Regis Corp (RGS) 2006 Q2 法說會逐字稿

[OPERATOR INSTRUCTIONS] I would like to remind you that to the extent that the company’s statements or comments this morning represent forward looking statement I would like to refer you to the risk factors and other cautionary factors contained in today’s news release as well as the company’s SEC filings. Reconciliations and non-GAAP financial measures mentioned in the following presentation can be found on their web site at www.regis.regiscorp.com. With us this morning are Paul Finkelstein, President and Chief Executive Officer and Randy Pearce, Executive Vice President and CFO. [OPERATOR INSTRUCTIONS].

Thank you very much and good morning everyone and thank you for joining us. I will very briefly talk about our second quarter results and then spend most of my allotted time talking about the transaction between Regis Sally and BSG. Our second quarter sales increased 13% to $607 million compared to last year. Earnings were $.59 per share which, when adding back the 2 cents per share related to the hurricanes brought earnings to $.61, at the low end of the range communicated to the street. In addition, quarterly earnings were also impacted by lower product margins and Randy will discuss this in greater detail in a few minutes.

Hair Club for Men and Women and our Walmarts’ Salons continue to perform at or above plan. Our business is still quite weak in Europe. But that is the function of the European economy and we have high hopes that it will turn around within a year or so.

As we have pointed out in past conference calls it is not possible for Regis to achieve double digit EPS growth unless our comps increase at least 2%. As you know our company has been around for over 80 years and we have never had an annual comp decrease. We are highly confident that within the next year or so comps should be well north of 2%.

On the acquisition front we anticipate that salon acquisitions will continue to contribute to our overall growth. All acquisitions going forward will require a little bit more digging on our part. The salon landscape has not significantly changed.

With only a 4% U.S. market share and with no other acquirers in the space we believe that we can continue to buy salons for many years to come. In the near term there are some opportunities, including a larger salon acquisition that may be completed before the yearend.

Another comment before moving on to the discussion of the Sally BSG transaction. We are currently examining the whole issue of salon price increases and we will try to aggressively implement price increases sometime during the late winter and early spring. As you recall we increased prices at 2,500 of our salons during the same period last year. These increases have held and give us confidence that we may be able to take additional price increases where prudent.

I would like to now briefly share some of my thoughts regarding the Regis – Sally BSG transaction. Throughout the years both Regis and Alberto-Culver have been challenged in our communication to the street by being one of a kind companies with a lack of comparables. We have spent a tremendous amount of time and continue to do so, visiting both in person and telephonically with our existing and potential shareholders, in an effort to educate them more on our unique business.

With that said, let me briefly share with you again a few reasons why this deal makes a lot of sense. Let us first talk about the financial advantages of the transaction and how we feel they are significant. The transaction is significantly cash flow accretive. Because of this there will be a 125% increase on our annual dividend. And we will continue to examine our dividend policy on an annual basis. Second, we will have improved debt ratios and will have significantly better cash flow generation. Third, we will have higher pre-tax margins.

Reiterating our past comments. We anticipate synergies to be well north of $20 million, however we have modeled $20 million in our accretion analysis. We believe that this is a very conservative estimate. This synergy will be comprised of both cost takeouts and purchasing synergies.

What is really exciting to us is the opportunities that this transaction affords us. Last week I spent a few days traveling with Howard Bernick, Alberto-Culver’s CEO to meet with some of you. During our travels Howard and I discussed the merger in great detail. We are highly confident that there are significant potential revenue enhancements that exist with this deal. These enhancements have not been modeled. As it moves close to the consummation of the transaction, we will discuss these in greater depth.

In addition to financial advantages and synergies enumerated above relationships we have with our vendor partners are extremely important to us. We feel that we can work very closely together to come up with unique promotional programs that will benefit our vendor partners, Regis and its newly acquired BSG salon customers.

In addition, we firmly believe merging Sally BSG and Regis will provide us with countervailing power, which should help us in many ways, including working very closely with our vendor partners to reduce product diversion. Neither Regis, nor Sally will have had the same degree of influence had we remained two stand alone companies. Reducing diversion will improve the vitality of the entire salon industry, of which we are the leader.

For those of you new to the Regis story, product diversion encompasses professional salon products, sold inappropriately in drug stores, supermarkets and discount stores, outside of a salon environment. (Cash dollars) recommendations to be an integral part of the buying process of professional product and that can only occur in a salon with licensed cosmetologists.

