Supercuts 2012 Annual Report Download - page 75

Table of Contents
the purpose of speculation. The following details the Company's policies and use of financial instruments.
Interest Rate Risk:
The Company has established an interest rate management policy that attempts to minimize its overall cost of debt, while taking into
consideration the earnings implications associated with the volatility of short-term interest rates. On occasion, the Company uses interest rate
swaps to further mitigate the risk associated with changing interest rates and to maintain its desired balances of fixed and floating rate debt. In
addition, access to variable rate debt is available through the Company's revolving credit facility. The Company reviews its policy and interest
rate risk management quarterly and makes adjustments in accordance with market conditions and the Company's short and long-term
borrowing needs. The Company had outstanding fixed rate debt balances of $287.7 and $313.4 million at June 30, 2012 and June 30, 2011,
respectively.
Interest Rate Swap Contracts:
In the past, the Company used interest rate swaps to maintain its variable to fixed rate debt ratio in accordance with its established policy
to further mitigate the risk associated with changing interest rates and to maintain its desired balances of fixed and variable rate debt. Generally,
the terms of the interest rate swap agreements contain monthly and quarterly settlement dates based on the notional amounts of the swap
contracts.
Pay fixed rates, receive variable rates
During the three months ended December 31, 2008, the Company entered into two interest rate swap contracts that pay fixed rates of
interest and receive variable rates of interest (based on the one-month LIBOR) on notional amounts of indebtedness of $20.0 million each, that
had maturation dates in July 2011, respectively. These swaps were designated and were effective as cash flow hedges. These cash flow hedges
were recorded at fair value within other noncurrent liabilities in the Consolidated Balance Sheet, with a corresponding offset in deferred
income taxes and other comprehensive income within shareholders' equity. These contracts were terminated during fiscal year 2011 in
conjunction with the repayment of the $85.0 million term loan. The contracts were settled for an aggregate loss of $0.1 million recorded within
interest expense in the Consolidated Statement of Operations during fiscal year 2011. Prior to the termination of the contracts, the Company
paid fixed rates of interest of approximately 3.0 percent and 3.4 percent on their respective $20.0 million.
During the three months ended December 31, 2005, the Company entered into interest rate swap contracts that pay fixed rates of interest
and receive variable rates of interest (based on the three-month LIBOR) on notional amounts of indebtedness of $35.0 and $15.0 million, and
mature in March 2013 and March 2015, respectively. These swaps were designated and were effective as cash flow hedges. These cash flow
hedges were recorded at fair value within other noncurrent liabilities in the Consolidated Balance Sheet, with a corresponding offset in other
comprehensive income within shareholders' equity. These contracts were terminated during fiscal year 2010 in conjunction with the repayment
of the private placement senior term notes as discussed in Note 9 to the Consolidated Financial Statements. The contracts were settled for an
aggregate loss of $5.2 million recorded within interest expense in the Consolidated Statement of Operations during fiscal year 2010.
Tabular Presentation:
The following table presents information about the Company's debt obligations. As the Company did not have variable rate obligations or
derivative financial instruments sensitive to changes in interest
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