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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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¨
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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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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Large accelerated filer
x
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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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Common Stock, $.05 par value
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39,326,526
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Class
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Number of Shares
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March 31,
2019 |
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June 30,
2018 |
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ASSETS
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Current assets:
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Cash and cash equivalents
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$
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71,146
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$
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110,399
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Receivables, net
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33,737
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52,430
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Inventories
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90,869
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79,363
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Other current assets
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32,386
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47,867
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Total current assets
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228,138
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290,059
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Property and equipment, net
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83,629
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99,288
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Goodwill
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378,560
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412,643
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Other intangibles, net
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9,346
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10,557
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Other assets
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32,768
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37,616
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Non-current assets held for sale (Note 1)
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6,529
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6,572
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Total assets
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$
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738,970
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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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57,021
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$
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57,738
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Accrued expenses
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83,490
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100,716
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Total current liabilities
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140,511
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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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Long-term lease liability
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17,505
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—
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Other noncurrent liabilities
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115,144
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121,843
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Total liabilities
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363,160
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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, $0.05 par value; issued and outstanding 39,433,124 and 45,258,571 common shares at March 31, 2019 and June 30, 2018 respectively
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1,972
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2,263
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Additional paid-in capital
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93,515
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194,436
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Accumulated other comprehensive income
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9,050
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9,656
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Retained earnings
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271,273
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280,083
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Total shareholders’ equity
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375,810
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486,438
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Total liabilities and shareholders’ equity
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$
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738,970
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$
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856,735
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Three Months Ended March 31,
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Nine Months Ended March 31,
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||||||||||||
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2019
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2018
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2019
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2018
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Revenues:
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Service
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$
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181,809
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$
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222,022
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$
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580,076
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$
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680,930
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Product
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53,766
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64,911
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173,006
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197,701
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Royalties and fees
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22,768
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18,850
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67,767
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56,465
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258,343
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305,783
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820,849
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935,096
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Operating expenses:
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Cost of service
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111,632
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132,081
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348,060
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406,767
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Cost of product
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31,167
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37,139
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99,698
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107,165
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Site operating expenses
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34,339
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37,548
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106,723
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116,175
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General and administrative
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41,694
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45,727
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135,257
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129,485
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Rent
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32,332
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39,391
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102,952
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147,280
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Depreciation and amortization
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8,630
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9,558
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27,732
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46,764
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TBG mall location restructuring (Note 3)
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20,711
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—
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20,711
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—
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Total operating expenses
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280,505
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301,444
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841,133
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953,636
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Operating (loss) income
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(22,162
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)
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4,339
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(20,284
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)
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(18,540
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)
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Other (expense) income:
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Interest expense
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(1,354
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)
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(5,095
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)
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(3,432
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)
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(9,402
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)
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Gain from sale of salon assets to franchisees, net
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11,489
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237
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10,394
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255
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Interest income and other, net
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464
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1,495
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1,453
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3,934
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(Loss) income from continuing operations before income taxes
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(11,563
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)
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976
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(11,869
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)
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(23,753
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)
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Income tax (expense) benefit
|
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(3,248
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)
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2,609
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(2,988
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)
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77,875
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||||||||
(Loss) income from continuing operations
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(14,811
