10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended December 31, 2012

OR

oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from             to           

Commission file number 1-12725

Regis Corporation

(Exact name of registrant as specified in its charter)

Minnesota	41-0749934
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
7201 Metro Boulevard, Edina, Minnesota	55439
(Address of principal executive offices)	(Zip Code)

(952) 947-7777

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to be submit and post such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer x	Accelerated filer o
Non-accelerated filer o	Smaller reporting company o
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Act). Yes o  No x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of January 28, 2013:

Common Stock, $.05 par value	56,600,519
Class	Number of Shares

REGIS CORPORATION

INDEX

Part I.	Financial Information
	Item 1.	Financial Statements:
		Condensed Consolidated Balance Sheet as of December 31, 2012 and June 30, 2012	3
		Condensed Consolidated Statement of Operations for the three and six months ended December 31, 2012 and 2011	4
		Condensed Consolidated Statement of Comprehensive Income (Loss) for the three and six months ended December 31, 2012 and 2011	5
		Condensed Consolidated Statement of Cash Flows for the six months ended December 31, 2012 and 2011	6
		Notes to Condensed Consolidated Financial Statements	7
		Review Report of Independent Registered Public Accounting Firm	25
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26
	Item 3.	Quantitative and Qualitative Disclosures about Market Risk	40
	Item 4.	Controls and Procedures	41
Part II.	Other Information		42
	Item 1.	Legal Proceedings	42
	Item 1A.	Risk Factors	42
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	43
	Item 6.	Exhibits	44
	Signatures		45

2

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

REGIS CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEET (Unaudited)
As Of December 31, 2012 and June 30, 2012

(Dollars in thousands, except share data)

	December 31, 2012		June 30, 2012
ASSETS
Current assets:
Cash and cash equivalents	$	218,343	$	111,943
Receivables, net	24,597		28,954
Inventories	153,864		142,276
Deferred income taxes	17,988		14,503
Income tax receivable	13,864		14,098
Other current assets	21,486		55,903
Current assets held for sale (Note 2)	16,816		17,000
Total current assets	466,958		384,677
Property and equipment, net	302,756		305,799
Goodwill	463,470		462,279
Other intangibles, net	22,893		23,395
Investment in and loans to affiliates	42,170		160,987
Other assets	62,697		59,488
Long-term assets held for sale (Note 2)	179,959		175,221
Total assets	$	1,540,903	$	1,571,846
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Long-term debt, current portion	$	28,950	$	28,937
Accounts payable	59,277		47,890
Accrued expenses	140,322		157,026
Current liabilities related to assets held for sale (Note 2)	16,538		18,120
Total current liabilities	245,087		251,973
Long-term debt and capital lease obligations	240,033		258,737
Other noncurrent liabilities	160,257		143,972
Long-term liabilities related to assets held for sale (Note 2)	28,781		28,007
Total liabilities	674,158		682,689
Commitments and contingencies (Note 7)
Shareholders’ equity:
Common stock, $0.05 par value; issued and outstanding 56,615,264 and 57,415,241 common shares at December 31, 2012 and June 30, 2012, respectively	2,831		2,871
Additional paid-in capital	334,353		346,943
Accumulated other comprehensive income	26,109		55,114
Retained earnings	503,452		484,229
Total shareholders’ equity	866,745		889,157
Total liabilities and shareholders’ equity	$	1,540,903	$	1,571,846

The accompanying notes are an integral part of the unaudited Condensed Consolidated Financial Statements.

3

REGIS CORPORATION

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited)

For The Three and Six Months Ended December 31, 2012 and 2011

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

	Three Months Ended December 31,						Six Months Ended December 31,
	2012			2011			2012			2011
Revenues:
Service	$	388,286		$	404,025		$	781,702		$	819,042
Product	108,236			112,900			210,520			219,673
Royalties and fees	9,643			9,213			19,303			18,769
	506,165			526,138			1,011,525			1,057,484
Operating expenses:
Cost of service	234,265			231,392			466,793			467,057
Cost of product	55,064			57,007			108,196			110,030
Site operating expenses	49,872			51,466			102,219			106,277
General and administrative	55,795			62,642			111,667			128,512
Rent	80,555			83,249			162,054			165,425
Depreciation and amortization	21,891			28,446			42,600			59,243
Total operating expenses	497,442			514,202			993,529			1,036,544
Operating income	8,723			11,936			17,996			20,940
Other income (expense):
Interest expense	(6,649		)	(7,203		)	(13,478		)	(14,563		)
Interest income and other, net	601			2,651			35,213			3,969
Income before income taxes and equity in (loss) income of affiliated companies	2,675			7,384			39,731			10,346
Income taxes	(1,085		)	(543		)	(4,071		)	(1,752		)
Equity in (loss) income of affiliated companies, net of income taxes	(17,709		)	5,059			(17,132		)	8,929
(Loss) income from continuing operations	(16,119		)	11,900			18,528			17,523
Income (loss) from discontinued operations, net of taxes	3,853			(69,327		)	7,630			(66,613		)
Net (loss) income	$	(12,266	)	$	(57,427	)	$	26,158		$	(49,090	)
Net (loss) income per share:
Basic:
(Loss) income from continuing operations	(0.28		)	0.21			0.32			0.31
Income (loss) from discontinued operations	0.07			(1.22		)	0.13			(1.17		)
Net (loss) income per share, basic(1)	$	(0.22	)	$	(1.01	)	$	0.46		$	(0.86	)
Diluted:
(Loss) income from continuing operations	(0.28		)	0.20			0.32			0.31
Income (loss) from discontinued operations	0.07			(1.01		)	0.13			(1.17		)
Net (loss) income per share, diluted(1)	$	(0.22	)	$	(0.81	)	$	0.46		$	(0.86	)
Weighted average common and common equivalent shares outstanding:
Basic	56,794			56,857			57,043			56,853
Diluted	56,794			68,417			57,125			57,159
Cash dividends declared per common share	$	0.06		$	0.06		$	0.12		$	0.12

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

The accompanying notes are an integral part of the unaudited Condensed Consolidated Financial Statements.

4

REGIS CORPORATION

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE LOSS (Unaudited)

For The Three and Six Months Ended December 31, 2012 and 2011

(Dollars in thousands)

	Three Months Ended						Six Months Ended
	December 31,						December 31,
	2012			2011			2012			2011
Net (loss) income	$	(12,266	)	$	(57,427	)	$	26,158		$	(49,090	)
Other comprehensive loss, net of tax:
Foreign currency translation adjustments	(2,178		)	(2,089		)	4,860			(22,642		)
Change in fair market value of financial instruments designated as cash flow hedges	—			(89		)	(23		)	357
Reclassification associated with liquidation of foreign entities	—			—			(33,842		)	—
Other comprehensive loss	(2,178		)	(2,178		)	(29,005		)	(22,285		)
Comprehensive loss	$	(14,444	)	$	(59,605	)	$	(2,847	)	$	(71,375	)

The accompanying notes are an integral part of the unaudited Condensed Consolidated Financial Statements.

5

REGIS CORPORATION

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)

For The Six Months Ended December 31, 2012 and 2011

(Dollars in thousands)

	2012			2011
Cash flows from operating activities:
Net income (loss)	$	26,158		$	(49,090	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation	41,919			60,894
Amortization	1,170			4,907
Equity in loss (income) of affiliated companies	16,692			(9,313		)
Dividends received from affiliated companies	693			606
Deferred income taxes	11,352			(7,245		)
Accumulated other comprehensive income reclassification adjustments (Note 3)	(33,842		)	—
Goodwill impairment	—			78,426
Stock-based compensation	3,307			4,649
Amortization of debt discount and financing costs	3,527			3,279
Other noncash items affecting earnings	(100		)	(306		)
Changes in operating assets and liabilities (1):
Receivables	4,777			(4,861		)
Inventories	(12,251		)	(20,382		)
Income tax receivable	(1,894		)	4,996
Other current assets	3,481			2,662
Other assets	627			(2,708		)
Accounts payable	11,880			(2,900		)
Accrued expenses	(19,566		)	8,076
Other noncurrent liabilities	1,039			(9,743		)
Net cash provided by operating activities	58,969			61,947
Cash flows from investing activities:
Capital expenditures	(43,200		)	(42,979		)
Proceeds from sale of assets	152			371
Asset acquisitions, net of cash acquired	—			(2,225		)
Proceeds from loans and investments	131,054			1,956
Net cash provided by (used in) investing activities	88,006			(42,877		)
Cash flows from financing activities:
Borrowings on revolving credit facilities	5,200			222,000
Payments on revolving credit facilities	(5,200		)	(222,000		)
Repayments of long-term debt and capital lease obligations	(21,298		)	(21,990		)
Repurchase of common stock	(14,868		)	—
Dividends paid	(6,905		)	(6,952		)
Net cash used in financing activities	(43,071		)	(28,942		)
Effect of exchange rate changes on cash and cash equivalents	2,496			(3,292		)
Increase (decrease) in cash and cash equivalents	106,400			(13,164		)
Cash and cash equivalents:
Beginning of period	111,943			96,263
End of period	$	218,343		$	83,099

(1) Changes in operating assets and liabilities exclude assets acquired and liabilities assumed through acquisitions.

The accompanying notes are an integral part of the unaudited Condensed Consolidated Financial Statements.

6

REGIS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1.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, 2012 and for the three and six months ended December 31, 2012 and 2011, reflect, in the opinion of management, all adjustments necessary to fairly state the consolidated financial position of the Company as of December 31, 2012 and the consolidated results of its operations and its cash flows for the interim periods. Adjustments consist only of normal recurring items, except for any discussed in the notes below. The results of operations and cash flows for any interim period are not necessarily indicative of results of operations and cash flows for the full year.

The Consolidated Balance Sheet data for June 30, 2012 was derived from audited Consolidated Financial Statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America (GAAP). The unaudited interim Condensed Consolidated Financial Statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended June 30, 2012 and other documents filed or furnished with the Securities and Exchange Commission (SEC) during the current fiscal year.

The unaudited condensed consolidated financial statements of the Company as of December 31, 2012 and for the three and six month periods ended December 31, 2012 and 2011 included in this Form 10-Q have been reviewed by PricewaterhouseCoopers LLP, an independent registered public accounting firm. Their separate report dated February 4, 2013 appearing herein, states that they did not audit and they do not express an opinion on that unaudited financial information. Accordingly, the degree of reliance on their report on such information should be restricted in light of the limited nature of the review procedures applied. PricewaterhouseCoopers LLP is not subject to the liability provisions of Section 11 of the Securities Act of 1933 for their report on the unaudited financial information because that report is not a “report” or a “part” of the registration statement prepared or certified by PricewaterhouseCoopers LLP within the meaning of Sections 7 and 11 of the Act.

Reclassifications:

Beginning in the first quarter of fiscal year 2013, salon marketing and advertising expenses that were presented within cost of service and general and administrative operating expense line items in prior filings were reclassified to site operating expenses within the Condensed Consolidated Statement of Operations. The reclassifications were made to better present how management of the Company views the respective salon marketing and advertising expenses. The prior period amounts have been reclassified to conform to the current year presentation. These reclassifications had no impact on operating income or net income. The table below presents the impact of the reclassification to the three and six months ended December 31, 2011:

	For the Three Months Ended, December 31, 2011
	Prior Presentation(1)		Reclassification			As Presented
			(Dollars in thousands)
Cost of service	$	231,669	$	(277	)	$	231,392
Site operating expenses	46,825		4,641			51,466
General and administrative	67,006		(4,364		)	62,642

	For the Six Months Ended, December 31, 2011
	Prior Presentation(1)		Reclassification			As Presented
			(Dollars in thousands)
Cost of service	$	467,638	$	(581	)	$	467,057
Site operating expenses	97,796		8,481			106,277
General and administrative	136,412		(7,900		)	128,512

(1)  Prior presentation amounts exclude amounts related to discontinued operations.  See Note 2 to the Condensed Consolidated Statement of Operations.

7

In addition, expenses associated with our distribution centers were reclassified from Corporate to our North America reportable segment. The reclassifications were made to better present how management of the Company views the respective distribution centers expenses.  This reclassification had no impact on our Condensed Consolidated Statement of Operations. The prior period amounts have been reclassified to conform to the current year presentation.  The table below presents the impact of the reclassification of general and administrative, rent, and depreciation and amortization expenses between the Company’s Corporate and North America reportable segments:

	For the Three Months Ended, December 31, 2011
	North America						Corporate
	Prior Presentation		Reclassification		As Presented(2)		Prior Presentation		Reclassification			As Presented(2)
	(Dollars in thousands)						(Dollars in thousands)
General and administrative (1)	$	28,584	$	1,501	$	30,085	$	35,466	$	(5,516	)	$	29,950
Rent	73,686		147		73,833		503		(147		)	356
Depreciation and amortization	17,692		591		18,283		9,642		(591		)	9,051

(1) The North America general and administrative reclassification consists of a $5,516 increase for the offset to the Corporate reclassification within this line item, partially offset by a decrease applicable to North America of $4,015 for the marketing and advertising expense reclassifications.

(2) See Note 10 to the Condensed Consolidated Statement of Operations for presentation of segment information.

	For the Six Months Ended, December 31, 2011
	North America						Corporate
	Prior Presentation		Reclassification		As Presented(2)		Prior Presentation		Reclassification			As Presented(2)
	(Dollars in thousands)						(Dollars in thousands)
General and administrative (1)	$	58,290	$	4,440	$	62,730	$	72,241	$	(11,707	)	$	60,534
Rent	146,901		312		147,213		700		(312		)	388
Depreciation and amortization	35,662		1,162		36,824		21,163		(1,162		)	20,001

(1) The North America general and administrative reclassification consists of a $11,707 increase for the offset to the Corporate reclassification within this line item, partially offset by a decrease of $7,267 applicable to North America for the marketing and advertising expense reclassification above.

(2) See Note 10 to the Condensed Consolidated Statement of Operations for presentation of segment information.

Stock-Based Employee Compensation:

During the six months ended December 31, 2012, the Company granted 118,062 restricted stock awards (RSAs), 195,663 restricted stock units (RSUs), 596,157 equity-based stock appreciation rights (SARs), and 199,041 performance share units (PSUs). The Company did not have significant grants for the three months ended December 31, 2012. All options granted relate to stock option plans that have been approved by the shareholders of the Company.

Total compensation cost for stock-based payment arrangements totaled $1.5 and $2.2 million for the three months ended December 31, 2012 and 2011, respectively, and $3.3 and $4.6 million for the six months ended December 31, 2012 and 2011, respectively.

Goodwill:

As of the fiscal year 2012 annual impairment testing of goodwill, the estimated fair value of the Promenade salon concept and Hair Restoration Centers reporting units exceeded the carrying value by approximately 14.0 and 12.0 percent, respectively. The respective fair values of the Company’s remaining reporting units exceeded their carrying values by greater than 20.0 percent. While the Company has determined that the estimated fair value of Promenade is appropriate based on the historical level of revenue growth, operating income and cash flows, it is reasonably likely that Promenade may experience additional impairment in future periods. As previously disclosed, the Company has agreed to sell the Hair Restoration Centers reporting unit in fiscal year 2013; however, until this reporting unit is sold, it is reasonably likely that there could be impairment of the Hair Restoration Centers reporting unit’s goodwill in future periods. See Note 2 to the Condensed Consolidated Financial Statements for details of Hair Restoration Centers reporting unit’s goodwill balance. The term “reasonably likely” refers to an occurrence that is more than remote but less than probable in the judgment of the Company. Because some of the inherent assumptions and estimates used in determining the fair value of each reporting unit are outside the control of management, changes in these underlying assumptions can adversely impact fair value. Potential impairment of a portion or all of the carrying value of goodwill for the Promenade salon concept and Hair Restoration Centers reporting units is dependent on many factors and cannot be predicted with certainty.

As of December 31, 2012, the Company’s estimated fair value, as determined by the sum of our reporting units’ fair value, reconciled to within a reasonable range of our market capitalization which included an assumed control premium. The Company concluded that there were no triggering events requiring the Company to perform an interim goodwill impairment test between the annual impairment testing and December 31, 2012.

8

A summary of the Company’s goodwill balance as of December 31, 2012 and June 30, 2012 by reporting unit is as follows:

Reporting Unit	As of December 31, 2012		As of June 30, 2012
	(Dollars in thousands)
Regis	$	35,944	$	35,910
MasterCuts	4,652		4,652
SmartStyle	48,719		48,558
Supercuts	129,630		129,621
Promenade	244,525		243,538
Total	$	463,470	$	462,279

See Note 5 to the Condensed Consolidated Financial Statements for further details on the Company’s goodwill balance.

Property and Equipment:

Historically, because of the Company’s large size and scale requirements it had been necessary for the Company to internally develop and support its own proprietary point-of-sale (POS) information system. During the fourth quarter of fiscal year 2011, the Company identified a third party POS alternative. At June 30, 2011 and throughout fiscal year 2012, the Company reassessed and adjusted the remaining useful life of the Company’s internally developed POS software.  As of June 30, 2012, the internally developed POS information system was fully depreciated. Depreciation expense related to the internally developed POS information system totaled $7.0 million and $16.3 million during the three and six months ended December 31, 2011, respectively.

During the first quarter of fiscal year 2013, the Company decided the previously identified third party POS alternative would only be utilized in United Kingdom. The Company reviewed the previously identified third party POS alternative capitalized software carrying value for impairment at September 30, 2012 and December 31, 2012. As a result of the Company’s long-lived asset impairment testing for this asset grouping in the United Kingdom, no impairment charges were recorded. There was no adjustment to the useful life as the Company expects to fully utilize the previously identified third party POS alternative in the United Kingdom salons. The Company is currently implementing another third party POS solution for salons in North America.

Recent Accounting Standards Adopted by the Company:

Testing Goodwill for Impairment

In September 2011, the Financial Accounting Standards Board (FASB) updated the accounting guidance related to annual and interim goodwill impairment testing. The updated accounting guidance allows entities to first assess qualitative factors before performing a quantitative assessment of the fair value of a reporting unit. If it is determined on the basis of qualitative factors that the fair value of the reporting unit is more likely than not less than the carrying amount, the existing quantitative impairment test is required. Otherwise, no further impairment testing is required. The Company adopted this guidance in the first quarter of fiscal year 2013.

Comprehensive Income

In June 2011, and as subsequently amended in December 2011, the FASB issued final guidance on the presentation of comprehensive income. Under the newly issued guidance, net income and comprehensive income may only be presented either as one continuous statement or in two separate, but consecutive statements. The Company retrospectively adopted this guidance in the first quarter of fiscal year 2013, with comprehensive income shown as a separate statement immediately following the Condensed Consolidated Statements of Operations.

9

Accounting Standards Recently Issued But Not Yet Adopted by the Company:

Disclosures about Offsetting Assets and Liabilities

In December 2011, the FASB issued new accounting guidance related to disclosures on offsetting assets and liabilities on the balance sheet. This newly issued accounting standard requires an entity to disclose both gross and net information about instruments and transactions eligible for offset in the balance sheet as well as instruments and transactions executed under a master netting or similar arrangement and was issued to enable users of financial statements to understand the effects or potential effects of those arrangements on its financial position. This accounting guidance is required to be applied retrospectively and is effective for the Company beginning in the first quarter of fiscal year 2014. Since the accounting guidance only impacts disclosure requirements, its adoption will not have a material impact on the Company’s consolidated financial statements.

Testing Indefinite-Lived Intangible Assets for Impairment

In July 2012, the FASB updated the accounting guidance related to annual and interim indefinite-lived intangible asset impairment testing. The updated accounting guidance allows entities to first assess qualitative factors before performing a quantitative assessment of the fair value of indefinite-lived intangible assets. If it is determined on the basis of qualitative factors that the fair value of indefinite-lived intangible assets is more likely than not less than the carrying amount, the existing quantitative impairment test is required. Otherwise, no further impairment testing is required. The updated guidance is effective for the Company beginning in the first quarter of fiscal year 2014 with early adoption permitted under certain circumstances. The Company does not expect it to have a material impact on the Company’s consolidated financial statements.

2.DISCONTINUED OPERATIONS:

Hair Restoration Centers

On July 13, 2012, the Company entered into a definitive agreement to sell its Hair Club for Men and Women business (Hair Club), a provider of hair restoration services, for cash of $163.5 million to Aderans, Co., Ltd. The definitive agreement includes a working capital adjustment provision that could impact the final sale price.  The sale includes the Company’s 50.0 percent interest in Hair Club for Men, Ltd. accounted for by the Company under the equity method. The transaction is under review by the Federal Trade Commission. The Company is currently anticipating recognizing a gain upon the closing of the transaction.

The Company classified the results of operations of Hair Club as discontinued operations for all periods presented in the Condensed Consolidated Statement of Operations.  The assets and liabilities of this business to be sold met the criteria to be classified as held for sale and have been aggregated and reported as current assets held for sale, long-term assets held for sale, current liabilities related to assets held for sale and long-term liabilities related to assets held for sale in the Condensed Consolidated Balance Sheet for all periods presented. The classification was based on the Company entering into the agreement to sell Hair Club, the centers being available for sale in present condition, and the sale being probable as of December 31, 2012. The operations and cash flows of Hair Club will be eliminated from ongoing operations of the Company, which was previously recorded as the Hair Restoration reporting segment. There will be no significant continuing involvement by the Company in the operations of Hair Club after disposal.

10

The following summarizes the assets and liabilities of our Hair Club operations at December 31, 2012 and June 30, 2012:

	December 31, 2012		June 30, 2012
	(Dollars in thousands)
Current assets held for sale
Receivables, net	$	2,504	$	2,624
Inventories	7,276		6,165
Deferred income taxes	3,229		2,892
Other current assets	3,807		5,319
Total current assets held for sale	16,816		17,000
Property and equipment, net	22,261		17,261
Goodwill	74,377		74,376
Other intangibles, net	78,132		78,395
Investment in affiliates	5,189		5,189
Total long-term assets held for sale	179,959		175,221
Total assets held for sale	$	196,775	$	192,221
Current liabilities related to assets held for sale
Accounts payable	$	3,173	$	2,564
Accrued expenses	13,365		15,556
Total current liabilities related to assets held for sale	16,538		18,120
Long-term liabilities related to assets held for sale	28,781		28,007
Total liabilities related to assets held for sale	$	45,319	$	46,127

During the three months ended December 31, 2011, the Company performed an interim impairment test of goodwill related to Hair Club and recorded a $78.4 million impairment charge for the excess of the carrying value of goodwill over the implied fair value.

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

	For the Periods Ended December 31,
	Three Months						Six Months
	2012			2011			2012			2011
	(Dollars in thousands)
Revenues	$	38,230		$	37,140		$	77,180		$	74,543
Income (loss) from discontinued operations, before income taxes	5,994			(73,545		)	11,866			(69,479		)
Income tax (provision) benefit on discontinued operations	(2,378		)	3,996			(4,676		)	2,482
Equity in income of affiliated companies, net of tax	237			222			440			384
Income (loss) from discontinued operations, net of income taxes	$	3,853		$	(69,327	)	$	7,630		$	(66,613	)

Income taxes have been allocated to continuing and discontinued operations based on the methodology required by interim reporting and accounting for income taxes guidance.  Depreciation and amortization ceased during the three and six months ended December 31, 2012 in accordance with accounting for discontinued operations. Hair Club depreciation and amortization expense for the three and six months ended December 31, 2011 was $3.2 and $6.6 million, respectively.

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3.SHAREHOLDERS’ EQUITY:

Net (Loss) Income Per Share:

The Company’s basic earnings per share is calculated as net (loss) 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 (loss) 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. 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 the net (loss) income from continuing operations available to common shareholders and the net (loss) income from continuing operations for diluted earnings per share under the if-converted method:

	For the Periods Ended December 31,
	Three Months					Six Months
	2012			2011		2012		2011
	(Dollars in thousands)
Net (loss) income from continuing operations available to common shareholders	$	(16,119	)	$	11,900	$	18,528	$	17,523
Effect of dilutive securities:
Interest on convertible debt, net of taxes	—			2,078		—		—
Net (loss) income from continuing operations for diluted earnings per share	$	(16,119	)	$	13,978	$	18,528	$	17,523

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

	For the Periods Ended December 31,
	Three Months		Six Months
	2012	2011	2012	2011
	(Shares in thousands)
Weighted average shares for basic earnings per share	56,794	56,857	57,043	56,853
Effect of dilutive securities:
Dilutive effect of stock-based compensation (1)	—	357	82	306
Dilutive effect of convertible debt	—	11,203	—	—
Weighted average shares for diluted earnings per share	56,794	68,417	57,125	57,159

(1)For the three months ended December 31, 2012, 98,637 common stock equivalents of potentially dilutive common stock were not included in the diluted earnings per share calculation because to do so would have been anti-dilutive.

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

	For the Periods Ended December 31,
	Three Months		Six Months
	2012	2011	2012	2011
	(Shares in thousands)		(Shares in thousands)
Basic earnings per share:
RSAs (1)	482	791	482	791
RSUs (1)	189	215	189	215
	671	1,006	671	1,006
Diluted earnings per share:
Stock options (2)	579	810	600	810
SARs (2)	1,001	999	895	999
RSAs (2)	—	6	—	203
RSUs (2)	180	—	93	—
Shares issuable upon conversion of debt (3)	11,255	—	11,247	11,195
	13,015	1,815	12,835	13,207

(1)Shares were not vested

(2)Shares were anti-dilutive

(3)Share equivalents were anti-dilutive for the three and six months ended December 31, 2012 and for the six months ended December 31, 2011.

Additional Paid-In Capital:

The $12.6 million decrease in additional paid-in capital during the six months ended December 31, 2012 was due to repurchases of common stock partially offset by stock-based compensation.

In May 2000, the Company’s Board of Directors approved a stock repurchase program. To date, a total of $300.0 million has been authorized to be expended for the repurchase of the Company’s stock. All repurchased shares become authorized but unissued shares of the Company. This repurchase program has no stated expiration date.  During the three months ended December 31, 2012, the Company repurchased 909,175 shares for $14.9 million. At December 31, 2012, $58.7 million remains outstanding on the approved stock repurchase program.

Accumulated Other Comprehensive Income:

The Company completed the sale of its investment in Provalliance during the quarter ended September 30, 2012 and subsequently liquidated all foreign entities with Euro denominated operations.  Amounts previously classified within accumulated other comprehensive income that were recognized in earnings were foreign currency translation rate gain adjustments of $43.4 million, a cumulative tax-effected net loss of $7.9 million associated with a cross-currency swap that was settled in fiscal year 2007 that hedged the Company’s European operations, and a $1.7 million net loss associated with cash repatriation, which nets to $33.8 million for the six months ended December 31, 2012.

4.FAIR VALUE MEASUREMENTS:

Fair value measurements are categorized into one of three levels based on the lowest level of significant input used: Level 1 (unadjusted quoted prices in active markets); Level 2 (observable market inputs available at the measurement date, other than quoted prices included in Level 1); and Level 3 (unobservable inputs that cannot be corroborated by observable market data).

Assets and Liabilities that are Measured at Fair Value on a Recurring Basis

The fair value hierarchy requires the use of observable market data when available. In instances in which the inputs used to measure fair value fall into different levels of the fair value hierarchy, the fair value measurement has been determined based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular item to the fair value measurement in its entirety requires judgment, including the consideration of inputs specific to the asset or liability.

The following methods and assumptions were used to estimate the fair value of each class of financial instrument:

Derivative instruments.  The Company’s derivative instrument assets and liabilities historically have consisted of cash flow hedges represented by forward foreign currency contracts. Derivative instruments are classified as Level 2 as the fair value is

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obtained using observable inputs available for similar liabilities in active markets at the measurement date that are reviewed by the Company. There were no derivative instruments as of December 31, 2012.  The fair value of derivative instruments as of June 30, 2012 was $0.1 million.

Equity put option—Provalliance.  The Company’s merger of the European franchise salon operations with the operations of the Franck Provost Salon Group on January 31, 2008 contained an equity put (Provalliance Equity Put) and an equity call. The instruments were classified as Level 3 as the fair value was determined based on unobservable inputs that could not be corroborated by observable market data.  See Note 6 to the Consolidated Financial Statements for discussion of the share purchase agreement. On September 27, 2012 the share purchase agreement closed in which the Company sold its 46.7 percent equity interest in Provolliance. The fair value of the Provalliance Equity Put decreased from $0.6 million as of June 30, 2012 to zero during the three months ended September 30, 2012 as it automatically terminated upon closing of the share purchase agreement.

Equity put and call options—Roosters.  The purchase agreement for the Company’s acquisition of a 60.0 percent ownership interest in Roosters MGC International LLC (Roosters) on July 1, 2011 contained an equity put (Roosters Equity Put) and an equity call (Roosters Equity Call). The instruments are classified as Level 3 as the fair value is determined based on unobservable inputs that cannot be corroborated by observable market data.   See further discussion within Note 6 to the Consolidated Financial Statements. The Roosters Equity Put and Roosters Equity Call are valued using binomial lattice models that incorporate assumptions including the business enterprise value at that date and future estimates of volatility and earnings before interest, taxes, and depreciation and amortization multiples. The sensitivity of the underlying assumptions to the Roosters Equity Put and Roosters Equity Call is not material to the consolidated financial statements. At December 31, 2012 and June 30, 2012, the fair value of the Roosters Equity Put and Roosters Equity Call were $0.2 and $0.1 million, respectively, and are classified within noncurrent liabilities and other assets, respectively, on the Condensed Consolidated Balance Sheet.

Financial Instruments.  In addition to the financial instruments listed above, the Company’s financial instruments also include cash, cash equivalents, receivables, accounts payable and debt.

The fair value of cash and cash equivalents, receivables and accounts payable approximated the carrying values as of December 31, 2012 and 2011. At December 31, 2012, the estimated fair values and carrying amounts of debt were $285.4 and $269.0 million, respectively. At June 30, 2012, the estimated fair values and carrying amounts of debt were $307.5 and $287.7 million, respectively. The estimated fair value of debt was determined based on internal valuation models, which utilize quoted market prices and interest rates for the same or similar instruments (Level 2).

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

We measure certain assets, including the Company’s equity method investments, tangible fixed assets and goodwill, at fair value on a nonrecurring basis when they are deemed to be other than temporarily impaired. The fair values of our investments are determined based on valuation techniques using the best information available, and may include quoted market prices, market comparables, and discounted cash flow projections.

5.GOODWILL AND OTHER INTANGIBLES:

The table below contains details related to the Company’s recorded goodwill as of December 31, 2012 and June 30, 2012:

	Salons
	North America			International			Consolidated
				(Dollars in thousands)
Gross goodwill at June 30, 2012	$	717,466		$	41,661		$	759,127
Accumulated impairment losses	(255,187		)	(41,661		)	(296,848		)
Net goodwill at June 30, 2012	462,279			—			462,279
Goodwill acquired	—			—			—
Translation rate adjustments	1,191			—			1,191
Gross goodwill at December 31, 2012	718,657			41,661			760,318
Accumulated impairment losses	(255,187		)	(41,661		)	(296,848		)
Net goodwill at December 31, 2012	$	463,470		$	—		$	463,470

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The table below presents other intangible assets as of December 31, 2012 and June 30, 2012:

	December 31, 2012							June 30, 2012
			Accumulated							Accumulated
	Cost		Amortization (1)			Net		Cost		Amortization (1)			Net
						(Dollars in thousands)
Amortized intangible assets:
Brand assets and trade names	$	9,651	$	(3,173	)	$	6,478	$	9,494	$	(2,960	)	$	6,534
Franchise agreements	11,578		(6,841		)	4,737		11,398		(6,494		)	4,904
Lease intangibles	14,832		(6,248		)	8,584		14,796		(5,862		)	8,934
Non-compete agreements	212		(138		)	74		207		(117		)	90
Other	4,754		(1,734		)	3,020		4,533		(1,600		)	2,933
	$	41,027	$	(18,134	)	$	22,893	$	40,428	$	(17,033	)	$	23,395

(1)Balance sheet accounts are converted at the applicable exchange rates effective as of the reported balance sheet dates, while income statement accounts are converted at the average exchange rates for the year-to-date periods presented.

Total amortization expense related to the amortizable intangible assets was approximately $0.5 million during each of the three month periods ended December 31, 2012 and 2011, and $0.9 and $1.0 million during the six month periods ended December 31, 2012 and 2011, respectively.  As of December 31, 2012, future estimated amortization expense related to amortizable intangible assets is estimated to be:

Fiscal Year	(Dollars in thousands)
2013 (Remainder: six-month period)	$	880
2014	1,671
2015	1,647
2016	1,616
2017	1,611

6.ACQUISITIONS, INVESTMENT IN AND LOANS TO AFFILIATES:

Acquisitions

The Company did not make any acquisitions during the six months ended December 31, 2012. During the six months ended December 31, 2011, the Company made salon acquisitions and the purchase prices have been allocated to assets acquired and liabilities assumed based on their estimated fair values at the dates of acquisition. These acquisitions individually and in the aggregate are not material to the Company’s operations. Operations of the acquired companies have been included in the operations of the Company since the date of the respective acquisition.

On July 1, 2011, the Company acquired 31 franchise salon locations through its acquisition of a 60.0 percent ownership interest in Roosters for $2.3 million. The purchase agreement contains a right, Roosters Equity Put, to require the Company to purchase additional ownership interest in Roosters between specified dates in 2012 to 2015, and an option, Roosters Equity Call, whereby the Company can acquire additional ownership interest in Roosters beginning in 2015. The acquisition price was determined based on a multiple of the earnings before interest, taxes, depreciation and amortization of Roosters for a trailing twelve month period adjusted for certain items as defined in the agreement which is intended to approximate fair value.

Total assets, total liabilities and total shareholders’ equity of Roosters as of December 31, 2012 were $6.0, $2.1 and $3.9 million, respectively. Net income (loss) attributable to the noncontrolling interest in Roosters was less than $0.1 and ($0.1) million for the three and six months ended December 31, 2012.  Net loss attributable to the noncontrolling interest in Roosters was less than ($0.1) and ($0.1) million for the three and six months ended December 31, 2011. Net income (loss) attributable to the noncontrolling interest in Roosters is recorded in interest income and other, net within the Condensed Consolidated Statement of Operations. Shareholders’ equity attributable to the noncontrolling interest in Roosters was $1.6 million as of December 31, 2012 and was recorded in retained earnings within the Condensed Consolidated Balance Sheet.

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Investment in and loans to affiliates

The table below presents the carrying amount of investments in and loans to affiliates as of December 31, 2012 and June 30, 2012:

	December 31, 2012		June 30, 2012
	(Dollars in thousands)
Empire Education Group, Inc.	$	41,921	$	59,683
Provalliance	—		101,304
MY Style	249		—
	$	42,170	$	160,987

The table below presents the notes receivable from affiliates as of December 31, 2012 and June 30, 2012 recorded within other current assets on the Condensed Consolidated Balance Sheet:

	December 31, 2012		June 30, 2012
	(Dollars in thousands)
Empire Education Group, Inc.	$	—	$	26,412
MY Style	610		2,251
	$	610	$	28,663

Empire Education Group, Inc.

