INDIANAPOLIS, April 13 /PRNewswire-FirstCall/ -- Fortune Industries, Inc. announced today quarterly operating results for the second quarter ended February 28, 2007.
Highlights
Revenue for the six months ended February 28, 2007 were $72.9 million as compared to $69.8 million for the same period of 2006, representing a 4% increase. Revenue for the three months ended February 28, 2007 were $32.2 million as compared to $33.4 million for the same period of 2006, representing a 4% decrease.
Diluted net loss available to common shareholders for the six months ended February 28, 2007 was $7.0 million or $0.57 per share as compared to diluted net income available to common shareholders of $1.2 million or $0.10 per share for the same period of 2006. Diluted net loss available to common shareholders for the three months ended February 28, 2007 was $7.8 million or $0.63 per share as compared to diluted net income available to common shareholders of $0.3 million or $0.03 per share for the same period of 2006.
"This quarter proved to be a transitioning point for certain divisions of our Company," stated John Fisbeck, CEO. "Quarterly losses were primarily generated from a delay in the release of new work from our customers in the Wireless Infrastructure segment and cost overages within one of our electronic subsidiaries. We have initiated management changes within these divisions, right-sized the operations by bringing assets and labor costs in line with current market conditions and re-evaluated customer contracts."
"As a result of the cost reduction initiatives within our divisions, the company expects to generate annual savings of approximately $3.9 million. "While difficult, these actions are essential," continued Fisbeck. "These actions should lead to increased productivity and improved operating cash flows and assist in controlling our capital expenditures." "With these initiatives we expect to generate significant cash flows which we will invest in acquisitions within the PEO industry."
Wireless Infrastructure Segment Analysis & Business Outlook
"Wireless Infrastructure revenue and operating income decreases were due mainly to a delay in the release of new work from our customers. The Company initiated significant changes within the Wireless Infrastructure segment following an analysis of the segment's structure and efficiency. The new initiatives include changes in management structure, a reduction in the Company's current workforce and a reduction in discretionary spending including certain operating leases. In addition, the Company disposed of certain fixed assets, wrote down inventory to fair market value and recognized impairment on goodwill and other intangible assets. The management of Fortune Wireless will now report to the Company's JH Drew executive management team under the direction of Hank Sipe. Hank and the executive management team of JH Drew bring over 100 years of combined construction experience to the business. Hank and his team have grown JH Drew from $35 million sales in 1992 to $58 million sales in 2006 and maintained consistent profitability despite several periods of decreased state spending in the Company's geographic footprint during the period."
Electronics Integration Segment Analysis & Business Outlook
Electronics Integration operating losses were due to labor and inventory cost overages within one operating unit. The Company initiated several changes within this subsidiary including changes in management, a reduction in the unit's current workforce and a reduction in discretionary spending including certain operating leases. In addition, the Company recognized impairment on goodwill.
As a result of the cost reduction initiatives described above, the company expects to generate annual savings of approximately $0.5 million. The savings are expected to begin in the third quarter of 2007 and be fully implemented by the end of the Company's current fiscal year.
Business Solutions Segment Analysis & Business Outlook
Revenue increases in the Business Solutions segment were due to increases in customer base and the acquisition of Precision Employee Management, LLC in Tucson, Arizona. Operating income decreased as a result of unfavorable claims experience in health and workers compensation insurance programs.
Mr. Fisbeck commented, "Our Business Solutions segment will continue to see significant growth. I am very excited about the future of the business considering that PEO industry growth is projected to be around 20% annually for the foreseeable future and considering that the Company is achieving economies of scale generated by larger PEO's through vendor discounts, diversification of risk pools, and increases in technological offerings."
Transportation Infrastructure & UV Technologies Segment Analysis & Business Outlook
Revenue decreases in the Transportation Infrastructure segment were due to the completion of several long-term contracts. Operating income increased as a result of improved results in certain geographic divisions and favorable job closing costs.
Fisbeck further stated, "The expected release of a significant amount of highway funding in the state of Indiana combined with other geographic market growth, in fiscal 2008 should allow this segment to see a return in revenue growth. The completion of a number of larger projects in fiscal 2006, will allow us to focus on continuing to drive our earnings results for the remainder of fiscal 2007."
Ultraviolet Technologies revenue increases were due to increased sales of our POP/ Decal inks. Operating income decreased as a result of increased research and development and product testing. Ultraviolet Technologies revenues continue to grow because of the Company's investment in new innovative technologies and products. Said Fisbeck, "the new product pipeline remains strong both domestically and abroad."
Holding Company and Corporate Analysis & Business Outlook
Holding Company and other expenses increased as a result of negative claims experience within the Company's self-insured health program, increases in executive compensation, increased interest and preferred dividend costs.
Fisbeck concluded by saying, "as a result of the strategic initiatives mentioned above, I believe we will have positive operating results for the remainder of fiscal 2007," stated Fisbeck. "Our focus for the remainder of fiscal 2007 will be to fully implement the changes within our Wireless Infrastructure and Electronics Integration segments to return to profitability, improve our leverage ratio, and integrate operations under each reportable segment through software conversion and operating environments."
About Fortune Industries, Inc.
Fortune Industries, Inc. operates as a technology-based service company in the United States. It provides technology solutions to businesses in five segments: Wireless Infrastructure, Business Solutions, Transportation Infrastructure, Ultraviolet Technologies and Electronics Integration. The Wireless Infrastructure segment provides turnkey solutions directly to wireless carriers in 20 states and provides other specialty infrastructure services. The Business Solutions segment provides professional employment organization (PEO) services to small and medium sized businesses with up to 1,000 employees in over 44 states including human resource consulting & management, employee assessment, training, and benefits administration. The Transportation Infrastructure segment provides the installation of highway safety products and commercial structural steel. The Ultraviolet Technologies segment provides worldwide state-of-the-art UV ink technology solutions. The Electronics Integration segment provides sales and installation of commercial electronics.
Fortune Industries is based in Indianapolis, Indiana and is publicly traded on the American Stock Exchange under the symbol FFI. Additional information about Fortune Industries, Inc. can be found at http://www.ffi.net/.
This press release and other statements by Fortune Industries, Inc. may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are typically identified by words or phrases such as "believe", "expect", "estimate", "potential", or future/conditional verbs such as "will", "should", and "could" or the negative of those terms or other variations of them or by comparable terminology. The absence of such terms, however, does not mean that the statement is not forward-looking. Any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties that could cause actual results to differ materially. Factors that might cause or contribute to such differences, include, but are not limited to, the risks and uncertainties that are discussed under the heading "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" within the Company's Form 10-K for the year ended August 31, 2006. The Company undertakes no obligation to publicly update or revise any forward- looking statements, whether as a result of new information, future events or otherwise. Readers should carefully review the risk factors disclosed within the Company's Form 10-K and other documents filed by the Company with the Securities and Exchange Commission.
Consolidated Financial Information
Financial highlights are as follows:
Three Month Period Six Month Period
Ended February 28, Ended February 28,
2007 2006 2007 2006
(Dollars in thousands, except per share data)
Consolidated
Total Revenue $32,239 $33,356 $72,923 $69,799
Operating Income (Loss) (6,264) 909 (4,639) 2,209
Net Income (Loss) (7,631) 399 (6,781) 1,246
Net Income (Loss)
Available to Common
Shareholders $(7,755) $ 316 $(7,029) $1,163
Net Income (Loss) per Share:
Basic $(0.73) $0.03 $(0.66) $0.11
Diluted $(0.63) $0.03 $(0.57) $0.10
Segment Data
Segment Revenue
Wireless Infrastructure $4,694 $5,762 $13,690 $12,586
Business Solutions 13,462 11,325 25,092 21,063
Transportation
Infrastructure 7,885 9,625 20,632 23,727
Ultraviolet
Technologies 2,913 2,882 5,962 5,579
Electronics
Integrations 3,284 3,762 7,541 6,844
Subtotal Revenue 32,238 33,356 72,917 69,799
Variable Interest
Entity 1 - 6 -
Total Revenue $32,239 $33,356 $72,923 $69,799
Segment Operating Income (Loss)
Wireless
Infrastructure $(4,344) $ 438 $(3,797) $ 774
Business Solutions 282 1,360 1,020 2,332
Transportation
Infrastructure 318 (151) 911 399
Ultraviolet
Technologies (99) (7) (16) 75
Electronics
Integrations (985) 308 (648) 394
Holding Company (1,702) (1,039) (2,552) (1,765)
Subtotal Operating
Income (Loss) (6,530) 909 (5,082) 2,209
Variable Interest
Entity 266 - 443 -
Total Operating
Income (Loss) $(6,264) $909 $(4,639) $2,209
