What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2023-05-03 compared with 2023-02-01 · 89 added, 80 removed, 429 unchanged (28% of the section changed)

2 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEET (Unaudited)

(Dollars in thousands, except share data)

As of March 31, 2023 and June 30, 2022

(Dollars in thousands, except per share data)

2023 June 30,

30 unchanged sentences

Common stock, $ 0.05 par value;

issued and outstanding, 45,562,555 and 45,510,245 common shares at December 31, 2022 and June 30, 2022, respectively

issued and outstanding, 45,564,673 and 45,510,245 common shares at March 31, 2023 and June 30, 2022, respectively

Additional paid-in capital 64,045 62,562

7 unchanged sentences

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited)

For the Three and Six Months Ended December 31, 2022 and 2021

For the Three and Nine Months Ended March 31, 2023 and 2022

(Dollars and shares in thousands, except per share amounts)

Three Months Ended December 31, Six Months Ended December 31,

Three Months Ended March 31, Nine Months Ended March 31,

2023 2022 2023 2022

18 unchanged sentences

Long-lived asset impairment 36 327 36 542

Goodwill impairment — 13,120 — 13,120

Total operating expenses 53,769 86,022 172,407 237,481

5 unchanged sentences

Loss from operations before income taxes ( 2,402 ) ( 25,777 ) ( 6,753 ) ( 39,381 )

Income tax benefit (expense) — 164 ( 28 ) 213

Income tax benefit 241 1,270 213 1,482

Loss from continuing operations ( 2,161 ) ( 24,507 ) ( 6,540 ) ( 37,899 )

16 unchanged sentences

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE LOSS (Unaudited)

For the Three and Six Months Ended December 31, 2022 and 2021

For the Three and Nine Months Ended March 31, 2023 and 2022

(Dollars in thousands)

Three Months Ended December 31, Six Months Ended December 31,

Three Months Ended March 31, Nine Months Ended March 31,

2023 2022 2023 2022

6 unchanged sentences

CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' DEFICIT (Unaudited)

For the Three and Six Months Ended December 31, 2022 and 2021

For the Three and Nine Months Ended March 31, 2023 and 2022

(Dollars in thousands)

Three Months Ended December 31, 2022

Three Months Ended March 31, 2023

Common Stock Additional

3 unchanged sentences

Shares Amount

Balance, September 30, 2022 45,536,525 $ 2,277 $ 63,044 $ 8,597 $ ( 103,778 ) $ ( 29,860 )

Balance, December 31, 2022 45,562,555 $ 2,278 $ 63,543 $ 8,729 $ ( 106,185 ) $ ( 31,635 )

Net loss — — — — ( 1,643 ) ( 1,643 )

2 unchanged sentences

Net restricted stock activity 2,118 — — — — —

Balance, December 31, 2022 45,562,555 $ 2,278 $ 63,543 $ 8,729 $ ( 106,185 ) $ ( 31,635 )

Three Months Ended December 31, 2021

Balance, March 31, 2023 45,564,673 $ 2,278 $ 64,045 $ 8,758 $ ( 107,828 ) $ ( 32,747 )

Three Months Ended March 31, 2022

Common Stock Additional

3 unchanged sentences

Shares Amount

Balance, September 30, 2021 43,964,489 $ 2,198 $ 58,310 $ 9,069 $ ( 29,767 ) $ 39,810

Balance, December 31, 2021 45,490,074 $ 2,277 $ 61,601 $ 9,105 $ ( 34,695 ) $ 38,288

Net loss — — — — ( 27,918 ) ( 27,918 )

Foreign currency translation — — — 221 — 221

Issuance of common stock, net of offering costs 1,223,314 61 4,931 — — 4,992

Stock-based compensation — — 549 — — 549

Net restricted stock activity 14,981 ( 2 ) ( 19 ) — — ( 21 )

Balance, December 31, 2021 45,490,074 $ 2,277 $ 61,601 $ 9,105 $ ( 34,695 ) $ 38,288

Six Months Ended December 31, 2022

Balance, March 31, 2022 45,505,055 $ 2,275 $ 62,131 $ 9,326 $ ( 62,613 ) $ 11,119

Nine Months Ended March 31, 2023

Common Stock Additional

8 unchanged sentences

Net restricted stock activity 54,428 2 ( 39 ) — — ( 37 )

