Marine Products Corp. looking for acquisitions

ATLANTA – Boat builder Marine Products Corp. is looking for acquisitions, said CEO Richard A. Hubbell in the company’s second quarter earnings conference call, when asked about the company’s cash-heavy state.

Marine Products Corp. has over $14 million in cash and cash equivalents; however, Hubbell says acquisition prices are high right now, and “we definitely don’t overpay for things.”

Meanwhile, the company is reporting a strong quarter, with an almost 20-percent increase in sales and an almost $3-million increase in profits.

Marine Products Corp. (NYSE: MPX) generated net sales of $77,566,000 during the second quarter ended June 30, a 19.7-percent increase compared to $64,775,000 last year, the company reported in a recent statement.

The increase in net sales was due to a 9.7-percent increase in the number of boats sold, an 8.7-percent increase in the average selling price per boat, and an increase in parts and accessories sales. Most product lines experienced increased unit sales. All product lines experienced higher average selling prices, due to increased sales of larger boats and price increases instituted at the beginning of 2005.

Gross profit for the quarter was $19,875,000, or 25.6 percent of net sales, compared to $16,971,000, or 26.2 percent of net sales, in the prior year. The reduction in gross profit as a percentage of net sales was due to dealer incentives primarily related to model mix, and retail promotional programs.

Operating income for the quarter was $10,844,000, a 14.4-percent increase compared to the second quarter last year due to higher gross profit, partially offset by higher selling, general and administrative expenses. Operating income was 14.0 percent of net sales for the quarter compared to 14.6 percent of net sales in the prior year. Selling, general and administrative expenses increased primarily due to costs that vary with sales and profitability, such as incentive compensation and warranty expense, as well as higher public company compliance costs, including the costs associated with the original listing on the New York Stock Exchange.

Net income for the quarter was $7,956,000, a 24.4-percent increase compared to $6,396,000 in the prior year. Net income increased due to higher operating income, higher interest income, and a lower income tax rate. The effective tax rate during the second quarter was 29.3 percent compared to 33.3 percent in the prior year; this decrease was due primarily to the effect of tax return amendments. The tax rate change increased net income by $448,000, or $0.01 per diluted share. Diluted earnings per share for the quarter were $0.20, a 25.0 percent increase compared to $0.16 diluted earnings per share in the prior year.

Net sales for the six months ended June 30 were $150,152,000, an 18.6-percent increase from the first six months of 2004. Net income for the six-month period increased 22.7 percent to $14,773,000 or $0.36 diluted earnings per share compared to $12,042,000 or $0.30 diluted earnings per share in the prior year.

"We have just finished the 2005 model year,” said Richard A. Hubbell, Marine Products' chief executive officer. “It was marked by strong customer demand and high production levels. As we manage the transition to the 2006 model year, we are pleased to be introducing five new models, including three Robalo models, one new cruiser, and a large sportboat.

"At the end of the quarter, dealer inventories were higher than they were at this time last year, but this is understandable given our higher production and retail sales levels,” added Hubbell. “Dealer inventories were lower than anticipated last year given the higher demand our dealers experienced at retail. Our balance sheet inventory is higher to support higher production levels, and it includes certain large component purchases in advance prior to quarter-end to avoid price increases. We only produce to firm orders from our dealers and our finished goods inventory only includes undelivered pre-sold units to dealers."

Marine Products Corp. (NYSE: MPX) designs, manufactures and distributes Chaparral sterndrive and inboard pleasure boats and Robalo sport fishing boats.

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