On August 1, 2007, the Company contributed its 51 wholly-owned accredited cosmetology schools to Empire Education Group, Inc. (EEG) in exchange for a 49.0 percent equity interest in EEG. In January 2008, the Company’s effective ownership interest increased to 55.1 percent related to the buyout of EEG’s minority interest shareholder. EEG operates 108 accredited cosmetology schools.

During the three months ended December 31, 2012, to reflect the continuation of declining enrollment, revenue and profitability in the for-profit secondary educational market, EEG updated its budgeted financial projections for future periods. As a result, the Company recorded an additional $17.9 million other than temporary impairment charge on its investment in EEG. The Company did not receive a tax benefit on the impairment charge. The exposure to loss related to the Company’s involvement with EEG is the carrying value of the investment and the guarantee of EEG letters of credit totaling less than $0.5 million. Due to economic and other factors, the Company may be required to record additional impairment charges related to its investment in EEG and such impairments could be material to the Company’s consolidated balance sheet and results of operations. In addition, EEG may be required to record impairment charges related to long-lived assets and goodwill, and our share of such impairment charges could be material to the Company’s consolidated balance sheet and results of operations.  The Company’s share of EEG’s goodwill balances as of December 31, 2012 is approximately $16 million. Based on the Company’s work associated with the investment impairment recorded during the three months ended December 31, 2012, the Company’s estimate of EEG’s fair value exceeds carrying value by 5%. Any meaningful underperformance against plan or reduced outlook by EEG, changes to the carrying value of EEG or further erosion in valuations of the for—profit secondary educational market could lead to a goodwill impairment charge recorded by EEG for which the Company would record 55.1% of the impairment given the Company’s present ownership.

During the three months ended December 31, 2012 and 2011, the Company recorded $0.2 and $1.5 million, respectively, of equity earnings related to its investment in EEG. During the six months ended December 31, 2012 and 2011, the Company recorded $0.1 and $2.5 million, respectively, of equity earnings related to its investment in EEG.

The Company previously provided EEG with a $15.0 million revolving credit facility and outstanding loan, both of which matured during the three months ended December 31, 2012.  During the three months ended December 30, 2012 and 2011, the Company recorded less than $0.1 million of interest income related to the loan and revolving credit facility. During the six months ended December 31, 2012 and 2011, the Company recorded less than $0.1 and $0.3 million, respectively, of interest income related to the loan and revolving credit facility. In addition, the Company received $0.8 and $26.4 million in principal payments on the loan and revolving credit facility during the three and six months ended December 31, 2012, respectively.

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Provalliance

On April 9, 2012, the Company entered into the Agreement to sell the Company’s 46.7 percent equity interest in Provalliance to the Provost Family for a purchase price of €80 million. The transaction closed on September 27, 2012. During the three months ended September 30, 2012 the Company recorded a $0.6 million decrease in the fair value of the Provalliance Equity Put that automatically terminated upon closing of the share purchase agreement. Due to the sale of the Company’s investment in Provalliance, the Company has liquidated its foreign entities with Euro denominated operations.  During the three months ended September 30, 2012, the Company recognized $33.8 million from accumulated other comprehensive income into earnings, primarily foreign currency gain as a result of the liquidated Euro denominated operations.

MY Style

In April 2007, the Company purchased exchangeable notes issued by Yamano Holding Corporation (Exchangeable Note) and a loan obligation of a Yamano Holdings subsidiary, MY Style, formally known as Beauty Plaza Co. Ltd., (MY Style Note) for an aggregate amount of $11.3 million (1.3 billion Yen as of April 2007). The Exchangeable Note contained an option that the Company exercised during the three months ended September 30, 2012 by exchanging a portion (21,700,000 Yen or $0.3 million) of the Exchangeable Note for 27.1 percent of the 800 outstanding shares of common stock of MY Style. The Company accounts for the 27.1 percent ownership interest in MY Style as a cost method investment. The Company has no influence over the operating and financial policies of MY Style as the Company does not have representation on MY Style’s board of directors and is a minority shareholder with no voting influence compared to Yamano Holding Corporation’s super-majority voting interest.

The $0.6 million outstanding MY Style Note as of December 31, 2012 due in May 2013 is in good standing with no associated valuation allowance. All foreign currency transaction gains and losses on the MY Style Note are recorded through other income within the Condensed Consolidated Statement of Operations. The foreign currency transaction (loss) gain was less than ($0.1) and $0.6 million during the six months ended December 31, 2012 and 2011, respectively. The exposure to loss related to the Company’s involvement with MY Style is the carrying value of the outstanding note and investment in MY Style.

7.COMMITMENTS AND CONTINGENCIES:

The Company is a defendant in various lawsuits and claims arising out of the normal course of business. Like certain other large retail employers, the Company has been faced with allegations of purported class-wide consumer and wage and hour violations. In addition, the Company is a nominal defendant, and nine current and former directors and officers of the Company are named defendants, in a shareholder derivative action in Minnesota state court. The derivative shareholder alleges that the individual defendants breached their fiduciary duties to the Company in connection with their approval of certain executive compensation arrangements and certain related party transactions. A Special Litigation Committee has been formed per the direction of the presiding judge and is investigating these claims. The Company is working with outside counsel and is cooperating with the investigation. Litigation is inherently unpredictable and the outcome of these matters cannot presently be determined. Although the actions are being vigorously defended, the Company could in the future incur judgments or enter into settlements of claims that could have a material adverse effect on its results of operations in any particular period.

In fiscal year 2009 the Company sold its Trade Secret concept (Trade Secret). The Company reported Trade Secret as a discontinued operation. The exposure to loss related to the Company’s involvement with Trade Secret is the guarantee of certain operating leases that have future minimum rents of approximately $2.0 million. The Company has determined the exposure to the risk of loss on the guarantee of the operating leases to be immaterial to the financial statements.

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8.FINANCING ARRANGEMENTS:

The Company’s long-term debt as of December 31, 2012 and June 30, 2012 consisted of the following:

		Interest rate percentage		Amounts outstanding
	Maturity Dates	December 31, 2012	June 30, 2012	December 31, 2012			June 30, 2012
	(fiscal year)			(Dollars in thousands)
Senior term notes (1)	2013 - 2018	6.69 - 8.50%	6.69 - 8.50%	$	93,571		$	111,429
Convertible senior notes	2015	5.00	5.00	163,738			161,134
Revolving credit facility (1)	2016	—	—	—			—
Equipment and leasehold notes payable	2015 - 2016	4.90 - 8.75	4.90 - 8.75	11,620			14,780
Other notes payable	2013	8.00	5.75 - 8.00	54			331
				268,983			287,674
Less current portion				(28,950		)	(28,937		)
Long-term portion				$	240,033		$	258,737

(1)During the three months ended December 31, 2012 the Company amended its debt agreements to remove covenants related to specified minimum net worth levels.  The Company was in compliance with all covenants and requirements of its financing arrangements as of and during the three months ended December 31, 2012.

The table below contains details related to the Company’s financing arrangements during the six months ended December 31, 2012 and 2011:

	For the Six Months Ended December 31,
Total Debt	2012			2011
	(Dollars in Thousands)
Balance at June 30,	$	287,674		$	313,411
Repayment of long-term debt and capital lease obligations	(8,905		)	(9,669		)
Amortized debt discount	1,288			1,183
Other	4			(910		)
Balance at September 30,	$	280,061		$	304,015
Repayment of long-term debt and capital lease obligations	(12,393		)	(12,321		)
Amortized debt discount	1,316			1,208
Other	(1		)	(21		)
Balance at December 31,	$	268,983		$	292,881

Private Shelf Agreement

At December 31, 2012 and June 30, 2012, the Company had $93.6 and $111.4 million, respectively, in unsecured, fixed rate, senior term notes outstanding under a Private Shelf Agreement, of which $22.1 million were classified as part of the current portion of the Company’s long-term debt at December 31, 2012 and June 30, 2012. The notes require quarterly payments, and final maturity dates range from June 2013 through December 2017.

Convertible Senior Notes

In July 2009, the Company issued $172.5 million aggregate principal amount of 5.0 percent convertible senior notes due July 2014. The notes are unsecured, senior obligations of the Company and interest is payable semi-annually in arrears on January 15 and July 15 of each year at a rate of 5.0 percent per year. At issuance, the notes were convertible, subject to certain conditions further described below, at an initial conversion rate of 64.6726 shares of the Company’s common stock per $1,000 principal amount of notes (representing an initial conversion price of approximately $15.46 per share of the Company’s common stock). As of December 31, 2012, the conversion rate was 65.2891 shares of the Company’s common stock per $1,000 principal amount of notes (representing a conversion price of approximately $15.32 per share of the Company’s common stock).

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Holders may convert their notes at their option prior to April 15, 2014 if the Company’s stock price meets certain price triggers or upon the occurrence of specified corporate events as defined in the convertible senior note agreement. On or after April 15, 2014, holders may convert each of their notes at their option at any time prior to the maturity date for the notes.

The Company has the choice of net-cash settlement, settlement in its own shares or a combination thereof and concluded the conversion option is indexed to its own stock. As a result, the Company allocated $24.7 million of the $172.5 million principal amount of the convertible senior notes to equity, which resulted in a $24.7 million debt discount. The allocation was based on measuring the fair value of the convertible senior notes using a discounted cash flow analysis. The discount rate was based on an estimated credit rating for the Company. The estimated fair value of the convertible senior notes was $147.8 million, and the resulting $24.7 million debt discount is being amortized over the period the convertible senior notes are expected to be outstanding, as additional non-cash interest expense. The combined debt discount amortization and the contractual interest coupon resulted in an effective interest rate on the convertible debt of 8.9 percent.

The following table provides debt information for the convertible senior notes:

	As of December 31,
Convertible Senior Notes Due 2014	2012			2011
	(Dollars in thousands)
Principal amount on the convertible senior notes	$	172,500		$	172,500
Unamortized debt discount	(8,762		)	(13,861		)
Net carrying amount of convertible debt	$	163,738		$	158,639

The following table provides interest rate and interest expense amounts related to the convertible senior notes:

	For the Six Months Ended December 31,
Convertible Senior Notes Due 2014	2012		2011
	(Dollars in thousands)
Interest cost related to contractual interest coupon — 5.0%	$	4,313	$	4,313
Interest cost related to amortization of the discount	2,604		2,391
Total interest cost	$	6,917	$	6,704

Revolving Credit Facility

As of December 31, 2012 and June 30, 2012, the Company had no outstanding borrowings under this facility. Additionally, the Company had outstanding standby letters of credit under the facility of $26.6 and $26.1 million at December 31, 2012 and June 30, 2012, respectively, primarily related to its self-insurance program. Unused available credit under the facility at December 31, 2012 and June 30, 2012 was $373.4 and $373.9 million, respectively.

9.INCOME TAXES:

The determination of the annual effective income tax rate is based upon a number of significant estimates and judgments, including the estimated annual pre-tax income of the Company in each tax jurisdiction in which it operates and the development of tax planning strategies during the year.  In addition, the Company’s interim tax expense can be impacted by changes in tax rates or laws, the finalization of tax audits or reviews, as well as other factors that cannot be predicted with certainty.  As such, there can be significant volatility in interim tax provisions.

During the three and six months ended December 31, 2012, the Company recognized tax expense of $1.1 and $4.1 million, respectively, with corresponding effective tax rates of 40.6 and 10.2 percent utilizing the estimated annual effective tax rate method. This is compared to tax expense of $0.5 and $1.8 million with corresponding effective tax rates of 7.4 and 16.9 percent in the comparable periods of the prior year utilizing the year-to-date method.

The effective income tax rate for the three months ended December 31, 2012 is higher than the effective income tax rate for the three months ended December 31, 2011 due to employment credits related to the Small Business and Work Opportunity Tax Act of 2007 that were recognized in the prior year. Because these employment credits expired as of December 31, 2011, the income tax rate for the three months ended December 31, 2012 does not include any tax benefit for employment credits.

The effective income tax rate for the six months ended December 31, 2012 is lower than the effective income tax rate for the comparable period of the prior year due to the recognition of a $33.8 million foreign currency translation gain which was primarily non-taxable.

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On January 2, 2013, the American Taxpayer Relief Act of 2012 was enacted. This Act retroactively extends the Work Opportunity Tax Credit from January 1, 2012 through December 31, 2013. As a result, the Company will include an estimate of the tax benefit for the retroactive extension of the employment credits in the calculation of its income tax rate beginning in the quarter ended March 31, 2013. Depending upon the amount of credits earned and the relative amount of pre-tax book income, the benefit to be recorded may significantly affect the Company’s tax rate.

The Company accrues for the effects of open uncertain tax positions and the related potential penalties and interest.  There were no material adjustments to our recorded liability for unrecognized tax benefits during the three and six months ended December 31, 2012.  It is reasonably possible that the amount of the unrecognized tax benefit with respect to certain of our unrecognized tax positions will increase or decrease during the next 12 months. However, we do not expect the change to have a significant effect on our consolidated results of operations or financial position.

The Company files tax returns and pays tax primarily in the United States, Canada, the United Kingdom, and Luxembourg as well as states, cities, and provinces within these jurisdictions. In the United States, fiscal years 2009 and after remain open for federal tax audit. The Company’s United States federal income tax returns for the fiscal years 2010 and 2011 are currently under audit. For state tax audits, the statute of limitations generally spans three to four years, resulting in a number of states remaining open for tax audits back to fiscal year 2008. However, the Company is under audit in a number of states in which the statute of limitations has been extended to fiscal years 2006 and forward. Internationally (including Canada), the statute of limitations for tax audits varies by jurisdiction, but generally ranges from three to five years.

10.SEGMENT INFORMATION:

As of December 31, 2012, the Company owned, franchised, or held ownership interests in approximately 10,000 worldwide locations. The Company’s locations consisted of 9,259 North American salons (located in the United States, Canada and Puerto Rico), 381 international salons (located primarily in the United Kingdom), and approximately 245 locations in which the Company maintains an ownership interest through the Company’s investment in affiliates. See Note 6 to the Condensed Consolidated Financial Statements for discussion of the Company’s investment in affiliates.

The Company operates its North American salon operations through five primary concepts: Regis Salons, MasterCuts, SmartStyle, Supercuts and Promenade salons. The concepts offer similar products and services, concentrate on the mass market consumer marketplace and have consistent distribution channels. All company-owned and franchise salons within North America are located in high traffic, retail shopping locations that attract mass market consumers, and the individual salons display similar long-term economic characteristics. The salons share interdependencies and a common support base.

The Company operates its international salon operations, primarily in the United Kingdom, through three primary concepts: Regis, Supercuts, and Sassoon salons. Consistent with North America, the international concepts offer similar products and services, concentrate on the mass market consumer marketplace and have consistent distribution channels. All of the international salon concepts are company-owned and are located in malls, leading department stores, and high traffic locations. Individual salons display similar long-term economic characteristics. The salons share interdependencies and a common support base.

Based on the way the Company manages its business, it has reported its North American salons and international salons as two separate reportable segments.

20

Financial information for the Company’s reportable segments is shown in the following tables:

	For the Three Months Ended December 31, 2012(1)(2)
	Salons				Unallocated
	North America		International		Corporate			Consolidated
			(Dollars in thousands)
Revenues:
Service	$	364,486	$	23,800	$	—		$	388,286
Product	99,273		8,963		—			108,236
Royalties and fees	9,643		—		—			9,643
	473,402		32,763		—			506,165
Operating expenses:
Cost of service	221,562		12,703		—			234,265
Cost of product	50,176		4,888		—			55,064
Site operating expenses	47,417		2,455		—			49,872
General and administrative	30,129		2,499		23,167			55,795
Rent	71,778		8,420		357			80,555
Depreciation and amortization	17,138		1,565		3,188			21,891
Total operating expenses	438,200		32,530		26,712			497,442
Operating income (loss)	35,202		233		(26,712		)	8,723
Other income (expense):
Interest expense	—		—		(6,649		)	(6,649		)
Interest income and other, net	—		—		601			601
Income (loss) from continuing operations before income taxes and equity in (loss) income of affiliated companies	$	35,202	$	233	$	(32,760	)	$	2,675

(1)See Note 2 to the Condensed Consolidated Financial Statements for discussion of the classification of the results of operations of Hair Club as discontinued operations.

(2)See Note 1 to the Condensed Consolidated Financial Statements for discussion of reclassifications of general and administrative, rent and depreciation and amortization between the Company’s Corporate and North America reportable segments.

21

	For the Three Months Ended December 31, 2011(1)(2)
	Salons				Unallocated
	North America		International		Corporate			Consolidated
			(Dollars in thousands)
Revenues:
Service	$	379,694	$	24,331	$	—		$	404,025
Product	103,162		9,738		—			112,900
Royalties and fees	9,213		—		—			9,213
	492,069		34,069		—			526,138
Operating expenses:
Cost of service	218,270		13,122		—			231,392
Cost of product	51,753		5,254		—			57,007
Site operating expenses	48,758		2,708		—			51,466
General and administrative	30,085		2,607		29,950			62,642
Rent	73,833		9,060		356			83,249
Depreciation and amortization	18,283		1,112		9,051			28,446
Total operating expenses	440,982		33,863		39,357			514,202
Operating income (loss)	51,087		206		(39,357		)	11,936
Other income (expense):
Interest expense	—		—		(7,203		)	(7,203		)
Interest income and other, net	—		—		2,651			2,651
Income (loss) from continuing operations before income taxes and equity in (loss) income of affiliated companies	$	51,087	$	206	$	(43,909	)	$	7,384

(1)See Note 2 to the Condensed Consolidated Financial Statements for discussion of the classification of the results of operations of Hair Club as discontinued operations.

(2)See Note 1 to the Condensed Consolidated Financial Statements for discussion of reclassifications of general and administrative, rent and depreciation and amortization between the Company’s Corporate and North America reportable segments.

22

	For the Six Months Ended December 31, 2012(1)(2)
	Salons				Unallocated
	North America		International		Corporate			Consolidated
			(Dollars in thousands)
Revenues:
Service	$	734,166	$	47,536	$	—		$	781,702
Product	193,815		16,705		—			210,520
Royalties and fees	19,303		—		—			19,303
	947,284		64,241		—			1,011,525
Operating expenses:
Cost of service	441,793		25,000		—			466,793
Cost of product	99,252		8,944		—			108,196
Site operating expenses	97,013		5,206		—			102,219
General and administrative	61,820		5,017		44,830			111,667
Rent	144,500		16,822		732			162,054
Depreciation and amortization	33,726		2,597		6,277			42,600
Total operating expenses	878,104		63,586		51,839			993,529
Operating income (loss)	69,180		655		(51,839		)	17,996
Other income (expense):
Interest expense	—		—		(13,478		)	(13,478		)
Interest income and other, net	—		—		35,213			35,213
Income (loss) from continuing operations before income taxes and equity in (loss) income of affiliated companies	$	69,180	$	655	$	(30,104	)	$	39,731

(1)See Note 2 to the Condensed Consolidated Financial Statements for discussion of the classification of the results of operations of Hair Club as discontinued operations.

(2)See Note 1 to the Condensed Consolidated Financial Statements for discussion of reclassifications of general and administrative, rent and depreciation and amortization between the Company’s Corporate and North America reportable segments.

23

	For the Six Months Ended December 31, 2011(1)(2)
	Salons				Unallocated
	North America		International		Corporate			Consolidated
			(Dollars in thousands)
Revenues:
Service	$	769,858	$	49,184	$	—		$	819,042
Product	201,299		18,374		—			219,673
Royalties and fees	18,769		—		—			18,769
	989,926		67,558					1,057,484
Operating expenses:
Cost of service	441,245		25,812		—			467,057
Cost of product	100,197		9,833		—			110,030
Site operating expenses	100,610		5,667		—			106,277
General and administrative	62,730		5,248		60,534			128,512
Rent	147,213		17,824		388			165,425
Depreciation and amortization	36,824		2,418		20,001			59,243
Total operating expenses	888,819		66,802		80,923			1,036,544
Operating income (loss)	101,107		756		(80,923		)	20,940
Other income (expense):
Interest expense	—		—		(14,563		)	(14,563		)
Interest income and other, net	—		—		3,969			3,969
Income (loss) from continuing operations before income taxes and equity in (loss) income of affiliated companies	$	101,107	$	756	$	(91,517	)	$	10,346

(1)See Note 2 to the Condensed Consolidated Financial Statements for discussion of the classification of the results of operations of Hair Club as discontinued operations.

(2)See Note 1 to the Condensed Consolidated Financial Statements for discussion of reclassifications of general and administrative, rent and depreciation and amortization between the Company’s Corporate and North America reportable segments.

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REVIEW REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and Directors of Regis Corporation:

We have reviewed the accompanying condensed consolidated balance sheet of Regis Corporation as of December 31, 2012 and the related condensed consolidated statements of operations and of comprehensive income (loss) for the three and six month periods ended December 31, 2012 and 2011 and the condensed consolidated statement of cash flows for the six month periods ended December 31, 2012 and 2011.  These interim financial statements are the responsibility of the Company’s management.

We conducted our reviews in accordance with the standards of the Public Company Accounting Oversight Board (United States).  A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters.  It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material modifications that should be made to the accompanying condensed consolidated interim financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.

We previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet as of June 30, 2012, and the related consolidated statements of operations, of changes in shareholders’ equity and comprehensive income and of cash flows for the year then ended (not presented herein), and in our report dated August 29, 2012, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the accompanying consolidated balance sheet information as of June 30, 2012, is fairly stated, in all material respects in relation to the consolidated balance sheet from which it has been derived.

/s/ PricewaterhouseCoopers LLP

PRICEWATERHOUSECOOPERS LLP

Minneapolis, Minnesota

February 4, 2013

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Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is designed to provide a reader of our financial statements with a narrative from the perspective of our management on our financial condition, results of operations, liquidity and certain other factors that may affect our future results.  Our MD&A is presented in five sections:

·Management’s Overview

·Critical Accounting Policies

·Overview of Results

·Results of Operations

·Liquidity and Capital Resources

MANAGEMENT’S OVERVIEW

Regis Corporation (RGS) owns, franchises and operates beauty salons. As of December 31, 2012, we owned, franchised or held ownership interests in approximately 10,000 worldwide locations. Our locations consisted of 9,640 system wide North American and international salons, and 245 locations in which we maintain a non-controlling ownership interest less than 100 percent. Our salon concepts offer generally similar products and services and serve mass market consumers. Our salon operations are organized to be managed based on geographical location. Our North American salon operations include 9,259 salons, including 2,039 franchise salons, operating in the United States, Canada and Puerto Rico primarily under the trade names of Regis Salons, MasterCuts, SmartStyle, Supercuts and Cost Cutters. Our international salon operations include 381 salons located in Europe, primarily in the United Kingdom. As of December 31, 2012, we had approximately 55,000 corporate employees worldwide.

Our strategy is focused on creating an ideal guest experience. We plan to execute our strategy by putting guests and stylists first, leveraging core salon brands, focusing on technology and connectivity, simplifying our operating model, and reviewing our non-core assets. Initiatives include:

·Putting guests and stylists first by improving both the experience for the person in the chair and behind the chair. The Company continues to work on attracting, developing and retaining the best stylists through orientation programs, training and development, rewards and recognition through a performance driven culture.

·Optimizing our brand portfolio.

·Using technology and connectivity, including point-of-sale systems and internet in the salons, as well as guest relationship management systems to enhance effectiveness of field management and improve guest satisfaction and retention.

·Simplifying our operating model by leveraging the benefits of an optimized brand portfolio and technological improvements.

·Reviewing non-core assets.

Salon Business

The strength of our salon business is in the fundamental similarity and broad appeal of our salon concepts. Each concept generally targets the middle market guest; however, each attracts a different demographic.

We execute our salon growth strategy by focusing on real estate. Our salon real estate strategy is to add new units in convenient locations with good visibility and guest traffic, as well as appropriate trade demographics. Our various salon and product concepts operate in a wide range of retailing environments, including regional shopping malls, strip centers and Walmart. We believe that the availability of real estate will augment our ability to achieve the aforementioned strategic objectives.

Organic salon revenue is achieved through the combination of new salon construction and salon same-store sales results. Older, unprofitable salons will be closed or relocated. Although we have generally been experiencing negative same-store sales, we believe our strategy of focusing on the in-salon guest experience will improve guest counts and same-store sales.

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Hair Restoration Business

In December 2004, we acquired Hair Club for Men and Women. Hair Club for Men and Women is a provider of hair loss solutions. This industry is comprised of numerous locations domestically and is highly fragmented. In an effort to provide confidentiality for guests, the hair restoration centers operate primarily in professional or medical office buildings. Further, the hair restoration business is more marketing intensive. As a result, organic growth at hair restoration centers is dependant on successfully generating new leads and converting them into hair restoration guests.

On July 13, 2012, the Company entered into a definitive agreement to sell its Hair Club for Men and Women business (Hair Club) for $163.5 million. The transaction is under review by the Federal Trade Commission.

See Note 2 to the Condensed Consolidated Financial Statements as the results of operations for Hair Club are accounted for as a discontinued operation for all periods presented.

CRITICAL ACCOUNTING POLICIES

The interim Condensed Consolidated Financial Statements are prepared in conformity with accounting principles generally accepted in the United States of America. In preparing the interim Condensed Consolidated Financial Statements, we are required to make various judgments, estimates and assumptions that could have a significant impact on the results reported in the interim Condensed Consolidated Financial Statements. We base these estimates on historical experience and other assumptions believed to be reasonable under the circumstances. Estimates are considered to be critical if they meet both of the following criteria: (1) the estimate requires assumptions about material matters that are uncertain at the time the accounting estimates are made, and (2) other materially different estimates could have been reasonably made or material changes in the estimates are reasonably likely to occur from period to period. Changes in these estimates could have a material effect on our interim Condensed Consolidated Financial Statements.

Our significant accounting policies can be found in Note 1 to the Consolidated Financial Statements contained in Part II, Item 8 of the June 30, 2012 Annual Report on Form 10-K, as well as Note 1 to the Condensed Consolidated Financial Statements contained within this Quarterly Report on Form 10-Q. We believe the accounting policies related to the valuation of goodwill, the valuation and estimated useful lives of long-lived assets, investment in and loans to affiliates, purchase price allocations, revenue recognition, self-insurance accruals, stock-based compensation expense, legal contingencies and estimates used in relation to tax liabilities and deferred taxes are most critical to aid in fully understanding and evaluating our reported financial condition and results of operations. Discussion of each of these policies is contained under “Critical Accounting Policies” in Part II, Item 7 of our June 30, 2012 Annual Report on Form 10-K. There were no significant changes in or application of our critical accounting policies during the three and six months ended December 31, 2012.

Goodwill:

In connection with the fiscal year 2012 annual impairment testing of goodwill, the estimated fair value of the Promenade salon concept and Hair Restoration Centers reporting units exceeded the carrying value by approximately 14.0 and 12.0 percent, respectively. In addition, the respective fair values of the Company’s remaining reporting units exceeded their carrying values by greater than 20.0 percent. While the Company has determined the estimated fair value of Promenade to be appropriate based on the historical level of revenue growth, operating income and cash flows, it is reasonably likely that Promenade may experience additional impairment in future periods. As previously disclosed, in fiscal year 2013 the Company has agreed to sell the Hair Restoration Centers reporting unit; however, until this reporting unit is sold it is reasonably likely that there could be impairment of the Hair Restoration Centers reporting unit’s goodwill in future periods. The term “reasonably likely” refers to an occurrence that is more than remote but less than probable in the judgment of the Company. Because some of the inherent assumptions and estimates used in determining the fair value of the reportable segment are outside the control of management, changes in these underlying assumptions can adversely impact fair value. Potential impairment of a portion or all of the carrying value of goodwill for the Promenade salon concept and Hair Restoration Centers reporting units is dependent on many factors and cannot be predicted with certainty. As of December 31, 2012, the carrying value of goodwill for the Promenade salon concept and Hair Restoration Centers reporting units was $244.5 and $74.4 million, respectively

As of December 31, 2012, the Company’s estimated fair value, as determined by the sum of our reporting units’ fair value, reconciled to within a reasonable range of our market capitalization which included an assumed control premium. The Company concluded there were no triggering events requiring the Company to perform an interim goodwill impairment test between the annual impairment testing and December 31, 2012.

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OVERVIEW OF RESULTS FOR THE THREE MONTHS ENDED DECEMBER 31, 2012

·Revenues decreased 3.8 percent to $506.2 million driven by the consolidated same-store sales decrease of 1.9 percent and the closure of 510 salons during the twelve months ended December 31, 2012. The same-store sales decrease was caused by a decline in guest visitations, partially offset by an increase in average ticket price.

·We built 65 corporate locations and closed, converted or relocated 141 locations. Our franchisees constructed 36 locations and closed or relocated 23 locations. As of December 31, 2012, we had 7,601 company-owned salon locations and 2,039 franchise salon locations.

·The Company recorded a $17.9 million other than temporary impairment of its investment in EEG.

·Our Hair Restoration Centers remain classified as held for sale and reported as a discontinued operation.

RESULTS OF OPERATIONS

As of September 30, 2012, the Hair Restoration Centers reportable segment was accounted for as a discontinued operation.  All comparable periods reflect Hair Restoration Centers as a discontinued operation.  The following discussion of results of operations reflects results from continuing operations, primarily from our North American salons unless otherwise noted.  Discontinued operations is discussed at the end of this section.

Consolidated Results of Operations

The following table sets forth, for the periods indicated, certain information derived from our Condensed Consolidated Statement of Operations, expressed as a percent of revenues. The percentages are computed as a percent of total consolidated revenues, except as noted.

	For the Periods Ended December 31,
	Three Months				Six Months
Results of Operations as a Percent of Revenues	2012		2011		2012		2011
Service revenues	76.7	%	76.8	%	77.3	%	77.4	%
Product revenues	21.4		21.5		20.8		20.8
Franchise royalties and fees	1.9		1.7		1.9		1.8
Operating expenses:
Cost of service (1)	60.3		57.3		59.7		57.0
Cost of product (2)	50.9		50.5		51.4		50.1
Site operating expenses	9.9		9.8		10.1		10.0
General and administrative	11.0		11.9		11.0		12.2
Rent	15.9		15.8		16.0		15.6
Depreciation and amortization	4.3		5.4		4.2		5.6
Operating income	1.7		2.3		1.8		2.0
Income before income taxes and equity in (loss) income of affiliated companies	0.5		1.4		3.9		1.0
(Loss) income from continuing operations	(3.2	)	2.3		1.8		1.7
Income (loss) from discontinued operations, net of tax	0.8		(13.2	)	0.8		(6.3	)
Net (loss) income	(2.4	)	(10.9	)	2.6		(4.6	)

(1)Computed as a percent of service revenues and excludes depreciation and amortization expense.

(2)Computed as a percent of product revenues and excludes depreciation and amortization expense.

28

Consolidated Revenues

Consolidated revenues primarily include revenues of company-owned salons, product and equipment sales to franchisees, and franchise royalties and fees. As compared to the respective prior period, consolidated revenues decreased 3.8 percent to $506.2 million during the three months ended December 31, 2012 and decreased 4.3 percent to $1,011.5 million during the six months ended December 31, 2012. The following table details our consolidated revenues by concept. All service revenues, product revenues (which include product and equipment sales to franchisees), and franchise royalties and fees are included within their respective concept detailed in the table below:

	For the Periods Ended December 31,
	Three Months						Six Months
	2012			2011			2012			2011
				(Dollars in thousands)
North American salons:
Regis	$	95,432		$	104,629		$	192,299		$	209,496
MasterCuts	37,604			40,293			75,535			80,751
SmartStyle	127,369			125,980			250,367			254,464
Supercuts	85,109			85,031			172,177			168,634
Promenade	127,888			136,136			256,906			276,581
Total North American salons	473,402			492,069			947,284			989,926
International salons	32,763			34,069			64,241			67,558
Consolidated revenues	$	506,165		$	526,138		$	1,011,525		$	1,057,484
Percent change from prior year	(3.8		)%	(2.3		)%	(4.3		)%	(2.1		)%
Salon same-store sales decrease	(1.9		)%	(3.3		)%	(2.5		)%	(3.4		)%

Same-store sales by concept as of the three months ended December 31, 2012 and 2011, respectively, are detailed in the table below

	For the Periods Ended December 31,
	Three Months				Six Months
	2012		2011		2012		2011
Regis	(3.2	)%	(3.5	)%	(3.4	)%	(3.5	)%
MasterCuts	(4.2	)	(2.1	)	(4.2	)	(2.9	)
SmartStyle	0.5		(3.7	)	(1.9	)	(3.8	)
Supercuts	0.3		(1.3	)	0.7		(0.9	)
Promenade	(2.9	)	(2.8	)	(3.0	)	(2.9	)
North America same-store sales	(1.7	)	(2.9	)	(2.3	)	(3.0	)
International same-store sales	(6.6	)	(10.1	)	(5.8	)	(9.8	)
Consolidated same-store sales	(1.9	)%	(3.3	)%	(2.5	)%	(3.4	)%

The percent changes in consolidated revenues during the three and six months ended December 31, 2012 and 2011, respectively, were driven by the following:

	For the Periods Ended December 31,
	Three Months				Six Months
Percentage Increase (Decrease) in Revenues	2012		2011		2012		2011
Same-store sales	(1.9	)%	(3.3	)%	(2.5	)%	(3.4	)%
Acquisitions	0.0		0.8		0.1		1.0
New stores and conversions	1.2		1.3		1.4		1.1
Foreign currency	0.1		0.1		(0.1	)	0.4
Franchise revenues	0.1		0.0		0.1		0.0
Closed salons	(3.4	)	(2.2	)	(3.2	)	(2.0	)
Other	0.1		1.0		(0.1	)	0.8
	(3.8	)%	(2.3	)%	(4.3	)%	(2.1	)%

The same-store sales decrease of 1.9 and 2.5 percent during the three and six months ended December 31, 2012, respectively, was due to a decrease in guest visits, partially offset by an increase in average ticket. We acquired five salons (including four franchise salon buybacks) during the twelve months ended December 31, 2012. The Company constructed 231 company-owned salons during the twelve months ended December 31, 2012. We closed 510 salons (including 76 franchise salons) during the twelve months ended December 31, 2012.

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The same-store sales decrease of 3.3 and 3.4 percent during the three and six months ended December 31, 2011, respectively, was due to a decrease in guest visits and average ticket. We acquired 56 salons (including 54 franchise salon buybacks) during the twelve months ended December 31, 2011. The company constructed 165 company-owned salons during the twelve months ended December 31, 2011. We closed 287 salons (including 34 franchise salons) during the twelve months ended December 31, 2011.

Consolidated revenues are primarily comprised of service and product revenues, as well as franchise royalties and fees.  Fluctuations in these three major revenue categories were as follows:

Service Revenues. Service revenues include revenues generated from company-owned salons. Total service revenues for the three and six months ended December 31, 2012 and 2011 were as follows:

			Decrease Over Prior Fiscal Year
Periods Ended December 31,	Revenues		Dollar			Percentage
			(Dollars in thousands)
Three Months
2012	$	388,286	$	(15,739	)	(3.9	)%
2011	404,025		(10,265		)	(2.5	)
Six Months
2012	$	781,702	$	(37,340	)	(4.6	)%
2011	819,042		(17,932		)	(2.1	)

The decrease in service revenues during the three and six months ended December 31, 2012 was primarily due to the closure of 434 company-owned salons during the twelve months ended December 31, 2012. In addition, the decrease in service revenues is also due to Hurricane Sandy and same-store service sales decreases of 1.5 and 2.3 percent, respectively, which was primarily a result of a decline in same-store guest visits, partially offset by an increase in average ticket. The decrease in service revenues was partially offset by growth due to new salons during the previous twelve months.

