Supercuts 2012 Annual Report Download - page 87

Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
1. BUSINESS DESCRIPTION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
primarily utilizes a cash management system with a series of separate accounts consisting of lockbox accounts for receiving cash, concentration
accounts that funds are moved to, and several "zero balance" disbursement accounts for funding of payroll and accounts payable. As a result of
the Company's cash management system, checks issued, but not presented to the banks for payment, may create negative book cash balances.
There were no checks outstanding in excess of related book cash balances at June 30, 2012 and 2011.
Receivables and Allowance for Doubtful Accounts:
The receivable balance on the Company's Consolidated Balance Sheet primarily includes accounts and notes receivable from franchisees
and credit card receivables. The balance is presented net of an allowance for expected losses (i.e., doubtful accounts), primarily related to the
receivables from the Company's franchisees. The Company monitors the financial condition of its franchisees and records provisions for
estimated losses on receivables when it believes its franchisees are unable to make their required payments based on factors such as
delinquencies and aging trends. The allowance for doubtful accounts is the Company's best estimate of the amount of probable credit losses
related to existing accounts and notes receivables.
The following table summarizes the activity in the allowance for doubtful accounts:
Note Receivables, Net:
The note receivable balances within the Company's Consolidated Balance Sheet primarily include note receivables related to the
Company's investments in EEG and MY Style, a note receivable with the purchaser of Trade Secret and note receivables with our franchisees.
The Company monitors the financial condition of its counterparties with an outstanding note receivable and records provisions for estimated
losses on receivables when it believes the counterparties are unable to make their required payments. As of June 30, 2012, the outstanding note
receivable balances with EEG and MY Style were in good standing with no associated valuation allowance. See discussion of the note
receivables related to the purchaser of Trade Secret and Company's investments in EEG and MY Style within Notes 2 and 6, respectively, to
the Consolidated Financial Statements.
Inventories:
Inventories of finished goods consist principally of hair care products for retail product sales. A portion of inventories are also used for
salon services consisting of hair color, hair care products including shampoo and conditioner and hair care treatments including permanents,
neutralizers and
84
For the Years Ended June 30,
2012 2011 2010
(Dollars in thousands)
Beginning balance
$
1,482
$
3,170
$
2,382
Bad debt expense
454
853
1,040
Write
-
offs
(714
)
(2,549
)
(252
)
Other (primarily the impact of foreign currency
fluctuations)
10
8
—
Ending balance
$
1,232
$
1,482
$
3,170