<HTML> <HEAD> <TITLE> Prepared by MERRILL CORPORATION www.edgaradvantage.com </TITLE> </HEAD> <BODY BGCOLOR="#FFFFFF"> <H2><FONT SIZE=3 ><A HREF="#99STP2936_1">QuickLinks</A></FONT></H2> <HR NOSHADE> <HR NOSHADE> <P ALIGN="CENTER"><FONT SIZE=5><B>FORM 10-Q<BR> SECURITIES AND EXCHANGE COMMISSION<BR></B></FONT><FONT SIZE=2><B>WASHINGTON, D.C. 20549</B></FONT></P> <P><FONT SIZE=2><B>(Mark One)</B></FONT></P> <!-- User-specified TAGGED TABLE --> <TABLE WIDTH="77%" BORDER=0 CELLSPACING=0 CELLPADDING=0> <TR VALIGN="TOP"> <TD WIDTH="12%" ALIGN="CENTER"><FONT SIZE=2> <BR></FONT><FONT SIZE=3>/x/</FONT></TD> <TD WIDTH="88%"><FONT SIZE=3> <BR></FONT><FONT SIZE=3><B>QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934</B></FONT></TD> </TR> </TABLE> <!-- end of user-specified TAGGED TABLE --> <P ALIGN="CENTER"><FONT SIZE=2><B>For the quarterly period ended September 30, 1999</B></FONT></P> <!-- User-specified TAGGED TABLE --> <TABLE WIDTH="77%" BORDER=0 CELLSPACING=0 CELLPADDING=0> <TR VALIGN="TOP"> <TD WIDTH="12%" ALIGN="CENTER"><FONT SIZE=3>/ /</FONT></TD> <TD WIDTH="88%"><FONT SIZE=3><B>TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934</B></FONT></TD> </TR> </TABLE> <!-- end of user-specified TAGGED TABLE --> <P ALIGN="CENTER"><FONT SIZE=2><B>For the transition period from <U> </U> to <U> </U></B></FONT></P> <P ALIGN="CENTER"><FONT SIZE=2><B>For Quarter Ended September 30, 1999 Commission file number 011230</B></FONT></P> <HR NOSHADE WIDTH=120> <BR> <P ALIGN="CENTER"><FONT SIZE=5><B>Regis Corporation</B></FONT></P> <P ALIGN="CENTER"><FONT SIZE=2>(Exact name of registrant as specified in its charter)</FONT></P> <!-- User-specified TAGGED TABLE --> <CENTER><TABLE WIDTH="66%" BORDER=0 CELLSPACING=0 CELLPADDING=0> <TR VALIGN="TOP"> <TD WIDTH="48%" ALIGN="CENTER"><FONT SIZE=2><B>Minnesota</B></FONT><FONT SIZE=2><BR> (State or other jurisdiction of<BR> incorporation or organization)</FONT></TD> <TD WIDTH="9%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="43%" ALIGN="CENTER"><FONT SIZE=2><B>41-0749934</B></FONT><FONT SIZE=2><BR> (I.R.S. Employer<BR> Identification No.)</FONT></TD> </TR> <TR VALIGN="TOP"> <TD WIDTH="48%" ALIGN="CENTER"><FONT SIZE=2> <BR> 7201 Metro Boulevard, Edina, Minnesota<BR> (Address of principal executive offices)</FONT></TD> <TD WIDTH="9%"><FONT SIZE=2> <BR> </FONT></TD> <TD WIDTH="43%" ALIGN="CENTER"><FONT SIZE=2> <BR> 55439<BR> (Zip Code)</FONT></TD> </TR> </TABLE></CENTER> <!-- end of user-specified TAGGED TABLE --> <P ALIGN="CENTER"><FONT SIZE=2><B>(612)947-7777<BR></B></FONT><FONT SIZE=2>(Registrant's telephone number, including area code)</FONT></P> <HR NOSHADE WIDTH=120> <BR><BR> <P><FONT SIZE=2> Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes /x/ No / /</FONT></P> <P><FONT SIZE=2> Indicate the number of shares outstanding of each of the issuer's classes of common stock as of October 29, 1999:</FONT></P> <!-- User-specified TAGGED TABLE --> <CENTER><TABLE WIDTH="66%" BORDER=0 CELLSPACING=0 CELLPADDING=0> <TR VALIGN="TOP"> <TD WIDTH="48%" ALIGN="CENTER"><FONT SIZE=2><B>Common Stock, $.05 par value</B></FONT></TD> <TD WIDTH="9%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="43%" ALIGN="CENTER"><FONT SIZE=2><B>38,751,222</B></FONT></TD> </TR> <TR VALIGN="TOP"> <TD WIDTH="48%" ALIGN="CENTER"><FONT SIZE=2>Class</FONT></TD> <TD WIDTH="9%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="43%" ALIGN="CENTER"><FONT SIZE=2>Number of Shares</FONT></TD> </TR> </TABLE></CENTER> <!-- end of user-specified TAGGED TABLE --> <HR NOSHADE> <HR NOSHADE> <P><FONT SIZE=2> <!-- ZEQ.=1,SEQ=1,EFW="9926212",CP="REGIS CORPORATION",DN="1",FOLIO=blank,FILE='DISK004:[99STP6.99STP2936]BA2936A.;13',USER='MGUZA',CD=';9-NOV-1999;09:08' --> </FONT></P> <!-- Generated by Merrill Corporation (www.merrillcorp.com) --> <H2><FONT SIZE=3 > </FONT></H2> <P ALIGN="CENTER"><FONT SIZE=2><A NAME="bg2936_regis_corporation_index"> </A></FONT><FONT SIZE=2><B>REGIS CORPORATION<BR> INDEX </B></FONT></P> <!-- User-specified TAGGED TABLE --> <TABLE WIDTH="77%" BORDER=0 CELLSPACING=0 CELLPADDING=0> <TR VALIGN="BOTTOM"> <TH WIDTH="9%" ALIGN="CENTER"><FONT SIZE=1> </FONT><BR></TH> <TH WIDTH="2%"><FONT SIZE=1> </FONT></TH> <TH WIDTH="9%" ALIGN="LEFT"><FONT SIZE=1> </FONT><BR></TH> <TH WIDTH="2%"><FONT SIZE=1> </FONT></TH> <TH WIDTH="68%" ALIGN="LEFT"><FONT SIZE=1> </FONT><BR></TH> <TH WIDTH="2%"><FONT SIZE=1> </FONT></TH> <TH WIDTH="7%" ALIGN="LEFT"><FONT SIZE=1> </FONT><BR></TH> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="TOP"> <TD WIDTH="9%"><FONT SIZE=2> <BR> PART I.</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="79%" COLSPAN=3><FONT SIZE=2> <BR></FONT><FONT SIZE=2><B>Financial Information</B></FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2><B>Page Nos.</B></FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="TOP"> <TD WIDTH="9%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>Item 1.</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="68%"><FONT SIZE=2>Consolidated Financial Statements:</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="TOP"> <TD WIDTH="9%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="68%"><FONT SIZE=2>Balance Sheet as of September 30, 1999 and June 30, 1999</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>3</FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="TOP"> <TD WIDTH="9%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="68%"><FONT SIZE=2>Statement of Operations for the three months ended September 30, 1999 and 1998</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>4</FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="TOP"> <TD WIDTH="9%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="68%"><FONT SIZE=2>Statement of Cash Flows for the three months ended September 30, 1999 and 1998</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>5</FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="TOP"> <TD WIDTH="9%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="68%"><FONT SIZE=2>Notes to Consolidated Financial Statements</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>6-8</FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="TOP"> <TD WIDTH="9%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="68%"><FONT SIZE=2>Review Report of Independent Accountants</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>9</FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="TOP"> <TD WIDTH="9%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>Item 2.</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="68%"><FONT SIZE=2>Management's Discussion and Analysis of Financial Condition and Results of Operations</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>10-15</FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="TOP"> <TD WIDTH="9%"><FONT SIZE=2>Part II.</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="79%" COLSPAN=3><FONT SIZE=2><B>Other Information</B></FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="TOP"> <TD WIDTH="9%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>Item 4.</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="68%"><FONT SIZE=2>Submission of Matters to a Vote of Security Holders</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>16</FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="TOP"> <TD WIDTH="9%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>Item 6.</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="68%"><FONT SIZE=2>Exhibits and Reports on Form 8-K</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>16</FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="TOP"> <TD WIDTH="9%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="79%" COLSPAN=3><FONT SIZE=2> Signature</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>17</FONT></TD> </TR> </TABLE> <!-- end of user-specified TAGGED TABLE --> <P><FONT SIZE=2> <!-- ZEQ.=1,SEQ=2,EFW="9926212",CP="REGIS CORPORATION",DN="1",FOLIO=2,FILE='DISK004:[99STP6.99STP2936]BG2936A.;33',USER='MGUZA',CD=';9-NOV-1999;09:08' --> </FONT></P> <!-- Generated by Merrill Corporation (www.merrillcorp.com) --> <P ALIGN="CENTER"><FONT SIZE=2><B>PART I—FINANCIAL INFORMATION<BR> Item 1. Financial Statements<BR> REGIS CORPORATION<BR> CONSOLIDATED BALANCE SHEET<BR> as of September 30, 1999 and June 30, 1999<BR> (Dollars in thousands, except par value and share amounts)</B></FONT></P> <!-- User-specified TAGGED TABLE --> <TABLE WIDTH="86%" BORDER=0 CELLSPACING=0 CELLPADDING=0> <TR VALIGN="BOTTOM"> <TH WIDTH="61%" ALIGN="LEFT"><FONT SIZE=2> </FONT><BR></TH> <TH WIDTH="2%"><FONT SIZE=1> </FONT></TH> <TH WIDTH="21%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>(Unaudited)<BR> September 30, 1999</B></FONT><HR NOSHADE></TH> <TH WIDTH="2%"><FONT SIZE=1> </FONT></TH> <TH WIDTH="12%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>June 30, 1999</B></FONT><HR NOSHADE></TH> <TH WIDTH="1%"><FONT SIZE=1> </FONT></TH> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM"> <TD WIDTH="99%" COLSPAN=7 ALIGN="CENTER"><FONT SIZE=2><B>ASSETS</B></FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="BOTTOM"> <TD WIDTH="61%"><FONT SIZE=2> <BR> Current assets:</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> <BR> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> <BR> </FONT></TD> <TD WIDTH="19%"><FONT SIZE=2> <BR> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> <BR> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> <BR> </FONT></TD> <TD WIDTH="9%"><FONT SIZE=2> <BR> </FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> <BR> </FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM"> <TD WIDTH="61%"><FONT SIZE=2>Cash</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="19%" ALIGN="RIGHT"><FONT SIZE=2>12,159</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>7,351</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="BOTTOM"> <TD WIDTH="61%"><FONT SIZE=2>Accounts receivable, net</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="19%" ALIGN="RIGHT"><FONT SIZE=2>17,995</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>16,506</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM"> <TD WIDTH="61%"><FONT SIZE=2>Inventories</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="19%" ALIGN="RIGHT"><FONT SIZE=2>73,720</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>70,056</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="BOTTOM"> <TD WIDTH="61%"><FONT SIZE=2>Deferred income taxes</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="19%" ALIGN="RIGHT"><FONT SIZE=2>8,321</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>8,596</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM"> <TD WIDTH="61%"><FONT SIZE=2>Other current assets</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="19%" ALIGN="RIGHT"><FONT SIZE=2>5,199</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>10,570</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR VALIGN="TOP"> <TD WIDTH="61%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="21%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="BOTTOM"> <TD WIDTH="61%"><FONT SIZE=2>Total current assets</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="19%" ALIGN="RIGHT"><FONT SIZE=2>117,394</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>113,079</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM"> <TD WIDTH="61%"><FONT SIZE=2>Property and equipment, net</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="19%" ALIGN="RIGHT"><FONT SIZE=2>224,269</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>213,299</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="BOTTOM"> <TD WIDTH="61%"><FONT SIZE=2>Goodwill</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="19%" ALIGN="RIGHT"><FONT SIZE=2>166,036</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>153,954</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM"> <TD WIDTH="61%"><FONT SIZE=2>Other assets</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="19%" ALIGN="RIGHT"><FONT SIZE=2>14,926</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>13,292</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR VALIGN="TOP"> <TD WIDTH="61%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="21%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="BOTTOM"> <TD WIDTH="61%"><FONT SIZE=2>Total assets</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="19%" ALIGN="RIGHT"><FONT SIZE=2>522,625</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>493,624</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR VALIGN="TOP"> <TD WIDTH="61%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="21%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM"> <TD WIDTH="99%" COLSPAN=7 ALIGN="CENTER"><FONT SIZE=2><B>LIABILITIES AND SHAREHOLDERS' EQUITY</B></FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="BOTTOM"> <TD WIDTH="61%"><FONT SIZE=2> <BR> Current liabilities:</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> <BR> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> <BR> </FONT></TD> <TD WIDTH="19%"><FONT SIZE=2> <BR> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> <BR> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> <BR> </FONT></TD> <TD WIDTH="9%"><FONT SIZE=2> <BR> </FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> <BR> </FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM"> <TD WIDTH="61%"><FONT SIZE=2>Long-term debt, current portion</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="19%" ALIGN="RIGHT"><FONT SIZE=2>13,157</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>23,945</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="BOTTOM"> <TD WIDTH="61%"><FONT SIZE=2>Accounts payable</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="19%" ALIGN="RIGHT"><FONT SIZE=2>31,340</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>22,754</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM"> <TD WIDTH="61%"><FONT SIZE=2>Accrued expenses</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="19%" ALIGN="RIGHT"><FONT SIZE=2>54,835</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>53,310</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR VALIGN="TOP"> <TD WIDTH="61%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="21%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="BOTTOM"> <TD WIDTH="61%"><FONT SIZE=2>Total current liabilities</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="19%" ALIGN="RIGHT"><FONT SIZE=2>99,332</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>100,009</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM"> <TD WIDTH="61%"><FONT SIZE=2>Long-term debt</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="19%" ALIGN="RIGHT"><FONT SIZE=2>159,825</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>143,041</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="BOTTOM"> <TD WIDTH="61%"><FONT SIZE=2>Other noncurrent liabilities</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="19%" ALIGN="RIGHT"><FONT SIZE=2>16,012</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>14,377</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM"> <TD WIDTH="61%"><FONT SIZE=2>Shareholders' equity:</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="19%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="BOTTOM"> <TD WIDTH="61%"><FONT SIZE=2>Common stock, $.05 par value; issued and outstanding, 38,714,172 and 38,641,122 common shares at September 30, 1999 and June 30, 1999, respectively</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="19%" ALIGN="RIGHT"><FONT SIZE=2>1,936</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>1,932</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM"> <TD WIDTH="61%"><FONT SIZE=2>Additional paid-in capital</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="19%" ALIGN="RIGHT"><FONT SIZE=2>148,872</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>148,591</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="BOTTOM"> <TD WIDTH="61%"><FONT SIZE=2>Accumulated other comprehensive income</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="19%" ALIGN="RIGHT"><FONT SIZE=2>(862</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(1,148</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM"> <TD WIDTH="61%"><FONT SIZE=2>Retained earnings</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="19%" ALIGN="RIGHT"><FONT SIZE=2>97,510</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>86,822</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR VALIGN="TOP"> <TD WIDTH="61%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="21%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="BOTTOM"> <TD WIDTH="61%"><FONT SIZE=2>Total shareholders' equity</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="19%" ALIGN="RIGHT"><FONT SIZE=2>247,456</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>236,197</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR VALIGN="TOP"> <TD WIDTH="61%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="21%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM"> <TD WIDTH="61%"><FONT SIZE=2>Total liabilities and shareholders' equity</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="19%" ALIGN="RIGHT"><FONT SIZE=2>522,625</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>493,624</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR VALIGN="TOP"> <TD WIDTH="61%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="21%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> </TABLE> <!-- end of user-specified TAGGED TABLE --> <P ALIGN="CENTER"><FONT SIZE=2>The accompanying notes are an integral part of the unaudited consolidated financial statements.</FONT></P> <P ALIGN="CENTER"><FONT SIZE=2> <!-- ZEQ.=1,SEQ=3,EFW="9926212",CP="REGIS CORPORATION",DN="1",FOLIO=3,FILE='DISK004:[99STP6.99STP2936]FC2936A.;12',USER='MGUZA',CD=';9-NOV-1999;09:08' --> </FONT><FONT SIZE=2><B>REGIS CORPORATION<BR> CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited)<BR> for the three months ended September 30, 1999 and 1998<BR> (Dollars in thousands, except per share amounts)</B></FONT></P> <!-- User-specified TAGGED TABLE --> <TABLE WIDTH="85%" BORDER=0 CELLSPACING=0 CELLPADDING=0> <TR VALIGN="BOTTOM"> <TH WIDTH="71%" ALIGN="LEFT"><FONT SIZE=2> </FONT><BR></TH> <TH WIDTH="2%"><FONT SIZE=1> </FONT></TH> <TH WIDTH="12%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>1999</B></FONT><HR NOSHADE></TH> <TH WIDTH="2%"><FONT SIZE=1> </FONT></TH> <TH WIDTH="12%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>1998</B></FONT><HR NOSHADE></TH> <TH WIDTH="1%"><FONT SIZE=1> </FONT></TH> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="TOP"> <TD WIDTH="71%"><FONT SIZE=2>Revenues:</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="TOP"> <TD WIDTH="71%"><FONT SIZE=2>Company-owned salons:</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="TOP"> <TD WIDTH="71%"><FONT SIZE=2>Service</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>177,229</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>155,898</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="TOP"> <TD WIDTH="71%"><FONT SIZE=2>Product</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>71,633</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>60,230</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR VALIGN="TOP"> <TD WIDTH="71%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="TOP"> <TD WIDTH="71%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>248,862</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>216,128</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="TOP"> <TD WIDTH="71%"><FONT SIZE=2>Franchise income</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>12,401</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>11,571</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR VALIGN="TOP"> <TD WIDTH="71%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="TOP"> <TD WIDTH="71%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>261,263</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>227,699</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="TOP"> <TD WIDTH="71%"><FONT SIZE=2>Operating expenses:</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="TOP"> <TD WIDTH="71%"><FONT SIZE=2>Company-owned:</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="TOP"> <TD WIDTH="71%"><FONT SIZE=2>Cost of service</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>101,197</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>88,898</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="TOP"> <TD WIDTH="71%"><FONT SIZE=2>Cost of product</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>38,426</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>32,311</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="TOP"> <TD WIDTH="71%"><FONT SIZE=2>Direct salon</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>22,073</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>18,849</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="TOP"> <TD WIDTH="71%"><FONT SIZE=2>Rent</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>34,201</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>29,734</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="TOP"> <TD WIDTH="71%"><FONT SIZE=2>Depreciation</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>8,530</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>7,299</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR VALIGN="TOP"> <TD WIDTH="71%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="TOP"> <TD WIDTH="71%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>204,427</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>177,091</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="TOP"> <TD WIDTH="71%"><FONT SIZE=2>Selling, general and administrative</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>27,942</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>27,266</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="TOP"> <TD WIDTH="71%"><FONT SIZE=2>Depreciation and amortization</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>3,768</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>3,218</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="TOP"> <TD WIDTH="71%"><FONT SIZE=2>Nonrecurring items</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>1,359</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="TOP"> <TD WIDTH="71%"><FONT SIZE=2>Other</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>2,599</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>2,234</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR VALIGN="TOP"> <TD WIDTH="71%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="TOP"> <TD WIDTH="71%"><FONT SIZE=2>Total operating expenses</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>238,736</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>211,168</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR VALIGN="TOP"> <TD WIDTH="71%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="TOP"> <TD WIDTH="71%"><FONT SIZE=2>Operating