Our manufactures can do a much better job controlling diversion and frankly in many instances they have put too much pressure on distributors by raising quotas, goals and forecasts to very unrealistic levels which in turn is the main cause for products being diverted to inappropriate channels.

We do have the resources to put systems in place to identify the causes of diversion and we are confident that we can work hand in hand with our vendors to affect better controls.

In the event that we are only partially successful and as a last resort, this merger will provide Regis with the ability to buy one, two or even three small, yet successful entrepreneurial driven manufactures and prominently display and utilize these brands within our salons. It could also provide huge incentives to the tens of thousands of BSG salon customers to buy and prominently display these lines as well. We would play with these lines and no diversion attached to them, given the fact that so many thousands of hairstylists feel abused by the diversion process, we believe they would rally behind non-diverted lines.

We also believe that the distribution and merchandising core capabilities of both Regis, as well as Sally and BSG, can create an even more forceful entity that can efficiently distribute and sell even more product to consumers to our own salons and BSG’s tens of thousands of salon customers. As you know, we feel that Sally can be far more aggressive with respect to its own advertising and promotion and we have not based any internal projections of Sally comps increasing at a level even close to it’s potential.

In the past, BSG sales people would lose a customer whenever Regis bought an independent salon chain. Going forward, we can financially incent the same sales people to provide us with quality acquisition targets.

Of equal importance is the shareholder value created by bringing together two seasoned and smart management teams. In addition, we realize that the process of identifying these huge opportunities is a constantly evolving one. I believe that our shareholders will be extremely gratified by the results we will obtain in the years ahead.

Randy Pearce will now continue our presentation.

Thanks Paul. Good morning everyone. For many years, we have talked about the strong predictable cash flow characteristics of Regis Corporation. This fiscal year has certainly been no exception. Through the first half of our current year, our EBITDA has increased nearly 13% to just over $146 million. This only serves to further solidify our investment grade financial condition.

For example, despite spending over $100 million over the last six months on capital expenditures and acquisitions, our debt capitalization ratio has, has improved 140 basis points during this same period of time, now standing at 41.6%.

Again, we are very pleased with the strong cash flow characteristics of our company.

As Paul just mentioned, our second quarter earnings of $27.3 million or $0.59 per share met the low end of our guidance range for the quarter, once you add back the $.02 impact from hurricanes. In other words, we consider that operationally, we achieved earnings of $0.61 for the quarter. However, given that our second quarter comps of 1.2% fell in the mid-point of our guidance range, we had expected to do a couple of cents better. Perhaps $0.63 per share.

So before I begin discussing the performance of our individual business segments, let me address two items that impacted our second quarter consolidated results.

The first item relates to the impact of the hurricanes from last fall. As you may remember, Hurricane Wilma struck the southern United States on October 24th. The impact of Wilma, coupled with the residual effects of hurricanes Katrina and Rita that struck during our first quarter, resulted in Regis losing nearly 2,700 salon days and approximately $2.5 million of revenue in our second quarter. In addition, we continued to provide substantial disaster pay during the second quarter to our affected employees.

In total, the ongoing effects of these storms reduced second quarter earnings by $0.02 per share. It is safe to say that our guidance for the remainder of this year does not include any revenue or profit contributions from the 15 salons that remain closed yet today.

A second item that impacted our second quarter results related to retail products margins. In years past, our second fiscal quarter has tended to be more promotional in nature than any other quarter during the year due to the holidays. This year was no exception. In fact, we experienced a larger than anticipated promotional holiday selling season. This caused our second quarter product margins to come in below plan which reduced our profit contribution by about $0.02 per share.

And let us talk about the impact of this going forward. Historically, we usually do not experience heavy promotional activity in our third and fourth quarters. However, this year may be different. Having recently analyzed our second quarter retail results, our merchants now believe several current promotional trends may continue in the short term.

Let me go through some of these trends that we have identified. First of all, our overall promotional activities in the near term are expected to be higher than normal, as we sell through our remaining stock of recently repackaged lines such as Back To Basics, Nioxin, KMS, and Joico, as well as selling through our remaining stock of Nexxus. That is a product line that is going mass retail and no longer will be sold in our beauty salons.

Second, our merchants are also seeing a mix shift towards lower margin merchandise such as appliances which includes curling irons, hair dryers, and flat irons. They are currently looking at price increase opportunities within these lines in order to improve our gross margins going forward.