The decrease in service revenues during the three and six months ended December 31, 2011 was primarily due to same-store service sales decreasing 3.4 and 3.3 percent, respectively, which was primarily as a result of a decline in same-store guest visits and average ticket and the closure of the 253 company-owned salons during the twelve months ended December 31, 2011. The decrease in service revenues was partially offset by growth due to new and acquired salons during the previous twelve months and the weakening of the United States dollar against the British Pound, Canadian dollar, and Euro.

Product Revenues. Product revenues are primarily sales at company-owned salons and sales of product and equipment to franchisees. Total product revenues for the three and six months ended December 31, 2012 and 2011 were as follows:

			(Decrease) Increase Over Prior Fiscal Year
Periods Ended December 31,	Revenues		Dollar			Percentage
			(Dollars in thousands)
Three Months
2012	$	108,236	$	(4,664	)	(4.1	)%
2011	112,900		(2,318		)	(2.0	)
Six Months
2012	$	210,520	$	(9,153	)	(4.2	)%
2011	219,673		(5,360		)	(2.4	)

The decrease in product revenues during the three and six months ended December 31, 2012 was primarily due to same-store product sales decreasing 3.6 and 3.4 percent, respectively, and the closure of 434 company-owned salons during the twelve months ended December 31, 2012. The decrease in product revenues was partially offset by growth due to new salons during the previous twelve months.

The decrease in product revenues during the three and six months ended December 31, 2011 was primarily due to same-store product sales decreasing 3.0 and 3.6 percent, respectively, and the closure of 253 company-owned salons during the twelve months ended December 31, 2011. Product sales were unfavorably impacted during the six months ended December 31, 2011 as two vendor lines were repackaged in the first fiscal quarter. The decrease in product revenues was partially offset by increased product sales of the Company’s private label lines in our North American segment due to holiday promotional deals, growth due to new and acquired salons during the previous twelve months, and the weakening of the United States dollar against the British Pound, Canadian dollar, and Euro.

30

Royalties and Fees.  Total franchise revenues, which include royalties and fees, for the three and six months ended December 31, 2012 and 2011 were as follows:

			Increase Over Prior Fiscal Year
Periods Ended December 31,	Revenues		Dollar		Percentage
			(Dollars in thousands)
Three Months
2012	$	9,643	$	430	4.7	%
2011	9,213		195		2.2
Six Months
2012	$	19,303	$	534	2.8	%
2011	18,769		259		1.4

Total franchise locations open at December 31, 2012 were 2,039, as compared to 2,007, at December 31, 2011. The increase in royalties and fees was primarily due to franchise positive same-store sales and the increase in franchise locations during the twelve months ended December 31, 2012.

Total franchise locations open at December 31, 2011 were 2,007, as compared to 1,974, at December 31, 2010. During the six months ended December 31, 2011 we purchased a franchise network, consisting of 31 franchise locations. The increase in royalties and fees was primarily due to franchise positive same-store sales and the increase in franchise locations during the twelve months ended December 31, 2011.

Gross Margin (Excluding Depreciation and Amortization)

Our cost of revenues primarily includes labor costs related to salon employees, the cost of product used in providing services and the cost of products sold to guests and franchisees.  The resulting gross margin for the three and six months ended December 31, 2012 and 2011 was as follows:

	Gross		Margin as % of Service and Product		(Decrease) Increase Over Prior Fiscal Year
Periods Ended December 31,	Margin		Revenues		Dollar			Percentage		Basis Point(1)
	(Dollars in thousands)
Three Months
2012	$	207,193	41.7	%	$	(21,333	)	(9.3	)%	(250	)
2011	228,526		44.2		(3,311		)	(1.4	)	40
Six Months
2012	$	417,233	42.1	%	$	(44,395	)	(9.6	)%	(230	)
2011	461,628		44.4		(7,852		)	(1.7	)	20

(1)Represents the basis point change in gross margin as a percent of service and product revenues as compared to the corresponding periods of the prior fiscal year.

Service Margin (Excluding Depreciation and Amortization).  Service margin for the three and six months ended December 31, 2012 and 2011 was as follows:

	Service		Margin as % of Service		(Decrease) Increase Over Prior Fiscal Year
Periods Ended December 31,	Margin		Revenues		Dollar			Percentage		Basis Point(1)
	(Dollars in thousands)
Three Months
2012	$	154,021	39.7	%	$	(18,612	)	(10.8	)%	(300	)
2011	172,633		42.7		(1,876		)	(1.1	)	60
Six Months
2012	$	314,909	40.3	%	$	(37,076	)	(10.5	)%	(270	)
2011	351,985		43.0		(5,333		)	(1.5	)	30

(1)Represents the basis point change in service margin as a percent of service revenues as compared to the corresponding periods of the prior fiscal year.

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The basis point decrease in service margin as a percent of service revenues during the three and six months ended December 31, 2012 was primarily due to increased labor costs in our North American salons, a result of increased hours, compensating stylists on the gross sales amount during certain coupon events and a new manager bonus program.

The basis point increase in service margin as a percent of service revenues during the three and six months ended December 31, 2011 was primarily due to increased productivity in our salons, lower commissions as a result of the implementation of leveraged pay plans for new stylists and a decrease in salon health insurance costs due to lower claims. Partially offsetting the increase was negative leverage on fixed payroll costs due to negative same-store service sales and an increase in payroll taxes as a result of states increasing unemployment taxes.

Product Margin (Excluding Depreciation and Amortization).  Product margin for the three and six months ended December 31, 2012 and 2011 was as follows:

	Product		Margin as % of Product		(Decrease) Increase Over Prior Fiscal Year
Periods Ended December 31,	Margin		Revenues		Dollar			Percentage		Basis Point(1)
	(Dollars in thousands)
Three Months
2012	$	53,172	49.1	%	$	(2,721	)	(4.9	)%	(40	)
2011	55,893		49.5		(1,435		)	(2.5	)	(30	)
Six Months
2012	$	102,324	48.6	%	$	(7,319	)	(6.7	)%	(130	)
2011	109,643		49.9		(2,519		)	(2.2	)	10

(1)Represents the basis point change in product margin as a percent of product revenues as compared to the corresponding periods of the prior fiscal year.

The basis point decrease in product margin as a percent of product revenues during the three and six months ended December 31, 2012 was primarily a result of inventory write-offs associated with salon locations that closed during the six months ended December 31, 2012 and donations associated with Hurricane Sandy. In addition, the basis point decrease during the six months was also due to higher commissions paid to stylists in North American salons as a result of a service and retail combined ticket commission incentive and a shift in mix to promotional items with lower margins.

The basis point decrease in product margin as a percent of product revenues during the three months ended December 31, 2011 was due to a shift in sales mix to lower margin products and promotions in our North American segment and increases in freight-in costs due to higher fuel prices. Partially offsetting the decrease was a reduction in commissions paid to new employees on retail product sales in our North American segment and an improvement in product margins in our International segment due to a shift in sales mix to higher margin products.

The basis point increase in product margin as a percent of product revenues during the six months ended December 31, 2011 was due to a reduction in commissions paid to new employees. Partially offsetting the increase was a shift in sales mix to lower margin products and promotions in our North American segment and increase in freight-in costs due to higher fuel prices.

Site Operating Expenses

This expense category includes direct costs incurred by our salons such as advertising, workers’ compensation, insurance, utilities and janitorial costs. Site operating expenses for the three and six months ended December 31, 2012 and 2011 were as follows:

	Site		Expense as % of Consolidated		(Decrease) Increase Over Prior Fiscal Year
Periods Ended December 31,	Operating		Revenues		Dollar			Percentage		Basis Point(1)
	(Dollars in thousands)
Three Months
2012	$	49,872	9.9	%	$	(1,594	)	(3.1	)%	10
2011	51,466		9.8		(4,007		)	(7.2	)	(50	)
Six Months
2012	$	102,219	10.1	%	$	(4,058	)	(3.8	)%	10
2011	106,277		10.0		(2,036		)	(1.9	)	—

(1)Represents the basis point change in site operating expenses as a percent of consolidated revenues as compared to the corresponding periods of the prior fiscal year.

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The reduction in site operating expenses during the three and six months ended December 31, 2012 was primarily due to a reduction in advertising expenses partially offset by an increase in communications expense.

The reduction in site operating expenses during the three and six months ended December 31, 2011 was primarily due to a reduction in self-insurance accruals and cost savings associated with inventory counts. In addition, the reduction during the six months ended December 31, 2011 was partially offset by increases in advertising expense related to promotional activity to increase guest trial and charges for salon internet connectivity.

General and Administrative

General and administrative (G&A) includes costs associated with our field supervision, salon training and promotions, product distribution centers and corporate offices (such as salaries and professional fees), including costs incurred to support franchise operations. G&A expenses for the three and six months ended December 31, 2012 and 2011 were as follows:

			Expense as % of Consolidated		(Decrease) Increase Over Prior Fiscal Year
Periods Ended December 31,	G&A		Revenues		Dollar			Percentage		Basis Point(1)
	(Dollars in thousands)
Three Months
2012	$	55,795	11.0	%	$	(6,847	)	(10.9	)%	(90	)
2011	62,642		11.9		942			1.5		40
Six Months
2012	$	111,667	11.0	%	$	(16,845	)	(13.1	)%	(120	)
2011	128,512		12.2		5,490			4.5		80

(1)Represents the basis point change in G&A as a percent of consolidated revenues as compared to the corresponding periods of the prior fiscal year.

The basis point improvement in G&A costs as a percent of consolidated revenues during the three and six months ended December 31, 2012 was primarily due to the prior year comparable period including costs associated with the Company’s senior management restructuring and professional fees incurred in connection with the contested proxy within our unallocated corporate segment. In addition, salary expense has decreased due to the January 2012 reduction in the corporate workforce and lower warehouse costs.

The basis point increase in G&A costs as a percent of consolidated revenues during the three and six months ended December 31, 2011 was primarily due to incremental costs associated with the Company’s senior management restructuring and professional fees incurred in connection with the contested proxy within our unallocated corporate segment information, partially offset by a decline in travel expense that was a result of the implementation of portable technology for field staff and the prior period including expenditures associated with the Regis salon concept national salon managers’ meeting.

Rent

Rent expense, which includes base and percentage rent, common area maintenance, and real estate taxes, for the three and six months ended December 31, 2012 and 2011, was as follows:

			Expense as % of Consolidated		(Decrease) Increase Over Prior Fiscal Year
Periods Ended December 31,	Rent		Revenues		Dollar			Percentage		Basis Point(1)
	(Dollars in thousands)
Three Months
2012	$	80,555	15.9	%	$	(2,694	)	(3.2	)%	10
2011	83,249		15.8		328			0.4		40
Six Months
2012	$	162,054	16.0	%	$	(3,371	)	(2.0	)%	40
2011	165,425		15.6		(340		)	(0.2	)	30

(1)Represents the basis point change in rent as a percent of consolidated revenues as compared to the corresponding periods of the prior fiscal year.

The basis point increase in rent expense as a percent of consolidated revenues for all periods presented was due to negative leverage in this fixed costs category, partially offset by salon closures.

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Depreciation and Amortization

Depreciation and amortization expense (D&A) for the three and six months ended December 31, 2012 and 2011 was as follows:

			Expense as % of Consolidated		(Decrease)  Increase Over Prior Fiscal Year
Periods Ended December 31,	D&A		Revenues		Dollar			Percentage		Basis Point(1)
	(Dollars in thousands)
Three Months
2012	$	21,891	4.3	%	$	(6,555	)	(23.0	)%	(110	)
2011	28,446		5.4		5,418			23.5		110
Six Months
2012	$	42,600	4.2	%	$	(16,643	)	(28.1	)%	(140	)
2011	59,243		5.6		13,314			29.0		130

(1)Represents the basis point change in D&A as a percent of consolidated revenues as compared to the corresponding periods of the prior fiscal year.

The basis point decrease in D&A as a percent of consolidated revenues during the three and six months ended December 31, 2012 was primarily due to the prior periods including $6.3 and $15.0 million, respectively, of accelerated depreciation expense, primarily in our unallocated corporate segment, associated with the Company’s previously internally developed point-of-sale (POS) system.

The basis point increase in D&A as a percent of consolidated revenues during the three and six months ended December 31, 2011 was primarily due to accelerated depreciation expense resulting from the useful life adjustment of the Company’s previously internally developed point-of-sale (POS) system. The previously internally developed POS system was fully depreciated as of June 30, 2012.

Interest Expense

Interest expense for the three and six months ended December 31, 2012 and 2011 was as follows:

			Expense as % of Consolidated		Decrease Over Prior Fiscal Year
Periods Ended December 31,	Interest		Revenues		Dollar			Percentage		Basis Point(1)
	(Dollars in thousands)
Three Months
2012	$	6,649	1.3	%	$	(554	)	(7.7	)%	(10	)
2011	7,203		1.4		(1,531		)	(17.5	)	(20	)
Six Months
2012	$	13,478	1.3	%	$	(1,085	)	(7.5	)%	(10	)
2011	14,563		1.4		(3,089		)	(17.5	)	(20	)

(1)Represents the basis point change in interest expense as a percent of consolidated revenues as compared to the corresponding periods of the prior fiscal year.

The basis point decrease in interest expense as a percent of consolidated revenues for all periods presented was primarily due to decreased debt levels as compared to the prior year comparable period.

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Interest Income and Other, net

Interest income and other, net for the three and six months ended December 31, 2012 and 2011 was as follows:

			Income as % of Consolidated		(Decrease) Increase Over Prior Fiscal Year
Periods Ended December 31,	Interest		Revenues		Dollar			Percentage		Basis Point(1)
	(Dollars in thousands)
Three Months
2012	$	601	0.1	%	$	(2,050	)	(77.3	)%	(40	)
2011	2,651		0.5		49			1.9		—
Six Months
2012	$	35,213	3.5	%	$	31,244		787.2	%	310
2011	3,969		0.4		596			17.7		10

(1)Represents the basis point change in interest income and other, net as a percent of consolidated revenues as compared to the corresponding periods of the prior fiscal year.

The decrease in interest income and other, net as a percent of consolidated revenues during the three months ended December 31, 2012 was due to the prior year comparable period including a favorable legal settlement and the foreign currency impact on the Company’s investment in MY Style.

The basis point improvement in interest income and other, net as a percent of consolidated revenues during the six months ended December 31, 2012 was primarily due to the recognition of a $33.8 million foreign currency translation gain in connection with the sale of Provalliance.

Interest income and other, net as a percent of consolidated revenues during the three and six months ended December 31, 2011 was flat and increased by ten basis points, respectively, with the comparable prior period. Foreign currency impact related to the Company’s investment in MY Style and a favorable legal settlement during the three and six month periods ended December 31, 2011 were offset by the prior year comparable period including an interest payment of $0.7 million on the note receivable with the purchaser of Trade Secret and lower fees received during the three and six month periods ended December 31, 2011 for warehousing services provided to the purchaser of Trade Secret.

Income Taxes

Our reported effective income tax rate for the three and six months ended December 31, 2012 and 2011 was as follows:

			Basis Point(1)
Periods Ended December 31,	Effective Rate		Increase (decrease)
Three Months
2012	40.6	%	3,320
2011	7.4		(2,100	)
Six Months
2012	10.2	%	(670	)
2011	16.9		(1,750	)

(1)Represents the basis point change in income tax (benefit) expense as a percent of (loss) income before income taxes and equity in income of affiliated companies as compared to the corresponding periods of the prior fiscal year.

The basis point increase in our overall effective income tax rate for the three months ended December 31, 2012 was due to employment credits related to the Small Business and Work Opportunity Tax Act of 2007 that were recognized in the comparable period of the prior year. Because these employment credits expired as of December 31, 2011, the income tax rate for the three months ended December 31, 2012 does not include any tax benefit for employment credits. On January 2, 2013, the American Taxpayer Relief Act of 2012 was enacted. This Act retroactively extends the Work Opportunity Tax Credit from January 1, 2012 through December 31, 2013. As a result, the Company will include an estimate of the tax benefit for the retroactive extension of the employment credits in the calculation of its income tax rate beginning in the quarter ended March 31, 2013. Depending upon the amount of credits earned and the relative amount of pre-tax book income, the benefit to be recorded may significantly affect the Company’s tax rate.

35

The basis point decrease in our overall effective income tax rate for the six months ended December 31, 2012 was due to the recognition of a $33.8 million foreign currency translation gain. This amount was primarily non-taxable.

The basis point decrease in our overall effective income tax rate for the three and six months ended December 31, 2011 was primarily due to the employment credits related to the Small Business and Work Opportunity Tax Act of 2007 providing a larger tax benefit than the comparable period of the prior year

Equity in (Loss) Income of Affiliated Companies, Net of Income Taxes

Equity in (loss) income of affiliates represents the income or loss generated by our equity investment in Empire Education Group, Inc., and other equity method investments. Equity in (loss) income of affiliated companies for the three and six months ended December 31, 2012 and 2011 was as follows:

	Equity in (loss)			(Decrease) Increase Over Prior Fiscal Year
Periods Ended December 31,	income			Dollar			Percentage
				(Dollars in thousands)
Three Months
2012	$	(17,709	)	$	(22,768	)	(450.0	)%
2011	5,059			2,047			68.0
Six Months
2012	$	(17,132	)	$	(26,061	)	(291.9	)%
2011	8,929			3,342			59.8

The (loss) in equity of affiliated companies during the three and six months ended December 31, 2012 was primarily a result of the Company’s $17.9 million other than temporary impairment charge recorded on its investment in EEG. In addition, the comparable prior periods included the equity in income of the Company’s investment in Provalliance, which was sold in September 2012.

The increase in equity in income of affiliated companies during the three and six months ended December 31, 2011 was a result of an increase in the Company’s share of Provalliance’s net income over the comparable prior period due to the Company’s 16.7 percent increase in ownership in March 2011.

Income (Loss) from Discontinued Operations, Net of Income Taxes

Income from discontinued operations for the three and six months ended December 31, 2012 and 2011 was as follows:

	Income (loss) from Discontinued Operations,			Increase (Decrease) Over Prior Fiscal Year
Periods Ended December 31,	Net of Taxes			Dollar			Percentage
	(Dollars in thousands)
Three Months
2012	$	3,853		$	73,180		105.6	%
2011	(69,327		)	(72,510		)	(2,278.0	)
Six Months
2012	$	7,630		$	74,243		111.5	%
2011	(66,613		)	(73,726		)	(1,036.5	)

Hair Restoration Centers was held for sale as of December 31, 2012 and is presented as a discontinued operation for all comparable prior periods. The increase in income from discontinued operations, net of income taxes for the three and six months ended December 31, 2012 relates to goodwill impairment charges of $78.4 million during the three and six months ended December 31, 2011.

The decrease in income from discontinued operations, net of taxes for the three and six months ended December 31, 2011 relates to the goodwill impairment charges of $78.4 million during the three and six months ended December 31, 2011.

See Note 2 to the Condensed Consolidated Financial Statements for further discussion.

Recent Accounting Pronouncements

Recent accounting pronouncements are discussed in Note 1 to the Condensed Consolidated Financial Statements.

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Effects of Inflation

We compensate some of our salon employees with percentage commissions based on sales they generate, thereby enabling salon payroll expense as a percent of company-owned salon revenues to remain relatively constant. Accordingly, this provides us certain protection against inflationary increases, as payroll expense and related benefits (our major expense components) are variable costs of sales. In addition, we may increase pricing in our salons to offset any significant increases in wages. Therefore, we do not believe inflation has had a significant impact on the results of our operations.

LIQUIDITY AND CAPITAL RESOURCES

Overview

We continue to maintain a strong balance sheet to support system growth and financial flexibility. Our debt to capitalization ratio, calculated as total debt as a percentage of total debt and shareholders’ equity at fiscal quarter end, was as follows:

Periods Ended	Debt to Capitalization		Basis Point (Decrease) Increase (1)
December 31, 2012	23.7	%	(70	)
June 30, 2012	24.4		110

(1)Represents the basis point change in total debt as a percent of total debt and shareholders’ equity as compared to prior fiscal year end.

The decrease in the debt to capitalization ratio as of December 31, 2012 compared to June 30, 2012 was primarily due to decreased debt levels stemming from repayments during the six months ended December 31, 2012, partially offset by the $17.9 million impairment charge associated with our investment in EEG.

The basis point increase in the debt to capitalization ratio as of June 30, 2012 compared to June 30, 2011 was primarily due to the decrease in shareholders’ equity as a result of the $146.1 million in non-cash goodwill impairment charges related to the Regis salon concept and Hair Restoration Centers reporting unit, a $17.2 million net impairment charge associated with the sale of Provalliance, and a $19.4 million impairment charge associated with our investment in EEG. Partially offsetting these impacts was a decrease in debt levels from scheduled payments.

Total assets at December 31, 2012 and June 30, 2012 were as follows:

	December 31,		June 30,		$ Decrease Over			% Decrease Over
	2012		2012		Prior Period(1)			Prior Period(1)
	(Dollars in thousands)
Total Assets	$	1,540,903	$	1,571,846	$	(30,943	)	(2.0	)%

(1)Change as compared to prior fiscal year end.

During the six months ended December 31, 2012, total assets decreased primarily as a result of the non cash other than temporary impairment charge of $17.9 million associated with our investment in EEG and the $14.9 million repurchase of common stock.

Total shareholders’ equity at December 31, 2012 and June 30, 2012 was as follows:

	December 31,		June 30,		$ Decrease Over			% Decrease Over
	2012		2012		Prior Period(1)			Prior Period(1)
	(Dollars in thousands)
Shareholders’ Equity	$	866,745	$	889,157	$	(22,412	)	(2.5	)%

(1)Change as compared to prior fiscal year end.

During the six months ended December 31, 2012, equity decreased primarily as a result of the non cash other than temporary impairment charge of $17.9 million associated with our investment in EEG, $14.9 million in repurchases of common stock and $6.9 million of dividends, partially offset by $4.9 million in foreign currency translation adjustments, $3.9 million in income from discontinued operations and income from continuing operations before the equity in loss of affiliated companies due to the EEG impairment.

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Cash Flows

Operating Activities

Net cash provided by operating activities was $59.0 and $61.9 million during the six months ended December 31, 2012 and 2011, respectively, and was the result of the following:

	For the Six Months Ended December 31,
Operating Cash Flows	2012			2011
	(Dollars in thousands)
Net (loss) income	$	26,158		$	(49,090	)
Depreciation and amortization	43,089			65,801
Equity in income of affiliated companies	16,692			(9,313		)
Dividends received from affiliated companies	693			606
Deferred income taxes	11,352			(7,245		)
Goodwill impairment	—			78,426
Accumulated other comprehensive income reclassification adjustments	(33,842		)	—
Receivables	4,777			(4,861		)
Inventories	(12,251		)	(20,382		)
Income tax receivable	(1,894		)	4,996
Other current assets	3,481			2,662
Other assets	627			(2,708		)
Accounts payable and accrued expenses	(7,686		)	5,176
Other non-current liabilities	1,039			(9,743		)
Other	6,734			7,622
	$	58,969		$	61,947

During the six months ended December 31, 2012, cash provided by operating activities was less than the corresponding period of the prior fiscal year as a result of the operations shortfall due to the decrease in same-store sales and gross margins.

Investing Activities

Net cash provided by (used in) investing activities was $88.0 and ($42.9) million during the six months ended December 31, 2012 and 2011, respectively, and was the result of the following:

	For the Six Months Ended December 31,
Investing Cash Flows	2012			2011
	(Dollars in thousands)
Capital expenditures for remodels or other additions	$	(20,641	)	$	(17,814	)
Capital expenditures for the corporate office (including all technology-related expenditures)	(14,802		)	(15,829		)
Capital expenditures for new salon construction	(7,757		)	(9,336		)
Proceeds from sale of assets	152			371
Business and salon acquisitions	—			(2,225		)
Proceeds from loans and investments	131,054			1,956
Disbursements for loans and investments	—			—
	$	88,006		$	(42,877	)

During the six months ended December 31, 2012, cash provided by investing activities was greater than the corresponding period of the prior fiscal year primarily due to the receipt of $103.4 million from the sale of Provalliance and $26.4 million from EEG related to principal payments on the outstanding note receivable and revolving line of credit.

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Financing Activities

Net cash used in financing activities was $43.1 and $28.9 million during the six months ended December 31, 2012 and 2011, respectively, was the result of the following:

	For the Six Months Ended December 31,
Financing Cash Flows	2012			2011
	(Dollars in thousands)
Net payments of long-term debt	$	(21,298	)	$	(21,990	)
Repurchase of common stock	(14,868		)	—
Dividends paid	(6,905		)	(6,952		)
	$	(43,071	)	$	(28,942	)

During the six months ended December 31, 2012, cash used in financing activities was greater than the corresponding period of the prior fiscal year due to the repurchase of common stock.

Acquisitions

There were no acquisitions for the three and six months ended December 31, 2012.

Acquisitions of $2.2 million during the six months ended December 31, 2011 consisted of eight franchise buybacks and one acquired corporate salon. On July 1, 2011, the Company acquired a 60.0 percent ownership interest in Roosters MGC International LLC (Roosters), consisting of 31 franchise salons.

Contractual Obligations and Commercial Commitments

As a part of our salon development program, we continue to negotiate and enter into leases and commitments for the acquisition of equipment and leasehold improvements related to future salon locations. In connection with the sale of Trade Secret during fiscal year 2009, the Company maintains a guarantee of certain operating leases with future minimum rents of approximately $2.0 million. The Company has determined the exposure to the risk of loss on the guarantee of the operating leases to be immaterial to the financial statements.

Sources of Liquidity

Funds generated by operating activities, available cash and cash equivalents, and our revolving credit facility are our most significant sources of liquidity.  We believe these sources of liquidity will be sufficient to sustain operations and to finance anticipated growth opportunities and strategic initiatives for at least the next twelve months.  We also anticipate access to long-term financing. However, in the event our liquidity is insufficient and we are not able to access long-term financing, we may be required to limit our growth opportunities.  There can be no assurance that we will continue to generate cash flows at or above current levels.

As of December 31, 2012, cash and cash equivalents were $180.2, $10.2 and $27.9 million within the United States, Canada, and Europe, respectively. In October 2012, $120.6 million of cash was returned to the U.S. through the repayment of intercompany notes.

We have a $400.0 million five-year senior unsecured revolving credit facility with a syndicate of banks that expires in June 2016.  As of December 31 2012, the Company had no outstanding borrowings under the facility.  Additionally, the Company had outstanding standby letters of credit under the facility of $26.6 million at December 31, 2012, primarily related to its self insurance program. Unused available credit under the facility at December 31, 2012 was $373.4 million.

Our ability to access our revolving credit facility is subject to our compliance with the terms and conditions of such facility.  At December 31, 2012, we were in compliance with all covenants and other requirements of our credit agreement and senior notes.

See Note 8 of the Notes to Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for the quarter ended December 31, 2012 and Note 8 of the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2012, for additional information regarding our financing arrangements.

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Dividends

We paid dividends of $0.12 per share during the six months ended December 31, 2012 and 2011. On January 29, 2013, our Board of Directors declared a $0.06 per share quarterly dividend payable February 26, 2013 to shareholders of record on February 12, 2013.

Share Repurchase Program

In May 2000, the Company’s Board of Directors approved a stock repurchase program. To date, a total of $300.0 million has been authorized to be expended for the repurchase of the Company’s stock. All repurchased shares become authorized but unissued shares of the Company. This repurchase program has no stated expiration date.  During the three months ended December 31, 2012, the Company repurchased 909,175 shares for $14.9 million. At December 31, 2012, $58.7 million remains outstanding under the approved stock repurchase program.

SAFE HARBOR PROVISIONS UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

This Quarterly Report on Form 10-Q, as well as information included in, or incorporated by reference from, future filings by the Company with the Securities and Exchange Commission and information contained in written material, press releases and oral statements issued by or on behalf of the Company contains or 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. 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 the impact of management and organizational changes; the Company’s dependence on same-store sales increases to increase revenue; the impact on the Company of healthcare reform legislation; 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; the Company’s reliance on management information systems; successful deployment of point-of-sale and guest relationship management systems; the ability of the Company to retain and attract stylists; labor and benefit costs; legal claims; 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 optimize its brand portfolio and integrate salons that support its growth objectives; the ability of the Company to maintain satisfactory relationships with suppliers; financial performance of our joint ventures; risk inherent to international developments (including currency fluctuations); or other factors not listed above. 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, 2012. 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

Item 3.  Quantitative and Qualitative Disclosures about Market Risk

The primary market risk exposure of the Company relates to changes in interest rates in connection with its debt, some of which bears interest at variable rates based on LIBOR plus an applicable borrowing margin. Additionally, the Company is exposed to foreign currency translation risk related to its net investments in its foreign subsidiaries and notes receivable with certain affiliated companies and, to a lesser extent, changes in the Canadian dollar exchange rate. The Company has established policies and procedures that govern the management of these exposures through the use of derivative financial instrument contracts. By policy, the Company does not enter into such contracts for the purpose of speculation.

The Company has established an interest rate management policy that attempts to minimize its overall cost of debt, while taking into consideration the earnings implications associated with the volatility of short-term interest rates. On occasion, the Company uses interest rate swaps to further mitigate the risk associated with changing interest rates and to maintain its desired balances of fixed and floating rate debt. In addition, access to variable debt is available through the Company’s revolving credit facility. The Company reviews its policy and interest rate risk management quarterly and makes adjustments in accordance with market conditions and the Company’s short and long-term borrowing needs. The Company had outstanding fixed rate debt balances of $269.0 and $287.7 million at December 31, 2012 and June 30, 2012, respectively.

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For additional information, including a tabular presentation of the Company’s debt obligations and derivative financial instruments, refer to Part II, Item 7A, “Quantitative and Qualitative Disclosures About Market Risk,” in the Company’s June 30, 2012 Annual Report on Form 10-K. Other than the information included above, there have been no material changes to the Company’s market risk during the three months ended December 31, 2012.

Item 4.  Controls and Procedures

Evaluation of Disclosure Controls and Procedures

The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in its Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to management, including the chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.

Our Disclosure Committee, consisting of certain members of management, assists in this evaluation. The Disclosure Committee meets on a quarterly basis and more often if necessary.

With the participation of management, the Company’s chief executive officer and chief financial officer evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rules 13a-5(e) and 15d-15(e) promulgated under the Exchange Act) as of the end of the period.  Our management, including our chief executive officer and chief financial officer, concluded that our disclosure controls and procedures were not effective as of December 31, 2012 because of the material weakness in our internal control over financial reporting.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis.

The Company did not maintain effective controls over the reclassification out of accumulated other comprehensive income of foreign currency translation adjustments associated with the liquidation of a business.  Specifically, certain foreign currency translation accounts were not included in the calculation of the foreign currency gain associated with the liquidation of a Euro denominated business.  This control deficiency resulted in the restatement of the Company’s interim Condensed Consolidated Financial Statements at and for the three month period ended September 30, 2012.  Additionally, this control deficiency could result in misstatement of the aforementioned accounts and disclosures that would result in a material misstatement of the consolidated financial statements that would not be prevented or detected on a timely basis.  Accordingly, our management has determined that this control deficiency constitutes a material weakness.

Notwithstanding the material weakness described above, management has concluded that the Company’s Interim Condensed Consolidated Financial Statements for the periods covered by and included in this Quarterly Report on Form 10-Q are fairly stated in all material respects in accordance with generally accepted accounting principles in the United States of America for each of the periods presented herein.

Management’s Plan for Remediation

Our management has taken immediate action to remediate the material weakness identified. The Company has made refinements to the executional process and controls around transactions involving foreign currency translation.  With successful operation of these refinements, the Company expects remediation of the material weakness by March 31, 2013.

Changes in Internal Controls over Financial Reporting

There were no changes in our internal control over financial reporting during the three months ended December 31, 2012 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II — OTHER INFORMATION

Item 1.  Legal Proceedings

The Company is a defendant in various lawsuits and claims arising out of the normal course of business. Like certain other large retail employers, the Company has been faced with allegations of purported class-wide consumer and wage and hour violations. In addition, the Company is a nominal defendant, and nine current and former directors and officers of the Company are named defendants, in a shareholder derivative action in Minnesota state court. The derivative shareholder alleges that the individual defendants breached their fiduciary duties to the Company in connection with their approval of certain executive compensation arrangements and certain related party transactions. A Special Litigation Committee has been formed per the direction of the presiding judge and is investigating these claims. The Company is working with outside counsel and is cooperating with the investigation. Litigation is inherently unpredictable and the outcome of these matters cannot presently be determined. Although the actions are being vigorously defended, the Company could in the future incur judgments or enter into settlements of claims that could have a material adverse effect on its results of operations in any particular period.

Item 1A.  Risk Factors

We have updated the risk factors affecting our business since those presented in our Annual Report on Form 10-K, Part I, Item 1A, for the fiscal year ended June 30, 2012. The following is not an exclusive list of all risk factors the Company faces. You should consider the risks and uncertainties more fully discussed under Part I, Item 1A, Risk Factors within the Company’s 2012 Annual Report on Form 10-K and in any of the Company’s subsequent Securities and Exchange Commission filings.

Our business is based on the success of our salons which is driven by the success of our stylists. It is important for us to attract and retain talented stylists.

Guest loyalty is based on the stylist who is providing services to our guests. Our main objective is to have our guests leave feeling satisfied and wanting to come back. To ensure that our guests are receiving the best possible care, we need to focus on retaining and attracting highly qualified stylists. We have recently invested in orientation programs, training and development, rewards and recognition to ensure a performance driven culture. To continue to be successful in the future we will need to continue to offer competitive wages, benefits and education and training programs to attract and retain talented stylists. Any shortcomings by stylists or the training and guidance they receive, particularly an issue affecting the quality of the guest service experience or compliance with safety and health regulations, may be attributed to the Company as a whole, thus damaging our reputation and brand value and potentially affecting our results of operations.

Failure to optimize our brand portfolio could have a negative impact on our financial results.

To be successful in the future, we must focus on optimizing our core brands to increase their values and growth. Optimization of our core brands will enable us to simplify our operating model.  Failure to do so could adversely impact our ability to grow revenue and realize further efficiencies within our results of operations.

The effect of changes to healthcare laws in the United States may increase the number of employees who choose to participate in our healthcare plans, which may significantly increase our healthcare costs and negatively impact our operating results.

We offer comprehensive healthcare coverage to eligible full-time and part-time employees in the United States. We currently have relatively low minimum work hour requirements for our United States employees to be eligible for healthcare coverage under our healthcare plans but for various reasons many of our eligible employees choose not to participate in our plans. However, many of such eligible employees who currently choose not to participate in our healthcare plans may find it more advantageous to do so when recent changes to healthcare laws in the United States become effective in 2014. Such changes include potential fees to persons for not obtaining healthcare coverage and being ineligible for certain healthcare subsidies if an employee is eligible for healthcare coverage under an employer’s plan. If a large portion of current eligible employees who currently choose not to participate in our plans choose to enroll when or after the law becomes effective and clarification around uncertainties on this pending legislation may significantly increase our healthcare coverage costs and negatively impact on our operating results.

