What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2021-02-03 compared with 2020-11-02 · 266 added, 124 removed, 453 unchanged (46% of the section changed)

3 unchanged sentences

(Dollars in thousands, except share data)

September 30,

2020 June 30,

25 unchanged sentences

Common stock, $ 0.05 par value;

issued and outstanding 35,665,783 and 35,625,716 common shares at September 30, 2020 and June 30, 2020, respectively

issued and outstanding 35,768,086 and 35,625,716 common shares at December 31, 2020 and June 30, 2020, respectively

Additional paid-in capital 22,076 22,011

7 unchanged sentences

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited)

For The Three Months Ended September 30, 2020 And 2019

For The Three And Six Months Ended December 31, 2020 And 2019

(Dollars and shares in thousands, except per share data amounts)

Three Months Ended September 30,

Three Months Ended December 31, Six Months Ended December 31,

2020 2019 2020 2019

Service $ 28,987 $ 101,805 $ 65,395 $ 243,746

37 unchanged sentences

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE LOSS (Unaudited)

For The Three Months Ended September 30, 2020 And 2019

For The Three And Six Months Ended December 31, 2020 And 2019

(Dollars in thousands)

Three Months Ended September 30,

Three Months Ended December 31, Six Months Ended December 31,

2020 2019 2020 2019

Net loss $ ( 32,879 ) $ ( 16,441 ) $ ( 68,144 ) $ ( 30,246 )

5 unchanged sentences

CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (Unaudited)

For the Three Months Ended September 30, 2020 And 2019

For The Three And Six Months Ended December 31, 2020 And 2019

(Dollars in thousands)

Three Months Ended September 30, 2020

Three Months Ended December 31, 2020

Common Stock Additional

4 unchanged sentences

Shares Amount

Balance, June 30, 2020 35,625,716 $ 1,781 $ 22,011 $ 7,449 $ 94,462 $ 125,703

Balance, September 30, 2020 35,665,783 $ 1,783 $ 20,596 $ 7,951 $ 59,211 $ 89,541

Net loss — — — — ( 32,879 ) ( 32,879 )

3 unchanged sentences

Minority interest — — — — ( 534 ) ( 534 )

Balance, December 31, 2020 35,768,086 $ 1,788 $ 22,076 $ 8,786 $ 25,798 $ 58,448

Three Months Ended December 31, 2019

Common Stock Additional

Capital Accumulated

Comprehensive

Income Retained

Earnings Total

Shares Amount

Balance, September 30, 2019 35,548,036 $ 1,777 $ 20,880 $ 8,939 $ 252,143 $ 283,739

Three Months Ended September 30, 2019

Net loss — — — — ( 16,441 ) ( 16,441 )

Foreign currency translation — — — 541 — 541

Exercise of SARs 1,500 — 28 — — 28

Stock-based compensation — — 332 — — 332

Net restricted stock activity 14,075 1 ( 10 ) — — ( 9 )

Minority interest — — — — ( 168 ) ( 168 )

Balance, December 31, 2019 35,563,611 $ 1,778 $ 21,230 $ 9,480 $ 235,534 $ 268,022

REGIS CORPORATION

CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (Unaudited)

For The Three And Six Months Ended December 31, 2020 And 2019 (Continued)

(Dollars in thousands)

Six Months Ended December 31, 2020

Common Stock Additional

7 unchanged sentences

Foreign currency translation — — — 1,337 — 1,337

Stock-based compensation — — 89 — — 89

Net restricted stock activity 142,370 7 ( 24 ) — — ( 17 )

Minority interest — — — — ( 520 ) ( 520 )

Balance, December 31, 2020 35,768,086 $ 1,788 $ 22,076 $ 8,786 $ 25,798 $ 58,448

Six Months Ended December 31, 2019

Common Stock Additional

Capital Accumulated

Comprehensive

Income Retained

Earnings Total

Shares Amount

Balance, June 30, 2019 36,869,249 $ 1,843 $ 47,152 $ 9,342 $ 265,908 $ 324,245

Net loss — — — — ( 30,246 ) ( 30,246 )

Foreign currency translation — — — 138 — 138

Stock repurchase program ( 1,504,000 ) ( 75 ) ( 26,281 ) — — ( 26,356 )

3 unchanged sentences

Minority interest — — — — ( 128 ) ( 128 )

Balance, September 30, 2019 35,548,036 $ 1,777 $ 20,880 $ 8,939 $ 252,143 $ 283,739

Balance, December 31, 2019 35,563,611 $ 1,778 $ 21,230 $ 9,480 $ 235,534 $ 268,022

_______________________________________________________________________________

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)

For The Three Months Ended September 30, 2020 And 2019

For The Six Months Ended December 31, 2020 And 2019

(Dollars in thousands)

Three Months Ended September 30,

Six Months Ended December 31,

Cash flows from operating activities:

Net loss $ ( 68,144 ) $ ( 30,246 )

Adjustments to reconcile net loss to net cash provided by operating activities:

Adjustments to reconcile net loss to cash used in operating activities:

Non-cash adjustments related to discontinued operations — ( 586 )

Depreciation and amortization 11,123 14,484

Salon asset impairments — 1,517

Salon asset impairment — 2,643

Long-lived asset impairment 8,984 —

Deferred income taxes ( 669 ) ( 6,380 )

Gain from sale of company headquarters, net — ( 2,513 )

Loss from sale of salon assets to franchisees, net 3,888 18,267

Stock-based compensation (Note 5) ( 1,225 ) 1,807

Stock-based compensation 89 2,139

Amortization of debt discount and financing costs 875 138

6 unchanged sentences

Costs associated with sale of salon assets to franchisees ( 222 ) ( 1,550 )

Net cash (used in) provided by investing activities ( 201 ) 32,027

Proceeds from company-owned life insurance policies 1,200 —

Proceeds from sale of company headquarters — 8,996

Net cash provided by investing activities 624 59,284

Cash flows from financing activities:

Repayments of revolving credit facility — ( 30,000 )

Repurchase of common stock — ( 28,246 )

Taxes paid for shares withheld ( 212 ) ( 1,809 )

Minority interest buyout ( 562 ) —

Distribution center lease payments ( 478 ) ( 480 )

11 unchanged sentences

BASIS OF PRESENTATION OF UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

The unaudited interim Condensed Consolidated Financial Statements of Regis Corporation (the "Company") as of September 30, 2020 and for the three months ended September 30, 2020 and 2019, reflect, in the opinion of management, all adjustments necessary to fairly state the consolidated financial position of the Company as of September 30, 2020 and its consolidated results of operations, comprehensive loss, changes in equity and cash flows for the interim periods.