Our product merchants continue to address our purchasing and pricing synergies and the related impact they will have on future retail product margins, which by the way remain quite healthy. These strategies are intended to offset the impact of the recent promotional trends I just discussed. At this point and time we are projecting our retail product margins in the later half of our current fiscal year to be in the range of 49%.

I would like to transition now by giving you a bit more detail behind our second quarter operating results by business segments. A breakout of our segment performance is found in today’s press release. And I will begin with our largest segment, and that is our North American Salons.

Revenue in our North American salons represented 84% of our consolidated second quarter revenue. And revenue for our North American salons grew 10% during the quarter to $512 million. This revenue growth was due to a 12% year-over-year increase in the number of company owned salons that we operated as well as a 1.5% increase in same-store sales.

Service revenue in our North American salons grew 11% during the quarter to $342 million fueled by a 1.3% increase in service same-store sales.

Product revenue grew 9% in the quarter to $159 million, which included a 2% increase in product comps.

Royalties and fees from our North American franchise salons declined 1% during the quarter to $9.8 million. This slight reduction was primarily due to a net year-over-year reduction of 55 franchise salons, due largely to franchise buybacks, as well as closures that we had in the franchise division. These buybacks and closures more than offset the new construction.

Our combined gross margin rate for North American salon came in at exactly 44% in the second quarter, representing a 30 basis point improvement over the same period last year. Despite the improvement our combined gross margin rate came in a bit below our expectations due to our retail product margin rate coming in below plan, which I will discuss in a moment.

Our second quarter service margin rate came in on plan at 41.9%, which represented a 30 basis point improvement over the same quarter last year. Our service comp of 1.3% for the quarter was 80 basis points higher than last years second quarter results and therefore, fueled service margin expansion in our fixed cost payroll concepts. This occurred despite the additional compensation we paid to employees impacted by the hurricanes. Our salon payrolls throughout all of our salon concepts were once again extremely well managed this past quarter.

Our retail product margin for our North American salons came in at 48.3% in the second quarter. Although this rate was identical to the same period a year ago, it was lower than what we had forecasted it to be, due to an increased level of retail promotional discounting that occurred during the quarter, which we had previously talked about.

As a percentage of sales, our general and administrative expense rate improved 60 basis points in the quarter to 4.8% of sales. This improvement was due to our ability to leverage this fixed cost category with the stronger constantly posted in the second quarter this year versus last. In addition our marketing spent in the quarter was slightly under that of the same period of the prior year.

Our depreciation and amortization expense grew 40 basis points during the quarter but was in line with our plan. Our second quarter rate of 3.7% was identical to that of the preceding first quarter and once again approximated what we had budgeted so there is not much reason to discuss that line of item further.

The net effect of all the items I've just discussed caused second quarter operating income for our North American salons to improve 30 basis points, to 13.8% of revenue.

Next, I will now review our second quarter performance of our international salons segment. This segment includes our company owned salons located primarily in the United Kingdom and it also includes our franchised salons located on the continent of Europe.

International salon revenue comprised 9% of our consolidated second quarter revenue and declined 5% over the same period a year ago coming in at $53.1 million. The decrease in revenue was caused by a combination of factors including negative same-store sales of 2.6% during the period.

In addition, fluctuation in both the Euro and the British pound exchange rates, as well as the year-over-year reduction in franchise locations also contributed to the overall decline in revenue.

Service revenue component declined 6% in the second quarter to $31.6 million. Similar to the first quarter of this year, service revenue was impacted by a 6% decline in service same store sales.

On the other hand, product revenue increased 7% during the quarter. Largely it was the result of positive same-store sales growth of 6%. Royalties and fees from our international franchisees decreased 13% due primarily to exchange rates fluctuation of the Euro.

Our overall international growth margin rate was essentially in line with our expectations and was 60 basis points better than last year. This is particularly encouraging to us given the negative comps of 2.6% we experienced in the second quarter this year versus a positive comp of 2.6% of the same period a year ago. However, negative second quarter comps did put pressure on certain fixed-cost categories. For example, our rent expense increased 180 basis points to 18.5% of sales. And our site operating expenses grew 60 basis points in the quarter to 4.9%.

As a result of all the factors I have just discussed, our operating income rate for our international salon segment declined 330 basis points in the second quarter to 6.8% of sales.

I will now talk about Hair Club for Men and Women. As a point of reference, our prior year compared to second quarter results included only one month of revenue and expenses because as you recall we acquired Hair Club on December 1, 2004.

This year in our second quarter, revenue from our hair restoration centers was nearly $27 million and represented over 4% of our consolidated revenue. This business is incredibly consistent and the revenue and expenses for the quarter were in line with our expectations and were quite similar to the results we reported in previous quarters. With operating margins north of 20% for the fourth quarter in a row, it is safe to say that we are very pleased with the performance of this segment of our business.

Next, I will briefly touch on our second quarter performance of our beauty schools. Our beauty school revenue nearly doubled to $15 million during the quarter and comprised about 2.5% of our total consolidated revenue. The increase in revenue was primarily related to the operation of 35 beauty schools at the end of the second quarter of this year compared to only 15 schools at the end of the second quarter last year. We are very pleased with an operating income rate north of 20% in the quarter from our beauty schools. Please keep in mind that we are still in the preliminary stages of amalgamating and growing this school business.

We anticipate that many of the expense line items will fluctuate from quarter-to-quarter due to mix. As we continue to integrate the school group, we do expect significant leverage in operating expenses, resulting in improved cash flow and operating income.

That concludes my comments concerning our individual business segments. However I do have two other comments before we open it up for Q & A.

We ended the quarter with a total of 11,211 locations worldwide, which was a net increase of 693 units over the previous twelve months. For the quarter, we added a net total of 134 new locations. In today’s press release, you will find a detailed table that breaks out our location activity and year-end counts for each division.

In today’s press release, you will also note that we are projecting consolidated revenue for the full 2006 fiscal year to be approximately $2.4 billion with same-store sales increasing about 1%. Diluted earnings per share are expected to be in the range of $2.31 to $2.37 per share which has been reduced by the $0.05 impact we have suffered from the hurricanes this year. For a detailed summary of our guidance, again, you can always visit our corporate web site.

So that is it. With that, Paul and I would be happy to answer any questions you may have. So Eric, if you can step in and provide some instructions as to how people can ask their questions, we would appreciate it.

+++ q-and-a

[OPERATOR’S INSTRUCTIONS]

Jeff Stein with KeyBanc, please go ahead with your question.

Good morning Paul. A couple of questions. First of all, fourth quarter. Historically it is, especially in recent years, we have had a little bit more trouble in terms of managing sales during this December holiday period. And I am wondering if you guys, have you thought at all of about perhaps changing the promotional calendar or changing the pace of marketing merchandise strategies to employ due to the fact that you seem to behave more like a traditional retailer during this period of time?

No Jeff, I think, I think that it is definitely a core capability of ours and I do not think it is broken. I do not think there has to be any significant change. The, we are talking about quintessential replenishment business. That is what makes this company so special. It is an affordable luxury and I, we do have a 15% shareholder product sold in North America beauty salons and barbershops. I do not think there is any need to have significant change.

Okay, so in other words the fourth quarter, I mean December sales, which seem to weaken relative to October and November. Know talk in terms of if you have to go back and do it again, what perhaps may you have done differently to try to drive a higher rate of growth.

I think we were incredibly aggressive and you could see that in our margins. I think it would sound frivolous to be more aggressive.

Paul, can you talk a little bit more about what you would have done with respect testing cross-merchandising initiatives between the salons and Hair Club and if you are seeing any benefits there as of yet?

We have not seen any material, positive benefits, we are still testing and it is still premature Jeff. It is a question of getting people involved. It is going to take a while. It is very similar to the challenge we face of 12, 13 years ago getting our people involved with selling products or selling hair color. You do not have, hairstylists are reluctant to be aggressive, reluctant to change. They are not the best sales people in the world. It takes time.

Okay, and then real quickly Paul, you indicated in your opening comments that within the next 12 months you would hope or expect that comps would begin to accelerate to perhaps to the 2 % level. And I am wondering is there anything that you are seeing in your numbers that gives you confidence that, that in fact is going to happen and maybe you could just comment a little on that. And also the timing of price increases, when and how much we may see in the way of pricing?

I hope we will [indiscernible] those price increases. We will meet with our operating people and we will be doing that within the next 30 days. The, we see some real strengthening in our Supercuts comps. And now thank God, Johnny Damon is a Yankee. So the male business should take care of itself. And once again we eventually leave this whole long hair phenomenon will reverse itself and demographics, namely the Asian population helps. I just can not believe they will go on for much longer.

Mitch Kaiser with Piper Jaffray, please go ahead with your question.

Hey Paul. Did you help Steinbrenner out with any of Damon’s salary then?

You know we offered them $1 million to cut his hair and it was too late.

Question on the guidance. You talked about product margins in the 49% range, how should we be thinking about the services margins? Because you know a slight increase kind of like it did in the second quarter, or how should we be thinking about that?

I still feel pretty good that our product margins, I am sorry, our service margin rate, it should be in the mid-43% range. We are still expecting to see growth in service margin rate in our third and fourth quarters.

Okay, okay. And then on the transaction, as you, as you kind of look out, and I know you have had some more time to spend with Howard and to kind of think about the business some more – and you know when we think about EBIT margins, I mean, when could you, when could we conceivably see kind of 10% EBIT margins from the business?

Yes, I will take a stab at that Mitch. Right now, our preliminary modeling is showing that that should go relatively quick. You know, maybe in a year or two post- close. As we know, Sally’s EBIT margins are stronger than ours. We have a higher level of depreciation and amortization than they do. We are expecting that that should happen relatively quick. Having said that, we are right now going through in preparation for the closing, we are going through preparing an S4 document which will have a bunch of pro forma financial results in there. And we are mapping specific accounts and line items to make sure that - - that both companies are going to be presented with, with financial statements that conform to that in which Regis presents itself. We will know more in the near-term, but I will say this, that we are highly confident we will be close to 10% EBITDA sometime in the next year or two post-close.

Okay. And then I guess that would come from the synergies that you have identified, probably some rebound on the BSG business, and then potentially some improvement on comps for that?

Not a lot of improvement in comps [because they tend to], but you are right on the first two points. We are looking that, the synergies that we do expect will be partially realized in year one and fully realized in year two.

Okay.

Those, those are the synergies that we have articulated in the past and we believe that there is more to it than that as well.

And let us not forget Sally is a 12% pre-tax earner. And they are looking at some acquisitions in the UK which would take a break even business and make it significantly profitable. And that would help as well.

Great, okay and then lastly on capital structure, you talked about that cap right now being 41.6%. As we look down a couple of years how do you think about what the optimum capital structure should be and how should we be thinking about using the cash as we go out?

Mitch it is really too premature to make a definitive statement. I tell you what my personal opinion is. We have a brand new board. Regis will have four representatives Alberto Culver with have four representatives. We have been fairly aggressive with respect to adding debt in order to build shareholder value. They have not. They have virtually no debt and that is great. The, we have been benefited by a relatively low interest rate environment and we are taking advantage of that. We feel that the interest rate environment will continue to be modest or low. So you know we will arm wrestle it and we will come up with a satisfactory solution. We generate so much free cash that and we are $1 billion in debt and soon to have $650 million in EBITDA we certainly can afford another half billion dollars in debt. Buy back stock increase dividend, we can do an awful lot of that. But we have to discuss it at board level. My, we have always been somewhat conservative in terms of debt to cap more importantly in our coverage ratios. And so I mean, I would hate to see our debt go down to $5 to $600 million with EBITDA greater than $5 or $600 million. I think there are plenty of opportunities to increase shareholder value and not have that occur.

Sharon Zackfia with William Blair, please go ahead with your question.

Hi, good morning. Acquisition activities so far this year has been pretty slim and I guess I was wondering where your thoughts are, I think at the beginning of the fiscal year ’05 $100 million in acquisition budget, is that still what you are targeting and what is a good cost that you can think of for the end of the year?

Look, we will be spending at least 120 million in acquisitions. And that is probably, our initial budget was about 120, so I do not think that’s slim- - let us not forget we are buying a bunch of schools, we are buying back hair club franschisees, we have, we’re in the final stages of discussion with some significant salon acquisition candidates so I think it will be a very active year.

Okay, so you’re still on the plan, it’s just more back-end weighted.

Yes.

Okay, and then I think there’s a question on this but maybe it wasn’t my question, on the price increase that you mentioned perhaps your thinking again this year, are you thinking about doing it again in the same forms you did last year or in a different (indiscernible). Would it be somewhat similar in magnitude?

We hope. That’s up to the operating people who will be meeting with us here shortly. They make that determination, not I.

Okay, would it be on basic haircuts or do you think it’s about other surfaces?

We’re thinking about everything.

Okay, and then lastly Paul, I mean I know that it’s a pretty simple business as you would like to say but I’m just wondering is there anything that you’re doing, any initiatives where you can be more proactive to drive your comps back to being north of the 2 percent range?

No we have limited advertising and promotional budgets. The - - - and even if we spend $100 million trying to urge people to cut their hair off, they’re going to do it as they wish and when they wish. There’s just so much we can do and we’re doing everything we can. This is not the kind of company where, it’s never really been a comp story and never will be a comp story, we’re a revenue story, but we need 2% comps to have double digit growth and we’ll get there. We’re highly confident that we will.

Let me phrase this in a different way. Are you seeing something in the business that’s making you more confident that you’ll get there in the next year?

Yes, as I mentioned before, the male business is already well above 2 percent.

Is the woman’s business turning?

Well the woman’s business will turn.

Mike Hamilton from RBC Dain, please go ahead sir.

Good morning. A couple of, if I may, first of all, I was just wondering as we look at the combination ahead. Is there anything that you’re senses you’re going to need to be working on or want to focus on in cultural changes within the combined organization?

Sally’s has been very independently run in Denton, TX which is a suburb of Dallas and their culture is very similar to ours. We both are very efficient. We both focus on expense control, we both focus on the middle market, not the high end, we know what we are not, I don’t think the cultural inspiration issues are going to be an issue because businesses are so independent.

Thanks. On the looking at the product in the back half of the year, traditionally this has not been an area where a product obsolescence has been much of an issue but we’ve got a few more moving parts than the norm. Is there anything there that could be a concern?

In the long-term, there’s no systemic change to the model both in service and in product. If you have 4 packagings and, you know within a month or two, that’s kind of unique, no there’s been no significant change.

One clean-up for Randy, tax rate outlook on the back-half of the year, understanding there’s a currency dynamic there.

Well the larger issue that we have in terms of the tax rate, we’re still expecting that our tax rate for the full year will come in somewhere in the 35.5 percent range for the entire year, so no real change there. The one thing that we may see which we had budgeted for, is that the effective tax rate may spike up a little bit in Q’s Three and Four as targeted jobs credits have been eliminated at the end of December and it happened last year Mike. Congress has to go in and re-approve the targeted jobs credit and typically they do that and typically it’s retroactively applied. That’s why in the December quarter a year ago, our effective tax rate dropped quite a bit because of the reinstatement retroactively of targeted jobs credits. So we are going to see a little bit of a rate increase assuming that those jobs credits are not going to be reinstated here in the near term but again, we budgeted for that, we expect our effective rate to be about 35.5.

[OPERATOR INSTRUCTIONS] David Lee with Porter Orlin please go ahead with your question.

Hi guys, how are you? Quick question, I believe the supply business is $700 million on a trailing basis and you mentioned about 15 percent of the market. After the merger with Sally, Sally has gotten $2.2 billion worth of revenue, so does that mean you’re going to go from a 15 percent market to perhaps 45 to 50 percent?

We’re really comparing apples and oranges to a point because Sally’s has far different SKU make-up than we do but however the question in another way. We respect toa lot of our vendors the combined BSG Regis business will have anywhere between 30 and 40 percent of their business, which should be very good for them because we’re they’re most profitable account and we have, there’s no selling cost and no credit risk.

This sounds like through a vendor, you consume consolidated vendors even more and squeeze out much better margins.

Squeeze out is a very funny term.

Not squeeze, I’m sorry but definitely a lot of money can be saved by buying at even at a greater bulk.

I hope so.

Also, you mentioned, as I started to back on the price increase, the thing that you talk about price increase in the past, you talk about targeted percentage revenues, any thoughts on what’s your expectation or what would you like to, what percent of your revenue would you like to see a price increase, what percentage would you like to see stay flat?

Well, last year, I’m not really getting the question. Last year, we increased prices in about 2,500 stores and they affected our comps anywhere between ¾ of 1 percent, give or take 10 percent and we would hope that we would have similar numbers this year.

Geoff Hulme with Porter Orlin please go ahead for a question.

Yes, hi, there was already a question about this earlier, but you mentioned on the optimism in comps that you seem strong comps and the Super-Cut comps and I just wondered why that you think is a harbinger, is that more male oriented or is there a different geographic location of those stores or I just wondered why you picked that out.

It spans geography and 75 percent of our customers in Super Cuts are male and it’s, I mean it’s a good, solid growing business that’s going extremely well, and I think that reflects that fact that you know, certainly male customers are cutting their hair more often. We also have the benefit of hair color this year in Super Cuts and that eventually will be as much as 10 percent of our sales in Super Cuts, it will take 3 or 4 years for that to occur but it should happen.

If there are no further questions, I will now turn the conference back to Paul.

Thank you for joining us everyone. Have a good day.

[OPERATOR INSTRUCTIONS]