TBG RESTRUCTURING AND DISCONTINUED OPERATIONS

3 Months Ended

Sep. 30, 2019

Discontinued Operations and Disposal Groups [Abstract]

TBG RESTRUCTURING AND DISCONTINUED OPERATIONS

TBG RESTRUCTURING AND DISCONTINUED OPERATIONS:

In October 2017, the Company sold substantially all its mall-based salon business in North America, representing 858 salons, to The Beautiful Group (TBG),who operated these locations as franchise locations until June 2019. In addition, the Company entered into a share purchase agreement for substantially all of its International segment, representing approximately 250 salons in the UK, with TBG who operates these locations as franchise locations. In June 2019, the Company entered into a settlement agreement with TBG regarding the US and Canadian salons, which, among other things, substitutes the master franchise agreement for a license agreement. The Company classified the results of its mall-based business and its International segment as discontinued operations for all periods presented in the Condensed Consolidated Statement of Operations.

For the three months ended September 30, 2019 the Company recorded $1.5 million of TBG restructuring charges which relate to the Company assisting TBG with operating expenses to mitigate the risk of default associated with TBG's lease obligations where Regis has potential contingent liability. Included in discontinued operations for the three months ended September 30, 2019 and September 30, 2018 is insurance reserve benefits and professional fees, respectively. Other than the items presented in the Consolidated Statement of Cash Flows, there were no other significant non-cash operating activities or any significant non-cash investing activities related to discontinued operations for the three months ended September 30, 2019 and 2018.

The Company utilized the consolidation of variable interest entities guidance to determine whether or not TBG was a variable interest entity (VIE), and if so, whether the Company was the primary beneficiary of TBG. The Company concluded that TBG is a VIE, based on the fact that the equity investment at risk in TBG is not sufficient. The Company determined that it is not the primary beneficiary of TBG based on its exposure to the expected losses of TBG and as it is not the variable interest holder that is most closely associated within the relationship and the significance of the activities of TBG. The exposure to loss related to the Company's involvement with TBG is the guarantee of the operating leases. As of September 30, 2019, prior to any mitigation efforts which may be available, the Company remains liable for up to $35 million associated with remaining TBG salon lease commitments, should TBG not perform.