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Fountain Reports Third Quarter Results - Not Pretty

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Old 05-15-2007, 10:51 AM
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Default Fountain Reports Third Quarter Results - Not Pretty

Fountain Powerboats Reports Fiscal 2007 Third Quarter Financial Results
Tuesday May 15, 10:37 am ET


WASHINGTON, NC--(MARKET WIRE)--May 15, 2007 -- Fountain Powerboat Industries, Inc. (AMEX:FPB - News), 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





--------------------------------------------------------------------------------
Source: Fountain Powerboat Industries, Inc.
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Old 05-15-2007, 07:33 PM
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Sell!!!
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Old 05-15-2007, 08:37 PM
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Really not suprising. Just take a look at all the steals on used boats right now. Its just not a good time to be selling a boat. I bet that all manufacturers are seeing a similar trend. $3-4 dollar gas prices don't help much either.
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Old 05-15-2007, 09:18 PM
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tough business. I would like to see Mercurys financial statement, I bet they are the ones making money
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Old 05-15-2007, 09:36 PM
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Quote:
Originally Posted by bmanafort View Post
I would like to see Mercurys financial statement, I bet they are the ones making money
No problem. They too just released. Keeping in mind that Brunswick reports the total, not the breakout numbers.
The summary is below. Full reports can be read at these links
http://biz.yahoo.com/e/070503/bc10-q.html
http://finance.yahoo.com/q/is?s=bc


Sales from continuing operations during the first quarter of 2007 decreased 1.9 percent to $1,386.1 million, with gains reported by the Marine Engine and Fitness segments, which were more than offset by a reduction in the Boat and Bowling & Billiards segments. The decrease in sales was primarily due to lower sales volumes resulting from the continued reduction in domestic marine industry demand levels, partially offset by the effect of marine acquisitions during 2006, growth in the Fitness segment, strong international performance, higher sales of marine parts and accessories and favorable pricing. Excluding incremental sales of $12.3 million from acquisitions, Brunswick's sales in the quarter declined 2.8 percent from the same period in 2006. Operating earnings from continuing operations of $53.0 million and related operating margins of 3.8 percent decreased from the same period in the prior year, primarily as a result of lower fixed-cost absorption due to reduced production rates in Brunswick's marine businesses in an effort to achieve appropriate levels of dealer pipeline inventories, higher raw material and production costs and unfavorable mix factors. These factors were partially offset by successful cost-reduction initiatives and the effects of higher pricing and acquisitions. In the quarter ended April 1, 2006, the Company reported operating earnings from continuing operations of $98.2 million with related operating margins of 6.9 percent.
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Old 05-16-2007, 12:03 AM
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In all honesty I thought it was going to be worse.Entry level boaters are staying out with fuel prices = overstock of used boats=new boats don't sell.My main supplier is off 10% this year and my business is not as sensitive to fuel prices as boat sales
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Old 05-16-2007, 12:27 AM
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The boating industry is in a slump, especially the performance segment. I will just leave it at that.
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Old 05-16-2007, 08:24 AM
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Fountain hulls are pretty efficient, i would think with high gas prices they would do better than some others. That 48 express gets the same gas mileage as boats half the size!

But I guess people are staying away from boating entirely. This $3 a gallon **** is not fun.
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Old 05-16-2007, 09:06 AM
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I know of one builder adding to their workforce due to high demand. Sun is up for some evidently.
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Old 05-16-2007, 10:00 AM
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Quote:
Originally Posted by sleeper_dave View Post
Fountain hulls are pretty efficient, i would think with high gas prices they would do better than some others. That 48 express gets the same gas mileage as boats half the size!

But I guess people are staying away from boating entirely. This $3 a gallon **** is not fun.
That is very true. Boating just tested a bunch of triple outboard 38' CC's and Fountain fuel mileage was far better. I have a Fountain 38TE with triple 275 Verado's. I get 1.4-1.5 mpg burning about 10 gallons per hour per engine at a 50mph cruise. None of the other boats could even come close to this. They had top speeds and cruise speeds 10mph less and got around 1mpg.
I am trying to sell my boat because I want to downsize because of various reasons and I am finding boats that weight 5-8,000 lbs less, go 15-20mph slower and are 10 feet less still can not get the MPG of my 38te Fountain.
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