Balance, December 31, 2022 45,562,555 $ 2,278 $ 63,543 $ 8,729 $ ( 106,185 ) $ ( 31,635 )

Six Months Ended December 31, 2021

Balance, March 31, 2023 45,564,673 $ 2,278 $ 64,045 $ 8,758 $ ( 107,828 ) $ ( 32,747 )

Nine Months Ended March 31, 2022

Common Stock Additional

9 unchanged sentences

Net restricted stock activity 413,593 20 ( 545 ) — — ( 525 )

Balance, December 31, 2021 45,490,074 $ 2,277 $ 61,601 $ 9,105 $ ( 34,695 ) $ 38,288

Balance, March 31, 2022 45,505,055 $ 2,275 $ 62,131 $ 9,326 $ ( 62,613 ) $ 11,119

_______________________________________________________________________________

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)

For the Six Months Ended December 31, 2022 and 2021

For the Nine Months Ended March 31, 2023 and 2022

(Dollars in thousands)

Six Months Ended December 31,

Nine Months Ended March 31,

Cash flows from operating activities:

6 unchanged sentences

Inventory reserve 1,228 9,007

Paid-in-kind interest 51 —

Loss from sale of salon assets to franchisees, net — 2,189

Goodwill impairment — 16,000

Stock-based compensation 1,668 854

25 unchanged sentences

BASIS OF PRESENTATION OF UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

The unaudited interim Condensed Consolidated Financial Statements of Regis Corporation (the Company) as of December 31, 2022 and for the three and six months ended December 31, 2022 and 2021, reflect, in the opinion of management, all adjustments necessary to fairly state the consolidated financial position of the Company as of December 31, 2022 and its consolidated results of operations, comprehensive loss, shareholders' deficit and cash flows for the interim periods.

The unaudited interim Condensed Consolidated Financial Statements of Regis Corporation (the Company) as of March 31, 2023 and for the three and nine months ended March 31, 2023 and 2022, reflect, in the opinion of management, all adjustments necessary to fairly state the consolidated financial position of the Company as of March 31, 2023 and its consolidated results of operations, comprehensive loss, shareholders' deficit and cash flows for the interim periods.

Adjustments consist only of normal recurring items, except for any discussed in the notes below.

6 unchanged sentences

To facilitate the exit of the distribution centers, the Company sold inventory at discounts.

The inventory valuation reserve as of December 31, 2022 and June 30, 2022 was $ 1.9 and $ 1.9 million, respectively.

In the three and six months ended December 31, 2022, an inventory reserve charge of $ 1.2 million was recorded in Inventory reserve on the unaudited Condensed Consolidated Statement of Operations.

In the three and six months ended December 31, 2021, an inventory reserve charge of $ 1.2 and $ 1.5 million, respectively, was recorded in Company-owned salon expense on the unaudited Condensed Consolidated Statement of Operations.

As of December 31, 2022 and June 30, 2022, the Company had inventory related to discontinued operations of $ 1.3 and $ 1.8 million, respectively, net of a reserve of $ 1.3 and $ 1.1 million, respectively.

The inventory valuation reserve as of March 31, 2023 and June 30, 2022 was $ 1.8 and $ 1.9 million, respectively.

In the three months ended March 31, 2023, the Company did no t record an inventory reserve charge and in the nine months ended March 31, 2023, the Company recorded an inventory reserve charge of $ 1.2 million in inventory reserve on the unaudited Condensed Consolidated Statement of Operations.

In the three and nine months ended March 31, 2022, the Company recorded total inventory reserve charges of $ 7.5 and $ 9.0 million, respectively.

In the three months ended March 31, 2022, $ 6.4 and $ 1.1 million were recorded in inventory reserve and company-owned salon expense, respectively, on the unaudited Condensed Consolidated Statement of Operations.

In the nine months ended March 31, 2022, $ 6.4 and $ 2.6 million were recorded in inventory reserve and company-owned salon expense, respectively, on the unaudited Condensed Consolidated Statement of Operations.

As of March 31, 2023 and June 30, 2022, the Company had inventory related to discontinued operations of $ 1.3 and $ 1.8 million, respectively, offset by a reserve of $ 1.3 and $ 1.1 million, respectively.

The increase in the reserve during fiscal year 2023 reduced the gain from discontinued operations.

See Note 3 to the unaudited Condensed Consolidated Financial Statements.

As of December 31, 2022 and June 30, 2022, the Franchise reporting unit had $ 173.3 and $ 174.4 million, respectively, of goodwill.

The change in goodwill for the six months ended December 31, 2022 is due to foreign currency translation.

As of March 31, 2023 and June 30, 2022, the Franchise reporting unit had $ 173.4 and $ 174.4 million, respectively, of goodwill.

The change in goodwill for the nine months ended March 31, 2023 is due to foreign currency translation.

The Company assesses goodwill impairment on an annual basis, during the Company's fourth fiscal quarter, and between annual assessments if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value.

An interim impairment analysis was not required in the three and six months ended December 31, 2022.

An interim impairment analysis was not required in the three or nine months ended March 31, 2023.

Depreciation:

Depreciation expense in the three months ended December 31, 2022 and 2021 includes $ 0.2 and $ 0.3 million, respectively, and for the six months ended December 31, 2022 and 2021 includes $ 0.4 and $ 0.6 million, respectively, of asset retirement obligations, which are cash expenses.

Depreciation expense in the three and six months ended December 31, 2022 includes a $ 2.6 million accelerated depreciation charge related to the consolidation of office space within the Company's corporate headquarters.

Depreciation expense in the three months ended March 31, 2023 and 2022 includes $ 0.2 and $ 0.3 million, respectively, and for the nine months ended March 31, 2023 and 2022 includes $ 0.6 and $ 0.9 million, respectively, of asset retirement obligations, which are cash expenses.

Depreciation expense in the nine months ended March 31, 2023 includes a $ 2.6 million accelerated depreciation charge in the second quarter related to the consolidation of office space within the Company's corporate headquarters.

REVENUE RECOGNITION:

30 unchanged sentences

The receivables balance is presented net of an allowance for expected losses (i.e., doubtful accounts), primarily related to receivables from franchisees.

The following table is a rollforward of the allowance for doubtful accounts for the period:

Six Months Ended December 31,

The following table is a rollforward of the allowance for doubtful accounts for the periods indicated:

Nine Months Ended March 31,

(Dollars in thousands)

12 unchanged sentences

The following table is a rollforward of the broker fee balance for the periods indicated:

Six Months Ended December 31,

Nine Months Ended March 31,

(Dollars in thousands)

5 unchanged sentences

Deferred franchise fees related to open salons are generally recognized on a straight-line basis over the term of the franchise agreement.

Franchise fee revenue for the three months ended December 31, 2022 and 2021 was $ 1.7 and $ 1.6 million, respectively, and for the six months ended December 31, 2022 and 2021 was $ 3.2 and $ 3.2 million, respectively.

Estimated revenue expected to be recognized in the future related to deferred franchise fees for open salons as of December 31, 2022 is as follows (in thousands):

Franchise fee revenue for the three months ended March 31, 2023 and 2022 was $ 1.6 and $ 1.6 million, respectively, and for the nine months ended March 31, 2023 and 2022 was $ 4.8 and $ 4.9 million, respectively.

Estimated revenue expected to be recognized in the future related to deferred franchise fees for open salons as of March 31, 2023 is as follows (dollars in thousands):

Remainder of 2023 $ 1,362

3 unchanged sentences

On June 30, 2022, the Company sold its Opensalon ® Pro (OSP) solution to Soham Inc.

The Company received $ 13.0 million in proceeds in June 2022 and in the six months ended December 31, 2022, received an additional $ 4.5 million in proceeds, net of a $ 0.5 million transaction fee.

The Company received $ 13.0 million in proceeds in June 2022 and in the nine months ended March 31, 2023, received an additional $ 5.0 million in proceeds, of which $ 0.5 million were received in the third quarter, offset by a $ 0.5 million transaction fee.

As a result of the sale, the Company classified the OSP business as discontinued operations in the financial statements for all periods presented.

1 unchanged sentence

The following summarizes the results of discontinued operations for the periods presented:

Three Months Ended December 31, Six Months Ended December 31,

Three Months Ended March 31, Nine Months Ended March 31,

2023 2022 2023 2022

6 unchanged sentences

Depreciation and amortization — ( 375 ) — ( 1,080 )

Goodwill impairment — ( 2,880 ) — ( 2,880 )

Interest expense — ( 179 ) — ( 537 )

Gain from sale of OSP 518 — 4,552 —

Gain (loss) from OSP discontinued operations, net $ 134 $ ( 818 ) $ 3,440 $ ( 1,914 )

