ATLANTA – Boat builder Marine Products Corp. (NYSE: MPX) experienced the first operating loss in its history during the quarter ended Dec. 31, it reported in a statement Wednesday. Marine Products manufactures fiberglass boats under two brand names: sterndrive and inboard pleasure boats by Chaparral and outboard sport fishing boats by Robalo.
"The pleasure boating industry's downturn continued, and in fact deepened, during the fourth quarter of 2008, marking three full years of depressed conditions for our industry,” explained Richard A. Hubbell, Marine Products' CEO. “Negative consumer sentiment increased during the quarter as the problems in the financial system surfaced, and the availability of credit for dealers and consumers became even tighter than it had been. During the quarter we decreased our production levels significantly. We accomplished this, but the resulting low level of unit production created manufacturing inefficiencies. These inefficiencies, along with high retail incentives during the quarter, caused us to realize an operating loss for the first time in our history.”
For the quarter ended Dec. 31, Marine Products generated net sales of $22,764,000, a 61.4-percent decrease compared to $58,947,000 last year. The decrease in net sales was due to a 63.3 percent decrease in the number of boats sold, partially offset by a 6.7 percent increase in the average selling price per boat, according to the company. The increase in average selling price per boat was due to sales of Chaparral's new Premiere 400, several larger Signature cruisers and higher average selling prices of the Sunesta Wide Techs and Xtremes, the company stated.
Gross profit for the quarter was $2,350,000, or 10.3 percent of net sales, compared to $12,299,000, or 20.9 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 and higher retail incentives, the boat builder reported.
Operating loss for the quarter was $1,831,000, compared to operating income of $4,905,000 in the fourth quarter of last year, due to lower gross profit, partially offset by lower selling, general and administrative expenses, according to Marine Products. Selling, general and administrative expenses in the fourth quarter of 2008 decreased by 43.5 percent compared to the prior year due to the variable nature of many of these expenses, including incentive compensation and warranty expense, which declined with lower sales and profitability. In addition, salaries and research and development expenses were lower due to cost control measures instituted during 2008.
These decreases were partially offset by costs recorded during the quarter associated with repurchasing dealer inventory under Marine Products' agreements with third-party floorplan lenders, the company added.
Net loss for the quarter was $1,126,000 compared to net income of $4,002,000 in the prior year.
Net sales for the 12 months ended Dec. 31 were $175,622,000, a 28.1-percent decrease compared to the year ended Dec. 31, 2007. Net income for the 12-month period decreased 53.8 percent to $7,586,000 compared to $16,423,000 in the prior year.
No signs of hope yet
Marine Products executives suggested there are no signs of hope for future improvement so far.
"The winter boat show season is a very important indicator for us, and reports of attendance and sales at the early winter shows do not give us any reason to be hopeful about the upcoming retail selling season,” commented Hubbell. “In addition, we continue to see signs that the ongoing financial crisis is damaging the availability of floorplan lending for our dealers, which is vital to our operations. As stated above, we incurred costs during the quarter under these floorplan lending agreements for the repurchase of dealer inventory. We do not anticipate the return of strength to our industry until the credit markets stabilize and some measure of consumer confidence returns.
Despite this, the company said it is “pleased with the reception of our 2009 models by industry observers, dealers and consumers” and expects that it will “capture greater market share and emerge from this downturn even stronger than in the past.”
Hubbell noted that one way the company is preserving capital to support its operations and long-term goals is by reducing its quarterly dividend from $0.065 per share to $0.01 per share.
“This type of conservative management style has and will continue to benefit shareholders of Marine Products as our debt-free balance sheet, with a high balance of cash and investment-grade marketable securities, has given us the financial strength to operate in this stagnant environment, continue to produce appealing products for our consumers and to continue to capture market share," he concluded.
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