U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 2003
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________ to _______________
Commission File Number 0-14712
FOUNTAIN POWERBOAT INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Nevada 56-1774895
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification No.)
Whichard's Beach Road, P.O. Drawer 457, Washington, NC 27889
(Address of principal executive offices)
Registrant's telephone no. including area code: (252) 975-2000
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes[ X ] No[ ]
Indicate by check mark whether the registrant is an accelerated filer
(as defined in Rule 12b-2 of the Act)
Yes[ ] No[ X ]
Indicate the number of shares outstanding of each of the issuer's
classes of common stock as of the latest practicable date.
Class Outstanding at December 31, 2003
Common Stock, $.01 par value 4,757,608 shares
FOUNTAIN POWERBOAT INDUSTRIES, INC. AND SUBSIDIARY
INDEX
Page No.
Part I Financial Information
Item 1. Financial Statements
Unaudited Condensed Consolidated Balance Sheets,
December 31, 2003 and June 30, 2003 3 - 4
Unaudited Condensed Consolidated Statements of
Operations, for the three and six months ended
December 31, 2003 and 2002 5
Unaudited Condensed Consolidated Statements of
Cash Flows, for the three and six months ended
December 31, 2003 and 2002 6 - 7
Notes to Unaudited Condensed Consolidated
Financial Statements 8 - 15
Item 2. Management's Discussion and Analysis of Results
of Operations and Financial Condition 16 - 18
Item 3. Quantitative and Qualitative Disclosures
of Market Risk 18
Item 4. Controls and Procedures 18
Part II Other Information
Items 1, 2, 3, 4, 5 & 6 18 - 19
Signature 20
Exhibits
Explanatory Note
Fountain Powerboat Industries, Inc. is filing this Amendment to its
Quarterly Report on Form 10-Q for the quarterly period ended December 31,
2003 to restate earnings and earnings per share due to adjustments to its
previously reported allowance for deferred tax assets as required by SFAS
109. Previous amounts did not reflect fully the effects of certain NOL
carryforwards and their affects on the net of deferred tax assets and
liabilities. See Note 7 to the financial statements for further
information related to this issue. Additional comments were also added to
the Managements' Discussion and Analysis, Results of Operations, to
further explain the Company's reasons for maintaining the deferred tax
asset allowance.
The original Management's Discussion and Analysis, Liquidity and
Capital Resources, was further expanded to include additional discussion
about sufficient current and future cash flows to satisfy liquidity
demands of the Company.
With the exception of the foregoing corrections, no other
information in the Quarterly Report on Form 10-Q for the quarterly period
ended December 31, 2003 has been supplemented, updated or amended.
PART I. FINANCIAL INFORMATION.
ITEM 1: Financial Statements.
FOUNTAIN POWERBOAT INDUSTRIES, INC. AND SUBSIDIARY
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
December 31, June 30,
ASSETS 2003 2003
CURRENT ASSETS:
Cash and cash equivalents $ 3,995,211 $ 1,224,935
Accounts receivable, net 2,239,123 2,015,371
Inventories 3,891,464 3,460,286
Prepaid Expenses 838,397 644,581
Current tax assets 292,935 303,823
Total Current Assets 11,260,130 7,648,996
PROPERTY, PLANT AND EQUIPMENT 42,268,908 41,676,783
Less: Accumulated depreciation (26,554,008) (25,511,099)
15,714,900 16,165,684
CASH SURRENDER VALUE LIFE INSURANCE 1,479,000 1,378,626
OTHER ASSETS 611,403 736,288
TOTAL ASSETS $ 29,065,433 $ 25,929,594
(Continued)
FOUNTAIN POWERBOAT INDUSTRIES, INC. AND SUBSIDIARY
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities - long-term debt $ 1,070,916 $ 1,060,444
Current maturities - capital lease 17,709 20,118
Accounts payable 1,945,322 7,498,762
Accounts payable - related party 34,000 169,043
Accrued expenses 793,599 1,317,398
Dealer incentives 693,653 190,010
Customer deposits 229,937 290,658
Allowance for boat repurchases 200,000 200,000
Warranty reserve 900,000 900,000
Total Current Liabilities 5,885,136 11,646,433
LONG-TERM DEBT, less current maturities 18,070,298 8,986,160
CAPITAL LEASE, less current maturities 21,249 24,367
DEFERRED TAX LIABILITY 295,935 303,823
COMMITMENTS AND CONTINGENCIES (NOTE 5)
Total Liabilities 24,272,618 20,960,783
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value, 200,000,000 shares authorized,
4,757,608 shares issued and outstanding 47,576 47,576
Additional paid-in capital 10,443,840 10,436,551
Accumulated earnings (deficit) (5,517,971) (5,400,683)
4,973,445 5,083,444
Less: Treasury stock, at cost, 15,000 shares (110,748) (110,748)
Deferred compensation for stock options issued (2,090) (3,885)
Accumulated other comprehensive income from interest rate swap (67,792) -
Total Stockholders' Equity 4,792,815 4,968,811
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 29,065,433 $ 25,929,594
The Accompanying notes are an integral part of these unaudited condensed
consolidated financial statements
FOUNTAIN POWERBOAT INDUSTRIES, INC. AND SUBSIDIARY
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months Ended For the Six Months Ended
December 31, December 31, December 31, December 31,
2003 2002 2003 2002
(Restated) (Restated)
NET SALES $ 13,361,811 $ 12,941,227 $ 26,247,043 $ 25,016,213
COST OF SALES 11,334,711 10,570,853 22,187,762 20,739,887
Gross Profit 2,027,100 2,370,374 4,059,281 4,276,326
EXPENSES:
Selling expense 1,050,694 1,082,315 2,406,264 1,915,293
General and administrative 519,353 431,241 1,085,212 898,254
Total Expenses 1,570,047 1,513,556 3,491,476 2,813,547
OPERATING INCOME (LOSS) 457,053 856,818 567,805 1,462,779
NON-OPERATING INCOME (EXPENSE):
Other income (expense) (1,962) 1,389 1,097 29,965
Interest expense (216,032) (214,475) (686,190) (520,676)
Total Non-operating Income (Expense) (217,994) (213,086) (685,093) (490,711)
INCOME (LOSS) BEFORE INCOME TAXES 239,059 643,732 (117,288) 972,068
CURRENT TAX EXPENSE (BENEFIT) - - - -
DEFERRED TAX EXPENSE (BENEFIT) 0 161,273 0 320,364
NET INCOME (LOSS) $ 239,059 $ 482,459 $ (117,288) $ 651,704
BASIC EARNINGS (LOSS) PER SHARE $ 0.05 $ 0.10 $ (0.02) $ 0.14
WEIGHTED AVERAGE SHARES OUTSTANDING 4,757,608 4,745,108 4,757,608 4,745,108
DILUTED EARNINGS (LOSS) PER SHARE $ 0.05 $ 0.10 $ (0.02) $ 0.14
WEIGHTED AVERAGE SHARES OUTSTANDING
ASSUMING DILUTION 4,819,635 4,825,399 4,821,862 4,803,886
