DISCONTINUED OPERATIONS

12 Months Ended

Jun. 30, 2013

DISCONTINUED OPERATIONS

DISCONTINUED OPERATIONS

2. DISCONTINUED OPERATIONS

Hair Restoration Centers

        On April 9, 2013, the Company sold its Hair Club for Men and Women business (Hair Club), a provider of hair restoration services. The sale included the Company's 50.0 percent interest in Hair Club for Men, Ltd., which was previously accounted for under the equity method. The Company received $162.8 million, which represented the purchase price of $163.5 million adjusted for the preliminary working capital provision. The Company has since recorded a receivable of $2.0 million as of June 30, 2013 based upon the final working capital provision that increased the purchase price to approximately $165 million. The Company recorded an after-tax gain of $17.8 million upon the sale of Hair Club and incurred $5.4 million in professional and transaction fees during fiscal year 2013 associated with the sale.

        Hair Club has been presented as discontinued operations for all periods presented in the Consolidated Statement of Operations. The assets and liabilities 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 Consolidated Balance Sheet for all periods presented. Long-term assets held for sale as of June 30, 2012, included $74.4 million of goodwill related to Hair Club. In addition, there will be no significant continuing involvement by the Company in the operations of Hair Club after the disposal.

        The Company also reclassified professional fees of $2.5 million in fiscal year 2012 related to the sale of Hair Club, which were previously included in unallocated corporate costs, to discontinued operations.

        The following summarizes the results of operations of our discontinued Hair Club operations for the periods presented:

	Fiscal Years
	2013			2012			2011
	(Dollars in thousands)
Revenues	$	115,734		$	151,552		$	145,688
Income (loss) from discontinued operations, before income taxes		28,643			(65,114	)		18,304
Income tax (provision) benefit on discontinued operations		(4,242	)		849			(6,837	)
Equity in income of affiliated companies, net of tax		627			816			567
Income (loss) from discontinued operations, net of income taxes	$	25,028		$	(63,449	)	$	12,034

        Income taxes have been allocated to continuing and discontinued operations based on the methodology required by accounting for income taxes guidance. Depreciation and amortization ceased during fiscal year 2013 in accordance with accounting for discontinued operations. Hair Club depreciation and amortization expense for fiscal years 2012 and 2011 was $13.1 and $12.8 million, respectively. During the three months ended December 31, 2011, the Company performed an interim impairment test of goodwill related to Hair Club and recorded a $78.4 million impairment charge for the excess of the carrying value of goodwill over the implied fair value.

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. During the fiscal year 2012, the Company recorded a $1.1 million tax benefit in discontinued operations related to the release of tax reserves associated with the disposition of the Trade Secret.

        The Company has a note receivable agreement with the purchaser of Trade Secret. The Company recorded a valuation reserve of $31.2 million during fiscal year 2011. As of June 30, 2013 the carrying value of the note receivable continues to be fully reserved.