Supercuts 2007 Annual Report Download - page 49

The percentage increases during the years ended June 30, 2007 and 2006 were due to the following factors.
We acquired 16 international salons during the twelve months ended June 30, 2007, including four franchise buybacks. The organic
growth was due to the construction of 25 company-owned international salons during the twelve months ended June 30, 2007 and the
additional week in the fiscal year 2007 reporting period as compared to the fiscal year 2006 reporting period, partially offset by a same-store
sales decrease of 0.6 percent for the twelve months ended June 30, 2007. The foreign currency impact during fiscal year 2007 was driven by
the weakening of the United States dollar against the British pound and the Euro as compared to the exchange rates for fiscal year 2006.
We acquired 12 international salons during the twelve months ended June 30, 2006, including two franchise buybacks. The organic
growth stemmed from the construction of 33 company-owned international salons during the twelve months ended June 30, 2006, partially
offset by a same-store sales decrease of 3.0 percent during the twelve months ended June 30, 2006. The foreign currency impact during fiscal
year 2006 was driven by the strengthening of the United States dollar against the British pound and the Euro as compared to the exchange rates
for fiscal year 2005. The decrease in franchise revenues was primarily due to the closure and sale of 116 franchise salons during fiscal year
2006.
International Salon Operating Income (Loss). Operating income (loss) for the international salons was as follows:
(1)
Represents the basis point change in international salon operating income (loss) as a percent of total international salon revenues as
compared to the corresponding period of the prior fiscal year.
The basis point improvement in international salon operating income as a percent of international salon revenues during fiscal year 2007
was primarily due to improved product margins and severance expenses incurred in fiscal 2006 that did not occur in fiscal 2007. A same-store
product sales increase of 7.1 percent for the twelve months ended June 30, 2007 also contributed to the improvement.
The basis point improvement in international salon operating income as a percent of international salon revenues during fiscal year 2006
was primarily due to the goodwill impairment charge of $38.3 million recorded during the three months ended March 31, 2005, offset by a $1.0
million charge in fiscal year 2006 related to the impairment of certain salons’ property and equipment which contributed to an increase in
depreciation and amortization expense. Exclusive of the prior year goodwill impairment charge, operating income decreased 280 basis points as
a percentage of total international salon revenues.
48
Percentage Increase
(Decrease) in Revenues
For the Years Ended June 30,
2007
2006
Acquisitions (previous twelve months)
2.6
%
1.8
%
Organic growth
4.4
2.0
Foreign currency
8.5
(3.9
)
Franchise revenues
0.3
(0.5
)
Closed salons
(1.0
)
(2.1
)
14.8
%
(2.7
)%
Operating
Operating Income
(Loss) as
Increase (Decrease) Over Prior Fiscal Year
Years Ended June 30,
Income (Loss)
% of Total Revenues
Dollar
Percentage
Basis Point
(1)
(Dollars in thousands)
2007
$
17,548
6.9
%
$
3,986
29.4
%
80
2006
13,562
6.1
31,695
174.8
1,410
2005
(18,133
)
(8.0
)
(40,612
)
(180.7
)
(1,910
)