Good morning. My name is Chardonnae and I will be your conference facilitator today. At this time, I would like to welcome everyone to the Regis Corporation Third Quarter 2009 Conference Call. All lines have been placed on mute to prevent any background noise. If anyone has not received a copy of today's press release, please call Regis Corporation at 952-806-2154 and a copy will be faxed to you immediately. If you wish to access a replay for this call, you may do so by dialing 1-800-405-2236, using the access code 11128659 followed by the pound. The replay will be available 60 minutes after the conclusion of today's call. I would like to remind you that to the extent the company's statements or comments this morning represent forward-looking statements. I 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 the 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 Randy Pearce, Senior Executive, Vice President and Chief Financial and 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 conference over to Paul Finkelstein for his comments. Paul, you may begin.

Thank you and good morning everyone and thanks for joining us. As you know, the current retail environment has been an incredibly challenging one for virtually all retailers. Today we reported third quarter earnings per share from continuing operations of $0.49 compared to $0.44 last year. The $0.49 includes $0.01 per share for lease termination costs incurred during the quarter. And as you can recall, last year included $0.07 of one-time incremental tax expense relating to the repatriation of international cash. The March and June quarters are difficult to measure due to the shift in Easter. Our same-store sales for the quarter were a negative 4.5%. The Easter shift probably hurt the quarter by about 1%. Our sales results were essentially on plan. We did, however, exceed our profit plan primarily due to the continued focus on expense control as well as an unbudgeted tax benefit that Randy Pearce will discuss later in the call. We are assuming that the consumer is becoming more frugal. While this may be a good thing for our economy in the long term, it does create short-term challenges. Our core business, our sweet spot, which is value, Wal-Mart and Supercuts in particular performed much better than our higher price concepts. Regis division service comps were negative 10.8%. Value concept service comps were essentially flat to down 1%. Consolidated product comps were negative 6.5%. Product comps did, however, perform better without Trade Secret, which illustrate the basic difference between a traditional retail concept such as trade and beauty salons where our stylists touch people everyday and can recommend product. Our strategy for the next year or two will continue to be the same strategy that we articulated on our conference call in January. Thus, my remarks today will be brief. Mainly, we'll continue to reduce…

Thanks Paul and good morning everyone. Let me begin by addressing two items that we discussed with you last quarter. The first relates to the divestiture of our Trade Secret retail product division, which was finalized midway through our third quarter on February 16, 2009. As we discussed with you last quarter, this transaction was accounted for using discontinued operations accounting treatment. What this effectively means is that the current and historical performance of Trade Secret must be removed from the operating results of our continuing business units, aggregated and separately recorded below the line on an after-tax basis. That's true for our overall consolidated results as well as for our North American salon segment P&L. The net Trade Secret results appear on the P&L in the line item called loss on discontinued operations for both the current and prior year periods. Our net income doesn't change, but the individual revenue and expense line items above it will. Results from our discontinued Trade Secret operations contributed a non-operational loss of $0.28 a share in the third quarter. We had expected this as the major portion of this loss related to our final write-off of Trade Secret inventories that accounting convention precluded us from recording last quarter. For those you working with financial models, please go to our corporate website and you'll find a reconciliation that removes Trade Secret results from our ongoing operations. This same reconciliation also bridges our overall reported earnings for the third quarter to our operational earnings. We're trying to be as transparent and as helpful is possible. Also, feel free to contact either Mark Fosland or Alex Forliti here at Regis, should you have any additional questions regarding your models. The second item I want to address relates to earnings guidance. And as Paul said last…

Thank you. Thanks Paul and Randy. The question and answer session will begin at this time. And our first question is from Bill Armstrong with CL King & Associates. Please go ahead. William Armstrong - CL King & Associates: Good morning, Paul and Randy. Nice job in a bad economy. Your international service gross margin was up over 500 basis points year-over-year. I was wondering if you could just discuss that for us a little bit, how that happened.

Well a lot of that, Bill, is going to again relate to the deconsolidation of our international operations. If you look at service margin, I did mention to you as well that we did have an expected vacation accrual adjustment. I think I mentioned that. Anyway, that amounted to about 350 basis points during the quarter. So we're not expecting that's going to continue. That was a one-time adjustment. So again, we also had, as I mentioned, the deconsolidation impact and we remain very pleased, though, with the underlying control of our service payrolls during this tough economy. William Armstrong - CL King & Associates: Okay. So that vacation accrual is not in the G&A; that was up in the cost of service line?

Yes, in our cost of service, it's going to be largely in all of our segments, the cost of the payrolls that we pay our stylists and the related benefits, which would include vacation. So that's included in our service gross margin, yes. William Armstrong - CL King & Associates: Okay. Would that be ongoing then, or is that just a one shot kind of --

Yeah, that 300... I would say the 350 basis points, and call it another 50 related to deconsolidation. So 400 in total is not ongoing; it's one-time. William Armstrong - CL King & Associates: Okay. Looking at your, I guess, comments on fiscal 2010 with the $200 million to $240 million in EBITDA, if you get down to the low end of that, at $200 million, will you still be in compliance with your fixed charge coverage covenant?

It all depends on comps. So you are picking the low end of the comps. As we sit here today, we anticipate that we probably have cushion... I don't know... if it's for nine months, 12 months or longer. Again, it's all going to be, Bill, depending on the comps. We continue to work on other initiatives to try to provide us additional cushion as time goes on. We are hoping, though, that business is going to start getting better in the future. We've got time. William Armstrong - CL King & Associates: Right. And taking your EBITDA range and your CapEx budget, it looks like you are going to generate some pretty good free cash flow next year. Would it be possible or desirable to maybe reduce debt by more than the $30 million to $50 million that you are talking about?

$30 million to $50 million is a pretty good number, Bill. William Armstrong - CL King & Associates: Okay. And then finally, are there any other costs associated with the Trade Secret transition other than those you mentioned in your prepared remarks?

No, no other costs. William Armstrong - CL King & Associates: Okay. All right, thank you.

You are welcome.

Thank you. Our next question is from Erika Maschmeyer of Robert W Baird. Please go ahead.

Good morning, great job in a tough environment.

Thank you.

Could you comment at all about your comp trend so far in the quarter or in April?

It's about the same it has been. Obviously, there is an Easter bump.

Yes.

But we continue to show six, seven points in terms of a negative customer count.

Okay.

It's about the same. Our value concepts are positively comping slightly and the Regis division is still down upper single digit.

If you're going to allocate blame between the economy and fashion trends, I know fashions trends have started to hurt you first, what would the proportion of that be at this point do you think?

Well, I would say 80% to 90% would be the economy. I think we have to put it in perspective. The people are coming less, but that does anniversary and that's why we are pretty darn confident that certainly by the end of fiscal 2010, there should be significant moderations with respect to customer count.

Erika, just let me echo what Paul said. We've said in the past, our service business, which represents 80% of our business, we saw probably up through September of last calendar year, we had the highest service margin in comps in the past eight years. We were feeling very good about anniversaring this fashion trend. I think we've hit a wall as most companies have hit a wall probably beginning in October, which leads us to believe this is really the economy now that's impacting us. And once that start to improve, we're well positioned to continue growing.

Great. And then in terms of your fiscal 2010 guidance, can you talk a little bit about your thinking behind the comps guidance? And then does that include any assumptions for additional price increases in 2010 besides the effect that you have in fiscal '09?

Yeah, our average value concept for our ticket is about $15. So, we're highly confident that we... and our average service ticket companywide is $20. So we certainly think that we can raise prices in 5000 of our stores for the next year or two. And we are don't see that as a problem. The elasticity of demand was frankly quite favorable to us.

Okay. So you haven't seen any negative impact on traffic from that.

No, no.

