BASIS OF PRESENTATION OF UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

6 Months Ended

Dec. 31, 2014

Stock-Based Employee Compensation

Stock-Based Employee Compensation:

During the three and six months ended December 31, 2014, the Company granted various equity awards including restricted stock units (RSUs), equity-based stock appreciation rights (SARs) and performance share units (PSUs). During the six months ended December 31, 2014, the dividend yield assumption was updated to 0%. Otherwise there were no significant changes to the assumptions used in calculating the fair value of SARs. All grants relate to stock incentive plans that have been approved by the shareholders of the Company.

A summary of equity awards granted is as follows:



	For the Periods Ended December 31, 2014
	Three Months	Six Months
Restricted stock units	48,225	301,508
Equity-based stock appreciation rights	13,869	450,334
Performance share units	6,097	199,337

Subsequent to December 31, 2014, the Company granted 176,263 RSUs and 363,970 SARs. These RSUs and SARs cliff vest on the fifth anniversary of the date of grant, with the SARs having an expiration date on the seventh anniversary of the date of grant. The expected volatility assumption was updated to 38%. Otherwise there were no significant changes to the assumptions used in calculating the fair value of the SARs.

Total compensation cost for stock-based payment arrangements totaled $2.3 and $1.7 million for the three months ended December 31, 2014 and 2013, respectively, and $4.0 and $3.6 million for the six months ended December 31, 2014 and 2013, respectively, recorded within general and administrative expense on the unaudited Condensed Consolidated Statement of Operations.

During fiscal year 2014, the Company granted 0.1 million PSUs with a performance metric based upon achieving a three-year cumulative adjusted earnings before interest, income taxes and depreciation and amortization balance. As of December 31, 2014, the Company does not expect any of these units to be earned and has not recorded any net expense associated with these awards. However, future compensation expense for the unvested awards could reach a maximum of $1.9 million if the maximum performance metric is earned.

Long-Lived Asset Impairment Assessments, Excluding Goodwill

Long-Lived Asset Impairment Assessments, Excluding Goodwill:

The Company assesses impairment of long-lived assets at the individual salon level, as this is the lowest level for which identifiable cash flows are largely independent of other groups of assets and liabilities, when events or changes in circumstances indicate the carrying value of the assets or the asset grouping may not be recoverable. 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. Impairment is evaluated based on the sum of undiscounted estimated future cash flows expected to result from use of the long-lived assets. If the undiscounted estimated cash flows are less than the carrying value of the assets, the Company calculates an impairment charge based on the assets' estimated fair value. The fair value of the long-lived assets is estimated using a discounted cash flow model based on the best information available, including market data and salon level revenues and expenses. Long-lived asset impairment charges are recorded within depreciation and amortization in the Consolidated Statement of Operations for the three and six months ended December 31, 2014 and 2013.

Prior Period Adjustments

Prior Period Adjustments:

During the three months ended December 31, 2014, the Company identified an error related to the understatement of self-insurance accruals in prior periods. Because this item was not material to the Company’s consolidated financial statements for any prior periods or the current quarter, the Company recorded a correcting cumulative adjustment during the three months ended December 31, 2014. The impact of this item on the Company’s Consolidated Statement of Operations increased site operating expense and net loss by $1.5 million, respectively.

Accounting Standards Recently Issued But Not Yet Adopted by the Company

Accounting Standards Recently Issued But Not Yet Adopted by the Company:

Revenue from Contracts with Customers

In May 2014, the FASB issued updated guidance for revenue recognition. The updated accounting guidance provides a comprehensive new revenue recognition model that requires a Company to recognize revenue to depict the exchange for goods or services to a customer at an amount that reflects the consideration it expects to receive for those goods or services. The guidance also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts. This guidance will be effective in the first quarter of fiscal year 2018. This update permits the use of either the retrospective or simplified transition method. The Company does not expect the adoption of this update to have a material impact on the Company's consolidated financial statements and is evaluating the impact this guidance will have on its related disclosures.