DISCONTINUED OPERATIONS:

6 Months Ended

Dec. 31, 2012

DISCONTINUED OPERATIONS:

DISCONTINUED OPERATIONS:

2. DISCONTINUED OPERATIONS:

Hair Restoration Centers

On July 13, 2012, the Company entered into a definitive agreement to sell its Hair Club for Men and Women business (Hair Club), a provider of hair restoration services, for cash of $163.5 million to Aderans, Co., Ltd. The definitive agreement includes a working capital adjustment provision that could impact the final sale price.  The sale includes the Company’s 50.0 percent interest in Hair Club for Men, Ltd. accounted for by the Company under the equity method. The transaction is under review by the Federal Trade Commission. The Company is currently anticipating recognizing a gain upon the closing of the transaction.

The Company classified the results of operations of Hair Club as discontinued operations for all periods presented in the Condensed Consolidated Statement of Operations.  The assets and liabilities of this business to be sold met the criteria to be classified as held for sale and have been aggregated and reported as current assets held for sale, long-term assets held for sale, current liabilities related to assets held for sale and long-term liabilities related to assets held for sale in the Condensed Consolidated Balance Sheet for all periods presented. The classification was based on the Company entering into the agreement to sell Hair Club, the centers being available for sale in present condition, and the sale being probable as of December 31, 2012. The operations and cash flows of Hair Club will be eliminated from ongoing operations of the Company, which was previously recorded as the Hair Restoration reporting segment. There will be no significant continuing involvement by the Company in the operations of Hair Club after disposal.

The following summarizes the assets and liabilities of our Hair Club operations at December 31, 2012 and June 30, 2012:

	December 31, 2012		June 30, 2012
	(Dollars in thousands)
Current assets held for sale
Receivables, net	$	2,504	$	2,624
Inventories	7,276		6,165
Deferred income taxes	3,229		2,892
Other current assets	3,807		5,319
Total current assets held for sale	16,816		17,000
Property and equipment, net	22,261		17,261
Goodwill	74,377		74,376
Other intangibles, net	78,132		78,395
Investment in affiliates	5,189		5,189
Total long-term assets held for sale	179,959		175,221
Total assets held for sale	$	196,775	$	192,221
Current liabilities related to assets held for sale
Accounts payable	$	3,173	$	2,564
Accrued expenses	13,365		15,556
Total current liabilities related to assets held for sale	16,538		18,120
Long-term liabilities related to assets held for sale	28,781		28,007
Total liabilities related to assets held for sale	$	45,319	$	46,127

During the three months ended December 31, 2011, the Company performed an interim impairment test of goodwill related to Hair Club and recorded a $78.4 million impairment charge for the excess of the carrying value of goodwill over the implied fair value.

The following summarizes the results of operations of our discontinued Hair Club operations for the periods presented:

	For the Periods Ended December 31,
	Three Months						Six Months
	2012			2011			2012			2011
	(Dollars in thousands)
Revenues	$	38,230		$	37,140		$	77,180		$	74,543
Income (loss) from discontinued operations, before income taxes	5,994			(73,545		)	11,866			(69,479		)
Income tax (provision) benefit on discontinued operations	(2,378		)	3,996			(4,676		)	2,482
Equity in income of affiliated companies, net of tax	237			222			440			384
Income (loss) from discontinued operations, net of income taxes	$	3,853		$	(69,327	)	$	7,630		$	(66,613	)

Income taxes have been allocated to continuing and discontinued operations based on the methodology required by interim reporting and accounting for income taxes guidance.  Depreciation and amortization ceased during the three and six months ended December 31, 2012 in accordance with accounting for discontinued operations. Hair Club depreciation and amortization expense for the three and six months ended December 31, 2011 was $3.2 and $6.6 million, respectively.