Income (loss) from OSP discontinued operations, net $ 518 $ ( 3,411 ) $ 3,958 $ ( 5,325 )

SHAREHOLDERS' EQUITY:

Stock-Based Employee Compensation:

During the three and six months ended December 31, 2022, the Company granted various equity awards including stock options and stock appreciation rights as follows:

Three Months Ended December 31, 2022 Six Months Ended December 31, 2022

During the nine months ended March 31, 2023, the Company granted various equity awards including stock options and stock appreciation rights as follows:

Three Months Ended March 31, 2023 Nine Months Ended March 31, 2023

Stock options (SOs) — 1,600,000

Stock appreciation rights (SARs) — 600,000

The SOs and SARs granted during the three and six months ended December 31, 2022 vest in equal amounts over a one or three-year period subsequent to the grant date.

Total compensation cost for stock-based payment arrangements totaling $ 0.6 and $( 1.4 ) million for the three months ended December 31, 2022 and 2021, respectively, and $ 1.1 and $ 0.3 million for the six months ended December 31, 2022 and 2021, respectively, were recorded within general and administrative expense on the unaudited Condensed Consolidated Statement of Operations.

In the three and six months ended December 31, 2021, stock compensation includes a benefit related to executive forfeitures of $ 2.0 million.

The SOs and SARs granted during the nine months ended March 31, 2023 vest in equal amounts over a one or three-year period subsequent to the grant date.

Total compensation cost for stock-based payment arrangements totaling $ 0.6 and $ 0.5 million for the three months ended March 31, 2023 and 2022, respectively, and $ 1.7 and $ 0.9 million for the nine months ended March 31, 2023 and 2022, respectively, were recorded within general and administrative expense on the unaudited Condensed Consolidated Statement of Operations.

In the nine months ended March 31, 2022, stock compensation includes a benefit related to executive forfeitures of $ 2.0 million.

Share Issuance Program:

In fiscal year 2021, the Company filed a $ 150.0 million shelf registration statement and $ 50.0 million prospectus supplement with the Securities and Exchange Commission (SEC) under which it may offer and sell, from time to time, up to $ 50.0 million worth of its Class A common stock in "at-the-market" offerings.

During the six months ended December 31, 2022, the Company did no t issue any shares.

During the six months ended December 31, 2021, the Company issued 9.3 million shares and received net proceeds of $ 37.2 million.

As of December 31, 2022, $ 11.6 million remains under the prospectus supplement, which equates to 9.5 million shares based on the share price as of December 31, 2022.

During the nine months ended March 31, 2023, the Company did no t issue any shares.

During the nine months ended March 31, 2022, the Company issued 9.3 million shares and received net proceeds of $ 37.2 million.

As of March 31, 2023, $ 11.6 million remains under the prospectus supplement, which equates to 10.4 million shares based on the share price as of March 31, 2023.

INCOME TAXES:

A summary of income tax benefit (expense) and corresponding effective tax rates is as follows:

Three Months Ended December 31, Six Months Ended December 31,

A summary of the income tax benefits and corresponding effective tax rates is as follows:

Three Months Ended March 31, Nine Months Ended March 31,

2023 2022 2023 2022

(Dollars in thousands)

Income tax benefit (expense) $ — $ 164 $ ( 28 ) $ 213

Income tax benefit $ 241 $ 1,270 $ 213 $ 1,482

Effective tax rate 10.0 % 4.9 % 3.2 % 3.8 %

The recorded tax provision and effective tax rates for the three and six months ended December 31, 2022 and 2021 were different than what would normally be expected, primarily due to the impact of the deferred tax valuation allowance.

The recorded tax provision and effective tax rates for the three and nine months ended March 31, 2023 and 2022 were different than what would normally be expected, primarily due to the impact of the deferred tax valuation allowance.

On August 16, 2022, the Inflation Reduction Act (the IRA) was signed into law.

7 unchanged sentences

Further, similar to other large retail employers, the Company has faced, and may continue to face, allegations of purported class-wide consumer and wage and hour violations.

During the three and six months ended December 31, 2022, the Company recorded $ 0.4 and $ 0.9 million, respectively, of expense related to litigation, and $ 0.6 and $ 1.1 million was paid during the three and six months ended December 31, 2022, respectively.

During the three and nine months ended March 31, 2023, the Company recorded $ 0.0 and $ 0.9 million, respectively, of expense related to litigation, and $ 0.2 and $ 1.3 million was paid during the three and nine months ended March 31, 2023, respectively.