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)
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3,585
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(14,857
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)
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54,122
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Income (loss) from TBG discontinued operations, net of taxes
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178
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(10,605
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)
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6,027
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(50,973
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)
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||||
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||||||||
Net (loss) income
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$
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(14,633
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)
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$
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(7,020
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)
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$
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(8,830
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)
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$
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3,149
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Net (loss) income per share:
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Basic:
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(Loss) income from continuing operations
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$
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(0.37
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)
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$
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0.08
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$
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(0.35
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)
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$
|
1.16
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Income (loss) from TBG discontinued operations
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0.00
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(0.23
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)
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0.14
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(1.09
|
)
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Net (loss) income per share, basic (1)
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|
$
|
(0.36
|
)
|
|
$
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(0.15
|
)
|
|
$
|
(0.21
|
)
|
|
$
|
0.07
|
|
Diluted:
|
|
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|
|
|
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|
|
||||||||
(Loss) income from continuing operations
|
|
$
|
(0.37
|
)
|
|
$
|
0.08
|
|
|
$
|
(0.35
|
)
|
|
$
|
1.15
|
|
Income (loss) from TBG discontinued operations
|
|
0.00
|
|
|
(0.22
|
)
|
|
0.14
|
|
|
(1.08
|
)
|
||||
Net (loss) income per share, diluted (1)
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|
$
|
(0.36
|
)
|
|
$
|
(0.15
|
)
|
|
$
|
(0.21
|
)
|
|
$
|
0.07
|
|
|
|
|
|
|
|
|
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||||||||
Weighted average common and common equivalent shares outstanding:
|
|
|
|
|
|
|
|
|
||||||||
Basic
|
|
40,314
|
|
|
46,612
|
|
|
42,900
|
|
|
46,684
|
|
||||
Diluted
|
|
40,314
|
|
|
47,153
|
|
|
42,900
|
|
|
47,093
|
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(1)
|
Total is a recalculation; line items calculated individually may not sum to total due to rounding.
|
|
|
Three Months Ended March 31,
|
|
Nine Months Ended March 31,
|
||||||||||||
|
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2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Net (loss) income
|
|
$
|
(14,633
|
)
|
|
$
|
(7,020
|
)
|
|
$
|
(8,830
|
)
|
|
$
|
3,149
|
|
Other comprehensive income (loss), net of tax:
|
|
|
|
|
|
|
|
|
||||||||
Foreign currency translation adjustments during the period:
|
|
|
|
|
|
|
|
|
||||||||
Foreign currency translation adjustments
|
|
905
|
|
|
(1,372
|
)
|
|
(606
|
)
|
|
904
|
|
||||
Reclassification adjustments for losses included in net (loss) income (Note 3)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6,152
|
|
||||
Net current period foreign currency translation adjustments
|
|
905
|
|
|
(1,372
|
)
|
|
(606
|
)
|
|
7,056
|
|
||||
Comprehensive (loss) income
|
|
$
|
(13,728
|
)
|
|
$
|
(8,392
|
)
|
|
$
|
(9,436
|
)
|
|
$
|
10,205
|
|
|
|
Three Months Ended March 31, 2019
|
|||||||||||||||||||||
|
|
Common Stock
|
|
Additional
Paid-In Capital |
|
Accumulated
Other
Comprehensive
Income
|
|
Retained
Earnings
|
|
Total
|
|||||||||||||
|
|
Shares
|
|
Amount
|
|
|
|
|
|||||||||||||||
Balance, December 31, 2018
|
|
41,472,468
|
|
|
$
|
2,074
|
|
|
$
|
128,964
|
|
|
$
|
8,145
|
|
|
$
|
285,827
|
|
|
$
|
425,010
|
|
Net loss
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(14,633
|
)
|
|
(14,633
|
)
|
|||||
Foreign currency translation adjustments
|
|
—
|
|
|
—
|
|
|
—
|
|
|
905
|
|
|
—
|
|
|
905
|
|
|||||
Stock repurchase program
|
|
(2,050,430
|
)
|
|
(102
|
)
|
|
(37,818
|
)
|
|
—
|
|
|
—
|
|
|
(37,920
|
)
|
|||||
Exercise of SARs
|
|
7,080
|
|
|
—
|
|
|
(101
|
)
|
|
—
|
|
|
—
|
|
|
(101
|
)
|
|||||
Stock-based compensation
|
|
—
|
|
|
—
|
|
|
2,512
|
|
|
—
|
|
|
—
|
|
|
2,512
|
|
|||||
Net restricted stock activity
|
|
4,006
|
|
|
—
|
|
|
(42
|
)
|
|
—
|
|
|
—
|
|
|
(42
|
)
|
|||||
Minority interest
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
79
|
|
|
79
|
|
|||||
Balance, March 31, 2019
|
|
39,433,124
|
|
|
$
|
1,972
|
|
|
$
|
93,515
|
|
|
$
|
9,050
|
|
|
$
|
271,273
|
|
|
$
|
375,810
|
|
|
|
Three Months Ended March 31, 2018
|
|||||||||||||||||||||
|
|
Common Stock
|
|
Additional
Paid-In Capital |
|
Accumulated
Other
Comprehensive
Income
|
|
Retained
Earnings
|
|
Total
|
|||||||||||||
|
|
Shares
|
|
Amount
|
|
|
|
|
|||||||||||||||
Balance, December 31, 2017
|
|
46,688,423
|
|
|
$
|
2,335
|
|
|
$
|
216,301
|
|
|
$
|
11,843
|
|
|
$
|
283,694
|
|
|
$
|
514,173
|
|
Net loss
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(7,020
|
)
|
|
(7,020
|
)
|
|||||
Foreign currency translation adjustments
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,372
|
)
|
|
—
|
|
|
(1,372
|
)
|
|||||
Stock repurchase program
|
|
(585,967
|
)
|
|
(30
|
)
|
|
(9,605
|
)
|
|
—
|
|
|
—
|
|
|
(9,635
|
)
|
|||||
Exercise of SARs
|
|
18,697
|
|
|
1
|
|
|
(184
|
)
|
|
—
|
|
|
—
|
|
|
(183
|
)
|
|||||
Stock-based compensation
|
|
—
|
|
|
—
|
|
|
1,690
|
|
|
—
|
|
|
—
|
|
|
1,690
|
|
|||||
Net restricted stock activity
|
|
5,096
|
|
|
—
|
|
|
(53
|
)
|
|
—
|
|
|
—
|
|
|
(53
|
)
|
|||||
Minority interest
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
67
|
|
|
67
|
|
|||||
Balance, March 31, 2018
|
|
46,126,249
|
|
|
$
|
2,306
|
|
|
$
|
208,149
|
|
|
$
|
10,471
|
|
|
$
|
276,741
|
|
|
$
|
497,667
|
|
|
|
Nine Months Ended March 31, 2019
|
|||||||||||||||||||||
|
|
Common Stock
|
|
Additional
Paid-In Capital |
|
Accumulated
Other
Comprehensive
Income
|
|
Retained
Earnings
|
|
Total
|
|||||||||||||
|
|
Shares
|
|
Amount
|
|
|
|
|
|||||||||||||||
Balance, June 30, 2018
|
|
45,258,571
|
|
|
$
|
2,263
|
|
|
$
|
194,436
|
|
|
$
|
9,656
|
|
|
$
|
280,083
|
|
|
$
|
486,438
|
|
Net loss
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(8,830
|
)
|
|
(8,830
|
)
|
|||||
Foreign currency translation adjustments
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(606
|
)
|
|
—
|
|
|
(606
|
)
|
|||||
Stock repurchase program
|
|
(6,023,523
|
)
|
|
(301
|
)
|
|
(105,951
|
)
|
|
—
|
|
|
—
|
|
|
(106,252
|
)
|
|||||
Exercise of SARs
|
|
15,412
|
|
|
1
|
|
|
(205
|
)
|
|
—
|
|
|
—
|
|
|
(204
|
)
|
|||||
Stock-based compensation
|
|
—
|
|
|
—
|
|
|
7,065
|
|
|
—
|
|
|
—
|
|
|
7,065
|
|
|||||
Net restricted stock activity
|
|
182,664
|
|
|
9
|
|
|
(1,830
|
)
|
|
—
|
|
|
—
|
|
|
(1,821
|
)
|
|||||
Minority interest
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
20
|
|
|
20
|
|
|||||
Balance, March 31, 2019
|
|
39,433,124
|
|
|
$
|
1,972
|
|
|
$
|
93,515
|
|
|
$
|
9,050
|
|
|
$
|
271,273
|
|
|
$
|
375,810
|
|
|
|
Nine Months Ended March 31, 2018
|
|||||||||||||||||||||
|
|
Common Stock
|
|
Additional
Paid-In Capital |
|
Accumulated
Other
Comprehensive
Income
|
|
Retained
Earnings
|
|
Total
|
|||||||||||||
|
|
Shares
|
|
Amount
|
|
|
|
|
|||||||||||||||
Balance, June 30, 2017
|
|
46,400,367
|
|
|
$
|
2,320
|
|
|
$
|
214,109
|
|
|
$
|
3,415
|
|
|
$
|
273,776
|
|
|
$
|
493,620
|
|
Net income
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,149
|
|
|
3,149
|
|
|||||
Foreign currency translation adjustments
|
|
—
|
|
|
—
|
|
|
—
|
|
|
7,056
|
|
|
—
|
|
|
7,056
|
|
|||||
Stock repurchase program
|
|
(585,967
|
)
|
|
(30
|
)
|
|
(9,605
|
)
|
|
—
|
|
|
—
|
|
|
(9,635
|
)
|
|||||
Exercise of SARs
|
|
27,793
|
|
|
2
|
|
|
(278
|
)
|
|
—
|
|
|
—
|
|
|
(276
|
)
|
|||||
Stock-based compensation
|
|
—
|
|
|
—
|
|
|
5,933
|
|
|
—
|
|
|
—
|
|
|
5,933
|
|
|||||
Shares issued through franchise stock incentive program
|
|
522
|
|
|
—
|
|
|
7
|
|
|
—
|
|
|
—
|
|
|
7
|
|
|||||
Net restricted stock activity
|
|
283,534
|
|
|
14
|
|
|
(2,017
|
)
|
|
—
|
|
|
—
|
|
|
(2,003
|
)
|
|||||
Minority interest
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(184
|
)
|
|
(184
|
)
|
|||||
Balance, March 31, 2018
|
|
46,126,249
|
|
|
$
|
2,306
|
|
|
$
|
208,149
|
|
|
$
|
10,471
|
|
|
$
|
276,741
|
|
|
$
|
497,667
|
|
|
|
Nine Months Ended March 31,
|
||||||
|
|
2019
|
|
2018
|
||||
Cash flows from operating activities:
|
|
|
|
|
|
|
||
Net (loss) income
|
|
$
|
(8,830
|
)
|
|
$
|
3,149
|
|
Adjustments to reconcile net (loss) income to net cash used in operating activities:
|
|
|
|
|
|
|||
Non-cash impairment and other adjustments related to TBG discontinued operations
|
|
(163
|
)
|
|
37,020
|
|
||
Depreciation and amortization
|
|
24,727
|
|
|
29,736
|
|
||
Depreciation related to TBG discontinued operations
|
|
—
|
|
|
3,723
|
|
||
Deferred income taxes
|
|
(6,034
|
)
|
|
(85,026
|
)
|
||
Gain on life insurance
|
|
—
|
|
|
(7,986
|
)
|
||
Non-cash TBG mall location restructuring charge
|
|
20,711
|
|
|
—
|
|
||
Gain from sale of salon assets to franchisees, net
|
|
(10,394
|
)
|
|
(255
|
)
|
||
Salon asset impairments
|
|
3,005
|
|
|
11,099
|
|
||
Accumulated other comprehensive income reclassification adjustment
|
|
—
|
|
|
6,152
|
|
||
Stock-based compensation
|
|
7,065
|
|
|
6,483
|
|
||
Amortization of debt discount and financing costs
|
|
206
|
|
|
4,011
|
|
||
Other non-cash items affecting earnings
|
|
(492
|
)
|
|
(287
|
)
|
||
Changes in operating assets and liabilities, excluding the effects of asset sales
|
|
(50,074
|
)
|
|
(29,483
|
)
|
||
Net cash used in operating activities
|
|
(20,273
|
)
|
|
(21,664
|
)
|
||
|
|
|
|
|
||||
Cash flows from investing activities:
|
|
|
|
|
|
|||
Capital expenditures
|
|
(23,160
|
)
|
|
(20,065
|
)
|
||
Capital expenditures related to TBG discontinued operations
|
|
—
|
|
|
(1,171
|
)
|
||
Proceeds from sale of assets to franchisees
|
|
54,619
|
|
|
5,620
|
|
||
Proceeds from company-owned life insurance policies
|
|
24,617
|
|
|
18,108
|
|
||
Net cash provided by investing activities
|
|
56,076
|
|
|
2,492
|
|
||
|
|
|
|
|
||||
Cash flows from financing activities:
|
|
|
|
|
|
|||
Borrowings on revolving credit facilities
|
|
—
|
|
|
90,000
|
|
||
Repayment of long-term debt and capital lease obligations
|
|
—
|
|
|
(124,230
|
)
|
||
Repurchase of common stock
|
|
(105,364
|
)
|
|
(9,634
|
)
|
||
Settlement of equity awards
|
|
—
|
|
|
(550
|
)
|
||
Taxes paid for shares withheld
|
|
(2,447
|
)
|
|
(2,279
|
)
|
||
Net proceeds from sale and leaseback transaction
|
|
18,068
|
|
|
—
|
|
||
Net cash used in financing activities
|
|
(89,743
|
)
|
|
(46,693
|
)
|
||
|
|
|
|
|
||||
Effect of exchange rate changes on cash and cash equivalents
|
|
5
|
|
|
(30
|
)
|
||
|
|
|
|
|
||||
Decrease in cash, cash equivalents, and restricted cash
|
|
(53,935
|
)
|
|
(65,895
|
)
|
||
|
|
|
|
|
||||
Cash, cash equivalents and restricted cash:
|
|
|
|
|
|
|||
Beginning of period
|
|
148,774
|
|
|
208,634
|
|
||
Cash, cash equivalents and restricted cash included in current assets held for sale
|
|
—
|
|
|
1,352
|
|
||
Beginning of period, total cash, cash equivalents and restricted cash
|
|
148,774
|
|
|
209,986
|
|
||
End of period
|
|
$
|
94,839
|
|
|
$
|
144,091
|
|
1.
|
BASIS OF PRESENTATION OF UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
|
•
|
Changes in the company-owned salon strategy,
|
•
|
Franchise expansion and sales opportunities,
|
•
|
Future market earnings multiples deterioration,
|
•
|
Our financial performance falls short of our projections due to internal operating factors,
|
•
|
Economic recession,
|
•
|
Reduced salon traffic, as defined by total transactions, and/or revenue,
|
•
|
Deterioration of industry trends,
|
•
|
Increased competition,
|
•
|
Inability to reduce general and administrative expenses as company-owned salon count potentially decreases,
|
•
|
Other factors causing our cash flow to deteriorate.
