EX-99 2 a08-22006_1ex99.htm EX-99

 

Exhibit No. 99

 

 

 

CONTACT: REGIS CORPORATION:

 

 

Mark Fosland — Vice President, Finance

 

 

952-806-1707

 

 

Alex Forliti — Director, Finance—Investor Relations

 

 

952-806-1767

 

For Immediate Release

 

REGIS REPORTS FOURTH QUARTER AND FISCAL YEAR 2008 RESULTS

— Fourth Quarter Operational Earnings Meet Guidance —

 

MINNEAPOLIS, August 20, 2008 — Regis Corporation (NYSE:RGS), the global leader in the $170 billion hair care industry, today reported fourth quarter net income of $23.1 million, or $0.54 per diluted share.  Fourth quarter earnings included two non-operational items that were not contemplated in previous guidance.  The first item relates to an incremental non-cash asset write-off of $4.5 million, on a pre-tax basis, associated with the planned closure of up to 160 underperforming salons which was announced in a press release issued July 9, 2008.  The second item relates to a pre-tax $3.4 million benefit from an unplanned change in workers’ compensation and other insurance reserve estimates.  Absent these two items, fourth quarter earnings were $0.55 per diluted share which was at the low end of the Company’s previously issued guidance.

 

On July 10, 2008, the Company reported revenues for the fourth quarter ended June 30, 2008 of $709 million, compared to $675 million a year ago.  Deconsolidation of the beauty schools and the European franchise salon operations reduced revenue in the quarter by approximately $31.5 million.  Absent the impact of the school and European deconsolidation, consolidated revenues for the quarter would have increased 10.1 percent.  Fourth quarter total same-store sales increased 0.6 percent, falling within the previously issued guidance of 0.5 to 2.5 percent.  Same-store service sales in North America increased 3.3 percent during the fourth quarter.

 

“Our retail business remains a challenge and will continue to have issues for a year or two,” commented Paul D. Finkelstein, Chairman and Chief Executive Officer. “Service comps are a barometer as to the health of our business, as nearly seventy percent of our revenues come from services.  Third and fourth quarter same-store service sales were the best we have reported in eight years.  Regis is well positioned and I am more bullish today, for the long term, than I have been in over four years.  We are in the quintessential replenishment business offering affordable services and products.  Our strategy of moderately increasing service prices is working and we plan to continue this strategy for the next several years.  However, in the near term, my optimism has to be moderated by the current state of the economy which is adversely impacting consumer related businesses.  We are no exception, as our current quarter-to-date same-store sales are down slightly.”

 

As of June 30, 2008, Regis Corporation owned, franchised or held ownership interests in 13,551 worldwide locations, a net increase of 102 units during the quarter and 1,135 units for the fiscal year.

 

 


 

Full-Year Results

 

For the full year, revenues totaled $2.7 billion, up 4 percent compared to $2.6 billion during fiscal year 2007. Deconsolidation of the beauty schools and the European franchise salon operations reduced fiscal year revenue by approximately $86.9 million.  Absent the impact of the school and European deconsolidation, consolidated revenues for the year would have increased 7.8 percent.  Same-store sales for the full year increased 0.5 percent. Net income was $85.2 million, or $1.95 per diluted share.  Fiscal 2008 earnings results included several non-operational items which reduced earnings per diluted share by $0.04.  Absent these items, fiscal year 2008 earnings were $1.99 per diluted share.

 

First Quarter 2009 Outlook

 

The following outlook pertains to the fiscal first quarter ending September 30, 2008:

 

·                                          The Company’s non-GAAP earnings per diluted share, which excludes lease termination costs and costs associated with its Trade Secret transformation, is forecasted to be in a range of $0.41 to $0.47.

 

·                                          Lease termination costs are expected to be spread across the first half of fiscal 2009, the timing of which is dependent on lease termination negotiations with third parties.

 

·                                          The Company forecasts the cost of the Trade Secret transformation to be in a range of $0.03 to $0.05 per diluted share in the first quarter.

 

·                                          Consolidated revenue is forecasted to grow four to six percent to a range of $695 million to $705 million, compared to $668 million a year ago. (Revenue growth of approximately seven to nine percent before deconsolidation of beauty schools and the European franchise salon operations.)

 

·                                          Consolidated same-store sales are forecasted to be in a range of negative one percent to positive one percent.

 

Fiscal Year 2009 Outlook Remains Unchanged

 

                The following outlook pertains to the fiscal year ending June 30, 2009:

 

·                                          Excluding accretion from future possible acquisitions, the Company’s non-GAAP diluted earnings per share, which excludes lease termination costs and costs associated with its Trade Secret transformation, is forecasted to be in a range of $2.03 to $2.29.

 

·                                          Excluding revenue from future possible acquisitions, consolidated revenue is forecasted to grow four percent to $2.85 billion.  (Revenue growth of approximately six percent before deconsolidation of beauty schools and the European franchise salon operations.)

 

·                                          Consolidated same-store sales are forecasted to increase to a range of 0.5 to 2.5 percent.

 

·                                          The effective income tax rate is forecasted to be in the high 37 percent range.

 

                Regis Corporation will host a conference call discussing fourth quarter and fiscal year results today at 4:00 p.m., Central time. Interested parties are invited to listen by logging on to www.regiscorp.com or dialing 800-218-9073. A replay of the call will be available through August 23, 2008. The replay phone number is 800-405-2236, access code 11117579#.

