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REGIS CORP
Symbol U : RGS
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Regis Reports Second Quarter 2013 Results

2013-01-31 06:00 ET - News Release


Company Website: http://www.regiscorp.com
MINNEAPOLIS -- (Business Wire)

Regis Corporation (NYSE: RGS), a leader in the haircare industry, whose primary business is owning, operating and franchising hair salons, today reported results for its fiscal second quarter ended December 31, 2012 versus the prior year as noted below. References made to discrete items were formerly referred to as non-operational items in previous earnings releases, and references made to financial measures, as adjusted, were formerly referred to as operational measures in previous earnings releases.

  • Sales of $506.2 million, a decrease of 3.8 %. Same-store sales declined 1.9%.
  • GAAP net loss of $12.3 million. GAAP net loss including discontinued operations per diluted share (Diluted EPS) of $0.22.
  • Diluted EPS, as adjusted, of $0.03 compared to $0.27.
    • Current year earnings were reduced by approximately $0.05 per share, representing increased labor costs, primarily associated with increased stylist hours, impacts of Hurricane Sandy and reduced equity in earnings of Empire Education Group, partly offset by reductions in general & administrative expenses.
    • Prior year earnings were increased by $0.10 per share, representing equity in earnings of Provalliance (sold in the current year first quarter) and tax benefits primarily from the realization of employment tax credits.
  • EBITDA, as adjusted, of $31.1 million compared to $43.7 million.
    • Current year was reduced by approximately $8.9 million due to increased labor costs, primarily associated with increased stylist hours and impacts of Hurricane Sandy.
    • Current year was improved by $6.1 million of reductions in general and administrative expenses, as adjusted, representing an 80 basis point decline as a percentage of revenues.
  • The current year quarter includes net discrete after-tax expense of $14.0 million, primarily related to impairment of our investment in Empire Education Group, partly offset by earnings from discontinued operations. The prior year quarter includes $73.8 million of net discrete after-tax expense.
  • All periods presented reflect the reclassification of our Hair Restoration segment to discontinued operations. During the current quarter, the Hair Restoration segment generated earnings of $0.07 per diluted share.

“Second quarter results reflect conscious decisions we’ve made to invest in our business to drive traffic,” said Dan Hanrahan, President and Chief Executive Officer. “We made the decision to increase salon hours, primarily in our SmartStyle salons located in Walmart and our Supercuts salons. We knew this decision would impact gross margins, but we believed increasing hours would help stem continued declines in guest traffic. By adding hours, we are beginning to see improvements in guest traffic, especially in our SmartStyle and Supercuts businesses. Service traffic in SmartStyle was up over 4% for the quarter compared to the same period last year, and for the first time in thirteen consecutive quarters, SmartStyle posted positive same-store service sales. Overall, same-store sales trends improved 120 basis points compared to the first quarter of this fiscal year.”

Mr. Hanrahan continued, “While this investment currently reduced gross margins, we are continuing to focus on scheduling optimization, so that in the back half of this year our margins will be less impacted by increased hours. Scheduling optimization is in its early stages, and we are working diligently to strike the proper balance between staffing and guest traffic. Preliminary January findings indicate this gap may be narrowing in a number of our Supercuts salons, giving me confidence we can and will continue to improve during the remainder of our fiscal year.

“On a positive note, we continued to drive expense out of the business. General and administrative expenses, as adjusted, were reduced by over $6 million compared to the same quarter last year. While we expect our general and administrative run rate to continue in the second half, we continue to focus on areas of the business that can drive further cost efficiencies.”

Mr. Hanrahan concluded, “We are in the early stages on several initiatives focused on creating an ideal guest experience that drives loyalty and repeat business, developing, retaining and attracting the best stylists and optimizing our brand portfolio. Changing the strategic direction of any established business requires investment, execution and time. After six months in this role, I remain extremely confident about our ability to improve Regis’ performance and the entire organization shares my sense of urgency to achieve that goal.”

 
Comparable Profitability Measures (1)
 
  Three Months Ended   Six Months Ended   Fiscal Years Ended
December 31,December 31,June 30,
2012   20112012   20112012   2011
(Dollars in Millions)
Revenue $ 506.2 $ 526.1 $ 1,011.5 $ 1,057.5 $ 2,122.2 $ 2,180.2
 
Revenue growth (decline) % (3.8 ) (2.3 ) (4.3 ) (2.1 ) (2.7 ) (1.6 )
 
Same-Store Sales % (1.9 ) (3.3 ) (2.5 ) (3.4 ) (3.5 ) (1.9 )
Same-Store Average Ticket % Change 0.5 (0.9 ) (0.2 ) (0.4 ) (0.6 ) 1.0
Same-Store Guest Count % Change (2.4 ) (2.4 ) (2.3 ) (3.0 ) (2.9 ) (2.9 )
 
Gross Margin % (2) 41.7 44.2 42.1 44.4 44.2 44.1
Service Margin % (2) 39.7 42.7 40.3 43.0 42.7 42.6
Product Margin % (2) 49.1 49.5 48.6 49.9 49.6 49.7
 
Site operating expense as % of total revenues, U.S. GAAP reported 9.9 9.8 10.1 10.0 9.8 9.7
Site operating expense as % of total revenues, as adjusted 10.1 9.8 10.2 10.0 9.7 9.7
 
General and administrative as % of total revenues, U.S. GAAP reported 11.0 11.9 11.0 12.2 11.8 13.1
General and administrative as % of total revenues, as adjusted 10.8 11.6 11.0 11.7 11.0 11.3
 
Operating income (loss) as % of total revenues, U.S. GAAP reported 1.7 2.3 1.8 2.0 (0.1 ) (0.7 )
Operating income as % of total revenues, as adjusted 1.7 3.8 1.7 3.8 4.6 4.5
 
EBITDA 17.4 (21.2 ) 86.3 26.5 14.7 101.3
EBITDA, as adjusted 31.1 43.7 61.5 87.6 191.4 195.3
 
    1)   As of September 30, 2012, the Company classified the results of operations of the Hair Restoration Centers as discontinued operations. Beginning with the first quarter ended September 30, 2012, the Company reclassified certain salon marketing and advertising expenses that were previously within cost of service and general and administrative expense to site operating expense. All periods presented reflect the Hair Restoration segment operations as discontinued operations and the reclassifications that were made during the quarter ended September 30, 2012.
2) Excludes depreciation and amortization.
 

Second Quarter Results:

Revenues. Revenues for the quarter declined $20.0 million, or 3.8%, compared to the prior year quarter.

Salon revenues during the quarter were $496.5 million, a decrease of $20.4 million, or 3.9%, from the prior year quarter, mainly driven by declines in North American salons. North American service revenues for the quarter were $364.5 million, a decrease of $15.2 million, or 4.0%, compared to the same period last year. Compared to the prior year quarter, North American same-store service sales declined 1.5%, comprised of a 2.2% decrease in guest counts and 0.7 % increase in average ticket price. Management estimates that lost business from Hurricane Sandy negatively impacted same-store service sales by approximately 30 basis points. Net changes in store counts drove the remaining 2.5% decrease compared to the prior year quarter.

Product revenues for the quarter were $108.2 million, a decrease of $4.7 million, or 4.1% versus the same period last year. Product same-store sales declined 3.6%.

Royalties and fees for the quarter of $9.6 million increased $0.4 million, or 4.7%, versus the prior year quarter.

Gross Margin. Gross margin as a percent of service and product revenues for the second quarter decreased 250 basis points to 41.7% compared to the prior year quarter.

Service margin as a percent of service revenues for the quarter was 39.7%, a decline of 300 basis points compared the prior year quarter, primarily related to increased salon labor costs in North American salons. The increase in salon labor costs was due the Company’s decision to increase stylist hours to drive traffic. Hours increased at a faster rate than same-store service sales. The Company is in the early stages of implementing a scheduling optimization tool which will help align changes to salon hours with changes in guest traffic. Product margin as a percent of product revenues for the quarter was 49.1%, a decline of 40 basis points compared to the prior year quarter, in part, driven by product donations for Hurricane Sandy relief efforts.

Site Operating Expenses. Site operating expenses for the quarter of $49.9 million, or 9.9% of revenues, declined by $1.6 million or 3.1% compared to the same quarter last year. Excluding the impact of discrete items, site operating expenses, as adjusted, for the quarter of $51.0 million, or 10.1% of revenues, a decrease of $0.5 million, or 0.9%, compared to the same quarter last year. The decrease in expense was primarily driven by the fact that we were lapping a marketing event in the prior year that was not repeated in the current year, partly offset by increased communication and insurance costs.

General and Administrative. General and administrative expenses for the quarter of $55.8 million, or 11.0% of revenues, decreased $6.8 million, or 90 basis points, compared to the same quarter last year. Excluding the impact of discrete items, general and administrative expenses, as adjusted, for the quarter decreased $6.1 million, or 9.9%, compared to the same quarter last year, representing an 80 basis point decline as a percent of revenues. This reduction was driven by cost saving initiatives the Company put in place to simplify and become efficient in supporting salon operations. We expect general and administrative run rates to continue in the second half and we continue to focus on simplification to drive further cost efficiencies.

Rent. Rent expense for the quarter was $80.6 million, or 15.9% of revenues, representing an increase of 10 basis points over the same quarter last year, primarily the result of negative leverage due to decreases in same-store sales. Rent expense actually declined by $2.7 million, or 3.2%, compared to the same quarter last year, due to store closures.

