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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 1998
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-11230
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Regis Corporation
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(Exact name of registrant as specified in its charter)
Minnesota 41-0749934
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State or other jurisdiction (I.R.S. Employer
of incorporation or organization Identification No.)
7201 Metro Boulevard, Edina, Minnesota 55439
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (612) 947-7777
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Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
None None
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Securities registered pursuant to section 12(g) of the Act:
Common Stock, Par Value $.05 per share
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(Title of class)
1
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
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Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S- K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. / /
The aggregate market value of the voting stock held by nonaffiliates of
registrant (based upon closing price of $26.38 per share as of September 4,
1998, as quoted on the NASDAQ), was $472,840,607.
The number of outstanding shares of the registrant's common stock, par
value $.05 per share, as of September 4, 1998, was 23,838,780.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Proxy Statement dated September 17, 1998 and
Annual Report to Shareholders for the year ended June 30, 1998, are incorporated
by reference into Parts I, II and III.
2
PART I
ITEM 1. BUSINESS
BACKGROUND
Regis Corporation (the Company), based in Minneapolis, is the largest owner,
operator, franchisor, and consolidator of hair and retail product salons in
the world. The Regis worldwide operations include 3,539 hairstyling salons at
June 30, 1998 operating in six divisions: Regis Hairstylists, Strip Center
Salons (primarily Supercuts), MasterCuts, Trade Secret, Wal-Mart/SmartStyle
and International. Worldwide operations include 2,723 company-owned salons
and 816 franchised salons operating primarily as Supercuts salons. The
Company has 28,000 employees worldwide (excluding franchisee operations).
INDUSTRY OVERVIEW
Management estimates that annual revenues of the haircare industry are $40
billion in the United States and $80 billion worldwide. The industry is
highly fragmented with the vast majority of haircare salons independently
owned. However, the influence of chains, both franchise and company-owned,
has increased substantially, although still accounting for a small percentage
of total locations. Management believes that chains will continue to increase
their presence. Management also believes that the demand for salon services
and products will increase in the next decade as the population ages and
desires additional haircare services, such as coloring.
BUSINESS STRATEGY
The Company's goal is to provide high quality haircare services and products
to customers in different market groups through physically attractive salons
located in high profile and convenient locations. The key elements of the
Company's strategy to achieve these goals are the following:
CONSISTENT, QUALITY SERVICE. The Company is committed to meeting its customer's
haircare needs by providing competitively priced services and products in
convenient locations with professional and knowledgeable hairstylists. The
Company's operations and marketing emphasize high-quality services to create
customer loyalty, to encourage referrals and to distinguish the Company's salons
from its competitors. The major services supplied by the Company's salons are
haircutting and styling, hair coloring, shampooing, conditioning and permanent
waving. To promote quality and consistency of services provided throughout the
Company's salons, Regis has full and part-time artistic directors whose duties
are to teach and train salon operators and to instruct the stylists in current
styling trends.
During fiscal 1998, the Company and its franchisees provided services to 71.8
million customers worldwide.
3
MALL-BASED LOCATIONS. As the largest national mall-based operator in the hair
salon industry, the Company has the ability to obtain desirable locations in
high-profile, regional malls anchored by major department stores. Mall owners
and developers typically seek retailers such as Regis due to the Company's
financial strength, successful salon operations and status as a national mall
tenant. The Company's locations, which are aesthetically appealing and designed
to attract customers from mall shoppers, provide a steady source of new
business.
STRIP-MALL-BASED LOCATIONS. The merger with Supercuts on October 25, 1996,
positions the Company in the rapidly growing strip shopping center segment of
the retail haircare market in the United States (see below). Supercuts salons
are conveniently located in strip shopping centers with adequate traffic,
appropriate trade area demographics, good visibility within the center or
from adjoining streets, effective signage, easy access and adequate parking.
Supercuts seeks to locate its salons in so-called "power strips", anchored by
the number one or two grocery chain in the specific market or alternatively,
a major mass merchant. In addition to Supercuts, the Company has added 62
strip center salons (11 franchised) in 1998, which together with Supercuts,
comprise the Strip Center Salons division.
MULTIPLE SALON CONCEPTS. Regis operates six salon concepts: Regis
Hairstylists, Strip Center Salons (primarily Supercuts), MasterCuts, Trade
Secret, Wal-Mart/SmartStyle and International. Regis' various salon concepts
in the United States address the major segments of the salon market. The
Company's regional mall salon concepts provide the Company with the ability
to have multiple locations in a single mall and the flexibility to convert
concepts if mall demographics or customer preferences shift.
Regis Hairstylists appeal primarily to women and are positioned at the
moderate-to-upscale end of the salon market. MasterCuts appeal to the more
value-conscious customer with promotional or discount prices and have a
higher percentage of men and children as customers. Trade Secret provides
hairstyling service and a broad selection of quality haircare and beauty
products sold only through professional salons. Because the square footage
for each of these concepts is approximately the same, the Company has the
ability to determine which salon concept is best suited to a new location and
change the concept of existing salons to meet demographic changes in the
salon's market.
The Company also operates salons outside of the mall concepts, as mentioned
previously. The Strip Center Salons division primarily targets the male
population with affordable hair care salons in strip centers. SmartStyle
salons located in Wal-Mart stores and supercenters offer promotionally
priced, family-oriented hair care. The International salons are located in
department stores, hotels and stand-alone locations and are primarily focused
on the moderate-to-upscale market.
EXPANSION. The Company has grown through increased revenues from existing
salons, constructing additional salons, and mergers and acquisitions. During
the five year period ended June 30, 1998, the Company has added 2,228 net
units (including franchised salons) to its worldwide salon base from new
salon construction and merger and acquisitions. During this same period of
time, the Company added new operating divisions, Trade Secret and Wal-
Mart/SmartStyle, merged with Supercuts (see below), and expanded its Regis
Hairstylists,
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MasterCuts and International salon divisions. In addition to continuing its
salon acquisition strategy, the Company expects to construct about 275 new
company-owned salons and complete approximately 125 major remodeling and
conversion projects during fiscal 1999.
The Company intends to continue to focus future growth of salons in strip
shopping centers across the United States as it adds additional company-owned
salons and assists current and new franchisees in their expansion and market
development. The Company believes the growth opportunities in the strip
shopping center segment of the retail haircare market in the United States
are vast, and will complement the Company's continuing growth of other
divisions. The Company does not intend to refocus other divisions, now
located in enclosed shopping malls throughout the United States, into the
strip shopping center segment of the retail haircare market, nor does it
intend to refocus its strip center salons into the enclosed shopping mall
segment of the retail haircare market in the United States. The Strip Center
Salon division (primarily Supercuts) does not have operations outside North
America. The Company may elect to grow this division through international
expansion, but any such plans have not been finalized.
HIGH QUALITY HAIRCARE PRODUCTS. Through Trade Secret and the Company's other
salons, Regis sells nationally-recognized haircare products such as
Matrix-Registered Trademark-, Paul Mitchell-Registered Trademark-,
Sebastian-Registered Trademark-, Redken-Registered Trademark-, and
Nexxus-Registered Trademark- and a complete line of products sold under the
Regis label, which is the Company's best selling product line. The salon
branded products are typically sold only through professional salons and
generate slightly higher gross margins than haircutting and other salon
services. The Company's stylists are trained to sell haircare products as
well as services such as color treatments and manicures to their customers.
Sales of haircare products increased 18.1 percent in fiscal 1998 to $221.6
million and represented 28.7 percent of total revenues.
CONTROL OVER SALON OPERATIONS. Regis controls the quality of operations and
enjoys certain economies of scale in terms of certain corporate and store
level expenses. The Company has an extensive training program, including the
production of training videos for use in the salons, to ensure that
hairstylists are knowledgeable and provide consistent quality haircare
services.
5
ECONOMIES OF SCALE. Management believes that due to its size and number of
locations the Company has certain advantages which are not available to
single location salons or small chains. The Company uses its point-of-sale
system to track inventory and to monitor service and product sales. This
product and customer information is used to evaluate salon productivity and,
in some cases, to determine the most appropriate salon use for the location.
Additionally, as a result of its volume purchases, the Company is able to
purchase haircare products and supplies and salon fixtures on an advantageous
basis. The Company is also able to gain national and local market recognition
for the Regis name and its salon concepts through national and local
advertising and promotional programs.
REGIS HAIRSTYLISTS
Regis Hairstylists are full-service salons providing complete haircare and
beauty services aimed at moderate to upscale, fashion-conscious consumers.
The customer mix at Regis Hairstylists salons is approximately 70 percent
women and 30 percent men. These salons offer a full range of custom
hairstyling, cutting, coloring, permanent wave and manicuring as well as
haircare products. The average sale at Regis Hairstylists salons is
approximately $21. Regis Hairstylists salons compete in their existing
markets primarily by emphasizing the high quality of full services provided.
The Company actively monitors the prices charged by its competitors in each
area and makes every effort to maintain prices which, although in the higher
range of local prices, are not so high as to be uncompetitive with prices of
other salons offering similar, high-quality services. At June 30, 1998, the
Company operated 820 Regis Hairstylists salons in shopping malls in North
America. Revenues from the Regis Hairstylists salons were $294.6 million, or
37.0 percent of the Company's total revenues, in fiscal 1998. The Company
expects to construct about 45 new Regis Hairstylists salons in fiscal 1999.
STRIP CENTER SALONS (PRIMARILY SUPERCUTS)
The Strip Center Salons division is primarily comprised of Supercuts stores.
This concept provides consistent high quality haircare services to its
customers at convenient times and locations and at a reasonable price. The
services offered by strip center salons are limited and standardized. The
salons are designed for ease of operation and the demand for basic haircare
is believed to be recession resistant and non-seasonal. This concept appeals
to men, women and children, although male customers account for over 75
percent of total haircuts. Consumer research indicates that males get their
hair cut slightly more often (8-9 times annually) than females (7-8 times
annually) and their haircuts generally take less time. The Strip Center
concept targets a male audience. At June 30, 1998, the Company operated 1,268
strip center salons in North America, including 775 franchised locations.
Revenues and income from company-owned strip center salons and franchising
activity was $108.1 million and $23.4 million, respectively, or 16.5 percent
of the Company's total revenues in fiscal 1998. The Company expects to
construct about 45 new company-owned and add about 80 franchised strip center
salons in fiscal 1999.
6
MASTERCUTS FAMILY HAIRCUTTERS
MasterCuts Family Haircutters salons serve a broader customer base than Regis
Hairstylists and respond to competitive pressures for lower cost haircare
services. MasterCuts salons emphasize quality haircutting, lower prices and
time-saving services for the entire family. The customer mix at MasterCuts
salons contains a greater percentage of men and children than at Regis
Hairstylists salons. MasterCuts salons cater to walk-in customers and provide
a warm, inviting atmosphere that is comfortable for all members of the
family. Many of the same product lines sold in Regis Hairstylists salons are
also available in MasterCuts salons. The average sale at MasterCuts salons is
approximately $11. The MasterCuts salons place more emphasis on discount or
promotional pricing for the services being offered in order to compete more
effectively with the chains of salons, primarily franchises, now offering
such services at discount prices. In certain markets, the Company has been
able to improve a salon's performance by converting it to a MasterCuts salon.
At June 30, 1998, the Company operated 412 MasterCuts salons in North
America. Revenues from MasterCuts salons accounted for $107.8 million, or
13.5 percent of the Company's total revenues, in fiscal 1998. During fiscal
1999, the Company plans to construct approximately 50 new MasterCuts salons.
TRADE SECRET
Trade Secret salons emphasize haircare and beauty product sales in a retail
setting while providing high-quality haircare services. Trade Secret salons
are designed to display and attract sales of haircare and beauty products.
Trade Secret salons offer the same products as the Regis Hairstylists and
MasterCuts salons, but also have additional haircare items. The average sale
at Trade Secret salons is approximately $16. At June 30, 1998, the number of
Trade Secret salons totaled 374 in North America, including 34 franchised
locations. Revenues and franchise income from company-owned Trade Secret
salons and franchising activity during fiscal 1998 was $115.0 million and
$2.8 million, respectively, or 14.7 percent of the Company's total revenues.
The Company anticipates constructing approximately 40 new Trade Secret salons
in fiscal 1999.
WAL-MART/SMARTSTYLE FAMILY HAIR SALONS
The Company expanded into the mass merchant retail arena in May 1996 by
acquiring 154 salons operating within Wal-Mart stores and supercenters.
Wal-Mart salons share many operating characteristics with MasterCuts: pricing
is promotional, services are focused on family hair cutting, and product
revenues contribute solidly to overall revenues. In fiscal 1998, the Company
introduced a new brand name, SmartStyle Family Hair Salons, for its Wal-Mart
salons and plans to rapidly expand this new brand name into its Wal-Mart
salons in fiscal 1999. The Company operated 273 salons within Wal-Mart stores
and supercenters at June 30, 1998. Revenue from Wal-Mart salons totaled $40.3
million, or 5.0 percent of the Company's total revenue. The Company
anticipates constructing about 80 new SmartStyle salons in Wal-Mart stores
and supercenters in fiscal 1999.
7
INTERNATIONAL SALON OPERATIONS
The Company operated 392 hair care salons in eight countries outside of the
United States at June 30, 1998, including 322 salons in the United Kingdom.
Canadian salons operate under the Regis Hairstylists, MasterCuts and Trade
Secret tradenames and revenues are included within the respective operating
divisions, while salons in the remaining seven countries operate in
freestanding locations and department stores under license arrangements.
Revenues from the International salon operations were $106.2 million, or 13.3
percent of the Company's total revenues, in fiscal 1998. The Company expects
to continue to modestly increase its International salon base in fiscal 1999.
NEW SALON DEVELOPMENT
The table on the following page sets forth the number of Company salons
opened at the beginning and end of each of the last five years, as well as
the number of salons opened, closed, relocated, converted and acquired during
each of these periods.
