REVISION OF THIRD QUARTER 2020 UNAUDITED RESULTS

9 Months Ended

Mar. 31, 2021

Accounting Changes and Error Corrections [Abstract]

REVISION OF THIRD QUARTER 2020 UNAUDITED RESULTS

REVISION OF THIRD QUARTER 2020 UNAUDITED RESULTS:

During the fourth quarter of 2020, the Company identified an error in the calculation of the goodwill derecognition associated with the sale of salons to franchisees in the second quarter and third quarter. During the third quarter, goodwill derecognition was overstated by $2.4 million. As of March 31, 2020, the Company fully impaired its remaining Company-owned goodwill with the amount of goodwill impairment being overstated by $4.4 million in the third quarter. The Company assessed the applicable guidance issued by the Securities and Exchange Commission (SEC) and the Financial Accounting Standards Board (FASB) and concluded these misstatements were not material, individually or in the aggregate, to the Company’s Unaudited Condensed Consolidated Financial Statements for the aforementioned interim periods. However, to facilitate comparisons among periods, the Company has decided to revise its previously issued second and third quarter unaudited condensed consolidated financial information.

	Three Months Ended March 31, 2020
	As Previously Reported		Adjustments		As Revised
	(Dollars in thousands, except per share amounts)
Rent expense (1)	$	19,243	$	(578)	$	18,665
Goodwill impairment (2)	44,529		(4,365)		40,164
Operating loss	(64,342)		4,943		(59,399)
Loss from sale of salon assets to franchisees, net	(10,208)		2,350		(7,858)
Interest income and other, net	(1,329)		1,477		148
Loss from continuing operations before income taxes	(77,591)		8,770		(68,821)
Income tax benefit	2,253		(1,274)		979
Net loss	(75,037)		7,496		(67,541)
Net loss per share	(2.10)		0.22		(1.88)
Comprehensive loss	(77,519)		7,496		(70,023)

	Nine Months Ended March 31, 2020
	As Previously Reported		Adjustments		As Revised
	(Dollars in thousands, except per share amounts)
Rent expense (1)	$	64,002	$	(578)	$	63,424
Goodwill impairment (2)	44,529		(4,365)		40,164
Operating loss	(81,714)		4,943		(76,771)
Loss from sale of salon assets to franchisees, net	(21,760)		(4,365)		(26,125)
Interest income and other, net	3,188		—		3,188
Loss from continuing operations before income taxes	(104,901)		578		(104,323)
Income tax benefit	5,904		(121)		5,783
Net loss	(98,244)		457		(97,787)
Net loss per share	(2.73)		0.01		(2.72)
Comprehensive loss	(100,588)		457		(100,131)

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The Company revised the amounts originally reported for the third quarter of fiscal year 2020 for the following items:

(1)Adjusted third quarter rent expense includes a $0.6 million benefit related to leases signed in the third quarter, but not identified until the fourth quarter. The net loss for the three and nine months ended March 31, 2020 were both impacted by the misstatement.

(2)During the third quarter, goodwill derecognition was overstated by $2.4 million. As of March 31, 2020, the Company impaired its remaining Company-owned goodwill, with the amount of goodwill impairment being overstated by $4.4 million. As the second quarter error which understated goodwill derecognition was not identified until the fourth quarter, goodwill impairment and loss from the sale of salons to franchisees, net were misstated in the third quarter. The Company recorded a $4.4 million decrease to goodwill impairment and a $2.4 million decrease to loss from the sale of salon assets to franchisees, net to correct the error. Net loss for the nine months ended March 31, 2020 was not misstated. However, goodwill impairment and the loss from the sales of salons to franchisees, net were misstated in the nine months ended March 31, 2020, with goodwill impairment overstated by $4.4 million and loss from the sale of salons to franchisees, net understated by $4.4 million.