The unaudited interim Condensed Consolidated Financial Statements of Regis Corporation (the "Company") as of December 31, 2020 and for the three and six months ended December 31, 2020 and 2019, reflect, in the opinion of management, all adjustments necessary to fairly state the consolidated financial position of the Company as of December 31, 2020 and its consolidated results of operations, comprehensive loss, changes in shareholders' equity and cash flows for the interim periods.

Adjustments consist only of normal recurring items, except for any discussed in the notes below.

The results of operations and cash flows for any interim period are not necessarily indicative of results of operations and cash flows for the full year.

The accompanying unaudited interim condensed consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (SEC).

The accompanying interim unaudited condensed consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (SEC).

Accordingly, they do not include all disclosures required by accounting principles generally accepted in the United States of America (GAAP).

The unaudited interim Condensed Consolidated Financial Statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended June 30, 2020 and other documents filed or furnished with the SEC during the current fiscal year.

Impact of the COVID-19 Pandemic on Business Operations:

During the period ended September 30, 2020, the global coronavirus pandemic ("COVID-19") had an adverse impact on operations, including the closure of all salons in California for the majority of the quarter due to government-mandated closures.

These restrictions were lifted in September and as of September 30, 2020, system-wide salons are approximately 95 % open.

Management is evaluating the future of the unopened salons, including potential closures.

The COVID-19 pandemic continues to impact salon guest visits leading to a significant reduction in revenue.

Impact of COVID-19 on Business Operations:

During the period ended December 31, 2020, the global coronavirus pandemic ("COVID-19") had an adverse impact on operations, including prolonged government mandated salon closures in California and Ontario, in addition to other U.S.

states and Canadian provinces.

As of January 25, 2021, salons in California were allowed to re-open.The COVID-19 pandemic continues to impact salon guest visits resulting in a significant reduction in revenue and traffic.

Due to the economic disruption caused by the COVID-19 pandemic, the Company faces a greater degree of uncertainty than normal in making judgments and estimates needed to apply the Company's significant accounting policies.

6 unchanged sentences

The fair value of the salon long-lived asset group is estimated using market participant methods based on the best information available.

The fair value of the right of use asset is estimated by determining what a market participant would pay over the life of the primary asset in the group, discounted back to September 30, 2020.

See Note 10 for further discussion related to the right of use asset impairment.

1 unchanged sentence

As the ongoing expected cash flows and carrying amounts of long-lived assets are assessed, these factors could cause the Company to realize material impairment charges.

A long-lived asset impairment charge, including right of use and salon property and equipment, of $ 5.8 million was recorded in the three months ended September 30, 2020, and is separately stated on the unaudited Condensed Consolidated Statement of Operations.

Of the total $ 5.8 million long-lived asset impairment charge, $ 4.6 million was allocated to the right of use asset and $ 1.2 million was allocated to salon property and equipment.

A long-lived salon property and equipment asset impairment charge of $ 1.5 million was recorded during the three months ended September 30, 2019, and is recorded in Depreciation and Amortization in the unaudited Condensed Consolidated Statement of Operations.

As of September 30, 2020 and June 30, 2020, the Franchise reporting unit had $ 227.9 and $ 227.5 million, respectively, of goodwill.

Long-lived asset impairment charges, including right of use and salon property and equipment, of $ 3.2 and $ 9.0 million were recorded in the three and six months ended December 31, 2020, respectively, and is separately stated on the unaudited Condensed Consolidated Statement of Operations.

Of the total long-lived asset impairment charges, $ 1.5 and $ 6.0 million, respectively, were allocated to the right of use asset and $ 1.7 and $ 3.0 million, respectively, were allocated to salon property and equipment.

Long-lived salon property and equipment asset impairment charges of $ 1.1 and $ 2.6 million were recorded during the three and six months ended December 31, 2019, respectively, and are recorded in Depreciation and amortization in the unaudited Condensed Consolidated Statement of Operations.

As of December 31, 2020 and June 30, 2020, the Franchise reporting unit had $ 229.0 and $ 227.5 million, respectively, of goodwill.

For further information, see Note 9 of the interim unaudited Condensed Consolidated Financial Statements.

The Company assesses goodwill impairment on an annual basis, during the Company's fourth fiscal quarter, and between annual assessments if an event occurs, or circumstances change, that would more likely than not reduce the fair value of a reporting unit below its carrying amount.

An interim impairment analysis was not required in the three months ended September 30, 2020.

An interim impairment analysis was not required in the three months ended December 31, 2020.

The Company performs its annual impairment assessment as of April 30.

3 unchanged sentences

For the goodwill impairment analysis, management utilized a combination of both a discounted cash flows approach and a market approach.

The key assumptions utilized in the analysis were the number of salons to be sold to franchisees and using the discount rate.

The key assumptions utilized in the analysis were the number of salons to be sold to franchisees and the discount rate.

If a future triggering event occurs or if during the Company's annual impairment assessment the fair value of the Franchise reporting unit has decreased significantly, it may result in a non-cash impairment charge to reduce the carrying value of goodwill.

Depreciation:

Depreciation expense in the three months ended September 30, 2020 includes $ 1.3 million of asset retirement obligations, which are cash expenses.

Additionally, in the three month period ended September 30, 2020, the Company recognized a $ 1.0 million incremental charge in depreciation expense that related to a prior period.

Management evaluated the effect of this out-of-period adjustment on the three months ended September 30, 2020, as well as the previous period in which the charge should have been recognized and concluded for both quantitative and qualitative reasons that the adjustment is not material to the periods affected.

Depreciation expense in the three and six months ended December 31, 2020 includes $ 1.3 and $ 2.6 million of asset retirement obligations, which are cash expenses.

