UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

FORM 10-K/A

(Mark One)

þ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended June 30, 2004

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to

Commission file number 0-11230

Regis Corporation

(952) 947-7777

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to section 12(g) of the Act:

Common Stock, Par Value $.05 per share

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     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 þ No o

     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/A or any amendment to this Form 10-K/A. þ

     Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes þ No o

     The aggregate market value of the voting common stock held by non-affiliates computed by reference to the price at which common stock was last sold as of the last business day of the Registrant’s most recently completed second fiscal quarter, December 31, 2003, was approximately $1,698,000,000. The Registrant has no non-voting common stock.

     The number of outstanding shares of the Registrant’s common stock, par value $.05 per share, as of August 31, 2004 was 44,310,574.

DOCUMENTS INCORPORATED BY REFERENCE

     Portions of the Registrant’s Proxy Statement dated September 20, 2004 are incorporated by reference into Parts I, II and III.

EXPLANATORY NOTE

The Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2004 was filed with the SEC on September 10, 2004 (the Original Filing). The Company is filing this Amendment No. 1 to its Annual Report on Form 10-K for the fiscal year ended June 30, 2004 (Form 10-K/A) to reflect restatements of its Consolidated Balance Sheets at June 30, 2004 and 2003, and its Consolidated Statement of Operations, Consolidated Statements of Changes in Shareholders’ Equity and Comprehensive Income, and Consolidated Statement of Cash Flows for the fiscal years ended June 30, 2004, 2003 and 2002, and the related notes thereto, as discussed below. For a more detailed description of these restatements, see “Restatement of Financial Statements” in Note 2 of the Notes to the Consolidated Financial Statements. Information presented in the sections entitled Item 6, “Selected Financial Data” and Item 8, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” has also been revised, as applicable, for the effects of the restatement of financial data.

During the third quarter of its fiscal year ending June 30, 2005 (fiscal year 2005), Regis Corporation (the Company) became aware that a number of retailers and restaurant operators had disclosed in their filings with the Securities and Exchange Commission (SEC) that they were reassessing their accounting related to leases and that some companies had restated their financial statements to reflect changes in their accounting for leases. In light of these disclosures and restatements, the Company conducted a review of its lease accounting policies and practices.

In its lease accounting review, the Company examined its leases to determine the appropriate lease term for each lease under generally accepted accounting principles (GAAP). Typically, the Company’s operating leases do not require rental payments to begin until the salon is opened. The leased space is sometimes made available to the Company prior to the commencement of salon operations in order to allow time for installing normal leasehold improvements and equipment necessary to operate a salon. The Company historically began to recognize rental expense on a straight-line basis at the earlier of the commencement of operations or the commencement of rental payments. However, the Company did not include the rent holiday period in its straight-line rent calculation. A rent holiday is considered to be any period where the lessee has the right to control the use of the leased property but no rental payments are required under the lease during that period. FASB Technical Bulletin (FTB) 85-3, “Accounting for Operating Leases with Scheduled Rent Increases,” requires rent holiday periods in an operating lease to be recognized by the lessee on a straight-line basis over the lease term, which includes any rent holiday period.

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Based on the review of the Company’s accounting for operating leases, the Company determined that it would be appropriate to restate certain of its prior financial statements to appropriately account for rent holiday periods. On April 13, 2005 the Company determined that its previously filed financial statements for fiscal year 2004 (ended June 30, 2004) and for the first two quarters of fiscal year 2005 should be restated. The restatement to appropriately account for rent holidays had no impact on the overall cash flows of the Company’s business. The Company has completed its lease accounting review and has reflected all of the necessary adjustments in its restated Consolidated Financial Statements.

This Form 10-K/A sets forth the content of the Original Filing in its entirety, with changes to Items 6, 7, 8, and 9A of Part II and Item 15 of Part IV of the Original Filing amended, in each case, solely as a result of, and to reflect, the restatement. No other information in the Original Filing has been amended in this Form 10-K/A. Pursuant to the rules of the SEC, Item 15 of Part IV of the Original Filing has been amended to contain the consents of the Company’s independent registered public accountants and currently-dated certifications from the Company’s Chief Executive Officer (CEO) and Chief Financial Officer (CFO), as required by Sections 302 and 906 of the Sarbanes-Oxley Act of 2002. The consent of the Company’s independent registered public accountant is attached to this Form 10-K/A as Exhibit 23. The certifications of the Company’s CEO and CFO are attached to this form 10-K/A as Exhibits 31.1, 31.2, 32.1 and 32.2.

Except for the foregoing amended information, this Form 10-K/A continues to describe conditions as of the date of the Original Filing, and the Company has not updated the disclosures contained herein to reflect events that have occurred subsequent to that date. Other events occurring after the date of the Original Filing or other information necessary to reflect subsequent events have been disclosed in reports filed with the SEC subsequent to the Original Filing or will be disclosed in the Company’s amended Quarterly Reports on Form 10-Q/A for the quarterly periods ended September 30, 2004 and December 31, 2004, which will be filed subsequent to the filing of this Form 10-K/A, and any other reports filed with the SEC subsequent to the date of this filing.

The Company has not amended and does not intend to amend its previously-filed Annual Reports on Form 10-K or Quarterly Reports on Form 10-Q for the periods affected by the restatement that ended prior to June 30, 2004. For this reason, the Consolidated Financial Statements, reports of independent accountants and related financial information for the affected periods contained in such reports should no longer be relied upon.

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Table of Contents

PART I

Item 1. Business

Regis Corporation, the Registrant, together with its subsidiaries, is referred to herein as the “Company.”

(a) General Development of Business

In 1922, Paul and Florence Kunin opened Kunin Beauty Salon, which quickly expanded into a chain of value-priced salons located in department stores. Their son, Myron, bought the chain in 1958 and changed its name to Regis. Regis Corporation was listed on the Nasdaq June 21, 1991 at a price of $13.00 ($5.78 adjusted for subsequent stock splits). In March of 2003, Regis Corporation began trading on the NYSE under the ticker symbol “RGS.” Discussions of the general development of the business take place throughout this Annual Report on Form 10-K/A. During fiscal year 2004, there were no significant changes to the Company’s corporate structure or material changes in the Company’s method of conducting business.

(b) Financial Information about Segments

Segment Data for the years ended June 30, 2004, 2003 and 2002 are included in Note 12 to the Consolidated Financial Statements in Part II, Item 8, of this Form 10-K/A.

(c) Narrative Description of Business

The following topical areas are discussed below in order to aid in understanding the Company and its operations:

Background:

The Company, based in Minneapolis, Minnesota, is an owner, operator and franchisor of hair and retail product salons. Additionally, the Company operates a limited number of beauty career schools in North America and internationally, which is a new undertaking for the Company in the past two years. The Company’s worldwide operations include 10,162 company-owned and franchise salons at June 30, 2004 (including ten beauty career schools). Each of the Company’s concepts generally has similar products and services, concentrates on the mass-market consumer marketplace and generally display similar economic characteristics. The Company is organized to manage its operations based on geographical location. The Company’s North American operations include 8,148 salons, including six beauty career schools and 2,330 franchise salons, operating in North America. The Company’s international operations include 2,014 salons, including four beauty career schools and 1,594 franchise salons, operating throughout Europe, primarily in the United Kingdom, France, Italy and Spain. The Company’s worldwide operations utilize key hair salon concepts such as: Supercuts, Jean Louis David, Vidal Sassoon, Regis Salons, MasterCuts, Trade Secret, SmartStyle and Cost Cutters. During fiscal year 2004, the number of customer visits at the Company’s corporate salons approximated 90.7 million. The Company had an average of approximately 50,000 corporate employees worldwide during fiscal year 2004.

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Industry Overview:

Management estimates that annual revenues of the hair care industry are $53 billion in the United States and $150 billion worldwide. The industry is highly fragmented with the vast majority of hair care salons independently owned. However, the influence of chains, both franchise and company-owned, has increased substantially. Management believes that chains will continue to have a significant influence on the overall market and will continue to increase their presence. Management also believes that the demand for salon services and products will continue to increase as the overall population continues to focus on personal health and beauty, as well as convenience.

