Supercuts 2010 Annual Report Download

Download and view the complete annual report

Please find the complete 2010 Supercuts annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 221

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144
  • 145
  • 146
  • 147
  • 148
  • 149
  • 150
  • 151
  • 152
  • 153
  • 154
  • 155
  • 156
  • 157
  • 158
  • 159
  • 160
  • 161
  • 162
  • 163
  • 164
  • 165
  • 166
  • 167
  • 168
  • 169
  • 170
  • 171
  • 172
  • 173
  • 174
  • 175
  • 176
  • 177
  • 178
  • 179
  • 180
  • 181
  • 182
  • 183
  • 184
  • 185
  • 186
  • 187
  • 188
  • 189
  • 190
  • 191
  • 192
  • 193
  • 194
  • 195
  • 196
  • 197
  • 198
  • 199
  • 200
  • 201
  • 202
  • 203
  • 204
  • 205
  • 206
  • 207
  • 208
  • 209
  • 210
  • 211
  • 212
  • 213
  • 214
  • 215
  • 216
  • 217
  • 218
  • 219
  • 220
  • 221

REGIS CORP
FORM 10-K
(Annual Report)
Filed 08/27/10 for the Period Ending 06/30/10
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 08/27/10 for the Period Ending 06/30/10 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
    ... One) 1 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended June 30, 2010 OR 3 TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 1-12725 Regis...

  • Page 3
    ... the registrant is a shell company (as defined by Rule 12b-2 of the Act). Yes 3 No 1 The aggregate market value of the voting common equity held by non-affiliates computed by reference to the price at which common equity was last sold as of the last business day of the registrant's most recently...

  • Page 4
    ... Information Directors, Executive Officers and Corporate Governance Executive Compensation Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Certain Relationships and Related Transactions, and Director Independence Principal Accounting Fees and Services...

  • Page 5
    ... Franchising Program Salon Markets and Marketing Salon Education and Training Programs Salon Staff Recruiting and Retention Salon Design Salon Management Information Systems Salon Competition Hair Restoration Business Strategy Affiliated Ownership Interest Corporate Trademarks Corporate Employees...

  • Page 6
    ...hair therapy, which are targeted at the mass market consumer. The Company is organized to manage its operations based on significant lines of business-salons and hair restoration centers. Salon operations are managed based on geographical location-North America and international. The Company's North...

  • Page 7
    ... are located in high-traffic locations such as regional shopping malls, strip centers, lifestyle centers, Wal-Mart Supercenters, high-street locations and department stores. The Company is an attractive tenant to landlords due to its financial strength, successful salon operations and international...

  • Page 8
    ... to positive 2.0 percent. Pricing is a factor in same-store sales growth. The Company actively monitors the prices charged by its competitors in each market and makes every effort to maintain prices which remain competitive with prices of other salons offering similar services. Price increases are...

  • Page 9
    ...salons' point of sale system. This information is used to reconcile cash on a daily basis. Consistent, Quality Service. The Company is committed to meeting its customers' hair care needs by providing competitively priced services and products with professional and knowledgeable stylists. The Company...

  • Page 10
    ... affordable hair care products and services in the United States, Canada and Puerto Rico. The Company's international salon operations consist of 404 hair care salons located in Europe, primarily in the United Kingdom. The number of new salons expected to be opened within the upcoming fiscal year is...

  • Page 11
    ... last five years, as well as the number of salons opened, closed, relocated, converted and acquired during each of these periods. COMPANY-OWNED AND FRANCHISE LOCATION SUMMARY NORTH AMERICAN SALONS: 2010 2009 2008 2007 2006 REGIS SALONS Open at beginning of period Salons constructed Acquired Less...

  • Page 12
    ...closed Total company-owned salons Franchise salons: Open at beginning of period Salons constructed Salon openings Franchise buybacks Salons closed Total franchise salons Total, SmartStyle/Cost Cutters in Wal-Mart SUPERCUTS Company-owned salons: Open at beginning of period Salons constructed Acquired...

  • Page 13
    Table of Contents NORTH AMERICAN SALONS: 2010 2009 2008 2007 2006 Franchise salons: Open at beginning of period Salons constructed Acquired(2) Less relocations Salon openings Conversions Franchise buybacks Salons closed Total franchise salons Total, Supercuts PROMENADE Company-owned salons: Open at...

  • Page 14
    ... Salons closed Total company-owned salons Franchise salons: Open at beginning of period Salons constructed Acquired(2) Less relocations Salon openings Conversions Franchise buybacks Affiliated joint ventures(3) Salons closed Total franchise salons Total, International Salons TOTAL SYSTEM WIDE SALONS...

  • Page 15
    ... offer a full range of custom styling, cutting, hair coloring and waving services, as well as, professional hair care products. Service revenues represent approximately 84 percent of the concept's total revenues. The average ticket is approximately $41. Regis Salons compete in their existing markets...

  • Page 16
    ... $8,100. Average annual salon revenues in a company-owned Supercuts salon which has been open five years or more are approximately $269,000. The Supercuts franchise salons provide consistent, high quality hair care services and professional products to customers at convenient times and locations and...

  • Page 17
    ... on prominent high-street locations and offer a full range of custom hairstyling, cutting, coloring and waving, as well as professional hair care products. The initial capital investment required is approximately £450,000. Average annual salon revenues for a salon which has been open five years or...

  • Page 18
    ..., inventory, payroll costs and certain other items, including initial working capital. Additional information regarding each of the major franchisee brands is listed below: Supercuts (North America) The majority of existing Supercuts franchise agreements have a perpetual term, subject to termination...

  • Page 19
    ... and stylists. The Company believes that its compensation structure for salon managers and stylists is competitive within the industry. Stylists benefit from the Company's high-traffic locations and receive a steady source of new business from walk-in customers. In addition, the Company offers...

  • Page 20
    ... hair care industry is highly fragmented and competitive. In every area in which the Company has a salon, there are competitors offering similar hair care services and products at similar prices. The Company faces competition within malls from companies which operate salons within department stores...

  • Page 21
    ...these areas and to create additional points of differentiation versus the competition. In order to obtain locations in shopping malls, the Company must be competitive as to rentals and other customary tenant obligations. Hair Restoration Business Strategy: In December 2004, the Company acquired Hair...

  • Page 22
    ... to add a limited number of new centers in under penetrated markets. Hair Restoration Acquisition Growth. The Company plans to supplement organic growth with opportunistic acquisition activity. The hair restoration industry is comprised of a highly-fragmented group of 4,000 locations. This landscape...

  • Page 23
    ... the result of the quality of its salon location selections and real estate strategies. Corporate Employees: During fiscal year 2010, the Company had approximately 56,000 full- and part-time employees worldwide, of which approximately 49,000 employees were located in the United States. None of the...

  • Page 24
    ... without payment of reasonable compensation. The Company believes that the current trend is for government regulation of franchising to increase over time. However, such laws have not had, and the Company does not expect such laws to have, a significant effect on the Company's operations. In Canada...

  • Page 25
    ... with applicable laws and regulations governing all of its operations. The Company maintains an ownership interest in EEG. Beauty schools derive a significant portion of their revenue from student financial assistance originating from the U.S Department of Education's Title IV Higher Education Act...

  • Page 26
    ... patterns to our salons and hair restoration centers can be adversely impacted by increases in unemployment rates and decreases in discretionary income levels. If we continue to have negative same-store sales our business and results of operations may be affected. Our success depends, in part...

  • Page 27
    ... in laws. Due to the number of people we employ, laws that increase minimum wage rates or increase costs to provide employee benefits may result in additional costs to our company. Compliance with new, complex and changing laws may cause our expenses to increase. In addition, any non-compliance...

