Supercuts 2011 Annual Report Download - page 107

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Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
4. ACQUISITIONS (Continued)
The value and related weighted average amortization periods for the intangibles acquired during fiscal years 2011 and 2010 business
acquisitions, in total and by major intangible asset class, are as follows:
The majority of the purchase price in salon acquisitions is accounted for as residual goodwill rather than identifiable intangible assets. This
stems from the value associated with the walk-in customer base of the acquired salons, which is not recorded as an identifiable intangible asset
under current accounting guidance, as well as the limited value and customer preference associated with the acquired hair salon brand. Key
factors considered by consumers of hair salon services include personal relationships with individual stylists, service quality and price point
competitiveness. These attributes represent the "going concern" value of the salon.
Residual goodwill further represents the Company's opportunity to strategically combine the acquired business with the Company's existing
structure to serve a greater number of customers through its expansion strategies. In the acquisitions of international salons and hair restoration
centers, the residual goodwill primarily represents the growth prospects that are not captured as part of acquired tangible or identified intangible
assets. Generally, the goodwill recognized in the North American salon transactions is expected to be fully deductible for tax purposes and the
goodwill recognized in the international salon transactions is non-
deductible for tax purposes. Goodwill generated in certain acquisitions, such as
the acquisition of hair restoration centers, is not deductible for tax purposes due to the acquisition structure of the transaction.
During fiscal years 2011, 2010, and 2009, the Company purchased salon operations from its franchisees. The Company evaluated the
effective settlement of the pre-existing franchise contracts and associated rights afforded by those contracts. The Company determined that the
effective settlement of the pre-existing franchise contracts at the date of the acquisition did not result in a gain or loss, as the agreements were
neither favorable nor unfavorable when compared to similar current market transactions, and no settlement provisions exist in the pre-existing
contracts. Therefore, no settlement gain or loss was recognized with respect to the Company's franchise buybacks.
103
Purchase Price
Allocation
Weighted
Average
Amortization
Period
Year Ended
June 30,
(in years)
2011 2010 2011 2010
(Dollars in
thousands)
Amortized intangible assets:
Brand assets and trade
names
$
159
$
61
10
20
Customer lists
1,207
—
7
—
Franchise agreements
269
—
40
—
Lease intangibles
151
15
20
20
Non
-
compete agreements
—
—
—
—
Other
178
58
20
20
Total
$
1,964
$
134
14
20