UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
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x
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the quarterly period ended
September 30, 2018
OR
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¨
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period from to
Commission file number 1-12725
Regis Corporation
(Exact name of registrant as specified in its charter)
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Minnesota
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41-0749934
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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7201 Metro Boulevard, Edina, Minnesota
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55439
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(Address of principal executive offices)
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(Zip Code)
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(952) 947-7777
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes
x
No
¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to be submit and post such files). Yes
x
No
¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
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Large accelerated filer
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Accelerated filer
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Non-accelerated filer
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Smaller reporting company
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(Do not check if a smaller reporting company)
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Emerging growth company
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
¨
Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Act). Yes
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No
x
Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of
October 24, 2018
:
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Common Stock, $.05 par value
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44,328,127
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Class
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Number of Shares
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REGIS CORPORATION
INDEX
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
REGIS CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET (Unaudited)
(Dollars in thousands, except share data)
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September 30,
2018
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June 30,
2018
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ASSETS
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Current assets:
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Cash and cash equivalents
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$
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115,729
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$
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110,399
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Receivables, net
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29,096
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52,430
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Inventories
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87,626
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79,363
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Other current assets
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33,462
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47,867
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Total current assets
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265,913
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290,059
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Property and equipment, net
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101,264
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105,860
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Goodwill
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402,202
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412,643
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Other intangibles, net
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10,322
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10,557
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Other assets
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40,922
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37,616
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Total assets
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$
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820,623
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$
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856,735
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LIABILITIES AND SHAREHOLDERS’ EQUITY
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Current liabilities:
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Accounts payable
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$
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55,994
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$
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57,738
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Accrued expenses
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85,384
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100,716
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Total current liabilities
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141,378
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158,454
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Long-term debt
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90,000
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90,000
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Other noncurrent liabilities
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120,888
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121,843
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Total liabilities
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352,266
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370,297
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Commitments and contingencies (Note 7)
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Shareholders’ equity:
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Common stock, $0.05 par value; issued and outstanding 44,328,127 and 45,258,571 common shares at September 30, 2018 and June 30, 2018 respectively
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2,217
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2,263
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Additional paid-in capital
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175,983
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194,436
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Accumulated other comprehensive income
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10,737
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9,656
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Retained earnings
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279,420
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280,083
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Total shareholders’ equity
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468,357
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486,438
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Total liabilities and shareholders’ equity
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$
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820,623
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$
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856,735
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The accompanying notes are an integral part of the unaudited Condensed Consolidated Financial Statements.
REGIS CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited)
For The
Three Months Ended September 30, 2018
and
2017
(Dollars and shares in thousands, except per share data amounts)
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Three Months Ended September 30,
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2018
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2017
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Revenues:
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Service
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$
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207,848
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$
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235,630
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Product
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57,591
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60,958
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Royalties and fees
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22,396
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18,876
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287,835
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315,464
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Operating expenses:
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Cost of service
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121,497
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139,836
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Cost of product
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32,181
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30,162
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Site operating expenses
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36,821
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40,029
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General and administrative
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47,727
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35,166
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Rent
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35,978
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42,416
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Depreciation and amortization
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10,202
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12,255
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Total operating expenses
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284,406
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299,864
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Operating income
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3,429
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15,600
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Other (expense) income:
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Interest expense
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(1,006
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(2,138
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(Loss) gain from sale of salon assets to franchisees, net
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(3,960
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122
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Interest income and other, net
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360
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420
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(Loss) income from continuing operations before income taxes
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(1,177
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14,004
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Income tax benefit (expense)
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714
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(5,559
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(Loss) income from continuing operations
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(463
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8,445
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Loss from discontinued operations, net of taxes
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(264
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(33,767
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Net loss
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$
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(727
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$
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(25,322
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)
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Net loss per share:
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Basic:
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(Loss) income from continuing operations
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$
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(0.01
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$
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0.18
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Loss from discontinued operations
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(0.01
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(0.72
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Net loss per share, basic (1)
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$
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(0.02
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$
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(0.54
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Diluted:
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(Loss) income from continuing operations
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$
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(0.01
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$
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0.18
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Loss from discontinued operations
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(0.01
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(0.72
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Net loss per share, diluted (1)
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$
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(0.02
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$
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(0.54
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Weighted average common and common equivalent shares outstanding:
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Basic
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44,730
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46,677
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Diluted
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44,730
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46,900
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_______________________________________________________________________________
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(1)
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Total is a recalculation; line items calculated individually may not sum to total due to rounding.
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The accompanying notes are an integral part of the unaudited Condensed Consolidated Financial Statements.
REGIS CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS) (Unaudited)
For The
Three Months Ended September 30, 2018
and
2017
(Dollars in thousands)
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Three Months Ended September 30,
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2018
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2017
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Net loss
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$
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(727
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$
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(25,322
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)
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Foreign currency translation adjustments
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1,081
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2,652
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Comprehensive income (loss)
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$
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354
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$
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(22,670
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)
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The accompanying notes are an integral part of the unaudited Condensed Consolidated Financial Statements.
REGIS CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)
For The
Three Months Ended September 30, 2018
and
2017
(Dollars in thousands)
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Three Months Ended September 30,
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2018
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2017
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Cash flows from operating activities:
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Net loss
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$
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(727
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$
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(25,322
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Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
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Non-cash impairment and other adjustments related to discontinued operations
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(427
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)
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29,169
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Depreciation and amortization
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8,371
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9,975
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Depreciation related to discontinued operations
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—
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2,129
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Deferred income taxes
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(875
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4,504
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Gain on life insurance
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—
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(7,986
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)
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Loss (gain) from sale of salon assets to franchisees, net (1)
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3,960
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(122
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Salon asset impairments
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1,831
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2,280
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Stock-based compensation
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2,335
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2,030
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Amortization of debt discount and financing costs
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69
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351
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Other non-cash items affecting earnings
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(26
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75
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Changes in operating assets and liabilities, excluding the effects of asset sales
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(32,053
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)
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(8,079
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)
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Net cash (used in) provided by operating activities
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(17,542
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)
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9,004
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Cash flows from investing activities:
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Capital expenditures
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(11,258
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)
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(6,126
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)
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Capital expenditures related to discontinued operations
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—
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(1,007
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)
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Proceeds from sale of assets to franchisees (1)
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12,422
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1,472
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Proceeds from company-owned life insurance policies
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24,617
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—
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Net cash provided by (used in) investing activities
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25,781
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(5,661
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)
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Cash flows from financing activities:
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Proceeds on issuance of common stock
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378
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—
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Repurchase of common stock
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(19,337
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)
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—
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Taxes paid for shares withheld
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(1,918
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)
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(1,530
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)
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Net cash used in financing activities
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(20,877
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)
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(1,530
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)
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Effect of exchange rate changes on cash and cash equivalents
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388
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680
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(Decrease) increase in cash, cash equivalents, and restricted stock
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(12,250
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)
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2,493
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Cash, cash equivalents and restricted cash:
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Beginning of period
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148,774
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208,634
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Cash, cash equivalents and restricted cash included in current assets held for sale
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—
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1,352
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Beginning of period, total cash, cash equivalents and restricted cash
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148,774
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209,986
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End of period
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$
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136,524
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$
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212,479
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__________________________________________________________
(1) Excludes transaction with The Beautiful Group.
The accompanying notes are an integral part of the unaudited Condensed Consolidated Financial Statements.
REGIS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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1.
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BASIS OF PRESENTATION OF UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
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The unaudited interim Condensed Consolidated Financial Statements of Regis Corporation (the "Company") as of
September 30, 2018
and for the three months ended
September 30, 2018
and
2017
, reflect, in the opinion of management, all adjustments necessary to fairly state the consolidated financial position of the Company as of
September 30, 2018
and its consolidated results of operations,
comprehensive income (loss)
and cash flows for the interim periods. Adjustments consist only of normal recurring items, except for any discussed in the notes below. The results of operations and cash flows for any interim period are not necessarily indicative of results of operations and cash flows for the full year.
The accompanying interim unaudited condensed consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). Accordingly, they do not include all disclosures required by accounting principles generally accepted in the United States of America (GAAP). The unaudited interim Condensed Consolidated Financial Statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended
June 30, 2018
and other documents filed or furnished with the SEC during the current fiscal year.
Goodwill:
As of
September 30, 2018
and
June 30, 2018
, the Company-owned reporting unit had
$173.9 million
and
$184.8 million
of goodwill, respectively, and the Franchise salons reporting unit had
$228.3 million
and
$227.9 million
of goodwill, respectively. See Note 9 to the Consolidated Financial Statements. The Company assesses goodwill impairment on an annual basis, during the Company’s fourth fiscal quarter, and between annual assessments if an event occurs, or circumstances change, that would more likely than not reduce the fair value of a reporting unit below its carrying amount. An interim impairment analysis was not required in the three months ended September 20, 2018.
The Company performs its annual impairment assessment as of April 30. For the fiscal year 2018 annual impairment assessment, due to the transformational efforts completed during the year, the Company elected to forgo the optional Step 0 assessment and performed the quantitative impairment analysis on the Company-owned and Franchise reporting units. The Company compared the carrying value of the reporting units, including goodwill, to their estimated fair value. The results of these assessments indicated that the estimated fair value of our reporting units exceeded their carrying value. The Franchise reporting unit had substantial headroom and the Company-owned reporting unit had headroom of approximately
24%
. The fair value of the Company-owned reporting unit was determined based on a discounted cash flow analysis and comparable market multiples. The assumptions used in determining fair value were the number and pace of salons sold to franchisees, proceeds for salon sales, weighted average cost of capital, general and administrative expenses and utilization of net operating loss benefits. We selected the assumptions by considering our historical financial performance and trends, historical salon sale proceeds and estimated salon sale activities. The preparation of our fair value estimate includes uncertain factors and requires significant judgments and estimates which are subject to change. A 100 basis point increase in our weighted average cost of capital within the Company-owned reporting unit would result in a reduction in headroom to approximately
17%
.
Other uncertain factors or events exist which may result in a future triggering event and require us to perform an interim impairment analysis with respect to the carrying value of goodwill for the Company-owned reporting unit prior to our annual assessment. These internal and external factors include but are not limited to the following:
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•
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Changes in the company-owned salon strategy,
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•
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Franchise expansion and sales opportunities,
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•
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Future market earnings multiples deterioration,
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•
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Our financial performance falls short of our projections due to internal operating factors,
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•
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Reduced salon traffic, as defined by total transactions, and/or revenue,
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•
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Deterioration of industry trends,
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•
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Inability to reduce general and administrative expenses as company-owned salon count potentially decreases,
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•
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Other factors causing our cash flow to deteriorate.
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If the triggering event analysis indicates the fair value of the Company-owned reporting unit has potentially fallen below more than the
24%
headroom, we may be required to perform an updated impairment assessment which may result in a non-cash impairment charge to reduce the carrying value of goodwill.
Assessing goodwill for impairment requires management to make assumptions and to apply judgment, including forecasting future sales and expenses, and selecting appropriate discount rates, which can be affected by economic conditions and other factors that can be difficult to predict. The Company does not believe there is a reasonable likelihood that there will be a material change in the estimates or assumptions it uses to calculate impairment losses of goodwill. However, if actual results are not consistent with the estimates and assumptions used in the calculations, or if there are significant changes to the Company's planned strategy for company-owned salons, the Company may be exposed to future impairment losses that could be material.
Accounting Standards Recently Adopted by the Company:
Revenue from Contracts with Customers
In May 2014, the FASB issued amended guidance for revenue recognition which provides a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. The Company retrospectively adopted these standards on July 1, 2018. The impact of these standards was applied to all periods presented and the cumulative effect of applying the standard was recognized at the beginning of the earliest period presented. See Note 2 to the unaudited Condensed Consolidated Financial Statements for additional information regarding the impact of the adoption of the revenue recognition guidance.
Restricted Cash
In November 2016, the FASB issued cash flow guidance requiring restricted cash and restricted cash equivalents to be included in the cash and cash equivalent balances in the statement of cash flows. Transfers between cash and cash equivalents and restricted cash are no longer be presented in the statement of cash flows and a reconciliation between the balance sheet and statement of cash flows must be disclosed. The Company retrospectively adopted this guidance on July 1, 2018. The impact of this standard was applied to all periods presented. As a result of including restricted cash in the beginning and end of period balances, cash, cash equivalents and restricted cash presented in the statement of cash flows increased
$38.4 million
,
$36.2 million
and
$37.6 million
as of June 30, 2018, September 30, 2017 and June 30, 2017, respectively.
Statement of Cash Flows
In August 2016, the FASB issued updated cash flow guidance clarifying cash flow classification and presentation for certain items. The Company retrospectively adopted this guidance on July 1, 2018. The adoption of this standard did not have a material impact on the Company's consolidated statement of cash flows.
A
ccounting Standards Recently Issued But Not Yet Adopted by the Company:
Leases
In February 2016, the FASB issued updated guidance requiring organizations that lease assets to recognize the rights and obligations created by those leases on the consolidated balance sheet. The new standard is effective for the Company in the first quarter of fiscal year 2020, with early adoption permitted. The standard allows for either (1) a modified retrospective transition method under which the standard is applied at the beginning of the earliest period presented in the financial statements or (2) an alternative transition method under which the standard is applied at the adoption date and a cumulative-effect adjustment to the opening balance of retrained earnings is recognized in the period of adoption. As part of evaluating the impact of the new standard, the Company is continuing to evaluate which transition method to use. In addition, the Company is currently leveraging its lease management system to facilitate the adoption of this standard. The Company is continuing to evaluate the effect the new standard will have on the Company's consolidated financial statements but expects this adoption will result in a material increase in the assets and liabilities on the Company's consolidated balance sheet, as substantially all of its operating lease commitments will be subject to the new guidance.
2.
REVENUE RECOGNITION:
In May 2014, the FASB issued amended guidance for revenue recognition which provides a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. The Company adopted the amended revenue recognition guidance, ASC Topic 606, on July 1, 2018 using the full retrospective transition method which required the adjustment of each prior reporting period presented. The adjusted amounts include the application of a practical expedient that permitted the Company to reflect the aggregate effect of all modifications that occurred prior to fiscal year 2017 when identifying the satisfied and unsatisfied performance obligation, determining the transaction price and allocating the transaction price to the satisfied and unsatisfied performance obligation. As a result of adopting this new standard the Company is providing its updated revenue recognition policies.
Revenue Recognition and Deferred Revenue:
Revenue recognized at point of sale
Company-owned salon revenues are recognized at the time when the services are provided. Product revenues are recognized when the guest receives and pays for the merchandise. Revenues from purchases made with gift cards are also recorded when the guest takes possession of the merchandise or services are provided. Gift cards issued by the Company are recorded as a liability (deferred revenue) upon sale and recognized as revenue upon redemption by the customer. Gift card breakage, the amount of gift cards which will not be redeemed, is recognized proportional to redemptions using estimates based on historical redemption patterns. Product sales by the Company to its franchisees are included within product revenues in the Condensed Consolidated Statement of Operations and recorded at the time product is delivered to the franchisee. Payment for franchisee product revenue is generally collected within
30 days
of delivery.
Revenue recognized over time
Franchise revenues primarily include royalties, advertising fund fees, franchise fees and other fees. Royalty and advertising revenues represent sales-based royalties that are recognized in the period in which the sales occur. Generally, royalty and advertising revenue is billed and collected monthly in arrears. Advertising revenues and expenditures, which must be spent on marketing and related activities per the franchise agreement, are recorded on a gross basis within the Condensed Consolidated Statement of Operations. This increases both the gross amount of reported franchise revenue and site operating expense and generally has no impact on operating income and net income. Franchise fees are billed and received upon the signing of the franchise agreement. Upon adoption of the new revenue recognition guidance, recognition of these fees is deferred until the salon opening and is then recognized over the term of the franchise agreement, typically
ten years
. Under previous guidance the initial franchise fees were recognized in full upon salon opening.
The following table disaggregates revenue by timing of revenue recognition and is reconciled to reportable segment revenues as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, 2018
|
|
Three Months Ended September 30, 2017
|
|
|
Company-owned
|
|
Franchise
|
|
Company-owned
|
|
Franchise
|
|
|
(in thousands)
|
Revenue recognized at a point in time:
|
|
|
|
|
|
|
|
|
Service
|
|
$
|
207,848
|
|
|
$
|
—
|
|
|
$
|
235,630
|
|
|
$
|
—
|
|
Product
|
|
41,962
|
|
|
15,629
|
|
|
53,236
|
|
|
7,722
|
|
Total revenue recognized at a point in time
|
|
$
|
249,810
|
|
|
$
|
15,629
|
|
|
$
|
288,866
|
|
|
$
|
7,722
|
|
|
|
|
|
|
|
|
|
|
Revenue recognized over time:
|
|
|
|
|
|
|
|
|
Royalty and other franchise fees
|
|
$
|
—
|
|
|
$
|
14,420
|
|
|
$
|
—
|
|
|
$
|
12,150
|
|
Advertising fund fees
|
|
—
|
|
|
7,976
|
|
|
—
|
|
|
6,726
|
|
Total revenue recognized over time
|
|
$
|
—
|
|
|
$
|
22,396
|
|
|
$
|
—
|
|
|
$
|
18,876
|
|
Total revenue
|
|
$
|
249,810
|
|
|
$
|
38,025
|
|
|
$
|
288,866
|
|
|
$
|
26,598
|
|
|
|
|
|
|
|
|
|
|
Information about receivables, broker fees and deferred revenue subject to the amended revenue recognition guidance is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
2018
|
|
June 30,
2018
|
|
Balance Sheet Classification
|
|
|
(in thousands)
|
|
|
Receivables from contracts with customers, net
|
|
$
|
23,004
|
|
|
$
|
21,504
|
|
|
Accounts receivable, net
|
Broker fees
|
|
$
|
14,657
|
|
|
$
|
14,002
|
|
|
Other assets
|
|
|
|
|
|
|
|
Deferred revenue:
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
Gift card liability
|
|
$
|
2,974
|
|
|
$
|
3,320
|
|
|
Accrued expenses
|
Deferred franchise fees unopened salons
|
|
1,714
|
|
|
2,306
|
|
|
Accrued expenses
|
Deferred franchise fees open salons
|
|
3,221
|
|
|
3,030
|
|
|
Accrued expenses
|
Total current deferred revenue
|
|
$
|
7,909
|
|
|
$
|
8,656
|
|
|
|
Non-current
|
|
|
|
|
|
|
Deferred franchise fees unopened salons
|
|
$
|
12,062
|
|
|
$
|
11,161
|
|
|
Other non-current liabilities
|
Deferred franchise fees open salons
|
|
19,134
|
|
|
18,346
|
|
|
Other non-current liabilities
|
Total non-current deferred revenue
|
|
$
|
31,196
|
|
|
$
|
29,507
|
|
|
|
Receivables relate primarily to payments due for royalties, franchise fees, advertising fees, and sales of salon services and product. The receivable balance is presented net of an allowance for expected losses (i.e., doubtful accounts), primarily related to receivables from franchisees. As of September 30, 2018 and June 30, 2018, the balance in the allowance for doubtful accounts was
$1.6 million
and
$1.2 million
, respectively. Activity in the period was not significant. Broker fees are the costs associated with using external brokers to identify new franchisees. These fees are paid upon the signing of the franchise agreement and recognized as General and Administrative expense over the term of the agreement. The adoption of the amended revenue recognition guidance did not significantly change the Company's accounting for broker fees.
