Regis Corporation 2004 Annual Report
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OURSERVICESAME STORESALESRESULTSIMPROVED SUG GESTINGSHORTERANDSHAPEDSTYLESARERETURNING 2EGISISAMULTI FACETEDCOMPANY ANDWHILESER VICESAME STORESALESWERENOTALLWEHADHOPED RETAILPRODUCTSALESMORETHANOFFSETTHAT INCREAS INGPERCENTTOMILLION4HISSUCCESSWAS SIGNIFICANTLYENHANCEDBYOURINTRODUCTIONOF -ATRIX THELARGESTPROFESSIONALPRODUCTHAIRCARE LINEINTHEWORLD TO4RADE3ECRETIN$ECEMBER "UTEVENWITHOUTTHATPRODUCTLINE OUR )NTHEFISCALYEARENDED*UNE 4RADE3ECRETBUSINESSWASSTRONG)NDEED 4RADE 2EGISDELIVEREDANOTHERYEAROFDOUBLE DIGITEARNINGS 3ECRETHASBECOMEANATIONALLYRECOGNIZEDBRAND ANDREVENUEGROWTH ANDALSOPASSEDASIGNIFICANT 4OEXPANDONTHISSUCCESS WEACCELERATEDOUR MILESTONEIN!PRILOF THEACQUISITIONOF DEVELOPMENTOFTHE4RADE3ECRETCONCEPTOUTSIDE (OLIDAY(AIRSALONSPUSHEDUSOVER STORES OFTHEMALL WITHPROMISINGRESULTS 7EAGAINDELIVEREDTHECALIBEROFFINANCIALPER 'ROWTH0LANS FORMANCETHATOURSHAREHOLDERSHAVECOMETOEXPECT /VERTHEPASTYEARS2EGISCANLOOKBACKON = 2ECORDEARNINGSOFMILLION ANINCREASE DOUBLE DIGITCOMPOUNDEDUNIT REVENUEANDEARN OFPERCENT INGSGROWTH7HILEBOTHIMPRESSIVEANDGRATIFYING = 2ECORDREVENUEOFBILLION ANINCREASEOF WEBELIEVETHATTHEMOREIMPORTANTASPECTOFTHIS PERCENT PERFORMANCEISTHATITPROVESOURABILITYTOEXECUTE = 2ECORDOPERATINGCASHFLOWOFMILLION OURGROWTHSTRATEGYOVERANEXTENDEDPERIODOF ANINCREASEOFPERCENT TIME4HISCONSISTENTEXECUTIONGIVESUSCONFIDENCE = 2EDUCEDLEVERAGEBASISPOINTSTO THATWEWILLDOUBLEOURSIZEWITHINTHENEXTFIVETO PERCENTOFTOTALCAPITALIZATION SEVENYEARS 7EARETHELARGESTSALONOPERATORINTHEWORLD 7ITHINTHESALONINDUSTRY ACQUISITIONCANDIDATES BUTOURTOTALMARKETSHAREANESTIMATEDPERCENT REMAINABUNDANT!SOURINDUSTRYBECOMESMORE SOPHISTICATED WEREMAINTHEONLYCOMPANYWITHTHE INFRASTRUCTURE EFFICIENCYANDINTEGRATIONEXPERTISE COMPOUNDEDUNIT REVENUEANDEARNINGSGROWTH TOMAINTAINTHISENVIABLEPOSITION!TTRACTIVECANDI DATESEXISTBOTHDOMESTICALLYANDINTERNATIONALLY $OMESTICALLY THENUMBEROFSALONACQUISITION OFTHEBILLIONWORLDWIDEHAIRCAREINDUSTRY CANDIDATESHASINCREASEDINRECENTYEARS THERESULT ALSOHIGHLIGHTSTHESIGNIFICANTSALONGROWTH OFMULTIPLESTORECHAINSGROWINGTOACERTAINLEVELAND OPPORTUNITYBEFOREUS.ORTH!MERICAALONEHAS THENSEEKINGEXITSTRATEGIES4HISPROVIDESAMPLE APPROXIMATELY SALONSANDBARBERSHOPS OPPORTUNITIESFORUSTOACQUIRECHAINSOFSTORES %XPRESSING'RATITUDE AND"UILDINGON RANGINGFROMUNITSOURTYPICALACQUISITION FOR SIZETOOPERATIONSNUMBERINGINTHEHUNDREDS &ORALLOFOURCONTINUEDFINANCIALSUCCESSANDNEW $URINGTHEYEAR WEACQUIREDSALONS INCLUDING MILESTONES FISCALALSOREPRESENTEDTHEPASSING THE STORE(OLIDAY(AIRCHAIN WHICHWILLADD OFANERA-YRON+UNINWASOUR#HAIRMANOFTHE MILLIONINANNUALIZEDREVENUEANDFIVECENTSA "OARD ANDFORMANYYEARSOUR#%/)N-AY AFTER SHAREINEARNINGS)NFISCALWEPLANTO GUIDING2EGIS#ORPORATIONFORMORETHANYEARS SPENDUPTOMILLIONTOACQUIREUPTOSALONS -YRONASSUMEDANEWROLEAS6ICE#HAIRMANOF 7EALSOESTABLISHEDABEACHHEADINANALL NEW THE"OARD-YRONISAFRIEND ALEADERANDAMENTOR AREAOFGROWTH%DUCATION )N$ECEMBEROF 2EGISACQUIRED6IDAL !SOURINDUSTRYBECOMESMORESOPHISTICATED WEREMAINTHEONLY 3ASSOONSALONSANDFOUR6IDAL3ASSOONBEAUTY COMPANYWITHTHEINFRASTRUCTURE EFFICIENCYANDINTEGRATIONEXPERTISE ACADEMIES4HEBEAUTYACADEMIESWEREOFPARTICU LARSTRATEGICIMPORTANCEBECAUSETHEYINTRODUCED TOMAINTAINTHISENVIABLEPOSITION ANIMPORTANTNEWVERTICALELEMENTTOOURBUSINESS )N*UNE WEANNOUNCEDTHEACQUISITIONOF"LAINE TOMANYOFUS7EEXTENDOURDEEPESTGRATITUDE "EAUTY#AREER3CHOOLS ONEOFTHEPREMIERPRIVATE FORHISEXCEPTIONALCONTRIBUTIONSWHILELEADINGTHIS OCCUPATIONALCOSMETOLOGYSCHOOLCHAINSINTHE GREATCOMPANY ANDWEAPPRECIATEHISCONTINUA 5NITED3TATES4HISCHAINISMADEUPOFSIXSCHOOLSIN TIONASOUR6ICE#HAIRMAN -ASSACHUSETTSANDISEXPECTEDTOGENERATEMIL &ISCALSHOULDBEAYEARINWHICHWEBELIEVE LIONINREVENUEDURINGFISCALYEAR THATTHESTRENGTH THEMOMENTUM ANDTHEEXPERTISE 7ESEEBEAUTYSCHOOLEDUCATIONASANEXTENSION OFOURCOMPANYWILLEXTENDOURTRACKRECORDOF OFOUREXISTINGEDUCATIONEFFORTSANDASIGNIFICANT FINANCIALANDOPERATIONALEXCELLENCEINANINDUSTRY INCREMENTALBUSINESSOPPORTUNITY)NFISCAL RICHWITHOPPORTUNITY ALONE WESPENTMORETHANMILLIONTRAININGTHE .ETOFCLOSURES RELOCATIONSANDFRANCHISE STYLISTSWHOWORKINOURCORPORATEAND BUYBACKS WEANTICIPATEADDINGMORETHAN FRANCHISEDSALONS7EEMPLOYMORETHANARTIS SALONSINFISCAL7EANTICIPATETHATTHIS TICDIRECTORS)NRECENTYEARS WEHAVEDEVELOPED GROWTHWILLBEFOCUSEDIN.ORTH!MERICAHOW EXTENSIVETRAININGCURRICULAANDPROVIDEDTHESE EVER CONTINUEDEXPANSIONWILLTAKEPLACEINTERNA STATE OF THE ART AWARD WINNINGTRAININGPROGRAMS TIONALLY$URING WEALSOLOOKFORWARDTOTHE TOTHEBEAUTYSCHOOLINDUSTRY FULLPARTICIPATIONOFOURNEWBASEOFBEAUTYSCHOOLS )TSOURVIEWTHATUNEMPLOYMENTWILLCONTINUETO INOUREARNINGSANDREVENUESTREAM BERELATIVELYHIGHFORMANYYEARSTOCOME ANDTHAT 7EREMAINPOSITIONEDTODOUBLETHESIZEOFTHE THEBUSINESSOFEDUCATIONWILLBEHIGHLYPROFITABLE COMPANYINTHENEXTFIVETOSEVENYEARSANDTO ANDWILLADDASIGNIFICANTNEWSTRATEGICCOMPONENT CONTINUETHE2EGISTRADITIONOFEXCELLENCE TOOURBUSINESS&ROMAFINANCIALPOINTOFVIEW 3INCERELYYOURS OPERATINGINCOMEASAPERCENTAGEOFREVENUEFROM THESCHOOLBUSINESSISHIGHERTHANOURBASICCORE BUSINESS ANDOURABILITYTOPLACEMANYOFOUR GRADUATESINTOOURSALONSISLIKELYTORESULTINEVEN LOWERSTUDENTDEFAULTRATES FURTHERINCREASING MARGINS7EBELIEVETHEADDITIONOFBEAUTYSCHOOLS 0AUL$&INKELSTEIN WILLADDINCREMENTALREVENUEANDEARNINGSWHILE #HAIRMANAND#%/ CONTINUINGTOENHANCEOURWORKFORCEANDTHE 2EGIS#ORPORATION OVERALLLEVELOFQUALITYINOURSALONS&INALLY ENTERING THEBEAUTYSCHOOLBUSINESSWILLNOTIMPEDEOUR PROJECTEDSALONGROWTH 4HE%XPERIENCE THE3TRENGTH THE2ESOURCESTO#ONTROL/UR$ESTINY !SRETAILCONCEPTSEVOLVE SOWILLWE!STHEDIVERSITYOFOURCUSTOMERSGROWS SOWILLOUROFFERINGS!SACQUISITIONOPPORTUNITIESPRESENTTHEMSELVES WEWILL TAKEADVANTAGEOFTHEM(OW/VERTHESPANOFYEARS 2EGIS#ORPORATION HASDEVELOPEDANDREFINEDATIME TESTEDBUSINESSTHATISHIGHLYADAPTABLE SCALABLE PROFITABLE PROVEN $)3#)0,).%$ 02/&)4!",%'2/74( %MBRACING/UR&UTURE $ISCIPLINED'ROWTH/VER SALONS 7ORLDWIDEREACH4ENYEARSAGO 2EGIS #ORPORATIONHADJUST SALONS)NTHE PASTDECADE WEHAVEEXPANDEDOURSTORE BASEATANANNUALCOMPOUNDGROWTHRATEOF PERCENT/NCESTRICTLYDOMESTIC WENOW OPERATESTORESINTENFOREIGNCOUNTRIESANDIN EVERYCONCEIVABLERETAILENVIRONMENT4HIS INCLUDESNEARLY SALONSIN7AL -ART 4OTAL3ALON#OUNT 3UPERCENTERS7ENOWOPERATEORFRANCHISE )NCREASED5NITS APPROXIMATELY 2EGIS3ALONLOCATIONS -ASTER#UTSSALONS SALONSINOPEN AIRCENTERSAND %UROPEANSALONS/UR 4RADE3ECRETSALONSNOWTOTAL ANDHAVE BECOMEANATIONALLYRECOGNIZEDCONCEPT 0ROFITABLE'ROWTH$URINGTHISTEN YEAR PERIODOFGROWTH PROFITABILITYHASOUTPACED UNITGROWTH(OW$ISCIPLINE$ISCIPLINEIN OURCHOICEOFHIGH TRAFFICREALESTATE DISCIPLINE INKEEPINGEXPENSESINLINEANDDISCIPLINEIN /URPORTFOLIOOF STICKINGTOOURPRINCIPLESONACQUISITIONS4HE CONCEPTSALLOWSUS RESULTREVENUETOTALEDMILLIONAND TOOPERATEINAWIDE NETINCOME MILLION ORONEPERCENTOF VARIETYOFHIGH TRAFFIC SALES&ISCALSALESBILLIONNETINCOME RETAILCONFIGURATIONS MILLION OROVERFIVEPERCENTOFSALES INCLUDINGREGIONALMALLS /URRATEOFEXPANSIONWASONPLANINFISCAL STRIPCENTERS LIFESTYLE ,ASTFISCALYEAR WEBUILTCORPORATE CENTERS 7AL -ART 3UPERCENTERSAND SALONS ANDOURFRANCHISEESBUILT7E HIGH STREETLOCATIONS ACQUIREDSALONS INCLUDINGFRANCHISE BUY BACKS ANDWECOMPLETEDACQUISITIONS DURINGTHEYEAR/URMOSTSIGNIFICANTACQUI SITIONTHISYEARWASTHE STORE(OLIDAY (AIRCHAINOFSALONS LOCATEDPRIMARILYIN 0ENNSYLVANIA ATOP NOTCHOPERATIONTHATIN THECOMINGFISCALYEARWILLADDANESTIMATED MILLIONINANNUALIZEDREVENUEANDFIVE CENTSPERSHAREINEARNINGS "EYONDOURTERRITORIESIN.ORTH!MERICA AND%UROPE WEREMAININTRIGUEDWITHTHE EXPANSIONPOSSIBILITIESIN!SIA7HENTHE