Supercuts 2002 Annual Report Download

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REGIS CORP
FORM 10-K
(Annual Report)
Filed 09/24/02 for the Period Ending 06/30/02
Address 7201 METRO BLVD
MINNEAPOLIS, MN 55439
Telephone 9529477777
CIK 0000716643
Symbol RGS
SIC Code 7200 - Services-Personal Services
Industry Personal Services
Sector Services
Fiscal Year 06/30
http://www.edgar-online.com
© Copyright 2013, EDGAR Online, Inc. All Rights Reserved.
Distribution and use of this document restricted under EDGAR Online, Inc. Terms of Use.

Table of contents

  • Page 1
    REGIS CORP FORM 10-K (Annual Report) Filed 09/24/02 for the Period Ending 06/30/02 Address Telephone CIK Symbol SIC Code Industry Sector Fiscal Year 7201 METRO BLVD MINNEAPOLIS, MN 55439 9529477777 0000716643 RGS 7200 - Services-Personal Services Personal Services Services 06/30 http://www.edgar-...

  • Page 2

  • Page 3
    ... file number 0-11230 Regis Corporation (Exact name of registrant as specified in its charter) Minnesota State or other jurisdiction of incorporation or organization 7201 Metro Boulevard, Edina, Minnesota (Address of principal executive offices) Registrant's telephone number, including area code...

  • Page 4
    ... SCHEDULE REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULE SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS EX-10.(AA) Note Purchase Agreement EX-13 Selected Pages of the 2002 Annual Report EX-23 Consent of PricewaterhouseCoopers LLP EX-99.1 Certification of Chief Executive Officer...

  • Page 5
    ... Form 10-K. 2 The aggregate market value of the voting stock held by nonaffiliates of registrant (based upon closing price of $27.83 per share as of September 16 , 2002, as quoted on the Nasdaq Stock Exchange), was $1,205,460,847. The number of outstanding shares of the registrant's common stock...

  • Page 6
    ... Company is committed to meeting its customer's hair care needs by providing competitively priced services and products in high traffic retail locations with professional and knowledgeable hairstylists. The Company's operations and marketing emphasize high quality services to create customer loyalty...

  • Page 7
    ...the salon's market. The Company also has salons located internationally in malls, leading department stores, mass merchants and high-street locations, and is consistently focused on the moderate-to-upscale hair care and beauty market. Expansion. The Company has grown through increasing revenues from...

  • Page 8
    ... salons offer a full range of custom hairstyling, cutting, coloring, permanent wave and manicuring as well as hair care products. The average sale at Regis Salons is approximately $27. Regis Salons compete in their existing markets primarily by emphasizing the high quality of full services provided...

  • Page 9
    ... revenues, in fiscal 2002. During fiscal 2003, the Company plans to construct approximately 40 new MasterCuts salons. Trade Secret . Trade Secret salons are designed to emphasize the sale of hair care and beauty products in a mall-based retail setting while providing high quality hair care services...

  • Page 10
    ... Supercuts stores in fiscal 2003. Cost Cutters. This group of franchised salons was added to the Company's salon base as a result of the merger with The Barbers in fiscal 1999, as previously discussed. Cost Cutters salons provide value-priced hair care services for men, women and children and sell...

  • Page 11
    ... Service. Company-owned salons in the international division operate in malls, leading department stores, high-street locations and grocery and retail chains under license arrangements or real property leases, consistently focused on the value-priced, moderate and upscale hair care and beauty market...

  • Page 12
    ...five years, as well as the number of salons opened, closed, relocated, converted and acquired during each of these periods. SALON LOCATION SUMMARY 1998 1999 2000 2001 2002 REGIS SALONS (3) Open at beginning of period Salons constructed Acquired Less relocations Net salon openings Conversions Salons...

  • Page 13
    ... 2001 2002 SMARTSTYLE/COST CUTTERS IN WAL-MART Company-owned Salons: Open at beginning of period Salons constructed Acquired Less relocations Net salon openings Conversions (1) Salon closed or sold Open at end of period Franchised Salons: Open at beginning of period Salons constructed Acquired...

  • Page 14
    ... the conversion of franchise operations to company-owned. Canadian and Puerto Rican salons are included in the Regis Salons, Strip Center, MasterCuts and Trade Secret divisions and not included in the International salon totals. Includes Mia & Maxx Hair Studio salons. Represents primarily the...

  • Page 15
    ...hair care products offered are primarily shampoos, hair conditioners and styling and finishing products. The Company actively reviews its product line offerings and continuously investigates the quality and sales potential of new products. The Company utilizes its national salon network as a testing...

  • Page 16
    ... marketing, promotion and advertising programs, and other forms of support designed to help the franchisee build a successful business. Standards of Operations Franchisees are required to conform to company-established operational policies and procedures relating to quality of service, training...

  • Page 17
    ... sale of the franchise. The current franchise agreement is site specific. Franchisees may enter into development agreements with the Company which provides limited territorial protection. Groupe Gerard Glemain(GGG) and Jean Louis David (JLD) The majority of GGG's franchise contracts have a five-year...

  • Page 18
    ... and product sales. The Company has full- and part-time artistic directors who teach and train the salon operators in techniques for providing the salon services and who instruct the stylists in current styling trends. The Company also has an audiovisual based training system in its salons designed...

  • Page 19
    ... for salon managers and hairstylists is competitive within the industry. Stylists benefit from the Company's high-traffic locations, as well as name-recognition from Regis and Supercuts, and receive a steady source of new business from walk-in customers. In addition, the Company offers a career path...

  • Page 20
    ... and creme colors. Supercuts salons are functional in design and tastefully furnished, consistent with its image of a quality provider of affordable haircutting services. Cost Cutters and Style America salons appeal to a broad range of customers, providing value-priced full services in convenient...

  • Page 21
    ... management reports. The salon managers deposit all cash receipts into local accounts each night, which are then transferred into a centralized bank account. This process limits the Company's need for working capital as cash is collected in advance of the payment of bills. Point-of-sale information...

  • Page 22
    ...of high quality hairstyling salons and is committed to protecting these trademarks by vigorously challenging any unauthorized use, the Company's success and continuing growth are the result of the quality of its salon location selections and real estate strategies. Employees As of June 30, 2002, the...

  • Page 23
    ...Contents In Canada, the Company's franchise operations are subject to both the Alberta Franchise Act and the Ontario Franchise Act. The offering of franchises in Canada occurs by way of a disclosure document, which contains certain disclosures required by the Ontario and Alberta Franchise Acts. Both...

  • Page 24
    ... Design and Construction Senior Vice President, President, Franchise Division Senior Vice President, Fashion and Education Senior Vice President, General Counsel and Secretary Senior Vice President, International Managing Director, Europe Chief Operating Officer, Regis Salons Chief Operating Officer...

  • Page 25
    ... outside legal counsel to the Company from 1957 to 1997. Raymond Duke was elected Senior Vice President, International Managing Director, Europe in February, 1999 and has served as Vice President since 1992. Sharon Kiker was elected Chief Operating Officer, Regis Salons in April 1998 and has served...

  • Page 26
    ...operates small executive and administrative offices for the international division primarily located in Coventry, England and Paris, France. These offices are occupied under long-term leases. The Company completed construction of a new distribution center in Chattanooga, Tennessee during fiscal 1998...

  • Page 27
    ... of the normal course of business. As of June 30, 2002, in the opinion of company counsel, the ultimate liabilities resulting from such lawsuits and claims are not anticipated to have a material adverse effect on the consolidated financial position, the results of operations or the liquidity of the...

  • Page 28
    ...27,476 shareholders based on the number of record holders and an estimate of individual participants in security position listings. Item 6. Selected Financial Data Five-Year Summary of Selected Financial Data which is included on page 18 of the Registrant's 2002 Annual Report to Shareholders, a copy...

  • Page 29
    ...in Note 6 to the Consolidated Financial Statements. The residual value guarantee is on a variable rate operating lease whose rental payments are based on current interest rates and an $11.8 million notional amount. The Company has entered into a derivative financial instrument to hedge $11.8 million...

  • Page 30
    ... in fiscal 2007 and at June 30, 2002, the Company's net investment in this derivative financial instrument was in a $2.4 million loss position, based on its estimated fair value. At June 30, 2002, the Company's cash is concentrated at a limited number of financial institutions. This exposes the...

  • Page 31
    ... stock options granted under the Regis Corporation 2000 Stock Option Plan and 1991 Stock Option Plan. All of the Registrant's equity compensation plans were approved by the shareholders. Information regarding the stock option plans included on pages 39 and 40 of the Registrant's 2002 Annual Report...

  • Page 32
    ... information included in this filing. Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K (a) (1). The following Consolidated Financial Statements of Regis Corporation, and the Report of Independent Accountants thereon, included on pages 26 to 42 of the Registrant's 2002 Annual...

  • Page 33
    ...for the year ended June 30, 1998) Form of Employment and Deferred Compensation Agreement between the Company and six executive officers. (Incorporated by reference to Exhibit 10(b) of the Company's Report on Form 10-K date September 24, 1997.) Northwestern Mutual Life Insurance Company Policy Number...

  • Page 34
    ... Stock Award Plan and Trust Agreement dated as of July 1, 1992 between the registrant and Myron Kunin, Trustee (Incorporated by reference to Exhibit 10(r) as part of the Company's Report on Form 10-K dated September 27, 1993, for the year ended June 30, 1993) Survivor benefit agreement dated...

  • Page 35
    ... 31, 1997.) Series G Senior Note dated as of July 10, 1998 between the registrant and Prudential Insurance Company of America. (Incorporated by reference to the Company's Report on Form 10-K dated September 17, 1998, for the year ended June 30, 1998.) Term Note C Agreement between the registrant and...

  • Page 36
    ...). Series B Senior Note between the Registrant and purchasers listed in the attached schedule A as referred to in 10(aa). Selected pages of the 2002 Annual Report to Shareholders Consent of PricewaterhouseCoopers LLP President and Chief Executive Officer of Regis Corporation: Certification pursuant...

  • Page 37
    ... this report to be signed on its behalf by the undersigned, thereunto duly authorized. REGIS CORPORATION By /s/ Paul D. Finkelstein Paul D. Finkelstein, President and Chief Executive Officer By /s/ Randy L. Pearce Randy L. Pearce, Executive Vice President, Chief Financial and Administrative Officer...

  • Page 38
    ... 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Paul D. Finkelstein, President and Chief Executive Officer of Regis Corporation, certify that: 1. 2. I have reviewed this annual report on Form 10-K of Regis Corporation; Based on my knowledge, this annual report does not contain any untrue statement of...

  • Page 39
    ...in our report dated August 27, 2002 appearing in the 2002 Annual Report to Shareholders of Regis Corporation (which report and consolidated financial statements are incorporated by reference in this Annual Report on Form 10-K) also included an audit of the financial statement schedule listed in Item...

  • Page 40
    ... REGIS CORPORATION SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS as of June 30, 2002, 2001 and 2000 (dollars in thousands) Column A Column B Balance at beginning of period Column C Charged to costs and Charged to expenses Other Accounts Column D Column E Balance at end of period Description...

  • Page 41
    ......3 4.7. Payment of Special Counsel Fees...4 4.8. Private Placement Numbers...4 4.9. Changes in Corporate Structure...4 4.10. Subsidiary Guaranty...4 4.11. Intercreditor Agreement...4 4.12. Proceedings and Documents...4 REPRESENTATIONS AND WARRANTIES OF THE COMPANY...4 5.1. Organization; Power and...

  • Page 42
    .... 10.13. COVENANTS...21 Consolidated Net Debt...21 Priority Debt...21 Fixed Charge Coverage...21 Liens...21 Sale of Assets...23 Mergers, Consolidations, etc...23 Restricted Payments...24 Investments...25 Disposition of Stock of Restricted Subsidiaries...26 Designation of Restricted and Unrestricted...

  • Page 43
    ... ON NOTES...32 14.1. Place of Payment...32 14.2. Home Office Payment...33 EXPENSES, ETC...33 15.1. Transaction Expenses...33 15.2. Survival...33 SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT...34 AMENDMENT AND WAIVER...34 17.1. Requirements...34 17.2. Solicitation of Holders of...

