Marine Products Corporation announced its unaudited results for the quarter ended September 30, 2021. Marine Products is the manufacturer of fiberglass boats under the brand names of Chaparral and Robalo. Chaparral’s sterndrive models include SSi and SSX, along with the Chaparral Surf Series. Chaparral’s outboard offerings include OSX Luxury Sportboats, the 267 SSX OB, and SSi outboard models. Robalo builds an array of outboard sport fishing boats, which include center consoles, dual consoles and Cayman Bay Boat models.
For the quarter ended September 30, 2021, Marine Products generated net sales of $75,843,000, a 10.3% increase compared to $68,778,000 in the same period of the prior year. The increase in net sales was due to a 5.3% increase in the number of units shipped during the quarter as compared to the prior year. A favorable model mix generated a small increase in average selling price per boat.
Gross profit for the third quarter of 2021 was $16,044,000, a slight decrease compared to the third quarter of the prior year. Gross margin as a percentage of net sales decreased to 21.2% in the third quarter of 2021 compared to 23.6% in the third quarter of 2020. Gross margin as a percentage of net sales declined due to increased raw materials and component costs, as well as higher freight costs as compared to the prior year. Also, labor inefficiencies resulting from production disruptions caused by delays in receiving critical components impacted profitability. An additional factor causing a decline in gross margin as a percentage of net sales was that during the quarter the company shipped very few 2022 models, which carry higher prices.
Operating profit for the third quarter of 2021 was $8,343,000, approximately the same as operating profit of $8,350,000 in the third quarter of last year. Selling, general and administrative expenses were $7,701,000 in the third quarter of 2021 compared to $7,886,000 in the third quarter of 2020. These expenses decreased slightly due to changes in costs that vary with profitability, as well as lower advertising expenses. Selling, general and administrative expenses as a percentage of net sales were 10.2% in the third quarter of 2021 compared to 11.5% of net sales during the third quarter of 2020. Earnings before interest, taxes, depreciation and amortization (EBITDA) for the third quarter of 2021 was $8,791,000, an increase of $5,000 compared to the third quarter of 2020.1
Net income for the third quarter of 2021 was $6,687,000, a slight increase compared with net income of $6,535,000 in the third quarter of 2020. Diluted earnings per share were $0.20 in the third quarter of 2021 compared with $0.19 in the third quarter of the prior year. The effective tax rate for the third quarter of 2021 was 19.9%, a decrease compared to an effective tax rate of 21.8% for the third quarter of the prior year.
Net sales for the nine months ended September 30, 2021 were $221,477,000, an increase of 31.3% compared to the first nine months of 2020, which were significantly impacted by our production facility shutdown due to concerns arising from the COVID-19 pandemic. Net income for the nine-month period was $20,578,000 or $0.61 diluted earnings per share, compared to net income of $12,450,000, or $0.37 diluted earnings per share in the prior year.
“Marine Products Corporation’s third quarter results reflect continued high dealer and retail demand, offset by significant supply chain challenges preventing us from shipping as many boats as we planned,” stated Richard A. Hubbell, Marine Products’ President and Chief Executive Officer. “Demand once again extended beyond the traditional retail selling season for recreational boats. Unfortunately, along with the rest of our industry as well as other manufacturers that rely on an extensive supply chain, our production was negatively impacted by shortages and delayed receipts of raw materials and critical components used in our manufacturing operations. As a result, we reduced production during the quarter, although total shipments increased, and materials cost increases negatively impacted our profitability. In addition, we honored our 2021 model year pricing and delivery commitments, which extended through the third quarter. As a result, the vast majority of our third quarter shipments were of 2021 model year boats, which reflected lower pricing and generated lower profitability than our 2022 model year boats. We began shipping 2022 models almost exclusively during the fourth quarter.
“These conditions also increased our working capital requirements, as reflected in delayed shipments of substantially completed boats and a lower cash balance at the end of the third quarter as compared to the prior year. We continue to coordinate our suppliers’ anticipated deliveries with our production schedules so that we can optimize labor and transportation resources to meet as much demand as possible, and we are pleased that several critical bottlenecks have eased. As a result, our working capital requirements are declining and our cash balance should improve in the coming months. However, we continue to face delays in receiving some of our critical components and do not know at this time when these problems will be resolved.
“During the fourth quarter, Marine Products will continue to exercise every effort to support our dealers with virtual marketing efforts, equitable production allocations, and winter boat show support. We will be almost exclusively shipping higher-priced 2022 model year boats, which will allow for more efficient production as well as enhance average selling prices and profitability. We continue to monitor our market share and are pleased that for the 12 months ended June 30, 2021, both Chaparral and Robalo continued to hold leading market shares in each of their categories,” concluded Hubbell.