FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
( X ) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1997
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
For Quarter Ended Commission File Number
0-14712
Fountain Powerboat Industries, Inc.
(Exact name of registrant as specified in its charter)
Nevada 56-1774895
(State or other (I.R.S. Identification No.)
jurisdiction of
incorporation or
organization)
Whichard's Beach Road
P.O. Drawer 457
Washington, NC 27889
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (919) 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 the number of shares outstanding of each of the issurer's classes of
common stock as of the latest practicable date.
Class Outstanding at January 31, 1998
Common stock, $.01 par value 4,755,108 shares
FOUNTAIN POWERBOAT INDUSTRIES, INC. AND SUBSIDIARY
INDEX
PART I. Financial Information. Page No.
Review Report of Independent Certified
Public Accountants........................... 3
Consolidated Balance Sheets - Assets,
December 31, 1997 and June 30, 1997......... 4
Consolidated Balance Sheets - Liabilities &
Shareholders' Equity, December 31, 1997
and June 30, 1997............................ 5
Consolidated Statements of Income -
Three Months Ended December 31, 1997
and December 31, 1996......................... 6-7
Consolidated Statements of Cash Flows -
Three Months Ended December 31, 1997
and December 31, 1996........................ 8-9
Notes to Consolidated Financial Statements .... 10-14
Management's Discussion and Analysis of
Results of Operations and
Financial Condition.......................... 15-17
PART II. Other Information.
Item 2. Changes in Securities............................. 17
Item 6. Exhibits and Reports on Form 8 and Form 8-K....... 17
Signature........................................ 18
-2-
PRITCHETT, SILER & HARDY, P.C.
430 EAST 400 SOUTH
SALT LAKE CITY, UTAH 84111
(801) 328-2727
To the Board of Directors
FOUNTAIN POWERBOAT INDUSTRIES, INC.
Washington, North Carolina
We have reviewed the accompanying consolidated balance sheet of
Fountain Powerboat Industries, Inc. as of December 31, 1997, and
the related consolidated statements of income and cash flows
for the three and six months then ended. All information included
in these financial statements is the representation of the
management of Fountain Powerboat Industries, Inc.
We conducted our review in accordance with standards established
by the American Institute of Certified Public Accountants. A
review of interim financial information consists principally of
applying analytical procedures to financial data and making
inquiries of Company personnel responsible for financial and
accounting matters. It is substantially less in scope than an
audit conducted in accordance with generally accepted auditing
standards, the objective of which is the expression of an opinion
regarding the financial statements taken as a whole. Accordingly,
we do not express such an opinion.
Based on our review, we are not aware of any material modifications
that should be made to the consolidated financial statements
referred to above for them to be in conformity with generally
accepted accounting principles.
/s/ PRITCHETT, SILER & HARDY, P.C.
PRITCHETT, SILER & HARDY, P.C.
February 6, 1998
FOUNTAIN POWERBOAT INDUSTRIES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
ASSETS
(Unaudited - See Accountants' Review Report)
December 31, June 30,
1997 1997
___________ ___________
CURRENT ASSETS:
Cash and cash equivalents $ 1,952,689 $2,994,503
Certificates of deposit - 696,155
Accounts receivable, net 4,123,944 1,867,747
Inventories 6,253,788 3,937,757
Prepaid expenses 711,632 1,131,703
Deferred tax assets 979,553 369,268
___________ ___________
Total Current Assets 14,021,606 10,997,133
___________ ___________
PROPERTY, PLANT AND EQUIPMENT 29,458,550 24,554,322
Less: Accumulated depreciation (13,195,468) (12,335,166)
___________ ___________
16,263,082 12,219,156
___________ ___________
OTHER ASSETS 503,903 497,607
___________ ___________
TOTAL ASSETS $30,788,591 $ 23,713,896
___________ ___________
-4-
[Continued]
FOUNTAIN POWERBOAT INDUSTRIES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
(Unaudited - See Accountants' Review Report)
[Continued]
December 31, June 30,
1997 1997
___________ ___________
CURRENT LIABILITIES:
Current portion/long-term debt $ 875,869 $ 595,607
Accounts payable 2,882,213 1,987,508
Accrued expenses 1,139,425 860,786
Dealer territory service accrual 1,382,262 1,637,572
Customer deposits 260,116 310,042
Allowance for boat repurchases 200,000 200,000
Reserve for warranty expense 500,000 500,000
Net liabilities of discontinued operations 74,774 213,697
Income taxes payable 824,730 -
___________ ___________
Total Current Liabilities 8,139,389 6,305,212
___________ ___________
LONG-TERM DEBT, LESS CURRENT PORTION 9,539,912 7,677,771
NOTE PAYABLE - RELATED PARTY 415,821 -
DEFERRED TAX LIABILITY 907,735 369,268
___________ ___________
Total Liabilities 19,002,857 14,352,251
___________ ___________
COMMITMENTS AND CONTINGENCIES [NOTE 6] - -
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value,
200,000,000 shares authorized,
4,755,108 shares issued 47,551 47,251
Capital in excess of par value 10,624,940 10,517,740
Retained earnings (Deficit) accumulated 1,223,991 (1,092,598)
___________ ___________
11,896,482 9,472,393
Less: Treasury stock (110,748) (110,748)
___________ ___________
Total Stockholders' Equity 11,785,734 9,361,645
___________ ___________
$30,788,591 $23,713,896
___________ ___________
The accompanying notes are an integral part of these financial statements.
-5-
FOUNTAIN POWERBOAT INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited - See Accountants' Review Report)
For The Three Months Ended For The Six Months Ended
December 31 December 31
1997 1996 1997 1996
NET SALES $13,091,803 $12,257,562 $24,613,237 $24,577,935
COST OF SALES 9,143,760 8,667,230 17,711,833 17,740,489
Gross Profit 3,948,043 3,590,332 6,901,404 6,837,446
EXPENSES
Selling Expense 883,669 1,201,995 1,916,763 2,186,040
General & Administrative 776,467 516,360 1,497,200 1,182,340
General & Administrative
- related parties 932 86,781 73,853 170,613
Total Expenses 1,661,068 1,805,136 3,487,816 3,538,993
OPERATING INCOME 2,286,975 1,785,196 3,413,588 3,298,453
NON-OPERATING INCOME
(EXPENSE):
Other Income 23,707 40,862 40,165 126,726
Interest Expense (135,161) (162,000) (281,133) (321,053)
INCOME BEFORE INC. TAXES 2,175,521 1,664,058 3,172,620 3,104,127
CURRENT TAX EXPENSE 720,116 365,211 954,448 469,891
DEFERRED TAXES (BENEFIT) 109,154 - (71,818) -
INCOME FROM CONTINUING
OPERATIONS 1,346,251 1,298,847 2,289,990 2,634,236
DISCONTINUED OPERATIONS:
Loss from Operations of
Fountain Power, Inc. and
Mach Performance, Inc. - 286,597 - 286,597
Estimated income on disposal
of operations of Fountain
Power, Inc. and Mach
Performance, Inc. - - 26,600 -
INCOME (LOSS) FROM
DISCONTINUED OPER'S - (286,597) 26,600 (286,597)
NET INCOME $1,346,251 $1,012,250 $2,316,590 $2,347,639
[Continued]
-6-
FOUNTAIN POWERBOAT INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited - See Accountants' Review Report)
[Continued]
For The Three Months Ended For The Six Months Ended
December 31 December 31
1997 1996 1997 1996
BASIC EARNINGS PER SHARE:
Continuing Operations $ .28 $ .28 $ .48 $ .57
Loss from Operations of
Discontinued Segments - (.06) - (.06)
Estimated Income on Disposal
of Discontinued Segments - - .01 -
TOTAL BASIC EARNINGS
PER SHARE .28 .22 .49 .51
TOTAL SHARES OUTSTANDING 4,740,108 4,662,385 4,737,499 4,595,496
DILUTED EARNINGS
PER SHARE:
Continuing Operations $ .27 $ .26 $.45 $.54
Loss from Operations of
Discontinued Segments - (.06) - (.06)
Estimated Income on Disposal
of Discontinued Segments - - .01 -
TOTAL DILUTED
EARNINGS PER SHARE .27 .20 .46 .48
DILUTED WEIGHTED
AVERAGE SHARES O/S 5,028,127 5,060,707 5,078,379 4,934,288
The accompanying notes are an integral part of these financial statements.
-7-
FOUNTAIN POWERBOAT INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited - See Accountants' Review Report)
Six Months Ended December 31,
1997 1996
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income/Loss $2,316,590 $ 2,347,639
Adjustments to reconcile net income (loss) to net
Cash provided by operating activities:
Depreciation Expense 860,302 810,943
(Increase) decrease in
accounts receivable (2,256,197) 756,976
(Increase) decrease
in inventory (2,316,031) (1,511,706)
(Increase) decrease
in prepaid expenses 420,071 (178,400)
(Increase) decrease
in other assets (6,296) (419,424)
Increase (decrease)
in accounts payable 894,705 (239,174)
Increase (decrease) in
accrued expenses 278,639 435,276
Increase (decrease) in dealer
service territory
Accrual (255,310) -
Increase (decrease) in
customer deposits (49,926) (146,942)
Net deferred taxes 752,912 365,211
Net liabilities of
discontinued operations (138,923) -
Net cash Provided by (Used in)
Operating Activities 500,536 2,220,399
CASH FLOWS FROM INVESTING ACTIVITIES:
Construction of molds, plugs
and other tooling (869,007) (879,482)
Purchase of property plant
and equipment (4,035,222) (1,171,880)
Proceeds from certificates
of deposit, net 696,155 -
Net Cash Provided by (Used in)
Investing Activities (4,208,074) (2,051,362)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt 2,875,000 7,500,000
Repayment of long-term debt (316,776) (5,576,605)
Note payable - (1,416,333)
Proceeds from issuance of
common stock 107,500 1,123,750
Net Cash Provided by (Used in)
Financing Activities 2,665,724 1,630,812
Net increase (decrease) in cash ( 1,041,814) 1,799,849
Cash at beginning of year 2,994,503 1,360,619
Cash at end of period 1,952,689 3,160,468
[Continued]
-8-
FOUNTAIN POWERBOAT INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited - See Accountants' Review Report)
[Continued]
For the Six Months Ended
December 31,
__________________________________
1997 1996
__________________________
Supplemental Disclosures of Cash Flow information:
Cash paid during the period for:
Interest:
Unrelated parties $ 272,297 $ 325,760
Related parties 8,836 -
__________________________
$ 281,133 $ 325,760
__________________________
Income taxes $ 129,718 $ 469,891
__________________________
See accompanying Notes to Consolidated Financial Statements.
-9-
FOUNTAIN POWERBOAT INDUSTRIES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Unaudited - See Accountants' Review Report)
1. Basis of Presentation.
Although these statements have been reviewed by our independent
auditors, they are Unaudited. The statements, in management's
opinion, present fairly the Company's financial position and results
of its operations for the interim periods presented. Certain
information and footnotes disclosures normally included in the
financial statements have been omitted. It is suggested that
this Unaudited interim period financial information be read in
conjunction with the Company's audited financial statements for
the fiscal year ended June 30, 1997. The results of operations
for the period ended December 31, 1997 are not necessarily
indicative of the operating results for the full year.
2. Accounts Receivable.
As of December 31, 1997, accounts receivable were $4,123,944
net of the allowance for bad debts of $31,928. This represents
a increase of $2,256,197 from the $1,867,747 in net accounts
receivable recorded at June 30, 1997. Of the $4,123,944
balance at December 31, 1997, $3,224,953 has subsequently
been collected as of January 31, 1997, and the remaining
$898,991 is believed to be fully collectible.
3. Inventories.
Inventories at December 31, 1997 and June 30, 1997 consisted
of the following:
December 31, June 30,
1997 1997
Parts and supplies.................$ 4,458,029 $ 2,985,615
Work-in-process.................... 1,571,415 882,323
Finished goods..................... 202,933 169,819
Sportswear......................... 121,411 -0-
Obsolete inventory reserve......... (100,000) (100,000)
Total..............................$ 6,253,788 $ 3,937,757
============= =============
-10-
FOUNTAIN POWERBOAT INDUSTRIES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Unaudited - See Accountants' Review Report)
4. Revenue Recognition.
The Company 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 to the Government, and an account receivable is
recorded or payment is received from the dealer, from the
Government, or from the dealer's third-party commercial lender.
This is the method of sales recognition in use by most boat
manufacturers.
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 all other 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 or to pay floor
plan interest for the dealer beyond the normal, published
sales program terms.
The sales incentive floor plan interest expense for each
individual boat sale is accrued for the maximum six month (180 days)
interest payment period in the same fiscal accounting period that
the related boat sale is recorded. The entire six months'
interest expense is accrued at the time of the sale because
the Company considers it a selling expense. 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.
Presently, the Company's normal sales program provides
for the payment of floor plan interest on behalf of its dealers
for a maximum of six months. The Company believes that this
program is currently competitive with the interest payment
programs offered by other boat manufacturers, but may from
time to time adopt and publish different programs as necessary
in order to meet competition.
-11-
FOUNTAIN POWERBOAT INDUSTRIES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Unaudited - See Accountants' Review Report)
5. Allowance and Qualifying Accounts.
For the six months ended December 31, 1997, the Company adjusted its
allowance and qualifying accounts as follows:
Balance at Charged to Balance
Beginning Cost and Additions at End
of Period Expense (Deductions) of Period
Allowance for
boat repurchases $ 200,000 $ -0- $ -0- $ 200,000
Allowance for
doubtful accounts 30,000 2,057 (129) 31,928
Allowance for
warranty claims 500,000 67,987 (67,987) 500,000
Allowance for
inventory values 100,000 -0- -0- 100,000
---------- ---------- ---------- ---------
Total $ 830,000 $70,044 $ (68,116) $831,928
========== ========== ========== =========
In management's opinion, the balances of the allowance and qualifying
accounts are adequate to provide for all reasonably anticipated
future losses.
6. Commitments and Contingencies.
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, 1997, 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
$18,070,000.
-12-
FOUNTAIN POWERBOAT INDUSTRIES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Unaudited - See Accountants' Review Report)
The Company has reserved for probable future losses it is expected
to incur upon the repossession and repurchase of boats from
commercial lenders. At December 31, 1997, the allowance for
losses on boat repurchases was $200,000. The amount of the
allowance is based upon probable future events which can be
reasonably estimated.
Additionally, as part of its normal sales program, the Company
regularly pays a portion of dealers' interest charges for floor
plan financing for up to six months. Such charges amounting
to $221,285 for the second quarter of Fiscal 1998 are included
in selling expenses in the accompanying statement of operations.
7. Transactions with Related Parties.
Prior to 1993, the Company owned and operated an
aircraft. During Fiscal 1993, the aircraft was sold to an
officer and director of the Company. The Company has been
leasing airplane services from the officer and director
since that time. During the first quarter of Fiscal 1998,
the board of directors determined to acquire an airplane
for the Company and approved the acquisition of an airplane
from Mr. Fountain for $1,375,000. The Company issued a
note payable to Mr. Fountain for $415,821 and assumed the
balance of a note payable to General Electric Capital
Corporation for $959,179.
The Company paid or accrued the following amounts
for services rendered or for interest on indebtedness to
related parties:
Six Months Ended
December 31,
1998 1997
Apartments - rentals $ 1902 $ 8,740
R.M. Fountain, Jr. - aircraft
Rental 71,951 161,872
----------- -----------
$ 73,853 $ 170,612
=========== ===========
At December 31, 1997 the Company had travel advances and other
receivables from employees in the amount of $125,270, of which
$101,310 was due from an officer of the Company. For the six
months ended December 31, 1997 the Company paid interest expense
of $8000 to an Officer/Director of the Company.
-13-
FOUNTAIN POWERBOAT INDUSTRIES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Unaudited - See Accountants' Review Report)
8. Income Taxes.
During the second quarter of Fiscal 1998 ending December 31, 1997,
as the Company has previously used up all of its net operating
loss carry-forwards, the Company has provided $720,116 for
current income taxes.
9. Stock Options.
At December 31, 1997 there were 576,000 unexercised stock options,
of which 516,000 were held by officers and directors of the Company
at prices ranging from $3.583 to $8.167 per share. No options
were exercised during the second quarter of this Fiscal year.
10. Earnings Per Share.
The computation of earnings per share for the second quarter of
the fiscal year ending December 31, 1997 changes from a calculation
based on primary and fully diluted earnings per share to a
computation based on basic and diluted earnings per share.
The computation of basic earnings per share is based on the
weighted actual number of shares issued and outstanding whereas
the computation of diluted earnings per share is based on 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. For comparison purposes, all prior periods
have been restated to reflect basic and diluted earnings per
share computations.
11. Discontinued Operations.
Net (liabilities) of discontinued operations at December 31, 1997
consisted of the following:
Equipment, net 507,464
Accounts Payable (38,226)
Warranty & returns reserve (98,645)
Customer deposits (4,966)
Estimated loss on disposal (440,401)
_________
$ (74,774)
_________
-14-
12. Common Stock Split.
During July 1997, the Company approved a three-for-two forward
stock split of all its previously issued and outstanding common
stock including options to purchase common stock (effectively
a three share for two share stock dividend). The shareholder
record date was August 1, 1997. The split was accomplished
during August. The effect of the common stock split has been
reflected in these financial statements.
13. Subsequent Events.
Dissolution of Subsidiaries - Effective October 1, 1997,
Fountain Trucking, Inc., Fountain Sportswear, Inc., Fountain
Aviation, Inc. and Fountain Unlimited, Inc. were dissolved.
In connection with the dissolution of the subsidiaries, the
operations of Fountain Trucking, Inc. and Fountain
Sportswear, Inc. were transferred to Fountain Powerboats, Inc.
Management's Discussion and Analysis of Results of Operations
and Financial Condition
Results of Operations.
The operating income for the second quarter ended December 31, 1997
was $2,286,975 or $.48 per share versus $1,785,196 or $.38 per
share for the corresponding period of the previous year. Operating
income as a percent of sales for the second quarter of Fiscal 1998
was 17.4% versus 15.0% for the same period the previous Fiscal year.
The net income for the second quarter of Fiscal 1998 was $1,346,251
or $.28 per share. This compares to net income amounting
to $1,012,250, or $.22 per share for the second quarter of
Fiscal 1997. For the second quarter of Fiscal 1998, our actual
net income was better than planned.
Net sales were $13,091,803 for the second quarter of
Fiscal 1998 as compared to $12,257,562 for the second quarter of
the prior Fiscal year. Unit sales volume for the second quarter
of Fiscal 1998 was 117 boats as compared to 120 boats for the
second quarter of 1997. A smaller number of larger, higher priced,
higher margin boats accounted for the overall higher sales
volume than the second quarter of the previous Fiscal year.
For the second quarter of Fiscal 1998, the gross margin on sales
was $3,948,043 (30.2%) as compared to $3,590,332 (29.3%) for
the second quarter of Fiscal 1997.
Selling expenses were $883,669 for the second quarter of
Fiscal 1998 as compared to $1,201,995 for the second quarter
of last year. Most of the decrease for Fiscal 1998 was in
promotional racing and advertising expense.
General and administrative expenses were $777,399 for the
second quarter of Fiscal 1998 as compared to $603,141 for the
second quarter of last year. Most of the increase was in
legal expense.
-15-
Interest expense for the second quarter of Fiscal 1998
was $135,161 as compared to $162,000 for the second quarter of
last year. Interest expense is down due to restructuring and
consolidation of several loans into one at a reduced interest
rate during the second quarter of last year.
Other non-operating (income)/expense for the second quarter of
Fiscal 1998 was $(23,707) as compared to $(40,862) for the
second quarter of last Fiscal year.
Financial Condition.
The Company's cash flows for the second three months of
Fiscal 1998 are summarized as follows:
Net cash used in operating activities....... $ 500,536
" " used in investing activities..... (4,208,074)
" " " provided by financing activities. 2,665,724
Net decrease in cash...................$(1,041,814)
===========
This net decrease compared to a $1,799,849 net increase for
the second three months of the prior fiscal year.
Cash used in the second three months of Fiscal 1998 to acquire
additional property, plant, and equipment (investing activity)
amounted to $4,904,229 of which $869,007 was for plugs, molds,
and other product tooling. This was partially offset by the
proceeds from a certificate of deposit.
On December 31, 1996, the Company concluded a $10.000,000
credit agreement with General Electric Capital Corporation.
Under the terms of the new credit agreement, the Company
refinanced substantially all of its interest bearing debts
and will have additional funds made available to it for
expansion. Initially, the Company borrowed $7,500,000 from
GE Capital Services primarily to refinance existing debts.
All of the Company's prior interest bearing debts to MetLife
Capital Corporation, Deutsche Financial Services, GE Capital
Corporation, Branch Bank & Trust Leasing Corp., and other
smaller creditors were paid off entirely.
During the last Fiscal year, the Company borrowed another
$1,000,000 from GE Capital Services to fund plant and equipment
additions. An additional $1,500,000 was borrowed from
GE Capital services during the second quarter of Fiscal 1998
to fund site development to accomodate testing of the
65' Super Cruiser, the initial yacht manufacturing facility
and the tooling for the 65' Super Cruiser. The interest
rate on the indebtedness to GE Capital Services is variable.
There is a ten-year amortization of the debt with a five-year call.
The loan is secured by all of the Company's real and personal
property and by the Company's assignment of a $1,000,000 key
man life insurance policy.
-16-
For the remainder of 1998 and beyond, the Company expects to
generate sufficient cash through operations to meet its needs
and obligations. Management believes that the Company' s sales
and production volume will continue to grow with a corresponding
increase in net earnings and cash flow. Most of the Company's
cash resources will be used to maintain and improve its plant
and equipment, for new product tooling and for line startup
in the new interim yacht facility. We anticipate finishing
our first yacht shortly with shipments beginning during the
fourth quarter.
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.
PART II. Other Information.
ITEM 2: Change in Securities.
There were no change in securities during the second
quarter of Fiscal 1998.
-17-
ITEM 6: Exhibits and Reports on Form 8 and Form 8-K.
(a) No Amendments on Form 8 were filed by the Registrant
during the first six months of Fiscal 1998.
(b) No Current Reports on Form 8-K were filed by the Registrant
during the first six months of Fiscal 1998.
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/ Joseph F. Schemenauer Date: February 6, 1998
Joseph F. Schemenauer
Vice President, Chief Financial
Officer, and Designated Principal
Accounting Officer
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