Supercuts 2010 Annual Report Download - page 70

Table of Contents
referred to as interest rate swaps, as discussed in Part II, Item 7A, "Quantitative and Qualitative Disclosures about Market Risk." Additionally,
no adjustment was necessary to mark the hedged portion of the debt obligation to fair value (a reduction to long-term debt). Interest payments
on long-term debt and capital lease obligations were estimated based on each debt obligation's agreed upon rate as of June 30, 2010 and
scheduled contractual repayments.
Other long-term liabilities include a total of $18.2 million related to the Executive Profit Sharing Plan and a salary deferral program,
$7.8 million (including $0.3 million in interest) related to established contractual payment obligations under retirement and severance payment
agreements for a small number of retired employees.
This table excludes the short-term liabilities, other than the current portion of long-term debt, disclosed on our balance sheet as the
amounts recorded for these items will be paid in the next year. We have no unconditional purchase obligations, as defined by long-term
obligations guidance. Also excluded from the contractual obligations table are payment estimates associated with employee health and workers'
compensation claims for which we are self-insured. The majority of our recorded liability for self-insured employee health and workers'
compensation losses represents estimated reserves for incurred claims that have yet to be filed or settled.
The Company has unfunded deferred compensation contracts covering certain management and executive personnel. The deferred
compensation contracts are offered to key executives based on their accomplishments within the Company. Because we cannot predict the
timing or amount of our future payments related to these contracts, such amounts were not included in the table above. Related obligations
totaled $30.0, $24.5, and $20.2 million at June 30, 2010, 2009, and 2008, respectively, and are included in other noncurrent liabilities in the
Consolidated Balance Sheet. Refer to Note 14 to the Consolidated Financial Statements for additional information. The obligations are funded
by insurance contracts.
Off-Balance Sheet Arrangements
Operating leases primarily represent long-term obligations for the rental of salon and hair restoration center premises, including leases for
company-owned locations, as well as future salon franchisee lease payments of approximately $138.1 million, which are reimbursed to the
Company by franchisees. Regarding the franchisee subleases, we generally retain the right to the related salon assets net of any outstanding
obligations in the event of a default by a franchise owner. Management has not experienced and does not expect any material loss to result from
these arrangements.
We have interest rate swap contracts and forward foreign currency contracts. See Part II, Item 7A, "Quantitative and Qualitative
Disclosures about Market Risk," for a detailed discussion of our derivative instruments. Future net settlements under these agreements are not
included in the table above.
We are a party to a variety of contractual agreements under which we may be obligated to indemnify the other party for certain matters,
which indemnities may be secured by operation of law or otherwise, in the ordinary course of business. These contracts primarily relate to our
commercial contracts, operating leases and other real estate contracts, financial agreements, credit facility of EEG, agreements to provide
services, and agreements to indemnify officers, directors and employees in the performance of their work. While our aggregate indemnification
obligation could result in a material liability, we are not aware of any current matter that we expect to result in a material liability.
We do not have other unconditional purchase obligations or significant other commercial commitments such as commitments under lines
of credit and standby repurchase obligations or other commercial commitments.
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