Supercuts 2006 Annual Report Download - page 44

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Rent
Rent expense, which includes base and percentage rent, common area maintenance and real estate taxes, was as follows:
(1)
Represents the basis point change in rent expense as a percent of total revenues as compared to the corresponding period of the prior fiscal
year.
During fiscal year 2006, $4.1 million in lease termination costs were recognized through rent expense. These costs resulted from our
decision to close 64 company-owned salon locations and refocus efforts on improving the sales and operations of nearby salons. Additionally,
the increase in this fixed-cost expense as a percent of total revenues was due to salon rent increasing at a faster rate than salon same-store sales
during both fiscal year 2006 and 2005.
Depreciation and Amortization
Depreciation and amortization expense (D&A) was as follows:
(1)
Represents the basis point change in depreciation and amortization as a percent of total revenues as compared to the corresponding period
of the prior fiscal year.
The fiscal year 2006 basis point increase in depreciation and amortization was primarily due to increased salon impairment charges during
fiscal year 2006 stemming from lower same-store sales volumes during recent fiscal years. Impairment charges of $7.4 and $1.0 million were
recognized for the North American and International operations, respectively, during fiscal year 2006. Additionally, $2.4 million in losses on
disposal of property and equipment was recognized related to the fourth quarter closure of 64 salons. We decided to close these company-
owned salon locations in order to refocus efforts on improving the sales and operations of nearby salons. The fiscal year 2005 basis point
increase was primarily due to amortization of intangible assets that we acquired in the acquisition of the hair restoration centers during the
second quarter of fiscal year 2005.
43
Expense as %
of Total
Increase Over Prior Fiscal Year
Years Ended June 30,
Rent
Revenues
Dollar
Percentage
Basis Point(1)
(Dollars in thousands)
2006
$
350,926
14.4
%
$
39,942
12.8
%
20
2005
310,984
14.2
41,555
15.4
20
2004
269,429
14.0
33,781
14.3
—
Expense as %
of Total
Increase (Decrease) Over Prior Fiscal Year
Periods Ended June 30,
D&A
Revenues
Dollar
Percentage
Basis Point(1)
(Dollars in thousands)
2006
$
115,903
4.8
%
$
24,150
26.3
%
60
2005
91,753
4.2
16,770
22.4
30
2004
74,983
3.9
8,234
12.3
(10
)