Depreciation and Amortization. Depreciation and amortization for the quarter was $21.9 million, or 4.3% of revenues, compared to $28.4 million, or 5.4% of revenues in the prior quarter. Excluding the impact of discrete items in the prior year quarter, depreciation and amortization was essentially flat versus the prior year quarter.

Income Taxes. During the three months ended December 31, 2012, the Company recognized tax expense of $1.1 million at an effective tax rate, as adjusted, of 40.6%. The Company’s tax rate, as adjusted, came in higher than the rate of 21.6% for the prior year quarter primarily due to the prior year rate benefiting from employment tax credits.

Equity in Affiliates. Loss from equity method investments and affiliated companies was $17.7 million in the second quarter of fiscal 2013, which included a net discrete impairment charge of $17.9 million related to Empire Education Group. Income from equity method investments and affiliated companies, as adjusted, was $0.2 million, a decrease of $4.9 million over the second quarter of fiscal 2012. The reduction in earnings, as adjusted, is the result of the Company’s sale of its investment in Provalliance and reduced earnings at Empire Education Group due to declining student enrollment.

EBITDA. EBITDA for the quarter of $17.4 million increased by $38.6 million, or 181.7%, compared to the prior year quarter. Excluding the impact of discrete items, EBITDA, as adjusted, for the quarter of $31.1 million decreased by $12.6 million, or 28.9% compared to the prior year quarter.

Discrete Items. Discrete expense for the current quarter netted to $14.0 million on an after-tax basis, and consisted of the following after-tax items:

  • After-tax non-cash impairment charge of $17.9 million related to the Company’s investment in Empire Education Group.
  • Senior management restructuring costs of $0.6 million after-tax related to severance.
  • Self-insurance reserve benefit of $0.7 million after-tax primarily related to an actuarial adjustment to prior years’ workers’ compensation reserves.
  • Earnings from discontinued operations of $3.9 million after-tax related to the Company’s Hair Restoration segment.

A complete reconciliation of reported earnings to adjusted earnings is included in this press release and is available on the Company’s website at www.regiscorp.com.

Regis Corporation will host a conference call discussing second quarter results today, January 31, 2013, at 10 a.m., Central time. Interested parties are invited to listen by logging on to www.regiscorp.com or dialing 877-941-8609. A replay of the call will be available later that day. The replay phone number is 800-406-7325, access code 4590684#.

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, 2012, the Company owned, franchised or held ownership interests in approximately 10,000 worldwide locations. Regis’ corporate and franchised locations operate under concepts such as Supercuts, Sassoon Salon, Regis Salons, MasterCuts, SmartStyle, Cost Cutters, Cool Cuts 4 Kids and Hair Club for Men and Women. Regis maintains ownership interests in Empire Education Group in the U.S. and the MY Style concepts in Japan. For additional information about the company, including a reconciliation of certain non-GAAP financial information and certain supplemental 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 may contain “forward-looking statements” within the meaning of the federal securities laws, including statements concerning anticipated future events and expectations that are not historical facts. 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 the impact of management and organizational changes; the Company’s dependence on same-store sales increases to increase revenue; the impact on the Company of healthcare reform legislation; 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; the ability of the Company to implement its planned spending and cost reduction plan and to continue to maintain compliance with financial covenants in its credit agreements; the Company’s reliance on management information systems; successful deployment of point-of-sale and guest relationship management systems; the ability of the Company to retain and attract stylists; labor and benefit costs; legal claims; the continued ability of the Company and its franchisees to obtain suitable locations and financing for new salon development and to maintain satisfactory relationships with landlords and other licensors with respect to existing locations; governmental initiatives such as minimum wage rates, taxes and possible franchise legislation; the ability of the Company to optimize its brand portfolio and integrate salons that support its growth objectives; the ability of the Company to maintain satisfactory relationships with suppliers; financial performance of our joint ventures; risk inherent to international developments (including currency fluctuations); or other factors not listed above. 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, 2012. 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.

REGIS CORPORATION (NYSE: RGS)

CONDENSED CONSOLIDATED BALANCE SHEET (Unaudited)

as of December 31, 2012 and June 30, 2012

(Dollars in thousands, except per share data)

 
December 31, 2012   June 30, 2012
ASSETS
Current assets:
Cash and cash equivalents $ 218,343 $ 111,943
Receivables, net 24,597 28,954
Inventories 153,864 142,276
Deferred income taxes 17,988 14,503
Income tax receivable 13,864 14,098
Other current assets 21,486 55,903
Current assets held for sale   16,816   17,000
Total current assets 466,958 384,677
 
Property and equipment, net 302,756 305,799
Goodwill 463,470 462,279
Other intangibles, net 22,893 23,395
Investment in and loans to affiliates 42,170 160,987
Other assets 62,697 59,488
Long-term assets held for sale   179,959   175,221
 
Total assets $ 1,540,903 $ 1,571,846
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Long-term debt, current portion $ 28,950 $ 28,937
Accounts payable 59,277 47,890
Accrued expenses 140,322 157,026
Current liabilities related to assets held for sale   16,538   18,120
Total current liabilities 245,087 251,973
 
Long-term debt and capital lease obligations 240,033 258,737
Other noncurrent liabilities 160,257 143,972
Long-term liabilities related to assets held for sale   28,781   28,007
Total liabilities   674,158   682,689
 
Commitments and contingencies
 
Shareholders’ equity:
Common stock, $0.05 par value; issued and outstanding 56,615,264 and 57,415,241 common shares at December 31, 2012 and June 30, 2012, respectively 2,831 2,871
Additional paid-in capital 334,353 346,943
Accumulated other comprehensive income 26,109 55,114
Retained earnings   503,452   484,229
 
Total shareholders’ equity   866,745   889,157
 
Total liabilities and shareholders’ equity $ 1,540,903 $ 1,571,846
 

REGIS CORPORATION (NYSE: RGS)

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited)

(Dollars in thousands, except per share data)

   
Three Months EndedSix Months Ended
December 31,December 31,
2012   20112012   2011
Revenues:
Service $ 388,286 $ 404,025 $ 781,702 $ 819,042
Product 108,236 112,900 210,520 219,673
Royalties and fees 9,643 9,213 19,303 18,769
506,165 526,138 1,011,525 1,057,484
Operating expenses:
Cost of service 234,265 231,392 466,793 467,057
Cost of product 55,064 57,007 108,196 110,030
Site operating expenses 49,872 51,466 102,219 106,277
General and administrative 55,795 62,642 111,667 128,512
Rent 80,555 83,249 162,054 165,425
Depreciation and amortization 21,891 28,446 42,600 59,243
Total operating expenses 497,442 514,202 993,529 1,036,544
 
Operating income 8,723 11,936 17,996 20,940
 
Other income (expense):
Interest expense (6,649 ) (7,203 ) (13,478 ) (14,563 )
Interest income and other, net 601 2,651 35,213 3,969
 
Income before income taxes and equity in (loss) income of affiliated companies 2,675 7,384 39,731 10,346
 
Income taxes (1,085 ) (543 ) (4,071 ) (1,752 )
Equity in (loss) income of affiliated companies, net of income taxes (17,709 ) 5,059 (17,132 ) 8,929
 
(Loss) income from continuing operations (16,119 ) 11,900 18,528 17,523
 
Income (loss) from discontinued operations, net of taxes 3,853 (69,327 ) 7,630 (66,613 )
 
Net (loss) income $ (12,266 ) $ (57,427 ) $ 26,158 $ (49,090 )
 
Net (loss) income per share:
Basic:
(Loss) income from continuing operations (0.28 ) 0.21 0.32 0.31
Income (loss) from discontinued operations 0.07 (1.22 ) 0.13 (1.17 )
Net (loss) income per share, basic(1) $ (0.22 ) $ (1.01 ) $ 0.46 $ (0.86 )
Diluted:
(Loss) income from continuing operations (0.28 ) 0.20 0.32 0.31
Income (loss) from discontinued operations 0.07 (1.01 ) 0.13 (1.17 )
Net (loss) income per share, diluted(1) $ (0.22 ) $ (0.81 ) $ 0.46 $ (0.86 )
 
Weighted average common and common equivalent shares outstanding:
Basic 56,794 56,857 57,043 56,853
Diluted 56,794 68,417 57,125 57,159
 
Cash dividends declared per common share $ 0.06 $ 0.06 $ 0.12 $ 0.12
 

(1) Total is a recalculation; line items calculated individually may not sum to total due to rounding.