Minority Interest:

In December 2020, the Company purchased its non-controlling interest in Roosters from the minority shareholders.

The Company paid $ 0.6 million to obtain 100 % ownership.

The payment is recorded in cash used in financing activities on the unaudited Condensed Consolidated Statement of Cash Flows.

REVENUE RECOGNITION:

16 unchanged sentences

Recognition of these fees is deferred until the salon opening and is then recognized over the term of the franchise agreement, typically ten years .

Franchise rental income is a result of the Company signing the lease on behalf of franchisees and entering into a sublease arrangement with the franchisee.

Franchise rental income is a result of the Company signing leases on behalf of franchisees and entering into a sublease arrangement with the franchisee.

The Company recognizes franchise rental income and expense when it is due to the landlord.

The following table disaggregates revenue by timing of revenue recognition and is reconciled to reportable segment revenues as follows:

Three Months Ended September 30, 2020 Three Months Ended September 30, 2019

Three Months Ended December 31, 2020 Three Months Ended December 31, 2019

Franchise Company-owned Franchise Company-owned

10 unchanged sentences

Total revenue $ 66,423 $ 37,897 $ 79,841 $ 128,924

Information about receivables, broker fees and deferred revenue subject to the revenue recognition guidance is as follows:

September 30,

Six Months Ended December 31, 2020 Six Months Ended December 31, 2019

Franchise Company-owned Franchise Company-owned

(Dollars in thousands)

Revenue recognized at a point in time:

Service $ — $ 65,395 $ — $ 243,746

Product 27,978 19,917 29,969 59,670

Total revenue recognized at a point in time $ 27,978 $ 85,312 $ 29,969 $ 303,416

Revenue recognized over time:

Royalty and other franchise fees $ 28,634 $ — $ 36,235 $ —

Advertising fund fees 9,224 — 21,129 —

Franchise rental income 64,568 — 65,054 —

Total revenue recognized over time 102,426 — 122,418 —

Total revenue $ 130,404 $ 85,312 $ 152,387 $ 303,416

Information about receivables, broker fees and deferred revenue subject to the amended revenue recognition guidance is as follows:

2020 June 30,

13 unchanged sentences

The receivables balance is presented net of an allowance for expected losses (i.e., doubtful accounts), primarily related to receivables from franchisees.

The following table is a rollforward of the allowance for doubtful accounts for the period:

The following table is a rollforward of the allowance for doubtful accounts for the period (in thousands):

Balance as of June 30, 2020 $ 6,899

2 unchanged sentences

Write-offs ( 632 )

Balance as of September 30, 2020 $ 9,403

Balance as of December 31, 2020 $ 8,747

_______________________________________________________________________________

(1) The provision for doubtful accounts is recognized as General and administrative expense in the unaudited Condensed Consolidated Statement of Operations.

(2) The provision for franchisee rent is recognized as Rent expense in the unaudited Condensed Consolidated Statement of Operations.

(2) The provision for franchisee rent is recognized as Rent in the unaudited Condensed Consolidated Statement of Operations.

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 following table is a rollforward of the broker fee balance for the period:

The following table is a rollforward of the broker fee balance for the periods indicated (in thousands):

Balance as of June 30, 2020 $ 20,516

1 unchanged sentence

Amortization ( 1,565 )

Balance as of September 30, 2020 $ 20,442

Write-offs ( 24 )

Balance as of December 31, 2020 $ 20,345

Deferred revenue includes the gift card liability and deferred franchise fees for unopened salons and open salons.

Gift card revenue for the three months ended September 30, 2020 and 2019 was $ 0.3 and $ 0.8 million, respectively.

Gift card revenue for the three months ended December 31, 2020 and 2019 was $ 0.1 and $ 0.7 million, respectively, and for the six months ended December 31, 2020 and 2019 was $ 0.4 and $ 1.5 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, 2020 and 2019 was $ 1.6 and $ 1.2 million, respectively.

Estimated revenue expected to be recognized in the future related to deferred franchise fees for open salons as of September 30, 2020 is as follows (in thousands):

Franchise fee revenue for the three months ended December 31, 2020 and 2019 was $ 1.6 and $ 1.3 million, respectively, and for the six months ended December 31, 2020 and 2019 was $ 3.3 and $ 2.4 million, respectively.

Estimated revenue expected to be recognized in the future related to deferred franchise fees for open salons as of December 31, 2020 is as follows (in thousands):

Remainder of 2021 $ 2,959

2 unchanged sentences

TBG RESTRUCTURING AND DISCONTINUED OPERATIONS:

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), who operated these locations as franchise locations until June 2019.

In June 2019, the Company entered into a settlement agreement with TBG regarding the North American salons, which, among other things, substituted the master franchise agreement for a license agreement.

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).

The Company classified the results of its mall-based business as discontinued operations in the unaudited Condensed Consolidated Statement of Operations.

Included in discontinued operations in fiscal year 2020 are adjustments to actuarial assumptions related to the discontinued operations.

Other than the items presented in the unaudited Consolidated Statement of Cash Flows, there were no other significant non-cash operating activities or non-cash investing activities related to discontinued operations for the three months ended September 30, 2020 and 2019.

For the three months ended September 30, 2019 the Company recorded $ 1.5 million of TBG restructuring charges that relate to the Company assisting TBG with operating expenses to mitigate the risk of default associated with TBG's lease obligations.

For the three and six months ended December 31, 2019, the Company recorded $ 0.7 and $ 2.2 million of professional fees and restructuring charges related to the Company assisting TBG with operating expenses to mitigate the risk of default associated with TBG's lease obligations.

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.

In the United States, the transfer was consummated in connection with an assignment for the benefit of TBG US's creditors.

The transfer of the 207 mall-based salons occurred on December 31, 2019, and the operational results of these mall-based salons are included in the unaudited Condensed Consolidated Statement of Operations.

The assets acquired and liabilities assumed were not material to the unaudited Condensed Consolidated Balance Sheet.

As of September 30, 2020, prior to any mitigation efforts which may be available, the Company remains liable for up to approximately $ 18 million related to its mall-based salon lease commitments on the 104 salons that remain open, which is a $ 5 million reduction from June 30, 2020.

