Paul D. Finkelstein - Chairman of the Board, President & Chief Executive Officer Randy L. Pearce - Senior Executive Vice President, Chief Financial and Administrative Officer

Rick Bethel - Bank of America - Merrill Lynch Tracy Kogan - Credit Suisse. William Armstrong - CL King & Associates Erika Maschmeyer - Robert W. Baird & Co. Jill Caruthers - Johnson Rice Mimi Noel - Sidoti & Company, LLC Jeff Stein - Soleil Securities. Ross Haberman - Haberman Funds

Good morning. My name is Sarah and I will be your conference facilitator today. At this time I would like to welcome everyone to the Regis Corporation Second Quarter 2010 Conference Call. (Operator Instructions). I would like to remind you 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 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, resident & Chief Executive Officer and Randy Pearce, Senior Executive Vice President and Chief Financial and Administrative Officer. After the management have completed a review of the quarter we will open the call for questions. (Operator Instructions). I would now like to turn the call over to Mr. Paul Finkelstein for his comments. Paul you may now begin.

Thank you Sarah and good morning everyone. Thank you for joining us. I would like to apologize in advance in the event I start coughing. I’m getting rid of a cold. We are pleased to report second quarter operational earnings were ahead of plan at $0.28 per share versus $0.27 last year, after adjusting for the impact of our recent equity and convert offering. The second quarter did include a non-operational benefit of $0.02 a share related to an adjustment in insurance reserves that Randy will talk about during his portion of the presentation. As we mentioned on our first quarter conference call, the second quarter also saw continuation of customer and business trends that we've seen during the last several quarters. Second half of December was stronger than the first half, even though we were significantly affected by the Saturday snowstorm that occurred just before Christmas. In this challenging economy, our management team has been quite proactive in increasing average ticket, enhancing gross margin, reducing expenses and closing underperforming salons. During the second quarter, consolidated gross margins were much better than plan and improved 70 basis points compared to last year primarily the result of a recently implemented leverage pay plan as well as reducing retail product commissions. We continue to see improvements on the expense side in many other categories including travel and marketing costs and administrative head count. Our efforts to increase average ticket through a combination of price increases and by selling add-on services and products continued to produce strong results. Second quarter average ticket was up almost 4%, maintaining and strengthening our balance sheet by continuing to build cash and improving liquidity remains a top priority. Customer visits continues to be a major challenge. Compared to the prior year in North American average service ticket…

Thanks Paul, and good morning everyone. Overall, I believe we’ve had a relatively straightforward quarter. Today we are reporting second quarter fiscal 2010 earnings of $0.30 a share, which includes about $0.02 of non-operational benefit associated with an adjustment to our prior year worker compensation and insurance claim reserves. Therefore on an operational basis, we are reporting second quarter earnings of $0.28 a share, up slightly from our operational results of $0.27 that we reported last year on our second quarter after you adjust for the impact of our recent equity and convert issuance. For many years, we’ve talked about the direct correlation of our earnings with our same store sales performance. With our actual comps declining 3.7% during the second quarter, we would have expected our operational earning could be about $0.20 a share, which included an incremental $2.5 million or two and half cents per share of planned cost savings that we discussed with you in recent quarters. Therefore, our operational results of $0.28 a share are about $0.08 higher than what our comps would indicate. The $0.08 of upside came from strong expense control including gross margin enhancement. Our service and retail product margins came in about $0.03 per share better than planned during the second quarter. In addition, our site operating and G&A expenses were about $0.03 favorable to plan on an overall basis. Earnings from our equity investments exceeded plan by about a penny a share primarily due to the performance of our European Salons managed by Franck Provost. Finally, our effective income tax rate came in favorable to plan by about a penny and I will address each of these items with you in more detail a bit later on. As always, we've included in today's press release, as well as on our corporate…

(Operator Instructions) Your first question comes from Rick Bethel - Bank of America/Merrill Lynch. Rick Bethel - Bank of America/Merrill Lynch: Could you just provide some color around your January comp improvement? Can you point any differences between the service and product comps? And secondly, did you do anything differently in the business in the New Year that you didn't do during the second quarter to get people in the door?