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SALON LOCATION SUMMARY
1994 1995 1996 1997 1998
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REGIS
Open at beginning of period 802 801 787 797 811
Salons constructed 24 17 31 28 33
Acquired 6 9 9 18 15
Less: Relocations 11 11 11 10 15
---- ---- ---- ---- ----
Net salon openings 19 15 29 36 33
Conversions (3) (10) (4) (4)
Salons closed or sold (17) (19) (15) (18) (24)
---- ---- ---- ---- ----
Open at end of period 801 787 797 811 820
---- ---- ---- ---- ----
---- ---- ---- ---- ----
STRIP CENTERS (PRIMARILY SUPERCUTS)
Company-Owned:
Open at beginning of period 185 326 464 507 419
Salons constructed 87 107 44 4 4
Acquired 16 1 47
---- ---- ---- ---- ----
Net salon openings 87 123 45 4 51
Conversions (1) 59 21 9 (61) 38
Salon closed or sold (5) (6) (11) (31) (15)
---- ---- ---- ---- ----
Open at end of period 326 464 507 419 493
---- ---- ---- ---- ----
---- ---- ---- ---- ----
Franchised Salons:
Open at beginning of period 646 617 629 661 757
Salons added 35 41 41 37 41
Acquired 3 30
Less: Relocations 3
---- ---- ---- ---- ----
Net salon openings 35 41 44 37 68
Conversions (1) (59) (21) (9) 61 (38)
Salon closed or sold (5) (8) (3) (2) (12)
---- ---- ---- ---- ----
Open at end of period 617 629 661 757 775
---- ---- ---- ---- ----
---- ---- ---- ---- ----
MASTERCUTS
Open at beginning of period 229 257 283 327 362
Salons constructed 25 21 33 36 50
Acquired 3 1 12 2 8
Less: Relocations 3 2 3 3 4
---- ---- ---- ---- ----
Net salon openings 25 20 42 35 54
Conversions 3 10 3 3
Salon closed or sold (4) (1) (3) (4)
---- ---- ---- ---- ----
Open at end of period 257 283 327 362 412
---- ---- ---- ---- ----
---- ---- ---- ---- ----
9
1994 1995 1996 1997 1998
---- ---- ---- ---- ----
TRADE SECRET
Company-Owned:
Open at beginning of period 55 106 152 219 302
Salons constructed 22 28 40 56 32
Acquired 30 19 11 11 14
Less: Relocations 2 1 4 4 4
----- ----- ----- ----- -----
Net salon openings 50 46 47 63 42
Conversions (1) 1 2 20 24 2
Salon closed or sold (2) (4) (6)
----- ----- ----- ----- -----
Open at end of period 106 152 219 302 340
----- ----- ----- ----- -----
----- ----- ----- ----- -----
Franchised Salons:
Open at beginning of period 64 68 55 38
Salons added 1 7 8 6
Acquired 64
Less: Relocations 1
----- ----- ----- ----- -----
Net salon openings 65 7 7 6
Conversions (1) (1) (2) (19) (23) (2)
Salon closed or sold (1) (1) (2)
----- ----- ----- ----- -----
Open at end of period 64 68 55 38 34
----- ----- ----- ----- -----
----- ----- ----- ----- -----
WAL-MART/SMARTSTYLE
Open at beginning of period 157 181
Salons constructed 3 24 45
Acquired 154 47
----- ----- ----- ----- -----
Net salon openings 157 24 92
Open at end of period 157 181 273
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----- ----- ----- ----- -----
INTERNATIONAL(2)
Open at beginning of period 225 251 244 408 423
Salons constructed 6 9 9 26 17
Acquired 27 2 178 3
Less: Relocations 1
----- ----- ----- ----- -----
Net salon openings 33 11 186 29 17
Salons closed or sold (7) (18) (22) (14) (48)
----- ----- ----- ----- -----
Open at end of period 251 244 408 423 392
----- ----- ----- ----- -----
----- ----- ----- ----- -----
Grand total, system-wide 2,422 2,627 3,131 3,293 3,539
----- ----- ----- ----- -----
----- ----- ----- ----- -----
Major remodelings & conversions 35 46 65 72 97
---- ---- ---- ---- ----
---- ---- ---- ---- ----
(1) Represents primarily the acquisition of franchise locations.
(2) Canadian salons are included in the Regis, MasterCuts and
Trade Secret divisions and not included in the International salon
totals.
10
Of the 181 new company-owned salons constructed in fiscal 1998, 33 were Regis
Hairstylists salons, 4 were Strip Center Salons, 50 were MasterCuts, 32 were
Trade Secret, 45 were Wal-Mart/SmartStyle and 17 were International salons. The
Company intends to construct approximately 275 new company-owned salons during
fiscal year 1999. The Company has a program of modernizing its existing salons,
ranging from redecoration to substantial reconstruction, in order to raise its
older salons to the standards of its newly constructed locations. This program
is implemented as management determines that a particular location will benefit
from such modernization, or as required by lease renewals.
HAIRCARE PRODUCTS
In recent years, the Company has placed emphasis on the sales of
higher-margin haircare products, with the result that such revenues have
become an increasingly important part of the Company's business, having grown
from 5.4 percent of total company-owned revenues in fiscal 1987 to 28.7
percent in fiscal 1998. A significant portion of this growth has resulted
from the introduction of national brand merchandise in 1988 and the
acquisition of Beauty Express in November 1992 and Trade Secret in December
1993. The haircare products offered are primarily shampoos, hair
conditioners, fixatives and hair sprays. Regis, MasterCuts, and Trade Secret
private label products, as well as lines of salon branded products are sold
only through licensed beauty salons, including Matrix-Registered Trademark-,
Paul Mitchell-Registered Trademark-, Redken-Registered Trademark-,
Sebastian-Registered Trademark-, and Nexxus-Registered Trademark-. The Regis
line continues to be the Company's best selling product line. The Company
actively reviews its product line offerings and continuously investigates the
quality and sales potential of new products. The Company utilizes its
national salon network as a testing ground for new product formulations.
There are many potential sources of supply for the types of products used or
sold at the salons, and the Company is not dependent upon any single supplier.
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SITE SELECTION
The Company is the largest shopping mall tenant which operates haircare salons
in the United States and has attained national tenant status which makes the
Company an attractive tenant for shopping mall owners and developers. In the
United States, there are approximately 1,850 enclosed malls which meet the
Company's performance criteria with several new shopping malls developed each
year. At June 30, 1998, the Company's 1,606 United States and Canadian mall-
based salons were located in 1,047 shopping malls. Because the Company's
different salon concepts target different customer groups depending on the size
and location of the shopping malls, more than one of the Company's salon
concepts may be located in the same mall. As a result, there are numerous
leasing opportunities in shopping malls for its Regis Hairstylists, MasterCuts
and Trade Secret salons, of which the Company has penetrated less than 50
percent.
The Company generally locates its Regis, MasterCuts and Trade Secret salons in
fully enclosed, climate-controlled shopping malls classified as "regional"
having 400,000 or more square feet of leasable area and at least two full-line
department store anchor tenants. The Company's experience has been that
selecting the proper mall and obtaining a favorable, high-traffic location
within the mall are important determinants of the success of a new salon. For
existing malls, the Company evaluates the current sales per square foot of
selected tenants, the stature and strength of the anchor stores and the other
major tenants, the location and traffic patterns within the mall, and the
proximity of competitors. In addition, the Company may conduct site surveys and
physical observations to assess the location, traffic patterns and competitive
environment.
Several trends have enabled the Company to continue to lease high-profile space
in existing malls. Leasing velocity and turnover have increased because the
average length of shopping mall lease terms has steadily descended. Also, many
larger tenants are downsizing their leased areas to make better use of costly
space, thereby creating available floor space which can be leased for other
uses. Additionally, many existing malls are being expanded, renovated and
remerchandised. Because of these factors, the Company believes that it has ample
expansion opportunities and therefore can be selective in establishing new
locations.
In evaluating specific locations for Supercuts company-owned and franchise
stores, the Company seeks conveniently located, highly visible strip shopping
centers which allows customers adequate parking and quick and easy store access.
The Company believes strip shopping centers anchored by the number one or two
grocery chain in the specific market, or a major mass merchant, provide a
profitable customer flow. Supercuts' customers are destination shoppers and, as
a result, Supercuts is not dependent upon expensive regional shopping mall
locations. Various other factors are considered in evaluating sites, including
trade area demographics, availability and cost of space, location of
competitors, traffic count, visibility, signage and other leasehold factors in a
given center or area. All franchisee sites must be approved by the Company.