As of December 31, 2020, prior to any mitigation efforts which may be available, the Company remains liable for up to approximately $ 14 million related to its mall-based salon lease commitments on the 77 salons that remain open, a $ 9 million reduction from June 30, 2020.

The commitments are included in our lease liabilities.

EARNINGS PER SHARE:

The Company’s basic earnings per share is calculated as net loss divided by weighted average common shares outstanding, excluding unvested outstanding restricted stock awards (RSAs), restricted stock units (RSUs) and stock-settled performance units (PSUs).

The Company’s basic earnings per share is calculated as net loss divided by weighted average common shares outstanding, excluding unvested outstanding stock options (SOs), restricted stock units (RSUs) and stock-settled performance units (PSUs).

The Company’s diluted earnings per share is calculated as net loss divided by weighted average common shares and common share equivalents outstanding, which includes shares issued under the Company’s stock-based compensation plans.

Stock-based awards with exercise prices greater than the average market price of the Company’s common stock are excluded from the computation of diluted earnings per share.

For the three months ended September 30, 2020 and 2019, there were 310,557 and 902,478 common stock equivalents of dilutive common stock, respectively, excluded in the diluted earnings per share calculations due to the net loss from continuing operations.

The computation of weighted average shares outstanding, assuming dilution, excluded 1,834,999 and 391,531 of stock-based awards during the three months ended September 30, 2020 and 2019, respectively, as they were not dilutive under the treasury stock method.

For the three and six months ended December 31, 2020, there were 421,687 and 432,774 , respectively, and for the three and six months ended December 31, 2019 there were 1,322,308 and 1,338,634 , respectively, common stock equivalents of dilutive common stock excluded in the diluted earnings per share calculations due to the net loss from continuing operations.

The computation of weighted average shares outstanding, assuming dilution, excluded 3,041,962 and 66,151 of stock-based awards during the three months ended December 31, 2020 and 2019, respectively, and 1,990,449 and 77,514 of stock-based awards during the six months ended December 31, 2020 and 2019, respectively, as they were not dilutive under the treasury stock method.

SHAREHOLDERS’ EQUITY:

Stock-Based Employee Compensation:

During the three months ended September 30, 2020, the Company granted various equity awards including restricted stock units (RSUs) and performance-based restricted stock units (PSUs).

During the three and six months ended December 31, 2020, the Company granted various equity awards including RSUs, PSUs and SOs.

A summary of equity awards granted is as follows:

For the Three Months Ended September 30, 2020

Three Months Ended December 31, 2020 Six Months Ended December 31, 2020

Restricted stock units 597,888 844,522

Performance-based restricted stock units — 62,290

The RSUs granted to employees during the three months ended September 30, 2020 vest in equal amounts over a three-year period subsequent to the grant date, cliff vest after a three-year period or cliff vest after a five-year period subsequent to the grant date.

Stock option units 1,458,680 1,458,680

The RSUs granted to employees during the three and six months ended December 31, 2020 vest in equal amounts over a three-year period subsequent to the grant date, cliff vest after a one-year period, cliff vest after a three-year period or cliff vest after a five-year period subsequent to the grant date.

The CEO, who was appointed in October 2020, was granted 0.4 million "sign-on" RSUs that vest pro-rated over one year .

The PSUs granted to employees have a three-year performance period ending June 30, 2023 linked to the Company's stock price reaching a specified volume weighted average closing price for a 50-day period that ends on June 30, 2023.

The PSUs granted have a maximum vesting percentage of 200 % based on the level of performance achieved for the respective award.

Total compensation cost for stock-based payment arrangements totaling $( 1.2 ) and $ 1.8 million for the three months ended September 30, 2020 and 2019, respectively, was recorded within General and administrative expense on the unaudited Condensed Consolidated Statement of Operations.

The benefit recorded in the three months ended September 30, 2020 was due to the forfeiture of awards related to the departure of the Company's CEO, resulting in an expense reversal of $ 2.4 million.

The SOs granted during the three and six months ended December 31, 2020 were granted in connection with the appointment of the Company's CEO and consists of options to purchase shares of the Company's common stock.

The SOs are subject to both a four-year service-based vesting condition and a performance-based vesting condition.

Additionally, 0.4 million SOs are matching options that vest on the fourth anniversary of employment up to the number of RSUs the CEO still holds of the "sign-on" RSUs.

Total compensation cost for stock-based payment arrangements totaling $ 1.3 and $ 0.3 million for the three months ended December 31, 2020 and 2019, respectively, and $ 0.1 and $ 2.1 million for the six months ended December 31, 2020 and 2019, respectively, was recorded within General and administrative expense on the unaudited Condensed Consolidated Statement of Operations.

In the six months ended December 31, 2020 stock compensation includes a $ 2.4 million benefit from the forfeiture of awards related to the departure of the Company's former CEO.

Share Repurchases:

During the three months ended September 30, 2020, the Company did no t repurchase shares under the previously approved stock repurchase program.

During the three months ended September 30, 2019, the Company repurchased 1.5 million shares for $ 26.4 million under the previously approved stock repurchase program.

At September 30, 2020, $ 54.6 million remains outstanding under the approved stock repurchase program.

During the six months ended December 31, 2020, the Company did no t repurchase shares under the previously approved stock repurchase program.

During the six months ended December 31, 2019, the Company repurchased 1.5 million shares for $ 26.4 million under a previously approved stock repurchase program.

At December 31, 2020, $ 54.6 million remains outstanding under the approved stock repurchase program.

INCOME TAXES:

A summary of income tax benefits and corresponding effective tax rates is as follows:

For the Three Months Ended September 30,

Three Months Ended December 31, Six Months Ended December 31,

2020 2019 2020 2019

(Dollars in thousands)

1 unchanged sentence

Effective tax rate 1.2 % 10.5 % 1.5 % 13.5 %

The recorded tax provision and effective tax rate for the three months ended September 30, 2020 were different than what would normally be expected primarily due to the impact of the deferred tax valuation allowance.

The recorded tax provision and effective tax rate for the three months ended September 30, 2019 were different than what would normally be expected primarily due to the impact of the deferred tax valuation allowance and global intangible low-taxed income ("GILTI").

The recorded tax provisions and effective tax rates for the three and six months ended December 31, 2020 were different than what would normally be expected primarily due to the impact of the deferred tax valuation allowance.

The recorded tax provisions and effective tax rates for the three and six months ended December 31, 2019 were different than what would normally be expected primarily due to the impact of the deferred tax valuation allowance and global intangible low-taxed income ("GILTI").

The Company is no longer subject to IRS examinations for years before 2014.

10 unchanged sentences

Barring successful objection from plaintiffs’ attorneys to the first class action, the second case will be subsumed into the first case’s settlement.

As of June 30, 2020 and September 30, 2020, $ 2.1 million was included within accrued expenses on the unaudited Condensed Consolidated Balance Sheet related to these class action lawsuits.

As of June 30, 2020 and December 31, 2020, $ 2.1 million was included within accrued expenses on the unaudited Condensed Consolidated Balance Sheet related to these class action lawsuits.

In addition, our existing point of sale system supplier has challenged the development of certain parts of our technology systems in litigation brought in the Northern District of California, case No.

6 unchanged sentences

The table below reconciles the cash and cash equivalents balances and restricted cash balances, recorded in other current assets from the unaudited Condensed Consolidated Balance Sheet to the amount of cash, cash equivalents and restricted cash reported on the unaudited Condensed Consolidated Statement of Cash flows:

September 30,

2020 June 30,

10 unchanged sentences

Translation rate adjustments 1,493

Goodwill, net at September 30, 2020 $ 227,896

Goodwill, net at December 31, 2020 $ 228,950

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.

1 unchanged sentence

The Company leases its company-owned salons and some of its corporate facilities under operating leases.

The original terms of the salon leases range from 1 to 20 years with many leases renewable for an additional 5 to 10 year term at the option of the Company.

The original terms of the salon leases range from 1 to 20 years with many leases renewable for an additional 5 to 10 year terms 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 expense includes the following:

For the Three Months Ended September 30,

Total Rent includes the following:

Three Months Ended December 31, Six Months Ended December 31,

2020 2019 2020 2019

(Dollars in thousands)

8 unchanged sentences

_______________________________________________________________________________

(1) During the three months ended September 30, 2020 and 2019, the Company terminated the leases for 131 and 37 company-owned salons, respectively, before the lease end dates.

Lease termination fees include $ 3.1 million of future lease payments for underperforming salons that management closed without a termination agreement.

Lease termination fees also includes $ 2.5 million of early termination payments to close salons before lease end date and relieve the Company of future lease obligations.

The early termination payments will save the Company approximately $ 2 million in future minimum rent plus associated real estate taxes and other lease expenses.

(2) Upon termination of previously impaired leases, the Company derecognized ROU assets of $ 7.1 million and lease liabilities of $ 10.3 million that resulted in a net gain of $ 3.2 million.

(1) During the three and six months ended December 31, 2020, the Company terminated the leases for 98 and 229 company-owned salons, respectively, before the lease end dates.

During the three and six months ended December 31, 2019, the Company terminated the leases for 20 and 57 company-owned salons, respectively, before the lease end dates.

For the three and six months ended December 31, 2020, lease termination fees include $ 2.2 and $ 4.6 million, respectively, of early termination payments to close salons before lease end date and relieve the Company of future lease obligations.

For the three and six months ended December 31, 2020, lease termination fees also include $( 1.1 ) and $ 2.0 million, respectively, of adjustments to accrued future lease payments for underperforming salons.

The early termination payments made in the six months ended December 31, 2020 will save the Company approximately $ 4.3 million in future minimum rent plus associated real estate taxes and other lease expenses.

(2) For the three and six months ended December 31, 2020, upon termination of previously impaired leases, the Company derecognized ROU assets of $ 3.0 and $ 10.1 million, respectively, and lease liabilities of $ 4.2 and $ 14.5 million, respectively, that resulted in a net gain of $ 1.2 and $ 4.4 million, respectively.

In addition, the Company recognized a benefit from lease liabilities decreasing in excess of previously impaired ROU assets.

The benefit recognized was $ 2.9 million and $ 0 in the three months ended September 30, 2020 and 2019, respectively.

The benefit recognized was $ 1.0 and $ 3.9 million in the three and six months ended December 31, 2020, respectively.

The Company leases salon premises in which the majority of its franchisees operate and has entered into corresponding sublease arrangements with franchisees.

1 unchanged sentence

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 Statement of Operations.

For the three months ended September 30, 2020 and 2019, franchise rental income and franchise rent expense were $ 32.3 and $ 31.4 million, respectively.

These leases, generally with terms of approximately 5 years, are expected to be renewed on expiration.

For the three months ended December 31, 2020 and 2019, franchise rental income and franchise rent expense were $ 32.3 and $ 33.6 million, respectively.

For the six months ended December 31, 2020 and 2019, franchise rental income and franchise rent expense was $ 64.6 and $ 65.1 million.

These leases generally have lease terms of approximately 5 years.

Excluding underperforming salons we plan to close, leases are assumed to be renewed upon expiration.

The Company expects to renew SmartStyle and Supercuts franchise leases upon expiration.

Other leases are expected to be renewed by the franchisee upon expiration.

This represents a Board approved change in estimate, which was intended to reduce lease exposure.

The change in estimate resulted in a decrease to lease liabilities and right of use assets of $ 72.9 million, with no impact to net income.

For franchise and company-owned salon 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 Right of Use (ROU) asset is initially and subsequently measured throughout the lease term at the carrying amount of the lease liability, plus initial direct costs, less any accrued lease payments and unamortized lease incentives received, if any.

The Company's consolidated ROU asset balance was $ 728.5 and $ 786.2 million as of September 30, 2020 and June 30, 2020, respectively.

The Company's consolidated ROU asset balance was $ 637.1 and $ 786.2 million as of December 31, 2020 and June 30, 2020, respectively.

For leases classified as operating leases, 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.

1 unchanged sentence

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 original lease term.

The weighted average remaining lease term was 6.85 and 6.87 years and the weighted-average discount rate was 3.98 % and 3.95 % for all salon operating leases as of September 30, 2020 and June 30, 2020, respectively.

The Company uses the portfolio approach in applying the discount rate based on the original lease term.

The weighted average remaining lease term was 6.50 and 6.87 years and the weighted average discount rate was 4.03 % and 3.95 % for all salon operating leases as of December 31, 2020 and June 30, 2020, respectively.

A lessee’s ROU asset is subject to the same asset impairment guidance in ASC 360, Property, Plant, and Equipment, applied to other elements of property, plant, and equipment.

The Company has identified its asset groups at the individual salon level as this represents the lowest level that identifiable cash flows are largely independent of the cash flows of other groups of assets and liabilities.

As a result of the COVID-19 pandemic and the related salon closures that occurred during the fourth fiscal quarter of 2020, the Company determined that a triggering event had occurred pursuant to ASC 360-10-35-21 given that there had been a significant adverse change in the business climate that could affect the value of its salon long-lived asset groups combined with a significant adverse change in the extent or manner in which the salon long-lived groups were being used.

Poor salon performance, primarily due to the COVID-19 pandemic, resulted in an ASC 360-10-35-21 triggering event.

As a result, management assessed all salon asset groups, which included the related ROU assets, for impairment in accordance with ASC 360.

3 unchanged sentences

The period of time used to determine the estimates of the future cash flows for the recoverability test was based on the remaining useful life of the primary asset of the group, which was the ROU asset in all cases.

Step two of the long-lived asset impairment test requires that the fair value of the asset group be determined when calculating the amount of any impairment loss.

Step two of the long-lived asset impairment test requires that the fair value of the asset group be estimated when determining the amount of any impairment loss.

For the salon asset groups that failed the recoverability test, an impairment loss was measured as the amount by which the carrying amount of the asset group exceeds its fair value.

1 unchanged sentence

To determine the fair value of the salon asset groups, the Company utilized market-participant assumptions rather than the Company’s own assumptions about how it intends to use the asset group.

The fair value of the salon long-lived asset group is estimated using market participant methods based on the best information available.

The significant judgments and assumptions utilized to determine the fair value of the salon asset groups include;

the market rent of comparable properties based on recently negotiated leases as applicable, the asset group’s projected sales for fiscal years 2021 through 2023 for properties with no recently negotiated leases, and a discount rate.

The Company engaged a third-party valuation specialist to assist with the research related to inputs used in their determination of the fair value of the ROU asset, which included providing information related to significant inputs and assumptions utilized in the measurement of the impairment loss.

In the fourth quarter of fiscal year 2020, the Company recorded a total long-lived asset impairment charge of $ 22.6 million in the Consolidated Statement of Operations, including $ 17.4 million related to the right of use asset in the salon asset groups.

The impairment loss for each salon asset group that was recognized was allocated among the long-lived assets of the group on a pro-rata basis using their relative carrying amounts.

Additionally, the impairment losses did not reduce the carrying amount of an individual asset below its fair value, including for the ROU assets in the salon asset groups.

the market rent of comparable properties based on recently negotiated leases as applicable, the asset group’s projected sales for properties with no recently negotiated leases, and a discount rate.

Assessing the long-lived assets for impairment requires management to make assumptions and to apply judgment which can be affected by economic conditions and other factors that can be difficult to predict.

The Company does not believe there is a reasonable likelihood that there will be a material change in the estimates or assumptions it uses to calculate impairment losses for its long-lived asset, including its ROU assets.

However, the ultimate severity and longevity of the COVID-19 pandemic is unknown and therefore, if actual results are not consistent with the estimates and assumptions used in the calculations, the Company may be exposed to future impairment losses that could be material.

In the three months ended September 30, 2020, the Company recognized a long-lived impairment charge of $ 5.8 million, which included $ 4.6 million related to the right of use assets, in the unaudited Condensed Consolidated Statement of Operations.

The impairments recorded for the three months ended September 30, 2020 were primarily the result of triggering events identified on certain underperforming salons, salons that were identified in the quarter to close, and certain salons where franchisees are unable to fulfill their rent obligations.

As of September 30, 2020, future operating lease commitments, including one renewal option when leases are expected to be renewed, to be paid and received by the Company were as follows:

The ultimate severity and longevity of the COVID-19 pandemic is unknown and therefore, if actual results are not consistent with the estimates and assumptions used in the calculations, the Company may be exposed to future impairment losses that could be material.

In the three and six months ended December 31, 2020, the Company recognized a long-lived impairment charge of $ 3.2 and $ 9.0 million, respectively, which included $ 1.5 and $ 6.0 million, respectively, related to the right of use assets, in the unaudited Condensed Consolidated Statement of Operations.

The impairments recorded for the three and six months ended December 31, 2020 were primarily the result of triggering events identified on certain underperforming salons, salons that were identified to close in the year, and certain salons where franchisees are unable to fulfill their rent obligations.

As of December 31, 2020, 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:

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

10 unchanged sentences

Long-term lease liabilities $ 463,084 $ 66,659 $ 11,187 $ 540,930

Excluding the option period, the Company's operating lease commitments as of September 30, 2020 were approximately $ 360 and $ 100 million for franchise salons and company-owned salons, respectively.

FINANCING ARRANGEMENTS:

1 unchanged sentence

Revolving Credit Facility

Maturity Date September 30,

2020 September 30,

Maturity Date December 31,

2020 December 31,

2020 June 30,

1 unchanged sentence

Revolving credit facility 2023 5.00 % $ 177,500 $ 177,500

At September 30, 2020, cash and cash equivalents totaled $ 85.0 million.

As of September 30, 2020, the Company has $ 177.5 million of outstanding borrowings under a $ 295.0 million revolving credit facility.

At September 30, 2020, the Company has outstanding standby letters of credit under the revolving credit facility of $ 18.7 million, primarily related to the Company's self-insurance program.

The unused available credit under the facility was $ 98.8 million as of September 30, 2020.

The Company's liquidity, which includes the unused available balance under the credit facility and unrestricted cash and cash equivalents, totaled $ 183.8 million as of September 30, 2020.

At December 31, 2020, cash and cash equivalents totaled $ 50.9 million.

As of December 31, 2020, the Company has $ 177.5 million of outstanding borrowings under a $ 295.0 million revolving credit facility.

At December 31, 2020, the Company has outstanding standby letters of credit under the revolving credit facility of $ 18.7 million, primarily related to the Company's self-insurance program.

The unused available credit under the facility was $ 98.8 million as of December 31, 2020.

The Company's liquidity, which includes the unused available balance under the credit facility and unrestricted cash and cash equivalents, totaled $ 149.7 million as of December 31, 2020.

The revolving credit facility has a minimum liquidity covenant of $ 75.0 million.

As of September 30, 2020, the Company had cash, cash equivalents and restricted cash of $ 93.5 million and current liabilities of $ 236.3 million.

The Company was is in compliance with all covenants and other requirements of the financing arrangements as of September 30, 2020 and believes it will continue to be in compliance for at least one year from our filing date.

Sale and Leasebacks

As of December 31, 2020, the Company had cash, cash equivalents and restricted cash of $ 56.7 million and current liabilities of $ 213.8 million.

The Company is in compliance with all covenants and other requirements of the financing arrangements as of December 31, 2020 and believes it will continue to be in compliance for at least one year from our filing date.

Sale and Leaseback Transaction

The Company’s long-term financing liabilities consists of the following:

Maturity Date Interest Rate September 30,

Maturity Date Interest Rate December 31,

2020 June 30,

7 unchanged sentences

This financial liability is reduced based on the rental payments made under the lease that are allocated between principal and interest.

As of September 30, 2020, the current portion of the Company’s lease liability was $ 1.0 million, which was recorded in accrued expenses on the unaudited Condensed Consolidated Balance Sheet.

The weighted average remaining lease term was 13.4 years and the weighted-average discount rate was 3.46 % for financing leases as of September 30, 2020.

As of September 30, 2020, future lease payments due are as follows:

As of December 31, 2020, the current portion of the Company’s lease liability was $ 1.0 million, which was recorded in accrued expenses on the unaudited Condensed Consolidated Balance Sheet.

The weighted average remaining lease term was 13.1 years and the weighted average discount rate was 3.46 % for financing leases as of December 31, 2020.

As of December 31, 2020, future lease payments due are as follows:

Fiscal year Salt Lake City Distribution Center Chattanooga Distribution Center

10 unchanged sentences

Therefore, the total payments do not equal the financing liability.

Total interest expense for the financing lease was $ 0.3 million for the three months ended September 30, 2020.

Total interest expense for the financing lease was $ 0.3 and $ 0.5 million for the three and six months ended December 31, 2020.

FAIR VALUE MEASUREMENTS:

4 unchanged sentences

Assets and Liabilities Measured at Fair Value on a Recurring Basis

As of September 30, 2020 and June 30, 2020, the estimated fair value of the Company’s cash, cash equivalents, restricted cash, receivables, accounts payable, debt and long-term financial liabilities approximated their carrying values.

As of December 31, 2020 and June 30, 2020, the estimated fair value of the Company’s cash, cash equivalents, restricted cash, receivables, accounts payable, debt and long-term financial liabilities approximated their carrying values.

The estimated fair values of the Company's debt and long-term financial liability are based on Level 2 inputs.

3 unchanged sentences

The following impairments were based on fair values using Level 3 inputs:

For the Three Months Ended September 30,

Three Months Ended December 31, Six Months Ended December 31,

2020 2019 2020 2019

(Dollars in thousands)

1 unchanged sentence

_______________________________________________________________________________

(1) See Note 1 to the Condensed Consolidated Financial Statements.

(1) Long-lived asset impairment charges, including right of use and salon property and equipment, are separately stated on the unaudited Condensed Consolidated Statement of Operations for the three and six months ended December 31, 2020.

Long-lived salon property and equipment asset impairment charges are recorded in Depreciation and amortization in the unaudited Condensed Consolidated Statement of Operations for the three and six months ended December 31, 2019.

See Note 1 to the unaudited Condensed Consolidated Financial Statements.

SEGMENT INFORMATION:

1 unchanged sentence

The Company’s reportable operating segments consisted of the following salons:

September 30,

2020 June 30,

1 unchanged sentence

SmartStyle/Cost Cutters in Walmart Stores

Signature Style

Portfolio Brands (1)

Total North American salons

5 unchanged sentences

SmartStyle/Cost Cutters in Walmart Stores

Signature Style

Portfolio Brands (1)

Mall-based (3)

6 unchanged sentences

_______________________________________________________________________________

(1) Portfolio Brands was previously referred to as Signature Style.

(2) Canadian and Puerto Rican salons are included in the North American salon totals.

1 unchanged sentence

They are included in continuing operations under the Company-owned operating segment from January 1, 2020.

As of September 30, 2020, the Franchise operating segment is comprised primarily of Supercuts ® , SmartStyle ® , Cost Cutters ® , First Choice Haircutters ® , Magicuts ® and Roosters ® concepts and the Company-owned operating segment is comprised primarily of SmartStyle ® , Supercuts ® , Cost Cutters ® , and other regional trade names.

As of December 31, 2020, the Franchise operating segment is comprised primarily of Supercuts ® , SmartStyle ® , Cost Cutters ® , First Choice Haircutters ® , Magicuts ® , and Roosters ® concepts and the Company-owned operating segment is comprised primarily of SmartStyle ® , Supercuts ® , Cost Cutters ® , and other regional trade names.

Financial information concerning the Company's reportable operating segments is shown in the following tables:

For the Three Months Ended September 30, 2020

Three Months Ended December 31, 2020

Franchise Company-owned Corporate Consolidated

21 unchanged sentences

Income (loss) from continuing operations before income taxes $ 10,430 $ ( 17,370 ) $ ( 26,339 ) $ ( 33,279 )

For the Three Months Ended September 30, 2019

Three Months Ended December 31, 2019

Franchise Company-owned Corporate Consolidated

18 unchanged sentences

Interest expense — — ( 1,464 ) ( 1,464 )

Gain from sale of salon assets to franchisees, net — — ( 5,860 ) ( 5,860 )

Loss from sale of salon assets to franchisees, net — — ( 12,407 ) ( 12,407 )

Interest income and other, net — — 2,869 2,869

Income (loss) from continuing operations before income taxes $ 12,126 $ ( 1,105 ) $ ( 29,489 ) $ ( 18,468 )

Six Months Ended December 31, 2020

Franchise Company-owned Corporate Consolidated

(Dollars in thousands)

Service $ — $ 65,395 $ — $ 65,395

Product 27,978 19,917 — 47,895

Royalties and fees 37,858 — — 37,858

Franchise rental income 64,568 — — 64,568

Total revenue 130,404 85,312 — 215,716

Operating expenses:

Cost of service — 50,620 — 50,620

Cost of product 21,969 11,603 — 33,572

Site operating expenses 9,258 14,331 — 23,589

General and administrative 15,604 5,411 31,822 52,837

Rent 962 23,790 1,375 26,127

Franchise rent expense 64,568 — — 64,568

Depreciation and amortization 563 9,393 3,808 13,764

Long-lived asset impairment 704 8,280 — 8,984

Total operating expenses 113,628 123,428 37,005 274,061

Operating income (loss) 16,776 ( 38,116 ) ( 37,005 ) ( 58,345 )

Other (expense) income:

Interest expense — — ( 7,463 ) ( 7,463 )

Loss from sale of salon assets to franchisees, net — — ( 3,888 ) ( 3,888 )

Interest income and other, net — — 517 517

Income (loss) from continuing operations before income taxes $ 16,776 $ ( 38,116 ) $ ( 47,839 ) $ ( 69,179 )

Six Months Ended December 31, 2019

Franchise Company-owned Corporate Consolidated

(Dollars in thousands)

Service $ — $ 243,746 $ — $ 243,746

Product 29,969 59,670 — 89,639

Royalties and fees 57,364 — — 57,364

Franchise rental income 65,054 — — 65,054

Total revenue 152,387 303,416 — 455,803

Operating expenses:

Cost of service — 157,840 — 157,840

Cost of product 23,352 30,233 — 53,585

Site operating expenses 21,130 38,142 — 59,272

General and administrative 17,333 17,697 38,286 73,316

Rent 591 43,163 1,005 44,759

Franchise rent expense 65,054 — — 65,054

Depreciation and amortization 370 12,045 4,712 17,127

TBG mall location restructuring 2,222 — — 2,222

Total operating expenses 130,052 299,120 44,003 473,175

Operating income (loss) 22,335 4,296 ( 44,003 ) ( 17,372 )

Other (expense) income:

Interest expense — — ( 2,903 ) ( 2,903 )

Loss from sale of salon assets to franchisees, net — — ( 18,267 ) ( 18,267 )

Interest income and other, net — — 3,040 3,040

Income (loss) from continuing operations before income taxes $ 22,335 4,296 $ ( 62,133 ) $ ( 35,502 )

REVISION OF SECOND QUARTER 2020 UNAUDITED RESULTS:

During the fourth quarter of fiscal year 2020, the Company identified an error in the calculation of the goodwill derecognition associated with the sale of salons to franchisees in the second quarter.

In the second quarter, goodwill derecognition was understated by $ 6.7 million, resulting in the loss from the sale of salons to franchisees and net loss being understated and goodwill being overstated by $ 6.7 million.

The Company assessed the applicable guidance issued by the Securities and Exchange Commission (SEC) and the Financial Accounting Standards Board (FASB) and concluded these misstatements were not material, individually or in the aggregate, to the Company’s Unaudited Condensed Consolidated Financial Statements for the aforementioned interim period.

However, to facilitate comparisons among periods, the Company has decided to revise its previously issued second quarter unaudited condensed consolidated financial information.

Three Months Ended December 31, 2019

As Previously Reported Adjustments As Revised

(Dollars in thousands, except per share amounts)

Loss from sale of salon assets to franchisees, net (1) $ ( 5,692 ) $ ( 6,715 ) $ ( 12,407 )

Interest income and other, net (2) 4,346 ( 1,477 ) 2,869

Loss from continuing operations before income taxes ( 10,276 ) ( 8,192 ) ( 18,468 )

Income tax benefit 795 1,153 1,948

Net loss ( 9,402 ) ( 7,039 ) ( 16,441 )

Net loss per share ( 0.26 ) ( 0.20 ) ( 0.46 )

Comprehensive loss ( 8,861 ) ( 7,039 ) ( 15,900 )

Goodwill as of December 31, 2019 293,019 ( 6,715 ) 286,304

Other assets as of December 31, 2019 38,144 ( 1,477 ) 36,667

Other non-current liabilities as of December 31, 2019 95,979 ( 1,153 ) 94,826

Six Months Ended December 31, 2019

As Previously Reported Adjustments As Revised

(Dollars in thousands, except per share amounts)

Loss from sale of salon assets to franchisees, net (1) $ ( 11,552 ) $ ( 6,715 ) $ ( 18,267 )

Interest income and other, net (2) 4,517 ( 1,477 ) 3,040

Loss from continuing operations before income taxes ( 27,310 ) ( 8,192 ) ( 35,502 )

Income tax benefit 3,651 1,153 4,804

Net loss ( 23,207 ) ( 7,039 ) ( 30,246 )

Net loss per share ( 0.64 ) ( 0.20 ) ( 0.84 )

Comprehensive loss ( 23,069 ) ( 7,039 ) ( 30,108 )

_______________________________________________________________________________

The Company revised the amounts originally reported for the second quarter of fiscal year 2020 for the following items:

(1) Recorded an additional $ 6.7 million loss from the sale of salons to franchisees, net that should have been recorded in the second quarter.

The error in the Company's goodwill derecognition estimation calculation was identified in the fourth quarter of fiscal year 2020.

The goodwill derecognition was understated which understated the loss of the sale of salons to franchisees, net.

The error impacted the three and six months ended December 31, 2019.

(2) Recorded a reduction to the gain on the sale of a building, included in interest income and other, net related to the sale of the Company's headquarters which occurred in the second quarter of fiscal year 2020.

Previously, the Company identified this error during the third quarter of fiscal year 2020 and recorded and disclosed the correction in the third quarter as an out-of-period adjustment.

The correction applies to the three and six months ended December 31, 2019.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements