Supercuts 2009 Annual Report Download - page 51

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Table of Contents
Goodwill Impairment
Goodwill impairment was as follows:
(1)
Increase (Decrease) Over
Prior Fiscal Year
Years Ended June 30, Goodwill
Impairment
Expense as %
of Consolidated
Revenues Dollar
Percentage
Basis Point(1)
(Dollars in thousands)
2009
$
41,661
1.7
%
$
41,661
100.0
%
170
2008
—
—
(
23,000
)
(100.0
)
(100
)
2007
23,000
1.0
23,000
100.0
100
Represents the basis point change in goodwill impairment as a percent of consolidated revenues as compared to the corresponding period
of the prior fiscal year.
The Company recorded a $41.7 million goodwill impairment charge related to the salon concepts in the United Kingdom during fiscal year
2009. The recent performance challenges of the International salon operations indicated that the estimated fair value of the International salon
operations was less than the current carrying value of the reporting unit's net assets, including goodwill. There is no remaining goodwill recorded
within the salon concepts in the United Kingdom.
No impairment charges were recorded during fiscal years 2008.
The Company recorded a $23.0 million impairment charge related to the Company's beauty school operating segment during fiscal year
2007. During fiscal year 2007, the Company entered into an agreement to merge its 51 accredited cosmetology schools into Empire Education
Group, Inc. The terms of the transaction indicated the estimated fair value of the accredited cosmetology schools was less than the carrying value
of the beauty school's net assets, including goodwill, immediately prior to the merger.
Lease Termination Costs
Lease termination costs were as follows:
(1)
Increase (Decrease) Over
Prior Fiscal Year
Years Ended June 30,
Lease
Termination
Costs
Expense as %
of Consolidated
Revenues
Dollar
Percentage
Basis Point(1)
(Dollars in thousands)
2009
$
5,732
0.2
%
$
5,732
100.0
%
20
2008
—
—
—
—
—
2007
—
—
—
—
—
Represents the basis point change in lease termination costs as a percent of consolidated revenues as compared to the corresponding
periods of the prior fiscal year.
The lease termination costs are associated with the Company's plan to close up to 160 (112 from continuing operations) underperforming
company-owned salons in fiscal year 2009. During fiscal year 2009 we closed 71 salons. During the first fiscal quarter of 2010, we anticipate
recording lease termination costs of approximately $3.4 million in connection with closing underperforming salons in the United Kingdom.
See further discussion within Note 11 of the Condensed Consolidated Financial Statements.
49