XML 24 R8.htm IDEA: XBRL DOCUMENT
v3.10.0.1

REVENUE RECOGNITION: | 3 Months Ended
--- | ---
Sep. 30, 2018
Revenue from Contract with Customer [Abstract] |
REVENUE RECOGNITION: | REVENUE RECOGNITION: In May 2014, the FASB issued amended guidance for revenue recognition which provides a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. The Company adopted the amended revenue recognition guidance, ASC Topic 606, on July 1, 2018 using the full retrospective transition method which required the adjustment of each prior reporting period presented. The adjusted amounts include the application of a practical expedient that permitted the Company to reflect the aggregate effect of all modifications that occurred prior to fiscal year 2017 when identifying the satisfied and unsatisfied performance obligation, determining the transaction price and allocating the transaction price to the satisfied and unsatisfied performance obligation. As a result of adopting this new standard the Company is providing its updated revenue recognition policies. Revenue Recognition and Deferred Revenue: Revenue recognized at point of sale Company-owned salon revenues are recognized at the time when the services are provided. Product revenues are recognized when the guest receives and pays for the merchandise. Revenues from purchases made with gift cards are also recorded when the guest takes possession of the merchandise or services are provided. Gift cards issued by the Company are recorded as a liability (deferred revenue) upon sale and recognized as revenue upon redemption by the customer. Gift card breakage, the amount of gift cards which will not be redeemed, is recognized proportional to redemptions using estimates based on historical redemption patterns. Product sales by the Company to its franchisees are included within product revenues in the Condensed Consolidated Statement of Operations and recorded at the time product is delivered to the franchisee. Payment for franchisee product revenue is generally collected within 30 days of delivery. Revenue recognized over time Franchise revenues primarily include royalties, advertising fund fees, franchise fees and other fees. Royalty and advertising revenues represent sales-based royalties that are recognized in the period in which the sales occur. Generally, royalty and advertising revenue is billed and collected monthly in arrears. Advertising revenues and expenditures, which must be spent on marketing and related activities per the franchise agreement, are recorded on a gross basis within the Condensed Consolidated Statement of Operations. This increases both the gross amount of reported franchise revenue and site operating expense and generally has no impact on operating income and net income. Franchise fees are billed and received upon the signing of the franchise agreement. Upon adoption of the new revenue recognition guidance, recognition of these fees is deferred until the salon opening and is then recognized over the term of the franchise agreement, typically ten years. Under previous guidance the initial franchise fees were recognized in full upon salon opening. The following table disaggregates revenue by timing of revenue recognition and is reconciled to reportable segment revenues as follows:
|  | Three Months Ended September 30, 2018 |  | Three Months Ended September 30, 2017
|  | Company-owned |  | Franchise |  | Company-owned |  | Franchise
|  | (in thousands)
Revenue recognized at a point in time: |  |  |  |  |  |  |  |
Service |  | $ | 207,848 |  |  | $ | — |  |  | $ | 235,630 |  |  | $ | — |