income</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>22,527</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>16,531</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="TOP"> <TD WIDTH="71%"><FONT SIZE=2>Other income (expense):</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="TOP"> <TD WIDTH="71%"><FONT SIZE=2>Interest</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(3,380</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(2,719</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="TOP"> <TD WIDTH="71%"><FONT SIZE=2>Other, net</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>410</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>366</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR VALIGN="TOP"> <TD WIDTH="71%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="TOP"> <TD WIDTH="71%"><FONT SIZE=2>Income before income taxes</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>19,557</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>14,178</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="TOP"> <TD WIDTH="71%"><FONT SIZE=2>Income taxes</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(7,707</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(5,514</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD> </TR> <TR VALIGN="TOP"> <TD WIDTH="71%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="TOP"> <TD WIDTH="71%"><FONT SIZE=2>Net income</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>11,850</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>8,664</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR VALIGN="TOP"> <TD WIDTH="71%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="TOP"> <TD WIDTH="71%"><FONT SIZE=2>Net income per share:</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="TOP"> <TD WIDTH="71%"><FONT SIZE=2>Basic</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>.31</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>.23</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR VALIGN="TOP"> <TD WIDTH="71%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="TOP"> <TD WIDTH="71%"><FONT SIZE=2>Diluted</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>.30</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>.22</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR VALIGN="TOP"> <TD WIDTH="71%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> </TABLE> <!-- end of user-specified TAGGED TABLE --> <P ALIGN="CENTER"><FONT SIZE=2>The accompanying notes are an integral part of the unaudited consolidated financial statements.</FONT></P> <P><FONT SIZE=2> <!-- ZEQ.=2,SEQ=4,EFW="9926212",CP="REGIS CORPORATION",DN="1",FOLIO=4,FILE='DISK004:[99STP6.99STP2936]FC2936B.;7',USER='MGUZA',CD=';9-NOV-1999;09:08' --> </FONT></P> <!-- Generated by Merrill Corporation (www.merrillcorp.com) --> <H2><FONT SIZE=3 > </FONT></H2> <P ALIGN="CENTER"><FONT SIZE=2><B>REGIS CORPORATION<BR> CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)<BR> for the three months ended September 30, 1999 and 1998<BR> (Dollars in thousands)</B></FONT></P> <!-- User-specified TAGGED TABLE --> <TABLE WIDTH="86%" BORDER=0 CELLSPACING=0 CELLPADDING=0> <TR VALIGN="BOTTOM"> <TH WIDTH="72%" ALIGN="LEFT"><FONT SIZE=2> </FONT><BR></TH> <TH WIDTH="2%"><FONT SIZE=1> </FONT></TH> <TH WIDTH="11%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>1999</B></FONT><HR NOSHADE></TH> <TH WIDTH="2%"><FONT SIZE=1> </FONT></TH> <TH WIDTH="11%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>1998</B></FONT><HR NOSHADE></TH> <TH WIDTH="1%"><FONT SIZE=1> </FONT></TH> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="TOP"> <TD WIDTH="72%"><FONT SIZE=2>Cash flows from operating activities:</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="TOP"> <TD WIDTH="72%"><FONT SIZE=2>Net income</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>11,850</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>8,664</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="TOP"> <TD WIDTH="72%"><FONT SIZE=2>Adjustments to reconcile net income to net cash provided by operating activities:</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="TOP"> <TD WIDTH="72%"><FONT SIZE=2>Depreciation</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>9,884</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>8,498</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="TOP"> <TD WIDTH="72%"><FONT SIZE=2>Amortization</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>2,404</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>1,959</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="TOP"> <TD WIDTH="72%"><FONT SIZE=2>Deferred income taxes</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>414</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(143</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="TOP"> <TD WIDTH="72%"><FONT SIZE=2>Other</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>144</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>1,028</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="TOP"> <TD WIDTH="72%"><FONT SIZE=2>Changes in assets and liabilities:</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="TOP"> <TD WIDTH="72%"><FONT SIZE=2>Accounts receivable</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(1,335</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>503</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="TOP"> <TD WIDTH="72%"><FONT SIZE=2>Inventories</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(3,149</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(947</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="TOP"> <TD WIDTH="72%"><FONT SIZE=2>Other current assets</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>5,331</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>294</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="TOP"> <TD WIDTH="72%"><FONT SIZE=2>Other assets</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(1,859</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(303</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="TOP"> <TD WIDTH="72%"><FONT SIZE=2>Accounts payable</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>7,059</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(2,367</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="TOP"> <TD WIDTH="72%"><FONT SIZE=2>Accrued expenses</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>1,273</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(121</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="TOP"> <TD WIDTH="72%"><FONT SIZE=2>Other noncurrent liabilities</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>1,630</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>1,884</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR VALIGN="TOP"> <TD WIDTH="72%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="11%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="11%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="TOP"> <TD WIDTH="72%"><FONT SIZE=2>Net cash provided by operating activities</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>33,646</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>18,949</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR VALIGN="TOP"> <TD WIDTH="72%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="11%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="11%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="TOP"> <TD WIDTH="72%"><FONT SIZE=2>Cash flows from investing activities:</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="TOP"> <TD WIDTH="72%"><FONT SIZE=2>Capital expenditures</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(19,138</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(16,013</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="TOP"> <TD WIDTH="72%"><FONT SIZE=2>Proceeds from sale of assets</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>51</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>19</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="TOP"> <TD WIDTH="72%"><FONT SIZE=2>Purchases of salon assets, net of cash acquired and certain obligations assumed</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(14,637</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(10,506</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD> </TR> <TR VALIGN="TOP"> <TD WIDTH="72%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="11%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="11%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="TOP"> <TD WIDTH="72%"><FONT SIZE=2>Net cash used in investing activities</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(33,724</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(26,500</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD> </TR> <TR VALIGN="TOP"> <TD WIDTH="72%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="11%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="11%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="TOP"> <TD WIDTH="72%"><FONT SIZE=2>Cash flows from financing activities:</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="TOP"> <TD WIDTH="72%"><FONT SIZE=2>Borrowings on revolving credit facilities</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>86,361</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>67,987</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="TOP"> <TD WIDTH="72%"><FONT SIZE=2>Payments on revolving credit facilities</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(57,161</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(66,695</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="TOP"> <TD WIDTH="72%"><FONT SIZE=2>Proceeds from issuance of long-term debt</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>21,392</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="TOP"> <TD WIDTH="72%"><FONT SIZE=2>Repayment of long-term debt</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(23,372</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(13,510</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="TOP"> <TD WIDTH="72%"><FONT SIZE=2>Dividends paid</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(1,162</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(715</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="TOP"> <TD WIDTH="72%"><FONT SIZE=2>Proceeds from issuance of common stock</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>216</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>281</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR VALIGN="TOP"> <TD WIDTH="72%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="11%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="11%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="TOP"> <TD WIDTH="72%"><FONT SIZE=2>Net cash provided by financing activities</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>4,882</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>8,740</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR VALIGN="TOP"> <TD WIDTH="72%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="11%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="11%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="TOP"> <TD WIDTH="72%"><FONT SIZE=2>Effect of exchange rate changes on cash</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>4</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(28</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD> </TR> <TR VALIGN="TOP"> <TD WIDTH="72%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="11%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="11%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="TOP"> <TD WIDTH="72%"><FONT SIZE=2>Increase in cash</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>4,808</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>1,161</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="TOP"> <TD WIDTH="72%"><FONT SIZE=2>Cash:</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="TOP"> <TD WIDTH="72%"><FONT SIZE=2>Beginning of period</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>7,351</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>7,678</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR VALIGN="TOP"> <TD WIDTH="72%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="11%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="11%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="TOP"> <TD WIDTH="72%"><FONT SIZE=2>End of period</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>12,159</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>8,839</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR VALIGN="TOP"> <TD WIDTH="72%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="11%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="11%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> </TABLE> <!-- end of user-specified TAGGED TABLE --> <P ALIGN="CENTER"><FONT SIZE=2>The accompanying notes are an integral part of the unaudited consolidated financial statements.</FONT></P> <P ALIGN="CENTER"><FONT SIZE=2> <!-- ZEQ.=1,SEQ=5,EFW="9926212",CP="REGIS CORPORATION",DN="1",FOLIO=5,FILE='DISK004:[99STP6.99STP2936]FE2936A.;9',USER='MGUZA',CD=';9-NOV-1999;09:08' --> </FONT></P> <P ALIGN="CENTER"><FONT SIZE=2><A NAME="fe2936_regis_corporation_notes_to_con__reg02849"> </A></FONT><FONT SIZE=2><B>REGIS CORPORATION<BR> NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<BR> (Unaudited) </B></FONT></P> <P><FONT SIZE=2><B>1. Basis of Presentation of Unaudited Interim Consolidated Financial Statements:</B></FONT></P> <P><FONT SIZE=2> The unaudited interim consolidated financial statements of Regis Corporation (the Company) as of September 30, 1999 and for the three months ended September 30, 1999 and 1998, reflect, in the opinion of management, all adjustments (which, with the exception of the matters discussed in Note 5 herein, include only normal recurring adjustments) necessary to fairly present the consolidated financial position of the Company as of September 30, 1999 and its consolidated results of operations and cash flows for the interim periods. The results of operations and cash flows for any interim period are not necessarily indicative of results of operations and cash flows for the full year.</FONT></P> <P><FONT SIZE=2> The year-end consolidated balance sheet data was derived from audited consolidated financial statements, but does not include all disclosures required by generally accepted accounting principles. The unaudited interim consolidated financial statements should be read in conjunction with the Company's consolidated financial statements which are included in the Company's 1999 Annual Report to Shareholders and incorporated by reference in the Company's Annual Report on Form 10-K for the year ended June 30, 1999. PricewaterhouseCoopers LLP, the Company's independent accountants, have performed limited reviews of the interim consolidated financial data included herein. Their report on such reviews accompanies this filing.</FONT></P> <P><FONT SIZE=2><B> Cost of Product Sales.</B></FONT><FONT SIZE=2> On an interim basis, product costs are determined by applying an estimated gross profit margin to product revenues.</FONT></P> <P><FONT SIZE=2><B>2. Comprehensive Income</B></FONT></P> <P><FONT SIZE=2> Comprehensive income for the Company includes net income and foreign currency translation charged or credited to the cumulative translation account within shareholders' equity. Comprehensive income for the three months ended September 30, 1999 and 1998 was as follows:</FONT></P> <!-- User-specified TAGGED TABLE --> <CENTER><TABLE WIDTH="71%" BORDER=0 CELLSPACING=0 CELLPADDING=0> <TR VALIGN="BOTTOM"> <TH WIDTH="70%" ALIGN="LEFT"><FONT SIZE=2> </FONT><BR></TH> <TH WIDTH="2%"><FONT SIZE=1> </FONT></TH> <TH WIDTH="26%" COLSPAN=5 ALIGN="CENTER"><FONT SIZE=1><B>Three Months Ended<BR> September 30,</B></FONT><HR NOSHADE></TH> <TH WIDTH="2%"><FONT SIZE=1> </FONT></TH> </TR> <TR VALIGN="BOTTOM"> <TH WIDTH="70%" ALIGN="LEFT"><FONT SIZE=1> </FONT><BR></TH> <TH WIDTH="2%"><FONT SIZE=1> </FONT></TH> <TH WIDTH="26%" COLSPAN=5 ALIGN="CENTER"><FONT SIZE=1><B>(Dollars in thousands)<BR></B></FONT><BR></TH> <TH WIDTH="2%"><FONT SIZE=1> </FONT></TH> </TR> <TR VALIGN="BOTTOM"> <TH WIDTH="70%" ALIGN="LEFT"><FONT SIZE=1> </FONT><BR></TH> <TH WIDTH="2%"><FONT SIZE=1> </FONT></TH> <TH WIDTH="13%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>1999</B></FONT><HR NOSHADE></TH> <TH WIDTH="2%"><FONT SIZE=1> </FONT></TH> <TH WIDTH="11%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>1998</B></FONT><HR NOSHADE></TH> <TH WIDTH="2%"><FONT SIZE=1> </FONT></TH> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM"> <TD WIDTH="70%"><FONT SIZE=2>Net income</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>11,850</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>8,664</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="BOTTOM"> <TD WIDTH="70%"><FONT SIZE=2>Change in cumulative foreign currency translation</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>286</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>1,008</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM"> <TD WIDTH="70%"><FONT SIZE=2>Less reclassification adjustment for translation losses realized in net income</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(964</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD> </TR> <TR VALIGN="TOP"> <TD WIDTH="70%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="11%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="BOTTOM"> <TD WIDTH="70%"><FONT SIZE=2>Total comprehensive income</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>12,136</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>8,708</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> </TR> <TR VALIGN="TOP"> <TD WIDTH="70%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="11%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> </TR> </TABLE></CENTER> <!-- end of user-specified TAGGED TABLE --> <P><FONT SIZE=2><B>3. Net Income per Share:</B></FONT></P> <P><FONT SIZE=2> Basic earnings per share (EPS) is calculated as net income divided by weighted average common shares outstanding. The Company's only dilutive securities are issuable under the Company's Stock Option Plan, as amended. Diluted EPS is calculated as net income divided by weighted average common shares outstanding, increased to include assumed conversion of dilutive securities. <!-- ZEQ.=2,SEQ=6,EFW="9926212",CP="REGIS CORPORATION",DN="1",FOLIO=6,FILE='DISK004:[99STP6.99STP2936]FE2936B.;15',USER='MGUZA',CD=';9-NOV-1999;09:08' --> </FONT></P> <P><FONT SIZE=2> The following provides information related to the weighted average common shares used in the calculation of the Company's basic and diluted EPS:</FONT></P> <!-- User-specified TAGGED TABLE --> <CENTER><TABLE WIDTH="70%" BORDER=0 CELLSPACING=0 CELLPADDING=0> <TR VALIGN="BOTTOM"> <TH WIDTH="63%" ALIGN="LEFT"><FONT SIZE=2> </FONT><BR></TH> <TH WIDTH="3%"><FONT SIZE=1> </FONT></TH> <TH WIDTH="34%" COLSPAN=3 ALIGN="CENTER"><FONT SIZE=1><B>Three Months Ended<BR> September 30,</B></FONT><HR NOSHADE></TH> </TR> <TR VALIGN="BOTTOM"> <TH WIDTH="63%" ALIGN="LEFT"><FONT SIZE=1> </FONT><BR></TH> <TH WIDTH="3%"><FONT SIZE=1> </FONT></TH> <TH WIDTH="16%" ALIGN="CENTER"><FONT SIZE=1><B>1999</B></FONT><HR NOSHADE></TH> <TH WIDTH="3%"><FONT SIZE=1> </FONT></TH> <TH WIDTH="16%" ALIGN="CENTER"><FONT SIZE=1><B>1998</B></FONT><HR NOSHADE></TH> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="TOP"> <TD WIDTH="63%"><FONT SIZE=2>Weighted average shares for basic earnings per share</FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="16%" ALIGN="RIGHT"><FONT SIZE=2>38,670,420</FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="16%" ALIGN="RIGHT"><FONT SIZE=2>38,258,057</FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="TOP"> <TD WIDTH="63%"><FONT SIZE=2>Dilutive effect of stock options</FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="16%" ALIGN="RIGHT"><FONT SIZE=2>1,143,202</FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="16%" ALIGN="RIGHT"><FONT SIZE=2>1,138,606</FONT></TD> </TR> <TR VALIGN="TOP"> <TD WIDTH="63%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="16%" ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="16%" ALIGN="RIGHT"><HR NOSHADE></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="TOP"> <TD WIDTH="63%"><FONT SIZE=2>Weighted average for shares for diluted earnings per share</FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="16%" ALIGN="RIGHT"><FONT SIZE=2> <BR> 39,813,622</FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="16%" ALIGN="RIGHT"><FONT SIZE=2> <BR> 39,396,663</FONT></TD> </TR> <TR VALIGN="TOP"> <TD WIDTH="63%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="16%" ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="16%" ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD> </TR> </TABLE></CENTER> <!-- end of user-specified TAGGED TABLE --> <P><FONT SIZE=2><B>4. Nonrecurring Items:</B></FONT></P> <P><FONT SIZE=2> Nonrecurring items included in operating income in the first quarter of fiscal 1999 consist of $1.4 million of expense associated with the Company's year 2000 remediation.</FONT></P> <P><FONT SIZE=2><B>5. Transaction and Restructuring Liabilities:</B></FONT></P> <P><FONT SIZE=2> The following provides additional information concerning the Company's transaction and restructuring liability related to its fiscal 1999 mergers with The Barbers and Heidi's and its restructuring liability related to its fiscal 1999 restructuring plan for its international operations.</FONT></P> <!-- User-specified TAGGED TABLE --> <TABLE WIDTH="89%" BORDER=0 CELLSPACING=0 CELLPADDING=0> <TR VALIGN="BOTTOM"> <TH WIDTH="58%" ALIGN="LEFT"><FONT SIZE=2> </FONT><BR></TH> <TH WIDTH="2%"><FONT SIZE=1> </FONT></TH> <TH WIDTH="10%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>June 30,<BR> 1999</B></FONT><HR NOSHADE></TH> <TH WIDTH="2%"><FONT SIZE=1> </FONT></TH> <TH WIDTH="11%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Cash<BR> Payments</B></FONT><HR NOSHADE></TH> <TH WIDTH="2%"><FONT SIZE=1> </FONT></TH> <TH WIDTH="15%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>September 30,<BR> 1999</B></FONT><HR NOSHADE></TH> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="TOP"> <TD WIDTH="58%"><FONT SIZE=2>Restructuring-International</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="8%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="13%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="TOP"> <TD WIDTH="58%"><FONT SIZE=2>Severance</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>562</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>378</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>184</FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="TOP"> <TD WIDTH="58%"><FONT SIZE=2>Salon closures and dispositions</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>1,187</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>177</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>1,010</FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="TOP"> <TD WIDTH="58%"><FONT SIZE=2>Other</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>351</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>351</FONT></TD> </TR> <TR VALIGN="TOP"> <TD WIDTH="58%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="11%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="15%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="TOP"> <TD WIDTH="58%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>2,100</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>555</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>1,545</FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="TOP"> <TD WIDTH="58%"><FONT SIZE=2>Restructuring-Mergers</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="8%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="13%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="TOP"> <TD WIDTH="58%"><FONT SIZE=2>Severance</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>2,883</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>288</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>2,595</FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="TOP"> <TD WIDTH="58%"><FONT SIZE=2>Salon closures and dispositions</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>115</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>32</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>83</FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="TOP"> <TD WIDTH="58%"><FONT SIZE=2>Other</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>746</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>583</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>163</FONT></TD> </TR> <TR VALIGN="TOP"> <TD WIDTH="58%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="11%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="15%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> </TR> <TR BGCOLOR="White" VALIGN="TOP"> <TD WIDTH="58%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>3,744</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>903</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>2,841</FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="TOP"> <TD WIDTH="58%"><FONT SIZE=2>Transaction Charges-Mergers</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>137</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>110</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>27</FONT></TD> </TR> <TR VALIGN="TOP"> <TD WIDTH="58%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="11%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="15%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> </TR> <TR BGCOLOR="White" VALIGN="TOP"> <TD WIDTH="58%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>5,981</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>1,568</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>4,413</FONT></TD> </TR> <TR VALIGN="TOP"> <TD WIDTH="58%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="11%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="15%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD> </TR> </TABLE> <!-- end of user-specified TAGGED TABLE --> <P><FONT SIZE=2> <!-- ZEQ.=3,SEQ=7,EFW="9926212",CP="REGIS CORPORATION",DN="1",FOLIO=7,FILE='DISK004:[99STP6.99STP2936]FE2936B.;15',USER='MGUZA',CD=';9-NOV-1999;09:08' --> </FONT></P> <!-- Generated by Merrill Corporation (www.merrillcorp.com) --> <BR> <P><FONT SIZE=2><B>6. Segment Information:</B></FONT></P> <P><FONT SIZE=2> Commencing with its 1999 fiscal year end reporting, the Company adopted SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information". This new standard requires public companies to report financial and descriptive information about their reportable operating segments, generally based on the way that management has organized the segments within the enterprise for making operating decisions and assessing performance.</FONT></P> <P><FONT SIZE=2> Each of the Company's operating segments have generally similar products and services. The Company is organized to manage its operations based on geographical location. The Company's operating segments have been aggregated into two reportable segments: domestic salons and international salons. The Company operates or franchises 4,742 domestic salons located within high-profile regional malls and strip shopping centers under several different concepts including Regis Salons, MasterCuts, Trade Secret, SmartStyle, Supercuts and Cost Cutters brand names. The Company's International segment includes 299 salons operating in leading department stores, mass merchants and high street locations.</FONT></P> <P><FONT SIZE=2> The accounting policies of the reportable segments are the same as those used for the Consolidated Financial Statements. The Company evaluates the performance of its operating segments based on direct salon contribution, before supervision and corporate overhead expenses. Intersegment sales and transfers are not significant</FONT></P> <P><FONT SIZE=2> Summarized financial information concerning the Company's reportable segments for the three months ended September 30, 1999 and 1998, respectively, is shown in the following table.</FONT></P> <!-- User-specified TAGGED TABLE --> <CENTER><TABLE WIDTH="70%" BORDER=0 CELLSPACING=0 CELLPADDING=0> <TR VALIGN="BOTTOM"> <TH WIDTH="66%" ALIGN="LEFT"><FONT SIZE=2> </FONT><BR></TH> <TH WIDTH="2%"><FONT SIZE=1> </FONT></TH> <TH WIDTH="31%" COLSPAN=5 ALIGN="CENTER"><FONT SIZE=1><B>(Dollars in thousands)</B></FONT><HR NOSHADE></TH> </TR> <TR VALIGN="BOTTOM"> <TH WIDTH="66%" ALIGN="LEFT"><FONT SIZE=1> </FONT><BR></TH> <TH WIDTH="2%"><FONT SIZE=1> </FONT></TH> <TH WIDTH="14%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>1999</B></FONT><HR NOSHADE></TH> <TH WIDTH="2%"><FONT SIZE=1> </FONT></TH> <TH WIDTH="14%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>1998</B></FONT><HR NOSHADE></TH> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="TOP"> <TD WIDTH="66%"><FONT SIZE=2>Company-owned revenues:</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="TOP"> <TD WIDTH="66%"><FONT SIZE=2>Domestic</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>240,118</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>202,221</FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="TOP"> <TD WIDTH="66%"><FONT SIZE=2>International</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>21,145</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>25,478</FONT></TD> </TR> <TR VALIGN="TOP"> <TD WIDTH="66%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="14%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="14%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> </TR> <TR BGCOLOR="White" VALIGN="TOP"> <TD WIDTH="66%"><FONT SIZE=2>Total</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>261,263</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>227,699</FONT></TD> </TR> <TR VALIGN="TOP"> <TD WIDTH="66%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="14%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="14%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="TOP"> <TD WIDTH="66%"><FONT SIZE=2>Salon contribution:</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="TOP"> <TD WIDTH="66%"><FONT SIZE=2>Domestic</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>41,354</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>35,586</FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="TOP"> <TD WIDTH="66%"><FONT SIZE=2>International</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>3,081</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>3,451</FONT></TD> </TR> <TR VALIGN="TOP"> <TD WIDTH="66%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="14%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="14%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> </TR> <TR BGCOLOR="White" VALIGN="TOP"> <TD WIDTH="66%"><FONT SIZE=2>Total</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>44,435</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>39,037</FONT></TD> </TR> <TR VALIGN="TOP"> <TD WIDTH="66%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="14%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="14%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD> </TR> </TABLE></CENTER> <!-- end of user-specified TAGGED TABLE --> <BR> <P><FONT SIZE=2><B>7. Subsequent Event:</B></FONT></P> <P><FONT SIZE=2> On November 1, 1999, the Company entered into an agreement and plan of merger with Supercuts (Holdings) Limited (Supercuts Limited), a United Kingdom based company operating 68 hairstyling salons under the Supercuts brand name. Under the terms of the agreement and plan of merger, the shareholders of Supercuts Limited will receive approximately 1.8 million shares of Regis common stock. It is expected that the transaction will be accounted for as a pooling-of-interests. The transaction is expected to close during the Company's fiscal 2000 second quarter.</FONT></P> <P><FONT SIZE=2> <!-- ZEQ.=1,SEQ=8,EFW="9926212",CP="REGIS CORPORATION",DN="1",FOLIO=8,FILE='DISK004:[99STP6.99STP2936]FG2936A.;13',USER='MGUZA',CD=';9-NOV-1999;09:11' --> </FONT></P> <!-- Generated by Merrill Corporation (www.merrillcorp.com) --> <P ALIGN="CENTER"><FONT SIZE=2><B>REPORT OF INDEPENDENT ACCOUNTANTS</B></FONT></P> <P><FONT SIZE=2>To the Shareholders and Directors of Regis Corporation:</FONT></P> <P><FONT SIZE=2> We have reviewed the accompanying consolidated balance sheet of Regis Corporation as of September 30, 1999, and the related consolidated statements of operations and cash flows for the three month periods ended September 30, 1999 and 1998. These financial statements are the responsibility of the Company's management.</FONT></P> <P><FONT SIZE=2> We conducted our reviews in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.</FONT></P> <P><FONT SIZE=2> Based on our reviews, we are not aware of any material modifications that should be made to the accompanying consolidated interim financial statements referred to above for them to be in conformity with generally accepted accounting principles.</FONT></P> <P><FONT SIZE=2> We previously audited in accordance with generally accepted auditing standards, the consolidated balance sheet as of June 30, 1999, and the related consolidated statements of operations, changes in shareholders' equity and cash flows for the year then ended (not presented herein), and in our report dated August 24, 1999, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet as of June 30, 1999, is fairly stated, in all material respects in relation to the consolidated balance sheet from which it has been derived.</FONT></P> <P><FONT SIZE=2>PRICEWATERHOUSECOOPERS LLP</FONT></P> <P><FONT SIZE=2>Minneapolis, Minnesota<BR> October 27, 1999</FONT></P> <P><FONT SIZE=2> <!-- ZEQ.=1,SEQ=9,EFW="9926212",CP="REGIS CORPORATION",DN="1",FOLIO=9,FILE='DISK004:[99STP6.99STP2936]FI2936A.;9',USER='MGUZA',CD=';9-NOV-1999;09:08' --> </FONT></P> <!-- Generated by Merrill Corporation (www.merrillcorp.com) --> <H2><FONT SIZE=3 > </FONT></H2> <BR> <P ALIGN="CENTER"><FONT SIZE=2><A NAME="fk2936_item_2._management_s_discussio__ite03663"> </A></FONT><FONT SIZE=2><B>Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL<BR> CONDITION AND RESULTS OF OPERATIONS </B></FONT></P> <P ALIGN="CENTER"><FONT SIZE=2> </FONT><FONT SIZE=2><B>Summary</B></FONT></P> <P><FONT SIZE=2> Regis Corporation, based in Minneapolis, is the world's largest owner, operator, franchisor and acquirer of hair and retail product salons in 50 states, Puerto Rico, Canada and the United Kingdom. The Regis worldwide operations include 5,041 salons at September 30, 1999 operating in two segments: domestic and international. The Company's domestic segment includes 4,742 salons operating primarily under the brand names of Regis Salons, MasterCuts, Trade Secret, SmartStyle, Supercuts and Cost Cutters. The Company's international operations include 299 salons located in the United Kingdom. The Company has more than 32,000 employees worldwide.</FONT></P> <P><FONT SIZE=2> On November 1, 1999, the Company entered into an agreement and plan of merger with Supercuts (Holdings) Limited, a United Kingdom based company operating 68 hairstyling salons under the Supercuts brand name. The transaction is expected to close during the Company's fiscal 2000 second quarter.</FONT></P> <P><FONT SIZE=2> During the first quarter of fiscal 2000, the Company's consolidated revenues grew to a record $261.3 million, including franchise income of $12.4 million, a 14.7 percent increase over first quarter fiscal 1999 consolidated revenues of $227.7 million. First quarter operating income grew to $22.5 million, a 36.3 percent increase over the first quarter of fiscal 1999.</FONT></P> <P><FONT SIZE=2> Net income in the first quarter of fiscal 2000, increased to $11.9 million, or $.30 per diluted share, an earnings per share increase of 25.0 percent from first quarter fiscal 1999 net income of $9.5 million, or $.24 per diluted share. Prior year fiscal 1999 results reflect the costs associated with the Company's year 2000 remediation program, which are nonrecurring in nature. Net income in the first quarter of fiscal 1999, including nonrecurring items, was $8.7 million, or $.22 per diluted share. <!-- ZEQ.=1,SEQ=10,EFW="9926212",CP="REGIS CORPORATION",DN="1",FOLIO=10,FILE='DISK004:[99STP6.99STP2936]FK2936A.;21',USER='MGUZA',CD=';9-NOV-1999;09:11' --> </FONT></P> <BR> <P ALIGN="CENTER"><FONT SIZE=2><A NAME="fk2936_results_of_operations"> </A></FONT><FONT SIZE=2><B>Results of Operations </B></FONT></P> <P><FONT SIZE=2> The following table sets forth for the periods indicated certain information derived from the Company's Consolidated Statement of Operations expressed as a percentage of total revenues, except as noted.</FONT></P> <!-- User-specified TAGGED TABLE --> <TABLE WIDTH="81%" BORDER=0 CELLSPACING=0 CELLPADDING=0> <TR VALIGN="BOTTOM"> <TH WIDTH="79%" ALIGN="LEFT"><FONT SIZE=2> </FONT><BR></TH> <TH WIDTH="4%"><FONT SIZE=1> </FONT></TH> <TH WIDTH="15%" COLSPAN=3 ALIGN="CENTER"><FONT SIZE=1><B>For the Three Months Ended<BR> September 30,</B></FONT><HR NOSHADE></TH> <TH WIDTH="2%"><FONT SIZE=1> </FONT></TH> </TR> <TR VALIGN="BOTTOM"> <TH WIDTH="79%" ALIGN="LEFT"><FONT SIZE=1> </FONT><BR></TH> <TH WIDTH="4%"><FONT SIZE=1> </FONT></TH> <TH WIDTH="6%" ALIGN="CENTER"><FONT SIZE=1><B>1999</B></FONT><HR NOSHADE></TH> <TH WIDTH="4%"><FONT SIZE=1> </FONT></TH> <TH WIDTH="6%" ALIGN="CENTER"><FONT SIZE=1><B>1998</B></FONT><HR NOSHADE></TH> <TH WIDTH="2%"><FONT SIZE=1> </FONT></TH> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="TOP"> <TD WIDTH="79%"><FONT SIZE=2>Company-owned service revenues (1)</FONT></TD> <TD WIDTH="4%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>71.2</FONT></TD> <TD WIDTH="4%"><FONT SIZE=2>%</FONT></TD> <TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>72.1</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="TOP"> <TD WIDTH="79%"><FONT SIZE=2>Company-owned product revenues (1)</FONT></TD> <TD WIDTH="4%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>28.8</FONT></TD> <TD WIDTH="4%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>27.9</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="TOP"> <TD WIDTH="79%"><FONT SIZE=2>Franchise income</FONT></TD> <TD WIDTH="4%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>4.7</FONT></TD> <TD WIDTH="4%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>5.1</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="TOP"> <TD WIDTH="79%"><FONT SIZE=2>Company-owned operations:</FONT></TD> <TD WIDTH="4%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="6%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="4%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="6%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="TOP"> <TD WIDTH="79%"><FONT SIZE=2>Profit margins on service (2)</FONT></TD> <TD WIDTH="4%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>42.9</FONT></TD> <TD WIDTH="4%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>43.0</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="TOP"> <TD WIDTH="79%"><FONT SIZE=2>Profit margins on product (3)</FONT></TD> <TD WIDTH="4%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>46.4</FONT></TD> <TD WIDTH="4%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>46.4</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="TOP"> <TD WIDTH="79%"><FONT SIZE=2>Direct salon (1)</FONT></TD> <TD WIDTH="4%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>8.9</FONT></TD> <TD WIDTH="4%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>8.7</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="TOP"> <TD WIDTH="79%"><FONT SIZE=2>Rent (1)</FONT></TD> <TD WIDTH="4%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>13.7</FONT></TD> <TD WIDTH="4%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>13.8</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="TOP"> <TD WIDTH="79%"><FONT SIZE=2>Depreciation (1)</FONT></TD> <TD WIDTH="4%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>3.4</FONT></TD> <TD WIDTH="4%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>3.4</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="TOP"> <TD WIDTH="79%"><FONT SIZE=2> <BR> Direct salon contribution (1)</FONT></TD> <TD WIDTH="4%"><FONT SIZE=2> <BR> </FONT></TD> <TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2> <BR> 17.9</FONT></TD> <TD WIDTH="4%"><FONT SIZE=2> <BR> </FONT></TD> <TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2> <BR> 18.1</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> <BR> </FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="TOP"> <TD WIDTH="79%"><FONT SIZE=2> <BR> Selling, general and administrative</FONT></TD> <TD WIDTH="4%"><FONT SIZE=2> <BR> </FONT></TD> <TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2> <BR> 10.7</FONT></TD> <TD WIDTH="4%"><FONT SIZE=2> <BR> </FONT></TD> <TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2> <BR> 12.0</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> <BR> </FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="TOP"> <TD WIDTH="79%"><FONT SIZE=2>Depreciation and amortization</FONT></TD> <TD WIDTH="4%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>1.4</FONT></TD> <TD WIDTH="4%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>1.4</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="TOP"> <TD WIDTH="79%"><FONT SIZE=2>Nonrecurring items</FONT></TD> <TD WIDTH="4%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2> </FONT></TD> <TD WIDTH="4%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>0.6</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="TOP"> <TD WIDTH="79%"><FONT SIZE=2>Other</FONT></TD> <TD WIDTH="4%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>1.0</FONT></TD> <TD WIDTH="4%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>1.0</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="TOP"> <TD WIDTH="79%"><FONT SIZE=2>Operating income</FONT></TD> <TD WIDTH="4%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>8.6</FONT></TD> <TD WIDTH="4%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>7.3</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="TOP"> <TD WIDTH="79%"><FONT SIZE=2>Income before income taxes</FONT></TD> <TD WIDTH="4%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>7.5</FONT></TD> <TD WIDTH="4%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>6.2</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="TOP"> <TD WIDTH="79%"><FONT SIZE=2>Net income</FONT></TD> <TD WIDTH="4%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>4.5</FONT></TD> <TD WIDTH="4%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>3.8</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="TOP"> <TD WIDTH="79%"><FONT SIZE=2>Operating income, excluding nonrecurring items</FONT></TD> <TD WIDTH="4%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>8.6</FONT></TD> <TD WIDTH="4%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>7.9</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="TOP"> <TD WIDTH="79%"><FONT SIZE=2>Net income, excluding nonrecurring items</FONT></TD> <TD WIDTH="4%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>4.5</FONT></TD> <TD WIDTH="4%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>4.2</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> </TR> </TABLE> <!-- end of user-specified TAGGED TABLE --> <HR NOSHADE ALIGN=LEFT WIDTH=120> <DL compact> <DT><FONT SIZE=2>(1)</FONT></DT><DD><FONT SIZE=2>Computed as a percent of company-owned revenues <BR><BR></FONT></DD><DT><FONT SIZE=2>(2)</FONT></DT><DD><FONT SIZE=2>Computed as a percent of company-owned service revenues <BR><BR></FONT></DD><DT><FONT SIZE=2>(3)</FONT></DT><DD><FONT SIZE=2>Computed as a percent of company-owned product revenues</FONT></DD></DL> <BR> <P><FONT SIZE=2> </FONT><FONT SIZE=2><B>Three months ended September 30, 1999, compared to three months ended September 30, 1998:</B></FONT></P> <P><FONT SIZE=2><B>REVENUES</B></FONT></P> <P><FONT SIZE=2> </FONT><FONT SIZE=2><B>Revenues</B></FONT><FONT SIZE=2> for the first quarter of fiscal 2000 grew to a record $261.3 million, an increase of $33.6 million or 14.7 percent, over the same period in fiscal 1999. System-wide sales, inclusive of non-consolidated sales generated from franchised salons, increased 10.0 percent in the first quarter of fiscal 2000 to $385.0 million. These increases in company-owned and system-wide sales are the result of the total number of salons added to the system through acquisitions, same-store sales increases as well as net salon openings. <!-- ZEQ.=2,SEQ=11,EFW="9926212",CP="REGIS CORPORATION",DN="1",FOLIO=11,FILE='DISK004:[99STP6.99STP2936]FK2936A.;21',USER='MGUZA',CD=';9-NOV-1999;09:11' --> </FONT></P> <P><FONT SIZE=2> Revenues by division for the first quarter of fiscal 2000 and 1999 are as follows:</FONT></P> <!