REGIS CORP (Form: 10-Q, Received: 11/09/2012 11:27:00)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended September 30, 2012

o TRANSITION 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		(I.R.S. Employer
incorporation or organization)		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. (Check one):

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 October 24, 2012:

Common Stock, $.05 par value		57,526,940
Class		Number of Shares

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REGIS CORPORATION

INDEX

Part I.	Financial Information UNAUDITED

	Item 1.	Condensed Consolidated Financial Statements:

		Condensed Consolidated Balance Sheet as of September 30, 2012 and June 30, 2012	3

		Condensed Consolidated Statement of Operations for the three months ended September 30, 2012 and 2011	4

		Condensed Consolidated Statement of Comprehensive Income (Loss) for the three months ended September 30, 2012 and 2011	5

		Condensed Consolidated Statement of Cash Flows for the three months ended September 30, 2012 and 2011	6

		Notes to Condensed Consolidated Financial Statements	7

		Review Report of Independent Registered Public Accounting Firm	28

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	29

	Item 3.	Quantitative and Qualitative Disclosures about Market Risk	45

	Item 4.	Controls and Procedures	46

Part II.	Other Information

	Item 1.	Legal Proceedings	46

	Item 1A.	Risk Factors	46

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	50

	Item 6.	Exhibits	50

	Signatures		51

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PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

REGIS CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEET (Unaudited)

As of September 30, 2012 and June 30, 2012
(Dollars in thousands, except per share data)

	September 30, 2012		June 30, 2012
ASSETS
Current assets:
Cash and cash equivalents	$	222,458	$	111,943
Receivables, net	32,424		28,954
Inventories	155,990		142,276
Deferred income taxes	14,520		14,503
Income tax receivable	14,175		14,098
Other current assets	24,233		55,903
Current assets held for sale (Note 2)	17,202		17,000
Total current assets	481,002		384,677

Property and equipment, net	303,150		305,799
Goodwill	463,917		462,279
Other intangibles, net	23,375		23,395
Investment in and loans to affiliates	59,910		160,987
Other assets	60,824		59,488
Long-term assets held for sale (Note 2)	176,204		175,221

Total assets	$	1,568,382	$	1,571,846

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Long-term debt, current portion	$	28,883	$	28,937
Accounts payable	63,428		47,890
Accrued expenses	134,565		157,026
Current liabilities related to assets held for sale (Note 2)	15,959		18,120
Total current liabilities	242,835		251,973

Long-term debt and capital lease obligations	251,178		258,737
Other noncurrent liabilities	148,594		143,972
Long- term liabilities related to assets held for sale (Note 2)	28,063		28,007
Total liabilities	670,670		682,689
Commitments and contingencies (Note 8)
Shareholders’ equity:
Common stock, $0.05 par value; issued and outstanding 57,527,496 and 57,415,241 common shares at September 30, 2012 and June 30, 2012, respectively	2,876		2,871
Additional paid-in capital	347,408		346,943
Accumulated other comprehensive income	38,173		55,114
Retained earnings	509,255		484,229

Total shareholders’ equity	897,712		889,157

Total liabilities and shareholders’ equity	$	1,568,382	$	1,571,846

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

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REGIS CORPORATION

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited)

For The Three Months Ended September 30, 2012 and 2011

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

	2012			2011
Revenues:
Service	$	393,416		$	415,017
Product	102,284			106,773
Royalties and fees	9,660			9,556
	505,360			531,346
Operating expenses:
Cost of service	232,528			235,665
Cost of product	53,132			53,023
Site operating expenses	52,347			54,811
General and administrative	55,872			65,870
Rent	81,499			82,176
Depreciation and amortization	20,709			30,797
Total operating expenses	496,087			522,342

Operating income	9,273			9,004

Other income (expense):
Interest expense	(6,829		)	(7,360		)
Interest income and other, net (Note 3)	24,726			1,317

Income from continuing operations before income taxes and equity in income of affiliated companies	27,170			2,961

Income taxes	(2,986		)	(1,209		)
Equity in income of affiliated companies, net of income taxes	577			3,870

Income from continuing operations	24,761			5,622

Income from discontinued operations, net of taxes (Note 2)	3,777			2,715

Net income	$	28,538		$	8,337

Net income per share:
Basic:
Income from continuing operations	0.43			0.10
Income from discontinued operations	0.07			0.05
Net income per share, basic(1)	$	0.50		$	0.15
Diluted:
Income from continuing operations	0.39			0.10
Income from discontinued operations	0.06			0.05
Net income per share, diluted(1)	$	0.45		$	0.15

Weighted average common and common equivalent shares outstanding:
Basic	57,283			56,849
Diluted	68,589			57,098

Cash dividends declared per common share	$	0.06		$	0.06

(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.

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REGIS CORPORATION

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS) (Unaudited)

For The Three Months Ended September 30, 2012 and 2011

(Dollars in thousands)

	2012			2011
Net income	$	28,538		$	8,337
Other comprehensive loss, net of tax:
Foreign currency translation adjustments	7,038			(20,552		)
Change in fair market value of financial instruments designated as cash flow hedges	(23		)	446
Recognition of deferred compensation and other	—			(1		)
Reclassifications associated with liquidation of foreign entities (Note 3)	(23,956		)	—
Other comprehensive loss	(16,941		)	(20,107		)
Comprehensive income (loss)	$	11,597		$	(11,770	)

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

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REGIS CORPORATION

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)

For The Three Months Ended September 30, 2012 and 2011

(In thousands)

	2012			2011
Cash flows from operating activities:
Net income	$	28,538		$	8,337
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	20,433			31,638
Amortization	728			2,468
Equity in income of affiliated companies	(907		)	(4,032		)
Dividends received from affiliated companies	347			270
Deferred income taxes	7,120			(2,800		)
Accumulated other comprehensive income reclassifications (Note 3)	(23,956		)	—
Excess tax benefits from stock-based compensation plans	(35		)	—
Stock-based compensation	1,818			2,440
Amortization of debt discount and financing costs	1,749			1,613
Other noncash items affecting earnings	98			(477		)
Changes in operating assets and liabilities (1):
Receivables	(3,355		)	(907		)
Inventories	(13,534		)	(23,612		)
Income tax receivable	(57		)	4,260
Other current assets	1,790			1,806
Other assets	1,408			509
Accounts payable	14,599			11,376
Accrued expenses	(24,670		)	(7,906		)
Other noncurrent liabilities	(3,648		)	(11,528		)
Net cash provided by operating activities	8,466			13,455

Cash flows from investing activities:
Capital expenditures	(18,077		)	(16,827		)
Proceeds from sale of assets	21			369
Asset acquisitions, net of cash acquired and certain obligations assumed	—			(2,077		)
Proceeds from loans and investments	130,281			1,290
Net cash provided by (used in) investing activities	112,225			(17,245		)

Cash flows from financing activities:
Borrowings on revolving credit facilities	—			23,900
Payments on revolving credit facilities	—			(23,900		)
Repayments of long-term debt and capital lease obligations	(8,905		)	(9,669		)
Excess tax benefits from stock-based compensation plans	35			—
Dividends paid	(3,448		)	(3,494		)
Proceeds from exercise of stock options and stock appreciation rights	45			—
Net cash used in financing activities	(12,273		)	(13,163		)

Effect of exchange rate changes on cash and cash equivalents	2,097			(3,637		)
Increase (decrease) in cash and cash equivalents	110,515			(20,590		)

Cash and cash equivalents:
Beginning of period	111,943			96,263
End of period	$	222,458		$	75,673

(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.

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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 September 30, 2012 and for the three months ended September 30, 2012 and 2011, reflect, in the opinion of management, all adjustments necessary to fairly state the consolidated financial position of the Company as of September 30, 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 September 30, 2012 and for the three month periods ended September 30, 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 November 9, 2012 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 months ended September 30, 2011 and excludes discontinued operations:

	For the Three Months Ended, September 30, 2011
	Prior Presentation(1)		Reclassification			As Presented
	(Dollars in thousands)
Cost of service	$	235,969	$	(304	)	$	235,665
Site operating expenses	50,971		3,840			54,811
General and administrative	69,406		(3,536		)	65,870

(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:

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	For the three months ended, September 30, 2011
	North America						Corporate
	Prior Presentation(1)		Reclassification		As Presented(3)		Prior Presentation		Reclassification			As Presented(3)
	(Dollars in thousands)						(Dollars in thousands)
General and administrative(2)	$	29,706	$	2,939	$	32,645	$	36,775	$	(6,191	)	$	30,584
Rent	73,215		165		73,380		197		(165		)	32
Depreciation and amortization	17,970		571		18,541		11,521		(571		)	10,950

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

(2) The North America general and administrative reclassification consists of a $6,191 increase for the offset to the Corporate reclassification within this line item, partially offset by a decrease of $3,252 applicable to North America for the marketing and advertising expense reclassification above.

(3) See Note 11 to the Condensed Consolidated Statement of Operations for presentation of segment information.

Stock-Based Employee Compensation:

Stock-based awards are granted under the terms of the 2004 Long Term Incentive Plan (2004 Plan). Additionally, the Company has outstanding stock options under its 2000 Stock Option Plan (2000 Plan), although the 2000 Plan terminated in 2010. Under these plans, five types of stock-based compensation awards are granted: stock options, equity-based stock appreciation rights (SARs), restricted stock awards (RSAs), restricted stock units (RSUs) and performance share units (PSUs). Stock options, SARs and RSAs granted prior to July 1, 2011 under the 2004 Plan generally vest at a rate of 20.0 percent annually on each of the first five anniversaries of the date of grant. The stock options and SARs have a maximum term of ten years. The RSUs granted prior to fiscal year 2012 cliff vest after five years and payment of the RSUs is deferred until January 31 of the year following vesting.

During fiscal year 2012, the Company granted RSAs and RSUs. Certain of the RSAs vest at a rate of 20.0 percent annually on the first five anniversaries of the date of grant while the other RSAs cliff vest two years after the grant date. The RSUs granted to the Company’s non-employee directors occurred in the last month of fiscal year 2012, with retroactive vesting on a monthly basis, generally from the Company’s 2011 annual shareholder meeting date. The distribution of vested RSUs is deferred until the non-employee director’s separation of service from the Company, at which time the vested RSUs will be converted into common stock. Awards granted prior to July 1, 2012 do not contain acceleration of vesting terms for retirement of eligible recipients.

During the three months ended September 30, 2012, the Company granted SARs, RSAs, RSUs, and PSUs. The SARs and RSUs granted to employees vest 33.3 percent annually on the first three anniversaries of the date of grant and become fully vested on the third anniversary of the date of grant. The Company also granted RSUs to the Company’s Chief Executive Officer that will vest in full and convert to common stock if the Company’s stock price reaches a certain price for twenty consecutive days prior to the fifth anniversary of his start date. The RSAs granted cliff vest after five years. The PSUs represent shares potentially issuable in the future. Issuance of the PSUs is based on the Company’s performance during fiscal year 2013 as it relates to the Company achievement of same-store sales and adjusted earnings before interest, taxes, and depreciation and amortization.

Awards granted after July 1, 2012 generally contain various acceleration of vesting terms depending on the type of award for eligible recipients aged sixty-two years or older and employees aged fifty-five and have fifteen years of continuous service.

Unvested awards are subject to forfeiture in the event of termination of employment. The Company utilizes an option-pricing model to estimate the fair value of options and SARs at their grant date. Stock options and SARs are granted at not less than fair market value on the date of grant. The Company utilized a Monte Carlo simulation model to estimate the fair value of the market-based restricted stock unit.The Company generally recognizes compensation expense for its stock-based compensation awards on a straight-line basis over the respective awards vesting period. Compensation expense related to the PSUs is recognized based on the Company’s estimate for the number of shares that will ultimately be issued. Historically, the Company’s primary employee stock-based compensation grant occurs during the fourth fiscal quarter.

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Total compensation cost for stock-based payment arrangements totaled $1.8 and $2.4 million for each of the three month periods ended September 30, 2012 and 2011, respectively.

Stock options outstanding and weighted average exercise price as of September 30, 2012 were as follows:

Options	Shares		Weighted Average Exercise Price
	(in thousands)
Outstanding at June 30, 2012	652		$	32.53
Granted	—		—
Exercised	(3	)	18.90
Forfeited or expired	(64	)	29.77
Outstanding at September 30, 2012	585		$	32.89
Exercisable at September 30, 2012	531		$	33.94

Outstanding options of 584,938 at September 30, 2012 had an intrinsic value (the amount by which the stock price exceeded the exercise or grant date price) of zero and a weighted average remaining contractual term of 3.6 years. Exercisable options of 530,568 at September 30, 2012 had an intrinsic value of zero and a weighted average remaining contractual term of 3.3 years. Of the outstanding and unvested options and due to estimated forfeitures, 49,399 are expected to vest with a $22.96 per share weighted average grant price, a weighted average remaining contractual life of 6.7 years and a total intrinsic value of zero.

All options granted relate to stock option plans that have been approved by the shareholders of the Company.

The table below contains a rollforward of RSAs, RSUs and SARs outstanding, as well as other relevant terms of the awards:

	Restricted Stock Outstanding				SARs Outstanding
	Shares/Units		Weighted Average Grant Date Fair Value		Shares		Weighted Average Exercise Price
	(in thousands)				(in thousands)
Balance, June 30, 2012	660		$	25.44	734		$	26.02
Granted	284		17.52		581		18.01
Vested/Exercised	(17	)	17.96		(3	)	16.60
Forfeited or expired	(3	)	18.01		(287	)	28.00
Balance, September 30, 2012	924		$	23.18	1,025		$	20.95

Outstanding and unvested RSAs of 500,701 at September 30, 2012 had an intrinsic value of $9.2 million and a weighted average remaining vesting term of 2.5 years. Due to estimated forfeitures, 452,826 are expected to vest with a total intrinsic value of $8.3 million.

Outstanding RSUs of 423,782 at September 30, 2012 had an intrinsic value of $7.8 million and a weighted average remaining vesting term of 1.0 years. Vested RSUs of 250,907 at September 30, 2012 had an intrinsic value of $4.6 million. Unvested RSUs of 164,106 at September 30, 2012 had an intrinsic value of $3.0 million and a weighted average remaining vesting term of 2.6 years. The payment of 215,000 vested RSUs is deferred until January 31, 2013. The payment of the remaining 35,907 vested RSUs is deferred until the non-employee director no longer serves on the Board of Directors, at which time the vested RSUs will be converted into common stock.

Outstanding SARs of 1,024,725 at September 30, 2012 had a total intrinsic value of $0.3 million and a weighted average remaining contractual term of 8.1 years. Exercisable SARs of 299,080 at September 30, 2012 had a total intrinsic value of less than $0.1 million and a weighted average remaining contractual term of 5.2 years. Of the outstanding and unvested rights and due to estimated forfeitures, 672,567 are expected to vest with a $18.18 per share weighted average grant price, a weighted average remaining contractual life of 9.4 years and a total intrinsic value of $0.3 million.

