Regis (RGS) 8-K Regis Reports Fourth Quarter 2011 Results

Exhibit 99

CONTACT: REGIS CORPORATION:

Mark Fosland – SVP, Finance and Investor Relations

952-806-1707

Andy Larew – Director, Finance-Investor Relations

952-806-1425

For Immediate Release

REGIS REPORTS FOURTH QUARTER 2011 RESULTS

- Fourth quarter loss of $0.29 per share includes non-operational charges -

- Fourth quarter operational earnings grow to $0.37 per share from $0.34 per share in the prior year -

MINNEAPOLIS, August 25, 2011 — Regis Corporation (NYSE:RGS), the global leader in the $160 billion haircare industry, today reported a fourth quarter net loss of $0.29 per share.  These results include non-operational after-tax charges of $39.3 million, primarily related to income tax expense associated with the third quarter Promenade division goodwill impairment charge and a reserve recorded on the Pure Beauty note receivable.  Absent these items, fourth quarter operational earnings were $0.37 per diluted share.

A complete reconciliation of reported loss to operational earnings is included in today’s press release and is also available on the Company’s website at www.regiscorp.com.

On July 8, 2011, the Company reported that revenues for the fourth quarter ended June 30, 2011 increased 0.3 percent to $592 million, with fourth quarter total same-store sales declining 1.7 percent.

“We are pleased to report strong fourth quarter operational earnings of $0.37 per share, which exceeded our plan and were $0.03 better than the operational results we reported last year in the same period.  Additionally, trends in our customer visitations improved in the quarter,” said Randy L. Pearce, President.

Mr. Pearce concluded, “Our number-one focus is on increasing customer visits by providing superior value and service for our customers.  We are investing in strategies and initiatives to increase our connections with customers, leverage the scale of our business and enhance organizational effectiveness at all levels.  Despite making these investments, we are committed to drive improved financial performance in fiscal 2012. To achieve this goal, we have adjusted our cost structure and expect these efforts to result in improved cash flow and earnings.”

Fiscal 2012 Update

·The Company continues to expect fiscal 2012 same-store sales to be in a range of negative one percent to positive one percent.

·At these same-store levels, EBITDA is expected to be in a range of $222 million to $242 million and operational earnings are forecasted to grow to a range of $1.16 to $1.32 per share.

·Through seven weeks, first quarter customer counts have declined 2.5 percent and same-store sales have declined 3.6 percent.

·The Company has identified a new third party point-of-sale software alternative, which it is now planning to implement in all of its company-owned salons over the next year.  The new point-of-sale system will replace the current point-of-sale system and enable the Company to accelerate its strategies and initiatives.  As a result, the Company now expects to incur in the first half of fiscal 2012 pre-tax, non-operational expense of approximately $20 million related to the acceleration of depreciation on the current point-of-sale software.

Fourth Quarter Non-Operational Items

Fourth quarter non-operational charges, which netted to $39.3 million on an after-tax basis, consisted of the following items:

·Non-cash tax expense of $22.4 million related to the goodwill impairment of the Company’s Promenade division in the third quarter.

·An after-tax $13.7 million reserve related to the Company’s note receivable from Pure Beauty.

·Senior management after-tax restructuring costs of $1.5 million.

·Other after-tax non-operational charges of $1.7 million.

As of June 30, 2011 Regis Corporation owned, franchised, or held ownership interest in 12,701 worldwide locations.

Regis Corporation will host a conference call discussing fourth quarter results today, August 25, 2011 at 1:30 p.m., Central time. Interested parties are invited to listen by logging on to www.regiscorp.com or dialing 877-941-6009. A replay of the call will be available later that day. The replay phone number is 800-406-7325, access code 4462821#.

About Regis Corporation

Regis Corporation (NYSE:RGS) is the beauty industry’s global leader in beauty salons, hair restoration centers and cosmetology education. As of June 30, 2011, the Company owned, franchised or held ownership interests in approximately 12,700 worldwide locations.  Regis’ corporate and franchised locations operate under concepts such as Supercuts, Sassoon Salon, Regis Salons, MasterCuts, SmartStyle, Cost Cutters, Cool Cuts 4 Kids and Hair Club for Men and Women.  In addition, Regis maintains an ownership interest in Provalliance, which operates salons primarily in Europe, under the brands of Jean Louis David, Franck Provost and Saint Algue.  Regis also maintains ownership interests in Empire Education Group in the U.S. and the MY Style concepts in Japan.  System-wide, these and other concepts are located in the U.S. and in over 30 other countries in North America, South America, Europe, Africa and Asia.  For additional information about the company, including a reconciliation of certain non-GAAP financial information and certain supplemental financial information, please visit the Investor Information section of the corporate website at www.regiscorp.com. To join Regis Corporation’s email alert list, click on this link: http://www.b2i.us/irpass.asp?BzID=913&to=ea&Nav=1&S=0&L=1

