Executive Summary
PetMed Express (the "Company") was incorporated in the state ofFlorida inJanuary 1996 , and since 2004 its common stock has traded on the NASDAQ Global Select Market under the symbol "PETS." The Company began selling pet medications and other pet health products inSeptember 1996 , and inMarch 2010 , the Company started offering additional pet supplies on its website for sale, and these items are drop shipped to customers by third party vendors. Presently, the Company's product line includes approximately 3,000 of the most popular pet medications, health products, and supplies for dogs, cats, and horses. The Company markets its products through national advertising campaigns which aim to increase the recognition of the "PetMeds" brand name, increase traffic on its website at www.petmeds.com, acquire new customers, and maximize repeat purchases. Approximately 84% of all sales were generated via the Internet in both fiscal 2022 and fiscal 2021. The twelve-month average purchase was approximately$93 per order for the fiscal year endedMarch 31, 2022 , compared to$89 for the fiscal year endedMarch 31, 2021 . Critical Accounting Policies Our discussion and analysis of our financial condition and the results of our operations contained herein are based upon our Consolidated Financial Statements and the data used to prepare them. The Company's Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted inthe United States of America . On an ongoing basis we re-evaluate our judgments and estimates including those related to product returns, bad debts, inventories, and income taxes. We base our estimates and judgments on our historical experience, knowledge of current conditions, and our beliefs of what could occur in the future considering available information. Actual results may differ from these estimates under different assumptions or conditions. Our estimates are guided by observing the following critical accounting policies. Revenue recognition The Company generates revenue by selling pet medication products and pet supplies mainly to retail customers. Certain pet supplies offered on the Company's website are drop shipped to customers. The Company considers itself the principal in the arrangement because the Company controls the specified good before it is transferred to the customer. Revenue contracts contain one performance obligation, which is delivery of the product; customer care and support is deemed not to be a material right to the contract. The transaction price is adjusted at the date of sale for any applicable sales discounts and an estimate of product returns, which are estimated based on historical patterns; however, this is not considered a key judgment. There are no amounts excluded from variable consideration. Revenue is recognized when control transfers to the customer at the point in time in which the shipment of the product occurs. Outbound shipping and handling fees are an accounting policy election and are included in sales as the Company considers itself the principal in the arrangement given responsibility for supplier selection and discretion over pricing. Shipping costs associated with outbound freight after control over a product has transferred to a customer are an accounting policy election and are accounted for as fulfillment costs and are included in cost of sales. The Company disaggregates revenue in the following two categories: (1) reorder sales vs new order sales, and (2) internet sales vs contact center sales. The following table illustrates sales by various classifications: Year Ended March 31, Sales (In thousands) 2022 % 2021 %
$ Variance % Variance
Reorder Sales$ 250,401 91.6 %$ 272,648 88.2 %$ (22,247 ) -8.2 % New Order Sales$ 23,016 8.4 %$ 36,567
11.8 %
Total
Internet Sales$ 230,263 84.2 %$ 259,404 83.9 %$ (29,141 ) -11.2 % Contact Center Sales$ 43,154 15.8 %$ 49,811
16.1 %
Total
18 -------------------------------------------------------------------------------- Year Ended March 31, Sales (In thousands) 2021 % 2020 %
$ Variance % Variance
Reorder Sales$ 272,648 88.2 %$ 248,560 87.5 %$ 24,088 9.7 % New Order Sales$ 36,567 11.8 %$ 35,565 12.5 %$ 1,002 2.8 %
Total
8.8 % Internet Sales$ 259,404 83.9 %$ 238,054 83.8 %$ 21,350 9.0 % Contact Center Sales$ 49,811 16.1 %$ 46,071 16.2 %$ 3,740 8.1 %
