COMMITMENTS AND CONTINGENCIES:

12 Months Ended

Jun. 30, 2011

COMMITMENTS AND CONTINGENCIES:

COMMITMENTS AND CONTINGENCIES:

10. COMMITMENTS AND CONTINGENCIES:

Operating Leases:

        The Company is committed under long-term operating leases for the rental of most of its company-owned salon and hair restoration center locations. The original terms of the leases range from one to 20 years, with many leases renewable for an additional five to ten year term at the option of the Company, and certain leases include escalation provisions. For certain leases, the Company is required to pay additional rent based on a percent of sales in excess of a predetermined amount and, in most cases, real estate taxes and other expenses. Rent expense for the Company's international department store salons is based primarily on a percent of sales.

        The Company also leases the premises in which the majority of its franchisees operate and has entered into corresponding sublease arrangements with the franchisees. These leases, generally with terms of approximately five years, are expected to be renewed on expiration. All additional lease costs are passed through to the franchisees.

        During fiscal year 2005, the Company entered into a lease agreement for a 102,448 square foot building, located in Edina, Minnesota. The Company began to recognize rent expense related to this property during the three months ended September 30, 2005, which was the date that it obtained the legal right to use and control the property. The original lease term ends in May 2016 and the aggregate amount of lease payments to be made over the remaining original lease term are approximately $5.6 million. The lease agreement includes an option to purchase the property or extend the original term for two successive periods of five years.

        In addition, the Company leases an 89,900 square foot building near the company-owned distribution center located in Chattanooga, Tennessee. The original lease term ends in August 2013 and the aggregate amount of lease payments to be made over the remaining original lease term are approximately $0.5 million

        Sublease income was $28.4, $29.2, and $29.9 million in fiscal years 2011, 2010 and 2009, respectively. Rent expense on premises subleased was $27.9, $28.8, and $29.5 million in fiscal years 2011, 2010 and 2009, respectively. Rent expense and the related rental income on the sublease arrangements with franchisees is netted within the rent expense line item on the Consolidated Statement of Operations. In most cases, the amount of rental income related to sublease arrangements with franchisees approximates the amount of rent expense from the primary lease, thereby having no net impact on rent expense or net income (loss). However, in limited cases, the Company charges a ten percent mark-up in its sublease arrangements. The net rental income resulting from such arrangements totaled $0.5 million for fiscal year 2011, and $0.4 million for each fiscal year 2010 and 2009, and was classified in the royalties and fees caption of the Consolidated Statement of Operations.

        Total rent expense, excluding rent expense on premises subleased to franchisees, includes the following:

	2011		2010		2009
	(Dollars in thousands)
Minimum rent	$	260,644	$	259,984	$	260,140
Percentage rent based on sales		9,225		10,138		11,623
Real estate taxes and other expenses		72,417		73,976		76,029
	$	342,286	$	344,098	$	347,792

        As of June 30, 2011, future minimum lease payments (excluding percentage rents based on sales) due under existing noncancelable operating leases with remaining terms of greater than one year are as follows:

Fiscal year	Corporate leases		Franchisee leases		Guaranteed leases
	(Dollars in thousands)
2012	$	266,339	$	43,549	$	2,150
2013		216,435		35,135		1,215
2014		164,420		26,686		787
2015		115,048		18,269		552
2016		68,458		9,871		409
Thereafter		87,410		7,653		483
Total minimum lease payments	$	918,110	$	141,163	$	5,596

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.