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SUPERCUTS FRANCHISING PROGRAM
GENERAL
The Company provides its Supercuts franchisees with a comprehensive system of
business training, stylist education, site approval and lease negotiation,
professional marketing, promotion and advertising programs, and other forms
of support designed to help the franchisee build a successful business. The
Company employs field staff personnel to assist franchisees in all aspects of
operations, training and supervision.
STANDARDS OF OPERATIONS
All Supercuts franchisees are required to conform to Company-established
operational policies and procedures relating to quality of service, training,
design and decor of stores, and trademark usage. The Company's field
personnel make periodic visits to franchised stores to ensure that the stores
are operating in conformity with Supercuts standards. In addition, to further
ensure such conformity, the Company enters into the lease for the store site
directly with the landlord, and subsequently subleases the site to the
franchisee. The sublease provides the Company with the right to terminate the
sublease and gain possession of the store if the franchisee fails to comply
with the Company's operational policies and procedures. See Note 5 of "Notes
to the Consolidated Financial Statements" for further information.
FRANCHISE SALES
Franchise expansion is now being encouraged and will continue to be a
significant focus of the Company in the future. Existing franchisees and new
franchisees who open more than one salon receive a reduction in franchise
fees.
FRANCHISEE TRAINING
The Company provides new Supercuts franchisees with training, focusing on the
various aspects of store management, including operations, personnel
management, marketing fundamentals and financial controls. Existing
franchisees receive training, counseling and information from the Company on
a continuous basis. The mechanisms include mail, "800" number information
lines and E-mail. In addition, the Company provides store managers and
stylists with extensive training. For a further description of the Company's
education and training programs, see "Education and Training" below.
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FRANCHISE TERMS
Supercuts franchisees pay monthly royalty fees based on service and product
revenues. In addition, franchisees pay an advertising fee of five percent of
service revenues, which is held in a separate account and administered by the
Company. In calendar 1997, franchisees contributed approximately $10.9
million to the advertising fund. All royalties and advertising fees are due
monthly.
The franchisees pay an initial franchise fee for each new franchise location.
Franchisees are responsible for the costs of leasehold improvements,
furniture, fixtures, equipment, supplies, inventory and certain other items,
including initial working capital. New franchisees also must pay an initial
fee for franchisee training.
The existing franchise agreements have an initial term of 10 years with the
option by the franchisee to renew for one additional ten-year period. Upon
renewal, franchisees pay a renewal fee of four percent of the franchisee's
total store revenues for the prior 12 months. During fiscal 1998, all
agreements eligible for renewal were renewed. The agreements also provide the
Company a right of first refusal if the store is to be sold. The franchisee
must obtain the Company's approval in all instances where there is a sale of
the franchise. The current franchise agreement is site specific and does not
provide any territorial protection to a franchisee, although some older
franchise agreements do include limited territorial protection. The Company
has a comprehensive impact policy that resolves potential conflicts among
franchisees and/or the Company regarding proposed salon sites.
MARKETS AND MARKETING
Approximately half of the Company's North American salons are situated in
"middle markets" with service area populations between 80,000 and 800,000.
Approximately one-fourth of the Company's salons are located in smaller
markets with a service area population below 80,000, and about one-fourth are
located in major metropolitan areas with populations in excess of 800,000.
The Company believes that the geographic dispersion of its salons throughout
the United States may diminish the impact of fluctuations in regional
business cycles.
The Company maintains various advertising, sales and promotion programs for
its salons, budgeting a predetermined percent of revenues for such programs.
The Company has developed promotional tactics and institutional sales
messages for each of its divisions targeting certain customer types and
positioning each concept in the marketplace. Print, radio and television and
billboard advertising are developed and supervised at the Company's
headquarters, but most advertising is done in the immediate area of the
particular salon.
Supercuts maintains an Advertising Fund (the "Fund") that provides
comprehensive advertising and sales promotion support for the Supercuts
system. All Supercuts stores, company-owned and franchised, contribute five
percent of service revenues to the Fund, 80 percent of which is allocated to
the contributing market for media placement and local marketing activities
and 20 percent of which is allocated for national advertising campaigns and
system-wide activities. Each new franchised salon opened by a new franchisee
or by an existing franchisee in a new market, contributes $5,000 for grand
opening expenses. Additionally, stores may contribute supplemental funds to
pay for advertising costs above their total market contributions. The
Company's marketing department administers (at no additional cost to the
franchisees or the Fund) the development of
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system-wide advertising and promotion, working with McCann-Erickson San
Francisco, as agency of record. This intensive advertising program creates
significant consumer awareness, a strong brand image and high loyalty. In
calendar 1997, $15.2 million was paid into the Fund, by both franchised and
company-owned Supercuts stores.
Supercuts conducts regular, system-wide promotional programs for markets and
an initial grand opening program for new stores. Each includes broadcast,
print, direct mail and public relations campaigns.
In many of the Company's salons, stylists volunteer their time to support
charitable events for breast cancer research. Proceeds collected from such
events are distributed through the Regis Foundation for Breast Cancer
Research. In a unique three-year agreement, the Company will support three
postdoctoral fellows known as Regis Scholars, to conduct research in the
field of breast cancer at the Mayo Foundation, Rochester, MN. The goal of the
Regis Scholars program is to further the prevention, diagnosis and treatment
of breast cancer, and to recruit and train future leaders in the biology of
the disease. The Company's community involvement also includes a major
sponsorship role for the Susan G. Komen Breast Cancer Foundation Twin Cities
Race for the Cure. This 5K run and one-mile walk is held in Minneapolis on
Mother's Day to help fund breast cancer research, education, screening and
treatment. The Company has reached nearly $2.2 million in fundraising for
breast cancer charities.
SALON TRAINING PROGRAMS
The Company has an extensive hands-on training program for its salon managers
and hairstylist associates which emphasizes both technical training in
hairstyling and cutting, perming, hair coloring and hair treatment regimes as
well as customer service and product sales. The objective of the training
programs is to ensure that customers receive professional and quality service
which the Company believes will result in more repeat customers, referrals
and product sales.
The Company has full- and part-time artistic directors who teach and train
the salon operators in techniques for providing the salon services and who
instruct the stylists in current styling trends. The Company also has an
audiovisual based training system in its salons designed to enhance technical
skills of hairstylists.
The Company has a customer service training program to improve the
interaction between employees and customers. Staff members are trained in the
proper techniques of customer greeting, telephone courtesy and professional
behavior through a series of professionally designed video tapes and
instructional seminars.
Supercuts provides extensive initial and ongoing training to stylists through
its system of field educators. Every stylist must attend a training course at
one of the Supercuts' designated training centers at which they are taught the
Supercuts' haircutting technique and customer service principles. Stylists
may be recertified every six to nine months. For annual re-certification each
stylist must participate in a combination of store seminars and studio visits.
15
STAFF RECRUITING AND RETENTION
Recruiting quality managers and hairstylists is essential to the
establishment and operation of successful salons. The Company's supervisory
team seeks to recruit entrepreneurial salon managers who display initiative
and imagination. The Company has been successful in recruiting capable
managers and stylists for a number of reasons. To employ and retain qualified
and productive employees, the Company utilizes a broad compensation system
including cash incentives, merchandise awards, Company-sponsored trips and
benefit programs. The Company believes that its compensation structure for
salon managers and hairstylists is competitive within the industry. Stylists
benefit from the Company's high-traffic locations in quality malls, as well
as name-recognition from Supercuts and Wal-Mart, and receive a steady source
of new business from walk-in customers. In addition, the Company offers a
career path with the opportunity to move into managerial and training
positions within the Company.