This press release may contain “forward-looking statements” within the meaning of the federal securities laws, including statements concerning anticipated future events and expectations that are not historical facts. The forward-looking statements in this document reflect management’s best judgment at the time they are made, but all such statements are subject to numerous risks and uncertainties, which could cause actual results to differ materially from those expressed in or implied by the statements herein. Such forward-looking statements are often identified herein by use of words including, but not limited to, “may,” “believe,” “project,” “forecast,” “expect,” “estimate,” “anticipate,” and “plan.” In addition, the following factors could affect the Company’s actual results and cause such results to differ materially from those expressed in forward-looking statements. These factors include, competition within the personal hair care industry, which remains strong, both domestically and internationally, price sensitivity; changes in economic conditions; changes in consumer tastes and fashion trends; the ability of the Company to implement its planned spending and cost reduction plan and to continue to maintain compliance with financial covenants in its credit agreements; labor and benefit costs; legal claims; risk inherent to international development (including currency fluctuations); the continued ability of the Company and its franchisees to obtain suitable locations and financing for new salon development and to maintain satisfactory relationships with landlords and other licensors with respect to existing locations; governmental initiatives such as minimum wage rates, taxes and possible franchise legislation; the ability of the Company to successfully identify, acquire and integrate salons that support its growth objectives; the ability of the Company to maintain satisfactory relationships with suppliers; or other factors not listed above. The ability of the Company to meet its expected revenue target is dependent on salon acquisitions, new salon construction and same-store sales increases, all of which are affected by many of the aforementioned risks. Additional information concerning potential factors that could affect future financial results is set forth in the Company’s Annual Report on Form 10-K for the year ended June 30, 2010. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.  However, your attention is directed to any further disclosures made in our subsequent annual and periodic reports filed or furnished with the SEC on Forms 10-K, 10-Q and 8-K and Proxy Statements on Schedule 14A.

(TABLES TO FOLLOW)

REGIS CORPORATION (NYSE: RGS)
CONSOLIDATED BALANCE SHEET (Unaudited)
as of June 30, 2011 and 2010
(In thousands, except per share data)

	June 30,
	2011		2010
ASSETS
Current assets:
Cash and cash equivalents	$	96,263	$	151,871
Receivables, net	27,149		24,312
Inventories	150,804		153,380
Deferred income taxes	17,887		16,892
Income tax receivable	22,341		46,207
Other current assets	32,118		36,203
Total current assets	346,562		428,865
Property and equipment, net	347,811		359,250
Goodwill	680,512		736,989
Other intangibles, net	111,328		118,070
Investment in and loans to affiliates	261,140		195,786
Other assets	58,400		80,612
Total assets	$	1,805,753	$	1,919,572
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Long-term debt, current portion	$	32,252	$	51,629
Accounts payable	55,107		57,683
Accrued expenses	167,321		160,797
Total current liabilities	254,680		270,109
Long-term debt and capital lease obligations	281,159		388,400
Other noncurrent liabilities	237,295		247,770
Total liabilities	773,134		906,279
Commitments and contingencies
Shareholders’ equity:
Common stock, $0.05 par value; issued and outstanding 57,710,811 and 57,561,180 common shares at June 30, 2011 and 2010, respectively	2,886		2,878
Additional paid-in capital	341,190		332,372
Accumulated other comprehensive income	77,946		47,032
Retained earnings	610,597		631,011
Total shareholders’ equity	1,032,619		1,013,293
Total liabilities and shareholders’ equity	$	1,805,753	$	1,919,572

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REGIS CORPORATION (NYSE: RGS)

CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited)

(In thousands, except per share data)

	(Unaudited)
	Three Months Ended June 30,						Year Ended June 30,
	2011			2010			2011			2010
Revenues:
Service	$	452,397		$	451,855		$	1,762,974		$	1,784,137
Product	129,415			127,820			523,194			514,631
Product sold to Pure Beauty(1)	—			—			—			19,962
Royalties and fees	10,173			10,273			39,701			39,704
	591,985			589,948			2,325,869			2,358,434
Operating expenses:
Cost of service	258,288			255,371			1,012,868			1,015,720
Cost of product	61,910			59,907			249,979			243,921
Cost of product sold to Pure Beauty(1)	—			—			—			19,962
Site operating expenses	47,594			51,973			197,722			199,338
General and administrative	103,545			74,079			339,857			291,991
Rent	87,552			86,718			342,286			344,098
Depreciation and amortization	25,942			27,511			105,109			108,764
Goodwill impairment	—			—			74,100			35,277
Lease termination costs	—			(1,325		)	—			2,145
Total operating expenses	584,831			554,234			2,321,921			2,261,216
Operating income	7,154			35,714			3,948			97,218
Other income (expense):
Interest expense	(8,390		)	(8,990		)	(34,388		)	(54,414		)
Interest income and other, net	2,081			3,642			4,811			10,410
Income (loss) from continuing operations before income taxes and equity in income of affiliated companies	845			30,366			(25,629		)	53,214
Income taxes	(20,182		)	(15,575		)	9,496			(25,577		)
Equity in income of affiliated companies, net of income taxes	2,942			3,548			7,228			11,942
(Loss) income from continuing operations	$	(16,395	)	$	18,339		$	(8,905	)	$	39,579
Income from discontinued operations, net of tax	—			—			—			3,161
Net (loss) income	$	(16,395	)	$	18,339		$	(8,905	)	$	42,740
Net (loss) income per share:
Basic:
(Loss) income from continuing operations	$	(0.29	)	$	0.32		$	(0.16	)	$	0.71
Income from discontinued operations, net of tax	—			—			—			0.06
Net (loss) income per share, basic(2)	$	(0.29	)	$	0.32		$	(0.16	)	$	0.77
Diluted:
(Loss) income from continuing operations	$	(0.29	)	$	0.30		$	(0.16	)	$	0.71
Income from discontinued operations, net of tax	—			—			—			0.05
Net (loss) income per share, diluted(2)	$	(0.29	)	$	0.30		$	(0.16	)	$	0.75
Weighted average common and common equivalent shares outstanding:
Basic	56,800			56,493			56,704			55,806
Diluted	56,800			67,878			56,704			66,753
Cash dividends declared per common share	$	0.06		$	0.04		$	0.20		$	0.16

(1) Pure Beauty Salons & Boutiques, Inc. (Pure Beauty), formerly known as Premier Salons Beauty, Inc., purchased Trade Secret, Inc. from Regis Corporation on February 16, 2009.  The agreement included a provision that Regis Corporation would supply product to Pure Beauty at cost for a transition period.  The agreement was substantially complete as of September 30, 2009.

(2) Total is a recalculation; line items calculated individually may not sum to total.

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REGIS CORPORATION (NYSE: RGS)
SELECTED CASH FLOW DATA (Unaudited)
(In thousands)

	Year EndedJune 30,
	2011			2010
Net cash provided by operating activities	$	229,178		$	192,223
Net cash used in investing activities	(144,330		)	(44,580		)
Net cash used in financing activities	(148,431		)	(39,133		)
Effect of exchange rate changes on cash and cash equivalents	7,975			823
(Decrease) increase in cash and cash equivalents	(55,608		)	109,333
Cash and cash equivalents:
Beginning of year	151,871			42,538
End of year	$	96,263		$	151,871

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REGIS CORPORATION (NYSE: RGS)

Salon and Hair Restoration Center Counts and Revenues

SYSTEM-WIDE LOCATIONS:	June 30, 2011	June 30, 2010
Company-owned salons	7,883	7,909
Franchise salons	1,936	2,020
Company-owned hair restoration centers	67	62
Franchise hair restoration centers	29	33
Ownership interest locations	2,786	2,704
Total, system-wide	12,701	12,728

SALON LOCATION SUMMARY

NORTH AMERICAN SALONS:	June 30, 2011		June 30, 2010
REGIS SALONS
Open at beginning of period	1,049		1,071
Salons constructed	12		14
Acquired	9		3
Less relocations	(10	)	(11	)
Salon openings	11		6
Conversions	(1	)	—
Salons closed	(36	)	(28	)
Total, Regis Salons	1,023		1,049
MASTERCUTS
Open at beginning of period	600		602
Salons constructed	6		15
Acquired	—		—
Less relocations	(5	)	(7	)
Salon openings	1		8
Conversions	1		—
Salons closed	(14	)	(10	)
Total, MasterCuts Salons	588		600
SMARTSTYLE/COST CUTTERS IN WALMART
Company-owned salons:
Open at beginning of period	2,374		2,300
Salons constructed	65		80
Acquired	—		—
Franchise buybacks	—		5
Less relocations	(1	)	(3	)
Salon openings	64		82
Conversions	—		—
Salons closed	(45	)	(8	)
Total company-owned salons	2,393		2,374
Franchise salons:
Open at beginning of period	119		122
Salons constructed	3		2
Acquired	—		—
Less relocations	—		—
Salon openings	3		2
Conversions	—		—
Franchise buybacks	—		(5	)
Salons closed	(2	)	—
Total franchise salons	120		119
Total, SmartStyle/Cost Cutters in Walmart Salons	2,513		2,493

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	June 30, 2011		June 30, 2010
SUPERCUTS
Company-owned salons:
Open at beginning of period	1,100		1,114
Salons constructed	24		10
Acquired	—		—
Franchise buybacks	73		12
Less relocations	(3	)	(2	)
Salon openings	94		20
Conversions	13		—
Salons closed	(49	)	(34	)
Total company-owned salons	1,158		1,100
Franchise salons:
Open at beginning of period	1,034		1,022
Salons constructed	43		42
Acquired	—		—
Less relocations	(7	)	(6	)
Salon openings	36		36
Conversions	10		9
Franchise buybacks	(73	)	(12	)
Salons closed	(20	)	(21	)
Total franchise salons	987		1,034
Total, Supercuts Salons	2,145		2,134
PROMENADE
Company-owned salons:
Open at beginning of period	2,382		2,450
Salons constructed	26		18
Acquired	18		—
Franchise buybacks	5		6
Less relocations	(10	)	(10	)
Salon openings	39		14
Conversions	(14	)	—
Salons closed	(86	)	(82	)
Total company-owned salons	2,321		2,382
Franchise salons:
Open at beginning of period	867		901
Salons constructed	21		34
Acquired	—		—
Less relocations	(7	)	(9	)
Salon openings	14		25
Conversions	(9	)	(9	)
Franchise buybacks	(5	)	(6	)
Salons closed	(38	)	(44	)
Total franchise salons	829		867
Total, Promenade Salons	3,150		3,249

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	June 30, 2011		June 30, 2010
INTERNATIONAL SALONS (1)
Company-owned salons:
Open at beginning of period	404		444
Salons constructed	13		2
Acquired	—		—
Franchise buybacks	—		—
Less relocations	(2	)	—
Salon openings	11		2
Conversions	—		—
Salons closed	(15	)	(42	)
Total company-owned salons	400		404
Total franchise salons	—		—
Total, International Salons	400		404
TOTAL SYSTEM-WIDE SALONS:
Company-owned salons:
Open at beginning of period	7,909		7,981
Salons constructed	146		139
Acquired	27		3
Franchise buybacks	78		23
Less relocations	(31	)	(33	)
Salon openings	220		132
Conversions	(1	)	—
Salons sold	—		—
Salons closed	(245	)	(204	)
Total company-owned salons	7,883		7,909
Franchise salons:
Open at beginning of period	2,020		2,045
Salons constructed	67		78
Acquired	—		—
Less relocations	(14	)	(15	)
Salon openings	53		63
Conversions	1		—
Franchise buybacks	(78	)	(23	)
Salons sold	—		—
Salons closed	(60	)	(65	)
Total franchise salons	1,936		2,020
Total Salons	9,819		9,929

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	June 30, 2011		June 30, 2010
HAIR RESTORATION CENTERS:
Company-owned hair restoration centers:
Open at beginning of period	62		62
Salons constructed	3		4
Acquired	—		—
Franchise buybacks	4		—
Less relocations	(1	)	(4	)
Salon openings	6		—
Conversions	—		—
Sites closed	(1	)	—
Total company-owned hair restoration centers	67		62
Franchise hair restoration centers:
Open at beginning of period	33		33
Salons constructed	—		—
Acquired	—		—
Less relocations	—		—
Salon openings	—		—
Franchise buybacks	(4	)	—
Sites closed	—		—
Total franchise hair restoration centers	29		33
Total Hair Restoration Centers	96		95
Ownership interest locations	2,786		2,704
Grand Total, System-wide	12,701		12,728

(1) Canadian and Puerto Rican salons are included in the Regis Salons, MasterCuts, SmartStyle, Supercuts, and Promenade concepts and not included in the International salon totals.

Relocations represent a transfer of location by the same salon concept.

Conversions represent the transfer of one salon concept to another concept.

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REVENUES BY CONCEPT:

	For the Periods Ended June 30,
	Three Months						Twelve Months
(Dollars in thousands)	2011			2010			2011			2010
North American salons:
Regis	$	108,227		$	108,021		$	434,249		$	437,990
MasterCuts	40,609			41,261			165,729			166,821
SmartStyle	131,820			134,275			531,090			533,094
Supercuts	84,165			80,791			321,881			314,698
Promenade(2)	146,902			147,558			576,995			607,960
Total North American salons	511,723			511,906			2,029,944			2,060,563
International salons	42,567			41,482			150,237			156,085
Hair restoration centers	37,695			36,560			145,688			141,786
Consolidated revenues	$	591,985		$	589,948		$	2,325,869		$	2,358,434
Percent change from prior year	0.3		%	(5.6		)%	(1.4		)%	(2.9		)%
Same-store sales decrease(1)	(1.7		)%	(2.7		)%	(1.7		)%	(3.2		)%

(1) Same-store sales are calculated on a daily basis as the total change in sales for company-owned locations which were open on a specific day of the week during the current period and the corresponding prior period. Quarterly and year-to-date same-store sales are the sum of the same-store sales computed on a daily basis. Locations relocated within a one mile radius are included in same-store sales as they are considered to have been open in the prior period. International same-store sales are calculated in local currencies so that foreign currency fluctuations do not impact the calculation. Management believes that same-store sales, a component of organic growth, are useful in order to help determine the increase in revenues attributable to its organic growth (new locations construction and same-store sales growth) versus growth from acquisitions.

