Supercuts 2011 Annual Report Download - page 72

Table of Contents
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 performance 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 $5.0 and
$28.6 million, respectively at June 30, 2011, and are included in accrued liabilities and 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 $141.2 million, which are reimbursed to the
Company by franchisees, and the guarantee of approximately 40 salons operated by the purchaser of Trade Secret. 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 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.
As a part of our salon development program, we continue to negotiate and enter into leases and commitments for the acquisition of
equipment and leasehold improvements related to future salon locations, and continue to enter into transactions to acquire established hair care
salons and businesses.
We do not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured
finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet financial arrangements or
other contractually narrow or limited purposes at June 30, 2011. As such, we are not materially exposed to any financing, liquidity, market or
credit risk that could arise if we had engaged in such relationships.
70