Supercuts 2009 Annual Report Download - page 37

Table of Contents
A summary of the Company's goodwill balance as of June 30, 2009 by reporting unit is as follows:
Prior to the annual goodwill impairment analysis for fiscal year 2009, the fair value of the Company's stock declined such that it began
trading below book value per share. Due to the adverse changes in operating results and the continuation of the Company's stock trading below
book value per share, the Company performed an interim impairment test of goodwill during the three months ended December 31, 2008.
As a result of the Company's interim impairment test of goodwill during the three months ended December 31, 2008, a $41.7 million
impairment charge for the full carrying amount of goodwill within the salon concepts in the United Kingdom was recorded within continuing
operations. The recent performance challenges of the international salon operations indicated that the estimated fair value was less than the
current carrying of this reporting units net assets, including goodwill.
During the three months ended March 31 of fiscal years 2008 and 2007, we performed our annual goodwill impairment analysis on our
reporting units. Based on our testing, a $23.0 million impairment charge was recorded during fiscal year 2007 related to our beauty school
business. No impairment charges were recorded during fiscal years 2008.
Long
-Lived Assets, Excluding Goodwill
We assess the impairment of long-lived assets annually or when events or changes in circumstances indicate that the carrying value of the
assets or the asset grouping may not be recoverable. Our impairment analysis is performed on a salon by salon basis. The Company's test for
impairment is performed at a salon level as this is the lowest level for which identifiable cash flows are largely independent of the cash flows of
other groups of assets and liabilities. Factors considered in deciding when to perform an impairment review include significant under-
performance of an individual salon in relation to expectations, significant economic or geographic trends, and significant changes or planned
changes in our use of the assets. Impairment is evaluated based on the sum of undiscounted estimated future cash flows expected to result from
use of the related salon assets that does not recover the carrying value of the salon assets. When the sum of a salon's undiscounted estimated
future cash flow is zero or negative, impairment is measured as the full carrying value of the related salon's equipment and leasehold
improvements. When the sum of a salon's undiscounted cash flows is greater than zero but less than the carrying value of the related salon's
equipment and leasehold improvements, a discounted cash flow analysis is performed to estimate the fair value of the salon assets and
impairment is measured as the difference between then carrying value of the salon assets and the estimated fair value. The fair value estimate is
based on the best information available, including market data.
Judgments made by management related to the expected useful lives of long-lived assets and the ability to realize undiscounted cash flows
in excess of the carrying amounts of such assets are affected by factors such as the ongoing maintenance and improvement of the assets, changes
in economic conditions and changes in operating performance. As the ongoing expected cash flows and carrying
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Reporting Unit As of
June 30, 2009
(Dollars in thousands)
Regis
$
136,274
MasterCuts
4,652
SmartStyle
47,783
Supercuts
120,360
Promenade
305,986
Total North America Salons
615,055
Hair Restoration Centers
149,367
Consolidated Goodwill
$
764,422