Great. And then could you give any indication on the comps that you need to leverage your fixed costs in 2010?

Positive 2%.

Okay, so the same. Are you trying to get that down with your cost reductions?

Well, clearly, if these cost reductions are having a favorable trend towards reducing it downwards. But I still think at this point in time, let's just assume it's 2%. It could be slightly less than that.

Okay, well thanks very much.

You're welcome. Thank you.

Thank you. Our next question is from Jill Caruthers with Johnson Rice & Company. Please go ahead. Jill Caruthers - Johnson Rice & Company LLC: Good morning. If could talk a little bit more about the debt covenants and your comfort level in fiscal '10 if you hit the $200 million EBITDA level. Kind of what other levers are out there that you pull outside of where the comps come in?

Cost reduction continues to be the one area. And look, we don't want... we have not cut to the bare bones yet. I think we've done some things prudently without really impacting the underlying business. And I think we are going to be reluctant to cut into the bone. But let me just say this, the other initiatives that we're looking at, I just think that we continue to try to buy ourselves time. And so once the... the economy will improve; we all know that. The only question that nobody really knows the answer to how long is it going to take. So as we continue to buy ourselves time, good things could happen. In the interim, we continue look at other options and when we continue to talk right now with our overall lending institutions, we've been big believers on we have strong relationships and we are big believers on continuing to have active dialogue with all of our lending institutions telling them what we're doing, what our thought processes are? We're looking at a lot of options here to be proactive on perhaps covenant relief, not sure that we need to do that or going to do that, but we just continue to look at our a lot of options if we felt it, business wasn't going to improve in the near term.

Enhance some additional call-up our relationships, where this lending institutions as we require good and they want to work with us. So, I think Randy is somewhat or pretty active. Jill Caruthers - Johnson Rice & Company LLC: I appreciate it. And then just last question. I know the product side of the business is more discretionary. But maybe you could talk about drivers you might have in place to help drive product sales, possibly some initiatives to help increase that combo kind of add on sale?

Well we continue to significantly increase our private label sales. And as I pointed out in my presentation, the product comps relating to our traditional salon businesses weren't nearly as negatively impacted as Trade, because we have a huge advantage over the Eckerds and the Wal-Marts and the Wallgreens of the world in that we are recommend product to our service clients out. And while it's somewhat discretionary, most people shampoo daily. So whether it's a service business or a product business, these are replenishment businesses, good businesses to be in. Jill Caruthers - Johnson Rice & Company LLC: Thank you.

Welcome.

Thank you. Our next question is from Mike Hamilton with RBC Capital Markets. Please go ahead.

Good morning everyone.

Hi Mike.

I was wondering you gave some good color on the lease renegotiations here. How about on your existing rental rollovers, what are you seeing?

Well we are definitely working well with our landlord partners to get reductions in some instances. But the real problem we have is taxes and CAM (ph). So net-net-net, whatever advantages we get with respect to renewals at lower rates and store closures, we still have, not the basic rent increase, but we do have some increases with respect to CAM and taxes. So net-net-net will probably be the same. I mean it won't move very much either way.

Thanks. Could you comment as well on any trends you are seeing apart from workers' comp on stylist comp at this stage?

It's easier to get stylists today than it has been in 10 years. So hiring rates are not an issue. We are highly confident that our labor... that our service margins will continue to be strong for quite a long period of time. And the mix should help us because our value concepts have lower payrolls than our hiring concepts. And as they continue to garner as large a share of our business, our service margins should continue to be strong.

Do you see an environment the next couple of years where just the natural churn brings you overall payroll cost reductions?

I think our service margins will be about what they are today, maybe slightly less in the years ahead, not materially less... but. I'm sorry. We'll get it with mix. We won't necessarily get it because each concept will be paying a lower amount.

Yeah, thanks for the insights.

Okay.

