Supercuts 2012 Annual Report Download - page 126
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Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
10. COMMITMENTS AND CONTINGENCIES: (Continued)
Salon Development Program:
As a part of its salon development program, the Company continues to negotiate and enter into leases and commitments for the acquisition
of equipment and leasehold improvements related to future salon locations, and continues to enter into transactions to acquire established hair
care salons.
Contingencies:
The Company is self-insured for most workers' compensation, employment practice liability, and general liability. Workers' compensation
and general liability losses are subject to per occurrence and aggregate annual liability limitations. The Company is insured for losses in excess
of these limitations. The Company is also self-insured for health care claims for eligible participating employees subject to certain deductibles
and limitations. The Company determines its liability for claims incurred but not reported on an actuarial basis.
11. LITIGATION
The Company is a defendant in various lawsuits and claims arising out of the normal course of business. Like certain other large retail
employers, the Company has been faced with allegations of purported class-wide consumer and wage and hour violations. In addition, the
Company is a nominal defendant, and nine current and former directors and officers of the Company are named defendants, in a shareholder
derivative action in Minnesota state court. The derivative shareholder alleges that the individual defendants breached their fiduciary duties to
the Company in connection with their approval of certain executive compensation arrangements and certain related party transactions. A
Special Litigation Committee has been formed per the direction of the judge in the matter. The Company is working with outside counsel to
formulate its next steps in keeping with the courts. Litigation is inherently unpredictable and the outcome of these matters cannot presently be
determined. Although the actions are being vigorously defended, the Company could in the future incur judgments or enter into settlements of
claims that could have a material adverse effect on its results of operations in any particular period.
During fiscal year 2012, the Company was awarded $1.1 million in conjunction with a class-action lawsuit.
During fiscal year 2011, the Company settled a legal claim with the former owner of Hair Club for $1.7 million.
During fiscal year 2010, the Company settled two legal claims regarding certain guest and employee matters for an aggregate charge of
$5.2 million plus a commitment to provide discount coupons. Payments aggregating $4.3 and $0.9 million were made during fiscal years 2011
and 2010, respectively.
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