Supercuts 2010 Annual Report Download - page 73

Table of Contents
Commissioners downgraded Regis' private placement debt from investment-grade to non-investment grade. The downgrade did not have any
effect on the private placement debt outstanding and corresponding interest rate as of June 30, 2010. The downgrade has no impact on the
Company's current revolving credit facility or its ability to secure future bank borrowings. Considering the effect of interest rate swaps and
including no increases to long-term debt related to fair value swaps at June 30, 2010 and 2009, the Company had the following outstanding
debt balances:
The Company manages its interest rate risk by continually assessing the amount of fixed and variable rate debt. On occasion, the
Company uses interest rate swaps to further mitigate the risk associated with changing interest rates and to maintain its desired balances of
fixed and floating rate debt.
In addition, the Company has entered into the following financial instruments:
Interest Rate Swap Contracts:
The Company manages its interest rate risk by balancing the amount of fixed and variable rate debt. On occasion, the Company uses
interest rate swaps to further mitigate the risk associated with changing interest rates and to maintain its desired balances of fixed and variable
rate debt. Generally, the terms of the interest rate swap agreements contain monthly and quarterly settlement dates based on the notional
amounts of the swap contracts.
Pay fixed rates, receive variable rates
During the three months ended December 31, 2008, the Company entered into two interest rate swap contracts that pay fixed rates of
interest and receive variable rates of interest (based on the one-month LIBOR) on notional amounts of indebtedness of $20.0 million each as of
June 30, 2010, and mature in July 2011, respectively. The Company will pay fixed rates of interest of approximately 3.0 percent and
3.4 percent on their respective $20.0 million. The contracts are on an aggregate notional amount of indebtedness of $40.0 million related to the
$85.0 million term loan, which the Company entered into during the three months ended December 31, 2008. The contracts expire in July 2011
and the debt matures in July 2012. These interest rate swap contracts were designed and are effective as cash flow hedges. They were recorded
at fair value within other noncurrent liabilities in the Consolidated Balance Sheet, with corresponding offset in deferred income taxes and other
comprehensive income within shareholders' equity.
During the three months ended December 31, 2005, the Company entered into interest rate swap contracts that pay fixed rates of interest
and receive variable rates of interest (based on the three-month LIBOR) on notional amounts of indebtedness of $35.0 and $15.0 million, and
mature in March 2013 and March 2015, respectively. These swaps were designated and were effective as cash flow hedges. These cash flow
hedges were recorded at fair value within other noncurrent liabilities in the Consolidated Balance Sheet, with a corresponding offset in other
comprehensive income within shareholders' equity. These contracts were terminated during fiscal year 2010 in conjunction with the repayment
of the private placement senior term notes as discussed in Note 17 to the Consolidated Financial Statements. These contracts were settled for an
aggregate loss of $5.2 million recorded within interest expense in the Consolidated Statement of Operations.
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As of June 30,
2010 2009
(Dollars in thousands)
Fixed rate debt
$
395,029
$
534,307
Variable rate debt
45,000
100,000
$
440,029
$
634,307