Good morning. My name is Val and I’ll be your conference facilitator today. At this time I would like to welcome everyone to the Regis Corporation’s second quarter 2008 conference call. All lines have been placed on mute to prevent any background noise. If anyone has not received a copy of this morning’s press release, please call Regis Corporation at 952-806-1798 and a copy will be faxed to you immediately. If you wish to access the replay for this call, you may do so by dialing 800-405-2236, access code 11104730 followed by the pound sign. I would like to remind you that to the extent the company’s statements or comments this morning represent forward-looking statements, I’ll refer you to the risk factors and other cautionary factors in today’s news release as well as the company’s SEC filings. Reconciliation to non-GAAP financial measures mentioned in the following presentation can be found on the website at www.regiscorp.com. With us today are Paul Finkelstein, Chairman, President, and Chief Executive Officer and Rodney Pearce, Senior Executive Vice President and Chief Financial Administrative Officer. After management has completed its review of the quarter, we will open the call for questions. (Operator Instructions) I would now like to turn the call over to Paul Finkelstein for his comments. Paul, you may begin.

Thank you very much and good morning, everyone. As you all know from the press release, we did have a disappointing second quarter. It gives us little comfort to know that many retailers had similar difficulties during the holidays. Regis has morphed into a mature company and the current environment same-store sales are the major driver of profitability. As many of you know, this was not the case in the 1990s. Regis at that time was a total sales growth story. To reiterate something we have talked about ad nauseum, we do need same-store sales increases of at least 2% to leverage our fixed costs. Results above 2% give us positive leverage. Results below 2% create negative leverage. I’ll be very brief with my statistical analysis as we have issued a very detailed press release. Total revenues for the quarter increased 4%. If one considers the deconsolidation of beauty schools excluding Vidal Sassoon, and adds back the deconsolidated beauty school sales number, total revenues would have increased 6.5%. Same-store sales for the quarter declined 0.8%. Earnings per share was $0.51 contrasted to $0.59 per share last year. Excluding the benefit of the workers comp accrual adjustment, EPS would have been $0.46 this year and last year would have been $0.54 without a $0.05 per share one-time tax credit. With a negative comp of 80 basis points, the earnings at $0.46 per share correlates to our sales performance. Randy will go into greater detail describing our second quarter results in his remarks. Strong business segments include the European continent, excluding the United Kingdom, Super Cuts, and Hair Clubs for Men and Women. Our systemwide store count increased by 51. We built 74 new salons. We acquired 19 salons, and our franchisees built 69 salons. Other miscellaneous items. First, Intelligent Nutrients should…

Thanks, Paul, and good morning, everyone. Our second quarter earnings of $0.51 per share that we’re reporting today met the low end of our previously issued guidance; however, the $0.51 included a benefit of about $0.05 per share due to a better than expected adjustment to our prior year’s workers compensation reserves. I’ll discuss that in more detail a bit later. Therefore, excluding this workers comp benefit, our second quarter operational earnings came in below plan at $0.46 per share. The shortfall was virtually all same-store sales related. As you’re aware, our quarterly earnings guidance directly correlates to our same-store sales guidance. We forecasted our second quarter same-store sales to be within a range of positive 50 basis points to 2.5%. Earnings would therefore be in a range of $0.51 to $0.57 per share. Actual same-store sales growth as Paul mentioned came in at negative 80 basis points for the quarter which was 130 basis points below the low end of our guidance. As you remember, for every one percentage point change in comps this has an annual impact of $0.12 to $0.13 per share or just over $0.03 on a quarterly basis. Therefore, the 130 basis point shortfall in comps correlates to an earnings impact of about $0.05 per share, resulting in the $0.46 of operational earnings that we’re reporting today. Absent the impact from our same-store sales shortfall, I believe we had a pretty straightforward quarter, and let me now transition my comments by giving you some detail behind our second quarter operating results and we’ll go through each business segment as we typically have done in the past. A break out of our segment performance is found in today’s press release. I’m going to begin with our largest segment which is our North American salons. Revenue from…

Thank you, Paul and Randy. The question and answer session will begin at this time. (Operator Instructions) Our first question comes from the line of Jeff Stein. Please state your company name followed by your question.

Good morning, Paul. Question for you on the Pure Beauty transaction. It seems to me that you’ve got a business in Trade Secret that’s doing about $250 million in revenues and probably not producing a great deal of an operating profit so it would seem that you’ve got a pretty significant leverage opportunity if management of Pure Beauty can get Trade turned around, and I’m wondering what kind of timeline are you looking at in terms of beginning to integrate the two businesses, completing the integration, and along the way, what kind of inventory markdowns might be necessary to align the inventories of both businesses together and similarly, systems?

We just closed on the purchase agreement last week so we have not had a lot of time to have Steve weigh in as he must weigh in with respect to all these issues. I don’t envision a significant amount of markdowns but we’ll certainly communicate with you if for some reason my assumption is wrong. When I say you, I mean the entire investment community. I don’t think that’s going to be an issue. Most of the lines that we’ll be paring down are hair related lines and most of our stores are in malls. We can certainly ship those items to other Regis stores in the same mall. With respect to systems, the next realistically Pure Beauty and Beauty First headquartered in Wichita will continue to use their own systems and the like for at least 4 to 6 months and during that period of time we’ll evaluate exactly what the game plan is in terms of transition. Steve Hudson as you know will be Chairman and we’ll work out a financial arrangement where he ends up with a significant percentage of the incremental profit in that division so there’s a lot of skin in the game for Steve and obviously for us. You’re right, we start at a very low base, so the earnings opportunity are significant for both Steve and for us. I’m sorry I can’t be more specific under this timetable, we just don’ t know. But you know what, we’re impatient, so sooner is better than later and our plans should be set, most of the integration should be done, I would hope that most of the systems work will be done certainly within the next 3 to 6 months. There’s a little bit of an issue with respect to their POS but in terms of regular back office systems, that should be easy.

Okay. Paul, can you just real quickly kind of differentiate the Pure Beauty and Beauty First model from Ulta and also from Sephora? What is your point of differentiation going to be?

Ulta’s a big box. They’re 10,000 square foot boxes. We’re not comfortable with that at all. Between Trade and Beauty First and Pure Beauty you’re talking about 1500 square feet boxes so it’s totally different as it relates to Ulta and Ulta obviously has a different variety of assortments. They’re a big drug store in the way. We just don’t have the space nor the inclination to carry all the lines, all the categories that they carry. With respect to Sephora, I think Sephora is the best managed company in our category, bar none. They’re 3500 square feet, highly specialized, and we’ll have more brands than Sephora per se. It’s a whole different experience but there’s no question when you look at a Pure Beauty operation it’s far more upscale than Trade but not too far upscale so it’s not affordable, but I think you’re going to see a whole different French-English boutique experience in Pure Beauty which will morph into Trade. It will be very, very different, but the categories Pure Beauty, Ulta, and Sephora have very, very different cultures and very different customer experiences and all three work.: Jeff Stein - KeyBanc Capital Markets Thanks.

Thank you. Our next question comes from the line of Neely Tamminga. Please state your company name followed by your question.

Great, good morning, it’s Piper Jaffray. Thanks for taking my question. Paul, could you talk a little bit more about again obviously it’s at the top of mind, this transaction that you announced last week. Could you talk a little bit more about some of the category opportunities? As I looked at it and as I know the Pure Beauty and Beauty First brands, I think there’s definitely a knowledge base of that customer that shops hair and some cosmetics and skin care but I think that maybe not as much on the cosmetics side as well as fragrance, so would those categories then be included in the 1100 square foot box or is that just kind of, you can’t be all things to all people?

Neely, it’s an interesting question, because Pure Beauty was created 10 years ago, I’ll be off a couple of years. It really was copying the Trade Secret model but they wanted it to be a little more upscale and have broader categories so over time 23% of their business is in bath, body, cosmetics, contrasted to only 2% with Trade so the solution is obviously to model what they’ve done because as we’ve talked about in past conference calls, the shampoo business has become very competitive, very fragmented, more and more people are in it, and including the Victoria Secrets of the world, so we know what we have to do. We just have to expand our categories and the most important thing is that we have 750 fabulous locations and what really is very attractive from a vendor perspective is that department stores are shrinking and the L’Oreals and the Lauders of the world are finding reduced distribution in malls so we’re an ideal outlet for them and once again, one size does not fit all, and Boca Raton is very different from Burnsville and Minneapolis. : Neely Tamminga - Piper Jaffray So maybe could you help us think out a little bit then? There’s been a lot written in these press releases about how Pure Beauty has a return system of profitability and there’s been some significant improvement under Steve’s leadership. What was it specifically, can you name, was it just execution error that got Pure Beauty and Beauty First to the point of needing to be turned around?

Oh yes. Steve bought Pure Beauty out of the estate which was bankrupt. That was not the case of Beauty First. Pure Beauty was very badly run and he turned around Hair Club also but Hair Club was still making plenty of money, but he’s very good at identifying opportunities and Neely I would... We need more time with Steve before I can be more specific because I’d hate to say something that just isn’t so. Neely Tamminga - Piper Jaffray Okay, then maybe just one other technical question. I think by the way this is up front, a really interesting transaction and so I’m glad to see that Pure Beauty and Beauty First is going to an operator like Regis, so I think that this is a good decision on your part. Just a real technical question, do you have any sense of how many Beauty Club members you acquired when you made that transaction?

No, I don’t.: Neely Tamminga - Piper Jaffray Okay. Thank you.

Thank you. Our next question comes from the line of Justin Hott. Please state your company name followed by your question.

Hi, I’m with Bear Stearns.:

Justin Hott - Bear Stearns Hey Paul. Quickly, the one real quest ion I have is how do you rebrand hundreds of stores quickly with Trade Secret without losing customers?:

We’re not going to lose any customers because the bulk of what they want is still going to be in those stores and let’s not forget we have 35 or 40 hardline locations in the busiest malls in North America. These are beauty junkies. 26% of our style club memberships have family incomes in excess of $125,000. These people, a whole bunch of them come in on a weekly basis. They always want the new stuff so we’re going to give them more new stuff then they’ve ever had. We think that is a very low risk factor, Justin.: Justin Hott - Bear Stearns Paul, can you just give us a quick update on diversion? Any improvements or changes from previous conference calls?:

No, it remains about the same. L’Oreal has work to do. Mitchell’s going great. You can access our BIF website, beauty industry fun website, the Regis website, and you can see the winners and losers. It’s about the same. The losers are getting worse, the winners are getting better. Overall diversion continues to be up a little bit.: Justin Hott - Bear Stearns Any changes in shelf space?:

Yes, we’ve had some changes in shelf space. The lines that are diverting more have had some space taken away or have been moved in our stores.: Justin Hott - Bear Stearns Paul, just one last question. The Pure Beauty acquisition, I would assume it would be the typical very inexpensive acquisition you’ve done before, but if this acquisition wasn’t really that much cheaper and if you like your shares in the $30s in repurchasing, I would think when your shares fall from the $30s to the $20s, to the low $20s, that it would be a lot more accretive to buy shares. Could you give us your feeling on that?:

We had a $75 million to $100 million budget range for acquisitions and investments. We’re going to be at least at $110 million or $120 million and we just wanted some dry powder. We’ll take the risk of the stock really running away from us, Justin, that would be a pleasant problem to have. Knowing full well that we’re taking KeyBanc out of the Empire deal and that’s $20 some odd million, we just wanted to keep some dry powder. We certainly could invest another $50 million but it’s not a need and we can do it tomorrow, Justin. There’ s no real rush that compels us to do it. We can do it tomorrow.:

Take care and belated Happy New Year, Justin.

Thank you. Our next question comes from the line of R.J. Hottovy. Please state your company name followed by your question.

Good morning, everyone. I’m with Next Generation Research. Two questions for you, Paul. First one having to do with the service comps. Some of the commentary in the press release made it sound like you actually started out the year quite strong and I just wanted to see if there’s anything you could attribute that service comp number that we saw just for the first 20 days there.

First of all, you really don’t really know in this business with 160 million transactions. I hate to sound ignorant but the fact of the matter is October was terrific and the first half of November was fine. Then the last six weeks of the quarter were bad and it may have been mall traffic and the like and maybe just people had waited so long to get their hair cut so they did it in January. You really don’t know until after the fact. At the same time we have implemented price increases in early January in about 2,000 of our stores and that probably had something to do with it, but it’s impossible... We’ve had the McKinzies of the world over the years. We spent millions and millions of dollars determining why January this year would be good and absent weather and January last year wasn’t. No one has come up with a truly definitive answer. The important thing is over time, over a six month or year period of time, what are they and what are the fashion changes. The issue here, we believe, continues to be fashion primarily. We think the economy is secondary as it relates to comps.

Kind of a secondary question to that is what’s the next step if the price increases that you’re going to be knocking don’t stick? Is there any other plan of action just with the discretionary headwinds that we see out there? Is there any other --

If they don’t stick we’ll have couponing. We’ll have specials. We’ve done this before and I promise you they won’t stick in Au Claire, Wisconsin. In some places they won’t tick, but we are highly confident that they’re going to stick in at least 90% of the instances. I don’t think that’s an issue because our competitors have minimum wage increases and frankly the women are spending less money even if there’s a 10% or 15% increase then they spent 5 years ago because they’re going less often. We don’t think it’s an issue.

Okay. Good luck with the acquisition here.

Thank you and by the way, from what we’ve seen, our competitors are raising prices significantly, in fact, some of them more aggressively than we are. Next question?

Thank you. (Operator Instructions) Our next quest ion comes from the line of Daniel Hofkin. Please state your company name followed by your question. Daniel Hofkin - William Blair & Co., LLC: Good morning. William Blair. Just to follow up on R.J.’s question on with regard to how strong the quarter had started out. It does sound like the beginning of this quarter is maybe even stronger than how the December quarter started. I’m wondering if that is in fact true. I’m talking obviously on the second side, and second, the strategy behind price increases. Would it make sense to, I guess thus far through the month of J an what have you seen in terms of any impact on traffic where you have raised prices? Are you seeing any flippage or is it holding firm?

It’s too early but to answer your question, no, we have had no negative impact thus far. We started out stronger in January than even October but with 20 days it’s not enough time. Daniel Hofkin - William Blair & Co., LLC: What type of comparison was it last January? Just to understand a little bit the year to year comparison?

I don’t have the first 20 days of January comps last year as it related to the year before. I just don’t have that data.

Overall we ended up with negative 2.3% comps in the month of January. Worldwide total service and retail.

I think we had more weather last year in January. I think we had a lot of ice in Texas and Ohio but there’s no question the business is strengthening in January, but it’s too early. Daniel Hofkin - William Blair & Co., LLC: Okay. Thank you.

Thank you. Our next question comes from Peter Eisele. Please state your company name followed by your question.

Yes, it’s Peter Eisele with Snyder Capital. I’m just curious, have you ever before raised prices in a weakening or recessionary type environment, and if so, how well did they stick?

We price by market, Peter. So it’s not an overall increase. Everybody’s going to charge a buck more, that isn’t the way we do it. But historically 85% to 90% of the price increases have stuck three years, whether it’s been in a recession or a period with ebullient activity. We talk about the failures but the failures are less than 10% or 15% so it’s not a significant number.

Is this across all the --

Yes.

Okay, thanks very much.

Thank you. As there are no further questions, I will now turn the conference back to Paul.

Well, these are hectic times, everyone, but thank you for joining us. We appreciate it.

Thank you. Ladies and gentlemen, if you wish to access our replay for this call, you may do so by dialing 800-405-2236 with an ID number of 11104730 followed b y the pound. This concludes our conference for today. Thank you all for participating. Have a nice day. All parties may now disconnect.