XML 24 R15.htm IDEA: XBRL DOCUMENT
v3.23.3

LEASES | 3 Months Ended
--- | ---
Sep. 30, 2023
Leases [Abstract] |
LEASES | LEASES: At contract inception, the Company determines whether a contract is, or contains, a lease by determining whether it conveys the right to control the use of the identified asset for a period of time. If the contract provides the Company the right to substantially all of the economic benefits from the use of the identified asset and the right to direct the use of the identified asset, the Company considers it to be, or contain, a lease. The Company leases its company-owned salons and its corporate facilities under operating leases. The original terms range from one to 20 years with many leases renewable for an additional five to 10-year term at the option of the Company. In addition to the obligation to make fixed rental payments for the use of the salons, the Company also has variable lease payments that are based on sales levels. For most leases, the Company is required to pay real estate taxes and other occupancy expenses. Total rent includes the following:
|  |  |  | Three Months Ended September 30,
|  |  |  |  |  | 2023 |  | 2022
|  |  |  |  |  | (Dollars in thousands)
Office rent |  |  |  |  |  | $ | 825 |  |  | $ | 872 |
Lease termination (benefit) expense |  |  |  |  |  | (13) |  |  | 458 |
Lease liability benefit (1) |  |  |  |  |  | (128) |  |  | (602) |
Franchise salon rent (2) |  |  |  |  |  | (337) |  |  | (53) |
Company-owned salon rent |  |  |  |  |  | 750 |  |  | 1,078 |
Total |  |  |  |  |  | $ | 1,097 |  |  | $ | 1,753 |
_______________________________________________________________________________ (1)Upon termination of previously impaired leases, the Company derecognizes the corresponding ROU assets and lease liabilities, which results in a net gain. In addition, the Company recognizes a benefit from lease liabilities decreasing in excess of previously impaired ROU assets for ongoing leases that were previously impaired. (2)The credit in franchise salon rent is related to settlements with landlords for less than previously accrued. The Company leases salon premises in which the majority of its franchisees operate and has entered into corresponding sublease arrangements with franchisees. All lease-related costs are passed through to the franchisees. The Company records the rental payments due from franchisees as franchise rental income and the corresponding amounts owed to landlords as franchise rent expense on the unaudited Condensed Consolidated Statements of Operations. For the three months ended September 30, 2023 and 2022, franchise rental income and franchise rent expense were $24.7 and $30.3 million, respectively. These leases generally have lease terms of approximately five years. The Company expects to renew the SmartStyle® master lease and some leases for locations subleased to our franchisees upon expiration of those leases. Other leases are expected to be renewed by the franchisee upon expiration. All the Company's leases are operating leases. The lease liability is initially and subsequently measured at the present value of the unpaid lease payments at the lease commencement date, including one lease term option when the lease is expected to be renewed. The ROU asset is initially and subsequently measured throughout the lease term at the carrying amount of the lease liability, plus initial direct costs, less accrued lease payments and unamortized lease incentives received, if any. Expense for lease payments is recognized on a straight-line basis over the lease term, including the lease renewal option when the lease is expected to be renewed. Generally, the non-lease components, such as real estate taxes and other occupancy expenses, are separate from rent expense within the lease and are not included in the measurement of the lease liability because these charges are variable. The discount rate used to determine the present value of the lease payments is the Company's estimated collateralized incremental borrowing rate, based on the yield curve for the respective lease terms, as the interest rate implicit in the lease cannot generally be determined. The Company uses the portfolio approach in applying the discount rate based on the original lease term. The weighted average remaining lease term was 5.65 years and 5.52 years and the weighted average discount rate was 4.60% and 4.55% for all salon operating leases as of September 30, 2023 and June 30, 2023, respectively. As of September 30, 2023, future operating lease commitments, including one renewal option for leases expected to be renewed, to be paid and received by the Company were as follows (dollars in thousands):
Fiscal Year |  | Leases for Franchise Salons |  | Leases for Company-owned Salons |  | Corporate Leases |  | Total Operating Lease Payments |  | Sublease Income to be Received from Franchisees |  | Net Rent Commitments
Remainder of 2024 |  | $ | 68,629 |  |  | $ | 1,044 |  |  | $ | 978 |  |  | $ | 70,651 |  |  | $ | (68,629) |  |  | $ | 2,022 |
2025 |  | 77,882 |  |  | 674 |  |  | 1,334 |  |  | 79,890 |  |  | (77,882) |  |  | 2,008 |
2026 |  | 64,605 |  |  | 454 |  |  | 1,367 |  |  | 66,426 |  |  | (64,605) |  |  | 1,821 |
2027 |  | 54,830 |  |  | 229 |  |  | 1,401 |  |  | 56,460 |  |  | (54,830) |  |  | 1,630 |
2028 |  | 46,254 |  |  | 218 |  |  | 1,436 |  |  | 47,908 |  |  | (46,254) |  |  | 1,654 |
Thereafter |  | 70,459 |  |  | 56 |  |  | 2,981 |  |  | 73,496 |  |  | (70,459) |  |  | 3,037 |
Total future obligations |  | $ | 382,659 |  |  | $ | 2,675 |  |  | $ | 9,497 |  |  | $ | 394,831 |  |  | $ | (382,659) |  |  | $ | 12,172 |
Less amounts representing interest |  | 43,445 |  |  | 208 |  |  | 1,230 |  |  | 44,883 |  |  |  |  |
Present value of lease liability |  | $ | 339,214 |  |  | $ | 2,467 |  |  | $ | 8,267 |  |  | $ | 349,948 |  |  |  |  |
Less short-term lease liability |  | 75,885 |  |  | 1,132 |  |  | 989 |  |  | 78,006 |  |  |  |  |
Long-term lease liability |  | $ | 263,329 |  |  | $ | 1,335 |  |  | $ | 7,278 |  |  | $ | 271,942 |  |  |  |  |
LEASES | LEASES: At contract inception, the Company determines whether a contract is, or contains, a lease by determining whether it conveys the right to control the use of the identified asset for a period of time. If the contract provides the Company the right to substantially all of the economic benefits from the use of the identified asset and the right to direct the use of the identified asset, the Company considers it to be, or contain, a lease. The Company leases its company-owned salons and its corporate facilities under operating leases. The original terms range from one to 20 years with many leases renewable for an additional five to 10-year term at the option of the Company. In addition to the obligation to make fixed rental payments for the use of the salons, the Company also has variable lease payments that are based on sales levels. For most leases, the Company is required to pay real estate taxes and other occupancy expenses. Total rent includes the following:
|  |  |  | Three Months Ended September 30,
|  |  |  |  |  | 2023 |  | 2022
|  |  |  |  |  | (Dollars in thousands)
Office rent |  |  |  |  |  | $ | 825 |  |  | $ | 872 |
Lease termination (benefit) expense |  |  |  |  |  | (13) |  |  | 458 |
Lease liability benefit (1) |  |  |  |  |  | (128) |  |  | (602) |
Franchise salon rent (2) |  |  |  |  |  | (337) |  |  | (53) |
Company-owned salon rent |  |  |  |  |  | 750 |  |  | 1,078 |
Total |  |  |  |  |  | $ | 1,097 |  |  | $ | 1,753 |
_______________________________________________________________________________ (1)Upon termination of previously impaired leases, the Company derecognizes the corresponding ROU assets and lease liabilities, which results in a net gain. In addition, the Company recognizes a benefit from lease liabilities decreasing in excess of previously impaired ROU assets for ongoing leases that were previously impaired. (2)The credit in franchise salon rent is related to settlements with landlords for less than previously accrued. The Company leases salon premises in which the majority of its franchisees operate and has entered into corresponding sublease arrangements with franchisees. All lease-related costs are passed through to the franchisees. The Company records the rental payments due from franchisees as franchise rental income and the corresponding amounts owed to landlords as franchise rent expense on the unaudited Condensed Consolidated Statements of Operations. For the three months ended September 30, 2023 and 2022, franchise rental income and franchise rent expense were $24.7 