Supercuts 2008 Annual Report Download - page 43

The basis point improvement in product margins as a percent of product revenues during fiscal year 2007 was primarily due to a reduction
in retail promotional discounting as compared to fiscal year 2006.
The basis point improvement in product margins as a percent of product revenues during fiscal year 2006 was primarily related to product
sales from the hair restoration centers, which have higher product margins than sales of retail products in salons, for the full year as compared to
seven months (since the date of acquisition) during the prior fiscal year. This benefit was partially offset by reduced sales margins realized on
several vendor product lines repackaged during the fiscal year.
Site Operating Expenses
This expense category includes direct costs incurred by our salons and hair restoration centers, such as on-site advertising, workers'
compensation, insurance, utilities and janitorial costs. Site operating expenses were as follows:
(1)
Increase (Decrease) Over
Prior Fiscal Year
Years Ended June 30,
Site
Operating
Expense as %
of Consolidated
Revenues
Dollar
Percentage
Basis Point(1)
(Dollars in thousands)
2008
$
204,001
7.4
%
$
(4,100
)
(2.0
)%
(50
)
2007
208,101
7.9
8,499
4.3
(30
)
2006
199,602
8.2
16,546
9.0
(10
)
Represents the basis point change in site operating expenses as a percent of consolidated revenues as compared to the corresponding
period of the prior fiscal year.
The basis point improvement in site operating expenses as a percent of consolidated revenues during fiscal year 2008 was primarily due to a
decrease in workers' compensation expense due to a continued reduction in the frequency and severity of injury claims from our successful salon
safety programs. During fiscal year 2009, we are forecasting site operating expenses be in the high seven percent range of consolidated revenue.
The basis point improvement in site operating expenses as a percent of consolidated revenues during fiscal year 2007 was primarily due to
an actuarial reduction in insurance claims reserves, primarily workers' compensation, as a result of the continued improvement of our safety and
return-to-
work programs over the recent years, as well as changes in state laws, providing an additional benefit of $10.2 million ($6.7 million net
of tax) during fiscal year 2007. 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.
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
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