Supercuts 2008 Annual Report Download - page 54

acquired as part of the original Hair Club acquisition, as it was determined that the software would no longer be used. The remaining 50 basis
point fluctuation in hair restoration center operating income as a percent of hair restoration center revenues was primarily due to our integration
of the recently acquired centers.
LIQUIDITY AND CAPITAL RESOURCES
Overview
We continue to maintain a strong balance sheet to support system growth and financial flexibility. Our debt to capitalization ratio,
calculated as total debt as a percentage of total debt and shareholders' equity at fiscal year end, was as follows:
(1)
As of June 30,
Debt to
Capitalization
Basis Point
(Decrease)
Increase
2008
43.9
%
(20
)
2007
43.7
(200
)
2006
41.7
130
Represents the basis point change in debt to capitalization as compared to prior fiscal year end (June 30).
The basis point decrease in the debt to capitalization ratio as of June 30, 2008 compared to June 30, 2007 and June 30, 2007 compared to
June 30, 2006 was primarily due to increased debt levels stemming from share repurchases, acquisitions and timing of customary income tax
payments made during fiscal year 2008 and 2007. As of June 30, 2008 and 2007, approximately $230.2 million and $223.4 million, respectively,
of our debt outstanding is classified as a current liability. We have a revolving credit facility which provides for possible acceleration of the
maturity date based on provisions that are not objectively determinable and we have therefore included the outstanding borrowings under our
revolving credit facility in our current portion of debt. As of June 30, 2008 and 2007 we had borrowings on our revolving credit facility of
$139.1 million and $147.8 million, respectively. Our principal on-going cash requirements are to finance construction of new stores, remodel
certain existing stores, acquire salons and purchase inventory. Customers pay for salon services and merchandise in cash at the time of sale,
which reduces our working capital requirements.
The basis point improvement in the debt to capitalization ratio as of June 30, 2006 as compared to June 30, 2005 was due to increased
equity levels stemming primarily from fiscal year 2006 earnings.
Total assets at June 30, 2008, 2007, and 2006 were as follows:
Acquisitions and new salon construction (a component of organic growth) were the primary drivers of the increase in total assets as of
June 30, 2008 compared to June 30, 2007. Acquisitions and new salon construction were primarily funded by a combination of operating cash
flow, debt, and assumption of liabilities.
52
Increase Over Prior
Fiscal Year
Total
Assets
As of June 30,
Dollar
Percentage
(Dollars in thousands)
2008
$
2,235,871
$
103,757
4.9
%
2007
2,132,114
146,790
7.4
2006
1,985,324
259,348
15.0