REVENUE RECOGNITION: (Tables)

6 Months Ended

Dec. 31, 2018

Revenue from Contract with Customer [Abstract]

Disaggregation of revenue

The following table disaggregates revenue by timing of revenue recognition and is reconciled to reportable segment revenues as follows:

	Three Months Ended December 31, 2018				Three Months Ended December 31, 2017
	Company-owned		Franchise		Company-owned		Franchise
	(in thousands)
Revenue recognized at a point in time:
Service	$	190,419	$	—	$	223,278	$	—
Product	43,831		17,818		56,764		15,068
Total revenue recognized at a point in time	$	234,250	$	17,818	$	280,042	$	15,068
Revenue recognized over time:
Royalty and other franchise fees	$	—	$	14,736	$	—	$	12,260
Advertising fund fees	—		7,867		—		6,479
Total revenue recognized over time	$	—	$	22,603	$	—	$	18,739
Total revenue	$	234,250	$	40,421	$	280,042	$	33,807

	Six Months Ended December 31, 2018				Six Months Ended December 31, 2017
	Company-owned		Franchise		Company-owned		Franchise
	(in thousands)
Revenue recognized at a point in time:
Service	$	398,267	$	—	$	458,908	$	—
Product	85,793		33,447		110,000		22,790
Total revenue recognized at a point in time	$	484,060	$	33,447	$	568,908	$	22,790
Revenue recognized over time:
Royalty and other franchise fees	$	—	$	29,156	$	—	$	24,410
Advertising fund fees	—		15,843		—		13,205
Total revenue recognized over time	$	—	$	44,999	$	—	$	37,615
Total revenue	$	484,060	$	78,446	$	568,908	$	60,405

Schedule of receivables, broker fees and deferred revenue

Information about receivables, broker fees and deferred revenue subject to the amended revenue recognition guidance is as follows:

	December 31, 2018		June 30, 2018		Balance Sheet Classification
	(in thousands)
Receivables from contracts with customers, net	$	17,861	$	21,504	Accounts receivable, net
Broker fees	$	15,584	$	14,002	Other assets
Deferred revenue:
Current
Gift card liability	$	4,613	$	3,320	Accrued expenses
Deferred franchise fees unopened salons	172		2,306		Accrued expenses
Deferred franchise fees open salons	3,428		3,030		Accrued expenses
Total current deferred revenue	$	8,213	$	8,656
Non-current
Deferred franchise fees unopened salons	$	13,472	$	11,161	Other non-current liabilities
Deferred franchise fees open salons	20,112		18,346		Other non-current liabilities
Total non-current deferred revenue	$	33,584	$	29,507

Broker fees

The following table is a rollforward of the broker fee balance for the periods indicated (in thousands):

Balance as of June 30, 2018	$	14,002
Additions	2,752
Amortization	(1,158		)
Write-offs	(12		)
Balance as of December 31, 2018	$	15,584

Estimated revenue expected to be recognized

Estimated revenue expected to the recognized in the future related to deferred franchise fees for open salons as of December 31, 2018 is as follows (in thousands):

Remainder of 2019	$	1,643
2020	3,326
2021	3,238
2022	3,118
2023	2,941
Thereafter	9,274
Total	$	23,540

Schedules of impact of revenue recognition policy

The amended revenue recognition guidance impacted the Company's previously reported financial statements as follows:

CONDENSED CONSOLIDATED BALANCE SHEET (Unaudited)

June 30, 2018

(Dollars in thousands)

			Adjustments for new revenue recognition guidance
	Previously		Franchise			Advertising		Gift Card
	Reported		Fees			Funds		Breakage			Taxes			Adjusted
ASSETS
Current assets:
Cash and cash equivalents	$	110,399	$	—		$	—	$	—		$	—		$	110,399
Receivables, net	52,430		—			—		—			—			52,430
Inventories	79,363		—			—		—			—			79,363
Other current assets	47,867		—			—		—			—			47,867
Total current assets	290,059		—			—		—			—			290,059
Property and equipment, net	105,860		—			—		—			—			105,860
Goodwill	412,643		—			—		—			—			412,643
Other intangibles, net	10,557		—			—		—			—			10,557
Other assets	37,616		—			—		—			—			37,616
Total assets	$	856,735	$	—		$	—	$	—		$	—		$	856,735
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	57,738	$	—		$	—	$	—		$	—		$	57,738
Accrued expenses	97,630		3,030			—		56			—			100,716
Total current liabilities	155,368		3,030			—		56			—			158,454
Long-term debt	90,000		—			—		—			—			90,000
Other noncurrent liabilities	107,875		18,346			—		—			(4,378		)	121,843
Total liabilities	353,243		21,376			—		56			(4,378		)	370,297
Commitments and contingencies (Note 7)
Shareholders’ equity:			0
Common stock	2,263		—			—		—			—			2,263
Additional paid-in capital	194,436		—			—		—			—			194,436
Accumulated other comprehensive income	9,568		88			—		—			—			9,656
Retained earnings	297,225		(21,464		)	—		(56		)	4,378			280,083
Total shareholders’ equity	503,492		(21,376		)	—		(56		)	4,378			486,438
Total liabilities and shareholders’ equity	$	856,735	$	—		$	—	$	—		$	—		$	856,735

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited)

For The Three Months Ended December 31, 2017

(Dollars and shares in thousands, except per share data amounts)

