Income Taxes
The effective income tax rate was 3.6% and (112.1)% in fiscal years 2009 and 2008, respectively. In fiscal year 2009, the effective income tax rate differed from the applicable mixed statutory rate of approximately 38% primarily due to recording a full valuation allowance on our deferred tax assets of $8,443 in fiscal year 2008 (Refer to Note 4). The 2009 provision for taxes on income of $255 consists of minimum federal and state income taxes. In fiscal year 2008 the effective income tax rate differed from the applicable mixed statutory rate of approximately 38% primarily due to recording a full valuation allowance on our deferred tax assets of $8,615 (Refer to Note 4) and our current year claim for research and development tax credits and non-taxable life insurance.
Liquidity and Capital Resources (in thousands except share amounts)
Our need for operations growth, capital expenses and share repurchases are expected to be met with cash flows provided by operating activities.
Cash flows from operating activities:
| |
|
2009 |
|
|
2008 |
|
| |
|
|
|
|
|
|
Net income (loss) |
|
$ |
6,787 |
|
|
$ |
(12,447 |
) |
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: |
|
|
|
|
|
|
|
|
Depreciation |
|
|
2,733 |
|
|
|
3,283 |
|
Provision (recovery) on losses on accounts receivable |
|
|
78 |
|
|
|
(194 |
) |
(Gain) on sale of property, plant and equipment |
|
|
(11 |
) |
|
|
(27 |
) |
Loss on sale of equity securities |
|
|
159 |
|
|
|
— |
|
Deferred income taxes, net |
|
|
171 |
|
|
|
(2,107 |
) |
Tax valuation allowance |
|
|
(171 |
) |
|
|
8,615 |
|
Changes in operating working capital |
|
|
(310 |
) |
|
|
2,483 |
|
Net cash provided by (used in) operating activities |
|
$ |
9,436 |
|
|
$ |
(394 |
) |
For fiscal year 2009, net cash provided by operating activities was $9,436, which enabled us to fund additions to property, plant and equipment in the amount of $1,303 and share repurchases of $638. The available cash balance increased by $7,819 during the fiscal year. In November 2009, we declared a one-time cash dividend of $0.10 per share of common stock for shareholders of record on December 8, 2009, payable on January 4, 2010, based on operations for fiscal year 2009. For fiscal year 2008, net cash used in operating activities was $394. We funded additions to property, plant and equipment in the amount of $1,880 and share repurchases of $3,039 from cash balances.
Significant changes in operating working capital are as follows:
2009 – Operating cash flows increased primarily due to net income of $6,787 and non-cash depreciation expense of $2,733. Operating cash flows was increased by a reduction in inventories, increase in accounts payable and the current portion of non-current liabilities. Significant increases in accounts receivable and other non-current assets and decreases in accrued payroll, advertising and other expenses offset the cash flow increases during 2009. During the 2009 fiscal year we funded $989 toward our defined benefit pension plan.
2008 – Operating cash flows decreased primarily due to reductions in other non-current assets and the current portion of non-current liabilities offset by decreases in inventories, prepaid expenses and accrued payroll, advertising and other expenses. During the year we funded $2,467 toward our defined benefit pension plan.
Cash used in investing activities:
| |
|
2009 |
|
|
2008 |
|
Proceeds from sale of property, plant and equipment |
|
$ |
56 |
|
|
$ |
69 |
|
Proceeds from sale of equity securities |
|
|
268 |
|
|
|
— |
|
Additions to property, plant and equipment |
|
|
(1,303 |
) |
|
|
(1,880 |
) |
Net cash used in investing activities |
|
$ |
(979 |
) |
|
$ |
(1,811 |
) |
Expenditures for property, plant and equipment include the acquisition of new equipment, upgrading of facilities to maintain operating efficiency and investments in cost effective technologies to lower costs. Overall capital spending has declined in recent years as we carefully scrutinize capital investments for short term pay-back of our investments.
