<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 1997
---------------------
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
-------------------- -----------------
--------------------
For Quarter Ended March 31, 1997 Commission file number 011230
-------------- ----------
Regis Corporation
-------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Minnesota 41-0749934
--------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
7201 Metro Boulevard, Edina, Minnesota 55439
-----------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(612)947-7777
-------------------------------------------------------------------
(Registrant's telephone number, including area code)
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 the number of shares outstanding of each of the issuer's classes of
common stock as of April 25, 1997:
Common Stock, $.05 par value 22,601,600
- ---------------------------- ----------------
Class Number of Shares
1
<PAGE>
REGIS CORPORATION
INDEX
<TABLE>
<CAPTION>
PART I. Financial Information Page No.
--------------------- -------
<S> <C>
Item 1. Consolidated Financial Statements:
Balance Sheet as of June 30, 1996
and March 31, 1997 3
Statement of Operations for the three
months ended March 31, 1996 and 1997 4
Statement of Operations for the nine
months ended March 31, 1996 and 1997 5
Statement of Cash Flows for the nine
months ended March 31, 1996 and 1997 6
Notes to Consolidated Financial Statements 7-11
Review Report of Independent Accountants 12
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 13-22
Part II. Other Information
-----------------
Item 1. Legal Proceedings 23
Item 2. Changes in Securities 24
Item 4. Submission of Matters to a Vote of Security Holders 24
Item 6. Exhibits and Reports on Form 8-K 25-26
Signature 27
</TABLE>
2
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
REGIS CORPORATION
CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 1996 AND MARCH 31, 1997
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
JUNE 30, 1996 MARCH 31, 1997
(UNAUDITED)
------------- --------------
<S> <C> <C>
ASSETS
- ------
Current assets:
Cash and cash equivalents $ 7,558 1,466
Accounts receivable 10,640 12,124
Inventories 32,507 41,815
Deferred income taxes 6,687 8,726
Other current assets 9,691 7,261
-------- --------
Total current assets 67,083 71,392
Property and equipment, net 126,821 135,962
Goodwill 93,352 98,902
Other assets 16,698 19,163
-------- -------
Total assets $303,954 $325,419
-------- --------
-------- --------
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Long-term debt and capital lease
obligations, current portion $ 19,168 $ 20,086
Accounts payable 20,369 21,773
Accrued expenses 40,768 37,292
Restructuring accruals 6,493 8,858
-------- ------
Total current liabilities 86,798 88,009
Long-term debt and capital lease obligations 83,213 102,922
Other noncurrent liabilities 6,308 7,360
Contingencies (Note 7)
Shareholders' equity:
Capital stock, $.05 par value; authorized,
50,000,000 shares; issued and outstanding,
22,537,161 common shares at June 30, 1996 and
22,601,600 common shares at March 31,1997 1,127 1,130
Additional paid-in capital 104,634 105,369
Retained earnings 21,874 20,629
-------- --------
Total shareholders' equity 127,635 127,128
-------- --------
Total liabilities and shareholders
equity $303,954 $325,419
-------- ---------
-------- ---------
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
3
<PAGE>
REGIS CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1997
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
1996 1997
---- ----
<S> <C> <C>
Revenues:
Company-owned operations:
Service $ 111,477 $ 121,995
Product 37,880 46,823
--------- -----------
149,357 168,818
Franchise revenues 6,109 6,670
---------- ----------
155,466 175,488
Operating expenses:
Cost of sales:
Service 66,288 71,727
Product 20,286 26,285
Rent 21,010 23,804
Selling, general and administrative 31,355 35,728
Depreciation and amortization 6,477 7,225
Other 1,084 946
--------- ----------
146,500 165,715
Operating income 8,966 9,773
Other income (expense):
Interest (2,465) (2,506)
Nonrecurring gains 209 230
Other, net 51 97
--------- ----------
Income before income tax expense 6,761 7,594
Income tax expense 2,804 3,343
--------- ----------
Net income $ 3,957 $ 4,251
--------- ----------
--------- ----------
Net income per share $ .17 $ .18
--------- ----------
--------- ----------
Weighted average common and common equivalent shares outstanding 22,874 23,092
--------- ----------
--------- ----------
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
4
<PAGE>
REGIS CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE NINE MONTHS ENDED MARCH 31, 1996 AND 1997
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
1996 1997
---- ----
<S> <C> <C>
Revenues:
Company-owned operations:
Service $321,524 $ 364,490
Product 110,539 138,066
-------- ----------
432,063 502,556
Franchise revenues 19,294 19,995
-------- --------
451,357 522,551
Operating expenses:
Cost of sales:
Service 190,103 212,551
Product 59,514 76,377
Rent 59,125 70,383
Selling, general and administrative 93,245 106,438
Depreciation and amortization 18,448 21,153
Merger and transaction costs 14,322
Provision for restructuring activities 11,965 4,409
Other 4,178 2,751
------- -------
436,578 508,384
Operating income 14,779 14,167
Other income (expense):
Interest (7,185) (7,480)
Nonrecurring gains 486 670
Other, net 160 402
------- -------
Income before income tax expense 8,240 7,759
Income tax expense 4,080 7,847
-------- --------
Net income (loss) $ 4,160 $ (88)
-------- -------
-------- -------
Net income per share $ .19 $ .00
-------- -------
-------- -------
Weighted average common and common equivalent shares outstanding 22,647 23,232
------- -------
------- -------
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
5
<PAGE>
REGIS CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
FOR THE NINE MONTHS ENDED MARCH 31, 1996 AND 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1996 1997
-------- -------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 4,160 $ (88)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization 18,771 21,398
Merger and transaction costs 14,322
Provision for restructuring 11,965 4,409
Deferred income taxes (5,149) (4,131)
Changes in assets and liabilities, exclusive
of investing and financing activities (353) (22,050)
Other (816) 563
-------- --------
Net cash provided by operating activities 28,578 14,423
--------- ---------
Cash flows from investing activities:
Capital expenditures (25,054) (28,852)
Purchases of salon assets, net of cash acquired and
certain obligations assumed (14,921) (8,822)
--------- ---------
Net cash used in investing activities (39,975) (37,674)
--------- ---------
Cash flows from financing activities:
Borrowings on line of credit 103,195 138,846
Payments on line of credit (103,275) (150,500)
Proceeds from issuance of long-term debt 23,216 37,000
Repayment of long-term debt and capital lease obligations (3,908) (7,661)
Dividends paid (871) (1,265)
Proceeds from issuance of common stock 4,552 738
--------- ---------
Net cash provided by financing activities 22,909 17,158
--------- ---------
Effect of exchange rate changes on cash (147) 1
--------- ---------
Increase (decrease) in cash and cash equivalents 11,365 (6,092)
Cash and cash equivalents:
Beginning of period 3,182 7,558
--------- ---------
End of period $ 14,547 $ 1,466
--------- ---------
--------- ---------
Changes in assets and liabilities, exclusive of
investing and financing activities:
Accounts receivable $ 1,959 $ (1,157)
Inventories (1,141) (7,909)
Other current assets (2,632) 164
Accounts payable 715 854
Accrued expenses 1,373 (11,958)
Restructuring accruals (627) (2,044)
--------- ----------
$ (353) $ (22,050)
--------- ----------
--------- ----------
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
6
<PAGE>
REGIS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. Basis of Presentation of Interim Consolidated Financial Statements:
The unaudited consolidated statements of operations for the three and nine
months ended March 31, 1996 and 1997, reflect, in the opinion of
management, all adjustments (which, with the exception of the matters
discussed in Notes 3, 4 and 5 herein, include only normal recurring
adjustments) necessary to fairly present the results of operations for the
interim periods. The results of operations for any interim period are not
necessarily indicative of results for the full year.
