Supercuts 2005 Annual Report Download - page 87

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
Salon Development Program:
As a part of its salon development program, the Company continues to negotiate and enter into leases and commitments for the acquisition
of equipment and leasehold improvements related to future salon locations, and continues to enter into transactions to acquire established hair
care salons and businesses.
Contingencies:
The Company is self-insured for most workers’ compensation and general liability losses subject to per occurrence and aggregate annual
liability limitations. The Company is insured for losses in excess of these limitations. The Company is also self-insured for health care claims
for eligible participating employees subject to certain deductibles and limitations. The Company determines its liability for claims incurred but
not reported on an actuarial basis.
7. LITIGATION
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 general and
administrative expenses in the Consolidated Statement of Operations.
8. INCOME TAXES:
The provision for income taxes consists of:
On October 4, 2004, President Bush signed an Act into law that included a provision reinstating the Work Opportunity and Welfare-to-
Work Credits. The reinstatement is retroactive to January 1, 2004 and the credits will be available through December 31, 2005. This change in
tax law had an annual impact of approximately $1.8 million for fiscal year 2005.
86
2005
2004
2003
(Dollars in thousands)
Current:
United States
$
58,078
$
39,722
$
46,462
International
3,272
3,538
2,086
Deferred:
United States
(10,888
)
14,449
1,383
International
1,364
912
1,288
$
51,826
$
58,621
$
51,219