Supercuts 2007 Annual Report Download - page 55

levels in fiscal year 2007. Receivables increased during the twelve months ended June 30, 2007 primarily due to credit card receivables and
increased student enrollment in the beauty school segment as compared to June 30, 2006.
During fiscal year 2006, depreciation and amortization increased primarily due to the amortization of intangible assets that we acquired in
the acquisition of the hair restoration centers during December 2004 and the amortization of intangibles acquired in conjunction with recent
beauty school acquisitions. Also, losses on the disposal of property and equipment (which is included in depreciation and amortization) from
salons which were closed during the fourth quarter contributed to the increase. The asset impairment charge was primarily due to impairment
charges for underperforming salons and the impairment of a minority investment in a privately held company. SFAS No. 123R requires that the
cash retained as a result of the tax deductibility of increases in the value of stock-based arrangements be presented as a cash outflow from
operating activities and a cash inflow from financing activities in the Consolidated Statement of Cash Flows (shown as Excess tax benefit from
stock-based compensation plans). In periods prior to the three months ended September 30, 2005, and the Company’s adoption of SFAS
No. 123R, the tax benefit realized upon exercise of stock options was presented as an operating activity (included within accrued expenses) and
totaled $9.1 million for the year ended June 30, 2005.
During fiscal year 2005, accounts payable and accrued expenses increased primarily due to an increase in inventory, as well as the timing
of advertising expenses and income tax payments. Inventories increased due to growth in the number of salons, as well as lower than expected
same-store product sales. The asset and goodwill impairment was primarily comprised of a goodwill impairment charge of $38.3 million
resulting from a write-off related to the international salon segment.
Investing Activities
Net cash used in investing activities during the twelve months ended June 30, 2007, 2006 and 2005 were the result of the following:
Acquisitions were primarily funded by a combination of operating cash flows and debt. Additionally, 155 major remodeling projects
during fiscal year 2007, compared to 170 and 205 during fiscal years 2006 and 2005, respectively. We constructed 420 company-owned salons
and two beauty schools and acquired 354 company-owned salons (97 of which were franchise buybacks), one beauty school and two hair
restoration centers (one of which was a franchise buyback) during fiscal year 2007.
We constructed 531 company-owned salons, two beauty schools and one hair restoration center and acquired 290 company-owned salons
(142 of which were franchise buybacks), 30 beauty schools and eight
54
Investing Cash Flows
For the Years Ended June 30,
2007
2006
2005
(Dollars in thousands)
Business and salon acquisitions
$
(68,747
)
$
(155,481
)
$
(328,566
)
Capital expenditures for remodels or other additions
(35,299
)
(41,246
)
(34,737
)
Capital expenditures for the corporate office (including all
technology
-
related expenditures)
(23,854
)
(30,455
)
(18,001
)
Payment of contingent purchase price
—
(
3,630
)
—
Capital expenditures for new salon construction
(30,926
)
(44,583
)
(48,360
)
Proceeds from loans and investments
5,250
—
—
Disbursements for loans and investments
(30,673
)
(6,000
)
—
Net investment hedge settlement
(8,897
)
—
—
Proceeds from sale of assets
97
730
846
$
(193,049
)
$
(280,665
)
$
(428,818
)