-- User-specified TAGGED TABLE --> <CENTER><TABLE WIDTH="70%" BORDER=0 CELLSPACING=0 CELLPADDING=0> <TR VALIGN="BOTTOM"> <TH WIDTH="66%" ALIGN="LEFT"><FONT SIZE=2> </FONT><BR></TH> <TH WIDTH="2%"><FONT SIZE=1> </FONT></TH> <TH WIDTH="31%" COLSPAN=5 ALIGN="CENTER"><FONT SIZE=1><B>(Dollars in thousands)<BR></B></FONT><BR></TH> </TR> <TR VALIGN="BOTTOM"> <TH WIDTH="66%" ALIGN="LEFT"><FONT SIZE=1> </FONT><BR></TH> <TH WIDTH="2%"><FONT SIZE=1> </FONT></TH> <TH WIDTH="14%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2000</B></FONT><HR NOSHADE></TH> <TH WIDTH="2%"><FONT SIZE=1> </FONT></TH> <TH WIDTH="14%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>1999</B></FONT><HR NOSHADE></TH> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="TOP"> <TD WIDTH="66%"><FONT SIZE=2>Regis Salons</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>91,707</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>83,849</FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="TOP"> <TD WIDTH="66%"><FONT SIZE=2>Strip Center Salons (primarily Supercuts)</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>44,700</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>32,345</FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="TOP"> <TD WIDTH="66%"><FONT SIZE=2>MasterCuts</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>34,227</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>29,418</FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="TOP"> <TD WIDTH="66%"><FONT SIZE=2>Trade Secret</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>38,238</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>30,981</FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="TOP"> <TD WIDTH="66%"><FONT SIZE=2>SmartStyle</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>18,845</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>14,057</FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="TOP"> <TD WIDTH="66%"><FONT SIZE=2>International</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>21,145</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>25,478</FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="TOP"> <TD WIDTH="66%"><FONT SIZE=2>Franchise income</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>12,401</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>11,571</FONT></TD> </TR> <TR VALIGN="TOP"> <TD WIDTH="66%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="14%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="14%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> </TR> <TR BGCOLOR="White" VALIGN="TOP"> <TD WIDTH="66%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>261,263</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>227,669</FONT></TD> </TR> <TR VALIGN="TOP"> <TD WIDTH="66%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="14%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="14%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD> </TR> </TABLE></CENTER> <!-- end of user-specified TAGGED TABLE --> <P><FONT SIZE=2> Same-store sales for domestic company-owned salons increased 4.2 percent in the first quarter of fiscal 2000, compared to same-store sales increases of 5.8 reported in the first quarter of fiscal 1999. System-wide same-store sales for the first quarter of fiscal 2000 increased 4.2 percent, compared to 5.6 percent in the same period in fiscal 1999. Same-store sales increases achieved are primarily due to an increase in the number of customers served. A total of 25.3 million customers system-wide were served during the first quarter of fiscal 2000. The Company utilizes an audiovisual-based training system in its company-owned salons. Management believes this training system provides its employees with improved customer service and technical skills, and positively contributes to the increase in customers served.</FONT></P> <P><FONT SIZE=2> </FONT><FONT SIZE=2><B>Service Revenues</B></FONT><FONT SIZE=2> in the first quarter of fiscal 2000 grew to $177.2 million, an increase of $21.3 million, or 13.7 percent, over the same period in fiscal 1999. This increase is a result of salon acquisitions the Company has made during the past twelve months, strong service same-store sale increases of 4.0 percent, and accelerated new salon construction.</FONT></P> <P><FONT SIZE=2> </FONT><FONT SIZE=2><B>Product Revenues</B></FONT><FONT SIZE=2> in the first quarter of fiscal 2000 grew to $71.6 million, an increase of $11.4 million, or 18.9 percent, over the same period in fiscal 1999. This increase continues a trend of escalating product revenues due to strong product same-store sales growth of 4.8 percent, a reflection of the continuous focus on product awareness, training and acceptance of national label merchandise. Product revenues as a percent of total company-owned revenues increased to 28.8 percent of revenues compared to 27.9 percent of revenues in the same period of fiscal 1999.</FONT></P> <P><FONT SIZE=2> </FONT><FONT SIZE=2><B>Franchise Income,</B></FONT><FONT SIZE=2> including royalties, initial franchise fees and product and equipment sales made by the Company to franchisees, increased slightly to $12.4 million in the first quarter of fiscal 2000. The increase in franchise income is a result of an increase in royalties on franchisee sales, which sales are not included in the Company's consolidated revenues, as well as an increase in product sales to franchisees.</FONT></P> <P><FONT SIZE=2><B>COST OF REVENUES</B></FONT></P> <P><FONT SIZE=2> The aggregate cost of revenues in the first quarter of fiscal 2000 was $139.6 million, compared to $121.2 million in the same period in fiscal 1999. The resulting combined gross margin percentage for the first quarter of fiscal 2000 was 43.9 percent of revenues, identical to that of the first quarter of fiscal 1999.</FONT></P> <P><FONT SIZE=2> </FONT><FONT SIZE=2><B>Service margins</B></FONT><FONT SIZE=2> remained fairly consistent at 42.9 percent in the first quarter of fiscal 2000, compared to 43.0 percent in the same period in fiscal 1999. This 10 basis point decline is primarily due to higher initial payroll costs related to certain acquisitions, partially offset by strong service same-store sale increases.</FONT></P> <P><FONT SIZE=2> </FONT><FONT SIZE=2><B>Product margins</B></FONT><FONT SIZE=2> remained consistent at 46.4 percent in the first quarter of fiscal 2000 and 1999.</FONT></P> <P><FONT SIZE=2> <!-- ZEQ.=3,SEQ=12,EFW="9926212",CP="REGIS CORPORATION",DN="1",FOLIO=12,FILE='DISK004:[99STP6.99STP2936]FK2936B.;8',USER='MGUZA',CD=';9-NOV-1999;09:11' --> </FONT><FONT SIZE=2><B>DIRECT SALON</B></FONT></P> <P><FONT SIZE=2> This expense category includes direct costs associated with salon operations such as advertising, promotion, insurance, telephone and utilities. Direct salon expense of $22.1 million increased slightly as a percentage of company-owned revenues to 8.9 percent in the first quarter of fiscal 2000 from 8.7 percent in the same period in fiscal 1999. The slight increase is due to an increase in freight costs during the quarter resulting from the roll-out of the new Regis private label product line and, an increase in salon advertising related to the Company's development of the HairMasters and Style America strip center salon concepts.</FONT></P> <P><FONT SIZE=2><B>RENT</B></FONT></P> <P><FONT SIZE=2> Rent expense in the first quarter of fiscal 2000 was $34.2 million or 13.7 percent of company-owned revenues, compared to $29.7 million or 13.8 percent of company-owned revenues, in the same period in fiscal 1999. The slight improvement in rate is primarily due to leveraging this fixed cost against sales increases in the Wal-Mart and International divisions.</FONT></P> <P><FONT SIZE=2><B>DEPRECIATION—SALON LEVEL</B></FONT></P> <P><FONT SIZE=2> Depreciation expense at the salon level remained consistent at 3.4 percent of revenues in both the first quarter of fiscal 2000 and 1999, primarily due to this fixed cost growing at relatively the same rate as sales due to accelerated new salon construction and acquisitions.</FONT></P> <P><FONT SIZE=2><B>DIRECT SALON CONTRIBUTION</B></FONT></P> <P><FONT SIZE=2> For the reasons described above, direct salon contribution, representing company-owned salon revenues less associated operating expenses, improved in the first quarter of fiscal 2000 to $44.4 million, or 17.9 percent of company-owned revenues, compared to $39.0 million or 18.1 percent of company-owned revenues in the same period of fiscal 1999.</FONT></P> <P><FONT SIZE=2><B>SELLING, GENERAL AND ADMINISTRATIVE</B></FONT></P> <P><FONT SIZE=2> Selling, general and administrative (SG&A) expenses was to $27.9 million, or 10.7 percent of total revenues in the first quarter of fiscal 2000, compared to $27.3 million, or 12.0 percent of total revenues in the same period in fiscal 1999. Expenses in this category include field supervision (payroll, related taxes and travel) and home office administration costs (such as warehousing, salaries, occupancy costs and professional fees). This 130 basis point rate improvement is primarily related the Company's ability to leverage the fixed cost components of SG&A against sales growth and a decrease in SG&A expenses as a result of the amalgamation of The Barbers merger and implementation of the UK restructuring plan.</FONT></P> <P><FONT SIZE=2><B>DEPRECIATION AND AMORTIZATION—CORPORATE</B></FONT></P> <P><FONT SIZE=2> Depreciation and amortization remained constant at 1.4 percent of total revenues in the first quarter of fiscal 2000 and 1999, primarily due to increases in the level of goodwill amortization resulting from acquisitions in the past twelve months, offset by leveraging this fixed cost against revenue increases.</FONT></P> <P><FONT SIZE=2><B>NONRECURRING ITEMS</B></FONT></P> <P><FONT SIZE=2> Nonrecurring items included in operating income in the first quarter of fiscal 1999 consist of expenses associated with the Company's year 2000 remediation efforts. See discussion of year 2000 remediation within Liquidity and Capital Resources. <!-- ZEQ.=4,SEQ=13,EFW="9926212",CP="REGIS CORPORATION",DN="1",FOLIO=13,FILE='DISK004:[99STP6.99STP2936]FK2936B.;8',USER='MGUZA',CD=';9-NOV-1999;09:11' --> </FONT></P> <P><FONT SIZE=2><B>OPERATING INCOME</B></FONT></P> <P><FONT SIZE=2> Operating income in the first quarter of fiscal 2000 improved to $22.5 million, an increase of $6.0 million over the same period in fiscal 1999 (an increase of $7.4 million, excluding nonrecurring items). Operating income as a percentage of total revenues grew to 8.6 percent in the first quarter of fiscal 2000 compared to 7.9 percent in the same period in fiscal 1999, excluding nonrecurring items. This improvement is attributable primarily to leveraging of SG&A expenses, partially offset by higher direct salon expenses as a percent of total revenues, excluding nonrecurring items.</FONT></P> <P><FONT SIZE=2><B>INTEREST</B></FONT></P> <P><FONT SIZE=2> Interest expense in the first quarter of fiscal 2000 grew to $3.4 million compared to $2.7 million for the same period in fiscal 1999, primarily due to an increase in debt levels over the prior year.</FONT></P> <P><FONT SIZE=2><B>INCOME TAXES</B></FONT></P> <P><FONT SIZE=2> The Company's annual effective income tax rate for fiscal 2000 is estimated to be approximately 39.5 percent, compared to 42.5 percent for fiscal year 1999. In fiscal 1999, the Company's effective tax rate was negatively impacted by nondeductible merger and transaction costs associated with the Company's merger with Heidi's and The Barbers, and the U.K. restructuring charge.</FONT></P> <P><FONT SIZE=2><B>NET INCOME</B></FONT></P> <P><FONT SIZE=2> Net income in the first quarter of fiscal 2000 grew to a record $11.9 million or $.30 per diluted share, compared to net income of $8.7 million or $.22 per diluted share in the same period in fiscal 1999. Exclusive of nonrecurring items, net income in the first quarter of the previous 1999 fiscal year was $9.5 million or $.24 per share.</FONT></P> <P><FONT SIZE=2><B>Liquidity and Capital Resources</B></FONT></P> <P><FONT SIZE=2> Customers generally 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 the first three months of fiscal 2000 grew to $34.0 million compared to $19.0 million during the same period in fiscal 1999. The increase between the two periods is primarily due to improved operating performance.