SOURCE: Fountain Powerboat Industries, Inc.

September 20, 2006 09:45 ET

Fountain Powerboats Reports Fiscal 2006 Sales of $79.2 Million and a Strong Backlog of $43 Million

Sales for the Year Increase 11.3 Percent Versus Industry Analyst Projections of 4.8 Percent

WASHINGTON, NC -- (MARKET WIRE) -- September 20, 2006 -- Fountain Powerboat Industries, Inc. (AMEX: FPB), a leading manufacturer of high performance fish boats, express cruisers and sport boats, today announced results for its fiscal year ended June 30, 2006.

Highlights of fiscal year end 2006:

--  Increased sales by 11.3 percent
--  Finished year with strong $43 million backlog
--  Drove up net income 218 percent
--  Reported fourth quarter sales of $23.3 million -- highest in Fountain
    Powerboats' history
--  Expanded international sales by 54 percent
--  Added new dealers in Florida, Canada, Italy and England
--  Added depth to management team with appointment of David Knight to
    President and Betty Smith to Vice President of Administration
--  Launched 'Lean Manufacturing' program (Toyota Production System)
    company-wide
--  Introduced three new boat models:  The Fountain 38 Open center console
    fish boat, the 38 Lightning offshore high performance sport boat, and the
    42 Lightning with redesigned cockpit
--  Maintained dealer inventory at approximately 3.3 boats per dealer
    
Sales up 11.3 percent for fiscal 2006
--  Net Sales for the year ended June 30, 2006 was $79,226,224, an
    increase of approximately 11.3 percent, compared to net sales of
    $71,182,069 for fiscal 2005.
    
Profit: Gross profit up 20 percent for the year
--  Gross profit for the year was $13,073,801, with a gross profit margin
    of approximately 16.5 percent, versus a gross profit of $10,910,563, with a
    gross profit margin of 15.3 percent for fiscal 2005.
    
"Our gross profit margin for the year increased approximately 7.8 percent due in part to the restructuring of our manufacturing facility which improved productivity and labor efficiency," commented Fountain Powerboats Chief Financial Officer Irving Smith."

Profit: Operating profit up 29 percent for the year

--  Operating profit for the year increased 29 percent to $2,275,356,
    compared to operating profit of $1,766,347 for fiscal 2005.
    
Net income
--  Net income for the year increased to $2,404,912, or earnings per share
    of $0.50 and $0.49 on a basic and diluted basis, respectively. Net income
    was increased by $1,283,746 pertaining to a deferred tax benefit reserved
    by the company in 2002. After four years of operating profits the company
    has determined that it no longer has to carry the reserve and has taken a
    portion of the reserve as a deferred tax benefit. Before the addition of
    the deferred tax benefit, net income was $1,121,166, or earnings per share
    of $0.23 on a basic and diluted basis, compared to a net income of
    $756,212, or a net income per share of $0.15 on a basic and diluted basis,
    for the fiscal 2005.
    
"Our net income for the year, before the deferred tax benefit, increased 48.3 percent, a significant increase when compared to other boat manufacturers who are experiencing downturns in growth," commented Fountain CEO and Founder Reggie Fountain. "Our goal for 2007 is to continue the trend by increasing our gross profit and net income through evaluating and reducing unnecessary costs and expenses. With the assistance of an industry consultant, every member of our management team, from the top down, is involved in organizing and streamlining our manufacturing processes and implementing best business practices throughout the company. This process requires educational programs and training classes for all employees, and we believe the time investment will allow us to better manage our sales growth and profitability now and well into the future," added Fountain.

The Lean Manufacturing process is the framework and philosophy utilized to organize manufacturing facilities with the main goal of eliminating waste and increasing profitability. Lean Manufacturing targets seven types of waste: defects, over production, transportation, waiting, inventory, motion and over processing. Lean Manufacturing techniques have successfully assisted management and employees to enhance processes in the manufacturing facility.

The company's balance sheet remains strong, with almost $4.5 million in cash and cash equivalents and a current ratio of 1.19:1. Shareholders' equity was approximately $8 million, a 23 percent increase, when compared to $6.5 million for fiscal 2005. Cash on hand, accounts receivable and the value of the key-man life insurance policy provide the company with approximately $10.5 million in liquid assets.

Fountain Powerboats will hold a conference call today at 11:00 a.m. Eastern Daylight Time. The toll-free conference call dial-in number for U.S. callers is 877.412.8089. The toll/international dial-in number is 973.582.2843. The passcode for the call is 7773478. Please dial in to the conference five minutes before the call is scheduled to begin. An audio replay of the conference call will be available from September 21 through 27, 2006, and can be accessed by dialing toll free 877.519.4471 in the U.S., or toll/international 973.341.3080, and entering passcode 7773478.

The conference call is being webcast by Vcall and can be accessed by visiting www.InvestorCalendar.com or Fountain Powerboats' web site, www.fountainpowerboats.com. The event will be archived and available for replay through September 30, 2006.

About Fountain Powerboat Industries

Fountain Powerboat Industries has its executive offices and manufacturing facilities along the Pamlico River in Beaufort County, North Carolina. The company designs, manufactures and sells offshore sport boats, sport fishing boats and express cruisers that target the segment of the recreational power boat market where speed, performance, safety and quality are the main criteria for purchase. These recreational boats are based upon an innovative, award-winning design enabling world class performance while using standard reliable power. There are currently 12 buildings located on 65 acres totaling over 237,000 square feet accommodating 40 to 45 boats in various stages of construction at any one time. The present plant site can also accommodate up to 300,000 square feet of additional manufacturing space. The land and buildings are wholly owned by Fountain Powerboat Industries, Inc. and its subsidiary, Fountain Powerboats, Inc. For more information, visit www.fountainpowerboats.com.

SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS:

Except for the historical information contained herein, this press release contains forward-looking statements, including statements containing the words "planned," "expects," "believes," "strategy," "opportunity," "anticipates" and similar words. Such forward-looking statements are subject to known and unknown risks, uncertainties or other factors that may cause the company's actual results to be materially different from historical results or any results expressed or implied by such forward-looking statements. We assume no obligation to update any forward-looking statements to reflect events or circumstances arising after the date hereof. The potential risks and uncertainties which could cause actual growth and results to differ materially include, but are not limited to, customer acceptance of the company's services, products and fee structures, the success of the company's brand development efforts, the volatile and competitive nature of the industry, and changes in domestic and international market conditions, and foreign exchange rates. Further information on the factors and risks that could affect Fountain Powerboat Industries, Inc.'s business, financial condition and results of operations are included under the "Risk Factors" or "Factors Affecting Our Operating Results" sections of Fountain Powerboat Industries, Inc. public filings with the Securities and Exchange Commission, available at (http://www.sec.gov).

            FOUNTAIN POWERBOAT INDUSTRIES, INC. AND SUBSIDIARY
                        CONSOLIDATED BALANCE SHEETS
                          JUNE 30, 2006 AND 2005

                                  ASSETS

                                                    2006          2005
                                                ------------  ------------
ASSETS
CURRENT ASSETS
    Cash and cash equivalents                   $  4,474,552  $  4,013,225
    Accounts receivable, net                       3,405,868     2,195,357
    Inventories                                    6,959,188     6,473,017
    Prepaid expenses                                 849,160       341,989
    Deferred tax assets                            1,446,018            --

                                                ------------  ------------

      Total Current Assets                        17,134,786    13,023,588

PROPERTY, PLANT AND EQUIPMENT                     47,898,410    46,067,797
    Less: Accumulated depreciation               (30,790,537)  (28,889,410)
                                                ------------  ------------

                                                  17,107,873    17,178,387

CASH SURRENDER VALUE LIFE INSURANCE, NET           2,552,682     2,179,617

OTHER ASSETS                                       1,065,019       652,660
                                                ------------  ------------

      TOTAL ASSETS                              $ 37,860,360  $ 33,034,252
                                                ============  ============


                   LIABILITIES AND STOCKHOLDERS' EQUITY

                                                    2006          2005
                                                ------------  ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
    Current maturities of long-term debt        $    711,984  $    760,739
    Accounts payable                               3,861,061     3,844,102
    Accrued expenses                               1,253,714     1,079,558
    Dealer incentives                              6,367,229     3,702,738
    Customer deposits                                391,024       859,879
    Allowance for boat repurchases                    15,459        75,000
    Warranty reserve                                 632,357       740,000
                                                ------------  ------------

      Total Current Liabilities                   13,232,828    11,062,016

LONG-TERM DEBT, less current portion              15,228,700    15,433,446
DEFERRED TAX LIABILITY                               305,133            --

      Total Liabilities                           28,766,661    26,495,462
                                                ------------  ------------


COMMITMENTS AND CONTINGENCIES [NOTE 8]

STOCKHOLDERS' EQUITY
    Common stock, $.01 par value, 200,000,000
     shares authorized, 4,834,275 shares issued
     and outstanding as of June 30, 2006 and
     June 30, 2005                                    48,342        48,342
    Additional paid-in capital                    10,558,853    10,558,853
    Accumulated deficit                           (1,630,472)   (4,035,384)
    Less: Treasury stock, at cost, 15,000
     shares                                         (110,748)     (110,748)
    Accumulated other comprehensive income from
     interest rate swap                              227,724        77,727
                                                ------------  ------------

      Total Stockholders' Equity                   9,093,699     6,538,790
                                                ------------  ------------

      Total Liabilities and Stockholders'
       Equity                                   $ 37,860,360  $ 33,034,252



            FOUNTAIN POWERBOAT INDUSTRIES, INC. AND SUBSIDIARY
                  CONSOLIDATED STATEMENTS OF OPERATIONS
                 YEARS ENDED JUNE 30, 2006, 2005 AND 2004


                                         2006         2005         2004
                                     ------------ ------------ ------------

NET SALES                            $ 79,226,224 $ 71,182,069 $ 59,296,964

COST OF SALES                          66,152,424   60,271,506   49,247,743
                                     ------------ ------------ ------------

Gross Profit                           13,073,800   10,910,563   10,049,221
                                     ------------ ------------ ------------

EXPENSES

Selling Expense                         6,765,871    5,726,283    5,558,709

General and Administrative              4,032,574    3,417,933    2,660,432
                                     ------------ ------------ ------------

Total Expense                          10,798,445    9,144,216    8,219,141
                                     ------------ ------------ ------------

OPERATING INCOME                        2,275,355    1,766,347    1,830,080
                                     ------------ ------------ ------------

Other (Income) Expense                      9,944       23,507
(1,380)

Interest Expense                        1,132,584    1,011,860    1,210,477

(Gain) loss on disposal of assets          11,661       (4,000)      11,896
                                     ------------ ------------ ------------

TOTAL NON-OPERATING EXPENSE             1,154,189    1,031,367    1,220,993
                                     ------------ ------------ ------------

INCOME BEFORE INCOME TAXES              1,121,166      734,980      609,087


CURRENT TAX BENEFIT                            --      (21,232)          --

DEFERRED TAX BENIFIT                   (1,283,746)          --           --
                                     ------------ ------------ ------------

NET INCOME                           $  2,404,912 $    756,212 $    609,087
                                     ============ ============ ============

BASIC EARNINGS PER SHARE             $        .50 $        .16 $        .13
                                     ============ ============ ============

WEIGHTED AVERAGE SHARES OUTSTANDING     4,819,275    4,815,188    4,761,460
                                     ============ ============ ============

DILUTED EARNINGS PER SHARE           $        .49 $        .15 $        .13
                                     ============ ============ ============

DILUTED WEIGHTED AVERAGE SHARES
 OUTSTANDING                            4,903,949    4,890,124    4,825,179

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