 

About Regis Corporation

 

                Regis Corporation (NYSE:RGS) is the beauty industry’s global leader in beauty salons, hair restoration centers and cosmetology education. As of June 30, 2008, the Company owned, franchised or held ownership interests in over 13,500 worldwide locations.  Regis’ corporate and franchised locations operate under concepts such as Supercuts, Sassoon Salon, Regis Salons, MasterCuts, SmartStyle, Cost Cutters, Trade Secret, PureBeauty, BeautyFirst and Hair Club for Men and Women.  In addition, Regis maintains an ownership interest in Provalliance, which operates

 

 


 

salons primarily in Europe, under the brands of Jean Louis David, Franck Provost and Saint Algue.  Regis also maintains ownership interests in Empire Education Group and various other salon concepts such as Cool Cuts 4 Kids and the MY Style concepts in Japan.  System-wide, these and other concepts are located in the U.S. and in over 30 other countries in North America, South America, Europe, Africa and Asia. Regis also maintains a 49 percent ownership interest in Intelligent Nutrients, a business that provides a wide variety of certified organic products for health and beauty.  For additional information about the company, including management’s current financial outlook and a reconciliation of non-GAAP financial information, please visit the Investor Information section of the corporate website at www.regiscorp.com. To join Regis Corporation’s email alert list, click on this link:

 

                http://www.b2i.us/irpass.asp?BzID=913&to=ea&Nav=1&S=0&L=1

 

                This press release contains “forward-looking statements” within the meaning of the federal securities laws, including statements concerning anticipated future events and expectations that are not historical facts. These forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The forward—looking statements in this document reflect management’s best judgment at the time they are made, but all such statements are subject to numerous risks and uncertainties, which could cause actual results to differ materially from those expressed in or implied by the statements herein. Such forward-looking statements are often identified herein by use of words including, but not limited to, “may,” “believe,” “project,” “forecast,” “expect,” “estimate,” “anticipate” and “plan.” In addition, the following factors could affect the Company’s actual results and cause such results to differ materially from those expressed in forward-looking statements. These factors include competition within the personal hair care industry, which remains strong, both domestically and internationally; price sensitivity; changes in economic conditions; changes in consumer tastes and fashion trends; labor and benefit costs; legal claims; risk inherent to international development (including currency fluctuations); the continued ability of the Company and its franchisees to obtain suitable locations for new salon development; governmental initiatives such as minimum wage rates, taxes and possible franchise legislation; the ability of the Company to successfully identify, acquire and integrate salons that support its growth objectives; the ability of the Company to maintain satisfactory relationships with suppliers; the ability of the Company to consummate the planned closure of salons and the related realization of the anticipated costs, benefits and time frame; the ability of the Company to successfully complete the transformation of Trade Secret through expansion of product assortments; or other factors not listed above. The ability of the Company to meet its expected revenue growth is dependent on salon acquisitions, new salon construction and same-store sales increases, all of which are affected by many of the aforementioned risks. Additional information concerning potential factors that could affect future financial results is set forth in the Company’s Annual Report on Form 10-K for the year ended June 30, 2007. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. However, your attention is directed to any further disclosures made in our subsequent annual and periodic reports filed or furnished with the SEC on Forms 10-K, 10-Q and 8-K and Proxy Statements on Schedule 14A.

 

(TABLES TO FOLLOW)

 

 


 

REGIS CORPORATION (NYSE: RGS)

CONSOLIDATED BALANCE SHEET

As of June 30, 2008 and 2007

(Dollars in thousands, except share data)

 

 

 

June 30,

 

 

 

2008

 

2007

 

ASSETS

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

 

$

127,627

 

$

184,785

 

Receivables, net

 

37,824

 

67,773

 

Inventories

 

212,468

 

196,582

 

Deferred income taxes

 

15,954

 

18,775

 

Other current assets

 

51,278

 

57,149

 

Total current assets

 

445,151

 

525,064

 

Property and equipment, net

 

481,851

 

494,085

 

Goodwill

 

870,993

 

812,383

 

Other intangibles, net

 

144,291

 

213,452

 

Investment in affiliates

 

203,706

 

20,213

 

Other assets

 

89,879

 

66,917

 

Total assets

 

$

2,235,871

 

$

2,132,114

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Long-term debt, current portion

 

$

230,224

 

$

223,352

 

Accounts payable

 

69,693

 

74,532

 

Accrued expenses

 

207,605

 

240,748

 

Total current liabilities

 

507,522

 

538,632

 

Long-term debt and capital lease obligations

 

534,523

 

485,879

 

Other noncurrent liabilities

 

217,640

 

194,295

 

Total liabilities

 

1,259,685

 

1,218,806

 

Shareholders’ equity:

 

 

 

 

 

Common stock, $0.05 par value; issued and outstanding, 43,070,927 and 44,164,645 common shares at June 30, 2008 and 2007, respectively

 

2,153

 

2,209

 

Additional paid-in capital

 

143,265

 

178,029

 

Accumulated other comprehensive income

 

101,973

 

78,278

 

Retained earnings

 

728,795

 

654,792

 

Total shareholders’ equity

 

976,186

 

913,308

 

Total liabilities and shareholders’ equity

 

$

2,235,871

 

$

2,132,114

 

 

 


 

REGIS CORPORATION (NYSE: RGS)

CONSOLIDATED STATEMENT OF OPERATIONS

 (In thousands, except per share data)

 

 

 

(Unaudited)

 

 

 

 

 

 

 

Three Months Ended

June 30,

 

Year Ended

June 30,

 

 

 

2008

 

2007

 

2008

 

2007

 

Revenues:

 

 

 

 

 

 

 

 

 

Service

 

$

501,494

 

$

469,357

 

$

1,894,257

 

$

1,793,802

 

Product

 

195,940

 

185,141

 

775,980

 

752,280

 

Royalties and fees

 

