corporate governance expense of $383,000 and an increase of $359,000 in operating expense for the Companys International operations, partially offset by a decrease in pension expense of
$246,000. The increase in operating expense dollars in fiscal year 2017 as compared to fiscal year 2016 is related primarily to increases in wages and benefits of $539,000, incentive compensation of $362,000, pension expense of $168,000,
professional services of $261,000, sales and marketing of $297,000 and an increase of $667,000 in operating expense for the Companys International operations, partially offset by decreases of bad debt expense of $37,000 and $678,000 of non-recurring expenses incurred in the prior fiscal year.
Other income was $693,000, $496,000 and $347,000 in fiscal
years 2018, 2017 and 2016, respectively. The increase in other income in fiscal year 2018 was primarily due to an increase in interest income from cash on hand at the international subsidiaries. The increase in other income in fiscal year 2017 was
primarily due to an increase in interest income from cash on hand at the international subsidiaries.
Interest expense was $299,000, $292,000 and $306,000
in fiscal years 2018, 2017 and 2016, respectively. The increase in interest expense for fiscal year 2018 was primarily due to increases in interest rate, partially offset by lower levels of bank borrowings. The decrease in interest expense for
fiscal year 2017 was primarily due to lower levels of bank borrowings.
Income tax expense was $4,115,000, $2,126,000 and $1,862,000 in fiscal years 2018,
2017 and 2016, respectively, or 43.4%, 31.5% and 32.4% of pretax earnings, respectively. Our effective tax rate increased in fiscal year 2018, primarily due to the effect of the enactment of the Tax Cuts and Jobs Act, which was signed into law on
December 22, 2017. Two provisions of the new law had an immediate impact. First, the U.S. corporate tax rate was reduced from 35% to 21%. This rate reduction required the Company to re-measure our net
deferred tax assets assuming a future tax benefit at the new lower 21% rate. The impact of this re-measurement of our net deferred tax assets recorded for fiscal year 2018 was $680,000. Second, as part of the transition to a modified territorial
system, the new law imposes a one-time transition tax on the unrepatriated earnings of our foreign subsidiaries. The impact of this one-time transition tax recorded for
fiscal year 2018 was $649,000. The Company intends to elect to pay this tax over an 8-year period. The effective tax rate for fiscal years 2017 and 2016 is lower than the statutory rate due to the favorable
impact of tax rates for the Companys international subsidiaries and the impact of state and federal tax credits.
Net earnings attributable to the
noncontrolling interest related to our subsidiaries that are not 100% owned by the Company were $177,000, $105,000 and $75,000 for fiscal years 2018, 2017 and 2016, respectively. The changes in the net earnings attributable to the noncontrolling
interest for each year were due to changes in the levels of net income of the subsidiaries.
Net earnings in fiscal year 2018 were $5,188,000, or $1.87
per diluted share. Net earnings in fiscal year 2017 were $4,515,000, or $1.66 per diluted share, and net earnings in fiscal year 2016 were $3,802,000, or $1.42 per diluted share.
LIQUIDITY AND CAPITAL RESOURCES
Our principal sources of
liquidity have historically been funds generated from operating activities, supplemented as needed by borrowings under our revolving credit facility. Additionally, certain machinery and equipment are financed by
non-cancelable operating leases. We believe that these sources of funds will be sufficient to support ongoing business requirements, including capital expenditures, through fiscal year 2019.
At April 30, 2018, we had advances of $3.8 million and standby letters of credit aggregating $5.2 million outstanding under our unsecured
$20 million revolving credit facility. See Note 3 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report for additional information concerning our credit facility. We did not have any off balance sheet
arrangements at April 30, 2018.