ATLANTA, July 26, 2006 – Marine Products Corporation (NYSE: MPX) announced its unaudited results for the quarter ended June 30, 2006. Marine Products is a leading manufacturer of fiberglass boats under two brand names: sterndrive and inboard pleasure boats by Chaparral, including SSi Sportboats, Sunesta Deckboats, and Signature Cruisers, and outboard sport fishing boats by Robalo.
For the quarter ended June 30, 2006, Marine Products generated net sales of $71,739,000, a 7.5 percent decrease compared to $77,566,000 last year. The decrease in net sales was due to a 22.2 percent decrease in the number of boats sold, partially offset by a 17.2 percent increase in the average gross selling price per boat. Most product lines experienced higher average selling prices, due to increased focus on selling larger boats and price increases instituted during the 2006 model year. Gross profit for the quarter was $16,136,000, or 22.5 percent of net sales, compared to $19,875,000, or 25.6 percent of net sales, in the prior year. The reduction in gross profit as a percentage of net sales was due to increased raw materials and component costs and production inefficiencies due to lower unit production volumes.
Operating income for the quarter was $7,699,000, a 29.3 percent decrease compared to the second quarter last year due to lower gross profit, partially offset by lower selling, general and administrative expenses. Operating income was 10.7 percent of net sales for the quarter compared to 14.0 percent of net sales in the prior year. Selling, general and administrative expenses decreased primarily due to a decrease in incentive compensation expense, which varies with sales and profitability.
Net income for the quarter ended June 30, 2006 was $6,289,000, a 21.0 percent decrease compared to $7,956,000 in the prior year. Net income decreased due to lower operating income, partially offset by higher interest income, and a lower income tax provision. The effective tax rate during the second quarter was 24.1 percent compared to 29.3 percent in the prior year; both periods include adjustments to reduce tax liabilities. The adjustment in 2006 due to the successful resolution of tax examinations increased diluted earnings per share by $0.02. The adjustment in 2005 resulting from tax return amendments increased diluted earnings per share by $0.01. Diluted earnings per share for the quarter were $0.16, a 20.0 percent decrease compared to $0.20 diluted earnings per share in the prior year.
Net sales for the six months ended June 30, 2006 were $141,696,000, a 5.6 percent decrease from the first six months of 2005. Net income for the six-month period decreased 18.3 percent to $12,065,000 or $0.31 diluted earnings per share compared to $14,773,000 or $0.36 diluted earnings per share in the prior year.
Richard A. Hubbell, Marine Products' Chief Executive Officer stated, "The second quarter of 2006 continued the trend of lower retail demand that we first experienced late in the third quarter of 2005. Higher interest rates and fuel prices have increased the cost of owning a boat, and consumers impacted by higher costs of ownership have reacted by delaying their purchases, especially in the market segment that purchases smaller boats. We continue to be pleased with our increase in average selling prices, which is principally due to a favorable model mix, resulting from our strategy of designing and selling larger boats.
Hubbell continued, "Our dealer inventories and order backlog are in reasonable shape given the current sales environment. At the end of the second quarter, field inventories were 22 percent lower than the prior year, and order backlog in weeks of scheduled production is 35 percent higher. This is the result of actions we took last year when we realized that demand was weakening. Our experience has taught us to react very quickly to potential downturns in demand, and we have done so very effectively over the past nine months.
Hubbell continued, "Our dealer conferences will be taking place within the next several weeks, when we will meet with our dealers and show them the new models for 2007. We are excited about our new models, and look forward to our dealers' reactions. However, we will continue to monitor dealer and consumer demand and take appropriate actions, as we have in the past, if we continue to see product demand weakness in the market for our products.
Marine Products Corporation (NYSE: MPX) designs, manufactures and distributes premium-branded Chaparral sterndrive and inboard pleasure boats and Robalo sport fishing boats, and continues to diversify its product line through product innovation and strategic acquisition. With premium brands, a solid capital structure, and a strong independent dealer network, 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. For more information on Marine Products Corporation visit our website at www.marineproductscorp.com.
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 regarding our evaluation of the status of our dealer inventories, and order backlog given the current sales environment. 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 impacting discretionary spending, increased interest rates, 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, 2005.
For information contact:
BEN M. PALMER
Chief Financial Officer
404.321.7910
irdept@marineproductscorp.com
JIM LANDERS
Corporate Finance
404.321.2162
jlanders@marineproductscorp.com |