Despite receiving a delisting notification from the American Stock Exchange, Reginald Fountain Jr. told Soundings Trade Only he is optimistic about his company’s financial strength and future prospects.
Fountain Powerboat Industries must submit a plan to Amex next week addressing how it intends to regain compliance. Until then, Fountain said he is prohibited from releasing details of the company’s plans or financial status.
However, he did say, “We will be responding to them in a very positive way. We will detail our situation, which is not nearly as bad as they seem to think it is.”
The Washington, N.C., boatbuilder received notice last month that it is not in compliance with one of Amex’s standards for the continued listing of the company’s common stock. The June 11 notice said the decision was based on Amex’s review of the company’s quarterly report for the period ended March 31.
Specifically, the notice stated Fountain “… has sustained losses which are so substantial in relation to its overall operations or its existing financial resources, or its financial condition has become so impaired that it appears questionable, in the opinion of the Exchange, whether such company will be able to continue operations and/or meet its obligations as they mature.”
Amex also noted Fountain is not in compliance with covenants contained in its $14.5 million term loan and the company has been operating under a waiver from its lender that expired June 30.
This morning, Fountain’s stock was trading at 70 cents a share. On Tuesday, it hit its 52-week low of 61 cents a share.
For its fiscal third quarter, Fountain reported a 13.7 percent drop in net sales, to $14.2 million from $16.5 million in the 2007 period. Net loss for the traditionally slow quarter was $1.96 million, compared to a net loss of $3.87 million in the fiscal 2007 third quarter.
The company’s CEO said he is unable discuss any of the issues raised in the delisting notice before submitting a plan to Amex. He also is prohibited from releasing figures for the fourth quarter and full year ended June 30 before filing official reports with the Securities and Exchange Commission. However, he did say he expects the company to report positive results for fiscal 2008.
Fountain said sales in the fourth quarter will be up compared to the year-ago comparable quarter, and will make up for the sales deficit reported in the 2008 third quarter. Overall, he said, the fiscal 2008 sales volume will be about the same as the previous year.
And, he added, “operating profit has improved dramatically this year over last year.”
Fountain also was upbeat as he discussed expectations for the Baja brand that the company recently purchased from Brunswick Corp.
“There is a lot of pent-up demand for Baja because nobody has been building them for the last six months,” said Fountain. “Dealer inventory is down. We have received hundreds of orders for Baja from all over the world.
“Baja merging with Fountain gives us hope for the coming year,” he added.
Fountain, according to its SEC filing, said it is aware that the Baja boat line was unprofitable when it was operated by Baja Marine Corp. “Therefore, the company [Fountain] will be required to make substantial operational changes to operate profitably.”
Fountain paid $4 million for the assets, which the company borrowed.
The company has already begun manufacturing a limited number of Baja boats from its North Carolina plant and in the process has made improvements in manufacturing efficiencies, said Fountain. The company has not yet made a final decision about whether it will move all of the Baja production from the Bucyrus, Ohio, plant to Fountain’s existing plant in North Carolina.
— Melanie Winters