Fountain Powerboats, under its Fountain by Baja subsidiary, borrowed $4 million from Baja Marine Corp., a former Brunswick subsidiary, to buy assets of the boat company, according to documents filed last week with the Securities and Exchange Commission.
Documents show that no payment is due on the note until June 2020, and at that time the note will be cancelled by Brunswick, provided Fountain has not “defaulted on its obligations to the Brunswick Corp. on either of the two engine supply agreements.”
Fountain has an agreement with Brunswick to purchase all engines from Mercury Marine, a Brunswick division, except for products in categories in which Mercury does not manufacture or that are unavailable from Mercury because of production shortages.
“This was a strategic decision to further refine our product portfolio and best focus our resources on brands and marine segments that we believe are core to our success going forward,” Dan Kubera, Brunswick director of media relations and corporate communications, told Trade Only Today Friday afternoon, Nov. 14. “Further, we believed the Baja brand would benefit under Fountain ownership, continuing to perform and satisfy its customers.”
Fountain announced this spring it was purchasing Baja assets, including equipment, tooling, drawings, blueprints, design software and production process documentation used to build Baja boats for model year 2009 and later. The company also acquired trademarks and other assets used to sell the acquired models.
“[Fountain] is aware, however, that the Baja boat line was unprofitable when it was operated by Baja Marine Corp. Therefore, [Fountain] will be required to make substantial operational changes to operate profitably,” according to documents Fountain previously filed with the SEC.
Fountain also previously announced plans to add 250 jobs and invest $12 million during the next five years to expand its Beaufort County, N.C., operations so it could produce the Baja line.
SEC documents show Fountain completed engineering revisions for nine of the boat models acquired from Baja during the quarter ending Sept. 30. The company expects to have most of the models in full production in the second quarter of fiscal 2009.
The company sold 10 Baja boats in September, according to documents. It sold a total of 75 boats for the three months ending Sept. 30, compared with 82 boats sold in the same period of 2007.
Net sales for the three months ending Sept. 30 were $17.59 million, compared with $18.05 million for the same quarter of 2007, a decrease of 2.6 percent.
For the most recent quarter, Fountain reported net income of $81,769, compared to a net income of $273,340 for the same period of 2007.
Earnings per share were 2 cents for the three months ending Sept. 30, compared with 6 cents in the same period last year.
— Beth Rosenberg