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) |
Common Stock, $.05 par value | 46,287,937 | |
Class | Number of Shares |
December 31, 2016 (Unaudited) | June 30, 2016 | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 155,642 | $ | 147,346 | ||||
Receivables, net | 30,742 | 24,691 | ||||||
Inventories | 131,386 | 134,212 | ||||||
Other current assets | 53,093 | 51,765 | ||||||
Total current assets | 370,863 | 358,014 | ||||||
Property and equipment, net | 165,644 | 183,321 | ||||||
Goodwill | 415,900 | 417,393 | ||||||
Other intangibles, net | 14,309 | 15,185 | ||||||
Other assets | 63,511 | 62,019 | ||||||
Total assets | $ | 1,030,227 | $ | 1,035,932 | ||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 59,629 | $ | 59,884 | ||||
Accrued expenses | 127,344 | 135,431 | ||||||
Total current liabilities | 186,973 | 195,315 | ||||||
Long-term debt, net | 120,103 | 119,606 | ||||||
Other noncurrent liabilities | 204,083 | 201,610 | ||||||
Total liabilities | 511,159 | 516,531 | ||||||
Commitments and contingencies (Note 6) | ||||||||
Shareholders’ equity: | ||||||||
Common stock, $0.05 par value; issued and outstanding 46,283,085 and 46,154,410 common shares at December 31, 2016 and June 30, 2016, respectively | 2,314 | 2,308 | ||||||
Additional paid-in capital | 210,968 | 207,475 | ||||||
Accumulated other comprehensive income | 230 | 5,068 | ||||||
Retained earnings | 305,556 | 304,550 | ||||||
Total shareholders’ equity | 519,068 | 519,401 | ||||||
Total liabilities and shareholders’ equity | $ | 1,030,227 | $ | 1,035,932 |
Three Months Ended December 31, | Six Months Ended December 31, | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
Revenues: | ||||||||||||||||
Service | $ | 323,212 | $ | 340,527 | $ | 658,752 | $ | 690,688 | ||||||||
Product | 89,420 | 98,279 | 172,898 | 186,255 | ||||||||||||
Royalties and fees | 11,411 | 11,661 | 23,435 | 23,654 | ||||||||||||
424,043 | 450,467 | 855,085 | 900,597 | |||||||||||||
Operating expenses: | ||||||||||||||||
Cost of service | 208,851 | 216,672 | 418,874 | 434,440 | ||||||||||||
Cost of product | 45,990 | 50,384 | 87,209 | 93,420 | ||||||||||||
Site operating expenses | 42,736 | 47,405 | 86,642 | 95,233 | ||||||||||||
General and administrative | 40,705 | 47,400 | 80,997 | 91,948 | ||||||||||||
Rent | 70,583 | 74,459 | 142,520 | 149,278 | ||||||||||||
Depreciation and amortization | 16,025 | 17,030 | 31,975 | 34,885 | ||||||||||||
Total operating expenses | 424,890 | 453,350 | 848,217 | 899,204 | ||||||||||||
Operating (loss) income | (847 | ) | (2,883 | ) | 6,868 | 1,393 | ||||||||||
Other (expense) income: | ||||||||||||||||
Interest expense | (2,178 | ) | (2,382 | ) | (4,370 | ) | (4,736 | ) | ||||||||
Interest income and other, net | 1,525 | 997 | 2,023 | 1,941 | ||||||||||||
(Loss) income before income taxes and equity in loss of affiliated companies | (1,500 | ) | (4,268 | ) | 4,521 | (1,402 | ) | |||||||||
Income tax (expense) benefit | (719 | ) | 4,207 | (3,459 | ) | 1,391 | ||||||||||
Equity in loss of affiliated companies, net of income taxes | — | (13,925 | ) | — | (14,783 | ) | ||||||||||
Net (loss) income | $ | (2,219 | ) | $ | (13,986 | ) | $ | 1,062 | $ | (14,794 | ) | |||||
Net (loss) income per share: | ||||||||||||||||
Basic and diluted | $ | (0.05 | ) | $ | (0.29 | ) | $ | 0.02 | $ | (0.29 | ) | |||||
Weighted average common and common equivalent shares outstanding: | ||||||||||||||||
Basic | 46,327 | 48,050 | 46,277 | 50,422 | ||||||||||||
Diluted | 46,327 | 48,050 | 46,751 | 50,422 | ||||||||||||
Three Months Ended December 31, | Six Months Ended December 31, | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
Net (loss) income | $ | (2,219 | ) | $ | (13,986 | ) | $ | 1,062 | $ | (14,794 | ) | |||||
Foreign currency translation adjustments | (2,322 | ) | (2,335 | ) | (4,838 | ) | (6,607 | ) | ||||||||
Comprehensive loss | $ | (4,541 | ) | $ | (16,321 | ) | $ | (3,776 | ) | $ | (21,401 | ) |
Six Months Ended December 31, | ||||||||
2016 | 2015 | |||||||
Cash flows from operating activities: | ||||||||
Net income (loss) | $ | 1,062 | $ | (14,794 | ) | |||
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 27,589 | 29,844 | ||||||
Equity in loss of affiliated companies | — | 14,783 | ||||||
Deferred income taxes | 3,297 | (1,860 | ) | |||||
Gain from sale of salon assets, net | (121 | ) | (625 | ) | ||||
Salon asset impairments | 4,386 | 5,041 | ||||||
Stock-based compensation | 4,400 | 4,970 | ||||||
Amortization of debt discount and financing costs | 703 | 782 | ||||||
Other non-cash items affecting earnings | 64 | 235 | ||||||
Changes in operating assets and liabilities, excluding the effects of asset sales | (13,775 | ) | (25,795 | ) | ||||
Net cash provided by operating activities | 27,605 | 12,581 | ||||||
Cash flows from investing activities: | ||||||||
Capital expenditures | (18,403 | ) | (15,670 | ) | ||||
Proceeds from sale of assets | 335 | 1,190 | ||||||
Change in restricted cash | 738 | (943 | ) | |||||
Net cash used in investing activities | (17,330 | ) | (15,423 | ) | ||||
Cash flows from financing activities: | ||||||||
Repayments of long-term debt and capital lease obligations | — | (2 | ) | |||||
Repurchase of common stock | — | (77,033 | ) | |||||
Purchase of noncontrolling interest | — | (684 | ) | |||||
Employee taxes paid for shares withheld | (1,113 | ) | (683 | ) | ||||
Net cash used in financing activities | (1,113 | ) | (78,402 | ) | ||||
Effect of exchange rate changes on cash and cash equivalents | (866 | ) | (882 | ) | ||||
Increase (decrease) in cash and cash equivalents | 8,296 | (82,126 | ) | |||||
Cash and cash equivalents: | ||||||||
Beginning of period | 147,346 | 212,279 | ||||||
End of period | $ | 155,642 | $ | 130,153 |
1. | BASIS OF PRESENTATION OF UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: |
For the Periods Ended December 31, 2016 | ||||||
Three Months | Six Months | |||||
Restricted stock units | 92,558 | 427,217 | ||||
Performance-based restricted stock units (1) | — | 393,045 |
(1) | Includes 66,082 incremental PSUs earned in connection with the achievement of fiscal year 2016 performance metrics. |
For the Six Months Ended December 31, | ||||||||
2016 | 2015 | |||||||
(Dollars in thousands) | ||||||||
North American Value | $ | 3,277 | $ | 4,208 | ||||
North American Premium | 882 | 752 | ||||||
International | 227 | 81 | ||||||
Total | $ | 4,386 | $ | 5,041 |
2. | INVESTMENT IN AFFILIATES: |
For the Three Months Ended December 31, | For the Six Months Ended December 31, | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
(Dollars in thousands) | ||||||||||||||||
Equity losses | $ | — | $ | (973 | ) | $ | — | $ | (1,832 | ) | ||||||
Other than temporary impairment | — | (12,954 | ) | — | (12,954 | ) | ||||||||||
Total losses related to EEG | $ | — | $ | (13,927 | ) | $ | — | $ | (14,786 | ) |
For the Three Months Ended December 31, | For the Six Months Ended December 31, | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
(Unaudited) | (Dollars in thousands) | |||||||||||||||
Gross revenues | $ | 31,019 | $ | 33,724 | $ | 61,055 | $ | 69,664 | ||||||||
Gross profit | 9,168 | 7,365 | 17,278 | 15,406 | ||||||||||||
Operating income (loss) | 488 | (1,819 | ) | (219 | ) | (3,290 | ) | |||||||||
Net income (loss) | 357 | (1,805 | ) | (472 | ) | (3,358 | ) |
3. | EARNINGS PER SHARE: |
4. | SHAREHOLDERS’ EQUITY: |
5. | INCOME TAXES: |
6. | COMMITMENTS AND CONTINGENCIES: |
December 31, 2016 | June 30, 2016 | |||||||||||||||||||||||
Gross Carrying Value (3) | Accumulated Impairment (1) | Net | Gross Carrying Value | Accumulated Impairment (1) | Net | |||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||
Goodwill | $ | 669,561 | $ | (253,661 | ) | $ | 415,900 | $ | 671,054 | $ | (253,661 | ) | $ | 417,393 |
(1) | The table below contains additional information regarding accumulated impairment losses: |
Fiscal Year | Impairment Charge | Reporting Unit (2) | ||||
(Dollars in thousands) | ||||||
2009 | $ | (41,661 | ) | International | ||
2010 | (35,277 | ) | North American Premium | |||
2011 | (74,100 | ) | North American Value | |||
2012 | (67,684 | ) | North American Premium | |||
2014 | (34,939 | ) | North American Premium | |||
Total | $ | (253,661 | ) |
December 31, 2016 | June 30, 2016 | |||||||||||||||||||||||
Cost (1) | Accumulated Amortization (1) | Net | Cost (1) | Accumulated Amortization (1) | Net | |||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||
Amortized intangible assets: | ||||||||||||||||||||||||
Brand assets and trade names | $ | 8,006 | $ | (3,797 | ) | $ | 4,209 | $ | 8,206 | $ | (3,746 | ) | $ | 4,460 | ||||||||||
Franchise agreements | 9,623 | (7,120 | ) | 2,503 | 9,853 | (7,116 | ) | 2,737 | ||||||||||||||||
Lease intangibles | 14,459 | (8,965 | ) | 5,494 | 14,535 | (8,649 | ) | 5,886 | ||||||||||||||||
Other | 5,680 | (3,577 | ) | 2,103 | 5,748 | (3,646 | ) | 2,102 | ||||||||||||||||
$ | 37,768 | $ | (23,459 | ) | $ | 14,309 | $ | 38,342 | $ | (23,157 | ) | $ | 15,185 |
(1) | The change in the gross carrying value and accumulated amortization of other intangible assets is impacted by foreign currency. |
8. | FINANCING ARRANGEMENTS: |
Amounts Outstanding | ||||||||||||
Maturity Dates | Interest Rate | December 31, 2016 | June 30, 2016 | |||||||||
(fiscal year) | (Dollars in thousands) | |||||||||||
Senior Term Notes, net | 2020 | 5.50% | $ | 120,103 | $ | 119,606 | ||||||
Revolving credit facility | 2018 | — | — | — | ||||||||
$ | 120,103 | $ | 119,606 |
December 31, 2016 | June 30, 2016 | |||||||
(Dollars in thousands) | ||||||||
Principal amount on the Senior Term Notes | $ | 123,000 | $ | 123,000 | ||||
Unamortized debt discount | (2,190 | ) | (2,565 | ) | ||||
Unamortized debt issuance costs | (707 | ) | (829 | ) | ||||
Senior Term Notes, net | $ | 120,103 | $ | 119,606 |
9. | FAIR VALUE MEASUREMENTS: |
For the Three Months Ended December 31, | For the Six Months Ended December 31, | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
(Dollars in thousands) | ||||||||||||||||
Long-lived assets (1) | $ | (2,476 | ) | $ | (2,391 | ) | $ | (4,386 | ) | $ | (5,041 | ) | ||||
Investment in EEG (2) | — | (12,954 | ) | — | (12,954 | ) |
(1) | See Note 1 to the unaudited Condensed Consolidated Financial Statements. |
(2) | See Note 2 to the unaudited Condensed Consolidated Financial Statements. |
10. | SEGMENT INFORMATION: |
Company-owned | Franchised | Total | |||||||
North American Value | 5,710 | 2,540 | 8,250 | ||||||
North American Premium | 637 | — | 637 | ||||||
International | 311 | 9 | 320 | ||||||
Total | 6,658 | 2,549 | 9,207 |
For the Three Months Ended December 31, | For the Six Months Ended December 31, | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
(Dollars in thousands) | ||||||||||||||||
Revenues: | ||||||||||||||||
North American Value | $ | 339,035 | $ | 349,251 | $ | 682,212 | $ | 698,222 | ||||||||
North American Premium | 62,888 | 73,022 | 127,591 | 146,177 | ||||||||||||
International | 22,120 | 28,194 | 45,282 | 56,198 | ||||||||||||
$ | 424,043 | $ | 450,467 | $ | 855,085 | $ | 900,597 | |||||||||
Operating income (loss): | ||||||||||||||||
North American Value | $ | 25,974 | $ | 28,061 | $ | 59,411 | $ | 58,610 | ||||||||
North American Premium | (4,043 | ) | (3,900 | ) | (7,904 | ) | (6,323 | ) | ||||||||
International | (427 | ) | (607 | ) | (734 | ) | (501 | ) | ||||||||
Total segment operating income | 21,504 | 23,554 | 50,773 | 51,786 | ||||||||||||
Unallocated Corporate | (22,351 | ) | (26,437 | ) | (43,905 | ) | (50,393 | ) | ||||||||
Operating (loss) income | $ | (847 | ) | $ | (2,883 | ) | $ | 6,868 | $ | 1,393 |
For the Periods Ended December 31, | |||||||||||||||||||||||||||||||||||||||
Three Months | Six Months | ||||||||||||||||||||||||||||||||||||||
2016 | 2015 | 2016 | 2015 | 2016 | 2015 | 2016 | 2015 | 2016 | 2015 | 2016 | 2015 | ||||||||||||||||||||||||||||
($ in millions) | % of Total Revenues | Basis Point (Decrease) Increase | ($ in millions) | % of Total Revenues | Basis Point (Decrease) Increase | ||||||||||||||||||||||||||||||||||
Service revenues | $ | 323.2 | $ | 340.5 | 76.2 | % | 75.6 | % | 60 | (120 | ) | $ | 658.8 | $ | 690.7 | 77.0 | % | 76.7 | % | 30 | (100 | ) | |||||||||||||||||
Product revenues | 89.4 | 98.3 | 21.1 | 21.8 | (70 | ) | 100 | 172.9 | 186.3 | 20.2 | 20.7 | (50 | ) | 80 | |||||||||||||||||||||||||
Franchise royalties and fees | 11.4 | 11.7 | 2.7 | 2.6 | 10 | 20 | 23.4 | 23.7 | 2.7 | 2.6 | 10 | 20 | |||||||||||||||||||||||||||
Cost of service (1) | 208.9 | 216.7 | 64.6 | 63.6 | 100 | 100 | 418.9 | 434.4 | 63.6 | 62.9 | 70 | 100 | |||||||||||||||||||||||||||
Cost of product (2) | 46.0 | 50.4 | 51.4 | 51.3 | 10 | (30 | ) | 87.2 | 93.4 | 50.4 | 50.2 | 20 | (90 | ) | |||||||||||||||||||||||||
Site operating expenses | 42.7 | 47.4 | 10.1 | 10.5 | (40 | ) | 50 | 86.6 | 95.2 | 10.1 | 10.6 | (50 | ) | 10 | |||||||||||||||||||||||||
General and administrative | 40.7 | 47.4 | 9.6 | 10.5 | (90 | ) | 30 | 81.0 | 91.9 | 9.5 | 10.2 | (70 | ) | 20 | |||||||||||||||||||||||||
Rent | 70.6 | 74.5 | 16.6 | 16.5 | 10 | (40 | ) | 142.5 | 149.3 | 16.7 | 16.6 | 10 | (20 | ) | |||||||||||||||||||||||||
Depreciation and amortization | 16.0 | 17.0 | 3.8 | 3.8 | — | (50 | ) | 32.0 | 34.9 | 3.7 | 3.9 | (20 | ) | (60 | ) | ||||||||||||||||||||||||
Interest expense | 2.2 | 2.4 | 0.5 | 0.5 | — | — | 4.4 | 4.7 | 0.5 | 0.5 | — | (10 | ) | ||||||||||||||||||||||||||
Interest income and other, net | 1.5 | 1.0 | 0.4 | 0.2 | 20 | — | 2.0 | 1.9 | 0.2 | 0.2 | — | 10 | |||||||||||||||||||||||||||
Income taxes (3) | (0.7 | ) | 4.2 | (47.9 | ) | 98.6 | N/A | N/A | (3.5 | ) | 1.4 | 76.5 | 99.2 | N/A | N/A | ||||||||||||||||||||||||
Equity in loss of affiliated companies, net of income taxes | — | 13.9 | — | 3.1 | (310 | ) | 50 | — | 14.8 | — | 1.6 | (160 | ) | 30 |
(1) | Computed as a percent of service revenues and excludes depreciation and amortization expense. |
(2) | Computed as a percent of product revenues and excludes depreciation and amortization expense. |
(3) | Computed as a percent of 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 December 31, | For the Six Months Ended December 31, | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
(Dollars in thousands) | ||||||||||||||||
North American Value salons: | ||||||||||||||||
SmartStyle | $ | 130,938 | $ | 131,470 | $ | 259,825 | $ | 259,525 | ||||||||
Supercuts | 84,383 | 85,220 | 170,595 | 171,742 | ||||||||||||
MasterCuts | 24,781 | 27,616 | 50,011 | 55,012 | ||||||||||||
Other Value | 98,933 | 104,945 | 201,781 | 211,943 | ||||||||||||
Total North American Value salons | 339,035 | 349,251 | 682,212 | 698,222 | ||||||||||||
North American Premium salons | 62,888 | 73,022 | 127,591 | 146,177 | ||||||||||||
International salons | 22,120 | 28,194 | 45,282 | 56,198 | ||||||||||||
Consolidated revenues | $ | 424,043 | $ | 450,467 | $ | 855,085 | $ | 900,597 | ||||||||
Percent change from prior year | (5.9 | )% | (1.2 | )% | (5.1 | )% | (2.2 | )% | ||||||||
Salon same-store sales (decrease) increase (1) | (3.6 | )% | 2.2 | % | (2.3 | )% | 1.4 | % |
(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 December 31, | For the Six Months Ended December 31, | |||||||||||
Factor | 2016 | 2015 | 2016 | 2015 | ||||||||
Same-store sales | (3.6 | )% | 2.2 | % | (2.3 | )% | 1.4 | % | ||||
Closed salons | (2.6 | ) | (2.7 | ) | (2.7 | ) | (2.8 | ) | ||||
New stores and conversions | 0.4 | 0.6 | 0.4 | 0.6 | ||||||||
Foreign currency | (1.0 | ) | (1.5 | ) | (0.9 | ) | (1.6 | ) | ||||
Other | 0.9 | 0.2 | 0.4 | 0.2 | ||||||||
(5.9 | )% | (1.2 | )% | (5.1 | )% | (2.2 | )% |
For the Three Months Ended December 31, | For the Six Months Ended December 31, | |||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||
SmartStyle | (2.3 | )% | 6.8 | % | (1.1 | )% | 5.2 | % | ||||
Supercuts | (1.1 | ) | 2.9 | — | 2.6 | |||||||
MasterCuts | (6.2 | ) | (2.1 | ) | (4.7 | ) | (2.9 | ) | ||||
Other Value | (3.7 | ) | 0.9 | (1.9 | ) | 0.3 | ||||||
North American Value same-store sales | (2.8 | ) | 3.3 | (1.4 | ) | 2.4 | ||||||
North American Premium same-store sales | (7.3 | ) | (1.4 | ) | (6.2 | ) | (2.0 | ) | ||||
International same-store sales | (5.8 | ) | (2.8 | ) | (4.7 | ) | (1.4 | ) | ||||
Consolidated same-store sales | (3.6 | )% | 2.2 | % | (2.3 | )% | 1.4 | % |
As of | Debt to Capitalization | Basis Point Increase (1) | ||||
December 31, 2016 | 19.2 | % | 10 | |||
June 30, 2016 | 19.1 | % | 300 |
Exhibit 10 | Regis Corporation 2016 Long Term Incentive Plan, effective October 18, 2016. (Incorporated by reference to Appendix A of the Company's Proxy Statement on Definitive Form 14A filed on September 7, 2016.) | |
Exhibit 31.1 | President and Chief Executive Officer of Regis Corporation: Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
Exhibit 31.2 | Interim Chief Financial Officer of Regis Corporation: Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
Exhibit 32 | Chief Executive Officer and Interim 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 December 31, 2016, 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: February 3, 2017 | By: | /s/ Michael C. Pomeroy |
Michael C. Pomeroy | ||
Interim Chief Financial Officer | ||
(Signing on behalf of the registrant and as Principal Financial Officer) | ||
Date: February 3, 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. |
February 3, 2017 | ||
/s/ Daniel J. Hanrahan | ||
Daniel J. Hanrahan, 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. |
February 3, 2017 | ||
/s/ Michael C. Pomeroy | ||
Michael C. Pomeroy, Interim 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. |
February 3, 2017 | ||
/s/ Daniel J. Hanrahan | ||
Daniel J. Hanrahan, President and Chief Executive Officer | ||
February 3, 2017 | ||
/s/ Michael C. Pomeroy | ||
Michael C. Pomeroy, Interim Chief Financial Officer |
Document and Entity Information - shares |
6 Months Ended | |
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Dec. 31, 2016 |
Jan. 27, 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 | Dec. 31, 2016 | |
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 | 46,287,937 | |
Document Fiscal Year Focus | 2017 | |
Document Fiscal Period Focus (Q1,Q2,Q3,FY) | Q2 |
CONDENSED CONSOLIDATED BALANCE SHEET (Parenthetical) - $ / shares |
Dec. 31, 2016 |
Jun. 30, 2016 |
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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) | 46,283,085 | 46,154,410 |
Common stock outstanding (in shares) | 46,283,085 | 46,154,410 |
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited) - USD ($) shares in Thousands, $ in Thousands |
3 Months Ended | 6 Months Ended | ||
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Dec. 31, 2016 |
Dec. 31, 2015 |
Dec. 31, 2016 |
Dec. 31, 2015 |
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Revenues: | ||||
Service | $ 323,212 | $ 340,527 | $ 658,752 | $ 690,688 |
Product | 89,420 | 98,279 | 172,898 | 186,255 |
Royalties and fees | 11,411 | 11,661 | 23,435 | 23,654 |
Total revenues | 424,043 | 450,467 | 855,085 | 900,597 |
Operating expenses: | ||||
Cost of service | 208,851 | 216,672 | 418,874 | 434,440 |
Cost of product | 45,990 | 50,384 | 87,209 | 93,420 |
Site operating expenses | 42,736 | 47,405 | 86,642 | 95,233 |
General and administrative | 40,705 | 47,400 | 80,997 | 91,948 |
Rent | 70,583 | 74,459 | 142,520 | 149,278 |
Depreciation and amortization | 16,025 | 17,030 | 31,975 | 34,885 |
Total operating expenses | 424,890 | 453,350 | 848,217 | 899,204 |
Operating (loss) income | (847) | (2,883) | 6,868 | 1,393 |
Other income (expense): | ||||
Interest expense | (2,178) | (2,382) | (4,370) | (4,736) |
Interest income and other, net | 1,525 | 997 | 2,023 | 1,941 |
(Loss) income before income taxes and equity in loss of affiliated companies | (1,500) | (4,268) | 4,521 | (1,402) |
Income tax (expense) benefit | (719) | 4,207 | (3,459) | 1,391 |
Equity in loss of affiliated companies, net of income taxes | 0 | (13,925) | 0 | (14,783) |
Net (loss) income | $ (2,219) | $ (13,986) | $ 1,062 | $ (14,794) |
Net (loss) income per share: | ||||
Basic and diluted (in dollars per share) | $ (0.05) | $ (0.29) | $ 0.02 | $ (0.29) |
Weighted average common and common equivalent shares outstanding: | ||||
Basic (in shares) | 46,327 | 48,050 | 46,277 | 50,422 |
Diluted (in shares) | 46,327 | 48,050 | 46,751 | 50,422 |
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE LOSS (Unaudited) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
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Dec. 31, 2016 |
Dec. 31, 2015 |
Dec. 31, 2016 |
Dec. 31, 2015 |
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Statement of Comprehensive Income [Abstract] | ||||
Net (loss) income | $ (2,219) | $ (13,986) | $ 1,062 | $ (14,794) |
Foreign currency translation adjustments | (2,322) | (2,335) | (4,838) | (6,607) |
Comprehensive loss | $ (4,541) | $ (16,321) | $ (3,776) | $ (21,401) |
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 December 31, 2016 and for the three and six months ended December 31, 2016 and 2015, reflect, in the opinion of management, all adjustments necessary to fairly state the consolidated financial position of the Company as of December 31, 2016 and its consolidated results of operations, comprehensive loss 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, 2016 was derived from audited Consolidated Financial Statements, but 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, 2016 and other documents filed or furnished with the Securities and Exchange Commission (SEC) during the current fiscal year. Stock-Based Employee Compensation: During the three and six months ended December 31, 2016, the Company granted various equity awards including restricted stock units (RSUs) and performance-based restricted stock units (PSUs). All grants relate to stock incentive plans that have been approved by the shareholders of the Company. A summary of equity awards granted is as follows:
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Total compensation cost for stock-based payment arrangements totaled $2.5 million for each of the three months ended December 31, 2016 and 2015, and $4.4 and $5.0 million for the six months ended December 31, 2016 and 2015, 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 are recorded within depreciation and amortization in the Consolidated Statement of Operations. A summary of long-lived asset impairment charges follows:
Recent Accounting Standards Adopted by the Company: Stock Compensation In March 2016, the FASB issued updated guidance simplifying the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities and classification on the consolidated statement of cash flows. The Company early adopted this guidance in the first quarter of fiscal year 2017, applying it retrospectively. The Condensed Consolidated Statement of Cash Flows for the six months ended December 31, 2015 reflects the reclassification of employee taxes paid for shares withheld of $0.7 million from operating to financing activities, in accordance with this new guidance. The other provisions of this new guidance did not have a material impact on the Company's consolidated financial statements. Simplifying the Presentation of Debt Issuance Costs In April 2015, the FASB issued updated guidance requiring debt issuance costs related to a recognized debt liability to be presented in the consolidated balance sheet as a direct reduction from the carrying amount of the debt liability. The Company adopted this standard in the first quarter of fiscal year 2017, applying it retrospectively. The Condensed Consolidated Balance Sheet as of June 30, 2016 reflects the reclassification of debt issuance costs of $0.8 million from other assets to long-term debt, net. 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 significant 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 and has not yet selected a transition method. 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. 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 financial statements. 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 financial statements. |
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 December 31, 2016, 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 losses related to its investment in EEG subsequent to the 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 summarizes losses recorded by the Company related to EEG:
The table below presents the summarized Statement of Operations information for EEG:
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EARNINGS PER SHARE: |
6 Months Ended |
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Dec. 31, 2016 | |
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 December 31, 2016 and 2015, 446,877 and 592,664, respectively, and for the six months ended December 31, 2015, 405,015 of common stock equivalents of potentially dilutive common stock were excluded from the diluted earnings per share calculation due to the net loss from continuing operations. The computation of weighted average shares outstanding, assuming dilution, excluded 2,361,971 and 2,097,378 of stock-based awards during the three months ended December 31, 2016 and 2015, respectively, and 2,411,047 and 2,210,212 of stock-based awards during the six months ended December 31, 2016 and 2015, respectively, as they were not dilutive under the treasury stock method. |
SHAREHOLDERS' EQUITY: |
6 Months Ended |
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Dec. 31, 2016 | |
Stockholders' Equity Note [Abstract] | |
SHAREHOLDERS' EQUITY | SHAREHOLDERS’ EQUITY: Additional Paid-In Capital: The $3.5 million increase in additional paid-in capital during the six months ended December 31, 2016 was primarily due to $4.4 million of stock-based compensation, partly offset by other stock-based compensation activity of $0.9 million. |
INCOME TAXES: |
6 Months Ended |
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Dec. 31, 2016 | |
Income Tax Disclosure [Abstract] | |
INCOME TAXES | INCOME TAXES: During the three and six months ended December 31, 2016, the Company recognized tax expense of $0.7 and $3.5 million, respectively, with corresponding effective tax rates of (47.9)% and 76.5%. During the three and six months ended December 31, 2015, the Company recognized tax benefits of $4.2 and $1.4 million, respectively, with corresponding effective tax rates of 98.6% and 99.2%. The recorded tax provision and effective tax rates for the three and six months ended December 31, 2016 and 2015 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 $7.8 million of expense for the fiscal year ending June 30, 2017. 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 for outstanding IRS proposed audit adjustments. 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 fiscal year 2012. |
COMMITMENTS AND CONTINGENCIES: |
6 Months Ended |
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Dec. 31, 2016 | |
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 OTHER INTANGIBLES | GOODWILL AND OTHER INTANGIBLES: The table below contains details related to the Company’s recorded goodwill:
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_____________________________ (2) See Note 10 to the unaudited Condensed Consolidated Financial Statements. (3) The change in the gross carrying value of goodwill relates to foreign currency. 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 As of December 31, 2016 and June 30, 2016, the Company had no outstanding borrowings under this facility. Additionally, the Company had outstanding standby letters of credit under the facility of $1.5 and $1.6 million at December 31, 2016 and June 30, 2016, respectively, primarily related to the Company's self-insurance program. Unused available credit under the facility at December 31, 2016 and June 30, 2016 was $198.5 and $198.4 million, respectively. The Company was in compliance with all covenants and requirements of its financing arrangements as of and during the three months ended December 31, 2016. |
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 December 31, 2016 and June 30, 2016, the Company’s cash, cash equivalents, restricted cash, receivables, accounts payable and debt approximated their carrying values. 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 the Company’s investments 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. As of December 31, 2016, the Company’s reportable operating segments consisted of the following salons:
The North American Value operating segment is comprised primarily of SmartStyle, Supercuts, MasterCuts, Cost Cutters, and other regional trade names. The North American Premium operating segment is comprised primarily of the Regis salon concept and the International operating segment includes Supercuts, Regis and Sassoon salon concepts. The Company's operating segment results were as follows:
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(Policies) |
6 Months Ended |
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Dec. 31, 2016 | |
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. Long-lived asset impairment charges are recorded within depreciation and amortization in the Consolidated Statement of Operations. |
Recent Accounting Standards Adopted and Not Yet Adopted by the Company | Recent Accounting Standards Adopted by the Company: Stock Compensation In March 2016, the FASB issued updated guidance simplifying the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities and classification on the consolidated statement of cash flows. The Company early adopted this guidance in the first quarter of fiscal year 2017, applying it retrospectively. The Condensed Consolidated Statement of Cash Flows for the six months ended December 31, 2015 reflects the reclassification of employee taxes paid for shares withheld of $0.7 million from operating to financing activities, in accordance with this new guidance. The other provisions of this new guidance did not have a material impact on the Company's consolidated financial statements. Simplifying the Presentation of Debt Issuance Costs In April 2015, the FASB issued updated guidance requiring debt issuance costs related to a recognized debt liability to be presented in the consolidated balance sheet as a direct reduction from the carrying amount of the debt liability. The Company adopted this standard in the first quarter of fiscal year 2017, applying it retrospectively. The Condensed Consolidated Balance Sheet as of June 30, 2016 reflects the reclassification of debt issuance costs of $0.8 million from other assets to long-term debt, net. 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 significant 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 and has not yet selected a transition method. 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. 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 financial statements. 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 financial statements. |
BASIS OF PRESENTATION OF UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (Tables) |
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Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of equity awards granted | A summary of equity awards granted is as follows:
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Schedule of long-lived asset impairment charges | A summary of long-lived asset impairment charges follows:
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INVESTMENT IN AFFILIATES: INVESTMENT IN AFFILIATES: (Tables) |
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Investments, All Other Investments [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of equity method investments | The table below summarizes losses recorded by the Company related to EEG:
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 recorded goodwill:
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_____________________________ (2) See Note 10 to the unaudited Condensed Consolidated Financial Statements. (3) The change in the gross carrying value of goodwill relates to foreign currency. |
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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 Company’s long-term debt consists of the following:
The following table contains details related to the Company's Senior Term Notes:
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FAIR VALUE MEASUREMENTS: FAIR VALUE MEASUREMENTS (Tables) |
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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) |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Company's reportable operating segments | As of December 31, 2016, the Company’s reportable operating segments consisted of the following salons:
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Schedule of summarized financial information of reportable operating segments | The Company's operating segment results were as follows:
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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 | 6 Months Ended | ||
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Dec. 31, 2016 |
Dec. 31, 2015 |
Dec. 31, 2016 |
Dec. 31, 2015 |
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Stock-based employees compensation [Line Items] | ||||
Stock-based compensation | $ 2,500 | $ 2,500 | $ 4,400 | $ 4,970 |
Restricted stock units | ||||
Stock-based employees compensation [Line Items] | ||||
Stock granted (in shares) | 92,558 | 427,217 | ||
Performance share units | ||||
Stock-based employees compensation [Line Items] | ||||
Stock granted (in shares) | 0 | 393,045 | ||
Performance share units | 2016 Performance Metrics | ||||
Stock-based employees compensation [Line Items] | ||||
Stock granted (in shares) | 66,082 |
BASIS OF PRESENTATION OF UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: Summary of Long-lived Asset Impairment Charges (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
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Dec. 31, 2016 |
Dec. 31, 2015 |
Dec. 31, 2016 |
Dec. 31, 2015 |
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Impaired Long-Lived Assets Held and Used [Line Items] | ||||
Salon asset impairments | $ 2,476 | $ 2,391 | $ 4,386 | $ 5,041 |
North American Value | ||||
Impaired Long-Lived Assets Held and Used [Line Items] | ||||
Salon asset impairments | 3,277 | 4,208 | ||
North American Premium | ||||
Impaired Long-Lived Assets Held and Used [Line Items] | ||||
Salon asset impairments | 882 | 752 | ||
International | ||||
Impaired Long-Lived Assets Held and Used [Line Items] | ||||
Salon asset impairments | $ 227 | $ 81 |
INVESTMENT IN AFFILIATES: (Details) - USD ($) |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
Dec. 31, 2016 |
Dec. 31, 2015 |
|
Investment in affiliates | ||||
Equity in loss of affiliated companies | $ 0 | $ 13,925,000 | $ 0 | $ 14,783,000 |
Empire Education Group Inc | ||||
Investment in affiliates | ||||
Ownership percentage | 54.60% | 54.60% | ||
Investment value | $ 0 | $ 0 | ||
Equity in loss of affiliated companies | 0 | 973,000 | 0 | 1,832,000 |
Non-cash impairment charge | 0 | (12,954,000) | 0 | (12,954,000) |
Total losses related to EEG | 0 | (13,927,000) | 0 | (14,786,000) |
Summarized Statement of Operations (Unaudited) [Abstract] | ||||
Gross revenues | 31,019,000 | 33,724,000 | 61,055,000 | 69,664,000 |
Gross profit | 9,168,000 | 7,365,000 | 17,278,000 | 15,406,000 |
Operating income (loss) | 488,000 | (1,819,000) | (219,000) | (3,290,000) |
Net income (loss) | $ 357,000 | $ (1,805,000) | $ (472,000) | $ (3,358,000) |
EARNINGS PER SHARE: (Details) - shares |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
Dec. 31, 2016 |
Dec. 31, 2015 |
|
Awards excluded from earnings per share calculations | ||||
Awards excluded from diluted earnings per share computation (in shares) | 446,877 | 592,664 | 405,015 | |
Equity Based Compensation Awards | ||||
Awards excluded from earnings per share calculations | ||||
Awards excluded from diluted earnings per share computation (in shares) | 2,361,971 | 2,097,378 | 2,411,047 | 2,210,212 |
SHAREHOLDERS' EQUITY: (Details) $ in Millions |
6 Months Ended |
---|---|
Dec. 31, 2016
USD ($)
| |
Stockholders' Equity [Line Items] | |
Stock-based compensation | $ 4.4 |
Adjustments to APIC offset by other stock-based compensation activity | 0.9 |
Additional Paid-in Capital | |
Stockholders' Equity [Line Items] | |
Increase (decrease) in additional paid-in capital | $ 3.5 |
INCOME TAXES: (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | 12 Months Ended | ||
---|---|---|---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
Dec. 31, 2016 |
Dec. 31, 2015 |
Jun. 30, 2017 |
|
Subsequent Event [Line Items] | |||||
Income tax (benefit) expense | $ 719 | $ (4,207) | $ 3,459 | $ (1,391) | |
Effective tax rate (as a percent) | (47.90%) | 98.60% | 76.50% | 99.20% | |
Forecast | |||||
Subsequent Event [Line Items] | |||||
Other noncash income tax expense | $ 7,800 |
GOODWILL AND OTHER INTANGIBLES: Schedules of Goodwill and Impairment (Details) - USD ($) $ in Thousands |
Dec. 31, 2016 |
Jun. 30, 2016 |
Jun. 30, 2014 |
Jun. 30, 2012 |
Jun. 30, 2011 |
Jun. 30, 2010 |
Jun. 30, 2009 |
---|---|---|---|---|---|---|---|
Goodwill | |||||||
Gross Carrying Value | $ 669,561 | $ 671,054 | |||||
Accumulated Impairment | (253,661) | (253,661) | |||||
Goodwill | $ 415,900 | $ 417,393 | |||||
Operating Segments | International | |||||||
Goodwill | |||||||
Accumulated Impairment | $ (41,661) | ||||||
Operating Segments | North American Premium | |||||||
Goodwill | |||||||
Accumulated Impairment | $ (34,939) | $ (67,684) | $ (35,277) | ||||
Operating Segments | North American Value | |||||||
Goodwill | |||||||
Accumulated Impairment | $ (74,100) |
FINANCING ARRANGEMENTS: Schedule of Long-term Debt (Details) - USD ($) |
Dec. 31, 2016 |
Jun. 30, 2016 |
Dec. 31, 2015 |
---|---|---|---|
Debt Instrument [Line Items] | |||
Long-term debt | $ 120,103,000 | $ 119,606,000 | |
Senior Notes | Senior Term Notes, net | |||
Debt Instrument [Line Items] | |||
Interest rate percentage | 5.50% | 5.50% | |
Long-term debt | $ 120,103,000 | 119,606,000 | |
Line of Credit | Revolving Credit Facility | |||
Debt Instrument [Line Items] | |||
Long-term debt | $ 0 | $ 0 |
FINANCING ARRANGEMENTS: Additional Information (Details) - USD ($) |
Dec. 31, 2016 |
Jun. 30, 2016 |
Dec. 31, 2015 |
---|---|---|---|
Debt Instrument [Line Items] | |||
Long-term debt | $ 120,103,000 | $ 119,606,000 | |
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 | $ 2,190,000 | 2,565,000 | $ 3,000,000 |
Long-term debt | 120,103,000 | 119,606,000 | |
Line of Credit | Revolving Credit Facility | |||
Debt Instrument [Line Items] | |||
Long-term debt | 0 | 0 | |
Outstanding standby letters of credit | 1,500,000 | 1,600,000 | |
Revolving credit facility remaining borrowing capacity | $ 198,500,000 | $ 198,400,000 |
FINANCING ARRANGEMENTS: Schedule of Senior Term Notes (Details) - USD ($) $ in Thousands |
Dec. 31, 2016 |
Jun. 30, 2016 |
Dec. 31, 2015 |
---|---|---|---|
Debt Instrument [Line Items] | |||
Senior Term Notes, net | $ 120,103 | $ 119,606 | |
Senior Notes | Senior Term Notes, net | |||
Debt Instrument [Line Items] | |||
Principal amount on the Senior Term Notes | 123,000 | 123,000 | |
Unamortized debt discount | (2,190) | (2,565) | $ (3,000) |
Unamortized debt issuance costs | (707) | (829) | |
Senior Term Notes, net | $ 120,103 | $ 119,606 |
FAIR VALUE MEASUREMENTS (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
Dec. 31, 2016 |
Dec. 31, 2015 |
|
Assets and liabilities measured at fair value on a nonrecurring basis | ||||
Long-lived assets | $ (2,476) | $ (2,391) | $ (4,386) | $ (5,041) |
Empire Education Group Inc | ||||
Assets and liabilities measured at fair value on a nonrecurring basis | ||||
Investment in EEG | $ 0 | $ (12,954) | $ 0 | $ (12,954) |
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