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DISCONTINUED OPERATIONS: | 3 Months Ended
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Sep. 30, 2012
DISCONTINUED OPERATIONS: |
DISCONTINUED OPERATIONS: | 3. 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 expected to close during fiscal year 2013. The Company is currently anticipating recognizing a gain upon closing of the deal. As of September 30, 2012, 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 September 30, 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 September 30, 2012 and June 30, 2012:
|  | September 30, 2012 |  | June 30, 2012 |
|  | (Dollars in thousands) |
Current assets held for sale |  |  |  |  |
Receivables, net |  | $ | 2,563 |  | $ | 2,624 |
Inventories |  | 6,564 |  | 6,165 |
Deferred income taxes |  | 3,229 |  | 2,892 |
Other current assets |  | 4,846 |  | 5,319 |
Total current assets held for sale |  | 17,202 |  | 17,000 |
Property and equipment, net |  | 18,559 |  | 17,261 |
Goodwill |  | 74,374 |  | 74,376 |
Other intangibles, net |  | 78,119 |  | 78,395 |
Investment in affiliates |  | 5,152 |  | 5,189 |
Total long-term assets held for sale |  | 176,204 |  | 175,221 |
Total assets held for sale |  | $ | 193,406 |  | $ | 192,221 |
Current liabilities related to assets held for sale |  |  |  |  |
Accounts payable |  | $ | 1,806 |  | $ | 2,564 |
Accrued expenses |  | 14,153 |  | 15,556 |
Total current liabilities related to assets held for sale |  | 15,959 |  | 18,120 |
Other non-current liabilities related to assets held for sale |  | 28,063 |  | 28,007 |
Total liabilities related to assets held for sale |  | $ | 44,022 |  | $ | 46,127 |
The following summarizes the results of operations of our discontinued hair restoration service operations for the periods presented:
|  | For the Periods Ended September 30, |
|  | Three Months |
|  | 2012 |  | 2011 |
|  | (Dollars in thousands) |
Revenues |  | $ | 38,951 |  | $ | 37,403 |
Income from discontinued operations, before income taxes |  | 5,872 |  | 4,067 |
Income tax provision on discontinued operations |  | (2,299 | ) | (1,514 | )
Equity in income of affiliated companies, net of tax |  | 204 |  | 162 |
Income from discontinued operations, net of income taxes |  | 3,777 |  | 2,715 |
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 were ceased during the three months ended September 30, 2012 in accordance with accounting for discontinued operations. Trade Secret On February 16, 2009, the Company sold its Trade Secret salon concept (Trade Secret). The Company reported Trade Secret as a discontinued operation. The carrying value of the note receivable with the purchaser of Trade Secret was fully reserved as of June 30, 2011. The purchaser of Trade Secret emerged from bankruptcy in March 2012 and in conjunction, the Company entered into a credit and security agreement in which the principal balance of the note receivable was reduced from $35.7 to $18.0 million. Payments of $0.5 million are due quarterly beginning on May 31, 2012. Upon receipt of the quarterly payments through February 2019 the remaining principal and unpaid interest will be forgiven. The purchaser of Trade Secret partially satisfied the principal payment during the first fiscal quarter of 2013 by providing the Company with $0.3 million of saleable inventory. The Company recorded the recovery of bad debt expense upon receipt of the inventory during the three months ended September 30, 2012. The carrying value of the note receivable continues to be fully reserved at September 30, 2012. Effective in the second quarter of fiscal year 2010, the Company has an agreement in which the Company provides warehouse services to the purchaser of Trade Secret. Under the warehouse services agreement, the Company recognized $0.2 and $0.5 million of other income related to warehouse services during the three months ended September 30, 2012 and 2011, respectively. The carrying value of the receivable related to warehouse services was $0.2 and $0.1 million as of September 30, 2012 and 2011, respectively. The Company utilized the consolidation of variable interest entities guidance to determine whether or not Trade Secret was a VIE, and if so, whether the Company was the primary beneficiary of Trade Secret. The Company concluded that Trade Secret is a VIE based on the fact that the equity investment at risk in Trade Secret is insufficient. The Company determined that the purchaser of Trade Secret has met the power criterion due to the purchaser of Trade Secret having the authority to direct the activities that most significantly impact Trade Secret’s economic performance. The Company concluded based on the consideration above that the primary beneficiary of Trade Secret is the purchaser of Trade Secret. The exposure to loss related to the Company’s involvement with Trade Secret is the guarantee of approximately 20 operating leases. The Company has determined the exposure to the risk of loss on the guarantee of the operating leases to be immaterial to the financial statements.

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- Definition The entire disclosure for the facts and circumstances leading to the completed or expected disposal, manner and timing of disposal, the gain (loss) recognized in the income statement and the income statement caption that includes that gain (loss), amounts of revenues and pretax profit or loss reported in discontinued operations, the segment in which the disposal group was reported, and the classification (whether sold or classified as held for sale) and carrying value of the assets and liabilities comprising the disposal group. Includes all disposal groups, including those classified as components of the entity (discontinued operations). + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -SubTopic 20 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6360339&loc=d3e1474-107760 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -SubTopic 20 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6360339&loc=d3e1361-107760 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 144 -Paragraph 43-48 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -SubTopic 20 -Section 45 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6892542&loc=d3e957-107759 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -SubTopic 20 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6360339&loc=d3e1436-107760 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 360 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6391110&loc=d3e2941-110230 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 360 -SubTopic 10 -Section 45 -Paragraph 5 -URI http://asc.fasb.org/extlink&oid=8077374&loc=d3e2443-110228 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -SubTopic 20 -Section 45 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=6892542&loc=d3e1012-107759 Reference 9: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -SubTopic 20 -Section 50 -Paragraph 5 -URI http://asc.fasb.org/extlink&oid=6360339&loc=d3e1510-107760 Reference 10: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -SubTopic 20 -Section 45 -Paragraph 5 -URI http://asc.fasb.org/extlink&oid=6892542&loc=d3e1020-107759 + Details
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