  • Page 44
    ... Information Relating to Purchasers Defined Terms Changes in Corporate Structure Disclosure Materials Subsidiaries; Affiliates Financial Statements Litigation Licenses, Permits, etc. Use of Proceeds Existing Debt Liens Form Form Form Form Form of of of of of Series A Senior Note Series B Senior...

  • Page 45
    ... March 15, 2009 $67,000,000 7.20% Senior Notes, Series B, due March 15, 2012 Dated as of March 1, 2002 TO EACH OF THE PURCHASERS LISTED IN THE ATTACHED SCHEDULE A: Ladies and Gentlemen: REGIS CORPORATION, a Minnesota corporation (the "Company"), agrees with you as follows: 1. AUTHORIZATION OF NOTES...

  • Page 46
    ... you and the Other Purchasers shall occur at the offices of Gardner, Carton & Douglas, Quaker Tower, Suite 3400, 321 North Clark Street, Chicago, Illinois 60610 at 9:00 a.m., Chicago time, at a closing (the "Closing") on March 7, 2002 or on such other Business Day thereafter on or prior to March 28...

  • Page 47
    ... New York Insurance Law) permitting limited investments by insurance companies without restriction as to the character of the particular investment, (ii) not violate any applicable law or regulation (including, without limitation, Regulation U, T or X of the Board of Governors of the Federal Reserve...

  • Page 48
    ... shall have entered into an Intercreditor Agreement (the "Intercreditor Agreement"), on terms satisfactory to you, with Bank of America, N.A., as administrative agent for the banks party to the Credit Agreement, and with the holders of outstanding senior notes issued pursuant to the Private...

  • Page 49
    ... to be so qualified or in good standing could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. The Company has the corporate power and authority to own or hold under lease the properties it purports to own or hold under lease, to transact the business...

  • Page 50
    ... of shares of each class of its capital stock or similar equity interests outstanding owned by the Company and each other Subsidiary, (ii) the Company's Affiliates, other than Subsidiaries, and (iii) the Company's directors and senior officers. Each Subsidiary listed in Schedule 5.4 is designated...

  • Page 51
    ... by the Company of this Agreement, the Intercreditor Agreement or the Notes or the execution, delivery or performance by each Subsidiary Guarantor of the Subsidiary Guaranty. 5.8. LITIGATION; OBSERVANCE OF STATUTES AND ORDERS. (a) Except as disclosed in Schedule 5.8, there are no actions, suits or...

  • Page 52
    ...for all fiscal periods are adequate. The Federal income tax liabilities of the Company and its Subsidiaries have been determined by the Internal Revenue Service and paid for all fiscal years up to and including the fiscal year ended June 30, 1993. 5.10. TITLE TO PROPERTY; LEASES. The Company and its...

  • Page 53
    ... be expected to result in a Material Adverse Effect. Neither the Company nor any ERISA Affiliate has incurred any liability pursuant to Title I or IV of ERISA or the penalty or excise tax provisions of the Code relating to employee benefit plans (as defined in Section 3 of ERISA), and no event...

  • Page 54
    .... The Company will apply the proceeds of the sale of the Notes for general corporate purposes and to refinance Debt as set forth in Schedule 5.14. No part of the proceeds from the sale of the Notes will be used, directly or indirectly, for the purpose of buying or carrying any margin stock within...

  • Page 55
    ...or in any way related to real properties now or formerly owned, leased or operated by any of them or to other assets or their use, except, in each case, such as could not reasonably be expected to result in a Material Adverse Effect; (b) neither the Company nor any of its Subsidiaries has stored any...

  • Page 56
    ...(a) the Source is an "insurance company general account" as such term is defined in the Department of Labor Prohibited Transaction Exemption ("PTE") 95-60 (issued July 12, 1995) ("PTE 95-60") and as of the date of this Agreement there is no "employee benefit plan" with respect to which the aggregate...

  • Page 57
    ... which has been identified to the Company in writing pursuant to this paragraph (e); or (f) the Source is the assets of one or more employee benefit plans that are managed by an "in-house asset manager," as that term is defined in PTE 96-23 and such purchase and holding of the Notes is exempt under...

  • Page 58
    ... provided that the delivery within the time period specified above of the Company's Annual Report on Form 10-K for such fiscal year (together with the Company's annual report to shareholders, if any, prepared pursuant to Rule 14a-3 under the Exchange Act) prepared in accordance with the requirements...

  • Page 59
    ... pursuant to Title I or IV of ERISA or the penalty or excise tax provisions of the Code relating to employee benefit plans, or in the imposition of any Lien on any of the rights, properties or assets of the Company or any ERISA Affiliate pursuant to Title I or IV of ERISA or such penalty or excise...

  • Page 60
    ...of a Senior Financial Officer setting forth: (a) Covenant Compliance -- the information (including detailed calculations) required in order to establish whether the Company was in compliance with the requirements of Section 10.1 through Section 10.13, inclusive, during the quarterly or annual period...

  • Page 61
    ...a Default or Event of Default then exists, at the expense of the Company, to visit and inspect any of the offices or properties of the Company or any Subsidiary, to examine all their respective books of account, records, reports and other papers, to make copies and extracts therefrom, and to discuss...

  • Page 62
    ... to maturity implied by (i) the yields reported, as of 10:00 A.M. (New York City time) on the second Business Day preceding the Settlement Date with respect to such Called Principal, on the display designated as the "PX Screen" on the Bloomberg Financial Market Service (or such other display as may...

  • Page 63
    ... AVERAGE LIFE" means, with respect to any Called Principal, the number of years (calculated to the nearest one-twelfth year) obtained by dividing (i) such Called Principal into (ii) the sum of the products obtained by multiplying (a) the principal component of each Remaining Scheduled Payment...

  • Page 64
    ... a Lien on properties or assets of the Company or any Subsidiary, provided that neither the Company nor any Subsidiary need pay any such tax or assessment or claims if (i) the amount, applicability or validity thereof is contested by the Company or such Subsidiary on a timely basis in good faith and...

  • Page 65
    ... Subsidiaries) and all such dispositions had occurred on the first day of such period. 10.2. PRIORITY DEBT. The Company will not permit Priority Debt to exceed 20% of Consolidated Net Worth at any time. 10.3. FIXED CHARGE COVERAGE. The Company will not permit the ratio (calculated as of the end...

  • Page 66
    ... or the fair market value (determined in good faith by one or more officers of the Company to whom authority to enter into the transaction has been delegated by the board of directors of the Company) of the property subject thereto; (h) Liens resulting from extensions, renewals or replacements...

  • Page 67
    ... fair market value of the property subject thereto, and (ii) the net proceeds from such Disposition are within 180 days of such Disposition (A) reinvested in productive assets used or useful in carrying on the business of the Company and its Restricted Subsidiaries or (B) applied to the payment or...

  • Page 68
    ... Agreement or the Notes. 10.7. RESTRICTED PAYMENTS. The Company will not, and will not permit any Restricted Subsidiary to, declare or make any dividend payment or other distribution of assets, properties, cash, rights, obligations or securities on account of any shares of any class of its capital...

  • Page 69
    ... Net Income for the period of four fiscal quarters ending with the second preceding fiscal quarter prior to the fiscal quarter in which such payment is made (if positive), (ii) the total consideration paid to repurchase the Company's capital stock in connection with one or more Repurchase Programs...

  • Page 70
    ... to, sell, transfer or otherwise dispose of any shares of capital stock of a Restricted Subsidiary if such sale would be prohibited by Section 10.5, except (i) for directors' qualifying shares or (ii) to satisfy local ownership requirements. (c) If a Restricted Subsidiary at any time ceases to...

  • Page 71
    ... to enter into directly or indirectly any Material transaction or Material group of related transactions (including without limitation the purchase, lease, sale or exchange of properties of any kind or the rendering of any service) with any Affiliate (other than the Company or another Restricted...

  • Page 72
    ... the benefit of its creditors, (iv) consents to the appointment of a custodian, receiver, trustee or other officer with similar powers with respect to it or with respect to any substantial part of its property, (v) is adjudicated as insolvent or to be liquidated, or (vi) takes corporate action for...

  • Page 73
    ... the Code relating to employee benefit plans, (v) the Company or any ERISA Affiliate withdraws from any Multiemployer Plan, or (vi) the Company or any Subsidiary establishes or amends any employee welfare benefit plan that provides post-employment welfare benefits in a manner that would increase the...

  • Page 74
    ...to the full extent permitted by applicable law), shall all be immediately due...Company (except as herein specifically provided for) and that the provision for payment of a Make-Whole Amount by the Company... any power granted hereby or thereby or by law or otherwise. 12.3. RESCISSION. At any time after ...

  • Page 75
    ... limitation, reasonable attorneys' fees, expenses and disbursements. 13. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES. 13.1. REGISTRATION OF NOTES. The Company shall keep at its principal executive office a register for the registration and registration of transfers of Notes. The name and address...

  • Page 76
    ... shall be made in Chicago, Illinois at the principal office of Bank of America in such jurisdiction. The Company may at any time, by notice to each holder of a Note, change the place of payment of the Notes so long as such place of payment shall be either the principal office of the Company in such...

  • Page 77
    ...shall surrender such Note for cancellation, reasonably promptly after any such request, to the Company at its principal executive office or at the place of payment most recently designated by the Company pursuant to Section 14.1. Prior to any sale or other disposition of any Note held by you or your...

  • Page 78
    ... by, or receives the consent or approval of, the requisite holders of Notes. (b) Payment. The Company will not directly or indirectly pay or cause to be paid any remuneration, whether by way of supplemental or additional interest, fee or otherwise, or grant any security, to any holder of Notes as...

  • Page 79
    ... (c) by a recognized overnight delivery service (with charges prepaid). Any such notice must be sent: (i) if to you or your nominee, to you or it at the address specified for such communications in Schedule A, or at such other address as you or it shall have specified to the Company in writing, (ii...

  • Page 80
    ... of third parties delivered to you, provided that you may deliver or disclose Confidential Information to (i) your directors, trustees, officers, employees, agents, attorneys and affiliates (to the extent such disclosure reasonably relates to the administration of the investment represented by your...

  • Page 81
    ... to be entitled to the benefits of this Section 20 as though it were a party to this Agreement. On reasonable request by the Company in connection with the delivery to any holder of a Note of information required to be delivered to such holder under this Agreement or requested by such holder (other...

  • Page 82
    ... by any Person, or which such Person is prohibited from taking, such provision shall be applicable whether such action is taken directly or indirectly by such Person. 23.5. COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which shall be an original but all of which...

  • Page 83
    ... of this Agreement and return it to the Company, whereupon the foregoing shall become a binding agreement between you and the Company. Very truly yours, REGIS CORPORATION By: /s/ Randy L. Pearce Name: Randy L. Pearce Title: Executive Vice President Chief Financial and Administrative Officer S-1

  • Page 84
    The foregoing is agreed to as of the date thereof. TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA By: /s/ Lisa M. Ferraro Name: Lisa M. Ferraro Title: Director S-2

  • Page 85
    MONUMENTAL LIFE INSURANCE COMPANY By: /s/ Bill Henricksen Name: Bill Henricksen Title: Vice President S-3

  • Page 86
    ...INSURANCE COMPANY OF NEW YORK By: PPM America, Inc., as attorney in fact, on behalf of Jackson National Life Insurance Company of New York By: /s/ Chris Raub Name: Chris Raub Title: Senior Managing Director THE PRUDENTIAL ASSURANCE COMPANY LIMITED By: The Prudential Assurance Company Limited By...

  • Page 87
    PACIFIC LIFE INSURANCE COMPANY By: /s/ Diane W. Dales ------------------------------Name: Diane W. Dales ----------------------------Title: Assistant Vice President ---------------------------- By: /s/ Cathy Schwartz ------------------------------Name: Cathy Schwartz ----------------------------...

  • Page 88
    ... Christopher Wilkos --------------------------------------Name: Christopher Wilkos ------------------------------------Title: Senior Vice President ------------------------------------ PHL VARIABLE INSURANCE COMPANY By: /s/ Christopher Wilkos --------------------------------------Name: Christopher...

  • Page 89
    PROVIDENT MUTUAL LIFE INSURANCE COMPANY By: /s/ James D. Kestner ------------------------------Name: James D. Kestner ----------------------------Title: Vice President ---------------------------- S-7

  • Page 90
    SECURITY FINANCIAL LIFE INSURANCE CO. By: /s/ Kevin W. Hammond Name: Kevin W. Hammond Title: Vice President Chief Investment Officer S-8

  • Page 91
    ...any special payment; and (3) name and address of Bank (or Trustee) from which wire transfer was sent, shall be delivered, mailed or faxed to: Teachers Insurance and Annuity Association of America 730 Third Avenue New York, New York 10017-3206 Attention: Securities Accounting Division Telephone: (212...

  • Page 92
    ...: Citibank, NA 111 Wall Street New York, NY 10043 ABA #021000089 DDA #36218394 Custody Account No.847785 FC Monumental Life Insurance Company ADDITIONAL REQUIRED INFORMATION: Identify source and application of funds. Include the following: Security/Issuer Description, CUSIP (if available), principal...

  • Page 93
    AEGON USA Investment Management, LLC Attn: Lizz Taylor--Private Placements 400 West Market Street Louisville, KY 40202 Fax#: 502/560-2030 Tax ID No. 52-0419790 Schedule A

  • Page 94
    ... #: IOC566 FBO: Jackson National Life Ref: CUSIP / PPN, Description, and Breakdown (P&I) (2) Payment notices should be sent to: Jackson National Life Insurance Company c/o The Bank of New York Attn: P&I Department P. O. Box 19266 Newark, New Jersey 07195 Phone: (212) 437-3054, Fax: (212) 437-6466...

  • Page 95
    ... #: IOC566 FBO: Jackson National Life Ref: CUSIP / PPN, Description, and Breakdown (P&I) (2) Payment notices should be sent to: Jackson National Life Insurance Company c/o The Bank of New York Attn: P&I Department P. O. Box 19266 Newark, New Jersey 07195 Phone: (212) 437-3054, Fax: (212) 437-6466...

  • Page 96
    ... OBO-FI A/C# PMIF0583002 Ref: CUSIP/PPN, Description, and Breakdown (P&I) Special Instructions: Cost Center 1253 (2) Payment notices should be sent to: a) PPM America, Inc. 225 West Wacker Drive, Suite 1200 Chicago, IL 60606-1228 Attn: Portfolio Services - Craig Close Phone: (312) 634-2502 Fax: (312...

  • Page 97
    ... SAL-FI A/C# PMIF0584002 Ref: CUSIP/PPN, Description, and Breakdown (P&I) Special Instructions: Cost Center 1253 (2) a) Payment notices should be sent to: PPM America, Inc. 225 West Wacker Drive, Suite 1200 Chicago, IL 60606-1228 Attn: Portfolio Services Craig Close Phone: (312) 634-2502 Fax: (312...

  • Page 98
    ... Security Description & PPN (2) All notices of payments and written confirmations of such wire transfers to: Mellon Trust Attn: Pacific Life Accounting Team One Mellon Bank Center-Room 0930 Pittsburgh, PA 15258-0001 FAX# 412-236-7529 AND Pacific Life Insurance Company Attn: Securities Administration...

  • Page 99
    ... other communications shall be addressed to: Pacific Life Insurance Company Attn: Securities Department 700 Newport Center Drive Newport Beach, CA 92660-6397 FAX# 949-219-5406 (4) For Physical Delivery of Certificates: Mellon Securities Trust Company 120 Broadway, 13th Floor New York, NY 10271 Attn...

  • Page 100
    ... Register Notes in name of: PHOENIX LIFE INSURANCE COMPANY (1) All payments by wire transfer of immediately available funds to: Chase Manhattan Bank New York, NY ABA 021 000 21 Acct. Number: 900 9000 200 Acct. Name: Income Processing Reference: G05123, Phoenix Life Insurance, PPN: (2) All notices...

  • Page 101
    ... Register Notes in name of: PHL VARIABLE INSURANCE COMPANY (1) All payments by wire transfer of immediately available funds to: Chase Manhattan Bank New York, NY ABA 021 000 21 Acct. Number: 900 9000 200 Acct. Name: Income Processing Reference: G05948, Phoenix Life Insurance, PPN: (2) All notices...

  • Page 102
    SCHEDULE A INFORMATION RELATING TO PURCHASERS Principal Amount of Notes to be Purchased Series A Series B 2,000,000 $3,000,000 Name of Purchaser Provident Mutual Life Insurance Company Register Notes in name of: PROVIDENT MUTUAL LIFE INSURANCE COMPANY (1) All payments by wire transfer of ...

  • Page 103
    ..., premium and interest, if applicable. (2) All notices of payments and written confirmations of such wire transfers should be sent to: Security Financial Life Insurance Co. 4000 Pine Lake Road P.O. Box 82248 Lincoln, NE 68516 Attention: Investment Division Fax: (402) 458-2170 Phone: (402) 434-9500...

  • Page 104
    ... banks in New York City are required or authorized to be closed, and (b) for the purposes of any other provision of this Agreement, any day other than a Saturday, a Sunday or a day on which commercial banks in Chicago, Illinois or New York City are required or authorized to be closed. "CAPITAL...

  • Page 105
    ...the Amended and Restated Credit Agreement dated as of September 26, 2000 among the Company, Bank of America, N.A., as Administrative Agent, LaSalle Bank National Association, as Co-Administrative Agent and Swing Line Lender, Bank One, NA and First Union National Bank, as Co-Documentation Agents, and...

  • Page 106
    ... first paragraph of the Notes or (ii) 2% over the rate of interest publicly announced by Bank of America in Chicago, Illinois as its "base" or "prime" rate. "DISPOSITION" is defined in Section 10.5. "ENVIRONMENTAL LAWS" means any and all Federal, state, local, and foreign statutes, laws, regulations...

  • Page 107
    ... maintain any working capital or other balance sheet condition or any income statement condition of any other Person or otherwise to advance or make available funds for the purchase or payment of such indebtedness or obligation; (c) to lease properties or to purchase properties or services primarily...

  • Page 108
    ... entity, regardless of legal form. "INTERCREDITOR AGREEMENT" is defined in Section 4.11. "INVESTMENTS" means all investments made, in cash or by delivery of property, directly or indirectly, by any Person, in any other Person, whether by acquisition of shares of capital stock, indebtedness or other...

  • Page 109
    ... five years, have been made or required to be made, by the Company or any ERISA Affiliate or with respect to which the Company or any ERISA Affiliate may have any liability. "PREFERRED STOCK" means any class of capital stock of a corporation that is preferred over any other class of capital stock of...

  • Page 110
    ... purchaser listed in Schedule A. "QPAM EXEMPTION" means Prohibited Transaction Class Exemption 84-14 issued by the United States Department of Labor. "RENTAL EXPENSE" means, for any period, the sum of (i) all store rental payments, (ii) all common area maintenance payments and (iii) all real estate...

  • Page 111
    ... of the Company that has been so designated by notice in writing given to the holders of the Notes. "VOTING STOCK" means the capital stock of any class or classes of a corporation having power under ordinary circumstances to vote for the election of members of the board of directors of such...

  • Page 112
    SCHEDULE 4.9 CHANGES IN CORPORATE STRUCTURE NONE Schedule 4.9

  • Page 113
    SCHEDULE 5.3 DISCLOSURE MATERIALS NONE Schedule 5.3

  • Page 114
    ... COMPANY'S SUBSIDIARIES SUBSIDIARIES OF REGIS CORPORATION 1. THE BARBERS, HAIRSTYLING FOR MEN & WOMEN, INC. A. WCH, Inc. * 1. We Care Hair Realty, Inc. * B. CLS International, Inc. * C. The Barbers Export, Inc. * SUPERCUTS, INC. A. Supercuts Corporate Shops, Inc . B. Super Rico, Inc. C. SC Capital...

  • Page 115
    ...00% 100.00% 100.00% 100.00% 100.00% Regis Corporation Regis Netherlands, Inc. RHS Netherlands CV RHS Netherlands CV RHS Neth Holdings BV RHS Neth Holdings BV RHS France SAS 20. 21. Regis Corp. Regis Insurance Group, Inc. 100.00% Regis Corporation 100.00% Regis Corporation * INACTIVE Schedule 5.4

  • Page 116
    ... President Executive VP, CAO and CFO Senior V.P., International Managing Director, Europe Senior V.P., General Counsel, & Secretary Senior V.P., Design & Construction Senior Vice President, Regis Corp President, Franchise Division Senior Vice President, Fashion Education & Marketing Chief Operating...

  • Page 117
    SCHEDULE 5.5 FINANCIAL STATEMENTS As provided in the Offering Memorandum and Enclosures: 1. Income Statement Summary for: - 3 months ended September 30, 2001 and September 30, 2000 - Fiscal years each ending June 30, 1997 through June 30, 2001 2. Consolidated Balance Sheet Summary for: - September ...

  • Page 118
    SCHEDULE 5.8 LITIGATION NONE Schedule 5.8

  • Page 119
    SCHEDULE 5.11 LICENSES, PERMITS, ETC. NONE Schedule 5.11

  • Page 120
    SCHEDULE 5.14 USE OF PROCEEDS 1. Refinance short term Libor and prime rate loans under a Revolving Credit Facility of approximately $72 million. 2. Fund future general corporate purposes, including but not limited to, acquisitions and capital expenditures. Schedule 5.14

  • Page 121
    SCHEDULE 5.15 EXISTING DEBT AS OF DECEMBER 31, 2001 Senior Fixed Rate Debt Revolving Line of Credit International Debt Other (including acquired) Capital Leases TOTAL $111,481,250 $136,400,000 $ 786,025 $ 3,713,337 $ 2,665,740 $255,046,352 Schedule 5.15

  • Page 122
    SCHEDULE 10.4 EXISTING LIENS LIEN HOLDER ----------Information Leasing Corporation ASSETS -----Various Salon Equipment and Warehouse Equipment Office Furniture Synthetic Lease OUTSTANDING 3,300,000 Steelcase Financial Services, Inc. Atlantic Financial Group, Ltd. $ 2,000,000 $11,800,000 Schedule...

  • Page 123
    ... to be made in lawful money of the United States of America at the principal office of Bank of America in Chicago, Illinois or at such other place as the Company shall have designated by written notice to the holder of this Note as provided in the Note Purchase Agreement referred to below. This Note...

  • Page 124
    ... the law of the State of Illinois excluding choice-of-law principles of the law of such State that would require the application of the laws of a jurisdiction other than such State. REGIS CORPORATION By: Name: Title: * This paragraph must be removed at such time as there are no Subsidiary Guarantors...

  • Page 125
    ... to be made in lawful money of the United States of America at the principal office of Bank of America in Chicago, Illinois or at such other place as the Company shall have designated by written notice to the holder of this Note as provided in the Note Purchase Agreement referred to below. This Note...

  • Page 126
    ... the law of the State of Illinois excluding choice-of-law principles of the law of such State that would require the application of the laws of a jurisdiction other than such State. REGIS CORPORATION By: Name: Title: * This paragraph must be removed at such time as there are no Subsidiary Guarantors...

  • Page 127
    ...S S E T H: WHEREAS, REGIS CORPORATION, a Minnesota corporation (the "Company"), and the initial Holders have entered into a Note Purchase Agreement dated as of March 1, 2002 (the Note Purchase Agreement as amended, supplemented, restated or otherwise modified from time to time in accordance with its...

  • Page 128
    ... provided for under such Note Documents) on any amount due and owing from the Company. Each Guarantor, promptly after demand, will pay to the Holders the reasonable costs and expenses of collecting such amounts or otherwise enforcing this Guaranty, including, without limitation, the reasonable fees...

  • Page 129
    ... or with any other corporation, or any sale, lease or transfer of any of the assets of the Company or any Guarantor to any other person; (i) any change in the ownership of any shares of capital stock of the Company or any change in the corporate relationship between the Company and any Guarantor, or...

  • Page 130
    ...the Holders against the Company or against any collateral security or guaranty or right of offset held by the Holders for the payment of the Obligations. Until one year and one day after all Obligations have been indefeasibly paid in full, each Guarantor agrees not to take any action pursuant to any...

  • Page 131
    ... other person, or upon or as a result of the appointment of a custodian, receiver, trustee or other officer with similar powers with respect to the Company or other person or any substantial part of its property, or otherwise, all as though such payment had not been made. If an event permitting the...

  • Page 132
    ...mailed by first-class mail, postage prepaid, or sent by a recognized overnight delivery service, charges prepaid, addressed (a) if to the Company or any Holder at the address set forth in, the Note Purchase Agreement or (b) if to a Guarantor, in care of the Company at the Company's address set forth...

  • Page 133
    ..., return receipt requested, to the address of such Guarantor specified in or designated pursuant to the Note Purchase Agreement. Each Guarantor agrees that such service upon receipt (i) shall be deemed in every respect effective service of process upon it in any such suit, action or proceeding and...

  • Page 134
    ..., each Guarantor has caused this Guaranty to be duly executed as of the day and year first above written. TRADE SECRET, INC. By: Name: Title: SUPERCUTS, INC. By: Name: Title: THE BARBERS, HAIRSTYLING FOR MEN AND WOMEN, INC. By: Name: Title: REGIS INTERNATIONAL, LTD. By: Name: Title: 8 Exhibit 1(c)

  • Page 135
    ...good standing under the laws of its jurisdiction of organization and has the requisite power and authority to own and operate its property, to lease the property...declaration with, any Governmental Authority is required in connection with the execution, delivery or performance by such Guarantor of ...

  • Page 136
    ..., threatened by or against the Guarantor or any of its properties or revenues (i) with respect to this Joinder, the Subsidiary Guaranty or ...pay its debts as they mature, and (iii) such Guarantor has capital sufficient to carry on its business as conducted and as proposed to be conducted. Capitalized ...

  • Page 137
    ...would honor the choice of Illinois law to govern the Note Purchase Agreement, the Notes and the Subsidiary Guaranty. 5. Based on the representations set forth in the Agreement, the offering, sale and delivery of the Notes and delivery of the Subsidiary Guaranty do not require the registration of the...

  • Page 138
    ... of the Note Purchase Agreement or the offering, issuance and sale by the Company of the Notes, and no authorization, approval or consent of, and no designation, filing, declaration, registration and/or qualification with, any Governmental Authority is necessary or required in connection with the...

  • Page 139
    ... fact on which such opinion is based, such counsel shall be entitled to rely on appropriate certificates of public officials and officers of the Company. The opinion of Bert M. Gross may be limited to the laws of the United States of America, the Delaware General Corporation Law and the laws of the...

  • Page 140
    ...of general application relating to or affecting the enforcement of the rights of creditors or by equitable principles, regardless of whether enforcement is sought in a proceeding in equity or at law. 4. Based upon the representations set forth in the Agreement, the offering, sale and delivery of the...

  • Page 141
    FINANCIAL REVIEW 18 Selected Financial Data 19 Management's Discussion and Analysis of Financial Condition and Results of Operations 26 Consolidated Balance Sheet 27 Consolidated Statement of Operations 28 Consolidated Statements of Changes in Shareholders' Equity and Comprehensive Income 29 ...

  • Page 142
    ... June 30 2002 2001 2000 Company-owned service revenues(1) ...70.0% 71.2% 71.3% Company-owned product revenues(1) ...30.0 28.8 28.7 Franchise revenues ...5.3 4.3 4.4 Company-owned operations: Profit margins on service(2) ...43.4 43.0 43.3 Profit margins on product(3) ...47.6 47.0 46.1 Direct salon...

  • Page 143
    ... items in prior years) (Dollars in millions) 00 01 02 156 175 $194 Compounded Annual Growth Rate - 11.5% SUMMARY Regis Corporation, based in Minneapolis, Minnesota, is the world's largest owner, operator, franchisor and acquirer of hair and retail product salons. The Regis worldwide operations...

  • Page 144
    ...-store sales increases. Mall and strip center based salon operations in the United States and Canada (domestic salons) accounted for $116.7 million of the increase in total revenues, while franchise revenues increased $21.3 million, primarily due to International operations, and revenue from company...

  • Page 145
    ... profit margin. Additionally, the fiscal 2002 improvement was driven by improved purchasing power, enabling the Company to buy retail product from vendors at lower prices. Direct Salon This expense category includes direct costs associated with salon operations such as salon advertising, insurance...

  • Page 146
    ... Company's salon acquisition activity, as well as increases in corporate depreciation related to self-developed software placed in service between periods. Nonrecurring Items See Note 11 to the Consolidated Financial Statements. Operating Income Operating income in fiscal 2002 increased to a record...

  • Page 147
    ... Financial Statements. LIQUIDITY AND CAPITAL RESOURCES Customers pay for salon services and merchandise in cash at the time of sale, which reduces the Company's working capital requirements. Net cash provided by operating activities in fiscal 2002 rose to a record $152.0 million compared to...

  • Page 148
    ... $109.9 million, which are funded by franchisees. In the event of default by a franchise owner, the Company generally retains the right to acquire the related salon assets net of any outstanding obligations. Management has not experienced and does not expect any material loss to result from these...

  • Page 149
    ... million related to the residual value guarantee of a five-year operating lease agreement for the Company's distribution center and various equipment in Salt Lake City, Utah. Under the agreement, the Company is obligated to pay the deficiency between the residual value guarantee and the fair market...

  • Page 150
    ... year 2002, retail product sales increased 14 percent to $413 million. Through the offering of the largest assortment of professional hair care products in the industry and superior merchandising, the Company is confident that it can continue to successfully grow its retail product business. Today...

  • Page 151
    Regis Corporation Consolidated Balance Sheet June 30 Dollars in thousands, except per share amounts) 2002 2001 ASSETS Current assets: Cash ...$ 87,103 $ 24,658 Receivables, net ...26,901 18,861 Inventories ...120,259 110,247 Deferred income taxes ...9,843 10,087 Other current assets ...12,580 8,...

  • Page 152
    Regis Corporation Consolidated Statement of Operations Years Ended June 30 Dollars and shares in thousands, except per share amounts) 2002 2001 2000 Revenues: Company-owned salons: Service ...$ 963,884 $ 893,472 $ 779,604 Product ...412,728 361,858 313,125 1,376,612 1,255,330 1,092,729 Franchise ...

  • Page 153
    ...160) Changes in fair market value of financial instruments designated as hedges of interest rate exposure, net of taxes and transfers ...(1,460) (1,460) (1,460) Proceeds from exercise of stock options .. 298,362 16 1,971 1,987 Shares issued through franchise stock incentive program ...10,662 149 149...

  • Page 154
    Regis Corporation Consolidated Statement of Cash Flows Years Ended June 30 Dollars in thousands) 2002 2001 2000 Cash flows from operating activities: Net income ...$ 72,054 $ 53,088 $ 49,654 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation ...56,821 49...

  • Page 155
    ...exchange rates from period to period impact the amount of reported income from the Company's international operations. Inventories: Inventories consist principally of hair care products held either for use in salon services or for sale. Inventories are stated at the lower of cost or market with cost...

  • Page 156
    ... franchisees. The Company recognizes revenue from initial franchise fees at the time franchisee salons are opened. Product sales by the Company to franchisees are recorded at the time product is shipped to franchise locations. Franchise expenses included in franchise direct costs in the Consolidated...

  • Page 157
    ... shown below reflect the effect of retroactive application of the nonamortization of goodwill as if the new method of accounting had been in effect in the prior periods. Pro Forma Amounts) 2002 2001 2000 Net income (Dollars in thousands) Reported net income ...$ 72,054 $ 53,088 $ 49,654 Goodwill...

  • Page 158
    Other ...31,628 26,998 61,441 $ 28,969 *Accounts payable and accrued expenses include $11,869 and $5,762 of book overdrafts in fiscal 2002 and 2001, respectively. 32

  • Page 159
    ... number of years that approximate their respective useful lives (ranging from four to 30 years). The straight-line method of amortization allocates the cost of the intangible assets to earnings in proportion to the amount of economic benefits obtained by the Company in that reporting period. Total...

  • Page 160
    33

  • Page 161
    ...: Supercuts (Holdings) Limited Merger: Effective October 31, 1999, the Company consummated a merger with Supercuts UK. Under the terms of the merger agreement, the shareholders of Supercuts UK, a privately held company, received approximately 1.8 million shares of Regis Corporation common stock...

  • Page 162
    Balance at end of year ...$ 252,055 $ 52,474 $ 230,716 $ 5,401 34

  • Page 163
    ... of new salon and acquisition growth as well as to finance the general working capital requirements of the Company. In June 2000, the Company extended the term of a $4.0 million note payment originally due July 1, 2000. The $4.0 million is the final payment due under a $10.0 million senior term...

  • Page 164
    ...For certain leases, the Company is required to pay additional rent based on a percent of sales and, in most cases, real estate taxes and other expenses. Rent expense for the Company's international department store salons is based primarily on a percent of sales. The Company also leases the premises...

  • Page 165
    ...Lake City, Utah. The future minimum lease payments, which are included in the table above, are estimated to be $1.8 million based on the cost of the distribution center and the related equipment. Under the agreement, the Company is obligated to pay the deficiency between the residual value guarantee...

  • Page 166
    ... and, accordingly, the Company has not provided U.S. income taxes on such earnings. 8. BENEFIT PLANS: Employee Stock Ownership Plan: The Company has a qualified employee stock ownership plan (ESOP) covering substantially all field supervisors, warehouse and corporate office employees. The ESOP is...

  • Page 167
    ...terms of the plan, eligible employees may purchase the Company's common stock through payroll deductions. The Company contributes an amount equal to 15 percent of the purchase price of the stock to be purchased on the open market and pays all expenses of the SPP and its administration, not to exceed...

  • Page 168
    ... terms of the plan, eligible franchisees and their employees may purchase the Company's common stock. The Company contributes an amount equal to five percent of the purchase price of the stock to be purchased on the open market and pays all expenses of the plan and its administration, not to exceed...

  • Page 169
    ...Executive Officer an amount equal to 60 percent of his salary, adjusted for inflation, for the remainder of his life. Compensation associated with these agreements is charged to expense as services are provided. The Company has a survivor benefit plan for the Chairman of the Board of Directors' (the...

  • Page 170
    ... primarily in Europe, are located in salons operating in malls, leading department stores, mass merchants and high-street locations. Based on the way in which the Company manages its business, it has presented its domestic and international operations as two reportable operating segments, domestic...

  • Page 171
    ... items recorded by the Company: Dollars in thousands) 2002 2001 2000 Merger transaction costs (Note 2) ...$3,145 Change in estimate, merger costs ...(548) Severance ...343 Nonrecurring federal income tax benefit ...$(1,750) $0 1,750) $0 $2,940 In fiscal 2002, the Company implemented...

  • Page 172
    42

  • Page 173
    ... nonrecurring income tax benefit (Note 11) increased reported net income per diluted share by $.04. Regis Corporation Stock Data June 30, 2002 Regis common stock is listed and traded on the Nasdaq National Market under the symbol "RGIS." The accompanying table sets forth the high and low closing bid...

  • Page 174
    ...and comprehensive income and of cash flows present fairly, in all material respects, the consolidated financial position of Regis Corporation at June 30, 2002 and 2001, and the consolidated results of its operations and its cash flows for each of the three years in the period ended June 30, 2002, in...

  • Page 175
    ... (Nos. 33-44867 and 33-89882) of Regis Corporation of our report dated August 27, 2002, relating to the consolidated financial statements, which appears in the Annual Report to Shareholders, which is incorporated in this Annual Report on Form 10-K. We also consent to the incorporation by reference...

  • Page 176
    ...-OXLEY ACT OF 2002 In connection with the Annual Report of Regis Corporation (the Registrant) on Form 10-K for the fiscal year ending June 30, 2002 as filed with the Securities and Exchange Commission on the date hereof, I, Paul D. Finkelstein, President and Chief Executive Officer of the Registrant...

  • Page 177
    ... with the Annual Report of Regis Corporation (the Registrant) on Form 10-K for the fiscal year ending June 30, 2002 as filed with the Securities and Exchange Commission on the date hereof, I, Randy L. Pearce, Executive Vice President, Chief Financial and Administrative Officer of the Registrant...