  • Page 28
    ... senior notes due 2014 in a public offering. Certain terms of the notes we issued may adversely affect our financial condition and operating results or impose other risks, such as the following Holders of notes may convert their notes into shares of our common stock, which may dilute the ownership...

  • Page 29
    ...,000 square feet to accommodate future growth. The Company operates all of its salon locations and hair replacement centers under leases or license agreements. Substantially all of its North American locations in regional malls are operating under leases with an original term of at least ten years...

  • Page 30
    ... Corp., Service Corporation International, and Starbucks Corp. The Peer Group is a self-constructed peer group of companies with comparable annual revenues, the customer service element is a critical component to the business and targets moderate customers in terms of income and style, excluding...

  • Page 31
    Table of Contents Comparison of 5 Year Cumulative Total Return Assumes Initial Investment of $100 June 2010 2005 2006 2007 2008 2009 2010 Regis S & P 500 S & P 400 Midcap Dow Jones Consumer Service Index Peer Group (b) Share Repurchase Program 100.00 100.00 100.00 100.00 100.00 91.51 108....

  • Page 32
    ...Revenues from the deconsolidated European franchise salon operations were $36.2, $57.0, and $52.7 million in fiscal years 2008, 2007, and 2006, respectively. The following significant items affected operating income: • An impairment charge of $35.3 million associated with the Company's Regis salon...

  • Page 33
    ... Overview Critical Accounting Policies Overview of Fiscal Year 2010 Results Results of Operations Liquidity and Capital Resources MANAGEMENT'S OVERVIEW Regis Corporation (RGS) owns or franchises beauty salons and hair restoration centers. As of June 30, 2010, we owned, franchised or held ownership...

  • Page 34
    ... Our salon real estate strategy is to add new units in convenient locations with good visibility and customer traffic, as well as appropriate trade demographics. Our various salon and product concepts operate in a wide range of retailing environments, including regional shopping malls, strip centers...

  • Page 35
    ... number of new locations in untapped markets domestically and internationally. However, the success of our hair restoration business is not dependent on the same real estate criteria used for salon expansion. In an effort to provide confidentiality for our customers, hair restoration centers operate...

  • Page 36
    ...Corporate overhead incurred by the home office based on the number of Regis company-owned salons as a percent of total company-owned salons. Long-term growth. conditions. A long-term growth rate of 2.5 percent was applied to terminal cash flow based on anticipated economic Discount rate. A discount...

  • Page 37
    .... Corporate overhead incurred by the home office based on the number of Promenade companyowned salons as a percent of total company-owned salons. Long-term growth. conditions. A long-term growth rate of 2.5 percent was applied to terminal cash flow based on anticipated economic Discount rate...

  • Page 38
    ...annual impairment testing and June 30, 2010. A summary of the Company's goodwill balance as of June 30, 2010 by reporting unit is as follows: Reporting Unit As of June 30, 2010 (Dollars in thousands) Regis MasterCuts SmartStyle Supercuts Promenade Total North America Salons Hair Restoration Centers...

  • Page 39
    ... the acquired hair salon brand. Residual goodwill further represents our opportunity to strategically combine the acquired business with our existing structure to serve a greater number of customers through our expansion strategies. Identifiable intangible assets purchased in fiscal year 2010, 2009...

  • Page 40
    ... consider new claims and developments associated with existing claims for each open policy period. As certain claims can take years to settle, the Company has multiple policy periods open at any point in time. Income Taxes In determining income for financial statement purposes, management must...

  • Page 41
    ...of product sold to the purchaser of Trade Secret. The Company expects fiscal year 2011 same-store sales to be in the range of negative 1.0 percent to positive 2.0 percent. Goodwill impairment charges of $35.3 million associated with our Regis salon concept were recorded during fiscal year 2010. Long...

  • Page 42
    ... the Years Ended June 30, 2010 2009 2008 Service revenues Product revenues Royalties and fees Operating expenses: Cost of service(1) Cost of product(2) Site operating expenses General and administrative Rent Depreciation and amortization Goodwill impairment Lease termination costs Operating income...

  • Page 43
    ... North American and international salon segments. Same-store sales increases or decreases are calculated on a daily basis as the total change in sales for company-owned locations which were open on a specific day of the week during the current period and the corresponding prior period. Annual...

  • Page 44
    ... by Regis Corporation on February 16, 2009. The agreement included a provision that the Company would supply product to the buyer of Trade Secret and provide certain administrative services for a transition period. For the fiscal year ended June 30, 2010, and 2009, the Company generated revenue of...

  • Page 45
    .... Service revenues include revenues generated from company-owned salons and service revenues generated by hair restoration centers. Consolidated service revenues were as follows: (Decrease) Increase Over Prior Fiscal Year Revenues Dollar Percentage (Dollars in thousands) Years Ended June 30, 2010...

  • Page 46
    ... economic condition and the continued trend of product diversion and increased appeal of mass hair care lines by the consumer. Royalties and Fees. Consolidated franchise revenues, which include royalties and franchise fees, were as follows: Increase (Decrease) Over Prior Fiscal Year Revenues Dollar...

  • Page 47
    ...corresponding period of the prior fiscal year. The basis point improvement in service margins as a percent of service revenues during fiscal year 2010 was primarily due to the benefit of the new leveraged salon pay plans implemented in the 2009 calendar year. Increases in salon health insurance and...

  • Page 48
    ... fiscal year 2010 was due to a planned reduction in retail commissions paid to new employees on retail product sales. The basis point improvement in product margin other than sold to purchaser of Trade Secret as a percentage of product revenues during fiscal year 2009 was due to selling higher cost...

  • Page 49
    ... reduction in fiscal year 2009. In addition the Company settled two legal claims related to customer and employee matters resulting in a $5.2 million charge during fiscal year 2010. The basis point increase in site operating expenses as a percent of consolidated revenues during fiscal year 2009 was...

  • Page 50
    ... fees), including costs incurred to support franchise and hair restoration center operations. G&A expenses were as follows: Increase (Decrease) Over Prior Fiscal Year Expense as % of Consolidated Revenues Dollar Percentage (Dollars in thousands) Years Ended June 30, G&A Basis Point(1) 2010...

  • Page 51
    ... locations, including those salons under the Company approved plan to close up to 80 underperforming United Kingdom company-owned salons. The basis point improvement in D&A as a percent of consolidated revenues during fiscal year 2008 was primarily due to same-store sales increasing at a faster rate...

  • Page 52
    ... revenues as compared to the corresponding period of the prior fiscal year. The Company recorded a $35.3 million goodwill impairment charge related to the Regis salon concept during fiscal year 2010. Due to the current economic conditions, the estimated fair value of the Regis salon operations...

  • Page 53
    ...months ended June 30, 2007. Interest Income and Other, net Interest income and other, net was as follows: Increase Over Prior Fiscal Year Income as % of Consolidated Revenues Dollar Percentage Basis Point(1) (Dollars in thousands) Years Ended June 30, Interest 2010 2009 2008 $ 10,410 9,461 8,173...

  • Page 54
    ... Companies, Net of Income Taxes Equity in income (loss) of affiliates, represents the income or loss generated by our equity investment in Empire Education Group, Inc., Provalliance, and other equity method investments was as follows: Increase (Decrease) Over Prior Fiscal Year Dollar Percentage...

  • Page 55
    ... conditions. The Company calculated the estimated fair value of Provalliance based on discounted future cash flows that utilize estimates in annual revenue growth, gross margins, capital expenditures, income taxes and long-term growth for determining terminal value. The discounted cash flow model...

  • Page 56
    ... of company-owned salon revenues to remain relatively constant. Accordingly, this provides us certain protection against inflationary increases, as payroll expense and related benefits (our major expense components) are variable costs of sales. In addition, we may increase pricing in our salons to...

