Slide 1: Investor Presentation October 2011
Investor Presentation October 2011
Slide 2: Agenda
2 Agenda Company Background New Strategic Initiatives to Drive Shareholder Value Revenue Cost Review of Alternatives for Non-Core Assets Changes to Corporate Governance and Board of Directors Timeline of Events with Starboard Review of Starboard Assertions and Demands Conclusion
Slide 3: Global Leader in Hair Care Industry
Two operating divisions Hair salons (93% of total revenues) Hair restoration Primarily value-based salons Supercuts is our strongest brand 2011 revenue: $2.3 billion System-wide sales: $3.8 billion Global Leader in Hair Care Industry 3 Approximately 55,000 employees 12,700 worldwide locations 8,000
Slide 4: Financial Strength Enhances Flexibility
Financial Strength Enhances Flexibility Significant and predictable cash flow $227 million EBITDA in FY 2011 Solid balance sheet Minimal working capital Minimal inventories supporting $3.8 billion in system-wide sales Reduced debt levels No liquidity or covenant issues Improved credit ratios Substan
Slide 5: Market Leader Focused on Profitable Growth
5 Market Leader Focused on Profitable Growth Attractive, profitable business We provide an affordable necessity Recurring revenue, strong cash flows, consistent product and service margins Opportunities to continue to gain market share by developing best markets through organic growth and targeted a
Slide 6: Demonstrated Ability to Manage Changing Customer Trends
Demonstrated Ability to Manage Changing Customer Trends 6 Trend Change Regis Response Perms Moved the Regis brand from shampoo, conditioner, and hairspray to a wide variety of finishing products Introduced national guest lines (Paul Mitchell) Shift from Perms to Hair Color Foiling technique became p
Slide 7: History of Long-Term Revenue and Profit Growth
7 History of Long-Term Revenue and Profit Growth REVENUE EBITDA ’96-’08 CAGR: 13.4% ’96-’08 CAGR: 17.0% Same-store sales and acquisition strategy drove significant growth from 1996 to 2008 Average annual same-store sales growth of 2.6% Total system-wide store growth of over 9,000 units Economic down
Slide 8: Shareholder Value Creation
Shareholder Value Creation 8 Strong Record of Above-Market Value Creation Leading Up to Financial Crisis Economic Conditions Since Financial Crisis Regis Russell 2000 IPO + 5 years: 268% 100% 1995 – 2000: 183% 102% 2000 – June 2007: 103% 65% Financial Crisis: (54%) (39%) Prolonged high unemployment
Slide 9: Significant Cost Reductions Already Achieved
9 Significant Cost Reductions Already Achieved $ in millions Regis has aggressively managed its cost structure in response to the top-line impact of the financial crisis and subsequent economic downturn 2011 G&A was $301 million, excluding non-operational and non-recurring charges Cumulative Cost Sa
Slide 10: Successfully De-Risked Capital Structure
10 Successfully De-RiskedCapital Structure $ in millions Regis has reduced debt significantly since the end of Q1 2009 Currently total debt at 1.4x latest twelve months EBITDA 1.4x improvement in debt / EBITDA since September 30, 2008 Gross Debt Reduced debt by >$490 million in less than 3 years
Slide 11: New Leadership Team is Fully Committed to Making Changes
New Leadership Team is Fully Committed to Making Changes to Improve Future Performance New leadership team is proactively making changes and needs time to execute its plan 11 Improve financial performance Revenue initiatives to drive growth Improve operational efficiency through reduction in number
Slide 12: New Strategic Initiatives to Drive Shareholder Value
New Strategic Initiatives to Drive Shareholder Value
Slide 13: Key Strategic Priorities to Drive Shareholder Value
Key Strategic Priorities to Drive Shareholder Value Revenue initiatives Increase customer centricity Leverage the power of existing brands Enhance the use of technology to improve connectivity with salons Earnings leverage through revenue growth Utilize scalable cost structure and brands to deliver
Slide 14: Important Revenue Initiatives
Important Revenue Initiatives Increasing customer centricity Enhance customer experience to attract and retain customers Expand promotional strategies to drive new customer trial Establish ongoing client relationships to drive retention, as well as increase share of salon visits and average ticket (
Slide 15: Reduced same-store sales growth required to grow earnings
