Good morning. My name is Catherine, and I'll be your conference facilitator today. At this time, I would like to welcome everyone to the Regis Corporation Fiscal 2016 Fourth Quarter Earnings 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 sent to you immediately. If you wish to access the replay for this call, you may do so by dialing 1-888-203-1112, access code 861-8174. The replay will be available 60 minutes after the conclusion of today's call. I would like to remind everyone 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 non-GAAP financial measures mentioned in the following presentation, as well as others, can be found on their website at www.regiscorp.com. Speaking today will be Dan Hanrahan, Chief Executive Officer; and Steve Spiegel, Chief Financial Officer. I'm, sorry, Dan Hanrahan, Chief Executive 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 Mr. Hanrahan for his comments. Dan, you may begin.

Thanks, Catherine. Good morning, everyone, and thank you for joining us today. With me are Steve Spiegel, our Executive Vice President and Chief Financial Officer; Eric Bakken, our Executive Vice President and Chief Administrative Officer; and Mark Fosland, our Senior Vice President of Finance. I want to start by saying and I'm proud of the work our organization has put forth to deliver our first positive full year sales comp since fiscal 2007. This could not have been achieved without improved execution in the organization around our key strategies focused on Leadership Development, Technical Education and Asset Protection. I am also pleased we expanded our EBITDA by $3.8 and $3 million for the full year and the fourth quarter respectively. This reflects our continued efforts to contain our cost structure while we are fixing our business. During the year, we aggressively grew our franchising business, strengthened our balance sheet and returned $101 million to shareholders in the form of share repurchases. That said, I end the year with a bit of mixed emotions. We still need to reverse guest traffic declines that have persisted for many years and fourth quarter same-store sales declined by 1.4%. This demonstrates the opportunity we have to continue to improve our execution capabilities and a key reason why I have said over the past three years, our improvement would not be linear. Improving field leadership talent and capabilities continues to be our top priority. Our ability to drive more consistent improvement fluctuates from quarter-to-quarter as we are still developing execution capabilities and upgrading talent at the field leadership level. Today, we have three tiers of leaders. The top tier represents our strong field leaders who consistently execute against all of our initiatives and are driving sustainable improvement in revenues and profits by using tools, processes…

Thank you, Dan and good morning. Before discussing our performance for the fourth quarter, I want to cover three housekeeping items. First, included in today's press release, as well as on our corporate website is a reconciliation bridging reported results to earnings as adjusted for the impact of discrete items for the fourth quarter of the current and prior years. Second, the presence of evaluation allowance against most of our deferred tax assets affects comparability of reported and as adjusted results to prior periods, mainly as a result of tax benefits we claim for goodwill amortization, but do not recognize for GAAP purposes. Income tax expense of $4.1 million in the fourth quarter and $9.1 million for the full year, include non-cash tax expense of $4.5 million and $7.9 million respectively related to this matter. Looking forward, we expect this should will have a similar impact in fiscal 2017. As we've said in the past, the associated quarterly non-cash charge or benefit could fluctuate significantly from quarter-to-quarter as a result of how the effective tax rate is determined at interim periods. Third, during the fourth quarter, we issued a press release stating that the new Department of Labor overtime rules effective this coming December could increase our costs within a range of zero million to $5 million per year. After considering alternatives to mitigate these cost increases, we believe the annualized impact would be on the lower-end of this range. Our press release and Form 10-K include detailed explanations for our major P&L line items. So, I won't repeat them here. I'll clarify that our fourth quarter G&A of $43.5 million is not indicative of our annual run rate of $177 million. We benefited in the fourth quarter from lower incentives and timing of certain expenses throughout the year. I'll…

Absolutely. [Operator Instructions] And we'll go first Jeff Stein with Northcoast Research.

Hey, good morning, Dan. Just one question, and that is – I mean, you guys have done a really nice job of kind of stabilizing the comps, but what is it going to take for you to get out of this minus 1% to plus 1% range. And do you think fiscal 2017 is the year that you can accomplish that?