We rely heavily on our management information systems. If our systems fail to perform adequately or if we experience an interruption in their operation, our results of operations may be affected.

The efficient operation of our business is dependent on our management information systems. We rely heavily on our management information systems to collect daily sales information and guest demographics, generate payroll information, monitor salon

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performance, manage salon staffing and payroll costs, inventory control and other functions. The failure of our management information systems to perform as we anticipate, or to meet the continuously evolving needs of our business, could disrupt our business and may adversely affect our operating results.

In fiscal year 2012 the Company began the process of implementing a new point-of-sale system in our salons and will continue to implement in the United Kingdom as technology will allow. The Company is currently implementing another third party POS solution for salons in North America. Failure to effectively implement the point-of-sale system may adversely affect our operating results.

If our joint ventures are unsuccessful our financial results may be affected.

We have entered into joint venture arrangements with other companies in the hair salon and beauty school businesses in order to maintain and expand our operations in the United States and Asia. If our joint venture partners are unwilling or unable to devote their financial resources or marketing and operational capabilities to our joint venture businesses, or if any of our joint ventures are terminated, we may not be able to realize anticipated revenues and profits in the countries where our joint ventures operate and our business could be materially adversely affected. If our joint venture arrangements are not successful, we may have a limited ability to terminate or modify these arrangements. If any of our joint ventures are terminated, there can be no assurance that we will be able to attract new joint venture partners to continue the activities of the terminated joint venture or to operate independently in the countries in which the terminated joint venture conducted business.

During the three months ended December 31, 2012 and fiscal year 2012, we recorded impairments of $17.9 and $19.4 million related to our investment in EEG. Due to economic and other factors, we may be required to take additional impairment charges related to our investments and such impairments could be material to our consolidated balance sheet and results of operations. In addition, our joint venture partners may be required to take impairment charges related to long-lived assets and goodwill, and our share of such impairment charges could be material to our consolidated balance sheet and results of operations. Specific to EEG, the for-profit post secondary educational market has experienced further and substantial declines during the six months ended December 31, 2012. Should this continue, an additional investment impairment would be likely. Further, our share of our EEG’s goodwill balances as of December 31, 2012 is approximately $16 million. Based on the Company’s work associated with the investment impairment recorded during the three months ended December 31, 2012, the Company’s estimate of EEG’s fair value exceed carrying value by 5%. Any meaningful underperformance against plan or reduced outlook by EEG, changes to the carrying value of EEG or further erosion in valuations for the for—profit educational sector could lead to a goodwill impairment by EEG which the Company would record 55.1% of the impairment given our present ownership. For example, during fiscal year 2012 we recorded $8.7 million for our share of an intangible asset impairment recorded by EEG.

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds

In May 2000, our Board of Directors approved a stock repurchase program. To date, a total of $300.0 million has been authorized to be expended for the repurchase of the Company’s stock. All repurchased shares become authorized but unissued shares of the Company. This repurchase program has no stated expiration date. The timing and amounts of any repurchases will depend on many factors, including the market price of the common stock and overall market conditions. As of December 31, 2012, a total accumulated 7.7 million shares have been repurchased for $241.3 million. At December 31, 2012, $58.7 million remains outstanding under the approved stock repurchase program.

The following table shows the stock repurchase activity by the Company or any “affiliated purchaser” of the Company, as defined in rule 10b-18(a)(3) under the Exchange Act, by month for the three months ended December 31, 2012:

				Total Number of	Approximate Dollar
				Shares Purchased	Value of Shares that
				As Part of Publicly	May Yet Be Purchased
	Total Number of	Average Price		Announced Plans	under the Plans or
Period	Shares Purchased	Paid per Share		or Programs	Programs (in thousands)
10/1/12 — 10/31/12	63,283	$	16.19	6,848,072	$	72,500
11/1/12 — 11/30/12	845,892	16.33		7,693,964	58,684
12/1/12 — 12/31/12	—	—		—	58,684
Total	909,175	$	16.32	7,693,964	$	58,684

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Item 6.  Exhibits

Exhibit 10(a)(*)	Employment Agreement, dated November 28, 2012, between the Company and Steven M. Spiegel
Exhibit 10(b)	First Amendment to Fifth Amended and Restated Credit Agreement, dated June 30, 2011, among the Company, and various financial institutions and JPMorgan Chase Bank, N.A., as Administration Agent, dated December 19, 2012
Exhibit 10(c)	Amendment No. 9 to Amend and Restated Private Shelf Agreement between Regis Corporation and Prudential Investment Management, Inc., The Prudential Insurance Company of America, Pruco Life Insurance Company, Pruco Life Insurance Company of New Jersey and other Prudential affiliates dated December 19, 2012
Exhibit 15	Letter Re: Unaudited Interim Financial Information.
Exhibit 31.1	Chief Executive Officer of Regis Corporation: Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Exhibit 31.2	Senior Vice President and Chief Financial Officer of Regis Corporation: Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Exhibit 32.1	Chief Executive Officer of Regis Corporation: Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
Exhibit 32.2	Senior Vice President and Chief Financial Officer of Regis Corporation: Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
Exhibit 101.INS (**)	XBRL Instance Document
Exhibit 101.SCH (**)	XBRL Taxonomy Extension Schema
Exhibit 101.CAL (**)	XBRL Taxonomy Extension Calculation Linkbase
Exhibit 101.LAB (**)	XBRL Taxonomy Extension Label Linkbase
Exhibit 101.PRE (**)	XBRL Taxonomy Extension Presentation Linkbase
Exhibit 101.DEF (**)	XBRL Taxonomy Extension Definition Linkbase

(*)Management contract, compensatory plan or arrangement required to be filed as an exhibit to the Company’s Report on Form 10-Q.

(**)The XBRL related information in Exhibit 101 to this Quarterly Report on Form 10-Q shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liability of that section and shall not be incorporated by reference into any filing or other document pursuant to the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing or document.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	REGIS CORPORATION
Date: February 4, 2013	By:	/s/ Steven M. Spiegel
		Steven M. Spiegel
		Executive Vice President and Chief Financial Officer
		Signing on behalf of the registrant and as principal accounting officer

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EX-10.(A)

Exhibit 10(a)

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (this “Agreement) is made by and between Regis Corporation, a Minnesota corporation (the “Corporation”), and Steven Spiegel (the “Executive”) as of this 28th day of November, 2012.

In consideration of the mutual agreements set forth herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Corporation agrees to employ the Executive, and the Executive agrees to such employment, upon the following terms and conditions:

1.EMPLOYMENT COMMENCEMENT DATE; PERIOD OF EMPLOYMENT.

(a)Employment Commencement Date.  The Executive’s employment with the Corporation shall commence at 12:01 a.m. on December 3, 2012 (the “Employment Commencement Date”).

(b)Period of Employment.  The employment of the Executive by the Corporation pursuant to this Agreement shall be for a period beginning on the Employment Commencement Date and continuing until Executive’s employment is terminated as provided in Section 5 herein (the “Employment Period”).

(c)Definitions.  Various terms are defined either where they first appear underlined in this Agreement or in Section 7.

2.DUTIES.  During the Employment Period, the Executive shall serve as Executive Vice President and Chief Financial Officer of the Corporation, and in such other additional office or offices to which he shall be elected by the Board of Directors of the Corporation (“Board”) with his approval, performing the duties of such office or offices held at the time and such other duties not inconsistent with his position as such an officer as are assigned to him by the Board or committees of the Board.  During the Employment Period, the Executive shall devote his full time and attention to the business of the Corporation and the discharge of the aforementioned duties, except for reasonable vacations, absences due to illness, and reasonable time for attention to personal affairs and charitable activities.  The Executive shall follow applicable policies and procedures adopted by the Corporation from time to time, including without limitation policies relating to business ethics, conflicts of interest, non-discrimination, and confidentiality and protection of trade secrets.  The Executive hereby represents and confirms that he is under no contractual or legal commitments that would prevent him from fulfilling his duties and responsibilities as set forth in this Agreement.

3.OFFICE FACILITIES.  During the Employment Period under this Agreement, the Executive shall have his office where the Corporation’s principal executive offices are located from time to time, which currently are at 7201 Metro Boulevard, Edina, Minnesota, and the Corporation shall furnish the Executive with office facilities reasonably suitable to his position at such location.

4.COMPENSATION, BENEFITS AND EXPENSE REIMBURSEMENTS.  As compensation for his services performed as an officer and employee of the Corporation, the Corporation shall pay or provide to the Executive the following compensation, benefits and expense reimbursements during the Employment Period:

(a)Base Salary.  The Corporation shall pay the Executive a base salary (the “Base Salary”), initially at the rate of $400,000.00 per annum, payable monthly, semi-monthly or weekly according to the Corporation’s general practice for its executives, for the Employment Period.  For the Corporation’s fiscal year beginning July 1, 2013, such Base Salary may be revised by the Compensation Committee of the Board (the “Committee”), provided that the Executive’s Base Salary may not be reduced by the Committee unless such reduction is part of an across-the-board reduction of base salaries for all senior executive employees, and provided further that the percentage reduction in the Executive’s Base Salary is commensurate with the percentage reduction in the base salaries for all other senior executive employees.  Thereafter, any then-current Base Salary shall be the “Base Salary” for purposes of this Agreement.

(b)Bonus.  The Corporation shall grant the Executive an award under the Regis Corporation Short Term Incentive Plan (“Short Term Plan”) for the fiscal year ending June 30, 2013, with a guaranteed payout equal to $116,667.00, which is 50% of the Executive’s initial Base Salary, prorated for the period December 1, 2012 through June 30, 2013 (the “FY13 Bonus Award”).  For each successive year thereafter during the Employment Period, the Executive shall be eligible for an annual performance bonus (the “Bonus”) as determined under the provisions of the then-applicable Short Term Plan, as amended from time to time, any successor to such plan, or such other annual incentive compensation program developed for the Corporation’s senior executive officers, with performance goals and other terms consistent with other senior executive officers of the Corporation, and with a target payout of no less than 50% of the Executive’s then current Base Salary.  The FY13 Bonus Award and any Bonus for other years shall be paid at the same time as bonuses are paid to other senior executive officers of the Corporation under the then-applicable Short Term Plan.

(c)Special One Time Restricted Stock Awards.  Effective as of the Employment Commencement Date (the “Equity Grant Date”), the Executive will receive an award of such number of restricted stock units as are equal to $400,000 divided by the fair market value of a share of the Corporation’s common stock on the Equity Grant Date.  The award will be granted under the Regis Corporation 2004 Long Term Incentive Plan (“Long Term Plan”), subject to the Executive’s execution of a restricted stock unit agreement approved by the Committee and subject to the terms and conditions of the Long Term Plan, with such units vesting in full on the five (5) year anniversary of the Equity Grant Date, provided the Executive is an employee of the Corporation on that date (except as otherwise provided in the award agreement).

(d)Stock Incentive Awards.  Effective as of the Employment Commencement Date,  the Executive shall receive an equity award under, and in accordance with the terms and provisions of, the Regis Corporation 2004 Long Term Incentive Plan (“Long Term Plan”) which shall be prorated from the period December 1, 2012 through June 30, 2013 (the “FY2013 Equity Award”) .  For the FY2013 Equity Award, the Executive will be awarded equity with a projected total value of $233,000.00 and comprised of the following: (i) twenty percent (20% or approximately $47,000) in an award of restricted stock units vesting ratably over a three (3) year period, (ii) forty percent (40% or approximately $93,000) in a performance share award that will cliff vest on the three (3) year anniversary subject to attainment of performance goals during the first twelve months of the Performance Period, as

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determined by the Committee, and (iii) forty percent (40% or approximately $93,000) in an award of stock appreciation rights vesting ratably over a three (3) year period.  To determine the number of shares for each type of award, the projected total value will be multiplied by the applicable percentage, and then, in the case of the restricted stock units and performance shares, divided by the fair market value of a share of the Corporation’s stock on the date of grant and, in the case of the stock appreciation rights, divided by the Black-Scholes value of a share of the Corporation’s stock on the date of grant.  The above-described award is subject to the Executive’s execution of applicable award agreements approved by the Committee and terms and conditions of the Long Term Plan.  Notwithstanding the foregoing or anything to the contrary in the Long Term Plan, the Special One Time Restricted Stock Awards referred to in Section 4(c) and all awards of time-based equity compensation granted to the Executive during the Employment Period shall provide for full acceleration of vesting of such awards upon a Change in Control (as defined in the Long Term Plan), and all awards of performance-based equity compensation shall provide for full acceleration of vesting at the target level of performance, prorated for the portion of the performance period prior to such Change in Control, upon such a Change in Control.

(e)Relocation Expenses.  The Corporation shall reimburse the Executive for the following costs associated with the relocation of the Executive and his immediate family sharing his household to the Minneapolis/St. Paul, Minnesota metropolitan area: (i) the actual travel costs for up to two round trips by the Executive and his spouse or significant other from Chicago, Illinois to the Minneapolis/St. Paul, Minnesota metropolitan area (provided such travel arrangements, including airfare and lodging, are made in accordance with the Corporation’s travel policies and procedures), plus (ii) the reasonable costs of moving the household goods and personal effects of the Executive and his immediate family to the Minneapolis/St. Paul, Minnesota metropolitan area by one or more vendors agreed upon by the Executive and the Corporation, plus (iii) the reasonable cost for temporary housing for the Executive and his immediate family for up to six (6) months after the Employment Commencement Date; plus, (iv) the actual costs of the Executive’s real estate brokerage and related fees and closing costs in connection with the sale of the Executive’s current primary residence in Chicago, Illinois, provided the total amount payable under this Section 4(e) shall not exceed $75,000.00.  The Corporation’s relocation reimbursement obligations under this Section 4(e) are subject to any withholdings required under applicable law and the Executive’s submission of appropriate receipts, and do not include any reimbursement for any relocation expenses not specifically identified above.

(f)Commuting Expenses.  The Corporation shall reimburse the Executive for the actual airfare expense for one round trip by the Executive from Chicago, Illinois to Minneapolis, Minnesota for each week during which such travel is completed during the Executive’s Employment Period, provided such travel arrangements are made in accordance with the Corporation’s travel policies and procedures, and provided that such commuting expense reimbursement obligation shall cease upon the earlier of (i) July 1, 2016 or (ii) any such time as the Executive moves his permanent residence to Minneapolis, Minnesota. The Corporation’s relocation reimbursement obligations under this Section 4(f) are subject to any withholdings required under applicable law and the Executive’s submission of

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appropriate receipts, and do not include any reimbursement for any commuting expenses not specifically identified in this Section 4(f).

(g)Health, Welfare and Retirement Plans; Vacation.  To the extent the Executive meets the eligibility requirements for such arrangements, plans or programs, the Executive shall be entitled to:

(i)participate in such retirement, health (medical, hospital and/or dental) insurance, life insurance, disability insurance, flexible benefits arrangements and accident insurance plans and programs as are maintained in effect from time to time by the Corporation for its headquarters employees;

(ii)participate in other non-duplicative benefit programs which the Corporation may from time to time offer generally to senior executive officers of the Corporation; and

(iii)take vacations and be entitled to sick leave in accordance with the Corporation’s policy for senior executive officers of the Corporation.

For the sake of clarity, the Corporation may modify its health, welfare, retirement and other benefit plans and vacation and sick leave policies from time to time and the Executive’s rights under these plans are subject to change in the event of any such modifications, provided that he will receive the benefits generally provided to other senior executive officers of the Corporation.  In addition, the Executive acknowledges that the Corporation has frozen its Executive Retirement Savings Plan effective June 30, 2012 and, therefore, the Executive will have no right to participate in that plan.

(h)Other Incentive Plans, Benefits and Perquisites.  The Executive shall be offered any additional employee benefits and perquisites the Corporation offers to other senior executive officers of the Corporation (to the extent the Executive otherwise satisfies the eligibility criteria for such benefits), including receipt of an annual perquisite account that includes an automobile allowance of $25,000.  The Executive also shall be eligible to participate in such other incentive compensation programs in accordance with their terms as the Corporation may have in effect from time to time for its senior executive officers and all compensation and other entitlements earned thereunder shall be in addition to, and shall not in any way reduce, the amount payable to the Executive as Base Salary and Bonus.

(h)Expenses.  During the Employment Period, the Executive shall be reimbursed for reasonable business expenses incurred in connection with the performance of his duties hereunder consistent with the Corporation’s policy regarding reimbursement of such expenses, including submission of appropriate receipts.  With respect to any benefits or payments received or owed to the Executive hereunder, the Executive shall cooperate in good faith with the Corporation to structure such benefits or payments in the most tax-efficient manner to the Corporation.

5.TERMINATION OF EMPLOYMENT.  The employment of the Executive by the Corporation pursuant to this Agreement may be terminated by the Corporation or the Executive at any time as follows:

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(a)Death.  In the event of the Executive’s death, such employment shall terminate on the date of death.

(b)Permanent Disability.  In the event of the Executive’s physical or mental disability or health impairment which prevents the effective performance by the Executive of his duties hereunder on a full time basis, with such termination to occur (i) with respect to disability, on or after the time which the Executive becomes entitled to disability compensation benefits under the Corporation’s long term disability insurance policy or program as then in effect or (ii) with respect to health impairment, after Executive has been unable to substantially perform his services hereunder for six consecutive months.  Any dispute as to the Executive’s physical or mental disability or health impairment shall be settled by the opinion of an impartial physician selected by the parties or their representatives or, in the event of failure to make a joint selection after request therefor by either party to the other, a physician selected by the Corporation, with the fees and expenses of any such physician to be borne by the Corporation.

(c)Cause.  The Corporation, by giving written notice of termination to the Executive, may terminate such employment hereunder for Cause.

(d)Without Cause.  The Corporation may terminate such employment without Cause (which shall be for any reason not covered by preceding Sections 5(a) through (c)), with such termination to be effective upon the date specified by the Corporation in a written notice delivered to the Executive.

(e)By the Executive For Good Reason.  The Executive may terminate such employment for an applicable Good Reason, subject to the process described in the Good Reason definition in Section 7.

(f)By the Executive Without Good Reason.  The Executive may terminate such employment for any reason other than Good Reason upon thirty (30) days advance notice to the Corporation.

(g)Notice of Termination.  Any termination of the Executive’s employment by the Corporation or by the Executive (other than termination based on the Executive’s death) shall be communicated by a written Notice of Termination to the other party hereto.  For purposes of this Agreement, a “Notice of Termination” shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive’s employment under the provision so indicated.  For purposes of this Agreement, no purported termination shall be effective without the delivery of such Notice of Termination.

(h)Date of Termination.  The date upon which the Executive’s termination of employment with the Corporation occurs is the “Date of Termination.”  For purposes of Sections 6(b) and 6(c) of this Agreement only, with respect to the timing of any payments thereunder, the Date of Termination shall mean the date on which a “separation from service” has occurred for purposes of Section 409A(a)(2)(A)(i) of the Internal Revenue Code of 1986, as amended (the “Code”), and Treas. Reg. Section 1.409A-1(h).

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6.PAYMENTS UPON TERMINATION.

(a)Death or Disability.  If the Executive’s employment is terminated by reason of his death or permanent disability, he (or the legal representative of his estate in the event of his death) shall be entitled to the following:

(i)Accrued Compensation.  All compensation due the Executive under this Agreement and under each plan or program of the Corporation in which he may be participating at the time shall cease to accrue as of the date of such termination, except (A) as specifically provided in this Agreement or (B) in the case of any such plan or program, if and to the extent otherwise provided in the terms of such plan or program or by applicable law.  All such compensation accrued as of the date of such termination but not previously paid shall be paid to the Executive at the time such payment otherwise would be due.

(ii)Accrued Obligations.  In addition, the Executive shall be entitled to payment of all accrued vacation pay.

(b)Termination Without Cause or for Good Reason Prior to a Change in Control or More Than Twenty-Four Months After a Change in Control. If, prior to a Change in Control or more than twenty-four (24) months after a Change in Control, the Executive’s employment pursuant to this Agreement is terminated by the Corporation without Cause or the Executive terminates his employment for Good Reason, then the Executive shall be entitled to and shall receive the following:

(i)Accrued Compensation.  All compensation due the Executive under this Agreement and under each plan or program of the Corporation in which he may be participating at the time shall cease to accrue as of the date of such termination, except (A) as specifically provided in this Agreement or (B) in the case of any such plan or program, if and to the extent otherwise provided in the terms of such plan or program or by applicable law.  All such compensation accrued as of the date of such termination but not previously paid shall be paid to the Executive at the time such payment otherwise would be due.

(ii)Accrued Obligations.  In addition, the Executive shall be entitled to payment of all accrued vacation pay.

(iii)Severance Payment.  Subject to the Executive signing and not revoking a release of claims in a form prescribed by the Corporation and the Executive remaining in strict compliance with the terms of this Agreement and any other written agreements between the Corporation and the Executive, the Executive shall be entitled to receive the following amount as severance pay, subject to such amount being reduced as provided below (referred to in this Section 6(b)(iii) as the “Severance Payment”): (A) if the Executive’s Date of Termination occurs prior to the date the Executive is paid his FY13 Bonus Award, the amount of the Executive’s FY13 Bonus Award payable at the same time as bonuses for the Corporation’s fiscal year ending June 30, 2013 are paid to other then-current officers of the Corporation under the then-applicable Short Term Plan, plus (B) if the Executive’s Date of Termination occurs after June 30, 2013, an amount equal to the pro rata Bonus for

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the fiscal year in which the Date of Termination occurs, determined by pro rating the Bonus the Executive would have received had the Executive remained employed through the payment date of any such Bonus (the proration shall be a fraction whose numerator is the number of days the Executive was employed by the Corporation that fiscal year through and including the Date of Termination and the denominator is 365), payable at the same time as bonuses are paid to other then-current officers of the Corporation under the then-applicable Short Term Plan for the fiscal year in which the Date of Termination occurs, plus (C) an amount equal to one times the Executive’s Base Salary as of the Date of Termination, payable in substantially equal installments in accordance with the Corporation’s normal payroll policies commencing on the Date of Termination and continuing for twelve (12) consecutive months; provided, however, that any installments that otherwise would be paid during the first sixty (60) days after the Date of Termination will be delayed and included in the first installment paid to the Executive on the first payroll date that is more than sixty (60) days after the Date of Termination, and provided further that if the Executive is considered a “specified employee” (as defined in Treasury Regulation Section 1.409A-1(i)) as of the Date of Termination, then no payments of deferred compensation payable due to Executive’s separation from service for purposes of section 409A of the Code shall be made under this Agreement until the Corporation’s first regular payroll date that is after the first day of the seventh (7th) month following the Date of Termination and included with the installment payable on such payroll date, if any, without adjustment for interest or earnings during the period of delay.  Furthermore, any Severance Payment owed to the Executive under subsections (B) or (C) above will be reduced by the amount of any compensation earned by the Executive for any consulting or employment services provided on a substantially full-time basis during the 12-month period immediately following the Date of Termination, to the extent such compensation is payable by an entity unrelated to the Corporation.

(iv)Benefits Continuation.  Subject to the Executive signing and not revoking a release of claims in a form prescribed by the Corporation and the Executive remaining in strict compliance with the terms of this Agreement and any other written agreements between the Corporation and the Executive, the Corporation will pay the employer portion of the Executive’s COBRA premiums for health and dental insurance coverage under the Corporation’s group health and dental insurance plans for the same period of time the Executive remains eligible to receive the Severance Payment installments under Section 6(b)(iii) (up to a maximum of twelve (12) months), provided the Executive timely elects COBRA coverage.  Notwithstanding the foregoing, the Corporation will discontinue COBRA premium payments if, and at such time as, the Executive (A) is covered or eligible to be covered under the health and/or dental insurance policy of a new employer, (B) ceases to participate, for whatever reason, in the Corporation’s group insurance plans, or (C) ceases to be eligible to receive the Severance Payment installments under Section 6(b)(iii).

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(c)Termination Without Cause or for Good Reason Within Twenty-Four Months After a Change in Control. If a Change in Control occurs during the Employment Period and within twenty-four (24) months after the Change in Control the Executive’s employment pursuant to this Agreement is terminated by the Corporation without Cause or the Executive terminates his employment for Good Reason, then the Executive shall be entitled to and shall receive the following:

(i)Accrued Compensation.  All compensation due the Executive under this Agreement and under each plan or program of the Corporation in which he may be participating at the time shall cease to accrue as of the date of such termination, except (A) as specifically provided in this Agreement or (B) in the case of any such plan or program, if and to the extent otherwise provided in the terms of such plan or program or by applicable law.  All such compensation accrued as of the date of such termination but not previously paid shall be paid to the Executive at the time such payment otherwise would be due.

(ii)Accrued Obligations.  In addition, the Executive shall be entitled to payment of all accrued vacation pay.

(iii)Severance Payment.  Subject to the Executive signing and not revoking a release of claims in a form prescribed by the Corporation and the Executive remaining in strict compliance with the terms of this Agreement and any other written agreements between the Corporation and the Executive, the Executive shall be entitled to receive the following amount as severance pay, subject to such amount being reduced as provided below (referred to in this Section 6(c)(iii) as the “Severance Payment”): (A) if the Date of Termination occurs after June 30, 2013,  but prior to the date the Executive is paid his FY13 Bonus Award, the amount of the Executive’s FY13 Bonus Award payable no later than 30 days following the Date of Termination, plus (B) an amount equal to two times the Executive’s Base Salary as of the Date of Termination, plus (C) an amount equal to two times the Executive’s target Bonus for the fiscal year in which the Date of Termination occurs.  The Severance Payment described in subsections (B) and (C) above shall be added together and will be paid in substantially equal installments in accordance with the Corporation’s normal payroll policies based on a 24-month payment schedule commencing on the Date of Termination.  Notwithstanding the forgoing, any installments that otherwise would be payable on the regular payroll dates between the Date of Termination and first day of the seventh (7th) month following the Date of Termination shall be delayed until the Corporation’s first regular payroll date that is after the first day of the seventh (7th) month following the Date of Termination and included with the installment payable on such payroll date, if any, without adjustment for interest or earnings during the period of delay.  Furthermore, any Severance Payment owed to the Executive will be reduced by the amount of any compensation earned by the Executive for any consulting or employment services provided on a substantially full-time basis for the period to which the corresponding Severance Payment relates.

(iv)Benefits Continuation.  Subject to the Executive signing and not revoking a release of claims in a form prescribed by the Corporation and the

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Executive remaining in strict compliance with the terms of this Agreement and any other written agreements between the Corporation and the Executive, the Corporation will pay the employer portion of the Executive’s COBRA premiums for health and dental insurance coverage under the Corporation’s group health and dental insurance plans for the same period of time the Executive remains eligible to receive the Severance Payment installments under Section 6(c)(iii) (up to a maximum of eighteen (18) months), provided the Executive timely elects COBRA coverage.  Notwithstanding the foregoing, the Corporation will discontinue COBRA premium payments if, and at such time as, the Executive (A) is covered or eligible to be covered under the health and/or dental insurance policy of a new employer, (B) ceases to participate, for whatever reason, in the Corporation’s group insurance plans, or (C) ceases to be eligible to receive the Severance Payment installments under Section 6(c)(iii).

(d)Termination for Cause or Without Good Reason.  If the Executive’s employment pursuant to this Agreement is terminated pursuant to subsection (c) of Section 5 hereof, or the Executive terminates this Agreement without Good Reason, then the Executive shall be entitled to and shall receive:

(i)Accrued Compensation.  All compensation due the Executive under this Agreement and under each plan or program of the Corporation in which he may be participating at the time shall cease to accrue as of the date of such termination, except (A) as specifically provided in this Agreement or (B) in the case of any such plan or program, if and to the extent otherwise provided in the terms of such plan or program or by applicable law.  All such compensation accrued as of the date of such termination but not previously paid shall be paid to the Executive at the time such payment otherwise would be due.

(ii)Accrued Obligations.  In addition, the Executive shall be entitled to payment of all accrued vacation pay.

(e)Limitation on Change in Control Payments.  This Section 6(e) applies only in the event the Corporation determines that this Agreement is subject to the limitations of Code Section 280G, or any successor provision, and the regulations issued thereunder.  The intent of this Section 6(e) is to reduce any Change in Control Benefits, as defined below, that would otherwise be characterized as a “parachute payment” as defined in Code Section 280G and be subject to an additional excise tax under Code Section 4999 by the minimum amount necessary to avoid characterization as a parachute payment and avoid the imposition of the excise tax, but only if doing so would provide a more favorable net after-tax result to the Executive than if the Change in Control Benefits were not reduced and the Executive were subject to the excise tax.

(i)In the event the Change in Control Benefits payable to the Executive would collectively constitute a “parachute payment” as defined in Code Section 280G, and if the “net after-tax amount” of such parachute payment to the Executive is less than what the net after-tax amount to the Executive would be if the Change in Control Benefits otherwise constituting the parachute payment were limited to the maximum “parachute value” of Change in Control Benefits that the Executive could

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receive without giving rise to any liability for any excise tax imposed by Section 4999 of the Code (the “Excise Tax”), then the Change in Control Benefits otherwise constituting the parachute payment shall be reduced so that the parachute value of all Change in Control Benefits, in the aggregate, will equal the maximum parachute value of all Change in Control Benefits that the Executive can receive without any Change in Control Benefits being subject to the Excise Tax.  Should such a reduction in Change in Control Benefits be required, the Executive shall be entitled, subject to the following sentence, to designate those Change in Control Benefits under this Agreement or the other arrangements that will be reduced or eliminated so as to achieve the specified reduction in Change in Control Benefits to the Executive and avoid characterization of such Change in Control Benefits as a parachute payment.  The Corporation will provide the Executive with all information reasonably requested by the Executive to permit the Executive to make such designation.  To the extent that the Executive’s ability to make such a designation would cause any of the Change in Control Benefits to become subject to any additional tax under Code Section 409A, or if the Executive fails to make such a designation within ten (10) business days of receiving the requested information from the Corporation, then the Corporation shall achieve the necessary reduction in the Change in Control Benefits by reducing them in the following order: (A) reduction of cash payments payable under this Agreement; (B) reduction of other payments and benefits to be provided to the Executive; (C) cancellation or reduction of accelerated vesting of equity-based awards that are subject to performance-based vesting conditions; and (D) cancellation or reduction of accelerated vesting of equity-based awards that are subject only to service-based vesting conditions.  If the acceleration of the vesting of the Executive’s equity-based awards is to be cancelled or reduced, such acceleration of vesting shall be reduced or cancelled in the reverse order of the date of grant.

(ii)For purposes of this Section 6(e), a “net after-tax amount” shall be determined by taking into account all applicable income, excise and employment taxes, whether imposed at the federal, state or local level, including the Excise Tax, and the “parachute value” of the Change in Control Benefits means the present value as of the date of the Change in Control for purposes of Code Section 280G of the portion of such Change in Control Benefits that constitutes a parachute payment under Code Section 280G(b)(2).

(iii)For purposes of this Section 6(e), “Change in Control Benefits” shall mean any payment, benefit or transfer of property in the nature of compensation paid to or for the benefit of the Executive under any arrangement which is considered contingent on a Change in Control for purposes of Code Section 280G, including, without limitation, any and all of the Corporation’s salary, incentive payments, restricted stock, stock option, equity-based compensation or benefit plans, programs or other arrangements, and shall include benefits payable under this Agreement.

(iv)For clarity, the Corporation shall have no obligation to provide any “tax gross-up” payment related to the Excise Tax in the event the Change in Control Benefits that would otherwise be characterized as a parachute payment are not

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reduced as set forth in Section 6(e)(i) above and the Executive is subject to the Excise Tax.

7.DEFINITIONS.  Certain terms are defined where they first appear in this Agreement and are underlined for ease of reference.  In addition, the following definitions shall apply for purposes of this Agreement.

“Cause” shall mean (a) acts during the Employment Period (i) resulting in a felony conviction under any Federal or state statute,  or (ii) willful non-performance by the Executive of his material employment duties required by this Agreement (other than by reason of his physical or mental incapacity) after reasonable notice to the Executive and reasonable opportunity (not less than thirty (30) days) to cease such non-performance, or (b) the Executive willfully engaging in fraud or gross misconduct which is detrimental to the financial interests of the Corporation.

“Change in Control” shall have the same meaning ascribed to that term in the Long-Term Plan.

“Good Reason” shall mean the occurrence during the Employment Period, without the express written consent of the Executive, of any of the following:

(a)any adverse alteration in the nature of the Executive’s reporting responsibilities, titles, or offices, or any removal of the Executive from, or any failure to reelect the Executive to, any such positions, except in connection with a termination of the employment of the Executive for Cause, permanent disability, or as a result of the Executive’s death or a termination of employment by the Executive other than for Good Reason;

(b)a material reduction by the Corporation in the Executive’s Base Salary then in effect (other than any such reduction that is part of an across-the-board reduction of base salaries for all senior executive employees provided the percentage reduction in the Executive’s Base Salary is commensurate with the percentage reduction in the base salaries for all other senior executive employees);

(c)failure by the Corporation to continue in effect (without substitution of a substantially equivalent plan or a plan of substantially equivalent value) any compensation plan, bonus or incentive plan, stock purchase plan, stock option plan, life insurance plan, health plan, disability plan or other benefit plan or arrangement in which the Executive is then participating;

(d)any material breach by the Corporation of any provisions of this Agreement;

(e)the requirement by the Corporation that the Executive’s principal place of employment be relocated more than thirty (30) miles from the Corporation’s address for notice in Section 11(h); or

(f)the Corporation’s failure to obtain a satisfactory agreement from any successor to assume and agree to perform Corporation’s obligations under this Agreement;

provided that the Executive notifies the Corporation of such condition set forth in clause (a), (b), (c), (d), (e) or (f) within ninety (90) days of its initial existence and the Corporation fails to remedy such condition within thirty (30) days of receiving such notice.

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8.CONFIDENTIAL INFORMATION.  The Executive shall not at any time during the Employment Period or thereafter disclose to others or use any trade secrets or any other confidential information belonging to the Corporation or any of its subsidiaries, including, without limitation, plans, programs and non-public information relating to customers of the Corporation or its subsidiaries, except as may be required to perform his duties hereunder.  The provisions of this Section 8 shall survive the termination of the Executive’s employment and consulting with the Corporation, provided that after the termination of the Executive’s employment with the Corporation, the restrictions contained in this Section 8 shall not apply to any such trade secret or confidential information which becomes generally known in the trade.

9.NON-COMPETITION.

(a)Non-competition.  For a period of twenty-four (24) months immediately following the Executive’s termination of employment hereunder (the “Non-Competition Period”), the Executive shall not enter into endeavors that are competitive with the business or operations of the Corporation in the beauty industry (provided, however, that for this purpose endeavors that are limited to the distribution of consumer packaged goods which include beauty products, but which such endeavors do not involve the ownership or management of beauty salons, shall not be considered endeavors that are competitive with the Corporation), and shall not own an interest in, manage, operate, join, control, lend money or render financial or other assistance to or participate in or be connected with, as an officer, employee, director, partner, member, stockholder (except for passive investments of not more than a one percent (1%) interest in the securities of a publicly held corporation regularly traded on a national securities exchange or in an over-the-counter securities market), consultant, independent contractor, or otherwise, any individual, partnership, firm, corporation or other business organization or entity that engages in a business which competes with the Corporation.

