EXHIBIT 99

CONTACTS:
Investors:	REGIS CORPORATION:
	Jack Nielsen – Director of Finance – Investor Relations (952) 947-7000
Media:	BERNS COMMUNICATIONS GROUP:
	Melissa Jaffin (212) 994-4660

For Immediate Release

REGIS REPORTS FISCAL YEAR 2005 THIRD QUARTER RESULTS
-Net Loss of $16.6 Million Includes $38.3 Million Non-Cash Write-Down for Goodwill Impairment -

     MINNEAPOLIS, April 27, 2005 — Regis Corporation (NYSE:RGS), the global leader in the $150 billion hair care industry, today reported financial results for its fiscal third quarter ended March 31, 2005.

     Consolidated third quarter revenues increased 16 percent to a record $557 million compared to $481 million a year ago. Same-store sales increased 1.4 percent. As announced on April 13, 2005, the Company recorded a $38.3 million non-cash write-down for goodwill impairment associated with the Company’s European operations. As a result, the Company reported a third quarter net loss of $16.6 million, or $0.37 per diluted share.

     “The write-down for goodwill impairment will reduce our third quarter earnings results by approximately $0.84 per diluted share,” commented Paul D. Finkelstein, chairman and chief executive officer. “These anticipated results for fiscal year 2005 are disappointing, but we have overcome challenging periods before. Specifically, in fiscal year 2001 we experienced relatively flat earnings growth. In the years that followed, we added several thousand new salons and significantly increased shareholder value.”

     Mr. Finkelstein continued, “We remain the dominant player in the hair care industry with only two percent worldwide market share and significant growth opportunities. Let me assure you, we are not losing market share. Recent surveys suggest that the salon industry continues to be plagued by the long hair fashion cycle. Nevertheless, we remain highly confident in our strategy and continue to manage our business for long-term, compounded double-digit, top and bottom-line growth.”

     During the quarter, Regis Corporation added a net total of 289 locations. The Company constructed 128 salons and franchisees built 62 salons. A total of 119 corporate and franchise locations were closed or relocated during the quarter. The Company acquired 273 locations, including 55 franchise buybacks and four beauty schools during the third quarter. Notable acquisitions included; 129 TGF Salons in Texas; 67 Head Start salons in Florida and Alabama; 52 Cost Cutter franchise salons in Pennsylvania and Illinois; and four beauty schools in Minnesota and Rhode Island. These acquisitions are expected to add $60 million in annualized revenue and $0.07 per diluted share of annual earnings accretion.

Revised Fourth Quarter 2005 Outlook

     The following points pertain to changes in our financial outlook for the fiscal fourth quarter ending June 30, 2005:

•   Consolidated revenue is forecasted to increase 16 to 17 percent to a range of $592 million to $597 million

•   Same-store sales are projected to increase 0.0 to 1.5 percent

•   Earnings per diluted share are expected to increase to a range of $0.62 to $0.67 compared to $0.58 for the same period a year ago

Revised Fiscal Year 2005 Outlook

     The following points pertain to changes in our financial outlook for the fiscal year ending June 30, 2005:

•   Consolidated revenue is forecasted to grow to approximately $2.2 billion, an increase of 14 percent

•   Consolidated same-store sales are projected to increase approximately one percent

•   Earnings per diluted share are expected to be in a range of $1.38 to $1.43 versus $2.26 in fiscal year 2004

Fiscal Year 2006 Outlook

     “As we have done in the past, we are providing our initial forecast for the upcoming fiscal year in conjunction with our third quarter press release,” commented Randy L. Pearce, executive vice president and chief financial officer. “We remind investors that our forecast excludes revenue and earnings from future acquisitions. While acquisitions are a key component of our overall growth strategy, uncertainty as to the size and timing of future acquisitions make it difficult to forecast the benefits we may realize in fiscal year 2006. In the upcoming year, we anticipate spending up to $100 million for acquisitions.”

     Mr. Pearce continued, “Our initial outlook for fiscal year 2006 calls for earnings per diluted share to be $2.42, assuming a one percent same-store sales increase. Excluding the fiscal year 2005 write-off for goodwill impairment, this represents an earnings per share increase of seven to nine percent. While we are optimistic that our recent price increases could provide upside potential to our fiscal year 2006 same-store sales and earnings per share expectations, it is premature to include this in our initial outlook. However, as we experience the impact of the price increases on our business, we will update our guidance as necessary.”

