Marine Products Corp. reports 77.9 percent fewer boats sold

ATLANTA – Boat builder Marine Products Corp. (NYSE: MPX) sold 77.9 percent fewer boats in the quarter ended March 31, which contributed to a 78.9-percent decrease in net sales, compared to the same quarter of last year, it reported in a statement today.

“Marine Products’ first quarter 2009 results reflect the very difficult environment in which the recreational boating industry finds itself, as the financial crisis of the fourth quarter of 2008 caused consumers to halt virtually all large discretionary purchases,” commented Richard A. Hubbell, Marine Products’ CEO.

Marine Products is a manufacturer of fiberglass boats under two brand names: sterndrive and inboard pleasure boats by Chaparral and outboard sport fishing boats by Robalo.

For the quarter ended March 31, Marine Products generated net sales of $13,806,000, compared to $65,542,000 last year. The decrease in net sales was due to a decrease of 77.9 percent in the number of boats sold and additional costs recorded during the quarter of our winter retail incentive program, according to the company.

Gross loss for the quarter was $58,000, compared to a gross profit of $13,464,000, or 20.5 percent of net sales, in the prior year. The gross loss for the quarter was due to very low production levels and sales to dealers, which resulted in significant production inefficiencies, as well as the additional costs of retail incentives, the company stated. Unit sales among all models declined significantly compared to the prior year, although average gross selling price per boat was unchanged, it said.

Operating loss for the quarter was $4,757,000, compared to an operating profit of $5,205,000 in the first quarter last year due to a gross loss partially offset by lower selling, general and administrative expenses. Selling, general and administrative expenses in the first quarter of 2009 decreased by 43.1 percent due primarily to the variable nature of many of these expenses as well as ongoing cost reduction measures, according to Marine Products Corp.

Net loss for the quarter ended March 31 was $2,486,000, a decrease compared to net income of $4,132,000 in the prior year. The net loss was due to an operating loss and lower interest income, partially offset by an income tax benefit, the company reported. Diluted loss per share for the quarter was $0.07, a decrease compared to $0.11 diluted earnings per share in the prior year.

Dealer inventories down

The good news that came out of the earnings report was a solid decline in dealer inventory levels.

“During the first quarter, we worked closely with our dealers to manage their inventory levels and monitor their financial conditions,” said Hubbell. “We also held discussions with current and potential floorplan lenders regarding those relationships. We made progress on dealer inventory reductions during the quarter, and dealer inventories at the end of the quarter were approximately 11 percent lower than at the end of 2008 and 35 percent lower than the same time last year.”

As a result of a weak winter boat show season “with average attendance and sales down by more than 30 percent” and “more current indicators from our dealers,” Hubbell said the company doesn’t expect its business to improve in the near term.

“Our strategy is to produce an appropriate quantity of current-year models in order to meet firm demand and preserve the value of our brand names, while continuing a prudent amount of new model development for the 2010 model year,” he said. “To support this strategy, we are producing our current-year models at a very low but steady production level. Also, we recently developed a new retail incentive program to be in effect during the 2009 spring retail selling season designed to reduce field inventory further.”

Hubbell said the company must “build on our strength of strong capitalization as much as possible” in order to execute those strategies, which is why the company’s Board of Directors has voted to suspend Marine Products’ quarterly dividend.

“With our enduring capital strength and management expertise, we believe that we are uniquely positioned to increase market share as other competitors do not have our stamina or ability to produce appealing products,” he concluded.

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