|
|
|
Three Months Ended March 31, 2019
|
|
Three Months Ended March 31, 2018
|
||||||||||||
|
|
Company-owned
|
|
Franchise
|
|
Company-owned
|
|
Franchise
|
||||||||
|
|
(in thousands)
|
||||||||||||||
Revenue recognized at a point in time:
|
|
|
|
|
|
|
|
|
||||||||
Service
|
|
$
|
181,809
|
|
|
$
|
—
|
|
|
$
|
222,022
|
|
|
$
|
—
|
|
Product
|
|
39,427
|
|
|
14,339
|
|
|
49,980
|
|
|
14,931
|
|
||||
Total revenue recognized at a point in time
|
|
$
|
221,236
|
|
|
$
|
14,339
|
|
|
$
|
272,002
|
|
|
$
|
14,931
|
|
|
|
|
|
|
|
|
|
|
||||||||
Revenue recognized over time:
|
|
|
|
|
|
|
|
|
||||||||
Royalty and other franchise fees
|
|
$
|
—
|
|
|
$
|
14,339
|
|
|
$
|
—
|
|
|
$
|
12,322
|
|
Advertising fund fees
|
|
—
|
|
|
8,429
|
|
|
—
|
|
|
6,528
|
|
||||
Total revenue recognized over time
|
|
—
|
|
|
22,768
|
|
|
—
|
|
|
18,850
|
|
||||
Total revenue
|
|
$
|
221,236
|
|
|
$
|
37,107
|
|
|
$
|
272,002
|
|
|
$
|
33,781
|
|
|
|
Nine Months Ended March 31, 2019
|
|
Nine Months Ended March 31, 2018
|
||||||||||||
|
|
Company-owned
|
|
Franchise
|
|
Company-owned
|
|
Franchise
|
||||||||
|
|
(in thousands)
|
||||||||||||||
Revenue recognized at a point in time:
|
|
|
|
|
|
|
|
|
||||||||
Service
|
|
$
|
580,076
|
|
|
$
|
—
|
|
|
$
|
680,930
|
|
|
$
|
—
|
|
Product
|
|
125,220
|
|
|
47,786
|
|
|
159,980
|
|
|
37,721
|
|
||||
Total revenue recognized at a point in time
|
|
$
|
705,296
|
|
|
$
|
47,786
|
|
|
$
|
840,910
|
|
|
$
|
37,721
|
|
|
|
|
|
|
|
|
|
|
||||||||
Revenue recognized over time:
|
|
|
|
|
|
|
|
|
||||||||
Royalty and other franchise fees
|
|
$
|
—
|
|
|
$
|
43,495
|
|
|
$
|
—
|
|
|
$
|
36,733
|
|
Advertising fund fees
|
|
—
|
|
|
24,272
|
|
|
—
|
|
|
19,732
|
|
||||
Total revenue recognized over time
|
|
—
|
|
|
67,767
|
|
|
—
|
|
|
56,465
|
|
||||
Total revenue
|
|
$
|
705,296
|
|
|
$
|
115,553
|
|
|
$
|
840,910
|
|
|
$
|
94,186
|
|
|
|
March 31,
2019 |
|
June 30,
2018 |
|
Balance Sheet Classification
|
||||
|
|
(in thousands)
|
|
|
||||||
Receivables from contracts with customers, net
|
|
$
|
23,904
|
|
|
$
|
21,504
|
|
|
Accounts receivable, net
|
Broker fees
|
|
$
|
16,904
|
|
|
$
|
14,002
|
|
|
Other assets
|
|
|
|
|
|
|
|
||||
Deferred revenue:
|
|
|
|
|
|
|
||||
Current
|
|
|
|
|
|
|
||||
Gift card liability
|
|
$
|
3,439
|
|
|
$
|
3,320
|
|
|
Accrued expenses
|
Deferred franchise fees unopened salons
|
|
137
|
|
|
2,306
|
|
|
Accrued expenses
|
||
Deferred franchise fees open salons
|
|
3,767
|
|
|
3,030
|
|
|
Accrued expenses
|
||
Total current deferred revenue
|
|
$
|
7,343
|
|
|
$
|
8,656
|
|
|
|
Non-current
|
|
|
|
|
|
|
||||
Deferred franchise fees unopened salons
|
|
$
|
13,941
|
|
|
$
|
11,161
|
|
|
Other non-current liabilities
|
Deferred franchise fees open salons
|
|
21,943
|
|
|
18,346
|
|
|
Other non-current liabilities
|
||
Total non-current deferred revenue
|
|
$
|
35,884
|
|
|
$
|
29,507
|
|
|
|
Balance as of June 30, 2018
|
|
$
|
14,002
|
|
Additions
|
|
4,393
|
|
|
Amortization
|
|
(1,484
|
)
|
|
Write-offs
|
|
(7
|
)
|
|
Balance as of March 31, 2019
|
|
$
|
16,904
|
|
Remainder of 2019
|
|
$
|
840
|
|
2020
|
|
3,631
|
|
|
2021
|
|
3,543
|
|
|
2022
|
|
3,423
|
|
|
2023
|
|
3,246
|
|
|
Thereafter
|
|
11,027
|
|
|
Total
|
|
$
|
25,710
|
|
|
|
|
|
Adjustments for new revenue recognition guidance
|
|
|
||||||||||||||||||
|
|
Previously
|
|
Franchise
|
|
Advertising
|
|
Gift Card
|
|
|
|
|
||||||||||||
|
|
Reported
|
|
Fees
|
|
Funds
|
|
Breakage
|
|
Taxes
|
|
Adjusted
|
||||||||||||
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Service
|
|
$
|
221,926
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
96
|
|
|
$
|
—
|
|
|
$
|
222,022
|
|
Product
|
|
64,887
|
|
|
—
|
|
|
—
|
|
|
24
|
|
|
—
|
|
|
64,911
|
|
||||||
Royalties and fees
|
|
13,988
|
|
|
(1,666
|
)
|
|
6,528
|
|
|
—
|
|
|
—
|
|
|
18,850
|
|
||||||
|
|
300,801
|
|
|
(1,665
|
)
|
|
6,527
|
|
|
120
|
|
|
—
|
|
|
305,783
|
|
||||||
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Cost of service
|
|
132,081
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
132,081
|
|
||||||
Cost of product
|
|
37,139
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
37,139
|
|
||||||
Site operating expenses
|
|
31,021
|
|
|
—
|
|
|
6,527
|
|
|
—
|
|
|
—
|
|
|
37,548
|
|
||||||
General and administrative
|
|
45,727
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
45,727
|
|
||||||
Rent
|
|
39,391
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
39,391
|
|
||||||
Depreciation and amortization
|
|
9,558
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
9,558
|
|
||||||
Total operating expenses
|
|
294,917
|
|
|
—
|
|
|
6,527
|
|
|
—
|
|
|
—
|
|
|
301,444
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Operating income
|
|
5,884
|
|
|
(1,665
|
)
|
|
—
|
|
|
120
|
|
|
—
|
|
|
4,339
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Other (expense) income:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Interest expense
|
|
(5,095
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(5,095
|
)
|
||||||
Gain from sale of salon assets to franchisees, net
|
|
237
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
237
|
|
||||||
Interest income and other, net
|
|
1,548
|
|
|
—
|
|
|
—
|
|
|
(53
|
)
|
|
—
|
|
|
1,495
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Income from continuing operations before income taxes
|
|
2,574
|
|
|
(1,665
|
)
|
|
—
|
|
|
67
|
|
|
—
|
|
|
976
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Income tax expense
|
|
2,225
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
384
|
|
|
2,609
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Income from continuing operations
|
|
4,799
|
|
|
(1,665
|
)
|
|
—
|
|
|
67
|
|
|
384
|
|
|
3,585
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Loss from TBG discontinued operations, net of taxes
|
|
(10,605
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(10,605
|
)
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Net loss
|
|
$
|
(5,806
|
)
|
|
$
|
(1,665
|
)
|
|
$
|
—
|
|
|
$
|
67
|
|
|
$
|
384
|
|
|
$
|
(7,020
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Net loss per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Basic:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Income from continuing operations (1)
|
|
$
|
0.10
|
|
|
$
|
(0.04
|
)
|
|
$
|
0.00
|
|
|
$
|
0.00
|
|
|
$
|
0.01
|
|
|
$
|
0.08
|
|
Loss from TBG discontinued operations
|
|
(0.23
|
)
|
|
0.00
|
|
|
0.00
|
|
|
0.00
|
|
|
0.00
|
|
|
(0.23
|
)
|
||||||
Net loss per share, basic (1)
|
|
$
|
(0.12
|
)
|
|
$
|
(0.04
|
)
|
|
$
|
0.00
|
|
|
$
|
0.00
|
|
|
$
|
0.01
|
|
|
$
|
(0.15
|
)
|
Diluted:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Income from continuing operations (1)
|
|
$
|
0.10
|
|
|
$
|
(0.04
|
)
|
|
$
|
0.00
|
|
|
$
|
0.00
|
|
|
$
|
0.01
|
|
|
$
|
0.08
|
|
Loss from TBG discontinued operations
|
|
(0.22
|
)
|
|
0.00
|
|
|
0.00
|
|
|
0.00
|
|
|
0.00
|
|
|
(0.22
|
)
|
||||||
Net loss per share, diluted (1)
|
|
$
|
(0.12
|
)
|
|
$
|
(0.04
|
)
|
|
$
|
0.00
|
|
|
$
|
0.00
|
|
|
$
|
0.01
|
|
|
$
|
(0.15
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Weighted average common and common equivalent shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Basic
|
|
46,612
|
|
|
46,612
|
|
|
46,612
|
|
|
46,612
|
|
|
46,612
|
|
|
46,612
|
|
||||||
Diluted
|
|
47,153
|
|
|
47,153
|
|
|
47,153
|
|
|
47,153
|
|
|
47,153
|
|
|
47,153
|
|
|
|
|
|
Adjustments for new revenue recognition guidance
|
|
|
||||||||||||||||||
|
|
Previously
|
|
Franchise
|
|
Advertising
|
|
Gift Card
|
|
|
|
|
||||||||||||
|
|
Reported
|
|
Fees
|
|
Funds
|
|
Breakage
|
|
Taxes
|
|
Adjusted
|
||||||||||||