The Company's previous point-of-sale system supplier had challenged the development of certain parts of the Company's technology systems in litigation brought in the Northern District of California.

1 unchanged sentence

The Company and the supplier entered into an amendment to the Settlement Agreement, effective June 15, 2022, in which the Company agreed to pay $ 2.0 million to the supplier in installments commencing on June 15, 2022, and ending on December 10, 2022, in consideration of a release of claims arising out of or related to the Transition Services Agreement and for the supplier to continue to provide the services set forth in that agreement.

As of December 31, 2022, the Company has made all payments under the agreement.

As of March 31, 2023, the Company has made all payments under the agreement.

Litigation is inherently unpredictable, and the outcome of these matters cannot presently be determined.

16 unchanged sentences

Total rent includes the following:

Three Months Ended December 31, Six Months Ended December 31,

Three Months Ended March 31, Nine Months Ended March 31,

2023 2022 2023 2022

7 unchanged sentences

_______________________________________________________________________________

(1) During the three and six months ended December 31, 2022, the Company incurred costs of $ 0.8 and $ 1.3 million, respectively, to exit salons before the lease end date in order to relieve the Company of future lease obligations.

During the three months ended December 31, 2021, the Company incurred costs of $ 0.2 million to exit salons before the lease end date to relieve the Company of future lease obligations.

During the six months ended December 31, 2021, the Company paid $ 0.9 million to exit its distribution centers before the lease end dates and incurred costs of $ 0.7 million to exit salons before the lease end dates in order to relieve the Company of future lease obligations.

(1) During the three and nine months ended March 31, 2023, the Company incurred costs of $ 0.3 and $ 1.6 million, respectively, to exit salons before the lease end date in order to relieve the Company of future lease obligations.

During the three months ended March 31, 2022, the Company incurred costs of $ 0.2 million to exit salons before the lease end date to relieve the Company of future lease obligations.

During the nine months ended March 31, 2022, the Company paid $ 0.9 million to exit its distribution centers before the lease end dates and incurred costs of $ 0.9 million to exit salons before the lease end dates in order to relieve the Company of future lease obligations.

(2) Upon termination of previously impaired leases, the Company derecognizes the corresponding ROU assets and lease liabilities, which results in a net gain.

In addition, the Company recognizes a benefit from lease liabilities decreasing in excess of previously impaired ROU assets for ongoing leases that were previously impaired.

(3) Franchise salon rent in fiscal year 2023 includes the benefit of incurring less cost to terminate a lease than estimated.

(3) The credit in franchise salon rent in the three months ended March 31, 2022 related to lower estimated exposure.

The Company leases salon premises in which the majority of its franchisees operate and has entered into corresponding sublease arrangements with franchisees.

1 unchanged sentence

The Company records the rental payments due from franchisees as franchise rental income and the corresponding amounts owed to landlords as franchise rent expense on the unaudited Condensed Consolidated Statement of Operations.

For the three months ended December 31, 2022 and 2021, franchise rental income and franchise rent expense were $ 28.9 and $ 33.8 million, respectively, and $ 59.2 and $ 67.5 million, respectively, for the six months ended December 31, 2022 and 2021.

For the three months ended March 31, 2023 and 2022, franchise rental income and franchise rent expense were $ 26.6 and $ 32.7 million, respectively, and $ 85.8 and $ 100.2 million, respectively, for the nine months ended March 31, 2023 and 2022.

These leases generally have lease terms of approximately five years .

3 unchanged sentences

The lease liability is initially and subsequently measured at the present value of the unpaid lease payments at the lease commencement date, including one lease term option when the lease is expected to be renewed.

The ROU asset is initially and subsequently measured throughout the lease term at the carrying amount of the lease liability, plus initial direct costs, less any accrued lease payments and unamortized lease incentives received, if any.

The ROU asset is initially and subsequently measured throughout the lease term at the carrying amount of the lease liability, plus initial direct costs, less accrued lease payments and unamortized lease incentives received, if any.

Expense for lease payments is recognized on a straight-line basis over the lease term, including the lease renewal option when the lease is expected to be renewed.

2 unchanged sentences

The Company uses the portfolio approach in applying the discount rate based on the original lease term.

The weighted average remaining lease term was 5.77 and 6.02 years and the weighted average discount rate was 4.34 % and 4.25 % for all salon operating leases as of December 31, 2022 and June 30, 2022, respectively.

The weighted average remaining lease term was 5.65 and 6.02 years and the weighted average discount rate was 4.44 % and 4.25 % for all salon operating leases as of March 31, 2023 and June 30, 2022, respectively.

A lessee's ROU asset is subject to the same asset impairment guidance in ASC 360, Property, Plant, and Equipment, applied to other elements of property, plant, and equipment.

11 unchanged sentences

The significant judgments and assumptions utilized to determine the fair value of the salon asset groups include the market rent of comparable properties and a discount rate.

In the three and six months ended December 31, 2022, the Company did not recognize long-lived asset impairment charges related to ROU assets in the unaudited Condensed Consolidated Statement of Operations.

In the three and six months ended December 31, 2021, the Company recognized long-lived asset impairment charges of $ 0.1 and $ 0.2 million, respectively, primarily related to ROU assets in the unaudited Condensed Consolidated Statement of Operations.

In the three and nine months ended March 31, 2023, the Company recognized a long-lived asset impairment charge of $ 0.04 million related to ROU assets in the unaudited Condensed Consolidated Statement of Operations.

In the three and nine months ended March 31, 2022, the Company recognized long-lived asset impairment charges of $ 0.3 and $ 0.5 million, respectively, primarily related to ROU assets in the unaudited Condensed Consolidated Statement of Operations.

The impairment loss for each salon asset group that was recognized was allocated among the long-lived assets of the group on a pro-rata basis using their relative carrying amounts.

3 unchanged sentences

If actual results are not consistent with the estimates and assumptions used in the calculations, the Company may be exposed to future impairment losses that could be material.

As of December 31, 2022, future operating lease commitments, including one renewal option for leases expected to be renewed, to be paid and received by the Company were as follows (in thousands):

As of March 31, 2023, future operating lease commitments, including one renewal option for leases expected to be renewed, to be paid and received by the Company were as follows (dollars in thousands):

Fiscal Year Leases for Franchise Salons Leases for Company-owned Salons Corporate Leases Total Operating Lease Payments Sublease Income to be Received from Franchisees Net Rent Commitments

12 unchanged sentences

The Company's debt consists of the following:

Maturity Date December 31,

2022 December 31,

Maturity Date March 31,

2023 March 31,

2023 June 30,

4 unchanged sentences

Revolving credit facility 2026 9.06 % 9,000 179,994

Paid-in-kind interest 51 —

Total long-term debt, net $ 174,694 $ 179,994

2 unchanged sentences

The amendment is accounted for as a modification of debt and any unamortized financing fees that existed at the date of the amendment and new financing fees incurred are amortized through the extended term of the credit facility.

At December 31, 2022, the Company had outstanding standby letters of credit under the revolving credit facility of $ 11.8 million, primarily related to the Company's self-insurance program.

As of December 31, 2022, total liquidity and available credit under the revolving credit facility, as defined by the agreement, were $ 43.7 and $ 34.3 million, respectively.

As of December 31, 2022, the Company had cash and cash equivalents of $ 9.4 million and current liabilities of $ 138.9 million.

At March 31, 2023, the Company had outstanding standby letters of credit under the revolving credit facility of $ 11.8 million, primarily related to the Company's self-insurance program.

As of March 31, 2023, total liquidity and available credit under the revolving credit facility, as defined by the agreement, were $ 43.0 and $ 34.3 million, respectively.

As of March 31, 2023, the Company had cash and cash equivalents of $ 8.8 million and current liabilities of $ 129.1 million.

The agreement utilizes an interest rate margin that is subject to annual increases.

The margin applicable to term secured overnight financing rate (SOFR) loans is currently 3.875 %.

Effective March 27, 2023, the margin will increase to 6.25 %, of which 4.25 % will be paid currently in cash and 2.00 % will be PIK interest (added to the principal balance and thereafter accruing interest).

The margin applicable to term secured overnight financing rate (SOFR) loans was 3.875 % through March 27, 2023.

Effective March 27, 2023, the margin increased to 6.25 %, of which 4.25 % is paid currently in cash and 2.00 % is PIK interest (added to the principal balance and thereafter accruing interest).

Effective March 27, 2024, the margin will increase to 7.25 %, of which 4.25 % will be paid currently in cash and 3.00 % will be PIK interest.

1 unchanged sentence

The agreement contains typical provisions and financial covenants regarding minimum EBITDA, maximum leverage and minimum fixed-charge coverage and a minimum liquidity threshold of $ 10.0 million.

The Company was in compliance with its covenants and other requirements of the financing arrangements as of December 31, 2022.

The Company was in compliance with its covenants and other requirements of the financing arrangements as of March 31, 2023.

FAIR VALUE MEASUREMENTS:

4 unchanged sentences

Assets and Liabilities Measured at Fair Value on a Recurring Basis

As of December 31, 2022 and June 30, 2022, the estimated fair value of the Company's cash, cash equivalents, restricted cash, receivables, inventory, deferred compensation assets, accounts payable and debt approximated their carrying values.

As of March 31, 2023 and June 30, 2022, the estimated fair value of the Company's cash, cash equivalents, restricted cash, receivables, inventory, deferred compensation assets, accounts payable and debt approximated their carrying values.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

5 unchanged sentences

Stock-based awards with exercise prices greater than the average market price of the Company's common stock are excluded from the computation of diluted earnings per share.

The computation of weighted average shares outstanding, assuming dilution, excluded 4,143,828 and 2,960,122 of stock-based awards during the three months ended December 31, 2022 and 2021, respectively, and excluded 3,662,602 and 2,635,055 of stock-based awards during the six months ended December 31, 2022 and 2021, respectively, as they were not dilutive under the treasury stock method.

The computation of weighted average shares outstanding, assuming dilution, excluded 4,293,687 and 2,286,499 of stock-based awards during the three months ended March 31, 2023 and 2022, respectively, and excluded 3,881,869 and 2,473,185 of stock-based awards during the nine months ended March 31, 2023 and 2022, respectively, as they were not dilutive under the treasury stock method.

SEGMENT INFORMATION:

20 unchanged sentences

(1) Canadian and Puerto Rican salons are included in the North American salon totals.

As of December 31, 2022, the Franchise operating segment is comprised primarily of Supercuts ® , SmartStyle ® , Cost Cutters ® , First Choice Haircutters ® , Magicuts ® , and Roosters ® concepts and the Company-owned operating segment is comprised primarily of Supercuts ® , SmartStyle ® , and other regional trade names.

Financial information concerning the Company's reportable operating segments is shown in the tables below.

As of March 31, 2023, the Franchise operating segment is comprised primarily of Supercuts ® , SmartStyle ® , Cost Cutters ® , First Choice Haircutters ® , Magicuts ® , and Roosters ® concepts and the Company-owned operating segment is comprised primarily of Supercuts ® , SmartStyle ® , and other regional trade names.

Financial information concerning the Company's reportable operating segments is shown in the table below.

Segment information is presented in the same way that the Company internally organizes the business for assessing performance and making decisions regarding allocation of resources.

1 unchanged sentence

Revenue and segment adjusted EBITDA are regularly reviewed by the CODM to make decisions about resources to be allocated to the segments, assess current performance and forecast future performance.

Segment adjusted EBITDA is defined as income from continuing operations before interest, income taxes, depreciation and amortization.

Asset information by segment is not provided to the CODM.

Segment adjusted EBITDA is defined as income from continuing operations before interest, income taxes, depreciation, amortization and impairment.

C onsistent with our internal management reporting, unallocated expenses include certain items impacting comparability.

1 unchanged sentence

They are based on how management views the business, makes financial, operating and planning decisions and evaluates the Company's ongoing performance and are not attributable to either segment.

Unallocated fees include distribution center wind down fees, inventory reserve, one-time professional fees and settlements, severance expense, the benefit from lease liability decreases in excess of previously impaired ROUA, lease termination fees, asset retirement obligation costs and long-lived asset impairment charges.

Figures for prior reporting periods have been restated to conform to the current period.

Three Months Ended December 31, Six Months Ended December 31,

Three Months Ended March 31, Nine Months Ended March 31,

2023 2022 2023 2022

10 unchanged sentences

Long-lived asset impairment ( 36 ) ( 327 ) ( 36 ) ( 542 )

Goodwill impairment — ( 13,120 ) — ( 13,120 )

Interest expense ( 4,787 ) ( 3,224 ) ( 13,123 ) ( 9,621 )

Income tax benefit (expense) — 164 ( 28 ) 213

Income tax benefit 241 1,270 213 1,482

Income (loss) from discontinued operations 518 ( 3,411 ) 3,958 ( 5,325 )

1 unchanged sentence

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements