Supercuts 2010 Annual Report Download - page 58

Table of Contents
North American Salon Operating Income. Operating income for the North American salons was as follows:
The basis point decrease in North American salon operating income as a percent of North American salon revenues during fiscal year
2010 was primarily due to the $35.3 million goodwill impairment of the Company's Regis salon concept and negative leverage in fixed cost
categories due to negative same-store sales. In addition, the basis point decrease was due to the settlement of two legal claims regarding
customer and employee matters totaling $5.2 million, higher self insurance expense (the Company recorded reduction in self insurance accruals
of $1.7 million in the twelve months ended June 30, 2010 compared to a $9.9 million reduction in the twelve months ended June 30, 2009),
partially offset by the Company's cost saving initiatives and gross margin improvement.
The basis point decrease in North American salon operating income as a percent of North American salon revenues during fiscal year
2009 was primarily due to negative leverage in fixed cost categories due to negative same-store sales and lease termination costs associated
with the Company's plan to close underperforming company-owned salons. In addition, the basis point decrease was due to an increase in
North American revenues of $32.2 million related to product sales to the purchaser of Trade Secret at cost.
The basis point increase in North American salon operating income as a percent of North American salon revenues during fiscal year 2008
was primarily due a decrease in workers' compensation expense due to a continued reduction in the frequency and severity of injury claims
from our successful salon safety programs. Partially offsetting the increase was impairment losses on the disposal of property and equipment
stemming from salon closures. In July 2008 (fiscal year 2009), we approved a plan to close up to 112 underperforming company-owned salon
locations in fiscal year 2009 prior to the lease end date in order to enhance overall profitability, which resulted in impairment charges of
$6.1 million.
International Salons
International Salon Revenues. Total international salon revenues were as follows:
56
(Decrease) Increase
Over Prior Fiscal Year
Operating
Income
as % of
Total Revenues
Years Ended June 30, Operating Income Dollar Percentage Basis Point(1)
(Dollars in thousands)
2010
$
219,855
10.7
%
(55,773
)
(20.2
)%
(230
)
2009
$
275,628
13.0
(10,227
)
(3.6
)
(70
)
2008
285,855
13.7
26,464
10.2
10
(1) Represents the basis point change in North American salon operating income as a percent of total North American salon
revenues as compared to the corresponding period of the prior fiscal year.
(Decrease) Increase
Over Prior
Fiscal Year
Same-
Store
Sales
(Decrease) Years Ended June 30, Revenues Dollar Percentage
(Dollars in thousands)
2010
$
156,085
$
(15,484
)
(9.0
)%
(3.8
)%
2009
171,569
(84,494
)
(33.0
)
(7.2
)
2008
256,063
2,633
1.0
(4.3
)