11,610

 

20,823

 

68,628

 

80,506

 

 

 

709,044

 

675,321

 

2,738,865

 

2,626,588

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

Cost of service

 

286,880

 

265,022

 

1,090,710

 

1,014,781

 

Cost of product

 

99,480

 

92,414

 

395,979

 

380,492

 

Site operating expenses

 

49,197

 

45,866

 

204,001

 

208,101

 

General and administrative

 

82,374

 

85,982

 

337,160

 

328,644

 

Rent

 

107,839

 

102,226

 

406,270

 

382,820

 

Depreciation and amortization

 

37,008

 

33,741

 

130,448

 

124,137

 

Goodwill impairment

 

—

 

—

 

—

 

23,000

 

Total operating expenses

 

662,778

 

625,251

 

2,564,568

 

2,461,975

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

46,266

 

50,070

 

174,297

 

164,613

 

 

 

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

 

 

Interest expense

 

(10,903

)

(10,906

)

(44,571

)

(41,770

)

Interest income and other, net

 

2,294

 

1,645

 

8,373

 

5,113

 

 

 

 

 

 

 

 

 

 

 

Income before income taxes and equity in income of affiliated companies

 

37,657

 

40,809

 

138,099

 

127,956

 

 

 

 

 

 

 

 

 

 

 

Income taxes

 

(14,735

)

(12,934

)

(53,744

)

(44,786

)

Equity in income of affiliated companies, net ofincome taxes

 

159

 

—

 

849

 

—

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

23,081

 

$

27,875

 

$

85,204

 

$

83,170

 

 

 

 

 

 

 

 

 

 

 

Net income per share:

 

 

 

 

 

 

 

 

 

Basic

 

$

0.54

 

$

0.63

 

$

1.97

 

$

1.86

 

Diluted

 

$

0.54

 

$

0.62

 

$

1.95

 

$

1.82

 

 

 

 

 

 

 

 

 

 

 

Weighted average common and common equivalent shares outstanding:

 

 

 

 

 

 

 

 

 

Basic

 

42,709

 

44,468

 

43,157

 

44,723

 

Diluted

 

43,073

 

45,256

 

43,587

 

45,623

 

 

 

 

 

 

 

 

 

 

 

Cash dividends declared per common share

 

$

0.04

 

$

0.04

 

$

0.16

 

$

0.16

 

 

 


 

REGIS CORPORATION (NYSE: RGS)
SELECTED CASH FLOW DATA
(In thousands)

 

 

 

Years Ended

June 30,

 

 

 

2008

 

2007

 

 

 

 

 

 

 

Net cash provided by operating activities

 

$

222,383

 

$

241,860

 

Net cash used in investing activities

 

(266,029

)

(193,049

)

Net cash used in financing activities

 

(11,004

)

(6,425

)

Effect of exchange rate changes on cash and cash equivalents

 

(2,508

)

7,002

 

(Decrease) increase in cash and cash equivalents

 

(57,158

)

49,388

 

Cash and cash equivalents:

 

 

 

 

 

Beginning of period

 

184,785

 

135,397

 

End of period

 

$

127,627

 

$

184,785

 

 

 


 

REGIS CORPORATION (NYSE: RGS)

Salon / School / Hair Restoration Center Counts and Revenues

 

SYSTEM-WIDE LOCATIONS:

 

 

June 30,
2008

 

June 30,
2007

 

 

 

 

 

 

 

Company-owned salons

 

8,582

 

8,139

 

Franchise salons

 

2,163

 

3,742

 

Beauty schools

 

—

 

56

 

Company-owned hair restoration centers

 

57

 

49

 

Franchise hair restoration centers

 

35

 

41

 

Ownership interest locations

 

2,714

 

389

 

Total, system-wide

 

13,551

 

12,416

 

 

 

 

 

 

 

SALON LOCATION SUMMARY

 

 

 

 

 

 

 

 

 

 

 

NORTH AMERICAN SALONS:

 

June 30,
2008

 

June 30,
2007

 

REGIS SALONS

 

 

 

 

 

Open at beginning of period

 

1,099

 

1,079

 

Salons constructed

 

14

 

17

 

Acquired

 

4

 

49

 

Less relocations

 

(11

)

(14

)

Salon openings

 

7

 

52

 

Conversions

 

1

 

(1

)

Salons closed

 

(29

)

(31

)

Total, Regis Salons

 

1,078

 

1,099

 

 

 

 

 

 

 

MASTERCUTS

 

 

 

 

 

Open at beginning of period

 

629

 

642

 

Salons constructed

 

7

 

15

 

Acquired

 

—

 

—

 

Less relocations

 

(6

)

(12

)

Salon openings

 

1

 

3

 

Conversions

 

—

 

—

 

Salons closed

 

(15

)

(16

)

Total, MasterCuts

 

615

 

629

 

 

 

 

 

 

 

TRADE SECRET

 

 

 

 

 

Company-owned salons:

 

 

 

 

 

Open at beginning of period

 

613

 

615

 

Salons constructed

 

16

 

20

 

Acquired

 

2

 

3

 

Franchise buybacks

 

10

 

—

 

Less relocations

 

(11

)

(11

)

Salon openings

 

17

 

12

 

Conversions

 

—

 

1

 

Affiliated joint ventures

 

63

 

—

 

Salons closed

 

(19

)

(15

)

Total company-owned salons

 

674

 

613

 

 

 

 

 

 

 

Franchise salons:

 

 

 

 

 

Open at beginning of period

 

19

 

19

 

Salons constructed

 

2

 

—

 

Acquired

 

42

 

—

 

Less relocations

 

(1

)

—

 

