Supercuts 2010 Annual Report Download - page 106

Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
4. ACQUISITIONS (Continued)
The value and related weighted average amortization periods for the intangibles acquired during fiscal years 2010 and 2009 business
acquisitions, in total and by major intangible asset class, are as follows:
The majority of the purchase price in salon acquisitions is accounted for as residual goodwill rather than identifiable intangible assets.
This stems from the value associated with the walk-in customer base of the acquired salons, which is not recorded as an identifiable intangible
asset under current accounting guidance, as well as the limited value and customer preference associated with the acquired hair salon brand.
Key factors considered by consumers of hair salon services include personal relationships with individual stylists, service quality and price
point competitiveness. These attributes represent the "going concern" value of the salon.
Residual goodwill further represents the Company's opportunity to strategically combine the acquired business with the Company's
existing structure to serve a greater number of customers through its expansion strategies. In the acquisitions of international salons and hair
restoration centers, the residual goodwill primarily represents the growth prospects that are not captured as part of acquired tangible or
identified intangible assets. Generally, the goodwill recognized in the North American salon transactions is expected to be fully deductible for
tax purposes and the goodwill recognized in the international salon transactions is non-deductible for tax purposes. Goodwill generated in
certain acquisitions, such as the acquisition of hair restoration centers, is not deductible for tax purposes due to the acquisition structure of the
transaction.
During fiscal years 2010 and 2009, the Company purchased salon operations from its franchisees. The Company evaluated the effective
settlement of the pre-existing franchise contracts and associated rights afforded by those contracts. The Company determined that the effective
settlement of the pre-existing franchise contracts at the date of the acquisition did not result in a gain or loss, as the agreements were neither
favorable nor unfavorable when compared to similar current market transactions, and no settlement provisions exist in the pre-existing
contracts. Therefore, no settlement gain or loss was recognized with respect to the Company's franchise buybacks.
102
Purchase Price
Allocation
Weighted
Average
Amortization
Period
Year Ended
June 30, 2010
(in years)
2010 2009 2010 2009
(Dollars in thousands)
Amortized intangible assets:
Brand assets and trade
names
$
61
$
204
20
20
Customer lists
—
191
—
7
Franchise agreements
—
244
—
40
Lease intangibles
15
480
20
20
Non
-
compete agreements
—
—
—
—
Other
58
203
20
20
Total
$
134
$
1,322
20
22