Supercuts 2012 Annual Report Download - page 95

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Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
1. BUSINESS DESCRIPTION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Shipping and Handling Costs:
Shipping and handling costs are incurred to store, move and ship product from the Company's distribution centers to company-owned and
franchise locations, and include an allocation of internal overhead. Such shipping and handling costs related to product shipped to company-
owned locations are included in site operating expenses in the Consolidated Statement of Operations. Shipping and handling costs related to
shipping product to franchise locations totaled $3.8, $3.5, and $2.9 million during fiscal years 2012, 2011, and 2010, respectively, and are
included within general and administrative expenses on the Consolidated Statement of Operations. Any amounts billed to the franchisee for
shipping and handling are included in product revenues within the Consolidated Statement of Operations.
Advertising:
Advertising costs, including salon collateral material, are expensed as incurred. Advertising costs expensed and included in continuing
operations in fiscal years 2012, 2011 and 2010 was $58.7, $63.3, and $54.9 million, respectively.
The Company participates in cooperative advertising programs under which the vendor reimburses the Company for costs related to
advertising for its products. The Company records such reimbursements as a reduction of advertising expense when the expense is incurred.
During fiscal years 2012, 2011, and 2010, no amounts were received in excess of the Company's related expense.
Advertising Funds:
The Company has various franchising programs supporting its franchise salon concepts consisting of Supercuts, Cost Cutters, First Choice
Haircutters, Magicuts, Pro-Cuts, Beauty Supply Outlet and Hair Club. Most of the concepts maintain advertising funds that provide
comprehensive advertising and sales promotion support.
The Supercuts advertising fund is the Company's largest advertising fund. The Supercuts advertising fund is administered by a council
consisting primarily of franchisee representatives. The council has overall control of all of the fund's expenditures and operates in accordance
with terms of the franchise operating and other agreements.
Each Supercuts salon contributes 5.0 percent of service revenues to the fund (contributions for other concepts range between 1.5 and
5.0 percent). The majority of the advertising funds are spent to support media placement and local marketing activities. The remainder is
allocated for the creation of national advertising campaigns and system wide activities. None of the Supercuts advertising funds collected may
be used by the Company as reimbursement for the cost of administering the advertising fund. Advertising funds can only be used as directed by
the fund's council and are considered to be restricted.
The Company records all advertising funds as assets and liabilities within the Company's Consolidated Balance Sheet. As of June 30,
2012 and 2011, approximately $14.8 and $16.7 million, respectively, of the advertising funds' assets and liabilities were recorded within total
assets and total liabilities in the Company's Consolidated Balance Sheet.
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