TBG DISCONTINUED OPERATIONS AND RESTRUCTURING

12 Months Ended

Jun. 30, 2021

Discontinued Operations and Disposal Groups [Abstract]

TBG DISCONTINUED OPERATIONS AND RESTRUCTURING

The Beautiful Group (TBG):

In October 2017, the Company sold substantially all of its mall-based salon business in North America, representing 858 salons, to The Beautiful Group (TBG), an affiliate of Regent, a private equity firm based in Los Angeles, California. 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 operating these locations as franchise locations until they were transferred to another franchisee in fiscal year 2020. The Company classified the results of its mall-based business and its International segment as discontinued operations for the periods TBG owned the salons in the Consolidated Statement of Operations.

In fiscal year 2019, TBG salons were operating at a loss and TBG struggled to pay the Company for the receivables related to the original purchase agreements as well as royalty and product receivables. The Company reserved $20.7 million of receivables in fiscal year 2019.

In the second quarter of fiscal year 2020, TBG transferred 207 of its North American mall-based salons to the Company. The 207 North American mall-based salons transferred were the salons that the Company was the guarantor of the lease obligation. The transfer of the 207 mall-based salons occurred on December 31, 2019, so the operational results of these mall-based salons are included in the Consolidated Statement of Operations beginning in the third quarter of fiscal year 2020. The assets acquired and liabilities assumed were not material to the Consolidated Balance Sheet.

As of June 30, 2021, prior to any mitigation efforts which may be available, the Company remains liable for up to approximately $9 million related to its mall-based salon lease commitments on the 43 salons that remain open, a $14 million reduction from June 30, 2020. The commitments are included in our lease liabilities.

The following summarizes the results of TBG related charges and TBG discontinued operations for the periods presented:


	Fiscal Years
	2021		2020		2019

	(Dollars in thousands)


TBG mall restructuring:
Accounts and notes receivable reserves	$	—	$	—	$	20,711
Other charges (1)	—		2,333		1,105
Total TBG mall restructuring	$	—	$	2,333	$	21,816

TBG discontinued operations:


(Income) loss from TBG discontinued operations, before taxes (2)	$	—	$	(1,063)	$	1,221
Income tax expense (benefit) from TBG discontinued operations (3)	—		231		(7,117)
Income from TBG discontinued operations, net of tax	$	—	$	(832)	$	(5,896)

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(1)In fiscal year 2020, the Company recorded professional fees associated with the transfer of the mall salons back to the Company as TBG mall restructuring charges.

(2)In fiscal years 2020 and 2019, the Company recorded professional fees related to the transaction, as well as insurance adjustments associated with the discontinued operations.

(3)Income taxes have been allocated to continuing and discontinued operations based on the methodology required by accounting for income taxes guidance.