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Marine Products Corp. Reports Operating Results (10-Q)

August 06, 2009 | About:

Marine Products Corp. (MPX) filed Quarterly Report for the period ended 2009-06-30.

MARINE PRODUCTS is the third-largest distributor of sterndrive powerboats in the U.S. The company designs manufactures and distributes premium-branded Chaparral sterndrive pleasure boats and Robalo outboard offshore fishing boats and continues to diversify its product line through product innovation and strategic acquisition. With premium brands and a solid capital structure Marine Products Corporation is prepared to capitalize on opportunities to increase its market share and to generate superior financial performance to build long-term shareholder value. Marine Products Corp. has a market cap of $211.1 million; its shares were traded at around $5.72 with and P/S ratio of 1.2.

Highlight of Business Operations:

Cost of goods sold for the three months ended June 30, 2009 was $12.2 million compared to $44.7 million for the comparable period in 2008, a decrease of $32.6 million or 72.8 percent. Cost of goods sold, as a percentage of net sales, increased primarily as the result of significant manufacturing cost inefficiencies due to very low production volumes and sales.

Selling, general and administrative expenses for the three months ended June 30, 2009 were $6.8 million compared to $6.6 million for the comparable period in 2008, an increase of $0.2 million or 2.3 percent. The increase in selling, general and administrative expenses was primarily due to $4.3 million in expenses for dealer inventory reduction efforts, partially offset by decreases in other expenses which vary with sales and profitability, as well as the impact of ongoing cost reduction measures. Warranty expense was 1.5 percent of net sales for the three months ended June 30, 2009 compared to 1.7 percent in the prior year. Additionally, costs incurred during the second quarter of 2009 in connection with boat repurchase obligations totaled approximately $0.2 million.

Cost of goods sold for the six months ended June 30, 2009 was $26.0 million compared to $96.8 million for the comparable period in 2008, a decrease of $70.8 million or 73.1 percent. Cost of goods sold, as a percentage of net sales, increased primarily as the result of significant manufacturing cost inefficiencies due to very low production volumes and sales.

Selling, general and administrative expenses for the six months ended June 30, 2009 were $11.5 million compared to $14.9 million for the comparable period in 2008, a decrease of $3.4 million or 22.9 percent. The decrease in selling, general and administrative expenses was primarily due to the variable nature of many of these expenses, including incentive compensation, which declined as a percentage of sales consistent with lower sales and profitability, and warranty expense partially offset by $4.3 million in expenses for dealer inventory reduction efforts. Also, salary, research and development and advertising expenses were lower due to cost control measures instituted in the past year. Additionally, costs incurred during the six month ended June 30, 2009 in connection with boat repurchase obligations totaled approximately $0.7 million.

Income tax (benefit) provision for the six months ended June 30, 2009 of $(3.9) million was $6.7 million lower than the income tax provision of $2.8 million for the comparable period in 2008. The income tax benefit for the six months ended June 30, 2009 reflects an effective tax rate of 38.2 percent, compared to an effective tax rate of 25.7 percent for the comparable period in the prior year. The change in the effective rate was due primarily to the relationship of our pretax income (loss) to permanent differences between book and taxable income.

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. Subsequent to June 30, 2009, an amendment to the current agreement with one of the Company\'s lenders has been executed with a contractual repurchase limit of $9.0 million effective January 1, 2009 which will expire June 30, 2010. The Company has contractual repurchase agreements with two additional lenders with an aggregate remaining repurchase obligation of approximately $2.1 million which effectively expire June 30, 2010. Effective July 1, 2009, the Company has an aggregate remaining repurchase obligation dollar limit of approximately $6.5 million with these three financing institutions.

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