Supercuts 2008 Annual Report Download - page 93

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
3. ACQUISITIONS, INVESTMENTS IN AFFILIATES AND LOANS (Continued)
Company's effective ownership interest increased to 55.1 percent related to the buyout of EEG's equity interest shareholder. In connection with
the buyout, the Company advanced EEG, an additional $21.4 million. Total outstanding debt was $36.4 million at June 30, 2008. The exposure
to loss related to the Company's involvement with EEG is the carrying value of the investment and the outstanding loans.
The Company will continue to account for the investment in EEG under the equity method of accounting as Empire Beauty School retains
majority voting interest and has full responsibility for managing EEG. During the fiscal year ended June 30, 2008 the Company recorded
$0.9 million of interest income related to the loans and advances. During the fiscal year ended June 30, 2008, the Company recorded
$0.8 million of equity earnings related to its investment in EEG.
Investment in Intelligent Nutrients, LLC
The Company holds a 49.0 percent interest in Intelligent Nutrients, LLC. The Company's ownership percentage decreased from
50.0 percent to 49.0 percent during the three months ended March 31, 2008 due to the issuance of additional shares by Intelligent Nutrients, LLC
to the other investor. The Company is accounting for this investment under the equity method. Intelligent Nutrients, LLC currently carries a wide
variety of organic, harmonically grown™ products, including dietary supplements, coffees, teas and aromatics. Additionally, a full line of
professional hair care and personal care products is in development and is expected to be available in the fall of calendar year 2008. These
products will be offered at the Company's corporate and franchise salons, and eventually in other independently owned salons. During the fiscal
year ended June 30, 2008 the Company recorded $1.6 million of equity losses related to its investment in Intelligent Nutrients, LLC. The
exposure to loss related to the Company's involvement with Intelligent Nutrients, LLC is the carrying value of the investment. Subsequent to
June 30, 2008, the Company completed $3.0 million of loans to Intelligent Nutrients, LLC.
Investment in MY Style
In April 2007, the Company purchased exchangeable notes issued by Yamano Holding Corporation and a loan obligation of a Yamano
Holdings subsidiary, Beauty Plaza Co. Ltd., for an aggregate amount of 1.3 billion JPY ($11.3 million USD). A portion of the notes are
exchangeable for approximately 14.8 percent of the outstanding shares of MY Style, a subsidiary of Yamano Holdings. The exchangeable
portion of the notes is accounted for as a cost method investment. The notes, excluding the exchangeable portion are recorded in the condensed
consolidated balance sheet as current assets and long-term assets of $3.9 and $2.0 million, respectively at June 30, 2008. The notes are due in
May of fiscal years 2009 through 2013. The Company recorded $0.2 million in interest income related to the exchangeable notes and loan
obligation during the fiscal year ended June 30, 2008. In connection with the purchase of the exchangeable notes and loan obligation, the parties
also entered into an agreement with respect to their joint pursuit of opportunities relating to retail hair salons in Asia. The Company did not
estimate the fair value of MY Style as of June 30, 2008 as there were no identified events or changes in circumstances that the Company was
aware of that would have had a significant adverse affect on the fair value of MY Style.
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