Supercuts 2008 Annual Report Download - page 63

uncertainties, which could cause actual results to differ materially from those expressed in or implied by the statements herein. Such forward-
looking statements are often identified herein by use of words including, but not limited to, "may," "believe," "project," "forecast," "expect,"
"estimate," "anticipate," and "plan." In addition, the following factors could affect the Company's actual results and cause such results to differ
materially from those expressed in forward-looking statements. These factors include competition within the personal hair care industry, which
remains strong, both domestically and internationally, price sensitivity; changes in economic conditions; changes in consumer tastes and fashion
trends; labor and benefit costs; legal claims; risk inherent to international development (including currency fluctuations); the continued ability of
the Company and its franchisees to obtain suitable locations and financing for new salon development; governmental initiatives such as
minimum wage rates, taxes and possible franchise legislation; the ability of the Company to successfully identify, acquire and integrate salons
that support its growth objectives; the ability of the Company to maintain satisfactory relationships with suppliers; or other factors not listed
above. The ability of the Company to meet its expected revenue growth is dependent on salon acquisitions, new salon construction and same-
store sales increases, all of which are affected by many of the aforementioned risks. Additional information concerning potential factors that
could affect future financial results is set forth under Item 1A of this Form 10-K. We undertake no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future events or otherwise. However, your attention is directed to any
further disclosures made in our subsequent annual and periodic reports filed or furnished with the SEC on Forms 10-Q and 8-K and Proxy
Statements on Schedule 14A.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
The primary market risk exposure of the Company relates to changes in interest rates in connection with its debt, some of which bears
interest at variable rates based on LIBOR plus an applicable borrowing margin. Additionally, the Company is exposed to foreign currency
translation risk related to its net investments in its foreign subsidiaries and, to a lesser extent, changes in the Canadian dollar exchange rate. The
Company has established policies and procedures that govern the management of these exposures through the use of derivative financial
instrument contracts. By policy, the Company does not enter into such contracts for the purpose of speculation. The following details the
Company's policies and use of financial instruments.
Interest Rate Risk:
The Company has established an interest rate management policy that attempts to minimize its overall cost of debt, while taking into
consideration the earnings implications associated with the volatility of short-term interest rates. As part of this policy, the Company has elected
to maintain a combination of variable and fixed rate debt. A one percent change in interest rates (including the impact of existing interest rate
swap contracts) could impact the Company's interest expense by approximately $1.9 million. During fiscal year 2008, the National Association
of Insurance Commissioners downgraded Regis' private placement debt from investment-grade to non-investment grade. The downgrade does
not have any immediate effect on the private placement debt outstanding and corresponding interest rate as of June 30, 2008. Any future non
investment grade private placement debt would result in a substantially higher interest rate. The downgrade has no impact on the Company's
current revolving credit facility or its ability to secure future bank borrowings. Considering the effect of interest rate swaps and including $0.3
and $0.9 million increases to long-term
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