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Service
|
|
$
|
680,699
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
231
|
|
|
$
|
—
|
|
|
$
|
680,930
|
|
Product
|
|
197,643
|
|
|
—
|
|
|
—
|
|
|
58
|
|
|
—
|
|
|
197,701
|
|
||||||
Royalties and fees
|
|
40,847
|
|
|
(4,114
|
)
|
|
19,732
|
|
|
—
|
|
|
—
|
|
|
56,465
|
|
||||||
|
|
919,189
|
|
|
(4,114
|
)
|
|
19,732
|
|
|
289
|
|
|
—
|
|
|
935,096
|
|
||||||
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Cost of service
|
|
406,767
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
406,767
|
|
||||||
Cost of product
|
|
107,165
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
107,165
|
|
||||||
Site operating expenses
|
|
96,443
|
|
|
—
|
|
|
19,732
|
|
|
—
|
|
|
—
|
|
|
116,175
|
|
||||||
General and administrative
|
|
129,485
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
129,485
|
|
||||||
Rent
|
|
147,280
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
147,280
|
|
||||||
Depreciation and amortization
|
|
46,764
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
46,764
|
|
||||||
Total operating expenses
|
|
933,904
|
|
|
—
|
|
|
19,732
|
|
|
—
|
|
|
—
|
|
|
953,636
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Operating income
|
|
(14,715
|
)
|
|
(4,114
|
)
|
|
—
|
|
|
289
|
|
|
—
|
|
|
(18,540
|
)
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Other (expense) income:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Interest expense
|
|
(9,402
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(9,402
|
)
|
||||||
Gain from sale of salon assets to franchisees, net
|
|
255
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
255
|
|
||||||
Interest income and other, net
|
|
4,919
|
|
|
—
|
|
|
—
|
|
|
(985
|
)
|
|
—
|
|
|
3,934
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Income from continuing operations before income taxes
|
|
(18,943
|
)
|
|
(4,114
|
)
|
|
—
|
|
|
(696
|
)
|
|
—
|
|
|
(23,753
|
)
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Income tax expense
|
|
73,855
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4,020
|
|
|
77,875
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Income from continuing operations
|
|
54,912
|
|
|
(4,114
|
)
|
|
—
|
|
|
(696
|
)
|
|
4,020
|
|
|
54,122
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Loss from TBG discontinued operations, net of taxes
|
|
(50,973
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(50,973
|
)
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Net loss
|
|
$
|
3,939
|
|
|
$
|
(4,114
|
)
|
|
$
|
—
|
|
|
$
|
(696
|
)
|
|
$
|
4,020
|
|
|
$
|
3,149
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Net loss per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Basic:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Income from continuing operations (1)
|
|
$
|
1.18
|
|
|
$
|
(0.09
|
)
|
|
$
|
0.00
|
|
|
$
|
(0.01
|
)
|
|
$
|
0.09
|
|
|
$
|
1.16
|
|
Loss from TBG discontinued operations
|
|
(1.09
|
)
|
|
0.00
|
|
|
0.00
|
|
|
0.00
|
|
|
0.00
|
|
|
(1.09
|
)
|
||||||
Net loss per share, basic (1)
|
|
$
|
0.08
|
|
|
$
|
(0.09
|
)
|
|
$
|
0.00
|
|
|
$
|
(0.01
|
)
|
|
$
|
0.09
|
|
|
$
|
0.07
|
|
Diluted:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Income from continuing operations (1)
|
|
$
|
1.17
|
|
|
$
|
(0.09
|
)
|
|
$
|
0.00
|
|
|
$
|
(0.01
|
)
|
|
$
|
0.09
|
|
|
$
|
1.15
|
|
Loss from TBG discontinued operations
|
|
(1.08
|
)
|
|
0.00
|
|
|
0.00
|
|
|
0.00
|
|
|
0.00
|
|
|
(1.08
|
)
|
||||||
Net loss per share, diluted (1)
|
|
$
|
0.08
|
|
|
$
|
(0.09
|
)
|
|
$
|
0.00
|
|
|
$
|
(0.01
|
)
|
|
$
|
0.09
|
|
|
$
|
0.07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Weighted average common and common equivalent shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Basic
|
|
46,684
|
|
|
46,684
|
|
|
46,684
|
|
|
46,684
|
|
|
46,684
|
|
|
46,684
|
|
||||||
Diluted
|
|
47,093
|
|
|
47,093
|
|
|
47,093
|
|
|
47,093
|
|
|
47,093
|
|
|
47,093
|
|
3.
|
TBG DISCONTINUED OPERATIONS:
|
|
For the Three Months Ended March 31,
|
|
For the Nine Months Ended March 31,
|
||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
|
(Dollars in thousands)
|
|
(Dollars in thousands)
|
||||||||||||
Revenue
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
101,140
|
|
|
|
|
|
|
|
|
|
||||||||
Income (loss) from TBG discontinued operations, before income taxes
|
224
|
|
|
(13,545
|
)
|
|
(862
|
)
|
|
(57,385
|
)
|
||||
Income tax (expense) benefit on TBG discontinued operations
|
(46
|
)
|
|
2,940
|
|
|
6,889
|
|
|
6,412
|
|
||||
Income (loss) from TBG discontinued operations, net of income taxes
|
$
|
178
|
|
|
$
|
(10,605
|
)
|
|
$
|
6,027
|
|
|
$
|
(50,973
|
)
|
|
For the Three Months Ended March 31,
|
|
For the Nine Months Ended March 31,
|
|
Income Statement Classification
|
||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
|
||||||||
|
(Dollars in thousands)
|
|
|
||||||||||||||
TBG mall location restructuring
|
$
|
20,711
|
|
|
$
|
—
|
|
|
$
|
20,711
|
|
|
$
|
—
|
|
|
TBG mall location restructuring
|
|
|
|
|
|
|
|
|
|
|
||||||||
Working capital and prepaid rent receivable reserve
|
—
|
|
|
(11,697
|
)
|
|
—
|
|
|
(11,697
|
)
|
|
Income (loss) from TBG discontinued operations
|
||||
Other charges
|
224
|
|
|
(1,848
|
)
|
|
(862
|
)
|
|
(45,688
|
)
|
|
Income (loss) from TBG discontinued operations
|
||||
Income (loss) from TBG discontinued operations, before income taxes
|
224
|
|
|
(13,545
|
)
|
|
(862
|
)
|
|
(57,385
|
)
|
|
Income (loss) from TBG discontinued operations
|
||||
Income tax (expense) benefit on TBG discontinued operations
|
(46
|
)
|
|
2,940
|
|
|
6,889
|
|
|
6,412
|
|
|
Income (loss) from TBG discontinued operations
|
||||
Income (loss) from TBG discontinued operations, net of income taxes
|
$
|
178
|
|
|
$
|
(10,605
|
)
|
|
$
|
6,027
|
|
|
$
|
(50,973
|
)
|
|
Income (loss) from TBG discontinued operations
|
4.
|
EARNINGS PER SHARE:
|
5.
|
SHAREHOLDERS’ EQUITY:
|
|
|
For the Three Months Ended March 31, 2019
|
|
For the Nine Months Ended March 31, 2019
|
||
Restricted stock units
|
|
—
|
|
|
338,859
|
|
Performance-based restricted stock units
|
|
—
|
|
|
733,688
|
|
6.
|
INCOME TAXES:
|
|
|
For the Three Months Ended March 31,
|
|
For the Nine Months Ended March 31,
|
||||||||||||
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
|
|
(Dollars in thousands)
|
||||||||||||||
Income tax (expense) benefit
|
|
$
|
(3,248
|
)
|
|
$
|
2,609
|
|
|
$
|
(2,988
|
)
|
|
$
|
77,875
|
|
Effective tax rate
|
|
(28.1
|
%)
|
|
(267.3
|
%)
|
|
(25.2
|
%)
|
|
327.9
|
%
|
7.
|
COMMITMENTS AND CONTINGENCIES:
|
|
March 31,
2019 |
|
June 30,
2018 |
||||
|
(Dollars in thousands)
|
||||||
Cash and cash equivalents
|
$
|
71,146
|
|
|
$
|
110,399
|
|
Restricted cash, included in Other current assets (1)
|
23,693
|
|
|
38,375
|
|
||
Total cash, cash equivalents and restricted cash
|
$
|
94,839
|
|
|
$
|
148,774
|
|
(1)
|
Restricted cash within Other current assets primarily relates to consolidated advertising cooperatives funds which can only be used to settle obligations of the respective cooperatives and contractual obligations to collateralize the Company's self-insurance programs.
|
|
|
Company-owned
|
|
Franchise
|
|
Consolidated
|
||||||
|
|
(Dollars in thousands)
|
||||||||||
Goodwill, net at June 30, 2018
|
|
$
|
184,788
|
|
|
$
|
227,855
|
|
|
$
|
412,643
|
|
Translation rate adjustments
|
|
(147
|
)
|
|
(408
|
)
|
|
(555
|
)
|
|||
Derecognition related to sale of salon assets to franchisees (1)
|
|
(33,528
|
)
|
|
—
|
|
|
(33,528
|
)
|
|||
Goodwill, net at March 31, 2019
|
|
$
|
151,113
|
|
|
$
|
227,447
|
|
|
$
|
378,560
|
|
(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.