     This forecast excludes revenue and earnings from future acquisitions. The following points pertain to the fiscal year ending June 30, 2006:

•   Earnings are forecasted to be $2.42 per diluted share, assuming a share count of 46.5 million shares. This forecast includes an incremental $0.035 per diluted share associated with the expensing of stock options

•   Consolidated revenue is forecasted to grow to $2.42 billion, an increase of 10 percent

•   Consolidated same-store sales are projected to increase one percent

•   Service margins are forecasted to increase to the mid-43 percent range of service revenue

•   Product margins are forecasted to increase to the mid-49 percent range of product revenue

•   Site operating expenses are forecasted to be in the low-to-mid eight percent range of consolidated revenue

•   General and administrative expenses are forecasted to be in the 12 percent range of consolidated revenue

•   Rent expense is forecasted to be in the low 14 percent range of consolidated revenue

•   Depreciation and amortization is forecasted to be in the low four percent range of consolidated revenue

•   Operating income is forecasted to be in the mid-eight percent range of consolidated revenue

•   Interest expense is forecasted to be $33 million to $34 million

•   Effective income tax rate is forecasted to be in the low 35 percent range

•   We plan to build 550 to 600 new corporate salons and we anticipate franchisees to build nearly 300 franchised salons, excluding salon closures

•   We anticipate spending up to $100 million for acquisitions

•   Net of salon closures, relocations and franchise buybacks, we anticipate adding over 1,000 salons

•   Capital expenditures, excluding acquisitions, are projected to be $100 million to $115 million, which includes $35 to $40 million for salon maintenance

•   Total debt as of June 30, 2006 is expected to be approximately $600 million, including acquisition expenditures, with debt-to-capitalization expected to improve to just over 40 percent

     On April 27, 2005, the Company will host a conference call discussing third quarter results at 10:00 a.m., Central Time. Interested parties are invited to listen by logging on to www.regiscorp.com.

     Regis Corporation (RGS) is the beauty industry’s global leader in salons, hair restoration centers and education. As of March 31, 2005, the Company owned or franchised 10,698 beauty salons, 90 hair restoration centers and 19 beauty schools operating under concepts such as Supercuts, Jean Louis David, Vidal Sassoon, Regis Salons, MasterCuts, Trade Secret, SmartStyle, Cost Cutters and Hair Club for Men and Women. These and other concepts are located in the US and in ten other countries throughout North America and Europe. For additional information about the Company, including management’s current financial outlook and a reconciliation of non-GAAP financial information, please visit the Investor Information section of the corporate website at www.regiscorp.com.

     This press release contains “forward-looking statements” within the meaning of the federal securities laws, including statements concerning anticipated future events and expectations that are not historical facts. These forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. 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, and price sensitivity; changes in economic condition; changes in consumer tastes and fashion trends; 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 for new salon development; governmental initiatives such as minimum wage rates, taxes and possible franchise legislation; the ability of the Company to successfully identify and acquire salons and beauty schools that support its growth objectives; or other factors not listed above. The ability of the Company to meet its expected revenue growth is dependent on salon and beauty school 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, 2004 and included in Form S-3 Registration Statement filed with the Securities and Exchange Commission on June 4, 2004. 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 March 31, 2005 and June 30, 2004
(Dollars in thousands, except per share amounts)

	March 31,		June 30,
	2005		2004
			(as restated,
			see Note 3)
ASSETS
Current assets:
Cash and cash equivalents	$	108,364	$	73,567
Receivables, net		46,576		35,033
Inventories		180,342		161,304
Deferred income taxes		17,230		15,285
Other current assets		29,443		28,210
Total current assets		381,955		313,399
Property and equipment, net		424,972		381,903
Goodwill		630,394		457,140
Other intangibles, net		210,285		79,174
Other assets		53,522		40,200
Total assets	$	1,701,128	$	1,271,816
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Long-term debt, current portion	$	18,944	$	19,128
Accounts payable		68,713		53,112
Accrued expenses		172,813		129,721
Total current liabilities		260,470		201,961
Long-term debt		523,402		282,015
Other noncurrent liabilities		171,597		105,820
Total liabilities		955,469		589,796
Shareholders’ equity:
Preferred stock, authorized 250,000 shares at December 31, 2004 and June 30, 2004
Common stock, $.05 par value; issued and outstanding, 44,972,886 and 44,283,949 common shares at March 31, 2005 and June 30, 2004, respectively		2,249		2,214
Additional paid-in capital		237,463		220,204
Accumulated other comprehensive income		55,729		40,615
Retained earnings		450,218		418,987
Total shareholders’ equity		745,659		682,020
Total liabilities and shareholders’ equity	$	1,701,128	$	1,271,816

