t64670_10k.htm
UNITED
STATES
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SECURITIES
AND EXCHANGE COMMISSION
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Washington,
D.C. 20549
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FORM
10-K
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(Mark
One)
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x
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Annual
report pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934
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o
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Transition
report pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934
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FOR
THE FISCAL YEAR ENDED DECEMBER 31, 2008
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Commission
File No. 1-16263
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MARINE
PRODUCTS
CORPORATION
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Delaware
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58-2572419
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(State
of Incorporation)
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(I.R.S.
Employer Identification No.)
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2801
BUFORD HIGHWAY, SUITE 520
ATLANTA,
GEORGIA 30329
(404)
321-7910
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Securities
registered pursuant to Section 12(b) of the Act:
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Title
of each class
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Name
of each exchange on which registered
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COMMON
STOCK, $0.10 PAR VALUE
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NEW
YORK STOCK EXCHANGE
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Securities
registered pursuant to section 12(g) of the Act:
NONE
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Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act. o Yes x No
Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act. o Yes x No
Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. x
Yes o
No
Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of registrant’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. x
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
definitions of “large accelerated filer,” “accelerated filer,” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
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Large
accelerated filer o
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Accelerated
filer x
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Non-accelerated
filer o
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Smaller
reporting company o
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Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes o No x
The
aggregate market value of Marine Products Corporation common stock held by
non-affiliates on June 30, 2008, the last business day of the registrant’s most
recent second fiscal quarter, was $59,049,694 based on the closing price on the
New York Stock Exchange on June 30, 2008 of $6.60 per share.
Marine
Products Corporation had 36,902,490 shares of common stock outstanding as of
February 13, 2009.
Documents
Incorporated by Reference
Portions
of the Proxy Statement for the 2009 Annual Meeting of Stockholders of Marine
Products Corporation are incorporated by reference into Part III, Items 10
through 14 of this report.
PART
I
References
in this document to “we,” “our,” “us,” “Marine Products,” or “the Company” mean
Marine Products Corporation (“MPC”) and its subsidiaries, Chaparral Boats, Inc.
(“Chaparral”) and Robalo Acquisition Company LLC (“Robalo”), collectively or
individually, except where the context indicates otherwise.
Forward-Looking
Statements
Certain
statements made in this report that are not historical facts are
“forward-looking statements” under the Private Securities Litigation Reform Act
of 1995. Such forward-looking statements may include, without limitation,
statements that relate to our business strategy, plans and objectives, and our
beliefs and expectations regarding future demand for our products and services
and other events and conditions that may influence our performance in the
future.
The words
“may,” “should,” “will,” “expect,” “believe,” “anticipate,” “intend,” “plan,”
“seek,” “project,” “estimate,” and similar expressions used in this document
that do not relate to historical facts are intended to identify forward-looking
statements. Such statements are based on certain assumptions and analyses made
by our management in light of its experience and its perception of historical
trends, current conditions, expected future developments and other factors it
believes to be appropriate. The forward-looking statements include, without
limitation, statements regarding our belief that international sales could
produce additional sales growth; our expectation to continue to offer sales
incentives and promotion programs in the future; our belief that the Wide Tech
TM
bow design may be incorporated on other Chaparral boat models in subsequent
model years; management’s belief that Marine Products is well positioned to take
advantage of current market conditions which characterize the industry; our
intention to continue seeking the most advantageous purchasing arrangements from
our suppliers; our assumption that our suppliers will remain in operation during
the extended business downturn in the recreational boating industry; our ability
to execute our marketing strategy to increase market share by expanding our
presence by building dedicated sales, marketing and distribution systems; our
intention to continue to strengthen our dealer network and build brand loyalty
with dealers and customers; our ability to locate and complete strategic
acquisitions that will complement our existing product lines, expand our
geographic presence and strengthen our capabilities; our belief that our
corporate infrastructure and marketing and sales capabilities, in addition to
our cost structure and nationwide presence, enable us to compete effectively;
our belief that we do not currently anticipate that any material expenditures
will be required to continue to comply with existing environmental or safety
regulations; our belief that the fall in prices of certain commodities during
the first part of 2009 may lead to lower material costs in 2009; our belief that
our product liability insurance will be adequate; our intention to pursue
acquisitions and form strategic alliances that will enable us to acquire
complementary skills and capabilities, offer new products, expand our customer
base and obtain other competitive advantages; our belief that the ultimate
outcome of litigation arising in the ordinary course of business will not have a
material adverse effect on our liquidity, financial condition or results of
operations; our intention to continue to pay cash dividends; our ability to
execute stated business and financial strategies in the future to better manage
our Company; our belief that there are not any near-term catalysts that will
improve the retail selling environment for our product; our belief that the
weak selling environment and dealer inventory levels may require the Company to
implement additional sales incentive programs designed to sell inventory;
management’s belief that net sales and profits in 2009 will decline compared to
2008; management’s belief that advertising and consumer targeting efforts will
benefit the boating industry and our Company and could result in increased
advertising and other selling and general administrative expenses during 2009;
our belief that the redesign of one of the Chaparral product lines for the 2009
model year will be very popular with dealers and consumers and that the success
of this product should continue to enhance our sales and profits in future
years; management’s belief that both the boating industry promotional
advertising program and the Company’s new boat models will benefit Marine
Products; management’s belief that the industry is projected to remain in a deep
downturn throughout 2009; our belief that the Company will continue to
experience the effect of reduced consumer demand for at least the remainder of
2009, which will adversely affect net sales, net income, operating margins, and
cash flows; expectations about the amount of capital expenditures and
contributions to our defined benefit plan during 2009 and the purpose of those
capital expenditures; the adequacy of the Company’s capital resources; the
amount and timing of future contractual obligations; judgments about the
Company’s critical accounting policies; and the effect of various recent
accounting pronouncements on the Company, its operating results and financial
condition. These statements involve known and unknown risks, uncertainties and
other factors which may cause the actual results, performance or achievements of
Marine Products Corporation to be materially different from any future results,
performance or achievements expressed or implied in such forward-looking
statements. These risks involve the outcome of current and future litigation,
the impact of interest rates, economic conditions, fuel costs and weather on our
business, our dependence on a network of independent boat dealers, the
possibility of defaults by our dealers in their obligations to third-party
dealer floor plan lenders, and our reliance on third-party suppliers. We caution
you that such statements are only predictions and not guarantees of future
performance and that actual results, developments and business decisions may
differ from those envisioned by the forward-looking statements. See “Risk
Factors” on page 12 for a discussion of factors that may cause actual results to
differ from our projections.
Marine
Products manufactures fiberglass motorized boats distributed and marketed
through its independent dealer network. Marine Products’ product offerings
include Chaparral sterndrive and inboard pleasure boats and Robalo outboard
sport fishing boats.
Organization
and Overview
Marine
Products is a Delaware corporation incorporated on August 31, 2000, in
connection with a spin-off from RPC, Inc. (NYSE: RES) (“RPC”). Effective
February 28, 2001, RPC accomplished the spin-off by contributing 100 percent of
the issued and outstanding stock of Chaparral to Marine Products, a newly formed
wholly owned subsidiary of RPC, and then distributing the common stock of Marine
Products to RPC stockholders.
Marine
Products designs, manufactures and sells recreational fiberglass powerboats in
the sportboat, deckboat, cruiser, sport yacht and sport fishing markets. The
Company sells its products to a network of 147 domestic and 46 international
independent authorized dealers. Marine Products’ mission is to enhance its
customers’ boating experience by providing them with high quality, innovative
powerboats. The Company intends to remain a leading manufacturer of recreational
powerboats for sale to a broad range of consumers worldwide.
The
Company manufactures Chaparral sterndrive and inboard-powered pleasure boats
including SSi Sportboats, SSX Sportdecks, Sunesta Wide Tech™ and Xtreme boats,
Signature Cruisers, Premiere Sport Yachts and Robalo outboard sport fishing
boats. The most recent available industry statistics [source: Statistical
Surveys, Inc. report dated September 30, 2008] indicate that Chaparral is the
fourth largest manufacturer of 18 to 35 foot sterndrive boats in the United
States.
Chaparral
was founded in 1965 in Ft. Lauderdale, Florida. Chaparral’s first boat was a
15-foot tri-hull design with a retail price of less than $1,000. Over time
Chaparral grew by offering exceptional quality and consumer value. In 1976,
Chaparral moved to Nashville, Georgia, where a manufacturing facility of a
former boat manufacturing company was available for purchase. This provided
Chaparral an opportunity to obtain additional manufacturing space and access to
a trained work force. With over 40 years of boatbuilding experience, Chaparral
continues to improve the design and manufacturing of its product offerings to
meet the growing needs of discriminating recreational boaters.
Robalo
was founded in 1969 and its first boat was a 19-foot center console salt-water
fishing boat, among the first of this type of boat to have an “unsinkable” hull.
The Company believes that Robalo’s share of the outboard sport fishing boat
market is approximately two percent.
Products
Marine
Products distinguishes itself by offering a wide range of products to the family
recreational market and cruiser market through its Chaparral brand, and to the
sport fishing market through its Robalo brand.
The following table provides a brief description of our product lines and their
particular market focus:
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Product
Line
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Number
of
Models
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Overall
Length
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Approximate
Retail
Price
Range
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Description
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Chaparral
- SSi Sportboats
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11
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18′-28′
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$22,000
- $148,000
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Fiberglass
bowriders and closed deck runabouts. Encompasses affordable, entry-level
to mid-range and larger sportboats. Marketed as high value runabouts for
family groups.
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Chaparral
– SSX Sportdecks
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3
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24′-28′
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$56,000
- $128,000
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Fiberglass
bowrider crossover sportboats that combine the ride of a sportboat and the
usefulness of a deckboat. Marketed as high value runabouts for family
groups.
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Chaparral
- Sunesta Wide Techs™ / Xtremes
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7
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22′-28′
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$47,000
- $128,000
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Fiberglass
pleasure boats with a high-performance hull design and updated styling.
Wide Tech™ is marketed
as an affordable, entry-level to mid-range pleasure boat with the handling
of a runabout, the style of a sportboat and the roominess of a cruiser.
Xtreme is marketed as a high-performance wakeboard/ski boat with technical
features and styling that appeal to wakeboard and ski
enthusiasts.
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Chaparral
- Signature Cruisers
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7
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25′-35′
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$74,000
- $371,000
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Fiberglass,
accommodation-focused cruisers. Marketed to experienced boat owners
through trade magazines and boat show exhibitions.
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Chaparral
– Premiere Sport Yacht
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1
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42′
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$615,000
- $635,000
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High
value, fiberglass sport yacht with Wide Tech™ Bow marketed to
experienced boat owners through trade magazines and boat show
exhibitions.
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Robalo
- Sport Fishing Boats
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10
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22′-31′
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$52,000
- $274,000
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Sport
fishing boats for large freshwater lakes or saltwater use. Marketed to
experienced fishermen.
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Manufacturing
Marine
Products’ manufacturing facilities are located in Nashville, Georgia and
Valdosta, Georgia. In 2008, the Company temporarily idled its plant located in
Valdosta, Georgia in response to the decline in production during the current
year in comparison to the prior year. Marine Products utilizes five different
plants to, among other things, manufacture interiors, design new models, create
fiberglass hulls and decks, and assemble various end products. Quality control
is conducted throughout the manufacturing process. The Company’s manufacturing
operations are ISO 9001: 2000 certified, which is an international designation
of design, manufacturing, and customer service processes. ISO 9001: 2000
surpasses previous ISO designations. Management believes Chaparral is the third
largest sterndrive boat manufacturing brand to hold the ISO 9001: 2000
certification. When fully assembled and inspected, the boats are loaded onto
either company-owned trailers or third-party marine transport trailers for
delivery to dealers. The manufacturing process begins with the design of a
product to meet dealer and customer needs. Plugs are constructed in the research
and development phase from designs. Plugs are used to create a mold from which
prototype boats can be built. Adjustments are made to the plug design until
acceptable parameters are met. The final plug is used to create the necessary
number of production molds. Molds are used to produce the fiberglass hulls and
decks. Fiberglass components are made by applying the outside finish or gel coat
to the mold, then numerous layers of fiberglass and resin are applied during the
lamination process over the gel coat. After curing, the hull and deck are
removed from the molds and are trimmed and prepared for final assembly, which
includes the installation of electrical and plumbing systems, engines,
upholstery, accessories and graphics.
Product
Warranty
For
our Chaparral products, Marine Products provides a lifetime limited structural
hull warranty against defects in material and workmanship for the original
purchaser, and a 10-year limited structural hull warranty for one subsequent
owner. Warranties on additional items are provided for periods of one to five
years. For our Robalo products, Marine Products provides a transferable 10-year
limited structural hull warranty against defects in material and workmanship,
and a transferable one-year limited warranty on other components. The engine
manufacturers for our Robalo and Chaparral products warrant engines included in
the boats as well.
Suppliers
Marine
Products’ two most significant components used in manufacturing its boats, based
on cost, are engines and fiberglass. For each of these, there is currently an
adequate supply available in the market. Marine Products has not experienced any
material shortages in any of these products. Temporary shortages, when they do
occur, usually involve manufacturers switching model mixes or introducing new
product lines. Marine Products obtains most of its fiberglass from a leading
domestic supplier. Marine Products believes that there are several alternative
suppliers if this supplier fails to provide adequate quality or quantities at
acceptable prices.
Marine
Products does not manufacture the engines installed in its boats. Engines are
generally specified by the dealers at the time of ordering, usually on the basis
of anticipated customer preferences or actual customer orders. Sterndrive
engines are purchased through the American Boatbuilders Association (“ABA”),
which has entered into engine supply arrangements with Mercury Marine and Volvo
Penta, the two currently existing suppliers of sterndrive engines. These
arrangements contain incentives and discount provisions, which may reduce the
cost of the engines purchased, if specified purchase volumes are met during
specified periods of time. Although no minimum purchases are required, Marine
Products expects to continue purchasing sterndrive engines through the ABA on a
voluntary basis in order to receive volume-based purchase discounts. Marine
Products does not have a long-term supply contract with the ABA. Marine Products
has an outboard engine supply contract with Yamaha. This engine supply
arrangement was not negotiated through the ABA. In the event of a sudden
interruption in the supply of engines from these suppliers, our sales and
profitability could be negatively impacted. See “Business Strategies”
below.
Marine
Products uses other raw materials in its manufacturing processes. Among these
are stainless steel, copper and resins made from feedstocks. During the first
six months of 2008, the price of these raw materials increased, adversely
affecting our 2008 operating results. See “Inflation” below.
Sales
and Distribution
Sales
are made through approximately 118 Chaparral dealers, 14 Robalo dealers, and 15
dealers that sell both brands located in markets throughout the United States.
Dealers market directly to consumers at boat show exhibitions and in the
dealers’ showrooms. Marine Products also has 46 international dealers. Most of
our dealers inventory and sell boat brands manufactured by other companies,
including some that compete directly with our brands. The territories served by
any dealer are not exclusive to the dealer; however, Marine Products uses
discretion in establishing relationships with new dealers in an effort to
protect the mutual interests of the existing dealers and the Company. Marine
Products’ nine independent field sales representatives call upon existing
dealers and develop new dealer relationships. The field sales representatives
are directed by a National Sales Coordinator, who is responsible for developing
a full dealer distribution network for the Company’s products. The marketing of
boats to retail customers is primarily the responsibility of the dealer. Marine
Products supports dealer marketing efforts by supplementing local advertising,
sales and marketing follow up in boating magazines, and participation in
selected regional, national, and international boat show exhibitions. No single
dealer accounts for more than 10 percent of sales.
Marine
Products continues to seek new dealers in many areas throughout the U.S.,
Europe, South America, Asia, Russia and the Middle East. In general, Marine
Products requires payment in full before it will ship a boat overseas.
Consequently, there is no credit risk associated with its international sales or
risk related to foreign currency fluctuation. Marine Products believes
international sales could produce additional sales growth, although the volume
of sales to international dealers decreased in 2008 compared to 2007 due to
global economic weakness. International sales are also affected by the value of
the U.S. dollar relative to other currencies. International sales were 33.4
percent of total sales in 2008, 23.3 percent of total sales in 2007 and 18.0
percent of total sales in 2006.
Marine
Products’ sales orders are indicators of strong interest from its dealers.
Historically, dealers have in most cases taken delivery of all their orders,
although in the third and fourth quarters of 2008, the frequency of order
cancellations increased due to the increase in consumer uncertainty resulting
from the deepening recession and the turmoil in the financial markets. The
Company attempts to ensure that its dealers do not accept an excessive amount of
inventory by monitoring their inventory levels, so these cancellations were a
factor that influenced Marine Products’ decision to further reduce production
during this time. Knowledge of inventory levels at the individual dealers
facilitates production scheduling with very short lead times in order to
maintain flexibility, in the event that adjustments need to be made to dealer
shipments. In the past, Marine Products has been able to resell any boat for
which the order has been cancelled, although the increase in order cancellations
that occurred during the third and fourth quarters of 2008 caused Marine
Products to decrease production to focus on reselling boats for which orders had
been cancelled.
Although
some dealers finance their boat inventory with smaller regional financial
institutions in local markets, the majority of Marine Products’ domestic
shipments are made pursuant to “floor plan financing” programs in which Marine
Products’ subsidiaries participate on behalf of their dealers with major
third-party financing institutions. Historically, and during most of 2008, there
were at least two major floor plan financing institutions, although one of these
institutions announced at the end of 2008 that it would cease floor plan lending
to all unaffiliated dealers including those in the marine industry. Under these
established arrangements with qualified lending institutions, a dealer
establishes a line of credit with one or more of these lenders for the purchase
of boat inventory for sales to retail customers in their show room or during
boat show exhibitions. In general, when a dealer purchases and takes delivery of
a boat pursuant to a floor plan financing arrangement, it draws against its line
of credit and the lender pays the invoice cost of the boat directly to Marine
Products within 10 business days. When the dealer in turn sells the boat to a
retail customer, the dealer repays the lender, thereby restoring its available
credit line. Each dealer’s floor plan credit facilities are secured by the
dealer’s inventory, letters of credit, and perhaps other personal and real
property. Until recently, most dealers maintained financing arrangements with
more than one lender, although that is less common at the present time, given
that there are fewer lenders. In connection with the dealer’s floor plan
financing arrangements with these qualified lending institutions, Marine
Products or its subsidiaries have agreed to repurchase inventory which the
lender repossesses from a dealer and returns to Marine Products in a “like new”
condition. The contractual agreements that Marine Products or its subsidiaries
have with these qualified lenders contain specified limits for the amounts of
these repurchases. In early 2009 one lender has approached Marine Products with
a request to raise this contractual repurchase limit. During 2008 this lender
imposed additional borrowing costs not covered in the current contractual
arrangement and Marine Products is presently negotiating with this lender
regarding these and other issues regarding contract provisions which as
presently written expire at the end of the 2009 model year. In the event that a
dealer defaults under a credit line, the qualified lender may then invoke the
manufacturers’ repurchase agreement with respect to that dealer. In that event,
all repurchase agreements of all manufacturers supplying a defaulting dealer are
generally invoked regardless of the boat or boats with respect to which the
dealer has defaulted. As of December 31, 2008, Marine Products’ aggregate
remaining contractual obligation to repurchase boats under these floor plan
financing programs described above was approximately $4.1 million. Unlike Marine
Products’ obligation to repurchase boats repossessed by lenders, Marine Products
is under no obligation to repurchase boats directly from dealers. Marine
Products does not sponsor financing programs to the consumer; any consumer
financing promotions for a prospective boat purchaser would be the
responsibility of the dealer. See “Risk Factors” on page 11 for a discussion of
the potential impact of the ongoing volatility and lack of liquidity in the
financial markets which may impact Marine Products during 2009.
Marine
Products’ dealer sales incentive programs are variously designed to promote
early replenishment of the stock in dealer inventories depleted throughout the
prime spring and summer selling seasons, and to promote the sales of older
models in dealer inventory and particular models during specified periods. These
programs help to stabilize Marine Products’ manufacturing between the peak and
off-peak periods, and promote sales of certain models. For the 2009 model year
(which commenced July 1, 2008), Marine Products offered its dealers several
sales incentive programs based on dollar volumes and timing of dealer purchases.
Program incentives offered include sales discounts, inventory reduction rebates,
and payment of floor plan financing interest charged by qualified floor plan
providers to dealers generally through March 31, 2009. After the interest
payment programs end, interest costs revert to the dealer at rates set by the
lender. A dealer makes periodic curtailment payments (principal payments) on
outstanding obligations against its dealer inventory as set forth in the floor
plan financing agreements between the dealer and their particular
lender.
These
various sales incentives and promotions have resulted in relatively level
month-to-month production and sales. As a result of lower sales during 2008, we
extended our 2008 winter promotions into the 2008 spring and summer selling
seasons. Additionally we have significantly enhanced our incentives in 2009 and
have extended the promotion to include prior year models. Similar sales
incentive and promotion programs have been in effect during the past several
years, and Marine Products expects to continue to offer these types of programs
in the future.
The
sales order backlog was approximately 200 boats with estimated net sales of
approximately $7.8 million as of December 31, 2008. This represents an
approximate nine week backlog based on production levels at December 31, 2008.
As of December 31, 2007, the sales order backlog was approximately 1,300 boats
with estimated net sales of approximately $59 million. The decrease in the sales
order backlog is the result of much lower dealer orders and much lower
production levels compared to the prior year. Based on recent trends the Company
continues to adjust its production levels downward to manage dealer inventory
levels. The Company typically does not manufacture a significant number of boats
for its own inventory. The Company occasionally manufactures boats for its own
inventory because the number of boats required for immediate shipment is not
always the most efficient number of boats to produce in a given production
schedule.
Research
and Development
Essentially
the same technologies and processes are used to produce fiberglass boats by all
boat manufacturers. The most common method is open-face molding. This is usually
a labor-intensive, manual process whereby employees hand spray and apply
fiberglass and resin in layers on open molds to create boat hulls, decks and
other smaller fiberglass components. This process can result in inconsistencies
in the size and weight of parts, which may lead to higher warranty costs. A
single open-face mold is typically capable of producing approximately three
hulls per week.
Marine
Products has been a leading innovator in the recreational boating industry. One
of the Company’s most innovative designs is the full-length “Extended V-Plane”
running surface on its Chaparral boat models. Typically, sterndrive boats have a
several foot gap on the bottom rear of the hull where the engine enters the
water. With the Extended V-Plane, the running surface extends the full length to
the rear of the boat. The benefit of this innovation is more deck space, better
planing performance and a more comfortable ride. Although the basic hull designs
are similar, the Company introduces a variety of new models each year and
periodically replaces, updates or discontinues existing models.
Another
hull design is the Hydro LiftTM used on
the Robalo boat models. This variable dead rise hull design provides a smooth
ride in rough conditions. It increases the maximum speed obtainable by a given
engine horsepower and weight of the boat. Robalo’s current models utilize the
Hydro LiftTM design
and we plan to continue to provide this design on Robalo models.
A
bow design known as the Wide TechTM was
first used on the Chaparral Sunesta Wide Tech™ and Xtreme models for the 2008
model year, and was also used on the 400 Premiere Sport Yacht and the SSI Wide
TechTM
for the 2009 model year. The Wide TechTM bow
design allows the models to have the Extended V-Plane hull, with the features
and benefits that this hull design offers. In addition, the Wide TechTM
bow design provides a larger seating area, as well as additional storage
space, in the front of the boat. Furthermore, this bow design allows the models
to have a non-skid walkway on the bow, which makes entering and leaving the boat
easier than in other boat models. The Wide TechTM bow
design may be incorporated on other Chaparral boat models in subsequent model
years.
In
support of its new product development efforts, Marine Products incurred
research and development costs of $1.8 million in 2008, $1.7 million in 2007,
and $1.4 million in 2006.
Industry
Overview
For
2008, the recreational boating industry accounted for less than one percent of
the United States gross domestic product. The recreational marine market is a
mature market, with 2007 (latest data available to us) retail expenditures of
approximately $37.5 billion spent on new and used boats, motors and engines,
trailers, accessories and other associated costs as estimated by the National
Marine Manufacturers Association (“NMMA”). Pleasure boats compete for consumers’
free time with all other leisure activities, from computers and video games to
other outdoor sports. One of the greatest obstacles to continued growth for the
recreational boating industry is consumers’ diminishing leisure
time.
The
NMMA conducts various surveys of pleasure boat industry trends, and the most
recent surveys indicate that 59 million adults in the United States participated
in recreational boating in 2007, an increase of 10.3 percent compared to the
prior year. There are currently approximately 17 million boats owned in the
United States, including outboard, inboard, sterndrive, sailboats, personal
watercraft, and miscellaneous (canoes, kayaks, rowboats, etc.). Marine Products
competes in the sterndrive and inboard boating category with its five lines of
Chaparral boats, and in the outboard boating category with its Robalo sport
fishing boats. More than 90 percent of the Company’s models are sterndrive
boats.
Industry
sales of sterndrive boats in the United States during 2008 totaling 32,402
(source: Info-Link Technologies, Inc.) accounted for approximately 38 percent of
the total new fiberglass powerboats sold that were between 18 and 35 feet in
hull length. Sales of sterndrive boats had an estimated total retail value of
$1.8 billion, or an average retail price per boat of approximately $55,000.
Management believes that the five largest states for boat sales are Florida,
Texas, California, New York and North Carolina. Marine Products has dealers in
each of these states.
The
U.S. domestic recreational boating industry includes sales in the segments of
new and used boats, motors and engines, trailers, and other boat accessories.
The new fiberglass boat market segment with hull lengths of 18 to 35 feet, the
primary market segment in which Marine Products competes, represented $4.1
billion in retail sales during 2008. The table below reflects the estimated
sales within this segment by category for 2008 and 2007, ranked by 2008 retail
sales (source: Info-Link Technologies, Inc.):
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
|
Boats
|
|
|
Sales
($ B)
|
|
|
Boats
|
|
|
Sales
($ B)
|
|
Sterndrive
Boats
|
|
|
32,402 |
|
|
$ |
1.8 |
|
|
|
50,778 |
|
|
$ |
2.8 |
|
Outboard
Boats
|
|
|
39,148 |
|
|
|
1.5 |
|
|
|
56,967 |
|
|
|
2.2 |
|
Inboard
Boats
|
|
|
9,653 |
|
|
|
0.7 |
|
|
|
13,434 |
|
|
|
1.0 |
|
Jet
Boats
|
|
|
3,364 |
|
|
|
0.1 |
|
|
|
4,634 |
|
|
|
0.1 |
|
TOTAL
|
|
|
84,567 |
|
|
$ |
4.1 |
|
|
|
125,813 |
|
|
$ |
6.1 |
|
Chaparral’s
products are categorized as sterndrive and inboard boats and Robalo’s products
are categorized as outboard boats.
Although
the recreational boat manufacturing market remains highly fragmented, Brunswick
Corporation and Genmar Holdings, Inc. have acquired a number of recreational
boat manufacturing operations. We estimate that the boat manufacturing industry
includes over 130 sterndrive manufacturers and over 300 outboard boat
manufacturers, largely small, privately held companies with varying degrees of
professional management and manufacturing skill. According to estimates provided
by Statistical Surveys, Inc., during the nine months ended September 30, 2008
(latest information available), the top five sterndrive manufacturers, which
includes Chaparral, have a market share of approximately 54 percent. Chaparral’s
market share in units during the period was 7.5 percent, which represents an
increase of 0.3 percentage points compared to the 12 months ended December 31,
2007. This increase is attributable to Chaparral’s increasing market share of
boats that are 21 to 35 feet in length, a size range in which Chaparral is the
second largest manufacturer. We attribute this increase in market share of this
segment to Chaparral’s long-term strategy of designing, building, and selling
larger boats which carry higher average selling prices. This increase was offset
by Chaparral’s declining market share in the sale of boats that are 18 to 20
feet in length, which we attribute to the strategy of certain manufacturers to
manufacture smaller boats in offshore manufacturing facilities to sell in the
domestic market at a lower price. Also, certain manufacturers have recently
gained market share in smaller boats by selling through non-traditional
retailers such as sporting good stores not located near a recreational
waterway.
Several
factors influence sales trends in the recreational boating industry, including
general economic growth, consumer confidence, household incomes, the
availability and cost of financing for our dealers and customers, weather, fuel
prices, tax laws, demographics and consumers’ leisure time. Also, the value of
residential and vacation real estate in strong boating states such as California
and Florida influences recreational boat sales. In addition, inflation has had
an impact on boat sales in recent years. As the cost of certain raw materials
used in the manufacturing process has increased, the cost of boat ownership
increases as well, which has prompted consumers either to buy a smaller boat or
defer or forego their purchase. Competition from other leisure and recreational
activities, such as vacation properties and travel, can also affect sales of
recreational boats.
Management
believes Marine Products is well positioned to take advantage of the following
conditions, which continue to characterize the industry:
|
|
|
|
●
|
labor-intensive
manufacturing processes that remain largely
unautomated;
|
|
|
|
|
●
|
increasingly
strict environmental standards derived from governmental regulations and
customer sensitivities;
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|
|
|
●
|
a
lack of focus on coordinated customer service and support by dealers and
manufacturers;
|
|
|
|
|
●
|
a
lack of financial strength among retail boat dealers, and at the present
time, among third-party floor plan lenders; and
|
|
|
|
|
●
|
a
high degree of fragmentation and competition among the more than 130
sterndrive and 300 outboard recreational boat
manufacturers.
|
Business
Strategies
Recreational
boating is a mature industry. According to Info-Link Technologies,
Inc., sales of sterndrive boats experienced a compound annual decline rate
of approximately 21 percent between 2006 and 2008. During this time, Marine
Products has experienced a compound annual decline rate of approximately 24
percent in the number of boats sold. Marine Products has historically grown its
boat sales and net sales primarily through increasing market share and by
expanding the number of models and product lines. Unit sales declined in 2008
partly due to industry conditions, but also because of Marine Products’ strategy
of building larger boats with higher average selling prices. Chaparral has grown
its sterndrive market share in the 18 to 35 feet length category from 5.9
percent in fiscal 1996 to 7.5 percent during the nine months ended September 30,
2008 (the most recent information provided to us by Statistical Surveys, Inc.).
The Company continues to expand its product offerings in the outboard boat
market, the largest boat market not previously served by the Company’s products,
and by improvement of existing models and expansion into larger boats within its
sterndrive and inboard offerings.
During
2008 we reduced our production levels at various times in response to our
concerns about dealer and consumer demand for products in our industry, which
resulted from continued problems in the housing market, high fuel prices and
concern regarding a general economic slowdown. At the end of 2008, our
production levels were significantly lower than the levels during
2007.
Marine
Products’ operating strategy emphasizes innovative designs and manufacturing
processes, by producing a high quality product while seeking to lower
manufacturing costs through increased efficiencies in our facilities. In
addition, we seek opportunities to leverage our buying power through economies
of scale. Management believes its membership in the ABA positions Marine
Products as a significant third-party customer of major suppliers of sterndrive
engines. Marine Products’ Chaparral subsidiary is a founding member of the ABA,
which collectively represents 13 independent boat manufacturers that have formed
a buying group to pool their purchasing power in order to gain improved pricing
on engines, fiberglass, resin and many other components. Marine Products intends
to continue seeking the most advantageous purchasing arrangements from its
suppliers.
Our
marketing strategy seeks to increase market share by enabling Marine Products to
expand its presence by building dedicated sales, marketing and distribution
systems. Marine Products has a distribution network of 193 dealers located
throughout the United States and internationally. Our strategy is to increase
selectively the quantity of our dealers, and work to improve the quality and
effectiveness of our entire dealer network. Marine Products seeks to capitalize
on its strong dealer network by educating its dealers on the sales and servicing
of our products and helping them provide more comprehensive customer service,
with the goal of increasing customer satisfaction, customer retention and future
sales. Marine Products provides promotional and incentive programs to help its
dealers increase product sales and customer satisfaction. Marine Products
intends to continue to strengthen its dealer network and build brand loyalty
with both dealers and customers, although the Company’s efforts to do so during
2008 were adversely impacted by economic conditions affecting both Marine
Products and its dealer network.
As
part of Marine Products’ overall strategy, Marine Products will also consider
making strategic acquisitions in order to complement existing product lines,
expand its geographic presence in the marketplace and strengthen its
capabilities depending upon availability, price and complementary product
lines.
Competition
The
recreational boat industry is highly fragmented, resulting in intense
competition for customers, dealers and boat show exhibition space. There is
significant competition both within markets we currently serve and in new
markets that we may enter. Marine Products’ brands compete with several large
national or regional manufacturers that have substantial financial, marketing
and other resources. However, we believe that our corporate infrastructure and
marketing and sales capabilities, in addition to our cost structure and our
nationwide presence, enable us to compete effectively against these companies.
In each of our markets, Marine Products competes on the basis of responsiveness
to customer needs, the quality and range of models offered, and the competitive
pricing of those models. Additionally, Marine Products faces general competition
from all other recreational businesses seeking to attract consumers’ leisure
time and discretionary spending dollars.
According
to Statistical Surveys, Inc., the following is a list of the top ten (largest to
smallest) sterndrive boat manufacturers in the United States based on unit sales
between 2006 and 2008. Several of these manufacturers are part of larger
integrated boat building companies and are marked with asterisks. According to
Statistical Surveys, Inc., the companies set forth below represent approximately
76 percent of all United States retail sterndrive boat registrations for the
nine months ended September 30, 2008.
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|
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|
|
1.
|
|
Sea
Ray*
|
|
2.
|
|
Bayliner*
|
|
3.
|
|
Tahoe
|
|
4.
|
|
Chaparral
|
|
5.
|
|
Glastron
**
|
|
6.
|
|
Four
Winns **
|
|
7.
|
|
Crownline
|
|
8.
|
|
Cobalt
|
|
9.
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|
Stingray
|
|
10.
|
|
Larson**
|
The
outboard engine powered market has a large breadth and depth, accounting for
approximately 46 percent of all boats sold during 2008. Robalo’s share of the
outboard sport fishing boat market during the nine months ended September 30,
2008 was approximately two percent. Primary competitors for Robalo during 2008
included Sea-Pro (discontinued production as of July 2008) *, Grady-White, Key
West, Pro-Line, Trophy*, Boston Whaler* and Hydra Sports**.
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*
|
a
subsidiary of Brunswick Corporation
|
|
|
**
|
a
subsidiary of Genmar Holdings, Inc.
|
Environmental
and Regulatory Matters
Certain
materials used in boat manufacturing, including the resins used to make the
decks and hulls, are toxic, flammable, corrosive, or reactive and are classified
by the federal and state governments as “hazardous materials.” Control of these
substances is regulated by the Environmental Protection Agency (“EPA”) and state
pollution control agencies, which require reports and inspect facilities to
monitor compliance with their regulations. The Occupational Safety and Health
Administration (“OSHA”) standards limit the amount of emissions to which an
employee may be exposed without the need for respiratory protection or upgraded
plant ventilation. Marine Products’ manufacturing facilities are regularly
inspected by OSHA and by state and local inspection agencies and departments.
Marine Products believes that its facilities comply in all material aspects with
these regulations. Although capital expenditures related to compliance with
environmental laws are expected to increase during the coming years, we do not
currently anticipate that any material expenditure will be required to continue
to comply with existing environmental or safety regulations in connection with
our existing manufacturing facilities.
Recreational
powerboats sold in the United States must be manufactured to meet the standards
of certification required by the United States Coast Guard. In addition, boats
manufactured for sale in the European Community must be certified to meet the
European Community’s imported manufactured products standards. These
certifications specify standards for the design and construction of powerboats.
All boats sold by Marine Products meet these standards. In addition, safety of
recreational boats is subject to federal regulation under the Boat Safety Act of
1971. The Boat Safety Act requires boat manufacturers to recall products for
replacement of parts or components that have demonstrated defects affecting
safety. While Marine Products has instituted recalls for defective component
parts produced by other manufacturers, there has never been a safety related
recall resulting from Marine Products’ design or manufacturing process. None of
the recalls has had a material adverse effect on Marine Products.
The
California Air Resources Board (ARB) in 2007 adopted regulations stipulating
that many marine engines manufactured in 2008 or later meet an air emission
standard that requires fitting a catalytic converter to the engine. The
regulations apply to sterndrive and inboard gasoline engines of less than 500
horsepower, and in 2009 and later, to all sterndrive and inboard gasoline
engines. In addition, the California ARB standard prohibits the purchase of a
boat engine from outside the state of California for use within the state of
California, if such purchase is made to avoid this emission standard, and
requires certification by dealers that engines sold in California meet this
emission standard as well as documentation affixed to the engines that they meet
this standard. The majority of the engines used in Marine Products’ Chaparral
product line sold in California are subject to this regulation. This regulation
will increase the cost of boats subject to it. This cost increase may either
reduce Marine Products’ profitability, because the Company may have to absorb
the increased cost, or reduce Marine Products’ sales in the state of California,
because the increased cost of owning a boat may force consumers to buy a smaller
boat or forgo a boat purchase.
Employees
As
of December 31, 2008, Marine Products had approximately 400 employees (a
reduction from 1,100 at December 31, 2007), of whom six were management and 39
administrative. In response to the significant decline in consumer demand for
our products and lower production, the Company significantly reduced its work
force during 2008 in an effort to align costs with lower sales.
None
of Marine Products’ employees are party to a collective bargaining agreement.
Marine Products’ entire workforce is currently employed in the United States and
Marine Products believes that its relations with its employees are
good.
Proprietary
Matters
Marine
Products owns a number of trademarks, trade names and patents that it believes
are important to its business. Except for the Chaparral, Robalo and Wahoo!
trademarks, however, Marine Products is not dependent upon any single trademark
or trade name or group of trademarks or trade names. The Chaparral, Robalo and
Wahoo! trademarks are currently registered in the United States. The current
duration for such registration ranges from seven to 15 years but each
registration may be renewed an unlimited number of times.
Several
of Chaparral’s and Robalo’s designs are protected under the U.S. Copyright
Office’s Vessel Hull Design Protection Act. This law grants an owner of an
original vessel hull design certain exclusive rights. Protection is offered for
hull designs that are made available to the public for purchase provided that
the application is made within two years of the hull design being made public.
As of December 31, 2008, there were 22 Chaparral hull designs and four Robalo
hull designs registered under the Vessel Hull Design Protection
Act.
During
2008 Chaparral was granted a design patent on its Wide Tech™ hull design by
the U.S. Patent and Trademark Office. The patent has a term of 14 years, and
protects the Wide Tech™ hull currently
used on the Sunesta Wide Tech™ and Xtreme, 400
Premiere, and SSi Wide Tech™ from being used
by other pleasure boat manufacturers. Marine Products believes that this patent
is important to its business.
Seasonality
Marine
Products’ quarterly operating results are affected by weather and general
economic conditions. Quarterly operating results for the second quarter have
historically recorded the highest sales volume for the year because this
corresponds with the highest retail sales volume period. The results for any
quarter are not necessarily indicative of results to be expected in any future
period.
Inflation
During
2007 and the first and second quarters of 2008 the Company experienced an
increase in certain material and component costs. The Company responded to these
cost increases in the beginning of this period by instituting price increases to
its dealers for the 2008 model year which began on July 1, 2007. These price
increases did not fully absorb the increased material costs during 2007 and
therefore negatively impacted the Company’s gross margin. The Company did not
attempt to institute a similar price increase for the 2009 model year which
began on July 1, 2008, because of low dealer demand. During the third and fourth
quarters of 2008, prices of many of these commodities fell dramatically. In the
first part of 2009, the prices of some of these commodities have stabilized.
This fall in prices may lead to lower materials costs in 2009. However, no
assurance can be given that commodities prices will remain low, or at what
prices they can be purchased in the future. Also, given low retail consumer
demand for the Company’s products at the present time, no assurance can be given
that the Company will be able to institute price increases to its dealers in the
event that the prices of its raw materials and components increase in the
future.
New
boat buyers typically finance their purchases. Higher inflation typically
results in higher interest rates that could translate into an increased cost of
boat ownership. Prospective buyers may choose to forego or delay their purchases
or buy a less expensive boat in the event that interest rates rise.
Availability
of Filings
Marine
Products makes available free of charge on its website,
www.marineproductscorp.com, the annual report on Form 10-K, quarterly reports on
Form 10-Q, current reports on Form 8-K, and all amendments to those reports on
the same day as they are filed with the Securities and Exchange
Commission.
Item
1A. Risk Factors
Economic
Conditions, Unavailability of Credit and Consumer Confidence Levels Affect
Marine Products’ Sales Because Marine Products’ Products are Purchased with
Discretionary Income
During an economic recession or when an economic recession is perceived as a
threat, Marine Products will be adversely affected as consumers have less
discretionary income or are more apt to save their discretionary income rather
than spend it. During times of global political or economic uncertainty, Marine
Products will be negatively affected to the extent consumers forego or delay
large discretionary purchases pending the resolution of those uncertainties. The
current financial crisis may have long-term effects on consumer behavior with
regard to pleasure boating as well. Current and potential future lower returns
on financial assets may force consumers to delay retirement, or to choose more
modest lifestyles when they do retire. In such a case, consumers may not
purchase boats, may purchase boats later in their lives, or may purchase
smaller, less expensive boats. Tight lending and credit standards, such as those
currently in use by lenders in the United States, can make loans for boats
harder to secure, and such loans may carry unfavorable terms, which may force
consumers to forgo boat purchases. These factors have also resulted in the past,
and may continue to result in the future, in a reduction in the quality and
number of dealers upon which Marine Products relies to sell its
products.
Marine
Products Indirectly Relies upon Third-Party Dealer Floor Plan Lenders Which
Provide Financing to its Network of Independent Dealers
Marine
Products sells its products to a network of independent dealers, most of whom
rely on one or more third-party dealer floor plan lenders to provide financing
for their inventory prior to its sale to retail customers. In general, this
source of financing is vital to Marine Products’ ability to sell products to its
dealer network. During the credit crisis and financial market volatility in late
2008, one large dealer floor plan lender announced that it was ceasing its
lending operations, and another large dealer floor plan lender became very
concerned about dealer inventory levels and dealer defaults on floor plan loans.
These factors may reduce the availability of floor plan loans to our dealers,
increase the cost of financing, or change the limits under which Marine Products
or its subsidiaries are required to repurchase inventory in the event of a
dealer default. Any of these developments would negatively impact Marine
Products sales and profitability.
Interest
Rates and Fuel Prices Affect Marine Products’ Sales
The
Company’s products are often financed by our dealers and the retail boat
consumers. Higher interest rates increase the borrowing costs and, accordingly,
the cost of doing business for dealers and the cost of boat purchases for
consumers. Fuel costs can represent a large portion of the costs to operate our
products. Therefore, higher interest rates and fuel costs can adversely affect
consumers’ decisions relating to recreational boating purchases.
Marine
Products’ Dependence on its Network of Independent Boat Dealers may Affect its
Operating Results and Sales
Virtually
all of Marine Products’ sales are derived from its network of independent boat
dealers. Marine Products has no long-term agreements with these dealers.
Competition for dealers among recreational powerboat manufacturers continues to
increase based on the quality of available products, the price and value of the
products, and attention to customer service. The Company faces intense
competition from other recreational powerboat manufacturers in attracting and
retaining independent boat dealers. The number of independent boat dealers
supporting the Chaparral and Robalo trade names and the quality of their
marketing and servicing efforts are essential to Marine Products’ ability to
generate sales. A deterioration in the number or quality of Marine Products’
network of independent boat dealers which occurred during 2008, has had and
could continue to have a material adverse effect on its boat sales. Marine
Products’ inability to attract new dealers and retain those dealers, or its
inability to increase sales with existing dealers, could substantially impair
its ability to execute its business plans.
Although
Marine Products’ management believes that the quality of its products and
services in the recreational boating market should permit it to maintain its
relationship with its dealers and its market position, there can be no assurance
that Marine Products will be able to sustain its current sales levels. In
addition, independent dealers in the recreational boating industry have
experienced significant consolidation in recent years, which could result in the
loss of one or more of Marine Products’ dealers in the future if the surviving
entity in any such consolidation purchases similar products from a Marine
Products competitor. During 2008, some boat dealers included within the Marine
Products’ dealer network ceased operations and this trend may continue given the
current adverse business environment in which boat dealers operate. See
“Business Strategies” above.
Marine
Products’ Financial Condition and Operating Results may be Adversely Affected by
Boat Dealer Defaults
The
Company’s products are sold through dealers and the financial health of these
dealers is critical to the Company’s continued success. The Company’s results
can be negatively affected if a dealer defaults because Marine Products or its
subsidiaries are required to repurchase inventory up to certain limits in the
event of a dealer default.
Marine Products’ Ability to Adjust
its Business Operations to Compensate for Reduced Sales of Boats may be
Restricted in the Future.
During
2008 Marine Products idled certain production facilities and reduced its number
of employees to offset the impact that reduced net sales has on the Company’s
operating results and cash flows. As the Company reduces its production, the
Company experiences lower rates of absorption of its fixed costs and thus
experiences lower profit margins. In addition, the Company’s ability to reduce
its fixed costs is limited. A prolonged downturn in the Company’s sale of
boats may have a larger adverse effect on Marine Products in future periods than
occurred in 2008.
Marine
Products’ Sales are Affected by Weather Conditions
Marine
Products’ business is subject to weather patterns that may adversely affect its
sales. For example, drought conditions, or merely reduced rainfall levels, or
excessive rain, may close area boating locations or render boating dangerous or
inconvenient, thereby curtailing customer demand for our products. In addition,
unseasonably cool weather and prolonged winter conditions may lead to a shorter
selling season in some locations. Hurricanes and other storms could cause
disruptions of our operations or damage to our boat inventories and docking
facilities.
Marine
Products Encounters Intense Competition Which Affects our Sales and
Profits
The
recreational boat industry is highly fragmented, resulting in intense
competition for customers, dealers and boat show exhibition space. This
competition affects both the markets which we currently serve and new markets
that we may enter in the future. We compete with several large national or
regional manufacturers that have substantial financial, marketing and other
resources. Competitive manufacturers have executed a strategy of constructing
entry-level smaller boats which are constructed in off-shore manufacturing
plants with lower labor costs. These competitive conditions have contributed to
our inability to pass along our increased manufacturing costs to customers,
reduced our market share in various selling categories including particularly
smaller boats, and negatively impacted our profit margins.
Marine
Products has Potential Liability for Personal Injury and Property Damage
Claims
The
products we sell or service may expose Marine Products to potential liabilities
for personal injury or property damage claims relating to the use of those
products. Historically, the resolution of product liability claims has not
materially affected Marine Products’ business. Marine Products maintains product
liability insurance that it believes to be adequate. However, there can be no
assurance that Marine Products will not experience legal claims in excess of its
insurance coverage or that claims will be covered by insurance. Furthermore, any
significant claims against Marine Products could result in negative publicity,
which could cause Marine Products’ sales to decline.
Because
Marine Products Relies on Third-party Suppliers, Marine Products may be Unable
to Obtain Adequate Raw Materials and Components
Marine
Products is dependent on third-party suppliers to provide raw materials and
components essential to the construction of its various powerboats. Especially
critical are the availability and cost of marine engines and commodity raw
materials used in the manufacture of Marine Products’ boats. While Marine
Products’ management believes that supplier relationships currently in place are
sufficient to provide the materials necessary to meet present production
demands, there can be no assurance that these relationships will continue, that
these suppliers will remain in operation given the extended business downturn in
the recreational boating industry or that the quantity or quality of materials
available from these suppliers will be sufficient to meet Marine Products’
future needs. Disruptions in current supplier relationships or the inability of
Marine Products to continue to purchase construction materials in sufficient
quantities and of sufficient quality at acceptable prices to meet ongoing
production schedules could cause a decrease in sales or a sharp increase in the
cost of goods sold. Additionally, because of this dependence, the volatility in
commodity raw materials or current or future price increases in construction
materials or the inability of Marine Products’ management to purchase
construction materials required to complete its growth and acquisition
strategies could cause a reduction in Marine Products’ profit margins or reduce
the number of powerboats Marine Products may be able to produce for
sale.
Marine
Products may be Unable to Identify, Complete or Successfully Integrate
Acquisitions
Marine
Products intends to pursue acquisitions and form strategic alliances that will
enable Marine Products to acquire complementary skills and capabilities, offer
new products, expand its customer base, and obtain other competitive advantages.
There can be no assurance, however, that Marine Products will be able to
successfully identify suitable acquisition candidates or strategic partners,
obtain financing on satisfactory terms, complete acquisitions or strategic
alliances, integrate acquired operations into its existing operations, or expand
into new markets. Once integrated, acquired operations may not achieve
anticipated levels of sales or profitability, or otherwise perform as expected.
Acquisitions also involve special risks, including risks associated with
unanticipated problems, liabilities and contingencies, diversion of management
resources, and possible adverse effects on earnings and earnings per share
resulting from increased interest costs, the issuance of additional securities,
and difficulties related to the integration of the acquired business. The
failure to integrate acquisitions successfully may divert management’s attention
from Marine Products’ existing operations and may damage Marine Products’
relationships with its key customers and suppliers.
Marine
Products’ Success will Depend on its key Personnel, and the Loss of any key
Personnel may Affect its Powerboat Sales
Marine
Products’ success will depend to a significant extent on the continued service
of key management personnel. The loss or interruption of the services of any
senior management personnel or the inability to attract and retain other
qualified management, sales, marketing and technical employees could disrupt
Marine Products’ operations and cause a decrease in its sales and profit
margins.
Marine
Products’ Ability to Attract and Retain Qualified Employees is Crucial to its
Results of Operations and Future Growth
Marine
Products relies on the existence of an available hourly workforce to manufacture
its products. As with many businesses, we are challenged at times to find
qualified employees. There are no assurances that Marine Products will be able
to attract and retain qualified employees to meet current and/or future growth
needs.
If
Marine Products is Unable to Comply with Environmental and Other Regulatory
Requirements, its Business may be Exposed to Liability and Fines
Marine
Products’ operations are subject to extensive regulation, supervision, and
licensing under various federal, state, and local statutes, ordinances, and
regulations. While Marine Products believes that it maintains all requisite
licenses and permits and is in compliance with all applicable federal, state and
local regulations, there can be no assurance that Marine Products will be able
to continue to maintain all requisite licenses and permits and comply with
applicable laws and regulations. The failure to satisfy these and other
regulatory requirements could cause Marine Products to incur fines or penalties
or could increase the cost of operations. The adoption of additional laws, rules
and regulations could also increase Marine Products’ costs.
California
recently adopted regulations setting emission standards affecting boat engines
sold or, under certain circumstances, used in California. This regulation will
increase the cost of boats subject to the regulation, which may either reduce
the Company’s profitability or reduce sales. Emission standards of this type may
be implemented nationwide by 2010.
As
with boat construction in general, our manufacturing processes involve the use,
handling, storage and contracting for recycling or disposal of hazardous or
toxic substances or wastes. Accordingly, we are subject to regulations regarding
these substances, and the misuse or mishandling of such substances could expose
Marine Products to liability or fines.
Additionally,
certain states have required or are considering requiring a license in order to
operate a recreational boat. While such licensing requirements are not expected
to be unduly restrictive, regulations may discourage potential first-time
buyers, thereby reducing future sales.
Marine
Products’ Stock Price has been Volatile
Historically,
the market price of common stock of companies engaged in the discretionary
consumer products industry has been highly volatile. Likewise, the market price
of our common stock has varied significantly in the past. In addition, the
availability of Marine Products common stock to the investing public is limited
to the extent that shares are not sold by the executive officers, directors and
their affiliates, which could negatively impact the trading price of Marine
Products’ common stock, increase volatility and affect the ability of minority
stockholders to sell their shares. Future sales by executive officers, directors
and their affiliates of all or a substantial portion of their shares could also
negatively affect the trading price of Marine Products’ common
stock.
Marine
Products’ Reduction of its Dividends Payable on Common Shares may Reduce the
Return on Investment in Marine Products’ Stock
In
January 2009, the Company reduced its cash dividend per common share from an
annual rate of $0.26 per share to $0.04 per share, and the Company may in the
future further reduce its dividend. The reduced dividend rate may adversely
affect the stockholders’ return on investment in the Company’s
shares.
Marine
Products’ Management has a Substantial Ownership Interest; Public Stockholders
may have no Effective Voice in Marine Products’ Management
The
Company has elected the “Controlled Corporation” exemption under Rule 303A of
the New York Stock Exchange (“NYSE”) Company Guide. The Company is a “Controlled
Corporation” because a group that includes the Company’s Chairman of the Board,
R. Randall Rollins and his brother, Gary W. Rollins, who is also a director of
the Company, and certain companies under their control, controls in excess of
fifty percent of the Company’s voting power. As a “Controlled Corporation,” the
Company need not comply with certain NYSE rules including those requiring a
majority of independent directors.
Marine
Products’ executive officers, directors and their affiliates hold directly or
through indirect beneficial ownership, in the aggregate, approximately 73
percent of Marine Products’ outstanding shares of common stock. As a result,
these stockholders effectively control the operations of Marine Products,
including the election of directors and approval of significant corporate
transactions such as acquisitions. This concentration of ownership could also
have the effect of delaying or preventing a third-party from acquiring control
of Marine Products at a premium.
Provisions
in Marine Products’ Certificate of Incorporation and Bylaws may Inhibit a
Takeover of Marine Products
Marine
Products’ certificate of incorporation, bylaws and other documents contain
provisions including advance notice requirements for shareholder proposals and
staggered terms of office for the Board of Directors. These provisions may make
a tender offer, change in control or takeover attempt that is opposed by Marine
Products’ Board of Directors more difficult or expensive.
The
Insurance Companies that Insure a Number of Marine Products’ Marketable
Securities have been Downgraded, Which may Cause Volatility in the Market Prices
of our Marketable Securities
Marine
Products maintains a diversified portfolio of investment-grade municipal debt
securities managed by a large, well-capitalized financial institution. A number
of these securities are insured by large insurance companies. The credit ratings
of these insurance companies have been downgraded over the past several years,
which prompted rating agencies to downgrade the ratings of many of these
securities, although all of these securities still have credit ratings that are
within our investment policy guidelines. However, this uncertainty and these
credit rating downgrades increase the volatility of the market prices of these
marketable securities. The market prices of these securities may continue to be
volatile during periods of uncertainty in the bond insurance
industry.
Item 1B. Unresolved Staff
Comments
None.
Item
2. Properties
Marine
Products’ corporate offices are located in Atlanta, Georgia. These offices are
currently shared with RPC and are leased. The monthly rent paid is allocated
between Marine Products and RPC. Under this arrangement, Marine Products pays
approximately $2,060 per month in rent. Marine Products may cancel this
arrangement at any time after giving a 30 day notice.
Chaparral
owns and maintains approximately 1,011,000 square feet of space utilized for
manufacturing, research and development, warehouse, and sales office and
operations in Nashville, Georgia. In addition, the Company leases 83,000 square
feet of manufacturing space at the Robalo facility in Valdosta, Georgia, under a
long-term arrangement expiring in 2014. During the fourth quarter of 2008, the
Robalo facility was temporarily idled and production of these boats were
moved to the Nashville facility. There are no plans or current intentions to
dispose of the facilities in Valdosta, Georgia. The Company also leases 111,000
square feet of warehouse space in Nashville, Georgia under a long-term
arrangement expiring in 2018. Marine Products’ total square footage under roof
is allocated as follows: manufacturing — 712,000, research and development —
67,200, warehousing — 294,500, office and other — 131,400.
Item
3. Legal Proceedings
Marine
Products is involved in litigation from time to time in the ordinary course of
its business. Marine Products does not believe that the ultimate outcome of such
litigation will have a material adverse effect on its liquidity, financial
condition or results of operations.
Item
4. Submission of Matters to a Vote of Security Holders
There
were no matters submitted to a vote of security holders during the fourth
quarter of 2008.
Item
4A. Executive Officers of the Registrant
Each
of the executive officers of Marine Products was elected by the Board of
Directors to serve until the Board of Directors’ meeting immediately following
the next annual meeting of stockholders or until his or her earlier removal by
the Board of Directors or his or her resignation. The following table lists the
executive officers of Marine Products and their ages, offices, and date first
elected to office.
|
|
|
|
|
|
|
|
Name
and Office with Registrant
|
|
Age
|
|
Date
First Elected
to
Present Office
|
|
R.
Randall Rollins (1)
|
|
|
77
|
|
|
2/28/01
|
|
Chairman
of the Board
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard
A. Hubbell (2)
|
|
|
64
|
|
|
2/28/01
|
|
President
and Chief Executive Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James
A. Lane, Jr. (3)
|
|
|
66
|
|
|
2/28/01
|
|
Executive
Vice President and President of Chaparral Boats, Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Linda
H. Graham (4)
|
|
|
72
|
|
|
2/28/01
|
|
Vice
President and Secretary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ben
M. Palmer (5)
|
|
|
48
|
|
|
2/28/01
|
|
Vice
President, Chief Financial Officer and Treasurer
|
|
|
|
|
|
|
|
(1)
|
R.
Randall Rollins began working for Rollins, Inc. (consumer services) in
1949. At the time of the spin-off of RPC from Rollins, in 1984, Mr.
Rollins was elected Chairman of the Board and Chief Executive Officer of
RPC. He remains Chairman of RPC and stepped down from the position of
Chief Executive Officer effective April 22, 2003. He has served as
Chairman of the Board of Marine Products since February 2001 and Chairman
of the Board of Rollins, Inc. since October 1991. He is also a director of
Dover Downs Gaming and Entertainment, Inc. and Dover Motorsports,
Inc.
|
|
|
(2)
|
Richard
A. Hubbell has been the President and Chief Executive Officer of Marine
Products since it was spun off in February 2001. He has also been the
President of RPC since 1987 and its Chief Executive Officer since April
22, 2003. Mr. Hubbell serves on the Board of Directors for both of these
companies.
|
|
|
(3)
|
James
A. Lane, Jr., has held the position of President of Chaparral Boats
(formerly a subsidiary of RPC) since 1976. Mr. Lane has been Executive
Vice President and Director of Marine Products since it was spun off in
2001. He is also a director of RPC and has served in that capacity since
1987.
|
|
|
(4)
|
Linda
H. Graham has been Vice President and Secretary of Marine Products since
it was spun off in 2001, and Vice President and Secretary of RPC since
1987. Ms. Graham serves on the Board of Directors for both of these
companies.
|
|
|
(5)
|
Ben
M. Palmer has been Vice President, Chief Financial Officer and Treasurer
of Marine Products since it was spun off in 2001 and has served the same
roles at RPC since 1996.
|
PART
II
Item
5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
Marine
Products’ common stock is listed for trading on the New York Stock Exchange
under the symbol “MPX.” At February 13, 2009, there were 36,902,490 shares of
common stock outstanding.
At
the close of business on February 13, 2009, there were approximately 2,600
holders of record of the Company’s common stock. The high and low prices of
Marine Products’ common stock and dividends paid for each quarter in the years
ended December 31, 2008 and 2007 were as follows:
|
|
2008
|
|
|
2007
|
|
Quarter
|
|
High
|
|
|
Low
|
|
|
Dividends
|
|
|
High
|
|
|
Low
|
|
|
Dividends
|
|
First
|
|
$ |
9.23 |
|
|
$ |
6.49 |
|
|
$ |
0.065 |
|
|
$ |
11.89 |
|
|
$ |
9.10 |
|
|
$ |
0.06 |
|
Second
|
|
|
8.53 |
|
|
|
6.56 |
|
|
|
0.065 |
|
|
|
9.79 |
|
|
|
7.68 |
|
|
|
0.06 |
|
Third
|
|
|
9.75 |
|
|
|
6.05 |
|
|
|
0.065 |
|
|
|
9.62 |
|
|
|
7.96 |
|
|
|
0.06 |
|
Fourth
|
|
|
8.65 |
|
|
|
3.58 |
|
|
|
0.065 |
|
|
|
9.13 |
|
|
|
6.45 |
|
|
|
0.06 |
|
At
the January 27, 2009 Board of Directors’ Meeting, the Board approved a decrease
in the quarterly cash dividend per common share from $0.065 to $0.01. The
Company expects to continue to pay cash dividends to common stockholders,
subject to the earnings and financial condition of the Company and other
relevant factors.
Issuer
Purchases of Equity Securities
In
accordance with actions by the Company’s Board of Directors, an aggregate of
8,850,000 shares have been authorized for repurchase in connection with a stock
buy back program announced in 2001, and subsequent increases to this program
announced in 2005 and January 2008. These programs do not have predetermined
expiration dates. A total of 4,925,157 shares have been repurchased in the open
market under these programs as of December 31, 2008, including 76,500 shares
during 2008. There were no shares repurchased during the fourth quarter of 2008.
As of December 31, 2008, a total of 3,324,843 shares remain available for
repurchase under these programs.
Performance
Graph
The
following graph shows a five-year comparison of the cumulative total stockholder
return based on the performance of the stock of the Company, assuming dividend
reinvestment, as compared with both a broad equity market index and an industry
or peer group index. The indices included in the following graph are the Russell
2000 Index (“Russell 2000”) and a peer group which includes companies that are
considered peers of the Company (“Peer Group”). The companies included in the
peer group have been weighted according to each respective issuer’s stock market
capitalization at the beginning of each year. The companies are Brunswick
Corporation and MarineMax, Inc.
The
Russell 2000 is used because the Company became a component of the Russell 2000
in 2004, and because the Russell 2000 is a stock index representing small
capitalization U.S. stocks. During 2008 the components of the Russell 2000 had
an average market capitalization of $887 million.
The
graph below assumes the value of $100.00 invested on December 31,
2003.
Item
6. Selected Financial Data
The
following table summarizes certain selected financial data of Marine Products.
The historical information may not be indicative of Marine Products’ future
results of operations. The information set forth below should be read in
conjunction with “Management’s Discussion and Analysis of Financial Condition
and Results of Operations” and the Consolidated Financial Statements and the
notes thereto included elsewhere in this document.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years
Ended December 31,
|
|
|
|
(In
thousands, except share, per share and employee data)
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
Statement
of Income Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
sales
|
|
$ |
175,622 |
|
|
$ |
244,273 |
|
|
$ |
261,378 |
|
|
$ |
272,057 |
|
|
$ |
252,418 |
|
Cost
of goods sold
|
|
|
143,677 |
|
|
|
191,810 |
|
|
|
201,971 |
|
|
|
202,936 |
|
|
|
186,832 |
|
Gross
profit
|
|
|
31,945 |
|
|
|
52,463 |
|
|
|
59,407 |
|
|
|
69,121 |
|
|
|
65,586 |
|
Selling,
general and administrative expenses
|
|
|
23,146 |
|
|
|
30,228 |
|
|
|
32,474 |
|
|
|
33,557 |
|
|
|
29,810 |
|
Operating
income
|
|
|
8,799 |
|
|
|
22,235 |
|
|
|
26,933 |
|
|
|
35,564 |
|
|
|
35,776 |
|
Interest
income
|
|
|
2,420 |
|
|
|
2,590 |
|
|
|
2,502 |
|
|
|
1,330 |
|
|
|
590 |
|
Income
before income taxes
|
|
|
11,219 |
|
|
|
24,825 |
|
|
|
29,435 |
|
|
|
36,894 |
|
|
|
36,366 |
|
Income
tax provision
|
|
|
3,633 |
|
|
|
8,402 |
|
|
|
9,121 |
|
|
|
10,671 |
|
|
|
12,623 |
|
Net
income
|
|
$ |
7,586 |
|
|
$ |
16,423 |
|
|
$ |
20,314 |
|
|
$ |
26,223 |
|
|
$ |
23,743 |
|
Earnings
per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$ |
0.21 |
|
|
$ |
0.44 |
|
|
$ |
0.54 |
|
|
$ |
0.69 |
|
|
$ |
0.62 |
|
Diluted
|
|
$ |
0.21 |
|
|
$ |
0.43 |
|
|
$ |
0.52 |
|
|
$ |
0.65 |
|
|
$ |
0.58 |
|
Dividends
paid per share
|
|
$ |
0.26 |
|
|
$ |
0.24 |
|
|
$ |
0.20 |
|
|
$ |
0.16 |
|
|
$ |
0.11 |
|
Other
Financial and Operating Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
profit margin percent
|
|
|
18.2
|
% |
|
|
21.5
|
% |
|
|
22.7
|
% |
|
|
25.4
|
% |
|
|
26.0
|
% |
Operating
margin percent
|
|
|
5.0
|
% |
|
|
9.1
|
% |
|
|
10.3
|
% |
|
|
13.1
|
% |
|
|
14.2
|
% |
Net
cash provided by operating activities
|
|
$ |
14,045 |
|
|
$ |
16,431 |
|
|
$ |
23,997 |
|
|
$ |
19,366 |
|
|
$ |
29,405 |
|
Net
cash (used for) provided by investing activities
|
|
|
(2,255
|
) |
|
|
(41,391
|
) |
|
|
1,351 |
|
|
|
(2,023
|
) |
|
|
(1,924
|
) |
Net
cash used for financing activities
|
|
|
(10,401
|
) |
|
|
(26,263
|
) |
|
|
(8,494
|
) |
|
|
(26,356
|
) |
|
|
(7,110
|
) |
Capital
expenditures
|
|
$ |
329 |
|
|
$ |
1,263 |
|
|
$ |
1,667 |
|
|
$ |
1,118 |
|
|
$ |
2,838 |
|
Employees
at end of year
|
|
|
441 |
|
|
|
1,073 |
|
|
|
1,089 |
|
|
|
1,065 |
|
|
|
1,187 |
|
Factory
and administrative space at end of year (square ft.)
|
|
|
1,205 |
|
|
|
1,205 |
|
|
|
1,149 |
|
|
|
1,149 |
|
|
|
1,146 |
|
Balance
Sheet Data at end of year:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$ |
4,622 |
|
|
$ |
3,233 |
|
|
$ |
54,456 |
|
|
$ |
37,602 |
|
|
$ |
46,615 |
|
Marketable
securities — current
|
|
|
8,799 |
|
|
|
8,870 |
|
|
|
652 |
|
|
|
1,323 |
|
|
|
132 |
|
Marketable
securities — non-current
|
|
|
37,953 |
|
|
|
36,087 |
|
|
|
3,715 |
|
|
|
5,893 |
|
|
|
6,202 |
|
Inventories
|
|
|
22,453 |
|
|
|
33,159 |
|
|
|
29,556 |
|
|
|
26,856 |
|
|
|
25,869 |
|
Working
capital
|
|
|
32,992 |
|
|
|
36,113 |
|
|
|
76,506 |
|
|
|
61,341 |
|
|
|
61,989 |
|
Property,
plant and equipment, net
|
|
|
14,579 |
|
|
|
15,944 |
|
|
|
16,641 |
|
|
|
17,252 |
|
|
|
18,362 |
|
Total
assets
|
|
|
110,293 |
|
|
|
118,726 |
|
|
|
124,179 |
|
|
|
108,805 |
|
|
|
109,734 |
|
Total
stockholders’ equity
|
|
$ |
90,789 |
|
|
$ |
93,757 |
|
|
$ |
101,401 |
|
|
$ |
87,688 |
|
|
$ |
87,372 |
|
Item
7. Management’s Discussion and Analysis of Financial Condition and Results of
Operations
The
following discussion is based upon and should be read in conjunction with
“Selected Financial Data” and “Financial Statements and Supplementary Data.” See
also “Forward-Looking Statements” on page 2.
Overview
Marine
Products, through our wholly-owned subsidiaries Chaparral and Robalo, is a
leading manufacturer of recreational fiberglass powerboats. Our sales and
profits are generated by selling the products that we manufacture to a network
of independent dealers who in turn sell the products to retail customers. These
dealers are located throughout the continental United States and in several
international markets. Most of these dealers finance their inventory through
third-party floor plan lenders, who pay Marine Products upon delivery of the
products to the dealers.
We
manage our Company by focusing on the execution of the following business and
financial strategies:
|
|
|
|
●
|
Manufacturing
high-quality, stylish, and innovative powerboats for our dealers and
retail customers,
|
|
|
|
|
●
|
Providing
our independent dealer network appropriate incentives, training, and other
support to enhance their success and their customers’ satisfaction,
thereby facilitating their continued relationship with
us,
|
|
|
|
|
●
|
Managing
our production and dealer order backlog to optimize operating results and
reduce risk in the event of a further downturn in sales of our
products,
|
|
|
|
|
●
|
Maintaining
a flexible, variable cost structure which can be reduced quickly when
deemed appropriate,
|
|
|
|
|
●
|
Focusing
on the competitive nature of the boating business and designing our
products and strategies in order to grow and maintain profitable market
share,
|
|
|
|
|
●
|
Monitoring
the activities and financial condition of the third-party floor plan
lenders who finance our dealers’ inventories and of our
dealers,
|
|
|
|
|
●
|
Maximizing
shareholder return by optimizing the balance of cash invested in the
Company’s productive assets, the payment of dividends to shareholders, and
the repurchase of the Company’s common stock on the open market,
and
|
|
|
|
|
●
|
Aligning
the interests of our management and
shareholders.
|
In
implementing these strategies and attempting to optimize our financial returns,
management closely monitors dealer orders and inventories, the production mix of
various models, and indications of near term demand such as consumer confidence,
interest rates, dealer orders placed at our annual dealer conferences, and
retail attendance and orders at annual winter boat show exhibitions. We also
consider trends related to certain key financial and other data, including our
market share, unit sales of our products, average selling price per boat, and
gross profit margins, among others, as indicators of the success of our
strategies. Marine Products’ financial results are affected by consumer
confidence — because pleasure boating is a discretionary expenditure, interest
rates — because many retail customers finance the purchase of their boats, and
other socioeconomic and environmental factors such as availability of leisure
time, consumer preferences, demographics and the weather.
During
2008, the industry continued the trend of lower wholesale and retail sales that
began in the fourth quarter of 2005. High fuel prices and the problems in the
residential mortgage market which came to light in 2007 continue to impact both
consumer confidence as a whole, as well as consumer spending decisions in
popular boating areas such as Florida and Southern California. In addition, the
financial crisis which intensified in late 2008 reduced the availability of
floor plan credit for our dealers, which in turn reduced their capacity to
accept deliveries of new products from us. The Company does not believe that
there are any near-term catalysts which will improve the retail selling
environment for our products, and as a result, we have continued to reduce
production in order to manage dealer inventory levels. These factors, along with
order cancellations resulting from a continued weak retail selling environment
and the repurchase obligations resulting from dealer defaults during the fourth
quarter, have required us to consolidate several plants in the fourth quarter,
reduce production further from third quarter 2008 levels, and undertake
additional workforce reductions. In addition, the weak selling environment and
dealer inventory levels may require us to implement additional sales incentive
programs designed to sell inventory and to further reduce production levels.
Management will continue to monitor the risk of additional dealer defaults and
resulting repurchase obligations.
We
monitor our market share in the 18 to 35 foot sterndrive category as one
indicator of the success of our strategies and the market’s acceptance of our
products. For the nine months ended September 30, 2008 (latest data available to
us), Chaparral’s market share in the 18 to 35 foot sterndrive category was 7.5
percent, an increase from our market share in the same category for the twelve
months ended December 31, 2007 of 7.2 percent. This increase was concentrated in
the larger 21 to 35 foot size boats in our market. We believe this was the
result of two factors: the execution of our stated strategy of selling larger,
more profitable boats, and the strategy of certain of our competitors, who have
built and sold a large number of entry-level smaller boats which are constructed
in offshore manufacturing plants with lower cost labor. Although we will
continue to monitor our market share and believe it to be important, we also
believe that maximizing profitability takes precedence over growing our market
share.
Outlook
Management
believes that net sales and profits in 2009 will decline compared to 2008. This
belief is based on lower attendance levels and sales during the first part of
the 2009 winter boat show season compared to the same period in 2008, as well as
the status of dealer inventories and backlog as of the end of 2008. In addition,
management believes that consumers continue to be concerned with the weak global
economy. The financial crisis, which intensified in the second half of 2008, has
also reduced the availability of credit from third-party floor plan lenders who
provide inventory financing to the vast majority of our dealers. Also, the
prolonged drought in several of Marine Products’ major Southeastern markets has
reduced or eliminated recreational boaters’ access to docks and boat ramps, and
has made certain waterways unusable. Boat show attendance has historically been
positively correlated with retail boat sales later in the selling season because
consumers attend shows due to their interest in recreational boating and make
initial purchasing decisions at a boat show exhibition. However, there can be no
assurance that this relationship will continue in 2009 or subsequent years.
Pleasure boating is a discretionary consumer activity, and can be negatively
impacted by many factors; therefore, an increase in interest rates, a decline in
the availability of consumer credit, high fuel costs, and further declines in
consumer confidence could have an additional negative impact on net sales and
profits. The current financial crisis may have long-term effects on consumer
behavior with regard to pleasure boating as well. Current and potential future
lower returns on financial assets may force consumers to delay retirement, or to
choose more modest lifestyles when they do retire. In such a case, consumers may
not purchase boats, may purchase boats later in their lives, or may purchase
smaller, less expensive boats. Over the past several years, Marine Products as
well as other manufacturers have been improving their customer service
capabilities, marketing strategies and sales promotions in order to attract more
consumers to recreational boating as well as improve consumers’ boating
experiences. In addition, the recreational boating industry began a promotional
program several years ago which involves advertising and consumer targeting
efforts, as well as other activities designed to increase the potential consumer
market for pleasure boats. Many manufacturers, including Marine Products, are
participating in this program. Management believes that these efforts will
benefit the industry and Marine Products. As in past years, Marine Products
enhanced the design of a number of its product lines for the 2009 model year
which began on July 1, 2008. Also for this model year, Chaparral introduced a
42-foot sport yacht. This model, as well as one of the redesigned product lines
from the 2008 model year, received important industry recognitions during 2008.
The success of these products should enhance Marine Products sales and operating
results in future years. Management believes that both the boating industry
promotional advertising program and the Company’s new boat models will benefit
Marine Products, although the industry is projected to remain in a deep downturn
throughout 2009.
Our
financial results in 2009 will depend on a number of factors, including interest
rates, consumer confidence, the availability of credit to our dealers and
consumers, fuel costs, the continued acceptance of our new products in the
recreational boating market, our ability to compete in the competitive pleasure
boating industry, and the costs of certain of our raw materials. We anticipate
that the Company will continue to experience the effect of reduced consumer
demand for at least the remainder of 2009, which will adversely affect net
sales, net income, operating margins and cash flows.
Results
of Operations
|
|
|
|
|
|
|
|
|
|
|
|
Years
ended December 31,
|
|
($’s
in thousands)
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
Total
number of boats sold
|
|
|
3,590 |
|
|
|
5,444 |
|
|
|
6,245 |
|
Average
gross selling price per boat
|
|
$ |
46.6 |
|
|
$ |
43.4 |
|
|
$ |
41.1 |
|
Net
sales
|
|
$ |
175,622 |
|
|
$ |
244,273 |
|
|
$ |
261,378 |
|
Percentage
of gross profit to net sales
|
|
|
18.2
|
% |
|
|
21.5
|
% |
|
|
22.7
|
% |
Percentage
of selling, general and administrative expense to net
sales
|
|
|
13.2
|
% |
|
|
12.4
|
% |
|
|
12.4
|
% |
Operating
income
|
|
$ |
8,799 |
|
|
$ |
22,235 |
|
|
$ |
26,933 |
|
Warranty
expense
|
|
$ |
3,191 |
|
|
$ |
4,958 |
|
|
$ |
6,714 |
|
Year
Ended December 31, 2008 Compared To Year Ended December 31, 2007
Net
Sales. Marine Products’ net sales decreased by $68.7 million or 28.1
percent in 2008 compared to 2007. The decrease was primarily due to a 34.1
percent decrease in the number of boats sold, partially offset by a 7.4 percent
increase in the average gross selling price per boat. The increase in average
gross selling price per boat was due primarily to relatively higher sales of the
redesigned Sunesta product line, which also carried higher average selling
prices. Also contributing to the increase were sales of Chaparral’s new Premiere
400 Sport Yacht during the fourth quarter of 2008.
Cost
of Goods Sold. Cost of goods sold decreased 25.1 percent in 2008 compared
to 2007, less than the decrease in net sales. As a percentage of net sales, cost
of goods sold increased in 2008 compared to 2007, primarily due to cost
inefficiencies resulting from lower production volumes and to a lesser extent
higher dealer discounts and retail incentives.
Selling,
General and Administrative Expenses. Selling, general and administrative
expenses decreased 23.4 percent in 2008 compared to 2007 as a result of costs,
including incentive compensation and warranty expense, that vary with the level
of Company sales and profitability. Warranty expense decreased in 2008 due to
lower sales. Warranty expense was 1.8 percent of net sales in 2008 and 2.0
percent of net sales in 2007. These decreases were offset by costs totaling $0.5
million associated with the repurchase of dealer inventory in accordance with
agreements with third-party floor plan lenders.
Interest
Income. Interest income was $2.4 million in 2008 compared to $2.6 million
in 2007. Marine Products generates interest income primarily from investments in
tax-exempt municipal obligations.
Income
Tax Provision. The effective tax rate in 2008 was 32.4 percent compared
to 33.8 percent in 2007
Year
Ended December 31, 2007 Compared To Year Ended December 31, 2006
Net
Sales. Marine Products’ net sales decreased by $17.1 million or 6.5
percent in 2007 compared to 2006. The decrease was primarily due to a 12.8
percent decrease in the number of boats sold, partially offset by a 5.6 percent
increase in the average gross selling price per boat. The increase in average
gross selling price per boat was due to higher sales of larger boats, in
addition to overall price increases that were implemented for the 2008 model
year, which began in the third quarter of 2007.
Cost
of Goods Sold. Cost of goods sold decreased 5.0 percent in 2007 compared
to 2006, less than the decrease in net sales. As a percentage of net sales, cost
of goods sold increased in 2007 compared to 2006, primarily due to higher costs
of certain raw materials and accessories.
Selling,
General and Administrative Expenses. Selling, general and administrative
expenses decreased 6.9 percent in 2007 compared to 2006 as a result of costs
that vary with the level of Company sales and profitability. Warranty expense
decreased in 2007 due to lower sales and adjustments made in 2006 that did not
reoccur in 2007. Warranty expense was 2.0 percent of net sales in 2007 and 2.6
percent of net sales in 2006.
Interest
Income. Interest income was $2.6 million in 2007 compared to $2.5 million
in 2006. Marine Products generates interest income primarily from investments in
tax-exempt municipal obligations.
Income
Tax Provision. The higher effective tax rate in 2007 of 33.8 percent
compared to 30.9 percent in 2006 resulted from the one time effect of 2005
amended return refunds and tax contingency releases in 2006, as compared to
statutorily eliminated foreign trade benefits and reduced research and
developments benefits in 2007.
Liquidity
and Capital Resources
Cash
and Cash Flows
The
Company’s cash and cash equivalents were $4.6 million at December 31, 2008, $3.2
million at December 31, 2007, and $54.5 million at December 31, 2006. In
addition, the aggregate of short-term and long-term marketable securities were
$46.8 million at December 31, 2008, $45.0 million at December 31, 2007 and $4.4
million at December 31, 2006. During 2007 the Company changed its investment
strategy towards investments with original maturities greater than three
months.
The
following table sets forth the historical cash flows for the twelve months ended
December 31:
|
|
|
|
|
|
|
|
|
|
(in
thousands)
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
Net
cash provided by operating activities
|
|
$ |
14,045 |
|
|
$ |
16,431 |
|
|
$ |
23,997 |
|
Net
cash (used for) provided by investing activities
|
|
|
(2,255
|
) |
|
|
(41,391
|
) |
|
|
1,351 |
|
Net
cash used for financing activities
|
|
$ |
(10,401 |
) |
|
$ |
(26,263 |
) |
|
$ |
(8,494 |
) |
2008
Cash
provided by operating activities decreased by $2.4 million in 2008 compared to
2007 as a result of lower net income and a decrease in working capital
requirements for inventory consistent with lower sales in 2008 compared to 2007
partially offset by the timing of receipts and payments.
Cash
used for investing activities decreased $39.1 million in 2008 compared to 2007,
resulting primarily from lower purchases of marketable securities in 2008
compared to 2007. Cash used for investing activities in 2007 was comprised of
$40.1 million in net purchases of marketable securities as a result of a new
investment strategy and $1.3 million in capital expenditures.
Cash
used for financing activities decreased $15.9 million in 2008 compared to 2007
due primarily to a decrease of $16.6 million in cash used to purchase the
Company’s common stock in the open market.
2007
Cash
provided by operating activities decreased by $7.6 million in 2007 compared to
2006 as a result of lower net income and an increase in working capital
requirements. Inventories increased as prices for raw materials increased and
components were added for new models and also due to timing of boat
shipments.
Cash
used for investing activities increased $42.7 million in 2007 compared to 2006
due to $40.1 million in net purchases of marketable securities, as we
implemented our new investment strategy, offset primarily by $1.3 million in
capital expenditures. Cash used for investing activities in 2006 was comprised
of $2.9 million in net sales of marketable securities offset primarily by $1.7
million in capital expenditures.
Cash
used for financing activities increased $17.8 million in 2007 compared to 2006
due primarily to an increase of $16.5 million in cash used to purchase the
Company’s common stock in the open market coupled with an increase in the cash
dividends paid per common share.
Cash
Requirements
Management
expects that capital expenditures during 2009 will be approximately $0.4 million
for enhancements to certain manufacturing plants.
We
currently expect that no additional contributions to the defined benefit pension
plan will be required in 2009 to achieve the Company’s funding
objective.
Based
on the shares outstanding on December 31, 2008, the aggregate annual dividends
to be paid at the current annual dividend rate of $0.04 per common share would
be approximately $1.5 million. The Company expects to continue to pay cash
dividends to common stockholders, subject to the earnings and financial
condition of the Company and other relevant factors.
The
Company has an agreement with two employees, which provides for a monthly
payment to each of the employees equal to 10 percent of profits (defined as
pretax income before goodwill amortization and certain allocated corporate
expenses).
On
January 22, 2008 the Board of Directors authorized an additional 3,000,000
shares that the Company can repurchase, increasing the number of shares
available for repurchase. The Company has purchased a total of 4,925,157 shares
in the open market as of December 31, 2008. As of December 31, 2008, there are
3,324,843 shares that remain available for repurchase.
The
Company has entered into agreements with third-party floor plan lenders where it
has agreed, in the event of default by the dealer, to repurchase MPC boats
repossessed from the dealer. These arrangements are subject to maximum
repurchase amounts and the associated risk is mitigated by the value of the
boats repurchased. During the fourth quarter of 2008, the Company became
obligated to repurchase inventory of $2.6 million as a result of dealer
defaults. At December 31, 2008, there is $2.4 million that remains payable to
floor plan lenders. As a result of a deepened recession and continued turmoil in
the financial markets, additional dealers could experience financial difficulty.
In the event that a dealer is unable to meet their obligations to third-party
floor plan lenders, MPC may become contractually obligated to repurchase boats
for up to the remaining aggregate obligation of $4.1 million as of December 31,
2008. See further information regarding repurchase obligations in “NOTE 9:
COMMITMENTS AND CONTINGENCIES” of the Consolidated Financial
Statements.
The
Company believes that the liquidity provided by its existing cash and cash
equivalents, marketable securities, and cash generated from operations will
provide sufficient capital to meet its requirements for at least the next twelve
months.
Contractual
Obligations
The
following table summarizes the Company’s contractual obligations as of December
31, 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments
due by period
|
|
Contractual
Obligations
|
|
Total
|
|
|
Less
than
1
year
|
|
|
1-3
years
|
|
|
3-5
years
|
|
|
More
than
5 years
|
|
Long-term
debt
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Capital
lease obligation
|
|
|
275,455 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
275,455 |
|
Operating
leases (1)
|
|
|
1,480,825 |
|
|
|
150,282 |
|
|
|
311,736 |
|
|
|
304,435 |
|
|
|
714,372 |
|
Purchase
obligations (2)
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Due
to floor plan lenders (3)
|
|
|
2,378,000 |
|
|
|
2,378,000 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Other
long-term liabilities
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total
|
|
$ |
4,134,280 |
|
|
$ |
2,528,282 |
|
|
$ |
311,736 |
|
|
$ |
304,435 |
|
|
$ |
989,827 |
|
(1)
|
Operating
leases represent agreements for warehouse space and various office
equipment.
|
|
|
(2)
|
As
part of the normal course of business the Company enters into purchase
commitments to manage its various operating needs. However, the Company
does not have any obligations that are non-cancelable or subject to a
penalty if canceled.
|
|
|
(3)
|
The
Company has agreements with various third-party lenders where it
guarantees varying amounts of debt for qualifying dealers on boats in
inventory. During the fourth quarter of 2008, MPC became obligated to
repurchase inventory of approximately $2.6 million as a result of dealer
defaults. As of December 31, 2008, the balance outstanding for these
repurchases is approximately $2.4 million which is expected to be paid
within one year.
|
Additionally,
the Company had approximately $0.2 million of recorded FIN 48 liabilities and
related interest and penalties as of December 31, 2008. Management is unable to
make a reasonable estimate as to when cash settlement with the tax authorities
might occur due to the uncertainties related to these tax matters.
Off
Balance Sheet Arrangements
To
assist dealers in obtaining financing for the purchase of its boats for
inventory, the Company has entered into agreements with various third-party
floor plan lenders whereby the Company guarantees varying amounts of debt for
qualifying dealers on boats in inventory. The Company’s obligation under these
guarantees becomes effective in the case of a default under the financing
arrangement between the dealer and the third-party lender. The agreements
provide for the return of all repossessed boats in “like new” condition to the
Company, in exchange for the Company’s assumption of specified percentages of
the debt obligation on those boats, up to certain contractually determined
dollar limits which vary by lender. During the fourth quarter of 2008, MPC
became contractually obligated to repurchase inventory of approximately $2.6
million as a result of dealer defaults of which $2.4 million is payable as of
December 31, 2008. As of December 31, 2008, the Company has an aggregate
remaining repurchase obligation to lenders of $4.1 million. The Company’s
remaining obligation relating to a maximum of $1.4 million of this total expire
one year after the July 1, 2008 effective date of these agreements and may reset
to a maximum of $4.0 million for one additional year thereafter. Our remaining
obligation related to the remaining $2.7 million of this total as of December
31, 2008 varies based on dealer floor plan debt outstanding, declines over time
based on the age of the inventory, and remains in force for periods ranging up
to 24 months from the end of the fourth quarter of 2008. The Company records an
estimate of the fair value of the remaining guarantee liability at the end of
each reporting period.
As
mentioned earlier, the Company recorded the repurchase of inventory totaling
approximately $2.6 million resulting from defaults by two dealers. At December
31, 2008, there is $2.4 million that remains payable to floor plan lenders and
is recorded in accrued expenses. During the fourth quarter of 2008, the Company
redistributed $0.6 million of these boats among existing and replacement
dealers. The remaining repurchased boats are included in inventory as of
December 31, 2008 and are recorded at a net realizable value of $1.9 million.
The Company recorded approximately $0.3 million for costs associated with these
repurchases including a reserve for estimated transportation costs and the write
down of repurchased inventory to net realizable value. There are additional
dealers experiencing financial difficulty as a result of the current market
conditions and the Company may under current contractual terms repurchase
additional dealer inventory totaling up to $4.1 million. The Company
re-evaluated the fair value of the remaining guarantee liability under the
foregoing circumstances and recorded a liability of approximately $0.2 million
as of December 31, 2008. Management continues to monitor the risk of additional
defaults and resulting repurchase obligation based primarily upon information
provided by the third-party floor plan lenders and will adjust the guarantee
liability accordingly. See further information regarding repurchase obligations
in “NOTE 9: COMMITMENTS AND CONTINGENCIES” of the Consolidated Financial
Statements.
Historically,
and during most of 2008, there were at least two major marine dealer floor-plan
financing institutions. At the end of 2008, one of these institutions announced
that it would cease floor plan lending to all unaffiliated dealers including
those in the marine industry. In early 2009 one lender has approached Marine
Products with a request to raise the contractual repurchase limit. During 2008
this lender imposed additional borrowing costs not covered in the current
contractual arrangement and Marine Products is presently negotiating with this
lender regarding these and other issues regarding contract provisions which
expire at the end of the 2009 model year.
Related
Party Transactions
In
conjunction with its spin-off from RPC in 2001, the Company and RPC entered into
various agreements that define the companies’ relationship after the
spin-off.
The
Transition Support Services Agreement provides for RPC to provide certain
services, including financial reporting and income tax administration,
acquisition assistance, etc., to Marine Products until the agreement is
terminated by either party. Marine Products reimbursed RPC for its estimated
allocable share of administrative costs incurred for services rendered on behalf
of Marine Products totaling $842,000 in 2008, $957,000 in 2007, and $739,000 in
2006. The Company’s liability to RPC for these services as of December 31, 2008
and 2007 was approximately $70,000 and $223,000. The Company’s directors are
also directors of RPC and all of the Company’s executive officers with the
exception of one are employees of both the Company and RPC.
The
Employee Benefits Agreement provides for, among other things, the Company’s
employees to continue participating subsequent to the spin-off in two RPC
sponsored benefit plans, specifically, the defined contribution 401(k) plan and
the defined benefit retirement income plan.
A
group that includes the Company’s Chairman of the Board, R. Randall Rollins and
his brother Gary W. Rollins, who is also a director of the Company, and certain
companies under their control, controls in excess of fifty percent of the
Company’s voting power.
Critical
Accounting Policies
The
consolidated financial statements are prepared in accordance with accounting
principles generally accepted in the United States, which require significant
judgment by management in selecting the appropriate assumptions for calculating
accounting estimates. These judgments are based on our historical experience,
terms of existing contracts, trends in the industry, and information available
from other outside sources, as appropriate. Senior management has discussed the
development, selection and disclosure of its critical accounting estimates with
the Audit Committee of our Board of Directors. The Company believes that, of its
significant accounting policies, the following may involve a higher degree of
judgment and complexity.
Sales
recognition - The Company sells its boats through its network of independent
dealers. Sales orders used to plan production are firm indications of interest
from dealers and are cancelable at any time, although historically very few
orders are cancelled after they have been placed. The Company recognizes sales
when all the following conditions are met: (1) a fully executed sales agreement
exists, (2) the price of the boat is established, (3) the dealer takes delivery
of the boat, and (4) collectibility of the sales price is reasonably
assured.
Sales
incentives and discounts - The Company records incentives as a reduction of
sales. Using historical trends, adjusted for current changes, the Company
estimates the amount of incentives that will be paid in the future on boats sold
and accrues an estimated liability. The Company offers various incentives that
promote sales to dealers, and to a lesser extent, retail customers. These
incentives are designed to encourage timely replenishment of dealer inventories
after peak selling seasons, stabilize manufacturing volumes throughout the year,
and improve production model mix. The dealer incentive programs are a
combination of annual volume commitment discounts, and additional discounts at
time of invoice for those dealers who do not finance their inventory through
specified floor plan financing agreements. The annual dealer volume discounts
are primarily based on July 1 through June 30 model year purchases. In addition,
the Company offers at various times other time-specific or model-specific
incentives. The retail incentive programs have historically been used during
off-peak selling seasons in addition to the winter boat exhibition
shows.
The
factors that complicate the calculation of the cost of these incentives are the
ability to forecast sales of the Company and individual dealers, the volume and
timing of inventory financed by specific dealers, identification of which boats
have been sold subject to an incentive, and the estimated lag time between sales
and payment of incentives. Settlement of the incentives generally occurs from
three to twelve months after the sale. The Company regularly analyzes the
historical incentive trends and makes adjustments to recorded liabilities for
changes in trends and terms of incentive programs. Total incentives as a
percentage of gross sales were 13.3 percent in 2008, 13.1 percent in 2007, and
13.3 percent in 2006. A 0.25 percentage point change in incentives as a
percentage of gross sales during 2008 would have increased or decreased net
sales, gross margin and operating income by approximately $0.4
million.
Warranty
costs -The Company records as part of selling, general and administrative
expense an experience based estimate of the future warranty costs to be incurred
when sales are recognized. The Company evaluates its warranty obligation on a
model year basis. The Company provides warranties against manufacturing defects
for various components of the boats, primarily the fiberglass deck and hull,
with warranty periods extending up to 10 years. Warranty costs, if any, on other
components of the boats are generally absorbed by the original component
manufacturer. Warranty costs can vary depending upon the size and number of
components in the boats sold, the pre-sale warranty claims, and the desired
level of customer service. While we focus on high quality manufacturing programs
and processes, including actively monitoring the quality of our component
suppliers and managing the dealer and customer service warranty experience and
reimbursements, our estimated warranty obligation is based upon the warranty
terms and the Company’s enforcement of those terms over time, defects, repair
costs, and the volume and mix of boat sales. The estimate of warranty costs is
regularly analyzed and is adjusted based on several factors including the actual
claims that occur. Warranty expense as a percentage of net sales was 1.8 percent
in 2008, 2.0 percent in 2007, and 2.6 percent in 2006. Warranty expense as
a percentage of net sales decreased in 2008 compared to 2007 because of
favorable trends in claims during 2008. A 0.10 percentage point increase in the
estimated warranty expense as a percentage of net sales during 2008 would have
increased selling, general and administrative expenses and reduced operating
income by approximately $0.2 million.
Income
taxes - The effective income tax rates were 32.4 percent in 2008, 33.8 percent
in 2007, and 30.9 percent in 2006. The effective tax rates vary due to changes
in estimates of future taxable income, fluctuations in the tax jurisdictions in
which the earnings and deductions are realized, variations in the relationship
of tax-exempt income or losses to income before taxes and favorable or
unfavorable adjustments to estimated tax liabilities related to proposed or
probable assessments. As a result, the effective tax rate may fluctuate
significantly on a quarterly or annual basis.
The
Company establishes a valuation allowance against the carrying value of deferred
tax assets when it is determined that it is more likely than not that the asset
will not be realized through future taxable income. Such amounts are charged to
earnings in the period the determination is made. Likewise, if it is later
determined that it is more likely than not that the net deferred tax assets
would be realized, the applicable portion of the previously provided valuation
allowance is reversed. The Company considers future market growth, forecasted
earnings, future taxable income, the mix of earnings in the jurisdictions in
which the Company operates, and prudent and feasible tax planning strategies in
determining the need for a valuation allowance.
The
Company calculates the current and deferred tax provision based on estimates and
assumptions that could differ from the actual results reflected in income tax
returns filed during the subsequent year. Adjustments based on filed returns are
recorded when identified, which is generally in the third quarter of the
subsequent year for U.S. federal and state provisions. Deferred tax liabilities
and assets are determined based on the differences between the financial and tax
bases of assets and liabilities using enacted tax rates in effect in the year
the differences are expected to reverse.
The
amount of income taxes the Company pays is subject to ongoing audits by federal
and state tax authorities, which often result in proposed assessments. Our
estimate for the potential outcome for any uncertain tax issue is highly
judgmental. The Company believes it has adequately provided for any reasonably
foreseeable outcome related to these matters. However, future results may
include favorable or unfavorable adjustments to estimated tax liabilities in the
period the assessments are made or resolved or when statutes of limitation on
potential assessments expire. Additionally, the jurisdictions in which earnings
or deductions are realized may differ from current estimates.
Impact
of Recent Accounting Pronouncements
In
December 2008, the FASB issued FASB Staff Position (FSP) FAS 132R-1, “Employers’
Disclosures about Postretirement Benefit Plan Assets.” The FASB issued the FSP,
which amends FASB Statement 132R, Employers’ Disclosures about
Pensions and Other Postretirement Benefits, in order to provide adequate
transparency about the types of assets and associated risks in employers’
postretirement plans. Disclosures are designed to provide an understanding of
how investment decisions are made: the major categories of plan assets; the
inputs and valuation techniques used to measure the fair value of plan assets;
the effect of fair value measurements using significant unobservable inputs
(Level 3 measurements in FASB Statement 157, Fair Value Measurements) on changes
in plan assets for the period; and significant concentrations of risk within
plan assets The disclosures about plan assets required by this FSP are required
to be provided for fiscal years ending after December 15, 2009, with the
provisions of this FSP not required for earlier periods that are presented for
comparative purposes, upon initial application. Earlier application of the
provisions of this FSP is permitted. The Company is currently in the process of
determining the additional disclosures required upon the adoption of this
FSP.
In
October 2008, the FASB issued FASB Staff Position (FSP) No. FAS 157-3,
“Determining the Fair Value of a Financial Asset When the Market for That Asset
Is Not Active.” FSP 157-3 clarifies the application of SFAS No. 157, “Fair Value Measurements,” in
a market that is not active and provides an example to illustrate key
considerations in determining the fair value of a financial asset when the
market for that financial asset is not active. The FSP stipulates that
determining fair value in a dislocated market depends on the facts and
circumstances and may require the use of significant judgment when evaluating
individual transactions or broker quotes which are some of the sources of the
fair value measurement. In addition, FSP FAS 157-3 states that if an entity uses
its own assumptions to determine fair value, it must include appropriate risk
adjustments that market participants would make for nonperformance and liquidity
risks. FSP FAS 157-3 is effective upon issuance, including prior periods for
which financial statements have not been issued. The Company adopted FSP FAS
157-3 in the third quarter of 2008 and has concluded that it does not have a
material effect on its consolidated financial statements.
In
September 2008, the FASB issued FSP No. FAS 133-1 and FIN 45-4, “Disclosures
about Credit Derivatives and Certain Guarantees – An Amendment of FASB Statement
No. 133 and FASB Interpretation No. 45; and Clarification of the Effective Date
of FASB Statement No. 161.” This FSP amends FASB Statement No. 133, “Accounting for Derivative
Instruments and Hedging Activities,” to require disclosures by sellers of
credit derivatives, including credit derivatives embedded in a hybrid
instrument. This FSP also amends FASB Interpretation No.(FIN) 45, “Guarantor’s Accounting and
Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others,” to require an additional disclosure about the
current status of the payment/performance risk of a guarantee. Further this FSP
clarifies the FASB’s intent about the effective date of FASB Statement No. 161,
“Disclosures about Derivative
Instruments and Hedging Activities.” The Company has adopted the
provisions of this FSP for the year ended December 31, 2008. Refer to “Off
Balance Sheet Arrangements” on page 24 for information regarding the status of
the payment/performance risk of the guarantees.
In
June 2008, the FASB issued FSP EITF 03-6-1, “Determining Whether Instruments
Granted in Share-Based Payment Transactions Are Participating Securities,” to
clarify that all outstanding unvested share-based payment awards that contain
non-forfeitable rights to dividends or dividend equivalents, whether paid or
unpaid, are participating securities. An entity must include participating
securities in its calculation of basic and diluted earnings per share (EPS)
pursuant to the two-class method, as described in FASB Statement 128, Earnings
per Share. FSP EITF 03-6-1 is effective for fiscal years beginning after
December 15, 2008 and interim periods within those fiscal years. The Company
intends to adopt FSP EITF 03-6-1 effective January 1, 2009 and apply its
provisions retrospectively to all prior-period EPS data presented in its
financial statements. The Company has periodically issued share-based payment
awards that contain non-forfeitable rights to dividends and does not expect the
adoption of this accounting guidance to have a material effect on its
consolidated financial statements or EPS.
In
April 2008, the FASB issued FSP FAS No. 142-3, which amends the
factors that must be considered in developing renewal or extension assumptions
used to determine the useful life over which to amortize the cost of a
recognized intangible asset under SFAS No. 142, “Goodwill and Other Intangible
Assets.” The FSP requires an entity that is estimating the useful life of
a recognized intangible asset to consider its historical experience in renewing
or extending similar arrangements or, in the absence of historical experience,
must consider assumptions that market participants would use about renewal or
extension that are both consistent with the asset’s highest and best use and
adjusted for entity-specific factors under SFAS No. 142. The FSP is
effective for fiscal years beginning after December 15, 2008, and the
guidance for determining the useful life of a recognized intangible asset must
be applied prospectively to intangible assets acquired after the effective date.
The Company does not expect the adoption of FSP FAS No. 142-3 to have a
material effect on its consolidated financial statements.
In
May 2008, the FASB issued SFAS 162, “The Hierarchy of Generally Accepted
Accounting Principles.” SFAS 162 is intended to improve financial reporting by
identifying a consistent framework, or hierarchy, for selecting accounting
principles to be used in financial statements that are presented in conformity
with U.S. generally accepted accounting principles for nongovernmental entities.
This Statement became effective on November 15, 2008. The Company does not
expect the adoption of this statement to have a material effect on its
consolidated financial statements.
In
March 2008, the FASB issued SFAS 161, “Disclosures about Derivative Instruments
and Hedging Activities - an Amendment of FASB Statement 133.” SFAS161 requires
enhanced disclosures regarding how: (a) an entity uses derivative
instruments; (b)
derivative instruments and related hedged items are accounted for under FASB
Statement No. 133, Accounting
for Derivative Instruments and Hedging Activities; and (c) derivative instruments and
related hedged items affect an entity’s financial position, financial
performance, and cash flows. Statement 161 is effective for fiscal years and
interim periods beginning after November 15, 2008 with early application being
encouraged. The Company does not have any derivative instruments nor is it
currently involved in hedging activities and therefore adoption of SFAS 161 is
not expected to have a material impact on the Company’s consolidated financial
statements.
In
February 2008, the FASB issued FSP FAS 157-1, “Application of FASB Statement No.
157 to FASB Statement No. 13 and Other Accounting Pronouncements that Address
Fair Value Measurements for Purposes of Lease Classification or Measurement
under Statement 13,” and FSP FAS 157-2, “Effective Date of FASB Statement No.
157.” These FSPs:
|
|
|
|
●
|
Exclude
certain leasing transactions accounted for under FASB Statement No. 13,
Accounting for
Leases, from the scope of Statement 157. The exclusion does not
apply to fair value measurements of assets and liabilities recorded as a
result of a lease transaction but measured pursuant to other
pronouncements within the scope of Statement 157.
|
|
|
|
|
●
|
Defer
the effective date in FASB Statement No. 157, Fair Value
Measurements, for one year for certain nonfinancial assets and
nonfinancial liabilities, except those that are recognized or disclosed at
fair value in the financial statements on a recurring basis (at least
annually).
|
FSP FAS
157-1 is effective upon the initial adoption of Statement 157. FSP FAS 157-2 is
effective February 12, 2008. The Company has adopted the provisions of FSP 157-1
and 157-2 in the first quarter of 2008.
Item
7A. Quantitative and Qualitative Disclosures About Market Risk
Marine
Products holds no derivative financial instruments which could expose Marine
Products to significant market risk. Marine Products maintains an investment
portfolio, comprised primarily of municipal debt securities, which are subject
to interest rate risk exposure. This risk is managed through conservative
policies to invest in high-quality obligations. Marine Products has performed an
interest rate sensitivity analysis using a duration model over the near term
with a 10 percent change in interest rates. Marine Products’ portfolio is not
subject to material interest rate risk exposure based on this analysis. Marine
Products does not expect any material changes in market risk exposures or how
those risks are managed.
MANAGEMENT’S
REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
To the
Stockholders of Marine Products Corporation:
The
management of Marine Products Corporation is responsible for establishing and
maintaining adequate internal control over financial reporting for the Company.
Marine Products Corporation maintains a system of internal accounting controls
designed to provide reasonable assurance, at a reasonable cost, that assets are
safeguarded against loss or unauthorized use and that the financial records are
adequate and can be relied upon to produce financial statements in accordance
with accounting principles generally accepted in the United States of America.
The internal control system is augmented by written policies and procedures, an
internal audit program and the selection and training of qualified personnel.
This system includes policies that require adherence to ethical business
standards and compliance with all applicable laws and regulations.
There
are inherent limitations to the effectiveness of any controls system. A controls
system, no matter how well designed and operated, can provide only reasonable,
not absolute, assurance that the objectives of the controls system are met.
Also, no evaluation of controls can provide absolute assurance that all control
issues and any instances of fraud, if any, within the Company will be detected.
Further, the design of a controls system must reflect the fact that there are
resource constraints, and the benefits of controls must be considered relative
to their costs. The Company intends to continually improve and refine its
internal controls.
Under
the supervision and with the participation of our management, including our
principal executive officer and principal financial officer, we conducted an
evaluation of the effectiveness of the design and operations of our internal
control over financial reporting, as of December 31, 2008 based on criteria
established in Internal Control—Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission. Based on this evaluation,
management’s assessment is that Marine Products Corporation maintained effective
internal control over financial reporting as of December 31, 2008.
The
independent registered public accounting firm, Grant Thornton LLP, has audited
the consolidated financial statements as of and for the year ended December 31,
2008, and has also issued their report on the effectiveness of the Company’s
internal control over financial reporting, included in this report on page
30.
/s/
Richard
A. Hubbell |
|
/s/
Ben
M. Palmer |
Richard
A. Hubbell
|
|
Ben
M. Palmer
|
President
and Chief Executive Officer
|
|
Chief
Financial Officer and Treasurer
|
Atlanta,
Georgia
|
March
3, 2009
|
Report
of Independent Registered Public Accounting Firm on Internal Control Over
Financial Reporting
|
Board
of Directors and Stockholders
|
Marine
Products Corporation
|
We have
audited Marine Products Corporation’s (a Delaware Corporation) and subsidiaries
(the “Company”) internal control over financial reporting as of December 31,
2008 based on criteria established in Internal Control—Integrated
Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO). The Company’s management is responsible for
maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting,
included in the accompanying Management’s Report on Internal Control Over
Financial Reporting. Our responsibility is to express an opinion on the
Company’s internal control over financial reporting based on our
audit.
We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether effective
internal control over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of internal control over
financial reporting, assessing the risk that a material weakness exists, testing
and evaluating the design and operating effectiveness of internal control based
on the assessed risk, and performing such other procedures as we considered
necessary in the circumstances. We believe that our audit provides a reasonable
basis for our opinion.
A
company’s internal control over financial reporting is a process designed to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. A company’s internal control over
financial reporting includes those policies and procedures that (1) pertain to
the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (2)
provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of
the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company’s
assets that could have a material effect on the financial
statements.
Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
In our
opinion, the Company maintained, in all material respects, effective internal
control over financial reporting as of December 31, 2008, based on criteria
established in Internal
Control—Integrated Framework issued by COSO.
We also
have audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), the consolidated balance sheets of the Company
as of December 31, 2008 and 2007, and
the related consolidated statements of operations, stockholders’ equity, and
cash flows for each of the three years in the period ended December 31, 2008 and
our report dated March 3, 2009 expressed an unqualified opinion on those
consolidated financial statements.
|
/s/ Grant
Thornton
LLP |
|
Atlanta,
Georgia
|
March
3, 2009
|
Report
of Independent Registered Public Accounting Firm on Consolidated Financial
Statements
|
Board
of Directors and Stockholders
|
Marine
Products Corporation
|
We have
audited the accompanying consolidated balance sheets of Marine Products
Corporation (a Delaware corporation) and subsidiaries (the “Company”) as of
December 31, 2008 and 2007, and the related consolidated statements of
operations, stockholders’ equity, and cash flows for each of the three years in
the period ended December 31, 2008. Our audits of the basic consolidated
financial statements included the financial statement schedule listed in the
index appearing under Item 15. These financial statements and financial
statement schedule are the responsibility of the Company’s management. Our
responsibility is to express an opinion on these financial statements and
financial statement schedule based on our audits.
We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the financial position of the Company as of December
31, 2008 and 2007, and the results of its operations and its cash flows for each
of the three years in the period ended December 31, 2008 in conformity with
accounting principles generally accepted in the United States of America. Also
in our opinion, the related financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
presents fairly, in all material respects, the information set forth
therein.
As
described in Note 7 to the consolidated financial statements, the Company
adopted the provisions of Financial Interpretation No. 48, “Accounting for
Uncertainty in Income Taxes – an interpretation of FASB Statement 109” during
2007. As described in Note 10 to the consolidated financial statements, the
Company adopted the provisions of Statement of Financial Accounting Standards
No. 123 (revised 2004), “Share-Based Payment” during 2006.
We also
have audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), the Company’s internal control over financial
reporting as of December 31, 2008, based on criteria established in Internal Control—Integrated
Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO) and our report dated March 3, 2009 expressed an
unqualified opinion thereon.
|
/s/ Grant Thornton LLP |
|
Atlanta,
Georgia
|
March
3, 2009
|
Item
8. Financial Statements and Supplementary Data
CONSOLIDATED
BALANCE SHEETS
MARINE
PRODUCTS CORPORATION AND SUBSIDIARIES
(in
thousands except share information)
|
|
|
|
|
|
|
December
31,
|
|
2008
|
|
|
2007
|
|
ASSETS
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$ |
4,622 |
|
|
$ |
3,233 |
|
Marketable
securities
|
|
|
8,799 |
|
|
|
8,870 |
|
Accounts
receivable, net
|
|
|
5,575 |
|
|
|
3,540 |
|
Inventories
|
|
|
22,453 |
|
|
|
33,159 |
|
Income
taxes receivable
|
|
|
2,464 |
|
|
|
1,321 |
|
Deferred
income taxes
|
|
|
1,116 |
|
|
|
2,746 |
|
Prepaid
expenses and other current assets
|
|
|
1,681 |
|
|
|
2,159 |
|
Current
assets
|
|
|
46,710 |
|
|
|
55,028 |
|
Property,
plant and equipment, net
|
|
|
14,579 |
|
|
|
15,944 |
|
Goodwill
|
|
|
3,308 |
|
|
|
3,308 |
|
Other
intangibles, net
|
|
|
465 |
|
|
|
465 |
|
Marketable
securities
|
|
|
37,953 |
|
|
|
36,087 |
|
Deferred
income taxes
|
|
|
2,934 |
|
|
|
1,098 |
|
Other
assets
|
|
|
4,344 |
|
|
|
6,796 |
|
Total
assets
|
|
|
110,293 |
|
|
$ |
118,726 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$ |
1,437 |
|
|
$ |
4,621 |
|
Accrued
expenses and other liabilities
|
|
|
12,281 |
|
|
|
14,294 |
|
Current
liabilities
|
|
|
13,718 |
|
|
|
18,915 |
|
Pension
liabilities
|
|
|
5,285 |
|
|
|
5,572 |
|
Other
long-term liabilities
|
|
|
501 |
|
|
|
482 |
|
Total
liabilities
|
|
|
19,504 |
|
|
|
24,969 |
|
Commitments
and contingencies
|
|
|
|
|
|
|
|
|
Stockholders’
Equity
|
|
|
|
|
|
|
|
|
Preferred
stock, $0.10 par value, 1,000,000 shares authorized, none
issued
|
|
|
— |
|
|
|
— |
|
Common
stock, $0.10 par value, 74,000,000 shares authorized, issued and
outstanding – 36,425,449 shares in 2008, 36,017,736 shares in
2007
|
|
|
3,643 |
|
|
|
3,602 |
|
Capital
in excess of par value
|
|
|
— |
|
|
|
— |
|
Retained
earnings
|
|
|
88,535 |
|
|
|
90,105 |
|
Accumulated
other comprehensive (loss) income
|
|
|
(1,389
|
) |
|
|
50 |
|
Total
stockholders’ equity
|
|
|
90,789 |
|
|
|
93,757 |
|
Total
liabilities and stockholders’ equity
|
|
$ |
110,293 |
|
|
$ |
118,726 |
|
The
accompanying notes are an integral part of these statements.
CONSOLIDATED
STATEMENTS OF OPERATIONS
MARINE
PRODUCTS CORPORATION AND SUBSIDIARIES
(in
thousands except per share data)
|
|
|
|
|
|
|
|
|
|
Years
ended December 31,
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
Net
sales
|
|
$ |
175,622 |
|
|
$ |
244,273 |
|
|
$ |
261,378 |
|
Cost
of goods sold
|
|
|
143,677 |
|
|
|
191,810 |
|
|
|
201,971 |
|
Gross
profit
|
|
|
31,945 |
|
|
|
52,463 |
|
|
|
59,407 |
|
Selling,
general and administrative expenses
|
|
|
23,146 |
|
|
|
30,228 |
|
|
|
32,474 |
|
Operating
income
|
|
|
8,799 |
|
|
|
22,235 |
|
|
|
26,933 |
|
Interest
income
|
|
|
2,420 |
|
|
|
2,590 |
|
|
|
2,502 |
|
Income
before income taxes
|
|
|
11,219 |
|
|
|
24,825 |
|
|
|
29,435 |
|
Income
tax provision
|
|
|
3,633 |
|
|
|
8,402 |
|
|
|
9,121 |
|
Net
income
|
|
$ |
7,586 |
|
|
$ |
16,423 |
|
|
$ |
20,314 |
|
EARNINGS
PER SHARE
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$ |
0.21 |
|
|
$ |
0.44 |
|
|
$ |
0.54 |
|
Diluted
|
|
|
0.21 |
|
|
$ |
0.43 |
|
|
$ |
0.52 |
|
Dividends
paid per share
|
|
$ |
0.26 |
|
|
$ |
0.24 |
|
|
$ |
0.20 |
|
The
accompanying notes are an integral part of these statements.
|
CONSOLIDATED
STATEMENTS OF STOCKHOLDERS’ EQUITY
|
MARINE
PRODUCTS CORPORATION AND SUBSIDIARIES
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
Years Ended
December
31, 2008
|
|
Comprehensive
Income
|
|
|
Common
Stock
Shares
Amount
|
|
|
Capital
in Excess
of Par
Value
|
|
|
Retained
Earnings
|
|
|
Deferred
Compensation
|
|
|
Accumulated
Other
Comprehensive
Income
(Loss)
|
|
|
Total
|
|
Balance,
December 31, 2005
|
|
|
|
|
|
37,698 |
|
|
$ |
3,770 |
|
|
$ |
16,364 |
|
|
$ |
72,192 |
|
|
$ |
(3,540 |
) |
|
$ |
(1,098 |
) |
|
$ |
87,688 |
|
Stock
issued for stock incentive plans, net
|
|
|
|
|
|
381 |
|
|
|
38 |
|
|
|
434 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
472 |
|
Stock
purchased and retired
|
|
|
|
|
|
(171
|
) |
|
|
(17
|
) |
|
|
(1,615
|
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(1,632
|
) |
Net
income
|
|
$ |
20,314 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
20,314 |
|
|
|
— |
|
|
|
— |
|
|
|
20,314 |
|
Minimum
pension liability adjustment, net of taxes
|
|
|
344 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
344 |
|
|
|
344 |
|
Unrealized
gain on securities, net of taxes and reclassification
adjustments
|
|
|
36 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
36 |
|
|
|
36 |
|
Comprehensive
income
|
|
$ |
20,694 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends
declared
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(7,631
|
) |
|
|
— |
|
|
|
— |
|
|
|
(7,631
|
) |
Stock-based
compensation
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
1,514 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1,514 |
|
Excess
tax benefits for share-based payments
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
296 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
296 |
|
Adoption
of SFAS 123(R)
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
(3,540
|
) |
|
|
— |
|
|
|
3,540 |
|
|
|
— |
|
|
|
— |
|
Balance,
December 31, 2006
|
|
|
|
|
|
|
37,908 |
|
|
|
3,791 |
|
|
|
13,453 |
|
|
|
84,875 |
|
|
|
— |
|
|
|
(718
|
) |
|
|
101,401 |
|
Stock
issued for stock incentive plans, net
|
|
|
|
|
|
|
407 |
|
|
|
41 |
|
|
|
286 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
327 |
|
Stock
purchased and retired
|
|
|
|
|
|
|
(2,297
|
) |
|
|
(230
|
) |
|
|
(15,694
|
) |
|
|
(2,182
|
) |
|
|
— |
|
|
|
— |
|
|
|
(18,106
|
) |
Net
income
|
|
$ |
16,423 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
16,423 |
|
|
|
— |
|
|
|
— |
|
|
|
16,423 |
|
Pension
adjustment, net of taxes
|
|
|
476 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
476 |
|
|
|
476 |
|
Unrealized
gain on securities, net of taxes and reclassification
adjustments
|
|
|
292 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
292 |
|
|
|
292 |
|
Comprehensive
income
|
|
$ |
17,191 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends
declared
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(9,011
|
) |
|
|
— |
|
|
|
— |
|
|
|
(9,011
|
) |
Stock-based
compensation
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
1,524 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1,524 |
|
Excess
tax benefits for share-based payments
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
431 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|