Good morning, Jeff. Excellent question. It really boils down to three things that we focused on in the call, and then there's a number of things that are supportive of that. But the main one is our ability to get our leaders to lead well in the salons. Where we've good leaders leading well, we're getting terrific results and that's across the board, that's at the RVP level, the regional director level, the district leader level, and obviously at the salon level. So we continue to work on that. The next thing is making sure that we keep our salons well-staffed and we retain our stylists. Our vision is focused on being the place where stylists to have successful and satisfying career. So everything that we're doing within the leadership development is to help people understand if they create the right environment for stylists, we hang on to our stylists. And we're also a place where stylists want to join, and that's really what those leaders that are doing a good job, Jeff, are doing. They're doing that well and it's what our franchisees do still well. Our franchisees create a great environment for their stylists and when they hang on to their stylists, they do very well and they succeed. And then in regards to 2017, we're – I think, we're going to find in 2017 is that, as soon as we can get good leaders in place, that we know can – they can deliver consistently. Those leaders will be accretive to our success as to whether or not that happens, we get all of them done in 2017, it's still difficult for me to say that. But I think, we're focused on the right areas. We've got an organization that's maniacally focused on creating good environment for stylists. So, that's really the key to our success, now. Now, things that help us is great work by our marketing and merchandizing departments to put the right kind of support to help drive traffic, and then the right products in the stores. And then the a final piece of that is the good work that our Asset Protection folks are doing to make sure that all [indiscernible].

Are the issues more with the quality or productivity, the stylists for the leaders that oversee the stylists? And then the second part of that question would be, it seems that you know, you do have this three tiers of leaders, the top tier consistently doing well, but issues with kind of the middle and the lower tier, do you have a template or have you created a template for selecting leaders, that would give you, I guess the higher level of success in identifying the right people and retaining those people as opposed to, it seems like you keep spinning your wheels in that middle tier and lower tier?

So another not a good question. If you kind of look across what we're doing, we've got a very strong Regional VP team, we've got a very strong Regional Director team. When you get down to the District Leader level, where we have a 1,000, and we – when you think about the fact that we just really started training district leaders a year ago on leadership development, they had never had any leadership development, and it's not unusual and lot of businesses, the best sales person becomes the sales manager, right, instead of potentially the best manager becoming the manager. Same thing in our salons, in the past that the best stylist became the salon manager, the best salon manager became the district leader. And that's where we really focused all of our attention in the past year on the leadership development at that district leader level. Expecting district leaders to be really successful without giving them training is just isn't fair, and that's why we've invested so much time, effort and money in the development of that group. So your question is spot on. We need to do a good job with that district leader lever. I feel really good about our Regional Vice President, and our Regional Director Group. We need to continue to support and help that district leader level to be good and give them the tools that they need to be successful. Some people grasp that quicker than others. As you heard me mention, and we have a lot of new people in those roles, and that creates some disruption when we put new people, but I think our field leadership is focused in the exact right direction to make sure that they give those district leaders all of the support they need to be successful.

Right. Thank you.

Thank you, Jeff.

Thank you. We'll go on to Jill Nelson with Johnson Rice.

Good morning. You've just post some significant expense cuts in the fourth quarter, I think you did mention that the G&A line was not representative ongoing rate. So, if you could just talk about as the year as a whole, and kind of looking out what we expect on kind of the total expense rate to be for the company?

Yeah. I think the way we ended the year is pretty representative of where annual run rate is. So $177 million is sort of where we landed this year, and I think that's a good way to think about our ongoing G&A.

And I just – I do think that you called out for a rent that there was a one-time landlord credit, was that significant at all in the fourth quarter is a pretty immaterial overall?

Moderate.

Okay. And then, traffics in the quarter down over 5%, I think that's the weakest quarterly trend you've posted in over two years. If you could talk about some of the metrics behind that weakness and areas that you believe you can improve at?

So I'll take that one Jill. Our biggest challenge within the mall business that had a weighted impact on our overall business. As I said, when in my comments, we're focused on what we can control, and what we can control is to help our leaders to be successful, and to make sure that we provide all the necessary technical training for our stylists. I still continue to believe that even though mall traffic is down that we can always do better, there is never a time where we can't do better, and we're working with the mall operators to help get more marketing support from them to continue to draw traffic into the mall. So we're in partnership with them trying to figure out what we can do to help boost that traffic.