Product |  | 41,962 |  |  | 15,629 |  |  | 53,236 |  |  | 7,722 |
Total revenue recognized at a point in time |  | $ | 249,810 |  |  | $ | 15,629 |  |  | $ | 288,866 |  |  | $ | 7,722 |
Revenue recognized over time: |  |  |  |  |  |  |  |
Royalty and other franchise fees |  | $ | — |  |  | $ | 14,420 |  |  | $ | — |  |  | $ | 12,150 |
Advertising fund fees |  | — |  |  | 7,976 |  |  | — |  |  | 6,726 |
Total revenue recognized over time |  | $ | — |  |  | $ | 22,396 |  |  | $ | — |  |  | $ | 18,876 |
Total revenue |  | $ | 249,810 |  |  | $ | 38,025 |  |  | $ | 288,866 |  |  | $ | 26,598 |
Information about receivables, broker fees and deferred revenue subject to the amended revenue recognition guidance is as follows:
|  | September 30, 2018 |  | June 30, 2018 |  | Balance Sheet Classification
|  | (in thousands) |  |
Receivables from contracts with customers, net |  | $ | 23,004 |  |  | $ | 21,504 |  |  | Accounts receivable, net
Broker fees |  | $ | 14,657 |  |  | $ | 14,002 |  |  | Other assets
Deferred revenue: |  |  |  |  |  |
Current |  |  |  |  |  |
Gift card liability |  | $ | 2,974 |  |  | $ | 3,320 |  |  | Accrued expenses
Deferred franchise fees unopened salons |  | 1,714 |  |  | 2,306 |  |  | Accrued expenses
Deferred franchise fees open salons |  | 3,221 |  |  | 3,030 |  |  | Accrued expenses
Total current deferred revenue |  | $ | 7,909 |  |  | $ | 8,656 |  |  |
Non-current |  |  |  |  |  |
Deferred franchise fees unopened salons |  | $ | 12,062 |  |  | $ | 11,161 |  |  | Other non-current liabilities
Deferred franchise fees open salons |  | 19,134 |  |  | 18,346 |  |  | Other non-current liabilities
Total non-current deferred revenue |  | $ | 31,196 |  |  | $ | 29,507 |  |  |
Receivables relate primarily to payments due for royalties, franchise fees, advertising fees, and sales of salon services and product. The receivable balance is presented net of an allowance for expected losses (i.e., doubtful accounts), primarily related to receivables from franchisees. As of September 30, 2018 and June 30, 2018, the balance in the allowance for doubtful accounts was $1.6 million and $1.2 million, respectively. Activity in the period was not significant. Broker fees are the costs associated with using external brokers to identify new franchisees. These fees are paid upon the signing of the franchise agreement and recognized as General and Administrative expense over the term of the agreement. The adoption of the amended revenue recognition guidance did not significantly change the Company's accounting for broker fees. The following table is a rollforward of the broker fee balance for the periods indicated (in thousands):
Balance as of June 30, 2018 |  | $ | 14,002 |
Additions |  | 1,285 |
Amortization |  | (628 | )
Write-offs |  | (2 | )
Balance as of September 30, 2018 |  | $ | 14,657 |
Deferred revenue includes the gift card liability, deferred franchise fees for unopened salons and open salons. Gift card revenue for the three months ended September 30, 2018 and 2017 was $1.0 million and $1.4 million, respectively. Deferred franchise fees related to open salons are generally recognized on a straight-line basis over the term of the franchise agreement. Franchise fee revenue for the three months ended September 30, 2018 and 2017 was $0.9 million and $0.6 million, respectively. Estimated revenue expected to the recognized in the future related to deferred franchise fees for open salons as of September 30, 2018 is as follows (in thousands):
Remainder of 2019 | $ | 2,391 |
2020 |  | 3,133 |
2021 |  | 3,044 |
2022 |  | 2,924 |
2023 |  | 2,748 |
Thereafter |  | 8,115 |
Total |  | $ | 22,355 |
The amended revenue recognition guidance impacted the Company's previously reported financial statements as follows: CONDENSED CONSOLIDATED BALANCE SHEET (Unaudited) June 30, 2018 (Dollars in thousands)
|  |  |  | Adjustments for new revenue recognition guidance |  |
|  | Previously |  | Franchise |  | Advertising |  | Gift Card |  |  |  |
|  | Reported |  | Fees |  | Funds |  | Breakage |  | Taxes |  | Adjusted
ASSETS |  |  |  |  |  |  |  |  |  |  |  |  |  |
Current assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash and cash equivalents |  | $ | 110,399 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 110,399 |
Receivables, net |  | 52,430 |  |  |  |  |  |  |  |  |  |  | 52,430 |
Inventories |  | 79,363 |  |  |  |  |  |  |  |  |  |  | 79,363 |
Other current assets |  | 47,867 |  |  |  |  |  |  |  |  |  |  |  | 47,867 |
Total current assets |  | 290,059 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 290,059 |
Property and equipment, net |  | 105,860 |  |  |  |  |  |  |  |  |  |  | 105,860 |
Goodwill |  | 412,643 |  |  |  |  |  |  |  |  |  |  | 412,643 |
Other intangibles, net |  | 10,557 |  |  |  |  |  |  |  |  |  |  | 10,557 |
Other assets |  | 37,616 |  |  |  |  |  |  |  |  |  |  | 37,616 |
Total assets |  | $ | 856,735 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 856,735 |
LIABILITIES AND SHAREHOLDERS’ EQUITY |  |  |  |  |  |  |  |  |  |  |  |  |
Current liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |
Accounts payable |  | $ | 57,738 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 57,738 |
Accrued expenses |  | 97,630 |  |  | 3,030 |  |  |  |  | 56 |  |  |  |  | 100,716 |
Total current liabilities |  | 155,368 |  |  | 3,030 |  |  | — |  |  | 56 |  |  | — |  |  | 158,454 |
Long-term debt |  | 90,000 |  |  |  |  |  |  |  |  |  |  | 90,000 |
Other noncurrent liabilities |  | 107,875 |  |  | 18,346 |  |  |  |  |  |  | (4,378 | ) |  | 121,843 |
Total liabilities |  | 353,243 |  |  | 21,376 |  |  | — |  |  | 56 |  |  | (4,378 | ) |  | 370,297 |
Commitments and contingencies (Note 7) |  |  |  |  |  |  |  |  |  |  |  |  |  |
Shareholders’ equity: |  |  |  |  |  |  |  |  |  |  |  |  |
Common stock |  | 2,263 |  |  |  |  |  |  |  |  |  |  | 2,263 |
Additional paid-in capital |  | 194,436 |  |  |  |  |  |  |  |  |  |  | 194,436 |
Accumulated other comprehensive income |  | 9,568 |  |  | 88 |  |  |  |  |  |  |  |  |  |  | 9,656 |
Retained earnings |  | 297,225 |  |  | (21,464 | ) |  |  |  | (56 | ) |  | 4,378 |  |  | 280,083 |
Total shareholders’ equity |  | 503,492 |  |  | (21,376 | ) |  | — |  |  | (56 | ) |  | 4,378 |  |  | 486,438 |
Total liabilities and shareholders’ equity |  | $ | 856,735 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 856,735 |
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited) For The Three Months Ended September 30, 2017 (Dollars and shares in thousands, except per share data amounts)
|  |  |  | Adjustments for new revenue recognition guidance |  |
|  | Previously |  | Franchise |  | Advertising |  | Gift Card |  |  |  |
|  | Reported |  | Fees |  | Funds |  | Breakage |  | Taxes |  | Adjusted
Revenues: |  |  |  |  |  |  |  |  |  |  |  |
Service |  | $ | 235,559 |  |  | $ | — |  |  | $ | — |  |  | $ | 71 |  |  | $ | — |  |  | $ | 235,630 |
Product |  | 60,940 |  |  |  |  |  |  | 18 |  |  |  |  | 60,958 |
Royalties and fees |  | 13,374 |  |  | (1,224 | ) |  | 6,726 |  |  |  |  |  |  | 18,876 |
|  | 309,873 |  |  | (1,224 | ) |  | 6,726 |  |  | 89 |  |  | — |  |  | 315,464 |
