Exhibit 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 SECOND QUARTER 2008 RESULTS
— Second Quarter Earnings Meet Low End of Guidance-
MINNEAPOLIS, January 22, 2008 — Regis Corporation (NYSE:RGS), the global leader in the $170 billion hair care industry, today reported financial results for its fiscal second quarter ending December 31, 2007. Net income for the quarter was $22.6 million, or $0.51 per diluted share, which came in at the low end of the Company’s previously issued guidance of $0.51 to $0.57 per diluted share. Second quarter earnings results benefited from an unplanned adjustment to prior years’ workers’ compensation reserves of approximately $0.05 per diluted share, the result of the Company’s continued success with its salon safety programs.
On January 11, 2008, the Company reported revenues for the second quarter ended December 31, 2007 increased four percent to $682 million versus $657 million in second quarter of fiscal 2007. Consolidated same-store sales decreased 0.8 percent for the quarter. Deconsolidation of the beauty schools reduced revenue in the quarter by approximately $17 million. Absent the impact of the school deconsolidation, consolidated revenues for the quarter would have increased 6.5 percent.
“The momentum we have seen in the last nine months around our service business slowed in the quarter. Like many retailers, we had a disappointing holiday shopping season and, as a result, our quarterly same-store sales came in below our expectations,” commented Paul D. Finkelstein, Chairman and Chief Executive Officer. “Today’s casual lifestyle continues to have a lingering impact on fashion and salon visitation patterns. However, ours is a very predictable business and, in our 85 year history, we’ve never experienced an annual same-store sales decrease. We have a great business model and, over time, customer visits will normalize. Until then, we will continue to focus on increasing our average ticket and, more specifically, implementing price increases.”
Mr. Finkelstein continued, “The outlook for the second half of our fiscal year has not changed and we expect our same-store sales to be in the range of 0.5 to 2.5 percent. Our service business is off to a strong start with North American same-store service sales increasing over 3.5 percent in the first 20 days of the quarter and total North American same-store sales increasing over 1.2 percent. However, based on the results of the first two quarters, we now expect our full fiscal year 2008 same-store sales to be in the range of 0.25 to 1.25 percent and related earnings to be in the range of $2.01 to $2.14 per diluted share.”
During the quarter, Regis added a net total of 52 locations. The Company constructed 74 locations and franchisees built an additional 69 units. In addition, Regis acquired 19 corporate
salons (including 18 franchise buybacks). The Company closed or relocated 92 corporate and franchise locations during the quarter.
Third Quarter Fiscal 2008 Outlook
The following outlook pertains to the third quarter ending March 31, 2008, and assumes the previously announced merger of our continental European franchise operations with Franck Provost will close in late January, 2008:
· Consolidated revenue is forecasted to grow three to five percent to a range of $675 million to $685 million compared to $655 million a year ago. (Note: The deconsolidation of beauty schools and the continental European franchise operations reduces revenue growth by approximately five percentage points in the quarter.)
· Consolidated same-store sales are forecasted to be in a range of 0.5 to 2.5 percent.
· The effective income tax rate is expected to be in a range of 34 to 35 percent, which reflects the adoption of FIN 48 and the impact of the deconsolidation of the continental European franchise business.
· Earnings per diluted share are forecasted to be in the range of $0.48 to $0.54, compared to $0.12 a year ago The year ago period included a $0.43 per diluted share non-cash goodwill impairment charge related to the beauty school merger with Empire Education Group. In addition, the year ago period benefited by $0.05 per diluted share from prior year workers’ compensation actuarial adjustments and jobs tax credits.
Fiscal Year 2008 Updated Outlook
The following points pertain to the fiscal year ending June 30, 2008:
· Consolidated revenue is forecasted to grow approximately four percent to $2.74 billion. (Note: The deconsolidation of beauty schools and the continental European franchise operations reduces revenue growth by approximately four percentage points in fiscal 2008.)
· Consolidated same-store sales are forecasted to be in a range of 0.25 to 1.25 percent.
· The effective income tax rate is expected to be in a range of 35 to 36 percent.
· Earnings per diluted share are forecasted to be in a range of $2.01 to $2.14.
Regis Corporation will host a conference call discussing second quarter results today, January 22, 2008 at 10:00 a.m., Central Time. Interested parties are invited to listen by logging on to www.regiscorp.com or dialing 800-257-7063. A replay of the call will be available later that day. The replay phone number is 800-405-2236, access code 11104730#.
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 December 31, 2007, the Company owned, franchised or held ownership interests in over 12,600 worldwide locations. Regis’ corporate and franchised locations operate under concepts such as Supercuts, Jean Louis David, Vidal Sassoon, Regis Salons, MasterCuts, Trade Secret, SmartStyle, Cost Cutters and Hair Club for Men and Women. In addition, Regis maintains ownership interests in Empire Education Group and various other salon concepts such as Cool Cuts 4 Kids, and the Beauty Takashi and Beauty Plaza concepts in Japan. System-wide, these and other concepts are located in the U.S. and in eleven other countries in North America, Europe and Asia. Regis also maintains a 50 percent ownership interest in Intelligent Nutrients, a joint venture 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; 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)
CONDENSED CONSOLIDATED BALANCE SHEET (Unaudited)
as of December 31, 2007 and June 30, 2007
(In thousands, except per share data)
| | December 31, 2007 | | June 30, 2007 | |
ASSETS | | | | | |
Current assets: | | | | | |
Cash and cash equivalents | | $ | 172,855 | | $ | 184,785 | |
Receivables, net | | 51,153 | | 67,773 | |
Inventories | | 208,107 | | 196,582 | |
Deferred income taxes | | 9,699 | | 18,775 | |
Other current assets | | 65,346 | | 57,149 | |
Total current assets | | 507,160 | | 525,064 | |
| | | | | |
Property and equipment, net | | 484,499 | | 494,085 | |
Goodwill | | 829,446 | | 812,383 | |
Other intangibles, net | | 191,182 | | 213,452 | |
Investment in affiliates | | 89,086 | | 20,213 | |
Other assets | | 82,606 | | 66,917 | |
| | | | | |
Total assets | | $ | 2,183,979 | | $ | 2,132,114 | |
| | | | | |
LIABILITIES AND SHAREHOLDERS’ EQUITY | | | | | |
Current liabilities: | | | | | |
Long-term debt, current portion | | $ | 244,041 | | $ | 223,352 | |
Accounts payable | | 69,573 | | 74,532 | |
Accrued expenses | | 212,660 | | 240,748 | |
Total current liabilities | | 526,274 | | 538,632 | |
| | | | | |
Long-term debt and capital lease obligations | | 523,265 | | 485,879 | |
Other noncurrent liabilities | | 203,646 | | 194,295 | |
Total liabilities | | 1,253,185 | | 1,218,806 | |
| | | | | |
Shareholders’ equity: | | | | | |
Common stock, $0.05 par value; issued and outstanding 42,881,965 and 44,164,645 common shares at December 31, 2007 and June 30, 2007, respectively | | 2,144 | | 2,209 | |
Additional paid-in capital | | 141,321 | | 178,029 | |
Accumulated other comprehensive income | | 97,174 | | 78,278 | |
Retained earnings | | 690,155 | | 654,792 | |
| | | | | |
Total shareholders’ equity | | 930,794 | | 913,308 | |
| | | | | |
Total liabilities and shareholders’ equity | | $ | 2,183,979 | | $ | 2,132,114 | |
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REGIS CORPORATION (NYSE: RGS)
CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited)
(In thousands, except per share data)
| | Three Months Ended
December 31, | | Six Months Ended
December 31, | |
| | 2007 | | 2006 | | 2007 | | 2006 | |
Revenues: | | | | | | | | | |
Service | | $ | 457,868 | | $ | 440,345 | | $ | 917,586 | | $ | 874,897 | |
Product | | 202,696 | | 196,752 | | 389,478 | | 381,677 | |
Royalties and fees | | 21,677 | | 19,893 | | 42,702 | | 39,659 | |