Total
8.8 % Virtually all of the Company's sales are paid by credit cards and the Company usually receives the cash settlement in two to three banking days. Credit card sales minimize accounts receivable balances relative to sales. The Company had no material contract asset or contract liability balances as ofMarch 31, 2022 , orMarch 31, 2021 . The Company maintains an allowance for doubtful accounts for losses that the Company estimates will arise from customers' inability to make required payments, arising from either credit card chargebacks or insufficient funds checks. The Company determines its estimates of the un-collectability of accounts receivable by analyzing historical bad debts and current economic trends. The allowance for doubtful accounts was approximately$39,000 at bothMarch 31, 2021 , andMarch 31, 2022 . Valuation of inventory Inventories consist of prescription and non-prescription pet medications and pet supplies that are available for sale and are priced at the lower of cost or net realizable value using a weighted average cost method. The Company writes down its inventory for estimated obsolescence. The inventory reserve was approximately$81,000 and$86,000 atMarch 31, 2022 and 2021, respectively. Advertising The Company's advertising expense consists primarily of Internet marketing, direct mail/print, and television advertising. Internet costs are expensed in the month incurred and direct mail/print advertising costs are expensed when the related brochures and postcards are produced, distributed, or superseded. Television advertising costs are expensed as the advertisements are televised. Accounting for income taxes The Company accounts for income taxes under the provisions of ASC Topic 740, ("Accounting for Income Taxes"), which generally requires the recognition of deferred tax assets and liabilities for the expected future tax benefits or consequences of events that have been included in the Consolidated Financial Statements or tax returns. Under this method, deferred tax assets and liabilities are determined based on differences between the financial reporting carrying values and the tax bases of assets and liabilities and are measured by applying enacted tax rates and laws for the taxable years in which those differences are expected to reverse. 19 --------------------------------------------------------------------------------
Results of Operations The following should be read in conjunction with the Company's Consolidated Financial Statements and the related notes thereto included elsewhere herein. The following table sets forth, as a percentage of sales, certain operating data appearing in the Company's Consolidated Statements of Income: Fiscal Year Ended March 31, 2022 2021 2020 Sales 100.0 % 100.0 % 100.0 % Cost of sales 71.4 70.9 71.4 Gross profit 28.6 29.1 28.6 Operating expenses: General and administrative 11.3 9.1 8.9 Advertising 6.9 7.0 8.0 Depreciation 1.0 0.8 0.8 Total operating expenses 19.2 16.9 17.7 Income from operations 9.4 12.2 10.9 Total other income 0.5 0.5 1.0 Income before provision for income taxes 9.9 12.7 11.9 Provision for income taxes 2.2 2.8 2.8 Net income 7.7 % 9.9 % 9.1 % Non-GAAP Financial Measures
Adjusted EBITDA and Adjusted EBITDA per share
To provide investors and the market with additional information regarding our financial results, we have disclosed (see below) adjusted EBITDA and adjusted EBITDA per share, non-GAAP financial measures that we calculate as net income excluding; share-based compensation expense; depreciation and amortization; income tax provision; and interest income (expense). We have provided reconciliations below of adjusted EBITDA to net income and adjusted EBITDA per share to diluted earnings per share, the most directly comparable GAAP financial measures. We have included adjusted EBITDA and adjusted EBITDA per share, herein, because they are key measures used by our management and Board of Directors to evaluate our operating performance, generate future operating plans and make strategic decisions regarding the allocation of capital. In particular, the exclusion of certain expenses in calculating adjusted EBITDA facilitates operating performance comparability across reporting periods by removing the effect of non-cash expenses. Accordingly, we believe that adjusted EBITDA and adjusted EBITDA per share provide useful information to investors and others in understanding and evaluating our operating results in the same manner as our management and Board of Directors. 20 -------------------------------------------------------------------------------- We believe it is useful to exclude non-cash charges, such as, share-based compensation expense, depreciation and amortization from our adjusted EBITDA and adjusted EBITDA per share because the amount of such expenses in any specific period may not directly correlate to the underlying performance of our business operations. In addition, we believe it is useful to exclude in our adjusted EBITDA and adjusted EBITDA per share income tax provision and interest income (expense), as neither are components of our core business operations. Adjusted EBITDA and adjusted EBITDA per share have limitations as financial measures, these non-GAAP measures should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are:
? Although depreciation and amortization are non-cash charges, the assets being
depreciated and amortized may have to be replaced in the future and adjusted
EBITDA and adjusted EBITDA per share do not reflect capital expenditure requirements for such replacements or for new capital expenditures;
? Adjusted EBITDA and adjusted EBITDA per share do not reflect share-based
compensation. Share-based compensation has been, and will continue to be for
the foreseeable future, a material recurring expense in our business and an
important part of our compensation strategy;
? Adjusted EBITDA and adjusted EBITDA per share do not reflect interest income
(expense), net; or changes in, or cash requirements for, our working capital;
and
? Other companies, including companies in our industry, may calculate adjusted
EBITDA and adjusted EBITDA per share differently, which reduces these measures' usefulness as comparative measures. Because of these and other limitations, you should consider adjusted EBITDA and adjusted EBITDA per share only as supplemental to, and alongside with other GAAP based financial performance measures, including various cash flow metrics, net income, net margin, and our other GAAP results. The following table presents a reconciliation of net income, the most directly comparable GAAP measure to adjusted EBITDA and adjusted EBITDA per share for each of the periods indicated: Reconciliation of Non-GAAP Measures PetMed Express, Inc. Three Months Ended Year Ended March 31, March 31, $ % March 31, March 31, $ % ($ in thousands, except percentages) 2022 2021 Change Change 2022 2021 Change Change
Consolidated Reconciliation of GAAP Net Income to Adjusted EBITDA:
Net income$ 6,066 $ 6,812 $ (746 ) -11 %$ 21,100 $ 30,603 $ (9,503 ) -31 % Add (subtract): Share-based compensation$ 1,509 $ 1,013 $ 496 49 %$ 4,549 $ 3,307 $ 1,242 38 % Income Taxes$ 1,368 $ 2,037 $ (669 ) -33 %$ 5,971 $ 8,613 $ (2,642 ) -31 % Depreciation$ 687 $ 636 $ 51 8 %$ 2,738 $ 2,427 $ 311 13 % Interest Income/Expense$ (92 ) $ (85 ) $ (7 ) 8 %$ (335 ) $ (314 ) $ (21 ) 7 % Adjusted EBITDA$ 9,538 $ 10,413 $ (875 ) -8 %$ 34,023 $ 44,636 $ (10,613 ) -24 % Three Months Ended Year Ended ($ in thousands, except percentages March 31, March 31, $ % March 31, March 31, $ % and per share amounts) 2022 2021 Change Change 2022 2021 Change Change
Consolidated Reconciliation of GAAP Net Income Per Share to Adjusted EBITDA per share:
Net income per share, diluted$ 0.30 $ 0.34 $ (0.04 ) -12 %$ 1.04 $ 1.52 $ (0.48 ) -32 % Add (subtract): Share-based compensation$ 0.07 $ 0.05 $ 0.02 40 %$ 0.22 $ 0.16 $ 0.06 38 % Income Taxes$ 0.07 $ 0.10 $ (0.03 ) -30 %$ 0.29 $ 0.43 $ (0.14 ) -33 % Depreciation$ 0.03 $ 0.03 $ - 0 %$ 0.13 $ 0.12 $ 0.01 8 % Interest Income/Expense $ - $ - $ - 0 %$ (0.01 ) $ (0.01 ) $ - 0 % Adjusted EBITDA Per Share$ 0.47 $ 0.52 $ (0.05 ) -9 %$ 1.67 $ 2.22 $ (0.55 ) -25 % 21
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Fiscal 2022 Compared to Fiscal 2021
