Supercuts 2008 Annual Report Download - page 36

income tax benefits, including interest and penalties. As of June 30, 2008 the Company's unrecognized income tax benefits were $27.6 million.
See Note 8, to the Consolidated Financial Statements, for further information.
Stock-based Compensation Expense
Compensation expense for stock-based compensation is estimated on the grant date using an option-pricing model. During fiscal years
2008, 2007, and 2006, stock-based compensation expense totaled $6.8, $4.9, and $4.9 million, respectively. Our specific weighted average
assumptions for the risk free interest rate, expected term, expected volatility and expected dividend yield are documented in Note 10 to the
Consolidated Financial Statements. Additionally, under SFAS No. 123R, we are required to estimate pre-vesting forfeitures for purposes of
determining compensation expense to be recognized. Future expense amounts for any particular quarterly or annual period could be affected by
changes in our assumptions or changes in market conditions.
Contingencies
We are involved in various lawsuits and claims that arise from time to time in the ordinary course of our business. Accruals are recorded for
such contingencies based on our assessment that the occurrence is probable, and where determinable, an estimate of the liability amount.
Management considers many factors in making these assessments including past history and the specifics of each case. However, litigation is
inherently unpredictable and excessive verdicts do occur, which could have a material impact on our Consolidated Financial Statements.
OVERVIEW OF FISCAL YEAR 2008 RESULTS
The following summarizes key aspects of our fiscal year 2008 results:
• Revenues increased 4.3 percent to $2.7 billion and consolidated same-store sales increased 0.5 percent during fiscal year 2008.
North American same-store service sales increased 3.8 and 3.3 percent during the third and fourth quarter of the fiscal year, the
Company's largest comparable increases in eight years. An increase in average ticket price was partially offset by the continued
decline in visitation patterns due to fashion trends resulted in an increase in consolidated same-store sales of 0.5 percent. The
revenue increase was partially offset by deconsolidation of accredited cosmetology schools and European franchise salon
operations. The Company expects fiscal year 2009 same-store sales growth to be 0.5 to 2.5 percent.
• A long-lived asset impairment charge of $10.5 million was recorded during fiscal year 2008 related to the approval of a plan to
close up to 160 underperforming company-owned salons in fiscal year 2009.
• Total debt at the end of the fiscal year was $764.7 million and our debt-to-capitalization ratio, calculated as total debt as a
percentage of total debt and shareholders' equity at fiscal year end, increased 20 basis points to 43.9 percent as compared to
June 30, 2007.
• Share repurchases of $50.0 million and $79.7 million occurred during fiscal years 2008 and 2007, respectively.
• The effective income tax rate was adversely impacted by $3.0 million tax charge, of which $1.3 million was recorded through
income tax expense and $1.7 million was recorded through other comprehensive income. primarily associated with repatriating
approximately $30.0 million of cash previously considered to be indefinitely reinvested outside of the United States, which
caused a 1.0 percent increase in the rate. The joint venture partnership with Franck Provost Group resulted in higher overall taxes
being paid by Regis due to Regis' income being subject to higher overall tax rates. In addition, Texas passed a new gross margins
tax which, together with a
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