  • Page 57
    ... in same-store customer visits, partially offset by an increase in average ticket. Contributing to the organic sales decline during the twelve months ended June 30, 2010 was the completion of an agreement to supply the purchaser of Trade Secret product at cost. The Company generated revenues of $20...

  • Page 58
    ... Company's plan to close underperforming company-owned salons. In addition, the basis point decrease was due to an increase in North American revenues of $32.2 million related to product sales to the purchaser of Trade Secret at cost. The basis point increase in North American salon operating income...

  • Page 59
    ... dollar against the British Pound and Euro as compared to the exchange rates for fiscal year 2008. Franchise revenues decreased primarily due to the merger of our continental Europe franchise salon operations with Franck Provost Salon Group on January 31, 2008. We acquired 25 international salons...

  • Page 60
    ... salon operating income as a percent of international salon revenues during fiscal year 2008 was primarily due to the deconsolidation of our European franchise salon operations, negative same-store sales, and higher impairment charges of $1.1 million related to the Company approved plan to close...

  • Page 61
    ... leverage in fixed cost categories due to negative same-store sales. The basis point decrease in hair restoration operating income as a percent of hair restoration revenues during fiscal year 2008 was primarily due to lower operating margins at the six acquired franchise centers during the twelve...

  • Page 62
    ... fiscal year 2010. Our principal on-going cash requirements are to finance construction of new stores, remodel certain existing stores, acquire salons and purchase inventory. Customers pay for salon services and merchandise in cash at the time of sale, which reduces our working capital requirements...

  • Page 63
    ... Fiscal Year Dollar Percentage (Dollars in thousands) As of June 30, Total Assets 2010 2009 2008 $ 1,919,572 $ 27,086 1,892,486 (343,385) 2,235,871 103,757 1.4% (15.4) 4.9 Cash flows from operations, partially offset by the $35.3 million goodwill impairment charge related to the Regis salon...

  • Page 64
    ... of Contents Cash Flows Operating Activities Net cash provided by operating activities during the twelve months ended June 30, 2010, 2009 and 2008 were a result of the following: Operating Cash Flows For the Years Ended June 30, 2010 2009 2008 (Dollars in thousands) Net income (loss) Depreciation...

  • Page 65
    ...: Investing Cash Flows For the Years Ended June 30, 2010 2009 2008 (Dollars in thousands) Business and salon acquisitions Capital expenditures for remodels or other additions Capital expenditures for the corporate office (including all technology-related expenditures) Capital expenditures for new...

  • Page 66
    ... the Years Ended June 30, 2010 2009 2008 (Dollars in thousands) Net repayments on revolving credit facilities Net (repayments) borrowings of long-term debt Proceeds from the issuance of common stock Repurchase of common stock Excess tax benefit from stock-based compensation plans Dividend payments...

  • Page 67
    ... Fiscal Year 2010 On July 8, 2009, the Company entered into an agreement to sell to underwriters $150 million aggregate principal amount of 5.0 percent convertible senior notes due 2014, and 11,500,000 shares of its common stock at $12.37 per share, which was the closing price per share on...

  • Page 68
    ... of a risk based capital fee calculated on the daily average outstanding principal amount equal to an annual rate of 1.0 percent that commences one year after the amendment date. During fiscal year 2010, the net proceeds from the convertible senior notes and common stock issuances in July 2009...

  • Page 69
    ... operating cash flow, debt and the issuance of common stock. Contractual Obligations and Commercial Commitments The following table reflects a summary of obligations and commitments outstanding by payment date as of June 30, 2010: Payments due by period 1-3 3-5 More than 5 years years years (Dollars...

  • Page 70
    ... of business. These contracts primarily relate to our commercial contracts, operating leases and other real estate contracts, financial agreements, credit facility of EEG, agreements to provide services, and agreements to indemnify officers, directors and employees in the performance of their work...

  • Page 71
    ... requirements of our credit agreements and senior notes during fiscal year 2010 and are currently in fiscal 2011. Additionally, the credit agreements do not include rating triggers or subjective clauses that would accelerate maturity dates. As a part of our salon development program, we continue to...

  • Page 72
    ... and the related realization of the anticipated costs, benefits and time frame; or other factors not listed above. The ability of the Company to meet its expected revenue growth is dependent on salon acquisitions, new salon construction and same-store sales increases, all of which are affected by...

  • Page 73
    ... outstanding and corresponding interest rate as of June 30, 2010. The downgrade has no impact on the Company's current revolving credit facility or its ability to secure future bank borrowings. Considering the effect of interest rate swaps and including no increases to long-term debt related to fair...

  • Page 74
    ...These swaps were designated as hedges of a portion of the Company's senior term notes and were being accounted for as fair value hedges. During fiscal year 2003, the Company terminated a portion of a $40.0 million interest rate swap contract. The remainder of this swap contract was terminated during...

  • Page 75
    ...relative to the U.S. dollar. The exposure to Canadian dollar exchange rates on the Company's fiscal year 2010 cash flows primarily includes payments in Canadian dollars from the Company's operations for retail inventory exported from the United States. The Company seeks to manage exposure to changes...

  • Page 76
    ... 14, 2010, the Company entered into a freestanding derivative forward contract to sell Canadian dollars and buy an aggregate $14.0 million U.S. dollars, with a maturation date in July 2010. The table below provides information about the Company's forecasted transactions in U.S. dollar equivalents...

  • Page 77
    ...: Management's Statement of Responsibility for Financial Statements and Report on Internal Control over Financial Reporting Report of Independent Registered Public Accounting Firm Consolidated Balance Sheet as of June 30, 2010 and 2009 Consolidated Statement of Operations for each of the three years...

  • Page 78
    ...to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Management has assessed the Company's internal control over financial reporting as of June 30, 2010, based...

  • Page 79
    ... and comprehensive income and of cash flows present fairly, in all material respects, the financial position of Regis Corporation and its subsidiaries at June 30, 2010 and June 30, 2009, and the results of their operations and their cash flows for each of the three years in the period ended June...

  • Page 80
    ... of Contents REGIS CORPORATION CONSOLIDATED BALANCE SHEET (Dollars in thousands, except per share data) June 30, 2010 2009 ASSETS Current assets: Cash and cash equivalents Receivables, net Inventories Deferred income taxes Income tax receivable Other current assets Total current assets Property...

  • Page 81
    ... of Contents REGIS CORPORATION CONSOLIDATED STATEMENT OF OPERATIONS (In thousands, except per share data) Years Ended June 30, 2009 2010 2008 Revenues: Service Product Royalties and fees Operating expenses: Cost of service Cost of product Site operating expenses General and administrative Rent...

  • Page 82

  • Page 83
    ... currency translation adjustments Changes in fair market value of financial instruments designated as cash flow hedges, net of taxes Stock repurchase plan Proceeds from exercise of stock options Stock-based compensation Shares issued through franchise stock incentive program Adoption of FIN No.48...

  • Page 84
    ... in fair market value of financial instruments designated as cash flow hedges, net of taxes Issuance of common stock Equity component of convertible debt, net of taxes Proceeds from exercise of stock options Stock-based compensation Shares issued through franchise stock incentive program Recognition...

  • Page 85
    ... Income tax receivable Other current assets Other assets Accounts payable Accrued expenses Other noncurrent liabilities Net cash provided by operating activities Cash flows from investing activities: Capital expenditures Proceeds from sale of assets Asset acquisitions, net of cash acquired...

  • Page 86
    ... POLICIES Business Description: Regis Corporation (the Company) owns, operates and franchises hairstyling and hair care salons throughout the United States, the United Kingdom (U.K.), Canada, Puerto Rico and several other countries. In addition, the Company owns and operates hair restoration centers...

  • Page 87
    ... counts, cost of retail product sold to salon customers is determined based on the weighted average cost of product sold, adjusted for an estimated shrinkage factor, and the cost of product used in salon services is determined by applying estimated gross profit margins to service revenues. The...

