Supercuts 2007 Annual Report Download - page 43

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The basis point improvement in site operating expenses as a percent of consolidated revenues during fiscal year 2006 was primarily due to
reduced workers’ compensation insurance-related costs stemming from decreased claims activity.
The basis point improvement in site operating expenses during fiscal year 2005 was primarily due to the addition of the hair restoration
centers in December 2004, which have lower site operating expenses as a percentage of consolidated revenue.
General and Administrative
General and administrative (G&A) includes costs associated with our field supervision, salon training and promotions, product
distribution centers and corporate offices (such as salaries and professional fees), including costs incurred to support franchise, beauty school
and hair restoration center operations. G&A expenses were as follows:
(1)
Represents the basis point change in G&A as a percent of consolidated revenues as compared to the corresponding period of the prior
fiscal year.
The planned basis point deterioration in G&A costs as a percent of consolidated revenues during fiscal year 2007 was primarily due to
increases in salon supervisor salaries, benefits, travel expenses, professional fees and the timing of promotional salon and hair restoration
advertising. During fiscal year 2008, we expect G&A expenses as a percent of consolidated revenues to remain consistent with fiscal year
2007. G&A expenses are not expected to be materially impacted by the deconsolidation of beauty schools.
The basis point deterioration in G&A costs as a percent of consolidated revenues during fiscal year 2006 was primarily due to $2.8 million
related to the settlement of a Fair Labor Standards Act (FLSA) lawsuit over wage and hour disputes. Excluding the ten basis point impact of
this settlement, G&A expenses were relatively consistent as a percent of revenues compared to the prior fiscal year.
The basis point deterioration in G&A expenses as a percent of consolidated revenues during fiscal year 2005 was primarily due to the
addition of the hair restoration centers, which have slightly higher G&A costs as a percent of consolidated revenues due to the marketing-
intensive nature of that business, as well as increased professional fees related to the June 30, 2005 Sarbanes-Oxley 404 compliance effort and
legal fees stemming from a lawsuit related to the FLSA. Additionally, we recorded additional expense related to certain employee benefits
during the fourth quarter of fiscal year 2005.
42
Expense as %
of Consolidated
Increase Over Prior Fiscal Year
Years Ended June 30,
G&A
Revenues
Dollar
Percentage
Basis Point
(1)
(Dollars in thousands)
2007
$
328,644
12.5
%
$
34,552
11.7
%
40
2006
294,092
12.1
33,885
13.0
20
2005
260,207
11.9
45,597
21.2
70