The following table is a rollforward of the broker fee balance for the periods indicated (in thousands):
|
|
|
|
|
|
Balance as of June 30, 2018
|
|
$
|
14,002
|
|
Additions
|
|
1,285
|
|
Amortization
|
|
(628
|
)
|
Write-offs
|
|
(2
|
)
|
Balance as of September 30, 2018
|
|
$
|
14,657
|
|
Deferred revenue includes the gift card liability, deferred franchise fees for unopened salons and open salons. Gift card revenue for the three months ended September 30, 2018 and 2017 was
$1.0 million
and
$1.4 million
, respectively. Deferred franchise fees related to open salons are generally recognized on a straight-line basis over the term of the franchise agreement. Franchise fee revenue for the three months ended September 30, 2018 and 2017 was
$0.9 million
and
$0.6 million
, respectively. Estimated revenue expected to the recognized in the future related to deferred franchise fees for open salons as of
September 30, 2018
is as follows (in thousands):
|
|
|
|
|
|
Remainder of 2019
|
$
|
2,391
|
|
2020
|
|
3,133
|
|
2021
|
|
3,044
|
|
2022
|
|
2,924
|
|
2023
|
|
2,748
|
|
Thereafter
|
|
8,115
|
|
Total
|
|
$
|
22,355
|
|
The amended revenue recognition guidance impacted the Company's previously reported financial statements as follows:
CONDENSED CONSOLIDATED BALANCE SHEET (Unaudited)
June 30, 2018
(Dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments for new revenue recognition guidance
|
|
|
|
|
Previously
|
|
Franchise
|
|
Advertising
|
|
Gift Card
|
|
|
|
|
|
|
Reported
|
|
Fees
|
|
Funds
|
|
Breakage
|
|
Taxes
|
|
Adjusted
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
110,399
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
110,399
|
|
Receivables, net
|
|
52,430
|
|
|
|
|
|
|
|
|
|
|
52,430
|
|
Inventories
|
|
79,363
|
|
|
|
|
|
|
|
|
|
|
79,363
|
|
Other current assets
|
|
47,867
|
|
|
|
|
|
|
|
|
|
|
|
47,867
|
|
Total current assets
|
|
290,059
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
290,059
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
105,860
|
|
|
|
|
|
|
|
|
|
|
105,860
|
|
Goodwill
|
|
412,643
|
|
|
|
|
|
|
|
|
|
|
412,643
|
|
Other intangibles, net
|
|
10,557
|
|
|
|
|
|
|
|
|
|
|
10,557
|
|
Other assets
|
|
37,616
|
|
|
|
|
|
|
|
|
|
|
37,616
|
|
Total assets
|
|
$
|
856,735
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
856,735
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
57,738
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
57,738
|
|
Accrued expenses
|
|
97,630
|
|
|
3,030
|
|
|
|
|
56
|
|
|
|
|
100,716
|
|
Total current liabilities
|
|
155,368
|
|
|
3,030
|
|
|
—
|
|
|
56
|
|
|
—
|
|
|
158,454
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt
|
|
90,000
|
|
|
|
|
|
|
|
|
|
|
90,000
|
|
Other noncurrent liabilities
|
|
107,875
|
|
|
18,346
|
|
|
|
|
|
|
(4,378
|
)
|
|
121,843
|
|
Total liabilities
|
|
353,243
|
|
|
21,376
|
|
|
—
|
|
|
56
|
|
|
(4,378
|
)
|
|
370,297
|
|
Commitments and contingencies (Note 7)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders’ equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock
|
|
2,263
|
|
|
|
|
|
|
|
|
|
|
2,263
|
|
Additional paid-in capital
|
|
194,436
|
|
|
|
|
|
|
|
|
|
|
194,436
|
|
Accumulated other comprehensive income
|
|
9,568
|
|
|
88
|
|
|
|
|
|
|
|
|
|
|
9,656
|
|
Retained earnings
|
|
297,225
|
|
|
(21,464
|
)
|
|
|
|
(56
|
)
|
|
4,378
|
|
|
280,083
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total shareholders’ equity
|
|
503,492
|
|
|
(21,376
|
)
|
|
—
|
|
|
(56
|
)
|
|
4,378
|
|
|
486,438
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and shareholders’ equity
|
|
$
|
856,735
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
856,735
|
|
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited)
For The Three Months Ended September 30,
2017
(Dollars and shares in thousands, except per share data amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments for new revenue recognition guidance
|
|
|
|
|
Previously
|
|
Franchise
|
|
Advertising
|
|
Gift Card
|
|
|
|
|
|
|
Reported
|
|
Fees
|
|
Funds
|
|
Breakage
|
|
Taxes
|
|
Adjusted
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
Service
|
|
$
|
235,559
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
71
|
|
|
$
|
—
|
|
|
$
|
235,630
|
|
Product
|
|
60,940
|
|
|
|
|
|
|
18
|
|
|
|
|
60,958
|
|
Royalties and fees
|
|
13,374
|
|
|
(1,224
|
)
|
|
6,726
|
|
|
|
|
|
|
18,876
|
|
|
|
309,873
|
|
|
(1,224
|
)
|
|
6,726
|
|
|
89
|
|
|
—
|
|
|
315,464
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of service
|
|
139,836
|
|
|
|
|
|
|
|
|
|
|
139,836
|
|
Cost of product
|
|
30,162
|
|
|
|
|
|
|
|
|
|
|
30,162
|
|
Site operating expenses
|
|
33,303
|
|
|
|
|
6,726
|
|
|
|
|
|
|
40,029
|
|
General and administrative
|
|
35,166
|
|
|
|
|
|
|
|
|
|
|
35,166
|
|
Rent
|
|
42,416
|
|
|
|
|
|
|
|
|
|
|
42,416
|
|
Depreciation and amortization
|
|
12,255
|
|
|
|
|
|
|
|
|
|
|
12,255
|
|
Total operating expenses
|
|
293,138
|
|
|
—
|
|
|
6,726
|
|
|
—
|
|
|
—
|
|
|
299,864
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
16,735
|
|
|
(1,224
|
)
|
|
—
|
|
|
89
|
|
|
—
|
|
|
15,600
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other (expense) income:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
(2,138
|
)
|
|
|
|
|
|
|
|
|
|
(2,138
|
)
|
Gain from sale of salon assets to franchisees, net
|
|
122
|
|
|
|
|
|
|
|
|
|
|
122
|
|
Interest income and other, net
|
|
905
|
|
|
|
|
|
|
(485
|
)
|
|
|
|
420
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations before income taxes
|
|
15,624
|
|
|
(1,224
|
)
|
|
—
|
|
|
(396
|
)
|
|
—
|
|
|
14,004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense
|
|
(4,832
|
)
|
|
|
|
|
|
|
|
(727
|
)
|
|
(5,559
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
10,792
|
|
|
(1,224
|
)
|
|
—
|
|
|
(396
|
)
|
|
(727
|
)
|
|
8,445
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from discontinued operations, net of taxes
|
|
(33,767
|
)
|
|
|
|
|
|
|
|
|
|
(33,767
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(22,975
|
)
|
|
$
|
(1,224
|
)
|
|
$
|
—
|
|
|
$
|
(396
|
)
|
|
$
|
(727
|
)
|
|
$
|
(25,322
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic:
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
$
|
0.23
|
|
|
|
|
|
|
|
|
|
|
|
$
|
0.18
|
|
Loss from discontinued operations
|
|
(0.72
|
)
|
|
|
|
|
|
|
|
|
|
|
(0.72
|
)
|
Net loss per share, basic (1)
|
|
$
|
(0.49
|
)
|
|
|
|
|
|
|
|
|
|
|
$
|
(0.54
|
)
|
Diluted:
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
$
|
0.23
|
|
|
|
|
|
|
|
|
|
|
$
|
0.18
|
|
Loss from discontinued operations
|
|
(0.72
|
)
|
|
|
|
|
|
|
|
|
|
(0.72
|
)
|
Net loss per share, diluted (1)
|
|
$
|
(0.49
|
)
|
|
|
|
|
|
|
|
|
|
$
|
(0.54
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common and common equivalent shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
46,677
|
|
|
|
|
|
|
|
|
|
|
46,677
|
|
Diluted
|
|
46,900
|
|
|
|
|
|
|
|
|
|
|
46,900
|
|
_____________________________________________________________________________
(1)
Total is a recalculation; line items calculated individually may not sum to total due to rounding.
|
|
3.
|
DISCONTINUED OPERATIONS:
|
In October 2017, the Company sold substantially all of
its mall-based salon business in
North America,
representing
858
salons, and substantially all of its International segment, representing approximately
250
salons in the UK, to The Bea
utiful Group ("TBG"), an affiliate of Regent, a private equity firm based in Los Angeles, California, who will operate these locations as franchise locations.
As part of the sale of the mall-based business, TBG
agreed to pay for the value of certain inventory, prepaid rent and assumed specific liabilities, including lease liabilities. In March 2018, the Company entered into discussions with TBG regarding a waiver of working capital and prepaid rent payments associated with the original transaction and the financing of certain receivables to assist TBG with its cash flow and operational needs. Based on the status of these discussions as of March 31, 2018, the Company fully reserved for the working capital and prepaid rent amount of
$11.7 million
. In August 2018, the Company entered into promissory notes for approximately
$11.7 million
in working capital receivables and
$8.0 million
in accounts receivables, a majority of which was for inventory purchases. All notes have a maturity date of August 2, 2020. Under the working capital notes, if no default has occurred under such notes and certain other conditions are met, such notes will be forgiven as of the maturity date and will be exchanged for a
three
-year contingent payment right that is payable to us upon the occurrence of certain TBG monetization events. Should the Company need to record reserves against its current and future receivables from TBG or their ability to meet the requirements of the promissory notes, these reserves would be recorded within general and administrative expenses.
For the International segment, the Company entered into a share purchase agreement with TBG for minimal consideration.
The Company classified the results of its mall-based business and its International segment as discontinued operations for all periods presented in the Condensed Consolidated Statement of Operations.
In connection with the sale of the mall-based business and the International segment, the Company performed an impairment assessment of the asset groups. The Company recognized net impairment charges within discontinued operations based on the difference between the expected sale prices and the carrying value of the asset groups.
The following summarizes the results of our discontinued operations for the periods presented:
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended September 30,
|
|
2018
|
|
2017
|
|
(Dollars in thousands)
|
Revenues
|
$
|
—
|
|
|
$
|
93,366
|
|
|
|
|
|
Loss from discontinued operations, before income taxes
|
(336
|
)
|
|
(33,767
|
)
|
Income tax benefit on discontinued operations
|
72
|
|
|
—
|
|
Loss from discontinued operations, net of income taxes
|
$
|
(264
|
)
|
|
$
|
(33,767
|
)
|
For the three months ended
September 30, 2018
, the
$0.3 million
loss from discontinued operations includes professional fees, partially offset by actuarial insurance accrual adjustments associated with the transaction. For the three months ended
September 30, 2017
, included within the
$33.8 million
loss from discontinued operations were
$30.5 million
of asset impairment charges,
$1.7 million
of loss from operations and
$1.6 million
of professional fees associated with the transaction.
No
income taxes were allocated to discontinued operations during the three months ended
September 30, 2017
as a result of the valuation allowance in place on all deferred tax assets associated with mall-based business and the International segment as of
September 30, 2017
.
Other than the items presented in the Consolidated Statement of Cash Flows, there were no other significant non-cash operating activities or any significant non-cash investing activities related to discontinued operations for the three months ended
September 30,
2017.
The Company utilized the consolidation of variable interest entities guidance to determine whether or not TBG was a variable interest entity (VIE), and if so, whether the Company was the primary beneficiary of TBG. As of
September 30, 2018
, the Company concluded that TBG is a VIE based on the fact that the equity investment at risk in TBG is not sufficient. The Company determined that it is not the primary beneficiary of TBG based on its exposure to the expected losses of TBG and as it is not the variable interest holder that is most closely associated within the relationship and the significance of the activities of TBG. The exposure to loss related to the Company's involvement with TBG is the carrying value of the amounts due from TBG and the guarantee of the operating leases.
The Company’s basic earnings per share is calculated as
net loss
divided by weighted average common shares outstanding, excluding unvested outstanding RSAs, RSUs and PSUs. The Company’s diluted earnings per share is calculated as
net loss
divided by weighted average common shares and common share equivalents outstanding, which includes shares issued under the Company’s stock-based compensation plans. Stock-based awards with exercise prices greater than the average market price of the Company’s common stock are excluded from the computation of diluted earnings per share.
For the three months ended
September 30, 2018
,
930,666
common stock equivalents of dilutive common stock were excluded in the diluted earnings per share calculations due to the
net loss
from continuing operations. For the three months ended
September 30, 2017
,
223,526
common stock equivalents of dilutive common stock were included in the diluted earnings per share calculations due to the net
income
from continuing operations.
The computation of weighted average shares outstanding, assuming dilution, excluded
357,468
and
2,530,400
of stock-based awards during the three months ended
September 30, 2018
and
2017
, respectively, as they were not dilutive under the treasury stock method.
Stock-Based Employee Compensation:
During the three months ended
September 30, 2018
, the Company granted various equity awards including restricted stock units (RSUs) and performance-based restricted stock units (PSUs).
A summary of equity awards granted is as follows:
|
|
|
|
|
|
|
For the Three Months Ended September 30, 2018
|
Restricted stock units
|
|
337,422
|
|
Performance-based restricted stock units
|
|
730,182
|
|
The RSUs granted to employees vest in equal amounts over a
three
-year period subsequent to the grant date, cliff vest after a
three
-year period or cliff vest after a
five
-year period subsequent to the grant date.
The PSUs granted to employees have a
three
year performance period ending June 30, 2021 linked to the Company's stock price reaching a specified volume weighted average closing price for a
50
day period that ends on June 30, 2021. The PSUs granted to certain executives include an additional
two
year service period after the performance period. Of the total PSUs granted,
49,084
PSUs have a maximum vesting percentage of
200%
based on the level of performance achieved for the respective award, while the remaining PSUs have a maximum vesting percentage of
100%
.
Total compensation cost for stock-based payment arrangements totaled
$2.3
and
$2.0 million
for the three months ended
September 30, 2018
and
2017
, respectively, was recorded within general and administrative expense on the unaudited Condensed Consolidated Statement of Operations.
Additional Paid-In Capital:
The
$18.5 million
decrease
in additional paid-in capital during the three months ended
September 30, 2018
was primarily due to
$19.3 million
of common stock repurchases and
$1.5 million
of other stock-based compensation activity, primarily shares forfeited for withholdings on vestings, partly offset by
$2.3 million
of stock-based compensation.
During the three months ended
September 30, 2018
, the Company repurchased
1.1 million
shares for
$19.3 million
under a previously approved stock repurchase program. At
September 30, 2018
,
$216.0 million
remains outstanding under the approved stock repurchase program.
A summary of income tax benefit (expense) and corresponding effective tax rates is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended September 30,
|
|
|
2018
|
|
2017
|
|
|
(Dollars in thousands)
|
Income tax benefit (expense)
|
|
$
|
714
|
|
|
$
|
(5,559
|
)
|
Effective tax rate
|
|
60.7
|
%
|
|
39.7
|
%
|
On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act made broad and complex changes to the U.S. tax code including, but not limited to, reducing the U.S. federal corporate tax rate from
35 percent
to
21 percent
.
The Company has applied guidance under SEC Staff Accounting Bulletin No. 118 which allows for a measurement period up to one year after the December 22, 2017 enactment date of the Tax Act to complete the accounting requirements. The Company recorded a provisional net tax benefit of
$68.1 million
in continuing operations through fiscal year 2018. During the three months ended September 30, 2018, the Company made no adjustments to previously recorded provisional amounts related to the Tax Act. We are still analyzing certain aspects of the Tax Act and refining our calculations, which could potentially affect the measurement of our deferred tax balances and ultimately cause us to revise our provisional estimate in the period ending December 31, 2018 in accordance with SAB 118. In addition, changes in interpretations, assumptions, and guidance regarding the new tax legislation, as well as the potential for technical corrections to the Tax Act, could have a material impact to the Company’s effective tax rate in future periods.
The Company is no longer subject to IRS examinations for years before 2013. Furthermore, with limited exceptions, the Company is no longer subject to state and international income tax examinations by tax authorities for years before 2012.
|
|
7.
|
COMMITMENTS AND CONTINGENCIES:
|
The Company is a defendant in various lawsuits and claims arising out of the normal course of business. Like certain other large retail employers, the Company has been faced with allegations of purported class-wide consumer and wage and hour violations. Litigation is inherently unpredictable and the outcome of these matters cannot presently be determined. Although the actions are being vigorously defended, the Company could in the future incur judgments or enter into settlements of claims that could have a material adverse effect on its results of operations in any particular period.
8. CASH, CASH EQUIVALENTS AND RESTRICTED CASH:
The table below reconciles the cash and cash equivalents balances and restricted cash balances, recorded in other current assets from the unaudited Condensed Consolidated Balance Sheet to the amount of cash, cash equivalents and restricted cash reported on the unaudited Condensed Consolidated Statement of Cash flows:
|
|
|
|
|
|
|
|
|
|
September 30,
2018
|
|
June 30,
2018
|
|
(Dollars in thousands)
|
Cash and cash equivalents
|
$
|
115,729
|
|
|
$
|
110,399
|
|
Restricted cash, included in Other current assets (1)
|
20,795
|
|
|
38,375
|
|
Total cash, cash equivalents and restricted cash
|
$
|
136,524
|
|
|
$
|
148,774
|
|
_______________________________________________________________________________
|
|
(1)
|
Restricted cash within Other current assets primarily relates to advertising cooperatives that are consolidated which can only be used to settle obligations of the respective cooperatives and contractual obligations to collateralize the Company's self-insurance programs.
|
9. GOODWILL AND OTHER INTANGIBLES:
The table below contains details related to the Company's goodwill:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company-owned
|
|
Franchise
|
|
Consolidated
|
|
|
(Dollars in thousands)
|
Goodwill, net at June 30, 2018
|
|
$
|
184,788
|
|
|
$
|
227,855
|
|
|
$
|
412,643
|
|
Translation rate adjustments
|
|
172
|
|
|
479
|
|
|
651
|
|
Derecognition related to sale of salon assets to franchisees (1)
|
|
(11,092
|
)
|
|
—
|
|
|
(11,092
|
)
|
Goodwill, net at September 30, 2018
|
|
$
|
173,868
|
|
|
$
|
228,334
|
|
|
$
|
402,202
|
|
_______________________________________________________________________________
|
|
(1)
|
Goodwill is derecognized for salons sold to franchisees with positive cash flows. The amount of goodwill derecognized is determined by a fraction (the numerator of which is the trailing-twelve months EBITDA of the salon being sold and the denominator of which is the estimated annualized EBITDA of the Company-owned reporting unit) that is applied to the total goodwill balance of the Company-owned reporting unit.
|
The table below presents other intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2018
|
|
June 30, 2018
|
|
|
Cost (1)
|
|
Accumulated
Amortization (1)
|
|
Net
|
|
Cost (1)
|
|
Accumulated
Amortization (1)
|
|
Net
|
|
|
(Dollars in thousands)
|
Amortized intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brand assets and trade names
|
|
$
|
8,170
|
|
|
$
|
(4,334
|
)
|
|
$
|
3,836
|
|
|
$
|
8,128
|
|
|
$
|
(4,260
|
)
|
|
$
|
3,868
|
|
Franchise agreements
|
|
9,864
|
|
|
(7,873
|
)
|
|
1,991
|
|
|
9,763
|
|
|
(7,712
|
)
|
|
2,051
|
|
Lease intangibles
|
|
14,012
|
|
|
(9,956
|
)
|
|
4,056
|
|
|
13,997
|
|
|
(9,770
|
)
|
|
4,227
|
|
Other
|
|
2,002
|
|
|
(1,563
|
)
|
|
439
|
|
|
1,983
|
|
|
(1,572
|
)
|
|
411
|
|
|
|
$
|
34,048
|
|
|
$
|
(23,726
|
)
|
|
$
|
10,322
|
|
|
$
|
33,871
|
|
|
$
|
(23,314
|
)
|
|
$
|
10,557
|
|
_______________________________________________________________________________
|
|
(1)
|
The change in the gross carrying value and accumulated amortization of other intangible assets is impacted by foreign currency.
|
|
|
10.
|
FINANCING ARRANGEMENTS:
|
The Company’s long-term debt consists of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maturity Date
|
|
Interest Rate
|
|
September 30,
2018
|
|
June 30,
2018
|
|
|
(Fiscal Year)
|
|
|
|
(Dollars in thousands)
|
Revolving credit facility
|
|
2023
|
|
3.49%
|
|
$
|
90,000
|
|
|
$
|
90,000
|
|
|
|
|
|
|
|
$
|
90,000
|
|
|
$
|
90,000
|
|
Revolving Credit Facility
As of
September 30, 2018
and
June 30, 2018
, the Company has
$90.0 million
of outstanding borrowings under a
$295.0 million
revolving credit facility. At
September 30, 2018
and
June 30, 2018
, the Company has outstanding standby letters of credit under the revolving credit facility of
$23.0 million
and
$1.5 million
, respectively, primarily related to the Company's self-insurance program. The unused available credit under the facility was
$182.0 million
and
$203.5 million
, respectively.
The Company was in compliance with all covenants and requirements of its financing arrangements as of and during the three months ended
September 30, 2018
.
|
|
11.
|
FAIR VALUE MEASUREMENTS:
|
Fair value measurements are categorized into one of three levels based on the lowest level of significant input used: Level 1 (unadjusted quoted prices in active markets); Level 2 (observable market inputs available at the measurement date, other than quoted prices included in Level 1); and Level 3 (unobservable inputs that cannot be corroborated by observable market data).
Assets and Liabilities Measured at Fair Value on a Recurring Basis
As of
September 30, 2018
and
June 30, 2018
, the estimated fair value of the Company’s cash, cash equivalents, restricted cash, receivables and accounts payable approximated their carrying values. As of
September 30, 2018
and
June 30, 2018
, the estimated fair value of the Company's debt was
$90.0 million
and the carrying value was
$90.0 million
. The estimated fair value of the Company's debt is based on Level 2 inputs.
Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis
We measure certain assets, including the Company’s equity method investments, tangible fixed and other assets and goodwill, at fair value on a nonrecurring basis when they are deemed to be other than temporarily impaired. The fair values of these assets are determined based on valuation techniques using the best information available, and may include quoted market prices, market comparables, and discounted cash flow projections.
The following impairments were based on fair values using Level 3 inputs:
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended September 30,
|
|
|
2018
|
|
2017
|
|
|
(Dollars in thousands)
|
Long-lived assets
|
|
$
|
1,831
|
|
|
$
|
2,280
|
|
12.
SEGMENT INFORMATION:
Segment information is prepared on the same basis the chief operating decision maker reviews financial information for operational decision-making purposes.
The Company’s reportable operating segments consisted of the following salons:
|
|
|
|
|
|
|
|
|
|
September 30, 2018
|
|
June 30, 2018
|
COMPANY-OWNED SALONS:
|
|
|
|
|
|
|
|
|
|
SmartStyle/Cost Cutters in Walmart Stores
|
|
1,622
|
|
|
1,660
|
|
Supercuts
|
|
865
|
|
|
928
|
|
Signature Style
|
|
1,335
|
|
|
1,378
|
|
Total Company-owned Salons
|
|
3,822
|
|
|
3,966
|
|
as a percent of total Company-owned and Franchise salons
|
|
47.6
|
%
|
|
49.1
|
%
|
|
|
|
|
|
FRANCHISE SALONS:
|
|
|
|
|
|
|
|
|
|
SmartStyle/Cost Cutters in Walmart Stores
|
|
596
|
|
|
561
|
|
Supercuts
|
|
1,812
|
|
|
1,739
|
|
Signature Style
|
|
753
|
|
|
745
|
|
Total franchise locations, excluding TBG
|
|
3,161
|
|
|
3,045
|
|
as a percent of total Company-owned and Franchise salons
|
|
39.4
|
%
|
|
37.7
|
%
|
|
|
|
|
|
TBG
|
|
781
|
|
|
807
|
|
as a percent of total Company-owned and Franchise salons
|
|
9.7
|
%
|
|
10.0
|
%
|
|
|
|
|
|
Total North American Salons
|
|
3,942
|
|
|
3,852
|
|
|
|
|
|
|
Total International TBG Salons (1)
|
|
263
|
|
|
262
|
|
as a percent of total Company-owned and Franchise salons
|
|
3.3
|
%
|
|
3.2
|
%
|
|
|
|
|
|
Total Franchise Salons
|
|
4,205
|
|
|
4,114
|
|
as a percent of total Company-owned and Franchise salons
|
|
52.4
|
%
|
|
50.9
|
%
|
|
|
|
|
|
OWNERSHIP INTEREST LOCATIONS:
|
|
|
|
|
|
|
|
|
|
Equity ownership interest locations
|
|
88
|
|
|
88
|
|
|
|
|
|
|
Grand Total, System-wide
|
|
8,115
|
|
|
8,168
|
|
____________________________________
|
|
(1)
|
Canadian and Puerto Rican salons are included in the North American salon totals.
|
As of
September 30, 2018
, the Company-owned operating segment is comprised primarily of SmartStyle
®
, Supercuts
®
, Cost Cutters
®
, and other regional trade names and the Franchise operating segment is comprised primarily of Supercuts
®
, Regis
®
, MasterCuts
®
, SmartStyle
®
, Cost Cutters
®
, First Choice Haircutters
®
, Roosters
®
and Magicuts
®
concepts. The Corporate segment represents home office and other unallocated costs.
Financial information concerning the Company's reportable operating segments is shown in the following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended September 30, 2018
|
|
|
Company-owned
|
|
Franchise
|
|
Corporate
|
|
Consolidated
|
|
|
(Dollars in thousands)
|
Revenues:
|
|
|
|
|
|
|
|
|
Service
|
|
$
|
207,848
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
207,848
|
|
Product
|
|
41,962
|
|
|
15,629
|
|
|
—
|
|
|
57,591
|
|
Royalties and fees
|
|
—
|
|
|
22,396
|
|
|
—
|
|
|
22,396
|
|
|
|
249,810
|
|
|
38,025
|
|
|
—
|
|
|
287,835
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
Cost of service
|
|
121,497
|
|
|
—
|
|
|
—
|
|
|
121,497
|
|
Cost of product
|
|
19,768
|
|
|
12,413
|
|
|
—
|
|
|
32,181
|
|
Site operating expenses
|
|
28,845
|
|
|
7,976
|
|
|
—
|
|
|
36,821
|
|
General and administrative
|
|
16,381
|
|
|
7,664
|
|
|
23,682
|
|
|
47,727
|
|
Rent
|
|
35,686
|
|
|
94
|
|
|
198
|
|
|
35,978
|
|
Depreciation and amortization
|
|
8,057
|
|
|
158
|
|
|
1,987
|
|
|
10,202
|
|
Total operating expenses
|
|
230,234
|
|
|
28,305
|
|
|
25,867
|
|
|
284,406
|
|
Operating income (loss)
|
|
19,576
|
|
|
9,720
|
|
|
(25,867
|
)
|
|
3,429
|
|
Other (expense) income:
|
|
|
|
|
|
|
|
|
Interest expense
|
|
—
|
|
|
—
|
|
|
(1,006
|
)
|
|
(1,006
|
)
|
Loss from sale of salon assets to franchisees, net
|
|
—
|
|
|
—
|
|
|
(3,960
|
)
|
|
(3,960
|
)
|
Interest income and other, net
|
|
—
|
|
|
—
|
|
|
360
|
|
|
360
|
|
Income (loss) from continuing operations before income taxes
|
|
$
|
19,576
|
|
|
$
|
9,720
|
|
|
$
|
(30,473
|
)
|
|
$
|
(1,177
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended September 30, 2017
|
|
|
Company-owned
|
|
Franchise
|
|
Corporate
|
|
Consolidated
|
|
|
(Dollars in thousands)
|
Revenues:
|
|
|
|
|
|
|
|
|
Service
|
|
$
|
235,630
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
235,630
|
|
Product
|
|
53,236
|
|
|
7,722
|
|
|
—
|
|
|
60,958
|
|
Royalties and fees
|
|
—
|
|
|
18,876
|
|
|
—
|
|
|
18,876
|
|
|
|
288,866
|
|
|
26,598
|
|
|
—
|
|
|
315,464
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
Cost of service
|
|
139,836
|
|
|
—
|
|
|
—
|
|
|
139,836
|
|
Cost of product
|
|
24,447
|
|
|
5,715
|
|
|
—
|
|
|
30,162
|
|
Site operating expenses
|
|
33,302
|
|
|
6,727
|
|
|
—
|
|
|
40,029
|
|
General and administrative
|
|
15,824
|
|
|
5,546
|
|
|
13,796
|
|
|
35,166
|
|
Rent
|
|
42,123
|
|
|
47
|
|
|
246
|
|
|
42,416
|
|
Depreciation and amortization
|
|
9,894
|
|
|
92
|
|
|
2,269
|
|
|
12,255
|
|
Total operating expenses
|
|
265,426
|
|
|
18,127
|
|
|
16,311
|
|
|
299,864
|
|
Operating income (loss)
|
|
23,440
|
|
|
8,471
|
|
|
(16,311
|
)
|
|
15,600
|
|
Other (expense) income:
|
|
|
|
|
|
|
|
|
Interest expense
|
|
—
|
|
|
—
|
|
|
(2,138
|
)
|
|
(2,138
|
)
|
Gain from sale of salon assets to franchisees, net
|
|
—
|
|
|
—
|
|
|
122
|
|
|
122
|
|
Interest income and other, net
|
|
—
|
|
|
—
|
|
|
420
|
|
|
420
|
|
Income (loss) from continuing operations before income taxes
|
|
$
|
23,440
|
|
|
$
|
8,471
|
|
|
$
|
(17,907
|
)
|
|
$
|
14,004
|
|
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is designed to provide a reader of our financial statements with a narrative from the perspective of our management on our financial condition, results of operations, liquidity and certain other factors that may affect our future results. This MD&A should be read in conjunction with the MD&A included in our
June 30, 2018
Annual Report on Form 10-K and other documents filed or furnished with the Securities and Exchange Commission (SEC) during the current fiscal year.
MANAGEMENT’S OVERVIEW
Regis Corporation (RGS) owns, franchises and operates beauty salons. As of
September 30, 2018
, the Company owned, franchised or held ownership interests in
8,115
worldwide locations. Our locations consisted of
8,027
system-wide North American and International salons, and in
88
locations we maintain a non-controlling ownership interest less than 100 percent. Each of the Company’s salon concepts generally offer similar salon products and services and serve the mass market. As of
September 30, 2018
, we had approximately
24,000
corporate employees worldwide.
CRITICAL ACCOUNTING POLICIES
The interim unaudited Condensed Consolidated Financial Statements are prepared in conformity with accounting principles generally accepted in the United States of America. In preparing the interim unaudited Condensed Consolidated Financial Statements, we are required to make various judgments, estimates and assumptions that could have a significant impact on the results reported in the interim unaudited Condensed Consolidated Financial Statements. We base these estimates on historical experience and other assumptions believed to be reasonable under the circumstances. Estimates are considered to be critical if they meet both of the following criteria: (1) the estimate requires assumptions about material matters that are uncertain at the time the accounting estimates are made, and (2) other materially different estimates could have been reasonably made or material changes in the estimates are reasonably likely to occur from period to period. Changes in these estimates could have a material effect on our interim unaudited Condensed Consolidated Financial Statements.
Our significant accounting policies can be found in Note 1 to the Consolidated Financial Statements contained in Part II, Item 8 of the
June 30, 2018
Annual Report on Form 10-K, as well as Notes 1 and 2 to the unaudited Condensed Consolidated Financial Statements contained within this Quarterly Report on Form 10-Q. We believe the accounting policies related to the valuation of goodwill, the valuation and estimated useful lives of long-lived assets, estimates used in relation to tax liabilities, and deferred taxes are most critical to aid in fully understanding and evaluating our reported financial condition and results of operations. Discussion of each of these policies is contained under “Critical Accounting Policies” in Part II, Item 7 of our
June 30, 2018
Annual Report on Form 10-K. Our updated policies on the amended revenue recognition guidance, ASC Topic 606, can be found in Note 2 to the unaudited Condensed Consolidated Financial Statements
Recent Accounting Pronouncements
The Company adopted the amended revenue recognition guidance, ASC Topic 606, on July 1, 2018 using the full retrospective transition method which required the adjustment of each prior reporting period presented. Recent accounting pronouncements are discussed in detail in Notes 1 and 2 to the unaudited Condensed Consolidated Financial Statements.
RESULTS OF OPERATIONS
Beginning with the period ended September 30, 2017, the mall-based business and International segment were accounted for as discontinued operations for all periods presented. Discontinued operations are discussed at the end of this section.
See Note 3 to the unaudited Condensed Consolidated Financial Statements for further discussion on this transaction.
The Company realigned its field leadership team by brand during the prior year first fiscal quarter. An outcome of this reorganization is that the costs associated with senior district leaders were moved out of cost of goods sold and site operating expense, where the expense had historically been recorded, and into G&A. This change, which affected one month of comparability during the quarter, does not impact the overall consolidated results. The estimated impact of the field reorganization (decreased) increased Cost of Service, Site Operating expense and General and Administrative expense by $(2.4), $(0.4) and
$2.8 million
, respectively, for the three months ended September 30, 2017. This expense classification does not have a financial impact on the Company's reported operating income, reported net loss or cash flows from operations.
In the past field leaders were responsible for a geographical area that included a variety of brands, with different business models, services, pay plans and guest expectations. They also served as salon managers with a home salon that they spent a large portion of their time serving guests rather than field leadership. Post-reorganization, each field leader is dedicated to a specific brand/concept, as well as geography, and are focused solely on field leadership.
In the three months ended
September 30, 2018
, the Company sold 124 company-owned salons to franchisees. The impact of these transaction is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
Increase
|
(Dollars in thousands)
|
|
2018
|
|
2017
|
|
|
|
|
|
|
|
|
Salons sold to franchisees
|
|
124
|
|
|
92
|
|
|
32
|
|
Cash proceeds received in quarter
|
|
$
|
12,422
|
|
|
$
|
1,472
|
|
|
$
|
10,950
|
|
|
|
|
|
|
|
|
Gain on sale of venditions, excluding goodwill derecognition
|
|
$
|
7,132
|
|
|
$
|
392
|
|
|
$
|
6,740
|
|
Non-cash goodwill derecognition
|
|
(11,092
|
)
|
|
(270
|
)
|
|
(10,822
|
)
|
(Loss) gain from sale of salon assets to franchisees, net
|
|
$
|
(3,960
|
)
|
|
$
|
122
|
|
|
$
|
(4,082
|
)
|
Condensed Consolidated Results of Operations (Unaudited)
The following table sets forth, for the periods indicated, certain information derived from our unaudited Condensed Consolidated Statement of Operations. The percentages are computed as a percent of total consolidated revenues, except as otherwise indicated.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
($ in millions)
|
|
% of Total
Revenues (1)
|
|
Basis Point
(Decrease)
Increase
|
Service revenues
|
$
|
207.8
|
|
|
$
|
235.6
|
|
|
72.2
|
%
|
|
74.7
|
%
|
|
(250
|
)
|
|
(20
|
)
|
Product revenues
|
57.6
|
|
|
61.0
|
|
|
20.0
|
|
|
19.3
|
|
|
70
|
|
|
(30
|
)
|
Franchise royalties and fees
|
22.4
|
|
|
18.9
|
|
|
7.8
|
|
|
6.0
|
|
|
180
|
|
|
50
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of service (2)
|
121.5
|
|
|
139.8
|
|
|
58.5
|
|
|
59.3
|
|
|
(80
|
)
|
|
(270
|
)
|
Cost of product (2)
|
32.2
|
|
|
30.2
|
|
|
55.9
|
|
|
49.5
|
|
|
640
|
|
|
120
|
|
Site operating expenses
|
36.8
|
|
|
40.0
|
|
|
12.8
|
|
|
12.7
|
|
|
10
|
|
|
60
|
|
General and administrative
|
47.7
|
|
|
35.2
|
|
|
16.6
|
|
|
11.1
|
|
|
550
|
|
|
—
|
|
Rent
|
36.0
|
|
|
42.4
|
|
|
12.5
|
|
|
13.4
|
|
|
(90
|
)
|
|
(80
|
)
|
Depreciation and amortization
|
10.2
|
|
|
12.3
|
|
|
3.5
|
|
|
3.9
|
|
|
(40
|
)
|
|
20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
3.4
|
|
|
15.6
|
|
|
1.2
|
|
|
4.9
|
|
|
(370
|
)
|
|
190
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
1.0
|
|
|
2.1
|
|
|
0.3
|
|
|
0.7
|
|
|
(40
|
)
|
|
—
|
|
(Loss) gain from sale of salon assets to franchisees, net
|
(4.0
|
)
|
|
0.1
|
|
|
(1.4
|
)
|
|
—
|
|
|
(140
|
)
|
|
—
|
|
Interest (expense) income and other, net
|
0.4
|
|
|
0.4
|
|
|
0.1
|
|
|
0.1
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax benefit (expense) (3)
|
0.7
|
|
|
(5.6
|
)
|
|
25.7
|
|
|
40.0
|
|
|
N/A
|
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from discontinued operations, net of taxes
|
(0.3
|
)
|
|
(33.8
|
)
|
|
(0.1
|
)
|
|
(10.7
|
)
|
|
1,060
|
|
|
(990
|
)
|
_____________________________
|
|
(1)
|
Cost of service is computed as a percent of service revenues. Cost of product is computed as a percent of product revenues.
|
|
|
(2)
|
Excludes depreciation and amortization expense.
|
|
|
(3)
|
Computed as a percent of income (loss) from continuing operations before income taxes. The income taxes basis point change is noted as not applicable (N/A) as the discussion within MD&A is related to the effective income tax rate.
|
Consolidated Revenues
Consolidated revenues primarily include revenues of company-owned salons, product and equipment sales to franchisees, and franchise royalties and fees. The following tables summarize revenues and same-store sales by concept as well as the reasons for the percentage change:
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
|
2018
|
|
2017
|
|
|
(Dollars in thousands)
|
Company-owned salons:
|
|
|
|
|
|
|
SmartStyle
|
|
$
|
95,963
|
|
|
$
|
126,202
|
|
Supercuts
|
|
67,279
|
|
|
71,432
|
|
Signature Style
|
|
86,568
|
|
|
91,232
|
|
Total Company-owned salons
|
|
249,810
|
|
|
288,866
|
|
Franchise salons:
|
|
|
|
|
Product
|
|
15,629
|
|
|
7,722
|
|
Royalties and fees
|
|
22,396
|
|
|
18,876
|
|
Total Franchise salons
|
|
38,025
|
|
|
26,598
|
|
Consolidated revenues
|
|
$
|
287,835
|
|
|
$
|
315,464
|
|
Percent change from prior year
|
|
(8.8
|
)%
|
|
(2.9
|
)%
|
Salon same-store sales increase (1)
|
|
0.5
|
%
|
|
0.4
|
%
|
_____________________________
|
|
(1)
|
Same-store sales are calculated on a daily basis as the total change in sales for company-owned locations that were open on a specific day of the week during the current period and the corresponding prior period. Quarterly and year-to-date same-store sales are the sum of the same-store sales computed on a daily basis. Locations relocated within a one-mile radius are included in same-store sales as they are considered to have been open in the prior period. Same-store sales are calculated in local currencies to remove foreign currency fluctuations from the calculation.
|
Decreases in consolidated revenues were driven by the following:
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
Factor
|
|
2018
|
|
2017
|
Same-store sales
|
|
0.5
|
%
|
|
0.4
|
%
|
Closed salons
|
|
(5.6
|
)
|
|
(2.0
|
)
|
Salons sold to franchisees
|
|
(6.7
|
)
|
|
(1.6
|
)
|
New company-owned stores
|
|
—
|
|
|
0.6
|
|
Franchise
|
|
2.8
|
|
|
0.4
|
|
Advertising fund
|
|
0.4
|
|
|
0.1
|
|
Foreign currency
|
|
(0.3
|
)
|
|
0.3
|
|
Other
|
|
0.1
|
|
|
(1.1
|
)
|
|
|
(8.8
|
)%
|
|
(2.9
|
)%
|
Same-store sales by concept are detailed in the table below:
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
|
2018
|
|
2017
|
SmartStyle
|
|
1.1
|
%
|
|
0.6
|
%
|
Supercuts
|
|
0.2
|
|
|
1.8
|
|
Signature Style
|
|
0.2
|
|
|
(0.8
|
)
|
Consolidated same-store sales
|
|
0.5
|
%
|
|
0.4
|
%
|
Three Months Ended
September 30, 2018
Compared with Three Months Ended
September 30, 2017
Consolidated Revenues
Consolidated revenues are primarily comprised of service and product revenues, as well as franchise royalties and fees.
The same-store sales
increase
of
0.5%
during the three months ended
September 30, 2018
was primarily due to an
increase
of
4.2%
in average ticket price, partly offset by a
decrease
of
3.7%
in same-store guest visits. The Company constructed (net of relocations) and closed
1
and
682
company-owned salons, respectively, during the twelve months ended
September 30, 2018
and sold (net of buybacks), excluding the salons previously included in the Company's previous mall-based business and International segment,
477
company-owned salons to franchisees during the same period (2018 Net Salon Count Changes). Revenue related to franchised locations
increased
$11.4 million
during the three months ended
September 30, 2018
primarily as a result of product sold to TBG and increased number of franchised locations during the twelve months ended
September 30, 2018
.
Service Revenues
The
decrease
of
$27.8 million
in service revenues during the three months ended
September 30, 2018
was primarily due to the 2018 Net Salon Count Changes. The same-store service sales
increase
of
0.8%
during the three months ended
September 30, 2018
, was primarily the result of a
4.7%
increase
in average ticket price and a
decrease
of
3.9%
in same-store guest visits. Also impacting service revenues during the three months ended
September 30, 2018
was unfavorable foreign currency.
Product Revenues
The
decrease
of
$3.4 million
in product revenues during the three months ended
September 30, 2018
was primarily due to 2018 Net Salon Count Changes and same-store product sales
decrease
of
0.9%
, partly offset by product sold to TBG. For the three months ended
September 30, 2018
, the
decrease
in same-store product sales was primarily the result of
a decrease
in same-store transactions of
3.9%
, partially offset by
an increase
in average ticket price of
3.1%
.
