Reggie Fountain: buoyant in bankruptcy

Author:
Publish date:

The irrepressible go-fast builder looks forward to a new, non-owner role

38_reggiefountain_01

The morning after his company filed for Chapter 11 bankruptcy protection, Reggie Fountain was patiently answering a reporter's questions when he said, "Hold on a minute ... hear that?"

It was the roar of a Fountain powerboat speeding by, and the builder was soon back on the line. "That was 150 mph that just went by the front door," Fountain says. "Doesn't sound like we're out of business."

The verbal swagger was vintage Reggie Fountain, the former powerboat racing champion and builder of some of the world's fastest high-performance boats. But bravado alone would not be enough to enable the 69-year-old Fountain's Washington, N.C., company to skirt the economic storm that has engulfed the boating industry.

Fountain Powerboat Industries and its subsidiaries - Fountain Powerboats, Fountain Dealers' Factory Superstore and Baja by Fountain - filed for Chapter 11 Aug. 24 in U.S. Bankruptcy Court, Eastern District of North Carolina. The filing didn't surprise many in the industry, because Fountain's financial struggles have been documented for years.

Declining sales and profits, delisting from NYSE Alternext US (the successor to the American Stock Exchange) as the stock's value dropped, an announcement in June that Fountain had retained Jacobs Capital to help find a partner to provide additional capital and keep it running - all demonstrated that the 30-year-old company bearing its majority owner's name was scrambling to stay solvent.

"Just like General Motors and Chrysler and all the rest of them, we found things pretty challenging out there, as you can imagine," Fountain says. "And as you can imagine, since food and shelter are staple things ... and cars are almost considered a necessity - you can imagine it's even tighter in boats."

Fountain, a leading builder of high-performance boats, is the second major boatbuilder to file for Chapter 11, following Genmar Holdings' filing in June. "We're just following suit with what everybody else is doing," Fountain says. "I see how General Motors did it, how Chrysler did it, how AIG did it. So I said, 'Well, I might as well get in on that deal.' Look at Irwin [Jacobs, Genmar chairman], he's been around a long time and he beat me to it."

39_fountainboat_01

Fountain has asked the court to allow it to sell substantially all of its assets, including its 237,000-square-foot production and office facility on 65 acres on the Pamlico River in Washington, N.C.; all equipment and tooling; all inventory, raw materials and work in process; all contracts with customers; all records and books relating to the business; and all other "tangible and intangible assets of every nature relating to this business." The sale, the company says, could bring in between $6 million and $8 million, maybe more.

Fountain, speaking with Soundings Trade Only in late August, says he expected a sale to go through relatively quickly, and he was working with nine possible investor groups on an acquisition. "We feel pretty sure one of the lucky ones will team up with us here, and we'll move forward in the next 30 years, just as we have here in the past 30," he says. "The tough time [in the industry] is really September, October, November, December, January, and that's why we felt the need to reorganize, restructure and bring in a new investor.

"I own 52 percent of the stock right now. I'll probably own very little, if any, of the stock in the new company, but I'm hoping to continue to work for them," Fountain adds. "That seems what they all want me to continue to do, since I started this up, engineered it up and sold it for the last 30 years - over $1 billion worth of boats. I'll be an employee, like everybody else."

The start of Fountain

Fountain has been involved in boating since he entered his first powerboat race in 1954, at age 14, moving into professional competition in 1970, according to information on the company's Web site. A year later, driving for Glastron Boats, he was named Houston Gulf Coast Marathon Association champion and the outstanding new driver at the Lake Havasu world championships. The following year, as an independent, he set two world records and took three national closed-course championships in one day at the Marine Stadium in Miami.

In 1973, racing for Mercury Marine, he won 20 of 31 races, and in 1976 he finished first in 15 of 23 races. Fountain retired from active competition in 1979 to pursue an extensive R&D testing program commissioned by Mercury, while continuing to manage his growing real estate interests.

Like many boatbuilders, Fountain started his company after evaluating the market and concluding he could do it better. Fountain Powerboats was born 30 years ago in an abandoned used-car dealership in Washington, N.C.

Financial troubles

In 2006, Fountain had about 450 employees and did $79 million in business. The company is now down to about a dozen employees, and sales figures are abysmal. "There are a lot of things going on out there that make it tough for guys like myself that didn't put aside money," Fountain says. "My mom and dad used to tell me, 'Son, you always ought to put some money aside for a rainy day.' I've done over $1 billion in sales. I probably made $100 million, and I spent it all.

"I spent it on new technology, new boats, buildings, machinery, equipment, tooling. I put it in my company," he adds. "I didn't put it aside in a bank account and, unfortunately, I can't spend that right now. I wish I had put aside an extra $10 [million], $15 million and I'd cruise right on through this thing."

Amid reports of Fountain's sluggish sales and decline in profits, Brunswick announced in March 2008 it was selling its Baja brand to Fountain. Documents filed with the Securities and Exchange Commission showed Fountain, under its Fountain by Baja subsidiary, borrowed $4 million from Baja Marine Corp., a former Brunswick subsidiary, to buy the assets of the boat company.

The documents showed that no payment was due on the note until June 2020 and, at that time, the note would be cancelled by Brunswick, provided Fountain "has not defaulted on its obligations to the Brunswick Corp. on either of the two engine supply agreements." In bankruptcy filings, Baja by Fountain lists $4 million in liabilities, and Baja Marine Corp. is the only listed creditor holding a secured claim.

When asked if Fountain's bankruptcy would affect this agreement, Brunswick spokesman Dan Kubera said in an e-mail, "As with any filing of this nature, we cannot speculate about what the outcome may be, or how it ultimately may affect Brunswick. Each situation is unique, and we continue to monitor the circumstances surrounding Fountain's efforts in this matter."

Three months after announcing it was buying Baja, word came that Fountain could be delisted from what was then the American Stock Exchange for non- compliance with listing standards. That decision was based on a review of the company's quarterly report for the period ending March 31, 2008.

The notice said 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."

After getting a listing extension in September 2008, delisting procedures for Fountain began in January 2009. At the time, its stock was listed at 33 cents a share, down from a 52-week high of $1.93. In February, Fountain announced it would trade its stock on Pink Sheets. At the time of the announcement, its stock was trading at 12 cents. In June, Fountain announced it had retained investment banker Jacobs Capital to help it find a partner to provide additional capital to support its operations during the economic downturn.

When Fountain filed for bankruptcy Aug. 24, Pink Sheets posted a warning about the company on its site. At the time, its last sale was listed at 5 cents a share.

In its court filings, Fountain Powerboat Industries and its three subsidiaries list approximately $25 million in combined assets. The combined listed liabilities of the four entities are about $79 million.

What's next?

Fountain says he wants to emerge from Chapter 11 by the end of September and asked the bankruptcy court for an expedited hearing to approve the company's proposal to sell its assets. "If the sale motion is not approved or a sale is not confirmed and consummated, the debtors may pursue a more traditional plan of reorganization or a plan of orderly liquidation," according to court documents.

No matter what, the boating industry is going to have to find a new way to do business, Fountain says. Floorplan companies don't want to lend money, and what they do lend comes with high interest rates. Dealers, in addition to being fewer in number, are stocking fewer boats than in the past.

"We all got away from reality," Fountain says. "Everybody was building all they could build and sending them out in the field, and the finance companies were financing them and then all this stuff happens."

If all goes according to Fountain's plan, the company will have new owners this fall and will be exhibiting at boat shows this winter - perhaps as early as the Miami International Boat Show in February. He hopes to bring back all of the employees who lost their jobs over the years. "Whether it's going to take six months or three or four years, I don't know," he says. "But I think that with Baja here and with Fountain here ... I hope that with all those here that I can bring my people back."

Pointing out that it was just three years ago that the company brought in $79 million in business in one year, Fountain says that if Baja and Fountain can together do $80 million in business in a year, "I'd be tickled pink."

"I just think it's a new way of life, and we're all going to have to learn to live within it," he says. "I always like to be positive. My glass is always half full, not half empty."

In the end, Fountain just hopes to continue working with the boats that bear his name. "What I'm going to gain is the right to have a job and work in my company," he says. "Somebody else is going to own it, but that's OK with me. I never took any money out of that company anyway, except just enough salary to get along. I do it because it's what I like to do."

This article originally appeared in the October 2009 issue.

Related

Montara signs 27 dealers

With 23 others waiting to sign on, the manufacturer of the new wake-surfing/pontoon design is “incredulous” at the quick dealer response.