| | 682,241 | | 656,990 | | 1,349,766 | | 1,296,233 | |
| | | | | | | | | |
Operating expenses: | | | | | | | | | |
Cost of service | | 265,977 | | 249,613 | | 529,037 | | 495,138 | |
Cost of product | | 105,045 | | 100,164 | | 199,122 | | 194,393 | |
Site operating expenses | | 48,844 | | 54,967 | | 102,529 | | 110,773 | |
General and administrative | | 86,144 | | 81,411 | | 172,496 | | 159,364 | |
Rent | | 99,768 | | 93,163 | | 197,531 | | 185,335 | |
Depreciation and amortization | | 31,604 | | 30,412 | | 63,186 | | 59,954 | |
Total operating expenses | | 637,382 | | 609,730 | | 1,263,901 | | 1,204,957 | |
| | | | | | | | | |
Operating income | | 44,859 | | 47,260 | | 85,865 | | 91,276 | |
| | | | | | | | | |
Other income (expense): | | | | | | | | | |
Interest | | (11,760 | ) | (10,671 | ) | (22,338 | ) | (20,509 | ) |
Other, net | | 2,092 | | 1,582 | | 4,247 | | 2,393 | |
| | | | | | | | | |
Income before income taxes and equity
in income of affiliated companies | | 35,191 | | 38,171 | | 67,774 | | 73,160 | |
| | | | | | | | | |
Income taxes | | (13,021 | ) | (11,297 | ) | (24,671 | ) | (23,193 | ) |
Equity in income of affiliated companies | | 386 | | — | | 52 | | — | |
| | | | | | | | | |
Net income | | $ | 22,556 | | $ | 26,874 | | $ | 43,155 | | $ | 49,967 | |
| | | | | | | | | |
Net income per share: | | | | | | | | | |
Basic | | $ | 0.52 | | $ | 0.60 | | $ | 0.99 | | $ | 1.11 | |
Diluted | | $ | 0.51 | | $ | 0.59 | | $ | 0.98 | | $ | 1.09 | |
| | | | | | | | | |
Weighted average common and common
equivalent shares outstanding: | | | | | | | | | |
Basic | | 43,369 | | 44,673 | | 43,559 | | 44,858 | |
Diluted | | 43,915 | | 45,596 | | 44,172 | | 45,847 | |
| | | | | | | | | |
Cash dividends declared per common share | | $ | 0.04 | | $ | 0.04 | | $ | 0.08 | | $ | 0.08 | |
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REGIS CORPORATION (NYSE: RGS)
SELECTED CASH FLOW DATA
(In thousands)
| | Six Months Ended
December 31, | |
| | 2007 | | 2006 | |
| | | | | |
Net cash provided by operating activities | | $ | 93,549 | | $ | 101,281 | |
Net cash used in investing activities | | (117,071 | ) | (95,201 | ) |
Net cash provided by financing activities | | 3,115 | | 13,128 | |
Effect of exchange rate changes on cash and cash equivalents | | 8,477 | | 1,525 | |
(Decrease) increase in cash and cash equivalents | | (11,930 | ) | 20,733 | |
Cash and cash equivalents: | | | | | |
Beginning of year | | 184,785 | | 135,397 | |
End of year | | $ | 172,855 | | $ | 156,130 | |
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REGIS CORPORATION (NYSE: RGS)
Salon / School / Hair Restoration Center Counts and Revenues
SYSTEM-WIDE LOCATIONS: | | December 31,
2007 | | June 30,
2007 | |
| | | | | |
Company-owned salons | | 8,303 | | 8,139 | |
Franchise salons | | 3,767 | | 3,742 | |
Beauty career schools | | — | | 56 | |
Company-owned hair restoration centers | | 55 | | 49 | |
Franchise hair restoration centers | | 35 | | 41 | |
Ownership interest locations | | 475 | | 389 | |
Total, system-wide | | 12,635 | | 12,416 | |
| | | | | |
SALON LOCATION SUMMARY | | | | | |
| | | | | |
NORTH AMERICAN SALONS: | | December 31,
2007 | | June 30,
2007 | |
REGIS SALONS | | | | | |
Open at beginning of period | | 1,099 | | 1,079 | |
Salons constructed | | 9 | | 17 | |
Acquired | | — | | 49 | |
Less relocations | | (6 | ) | (14 | ) |
Salon openings | | 3 | | 52 | |
Conversions | | 1 | | (1 | ) |
Salons closed | | (13 | ) | (31 | ) |
Total, Regis Salons | | 1,090 | | 1,099 | |
| | | | | |
MASTERCUTS | | | | | |
Open at beginning of period | | 629 | | 642 | |