  • Page 88
    ...ACCOUNTING POLICIES (Continued) $108.7 million in fiscal years 2010, 2009, and 2008, respectively. Leasehold improvements are amortized over the shorter of their estimated useful lives or the related lease term, generally 10 years. For leases with renewal periods at the Company's option, management...

  • Page 89
    ... years 2010, 2009, and 2008, the Company recorded decreases in expense from changes in estimates related to prior year open policy periods related to continuing operations of $1.7, $9.9, and $6.9 million, respectively. A 10.0 percent change in the self-insurance reserve would affect income from...

  • Page 90
    ... number of salons in each reporting unit as a percent of total company-owned salons. The Company calculates the estimated fair value of the reporting units based on discounted future cash flows that utilize estimates in annual revenue, gross margins, fixed expense rates, allocated corporate overhead...

  • Page 91
    ...annual impairment testing and June 30, 2010. A summary of the Company's goodwill balance as of June 30, 2010 by reporting unit is as follows: Reporting Unit As of June 30, 2010 (Dollars in thousands) Regis MasterCuts SmartStyle Supercuts Promenade Total North America Salons Hair Restoration Centers...

  • Page 92
    ... levels during the fiscal year is probable. Revenue Recognition and Deferred Revenue: Company-owned salon revenues and related cost of sales are recognized at the time of sale, as this is when the services have been provided or, in the case of product revenues, delivery has occurred, and the salon...

  • Page 93
    ...) 1. BUSINESS DESCRIPTION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Company-owned hair restoration center revenues stem primarily from servicing hair systems and surgical procedures, as well as through product and hair system sales. The Company records deferred revenue for contracts...

  • Page 94
    ... Company has various franchising programs supporting its franchise salon concepts consisting of Supercuts, Cost Cutters, First Choice Haircutters, Magicuts, Pro Cuts , Beauty Supply Outlet and Hair Club. Most of the concepts maintain advertising funds that provide comprehensive advertising and sales...

  • Page 95
    ... DESCRIPTION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Sales Taxes: Sales taxes are recorded on a net basis (rather than as both revenue and an expense) within the Company's Consolidated Statement of Operations. Income Taxes: Deferred income tax assets and liabilities are recognized...

  • Page 96
    ... purposes. The Company currently has or had interest rate swaps designated as both cash flow and fair value hedges, treasury locks designated as cash flow hedges, a hedge of its net investment in its European operations and forward foreign currency contracts designated as cash flow hedges of...

  • Page 97
    ... intrinsic value method of accounting. Total compensation cost for stock-based payment arrangements totaled $9.3, $7.5, and $6.8 million for the fiscal years ended June 30, 2010, 2009 and 2008, respectively. Guidance adopted by the Company for share-based payments requires that the cash retained as...

  • Page 98
    ... basis for interim and annual reporting periods ending after September 15, 2009. The adoption of the Codification changed the Company's references to GAAP accounting standards, but did not impact the Company's financial position, results of operations and cash flows. Fair Value Measurements...

  • Page 99
    ...1, 2009, for equity method investment accounting considerations did not have a material effect on the Company's financial position, results of operations and cash flows. Accounting Standards Recently Issued But Not Yet Adopted by the Company: Multiple-Deliverable Revenue Arrangements In October 2009...

  • Page 100
    ... a transition period. Under this agreement, the Company recognized $20.0 and $32.2 million of product revenues on the supply of product sold to the purchaser of Trade Secret and $1.9 and $2.9 million of other income related to the administrative services during the years ended June 30, 2010 and 2009...

  • Page 101
    ... are summarized below: For the Years Ended June 30, 2010 2009 2008 (Dollars in thousands) Revenues Income (loss) from discontinued operations, before income taxes Income tax benefit on discontinued operations Income (loss) from discontinued operations, net of income taxes $ - $ 163,436 $ 257,474...

  • Page 102
    ...-method investments Noncurrent loans to affiliates Other assets: Notes receivable Other noncurrent assets Accrued expenses: Payroll and payroll related costs Insurance Deferred revenues Taxes payable Other Other noncurrent liabilities: Deferred income taxes Deferred rent Deferred benefits Insurance...

  • Page 103
    ...-line basis over the number of years that approximate their expected period of benefit (ranging from one to 40 years). The cost of intangible assets is amortized to earnings in proportion to the amount of economic benefits obtained by the Company in that reporting period. The weighted average...

  • Page 104
    ... 2009 2008 (Dollars in thousands) Cash paid during the year for: Interest Income taxes, net of refunds $ 53,547 $ 40,992 $ 46,547 17,058 21,878 49,148 Significant non-cash investing and financing activities include the following: In fiscal years 2010, 2009, and 2008, the Company financed capital...

  • Page 105
    ... of the acquisitions made during fiscal years 2010, 2009, and 2008 and the allocation of the purchase prices were as follows: 2010 2009 2008 (Dollars in thousands) Components of aggregate purchase prices: Cash Note receivable applied to purchase price Common stock Liabilities assumed or payable...

  • Page 106
    ... further represents the Company's opportunity to strategically combine the acquired business with the Company's existing structure to serve a greater number of customers through its expansion strategies. In the acquisitions of international salons and hair restoration centers, the residual goodwill...

  • Page 107
    ... the Company's recorded goodwill for the years ended June 30, 2010 and 2009 is as follows: Salons Hair Restoration North America International Centers (Dollars in thousands) Consolidated Gross goodwill at June 30, 2008 Accumulated impairment losses Net goodwill at June 30, 2008 Goodwill acquired...

  • Page 108
    ... 30, 2010 and 2009: Empire Education Group, Inc. Intelligent Nutrients, LLC MY Style (Dollars in thousands) Hair Club for Men, Ltd. Provalliance Total Balance at June 30, 2008 Loans to affiliates Payment of loans by affiliates Equity in income (loss) of affiliated companies, net of income taxes...

  • Page 109
    ... Owned Owned 2010 2009 2010 2009 (Dollars in thousands) Summarized Balance Sheet Information: Current assets Noncurrent assets Current liabilities Noncurrent liabilities Summarized Statement of Operations Information: Gross revenue Gross profit Operating income Net income Investment in Provalliance...

  • Page 110
    ... the Franck Provost Group. The Company has accounted for its interest in Provalliance as an equity method investment. During fiscal years 2010 and 2009, the Company recorded $4.1 and $2.0 million, respectively, of equity in income related to its investment in Provalliance. Due to increased debt and...

  • Page 111
    ... a proxy to vote such number of the Company's shares such that the other shareholder would have voting control of 51.0 percent of the common stock of EEG. The Company accounts for EEG as an equity investment under the voting interest model. During fiscal years ended June 30, 2010 and 2009, the...

  • Page 112
    ... acquisition of Hair Club in fiscal year 2005. The Company accounts for its investment in Hair Club for Men, Ltd. under the equity method of accounting. Hair Club for Men, Ltd. operates Hair Club centers in Illinois and Wisconsin. During fiscal year 2010 the Company recorded income of $0.9 million...

  • Page 113
    ... principally from or corroborated by other observable market data. Level 3 -Unobservable inputs that cannot be corroborated by observable market data and reflect the use of significant management judgment. These values are generally determined using pricing models for which the assumptions utilize...

  • Page 114
    ... the valuation techniques the Company used to determine their fair values. Fair Value Measurements Using Inputs Considered as Level 1 Level 2 Level 3 (Dollars in thousands) Fair Value at June 30, 2010 ASSETS Non-current assets Derivative instruments Preferred shares LIABILITIES Current liabilities...

