2006 Highlights: For 2006, gross margin increased 20 basis points to 33.6% of sales; selling, general and administrative expenses decreased 10 basis points to 24.6% of sales primarily due to a reduction in incentive compensation; and net income increased to 6.0% of sales from 5.5% in fiscal 2005. The Company's effective income tax rate decreased to 35.4% primarily due to higher tax credits and increased tax-exempt interest income.
As noted above, the Company's 2006 results included several unusual and one-time items that increased net income. Similar to other retailers that use the National Retail Federation 4-5-4 calendar, the Company's fiscal year 2006 included 53 weeks as compared to 52 weeks in 2005.
During the year the Company received an insurance settlement related to hurricanes in the southeast in 2005 and a settlement related to excess credit card service fees the Company paid over a number of years. The after-tax effect of these items was an additional $3.0 million in net income or $.10 per diluted share.
During 2006, the Company returned $18.2 million in dividends to shareholders. The Company's annualized dividend of $.60 per share increased 15% in 2006, representing a yield of approximately 2.5% at the current share price. The Company also opened 58 stores and relocated 20 stores. The Company closed 26 stores including two stores that had been closed due to hurricane damage since September 2005.