Supercuts 2004 Annual Report Download - page 25

Table of Contents
The Company has distribution centers located in Chattanooga, Tennessee and Salt Lake City, Utah. The Chattanooga facility currently utilizes
250,000 square feet while the Salt Lake City facility utilizes 210,000 square feet. The Salt Lake City facility was originally leased, but was
purchased by the Company during the fourth quarter of fiscal year 2003. The Salt Lake City facility may be expanded to 290,000 square feet to
accommodate future growth.
The Company operates all of its salon locations under leases or license agreements. Substantially all of its North American locations in regional
malls are operating under leases with an original term of at least ten years. Salons operating within strip centers and Wal-Mart Supercenters
have leases with original terms of at least five years, generally with the ability to renew, at the Company’s option, for an additional five years.
Salons operating within department stores in Canada and Europe operate under license agreements, while freestanding or shopping center
locations in those countries have real property leases comparable to the Company’s domestic locations.
The Company also leases the premises in which certain franchisees operate and has entered into corresponding sublease arrangements with the
franchisees. These leases have a five-year initial term and one or more five-year renewal options. All lease costs are passed through to the
franchisees. Remaining franchisees, who do not enter into sublease arrangements with the Company, negotiate and enter into leases on their
own behalf.
None of the Company
’
s salon leases are individually material to the operations of the Company, and the Company expects that it will be able to
renew its leases on satisfactory terms as they expire. See Note 6 of “Notes to Consolidated Financial Statements.”
Item 3. Legal Proceedings
The Company is a defendant in various lawsuits and claims arising out of the normal course of business. Like certain other large retail
employers, the Company has been faced with allegations of purported class-wide wage and hour violations. The Company is currently a
defendant in a collective action lawsuit in which the plaintiffs allege violations under the Fair Labor Standards Act (“FLSA”). The Company
denies these allegations and will actively defend its position. However, litigation is inherently unpredictable and the outcome of these matters
cannot presently be determined. Although company counsel believes that the Company has valid defenses in these matters, it could in the
future incur judgments or enter into settlements of claims that could have a material adverse effect on its results of operations in any particular
period.
In August 2003, the Company reached an agreement with the Equal Employment Opportunity Commission (“EEOC”) to settle allegations of
discrimination in Supercuts. The $3.2 million settlement was accrued during the fourth quarter of fiscal year 2003 in corporate and franchise
support costs in the Consolidated Statement of Operations.
Item 4. Submission of Matters to a Vote of Security Holders
On October 30, 2003, at the annual meeting of the shareholders of the Company, a vote on the election of the Company’s directors took place
with the following results:
19
AUTHORITY
FOR
WITHHOLD
Rolf F. Bjelland
37,305,065
1,891,855
Paul D. Finkelstein
38,662,096
534,824
Thomas L. Gregory
37,303,902
1,893,017
Van Zandt Hawn
37,304,812
1,892,108
Susan Hoyt
37,306,646
1,890,274
David B. Kunin
38,357,673
839,246
Myron Kunin
38,353,629
843,291