The Company's basic earnings per share is calculated as net income divided by weighted average common shares outstanding, excluding unvested outstanding RSAs and RSUs. The Company's dilutive earnings per share is calculated as net income divided by weighted average common shares and common share equivalents outstanding, which includes shares issuable under the Company's stock option plan and long-term incentive plan, and dilutive securities. Stock-based awards with exercise prices greater than the average market value of the Company's common stock are excluded from the computation of diluted earnings per share. The Company's dilutive earnings per share will also reflect the assumed conversion under the Company's convertible debt if the impact is dilutive, along with the exclusion of interest expense, net of taxes. The impact of the convertible debt is excluded from the computation of diluted earnings per share when interest expense per common share obtainable upon conversion is greater than basic earnings per share.

The following table sets forth a reconciliation of shares used in the computation of basic and diluted earnings per share:

		2011

		(Shares in thousands)
Weighted average shares for basic earnings per share			56,704	55,806	42,897
Effect of dilutive securities:
	Dilutive effect of convertible debt		—	10,730	—
	Dilutive effect of stock-based compensation(1)		—	217	129

Weighted average shares for diluted earnings per share			56,704	66,753	43,026

The following table sets forth the awards which are excluded from the various earnings per share calculations:

	2011

	(Shares in thousands)
Basic earnings per share:
RSAs(1)		862	931	817
RSUs(1)		215	215	215

		1,077	1,146	1,032

Diluted earnings per share:
Stock options(2)		890	960	899
SARs(2)		1,084	1,110	613
RSAs(2)		580	677	301
RSUs(2)		—	—	215
Shares issuable upon conversion of debt(2)		11,163	—	—

		13,717	2,747	2,028

The following table sets forth a reconciliation of the net income from continuing operations available to common shareholders and the net income from continuing operations for diluted earnings per share under the if-converted method:

		2011			2010		2009

		(Dollars in thousands)
Net (loss) income from continuing operations available to common shareholders		$	(8,905	)	$	39,579	$	6,970
Effect of dilutive securities:
	Interest on convertible debt		—			7,520		—

Net (loss) income from continuing operations for diluted earnings per share		$	(8,905	)	$	47,099	$	6,970

In May of 2004, the Company's Board of Directors approved the 2004 Long Term Incentive Plan (2004 Plan). The 2004 Plan received shareholder approval at the annual shareholders' meeting held on October 28, 2004. The 2004 Plan provides for the granting of stock options, equity-based stock appreciation rights (SARs) and restricted stock, as well as cash-based performance grants, to employees and directors of the Company. On March 8, 2007, the Company's Board of Directors approved an amendment to the 2004 Plan to permit the granting and issuance of restricted stock units (RSUs). On October 28, 2010, the shareholders of Regis Corporation approved an amendment to the 2004 Plan to increase the maximum number of shares of the Company's common stock authorized for issuance pursuant to grants and awards from 2,500,000 to 6,750,000. The 2004 Plan expires on May 26, 2014. Stock options, SARs and restricted stock under the 2004 Plan generally vest at a rate of 20.0 percent annually on each of the first five anniversaries of the date of grant. The stock options and SARs have a maximum term of ten years. The cash-based performance grants will be tied to the achievement of certain performance goals during a specified performance period, not less than one fiscal year in length. The RSUs cliff vest after five years and payment of the RSUs is deferred until January 31 of the year following vesting. Unvested awards are subject to forfeiture in the event of termination of employment. See Note 1 to the Consolidated Financial Statements for discussion of the Company's measure of compensation cost for its incentive stock plans, as well as an estimate of future compensation expense related to these awards.

The Company also has outstanding stock options under the 2000 Stock Option Plan (2000 Plan), although the plan terminated in 2010, which allowed the Company to grant both incentive and nonqualified stock options and replaced the Company's 1991 Stock Option Plan (1991 Plan). Total options covering 3,500,000 shares of common stock were available for grant under the 2000 Plan to employees of the Company for a term not to exceed ten years from the date of grant. The term may not exceed five years for incentive stock options granted to employees of the Company possessing more than ten percent of the total combined voting power of all classes of stock of the Company or any subsidiary of the Company. Options may also be granted to the Company's outside directors for a term not to exceed ten years from the grant date. The 2000 Plan contains restrictions on transferability, time of exercise, exercise price and on disposition of any shares acquired through exercise of the options. Stock options were granted at not less than fair market value on the date of grant. The Board of Directors determines the 2000 Plan participants and establishes the terms and conditions of each option.