(2) Pure Beauty Salons & Boutiques, Inc. (Pure Beauty), formerly known as Premier Salons Beauty, Inc., purchased Trade Secret, Inc. from Regis Corporation on February 16, 2009. The agreement included a provision that Regis Corporation would supply product to Pure Beauty at cost for a transition period. For the twelve months ended June 30, 2010 the Company generated revenue of $20.0 million in product sold to Pure Beauty, which represented 0.8 percent of consolidated revenues. The agreement was substantially complete as of September 30, 2009.

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FINANCIAL INFORMATION BY SEGMENT:

Financial information concerning the Company’s salon and hair restoration businesses is shown in the following tables.

	For the Three Months Ended June 30, 2011
	Salons				Hair Restoration		Unallocated
(Dollars in thousands)	North America		International		Centers		Corporate			Consolidated
Revenues:
Service	$	403,982	$	31,187	$	17,228	$	—		$	452,397
Product	98,160		11,380		19,875		—			129,415
Royalties and fees	9,581		—		592		—			10,173
	511,723		42,567		37,695		—			591,985
Operating expenses:
Cost of service	232,086		16,018		10,184		—			258,288
Cost of product	48,996		6,235		6,679		—			61,910
Site operating expenses	43,552		2,825		1,217		—			47,594
General and administrative	29,147		3,504		9,676		61,218			103,545
Rent	72,830		11,844		2,352		526			87,552
Depreciation and amortization	16,761		1,433		3,451		4,297			25,942
Total operating expenses	443,372		41,859		33,559		66,041			584,831
Operating income (loss)	68,351		708		4,136		(66,041		)	7,154
Other income (expense):
Interest expense	—		—		—		(8,390		)	(8,390		)
Interest income and other, net	—		—		—		2,081			2,081
Income (loss) from continuing operations before income taxes and equity in income of affiliated companies	$	68,351	$	708	$	4,136	$	(72,350	)	$	845

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	For the Three Months Ended June 30, 2010
	Salons					Hair Restoration		Unallocated
(Dollars in thousands)	North America		International			Centers		Corporate			Consolidated
Revenues:
Service	$	404,276	$	30,480		$	17,099	$	—		$	451,855
Product	97,980		11,002			18,838		—			127,820
Royalties and fees	9,650		—			623		—			10,273
	511,906		41,482			36,560		—			589,948
Operating expenses:
Cost of service	230,041		15,563			9,767		—			255,371
Cost of product	48,808		5,526			5,573		—			59,907
Site operating expenses	47,748		2,792			1,433		—			51,973
General and administrative	28,575		3,826			8,687		32,991			74,079
Rent	73,303		10,592			2,269		554			86,718
Depreciation and amortization	19,232		599			3,084		4,596			27,511
Lease termination costs	—		(1,325		)	—		—			(1,325		)
Total operating expenses	447,707		37,573			30,813		38,141			554,234
Operating income (loss)	64,199		3,909			5,747		(38,141		)	35,714
Other income (expense):
Interest expense	—		—			—		(8,990		)	(8,990		)
Interest income and other, net	—		—			—		3,642			3,642
Income (loss) from continuing operations before income taxes and equity in income of affiliated companies	$	64,199	$	3,909		$	5,747	$	(43,489	)	$	30,366

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	For the Twelve Months Ended June 30, 2011
	Salons				Hair Restoration		Unallocated
(Dollars in thousands)	North America		International		Centers		Corporate			Consolidated
Revenues:
Service	$	1,588,690	$	106,734	$	67,550	$	—		$	1,762,974
Product	403,962		43,503		75,729		—			523,194
Royalties and fees	37,292		—		2,409		—			39,701
	2,029,944		150,237		145,688		—			2,325,869
Operating expenses:
Cost of service	919,526		54,213		39,129		—			1,012,868
Cost of product	201,560		23,631		24,788		—			249,979
Site operating expenses	183,552		9,852		4,318		—			197,722
General and administrative	122,281		12,630		37,038		167,908			339,857
Rent	292,479		38,423		9,227		2,157			342,286
Depreciation and amortization	69,763		4,750		12,958		17,638			105,109
Goodwill impairment	74,100		—		—		—			74,100
Total operating expenses	1,863,261		143,499		127,458		187,703			2,321,921
Operating income (loss)	166,683		6,738		18,230		(187,703		)	3,948
Other income (expense):
Interest expense	—		—		—		(34,388		)	(34,388		)
Interest income and other, net	—		—		—		4,811			4,811
Income (loss) from continuing operations before income taxes and equity in income of affiliated companies	$	166,683	$	6,738	$	18,230	$	(217,280	)	$	(25,629	)

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	For the Twelve Months Ended June 30, 2010
	Salons				Hair Restoration		Unallocated
(Dollars in thousands)	North America		International		Centers		Corporate			Consolidated
Revenues:
Service	$	1,605,979	$	111,833	$	66,325	$	—		$	1,784,137
Product	397,401		44,252		72,978		—			514,631
Product sold to Pure Beauty(1)	19,962		—		—		—			19,962
Royalties and fees	37,221		—		2,483		—			39,704
	2,060,563		156,085		141,786		—			2,358,434
Operating expenses:
Cost of service	920,905		57,657		37,158		—			1,015,720
Cost of product	199,783		22,570		21,568		—			243,921
Cost of product sold to Pure Beauty(1)	19,962		—		—		—			19,962
Site operating expenses	183,881		10,152		5,305		—			199,338
General and administrative	113,956		13,115		36,207		128,713			291,991
Rent	294,263		38,681		9,013		2,141			344,098
Depreciation and amortization	72,681		4,986		12,198		18,899			108,764
Goodwill impairment	35,277		—		—		—			35,277
Lease termination costs	—		2,145		—		—			2,145
Total operating expenses	1,840,708		149,306		121,449		149,753			2,261,216
Operating income (loss)	219,855		6,779		20,337		(149,753		)	97,218
Other income (expense):
Interest expense	—		—		—		(54,414		)	(54,414		)
Interest income and other, net	—		—		—		10,410			10,410
Income (loss) from continuing operations before income taxes and equity in income of affiliated companies	$	219,855	$	6,779	$	20,337	$	(193,757	)	$	53,214

(1) Pure Beauty Salons & Boutiques, Inc. (Pure Beauty), formerly known as Premier Salons Beauty, Inc., purchased Trade Secret, Inc. from Regis Corporation on February 16, 2009. The agreement included a provision that Regis Corporation would supply product to Pure Beauty at cost for a transition period. The agreement was substantially complete as of September 30, 2009.

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Non-GAAP Reconciliations

We believe our presentation of non-GAAP revenues, operating income, net income and net income per diluted share provides meaningful insight into our ongoing operating performance and an alternative perspective of our results of operations. Presentation of the non-GAAP measures allows investors to review our core ongoing operating performance business from the same perspective as management and Board of Directors. These non-GAAP financial measures provide investors an enhanced understanding of our operations, facilitate investors’ analysis and comparisons of our current and past results of operations and provide insight into the prospects of our future performance.  We also believe that the non-GAAP measures are useful to investors because they provide supplemental information that research analysts frequently use to analyze financial performance.

The method we use to produce non-GAAP results is not in accordance with U.S. GAAP and may differ from methods used by other companies.  These non-GAAP results should not be regarded as a substitute for the corresponding U.S. GAAP measures but instead should be utilized as a supplemental measure of operating performance in evaluating our business.  Non-GAAP measures do have limitations in that they do not reflect certain items that may have a material impact upon our reported financial results. As such, these non-GAAP measures should be viewed in conjunction with both our financial statements prepared in accordance with U.S. GAAP and the reconciliation of the selected U.S. GAAP to non-GAAP financial measures, which are located in the Investor Information section of the corporate website at www.regiscorp.com.

Non-GAAP reconciling items for the three and twelve months ended June 30, 2011 and 2010:

The following information is provided to give qualitative and quantitative information related to items impacting comparability.  Items impacting comparability are not defined terms within U.S. GAAP.  Therefore, our non-GAAP financial information may not be comparable to similarly titled measures reported by other companies.  We determine which items to consider as “items impacting comparability” based on how management views our business, makes financial, operating and planning decisions and evaluates the Company’s ongoing performance.

Product sales and cost of product sold to Pure Beauty — We have excluded product sales and the cost of product sold to Pure Beauty from our non-GAAP results.  Pure Beauty Salons & Boutiques, Inc. (Pure Beauty), formerly known as Premier Salons Beauty, Inc. purchased Trade Secret, Inc. from us on February 16, 2009.  The agreement included a provision that we would provide supply product to Premier at cost for a transition period.  For the twelve months ended June 30, 2010 the Company generated revenue of $20.0 million in product sold to Pure Beauty, which represented 0.8 percent of consolidated revenues. The agreement was substantially complete as of September 30, 2009.

Sales and use tax audit accrual adjustments — We have excluded a sales and use tax audit accrual adjustment from our non-GAAP results.  We recorded a benefit of $1.7 million during the three and twelve months ended June 30, 2011.

Self insurance reserves adjustments — We have excluded the self insurance reserve adjustments related to loss development associated with our prior year reserves from our non-GAAP results.  We incurred expense of $1.2 million during the three and twelve months ended June 30, 2011.  We recorded a benefit of $1.9 million during the twelve months ended June 30, 2010.

Pure Beauty note receivable reserve — We have excluded the note receivable valuation reserve recorded for the outstanding note receivable with Pure Beauty from our non-GAAP results.  We recorded valuation reserves of $22.2 and $31.2 million, respectively, during the three and twelve months ended June 30, 2011.

Legal settlements — We have excluded expense associated with legal settlements from our non-GAAP results.  During the three and twelve months ended June 30, 2011 we incurred expense of $2.4 million associated with legal settlements.

Senior management restructure — We have excluded expense associated with senior management restructuring from our non-GAAP results.  During the three and twelve months ended June 30, 2011 we incurred expense of $2.4 and $4.3 million, respectively, associated with senior management restructuring.

Strategic alternative costs - We have excluded the fees associated our exploration of strategic alternatives during our first and second quarters of fiscal year 2011 from our non-GAAP results.  During the twelve months ended June 30, 2011, we incurred $1.3 million of expense related to the exploration of strategic alternatives.

Goodwill impairment — We have excluded the goodwill impairment charges we recorded related to our various salon concepts from our non-GAAP results.  The Company recorded a goodwill impairment charge of $74.1 million related to our Promenade salon concept during the twelve months ended June 30, 2011.  The Company recorded a goodwill impairment charge of $35.3 million related to our Regis salon concept during the twelve months ended June 30, 2010.

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International restructure — We have excluded the incremental expense related to the closure of up to 80 underperforming company-owned salons located primarily in the United Kingdom from our non-GAAP results. We incurred expense of approximately $2.1 million during the twelve months ended June 30, 2010 that primarily consisted of lease settlement fees or the present value of the remaining contractual lease payments related to closed locations.  The benefit of $1.3 million during the three months ended June 30, 2010 represents a change in estimate of the international restructure expense.

Fees on prepayment of debt — We have excluded the make-whole premium payments and other fees associated with the repayment of private placement debt from our non-GAAP results.  During the twelve months ended June 30, 2010 the Company incurred $18.0 million of make-whole premium payments and other fees.

Tax provision adjustments — The non-GAAP tax provision adjustments are due to the change in non-GAAP taxable income as compared to U.S. GAAP taxable income or loss, resulting from the non-GAAP reconciling items addressed herein.  The non-GAAP tax provision adjustments are made to reflect the projected annual effective non-GAAP tax rate for each period.

MY Style impairment — We have excluded the impairment recorded for our investment in MY Style from our non-GAAP results.  Due to the natural disasters in Japan that occurred in March 2011, we recorded an other than temporary impairment for our investment in MY Style of $0.5 and $9.2 million, respectively during the three and twelve months ended June 30, 2011.

Provalliance equity put liability — We have excluded the gain recorded for settlement of a portion of an equity put option associated with our Provalliance equity method investment from our non-GAAP results.  The Company recorded a gain of approximately $3.6 million during the twelve months ended June 30, 2011.

Trade Secret discontinued operations — We have excluded the income from the sale of our Trade Secret, Inc. operations from our non-GAAP results.  The Company recorded income of approximately $3.2 million during the twelve months ended June 30, 2010.

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Regis Corporation

Reconciliation of selected U.S. GAAP to non-GAAP financial measures

(In thousands, except per share data)

(unaudited)

Reconciliation of U.S. GAAP revenues, operating income, and net (loss) income to equivalent non-GAAP measures

		Three Months Ended June 30,						Twelve Months Ended June 30,
	U.S. GAAP financial line item	2011			2010			2011			2010
U.S. GAAP revenue		$	591,985		$	589,948		$	2,325,869		$	2,358,434
Non-GAAP revenue adjustments:
Product sales to Pure Beauty	Product	—			—			—			(19,962		)
Total non-GAAP revenue adjustments		—			—			—			(19,962		)
Non-GAAP revenue		$	591,985		$	589,948		$	2,325,869		$	2,338,472
U.S. GAAP operating income		$	7,154		$	35,714		$	3,948		$	97,218
Total non-GAAP revenue adjustments		—			—			—			(19,962		)
Non-GAAP operating expense adjustments:
Cost of product sales to Pure Beauty	Cost of product	—			—			—			19,962
Sales and use tax audit accrual adjustment	Site operating expense	(1,748		)	—			(1,748		)	—
Self insurance reserves adjustment	Site operating expense	1,185			—			1,185			(1,925		)
Pure Beauty note receivable reserve	General and administrative	22,227			—			31,227			—
Legal settlements	General and administrative	2,433			—			2,433			—
Senior management restructure	General and administrative	2,393			—			4,299			—
Strategic alternative costs	General and administrative	—			—			1,253			—
Goodwill impairment	Goodwill impairment	—			—			74,100			35,277
International restructure	Lease termination costs	—			(1,325		)	—			2,145
Total non-GAAP operating expense adjustments		26,490			(1,325		)	112,749			55,459
Non-GAAP operating income		$	33,644		$	34,389		$	116,697		$	132,715
U.S. GAAP net (loss) income		$	(16,395	)	$	18,339		$	(8,905	)	$	42,740
Non-GAAP net (loss) income adjustments:
Non-GAAP revenue adjustments		—			—			—			(19,962		)
Non-GAAP operating expense adjustments		26,490			(1,325		)	112,749			55,459
Fees on prepayment of debt	Interest expense	—			—			—			18,020
Tax provision adjustments (1)	Income taxes	12,297			4,338			(38,167		)	(13,887		)
MY Style impairment	Equity in (loss) income of affiliated companies, net of tax	516			—			9,173			—
Provalliance equity put liability	Equity in (loss) income of affiliated companies, net of tax	—			—			(3,625		)	—
Trade Secret discontinued operations	Income from discontinued operations, net of tax	—			—			—			(3,161		)
Total non-GAAP net income adjustments		39,303			3,013			80,130			36,469
Non-GAAP net income		$	22,908		$	21,352		$	71,225		$	79,209

