WASHINGTON, N.C. - Fountain Powerboat Industries, Inc., saw a net sales increase of 11 percent in the third quarter of 2006 and 10.2 percent for the year, it reported in a release yesterday.
Net sales for the third quarter, ended March 31, were $18,526,332, from $16,714,140 for the comparable quarter of fiscal 2005. Net sales for the nine-month period of fiscal 2006 increased to $55,894,161, from $50,712,967 for the nine-month period of fiscal 2005.
Fountain said its gross profit was up 29 percent and operating profit was up 129 percent for the nine-month period. Gross profit for the quarter was $2,764,533, with a gross profit margin of approximately 15 percent, versus a gross profit of $2,891,593 and a gross profit margin of 17 percent for the third quarter of fiscal 2005.
"Our gross profit for the third quarter was affected by three components," said Fountain Powerboats Chief Financial Officer Irving Smith. "During the third quarter, we placed a hold on 38 foot cruiser shipments to dealers in order to complete a major new redesign. We now have a cruiser backlog and will begin shipping the redesigned 38 foot cruisers during the fourth quarter. Also there has been a resurgence of interest in the sport boat market, and to maintain our leadership position within this market, we initiated a special pricing program during the quarter. Thus far, the program has been a tremendous success.”
Smith said the last component that affected Fountain's gross profit was the increase in accounting and legal expenses associated with the restatement of the company's consolidated financial statements for fiscal 2004 and the first three quarters of fiscal 2005, along with the consulting fees associated with preparation of internal audit processes required by Sarbanes-Oxley.
“It is important to note that these are non-recurring expenses and are not anticipated to affect gross profits for the fourth quarter," he said.
Net income and gross profit
Fountain's gross profit for the nine-month period increased 28.6 percent to $9,338,349, with a gross profit margin of approximately 17 percent, versus a gross profit of $7,260,644, with a gross profit margin of approximately 14 percent for comparable nine-month period of fiscal 2005.
Operating profit for the third quarter was $276,203, a 55 percent decrease when compared to operating profit of $607,833 for the third quarter of fiscal 2005. Operating profit for the nine-month period increased 129 percent to $2,092,056, compared to operating profit of $912,218 for the nine-month period of fiscal 2005.
Fountain's net income for the third quarter was $22,410, or net earnings per share of $0.00 on a basic and diluted basis, versus net income of $360,460, or net earnings per share of $0.07 on a basic and diluted basis, for the third quarter of fiscal 2005.
Net income for the year increased significantly to $1,038,764, or earnings per share of $0.22 on a basic and diluted basis, compared to a net income of $124,528, or a net income per share of $0.03 on a basic and diluted basis, for the nine-month period of fiscal 2005.
The company said it was “not pleased” with the gross profit or net income for the third quarter and that it was implementing Lean Manufacturing techniques which have successfully assisted management and employees to significantly enhance processes in the manufacturing facility, as well as implement best business practices throughout the entire organization.
Fiscal year guidance
Smith said management had also provided guidance for the remainder of the fiscal year, ending June 30, and expects to report revenue for the year of between $77 million and $78 million with net income of between $1.2 million and $1.4 million, or net earnings per share of between $0.25 and $0.29 respectively.
Fountain's backlog as of March 31 was approximately $49 million.
The company's balance sheet remains strong, with almost $2.3 million in cash and cash equivalents and a current ratio of 1.21:1. Shareholders' equity was approximately $7.6 million, a 13 percent increase, compared to $6.7 million for the third quarter of fiscal 2005. Cash on hand, accounts receivable and key-man life insurance value together provide the company with approximately $8.6 million in liquid assets.
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