Thank you. Our next question is from Daniel Hofkin with William Blair. Please go ahead. Dan Hofkin - William Blair & Co., LLC: Good morning. Just a little bit of color with regard to the current quarter understanding that you should shift none of it. I'm just thinking in terms of the decision to sort of provide full year guidance for fiscal 2010. Can you provide a little bit of a base for where you might be looking at that in terms of how you see fiscal '09 wrapping up, maybe a range around that based on the comps sales estimates for the fourth quarter? That would be the first question.

Look, we really want to shy away from it because it's difficult to predict. Wee hate to use the word unprecedented, but we are in unprecedented times where we are seeing volatility in our comps. We are seeing, as Paul mentioned, April results, we're receiving the benefit from Easter as we expected. It's always tough to identify exactly how much that benefit really is. We still believe that the underlying business trends that we've seen in the recent quarter are continuing in the month of April. And we always realize that changes in industry are glacial. We are not going to see significant improvement or deterioration, at least we haven't. We don't know what the future will hold. But I think what... let me just generally say that we realize that comps will likely be negative in the third.... I'm sorry, in the fourth quarter as they have been in recent quarters, offsetting... we realize that that will have a negative impact on earnings. We've talked about for every one percentage point change in comps below 2%, it equates to about $0.13 a share per year of earnings. But offsetting that, probably, I won't say quite to an equal degree, but close to it will be some cost saving initiatives that we continue to enjoy. So all is not lost here. Dan Hofkin - William Blair & Co., LLC: Okay. And then I guess with regard to next year, what... how much are you... you are assuming that that comp benefit from the price increases that are already underway or will soon be underway. I guess what are you assuming in terms of additional expense savings in fiscal 2010 beyond what you would have already realized by the end of this fiscal year.

Marginal at this point. Again, in the assumptions, it's going to be marginal. There will be some more. Again, we've saved, I think I spoke of the fact that we expect to at least be $22 million this year. I don't know if it will be somewhere under $10 million, maybe $5 million to $10 million of potential incremental savings next year, at this point in time. Dan Hofkin - William Blair & Co., LLC: Okay. And then I guess my last question will be from a marketing standpoint, I understand that that was one area of some expense favorability relative to plan this quarter, anything that you've identified that can do it a even drive home even further the value message it some of your value orientated concepts? Or just increased customer loyalty at point of purchase, I'm taking it particularly on the service side?

The strategy really here is just obviously consumption is down industry wise, so the strategy is to make sure and we have the best brand recognition you think super cuts there's no other brand in the world that has super cuts rather recognition we have the brands we have the locations. So we'll continue to go on our increased share and that's the strategy. This is not a marketing-driven business. This is an operation and location and real estate-driven business. The only business we have that's significantly monitoring-driven is Hair Club, and we continue to spend substantial amounts... substantial percentage of our revenues on marketing in Hair Club. Our strategy with respect to locations and plan recognition is a good strategy with respect to the value business. Dan Hofkin - William Blair & Co., LLC: Anything in terms of point of sale at point of purchase; that is when the customer is ringing up at the end to drive...

We continue to use incentives for both stylists and customers to make one customer into two customers. I mean we have early days... early week specials and promotions. I mean that's just constant with us.

One of the things that were also doing, we've talked in the past about loyalty programs that we have experimented with. It was largely in the Trade Secret division, which is product focus rather than service. But we are looking now at trying to develop more customer database profiles that will enable us in the future to market directly to customers on the service side of the business. But that is something that we're not counting on to be implemented or be effective in the upcoming 2010 fiscal year. But it is a project that we are working on. Dan Hofkin - William Blair & Co., LLC: All right guys. Thanks for the color (ph)

You're welcome.

Thank you. Our next question is from Mimi Noel with Sidoti & Company. Please go ahead. Mimi Noel - Sidoti & Company: Thank you and good morning.

Hi. Mimi Noel - Sidoti & Company: First question I have is with regard to the $30 million to $40 million implied allocated for acquisitions. Given that Regis is the logical exit strategy for most salon operators, what does the company have to loose by just dedicating all that cash surplus to prepaying debt and shelving the acquisition strategy for the year?

Well, first of all, it's not $30 million to $40 million; it closer to $20 million. Mimi Noel - Sidoti & Company: Okay.

And most of that would be defensive. We wouldn't be going after anybody. But if a franchise A, for instance, gets sick, and there is a 30 store group and we have number one, a huge amount of royalty income to protect, we have enough allocated to be able to protect our share and protect our current income stream. It's that kind of acquisition. Mimi Noel - Sidoti & Company: Okay.

We are not going out and looking for another cool cut. Mimi Noel - Sidoti & Company: Gotcha.

Not the deal. Mimi Noel - Sidoti & Company: Okay.

And likewise, our CapEx spend is pretty similar. If a strip center is basically going under, I mean we have a salon generating $100,000 in profitability, we'll move that salon across the street. So most of our CapEx and acquisition spend is defensive in order to maintain share or maintain existing profitability. Mimi Noel - Sidoti & Company: Okay, that makes sense. Also wanted to ask you about the recent management change at COO. Can you elaborate or provide a little insight on what transpired there?

Look, we know we have to fill the post and we will fill the post within the next year or so. We have very capable Chief Operating Officers to every one of our divisions. It's business as usual. Mimi Noel - Sidoti & Company: Okay. And any reason, any particular reason for the change or new opportunity?

It just didn't work out. Mimi Noel - Sidoti & Company: Gotcha. Okay. And then can you elaborate on type of growth you are seeing in private label? Talking about low single digit or does it push double-digits?

It's about 10%. Mimi Noel - Sidoti & Company: Great, okay. And the last question I had was for Randy, and I don't know if he can even hazard an estimate at this time, but --

I cannot. Mimi Noel - Sidoti & Company: Let me try. Let me try.

I'm sorry, Mimi, go ahead. Mimi Noel - Sidoti & Company: I hate to play devil's advocate and force an issue, but in the even that you do need covenant relief, what's the magnitude of that cost?

Well -- Mimi Noel - Sidoti & Company: Were there too many variables and that's fair if that's what the response is?

It's probably, again, all indications are it could be 300 basis points give or take. Mimi Noel - Sidoti & Company: Okay, perfect. All right, thank you very much. That's everything I have.

Thanks Mimi.

Thank you. Our next question is a follow-up question from Bill Armstrong with CL King & Associates. Please go ahead. William Armstrong - CL King & Associates: Yes, you mentioned reduced field supervisors travel. I was wondering if you could elaborate on that a little bit and how you assure that field operations continue to be properly supervised and controlled.

Well, we have reduced our supervisory expense primarily due to the fact that a significant part of a supervisor's job was to open new stores. In other words, if a supervisor had 10 stores... had eight stores, but has to open 10... has to open two, I am sorry, that's a full-time job. So, in total, that supervisor would have 10 stores. But if the supervisor now has 10 stores that has no new ones to open, we can increase spend of control to 11 or 12. And that's basically what we've down. So it's a question of... it really relates to a reduction in new store construction. And that's really caused the reduction in supervised accounts. William Armstrong - CL King & Associates: So it's not reducing the number of visits to the supervisor's stores that are under his responsibility?

No. William Armstrong - CL King & Associates: Okay.

And these supervisors, these salons are largely clustered today. There is very little in the way of adds there (ph) in terms of supervisory visits. That was not the case 10 years ago. Our supervisors can drive virtually every one of their stores. William Armstrong - CL King & Associates: Right. Okay. Okay, thanks.

Welcome.

And if there are no further questions, I will now turn the conference back to Paul.

Thank you everybody. Have a good day.

Ladies and gentlemen, if you wish to access the replay for this call, you may do so by dialing 1-800-405-2236 with an ID number of 11128659#. This concludes our conference for today. Thank you for participating and have a nice day. All parties may now disconnect.