On Aug. 31, electronic payments equipment maker VeriFone Holdings (NYSE:PAY) released Q3 2006 earnings for the period ended July 31.

  • Wider margins plus increased sales equals happy shareholders, and VeriFone delivers on both counts this time.
  • Share dilution is somewhat disappointing, though not outrageous. Those extra shares also complicate the finances a bit, accounting for $1.7 million of the operational costs.
  • Cash flows turned south because of a $40 million increase in inventories in the quarter. That's presumably a stock buildup in anticipation of a new product release in the next quarter, a touch-screen device that can accept EMV "smart card" payments.

(Figures in thousands, except per-share data)

Income Statement Highlights

Avg. Est.

Q3 2006

Q3 2005

Change

Sales

$145,910

$147,617

$125,701

17.4%

Pro Forma Net Profit

--

$19,700

$13,100

50.4%

Pro Forma EPS

$0.26

$0.28

$0.20

40.0%

Diluted Shares

69,079

65,423

5.6%


Get back to basics with a look at the income statement.

Margin Checkup

Q3 2006

Q3 2005

Change*

Gross Margin

45.02%

40.66%

4.36

Operating Margin

19.28%

14.40%

4.88

Net Margin

13.28%

10.42%

2.86
*Expressed in percentage points.

Margins are the earnings engine. See how they work.

Balance Sheet Highlights

Assets

Q3 2006

Q3 2005

Change

Cash + ST Invest.

$92,145

$20,091

358.6%

Accounts Rec.

$106,521

$74,304

43.4%

Inventory

$73,870

$33,016

123.7%


Liabilities

Q3 2006

Q3 2005

Change

Accounts Payable

$62,583

$35,462

76.5%

Long-Term Debt

$179,379

$181,296

(1.1%)


Learn the ways of the balance sheet.

Cash Flow Highlights

Q3 2006

Q3 2005

Change

Cash From Ops.

($11,024)

$11,738

N/A

Capital Expenditures

$1,945

$1,212

60.5%

Free Cash Flow

($12,969)

$10,526

N/A


Find out why Fools always follow the money.

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Fool by Numbers is designed to give you the raw earnings information in a timely fashion, putting all the numbers you need in one easy-to-read place. But at The Motley Fool, we believe numbers tell only part of the story, so check Fool.com for more of our in-depth discussion of what the numbers mean.

At the time of publication, Fool contributor Anders Bylund had no positions in any company mentioned. Fool rules are here .