Business Strategy:

The Company’s goal is to provide high quality, affordable hair care services and products to a wide range of mass-market customers that enable the Company to expand in a controlled manner. The key elements of the Company’s strategy to achieve these goals are taking advantage of (1) growth opportunities, (2) economies of scale and (3) maintaining centralized control over salon operations in order to ensure (i) consistent, quality services and (ii) a superior selection of high quality, professional products. Each of these elements is discussed below.

Growth Opportunities. The Company’s expansion strategy focuses on organic (new construction and same-store sales growth) and acquisition growth.

Organic Growth

The Company executes its organic growth strategy through a combination of new construction of company-owned and franchise salons, as well as same-store sales increases. The relatively small capital and square footage requirements related to opening new salons allows the Company great flexibility in securing real estate for new salons. Additionally, franchising plays an important role in the Company’s overall growth strategy.

The Company’s long-term outlook for organic expansion remains strong. The Company has at least one salon in all major cities in the U.S. and has penetrated every viable U.S. market with at least one concept. However, because the Company has a variety of concepts, it can place several of its salons within any given market. The Company plans to continue expansion not only in North America, but also in the United Kingdom and throughout Europe. Opportunities in Asian markets are also being explored.

A key component to successful North American and international organic growth relates to site selection, as discussed in the following paragraphs.

Site Selection. The Company’s salons are located in malls, strip centers, lifestyle centers, Wal-Mart Supercenters and high-street locations. The Company’s financial strength, successful salon operations and national recognition causes the Company to be an attractive tenant to landlords. In evaluating specific locations for both company-owned and franchise stores, the Company seeks conveniently located, highly visible sites in high traffic locations which allow customers adequate parking and quick and easy store access. Various other factors are considered in evaluating sites, including trade area demographics, availability and cost of space, the strength of the major retailers within the area, location of competitors, traffic count, signage and other leasehold factors in a given center or area. All franchisee sites must be approved by the Company.

Because the Company’s different salon concepts target different mass-market customer groups, more than one of the Company’s salon concepts may be located in the same mall, strip center or lifestyle center. As a result, there are numerous leasing opportunities for all of its salon concepts.

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In addition, the Company plans to increase its involvement with owning and operating beauty career schools. The principle activity of the beauty career schools is the teaching of beauticians to prepare for their licensing. The activities also include clinic and school sales of products to students and customers and other miscellaneous sales. Subjects available for enrollment include cosmetology, nail art and esthetic programs. The schools are certified by the U.S. Department of Education for participation in Federal Title IV Student Financial Assistance Programs. While the Company has acquired its current base of beauty career schools, it expects to continue its expansion through not only acquisition, but also through organic growth.

While same-store sales growth plays an important part in the Company’s organic growth strategy, it is not critical to achieving the Company’s long-term growth objectives. The Company expects low single-digit same-store sales growth on an annual basis.

Pricing is a factor in same-store sales growth. The Company actively monitors the prices charged by its competitors in each market and makes every effort to maintain prices which remain competitive with prices of other salons offering similar services. However, the Company has not historically depended on price increases to significantly drive its organic growth.

Acquisition Growth

The Company has an estimated two percent world-wide market share. Therefore, abundant opportunities exist for the Company to purchase existing salons. Once acquired, it is determined whether the acquired salon’s brand should be kept or the salon should be converted to one of the Company’s existing concepts.

Over the past ten years, the Company has completed nearly 300 acquisitions, adding over 7,400 salons. Through acquisition, the Company has expanded in both North America and internationally. When contemplating an acquisition, the Company evaluates the existing salon or salon group with respect to the same characteristics as discussed above in conjunction with site selection for constructed salons (conveniently located, highly visible, high traffic, strong retailers in the area, etc.). The Company generally acquires mature strip center locations. Additionally, acquisitions include franchise salon buybacks, following the same criteria as non-franchise locations, as the Company is often already involved with the leasing arrangements associated with the salon site, and the franchise salon operates under one of the Company’s brand names and in accordance with the Company’s operating standards. Acquisitions are systematically integrated within the salon concept that it most closely emulates.

During fiscal year 2004, the Company further expanded its beauty career school business with the acquisition of six Blaine Beauty Career Schools. Operating beauty career schools is complementary to the salon business as it allows the Company to attract, train and retain valuable employees. The Company expects to open and acquire additional beauty career schools in the future in order to take advantage of this opportunity. During fiscal year 2003, the Company acquired four beauty career schools in conjunction with the Vidal Sassoon acquisition.

Salon Development

The table on the following pages sets forth the number of system-wide salons (company-owned and franchise) 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

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In the preceding table, relocations represent a transfer of location by the same salon concept and conversions represent the transfer of one concept to another concept.

In addition to adding new salon locations each year, the Company has an ongoing program of remodeling its existing salons, ranging from redecoration to substantial reconstruction. This program is implemented as management determines that a particular location will benefit from remodeling, or as required by lease renewals. A total of 169 and 179 salons were remodeled in fiscal year 2004 and 2003, respectively.

Recent Salon Additions

During fiscal year 2002, the Company added over 2,000 locations through the combination of new salon construction, acquisitions and new franchise salons. Fiscal year 2002’s growth was led by the acquisitions of two of Europe’s leading franchisors. The Company completed the acquisition of the European franchisors St. Algue, formerly known as Groupe Gerard Glemain (GGG), and Jean Louis David (JLD) in November 2001 and April 2002, respectively, adding over 1,700 franchise salons in Europe.

During fiscal year 2003, the Company added nearly 1,000 locations. The Company constructed or franchised 672 new salons (397 company-owned and 275 franchised) and acquired 758 salons (560 company-owned and 198 franchised). The 560 acquired company-owned salons included franchise buybacks of 97 salons. The Company’s most significant fiscal year 2003 acquisitions included 328 North American BoRics salons, 25 Vidal Sassoon salons, four Vidal Sassoon Academies (beauty career schools) and 286 salons, including 196 franchise salons, from Opal Concepts.

During fiscal year 2004, the Company added over 500 locations through new construction and acquisitions. The Company constructed or franchised 720 new salons (452 company-owned and 268 franchised). Additionally, the Company acquired 411 company-owned salons, including 206 franchise buybacks. The Company’s most significant fiscal year 2004 acquisitions included 153 Holiday Hair Salons (primarily in Pennsylvania) and six Blaine Beauty Career Schools in Massachusetts.

Salon Closures

The Company evaluates its salon performance on a regular basis. Upon evaluation, the Company may close a salon for operational performance or real estate issues. In either case, the closures generally occur at the end of a lease term and typically do not require significant lease buyouts. In addition, during the Company’s acquisition evaluation process, the Company may identify acquired salons that do not meet operational or real estate requirements. At the time of acquisition, generally limited value is allocated to these salons, which are usually closed within the first year.

During fiscal year 2004, the Company closed 338 salons, including 148 company-owned salons and 190 franchise salons. During fiscal year 2003, the Company closed 360 salons; including 127 company-owned salons and 233 franchise salons. The number of franchise salons closed during fiscal year 2004 and 2003 were primarily the result of transition related closures in Europe. During fiscal year 2002, the Company closed 297 salons; including 114 company-owned salons and 183 franchise salons.

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 has developed a comprehensive point of sale system to accumulate and monitor service and product sales trends, as well as assist in payroll and cash management. Economies of scale are realized through the support system offered by the home office. Additionally, due to its size, the Company has numerous financing and capital expenditure alternatives, as well as the benefits of buying retail products, supplies and salon fixtures directly from manufacturers. Furthermore, the Company can offer employee benefit programs, training and career path opportunities that differ from its smaller competitors.

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Control Over Salon Operations. The Company manages its expansive salon base through a combination of area and regional supervisors, corporate salon directors and chief operating officers. Each area supervisor is responsible for the management of approximately ten salons. Regional supervisors oversee the performance of five area supervisors or approximately 50 salons. Salon directors manage approximately 200 salons while chief operating officers are responsible for the oversight of an entire salon concept. This operational hierarchy is key to the Company’s ability to expand successfully. In addition, the Company has an extensive training program, including the production of training DVDs for use in the salons, to ensure its stylists are knowledgeable in the latest haircutting and fashion trends and provide consistent quality hair care services. Finally, the Company tracks salon activity for all of its company-owned salons through the utilization of daily sales detail delivered from the salons’ point of sale system. This information is used to reconcile cash on a daily basis. This information is also reported to the Company’s Chief Executive Officer, who is also the Chief Operating Decision Maker.