The year-end balance sheet data was derived from audited financial
statements, but does not include all disclosures required by generally
accepted accounting principles. The unaudited interim consolidated
financial statements should be read in conjunction with the Company's
consolidated financial statements which are incorporated by reference in
Regis Corporation's Annual Report on Form 10-K for the year ended June 30,
1996 and Supercuts, Inc.'s Annual Report on Form 10-K for the year ended
December 31, 1995. Coopers & Lybrand L.L.P., the Company's independent
accountants, has performed limited reviews of the financial data included
herein. Their report on such reviews accompanies this filing.
Financial data for all periods presented reflect the retroactive effects of
the October 1996 merger with SUPERCUTS, INC. (SUPERCUTS) which has been
accounted for as a pooling-of-interests (see Note 3). The financial
statements have been prepared by combining the current and historical
financial statements of Regis Corporation with those of SUPERCUTS for each
of the periods presented.
COST OF PRODUCT SALES. On an interim basis, product costs are determined
by applying an estimated gross profit margin.
ASSET IMPAIRMENT ASSESSMENTS. On a quarterly basis, the Company measures
and evaluates the recoverability of its tangible and intangible noncurrent
assets using undiscounted cash flow analyses.
USE OF ESTIMATES. The significant areas which require the use of
management's estimates relate to accruals for restructuring activity,
principally the portion associated with litigation, and store closures.
In February 1997, Statement of Financial Accounting Standards No. 128 (SFAS
No. 128), Earnings per Share (EPS) was issued by the Financial Accounting
Standards Board. This standard, which the Company must adopt effective
with its second quarter of fiscal 1998, requires dual presentation of basic
and diluted EPS on the face of the statement of operations. Net income per
share currently presented by the Company is comparable to the diluted EPS
required under SFAS No. 128. Basic EPS for the Company would be calculated
based on only common shares outstanding without considering the dilutive
effects of common stock equivalents.
7
<PAGE>
2. Nonrecurring Gains:
During the third quarters of fiscal 1997 and 1996, the Company received
$230,000 and $209,000, respectively, of principal payments from Premier
Salons. For the nine month periods ended March 31, 1997 and 1996, the
payments received totaled $670,000 and $486,000, respectively. The Company
had previously written off the related receivable, and accordingly, is
recording all subsequent principal payments as nonrecurring gains.
3. Mergers and Acquisitions:
SUPERCUTS, INC.
Effective October 25, 1996, the Company received shareholder approval for
the merger agreement with SUPERCUTS in a stock-for-stock merger
transaction. SUPERCUTS was the national operator of approximately 420
company-owned, and franchisor of approximately 750 affordable hair care
salons at the acquisition date. Each SUPERCUTS shareholder received 0.40
shares of the Company's common stock in exchange for each SUPERCUTS common
share, or approximately 4,550,000 shares of the Company's common stock on a
fully diluted basis. The transaction has been accounted for as a
pooling-of-interests.
As a result of the merger, the Company recorded a merger and transaction
charge of $14,322,000, on a pre-tax basis, during the quarter ended
December 31, 1996. This charge included $7,717,000 for professional fees
including investment banking, legal, accounting and miscellaneous
transaction costs, $3,465,000 for severance, and a non-cash charge of
$3,140,000 for the write-off of duplicative operating assets.
The severance accrual of $3,465,000 covers the termination of approximately
105 SUPERCUTS employees who had duplicate positions in corporate office
functions. These corporate overhead departments included finance and
accounting, human resources, legal, management information systems,
purchasing, real estate and marketing. Severance-related payments made
through March 31, 1997 totalled $303,000.
As of March 31, 1997, remaining merger and transaction liabilities of
$3,182,000 have been included in accrued expenses in the balance sheet.
The SUPERCUTS transaction was accounted for as a pooling-of-interests;
therefore, prior financial statements have been restated to reflect this
merger. To effect the restatement, significant accounting adjustments were
necessary to conform the accounting practices of SUPERCUTS to those of
Regis. A detailed description of the nature of these conforming accounting
adjustments, as well as unaudited pro forma information for periods ended
June 30, 1996, have been included in the Notes to the Company's consolidated
financial statements for the year ended June 30, 1996, which are included in
Exhibit A to the Company's May 14, 1997 report on Form 8-K filed with the
Securities and Exchange Commission. The conforming accounting adjustments
included adjustments to previously reported SUPERCUTS net income (loss) and
shareholders' equity due to consolidation of previously unconsolidated
investor/franchisee stores, change in goodwill amortization periods and
reversal of the capitalization of certain development costs.
8
<PAGE>
Prior to the merger, SUPERCUTS' fiscal year for financial reporting purposes
ended on December 31. No material adjustment to retained earnings was
necessary to conform with Regis' year end.
OTHER ACQUISITIONS
The following represents the unaudited pro forma results of operations of the
Company (restated for the inclusion of SUPERCUTS results) as if purchase
acquisitions occurring in fiscal 1996, primarily the U.K. and the WAL-MART
acquisitions, as more fully described under Management's Discussion and Analysis
of Financial Condition and Results of Operations, and the related common stock
activity had occurred at the beginning of fiscal 1996.
(Dollars in thousands, except per share amounts)
Three months ended Nine months ended
March 31, 1996 March 31, 1996
--------------- ---------------
Revenues $165,379 $498,469
Income before income tax expense 6,509 8,019
Net income 3,723 3,936
Net income per share $ .16 $ .17
These pro forma results may not be indicative of results that actually would
have occurred had the acquisitions taken place at the beginning of the periods
presented or of results which may occur in the future.
4. Restructuring:
-------------
During the three months ended December 31, 1995, a majority of the Board of
Directors of SUPERCUTS concluded that it was appropriate to modify
SUPERCUTS' strategic growth plans. It was decided that future expansion
efforts would focus primarily on expanding with existing franchisees in
existing franchise markets. Additionally, because of the significant
operating losses and negative cash flow from certain salons, it was decided
that salons in certain markets would be closed or sold to franchisees or
other third parties. The anticipated date of completion of the
restructuring is December 1997.
9
<PAGE>
The 1996 restructuring charge related to the activities described above
totalled approximately $11,965,000 (as adjusted from the $18,925,000
originally reported due to conforming accounting adjustments described
previously). This charge was recorded in the quarter ended December 31,
1995. Of the total charge of $11,965,000, $4,384,000 was related to
non-cash activity (i.e. primarily the write-off of assets that were
purchased before the merger and do not require a cash outlay for disposal).
In order to revise estimates included in the restructuring charge for legal
and professional fees, an additional $858,000 was charged against earnings
in the quarter ended June 30, 1996. In the quarter ended December 31,
1996, an additional $2,909,000 was charged against earnings to revise
restructuring charge estimates made in fiscal 1996 and $1,500,000 was
charged against earnings associated with identified Regis salon closures.
The changes in the estimated 1996 restructuring charge represent changes in
accounting estimates associated with litigation matters, legal and
professional fees and lease obligations.
5. Income Taxes:
The Company's effective tax rate for the nine-month period ended March 31,
1997 was negatively affected by certain nondeductible merger and
transaction costs associated with the SUPERCUTS merger.
Additionally, as reflected in the Statement of Operations for SUPERCUTS for
the quarter ended September 30, 1996, SUPERCUTS recorded as part of its
September 30, 1996 income tax provision, a $1,500,000 change in estimate
associated with income tax matters related to years prior to 1996. This
change in estimate includes tax changes resulting from the completion of an
Internal Revenue Service examination in the quarter ended September 30,
1996. Accordingly, this change in estimate is included in the financial
results for the combined companies of REGIS and SUPERCUTS for the nine
months ended March 31, 1997.
The Company's effective income tax rate, exclusive of the impact of
nondeductible merger and transaction costs and the $1,500,000 change in
estimate, for fiscal 1997 is estimated to be approximately 42 percent,
consistent with that incurred for fiscal 1996.
6. Financing Arrangements:
As previously discussed, on October 25, 1996, the Company completed the
merger with SUPERCUTS, INC., which has been accounted for as a
pooling-of-interests. In connection with the merger, Regis has borrowed
under a $10,000,000, 7.54 percent senior note, to fund transaction costs
and other merger related costs, and a $22,000,000, 7.8 percent senior note,
to repay and replace SUPERCUTS' existing revolving credit arrangements
under terms and conditions consistent with those of the Company's long-term
borrowings from financial institutions described in its 1996 Annual Report.
In December 1996, the Company borrowed $5,000,000 under a 7.16 percent
senior term note, and in April 1997, the Company borrowed $8,000,000 under
an 8.18 percent senior term note. Proceeds associated with these two
borrowings, although utilized to pay down borrowings under the Company's
existing revolving credit facility, are intended to make available up to
$5,000,000 of funds to contribute to the financing of franchisee expansion
in the Supercuts division and to refinance $8,000,000 of the principal
payment due on the 11.52 percent senior term notes in June 1997.
On March 19, 1997, the Company increased its revolving credit facility to
$25,000,000 from $20,000,000 under the same terms and conditions previously
established.
10
<PAGE>
The senior term notes and the revolving credit facility agreements contain
covenants, including limitations on incurrence of debt, granting of liens,
investments, merger or consolidation, and transactions with affiliates. In
addition, the Company must maintain specified interest coverage and
debt-to-equity ratios.
INTEREST RATE HEDGING
In March 1997, the Company entered into a treasury lock agreement for the
purpose of establishing the effective interest rate on debt expected to be
refinanced in June 1998. The contract was entered into to reduce the risk
to the Company of future interest rate fluctuations. The contract has a
notional amount of $14,000,000 and is tied to the US Government Ten-Year
Treasury Notes rate. At the settlement date in June 1998, the gain or loss
on the contract will be recognized. The deferred unrealized gain related to
this contract was not material at March 31, 1997. The Company does not
enter into financial instruments for trading or speculative purposes.
7. Contingencies:
See "Item 1. Legal Proceedings" under Part II of this Form 10-Q.
8. Shareholder Rights Plan:
In December 1996, the Board of Directors adopted a shareholders rights plan
and declared a dividend of one preferred share purchase right on each
outstanding share of common stock.
The rights become exercisable only following the acquisition by a person or
group, without the prior consent of the Board of Directors, of 20 percent
or more of the Company's voting stock, or following the announcement of a
tender offer or exchange offer to acquire any interest of 20 percent or
more. If the rights become exercisable, they entitle all holders, except
the take-over bidder, to purchase stock in the Company at a bargain price.
11
<PAGE>
REVIEW REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Directors of Regis Corporation:
We have reviewed the accompanying consolidated balance sheet of Regis
Corporation as of March 31, 1997, and the related consolidated statements
of operations for the three and nine months ended March 31, 1996 and 1997, and
the consolidated statements of cash flows for the nine months ended March 31,
1996 and 1997. These financial statements are the responsibility of the
Company's management.
