ATLANTA – Marine Products Corp. (NYSE: MPX), a manufacturer of fiberglass boats under the brand names Chaparral and Robalo, generated net sales of $31,582,000 during the third quarter ended Sept. 30, a 39.8-percent decrease compared to $52,481,000 last year, the company reported in a recent statement.
The decrease in net sales was due to a 47.7 percent decrease in the number of boats sold, partially offset by an 11.8 percent increase in the average selling price per boat, according to Marine Products. The increase in average selling price per boat was due to the new Sunesta Wide Techs and Xtremes, which maintained the quantities sold while realizing higher average selling prices than the earlier model, as well as an improved model mix among the Robalo sport fishing boats, the company said.
"Our results were once again negatively impacted by some of the same macroeconomic and industry-specific factors that have plagued the pleasure boating industry for over three years,” said Richard A. Hubbell, Marine Products' chief executive officer. “This quarter, retail boat sales were also affected by the credit crisis and unprecedented turmoil in the financial markets. Not only has this crisis made consumers reluctant to buy discretionary items such as pleasure boats, but the recent curtailment of consumer and business lending has made it difficult to secure loans for boat purchases.”
Gross profit for the quarter was $5,104,000, or 16.2 percent of net sales, compared to $11,266,000, or 21.5 percent of net sales, in the prior year. Gross profit as a percentage of net sales declined compared to the prior year due to cost inefficiencies resulting from lower production volumes, according to Marine Products.
Operating income for the quarter was $1,018,000, a 78.8-percent decrease compared to the third quarter last year due to lower gross profit, partially offset by lower selling, general and administrative expenses, the company stated. Selling, general and administrative expenses in the third quarter of 2008 decreased by 36.9 percent compared to the prior year due to the variable nature of many of these expenses, including incentive compensation and warranty expense. Operating income was 3.2 percent of net sales for the quarter compared to 9.1 percent of net sales in the prior year.
Net income for the quarter ended Sept. 30 was $684,000, a 78.8-percent decrease compared to $3,229,000 in the prior year. Net income decreased due to lower income before income taxes and a higher effective tax rate. Although the estimated effective tax rate for the full year 2008 is 30 percent, the effective tax rate for the quarter increased from 40.0 percent in the prior year to 58.3 percent in 2008, primarily because of declines in the value of non-qualified plan assets that are not deductible for tax purposes.
Net sales for the nine months ended Sept. 30 were $152,858,000, a 17.5-percent decrease compared to the first nine months of 2007. Net income for the nine-month period decreased 29.9 percent to $8,712,000 compared to $12,421,000 in the prior year.
More production cuts may be ahead
Hubbell said the company doesn’t see any signs of improvement in the market and pointed out that conditions were worse at the end of the third quarter than at the beginning, causing the boat builder to continue to reduce production.
The silver lining, however, is that the company’s dealer inventory levels were about the same at the end of the quarter as the same time last year, which Hubbell attributed to “our disciplined practices and dedication to working with our dealers."
The CEO did express concern over the impact of tight credit markets on its dealers in the form of increased costs and reduced availability of floorplan credit.
“This factor, along with order cancellations resulting from a continued weak selling environment, may require that we adjust production further from current levels,” he stated. “These issues force us to consider additional incentive programs, further workforce reductions, and temporary plant consolidations in this weak selling environment.”
Despite being in "the most protracted downturn in our company's history as a public company” Hubbell said the company is “pleased with the market's reception to our new products.”
That, combined with Marine Products’ debt-free balance sheet, high balance of cash and investment-grade marketable securities, “will allow us to operate in this environment, continue to design and build products that appeal to the consumer, and continue to capture market share," he concluded.
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