Royalties and Fees
The
increase
of
$3.5 million
in royalties and fees for the three months ended
September 30, 2018
was primarily due to an increase in franchise locations. Total franchised locations open at
September 30, 2018
were
4,205
as compared to
2,743
at
September 30, 2017
.
Cost of Service
The
80
basis point
decrease
in cost of service as a percent of service revenues during the three months ended
September 30, 2018
was primarily due to the change in expense categorization as a result of the field reorganization that took place during the first quarter of fiscal year 2018 and improved stylist productivity, partly offset by state minimum wage increases and higher commissions rates.
Cost of Product
The
640
basis point
increase
in cost of product as a percent of product revenues during the three months ended
September 30, 2018
was primarily due to franchise product sold to TBG which are in-line with the transaction agreements, but are currently at lower margin rates than normal franchise rates and shift into lower margin product revenue to franchisees.
Site Operating Expenses
The
decrease
of
$3.2 million
in site operating expenses during the three months ended
September 30, 2018
was primarily due to the change in expense categorization as a result of the field reorganization that took place during the first quarter of fiscal year 2018 and a net reduction in salon counts, partly offset by increased advertising fund costs as a result of increased franchise salons and marketing costs associated with our industry exclusive sponsorship with Major League Baseball.
General and Administrative
The
increase
of
$12.6 million
in general and administrative (G&A) during the three months ended
September 30, 2018
was primarily due to prior year's favorable impact from gain associated with life insurance proceeds in connection with the passing of a former executive officer, the change in expense categorization as a result of the field reorganization that took place during the first quarter of fiscal year 2018, increased stock compensation expense and professional fees, partly offset by lower administrative and field management salaries and travel expense.
Rent
The
decrease
of
$6.4 million
in rent expense during the three months ended
September 30, 2018
was primarily due to the net reduction in salon counts, partly offset by rent inflation.
Depreciation and Amortization
The
decrease
of
$2.1 million
in depreciation and amortization (D&A) during the three months ended
September 30, 2018
was primarily due to the reduced salon base.
Interest Expense
The
decrease
of
$1.1 million
in interest expense for the three months ended
September 30, 2018
was primarily due to a lower outstanding principal and lower interest rates associated with the revolving credit facility compared to the retired senior term note.
Loss (gain) from sale of salon assets to franchisees, net
The
decrease
of
$4.1 million
in loss from sale of salon assets to franchisees, net during the three months ended
September 30, 2018
was primarily due to $11.1 million of non-cash goodwill derecognition, partially offset by proceeds from the sale of salons to franchisees.
Interest Income and Other, net
The
decrease
of
$0.1 million
in interest income and other, net during the three months ended
September 30, 2018
was primarily due to unfavorable foreign currency.
Income Taxes
During the three months ended
September 30, 2018
the Company recognized tax benefit of
$0.7 million
, with a corresponding effective tax rate of
60.7%
as compared to recognizing tax expense of
$5.6 million
, with a corresponding effective tax rate of
39.7%
during the three months ended
September 30, 2017
.
On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”). In connection with the Tax Act, the Company recorded a provisional net tax benefit of $68.1 million in continuing operations during fiscal year 2018. The net tax benefit is primarily attributable to the impact of the corporate rate reduction on our deferred tax assets and liabilities along with a partial release of the U.S. valuation allowance. During the three months ended September 30, 2018, the Company made no adjustments to previously recorded provision amounts related to the Tax Act. We are still analyzing certain aspects of the Tax Act and refining our calculations, which could potentially affect the measurement of our deferred tax balances and ultimately cause us to revise our provisional estimate in the period ending December 31, 2018 in accordance with SAB 118. In addition, changes in interpretations, assumptions, and guidance regarding the new tax legislation, as well as the potential for technical corrections to the Tax Act, could have a material impact to the Company’s effective tax rate in future periods.
The recorded tax provisions and effective tax rates for the three months ended September 30, 2018 and three months ended September 30, 2017 were different than what would normally be expected primarily due to the impact of the Tax Act, state conformity of the new federal provisions and the deferred tax valuation allowance. The majority of the tax provision in periods ended prior to December 31, 2017 related to non-cash tax expense for tax benefits on certain indefinite-lived assets that the Company could not recognize for reporting purposes.
See Note 6 to the unaudited Condensed Consolidated Financial Statements.
Loss from Discontinued Operations
The
decrease
of
$33.5 million
in loss from discontinued operations during the three months ended
September 30, 2018
was primarily due to asset impairment charges associated with the prior year's sale of substantially all of its mall-based salon business in North America and International segments. See Note 3 to the unaudited Condensed Consolidated Financial Statements.
Results of Operations by Segment
Based on our internal management structure, we report two segments: Company-owned salons and Franchise salons. See Note 12 to the Consolidated Financial Statements. Significant results of operations are discussed below with respect to each of these segments.
Company-owned Salons
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended September 30,
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
(Dollars in millions)
|
|
(Decrease) Increase
|
Total revenue
|
$
|
249.8
|
|
|
$
|
288.9
|
|
|
$
|
(39.1
|
)
|
|
$
|
(10.6
|
)
|
Same-store sales
|
0.5
|
%
|
|
0.4
|
%
|
|
10 bps
|
|
|
10 bps
|
|
|
|
|
|
|
|
|
|
Operating income
|
$
|
19.6
|
|
|
$
|
23.4
|
|
|
$
|
(3.8
|
)
|
|
$
|
(0.1
|
)
|
Company-owned Salon Revenues
Decreases in Company-owned salon revenues were driven by the following:
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
Factor
|
|
2018
|
|
2017
|
Same-store sales
|
|
0.5
|
%
|
|
0.4
|
%
|
Closed salons
|
|
(6.1
|
)
|
|
(2.1
|
)
|
Salons sold to franchisees
|
|
(7.4
|
)
|
|
(1.7
|
)
|
New stores
|
|
—
|
|
|
0.4
|
|
Foreign currency
|
|
(0.2
|
)
|
|
0.3
|
|
Other
|
|
(0.4
|
)
|
|
(0.9
|
)
|
|
|
(13.6
|
)%
|
|
(3.6
|
)%
|
Company-owned salon revenues
decreased
$39.1 million
during the three months ended
September 30, 2018
, primarily due to the closure of
682
salons and the sale of
478
company-owned salons (net of buybacks) to franchisees during the twelve months ended
September 30, 2018
, partly offset by same-store sale
increase
of
0.5%
during the three months ended
September 30, 2018
. The same-store sales
increase
was due to an
increase
of
4.2%
in average ticket prices, partly offset by a
decrease
of
3.7%
in same-store guest visits during the three months ended
September 30, 2018
.
Company-owned Salon Operating Income
During the three months ended
September 30, 2018
, Company-owned salon operations generated operating income of
$19.6 million
, a
decrease
of
$3.8 million
compared to the prior comparable period. The
decrease
during the three months ended
September 30, 2018
was primarily due to salon-level compensation changes, investments in a strategic digital marketing campaign, and the prior year inclusion of a more favorable self-insurance reserve adjustment, offset partly by closure of underperforming salons and increased focus on cost reduction.
Franchise Salons
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended September 30,
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
(Dollars in millions)
|
|
Increase
|
Revenue
|
|
|
|
|
|
|
|
Product
|
$
|
10.1
|
|
|
$
|
7.7
|
|
|
$
|
2.4
|
|
|
$
|
0.3
|
|
Product sold to TBG
|
5.5
|
|
|
—
|
|
|
5.5
|
|
|
—
|
|
Total Product
|
$
|
15.6
|
|
|
$
|
7.7
|
|
|
$
|
7.9
|
|
|
$
|
0.3
|
|
Royalties and fees (1)
|
22.4
|
|
|
18.9
|
|
|
3.5
|
|
|
1.0
|
|
Total franchise salons revenue (2)
|
$
|
38.0
|
|
|
$
|
26.6
|
|
|
$
|
11.4
|
|
|
$
|
1.3
|
|
|
|
|
|
|
|
|
|
Operating income
|
$
|
9.1
|
|
|
$
|
8.5
|
|
|
$
|
0.6
|
|
|
$
|
0.6
|
|
Operating income from TBG
|
0.6
|
|
|
—
|
|
|
0.6
|
|
|
—
|
|
Total operating income
|
$
|
9.7
|
|
|
$
|
8.5
|
|
|
$
|
1.2
|
|
|
$
|
0.6
|
|
_______________________________________________________________________________
|
|
(1)
|
Total includes $0.5 million of royalties related to TBG during the three months ended
September 30, 2018
.
|
|
|
(2)
|
Total is a recalculation; line items calculated individually may not sum to total due to rounding.
|
Franchise Salon Revenues
Franchise salon revenues
increased
$11.4 million
during the three months ended
September 30, 2018
primarily due to an
increase
of
$7.9 million
in franchise product sales, primarily due to product sold to TBG, and an
increase
of
$3.5 million
in royalties, Ad Fund revenue and fees, primarily as a result of increased franchised locations. During the twelve months ended
September 30, 2018
, franchisees constructed (net of relocations) and closed
77
and
225
franchise-owned salons, respectively, and purchased (net of Company buybacks)
478
salons from the Company and
1,132
salons previously included in the Company's previous mall-based business and International segment during the same period.
Franchise Salon Operating Income
During the three months ended
September 30, 2018
, Franchise salon operations generated operating income of
$9.7 million
, an
increase
of
$1.2 million
compared to prior comparable period. The
increase
during the three months ended
September 30, 2018
was primarily due to the increased number of new franchised locations and increased franchise product sales, primarily to TBG.
Corporate
Corporate Operating Loss
Corporate operating loss
increased
$9.6 million
during the three months ended
September 30, 2018
primarily driven by prior year's favorable impact from a
$8.0 million
gain associated with life insurance proceeds in connection with the passing of a former executive officer,
$4.0 million
loss on the sale of salons to franchisees, which includes $11.1 million of non-cash goodwill derecognition and
$2.7 million
of severance related to the termination of former corporate employees during the quarter, partially offset by lower general and administrative salaries.
LIQUIDITY AND CAPITAL RESOURCES
Sources of Liquidity
Funds generated by operating activities, available cash and cash equivalents, and our borrowing agreements are our most significant sources of liquidity.
As of
September 30, 2018
, cash and cash equivalents were
$115.7 million
, with
$97.8
and
$17.9 million
within the United States and Canada, respectively.
The Company's borrowing arrangements include a $295.0 million five-year unsecured revolving credit facility that expires in March 2023, of which
$182.0 million
was available as of
September 30, 2018
. See Note 10 to the unaudited Condensed Consolidated Financial Statements.
Uses of Cash
The Company closely manages its liquidity and capital resources. The Company's liquidity requirements depend on key variables, including the level of investment needed to support its business strategies, the performance of the business, capital expenditures, credit facilities and borrowing arrangements and working capital management. Capital expenditures are a component of the Company's cash flow and capital management strategy which can be adjusted in response to economic and other changes to the Company's business environment. The Company has a disciplined approach to capital allocation, which focuses on investing in key priorities to support the Company's multi-year strategic plan as discussed within Part I, Item 1 of our Annual Report on Form 10-K for the fiscal year ended June 30,
2018
.
Cash Flows
Cash Flows from Operating Activities
During the three months ended
September 30, 2018
, cash
used in
operating activities of
$17.5 million
, an increase of
$26.5
million compared to the prior comparable period, was primarily due to incentive compensation payments and holiday inventory build.
Cash Flows from Investing Activities
During the three months ended
September 30, 2018
, cash
provided by
investing activities of
$25.8
million, an
increase
of
$31.4 million
compared to the prior comparable period, was primarily from proceeds from the settlement of company-owned life insurance policies of
$24.6 million
and cash proceeds from sale of salon assets of
$12.4 million
, partly offset by capital expenditures of
$11.3 million
.
Cash Flows from Financing Activities
During the three months ended
September 30, 2018
, cash
used in
financing activities of
$20.9 million
,
an increase
of
$19.3 million
compared to the prior comparable period, was primarily for the repurchase of common stock of
$19.3 million
, employee taxes paid for shares withheld of
$1.9 million
, partly offset by proceeds on issuance of common stock
of
$0.4 million
.
Financing Arrangements
See Note 10 of the Notes to the unaudited Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for the quarter ended
September 30, 2018
and Note 7 of the Notes to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended
June 30, 2018
, for additional information regarding our financing arrangements.
Debt to Capitalization Ratio
Our debt to capitalization ratio, calculated as the principal amount of debt as a percentage of the principal amount of debt and shareholders’ equity at fiscal quarter end, were as follows:
|
|
|
|
|
|
|
|
As of
|
|
Debt to
Capitalization
|
|
Basis Point Increase (Decrease) (1)
|
September 30, 2018
|
|
16.1
|
%
|
|
50
|
|
June 30, 2018
|
|
15.6
|
%
|
|
(390
|
)
|
_____________________________
(1)
Represents the basis point change in debt to capitalization as compared to the prior fiscal year end (
June 30, 2018
).
The
50
basis point
increase
in the debt to capitalization ratio as of
September 30, 2018
as compared to
June 30, 2018
was primarily due to decreases to shareholders' equity resulting from the repurchase of
1.1 million
of the Company's shares for
$19.3 million
.
Share Repurchase Program
In May 2000, the Company’s Board of Directors (Board) approved a stock repurchase program with no stated expiration date. Since that time and through
September 30, 2018
, the Board has authorized $650.0 million to be expended for the repurchase of the Company's stock under this program. All repurchased shares become authorized but unissued shares of the Company. The timing and amounts of any repurchases depend on many factors, including the market price of the common stock and overall market conditions. During the three months ended
September 30, 2018
, the Company repurchased
1.1 million
shares for
$19.3 million
. As of
September 30, 2018
,
21.0 million
shares have been cumulatively repurchased for
$434.0 million
, and
$216.0 million
remained outstanding under the approved stock repurchase program.
SAFE HARBOR PROVISIONS UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
This Quarterly Report on Form 10-Q, as well as information included in, or incorporated by reference from, future filings by the Company with the Securities and Exchange Commission and information contained in written material, press releases and oral statements issued by or on behalf of the Company contains or 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. 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 the continued ability of the Company to implement its strategy, priorities and initiatives; our ability to attract, train and retain talented stylists; financial performance of our franchisees; acceleration of sale of certain salons to franchisees; The Beautiful Group's ability to transition and operate its salons successfully, as well as maintain adequate working capital; the ability of the Company to maintain a satisfactory relationship with Walmart; marketing efforts to drive traffic; changes in regulatory and statutory laws including increases in minimum wages; our ability to maintain and enhance the value of our brands; premature termination of agreements with our franchisees; our ability to manage cyber threats and protect the security of sensitive information about our guests, employees, vendors or Company information; reliance on information technology systems; reliance on external vendors; competition within the personal hair care industry; changes in tax exposure; changes in healthcare; changes in interest rates and foreign currency exchange rates; failure to standardize operating processes across brands; consumer shopping trends and changes in manufacturer distribution channels; financial performance of Empire Education Group; the continued ability of the Company to implement cost reduction initiatives; compliance with debt covenants; changes in economic conditions; changes in consumer tastes and fashion trends; exposure to uninsured or unidentified risks; ability to attract and retain key management personnel; reliance on our management team and other key personnel 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, 2018
. 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.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
There has been no material change to the factors discussed within Part II, Item 7A in the Company’s June 30, 2018 Annual Report on Form 10-K.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in its Securities Exchange Act of 1934, as amended (the "Exchange Act”) reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to management, including the Chief Executive Officer (CEO) and Chief Financial Officer (CFO), as appropriate, to allow timely decisions regarding required disclosure.
Management, with the participation of the CEO and CFO, evaluated the effectiveness of the design and operation of the Company's disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Exchange Act) as of the end of the period. Based on their evaluation, our CEO and CFO concluded that our disclosure controls and procedures were effective as of
September 30, 2018
.
Changes in Internal Controls over Financial Reporting
There were no changes in our internal control over financial reporting during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II — OTHER INFORMATION
Item 1. Legal Proceedings
The Company is a defendant in various lawsuits and claims arising out of the normal course of business. Like certain other large retail employers, the Company has been faced with allegations of purported class-wide consumer and wage and hour violations. Litigation is inherently unpredictable and the outcome of these matters cannot presently be determined. Although the actions are being vigorously defended, the Company could in the future incur judgments or enter into settlements of claims that could have a material adverse effect on its results of operations in any particular period.
Item 1A. Risk Factors
There have been no material changes in our risk factors from those disclosed in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended June 30, 2018, except for the revisions to the fifth risk factor listed below:
TBG’s inability to transition and operate its salons successfully could adversely affect our business, financial condition and results of operations or cash flows, and could prevent the transaction from delivering the anticipated benefits and enhancing shareholder value.
In October 2017, we sold substantially all of our mall-based salon business in North America and substantially all of our International segment to TBG, an affiliate of Regent, which is operating them as a franchisee. The success of TBG depends upon a number of factors that are beyond our control, including, among other factors, market conditions, retail trends in mall locations, industry trends, stylist recruiting and retention, customer traffic, as defined by total transactions, the capabilities of TBG, the accuracy and reliability of TBG’s financial reporting systems, TBG's ability to maintain adequate working capital, technology and landlord issues. In particular, we remain liable under the leases for certain of these salons until the end of their various terms, and we could be required to make payments if TBG fails to do so, which could adversely impact our results of operations or cash flows. Under the agreements with TBG, we receive fees for certain services, fees for certain transition services, and product sales revenue; however, the amount of these fees is tied to the success of the business as operated by TBG. As of September 30, 2018, it is taking longer than we originally anticipated for TBG to implement the changes intended to improve the business of the mall-based salons and the International business, and there is no assurance that TBG will be successful in doing so in the future. In addition, several of the services we provided to TBG under the transition services agreement ended in the fourth quarter of fiscal year 2018, thereby reducing this current income stream. We anticipate we will attempt to reduce related general and administrative costs and other associated expenses in connection with providing these transition services; however it will take time for us to reduce all of these costs even though the related income stream has ended and we continue to provide consulting services to TBG to continue to facilitate its transition. In connection with the purchase agreements, subleases, transition services and other related agreements with the Company, from time to time, TBG has been delinquent on its payments to the Company and to third parties. It is foreseeable that TBG may in the future continue to have cash flow and working capital issues, which could have significant adverse impacts on our business, including a need to record reserves on receivables from TBG. In August 2018, we restructured certain payments due to us from TBG in the form of promissory notes representing approximately $11.7 million in working capital receivables and $8.0 million in accounts receivables, a majority of which was for inventory payables. All notes have a maturity date of August 2, 2020. Under the working capital notes, if no default has occurred under such notes and certain other conditions are met, such notes will be forgiven as of the maturity date and will be exchanged for a three-year contingent payment right that is payable to us upon the occurrence of certain TBG monetization events. Based on the likelihood of future forgiveness of the working capital notes, the Company recorded a full reserve against such notes. Should the Company need to record reserves against its current and future receivables from TBG or their ability to meet the requirements of the promissory notes, these reserves would be recorded within general and administrative expenses. In October 2018, TBG filed a voluntary insolvency proceeding involving its United Kingdom business, which its creditors approved. We had previously agreed in the note documents that such a filing would not constitute an item of default. We currently do not believe we will be directly adversely impacted by the insolvency proceeding, TBG’s debt obligations to us currently remain intact. TBG may in the future need to further restructure (operationally, legally, or otherwise) its businesses, operations and obligations. The Company has certain rights and remedies under the various agreements with TBG, including, but not limited to, utilization of collateral, litigation, reversion of the leases in respect of certain divested salons back to the Company and enforcement of a guarantee. If the divested salons were to revert, we may have difficulty supporting the businesses because of the challenges involved in quickly and sufficiently staffing the salons and corporate functions to support an influx in company-owned stores, addressing the stores’ performance issues, implementing required data privacy requirements in the United Kingdom and resuming support for the salons’ IT and marketing requirements. Overall, TBG’s inability to transition and operate the salons successfully, or its ability to make payments when due under the promissory notes or otherwise under the franchise agreements and transition service agreements, could adversely affect our business, including increased litigation risks, financial condition and results of operations or cash flows, and could prevent the transaction from delivering the anticipated benefits and shareholder value.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Share Repurchase Program
In May 2000, the Company’s Board of Directors (Board) approved a stock repurchase program with no stated expiration date. Since that time and through
September 30, 2018
, the Board has authorized $650.0 million to be expended for the repurchase of the Company's stock under this program. All repurchased shares become authorized but unissued shares of the Company. The timing and amounts of any repurchases depend on many factors, including the market price of the common stock and overall market conditions. During the three months ended
September 30, 2018
, the Company repurchased
1.1 million
shares for
$19.3 million
. As of
September 30, 2018
, a total accumulated
21.0 million
shares have been repurchased for
$434.0 million
. At
September 30, 2018
,
$216.0 million
remained outstanding under the approved stock repurchase program.
