Sales up, income down for Fountain

WASHINGTON, N.C. – Fountain Powerboats, Inc., said its net sales were up for the third quarter of fiscal 2005, ending March 31, but net income was down, as was operating profit, the company reported in a recent release.

Net sales for the fiscal third quarter were $16,564,276, up from sales of $15,790,650 for the third quarter of fiscal 2004. The company reported an operating profit of $516,573 for the quarter, compared to an operating profit of $1,037,460 for the third quarter of fiscal 2004.

Net income for the quarter was $230,560, or net earnings per share of $0.05 on a basic and diluted basis, compared to net income of $754,365 for the third quarter of fiscal 2004, or earnings per share of $0.16 on a basic and diluted basis.

“Net income for the fiscal third quarter was a significant improvement over the company’s fiscal second quarter ended Dec. 31, which posted a loss of approximately $47,000,” said Irving Smith, Fountain’s chief financial officer. “The company’s fiscal third quarter lagged behind the comparable quarter for fiscal 2004 due in part to disruption of the manufacturing process caused by a restructuring of our manufacturing operations and processes.

“The months of construction adversely affected productivity and increased our cost of goods sold. The construction is now complete, and the manufacturing operation is beginning to achieve the productivity and manufacturing efficiencies, as reflected in much improved margins, particularly for March 2005.”

Fountain’s net sales for the nine months ended March 31, were $50,820,178, compared to net sales of $42,037,693 for the comparable nine-month period of fiscal 2004, a 21 percent increase.

Operating income for the first nine months of fiscal 2005 was $1,276,260, compared to $1,605,265 for the first nine months of fiscal 2004. Net income for the first nine months of fiscal 2005 was $500,742, or earnings per share of $0.10 on a basic and diluted basis, compared to a net income of $637,077 for the first nine months of fiscal 2004, or earnings per share of $0.13 on a basic and diluted basis.

Fountain said the rise in petroleum prices and metal product prices during the period negatively impacted gross profit, but said prices of the company’s boats have been adjusted to offset the increases and considerably improved gross margins are expected.

The company said its balance sheet remains strong with $2.4 million in cash and cash equivalents, a current ratio of 1.28:1, and shareholders’ equity of approximately $6.7 million.

“We spent more than half a million dollars on restructuring and configuring our manufacturing operations and processes in order to increase capacity and improve productivity to meet the company’s sales objectives of $67 million for fiscal 2005,” said Regional M. Fountain, Jr., CEO and president. “While our profit margins were affected during the process, we believe the improvements will allow us to increase the number of boats in the manufacturing process at any one time, as well as move them through the process more quickly.

“While the Fort Lauderdale International Boat Show and the New York National Boat Show produced record sales in excess of $8 million, the Miami Boat Show, our most successful show of the season, produced sales in excess of $11.6 million, increasing our backlog to $50 million.”

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