The Accompanying notes are an integral part of these unaudited condensed
consolidated financial statements
FOUNTAIN POWERBOAT INDUSTRIES, INC. AND SUBSIDIARY
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Increase (Decrease) in Cash and Cash Equivalents
For the Six Months Ended
December 31, December 31,
2003 2002
CASH FLOWS FROM OPERATING ACTIVITIES: (Restated)
Net income (loss) $ (117,288) $ 651,704
Adjustments to reconcile net income (loss) to net cash
provided (used) by operating activities:
Depreciation 1,042,909 1,028,308
Net deferred taxes - 320,365
Loss on sale of fixed asset - 29,613
Amortization of deferred loan cost 246,980 30,900
Non-cash expense 9,085 8,846
Change in assets and liabilities:
Decrease (increase) in accounts receivable (223,752) 2,293,396
(Increase) in inventories (431,179) (477,112)
(Increase) in prepaid expenses (193,816) (238,089)
(Decrease) in accounts payable (5,688,483) (514,714)
(Decrease) in accrued expenses (447,814) (245,572)
Increase (decrease) in dealer incentives 427,658 (489,937)
(Decrease) in customer deposits (60,721) (381,106)
Net Cash Provided (Used) by Operating Activities (5,436,421) 2,016,602
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment (110,857) (793,891)
Investment in molds and related plugs (481,269) -
Proceeds from sale of fixed assets - 110,500
(Increase) in other assets (222,468) (100,824)
Net Cash Provided (Used) by Investing Activities (814,594) (784,215)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt 18,067,841 95,000
Payments of long-term debt (8,898,421) (497,442)
Payment of deferred loan cost (148,129) -
Proceeds from stock options exercised - 16,800
Net Cash Provided (Used) by Financing Activities 9,021,291 (385,642)
Net increase in cash and cash equivalents 2,770,276 846,745
Cash and cash equivalents at beginning of year 1,224,935 329,640
Cash and cash equivalents at end of period $ 3,995,211 $ 1,176,385
(Continued)
FOUNTAIN POWERBOAT INDUSTRIES, INC. AND SUBSIDIARY
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Increase (Decrease) in Cash and Cash Equivalents
(Continued)
For the Six Months Ended
December 31, December 31,
2003 2002
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest, net of amounts capitalized $ 498,339 $ 520,677
Income taxes $ - $ -
The Accompanying notes are an integral part of these unaudited condensed
consolidated financial statements
Supplemental Disclosures of Noncash Investing and Financing Activities:
For the six month period ended December 31, 2003:
The Company recorded consulting expense of $1,795 as a result of
amortization of deferred compensation from 20,000 options issued to
purchase common stock during Fiscal 2002, vesting through January
2004 and expiring through January 2009.
For the six month period ended December 31, 2002:
The Company recorded consulting expense of $8,846 as a result of
amortization of deferred compensation from 40,000 options issued to
purchase common stock during Fiscal 2002, vesting through January
2004 and expiring through January 2009.
The Accompanying notes are an integral part of these unaudited condensed
consolidated financial statements
FOUNTAIN POWERBOAT INDUSTRIES, INC. AND SUBSIDIARY
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
The accompanying financial statements have been prepared by the Company
without audit. In the opinion of management, all adjustments (which
include only normal recurring adjustments) necessary to present fairly the
financial position, results of operations and cash flows at December 31,
2003 and for all periods presented have been made.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles in the United States of America have been condensed
or omitted for purposes of filing interim financial statements with the
Securities and Exchange Commission. It is suggested that these condensed
financial statements be read in conjunction with the financial statements
and notes thereto included in the Company's June 30, 2003 audited
financial statements. The results of operations for the three and six
month periods ended December 31, 2003 and 2002 are not necessarily
indicative of the operating results for the full year.
Principles of Consolidation: The consolidated financial statements include
the accounts of the Company and its wholly owned subsidiary, Fountain
Powerboats, Inc. All significant inter-company accounts and transactions
have been eliminated in consolidation.
Accounting Estimates: The preparation of financial statements in
conformity with generally accepted accounting principles in the United
States of America requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities, the
disclosures of contingent assets and liabilities at the date of the
financial statements, and the reported amounts of revenues and expenses
during the reporting period. Actual operating results could differ from
those estimated by management.
Cash and Cash Equivalents: For purposes of the statement of cash flows,
the Company considers all highly liquid debt instruments with a maturity
of three months or less to be cash equivalents. At December 31, 2003 and
June 30, 2003, the Company had $3,895,211 and $1,124,935, respectively, in
excess of federally insured amounts held in cash.
Fair Value of Financial Instruments: Management estimates the carrying
value of financial instruments on the consolidated financial statements
approximates their fair values.
Derivative Financial Instruments: The Company uses derivative financial
instruments for the purpose of reducing its exposure to adverse
fluctuations in interest rates. While these hedging instruments are
subject to fluctuations in value, such fluctuations are generally offset
by the value of the underlying exposures being hedged. The Company
accounts for these derivative financial instruments as an effective cash
flow hedge under the provisions of Statement of Financial Accounting
Standards (SFAS) No. 133, "Accounting for Derivative Instruments and
Hedging Activities" and it has the effect of converting the interest rate
paid on the notional amount of $9,000,000 of the Company's variable debt
to a fixed rate of 6.02%. The difference between the Company's actual
variable interest rate and 6.02% on the notional amount for the next
twelve months is reclassified from other comprehensive income and
recognized as interest expense. The Company is not a party to leveraged
derivatives and does not hold or issue financial instruments for
speculative purposes.
