Ladies and gentlemen, thank you for standing by. Good morning, my name is Pattie, and I will be your conference facilitator today. At this time, I would like to welcome everyone to the Regis Corporation Third 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 1-800-405-2236 with the access code of 11110899 '#'. I would like to remind everyone that to the extent of the company's statements or comments in this morning's forward-looking statements, I refer to you the risk factor 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 their website at www.regiscorp.com. With us today are Paul Finkelstein, Chairman, President, and Chief Executive Officer; and Randy Pearce, Senior Executive Vice President, and Chief Financial and Administrative Officer. After management has completed this review of the quarter, we will open the call for questions. (Operator Instructions). And I would now like to turn the call over to Paul Finkelstein for his comments. Please go ahead, Paul.

Thank you, Pattie, and good morning everyone. Thank you for joining us. We're pleased to report our third quarter results. Operational earnings per share were $0.51 compared to $0.50 last year. Last year we reported $0.12, primarily after taking a [$0.48] impairment charge for our beauty schools. Third quarter EBITDA decreased $3.5 million in the quarter to $74 million, compared to $78 million last year. However, last year's EBITDA included $5.9 million from European schools that are now deconsolidated and not included in our third quarter EBITDA. Including salons in which we maintain an ownership interest, we ended the quarter with 13,449 worldwide locations; an increase of 814 locations in the quarter. Out of the 13,449 locations, 9283 are company-owned, and 4166 are franchise. Total debt at the end of the quarter was $799 million, and our debt-to-cap ratio was 45.8%. Consolidated same-store sales increased 1.4% at the mid-point of our guidance range. Third quarter service comps increased 3.3%, the highest in eight years. Product comps decreased 3.3%. I would like to now focus on certain miscellaneous items prior to delving in on the main topic of my presentation, mainly the conversion of Trade Secret into PureBeauty. The Jean Louis David sale to Provo closed in late January; the initial results have been excellent. The Provo Group has several attractive acquisition targets on their radar screen, and we're very optimistic that long-term our initial growth projections will prove out to be conservative. A brief update on Empire Schools. We have a 55% interest in the Empire School business. There are significant integration costs. However, this should be a very good business for us. The management team is excellent, the education business is countercyclical. It performs extremely well during recessions. Let's go onto Intelligent Nutrients. Goods should be on the shelves…

Thanks, Paul. Good morning, everyone. The results we're reporting today include additional income tax expense of $3 million or $0.07 a share, associated with our repatriation of $30 million of international cash following the third quarter closure of our joint venture transaction with Frank Provo. Therefore, absent this one-time tax charge, we are reporting third quarter earnings today of $22 million or $0.51 per diluted share, which met the midpoint of our previous guidance. As you're aware, our quarterly earnings guidance directly correlates to our same-store sales guidance. We forecasted our third quarter same-store sales to be within a range of positive 50 basis points to 2.5%, and earnings would therefore be in a range of $0.48 to $0.54 per share. Actual same-store sales growth essentially came in at the mid-point of the range at positive 1.4%, and as a result our operational earnings for the quarter of $0.51 also met the midpoint of the range. As a reminder, last year we discussed with you the fact that our third quarter reported results of $0.12 per share included a goodwill impairment charge associated with our school business, as well as $0.05 per share of non-operational benefits associated with a reduction to workers' compensation reserves and increased jobs tax credits. Therefore, excluding those items our third quarter operational results a year ago came in at $0.50 per share. Let me now transition my comments by giving you some detail behind our third quarter operating results by business segment. I think you'll see that operationally we had a pretty straight forward quarter. A breakout of our segment performance is found in today's press release. Following that, I will discuss our fourth quarter guidance as well as our fiscal 2009 outlook. As usual, I will begin with our largest segment which is our…

Thank you, sir. (Operator Instructions). The first question comes from the line of Daniel Hofkin from William Blair. Please go ahead.

Good morning, guys. Just wanted to talk a little bit about average ticket particularly on the service side, stripping out the impact of the price increase, what do you think is driving the improvement? Is it more or let's say the mix component. What specifically is driving that? And then is there any way to sort of looking at the trend where you have taken the price increases at some of the more value segment or value salons in your business, is there any way to sort of determine whether there was any difference in the trend of customer traffic between those locations and your -- let's say Regis concept where you were not taking the price increase so much?

We've taken price increases across all divisions. And two-thirds of our increase in average ticket is due to price. The balance mostly is due to service mix. You take SuperCuts, five years ago we didn't have hair color in SuperCuts. Now SuperCuts hair color represents 5% or 6% of SuperCuts sales, and that continues to increase. That will be 10%. Hair color will represent 10% within the next two or three years. So it's mostly price, but it is also mix as well. And no, there is no real difference in terms of impact by concept.

Okay. No difference, not just in the rate of the decline but also in the trend?

No, no significant difference.

Okay. Is that any different than what you might have expected going in or were you thinking --?

No, we've been actually surprised even with service comps being flat over the last four or five years, solely due to fashion. It's impacted every single segment of our business from Vidal Sassoon to SuperCuts. So, no, we're not surprised at all.

Okay. Thank you.

Thank you.

Thank you. And our next question comes from the line of [Lee Mathewson] from [KJ Harrison and Partners]. Please go ahead.

Hi, guys.

Good morning.

Just a couple of quick questions. First of all, the Ratner Company's deal for Hair Cuttery, I was a little bit confused by that. It seemed to be picking up, maybe 15% of their store base. Is that maybe prelude to something, a larger deal down the road? Is it the first time you guys have run stores there I guess technically under a banner that you don't fully control? I was just wondering if you can comment on that.

Well, Dennis Ratner sold his European -- his U.K. business to us a year or so ago. He has two daughters in the business. He has family in the business. He has no desire to sell the remaining part of his business to us. So no, this is not the first step by Hair Cutterry. We're not operating those Hair Cuttery salons under the Hair Cuttery banner. We have six months to change the signage, and we'll be changing the signage to Hair Masters, and we have today 500, 600 Hair Masters stores nationwide.

I see, okay. And were they geographically in areas that they -- I know they have done a couple of franchise agreements and such, but they didn't have critical mass and you guys did, is that the idea?

Yes. They wanted to get out of the Carolinas and Georgia.

I see Carolina and Georgia. And then with the U.K. business, I mean, again, it's weak over there. I think when we talked last; you mentioned there was a large amount of traffic, a large amount of store base was exposed to department store traffic which is down. Is there anything you can do to rectify that or ultimately you are going to cycle those leases out of the department stores or what's the --?

We'll have far, far less department store presence in the years ahead.

I see. Okay. And then just on Provo and Empire; are you guys willing to give any sort of rough guidance in terms of the EBITDA generation at those two units?

It's too early.

Too early? Okay.

Absolutely too early. Provo in a sense doubled its size. Empire doubled its size. There are transition costs. We'll monitor it and give you a better feel for it probably second or third quarter, fiscal '09. It's just too early.

Great. That's no problem. Thanks, guys.

Thank you. (Operator Instructions). Next question is from the line of [Michael Lee] from [Royal Capital]. Please go ahead.

Hi, guys. Just Randy wondering if you could walk us through the rationale for paying down debt at this point, given where your stock is trading?

Yes. We've -- again, there is probably no right or wrong answer. We've talked about the fact that we wanted to become more aggressive this year in buying back stock, and we did. We bought back $50 million through the first half of the year. We did discuss that with acquisition opportunities this year running ahead of plan, we're going to be spending $75 million to $100 million more than budgeted on acquisitions, and that's where we get more bang for the buck, that we were going to curtail our stock repurchase program at that time, and as a result we found that our overall debt levels because of the acquisitions despite curtailing the share repurchase was still at a level above where we wanted it to be, so that's the reason, primary reason that management and the Board decided to use that cash and pay down debt. We are going to be continuing to look at the best utilization of our cash going forward. We continue to see that acquisition opportunities -- we've never had a pipeline and nor do we today, acquisition opportunities come our way, and to Paul and he will quickly assess whether it is something we're interested in or not. And if we find that over the course of the upcoming months and year that acquisition opportunity aren’t as plentiful, we could consider share repurchase at that point in time.

It just seems like you're writing less than three times EBITDA leverage, your stock is trading at 12% free cash flow yield, your debt I think based on my calculation cost you about 8%, so from a returns perspective, the equity would make more sense than your debt.

Yeah. Overall borrowing rate on the debt is just around 6%. But having said that, again, we've been -- a lot of our debt is private placement debt where we have to be concerned about debt-to-capitalization ratio. The banks love the credit and so does the private placement lenders. But as you know, this quarter, despite paying down $30 million of debt from the international cash repatriation, our debt-to-capitalization was about 46% and the private placement guys and gals insist that it can be no higher than 50%. We like the ability to have flexibility and dry powder on the balance sheet, should acquisitions like a Hair Club come along again in the future. Again, I won't say that there's a right or a wrong answer but I'm giving you just our thought process as to why we did it.

Okay, thank you.

(Operator Instructions). And I am showing that we have no further questions at this time. Please continue, Paul.

Thanks for joining us. Have a good day everybody.

Ladies and gentlemen if you wish to access the replay for this call, you may do so by dialing 1-800-405-2236 with the ID number of 11110899 '#'. Once again the number is 800-405-2236 with the Id number of 11110899 '#'. This concludes our conference for today. Thank you for your participation, and have a nice day. All parties may now disconnect.