Marine Products Corporation
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The Marine Industry
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The Marine Industry
The recreational marine market in the United States is a mature market, with 2012 (latest data available to us) retail expenditures of approximately $36 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’ limited free time with all other leisure activities.
 
The NMMA conducts various surveys of pleasure boat industry trends, and the most recent surveys indicate that 88 million adults in the United States participated in recreational boating in 2012, an increase of 6 percent compared to the prior year, although non-active boat owners cite lack of leisure time and increased operational and fuel costs as the primary reasons for not using their boats.  The percentage of American consumers that participated in recreational boating during 2012 was the highest of any year in the NMMA’s survey period.  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. Approximately 77 percent of the Company’s unit sales in 2013 were sterndrive boats compared to 85 percent in 2012.

Industry sales of new sterndrive boats in the United States during 2013 totaling 13,477 (source: Info-Link Technologies, Inc.) accounted for approximately 25 percent of the total new fiberglass powerboats sold between 18 and 35 feet in hull length. Sales of sterndrive boats had an estimated total retail value of $785 million, or an average retail price per boat of approximately $58,000. Management believes that the five largest states for boat sales at the present time are Florida, Texas, Michigan, New York and Louisiana.  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 $2.5 billion in retail sales during 2013. The table below reflects the estimated sales within this segment by category for 2013 and 2012 (source: Info-Link Technologies, Inc.):
 

 

 

2013

 

 

2012

 

 

 

Boats

 

 

Sales ($ B)

 

 

Boats

 

 

Sales ($ B)

 

Sterndrive Boats

 

 

13,477

 

 

$

0.8

 

 

 

13,959

 

 

$

0.7

 

 

Outboard Boats

 

 

30,541

 

 

 

1.1

 

 

 

26,209

 

 

 

0.9

 

Inboard Boats

 

 

6,591

 

 

 

0.5

 

 

 

5,694

 

 

 

0.4

 

Jet Boats

 

 

2,888

 

 

 

0.1

 

 

 

3,558

 

 

 

0.1

 

TOTAL

 

 

53,497

 

 

$

2.5

 

 

 

49,420

 

 

$

2.1

 

 
Chaparral’s products are categorized as sterndrive boats and Robalo’s products are categorized as outboard boats.  Although industry-wide sterndrive boat unit sales have been declining, the rate of decline in recent years has slowed.  Jet boat sales also experienced a decline in 2013, partially due to a major jet boat manufacturer exiting the market.  In the four years prior to 2013, jet boat annual sales were consistently between 3,300 and 4,000 units sold.  Chaparral hopes to take advantage of this opportunity in the jet boat market when it introduces its jet boat product line, which the Company plans to have available for its dealer network during the 2014 retail selling season.

The recreational boat manufacturing market remains highly fragmented with the exception of Brunswick Corporation, which has acquired and currently operates a number of recreational boat brands. We estimate that the boat manufacturing industry includes approximately 60 sterndrive manufacturers and over 150 outboard boat manufacturers, with the majority representing 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, 2013 (latest information available), the top five sterndrive manufacturers, which includes Chaparral, have a combined market share of approximately 56 percent; approximately the same as one year ago.  Chaparral’s market share in units during this nine month period was approximately 13.9 percent, which represents an increase of approximately 2.3 percentage points compared to 11.6 percent during the 12 months ended December 31, 2012.  The Company believes that this improvement in market share is due primarily to the success of our value-priced Chaparral H2O models, which are 18, 19 and 21 feet in length.
 
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 coastal and recreational areas influences recreational boat sales. The most recent NMMA surveys indicate that participation in recreational boating has increased, that many boaters participate in boating by using another person’s boat, and that retirements of used boats have reduced the size of the total recreational boat fleet. These factors are positive indicators for near-term boat sales.  However, these surveys also indicate that many past boating participants do not currently participate in boating because of high costs and a lack of leisure time.   The increases in the cost of certain components, operating costs, and the impact of environmental regulation have increased the cost of boats and boat ownership in recent years, and these trends may continue.  Competition from other leisure and recreational activities for available leisure time 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;
 
-  a lack of focus on coordinated customer service and support by dealers and manufacturers;
 
-  a lack of financial strength among retail boat dealers and many manufacturers; and
 
-  a high degree of fragmentation and competition among the large number of sterndrive and outboard recreational boat manufacturers.
Forward-Looking Statement:
Certain statements and information included in this press release constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements include statements that look forward in time or express management’s beliefs, expectations or hopes. In particular, such statements include, without limitation, statements related to our belief that prolonged winter weather during the first quarter has caused dealer inventories to be higher than normal and our concerns about continued cold weather in many of our domestic markets. 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 include possible decreases in the level of consumer confidence and available funds impacting discretionary spending, increased interest rates and fuel prices, weather conditions, changes in consumer preferences, deterioration in the quality of Marine Products’ network of independent boat dealers or availability of financing of their inventory, and competition from other boat manufacturers and dealers. Additional discussion of factors that could cause the actual results to differ materially from management's projections, forecasts, estimates and expectations is contained in Marine Products' Form 10-K, filed with the Securities and Exchange Commission for the year ending December 31, 2013.
© 2003 MARINE PRODUCTS CORPORATION. ALL RIGHTS RESERVED.

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