Consistent, Quality Service. The Company is committed to meeting its customers’ hair care needs by providing competitively priced services and products with professional and knowledgeable stylists. The Company’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 and waving, shampooing, conditioning and waxing. During fiscal year 2004, 2003 and 2002, the percentage of company-owned service revenues attributable to each of these services was as follows:

Beauty career school tuition revenues were earned during fiscal years 2004 and 2003. They represented one percent or less of total company-owned service revenues for each of these years. However, the Company expects tuition revenues to increase as it expands its presence in the beauty career school market.

To promote quality and consistency of services provided throughout the Company’s salons, the Company employs full and part-time artistic directors whose duties are to train salon stylists in current styling trends.

High Quality, Professional Products. The Company’s salons merchandise nationally-recognized hair care and beauty products as well as a complete line of private label products sold under the Regis, MasterCuts and Cost Cutters labels. The retail products offered by the Company are sold exclusively through professional salons. The top selling brands include Matrix, Paul Mitchell, Tigi, Redken, Sebastian, Nioxin, OPI and the Company’s various private label brands.

The Company has the most comprehensive assortment of retail products in the industry, with an estimated share of the North American retail beauty product market of up to 15 percent. Although the Company constantly strives to carry an optimal level of inventory in relation to consumer demand, it is more economical for the Company to have excess inventory on hand than to run the risk of being under-stocked should demand prove higher than expected. The extended shelf life and lack of seasonality related to the beauty products allows the cost of carrying inventory to be relatively low and lessens the importance of inventory turnover ratios. The Company’s primary goal is to maximize revenues rather than inventory turns.

The retail portion of the Company’s business complements its salon services business. The Company’s stylists and beauty consultants are compensated and regularly trained to sell hair care and beauty products to their customers. Additionally, customers are enticed to purchase products after a stylist demonstrates its effect by using it in the styling of the customer’s hair.

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Salon Concepts:

The Company’s salon concepts focus on providing high quality hair care services and professional products, primarily to the middle consumer market. Most of the Company’s salon concepts are located in regional malls, strip centers, Wal-Mart Supercenters, high street locations and department stores.

The Company’s North American operations consist of 8,148 salons (2,330 franchised), operating under five concepts, each offering attractive and affordable hair care products and services in the United States, Canada and Puerto Rico, as discussed below. Under each concept below and within the discussion of international operations, the number of new salons expected to be opened within the upcoming fiscal year is discussed. In addition to these openings, the Company typically acquires several hundred salons each year. The number of acquired salons and the concept under which the acquisitions will fall vary based on the acquisition opportunities which emerge throughout the year.

Regis Salons. These salons are primarily mall-based, full-service salons providing complete hair care and beauty services aimed at moderate to upscale, fashion-conscious consumers. The customer mix at these salons is approximately 75 percent women and both appointments and walk-in customers are common. These salons offer a full range of custom styling, cutting, hair coloring, waving and waxing services as well as professional hair care products. Service revenues compose approximately 80 percent of Regis Salons’ total revenues. The average ticket is approximately $31. Regis Salons compete in their existing markets primarily by emphasizing the high quality of the services provided. Included within the Regis Salons concept are various other trade names, including Carlton Hair, Vidal Sassoon, Jean Louis David and Mia & Maxx Hair Studios.

The average initial capital investment required for a new Regis Salon typically ranges from $150,000 to $200,000, excluding average opening inventory costs of approximately $10,000. Average annual salon revenues in a Regis Salon which has been open five years or more are approximately $425,000. During fiscal year 2005, the Company plans to open approximately 55 new Regis Salons.

MasterCuts. MasterCuts is a full-service mall-based salon group which focuses on the walk-in consumer (no appointment necessary) that demands more moderately priced hair care services. MasterCuts salons emphasize quality hair care services, affordable prices and time-saving services for the entire family. The customer mix at MasterCuts salons historically contained a high percentage of men and children; however, in recent years, the customer mix has been split more evenly between men and women. In addition, MasterCuts private label haircare line was introduced into salons during fiscal year 2003. Service revenues compose approximately 75 percent of total revenues for this salon concept. The average sale at MasterCuts salons is approximately $16.

The average initial capital investment required for a new MasterCuts salon is typically $150,000, excluding average opening inventory costs of approximately $10,000. Average annual salon revenues in a MasterCuts salon which has been open five years or more are approximately $300,000. During fiscal year 2005, the Company plans to open approximately 45 new MasterCuts salons.

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Trade Secret. Trade Secret salons are designed to emphasize the sale of hair care and beauty products in a retail setting while providing high quality hair care services. Trade Secret salons offer one of the most comprehensive assortments of hair and beauty products in the industry. Trade Secret’s retail selection consists of highly recognized brands, and the products carried change in tandem with changing trends. Trade Secret’s primary customer base includes the female head of the household shopping for her entire family, as well as singles shopping for their own beauty products and accessories. Included within the Trade Secret concept are Beauty Express salons. Trade Secret salons are primarily mall-based. However, in recent years, the Company has begun to expand its Trade Secret salons into strip centers. As of June 30, 2004, 66 company-owned Trade Secret salons were located in strip centers. The average ticket at Trade Secret is approximately $22.

The average initial capital investment required for a new Trade Secret salon is typically $150,000, excluding average opening inventory costs of approximately $40,000. Average annual salon revenues in a Trade Secret salon which has been open five years or more are approximately $450,000. During fiscal year 2005, the Company plans to open approximately 35 new corporate Trade Secret salons.

SmartStyle. The SmartStyle salons share many operating characteristics of the Company’s other salon concepts; however, they are located entirely in Wal-Mart Supercenters. SmartStyle has a walk-in customer base, pricing is promotional and services are focused on the family. In addition, professional retail product sales contribute solidly to overall revenues. The Company also has 201 franchise salons located in Wal-Mart Supercenters.

Service revenues compose approximately 60 to 65 percent of SmartStyle’s total revenues. The average ticket at a SmartStyle salon is approximately $17.

The average initial capital investment required for a new SmartStyle salon is typically $30,000, excluding average opening inventory costs of approximately $10,000. Average annual salon revenues in a SmartStyle salon which has been open five years or more are approximately $250,000. During fiscal year 2005, the Company plans to open approximately 175 new corporate SmartStyle salons and approximately 25 franchise salons in Wal-Mart Supercenters.

Strip Center Salons. The Company’s Strip Center Salons are comprised of company-owned and franchise salons operating in strip centers across North America under the following concepts:

Supercuts. The Supercuts concept provides consistent, high quality hair care services and professional products to its customers at convenient times and locations and at a reasonable price. This concept appeals to men, women and children, although male customers account for over 65 percent of total haircuts. Service revenues typically compose approximately 85 to 90 percent of Supercuts’ total corporate revenues. The average sale at a corporate Supercuts salon is approximately $13.

The average initial capital investment required for a new Supercuts salon is typically $90,000, excluding average opening inventory costs of approximately $7,000. Average annual salon revenues in a corporate Supercuts salon which has been open five years or more are approximately $250,000. During fiscal year 2005, the Company plans to open approximately 110 new corporate Supercuts salons, as well as approximately 85 new franchise salons.

Cost Cutters (franchise salons). The Cost Cutters concept is a full-service salon concept providing value-priced hair care services for men, women and children. These full-service salons also sell a complete line of professional hair care products. Franchise revenues from Cost Cutters salons are split relatively evenly between franchise revenues related to royalties and fees and those from product sales to franchisees. During fiscal year 2005, the Company plans to open approximately 40 new franchised Cost Cutters salons.

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In addition to the franchise salons, the Company operates company-owned Cost Cutters salons, as discussed below.