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Performance share units outstanding and weighted average grant date fair value as of September 30, 2012 were as follows:

	Nonvested
Performance Share	Units (1)	Weighted Average Grant Date Fair Value
	(in thousands)
Outstanding at June 30, 2012	—	$	—
Granted	193	18.38
Vested	—	—
Forfeited	—	—
Outstanding at September 30, 2012	193	$	18.38

(1) Assumes attainment of targeted payout rates as set forth in the performance criteria based in thousands of share units.

Future compensation expense for currently unvested PSUs could reach a maximum of $7.1 million, assuming payout of all unvested performance units. Assuming attainment of targeted payout rates, future compensation expense for currently unvested PSUs would be $3.5 million.

During the three months ended September 30, 2012 and 2011 total cash received from the exercise of share-based instruments was less than $0.1 million and zero, respectively. As of September 30, 2012, the total unrecognized compensation cost related to all unvested stock-based compensation arrangements was $17.8 million. The related weighted average period over which such cost is expected to be recognized was approximately 2.9 years as of September 30, 2012.

The total intrinsic value of all stock-based compensation that was exercised during each of the three month periods ended September 30, 2012 and 2011 was less than $0.1 million.

The total fair value of stock awards that vested and were distributed during the months ended September 30, 2012 and 2011, was $0.3 and less than $0.1 million, respectively.

Using the fair value of each grant on the date of grant, the weighted average fair values per stock-based compensation award granted during the three months ended September 30, 2012 and 2011 were as follows:

	2012		2011
SARs	$	6.64	$	—
Restricted stock awards	18.01		13.59
Restricted stock units	17.16		—
Performance share units	18.38		—

The expense associated with the RSA and RSU grants is based on the market price of the Company’s stock at the date of grant. The significant assumptions used in determining the underlying fair value on the date of grant of the SAR and market-based RSU grants issued during the three months ended September 30 2012 is presented below:

	SAR		RSU
Risk-free interest rate	0.85	%	0.66	%
Expected term (in years)	6.00		N/A
Expected volatility	44.00	%	47.00	%
Expected dividend yield	1.33	%	1.33	%

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

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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 carrying value 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, 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 Center’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 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 September 30, 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 September 30, 2012.

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

Reporting Unit	As of September 30, 2012		As of June 30, 2012
	(Dollars in thousands)
Regis	$	35,957	$	35,910
MasterCuts	4,652		4,652
SmartStyle	48,780		48,558
Supercuts	129,634		129,621
Promenade	244,894		243,538
Total North America Salons	$	463,917	$	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 has 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 capitalized POS software. As of June 30, 2012, the existing POS information system was fully depreciated. Depreciation expense related to the existing POS information system totaled zero and $9.4 million during the three months ended September 30, 2012 and 2011, respectively.

Prior to September 30, 2012, the Company decided the third party POS alternative would only be utilized in United Kingdom (U.K.). The Company reviewed the third party POS alternative capitalized software carrying value for impairment at September 30, 2012. As a result of the Company’s long-lived asset impairment testing at September 30, 2012 for this grouping of assets, no impairment charges were recorded. There was no adjustment to the useful life as the Company expects to fully utilize the third party POS alternative in the U.K. salons. The Company is currently evaluating 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

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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 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 will adopt this accounting guidance in the first quarter of fiscal year 2014 and 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 expected to close during fiscal year 2013. The Company is currently anticipating recognizing a gain upon closing of the deal.

As of September 30, 2012, 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 September 30, 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.

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

	September 30, 2012		June 30, 2012
	(Dollars in thousands)
Current assets held for sale
Receivables, net	$	2,563	$	2,624
Inventories	6,564		6,165
Deferred income taxes	3,229		2,892
Other current assets	4,846		5,319
Total current assets held for sale	17,202		17,000

Property and equipment, net	18,559		17,261
Goodwill	74,374		74,376
Other intangibles, net	78,119		78,395
Investment in affiliates	5,152		5,189
Total long-term assets held for sale	176,204		175,221

Total assets held for sale	$	193,406	$	192,221

Current liabilities related to assets held for sale
Accounts payable	$	1,806	$	2,564
Accrued expenses	14,153		15,556
Total current liabilities related to assets held for sale	15,959		18,120

Other non-current liabilities related to assets held for sale	28,063		28,007

Total liabilities related to assets held for sale	$	44,022	$	46,127

The following summarizes the results of operations of our discontinued hair restoration service operations for the periods presented:

	For the Periods Ended September 30,
	Three Months
	2012			2011
	(Dollars in thousands)
Revenues	$	38,951		$	37,403
Income from discontinued operations, before income taxes	5,872			4,067
Income tax provision on discontinued operations	(2,299		)	(1,514		)
Equity in income of affiliated companies, net of tax	204			162
Income from discontinued operations, net of income taxes	3,777			2,715

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 were ceased during the three months ended September 30, 2012 in accordance with accounting for discontinued operations.

Trade Secret

On February 16, 2009, the Company sold its Trade Secret salon concept (Trade Secret). The Company reported Trade Secret as a discontinued operation. The carrying value of the note receivable with the purchaser of Trade Secret was fully reserved as of June 30, 2011.

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The purchaser of Trade Secret emerged from bankruptcy in March 2012 and in conjunction, the Company entered into a credit and security agreement in which the principal balance of the note receivable was reduced from $35.7 to $18.0 million. Payments of $0.5 million are due quarterly beginning on May 31, 2012. Upon receipt of the quarterly payments through February 2019 the remaining principal and unpaid interest will be forgiven. The purchaser of Trade Secret partially satisfied the principal payment during the first fiscal quarter of 2013 by providing the Company with $0.3 million of saleable inventory. The Company recorded the recovery of bad debt expense upon receipt of the inventory during the three months ended September 30, 2012. The carrying value of the note receivable continues to be fully reserved at September 30, 2012.

Effective in the second quarter of fiscal year 2010, the Company has an agreement in which the Company provides warehouse services to the purchaser of Trade Secret. Under the warehouse services agreement, the Company recognized $0.2 and $0.5 million of other income related to warehouse services during the three months ended September 30, 2012 and 2011, respectively. The carrying value of the receivable related to warehouse services was $0.2 and $0.1 million as of September 30, 2012 and 2011, respectively.

The Company utilized the consolidation of variable interest entities guidance to determine whether or not Trade Secret was a VIE, and if so, whether the Company was the primary beneficiary of Trade Secret. The Company concluded that Trade Secret is a VIE based on the fact that the equity investment at risk in Trade Secret is insufficient. The Company determined that the purchaser of Trade Secret has met the power criterion due to the purchaser of Trade Secret having the authority to direct the activities that most significantly impact Trade Secret’s economic performance. The Company concluded based on the consideration above that the primary beneficiary of Trade Secret is the purchaser of Trade Secret. The exposure to loss related to the Company’s involvement with Trade Secret is the guarantee of approximately 20 operating leases. 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.

3. SHAREHOLDERS’ EQUITY:

Net Income Per Share:

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

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

	For the Three Months Ended September 30,
	2012	2011
	(Shares in thousands)
Weighted average shares for basic earnings per share	57,283	56,849
Effect of dilutive securities:
Dilutive effect of stock-based compensation	67	249
Dilutive effect of convertible debt	11,239	—
Weighted average shares for diluted earnings per share	68,589	57,098

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

	For the Three Months Ended September 30,
	2012	2011
	(Shares in thousands)
Basic earnings per share:
RSAs (1)	501	858
RSUs (1)	173	215
	674	1,073

Diluted earnings per share:
Stock options (2)	585	826
SARs (2)	444	1,030
RSAs (2)	—	767
Shares issuable upon conversion of debt (3)	—	11,184
	1,029	13,807

(1) Awards were not vested

(2) Awards were anti-dilutive

(3) Shares were anti-dilutive for the three months ended September 30, 2011.

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

	For the Three Months Ended September 30,
	2012		2011
	(Dollars in thousands)
Net income from continuing operations available to common shareholders	$	24,761	$	5,622
Effect of dilutive securities:
Interest on convertible debt, net of taxes	2,130		—
Net income from continuing operations for diluted earnings per share	$	26,891	$	5,622

Additional Paid-In Capital:

The change in additional paid-in capital during the three months ended September 30, 2012 was due to the following:

	(Dollars in thousands)
Balance, June 30, 2012	$	346,943
Stock-based compensation	1,818
Vested stock option and stock appreciation right expirations	(1,126		)
Taxes related to restricted stock	(105		)
Net tax loss from stock-based compensation plans	(165		)
Proceeds from exercise of stock options and stock appreciation rights	45
Other	(2		)
Balance, September 30, 2012	$	347,408

Accumulated Other Comprehensive Income:

The Company completed the sale of its investment in Provalliance during the three months 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 $33.6 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 cash repatriation with the Company’s European operations.

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4. FAIR VALUE MEASUREMENTS:

The fair value measurement guidance for financial and nonfinancial assets and liabilities defines fair value, establishes a framework for measuring fair value and expands disclosure requirements about fair value measurements. This guidance defines fair value as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The fair value hierarchy prescribed by this guidance contains three levels as follows:

Level 1 — Unadjusted quoted prices that are available in active markets for the identical assets or liabilities at the measurement date.

Level 2 — Other observable inputs available at the measurement date, other than quoted prices included in Level 1, either directly or indirectly, including:

· Quoted prices for similar assets or liabilities in active markets;

· Quoted prices for identical or similar assets in non-active markets;

· Inputs other than quoted prices that are observable for the asset or liability; and

· Inputs that are derived principally from or corroborated by other observable market data.

Level 3 — Unobservable inputs that cannot be corroborated by observable market data and reflect the use of significant management judgment. These values are generally determined using pricing models for which the assumptions utilize management’s estimates of market participant assumptions.

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 tables sets forth by level within the fair value hierarchy, the Company’s financial assets and liabilities that were accounted for at fair value on a recurring basis at September 30, 2012 and June 30, 2012, according to the valuation techniques the Company used to determine their fair values.

	Fair Value at		Fair Value Measurements Using Inputs Considered as
	September 30, 2012		Level 1		Level 2		Level 3
	(Dollars in thousands)
ASSETS
Noncurrent assets
Equity call option-Roosters	$	117	$	—	$	—	$	117
LIABILITIES
Non-current liabilities
Equity put option — Roosters	$	161	$	—	$	—	$	161

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	Fair Value at		Fair Value Measurements Using Inputs Considered as
	June 30, 2012		Level 1		Level 2		Level 3
	(Dollars in thousands)
ASSETS
Current assets
Derivative instruments	$	145	$	—	$	145	$	—
Noncurrent assets
Equity call option-Roosters	117		—		—		117
LIABILITIES
Non-current liabilities
Equity put option-Provalliance	$	633	$	—	$	—	$	633
Equity put option-Roosters	161		—		—		161

Changes in Financial Instruments Measured at Level 3 Fair Value on a Recurring Basis

The following tables present the changes during the three months ended September 30, 2012 and 2011 in our Level 3 financial instruments that are measured at fair value on a recurring basis.

	Changes in Financial Instruments Measured at Level 3 Fair Value Classified as
	Roosters Equity Call Option		Roosters Equity Put Option		Provalliance Equity Put Option
	(Dollars in thousands)
Balance at July 1, 2012	$	117	$	161	$	633
Total realized and unrealized losses:
Included in equity income of affiliated companies	—		—		(633		)
Balance at September 30, 2012	$	117	$	161	$	—

	Changes in Financial Instruments Measured at Level 3 Fair Value Classified as
	Roosters Equity Call Option		Roosters Equity Put Option		Provalliance Equity Put Option
	(Dollars in thousands)
Balance at July 1, 2011	$	—	$	—	$	22,700
Total realized and unrealized losses:
Included in other comprehensive loss	—		—		(1,576		)
Issuances	—		161		—
Purchases	117		—		—
Balance at September 30, 2011	$	117	$	161	$	21,124

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. The 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. See Note 7 to the Consolidated Financial Statements.

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. 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 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). See further discussion within Note 6 to the Consolidated Financial Statements. The

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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 September 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 September 30, 2012 and 2011. At September 30, 2012, the estimated fair values and carrying amounts of debt were $298.5 and $280.1 million, respectively. At September 30, 2011, the estimated fair values and carrying amounts of debt were $330.0 and $304.0 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.

See Note 6 to the Consolidated Financial Statements for discussion of the €80 million share purchase agreement related to Provalliance. Other than the Company’s investment in Provalliance, there were no assets measured at fair value on a nonrecurring basis during the three months ended September 30, 2012 and 2011.

5. GOODWILL AND OTHER INTANGIBLES:

The table below contains details related to the Company’s recorded goodwill as of and for the three months ended September 30, 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	1,638			—			1,638
Gross goodwill at September 30, 2012	719,104			41,661			760,765
Accumulated impairment losses	(255,187		)	(41,661		)	(296,848		)
Net goodwill at September 30, 2012	$	463,917		$	—		$	463,917

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

	September 30, 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	$	9,710	$	(3,108	)	$	6,602	$	9,494	$	(2,960	)	$	6,534
Franchise agreements	11,646		(6,748		)	4,898		11,398		(6,494		)	4,904
Lease intangibles	14,844		(6,069		)	8,775		14,796		(5,862		)	8,934
Non-compete agreements	213		(130		)	83		207		(117		)	90
Other	4,695		(1,678		)	3,017		4,533		(1,600		)	2,933
	$	41,108	$	(17,733	)	$	23,375	$	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.

All intangible assets have been assigned an estimated finite useful life and are amortized over the number of years that approximate their respective useful lives (ranging from one to 40 years). The cost of intangible assets is amortized to earnings in proportion to the amount of economic benefits obtained by the Company in that reporting period. The weighted average amortization periods, in aggregate and by major intangible asset class, are as follows:

	Weighted Average Amortization Period
	September 30, 2012	June 30, 2012
	(In years)
Amortized intangible assets:
Brand assets and trade names	33	33
Franchise agreements	19	19
Lease intangibles	20	20
Non-compete agreements	6	6
Other	21	21
Weighted average amortization period	23	23

Total amortization expense related to the amortizable intangible assets was $0.7 and $0.5 million during the three months ended September 30, 2012 and 2011, respectively. As of September 30, 2012, future estimated amortization expense related to amortizable intangible assets is estimated to be:

Fiscal Year	(Dollars in thousands)
2013 (Remainder: nine-month period)	$	1,333
2014	1,946
2015	1,923
2016	1,891
2017	1,889

6. ACQUISITIONS, INVESTMENT IN AND LOANS TO AFFILIATES:

Acquisitions

The Company did not make any acquisitions during the three months ended September 30, 2012. During the three months ended September 30, 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.

