Supercuts 2010 Annual Report Download - page 6

Table of Contents
Background:
Based in Minneapolis, Minnesota, the Company's primary business is owning, operating and franchising hair and retail product salons. In
addition to the primary hair and retail product salons, the Company owns Hair Club for Men and Women, a provider of hair restoration
services. As of June 30, 2010, the Company owned, franchised or held ownership interests in over 12,700 worldwide locations. The Company's
locations consisted of 9,929 company-owned and franchise salons, 95 hair restoration centers, and 2,704 locations in which the Company
maintains an ownership interest of less than 100 percent. Each of the Company's salon concepts offer similar salon products and services and
serve the mass market consumer marketplace. The Company's hair restoration centers offer three hair restoration solutions; hair systems, hair
transplants and hair therapy, which are targeted at the mass market consumer.
The Company is organized to manage its operations based on significant lines of business—salons and hair restoration centers. Salon
operations are managed based on geographical location—North America and international. The Company's North American salon operations
are comprised of 7,505 company-owned salons and 2,020 franchise salons operating in the United States, Canada and Puerto Rico. The
Company's international operations are comprised of 404 company-owned salons. The Company's worldwide salon locations operate primarily
under the trade names of Regis Salons, MasterCuts, SmartStyle, Supercuts, Cost Cutters, and Sassoon. The Company's hair restoration centers
are located in the United States and Canada. During fiscal year 2010, the number of customer visits at the Company's company-owned salons
approximated 94 million. The Company had approximately 56,000 corporate employees worldwide during fiscal year 2010.
On August 1, 2007, the Company contributed 51 of its wholly-owned accredited cosmetology schools to EEG in exchange for a
49.0 percent equity interest in EEG. EEG is the largest beauty school operator in North America with 96 accredited cosmetology schools with
revenues of approximately $175 million annually and is overseen by the Empire Beauty School management team.
In January 2008, the Company's effective ownership interest increased to 55.1 percent related to the buyout of EEG's minority interest
shareholder. The Company will continue to account for the investment in EEG under the equity method of accounting as Empire Beauty
School retains majority voting interest and has full responsibility for managing EEG. Refer to Note 6 to the Consolidated Financial Statements
for additional information.
On January 31, 2008, the Company merged its continental European franchise salon operations with the operations of the Franck Provost
Salon Group in exchange for a 30.0 percent equity interest in the newly formed Provalliance entity (Provalliance). The merger with the
operations of the Franck Provost Salon Group which are also located in continental Europe, created Europe's largest salon operator with
approximately 2,500 company-owned and franchise salons as of June 30, 2010.
The Company contributed to Provalliance the shares of each of its European operating subsidiaries, other than the Company's operating
subsidiaries in the United Kingdom and Germany. The contributed subsidiaries operate retail hair salons in France, Spain, Switzerland and
several other European countries primarily under the Jean Louis David™ and Saint Algue™ brands. This transaction has created significant
growth opportunities for Europe's salon brands. The Franck Provost Salon Group management structure has a proven platform to build and
acquire company-owned stores as well as a strong franchise operating group that is positioned for expansion. The Company recorded a
$25.7 million "other-than-temporary" impairment charge in its fourth quarter ended June 30, 2009 on its investment in Provalliance as a result
of increased debt and reduced earnings expectations that reduced the fair value of Provalliance below carrying value as of June 30, 2009.
On February 16, 2009, the Company sold Trade Secret. The Company concluded, after a comprehensive review of its strategic and
financial options, to divest Trade Secret. The sale of Trade
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