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REGIS CORPORATION (NYSE:RGS)
CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited)
(Dollars in thousands, except per share amounts)

	Three Months Ended March 31,						Nine Months Ended March 31,
	2005			2004			2005			2004
				(as restated,						(as restated,
				see Note 3)						see Note 3)
Revenues:
Service	$	368,681		$	318,297		$	1,065,263		$	927,879
Product		168,684			144,681			477,052			431,783
Royalties and fees		19,899			18,395			58,503			54,884
		557,264			481,373			1,600,818			1,414,546
Operating expenses:
Cost of service		211,907			181,799			608,097			523,652
Cost of product		87,116			75,462			249,092			226,677
Site operating expenses		46,267			41,981			134,319			119,682
General and administrative		68,827			53,179			190,633			161,052
Goodwill impairment		38,319			—			38,319			—
Rent		78,578			66,776			226,203			195,396
Depreciation and amortization		24,904			18,564			65,464			54,863
Total operating expenses		555,918			437,761			1,512,127			1,281,322
Operating income		1,346			43,612			88,691			133,224
Other income (expense):
Interest		(7,027	)		(4,824	)		(16,802	)		(13,043	)
Other, net		467			452			2,168			1,123
(Loss) Income before income taxes		(5,214	)		39,240			74,057			121,304
Income taxes		(11,336	)		(13,997	)		(38,931	)		(43,876	)
Net (loss) income	$	(16,550	)	$	25,243		$	35,126		$	77,428
Net (loss) income per share:
Basic	$	(0.37	)	$	0.57		$	0.79		$	1.76
Diluted	$	(0.37	)	$	0.54		$	0.76		$	1.68
Weighted average common and common equivalent shares outstanding:
Basic		44,770			44,241			44,538			43,920
Diluted		44,770			46,367			46,393			46,036
Cash dividends declared per common share	$	0.04		$	0.04		$	0.12		$	0.10

A historical model of Regis Corporation’s quarterly results in this format is available in the Investor Information section of the corporate website at www.regiscorp.com. Click on “Financial Reports”.

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REGIS CORPORATION (NYSE:RGS)
CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in thousands)

	Nine Months Ended March 31,
	2005			2004
				(as restated,
				see Note 3)
Cash flows from operating activities:
Net income	$	35,126		$	77,428
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		60,109			52,729
Amortization		5,355			2,574
Deferred income taxes		(2,237	)		5,163
Goodwill impairment		38,319			—
Other		778			1,773
Changes in operating assets and liabilities*:
Receivables		(4,011	)		(626	)
Inventories		(14,325	)		(832	)
Other current assets		581			(2,125	)
Other assets		(4,912	)		(2,347	)
Accounts payable		11,792			3,690
Accrued expenses		29,637			16,688
Other noncurrent liabilities		15,209			7,860
Net cash provided by operating activities		171,421			161,975
Cash flows from investing activities:
Capital expenditures		(70,874	)		(52,356	)
Proceeds from sale of assets		705			81
Business and salon acquisitions, net of cash acquired		(303,551	)		(52,494	)
Net cash used in investing activities		(373,720	)		(104,769	)
Cash flows from financing activities:
Borrowings on revolving credit facilities		2,504,190			396,975
Payments on revolving credit facilities		(2,351,755	)		(407,950	)
Proceeds from issuance of long-term debt		100,755			12,196
Repayments of long-term debt		(18,763	)		(22,685	)
Other, primarily increase (decrease) in negative book cash balances		734			(8,897	)
Dividends paid		(5,346	)		(4,400	)
Repurchase of common stock		(11,482	)		(8,200	)
Proceeds from issuance of common stock		14,714			14,746
Net cash provided by (used in) financing activities		233,047			(28,215	)
Effect of exchange rate changes on cash and cash equivalents		4,049			2,906
Increase in cash and cash equivalents		34,797			31,897
Cash and cash equivalents:
Beginning of period		73,567			55,454
End of period	$	108,364		$	87,351

* Changes in operating assets and liabilities do not include assets and liabilities assumed through acquisitions.

