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Interest expense for the years ended June 30, 2007 and 2006 was $7.7 million and $2.2 million, respectively, reflecting interest paid on borrowings on the
Company’s line of credit and long-term debt. Interest expense for the current year increased primarily due to higher average debt balances as a result of the acquisition of
T2 Supply at the beginning of the fiscal year and to additional working capital requirements financed through an increase in the revolving credit facility.
Interest income for the year ended June 30, 2007 increased by approximately $318,000 over the prior year, principally as a result of higher interest-bearing
receivables.
Foreign exchange gains and losses consist of foreign currency transactional and functional currency re-measurements, offset by net foreign currency exchange
contract gains and losses. Net foreign exchange losses were $190,000 and $115,000 for the years ended June 30, 2007 and 2006, respectively. The change in foreign
exchange gains and losses for the year ended June 30, 2007 as compared to the prior year are primarily the result of fluctuations in the value of the Euro versus the
British Pound, and to a lesser extent, the U.S. Dollar versus other currencies. The Company utilizes foreign exchange contracts and debt in non-functional currencies to
hedge foreign currency exposure. The Company’s foreign exchange policy prohibits entering into speculative transactions.
Provision For Income Taxes
Income tax expense was $26.0 million and $21.6 million for the years ended June 30, 2007 and 2006, respectively, reflecting an effective income tax rate of 37.8%
and 35.0%, respectively. The increase in the tax rate is attributable to the prior year utilization of foreign net operating loss carryforwards.
Minority Interest in Income of Consolidated Subsidiaries
The Company recorded $60,000 and $225,000, respectively, of minority interest income in fiscal 2007 and 2006 for Netpoint’s minority shareholders. The decrease
in minority interest income relates to the Company’s purchase of additional equity in Netpoint.
Net Income
The following table summarizes the Company’s net income:
Percentage of
Net Sales
2007 2006 Difference Change 2007 2006
(In thousands)
Fiscal year ended $42,626 $39,816 $2,810 7.1% 2.1% 2.4%
The increase in the amount of net income in 2007 from 2006 is attributable to the changes in operating profits discussed above. Net income as a percentage of net
sales decreased primarily due to the lower tax rate in 2006 compared to 2007, special committee costs of $9.9 million in 2007, and higher interest expense of $5.5
million in 2007, all as discussed above.
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