ATLANTA – While boat builder Marine Products Corp. (NYSE: MPX) sold fewer boats in the third quarter ended September 30 than the same period last year, it still managed an overall increase in net sales.
The manufacturer of Chaparral and Robalo branded boats generated net sales of $65,032,000, a 3.0-percent increase compared to $63,129,000 last year. The increase in net sales was due to a 3.1 percent increase in average selling price per boat and an increase in parts and accessories sales, partially offset by a slight decrease in the number of boats sold, the company reported in a recent statement.
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 $17,145,000, or 26.4 percent of net sales, compared to $17,117,000, or 27.1 percent of net sales, in the prior year. The reduction in gross profit as a percentage of net sales was due primarily to increases in the costs of certain raw materials and components, according to the company.
Operating income for the quarter was $9,320,000, a 3.3-percent decrease compared to the third quarter last year due to higher selling, general and administrative expenses. Operating income was 14.3 percent of net sales for the quarter compared to 15.3 percent of net sales in the prior year. Selling, general and administrative expenses increased primarily due to higher public company compliance costs, MPX reported.
Net income for the quarter ended September 30 was $7,265,000, a 16.4-percent increase compared to $6,244,000 in the prior year. Net income increased due to a lower effective tax rate and higher interest income, partially offset by lower operating income.
Net sales for the nine months ended September 30 were $215,184,000, a 13.4-percent increase from the first nine months of 2004. Net income for the nine-month period increased 20.5 percent to $22,038,000 or $0.54 diluted earnings per share compared to $18,286,000 or $0.45 diluted earnings per share in the prior year.
Boat builder concerned about demand in 2006
Beginning in late October, Marine Products will decrease production volumes concentrated in its smaller Chaparral sportboats and selected deckboat models. This decision reflects near term retail demand uncertainties caused by declining consumer confidence, high fuel prices and the recent hurricanes, the company reported.
The impact of the production decrease should be partially offset by an increase in average selling prices due to the change in model mix to larger boats, cost reduction actions currently being undertaken, and the variable nature of many of our indirect expenses, according to MPX. In spite of these offsetting factors, however, Marine Products expects its fourth quarter 2005 net sales and net income to be lower than in the fourth quarter of 2004.
"Inventories are slightly higher due to shipment delays caused by Hurricanes Katrina and Rita," said Richard A. Hubbell, Marine Products' CEO. "We would rather forgo future sales opportunities due to lack of adequate inventory than sell excessive inventory into our dealer network. The winter boat show season begins in late December, and we will closely monitor consumer traffic and orders relative to inventory levels and re-assess production volumes and model mix. Although it is difficult to predict timing, we expect boat owners whose boats were destroyed in Hurricanes Katrina, Rita and Wilma to file insurance claims and buy replacement boats for the 2006 spring and summer boating season."
Hubbell continued, "We had enthusiastic dealer meetings with the highest attendance in our Company's history. Everyone is excited about the 2006 model year product offerings, which include four new Chaparral models and five new Robalo models, all of which were on display at the meetings. We are also offering a large number of new standard and optional features on our boats, which are the result of comments received from our dealers and retail consumers. We believe that our market position, management expertise and financial strength will continue to keep us in a position to thrive in the current environment, and we are committed to maintaining profitability and providing good returns to our shareholders."
In related news, the Marine Products Corp. Board of Directors declared a regular quarterly cash dividend of $0.04 per share payable December 12 to common shareholders of record at the close of business on November 11.
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