SALON DESIGN
The Company's salons are designed, built and operated in accordance with
uniform standards and practices developed by the Company based on its
experience. New salons are designed and constructed according to the
Company's standard specifications, thereby reducing design and construction
costs and enhancing operating efficiencies. Salon fixtures and equipment are
also uniform, allowing the Company to place large orders for these items with
attendant cost savings.
The size of the Company's salons ranges from 500 to 2,300 square feet, with
the typical salon having about 1,100 square feet. At present, the cost to the
Company of constructing and furnishing a new salon, including inventories,
averages in the range of approximately $40,000 to $173,000, with about 80
percent of the total construction cost for leasehold improvements and the
balance for salon fixtures, equipment, and inventory.
The Company maintains its own construction and design department, and designs
and supervises the construction, furnishing and fixturing of all new salons.
The Company has developed considerable expertise in designing upscale,
visually appealing salons. The design and construction staff focuses on
aesthetic appeal, efficient use of space, cost and rapid completion times.
The Company's salons are airy in appearance with open storefronts and have
limited partitions. Haircare products offered for sale are prominently and
attractively displayed in the salons. Each of the Company's salon concepts
has a different design related to the image to be projected. Regis
Hairstylists salons are more upscale in design and utilize wood and marble
floors, mirrors and contrasting black and creme colors. Supercuts salons are
functional in design and tastefully furnished, consistent with its image of a
quality provider of affordable haircutting services. MasterCuts salons are
family oriented and include extensive use of woodwork and warm, comfortable
colors. Trade Secret salons use many of the same design techniques as Regis
Hairstylists salons, and also have open and easily accessible product
displays. Wal-Mart/SmartStyle salons, which are strategically located near the
check out counters in the front of Wal-Mart stores and supercenters, are
efficiently designed and brightly colored to complement the Wal-Mart retail
environment.
16
OPERATIONS
Company-owned and franchised salons located in the United States, Puerto
Rico, Canada, and Mexico are operated and managed as part of the Company's
North American operations. All other salons, located in department stores in
the United Kingdom, South Africa, Switzerland, Ireland, France and the United
Arab Emirates are operated and managed through the Company's United Kingdom
subsidiary.
For each salon division, the Company's operations are divided into geographic
regions throughout the United States. Each region is headed by one of the
Company's salon directors, assisted by regional field managers and area
supervisors, who coordinate the operations of the salons in the particular
region. The area supervisors are responsible for hiring and training the
managers for each salon.
Over the years, the Company has developed uniform procedures for opening new
salons in such a manner as to maximize revenues from a new location as
rapidly as possible. After opening, all salons are operated according to
standard procedures which the Company has learned are desirable for the
operation of an efficient, high-quality, profitable salon.
MANAGEMENT INFORMATION SYSTEMS
The Company utilizes a retail point-of-sale information system in all its
salons. This system collects data daily from each salon and consolidates the
data into several management reports. The Company's automated system polls
terminals nightly and all salon cash receipts are transferred automatically
into a centralized bank account, thereby significantly reducing
administrative expenses. Point-of-sale information is also used both to
monitor salon performance and to generate customer data for use in
identifying and anticipating industry trends for purposes of pricing and
marketing. The Company has expanded the system to deliver on-line information
as to sales of products to improve its inventory and control system,
including suggested monthly product purchase recommendations for a salon, a
monthly report of sales and a perpetual inventory. Management believes that
its information systems provide advantages in planning and analysis which are
not available to a majority of its competitors which do not have management
information systems.
COMPETITION
The haircare industry is highly competitive. In every area in which the
Company has a salon, there are competitors offering similar haircare services
and products at similar prices. The Company faces competition within malls
from companies which operate salons as departments within department stores
and from smaller chains of salons, independently owned salons and, to a
lesser extent, salons which, although independently owned, are operating
under franchises from a franchising company that may assist such salons in
areas of training, marketing and advertising.
Significant entry barriers exist for new chains due to the need to establish
brand identification, systems and infrastructure, recruitment of experienced
haircare management and adequate store staff, and leasing of quality sites.
The principal factors of competition in the affordable haircare category are
quality, consistency and convenience. The Company continually strives to
improve its performance in each of these areas and to create additional
points of difference versus the competition.
17
In order to obtain locations in shopping malls, the Company must be
competitive as to rentals and other customary tenant obligations. The Company
believes that because of its established relationships with many leading
shopping center developers throughout the country, its status in the haircare
industry as a national rather than a local tenant, and its financial
resources, it will encounter little difficulty in obtaining sufficient
shopping center locations to continue its historical pattern of growth.
TRADEMARKS
The Company holds numerous trademarks, both in the United States and in
several foreign countries. The most important are the trademarks "Regis
Hairstylists," "Supercuts," "MasterCuts" and "Trade Secret."
The Company believes the use of these trademarks is important in establishing
and maintaining its reputation as a national operator of high-quality
hairstyling salons, and is committed to protecting these trademarks by
vigorously challenging any unauthorized use.
EMPLOYEES
As of June 30, 1998, the Company had 28,000 full- and part-time employees
worldwide, of which approximately 23,000 employees were located in the United
States. None of the Company's employees is subject to a collective bargaining
agreement and the Company believes that its employee relations are good.
GOVERNMENTAL REGULATIONS
The Company is subject to various federal, state and local laws affecting its
business as well as a variety of regulatory provisions relating to the
conduct of its cosmetology business, including health and safety. As a
franchisor, the Company's franchise operations are subject to the Federal
Trade Commission's Trade Regulation Rule on Franchising (the "FTC Rule") and
by state laws and administrative regulations that regulate various aspects of
franchise operations and sales. The Company's franchises are offered to
franchisees by means of an offering circular containing specified disclosures
in accordance with the FTC Rule and the laws and regulations of certain
states. The Company has registered its offering of franchises with the
regulatory authorities of those states in which it offers franchises and in
which such registration is required. State laws that regulate the
franchisor-franchisee relationship presently exist in a substantial number of
states and, in certain cases, apply substantive standards to this
relationship. Such laws may, for example, require that the franchisor deal
with the franchisee in good faith, may prohibit interference with the right
of free association among franchisees, and may limit termination of
franchisees without payment of reasonable compensation. The Company believes
that the current trend is for government regulation of franchising to
increase over time. However, such laws have not had, and the Company does not
expect such laws to have, a significant effect on the Company's operations.
The Company believes it is operating in substantial compliance with
applicable laws and regulations governing operations.
18
ITEM 1a. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information regarding the Directors of the Company and Exchange Act Section
16(a) filings is included on pages 3 and 4 of the Registrant's Proxy
Statement dated September 17, 1998, and is incorporated herein by reference.
Information relating to Executive Officers of the Company follows:
Name Age Position
- ---------------- --- ----------------------------------
Myron Kunin 69 Chairman of the Board of Directors
Paul D. Finkelstein 56 President, Chief Executive Officer
and Director
Christopher A. Fox 48 Executive Vice President and Director
Randy L. Pearce 43 Senior Vice President, Finance and
Chief Financial Officer
William E. Halfacre 57 Senior Vice President, Retail and
Purchasing
Bruce Johnson 45 Senior Vice President, Design and
Construction
Mark Kartarik 42 Senior Vice President and President,
Supercuts Inc.