  • Page 115
    ... Equity Put Preferred Shares Option Total (Dollars in thousands) Balance at July 1, 2009 Total realized and unrealized gains (losses): Additions to Level 3 Included in other comprehensive income Included in equity in income of affiliated companies Balance at June 30, 2010 $ - $ 3,362 140 - 3,502...

  • Page 116
    ... determined based on internal valuation models, which utilize quoted market prices and interest rates for the same or similar instruments. Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis We measure certain assets, including the Company's equity method investments, at fair value...

  • Page 117
    ... rate, senior term notes outstanding under a Private Shelf Agreement, of which $40.5 and $40.5 million were classified as part of the current portion of the Company's long-term debt at June 30, 2010 and 2009, respectively. The notes require quarterly payments, and final maturity dates range from...

  • Page 118
    ... of a risk based capital fee calculated on the daily average outstanding principal amount equal to an annual rate of 1.0 percent that commences one year after the amendment date. During fiscal year 2010, the net proceeds from the convertible senior notes and common stock issuances in July 2009...

  • Page 119
    ..., 2010 (Dollars in thousands) Interest cost related to contractual interest coupon-5.0% Interest cost related to amortization of the discount Total interest cost $ 8,266 3,956 12,222 $ In connection with the convertible senior note offering, the Company issued 13,225,000 shares of common stock...

  • Page 120
    ...effects on financial position, financial performance and cash flows. The Company's primary market risk exposures in the normal course of business are changes in interest rates and foreign currency exchange rates. The Company has established policies and procedures that govern the management of these...

  • Page 121
    ...a net basis. The Company assesses the effectiveness of its hedges on a quarterly basis using the critical terms method in accordance with guidance for accounting for derivative instruments and hedging activities. The Company has primarily utilized derivatives which are designated as either cash flow...

  • Page 122
    ... million during the twelve months ended June 30, 2010 and recorded within interest expense in the Consolidated Statement of Operations. The Company uses forward foreign currency contracts to manage foreign currency rate fluctuations associated with certain forecasted intercompany transactions. The...

  • Page 123
    ... forth the (gain) or loss on the Company's derivative instruments that has been reclassified from AOCI into current earnings during the years ended June 30, 2010 and 2009 within the following line items in the Consolidated Statement of Operations. Other Comprehensive Income (Gain)/Loss as of June 30...

  • Page 124
    ... contracts Interest income and other, net $ - $ (335) $ (811) $ (1,147) $ (811) $ (1,482) 10. COMMITMENTS AND CONTINGENCIES: Operating Leases: The Company is committed under long-term operating leases for the rental of most of its company-owned salon and hair restoration center locations...

  • Page 125
    ...self-insured for health care claims for eligible participating employees subject to certain deductibles and limitations. The Company determines its liability for claims incurred but not reported on an actuarial basis. 11. LEASE TERMINATION COSTS In June 2009, the Company approved a plan to close up...

  • Page 126
    ... a plan to close up to 160 underperforming company-owned salons in fiscal year 2009. Approximately 100 locations were regional mall based concepts, another 40 locations were strip center concepts and 20 locations were in the U.K. The timing of the closures was dependent on successfully completing...

  • Page 127
    ... on its results of operations in any particular period. During fiscal year 2010, the Company recorded a $5.2 million charge related to the settlement of two legal claims regarding certain customer and employee matters. Additionally, the Company has commitment to provide discount coupons. As of June...

  • Page 128
    ...2010 results of operations or its financial position or results of operations of any prior periods. During the fourth quarter of fiscal year 2009, the Company recorded an adjustment to correct its prior year deferred income tax balances. The adjustment increased the Company's fiscal year 2009 income...

  • Page 129
    ... and liabilities are as follows: 2010 2009 (Dollars in thousands) Deferred tax assets: Deferred rent Payroll and payroll related costs Net operating loss carryforwards Salon asset impairment Inventories Derivatives Deferred gift card revenue Unrecognized tax benefits Other Total deferred tax assets...

  • Page 130
    ... Plan The Company maintains a defined contributed 401(k) plan, the Regis Retirement Savings Plan (the RRSP). The RRSP is a defined contribution profit sharing plan with a 401(k) feature that is intended to qualify with the Internal Revenue Code (Code) and is subject to the Employee Retirement Income...

  • Page 131
    ...time employees of the Company who have at least one year of eligible service, 1,000 hours of service during the Plan year, are employed by the Employer on the last day of the Plan year and are employed at the home office or distribution centers, or as area or regional supervisors, artistic directors...

  • Page 132
    ...deferred compensation contracts. Compensation associated with these agreements is charged to expense as services are provided. Associated costs included in general and administrative expenses on the Consolidated Statement of Operations totaled $5.2, $3.7, and $2.4 million for fiscal years 2010, 2009...

  • Page 133
    ..., which includes shares issuable under the Company's stock option plan and longterm incentive plan, shares issuable under contingent stock agreements, and dilutive securities. Stock-based awards with exercise prices greater than the average market value of the Company's common stock are excluded...

  • Page 134
    ... also be granted to the Company's outside directors for a term not to exceed ten years from the grant date. The 2000 Plan contains restrictions on transferability, time of exercise, exercise price and on disposition of any shares acquired through exercise of the options. Stock options are granted at...

  • Page 135
    ... per share weighted average exercise price and a weighted average remaining contractual life of 8.4 years that have a total intrinsic value of zero. All options granted relate to stock option plans that have been approved by the shareholders of the Company. Stock options granted in fiscal year 2010...

  • Page 136
    .... As of June 30, 2010, the total unrecognized compensation cost related to all unvested stock-based compensation arrangements was $28.4 million. The related weighted average period over which such cost is expected to be recognized was approximately 3.5 years as of June 30, 2010. The total intrinsic...

  • Page 137
    ...Compensation expense included in income before income taxes related to stock- based compensation was $9.3, $7.5, and $6.8 million for the three years ended June 30, 2010, 2009, and 2008, respectively. Authorized Shares and Designation of Preferred Class: The Company has 100 million shares of capital...

  • Page 138
    ... of 9,525 North American salons (located in the United States, Canada and Puerto Rico), 404 international salons, 95 hair restoration centers, and 2,704 locations in which the Company maintains an ownership interest through its investments in affiliates. The Company operates its North American salon...

  • Page 139
    ... Company's reportable operating segments is shown in the following table as of June 30, 2010, 2009, and 2008: For the Year Ended June 30, 2010 Salons North America Hair Restoration Unallocated International Centers Corporate (Dollars in thousands) Consolidated Revenues: Service Product Royalties...

  • Page 140
    ... FINANCIAL STATEMENTS (Continued) 16. SEGMENT INFORMATION (Continued) For the Year Ended June 30, 2009(1) Salons North America Hair Unallocated Restoration International Centers Corporate (Dollars in thousands) Consolidated Revenues: Service Product Royalties and fees $ 1,646,239 $ 434,340 37...

  • Page 141
    ... FINANCIAL STATEMENTS (Continued) 16. SEGMENT INFORMATION (Continued) For the Year Ended June 30, 2008(1)(2) Salons North America Hair Unallocated Restoration International Centers Corporate (Dollars in thousands) Consolidated Revenues: Service Product Royalties and fees $ 1,635,238 $ 414,909 39...

  • Page 142
    ...) 16. SEGMENT INFORMATION (Continued) Total revenues and long-lived assets associated with business operations in the United States and all other countries in aggregate were as follows: Year Ended June 30, 2009 Total Long-lived Revenues Assets (Dollars in thousands) 2010 Total Revenues Long-lived...

  • Page 143
    ...Condition and Results of Operations in Part II, Item 6 in this Form 10-K for explanations of items which impacted fiscal year 2010 revenues, operating and net income. September 30 Quarter Ended December 31 March 31 June 30 (Dollars in thousands, except per share amounts) Year Ended 2009 Revenues...

