General and Administrative Expenses ("G&A")
G&A, as a percentage of total revenue, decreased to 5.5% in 2018 compared to 5.6% in 2017. The decrease was
primarily due to a pre-tax charge of $14.9 million ($9.2 million after-tax), or $0.13 per diluted share, related to the
settlement of a legal matter in 2017 and the benefit of an increase in average unit volume. This decrease was offset by
higher incentive compensation costs, higher managing partner conference costs, and reclassifications of $7.4 million
made in conjunction with the implementation of the new revenue recognition accounting guidance as previously
described.
G&A, as a percentage of total revenue, remained flat at 5.6% in 2017 and 2016. The benefit from an increase in
average unit volume and lower incentive and share-based compensation was offset by a pre-tax charge of $14.9 million
($9.2 million after-tax) related to the settlement of a legal matter in 2017. The impact of the legal charge was partially
offset by a pre-tax charge recorded in 2016 of $7.3 million ($4.5 million after-tax) or $0.06 per diluted share, related to a
separate legal matter.
We are currently subject to various claims and contingencies that arise from time to time in the ordinary course of
business, including those related to litigation, business transactions, employee-related matters and taxes, among others.
See note 13 to the Consolidated Financial Statements for further discussion of these matters.
Interest Expense, Net
Net interest expense decreased to $0.6 million in 2018 compared to $1.6 million in 2017. Net interest expense
increased to $1.6 million in 2017 compared to $1.3 million in 2016. The decrease in 2018 was primarily driven by
paying off our outstanding credit facility of $50.0 million in April 2018. The increase in 2017 is primarily due to higher
interest rates.
Income Taxes
Our effective tax rate decreased to 12.9% in 2018 compared to 26.1% in 2017 primarily due to new tax legislation
that was enacted in late 2017. As a result of the new tax legislation, significant tax changes were enacted including the
reduction of the federal corporate tax rate from 35.0% to 21.0%. These changes were generally effective at the
beginning of our 2018 fiscal year. See note 9 to the Consolidated Financial Statements for a reconciliation of the
statutory federal income tax rate to our effective tax rate. For 2019, we expect the effective tax rate to be
approximately 15%.
Our effective tax rate decreased to 26.1% in 2017 compared to 29.8% in 2016 primarily due to adoption of
Accounting Standards Update 2016-9, Compensation – Stock Compensation and new tax legislation that was enacted in
late 2017. As a result of the new guidance requirements, excess tax benefits and tax deficiencies from share-based
compensation are recognized within the income tax provision. During 2017, we recognized $3.4 million, or $0.05 per
share, as an income tax benefit related to the new guidance requirements. Also during 2017, as a result of the new tax
legislation, we recognized $3.1 million, or $0.04 per share, as an income tax benefit related to the new tax legislation
which includes an income tax benefit of approximately $3.8 million to revalue our deferred tax balances as of the
enactment date and an income tax expense of approximately $0.7 million related to our foreign operations.
Liquidity and Capital Resources
The following table presents a summary of our net cash provided by (used in) operating, investing and financing
activities (in thousands):
Fiscal Year
2018 2017 2016
Net cash provided by operating activities..... ..... $ 352,868 $ 286,373 $ 257,065
Net cash used in investing activities......... ..... (158,145) (178,156) (164,738)
Net cash used in financing activities......... ..... (135,516) (70,243) (38,717)
Net increase in cash and cash equivalents .......... $ 59,207 $ 37,974 $ 53,610