Reconciliation of U.S. GAAP net (loss) income per diluted share to non-GAAP net income per diluted share

	Three Months Ended June 30,						Twelve Months Ended June 30,
	2011			2010			2011			2010
U.S. GAAP net (loss) income per diluted share (2)	$	(0.289	)	$	0.299		$	(0.157	)	$	0.753
Product sales to Pure Beauty (1)	—			—			—			(0.180		)
Cost of product sales to Pure Beauty (1)	—			—			—			0.180
Sales and use tax audit accrual adjustment (1)	(0.016		)	—			(0.016		)	—
Self insurance reserves adjustment (1)	0.011			—			0.011			(0.018		)
Pure Beauty note receivable reserve (1)	0.201			—			0.281			—
Legal settlements (1)	0.022			—			0.022			—
Senior management restructure (1)	0.022			—			0.039			—
Strategic alternative costs (1)	—			—			0.011			—
Goodwill impairment (1)	0.329			0.056			0.745			0.429
International restructure (1)	—			(0.012		)	—			0.019
Fees on prepayment of debt (1)	—			—			—			0.163
MY Style impairment	0.008			—			0.134			—
Provalliance equity put liability	—			—			(0.053		)	—
Trade Secret discontinued operations	—			—			—			(0.047		)
Dilutive effect under if-converted method (4)	0.078			—			0.146			—
Non-GAAP net income per diluted share (3)(5)	$	0.366		$	0.344		$	1.163		$	1.299
U.S. GAAP Weighted average shares - basic	56,800			56,493			56,704			55,806
U.S. GAAP Weighted average shares - diluted	56,800			67,878			56,704			66,753
Non-GAAP Weighted average shares - diluted (4)	68,271			67,878			68,201			66,753

Notes

(1)	Based on a projected statutory effective tax rate analysis, the non-GAAP tax provision was calculated to be approximately 38% for the three and twelve months ended June 30, 2011 for all non-GAAP operating expense adjustments except the goodwill impairment. The goodwill impairment had a tax charge (benefit) of approximately $22.4 and ($23.3) million for the three and twelve months ended June 30, 2011, respectively as the charge is only partially deductible for income tax purposes. The non-GAAP tax provision calculated for the non-GAAP tax provision for the three and twelve months ended June 30, 2010 for all of the non-GAAP operating expense adjustments except the goodwill impairment was approximately 40%. The goodwill impairment had a tax charge (benefit) of approximately $3.8 and ($6.6) million for the three and twelve months ended June 30, 2010, respectively, as the charge is only partially deductible for income tax purposes.
(2)	For the three and twelve months ended June 30, 2010 U.S. GAAP net income per diluted shares is calculated under the if-converted method. Under the if-converted method for the three and twelve months $2.0 and $7.5 million, respectively, of net of tax interest expense on the convertible debt is added to the net income from continuing operations to determine the net income from continuing operations for diluted earnings per share.
(3)	For the three and twelve months ended June 30, 2011 non-GAAP operational net income per share, diluted has been calculated under the if-converted method. Under the if-converted method, $2.0 and $8.1 million, respectively, of net of tax interest on the convertible debt is added to the non-GAAP operational net income from continuing operations to determine the non-GAAP operational net income for diluted earnings per share.
(4)	The earnings per share impact of the adjustments for both the three and twelve months ended June 30, 2011 include 0.3 million of common share equivalents and convertible share equivalents of 11.2 million of additional shares under the if-converted method. The impact of the adjustments described above result in the effect of the common equivalent shares and convertible share equivalents to be dilutive to the non-GAAP operational net income per share.
(5)	Total is a recalculation; line items calculated individually may not sum to total due to rounding.

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