  • Page 144
    ... 0.04 0.16 Refer to Management's Discussion and Analysis of Financial Condition and Results of Operations in Part II, Item 6 in this Form 10-K for explanations of items which impacted fiscal year 2009 revenues, operating and net income. (a) Operating income and net income increased as a result of...

  • Page 145
    ... to be held for sale and accounted for it as a discontinued operation. As a result, the Company recorded expense of $171.8 million ($115.8 million net of tax) as a result of the write-off of the net assets associated with the sale of Trade Secret. An income tax benefit of $3.0 million was recorded...

  • Page 146
    ... 30, 2010. Based upon this evaluation, the chief executive officer and chief financial officer concluded that the Company's disclosure controls and procedures were effective. Management's Report on Internal Control over Financial Reporting In Part II, Item 8 above, management provided a report on...

  • Page 147
    ...Code of Business Conduct & Ethics that applies to all employees, including the Company's chief executive officer, chief financial officer, directors and executive officers. The Code of Business Conduct & Ethics is available on the Company's website at www.regiscorp.com , under the heading "Corporate...

  • Page 148
    ... 13, 2004, between the Company and Hair Club Group Inc. (Incorporated by reference to Exhibit 2 of the Company's Report on Form 10-Q filed on February 9, 2005, for the quarter ended December 31, 2004.) Stock Purchase Agreement dated as of January 26, 2009 between Regis Corporation, Trade Secret, Inc...

  • Page 149
    ... Company and Prudential Insurance Company of America. (Incorporated by reference to Exhibit 10(aa) of the Company's Report on Form 10-K filed on September 12, 2001, for the year ended June 30, 2001.) Note Purchase Agreement, dated March 1, 2002, between the Company and purchasers listed in Schedule...

  • Page 150
    ... Company's Report on Form 8-K filed July 6, 2009) Amendment No.6 to Amend and Restated Private Shelf Agreement between Regis Corporation and Prudential Investment Management, Inc., The Prudential Insurance Company of America, Pruco Life Insurance Company, Pruco Life Insurance Company of New Jersey...

  • Page 151
    ... Employment Agreement, as Amended and Restated effective December 31, 2008, between the Company and Paul D. Finkelstein (Incorporated by referenced to Exhibit 10(a) of the Company's Report on Form 10-Q filed May 10, 2010). 21 23 31.1 31.2 32.1 32.2 List of Subsidiaries of Regis Corporation. Consent...

  • Page 152
    ... duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. REGIS CORPORATION By /s/ PAUL D. FINKELSTEIN Paul D. Finkelstein, Chairman of the Board of Directors, President and Chief Executive Officer By /s/ RANDY L. PEARCE Randy L. Pearce, Senior Executive Vice...

  • Page 153

  • Page 154
    ... AND 2008 Index to Consolidated Financial Statements: Report of Independent Registered Public Accounting Firm Consolidated Balance Sheet as of December 31, 2009 and 2008 Consolidated Income Statement for each of the two years in the period ended December 31, 2009 Consolidated Statements of Changes...

  • Page 155
    ... of their operations and their cash flows for the year then ended in conformity with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). These financial statements are the responsibility of the Company's management. Our responsibility...

  • Page 156
    ... EQUITY Issued capital Share premium and other reserves Treasury shares Profit for the year EQUITY ATTRIBUTABLE TO OWNERS OF THE PARENT Non-controlling interests in equity TOTAL EQUITY NON-CURRENT LIABILITIES Long-term debt Deferred tax liabilities Provisions for liabilities and charges TOTAL NON...

  • Page 157
    ... Year-on-year change Revenue Other income from operations Cost of sales Payroll costs External charges Taxes other than on income Depreciation, amortization and impairment Net (additions to)/reversals from provisions Other operating income Other operating expenses Operating profit Income from cash...

  • Page 158
    ...Auditors' Report) Year ended Dec. 31, 2009 Note Year ended Dec. 31, 2008 Year-on-year change Profit for the year Other comprehensive income: Currency translation differences Share-based payments(1) Other Other comprehensive income for the year Total comprehensive income for the year Attributable...

  • Page 159
    ... 25,375,000 2008 Profit for 2008 Other comprehensive income for the year Total comprehensive income for the year Change in consolidating legal entity (25,375,000) Share issues 207,368,900 Share-based payments Sales/purchases of treasury shares Dividends Changes in Group structure Other movements At...

  • Page 160

  • Page 161
    ...tax expense(3) Cash flow before finance costs, net, and income tax expense Income tax paid Change in net operating working capital(4) Net cash generated from operating activities Cash flows from investing activities: Purchases of property, plant and equipment and intangible assets Proceeds from sale...

  • Page 162
    ... OF SIGNIFICANT ACCOUNTING POLICIES FINANCIAL RISK MANAGEMENT LIST OF CONSOLIDATED COMPANIES BUSINESS COMBINATIONS INTANGIBLE ASSETS PROPERTY, PLANT AND EQUIPMENT NON-CURRENT FINANCIAL ASSETS CURRENT AND DEFERRED INCOME TAXES INVENTORIES TRADE RECEIVABLES OTHER RECEIVABLES CASH AND CASH EQUIVALENTS...

  • Page 163
    ... AS OF DECEMBER 31, 2009 AND FOR THE YEAR THEN ENDED NOT COVERED BY AUDITORS' REPORT INCLUDED HEREIN) GENERAL INFORMATION The Provalliance group operates hair salons and manages license agreements as well as a network of franchises under the following brand names Franck Provost Fabio Salsa...

  • Page 164
    ..., 2009 Revised version of IAS 23, Borrowing Costs, which requires the capitalization of borrowing costs directly attributable to the acquisition, construction or production of qualifying assets. Amendment to IFRS 2, Share-based Payment-Vesting Conditions and Cancellations. Amendments to IAS 32 and...

  • Page 165
    ... been measured at fair value such as short-term cash investments and options on non-controlling interests. Non-current assets (or disposal groups) held for sale are measured at the lower of their carrying amount and fair value less costs to sell. 1.1.2 Use of estimates The preparation of financial...

  • Page 166
    ...subsidiaries are restated to comply with Group accounting policies. A list of consolidated companies is provided in Note 2. 1.1.4 Intangible assets 1.1.4.1 Business combinations-Goodwill The Group has elected not to apply IFRS 3 retrospectively to business combinations that occurred prior to January...

  • Page 167
    ... (Continued) (INFORMATION AS OF DECEMBER 31, 2009 AND FOR THE YEAR THEN ENDED NOT COVERED BY AUDITORS' REPORT INCLUDED HEREIN) 1.1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Goodwill represents the excess of the cost of an acquisition over the fair value of the Group's share of the...

  • Page 168
    ... The Group has not capitalized any development costs. Other intangible assets-notably software acquired for internal use-are amortized over their estimated useful lives, which generally correspond to three years. In the income statement, amortization expense is recorded as an operating expense under...

  • Page 169
    ...Group now has a multi-brand franchising business and also manages license agreements. As a result of these operational changes, the Group redefined its internal reporting structure, which is now based on the following three core businesses management of directly-owned salons management of franchise...

  • Page 170
    ...-year projection period is used and the terminal value is determined by extrapolating to perpetuity the discounted cash flows for the fifth year. The sensitivity of the value of goodwill to a 0.5% increase or decrease in the weighted average cost of capital or the long-term growth rate corresponds...

  • Page 171
    ...of cost and net realizable value. Net realizable value corresponds to the estimated selling price in the ordinary course of business, less the estimated costs necessary to make the sale. Internal margins on inventories are eliminated in consolidation. 1.1.9 Revenue recognition-"Rendering of services...

  • Page 172
    ... projected unit credit method based on assumptions concerning life expectancy, staff seniority, staff turnover and future salary levels and the application of a discount rate. The main assumptions used correspond to average forecasts determined by reference to historical data over recent years, as...

  • Page 173
    ... bargaining agreements applicable within the Group Hairdressing Syntec Advertising Actuarial gains and losses arising as a result of changes in assumptions are recognized directly in the income statement. 1.1.15 Other employee benefit obligations-statutory training entitlement and long-service...

  • Page 174
    ...) (INFORMATION AS OF DECEMBER 31, 2009 AND FOR THE YEAR THEN ENDED NOT COVERED BY AUDITORS' REPORT INCLUDED HEREIN) 1.1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 1.1.17 Share grants In 2008, Provalliance set up a share grant plan for which an expense was recorded under payroll costs, in...

  • Page 175
    ...) (INFORMATION AS OF DECEMBER 31, 2009 AND FOR THE YEAR THEN ENDED NOT COVERED BY AUDITORS' REPORT INCLUDED HEREIN) 1.1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued Volatility: the EWMA (Exponentially Weighted Moving Average) method applied to a sample group of comparable companies...

  • Page 176
    ...Funding Requirement IFRIC 12, Service Concession Arrangements IFRIC 15, Agreements for the Construction of Real Estate IFRIC 16, Hedges of a Net Investment in a Foreign Operation IFRIC 17, Distributions of Non-cash Assets to Owners IFRIC 18, Transfers of Assets from Customers IFRIC 19, Extinguishing...

  • Page 177
    ...-related risks Credit risk Liquidity risk Market risk This note sets out information on the Group's exposure to each of these risks, as well as the Group's objectives, strategy and procedures for risk management and assessment and its capital management practices. Quantitative information on these...

  • Page 178
    ...for each hair salon it owns, which helps it to manage its cash flow needs and optimize its cash return on investments. The Group generally ensures that it has sufficient demand deposits to cover its expected operating expenses for each coming month, including the amounts required to service its debt...

  • Page 179
    ...THE YEAR THEN ENDED NOT COVERED BY AUDITORS' REPORT INCLUDED HEREIN) 1.2 FINANCIAL RISK MANAGEMENT (Continued) The Group complied with all of its bank covenants at December 31, 2009. 1.2.3 Market risk Market risk corresponds to the risk that changes in market prices, such as exchange rates, interest...

  • Page 180
    ...) (INFORMATION AS OF DECEMBER 31, 2009 AND FOR THE YEAR THEN ENDED NOT COVERED BY AUDITORS' REPORT INCLUDED HEREIN) 2. LIST OF CONSOLIDATED COMPANIES Company Country % Control Consolidation method HAIR SAINT GERMAIN HAIR LEVALLOIS HAIR SQUARE FRANCK PROVOST RIVE DROITE HAIR SHOW HAIR SAINT...

  • Page 181
    ...) (INFORMATION AS OF DECEMBER 31, 2009 AND FOR THE YEAR THEN ENDED NOT COVERED BY AUDITORS' REPORT INCLUDED HEREIN) 2. LIST OF CONSOLIDATED COMPANIES (Continued) Company Country % Control Consolidation method HAIR TAVERNY SALSA CHELLES SALSA POITIERS HAIR CAREME HAIR ENGLOS HAIR RONCQ HAIR BOULOGNE...

  • Page 182
    ...NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) (INFORMATION AS OF DECEMBER 31, 2009 AND FOR THE YEAR THEN ENDED NOT COVERED BY AUDITORS' REPORT INCLUDED HEREIN) 2. LIST OF CONSOLIDATED COMPANIES (Continued) Company Country % Control Consolidation method HAIR DOCKS ROUEN FABIO SALSA AFAP...

  • Page 183
    ... THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) (INFORMATION AS OF DECEMBER 31, 2009 AND FOR THE YEAR THEN ENDED NOT COVERED BY AUDITORS' REPORT INCLUDED HEREIN) 2. LIST OF CONSOLIDATED COMPANIES (Continued) Company Country % Control Consolidation method RJD COIFFURE KAP COIFFURE LJPP WASQUEHAL...

  • Page 184
    ...(INFORMATION AS OF DECEMBER 31, 2009 AND FOR THE YEAR THEN ENDED NOT COVERED BY AUDITORS' REPORT INCLUDED HEREIN) 2. LIST OF CONSOLIDATED COMPANIES (Continued) Company Country % Control Consolidation method CLUB DE LA COIFFURE JM ATHIS MONS SOREFICO COIFFURE EXPANSION PROVALLIANCE SALONS LUXEMBOURG...

  • Page 185
    ... (Continued) (INFORMATION AS OF DECEMBER 31, 2009 AND FOR THE YEAR THEN ENDED NOT COVERED BY AUDITORS' REPORT INCLUDED HEREIN) 3. BUSINESS COMBINATIONS 3.1. LIST OF NEWLY-CONSOLIDATED AND DECONSOLIDATED COMPANIES Company Consolidation method Year ended Dec. 31, 2009 Consolidation method Year ended...

  • Page 186
    ...THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) (INFORMATION AS OF DECEMBER 31, 2009 AND FOR THE YEAR THEN ENDED NOT COVERED BY AUDITORS' REPORT INCLUDED HEREIN) 3. BUSINESS COMBINATIONS (Continued) Company Consolidation method Year ended Dec. 31, 2009 Consolidation method Year ended Dec. 31, 2008...

  • Page 187
    ... THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) (INFORMATION AS OF DECEMBER 31, 2009 AND FOR THE YEAR THEN ENDED NOT COVERED BY AUDITORS' REPORT INCLUDED HEREIN) 4. INTANGIBLE ASSETS Goodwill allocated to hair salons(2) Trademarks Lease premiums Franchise network and brands Patents and licenses...

  • Page 188
    ... Cost...shares in Elexia and Provalliance Spain generated goodwill totaling â,¬2,253,000 at the year-end. Goodwill allocated to hair salons corresponds to the value of customer relationships less the value of the applicable lease premiums. Reallocation of intangible assets in accordance with the method...

  • Page 189
    ...January 1 Acquisitions Assets held for sale Disposals Business combinations Other movements Impairment Depreciation expense Reversals of provisions and depreciation Carrying amount At December 31, 2008 Cost Accumulated depreciation and impairment Carrying amount Year ended December 31, 2009 Carrying...

  • Page 190
    ... held for sale Disposals Business combinations Other movements (1) Impairment Depreciation expense Reversals of provisions and depreciation Carrying amount At December 31, 2009 Cost Accumulated depreciation ...,069 162,763 172,139 (14,372,955) 28,350,812 (1) Inter-account reclassifications. 181

  • Page 191
    ... AUDITORS' REPORT INCLUDED HEREIN) 6. NON-CURRENT FINANCIAL ASSETS Investments in non-consolidated companies At January 1, 2008 Cost Accumulated amortization and impairment Carrying amount Year ended December 31, 2008 Carrying amount at January 1 Acquisitions Assets held for sale Disposals Business...

  • Page 192

  • Page 193
    ...,267 1,187,597 2009 2008 Theoretical taxable profit Parent company tax rate Theoretical income tax expense Actual income tax expense Difference between theoretical and actual income tax expense Analysis of difference Impact of differences in tax rates Impact of permanent differences Impact of tax...

  • Page 194
    ...' REPORT INCLUDED HEREIN) 7. CURRENT AND DEFERRED INCOME TAXES (Continued) 7.3. Deferred tax assets Dec. 31, 2009 Dec. 31, 2008 Elimination of internal margin on non-current assets Elimination of internal gains on inventories Provisions for pension and other post-employment benefit obligations...

  • Page 195
    ...AND FOR THE YEAR THEN ENDED NOT COVERED BY AUDITORS' REPORT INCLUDED HEREIN) 8. INVENTORIES Changes in inventories recognized in profit Impairment losses recognized in profit Impairment losses reversed through profit Carrying amount at Jan. 1, 2009 Impact of business combinations Other movements...

  • Page 196
    185

  • Page 197
    ... (INFORMATION AS OF DECEMBER 31, 2009 AND FOR THE YEAR THEN ENDED NOT COVERED BY AUDITORS' REPORT INCLUDED HEREIN) 11. CASH AND CASH EQUIVALENTS Impairment losses recognized in profit Impairment losses reversed through profit Carrying amount at Jan. 1, 2009 Change Impact of business combinations...

  • Page 198

  • Page 199
    ..., 2009 AND FOR THE YEAR THEN ENDED NOT COVERED BY AUDITORS' REPORT INCLUDED HEREIN) 13. LONG- AND SHORT-TERM DEBT (Continued) 13.1 Breakdown of long- and short-term debt by maturity At Dec. 31, 2009 Interest At Dec. 31, 2008 Interest Principal Total Principal Total 2009 2010 2011 2012 2013 2014...

  • Page 200
    ...) (INFORMATION AS OF DECEMBER 31, 2009 AND FOR THE YEAR THEN ENDED NOT COVERED BY AUDITORS' REPORT INCLUDED ...profit or equity amortized cost loss NON-CURRENT LIABILITIES Long-term debt TOTAL RECORDED UNDER NONCURRENT LIABILITIES CURRENT LIABILITIES Current portion of long-term debt Other short-term...

  • Page 201
    ...) (INFORMATION AS OF DECEMBER 31, 2009 AND FOR THE YEAR THEN ENDED NOT COVERED BY AUDITORS' REPORT INCLUDED ...profit or equity amortized cost loss NON-CURRENT LIABILITIES Long-term debt TOTAL RECORDED UNDER NONCURRENT LIABILITIES CURRENT LIABILITIES Current portion of long-term debt Other short-term...

  • Page 202
    ... 71,745 (354,246) (282,501 ) 2008 Impact on net financial income/(expense) Impact on equity Non-current financial assets Non-current financial liabilities TOTAL 14.3 Management of interest rate risk 45,761 45,761 The Group is exposed to interest rate risk as its debt comprises both fixed and...

  • Page 203
    ...THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) (INFORMATION AS OF DECEMBER 31, 2009 AND FOR THE YEAR THEN ENDED NOT COVERED BY AUDITORS' REPORT INCLUDED HEREIN) 14. FINANCIAL INSTRUMENTS (Continued) At Dec. 31, 2008 Average contractual fixed interest rate Notional amount Fair value Less that...

  • Page 204
    ... Prov's negative net worth at December 31, 2009 in the amount of â,¬234,000 were cancelled from equity. The difference between these two amounts (â,¬234,000) was recognized as an adjustment to goodwill. * * * * 16. PROVISIONS FOR LIABILITIES AND CHARGES Settled employee benefits reclassified to...

  • Page 205
    ...,094 (3,591,717) (3,009,194) (4,441,272) 18. REVENUE In 2009 and 2008 the Group's revenue broke down as follows by business segment: Year-on-year change (amount) Year-on-year change (%) (in â,¬ thousands) 2009 2008 Salons Franchises Licenses Total revenue 151,784 47,615 3,582 202,981 134,260...

  • Page 206
    ...) (INFORMATION AS OF DECEMBER 31, 2009 AND FOR THE YEAR THEN ENDED NOT COVERED BY AUDITORS' REPORT INCLUDED HEREIN) 18. REVENUE (Continued) The total number of Group salons can be analyzed as follows by brand: Year-on-year change (number) Year-on-year change (%) 2009 2008 Directly-owned salons...

  • Page 207
    ... 3,673 (115,763) 438,472 16,851 6,231,893 20. EXTERNAL CHARGES 2009 2008 Year-on-year change Water and electricity Rental expense Maintenance Professional fees Advertising, publications, public relations Banking services Other external charges TOTAL 3,660,964 23,472,855 4,381,740 4,150,700 8,802...

  • Page 208
    ... 2008 Year-on-year change "Other operating income" includes: Proceeds from disposals of property, plant and equipment and intangible assets "Other operating expenses" includes: Carrying amounts of property, plant and equipment and intangible assets "Finance costs-net" includes: • Income from cash...

  • Page 209
    ...date the Group considered that the utilization of â,¬5,568,449 of these losses was probable. A tax benefit of â,¬1,856,150 was therefore recorded in 2009. 23. NET CASH AND CASH EQUIVALENTS 2009 2008 Year-on-year change Marketable securities Cash Bank overdrafts TOTAL NET CASH AND CASH EQUIVALENTS...

  • Page 210

  • Page 211
    ...Continued) (INFORMATION AS OF DECEMBER 31, 2009 AND FOR THE YEAR THEN ENDED NOT COVERED BY AUDITORS' REPORT INCLUDED ...,753 2,984,043 67,960 Restructuring the Group's cash 593,208 position Restructuring the Group's cash 592,822 position 411,979 Purchase of a business base 213,691 74,957 143,390 1,...

  • Page 212
    ...Continued) (INFORMATION AS OF DECEMBER 31, 2009 AND FOR THE YEAR THEN ENDED NOT COVERED BY AUDITORS' REPORT INCLUDED ...business base Loan-Provalliance joint and several guarantee and pledge of a business base Loan-Provalliance joint and several guarantee and pledge of a business base Purpose Bank...

  • Page 213
    ... pledge of a business base Loan-pledge of shares Loan-pledge of equity interests and business bases Real estate leases (see Note 26) Interest rate swap (see Note 27) Deposits for rental payments, charges and incidental expenses(1) Accrued interest Two call options on two groups (33 salons in total...

  • Page 214
    ... FINANCIAL STATEMENTS (Continued) (INFORMATION AS OF DECEMBER 31, 2009 AND FOR THE YEAR THEN ENDED NOT COVERED BY AUDITORS' REPORT INCLUDED HEREIN) 27. NUMBER OF EMPLOYEES Number of employees at Dec. 31, 2009 Number of employees at Dec. 31, 2008 Year-on-year change Managerial Non-managerial...

  • Page 215

  • Page 216
    ...Ltd. 3115038 Canada, Inc. Hair Club for Men, Ltd. (50.0 percent Hair Club for Men, Ltd., Inc.) Hair Club for Men of Milwaukee, Ltd. (50.0 percent Hair Club for Men, Ltd., Inc.) TTEM, LLC* HCMA Staffing, LLC Salon Management Corporation Salon Management Corporation of New York* Regis Netherlands, Inc...

  • Page 217
    ... OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (File Nos. ...and Form S-8 (Nos. 33-163350, 333-123737, 333-88938, 33-44867 and 33-89882) of Regis Corporation of our report dated August 27, 2010 relating ...

  • Page 218
    ... 31.1 CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Paul D. Finkelstein certify that: 1. 2. I have reviewed this annual report on Form 10-K of Regis Corporation; Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state...

  • Page 219
    ..., whether or not material, that involves management or other employees who have a significant role in the Registrant's internal control over financial reporting. (b) August 27, 2010 /s/ RANDY L. PEARCE Randy L. Pearce, Senior Executive Vice President, Chief Financial and Administrative Officer

  • Page 220
    ... with the Annual Report of Regis Corporation (the Registrant) on Form 10-K for the fiscal year ending June 30, 2010 as filed with the Securities and Exchange Commission on the date hereof, I, Paul D. Finkelstein, Chairman of the Board of Directors, President and Chief Executive Officer of the...

  • Page 221
    ... with the Annual Report of Regis Corporation (the Registrant) on Form 10-K for the fiscal year ending June 30, 2010 as filed with the Securities and Exchange Commission on the date hereof, I, Randy L. Pearce, Senior Executive Vice President, Chief Financial and Administrative Officer of the...