(b)Non-solicitation.  During the Non-Competition Period, the Executive shall not (i) hire or attempt to hire any employee of the Corporation, assist in such hiring by any person or encourage any employee to terminate his relationship with the Corporation; or (ii) solicit, induce, or influence any proprietor, franchisee, partner, stockholder, lender, director, officer, employee, joint venturer, investor, consultant, agent, lessor, supplier, customer or any other person or entity which has a business relationship with the Corporation or its affiliates at any time during the Non-Competition Period, to discontinue or reduce or modify the extent of such relationship with the Corporation or any of its subsidiaries.

10.ACKNOWLEDGMENT; REMEDIES; LITIGATION EXPENSES.

(a)Acknowledgment.  The Executive has carefully read and considered the provisions of Sections 8 and 9 hereof and agrees that the restrictions set forth in such sections are fair and reasonable and are reasonably required for the protection of the interests of the Corporation, its officers, directors, shareholders, and other employees, for the protection of the business of the Corporation, and to ensure that the Executive devotes his entire professional time, energy, and skills to the business of the Corporation.  The Executive acknowledges that he is qualified to engage in businesses other than that described in Section 9. It is the belief of the parties, therefore, that the best protection that can be given to the Corporation that does not in any way infringe upon the rights of the Executive to engage in

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any unrelated businesses is to provide for the restrictions described in Section 9. In view of the substantial harm which would result from a breach by the Executive of Sections 8 or 9, the parties agree that the restrictions contained therein shall be enforced to the maximum extent permitted by law as more particularly set forth in Section 10(b) below. In the event that any of said restrictions shall be held unenforceable by any court of competent jurisdiction, the parties hereto agree that it is their desire that such court shall substitute a reasonable judicially enforceable limitation in place of any limitation deemed unenforceable and that as so modified, the covenant shall be as fully enforceable as if it had been set forth herein by the parties.

(b)Remedies.  If the Executive violates any of the restrictive covenants set forth in Sections 8 or 9 above, and such violation continues after the Executive is notified in writing by the Corporation that he is in violation of the restrictive covenant, then (i) the Corporation shall have no further obligation to pay any portion of any Severance Payment and all such future payments shall be forfeited, and (ii) the Executive shall immediately return to the Corporation any Severance Payment previously paid to the Executive.  The Executive acknowledges that any breach or threatened breach of Sections 8 or 9 would damage the Corporation irreparably and, consequently, the Corporation, in addition to any other remedies available to it, shall be entitled to preliminary and permanent injunction, without having to post any bond or other security.

(c)Attorneys Fees.  The Corporation shall be entitled to receive from the Executive reimbursement for reasonable attorneys’ fees and expenses incurred by the Corporation in successfully enforcing these provisions to final judgment and the Executive shall be entitled to receive from the Corporation reasonable attorney’s fees and expenses incurred by the Executive in the event the Corporation is found to be not entitled to enforcement of these provisions.

11.MISCELLANEOUS.

(a)Successors and Assigns.  This Agreement shall inure to the benefit of and shall be binding upon the successors and assigns of the Corporation, including any party with which the Corporation may merge or consolidate or to which it may transfer substantially all of its assets.  As used in this Agreement, the term “successor” shall include any person, firm, corporation or other business entity which at any time, whether by merger, purchase or otherwise, acquires all or substantially all of the capital stock or assets of the Corporation.

(b)Non-assignability and Non-transferability.  The rights and obligations of the Executive under this Agreement are expressly declared and agreed to be personal, nonassignable and nontransferable during his life.

(c)Limitation of Waiver.  The waiver by either party hereto of its rights with respect to a breach of any provision of this Agreement by the other shall not operate or be construed as a waiver of any rights with respect to any subsequent breach.

(d)Amendments.  No modification, amendment, addition, alteration or waiver of any of the terms, covenants or conditions hereof shall be effective unless made in writing and duly executed by the Corporation and the Executive.

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(e)Counterparts.  This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which together will constitute but one and the same agreement.

(f)Governing Law.  This Agreement shall be governed by and construed in accordance with the laws of the State of Minnesota, without regard to the conflicts of law principles thereof.

(g)Severability.  If any provision of this Agreement is determined to be invalid or unenforceable under any applicable statute or rule of law, it is to that extent to be deemed omitted and it shall not affect the validity or enforceability of any other provision.

(h)Notices.  Any notice required or permitted to be given under this Agreement shall be in writing, and shall be deemed given when sent by registered or certified mail, postage prepaid, addressed as follows:

If to the Executive:	Steven Spiegel
	Regis Corporation
	7201 Metro Boulevard
	Edina, Minnesota 55439
If to the Corporation:	Regis Corporation
	7201 Metro Boulevard
	Edina, Minnesota 55439
	Attn: General Counsel

or mailed to such other person and/or address as the party to be notified may hereafter have designated by notice given to the other party in a similar manner.

(i)Tax Withholding.  The Corporation may withhold from any amounts payable under this Agreement such federal, state and local income and employment taxes as the Corporation shall determine are required or authorized to be withheld pursuant to any applicable law or regulation.

(j)Section 409A.  This Agreement is intended to provide for payments that satisfy, or are exempt from, the requirements of Sections 409A(a)(2), (3) and (4) of the Code, including current and future guidance and regulations interpreting such provisions, and should be interpreted accordingly. Except for any tax amounts withheld by the Corporation from the payments or other consideration hereunder and any employment taxes required to be paid by the Corporation, the Executive shall be responsible for payment of any and all taxes owed in connection with the consideration provided for in this Agreement.

(k)Mandatory Arbitration.  Any dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by binding arbitration in the manner set forth in this Section 11(k).  Either party may submit any claim arising under or in connection with this Agreement for binding arbitration before an arbitrator in Hennepin County, Minnesota, in accordance with the commercial arbitration rules of the American Arbitration Association, as then in effect, or pursuant to such other form of alternative dispute resolution as the parties may agree (collectively, the “arbitration”).  The arbitrator’s sole authority shall be to interpret and apply the provisions of this Agreement; the arbitrator

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shall not change, add to, or subtract from, any of its provisions.  The arbitrator shall have the power to compel attendance of witnesses at the hearing.  Any court having competent jurisdiction may enter a judgment based upon such arbitration.  The arbitrator shall be appointed by mutual agreement of the Corporation and the claimant pursuant to the applicable commercial arbitration rules.  The arbitrator shall be a professional person with a national reputation for expertise in employee benefit matters and who is unrelated to the claimant and any employees of the Corporation.  All decisions of the arbitrator shall be final and binding on the claimant and the Corporation.

IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the date first set forth above.

REGIS CORPORATION
By:	/s/ Eric Bakken
Its:	EVP
/s/ Steven Spiegel
STEVEN SPIEGEL

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EX-10.(B)

Exhibit 10(b)

FIRST AMENDMENT

This FIRST AMENDMENT dated as of December 19, 2012 (this “Amendment”) amends the Fifth Amended and Restated Credit Agreement dated as of June 30, 2011 (the “Credit Agreement”) among REGIS CORPORATION, a Minnesota corporation (the “Company”), various financial institutions and JPMORGAN CHASE BANK, N.A., as Administrative Agent (in such capacity, the “Administrative Agent”).  Capitalized terms used but not defined herein have the respective meanings given to them in the Credit Agreement.

WHEREAS, the Company has requested that the Credit Agreement be amended as set forth herein.

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

SECTION 1.AMENDMENTS.  Subject to the conditions precedent set forth in Section 3, the Credit Agreement is amended as follows:

1.1Amendment to Section 1.01.  The definition of “Net Worth” in Section 1.01 is deleted in its entirety.

1.2Amendment to Section 8.01(i).  Section 8.01(i) is amended in its entirety to read as follows:

“(i)other Liens securing Indebtedness that does not exceed in the aggregate at any one time outstanding $20,000,000; provided that such Liens may not secure the Note Agreement”.

1.3Amendment to Section 8.04(e).  Section 8.04(e) is amended in its entirety to read as follows:

“(e)other Investments (excluding Permitted Acquisitions but including Investments in Joint Ventures) in addition to the foregoing Investments permitted by this Section 8.04; provided that (i) the total amount of Investments permitted under this Section 8.04(e) does not exceed in the aggregate at any one time outstanding the greater of (1) $200,000,000 and (2) the product of 35% and the difference between (x) consolidated tangible assets of the Company and its consolidated Subsidiaries and (y) the aggregate amount of Investments of the Company and its consolidated Subsidiaries not otherwise permitted by any of clauses (a) through (d) above, in each case as set forth in the most recently delivered Compliance Certificate pursuant to Section 7.02(a) and (ii) the aggregate amount of such Investments made in or to Persons that are not in the same or similar line of business in which the Company and its Subsidiaries are engaged as of the Effective Date shall not exceed one-third of the amount determined pursuant to the foregoing clause (i)”.

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1.4Amendment to Section 8.05(g).  Section 8.05(g) is amended in its entirety to read as follows:

“(g)other Indebtedness incurred by the Company or any Subsidiary from time to time; provided that after giving effect to such Indebtedness, (i) Section 8.14 would not be violated (as determined on a pro forma basis as of the last day of the previous fiscal quarter) and (ii) the aggregate outstanding amount of such Indebtedness of Subsidiaries that are not Guarantors shall not at any time exceed 9.5% of consolidated tangible assets of the Company and its consolidated Subsidiaries as set forth in the most recently delivered Compliance Certificate pursuant to Section 7.02(a)”.

1.5Amendment to Section 8.08(e).  Section 8.08(e) is amended in its entirety to read as follows:

“(e)other Contingent Obligations (other than L/C Obligations) of the Company and its Subsidiaries not to exceed in the aggregate at any one time outstanding the greater of (i) $60,000,000 and (ii) 7% of consolidated tangible assets of the Company and its consolidated Subsidiaries as set forth in the most recently delivered Compliance Certificate pursuant to Section 7.02(a)”.

1.6Amendment to Section 8.16.  Section 8.16 is amended in its entirety to read as follows:

“8.16[RESERVED.]”.

1.7Amendment to Section 8.18.  Section 8.18 is amended in its entirety to read as follows:

“8.18Restricted Payments.  The Company shall not, and shall not permit any Subsidiary to, (i) declare or pay any dividend or make any other distribution (whether in cash, securities or other property) on any of its stock or other equity interests or any warrants, options or other rights with respect thereto (any of the foregoing, “Equity Interests”) or (ii) purchase, redeem or otherwise acquire for value any of its Equity Interests, excluding any purchase or redemption of any obligations of the Company with respect to the convertible notes (due 7/14/14) described on Schedule 8.05 (x) upon the maturity thereof or (y) at the option of the holder thereof, in each case so long as no Default or Event of Default exists or would result therefrom (any such non-excluded declaration, payment, distribution, purchase, redemption or other acquisition, a “Restricted Payment”); provided that:

(a)any Subsidiary may declare and pay dividends, and make other distributions, to the Company or any other Subsidiary;

(b)the Company may declare and pay stock dividends; and

(c)so long as no Default or Event of Default exists, the Company and its Subsidiaries may make other Restricted Payments; provided that (1) if the Leverage Ratio as of the last day of the most recently ended fiscal quarter was greater than 2.50 to 1.0,

2

then neither the Company nor any Subsidiary will make any Restricted Payment pursuant to this clause (c) if, after giving effect thereto, the aggregate amount of all such Restricted Payments made during the 12-month period ending on the date of such Restricted Payment would exceed $25,000,000 and (2) the aggregate amount of all such Restricted Payments made on or after December 19, 2012 other than Ordinary Dividends would not exceed $100,000,000.  For purposes hereof, “Ordinary Dividends” shall mean normal, ordinary course, recurring dividends made by the Company on any of its Equity Interests and shall not include special, non-recurring distributions.”

SECTION 2.Representations and Warranties.  The Company represents and warrants to the Administrative Agent and the Lenders that as of the date of effectiveness of this Amendment (and after giving effect to such effectiveness): (a) the representations and warranties of the Company set forth in the Credit Agreement are true and correct in all material respects (except to the extent stated to relate to an earlier date, in which case such representations and warranties were true and correct in all material respects as of such earlier date); and (b) no Default or Event of Default exists.

SECTION 3.CONDITIONS PRECEDENT.  This Amendment shall become effective on the date on which the Administrative Agent has received the following:

(a)Counterparts of this Amendment signed by the Company and the Required Lenders.

(b)A Confirmation substantially in the form of Exhibit A signed by each Loan Party.

(c)An amendment fee of $5,000 for each Lender that, on or prior to 2:00 p.m. (Chicago time) on September 28, 2012, delivers a signed counterpart of this Amendment to the Administrative Agent.

(d)Payment of all invoiced fees and expenses of the Administrative Agent (including reasonable attorneys’ fees and expenses).

(e)Evidence that the Note Agreement has been amended in a manner consistent with the amendments set forth herein and otherwise reasonably satisfactory to the Administrative Agent.

SECTION 4.MISCELLANEOUS.

4.1Expenses.  The Company agrees to pay all reasonable out-of-pocket expenses incurred by the Administrative Agent (including the reasonable fees, charges and disbursements of counsel for the Administrative Agent) in connection with this Amendment and the transactions contemplated hereby.

4.2Incorporation of Credit Agreement Provisions.  The provisions of Sections 1.02 (Other Interpretive Provisions), 11.14 (Severability) and 11.17 (Waiver of Jury Trial) of the Credit Agreement are incorporated by reference as if fully set forth herein, mutatis mutandis.

3

4.3Signing in Counterparts.  This Amendment may be signed by the parties hereto in several counterparts, each of which shall be deemed to be an original and all of which shall constitute together but one and the same agreement.  A signature hereto delivered by facsimile or in .pdf format shall be effective as delivery of an original counterpart.

4.4Governing Law.  THIS AMENDMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF ILLINOIS.

4.5Successors and Assigns.  This Amendment shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns.

4.6Effect of Amendment.  Except as expressly set forth herein, this Amendment shall not (a) limit, impair, constitute a waiver of or otherwise affect the rights and remedies of the Lenders or the Administrative Agent under the Credit Agreement or any other Loan Document or (b) alter, modify or amend any term or condition set forth in the Credit Agreement or any other Loan Document.

[Remainder Of Page Intentionally Left Blank]

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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be signed by their respective officers thereunto duly authorized as of the day and year first above written.

REGIS CORPORATION
By:	/s/ Steven Spiegel
	Steven Spiegel
Title:	Chief Financial Officer

S-1

JPMORGAN CHASE BANK, N.A.,
as Administrative Agent, as an Issuer, as Swing Line Lender and as a Lender
By:	/s/ Krys Szremski
Title:	Vice President

S-2

BANK OF AMERICA, N.A.,
as Syndication Agent, as an Issuer and as a Lender
By:	/s/ Steven K. Kessler
Title:	Senior Vice President

S-3

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD. as a Lender
By:	/s/ Christine Howatt
Title:	Authorized Signatory

S-4

U.S. BANK NATIONAL ASSOCIATION, as a Lender
By:	/s/ Ludmila Yakovlev
	Name:	Ludamila Yakovlev
	Title:	AVP

S-5

WELLS FARGO BANK, N.A., as a Lender
	/s/ Peter Kiedrowski
By:	Peter Kiedrowski
Title:	Director

S-6

FIFTH THIRD BANK, as a Lender
By:	/s/ Christopher Motley
Name:	Christopher Motley
Title:	Senior Vice President

S-7

PNC BANK, NATIONAL ASSOCIATION, as a Lender
By:	/s/ Philip K. Liebscher
		Philip K. Liebscher
Title:		Senior Vice President

S-8

ROYAL BANK OF CANADA, as a Lender
By:	/s/ Jennifer Lee-You
Name:	Jennifer Lee-You
Title:	Attorney-In-Fact (New York)

S-9

EXHIBIT A

FORM OF CONFIRMATION

December 19, 2012

To:          JPMorgan Chase Bank, N.A., individually and as Administrative

Agent, and the other financial institutions that are

parties to the Credit Agreement referred to below

Please refer to the First Amendment dated as of the date hereof (the “Amendment”) to the Fifth Amended and Restated Credit Agreement dated as of June 30, 2011 (the “Credit Agreement”) among Regis Corporation, a Minnesota corporation, various financial institutions and JPMorgan Chase Bank, N.A., as Administrative Agent.  Capitalized terms used but not otherwise defined herein have the respective meanings given to them in the Credit Agreement.

Each of the undersigned hereby confirms to the Administrative Agent and the Lenders that such undersigned has received a copy of the Amendment and that, after giving effect to the Amendment and the transactions contemplated thereby, each Loan Document to which such undersigned is a party continues in full force and effect and is the legal, valid and binding obligation of such undersigned, enforceable against such undersigned in accordance with its terms.

REGIS CORPORATION
REGIS INC.
SUPERCUTS CORPORATE SHOPS, INC.
SUPERCUTS, INC.
THE BARBERS, HAIRSTYLING FOR MEN
& WOMEN, INC.
REGIS CORP.
HAIR CLUB FOR MEN, LLC
By:	/s/ Steven Spiegel
Name:	Steven Spiegel
Title:	Chief Financial Officer

EX-10.(C)

Exhibit 10(c)

Execution Copy

December 19, 2012

Regis Corporation

7201 Metro Boulevard

Minneapolis, Minnesota 55439

Re: Amendment No. 9 to Amended and Restated Private Shelf Agreement

Ladies and Gentlemen:

We refer to the Amended and Restated Private Shelf Agreement dated as of October 3, 2000, as amended by the letter amendment dated as of May 9, 2002, Letter Amendment No. 2 to Amended and Restated Private Shelf Agreement dated as of February 28, 2003, the letter amendment dated April 29, 2005, the letter amendment dated July 6, 2006, the letter amendment dated July 31, 2007, Amendment No. 6 thereto dated as of July 3, 2009, Amendment No. 7 thereto dated as of January 12, 2011 and Amendment No. 8 thereto dated as of April 23, 2012 (as so amended, the “Shelf Agreement”), between Regis Corporation, a Minnesota corporation (the “Company”), on the one hand, and Prudential Investment Management, Inc. (“PIM”), The Prudential Insurance Company of America, Pruco Life Insurance Company, Pruco Life Insurance Company of New Jersey and the other “Prudential Affiliates” which pursuant to the terms thereof have become bound by certain provisions thereof, on the other hand.  Unless otherwise defined herein, the terms defined in the Shelf Agreement shall be used herein as therein defined.

Pursuant to the request of the Company and in accordance with the provisions of paragraph 11C of the Shelf Agreement, the parties hereto agree as follows:

SECTION 1.Amendment.  From and after the Effective Date (as defined in Section 2 hereof), the Shelf Agreement and the Notes are amended as follows:

1.1.Paragraph 6B of the Shelf Agreement is hereby amended and restated in its entirety to read as follows:

“6B.[Intentionally Omitted].”

1.2.Paragraph 6C(1) of the Shelf Agreement is hereby amended by amending and restating clauses (iv) and (v) thereof to read as follows:

“(iv)Liens securing Capital Lease Obligations in an aggregate outstanding amount not to exceed $50,000,000 at any time, provided such Liens attach only to the assets subject to the underlying capital lease; and

(v) Liens securing Indebtedness other than Capital Lease Obligations not otherwise permitted by clauses (i)-(iv) above, provided that (the aggregate amount of Indebtedness secured by Liens pursuant to this clause (v) shall not exceed $20,000,000; and provided, further, that such Liens may not secure the Credit Agreement, the Term Loan Agreement or other Indebtedness to a bank, insurance company or other financial institution.”

1.3.Paragraph 6C(2) of the Shelf Agreement is hereby amended and restated in its entirety to read as follows:

“6C(2).  Subsidiary Debt.The Company shall not permit any Subsidiary to incur any Debt if after giving effect thereto (i) paragraph 6A(2) would be violated (as determined on a pro forma basis as of the last day of the previous fiscal quarter) or (ii) the aggregate amount of all Debt of all Subsidiaries that are not Guarantors (as defined in the Amended and Restated Subsidiary Guaranty dated February 23, 2003 by certain Subsidiaries of the Company in favor of the holders of the Notes) would exceed 9.5% of consolidated tangible assets of the Company and its consolidated Subsidiaries, determined as of the end of the most recently ended fiscal quarter.”

1.4.Paragraph 6C(3) of the Shelf Agreement is hereby amended by amending and restating clause (vii) thereof to read as follows:

“(vii)make or permit to remain outstanding other Investments (including Investments in Joint Ventures) in addition to the foregoing Investments permitted under this Section 6(C)(3); provided that (a) the aggregate amount thereof shall at no time exceed the greater of (1) $200,000,000 and (2) the product of 35% and the difference between (x) consolidated tangible assets of the Company and its consolidated Subsidiaries and (y) the aggregate amount of Investments of the Company and its consolidated Subsidiaries not otherwise permitted by any of clauses (i) through (vi) above, and (b) the aggregate amount thereof made in or to Persons that are not in the same or similar line of business in which the Company and its Subsidiaries are engaged as of June 30, 2011 shall at no time exceed one-third of the amount determined pursuant to the foregoing clause (a).”

1.5.Paragraph 6F of the Shelf Agreement is hereby amended and restated in its entirety to read as follows:

“6F.Restricted Payments.  The Company shall not, and shall not permit any Subsidiary to, (i) declare or pay any dividend or make any other distribution (whether in cash, securities or other property) on any of its stock or other equity interests or any warrants, options or other rights with respect thereto (any of the foregoing, “Equity Interests”) or (ii) purchase, redeem or otherwise acquire for value any of its Equity Interests, excluding any purchase or redemption of any obligations of the Company with respect to the convertible notes (due 7/14/14) described on Schedule 6F (x) upon the maturity thereof or (y) at the option of the holder thereof, in each case so long as no Default or Event of Default exists or would result therefrom (any such non-excluded

2

declaration, payment, distribution, purchase, redemption or other acquisition, a “Restricted Payment”); provided that:

(i)any Subsidiary may declare and pay dividends, and make other distributions, to the Company or any other Subsidiary;

(ii)the Company may declare and pay dividends consisting solely of Equity Interests; and

(iii)so long as no Default or Event of Default exists, the Company and its Subsidiaries may make other Restricted Payments; provided that (1) if the Leverage Ratio as of the last day of the most recently ended fiscal quarter was greater than 2.50 to 1.0, then neither the Company nor any Subsidiary will make any Restricted Payment pursuant to this clause (iii) if, after giving effect thereto, the aggregate amount of all such Restricted Payments made during the 12-month period ending on the date of such Restricted Payment would exceed $25,000,000 and (2) the aggregate amount of all such Restricted Payments made on or after December 19, 2012 other than Ordinary Dividends would not exceed $100,000,000.  For purposes hereof, “Ordinary Dividends” shall mean normal, ordinary course, recurring dividends made by the Company on any of its Equity Interests and shall not include special, non-recurring distributions.”

1.6.Paragraph 10B of the Shelf Agreement is amended by deleting therefrom the definition of “Net Worth”.

1.7.Schedule 6F — Convertible Notes is added to the Shelf Agreement in the form of Schedule 6F — Convertible Notes attached to this letter.

SECTION 2.Conditions Precedent.  This letter shall become effective as of the date (the “Effective Date”) when the following conditions have been satisfied:

2.1.Documents.  PIM and each holder of the Notes party hereto shall have received original counterparts or, if satisfactory to PIM and such holder, certified or other copies of all of the following, each duly executed and delivered by the party or parties thereto, in form and substance satisfactory to PIM and such holder, dated the date hereof unless otherwise indicated, and on the date hereof in full force and effect:

(i)counterparts of this letter duly executed by the Company, the Guarantors and the Required Holder(s) of the Notes of each Series ; and

(ii)a copy of an amendment to the Credit Agreement in form and substance satisfactory to the Required Holder(s), executed by the Company and the requisite lenders thereunder, and the conditions precedent to the effectiveness of such amendment shall have been satisfied and such amendment shall be in full force and effect.

The foregoing documentation should be returned to Prudential Capital Group, Two Prudential Plaza, Suite 5600, Chicago, Illinois, 60601-6716, Attention: Scott B. Barnett.

3

2.2.Representations.  The representations of the Company in Section 3 hereof shall be true and correct as of the Effective Date.

2.3.Proceedings.  All corporate and other proceedings taken or to be taken in connection with the transactions contemplated hereby and all documents incident thereto shall be satisfactory in substance and form to the Required Holder(s) of each Series, and each holder of the Notes party hereto shall have received all such counterpart originals or certified or other copies of such documents as it may reasonably request.

SECTION 3.Representations and Warranties; No Default.  To induce the holders of the Notes to execute and deliver this letter, the Company represents, warrants and covenants that (1) the execution and delivery of this letter has been duly authorized by all necessary corporate action on behalf of each Company and each Guarantor and this letter has been executed and delivered by a duly authorized officer of each Company and each Guarantor, and all necessary or required consents to and approvals of this letter have been obtained and are in full force and effect, (2) the representations and warranties contained in paragraph 8 of the Shelf Agreement shall be true on and as of the Effective Date, immediately before and after giving effect to the consummation of the transactions contemplated hereby, (3) the Shelf Agreement, as amended hereby, is the legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms except as enforceability thereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors’ rights generally and by the availability of the remedy of specific performance, (4) the Subsidiaries of the Company party to this letter represent all of the Subsidiaries of the Company that have joined the Guaranty Agreement (as defined in Section 5 below), (5) there shall exist on the Effective Date no Event of Default or Default, immediately before and after giving effect to the consummation of the transactions contemplated hereby and (6) neither the Company nor any Subsidiary has paid or agreed to pay, and neither the Company nor any Subsidiary will pay or agree to pay, any fees or other consideration for or with respect to the amendment under the Credit Agreement described in Section 2.1(ii).

SECTION 4.Reference to and Effect on Shelf _Agreement.  Upon the effectiveness of this letter, each reference to the Shelf Agreement in any other document, instrument or agreement shall mean and be a reference to the Shelf Agreement as modified by this letter.  Except as specifically set forth in Section 1 hereof, the Shelf Agreement and the Notes shall remain in full force and effect and is hereby ratified and confirmed in all respects.  Except as specifically stated in this letter, the execution, delivery and effectiveness of this letter shall not (a) amend the Shelf Agreement or any Note, (b) operate as a waiver of any right, power or remedy of PIM or any holder of the Notes, or (c) constitute a waiver of, or consent to any departure from, any provision of the Shelf Agreement or any Note at any time.  The Company acknowledges and agrees that neither PIM nor any holder of any Note is under any duty or obligation of any kind or nature whatsoever to grant the Company any additional amendments or waivers of any type, whether under the same or different circumstances, and no course of dealing or course of performance shall be deemed to have occurred as a result of the amendments and wavier herein.

SECTION 5.Reaffirmation.  Each Guarantor (as defined in the Amended and Restated Subsidiary Guaranty dated February 23, 2003 (the “Guaranty Agreement”) by certain

4

Subsidiaries of the Company in favor of the holders of the Notes) hereby ratifies and reaffirms all of its payment and performance obligations, contingent or otherwise, under the Guaranty Agreement. Each Guarantor hereby consents to the terms and conditions of this letter and reaffirms its obligations and liabilities under or with respect to the Shelf Agreement and the Notes, each as amended by this letter (including, without limitation, any additional Guaranteed Obligations (as defined in the Guaranty Agreement) resulting from this letter), and the Guaranty Agreement.  Each Guarantor acknowledges that the Guaranty Agreement remains in full force and effect and is hereby ratified and confirmed.  Without limiting the generality of the foregoing, each Guarantor agrees and confirms that the Guaranty Agreement continues to guaranty the Guaranteed Obligations arising under or in connection with the Shelf Agreement and the Notes, each as amended by this letter.  The execution of this letter shall not operate as a novation, waiver of any right, power or remedy of the holders of the Notes under the Guaranty Agreement.

SECTION 6.Expenses.  The Company hereby confirms its obligations under the Shelf Agreement, whether or not the transactions hereby contemplated are consummated, to pay, promptly after request by any holder of the Notes, all reasonable out-of-pocket costs and expenses, including attorneys’ fees and expenses, incurred by any holder of the Notes in connection with this letter or the transactions contemplated hereby, in enforcing any rights under this letter, or in responding to any subpoena or other legal process or informal investigative demand issued in connection with this letter or the transactions contemplated hereby.  The obligations of the Company under this Section 6 shall survive transfer by any holder of the Notes of any Note and payment of any Note.

SECTION 7.Governing Law.  THIS LETTER SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAW OF THE STATE OF ILLINOIS (EXCLUDING ANY CONFLICTS OF LAW RULES WHICH WOULD OTHERWISE CAUSE THIS AGREEMENT TO BE CONSTRUED OR ENFORCED IN ACCORDANCE WITH, OR THE RIGHTS OF THE PARTIES TO BE GOVERNED BY, THE LAWS OF ANY OTHER JURISDICTION).

SECTION 8.Counterparts, Section Titles.  This letter may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed to be an original and all of which when taken together shall constitute but one and the same instrument.  Delivery of an executed counterpart of a signature page to this letter by facsimile or electronic transmission shall be effective as delivery of a manually executed counterpart of this letter.  The section titles contained in this letter are and shall be without substance, meaning or content of any kind whatsoever and are not a part of the agreement between the parties hereto.

[signature pages follow]

5

Very truly yours,
PRUDENTIAL INVESTMENT MANAGEMENT, INC.
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
PRUCO LIFE INSURANCE COMPANY
By:	/s/ Dianna D. Carr
Vice President
RGA REINSURANCE COMPANY
MUTUAL OF OMAHA INSURANCE COMPANY
RELIASTAR LIFE INSURANCE COMPANY
UNION SECURITY INSURANCE COMPANY
PHYSICIANS MUTUAL INSURANCE COMPANY
FARMERS NEW WORLD LIFE INSURANCE COMPANY
ZURICH AMERICAN INSURANCE COMPANY
SECURITY BENEFIT LIFE INSURANCE COMPANY, INC
BAYSTATE INVESTMENTS, LLC
ING LIFE INSURANCE AND ANNUITY COMPANY
MEDICA HEALTH PLANS
MTL INSURANCE COMPANY
By:	Prudential Private Placement Investors,
	L.P. (as Investment Advisor)
By:	Prudential Private Placement Investors, Inc.
	(as its General Partner)
	By:	/s/ Dianna D. Carr
		Vice President
PRUDENTIAL RETIREMENT INSURANCE AND ANNUITY COMPANY
PRUDENTIAL ANNUITIES LIFE ASSURANCE CORPORATION
UNIVERSAL PRUDENTIAL ARIZONA REINSURANCE COMPANY
By:	Prudential Investment Management, Inc.,
	as investment manager
	By:	/s/ Dianna D. Carr
		Vice President

[Signature Page to Amendment No. 9 to Amended and Restated Private Shelf Agreement]

GIBRALTAR LIFE INSURANCE CO., LTD.
By:	Prudential Investment Management (Japan), Inc., as Investment Manager
By:	Prudential Investment Management, Inc., as Sub-Adviser
	By:	/s/ Dianna D. Carr
		Vice President

[Signature Page to Amendment No. 9 to Amended and Restated Private Shelf Agreement]

Agreed as of the date first above written:

REGIS CORPORATION

REGIS INC.

HAIR CLUB FOR MEN, LLC

SUPERCUTS CORPORATE SHOPS, INC.

THE BARBERS HAIRSTYLING FOR MEN & WOMEN, INC.

REGIS CORP.

FIRST CHOICE HAIRCUTTERS (INTERNATIONAL) CORP.

By:	/s/ Steven Spiegel
	Steven Spiegel
	Chief Financial Officer

[Signature Page to Amendment No. 9 to Amended and Restated Private Shelf Agreement]

SCHEDULE 6F

CONVERTIBLE NOTES

Convertible Notes

Amount		Rate	Due
$	172,500,000	5.00%	7/14/14

EX-15

Exhibit No. 15

February 4, 2013

Securities and Exchange Commission

100 F Street, N.E.

Washington DC 20549

RE:Regis Corporation Registration Statements on Form S-3 (File Nos. 333-125631, 333-100327, 333-102858, 333-116170, 333-87482, 333-51094, 333-78793, 333-89279, 333-90809, 333-31874, 333-57092 and 333-72200), and Form S-8 (Nos. 333-170517, 333-163350, 333-123737, 333-88938, 33-44867 and 33-89882)

Commissioners:

We are aware that our report dated February 4, 2013 on our review of the interim financial information of Regis Corporation for the three and six month periods ended December 31, 2012 and 2011 and included in the Company’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2012, is incorporated by reference in the above referenced registration statements.