and $30.3 million, respectively. These leases generally have lease terms of approximately five years. The Company expects to renew the SmartStyle® master lease and some leases for locations subleased to our franchisees upon expiration of those leases. Other leases are expected to be renewed by the franchisee upon expiration. All the Company's leases are operating leases. The lease liability is initially and subsequently measured at the present value of the unpaid lease payments at the lease commencement date, including one lease term option when the lease is expected to be renewed. The ROU asset is initially and subsequently measured throughout the lease term at the carrying amount of the lease liability, plus initial direct costs, less accrued lease payments and unamortized lease incentives received, if any. Expense for lease payments is recognized on a straight-line basis over the lease term, including the lease renewal option when the lease is expected to be renewed. Generally, the non-lease components, such as real estate taxes and other occupancy expenses, are separate from rent expense within the lease and are not included in the measurement of the lease liability because these charges are variable. The discount rate used to determine the present value of the lease payments is the Company's estimated collateralized incremental borrowing rate, based on the yield curve for the respective lease terms, as the interest rate implicit in the lease cannot generally be determined. The Company uses the portfolio approach in applying the discount rate based on the original lease term. The weighted average remaining lease term was 5.65 years and 5.52 years and the weighted average discount rate was 4.60% and 4.55% for all salon operating leases as of September 30, 2023 and June 30, 2023, respectively. As of September 30, 2023, future operating lease commitments, including one renewal option for leases expected to be renewed, to be paid and received by the Company were as follows (dollars in thousands):
Fiscal Year |  | Leases for Franchise Salons |  | Leases for Company-owned Salons |  | Corporate Leases |  | Total Operating Lease Payments |  | Sublease Income to be Received from Franchisees |  | Net Rent Commitments
Remainder of 2024 |  | $ | 68,629 |  |  | $ | 1,044 |  |  | $ | 978 |  |  | $ | 70,651 |  |  | $ | (68,629) |  |  | $ | 2,022 |
2025 |  | 77,882 |  |  | 674 |  |  | 1,334 |  |  | 79,890 |  |  | (77,882) |  |  | 2,008 |
2026 |  | 64,605 |  |  | 454 |  |  | 1,367 |  |  | 66,426 |  |  | (64,605) |  |  | 1,821 |
2027 |  | 54,830 |  |  | 229 |  |  | 1,401 |  |  | 56,460 |  |  | (54,830) |  |  | 1,630 |
2028 |  | 46,254 |  |  | 218 |  |  | 1,436 |  |  | 47,908 |  |  | (46,254) |  |  | 1,654 |
Thereafter |  | 70,459 |  |  | 56 |  |  | 2,981 |  |  | 73,496 |  |  | (70,459) |  |  | 3,037 |
Total future obligations |  | $ | 382,659 |  |  | $ | 2,675 |  |  | $ | 9,497 |  |  | $ | 394,831 |  |  | $ | (382,659) |  |  | $ | 12,172 |
Less amounts representing interest |  | 43,445 |  |  | 208 |  |  | 1,230 |  |  | 44,883 |  |  |  |  |
Present value of lease liability |  | $ | 339,214 |  |  | $ | 2,467 |  |  | $ | 8,267 |  |  | $ | 349,948 |  |  |  |  |
Less short-term lease liability |  | 75,885 |  |  | 1,132 |  |  | 989 |  |  | 78,006 |  |  |  |  |
Long-term lease liability |  | $ | 263,329 |  |  | $ | 1,335 |  |  | $ | 7,278 |  |  | $ | 271,942 |  |  |  |  |

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

X
- Definition The entire disclosure for operating leases of lessee. Includes, but is not limited to, description of operating lease and maturity analysis of operating lease liability. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 842 -SubTopic 20 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//842-20/tableOfContent + Details
Name: | us-gaap_LesseeOperatingLeasesTextBlock
Namespace Prefix: | us-gaap_
Data Type: | dtr-types:textBlockItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for lessor's operating leases. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 842 -SubTopic 30 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//842-30/tableOfContent + Details
Name: | us-gaap_OperatingLeasesOfLessorDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | dtr-types:textBlockItemType
Balance Type: | na
Period Type: | duration