We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted
in accordance with generally accepted auditing standards, the objective of which
is the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our reviews, we are not aware of any material modifications that
should be made to the consolidated financial statements referred to above for
them to be in conformity with generally accepted accounting principles.
We have audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet as of June 30, 1996, and the
related consolidated statements of operations, changes in shareholders'
equity and cash flows for the year then ended (not fully presented herein);
and in our report dated May 9, 1997, we expressed an unqualified opinion on
those consolidated financial statements. In our opinion, the information set
forth in the accompanying consolidated balance sheet as of June 30, 1996, is
fairly stated, in all material respects, in relation to the consolidated
balance sheet from which it has been derived.
/s/ Coopers & Lybrand L.L.P.
COOPERS & LYBRAND L.L.P.
Minneapolis, Minnesota
May 9, 1997
12
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SUMMARY
Regis Corporation, based in Minneapolis, is the largest owner, operator and
franchisor of hair and retail product salons in the world. The Regis worldwide
operations include 3,253 hairstyling salons at March 31, 1997 operating in six
divisions: REGIS HAIRSTYLISTS, SUPERCUTS, MASTERCUTS, TRADE SECRET, WAL-MART
and INTERNATIONAL. Worldwide operations include 2,444 company-owned salons, 751
franchised SUPERCUTS salons and 58 other franchised salons operating primarily
in the TRADE SECRET division. The Company has more than 25,000 employees
worldwide.
During the third quarter of fiscal 1997, the Company's consolidated
revenues increased 12.9 percent to $175,488,000. Operating income grew to
$9,773,000. Exclusive of nonrecurring gains, earnings per share in the third
quarter of fiscal 1997 increased to $.18 per share, compared to $.17 per share
in the same period the prior year.
During the first nine months of fiscal 1997, the Company's consolidated
revenues increased 15.8 percent to a record $522,551,000. Operating income grew
23.0 percent to $32,898,000 before special charges of $18,731,000 related to the
SUPERCUTS' merger, restructuring activities of that division and restructuring
charges related to Regis. Exclusive of nonrecurring gains and special charges,
earnings per share increased 28.0 percent in the first nine months of fiscal
1997 to $.64 per share, compared to $.50 per share in the same period the prior
year.
Financial data for all periods presented reflect the retroactive effects of
the October 1996 merger with SUPERCUTS which has been accounted for as a
pooling-of-interests. The financial statements have been prepared by combining
the current and historical financial statements of Regis Corporation with those
of SUPERCUTS for each of the periods presented.
13
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated certain
information derived from the Company's Consolidated Statement of Operations
expressed as a percentage of sales. The percentages are computed as a
percentage of total Company revenues, except as noted.
WORLDWIDE OPERATIONS
<TABLE>
<CAPTION>
FOR THE PERIODS ENDED MARCH 31,
-------------------------------
THREE MONTHS NINE MONTHS
------------ -----------
1996 1997 1996 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Company-owned service revenues (1) 74.6% 72.3% 74.4% 72.5%
Company-owned product revenues (1) 25.4 27.7 25.6 27.5
Franchise revenues 3.9 3.8 4.3 3.8
Company-owned operations:
Profit margins on service (2) 40.5 41.2 40.9 41.7
Profit margins on product (3) 46.4 43.9 46.2 44.7
Rent (1) 14.1 14.1 13.7 14.0
Depreciation and amortization 4.2 4.1 4.1 4.0
Selling, general and administrative 20.2 20.4 20.7 20.4
Operating income 5.8 5.6 3.3 2.7
Income before income tax expense 4.3 4.3 1.8 1.5
Net income 2.5 2.4 0.9 0.0
Operating income, excluding special charges 5.8 5.6 5.9 6.3
Earnings, excluding special charges and
nonrecurring gains 2.5 2.3 2.5 2.8
(1) Computed as a percentage of company-owned revenue.
(2) Computed as a percentage of service revenue.
(3) Computed as a percentage of product revenue.
</TABLE>
14
<PAGE>
THREE MONTHS ENDED MARCH 31, 1997, COMPARED TO THREE MONTHS ENDED MARCH 31,1996:
REVENUES. Revenues for the third quarter of fiscal 1997 grew to
$175,488,000, representing an increase of $20,022,000, or 12.9 percent, over the
same period in fiscal 1996. Approximately 65 percent of the increase is
attributable to salon acquisitions, with the remaining increase due to net salon
openings and to increases in customers served and product sales. REGIS
HAIRSTYLISTS, SUPERCUTS, MASTERCUTS, TRADE SECRET and WAL-MART salons in the
United States and Canada (Domestic salons) accounted for $17,937,000 of the
total revenue increase. The remainder of the revenue increase of $2,085,000 was
related to the Company's salon operations in the United Kingdom, South Africa,
Switzerland, Mexico, Ireland and France (International salons).
For the third quarter of fiscal 1997, revenues from REGIS HAIRSTYLISTS were
$68,350,000, an increase of 2.4 percent, and revenues from SUPERCUTS were
$28,544,000, a decrease of 2.5 percent, which reflects same-store sales growth
offset by restructuring activities that decreased the number of company-owned
salons. The decrease in company-owned salons is, as planned, the result of
selling certain salons to franchisees and closing others. Revenues from
MASTERCUTS were $23,529,000, an increase of 12.0 percent, TRADE SECRET
company-owned revenues were $23,564,000, an increase of 43.5 percent, revenues
from WAL-MART salons, a division acquired in June 1996, were $7,618,000, and
International salon revenues were $23,094,000, an increase of 9.9 percent.
During the third quarter of fiscal 1997, same-store sales from Domestic
company-owned salons open more than twelve months increased 3.6 percent,
compared to a 4.9 percent same-store sales increase during the same period the
previous year. Same-store sales for the United Kingdom salons (U.K. salons),
the primary component of International salons, increased 3.2 percent during the
quarter. Same-store sales increases achieved during the third quarter of fiscal
1997 are primarily due to an increase in the number of customers served. The
Company utilizes an audiovisual-based training system in its salons. Management
believes this training system provides its employees with improved customer
service and technical skills, and positively contributes to the increase in
customers served.
System-wide sales, inclusive of non-consolidated sales generated from
franchisee salons, increased 11.7 percent from $210,000,000 to $235,000,000 for
the three months ended March 31, 1996, and 1997, respectively. This increase in
system-wide sales is the result of the total number of stores in the system
increasing over the past twelve months as well as same-store sales increases.
System-wide comparable store sales for the third quarter of 1997 increased 2.9
percent.
SERVICE REVENUES. Service revenues in the third quarter of fiscal 1997
were $121,995,000, an increase of $10,518,000 or 9.4 percent, over the same
period in fiscal 1996. This increase was primarily due to acquisitions, net
salon openings and same-store sales growth.
15
<PAGE>
PRODUCT REVENUES. Product revenues in the third quarter of fiscal 1997
were $46,823,000, an increase of $8,943,000, or 23.6 percent, over the same
period in fiscal 1996. The TRADE SECRET retail product salon operations
contributed $6,003,000 of this overall increase, reflecting salon acquisitions
occurring subsequent to the third quarter of fiscal 1996 and net salon openings.
Product revenues for the Company's REGIS HAIRSTYLISTS, SUPERCUTS, MASTERCUTS and
WAL-MART salons increased $2,351,000 and represented 18.6 percent of their third
quarter fiscal 1997 revenue mix, compared to 18.2 percent in the same period of
fiscal 1996. This increase in product revenue mix reflects the impact of the
WAL-MART salons acquisition, which have a higher percentage of product revenue,
increased customer awareness, further acceptance of national brand salon
merchandise, and sales training of Company employees. The balance of the product
revenues increase relates to International salons.
NINE MONTHS ENDED MARCH 31, 1997, COMPARED TO NINE MONTHS ENDED MARCH 31, 1996:
REVENUES. Revenues for the first nine months of fiscal 1997 grew to a
record $522,551,000, representing an increase of $71,194,000, or 15.8 percent,
over the same period in fiscal 1996. Approximately 70 percent of the increase
is attributable to salon acquisitions, with the remaining increase due to net
salon openings and to increases in customers served and product sales. Domestic
salons accounted for $54,578,000 of the total revenue increase. The remainder
of the revenue increase of $16,616,000 was related to the Company's
International salon operations and was largely influenced by the Company's salon
acquisitions in fiscal 1996 in the United Kingdom.
For the first nine months of fiscal 1997, revenues from REGIS HAIRSTYLISTS
were $204,675,000, an increase of 2.5 percent, revenues from SUPERCUTS were
$87,640,000, an increase of 0.9 percent which reflects same-store sales growth
offset by restructuring activities that decreased the number of company-owned
salons. The decrease in company-owned salons is, as planned, the result of
selling certain salons to franchisees and closing others, revenues from
MASTERCUTS were $70,112,000, an increase of 13.3 percent, TRADE SECRET
company-owned revenues were $66,382,000, an increase of 40.3 percent, revenues
from WAL-MART salons were $22,592,000, and International salon revenues were
$68,429,000, an increase of 32.1 percent, principally due to acquisitions in
fiscal 1996.
During the first nine months of fiscal 1997, same-store sales from Domestic
company-owned salons open more than twelve months increased 2.9 percent,
compared to a 4.0 percent same-store sales increase during the same period the
previous year. Same-store sales for the United Kingdom salons (U.K. salons),
the primary component of International salons, increased 2.9 percent during the
nine months ended March 31, 1997. Same-store sales increases achieved during
the first nine months of fiscal 1997 are primarily due to an increase in the
number of customers served.
16
<PAGE>
System-wide sales, inclusive of non-consolidated sales from franchisee
salons, increased 13.0 percent from $619,000,000 to $700,000,000 for the nine
months ended March 31, 1996, and 1997, respectively. This increase in
system-wide sales is the result of the total number of stores in the system
increasing over the past twelve months as well as same-store sales increases.
System-wide comparable store sales for the first nine months of 1997 increased
2.4 percent.
SERVICE REVENUES. Service revenues in the first nine months of fiscal 1997
were $364,490,000, an increase of $42,966,000 or 13.4 percent, over the same
period in fiscal 1996. This increase was primarily due to acquisitions, net
salon openings and same-store sales growth.
PRODUCT REVENUES. Product revenues in the first nine months of fiscal 1997
were $138,066,000, an increase of $27,527,000, or 24.9 percent, over the same
period in fiscal 1996. The TRADE SECRET retail product salon operations
represented $15,681,000 of this overall increase, reflecting salon acquisitions
occurring subsequent to the third quarter of fiscal 1996 and net salon openings.
Product revenues for the Company's REGIS HAIRSTYLISTS, SUPERCUTS, MASTERCUTS and
WAL-MART salons increased $8,567,000 and represented 18.9 percent of their first
nine month fiscal 1997 revenue mix, compared to 18.3 percent in the same period
of fiscal 1996. This increase in product revenues mix reflects the impact of
the WAL-MART salons acquisition, which have a higher percentage of product
revenues, increased customer awareness, further acceptance of national brand
salon merchandise, and sales training of Company employees. The balance of the
product revenue increase relates to International salons, largely caused by
salon acquisitions in fiscal 1996.
COST OF SALES
THREE MONTHS ENDED MARCH 31, 1997, COMPARED TO THREE MONTHS ENDED MARCH 31,1996:
Cost of service and product sales in the third quarter of fiscal 1997 was
$98,012,000, compared to $86,574,000, in the same period the previous year. The
resulting combined gross margin percentage for the third quarter of fiscal 1997
was fairly consistent at 41.9 percent of sales, compared to 42.0 percent of
sales in the same period the previous year. As further discussed below, this
slight deterioration in the current quarter's gross margin was due to a decrease
in product margins.
Service margins improved 70 basis points to 41.2 percent in the third
quarter of fiscal 1997, compared to 40.5 percent in the same period the previous
year. The improvement was due to the continued sales maturation of SUPERCUTS
and the planned closures of under-performing stores. This was partially offset
by slight declines at REGIS due to slower same-store sales growth and wage
increases at MASTERCUTS, a result of upward pressure on hourly wages caused by
the federal minimum wage increase.
17
<PAGE>
Retail product margins declined to 43.9 percent in the third quarter of
fiscal 1997, compared to 46.4 percent in the same period the previous year.
The decline in product margins was primarily caused by three factors. First,
Trade Secret sells less higher-margin, private label merchandise than other
divisions. As this product sales mix continues to grow, the overall product
margins are reduced. Next, payroll as a percentage of sales has increased in
Trade Secret. This is due to a large number of new salons with fixed payroll
cost matched against a maturing sales base. Lastly, one additional item that
affected product margins this period was discounting. The Company responded
to a disappointing Christmas season by discounting retail products in
January. This bolstered the same-store sales growth, but it also reduced
margins.
NINE MONTHS ENDED MARCH 31, 1997, COMPARED TO NINE MONTHS ENDED MARCH 31, 1996:
Cost of service and product sales in the first nine months of fiscal 1997
was $288,928,000, compared to $249,617,000, in the same period the previous
year. The resulting combined gross margin percentage for the third quarter of
fiscal 1997 improved to 42.5 percent of sales compared to 42.2 percent of sales
in the same period the previous year. As further discussed below, this
improvement in gross margin was primarily due to improved service margins
partially offset by slight declines in REGIS HAIRSTYLISTS and TRADE SECRET
product margins.
Service margins improved 80 basis points to 41.7 percent in the first nine
months of fiscal 1997, compared to 40.9 percent in the same period the previous
year. This increase in margin was primarily due to the continued sales
maturation of SUPERCUTS and the planned closures of under-performing stores.
This was partially offset by slight declines at REGIS due to slower same-store
sales growth and wage increases at MASTERCUTS, a result of upward pressure on
hourly wages caused by the federal minimum wage increase.
Retail product margins declined to 44.7 percent in the first nine months of
fiscal 1997, compared to 46.2 percent in the same period the previous year. The
decline in product margins was primarily due to the items previously noted for
the three months ended March 1997.
RENT EXPENSE
THREE AND NINE MONTHS ENDED MARCH 31, 1997, COMPARED TO THREE AND NINE MONTHS
ENDED MARCH 31, 1996:
Rent expense in the third quarter of fiscal 1997 was $23,804,000, or 14.1
percent of revenues, compared to $21,010,000, or 14.1 percent of revenues, in
the same period the previous year.
Rent expense for the first nine months of fiscal 1997 was $70,383,000, or
14.0 percent of sales compared to $59,125,000, or 13.7 percent of sales, for
1996. The primary reason for the increase as a percentage of sales in the nine
month period is due to fiscal 1996 department store salon acquisitions in the
U.K. When compared to Domestic salon operations, the U.K. salon operations have
higher rent expenses, offset by lower selling and administrative expenses,
because certain costs are absorbed by department stores and passed on as rent.
18
<PAGE>
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE
THREE AND NINE MONTHS ENDED MARCH 31, 1997, COMPARED TO THREE AND NINE MONTHS
ENDED MARCH 31, 1996:
Selling, general and administrative (SG&A) expense in the third quarter of
fiscal 1997 was $35,728,000, or 20.4 percent of revenues, compared to
$31,355,000, or 20.2 percent of revenues, in the same period the previous year.
Such expenses include costs directly related to salon operations (such as
advertising, promotion, insurance, telephone and utilities), field supervision
costs (payroll, related taxes and travel) and home office administration costs
(such as warehousing, salaries, occupancy costs and professional fees). The
slight increase as a percent of sales was due to certain fixed expenses
increasing, such as warehouse costs and expenses to combine the UK
administrative functions.
SG&A expense in the first nine months of fiscal 1997 was $106,438,000, or
20.4 percent of revenues, compared to $93,245,000, or 20.7 percent of revenues,
in the same period the previous year. As previously discussed under rent
expense, the fiscal 1996 U.K. department store salon acquisitions had a
favorable effect on SG&A expense as a percent of revenues for the nine month
period. The balance of the improvement was due to continued sales leveraging of
fixed and semi-fixed costs, offset to a lesser extent by the slight increase as
a percent of sales due to certain fixed expenses increasing, such as warehouse
costs and expenses to combine the UK administrative functions.
DEPRECIATION AND AMORTIZATION
THREE AND NINE MONTHS ENDED MARCH 31, 1997, COMPARED TO THREE AND NINE MONTHS
ENDED MARCH 31, 1996:
For the third quarters of fiscal 1997 versus 1996, depreciation and
amortization expense improved to 4.1 percent of revenues from 4.2, respectively.
Depreciation and amortization expense for the first nine months of fiscal 1997
improved to 4.0 percent from 4.1 percent of revenues during the same period last
year. Depreciation expense, the major component within this category, has
remained relatively consistent as a percentage of revenues.
RESTRUCTURING CHARGES
THREE AND NINE MONTHS ENDED MARCH 31, 1997, COMPARED TO THREE AND NINE MONTHS
ENDED MARCH 31, 1996:
See Note 4 to the unaudited consolidated financial statements.
19
<PAGE>
MERGER AND TRANSACTION COSTS
THREE AND NINE MONTHS ENDED MARCH 31, 1997, COMPARED TO THREE AND NINE MONTHS
ENDED MARCH 31, 1996:
See Note 3 to the unaudited consolidated financial statements.
OPERATING INCOME
THREE AND NINE MONTHS ENDED MARCH 31, 1997, COMPARED TO THREE AND NINE MONTHS
ENDE MARCH 31, 1996:
Operating income in the third quarter of fiscal 1997 improved to
$9,773,000. This was an increase of $807,000, or 9.0 percent, over the same
period the previous year. Operating income as a percent of revenues, was 5.6
percent in the third quarter of fiscal 1997 compared to 5.8 percent in the same
period the previous year. As a percent of revenues, the decline is attributable
primarily to lower product margins.
Operating income in the first nine months of fiscal 1997 improved to
$32,898,000 before special charges of $18,731,000 related to the SUPERCUTS
merger, as well as continuing restructuring activities of that division and
restructuring charges related to Regis, described previously. This was an
increase of $6,154,000, or 23.0 percent, over the same period the previous year.
Operating income before special charges, as a percent of revenues, was 6.3
percent in the first nine months of fiscal 1997 compared to 5.9 percent in the
same period the previous year. As a percent of revenues, the improvement is
attributable primarily to SUPERCUTS' salon maturation and the planned closures
of under-performing SUPERCUTS salons.
INTEREST EXPENSE
THREE AND NINE MONTHS ENDED MARCH 31, 1997, COMPARED TO THREE AND NINE MONTHS
ENDED MARCH 31, 1996:
Interest expense for the third quarter of fiscal 1997 was $2,506,000, or
1.4 percent of revenues, compared to $2,465,000, or 1.6 percent of revenues in
the same period the previous year. For the first nine months of fiscal 1997
interest expense was $7,480,000, or 1.4 percent of revenues, compared to
$7,185,000, or 1.6 percent of revenues, in the same period the previous year.
The improvement as a percent of revenues is due to sales leveraging as the
expense amount remains relatively consistent.
20
<PAGE>
NONRECURRING GAINS
THREE AND NINE MONTHS ENDED MARCH 31, 1997, COMPARED TO THREE AND NINE MONTHS
ENDED MARCH 31, 1996:
See Note 2 to the unaudited consolidated financial statements.
INCOME TAXES
THREE AND NINE MONTHS ENDED MARCH 31, 1997, COMPARED TO THREE AND NINE MONTHS
ENDED MARCH 31, 1996:
See Note 5 to the unaudited consolidated financial statements.
NET INCOME/LOSS
THREE AND NINE MONTHS ENDED MARCH 31, 1997, COMPARED TO THREE AND NINE MONTHS
ENDED MARCH 31, 1996:
Earnings for the third quarter of fiscal 1997 increased to $4,113,000, or
$.18 per share, compared to earnings of $3,832,000, or $.17 per share, in the
same period the previous year, exclusive of the effect of nonrecurring income
items in both periods. Inclusive of nonrecurring income, net income for the
third quarter fiscal 1997 was $4,251,000 or $.18 per share, compared to a net
income for the third quarter of fiscal 1996 of $3,957,000, or $.17 per share.
Earnings for the first nine months of fiscal 1997 increased to $14,814,000,
or $.64 per share, compared to earnings of $11,287,000, or $.50 per share, in
the same period the previous year, exclusive of the effect of special charges
and nonrecurring income items in both periods. Inclusive of these charges, a net
loss of $88,000 was reported for the first nine months of fiscal 1997, compared
to net income for the first nine months of fiscal 1996 of $4,160,000, or $.19
per share.
LIQUIDITY AND CAPITAL RESOURCES
Customers generally pay for salon services and merchandise in cash at the
time of sale, which reduces the Company's working capital requirements. Net
cash provided by operating activities (before capital expenditures and debt
principal repayments) in the first nine months of fiscal 1997 was $14,423,000,
compared to $28,578,000 during the same period the previous year. The decrease
between the two periods is primarily due to the merger and transaction costs
associated with the SUPERCUTS merger.
During the first nine months of fiscal 1997, the Company had worldwide
capital expenditures of $30,824,000, $1,972,000 of which relates to
acquisitions. The Company constructed 22 new REGIS HAIRSTYLISTS salons, 8 new
SUPERCUTS salons, 24 new MASTERCUTS salons,
21
<PAGE>
43 new TRADE SECRET salons, 14 new WAL-MART salons and 20 new International
salons, and completed 37 major remodeling projects. All capital expenditures
during the first nine months of fiscal 1997 were funded by cash flow from the
Company's operations and borrowings under its revolving credit facilities.
The Company anticipates its worldwide salon development program for fiscal
1997 will include a minimum of 170 new salons, and 60 major remodeling and
conversion projects (including the 131 new salons opened and 37 remodeling
projects completed during the first nine months of fiscal 1997). It is expected
that expenditures for these new salons and other projects will be approximately
$36,000,000 in fiscal 1997, excluding acquisition activity.
FINANCING ARRANGEMENTS
See Note 6 to the unaudited consolidated financial statements.
DIVIDENDS
In September, December and March of fiscal 1997, the Company paid quarterly
dividends of $361,000, $452,000 and $452,000, respectively, or 2 cents per
share. In May 1997, the Board of Directors of the Company approved the payment
of a 2 cents per share dividend payable to shareholders of record on May 19,
1997.
OTHER
Transactions by the Company's International salons are invoiced and paid in
local currency. Accordingly, the Company is subject to risks associated with
fluctuations in currency exchange rates.
Management believes that cash generated from operations and amounts
available from additional debt capacity will be sufficient to fund its
anticipated salon capital expenditures and required debt repayments for the
foreseeable future.
CONTINGENCIES
See "Item 1. Legal Proceedings" under Part II of this Form 10-Q.
22
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On March 13, 1996, Mr. David E. Lipson and DEL Holding Corporation ("DEL"),
a Nevada corporation, which the Company believes is wholly owned by Mr. Lipson,
brought legal action against SUPERCUTS, INC., ("SUPERCUTS") a wholly owned
subsidiary of the Company, and certain SUPERCUTS directors and officers. The
initial lawsuit, prior to subsequent amendments, sought payment of $3,000,000,
allegedly due to DEL pursuant to a Consulting Agreement dated as of August 22,
1995, between SUPERCUTS and DEL. The initial lawsuit also sought unspecified
damages allegedly sustained by Mr. Lipson as a result of a delay in his ability
to sell 1,508,220 shares of SUPERCUTS' common stock, which were sold by him
between February 20 and February 28, 1996, because of SUPERCUTS' refusal to
remove restrictive legends from certificates representing such stock. According
to his lawsuit, Mr. Lipson sold the number of shares noted for an aggregate of
$7,800,000 or a reported average price of $5.20 per share. SUPERCUTS' common
stock price range for the month of February 1996, was a high of 7-3/8, a low of
5-1/8 and a close of 5-1/8. Certain matters relating to this case that were
heard in the United States District Court for the Northern District of Illinois,
Eastern Division, Case No. 96C-0822, are currently on appeal in the United
States Court of Appeals for the Seventh Circuit.
In August 1996, Mr. Lipson also brought legal action against SUPERCUTS in
the Circuit Court of Cook County, Illinois alleging that SUPERCUTS has defamed
him. Mr. Lipson requests a judgment "in excess of $200,000,000." Supercuts has
denied these allegations.