Okay. And just last one, if you could give us an update on the stylists' retention in the quarter, if you saw that improve or decline?

It was pretty consistent with what we've seen, we'll never be satisfied with stylists' retention as long as we lose a single stylist. But it wasn't anything significantly different than what we've seen in the past.

Appreciate it. Thank you.

Thank you.

Thank you. And we'll continue on to Steph Wissink with Piper Jaffray.

Thanks, good morning, everyone. We have two questions. And I apologize if you've mentioned this, I mean this, but can you talk a little bit about the overall menu price increases that you're taking across different salon chains, tell us a little bit about your plans for the balance of this year and into next year? How you're thinking about overall pricing as a contributor to the comp rate?

Sure, so pricing definitely has an impact on it. There is a number of things that have an impact on our revenue. And pricing is certainly one of them, and I'll come back to in just a second to explain how we think the price increases. So to the mix, we have seen a little bit of a mix change to color and we benefit from that as color is a more expensive service, so that's benefited from us. The other thing that we're seeing is our asset protection group is working, and so they are helping to ensure that we get more money that goes into the registers, so we've benefited from that. In terms of pricing itself, our pricing team looks at a number of different things. Before they make a decision to change price and we do it on a – on a store-by-store basis, we don't necessarily look at it. In fact, we don't look at it on a chain basis, we look at a store basis. So, we look at what our competitors are doing, so we know what our competitors are priced at around it, we look at the trend in the salon, so we know if the trend is a positive trend or a negative trend, we look at how well the salon is staffed, we look at the experience of the stylists and then we make a decision as to whether or not take price, and we may decide that we'll take price on haircuts, but not color or color and not haircuts or maybe all the above. So, it's a pretty sophisticated model, but it's done on a store-by-store basis, and it's constant. So, we don't just say, we raised price last January and we're done. If we see the ability to take more price without losing traffic, then we'll do it.

And can you talk a little bit about the responsiveness of your traffic to pricing changes? You tend to see fairly immediate response either traffic starts to decel and you can of course correct or is there something that really happens over time and you have to monitor the response of that consumer base to that potential pricing increase?

So, we see a little bit of both. And in terms of reaction to price, we start monitoring it from the minute when we change the price and watch it all the way through to see what kind of impact it has. But in general, it takes a little bit more time. What we do with – when we do change the price, we always have a control group of stores, where we haven't changed price and we use that to monitor it because we want to make sure that we don't chase consumers away. We know that this is, it is an elastic service that we provide. It's not an inelastic service. So, that we know that if we take too much price, we can chase people away. So, we watch it all the way through and it's a really difficult question to give an absolute answer to because it really varies by the salon, varies by the experience of the stylists in the salon and their ability to manage it. But we've learned over time is that what works, what doesn't work and I think our marketing team is a really good add and I think we're getting better and better at it. And I think our results show that even with traffic down, we were able to do fairly well on the revenue side comparatively speaking to the some of the toughness we're seeing on the traffic right now.

Okay. Final question for us and you hinted that just in your response around color, but any trend from your trend forecasting team that seem intriguing in terms of either basket value growing up the venue curve from pricing or any other unique cutting trends that might catalyze some incremental traffic?

So, well, color is definitely there, and we have seen a shift to more interesting color. We have seen a shift to bright colors. And so we've taken advantage of that. Our technical training team is out, training everybody on those colors. We do like the fact that people like to change the color of their hair with these bright colors fairly often. And so that's the trend that we're seeing right now. We don't see anything going away, there is some stuff around beach kind of beach wavy hair, I'm sure our – if our technical folks are listening, they're laughing at me right now that I'm talking about this. So we do have a really sharp team that stays on top of stuff, we hit the information out to our – either through video or through direct training to our folks right away, but I would say that color is the biggest one at this point.

Thank you, guys.

Thank you.

Thank you. And I would like to turn the floor back over to Dan Hanrahan for any additional or closing remarks.

Just a quick thank you to everybody for dialing in this morning. Look forward to talking to you again in October. Thank you.