Supercuts 2011 Annual Report Download - page 27

Table of Contents
During fiscal year 2011, we recorded an impairment of $9.2 million related to our investment in MY Style. During fiscal year 2009, we
recorded impairments of $25.7 million and $7.8 million ($4.8 million net of tax) related to our investment in Provalliance and investment in and
loans to Intelligent Nutrients, LLC, respectively. Due to economic and other factors, we may be required to take additional impairment charges
related to our investments and such impairments could be material to our consolidated balance sheet and results of operations. In addition, our
joint venture partners may be required to take impairment charges related to long
-lived assets and goodwill, and our share of such impairment
charges could be material to our consolidated balance sheet and results of operations. Our share of our investment's goodwill balances as of June
30, 2011 is $102.1 million.
We are subject to default risk on our accounts and notes receivable.
We have outstanding accounts and notes receivable subject to collectability. If the counterparties are unable to repay the amounts due or if
payment becomes unlikely our results of operations would be adversely affected. For example, during the twelve months ended June 30, 2011
the Company recorded a $31.2 million valuation reserve on the note receivable from the purchaser of Trade Secret to reflect the net realizable
value.
Changes in manufacturers' choice of distribution channels may negatively affect our revenues.
The retail products that we sell are licensed to be carried exclusively by professional salons. The products we purchase for sale in our salons
are purchased pursuant to purchase orders, as opposed to long-term contracts and generally can be terminated by the producer without much
advance notice. Should the various product manufacturers decide to utilize other distribution channels, such as large discount retailers, it could
negatively impact the revenue earned from product sales.
Changes to interest rates and foreign currency exchange rates may impact our results from operations.
Changes in interest rates will have an impact on our expected results from operations. Currently, we manage the risk related to fluctuations
in interest rates through the use of variable rate debt instruments and other financial instruments.
We rely heavily on our management information systems. If our systems fail to perform adequately or if we experience an interruption in
their operation, our results of operations may be affected.
The efficient operation of our business is dependent on our management information systems. We rely heavily on our management
information systems to collect daily sales information and customer demographics, generate payroll information, monitor salon performance,
manage salon staffing and payroll costs, inventory control and other functions. The failure of our management information systems to perform as
we anticipate, or to meet the continuously evolving needs of our business, could disrupt our business and may adversely affect our operating
results.
The Company plans to implement a new point-of-sale system in our salons during fiscal year 2012. Failure to effectively implement the
point-of-sale system may adversely affect our operating results.
If we fail to protect the security of personal information about our customers, we could be subject to costly government enforcement actions
or private litigation and our reputation could suffer.
The nature of our business involves processing, transmission and storage of personal information about our customers. If we experience a
data security breach, we could be exposed to government enforcement actions and private litigation. In addition, our customers could lose
confidence in our ability to protect their personal information, which could cause them to stop visiting our salons altogether. Such events could
lead to lost future sales and adversely affect our results of operations.
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