Mr. Lipson has also filed suit against SUPERCUTS in the Court of Chancery
of the State of Delaware seeking advancement of expenses incurred by him in
certain litigation and other proceedings. On December 10, 1996, the Delaware
Court ruled that Mr. Lipson is entitled to an advancement of certain expenses
incurred by him, but did not establish the amount of the advancement. The
amount to be advanced is under negotiation.
On April 17, 1997, the Securities and Exchange Commission charged Mr.
Lipson with unlawful insider trading in Supercuts stock during 1995, alleging
that he avoided a loss of approximately $621,000 through such trading. Mr.
Lipson has stated that he intends to contest the charges.
While additional future charges, if any, related to this litigation could
have a material adverse impact on the Company's net income in the quarterly
period in which they would be recorded, management of the Company believes,
based on the advice of counsel, that such additional charges, if any, will not
have a material adverse effect on the consolidated financial position or annual
results of operations of the Company.
23
<PAGE>
ITEM 2. CHANGES IN SECURITIES
a. On December 23, 1996, the Company's Board of Directors adopted a
Shareholder Rights Plan ("Rights Plan"). The Rights Plan provides for the
distribution of preferred stock purchase rights ("Rights") as a dividend at
the rate of one Right for each share of the Company's common stock held as
of the close of business on December 23, 1996. The Rights will expire on
December 23, 2006.
The Rights Plan is intended to protect the interests of the Company's
shareholders from abusive or unfair takeover tactics. It is not designed
to prevent the acquisition of the Company on terms beneficial to all
shareholders.
If any person other than Curtis Squire, Inc., becomes the beneficial owner
of 20 percent or more of the Company's common stock, then each Right not
owned by a 20 percent or more stockholder (other than Curtis Squire, Inc.)
will entitle its holder to purchase, at the Right's then current exercise
price, shares of common stock having a value of twice the Right's exercise
price. In addition, if, after any person (other than Curtis Squire, Inc.)
has become a 20 percent or more stockholder, the Company is involved in a
merger or other business combination with another person in which its
common stock is changed or converted, each Right will entitle its holder to
purchase shares of common stock of such other person having a value of
twice the Right's exercise price.
The Company will be entitled to redeem the Rights at $.001 per Right at any
time prior to the acquisition by a person with beneficial ownership of 20
percent or more of the Company's common stock.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
a. On October 23, 1996, the Company held a special meeting of shareholders.
The purpose of the meeting was to approve the issuance by the Company of up
to 4,920,590 shares of the Company's common stock in connection with the
proposed merger of RGIS Merger Corp., a wholly-owned subsidiary of the
Company, into Supercuts, Inc., and the conversion of each outstanding share
of SUPERCUTS' common stock into the right to receive 0.40 shares of the
Company's common stock pursuant to an agreement and plan of merger dated as
of July 14, 1996. At the meeting, 14,441,339 shares of the Company stock
was voted in favor of the merger and 208,463 shares voted against the
merger.
b. On November 12, 1996, at the annual meeting of the shareholders of the
Company, the shareholders approved an increase in the authorized shares of
common stock of the Company from 25,000,000 to 50,000,000. 16,086,395
shares were voted in favor of the proposal and no shares were voted against
the proposal.
24
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
Exhibit 15 Letter Re: Unaudited Interim Financial Information.
25
<PAGE>
(b) Reports on Form 8-K:
There were no reports on Form 8-K filed during the three months ended March
31, 1997.
26
<PAGE>
SIGNATURE
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: May 14, 1997 By: /s/ Frank E. Evangelist
---------------------------------
Frank E. Evangelist
Senior Vice President, Finance
Chief Financial Officer
Signing on behalf of the
registrant and as principal
accounting officer
27
<PAGE>
Exhibit 15
LETTER RE: UNAUDITED INTERIM FINANCIAL INFORMATION
Securities and Exchange Commission
450 Fifth Street, North West
Washington, D.C. 20549
RE: Regis Corporation
Registrations on Form S-8
(File No. 33-44867, No. 33-89882)
Registration on Form S-4
(File No. 333-12099)
Registrations on Form S-3
(File No. 33-82094, No. 33-86276,
No. 33-89150, No. 33-92244,
No. 33-96224 and No. 33-80337)
We are aware that our report dated May 9, 1997, on our reviews of the
interim financial information of Regis Corporation as of March 31, 1997 and
for the periods ended March 31, 1997 and 1996, and included in the Company's
quarterly report on Form 10-Q for the quarter ended March 31, 1997, is
incorporated by reference in these registration statements. Pursuant to Rule
436(c) under the Securities Act of 1933, this report should not be considered
a part of such registration statements prepared or certified by us within the
meaning of Sections 7 and 11 of that Act.
/s/ Coopers & Lybrand L.L.P.
Coopers & Lybrand L.L.P.
Minneapolis, MN
May 14, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
THIRD QUARTER BALANCE SHEET AND YEAR-TO-DATE INCOME STATEMENT.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 1,466
<SECURITIES> 0
<RECEIVABLES> 12,704
<ALLOWANCES> 580
<INVENTORY> 41,815
<CURRENT-ASSETS> 71,392
<PP&E> 257,091
<DEPRECIATION> 121,129
<TOTAL-ASSETS> 325,419
<CURRENT-LIABILITIES> 88,009
<BONDS> 0
0
0
<COMMON> 1,130
<OTHER-SE> 125,998
<TOTAL-LIABILITY-AND-EQUITY> 325,419
<SALES> 138,066
<TOTAL-REVENUES> 522,551
<CGS> 76,377
<TOTAL-COSTS> 288,928
<OTHER-EXPENSES> 113,018<F1>
<LOSS-PROVISION> 236
<INTEREST-EXPENSE> 7,480
<INCOME-PRETAX> 7,759
<INCOME-TAX> 7,847
<INCOME-CONTINUING> (88)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (88)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0.00<F2>
<FN>
<F1>INCLUDES MERGER AND TRANSACTION CHARGE OF $14,322 AND RESTRUCTURING
CHARGE OF $4,409.
<F2>EPS BEFORE MERGER AND TRANSACTION AND RESTRUCTURING CHARGE WOULD HAVE
BEEN $.64.
</FN>
</TABLE>
