ATLANTA – Marine Products Corp. (NYSE: MPX), manufacturer of the Chaparral and Robalo brands of boats, reported a 77.4-percent decrease in net sales and a net loss of more than $3.8 million for the quarter ended June 30, due in part to its commitment to helping its dealers manage their inventory, the company reported in a statement this morning.
“As we discussed at the end of the first quarter, one of our objectives this year has been to help our dealers manage their inventories,” stated Richard A. Hubbell, Marine Products’ Chief Executive Officer. “By providing substantial financial support, we have helped dealers sell from their existing inventory, which has enhanced their financial results as well as prepared them to meet renewed retail demand with current models. This effort negatively impacted our financial results, and combined with the inefficiencies resulting from low production levels, caused us to generate an operating loss for the quarter.”
Hubbell added that the effort has been successful. At the end of the second quarter, the company’s field inventory was 45 percent lower than at the end of 2008 and at what he considers “manageable levels” for today’s market.
For more information on this and other Marine Products Corp. strategies, visit www.boatingindustry.com and scroll down to Web Exclusives to read Boating Industry’s four-part interview with company president Jim Lane.
Sales down, but average boat price up
Marine Products Corp. generated net sales of $12,618,000 for the quarter ended June 30, 2009, compared to $55,734,000 last year, it reported. The decrease in net sales was due to a decrease of 80.4 percent in the number of boats sold, partially offset by a 9.6 percent increase in the average gross selling price per boat, the company explained.
Gross profit for the quarter was $462,000, or 3.7 percent of net sales, compared to $11,027,000, or 19.8 percent of net sales, in the prior year. Gross profit as a percentage of net sales declined compared to the prior year due to very low production levels, which resulted in significant production inefficiencies, according to the company. Unit sales among all models declined significantly compared to the prior year, due to our dealers meeting retail demand by liquidating existing inventory, the company stated.
Operating loss for the quarter was $6,310,000, compared to an operating profit of $4,407,000 in the second quarter last year due to lower gross profit and higher selling, general and administrative expenses, Marine Products Corp. reported. Selling, general and administrative expenses in the second quarter of 2009 increased by 2.3 percent compared to the prior year due to $4,255,000 in expenses related to the company’s dealer inventory reduction efforts, partially offset by decreases in other expenses, which vary with sales and profitability, as well as the impact of ongoing cost reduction measures.
Net loss for the quarter ended June 30 was $3,835,000, a decrease compared to net income of $3,896,000 in the prior year. The net loss was due to an operating loss and lower interest income, partially offset by an income tax benefit, according to the company. Diluted loss per share for the quarter was $0.11, a decrease compared to $0.11 diluted earnings per share in the prior year.
Net sales for the six months ended June 30 were $26,424,000, a 78.2 percent decrease compared to the first six months of 2008. Net loss for the six-month period was $6,321,000 or $0.18 loss per diluted share compared to net income of $8,028,000 or $0.22 diluted earnings per share in the prior year.
“Marine Products’ second quarter 2009 results reflect the continued depressed state of the recreational boating industry,” commented Hubbell. “The ongoing recession and lack of availability of consumer credit continue to prevent consumers from purchasing large discretionary items such as pleasure boats. Also, continued residential real estate weakness in key boating markets and cool, rainy weather in the Northeast have made the 2009 retail selling season even weaker than last year.”
Market share gains expected
While Hubbell said unit sales were down across all of the boat builder’s models, the company was “somewhat encouraged” by a model mix that realized higher average gross selling prices. He noted that its Sunesta Wide Tech and Xtreme models continue to sell at higher price points, and it has also sold several Premiere Sport Yachts.
“This protracted downturn is beginning to affect our industry’s landscape very profoundly. A number of manufacturers, including some large ones, have ceased operations, are attempting to sell to competitors, or have filed for bankruptcy protection,” Hubbell stated. “Some boat dealers are ceasing operations, and financing continues to be difficult to obtain, both for dealers and retail customers.
“In this historically difficult environment, we are encouraged by our stamina under these conditions. At the end of the second quarter, our balance sheet showed $55.6 million in cash and marketable securities, which increased by $4.2 million compared to the end of 2008, in spite of our operating results and support provided to our dealers. We believe that we will eventually benefit from our financial strength and management expertise.”
Not only did Hubbell note that it has had “several strong dealers” approach the company about forming a relationship, he highlighted the “number of new models” it has introduced for the 2010 model year, both of which he expects to result in market share gains.