Supercuts 2009 Annual Report Download - page 93

Download and view the complete annual report

Please find page 93 of the 2009 Supercuts annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 160

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144
  • 145
  • 146
  • 147
  • 148
  • 149
  • 150
  • 151
  • 152
  • 153
  • 154
  • 155
  • 156
  • 157
  • 158
  • 159
  • 160

Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
1. BUSINESS DESCRIPTION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
performed, at least quarterly, in order to ensure that the estimated rebate accrued is reasonable, and any necessary adjustments are recorded.
Shipping and Handling Costs:
Shipping and handling costs are incurred to store, move and ship product from the Company's distribution centers to company-owned and
franchise locations, and include an allocation of internal overhead. Such shipping and handling costs related to product shipped to company-
owned locations are included in site operating expenses in the Consolidated Statement of Operations. Shipping and handling costs related to
shipping product to franchise locations totaled $2.7, $3.4, and $2.8 million during fiscal years 2009, 2008, and 2007, respectively, and are
included within general and administrative expenses. Any amounts billed to the franchisee for shipping and handling are included in product
revenues within the Consolidated Statement of Operations.
Advertising:
Advertising costs, including salon collateral material, are expensed as incurred. Net advertising costs expensed were $61.4 million
($56.9 million included in continuing operations, and $4.5 million included in discontinued operations), $71.4 million ($65.8 million included in
continuing operations, and $5.6 million included in discontinued operations), and $69.2 million ($65.2 million included in continuing operations,
and $4.0 million included in discontinued operations) in fiscal years 2009, 2008, and 2007, respectively. The Company participates in
cooperative advertising programs under which the vendor reimburses the Company for costs related to advertising for its products. The
Company records such reimbursements as a reduction of advertising expense when the expense is incurred. During fiscal years 2009, 2008, and
2007, no amounts were received in excess of the Company's related expense.
Advertising Funds:
The Company has various franchising programs supporting its franchise salon concepts consisting of Supercuts, Cost Cutters, First Choice
Haircutters, Magicuts, Pro Cuts and Beauty Supply Outlet. Most of the concepts maintain advertising funds that provide comprehensive
advertising and sales promotion support.
The Supercuts advertising fund is the Company's largest advertising fund. The Supercuts advertising fund is administered by a council
consisting primarily of franchisee representatives. The council has overall control of all of the fund's expenditures and operates in accordance
with terms of the franchise operating and other agreements.
Each Supercuts salon contributes 5.0 percent of service revenues to the fund (contributions for other concepts range between 1.5 percent
and 5.0 percent). The majority of the advertising funds are spent to support media placement and local marketing activities. The remainder is
allocated for the creation of national advertising campaigns and system wide activities. None of the Supercuts advertising funds collected may be
used by the Company as reimbursement for the cost of administering the advertising fund. Advertising funds can only be used as directed by the
fund's council and are considered to be restricted.
The Company records all advertising funds as assets and liabilities within the Company's Consolidated Balance Sheet. As of June 30, 2009
and 2008, approximately $16.8 and $16.3 million,
91