Fountain Powerboat Industries said this morning that a recent auditor’s opinion raising concerns about the company’s finances is a “formality.”
“This is the second year in a row we’ve had a net loss,” Irving Smith, Fountain CFO, told Soundings Trade Only this morning. “Based on that, the auditor is required to put a going concern opinion in the [annual] report.”
“The whole thing was kind of a formality,” he said.
Fountain’s independent accounting firm, Gregory & Associates, included a letter in the boatbuilder’s Sept. 29 annual report that raised doubts about Fountain’s ability to stay in business.
“The company has current liabilities in excess of current assets, recent losses from operations, negative cash flows from operating activities, and has significant debt compared to the underlying equity,” the accounting firm said in the Sept. 16 letter accompanying Fountain’s annual report.
“These factors raise substantial doubt about the company’s ability to continue as a going concern,” the accounting firm said.
However, Smith said Fountain’s finances are improving. The company reported a net loss of $2.2 million in fiscal 2008, compared to a net loss of $5 million in fiscal 2007, which included a $1.3 million tax write-off. Smith said the company has instituted numerous cost-saving initiatives over the last year or two.
“Even though we’re still in the loss column, we’ve improved quite a bit,” he said. “We feel real good about where we are now.”
Smith noted the company plans to further improve the bottom line by stabilizing revenue and increasing prices of some models to compensate for increases in material and production costs; improving manufacturing efficiency by lowering production labor costs; and reducing advertising and offshore racing expenses.