This decrease in net sales is primarily due to the decline in the commercial construction industry affecting the Architectural segment.
On a consolidated basis, cost of sales, as a percentage of net sales, increased to 80.7% for fiscal 2004, from 75.1% in fiscal 2003. The primary factors underlying the resulting decrease in gross profit percentage were pricing pressures within the Architectural and Auto Glass segments. Also contributing to this decline was reduced volume and the lower margins experienced on short-term, fill-in work within the Architectural segment.
Selling, general and administrative (SG&A) expenses for the first quarter of fiscal 2004 decreased $4.9 million, or 14% from fiscal 2003, and decreased as a percentage of net sales to 18.2% from 19.6%. The majority of the decrease in SG&A expenses relates primarily to decreased incentive compensation levels. Also contributing to the decline in SG&A expenses for the quarter were decreased salaries and related benefit expenses resulting from cost reductions.
Interest expense decreased by 27% to $1.0 million for the first quarter of fiscal 2004 from $1.3 million in the prior-year quarter, reflecting decreased average borrowing levels and a lower weighted average interest rate under the Companys revolving credit agreement.
Our equity in loss from affiliated companies was $0.6 million in the first quarter of fiscal 2004 versus $1.1 million in the prior-year quarter. This decrease in loss reflects increased volume and improved operating performance, despite challenging market conditions.
The effective income tax rate of 27.0% decreased from the 31.0% level in fiscal 2003. The reduction in the annual effective tax rate is a result of favorable impacts of fixed tax credits relative to a declining base of pretax income.
In the first quarter of fiscal 2004, we reported earnings of $0.3 million, or $0.01 diluted earnings per share, compared to earnings of $5.2 million, or $0.18 diluted earnings per share, in the first quarter of fiscal 2003.