Operating expenses: |  |  |  |  |  |  |  |  |  |  |  |
Cost of service |  | 139,836 |  |  |  |  |  |  |  |  |  |  | 139,836 |
Cost of product |  | 30,162 |  |  |  |  |  |  |  |  |  |  | 30,162 |
Site operating expenses |  | 33,303 |  |  |  |  | 6,726 |  |  |  |  |  |  | 40,029 |
General and administrative |  | 35,166 |  |  |  |  |  |  |  |  |  |  | 35,166 |
Rent |  | 42,416 |  |  |  |  |  |  |  |  |  |  | 42,416 |
Depreciation and amortization |  | 12,255 |  |  |  |  |  |  |  |  |  |  | 12,255 |
Total operating expenses |  | 293,138 |  |  | — |  |  | 6,726 |  |  | — |  |  | — |  |  | 299,864 |
Operating income |  | 16,735 |  |  | (1,224 | ) |  | — |  |  | 89 |  |  | — |  |  | 15,600 |
Other (expense) income: |  |  |  |  |  |  |  |  |  |  |  |
Interest expense |  | (2,138 | ) |  |  |  |  |  |  |  |  |  | (2,138 | )
Gain from sale of salon assets to franchisees, net |  | 122 |  |  |  |  |  |  |  |  |  |  | 122 |
Interest income and other, net |  | 905 |  |  |  |  |  |  | (485 | ) |  |  |  | 420 |
Income from continuing operations before income taxes |  | 15,624 |  |  | (1,224 | ) |  | — |  |  | (396 | ) |  | — |  |  | 14,004 |
Income tax expense |  | (4,832 | ) |  |  |  |  |  |  |  | (727 | ) |  | (5,559 | )
Income from continuing operations |  | 10,792 |  |  | (1,224 | ) |  | — |  |  | (396 | ) |  | (727 | ) |  | 8,445 |
Loss from discontinued operations, net of taxes |  | (33,767 | ) |  |  |  |  |  |  |  |  |  | (33,767 | )
Net loss |  | $ | (22,975 | ) |  | $ | (1,224 | ) |  | $ | — |  |  | $ | (396 | ) |  | $ | (727 | ) |  | $ | (25,322 | )
Net loss per share: |  |  |  |  |  |  |  |  |  |  |  |
Basic: |  |  |  |  |  |  |  |  |  |  |  |
Income from continuing operations |  | $ | 0.23 |  |  |  |  |  |  |  |  |  |  |  | $ | 0.18 |
Loss from discontinued operations |  | (0.72 | ) |  |  |  |  |  |  |  |  |  |  | (0.72 | )
Net loss per share, basic (1) |  | $ | (0.49 | ) |  |  |  |  |  |  |  |  |  |  | $ | (0.54 | )
Diluted: |  |  |  |  |  |  |  |  |  |  |  |
Income from continuing operations |  | $ | 0.23 |  |  |  |  |  |  |  |  |  |  | $ | 0.18 |
Loss from discontinued operations |  | (0.72 | ) |  |  |  |  |  |  |  |  |  | (0.72 | )
Net loss per share, diluted (1) |  | $ | (0.49 | ) |  |  |  |  |  |  |  |  |  | $ | (0.54 | )
Weighted average common and common equivalent shares outstanding: |  |  |  |  |  |  |  |  |  |  |  |
Basic |  | 46,677 |  |  |  |  |  |  |  |  |  |  | 46,677 |
Diluted |  | 46,900 |  |  |  |  |  |  |  |  |  |  | 46,900 |
_____________________________________________________________________________ (1)Total is a recalculation; line items calculated individually may not sum to total due to rounding.

X
- References No definition available. + Details
Name: | us-gaap_RevenueFromContractWithCustomerAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure of revenue from contract with customer to transfer good or service and to transfer nonfinancial asset. Includes, but is not limited to, disaggregation of revenue, credit loss recognized from contract with customer, judgment and change in judgment related to contract with customer, and asset recognized from cost incurred to obtain or fulfill contract with customer. Excludes insurance and lease contracts. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 606 -URI http://asc.fasb.org/topic&trid=49130388 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -URI http://asc.fasb.org/topic&trid=2122369 + Details
Name: | us-gaap_RevenueFromContractWithCustomerTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration