Marine Products hit by decrease in demand

ATLANTA – Boat builder Marine Products Corp.’s (NYSE: MPX) sales and profits took a hit during the first quarter due to a decline in demand that began during the third quarter of 2005, the company reported in a recent statement.

“As we stated previously, we reduced our production in order to maintain appropriate levels of dealer inventories and order backlog,” commented Richard A. Hubbell, Marine Products’ CEO. “We have accomplished this, and in light of a better than expected winter boat show season, we have gradually increased our production during the first quarter.”

The company, which manufactures sterndrive and inboard pleasure boats by Chaparral and outboard sport fishing boats by Robalo, generated net sales of $69,957,000 during the quarter ended March 31, a 3.6-percent decrease compared to $72,586,000 in the first quarter of last year.

The change in net sales was comprised of a 16.4 percent increase in the average gross selling price per boat, a 19.3 percent decrease in the number of boats sold, and an increase in parts and accessories sales, according to the company.

Gross profit for the quarter was $16,818,000, or 24.0 percent of net sales, compared to $18,948,000, or 26.1 percent of net sales, in the prior year. The decrease in gross profit as a percentage of net sales was primarily the result of higher raw materials costs compared to the prior year, the boat builder reported.

Operating income for the quarter was $8,180,000, a 19.0 percent decrease compared to the first quarter last year, due to lower gross profit, partially offset by slightly lower selling, general and administrative expenses. Operating income was 11.7 percent of net sales for the quarter, compared to 13.9 percent in the prior year. Selling, general and administrative expenses decreased due to the variable nature of many of these costs, and were 12.3 percent of net sales in the first quarter of 2006 compared to 12.2 percent of net sales in the prior year, Marine Product stated.

Net income for the quarter was $5,776,000, a 15.3-percent decrease compared to $6,817,000 in the prior year. Net income decreased due to lower operating income, partially offset by increased interest income compared to the prior year, and a slightly lower tax rate. Diluted earnings per share for the quarter were $0.15, a decrease of $0.02, or 11.8 percent, compared to the prior year, according to the boat builder.

Despite these results, Hubbell said the company is “pleased with the reception of our new models for the 2006 model year.”

“The acceptance of these new models by the dealer and consumer market is reflected in the higher average gross selling prices that we realized during the quarter,” he explained. “Our order backlog is higher than it was at this time last year, and our dealer inventories are lower, indicating a healthy selling environment for our products. As we operate in the height of the retail selling season, and prepare for our 2007 model introductions, we continue to monitor dealer inventories, order backlog, and indications of consumer sentiment regarding recreational boating.”

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