REGIS CORPORATION (NYSE: RGS)

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (Unaudited)

(Dollars in thousands)

   
Three Months EndedSix Months Ended
December 31,December 31,
2012   20112012   2011
Net (loss) income: $ (12,266 ) $ (57,427 ) $ 26,158 $ (49,090 )
Other comprehensive loss, net of tax:
Foreign currency translation adjustments (2,178 ) (2,089 ) 4,860 (22,642 )
Change in fair market value of financial instruments designated as cash flow hedges (89 ) (23 ) 357
Reclassification associated with liquidation of foreign entities (33,842 )
Other comprehensive loss: (2,178 ) (2,178 ) (29,005 ) (22,285 )
Comprehensive loss: $ (14,444 ) $ (59,605 ) $ (2,847 ) $ (71,375 )
 

REGIS CORPORATION (NYSE: RGS)

SELECTED CASH FLOW DATA (Unaudited)

(Dollars in thousands)

 
Six Months Ended
December 31,
2012   2011
 
Net cash provided by operating activities $ 58,969 $ 61,947
Net cash provided by (used in) investing activities 88,006 (42,877 )
Net cash used in financing activities (43,071 ) (28,942 )
Effect of exchange rate changes on cash and cash equivalents 2,496 (3,292 )
Increase (decrease) in cash and cash equivalents 106,400 (13,164 )
Cash and cash equivalents:
Beginning of year 111,943 96,263
End of year $ 218,343

$

83,099
 

REVENUES BY CONCEPT:

  Three Months Ended   Six Months Ended
December 31,December 31,
(Dollars in thousands)2012   20112012   2011
North American salons:
Regis $ 95,432 $ 104,629 $ 192,299 $ 209,496
MasterCuts 37,604 40,293 75,535 80,751
SmartStyle 127,369 125,980 250,367 254,464
Supercuts 85,109 85,031 172,177 168,634
Promenade 127,888 136,136 256,906 276,581
Total North American salons 473,402 492,069 947,284 989,926
 
International salons 32,763 34,069 64,241 67,558
Consolidated revenues $ 506,165 $ 526,138 $ 1,011,525 $ 1,057,484
 
Percentage change from prior year (3.8 )% (2.3 )% (4.3 )% (2.1 )%
 

SAME-STORE SALES (1):

  For the Three Months Ended
December 31, 2012   December 31, 2011
       
ServiceProductTotalServiceProductTotal
Regis Salons (2.9 )% (4.6 )% (3.2 )% (4.9 )% 2.9 % (3.5 )%
MasterCuts (4.0 ) (4.8 ) (4.2 ) (3.4 ) 3.1 (2.1 )
Supercuts 0.5 (1.2 ) 0.3 (1.1 ) (3.0 ) (1.3 )
Promenade (2.6 ) (5.6 ) (2.9 ) (2.8 ) (2.8 ) (2.8 )
SmartStyle 0.8 (0.2 ) 0.5 (3.7 ) (3.7 ) (3.7 )
North America Same-Store Sales (1.5 )% (2.5 )% (1.7

)%

(3.2 )% (1.5 )% (2.9 )%
 
International Same-Store Sales (2.5 )% (14.3 )% (6.6 )% (6.7 )% (16.1 )% (10.1 )%
 
Consolidated Same-Store Sales (1.5 )% (3.6 )% (1.9 )% (3.4 )% (3.0 )% (3.3 )%
 
(1)   Same-store sales are calculated on a daily basis as the total change in sales for company-owned locations which were open on a specific day of the week during the current period and the corresponding prior period. Quarterly 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.
 

SAME-STORE SALES (1):

  For the Six Months Ended
December 31, 2012   December 31, 2011
       
ServiceProductTotalServiceProductTotal
Regis Salons (3.5 )% (3.1 )% (3.4 )% (4.7 )% 2.3 % (3.5 )%
MasterCuts (4.5 ) (3.3 ) (4.2 ) (3.9 ) 1.1 (2.9 )
Supercuts 0.9 (0.9 ) 0.7 (0.5 ) (3.7 ) (0.9 )
Promenade (2.8 ) (4.9 ) (3.0 ) (2.7 ) (4.3 ) (2.9 )
SmartStyle (1.9 ) (1.8 ) (1.9 ) (3.6 ) (4.0 ) (3.8 )
North America Same-Store Sales (2.2 )% (2.6 )% (2.3

)%

(3.1 )% (2.3 )% (3.0 )%
 
International Same-Store Sales (2.8 )% (11.8 )% (5.8 )% (6.6 )% (15.6 )% (9.8 )%
 
Consolidated Same-Store Sales (2.3 )% (3.4 )% (2.5 )% (3.3 )% (3.6 )% (3.4 )%
 
(1)   Same-store sales are calculated on a daily basis as the total change in sales for company-owned locations which were open on a specific day of the week during the current period and the corresponding prior period. Quarterly 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.
 

FINANCIAL INFORMATION BY SEGMENT:

Financial information concerning the Company’s salon businesses is shown in the following tables.

  For the Three Months Ended December 31, 2012 (Unaudited)
Salons   Unallocated  
(Dollars in thousands)North America   InternationalCorporateConsolidated
Revenues:
Service $ 364,486 23,800 $ $ 388,286
Product 99,273 8,963 108,236
Royalties and fees   9,643       9,643
  473,402   32,763     506,165
Operating expenses:
Cost of service 221,562 12,703 234,265
Cost of product 50,176 4,888 55,064
Site operating expenses 47,417 2,455 49,872
General and administrative 30,129 2,499 23,167 55,795
Rent 71,778 8,420 357 80,555
Depreciation and amortization   17,138   1,565   3,188   21,891
Total operating expenses   438,200   32,530   26,712   497,442
 
Operating income (loss) 35,202 233 (26,712 ) 8,723
 
Other income (expense):
Interest expense (6,649 ) (6,649 )
Interest income and other, net       601   601
Income (loss) from continuing operations before income taxes and equity in loss of affiliated companies $ 35,202 $ 233 $ (32,760 ) $ 2,675
 
For the Three Months Ended December 31, 2011 (Unaudited)
SalonsUnallocated
(Dollars in thousands)North AmericaInternationalCorporateConsolidated
Revenues:
Service $ 379,694 $ 24,331 $ $ 404,025
Product 103,162 9,738 112,900
Royalties and fees   9,213       9,213
  492,069   34,069     526,138
Operating expenses:
Cost of service 218,270 13,122 231,392
Cost of product 51,753 5,254 57,007
Site operating expenses 48,758 2,708 51,466
General and administrative 30,085 2,607 29,950 62,642
Rent 73,833 9,060 356 83,249
Depreciation and amortization   18,283   1,112   9,051   28,446
Total operating expenses   440,982   33,863   39,357   514,202
 
Operating income (loss) 51,087 206 (39,357 ) 11,936
 
Other income (expense):
Interest expense (7,203 ) (7,203 )
Interest income and other, net       2,651   2,651
Income (loss) from continuing operations before income taxes and equity in income of affiliated companies $ 51,087 $ 206 $ (43,909 ) $ 7,384
 
  For the Six Months Ended December 31, 2012 (Unaudited)
Salons   Unallocated  
(Dollars in thousands)North America   InternationalCorporateConsolidated
Revenues:
Service $ 734,166 $ 47,536 $ $ 781,702
Product 193,815 16,705 210,520
Royalties and fees   19,303       19,303
  947,284   64,241     1,011,525
Operating expenses:
Cost of service 441,793 25,000 466,793
Cost of product 99,252 8,944 108,196
Site operating expenses 97,013 5,206 102,219
General and administrative 61,820 5,017 44,830 111,667
Rent 144,500 16,822 732 162,054
Depreciation and amortization   33,726   2,597   6,277   42,600
Total operating expenses   878,104   63,586   51,839   993,529
 
Operating income (loss) 69,180 655 (51,839 ) 17,996
 
Other income (expense):
Interest expense (13,478 ) (13,478 )
Interest income and other, net       35,213   35,213
(Loss) income from continuing operations before income taxes and equity in loss of affiliated companies $ 69,180 $ 655 $ (30,104 ) $ 39,731
 
For the Six Months Ended December 31, 2011 (Unaudited)
SalonsUnallocated
(Dollars in thousands)North AmericaInternationalCorporateConsolidated
Revenues:
Service $ 769,858 $ 49,184 $ $ 819,042
Product 201,299 18,374 219,673
Royalties and fees   18,769       18,769
  989,926   67,558     1,057,484
Operating expenses:
Cost of service 441,245 25,812 467,057
Cost of product 100,197 9,833 110,030
Site operating expenses 100,610 5,667 106,277
General and administrative 62,730 5,248 60,534 128,512
Rent 147,213 17,824 388 165,425
Depreciation and amortization   36,824   2,418   20,001   59,243
Total operating expenses   888,819   66,802   80,923   1,036,544
 
Operating income (loss) 101,107 756 (80,923 ) 20,940
 
Other income (expense):
Interest expense (14,563 ) (14,563 )
Interest income and other, net       3,969   3,969
Income (loss) from continuing operations before income taxes and equity in income of affiliated companies $ 101,107 $ 756 $ (91,517 ) $ 10,346
 

Non-GAAP Reconciliations
References made to discrete items were formerly referred to as non-operational items in previous earnings releases, and references made to financial measures, as adjusted, were formerly referred to as operational measures in previous earnings releases.

We believe our presentation of non-GAAP operating income, net income, net income per diluted share, and other non-GAAP financial measures provides meaningful insight into our ongoing operating performance and an alternative perspective of our results of operations. Presentation of the non-GAAP measures allows investors to review our core ongoing operating performance business from the same perspective as management and Board of Directors. These non-GAAP financial measures provide investors an enhanced understanding of our operations, facilitate investors’ analysis and comparisons of our current and past results of operations and provide insight into the prospects of our future performance. We also believe that the non-GAAP measures are useful to investors because they provide supplemental information that research analysts frequently use to analyze financial performance.

The method we use to produce non-GAAP results is not in accordance with U.S. GAAP and may differ from methods used by other companies. These non-GAAP results should not be regarded as a substitute for the corresponding U.S. GAAP measures but instead should be utilized as a supplemental measure of operating performance in evaluating our business. Non-GAAP measures do have limitations in that they do not reflect certain items that may have a material impact upon our reported financial results. As such, these non-GAAP measures should be viewed in conjunction with both our financial statements prepared in accordance with U.S. GAAP and the reconciliation of the selected U.S. GAAP to non-GAAP financial measures, which are located in the Investor Information section of the corporate website at www.regiscorp.com.

Non-GAAP reconciling items for the three and six months ended December 31, 2012 and 2011:

The following information is provided to give qualitative and quantitative information related to items impacting comparability. Items impacting comparability are not defined terms within U.S. GAAP. Therefore, our non-GAAP financial information may not be comparable to similarly titled measures reported by other companies. We determine which items to consider as “items impacting comparability” based on how management views our business, makes financial, operating and planning decisions and evaluates the Company’s ongoing performance.

Self-insurance reserves adjustments – We have excluded the self-insurance reserves adjustments associated with our prior year reserves from our non-GAAP results. During the three and six months ended December 31, 2012, we recorded a benefit of $1.1 million.

Senior management restructure charges – We have excluded expense associated with senior management restructuring charges from our non-GAAP results. During the three and six months ended December 31, 2012 we incurred expense of $1.0 million associated with senior management restructuring. During the three and six months ended December 31, 2011 we incurred expense of $0.7 and $2.3 million, respectively, associated with senior management restructuring.

Pure Beauty note receivable recovery – We have excluded the bad debt recovery associated with the outstanding note receivable with Pure Beauty from our non-GAAP results. During the six months ended December 31, 2012, we recorded $0.3 million for the recovery of bad debt previously recorded on the outstanding note receivable with Pure Beauty.

Proxy fees – We have excluded the advisory fees and other costs associated with the fiscal year 2011 contested proxy from our non-GAAP results. During the three and six months ended December 31, 2011, we incurred $1.1 and $2.2 million, respectively, of advisory fees and other costs associated with the fiscal year 2011 contested proxy.

Point-of-sale system accelerated depreciation – We have excluded the accelerated depreciation we recorded related to our point-of-sale system from our non-GAAP results. During the three and six months ended December 31, 2011, we recorded $6.3 and $15.0 million, respectively, in accelerated depreciation related to our point-of-sale system.

Legal settlements – We have excluded income associated with legal settlements from our non-GAAP results. During the three and six months ended December 31, 2011 we recorded income of $1.1 million associated with a legal settlement.

Recognition in earnings of amounts within accumulated other comprehensive income – We have excluded the recognition in earnings of amounts previously classified within accumulated other comprehensive income (AOCI) that were associated with the liquidation of foreign entities denominated in the Euro. The Company completed the sale of its investment in Provalliance during the three months ended September 30, 2012 and subsequently liquidated all foreign entities with Euro denominated operations. During the six months ended December 31, 2012, amounts previously classified within AOCI that were recognized in earnings were foreign currency translation rate gain adjustments of $43.4 million, a cumulative tax-effected net loss of $7.9 million associated with a cross-currency swap that was settled in fiscal year 2007 that hedged the Company’s European operations, and a $1.7 million net loss from cash repatriation with the Company’s European operations.

Tax provision adjustments – The non-GAAP tax provision adjustments are due to the change in non-GAAP taxable income as compared to U.S. GAAP taxable income or loss, resulting from the non-GAAP reconciling items addressed herein. The non-GAAP tax provision adjustments are made to reflect the year-to-date non-GAAP tax rate for each period.

Empire Education Group (“EEG”) impairment– We have excluded the impairment recorded on our investment in EEG from our non-GAAP results. The Company recorded an other than temporary impairment charge of approximately $17.9 million during the three and six months ended December 31, 2012 as a result of a decrease in the fair value of the Company’s investment in EEG.

Provalliance impairment and equity put liability adjustment– We have excluded the $2.7 million other than temporary impairment recorded on our investment in Provalliance, partially offset by the $0.6 million gain recorded for the reduction in the fair value of the equity put option associated with our investment in Provalliance during the six months ended December 31, 2012 from our non-GAAP results.

Hair Restoration Centers discontinued operations – We have excluded the operations of our Hair Restoration Centers operations and professional fees associated with the disposition of our Hair Restoration Centers from our non-GAAP results. On July 13, 2012, the Company entered into an agreement to sell its Hair Restoration Centers operations. The Company recorded income from discontinued operations, net of taxes of approximately $3.9 and $7.6 million during the three and six months ended December 31, 2012, respectively. The Company recorded loss from discontinued operations, net of taxes of approximately $69.3 and $66.6 million during the three and six months ended December 31, 2011, respectively.

Weighted average shares adjustments – The non-GAAP weighted average shares adjustments are due to the change in non-GAAP net income as compared to the U.S. GAAP net income or loss, resulting from the non-GAAP reconciling items addressed herein. Non-GAAP net income per share reflects the weighted average shares associated with non-GAAP net income, which may included the dilutive effect of common stock and convertible share equivalents.

REGIS CORPORATION

Reconciliation of selected U.S. GAAP to non-GAAP financial measures

(In thousands, except per share data)

(unaudited)

 
Reconciliation of U.S. GAAP operating income and net (loss) income to equivalent non-GAAP measures
    Three Months Ended   Six Months Ended
December 31,December 31,
U.S. GAAP financial line item2012   2011

 

2012   2011
U.S. GAAP revenue$506,165$526,138$1,011,525$1,057,484
 
U.S. GAAP operating income$8,723$11,936$17,996$20,940
 
Non-GAAP operating expense adjustments:
Self-insurance reserves adjustments Site operating expense (1,127 ) (1,127 )
Senior management restructure General and administrative 992 696 992 2,349
Self-insurance reserves adjustments General and administrative 5 5
Pure Beauty note receivable recovery General and administrative (333 )
Proxy fees General and administrative 1,096 2,225
Point-of-sale accelerated depreciation Depreciation and amortization 6,338 15,037
Total non-GAAP operating expense adjustments (130 ) 8,130 (463 ) 19,611
Non-GAAP operating income (1)$8,593$20,066$17,533$40,551
 
U.S. GAAP net (loss) income$(12,266)$(57,427)$26,158$(49,090)
 
Non-GAAP net (loss) income adjustments:
Non-GAAP operating expense adjustments (130 ) 8,130 (463 ) 19,611
Legal settlement Interest income and other, net (1,098 ) (1,098 )
AOCI adjustments Interest income and other, net (33,842 )
Tax provision adjustments (2) Income taxes 51 (2,568 ) 1,862 (6,800 )
Empire Education Group impairment Equity in (loss) income of affiliated companies, net of tax 17,899 17,899
Provalliance impairment and equity put liability adjustment Equity in (loss) income of affiliated companies, net of taxes 2,048
Hair Restoration Center discontinued operations Income (loss) from discontinued operations, net of taxes (3,853 ) 69,327 (7,630 ) 66,613
Total non-GAAP net income adjustments 13,96773,791(20,126)78,326
Non-GAAP net income$1,701$16,364$6,032$29,236
 

Notes:

   

(1)

  Adjusted operating margins for the three and six months ended December 31, 2012, was 1.7%, and is calculated as non-GAAP operating income divided by U.S. GAAP revenue for each respective period. Adjusted operating margins for the three and six months ended December 31, 2011, was 3.8%, and is calculated as non-GAAP operating income divided by U.S. GAAP revenue for each respective period.
 

(2)

Based on a projected statutory effective tax rate analysis, the non-GAAP tax provision was calculated to be approximately 39% for the three and six months ended December 31, 2012 for all non-GAAP operating expense adjustments, except the AOCI adjustments during the six months ended December 31, 2012. The AOCI adjustments are primarily non-taxable. Based on a year-to-date tax rate analysis, the non-GAAP tax provision was calculated to be approximately 37% for the three and six months ended December 31, 2011 for all non-GAAP operating expense adjustments.
 

REGIS CORPORATION

Reconciliation of selected U.S. GAAP to non-GAAP financial measures

(In thousands, except per share data)

(unaudited)

 
Reconciliation of U.S. GAAP net (loss) income per diluted share to non-GAAP net income per diluted share
  Three Months Ended   Six Months Ended
December 31,December 31,
2012   20112012   2011
U.S. GAAP net (loss) income per diluted share (1)$(0.216)$(0.809 ) $0.458$(0.859)
Self-insurance reserves adjustments (2) (0.012 ) (0.012 )
Senior management restructure (2) 0.011 0.006 0.011 0.022
Pure Beauty note receivable recovery (2) (0.004 )
Proxy fees (2) 0.010 0.021
Point-of-sale accelerated depreciation (2) 0.059 0.139
Legal settlement (2) (0.010 ) (0.010 )
AOCI adjustments (2) (0.563 )
Empire Education Group impairment (2) 0.315 0.313
Provalliance impairment and equity put liability adjustment (2) 0.036
Hair Restoration Center discontinued operations (0.068 ) 1.013 (0.134 ) 0.975
Dilutive effect under if-converted method (3) (4) 0.200
Non-GAAP net income per diluted share (3) (4) (5)$0.030$0.270$0.106$0.488
 
U.S. GAAP Weighted average shares - basic 56,79456,85757,04356,853
U.S. GAAP Weighted average shares - diluted 56,79468,41757,12557,159
Non-GAAP Weighted average shares - diluted (3) 56,89368,41757,12568,354
 

Notes:

   

(1)

  For the three months ended December 31, 2011 U.S. GAAP net loss per diluted share is calculated under the if-converted method. Under the if-converted method for the three months ended December 31, 2011, $2.1 million of after tax interest expense on the convertible debt is added to net loss to determine the net loss for diluted earnings per share.
 

(2)

Based on a projected statutory effective tax rate analysis, the non-GAAP tax provision was calculated to be approximately 39% for the three and six months ended December 31, 2012 for all non-GAAP operating expense adjustments, except the AOCI adjustments during the six months ended December 31, 2012. The AOCI adjustments are primarily non-taxable. Based on a year-to-date tax rate analysis, the non-GAAP tax provision was calculated to be approximately 37% for the three and six months ended December 31, 2011 for all non-GAAP operating expense adjustments.
 

(3)

Non-GAAP net income per share reflects the weighted average shares associated with non-GAAP net income, which includes the dilutive effect of common stock and convertible share equivalents. The earnings per share impact of the adjustments for the three months ended December 31, 2012 included common stock equivalents of 0.1 million of additional shares. The earnings per share impact of the adjustments for the six months ended December 31, 2011 included convertible share equivalents of 11.2 million of additional shares under the if-converted method. The impact of the adjustments described above result in the effect of the common stock equivalents and convertible share equivalents to be dilutive to the non-GAAP net income per share.

 

(4)

For the six months ended December 31, 2011 non-GAAP net income per diluted share, has been calculated under the if-converted method. For the six months ended December 31, 2011, $4.1 million of after tax interest on the convertible debt is added to the non-GAAP net income to determine the non-GAAP net income per diluted earnings per share.
 

(5)

Total is a recalculation; line items calculated individually may not sum to total due to rounding.
 

REGIS CORPORATION

Summary of Pre-Tax, Income Taxes, and Net Income Impact for Q2 FY13 Discrete Items

     
Pre-TaxIncome TaxesNet Income
 
Self-insurance reserves adjustments $ (1,122 ) $ 438 $ (684 )
Senior management restructure 992 (387 ) 605
Empire Education Group impairment 17,899 17,899
Hair Restoration Center discontinued operations (6,379 ) 2,526 (3,853 )
Total $ 11,390 $ 2,577 $ 13,967
 

REGIS CORPORATION
Reconciliation of reported U.S. GAAP net (loss) income to Adjusted EBITDA, a non-GAAP financial measure
($ In thousands)
(unaudited)

Adjusted EBITDA
EBITDA represents U.S. GAAP net (loss) income for the respective period excluding interest expense, income taxes and depreciation and amortization expense. The Company defines adjusted EBITDA, as EBITDA excluding equity in (loss) income of affiliated companies, and identified items impacting comparability for each respective period. For the three and six months ended December 31, 2012, the items impacting comparability consisted of $1.1 and $1.1 million, respectively, of pre-tax benefit associated with our self-insurance adjustments for prior year reserves, $1.0 and $1.0 million, respectively, of pre-tax expense associated with senior management restructuring and $3.9 and $7.6 million, respectively, of after-tax income from discontinued operations. For the six months ended December 31, 2012 the items impacting comparability consisted of $0.3 million of income associated with the recovery of bad debt on the Pure Beauty note receivable, $33.8 million of net pre-tax income associated with the recognition in earnings of amounts previously classified within AOCI that were related to the liquidation of foreign entities denominated in the Euro. The impact of the income tax provision adjustments associated with the above items are already included in the U.S. GAAP reported net (loss) income to EBITDA reconciliation, therefore there is no adjustment needed for the reconciliation from EBITDA to operational EBITDA. The impact of the net $17.9 and $2.0 million impairments of Empire Education Group and Provalliance, respectively, is already included by excluding the impact of the Company’s equity in (loss) income of affiliated companies, net of taxes, as reported. For the three and six months ended December 31, 2011, the items impacting comparability consisted $0.7 and $2.3 million, respectively, of pre-tax expense associated with senior management restructuring, $1.1 and $2.2 million, respectively, of pre-tax expense associated with the fiscal year 2011 contested proxy, $1.1 million, for both periods, of income associated with legal settlements and $69.3 and $66.6 million of after-tax loss from discontinued operations. The impact of the $6.3 and $15.0 million, respectively, accelerated depreciation expense associated with the point-of-sale system and income tax provision adjustments associated with the above items are already included in the U.S. GAAP reported net (loss) income to EBITDA reconciliation, therefore there are no adjustments needed for the reconciliation from EBITDA to adjusted EBITDA.

  Three Months Ended   Six Months Ended
December 31,December 31,
2012   20112012   2011
(Dollars in thousands)
Consolidated reported net (loss) income, as reported (U.S. GAAP)$(12,266)$(57,427)$26,158$(49,090)
Interest expense, as reported 6,649 7,203 13,478 14,563
Income taxes, as reported 1,085 543 4,071 1,752
Depreciation and amortization, as reported 21,891 28,446 42,600 59,243
EBITDA (as defined above) $17,359     $(21,235)$86,307     $26,468
 
Equity in loss (income) of affiliated companies, net of income taxes, as reported 17,709 (5,059 ) 17,132 (8,929 )
Self-insurance reserves adjustments (1,122 ) (1,122 )
Senior management restructuring 992 696 992 2,349
Pure Beauty note receivable recovery (333 )
Proxy fees 1,096 2,225
Legal settlement (1,098 ) (1,098 )
AOCI adjustments (33,842 )
(Income) loss from discontinued operations, net of taxes, as reported (3,853 ) 69,327 (7,630 ) 66,613
Adjusted EBITDA, non-GAAP financial measure$31,085$43,727$61,504$87,628
 

REGIS CORPORATION CONSOLIDATED

Reconciliation of selected U.S. GAAP to non-GAAP financial measures

($ In thousands)

 (unaudited)

 
As Reported

Three
Months
Ended
December 31,
2012

 

% of
Revenues (2)

 
Total revenues (1) $ 506,165 100.0
   
As Reported

Discrete
Adjustments (3)

Non-GAAP

Three
Months
Ended
December 31,
2012

% of
Revenues (2)

Three
Months
Ended
December 31,
2012

 

% of
Revenues (2)

Cost of service (4) 234,265 60.3
Cost of product (5) 55,064 50.9
Site operating expenses 49,872 9.9 1,127 50,999 10.1
General and administrative 55,795 11.0 (997 ) 54,798 10.8
Rent 80,555 15.9
Depreciation and amortization 21,891 4.3    
Total operating expenses $ 497,442 98.3 $ 130 $ 497,572 98.3
 
Operating income $ 8,723 1.7 $ (130 ) $ 8,593 1.7
 
    (1)   The three months ended December 31, 2012 did not include any non-operational adjustments to U.S. GAAP revenues.
(2) Computed as a percent of total U.S. GAAP revenues.
(3) The three months ended December 31, 2012 included $1.1 million benefit associated with our self-insurance adjustments for prior year reserves and $1.0 million of pre-tax expense associated with senior management restructuring.
(4) Computed as a percent of service revenues and excludes depreciation and amortization expense.
(5) Computed as a percent of product revenues and excludes depreciation and amortization expense.
 
  As Reported  

Three
Months
Ended
December 31,
2011

 

% of
Revenues (2)

 
Total revenues (1) $ 526,138 100.0
   
As Reported

Discrete
Adjustments (3)

Non-GAAP

Three
Months
Ended
December 31,
2011

% of
Revenues (2)

Three
Months
Ended
December 31,
2011

 

% of
Revenues (2)

Cost of service (4) 231,392 57.3
Cost of product (5) 57,007 50.5
Site operating expenses 51,466 9.8
General and administrative 62,642 11.9 (1,792 ) 60,850 11.6
Rent 83,249 15.8
Depreciation and amortization 28,446 5.4 (6,338 ) 22,108 4.2
Total operating expenses $ 514,202 97.7 $ (8,130 ) $ 506,072 96.2
 
Operating income $ 11,936 2.3 $ 8,130 $ 20,066 3.8
 
    (1)   The three months ended December 31, 2011 did not include any non-operational adjustments to U.S. GAAP revenues.
(2) Computed as a percent of total U.S. GAAP revenues.
(3) The three months ended December 31, 2011 included $0.7 million pre-tax expense related to senior management restructuring, $1.1 million pre-tax expense related to our fiscal year 2011 contested proxy, and $6.3 million pre-tax expense for the accelerated depreciation related to our point-of-sale system.
(4) Computed as a percent of service revenues and excludes depreciation and amortization expense.
(5) Computed as a percent of product revenues and excludes depreciation and amortization expense.
 

REGIS CORPORATION CONSOLIDATED

Reconciliation of selected U.S. GAAP to non-GAAP financial measures

($ In thousands)

 (unaudited)

 
As Reported

Six
Months
Ended
December 31,
2012

 

% of
Revenues (2)

 
Total revenues (1) $ 1,011,525 100.0
 
As Reported

Discrete
Adjustments (3)

Non-GAAP

Six
Months
Ended
December 31,
2012

% of
Revenues (2)

Six
Months
Ended
December 31,
2012

 

% of
Revenues (2)

Cost of service (4) 466,793 59.7
Cost of product (5) 108,196 51.4
Site operating expenses 102,219 10.1 1,127 103,346 10.2
General and administrative 111,667 11.0 (664 ) 111,003 11.0
Rent 162,054 16.0
Depreciation and amortization 42,600 4.2    
Total operating expenses $ 993,529 98.2 $ 463 $ 993,992 98.3
 
Operating income $ 17,996 1.8 $ (463 ) $ 17,533 1.7
 
    (1)   The six months ended December 31, 2012 did not include any non-operational adjustments to U.S. GAAP revenues.
(2) Computed as a percent of total U.S. GAAP revenues.
(3) The six months ended December 31, 2012 included $1.1 million benefit associated with our self-insurance adjustments for prior year reserves, $1.0 million of pre-tax expense associated with senior management restructuring, and $0.3 million benefit for the recovery of bad debt on the Pure Beauty note receivable.
(4) Computed as a percent of service revenues and excludes depreciation and amortization expense.
(5) Computed as a percent of product revenues and excludes depreciation and amortization expense.
 
  As Reported

Six
Months
Ended
December 31,
2011

 

% of
Revenues (2)

 
Total revenues (1) $ 1,057,484 100.0
   
As Reported

Discrete
Adjustments (3)

Non-GAAP

Six
Months
Ended
December 31,
2011

% of
Revenues (2)

Six
Months
Ended
December 31,
2011

 

% of
Revenues (2)

Cost of service (4) 467,057 57.0
Cost of product (5) 110,030 50.1
Site operating expenses 106,277 10.0
General and administrative 128,512 12.2 (4,574 ) 123,938 11.7
Rent 165,425 15.6
Depreciation and amortization 59,243 5.6 (15,037 ) 44,206 4.2
Total operating expenses $ 1,036,544 98.0 $ (19,611 ) $ 1,016,933 96.2
 
Operating income $ 20,940 2.0 $ 19,611 $ 40,551 3.8
 
    (1)   The six months ended December 31, 2011 did not include any non-operational adjustments to U.S. GAAP revenues.
(2) Computed as a percent of total U.S. GAAP revenues.
(3) The six months ended December 31, 2011 included $2.3 million pre-tax expense related to senior management restructuring, $2.2 million pre-tax expense related to our fiscal year 2011 contested proxy, and $15.0 million pre-tax expense for the accelerated depreciation related to our point-of-sale system.
(4) Computed as a percent of service revenues and excludes depreciation and amortization expense.
(5) Computed as a percent of product revenues and excludes depreciation and amortization expense.
 

REGIS CORPORATION’S NORTH AMERICA REPORTABLE SEGMENT

Reconciliation of selected U.S. GAAP to non-GAAP financial measures

($ In thousands)

(unaudited)

 
As Reported

Three
Months
Ended
December 31,
2012

 

% of
Revenues (2)

 
Total revenues (1) $ 473,402 100.0
   
As Reported

Discrete
Adjustments (3)

Non-GAAP

Three
Months
Ended
December 31,
2012

% of
Revenues (2)

Three
Months
Ended
December 31,
2012

 

% of
Revenues (2)

Cost of service (4) 221,562 60.8
Cost of product (5) 50,176 50.5
Site operating expenses 47,417 10.0 1,127 48,544 10.3
General and administrative 30,129 6.4 (2 ) 30,127 6.4
Rent 71,778 15.2
Depreciation and amortization 17,138 3.6    
Total operating expenses $ 438,200 92.6 $ 1,125 $ 439,325 92.8
 
Operating income $ 35,202 7.4 $ (1,125 ) $ 34,077 7.2
 
    (1)   The three months ended December 31, 2012 did not include any non-operational adjustments to U.S. GAAP revenues.
(2) Computed as a percent of total U.S. GAAP revenues for the North America salons reportable segment.
(3) The three months ended December 31, 2012, included a $1.1 million benefit associated with our self-insurance adjustments for prior year reserves.
(4) Computed as a percent of service revenues and excludes depreciation and amortization expense.
(5) Computed as a percent of product revenues and excludes depreciation and amortization expense.
 
  As Reported

Three
Months
Ended
December 31,
2011

 

% of
Revenues (2)

 
Total revenues (1) $ 492,069 100.0
   
As Reported

Discrete
Adjustments (3)

Non-GAAP

Three
Months
Ended
December 31,
2011

% of
Revenues (2)

Three
Months
Ended
December 31,
2011

 

% of
Revenues (2)

Cost of service (4) 218,270 57.5
Cost of product (5) 51,753 50.2
Site operating expenses 48,758 9.9
General and administrative 30,085 6.1
Rent 73,833 15.0
Depreciation and amortization 18,283 3.7 (828 ) 17,455 3.5
Total operating expenses $ 440,982 89.6 $ (828 ) $ 440,154 89.4
 
Operating income $ 51,087 10.4 $ 828 $ 51,915 10.6
 
    (1)   The three months ended December 31, 2011 did not include any non-operational adjustments to U.S. GAAP revenues.
(2) Computed as a percent of total U.S. GAAP revenues for the North America salons reportable segment.
(3) The three months ended December 31, 2011 included $0.8 million pre-tax expense for the accelerated depreciation related to our point-of-sale system.
(4) Computed as a percent of service revenues and excludes depreciation and amortization expense.
(5) Computed as a percent of product revenues and excludes depreciation and amortization expense.
 

REGIS CORPORATION’S INTERNATIONAL REPORTABLE SEGMENT

Reconciliation of selected U.S. GAAP to non-GAAP financial measures

($ In thousands)

(unaudited)

 
As Reported

Three
Months
Ended
December 31,
2011

 

% of
Revenues (2)

 
Total revenues (1) $ 34,069 100.0
   
As Reported

Discrete
Adjustments (3)

Non-GAAP

Three
Months
Ended
December 31,
2011

% of
Revenues (2)

Three
Months
Ended
December 31,
2011

 

% of
Revenues (2)

Cost of service (4) 13,122 53.9
Cost of product (5) 5,254 54.0
Site operating expenses 2,708 7.9
General and administrative 2,607 7.7
Rent 9,060 26.6
Depreciation and amortization 1,112 3.3 (95 ) 1,017 3.0
Total operating expenses $ 33,863 99.4 $ (95 ) $ 33,768 99.1
 
Operating income $ 206 0.6 $ 95 $ 301 0.9
 
    (1)   The three months ended December 31, 2011 did not include any non-operational adjustments to U.S. GAAP revenues.
(2) Computed as a percent of total U.S. GAAP revenues for the International salons reportable segment.
(3) The three months ended December 31, 2011 included $0.1 million pre-tax expense for the accelerated depreciation related to our point-of-sale system.
(4) Computed as a percent of service revenues and excludes depreciation and amortization expense.
(5) Computed as a percent of product revenues and excludes depreciation and amortization expense.
 

REGIS CORPORATION’S UNALLOCATED CORPORATE REPORTABLE SEGMENT

Reconciliation of selected U.S. GAAP to non-GAAP financial measures

($ In thousands)

(unaudited)

 
As Reported

Three
Months
Ended
December 31,
2012

 

% of
Revenues (2)

 
Total revenues (1) $
   
As Reported

Discrete
Adjustments (3)

Non-GAAP

Three
Months
Ended
December 31,
2012

% of
Revenues (2)

Three
Months
Ended
December 31,
2012

 

% of
Revenues (2)

Cost of service (4)
Cost of product (5)
Site operating expenses
General and administrative 23,167 4.6 (995 ) 22,172 4.4
Rent 357 0.1
Depreciation and amortization 3,188 0.6    
Total operating expenses $ 26,712 5.3 $ (995 ) $ 25,717 5.1
 
Operating loss $ (26,712 ) (5.3 ) $ 995 $ (25,717 ) (5.1 )
 
    (1)   The three months ended December 31, 2012 did not include any non-operational adjustments to U.S. GAAP revenues.
(2) Computed as a percent of consolidated total revenues.
(3) The three months ended December 31, 2012 included $1.0 million pre-tax expense related to senior management restructuring.
(4) Computed as a percent of service revenues and excludes depreciation and amortization expense.
(5) Computed as a percent of product revenues and excludes depreciation and amortization expense.
 
  As Reported

Three
Months
Ended
December 31,
2011

 

% of
Revenues (2)

 
Total revenues (1) $
 
   
As Reported

Discrete
Adjustments (3)

Non-GAAP

Three
Months
Ended
December 31,
2011

% of
Revenues (2)

Three
Months
Ended
December 31,
2011

 

% of
Revenues (2)

Cost of service (4)
Cost of product (5)
Site operating expenses
General and administrative 29,950 5.7 (1,792 ) 28,158 5.4
Rent 356 0.1
Depreciation and amortization 9,051 1.7 (5,415 ) 3,636 0.7
Total operating expenses $ 39,357 7.5 $ (7,207 ) $ 32,150 6.1
 
Operating loss $ (39,357 ) (7.5 ) $ 7,207 $ (32,150 ) (6.1 )
 
    (1)   The three months ended December 31, 2011 did not include any non-operational adjustments to U.S. GAAP revenues.
(2) Computed as a percent of consolidated total revenues.
(3) The three months ended December 31, 2011 included $0.7 million pre-tax expense related to senior management restructuring, $1.1 million pre-tax expense related to our fiscal year 2011 contested proxy and $5.4 million pre-tax expense for the accelerated depreciation related to our point-of-sale system.
(4) Computed as a percent of service revenues and excludes depreciation and amortization expense.
(5) Computed as a percent of product revenues and excludes depreciation and amortization expense.
 

REGIS CORPORATION’S EQUITY IN INCOME OF AFFILIATED COMPANIES, NET OF TAXES

Reconciliation of selected U.S. GAAP to non-GAAP financial measures

($ In thousands)

(unaudited)

 
Three Months Ended
December 31, 2012   December 31, 2011
(Dollars in thousands)
Equity in (loss) income of affiliated companies, net of income taxes, as reported (U.S. GAAP) $ (17,709) $ 5,059
Empire Education Group (“EEG”) impairment adjustment(1) 17,899
Adjusted equity in income of affiliated companies, net of income taxes, non-GAAP $ 190 $ 5,059
 
    (1)   The Company recorded an other than temporary impairment charge of approximately $17.9 million during the three months ended December 31, 2012 as a result of the decrease in the fair value of the Company’s investment in EEG.
 

REGIS CORPORATION’S SAME-STORE SALES

Reconciliation of selected U.S. GAAP to non-GAAP financial measures

(unaudited)

   
Three Months EndedSix Months Ended
December 31,December 31,
2012   20112012   2011
Revenue decline, as reported (U.S. GAAP)(3.8) %(2.3) %(4.3) %(2.1) %
Effect of acquisitions (0.8 ) (0.1 ) (1.0 )
Effect of new stores and conversions (1.2 ) (1.3 ) (1.4 ) (1.1 )
Effect of franchise revenues (0.1 ) (0.1 )
Effect of foreign currency (0.1 ) (0.1 ) 0.1 (0.4 )
Effect of closed salons 3.4 2.2 3.2 2.0
Other (0.1 ) (1.0 ) 0.1 (0.8 )
Same-store sales, non-GAAP(1.9) %(3.3) %(2.5)%(3.4)%
 

Non-GAAP reconciling items for the twelve months ended June 30, 2012 and 2011:

The following information is provided to give qualitative and quantitative information related to items impacting comparability. Items impacting comparability are not defined terms within U.S. GAAP. Therefore, our non-GAAP financial information may not be comparable to similarly titled measures reported by other companies. We determine which items to consider as “items impacting comparability” based on how management views our business, makes financial, operating and planning decisions and evaluates the Company’s ongoing performance.

Self-insurance reserves adjustments – We have excluded the self-insurance reserves adjustments associated with our prior year reserves from our non-GAAP results. During the twelve months ended June 30, 2012, we incurred expense of $0.9 million. During the twelve months ended June 30, 2011, we incurred expense of $1.2 million.

Sales and use tax audit accrual adjustment – We have excluded a sales and use tax audit accrual adjustment from our non-GAAP results. During the twelve months ended June 30, 2011, we recorded a benefit of $1.7 million.

Senior management restructure and severance charges – We have excluded expense associated with senior management restructuring and other related severance charges from our non-GAAP results. During the twelve months ended June 30, 2012 and 2011, we incurred expense of $9.8 and $4.3 million, respectively, associated with senior management restructuring and other severance charges.

Professional fees – We have excluded expenses associated with our fiscal year 2011 contested proxy from our non-GAAP results. During the twelve months ended June 30, 2012, we incurred $2.4 million of expense for advisory fees and other costs associated with the fiscal year 2011 contested proxy.

Field restructure and other – We have excluded expenses associated with other one-time field restructuring charges from our non-GAAP results. During the twelve months ended June 30, 2012, we incurred expense of $2.8 million associated with our field restructuring.

Deferred compensation – We have excluded expense associated with amending our deferred compensation plan from our non-GAAP results. During the twelve months ended June 30, 2012, we incurred expense of $1.8 million associated with amending our deferred compensation plan such that the benefits are based on years of service and the employees’ compensation as of June 30, 2012.

Pure Beauty note receivable (recovery) reserve – We have excluded the bad debt recovery and valuation reserve associated with the outstanding note receivable with Pure Beauty from our non-GAAP results. During the twelve months ended June 30, 2012, we recorded $0.8 million for the recovery of bad debt previously recorded on the outstanding note receivable with Pure Beauty. We recorded valuation reserves of $31.2 million during the twelve months ended June 30, 2011.

Legal settlements – We have excluded income and expense associated with legal settlements from our non-GAAP results. During the twelve months ended June 30, 2012 we recorded income of $1.1 million associated with a legal settlement. During the twelve months ended June 30, 2011, we incurred expense of $2.4 million associated with a legal settlement.

Strategic alternative costs – We have excluded the fees associated with our exploration of strategic alternatives during fiscal year 2011 from our non-GAAP results. During the twelve months ended June 30, 2011, we incurred $1.3 million of expense related to the exploration of strategic alternatives.

Point-of-sale system accelerated depreciation – We have excluded the accelerated depreciation we recorded related to our point-of-sale system from our non-GAAP results. During the twelve months ended June 30, 2012, we recorded $16.1 million in accelerated depreciation related to our point-of-sale system.

Goodwill impairment – We have excluded the goodwill impairment charges we recorded related our Regis salon concept and our Promenade salon concept from our non-GAAP results. The Company recorded goodwill impairment charges of $67.7 million related to our Regis salon concept during the twelve months ended June 30, 2012. The Company recorded a goodwill impairment charge of $74.1 million related to our Promenade salon concept during the twelve months ended June 30, 2011.

Tax provision adjustments – The non-GAAP tax provision adjustments are due to the change in non-GAAP taxable income as compared to U.S. GAAP taxable income or loss, resulting from the non-GAAP reconciling items addressed herein. The non-GAAP tax provision adjustments are made to reflect the year-to-date non-GAAP tax rate for each period.

Empire Education Group (“EEG”) impairment and non-operational charges recorded by EEG– We have excluded the impairment recorded on our investment in EEG and non-operational charges recorded by EEG from our non-GAAP results. The Company recorded an other than temporary impairment charge of approximately $19.4 million during the twelve months ended June 30, 2012 as a result of a decrease in the fair value of the Company’s investment in EEG. In addition, the Company recorded an additional $8.7 million of expense primarily related to non-operational charges recorded by EEG for intangible asset impairments.

Provalliance impairment, equity put liability, and non-operational charges recorded by Provalliance – We have excluded the impairment recorded on our investment in Provalliance, partially offset by the gain recorded for the reduction in the fair value of the equity put option associated with our Provalliance equity method investment and non-operational charges recorded by Provalliance from our non-GAAP results. The Company recorded an other than temporary impairment charge of approximately $37.4 million during the twelve months ended June 30, 2012, as a result of the Company entering into an agreement to sell its 46.7 percent interest in Provalliance for EUR 80 million. As a result of the expected sale, the Company recorded a gain of approximately $20.2 million during the twelve months ended June 30, 2012 for the decrease in the fair value of the equity put option associated with the Provalliance. In addition, the Company recorded an additional $0.8 million of expense primarily related to non-operational charges recorded by Provalliance. The Company recorded a gain of approximately $3.6 million during the twelve months ended June 30, 2011 for the settlement of a portion of an equity put option associated with our Provalliance equity method investment from our non-GAAP results.

MY Style impairment – We have excluded the impairment recorded for our investment in MY Style from our non-GAAP results. Due to the natural disasters in Japan that occurred in March 2011, we recorded an other than temporary impairment for our investment in MY Style of $9.2 million during the twelve months ended June 30, 2011.

Discontinued Operations – We have excluded the operations of our Hair Restoration Centers operations and a tax benefit for the release of income tax reserves related to our previous ownership in Trade Secret, Inc. operations from our non-GAAP results. The Company recorded (loss) income of approximately ($62.4) and $12.0 million during the twelve months ended June 30, 2012 and 2011, respectively.

REGIS CORPORATION CONSOLIDATED

Reconciliation of selected U.S. GAAP to non-GAAP financial measures

($ In thousands)

(unaudited)

     
As ReportedAdjusted

Twelve
Months
Ended
June 30, 2012

Hair
Restoration
Centers
Adjustment
(2)

Twelve
Months
Ended
June 30, 2012

 

 
Total revenues (1) $ 2,273,779 (151,552 ) $ 2,122,227
   
As ReportedNon-GAAP

Twelve
Months
Ended
June 30, 2012

Hair
Restoration
Centers
Adjustment
(2)

Reclassifications
(2)

Discrete
Adjustments
(3)

Twelve
Months
Ended
June 30,
2012

 

% of
Revenues
(4)

Cost of service (5) 985,154 (42,693 ) (790 )
Cost of product (6) 249,655 (28,020 )
Site operating expenses 198,725 (6,479 ) 14,785 (840 ) 206,191 9.7
General and administrative 302,572 (38,943 )(7) (13,995 ) (16,055 ) 233,579 11.0
Rent 340,805 (9,036 )
Depreciation and amortization 118,071 (13,101 ) (16,149 ) 88,821 4.2
Goodwill impairment 146,110 (78,426 ) (67,684 )
Total operating expenses $ 2,341,092 (216,698 ) (100,728 ) $ 2,023,666 95.4
 
Operating (loss) income $ (67,313 ) 65,146 100,728 $ 98,561 4.6
 
    (1)   The twelve months ended June 30, 2012 did not include any discrete adjustments to U.S. GAAP revenues.
(2) As of September 30, 2012, the Company classified the results of operations of the Hair Restoration Centers as discontinued operations. Beginning with the first quarter ended September 30, 2012, the Company reclassified certain salon marketing and advertising expenses that were previously within cost of service and general and administrative expense to site operating expense. All periods presented reflect the Hair Restoration Centers operations as discontinued operations and the reclassifications that were made during the quarter ended September 30, 2012.
(3)

The twelve months ended June 30, 2012, included $0.9 million of pre-tax expense related to self-insurance reserves adjustments, $9.8 million of pre-tax expense related to senior management restructuring, $2.8 million of pre-tax expense associated with field restructuring, $2.4 of pre-tax expense for professional fees related our fiscal year 2011 contested proxy, $1.8 million of pre-tax expense associated with amending our deferred compensation plan, $0.8 million pre-tax benefit for the recovery of bad debt previously recorded on the outstanding note receivable with Pure Beauty, $16.1 million pre-tax expense of accelerated depreciation related to our point-of-sale system, and a goodwill impairment charge of $67.7 million pre-tax related to our Regis salon concept.

(4) Computed as a percent of total adjusted revenues.
(5) Computed as a percent of service revenues and excludes depreciation and amortization expense.
(6) Computed as a percent of product revenues and excludes depreciation and amortization expense.
(7) $2.5 million of professional fees related to the sale of the Hair Restoration Centers and were previously included within our Unallocated Corporate Segment have been included in the Hair Restoration Centers Adjustment.
 

REGIS CORPORATION CONSOLIDATED

Reconciliation of selected U.S. GAAP to non-GAAP financial measures

($ In thousands)

(unaudited)

     
As ReportedAdjusted

Twelve
Months
Ended
June 30, 2011

Hair
Restoration
Centers
Adjustment
(2)

Twelve
Months
Ended
June 30, 2011

 
Total revenues (1) $ 2,325,869 (145,688 ) $ 2,180,181
   
As ReportedNon-GAAP

Twelve
Months
Ended
June 30, 2011

Hair
Restoration
Centers
Adjustment
(2)

Reclassifications
(2)

Discrete
Adjustments (3)

Twelve
Months
Ended
June 30,
2011

 

% of
Revenues
(4)

Cost of service (5) 1,012,868 (39,129 ) (845 )
Cost of product (6) 249,979 (24,788 )
Site operating expenses 197,722 (4,318 ) 17,819 564 211,787 9.7
General and administrative 339,857 (37,038 ) (16,974 ) (39,212 ) 246,633 11.3
Rent 342,286 (9,227 )
Depreciation and amortization 105,109 (12,958 )
Goodwill impairment 74,100 (74,100 )
Total operating expenses $ 2,321,921 (127,458 ) (112,748 ) $ 2,081,715 95.5
 
Operating income $ 3,948 (18,230 ) 112,748 $ 98,466 4.5
 
    (1)   The twelve months ended June 30, 2011 did not include any discrete adjustments to U.S. GAAP revenues.
(2) As of September 30, 2012, the Company classified the results of operations of the Hair Restoration Centers as discontinued operations. Beginning with the first quarter ended September 30, 2012, the Company reclassified certain salon marketing and advertising expenses that were previously within cost of service and general and administrative expense to site operating expense. All periods presented reflect the Hair Restoration Centers operations as discontinued operations and the reclassifications that were made during the quarter ended September 30, 2012.
(3) The twelve months ended June 30, 2011, included $1.2 million of pre-tax expense related to self-insurance reserves adjustments, $1.7 million pre-tax benefit related to sales and use tax audit accrual adjustment, $31.2 million pre-tax valuation reserve for the note outstanding with Pure Beauty, $4.3 million of pre-tax expense related to senior management restructuring, $2.4 million of pre-tax expense associated with a legal settlement, $1.3 of pre-tax expense related to our exploration of strategic alternatives during fiscal year 2011, and a goodwill impairment charge of $74.1 million pre-tax related to our Promenade salon concept.
(4) Computed as a percent of total adjusted revenues.
(5) Computed as a percent of service revenues and excludes depreciation and amortization expense.
(6) Computed as a percent of product revenues and excludes depreciation and amortization expense.
 

REGIS CORPORATION
Reconciliation of reported U.S. GAAP net loss to Adjusted EBITDA, a non-GAAP financial measure
($ In thousands)
(unaudited)

Adjusted EBITDA
EBITDA represents U.S. GAAP net loss for the respective period excluding interest expense, income taxes and depreciation and amortization expense. The Company defines adjusted EBITDA, as EBITDA excluding equity in (loss) income of affiliated companies, and identified items impacting comparability for each respective period. For the twelve months ended June 30, 2012, the items impacting comparability consisted of $9.8 million of pre-tax expense associated with senior management restructuring and severance charges, $2.4 million of pre-tax professional fees expense associated our fiscal year 2011 contested proxy, $2.8 million of pre-tax expense associated our field restructuring, $1.8 million pre-tax expense associated with amending our deferred compensation contracts, $0.9 million of pre-tax expense associated with prior year’s self-insurance reserves adjustments, $67.7 million goodwill impairment charges related to our Regis salon concept, $0.8 million of income associated with the recovery of bad debt on the Pure Beauty note receivable, $1.1 million of income associated with a legal settlement, and $62.4 million after-tax loss for discontinued operations. The impact of the income tax provision adjustments associated with the above items and the $16.1 million of accelerated depreciation related to our point-of-sale system are already included in the U.S. GAAP reported net loss income to EBITDA reconciliation, therefore there is no adjustment needed for the reconciliation from EBITDA to operational EBITDA. The impact of the $28.2 million impairment and non-operational charges recorded by EEG and the net $17.9 million Provalliance impairment is already included by excluding the impact of the Company’s equity in (loss) income of affiliated companies, net of taxes, as reported. For the twelve months ended June 30, 2011, the items impacting comparability consisted $4.3 million of pre-tax expense associated with senior management restructuring and severance charges, $1.2 million of million of pre-tax expense associated with prior year’s self-insurance reserves adjustments, $31.2 million of pre-tax expense associated with the Pure Beauty note receivable reserve, $2.4 million of pre-tax expense associated with a legal settlement, $74.1 million goodwill impairment charge related to our Promenade salon concept, $1.7 million benefit for a sales and use tax audit accrual adjustment, $1.3 million of expense associated with our exploration of strategic alternative and $12.0 million after-tax income for discontinued operations. The impact of the income tax provision adjustments associated with the above items is already included in the U.S. GAAP reported net loss income to EBITDA reconciliation, therefore there is no adjustment needed for the reconciliation from EBITDA to operational EBITDA. The impact of the $9.2 million MY Style impairment and $3.6 million gain for the settlement of a portion of the Provalliance equity put is already included by excluding the impact of the Company’s equity in (loss) income of affiliated companies, net of taxes, as reported.

  Twelve Months Ended
June 30, 2012   June 30, 2011
(Dollars in thousands)
Consolidated reported net loss, as reported (U.S. GAAP)$(114,093)$(8,905)
Interest expense, as reported 28,245 34,388
Income taxes, as reported (5,279 ) (9,496 )
Depreciation and amortization, as reported 118,071 105,109
EBITDA (as defined above) $ 26,944 $ 121,096
 
Hair Restoration Centers Adjustments (1):
Interest expense (14 )
Income taxes 849 (6,837 )
Depreciation and amortization (13,101 ) (12,958 )
EBITDA (Hair Restoration Centers operations presented as discontinued operations) $ 14,692 $ 101,287
 
Equity in loss (income) of affiliated companies, net of income taxes (2) 30,858 (6,661 )
Senior management restructuring and severance charges 9,810 4,299
Professional fees 2,413
Field restructure and other 2,807
Deferred compensation 1,808
Self-insurance reserve adjustments 862 1,185
Pure Beauty note receivable (recovery) reserve (805 ) 31,227
Legal settlements (1,098 ) 2,433
Goodwill impairment (1) 67,684 74,100
Sales and use tax audit accrual adjustment (1,748 )
Strategic alternative costs 1,253
Loss (income) from discontinued operations, net of taxes (1) 62,351 (12,034 )
Adjusted EBITDA, non-GAAP financial measure$191,382$195,341
 
    (1)   As of September 30, 2012, the Company classified the results of operations of the Hair Restoration Centers as discontinued operations. All periods presented reflect the Hair Restoration Centers operations as discontinued operations.
(2) The Company’s 50.0 percent interest in Hair Club for Men, Ltd. is included in the sale of the Hair Restoration Centers and is included in the presentation of discontinued operations.
 

REGIS CORPORATION’S SAME-STORE SALES

Reconciliation of selected U.S. GAAP to non-GAAP financial measures

(unaudited)

 
Twelve Months Ended
June 30,
2012   2011
Revenue decline, as reported (U.S. GAAP)(2.7) %(1.6) %
Effect of acquisitions (0.7 ) (1.1 )
Effect of new stores and conversions (1.3 ) (0.6 )
Effect of franchise revenues
Effect of foreign currency (0.5 )
Effect of closed salons 2.3 1.6
Other (1.1 ) 0.3
Same-store sales, non-GAAP(3.5)%(1.9)%
 

Contacts:

Regis Corporation
Mark Fosland – SVP, Finance and Investor Relations, 952-806-1707
or
Andy Larew – Director, Finance-Investor Relations, 952-806-1425

Source: Regis Corporation

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