Revenue Recognition: The Company generally sells boats only to authorized
dealers and to the U.S. Government. A sale is recorded when a boat is
shipped to a dealer or to the Government, legal title and all other
incidents of ownership have passed from the Company to the dealer or
Government, and an accounts receivable is recorded or payment received
from the dealer, the Government, or the dealer's third-party commercial
lender. This method of sales recognition is in use by most boat
manufacturers.
FOUNTAIN POWERBOAT INDUSTRIES, INC. AND SUBSIDIARY
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION (continued)
The Company has developed criteria for determining whether a shipment
should be recorded as a sale or as a deferred sale (a balance sheet
liability). The criteria for recording a sale are that the boat has been
completed and shipped to a dealer or to the Government, that title and
incidents of ownership have passed to the dealer or to the Government, and
that there is no direct or indirect commitment to the dealer or to the
Government to repurchase the boat save those manufacturer's repurchase
agreements with lending institutions which are more fully discussed in
Note 6 to these financial statements.
The sales incentive interest payment program for each boat sale is accrued
for the entire interest period in the same fiscal accounting period that
the related sale is recorded (see Note 6 to these financial statements).
The amount of interest accrued is subsequently adjusted to reflect the
actual number of days of remaining liability for floor plan interest for
each individual boat remaining in the dealer's inventory and on floor
plan.
Stock Options: The Company has stock incentive plans that provide for
stock-based employee compensation, including the granting of stock
options, to certain key employees and other individuals. The plans are
more fully described in Note 5. The Company accounts for stock options
issued to employee, officer and directors under the stock incentive plan
in accordance with the recognition and measurement principles of APB
Opinion No. 25, "Accounting for Stock Issued to Employees", and related
Interpretations. Under this method, compensation expense is recorded on
the date of grant only if the current market price of the underlying stock
exceeded the exercise price. Under the Company's stock incentive plan,
stock options are granted at exercise prices that equal or exceed the
market value of the underlying common stock on the date of grant.
Therefore, no compensation expense related to stock options is recorded in
the Consolidated Statements of Operations.
During the periods presented in the accompanying financial statements the
Company has granted options under the 1995 and 1999 Stock Options Plans
and executive and other employment agreements. The Corporation has adopted
the disclosure-only provisions of SFAS No. 123, "Accounting for Stock-
Based Compensation." Accordingly, compensation cost under SFAS No. 123
has been recognized for certain stock options issued under other
agreements to non-employee and recorded in the accompanying statement of
operations, but no compensation cost under SFAS No. 123 has been
recognized for stock options issued under the plans and other agreements
with employees.
Had compensation cost for stock options issued to employees under the
Company's stock option plans and agreements been determined based on the
fair value at the grant date for awards in the six months ended December
31, 2003 and 2002 consistent with the provisions of SFAS No. 123, the
Company's net income and earnings per share would have been reduced to the
pro forma amounts indicated below:
FOUNTAIN POWERBOAT INDUSTRIES, INC. AND SUBSIDIARY
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION (continued)
For the Three Months Ended For the Six Months Ended
December 31, December 31, December 31, December 31,
2003 2002 2003 2002
(Restated) (Restated)
C>
Net Income (Loss) as Reported $ 239,059 $ 482,459 $ (117,288) $ 651,704
Add: Stock-based nonemployee compensation
expense included in reported net income - 9,117 1,795 13,533
Deduct: Total stock-based employee
compensation expense determined
under fair value based method (5,193) (24,826) (10,386) (36,118)
Net Income (Loss) Proforma $ 233,866 $ 466,750 $ (125,879) $ 629,119
Basic earnings (loss) per share: As reported $ 0.06 $ 0.10 $ (0.01) $ 0.14
Proforma $ 0.05 $ 0.10 $ (0.02) $ 0.13
Diluted earnings (loss) per share: As reported $ 0.06 $ 0.10 $ (0.01) $ 0.14
Proforma $ 0.05 $ 0.10 $ (0.02) $ 0.13
NOTE 2 - ACCOUNTS RECEIVABLE
As of December 31, 2003, accounts receivable were $2,239,123 net of the
allowance for bad debts of $27,841. This is an increase from the $223,752
in net accounts receivable over the amount recorded at June 30, 2003. Of
the balance at December 31, 2003, $2,068,687 subsequently has been
collected as of February 12, 2004, and the remaining $198,277 is believed
to be fully collectible.
The Company has pledged its receivables as collateral for its promissory
note with Bank of America.
NOTE 3 - INVENTORIES
Inventories at December 31, 2003 and June 30, 2003 consisted of the
following:
December 31, June 30,
2003 2003
Parts and supplies $ 1,721,675 $ 1,593,057
Work-in-process 2,112,199 1,702,533
Finished Goods 107,590 214,696
$ 3,941,464 $ 3,510,286
Obselete inventory reserve (50,000) (50,000)
Total $ 3,891,464 $ 3,460,286
The Company has pledged its inventories as collateral for its promissory
note with Bank of America.
FOUNTAIN POWERBOAT INDUSTRIES, INC. AND SUBSIDIARY
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4 - LONG-TERM DEBT AND PLEDGED ASSETS
The following is a summary of long-term debt:
December 31, June 30,
2003 2003
9.99% loans payable to a financial institution for
the purchase of vehicles, monthly payments
totaling $1,383 through August 2005, secured
by the vehicles purchased. $ 25,396 $ 32,224
6.5% loan payable to a financial institution for the
purchase of a vehicle, monthly payments of $726
through December 2006, secured by the vehicle
purchased. 22,159 25,306
7.93% to 8% loans payable borrowed against
the cash surrender value of key-man life insurance
policies, monthly payments
of $25,004. 1,358,472 1,265,438
$10,000,000 credit agreement with a financial
Corporation (See Below). - 8,723,636
$18,000,000 credit agreement with a financial
Corporation (See Below). 17,735,187 -
19,141,214 10,046,604
Less: Current maturities included in current liabilities (1,070,916) (1,060,444)
$ 18,070,298 $ 8,986,160
On July 17, 2003, the Company obtained an $18,000,000 long-term loan from
Bank of America. The proceeds were used to refinance the two loans with
General Electric Capital Corporation totaling $10,000,000 with total
remaining balance of $8,723,636 and a variable interest rate of prime plus
2% or 6.25% as of June 30, 2003. Proceeds from the Bank of America loan
were also used to pay trade payables to current status and provide
additional operating funds. The new agreement with Bank of America has a
$9,000,000 note with a rate that is variable with the Wall Street LIBOR
one month floating rate as the index plus the applicable margin. The
applicable margin is based on funded debt to earnings before income taxes
and depreciation adjustment (EBITDA). The applicable margin is as
follows:
FOUNTAIN POWERBOAT INDUSTRIES, INC. AND SUBSIDIARY
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4 - LONG-TERM DEBT AND PLEDGED ASSETS (Continued)
Funded Debt to EBITDA ratio Applicable Margin
Less than or equal to 1.74 to 1.00 1.90%
1.75 to 1.00, but less than 2.50 to 1.00 2.10%
2.50 to 1.00, but less than 3.76 to 1.00 2.25%
Greater than or equal to 3.76 to 1.00 2.50%
The applicable margin for the first year is deemed to be 2.25%.
The agreement with Bank of America further has a $9,000,000 note under an
interest rate swap to provide a fixed rate of 6.02%. The interest rate
swap is designated as a cash flow hedge and is deemed effective pursuant
to SFAS 133. These Bank of America loans have a fifteen year amortization
with a five year balloon payment and are secured by certain assets of the
Company and real estate of the Company's President, Chief Executive
Officer and majority shareholder, Reginald M. Fountain, Jr. Obligations
are guaranteed by the Company, an unlimited unconditional guarantee of Mr.
Fountain and by Brunswick Corporation, pursuant to a master funding
agreement with the Company. Combined monthly payments to Bank of America
will be approximately $126,000.
The Company has agreed to observe certain covenants under the terms of its
note agreements, the most restrictive of which relates to prepayment of
excess earnings, the sale of assets securing the notes and key financial
ratios. Chief among the covenants are:
1. Maintenance of a tangible net worth floor.
2. A current maturity coverage ratio defined as the ratio of the current
portion of long-term liabilities plus interest to "cash flow" which is
defined as net income plus depreciation, amortization, interest and
other non-cash expenditures.
3. A funded debt to earnings before interest, taxes, depreciation and
amortization (EBITDA) ratio which is defined as the ratio of all
outstanding debt both current and long-term to EBITDA.
As of December 31, 2003 the Company was in compliance with all its
required covenants.
Prepayment - The Company is obligated to pay in addition to required
monthly principle payments an additional 50% of the excess earnings after
debt service within 120 days after the close of the Company's fiscal year
end.
Should the Company prepay the balance of the note within one year of the
date of the note, the Company must pay one percent (1%) of the unpaid
balance on the date before the date of the prepayment is made. If the
Company prepays the balance of the note after one year of the date of the
note, the Company must pay a half of a percent (.5%) of the unpaid balance
on the date before the date the prepayment is made.
Should the Company default on the provision of timely payments, a
delinquency charge of four percent (4%) of the unpaid portion of the
payment that is more than fifteen days late will be applied. Should the
Company remain in a default status, the interest rate charged to the
Company shall be an additional two percent (2%) above the rates listed
above.
FOUNTAIN POWERBOAT INDUSTRIES, INC. AND SUBSIDIARY
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4 - LONG-TERM DEBT AND PLEDGED ASSETS (Continued)
Loan Guarantee - The Company entered into an agreement with Brunswick
Corporation, a division of which supplies marine engines used in the
Company's product, wherein Brunswick Corporation agreed to guarantee the
$18,000,000 in debt financing, in return the Company President granted
Brunswick the option to purchase his common shares and his options to
purchase common shares of the Company. The Company's President further
agreed to indemnify Brunswick for all amounts in excess of $14,700,000.
The Company issued 273,146 options to acquire common shares at $.05 per
share that are exercisable in the event of a default by the Company on its
loan. In the event Brunswick Corporation exercises its option to purchase
the Company President's shares the Company has agreed to issue additional
shares of common stock which would result in Brunswick owning together
with the shares purchased from the Company President 50.1% of the
Company's outstanding shares at the weighted average market closing price
for the previous 30 days. The Company further entered into an exclusive
supply agreement and agreed to restrictions on the Company issuing any
equity securities that would dilute Brunswick's potential equity interest
in the Company upon exercise of their options with the Company and
Company's President without Brunswick's prior approval. Brunswick
Corporation's options to purchase vest upon the earlier of the repayment
or default of $18,000,000 notes payable, or July 1, 2007. Brunswick
Corporation's option expires no earlier than approximately 180 days after
vesting.
NOTE 5 - COMMON STOCK
During January 2002, the Company issued 10,000 options to purchase common
stock to a consultant for services to be rendered valued at $14,254. The
options are exercisable at $1.67 per share, vest through January 2004 and
expire January 2009. During the three and six months ended December 31,
2003, the Company recorded consulting expense of $0 and $1,795,
respectively.
During July 2003, the Company issued 273,146 options to purchase common
stock to Brunswick Corporation as a condition of guarantying the Bank of
America loan. The options are exercisable only under conditions of
default by the Company of its loan and Brunswick having exercised its
guarantee of the loan. Should Brunswick Corporation exercise its option to
purchase the Company President's stock, the Company has agreed to issue
additional common shares which would result in Brunswick owning together
with the shares purchased from the Company President, 50.1% of the
Company's outstanding shares at the weighted average market closing price
for the previous 30 days. The Company also agreed not to issue any equity
instruments without prior approval of Brunswick Corporation.
If Brunswick Corporation exercised fully their options with the Company
and Company President under the loan guarantee they would own 50.1 % of
the outstanding stock of the Company.