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Based upon purchase price allocations, the components of the aggregate purchase prices of the acquisitions made during the three months ended September 30, 2011 and the allocation of the purchase prices were as follows:

	For the Three Months Ended September 30,
Allocation of Purchase Prices	2011
	(Dollars in thousands)
Components of aggregate purchase prices:
Cash (net of cash acquired)	$	2,077

Allocation of the purchase price:
Current assets	$	304
Property and equipment	145
Goodwill	4,337
Identifiable intangible assets	572
Accounts payable and accrued expenses	(1,068		)
Other noncurrent liabilities	(1,313		)
Noncontrolling interest	(900		)
	$	2,077

The majority of the purchase price in salon acquisitions is accounted for as residual goodwill rather than identifiable intangible assets. This stems from the value associated with the walk-in guest base of the acquired salons, which is not recorded as an identifiable intangible asset under current accounting guidance, as well as the limited value and guest preference associated with the acquired hair salon brand. Key factors considered by consumers of hair salon services include personal relationships with individual stylists, service quality and price point competitiveness. These attributes represent the “going concern” value of the salon.

Residual goodwill further represents the Company’s opportunity to strategically combine the acquired business with the Company’s existing structure to serve a greater number of guests through its expansion strategies. In the acquisitions of international salons, the residual goodwill primarily represents the growth prospects that are not captured as part of acquired tangible or identified intangible assets. Generally, the goodwill recognized in the North American salon transactions is expected to be fully deductible for tax purposes and the goodwill recognized in the international salon transactions is not deductible for tax purposes.

During the three months ended September 30, 2011, certain of the Company’s salon acquisitions were from its franchisees. The Company evaluated the effective settlement of the pre-existing franchise contracts and associated rights afforded by those contracts. The Company determined that the effective settlement of the pre-existing franchise contracts at the date of the acquisition did not result in a gain or loss, as the agreements were neither favorable nor unfavorable when compared to similar current market transactions, and no settlement provisions exist in the pre-existing contracts. Therefore, no settlement gain or loss was recognized with respect to the Company’s franchise buybacks.

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 is 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. The initial estimated fair values as of July 1, 2011 of the Roosters Equity Put and Roosters Equity Call were $0.2 and $0.1 million, respectively. Any changes in the estimated fair value of the Roosters Equity Put and Roosters Equity Call are recorded in the Company’s Condensed Consolidated Statement of Operations. During the three months ended September 30, 2012 there were no changes in the estimated fair value of the Roosters Equity Put and Roosters Equity Call.

The Company utilized the consolidation of variable interest entities guidance to determine whether or not its investment in Roosters was a VIE, and if so, whether the Company was the primary beneficiary of the VIE. The Company concluded that Roosters is a VIE based on the fact that the holders of the equity investment at risk, as a group, lack the obligation to absorb the expected losses of the entity. The Roosters Equity Put is based on a formula that may or may not be at market when exercised, therefore, it could prevent the minority interest owners from absorbing its share of expected losses by transferring such obligation to the Company. Under certain circumstances, including a decline in the fair value of Roosters, the Roosters

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Equity Put could be exercised and the minority interest owners could be protected from absorbing the downside of the equity interest. As the Roosters Equity Put absorbs a large amount of variability, this characteristic results in Roosters being a VIE.

Regis determined that the Company has met the power criterion due to the Company having the authority to direct the activities that most significantly impact Roosters’ economic performance. The Company concluded based on the considerations above that it is the primary beneficiary of Roosters and therefore the financial positions, results of operations, and cash flows of Roosters are consolidated in the Company’s financial statements from the acquisition date. Total assets, total liabilities and total shareholders’ equity of Roosters as of September 30, 2012 were $5.8, $2.0 and $3.8 million, respectively. Net loss attributable to the noncontrolling interest in Roosters was less than $0.1 million for the three months ended September 30, 2012 and was 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 September 30, 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 September 30, 2012 and June 30, 2012:

	September 30, 2012		June 30, 2012
	(Dollars in thousands)
Empire Education Group, Inc.	$	59,631	$	59,683
Provalliance	—		101,304
MY Style	279		—
	$	59,910	$	160,987

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 105 accredited cosmetology schools.

At September 30, 2012 and 2011, the Company had a $0.8 and $21.4 million outstanding loan receivable with EEG, respectively. The Company has also provided EEG with a $15.0 million revolving credit facility, against which there were no outstanding borrowings as of September 30, 2012 and 2011. During the three months ended September 30, 2012 and 2011, the Company recorded less than $0.1 and $0.1 million, respectively, of interest income related to the loan and revolving credit facility. The Company has also guaranteed a credit facility of EEG that expires on December 31, 2012 with a maximum exposure of $9 million. The exposure to loss related to the Company’s involvement with EEG is the carrying value of the investment, the outstanding loan and the guarantee of the credit facility.

Due to economic and other factors, the Company may be required to record impairment charges related to our investment in EEG and such impairments could be material to our consolidated balance sheet and results of operations. Subsequent to June 30, 2012, the market values of for profit educational entities has continued to decline. Since market values are part of how the Company assesses the fair value of EEG, if market conditions do not improve, this increases the likelihood the Company would need to record an impairment on our investment in EEG during fiscal year 2013. 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 our consolidated balance sheet and results of operations.

The Company utilized consolidation of variable interest entities guidance to determine whether or not its investment in EEG was a variable interest entity (VIE), and if so, whether the Company was the primary beneficiary of the VIE. The Company concluded that EEG was not a VIE based on the fact that EEG had sufficient equity at risk. As the substantive voting control relates to the voting rights of the Board of Directors, the Company granted the other shareholder a proxy to vote such number of the Company’s shares such that the other shareholder would have voting control of 51.0 percent of the common stock of EEG. The Company accounts for EEG as an equity investment under the voting interest model. During three months ended September 30, 2012 and 2011, the Company recorded less than $0.1 and $1.0 million of equity loss and earnings, respectively, related to its investment in EEG.

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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 $24.0 million from accumulated other comprehensive income into earnings, primarily cumulative translation adjustment 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.

MY Style Note. As of September 30, 2012, the principal amount outstanding under the MY Style Note is $0.7 million (52,164,000 Yen). Principal payments of 52,164,000 Yen along with accrued interest are due annually on May 31 through May 31, 2013. The Company reviews the outstanding note with MY Style for changes in circumstances or the occurrence of events that suggest the Company’s note may not be recoverable. The $0.7 million outstanding note with MY Style as of September 30, 2012 is in good standing with no associated valuation allowance. The Company has determined the future cash flows of MY Style support the ability to make payments on the outstanding note. The MY Style Note accrues interest at 3.0 percent. The Company recorded less than $0.1 million in interest income related to the MY Style Note during the three months ended September 30, 2012 and 2011.

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 gain was less than $0.1 and $0.5 million during the three months ended September 30, 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. DERIVATIVE FINANCIAL INSTRUMENTS:

As of September 30, 2012 the Company did not have any derivative instruments.

Cash Flow Hedges

The Company previously used forward foreign currency contracts to manage foreign currency rate fluctuations associated with certain forecasted intercompany transactions. The Company’s primary forward foreign currency contracts hedged approximately $0.6 million of monthly payments in Canadian dollars for intercompany transactions. The Company’s forward foreign currency contracts hedged transactions through September 2012. During the three months ended September 30, 2011 the Company recognized a $0.4 million gain on the forward foreign currency contracts designated as cash flow hedges in other comprehensive income.

These cash flow hedges were effective as cash flow hedges. They were recorded at fair value within other noncurrent liabilities or other current assets in the Condensed Consolidated Balance Sheet, with corresponding offsets primarily recorded in other comprehensive income (loss), net of tax.

Freestanding Derivative Forward Contracts

The Company previously used freestanding derivative forward contracts to offset the Company’s exposure to the change in fair value of certain foreign currency denominated investments and intercompany assets and liabilities. These derivatives were not designated as hedges and therefore, changes in the fair value of these forward contracts are recognized currently in earnings, thereby offsetting the current earnings effect of the related foreign currency denominated assets and liabilities.

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As of June 30, 2012, the Company had less than $0.1 and $0.1 million in forward foreign currency contracts, designed as a cash flow hedge and a freestanding derivative contract, respectively, recorded within other current assets on the Consolidated Balance Sheet.

There were no reclassifications from accumulated other comprehensive income into current earnings during the three months ended September 30, 2012 and 2011.

During the three months ended September 30, 2012 and 2011, the Company recognized less than $0.1 and ($0.4) million within interest income and other, net associated with the freestanding forward foreign currency contracts.

8. LITIGATION:

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 judge in the matter. The Company is working with outside counsel to formulate its next steps in keeping with the courts. 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.

9. FINANCING ARRANGEMENTS:

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

		Interest rate percentage		Amounts outstanding
	Maturity Dates	September 30, 2012	June 30, 2012	September 30, 2012			June 30, 2012
	(fiscal year)			(Dollars in thousands)
Senior term notes	2013 - 2018	6.69 - 8.50%	6.69 - 8.50%	$	104,286		$	111,429
Convertible senior notes	2015	5.00	5.00	162,422			161,134
Revolving credit facility	2016	—	—	—			—
Equipment and leasehold notes payable	2015 - 2016	4.90 - 8.75	4.90 - 8.75	13,219			14,780
Other notes payable	2013	8.00	5.75 - 8.00	134			331
				280,061			287,674
Less current portion				(28,883		)	(28,937		)
Long-term portion				$	251,178		$	258,737

The debt agreements contain covenants, including limitations on incurrence of debt, granting of liens, investments, merger or consolidation, and transactions with affiliates. In addition, the Company must adhere to specified fixed charge coverage and leverage ratios, as well as minimum net worth levels. The Company was in compliance with all covenants and other requirements of our financing arrangements as of September 30, 2012. The Company obtained a waiver in connection with the agreement to sell Hair Club.

The table below contains details related to the Company’s debt for the three months ending September 30, 2012 and 2011:

	For the Three Months Ended September 30,
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

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Private Shelf Agreement

At September 30, 2012 and June 30, 2012, the Company had $104.3 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 September 30, 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. Upon the July 2009 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 September 30, 2012, the conversion rate was 65.2163 shares of the Company’s common stock per $1,000 principal amount of notes (representing a conversion price of approximately $15.33 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 will be amortized over the period the convertible senior notes are expected to be outstanding, which is five years, 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 the principal and unamortized debt discount of the convertible senior notes:

	September 30,
Convertible Senior Notes Due 2014	2012			2011
	(Dollars in Thousands)
Principal amount on the convertible senior notes	$	172,500		$	172,500
Unamortized debt discount	(10,078		)	(15,069		)
Net carrying amount of convertible debt	$	162,422		$	157,431

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

	For the Three Months Ended September 30,
Convertible Senior Notes Due 2014	2012		2011
	(Dollars in thousands)
Interest cost related to contractual interest coupon — 5.0%	$	2,156	$	2,156
Interest cost related to amortization of the discount	1,288		1,183
Total interest cost	$	3,444	$	3,339

Revolving Credit Facility

As of September 30, 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 $51.0 and $26.1 million at September 30, 2012 and June 30, 2012, respectively, primarily related to its self-insurance program. Unused available credit under the facility at September 30, 2012 and June 30, 2012 was $349.0 and $373.9 million, respectively.

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10. 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, as a global enterprise, 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 months ended September 30, 2012 and 2011, the Company recognized tax expense of $3.0 and $1.2 million, respectively, with corresponding effective tax rates of 11.0% and 40.8% percent. The effective income tax rate for the three months ended September 30, 2012 is significantly lower than the effective income tax rate for the three months ended September 30, 2011 due to the $24.0 million net gain reclassified from accumulated other comprehensive income that is primarily non-taxable. This resulted in the Company recording less tax expense on pre-tax income than would normally be expected.

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 months ended September 30, 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 dating 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.

11. SEGMENT INFORMATION:

As of September 30, 2012, the Company owned, franchised, or held ownership interests in approximately 10,000 worldwide locations. The Company’s locations consisted of 9,311 North American salons (located in the United States, Canada and Puerto Rico), 392 international salons (located primarily in the United Kingdom), and approximately 242 locations in which the Company maintains an ownership interest.

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 of the company-owned and franchise salons within the North American salon concepts 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 the North American concepts, 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-street 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.

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

	For the Three Months Ended September 30, 2012(1)(2)
	Salons				Unallocated
	North America		International		Corporate			Consolidated
	(Dollars in thousands)
Revenues:
Service	$	369,680	$	23,736	$	—		$	393,416
Product	94,542		7,742		—			102,284
Royalties and fees	9,660		—		—			9,660
	473,882		31,478		—			505,360
Operating expenses:
Cost of service	220,231		12,297		—			232,528
Cost of product	49,076		4,056		—			53,132
Site operating expenses	49,596		2,751		—			52,347
General and administrative	31,691		2,518		21,663			55,872
Rent	72,722		8,402		375			81,499
Depreciation and amortization	16,588		1,032		3,089			20,709
Total operating expenses	439,904		31,056		25,127			496,087

Operating income (loss)	33,978		422		(25,127		)	9,273

Other income (expense):
Interest expense	—		—		(6,829		)	(6,829		)
Interest income and other, net	—		—		24,726			24,726
Income (loss) from continuing operations before income taxes and equity in income of affiliated companies	$	33,978	$	422	$	(7,230	)	$	27,170

(1) As of September 30, 2012, the Hair Restoration Centers reportable segment was accounted for as a discontinued operation. All comparable periods will reflect Hair Restoration Centers as a discontinued operation. See further discussion at Note 2 in these Notes to the Condensed Consolidated Financial Statements.

(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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	For the Three Months Ended September 30, 2011(1)(2)
	Salons				Unallocated
	North America		International		Corporate			Consolidated
	(Dollars in thousands)
Revenues:
Service	$	390,164	$	24,853	$	—		$	415,017
Product	98,137		8,636		—			106,773
Royalties and fees	9,556		—		—			9,556
	497,857		33,489					531,346
Operating expenses:
Cost of service	222,975		12,690		—			235,665
Cost of product	48,444		4,579		—			53,023
Site operating expenses	51,852		2,959		—			54,811
General and administrative	32,645		2,641		30,584			65,870
Rent	73,380		8,764		32			82,176
Depreciation and amortization	18,541		1,306		10,950			30,797
Total operating expenses	447,837		32,939		41,566			522,342

Operating income (loss)	50,020		550		(41,566		)	9,004

Other income (expense):
Interest expense	—		—		(7,360		)	(7,360		)
Interest income and other, net	—		—		1,317			1,317
Income (loss) from continuing operations before income taxes and equity in income of affiliated companies	$	50,020	$	550	$	(47,609	)	$	2,961

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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 September 30, 2012, the related condensed consolidated statements of operations and of comprehensive income (loss) and the condensed consolidated statement of cash flows for the three month periods ended September 30, 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 information set forth in the accompanying condensed consolidated balance sheets 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
November 9, 2012

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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 or franchises beauty salons and hair restoration centers. As of September 30, 2012, we owned, franchised or held ownership interests in approximately 10,000 worldwide locations. Our locations consisted of 9,703 system wide North American and international salons, and 242 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 9,311 salons, including 2,023 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 392 salons located in Europe, primarily in the United Kingdom. As of September 30, 2012, we had approximately 54,000 corporate employees worldwide.