15 By aggressively cutting costs, Regis has reduced the same-store sales growth required to grow earnings In an economic environment with 3% inflation and assuming no other operational changes, same-store sales growth of 2% would be required to deliver constant year-over-year earnings Through cost s
Slide 16: Revenue Growth is the Key Value Driver
16 Revenue Growth is the Key Value Driver Cumulative EPS and Value per Share Impact of Incremental 1.5% Same-Store Sales Growth EPS Impact Value per Share Impact (Assuming 11.0x P/E Multiple)
Slide 17: Aggressive Cost Cutting Initiatives
Aggressive Cost Cutting Initiatives Ongoing focus of management Achieved $43 million of savings over the past 3 fiscal years Expect to achieve $40-50 million of additional cost savings over next two fiscal years $25-35 million in FY 2012 and remainder in FY 2013 In aggregate, expect to achieve $80-9
Slide 18: Review of Alternatives for Non-Core Assets
18 Review of Alternatives for Non-Core Assets Retained financial advisors to evaluate strategic alternatives for Hair Club We will continue to evaluate the highest value alternatives for other assets, including Provalliance and Empire Education Group Nothing sacred – we will divest if in the best in
Slide 19: Changes to Corporate Governance & Board of Directors
Changes to Corporate Governance & Board of Directors
Slide 20: Important Corporate Governance Changes - Transition is Underway
Date Key Change We Continue to Implement Important Corporate Governance Changes –Transition is Underway 20 Stephen Watson was elected as a new independent director April 2008 Joseph (“Joel”) Conner was elected as a new independent director August 2010 New independent Board nominee, Michael Merriman
Slide 21: Our Director Nominees are Highly Qualified
Relevant Experience Nominee Our Director Nominees are Highly Qualified 21 Rolf Bjelland Joseph (“Joel”) Conner Paul Finkelstein Van Zandt Hawn Susan Hoyt Michael Merriman Stephen Watson CEO / CFO / Finance Experience Public Company Experience Retail / Branding Experience Regis’ well-balanced Board,
Slide 22: Process for Adding a New Independent Director in 2012
22 Process for Adding a New Independent Director in 2012 Board intends to commence a process to add an additional independent director This process will be overseen by the Nominating and Corporate Governance Committee (comprised solely of independent directors) The following attributes among others
Slide 23: Summary of Our Key Corporate Governance Principles
23 Summary of Our Key Corporate Governance Principles Super-majority of independent directors Five independent directors currently, increasing to six by end of 2011 Non-management directors meet without the CEO at every Board meeting By July 2012, independent Chairman will be named Directors limited
Slide 24: Timeline of Events with Starboard
Timeline of Events with Starboard
Slide 25: Timeline of Events with Starboard - 2011
Timeline of Events with Starboard – 2011 25 Regis received private notice of Starboard’s intention to nominate three directors Randy Pearce spoke with Jeff Smith of Starboard Randy Pearce and Paul Finkelstein met with Jeff Smith who asserted the Company was undervalued and expenses should be reduced
Slide 26: Review of Starboard Assertions and Demands
Review of Starboard Assertions and Demands
Slide 27: Regis is Already Taking Action - Starboard Platform Not Compelling
Criticizes cost structure, including field structure and overhead 27 Regis is Already Taking Action – Starboard Platform Not Compelling for All Shareholders Addressable expense base significantly lower than total expenses Cutting too aggressively will compromise future revenue – revenue growth is ke
Slide 28: Regis is Already Taking Action - Starboard Platform Not Compelling
3. Argues that Regis should explore strategic alternatives for non-core assets 28 Regis is Already Taking Action – Starboard Platform Not Compelling for All Shareholders Already commenced process for evaluating alternatives for non-core assets with the assistance of independent financial advisors St
Slide 29: Starboard cost-cutting plan unsupported by facts and analysis
Starboard cost-cutting plan unsupported by facts and analysis Initially suggested $150 million of costs could be cut, then $100 million, and most recently $80 million Starboard referenced G&A costs of $340 million, which improperly includes $39 million of non-recurring / non-operational charges Addr