|
|
|
March 31, 2019
|
|
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
|
|
$
|
7,830
|
|
|
$
|
(4,236
|
)
|
|
$
|
3,594
|
|
|
$
|
8,128
|
|
|
$
|
(4,260
|
)
|
|
$
|
3,868
|
|
Franchise agreements
|
|
9,675
|
|
|
(7,888
|
)
|
|
1,787
|
|
|
9,763
|
|
|
(7,712
|
)
|
|
2,051
|
|
||||||
Lease intangibles
|
|
13,474
|
|
|
(9,884
|
)
|
|
3,590
|
|
|
13,997
|
|
|
(9,770
|
)
|
|
4,227
|
|
||||||
Other
|
|
1,966
|
|
|
(1,591
|
)
|
|
375
|
|
|
1,983
|
|
|
(1,572
|
)
|
|
411
|
|
||||||
|
|
$
|
32,945
|
|
|
$
|
(23,599
|
)
|
|
$
|
9,346
|
|
|
$
|
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:
|
|
|
Maturity Date
|
|
Interest Rate
|
|
March 31,
2019 |
|
June 30,
2018 |
||||
|
|
(Fiscal Year)
|
|
|
|
(Dollars in thousands)
|
||||||
Revolving credit facility
|
|
2023
|
|
3.75%
|
|
$
|
90,000
|
|
|
$
|
90,000
|
|
|
|
Maturity Date
|
|
Interest Rate
|
|
March 31,
2019 |
|
June 30,
2018 |
||||
|
|
(Fiscal Year)
|
|
|
|
(Dollars in thousands)
|
||||||
Long-term lease liability
|
|
2033
|
|
3.30%
|
|
$
|
17,505
|
|
|
$
|
—
|
|
Remainder of 2019
|
|
$
|
302
|
|
2020
|
|
1,120
|
|
|
2021
|
|
1,157
|
|
|
2022
|
|
1,171
|
|
|
2023
|
|
1,186
|
|
|
Thereafter
|
|
13,265
|
|
|
Total
|
|
$
|
18,201
|
|
|
|
For the Three Months Ended March 31,
|
|
For the Nine Months Ended March 31,
|
||||||||||||
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
|
|
(Dollars in thousands)
|
||||||||||||||
Long-lived assets
|
|
$
|
702
|
|
|
$
|
313
|
|
|
$
|
3,005
|
|
|
$
|
9,565
|
|
(1)
|
Canadian and Puerto Rican salons are included in the North American salon totals.
|
|
|
For the Three Months Ended March 31, 2019
|
||||||||||||||
|
|
Company-owned
|
|
Franchise
|
|
Corporate
|
|
Consolidated
|
||||||||
|
|
(Dollars in thousands)
|
||||||||||||||
Revenues:
|
|
|
|
|
|
|
|
|
||||||||
Service
|
|
$
|
181,809
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
181,809
|
|
Product
|
|
39,427
|
|
|
14,339
|
|
|
—
|
|
|
53,766
|
|
||||
Royalties and fees
|
|
—
|
|
|
22,768
|
|
|
—
|
|
|
22,768
|
|
||||
|
|
221,236
|
|
|
37,107
|
|
|
—
|
|
|
258,343
|
|
||||
Operating expenses:
|
|
|
|
|
|
|
|
|
||||||||
Cost of service
|
|
111,632
|
|
|
—
|
|
|
—
|
|
|
111,632
|
|
||||
Cost of product
|
|
19,992
|
|
|
11,175
|
|
|
—
|
|
|
31,167
|
|
||||
Site operating expenses
|
|
25,894
|
|
|
8,445
|
|
|
—
|
|
|
34,339
|
|
||||
General and administrative
|
|
14,505
|
|
|
7,526
|
|
|
19,663
|
|
|
41,694
|
|
||||
Rent
|
|
31,964
|
|
|
190
|
|
|
178
|
|
|
32,332
|
|
||||
Depreciation and amortization
|
|
6,519
|
|
|
240
|
|
|
1,871
|
|
|
8,630
|
|
||||
TBG mall location restructuring
|
|
—
|
|
|
20,711
|
|
|
—
|
|
|
20,711
|
|
||||
Total operating expenses
|
|
210,506
|
|
|
48,287
|
|
|
21,712
|
|
|
280,505
|
|
||||
Operating income (loss)
|
|
10,730
|
|
|
(11,180
|
)
|
|
(21,712
|
)
|
|
(22,162
|
)
|
||||
Other (expense) income:
|
|
|
|
|
|
|
|
|
||||||||
Interest expense
|
|
—
|
|
|
—
|
|
|
(1,354
|
)
|
|
(1,354
|
)
|
||||
Gain from sale of salon assets to franchisees, net
|
|
—
|
|
|
—
|
|
|
11,489
|
|
|
11,489
|
|
||||
Interest income and other, net
|
|
—
|
|
|
—
|
|
|
464
|
|
|
464
|
|
||||
Income (loss) from continuing operations before income taxes
|
|
$
|
10,730
|
|
|
$
|
(11,180
|
)
|
|
$
|
(11,113
|
)
|
|
$
|
(11,563
|
)
|
|
|
For the Three Months Ended March 31, 2018
|
||||||||||||||
|
|
Company-owned
|
|
Franchise
|
|
Corporate
|
|
Consolidated
|
||||||||
|
|
(Dollars in thousands)
|
||||||||||||||
Revenues:
|
|
|
|
|
|
|
|
|
||||||||
Service
|
|
$
|
222,022
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
222,022
|
|
Product
|
|
49,980
|
|
|
14,931
|
|
|
—
|
|
|
64,911
|
|
||||
Royalties and fees
|
|
—
|
|
|
18,850
|
|
|
—
|
|
|
18,850
|
|
||||
|
|
272,002
|
|
|
33,781
|
|
|
—
|
|
|
305,783
|
|
||||
Operating expenses:
|
|
|
|
|
|
|
|
|
||||||||
Cost of service
|
|
132,081
|
|
|
—
|
|
|
—
|
|
|
132,081
|
|
||||
Cost of product
|
|
25,137
|
|
|
12,002
|
|
|
—
|
|
|
37,139
|
|
||||
Site operating expenses
|
|
31,022
|
|
|
6,526
|
|
|
—
|
|
|
37,548
|
|
||||
General and administrative
|
|
18,051
|
|
|
6,590
|
|
|
21,086
|
|
|
45,727
|
|
||||
Rent
|
|
39,094
|
|
|
51
|
|
|
246
|
|
|
39,391
|
|
||||
Depreciation and amortization
|
|
7,276
|
|
|
92
|
|
|
2,190
|
|
|
9,558
|
|
||||
TBG mall location restructuring
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Total operating expenses
|
|
252,661
|
|
|
25,261
|
|
|
23,522
|
|
|
301,444
|
|
||||
Operating income (loss)
|
|
19,341
|
|
|
8,520
|
|
|
(23,522
|
)
|
|
4,339
|
|
||||
Other (expense) income:
|
|
|
|
|
|
|
|
|
||||||||
Interest expense
|
|
—
|
|
|
—
|
|
|
(5,095
|
)
|
|
(5,095
|
)
|
||||
Gain from sale of salon assets to franchisees, net
|
|
—
|
|
|
—
|
|
|
237
|
|
|
237
|
|
||||
Interest income and other, net
|
|
—
|
|
|
—
|
|
|
1,495
|
|
|
1,495
|
|
||||
Income (loss) from continuing operations before income taxes
|
|
$
|
19,341
|
|
|
$
|
8,520
|
|
|
$
|
(26,885
|
)
|
|
$
|
976
|
|
|
|
For the Nine Months Ended March 31, 2019
|
||||||||||||||
|
|
Company-owned
|
|
Franchise
|
|
Corporate
|
|
Consolidated
|
||||||||
|
|
(Dollars in thousands)
|
||||||||||||||
Revenues:
|
|
|
|
|
|
|
|
|
||||||||
Service
|
|
$
|
580,076
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
580,076
|
|
Product
|
|
125,220
|
|
|
47,786
|
|
|
—
|
|
|
173,006
|
|
||||
Royalties and fees
|
|
—
|
|
|
67,767
|
|
|
—
|
|
|
67,767
|
|
||||
|
|
705,296
|
|
|
115,553
|
|
|
—
|
|
|
820,849
|
|
||||
Operating expenses:
|
|
|
|
|
|
|
|
|
||||||||
Cost of service
|
|
348,060
|
|
|
—
|
|
|
—
|
|
|
348,060
|
|
||||
Cost of product
|
|
61,661
|
|
|
38,037
|
|
|
—
|
|
|
99,698
|
|
||||
Site operating expenses
|
|
82,435
|
|
|
24,288
|
|
|
—
|
|
|
106,723
|
|
||||
General and administrative
|
|
45,084
|
|
|
24,656
|
|
|
65,517
|
|
|
135,257
|
|
||||
Rent
|
|
101,908
|
|
|
468
|
|
|
576
|
|
|
102,952
|
|
||||
Depreciation and amortization
|
|
21,304
|
|
|
613
|
|
|
5,815
|
|
|
27,732
|
|
||||
TBG mall location restructuring
|
|
—
|
|
|
20,711
|
|
|
—
|
|
|
20,711
|
|
||||
Total operating expenses
|
|
660,452
|
|
|
108,773
|
|
|
71,908
|
|
|
841,133
|
|
||||
Operating income (loss)
|
|
44,844
|
|
|
6,780
|
|
|
(71,908
|
)
|
|
(20,284
|
)
|
||||
Other (expense) income:
|
|
|
|
|
|
|
|
|
||||||||
Interest expense
|
|
—
|
|
|
—
|
|
|
(3,432
|
)
|
|
(3,432
|
)
|
||||
Gain from sale of salon assets to franchisees, net
|
|
—
|
|
|
—
|
|
|
10,394
|
|
|
10,394
|
|
||||
Interest income and other, net
|
|
—
|
|
|
—
|
|
|
1,453
|
|
|
1,453
|
|
||||
Income (loss) from continuing operations before income taxes
|
|
$
|
44,844
|
|
|
$
|
6,780
|
|
|
$
|
(63,493
|
)
|
|
$
|
(11,869
|
)
|
|
|
For the Nine Months Ended March 31, 2018
|
||||||||||||||
|
|
Company-owned
|
|
Franchise
|
|
Corporate
|
|
Consolidated
|
||||||||
|
|
(Dollars in thousands)
|
||||||||||||||
Revenues:
|
|
|
|
|
|
|
|
|
||||||||
Service
|
|
$
|
680,930
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
680,930
|
|
Product