We’re quite pleased with respect to our product business. Our product business continues to be stronger than our service business. And that’s the main reason for the pick up in business. Any changes with respect to customer visits and the like, in this industry would become really glacial. My vision is though, haircuts are on sale, 1400 people come barging in a particular salon door; it just hasn’t worked that way. But we’re very pleased with what’s happening in the retail environment, in terms of any other retail product environment. Rick Bethel - Bank of America/Merrill Lynch: :

It's getting better all over.

Your next question comes from Tracy Kogan - Credit Suisse.

Just a quick follow-up on January. What is the traffic versus the ticket there? And then secondly, for the December quarter, just looking at the performance of your value concepts, it was better than the overall results, but just wondering about the SmartStyle results and if you could give more color on the comps there. And is there are anything you are doing at that concept maybe to drive traffic?

Our locations in SmartStyle and Wal-Mart are by far the best locations in the entire system. We are right in front of the store, so we have plenty of Wal-Mart traffic. In part, the Wal-Mart comps throughout the years have been very, very strong. So, we are just meeting very, very strong comps from several years ago. The Wal-Mart business is extremely strong. It is quite profitable and we will continue to grow with Wal-Mart. So, if you have two or three months there, at a time where businesses are somewhat flat, it doesn’t create any major concern for us or our partner in Wal-Mart.

To address the first part of your question, I think in Paul's earlier comments, he indicated that in the last several weeks comps have been essentially flat. What we are seeing is average ticket continues to be up 3% to 3.5% and so it is really saying is that customer declines have improved. As we said in the first and the second quarter, customer comps were off close to 7.5% to 8%, which means in the last three weeks they are down maybe around 3.5%.

Your next question comes from William Armstrong - CL King & Associates. William Armstrong - CL King & Associates: Paul, you mentioned commissions and we've been seeing that I guess for a few quarters now helping margins. What's the rate of employee turnover among your stylists? I know the lower commissions are only for new stylists. I'm trying to get a sense for how long of tail that we have where we'll continue to see benefits from that?

Quite a long time. We have a turnover of about 40% a year. The industry has a turn of about 60% and our turn is overstated because if somebody goes from one store to another, that’s a turn and if somebody does go from one store to another, obviously we don’t affect that person's commission rate. But there should be a betterment over the next two or three years because once again are returning our workforce to about 35%, 40% a year. William Armstrong - CL King & Associates: Right and can you just remind me is that lower commission just on product sales or is it on service also?

Well, commissions on product went from 10% to 8%. The question with respect to services is a far more difficult one to explain because we have a myriad of commission arrangements. But basically what we are trying to do is get leveraged payrolls into in terms of increased sales to generate a higher margin for us because the hair stylist will still make more dollars at a lower percentage commission on the incremental business. I don’t know if I am explaining it appropriately. William Armstrong - CL King & Associates: And then one other question for Randy, I think. In the corporate G&A, you had some Trade Secret transition cost. How much was that?

I think it was $8.1 million is what I said Bill. William Armstrong - CL King & Associates: $1.8 million. Okay great. All right thanks.

You're welcome and Bill I just want to clarify the offsetting reimbursement is in other income. So overall there is no overall cost to Regis.

Your next question comes from Erika Maschmeyer - Robert W. Baird & Co. Erika Maschmeyer - Robert W. Baird & Co: Anecdotally, is there is anything that you think could be behind the differential and trends you’ve seen in January from December? I mean is that mostly comparisons?

Well three weeks does necessarily make a real difference and it would be far more comfortable when we have three or four months of flat comps or positive comps. It’s really difficult to make any kind of statement concerning what happened in the last three weeks. Obviously, we’re gratified. It’s about time. Eventually visitation patterns normalize. We don’t expect them to go back to the old rates. Let me give you an example. In Portugal two years ago the average woman went eight times a year to a salon. Last year the average female in Portugal went 5.4 times a year. I mean that is a tremendous decline now in fairness. Clients, female clients in Portugal and Spain do go more often to get their hair blown dry for instance. So it’s sort of an unfair comparison, but eventually it does normalize and we think we are close to normalization. Erika Maschmeyer - Robert W. Baird & Co: Do you think your trends are closely tied to unemployment?

No. I think they tie to the fact that the consumer has become more frugal. If you look at the Spa business, the Spa business nationwide is up 25% and people are just spending less money on those kinds of classy luxury. Now, especially if you're unemployed and if you have a job interview you want to look good. Some guy having a job interview is not going to wear a ponytail. I mean that would be absurd. Erika Maschmeyer - Robert W. Baird & Co: And then could you give some more detail on your thinking behind expanding your franchise business. How much do you think of your kind of 2011 expansion could be franchise versus company owned acquisitions?

Well, as I mentioned in my transcript, we are going to be far more aggressive in markets where we have a tremendous share and tremendous strength. Northern New Jersey, Boston, Los Angeles, there were plenty of markets where we're extremely strong. And we're going to sign a bunch of leases and it's really appealing to new franchisees because the brand is already established, so the returns are really quite strong. Now, having said that, financing today continues to be a problem for small businesses. Not a problem for people like, for companies like ours. But that’s the issue. I mean, we're going to, we've always been very, very good partners with our franchisees. We will continue to be good partners with our franchisees, but it's in everybody's best interest, especially our franchisees if we are able – if we can aggressively build those brands. Let's not forget we have ad funds and ad funds are dependent upon volumes. So the more volume we do the more money we have to spend to really merchandize these brands. Erika Maschmeyer - Robert W. Baird & Co: And then, in terms of what you're doing to increase your add-on sales and adding impulse items, was that something that was new for Q2? Could you talk a little bit more about that?

Well as I mentioned, we’re experimenting with an awful lot of impulse items. The main drivers of our sales betterment and product are a small line called “It's a 10” and that’s really driving sales tremendously. We have also added Pureology in a lot of our stores and added appliances in Salons where we haven’t had appliances before and those are the big generators of volume.

Your next question comes from Jill Caruthers - Johnson Rice

I know you mentioned you are going to be anniversarying a chunk of your price increases in the third quarter, just wondering if you could talk about your outlook for I guess the second half of this fiscal year, I'm trying to lap those price increases?

Lets assume that we will raise prices in about 5000 of our company-owned stores and I’ll give you a better fix on this next quarter because most of the price increases have all been implemented.

We would expect maybe 2-3%.

No, it will be the same order of aptitude this year. Price should add about 2.5% to our comps. Jill Caruthers – Johnson Rice: And then just given your overall expense costs in a year, its kind of getting a plane out there to cut 10 million incremental expenses and how is that tracking, your doing really well and we feel like your going cut more than that this year?

Well I rather be more conservative that buoy, but I will say we are – we still have our sights on at least $10 million, through the first half of the year we have achieved close to $6 million, so I think if you did the math you would probably see that we are going to be ahead of plans. Once again, we just continue to be very aggressive on looking for opportunities to shave costs, without dramatically cutting into the bone or impacting the business and we have been success at that.

Your next question from Mimi Noel - Sidoti & Company, LLC Mimi Noel - Sidoti & Company, LLC: Would you remind me some of the advantages to the franchise model?

Sure, well are you wanting --?

I’d say advantages for the franchise or for us? Mimi Noel - Sidoti & Company, LLC: It’s For Regis.

You’ll make an effect on infinite return on capital if the franchise finds the capital. But we can – there are 40,000 strip centers in the United States. We could never build them all out from a company owned perspective. So we want and we need franchisees to help build out the strip centers. Now having said that we don’t, the franchise model doesn’t work well on mall and with a limited universe such as Wall Mart, we’ll just soon have a company owned store rather than the franchise store. But the franchise model, I mean we are generating 40, 45% pretax on our royalty income and that’s fully loaded with everything. The model works extremely well for us. Mimi Noel - Sidoti & Company, LLC: Then the only other question I had was for Randy. You said that you had planned on increases in certain areas of site operating cost and I think you did list them but I missed them, would you repeat them?