Yours very truly,

/s/ PRICEWATERHOUSECOOPERS LLP

PRICEWATERHOUSECOOPERS LLP

Minneapolis, Minnesota

1

EX-31.1

Exhibit No. 31.1

CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Daniel J. Hanrahan, certify that:

1.I have reviewed this quarterly report on Form 10-Q of Regis Corporation;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;

4.The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and

5.The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s Board of Directors:

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

February 4, 2013

/s/ Daniel J. Hanrahan

Daniel J. Hanrahan, President and Chief Executive Officer

1

EX-31.2

Exhibit No. 31.2

CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Steven M. Spiegel, certify that:

1.I have reviewed this quarterly report on Form 10-Q of Regis Corporation;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;

4.The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and

5.The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s Board of Directors:

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

February 4, 2013

/s/ Steven M. Spiegel

Steven M. Spiegel Executive Vice President and Chief Financial Officer

1

EX-32.1

Exhibit No. 32.1

CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Regis Corporation (the Registrant) on Form 10-Q for the fiscal quarter ending December 31, 2012 as filed with the Securities and Exchange Commission on the date hereof, I, Daniel J. Hanrahan, President and Chief Executive Officer of the Registrant, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:

(1)The Quarterly Report on Form 10-Q complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)The information contained in the Quarter Report on Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

February 4, 2013

/s/ Daniel J. Hanrahan

Daniel J. Hanrahan, President and Chief Executive Officer

1

EX-32.2

Exhibit No. 32.2

CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Regis Corporation (the Registrant) on Form 10-Q for the fiscal quarter ending December 31, 2012 as filed with the Securities and Exchange Commission on the date hereof, I, Steven M. Spiegel, Executive Vice President and Chief Financial Officer of the Registrant, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:

(1)The Quarterly Report on Form 10-Q complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)The information contained in the Quarterly Report on Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

February 4, 2013

/s/ Steven M. Spiegel

Steven M. Spiegel, Executive Vice President and Chief Financial Officer

1

XML

INCOME TAXES: (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2012	Dec. 31, 2011
(Benefit) provision for income taxes
Income taxes	$ 1,085	$ 543	$ 4,071	$ 1,752
Effective tax rate (as a percentage)	40.60%	7.40%	10.20%	16.90%
Reclassification associated with liquidation of foreign entities			$ (33,842)
State | Minimum
Income Taxes
Statute of limitation period for tax audits			3 years
State | Maximum
Income Taxes
Statute of limitation period for tax audits			4 years
Foreign | Minimum
Income Taxes
Statute of limitation period for tax audits			3 years
Foreign | Maximum
Income Taxes
Statute of limitation period for tax audits			5 years

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GOODWILL AND OTHER INTANGIBLES: (Details) (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Dec. 31, 2012	Dec. 31, 2012 North American Salons	Dec. 31, 2012 International Salons	Jun. 30, 2012 International Salons
Changes in goodwill
Gross goodwill at the beginning of the period	$ 759,127	$ 717,466	$ 41,661	$ 41,661
Accumulated impairment losses at the beginning of the period	(296,848)	(255,187)	(41,661)	(41,661)
Net goodwill at the beginning of the period	462,279	462,279
Translation rate adjustments	1,191	1,191
Gross goodwill at the end of the period	760,318	718,657	41,661	41,661
Accumulated impairment losses at the end of the period	(296,848)	(255,187)	(41,661)	(41,661)
Net goodwill at the end of the period	$ 463,470	$ 463,470

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BASIS OF PRESENTATION OF UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2012	Dec. 31, 2011
Cost of service	$ 234,265	$ 231,392	$ 466,793	$ 467,057
Site operating expenses	49,872	51,466	102,219	106,277
General and administrative	55,795	62,642	111,667	128,512
Rent	80,555	83,249	162,054	165,425
Depreciation and amortization	21,891	28,446	42,600	59,243
North American Salons
Cost of service	221,562	218,270	441,793	441,245
Site operating expenses	47,417	48,758	97,013	100,610
General and administrative	30,129	30,085	61,820	62,730
Rent	71,778	73,833	144,500	147,213
Depreciation and amortization	17,138	18,283	33,726	36,824
Marketing and advertising expense	4,015		7,267
Corporate
General and administrative	23,167	29,950	44,830	60,534
Rent	357	356	732	388
Depreciation and amortization	3,188	9,051	6,277	20,001
Prior Presentation
Cost of service		231,669		467,638
Site operating expenses		46,825		97,796
General and administrative		67,006		136,412
Prior Presentation | North American Salons
General and administrative		28,584		58,290
Rent		73,686		146,901
Depreciation and amortization		17,692		35,662
Prior Presentation | Corporate
General and administrative		35,466		72,241
Rent		503		700
Depreciation and amortization		9,642		21,163
Reclassification
Cost of service		(277)		(581)
Site operating expenses		4,641		8,481
General and administrative		(4,364)		(7,900)
Reclassification | North American Salons
General and administrative		1,501		4,440
Rent		147		312
Depreciation and amortization		591		1,162
Reclassification | Corporate
General and administrative		(5,516)		(11,707)
Rent		(147)		(312)
Depreciation and amortization		$ (591)		$ (1,162)

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COMMITMENTS AND CONTINGENCIES: (Details) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Jun. 30, 2009	Dec. 31, 2012 defendant
COMMITMENTS AND CONTINGENCIES:
Number of current and former directors and officers who are named defendants		9
Future minimum rent	$ 2.0

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SHAREHOLDERS' EQUITY:

6 Months Ended

Dec. 31, 2012

SHAREHOLDERS' EQUITY:

SHAREHOLDERS' EQUITY:

3. SHAREHOLDERS’ EQUITY:

Net (Loss) Income Per Share:

The Company’s basic earnings per share is calculated as net (loss) 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 (loss) 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. 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 the net (loss) income from continuing operations available to common shareholders and the net (loss) income from continuing operations for diluted earnings per share under the if-converted method:

	For the Periods Ended December 31,
	Three Months					Six Months
	2012			2011		2012		2011
	(Dollars in thousands)
Net (loss) income from continuing operations available to common shareholders	$	(16,119	)	$	11,900	$	18,528	$	17,523
Effect of dilutive securities:
Interest on convertible debt, net of taxes	—			2,078		—		—
Net (loss) income from continuing operations for diluted earnings per share	$	(16,119	)	$	13,978	$	18,528	$	17,523

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

	For the Periods Ended December 31,
	Three Months		Six Months
	2012	2011	2012	2011
	(Shares in thousands)
Weighted average shares for basic earnings per share	56,794	56,857	57,043	56,853
Effect of dilutive securities:
Dilutive effect of stock-based compensation (1)	—	357	82	306
Dilutive effect of convertible debt	—	11,203	—	—
Weighted average shares for diluted earnings per share	56,794	68,417	57,125	57,159

(1) For the three months ended December 31, 2012, 98,637 common stock equivalents of potentially dilutive common stock were not included in the diluted earnings per share calculation because to do so would have been anti-dilutive.

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

	For the Periods Ended December 31,
	Three Months		Six Months
	2012	2011	2012	2011
	(Shares in thousands)		(Shares in thousands)
Basic earnings per share:
RSAs (1)	482	791	482	791
RSUs (1)	189	215	189	215
	671	1,006	671	1,006
Diluted earnings per share:
Stock options (2)	579	810	600	810
SARs (2)	1,001	999	895	999
RSAs (2)	—	6	—	203
RSUs (2)	180	—	93	—
Shares issuable upon conversion of debt (3)	11,255	—	11,247	11,195
	13,015	1,815	12,835	13,207

(1) Shares were not vested

(2) Shares were anti-dilutive

(3) Share equivalents were anti-dilutive for the three and six months ended December 31, 2012 and for the six months ended December 31, 2011.

Additional Paid-In Capital:

The $12.6 million decrease in additional paid-in capital during the six months ended December 31, 2012 was due to repurchases of common stock partially offset by stock-based compensation.

In May 2000, the Company’s Board of Directors approved a stock repurchase program. To date, a total of $300.0 million has been authorized to be expended for the repurchase of the Company’s stock. All repurchased shares become authorized but unissued shares of the Company. This repurchase program has no stated expiration date.  During the three months ended December 31, 2012, the Company repurchased 909,175 shares for $14.9 million. At December 31, 2012, $58.7 million remains outstanding on the approved stock repurchase program.

Accumulated Other Comprehensive Income:

The Company completed the sale of its investment in Provalliance during the quarter ended September 30, 2012 and subsequently liquidated all foreign entities with Euro denominated operations.  Amounts previously classified within accumulated other comprehensive income that were recognized in earnings were foreign currency translation rate gain adjustments of $43.4 million, a cumulative tax-effected net loss of $7.9 million associated with a cross-currency swap that was settled in fiscal year 2007 that hedged the Company’s European operations, and a $1.7 million net loss associated with cash repatriation, which nets to $33.8 million for the six months ended December 31, 2012.

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DISCONTINUED OPERATIONS: (Details) (USD $)	3 Months Ended		6 Months Ended		3 Months Ended		6 Months Ended				0 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2012 Hair Restoration Centers	Dec. 31, 2011 Hair Restoration Centers	Dec. 31, 2012 Hair Restoration Centers	Dec. 31, 2011 Hair Restoration Centers	Jul. 13, 2012 Hair Restoration Centers	Jun. 30, 2012 Hair Restoration Centers	Jul. 13, 2012 During Fiscal 2013 Hair Restoration Centers
Discontinued operations
Cash to be received excluding closing adjustments and transaction fees											$ 163,500,000
Ownership interest (as a percent)									50.00%
Current assets held for sale
Receivables, net					2,504,000		2,504,000			2,624,000
Inventories					7,276,000		7,276,000			6,165,000
Deferred income taxes					3,229,000		3,229,000			2,892,000
Other current assets					3,807,000		3,807,000			5,319,000
Total current assets held for sale					16,816,000		16,816,000			17,000,000
Property and equipment, net					22,261,000		22,261,000			17,261,000
Goodwill					74,377,000		74,377,000			74,376,000
Other intangibles, net					78,132,000		78,132,000			78,395,000
Investment in affiliates					5,189,000		5,189,000			5,189,000
Total long-term assets held for sale					179,959,000		179,959,000			175,221,000
Total assets held for sale					196,775,000		196,775,000			192,221,000
Current liabilities related to assets held for sale
Accounts payable					3,173,000		3,173,000			2,564,000
Accrued expenses					13,365,000		13,365,000			15,556,000
Total current liabilities related to assets held for sale					16,538,000		16,538,000			18,120,000
Long-term liabilities related to assets held for sale					28,781,000		28,781,000			28,007,000
Total liabilities related to assets held for sale					45,319,000		45,319,000			46,127,000
Goodwill impairment				78,426,000		78,400,000
Income from discontinued operations
Revenues					38,230,000	37,140,000	77,180,000	74,543,000
Income (loss) from discontinued operations, before income taxes					5,994,000	(73,545,000)	11,866,000	(69,479,000)
Income tax (provision) benefit on discontinued operations					(2,378,000)	3,996,000	(4,676,000)	2,482,000
Equity in income of affiliated companies, net of tax					237,000	222,000	440,000	384,000
Income from discontinued operations, net of income taxes	3,853,000	(69,327,000)	7,630,000	(66,613,000)	3,853,000	(69,327,000)	7,630,000	(66,613,000)
Depreciation and amortization expense						$ 3,200,000		$ 6,600,000

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BASIS OF PRESENTATION OF UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (Details 4) (USD $) In Thousands, unless otherwise specified	6 Months Ended		3 Months Ended	6 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2011 POS Information System	Dec. 31, 2011 POS Information System
Property and equipment:
Depreciation expense	$ 41,919	$ 60,894	$ 7,000	$ 16,300

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SHAREHOLDERS' EQUITY: (Details) (USD $)	3 Months Ended		6 Months Ended		3 Months Ended	6 Months Ended	3 Months Ended		6 Months Ended		3 Months Ended		6 Months Ended		3 Months Ended	6 Months Ended		3 Months Ended			6 Months Ended		3 Months Ended		6 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2012	Dec. 31, 2011	Sep. 30, 2012 Provalliance	Dec. 31, 2012 Provalliance	Dec. 31, 2012 Stock options	Dec. 31, 2011 Stock options	Dec. 31, 2012 Stock options	Dec. 31, 2011 Stock options	Dec. 31, 2012 SARs	Dec. 31, 2011 SARs	Dec. 31, 2012 SARs	Dec. 31, 2011 SARs	Dec. 31, 2012 Shares issuable upon conversion of debt	Dec. 31, 2012 Shares issuable upon conversion of debt	Dec. 31, 2011 Shares issuable upon conversion of debt	Dec. 31, 2012 Common Stock	Dec. 31, 2012 RSAs	Dec. 31, 2011 RSAs	Dec. 31, 2012 RSAs	Dec. 31, 2011 RSAs	Dec. 31, 2012 RSUs	Dec. 31, 2011 RSUs	Dec. 31, 2012 RSUs	Dec. 31, 2011 RSUs
Reconciliation of the net (loss) income available to common shareholders and the net (loss) income for diluted earnings per share
Net (loss) income from continuing operations available to common shareholders	$ (16,119,000)	$ 11,900,000	$ 18,528,000	$ 17,523,000
Effect of dilutive securities:
Interest on convertible debt, net of taxes		2,078,000
Net (loss) income from continuing operations for diluted earnings per share	(16,119,000)	13,978,000	18,528,000	17,523,000
Weighted average common and common equivalent shares outstanding:
Weighted average shares for basic earnings per share	56,794,000	56,857,000	57,043,000	56,853,000
Effect of dilutive securities:
Dilutive effect of stock-based compensation (in shares)		357,000	82,000	306,000
Dilutive effect of convertible debt (in shares)		11,203,000
Weighted average shares for diluted earnings per share	56,794,000	68,417,000	57,125,000	57,159,000
Additional Paid-In Capital:
Decrease in additional paid-in capital			12,600,000
Stock repurchase program authorized amount			300,000,000
Repurchase of common stock	14,868,000		14,868,000
Repurchases of common stock (in shares)	909,175
Outstanding repurchase amount under stock repurchase program			58,700,000
Awards excluded from earnings per share calculations
Awards excluded from basic earnings per share computation (in shares)	671,000	1,006,000	671,000	1,006,000														98,637	482,000	791,000	482,000	791,000	189,000	215,000	189,000	215,000
Awards excluded from diluted earnings per share computation (in shares)	13,015,000	1,815,000	12,835,000	13,207,000			579,000	810,000	600,000	810,000	1,001,000	999,000	895,000	999,000	11,255,000	11,247,000	11,195,000			6,000		203,000	180,000		93,000
Accumulated Other Comprehensive Income:
Foreign currency translation rate gain adjustments						43,400,000
Cross-currency swap net loss						7,900,000
Cash repatriation net loss						1,700,000
Accumulated other comprehensive income			$ (33,842,000)		$ 33,800,000	$ 33,800,000

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FAIR VALUE MEASUREMENTS: (Details) (USD $) In Millions, unless otherwise specified	Sep. 27, 2012 Provalliance	Jun. 30, 2012 Provalliance Equity Put Option	Dec. 31, 2012 Roosters	Jun. 30, 2012 Roosters	Jul. 02, 2011 Roosters
Assets and Liabilities that are Measured at Fair Value on a Recurring Basis and Non Recurring Basis
Equity call option			$ 0.1	$ 0.1
Ownership percentage in equity method investee (as a percent)	46.70%
Fair value of financial instrument		0.6
Ownership interest (as a percent)					60.00%
Equity put option			$ 0.2	$ 0.2

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DISCONTINUED OPERATIONS:

6 Months Ended

Dec. 31, 2012

DISCONTINUED OPERATIONS:

DISCONTINUED OPERATIONS:

2. DISCONTINUED OPERATIONS:

Hair Restoration Centers

On July 13, 2012, the Company entered into a definitive agreement to sell its Hair Club for Men and Women business (Hair Club), a provider of hair restoration services, for cash of $163.5 million to Aderans, Co., Ltd. The definitive agreement includes a working capital adjustment provision that could impact the final sale price.  The sale includes the Company’s 50.0 percent interest in Hair Club for Men, Ltd. accounted for by the Company under the equity method. The transaction is under review by the Federal Trade Commission. The Company is currently anticipating recognizing a gain upon the closing of the transaction.

The Company classified the results of operations of Hair Club as discontinued operations for all periods presented in the Condensed Consolidated Statement of Operations.  The assets and liabilities of this business to be sold met the criteria to be classified as held for sale and have been aggregated and reported as current assets held for sale, long-term assets held for sale, current liabilities related to assets held for sale and long-term liabilities related to assets held for sale in the Condensed Consolidated Balance Sheet for all periods presented. The classification was based on the Company entering into the agreement to sell Hair Club, the centers being available for sale in present condition, and the sale being probable as of December 31, 2012. The operations and cash flows of Hair Club will be eliminated from ongoing operations of the Company, which was previously recorded as the Hair Restoration reporting segment. There will be no significant continuing involvement by the Company in the operations of Hair Club after disposal.

The following summarizes the assets and liabilities of our Hair Club operations at December 31, 2012 and June 30, 2012:

	December 31, 2012		June 30, 2012
	(Dollars in thousands)
Current assets held for sale
Receivables, net	$	2,504	$	2,624
Inventories	7,276		6,165
Deferred income taxes	3,229		2,892
Other current assets	3,807		5,319
Total current assets held for sale	16,816		17,000
Property and equipment, net	22,261		17,261
Goodwill	74,377		74,376
Other intangibles, net	78,132		78,395
Investment in affiliates	5,189		5,189
Total long-term assets held for sale	179,959		175,221
Total assets held for sale	$	196,775	$	192,221
Current liabilities related to assets held for sale
Accounts payable	$	3,173	$	2,564
Accrued expenses	13,365		15,556
Total current liabilities related to assets held for sale	16,538		18,120
Long-term liabilities related to assets held for sale	28,781		28,007
Total liabilities related to assets held for sale	$	45,319	$	46,127

During the three months ended December 31, 2011, the Company performed an interim impairment test of goodwill related to Hair Club and recorded a $78.4 million impairment charge for the excess of the carrying value of goodwill over the implied fair value.

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

	For the Periods Ended December 31,
	Three Months						Six Months
	2012			2011			2012			2011
	(Dollars in thousands)
Revenues	$	38,230		$	37,140		$	77,180		$	74,543
Income (loss) from discontinued operations, before income taxes	5,994			(73,545		)	11,866			(69,479		)
Income tax (provision) benefit on discontinued operations	(2,378		)	3,996			(4,676		)	2,482
Equity in income of affiliated companies, net of tax	237			222			440			384
Income (loss) from discontinued operations, net of income taxes	$	3,853		$	(69,327	)	$	7,630		$	(66,613	)

Income taxes have been allocated to continuing and discontinued operations based on the methodology required by interim reporting and accounting for income taxes guidance.  Depreciation and amortization ceased during the three and six months ended December 31, 2012 in accordance with accounting for discontinued operations. Hair Club depreciation and amortization expense for the three and six months ended December 31, 2011 was $3.2 and $6.6 million, respectively.

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FAIR VALUE MEASUREMENTS: (Details 2) (USD $)	Dec. 31, 2012	Jun. 30, 2012
Financial Instruments
Debt	$ 268,983,000	$ 287,674,000
Fair value of debt	$ 285,400,000	$ 307,500,000

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SEGMENT INFORMATION: (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Dec. 31, 2012 salon	Dec. 31, 2011	Dec. 31, 2012 segment salon	Dec. 31, 2011
Summarized financial information of reportable operating segments
Number of stores	10,000		10,000
Number of stores in which the entity maintains an ownership interest through investments in affiliates	245		245
Revenues:
Service	$ 388,286	$ 404,025	$ 781,702	$ 819,042
Product	108,236	112,900	210,520	219,673
Royalties and fees	9,643	9,213	19,303	18,769
Total revenues	506,165	526,138	1,011,525	1,057,484
Operating expenses:
Cost of service	234,265	231,392	466,793	467,057
Cost of product	55,064	57,007	108,196	110,030
Site operating expenses	49,872	51,466	102,219	106,277
General and administrative	55,795	62,642	111,667	128,512
Rent	80,555	83,249	162,054	165,425
Depreciation and amortization	21,891	28,446	42,600	59,243
Total operating expenses	497,442	514,202	993,529	1,036,544
Operating income	8,723	11,936	17,996	20,940
Other income (expense):
Interest expense	(6,649)	(7,203)	(13,478)	(14,563)
Interest income and other, net	601	2,651	35,213	3,969
Income before income taxes and equity in (loss) income of affiliated companies	2,675	7,384	39,731	10,346
Number of reportable segments			2
North American Salons
Summarized financial information of reportable operating segments
Number of stores	9,259		9,259
Number of primary concepts			5
Revenues:
Service	364,486	379,694	734,166	769,858
Product	99,273	103,162	193,815	201,299
Royalties and fees	9,643	9,213	19,303	18,769
Total revenues	473,402	492,069	947,284	989,926
Operating expenses:
Cost of service	221,562	218,270	441,793	441,245
Cost of product	50,176	51,753	99,252	100,197
Site operating expenses	47,417	48,758	97,013	100,610
General and administrative	30,129	30,085	61,820	62,730
Rent	71,778	73,833	144,500	147,213
Depreciation and amortization	17,138	18,283	33,726	36,824
Total operating expenses	438,200	440,982	878,104	888,819
Operating income	35,202	51,087	69,180	101,107
Other income (expense):
Income before income taxes and equity in (loss) income of affiliated companies	35,202	51,087	69,180	101,107
International Salons
Summarized financial information of reportable operating segments
Number of stores	381		381
Number of primary concepts			3
Revenues:
Service	23,800	24,331	47,536	49,184
Product	8,963	9,738	16,705	18,374
Total revenues	32,763	34,069	64,241	67,558
Operating expenses:
Cost of service	12,703	13,122	25,000	25,812
Cost of product	4,888	5,254	8,944	9,833
Site operating expenses	2,455	2,708	5,206	5,667
General and administrative	2,499	2,607	5,017	5,248
Rent	8,420	9,060	16,822	17,824
Depreciation and amortization	1,565	1,112	2,597	2,418
Total operating expenses	32,530	33,863	63,586	66,802
Operating income	233	206	655	756
Other income (expense):
Income before income taxes and equity in (loss) income of affiliated companies	233	206	655	756
Unallocated Corporate
Operating expenses:
General and administrative	23,167	29,950	44,830	60,534
Rent	357	356	732	388
Depreciation and amortization	3,188	9,051	6,277	20,001
Total operating expenses	26,712	39,357	51,839	80,923
Operating income	(26,712)	(39,357)	(51,839)	(80,923)
Other income (expense):
Interest expense	(6,649)	(7,203)	(13,478)	(14,563)
Interest income and other, net	601	2,651	35,213	3,969
Income before income taxes and equity in (loss) income of affiliated companies	$ (32,760)	$ (43,909)	$ (30,104)	$ (91,517)

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CONDENSED CONSOLIDATED BALANCE SHEET (Unaudited) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012	Jun. 30, 2012
Current assets:
Cash and cash equivalents	$ 218,343	$ 111,943
Receivables, net	24,597	28,954
Inventories	153,864	142,276
Deferred income taxes	17,988	14,503
Income tax receivable	13,864	14,098
Other current assets	21,486	55,903
Current assets held for sale (Note 2)	16,816	17,000
Total current assets	466,958	384,677
Property and equipment, net	302,756	305,799
Goodwill	463,470	462,279
Other intangibles, net	22,893	23,395
Investment in and loans to affiliates	42,170	160,987
Other assets	62,697	59,488
Long-term assets held for sale (Note 2)	179,959	175,221
Total assets	1,540,903	1,571,846
Current liabilities:
Long-term debt, current portion	28,950	28,937
Accounts payable	59,277	47,890
Accrued expenses	140,322	157,026
Current liabilities related to assets held for sale (Note 2)	16,538	18,120
Total current liabilities	245,087	251,973
Long-term debt and capital lease obligations	240,033	258,737
Other noncurrent liabilities	160,257	143,972
Long-term liabilities related to assets held for sale (Note 2)	28,781	28,007
Total liabilities	674,158	682,689
Commitments and contingencies (Note 7)
Shareholders' equity:
Common stock, $0.05 par value; issued and outstanding 56,615,264 and 57,415,241 common shares at December 31, 2012 and June 30, 2012, respectively	2,831	2,871
Additional paid-in capital	334,353	346,943
Accumulated other comprehensive income	26,109	55,114
Retained earnings	503,452	484,229
Total shareholders' equity	866,745	889,157
Total liabilities and shareholders' equity	$ 1,540,903	$ 1,571,846

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CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited) (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Dec. 31, 2012		Dec. 31, 2011
Cash flows from operating activities:
Net income (loss)	$ 26,158		$ (49,090)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation	41,919		60,894
Amortization	1,170		4,907
Equity in loss (income) of affiliated companies	16,692		(9,313)
Dividends received from affiliated companies	693		606
Deferred income taxes	11,352		(7,245)
Accumulated other comprehensive income reclassification adjustments (Note 3)	(33,842)
Goodwill impairment			78,426
Stock-based compensation	3,307		4,649
Amortization of debt discount and financing costs	3,527		3,279
Other noncash items affecting earnings	(100)		(306)
Changes in operating assets and liabilities:
Receivables	4,777	[1]	(4,861)	[1]
Inventories	(12,251)	[1]	(20,382)	[1]
Income tax receivable	(1,894)	[1]	4,996	[1]
Other current assets	3,481	[1]	2,662	[1]
Other assets	627	[1]	(2,708)	[1]
Accounts payable	11,880	[1]	(2,900)	[1]
Accrued expenses	(19,566)	[1]	8,076	[1]
Other noncurrent liabilities	1,039	[1]	(9,743)	[1]
Net cash provided by operating activities	58,969		61,947
Cash flows from investing activities:
Capital expenditures	(43,200)		(42,979)
Proceeds from sale of assets	152		371
Asset acquisitions, net of cash acquired			(2,225)
Proceeds from loans and investments	131,054		1,956
Net cash provided by (used in) investing activities	88,006		(42,877)
Cash flows from financing activities:
Borrowings on revolving credit facilities	5,200		222,000
Payments on revolving credit facilities	(5,200)		(222,000)
Repayments of long-term debt and capital lease obligations	(21,298)		(21,990)
Repurchase of common stock	(14,868)
Dividends paid	(6,905)		(6,952)
Net cash used in financing activities	(43,071)		(28,942)
Effect of exchange rate changes on cash and cash equivalents	2,496		(3,292)
Increase (decrease) in cash and cash equivalents	106,400		(13,164)
Cash and cash equivalents:
Beginning of period	111,943		96,263
End of period	$ 218,343		$ 83,099

[1] Changes in operating assets and liabilities exclude assets acquired and liabilities assumed through acquisitions.

XML

ACQUISITIONS, INVESTMENT IN AND LOANS TO AFFILIATES: (Details) (USD $)			1 Months Ended			3 Months Ended		6 Months Ended
	Dec. 31, 2012	Jun. 30, 2012	Jul. 31, 2011 Roosters salon	Dec. 31, 2012 Roosters	Jul. 02, 2011 Roosters	Dec. 31, 2012 Roosters Maximum	Dec. 31, 2011 Roosters Maximum	Dec. 31, 2012 Roosters Maximum	Dec. 31, 2011 Roosters Maximum
Purchase prices of the acquisitions
Number of franchise salon locations acquired			31
Ownership interest (as a percent)					60.00%
Purchase price					$ 2,300,000
Trailing period for determining the acquisition price			12 months
Total assets	1,540,903,000	1,571,846,000		6,000,000
Total liabilities	674,158,000	682,689,000		2,100,000
Total shareholders' equity	866,745,000	889,157,000		3,900,000
Net income attributable to the noncontrolling interest						100,000	(100,000)	(100,000)	(100,000)
Shareholders' equity attributable to the noncontrolling interest				$ 1,600,000

XML

ACQUISITIONS, INVESTMENT IN AND LOANS TO AFFILIATES: (Tables)

6 Months Ended

Dec. 31, 2012

ACQUISITIONS, INVESTMENT IN AND LOANS TO AFFILIATES:

Schedule of carrying amount of investments in and loans to affiliates

	December 31, 2012		June 30, 2012
	(Dollars in thousands)
Empire Education Group, Inc.	$	41,921	$	59,683
Provalliance	—		101,304
MY Style	249		—
	$	42,170	$	160,987

Schedule of notes receivable from affiliates

	December 31, 2012		June 30, 2012
	(Dollars in thousands)
Empire Education Group, Inc.	$	—	$	26,412
MY Style	610		2,251
	$	610	$	28,663

XML

ACQUISITIONS, INVESTMENT IN AND LOANS TO AFFILIATES: (Details 2)	6 Months Ended		3 Months Ended		6 Months Ended					0 Months Ended	3 Months Ended	6 Months Ended		6 Months Ended				1 Months Ended		3 Months Ended		1 Months Ended
	Dec. 31, 2012 USD ($)	Jun. 30, 2012 USD ($)	Dec. 31, 2012 Empire Education Group, Inc. USD ($) item	Dec. 31, 2011 Empire Education Group, Inc. USD ($)	Dec. 31, 2012 Empire Education Group, Inc. USD ($) item	Dec. 31, 2011 Empire Education Group, Inc. USD ($)	Jun. 30, 2012 Empire Education Group, Inc. USD ($)	Jan. 31, 2008 Empire Education Group, Inc.	Aug. 01, 2007 Empire Education Group, Inc. item	Sep. 27, 2012 Provalliance EUR (€)	Sep. 30, 2012 Provalliance USD ($)	Dec. 31, 2012 Provalliance USD ($)	Jun. 30, 2012 Provalliance USD ($)	Dec. 31, 2012 MY Style USD ($)	Dec. 31, 2011 MY Style USD ($)	Jun. 30, 2012 MY Style USD ($)	Dec. 31, 2012 MY Style MY Style Note USD ($)	Apr. 30, 2007 MY Style Yamano Holding Corporation USD ($)	Apr. 30, 2007 MY Style Yamano Holding Corporation JPY (¥)	Sep. 30, 2012 MY Style Yamano Holding Corporation USD ($)	Sep. 30, 2012 MY Style Yamano Holding Corporation JPY (¥)	Apr. 30, 2007 MY Style Yamano Holding Corporation Shares issuable upon conversion of debt
Investment in and loans to affiliates
Investment in and loans to affiliates	$ 42,170,000	$ 160,987,000	$ 41,921,000		$ 41,921,000		$ 59,683,000						$ 101,304,000	$ 249,000
Notes receivable from affiliates	610,000	28,663,000					26,412,000							610,000		2,251,000
Number of cosmetology schools contributed to acquire equity method investment									51
Number of cosmetology schools owned by equity method investee			108		108
Ownership percentage in equity method investee								55.10%	49.00%	46.70%
Equity in (loss) income, net of income taxes			200,000	1,500,000	100,000	2,500,000
Maximum revolving credit facility provided to equity method investee			15,000,000		15,000,000
Other than temporary impairment			17,900,000
Amount of EEG's letters of credit that are guaranteed			500,000		500,000
Interest income related to the loan and revolving credit facility			100,000	100,000	100,000	300,000
Purchase price of equity method investment (in Euro)										80,000,000
Decrease in fair value of equity put valuation											600,000
Foreign currency translation rate gain adjustments	(33,842,000)										33,800,000	33,800,000
Aggregate amount of investment																		11,300,000	1,300,000,000	300,000	21,700,000
Exchangeable note, shares of affiliate permitted to be acquired (as a percent)																				27.10%	27.10%	27.10%
Affiliate shares outstanding																		800	800
Principal amount outstanding																	600,000
Foreign currency transaction (loss) gain														(100,000)	600,000
Goodwill balance	463,470,000	462,279,000	16,000,000		16,000,000
Percentage that fair value exceeded carrying value			5.00%
Principal payments on the loan received			$ 800,000		$ 26,400,000

XML

SEGMENT INFORMATION: (Tables)

6 Months Ended

Dec. 31, 2012

SEGMENT INFORMATION:

Summary of financial information of reportable segments

	For the Three Months Ended December 31, 2012(1)(2)
	Salons				Unallocated
	North America		International		Corporate			Consolidated
			(Dollars in thousands)
Revenues:
Service	$	364,486	$	23,800	$	—		$	388,286
Product	99,273		8,963		—			108,236
Royalties and fees	9,643		—		—			9,643
	473,402		32,763		—			506,165
Operating expenses:
Cost of service	221,562		12,703		—			234,265
Cost of product	50,176		4,888		—			55,064
Site operating expenses	47,417		2,455		—			49,872
General and administrative	30,129		2,499		23,167			55,795
Rent	71,778		8,420		357			80,555
Depreciation and amortization	17,138		1,565		3,188			21,891
Total operating expenses	438,200		32,530		26,712			497,442
Operating income (loss)	35,202		233		(26,712		)	8,723
Other income (expense):
Interest expense	—		—		(6,649		)	(6,649		)
Interest income and other, net	—		—		601			601
Income (loss) from continuing operations before income taxes and equity in (loss) income of affiliated companies	$	35,202	$	233	$	(32,760	)	$	2,675

(1) See Note 2 to the Condensed Consolidated Financial Statements for discussion of the classification of the results of operations of Hair Club as discontinued operations.

(2) See Note 1 to the Condensed Consolidated Financial Statements for discussion of reclassifications of general and administrative, rent and depreciation and amortization between the Company’s Corporate and North America reportable segments.

	For the Three Months Ended December 31, 2011(1)(2)
	Salons				Unallocated
	North America		International		Corporate			Consolidated
			(Dollars in thousands)
Revenues:
Service	$	379,694	$	24,331	$	—		$	404,025
Product	103,162		9,738		—			112,900
Royalties and fees	9,213		—		—			9,213
	492,069		34,069		—			526,138
Operating expenses:
Cost of service	218,270		13,122		—			231,392
Cost of product	51,753		5,254		—			57,007
Site operating expenses	48,758		2,708		—			51,466
General and administrative	30,085		2,607		29,950			62,642
Rent	73,833		9,060		356			83,249
Depreciation and amortization	18,283		1,112		9,051			28,446
Total operating expenses	440,982		33,863		39,357			514,202
Operating income (loss)	51,087		206		(39,357		)	11,936
Other income (expense):
Interest expense	—		—		(7,203		)	(7,203		)
Interest income and other, net	—		—		2,651			2,651
Income (loss) from continuing operations before income taxes and equity in (loss) income of affiliated companies	$	51,087	$	206	$	(43,909	)	$	7,384

(1) See Note 2 to the Condensed Consolidated Financial Statements for discussion of the classification of the results of operations of Hair Club as discontinued operations.

(2) See Note 1 to the Condensed Consolidated Financial Statements for discussion of reclassifications of general and administrative, rent and depreciation and amortization between the Company’s Corporate and North America reportable segments.

	For the Six Months Ended December 31, 2012(1)(2)
	Salons				Unallocated
	North America		International		Corporate			Consolidated
			(Dollars in thousands)
Revenues:
Service	$	734,166	$	47,536	$	—		$	781,702
Product	193,815		16,705		—			210,520
Royalties and fees	19,303		—		—			19,303
	947,284		64,241		—			1,011,525
Operating expenses:
Cost of service	441,793		25,000		—			466,793
Cost of product	99,252		8,944		—			108,196
Site operating expenses	97,013		5,206		—			102,219
General and administrative	61,820		5,017		44,830			111,667
Rent	144,500		16,822		732			162,054
Depreciation and amortization	33,726		2,597		6,277			42,600
Total operating expenses	878,104		63,586		51,839			993,529
Operating income (loss)	69,180		655		(51,839		)	17,996
Other income (expense):
Interest expense	—		—		(13,478		)	(13,478		)
Interest income and other, net	—		—		35,213			35,213
Income (loss) from continuing operations before income taxes and equity in (loss) income of affiliated companies	$	69,180	$	655	$	(30,104	)	$	39,731

(1) See Note 2 to the Condensed Consolidated Financial Statements for discussion of the classification of the results of operations of Hair Club as discontinued operations.

(2) See Note 1 to the Condensed Consolidated Financial Statements for discussion of reclassifications of general and administrative, rent and depreciation and amortization between the Company’s Corporate and North America reportable segments.

	For the Six Months Ended December 31, 2011(1)(2)
	Salons				Unallocated
	North America		International		Corporate			Consolidated
			(Dollars in thousands)
Revenues:
Service	$	769,858	$	49,184	$	—		$	819,042
Product	201,299		18,374		—			219,673
Royalties and fees	18,769		—		—			18,769
	989,926		67,558					1,057,484
Operating expenses:
Cost of service	441,245		25,812		—			467,057
Cost of product	100,197		9,833		—			110,030
Site operating expenses	100,610		5,667		—			106,277
General and administrative	62,730		5,248		60,534			128,512
Rent	147,213		17,824		388			165,425
Depreciation and amortization	36,824		2,418		20,001			59,243
Total operating expenses	888,819		66,802		80,923			1,036,544
Operating income (loss)	101,107		756		(80,923		)	20,940
Other income (expense):
Interest expense	—		—		(14,563		)	(14,563		)
Interest income and other, net	—		—		3,969			3,969
Income (loss) from continuing operations before income taxes and equity in (loss) income of affiliated companies	$	101,107	$	756	$	(91,517	)	$	10,346

(1) See Note 2 to the Condensed Consolidated Financial Statements for discussion of the classification of the results of operations of Hair Club as discontinued operations.

(2) See Note 1 to the Condensed Consolidated Financial Statements for discussion of reclassifications of general and administrative, rent and depreciation and amortization between the Company’s Corporate and North America reportable segments.

XML

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

6 Months Ended

Dec. 31, 2012

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

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

1. 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, 2012 and for the three and six months ended December 31, 2012 and 2011, reflect, in the opinion of management, all adjustments necessary to fairly state the consolidated financial position of the Company as of December 31, 2012 and the consolidated results of its operations and its cash flows for the interim periods. Adjustments consist only of normal recurring items, except for any discussed in the notes below. The results of operations and cash flows for any interim period are not necessarily indicative of results of operations and cash flows for the full year.

The Consolidated Balance Sheet data for June 30, 2012 was derived from audited Consolidated Financial Statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America (GAAP). The unaudited interim Condensed Consolidated Financial Statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended June 30, 2012 and other documents filed or furnished with the Securities and Exchange Commission (SEC) during the current fiscal year.

The unaudited condensed consolidated financial statements of the Company as of December 31, 2012 and for the three and six month periods ended December 31, 2012 and 2011 included in this Form 10-Q have been reviewed by PricewaterhouseCoopers LLP, an independent registered public accounting firm. Their separate report dated February 4, 2013 appearing herein, states that they did not audit and they do not express an opinion on that unaudited financial information. Accordingly, the degree of reliance on their report on such information should be restricted in light of the limited nature of the review procedures applied. PricewaterhouseCoopers LLP is not subject to the liability provisions of Section 11 of the Securities Act of 1933 for their report on the unaudited financial information because that report is not a “report” or a “part” of the registration statement prepared or certified by PricewaterhouseCoopers LLP within the meaning of Sections 7 and 11 of the Act.

Reclassifications:

Beginning in the first quarter of fiscal year 2013, salon marketing and advertising expenses that were presented within cost of service and general and administrative operating expense line items in prior filings were reclassified to site operating expenses within the Condensed Consolidated Statement of Operations. The reclassifications were made to better present how management of the Company views the respective salon marketing and advertising expenses. The prior period amounts have been reclassified to conform to the current year presentation. These reclassifications had no impact on operating income or net income. The table below presents the impact of the reclassification to the three and six months ended December 31, 2011:

	For the Three Months Ended, December 31, 2011
	Prior Presentation(1)		Reclassification			As Presented
			(Dollars in thousands)
Cost of service	$	231,669	$	(277	)	$	231,392
Site operating expenses	46,825		4,641			51,466
General and administrative	67,006		(4,364		)	62,642

	For the Six Months Ended, December 31, 2011
	Prior Presentation(1)		Reclassification			As Presented
			(Dollars in thousands)
Cost of service	$	467,638	$	(581	)	$	467,057
Site operating expenses	97,796		8,481			106,277
General and administrative	136,412		(7,900		)	128,512

(1)  Prior presentation amounts exclude amounts related to discontinued operations.  See Note 2 to the Condensed Consolidated Statement of Operations.

In addition, expenses associated with our distribution centers were reclassified from Corporate to our North America reportable segment. The reclassifications were made to better present how management of the Company views the respective distribution centers expenses.  This reclassification had no impact on our Condensed Consolidated Statement of Operations. The prior period amounts have been reclassified to conform to the current year presentation.  The table below presents the impact of the reclassification of general and administrative, rent, and depreciation and amortization expenses between the Company’s Corporate and North America reportable segments:

	For the Three Months Ended, December 31, 2011
	North America						Corporate
	Prior Presentation		Reclassification		As Presented(2)		Prior Presentation		Reclassification			As Presented(2)
	(Dollars in thousands)						(Dollars in thousands)
General and administrative (1)	$	28,584	$	1,501	$	30,085	$	35,466	$	(5,516	)	$	29,950
Rent	73,686		147		73,833		503		(147		)	356
Depreciation and amortization	17,692		591		18,283		9,642		(591		)	9,051

(1) The North America general and administrative reclassification consists of a $5,516 increase for the offset to the Corporate reclassification within this line item, partially offset by a decrease applicable to North America of $4,015 for the marketing and advertising expense reclassifications.

(2) See Note 10 to the Condensed Consolidated Statement of Operations for presentation of segment information.

	For the Six Months Ended, December 31, 2011
	North America						Corporate
	Prior Presentation		Reclassification		As Presented(2)		Prior Presentation		Reclassification			As Presented(2)
	(Dollars in thousands)						(Dollars in thousands)
General and administrative (1)	$	58,290	$	4,440	$	62,730	$	72,241	$	(11,707	)	$	60,534
Rent	146,901		312		147,213		700		(312		)	388
Depreciation and amortization	35,662		1,162		36,824		21,163		(1,162		)	20,001

(1) The North America general and administrative reclassification consists of a $11,707 increase for the offset to the Corporate reclassification within this line item, partially offset by a decrease of $7,267 applicable to North America for the marketing and advertising expense reclassification above.

(2) See Note 10 to the Condensed Consolidated Statement of Operations for presentation of segment information.

Stock-Based Employee Compensation:

During the six months ended December 31, 2012, the Company granted 118,062 restricted stock awards (RSAs), 195,663 restricted stock units (RSUs), 596,157 equity-based stock appreciation rights (SARs), and 199,041 performance share units (PSUs). The Company did not have significant grants for the three months ended December 31, 2012. All options granted relate to stock option plans that have been approved by the shareholders of the Company.

Total compensation cost for stock-based payment arrangements totaled $1.5 and $2.2 million for the three months ended December 31, 2012 and 2011, respectively, and $3.3 and $4.6 million for the six months ended December 31, 2012 and 2011, respectively.

Goodwill:

As of the fiscal year 2012 annual impairment testing of goodwill, the estimated fair value of the Promenade salon concept and Hair Restoration Centers reporting units exceeded the carrying value by approximately 14.0 and 12.0 percent, respectively. The respective fair values of the Company’s remaining reporting units exceeded their carrying values by greater than 20.0 percent. While the Company has determined that the estimated fair value of Promenade is appropriate based on the historical level of revenue growth, operating income and cash flows, it is reasonably likely that Promenade may experience additional impairment in future periods. As previously disclosed, the Company has agreed to sell the Hair Restoration Centers reporting unit in fiscal year 2013; however, until this reporting unit is sold, it is reasonably likely that there could be impairment of the Hair Restoration Centers reporting unit’s goodwill in future periods. See Note 2 to the Condensed Consolidated Financial Statements for details of Hair Restoration Centers reporting unit’s goodwill balance. The term “reasonably likely” refers to an occurrence that is more than remote but less than probable in the judgment of the Company. Because some of the inherent assumptions and estimates used in determining the fair value of each reporting unit are outside the control of management, changes in these underlying assumptions can adversely impact fair value. Potential impairment of a portion or all of the carrying value of goodwill for the Promenade salon concept and Hair Restoration Centers reporting units is dependent on many factors and cannot be predicted with certainty.

As of December 31, 2012, the Company’s estimated fair value, as determined by the sum of our reporting units’ fair value, reconciled to within a reasonable range of our market capitalization which included an assumed control premium. The Company concluded that there were no triggering events requiring the Company to perform an interim goodwill impairment test between the annual impairment testing and December 31, 2012.

A summary of the Company’s goodwill balance as of December 31, 2012 and June 30, 2012 by reporting unit is as follows:

Reporting Unit	As of December 31, 2012		As of June 30, 2012
	(Dollars in thousands)
Regis	$	35,944	$	35,910
MasterCuts	4,652		4,652
SmartStyle	48,719		48,558
Supercuts	129,630		129,621
Promenade	244,525		243,538
Total	$	463,470	$	462,279

See Note 5 to the Condensed Consolidated Financial Statements for further details on the Company’s goodwill balance.

Property and Equipment:

Historically, because of the Company’s large size and scale requirements it had been necessary for the Company to internally develop and support its own proprietary point-of-sale (POS) information system. During the fourth quarter of fiscal year 2011, the Company identified a third party POS alternative. At June 30, 2011 and throughout fiscal year 2012, the Company reassessed and adjusted the remaining useful life of the Company’s internally developed POS software.  As of June 30, 2012, the internally developed POS information system was fully depreciated. Depreciation expense related to the internally developed POS information system totaled $7.0 million and $16.3 million during the three and six months ended December 31, 2011, respectively.

During the first quarter of fiscal year 2013, the Company decided the previously identified third party POS alternative would only be utilized in United Kingdom. The Company reviewed the previously identified third party POS alternative capitalized software carrying value for impairment at September 30, 2012 and December 31, 2012. As a result of the Company’s long-lived asset impairment testing for this asset grouping in the United Kingdom, no impairment charges were recorded. There was no adjustment to the useful life as the Company expects to fully utilize the previously identified third party POS alternative in the United Kingdom salons. The Company is currently implementing another third party POS solution for salons in North America.

Recent Accounting Standards Adopted by the Company:

Testing Goodwill for Impairment

In September 2011, the Financial Accounting Standards Board (FASB) updated the accounting guidance related to annual and interim goodwill impairment testing. The updated accounting guidance allows entities to first assess qualitative factors before performing a quantitative assessment of the fair value of a reporting unit. If it is determined on the basis of qualitative factors that the fair value of the reporting unit is more likely than not less than the carrying amount, the existing quantitative impairment test is required. Otherwise, no further impairment testing is required. The Company adopted this guidance in the first quarter of fiscal year 2013.

Comprehensive Income

In June 2011, and as subsequently amended in December 2011, the FASB issued final guidance on the presentation of comprehensive income. Under the newly issued guidance, net income and comprehensive income may only be presented either as one continuous statement or in two separate, but consecutive statements. The Company retrospectively adopted this guidance in the first quarter of fiscal year 2013, with comprehensive income shown as a separate statement immediately following the Condensed Consolidated Statements of Operations.

Accounting Standards Recently Issued But Not Yet Adopted by the Company:

Disclosures about Offsetting Assets and Liabilities

In December 2011, the FASB issued new accounting guidance related to disclosures on offsetting assets and liabilities on the balance sheet. This newly issued accounting standard requires an entity to disclose both gross and net information about instruments and transactions eligible for offset in the balance sheet as well as instruments and transactions executed under a master netting or similar arrangement and was issued to enable users of financial statements to understand the effects or potential effects of those arrangements on its financial position. This accounting guidance is required to be applied retrospectively and is effective for the Company beginning in the first quarter of fiscal year 2014. Since the accounting guidance only impacts disclosure requirements, its adoption will not have a material impact on the Company’s consolidated financial statements.

Testing Indefinite-Lived Intangible Assets for Impairment

In July 2012, the FASB updated the accounting guidance related to annual and interim indefinite-lived intangible asset impairment testing. The updated accounting guidance allows entities to first assess qualitative factors before performing a quantitative assessment of the fair value of indefinite-lived intangible assets. If it is determined on the basis of qualitative factors that the fair value of indefinite-lived intangible assets is more likely than not less than the carrying amount, the existing quantitative impairment test is required. Otherwise, no further impairment testing is required. The updated guidance is effective for the Company beginning in the first quarter of fiscal year 2014 with early adoption permitted under certain circumstances. The Company does not expect it to have a material impact on the Company’s consolidated financial statements.

XML

CONDENSED CONSOLIDATED BALANCE SHEET (Unaudited) (Parenthetical) (USD $)	Dec. 31, 2012	Jun. 30, 2012
CONDENSED CONSOLIDATED BALANCE SHEET
Common stock, par value (in dollars per share)	$ 0.05	$ 0.05
Common stock, shares issued	56,615,264	57,415,241
Common stock, shares outstanding	56,615,264	57,415,241

XML

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

6 Months Ended

Dec. 31, 2012

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

Reclassifications

Reclassifications:

Beginning in the first quarter of fiscal year 2013, salon marketing and advertising expenses that were presented within cost of service and general and administrative operating expense line items in prior filings were reclassified to site operating expenses within the Condensed Consolidated Statement of Operations. The reclassifications were made to better present how management of the Company views the respective salon marketing and advertising expenses. The prior period amounts have been reclassified to conform to the current year presentation. These reclassifications had no impact on operating income or net income. The table below presents the impact of the reclassification to the three and six months ended December 31, 2011:

	For the Three Months Ended, December 31, 2011
	Prior Presentation(1)		Reclassification			As Presented
			(Dollars in thousands)
Cost of service	$	231,669	$	(277	)	$	231,392
Site operating expenses	46,825		4,641			51,466
General and administrative	67,006		(4,364		)	62,642

	For the Six Months Ended, December 31, 2011
	Prior Presentation(1)		Reclassification			As Presented
			(Dollars in thousands)
Cost of service	$	467,638	$	(581	)	$	467,057
Site operating expenses	97,796		8,481			106,277
General and administrative	136,412		(7,900		)	128,512

(1)  Prior presentation amounts exclude amounts related to discontinued operations.  See Note 2 to the Condensed Consolidated Statement of Operations.

In addition, expenses associated with our distribution centers were reclassified from Corporate to our North America reportable segment. The reclassifications were made to better present how management of the Company views the respective distribution centers expenses.  This reclassification had no impact on our Condensed Consolidated Statement of Operations. The prior period amounts have been reclassified to conform to the current year presentation.  The table below presents the impact of the reclassification of general and administrative, rent, and depreciation and amortization expenses between the Company’s Corporate and North America reportable segments:

	For the Three Months Ended, December 31, 2011
	North America						Corporate
	Prior Presentation		Reclassification		As Presented(2)		Prior Presentation		Reclassification			As Presented(2)
	(Dollars in thousands)						(Dollars in thousands)
General and administrative (1)	$	28,584	$	1,501	$	30,085	$	35,466	$	(5,516	)	$	29,950
Rent	73,686		147		73,833		503		(147		)	356
Depreciation and amortization	17,692		591		18,283		9,642		(591		)	9,051

(1) The North America general and administrative reclassification consists of a $5,516 increase for the offset to the Corporate reclassification within this line item, partially offset by a decrease applicable to North America of $4,015 for the marketing and advertising expense reclassifications.

(2) See Note 10 to the Condensed Consolidated Statement of Operations for presentation of segment information.

	For the Six Months Ended, December 31, 2011
	North America						Corporate
	Prior Presentation		Reclassification		As Presented(2)		Prior Presentation		Reclassification			As Presented(2)
	(Dollars in thousands)						(Dollars in thousands)
General and administrative (1)	$	58,290	$	4,440	$	62,730	$	72,241	$	(11,707	)	$	60,534
Rent	146,901		312		147,213		700		(312		)	388
Depreciation and amortization	35,662		1,162		36,824		21,163		(1,162		)	20,001

(1) The North America general and administrative reclassification consists of a $11,707 increase for the offset to the Corporate reclassification within this line item, partially offset by a decrease of $7,267 applicable to North America for the marketing and advertising expense reclassification above.

(2) See Note 10 to the Condensed Consolidated Statement of Operations for presentation of segment information.

Stock-Based Employee Compensation

Stock-Based Employee Compensation:

During the six months ended December 31, 2012, the Company granted 118,062 restricted stock awards (RSAs), 195,663 restricted stock units (RSUs), 596,157 equity-based stock appreciation rights (SARs), and 199,041 performance share units (PSUs). The Company did not have significant grants for the three months ended December 31, 2012. All options granted relate to stock option plans that have been approved by the shareholders of the Company.

Total compensation cost for stock-based payment arrangements totaled $1.5 and $2.2 million for the three months ended December 31, 2012 and 2011, respectively, and $3.3 and $4.6 million for the six months ended December 31, 2012 and 2011, respectively.

Goodwill

Goodwill:

As of the fiscal year 2012 annual impairment testing of goodwill, the estimated fair value of the Promenade salon concept and Hair Restoration Centers reporting units exceeded the carrying value by approximately 14.0 and 12.0 percent, respectively. The respective fair values of the Company’s remaining reporting units exceeded their carrying values by greater than 20.0 percent. While the Company has determined that the estimated fair value of Promenade is appropriate based on the historical level of revenue growth, operating income and cash flows, it is reasonably likely that Promenade may experience additional impairment in future periods. As previously disclosed, the Company has agreed to sell the Hair Restoration Centers reporting unit in fiscal year 2013; however, until this reporting unit is sold, it is reasonably likely that there could be impairment of the Hair Restoration Centers reporting unit’s goodwill in future periods. See Note 2 to the Condensed Consolidated Financial Statements for details of Hair Restoration Centers reporting unit’s goodwill balance. The term “reasonably likely” refers to an occurrence that is more than remote but less than probable in the judgment of the Company. Because some of the inherent assumptions and estimates used in determining the fair value of each reporting unit are outside the control of management, changes in these underlying assumptions can adversely impact fair value. Potential impairment of a portion or all of the carrying value of goodwill for the Promenade salon concept and Hair Restoration Centers reporting units is dependent on many factors and cannot be predicted with certainty.

As of December 31, 2012, the Company’s estimated fair value, as determined by the sum of our reporting units’ fair value, reconciled to within a reasonable range of our market capitalization which included an assumed control premium. The Company concluded that there were no triggering events requiring the Company to perform an interim goodwill impairment test between the annual impairment testing and December 31, 2012.

A summary of the Company’s goodwill balance as of December 31, 2012 and June 30, 2012 by reporting unit is as follows:

Reporting Unit	As of December 31, 2012		As of June 30, 2012
	(Dollars in thousands)
Regis	$	35,944	$	35,910
MasterCuts	4,652		4,652
SmartStyle	48,719		48,558
Supercuts	129,630		129,621
Promenade	244,525		243,538
Total	$	463,470	$	462,279

See Note 5 to the Condensed Consolidated Financial Statements for further details on the Company’s goodwill balance.

Property and Equipment

Property and Equipment:

Historically, because of the Company’s large size and scale requirements it had been necessary for the Company to internally develop and support its own proprietary point-of-sale (POS) information system. During the fourth quarter of fiscal year 2011, the Company identified a third party POS alternative. At June 30, 2011 and throughout fiscal year 2012, the Company reassessed and adjusted the remaining useful life of the Company’s internally developed POS software.  As of June 30, 2012, the internally developed POS information system was fully depreciated. Depreciation expense related to the internally developed POS information system totaled $7.0 million and $16.3 million during the three and six months ended December 31, 2011, respectively.

During the first quarter of fiscal year 2013, the Company decided the previously identified third party POS alternative would only be utilized in United Kingdom. The Company reviewed the previously identified third party POS alternative capitalized software carrying value for impairment at September 30, 2012 and December 31, 2012. As a result of the Company’s long-lived asset impairment testing for this asset grouping in the United Kingdom, no impairment charges were recorded. There was no adjustment to the useful life as the Company expects to fully utilize the previously identified third party POS alternative in the United Kingdom salons. The Company is currently implementing another third party POS solution for salons in North America.

XML

Document and Entity Information	6 Months Ended
	Dec. 31, 2012	Jan. 28, 2013
Document and Entity Information
Entity Registrant Name	REGIS CORP
Entity Central Index Key	0000716643
Document Type	10-Q
Document Period End Date	Dec. 31, 2012
Amendment Flag	false
Current Fiscal Year End Date	--06-30
Entity Current Reporting Status	Yes
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		56,600,519
Document Fiscal Year Focus	2013
Document Fiscal Period Focus	Q2

XML

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

6 Months Ended

Dec. 31, 2012

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

Schedule of impact of the reclassification

	For the Three Months Ended, December 31, 2011
	Prior Presentation(1)		Reclassification			As Presented
			(Dollars in thousands)
Cost of service	$	231,669	$	(277	)	$	231,392
Site operating expenses	46,825		4,641			51,466
General and administrative	67,006		(4,364		)	62,642

	For the Six Months Ended, December 31, 2011
	Prior Presentation(1)		Reclassification			As Presented
			(Dollars in thousands)
Cost of service	$	467,638	$	(581	)	$	467,057
Site operating expenses	97,796		8,481			106,277
General and administrative	136,412		(7,900		)	128,512

(1)  Prior presentation amounts exclude amounts related to discontinued operations.  See Note 2 to the Condensed Consolidated Statement of Operations.

Schedule of impact of the reclassification, excluding discontinued operations, by reportable segments

	For the Three Months Ended, December 31, 2011
	North America						Corporate
	Prior Presentation		Reclassification		As Presented(2)		Prior Presentation		Reclassification			As Presented(2)
	(Dollars in thousands)						(Dollars in thousands)
General and administrative (1)	$	28,584	$	1,501	$	30,085	$	35,466	$	(5,516	)	$	29,950
Rent	73,686		147		73,833		503		(147		)	356
Depreciation and amortization	17,692		591		18,283		9,642		(591		)	9,051

(1) The North America general and administrative reclassification consists of a $5,516 increase for the offset to the Corporate reclassification within this line item, partially offset by a decrease applicable to North America of $4,015 for the marketing and advertising expense reclassifications.

(2) See Note 10 to the Condensed Consolidated Statement of Operations for presentation of segment information.

	For the Six Months Ended, December 31, 2011
	North America						Corporate
	Prior Presentation		Reclassification		As Presented(2)		Prior Presentation		Reclassification			As Presented(2)
	(Dollars in thousands)						(Dollars in thousands)
General and administrative (1)	$	58,290	$	4,440	$	62,730	$	72,241	$	(11,707	)	$	60,534
Rent	146,901		312		147,213		700		(312		)	388
Depreciation and amortization	35,662		1,162		36,824		21,163		(1,162		)	20,001

(1) The North America general and administrative reclassification consists of a $11,707 increase for the offset to the Corporate reclassification within this line item, partially offset by a decrease of $7,267 applicable to North America for the marketing and advertising expense reclassification above.

(2) See Note 10 to the Condensed Consolidated Statement of Operations for presentation of segment information.

Schedule of goodwill by reporting unit

Reporting Unit	As of December 31, 2012		As of June 30, 2012
	(Dollars in thousands)
Regis	$	35,944	$	35,910
MasterCuts	4,652		4,652
SmartStyle	48,719		48,558
Supercuts	129,630		129,621
Promenade	244,525		243,538
Total	$	463,470	$	462,279

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CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended				6 Months Ended
	Dec. 31, 2012		Dec. 31, 2011		Dec. 31, 2012		Dec. 31, 2011
Revenues:
Service	$ 388,286		$ 404,025		$ 781,702		$ 819,042
Product	108,236		112,900		210,520		219,673
Royalties and fees	9,643		9,213		19,303		18,769
Total revenues	506,165		526,138		1,011,525		1,057,484
Operating expenses:
Cost of service	234,265		231,392		466,793		467,057
Cost of product	55,064		57,007		108,196		110,030
Site operating expenses	49,872		51,466		102,219		106,277
General and administrative	55,795		62,642		111,667		128,512
Rent	80,555		83,249		162,054		165,425
Depreciation and amortization	21,891		28,446		42,600		59,243
Total operating expenses	497,442		514,202		993,529		1,036,544
Operating income	8,723		11,936		17,996		20,940
Other income (expense):
Interest expense	(6,649)		(7,203)		(13,478)		(14,563)
Interest income and other, net	601		2,651		35,213		3,969
Income before income taxes and equity in (loss) income of affiliated companies	2,675		7,384		39,731		10,346
Income taxes	(1,085)		(543)		(4,071)		(1,752)
Equity in (loss) income of affiliated companies, net of income taxes	(17,709)		5,059		(17,132)		8,929
(Loss) income from continuing operations	(16,119)		11,900		18,528		17,523
Income (loss) from discontinued operations, net of taxes	3,853		(69,327)		7,630		(66,613)
Net (loss) income	$ (12,266)		$ (57,427)		$ 26,158		$ (49,090)
Basic:
(Loss) income from continuing operations (in dollars per share)	$ (0.28)		$ 0.21		$ 0.32		$ 0.31
Income (loss) from discontinued operations (in dollars per share)	$ 0.07		$ (1.22)		$ 0.13		$ (1.17)
Net (loss) income per share, basic (in dollars per share)	$ (0.22)	[1]	$ (1.01)	[1]	$ 0.46	[1]	$ (0.86)	[1]
Diluted:
(Loss) income from continuing operations (in dollars per share)	$ (0.28)		$ 0.20		$ 0.32		$ 0.31
Income (loss) from discontinued operations (in dollars per share)	$ 0.07		$ (1.01)		$ 0.13		$ (1.17)
Net (loss) income per share, diluted (in dollars per share)	$ (0.22)	[1]	$ (0.81)	[1]	$ 0.46	[1]	$ (0.86)	[1]
Weighted average common and common equivalent shares outstanding:
Basic (in shares)	56,794		56,857		57,043		56,853
Diluted (in shares)	56,794		68,417		57,125		57,159
Cash dividends declared per common share (in dollars per share)	$ 0.06		$ 0.06		$ 0.12		$ 0.12

[1] Total is a recalculation; line items calculated individually may not sum to total due to rounding.

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ACQUISITIONS, INVESTMENT IN AND LOANS TO AFFILIATES:

6 Months Ended

Dec. 31, 2012

ACQUISITIONS, INVESTMENT IN AND LOANS TO AFFILIATES:

ACQUISITIONS, INVESTMENT IN AND LOANS TO AFFILIATES:

6. ACQUISITIONS, INVESTMENT IN AND LOANS TO AFFILIATES:

Acquisitions

The Company did not make any acquisitions during the six months ended December 31, 2012. During the six months ended December 31, 2011, the Company made salon acquisitions and the purchase prices have been allocated to assets acquired and liabilities assumed based on their estimated fair values at the dates of acquisition. These acquisitions individually and in the aggregate are not material to the Company’s operations. Operations of the acquired companies have been included in the operations of the Company since the date of the respective acquisition.

On July 1, 2011, the Company acquired 31 franchise salon locations through its acquisition of a 60.0 percent ownership interest in Roosters for $2.3 million. The purchase agreement contains a right, Roosters Equity Put, to require the Company to purchase additional ownership interest in Roosters between specified dates in 2012 to 2015, and an option, Roosters Equity Call, whereby the Company can acquire additional ownership interest in Roosters beginning in 2015. The acquisition price was determined based on a multiple of the earnings before interest, taxes, depreciation and amortization of Roosters for a trailing twelve month period adjusted for certain items as defined in the agreement which is intended to approximate fair value.

Total assets, total liabilities and total shareholders’ equity of Roosters as of December 31, 2012 were $6.0, $2.1 and $3.9 million, respectively. Net income (loss) attributable to the noncontrolling interest in Roosters was less than $0.1 and ($0.1) million for the three and six months ended December 31, 2012.  Net loss attributable to the noncontrolling interest in Roosters was less than ($0.1) and ($0.1) million for the three and six months ended December 31, 2011. Net income (loss) attributable to the noncontrolling interest in Roosters is recorded in interest income and other, net within the Condensed Consolidated Statement of Operations. Shareholders’ equity attributable to the noncontrolling interest in Roosters was $1.6 million as of December 31, 2012 and was recorded in retained earnings within the Condensed Consolidated Balance Sheet.

Investment in and loans to affiliates

The table below presents the carrying amount of investments in and loans to affiliates as of December 31, 2012 and June 30, 2012:

	December 31, 2012		June 30, 2012
	(Dollars in thousands)
Empire Education Group, Inc.	$	41,921	$	59,683
Provalliance	—		101,304
MY Style	249		—
	$	42,170	$	160,987

The table below presents the notes receivable from affiliates as of December 31, 2012 and June 30, 2012 recorded within other current assets on the Condensed Consolidated Balance Sheet:

	December 31, 2012		June 30, 2012
	(Dollars in thousands)
Empire Education Group, Inc.	$	—	$	26,412
MY Style	610		2,251
	$	610	$	28,663

Empire Education Group, Inc.

On August 1, 2007, the Company contributed its 51 wholly-owned accredited cosmetology schools to Empire Education Group, Inc. (EEG) in exchange for a 49.0 percent equity interest in EEG. In January 2008, the Company’s effective ownership interest increased to 55.1 percent related to the buyout of EEG’s minority interest shareholder. EEG operates 108 accredited cosmetology schools.

During the three months ended December 31, 2012, to reflect the continuation of declining enrollment, revenue and profitability in the for-profit secondary educational market, EEG updated its budgeted financial projections for future periods. As a result, the Company recorded an additional $17.9 million other than temporary impairment charge on its investment in EEG. The Company did not receive a tax benefit on the impairment charge. The exposure to loss related to the Company’s involvement with EEG is the carrying value of the investment and the guarantee of EEG letters of credit totaling less than $0.5 million. Due to economic and other factors, the Company may be required to record additional impairment charges related to its investment in EEG and such impairments could be material to the Company’s consolidated balance sheet and results of operations. In addition, EEG may be required to record impairment charges related to long-lived assets and goodwill, and our share of such impairment charges could be material to the Company’s consolidated balance sheet and results of operations.  The Company’s share of EEG’s goodwill balances as of December 31, 2012 is approximately $16 million. Based on the Company’s work associated with the investment impairment recorded during the three months ended December 31, 2012, the Company’s estimate of EEG’s fair value exceeds carrying value by 5%. Any meaningful underperformance against plan or reduced outlook by EEG, changes to the carrying value of EEG or further erosion in valuations of the for—profit secondary educational market could lead to a goodwill impairment charge recorded by EEG for which the Company would record 55.1% of the impairment given the Company’s present ownership.

During the three months ended December 31, 2012 and 2011, the Company recorded $0.2 and $1.5 million, respectively, of equity earnings related to its investment in EEG. During the six months ended December 31, 2012 and 2011, the Company recorded $0.1 and $2.5 million, respectively, of equity earnings related to its investment in EEG.

The Company previously provided EEG with a $15.0 million revolving credit facility and outstanding loan, both of which matured during the three months ended December 31, 2012.  During the three months ended December 30, 2012 and 2011, the Company recorded less than $0.1 million of interest income related to the loan and revolving credit facility. During the six months ended December 31, 2012 and 2011, the Company recorded less than $0.1 and $0.3 million, respectively, of interest income related to the loan and revolving credit facility. In addition, the Company received $0.8 and $26.4 million in principal payments on the loan and revolving credit facility during the three and six months ended December 31, 2012, respectively.

Provalliance

On April 9, 2012, the Company entered into the Agreement to sell the Company’s 46.7 percent equity interest in Provalliance to the Provost Family for a purchase price of €80 million. The transaction closed on September 27, 2012. During the three months ended September 30, 2012 the Company recorded a $0.6 million decrease in the fair value of the Provalliance Equity Put that automatically terminated upon closing of the share purchase agreement. Due to the sale of the Company’s investment in Provalliance, the Company has liquidated its foreign entities with Euro denominated operations.  During the three months ended September 30, 2012, the Company recognized $33.8 million from accumulated other comprehensive income into earnings, primarily foreign currency gain as a result of the liquidated Euro denominated operations.

MY Style

In April 2007, the Company purchased exchangeable notes issued by Yamano Holding Corporation (Exchangeable Note) and a loan obligation of a Yamano Holdings subsidiary, MY Style, formally known as Beauty Plaza Co. Ltd., (MY Style Note) for an aggregate amount of $11.3 million (1.3 billion Yen as of April 2007). The Exchangeable Note contained an option that the Company exercised during the three months ended September 30, 2012 by exchanging a portion (21,700,000 Yen or $0.3 million) of the Exchangeable Note for 27.1 percent of the 800 outstanding shares of common stock of MY Style. The Company accounts for the 27.1 percent ownership interest in MY Style as a cost method investment. The Company has no influence over the operating and financial policies of MY Style as the Company does not have representation on MY Style’s board of directors and is a minority shareholder with no voting influence compared to Yamano Holding Corporation’s super-majority voting interest.

The $0.6 million outstanding MY Style Note as of December 31, 2012 due in May 2013 is in good standing with no associated valuation allowance. All foreign currency transaction gains and losses on the MY Style Note are recorded through other income within the Condensed Consolidated Statement of Operations. The foreign currency transaction (loss) gain was less than ($0.1) and $0.6 million during the six months ended December 31, 2012 and 2011, respectively. The exposure to loss related to the Company’s involvement with MY Style is the carrying value of the outstanding note and investment in MY Style.

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GOODWILL AND OTHER INTANGIBLES:

6 Months Ended

Dec. 31, 2012

GOODWILL AND OTHER INTANGIBLES:

GOODWILL AND OTHER INTANGIBLES:

5. GOODWILL AND OTHER INTANGIBLES:

The table below contains details related to the Company’s recorded goodwill as of December 31, 2012 and June 30, 2012:

	Salons
	North America			International			Consolidated
				(Dollars in thousands)
Gross goodwill at June 30, 2012	$	717,466		$	41,661		$	759,127
Accumulated impairment losses	(255,187		)	(41,661		)	(296,848		)
Net goodwill at June 30, 2012	462,279			—			462,279
Goodwill acquired	—			—			—
Translation rate adjustments	1,191			—			1,191
Gross goodwill at December 31, 2012	718,657			41,661			760,318
Accumulated impairment losses	(255,187		)	(41,661		)	(296,848		)
Net goodwill at December 31, 2012	$	463,470		$	—		$	463,470

The table below presents other intangible assets as of December 31, 2012 and June 30, 2012:

	December 31, 2012							June 30, 2012
			Accumulated							Accumulated
	Cost		Amortization (1)			Net		Cost		Amortization (1)			Net
						(Dollars in thousands)
Amortized intangible assets:
Brand assets and trade names	$	9,651	$	(3,173	)	$	6,478	$	9,494	$	(2,960	)	$	6,534
Franchise agreements	11,578		(6,841		)	4,737		11,398		(6,494		)	4,904
Lease intangibles	14,832		(6,248		)	8,584		14,796		(5,862		)	8,934
Non-compete agreements	212		(138		)	74		207		(117		)	90
Other	4,754		(1,734		)	3,020		4,533		(1,600		)	2,933
	$	41,027	$	(18,134	)	$	22,893	$	40,428	$	(17,033	)	$	23,395

(1) Balance sheet accounts are converted at the applicable exchange rates effective as of the reported balance sheet dates, while income statement accounts are converted at the average exchange rates for the year-to-date periods presented.

Total amortization expense related to the amortizable intangible assets was approximately $0.5 million during each of the three month periods ended December 31, 2012 and 2011, and $0.9 and $1.0 million during the six month periods ended December 31, 2012 and 2011, respectively.  As of December 31, 2012, future estimated amortization expense related to amortizable intangible assets is estimated to be:

Fiscal Year	(Dollars in thousands)
2013 (Remainder: six-month period)	$	880
2014	1,671
2015	1,647
2016	1,616
2017	1,611

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FINANCING ARRANGEMENTS: (Tables)

6 Months Ended

Dec. 31, 2012

FINANCING ARRANGEMENTS:

Schedule of long-term debt

		Interest rate percentage		Amounts outstanding
	Maturity Dates	December 31, 2012	June 30, 2012	December 31, 2012			June 30, 2012
	(fiscal year)			(Dollars in thousands)
Senior term notes (1)	2013 - 2018	6.69 - 8.50%	6.69 - 8.50%	$	93,571		$	111,429
Convertible senior notes	2015	5.00	5.00	163,738			161,134
Revolving credit facility (1)	2016	—	—	—			—
Equipment and leasehold notes payable	2015 - 2016	4.90 - 8.75	4.90 - 8.75	11,620			14,780
Other notes payable	2013	8.00	5.75 - 8.00	54			331
				268,983			287,674
Less current portion				(28,950		)	(28,937		)
Long-term portion				$	240,033		$	258,737

(1) During the three months ended December 31, 2012 the Company amended its debt agreements to remove covenants related to specified minimum net worth levels.  The Company was in compliance with all covenants and requirements of its financing arrangements as of and during the three months ended December 31, 2012.

Schedule of details related to the Company's debt

	For the Six Months Ended December 31,
Total Debt	2012			2011
	(Dollars in Thousands)
Balance at June 30,	$	287,674		$	313,411
Repayment of long-term debt and capital lease obligations	(8,905		)	(9,669		)
Amortized debt discount	1,288			1,183
Other	4			(910		)
Balance at September 30,	$	280,061		$	304,015
Repayment of long-term debt and capital lease obligations	(12,393		)	(12,321		)
Amortized debt discount	1,316			1,208
Other	(1		)	(21		)
Balance at December 31,	$	268,983		$	292,881

Schedule of the debt information for the convertible senior notes

	As of December 31,
Convertible Senior Notes Due 2014	2012			2011
	(Dollars in thousands)
Principal amount on the convertible senior notes	$	172,500		$	172,500
Unamortized debt discount	(8,762		)	(13,861		)
Net carrying amount of convertible debt	$	163,738		$	158,639

Schedule of interest rate and interest expense on convertible senior notes

	For the Six Months Ended December 31,
Convertible Senior Notes Due 2014	2012		2011
	(Dollars in thousands)
Interest cost related to contractual interest coupon — 5.0%	$	4,313	$	4,313
Interest cost related to amortization of the discount	2,604		2,391
Total interest cost	$	6,917	$	6,704

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DISCONTINUED OPERATIONS: (Tables)

6 Months Ended

Dec. 31, 2012

DISCONTINUED OPERATIONS:

Summarized assets and liabilities of discontinued hair restoration service operations

	December 31, 2012		June 30, 2012
	(Dollars in thousands)
Current assets held for sale
Receivables, net	$	2,504	$	2,624
Inventories	7,276		6,165
Deferred income taxes	3,229		2,892
Other current assets	3,807		5,319
Total current assets held for sale	16,816		17,000
Property and equipment, net	22,261		17,261
Goodwill	74,377		74,376
Other intangibles, net	78,132		78,395
Investment in affiliates	5,189		5,189
Total long-term assets held for sale	179,959		175,221
Total assets held for sale	$	196,775	$	192,221
Current liabilities related to assets held for sale
Accounts payable	$	3,173	$	2,564
Accrued expenses	13,365		15,556
Total current liabilities related to assets held for sale	16,538		18,120
Long-term liabilities related to assets held for sale	28,781		28,007
Total liabilities related to assets held for sale	$	45,319	$	46,127

Schedule of the results of operations of discontinued Hair Club operations

	For the Periods Ended December 31,
	Three Months						Six Months
	2012			2011			2012			2011
	(Dollars in thousands)
Revenues	$	38,230		$	37,140		$	77,180		$	74,543
Income (loss) from discontinued operations, before income taxes	5,994			(73,545		)	11,866			(69,479		)
Income tax (provision) benefit on discontinued operations	(2,378		)	3,996			(4,676		)	2,482
Equity in income of affiliated companies, net of tax	237			222			440			384
Income (loss) from discontinued operations, net of income taxes	$	3,853		$	(69,327	)	$	7,630		$	(66,613	)

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INCOME TAXES:

6 Months Ended

Dec. 31, 2012

INCOME TAXES:

INCOME TAXES:

9. INCOME TAXES:

The determination of the annual effective income tax rate is based upon a number of significant estimates and judgments, including the estimated annual pre-tax income of the Company in each tax jurisdiction in which it operates and the development of tax planning strategies during the year.  In addition, the Company’s interim tax expense can be impacted by changes in tax rates or laws, the finalization of tax audits or reviews, as well as other factors that cannot be predicted with certainty.  As such, there can be significant volatility in interim tax provisions.

During the three and six months ended December 31, 2012, the Company recognized tax expense of $1.1 and $4.1 million, respectively, with corresponding effective tax rates of 40.6 and 10.2 percent utilizing the estimated annual effective tax rate method. This is compared to tax expense of $0.5 and $1.8 million with corresponding effective tax rates of 7.4 and 16.9 percent in the comparable periods of the prior year utilizing the year-to-date method.

The effective income tax rate for the three months ended December 31, 2012 is higher than the effective income tax rate for the three months ended December 31, 2011 due to employment credits related to the Small Business and Work Opportunity Tax Act of 2007 that were recognized in the prior year. Because these employment credits expired as of December 31, 2011, the income tax rate for the three months ended December 31, 2012 does not include any tax benefit for employment credits.

The effective income tax rate for the six months ended December 31, 2012 is lower than the effective income tax rate for the comparable period of the prior year due to the recognition of a $33.8 million foreign currency translation gain which was primarily non-taxable.

On January 2, 2013, the American Taxpayer Relief Act of 2012 was enacted. This Act retroactively extends the Work Opportunity Tax Credit from January 1, 2012 through December 31, 2013. As a result, the Company will include an estimate of the tax benefit for the retroactive extension of the employment credits in the calculation of its income tax rate beginning in the quarter ended March 31, 2013. Depending upon the amount of credits earned and the relative amount of pre-tax book income, the benefit to be recorded may significantly affect the Company’s tax rate.

The Company accrues for the effects of open uncertain tax positions and the related potential penalties and interest.  There were no material adjustments to our recorded liability for unrecognized tax benefits during the three and six months ended December 31, 2012.  It is reasonably possible that the amount of the unrecognized tax benefit with respect to certain of our unrecognized tax positions will increase or decrease during the next 12 months. However, we do not expect the change to have a significant effect on our consolidated results of operations or financial position.

The Company files tax returns and pays tax primarily in the United States, Canada, the United Kingdom, and Luxembourg as well as states, cities, and provinces within these jurisdictions. In the United States, fiscal years 2009 and after remain open for federal tax audit. The Company’s United States federal income tax returns for the fiscal years 2010 and 2011 are currently under audit. For state tax audits, the statute of limitations generally spans three to four years, resulting in a number of states remaining open for tax audits back to fiscal year 2008. However, the Company is under audit in a number of states in which the statute of limitations has been extended to fiscal years 2006 and forward. Internationally (including Canada), the statute of limitations for tax audits varies by jurisdiction, but generally ranges from three to five years.

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COMMITMENTS AND CONTINGENCIES:

6 Months Ended

Dec. 31, 2012

COMMITMENTS AND CONTINGENCIES:

COMMITMENTS AND CONTINGENCIES:

7. COMMITMENTS AND CONTINGENCIES:

The Company is a defendant in various lawsuits and claims arising out of the normal course of business. Like certain other large retail employers, the Company has been faced with allegations of purported class-wide consumer and wage and hour violations. In addition, the Company is a nominal defendant, and nine current and former directors and officers of the Company are named defendants, in a shareholder derivative action in Minnesota state court. The derivative shareholder alleges that the individual defendants breached their fiduciary duties to the Company in connection with their approval of certain executive compensation arrangements and certain related party transactions. A Special Litigation Committee has been formed per the direction of the presiding judge and is investigating these claims. The Company is working with outside counsel and is cooperating with the investigation. Litigation is inherently unpredictable and the outcome of these matters cannot presently be determined. Although the actions are being vigorously defended, the Company could in the future incur judgments or enter into settlements of claims that could have a material adverse effect on its results of operations in any particular period.

In fiscal year 2009 the Company sold its Trade Secret concept (Trade Secret). The Company reported Trade Secret as a discontinued operation. The exposure to loss related to the Company’s involvement with Trade Secret is the guarantee of certain operating leases that have future minimum rents of approximately $2.0 million. The Company has determined the exposure to the risk of loss on the guarantee of the operating leases to be immaterial to the financial statements.

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FINANCING ARRANGEMENTS:

6 Months Ended

Dec. 31, 2012

FINANCING ARRANGEMENTS:

FINANCING ARRANGEMENTS:

8. FINANCING ARRANGEMENTS:

The Company’s long-term debt as of December 31, 2012 and June 30, 2012 consisted of the following:

		Interest rate percentage		Amounts outstanding
	Maturity Dates	December 31, 2012	June 30, 2012	December 31, 2012			June 30, 2012
	(fiscal year)			(Dollars in thousands)
Senior term notes (1)	2013 - 2018	6.69 - 8.50%	6.69 - 8.50%	$	93,571		$	111,429
Convertible senior notes	2015	5.00	5.00	163,738			161,134
Revolving credit facility (1)	2016	—	—	—			—
Equipment and leasehold notes payable	2015 - 2016	4.90 - 8.75	4.90 - 8.75	11,620			14,780
Other notes payable	2013	8.00	5.75 - 8.00	54			331
				268,983			287,674
Less current portion				(28,950		)	(28,937		)
Long-term portion				$	240,033		$	258,737

(1) During the three months ended December 31, 2012 the Company amended its debt agreements to remove covenants related to specified minimum net worth levels.  The Company was in compliance with all covenants and requirements of its financing arrangements as of and during the three months ended December 31, 2012.

The table below contains details related to the Company’s financing arrangements during the six months ended December 31, 2012 and 2011:

	For the Six Months Ended December 31,
Total Debt	2012			2011
	(Dollars in Thousands)
Balance at June 30,	$	287,674		$	313,411
Repayment of long-term debt and capital lease obligations	(8,905		)	(9,669		)
Amortized debt discount	1,288			1,183
Other	4			(910		)
Balance at September 30,	$	280,061		$	304,015
Repayment of long-term debt and capital lease obligations	(12,393		)	(12,321		)
Amortized debt discount	1,316			1,208
Other	(1		)	(21		)
Balance at December 31,	$	268,983		$	292,881

Private Shelf Agreement

At December 31, 2012 and June 30, 2012, the Company had $93.6 and $111.4 million, respectively, in unsecured, fixed rate, senior term notes outstanding under a Private Shelf Agreement, of which $22.1 million were classified as part of the current portion of the Company’s long-term debt at December 31, 2012 and June 30, 2012. The notes require quarterly payments, and final maturity dates range from June 2013 through December 2017.

Convertible Senior Notes

In July 2009, the Company issued $172.5 million aggregate principal amount of 5.0 percent convertible senior notes due July 2014. The notes are unsecured, senior obligations of the Company and interest is payable semi-annually in arrears on January 15 and July 15 of each year at a rate of 5.0 percent per year. At issuance, the notes were convertible, subject to certain conditions further described below, at an initial conversion rate of 64.6726 shares of the Company’s common stock per $1,000 principal amount of notes (representing an initial conversion price of approximately $15.46 per share of the Company’s common stock). As of December 31, 2012, the conversion rate was 65.2891 shares of the Company’s common stock per $1,000 principal amount of notes (representing a conversion price of approximately $15.32 per share of the Company’s common stock).

Holders may convert their notes at their option prior to April 15, 2014 if the Company’s stock price meets certain price triggers or upon the occurrence of specified corporate events as defined in the convertible senior note agreement. On or after April 15, 2014, holders may convert each of their notes at their option at any time prior to the maturity date for the notes.

The Company has the choice of net-cash settlement, settlement in its own shares or a combination thereof and concluded the conversion option is indexed to its own stock. As a result, the Company allocated $24.7 million of the $172.5 million principal amount of the convertible senior notes to equity, which resulted in a $24.7 million debt discount. The allocation was based on measuring the fair value of the convertible senior notes using a discounted cash flow analysis. The discount rate was based on an estimated credit rating for the Company. The estimated fair value of the convertible senior notes was $147.8 million, and the resulting $24.7 million debt discount is being amortized over the period the convertible senior notes are expected to be outstanding, as additional non-cash interest expense. The combined debt discount amortization and the contractual interest coupon resulted in an effective interest rate on the convertible debt of 8.9 percent.

The following table provides debt information for the convertible senior notes:

	As of December 31,
Convertible Senior Notes Due 2014	2012			2011
	(Dollars in thousands)
Principal amount on the convertible senior notes	$	172,500		$	172,500
Unamortized debt discount	(8,762		)	(13,861		)
Net carrying amount of convertible debt	$	163,738		$	158,639

The following table provides interest rate and interest expense amounts related to the convertible senior notes:

	For the Six Months Ended December 31,
Convertible Senior Notes Due 2014	2012		2011
	(Dollars in thousands)
Interest cost related to contractual interest coupon — 5.0%	$	4,313	$	4,313
Interest cost related to amortization of the discount	2,604		2,391
Total interest cost	$	6,917	$	6,704

Revolving Credit Facility

As of December 31, 2012 and June 30, 2012, the Company had no outstanding borrowings under this facility. Additionally, the Company had outstanding standby letters of credit under the facility of $26.6 and $26.1 million at December 31, 2012 and June 30, 2012, respectively, primarily related to its self-insurance program. Unused available credit under the facility at December 31, 2012 and June 30, 2012 was $373.4 and $373.9 million, respectively.

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SEGMENT INFORMATION:

6 Months Ended

Dec. 31, 2012

SEGMENT INFORMATION:

SEGMENT INFORMATION:

10. SEGMENT INFORMATION:

As of December 31, 2012, the Company owned, franchised, or held ownership interests in approximately 10,000 worldwide locations. The Company’s locations consisted of 9,259 North American salons (located in the United States, Canada and Puerto Rico), 381 international salons (located primarily in the United Kingdom), and approximately 245 locations in which the Company maintains an ownership interest through the Company’s investment in affiliates. See Note 6 to the Condensed Consolidated Financial Statements for discussion of the Company’s investment in affiliates.

The Company operates its North American salon operations through five primary concepts: Regis Salons, MasterCuts, SmartStyle, Supercuts and Promenade salons. The concepts offer similar products and services, concentrate on the mass market consumer marketplace and have consistent distribution channels. All company-owned and franchise salons within North America are located in high traffic, retail shopping locations that attract mass market consumers, and the individual salons display similar long-term economic characteristics. The salons share interdependencies and a common support base.

The Company operates its international salon operations, primarily in the United Kingdom, through three primary concepts: Regis, Supercuts, and Sassoon salons. Consistent with North America, the international concepts offer similar products and services, concentrate on the mass market consumer marketplace and have consistent distribution channels. All of the international salon concepts are company-owned and are located in malls, leading department stores, and high traffic locations. Individual salons display similar long-term economic characteristics. The salons share interdependencies and a common support base.

Based on the way the Company manages its business, it has reported its North American salons and international salons as two separate reportable segments.

Financial information for the Company’s reportable segments is shown in the following tables:

	For the Three Months Ended December 31, 2012(1)(2)
	Salons				Unallocated
	North America		International		Corporate			Consolidated
			(Dollars in thousands)
Revenues:
Service	$	364,486	$	23,800	$	—		$	388,286
Product	99,273		8,963		—			108,236
Royalties and fees	9,643		—		—			9,643
	473,402		32,763		—			506,165
Operating expenses:
Cost of service	221,562		12,703		—			234,265
Cost of product	50,176		4,888		—			55,064
Site operating expenses	47,417		2,455		—			49,872
General and administrative	30,129		2,499		23,167			55,795
Rent	71,778		8,420		357			80,555
Depreciation and amortization	17,138		1,565		3,188			21,891
Total operating expenses	438,200		32,530		26,712			497,442
Operating income (loss)	35,202		233		(26,712		)	8,723
Other income (expense):
Interest expense	—		—		(6,649		)	(6,649		)
Interest income and other, net	—		—		601			601
Income (loss) from continuing operations before income taxes and equity in (loss) income of affiliated companies	$	35,202	$	233	$	(32,760	)	$	2,675

(1) See Note 2 to the Condensed Consolidated Financial Statements for discussion of the classification of the results of operations of Hair Club as discontinued operations.

(2) See Note 1 to the Condensed Consolidated Financial Statements for discussion of reclassifications of general and administrative, rent and depreciation and amortization between the Company’s Corporate and North America reportable segments.

	For the Three Months Ended December 31, 2011(1)(2)
	Salons				Unallocated
	North America		International		Corporate			Consolidated
			(Dollars in thousands)
Revenues:
Service	$	379,694	$	24,331	$	—		$	404,025
Product	103,162		9,738		—			112,900
Royalties and fees	9,213		—		—			9,213
	492,069		34,069		—			526,138
Operating expenses:
Cost of service	218,270		13,122		—			231,392
Cost of product	51,753		5,254		—			57,007
Site operating expenses	48,758		2,708		—			51,466
General and administrative	30,085		2,607		29,950			62,642
Rent	73,833		9,060		356			83,249
Depreciation and amortization	18,283		1,112		9,051			28,446
Total operating expenses	440,982		33,863		39,357			514,202
Operating income (loss)	51,087		206		(39,357		)	11,936
Other income (expense):
Interest expense	—		—		(7,203		)	(7,203		)
Interest income and other, net	—		—		2,651			2,651
Income (loss) from continuing operations before income taxes and equity in (loss) income of affiliated companies	$	51,087	$	206	$	(43,909	)	$	7,384

(1) See Note 2 to the Condensed Consolidated Financial Statements for discussion of the classification of the results of operations of Hair Club as discontinued operations.

(2) See Note 1 to the Condensed Consolidated Financial Statements for discussion of reclassifications of general and administrative, rent and depreciation and amortization between the Company’s Corporate and North America reportable segments.

	For the Six Months Ended December 31, 2012(1)(2)
	Salons				Unallocated
	North America		International		Corporate			Consolidated
			(Dollars in thousands)
Revenues:
Service	$	734,166	$	47,536	$	—		$	781,702
Product	193,815		16,705		—			210,520
Royalties and fees	19,303		—		—			19,303
	947,284		64,241		—			1,011,525
Operating expenses:
Cost of service	441,793		25,000		—			466,793
Cost of product	99,252		8,944		—			108,196
Site operating expenses	97,013		5,206		—			102,219
General and administrative	61,820		5,017		44,830			111,667
Rent	144,500		16,822		732			162,054
Depreciation and amortization	33,726		2,597		6,277			42,600
Total operating expenses	878,104		63,586		51,839			993,529
Operating income (loss)	69,180		655		(51,839		)	17,996
Other income (expense):
Interest expense	—		—		(13,478		)	(13,478		)
Interest income and other, net	—		—		35,213			35,213
Income (loss) from continuing operations before income taxes and equity in (loss) income of affiliated companies	$	69,180	$	655	$	(30,104	)	$	39,731

(1) See Note 2 to the Condensed Consolidated Financial Statements for discussion of the classification of the results of operations of Hair Club as discontinued operations.

(2) See Note 1 to the Condensed Consolidated Financial Statements for discussion of reclassifications of general and administrative, rent and depreciation and amortization between the Company’s Corporate and North America reportable segments.

	For the Six Months Ended December 31, 2011(1)(2)
	Salons				Unallocated
	North America		International		Corporate			Consolidated
			(Dollars in thousands)
Revenues:
Service	$	769,858	$	49,184	$	—		$	819,042
Product	201,299		18,374		—			219,673
Royalties and fees	18,769		—		—			18,769
	989,926		67,558					1,057,484
Operating expenses:
Cost of service	441,245		25,812		—			467,057
Cost of product	100,197		9,833		—			110,030
Site operating expenses	100,610		5,667		—			106,277
General and administrative	62,730		5,248		60,534			128,512
Rent	147,213		17,824		388			165,425
Depreciation and amortization	36,824		2,418		20,001			59,243
Total operating expenses	888,819		66,802		80,923			1,036,544
Operating income (loss)	101,107		756		(80,923		)	20,940
Other income (expense):
Interest expense	—		—		(14,563		)	(14,563		)
Interest income and other, net	—		—		3,969			3,969
Income (loss) from continuing operations before income taxes and equity in (loss) income of affiliated companies	$	101,107	$	756	$	(91,517	)	$	10,346

(1) See Note 2 to the Condensed Consolidated Financial Statements for discussion of the classification of the results of operations of Hair Club as discontinued operations.

(2) See Note 1 to the Condensed Consolidated Financial Statements for discussion of reclassifications of general and administrative, rent and depreciation and amortization between the Company’s Corporate and North America reportable segments.

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GOODWILL AND OTHER INTANGIBLES: (Details 2) (USD $)	3 Months Ended		6 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2012	Dec. 31, 2011	Jun. 30, 2012
Amortized intangible assets:
Other intangibles, cost	$ 41,027,000		$ 41,027,000		$ 40,428,000
Other intangibles, accumulated amortization	(18,134,000)		(18,134,000)		(17,033,000)
Other intangibles, net	22,893,000		22,893,000		23,395,000
Total amortization expense related to amortizable intangible assets	500,000	500,000	900,000	1,000,000
Future estimated amortization expense related to amortizable intangible assets
2013 (Remainder: six-month period)	880,000		880,000
2014	1,671,000		1,671,000
2015	1,647,000		1,647,000
2016	1,616,000		1,616,000
2017	1,611,000		1,611,000
Brand assets and trade names
Amortized intangible assets:
Other intangibles, cost	9,651,000		9,651,000		9,494,000
Other intangibles, accumulated amortization	(3,173,000)		(3,173,000)		(2,960,000)
Other intangibles, net	6,478,000		6,478,000		6,534,000
Franchise agreements
Amortized intangible assets:
Other intangibles, cost	11,578,000		11,578,000		11,398,000
Other intangibles, accumulated amortization	(6,841,000)		(6,841,000)		(6,494,000)
Other intangibles, net	4,737,000		4,737,000		4,904,000
Lease intangibles
Amortized intangible assets:
Other intangibles, cost	14,832,000		14,832,000		14,796,000
Other intangibles, accumulated amortization	(6,248,000)		(6,248,000)		(5,862,000)
Other intangibles, net	8,584,000		8,584,000		8,934,000
Non-compete agreements
Amortized intangible assets:
Other intangibles, cost	212,000		212,000		207,000
Other intangibles, accumulated amortization	(138,000)		(138,000)		(117,000)
Other intangibles, net	74,000		74,000		90,000
Other
Amortized intangible assets:
Other intangibles, cost	4,754,000		4,754,000		4,533,000
Other intangibles, accumulated amortization	(1,734,000)		(1,734,000)		(1,600,000)
Other intangibles, net	$ 3,020,000		$ 3,020,000		$ 2,933,000

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GOODWILL AND OTHER INTANGIBLES: (Tables)

6 Months Ended

Dec. 31, 2012

GOODWILL AND OTHER INTANGIBLES:

Schedule of goodwill

	Salons
	North America			International			Consolidated
				(Dollars in thousands)
Gross goodwill at June 30, 2012	$	717,466		$	41,661		$	759,127
Accumulated impairment losses	(255,187		)	(41,661		)	(296,848		)
Net goodwill at June 30, 2012	462,279			—			462,279
Goodwill acquired	—			—			—
Translation rate adjustments	1,191			—			1,191
Gross goodwill at December 31, 2012	718,657			41,661			760,318
Accumulated impairment losses	(255,187		)	(41,661		)	(296,848		)
Net goodwill at December 31, 2012	$	463,470		$	—		$	463,470

Schedule of other intangible assets

	December 31, 2012							June 30, 2012
			Accumulated							Accumulated
	Cost		Amortization (1)			Net		Cost		Amortization (1)			Net
						(Dollars in thousands)
Amortized intangible assets:
Brand assets and trade names	$	9,651	$	(3,173	)	$	6,478	$	9,494	$	(2,960	)	$	6,534
Franchise agreements	11,578		(6,841		)	4,737		11,398		(6,494		)	4,904
Lease intangibles	14,832		(6,248		)	8,584		14,796		(5,862		)	8,934
Non-compete agreements	212		(138		)	74		207		(117		)	90
Other	4,754		(1,734		)	3,020		4,533		(1,600		)	2,933
	$	41,027	$	(18,134	)	$	22,893	$	40,428	$	(17,033	)	$	23,395

(1) Balance sheet accounts are converted at the applicable exchange rates effective as of the reported balance sheet dates, while income statement accounts are converted at the average exchange rates for the year-to-date periods presented.

Schedule of future estimated amortization expense related to amortizable intangible assets

Fiscal Year	(Dollars in thousands)
2013 (Remainder: six-month period)	$	880
2014	1,671
2015	1,647
2016	1,616
2017	1,611

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BASIS OF PRESENTATION OF UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (Details 2) (USD $) In Millions, except Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2012	Dec. 31, 2011
Stock-based employees compensation
Total compensation cost	$ 1.5	$ 2.2	$ 3.3	$ 4.6
RSAs
Stock-based employees compensation
Stock granted (in shares)			118,062
RSUs
Stock-based employees compensation
Stock granted (in shares)			195,663
SARs
Stock-based employees compensation
Stock granted (in shares)			596,157
Performance share units
Stock-based employees compensation
Stock granted (in shares)			199,041

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CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE LOSS (Unaudited) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2012	Dec. 31, 2011
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE LOSS
Net (loss) income	$ (12,266)	$ (57,427)	$ 26,158	$ (49,090)
Other comprehensive loss, net of tax:
Foreign currency translation adjustments	(2,178)	(2,089)	4,860	(22,642)
Change in fair market value of financial instruments designated as cash flow hedges		(89)	(23)	357
Reclassification associated with liquidation of foreign entities			(33,842)
Other comprehensive loss	(2,178)	(2,178)	(29,005)	(22,285)
Comprehensive loss	$ (14,444)	$ (59,605)	$ (2,847)	$ (71,375)

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FAIR VALUE MEASUREMENTS:

6 Months Ended

Dec. 31, 2012

FAIR VALUE MEASUREMENTS:

FAIR VALUE MEASUREMENTS:

4. FAIR VALUE MEASUREMENTS:

Fair value measurements are categorized into one of three levels based on the lowest level of significant input used: Level 1 (unadjusted quoted prices in active markets); Level 2 (observable market inputs available at the measurement date, other than quoted prices included in Level 1); and Level 3 (unobservable inputs that cannot be corroborated by observable market data).

Assets and Liabilities that are Measured at Fair Value on a Recurring Basis

The fair value hierarchy requires the use of observable market data when available. In instances in which the inputs used to measure fair value fall into different levels of the fair value hierarchy, the fair value measurement has been determined based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular item to the fair value measurement in its entirety requires judgment, including the consideration of inputs specific to the asset or liability.

The following methods and assumptions were used to estimate the fair value of each class of financial instrument:

Derivative instruments.  The Company’s derivative instrument assets and liabilities historically have consisted of cash flow hedges represented by forward foreign currency contracts. Derivative instruments are classified as Level 2 as the fair value is obtained using observable inputs available for similar liabilities in active markets at the measurement date that are reviewed by the Company. There were no derivative instruments as of December 31, 2012.  The fair value of derivative instruments as of June 30, 2012 was $0.1 million.

Equity put option—Provalliance.  The Company’s merger of the European franchise salon operations with the operations of the Franck Provost Salon Group on January 31, 2008 contained an equity put (Provalliance Equity Put) and an equity call. The instruments were classified as Level 3 as the fair value was determined based on unobservable inputs that could not be corroborated by observable market data.  See Note 6 to the Consolidated Financial Statements for discussion of the share purchase agreement. On September 27, 2012 the share purchase agreement closed in which the Company sold its 46.7 percent equity interest in Provolliance. The fair value of the Provalliance Equity Put decreased from $0.6 million as of June 30, 2012 to zero during the three months ended September 30, 2012 as it automatically terminated upon closing of the share purchase agreement.

Equity put and call options—Roosters.  The purchase agreement for the Company’s acquisition of a 60.0 percent ownership interest in Roosters MGC International LLC (Roosters) on July 1, 2011 contained an equity put (Roosters Equity Put) and an equity call (Roosters Equity Call). The instruments are classified as Level 3 as the fair value is determined based on unobservable inputs that cannot be corroborated by observable market data.   See further discussion within Note 6 to the Consolidated Financial Statements. The Roosters Equity Put and Roosters Equity Call are valued using binomial lattice models that incorporate assumptions including the business enterprise value at that date and future estimates of volatility and earnings before interest, taxes, and depreciation and amortization multiples. The sensitivity of the underlying assumptions to the Roosters Equity Put and Roosters Equity Call is not material to the consolidated financial statements. At December 31, 2012 and June 30, 2012, the fair value of the Roosters Equity Put and Roosters Equity Call were $0.2 and $0.1 million, respectively, and are classified within noncurrent liabilities and other assets, respectively, on the Condensed Consolidated Balance Sheet.

Financial Instruments.  In addition to the financial instruments listed above, the Company’s financial instruments also include cash, cash equivalents, receivables, accounts payable and debt.

The fair value of cash and cash equivalents, receivables and accounts payable approximated the carrying values as of December 31, 2012 and 2011. At December 31, 2012, the estimated fair values and carrying amounts of debt were $285.4 and $269.0 million, respectively. At June 30, 2012, the estimated fair values and carrying amounts of debt were $307.5 and $287.7 million, respectively. The estimated fair value of debt was determined based on internal valuation models, which utilize quoted market prices and interest rates for the same or similar instruments (Level 2).

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

We measure certain assets, including the Company’s equity method investments, tangible fixed assets and goodwill, at fair value on a nonrecurring basis when they are deemed to be other than temporarily impaired. The fair values of our investments are determined based on valuation techniques using the best information available, and may include quoted market prices, market comparables, and discounted cash flow projections.

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BASIS OF PRESENTATION OF UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (Details 3) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Jun. 30, 2012	Dec. 31, 2012
Goodwill,
Minimum excess of fair value over carrying value for reporting units not impaired or likely to be impaired (as a percent)	20.00%
Goodwill	$ 462,279	$ 463,470
Hair Restoration Centers
Goodwill,
Excess of fair value over carrying value (as a percent)	12.00%
Regis
Goodwill,
Goodwill	35,910	35,944
MasterCuts
Goodwill,
Goodwill	4,652	4,652
Smart Style
Goodwill,
Goodwill	48,558	48,719
Supercuts
Goodwill,
Goodwill	129,621	129,630
Promenade
Goodwill,
Excess of fair value over carrying value (as a percent)	14.00%
Goodwill	$ 243,538	$ 244,525

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FINANCING ARRANGEMENTS: (Details) (USD $)	3 Months Ended					6 Months Ended	12 Months Ended	1 Months Ended	6 Months Ended					6 Months Ended	12 Months Ended	6 Months Ended	12 Months Ended
	Dec. 31, 2012	Sep. 30, 2012	Dec. 31, 2011	Sep. 30, 2011	Jun. 30, 2012	Dec. 31, 2012 Senior term notes outstanding under Private Shelf Agreement	Jun. 30, 2012 Senior term notes outstanding under Private Shelf Agreement	Jul. 31, 2009 Convertible senior notes	Dec. 31, 2012 Convertible senior notes	Dec. 31, 2011 Convertible senior notes	Jun. 30, 2012 Convertible senior notes	Dec. 31, 2012 Revolving credit facility	Jun. 30, 2012 Revolving credit facility	Dec. 31, 2012 Equipment and leasehold notes payable	Jun. 30, 2012 Equipment and leasehold notes payable	Dec. 31, 2012 Other notes payable	Jun. 30, 2012 Other notes payable
Long-term debt
Interest rate percentage, minimum						6.69%	6.69%							4.90%	4.90%		5.75%
Interest rate percentage, maximum						8.50%	8.50%							8.75%	8.75%	8.00%	8.00%
Interest rate percentage								5.00%	5.00%		5.00%
Net carrying amount of long-term debt	$ 268,983,000				$ 287,674,000	$ 93,571,000	$ 111,429,000		$ 163,738,000	$ 158,639,000	$ 161,134,000			$ 11,620,000	$ 14,780,000	$ 54,000	$ 331,000
Less current portion	(28,950,000)				(28,937,000)	(22,100,000)	(22,100,000)
Long-term portion	240,033,000				258,737,000
Long-term debt, additional disclosures
Principal amount of long-term debt								172,500,000	172,500,000	172,500,000
Long-term debt conversion ratio								0.0646726	0.0652891
Long-term debt conversion price (in dollars per share)								$ 15.46	$ 15.32
Convertible long-term debt amount allocated to equity								24,700,000
Fair value of long-term debt								147,800,000
Effective interest rate on the convertible debt (as a percent)								8.90%
Unamortized debt discount								(24,700,000)	(8,762,000)	(13,861,000)
Interest cost related to contractual interest coupon									4,313,000	4,313,000
Interest cost related to amortization of the discount	1,316,000	1,288,000	1,208,000	1,183,000					2,604,000	2,391,000
Total interest cost									6,917,000	6,704,000
Outstanding standby letters of credit												26,600,000	26,100,000
Revolving credit facility remaining borrowing capacity												373,400,000	373,900,000
Total debt
Balance at the beginning of period	280,061,000	287,674,000	304,015,000	313,411,000
Repayment of long-term debt and capital lease obligations	(12,393,000)	(8,905,000)	(12,321,000)	(9,669,000)
Amortized debt discount	1,316,000	1,288,000	1,208,000	1,183,000					2,604,000	2,391,000
Other	(1,000)	4,000	(21,000)	(910,000)
Balance at the end of period	$ 268,983,000	$ 280,061,000	$ 292,881,000	$ 304,015,000

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SHAREHOLDERS' EQUITY: (Tables)

6 Months Ended

Dec. 31, 2012

SHAREHOLDERS' EQUITY:

Reconciliation of the net income from continuing operations available to common shareholders and the net income from continuing operations for diluted earnings per share

	For the Periods Ended December 31,
	Three Months					Six Months
	2012			2011		2012		2011
	(Dollars in thousands)
Net (loss) income from continuing operations available to common shareholders	$	(16,119	)	$	11,900	$	18,528	$	17,523
Effect of dilutive securities:
Interest on convertible debt, net of taxes	—			2,078		—		—
Net (loss) income from continuing operations for diluted earnings per share	$	(16,119	)	$	13,978	$	18,528	$	17,523

Reconciliation of shares used in the computation of basic and diluted earnings per share

	For the Periods Ended December 31,
	Three Months		Six Months
	2012	2011	2012	2011
	(Shares in thousands)
Weighted average shares for basic earnings per share	56,794	56,857	57,043	56,853
Effect of dilutive securities:
Dilutive effect of stock-based compensation (1)	—	357	82	306
Dilutive effect of convertible debt	—	11,203	—	—
Weighted average shares for diluted earnings per share	56,794	68,417	57,125	57,159

(1) For the three months ended December 31, 2012, 98,637 common stock equivalents of potentially dilutive common stock were not included in the diluted earnings per share calculation because to do so would have been anti-dilutive.

Awards excluded from earnings per share calculations

	For the Periods Ended December 31,
	Three Months		Six Months
	2012	2011	2012	2011
	(Shares in thousands)		(Shares in thousands)
Basic earnings per share:
RSAs (1)	482	791	482	791
RSUs (1)	189	215	189	215
	671	1,006	671	1,006
Diluted earnings per share:
Stock options (2)	579	810	600	810
SARs (2)	1,001	999	895	999
RSAs (2)	—	6	—	203
RSUs (2)	180	—	93	—
Shares issuable upon conversion of debt (3)	11,255	—	11,247	11,195
	13,015	1,815	12,835	13,207

(1) Shares were not vested

(2) Shares were anti-dilutive

(3) Share equivalents were anti-dilutive for the three and six months ended December 31, 2012 and for the six months ended December 31, 2011.