Gordon Nelson 47 Senior Vice President, Fashion and
Education
Anthony W.E. Rammelt 61 Senior Vice President, International
Bert M. Gross 68 Senior Vice President, General Counsel
Mary Andert 43 Senior Vice President, Marketing
Sharon Kiker 53 Chief Operating Officer, Regis
Hairstylists
Kris Bergly 37 Chief Operating Officer,
Wal-Mart/SmartStyle
Robert Ribnick 37 Chief Operating Officer, MasterCuts
Myron Kunin has served as Chairman of the Board of Directors of the Company
since 1983, as Chief Executive Officer of the Company from 1965 until July 1,
1996, as President of the Company from 1965 to 1987 and as a director of the
Company since its formation in 1954. He is also President, Chairman of the
Board and holder of the majority voting power of Curtis Squire, Inc., the
Company's principal shareholder. He is also a director of Nortech Systems
Incorporated and The Cerplex Group, Inc.
19
Paul D. Finkelstein has served as President, Chief Operating Officer and as a
director of the Company since December 1987, as Executive Vice President of
the Company from June 1987 to December 1987 and has served as Chief Executive
Officer since July 1, 1996.
Christopher A. Fox was elected Executive Vice President in 1994, was Senior
Vice President, Real Estate of the Company from 1988 to 1994, has served as
Vice President from 1984 to 1988 and has served as a director of the Company
since 1989.
Randy L. Pearce was elected Chief Financial Officer and Senior Vice
President, Finance in January 1998, has served as Vice President of Finance
from 1995 to 1997 and as Vice President of Financial Reporting from 1991 to
1994.
William E. Halfacre has served as Senior Vice President, Retail and
Purchasing of the Company since 1993 and as Vice President from 1990 to 1993.
Bruce Johnson was elected a Senior Vice President of Design and Construction
in 1997 and has served as Vice President from 1988 to 1997.
Mark Kartarik has served as Senior Vice President, Operations of the Company
since 1994 and as Vice President from 1989 to 1994. He was elected
President of Supercuts, Inc. in 1998 and served as Chief Operating Officer of
Supercuts, Inc. in 1997.
Gordon Nelson has served as Senior Vice President, Fashion and Education of
the Company since 1994 and as Vice President from 1989 to 1994.
Anthony W. E. Rammelt has served as Senior Vice President, International of
the Company since 1994 and as Vice President from 1993 to 1994.
Bert M. Gross was elected Senior Vice President, General Counsel in 1997 and
acted as outside legal counsel to the Company from 1957 to 1997.
Sharon Kiker was elected Chief Operating Officer, Regis Hairstylists in April
1998 and has served as Vice President, Salon Operations from 1989 to 1998.
Kris Bergly was elected Chief Operating Officer, Wal-Mart/SmartStyle in April
1998 and has served as Vice President, Salon Operations from 1993 to 1998.
Robert Ribnick was elected Chief Operating Officer, Mastercuts in April 1998 and
has served as Vice President, Salon Operations from 1993 to 1998.
20
ITEM 2. PROPERTIES
The Company's corporate executive and administrative offices are
headquartered in a 100,000 square foot building in Edina, Minnesota owned by
the Company. In December 1997, the Company acquired two buildings, totaling
70,000 square feet of office space, located adjacent to the Company's current
headquarters in Edina. This office space is currently leased to nine tenants.
As leases terminate and additional office space is required, the Company
plans to remove or relocate existing tenants to provide additional
administrative office space for its own purposes.
The Company also leases warehouse space in Eden Prairie, Minnesota for
storing and distributing inventory. The Company completed construction of a
new distribution center in Chattanooga, Tennessee during fiscal 1998. The
Company believes that these two facilities will be adequate for inventory
storage needs for the near future.
The Company operates all of its salon locations under leases or licenses. All
of its North American locations opened in regional malls during the past five
years are operating under leases with an original term of at least ten years.
Salons operating within strip centers and Wal-Mart stores and supercenters
have leases with original terms of at least five years. Salons in the U.K.
operations which are located in department stores operate under license
agreements with the host department stores.
The Company also leases the premises in which the majority of its franchisees
operate and has entered into corresponding sublease arrangements with the
franchisees. These leases, generally with terms of approximately five years,
are expected to be renewed on expiration. Future minimum lease payments for
the next five years, which are reimbursable from the franchisees, are
approximately $17 million annually. All additional lease costs are passed
through to the franchisees.
None of the Company's salon leases is individually material to the operations
of the Company, and the Company expects that it will be able to renew its
leases on satisfactory terms as they expire. See Note 5 of "Notes to the
Consolidated Financial Statements".
ITEM 3. LEGAL PROCEEDINGS
During fiscal 1997, the Company resolved the litigation brought by David E.
Lipson and DEL Holding Corporation (DEL), a corporation controlled by Mr.
Lipson, against Supercuts. The Company paid Mr. Lipson and DEL $6.7 million
in complete settlement of all claims of Mr. Lipson, DEL or any other entity
controlled by Mr. Lipson. See Note 10 to the Consolidated Financial
Statements. This was funded through the issuance of the Company's common
stock.
21
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
a. On October 14, 1997, at the annual meeting of the
shareholders of the Company, the shareholders approved an
increase in the authorized shares available under the
Company's Stock Option Plan from 1,650,000 to 2,200,000. There
were 20,511,534 shares voted in favor of the proposal and
701,120 shares against the proposal. The elections of the
Company's directors also took place with the following
results:
Election of Directors:
FOR WITHHOLD AUTHORITY
Rolf F. Bjelland 21,104,277 108,377
Frank E. Evangelist 21,099,647 113,007
Paul D. Finkelstein 21,101,155 111,499
Christopher A. Fox 21,097,072 115,582
Thomas L. Gregory 21,101,269 111,385
Van Zandt Hawn 21,105,435 107,219
Susan Hoyt 21,105,207 107,447
David B. Kunin 21,093,070 119,584
Myron Kunin 21,100,047 112,607
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
Data relating to Market Stock Data Information and dividends
as set forth in the sections included on Page 36 of the
Registrant's 1998 Annual Report to Shareholders, a copy of
which is included as Exhibit 13 hereto, are incorporated
herein by reference.
As of June 30, 1998, Regis shares were owned by approximately
13,000 shareholders based on the number of record holders and
an estimate of individual participants in security position
listings.
ITEM 6. SELECTED FINANCIAL DATA
Five-Year Summary of Selected Financial Data which is included
on page 16 of the Registrant's 1998 Annual Report to
Shareholders, a copy of which is included as Exhibit 13
hereto, is incorporated herein by reference.
22
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Management's Discussion and Analysis of Results of Operations
and Financial Condition of the Company on pages 17 to 23 of
the Registrant's 1998 Annual Report to Shareholders, a copy of
which is included as Exhibit 13 hereto, is incorporated herein
by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Report of Independent Accountants on page 35, the
Consolidated Financial Statements on pages 24 to 35 and the
Quarterly Financial Data on page 36 of the Registrant's 1998
Annual Report to Shareholders, a copy of which is included as
Exhibit 13 hereto, are incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
23
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
See Part I for information regarding Directors and Executive
Officers of the Registrant.
