Supercuts 2004 Annual Report Download - page 76

Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
Based upon purchase price allocations, which may have components representing preliminary allocations with respect to recent fiscal year
2004 acquisitions, the components of the aggregate purchase prices of the acquisitions made during fiscal years 2004, 2003 and 2002, and
the allocation of the purchase prices, were as follows:
Approximately $0.1, $1.1 and $1.1 million of employee termination and other exit costs were incurred in connection with acquisitions in
fiscal years 2004, 2003 and 2002, respectively. These costs consisted primarily of employee termination costs and were treated as a liability
assumed at the acquisition date.
Based upon the actual and preliminary purchase price allocations, the change in the carrying amount of the goodwill for the years ended
June 30, 2004 and 2003 is as follows:
Generally, the goodwill recognized in the North American transactions is expected to be fully deductible for tax purposes and the goodwill
recognized in the international transactions is non-deductible for tax purposes. The majority of the purchase price is accounted for as
residual goodwill rather than identifiable intangible assets. This stems from the value associated with the walk-in customer base of the
acquired hair salon brand. Residual goodwill further represents the Company’s opportunity to strategically combine the acquired business
with the Company’s existing structure to serve a greater number of customers through its expansion strategies. Internationally, the residual
goodwill primarily represents the growth prospects that are not captured as part of acquired tangible or identified intangible assets.
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(Dollars in thousands) 2004 2003 2002
Components of aggregate purchase prices:
Cash
$
99,734
$
66,880
$
59,925
Stock
9,000
21,501
26,301
Liabilities assumed or payable
1,472
3,246
13,608
$
110,206
$
91,627
$
99,834
Allocation of the purchase prices:
Net tangible assets (liabilities) acquired
$
15,704
$
16,828
$
(1,952
)
Identifiable intangible assets
14,990
9,172
41,181
Goodwill
79,512
65,627
60,605
$
110,206
$
91,627
$
99,834
2004
2003
(Dollars in thousands) North America International North America International
Balance at beginning of year
$
299,602
$
73,016
$
252,055
$
52,474
Goodwill acquired
77,042
2,470
45,963
19,664
Finalization of purchase accounting
8,882
*
(8,314
)*
(1,407
)
(8,496
)
Translation rate adjustments
193
4,249
2,991
9,374
Balance at end of year
$
385,719
$
71,421
$
299,602
$
73,016
*Relates to the finalization of the allocation of goodwill to the related reporting units, as well as a deferred tax adjustment related to
acquired intangible assets.