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REGIS CORPORATION (NYSE:RGS)
Salon / School/ Hair Restoration Center Counts and Revenues

	March 31,		June 30,
	2005		2004
SYSTEM-WIDE LOCATIONS:
Company-owned salons		6,818		6,227
Franchise salons		3,880		3,924
Beauty career schools		19		11
Company-owned hair restoration centers		41		—
Franchise hair restoration centers		49		—
		10,807		10,162

SALON LOCATION SUMMARY

	March 31,			June 30,
	2005			2004
NORTH AMERICAN SALONS:
REGIS SALONS
Open at beginning of period		1,085			1,095
Salons constructed		35			33
Acquired		—			4
Less relocations		14			10
Salon openings		21			27
Conversions		(1	)		(2	)
Salons closed		(21	)		(35	)
Total, Regis Salons		1,084			1,085
MASTERCUTS
Open at beginning of period		604			590
Salons constructed		30			34
Acquired		—			3
Less relocations		9			9
Salon openings		21			28
Conversions		1			1
Salons closed		(3	)		(15	)
Total, Mastercuts		623			604

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	March 31,			June 30,
	2005			2004
TRADE SECRET
Company-owned salons:
Open at beginning of period		549			517
Salons constructed		44			26
Acquired		7			12
Franchise buybacks		—			2
Less relocations		12			5
Salon openings		39			35
Conversions		—			1
Salons closed		(12	)		(4	)
Total company-owned salons		576			549
Franchise salons:
Open at beginning of period		24			25
Salons constructed		—			1
Acquired		—			—
Salon openings		—			1
Franchise buybacks		—			(2	)
Salons closed		—			—
Total franchise salons		24			24
Total, Trade Secret		600			573
SMARTSTYLE/COST CUTTERS IN WAL-MART
Company-owned salons:
Open at beginning of period		1,263			1,033
Salons constructed		127			174
Acquired		—			—
Franchise buybacks		37			61
Less relocations		1			—
Salon openings		163			235
Conversions		—			—
Salons closed		(2	)		(5	)
Total company-owned salons		1,424			1,263
Franchise salons:
Open at beginning of period		201			230
Salons constructed		19			33
Acquired		—			—
Less relocations		—			—
Salon openings		19			33
Conversions		—			—
Franchise buybacks		(37	)		(61	)
Salons closed		—			(1	)
Total franchise salons		183			201
Total, SmartStyle/Cost Cutters in Wal-Mart		1,607			1,464

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	March 31,			June 30,
	2005			2004
STRIP CENTERS
Company-owned salons:
Open at beginning of period		2,310			1,928
Salons constructed		119			166
Acquired		251			162
Franchise buybacks		85			133
Less relocations		18			8
Salon openings		437			453
Conversions		(3	)		(8	)
Salons closed		(54	)		(63	)
Total company-owned salons		2,690			2,310
Franchise salons:
Open at beginning of period		2,105			2,172
Salons constructed		111			146
Acquired (2)		7			—
Less relocations		12			10
Salon openings		106			136
Conversions		4			8
Franchise buybacks		(85	)		(133	)
Salons closed		(46	)		(78	)
Total franchise salons		2,084			2,105
Total, Strip Centers		4,774			4,415
INTERNATIONAL SALONS (1)
Company-owned salons:
Open at beginning of period		416			395
Salons constructed		18			19
Acquired		16			18
Franchise buybacks		—			10
Salon openings		34			47
Conversions		(1	)		—
Salons closed		(28	)		(26	)
Total company-owned salons		421			416
Franchise salons:
Open at beginning of period		1,594			1,627
Salons constructed		73			88
Acquired (2)		—			—
Salon openings		73			88
Conversions		—			—
Franchise buybacks		—			(10	)
Salons closed		(78	)		(111	)
Total franchise salons		1,589			1,594
Total international salons		2,010			2,010

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	March 31,			June 30,
	2005			2004
TOTAL SYSTEM-WIDE LOCATIONS
Company-owned salons:
Open at beginning of period		6,227			5,558
Salons constructed		373			452
Acquired		274			199
Franchise buybacks		122			206
Less relocations		54			32
Salon openings		715			825
Conversions		(4	)		(8	)
Salons closed		(120	)		(148	)
Total company-owned salons		6,818			6,227
Franchise salons:
Open at beginning of period		3,924			4,054
Salons constructed		203			268
Acquired (2)		7			—
Less relocations		12			10
Salon openings		198			258
Conversions		4			8
Franchise buybacks		(122	)		(206	)
Salons closed		(124	)		(190	)
Total franchise salons		3,880			3,924
Beauty career schools:
Open at beginning of period		11			5
Acquired		8			6
Site openings		8			6
Total beauty career schools		19			11
Company-owned hair restoration centers:
Acquired		42			—
Site openings		42			—
Sites closed		(1	)		—
Total company-owned hair restoration centers		41			—
Franchise hair restoration centers:
Acquired		49			—
Site openings		49			—
Total franchise hair restoration centers		49			—
Grand total, system-wide		10,807			10,162

(1)   Canadian and Puerto Rican salons are included in the Regis Salons, Strip Center, MasterCuts and Trade Secret concepts and not included in the International salon totals.

(2)   Represents primarily the acquisition of franchise networks.

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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NOTE 1. REVENUES BY CONCEPT:

	For the Periods Ended March 31,
	Three Months						Nine Months
(Dollars in thousands)	2005			2004			2005			2004
Revenues:
North American salons:
Regis Salons	$	120,947		$	120,867		$	361,456		$	357,553
MasterCuts		41,841			43,630			125,348			130,847
Trade Secret*		59,666			58,867			190,259			182,858
SmartStyle		89,906			77,344			254,419			215,755
Strip Center Salons*		155,550			127,220			450,173			376,385
Total North American Salons		467,910			427,928			1,381,655			1,263,398
International salons*		54,257			49,581			161,592			140,534
Beauty schools		10,158			3,864			24,246			10,614
Hair restoration centers*		24,939			—			33,325			—
Consolidated revenues	$	557,264		$	481,373		$	1,600,818		$	1,414,546
Percent change from prior year		15.8	%		14.0	%		13.2	%		14.4	%

*   Includes aggregate franchise royalties and fees of $19.9 and $18.4 million for the three months ended March 31, 2005 and 2004, respectively, and $58.5 and $54.9 million for the nine months ended March 31, 2005 and 2004, respectively. North American franchise revenues (including franchise revenues hair restoration centers) represented 54.9 and 55.7 percent of total franchise revenues in the three months ended March 31, 2005 and 2004, respectively, and 54.2 and 56.6 percent of total franchise revenues in the nine months ended March 31, 2005 and 2004, respectively.

NOTE 2. FINANCIAL INFORMATION BY SEGMENT:

Financial information concerning the Company’s salon, school and hair restoration businesses is shown in the following tables. A historical model of Regis Corporation’s quarterly results in this format is available in the Investor Information section of the corporate website at www.regiscorp.com. Click on “Financial Reports”.

	For the Three Months Ended March 31, 2005
	Salons					Beauty		Hair Restoration		Unallocated
(Dollars in thousands)	North America		International			Schools		Centers		Corporate			Consolidated
Revenues:
Service	$	319,176	$	32,383		$	9,486	$	7,636	$	—		$	368,681
Product		138,936		12,903			672		16,173		—			168,684
Royalties and fees		9,798		8,971			—		1,130		—			19,899
		467,910		54,257			10,158		24,939		—			557,264
Operating expenses:
Cost of service		185,724		17,963			3,396		4,824		—			211,907
Cost of product		73,663		8,225			491		4,737		—			87,116
Site operating expenses		41,539		2,380			912		1,436		—			46,267
General and administrative		25,176		10,851			1,484		5,019		26,297			68,827
Goodwill impairment		—		38,319			—		—		—			38,319
Rent		66,267		10,085			761		1,298		167			78,578
Depreciation and amortization		17,608		2,072			360		2,172		2,692			24,904
Total operating expenses		409,977		89,895			7,404		19,486		29,156			555,918
Operating income (loss)		57,933		(35,638	)		2,754		5,453		(29,156	)		1,346
Other income (expense):
Interest		—		—			—		—		(7,027	)		(7,027	)
Other, net		—		—			—		—		467			467
Income (loss) before income taxes	$	57,933	$	(35,638	)	$	2,754	$	5,453	$	(35,716	)	$	(5,214	)

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	For the Three Months Ended March 31, 2004 (as restated, see Note 3)
	Salons				Beauty		Hair Restoration		Unallocated
(Dollars in thousands)	North America		International		Schools		Centers		Corporate			Consolidated
Revenues:
Service	$	284,529	$	30,122	$	3,646	$	—	$	—		$	318,297
Product		133,157		11,306		218		—		—			144,681
Royalties and fees		10,242		8,153		—		—		—			18,395
		427,928		49,581		3,864		—		—			481,373
Operating expenses:
Cost of service		164,707		15,996		1,096		—		—			181,799
Cost of product		67,961		7,374		127		—		—			75,462
Site operating expenses		39,756		2,010		215		—		—			41,981
General and administrative		22,185		9,736		356		—		20,902			53,179
Rent		57,242		9,123		284		—		127			66,776
Depreciation and amortization		14,664		1,652		94		—		2,154			18,564
Total operating expenses		366,515		45,891		2,172		—		23,183			437,761
Operating income		61,413		3,690		1,692		—		(23,183	)		43,612
Other income (expense):
Interest		—		—		—		—		(4,824	)		(4,824	)
Other, net		—		—		—		—		452			452
Income before income taxes	$	61,413	$	3,690	$	1,692	$	—	$	(27,555	)	$	39,240