Mimi, can I just do this, can I call you, because I will have to dig it out of the transcript here. Mimi Noel - Sidoti & Company, LLC: That’s no problem.

Your next question comes from Jeff Stein - Soleil Securities.

First question for Randy, so your run rate on expense cuts looks like its slightly above $10 million, you do have some inflation embedded in your expense structure. So I'm wondering what kind of comp increase just generally would you need on a go forward basis to hold your operating income margin lapse.

We think in this current environment given the level of expense cut that we have and where inflation is currently running Jeff, it would be about 0% comps should give us leverage. That would be our tipping point today.

Can you talk a little bit about the real estate environment? I mean you guys have 8000 company owned locations, so when leases come up what kind of rent relief are you seeing and can you talk about the number of leases that will expire over the next 12 months?

Well all the strips and the stores have 5-year leases and we have about 1500 stores a year coming up for renewal and we are getting some significant rent relief but as we mentioned in previous calls, its offset in large part by increases in tenement taxes. There are some places, like New York City for instance, where personally I think the landlords are delusional. They just don't get it. And we're going to be reducing our footprint in New York unless the landlords do get it. And I think in the long run, they will. I just think they just are not facing reality Jeff. But we don’t need New York City to build our business.

And aside from trying to grow the franchise business, if we look at company owned unit growth and net your openings against the closing, should we be kind of modeling flattish type unit growth on a go-forward basis?

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And free cash flow; if you guys generate 90 million or better free cash this year, what are you going to use it for? Will it be debt repayment? Or is there another priority?

Jeff, our strategy right now is just to continue to maintain liquidity and build cash until we start utilizing it to grow the business through new stores and acquired stores. We have about $10 million of scheduled maturities over the next 6 months, of debt maturities, and we have maybe $75 million coming due next fiscal year. So we’re not in any hurry to pay down debt largely because most of our remaining debt has make-whole provisions and we just don't think it's prudent to incur those costs. So I think what you’re going to see is that debt levels will remain pretty consistent over the next 6 months and cash will continue to increase.

Your next question comes from Ross Haberman - Haberman Funds.

Just two quick questions on the two equity investments, the Empire and the Provalliance, I think you talked about, roughly $20 million cash flow you expected for Empire 2010. What was the cash flow number for the other operation you expect?

Well, they have a calendar year. And calendar year –

Or, what did they do last year? If you have that?

Yes, Brent, the EBITDA in euros for Provalliance 20 what?

For calendar 2009, it’s $23 million.

$23 million and they are projecting somewhere in the upper $27 million, $28 million.

Is that euros or dollars?

Euros.

And just refresh my memory, what percentage do you own to each of those?

55% for Empire and 30% for Provalliance.

And the plans for that are-- over the next couple of years, what?

Well, we don’t control the boards in either case. So please understand, it's their plans, not our plans. At some point in the future, we would hope to monetize certainly Empire, and hopefully either buy Provalliance to monetize our investment. But that’s not two-year deal. That’s probably closer to a 4 or 5-year deal.

And just one question for Randy. Any of that cash flow besides the GAAP income in your $240 million of cash flow estimates?

Ross, what was the question about? You are talking EBITDA now?

Correct, yes.

Is there anything other than GAAP estimate?

Yes, in your cash flow of those two operations.

No, no equities are not (inaudible).

Yes, 240 is GAAP.

If there are no further questions, I would like to turn the conference back to Paul.

Thanks for joining us everyone have a good day.

Ladies and gentlemen if you wish to access the replay for this call, you may do so by dialing 1-800-406-7325 within an ID of 4194363 followed by the pound sign. This concludes our conference for today. Thank you for all participating and have a nice day. All participants may now disconnect.