Our interest expense increased by $1.8 million to $2.4 million for the three months ended September 27, 2019, compared with $0.6 million for the three months ended September 28, 2018. The increase was primarily due to an unrealized loss of $1.7 million from
mark-to-market
of interest rate swap related to our term loan.
Foreign exchange gain (loss), net.
We recorded foreign exchange loss, net of $2.0 million for the three months ended September 27, 2019, compared with $3.1 million gain for the three months ended September 28, 2018.
Income before income taxes
.
We recorded income before income taxes of $28.1 million for the three months ended September 27, 2019, compared with $29.7 million for the three months ended September 28, 2018.
Our provision for income tax reflects an effective tax rate of 5.6% and 6.7% for the three months ended September 27, 2019 and September 28, 2018, respectively. The decrease was primarily due to the fact that we had lower income subject to tax during the first quarter of fiscal year 2020 as compared to the same period in fiscal year 2019.
We recorded net income of $26.0 million, or 6.5% of total revenues, for the three months ended September 27, 2019, compared with $27.9 million, or 7.4% of total revenues, for the three months ended September 28, 2018. The decrease was mainly due to (1) an increase in SG&A expenses of $1.6 million; (2) a net decrease of interest income and expenses of $ 1.1 million; and (3) a net decrease of foreign exchange gain of $5.0 million, offset by an increase in gross profit of $5.7 million.
Other comprehensive income.
We recorded other comprehensive loss of $0.2 million, or 0.1% of total revenues, for the three months ended September 27, 2019, compared with other comprehensive income of $87 thousand, or 0.0% of total revenues, for the three months ended September 28, 2018.
Liquidity and Capital Resources
Cash Flows and Working Capital
We primarily finance our operations through cash flow from operations. As of September 27, 2019 and September 28, 2018, we had cash, cash equivalents, and short-term investments of $406.8 million and $352.4 million, respectively, and outstanding debt of $60.9 million and $63.4 million, respectively.
Our cash and cash equivalents, which primarily consist of cash on hand, demand deposits, and liquid investments with original maturities of three months or less, are placed with banks and other financial institutions. The weighted-average interest rate on our cash and cash equivalents for the three months ended September 27, 2019 and September 28, 2018 was 2.0% and 1.9%, respectively.
Our cash investments are made in accordance with an investment policy approved by the audit committee of our board of directors. In general, our investment policy requires that securities purchased be rated A1,
P-1,
F1 or better. No security may have an effective maturity that exceeds three years. Our investments in fixed income securities are primarily classified as
available-for-sale
and are recorded at fair value. The cost of securities sold is based on the specific identification method. Unrealized gains and losses on these securities are recorded as other comprehensive income (loss) and are reported as a separate component of shareholders’ equity.
During the three months ended September 27, 2019, we paid off an existing term loan of $60.9 million under our previous Bank of America Facility Agreement and our subsidiaries in Thailand drew down a new term loan of $60.9 million under a new Credit Facility Agreement with the Bank of Ayudhya Public Company Limited. As a result, as of September 27, 2019, we had a long-term borrowing of $60.9 million under our new Credit Facility Agreement. (See Note 13 for further details.) We anticipate that our internally generated working capital, along with our cash and cash equivalents will be adequate to repay these obligations. To better manage our cash on hand, we held short-term investments of $238.3 million as of September 27, 2019.