NOTE 6 - COMMITMENTS AND CONTINGENCIES
Manufacturer Repurchase Agreements - The Company makes available through
third-party finance companies floor plan financing for many of its
dealers. Sales to participating dealers are approved by the respective
finance companies. If a participating dealer does not satisfy its
obligations under the floor plan financing agreement in effect with its
commercial lender(s) and boats are subsequently repossessed by the
lender(s), then under certain circumstances the Company may be required to
repurchase the repossessed boats if it has executed a repurchase agreement
with the lender(s). At December 31, 2003, the Company had a total
contingent liability to repurchase boats in the event of dealer defaults
and if repossessed by the commercial lenders amounting to approximately
$11,129,254. The Company has reserved for the future losses it might
incur upon the repossession and repurchase of boats from commercial
lenders. The amount of the allowance is based upon probable future events
which can be reasonably estimated. At December 31, 2003, the allowance
for boat repurchases was $200,000.
FOUNTAIN POWERBOAT INDUSTRIES, INC. AND SUBSIDIARY
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6 - COMMITMENTS AND CONTINGENCIES (Continued)
The Company vigilantly monitors all its dealers for solvency issues by
examining dealer inventory levels and amounts carried under floor plan
financing. At present the Company has no dealers that it believes to be at
risk of default under their floor plan arrangements.
Dealer Interest - The Company regularly pays a portion of dealers'
interest charges for floor plan financing. These interest charges amounted
to approximately $142,331 and $374,416, respectively for the three and six
months ended December 31, 2003 and the estimated unpaid dealer interest
included in accrued dealer incentives at December 31, 2003 amounted to
$77,432.
Interest Rate Risk - At December 31, 2003, the Company owed $17,667,394 on
a $18,000,000 credit agreement with Bank of America. The credit agreement
has $9,000,000 at one month LIBOR plus 2.25% or 3.77% as of December 31,
2003, and $9,000,000 under an interest rate swap to provide a fixed rate
of 6.02%. An increase in the LIBOR rate would have a negative effect on
the results of operations of the Company. A hypothetical 50 basis point
increase in interest rates would result in an approximately $45,000
increase in interest expense.
Engine Supply Agreement - The Company entered into an Engine Supply
agreement with Brunswick Corporation, as a condition for guarantying the
Bank of America loan, to purchase all marine engines from Mercury Marine
division of Brunswick except for products in categories in which Mercury
does not manufacture or are unavailable from Mercury due to production
shortages.
NOTE 7 - TRANSACTIONS WITH RELATED PARTIES
At December 31, 2003, the Company had receivables and advances from its
employees amounting to $19,294.
During the three and six month period ended December 31, 2003, the Company
paid $42,625 and $123,500 respectively, for services rendered to entities
owned or controlled by the Company's Chairman, President, and Chief
Executive Officer.
The Company's Chairman, President, and Chief Executive Officer has
guaranteed and personally pledged certain of his assets as collateral in
connection with the $18,000,000 loan with Bank of America and the
Brunswick Corporation agreement to guarantee said loan. The president
further agreed to sell certain of his common shares and options to
purchase common shares to Brunswick Corporation in connection with their
guarantee (See Note 4)
NOTE 8 - INCOME TAXES
The Company has provided for deferred income taxes in accordance with SAFS
No. 109, Accounting for Income Taxes, whereby deferred income taxes are
determined based upon the enacted income tax rates for the years in which
these taxes are estimated to be payable or recoverable. Deferred income
taxes arise from temporary differences resulting from a difference between
the tax basis of an asset or liability and its reported amount in the
financial statements.
FOUNTAIN POWERBOAT INDUSTRIES, INC. AND SUBSIDIARY
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8 - INCOME TAXES [Continued]
The components of federal income tax expense from continuing operations
consist of the following:
Six months Ended December 31,
_____________________________
2003 2002
_____________ _____________
(Restated)
Current income tax expense:
Federal $ - $ -
State - -
_____________ _____________
Net current tax (benefit) $ - $ -
_____________ _____________
Deferred tax expense (benefit)
resulted from:
Excess of tax over financial
accounting depreciation $(31,947) $ 119,529
Donations (1,043) (96)
Reserve for obsolete inventory - 51,480
Dealer incentive reserves - 97,945
Accrued dealer incentive interest (32,673) (6,178)
Accrued executive compensation 51,620 (32,100)
Accrued dealer service incentives 5,460 111,159
Inventory adjustment-Sec.263A (13,734) (21,375)
Health insurance reserve (4,680) -
Decrease in NOL carryforwards 6,014 62,567
Valuations allowance 20,983 (62,567)
_____________ _____________
Net deferred tax expense (benefit) $ - $ 320,364
_____________ _____________
The reconciliation of income tax from continuing operations computed at
the U.S. federal statutory tax rate to the Company's effective rate is as
follows:
Six Months Ended December 31,
__________________________
2003 2002
__________________________
(Restated)
Computed tax at the expected
federal statutory rate 34.00% 34.00%
State income taxes, net of
federal benefit 5.00 5.00
Valuations allowance (19.06) (6.44)
Compensation from stock options (3.22) (1.00)
Officer's life insurance (1.04) (.12)
Nondeductible entertainment (5.56) -
Penalties (10.12) -
Other - 1.52
__________________________
Effective income tax rates 0% 32.96%
__________________________
FOUNTAIN POWERBOAT INDUSTRIES, INC. AND SUBSIDIARY
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8 - INCOME TAXES [Continued]
Significant components of the Company's deferred tax assets and
liabilities are as follows:
Six Months
Ended Year Ended
December 31, June 30,
__________ _____________
2003 2003
__________ _____________
(Restated) (Restated)
Deferred tax assets:
Warranty reserve $ 351,000 $ 351,000
Obsolete inventory reserve 19,500 19,500
Accrued vacations 73,685 73,685
Allowance for boat repurchases 78,000 78,000
Bad debt reserve 10,858 10,858
Accrued Dealer incentive interest 58,051 25,378
Inventory adjustments - Sec. 263A 123,954 110,220
State NOL carryforwards 486,083 486,854
Federal NOL carryforwards 2,251,459 2,256,701
Alternative minimum tax credits 119,049 119,049
Accrued executive compensation 3,764 55,384
Donations carryforwards 5,651 4,608
Accrued dealer service incentives 32,662 38,122
Health insurance reserve 45,240 40,560
Investment tax credits 86,294 86,294
____________ ___________
Total deferred assets 3,745,250 3,756,213
Less: valuation allowance
for deferred tax assets (2,363,896) (2,342,912)
____________ ___________
Net deferred tax assets 1,381,354 1,413,301
Deferred tax liabilities:
Excess of financial accounting
depreciation over tax (1,381,354) (1,413,301)
_____________ __________
Net deferred tax assets (liabilities) $ - $ -
_____________ __________
FOUNTAIN POWERBOAT INDUSTRIES, INC. AND SUBSIDIARY
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Net deferred tax assets (liabilities) are presented as follows:
Six Months
Ended Year Ended
December 31, June 30,
___________ __________
2003 2003
___________ __________
(Restated) (Restated)
Current deferred tax asset $ 295,935 $ 303,823
Deferred tax liabilities (295,935) (303,823)
_________ __________
Net deferred tax assets (liabilities) $ - $ -
__________ __________
NOTE 8 - INCOME TAXES [Continued]
The Company has unused federal operating loss carryforwards at December
31, 2003 and 2002 of approximately $6,621,937 and $6,108,785,
respectively, which expire in various years through 2023. The Company has
unused state operating loss carryforwards at December 31, 2003 and 2002 of
approximately $9,721,667 and $9,208,515, respectively, which expire in
various years through 2023.
