Marine Products sees decrease in net sales, gross profit

ATLANTA – Net sales and gross profit for fiberglass boat manufacturer Marine Products Corp., dropped slightly in the third quarter, the company reported earlier this week as it released its unaudited results for the quarter, ended Sept. 30.

Marine Products – which manufactures sterndrive and inboard pleasure boats by Chaparral, including SSi Sportboats, SSX Sportdecks, Sunesta Deckboats, and Signature Cruisers, and outboard sport fishing boats by Robalo – generated net sales of $64,002,000, a 1.6 percent decrease compared to $65,032,000 last year.

The decrease in net sales was due to a 12.5 percent decrease in the number of boats sold, partially offset by an 11.6 percent increase in the average gross selling price per boat, the company said.

Net sales for the nine months ended Sept.30 were $205,698,000, a 4.4 percent decrease compared to the first nine months of 2005. Net income for the nine-month period decreased 24.6 percent to $16,627,000, or $0.43 diluted earnings per share, compared to $22,038,000, or $0.54 diluted earnings per share in the prior year.

“The third quarter of 2006 continued the trend of lower retail demand that we have seen for the last year,” said Richard A. Hubbell, Marine Products’ CEO. “Higher interest rates and fuel prices have increased the cost of owning a boat, and consumers impacted by higher costs of ownership have reacted by delaying their purchases, especially in the market segment that purchases smaller boats. We continue to be pleased with our increase in average selling prices, which is principally due to a favorable model mix, resulting from our increased focus on designing and selling larger boats, while still providing exciting models across our entire product line-up.”

Marine Products’ gross profit for the third quarter was $14,705,000, or 23.0 percent of net sales, compared to $17,145,000, or 26.4 percent of net sales, in the prior year. The company said the reduction in gross profit as a percentage of net sales was due to increased raw materials and component costs and production inefficiencies due to lower unit production volumes, partially offset by higher average selling prices due to the increased focus on selling larger boats and price increases instituted at the beginning of the 2007 model year, which began in the third quarter.

Operating income for the quarter was $6,677,000, a 28.6 percent decrease compared to the third quarter last year primarily due to lower gross profit. Operating income was 10.4 percent of net sales for the quarter compared to 14.4 percent of net sales in the prior year.

Net income for the quarter was $4,562,000, a 37.2 percent decrease compared to $7,265,000 in the prior year. Net income decreased due to lower operating income and a higher income tax provision, partially offset by higher interest income. The effective tax rate for the third quarter reflects adjustments to increase the tax provision and the effect of the research and development tax credit not being renewed, whereas the prior year reflects adjustments to reduce the tax provision. Diluted earnings per share for the quarter were $0.12, a 33.3 percent decrease compared to $0.18 diluted earnings per share in the prior year.

“We are pleased to report that Chaparral is continuing to gain market share,” Hubbell said. “According to recently-released data published by Statistical Surveys, Chaparral’s market share in the 18- to 35-foot category increased to 8.53 percent of retail unit sales for the six months ending June 30, 2006 compared to 8.27 percent during all of 2005. We are very pleased with this, and believe it is good evidence of the quality of our products and our customers’ satisfaction.

“During this soft retail selling environment, we are using our financial strength and management talent to develop better approaches to design and produce innovative new models with efficiency and high quality. We are encouraged by a few signs that lower fuel prices and a calm 2006 hurricane season may be beneficial for demand, and are eager to see the results of the 2007 winter boat show season, which begins in a few months. Our dealer inventories are down compared to this time last year, and our backlog in sales dollars and weeks of production has increased. These favorable dealer inventory and order flow statistics indicate that our dealer network is prepared to sell our new models when retail demand increases.”

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