Supercuts 2011 Annual Report Download - page 110

Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
6. INVESTMENTS IN AND LOANS TO AFFILIATES (Continued)
The table below presents the summarized financial information of the equity method investees as of June 30, 2011 and 2010. The financial
information of the equity investees was based on results as of and for the twelve months ended June 30.
Investment in Provalliance
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 2,600 company-owned and franchise salons as of June 30, 2011.
The merger agreement contains a right (Equity Put) to require the Company to purchase an additional ownership interest in Provalliance
between specified dates in 2010 to 2018. The acquisition price is determined based on a multiple of the earnings before interest, taxes,
depreciation and amortization of Provalliance for a trailing twelve month period adjusted for certain items as defined in the agreement which is
intended to approximate fair value. The initial estimated fair value of the Equity Put as of January 31, 2008, approximately $24.8 million, has
been included as a component of the Company's investment in Provalliance. A corresponding liability for the same amount as the Equity Put was
recorded in other noncurrent liabilities. Any changes in the estimated fair value of the Equity Put are recorded in the Company's consolidated
statement of operations. The Company recorded a $2.4 million decrease in the fair value of the Equity Put during fiscal year 2011, see further
discussion below and within Note 7 to the Consolidated Financial Statements. Any changes related to foreign currency translation are recorded
in accumulated other comprehensive income. The Company recorded a $3.8 million increase in the Equity Put related to foreign currency
translation during fiscal year 2011, see further discussion within Note 7 to the Consolidated Financial Statements. If the Equity Put is exercised,
and the Company fails to complete the purchase, the parties exercising the Equity Put will be entitled to exercise various remedies against the
Company, including the right to purchase the Company's interest in Provalliance for a purchase price determined based on a discounted multiple
of the earnings before interest and taxes of Provalliance for a trailing twelve month period. The merger
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Equity Method
Investee Greater
Than 50 Percent Owned
Equity Method
Investees Less
Than 50 Percent Owned
2011
2010
2009
2011
2010
2009
(Dollars in thousands)
Summarized Balance
Sheet Information:
Current assets
$
34,715
$
35,070
$
34,990
$
93,280
$
74,040
$
109,700
Noncurrent assets
113,249
105,469
99,858
314,127
263,472
313,763
Current liabilities
29,340
27,458
25,583
109,416
91,077
137,169
Noncurrent liabilities
33,658
32,017
39,661
98,269
93,055
115,067
Summarized Statement
of Operations
Information:
Gross revenue
$
192,864
$
176,535
$
153,693
$
283,442
$
299,188
$
290,978
Gross profit
73,068
64,661
48,173
120,992
123,210
124,361
Operating income
18,994
19,752
7,656
30,084
21,227
19,047
Net income
11,023
11,082
3,611
21,154
14,763
13,295