NOTE 9 - EARNINGS (LOSS) PER SHARE
The computations of earnings (loss) per share and diluted earnings per
share amounts are based upon the weighted average number of outstanding
common shares during the periods, plus, when their effect is dilutive,
additional shares assuming the exercise of certain vested stock options,
reduced by the number of shares which could be purchased from the proceeds
from the exercise of the stock options assuming they were exercised.
The weighted average common shares and common equivalent shares
outstanding for the three month and six month periods ended December 31,
2003 and 2002 for purposes of calculating earnings per share was as
follows:
For the Three Months Ended For the Six Months Ended
December 31, December 31, December 31, December 31,
2003 2002 2003 2002
Weighted average common shares outstanding
used in basic earnings per share for the three
and six months ending 4,757,608 4,745,108 4,757,608 4,745,108
Effect of dilutive stock options 62,027 80,291 64,254 58,778
Weighted average common shares and potential
dilutive common equivalent shares outstanding
used in dilutive earnings per share 4,819,635 4,825,399 4,821,862 4,803,886
FOUNTAIN POWERBOAT INDUSTRIES, INC. AND SUBSIDIARY
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9 - EARNINGS (LOSS) PER SHARE [Continued]
At December 31, 2003 there were 610,000 unexercised stock options, of
which 480,000 were held by officers and directors of the Company at prices
ranging from $3.58 to $4.67 per share that were not included in the
computation of earnings per share because the effect is anti-dilutive.
NOTE 10 - VALUATION AND QUALIFYING ACCOUNTS
The balance in the following valuation and qualifying accounts at December
31, 2003 and change from the year ended June 30, 2003 are as follows:
Valuation and Qualifying June 30, Expense and Other December 31,
Account Description 2003 Adjustments Reductions 2003
(Restated) (Restated) (Restated)
Allowance for doubtful accounts 27,841 - - 27,841
Inventory valuation reserve 50,000 - - 50,000
Deferred tax valuation allowance 2,342,913 - 20,983 2,363,896
Warranty reserve 900,000 638,018 (638,018) 900,000
Allowance for boat repurchases 200,000 - - 200,000
FOUNTAIN POWERBOAT INDUSTRIES, INC. AND SUBSIDIARY
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 11 - RESTATEMENT OF FINANCIAL STATEMENTS
The accompanying financial statements have been restated to reflect an
increase in the deferred tax asset valuation allowance. The valuation
allowance was increased by $20,983 for the six months ended December 31,
2003 to compensate for deferred tax liabilities that are available for
offsetting against the tax assets, thus reducing the amount of allowance
needed.
The Company's financial statements for the three months and the six months
ended December 31, 2003 have been restated as follows :
Three Months Ended Six Months Ended
December 31, 2003 December 31, 2003
-------------------------- --------------------------
As Reported As Restated As Reported As Restated
----------- ----------- ----------- -----------
Statement of Operations Data:
Deferred tax expense $( 15,659) $ -0- $( 26,997) $ -0-
Net income (loss) $ 254,718 $ 239,059 $( 90,291) $ (117,288)
Basic earnings (loss) per share $ .05 $ .05 $( .01) $ ( .02)
Diluted earnings (loss) per share $ .05 $ .05 $( .01) $ ( .02)
Balance Sheet Data:
Current tax assets $ 802,366 $ 295,935
Total current assets $ 11,766,561 $ 11,260,130
Total assets $ 29,571,864 $ 29,065,433
Deferred tax liability $ 1,176,012 $ 295,935
Total liabilities $ 25,152,695 $ 24,272,618
Retained earnings (deficit) $( 5,891,617) $( 5,517,971)
Stockholders' equity $ 4,419,169 $ 4,792,815
Total liabilities &
stockholders' Equity $ 29,571,864 $29,065,433
ITEM 2: Management's Discussion and Analysis of Results of Operations
and Financial Condition
Results of Operations
The following tables should be read in conjunction with management's
discussion and set forth, for the periods and dates indicated, certain
financial, operating and balance sheet data including, as applicable, the
percentages of net sales:
For the Three Months Ended Change over the
December 31, 2003 December 31, 2002 Prior Period
_________________________ _________________________ _________________________
(Restated) (Restated)
Net sales $ 13,361,811 100.0% $ 12,941,227 100.0% $ 420,584 3.2%
Cost of sales 11,334,711 84.8% 10,570,853 81.7% 763,858 7.2%
Gross profit $ 2,027,100 15.2% $ 2,370,374 18.3% $ (343,274) -14.5%
Selling expense $ 1,050,694 $ 1,082,315 $ (31,621)
General and administrative $ 519,353 $ 431,241 $ 88,112
Interest expense $ 216,032 $ 214,475 $ 1,557
Net income $ 239,059 $ 482,459 $ (243,400)
Boat shipments (Units shipped) 94 103 (9)
For the Six Months Ended Change over the
December 31, 2003 December 31, 2002 Prior Period
_________________________ _________________________ _________________________
(Restated) (Restated)
Net sales $ 26,247,043 100.0% $ 25,016,213 100.0% $ 1,230,830 4.9%
Cost of sales 22,187,762 84.5% 20,739,887 82.9% 1,447,875 7.0%
Gross profit $ 4,059,281 15.5% $ 4,276,326 17.1% $ (217,045) -5.1%
Selling expense $ 2,406,264 $ 1,915,293 $ 490,971
General and administrative $ 1,085,212 $ 898,254 $ 186,958
Interest expense $ 686,190 $ 520,676 $ 165,514
Net income $ (117,288) $ 651,704 $ (768,992)
Boat shipments (Units shipped) 205 188 17
Net Sales - The increase in net sales of $420,584 and $1,230,830 during
the three and six months ended December 31, 2003, respectively, from the
comparable periods during the previous year was primarily attributable to
increases in the unit selling price of the boats produced by the Company.
Gross Profit - The decrease in gross profit of $343,274 and $217,045 for
the three and six months ended December 31, 2003, respectively, as
compared to the comparable periods in the previous year is primarily
attributable to the mix of boats sold by the Company. During the current
quarter and six month period the Company sold smaller boats (which have a
lower gross margin per sales dollar) in greater numbers than during the
comparable period in the previous year.
Selling Expenses - Selling expenses for the three months ended December
31, 2003 were $31,621 less than the amounts incurred during the comparable
period in the previous year and represent normal expenditures for sales
and marketing activities of the Company. The increase of $490,971 in
selling expenses during the six months ended December 31, 2003 over the
comparable six months in the previous year is primarily attributable to
higher racing, fish team and magazine advertising expenses incurred during
the first three months of the Company's fiscal year.
General and Administrative Expenses - The increase in general and
administrative expenses of $88,112 and $186,958 for the three and six
months ended December 31, 2003, respectively, over the comparable periods
in the previous year is primarily attributable to increases in accounting
department expenditures relating to compliance with certain provisions of
the Sarbanes - Oxley Act and increased travel costs consistent with the
acquisition of additional dealers during the period.
Interest Expense - The interest expense during the three months ended
December 31, 2003 of $216,032 was $1,557 greater than the interest expense
during the comparable quarter in the previous year and represents normal
debt service for the Company. The $165,514 increase in interest expense
during the six months ended December 31, 2003 over the comparable period
in the previous year is primarily attributable to the write-off of the
unamortized closing costs of a loan with G. E. Capital that was paid with
a partial amount of the proceeds of the Bank of America loan during the
quarter ended September 30, 3003.
Net Income - The decrease in net income of $243,400 and $768,992 during
the three and six months ended December 31, 2003, respectively, as
compared to the comparable periods during the previous year, is primarily
attributable to the mix of units sold in the first and second quarters of
this year and the increased selling and general and administrative
expenses experienced in the first three months of the Company's fiscal
year.
Income Tax - Current tax expense is $0 and $0 for the three months and the
six months ended December 31, 2003, respectively. Current tax expense is
$0 and $0 for the three months and the six months ended December 31, 2002,
respectively. Deferred tax expense is $0 and $0 for the three months and
the six months ended December 31, 2003, respectively. Deferred tax
expense is $161,273 and $320,364 for the three months and the six months
ended December 31, 2002, respectively. Current tax expense of $0 for the
quarter and $0 for the six months ended December 31, 2003 and 2002 is a
result of the net operating loss carryovers from the year ended June 30,
2002. There remains $6,637,357 for Federal and $9,737,087 for State tax
purposes of net operating loss carryovers available till the years 2022
and 2023, to offset current tax expenses. The deferred tax charge for the
quarter and the six months ended December 31, 2002 resulted from changes
to the various temporary timing differences between book and tax as
outlined in Note 7 to the financial statements.
The ultimate realization of the benefits from the deferred tax assets is
dependent upon the Company's future earnings, the future tax laws in
effect, and other unknown factors; all of which are uncertain. For these
reasons and because the Company has generated operating tax losses in
recent years, the Company has elected to provide for a tax asset valuation
allowance of $2,363,896 at December 31, 2003 and $2,342,912 at June 30,
2003.
Management is of the opinion the tax asset valuation allowance will
not be required in its entirety in the coming years. Management
estimates, based on the Company's increased backlog of orders, that sales
volumes will continue to improve in the near future thus resulting in
improved earnings and partial absorption of the net operating tax loss
carryovers. However, at this time the Company has chosen not to reduce
the tax asset valuation allowance for the following reasons: 1.) with the
exception of order backlog, it is very difficult to predict future sales
volumes in an uncertain economy that exists at the present time; and 2.)
the Company's inconsistent earnings history in recent years, which
includes significant losses in fiscal 2001 and 2002, as well as a first
quarter loss in fiscal year 2004. Currently, the tax asset valuation
allowance is adjusted to the extent that total deferred tax assets exceed
total deferred tax liabilities. As operating results and the economy
stabilize and future sales volumes increase, consideration will be given
to reducing or eliminating the valuation allowance.
Liquidity and Capital Resources
The following table sets forth certain items relating to the measurement
of liquidity and capital resources from the Company's condensed
consolidated financial statements for the dates indicated:
Balances as of
December 31, June 30, Increase
2003 2002 (Decrease)
(Restated) (Restated)
Cash and cash equivalents 3,995,211 1,224,935 2,770,276
Working capital 5,374,994 (3,493,945) 8,868,939
Current Ratio 1.91 to 1.00 .070 to 1.00
Quick Ratio 1.25 to 1.00 0.11 to 1.00
Cash increased by $2,770,276 to $3,995,211 during the six months ended
December 31, 2003 from $1,224,935 at June 30, 2003. The increase in cash
can generally be attributed to financing activities which arose from the
Bank of America loan of $18,000,000, less $8,980,049 which was used to
reduce existing long-term debt, $6,065,742 which was used to reduce trade
payables and $592,126 which was used to construct additional molds for the
new 38' express fish boat and other miscellaneous tooling projects.
Cash used by operations for the six months ended December 31, 2003 was
$5,436,421 and was primarily attributable to the use of loan proceeds to
reduce trade payables as outlined in the immediately preceding paragraph
and to finance the increase in trade receivables and inventories
consistent with the improvement in the Company's sales.
Management is of the opinion that cash flows will be sufficient to satisfy
its current and future liquidity demands because of the increase in sales
volumes and sales backlogs at the date of this filing. Subsequent events
related to the senior debt placement strengthens the Company's ability to
pay off all the outstanding current debt and existing long-term debts.
Additionally the Company has maintained a historical sales backlog through
the date of this report.
As described in Note 4 of the notes to the condensed consolidated
financial statements, the Company is required to maintain certain
covenants with its senior lender, Bank of America. On February 10, 2004
the Company renegotiated certain of these covenants as described in
Exhibit 10 of this quarterly report. As of December 31, 2003 the Company
was in compliance with all covenants required by its loan agreement with
Bank of America.
Cautionary Statement for Purposes of "Safe Harbor" Under the Private
Securities Reform Act of 1995.
The Company may from time to time make forward-looking statements,
including statements projecting, forecasting, or estimating the Company's
performance and industry trends. The achievement of the projections,
forecasts, or estimates contained in these statements is subject to
certain risks and uncertainties, and actual results and events may differ
materially from those projected, forecasted, or estimated.
The applicable risks and uncertainties include general economic and
industry conditions that affect all businesses, as well as, matters that
are specific to the Company and the markets it serves. For example, the
achievement of projections, forecasts, or estimates contained in the
Company's forward-looking statements may be impacted by national and
international economic conditions; compliance with governmental laws and
regulations; accidents and acts of God; and all of the general risks
associated with doing business.
Risks that are specific to the Company and its markets include but are not
limited to compliance with increasingly stringent environmental laws and
regulations; the cyclical nature of the industry; competition in pricing
and new product development from larger companies with substantial
resources; the concentration of a substantial percentage of the Company's
sales with a few major customers, the loss of, or change in demand from,
any of which could have a material impact upon the Company; labor
relations at the Company and at its customers and suppliers; and the
Company's single-source supply and just-in-time inventory strategies for
some critical boat components, including high performance engines, which
could adversely affect production if a single-source supplier is unable
for any reason to meet the Company's requirements on a timely basis.
ITEM 3: Quantitative and Qualitative Disclosures about Market Risk.
Interest Rate Risk - At December 31, 2003, the Company owed $17,667,394
on a $18,000,000 credit agreement with Bank of America. The credit
agreement has $9,000,000 at one month LIBOR plus 2.25% or 3.77% as of
December 31, 2003, and $9,000,000 under an interest rate swap to provide
a fixed rate of 6.02%. A hypothetical 100 basis point increase in
interest rates would result in an approximately $90,000 increase in
interest expense, resulting in a negative impact on the Company's
liquidity and results of operations.
ITEM 4: Controls and Procedures
On December 31, 2003 an evaluation was performed under the supervision and
with the participation of the Company's management, including the Chief
Executive Officer and Chief Financial Officer, of the effectiveness of
the design and operation of the company's disclosure controls
and procedures pursuant to Exchange Act Rule 13a-14. Based on that
evaluation, the Chief Executive Officer and Chief Financial Officer have
concluded that the design and operation of these disclosure controls and
procedures were effective. Management's review and evaluation of
disclosure and internal controls and procedures is an ongoing and
continual process. There have been no significant changes in the
Company's internal controls or in other factors that could significantly
affect these controls subsequent to the date of their evaluation.
PART II. OTHER INFORMATION.
ITEM 1: Legal Proceedings.
There were no legal proceedings of a material nature during the quarter
ending December 31, 2003
ITEM 2: Change in Securities.
There was no change in securities during the quarter ending December 31,
2003.
Item 3: Defaults Upon Senior Securities.
There were no defaults upon senior securities during the quarter ending
December 31, 2003.
ITEM 4: Submission of Matters to a vote of Security Holders.
The Company's Annual Meeting of Shareholders was held on November 18,
2003. Each person who was then serving as a member of the Board of
Directors was re-elected for another one year term. The votes for each
nominee were cast as follows:
Shares Voting
For Against Withheld
Reginald M. Fountain, Jr. 3,972,730 - 535
A. Myles Cartrette 3,972,730 - 535
George L. Deichmann, III 3,972,730 - 535
Guy L. Hecker, Jr. 3,972,730 - 535
David C. Miller 3,972,730 - 535
Mark L. Spencer 3,972,730 - 535
Robert L. Stallings, III 3,972,730 - 535
David L. Woods 3,972,730 - 535
The shareholders ratified the Board of Directors' appointment of
Pritchett, Siler & Hardy, PA as independent certified public accountants
for the Company. The appointment was ratified by a vote of 3,973,099
shares for and 0 shares against or withheld, with 166 abstentions or
broker nonvotes.
ITEM 5: Other Information.
None.
ITEM 6: Exhibits and Reports on Form 8 and Form 8-K.
(1). Exhibits:
(a). Exhibit 10, Agreement dated February 10, 2004 between Fountain
Powerboat Industries, Inc. and Bank of America amending the covenant
ratios contained in the original loan agreement between the parties
executed on July 17. 2003
Exhibit 31.1, Certification pursuant to Rule 13a-14(a) by
the Chief Executive Officer
Exhibit 31.2, Certification pursuant to Rule 13a-14(a) by
the Chief Financial Officer
Exhibit 32, Certifications Pursuant to 18 U.S.C. Section 1350
(b). No Current Reports on Form 8-K were filed by the Registrant during
the quarter for which this report was filed.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FOUNTAIN POWERBOAT INDUSTRIES, INC.
(Registrant)
By: /s/ Irving L. Smith
__________________________
Date: August 09, 2004
Irving L. Smith
Chief Financial Officer