The terms and conditions of the shares granted under the 1991 Plan are similar to the 2000 Plan. The 1991 Plan terminated in 2001. All shares granted under the 1991 Plan have been exercised, forfeited, or cancelled as of June 30, 2011.

	Options Outstanding

	Shares			Weighted Average Exercise Price
	(in thousands)
Balance, June 30, 2008		1,713		$	24.55
Granted		9			35.15
Cancelled		(102	)		30.20
Exercised		(235	)		16.60

Balance, June 30, 2009		1,385			25.55
Granted		135			18.90
Cancelled		(337	)		17.74
Exercised		(203	)		15.12

Balance, June 30, 2010		980			29.48
Granted		—			—
Cancelled		(96	)		18.89
Exercised		(46	)		15.04

Balance, June 30, 2011		838		$	31.48

Exercisable June 30, 2011		670		$	33.22

Outstanding options of 838,318 at June 30, 2011 had an intrinsic value (the amount by which the stock price exceeded the exercise or grant date price) of zero and a weighted average remaining contractual term of 4.7 years. Exercisable options of 670,198 at June 30, 2011 had an intrinsic value of zero and a weighted average remaining contractual term of 3.9 years. An additional 154,708 options are expected to vest with a $24.81 per share weighted average exercise price and a weighted average remaining contractual life of 7.7 years that have a total intrinsic value of zero.

All options granted relate to stock option plans that have been approved by the shareholders of the Company. Stock options granted in fiscal year 2010 were granted under the 2000 and 2004 plan. Stock options granted in fiscal year 2009 were granted under the 2004 Plan.

A rollforward of RSAs, RSUs and SARs outstanding, as well as other relevant terms of the awards, were as follows:

	Nonvested					SARs Outstanding

	Restricted Stock Outstanding Shares/Units			Weighted Average Grant Date Fair Value		Shares			Weighted Average Exercise Price
	(in thousands)					(in thousands)
Balance, June 30, 2008		523		$	36.76		527		$	35.70
Granted		618			19.14		632			19.14
Cancelled		(28	)		35.41		(45	)		35.73
Vested/Exercised		(81	)		35.72		—			—

Balance, June 30, 2009		1,032			26.33		1,114			26.30

Granted		304			19.12		2			28.57
Cancelled		(2	)		20.02		(6	)		38.63
Vested/Exercised		(188	)		24.74		—			—

Balance, June 30, 2010		1,146			24.70		1,110			26.24

Granted		277			16.60		103			16.60
Cancelled		(118	)		20.42		(126	)		24.35
Vested/Exercised		(228	)		22.69		—			—

Balance, June 30, 2011		1,077		$	23.48		1,087		$	25.54

Outstanding and unvested RSAs of 862,094 at June 30, 2011 had an intrinsic value of $13.2 million and a weighted average remaining vesting term of 2.2 years. Due to estimated forfeitures, 806,986 awards are expected to vest with a total intrinsic value of $12.4 million.

Outstanding and unvested RSUs of 215,000 at June 30, 2011 had an intrinsic value of $3.3 million and a weighted average remaining vesting term of 0.7 years. All unvested RSUs are expected to vest in fiscal year 2012.

Outstanding SARs of 1,087,460 at June 30, 2011 had a total intrinsic value of zero and a weighted average remaining contractual term of 6.9 years. Exercisable SARs of 604,140 at June 30, 2011 had a total intrinsic value of zero and a weighted average contractual term of 6.0 years. An additional 459,838 SARs are expected to vest with a $20.39 per share weighted average grant price, a weighted average remaining contractual life of 8.0 years and a total intrinsic value of zero.