The following table shows the stock repurchase activity by the Company or any “affiliated purchaser” of the Company, as defined in Rule 10b-18(a)(3) under the Exchange Act, by month for the three months ended
September 30, 2018
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period
|
|
Total Number of Shares Purchased
|
|
Average Price Paid per Share
|
|
Total Number of Shares Purchased As Part of Publicly Announced Plans or Programs
|
|
Approximate Dollar Value of Shares that May Yet Be Purchased under the Plans or Programs (in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
7/1/18 - 7/31/18
|
|
664,622
|
|
|
$
|
17.56
|
|
|
20,529,849
|
|
|
$
|
223,599
|
|
8/1/18 - 8/31/18
|
|
429,057
|
|
|
17.81
|
|
|
20,958,906
|
|
|
215,956
|
|
9/1/18 - 9/30/18
|
|
—
|
|
|
—
|
|
|
20,958,906
|
|
|
215,956
|
|
Total
|
|
1,093,679
|
|
|
$
|
17.66
|
|
|
20,958,906
|
|
|
$
|
215,956
|
|
Item 6. Exhibits
|
|
|
|
|
|
Articles of Amendment of Restated Articles of Incorporation (Incorporated by reference to Exhibit 3.1 of the Company’s Quarterly Report on Form 10-Q filed on May 1, 2018.)
|
|
|
|
|
|
Bylaws of Regis Corporation. (Incorporated by reference to Exhibit 3.1 of the Company's Current Report on Form 8-K filed on April 27, 2018.)
|
|
|
|
|
|
Stock Purchase and Matching RSU Program, including forms of SPMP, including forms of Matching RSU Award Agreements (Incorporated by referenced to Exhibit 10.1 to the Company’s Registration Statement on Form S-8 filed on August 31, 2018 (No. 333-227163).)
|
|
|
|
|
|
Form of Letter Agreement with Executive Officers (September 2018)
|
|
|
|
|
|
Form of Restricted Stock Unit Award (Annual Fiscal 2019 Executive Grants, Excluding Hugh E. Sawyer)
|
|
|
|
|
|
Form of Restricted Stock Unit Award (Annual Fiscal 2019 Grant, Hugh E. Sawyer)
|
|
|
|
|
|
Form of Performance Stock Unit Award (Annual Fiscal 2019 Executive Grants, Excluding Hugh E. Sawyer)
|
|
|
|
|
|
Form of Performance Stock Unit Award (Annual Fiscal 2019, Hugh E. Sawyer)
|
|
|
|
|
|
Form of Restricted Stock Unit Agreement (Non-Employee Director Grants)
|
|
|
|
|
|
President and Chief Executive Officer of Regis Corporation: Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
|
|
Executive Vice President and Chief Financial Officer of Regis Corporation: Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
|
|
Chief Executive Officer and Chief Financial Officer of Regis Corporation: Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
Exhibit 101
|
|
The following financial information from Regis Corporation's Quarterly Report on Form 10-Q for the quarterly and year-to-date periods ended September 30, 2018, formatted in Extensible Business Reporting Language (XBRL) and filed electronically herewith: (i) the Condensed Consolidated Balance Sheets; (ii) the Condensed Consolidated Statements of Earnings; (iii) the Condensed Consolidated Statements of Comprehensive Income; (iv) the Condensed Consolidated Statements of Cash Flows; and (v) the Notes to the Consolidated Financial Statements.
|
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
|
|
|
|
REGIS CORPORATION
|
|
|
Date: October 30, 2018
|
By:
|
/s/ Andrew H. Lacko
|
|
|
Andrew H. Lacko
|
|
|
Executive Vice President and Chief Financial Officer
|
|
|
(Signing on behalf of the registrant and as Principal Financial Officer)
|
|
|
|
|
|
|
|
|
|
Date: October 30, 2018
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By:
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/s/ Kersten D. Zupfer
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Kersten D. Zupfer
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Senior Vice President and Chief Accounting Officer
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(Principal Accounting Officer)
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Regis Corporation
7201 Metro Boulevard
Edina, Minnesota 55439
August 31, 2018
[Laura Alexander] [Eric Bakken] [Rachel Endrizzi] [Chad Kapadia] [Andrew Lacko] [Jim B. Lain] [Shawn Moren] [Amanda Rusin] [Hugh Sawyer] [Kersten Zupfer]
c/o Regis Corporation
7201 Metro Boulevard
Edina, Minnesota 55439
Dear
[Laura] [Eric] [Rachel] [Chad ] [Andrew ] [Jim] [Shawn] [Amanda] [Hugh] [Kersten]
:
[Reference is made to the Employment Agreement (the “Employment Agreement”), dated [August 31, 2012]
Bakken and Endrizzi
[November 11, 2013]
Lain
[December 1, 2014],
Zupfer
by and between you and Regis Corporation (the “Company”).]
For individuals with an employment agreement.
In consideration of your continued employment with [the Company]
For individuals with an employment agreement.
[Regis Corporation (the “Company”)]
For individuals without an employment agreement.
and the grants of any restricted stock units and performance stock units covering shares of the Company made or to be made to you in Fiscal Year 2019 (the “FY19 Equity Awards”), the Company and you agree as follows:
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1.
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For the avoidance of doubt, neither: (a) implementation of the Company’s FY19-FY23 long-term incentive program as summarized in the Company’s press release dated August 22, 2018, including the terms and conditions of the FY19 Equity Awards granted to you, nor (b) the fact that the Company is not obligated to (and may not) grant to you additional equity awards through August 30, 2023, other than pursuant to the Company’s Stock Purchase and Matching RSU Program (if applicable), shall not constitute “Good Reason” under [the terms of the Employment Agreement or otherwise]
For individuals with an employment agreement.
[the terms of any arrangement between you and the Company].
For individuals without an employment agreement.
Such waiver shall be in effect until August 30, 2023 so long as the terms and conditions of the FY19-FY23 long-term incentive programs and associated award agreements and the terms and conditions of the award agreements governing long-term incentive awards granted prior to the date hereof are not materially and adversely modified. Notwithstanding the foregoing, nothing in this Paragraph 1 shall confer upon you any “Good Reason” right that you do not otherwise have or imply that any changes to the Company’s long-term incentive program would constitute “Good Reason.”
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2.
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[The [second paragraph of Section 4(b)]
Bakken
[last sentence of Section 4(e)]
Lain
of the Employment Agreement shall not apply to any Company equity awards granted on or after the date of this letter, including, for the avoidance of doubt, the FY19 Equity Awards, and, notwithstanding anything to the contrary contained in the Company’s 2016 Long Term Incentive Plan or any agreement between you and the Company, the treatment in the event of a Change in Control (as defined below) of any Company equity awards granted on or after the date of this letter, shall be governed by the applicable award agreement.]
Bakken and Lain
[Notwithstanding anything to the contrary contained in the Company’s 2016 Long Term Incentive Plan or any agreement between you and the Company, the treatment in the event of a Change in Control (as defined below) of any Company equity awards granted on or after the date of this letter shall be governed by the applicable award agreement.]
Endrizzi, Zupfer and all individuals without an employment agreement.
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3.
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For purposes of any Company equity award granted on or after the date of this letter, “Change in Control” shall have the meaning set forth in the corresponding equity award agreement.
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4.
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You hereby waive the application of Section 12.9 of the Regis Corporation Amended and Restated 2004 Long Term Incentive Plan, as amended and restated on October 22, 2013 and amended further effective August 29, 2014, and you acknowledge and agree that in no event will you be entitled to a “gross-up” for any excise taxes imposed by Section 4999 of the Internal Revenue Code of 1986 as amended. [For purposes of clarification, this Section 4 does not modify or supersede Section 6(e) of the Employment Agreement.]
Bakken
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5.
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[If you experience a Qualifying Termination prior to August 31, 2019, you will be entitled to a lump sum payment of $[•], less required tax withholding, payable on the Company’s first regular payroll date following such Qualifying Termination. For the avoidance of doubt, the foregoing payment shall be in addition to any other payment that may be owed to you by the Company in connection with your Qualifying Termination, including, but not limited to, pursuant to the terms of the Employment Agreement, your outstanding equity awards, any applicable Company severance policy or guidelines, and/or any other written arrangements between you and the Company. “Qualifying Termination” means (a) a Termination of Employment without Cause (other than as a result of death or Disability) under circumstances in which the Board of Directors of the Company does not intend to fill the position that you hold immediately prior to the Qualifying Termination, or (b) a Termination of Employment without Cause (other than as a result of death or Disability) or for Good Reason following the appointment of a successor or interim successor to the current Chief Executive Officer, Hugh Sawyer. For purposes of this Paragraph 5, “Termination of Employment,” “Cause,” and “Disability” have the meanings ascribed to such terms in the Company’s 2016 Long Term Incentive Plan, as amended and restated to date, and “Good Reason” has the meaning set forth in your Employment Agreement, as amended hereby; provided, however, that in order for the Termination of Employment to constitute a Termination of Employment for Good Reason, you must terminate employment no later than one hundred and twenty (120) days following the end of the applicable cure period.]
All participants with employment agreements other than HS
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[If you experience a Qualifying Termination prior to August 31, 2019, you will be entitled to a lump sum payment of $[•], less required tax withholding, payable on the Company’s first regular payroll date following such Qualifying Termination. For the avoidance of doubt, the foregoing payment shall be in addition to any other payment that may be owed to you by the Company in connection with your Qualifying Termination, including, but not limited to, pursuant to the terms of the Employment Agreement, your outstanding equity awards, any applicable Company severance policy or guidelines, and/or any other written arrangements between you and the Company. “Qualifying Termination” means a Termination of Employment without Cause (other than as a result of death or Disability). For purposes of this Paragraph 5, “Termination of Employment,” “Cause,” and “Disability” have the meanings ascribed to such terms in the Company’s 2016 Long Term Incentive Plan, as amended and restated to date.]
HS only
[If you experience a Qualifying Termination prior to August 31, 2019, you will be entitled to a lump sum payment of $[•], less required tax withholding, payable on the Company’s first regular payroll date following such Qualifying Termination. For the avoidance of doubt, the foregoing payment shall be in addition to any other payment that may be owed to you by the Company in connection with your Qualifying Termination, including, but not limited to, pursuant to the terms of your outstanding equity awards (if any), any applicable Company severance policy or guidelines, and/or any other written arrangements between you and the Company. “Qualifying Termination” means (a) a Termination of Employment without Cause (other than as a result of death or Disability) under circumstances in which the Board of Directors of the Company does not intend to fill the position that you hold immediately prior to the Qualifying Termination, or (b) a Termination of Employment
without Cause (other than as a result of death or Disability) or for Good Reason following the appointment of a successor or interim successor to the current Chief Executive Officer, Hugh Sawyer. For purposes of this Paragraph 5, “Termination of Employment,” “Cause,” and “Disability” have the meanings ascribed to such terms in the Company’s 2016 Long Term Incentive Plan, as amended and restated to date (the “2016 Plan”), and “Good Reason” means the occurrence, without your express written consent, of any of the following:
(A)
any material diminution in the nature of your authority, duties or responsibilities;
(B)
any reduction by the Company in your base salary then in effect or target bonus percentage (other than any reduction mutually agreed upon by the Company and you), other than an across the board reduction of not more than 10% that applies to all other executives who report to the Chief Executive Officer of the Company; or
(C)
following a Change in Control (as defined in the 2016 Plan, but substituting “forty-nine percent (49%)” for “twenty percent (20%)”), failure by the Company to continue in effect (without substitution of a substantially equivalent plan or a plan of substantially equivalent value) any compensation plan, bonus or incentive plan, stock purchase plan, stock option plan, life insurance plan, health plan, disability plan or other benefit plan or arrangement in which you are then participating;
provided that you notify the Company of such condition set forth in clause (A), (B) or (C) within ninety (90) days of its initial existence and the Company fails to remedy such condition within thirty (30) days of receiving such notice (the “Cure Period”) and you deliver written notice of termination of employment to the Company’s General Counsel within thirty (30) days following the end of the Cure Period; provided, further, that in order for the Termination of Employment to constitute a Termination of Employment for Good Reason, you must terminate employment no later than one hundred and twenty (120) days following the end of the applicable cure period.]
Participants without an employment agreement.
This letter agreement shall constitute the entire agreement between the parties with respect to the matters addressed hereunder and terminates and supersedes any and all prior agreements and understandings (whether written or oral) between the parties with respect to the subject matter of this letter agreement.
[
Signature Page Follows
]
Sincerely,
REGIS CORPORATION
Name:
Title:
Acknowledged and Agreed:
[Executive]
Form of Initial RSU (FY19 LTI Awards) - Tier I
REGIS CORPORATION
RESTRICTED STOCK UNIT AGREEMENT
THIS RESTRICTED STOCK UNIT AGREEMENT (the “
Agreement
”), dated as of _____________________, 20____ (the “
Grant Date
”), is between Regis Corporation, a Minnesota corporation (the “
Company
”), and __________________________ (the “
Participant
”).
WHEREAS, the Participant is a valued and trusted employee of the Company and the Company desires to grant the Participant an award of Restricted Stock Units which afford the Participant an opportunity to receive shares of the Company’s Common Stock under the Regis Corporation 2016 Long Term Incentive Plan, as amended and restated to date (the “
Plan
”); and
WHEREAS, the Committee has duly made all determinations necessary or appropriate for the grant of the Restricted Stock Units hereunder (the “
Award
”).
NOW, THEREFORE, in consideration of the premises and mutual covenants set forth and for other good and valuable consideration, receipt of which is hereby acknowledged, the parties hereto have agreed, and do hereby agree, as follows:
For purposes of this Agreement, the definitions of terms contained in the Plan hereby are incorporated by reference, except to the extent that any such term is specifically defined in this Agreement.
(a)
“
Change in Control
” shall have the meaning set forth in the Plan except that any references in such definition to “twenty percent (20%)” are replaced by “forty-nine percent (49%)”.
(b)
“
Good Reason
” (i) shall have the meaning ascribed to such term in Participant's employment agreement with the Company; provided, however, that in order for the Termination of Employment to constitute a Termination of Employment for Good Reason, Participant must terminate employment no later than one hundred and twenty (120) days following the end of the applicable cure period, or (ii) if there is no such employment agreement with the Company, “Good Reason” shall mean the occurrence, without the express written consent of the Participant, of any of the following:
(A)
any material diminution in the nature of the Participant's authority, duties or responsibilities;
(B)
any reduction by the Company in the Participant's base salary then in effect or target bonus percentage (other than any reduction mutually agreed upon by the Company and the Participant), other than an across the board reduction of not more than 10% that applies to all other executives who report to the Chief Executive Officer of the Company; or
(C)
following a Change in Control, failure by the Company to continue in effect (without substitution of a substantially equivalent plan or a plan of substantially equivalent value) any compensation plan, bonus or incentive plan, stock purchase plan, stock option plan, life insurance plan, health plan, disability plan or other benefit plan or arrangement in which the Participant is then participating;
provided that the Participant notifies the Company of such condition set forth in clause (A), (B) or (C) within ninety (90) days of its initial existence and the Company fails to remedy such condition within thirty (30) days of receiving such notice (the “Cure Period”) and the Participant delivers written notice of termination of employment to the Company's General Counsel within thirty (30) days following the end of the Cure Period, designating an employment termination date no later than one hundred and twenty (120) days following the end of the Cure Period.
(c)
“
Qualifying Termination
” means a Termination of Employment:
(i)
(A) without Cause (other than a result of death or Disability) or for Good Reason within 12 months following a Change in Control, (B) due to death or Disability or (C) without Cause (other than a result of death or Disability) after the one year anniversary of the Grant Date under circumstances in which the Board does not intend to fill the position that Executive holds immediately prior to the Termination of Employment; or
(ii)
without Cause (other than as a result of death or Disability) or for Good Reason both (A) after the first anniversary of the Grant Date and (B) following the appointment of a successor or interim successor to the current Chief Executive Officer, Hugh Sawyer.
(d)
“
Retirement
” means any Termination of Employment (other than by the Company for Cause or due to death or Disability) at or after age sixty-two (62) or at or after age fifty-five (55) with fifteen (15) or more years of continuous service to the Company and its Affiliates.
2.
Grant of Restricted Stock Units, Term and Vesting.
(a)
Subject to the terms and conditions of the Plan and this Agreement, the Company hereby grants to the Participant _________ (_____) Restricted Stock Units (the “
RSUs
”), with no obligation to pay cash or other property for such RSUs. The RSUs will be credited to an account in the Participant’s name maintained by the Company. This account shall be unfunded and maintained for book-keeping purposes only, with each RSU representing an unfunded and unsecured promise by the Company to issue to the Participant one share of the Company’s Common Stock in settlement of a vested RSU.
(b)
100% of the RSUs will vest on the third anniversary of the Grant Date, subject to Participant’s continued employment with the Company through such anniversary and the other terms and conditions set forth in this Agreement.
(c)
Notwithstanding Section 2(b), if the Participant experiences a Qualifying Termination, then the Applicable Portion of the RSUs immediately shall vest as of the date of Participant’s Termination of Employment. For purposes of the immediately preceding sentence, the “
Applicable Portion of the RSUs
” has the meaning set forth below:
Initial Grant
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Type of Qualifying Termination
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Applicable Portion of the RSUs
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Clause (i) of the Definition of Qualifying Termination
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a number of RSUs equal to the product obtained by multiplying (i) the total number RSUs by (ii) a fraction, the numerator of which is the number of days elapsed from the Grant Date through the date of Participant’s Termination of Employment and the denominator of which is the number of days between the Grant Date and the third anniversary of the Grant Date
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Clause (ii) of the Definition of Qualifying Termination
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a number of RSUs equal to the product obtained by multiplying (i) the total number RSUs by (ii) a fraction (not to exceed 1), the numerator of which is the number of days elapsed from the Grant Date through the date of Participant’s Termination of Employment plus 548 and the denominator of which is the number of days between the Grant Date and the third anniversary of the Grant Date
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(d)
For purposes of this Agreement, if Participant’s RSUs are considered non-qualified deferred compensation subject to Code Section 409A, a Termination of Employment shall be deemed to have occurred only if on such date the Participant has also experienced a “separation from service” as defined in the regulations promulgated under Code Section 409A.
(e)
For purposes of this Agreement, if Participant’s RSUs are considered non-qualified deferred compensation subject to Code Section 409A, a Change in Control shall be deemed to have occurred for purposes of settling vested RSUs only if such event would also be deemed to constitute a change in ownership or effective control, or a change in the ownership of a substantial portion of the assets, of the Company under Code Section 409A.
(f)
For the avoidance of doubt, Section 10.1 of the Plan shall not apply to this Award.
(g)
In the event that Participant’s Termination of Employment would qualify Participant for accelerated vesting under more than one type of Qualifying Termination, the type of Qualifying Termination that provides for the vesting of the greatest number of RSUs shall apply.
3.
Forfeiture of Unvested RSUs.
Subject to any accelerated vesting under Sections 2(c), and any exercise of the Committee’s discretion under Section 8.3(4) of the Plan, if the Participant experiences a Termination of Employment, any unvested RSUs shall be forfeited and the Participant shall have no further interest in, or right to receive shares of Common Stock in settlement of, such RSUs.
Subject to Section 21, after any RSUs vest pursuant to Section 2, the Company shall, as soon as practicable (but no later than thirty (30) days following the date on which the RSUs vest), cause to be issued and delivered to the Participant one share of Common Stock in payment and settlement of each vested RSU. Delivery of the shares shall be effected by the delivery of a stock certificate evidencing the shares, by an appropriate entry in the stock register maintained by the Company’s transfer agent with a notice of issuance provided to the Participant, or by the electronic delivery of the shares to a brokerage account designated by the Participant, and shall be subject to the tax withholding provisions of Section 8 and compliance with all applicable legal requirements, including compliance with the requirements of applicable federal and state securities laws, and shall be in complete satisfaction and settlement of such vested RSUs. Upon settlement of the RSUs, the Participant will obtain, with respect to the shares of Common Stock received in such settlement, full voting and other rights as a shareholder of the Company.
The RSUs subject to this Award do not entitle the Participant to any rights of a holder of the Company’s Common Stock. The Participant will not have any of the rights of a shareholder of the Company in connection with the grant of the RSUs unless and until shares of Common Stock are issued to the Participant in settlement of the RSUs as provided in Section 4.
If a cash dividend is declared and paid by the Company with respect to its Common Stock, the Participant will be credited as of the applicable dividend payment date with an additional number of RSUs (the “
Dividend RSUs
”) equal to (i) the total cash dividend the Participant would have received if the number of RSUs credited to the Participant under this Agreement as of the related dividend payment record date (including any previously credited Dividend RSUs) had been actual shares of Common Stock, divided by (ii) the Fair Market Value of a share of Common Stock as of the applicable dividend payment date (with the quotient rounded down to the nearest whole number). Once credited to the Participant’s account, Dividend RSUs will be considered RSUs for all purposes of this Agreement.
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7.
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Restrictions on Transferability.
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Neither the Award evidenced by this Agreement nor the RSUs may be sold, transferred, pledged, assigned, or otherwise alienated at any time, other than by will or the laws of descent and distribution. Any attempt to do so contrary to the provisions hereof shall be null and void.
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8.
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Tax Consequences and Payment of Withholding Taxes.
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Neither the Company nor any of its Affiliates shall be liable or responsible in any way for the tax consequences relating to the award of RSUs, their vesting and the settlement of vested RSUs in shares of Common Stock. The Participant agrees to determine and be responsible for any and all tax consequences to the Participant relating to the award, vesting and settlement of RSUs hereunder. If the Company is obligated to withhold an amount on account of any tax imposed as a result of the grant, vesting or settlement of the RSUs, the provisions of Section 12.5 of the Plan
regarding the satisfaction of tax withholding obligations shall apply (including any required payments by the Participant).
The Plan and this Award of RSUs are administered by the Committee, in accordance with the terms and conditions of the Plan. Actions and decisions made by the Committee in accordance with this authority shall be effectuated by the Company.
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10.
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Plan and Agreement; Recoupment Policy.
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The Participant hereby acknowledges receipt of a copy of the Plan. The grant of RSUs is made pursuant to the Plan, as in effect on the date hereof, and is subject to all the terms and conditions of the Plan, as the same may be amended or restated from time to time, and of this Agreement. If there is any conflict between the provisions of this Agreement and the Plan, the provisions of the Plan will govern. The interpretation and construction by the Committee of the Plan, this Agreement, and such rules and regulations as may be adopted by the Committee for the purpose of administering the Plan, shall be final and binding upon the Participant. The Company shall, upon written request therefore, send a copy of the Plan, in its then current form, to the Participant or any other person or entity then entitled to receive the shares of Common Stock to be issued in settlement of the RSUs.
The Company may recover any equity awarded to the Participant under this Agreement, or proceeds from the sale of such equity, to the extent required by any rule of the Securities and Exchange Commission or any listing standard of the New York Stock Exchange, including any rule or listing standard requiring recovery of incentive compensation in connection with an accounting restatement due to the Company’s material noncompliance with any financial reporting requirement under the securities laws, which recovery shall be subject to the terms of any policy of the Company implementing such rule or listing standard.
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11.
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No Employment Rights.
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Neither this Agreement nor the Award evidenced hereby shall give the Participant any right to continue in the employ of the Company, any Affiliate or any other entity, or create any inference as to the length of employment of the Participant, or affect the right of the Company (or any Affiliate or any other entity) to terminate the employment of the Participant (with or without Cause), or give the Participant any right to participate in any employee welfare or benefit plan or other program of the Company, any Affiliate or any other entity.
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12.
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Requirements of Law and No Disclosure Rights.
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The Company shall not be required to issue any shares of Common Stock in settlement of RSUs granted under this Agreement if the issuance of such shares shall constitute a violation of any provision of any applicable law or regulation of any governmental authority. The Company shall have no duty or obligation beyond those imposed by applicable securities laws generally to affirmatively disclose to the Participant or a Representative, and the Participant or Representative shall have no right to be advised of, any material non-public information regarding the Company or an Affiliate at any time prior to, upon or in connection with the issuance of the shares of Common Stock in settlement of the Participant’s RSU Award.
This Agreement, the awards of RSUs hereunder and the issuance of Common Stock in payment of RSUs shall be governed by, and construed and enforced in accordance with, the laws of the State of Minnesota (other than its laws respecting choice of law).
This Agreement and the Plan constitute the entire obligation of the parties hereto with respect to the subject matter hereof and shall supersede any prior expressions of intent or understanding with respect to this transaction.
Any amendment to this Agreement shall be in writing and signed on behalf of the Company, and shall comply with the terms and conditions of the Plan.
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16.
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Waiver; Cumulative Rights.
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The failure or delay of either party to require performance by the other party of any provision hereof shall not affect its right to require performance of such provision unless and until such performance has been waived in writing. Each and every right hereunder is cumulative and may be exercised in part or in whole from time to time.
This Agreement may be signed in two (2) counterparts, each of which shall be an original, but both of which shall constitute but one and the same instrument.
The headings contained in this Agreement are for reference purposes only and shall not affect the meaning or interpretation of this Agreement.
If for any reason any provision of this Agreement shall be determined to be invalid or unenforceable, such invalidity or unenforceability shall not affect any other provision hereof, and this Agreement shall be construed as if such invalid or unenforceable provision were omitted.
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20.
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Successors and Assigns.
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This Agreement shall inure to the benefit of and be binding upon each successor and assign of the Company, and upon the heirs, legal representatives and successors of the Participant.
Notwithstanding anything to the contrary in this Agreement, including Section 4, if any amount shall be payable with respect to this Award as a result of the Participant’s “separation from service” at such time as the Participant is a “specified employee” (as those terms are defined in regulations promulgated under Code Section 409A) and such amount is subject to the provisions of Code Section 409A, then no payment shall be made, except as permitted under Code Section 409A, prior to the first day of the seventh calendar month beginning after the Participant’s separation from service (or the date of Participant’s earlier death), or as soon as administratively practicable thereafter. Participant shall not have the right to designate the timing of settlement of the RSUs. If the thirty-day settlement period spans two different calendar years, settlement shall occur during the later calendar year.
[Signature Page Follows]
IN WITNESS WHEREOF, the Company has caused this Agreement to be duly executed by an officer thereunto duly authorized, and the Participant has hereunto set his hand, all as of the day and year first above written.
REGIS CORPORATION
By:__________________________________________________
Name:________________________________________________
Title:_________________________________________________
PARTICIPANT:
_____________________________________________________
[Name]
Form of Initial RSU (FY19 LTI Awards) - HS
REGIS CORPORATION
RESTRICTED STOCK UNIT AGREEMENT
THIS RESTRICTED STOCK UNIT AGREEMENT (the “
Agreement
”), dated as of _____________________, 20____ (the “
Grant Date
”), is between Regis Corporation, a Minnesota corporation (the “
Company
”), and Hugh Sawyer (the “
Participant
”).
WHEREAS, the Participant is a valued and trusted employee of the Company and the Company desires to grant the Participant an award of Restricted Stock Units which afford the Participant an opportunity to receive shares of the Company’s Common Stock under the Regis Corporation 2016 Long Term Incentive Plan, as amended and restated to date (the “
Plan
”); and
WHEREAS, reference is made to the Employment Agreement, by and between the Company and Participant as of the 17th day of April, 2017 (the “
Employment Agreement
”); and
WHEREAS, the Committee has duly made all determinations necessary or appropriate for the grant of the Restricted Stock Units hereunder (the “
Award
”).
NOW, THEREFORE, in consideration of the premises and mutual covenants set forth and for other good and valuable consideration, receipt of which is hereby acknowledged, the parties hereto have agreed, and do hereby agree, as follows:
For purposes of this Agreement, the definitions of terms contained in the Plan hereby are incorporated by reference, except to the extent that any such term is specifically defined in this Agreement. For purposes of this Agreement and the Award, Change in Control shall have the meaning set forth in the Plan except that any references in such definition to “twenty percent (20%)” are replaced by “forty-nine percent (49%)”.
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2.
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Grant of Restricted Stock Units, Term and Vesting.
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(a)
Subject to the terms and conditions of the Plan and this Agreement, the Company hereby grants to the Participant
(
) Restricted Stock Units (the “
RSUs
”), with no obligation to pay cash or other property for such RSUs. The RSUs will be credited to an account in the Participant’s name maintained by the Company. This account shall be unfunded and maintained for book-keeping purposes only, with each RSU representing an unfunded and unsecured promise by the Company to issue to the Participant one share of the Company’s Common Stock in settlement of a vested RSU.
(b)
100% of the RSUs will vest on the third anniversary of the Grant Date, subject to Participant’s continued employment with the Company through such anniversary and the other terms and conditions set forth in this Agreement.
(c)
Notwithstanding Section 2(b), if the Participant experiences a Qualifying Termination, then the Applicable Portion of the RSUs immediately shall vest on the date of the Qualifying Termination. For purposes of the immediately preceding sentence:
(i)
“
Qualifying Termination
” means a Termination of Employment (A) without Cause (other than as a result of death or Disability) or for Good Reason within 12 months following a Change in Control, (B) due to death or Disability, or (C) without Cause (other than as a result of death or Disability) after the Initial Term (as defined in the Employment Agreement).
(ii)
“
Applicable Portion of the RSUs
” means: a number of RSUs equal to the product obtained by multiplying (A) the total number RSUs by (B) a fraction, the numerator of which is the number of days elapsed from the Grant Date through the date of Participant’s Termination of Employment and the denominator of which is the number of days between the Grant Date and the third anniversary of the Grant Date.
(iii)
A Termination of Employment without Cause shall include a Termination of Employment at the conclusion of the Initial Term or any Renewal Term (each as defined in the Employment Agreement) resulting from the Company’s written notice of non-renewal pursuant to the terms of the Employment Agreement.
(d)
For purposes of this Agreement, (i) notwithstanding anything to the contrary in the Plan, Participant shall be deemed to have experienced a Termination of Employment when Participant ceases to be an employee of the Company, whether or not Participant is a member of the Board and (ii) if Participant’s RSUs are considered non-qualified deferred compensation subject to Code Section 409A, a Termination of Employment shall be deemed to have occurred only if on such date the Participant has also experienced a “separation from service” as defined in the regulations promulgated under Code Section 409A.
(e)
For purposes of this Agreement, if Participant’s RSUs are considered non-qualified deferred compensation subject to Code Section 409A, a Change in Control shall be deemed to have occurred for purposes of settling vested RSUs only if such event would also be deemed to constitute a change in ownership or effective control, or a change in the ownership of a substantial portion of the assets, of the Company under Code Section 409A.
(f)
For purposes of this Agreement “Good Reason” shall have the meaning ascribed to such term in the Employment Agreement; provided, however, that in order for the Termination of Employment to constitute a Termination of Employment for Good Reason, Participant must terminate employment no later than one hundred and twenty (120) days following the end of the applicable cure period.
(g)
For the avoidance of doubt, Section 10.1 of the Plan shall not apply to this Award.
3.
Forfeiture of Unvested RSUs.
Subject to any accelerated vesting under Section 2(c), and any exercise of the Committee’s discretion under Section 8.3(4) of the Plan, if the Participant experiences a Termination of Employment, any unvested RSUs shall be forfeited and the Participant shall have no further interest in, or right to receive shares of Common Stock in settlement of, such RSUs.
Subject to Section 21, after any RSUs vest pursuant to Section 2, the Company shall, as soon as practicable (but no later than thirty (30) days following the date on which the RSUs vest), cause to be issued and delivered to the Participant one share of Common Stock in payment and settlement of each vested RSU. Delivery of the shares shall be effected by the delivery of a stock certificate evidencing the shares, by an appropriate entry in the stock register maintained by the Company’s transfer agent with a notice of issuance provided to the Participant, or by the electronic delivery of the shares to a brokerage account designated by the Participant, and shall be subject to the tax withholding provisions of Section 8 and compliance with all applicable legal requirements, including compliance with the requirements of applicable federal and state securities laws, and shall be in complete satisfaction and settlement of such vested RSUs. Upon settlement of the RSUs, the Participant will obtain, with respect to the shares of Common Stock received in such settlement, full voting and other rights as a shareholder of the Company.
The RSUs subject to this Award do not entitle the Participant to any rights of a holder of the Company’s Common Stock. The Participant will not have any of the rights of a shareholder of the Company in connection with the grant of the RSUs unless and until shares of Common Stock are issued to the Participant in settlement of the RSUs as provided in Section 4.
If a cash dividend is declared and paid by the Company with respect to its Common Stock, the Participant will be credited as of the applicable dividend payment date with an additional number of RSUs (the “
Dividend RSUs
”) equal to (i) the total cash dividend the Participant would have received if the number of RSUs credited to the Participant under this Agreement as of the related dividend payment record date (including any previously credited Dividend RSUs) had been actual shares of Common Stock, divided by (ii) the Fair Market Value of a share of Common Stock
as of the applicable dividend payment date (with the quotient rounded down to the nearest whole number). Once credited to the Participant’s account, Dividend RSUs will be considered RSUs for all purposes of this Agreement.
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7.
|
Restrictions on Transferability.
|
(a)
Neither the Award evidenced by this Agreement nor the RSUs may be sold, transferred, pledged, assigned, or otherwise alienated at any time, other than by will or the laws of descent and distribution. Any attempt to do so contrary to the provisions hereof shall be null and void.
(b)
Participant agrees that Participant will not sell, transfer, pledge, assign or otherwise alienate at any time, other than by will or the laws of descent and distribution any shares of Common Stock that Participant receives upon the vesting of RSUs until such time as Participant is neither an employee of the Company nor a member of the Board and the Company may take such reasonable actions to ensure compliance with this Section 7(b).
8.
Tax Consequences and Payment of Withholding Taxes.
Neither the Company nor any of its Affiliates shall be liable or responsible in any way for the tax consequences relating to the award of RSUs, their vesting and the settlement of vested RSUs in shares of Common Stock. The Participant agrees to determine and be responsible for any and all tax consequences to the Participant relating to the award, vesting and settlement of RSUs hereunder. If the Company is obligated to withhold an amount on account of any tax imposed as a result of the grant, vesting or settlement of the RSUs, the provisions of Section 12.5 of the Plan regarding the satisfaction of tax withholding obligations shall apply (including any required payments by the Participant).
The Plan and this Award of RSUs are administered by the Committee, in accordance with the terms and conditions of the Plan. Actions and decisions made by the Committee in accordance with this authority shall be effectuated by the Company.
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10.
|
Plan and Agreement; Recoupment Policy.
|
The Participant hereby acknowledges receipt of a copy of the Plan. The grant of RSUs is made pursuant to the Plan, as in effect on the date hereof, and is subject to all the terms and conditions of the Plan, as the same may be amended or restated from time to time, and of this Agreement. If there is any conflict between the provisions of this Agreement and the Plan, the provisions of the Plan will govern. The interpretation and construction by the Committee of the Plan, this Agreement, and such rules and regulations as may be adopted by the Committee for the purpose of administering the Plan, shall be final and binding upon the Participant. The Company shall, upon written request therefore, send a copy of the Plan, in its then current form, to the Participant or any other person or entity then entitled to receive the shares of Common Stock to be issued in settlement of the RSUs.
The Company may recover any equity awarded to the Participant under this Agreement, or proceeds from the sale of such equity, to the extent required by Section 10(b) of the Employment Agreement or any rule of the Securities and Exchange Commission or any listing standard of the New York Stock Exchange, including any rule or listing standard requiring recovery of incentive compensation in connection with an accounting restatement due to the Company’s material noncompliance with any financial reporting requirement under the securities laws, which recovery shall be subject to the terms of any policy of the Company implementing such rule or listing standard.
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11.
|
No Employment Rights.
|
Neither this Agreement nor the Award evidenced hereby shall give the Participant any right to continue in the employ of the Company, any Affiliate or any other entity, or create any inference as to the length of employment of the Participant, or affect the right of the Company (or any Affiliate or any other entity) to terminate the employment of the Participant (with or without Cause), or give the Participant any right to participate in any employee welfare or benefit plan or other program of the Company, any Affiliate or any other entity.
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12.
|
Requirements of Law and No Disclosure Rights.
|
The Company shall not be required to issue any shares of Common Stock in settlement of RSUs granted under this Agreement if the issuance of such shares shall constitute a violation of any provision of any applicable law or regulation of any governmental authority. The Company shall have no duty or obligation beyond those imposed by applicable securities laws generally to affirmatively disclose to the Participant or a Representative, and the Participant or Representative shall have no right to be advised of, any material non-public information regarding the Company or an Affiliate at any time prior to, upon or in connection with the issuance of the shares of Common Stock in settlement of the Participant’s RSU Award.
This Agreement, the awards of RSUs hereunder and the issuance of Common Stock in payment of RSUs shall be governed by, and construed and enforced in accordance with, the laws of the State of Minnesota (other than its laws respecting choice of law).
This Agreement and the Plan constitute the entire obligation of the parties hereto with respect to the subject matter hereof and shall supersede any prior expressions of intent or understanding with respect to this transaction.
Any amendment to this Agreement shall be in writing and signed on behalf of the Company, and shall comply with the terms and conditions of the Plan.
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16.
|
Waiver; Cumulative Rights.
|
The failure or delay of either party to require performance by the other party of any provision hereof shall not affect its right to require performance of such provision unless and until such performance has been waived in writing. Each and every right hereunder is cumulative and may be exercised in part or in whole from time to time.
This Agreement may be signed in two (2) counterparts, each of which shall be an original, but both of which shall constitute but one and the same instrument.
The headings contained in this Agreement are for reference purposes only and shall not affect the meaning or interpretation of this Agreement.
If for any reason any provision of this Agreement shall be determined to be invalid or unenforceable, such invalidity or unenforceability shall not affect any other provision hereof, and this Agreement shall be construed as if such invalid or unenforceable provision were omitted.
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20.
|
Successors and Assigns.
|
This Agreement shall inure to the benefit of and be binding upon each successor and assign of the Company, and upon the heirs, legal representatives and successors of the Participant.
Notwithstanding anything to the contrary in this Agreement, including Section 4, if any amount shall be payable with respect to this Award as a result of the Participant’s “separation from service” at such time as the Participant is a “specified employee” (as those terms are defined in regulations promulgated under Code Section 409A) and such amount is subject to the provisions of Code Section 409A, then no payment shall be made, except as permitted under Code Section 409A, prior to the first day of the seventh calendar month beginning after the Participant’s separation from service (or the date of Participant’s earlier death), or as soon as administratively practicable thereafter. Participant shall not have the right to designate the timing of settlement of the RSUs. If the thirty-day settlement period spans two different calendar years, settlement shall occur during the later calendar year.
[Signature Page Follows]
IN WITNESS WHEREOF, the Company has caused this Agreement to be duly executed by an officer thereunto duly authorized, and the Participant has hereunto set his hand, all as of the day and year first above written.
REGIS CORPORATION
By:__________________________________________________
Name:________________________________________________
Title:_________________________________________________
PARTICIPANT:
_____________________________________________________
Hugh Sawyer
Form of PSU (FY19 LTI Awards) - Tier I
REGIS CORPORATION
PERFORMANCE UNITS AGREEMENT
THIS PERFORMANCE UNITS AGREEMENT (the “
Agreement
”), dated as of ________________________, 20____ (the “
Grant Date
”), is between Regis Corporation, a Minnesota corporation (the “
Company
”), and __________________________ (the “
Participant
”).
WHEREAS, the Participant is a valued and trusted employee of the Company or an Affiliate of the Company, and the Company desires to grant a Performance Unit award to Participant payable in shares of the Company’s common stock pursuant to the Company’s 2016 Long Term Incentive Plan, as amended and restated to date (the “
Plan
”); and
WHEREAS, the Committee has duly made all determinations necessary or appropriate for the grant of the Performance Units hereunder (the “
Award
”);
NOW, THEREFORE, in consideration of the premises and the mutual covenants hereinafter set forth and for other good and valuable consideration, receipt of which is hereby acknowledged, the parties hereto have agreed, and do hereby agree, as follows:
For purposes of this Agreement, the definitions of terms contained in the Plan hereby are incorporated by reference, except to the extent that any such term is specifically defined in this Agreement.
(a)
“
Change in Control
” shall have the meaning set forth in the Plan except that any references in such definition to “twenty percent (20%)” are replaced by “forty-nine percent (49%)”.
(b)
“
Good Reason
” shall have the meaning ascribed to such term in Participant’s employment agreement with the Company; provided, however, that in order for the Termination of Employment to constitute a Termination of Employment for Good Reason, Participant must terminate employment no later than one hundred and twenty (120) days following the end of the applicable cure period, or (ii) if there is no such employment agreement with the Company, “
Good Reason
” shall mean the occurrence, without the express written consent of the Participant, of any of the following:
(A)
any material diminution in the nature of the Participant’s authority, duties or responsibilities;
(B)
any reduction by the Company in the Participant’s base salary then in effect or target bonus percentage (other than any reduction mutually agreed upon by the Company and the Participant), other than an across the board reduction of not more than 10% that applies to all other executives who report to the Chief Executive Officer of the Company; or
(C)
following a Change in Control, failure by the Company to continue in effect (without substitution of a substantially equivalent plan or a plan of substantially equivalent value) any compensation plan, bonus or incentive plan, stock purchase plan, stock option plan, life insurance plan, health plan, disability plan or other benefit plan or arrangement in which the Participant is then participating;
provided that the Participant notifies the Company of such condition set forth in clause (A), (B) or (C) within ninety (90) days of its initial existence and the Company fails to remedy such condition within thirty (30) days of receiving such notice (the “
Cure Period
”) and the Participant delivers written notice of termination of employment to the Company’s General Counsel within thirty (30) days following the end of the Cure Period, designating an employment termination date no later than one hundred and twenty (120) days following the end of the Cure Period.
(c)
“
Qualifying Termination
” means a Termination of Employment:
(i)
(A) without Cause (other than a result of death or Disability) or for Good Reason, in either case, within 12 months following a Change in Control, (B) due to death or Disability or (C) without Cause (other than a result of death or Disability) after the one year anniversary of the Grant Date under circumstances in which the Board does not intend to fill the position that Executive holds immediately prior to the Termination of Employment;
(ii)
(A) the Performance Goal has been satisfied, and (B) the Participant experiences a Termination of Employment on or after the third anniversary of the Grant Date by reason of (1) the Participant’s Retirement (as defined below) or (2) termination by the Company without Cause (other than a result of death or Disability), then, the Applicable Portion of the Units immediately shall vest on the date of Participant’s Termination of Employment and Participant shall forfeit and remaining Units; or
(iii)
without Cause (other than as a result of death or Disability) or for Good Reason both (A) after the first anniversary of the Grant Date and (B) following the appointment of a successor or interim successor to the current Chief Executive Officer, Hugh Sawyer.
(d)
“
Retirement
” means any Termination of Employment (other than by the Company for Cause or due to death or Disability) at or after age sixty-two (62) or at or after age fifty-five (55) with fifteen (15) or more years of continuous service to the Company and its Affiliates.
2.
Award of Performance Units.
Subject to the terms and conditions of the Plan and this Agreement, the Company hereby grants to the Participant a Performance Unit Award consisting of
(
) Performance Units (the “
Units
”), the vesting of which shall be further subject to satisfaction of the Performance Goal specified in
Appendix A
to this Agreement (the “
Performance Goal
”). The Performance Units granted under this Agreement will be credited to an account in the Participant’s name maintained by the Company. This account shall be unfunded and maintained for bookkeeping purposes only, with each Unit representing an unfunded and unsecured promise by the Company to issue to the Participant one share of the Company’s Common Stock in settlement of a vested Unit.
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3.
|
Vesting of Units.
For purposes of this Agreement, “Vesting Date” means any date, including the Scheduled Vesting Date (defined below) on which Units vest as provided in this Section 3.
|
(a)
Subject to Section 3(b), the Units will be eligible to vest on the fifth anniversary of the Grant Date (the “
Scheduled Vesting Date
”). The Units will vest in full on the Scheduled Vesting Date (i) if the Participant has not experienced a Termination of Employment prior to the Scheduled Vesting Date, and (ii) if the Performance Goal has been satisfied.
(b)
If the Participant experiences a Qualifying Termination then, subject to satisfaction of the Performance Goal, the Applicable Portion of the Units shall immediately vest on the date of the Qualifying Termination and Participant shall forfeit the remainder of such Units. “
Applicable Portion of the Units
” means:
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Nature of Participant’s
Termination of Employment
|
Applicable Portion of the Units
|
Clause (i) of the definition of Qualifying Termination, and:
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Prior to July 1, 2021
|
a number of Units equal to the product obtained by multiplying (i) the total number of Units by (ii) a fraction, the numerator of which is the number of days that have elapsed from the Grant Date through the date of the Participant’s Qualifying Termination and the denominator of which is the number of days between the Grant Date and the fifth anniversary of the Grant Date
|
On or after July 1, 2021 but
before
the Scheduled Vesting Date
|
100% of the Units
|
Clause (ii) of the definition of Qualifying Termination
|
a number of Units equal to the product obtained by multiplying (i) the total number of Units by (ii) 60%, if the date of Participant’s Termination of Employment is on or after the third anniversary of the Grant Date and before the fourth anniversary of the Grant Date, or 80%, if the date of Participant’s Termination of Employment is on or after fourth anniversary but before the Scheduled Vesting Date
|
Clause (iii) of the definition of Qualifying Termination
|
a number of Units equal to the product obtained by multiplying (i) the total number of Units by (ii) a fraction (not to exceed 1), the numerator of which is the number of days that have elapsed from the Grant Date through the date of the Participant’s Termination of Employment plus 548 and the denominator of which is the number of days between the Grant Date and the Scheduled Vesting Date
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(c)
For purposes of this Agreement, if Participant’s Units are considered non-qualified deferred compensation subject to Code Section 409A, a Termination of Employment shall be deemed to have occurred only if on such date the Participant has also experienced a “separation from service” as defined in the regulations promulgated under Code Section 409A.
(d)
For purposes of this Agreement, if Participant’s Units are considered non-qualified deferred compensation subject to Code Section 409A, a Change in Control shall be deemed to have occurred for purposes of settling vested Units only if such event would also be deemed to constitute a change in ownership or effective control, or a change in the ownership of a substantial portion of the assets, of the Company under Code Section 409A.
(e)
For the avoidance of doubt, Section 10.1 of the Plan shall not apply to this Award.
(f)
In the event that Participant’s Termination of Employment would qualify Participant for accelerated vesting under more than one subsection of this Section 3, the subsection that provides for the vesting of the greatest number of Units shall apply.
4.
Settlement of Units.
Subject to Section 22, after any Units vest pursuant to Section 3, the Company will promptly, but in no event later than thirty (30) days after the Scheduled Vesting Date or earlier Vesting Date pursuant to Section 3(b), cause to be issued and delivered to the Participant (or to the Participant’s Representative in the event of the Participant’s death) one share of Common Stock in payment and settlement of each vested Unit. Delivery of the shares shall be effected by the delivery of a stock certificate evidencing the shares, by an appropriate entry in the stock register maintained by the Company’s transfer agent with a notice of issuance provided to the Participant, or by the electronic delivery of the shares to a brokerage account designated by the Participant, and shall be subject to the tax withholding provisions of Section 9 and compliance with all applicable legal requirements, including compliance with the requirements of applicable federal and state securities laws, and shall be in complete satisfaction and settlement of such vested Units. Upon settlement of the Units, the Participant will obtain, with respect to the shares of Common Stock received in such settlement, full voting and other rights as a shareholder of the Company.
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5.
|
Forfeiture of Unvested Units.
|
Subject to any accelerated vesting under Section 3(b), if the Participant experiences a Termination of Employment, any unvested Units shall be forfeited and the Participant shall have no further interest in, or right to receive shares of Common Stock in settlement of, such Units. In addition, Participant shall forfeit any unvested Units if Participant remains employed through the third anniversary of the Grant Date, or, if earlier, the date of a Change in Control, and the Performance Goal has not been satisfied.
The Units subject to this Award do not entitle the Participant to any rights of a holder of the Company’s Common Stock. The Participant will not have any of the rights of a shareholder of the Company in connection with the grant of the Units hereunder unless and until shares of Common Stock are issued to the Participant in settlement of the Units as provided in Section 5.
If a cash dividend is declared and paid by the Company with respect to its Common Stock, the Participant will be credited as of the applicable dividend payment date with an additional number of Units (the “
Dividend Units
”) equal to (a) the total cash dividend the Participant would have received if the number of Units credited to the Participant under this Agreement as of the related dividend payment record date (including any previously credited Dividend Units) had been actual shares of Common Stock, divided by (ii) the Fair Market Value of a share of Common Stock as of the applicable dividend payment date (with the quotient rounded down to the nearest whole number). Once credited to the Participant’s account, Dividend Units will be considered Units for all purposes of this Agreement.
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8.
|
Restrictions on Transfer.
|
Neither the Award evidenced by this Agreement nor the Units may be sold, transferred, pledged, assigned, or otherwise alienated at any time, other than by will or the laws of descent and distribution. Any attempt to do so contrary to the provisions hereof shall be null and void.
|
|
9.
|
Tax Consequences and Payment of Withholding Taxes.
|
Neither the Company nor any of its Affiliates shall be liable or responsible in any way for the tax consequences relating to the award of Units, their vesting and the settlement of vested Units in shares of Common Stock. The Participant agrees to determine and be responsible for any and all tax consequences to the Participant relating to the award, vesting and settlement of Units hereunder. If the Company is obligated to withhold an amount on account of any tax imposed as a result of the grant, vesting or settlement of the Units, the provisions of Section 12.5 of the Plan regarding the satisfaction of tax withholding obligations shall apply (including any required payments by the Participant).
The Plan and this Award of Units are administered by the Committee, in accordance with the terms and conditions of the Plan. Actions and decisions made by the Committee in accordance with this authority shall be effectuated by the Company.
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11.
|
Plan and Agreement; Recoupment Policy.
|
The Participant hereby acknowledges receipt of a copy of the Plan. The grant of Units is made pursuant to the Plan, as in effect on the date hereof, and is subject to all the terms and conditions of the Plan, as the same may be amended or restated from time to time, and of this Agreement. If there is any conflict between the provisions of this Agreement and the Plan, the provisions of the Plan will govern. The interpretation and construction by the Committee of the Plan, this Agreement, and such rules and regulations as may be adopted by the Committee for the purpose of administering the Plan, shall be final and binding upon the Participant. The Company shall, upon written request therefore, send a copy of the Plan, in its then current form, to the Participant or any other person or entity then entitled to receive the shares of Common Stock to be issued in settlement of the Units.
The Company may recover any equity awarded to the Participant under this Agreement, or proceeds from the sale of such equity, to the extent required by the Regis Corporation Amended and Restated Executive Officer Incentive Compensation Clawback Policy as in effect from time to time or any rule of the Securities and Exchange Commission or any listing standard of the New York Stock Exchange, including any rule or listing standard requiring recovery of incentive compensation in connection with an accounting restatement due to the Company’s material noncompliance with any financial reporting requirement under the securities laws, which recovery shall be subject to the terms of any policy of the Company implementing such rule or listing standard.
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12.
|
No Employment Rights.
|
Neither this Agreement nor the Award evidenced hereby shall give the Participant any right to continue in the employ of the Company, any Affiliate or any other entity, or create any inference as to the length of employment of the Participant, or affect the right of the Company (or any Affiliate or any other entity) to terminate the employment of the Participant (with or without Cause), or give the Participant any right to participate in any employee welfare or benefit plan or other program of the Company, any Affiliate or any other entity.
This Agreement, the awards of Units hereunder and the issuance of Common Stock in payment of Units shall be governed by, and construed and enforced in accordance with, the laws of the State of Minnesota (other than its laws respecting choice of law).
This Agreement and the Plan constitute the entire obligation of the parties hereto with respect to the subject matter hereof and shall supersede any prior expressions of intent or understanding with respect to this transaction.
Any amendment to this Agreement shall be in writing and signed on behalf of the Company, and shall comply with the terms and conditions of the Plan.
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16.
|
Waiver; Cumulative Rights.
|
The failure or delay of either party to require performance by the other party of any provision hereof shall not affect its right to require performance of such provision unless and until such performance has been waived in writing. Each and every right hereunder is cumulative and may be exercised in part or in whole from time to time.
This Agreement may be signed in two (2) counterparts, each of which shall be an original, but both of which shall constitute but one and the same instrument.
The headings contained in this Agreement are for reference purposes only and shall not affect the meaning or interpretation of this Agreement.
If for any reason any provision of this Agreement shall be determined to be invalid or unenforceable, such invalidity or unenforceability shall not affect any other provision hereof, and this Agreement shall be construed as if such invalid or unenforceable provision were omitted.
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20.
|
Successors and Assigns.
|
This Agreement shall inure to the benefit of and be binding upon each successor and assign of the Company, and upon the heirs, legal representatives and successors of the Participant.
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21.
|
Requirements of Law and No Disclosure Rights.
|
The Company shall not be required to issue any shares of Common Stock in settlement of Units granted under this Agreement if the issuance of such shares shall constitute a violation of any provision of any applicable law or regulation of any governmental authority. The Company shall have no duty or obligation beyond those imposed by applicable securities laws generally to affirmatively disclose to the Participant or a Representative, and the Participant or Representative shall have no right to be advised of, any material non-public information regarding the Company or an Affiliate at any time prior to, upon or in connection with the issuance of the shares of Common Stock in settlement of the Participant’s Unit Award.
Notwithstanding anything to the contrary in this Agreement, including Section 4, if any amount shall be payable with respect to this Award as a result of the Participant’s “separation from service” at such time as the Participant is a “specified employee” (as those terms are defined in regulations promulgated under Code Section 409A) and such amount is subject to the provisions of Code Section 409A, then no payment shall be made, except as permitted under Code Section 409A, prior to the first day of the seventh calendar month beginning after the Participant’s separation from service (or the date of Participant’s earlier death), or as soon as administratively practicable thereafter. Participant shall not have the right to designate the timing of settlement of the Units. If the thirty-day settlement period spans two different calendar years, settlement shall occur during the later calendar year.
[Signature Page Follows]
IN WITNESS WHEREOF, the Company has caused this Agreement to be duly executed by an officer thereunto duly authorized, and the Participant has hereunto set his hand, all as of the day and year first above written.
REGIS CORPORATION
By:__________________________________________________
Name:________________________________________________
Title:_________________________________________________
PARTICIPANT:
_____________________________________________________
[Name]
Appendix A
“Performance Goal” shall mean the volume-weighted average closing price per share of Company Common Stock for the fifty trading days preceding July 1, 2021 equals or exceeds $22.40; provided, however, that in the case of a Change in Control or Participant’s Termination of Employment occurring prior to July 1, 2021, Performance Goal shall mean the volume-weighted average closing price per share of Company Common Stock for the fifty trading days preceding the date of the Change in Control or the date of Participant’s Termination of Employment equals or exceeds $22.40. The volume-weighted average closing price per share of Company Common Stock for any relevant period shall be calculated as follows:
[(Closing Price x Volume for Trading Day 1) + (Closing Price x Volume for Trading Day 2)…through each of the 50 trading days]/Total Volume for the 50 Trading Days
Form of PSU (FY19 LTI Awards) - HS
REGIS CORPORATION
PERFORMANCE UNITS AGREEMENT
THIS PERFORMANCE UNIT AGREEMENT (the “
Agreement
”), dated as of _____________________, 20____ (the “
Grant Date
”), is between Regis Corporation, a Minnesota corporation (the “
Company
”), and Hugh Sawyer (the “
Participant
”).
WHEREAS, the Participant is a valued and trusted employee of the Company or an Affiliate of the Company, and the Company desires to grant a Performance Unit award to Participant payable in shares of the Company’s common stock pursuant to the Company’s 2016 Long Term Incentive Plan, as amended and restated to date (the “
Plan
”); and
WHEREAS, reference is made to the Employment Agreement, by and between the Company and Participant as of the 17th day of April, 2017 (the “
Employment Agreement
”); and
WHEREAS, the Committee has duly made all determinations necessary or appropriate for the grant of the Performance Units hereunder (the “
Award
”);
NOW, THEREFORE, in consideration of the premises and the mutual covenants hereinafter set forth and for other good and valuable consideration, receipt of which is hereby acknowledged, the parties hereto have agreed, and do hereby agree, as follows:
For purposes of this Agreement, the definitions of terms contained in the Plan hereby are incorporated by reference, except to the extent that any such term is specifically defined in this Agreement.
(a)
“
Applicable Vesting Date
” shall mean the later of (A) the first to occur of (1) a Change in Control and (2) July 1, 2021 (the “Applicable Measurement Date”) and (B) the date of Participant’s Termination of Employment.
(b)
“
Change in Control
” shall have the meaning set forth in the Plan except that any references in such definition to “twenty percent (20%)” are replaced by “forty-nine percent (49%)”.
(c)
"
Good Reason
" shall have the meaning ascribed to such term in the Employment Agreement; provided, however, that in order for the Termination of Employment to constitute a Termination of Employment for Good Reason, Participant must terminate employment no later than one hundred and twenty (120) days following the end of the applicable cure period.
(d)
“
Qualifying Termination
” means a Termination of Employment:
(i)
(A) without Cause (other than as a result of death or Disability) or for Good Reason, in each case, within 12 months following a Change in Control or (B) due to death or Disability; or
(ii)
on or after April 17, 2020 by reason of the Participant’s Termination of Employment by the Company without Cause (other than as a result of death or Disability).
|
|
2.
|
Award of Performance Units.
|
Subject to the terms and conditions of the Plan and this Agreement, the Company hereby grants to the Participant a Performance Unit Award consisting of
(
) Performance Units (the “
Units
”), the vesting of which shall be further subject to satisfaction of the Performance Goal specified in
Appendix A
to this Agreement (the “
Performance Goal
”). The Performance Units granted under this Agreement will be credited to an account in the Participant’s name maintained by the Company. This account shall be unfunded and maintained for bookkeeping
purposes only, with each Unit representing an unfunded and unsecured promise by the Company to issue to the Participant one share of the Company’s Common Stock in settlement of a vested Unit.
|
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3.
|
Vesting of Units.
For purposes of this Agreement, “Vesting Date” means any date, including the Scheduled Vesting Date (defined below) on which Units vest as provided in this Section 3.
|
(a)
Subject to Section 3(b), the Units will be eligible to vest on the fifth anniversary of the Grant Date (the “
Scheduled Vesting Date
”). The Units will vest in full on the Scheduled Vesting Date (i) if the Participant has not experienced a Termination of Employment prior to the Scheduled Vesting Date, and (ii) if the Performance Goal has been satisfied.
(b)
If the Participant experiences a Qualifying Termination then, subject to satisfaction of the Performance Goal, the Applicable Portion of the Units shall vest on the Applicable Vesting Date and Participant shall forfeit the remainder of such Units. In the event of a Qualifying Termination covered by this Section 3(b), if the Performance Goal is not satisfied as of the Applicable Measurement Date, Participant immediately shall forfeit the Units in their entirety. “
Applicable Portion of the Units
” means:
|
|
|
Nature of Participant’s
Qualifying Termination
|
Applicable Portion of the Units
|
Clause (i) of the definition of Qualifying Termination, and:
|
|
Prior to July 1, 2021
|
A number of Units equal to the product obtained by multiplying (i) the total number Units by (ii) a fraction, the numerator of which is the number of days elapsed from the Grant Date through the date of the Qualifying Termination and the denominator of which is the number of days between the Grant Date and the fifth anniversary of the Grant Date.
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On or after July 1, 2021 but before the Scheduled Vesting Date
|
100% of the Units
|
Clause (ii) of the definition of Qualifying Termination, and:
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On or after April 17, 2020 and prior to the third anniversary of the Grant Date
|
A number of Units equal to the product obtained by multiplying (i) the total number of Units by (ii) a fraction, the numerator of which is the number of days that have elapsed from the Grant Date through the date of the Participant’s Termination of Employment and the denominator of which is the number of days between the Grant Date and the fifth anniversary of the Grant Date
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On or after the third anniversary of the Grant Date and before the fourth anniversary of the Grant Date
|
A number of Units equal to the product obtained by multiplying (i) the total number of Units by (ii) 60%
|
On or after the fourth anniversary of the Grant Date and before the Scheduled Vesting Date
|
A number of Units equal to the product obtained by multiplying (A) the total number of Units by (B) 80%
|
For purposes of this Agreement, a Termination of Employment without Cause shall include a Termination of Employment at the conclusion of the Initial Term or any Renewal Term (each as defined in the Employment Agreement) resulting from the Company’s written notice of non-renewal pursuant to the terms of the Employment Agreement.
(c)
For purposes of this Agreement, (i) notwithstanding anything to the contrary in the Plan, Participant shall be deemed to have experienced a Termination of Employment when Participant ceases to be an employee of the Company, whether or not Participant is a member of the Board, and (ii) if Participant’s Units are considered non-qualified deferred compensation subject to Code Section 409A, a Termination of Employment shall be deemed to have occurred only if on such date the Participant has also experienced a “separation from service” as defined in the regulations promulgated under Code Section 409A.
(d)
For purposes of this Agreement, if Participant’s Units are considered non-qualified deferred compensation subject to Code Section 409A, a Change in Control shall be deemed to have occurred for purposes of
settling vested Units only if such event would also be deemed to constitute a change in ownership or effective control, or a change in the ownership of a substantial portion of the assets, of the Company under Code Section 409A.
(e)
For the avoidance of doubt, Section 10.1 of the Plan shall not apply to this Award.
(f)
In the event that Participant’s Termination of Employment would qualify Participant for accelerated vesting under more than one type of Qualifying Termination, the type of Qualifying Termination that provides for the vesting of the greatest number of Units shall apply.
4.
Settlement of Units.
