Regis Corp. (NYSE:RGS) Q2 2016 Earnings Conference Call - Final Transcript

Jan 28, 2016 • 10:00 am ET


Regis Corp. (NYSE:RGS) Q2 2016 Earnings Conference Call - Final Transcript


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Steven Spiegel

I want to cover two housekeeping items. First, included in today's press release as well as on our corporate website is a reconciliation bridging reported results to earnings as adjusted for the impact of discreet items for the second quarter of the current and prior years. Also on our website are revisions to our fiscal 2015 quarterly income statements. Second, the presence of evaluation allowance against most of our deferred tax assets affects comparability of reported and as adjusted results to prior periods, mainly as a result of tax benefits we claim for goodwill amortization, but do not recognize for GAAP purposes.

Our income tax benefit for the six months ended December 31, 2015 of $1.4 million includes $1.9 million of non-cash tax benefits associated with goodwill amortization. The total non-cash tax expense related to this matter is expected to approach $8 million for the fiscal year ending June 30, 2016 and will continue annually in decreasing amounts as long as we have a deferred tax asset valuation allowance in place. As we've said in the past, the associated quarterly non-cash charge or benefit could fluctuate significantly as a result of how the effective tax rate is determined at interim periods.

Since our press release and 10-Q include detailed explanations for our major P&L line items, I will focus my comments on our liquidity and financial position. In the first half of our fiscal year, we repurchased 6 million shares of our stock for $77 million at an average price approximating $12.90 per share, excluding transaction costs.

At December 31, 2015, $34 million remained outstanding under our existing share repurchase authorization. In January, our Board of Directors authorized an additional $50 million for share repurchases. In December, we exchanged $120 million 5.75% senior unsecured notes due December 2017 for $123 million 5.5% senior unsecured notes maturing December 2019. We were fortunate to be able to extend this liquidity at an effective borrowing rate approximating 6% especially during a turbulent period for high yield notes.

In January, we amended the terms of our revolving credit facility primarily reducing our borrowing capacity from $400 million to $200 million. This was primarily driven by our desire to rightsize this facility now that we've extended the tenure of our senior unsecured notes and to reduce unused commitment fees. We remain focused on funding investments and managing inflation through disciplined cost management and rigorous review of all spending to ensure we continue to protect our strong balance sheet. To that end, our business generated approximately $12 million of operating cash flow during the first half of our fiscal year. We finished the quarter with $130 million of cash, $120 million of total debt and no outstanding borrowings under our revolving credit facility.

This concludes the financial portion of the call. We would now like to answer any questions you may have. Angel, can you please provide the instructions for the Q&A portion of the call?