Supercuts 2012 Annual Report Download - page 58

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Table of Contents
During fiscal year 2012, the Company recorded a $1.1 million tax benefit in discontinued operations related to the release of tax reserves
associated with the disposition of the Trade Secret salon concept.
During fiscal year 2010, the Company recorded a $3.0 million tax benefit in discontinued operations to correct the prior year calculation
of the income tax benefit related to the disposition of the Trade Secret Salon concept.
Recent Accounting Pronouncements
Recent accounting pronouncements are discussed in Note 1 to the Consolidated Financial Statements.
Effects of Inflation
We compensate some of our salon employees with percentage commissions based on sales they generate, thereby enabling salon payroll
expense as a percent of company-owned salon revenues to remain relatively constant. Accordingly, this provides us certain protection against
inflationary increases, as payroll expense and related benefits (our major expense components) are variable costs of sales. In addition, we may
increase pricing in our salons to offset any significant increases in wages. Therefore, we do not believe inflation has had a significant impact on
the results of our operations.
Constant Currency Presentation
The presentation below demonstrates the effect of foreign currency exchange rate fluctuations from year to year. To present this
information, current period results for entities reporting in currencies other than United States dollars are converted into United States dollars at
the average exchange rates in effect during the corresponding period of the prior fiscal year, rather than the actual average exchange rates in
effect during the current fiscal year. Therefore, the foreign currency impact is equal to current year results in local currencies multiplied by the
change in the average foreign currency exchange rate between the current fiscal period and the corresponding period of the prior fiscal year.
During the fiscal year ended June 30, 2012, foreign currency translation had a minimal net impact on consolidated revenues as the
weakening of the British Pound and Euro against the United States dollar was offset by the strengthening of the Canadian dollar against the
United States dollar.
During the fiscal year ended June 30, 2011, foreign currency translation had a favorable impact on consolidated revenues due to the
strengthening of the Canadian dollar and British Pound against the United States dollar.
During the fiscal year ended June 30, 2010, foreign currency translation had a favorable impact on consolidated revenues due to the
strengthening of the Canadian dollar against the United States dollar, partially offset by the weakening of the British pound and Euro against
the United States dollar.
56
Favorable (Unfavorable) Impact of Foreign Currency Exchange Rate Fluctuations
Impact on Revenues Impact on (Loss) Income Before
Income Taxes
Currency Fiscal 2012 Fiscal 2011 Fiscal 2010 Fiscal 2012 Fiscal 2011 Fiscal 2010
(Dollars in thousands)
Canadian dollar
$
364
$
9,736
$
10,422
$
47
$
937
$
1,761
British pound
(263
)
653
(4,928
)
(2
)
15
(184
)
Euro
(114
)
(137
)
(34
)
(8
)
39
(5
)
Total
$
(13
)
$
10,252
$
5,460
$
37
$
991
$
1,572