for the Company in the first quarter of fiscal year 2020, with early adoption permitted. The Company is currently evaluating the effect the new standard will have on the Company's consolidated financial statements but expects this adoption will result in a material increase in the assets and liabilities on the Company's consolidated balance sheet. Revenue from Contracts with Customers In May 2014, the FASB issued updated guidance for revenue recognition. The updated accounting guidance provides a comprehensive new revenue recognition model that requires a company to recognize revenue to depict the exchange for goods or services to a customer at an amount that reflects the consideration it expects to receive for those goods or services. The guidance also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts. The guidance is effective for the Company in the first quarter of fiscal year 2019, with early adoption permitted at the beginning of fiscal year 2018. The standard allows for either full retrospective adoption, meaning the standard is applied to all of the periods presented, or modified retrospective adoption, meaning the standard is applied only to the most current period presented in the financial statements. The Company expects to adopt this guidance in fiscal year 2019 using the modified retrospective method of adoption. While the Company is continuing to assess all potential impacts of the standard, the Company currently believes the most significant impact relates to the timing of recognition for gift card breakage, although it is not expected to have a material impact on the Company's consolidated financial statements. The Company is continuing to evaluate the impact the adoption of this new guidance will have on these and other revenue transactions, in addition to the impact on related disclosures and internal controls. Intra-Entity Transfers Other Than Inventory In October 2016, the FASB issued guidance on the accounting for income tax effects of intercompany transfers of assets other than inventory. The guidance requires entities to recognize the income tax impact of an intra-entity transfer of an asset other than inventory when the transfer occurs, rather than when the assets have been sold to an outside party. The guidance is effective for the Company in the first quarter of fiscal year 2019, with early adoption permitted. The Company does not expect the adoption of this standard to have a material impact on the Company's consolidated financial statements. Restricted Cash In November 2016, the FASB issued updated cash flow guidance requiring restricted cash and restricted cash equivalents to be included in the cash and cash equivalent balances in the statement of cash flows. Transfers between cash and cash equivalents and restricted cash will no longer be presented in the statement of cash flows and a reconciliation between the balance sheet and statement of cash flows must be disclosed. The guidance is effective for the Company beginning in the first quarter of fiscal year 2019, with early adoption permitted. The Company is currently evaluating the impact this guidance will have on the Company's consolidated statement of cash flows. Statement of Cash Flows In August 2016, the FASB issued updated cash flow guidance clarifying cash flow classification and presentation for certain items. The guidance is effective for the Company beginning in the first quarter of fiscal year 2019, with early adoption permitted. The Company does not expect the adoption of this standard to have a material impact on the Company's consolidated statement of cash flows. |
INVESTMENT IN AFFILIATES: |
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Investments in and Advances to Affiliates, Schedule of Investments [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
INVESTMENT IN AFFILIATES | INVESTMENT IN AFFILIATES: Empire Education Group, Inc. (EEG) As of September 30, 2017, the Company had a 54.6% ownership interest in EEG and no remaining investment value as the Company fully impaired its investment in EEG as of December 31, 2015. The Company has not recorded any equity income or losses related to its investment in EEG subsequent to the impairment. The Company will record equity income related to the Company's investment in EEG once EEG's cumulative income exceeds its cumulative losses, measured from the date of impairment. While the Company could be responsible for certain liabilities associated with this venture, the Company does not currently expect them to have a material impact on the Company's financial position. The table below presents the summarized Statement of Operations information for EEG:
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EARNINGS PER SHARE: |
3 Months Ended |
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Sep. 30, 2017 | |
Earnings Per Share [Abstract] | |
EARNINGS PER SHARE | EARNINGS PER SHARE: The Company’s basic earnings per share is calculated as net income (loss) divided by weighted average common shares outstanding, excluding unvested outstanding restricted stock awards, RSUs and PSUs. The Company’s diluted earnings per share is calculated as net income divided by weighted average common shares and common share equivalents outstanding, which includes shares issued under the Company’s stock-based compensation plans. Stock-based awards with exercise prices greater than the average market price of the Company’s common stock are excluded from the computation of diluted earnings per share. For the three months ended September 30, 2017 and 2016, 223,526 and 394,847 common stock equivalents of dilutive common stock were included in the diluted earnings per share calculations due to the income from continuing operations. The computation of weighted average shares outstanding, assuming dilution, excluded 2,530,400 and 2,505,850 of stock-based awards during the three months ended September 30, 2017 and 2016, respectively, as they were not dilutive under the treasury stock method. |
SHAREHOLDERS' EQUITY: |
3 Months Ended |
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Sep. 30, 2017 | |
Stockholders' Equity Note [Abstract] | |
SHAREHOLDERS' EQUITY | SHAREHOLDERS’ EQUITY: Additional Paid-In Capital: The $0.5 million increase in additional paid-in capital during the three months ended September 30, 2017 was primarily due to $2.0 million of stock-based compensation, partly offset by other stock-based compensation activity of $1.5 million. |
INCOME TAXES: |
3 Months Ended |
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Sep. 30, 2017 | |
Income Tax Disclosure [Abstract] | |
INCOME TAXES | INCOME TAXES: During the three months ended September 30, 2017 and 2016, the Company recognized tax expense of $4.8 and $2.7 million, respectively, with corresponding effective tax rates of 30.9% and 32.3%. The recorded tax provision and effective tax rates for the three months ended September 30, 2017 and 2016 were different than what would normally be expected primarily due to the impact of the deferred tax valuation allowance. The majority of the tax provision related to non-cash tax expense for tax benefits on certain indefinite-lived assets the Company cannot recognize for reporting purposes. This non-cash impact will continue as long as the Company has a valuation allowance in place against most of its deferred tax assets and is expected to approximate $7.3 million of expense for the fiscal year ending June 30, 2018. The Company’s U.S. federal income tax returns for the fiscal years 2010 through 2013 have been examined by the Internal Revenue Service (IRS) and were moved to the IRS Appeals Division. The Company believes its income tax positions and deductions will be sustained and will continue to vigorously defend such positions. All earlier tax years are closed to examination. With limited exceptions, the Company is no longer subject to state and international income tax examinations by tax authorities for years before 2012. |
COMMITMENTS AND CONTINGENCIES: |
3 Months Ended |
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Sep. 30, 2017 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | COMMITMENTS AND CONTINGENCIES: The Company is a defendant in various lawsuits and claims arising out of the normal course of business. Like certain other large retail employers, the Company has been faced with allegations of purported class-wide consumer and wage and hour violations. Litigation is inherently unpredictable and the outcome of these matters cannot presently be determined. Although the actions are being vigorously defended, the Company could in the future incur judgments or enter into settlements of claims that could have a material adverse effect on its results of operations in any particular period. See Note 5 to the unaudited Condensed Consolidated Financial Statements for discussion regarding certain issues that have resulted from the IRS' examination of fiscal 2010 through 2013 federal income tax returns. Final resolution of these issues is not expected to have a material impact on the Company's financial position. |
GOODWILL AND OTHER INTANGIBLES: |
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Goodwill and Intangible Assets Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
GOODWILL AND OTHER INTANGIBLES | GOODWILL AND OTHER INTANGIBLES: During the first quarter of fiscal year 2018, the Company experienced a triggering event due to the redefining of its operating segments as a result of the sale of the mall-based business and the International segment. See Note 10 to the unaudited Condensed Consolidated Financial Statements. The Company now reports its operations in two reportable segments: Company-owned salons and Franchise salons. The Company considered whether any goodwill associated with the MasterCuts salons should be allocated as part of the sale of the mall-based business and considered for impairment. The Company determined no goodwill should be allocated to the mall-based business because the salons sold were projected to produce operating losses in the future and had minimal fair value. All goodwill associated with the North American Premium and International segments was previously impaired. Pursuant to the change in operating segments, the Company compared the fair value of the remaining salons in the Company-owned reporting unit to its carrying value and concluded the fair value exceeded its carrying value by a substantial margin, resulting in no goodwill impairment. The table below contains details related to the Company's goodwill:
_______________________________________________________________________________
The table below presents other intangible assets:
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FINANCING ARRANGEMENTS: |
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Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
FINANCING ARRANGEMENTS | FINANCING ARRANGEMENTS: The Company’s long-term debt consists of the following:
Senior Term Notes In December 2015, the Company exchanged its $120.0 million 5.75% senior notes due December 2017 for $123.0 million 5.5% senior notes due December 2019 (Senior Term Notes). The Senior Term Notes were issued at a $3.0 million discount which is being amortized to interest expense over the term of the notes. Interest on the Senior Term Notes is payable semi-annually in arrears on June 1 and December 1 of each year. The Senior Term Notes are unsecured and not guaranteed by any of the Company’s subsidiaries or any third parties. The following table contains details related to the Company's Senior Term Notes:
Revolving Credit Facility The Company has a $200 million five-year unsecured revolving credit facility that expires in June 2018. The revolving credit facility has interest rates tied to LIBOR credit spread. As of September 30, 2017 and June 30, 2017, the Company had no outstanding borrowings under this credit facility. The Company had outstanding standby letters of credit under the facility of $1.5 million at September 30, 2017 and June 30, 2017, primarily related to the Company's self-insurance program, therefore, unused available credit under the facility at September 30, 2017 and June 30, 2017 was $198.5 million. The Company was in compliance with all covenants and requirements of its financing arrangements as of and during the three months ended September 30, 2017. |
FAIR VALUE MEASUREMENTS: |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
FAIR VALUE MEASUREMENTS | FAIR VALUE MEASUREMENTS: Fair value measurements are categorized into one of three levels based on the lowest level of significant input used: Level 1 (unadjusted quoted prices in active markets); Level 2 (observable market inputs available at the measurement date, other than quoted prices included in Level 1); and Level 3 (unobservable inputs that cannot be corroborated by observable market data). Assets and Liabilities Measured at Fair Value on a Recurring Basis As of September 30, 2017 and June 30, 2017, the estimated fair value of the Company’s cash, cash equivalents, restricted cash, receivables and accounts payable approximated their carrying values. As of September 30, 2017, the estimated fair value of the Company's debt was $126.4 million and the carrying value was $123.0 million, excluding the $1.6 million unamortized debt discount and $0.5 million unamortized debt issuance costs. As of June 30, 2017, the estimated fair value of the Company's debt was $125.9 million and the carrying value was $123.0 million, excluding the $1.8 million unamortized debt discount and $0.6 million unamortized debt issuance costs. The estimated fair value of the Company's debt is based on Level 2 inputs. Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis We measure certain assets, including the Company’s equity method investments, tangible fixed and other assets and goodwill, at fair value on a nonrecurring basis when they are deemed to be other than temporarily impaired. The fair values of these assets are determined based on valuation techniques using the best information available, and may include quoted market prices, market comparables, and discounted cash flow projections. The following impairments were based on fair values using Level 3 inputs:
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SEGMENT INFORMATION: |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SEGMENT INFORMATION | SEGMENT INFORMATION: Segment information is prepared on the same basis the chief operating decision maker reviews financial information for operational decision-making purposes. During the first quarter of fiscal year 2018, the Company redefined its operating segments to reflect how the chief operating decision maker now evaluates the business as a result of the Company's Board of Directors' approval of the mall-based business and International segment sale. See Note 1 to the unaudited Condensed Consolidated Financial Statements. The Company now reports its operations in two operating segments: Company-owned salons and Franchise salons. The Company's operating segments are its reportable operating segments. Prior to this change, the Company had four operating segments: North American Value, North American Premium, North American Franchise, and International. The Company did not operate under the realigned operating segment structure prior to the first quarter of fiscal year 2018. As of September 30, 2017, the Company’s reportable operating segments consisted of the following salons:
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As of September 30, 2017, the Company-owned operating segment is comprised primarily of SmartStyle, Supercuts, Regis, MasterCuts, Cost Cutters, and other regional trade names and the Franchise operating segment is comprised primarily of Supercuts, SmartStyle, Cost Cutters, First Choice Haircutters, Roosters and Magicuts concepts. In connection with the sale of the mall-based business and International segment, the Regis and MasterCuts brands will be primarily franchise brands, beginning in October 2017. The Corporate segment represents home office and other unallocated costs. Concurrent with the change in reportable segments, the Company recast its prior period financial information to reflect comparable financial information for the new segment structure. Historical financial information shown in the following table and elsewhere in this filing reflects this change. Financial information concerning the Company's reportable operating segments is shown in the following table:
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(Policies) |
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Sep. 30, 2017 | |
Accounting Policies [Abstract] | |
Long-Lived Asset Impairment Assessments, Excluding Goodwill | The Company assesses impairment of long-lived assets at the individual salon level, as this is the lowest level for which identifiable cash flows are largely independent of other groups of assets and liabilities, when events or changes in circumstances indicate the carrying value of the assets or the asset grouping may not be recoverable. Factors considered in deciding when to perform an impairment review include significant under-performance of an individual salon in relation to expectations, significant economic or geographic trends, and significant changes or planned changes in our use of the assets. Impairment is evaluated based on the sum of undiscounted estimated future cash flows expected to result from use of the long-lived assets. If the undiscounted estimated cash flows are less than the carrying value of the assets, the Company calculates an impairment charge based on the estimated fair value of the assets. The fair value of the long-lived assets is estimated using a discounted cash flow model based on the best information available, including salon level revenues and expenses. |
Accounting Standards Recently Issued But Not Yet Adopted by the Company | Leases In February 2016, the FASB issued updated guidance requiring organizations that lease assets to recognize the rights and obligations created by those leases on the consolidated balance sheet. The new standard is effective for the Company in the first quarter of fiscal year 2020, with early adoption permitted. The Company is currently evaluating the effect the new standard will have on the Company's consolidated financial statements but expects this adoption will result in a material increase in the assets and liabilities on the Company's consolidated balance sheet. Revenue from Contracts with Customers In May 2014, the FASB issued updated guidance for revenue recognition. The updated accounting guidance provides a comprehensive new revenue recognition model that requires a company to recognize revenue to depict the exchange for goods or services to a customer at an amount that reflects the consideration it expects to receive for those goods or services. The guidance also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts. The guidance is effective for the Company in the first quarter of fiscal year 2019, with early adoption permitted at the beginning of fiscal year 2018. The standard allows for either full retrospective adoption, meaning the standard is applied to all of the periods presented, or modified retrospective adoption, meaning the standard is applied only to the most current period presented in the financial statements. The Company expects to adopt this guidance in fiscal year 2019 using the modified retrospective method of adoption. While the Company is continuing to assess all potential impacts of the standard, the Company currently believes the most significant impact relates to the timing of recognition for gift card breakage, although it is not expected to have a material impact on the Company's consolidated financial statements. The Company is continuing to evaluate the impact the adoption of this new guidance will have on these and other revenue transactions, in addition to the impact on related disclosures and internal controls. Intra-Entity Transfers Other Than Inventory In October 2016, the FASB issued guidance on the accounting for income tax effects of intercompany transfers of assets other than inventory. The guidance requires entities to recognize the income tax impact of an intra-entity transfer of an asset other than inventory when the transfer occurs, rather than when the assets have been sold to an outside party. The guidance is effective for the Company in the first quarter of fiscal year 2019, with early adoption permitted. The Company does not expect the adoption of this standard to have a material impact on the Company's consolidated financial statements. Restricted Cash In November 2016, the FASB issued updated cash flow guidance requiring restricted cash and restricted cash equivalents to be included in the cash and cash equivalent balances in the statement of cash flows. Transfers between cash and cash equivalents and restricted cash will no longer be presented in the statement of cash flows and a reconciliation between the balance sheet and statement of cash flows must be disclosed. The guidance is effective for the Company beginning in the first quarter of fiscal year 2019, with early adoption permitted. The Company is currently evaluating the impact this guidance will have on the Company's consolidated statement of cash flows. Statement of Cash Flows In August 2016, the FASB issued updated cash flow guidance clarifying cash flow classification and presentation for certain items. The guidance is effective for the Company beginning in the first quarter of fiscal year 2019, with early adoption permitted. The Company does not expect the adoption of this standard to have a material impact on the Company's consolidated statement of cash flows. |
Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis | We measure certain assets, including the Company’s equity method investments, tangible fixed and other assets and goodwill, at fair value on a nonrecurring basis when they are deemed to be other than temporarily impaired. The fair values of these assets are determined based on valuation techniques using the best information available, and may include quoted market prices, market comparables, and discounted cash flow projections. |
BASIS OF PRESENTATION OF UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (Tables) |
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Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedules of discontinued operations | The following summarizes the assets and liabilities of our mall-based business and International segment as of September 30, 2017 and June 30, 2017:
In connection with the sale of the mall-based business and the International segment as part of our held for sale assessment at September 30, 2017, the Company performed an impairment assessment of the asset groups. The Company recognized net impairment charges within discontinued operations during the three months ended September 30, 2017 based on the difference between the expected sale prices and the carrying value of the asset groups. The following summarizes the results of our discontinued operations for the periods presented:
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INVESTMENT IN AFFILIATES: (Tables) |
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Investments in and Advances to Affiliates, Schedule of Investments [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of equity method investments | The table below presents the summarized Statement of Operations information for EEG:
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GOODWILL AND OTHER INTANGIBLES: (Tables) |
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Goodwill and Intangible Assets Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of recorded goodwill | The table below contains details related to the Company's goodwill:
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Schedule of other intangible assets | The table below presents other intangible assets:
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FINANCING ARRANGEMENTS: (Tables) |
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Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of long-term debt | The following table contains details related to the Company's Senior Term Notes:
The Company’s long-term debt consists of the following:
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FAIR VALUE MEASUREMENTS: (Tables) |
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Sep. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of fair value impairments | The following impairments were based on fair values using Level 3 inputs:
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SEGMENT INFORMATION: (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Company's reportable operating segments | As of September 30, 2017, the Company’s reportable operating segments consisted of the following salons:
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Schedule of summarized financial information of reportable operating segments | egment, the Regis and MasterCuts brands will be primarily franchise brands, beginning in October 2017. The Corporate segment represents home office and other unallocated costs. Concurrent with the change in reportable segments, the Company recast its prior period financial information to reflect comparable financial information for the new segment structure. Historical financial information shown in the following table and elsewhere in this filing reflects this change. Financial information concerning the Company's reportable operating segments is shown in the following table:
|
BASIS OF PRESENTATION OF UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: Discontinued Operations, Additional Information (Details) |
3 Months Ended | ||
---|---|---|---|
Sep. 30, 2017
USD ($)
salon
|
Sep. 30, 2016
USD ($)
|
Oct. 31, 2017
salon
|
|
Discontinued Operations | |||
Number of stores | salon | 8,855 | ||
Loss from discontinued operations | $ (33,768,000) | $ (2,459,000) | |
Non-cash impairment related to discontinued operations | 29,169,000 | 0 | |
Mall-Based Salons and International Segment | Discontinued Operations, Held-for-sale | |||
Discontinued Operations | |||
Loss from discontinued operations | (33,768,000) | (2,459,000) | |
Non-cash impairment related to discontinued operations | 30,467,000 | ||
Loss from operations | 1,700,000 | ||
Professional fees | 1,600,000 | ||
Income taxes allocated to discontinued operations | $ 0 | ||
Impairment of assets, disposal group | $ 1,000,000 | ||
Subsequent Event | Mall-Based Salons and International Segment | Discontinued Operations, Disposed of by Sale | North American Value and North American Premium Segments | |||
Discontinued Operations | |||
Number of stores | salon | 858 | ||
Subsequent Event | Mall-Based Salons and International Segment | Discontinued Operations, Disposed of by Sale | International | |||
Discontinued Operations | |||
Number of stores | salon | 250 |
BASIS OF PRESENTATION OF UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: Discontinued Operations Assets and Liabilities (Details) - USD ($) $ in Thousands |
Sep. 30, 2017 |
Jun. 30, 2017 |
Jun. 30, 2016 |
---|---|---|---|
Current assets held for sale | |||
Cash and cash equivalents | $ 1,352 | $ 0 | |
Total current assets held for sale | $ 34,743 | 32,914 | |
Noncurrent assets held for sale | |||
Total noncurrent assets held for sale | 24,443 | 27,352 | |
Noncurrent liabilities related to assets held for sale | |||
Total noncurrent liabilities related to assets held for sale | 8,018 | 7,232 | |
Mall-Based Salons and International Segment | Discontinued Operations, Held-for-sale | |||
Current assets held for sale | |||
Cash and cash equivalents | 1,298 | 1,352 | |
Receivables, net | 4,674 | 3,792 | |
Inventories | 24,310 | 23,712 | |
Other current assets | 4,461 | 4,058 | |
Total current assets held for sale | 34,743 | 32,914 | |
Noncurrent assets held for sale | |||
Property and equipment, net | 22,435 | 23,713 | |
Other intangibles, net | 1,676 | 1,669 | |
Other assets | 332 | 1,970 | |
Total noncurrent assets held for sale | 24,443 | 27,352 | |
Current liabilities related to assets held for sale | |||
Accounts payable | 2,283 | 1,548 | |
Accrued expenses | 14,036 | 11,578 | |
Accrued loss on discontinued operations | 30,467 | 0 | |
Total current liabilities related to assets held for sale | 46,786 | 13,126 | |
Noncurrent liabilities related to assets held for sale | |||
Other noncurrent liabilities | 8,018 | 7,232 | |
Total noncurrent liabilities related to assets held for sale | $ 8,018 | $ 7,232 |
BASIS OF PRESENTATION OF UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: Discontinued Operations Results (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
|
Discontinued Operations | ||
Loss from discontinued operations | $ (33,768) | $ (2,459) |
Mall-Based Salons and International Segment | Discontinued Operations, Held-for-sale | ||
Discontinued Operations | ||
Revenues | 93,366 | 112,212 |
Loss from discontinued operations | $ (33,768) | $ (2,459) |
BASIS OF PRESENTATION OF UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: Additional Information (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
|
Stock-Based Employee Compensation: | ||
Stock-based compensation | $ 2,030 | $ 1,865 |
Long-Lived Asset Impairment Assessments, Excluding Goodwill: | ||
Long-lived asset impairments | $ 2,280 | $ 1,909 |
Restricted stock units | ||
Stock-Based Employee Compensation: | ||
Stock granted (in shares) | 259,158 |
INVESTMENT IN AFFILIATES: (Details) - Empire Education Group Inc - USD ($) |
3 Months Ended | |
---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
|
Investment in affiliates | ||
Ownership percentage | 54.60% | |
Investment value | $ 0 | |
(Unaudited) | ||
Gross revenues | 32,637,000 | $ 30,036,000 |
Gross profit | 9,679,000 | 8,110,000 |
Operating loss | (192,000) | (707,000) |
Net loss | $ (344,000) | $ (830,000) |
EARNINGS PER SHARE: (Details) - shares |
3 Months Ended | |
---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
|
Earnings Per Share [Abstract] | ||
Common stock equivalents included in the diluted earnings per share calculation (in shares) | 223,526 | 394,847 |
Equity Based Compensation Awards | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Awards excluded from diluted earnings per share computation (in shares) | 2,530,400 | 2,505,850 |
SHAREHOLDERS' EQUITY: (Details) $ in Millions |
3 Months Ended |
---|---|
Sep. 30, 2017
USD ($)
| |
Stockholders' Equity [Line Items] | |
Stock-based compensation | $ 2.0 |
Adjustments to APIC offset by other stock-based compensation activity | 1.5 |
Additional Paid-in Capital | |
Stockholders' Equity [Line Items] | |
Increase (decrease) in additional paid-in capital | $ 0.5 |
INCOME TAXES: (Details) - USD ($) $ in Thousands |
3 Months Ended | 12 Months Ended | |
---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Jun. 30, 2018 |
|
Income Tax Disclosure [Abstract] | |||
Income tax (benefit) expense | $ 4,832 | $ 2,740 | |
Effective tax rate (as a percent) | 30.90% | 32.30% | |
Forecast | |||
Subsequent Event [Line Items] | |||
Other noncash income tax expense | $ 7,300 |
GOODWILL AND OTHER INTANGIBLES: Additional Information (Details) |
3 Months Ended |
---|---|
Sep. 30, 2017
USD ($)
reporting_unit
| |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Number of reporting units | reporting_unit | 2 |
Company-owned | |
Goodwill, Impaired [Abstract] | |
Goodwill impairment loss | $ 0 |
Mall-Based Salons and International Segment | Discontinued Operations, Held-for-sale | |
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | |
Goodwill allocated to discontinued operations | $ 0 |
GOODWILL AND OTHER INTANGIBLES: Changes in Goodwill (Details) $ in Thousands |
3 Months Ended |
---|---|
Sep. 30, 2017
USD ($)
| |
Goodwill [Roll Forward] | |
Goodwill, net at June 30, 2017 | $ 416,987 |
Translation rate adjustments | 1,492 |
Derecognition related to sale of salon assets to franchisees | (270) |
Goodwill, net at September 30, 2017 | 418,209 |
Company-owned | |
Goodwill [Roll Forward] | |
Goodwill, net at June 30, 2017 | 188,888 |
Translation rate adjustments | 676 |
Derecognition related to sale of salon assets to franchisees | (270) |
Goodwill, net at September 30, 2017 | 189,294 |
Franchise | |
Goodwill [Roll Forward] | |
Goodwill, net at June 30, 2017 | 228,099 |
Translation rate adjustments | 816 |
Derecognition related to sale of salon assets to franchisees | 0 |
Goodwill, net at September 30, 2017 | $ 228,915 |
GOODWILL AND OTHER INTANGIBLES: Schedule of Intangible Assets (Details) - USD ($) $ in Thousands |
Sep. 30, 2017 |
Jun. 30, 2017 |
---|---|---|
Amortized intangible assets: | ||
Cost | $ 34,525 | $ 34,020 |
Accumulated amortization | (22,720) | (22,055) |
Net | 11,805 | 11,965 |
Brand assets and trade names | ||
Amortized intangible assets: | ||
Cost | 8,387 | 8,187 |
Accumulated amortization | (4,173) | (4,013) |
Net | 4,214 | 4,174 |
Franchise agreements | ||
Amortized intangible assets: | ||
Cost | 10,061 | 9,832 |
Accumulated amortization | (7,685) | (7,433) |
Net | 2,376 | 2,399 |
Lease intangibles | ||
Amortized intangible assets: | ||
Cost | 14,041 | 14,007 |
Accumulated amortization | (9,277) | (9,077) |
Net | 4,764 | 4,930 |
Other | ||
Amortized intangible assets: | ||
Cost | 2,036 | 1,994 |
Accumulated amortization | (1,585) | (1,532) |
Net | $ 451 | $ 462 |
FINANCING ARRANGEMENTS: Schedule of Long-term Debt (Details) - USD ($) |
Sep. 30, 2017 |
Jun. 30, 2017 |
Dec. 31, 2015 |
---|---|---|---|
Debt Instrument [Line Items] | |||
Long-term debt | $ 120,847,000 | $ 120,599,000 | |
Senior Notes | Senior Term Notes, net | |||
Debt Instrument [Line Items] | |||
Interest rate percentage | 5.50% | 5.50% | |
Long-term debt | $ 120,847,000 | 120,599,000 | |
Line of Credit | Revolving Credit Facility | |||
Debt Instrument [Line Items] | |||
Long-term debt | $ 0 | $ 0 |
FINANCING ARRANGEMENTS: Additional Information (Details) - USD ($) |
Sep. 30, 2017 |
Jun. 30, 2017 |
Dec. 31, 2015 |
---|---|---|---|
Debt Instrument [Line Items] | |||
Long-term debt | $ 120,847,000 | $ 120,599,000 | |
Senior Notes | Senior Term Notes 5.75% | |||
Debt Instrument [Line Items] | |||
Debt face amount | $ 120,000,000 | ||
Interest rate percentage | 5.75% | ||
Senior Notes | Senior Term Notes, net | |||
Debt Instrument [Line Items] | |||
Debt face amount | $ 123,000,000.0 | ||
Interest rate percentage | 5.50% | 5.50% | |
Unamortized discount | $ 1,627,000 | 1,815,000 | $ 3,000,000 |
Long-term debt | 120,847,000 | 120,599,000 | |
Line of Credit | Revolving Credit Facility | |||
Debt Instrument [Line Items] | |||
Maximum borrowing capacity | 200,000,000 | ||
Long-term debt | 0 | 0 | |
Outstanding standby letters of credit | 1,500,000 | 1,500,000 | |
Revolving credit facility remaining borrowing capacity | $ 198,500,000 | $ 198,500,000 |
FINANCING ARRANGEMENTS: Schedule of Senior Term Notes (Details) - USD ($) $ in Thousands |
Sep. 30, 2017 |
Jun. 30, 2017 |
Dec. 31, 2015 |
---|---|---|---|
Debt Instrument [Line Items] | |||
Senior Term Notes, net | $ 120,847 | $ 120,599 | |
Senior Notes | Senior Term Notes, net | |||
Debt Instrument [Line Items] | |||
Principal amount on the Senior Term Notes | 123,000 | 123,000 | |
Unamortized debt discount | (1,627) | (1,815) | $ (3,000) |
Unamortized debt issuance costs | (526) | (586) | |
Senior Term Notes, net | $ 120,847 | $ 120,599 |
FAIR VALUE MEASUREMENTS: (Details) - USD ($) $ in Thousands |
3 Months Ended | |||
---|---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Jun. 30, 2017 |
Dec. 31, 2015 |
|
Assets and liabilities measured at fair value on a nonrecurring basis | ||||
Long-lived assets | $ (2,280) | $ (1,909) | ||
Senior Notes | Senior Term Notes, net | ||||
Assets and liabilities measured at fair value on a nonrecurring basis | ||||
Debt fair value | 126,400 | $ 125,900 | ||
Debt, gross | 123,000 | 123,000 | ||
Unamortized discount | 1,627 | 1,815 | $ 3,000 | |
Unamortized debt issuance costs | $ 526 | $ 586 |
SEGMENT INFORMATION: Additional Information (Details) - segment |
3 Months Ended | |
---|---|---|
Sep. 30, 2017 |
Jun. 30, 2017 |
|
Segment Reporting [Abstract] | ||
Number of reportable segments | 2 | 4 |
SEGMENT INFORMATION: Salon Locations (Details) - salon |
1 Months Ended | |
---|---|---|
Oct. 31, 2017 |
Sep. 30, 2017 |
|
Franchisor Disclosure [Line Items] | ||
Number of stores | 8,855 | |
Company-owned | ||
Franchisor Disclosure [Line Items] | ||
Number of stores | 6,112 | |
Company-owned | Subsequent Event | ||
Franchisor Disclosure [Line Items] | ||
Increase (decrease) in number of stores | (1,108) | |
Franchise | ||
Franchisor Disclosure [Line Items] | ||
Number of stores | 2,743 | |
Franchise | Subsequent Event | ||
Franchisor Disclosure [Line Items] | ||
Increase (decrease) in number of stores | 1,108 | |
North American Value and North American Premium Segments | Discontinued Operations, Disposed of by Sale | Mall-Based Salons and International Segment | Subsequent Event | ||
Franchisor Disclosure [Line Items] | ||
Number of stores | 858 | |
International | Discontinued Operations, Disposed of by Sale | Mall-Based Salons and International Segment | Subsequent Event | ||
Franchisor Disclosure [Line Items] | ||
Number of stores | 250 |
SEGMENT INFORMATION: Operating Results (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
|
Revenues: | ||
Service | $ 235,559 | $ 243,091 |
Product | 60,940 | 63,716 |
Royalties and fees | 13,374 | 12,024 |
Total revenues | 309,873 | 318,831 |
Operating expenses: | ||
Cost of service | 139,836 | 150,797 |
Cost of product | 30,162 | 30,815 |
Site operating expenses | 33,303 | 32,645 |
General and administrative | 35,165 | 35,916 |
Rent | 42,416 | 46,233 |
Depreciation and amortization | 12,255 | 12,109 |
Total operating expenses | 293,137 | 308,515 |
Operating income | 16,736 | 10,316 |
Other (expense) income: | ||
Interest expense | (2,138) | (2,163) |
Interest income and other, net | 1,027 | 327 |
Income from continuing operations before income taxes | 15,625 | 8,480 |
Operating Segments | Company-owned | ||
Revenues: | ||
Service | 235,559 | 243,091 |
Product | 53,218 | 56,313 |
Royalties and fees | 0 | 0 |
Total revenues | 288,777 | 299,404 |
Operating expenses: | ||
Cost of service | 139,836 | 150,797 |
Cost of product | 24,447 | 25,347 |
Site operating expenses | 33,302 | 32,645 |
General and administrative | 15,824 | 11,542 |
Rent | 42,123 | 46,012 |
Depreciation and amortization | 9,894 | 9,595 |
Total operating expenses | 265,426 | 275,938 |
Operating income | 23,351 | 23,466 |
Other (expense) income: | ||
Interest expense | 0 | 0 |
Interest income and other, net | 0 | 0 |
Income from continuing operations before income taxes | 23,351 | 23,466 |
Operating Segments | Franchise | ||
Revenues: | ||
Service | 0 | 0 |
Product | 7,722 | 7,403 |
Royalties and fees | 13,374 | 12,024 |
Total revenues | 21,096 | 19,427 |
Operating expenses: | ||
Cost of service | 0 | 0 |
Cost of product | 5,715 | 5,468 |
Site operating expenses | 1 | 0 |
General and administrative | 5,546 | 5,397 |
Rent | 47 | 42 |
Depreciation and amortization | 92 | 90 |
Total operating expenses | 11,401 | 10,997 |
Operating income | 9,695 | 8,430 |
Other (expense) income: | ||
Interest expense | 0 | 0 |
Interest income and other, net | 0 | 0 |
Income from continuing operations before income taxes | 9,695 | 8,430 |
Unallocated Corporate | ||
Revenues: | ||
Service | 0 | 0 |
Product | 0 | 0 |
Royalties and fees | 0 | 0 |
Total revenues | 0 | 0 |
Operating expenses: | ||
Cost of service | 0 | 0 |
Cost of product | 0 | 0 |
Site operating expenses | 0 | 0 |
General and administrative | 13,795 | 18,977 |
Rent | 246 | 179 |
Depreciation and amortization | 2,269 | 2,424 |
Total operating expenses | 16,310 | 21,580 |
Operating income | (16,310) | (21,580) |
Other (expense) income: | ||
Interest expense | (2,138) | (2,163) |
Interest income and other, net | 1,027 | 327 |
Income from continuing operations before income taxes | $ (17,421) | $ (23,416) |
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