Our fiscal year 2013 strategy is focused on improving the guest experience. We plan to execute our strategy by putting guests and stylists first, leveraging the power of our salon brands, focusing on technology and connectivity, 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.

· Leveraging the power of our salon brands through focusing on the best brands within the best markets.

· Using technology and connectivity, including internet in the salons, to enhance effectiveness of field management and improve guest satisfaction and retention.

· 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 Supercenters. 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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Historically, our salon acquisitions have varied in size from as small as one salon to over one thousand salons. The median acquisition size is approximately ten salons. From fiscal year 1994 through September 30, 2012, we acquired 8,052 salons, net of franchise buybacks.

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 with an estimated five percent share of the $4 billion domestic market. 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 expected to close during fiscal year 2013.

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 Condensed Consolidated Financial Statements are prepared in conformity with accounting principles generally accepted in the United States of America. In preparing the 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 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 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 months ended September 30, 2012.

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 carrying value by greater than 20.0 percent at June 30, 2012. 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, 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. 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.

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OVERVIEW OF RESULTS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2012

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

· Revenues decreased 4.9 percent to $505.4 million driven by the consolidated same-store sales decrease of 3.1 percent and the closure of 439 salons during the twelve months ended September 30, 2012. The same-store sales decrease was caused by a decline in guest visitations and average ticket price.

· We did not acquire any corporate salon locations. We built 57 corporate locations and closed, converted or relocated 99 locations. Our franchisees constructed 31 locations and closed, converted or relocated 24 locations. As of September 30, 2012, we had 7,680 company-owned salon locations and 2,023 franchise salon locations.

· The Company completed the sale of its investment in Provalliance for €80 million.

· The Company recognized a $24.0 million net gain reclassified from accumulated other comprehensive income, primarily cumulative translation adjustment, as all foreign entities with Euro denominated operations have been liquidated.

RESULTS OF OPERATIONS

As of September 30, 2012, the Hair Restoration Centers reportable segment was accounted for as a discontinued operation. All comparable periods will reflect Hair Restoration Centers as a discontinued operation. The following discussion of results of operations will reflect results from continuing operations. Discontinued operations will be 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 Three Months Ended September 30,
Results of Operations as a Percent of Revenues	2012		2011
Service	77.9	%	78.1	%
Product	20.2		20.1
Royalties and fees	1.9		1.8

Operating expenses:
Cost of service (1)	59.1		56.8
Cost of product (2)	51.9		49.7
Site operating expenses	10.4		10.3
General and administrative	11.1		12.4
Rent	16.1		15.5
Depreciation and amortization	4.1		5.8

Operating income	1.8		1.7

Income before income taxes and equity in income of affiliated companies	5.4		0.6
Income from continuing operations	4.9		1.1
Income from discontinued operations, net of taxes	0.7		0.5
Net income	5.6		1.6

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

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

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 4.9 percent to $505.4 million during the three months ended September 30, 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:

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	For the Three Months Ended September 30,
	2012			2011
	(Dollars in thousands)
North American salons:
Regis	$	96,867		$	104,866
MasterCuts	37,931			40,459
SmartStyle	122,998			128,484
Supercuts	87,068			83,603
Promenade	129,018			140,445
Total North American salons	473,882			497,857
International salons	31,478			33,489
Consolidated revenues	$	505,360		$	531,346
Percent change from prior year	(4.9		)%	(2.0		)%

Same-store sales by concept as of the three months ended September 30, 2012 and 2011, respectively, are detailed in the table below:

	For the Three Months Ended September 30,
	2012		2011
	(Dollars in thousands)
Regis	(3.8	)%	(3.5	)%
MasterCuts	(4.2	)	(3.7	)
SmartStyle	(4.2	)	(3.8	)
Supercuts	1.2		(0.5	)
Promenade	(3.2	)	(3.0	)
North America same-store sales	(3.0	)	(3.0	)
International same-store sales	(5.1	)	(9.4	)
Consolidated same-store sales	(3.1	)%	(3.4	)%

The percent changes in consolidated revenues during the three months ended September 30, 2012 and 2011, respectively, were driven by the following:

	For the Three Months Ended September 30,
Percentage Increase (Decrease) in Revenues	2012		2011
Same-store sales	(3.1	)%	(3.4	)%
Acquisitions	0.1		1.3
New stores and conversions	1.5		0.9
Foreign currency	(0.2	)	0.8
Franchise revenues	—		—
Closed salons	(3.1	)	(1.7	)
Other	(0.1	)	0.1
	(4.9	)%	(2.0	)%

The same-store sales decrease of 3.1 percent during the three months ended September 30, 2012 was due to a decrease in same-store guest visits and marginal declines in average ticket. We acquired 7 salons (including 6 franchise salon buybacks) during the twelve months ended September 30, 2012. The Company constructed and closed 219 and 439 salons (including 63 franchise salons), respectively during the twelve months ended September 30, 2012. During the three months ended September 30, 2012 the foreign currency impact was driven by the strengthening of the United States dollar against the Canadian dollar, British Pound and Euro as compared to the exchange rates for the comparable prior period.

The same-store sales decrease of 3.4 percent during the three months ended September 30, 2011 was due to a decrease in same-store guest visits and marginal declines in average ticket. We acquired 85 salons (including 83 franchise salon buybacks) during the twelve months ended September 30, 2011. The Company constructed 153 company-owned salons during the twelve months ended September 30, 2011. We closed 286 salons (including 49 franchise salons) during the twelve months ended September 30, 2011. During the three

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months ended September 30, 2011 the foreign currency impact was driven by the weakening of the United States dollar against the Canadian dollar, British Pound, and Euro, as compared to the exchange rates for the comparable prior period.

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 months ended September 30, 2012 and 2011 were as follows:

			Decrease Over Prior Fiscal Year
Periods Ended September 30,	Revenues		Dollar			Percentage
	(Dollars in thousands)
2012	$	393,416	$	(21,601	)	(5.2	)%
2011	415,017		(7,667		)	(1.8	)

The decrease in service revenues during the three months ended September 30, 2012 was due to same-store service sales decreasing 3.0 percent, which was primarily the result of a decline in same-store guest visits. In addition, service revenues decreased due to the closure of 376 company-owned salons during the twelve months ended September 30, 2012. The decrease in service revenues was partially offset by growth due to new and acquired salons during the previous twelve months.

The decrease in service revenues during the three months ended September 30, 2011 was due to same-store service sales decreasing 3.2 percent, which was primarily the result of a decline in same-store guest visits. In addition, average ticket decreased slightly due to a multi-brand haircut sale during the back-to-school season. Service revenues also decreased due to the closure of 237 company-owned salons during the twelve months ended September 30, 2012. 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 months ended September 30, 2012 and 2011 were as follows:

			Decrease Over Prior Fiscal Year
Periods Ended September 30,	Revenues		Dollar			Percentage
	(Dollars in thousands)
2012	$	102,284	$	(4,489	)	(4.2	)%
2011	106,773		(3,042		)	(2.8	)

The decrease in product revenues during the three months ended September 30, 2012 was due to same-store product sales decreasing 3.2 percent and the closure of 376 company-owned salons during the twelve months ended September 30, 2012. The decrease in product revenues was partially offset by growth due to new and acquired salons during the previous twelve months.

The decrease in product revenues during the three months ended September 30, 2011 was due to same-store product sales decreasing 4.3 percent and the closure of 237 company-owned salons during the twelve months ended September 30, 2011. Product sales were unfavorably impacted in the first half of the quarter as two vendor lines were repackaged. The decrease in product 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.

Royalties and Fees. Total franchise revenues, which include royalties and fees, for the three months ended September 30, 2012 and 2011 were as follows:

			Increase Over Prior Fiscal Year
Periods Ended September 30,	Revenues		Dollar		Percentage
	(Dollars in thousands)
2012	$	9,660	$	104	1.1	%
2011	9,556		64		0.7

Total franchise locations open at September 30, 2012 were 2,023, as compared to 1,983, at September 30, 2011. The increase in royalties and fees was primarily due to franchise positive same-store sales and the increase in locations during the twelve months ended September 30, 2012.

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Total franchise locations open at September 30, 2011 were 1,983, as compared to 2,017, at September 30, 2010. We purchased 83 of our franchise salons during the twelve months ended September 30, 2011. During the three months ended September 30, 2011, we purchased a franchise network, consisting of 31 franchise locations. The increase in royalties and fees was primarily due to franchise same-store sales and the weakening of the United States dollar against the Canadian dollar, partially offset by a reduction in franchise locations as of September 30, 2011 compared to September 30, 2010.

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 months ended September 30, 2012 and 2011 was as follows:

	Gross		Margin as % of Service and		(Decrease) Increase Over Prior Fiscal Year
Periods Ended September 30,	Margin		Product Revenues		Dollar			Percentage		Basis Point(1)
	(Dollars in thousands)
2012	$	210,040	42.4	%	$	(23,062	)	(9.9	)%	(230	)
2011	233,102		44.7		(4,543		)	(1.9	)	10

(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 months ended September 30, 2012 and 2011 was as follows:

	Service		Margin as % of Service		Decrease Over Prior Fiscal Year
Periods Ended September 30,	Margin		Revenues		Dollar			Percentage		Basis Point(1)
	(Dollars in thousands)
2012	$	160,888	40.9	%	$	(18,464	)	(10.3	)%	(230	)
2011	179,352		43.2		(3,456		)	(1.9	)	—

(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.

The basis point decrease in service margin as a percent of service revenues during the three months ended September 30, 2012 was primarily due to keeping stylists hours flat compared to the prior year for all concepts, other than Supercuts that increased hours to drive additional sales, compensating stylists on the gross sales amount during a coupon event and higher quota bonuses for stylists.

Service margin as a percent of service revenues during the three months ended September 30, 2011 was flat compared to the three months ended September 30, 2010. An increase in payroll taxes as a result of states increasing unemployment taxes and negative leverage on fixed payroll costs due to negative same-store service sales were offset by lower commissions as a result of leveraged pay plans for new stylists.

Product Margin (Excluding Depreciation and Amortization). Product margin for the three months ended September 30, 2012 and 2011 was as follows:

	Product		Margin as % of Product		(Decrease) Increase Over Prior Fiscal Year
Periods Ended September 30,	Margin		Revenues		Dollar			Percentage		Basis Point(1)
	(Dollars in thousands)
2012	$	49,152	48.1	%	$	(4,598	)	(8.6	)%	(220	)
2011	53,750		50.3		(1,087		)	(2.0	)	40

(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.

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The basis point decrease in product margin as a percent of product revenues during the three months ended September 30, 2012 was due to higher commissions paid to stylists in our North America segment as a result of a service and retail combined ticket commission incentive. In addition, the decrease was due to a shift in mix to promotional items with lower margins.

The basis point improvement in product margin as a percent of product revenues during the three months ended September 30, 2011 was due to a reduction in commissions paid to new employees on retail product sales in our North American segment and improved product margins in our International segment due to the prior year comparable period including promotions of lower profit margin appliances.

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 months ended September 30, 2012 and 2011 were as follows:

	Site		Expense as % of Consolidated		(Decrease) Increase Over Prior Fiscal Year
Periods Ended September 30,	Operating		Revenues		Dollar			Percentage		Basis Point(1)
	(Dollars in thousands)
2012	$	52,347	10.4	%	$	(2,464	)	(4.5	)%	10
2011	54,811		10.3		1,967			3.7		60

(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.

The basis point increase in site operating expenses as a percent of consolidated revenues during the three months ended September 30, 2012 was primarily due to negative leverage from the decrease in same-store sales. Site operating expenses decreased due to a reduction in advertising expense partially offset by higher charges for salon internet connectivity.

The basis point increase in site operating expenses as a percent of consolidated revenues during the three months ended September 30, 2011 was primarily due to planned 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 months ended September 30, 2012 and 2011 were as follows:

			Expense as % of Consolidated		(Decrease) Increase Over Prior Fiscal Year
Periods Ended September 30,	G&A		Revenues		Dollar			Percentage		Basis Point(1)
	(Dollars in thousands)
2012	$	55,872	11.1	%	$	(9,998	)	(15.2	)%	(130	)
2011	65,870		12.4		4,551			7.4		110

(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 decrease in G&A costs as a percent of consolidated revenues during the three months ended September 30, 2012 was primarily due to the comparable prior period including costs associated with the Company’s senior management restructuring and professional fees incurred in connection with the contested proxy. In addition, the basis point decrease was a result of lower health insurance expense and a reduction in warehousing costs due to productivity improvements.

The basis point increase in G&A costs as a percent of consolidated revenues during the three months ended September 30, 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.

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Rent

Rent expense, which includes base and percentage rent, common area maintenance, and real estate taxes, for the three months ended September 30, 2012 and 2011, was as follows:

			Expense as % of Consolidated		(Decrease) Increase Over Prior Fiscal Year
Periods Ended September 30,	Rent		Revenues		Dollar			Percentage		Basis Point(1)
	(Dollars in thousands)
2012	$	81,499	16.1	%	$	(677	)	(0.8	)%	60
2011	82,176		15.5		(668		)	(0.8	)	20

(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 the three months ended September 30, 2012 and 2011 was due to negative leverage in this fixed cost category due to negative same-stores sales, partially offset by salon closures.

Depreciation and Amortization

Depreciation and amortization expense (D&A) for the three months ended September 30, 2012 and 2011 was as follows:

			Expense as % of Consolidated		(Decrease) Increase Over Prior Fiscal Year
Periods Ended September 30,	D&A		Revenues		Dollar			Percentage		Basis Point(1)
	(Dollars in thousands)
2012	$	20,709	4.1	%	$	(10,088	)	(32.8	)%	(170	)
2011	30,797		5.8		7,896			34.5		160

(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.

D&A as a percent of consolidated revenues during the three months ended September 30, 2012 improved primarily due to the comparable prior period including accelerated depreciation expense resulting from an adjustment to the useful life of the Company’s internally developed point-of-sale (POS) system and a continuation of a reduction in depreciation expense from the reduction in salon construction beginning in fiscal year 2009 as compared to historical levels prior to fiscal year 2009, partially offset by negative leverage from the decrease in same-store sales.

D&A as a percent of consolidated revenues during the three months ended September 30, 2011 increased primarily due to accelerated depreciation expense resulting from a June 30, 2011 adjustment to the useful life of the Company’s internally developed point-of-sale (POS) system.

Interest

Interest expense for the three months ended September 30, 2012 and 2011 was as follows:

			Expense as% of Consolidated		Decrease Over Prior Fiscal Year
Periods Ended September 30,	Interest		Revenues		Dollar			Percentage		Basis Point(1)
	(Dollars in thousands)
2012	$	6,829	1.4	%	$	(531	)	(7.2	)%	—
2011	7,360		1.4		(1,558		)	(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 reduction in interest expense as a percent of consolidated revenues during the three months ended September 30, 2012 and 2011 was primarily due to decreased debt levels as compared to the comparable prior period.

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Interest Income and Other, net

Interest income and other, net for the three months ended September 30, 2012 and 2011 was as follows:

			Income as% of Consolidated		Increase Over Prior Fiscal Year
Periods Ended September 30,	Interest		Revenues		Dollar		Percentage		Basis Point(1)
	(Dollars in thousands)
2012	$	24,726	4.9	%	$	23,409	1777.4	%	470
2011	1,317		0.2		546		70.8		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 basis point improvement in interest income and other, net as a percent of consolidated revenues during the three months ended September 30, 2012 was primarily due to the recognition of a $24.0 million net gain of amounts previously classified within accumulated other comprehensive income. The net gain was comprised of a $33.6 million cumulative translation rate adjustment, a cumulative tax-effected net loss of $7.9 million associated with a cross currency swap and a $1.7 million net loss associated with cash repatriation. The recognition of the net gain into earnings was the result of the Company’s liquidation of all foreign entities with Euro denominated operations.

The basis point improvement in interest income and other, net as a percent of consolidated revenues during the three months ended September 30, 2011 was primarily due to the foreign currency impact in the current year related to the Company’s investment in MY Style, partially offset by lower fees received for warehousing services provided to the purchaser of Trade Secret as compared to the three months ended September 30, 2010.

Income Taxes

Our reported effective income tax rate for the three months ended September 30, 2012 and 2011 was as follows:

			Basis Point(1)
Periods Ended September 30,	Effective Rate		(Decrease) Increase
2012	11.0	%	(2,980	)
2011	40.8	%	270

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

The basis point decrease in our overall effective income tax rate for the three months ended September 30, 2012 was due to the recognition of a $24.0 million net gain of amounts previously classified within accumulated other comprehensive income that was primarily non-taxable.

The basis point increase in our overall effective income tax rate for the three months ended September 30, 2011 was due primarily to state audit settlements having a greater impact on the quarterly tax rate for the three months ended September 30, 2011 as compared to the three months ended September 30, 2010.

Equity in Income of Affiliated Companies, Net of Income Taxes

Equity in income of affiliated companies represents the income or loss generated by our equity investment in Empire Education Group, Inc. and Provalliance. Equity in income of affiliated companies for the three months ended September 30, 2012 and 2011 was as follows:

	Equity in		(Decrease) Increase Over Prior Fiscal Year
Periods Ended September 30,	Income		Dollar			Percentage
	(Dollars in thousands)
2012	$	577	$	(3,293	)	(85.1	)%
2011	3,870		1,296			50.3

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The decrease in equity in income of affiliated companies during the three months ended September 30, 2012 was primarily due to the Company’s investment in Provalliance as the Company entered into a share purchase agreement for €80 million in fiscal year 2012. In addition, the Company recorded a $0.6 million gain on the Provalliance Equity Put that automatically terminated as a result of the sale.

The increase in equity in income of affiliated companies during the three months ended September 30, 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 from Discontinued Operations, Net of Income Taxes

Income from discontinued operations for the three months ended September 30, 2012 and 2011 was as follows:

	Income from Discontinued Operations,		Increase (Decrease) Over Prior Fiscal Year
Periods Ended September 30,	Net of Taxes		Dollar			Percentage
	(Dollars in thousands)
2012	$	3,777	$	1,062		39.1	%
2011	2,715		(1,215		)	(30.9	)

During the three months ended September 30, 2012, we concluded that Hair Restoration Centers was held for sale and presented as a discontinued operation for all comparable prior periods. Income from discontinued operations for the three months ended September 30, 2012 increased compared to the prior period as depreciation and amortization were ceased during the three months ended September 30, 2012 in accordance with accounting for discontinued operations.

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.

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.

Constant Currency Presentation

The presentation below demonstrates the effect of foreign currency exchange rate fluctuations from year to year. To present this information, current period results for entities reporting in currencies other than United States dollars are converted into United States dollars at the average exchange rates in effect during the corresponding period of the prior fiscal year, rather than the actual average exchange rates in effect during the current fiscal year. Therefore, the foreign currency impact is equal to current year results in local currencies multiplied by the change in the average foreign currency exchange rate between the current fiscal period and the corresponding period of the prior fiscal year. The impact of foreign currency exchange for the three and nine months ended September 30, 2012 and 2011 were as follows:

	Impact on Revenues					Impact on Income Before Income Taxes
Impact of Foreign Currency Exchange Rate Fluctuations	September 30, 2012			September 30, 2011		September 30, 2012			September 30, 2011
	(Dollars in thousands)
Canadian dollar	$	(481	)	$	2,549	$	(53	)	$	399
British pound	(457		)	1,374		2			14
Euro	(251		)	183		(267		)	38
Total	$	(1,189	)	$	4,106	$	(318	)	$	451

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Results of Operations by Segment

Based on our internal management structure, we report two segments: North American salons and international salons. Significant results of operations are discussed below with respect to each of these segments.

North American Salons

North American Salon Revenues. Total North American salon revenues for the three months ended September 30, 2012 and 2011 were as follows:

			Decrease Over Prior Fiscal Year					Same- Store Sales
Periods Ended September 30,	Revenues		Dollar			Percentage		Decrease
	(Dollars in thousands)
2012	$	473,882	$	(23,975	)	(4.8	)%	(3.0	)%
2011	497,857		(9,076		)	(1.8	)	(3.0	)

The percentage decreases during the three months ended September 30, 2012 and 2011 were due to the following factors:

	For the Three Months Ended September 30,
Percentage (Decrease) Increase in Revenues	2012		2011
Same-store sales	(3.0	)%	(3.0	)%
Acquisitions	0.1		1.4
New stores and conversions	1.5		0.8
Foreign currency	(0.1	)	0.5
Closed salons	(3.0	)	(1.7	)
Other	(0.3	)	0.2
	(4.8	)%	(1.8	)%

The same-store sales decrease of 3.0 percent for the three months ended September 30, 2012 was the result of a decline in guest visitations and a decrease in average ticket due to a back-to-school coupon event. We acquired 6 North American salons during the twelve months ended September 30, 2012, which were all franchise buybacks. The Company constructed and closed 197 and 356 company owned salons, respectively, during the twelve months ended September 30, 2012.

The same-store sales decrease of 3.0 percent for the three months ended September 30, 2011 was the result of a decline in guest visitations and a decrease in average ticket. We acquired 85 North American salons during the twelve months ended September 30, 2011, including 83 franchise buybacks. The Company constructed and closed 140 and 221 North American company owned salons during the twelve months ended September 30, 2011. The foreign currency impact during the three months ended September 30, 2011 was driven by the weakening of the United States dollar against the Canadian dollar as compared to the prior period’s exchange rate.

North American Salon Operating Income. Operating income for the North American salons for the three months ended September 30, 2012 and 2011 was as follows:

	Operating		Operating Income as % of		Decrease Over Prior Fiscal Year
Periods Ended September 30,	Income		Total Revenues		Dollar			Percentage		Basis Point(1)
	(Dollars in thousands)
2012	$	33,978	7.2	%	$	(16,042	)	(32.1	)%	(280	)
2011	50,020		10.0		(6,074		)	(10.8	)	(110	)

(1) Represents the basis point change in North American salon operating income as a percent of North American salon revenues as compared to the corresponding periods of the prior fiscal year.

The basis point decrease in North American salon operating income as a percent of North American salon revenues for the three months ended September 30, 2012 was primarily due to the decrease in gross margins as a result of increased salon labor costs, and negative leverage in fixed cost categories due to negative same-store sales, partially offset by a reduction in advertising expense.

The basis point decrease in North American salon operating income as a percent of North American salon revenues for the three months ended September 30, 2011 was primarily due to $1.2 million of accelerated depreciation expense recorded as a result of an adjustment at June 30, 2011 to the useful life of the Company’s internally developed point-of-sale system, a planned increase in

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advertising expense related to promotional activity to increase guest trial and negative leverage in fixed cost categories due to negative same-store sales.

International Salons

International Salon Revenues. Total international salon revenues for the three months ended September 30, 2012 and 2011 were as follows:

			Decrease Over Prior Fiscal Year					Same- Store Sales
Periods Ended September 30,	Revenues		Dollar			Percentage		Decrease
	(Dollars in thousands)
2012	$	31,478	$	(2,011	)	(6.0	)%	(5.1	)%
2011	33,489		(1,569		)	(4.5	)	(9.4	)

The percentage decreases during the three months ended September 30, 2012 and 2011 were due to the following factors:

	For the Three Months Ended September 30,
Percentage Increase (Decrease) in Revenues	2012		2011
Same-store sales	(5.1	)%	(9.4	)%
New stores	2.3		1.5
Foreign currency	(2.1	)	4.4
Closed salons	(3.4	)	(2.2	)
Other	2.3		1.2
	(6.0	)%	(4.5	)%

Same-store sales decreased 5.1 percent as the retail environment in the United Kingdom remains challenging. The Company constructed, acquired and closed 22, 1 and 20 company-owned salons, respectively, during the twelve months ended September 30, 2012. The foreign currency impact during the three months ended September 30, 2012 was driven by the strengthening of the United States dollar against the British pound and Euro as compared to the prior period.

Same-store sales decreased 9.4 percent as the retail environment in the United Kingdom remain challenging. The Company constructed and closed 13 and 16 company-owned salons, respectively, during the twelve months ended September 30, 2011. The foreign currency impact during the three months ended September 30, 2011 was driven by the weakening of the United States dollar against the British pound and Euro as compared to the comparable prior period.

International Salon Operating Income. Operating income for the international salons for the three months ended September 30, 2012 and 2011 was as follows:

	Operating		Operating Income as % of		Decrease Over Prior Fiscal Year
Periods Ended September 30,	Income		Total Revenues		Dollar			Percentage		Basis Point(1)
	(Dollars in thousands)
2012	$	422	1.3	%	$	(128	)	(23.3	)%	(30	)
2011	550		1.6		(1,636		)	(74.8	)	(460	)

(1) Represents the basis point change in international salon operating income as a percent of international salon revenues as compared to the corresponding periods of the prior fiscal year.

The basis point decrease in international salon operating income as a percent of international salon revenues during the three months ended September 30, 2012 was primarily due to the decrease in gross margins and negative leverage on fixed payroll costs due to decreased same-store sales.

The basis point decrease in international salon operating income as a percent of international salon revenues during the three months ended September 30, 2011 was primarily due to negative leverage on fixed payroll costs due to decreased same-store sales and the timing of expenses incurred for an annual marketing event held by our Sassoon salons.

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Unallocated Corporate

Unallocated Corporate Operating Loss. Unallocated corporate operating expenses include salaries, stock-based compensation, professional fees, rent, depreciation and other expenses that are not allocated. Unallocated corporate operating losses were as follows:

	Operating		(Decrease) Increase Over Prior Fiscal Year
Periods Ended September 30,	Loss		Dollar			Percentage
	(Dollars in thousands)
2012	$	25,127	$	(16,439	)	(39.5	)%
2011	41,566		10,515			33.9

The decrease in unallocated corporate operating loss during the three months ended September 30, 2012 was primarily due to the comparable prior period including $7.4 million of accelerated depreciation expense as a result of an adjustment to the useful life of the Company’s internally developed point-of-sale system, incremental costs associated with the Company’s senior management restructuring and professional fees as a result of the contested proxy.

The increase in unallocated corporate operating loss during the three months ended September 30, 2011 as compared to the three months ended September 30, 2010 was primarily due to $7.4 million of accelerated depreciation expense recorded as a result of an adjustment at June 30, 2011 to the useful life of the Company’s internally developed point-of-sale system, incremental costs associated with the Company’s senior management restructuring, and professional fees as a result of the contested proxy.

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)
September 30, 2012	23.8	%	(60	)
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 (June 30).

The decrease in the debt to capitalization ratio as of September 30, 2012 compared to June 30, 2012 was primarily due to decreased debt levels stemming from repayments during the three months ended September 30, 2012.

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 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 Agreement to sell the Company’s 46.7 percent equity interest in Provalliance to the Provost family, and a $19.4 million impairment charge associated with our investment in EEG. Partially offsetting the impact of the decrease in shareholders’ equity was a decrease in debt levels.

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

	September 30,		June 30,		$ Decrease Over			% Decrease Over
	2012		2012		Prior Period(1)			Prior Period(1)
	(Dollars in thousands)
Total Assets	$	1,568,382	$	1,571,846	$	(3,464	)	(0.2	)%

(1) Change as compared to prior fiscal year end (June 30).

There was no material change in total assets during the three months ended September 30, 2012 as the decreases in investment in and loans to affiliates and other current assets were primarily offset by the increase in cash.

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

	September 30,		June 30,		$ Increase Over		% Increase Over
	2012		2012		Prior Period(1)		Prior Period(1)
	(Dollars in thousands)
Shareholders’ Equity	$	897,712	$	889,157	$	8,555	1.0	%

(1) Change as compared to prior fiscal year end (June 30).

During the three months ended September 30, 2012, equity increased as a result of net income recorded for the period excluding the impact of the $24.0 million cumulative translation adjustment that was recognized in earnings from accumulated other comprehensive income.

Cash Flows

Operating Activities

Net cash provided by operating activities was $8.5 and $13.5 million during the three months ended September 30, 2012 and 2011, respectively, and was the result of the following:

	For the Three Months Ended September 30,
Operating Cash Flows	2012			2011
	(Dollars in thousands)
Net income	$	28,538		$	8,337
Depreciation and amortization	21,161			34,106
Equity in income of affiliated companies	(907		)	(4,032		)
Dividends received from affiliated companies	347			270
Deferred income taxes	7,120			(2,800		)
Accumulated other comprehensive income reclassification adjustment	(23,956		)	—
Receivables	(3,355		)	(907		)
Inventories	(13,534		)	(23,612		)
Income tax receivable	(57		)	4,260
Other current assets	1,790			1,806
Other assets	1,408			509
Accounts payable and accrued expenses	(10,071		)	3,470
Other noncurrent liabilities	(3,648		)	(11,528		)
Other	3,630			3,576
	$	8,466		$	13,455

During the three months ended September 30, 2012, cash provided by operating activities was lower 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.