Subject to Section 22, after any Units vest pursuant to Section 3, the Company will promptly, but in no event later than thirty (30) days following the Scheduled Vesting Date or earlier Vesting Date pursuant to Section 3(b) , cause to be issued and delivered to the Participant (or to the Participant’s Representative in the event of the Participant’s death) one share of Common Stock in payment and settlement of each vested Unit. Delivery of the shares shall be effected by the delivery of a stock certificate evidencing the shares, by an appropriate entry in the stock register maintained by the Company’s transfer agent with a notice of issuance provided to the Participant, or by the electronic delivery of the shares to a brokerage account designated by the Participant, and shall be subject to the tax withholding provisions of Section 9 and compliance with all applicable legal requirements, including compliance with the requirements of applicable federal and state securities laws, and shall be in complete satisfaction and settlement of such vested Units. Upon settlement of the Units, the Participant will obtain, with respect to the shares of Common Stock received in such settlement, full voting and other rights as a shareholder of the Company.
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5.
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Forfeiture of Unvested Units.
|
Subject to any accelerated vesting under Section 3(b), if the Participant experiences a Termination of Employment, any unvested Units shall be forfeited and the Participant shall have no further interest in, or right to receive shares of Common Stock in settlement of, such Units. In addition, Participant shall forfeit any unvested Units if Participant remains employed through the third anniversary of the Grant Date, or, if earlier, the date of a Change in Control, and the Performance Goal has not been satisfied.
The Units subject to this Award do not entitle the Participant to any rights of a holder of the Company’s Common Stock. The Participant will not have any of the rights of a shareholder of the Company in connection with the grant of the Units hereunder unless and until shares of Common Stock are issued to the Participant in settlement of the Units as provided in Section 5.
If a cash dividend is declared and paid by the Company with respect to its Common Stock, the Participant will be credited as of the applicable dividend payment date with an additional number of Units (the “
Dividend Units
”) equal to (a) the total cash dividend the Participant would have received if the number of Units credited to the Participant under this Agreement as of the related dividend payment record date (including any previously credited Dividend Units) had been actual shares of Common Stock, divided by (ii) the Fair Market Value of a share of Common Stock as of the applicable dividend payment date (with the quotient rounded down to the nearest whole number). Once credited to the Participant’s account, Dividend Units will be considered Units for all purposes of this Agreement.
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8.
|
Restrictions on Transfer.
|
(a)
Neither the Award evidenced by this Agreement nor the Units may be sold, transferred, pledged, assigned, or otherwise alienated at any time, other than by will or the laws of descent and distribution. Any attempt to do so contrary to the provisions hereof shall be null and void.
(b)
Participant agrees that Participant will not sell, transfer, pledge, assign or otherwise alienate at any time, other than by will or the laws of descent and distribution any shares of Common Stock that Participant receives
upon the vesting of Units until such time as Participant is neither an employee of the Company nor a member of the Board and the Company may take such reasonable actions to ensure compliance with this Section 8(b).
9.
Tax Consequences and Payment of Withholding Taxes.
Neither the Company nor any of its Affiliates shall be liable or responsible in any way for the tax consequences relating to the award of Units, their vesting and the settlement of vested Units in shares of Common Stock. The Participant agrees to determine and be responsible for any and all tax consequences to the Participant relating to the award, vesting and settlement of Units hereunder. If the Company is obligated to withhold an amount on account of any tax imposed as a result of the grant, vesting or settlement of the Units, the provisions of Section 12.5 of the Plan regarding the satisfaction of tax withholding obligations shall apply (including any required payments by the Participant).
The Plan and this Award of Units are administered by the Committee, in accordance with the terms and conditions of the Plan. Actions and decisions made by the Committee in accordance with this authority shall be effectuated by the Company.
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11.
|
Plan and Agreement; Recoupment Policy.
|
The Participant hereby acknowledges receipt of a copy of the Plan. The grant of Units is made pursuant to the Plan, as in effect on the date hereof, and is subject to all the terms and conditions of the Plan, as the same may be amended or restated from time to time, and of this Agreement. If there is any conflict between the provisions of this Agreement and the Plan, the provisions of the Plan will govern. The interpretation and construction by the Committee of the Plan, this Agreement, and such rules and regulations as may be adopted by the Committee for the purpose of administering the Plan, shall be final and binding upon the Participant. The Company shall, upon written request therefore, send a copy of the Plan, in its then current form, to the Participant or any other person or entity then entitled to receive the shares of Common Stock to be issued in settlement of the Units.
The Company may recover any equity awarded to the Participant under this Agreement, or proceeds from the sale of such equity, to the extent required by the Regis Corporation Amended and Restated Executive Officer Incentive Compensation Clawback Policy as in effect from time to time, Section 10(b) of the Employment Agreement or any rule of the Securities and Exchange Commission or any listing standard of the New York Stock Exchange, including any rule or listing standard requiring recovery of incentive compensation in connection with an accounting restatement due to the Company’s material noncompliance with any financial reporting requirement under the securities laws, which recovery shall be subject to the terms of any policy of the Company implementing such rule or listing standard.
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12.
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No Employment Rights.
|
Neither this Agreement nor the Award evidenced hereby shall give the Participant any right to continue in the employ of the Company, any Affiliate or any other entity, or create any inference as to the length of employment of the Participant, or affect the right of the Company (or any Affiliate or any other entity) to terminate the employment of the Participant (with or without Cause), or give the Participant any right to participate in any employee welfare or benefit plan or other program of the Company, any Affiliate or any other entity.
This Agreement, the awards of Units hereunder and the issuance of Common Stock in payment of Units shall be governed by, and construed and enforced in accordance with, the laws of the State of Minnesota (other than its laws respecting choice of law).
This Agreement and the Plan constitute the entire obligation of the parties hereto with respect to the subject matter hereof and shall supersede any prior expressions of intent or understanding with respect to this transaction.
Any amendment to this Agreement shall be in writing and signed on behalf of the Company, and shall comply with the terms and conditions of the Plan.
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16.
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Waiver; Cumulative Rights.
|
The failure or delay of either party to require performance by the other party of any provision hereof shall not affect its right to require performance of such provision unless and until such performance has been waived in writing. Each and every right hereunder is cumulative and may be exercised in part or in whole from time to time.
This Agreement may be signed in two (2) counterparts, each of which shall be an original, but both of which shall constitute but one and the same instrument.
The headings contained in this Agreement are for reference purposes only and shall not affect the meaning or interpretation of this Agreement.
If for any reason any provision of this Agreement shall be determined to be invalid or unenforceable, such invalidity or unenforceability shall not affect any other provision hereof, and this Agreement shall be construed as if such invalid or unenforceable provision were omitted.
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20.
|
Successors and Assigns.
|
This Agreement shall inure to the benefit of and be binding upon each successor and assign of the Company, and upon the heirs, legal representatives and successors of the Participant.
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21.
|
Requirements of Law and No Disclosure Rights.
|
The Company shall not be required to issue any shares of Common Stock in settlement of Units granted under this Agreement if the issuance of such shares shall constitute a violation of any provision of any applicable law or regulation of any governmental authority. The Company shall have no duty or obligation beyond those imposed by applicable securities laws generally to affirmatively disclose to the Participant or a Representative, and the Participant or Representative shall have no right to be advised of, any material non-public information regarding the Company or an Affiliate at any time prior to, upon or in connection with the issuance of the shares of Common Stock in settlement of the Participant’s Unit Award.
Notwithstanding anything to the contrary in this Agreement, including Section 4, if any amount shall be payable with respect to this Award as a result of the Participant’s “separation from service” at such time as the Participant is a “specified employee” (as those terms are defined in regulations promulgated under Code Section 409A) and such amount is subject to the provisions of Code Section 409A, then no payment shall be made, except as permitted under Code Section 409A, prior to the first day of the seventh calendar month beginning after the Participant’s separation from service (or the date of Participant’s earlier death), or as soon as administratively practicable thereafter. Participant
shall not have the right to designate the timing of settlement of the Units. If the thirty-day settlement period spans two different calendar years, settlement shall occur during the later calendar year.
[Signature Page Follows]
IIN WITNESS WHEREOF, the Company has caused this Agreement to be duly executed by an officer thereunto duly authorized, and the Participant has hereunto set his hand, all as of the day and year first above written.
REGIS CORPORATION
By:__________________________________________________
Name:________________________________________________
Title:_________________________________________________
PARTICIPANT:
_____________________________________________________
Hugh Sawyer
Appendix A
“Performance Goal” shall mean the volume-weighted average closing price per share of Company Common Stock for the fifty trading days preceding July 1, 2021 equals or exceeds $22.40; provided, however, that in the case of a Change in Control occurring prior to July 1, 2021, Performance Goal shall mean the volume-weighted average closing price per share of Company Common Stock for the fifty trading days preceding the date of the Change in Control equals or exceeds $22.40. The volume-weighted average closing price per share of Company Common Stock for any relevant period shall be calculated as follows:
[(Closing Price x Volume for Trading Day 1) + (Closing Price x Volume for Trading Day 2)…through each of the 50 trading days]/Total Volume for the 50 Trading Days
Form of Director RSU Grant (FY19)
REGIS CORPORATION
RESTRICTED STOCK UNIT AGREEMENT
THIS AGREEMENT, dated as of ________, 2018 (the “
Grant Date”)
, is made between Regis Corporation, a Minnesota corporation (the “
Company
”), and ____________, a nonemployee director of the Company (the “
Director
”).
WHEREAS, the Company desires to increase the Director’s identification with the Company and the interests of its shareholders, and to compensate the Director for service on the Board of Directors of the Company (the “
Board
”) by awarding the Director restricted stock units (“
RSUs
”) with respect to _______________ (_____) shares of the Company’s common stock in accordance with the terms and conditions of: (i) this Restricted Stock Unit Agreement (“
Agreement
”) and (ii) the Regis Corporation 2018 Long Term Incentive Plan (the "
Plan
"); and
WHEREAS, the Committee has duly made all determinations necessary or appropriate to the grants hereunder;
NOW, THEREFORE, in consideration of the premises and mutual covenants set forth and for other good and valuable consideration, receipt of which is hereby acknowledged, the parties hereto have agreed, and do hereby agree, as follows:
For purposes of this Agreement, the definitions of terms contained in the Plan are hereby incorporated by reference, except to the extent that any such term is specifically defined in this Agreement.
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2.
|
Grant of Restricted Stock and Vesting
.
|
(a)
In consideration for services rendered and to be rendered as a member of the Board, and with no obligation to pay cash or other property therefor, the Company hereby grants to the Director ___________ (______) RSUs, on the terms and conditions herein set forth. An RSU represents an unfunded and unsecured promise to deliver (or cause to be delivered) to the Director, subject to the Plan and this Agreement, one share of the Company’s common stock or an amount in cash equal to the Fair Market Value of a share of Common Stock on the date of settlement.
(b)
The RSUs granted to the Director hereunder will vest on a pro-rata basis as to one-twelfth (1/12) of the RSUs covered by this Agreement on each monthly anniversary of the Grant Date, _______, 2018 (the “Vesting Commencement Date”), for the first eleven (11) months, and as to any remaining unvested RSUs on the date of the Company’s 2019 annual shareholders meeting, _______, provided the Director has not had a Separation from Service prior to the commencement of such meeting (the “Full Vesting Date”).
(c)
Vested RSUs will be converted into shares of Common Stock or an amount in cash equal to the product obtained by multiplying the Fair Market Value of a share of Common Stock on the date of settlement by the number of Vested RSUs (“settled”) on the Director’s Separation from Service with the Company (the “Settlement Date”).
(d)
For purposes of this Agreement, the Director’s “Separation from Service” with the Board shall occur upon the effective date of the Director’s termination of membership on the Board, unless the Director is an employee of the Company as of that date. For purposes of this Agreement, the Director’s “Separation from Service” with the Company as an employee shall have the same meaning as defined in Treas. Reg. §1.409A-1(h).
(e)
If the Director is a “specified employee” of the Company, as defined in Treas. Reg. §1.409A-1(i), at the Director’s Separation from Service, the Settlement Date shall be delayed until the first day of the seventh month following the Director’s Separation from Service, to the extent such delay is required under Section 409A of the Code or the regulations thereunder.
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3.
|
Separation From Service Prior to Vesting.
|
(a)
Unless vesting is otherwise accelerated in accordance with the terms of this Agreement or the Plan, if the Director incurs a Separation from Service (other than due to death, Disability or upon a Change in Control) on or before the Full Vesting Date, any unvested RSUs (and any reinvested stock dividend accumulations with respect thereto) shall be forfeited and the Director shall have no further interest in such RSUs (or such reinvested stock dividends). For example, if a Director incurs a Separation from Service six months after the Vesting Commencement Date, the Director shall be vested in 6/12 (or ½) of the RSUs, and shall forfeit the remaining unvested RSUs granted hereunder.
(b)
Upon a Change in Control or upon the Director’s Separation from Service due to death, or Disability, any unvested RSUs will become automatically fully vested. The terms “Disability” and “Change in Control” shall have the meanings set out in the Plan. Notwithstanding the foregoing, for purposes of settlement (but not vesting) of any RSUs that vest as a result of the application of this Section 3(b), RSUs that vest upon the Director’s Disability or a Change in Control shall be settled on the first to occur of (i) the Director’s “disability” under Section 409A of the Code, (ii) a Change in Control that constitutes a “change in the ownership or effective control of the corporation, or a change in the ownership of a substantial portion of the assets of the corporation” under Section 409A of the Code, as applicable, (iii) the Director’s Separation from Service, and (iv) the Director’s death.
As soon as practicable after the Settlement Date (but no later than 30 days after the Director’s Separation from Service occurred), if the RSUs are settled in shares of Common Stock, stock certificates (the “
Stock Certificates
”) evidencing the conversion of the RSUs into shares of Common Stock shall be issued and registered in the Director’s name. Upon settlement of the RSUs in shares of Common Stock, the Director will obtain, with respect to the shares of Common Stock received in such settlement, full voting and other rights as a shareholder of the Company.
(a)
The Director shall have no rights of ownership with respect to any of the RSUs held in the Director’s name, and shall have no right to vote them or the shares of Common Stock represented by the RSUs, until the Settlement Date (and then, only if the RSUs are settled in shares of Common Stock).
(b)
Until the Settlement Date, any dividends otherwise payable to the Director with respect to the Common Stock underlying the RSUs held in the Director’s name shall not be distributed but instead shall be accumulated and reinvested as additional RSUs and shall be distributed after vesting
as additional shares of Common Stock or an amount in cash equal to the product obtained by multiplying the Fair Market Value of a share of Common Stock on the date of settlement by the number of additional RSUs into which such dividends were converted.
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6.
|
Restrictions on Transferability.
|
Until the Settlement Date, the RSUs may not be sold, transferred, pledged, assigned, or otherwise alienated at any time. Any attempt to do so contrary to the provisions hereof shall be null and void.
The Plan and this Award of RSUs are administered by the Committee, in accordance with the terms and conditions of the Plan. Actions and decisions made by the Committee in accordance with this authority shall be effectuated by the Company.
The Director hereby acknowledges receipt of a copy of the Plan. Notwithstanding any other provision of this Agreement, the grant of RSUs is made pursuant to the Plan, as in effect on the date hereof, and is subject to all the terms and conditions of the Plan, as the same may be amended from time to time. The interpretation and construction by the Committee of the Plan, this Agreement, and such rules and regulations as may be adopted by the Committee for the purpose of administering the Plan, shall be final and binding upon the Director. The Company shall, upon written request therefore, send a copy of the Plan, in its then current form, to the Director or any other person or entity then entitled to receive such shares.
No provision of this Agreement shall give the Director any right to, or to continue in, service on the Board of Directors of the Company. In addition, no provision of this Agreement shall give the Director any right to, or to the extent the Director becomes an employee of the Company following the Grant Date, to continue in, the employ of the Company, any Affiliate or any other entity, or create any inference as to the length of employment of the Director, or affect the right of the Company (or any Affiliate or any other entity) to terminate the employment of the Director (with or without Cause), or give the Director any right to participate in any employee welfare or benefit plan or other program of the Company, any Affiliate or any other entity.
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10.
|
Requirements of Law and No Disclosure Rights.
|
The Company shall not be required to issue any shares of Common Stock in satisfaction of the Award of RSUs made under this Agreement if the issuance of such shares shall constitute a violation of any provision of any law or regulation of any governmental authority. The Company shall have no duty or obligation to affirmatively disclose to the Director or a Representative, and the Director or Representative shall have no right to be advised of, any material information regarding the Company or an Affiliate at any time prior to, upon or in connection with the issuance of the shares of Common Stock or payment of cash in satisfaction of the Director's award of RSUs.
This Agreement, the awards of RSUs hereunder and the issuance of Common Stock in payment of RSUs shall be governed by, and construed and enforced in accordance with, the laws of the State of Minnesota (other than its laws respecting choice of law).
This Agreement and the Plan constitute the entire obligation of the parties hereto with respect to the subject matter hereof and shall supersede any prior expressions of intent or understanding with respect to this transaction.
Any amendment to this Agreement shall be in writing and signed on behalf of the Company, and shall comply with the terms and conditions of the Plan.
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14.
|
Waiver; Cumulative Rights.
|
The failure or delay of either party to require performance by the other party of any provision hereof shall not affect its right to require performance of such provision unless and until such performance has been waived in writing. Each and every right hereunder is cumulative and may be exercised in part or in whole from time to time.
This Agreement may be signed in two (2) counterparts, each of which shall be an original, but both of which shall constitute but one and the same instrument.
The headings contained in this Agreement are for reference purposes only and shall not affect the meaning or interpretation of this Agreement.
If for any reason any provision of this Agreement shall be determined to be invalid or unenforceable, such invalidity or unenforceability shall not affect any other provision hereof, and this Agreement shall be construed as if such invalid or unenforceable provision were omitted.
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18.
|
Successors and Assigns.
|
This Agreement shall inure to the benefit of and be binding upon each successor and assign of the Company. All obligations imposed upon the Director or a Representative, and all rights granted to the Company hereunder, shall be binding upon the Director's or the Representative's heirs, legal representatives and successors.
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19.
|
Tax Consequences/409A.
|
None of the Company, nor any Affiliate shall be liable or responsible in any way for the tax consequences relating to a grant of RSUs or the lapse of the restrictions hereunder. The Director agrees to determine and be responsible for any and all tax consequences to Director relating to the grant of RSUs and the issuance of Common Stock or payment of cash hereunder. If the Company is obligated to withhold an amount on account of any tax imposed as a result of the issuance of shares of Common Stock or payment of cash in satisfaction of an award of RSUs or the release of any restrictions or limitations in respect of RSUs,
the provisions of the Plan regarding tax withholding shall apply (including any required payments by the Director).
The award of RSUs as provided in this Agreement and any issuance of Shares or payment pursuant to this Agreement are intended to comply with Section 409A of the Code and the regulations thereunder.
IN WITNESS WHEREOF, the Company has caused this Agreement to be duly executed by an officer thereunto duly authorized, and the Director has hereunto set his hand, all as of the day and year first above written.
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REGIS CORPORATION
|
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By:
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DIRECTOR:
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Exhibit No. 31.1
CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Hugh E. Sawyer, certify that:
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1.
|
I have reviewed this quarterly report on Form 10-Q of Regis Corporation;
|
|
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
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3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;
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4.
|
The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:
|
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(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
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(c)
|
Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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(d)
|
Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and
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5.
|
The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s Board of Directors or persons performing the equivalent functions:
|
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|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and
|
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|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.
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October 30, 2018
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/s/ Hugh E. Sawyer
|
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Hugh E. Sawyer, President and Chief Executive Officer
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Exhibit No. 31.2
CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Andrew H. Lacko, certify that:
|
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Regis Corporation;
|
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|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
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3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;
|
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4.
|
The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:
|
|
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
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(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
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(c)
|
Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
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(d)
|
Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and
|
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5.
|
The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s Board of Directors or persons performing the equivalent functions:
|
|
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and
|
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|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.
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October 30, 2018
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/s/ Andrew H. Lacko
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Andrew H. Lacko, Executive Vice President and Chief Financial Officer
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Exhibit No. 32
CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Regis Corporation (the Registrant) on Form 10-Q for the fiscal quarter ending
September 30, 2018
filed with the Securities and Exchange Commission on the date hereof, Hugh E. Sawyer, President and Chief Executive Officer of the Registrant, and Andrew H. Lacko, Executive Vice President and Chief Financial Officer of the Registrant, each hereby certifies, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:
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(1)
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The Quarterly Report on Form 10-Q complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
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(2)
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The information contained in the Quarter Report on Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Registrant.
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October 30, 2018
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/s/ Hugh E. Sawyer
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Hugh E. Sawyer, President and Chief Executive Officer
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October 30, 2018
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/s/ Andrew H. Lacko
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Andrew H. Lacko, Executive Vice President and Chief Financial Officer
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