Slide 30: Starboard's Other Recent Shareholdings
30 Starboard’s Other Recent Shareholdings – Uniform Activist Approach with No Retail Experience We believe Starboard has no relevant experience in the retail service sector and typically seeks to implement initiatives that inhibit future growth Target Company MIPS Technologies 9.1% Improve operating
Slide 31: Conclusions
Conclusions
Slide 32: Conclusions
32 Conclusions We believe the new leadership team has the right plan to drive performance and shareholder value Revenue initiatives $40-50 million of cost savings Review of alternatives for non-core assets, with near-term focus on Hair Club Important changes to Board and corporate governance are alr
Slide 33: Notes Page
33 Notes Page 7 Financials exclude impact of Trade Secret which was divested in 2009 Page 7 Prior to 2003, same-store sales metrics did not include international results as they were not captured by the reporting systems in place at that time Page 7See following non-GAAP reconciliation pages for con
Slide 34: Reconciliation of Non-GAAP Financial Measures
34 Appendix REGIS CORPORATION (NYSE:RGS) RECONCILIATION OF NON-GAAP FINANCIAL MEASURES This investor presentation includes certain financial measures, such as EBITDA, revenues less product sales to Pure Beauty Salons & Boutiques, Inc. (Pure Beauty), adjusted general and administrative expenses, non-
Slide 35: Reconciliation of Net Income to Adjusted EBITDA
35 Appendix Below is a reconciliation of the Company’s reported consolidated net (loss) income to adjusted EBITDA for the twelve months ended June 30, 2011, 2010, 2009, 2008, 2007, and 2006. For the twelve months ended June 30, 2011, adjusted EBITDA represents net loss plus interest expense, depreci
Slide 36: EBITDA Reconciliation, Twelve Months Ended June 30, 1996
36 Appendix Below is a reconciliation of the Company’s reported consolidated net income to EBITDA for the twelve months ended June 30, 1996. For the twelve months ended June 30, 1996, EBITDA represents net income plus income taxes, interest expense, depreciation and amortization, and depreciation, a
Slide 37: Adjusted EBITDA Reconciliation, Twelve Months Ended September 30, 2008
37 Appendix Below is a reconciliation of the Company’s reported consolidated net income to adjusted EBITDA for the twelve months ended September 30, 2008. For the twelve months ended September 30, 2008, adjusted EBITDA represents net income plus income taxes, interest expense, depreciation and amort
Slide 38: Total Debt to EBITDA Multiple Reconciliation
38 Appendix Below is a reconciliation of the Company’s total debt to EBITDA multiple as of June 30, 2011 and September 30, 2008. June 30, September 30, 2011 2008 (Dollars in thousands) Long-term debt, current portion, as reported (U.S. GAAP) $ 32,252 $ 272,442 Long-term debt and capital lease obliga
Slide 39: Consolidated Revenues Reconciliation
39 Appendix Below is a reconciliation of the Company’s reported consolidated revenues to consolidated revenues less product sales to Pure Beauty for the twelve months ended June 30, 2010 and 2009. Twelve Months Ended June 30, 2010 2009 (Dollars in thousands) Consolidated revenues, as reported (U.S.
Slide 40: Adjusted General and Administrative Expenses Reconciliation
40 Appendix Below is a reconciliation of the Company’s reported consolidated general and administrative expenses to non-GAAP adjusted general and administrative expenses for the twelve months ended June 30, 2011. The non-GAAP adjusted general and administrative expense represents the Company’s U.S.
Slide 41: Expense Base Composition Reconciliation
41 Appendix Below is a reconciliation of the Company’s consolidated U.S. GAAP reported expenses to the expense base composition (non-GAAP) for the twelve months ended June 30, 2011. The expense base composition represents the reported operating expenses less depreciation and amortization and goodwil
Slide 42: Forward-Looking Statements
42 This presentation, as well as information included in, or incorporated by reference from, future filings by the Company with the Securities and Exchange Commission and information contained in written material, press releases and oral statements issued by or on behalf of the Company contains or m
Slide 43: Investor Presentation October 2011
Investor Presentation October 2011