Supercuts 2009 Annual Report Download - page 55

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Table of Contents
impairment charges of $183.3 million. The income for the years ended June 30, 2008 and 2007 are the result of operating income, net of tax. The
decrease in income from discontinued operations during fiscal year 2008 was primarily due to same-store sales decreasing 7.9 percent and
reduced retail product margins, largely the result of recent salon acquisitions which have lower product margins. The decrease in income from
discontinued operations during fiscal year 2008 was also due to long-lived asset impairment charges of $4.4 million in fiscal year 2008 as
compared to $1.7 million during fiscal year 2007. See Note 2 to the Consolidated Financial Statements for further discussion.
Recent Accounting Pronouncements
Recent accounting pronouncements are discussed in Note 1 to the Consolidated Financial Statements.
Effects of Inflation
We compensate some of our salon employees with percentage commissions based on sales they generate, thereby enabling salon payroll
expense as a percent of company-owned salon revenues to remain relatively constant. Accordingly, this provides us certain protection against
inflationary increases, as payroll expense and related benefits (our major expense components) are variable costs of sales. In addition, we may
increase pricing in our salons to offset any significant increases in wages. Therefore, we do not believe inflation has had a significant impact on
the results of our operations.
Constant Currency Presentation
The presentation below demonstrates the effect of foreign currency exchange rate fluctuations from year to year. To present this
information, current period results for entities reporting in currencies other than United States dollars are converted into United States dollars at
the average exchange rates in effect during the corresponding period of the prior fiscal year, rather than the actual average exchange rates in
effect during the current fiscal year. Therefore, the foreign currency impact is equal to current year results in local currencies multiplied by the
change in the average foreign currency exchange rate between the current fiscal period and the corresponding period of the prior fiscal year.
During the fiscal years ended June 30, 2009, foreign currency translation had an unfavorable impact on consolidated revenues due to the
weakening of the Canadian dollar, British pound, and Euro against the United States dollar.
During the fiscal years ended June 30, 2008 and 2007, foreign currency translation had a favorable impact on consolidated revenues due to
the strengthening of the Canadian dollar, British pound, and Euro against the United States dollar.
Results of Operations by Segment
Based on our internal management structure, we report three segments: North American salons, international salons and hair restoration
centers. Significant results of operations are discussed below with respect to each of these segments.
53
Favorable (Unfavorable) Impact of Foreign Currency Exchange Rate Fluctuations
Impact on Income Before Income Taxes
Impact on Revenues
Fiscal 2008
Fiscal 2007
(Dollars in thousands)
Fiscal 2009
Fiscal 2008
Fiscal 2007
Fiscal 2009
Currency
Canadian dollar
$
(18,509
)
$
14,400
$
3,396
$
(3,009
)
$
2,487
$
567
British pound
(36,624
)
7,689
15,167
7,248
134
616
Euro
(496
)
3,831
4,388
(252
)
755
782
Total
$
(55,629
)
$
25,920
$
22,951
$
3,987
$
3,376
$
1,965