Salons constructed | | 5 | | 15 | |
Acquired | | — | | — | |
Less relocations | | (4 | ) | (12 | ) |
Salon openings | | 1 | | 3 | |
Conversions | | — | | — | |
Salons closed | | (4 | ) | (16 | ) |
Total, MasterCuts Salons | | 626 | | 629 | |
| | | | | |
TRADE SECRET | | | | | |
Company-owned salons: | | | | | |
Open at beginning of period | | 613 | | 615 | |
Salons constructed | | 8 | | 20 | |
Acquired | | 2 | | 3 | |
Franchise buybacks | | 8 | | — | |
Less relocations | | (5 | ) | (11 | ) |
Salon openings | | 13 | | 12 | |
Conversions | | — | | 1 | |
Salons closed | | (10 | ) | (15 | ) |
Total company-owned salons | | 616 | | 613 | |
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| | December 31,
2007 | | June 30,
2007 | |
Franchise salons: | | | | | |
Open at beginning of period | | 19 | | 19 | |
Salons constructed | | 2 | | — | |
Acquired | | 42 | | — | |
Less relocations | | (1 | ) | — | |
Salon openings | | 43 | | — | |
Franchise buybacks | | (3 | ) | — | |
Salons closed | | — | | — | |
Total franchise salons | | 59 | | 19 | |
| | | | | |
Total, Trade Secret Salons | | 675 | | 632 | |
| | | | | |
SMARTSTYLE/COST CUTTERS IN WAL-MART | | | | | |
Company-owned salons: | | | | | |
Open at beginning of period | | 2,000 | | 1,739 | |
Salons constructed | | 84 | | 242 | |
Acquired | | — | | — | |
Franchise buybacks | | 12 | | 21 | |
Less relocations | | (1 | ) | (2 | ) |
Salon openings | | 95 | | 261 | |
Conversions | | — | | — | |
Salons closed | | — | | — | |
Total company-owned salons | | 2,095 | | 2,000 | |
| | | | | |
Franchise salons: | | | | | |
Open at beginning of period | | 151 | | 164 | |
Salons constructed | | 4 | | 8 | |
Acquired | | — | | — | |
Less relocations | | — | | — | |
Salon openings | | 4 | | 8 | |
Conversions | | — | | — | |
Franchise buybacks | | (12 | ) | (21 | ) |
Salons closed | | — | | — | |
Total franchise salons | | 143 | | 151 | |
| | | | | |
Total, SmartStyle/Cost Cutters in Wal-Mart Salons | | 2,238 | | 2,151 | |
| | | | | |
STRIP CENTERS | | | | | |
Company-owned salons: | | | | | |
Open at beginning of period | | 3,317 | | 3,031 | |
Salons constructed | | 39 | | 101 | |
Acquired | | 6 | | 193 | |
Franchise buybacks | | 51 | | 72 | |
Less relocations | | (8 | ) | (17 | ) |
Salon openings | | 88 | | 349 | |
Conversions | | — | | — | |
Salons closed | | (44 | ) | (63 | ) |
Total company-owned salons | | 3,361 | | 3,317 | |
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| | December 31,
2007 | | June 30,
2007 | |
Franchise salons: | | | | | |
Open at beginning of period | | 1,998 | | 2,004 | |
Salons constructed | | 68 | | 135 | |
Acquired (2) | | — | | — | |
Less relocations | | (7 | ) | (19 | ) |
Salon openings | | 61 | | 116 | |
Conversions | | — | | — | |
Franchise buybacks | | (56 | ) | (72 | ) |
Salons closed | | (26 | ) | (50 | ) |
Total franchise salons | | 1,977 | | 1,998 | |
| | | | | |
Total, Strip Center Salons | | 5,338 | | 5,315 | |
| | | | | |
INTERNATIONAL SALONS (1) | | | | | |
Company-owned salons: | | | | | |
Open at beginning of period | | 481 | | 453 | |
Salons constructed | | 13 | | 25 | |
Acquired | | 25 | | 12 | |
Franchise buybacks | | — | | 4 | |
Less relocations | | (1 | ) | (3 | ) |
Salon openings | | 37 | | 38 | |
Conversions | | 1 | | — | |
Salons closed | | (4 | ) | (10 | ) |
Total company-owned salons | | 515 | | 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 | ) |
Salons closed | | (39 | ) | (118 | ) |
Total franchise salons | | 1,588 | | 1,574 | |
| | | | | |
Total, International Salons | | 2,103 | | 2,055 | |
| | | | | |
TOTAL SYSTEM-WIDE SALONS: | | December 31,
2007 | | June 30,
