ACQUISITIONS

12 Months Ended

Jun. 30, 2012

ACQUISITIONS

ACQUISITIONS

4. ACQUISITIONS

        During fiscal years 2012, 2011, and 2010, the Company made acquisitions and the purchase prices have been allocated to assets acquired and liabilities assumed based on their estimated fair values at the dates of acquisition. These acquisitions individually and in the aggregate are not material to the Company's operations. Operations of the acquired companies have been included in the operations of the Company since the date of the respective acquisition.

        Based upon purchase price allocations, the components of the aggregate purchase prices of the acquisitions made during fiscal years 2012, 2011, and 2010 and the allocation of the purchase prices were as follows:

	For the Years Ended June 30,
	2012			2011			2010
	(Dollars in thousands)
Components of aggregate purchase prices:
Cash (net of cash acquired)	$	2,587		$	17,990		$	3,664
Liabilities assumed or payable		—			561			—
	$	2,587		$	18,551		$	3,664
Allocation of the purchase prices:
Current assets	$	344		$	641		$	178
Property and equipment		534			4,232			873
Goodwill		4,978			12,489			2,581
Identifiable intangible assets		594			1,964			134
Accounts payable and accrued expenses		(1,117	)		(534	)		(102	)
Other noncurrent liabilities		(1,246	)		(241	)		—
Noncontrolling interest		(1,500	)		—			—
	$	2,587		$	18,551		$	3,664

        The value and related weighted average amortization periods for the intangibles acquired during fiscal years 2012 and 2011 business acquisitions, in total and by major intangible asset class, are as follows:

	Purchase Price Allocation				Weighted Average Amortization Period
	For the Years Ended June 30,
	2012		2011		2012		2011
	(Dollars in thousands)				(in years)
Amortized intangible assets:
Brand assets and trade names	$	31	$	159		20		10
Guest lists		—		1,207		—		7
Franchise agreements		513		269		30		40
Lease intangibles		13		151		20		20
Non-compete agreements		10		—		5		—
Other		27		178		20		20
Total value and weighted average amortization period	$	594	$	1,964		28		14

        The majority of the purchase price in salon acquisitions is accounted for as residual goodwill rather than identifiable intangible assets. This stems from the value associated with the walk-in guest base of the acquired salons, which is not recorded as an identifiable intangible asset under current accounting guidance, as well as the limited value and guest preference associated with the acquired hair salon brand. Key factors considered by guests of hair salon services include personal relationships with individual stylists, service quality and price point competitiveness. These attributes represent the "going concern" value of the salon.

        Residual goodwill further represents the Company's opportunity to strategically combine the acquired business with the Company's existing structure to serve a greater number of guests through its expansion strategies. In the acquisitions of international salons and hair restoration centers, the residual goodwill primarily represents the growth prospects that are not captured as part of acquired tangible or identified intangible assets. Generally, the goodwill recognized in the North American salon transactions is expected to be fully deductible for tax purposes and the goodwill recognized in the international salon transactions is not deductible for tax purposes. Goodwill generated in certain acquisitions, such as the acquisition of hair restoration centers, is not deductible for tax purposes due to the acquisition structure of the transaction.

        During fiscal years 2012, 2011, and 2010, the Company purchased salon operations from its franchisees. The Company evaluated the effective settlement of the pre-existing franchise contracts and associated rights afforded by those contracts. The Company determined that the effective settlement of the pre-existing franchise contracts at the date of the acquisition did not result in a gain or loss, as the agreements were neither favorable nor unfavorable when compared to similar current market transactions, and no settlement provisions exist in the pre-existing contracts. Therefore, no settlement gain or loss was recognized with respect to the Company's franchise buybacks.

        On July 1, 2011, the Company acquired 31 franchise salon locations through its acquisition of a 60.0 percent ownership interest in Roosters for $2.3 million. The purchase agreement contains a right, Roosters Equity Put, to require the Company to purchase additional ownership interest in Roosters between specified dates in 2012 to 2015, and an option, Roosters Equity Call, whereby the Company can acquire additional ownership interest in Roosters beginning in 2015. The acquisition price is determined based on a multiple of the earnings before interest, taxes, depreciation and amortization of Roosters for a trailing twelve month period adjusted for certain items as defined in the agreement which is intended to approximate fair value. The initial estimated fair values as of July 1, 2011 of the Roosters Equity Put and Roosters Equity Call were $0.2 and $0.1 million, respectively. Any changes in the estimated fair value of the Roosters Equity Put and Roosters Equity Call are recorded in the Company's Consolidated Statement of Operations.

        The Company utilized the consolidation of variable interest entities guidance to determine whether or not its investment in Roosters was a VIE, and if so, whether the Company was the primary beneficiary of the VIE. The Company concluded that Roosters is a VIE based on the fact that the holders of the equity investment at risk, as a group, lack the obligation to absorb the expected losses of the entity. The Roosters Equity Put is based on a formula that may or may not be at market when exercised, therefore, it could prevent the minority interest owners from absorbing its share of expected losses by transferring such obligation to the Company. Under certain circumstances, including a decline in the fair value of Roosters, the Roosters Equity Put could be exercised and the minority interest owners could be protected from absorbing the downside of the equity interest. As the Roosters Equity Put absorbs a large amount of variability this characteristic results in Roosters being a VIE.

        Regis determined that the Company has met the power criterion due to the Company having the authority to direct the activities that most significantly impact Roosters' economic performance. The Company concluded based on the considerations above that it is the primary beneficiary of Roosters and therefore the financial positions, results of operations, and cash flows of Roosters are consolidated in the Company's financial statements from the acquisition date. Total assets, total liabilities and total shareholders' equity of Roosters as of June 30, 2012 were $5.9, $2.0 and $3.9 million, respectively. Net income attributable to the noncontrolling interest in Roosters was $0.1 million for the twelve months ended June 30, 2012, and was recorded within interest income and other, net in the Consolidated Statement of Operations. Shareholders' equity attributable to the noncontrolling interest in Roosters was $1.6 million as of June 30, 2012 and was recorded within retained earnings on the Consolidated Balance Sheet.