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Fountain Powerboat Reports Continuing Growth

13 February 2000

    WASHINGTON, N.C.--Fountain Powerboat Industries, Inc., announces sales and earnings for the second quarter ending December 31, 1999.

    Sales for the quarter were up by 16.1% to $15.4 million from sales of $13.3 for the same quarter in the previous Fiscal year. Operating income for the second quarter of Fiscal 2000 increased dramatically to $1.0 million or 6.3% from $.2 million or 1.4% (before the affect of the $2.4 million strategic charge) for the same quarter in the previous Fiscal year. Net income was $.4 million or $.081 per share for the second quarter of Fiscal year 2000 as compared to a loss of $(1.2 million) or $(.252) per share for the same quarter of the previous Fiscal year.

    Gross profit was $3.2 million or 20.6% for the second quarter of Fiscal 2000 as compared to $3.0 million or 22.8% for the same quarter of the previous Fiscal year. The drop in margin was primarily due to the mix of boats in the quarter. Expenses are down 22% for the quarter and down 15% for the year to date, primarily due to reductions in promotional racing expenditures. On a year to date basis, sales are ahead of the prior year not withstanding the considerable loss of sales due to the hurricanes in September.

    During the second quarter of Fiscal 2000, the Company has resolved the majority of the property damage claim with its insurance carrier. The Company in its opinion has not received a timely and reasonable resolution of its business interruption claim. In late December the Company filed suit against its insurance carrier. Subsequently, in early February, the Company and its insurance carrier have initiated meaningful work to resolve the claim and the insurance carrier has provided an advance toward the resolution of the claims. The full effect of the final settlement cannot be reasonable estimated and will be recorded in the future when collected.

    Following are comparative Condensed Consolidated Statements of Income and Condensed Consolidated Balance Sheets:

          FOUNTAIN POWERBOAT INDUSTRIES, INC. AND SUBSIDIARY
                      CONSOLIDATED BALANCE SHEETS
                                ASSETS



                                            December 31,     June 30,
                                               1999           1999
                                            -----------    -----------
CURRENT ASSETS:
   Cash and cash equivalents                  $ 842,867    $ 2,217,301
   Accounts receivable, net                   2,085,129      1,576,712
   Inventories                                8,628,767      7,307,890
   Prepaid expenses                             802,943        761,486
   Current deferred tax assets                2,192,135      2,221,499
                                            -----------    -----------
      Total Current Assets                   14,551,841     14,081,888
                                            -----------    -----------
PROPERTY, PLANT AND EQUIPMENT                36,775,371     36,209,584


   Less:  Accumulated depreciation          (18,197,612)   (17,144,314)
                                            -----------     ----------
                                             18,577,759     19,065,270
                                            -----------     ----------

OTHER ASSETS                                    845,199        780,802
                                            -----------    -----------
TOTAL ASSETS                                $33,974,799   $ 33,930,960
                                            -----------    -----------


          FOUNTAIN POWERBOAT INDUSTRIES, INC. AND SUBSIDIARY
                      CONSOLIDATED BALANCE SHEETS
                 LIABILITIES AND STOCKHOLDERS' EQUITY
                              (Continued)


                                             December 31,     June 30,
                                                 1999           1999
                                             -----------    -----------
CURRENT LIABILITIES:
   Current maturities - long-term debt     $  2,464,535   $  2,464,535
   Current maturities - capital lease            11,788         11,788
   Accounts payable                           5,506,791      3,961,516
   Accrued expenses                           1,920,482      2,231,061
   Dealer territory service accrual           1,804,916      2,037,170
   Customer deposits                            555,314        687,560
   Allowance for boat repurchases               200,000        200,000
   Reserve for warranty expense                 590,000        590,000
                                             -----------    -----------
      Total Current Liabilities              13,053,826     12,183,630
                                             -----------    -----------
LONG-TERM DEBT, LESS CURRENT PORTION          9,287,947     10,138,395
CAPITAL LEASE, less current maturities           76,939         76,939
DEFERRED TAX LIABILITY                          912,116        899,680

COMMITMENTS AND CONTINGENCIES (NOTE 7)                -              -
                                             -----------    -----------

   Total Liabilities                         23,330,828     23,298,644
                                             -----------    -----------

STOCKHOLDERS' EQUITY:
   Common stock, $.01 par value,
     200,000,000 shares authorized,
     4,732,608 shares issued                     47,026         47,026
   Capital in excess of par value            10,303,640     10,303,640
   Retained earnings - accumulated              403,753        392,098
                                             -----------    -----------
                                             10,754,719     10,743,064
   Less: Treasury stock                        (110,748)      (110,748)
                                             -----------    -----------
         Total Stockholders' Equity          10,643,971     10,632,316
                                             -----------    -----------
                                           $ 33,974,799   $ 33,930,960
                                             -----------    -----------


                  FOUNTAIN POWERBOAT INDUSTRIES, INC.
                 CONSOLIDATED STATEMENTS OF OPERATIONS

                          For The Three Months      For The Six Months
                           Ended December 31        Ended December 31    
                           1999        1998        1999         1998
NET SALES              $ 15,384,022 $13,254,267 $26,179,190 $25,676,494
COST OF SALES            12,213,163  10,238,921  20,973,104  20,077,832              
     Gross Profit         3,170,859   3,015,346   5,206,086   5,598,662
EXPENSES
     Selling Expense      1,502,305   2,151,203   3,215,685   4,094,385
     General & 
      Administrative        694,530     676,984   1,416,033   1,318,616
         Total Expenses   2,196,835   2,830,700   4,631,718   5,417,434                     
OPERATING INCOME BEFORE
     STRATEGIC CHARGE       974,024     184,649     574,368     181,228
STRATEGIC CHARGE                  -  (2,440,000)          -  (2,440,000)
OPERATING INCOME (LOSS)     974,024  (2,255,353)    574,368  (2,258,772)  
NON-OPERTNG INCOME/(EXPENSE)
     Other Income            10,867      59,088      39,853      54,996
     Interest Expense      (244,095)   (264,474)   (527,486)   (519,631)
     Interest Expense -
            Related party         -      (5,097)          -     (13,933)
     Other Expense          (33,280)         -      (33,280)          -
INCOME (LOSS) BEFORE TAX    707,516  (2,465,837)     53,455  (2,737,340)
CURRENT TAX EXPENSE               -           -           -           -
DEFERRED TAXES (BENEFIT)    326,103  (1,283,120)     41,800  (1,356,628)
NET INCOME (LOSS)           381,413  (1,182,717)     11,655  (1,380,712)
EARNINGS (LOSS) PER SHARE      .081       (.252)       .002       (.294)
WEIGHTED AVERAGE
    SHARES OUTSTANDING    4,732,608   4,702,608   4,732,608   4,702,608
                        ----------- ----------- -----------  -----------
DILUTED EARNINGS PER SHARE      N/A         N/A         N/A         N/A
                        ----------- ----------- -----------  -----------
DILUTED WEIGHTED AVERAGE
    SHARES OUTSTANDING          N/A         N/A         N/A         N/A

               
                  FOUNTAIN POWERBOAT INDUSTRIES, INC.
                 CONSOLIDATED STATEMENTS OF CASH FLOWS

                                          Six Months Ended December 31,
                                             1999               1998
  CASH FLOWS FROM OPERATING ACTIVITIES:
  Net Income (Loss)                        $ 11,655       $ (1,380,712)
  Adjustments to reconcile 
   net income (loss) to net
   Cash provided by operating activities:
    Depreciation Expense                  1,053,298          1,192,402
    Strategic Charge
    (Increase) decrease in 
     accounts receiveable                  (508,416)         2,246,338                                        
    (Increase) decrease in inventory     (1,320,877)        (1,293,310)             
    (Increase) decrease in prepaid 
     expenses                               (41,457)          (514,422)                     
    Increase (decrease) in accounts
     payable                              1,545,274           (587,933)
    Increase (decrease) in accrued
     expenses                              (258,528)           165,262              
    Increase (decrease) in dealer 
     service territory                         
     Accrual                               (232,254)            18,317                                    
    Increase (decrease) in customer
     deposits                              (132,247)          (147,983)                    
    Net deferred taxes                     (242,504)        (1,356,629)              
    Net liabilities of discontinued
     operations                                   -            (93,612)                                  
      Net cash Provided by (Used in)
       Operating Activities               $ 106,198          $ 687,718
                                    ------------------ ------------------
  CASH FLOWS FROM INVESTING ACTIVITIES:
   (Purchase) sale of certificates of 
    deposit, net
   Construction of molds, plugs and 
    other tooling                           (83,033)          (398,078)
   Purchase of property plant and 
    equipment                              (482,754)        (1,786,043)                        
   (Increase) in other assets               (64,397)           (71,524)        
     Net Cash Provided by (Used) 
      Investing Activities               $ (630,184)      $ (2,255,645)
                                    ------------------ ------------------
  CASH FLOWS FROM FINANCING ACTIVITIES:
   Proceeds from long-term debt                   -          4,000,000                            
   Repayment of long-term debt             (850,447)          (813,816)                             
   Repayment of long-term debt
    - related party                               -           (257,911) 
   Proceeds from issuance of 
    common stock                                  -                  -
   Net Cash Provided by (Used in) 
    Financing Activities                 $ (850,447)       $ 2,928,273
                                    ------------------ ------------------
  Net increase (decrease) in cash      $ (1,374,433)       $ 1,360,346
  Cash at beginning of year               2,217,300          1,376,984                                      
                                    ------------------ ------------------
  Cash at end of period                   $ 842,867        $ 2,737,330