Supercuts 2005 Annual Report Download - page 20

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The Company’s long-
term outlook for organic expansion remains strong. Given the recent trends in the domestic unemployment rate,
the Company believes that the post-secondary education market will remain attractive for the foreseeable future. Additionally, the
Company believes students will be attracted to its schools for reasons unique to Regis Corporation. Given its long history of educating
stylists, the Company seeks to improve curriculum and training techniques in its schools. Also, as the largest employer in the beauty
industry, the Company believes these schools may provide a continuous pipeline of strong job applicants upon graduation.
Beauty School Acquisition Growth. To date, the Company has acquired all 24 beauty schools that it currently operates. The
Company’s first beauty school acquisition came as part of the fiscal year 2003 acquisition of Vidal Sassoon which included five beauty
schools. In June 2004, the Company acquired six Blaine Beauty Career Schools operating in the Massachusetts market. During fiscal year
2005, the Company acquired 13 schools in four transactions; these included, five Pierre’s School of Cosmetology in Maine, four Natural
Motion Member Schools in New Jersey, three Scot Lewis schools in Minnesota and one Arthur Angelo School in Rhode Island.
The beauty school industry is highly-fragmented and dominated by small, independent operators. For this reason, the Company
believes there remain numerous acquisition candidates.
Title IV Eligible Beauty Schools
During fiscal year 2004, the Company purchased its first Title IV eligible beauty schools and, as indicated above, purchased additional
schools in fiscal year 2005. The Company owns and operates these beauty schools under the names Blaine the Beauty Career Schools, Natural
Motion Member Schools, Scot Lewis Schools, Arthur Angelo and Pierre’s School of Cosmetology. Vidal Sassoon Academies are not Title IV
eligible and therefore the discussions of accreditation and licensing, financing student education and regulation below do not apply to Vidal
Sassoon Academies.
Accreditation and Licensing
The Company’s beauty schools are subject to numerous regulations including oversight, approvals and licensing by ED, accrediting
agencies, state education bodies and program specific agencies. ED authorizes legislation regarding student loans, grants and other funding. In
addition, ED approves accrediting agencies and conducts periodic compliance reviews of institutions. Accrediting agencies verify that
institutions meet specific standards established by the respective agency including completion and placement rates. State education bodies
approve institutions eligibility to operate in their state, process student complaints and provide oversight concerning state education regulations.
The beauty schools are accredited through accreditation associations recognized by ED. Accreditation by an accrediting body recognized
by ED is necessary for a school to be eligible to participate in federally sponsored financial aid programs. See “Financing Student Education”
below.
Financing Student Education
Most students attending the beauty schools utilize federal government grants and / or the Federal Family Education Loan programs
available under the Higher Education Act of 1965 (“HEA”), and various programs administered thereunder to finance their tuition. Currently,
each beauty school is an eligible institution for some or all of the following federally funded programs: Federal Pell Grant (Pell), Federal
Supplemental Education Opportunity Grant (SEOG), Federal Perkins Loan, Federal Parent Loan for Undergraduate Students (PLUS), Federal
Subsidized Stafford Loan, Federal Unsubsidized Stafford Loan, and Veterans benefits. Also, some students are eligible for assistance under the
Department of Labor’s Workforce Investment Act. State grants are sometimes offered to students enrolled in educational programs of the type
offered by the Company’s schools. However, many restrictions typically apply in qualifying and maintaining eligibility for participation in
these state programs.
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