Salon openings

 

43

 

—

 

Franchise buybacks

 

(5

)

—

 

Affiliated joint ventures

 

51

 

—

 

Salons closed

 

(2

)

—

 

Total franchise salons

 

106

 

19

 

Total, Trade Secret

 

780

 

632

 

 

 


 

SMARTSTYLE/COST CUTTERS IN WAL-MART

 

 

 

 

 

Company-owned salons:

 

 

 

 

 

Open at beginning of period

 

2,000

 

1,739

 

Salons constructed

 

207

 

242

 

Acquired

 

—

 

—

 

Franchise buybacks

 

12

 

21

 

Less relocations

 

(3

)

(2

)

Salon openings

 

216

 

261

 

Conversions

 

—

 

—

 

Salons closed

 

(4

)

—

 

Total company-owned salons

 

2,212

 

2,000

 

 

 

 

 

 

 

Franchise salons:

 

 

 

 

 

Open at beginning of period

 

151

 

164

 

Salons constructed

 

7

 

8

 

Salon openings

 

7

 

8

 

Franchise buybacks

 

(12

)

(21

)

Salons closed

 

—

 

—

 

Total franchise salons

 

146

 

151

 

Total, SmartStyle/Cost Cutters in Wal-Mart

 

2,358

 

2,151

 

 

 

 

 

 

 

STRIP CENTERS

 

 

 

 

 

Company-owned salons:

 

 

 

 

 

Open at beginning of period

 

3,317

 

3,031

 

Salons constructed

 

66

 

101

 

Acquired

 

138

 

193

 

Franchise buybacks

 

128

 

72

 

Less relocations

 

(14

)

(17

)

Salon openings

 

318

 

349

 

Conversions

 

—

 

—

 

Salons closed

 

(104

)

(63

)

Total company-owned salons

 

3,531

 

3,317

 

 

 

 

 

 

 

Franchise salons:

 

 

 

 

 

Open at beginning of period

 

1,998

 

2,004

 

Salons constructed

 

120

 

135

 

Acquired(2)

 

—

 

—

 

Less relocations

 

(11

)

(19

)

Salon openings

 

109

 

116

 

Conversions

 

—

 

—

 

Franchise buybacks

 

(133

)

(72

)

Salons closed

 

(63

)

(50

)

Total franchise salons

 

1,911

 

1,998

 

Total, Strip Centers

 

5,442

 

5,315

 

 

 

 

 

 

 

INTERNATIONAL SALONS (1):

 

 

 

 

 

Company-owned salons:

 

 

 

 

 

Open at beginning of period

 

481

 

453

 

Salons constructed

 

15

 

25

 

Acquired

 

25

 

12

 

Franchise buybacks

 

—

 

4

 

Less relocations

 

(1

)

(3

)

Salon openings

 

39

 

38

 

Conversions

 

1

 

—

 

Affiliated joint ventures

 

(40

)

—

 

Salons closed

 

(9

)

(10

)

Total company-owned salons

 

472

 

481

 

 

 

 

 

 

 

Franchise salons:

 

 

 

 

 

Open at beginning of period

 

1,574

 

1,587

 

Salons constructed

 

50

 

110

 

Acquired(2)

 

—

 

—

 

Less relocations

 

—

 

1

 

Salon openings

 

50

 

109

 

 

 


 

Conversions

 

3

 

—

 

Franchise buybacks

 

—

 

(4

)

Affiliated joint ventures

 

(1,587

)

—

 

Salons closed

 

(40

)

(118

)

Total franchise salons

 

—

 

1,574

 

Total, International Salons

 

472

 

2,055

 

 

 

 

 

 

 

TOTAL SYSTEM WIDE SALONS

 

 

 

 

 

Company-owned salons:

 

 

 

 

 

Open at beginning of period

 

8,139

 

7,559

 

Salons constructed

 

325

 

420

 

Acquired

 

169

 

257

 

Franchise buybacks

 

150

 

97

 

Less relocations

 

(46

)

(59

)

Salon openings

 

598

 

715

 

Conversions

 

2

 

—

 

Affiliated joint ventures

 

23

 

—

 

Salons closed

 

(180

)

(135

)

Total company-owned salons

 

8,582

 

8,139

 

 

 

 

 

 

 

Franchise salons:

 

 

 

 

 

Open at beginning of period

 

3,742

 

3,774

 

Salons constructed

 

179

 

253

 

Acquired(2)

 

42

 

—

 

Less relocations

 

(12

)

(20

)

Salon openings

 

209

 

233

 

Conversions

 

3

 

—

 

Franchise buybacks

 

(150

)

(97

)

Affiliated joint ventures

 

(1,536

)

—

 

Salons closed

 

(105

)

(168

)

Total franchise salons

 

2,163

 

3,742

 

Total Salons

 

10,745

 

11,881

 

 

 

 

 

 

 

BEAUTY SCHOOLS

 

 

 

 

 

Open at beginning of period

 

56

 

54

 

Salons constructed

 

—

 

2

 

Acquired

 

—

 

1

 

Less closures

 

—

 

—

 

Conversions

 

(5

)

—

 

Affiliate joint ventures

 

(51

)

—

 

Less relocations

 

—

 

(1

)

Total Beauty Schools

 

—

 

56

 

 

 

 

 

 

 

HAIR RESTORATION CENTERS:

 

 

 

 

 

Company-owned hair restoration centers:

 

 

 

 

 

Open at beginning of period

 

49

 

48

 

Salons constructed

 

3

 

—

 

Acquired

 

—

 

1

 

Franchise buybacks

 

6

 

1

 

Less relocations

 

(1

)

—

 

Salon openings

 

8

 

2

 

Sites closed

 

—

 

(1

)

Total company-owned hair restoration centers

 

57

 

49

 

 

 

 

 

 

 

Franchise hair restoration centers:

 

 

 

 

 

Open at beginning of period

 

41

 

42

 

Salons constructed

 

2

 

—

 

Acquired

 

—

 

3

 

Less relocations

 

(2

)

(2

)

Salon openings

 

—

 

1

 

Franchise buybacks

 

(6

)

(1

)

Sites closed

 

—

 

(1

)

Total franchise hair restoration centers

 

35

 

41

 

 

 


 

Total Hair Restoration Centers

 

92

 

90

 

 

 

 

 

 

 

Ownership interest locations

 

2,714

 

389

 

 

 

 

 

 

 

Grand Total, System-wide

 

13,551

 

12,416

 

(1)                      Canadian and Puerto Rican salons are included in the Regis Salons, Strip Center, MasterCuts and Trade Secret concepts and not included in the International salon totals.

 

(2)                      Represents primarily the acquisition of franchise networks.

 

Relocations represent a transfer of location by the same salon concept. Conversions represent the transfer of one salon concept to another concept.

 

 

 


 

NOTE 1: REVENUES BY CONCEPT:

 

 

 

For the Periods Ended June 30,

 

 

 

Three Months

 

Twelve Months

 

(Dollars in thousands)

 

2008

 

2007

 

2008

 

2007

 

North American salons:

 

 

 

 

 

 

 

 

 

Regis

 

$

127,288

 

$

107,626

 

$

513,820

 

$

498,577

 

MasterCuts

 

43,752

 

42,310

 

175,974

 

174,287

 

Trade Secret (1)

 

68,597

 

57,248

 

257,873

 

253,250

 

SmartStyle

 

132,590

 

119,235

 

507,349

 

462,321

 

Strip Centers (1)

 

237,326

 

202,473

 

886,646

 

776,995

 

Other (2)

 

—

 

17,077

 

5,558

 

—

 

Total North American salons

 

609,553

 

545,969

 

2,347,220

 

2,165,430

 

 

 

 

 

 

 

 

 

 

 

International salons (1)(3)

 

63,753

 

76,194

 

256,063

 

253,430

 

Beauty schools (2)

 

—

 

21,245

 

—

 

85,627

 

Hair restoration centers (1)

 

35,738

 

31,913

 

135,582

 

122,101

 

Consolidated revenues

 

$

709,044

 

$

675,321

 

$

2,738,865

 

$

2,626,588

 

 

 

 

 

 

 

 

 

 

 

Percent change from prior year

 

5.0

%

6.2

%

4.3

%

8.1

%

 

 

 

 

 

 

 

 

 

 

Same-store sales increase (decrease) (4)

 

0.6

%

(0.1

)%

0.5

%

0.2

%

(1)                      Includes aggregate franchise royalties and fees of $11.6 and $20.8 million for the three months ended June 30, 2008 and 2007, respectively, and $68.6 and $80.5 million for the twelve months ended June 30, 2008 and 2007, respectively.  North American salon franchise royalties and fees represented 91.6 and 48.4 percent of total franchise revenues in the three months ended June 30, 2008 and 2007, respectively, and 59.2 and 48.2 percent of total franchise revenues in the twelve months ended June 30, 2008 and 2007, respectively.

 

(2)                      On August 1, 2007, the Company contributed its 51 accredited cosmetology schools to Empire Education Group, Inc. Accordingly, revenue growth was negatively impacted as a result of the deconsolidation.  For the fiscal year ended June 30, 2008, the results of operations for the month ended July 31, 2007 for the accredited cosmetology schools are reported in the North American salons segment. The Company retained ownership of its one North America and four United Kingdom Sassoon schools. Subsequent to August 1, 2007 results of operations for the Sassoon schools are included in the respective North American and international salon segments.

 

(3)                      On January 31, 2008, the Company deconsolidated the results of operations of its European franchise salon operations. Accordingly, revenue growth was negatively impacted as a result of the deconsolidation.

 

(4)                      Same-store sales increases or decreases are calculated on a daily basis as the total change in sales for company-owned locations which were open on a specific day of the week during the current period and the corresponding prior period. Annual same-store sales increases are the sum of the same-store sales increases computed on a daily basis. Relocated locations 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 so that foreign currency fluctuations do not impact the calculation. We began including hair restoration centers in same-store sales calculations beginning with the third fiscal quarter of 2007. Management believes that same-store sales, a component of organic growth, are useful in order to help determine the increase in salon revenues attributable to its organic growth (new salon construction and same-store sales growth) versus growth from acquisitions.

 

 


 

NOTE 2: FINANCIAL INFORMATION BY SEGMENT:

 

Financial information concerning the Company’s salon, school, and hair restoration business is shown in the following tables:

 

 

 

For the Three Months Ended June 30, 2008(1)

 

 

 

 

 

 

 

Hair

 

 

 

 

 

 

 

Salons

 

Restoration

 

Unallocated

 

 

 

(Dollars in thousands)

 

North America

 

International

 

Centers

 

Corporate

 

Consolidated

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

Service

 

$

438,281

 

$

46,954

 

$

16,259

 

$

—

 

$

501,494

 

Product

 

160,639

 

16,799

 

18,502

 

—

 

195,940

 

Royalties and fees

 

10,633

 

—

 

977

 

—

 

11,610

 

 

 

609,553

 

63,753

 

35,738

 

—

 

709,044

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

Cost of service

 

253,276

 

24,700

 

8,904

 

—

 

286,880

 

Cost of product

 

85,929

 

8,302

 

5,249

 

—

 

99,480

 

Site operating expenses

 

43,949

 

3,884

 

1,364

 

—

 

49,197

 

General and administrative

 

35,874

 

6,000

 

8,407

 

32,093

 

82,374

 

Rent

 

88,660

 

16,667

 

2,005

 

507

 

107,839

 

Depreciation and amortization

 

25,856

 

3,698

 

2,613

 

4,841

 

37,008

 

Total operating expenses

 

533,544

 

63,251

 

28,542

 

37,441

 

662,778

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income (loss)

 

76,009

 

502

 

7,196

 

(37,441

)

46,266

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

—

 

—

 

—

 

(10,903

)

(10,903

)

Interest income and other, net

 

—

 

—

 

—

 

2,294

 

2,294

 

Income (loss) before income taxes and equity in income of affiliated companies

 

$

76,009

 

$

502

 

$

7,196

 

$

(46,050

)

$

37,657

 

(1)                      On August 1, 2007, the Company contributed its accredited cosmetology schools to Empire Education Group, Inc.  For the year ended June 30, 2008 the results of operations for the month ended July 31, 2007 for the accredited cosmetology schools are reported in the North American salons segment. The Company retained ownership of its one North American and four United Kingdom Sassoon schools. Subsequent to August 1, 2007 results of operations for the Sassoon schools are included in their respective North American and International salon segments.

 

On January 31, 2008, the Company merged its continental European franchise salon operations with the Franck Provost Salon Group. For the year ended June 30, 2008 the results of operations for the seven months ended January 31, 2008 are reported in the International salon segment.

 

 


 

 

 

For the Three Months Ended June 30, 2007

 

 

 

 

 

 

 

Hair

 

 

 

 

 

 

 

Salons

 

Beauty

 

Restoration

 

Unallocated

 

 

 

(Dollars in thousands)

 

North America

 

International

 

Schools

 

Centers

 

Corporate

 

Consolidated

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

Service

 

$

389,024

 

$

47,277

 

$

18,991

 

$

14,065

 

$

—

 

$

469,357

 

Product

 

146,857

 

19,521

 

2,254

 

16,509

 

—

 

185,141

 

Royalties and fees

 

10,088

 

9,396

 

0

 

1,339

 

—

 

20,823

 

 

 

545,969

 

76,194

 

21,245

 

31,913

 

—

 

675,321

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of service

 

224,499

 

24,738

 

8,328

 

7,457

 

—

 

265,022

 

Cost of product

 

75,596

 

10,931

 

1,049

 

4,838

 

—

 

92,414

 

Site operating expenses

 

36,587

 

4,122

 

3,770

 

1,387

 

—

 

45,866

 

General and administrative

 

30,307

 

12,235

 

2,328

 

7,146

 

33,966

 

85,982

 

Rent

 

81,014

 

16,642

 

2,447

 

1,637

 

486

 

102,226

 

Depreciation and amortization

 

22,744

 

2,835

 

862

 

2,657

 

4,643

 

33,741

 

Total operating expenses

 

470,747

 

71,503

 

18,784

 

25,122

 

39,095

 

625,251

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income (loss)

 

75,222

 

4,691

 

2,461

 

6,791

 

(39,095

)

50,070

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

—

 

—

 

—

 

—

 

(10,906

)

(10,906

)

Interest income and other, net

 

—

 

—

 

—

 

—

 

1,645

 

1,645

 

Income (loss) before income taxes

 

$

75,222

 

$

4,691

 

$

2,461

 

$

6,791

 

$

(48,356

)

$

40,809

 

 

 


 

 

 

For the Year Ended June 30, 2008(1)

 

 

 

 

 

 

 

Hair

 

 

 

 

 

 

 

Salons

 

Restoration

 

Unallocated

 

 

 

(Dollars in thousands)

 

North America

 

International

 

Centers

 

Corporate

 

Consolidated

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

Service

 

$

1,667,005

 

$

165,379

 

$

61,873

 

$

—

 

$

1,894,257

 

Product

 

639,603

 

67,078

 

69,299

 

—

 

775,980

 

Royalties and fees

 

40,612

 

23,606

 

4,410

 

—

 

68,628

 

 

 

2,347,220

 

256,063

 

135,582

 

—

 

2,738,865

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

Cost of service

 

967,393

 

89,617

 

33,700

 

—

 

1,090,710

 

Cost of product

 

340,293

 

35,702

 

19,984

 

—

 

395,979

 

Site operating expenses

 

184,417

 

14,410

 

5,174

 

—

 

204,001

 

General and administrative

 

136,942

 

37,143

 

30,941

 

132,134

 

337,160

 

Rent

 

340,453

 

56,571

 

7,313

 

1,933

 

406,270

 

Depreciation and amortization

 

90,910

 

10,969

 

10,289

 

18,280

 

130,448

 

Total operating expenses

 

2,060,408

 

244,412

 

107,401

 

152,347

 

2,564,568

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income (loss)

 

286,812

 

11,651

 

28,181

 

(152,347

)

174,297

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

—

 

—

 

—

 

(44,571

)

(44,571

)

Interest income and other, net

 

—

 

—

 

—

 

8,373

 

8,373

 

Income (loss) before income taxes and equity in income of affiliated companies

 

$

286,812

 

$

11,651

 

$

28,181

 

$

(188,545

)

$

138,099

 

(1)                      On August 1, 2007, the Company contributed its accredited cosmetology schools to Empire Education Group, Inc.  For the year ended June 30, 2008 the results of operations for the month ended July 31, 2007 for the accredited cosmetology schools are reported in the North American salons segment. The Company retained ownership of its one North American and four United Kingdom Sassoon schools. Subsequent to August 1, 2007 results of operations for the Sassoon schools are included in their respective North American and International salon segments.

 

On January 31, 2008, the Company merged its continental European franchise salon operations with the Franck Provost Salon Group. For the year ended June 30, 2008 the results of operations for the seven months ended January 31, 2008 are reported in the International salon segment.

 

 


 

 

 

For the Year Ended June 30, 2007

 

 

 

 

 

 

 

 

 

Hair

 

 

 

 

 

 

 

Salons

 

Beauty

 

Restoration

 

Unallocated

 

 

 

(Dollars in thousands)

 

North America

 

International

 

Schools

 

Centers

 

Corporate

 

Consolidated

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

Service

 

$

1,512,287

 

$

151,057

 

$

76,556

 

$

53,902

 

$

—

 

$

1,793,802

 

Product

 

614,377

 

65,675

 

9,071

 

63,157

 

—

 

752,280

 

Royalties and fees

 

38,766

 

36,698

 

—

 

5,042

 

—

 

80,506

 

 

 

2,165,430

 

253,430

 

85,627

 

122,101

 

—

 

2,626,588

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of service

 

872,813

 

80,256

 

32,583

 

29,129

 

—

 

1,014,781

 

Cost of product

 

317,214

 

38,957

 

5,462

 

18,859

 

—

 

380,492

 

Site operating expenses

 

174,733

 

11,989

 

16,366

 

5,013

 

—

 

208,101

 

General and administrative

 

119,204

 

45,179

 

9,848

 

27,191

 

127,222

 

328,644

 

Rent

 

314,718

 

50,410

 

9,272

 

6,535

 

1,885

 

382,820

 

Depreciation and amortization

 

84,250

 

9,091

 

3,355

 

9,813

 

17,628

 

124,137

 

Goodwill impairment (1)

 

—

 

—

 

23,000

 

—

 

—

 

23,000

 

Total operating expenses

 

1,882,932

 

235,882

 

99,886

 

96,540

 

146,735

 

2,461,975

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income (loss)

 

282,498

 

17,548

 

(14,259

)

25,561

 

(146,735

)

164,613

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

—

 

—

 

—

 

—

 

(41,770

)

(41,770

)

Interest income and other, net

 

—

 

—

 

—

 

—

 

5,113

 

5,113

 

Income (loss) before income taxes

 

$

282,498

 

$

17,548

 

$

(14,259

)

$

25,561

 

$

(183,392

)

$

127,956

 

(1)                      Operating income for the beauty schools segment was reduced by $23.0 million for a non-cash write-off for goodwill impairment related to the merger of the Company’s beauty schools segment with Empire Education.

 

 


 

REGIS CORPORATION (NYSE: RGS)

NON-GAAP FINANCIAL MEASURES (Unaudited)

 

The Company’s press release announcing results of operations for the fourth quarter and fiscal year ended June 30, 2008 includes references to the following “non-GAAP financial measures” as defined by Regulation G of the Securities and Exchange Commission:

 

·                  Revenue results absent the impact of the deconsolidation of the 51 wholly owned accredited cosmetology schools (schools) and the European franchise salon operations.  On August 1, 2007, the Company contributed the schools to Empire Education Group, Inc. (Empire), in exchange for a minority interest in Empire, and, on January 31, 2008, merged its European franchise salon operations with the Franck Provost Salon Group in exchange for a minority interest in Provalliance.

 

·                  Fourth quarter diluted net income per share from ongoing operations absent the impact of two non-operational items.

 

·                  An incremental non-cash asset write-off of $4.5 million, on a pre-tax basis, associated with the planned closure of up to 160 underperforming salons

 

·                  $3.4 million pre-tax benefit from an unplanned change in workers’ compensation and other insurance reserve estimates

 

·                  Fiscal 2008 earnings results included several non-operational items which reduced earnings per diluted share by $0.04.  Absent these items, fiscal year 2008 earnings were $1.99 per diluted share.

 

 


 

Non-GAAP Consolidated Revenues

 

On August 1, 2007, the Company contributed the schools to Empire, and the results of operations through July 31, 2007 were included in the consolidated statement of operations.  The Company retained ownership of its one North American and four United Kingdom Vidal Sassoon schools.

 

On January 31, 2008, the Company merged its continental European franchise salon operations with the Franck Provost Salon Group.  The results of operations through January 31, 2008 were included in the consolidated statement of operations.

 

The unaudited adjusted revenues, a non-GAAP financial measure (adjusted revenues), set forth below assume the deconsolidation of the schools as of July 31 for each respective three month and fiscal year periods presented, and exclude product sales to Empire for the periods presented.  The unaudited adjusted revenues also assume the deconsolidation of the European franchise salon operations as of January 31 for each respective three month and fiscal year periods presented.  Management believes this measurement is a meaningful presentation of the revenue growth of the Company’s core salon and hair restoration businesses between the comparable periods, excluding the impact of deconsolidating the school business and the European franchise salon operations.  If the Company had deconsolidated the schools and the European franchise salon operations on the dates assumed in the adjusted revenues, the Company might have performed differently.  You should not rely on the adjusted revenues as an indication of the revenues that the Company would have achieved, had the deconsolidation of the schools and European franchise salon operations been completed at the dates indicated, or of the future revenues that the Company will achieve after the deconsolidation of the schools and the European franchise salon operations.

 

The adjusted revenues are based on available information and certain assumptions that management believes are reasonable.  The unaudited adjusted revenues should be read in conjunction with the historical financial statements of the Company.

 

 

 

Three Months Ended

 

Three Months Ended

 

 

 

June 30, 2008

 

June 30, 2007

 

 

 

(Dollars in thousands)

 

(Dollars in thousands)

 

Consolidated revenues, as reported (U.S. GAAP)

 

$

709,044

 

$

675,321

 

Increase in consolidated revenues, as reported

 

5.0

%

 

 

 

 

 

 

 

 

Consolidated revenues, as reported (U.S. GAAP)

 

$

709,044

 

$

675,321

 

Deconsolidation of schools

 

—

 

(17,077

)

Deconsolidation of European franchise salon operations

 

—

 

(14,776

)

Product sales to Empire Education Group, Inc.

 

(373

)

—

 

Consolidated revenues, adjusted

 

$

708,671

 

$

643,468

 

Increase in consolidated revenues, adjusted

 

10.1

%

 

 

 

 

 

 

 

 

 

 

Fiscal Year Ended

 

Fiscal Year Ended

 

 

 

June 30, 2008

 

June 30, 2007

 

 

 

(Dollars in thousands)

 

(Dollars in thousands)

 

Consolidated revenues, as reported (U.S. GAAP)

 

$

2,738,865

 

$

2,626,588

 

Increase in consolidated revenues, as reported

 

4.3

%

 

 

 

 

 

 

 

 

Consolidated revenues, as reported (U.S. GAAP)

 

$

2,738,865

 

$

2,626,588

 

Deconsolidation of schools

 

—

 

(64,089

)

Deconsolidation of European franchise salon operations

 

—

 

(24,666

)

Product sales to Empire Education Group, Inc.

 

(1,869

)

—

 

Consolidated revenues, adjusted

 

$

2,736,996

 

$

2,537,833

 

Increase in consolidated revenues, adjusted

 

7.8

%

 

 

 

 


 

Non-GAAP Diluted Net Income Per Share

 

The table below is provided to assist the reader’s understanding of earnings for the three months and fiscal years ended June 30, 2008 and 2007.  The Company believes that adjusted net income per diluted share from ongoing operations, a non-GAAP financial measure, is a useful basis to compare the Company’s results against, because unusual items during the three months and fiscal years ended June 30, 2008 and 2007 impacted the Company’s reported net income (see “Adjustments” in table below).  The presentation below reconciles as reported net income per diluted share (U.S. GAAP amounts) to adjusted net income per diluted share from ongoing operations.  The adjusted net income per diluted share information should not be construed as an alternative to reported results under U.S. GAAP.

 

 

 

Three Months Ended

 

Three Months Ended

 

 

 

June 30, 2008

 

June 30, 2007

 

 

 

(Dollars)

 

(Dollars)

 

Diluted net income per share, as reported (U.S. GAAP)

 

$

0.54

 

$

0.62

 

 

 

 

 

 

 

Adjustments:

 

 

 

 

 

 Asset write-offs (1)

 

$

0.06

 

$

0.01

 

 Workers’ compensation (2)

 

(0.05

)

(0.11

)

Severance (3)

 

—

 

0.01

 

Diluted net income per share from ongoing operations, adjusted

 

$

0.55

 

$

0.53

 

(1)                      The three months ended June 30, 2008 included a $4.5 million pre-tax non-cash asset write-off associated with the planned closure of up to 160 underperforming salons.  The three months ended June 30, 2007 included a $0.5 million pre-tax non-cash asset write-off associated with five underperforming salons.

 

(2)                      The three months ended June 30, 2008 included a $3.4 million pre-tax benefit from an unplanned change in workers’ compensation and other insurance reserve estimates.   The three months ended June 30, 2007 included a $7.5 million pre-tax benefit from an unplanned change in workers’ compensation reserve estimates.

 

(3)                      The three months ended June 30, 2007 included a $1.0 million severance charge associated with the termination of certain executives.

 

 

 

Fiscal Year Ended

 

Fiscal Year Ended

 

 

 

June 30, 2008

 

June 30, 2007

 

 

 

(Dollars)

 

(Dollars)

 

Diluted net income per share, as reported (U.S. GAAP)

 

$

1.95

 

$

1.82

 

 

 

 

 

 

 

Adjustments:

 

 

 

 

 

Asset write-offs (1)

 

$

0.06

 

$

0.01

 

Workers’ compensation (2)

 

(0.09

)

(0.15

)

Tax charge (benefit) (3)

 

0.07

 

(0.07

)

Goodwill impairment (4)

 

—

 

0.43

 

Severance (5)

 

—

 

0.01

 

Diluted net income per share from ongoing operations, adjusted

 

$

1.99

 

$

2.05

 

(1)                      The fiscal year ended June 30, 2008 included a $4.5 million pre-tax non-cash asset write-off associated with the planned closure of up to 160 underperforming salons.  The fiscal year ended June 30, 2007 included a $0.5 million pre-tax non-cash asset write-off associated with five underperforming salons.

 

(2)                      The fiscal year ended June 30, 2008 included a $7.1 million pre-tax benefit from an unplanned change in workers’ compensation and other insurance reserve estimates. The fiscal year ended June 30, 2007 included a $10.2 million pre-tax benefit from an unplanned change in workers’ compensation reserve estimates.

 

(3)                      The fiscal year ended June 30, 2008 included a $3.0 million tax charge associated with the cash repatriation of $30.0 million.  The fiscal year ended June 30, 2007 included a tax benefit related to the retroactive reinstatement of the work opportunity and welfare-to-work tax credits.

 

(4)                      The fiscal year ended June 30, 2007 included a $23.0 million goodwill impairment charge associated with the beauty school transaction.

 

(5)                      The fiscal year ended June 30, 2007 included a $1.0 million severance charge associated with the termination of certain executives.