</FONT></P> <P><FONT SIZE=2> During the first three months of fiscal 2000, the Company had worldwide capital expenditures of $20.5 million, of which $1.4 million related to acquisitions of 92 salons. The Company constructed 18 new Regis Salons, 13 new MasterCuts salons, 11 new Trade Secret salons, 29 new Wal-Mart/SmartStyle salons, 15 new Strip Center Salons and 9 new International salons, and completed 22 major remodeling projects. All capital expenditures during the first three months of fiscal 2000 were funded by cash flow from the Company's operations and borrowings under its revolving credit facility.</FONT></P> <P><FONT SIZE=2> The Company anticipates its worldwide salon development program for fiscal 2000 will include the construction of approximately 360 new company-owned salons, and 125 major remodeling and conversion projects. It is expected that expenditures for these new salons and other projects will be approximately $70.0 million in fiscal 2000, excluding capital expenditures related to acquisitions.</FONT></P> <P><FONT SIZE=2><I>Financing</I></FONT></P> <P><FONT SIZE=2> Management believes that cash generated from operations and amounts available under its revolving credit facilities will be sufficient to fund its anticipated capital expenditures and required debt repayments for the foreseeable future. <!-- ZEQ.=5,SEQ=14,EFW="9926212",CP="REGIS CORPORATION",DN="1",FOLIO=14,FILE='DISK004:[99STP6.99STP2936]FK2936B.;8',USER='MGUZA',CD=';9-NOV-1999;09:11' --> </FONT></P> <P><FONT SIZE=2><I>Dividends</I></FONT></P> <P><FONT SIZE=2> During the first quarter of fiscal 2000, the Company paid quarterly dividends of $1.2 million, or $.03 per share. On November 2, 1999 the Board of Directors of the Company declared a $.03 per share quarterly dividend payable November 30, 1999 to shareholders of record on November 15, 1999.</FONT></P> <P><FONT SIZE=2><I>Year 2000</I></FONT></P> <P><FONT SIZE=2> The Company previously initiated a comprehensive project to prepare its computer systems for the year 2000. The Company has completed all phases of the project including the awareness, assessment, validation and implementation phases. Accordingly, management believes the year 2000 will not have a significant impact on operations. As part of the overall project, the Company is in the process of developing a contingency plan to mitigate the Company's risk that primary vendors or other external forces could have an impact on the Company's operations.</FONT></P> <P><FONT SIZE=2> Costs associated with the year 2000 were expensed as incurred and funded through operating cash flows. The Company incurred $4.6 million related to year 2000 project costs from the project's inception in fiscal 1998 through its completion in fiscal 1999. No significant additional costs are anticipated to be incurred in the future.</FONT></P> <P><FONT SIZE=2> The Company has contacted critical suppliers of products and services to assess whether the suppliers' operations and the products and services they provide are year 2000 compliant or to monitor their progress toward year 2000 compliance. The results of the Company's inquiries have indicated that the majority of its critical suppliers are either compliant or have a plan in place to be compliant by the end of 1999. There can be no absolute assurance that another company's failure to ensure year 2000 compliance would not have an adverse effect on the Company.</FONT></P> <P><FONT SIZE=2> <!-- ZEQ.=6,SEQ=15,EFW="9926212",CP="REGIS CORPORATION",DN="1",FOLIO=15,FILE='DISK004:[99STP6.99STP2936]FK2936B.;8',USER='MGUZA',CD=';9-NOV-1999;09:11' --> </FONT></P> <!-- Generated by Merrill Corporation (www.merrillcorp.com) --> <BR> <P><FONT SIZE=2><I>Item 4. Submission of Matters to a Vote of Security Holders</I></FONT></P> <P><FONT SIZE=2> On October 19, 1999, at the annual meeting of the shareholders of the Company, votes on the elections of the Company's directors, increasing the number of authorized shares of common stock and increasing shares available under the Company's stock option plan took place with the following results:</FONT></P> <P><FONT SIZE=2>1. Election of Directors:</FONT></P> <!-- User-specified TAGGED TABLE --> <TABLE WIDTH="79%" BORDER=0 CELLSPACING=0 CELLPADDING=0> <TR VALIGN="BOTTOM"> <TH WIDTH="62%" ALIGN="LEFT"><FONT SIZE=2> </FONT><BR></TH> <TH WIDTH="2%"><FONT SIZE=1> </FONT></TH> <TH WIDTH="14%" ALIGN="CENTER"><FONT SIZE=1><B>FOR</B></FONT><HR NOSHADE></TH> <TH WIDTH="2%"><FONT SIZE=1> </FONT></TH> <TH WIDTH="20%" ALIGN="CENTER"><FONT SIZE=1><B>WITHHOLD AUTHORITY</B></FONT><HR NOSHADE></TH> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="TOP"> <TD WIDTH="62%"><FONT SIZE=2>Rolf F. Bjelland</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>32,024,155</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="20%" ALIGN="RIGHT"><FONT SIZE=2>554,410</FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="TOP"> <TD WIDTH="62%"><FONT SIZE=2>Paul D. Finkelstein</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>31,901,251</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="20%" ALIGN="RIGHT"><FONT SIZE=2>677,314</FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="TOP"> <TD WIDTH="62%"><FONT SIZE=2>Christopher A. Fox</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>31,897,459</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="20%" ALIGN="RIGHT"><FONT SIZE=2>681,105</FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="TOP"> <TD WIDTH="62%"><FONT SIZE=2>Thomas L. Gregory</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>31,896,163</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="20%" ALIGN="RIGHT"><FONT SIZE=2>682,402</FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="TOP"> <TD WIDTH="62%"><FONT SIZE=2>Van Zandt Hawn</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>32,025,220</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="20%" ALIGN="RIGHT"><FONT SIZE=2>553,345</FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="TOP"> <TD WIDTH="62%"><FONT SIZE=2>Susan Hoyt</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>32,025,162</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="20%" ALIGN="RIGHT"><FONT SIZE=2>553,403</FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="TOP"> <TD WIDTH="62%"><FONT SIZE=2>David B. Kunin</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>31,875,312</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="20%" ALIGN="RIGHT"><FONT SIZE=2>703,253</FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="TOP"> <TD WIDTH="62%"><FONT SIZE=2>Myron Kunin</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>31,900,428</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="20%" ALIGN="RIGHT"><FONT SIZE=2>678,137</FONT></TD> </TR> </TABLE> <!-- end of user-specified TAGGED TABLE --> <P><FONT SIZE=2>2. To increase the number of authorized shares of common stock:</FONT></P> <!-- User-specified TAGGED TABLE --> <TABLE WIDTH="21%" BORDER=0 CELLSPACING=0 CELLPADDING=0> <TR VALIGN="TOP"> <TD WIDTH="34%"><FONT SIZE=2>For</FONT></TD> <TD WIDTH="15%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="51%" ALIGN="RIGHT"><FONT SIZE=2>26,421,284</FONT></TD> </TR> <TR VALIGN="TOP"> <TD WIDTH="34%"><FONT SIZE=2>Against</FONT></TD> <TD WIDTH="15%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="51%" ALIGN="RIGHT"><FONT SIZE=2>6,065,072</FONT></TD> </TR> <TR VALIGN="TOP"> <TD WIDTH="34%"><FONT SIZE=2>Abstain</FONT></TD> <TD WIDTH="15%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="51%" ALIGN="RIGHT"><FONT SIZE=2>53,346</FONT></TD> </TR> </TABLE> <!-- end of user-specified TAGGED TABLE --> <P><FONT SIZE=2>3. To increase the number of shares available under the Company's 1991 Stock Option Plan from 3,300,000 shares to 5,200,000 shares</FONT></P> <!-- User-specified TAGGED TABLE --> <TABLE WIDTH="21%" BORDER=0 CELLSPACING=0 CELLPADDING=0> <TR VALIGN="TOP"> <TD WIDTH="34%"><FONT SIZE=2>For</FONT></TD> <TD WIDTH="15%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="51%" ALIGN="RIGHT"><FONT SIZE=2>26,692,754</FONT></TD> </TR> <TR VALIGN="TOP"> <TD WIDTH="34%"><FONT SIZE=2>Against</FONT></TD> <TD WIDTH="15%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="51%" ALIGN="RIGHT"><FONT SIZE=2>5,853,861</FONT></TD> </TR> <TR VALIGN="TOP"> <TD WIDTH="34%"><FONT SIZE=2>Abstain</FONT></TD> <TD WIDTH="15%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="51%" ALIGN="RIGHT"><FONT SIZE=2>31,949</FONT></TD> </TR> </TABLE> <!-- end of user-specified TAGGED TABLE --> <P><FONT SIZE=2><I>Item 6. Exhibits and Reports on Form 8-K</I></FONT></P> <DL compact> <DT><FONT SIZE=2>(a)</FONT></DT><DD><FONT SIZE=2>Exhibits:</FONT></DD></DL> <BR> <!-- User-specified TAGGED TABLE --> <TABLE WIDTH="76%" BORDER=0 CELLSPACING=0 CELLPADDING=0> <TR VALIGN="TOP"> <TD WIDTH="10%"><FONT SIZE=2>Exhibit 15</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="88%"><FONT SIZE=2>Letter Re: Unaudited Interim Financial Information.</FONT></TD> </TR> <TR VALIGN="TOP"> <TD WIDTH="10%"><FONT SIZE=2>Exhibit 27</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="88%"><FONT SIZE=2>Financial Data Schedule</FONT></TD> </TR> </TABLE> <!-- end of user-specified TAGGED TABLE --> <DL compact> <DT><FONT SIZE=2>(b)</FONT></DT><DD><FONT SIZE=2>Reports on Form 8-K:</FONT></DD></DL> <BR> <P><FONT SIZE=2> There were no reports on Form 8-K filed during the three months ended September 30, 1999. <!-- ZEQ.=1,SEQ=16,EFW="9926212",CP="REGIS CORPORATION",DN="1",FOLIO=16,FILE='DISK004:[99STP6.99STP2936]FM2936A.;13',USER='MGUZA',CD=';9-NOV-1999;09:08' --> </FONT></P> <!-- Generated by Merrill Corporation (www.merrillcorp.com) --> <H2><FONT SIZE=3 > </FONT></H2> <BR> <P ALIGN="CENTER"><FONT SIZE=2><A NAME="jc2936_signature"> </A></FONT><FONT SIZE=2><B>SIGNATURE </B></FONT></P> <P><FONT SIZE=2> Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.</FONT></P> <!-- User-specified TAGGED TABLE --> <TABLE WIDTH="76%" BORDER=0 CELLSPACING=0 CELLPADDING=0> <TR VALIGN="TOP"> <TD WIDTH="48%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="50%" COLSPAN=2><FONT SIZE=2>REGIS CORPORATION</FONT></TD> </TR> <TR VALIGN="TOP"> <TD WIDTH="48%"><FONT SIZE=2> <BR> Date: November 9, 1999</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> <BR> </FONT></TD> <TD WIDTH="4%"><FONT SIZE=2> <BR> By:</FONT></TD> <TD WIDTH="46%"><FONT SIZE=2> <BR> /s/ </FONT><FONT SIZE=2>RANDY L. PEARCE</FONT><FONT SIZE=2> </FONT><HR NOSHADE><FONT SIZE=2> Randy L. Pearce<BR></FONT><FONT SIZE=2><I>Senior Vice President, Finance<BR> Chief Financial and Administrative Officer</I></FONT><FONT SIZE=2><BR> Signing on behalf of the<BR> registrant and as principal<BR> accounting officer<BR></FONT> </TD> </TR> </TABLE> <!-- end of user-specified TAGGED TABLE --> <P><FONT SIZE=2> <!-- ZEQ.=1,SEQ=17,EFW="9926212",CP="REGIS CORPORATION",DN="1",FOLIO=17,FILE='DISK004:[99STP6.99STP2936]JC2936A.;11',USER='MGUZA',CD=';9-NOV-1999;09:08' --> </FONT></P> <!-- Generated by Merrill Corporation (www.merrillcorp.com) --> <H2><FONT SIZE=3 ><A NAME="#99STP2936_1">QuickLinks</A></FONT></H2> <!-- TOC_BEGIN --> <P><FONT SIZE=2><A HREF="#bg2936_regis_corporation_index">REGIS CORPORATION INDEX</A></FONT><BR> </P> <!-- TOC_END --> <!-- TOC_BEGIN --> <P><FONT SIZE=2><A HREF="#fe2936_regis_corporation_notes_to_con__reg02849">REGIS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)</A></FONT><BR> </P> <!-- TOC_END --> <!-- TOC_BEGIN --> <P><FONT SIZE=2><A HREF="#fk2936_item_2._management_s_discussio__ite03663">Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS</A></FONT><BR> <FONT SIZE=2><A HREF="#fk2936_results_of_operations">Results of Operations</A></FONT><BR> </P> <!-- TOC_END --> <!-- TOC_BEGIN --> <P><FONT SIZE=2><A HREF="#jc2936_signature">SIGNATURE</A></FONT><BR> </P> <!-- TOC_END --> </BODY> </HTML>