|
|
159,980
|
|
|
37,721
|
|
|
—
|
|
|
197,701
|
|
||||
Royalties and fees
|
|
—
|
|
|
56,465
|
|
|
—
|
|
|
56,465
|
|
||||
|
|
840,910
|
|
|
94,186
|
|
|
—
|
|
|
935,096
|
|
||||
Operating expenses:
|
|
|
|
|
|
|
|
|
||||||||
Cost of service
|
|
406,767
|
|
|
—
|
|
|
—
|
|
|
406,767
|
|
||||
Cost of product
|
|
77,628
|
|
|
29,537
|
|
|
—
|
|
|
107,165
|
|
||||
Site operating expenses
|
|
96,443
|
|
|
19,732
|
|
|
—
|
|
|
116,175
|
|
||||
General and administrative
|
|
51,822
|
|
|
19,005
|
|
|
58,658
|
|
|
129,485
|
|
||||
Rent
|
|
146,376
|
|
|
168
|
|
|
736
|
|
|
147,280
|
|
||||
Depreciation and amortization
|
|
39,224
|
|
|
275
|
|
|
7,265
|
|
|
46,764
|
|
||||
TBG mall location restructuring
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Total operating expenses
|
|
818,260
|
|
|
68,717
|
|
|
66,659
|
|
|
953,636
|
|
||||
Operating income (loss)
|
|
22,650
|
|
|
25,469
|
|
|
(66,659
|
)
|
|
(18,540
|
)
|
||||
Other (expense) income:
|
|
|
|
|
|
|
|
|
||||||||
Interest expense
|
|
—
|
|
|
—
|
|
|
(9,402
|
)
|
|
(9,402
|
)
|
||||
Gain from sale of salon assets to franchisees, net
|
|
—
|
|
|
—
|
|
|
255
|
|
|
255
|
|
||||
Interest income and other, net
|
|
—
|
|
|
—
|
|
|
3,934
|
|
|
3,934
|
|
||||
Income (loss) from continuing operations before income taxes
|
|
$
|
22,650
|
|
|
$
|
25,469
|
|
|
$
|
(71,872
|
)
|
|
$
|
(23,753
|
)
|
|
|
Three Months Ended
March 31, |
|
Increase
|
|
Nine Months Ended
March 31, |
|
(Decrease) Increase
|
||||||||||||||||
(Dollars in thousands)
|
|
2019
|
|
2018
|
|
|
2019
|
|
2018
|
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Salons sold to franchisees (1)
|
|
245
|
|
|
126
|
|
|
119
|
|
|
502
|
|
|
1,437
|
|
|
(935
|
)
|
||||||
Cash proceeds received
|
|
$
|
30,569
|
|
|
$
|
2,924
|
|
|
$
|
27,645
|
|
|
$
|
54,619
|
|
|
$
|
5,620
|
|
|
$
|
48,999
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Gain on sale of venditions, excluding goodwill derecognition
|
|
$
|
27,421
|
|
|
$
|
1,409
|
|
|
$
|
26,012
|
|
|
$
|
43,922
|
|
|
$
|
1,969
|
|
|
$
|
41,953
|
|
Non-cash goodwill derecognition
|
|
(15,932
|
)
|
|
(1,172
|
)
|
|
14,760
|
|
|
(33,528
|
)
|
|
(1,714
|
)
|
|
31,814
|
|
||||||
Gain from sale of salon assets to franchisees, net
|
|
$
|
11,489
|
|
|
$
|
237
|
|
|
$
|
11,252
|
|
|
$
|
10,394
|
|
|
$
|
255
|
|
|
$
|
10,139
|
|
|
|
Three Months Ended
March 31, |
|
Nine Months Ended
March 31, |
||||||||
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||
SmartStyle
|
|
0.6
|
%
|
|
0.6
|
%
|
|
1.2
|
%
|
|
(0.1
|
)%
|
Supercuts
|
|
(2.2
|
)
|
|
3.2
|
|
|
(0.2
|
)
|
|
2.5
|
|
Signature Style
|
|
(3.9
|
)
|
|
2.2
|
|
|
(1.0
|
)
|
|
0.6
|
|
Total, excluding TBG mall-locations
|
|
(2.0
|
)%
|
|
NA
|
|
|
(0.1
|
)%
|
|
NA
|
|
TBG mall-locations
|
|
(4.7
|
)
|
|
NA
|
|
|
(4.0
|
)
|
|
NA
|
|
Total
|
|
(2.4
|
)%
|
|
2.2
|
%
|
|
(0.5
|
)%
|
|
1.1
|
%
|
(1)
|
System-wide same-store sales are calculated as the total change in sales for system-wide company-owned and franchise locations for more than one year (including TBG mall locations in 2019) that were open on a specific day of the week during the current period and the corresponding prior period. Quarterly and year-to-date system-wide same-store sales are the sum of the system-wide same-store sales computed on a daily basis. Franchise salons that do not report daily sales are excluded from same-store sales. 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. System-wide same-store sales are calculated in local currencies to remove foreign currency fluctuations from the calculation.
|
|
For the Periods Ended March 31,
|
||||||||||||||||||||||||||||||||||||||
|
Three Months
|
|
Nine Months
|
||||||||||||||||||||||||||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||||||||||
|
($ in millions)
|
|
% of Total
Revenues (1) |
|
Basis Point
(Decrease) Increase |
|
($ in millions)
|
|
% of Total
Revenues (1) |
|
Basis Point
(Decrease) Increase |
||||||||||||||||||||||||||||
Service revenues
|
$
|
181.8
|
|
|
$
|
222.0
|
|
|
70.4
|
%
|
|
72.6
|
%
|
|
(220
|
)
|
|
(200
|
)
|
|
$
|
580.1
|
|
|
$
|
680.9
|
|
|
70.6
|
%
|
|
72.9
|
%
|
|
(230
|
)
|
|
(140
|
)
|
Product revenues
|
53.8
|
|
|
64.9
|
|
|
20.8
|
|
|
21.2
|
|
|
(40
|
)
|
|
120
|
|
|
173.0
|
|
|
197.7
|
|
|
21.1
|
|
|
21.1
|
|
|
—
|
|
|
80
|
|
||||
Franchise royalties and fees
|
22.8
|
|
|
18.9
|
|
|
8.8
|
|
|
6.2
|
|
|
260
|
|
|
80
|
|
|
67.8
|
|
|
56.5
|
|
|
8.3
|
|
|
6.0
|
|
|
230
|
|
|
60
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Cost of service (2)
|
111.6
|
|
|
132.1
|
|
|
61.4
|
|
|
59.5
|
|
|
190
|
|
|
(470
|
)
|
|
348.1
|
|
|
406.8
|
|
|
60.0
|
|
|
59.7
|
|
|
30
|
|
|
(380
|
)
|
||||
Cost of product (2)
|
31.2
|
|
|
37.1
|
|
|
58.0
|
|
|
57.2
|
|
|
80
|
|
|
870
|
|
|
99.7
|
|
|
107.2
|
|
|
57.6
|
|
|
54.2
|
|
|
340
|
|
|
500
|
|
||||
Site operating expenses
|
34.3
|
|
|
37.5
|
|
|
13.3
|
|
|
12.3
|
|
|
100
|
|
|
80
|
|
|
106.7
|
|
|
116.2
|
|
|
13.0
|
|
|
12.4
|
|
|
60
|
|
|
50
|
|
||||
General and administrative
|
41.7
|
|
|
45.7
|
|
|
16.1
|
|
|
15.0
|
|
|
110
|
|
|
70
|
|
|
135.3
|
|
|
129.5
|
|
|
16.5
|
|
|
13.8
|
|
|
270
|
|
|
150
|
|
||||
Rent
|
32.3
|
|
|
39.4
|
|
|
12.5
|
|
|
12.9
|
|
|
(40
|
)
|
|
(140
|
)
|
|
103.0
|
|
|
147.3
|
|
|
12.5
|
|
|
15.8
|
|
|
(330
|
)
|
|
160
|
|
||||
Depreciation and amortization
|
8.6
|
|
|
9.6
|
|
|
3.3
|
|
|
3.1
|
|
|
20
|
|
|
(120
|
)
|
|
27.7
|
|
|
46.8
|
|
|
3.4
|
|
|
5.0
|
|
|
(160
|
)
|
|
100
|
|
||||
TBG mall location restructuring
|
20.7
|
|
|
—
|
|
|
8.0
|
|
|
—
|
|
|
800
|
|
|
—
|
|
|
20.7
|
|
|
—
|
|
|
2.5
|
|
|
—
|
|
|
250
|
|
|
—
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Operating (loss) income
|
(22.2
|
)
|
|
4.3
|
|
|
(8.6
|
)
|
|
1.4
|
|
|
(1,000
|
)
|
|
340
|
|
|
(20.3
|
)
|
|
(18.5
|
)
|
|
(2.5
|
)
|
|
(2.0
|
)
|
|
(50
|
)
|
|
(260
|
)
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Interest expense
|
1.4
|
|
|
5.1
|
|
|
0.5
|
|
|
1.7
|
|
|
(120
|
)
|
|
100
|
|
|
3.4
|
|
|
9.4
|
|
|
0.4
|
|
|
1.0
|
|
|
(60
|
)
|
|
30
|
|
||||
Gain from sale of salon assets to franchisees, net
|
11.5
|
|
|
0.2
|
|
|
4.4
|
|
|
0.1
|
|
|
430
|
|
|
10
|
|
|
10.4
|
|
|
0.3
|
|
|
1.3
|
|
|
—
|
|
|
130
|
|
|
—
|
|
||||
Interest income and other, net
|
0.5
|
|
|
1.5
|
|
|
0.2
|
|
|
0.5
|
|
|
(30
|
)
|
|
40
|
|
|
1.5
|
|
|
3.9
|
|
|
0.2
|
|
|
0.4
|
|
|
(20
|
)
|
|
30
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Income tax (expense) benefit (3)
|
(3.2
|
)
|
|
2.6
|
|
|
28.1
|
|
|
267.3
|
|
|
N/A
|
|
|
N/A
|
|
|
(3.0
|
)
|
|
77.9
|
|
|
25.2
|
|
|
327.9
|
|
|
N/A
|
|
|
N/A
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Income (loss) from TBG discontinued operations, net of taxes
|
0.2
|
|
|
(10.6
|
)
|
|
0.1
|
|
|
(3.5
|
)
|
|
360
|
|
|
(140
|
)
|
|
6.0
|
|
|
(51.0
|
)
|
|
0.7
|
|
|
(5.5
|
)
|
|
620
|
|
|
(420
|
)
|
(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 (loss) income 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.
