SOURCE: Fountain Powerboat Industries, Inc.

May 15, 2007 10:38 ET

Fountain Powerboats Reports Fiscal 2007 Third Quarter Financial Results

WASHINGTON, NC -- (MARKET WIRE) -- May 15, 2007 -- Fountain Powerboat Industries, Inc. (AMEX: FPB), a leading manufacturer of high performance sport boats, fish boats and express cruisers, today announced results for the fiscal third quarter and nine-month period ended March 31, 2007.

Net Sales

Net sales for the third quarter of fiscal 2007 were $16,475,688, an 11 percent decrease, when compared to net sales of $18,526,332 for the third quarter of fiscal 2006.

Net sales for the nine-month period of fiscal 2007 were $48,922,327, a decrease of 14 percent, when compared to net sales of $55,894,161 for the nine-month period of fiscal 2006.

"The decrease in sales over the nine-month period was a result of continued concern over economic conditions and rising fuel prices, which together have created a weakness within the entire recreational boating industry," commented Fountain's Chairman and CEO Reggie Fountain. "We have experienced greater attendance and more retail orders at this year's boat shows than last year's, and sales of our larger sport fish boats have continued to increase. We are maintaining market share in the sport boat market, but are currently experiencing softness in the sales of our top-of-the-line express cruisers. As we enter the 2007 retail season, management will continue to closely monitor dealer inventories and buying indicators for demand in specific product lines," added Fountain.

Profit

Gross profit for the quarter was $1,335,657, with a gross profit margin of approximately 7 percent, versus a gross profit of $2,764,533, with a gross profit margin of 14.9 percent, for the third quarter of fiscal 2006.

Gross profit for the nine-month period was $5,461,682, with a gross profit margin of approximately 11.2 percent, versus a gross profit of $9,338,349, with a gross profit margin of approximately 17 percent, for comparable nine-month period of fiscal 2006.

"The decline in gross profit for the last nine months is attributed to inefficiencies due to lower production volumes, reduced fixed-cost absorption from production cuts, increases in material costs -- especially those associated with petrochemicals, nickel and wood," commented Fountain Powerboats Chief Financial Officer Irving Smith.

Net income (loss)

Net loss for the third quarter was $(3,912,189), or a net loss per share of $(0.81) on a basic and diluted basis, versus net income of $22,410, or net earnings per share of $0.00 on a basic and diluted basis, for the third quarter of fiscal 2006.

The net loss for the nine-month period was $(5,478,168), or a loss per share of $(1.13) on a basic and diluted basis, compared to a net income of $1,038,764, or a net income per share of $0.21 on a basic and diluted basis, for the nine-month period of fiscal 2006.

The net loss for the three-month and nine-month periods was affected by the Deferred Tax Expense. The Deferred Tax Expense was approximately $2.2 million for the three-month period and $1.3 million for the nine-month period. With the profits achieved by the company during fiscal 2005 and 2006, management decided that the Valuation Allowance was no longer appropriate and that a full realization of tax loss carryforwards seemed likely. But, the company's losses incurred during the nine months ended March 31, 2007 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-Q.

"Fountain's international sales continue to maintain growth paralleling that of fiscal 2006," commented Fountain President David Knight. "Our dealer inventories in the U.S. are down more than 18 percent and are expected to have a favorable effect on sales during the upcoming 2007 retail season. Currently we have a backlog of approximately $30 million, and enjoyed strong sales from our winter boat shows, which have historically been an indication of a strong summer season. We will continue to work closely with our dealers, and have established a dealer council to improve communications and assist in model planning to meet consumer demands. Our goal is to increase market penetration while focusing on reducing overall expenses."

About Fountain Powerboat Industries

Fountain Powerboats, Inc., a subsidiary of Fountain Powerboat Industries, Inc., 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 suc h 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
         UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS


                                               For the Three Months Ended
                                              ----------------------------
                                                March 31,       March 31,
                                                  2007            2006
                                              ------------    ------------
NET SALES                                     $ 16,475,688    $ 18,526,332
COST OF SALES                                   15,140,031      15,761,799

Gross Profit                                     1,335,657       2,764,533

EXPENSES:
Selling                                          1,869,486       1,484,647
General and administrative                         852,457       1,063,484

Total Expenses                                   2,721,943       2,548,131

OPERATING INCOME (LOSS)                         (1,386,286)        216,402

NON-OPERATING INCOME (EXPENSE):
Other                                                   26          25,429
Interest                                          (293,095)       (219,421)

Total Non-operating (Expense)                     (293,069)       (193,992)

INCOME (LOSS) BEFORE INCOME TAXES               (1,679,355)         22,410

DEFERRED TAX EXPENSE                             2,232,834              --

NET INCOME (LOSS)                             $ (3,912,189)   $     22,410

BASIC EARNINGS (LOSS) PER SHARE               $      (0.81)   $       0.00

WEIGHTED AVERAGE SHARES OUTSTANDING              4,835,164       4,834,275

DILUTED EARNINGS (LOSS) PER SHARE             $      (0.81)   $       0.00

WEIGHTED AVERAGE SHARES OUTSTANDING ASSUMING
 DILUTION                                        4,835,164       4,993,041



            FOUNTAIN POWERBOAT INDUSTRIES, INC. AND SUBSIDIARY
         UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS


                                                For the Nine Months Ended
                                              ----------------------------
                                                March 31,       March 31,
                                                  2007            2006
                                              ------------    ------------
NET SALES                                     $ 48,922,327    $ 55,894,161
COST OF SALES                                   43,460,645      46,555,812

Gross Profit                                     5,461,682       9,338,349

EXPENSES:
Selling expenses                                 6,045,455       4,211,356
General and administrative expenses              2,730,149       3,034,937

Total Expenses                                   8,775,604       7,246,293

OPERATING INCOME (LOSS)                         (3,313,922)      2,092,056

NON-OPERATING INCOME (EXPENSE):
Other                                              (49,985)        (25,671)
Interest                                          (830,534)     (1,027,621)
Total Non-operating (Expense)                     (880,519)     (1,053,292)

INCOME (LOSS) BEFORE INCOME TAXES               (4,194,441)      1,038,764

DEFERRED TAX EXPENSE                             1,283,727              --

NET INCOME (LOSS)                             $ (5,478,168)   $  1,038,764

BASIC EARNINGS (LOSS) PER SHARE               $      (1.13)   $       0.21

WEIGHTED AVERAGE SHARES OUTSTANDING              4,834,567       4,834,275

DILUTED EARNINGS (LOSS) PER SHARE             $      (1.13)   $       0.21

WEIGHTED AVERAGE SHARES OUTSTANDING ASSUMING
 DILUTION                                        4,834,567       4,910,072



            FOUNTAIN POWERBOAT INDUSTRIES, INC. AND SUBSIDIARY
              UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS


                                               March 31,        June 30,
                                                 2007             2006
                                             -------------   -------------
ASSETS

CURRENT ASSETS:
Cash and cash equivalents                    $   1,048,609   $   4,474,552
Accounts receivable, net                         6,035,369       3,405,868
Inventories                                      6,358,884       6,959,188
Prepaid expenses                                   721,601         849,160
Deferred tax assets                                      -       1,446,018


Total Current Assets                            14,164,463      17,134,786

Property, Plant& Equipment                      49,591,238      47,898,410
Less: Accumulated Depreciation                 (32,513,258)    (30,790,537)

                                                17,077,980      17,107,873


CASH SURRENDER VALUE LIFE INSURANCE              2,737,587       2,552,682
OTHER ASSETS                                       511,590       1,065,019

TOTAL ASSETS                                 $  34,491,620   $  37,860,360



             FOUNTAIN POWERBOAT INDUSTRIES, INC. AND SUBSIDIARY
              UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS


                                                March 31,       June 30,
                                                  2007            2006
                                              ------------    ------------
LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES
Current maturities - long-term debt           $    747,177    $    711,984
Notes payable                                    1,791,239              --
Accounts payable - trade                         2,909,532       3,861,061
Accrued expenses and other liabilities           1,154,797       1,253,714
Dealer incentives                                6,991,040       6,367,229
Customer deposits                                  555,795         391,024
Allowance for boat repurchases                      98,331          15,459
Warranty reserve                                   613,685         632,357

Total Current Liabilities                       14,861,596      13,232,828

OTHER LONG-TERM LIABILITIES                          4,827              --
LONG-TERM DEBT, less current maturities         16,163,833      15,228,700
DEFERRED TAX LIABILITY                              22,203         305,133

COMMITMENTS AND CONTINGENCIES

Total Liabilities                               31,052,459      28,766,661

STOCKHOLDERS’ EQUITY
Common stock, $.01 par value, 200,000,000
 shares authorized, 4,834,275 shares issued
 and outstanding as of March 31, 2007 and
 June 30, 2006                                      48,442          48,342
Additional paid-in capital                      10,574,753      10,558,853
Accumulated deficit                             (7,108,640)     (1,630,472)
Less: Treasury stock, at cost 15,000 shares       (110,748)       (110,748)
Accumulated other comprehensive income from
 interest rate swap                                 35,354         227,724

Total Stockholders’ Equity                       3,439,161       9,093,699

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY    $ 34,491,620    $ 37,860,360

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