Supercuts 2002 Annual Report Download - page 163

Generally, the goodwill recognized in the domestic transactions is expected to be fully deductible for tax purposes and the goodwill recognized
in the international transactions is non-deductible for tax purposes. The walk-in customer base of acquired salons was not recognized as an
identifiable intangible asset as the customers are not known or identifiable by the Company. Therefore, the value of the customer base is
recognized as part of residual goodwill. Internationally, the acquisition purchase price goodwill residual primarily represents the growth
prospects that are not captured as part of acquired tangible or identified intangible assets.
4. FINANCING ARRANGEMENTS:
The Company's long-term debt as of June 30, 2002 and 2001 consists of the following:
During March of fiscal 2002, the Company completed a $125.0 million private debt placement, with an average life of 8.6 years and a fixed
coupon rate of 6.98 percent. Proceeds were in part used to repay approximately $75.0 million of existing debt from the Company's revolving
credit facility. The additional $50.0 million of proceeds were primarily used to fund the Jean Louis David acquisition, which was completed in
April of 2002.
In October 2000, the Company borrowed $25 million under an 8.39 percent senior term note due October 2010 to finance various acquisitions
by the Company.
In September 2000, the Company amended its senior revolving credit agreement to increase the amount available from $180 million to $250
million, extending the expiration date to September 2003, and modifying certain debt covenant restrictions. The facility bears interest at the
prime rate or LIBOR plus 75 to 137.5 basis points based on the Company's debt-to-capitalization ratio and allows for multi-currency
borrowings. The prime rate at June 30, 2002 and 2001 was 4.75 percent and 6.75 percent, respectively. The revolving credit facility requires a
quarterly commitment fee of 15 to 25 basis points on the unused portion of the facility. The LIBOR credit spread and commitment fee are
based on the Company's debt-to-EBITDA ratio at the end of each fiscal quarter. The facility is used for short-term financing of new salon and
acquisition growth as well as to finance the general working capital requirements of the Company.
In June 2000, the Company extended the term of a $4.0 million note payment originally due July 1, 2000. The $4.0 million is the final payment
due under a $10.0 million senior term note entered into in October 1996. The maturity on the term note has been extended to September 2003.
The equipment and leasehold notes payable are primarily comprised of capital lease obligations totaling $4.0 million and $5.9 million at June
30, 2002 and 2001, respectively. These capital lease obligations are payable in monthly installments through 2005.
All of the Company's debt instruments are unsecured, except for its capital lease obligations which are collateralized by the assets purchased
under the agreement.
The debt agreements contain covenants, including limitations on incurrence of debt, granting of liens, investments, merger or consolidation,
and transactions with affiliates. In addition, the Company must not exceed specified fixed charge coverage, leverage and debt-to-capitalization
ratios.
As a result of the fair value hedging activities discussed in Note 5, an adjustment of approximately $2.3 million was made to increase the
carrying values of the Company's long-term fixed rate debt. Approximately 47 percent of the Company's fixed rate debt has been marked to
market. Considering the mark-to-market adjustment and current market interest rates, the carrying values of the Company's debt instruments,
based upon discounted cash flow analyses using the Company's current incremental borrowing rate, approximate their fair values at June 30,
2002.
Aggregate maturities of long-term debt, including capital lease obligations at June 30, 2002, are as follows:
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Interest Maturity
Rate % Dates 2002 2001
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(Dollars in thousands)
Senior term notes ........................ 6.55- 8.39 2003-2012 $ 237,711 $ 113,163
Revolving credit facilities .............. 2.68- 8.23 2004 55,000 140,500
Equipment and leasehold notes payable .... 7.57-11.56 2004-2007 4,047 6,391
Other notes payable ...................... 5.00-10.00 2003-2009 2,258 1,504
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299,016 261,558
Less current portion ..................... (7,221) (5,438)
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Long-term portion ........................ $ 291,795 $ 256,120
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Fiscal Year (Dollars in thousands)
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2003..................................................... $ 7,221
2004..................................................... 76,863
2005..................................................... 15,750
2006..................................................... 12,549
2007..................................................... 22,037
Thereafter............................................... 164,596
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$299,016
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