Supercuts 2011 Annual Report Download - page 40

Table of Contents
periods. The term "reasonably likely" refers to an occurrence that is more than remote but less than probable in the judgment of the Company.
Because some of the inherent assumptions and estimates used in determining the fair value of the reportable segments are outside the control of
management, changes in these underlying assumptions can adversely impact fair value. Potential impairment of a portion or all of the carrying
value of goodwill for the Promenade salon concept, Regis salon concept, and Hair Restoration Centers reporting units is dependent on many
factors and cannot be predicted.
As of June 30, 2011, the Company's estimated fair value, as determined by the sum of our reporting units' fair value reconciled to within a
reasonable range of our market capitalization which included an assumed control premium.
A summary of the Company's goodwill balance as of June 30, 2011 by reporting unit is as follows:
As a result of the Company's annual impairment analysis of goodwill during the third quarter of fiscal year 2010, a $35.3 million
impairment charge was recorded within continuing operations for the excess of the carrying value of goodwill over the implied fair value of
goodwill for the Regis salon concept.
As a result of the Company's interim impairment test of goodwill during the three months ended December 31, 2008, a $41.7 million
impairment charge for the full carrying amount of goodwill within the salon concepts in the United Kingdom was recorded within continuing
operations. The recent performance challenges of the international salon operations indicated that the estimated fair value was less than the
current carrying of this reporting unit's net assets, including goodwill.
Long
-Lived Assets, Excluding Goodwill
We assess the impairment of long-lived assets annually or when events or changes in circumstances indicate that the carrying value of the
assets or the asset grouping may not be recoverable. Our impairment analysis on salon property and equipment is performed on a salon by salon
basis. The Company's test for impairment is performed at a salon level as this is the lowest level for which identifiable cash flows are largely
independent of the cash flows of other groups of assets and liabilities. Factors considered in deciding when to perform an impairment review
include significant under-performance of an individual salon in relation to expectations, significant economic or geographic trends, and
significant changes or planned changes in our use of the assets. Impairment is evaluated based on the sum of undiscounted estimated future cash
flows expected to result from use of the related salon assets that does not recover the carrying value of the salon assets. When the sum of a
salon's undiscounted estimated future cash flow is zero or negative, impairment is measured as the full carrying value of the related salon's
equipment and leasehold improvements. When the sum of a salon's undiscounted cash flows is greater than zero but less than the carrying value
of the related salon's equipment and leasehold improvements, a discounted cash flow analysis is performed to estimate the fair value of the salon
assets and impairment is measured as the difference between the carrying value
38
Reporting Unit As of June 30, 2011 As of June 30, 2010
(Dollars in thousands)
Regis
$
103,761
$
102,180
MasterCuts
4,652
4,652
SmartStyle
48,916
48,280
Supercuts
129,477
121,693
Promenade
240,910
309,804
Total North America Salons
527,716
586,609
Hair Restoration Centers
152,796
150,380
Consolidated Goodwill
$
680,512
$
736,989