During fiscal year 2011, the Company accelerated the vesting of 68,390 unvested RSAs held by the Company's Chief Executive Officer and the Company's Executive Vice President, Fashion and Education. Under the terms of the modifications, any unvested RSAs granted to the Chief Executive Officer and the Executive Vice President, Fashion and Education fully vest on their last days of employment, which is expected to be February 8, 2012 and June 30, 2012, respectively. As a result of the modifications, the Company recognized an incremental compensation cost of less than $0.1 million during fiscal year 2011.

Total cash received from the exercise of share-based instruments in fiscal years 2011, 2010 and 2009 was $0.7, $3.1 and $3.9 million, respectively.

As of June 30, 2011, the total unrecognized compensation cost related to all unvested stock-based compensation arrangements was $20.9 million. The related weighted average period over which such cost is expected to be recognized was approximately 3.1 years as of June 30, 2011.

The total intrinsic value of all stock-based compensation that was exercised during fiscal years 2011, 2010 and 2009 was $0.2, $0.7, and $1.9 million, respectively.

Using the fair value of each grant on the date of grant, the weighted average fair values per stock-based compensation award granted during fiscal years 2011, 2010 and 2009 were as follows:

	2011		2010		2009

Stock options	$	—	$	7.36	$	8.60
SARs		6.26		8.60		7.07
Restricted stock awards		16.60		19.12		19.14
Restricted stock units		—		—		—

The expense associated with the RSA and RSU grants is based on the market price of the Company's stock at the date of grant. The significant assumptions used in determining the underlying fair value on the date of grant of each stock option and SAR grant issued during the fiscal years 2011, 2010 and 2009 is presented below:

					2009

Risk-free interest rate	2.29	%	2.79	%	2.45 - 3.29%
Expected term (in years)	5.50		5.50		5.50
Expected volatility	44.00	%	42.00	%	28.00 - 40.00%
Expected dividend yield	1.45	%	0.85	%	0.56 - 0.84%

The risk free rate of return is determined based on the U.S. Treasury rates approximating the expected life of the options and SARs granted. Expected volatility is established based on historical volatility of the Company's stock price. Estimated expected life was based on an analysis of historical stock options granted data which included analyzing grant activity including grants exercised, expired, and canceled. The expected dividend yield is determined based on the Company's annual dividend amount as a percentage of the strike price at the time of the grant. The Company uses historical data to estimate pre-vesting forfeiture rates.

Compensation expense included in income before income taxes related to stock- based compensation was $9.6, $9.3, and $7.5 million for the three years ended June 30, 2011, 2010, and 2009, respectively.

The Company has 100 million shares of capital stock authorized, par value $0.05, of which all outstanding shares, and shares available under the Stock Option Plans, have been designated as common.

In addition, 250,000 shares of authorized capital stock have been designated as Series A Junior Participating Preferred Stock (preferred stock). None of the preferred stock has been issued.

The Company has a shareholders' rights plan pursuant to which one preferred share purchase right is held by shareholders for each outstanding share of common stock. The rights become exercisable only following the acquisition by a person or group, without the prior consent of the Board of Directors, of 15.0 percent or more of the Company's voting stock, or following the announcement of a tender offer or exchange offer to acquire an interest of 15.0 percent or more. If the rights become exercisable, they entitle all holders, except the takeover bidder, to purchase one one-thousandth of a share of preferred stock at an exercise price of $140, subject to adjustment, or in lieu of purchasing the preferred stock, to purchase for the same exercise price common stock of the Company (or in certain cases common stock of an acquiring company) having a market value of twice the exercise price of a right.

In May 2000, the Company's Board of Directors (BOD) approved a stock repurchase program. Originally, the program authorized up to $50.0 million to be expended for the repurchase of the Company's stock. The BOD elected to increase this maximum to $100.0 million in August 2003, to $200.0 million on May 3, 2005, and to $300.0 million on April 26, 2007. The timing and amounts of any repurchases will depend on many factors, including the market price of the common stock and overall market conditions. Historically, the repurchases to date have been made primarily to eliminate the dilutive effect of shares issued in conjunction with acquisitions, restricted stock grants and stock option exercises. All repurchased shares become authorized but unissued shares of the Company. This repurchase program has no stated expiration date. As of June 30, 2011, 2010, and 2009, a total accumulated 6.8 million shares have been repurchased for $226.5 million. As of June 30, 2011, $73.5 million remains to be spent on share repurchases under this program.