COVID-19 We are dedicated to making every effort to ensure our customers' pets receive the medications they need. We are also dedicated to making every effort to ensure the health and safety of our employees. We have continued with working from home where possible and enhanced disinfection and social distancing within our workplace. The Company has been open during our normal business hours without any material disruptions to our operations. We have not seen any major disruptions in our supply chain; however, we have experienced some delays in the delivery of some inventory items. See risk factor "The outbreak of the COVID-19 global pandemic and related government, private sector and individual consumer responsive actions may adversely affect our business operations, employee availability, financial performance, liquidity and cash flow for an unknown period of time" in Part I, Item 1A of this Form 10-K. Sales Sales decreased by approximately$35.8 million , or 11.6%, to$273.4 million for the fiscal year endedMarch 31, 2022 , from approximately$309.2 million for the fiscal year endedMarch 31, 2021 . The decrease in sales for the fiscal year endedMarch 31, 2022 , was primarily due to decreases in reorder and new order sales. Sales for fiscal year 2022 were impacted by a much more competitive environment, and a crowded advertising market which had substantially higher advertising costs compared to the same period in the prior year. Veterinary visits increased during fiscal year 2022, compared to being down during the prior year. We believe the increase in veterinary visits was primarily due to pet owners needing to visit their veterinarian for their pets' annual exam in order to renew their prescriptions, as many veterinarians were closed in the prior year due to the pandemic. The Company acquired approximately 263,000 new customers for the fiscal year endedMarch 31, 2022 , compared to approximately 443,000 new customers for the same period the prior year. The following chart illustrates sales by various sales classifications: Year Ended March 31, Sales (In thousands) 2022 % 2021 %
$ Variance % Variance
Reorder Sales$ 250,401 91.6 %$ 272,648 88.2 %$ (22,247 ) -8.2 % New Order Sales$ 23,016 8.4 %$ 36,567
11.8 %
Total
Internet Sales$ 230,263 84.2 %$ 259,404 83.9 %$ (29,141 ) -11.2 % Contact Center Sales$ 43,154 15.8 %$ 49,811
16.1 %
Total
Going forward sales may be adversely affected due to increased competition and consumers giving more consideration to price. The changes in consumer behavior post pandemic makes future sales somewhat challenging to predict. No guarantees can be made that sales will continue to grow in the future. The majority of our product sales are affected by the seasons, due to the seasonality of mainly heartworm, and flea and tick medications. For the quarters endedJune 30 ,September 30 ,December 31 , andMarch 31 of fiscal year 2022, the Company's sales were approximately 29%, 25%, 22%, and 24%, respectively. For the quarters endedJune 30 ,September 30 ,December 31 , andMarch 31 of fiscal year 2021, the Company's sales were approximately 31%, 25%, 21%, and 23%, respectively. Cost of sales Cost of sales decreased by approximately$24.0 million , or 10.9% to$195.3 million for the fiscal year endedMarch 31, 2022 , from$219.3 million for the fiscal year endedMarch 31, 2021 . The cost of sales decrease can be directly related to the decrease in sales during fiscal year 2022. As a percentage of sales, cost of sales was 71.4% in fiscal year 2022, as compared to 70.9% in fiscal 2021. The cost of sales percentage increase was adversely impacted due to the major manufacturers, with whom we have a purchasing relationship, shifting their rebate funding from discounting product costs to more cooperative marketing rebates. 22
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Gross profit Gross profit decreased by approximately$11.8 million , or 13.2%, to$78.1 million for the fiscal year endedMarch 31, 2022 , from$89.9 million for the fiscal year endedMarch 31, 2021 . The decrease in gross profit can be directly related to the decrease in sales during fiscal 2022. Gross profit as a percentage of sales for fiscal 2022 was 28.6% compared to 29.1% for fiscal 2021. The decrease in the gross profit percentage was adversely impacted due to the major manufacturers, with whom we have a purchasing relationship, shifting their rebate funding from discounting product costs to more cooperative marketing rebates.
General and administrative expenses
General and administrative expenses increased by approximately$2.5 million , or 9.0%, to$30.8 million for the fiscal year endedMarch 31, 2022 , from$28.3 million for the fiscal year endedMarch 31, 2021 . The increase in general and administrative expenses for the fiscal year endedMarch 31, 2022 was primarily due to the following: a$1.4 million increase in payroll expenses, the majority of which related to increased stock compensation expense; a$989,000 increase in professional fees related to brand and marketing consultation, legal, and investment banking; and a$514,000 increase in other expenses which include property expenses, travel related expense, insurance expense, and other expenses. Offsetting the increase was a decrease of$397,000 primarily related to decreased bank service fees due to the decrease in sales. General and administrative expenses as a percentage of sales was 11.3% for the fiscal year endedMarch 31, 2022 , compared to 9.1% for the fiscal year endedMarch 31, 2021 . The Company expects general and administrative expense as a percentage of sales to approximate 12.5% and expects stock compensation expense to approximate$6.4 million in fiscal 2023. Advertising expenses Advertising expenses decreased by approximately$2.8 million to$18.8 million for the fiscal year endedMarch 31, 2022 , from$21.6 million for the fiscal year endedMarch 31, 2021 . The decrease in advertising expenses for fiscal 2022 was due to the Company receiving increased cooperative marketing funds from product manufacturers to offset our advertising expenses, within the terms of our contractual relationships. Overall advertising spending was flat compared to fiscal 2021, yet total net advertising expenses decreased due to increased cooperative advertising rebates. The advertising costs of acquiring a new customer, defined as total advertising costs divided by new customers acquired, was$72 for the fiscal year endedMarch 31, 2022 , compared to$49 for the fiscal year endedMarch 31, 2021 . The increase to customer acquisition costs for the fiscal year endedMarch 31, 2022 , was due to an increase in overall advertising prices and a less efficient variable marketing spend. Advertising cost of acquiring a new customer can be impacted by the advertising environment, the effectiveness of our advertising creative, advertising spending, and price competition. Historically, the advertising environment fluctuates due to supply and demand. A more favorable advertising environment may positively impact future sales, whereas a less favorable advertising environment may negatively impact future sales. As a percentage of sales, advertising expense was 6.9% and 7.0% for the fiscal years endedMarch 31, 2022 , and 2021, respectively. The Company currently anticipates advertising as a percentage of sales to be approximately 7.0% for fiscal year 2023. However, the advertising percentage may fluctuate quarter to quarter due to seasonality and advertising availability. Depreciation Depreciation expense for the fiscal year endedMarch 31, 2022 , increased to approximately$2.7 million from$2.4 million for the fiscal year endedMarch 31, 2021 . This increase to depreciation expense for the fiscal year endedMarch 31, 2022 , can be attributed to increased new property and equipment additions in fiscal 2022. Other income Other income decreased by approximately$268,000 , to$1.4 million for the fiscal year endedMarch 31, 2022 , from$1.6 million for the fiscal year endedMarch 31, 2021 . The decrease was related to a reduction in advertising income in fiscal 2022. Interest income was flat compared to the prior year. Interest income may decrease in the future as the Company utilizes its cash balances on its share repurchase plan, with approximately$28.7 million remaining as ofMarch 31, 2022 , on any quarterly dividend payment, on future investment/partnerships, or on its operating activities. 23
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Provision for income taxes For the fiscal years endedMarch 31, 2022 and 2021, the Company recorded an income tax provision of approximately$6.0 million and$8.6 million , respectively. The decrease to the income tax provision for fiscal 2022 is related to a decrease in operating income compared to fiscal 2021. The effective tax rate for the fiscal years endedMarch 31, 2022 , and 2021 were 22.1% and 22.0%, respectively. The slight increase to the effective rate for the fiscal year endedMarch 31, 2022 , can be attributed to the Company receiving more one-time tax benefits in fiscal 2021 than in fiscal 2022. The one-time tax benefits received in fiscal 2021 included a one-time state income tax refund of$285,000 in theJune 2020 quarter and a$135,000 income tax benefit related to restricted stock compensation in theSeptember 2020 andMarch 2021 quarters. This compared to a$196,000 one-time state income tax refund and a$131,000 benefit due to a state rate reduction in theMarch 2022 quarter. The Company estimates its effective tax rate will be approximately 23.0% for fiscal 2023. Net income Net income decreased by approximately$9.5 million , or 31%, to approximately$21.1 million for the fiscal year endedMarch 31, 2022 , from approximately$30.6 million for the fiscal year endedMarch 31, 2021 . The decrease to net income was primarily related to a decrease in sales and resulting gross profit, and an increase in general and administrative expenses, all partially offset by a decrease in advertising expenses, during the fiscal year.
