Supercuts 2010 Annual Report Download - page 126

Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
11. LEASE TERMINATION COSTS (Continued)
profitability. The Company recorded a write-
off of salon assets in the fourth quarter of fiscal year 2009 of approximately $2.9 million related to
the closures. The Company ceased using the right to use the leased property or negotiated a lease termination agreement with the lessor prior to
June 30, 2010 and 2009 for 29 and seven U.K. company-owned salons, respectively. The June 2009 plan is substantially complete.
In July 2008, the Company approved a plan to close up to 160 underperforming company-owned salons in fiscal year 2009.
Approximately 100 locations were regional mall based concepts, another 40 locations were strip center concepts and 20 locations were in the
U.K. The timing of the closures was dependent on successfully completing lease termination agreements and was therefore subject to change.
The Company offered employment to associates affected by such closings at nearby Regis-owned salons. The decision was a result of a
comprehensive evaluation of the Company's salon portfolio, further continuing the Company's initiatives to enhance profitability. As lease
settlements were negotiated the Company found that some lessors were willing to negotiate rent reductions which allowed the Company to
keep operating certain stores. As a result, the number of stores closed was less than the 160 stores per the approved plan in July 2008. The July
2008 plan is substantially complete.
As of June 30, 2009, 69 stores under the July 2008 plan ceased using the right to use the leased property or negotiated a lease termination
agreement with the lessor in which the Company will cease using the right to the leased property subsequent to June 30, 2009. Of the 69 stores,
63 stores were within the North America reportable segment, one store within the international segment, and five stores within discontinued
operations. Lease termination costs from continuing operations are presented as a separate line item in the Consolidated Statement of
Operations. Lease termination costs related to the Trade Secret salon concept are reported within discontinued operations.
During the twelve months ended June 30, 2010, an additional 42 stores under the July 2008 plan ceased using the right to use the leased
property or negotiated a lease termination agreement with the lessor in which the Company will cease using the right to the leased property
subsequent to June 30, 2010. The 42 stores were within the North America reportable segment.
Lease termination expense represents either the lease settlement or the net present value of remaining contractual lease payments related to
closed stores, after reduction by estimated sublease rentals. The activity reflected in the accrual for lease termination costs is as follows:
122
For the Twelve
Months Ended
June 30,
Accrual for Lease Terminations 2010 2009
(Dollars in thousands)
Balance at July 1,
$
2,760
$
—
Provision for lease termination costs:
Provisions associated with store
closings
2,212
6,221
Change in assumptions about lease
terminations and sublease income
(67
)
—
Cash payments
(3,519
)
(3,461
)
Balance at June 30,
$
1,386
$
2,760