SOURCE: Fountain Powerboat Industries, Inc.

September 27, 2007 10:00 ET

Fountain Powerboats Reports Fiscal 2007 Sales of $68.8 Million

Company Reports Profitable Fourth Quarter

WASHINGTON, NC--(Marketwire - September 27, 2007) - 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, 2007.

Net Sales

Net sales for the fourth quarter of fiscal 2007 were $19,907,661, a 14.7 percent decrease, when compared to net sales of $23,332,064 for the fourth quarter of fiscal 2006.

Net sales for fiscal 2007 were $68,829,987, a 13 percent decrease, when compared to net sales of $79,226,224 for fiscal 2006.

"The decrease in sales for the year was due to an overall softening of the marine industry," commented Fountain's Chief Financial Officer, Irving L. Smith. "Boat purchasing decisions are influenced by interest rates, fuel prices, insurance rates, weather, as well as socioeconomic and environmental factors, all of which negatively affected consumer confidence and discretionary spending."

"While dealer inventories of Fountain boats are at a four-year low, the results of the late summer boat shows have been encouraging," said Fountain's Chairman and CEO, Reginald M. Fountain, Jr. "We are maintaining market share in the sport boat segment and experienced improvement in the express cruiser segment in the latter half of fiscal 2007. We expect sales for fiscal 2008 to be at approximately the same level as 2007," added Fountain.

Gross Profit

Gross profit for the fourth quarter of fiscal 2007 was $3,749,583, with a gross profit margin of approximately 18.8 percent, versus a gross profit of $3,735,452, with a gross profit margin of approximately 16 percent, for the fourth quarter of fiscal 2006.

Gross profit for fiscal 2007 was $9,108,088, with a gross profit margin of approximately 13.2 percent, versus a gross profit of $13,073,800, with a gross profit margin of approximately 16.5 percent, for fiscal 2006.

"The decline in gross profit margins for fiscal 2007 is attributed to inefficiencies due to lower production volumes, reduced fixed-cost absorption from production cuts, and promotional program pricing in the first half of the year," remarked Smith.

Net Profit/(Loss)

Net profit for the fourth quarter of fiscal 2007 was $535,059, or a net earnings per share of $0.11 on a basic and diluted basis, versus net income of $1,366,148, or net earnings per share of $0.29 on a basic basis and $0.28 on a diluted basis, for the fourth quarter of fiscal 2006.

Net loss for fiscal 2007 was ($5,046,286), or a net loss per share of ($1.05) on a basic and diluted basis, versus net income of $2,404,912, or net earnings per share of $0.50 on a basic basis and $0.49 on a diluted basis, for fiscal 2006.

The net loss for fiscal 2007 was affected by the Deferred Tax Expense, which was approximately $1.3 million for the year. As a result of profits during fiscal 2005 and 2006, management decided that the Valuation Allowance was no longer appropriate and that a full realization of tax loss carryforwards was applicable. But the company's losses during the second and third quarters have resulted in the Valuation Allowance being reestablished, which resulted in the above mentioned tax expenses. An in depth explanation of the expense is available in the company's Form 10-K.

"Our revenue projections for 2008 are expected to be on the same level of those for fiscal 2007," said Fountain's President R. David Knight. "We have budgeted our operational costs and expenses to parallel our projected revenue."

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, 2007 AND 2006

                                  ASSETS

                                                    2007          2006
                                                ------------  ------------
ASSETS
CURRENT ASSETS
    Cash and cash equivalents                   $  2,379,383  $  4,474,552
    Accounts receivable, net                       3,688,986     3,405,868
    Inventories                                    6,645,213     6,959,188
    Prepaid expenses                                 668,237       849,160
    Deferred tax assets                                   --     1,446,018

                                                ------------  ------------
      Total Current Assets                        13,381,819    17,134,786

PROPERTY, PLANT AND EQUIPMENT                     49,533,443    47,898,410
    Less: Accumulated depreciation               (33,104,217)  (30,790,537)
                                                ------------  ------------
                                                  16,429,226    17,107,873

CASH SURRENDER VALUE LIFE INSURANCE, NET           2,951,010     2,552,682

OTHER ASSETS                                         654,890     1,065,019
                                                ------------  ------------

      TOTAL ASSETS                              $ 33,416,945  $ 37,860,360
                                                ============  ============




                   LIABILITIES AND STOCKHOLDERS’ EQUITY

                                                    2007          2006
                                                ------------  ------------
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
    Current maturities of long-term debt        $    759,290  $    711,984
    Note payable                                     799,333            --
    Accounts payable                               2,846,303     3,861,061
    Accrued expenses                               1,092,908     1,253,714
    Dealer incentives                              6,342,467     6,367,229
    Customer deposits                                879,102       391,024
    Allowance for boat repurchases                    64,124        15,459
    Warranty reserve                                 941,928       632,357
                                                ------------  ------------

      Total Current Liabilities                   13,725,455    13,232,828



OTHER LONG TERM LIABILITIES                            4,828            --
LONG-TERM DEBT, less current portion              15,969,407    15,228,700
DEFERRED TAX LIABILITY                                80,896       305,133

      Total Liabilities                           29,780,586    28,766,661
                                                ------------  ------------

COMMITMENTS AND CONTINGENCIES [NOTE 8]

STOCKHOLDERS’ EQUITY
    Common stock, $.01 par value, 200,000,000
     shares authorized, 4,844,275 shares issued
     and outstanding as of June 30, 2007 and
     June 30, 2006                                    48,442        48,342
    Additional paid-in capital                    10,574,753    10,558,853
    Accumulated deficit                           (7,005,001)   (1,630,472)
    Less: Treasury stock, at cost, 15,000
     shares                                         (110,748)     (110,748)
    Accumulated other comprehensive income from
     interest rate swap                              128,913       227,724
                                                ------------  ------------

      Total Stockholders’ Equity                   3,636,359     9,093,699
                                                ------------  ------------

      Total Liabilities and Stockholders’
       Equity                                   $ 33,416,945  $ 37,860,360




            FOUNTAIN POWERBOAT INDUSTRIES, INC. AND SUBSIDIARY
                  CONSOLIDATED STATEMENTS OF OPERATIONS
                 YEARS ENDED JUNE 30, 2007, 2006 AND 2005

                                      2007          2006          2005
                                  ------------  ------------  ------------
NET SALES                         $ 68,829,987  $ 79,226,224  $ 71,182,069

COST OF SALES                       59,721,899    66,152,424    60,271,506
                                  ------------  ------------  ------------

Gross Profit                         9,108,088    13,073,800    10,910,563
                                  ------------  ------------  ------------

EXPENSES

Selling Expense                      8,040,083     6,765,871     5,726,283

General and Administrative           3,813,883     4,032,574     3,417,933
                                  ------------  ------------  ------------

Total Expense                       11,853,966    10,798,445     9,144,216
                                  ------------  ------------  ------------

OPERATING (LOSS) INCOME             (2,745,878)    2,275,355     1,766,347
                                  ------------  ------------  ------------

Other Expense                           49,855         9,944        23,507

Interest Expense                       966,784     1,132,584     1,011,860

(Gain) loss on disposal of assets           41        11,661        (4,000)
                                  ------------  ------------  ------------

TOTAL NON-OPERATING EXPENSE          1,016,680     1,154,189     1,031,367
                                  ------------  ------------  ------------

(LOSS) INCOME BEFORE INCOME TAXES   (3,762,558)    1,121,166       734,980

TAX PROVISION (BENEFIT)              1,283,728    (1,283,746)      (21,232)
                                  ------------  ------------  ------------

NET (LOSS) INCOME                 $ (5,046,286) $  2,404,912  $    756,212
                                  ============  ============  ============

BASIC (LOSS) EARNINGS PER SHARE   $      (1.05) $        .50  $        .16
                                  ============  ============  ============

WEIGHTED AVERAGE SHARES
 OUTSTANDING                         4,821,987     4,819,275     4,815,188
                                  ============  ============  ============

DILUTED (LOSS) EARNINGS PER SHARE $      (1.05) $        .49  $        .15
                                  ============  ============  ============

DILUTED WEIGHTED AVERAGE SHARES
 OUTSTANDING                         4,821,987     4,903,949     4,890,124

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