Other Company-owned Strip Center Salon Concepts. Company-owned Strip Center Salons are made up of successful salon groups acquired over the past several years operating under the primary concepts of Hair Masters, Style America, First Choice Haircutters, Best Cuts, Cost Cutters, BoRics, Magicuts and Holiday Hair, as well as other regional concept names. All concepts offer a full range of custom hairstyling, cutting, coloring and permanent wave, as well as hair care products. Hair Masters offers moderately-priced services to a predominately female demographic, while the other concepts primarily cater to time-pressed, value-oriented families. On average, service revenues compose approximately 85 to 90 percent of total company-owned strip center revenues. The average sale for a company-owned strip center salon is approximately $15.

The average initial capital investment required for a new strip center salon within this group typically ranges from $50,000 to $80,000, excluding average opening inventory costs of approximately $7,000. Average annual salon revenues in a strip center salon which has been open five years or more are approximately $300,000. During fiscal year 2005, the Company plans to open approximately 110 new company-owned strip center salons.

Other Franchise Concepts. This group of franchise salons includes primarily First Choice Haircutters, Magicuts, Pro-Cuts and Haircrafters. These concepts function primarily in the high volume, value-priced hair care market segment, with key selling features of value, convenience, quality and friendliness, as well as a complete line of professional hair care products. In addition to these franchise salons, the Company operates company-owned First Choice Haircutters and Magicuts salons, as previously discussed above.

Franchise revenues from strip center salons are split relatively evenly between franchise revenues related to royalties and fees and those from product sales to franchisees. During fiscal year 2005, the Company plans to open approximately 40 new franchised strip center salons.

International Salons:

At June 30, 2004, the Company operated 2,014 hair care salons, including 1,594 franchise salons, located throughout Europe, primarily in the United Kingdom, France, Italy and Spain. During fiscal year 2002, the Company added to its existing international salon concepts – primarily Regis Hairstylists, Trade Secret, Hair Express and Supercuts – with the acquisitions of the French franchisors St. Algue, formerly known as GGG, and JLD. Salons associated with St. Algue operate under the concepts Saint Algue, Coiff & Co., Intermede and City Looks. JLD operates primarily under the following concepts: JLD Diffusion, JLD Tradition, JLD Quick Service and JLD Just a Cut. During fiscal year 2003, the Company acquired 25 Vidal Sassoon salons, 14 of which are located in Europe. Additionally, four Vidal Sassoon Academies (beauty career schools) were acquired, including one located in Europe. Company-owned salons in the international division operate in malls, leading department stores, high-street locations and grocery and retail chains under license arrangements or real property leases, consistently focused on the value-priced, moderate and upscale hair care and beauty market.

Service revenues compose approximately 75 to 80 percent of total revenues for international corporate salons, including tuition revenues which compose approximately 5 percent of total revenues. Excluding the effects of tuition revenues, the average sale at an international salon is approximately $53. Approximately 80 percent of international franchise revenues are generated from franchise royalties and fees.

The initial capital investment required is typically £100,000 for a Regis Hairstylists salon, £50,000 for a Supercuts UK salon and £100,000 to £125,000 for an international Trade Secret salon. For a Vidal Sassoon salon, the initial capital investment required is typically over £250,000. Average annual salon revenues for a salon which has been open five years or more typically range from £300,000 to £600,000 in a Regis Hairstylists salon, £150,000 to £300,000 in a Supercuts UK salon and £500,000 to £600,000 in an international Trade Secret salon. For a mature Vidal Sassoon salon, the average annual revenues are typically in excess of £550,000. During fiscal year 2005, the Company plans to open approximately 35 new company-owned international salons, as well as approximately 130 new international franchise salons.

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Franchising Program:

General. The Company has various franchising programs supporting its 3,924 franchise salons as of June 30, 2004, consisting mainly of Supercuts, Cost Cutters, First Choice Haircutters, Magicuts, Haircrafters, Pro Cuts, St. Algue and JLD. These salons have been included in the discussions regarding salon counts and concepts on the preceding pages.

The Company provides its 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.

Standards of Operations. The Company does not control the day-to-day operations of its franchisees, including hiring and firing, establishing prices to charge for products and services, business hours and capital expenditure decisions. However, the franchise agreements afford certain rights to the Company, such as the right to approve location, suppliers and the sale of a franchise. Additionally, 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 the standards for each franchising program. All of the rights afforded the Company with regard to the franchise operations allow the Company to protect its brands, but do not allow the Company to control the franchise operations or make decisions that have a significant impact on the success of the franchise salons.

To further ensure conformity, the Company may enter into the lease for the store site directly with the landlord, and subsequently sublease the site to the franchisee. The franchise agreement and sublease provide 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 7 of “Notes to Consolidated Financial Statements” for further information.

Franchise Terms. Pursuant to their franchise agreement with the Company, each franchisee pays an initial fee for each store and ongoing royalties to the Company. In addition, for most franchise concepts, the Company collects advertising funds from franchisees and administers the funds on behalf of the concept. Franchisees are responsible for the costs of leasehold improvements, furniture, fixtures, equipment, supplies, inventory and certain other items, including initial working capital.

Additional information regarding each of the major franchisee brands is listed below:

Supercuts (North America)

The majority of existing Supercuts franchise agreements have a perpetual term, subject to termination of the underlying lease agreement or termination of the franchise agreement by either the Company or the franchisee. 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. During fiscal year 2001, the Company began selling development agreements for new markets which include limited territory protection for the Supercuts concept. The Company has a comprehensive impact policy that resolves potential conflicts among franchisees and/or the Company regarding proposed salon sites.

Cost Cutters, First Choice Haircutters and Magicuts (North America)

The majority of existing Cost Cutters’ franchise agreements have a 15-year term with a 15-year option to renew (at the option of the franchisee), while the majority of First Choice Haircutters’ franchise agreements have a ten-year term with a five-year option to renew. The majority of Magicuts’ franchise agreements have a term equal to the greater of five years or the current initial term of the lease agreement with an option to renew for two additional five-year periods. All of 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. Franchisees may enter into development agreements with the Company which provide limited territorial protection.

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Pro Cuts (North America)

The majority of existing Pro Cuts franchise agreements have a ten-year term with a ten-year option to renew. The agreements also provide the Company a right of first refusal if the store is to be sold or transferred. The current franchise agreement is site specific. Franchisees may enter into development agreements with the Company which provide limited territorial protection.

St. Algue and JLD (International)

St. Algue was purchased in connection with the acquisition of the French franchisor, GGG. The majority of St. Algue’s franchise contracts have a five-year term with an implied option to renew for a term of three years. All new JLD contracts have five-year terms. The franchise agreements for both St. Algue and JLD are site specific and only a small minority of the contracts provide for territorial exclusivity. The agreements provide for the right of first refusal during the period covered by the franchise contract if the salon is to be sold and the franchisee must obtain the Company’s approval before selling of the salon. With regards to the store site, neither St. Algue nor JLD acts as lessor for their franchisees. Additionally, JLD franchise contracts prohibit the franchisee from selling the salon to another major national competitor for one year after the contract term ends.

Franchise Sales. Franchise expansion will continue to be a significant focus of the Company in the future.

Franchisee Training. The Company provides new 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 Company provides store managers and stylists with extensive technical training for Supercuts franchises. For further description of the Company’s education and training programs, see the “Education and Training Programs” section of this document.

Markets and Marketing:

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, television and billboard advertising are developed and supervised at the Company’s headquarters, but most advertising is done in the immediate market of the particular salon.

Most franchise concepts maintain separate Advertising Funds (the “Funds”), managed by the Company, that provide comprehensive advertising and sales promotion support for each system. All stores, company-owned and franchised, contribute to the Funds, the majority of which are allocated to the contributing market for media placement and local marketing activities. The remainder is allocated for the creation of national advertising campaigns and system-wide activities. This intensive advertising program creates significant consumer awareness, a strong concept image and high loyalty.

Education and Training Programs:

The Company has an extensive hands-on training program for its stylists which emphasizes both technical training in hairstyling and cutting, hair coloring, perming 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 train the stylists in techniques for providing the salon services and who instruct the stylists in current styling trends. Stylist training is achieved through seminars, workshops and DVD-based programs. The Company was the first in its industry to develop a DVD-based training system in its salons and currently has over 50 DVDs designed to enhance technical skills of stylists.

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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.

The Company also provides regulatory compliance training for all its field employees. This training is designed to help supervisors and stylists understand employee regulatory requirements and compliance with these standards.

Staff Recruiting and Retention:

Recruiting quality managers and stylists is essential to the establishment and operation of successful salons. In search of salon managers, the Company’s supervisory team recruits or develops and promotes from within those stylists that display initiative and commitment. The Company has been and believes it will continue to be successful in recruiting capable managers and stylists. The Company believes that its compensation structure for salon managers and stylists is competitive within the industry. Stylists benefit from the Company’s high-traffic locations and receive a steady source of new business from walk-in customers. In addition, the Company offers 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. Salon fixtures and equipment are generally 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 5,000 square feet, with the typical salon having about 1,200 square feet. At present, the cost to the Company of constructing and furnishing a new salon, including inventories, normally ranges from approximately $40,000 to $200,000, depending on the size of the salon and the concept. Less than ten percent of all salons constructed fall within a higher bracket and will cost between $200,000 and $400,000 to construct. Of the total construction costs, approximately 70 percent of the cost is for leasehold improvements and the balance is for salon fixtures, equipment and inventories.

The Company maintains its own design and construction department, which designs and supervises the constructing, furnishing and fixturing of all new company-owned salons and certain franchise locations. The Company has developed considerable expertise in designing salons. The design and construction staff focuses on visual appeal, efficient use of space, cost and rapid completion times.

Management Information Systems:

The Company utilizes a point-of-sale (POS) information system in all its company-owned salons which collects data daily from each salon. The data is consolidated into several management systems maintained at the corporate office. Salon employees deposit cash receipts into a local bank account on a daily basis. The POS system then sends the amount expected to be deposited to the corporate office, where the amount is reconciled with local depository balances transferred into a centralized corporate bank account on a daily basis. Point-of-sale information is also used to generate payroll information, monitor salon performance, and to generate customer data for use in identifying and anticipating industry trends for purposes of pricing and staffing. The Company has expanded the corporate information systems to deliver on-line information of product sales to improve its inventory control system, including monthly replenishment recommendations for a salon. Management believes that its information systems provide advantages in planning and analysis which are generally not available to a majority of its competitors.

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Competition:

The hair care industry is highly fragmented and competitive. In every area in which the Company has a salon, there are competitors offering similar hair care services and products at similar prices. The Company faces competition within malls from companies which operate salons within department stores 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 chains to expand nationally due to the need to establish customer awareness, systems and infrastructure, recruitment of experienced hair care management and adequate store staff, and leasing of quality sites. The principal factors of competition in the affordable hair care 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. In order to obtain locations in shopping malls, the Company must be competitive as to rentals and other customary tenant obligations.

Trademarks:

The Company holds numerous trademarks, both in the United States and in many foreign countries. The most recognized trademarks are “Regis Salons,” “Supercuts,” “MasterCuts,” “Trade Secret,” “SmartStyle,” “Cost Cutters,” “Hair Masters,” “Jean Louis David,” “Saint Algue,” “First Choice Haircutters” and “Magicuts.”

“Vidal Sassoon” is a registered trademark of Procter & Gamble. The Company has a license agreement to use the Vidal Sassoon name for existing salons and academies, and new salon development.

Although the Company believes the use of these trademarks is an element 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, the Company’s success and continuing growth are the result of the quality of its salon location selections and real estate strategies.

Employees:

During fiscal year 2004, the Company had an average of approximately 50,000 full- and part-time employees worldwide, of which an average of approximately 44,000 employees were located in the United States. None of the Company’s employees are subject to a collective bargaining agreement and the Company believes that its employee relations are amicable.

Community Involvement:

Many of the Company’s 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. The Company’s community involvement also includes a major sponsorship role for the Susan G. Komen Twin Cities Race for the Cure. This 5K run and one-mile walk is held in Minneapolis, Minnesota on Mother’s Day to help fund breast cancer research, education, screening and treatment. Through its community involvement efforts, the Company has helped raise millions of dollars in fundraising for breast cancer research.

Governmental Regulations:

The Company is subject to various federal, state, local and provincial laws affecting its business as well as a variety of regulatory provisions relating to the conduct of its cosmetology business, including health and safety.

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In the United States, 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/disclosure document 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.

In Canada, the Company’s franchise operations are subject to both the Alberta Franchise Act and the Ontario Franchise Act. The offering of franchises in Canada occurs by way of a disclosure document, which contains certain disclosures required by the Ontario and Alberta Franchise Acts. Both the Ontario and Alberta Franchise Acts primarily focus on disclosure requirements, although each requires certain relationship requirements such as a duty of fair dealing and the right of franchisees to associate and organize with other franchisees.

Governmental regulations surrounding franchise operations in Europe are similar to those in the United States. The Company believes it is operating in substantial compliance with applicable laws and regulations governing all of its operations.

The beauty career schools derive a significant portion of their revenue from student financial assistance originating from the U.S. Department of Education’s Title IV Higher Education Act of 1965. For the students to receive financial assistance at the school, the beauty career schools must maintain eligibility requirements established by the U.S. Department of Education.

(d) Financial Information about Foreign and North American Operations

Financial information about foreign and North American markets is incorporated herein by reference to Management’s Discussion and Analysis of Financial Condition and Results of Operations in Part II, Item 7 and segment information in Note 12 to the Consolidated Financial Statements in Part II, Item 8 of this Form 10-K/A.

(e) Available Information

The Company is subject to the informational requirements of the Securities and Exchange Act of 1934 (“Exchange Act”). The Company therefore files periodic reports, proxy statements and other information with the Securities and Exchange Commission (“SEC”). Such reports may be obtained by visiting the Public Reference Room of the SEC at 450 Fifth Street, NW, Washington, D.C. 20549, or by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains an internet site (http://www.sec.gov) that contains reports, proxy and information statements and other information regarding issuers that file electronically.

Financial and other information can be accessed in the Investor section of the Company’s website at www.regiscorp.com. The Company makes available, free of charge, copies of its annual report on Form 10-K/A, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after filing such material electronically or otherwise furnishing it to the SEC.

Item 2. Properties

The Company’s corporate offices are headquartered in a 170,000 square foot, three building complex in Edina, Minnesota owned by the Company. The Company also operates small offices in Toronto, Ontario, Coventry, England, London, England and Paris, France. These offices are occupied under long-term leases.

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The Company has distribution centers located in Chattanooga, Tennessee and Salt Lake City, Utah. The Chattanooga facility currently utilizes 250,000 square feet while the Salt Lake City facility utilizes 210,000 square feet. The Salt Lake City facility was originally leased, but was purchased by the Company during the fourth quarter of fiscal year 2003. The Salt Lake City facility may be expanded to 290,000 square feet to accommodate future growth.

The Company operates all of its salon locations under leases or license agreements. Substantially all of its North American locations in regional malls are operating under leases with an original term of at least ten years. Salons operating within strip centers and Wal-Mart Supercenters have leases with original terms of at least five years, generally with the ability to renew, at the Company’s option, for an additional five years. Salons operating within department stores in Canada and Europe operate under license agreements, while freestanding or shopping center locations in those countries have real property leases comparable to the Company’s domestic locations.

The Company also leases the premises in which certain franchisees operate and has entered into corresponding sublease arrangements with the franchisees. These leases have a five-year initial term and one or more five-year renewal options. All lease costs are passed through to the franchisees. Remaining franchisees, who do not enter into sublease arrangements with the Company, negotiate and enter into leases on their own behalf.

None of the Company’s salon leases are 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 7 of “Notes to Consolidated Financial Statements.”

Item 3. Legal Proceedings

The Company is a defendant in various lawsuits and claims arising out of the normal course of business. Like certain other large retail employers, the Company has been faced with allegations of purported class-wide wage and hour violations. The Company is currently a defendant in a collective action lawsuit in which the plaintiffs allege violations under the Fair Labor Standards Act (“FLSA”). The Company denies these allegations and will actively defend its position. However, litigation is inherently unpredictable and the outcome of these matters cannot presently be determined. Although company counsel believes that the Company has valid defenses in these matters, it could in the future incur judgments or enter into settlements of claims that could have a material adverse effect on its results of operations in any particular period.

In August 2003, the Company reached an agreement with the Equal Employment Opportunity Commission (“EEOC”) to settle allegations of discrimination in Supercuts. The $3.2 million settlement was accrued during the fourth quarter of fiscal year 2003 in corporate and franchise support costs in the Consolidated Statement of Operations.

Item 4. Submission of Matters to a Vote of Security Holders

On October 30, 2003, at the annual meeting of the shareholders of the Company, a vote on the election of the Company’s directors took place with the following results:

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PART II

Item 5. Market for the Registrant’s Common Equity and Related Stockholder Matters

(a) Market Price of and Dividends on the Registrant’s Common Equity and Related Stockholder Matters

Regis common stock is listed and traded on the New York Stock Exchange under the symbol “RGS.”

The accompanying table sets forth the high and low closing bid quotations for each quarter during the previous two fiscal years as reported by Nasdaq through March 26, 2003 (under the symbol “RGIS”) and the New York Stock Exchange (under the symbol “RGS”) beginning on March 27, 2003. The quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission, and may not necessarily represent actual transactions.

As of August 31, 2004, Regis shares were owned by approximately 25,000 shareholders based on the number of record holders and an estimate of individual participants in security position listings. The common stock price was $40.93 per share on August 31, 2004.

The Company paid quarterly dividends of $0.03 per share during each quarter of fiscal year 2003 and during the first and second quarters of fiscal year 2004. During the third and fourth quarters of fiscal year 2004, the Company increased its dividends paid to $0.04 per share. The Company expects to continue its quarterly dividend rate of $0.04 per share for the foreseeable future.

(c) Share Repurchase Program

In May 2000, the Company’s Board of Directors approved a stock repurchase program under which up to $50.0 million can be expended for the repurchase of the Company’s common stock. On August 19, 2003, the Board of Directors elected to increase the maximum repurchase amount to $100.0 million. The timing and amounts of any repurchases will depend on many factors, including the market price of the common stock and overall market conditions. All repurchased shares are immediately retired. This repurchase program has no stated expiration date.

All repurchases of the Company’s common stock during the quarter ended June 30, 2004 were part of this repurchase program. The following table shows the monthly fourth quarter fiscal year 2004 stock repurchase activity:

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Item 6. Selected Financial Data

The following information has been restated to reflect adjustments to the Original Filing that are further discussed in the sections entitled “Explanatory Note” in the forepart of this Form 10-K/A and under “Restatement of Financial Statements” in Note 2 of the Notes to Consolidated Financial Statements included in Item 8 of this Form 10-K/A. The following table sets forth, in thousands (except per share data), for the periods indicated, selected financial data derived from the Company’s Consolidated Financial Statements in Item 8.

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

RESTATEMENT OF FINANCIAL STATEMENTS

During our quarter ending March 31, 2005 (third quarter of fiscal year 2005), we became aware that a number of retailers and restaurant operators had disclosed in their filings with the SEC that they were reassessing their accounting related to leases and that some companies had restated their financial statements to reflect changes in their accounting for leases. In light of these disclosures and restatements, we conducted a review of our lease accounting policies and practices.

In our lease accounting review, we examined our leases to determine the appropriate lease term for each lease under GAAP. Typically, our operating leases do not require rental payments to begin until the salon is opened. The leased space is sometimes made available to us prior to the commencement of salon operations in order to allow time for installing normal leasehold improvements and equipment necessary to operate a salon. We historically began to recognize rental expense on a straight-line basis at the earlier of the commencement of operations or the commencement of rental payments. However, we did not include the rent holiday period in our straight-line rent calculation. A rent holiday is considered to be any period where the lessee has the right to control the use of the leased property but no rental payments are required under the lease during that period. FASB Technical Bulletin (FTB) 85-3, “Accounting for Operating Leases with Scheduled Rent Increases,” requires that rent holiday periods in an operating lease should be recognized by the lessee on a straight-line basis over the lease term, which includes any rent holiday period. Therefore, we are restating our financial statements for fiscal years 2004, 2003 and 2002 to appropriately account for rent holiday periods. The restatement to appropriately account for rent holidays had no impact on our consolidated revenues or cash flows from operations.

See Note 2 to the Consolidated Financial Statements of this Form 10-K/A for a summary of the effect of this change on the Consolidated Balance Sheets as of June 30, 2004 and 2003, as well as the Consolidated Statement of Operations for fiscal years 2004, 2003 and 2002.

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ANNUAL RESULTS

The following table sets forth, for the periods indicated, certain information derived from the Company’s Consolidated Statement of Operations in Item 8, expressed as a percent of revenues. The percentages are computed as a percent of total revenues, except as noted.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

MANAGEMENT’S OVERVIEW

Regis Corporation, based in Minneapolis, Minnesota, is an owner, operator and franchisor of hair and retail product salons and beauty career schools. Our worldwide operations include 10,162 system-wide North American and international salons, including ten beauty career schools, at June 30, 2004. Each of our concepts has generally similar products and services and serves mass-market consumers. Our operations are organized to be managed based on geographical location. Our North American operation includes 8,148 salons, including 2,330 franchise salons, operating in the United States, Canada and Puerto Rico primarily under the trade names of Regis Salons, MasterCuts, Trade Secret, SmartStyle, Supercuts and Cost Cutters. Our international operations include 2,014 salons, including 1,594 franchise salons, located throughout Europe, primarily in the United Kingdom, France, Italy and Spain. During fiscal year 2004, we had an average of approximately 50,000 corporate employees worldwide.

Our growth strategy consists of two primary, but flexible, building blocks. Through a combination of organic and acquisition growth, we seek to achieve our long-term objective of 10-to-14 percent annual revenue growth. We anticipate that going forward, the mix of organic and acquisition growth to be roughly equal. However, depending on several factors, including the availability of appropriate real estate, availability of salons for sale and same-store sales trends, this mix will vary from year-to-year. We believe achieving revenue growth of 10-to-14 percent will allow us to increase annual earnings at a low-to-mid teen percent growth rate.

Organic revenue growth is achieved through the combination of new salon construction and same-store sales increases. Each fiscal year, we anticipate building several hundred corporate salons. We anticipate our franchisees will open several hundred salons as well. Older, unprofitable salons will be closed or relocated. Our long-term outlook is for annual consolidated low single-digit same-store sales increases. Based on current fashion and economic cycles, we project our fiscal year 2005 consolidated same-store sales increase to be at the low end of our long-term outlook range.

Historically, acquisitions have varied in size from as small as one salon to over one-thousand salons. The median acquisition size is approximately 10 salons. From fiscal year 1994 to fiscal year 2004, we completed nearly 300 acquisitions, adding over 7,400 salons. We anticipate adding several hundred corporate salons each year from acquisitions. Some of these acquisitions may include buying salons from our franchisees.

We execute our growth strategy by focusing on real estate. Our real estate strategy is dependent on adding salons in convenient locations with good visibility, strong customer traffic and appropriate trade demographics. Our various salon and product concepts are now operating in a wide range of retailing environments. We believe that the availability of real estate will augment our ability to achieve the aforementioned long-term growth objectives. We anticipate that we will add approximately 1,000 salons each year through a combination of organic, acquisition and franchise growth.

The conceptual strength of our business is in the fundamental similarity of our salon concepts that allow flexibility and multiple salon concept placement in shopping centers and neighborhoods, and broad customer mix. Each concept is targeted at the middle market customer, however each attracts a slightly different demographic. We anticipate expanding all of our salon concepts. In addition, we anticipate testing and developing new salon concepts to complement our existing concepts.

We have begun acquiring and are exploring the possibility of building beauty career schools. The beauty career school business is highly profitable, and often participates in governmental programs designed to encourage education. We believe there is an opportunity to place graduates in our various salon concepts which may provide us with another competitive advantage. Similar to the salon industry, the beauty career school business is highly fragmented. As a result, we believe there is an opportunity to consolidate this industry. Expanding this business would allow the Company to add incremental revenue without cannibalizing our existing salon business. Primarily through acquisition, we believe beauty career schools could contribute over $100 million in annual revenue in five years.

Additionally, we desire to enter the Asian market within the next five years.

For a discussion of our near-term expectations, please refer to the Investor Information section of our website at www.regiscorp.com.

Maintaining financial flexibility is a key element in continuing our successful growth. With strong operating cash flow and an investment grade credit rating, we are confident that we will be able to financially support our long-term growth objectives.

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CRITICAL ACCOUNTING POLICIES

The Consolidated Financial Statements are prepared in conformity with accounting principles generally accepted in the United States of America. In preparing the Consolidated Financial Statements, we are required to make various judgments, estimates and assumptions that could have a significant impact on the results reported in the Consolidated Financial Statements. We base these estimates on historical experience and other assumptions believed to be reasonable under the circumstances. Changes in these estimates could have a material effect on our Consolidated Financial Statements.

Our significant accounting policies can be found in Note 1 to the Consolidated Financial Statements contained in Item 8. of this Form 10-K/A. We believe the following accounting policies are most critical to aid in fully understanding and evaluating our reported financial condition and results of operations.

Goodwill

We review goodwill for impairment annually or at any time events or circumstances indicate that the carrying value may not be fully recoverable. According to our accounting policy, an annual review was performed during the third quarter of fiscal year 2004, and no impairment was identified. A similar review will be performed in the third quarter of each year, or more frequently if indicators of potential impairment exist. Our impairment review process is based on a discounted future cash flow approach that uses estimates of revenues for the reporting units, driven by assumed organic growth rates, estimated future gross margin and expense rates, as well as acquisition integration and maturation, and appropriate discount rates. These estimates are consistent with the plans and estimates that are used to manage the underlying businesses. Charges for impairment of goodwill for a reporting unit may be incurred in the future if the reporting unit fails to achieve its assumed revenue growth rates or assumed gross margin, or if interest rates increase significantly. We generally consider our various concepts to be reporting units when we test for goodwill impairment because that is where we believe goodwill naturally resides. The Company believes that the international operations have the highest risk for potential impairment should future revenue growth rates be lower than expected, or interest or tax rates increase.

Long-Lived Assets

We assess the impairment of long-lived assets annually or when events or changes in circumstances indicate that the carrying value of the assets or the asset grouping may not be recoverable. Our impairment analysis is performed on a salon-by-salon basis. Factors considered in deciding when to perform an impairment review include significant under-performance of an individual salon in relation to expectations, significant economic or geographic trends, and significant changes or planned changes in our use of the assets. Recoverability of assets that will continue to be used in our operations is measured by comparing the carrying amount of the asset to the related total estimated future net cash flows. If an asset’s carrying value is not recoverable through those cash flows, the asset grouping is considered to be impaired. The impairment is measured by the difference between the assets’ carrying amount and their fair value, based on the best information available, including market prices or discounted cash flow analysis.

Judgments made by management related to the expected useful lives of long-lived assets and the ability to realize undiscounted cash flows in excess of the carrying amounts of such assets are affected by factors such as the ongoing maintenance and improvement of the assets, changes in economic conditions and changes in operating performance. As the ongoing expected cash flows and carrying amounts of long-lived assets are assessed, these factors could cause us to realize material impairment charges.

Purchase Price Allocation

We make numerous acquisitions. The purchase prices are allocated to assets acquired, including identifiable intangible assets, and liabilities assumed based on their estimated fair values at the dates of acquisition. Fair value is estimated based on the amount for which the asset or liability could be bought or sold in a current transaction between willing parties. For our acquisitions, the majority of the purchase price that is not allocated to identifiable assets, or liabilities assumed, is accounted for as residual goodwill rather than identifiable intangible assets. This stems from the value associated with the walk-in customer base of the acquired salons, the value of which is not recorded as an identifiable intangible asset under current accounting guidance and the limited value and customer preference associated with the acquired hair salon brand. Residual goodwill further represents our opportunity to strategically combine the acquired business with our existing structure to serve a greater number of customers through our expansion strategies.

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Revenue Recognition for Company-Owned Salons

Company-owned salon revenues and related gross margin are recorded at the time of sale, as this is when the services have been provided or, in the case of product revenues, delivery has occurred, and the salon receives the customer’s payment. There are minimal accounting judgments and uncertainties affecting the application of this policy. Based on historical results, refunds to the customer represent less than one percent of total company-owned revenues. The vast majority of returns and refunds occur within a matter of days of the original sales transaction. A significant increase in returns or refunds could have a material impact on revenues disclosed in the Consolidated Financial Statements.

Cost of Product Used and Sold

Product costs are determined by applying estimated gross profit margins to service and product revenues, which are based on historical factors including product pricing trends and estimated shrinkage. In addition, the estimated gross profit margin is adjusted based on the results of physical inventory counts performed at least twice a year and the monthly monitoring of factors that could impact our usage rates estimates. These factors include mix of service sales, discounting and special promotions. During fiscal year 2004, we performed physical inventory counts in September, January and May and adjusted our estimated gross profit margin to reflect the results of the observations. Significant changes in product costs, volumes or shrinkage could have a material impact on our gross margin.

Self-insurance Accruals

We use a combination of third-party insurance and self-insurance for a number of risks including workers’ compensation, health insurance and general liability claims. The liability reflected on our Consolidated Balance Sheet represents an estimate of the undiscounted ultimate cost of uninsured claims incurred as of the balance sheet date. In estimating this liability, we utilize loss development factors prepared by independent third-party actuaries. These development factors utilize historical data to project the future development of incurred losses. Loss estimates are adjusted based upon actual claims settlements and reported claims. Although we do not expect the amounts ultimately paid to differ significantly from the estimates, self-insurance accruals could be affected if future claims experience differs significantly from the historical trends and actuarial assumptions.

Contingencies

We are involved in various lawsuits and claims that arise from time to time in the ordinary course of our business. Accruals are recorded for such contingencies based on our assessment that the occurrence is probable, and where determinable, an estimate of the liability amount. Management considers many factors in making these assessments including past history and the specifics of each case. However, litigation is inherently unpredictable and excessive verdicts do occur, which could have a material impact on our Consolidated Financial Statements.

Income Taxes

In determining income for financial statement purposes, management must make certain estimates and judgements. Certain of these estimates and judgements occur in the calculation of certain tax liabilities and in the determination of the recoverability of certain deferred tax assets, which arise from temporary differences between the tax and financial statement recognition of revenue and expense.

Management must assess the likelihood that deferred tax assets will be recovered. If recovery is not likely, we must increase our provision for taxes by recording a reserve, in the form of a valuation allowance, for the deferred tax assets that will not be ultimately recoverable. Should there be a change in our ability to recover our deferred tax assets, our tax provision would increase in the period in which it is determined that the recovery is not probable.

In addition, the calculation of tax liabilities involves dealing with uncertainties in the application of complex tax regulations. Management recognizes potential liabilities for anticipated tax audit issues in the United States and other tax jurisdictions based on its estimate of whether and the extent to which additional taxes will be due. If payment of these amounts ultimately proves to be unnecessary, the reversal of the liabilities would result in tax benefits being recognized in the period when management determines the liabilities are no longer necessary. If management’s estimate of tax liabilities proves to be less than the ultimate assessment, a further charge to expense would result.

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RESULTS OF OPERATIONS

Revenues

Consolidated revenues primarily include revenues of company-owned salons, franchise royalties, franchise fees and product and equipment sales to franchisees. During fiscal year 2004, consolidated revenues increased 14.2 percent to a record $1.9 billion. During fiscal year 2003, consolidated revenues increased 15.8 percent to $1.7 billion. The following chart details our consolidated revenues by concept:

Same-store sales increases or decreases are calculated on a daily basis as the total change in sales for company-owned salons which were open on that specific day of the week during the corresponding prior period. Annual same-store sales increases are the sum of the same-store sales increases computed on a daily basis. Relocated salons are included in same-store sales as they are considered to have been open in the prior period. International same-store sales are calculated in local currencies so that foreign currency fluctuations do not impact the calculation. Management believes that same-store sales, a component of organic growth, are useful in order to help determine the increase in revenue attributable to its organic growth (new salon construction and same-store sales growth) versus growth from acquisitions.

The 14.2 and 15.8 percent increases in consolidated revenues during fiscal year 2004 and 2003, respectively, were driven by the following:

We acquired 411 and 560 company-owned salons during the years ended June 30, 2004 and 2003, respectively, including 206 franchise buybacks during fiscal year 2004 and 97 during fiscal year 2003. The organic growth stemmed from the construction of 452 and 397 company-owned salons during the twelve months ended June 30, 2004 and 2003, respectively, as well as consolidated same-store sales increases. During fiscal year 2004 and 2003, the foreign currency impact was driven by the weakening of the United States dollar against the British pound, Euro and Canadian dollar as compared to the prior periods’ exchange rates. The impact of foreign currency was calculated by multiplying current year revenues in local currencies by the change in the foreign currency exchange rate between the current fiscal year and the prior fiscal year.

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North American Revenues. Total North American revenues were as follows:

The fiscal year 2004 and 2003 percentage increases were due to the following factors:

We acquired 383 and 543 company-owned North American salons during the years ended June 30, 2004 and 2003, respectively. The organic growth stemmed from the construction of 433 and 387 company-owned salons in North America during the twelve months ended June 30, 2004 and 2003, respectively, as well as North American same-store sales increases. Same-store sales increases achieved during fiscal year 2004 and 2003 were driven primarily by strong product sales, as well as a shift towards higher priced services, such as hair coloring. The foreign currency impact during fiscal years 2004 and 2003 was driven by the weakening of the United States dollar against the Canadian dollar as compared to the prior periods’ exchange rates.

International Revenues. Total international revenues were as follows:

The fiscal year 2004 and 2003 percentage increases were due to the following factors:

We acquired 28 and 17 company-owned international salons during fiscal year 2004 and 2003, respectively. The organic growth stemmed from the construction of 19 and ten company-owned salons in the United Kingdom during the twelve months ended June 30, 2004 and 2003, respectively, as well as international same-store sales increases. During fiscal year 2004, same-store service sales were lower than in the prior fiscal year as the service business continues to be impacted by the economy and a lengthening of hairstyles. International same-store product sales increased 30.2 and 23.6 percent during fiscal year 2004 and 2003, respectively, benefiting from our continuing improvement in assessing the merchandising demands of our international customers. The foreign currency impact during fiscal year 2004 and 2003 was driven by the weakening of the United States dollar against the British pound and the Euro as compared to the prior periods’ exchange rates. International franchise revenues decreased primarily due to 33 and 57 fewer international franchise salons being open at June 30, 2004 and 2003, respectively, as compared to the prior fiscal year.

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Consolidated Revenues. North American and international revenues are primarily comprised of company-owned service and product revenues, as well as franchise revenues from franchise fees and royalties, and product and equipment sales to franchisees. Fluctuations in these three revenue categories were as follows:

Service Revenues. Service revenues were as follows:

The growth in service revenues in fiscal years 2004 and 2003 was driven by acquisitions and organic growth (new salon construction and same-store sales growth). Fiscal year 2003 same-store service sales increases were not as robust as in the prior year due to a weaker economic climate. During fiscal year 2004, same-store service sales continued to be modest due to a slight lengthening of customer visitation patterns stemming from a fashion trend towards longer hairstyles, as well as a continuing weak economic climate.

Product Revenues. Product revenues were as follows:

The increases in product revenues demonstrate our strength in merchandising professional salon products. During fiscal year 2004, product revenues increased 60 basis points to 30.0 percent of total company-owned revenues. This increase is due primarily to strong same-store product sales, coupled with modest same-store service sales growth. Same-store product sales increases were more robust than in the prior fiscal year primarily due to continual improvement in our merchandising execution, with emphasis placed on management of promotional buying and new product lines. Our merchandising strategy recognizes and stresses the importance of product education and communication with the salons. In addition, the sale of beauty tools, such as flat irons, was a strong contributor to the increased same-store product sales, particularly in Trade Secret and the international salons.

In fiscal year 2003, product revenues as a percent of total company-owned revenues decreased to 29.4 percent, compared to 30.0 percent of revenues in fiscal year 2002. The decrease as a percent of company-owned sales during fiscal year 2003 was primarily due to the large number of strip center salons which were acquired over the twelve months ended June 30, 2003. Strip center salons have a lower product sales mix than the corporate average. Same-store product sales increases were lower during fiscal year 2003 than in the prior year primarily due to decreased mall traffic, as well as a weaker economy.

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Franchise Revenues. Total franchise revenues, which include royalties, franchise fees and our product and equipment sales to franchisees, were as follows:

Total franchise salons open at June 30 were 3,924, 4,054 and 3,908 for fiscal years 2004, 2003 and 2002, respectively. We purchased 206 of our franchise salons during fiscal year 2004, which was one of the drivers of the overall decrease in the number of franchise salons between periods. Of total consolidated franchise revenues, North American franchise revenues represented 63.0, 64.4 and 82.6 percent in fiscal years 2004, 2003 and 2002, respectively.

Fiscal Year 2004 Versus Fiscal Year 2003

The increase in total consolidated franchise revenues during fiscal year 2004 was due to favorable foreign currency fluctuations, which caused franchise revenues to increase 5.1 percent. Exclusive of the effect of this favorable currency fluctuation, consolidated franchise revenues decreased 0.2 percent, primarily due to our purchase of 206 franchise salons during the year.

Royalties increased during fiscal year 2004 primarily due to international franchise salons. Approximately 6.6 percent of the 13.4 percent fiscal year 2004 increase was related to favorable foreign currency fluctuations.

Franchise fees decreased during fiscal year 2004 primarily due to the timing of franchise development, particularly with regard to the international franchise salons. The 40.4 percent decrease in franchise fees during fiscal year 2004 was net of a favorable impact of approximately one percent related to foreign currency exchange rate fluctuations.

Sales of product and equipment to franchise salons decreased during fiscal year 2004 primarily due to our purchase of 206 franchise salons during the year. The franchise product revenues contributed by these salons were replaced by company-owned product revenues. Further, lower international franchise salon counts as compared to the prior fiscal year and a reduction in the prices of product sold to international franchisees contributed to the decrease in franchise product revenues. The 2.8 percent decrease is net of a 3.1 percent favorable impact related to foreign currency exchange rate fluctuations.

Fiscal Year 2003 Versus Fiscal Year 2002

The increase in international franchise revenues during fiscal year 2003, which drove the overall annual increase in consolidated franchise revenues, was primarily due to the acquisition of the European franchise operations during fiscal year 2002. Approximately seven percent of the 31.4 percent increase during fiscal year 2003 was due to the favorable impact of foreign currency exchange rate fluctuations.

Royalties increased during fiscal year 2003 primarily related to the acquisitions of the European franchise operations during the first and fourth quarters of fiscal year 2002. Approximately eight percent of the 30.8 percent increase during fiscal year 2003 was due to the favorable impact of foreign currency exchange rate fluctuations.

Franchise fees increased during fiscal year 2003 primarily as the result of franchise fees from salons opened in Europe due to our increased presence there after the fiscal year 2002 acquisitions of the European franchise operations. Favorable foreign currency exchange rate fluctuations caused 14.1 of the 69.5 percent increase during fiscal year 2003.

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Sales of product and equipment to franchise salons increased during fiscal year 2003 primarily as the result of product sales to the European franchise operations. The increase during fiscal year 2003 was lower than during fiscal year 2002 primarily due to a same-store product sales decrease of 2.6 percent for North American franchise salons during fiscal year 2003. As previously discussed, a weaker economic environment negatively impacted fiscal year 2003 same-store product sales. Favorable foreign currency exchange rate fluctuations caused 5.0 of the 27.6 percent increase during fiscal year 2003.

Cost of Revenue

Total company-owned gross margin. Our cost of revenues includes salon based labor costs, the cost of product to provide services for company-owned salons and the cost of products sold to salon customers. The resulting gross margin for fiscal years 2004, 2003 and 2002 was as follows: