Fountain Powerboats Industries, Inc. History

Address:

P.O. Drawer 457
Washington, North Carolina 27889
U.S.A.

Telephone: (252) 975-2000
Fax: (252) 975-6793

Public Company
Incorporated: 1979
Employees: 331
Sales: $50.6 million (1998)
Stock Exchanges: NASDAQ
Ticker Symbol: FPWR
NAIC: 336612 Boat Building; 326199 Boats, Inflatable Plastics, Manufacturing

Company History:

Fountain Powerboats Industries, Inc., through its wholly owned subsidiary Fountain Powerboats, Inc., is one of the premier designers and manufacturers of ultra high-performance speed boats, sport cruisers, sport boats, and sport fishing boats. However, the company is no ordinary recreational powerboat manufacturer. As Ferrari and Lamborghini are to the automotive world, so Fountain is to the world of powerboats--a firm that is at the pinnacle of its industry. Having produced and sold some of the most expensive powerboats in the world to such customers as the late King Hussein of Jordan, the company recently has entered into numerous defense contracts with the U.S. Navy, U.S. Customs, and the U.S. Coast Guard to make high-quality, custom-designed rigid inflatables. In addition, the company has gone on an acquisitions campaign to vertically integrate its production process. Although the company's state-of-the-art production plant and headquarters are located along the Pamlico River in Washington, North Carolina, its network of distributors is worldwide.

Early History

The founder and owner of Fountain Powerboats, Reggie Fountain, was born and educated in Tarboro, North Carolina, and from his early childhood he was fascinated with speedboats. He entered his first boat race at the age of 14, and from that time onward was increasingly involved in competitive speedboat racing. Yet he found time to earn both an undergraduate degree and a law degree from the University of North Carolina while he developed his skills as a speedboat racer. In 1970 Fountain entered into professional competition and, one year later, was honored as the Outstanding New Driver at one of the most prestigious speedboat racing events of the time, the Lake Havasu World Championships.

The skills he had developed during his earlier years paid off immediately in professional competition. In the second year of his career, Fountain set two world records and earned three national closed-course championships in one day at Marine Stadium in Miami--thus assuring himself a place in boat racing history. As his skills improved and the accolades continued, Fountain was soon a dominant force in speedboat racing. One of the most admired and vaunted teams in speedboat racing, the Mercury Factory Team, asked him to drive with legends Bill Seebold and Earl Bentz, and by 1972 the three men had become the winningest team in the history of tunnel outboard racing.

Fountain's success continued unabated during the entire decade of the 1970s. In 1973 he won an astounding 20 out of 31 races entered, and in 1975 he won a total of ten out of 19 racing events entered. In 1976 Fountain reached the top of his career in tunnel racing, when he won 15 out of 23 races, the most important including the famous St. Louis OZ World Championships. In 1978 the now legendary speedboat racer once again won the St. Louis OZ World Championships, among numerous other prestigious races around the globe. When he retired from active competition in 1979, Reggie Fountain had achieved a reputation and status in speedboat racing comparable to Babe Ruth and Joe DiMaggio in baseball and Mario Andretti in automobile racing. In short, it was not likely that another speedboat racer would equal Fountain's record-setting accomplishments for a long time.

The 1980s and Corporate Success

After retiring from active competition, Fountain contracted with Mercury Marine to design and manage a comprehensive research and development testing program. Before he could actually start the testing program, however, Fountain required a high-performance boat. He decided to purchase a 31-foot V-Bottom speedboat from Bill Farmer of Excalibur Boats located in Florida. As he became more and more involved in the testing program, Fountain came up with the idea of altering the boat to suit his purposes. At first the changes were relatively simple and small, like sandpapering the running surface to increase the overall speed of the boat. But as time went on, Fountain's alterations became noticeable and dramatic, such as the hand-crafted putty strakes added to improve handling and control of the boat, and the redesign and improvement of the stern drive height meant to improve acceleration.

Within a short time, Fountain had significantly improved the performance of his test speedboat. Recognizing that he could enhance its performance even more, he devoted himself to redesigning and improving both the hull and deck configurations. By the time he was finished, Fountain's alterations had changed the boat so much that it was virtually a new boat. As this alteration and testing process continued, Fountain discovered that there was a clearly identifiable market for the highly customized test boats that he was producing. A little marketing research, mostly consisting of discussions with speedboat enthusiasts and other speedboat retailers, convinced him that he could design, produce, and market his own boats, with less overhead and more customization than anyone thought possible.

With his own money earned from real estate investments over the years, the enthusiastic entrepreneur opened his business, Fountain Powerboats, Inc., in late 1979. Situated in an abandoned used car dealership in Washington, North Carolina, near the shores of the Pamlico River, Fountain's new firm grew rapidly. The first year of operation began with a 10,000-square-foot facility, eight employees, and sales amounting to $515,000. One year later, although his design and manufacturing facility remained the same size, both the number of employees and sales figure doubled. Fountain had discovered a niche in the recreational boat market, one that emphasized highly customized designs without concern for the price.

Throughout the decade of the 1980s Fountain Powerboats flourished. The success of the company was in large part due to the hands-on management style of its owner and the meticulous attention Fountain gave to the quality of his boats. From the beginning of the design and production process, Fountain insisted on using the best materials available for their construction. His company was one of the first in the boating industry to use space-age laminates, heralding a breakthrough in boat design and performance. Fountain was also a pioneer in using bidirectional, tridirectional, and quad-directional glass to improve and enhance performance, as well as paving the way for the use of lightweight coring material in constructing speedboats. One of his most impressive revolutionary designs involved the reconfiguration of the underneath of his boats by utilizing a notch transom, pad keel running surface that significantly improved the handling and performance of his speedboats. By the time the decade had come to a close, Fountain Powerboats employed more than 100 people and was selling millions of dollars worth of boats to people around the world, including some of the most notable celebrities and personalities in the United States, Europe, and the Middle East.

The Challenges of the 1990s

During the early and mid-1990s Fountain Powerboats was confronted with a series of challenges that tested the commitment and talent of its owner. A recession affected the fortunes of the company adversely, with many of the customers to which Fountain would ordinarily sell his boats unable to pay his higher prices because of setbacks in their investment portfolios. Compounding the matter was the government's imposition of a ten percent luxury tax placed on all boats, airplanes, and cars with a sticker price of more than $100,000. Consequently, the demand for Fountain's speedboats and new line of fishing boats dropped precipitously. To keep his boats before the public eye, and to raise money to sustain his company through this difficult time, Fountain decided to return to the professional offshore racing circuit.

Fountain's return to the racing circuit was an enormous success. He designed, built, and drove his own boat, the only V-bottom boat in most of the offshore races he entered, and dominated the competition. In 1990, at the start of his return, Fountain overcame overwhelming odds and predictions to the contrary to beat the entire field of unusually designed catamarans operated both by professionals and celebrities. Fountain was particularly vindicated by his victory, since it was widely regarded that V-bottom boats were not competitive with catamarans in smooth water. In 1992 Fountain won the OPT World and National Championships in open V-bottom boats, as well as the APBA World Championship. From the time he returned to the end of 1992, Fountain remained undefeated in all major offshore racing competitions.

In 1992 Fountain introduced a revolutionary design for his high-performance boats: the Positive Lift, a new type of boat bottom that increased acceleration, improved handling and cornering agility, and reduced consumption of fuel. With the government's repeal of the luxury tax in 1993, Fountain Powerboats seemed poised for a financial recovery. Yet the company's capital expenditure for retooling its production line to incorporate the new configurations for the Positive Lift boat bottoms, in concert with a complete overhaul of the firm's production process and facility, delayed prospects for an immediate and full economic recovery. By 1995, however, Fountain Powerboats was in the driver's seat, so to speak, with sales increasing dramatically and demand for the company's powerboats skyrocketing.

The year 1997 was a mixed one for Fountain Powerboats and its owner. Fountain had set eight world speed records in offshore racing competition since his return to the professional circuit in 1990 and was at the peak of his ability and performance as a speedboat racer. Fountain formed a partnership with Fabio Bruzzi, another veteran racer, and the two men designed and developed a unique surface drive for high-performance speedboats that was soon incorporated into many of the designs used for boats at Fountain's company. During the same time, however, Fountain had decided to merge with Mach Performance, Inc., a manufacturer of propellers for speedboats and various other types of boat designs. Unfortunately, the deal went sour when Fountain brought suit against the owner of Mach Performance, Gary Garbrecht, for fraud. Fountain argued that he had arranged a merger with Garbrecht in good faith, but that Garbrecht hid the true nature of his company's financial situation and prevented auditors from inspecting its inventory, consisting of equipment at the time of the merger that was obsolete and even defective. Even more distressing to Fountain was the suit brought against him and his company by the most famous basketball player in the world, Michael Jordan. Jordan and his lawyers accused Fountain of infringing on his trademark "Air Jordan" by using the phrase "Air Reggie" as part of an advertisement showing a powerboat surging in the air above the water.

Luckily, both of the lawsuits resulted in favor of Fountain Powerboats. The merger with Mach Performance was rescinded by the courts, at no loss to Fountain Powerboats or its operations. The suit brought by Michael Jordan against Fountain Powerboats for trademark infringement was settled out of court, also at no cost to the company, since there was a mutual agreement that the company would not use the particular phrase under discussion again in an advertisement.

As of mid-1999, Reggie Fountain maintained a 55 percent ownership of the company and was the driving force behind its continued success. Sales exceeded $50 million in 1998 and showed no signs of slowing down. Clearly, Reggie Fountain's hands-on management of the company, including his ability to incorporate revolutionary designs for the improved performance of his boats, placed Fountain Powerboats in a class by itself.

Fountain Powerboats Industries, Inc. History

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