				Adjustments for new revenue recognition guidance
	Previously			Franchise			Advertising		Gift Card
	Reported			Fees			Funds		Breakage			Taxes		Adjusted
Revenues:
Service	$	223,214		$	—		$	—	$	64		$	—	$	223,278
Product	71,816			—			—		16			—		71,832
Royalties and fees	13,485			(1,225		)	6,479		—			—		18,739
	308,515			(1,225		)	6,479		80			—		313,849
Operating expenses:
Cost of service	134,850			—			—		—			—		134,850
Cost of product	39,864			—			—		—			—		39,864
Site operating expenses	32,119			—			6,479		—			—		38,598
General and administrative	48,592			—			—		—			—		48,592
Rent	65,473			—			—		—			—		65,473
Depreciation and amortization	24,951			—			—		—			—		24,951
Total operating expenses	345,849			—			6,479		—			—		352,328
Operating income	(37,334		)	(1,225		)	—		80			—		(38,479		)
Other (expense) income:
Interest expense	(2,169		)	—			—		—			—		(2,169		)
Gain from sale of salon assets to franchisees, net	(104		)	—			—		—			—		(104		)
Interest income and other, net	2,466			—			—		(447		)	—		2,019
Income from continuing operations before income taxes	(37,141		)	(1,225		)	—		(367		)	—		(38,733		)
Income tax expense	76,462			—			—		—			4,363		80,825
Income from continuing operations	39,321			(1,225		)	—		(367		)	4,363		42,092
Loss from discontinued operations, net of taxes	(6,601		)	—			—		—			—		(6,601		)
Net loss	$	32,720		$	(1,225	)	$	—	$	(367	)	$	4,363	$	35,491
Net loss per share:
Basic:
Income from continuing operations	$	0.84		$	(0.03	)	$	0.00	$	(0.01	)	$	0.09	$	0.90
Loss from discontinued operations	(0.14		)	0.00			0.00		0.00			0.00		(0.14		)
Net loss per share, basic (1)	$	0.70		$	(0.03	)	$	0.00	$	(0.01	)	$	0.09	$	0.76
Diluted:
Income from continuing operations	$	0.83		$	(0.03	)	$	0.00	$	(0.01	)	$	0.09	$	0.89
Loss from discontinued operations	(0.14		)	0.00			0.00		0.00			0.00		(0.14		)
Net loss per share, diluted (1)	$	0.69		$	(0.03	)	$	0.00	$	(0.01	)	$	0.09	$	0.75
Weighted average common and common equivalent shares outstanding:
Basic	46,821			46,821			46,821		46,821			46,821		46,821
Diluted	47,314			47,314			47,314		47,314			47,314		47,314

_____________________________________________________________________________

(1)Total is a recalculation; line items calculated individually may not sum to total due to rounding.

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited)

For The Six Months Ended December 31, 2017

(Dollars and shares in thousands, except per share data amounts)

				Adjustments for new revenue recognition guidance
	Previously			Franchise			Advertising		Gift Card
	Reported			Fees			Funds		Breakage			Taxes		Adjusted
Revenues:
Service	$	458,773		$	—		$	—	$	135		$	—	$	458,908
Product	132,756			—			—		34			—		132,790
Royalties and fees	26,859			(2,449		)	13,205		—			—		37,615
	618,388			(2,449		)	13,205		169			—		629,313
Operating expenses:
Cost of service	274,686			—			—		—			—		274,686
Cost of product	70,026			—			—		—			—		70,026
Site operating expenses	65,422			—			13,205		—			—		78,627
General and administrative	83,758			—			—		—			—		83,758
Rent	107,889			—			—		—			—		107,889
Depreciation and amortization	37,206			—			—		—			—		37,206
Total operating expenses	638,987			—			13,205		—			—		652,192
Operating income	(20,599		)	(2,449		)	—		169			—		(22,879		)
Other (expense) income:
Interest expense	(4,307		)	—			—		—			—		(4,307		)
Gain from sale of salon assets to franchisees, net	18			—			—		—			—		18
Interest income and other, net	3,371			—			—		(932		)	—		2,439
Income from continuing operations before income taxes	(21,517		)	(2,449		)	—		(763		)	—		(24,729		)
Income tax expense	71,630			—			—		—			3,636		75,266
Income from continuing operations	50,113			(2,449		)	—		(763		)	3,636		50,537
Loss from discontinued operations, net of taxes	(40,368		)	—			—		—			—		(40,368		)
Net loss	$	9,745		$	(2,449	)	$	—	$	(763	)	$	3,636	$	10,169
Net loss per share:
Basic:
Income from continuing operations	$	1.07		$	(0.05	)	$	0.00	$	(0.02	)	$	0.08	$	1.08
Loss from discontinued operations	(0.86		)	0.00			0.00		0.00			0.00		(0.86		)
Net loss per share, basic (1)	$	0.21		$	(0.05	)	$	0.00	$	(0.02	)	$	0.08	$	0.22
Diluted:
Income from continuing operations	$	1.07		$	(0.05	)	$	0.00	$	(0.02	)	$	0.08	$	1.07
Loss from discontinued operations	(0.86		)	0.00			0.00		0.00			0.00		(0.86		)
Net loss per share, diluted (1)	$	0.21		$	(0.05	)	$	0.00	$	(0.02	)	$	0.08	$	0.22
Weighted average common and common equivalent shares outstanding:
Basic	46,719			46,719			46,719		46,719			46,719		46,719
Diluted	47,053			47,053			47,053		47,053			47,053		47,053

_____________________________________________________________________________

(1)Total is a recalculation; line items calculated individually may not sum to total due to rounding.