2007 | |
Company-owned salons: | | | | | |
Open at beginning of period | | 8,139 | | 7,559 | |
Salons constructed | | 158 | | 420 | |
Acquired | | 33 | | 257 | |
Franchise buybacks | | 71 | | 97 | |
Less relocations | | (25 | ) | (59 | ) |
Salon openings | | 237 | | 715 | |
Conversions | | 2 | | — | |
Salons closed | | (75 | ) | (135 | ) |
Total company-owned salons | | 8,303 | | 8,139 | |
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| | December 31,
2007 | | June 30,
2007 | |
Franchise salons: | | | | | |
Open at beginning of period | | 3,742 | | 3,774 | |
Salons constructed | | 124 | | 253 | |
Acquired (2) | | 42 | | — | |
Less relocations | | (8 | ) | (20 | ) |
Salon openings | | 158 | | 233 | |
Conversions | | 3 | | — | |
Franchise buybacks | | (71 | ) | (97 | ) |
Salons closed | | (65 | ) | (168 | ) |
Total franchise salons | | 3,767 | | 3,742 | |
| | | | | |
Total Salons | | 12,070 | | 11,881 | |
| | | | | |
BEAUTY SCHOOLS | | | | | |
Open at beginning of period | | 56 | | 54 | |
Salons constructed | | — | | 2 | |
Less closures | | (56 | ) | — | |
Acquired | | — | | 1 | |
Less relocations | | — | | (1 | ) |
Total Beauty Schools | | — | | 56 | |
| | | | | |
HAIR RESTORATION CENTERS: | | | | | |
Company-owned hair restoration centers: | | | | | |
Open at beginning of period | | 49 | | 48 | |
Salons constructed | | 1 | | — | |
Acquired | | — | | 1 | |
Franchise buybacks | | 6 | | 1 | |
Less relocations | | (1 | ) | — | |
Salon openings | | 6 | | 2 | |
Sites closed | | — | | (1 | ) |
Total company-owned hair restoration centers | | 55 | | 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 | | 90 | | 90 | |
| | | | | |
Ownership interest locations | | 475 | | 389 | |
| | | | | |
Grand Total, System-wide | | 12,635 | | 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.
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REVENUES BY CONCEPT:
| | Three Months Ended
December 31, | | Six Months Ended
December 31, | |
(Dollars in thousands) | | 2007 | | 2006 | | 2007 | | 2006 | |
North American salons: | | | | | | | | | |
Regis | | $ | 128,862 | | $ | 125,461 | | $ | 256,348 | | $ | 247,736 | |
MasterCuts | | 43,879 | | 44,093 | | 87,468 | | 88,142 | |
Trade Secret (1) | | 67,684 | | 72,442 | | 127,990 | | 137,904 | |
SmartStyle | | 122,179 | | 112,513 | | 244,282 | | 223,802 | |
Strip Centers (1) | | 213,476 | | 190,404 | | 426,555 | | 382,235 | |
Other (3) | | — | | — | | 5,558 | | — | |
Total North American salons | | 576,080 | | 544,913 | | 1,148,201 | | 1,079,819 | |
| | | | | | | | | |
International salons (1) | | 73,056 | | 60,369 | | 136,337 | | 116,244 | |
Beauty schools (3) | | — | | 21,976 | | — | | 41,341 | |
Hair restoration centers (1) | | 33,105 | | 29,732 | | 65,228 | | 58,829 | |
| | | | | | | | | |
Consolidated revenues | | $ | 682,241 | | $ | 656,990 | | $ | 1,349,766 | | $ | 1,296,233 | |
| | | | | | | | | |
Percent change from prior year | | 3.8 | % | 8.3 | % | 4.1 | % | 8.8 | % |
| | | | | | | | | |
Same-store sales (decrease) increase (2) | | (0.8 | )% | 0.5 | % | 0.0 | % | 0.2 | % |
(1) Includes aggregate franchise royalties and fees of $21.7 and $19.9 million for the three months ended December 31, 2007 and 2006, respectively, and $42.7 and $39.7 million for the six months ended December 31, 2007 and 2006, respectively. North American salon franchise royalties and fees represented 45.7 and 47.7 percent of total franchise revenues in the three months ended December 31, 2007 and 2006, respectively, and 47.0 and 48.7 percent of total franchise revenues in the six months ended December 31, 2007 and 2006, respectively.
(2) Salon same-store sales increases or decreases are calculated on a daily basis as the total change in sales for company-owned salons which were open on a specific day of the week during the current period and the corresponding prior period. Quarterly and year-to-date salon same-store sales increases are the sum of the same-store sales increases computed on a daily basis. Relocated salons 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. The Company began including Hair Restoration Centers in its same-store sales calculation 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.
(3) On August 1, 2007, the Company contributed its accredited cosmetology schools to Empire Education Group, Inc. For the three and six months ended December 31, 2007 the results of operations for the month ended July 31, 2007 are reported in the North American salons segment.
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FINANCIAL INFORMATION BY SEGMENT:
Financial information concerning the Company’s salon, school and hair restoration businesses is shown in the following tables.
| | For the Three Months Ended December 31, 2007(1) | |
| | Salons | | Hair
Restoration | | Unallocated | | | |
(Dollars in thousands) | | North America | | International | | Centers | | Corporate | | Consolidated | |
Revenues: | | | | | | | | | | | |
Service | | $ | 399,377 | | $ | 43,224 | | $ | 15,267 | | $ | — | | $ | 457,868 | |
Product | | 166,803 | | 19,133 | | 16,760 | | — | | 202,696 | |
Royalties and fees | | 9,900 | | 10,699 | | 1,078 | | — | | 21,677 | |
| | 576,080 | | 73,056 | | 33,105 | | — | | 682,241 | |
Operating expenses: | | | | | | | | | | | |
Cost of service | | 233,667 | | 24,091 | | 8,219 | | — | | 265,977 | |
Cost of product | | 90,002 | | 10,117 | | 4,926 | | — | | 105,045 | |
Site operating expenses | | 43,829 | | 3,708 | | 1,307 | | — | | 48,844 | |
General and administrative | | 33,394 | | 11,786 | | 7,357 | | 33,607 | | 86,144 | |
Rent | | 83,324 | | 14,284 | | 1,728 | | 432 | | 99,768 | |
Depreciation and amortization | | 21,690 | | 2,589 | | 2,552 | | 4,773 | | 31,604 | |
Total operating expenses | | 505,906 | | 66,575 | | 26,089 | | 38,812 | | 637,382 | |
| | | | | | | | | | | |
Operating income (loss) | | 70,174 | | 6,481 | | 7,016 | | (38,812 | ) | 44,859 | |
| | | | | | | | | | | |
Other income (expense): | | | | | | | | | | | |
Interest | | — | | — | | — | | (11,760 | ) | (11,760 | ) |
Other, net | | — | | — | | — | | 2,092 | | 2,092 | |
Income (loss) before income taxes and equity in income of affiliated companies | | $ | 70,174 | | $ | 6,481 | | $ | 7,016 | | $ | (48,480 | ) | $ | 35,191 | |
(1) On August 1, 2007, the Company contributed its accredited cosmetology schools to Empire Education Group, Inc. The Company retained ownership of its one North America and four United Kingdom Vidal Sassoon schools. Results of operations for the Vidal Sassoon schools are included in the respective North American and international salon segments.
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| | For the Three Months Ended December 31, 2006 | |
| | Salons | | Beauty | | Hair
Restoration | | Unallocated | | | |
(Dollars in thousands) | | North America | | International | | Schools | | Centers | | Corporate | | Consolidated | |
Revenues: | | | | | | | | | | | | | |
Service | | $ | 372,161 | | $ | 35,234 | | $ | 20,142 | | $ | 12,808 | | $ | — | | $ | 440,345 | |
Product | | 163,256 | | 15,919 | | 1,834 | | 15,743 | | — | | 196,752 | |
Royalties and fees | | 9,496 | | 9,216 | | — | | 1,181 | | — | | 19,893 | |
| | 544,913 | | 60,369 | | 21,976 | | 29,732 | | — | | 656,990 | |
Operating expenses: | | | | | | | | | | | | | |
Cost of service | | 215,863 | | 18,618 | | 8,184 | | 6,948 | | — | | 249,613 | |
Cost of product | | 84,591 | | 9,883 | | 1,126 | | 4,564 | | — | | 100,164 | |
Site operating expenses | | 46,739 | | 2,721 | | 4,216 | | 1,291 | | — | | 54,967 | |
General and administrative | | 30,345 | | 11,556 | | 2,796 | | 6,542 | | 30,172 | | 81,411 | |
Rent | | 77,690 | | 11,111 | | 2,241 | | 1,608 | | 513 | | 93,163 | |
Depreciation and amortization | | 20,631 | | 2,193 | | 829 | | 2,390 | | 4,369 | | 30,412 | |
Total operating expenses | | 475,859 | | 56,082 | | 19,392 | | 23,343 | | 35,054 | | 609,730 | |
| | | | | | | | | | | | | |
Operating income (loss) | | 69,054 | | 4,287 | | 2,584 | | 6,389 | | (35,054 | ) | 47,260 | |
| | | | | | | | | | | | | |
Other income (expense): | | | | | | | | | | | | | |
Interest | | — | | — | | — | | — | | (10,671 | ) | (10,671 | ) |
Other, net | | — | | — | | — | | — | | 1,582 | | 1,582 | |
Income (loss) before income taxes | | $ | 69,054 | | $ | 4,287 | | $ | 2,584 | | $ | 6,389 | | $ | (44,143 | ) | $ | 38,171 | |
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| | For the Six Months Ended December 31, 2007(1) | |
| | Salons | | Hair
Restoration | | Unallocated | | | |
(Dollars in thousands) | | North America | | International | | Centers | | Corporate | | Consolidated | |
Revenues: | | | | | | | | | | | |
Service | | $ | 806,516 | | $ | 81,653 | | $ | 29,417 | | $ | — | | $ | 917,586 | |
Product | | 321,636 | | 34,426 | | 33,416 | | — | | 389,478 | |
Royalties and fees | | 20,049 | | 20,258 | | 2,395 | | — | | 42,702 | |
| | 1,148,201 | | 136,337 | | 65,228 | | — | | 1,349,766 | |
Operating expenses: | | | | | | | | | | | |
Cost of service | | 468,555 | | 44,512 | | 15,970 | | — | | 529,037 | |
Cost of product | | 170,635 | | 18,728 | | 9,759 | | — | | 199,122 | |
Site operating expenses | | 93,037 | | 6,915 | | 2,577 | | — | | 102,529 | |
General and administrative | | 66,388 | | 23,600 | | 14,516 | | 67,992 | | 172,496 | |
Rent | | 166,320 | | 26,913 | | 3,385 | | 913 | | 197,531 | |
Depreciation and amortization | | 43,585 | | 5,048 | | 5,049 | | 9,504 | | 63,186 | |
Total operating expenses | | 1,008,520 | | 125,716 | | 51,256 | | 78,409 | | 1,263,901 | |
| | | | | | | | | | | |
Operating income (loss) | | 139,681 | | 10,621 | | 13,972 | | (78,409 | ) | 85,865 | |
| | | | | | | | | | | |
Other income (expense): | | | | | | | | | | | |
Interest | | — | | — | | — | | (22,338 | ) | (22,338 | ) |
Other, net | | — | | — | | — | | 4,247 | | 4,247 | |
Income (loss) before income taxes and equity in income of affiliated companies | | $ | 139,681 | | $ | 10,621 | | $ | 13,972 | | $ | (96,500 | ) | $ | 67,774 | |
(1) On August 1, 2007, the Company contributed its accredited cosmetology schools to Empire Education Group, Inc. For the six months ended December 31, 2007 the results of operations for the month ended July 31, 2007 are reported in the North American salons segment. The Company retained ownership of its one North America and four United Kingdom Vidal Sassoon schools. Results of operations for the Vidal Sassoon schools are included in the respective North American and international salon segments.
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| | For the Six Months Ended December 31, 2006 | |
| | Salons | | Beauty | | Hair
Restoration | | Unallocated | | | |
(Dollars in thousands) | | North America | | International | | Schools | | Centers | | Corporate | | Consolidated | |
Revenues: | | | | | | | | | | | | | |
Service | | $ | 743,360 | | $ | 68,924 | | $ | 37,106 | | $ | 25,507 | | $ | — | | $ | 874,897 | |
Product | | 317,164 | | 29,360 | | 4,235 | | 30,918 | | — | | 381,677 | |
Royalties and fees | | 19,295 | | 17,960 | | — | | 2,404 | | — | | 39,659 | |
| | 1,079,819 | | 116,244 | | 41,341 | | 58,829 | | — | | 1,296,233 | |
Operating expenses: | | | | | | | | | | | | | |
Cost of service | | 428,235 | | 36,596 | | 16,220 | | 14,087 | | — | | 495,138 | |
Cost of product | | 164,295 | | 17,875 | | 2,928 | | 9,295 | | — | | 194,393 | |
Site operating expenses | | 94,844 | | 5,075 | | 8,546 | | 2,308 | | — | | 110,773 | |
General and administrative | | 59,390 | | 21,726 | | 5,163 | | 12,819 | | 60,266 | | 159,364 | |
Rent | | 154,585 | | 22,106 | | 4,477 | | 3,272 | | 895 | | 185,335 | |
Depreciation and amortization | | 40,770 | | 4,065 | | 1,641 | | 4,724 | | 8,754 | | 59,954 | |
Total operating expenses | | 942,119 | | 107,443 | | 38,975 | | 46,505 | | 69,915 | | 1,204,957 | |
| | | | | | | | | | | | | |
Operating income (loss) | | 137,700 | | 8,801 | | 2,366 | | 12,324 | | (69,915 | ) | 91,276 | |
| | | | | | | | | | | | | |
Other income (expense): | | | | | | | | | | | | | |
Interest | | — | | — | | — | | — | | (20,509 | ) | (20,509 | ) |
Other, net | | — | | — | | — | | — | | 2,393 | | 2,393 | |
Income (loss) before income taxes | | $ | 137,700 | | $ | 8,801 | | $ | 2,366 | | $ | 12,324 | | $ | (88,031 | ) | $ | 73,160 | |
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REGIS CORPORATION (NYSE: RGS)
PRO FORMA REVENUES (Unaudited)
(In thousands)
The Company’s press release announcing results of operations for the three month period ended December 31, 2007 includes references to the following “non-GAAP financial measure” as defined by Regulation G of the Securities and Exchange Commission:
- pro forma results for the deconsolidation of the 51 wholly owned accredited cosmetology schools (schools) to Empire Education Group, Inc., in exchange for a 49.0 percent minority interest in Empire Education Group, Inc.
On August 1, 2007, the Company contributed the schools to Empire Education Group, Inc., 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 America and four United Kingdom Vidal Sassoon schools.
The unaudited pro forma revenues set forth below for the Company give the effect of the deconsolidation of the schools being completed on July 1, 2006 and excludes product sales to Empire Education Group, Inc. Management believes this measurement accurately portrays the true revenue growth of the Company’s core salon and hair restoration businesses between the comparable periods, excluding the impact of deconsolidating the school business. If the Company had completed the agreement and deconsolidated the schools on the dates assumed in the pro forma revenues, the Company might have performed differently. You should not rely on the pro forma financial information as an indication of the revenues that the Company would have achieved, had the deconsolidation of the schools been completed at the dates indicated, or of the future revenues that the Company will achieve after the deconsolidation of the schools.
The pro forma revenues are based on available information and certain assumptions that management believes are reasonable. The unaudited pro forma revenues should be read in conjunction with the historical financial statements of the Company.
| | Three Months Ended | | Three Months Ended | |
| | December 31, 2007 | | December 31, 2006 | |
| | (Dollars in thousands) | | (Dollars in thousands) | |
Consolidated revenues, reported | | $ | 682,241 | | $ | 656,990 | |
Increase in consolidated revenues, reported | | 3.8 | % | | |
| | | | | |
Consolidated revenues, reported | | $ | 682,241 | | $ | 656,990 | |
Deconsolidation of schools | | | | (17,243 | ) |
Product sales to Empire Education Group, Inc. | | (594 | ) | | |
Consolidated revenues, adjusted | | $ | 681,647 | | $ | 639,747 | |
Increase in consolidated revenues, adjusted | | 6.5 | % | | |
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