NOTE 3. RESTATEMENT OF FINANCIAL STATEMENTS:

In light of recent restatements by other public companies related to lease accounting practices, the Company’s management performed a review of its lease accounting practices. As a result of such review, the Company will correct the manner in which it accounts for rent holiday peri ods associated with its operating leases. On April 13, 2005, the Company’s management and its Audit Committee determined that the Company’s previously issued financial statements, including those in the Company’s 2004 Annual Report on Form 10-K for the fiscal year ended June 30, 2004 and those in the Company’s Quarterly Reports on Form 10-Q for the quarters ended September 30, 2004 and December 31, 2004 should no longer be relied upon. The Company’s management has discussed its lease accounting practices for rent holiday periods with its independent registered public accounting firm.

Typically, the Company’s operating leases do not require rental payments to begin until the salon is opened. The leased space is made available to the Company prior to the commencement of salon operations in order to allow time for installing normal leasehold improvements and equipment necessary to operate a salon. The Company historically began to recognize rental expense on a straight-line basis at the earlier of the commencement of operations or the commencement of rental payments. A rent holiday is considered to be any period where the lessee has the right to control the use of the leased property but no rental payments are required under the lease during that period. FASB Technical Bulletin (FTB) 85-3, Accounting for Operating Leases with Scheduled Rent Increases, requires that rent holiday periods in an operating lease should be recognized by the lessee on a straight-line basis over the lease term, which includes any rent holiday period. Previously, the Company has not included the rent holiday period in its straight-line rent calculation. Therefore, the Company is restating its financial statements to appropriately account for rent holiday periods.

As a result of the above, the Company has restated its consolidated balance sheet as of June 30, 2004, and its consolidated statements of operations and cash flows for the three and nine months ended March 31, 2004. The restatement did not have any effect on the Company’s previously reported cash flow from operations or revenues. The Company is currently evaluating the effect of the lease accounting changes with respect to its internal control over financial reporting in order to determine whether a material weakness currently exists or existed in prior reporting periods.

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Following is a summary of the effects of the accounting corrections on the Company’s consolidated statements of operations for the three and nine months ended March 31, 2004 (in thousands, except share data):

	Consolidated Statement of Operations
	For the Periods Ended March 31, 2004
	Three Months							Nine Months
	As Previously					As		As Previously					As
	Reported		Adjustment			Restated		Reported		Adjustment			Restated
Rent	$	66,394	$	382		$	66,776	$	194,212	$	1,184		$	195,396
Operating income		43,994		(382	)		43,612		134,408		(1,184	)		133,224
Net income		25,554		(311	)		25,243		78,174		(746	)		77,428
Net income per share — basic	$	0.58	$	(0.01	)	$	0.57	$	1.78	$	(0.02	)	$	1.76
Net income per share — diluted	$	0.55	$	(0.01	)	$	0.54	$	1.70	$	(0.02	)	$	1.68

Following is a summary of the effects of the lease accounting corrections on the Company’s consolidated balance sheet as of June 30, 2004 (in thousands):

	Consolidated Balance Sheet
	As of June 30, 2004
	As Previously					As
	Reported		Adjustment			Restated
Total assets	$	1,271,859	$	(43	)	$	1,271,816
Total liabilities		584,298		5,498			589,796
Total shareholders’ equity		687,561		(5,541	)		682,020

NOTE 4. GOODWILL IMPAIRMENT:

On April 13, 2005, in connection with the Company’s annual review of goodwill impairment, the Company and the Audit Committee concluded that a pre-tax, non-cash goodwill impairment charge for its European business would be recorded in the Company’s fiscal third quarter. After completing the testing, analysis and review of the forecast and valuation of the affected entity with its independent third-party valuation specialist, the Company finalized the exact amount of the impairment and recorded an expense of $38.3 million. This non-cash impairment charge does not impact the Company’s ability to generate cash flow in the future or its compliance with its debt covenants, nor are such charges tax deductible.

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