|
|
|
Three Months Ended
March 31, |
|
Nine Months Ended
March 31, |
||||||||||||
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
|
|
(Dollars in thousands)
|
||||||||||||||
Company-owned salons:
|
|
|
|
|
|
|
|
|
|
|
||||||
SmartStyle
|
|
$
|
96,139
|
|
|
$
|
112,857
|
|
|
$
|
286,465
|
|
|
$
|
361,556
|
|
Supercuts
|
|
48,552
|
|
|
70,448
|
|
|
174,687
|
|
|
212,914
|
|
||||
Signature Style
|
|
76,545
|
|
|
88,697
|
|
|
244,144
|
|
|
266,440
|
|
||||
Total Company-owned salons
|
|
221,236
|
|
|
272,002
|
|
|
705,296
|
|
|
840,910
|
|
||||
Company-owned salon same-store sales decrease (1)
|
|
(2.5
|
)%
|
|
1.6
|
%
|
|
(0.4
|
)%
|
|
0.4
|
%
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Franchise salons:
|
|
|
|
|
|
|
|
|
||||||||
Product
|
|
14,339
|
|
|
14,931
|
|
|
47,786
|
|
|
37,721
|
|
||||
Royalties and fees
|
|
22,768
|
|
|
18,850
|
|
|
67,767
|
|
|
56,465
|
|
||||
Total Franchise salons
|
|
37,107
|
|
|
33,781
|
|
|
115,553
|
|
|
94,186
|
|
||||
Franchise Same-Store Sales Comps, excluding TBG mall locations (2)
|
|
(1.3
|
)%
|
|
NA
|
|
|
0.4
|
%
|
|
NA
|
|
||||
Franchise salon same-store sales decrease (2)
|
|
(2.2
|
)%
|
|
3.3
|
%
|
|
(0.5
|
)%
|
|
2.5
|
%
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Consolidated revenues
|
|
$
|
258,343
|
|
|
$
|
305,783
|
|
|
$
|
820,849
|
|
|
$
|
935,096
|
|
Percent change from prior year
|
|
(15.5
|
)%
|
|
(4.3
|
)%
|
|
(12.2
|
)%
|
|
(3.1
|
)%
|
(1)
|
Company-owned same-store sales are calculated 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 company-owned same-store sales are the sum of the company-owned 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. Company-owned same-store sales are calculated in local currencies to remove foreign currency fluctuations from the calculation.
|
(2)
|
Franchise same-store sales are calculated as the total change in sales for salons that have been a franchise location for more than one year that were open on a specific day of the week during the current period and the corresponding prior period. Quarterly and year-to-date franchise same-store sales are the sum of the franchise same-store sales computed on a daily basis. Franchise salons that do not report daily sales are excluded from same-store sales. 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. Franchise same-store sales are calculated in local currencies to remove foreign currency fluctuations from the calculation. TBG is not included in 2018 same-store sales as it was not a franchise location in the previous year.
|
(1)
|
Franchise same-store sales increase (decrease) franchise royalties. As we transition to the asset-light franchise platform, franchise same-store sales will become more significant to consolidated revenues.
|
|
For the Three Months Ended March 31,
|
|
For the Nine Months Ended March 31,
|
||||||||||||||||||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||||||||||
|
(Dollars in millions)
|
|
(Decrease) Increase
|
|
(Dollars in millions)
|
|
(Decrease) Increase
|
||||||||||||||||||||||||
Total revenue
|
$
|
221.2
|
|
|
$
|
272.0
|
|
|
$
|
(50.8
|
)
|
|
$
|
(22.5
|
)
|
|
$
|
705.3
|
|
|
$
|
840.9
|
|
|
$
|
(135.6
|
)
|
|
$
|
(49.5
|
)
|
Company-owned same-store sales
|
(2.5
|
)%
|
|
1.6
|
%
|
|
(410 bps)
|
|
|
330 bps
|
|
|
(0.4
|
)%
|
|
0.4
|
%
|
|
(80 bps)
|
|
|
170 bps
|
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Operating income
|
$
|
10.7
|
|
|
$
|
19.3
|
|
|
$
|
(8.6
|
)
|
|
$
|
2.6
|
|
|
$
|
44.8
|
|
|
$
|
22.7
|
|
|
$
|
22.2
|
|
|
$
|
(34.4
|
)
|
|
|
Three Months Ended
March 31, |
|
Nine Months Ended
March 31, |
||||||||
Factor
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||
Company-owned same-store sales
|
|
(2.5
|
)%
|
|
1.6
|
%
|
|
(0.4
|
)%
|
|
0.4
|
%
|
Closed salons
|
|
(6.2
|
)
|
|
(5.5
|
)
|
|
(6.2
|
)
|
|
(3.2
|
)
|
Salons sold to franchisees
|
|
(10.0
|
)
|
|
(4.3
|
)
|
|
(9.0
|
)
|
|
(3.0
|
)
|
New stores
|
|
—
|
|
|
0.1
|
|
|
—
|
|
|
0.2
|
|
Foreign currency
|
|
(0.3
|
)
|
|
0.3
|
|
|
(0.3
|
)
|
|
0.3
|
|
Other
|
|
0.3
|
|
|
0.2
|
|
|
(0.2
|
)
|
|
(0.3
|
)
|
|
|
(18.7
|
)%
|
|
(7.6
|
)%
|
|
(16.1
|
)%
|
|
(5.6
|
)%
|
|
|
Three Months Ended
March 31, |
|
Nine Months Ended
March 31, |
||||||||
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||
SmartStyle
|
|
1.1
|
%
|
|
0.6
|
%
|
|
1.6
|
%
|
|
(0.1
|
)%
|
Supercuts
|
|
(5.6
|
)
|
|
3.5
|
|
|
(2.1
|
)
|
|
2.2
|
|
Signature Style
|
|
(4.7
|
)
|
|
1.5
|
|
|
(1.5
|
)
|
|
(0.2
|
)
|
Total
|
|
(2.5
|
)%
|
|
1.6
|
%
|
|
(0.4
|
)%
|
|
0.4
|
%
|
|
For the Three Months Ended March 31,
|
|
For the Nine Months Ended March 31,
|
||||||||||||||||||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||||||||||
|
(Dollars in millions)
|
|
Increase
|
|
(Dollars in millions)
|
|
Increase
|
||||||||||||||||||||||||
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Product
|
$
|
10.6
|
|
|
$
|
8.4
|
|
|
$
|
2.2
|
|
|
$
|
0.9
|
|
|
$
|
31.3
|
|
|
$
|
24.8
|
|
|
$
|
6.5
|
|
|
$
|
2.3
|
|
Product sold to TBG
|
3.7
|
|
|
6.5
|
|
|
(2.8
|
)
|
|
6.5
|
|
|
16.5
|
|
|
12.9
|
|
|
3.6
|
|
|
12.9
|
|
||||||||
Total product
|
$
|
14.3
|
|
|
$
|
14.9
|
|
|
$
|
(0.6
|
)
|
|
$
|
7.4
|
|
|
$
|
47.8
|
|
|
$
|
37.7
|
|
|
$
|
10.1
|
|
|
$
|
15.2
|
|
Royalties and fees (1)
|
22.8
|
|
|
18.9
|
|
|
3.9
|
|
|
1.5
|
|
|
67.8
|
|
|
56.5
|
|
|
11.3
|
|
|
3.9
|
|
||||||||
Total franchise salons revenue (2)
|
$
|
37.1
|
|
|
$
|
33.8
|
|
|
$
|
3.3
|
|
|
$
|
8.9
|
|
|
$
|
115.6
|
|
|
$
|
94.2
|
|
|
$
|
21.4
|
|
|
$
|
19.2
|
|
Franchise same-store sales, excluding TBG mall-locations (3)
|
(1.3
|
)%
|
|
NA
|
|
|
|
|
|
|
|
|
0.4
|
%
|
|
NA
|
|
|
|
|
|
|
|
||||||||
Franchise same-store sales (3)
|
(2.2
|
)%
|
|
3.3
|
%
|
|
(550 bps)
|
|
|
340 bps
|
|
|
(0.5
|
)%
|
|
2.5
|
%
|
|
(300 bps)
|
|
|
190 bps
|
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Operating income
|
$
|
(11.1
|
)
|
|
$
|
8.5
|
|
|
$
|
(19.6
|
)
|
|
$
|
0.5
|
|
|
$
|
5.1
|
|
|
$
|
25.2
|
|
|
$
|
(20.1
|
)
|
|
$
|
1.7
|
|
Operating income from TBG
|
(0.1
|
)
|
|
—
|
|
|
(0.1
|
)
|
|
—
|
|
|
1.7
|
|
|
0.3
|
|
|
1.4
|
|
|
0.3
|
|
||||||||
Total operating income (2)
|
$
|
(11.2
|
)
|
|
$
|
8.5
|
|
|
$
|
(19.7
|
)
|
|
$
|
0.5
|
|
|
$
|
6.8
|
|
|
$
|
25.5
|
|
|
$
|
(18.7
|
)
|
|
$
|
2.0
|
|
(1)
|
Total includes $0.0 and $1.7 million of royalties related to TBG during the three and
nine
months ended
March 31, 2019
.