Fiscal 2021 Compared to Fiscal 2020
Sales Sales increased by approximately$25.1 million , or 8.8%, to$309.2 million for the fiscal year endedMarch 31, 2021 , from approximately$284.1 million for the fiscal year endedMarch 31, 2020 . The increase in sales for the fiscal year endedMarch 31, 2021 was primarily due to increased reorder sales and new order sales. Fiscal 2021 started out with greater than expected e-commerce demand due to COVID-19, with consumers shifting their purchases to online, which positively impacted our reorder and new order sales during the year. In the latter half of fiscal 2021, veterinarian clinics and retail stores re-opened. The Company acquired approximately 443,000 new customers for the fiscal year endedMarch 31, 2021 , compared to approximately 421,000 new customers for the same period the prior year. The following chart illustrates sales by various sales classifications: Year Ended March 31, Sales (In thousands) 2021 % 2020 %
$ Variance % Variance
Reorder Sales$ 272,648 88.2 %$ 248,560 87.5 %$ 24,088 9.7 % New Order Sales$ 36,567 11.8 %$ 35,565 12.5 %$ 1,002 2.8 %
Total
8.8 % Internet Sales$ 259,404 83.9 %$ 238,054 83.8 %$ 21,350 9.0 % Contact Center Sales$ 49,811 16.1 %$ 46,071 16.2 %$ 3,740 8.1 %
Total
8.8 % Going forward sales may be adversely affected due to increased competition and consumers giving more consideration to price. The changes in consumer behavior post pandemic makes future sales somewhat challenging to predict. No guarantees can be made that sales will continue to grow in the future. The majority of our product sales are affected by the seasons, due to the seasonality of mainly heartworm, and flea and tick medications. For the quarters endedJune 30 ,September 30 ,December 31 , andMarch 31 of fiscal 2021, the Company's sales were approximately 31%, 25%, 21%, and 23%, respectively. For the quarters endedJune 30 ,September 30 ,December 31 , andMarch 31 of fiscal 2020, the Company's sales were approximately 28%, 25%, 21%, and 26%, respectively. Cost of sales Cost of sales increased by approximately$16.4 million , or 8.1% to$219.3 million for the fiscal year endedMarch 31, 2021 , from$202.9 million for the fiscal year endedMarch 31, 2020 . The cost of sales increase can be directly related to the increase in sales during fiscal 2021. As a percentage of sales, cost of sales was 70.9% in fiscal 2021, as compared to 71.4% in fiscal 2020. The cost of sales percentage decrease can be attributed to the benefit of having direct relationships with all major manufacturers, which helped reduce product costs, and these manufacturers having minimum advertised price policies. In the future, cost of sales may be adversely impacted due to the major manufacturers shifting their rebate funding from discounting product costs to cooperative marketing rebates. 24
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Gross profit Gross profit increased by approximately$8.7 million , or 10.7%, to$89.9 million for the fiscal year endedMarch 31, 2021 , from$81.2 million for the fiscal year endedMarch 31, 2020 . The increase in gross profit can be directly related to the increase in sales during fiscal 2021. Gross profit as a percentage of sales for fiscal 2021 was 29.1% compared to 28.6% for fiscal 2020. The increase in gross profit percentage can be attributed to the benefit of having direct relationships with all major manufacturers, which helped reduce product costs, and these manufacturers having minimum advertised price policies. Going forward gross profit may be adversely affected due to increased competition and consumers giving more consideration to price. In the future, gross profit may also be adversely impacted due to the major manufacturers shifting their rebate funding from discounting product costs to cooperative marketing rebates.
General and administrative expenses
General and administrative expenses increased by approximately$3.0 million , or 12.0%, to$28.3 million for the fiscal year endedMarch 31, 2021 from$25.3 million for the fiscal year endedMarch 31, 2020 . The increase in general and administrative expenses for the fiscal year endedMarch 31, 2021 was primarily due to the following: a$1.9 million increase in payroll expenses, due to increased sales and increased COVID-19 related work from home expenses, with$485,000 related to increased stock compensation expense due to the accelerated release of restrictions of the Company's former ChairmanRobert Schweitzer's restricted stock upon his passing onFebruary 23, 2021 ; a$619,000 increase in bank service fees due to increased sales; a$388,000 increase in property expenses related to the Company's e-commerce platform; and a$207,000 increase in telephone expenses due to employees working from home in response to COVID-19. Offsetting the increase was a net decrease of$48,000 to other expenses which include insurance, professional fees, and bad debt expense. General and administrative expenses as a percentage of sales was 9.1% for the fiscal year endedMarch 31, 2021 , compared to 8.9% for the fiscal year endedMarch 31, 2020 . Advertising expenses Advertising expenses decreased by approximately$1.1 million to$21.6 million for the fiscal year endedMarch 31, 2021 , from$22.7 million for the fiscal year endedMarch 31, 2020 . The decrease in advertising expenses for fiscal 2021 was due to the Company receiving increased cooperative marketing funds from product manufacturers to offset our advertising expenses, within the terms of our contractual relationships. Overall advertising spending increased over the prior year, yet total net advertising expenses decreased due to increased cooperative advertising rebates. The advertising costs of acquiring a new customer, defined as total advertising costs divided by new customers acquired, was$49 for the fiscal year endedMarch 31, 2021 , compared to$54 for the fiscal year endedMarch 31, 2020 . The decrease to customer acquisition costs for the fiscal year endedMarch 31, 2021 can also be attributed to receiving increased cooperative marketing funds from product manufacturers. Advertising cost of acquiring a new customer can be impacted by the advertising environment, the effectiveness of our advertising creative, advertising spending, and price competition. Historically, the advertising environment fluctuates due to supply and demand. A more favorable advertising environment may positively impact future sales, whereas a less favorable advertising environment may negatively impact future sales. As a percentage of sales, advertising expense was 7.0% and 8.0% for the fiscal years endedMarch 31, 2021 and 2020, respectively. The decrease in advertising expense as a percentage of total sales for the fiscal year endedMarch 31, 2021 can be attributed to a decrease in advertising expenses and an increase in sales as compared to the same period in the prior year. The Company currently anticipates advertising as a percentage of sales to be approximately 7% for fiscal 2022. However, the advertising percentage may fluctuate quarter to quarter due to seasonality and advertising availability. Depreciation Depreciation expense for the fiscal year endedMarch 31, 2021 increased slightly to approximately$2.4 million from$2.3 million for the fiscal year endedMarch 31, 2020 . This increase to depreciation expense for the fiscal year endedMarch 31, 2021 can be attributed to increased new property and equipment additions in fiscal 2021. 25
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Other income Other income decreased by approximately$1.3 million to$1.6 million for the fiscal year endedMarch 31, 2021 , from$2.9 million for the fiscal year endedMarch 31, 2020 . The decrease to other income was primarily related to decreased interest income due to decreased interest rates compared to the prior year. Interest income may decrease in the future as the Company utilizes its cash balances on its share repurchase plan, with approximately$28.7 million remaining atMarch 31, 2021 , on any quarterly dividend payment, on its operating activities, or with further decreases in interest rates. Provision for income taxes For the fiscal years endedMarch 31, 2021 and 2020, the Company recorded an income tax provision of approximately$8.6 million and$8.0 million , respectively. The increase to the income tax provision for fiscal 2021 is related to an increase in operating income compared to fiscal 2020. The effective tax rate for the fiscal years endedMarch 31, 2021 and 2020 were 22.0% and 23.7%, respectively. The decrease to the effective rate for the fiscal year endedMarch 31, 2021 can be attributed to the Company receiving a one-time state income tax refund of$285,000 in theJune 2020 quarter and a$135,000 income tax benefit related to restricted stock compensation in theSeptember 2020 andMarch 2021 quarters, compared to a$322,000 income tax charge related to restricted stock compensation, which was recognized in theSeptember 2019 quarter. The Company estimates its effective tax rate will be approximately 23.5% for fiscal 2022. Net income Net income increased by approximately$4.7 million , or 18.4%, to approximately$30.6 million for the fiscal year endedMarch 31, 2021 from approximately$25.9 million for the fiscal year endedMarch 31, 2020 . The increase to net income was primarily related to an increase in gross profit, offset by an increase in operating expenses and a decrease to interest income during the fiscal year.
Liquidity and Capital Resources
The Company's working capital atMarch 31, 2022 and 2021 was approximately$117.8 million and approximately$116.3 million , respectively. The$1.5 million increase in working capital was primarily attributable to income generated by operations and a reduction to accounts payable, offset by dividends paid in the period. Net cash provided by operating activities was$18.5 million and$40.1 million for the fiscal years endedMarch 31, 2022 and 2021, respectively. This change can be mainly attributed to a decrease in the Company's net income for the fiscal year endedMarch 31, 2022 and a decrease to accounts payable compared to the prior year. Net cash used in investing activities was$1.8 million and$2.4 million for the fiscal years endedMarch 31, 2022 and 2021, respectively. This change in investing activities is related to decreased property and equipment additions acquired in fiscal 2022. Net cash used in financing activities was$24.4 million and$22.7 million for the fiscal years endedMarch 31, 2022 and 2021, respectively. The increase to financing activities relates to an increase in the dividend paid in fiscal 2022, compared to the dividend paid in fiscal 2021. AtMarch 31, 2022 , the Company had approximately$28.7 million remaining under the Company's share repurchase plan. Subsequent toMarch 31, 2022 , the Company's Board of Directors declared a quarterly dividend of$0.30 per share onMay 9, 2022 . The Board established aMay 20, 2022 record date and aMay 27, 2022 payment date. Depending on future market conditions the Company may utilize its cash and cash equivalents on the remaining balance of its current share repurchase plan, on quarterly dividends, or on its operating activities. AtMarch 31, 2022 the Company had no material outstanding lease commitments. We are not currently bound by any long- or short-term agreements for the purchase or lease of capital expenditures. Any material amounts expended for capital expenditures would be the result of an increase in the capacity needed to adequately provide for any future increase in our business. To date we have paid for any needed additions to our capital equipment infrastructure from working capital funds and anticipate this being the case in the future. Presently, we have approximately$5.0 million forecasted for capital expenditures in fiscal 2023, which will be funded through cash from operations. The Company's primary source of working capital is cash from operations. The Company presently has no need for alternative sources of working capital and has no commitments or plans to obtain additional capital.
Recent Accounting Pronouncements
Other than disclosures included in Note 1 of the Consolidated Financial Statements, which are incorporated by reference as if fully set forth herein, the Company does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, will have a material effect on the Company's consolidated financial position, results of operations, or cash flows. 26
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