Marine Products Corp. reports unit, dollar sales increases

ATLANTA – Boat builder Marine Products Corp. (Amex: MPX) saw increases in unit and dollars sales during the quarter and year ended December 31, 2004, the company reported in a recent statement. Its gross profit as a percentage of sales took a small hit, however.

During the quarter, Marine Products generated net sales of $62,684,000, a 33.3-percent increase compared to $47,019,000 last year. The increase in net sales was due to a 20.6 percent increase in the number of boats sold, a 9.8 percent increase in the average selling price per boat, and an increase in parts and accessories sales, according to the company.

All four boat lines experienced increased unit sales and higher average selling prices. The increase in unit sales was highlighted by increased sales of Robalo sport fishing boats, Sunesta deckboats and Signature Cruisers. The increase in average selling prices was due to a favorable Robalo model mix and higher sales of larger SSi Sportboats and Signature Cruisers, Marine Products reported.

Gross profit for the quarter was $15,775,000, or 25.2 percent of net sales, compared to $13,171,000, or 28.0 percent of net sales, in the prior year. The decrease in gross profit as percent of sales was the result of increased raw materials costs, increased discounts on selected models to improve model mix, inefficiencies resulting from the temporary reduction in production volumes during the quarter to make manufacturing process changes, and direct expense adjustments in the fourth quarter of 2003, which did not occur this year, the company reported.

Operating income for the quarter was $8,095,000, a 19.6-percent increase compared to the fourth quarter last year due to higher gross profit, partially offset by higher selling, general and administrative expenses. Operating income was 12.9 percent of net sales for the quarter compared to 14.4 percent of net sales in the prior year. Selling, general and administrative expenses increased primarily due to costs that vary with sales, as well as increased costs associated with public company compliance. As a percentage of net sales, however, these costs decreased to 12.3 percent in the fourth quarter compared to 13.6 percent last year. This was due to a decrease, as a percent of net sales, in incentive compensation and sales commissions, which resulted from the lower gross margin percent and lower operating profit, reported the company. In addition, warranty expense as a percentage of net sales decreased.

Net income for the quarter was $5,457,000, a 22.4-percent increase compared to $4,458,000 in the prior year. Net income increased due to higher operating income and increased interest income. Diluted earnings per share for the quarter were $0.20 ($0.13 adjusted for the three-for-two split previously announced on January 25, 2005), a 17.6-percent increase compared to $0.17 diluted earnings per share in the prior year ($0.11 adjusted for the three- for-two split).

Net sales for the twelve months ended December 31, 2004 were $252,418,000, a 30.1-percent increase compared to 2003. Net income for the year increased 31.4 percent to $23,743,000 or $0.87 diluted earnings per share ($0.58 adjusted for the three-for-two split) compared to $18,072,000 or $0.67 diluted earnings per share ($0.45 adjusted for the three-for-two split) last year.

Optimism for 2005

“The winter boat show season has started, and the retail order volumes thus far indicate continued strong demand,” commented Richard A. Hubbell, Marine Products’ chief executive officer. “This is an important indicator for us and provides a positive outlook for the beginning of 2005.”

Hubbell added that the company adjusted its manufacturing process during the quarter to increase efficiency in anticipation of higher production levels in 2005. As a result, its fourth quarter production levels were temporarily reduced. Now, however, the company has returned to previous production levels, which he said is appropriate given the strong boat show season.

“As planned, dealer inventory is higher at the end of 2004 than it was last year, but order backlog is similar to the prior year end, indicating the dealers’ confidence in the strength of sales at the retail level,” he said. “We have seen some increases in the prices of resin and steel, which are used in our manufacturing process. We have reacted to these increases by instituting a one to one and a half percent price increase on all of our models effective January 1, and we believe that this will help insulate us from any downward margin pressure as a result of this increase in commodity prices.”

Marine Products Corp. manufactures fiberglass boats under two brand names: sterndrive and inboard pleasure boats by Chaparral, including SSi Sportboats, Sunesta Deckboats, and Signature Cruisers, and outboard sport fishing boats by Robalo.

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