Subsequent events

12 Months Ended

Dec. 31, 2018

On February 26, 2019, the Company announced its decision to close all e.l.f. retail stores (the “e.l.f. Store Closing”). As part of the e.l.f. Store Closing, the Company will close all 22 of its e.l.f. retail stores on February 26, 2019, and implement a workforce reduction of approximately 185 retail store employees and approximately 8 corporate employees that manage and operate the e.l.f. retail stores.

The Company currently expects to incur one-time, pre-tax charges and costs associated with the e.l.f. Store Closing of approximately $23.0 to $25.0 million in total, which will be taken in the transition period ended March 31, 2019. These charges include:


•	acceleration of rent expense related to e.l.f. retail store lease right-of-use assets of approximately $16.0 million;


•	write-offs of other assets, including property and equipment, of approximately $5.0 to $6.0 million;


•	employee severance payments of approximately $0.5 million;


•	other costs of approximately $1.5 to $2.5 million.

The decision to close all e.l.f. retail stores was made during the transition period ended March 31, 2019. The property and equipment used to operate the e.l.f. retail stores is part of an entity-wide asset group. This is due, in part, to the integrated nature of the e.l.f. retail stores business with the Company’s various other distribution channels and the extent of shared costs across those channels.

Right-of-use assets and liabilities for all leases, including e.l.f. retail store leases, will be recorded effective January 1, 2019 in connection with the adoption of ASC 842.

Any outstanding liabilities associated with leases or other contracts will be adjusted at the time the liability is considered extinguished.

The above estimated costs and charges are preliminary and may vary materially based on various factors, including negotiations with third parties, and changes in management’s assumptions and projections.