ITEM 11. EXECUTIVE COMPENSATION
Executive compensation included on pages 6 through 8 of the
Registrant's Proxy Statement dated September 17, 1998 is
incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Security Ownership of Certain Beneficial owners and Management
on page 10 of the Registrant's Proxy Statement dated September
17, 1998 is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information regarding certain relationships and related
transactions is included on page 9 of the Registrant's Proxy
Statement dated September 17, 1998 and is incorporated herein by
reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) (1). The following Consolidated Financial Statements of Regis
Corporation, and the Report of Independent Accountants
thereon, included on pages 24 to 35 of the Registrant's 1998
Annual Report to Shareholders, are incorporated by reference
in Item 8:
Report of Independent Accountants
Consolidated Balance Sheet as of June 30, 1998 and 1997
Consolidated Statement of Operations for each of the three
years in the period ended June 30, 1998
Consolidated Statements of Changes in Shareholders' Equity
for each of the three years in the period ended
June 30, 1998
Consolidated Statement of Cash Flows for each of the three
years in the period ended June 30, 1998
Notes to Consolidated Financial Statements
(2). The financial statement schedule required to be filed by Item 8
of this form is as follows:
Report of Independent Accountants on Financial
Statement Schedule
Schedule II -- Valuation and Qualifying
Accounts as of June 30, 1998, 1997 and 1996
24
All other schedules are inapplicable to the
Registrant, or equivalent information has been
included in the consolidated financial statements or
the notes thereto, and have therefore been excluded.
(3). Listing of Exhibits:
EXHIBIT NUMBER
3(a) Election of the registrant to become governed by
Minnesota Statutes Chapter 302A and Restated Articles of
Incorporation of the registrant, dated March 11, 1983;
Articles of Amendment to Restated Articles of
Incorporation, dated October 29, 1984; Articles of
Amendment to Restated Articles of Incorporation, dated
August 14, 1987; Articles of Amendment to Restated
Articles of Incorporation, dated October 21, 1987.
(Filed as Exhibit 3(a) to the Registrant's Registration
Statement on Form S-1 (Reg. No. 40142) and incorporated
herein by reference.)
3(b) By-Laws of the registrant. (Filed as Exhibit 3(c) to the
Registrant's Registration Statement on Form S-1 (Reg.
No. 40142) and incorporated herein by reference.)
4(a) Three-for-two stock split. (Incorporated by reference to Exhibit A to
May 2, 1996, Form 8-K.)
4(b) Shareholder Rights Agreement dated December 23, 1996 (Incorporated by
reference to Exhibit 4 of the Company's report on Form 8-A12G dated
February 4, 1997)
10(a) Employment and Deferred Compensation Agreement, Dated as of April 14,
1998, between the Company and Paul D. Finkelstein.
10(b) Form of Employment and Deferred Compensation Agreement between the
Company and six executive officers. (Incorporated by reference to
Exhibit 10(b) of the Company's report on 10-K dated September 24,
1997, for the year ended June 30, 1997.)
10(c) Northwestern Mutual Life Insurance Company Policy Number
10327324, dated June 1, 1987, face amount $400,000 owned
by the registrant, insuring the life of Paul D.
Finkelstein and providing for division of death proceeds
between the registrant and the insured's designated
beneficiary (split-dollar plan). (Filed as Exhibit 10(g)
to the Registrant's Registration Statement on Form S-1
(Reg. No. 40142) and incorporated herein by reference.)
25
10(d) Schedule of omitted split-dollar insurance policies.
(Filed as Exhibit 10(h) to the Registrant's Registration
Statement on Form S-1 (Reg. No. 40142) and incorporated
herein by reference.)
10(e) Note Agreement dated as of June 21, 1991 between the registrant and
The Prudential Insurance Company of America (Incorporated by
reference to Exhibit 10(o) as part of the Company's Report on 10-K
dated September 26, 1991 for the year ended June 30, 1991).
10(f) Employee Stock Ownership Plan and Trust Agreement dated as of May 15,
1992 between the registrant and Myron Kunin and Paul D. Finkelstein,
Trustees (Incorporated by reference to Exhibit 10(q) as part of the
Company's Report on 10-K dated September 27, 1993 for the year ended
June 30, 1993).
10(g) Executive Stock Award Plan and Trust Agreement dated as of July 1,
1992 between the registrant and Myron Kunin, Trustee (Incorporated by
reference to Exhibit 10(r) as part of the Company's Report on 10-K
dated September 27, 1993 for the year ended June 30, 1993).
10(h) Revolving Credit Agreement as of June 21, 1994 between the registrant
and LaSalle National Bank and Bank Hapoalim. (Incorporated by
reference to Exhibit 10(r) part of the Company's report on 10-K dated
September 28, 1994 for the year ended June 30, 1994.)
10(i) Employee Profit Sharing Plan and Trust agreement, amended June 22,
1994 between the registrant and Myron Kunin, Trustee. (Incorporated
by reference to Exhibit 10(t) part of the Company's report on 10-K
dated September 28, 1994 for the year ended June 30, 1994.)
10(j) Survivor benefit agreement dated June 27, 1994 between the Company
and Myron Kunin. (Incorporated by reference to Exhibit 10(t) part of
the Company's report on 10-K dated September 28, 1994 for the year
ended June 30, 1994.)
10(k) Modification to Revolving Credit Agreement in 10(h) dated July 20,
1995. (Incorporated by reference to Exhibit 10(n) part of the
Company's report on 10-K dated September 27, 1995 for the year ended
June 30, 1995.)
10(l) Modification of Note Agreement in 10(e) dated July 21, 1995.
(Incorporated by reference to Exhibit 10(g) part of the Company's
report on 10-K dated September 27, 1995 for the year ended June 30,
1995.)
10(m) Private Shelf Agreement dated as of July 25, 1995 between the
registrant and the Prudential Insurance Company of America.
(Incorporated by reference to Exhibit 10(m) of the Company's report
on 10-K dated September 24, 1997, for the year ended June 30, 1997.)
10(n) Agreements for Sale and Purchase dated as of December 29, 1995,
between the Company and Steiner Salons Limited and Steiner
Hairdressing Limited. (Incorporated by reference to Exhibit 10(r) of
the Company's report on 10-Q dated February 13, 1996, for the quarter
ended December 31, 1995.)
26
10(o) Series A Senior Note drawn from Private Shelf Agreement dated as of
February 21, 1996, between the registrant and the Prudential
Insurance Company of America. (Incorporated by reference to Exhibit
10(s) of the Company's report on 10-Q dated May 3, 1996, for the
quarter ended March 31, 1996.)
10(p) Modification to Revolving Credit agreement in 10(k) dated March 19,
1996. (Incorporated by reference to Exhibit 10(t) of the Company's
report on 10-Q dated May 3, 1996, for the quarter ended March 31,
1996.)
10(q) Asset purchase agreement between the Company and National Hair Care
Centers LLC. (Incorporated by reference to Exhibit B to May 9, 1996,
Form 8-K.)
10(r) Series B Senior Note drawn from Private Shelf Agreement dated as of
June 10, 1996, between the registrant and the Prudential Insurance
Company of America. (Incorporated by reference to Exhibit 10(v) of
the Company's report on 10-K dated September 16, 1996, for the year
ended June 30, 1996.)
10(s) Modification to Revolving Credit agreement in 10(p) dated July 9,
1996. (Incorporated by reference to Exhibit 10(w) of the Company's
report on 10-K dated September 16, 1996, for the year ended
June 30, 1996.)
10(t) Agreement and plan of merger between the Company and Supercuts,
Inc. (Incorporated by reference to Exhibit 2.1 to July 15, 1996,
Form 8-K.)
10(u) Series C Senior Note drawn from Private Shelf Agreement dated as of
October 28, 1996, between the registrant and the Prudential Insurance
Company of America. (Incorporated by reference to Exhibit 10(x) of
the Company's report on 10-Q dated November 5, 1996, for the quarter
ended September 30, 1996.)
10(v) Term Note A Agreement between the registrant and LaSalle National
Bank dated October 28, 1996. (Incorporated by reference to Exhibit
10(y) of the Company's report on 10-Q dated November 5, 1996, for the
quarter ended September 30, 1996)
10(w) Series D Senior Note drawn from Private Shelf Agreement dated as of
December 13, 1996, between the registrant and the Prudential
Insurance Company of America. (Incorporated by reference to Exhibit
10(w) of the Company's report on 10-K dated September 24, 1997, for
the year ended June 30, 1997.)
10(x) Modification to Revolving Credit agreement in 10(s) dated March 19,
1997. (Incorporated by reference to Exhibit 10(x) of the Company's
report on 10-K dated September 24, 1997, for the year ended June 30,
1997.)
10(y) Series E Senior Note drawn from Private Shelf Agreement dated as of
April 7, 1997, between the registrant and the Prudential Insurance
Company of America. (Incorporated by reference to Exhibit 10(y) of
the Company's report on 10-K dated September 24, 1997, for the year
ended June 30, 1997.)
27
10(z) Compensation and non-competition agreement dated May 7, 1997, between
the Company and Myron Kunin. (Incorporated by reference to Exhibit
10(z) of the Company's report on 10-K dated September 24, 1997, for
the year ended June 30, 1997.)
10(aa) Term Note B Agreement between the registrant and LaSalle National
Bank dated July 11, 1997. (Incorporated by reference to Exhibit
10(aa) of the Company's report on 10-K dated September 24, 1997, for
the year ended June 30, 1997.)
10(bb) Modification of Private Shelf Agreement in 10(m) dated July 11, 1997.
(Incorporated by reference to Exhibit 10(bb) of the Company's report
on 10-K dated September 24, 1997, for the year ended June 30, 1997.)
10(cc) Series F Senior Note drawn from Private Shelf Agreement dated as of
July 28, 1997, between the registrant and the Prudential Insurance
Company of America. (Incorporated by reference to Exhibit 10(cc) of
the Company's report on 10-K dated September 24, 1997, for the year
ended June 30, 1997.)
10(dd) Modifications of Private Shelf Agreement in 10(bb) dated October 1,
1997. (Incorporated by reference to Exhibit 10(ff) of the Company's
report on 10-Q dated February 9, 1998, for the quarter ended December
31, 1997.)
10(ee) Private Shelf Agreement dated as of December 19, 1997 between the
registrant and ING Investment Management, Inc. (Incorporated by
reference to Exhibit 10(gg) of the Company's report on 10-Q dated
February 9, 1998, for the quarter ended December 31, 1997.)
10(ff) Series R-1 Senior Note drawn from Private Shelf dated as of December
19, 1997, between registrant and ING Investment Management, Inc.
(Incorporated by reference to Exhibit 10(hh) of the Company's report
on 10-Q dated February 9, 1998, for the quarter ended December 31,
1997.)
10(gg) Series R-2 Senior Note drawn from Private Shelf dated as of December
19, 1997, between registrant and ING Investment Management, Inc.
(Incorporated by reference to Exhibit 10(ii) of the Company's report
on 10-Q dated February 9, 1998, for the quarter ended December 31,
1997.)
10(hh) Modifications to Revolving Credit Agreement in 10 (x) dated December
30, 1997. (Incorporated by reference to Exhibit 10(jj) of the
Company's report on 10-Q dated February 9, 1998, for the quarter
ended December 31, 1997.)
10(ii) Revolving Credit Agreement dated as of May 5, 1998 between the
registrant and Bank of America National Trust and Savings
Association.
10(jj) Series G Senior Note dated as of July 10, 1998 between the registrant
and Prudential Insurance Company of America.
10(kk) Modifications to Revolving Credit Agreement in 10(hh) dated
September 1, 1998.
28
10(ll) Variation and Restatement Agreement dated as of August 10, 1998
between Regis Europe Limited and National Westminster Bank Plc.
13 Select pages of the 1998 Annual Report to Shareholders.
23 Consent of Independent Accountants.
27 Financial Data Schedule
(b) REPORTS ON FORM 8-K.
There were no reports on Form 8-K filed during fiscal 1998.
29
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
REGIS CORPORATION
By /s/ Myron Kunin
---------------------------
Myron Kunin, Chairman of the Board of Directors
By /s/ Randy L. Pearce
---------------------------
Randy L. Pearce, Senior Vice President, Finance and Chief
Financial Officer (Principal Financial and Accounting Officer)
DATE: September 17, 1998
-------------------
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
/s/ Myron Kunin
- -----------------------------
Myron Kunin, Chairman of the
Board of Directors
/s/ Paul D. Finkelstein
- -----------------------------
Paul D. Finkelstein, Director
/s/ Christopher A. Fox
- -----------------------------
Christopher A. Fox, Director
/s/ David Kunin
- -----------------------------
David Kunin, Director
/s/ Rolf F. Bjelland
- -----------------------------
Rolf F. Bjelland, Director
/s/ Van Zandt Hawn
- -----------------------------
Van Zandt Hawn, Director
/s/ Susan Hoyt
- -----------------------------
Susan Hoyt, Director
/s/ Tom Gregory
- -----------------------------
Tom Gregory, Director
30
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULE
To the Shareholders and Directors of
Regis Corporation:
Our report on the consolidated financial statements of Regis
Corporation has been incorporated by reference in this Form 10-K from page 35
of the 1998 Annual Report to Shareholders of Regis Corporation. In connection
with our audits of such financial statements, we have also audited the
related financial statement schedule listed in Item 14(a)(2) of this Form
10-K.
In our opinion, the financial statement schedule referred to above,
when considered in relation to the basic financial statements taken as a
whole, presents fairly, in all material respects, the information required to
be included therein.
/s/ PricewaterhouseCoopers LLP
PRICEWATERHOUSECOOPERS LLP
Minneapolis, Minnesota
August 21, 1998
31
REGIS CORPORATION
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
as of June 30, 1998, 1997 and 1996
(dollars in thousands)
Column A Column B Column C Column D Column E
- -------- -------- ------------------------ -------- --------
Balance at Charged to Balance at
beginning costs and Charged to end of
Description of period expenses Other Accounts Deductions period
- ----------- ---------- --------- -------------- ---------- ---------
JUNE 30, 1998:
Valuation Account, Receivable from Premier Salons $2,899 xx xx $2,899 (1) $0
Valuation Account, Premier Salons Preferred Stock $500 xx xx $500 (2) $0
Valuation Account, Allowance for doubtful accounts $200 xx xx $122 $78
JUNE 30, 1997:
Valuation Account, Receivable from Premier Salons $3,800 xx xx $901(3) $2,899
Valuation Account, Premier Salons Preferred Stock $500 xx xx xx $500
Valuation Account, Allowance for doubtful accounts $344 $236 xx $380 $200
JUNE 30, 1996:
Valuation Account, Receivable from Premier Salons $4,500 xx xx $700(3) $3,800
Valuation Account, Premier Salons Preferred Stock $500 xx xx xx $500
Valuation Account, Allowance for doubtful accounts $73 $360 xx $89 $344
NOTES:
(1) Includes a payment of $156,000 and salon assets totalling $629,000
received in partial settlement of previously reserved balance.
(2) Redemption of Preferred Stock by Premier Salons.
(3) Payments received on previously reserved balance.
32