Supercuts 2009 Annual Report Download - page 27

Table of Contents
Certain of the terms and provisions of the convertible notes we recently issued may adversely affect our financial condition and operating results
and impose other risks.
We recently issued $172,500,000 aggregate principal amount of our 5.0% convertible senior notes due 2014 in a public offering. Certain
terms of the notes we issued may adversely affect our financial condition and operating results or impose other risks, such as the following:
• Holders of notes may convert their notes into shares of our common stock, which may dilute the ownership interest of our
shareholders,
•
If we elect to settle all or a portion of the conversion obligation exercised by holders of the notes through the payment of cash, it
could adversely affect our liquidity,
• Holders of notes may require us to purchase their notes upon certain fundamental changes, and any failure by us to purchase the
notes in such event would result in an event of default with respect to the notes,
• The fundamental change provisions contained in the notes may delay or prevent a takeover attempt of the Company that might
otherwise be beneficial to our investors,
•
Recent changes in the accounting method for convertible debt securities that may be settled in cash require us to include both the
current period's amortization of the debt discount and the instrument's coupon interest as interest expense, which will decrease our
financial results,
•
Our ability to pay principal and interest on the notes depends on our future operating performance and any failure by us to make
scheduled payments could allow the note holders to declare all outstanding principal and interest to be due and payable, result in
termination of other debt commitments and foreclosure proceedings by other lends, or force us into bankruptcy or liquidation, and
• The debt obligations represented by the notes may limit our ability to obtain additional financing, require us to dedicate a
substantial portion of our cash flow from operations to pay our debt, limit our ability to adjust rapidly to changing market
conditions and increase our vulnerability to downtowns in general economic conditions in our business.
Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
The Company's corporate offices are headquartered in a 270,000 square foot, four building complex in Edina, Minnesota owned or leased
by the Company. The Company also operates small offices in Toronto, Canada; Coventry and London, England; and Boca Raton, Florida. These
offices are occupied under long-term leases.
The Company owns distribution centers located in Chattanooga, Tennessee and Salt Lake City, Utah. The Chattanooga facility currently
utilizes 250,000 square feet while the Salt Lake City facility utilizes 210,000 square feet. The Salt Lake City facility may be expanded to
290,000 square feet to accommodate future growth.
The Company operates all of its salon locations and hair replacement centers under leases or license agreements. Substantially all of its
North American locations in regional malls are operating under leases with an original term of at least ten years. Salons operating within strip
centers and Wal-Mart Supercenters have leases with original terms of at least five years, generally with the ability to renew, at the Company's
option, for one or more additional five year periods. Salons operating within department stores in Canada and Europe operate under license
agreements, while freestanding or
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