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

William R. Armstrong - CL King & Associates Erika K. Maschmeyer - Robert W Baird Jill R. Caruthers - Johnson Rice & Company LLC Mike Hamilton - RBC Dain Rauscher, LLC Dan Hofkin - William Blair & Co., LLC Mimi Noel - Sidoti & Company

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. Paul D. Finkelstein: 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 our capital expenditure and acquisition spend, continue to cut expenses wherever possible and pay down debt. Long term, there are significant growth opportunities for us. Today, we have over 12,800 locations. When the economy turns and the customer visitation patterns stabilize, our acquisition and capital spend opportunities will still be available. Unlike many other retailers, there is no limit to our unit growth. Some day we should own or franchise 30,000 to 40,000 locations. In addition, our research shows that there are more salons for sale than ever before. We'll certainly gain market share from independent salon closures. Frankly, not much has changed since the January call. Our January business was okay, but not great. February was actually a quite good, performing well over plan and March of course was poor, in large part due to a late Easter. It's also interesting to note that Europe now is mirroring the United States. During the January conference call, I referred to a high rent continental business being quite strong. However, January, February and March results on the continent of Europe pretty much mirror ours. The UK environment is still very difficult. We have plans to close a significant number of our underperforming stores in the UK. We'll go into this further during our next conference call. Our Trade Secret sale closed on February 16th. We continue to perform certain transitional functions for the new owner of Trade. We are reimbursed for these functions and they are gradually being phased out. The back-office should be phased out sometime during the month of September. We continue to work on closing stores or getting rent relief. And to date, we have closed or about to close 47 stores and we are getting rent relief in 45 stores. Hair Club continues to perform well, although we are forecasting a drop in EBITDA of several million dollars for fiscal 2010 solely due to the economy. We are getting more new entrants into the Hair Club program than ever before, but we do have a significant number of people dropping out due to the 250 to $300 monthly charge. We feel that this is totally related to the economy. By the way, increased new entrants are a function of increased advertising due to significantly lower advertising rates. During the quarter, we completed the Cool Cuts 4 Kids acquisition. This is our first entry into a children's haircutting concept. Cool Cuts has 67 locations, generating approximately $15 million in revenues, up 18% (ph) and store level cash flow. Cool Cuts is certainly a good growth vehicle for us in the future as this is a very uncrowded field with significant company-owned and franchise growth opportunities. Our investment in Empire Education Group continues to perform well and EBITDA should be in the $15 million to $16 million range at fiscal 2009 contrasted to $9 million last year. The Provost (ph) business in the European continent is somewhat sheltered from the current economic environment due to over 80% of its stores being franchised. Provost should have EBITDA in excess of €30 million this calendar year, up from €28 million in 2008. Consistent (ph) that we have given next year's guidance during our third quarter conference call, but as we stated in January, it's almost impossible to predict how long and how deep this recession will be. Thus, we have made a decision not to provide precise quarterly sales and earnings guidance or even annual guidance, at least until conditions normalize. We'll then reevaluate the guidance topic. We would, however, like to provide some insight into our internal fiscal 2010 expectations. Based on the current economic environment, comps could be in the range of minus 3% to plus 1% and EBITDA would therefore be in the range of $200 million to $240 million. Our CapEx and acquisition spend should between $90 million and $100 million, including maintenance CapEx of approximately $55 million to $60 million. We plan to pay down approximately $30 million to $50 million of debt. The biggest challenge that Regis has in this business environment is to maintain the morale of our people, because in the service business, your people are your product. Even though the current economic environment is the worst I've ever seen since I have been in business, I am still quite bullish about our future prospects. Our business model remains very profitable. Ours is the quintessential replenishment business with our average consumer spending less than $200 per year on salon services. This is the first year in our 87-year history that we'll have negative same-store sales and yet our core business, namely value concept such as Wal-Mart and Supercuts will essentially be showing flat comps. We continue to focus on increasing average ticket and we have, or we'll shortly increase prices in 5000 company-owned salons, which will have a 2.5% to 3% positive impact on average ticket over the next 12 months. Customer visitation patterns will eventually normalize. And once the economy rebounds, Regis's strategy will be to resume its salon growth worldwide. Although we are 10 times larger than our nearest competitor, we only have a 4% North American share and a 2% worldwide share. So our future is bright indeed. Regis is extremely liquid and the covenant issue, which we have discussed in prior quarters, is less of problem today than it was before the disposition of trade as we are able to utilize discontinued operations accounting and gain more cushion in terms of the covenants. Today we are in full compliance with all of our covenants and feel that we have cushion with respect to the covenants. The amount and duration of this cushion is dependent on our same-store sales performance. As we continue to pay down debt, the potential cost to us with respect to restructuring our covenant becomes less of an issue. We are obviously running the company very conservatively today, which we think is prudent. Our position (ph) reflects the bullishness that we feel about our company long term. Randy Pearce will now continue our presentation. Randy L. Pearce: 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 quarter, we made the decision to discontinue providing sales and earnings guidance, at least until economic conditions normalize. However, we did furnish a reference point by stating that if same-store sales were to be at negative 5% for the entire third quarter, we would expect our operational earnings to be just over $0.40 a share. Our actual comps declined 4.5% in the third quarter. And our reported earnings from continuing operations came in at $0.49 a share. That included $800,000 or about a penny a share for lease termination costs incurred in the quarter. So operationally, we came in at $0.50 a share, which was about $0.07 or so better than our comp sales would have indicated. This upside was largely due to our continued focus on expense control as well as in unbudgeted favorable adjustment to our income tax rate. I'll talk a bit more about both of these items later. So on an operational basis, our third quarter earnings of $0.50 a share compares to $0.51 that we reported in the comparable period last year. Recall that last year in the third quarter, we incurred a one-time income tax charge of $0.07 a share associated with the repatriation of international cash following our joint venture transaction with Franck Provost. As Paul mentioned, the shift in the Easter holiday season also affects the quarter-over-quarter sales and earnings comparisons as well. Let me now transition my comments by giving you some detail behind our third quarter operating results by business segment. A breakout of our segment performance is found in today's press release. And as usual, I will begin with our largest segment, which is our North American salons. Let me once again remind you that the current and prior year results of Trade Secret have been removed from the individual revenue and expense line items on the North American segment P&L as required by the discontinued operations accounting treatment. I would also like to point out that the financial statements in our press release today include two new line items related to the sale of retail product by Regis to Premier Salons, who now owns Trade Secret. As we discussed last quarter, Regis has agreed to provide certain transitional support services to Premier including the supply of certain retail products at Regis's cost. In order to separate these results from our ongoing operations, we have added a revenue line called 'product sold to Premier' and a related expense line item labeled 'cost of product sold to Premier'. These two items exactly offset each other and have no impact on the profitability of Regis. Therefore, I will exclude these two line items for the remainder of my discussion. On a continuing operations basis, total North American salon revenue, which represented 88% of our consolidated third quarter revenue, decreased 1% during the quarter to $521 million. This revenue decline was the result of a decline in total same-store sales of 430 basis points, partially offset by revenue from company-owned salons that were built or acquired over the past year. Service revenue in our North American salons declined 50 basis points during the quarter to $412 million. This reduction was due to a decline in service comps during the quarter of 3.7%, partially offset by revenue from new and acquired salons over the last 12 months. We continue to feel very good about the growth in our average service ticket, which increased 3.5% during the third quarter, largely due to recent price increase initiatives. However, more than offsetting the increase in average ticket was a 7.2% decline in same-store customer visits during the quarter due to the economy and the late shift in the Easter holiday season. Product revenue from our continuing operations fell 4.5% in the quarter to $100 million due to a decline in product same-store sales of 7%. Royalties and fees from our North American franchise salons fell 7% in the third quarter to $9 million. New franchise units that were added to the system over the past 12 months were more than offset by franchise buybacks, franchise unit closures and relocations. In addition, our franchise salons are experiencing the same softness in same-store sales trends as our company-owned concepts are experiencing. Let's now talk gross margin. Our combined gross margin rate for North American salons came in on plan at 43.7%, and that was down 20 basis points from what we reported last year in our third quarter. As I'll discuss in a moment, most of this planned margin decline related to service. Despite an extremely challenging sales environment, we were very pleased to report that our third quarter service margin rate came in on plan at 42.2%, down 20 basis points from the same period last year. We had planned for service margin rate to be down a bit this quarter due to certain manufacturers passing along slightly higher cost increases in our service supplies. Our saloon labor costs, however, came in on plan. And once again, we were pleased with our ability to control these costs during this extremely difficult sales period. Our retail product margin rate for the third quarter came in at 49.8%, identical to the rate we reported in the same period last year. We had actually planned for a slight improvement in rate as last year in our third quarter, we were selling through some higher cost inventories we had obtained in connection with a few acquisitions. Offsetting this planned improvement in product margin rate was a change in our current year sales mix as a larger percentage of our retail sales continues to come from lower margin promotional items. Once again, we are not promoting or discounting at a higher rate, but consumers are continuing to be more value focused and are buying our promotions at an increased rate. Let me now address our site operating expense which includes costs directly incurred by our salons such as advertising, insurance, utilities and janitorial costs. Our third quarter site operating expense came in at 8.9% of sales, which was 30 basis points better than plan due to the timing of advertising expenditures as well as reduced current year workers' compensation costs. Although this rate of 8.9% was better than plan, site operating expense was 80 basis points higher than the rate we reported last year in the third quarter. This increase was solely due to a P&L reclassification that we initiated and discussed with you last quarter. Certain expense items which had previously been categorized within our rent expense have now been appropriately reclassified into site operating expense. These items primarily related to utilities and rubbish removal costs for which Regis pays its landlords as part of our lease agreements. Our North American salon G&A expense came in at 5.4% of revenue, which was 30 basis points better than the same period last year and 50 basis point better than our initial plans. Although some of this improvement, both through the prior year as well as to plan related to a reduced level of marketing expenditures, most of the improvement was due to a reduction in field supervisor travel costs. We are seeing a significant reduction in our travel cost due to our cost saving initiatives. And as well, we're seeing fuel costs coming in lower than what we had initially budgeted. Rent expense, which is primarily a fixed cost, came in at 14.1% of total third quarter sales, which was the same rate we recorded last year in the comparable quarter. The reclassification of certain expenses from rent into site operating expense that we just discussed favorably reduced our third quarter rent by 80 basis points. However, offsetting that rate improvement was negative leverage in this fixed cost category caused from reduced sales volume. Depreciation and amortization came in on plan at 3.6% of sales, which was 20 basis points higher than the rate we reported last year. The increase in rate is again caused by negative leverage from reduced same-store sales. The net effect of all the items I just discussed caused our operational... operating income from continuing North American salon to come in at 12.7% of third quarter revenue compared to 13.6% in the comparable period last year. Next I will review our third quarter performance of our international salon segment. As we discussed with you during the last few quarters, analyzing the quarter-over-quarter line item comparisons for this business continues to be very difficult. This segment includes our company-owned salons located primarily in the United Kingdom. Historically, our international salons had also included results from our franchise business on the continent of Europe. However, following our joint venture transaction with Franck Provost, the European business was deconsolidated effective January 31st of 2008. So as a result, our third quarter fiscal 2009 international segment does not include any continental Europe activity whereas one month of activity was fully consolidated in the comparable period a year ago. So for this reason, the quarter-over-quarter comparisons remain tough. However, I'll provide a bit more color behind the quarterly change in revenue and also give you some high level comments on any expense categories that may have surprised us during the quarter. Once again, those of you who build segment models may want to speak directly with Mark Fosland or Alex Forliti here at Regis and they can help you. Total revenue from international salons represented 6% of our consolidated third quarter revenue and came in at $36 million, a reduction of $20 million from the same period a year ago. About one-fourth of this decline or $5 million was due to the deconsolidation of our continental Europe franchise salon business. The balance of the quarter-over-quarter sales decline was largely due to two factors. The first related to foreign currency as nearly $12 million of the overall revenue decrease was due to a quarter-over-quarter decline in the British pound exchange rate against the strengthening U.S. dollar. The second factor related to declining sales in our core business with our UK salons experiencing an 8.1% decrease in overall third quarter comps. From a profit perspective, our international segment met plan by generating third quarter operating income of $888,000, an improvement of more than $360,000 over the same period a year ago. However, all of this planned improvement was due to a vacation accrual adjustment we recorded in the third quarter this year. Let's now speak to Hair Club. Our Hair Club business continues to perform well. However, as Paul mentioned, the economy is starting to impact this business. Nevertheless, our operating results for the third quarter essentially met plan. And let me highlight a couple of items. Third quarter revenue from our hair restoration centers came in at nearly $35 million, which was up just slightly from last year and represented 6% of our consolidated third quarter sales. Hair Club's revenue benefited from the acquisition of two franchise centers and the construction of five new corporate locations over the past year. This revenue growth was essentially offset by negative comps of 2.9% during the quarter. The third quarter operating margin rate for Hair Club came in at 13.8%. Although this rate was down from the rate of 20.3% we reported last year in our third quarter, it nevertheless met plan. As expected, we experienced lower operating margins at two recently acquired franchise centers as well as the five recently built locations. Additionally, we have planned for a year-over-year increase in advertising spend. The negative comps have also put pressure on both our service and product margins. Hair Club's third quarter EBITDA margin came in at over 22%. We remain very pleased with the performance of this segment of our business. I'm going to now switch gears and talk, make a quick comment regarding our corporate G&A expense. The major component within our corporate G&A continues to be salaries and related benefits for our 800 or so employees working here in Minneapolis and the 500 associates that work in our two distribution centers. Centralized back-office support functions provide leverage to our operating model. As I stated last quarter, over the past five years, our company-owned salon counts have increased at a compounded annual rate of 9% and our sales have grown double digit. Yet, our home office head count has grown at a much slower rate of 5%. Despite this leverage, we continue to be very aggressive with expense control during challenging times of slow sales growth. I am very pleased to report that our corporate G&A expense came in at $29 million in the third quarter, which was down nearly $3 million or 9% from the same period last year. As we discussed with you last quarter, the primary reason for this expense reduction was due to our recent cost saving initiatives. We continue to focus very aggressively on expense control and controlling corporate overhead. Once again, we're very pleased with the results of our efforts. Let me make one other point regarding our corporate G&A. This expense category in our third quarter included about $1 million of home office and distribution center costs related to providing transitional back-office support to our former Trade Secret salons. Premier Salons, who now owns Trade Secret, is fully reimbursing Regis for all of our costs that we're incurring on their behalf. However, accounting convention requires that this expense reimbursement be included on our P&L as other income rather than netted against G&A. So in reality, our G&A has come down even more than the $3 million. Let me make a few comments regarding our effective income tax rate. Our third quarter reported rate of 33.7% benefited by approximately 500 basis points, which was largely due to the statutory expiration of certain open tax year items. Absent this benefit, our underlying effective tax rate came in on plan during the quarter at 39%. Looking forward, we anticipate the underlying tax rate for our entire 2009 fiscal year should continue to be in the range of 39 to 40%. I would now like to briefly update you on our debt covenant ratios, and I will be very brief. Our fixed charge coverage ratio at March 31st, and that's the ratio we've been focusing on, improved to 1.61 times, well above the minimum threshold of 1.50 times. We remain in compliance with all of our other debt covenants including our leverage ratio and our minimum net worth test. During the quarter, we continued to make significant progress in achieving the expense reduction and cash flow enhancement initiatives we announced at the beginning of our second quarter. I would like to update you on our progress. Our total debt at the end of March stood at $702 million. That's down $106 million from our debt balance just six months ago at the end of our first quarter. We remain committed to bring our total debt levels down to less than $700 million by June 30th, the end of our current fiscal year. We've already exceeded our plan to reduce inventory levels. When you exclude the impact of the Trade Secret divestiture, our inventory levels are down $33 million over the past two quarters, well above our $20 million goal. Although we do not anticipate inventory levels to change much by the end of June, there could very well be a slight increase from the March level due to additional inventory we plan to bring in to support the back to school season. As you recall this past October, we implemented a variety of expense reduction initiatives designed to save $20 million this fiscal year. During the third quarter, we achieved over $8 million of expense savings to go along with the $5 million we realized in the second quarter. We now project total fiscal 2009 savings to exceed $22 million. So again, we're going to be north of our goal. Year-to-date, our capital expenditures, our loans and acquisition spend has totaled $120 million. We remain on track to spend about $135 million for the full fiscal year, which was a significant reduction from our original plan of $170 million. Once again, we're very pleased at the success we've achieved so far and are highly confident that we will meet or exceed our cost saving targets. Now that completes my prepared remarks. So Paul and I would now like to answer any questions you have. Chardonnae, can you please step in and provide any instructions; we'd appreciate that.

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. Erika Maschmeyer - Robert W Baird: Good morning, great job in a tough environment.

Thank you. Erika Maschmeyer - Robert W Baird: 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. Erika Maschmeyer - Robert W Baird: Yes.

But we continue to show six, seven points in terms of a negative customer count. Erika Maschmeyer - Robert W Baird: Okay.

It's about the same. Our value concepts are positively comping slightly and the Regis division is still down upper single digit. Erika Maschmeyer - Robert W Baird: 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. Erika Maschmeyer - Robert W Baird: 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. Erika Maschmeyer - Robert W Baird: Okay. So you haven't seen any negative impact on traffic from that.

No, no. Erika Maschmeyer - Robert W Baird: Great. And then could you give any indication on the comps that you need to leverage your fixed costs in 2010?

Positive 2%. Erika Maschmeyer - Robert W Baird: 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. Erika Maschmeyer - Robert W Baird: 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. Mike Hamilton - RBC Dain Rauscher, LLC: Good morning everyone.

Hi Mike. Mike Hamilton - RBC Dain Rauscher, LLC: 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. Mike Hamilton - RBC Dain Rauscher, LLC: 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. Mike Hamilton - RBC Dain Rauscher, LLC: 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. Mike Hamilton - RBC Dain Rauscher, LLC: 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.

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