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Investing Activities

Net cash provided by (used in) investing activities during the three months ended September 30, 2012 and 2011 was the result of the following:

	For the Three Months Ended September 30,
Investing Cash Flows	2012			2011
	(Dollars in thousands)
Capital expenditures for remodels or other additions	$	(6,606	)	$	(8,247	)
Capital expenditures for the corporate office (including all technology-related expenditures)	(5,713		)	(4,172		)
Capital expenditures for new salon construction	(5,758		)	(4,408		)
Proceeds from sale of assets	21			369
Business and salon acquisitions	—			(2,077		)
Proceeds from loans and investments	130,281			1,290
	$	112,225		$	(17,245	)

Cash was provided by investing activities during the three months ended September 30, 2012 due to the receipt of $103.4 million from the sale of Provalliance, $25.6 million from EEG related to principal payments on the outstanding note receivable and revolving line of credit, and $1.3 million from Yamano Holdings Corporation related to the principal and interest payments on a note receivable.

Cash was used in investing activities during the three months ended September 30, 2011 primarily for capital expenditures and acquisitions.

The company-owned constructed and acquired locations (excluding franchise buybacks) consisted of the following number of locations in each concept:

	For the Three Months Ended September 30, 2012		For the Three Months Ended September 30, 2011
	Constructed	Acquired	Constructed	Acquired
Regis Salons	2	—	2	—
MasterCuts	3	—	4	—
SmartStyle	13	—	16	—
Supercuts	15	—	13	1
Promenade	18	—	10	—
International	6	—	2	—
	57	—	47	1

Financing Activities

Net cash used in financing activities during the three months ended September 30, 2012 and 2011 was the result of the following:

	For the Three Months Ended September 30,
Financing Cash Flows	2012			2011
	(Dollars in thousands)
Repayments of long-term debt	$	(8,905	)	$	(9,669	)
Proceeds from exercise of stock options and stock appreciation rights	45			—
Excess tax benefits from stock-based compensation plans	35			—
Dividend paid	(3,448		)	(3,494		)
	$	(12,273	)	$	(13,163	)

During the three months ended September 30, 2012 and 2011, cash was used in financing activities for repayments on long-term debt and dividends.

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Acquisitions

There were no acquisitions during the three months ended September 30, 2012. Acquisitions during the three months ended September 30, 2011 consisted of six franchise buybacks and 1 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, and continue to enter into transactions to acquire established hair care salons and businesses. In connection with the sale of Trade Secret, the Company maintains a guarantee of approximately 20 salons operated by the purchaser of Trade Secret. 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 our 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 September 30, 2012, cash and cash equivalents were $34.7, $43.9 and $143.9 million within the United States, Canada, and Europe, respectively. In October 2012, $120.7 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 September 30, 2012, the Company had no outstanding borrowings under the facility. Additionally, the Company had outstanding standby letters of credit under the facility of $51.0 million at September 30, 2012, primarily related to its self insurance program. Unused available credit under the facility at September 30, 2012 was $349.0 million.

Our ability to access our revolving credit facility is subject to our compliance with the terms and conditions of such facility, including minimum net worth and other covenants and requirements. At September 30, 2012, we were in compliance with all covenants and other requirements of our credit agreement and senior notes.

See Note 9 of the Notes to Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for the quarter ended September 30, 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.

Dividends

We paid dividends of $0.06 per share during the three months ended September 30, 2012 and 2011. On October 25, 2012, our Board of Directors declared a $0.06 per share quarterly dividend payable November 22, 2012 to shareholders of record on November 8, 2012.

Share Repurchase Program

The Company did not repurchase any of its common stock through its share repurchase program during the three months ended September 30, 2012. As of September 30, 2012, $73.5 million remains to be spent on share repurchases under this program.

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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; competition within the personal hair care industry, which remains strong, both domestically and internationally; price sensitivity; changes in economic conditions; changes in consumer tastes and fashion trends; the ability of the Company to implement its planned spending and cost reduction plan and to continue to maintain compliance with financial covenants in its credit agreements; labor and benefit costs; legal claims; risk inherent to international development (including currency fluctuations); the continued ability of the Company and its franchisees to obtain suitable locations and financing for new salon development and to maintain satisfactory relationships with landlords and other licensors with respect to existing locations; the impact on the Company of healthcare reform legislation; governmental initiatives such as minimum wage rates, taxes and possible franchise legislation; the ability of the Company to successfully identify, acquire and integrate salons that support its growth objectives; the ability of the Company to maintain satisfactory relationships with suppliers; or other factors not listed above. The ability of the Company to meet its expected revenue target is dependent on salon acquisitions, new salon construction and same-store sales performance, all of which are affected by many of the aforementioned risks. Additional information concerning potential factors that could affect future financial results is set forth in the Company’s Annual Report on Form 10-K for the year ended June 30, 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 $280.1 and $287.7 million at September 30, 2012 and June 30, 2012, respectively.

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 and hedging activities during the three months ended September 30, 2012.

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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) at the conclusion of the period ended September 30, 2012. Based upon this evaluation, the chief executive officer and chief financial officer concluded that the Company’s disclosure controls and procedures were effective.

Changes in Internal Controls

Based on management’s most recent evaluation of the Company’s internal control over financial reporting, management determined that there were no changes in the Company’s internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting that occurred during the Company’s most recent fiscal quarter.

PART II — OTHER INFORMATION

Item 1. Legal Proceedings

Item 1A. Risk Factors

Changes in the general economic environment may impact our business and results of operations.

Changes to the United States, Canadian, United Kingdom, and other economies have an impact on our business. General economic factors that are beyond our control, such as interest rates, recession, inflation, deflation, tax rates and policy, energy costs, unemployment trends, and other matters that influence consumer confidence and spending, may impact our business. In particular, visitation patterns to our salons can be adversely impacted by increases in unemployment rates and decreases in discretionary income levels.

If we continue to have negative same-store sales our business and results of operations may be affected.

Our success depends, in part, upon our ability to improve sales, as well as both gross margins and operating margins. Comparable same-store sales are affected by average ticket and same-store guest visits. A variety of factors affect same-store guest visits, including the guest experience, fashion trends, competition, current economic conditions, changes in our product assortment, the success of marketing programs and weather conditions. These factors may cause our comparable same-store sales results to differ materially from prior periods and from our expectations. Our comparable same-store sales results for the three months ended September 30, 2012 declined 3.1 percent. During fiscal year 2012, we impaired $67.7 and $78.4 million of goodwill associated with our Regis salon concept and Hair Restoration Centers reporting units, respectively. We impaired $74.1 million of goodwill associated with our Promenade salon concept during fiscal year 2011 and $35.3 million of goodwill associated with our Regis salon concept during fiscal

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year 2010. We also impaired $41.7 million of goodwill associated with our salon concepts in the United Kingdom during fiscal year 2009. If negative same-store sales continue and we are unable to offset the impact with operational savings, our financial results may be further affected. We may be required to take additional impairment charges and to impair certain long-lived assets and goodwill and such impairments could be material to our consolidated balance sheet and results of operations. The concept that has the highest likelihood of impairment is Promenade. 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 there could be impairment of goodwill in future periods.

If we are unable to improve our comparable same-store sales on a long-term basis or offset the impact with operational savings, our financial results may be affected. Furthermore, continued declines in same-store sales performance may cause us to be in default of certain covenants in our financing arrangements.

The Board of Directors is engaged in a strategic review of non-core assets that may impact our business and results of operations.

Our strategic review of non-core assets may adversely affect our financial condition and operating results or impose other risk, such as the following:

· Disruption of our business or distraction of our employees and management;

· Difficulty recruiting, hiring, motivating and retaining talented and skilled personnel;

· Increased stock price volatility;

· Difficulty in establishing, maintaining or negotiating business or strategic relationships or transactions; and

· Increased advisory fees.

On July 13, 2012, the Company entered into a definitive agreement to sell its Hair Club for Men and Women business for $163.5 million. The transaction is expected to close during fiscal year 2013.

Changes in our management and organizational structure may affect our operating results.

On August 6, 2012, Mr. Daniel J. Hanrahan became President and Chief Executive Officer of the Company. The changes to our management and organizational structure may adversely affect our financial condition and operating results or impose other risk, such as the following:

· Disruption of our business or distraction of our employees and management;

· Difficulty recruiting, hiring, motivating and retaining talented and skilled personnel;

· Increased stock price volatility; and

· Difficulty in establishing, maintaining or negotiating business or strategic relationships or transactions.

Failure to control cost may adversely affect our operating results.

We must continue to control our expense structure. Failure to manage our cost of product, labor and benefit rates, advertising and marketing expenses, operating lease costs, other store expenses or indirect spending could delay or prevent us from achieving increased profitability or otherwise adversely affect our operating results.

Changes in our key relationships may adversely affect our operating results.

We maintain key relationships with certain companies, including Walmart. Termination or modification of any of these relationships, including Walmart, could significantly reduce our revenues and have a material and adverse impact on our business, our operating results and our ability to grow.

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Changes in fashion trends may impact our revenue.

Changes in consumer tastes and fashion trends can have an impact on our financial performance. For example, trends in wearing longer hair may reduce the number of visits to, and therefore, sales at our salons.

The health care reform legislation may adversely affect our operating results.

In March 2010, the United States government enacted comprehensive health care reform legislation, which, among other things, includes guaranteed coverage requirements, eliminates pre-existing condition exclusions and annual and lifetime maximum limits, restricts the extent to which policies can be rescinded and imposes new and significant taxes on health insurers and health care benefits. The current legislation imposed implementation dates beginning in 2010 and extending through 2020, with many of the reform components requiring additional guidance from government agencies or federal regulators. Due to the lack of interpretative guidance and the phased-in nature of the reform, it is difficult to determine at this time what the impact of the health care reform legislation will be on our future financial results. Possible adverse impacts of the health care reform legislation include, but are not limited to, increased costs, exposure to expanded liability and requirements for us to revise the way we provide health care and other benefits to our employees. As a result, the impact of the health care reform legislation could have a material and adverse impact on our results of operations.

Changes in regulatory and statutory laws may result in increased costs to our business.

With approximately 10,000 locations and 54,000 employees worldwide, our financial results can be adversely impacted by regulatory or statutory changes in laws. Due to the number of people we employ, laws that increase minimum wage rates or increase costs to provide employee benefits may result in additional costs to our company. Compliance with new, complex and changing laws may cause our expenses to increase. In addition, any non-compliance with these laws could result in fines, product recalls and enforcement actions or otherwise restrict our ability to market certain products, which could adversely affect our business, financial condition and results of operations. We are also subject to laws that affect the franchisor-franchisee relationship.

If we are not able to successfully compete in our business segments, our financial results may be affected.

Competition on a market by market basis remains strong as many smaller chain competitors are franchise systems with local operating strength in certain markets. Therefore, our ability to raise prices or recruit and retain stylists in certain markets can be adversely impacted by this competition. If we are not able to raise prices or recruit and retain stylists, our ability to grow same-store sales and increase our revenue and earnings may be impaired.

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 fiscal year 2012, we recorded an impairments of $19.4 and $37.4 million related to our investments in EEG and Provalliance, respectively. During fiscal year 2011, we recorded an impairment of $9.2 million related to our investment in MY Style. 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 in late July and August of 2012. Should this continue or not reverse, an additional impairment would be more likely than not during fiscal year 2013. For example, during fiscal year 2012 we recorded $8.7 million for our share of an intangible asset impairment recorded by EEG. Our share of our investment’s goodwill balances as of September 30, 2012 is approximately $16 million.

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We are subject to default risk on our accounts and notes receivable.

We have outstanding accounts and notes receivable subject to collectability. If the counterparties are unable to repay the amounts due or if payment becomes unlikely our results of operations would be adversely affected. For example, in fiscal year 2011 the Company recorded a $31.2 million valuation reserve on the note receivable from the purchaser of Trade Secret to reflect the net realizable value.

Changes in manufacturers’ choice of distribution channels may negatively affect our revenues.

The retail products that we sell are licensed to be carried exclusively by professional salons. The products we purchase for sale in our salons are purchased pursuant to purchase orders, as opposed to long-term contracts and generally can be terminated by the producer without much advance notice. Should the various product manufacturers decide to utilize other distribution channels, such as large discount retailers, it could negatively impact the revenue earned from product sales.

Changes to interest rates and foreign currency exchange rates may impact our results from operations.

Changes in interest rates will have an impact on our expected results from operations. Currently, we manage the risk related to fluctuations in interest rates through the use of fixed rate debt instruments and other financial instruments.

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 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 evaluating 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 we fail to protect the security of personal information about our guests, we could be subject to costly government enforcement actions or private litigation and our reputation could suffer.

The nature of our business involves processing, transmission and storage of personal information about our guests. If we experience a data security breach, we could be exposed to government enforcement actions and private litigation. In addition, our guests could lose confidence in our ability to protect their personal information, which could cause them to stop visiting our salons altogether. Such events could lead to lost future sales and adversely affect our results of operations.

Certain of the terms and provisions of the convertible notes we issued in July 2009 may adversely affect our financial condition and operating results and impose other risks.

In July 2009, we issued $172.5 million aggregate principal amount of our 5.0 percent convertible senior notes due 2014 in a public offering. Certain terms of the notes we issued may adversely affect our financial condition and operating results or impose other risks, such as the following:

· Holders of notes may convert their notes into shares of our common stock, which may dilute the ownership interest of our shareholders,

· If we elect to settle all or a portion of the conversion obligation exercised by holders of the notes through the payment of cash, it could adversely affect our liquidity,

· Holders of notes may require us to purchase their notes upon certain fundamental changes, and any failure by us to purchase the notes in such event would result in an event of default with respect to the notes,

· The fundamental change provisions contained in the notes may delay or prevent a takeover attempt of the Company that might otherwise be beneficial to our investors,

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· Our ability to pay principal and interest on the notes depends on our future operating performance and any failure by us to make scheduled payments could allow the note holders to declare all outstanding principal and interest to be due and payable, result in termination of other debt commitments and foreclosure proceedings by other lenders, or force us into bankruptcy or liquidation, and

· The debt obligations represented by the notes may limit our ability to obtain additional financing, require us to dedicate a substantial portion of our cash flow from operations to pay our debt, limit our ability to adjust rapidly to changing market conditions and increase our vulnerability to downtowns in general economic conditions in our business.

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

Item 6. Exhibits

Exhibit 10(a)(*)		Employment Agreement, dated August 31, 2012, between the Company and Daniel J. Hanrahan

Exhibit 10(b)(*)		Form of Amended and Restated Senior Officer Employment and Deferred Compensation Agreement, dated August 31, 2012 between the Company and certain senior executive officers

Exhibit 15		Letter Re: Unaudited Interim Financial Information.

Exhibit 31.1		President and 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		President and 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: November 9, 2012	By:	/s/ Brent A. Moen
		Brent A. Moen
		Senior Vice President and Chief Financial Officer

		Signing on behalf of the registrant and as principal accounting officer

Exhibit 10(a)(*)

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (this “ Agreement ) is made by and between Regis Corporation, a Minnesota corporation (the “ Corporation ”), and Daniel Hanrahan (the “ Executive ”) as of this 31 st day of August, 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 commenced at 12:01 a.m. on August 6, 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 ”).

2. DUTIES . During the Employment Period, the Executive shall serve as President and Chief Executive 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 $850,000.00 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, 2014, 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 payout equal to $1,062,500.00, which is 125% of the Executive’s initial Base Salary (the “ 2013 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 125% of the Executive’s then-current Base Salary. The 2013 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 date of this Agreement (the “ Equity Grant Date ”), the Executive will receive an award of (i) 118,062 shares of restricted stock granted under the Regis Corporation 2004 Long Term Incentive Plan (“ Long Term Plan ”), subject to the Executive’s execution of a restricted stock agreement approved by the Committee and subject to the terms and conditions of the Long Term Plan, with such shares vesting in full on the five (5) year anniversary of the Employment Commencement Date, provided the Executive is an employee of the Corporation on that date (except as otherwise provided in the award agreement), and (ii) 20,000 restricted stock units granted under the 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 immediately after a share of the Corporation’s common stock trades at or above $35 (subject to appropriate adjustment for stock splits and similar events) for a period of at least twenty (20) consecutive trading days on or before the five (5) year anniversary of the Employment Commencement 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 . The Executive shall be eligible to participate in the Long Term Plan in accordance with the terms and provisions of the Long Term Plan as may be in effect from time to time for its senior executive officers. For the fiscal year ending June 30, 2013, the Executive will be awarded equity with a projected total value of

$2,250,000 and comprised of the following: (i) twenty percent (20%) in an award of restricted stock units vesting ratably over a three (3) year period, (ii) forty percent (40%) in a performance share award that will cliff vest on the three (3) year anniversary subject to attainment of performance goals determined by the Committee, and (iii) forty percent (40%) 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 restricted stock and restricted stock unit 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 Miami, Florida 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 Miami, Florida, plus (v) an amount equal to one-half of any loss the Executive experiences as a result of the sale of the Executive’s current primary residence in Miami, Florida, provided the total amount payable under this clause (v) shall not exceed $100,000.00. 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) 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.

(g) 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 include a $25,000 automobile allowance. 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:

(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).

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:

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.

(A) If the Executive’s Date of Termination occurs prior to the date the Executive is paid his Bonus for the fiscal year ending June 30, 2014, then the Executive shall be entitled to receive (I) an amount equal to the Base Salary the Executive would have received assuming the Executive would have remained employed through the three-year anniversary of the Employment Commencement Date, based on 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 through the end of the three-year anniversary of the Employment Commencement Date, plus (II) an amount equal to the Bonus the Executive would have otherwise been paid for the fiscal year in which the Date of Termination occurs and the Bonus(es) the Executive would have otherwise been paid for any subsequent fiscal year(s)

through the three-year anniversary of the Employment Commencement Date (assuming the same minimum, target and maximum Bonus payment structure for the fiscal year in which the Date of Termination occurs would have remained in place during any such subsequent fiscal years, and that the Executive would have otherwise remained employed by the Corporation through the three-year anniversary of the Employment Commencement Date), payable at the same time as bonuses are paid to such other senior executive officers of the Corporation under the then-applicable Short Term Plan for the fiscal year in which the Date of Termination occurs and any subsequent fiscal year(s) through the three-year anniversary of the Employment Commencement Date (if any), plus (III) if the Date of Termination occurs after the end of a fiscal year and prior to the date of payment to the Executive of any Bonus for such prior fiscal year, then Executive also will be entitled to receive an amount equal to the Bonus the Executive would have otherwise been paid a Bonus for such prior fiscal year, payable at the same time as bonuses for such prior fiscal year are paid to such other senior executive officers of the Corporation under the then-applicable Short Term Plan.

(B) If the Executive’s Date of Termination occurs after the date the Executive is paid his Bonus for the fiscal year ending June 30, 2014, then the Executive shall be entitled to receive (I) 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 12 months, plus (II) an amount equal to the Bonus the Executive would have otherwise been paid for the fiscal year in which the Date of Termination occurs had the Executive remained employed by the Corporation through the payment date of any such Bonus, payable at the same time as bonuses are paid to other then-current senior executive officers of the Corporation under the then-applicable Short Term Plan for the fiscal year in which the Date of Termination occurs.

Notwithstanding the foregoing, any installments under Section 6(b)(iii)(A)(I) or Section 6(b)(iii)(B)(I), as applicable, that otherwise would be payable on the regular payroll dates between the Date of Termination and first day of the seventh (7 th ) 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 (7 th ) 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.

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 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(b)(iii).

(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:

(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) an amount equal to two times the Executive’s Base Salary as of the Date of Termination, plus (B) 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 (A) and (B) 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 (7 th ) 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 (7 th ) 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 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:

(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 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 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.

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, 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 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.

(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:	Daniel Hanrahan
	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 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 A. Bakken

	Its:	Executive Vice President

	/s/ Daniel J. Hanrahan
	DANIEL HANRAHAN

Exhibit 10(b)(*)

AMENDED AND RESTATED EMPLOYMENT AGREEMENT

THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (this “ Agreement ) is made by and between Regis Corporation, a Minnesota corporation (the “ Corporation ”), and [***NAME***] (the “ Employee ”) as of this 31 st day of August, 2012 (the “ Effective Date ”).

WHEREAS, the Employee has been employed by the Corporation.

WHEREAS, effective as of [***DATE***], the Corporation and the Employee entered into an Employment and Deferred Compensation Agreement, which was subsequently amended and restated effective as of [***NAME***] (the “ Prior Agreement ”).

WHEREAS, in connection with the Employee’s employment with the Corporation, the Employee has had and will continue to have access to confidential, proprietary and trade secret information of the Corporation and its affiliates and relating to the business of the Corporation and its affiliates, which confidential, proprietary and trade secret information the Corporation and its affiliates desire to protect from disclosure and unfair competition.

WHEREAS, the Compensation Committee of the Board of Directors has recently completed a review of all of the Corporation’s compensation programs as compared to current market practices, and the changes reflected in this Agreement are part of the comprehensive changes being enacted to ensure the overall competitiveness of the Corporation’s compensation programs.

WHEREAS, the Corporation and the Employee now desire to amend and fully restate the Prior Agreement.

WHEREAS, the Employee specifically acknowledges that executing this Agreement makes the Employee eligible for incentive compensation and severance opportunities that the Employee was not eligible for under the Prior Agreement and for which the Employee would not be eligible if the Employee did not enter into this Agreement with the Corporation.

NOW, THEREFORE, 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 and the Employee hereby agree as follows:

1. EMPLOYMENT COMMENCEMENT DATE; PERIOD OF EMPLOYMENT .

(a) Period of Employment . The Corporation agrees to continue to employ the Employee, and the Employee agrees to continue to serve the Corporation, upon the terms and conditions hereinafter set forth. The employment of the Employee by the Corporation pursuant to this Agreement shall be for a period beginning on the Effective Date and continuing until the Executive’s employment is terminated as provided in Section 5 herein (the “ Employment Period ”).

2. DUTIES . During the Employment Period, the Employee agrees to serve the Corporation faithfully and to the best of the Employee’s ability under the direction of the Chief Executive Officer and the Board of Directors of the Corporation (the “ Board ”), devoting the Employee’s entire business time, energy and skill to such employment, and to perform from time to

time such services and act in such office or capacity as the President and the Board shall request. The Employee 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.

3. OFFICE FACILITIES . During the Employment Period under this Agreement, the Employee shall have the Employee’s office where the Corporation’s principal executive offices are located from time to time, which currently are at 7201 Metro Boulevard, Edina, Minnesota.

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

(a) Base Salary . The Corporation shall pay the Employee a base salary (the “ Base Salary ”), payable monthly, semi-monthly or weekly according to the Corporation’s general practice for its officers. Such Base Salary may be modified by the Chief Executive Officer or the Compensation Committee of the Board of Directors (or, if the Employee is an “Executive Officer” under regulations of the Securities and Exchange Commission, then only by the Compensation Committee of the Board of Directors) in their sole discretion. Following any such modification, any then-current Base Salary shall be the “Base Salary” for purposes of this Agreement.

(b) Bonus; Equity Awards . To the extent the Employee meets the eligibility requirements, the Employee shall be eligible for an annual performance bonus (the “ Bonus ”) as determined under the provisions of the then-applicable Regis Corporation Short Term Incentive Plan (“ 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 officers, with performance goals and other terms consistent with other officers of the Corporation. Any Bonus shall be paid at the same time as bonuses are paid to other officers of the Corporation under the then-applicable Short Term Plan.

If the Employee is selected to receive any equity awards under the Regis Corporation 2004 Long Term Incentive Plan, or any successor plan (the “ Long Term Plan ”), then, notwithstanding anything to the contrary in such plan, all awards of time-based equity compensation granted to the Employee 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.

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

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

(iii) take vacations and be entitled to sick leave in accordance with the Corporation’s policy for 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 Employee’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 officers of the Corporation. In addition, the Employee acknowledges that the Employee’s right to deferred compensation under the Prior Agreement has been frozen effective June 30, 2012, subject to the provisions of Appendix A to this Agreement.

(d) Expenses . During the Employment Period, the Employee shall be reimbursed for reasonable business expenses incurred in connection with the performance of the Employee’s 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 Employee hereunder, the Employee shall cooperate in good faith with the Corporation to structure such benefits or payments in the most tax-efficient manner to the Corporation.

(e) Life Insurance . [The Employee and the Corporation are parties to an agreement pursuant to which the Corporation agreed to pay ten (10) annual premium payments with respect to one or more life insurance policies insuring the Employee’s life. Such agreement shall remain in full force and effect in accordance with its terms, provided, however, that Section 5 of such agreement, and the provisions of Section 7 of such agreement relating to reimbursement of income taxes and excise taxes and related tax gross-ups, shall be null and void and shall have no further effect from and after the Effective Date.][The Corporation has previously made one or more annual premium payments with respect to one or more life insurance policies insuring the Employee’s life. The Corporation agrees to continue making such annual premium payments until a total of ten (10) such payments have been made under each such policy, so long as the Employee remains employed by the Corporation. However, the Employee acknowledges that the Corporation shall have no further obligation to make any payment with respect to the payment or reimbursement of related income taxes or any tax gross-up payment with respect to such annual premium payments from and after the Effective Date.]

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

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

(b) Permanent Disability . In the event of the Employee’s physical or mental disability or health impairment which prevents the effective performance by the Employee of the Employee’s duties hereunder on a full time basis, with such termination to occur (i) with respect to disability, on or after the time which the Employee 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 Employee has been unable to substantially perform the Employee’s services hereunder for six consecutive months. Any dispute as to the Employee’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 Employee, may terminate such employment hereunder for Cause.

(e) By the Employee For Good Reason . The Employee 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 Employee Without Good Reason . The Employee 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 Employee’s employment by the Corporation or by the Employee (other than termination based on the Employee’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 Employee’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 Employee’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).

6. PAYMENTS UPON TERMINATION .

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

(i) Accrued Compensation . All compensation due the Employee 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 Employee at the time such payment otherwise would be due.

(ii) Accrued Obligations . In addition, the Employee 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 Employee’s employment pursuant to this Agreement is terminated by the Corporation without Cause or the Employee terminates the Employee’s employment for Good Reason, then the Employee shall be entitled to and shall receive the following:

(i) Accrued Compensation . All compensation due the Employee 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 Employee at the time such payment otherwise would be due.

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

days after the Date of Termination will be delayed and included in the first installment paid to the Employee on the first payroll date that is more than sixty (60) days after the Date of Termination, and provided further that if the Employee 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 Employee’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 (7 th ) 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 Employee under subsections (A) or (B) above will be reduced by the amount of any compensation earned by the Employee 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 Employee signing and not revoking a release of claims in a form prescribed by the Corporation and the Employee remaining in strict compliance with the terms of this Agreement and any other written agreements between the Corporation and the Employee, the Corporation will pay the employer portion of the Employee’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 Employee remains eligible to receive the Severance Payment installments under Section 6(b)(iii) (up to a maximum of twelve (12) months), provided the Employee timely elects COBRA coverage. Notwithstanding the foregoing, the Corporation will discontinue COBRA premium payments if, and at such time as, the Employee (A) is 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).

(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 Employee’s employment pursuant to this Agreement is terminated by the Corporation without Cause, or the Employee terminates the Employee’s employment for Good Reason, then the Employee shall be entitled to and shall receive the following:

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

(iii) Severance Payment . Subject to the Employee signing and not revoking a release of claims in a form prescribed by the Corporation and the Employee remaining in strict compliance with the terms of this Agreement and any other written agreements between the Corporation and the Employee, the Employee 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) an amount equal to two times the Employee’s target Bonus for the fiscal year in which the Date of Termination occurs, plus (B) an amount equal to two times the Employee’s Base Salary as of the Date of Termination. The Severance Payment described in subsections (A) and (B) above shall be added together and will be paid in substantially equal installments in accordance with the Corporation’s normal payroll policies commencing on the Date of Termination and continuing for twenty-four (24) 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 Employee on the first payroll date that is more than sixty (60) days after the Date of Termination, and provided further that if the Employee 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 Employee’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 (7 th ) 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 Employee under subsections (A) or (B) above will be reduced by the amount of any compensation earned by the Employee for any consulting or employment services provided on a substantially full-time basis during the 24-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 Employee signing and not revoking a release of claims in a form prescribed by the Corporation and the Employee remaining in strict compliance with the terms of this Agreement and any other written agreements between the Corporation and the Employee, the Corporation will pay the employer portion of the Employee’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 Employee remains eligible to receive the Severance Payment installments under Section 6(c)(iii) (up to a maximum of eighteen (18) months), provided the Employee timely elects COBRA coverage. Notwithstanding the foregoing, the Corporation will discontinue COBRA premium payments if, and at such time as, the Employee (A) is 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 Employee’s employment pursuant to this Agreement is terminated pursuant to subsection (c) of Section 5 hereof, or the Employee terminates this Agreement without Good Reason, then the Employee shall be entitled to and shall receive:

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

(i) In the event the Change in Control Benefits payable to the Employee 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 Employee is less than what the net after-tax amount to the Employee 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 Employee could 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 Employee 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 Employee 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 Employee and avoid characterization of such Change in Control Benefits as a parachute payment.

The Corporation will provide the Employee with all information reasonably requested by the Employee to permit the Employee to make such designation. To the extent that the Employee’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 Employee 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 Employee; (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 Employee’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.

(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 Employee 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.

“ 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 Employee of the Employee’s material employment duties required by this Agreement (other than by reason of the Employee’s physical or mental incapacity) after reasonable notice to the Employee and reasonable opportunity (not less than thirty (30) days) to cease such non-performance, or (b) the Employee 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 (currently, Section 2.7(2) of the Long-Term Plan).

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

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

(b) a material reduction by the Corporation in the Employee’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 officers provided the percentage reduction in the Employee’s Base Salary is commensurate with the percentage reduction in the base salaries for all other officers);

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

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

8. CONFIDENTIAL INFORMATION . The Employee 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 the Employee’s duties hereunder. The provisions of this Section 8 shall survive the termination of the Employee’s employment and consulting with the Corporation, provided that after the termination of the Employee’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 Employee’s termination of employment hereunder (the “ Non-Competition Period ”), the Employee shall not enter into endeavors that are competitive with the business or operations of the Corporation in the beauty industry, 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 Employee 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 the Employee’s 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 Employee 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 Employee devotes the Employee’s entire professional time, energy, and skills to the business of the Corporation. The Employee 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 Employee to engage in 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 Employee 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 Employee violates any of the restrictive covenants set forth in Sections 8 or 9 above, and such violation continues after the Employee 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 Employee shall immediately return to the Corporation any Severance Payment previously paid to the Employee. The Employee 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 Employee reimbursement for reasonable attorneys’ fees and expenses incurred by the Corporation in successfully enforcing these provisions to final judgment and the Employee shall be entitled to receive from the Corporation reasonable attorney’s fees and expenses incurred by the Employee in the event the Corporation is found to be not entitled to enforcement of these provisions.

11. MISCELLANEOUS .

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

(d) Complete Agreement; Prior Agreement . This Agreement (and Appendix A) is the entire agreement of the parties with respect to the subject matter hereof, and supersedes and replaces any and all prior agreements among the Corporation and the Employee with respect to the matters covered herein, including without limitation the Prior Agreement. The Employee acknowledges and agrees that the Employee has no right or claim to any other compensation or benefits under any such prior agreements, including the Prior Agreement.

(e) 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 Employee.

(f) 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.

(g) 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.

(h) 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.

(i) 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 Employee:



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.

(j) 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.

(k) 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 Employee shall be responsible for payment of any and all taxes owed in connection with the consideration provided for in this Agreement.

(l) 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(l). 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 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/ Daniel J. Hanrahan

	Its:	Chief Executive Officer


	[*NAME*]

APPENDIX A

DEFERRED COMPENSATION AGREEMENT

In addition to any amounts payable under the Agreement, Employee also is eligible for the payment of certain deferred compensation amounts, subject to the terms of this Appendix A.

1. Definitions . T he following definitions shall apply for purposes of this Appendix A (other definitions are included in the text of the main Agreement):

“Aggregate Benefit” shall be an amount equal to the Employee’s Monthly Benefit multiplied by 240.

“Discounted Vested Monthly Benefit” shall be an amount determined by discounting Employee’s Vested Monthly Benefit to present value based on the number of months between (a) the Employee’s age at the time of her separation from service or, if Employee elects to defer payment or commencement pursuant to subparagraph 3(d) of this Agreement, the date of payment or commencement, and (b) the date of Employee’s 65th birthday. Payments shall be discounted to present value at a rate of interest equal to 2.76%, which is the yield to maturity of 30-year U.S. Treasury Notes as of June 30, 2012.

“Monthly Benefit” shall be the greater of (i) forty percent (40%) of Employee’s average monthly base salary for the sixty (60) month period from July 1, 2007 through June 30, 2012, or (ii) Five Thousand Dollars ($5,000.00).

“Vested Monthly Benefit” shall be a percentage of Employee’s Monthly Benefit determined on the basis of the number of Employee’s years of service beginning and ending on June 30, 2012 (the “Vesting Period”), based on the following schedule:

Years of Service	Percentage

Less than 7 years	0	%
7 years	5	%
8 years	10	%
9 years	15	%
10 years	20	%
11 years	25	%
12 years	30	%
13 years	35	%
14 years	40	%
15 years	50	%
16 years	60	%
17 years	70	%
18 years	80	%
19 years	90	%
20 or more years	100	%

A year of service for purposes of vesting shall be a consecutive 12-month period. A partial year of service will be given for any period of service that is less than a consecutive 12-month period, based on a fraction whose numerator is the number of days Employee was employed by the Corporation during that 12-month period and the denominator is 365. If Employee has a partial year of service, determined as stated above, Employee’s Vested Monthly Benefit will also be pro-rated, to give Employee the benefit of the additional partial year of service. (By means of example only, if Employee had 16.25 years of service on June 30, 2012, Employee’s vesting percentage would be 62.5%.)

Vesting credit shall not be given for any period of employment after June 30, 2012.

Notwithstanding the foregoing, if the Corporation terminates the Employee’s employment for any reason other than Cause or the Employee terminates the Employee’s employment for Good Reason, the Employee’s Vested Monthly Benefit as of the termination shall be deemed to be one hundred percent (100%).

2. Employment/Term. Notwithstanding the termination of employment of Employee, this Appendix shall remain in full force and effect during such time as Employee is or may be entitled to any Monthly Benefit under this Appendix.

3. Deferred Compensation. The Corporation shall pay to Employee, if living, or, in the event of Employee’s death, to Employee’s surviving spouse, or to such other person or persons as Employee shall have designated in writing (or in the absence of either, to Employee’s estate) (the “Beneficiary”), the following sums upon the terms and conditions and for the periods hereinafter set forth:

(a) Payments upon Retirement. On the last day of the month next following the month in which Employee has a separation from service with the Corporation at or after age 65, or upon the last day of the month next following the month in which Employee reaches age 65 if Employee is then disabled within the meaning of subparagraph 3(c), the Corporation shall pay to Employee a lump sum cash payment of an amount equal to the present value of Employee’s Vested Monthly Benefit. For the purpose of determining the present value, the following assumptions shall apply:

(1) Interest: Payments shall be discounted to present value at a rate of interest equal to 2.76%, which is the yield to maturity of 30-year U.S. Treasury Notes as of June 30, 2012.

(2) Payment Duration: It shall be assumed that payments of the Vested Monthly Benefit will be made for two hundred and forty (240) months.

Notwithstanding the foregoing in this subparagraph 3(a), Employee shall be entitled, by written election to the Corporation’s Board of Directors, to receive, in connection with a separation from service at or after age 65, to have Employee’s Vested Monthly Benefit paid in monthly payments rather than the lump-sum described above,

provided (x) Employee makes such written election more than 12 months before Employee attains age 65, (y) such election is not effective for 12 months, and (z) the first installment of the Vested Monthly Benefit is paid five years after the month next following the month of such separation from service (or if earlier, upon death or disability pursuant to subparagraphs 3(b) and 3(c), respectively). Pursuant to (and subject to the requirements of) transitional relief provided with respect to initial and subsequent deferral elections under Code Section 409A (including without limitation, IRS Notice 2005-1, Notice 2006-79, the Preamble to the final Section 409A treasury regulations, and Notice 2007-86), any election made on or before December 31, 2008 shall not be subject to the foregoing timing requirements.

If this election is made, the Vested Monthly Benefit will be paid for two hundred and forty (240) months. If Employee dies before receiving all two hundred and forty (240) monthly payments specified herein, the Corporation shall pay to Employee’s Beneficiary the remaining unpaid monthly payments as they become due as provided above.

(b) Payments upon Death before Separation. If Employee dies while employed by the Corporation, during the first six (6) months of disability, or while disability payments are being paid under subparagraph (c), the Corporation shall pay to Employee’s Beneficiary a lump sum cash payment of an amount equal to the present value of Employee’s Monthly Benefit (based on the assumptions listed in subparagraph (a) above); provided, however, that if Employee elected to receive monthly payments rather than a lump sum (as provided under subparagraph (d)), the Corporation shall pay to Employee’s Beneficiary Employee’s full Monthly Benefit for two hundred and forty (240) months. The lump sum payment or the first monthly payment as applicable will be paid within thirty (30) days after Employee’s death.

(c) Payments during Disability. In addition to the payments provided in subparagraphs (a) and (b), should Employee become disabled while employed by the Corporation, and such disability continues for a period of six (6) months, the Corporation shall pay to Employee the Monthly Benefit during each month that Employee remains disabled until Employee attains age 65 or until Employee’s death prior to attaining such age, at which time the payments provided in subparagraph (a) or (b), as applicable, shall begin. The first payment under this subparagraph (c) shall be made during the seventh month of such disability, and each succeeding payment shall be made on the same date of each succeeding month thereafter. Payments shall be made under this subparagraph (c) only if Employee is disabled within the meaning of the disability clause of an applicable policy’s waiver of premium provision and within the meaning of “disability” as set forth in Treas. Reg. Section 1.409A-3(i)(4).

(d) Early Separation. In the event Employee has a separation from service with the Corporation before reaching age 65 (unless the Employee is terminated by the Corporation for Cause, or if the separation is by reason of disability pursuant to subparagraph 3(c), or by reason of death), then on the last day of the month next

following the month of Employee’s separation from service, the Corporation shall pay to Employee a lump sum cash payment of an amount equal to the present value of Employee’s Discounted Vested Monthly Benefit. For the purpose of determining the present value, the following assumptions shall apply:

(1) Interest: Payments shall be discounted to present value at a rate of interest equal to 2.76%, which is the yield to maturity of 30-year U.S. Treasury Notes as of June 30, 2012.

(2) Payment Duration: It shall be assumed that payments of the Discounted Vested Monthly Benefit will be made for two hundred and forty (240) months.

Notwithstanding the foregoing in this subparagraph 3(d), Employee shall be entitled, by written election to the Corporation’s Board of Directors, to receive, in connection with Employee’s separation from service prior to age 65, to (i) be paid the lump sum cash payment on the basis of Employee’s Vested Monthly Benefit rather than the Discounted Vested Monthly Benefit (or based on Employee’s Discounted Vested Monthly Benefit but commencing at a later date if the payment date is prior to age 65), and/or (ii) to be paid in monthly payments rather than the lump-sum described above, provided (x) Employee makes such written election more than 12 months before Employee’s separation from service, (y) such election is not effective for 12 months following the date the election is made, and (z) the first installment of the Monthly Benefit (or the lump sum payment as applicable) is paid no earlier than five years after the month next following the month of Employee’s separation from service (or if earlier, upon death or disability pursuant to subparagraphs 3(b) and 3(c), respectively). Pursuant to (and subject to the requirements of) transitional relief provided with respect to initial and subsequent deferral elections under Code Section 409A (including without limitation, IRS Notice 2005-1, Notice 2006-79, the Preamble to the final Section 409A treasury regulations, and Notice 2007-86), any election made on or before December 31, 2008 shall not be subject to the foregoing timing requirements.

If monthly payments are elected, the Vested Monthly Benefit (or the Discounted Vested Monthly Benefit (if payment commences prior to age 65)) will be paid for two hundred and forty (240) months. If Employee dies before receiving all two hundred and forty (240) monthly payments specified herein, the Corporation shall pay to Employee’s Beneficiary the remaining unpaid monthly payments as they become due as provided above. If Employee dies after Employee’s separation from service but prior to the date on which Employee elected to receive payment, the Corporation shall pay to Employee’s Beneficiary the Discounted Vested Monthly Benefit or the Vested Monthly Benefit that Employee had otherwise elected to receive for two hundred and forty (240) months. The first such payment shall begin within thirty (30) days after Employee’s death.

(e) Termination for Cause . If Employee’s employment with the Corporation is

terminated at any time for Cause, the Corporation shall have no obligation to make any payments to Employee or Employee’s Beneficiary under this Agreement and all future payments shall be forfeited.

The Corporation is the owner and beneficiary of certain insurance policies on Employee’s life and insuring against Employee’s disability. No payments shall be required under subparagraphs (a), (b), (c) or (d) of this paragraph, if because of any act by Employee, either (i) the applicable policy is canceled by the insurance company issuing such policy or (ii) the insurance company refuses to pay the proceeds of said policy. The provisions of the preceding sentence shall be inapplicable and of no further force or effect upon and after a Change in Control.

Notwithstanding the foregoing provisions of this paragraph 3 or of the following paragraph 4, to the extent required in order to be made without triggering any tax or penalty under Section 409A of the Code if Employee is a “specified employee” for purposes of Section 409A of the Code, amounts that would otherwise be payable under this paragraph 6 during the six-month period immediately following the Employee’s separation from service shall instead be paid on the first business day after the date that is six months following Employee’s separation from service, or, if earlier, the date of Employee’s death.

4. Restrictive Covenant. If Employee violates Section 8 or 9 of the Agreement, and such violation continues after the Employee is notified in writing by the Corporation that Employee is in violation of the restrictive covenant, then (i) the Corporation shall have no further obligation to pay any installments of the Monthly Benefit and all such future payments shall be forfeited, and (ii) the Employee shall immediately return to the Corporation all of the Monthly Benefits previously paid to the Employee. The Employee acknowledges that any breach or threatened breach of Section 8 or 9 of the Agreement 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.

5. Trust Agreement. The Corporation has established a Trust Agreement under the Regis Corporation Deferred Compensation Agreement and said Trust Agreement is hereby incorporated by reference into this Agreement and made a part hereof.

6. Prohibition against Assignment. Employee agrees, on behalf of Employee and Employee’s personal representatives, and any other person claiming any benefits under the Employee or Employee’s by virtue of this Agreement, that this Agreement and the rights, interests and benefits hereunder shall not be assigned, transferred or pledged in any way by Employee or any person claiming under the Employee by virtue of this Agreement, and shall not be subject to execution, attachment, garnishment or similar process.

Exhibit No. 15

November 9, 2012

Securities and Exchange Commission

100 F Street, N.E.

Washington DC 20549

RE:

Regis Corporation Registration Statements on Form S-3 (File Nos. 333-160438, 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 November 9, 2012 on our review of the interim financial information of Regis Corporation for the three month periods ended September 30, 2012 and 2011 and included in the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2012, is incorporated by reference in the above referenced registration statements.

Yours very truly,

/s/ PRICEWATERHOUSECOOPERS LLP

PRICEWATERHOUSECOOPERS LLP
Minneapolis, Minnesota

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.

November 9, 2012

/s/ Daniel J. Hanrahan
Daniel J. Hanrahan, President and Chief Executive Officer

Exhibit No. 31.2

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

I, Brent A. Moen, certify that:

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

(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.

November 9, 2012

/s/ Brent A. Moen
Brent A. Moen, Senior Vice President and Chief Financial Officer

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 September 30, 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.

November 9, 2012

/s/ Daniel J. Hanrahan
Daniel J. Hanrahan, President and Chief Executive Officer

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 September 30, 2012 as filed with the Securities and Exchange Commission on the date hereof, I, Brent A. Moen, Senior 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.

November 9, 2012

/s/ Brent A. Moen
Brent A. Moen, Senior Vice President and Chief Financial Officer