|
(2)
|
Total is a recalculation; line items calculated individually may not sum to total due to rounding.
|
(3)
|
Franchise same-store sales are calculated as the total change in sales for salons that have been a franchise location for more than one year that were open on a specific day of the week during the current period and the corresponding prior period. Quarterly and year-to-date franchise same-store sales are the sum of the franchise same-store sales computed on a daily basis. Franchise salons that do not report daily sales are excluded from same-store sales. 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. Franchise same-store sales are calculated in local currencies to remove foreign currency fluctuations from the calculation. TBG is not included in 2018 same-store sales as it was not a franchise location in the previous year.
|
|
|
Three Months Ended
March 31, |
|
Nine Months Ended
March 31, |
||||||||
Factor
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||
Franchise same-store sales (1)
|
|
(0.3
|
)%
|
|
1.0
|
%
|
|
0.1
|
%
|
|
0.9
|
%
|
Franchise product
|
|
0.6
|
|
|
(2.9
|
)
|
|
0.2
|
|
|
(1.9
|
)
|
Franchise royalties and fees
|
|
2.2
|
|
|
3.6
|
|
|
2.0
|
|
|
3.2
|
|
TBG product, royalties and fees
|
|
(8.3
|
)
|
|
26.3
|
|
|
5.5
|
|
|
17.2
|
|
Salons sold to franchisees and new salons
|
|
11.8
|
|
|
6.6
|
|
|
11.8
|
|
|
5.2
|
|
Closed salons
|
|
(1.3
|
)
|
|
(0.5
|
)
|
|
(1.4
|
)
|
|
(0.5
|
)
|
Advertising fund
|
|
5.6
|
|
|
1.0
|
|
|
4.8
|
|
|
1.0
|
|
Foreign currency
|
|
(0.4
|
)
|
|
0.4
|
|
|
(0.4
|
)
|
|
0.4
|
|
Other
|
|
(0.1
|
)
|
|
0.1
|
|
|
0.1
|
|
|
—
|
|
|
|
9.8
|
%
|
|
35.6
|
%
|
|
22.7
|
%
|
|
25.5
|
%
|
(1)
|
Franchise same-store sales increase (decrease) franchise royalties. As we transition to the asset-light franchise platform, franchise same-store sales will become more significant to consolidated revenues.
|
|
|
Three Months Ended
March 31, |
|
Nine Months Ended
March 31, |
||||||||
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||
SmartStyle
|
|
(5.2
|
)%
|
|
0.9
|
%
|
|
(4.7
|
)%
|
|
(4.3
|
)%
|
Supercuts
|
|
(0.6
|
)
|
|
3.1
|
|
|
0.8
|
|
|
2.7
|
|
Signature Style
|
|
(2.2
|
)
|
|
3.7
|
|
|
0.1
|
|
|
2.2
|
|
Total, excluding TBG mall-locations (1)
|
|
(1.3
|
)%
|
|
NA
|
|
|
0.4
|
%
|
|
NA
|
|
TBG mall-locations
|
|
(4.7
|
)
|
|
NA
|
|
|
(4.0
|
)
|
|
NA
|
|
Total
|
|
(2.2
|
)%
|
|
3.3
|
%
|
|
(0.5
|
)%
|
|
2.5
|
%
|
(1)
|
Same-store sales include salons that have been a franchise location for more than one year, therefore TBG is not included in 2018 same-store sales.
|
As of
|
|
Debt to
Capitalization
|
|
Basis Point Increase (Decrease) (1)
|
||
March 31, 2019
|
|
22.3
|
%
|
|
670
|
|
June 30, 2018
|
|
15.6
|
%
|
|
(390
|
)
|
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)
|
||||||
|
|
|
|
|
|
|
|
|
|
|
||||
1/1/19 - 1/31/19
|
|
1,357,039
|
|
|
$
|
18.43
|
|
|
25,195,359
|
|
|
$
|
142,012
|
|
2/1/19 - 2/28/19
|
|
294,004
|
|
|
18.35
|
|
|
25,489,363
|
|
|
136,617
|
|
||
3/1/19 - 3/31/19
|
|
399,387
|
|
|
18.72
|
|
|
25,888,750
|
|
|
129,141
|
|
||
Total
|
|
2,050,430
|
|
|
$
|
18.47
|
|
|
25,888,750
|
|
|
$
|
129,141
|
|
|
Regis Corporation Amended and Restated Short Term Incentive Compensation Plan, effective February 27, 2019.
|
|
|
|
|
|
Regis Corporation Stock Purchase and Matching RSU Program as amended and restated effective March 20, 2019, including form of SPMP and forms of Matching RSU Award Agreements.
|
|
|
|
|
|
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 March 31, 2019, formatted in Extensible Business Reporting Language (XBRL) and filed electronically herewith: (i) the Condensed Consolidated Balance Sheets; (ii) the Condensed Consolidated Statements of Earnings; (iii) the Condensed Consolidated Statements of Comprehensive Income; (iv) the Condensed Consolidated Statements of Cash Flows; and (v) the Notes to the Consolidated Financial Statements.
|
|
REGIS CORPORATION
|
|
|
|
|
Date: April 30, 2019
|
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: April 30, 2019
|
By:
|
/s/ Kersten D. Zupfer
|
|
|
Kersten D. Zupfer
|
|
|
Senior Vice President and Chief Accounting Officer
|
|
|
(Principal Accounting Officer)
|
|
|
|
ARTICLE I ESTABLISHMENT AND PURPOSE
|
|
|
||
1.1
|
|
Establishment
|
|
|
1.2
|
|
Purposes
|
|
|
ARTICLE II DEFINITIONS
|
|
|
||
ARTICLE III ADMINISTRATION
|
|
|
||
3.1
|
|
Committee Structure and Actions
|
|
|
3.2
|
|
Committee Authority
|
|
|
2ARTICLE IV ELIGIBILITY
|
|
|
||
4.1
|
|
Eligibility
|
|
|
ARTICLE V AWARDS
|
|
|
||
5.1
|
|
General
|
|
|
5.2
|
|
Award Amounts
|
|
|
5.3
|
|
Performance Goals
|
|
|
5.4
|
|
Payments
|
|
|
5.5
|
|
Termination of Employment Due to Death, Disability or Other Reason
|
|
|
5.6
|
|
Election to Defer
|
|
|
5.7
|
|
Compensation Recovery
|
|
|
ARTICLE VI MISCELLANEOUS
|
|
|
||
6.1
|
|
Amendment and Termination
|
|
|
6.2
|
|
Unfunded Status of Plan
|
|
|
6.3
|
|
No Additional Obligation
|
|
|
6.4
|
|
Withholding
|
|
|
6.5
|
|
Controlling Law
|
|
|
6.6
|
|
Offset
|
|
|
6.7
|
|
Nontransferability; Beneficiaries
|
|
|
6.8
|
|
No Rights with Respect to Continuance of Employment
|
|
|
6.9
|
|
Headings
|
|
|
6.10
|
|
Severability
|
|
|
6.11
|
|
Successors and Assigns
|
|
|
6.12
|
|
Entire Agreement
|
|
|
|
FY18
|
FY19
|
Pre-tax contribution:
|
$250,000
|
$250,000
|
Assumed tax rate:
|
47.2%
|
47.2%
|
After-tax common stock purchase value required to be paid to the Company by Participant (i.e., “Stock Purchase Amount”):
|
$132,000
|
$132,000
|
Value of Matching RSU grant:
|
$250,000
|
$500,000
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Regis Corporation;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;
|
4.
|
The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c)
|
Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
(d)
|
Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and
|
5.
|
The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s Board of Directors or persons performing the equivalent functions:
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.
|
April 30, 2019
|
|
|
|
|
|
/s/ Hugh E. Sawyer
|
|
|
Hugh E. Sawyer, President and Chief Executive Officer
|
|
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Regis Corporation;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;
|
4.
|
The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c)
|
Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
(d)
|
Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and
|
5.
|
The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s Board of Directors or persons performing the equivalent functions:
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.
|
April 30, 2019
|
|
|
|
|
|
/s/ Andrew H. Lacko
|
|
|
Andrew H. Lacko, Executive Vice President and Chief Financial Officer
|
|
|
(1)
|
The Quarterly Report on Form 10-Q complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
(2)
|
The information contained in the Quarter Report on Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Registrant.
|
April 30, 2019
|
|
|
|
|
|
/s/ Hugh E. Sawyer
|
|
|
Hugh E. Sawyer, President and Chief Executive Officer
|
|
|
|
|
|
April 30, 2019
|
|
|
|
|
|
/s/ Andrew H. Lacko
|
|
|
Andrew H. Lacko, Executive Vice President and Chief Financial Officer
|
|
|