Marine Products Corporation Reports Second Quarter 2024 Financial Results And Declares Regular Quarterly Dividend

Rhea-AI Summary

Marine Products (NYSE: MPX) reported a challenging second quarter 2024, with net sales decreasing 40% year-over-year to $69.5 million. Net income fell 61% to $5.6 million, with diluted EPS at $0.14. The company faced continued weakness in dealer ordering patterns due to high industry-wide channel inventories and soft consumer demand. Despite these challenges, Marine Products maintains a strong financial position with no debt and over $55 million in cash. The company is responding with cost reduction measures, adjusted production schedules, and retail incentives. Looking ahead, Marine Products is preparing for its 2025 model year launch and Chaparral's 60th anniversary celebration at the upcoming August dealer conference.

Positive

• Strong cash position with over $55 million and no debt
• Maintained regular quarterly dividend of $0.14 per share
• Net cash provided by operating activities of $19.7 million year-to-date
• Free cash flow of $18.1 million year-to-date
• Price/mix up 1% driven by higher gross selling prices

Negative

• Net sales decreased 40% year-over-year to $69.5 million
• Net income down 61% to $5.6 million
• Diluted EPS decreased from $0.42 to $0.14
• Gross margin declined 580 basis points to 18.9%
• EBITDA margin decreased 540 basis points to 9.3%
• Number of boats sold decreased by 41%

Financial Analyst

Marine Products 's Q2 2024 results paint a challenging picture for the recreational boating industry. The 40% year-over-year decline in net sales to $69.5 million is a stark indicator of the current market conditions. This significant drop, primarily driven by a 41% decrease in the number of boats sold, reflects the ongoing struggle with high inventory levels and soft consumer demand.

The company's profitability has taken a substantial hit, with net income down 61% to $5.6 million and EBITDA falling 62% to $6.5 million. The 430 basis point decrease in net income margin to 8.0% and 540 basis point drop in EBITDA margin to 9.3% underscore the operational challenges faced by Marine Products in this tough environment.

Despite these headwinds, the company's strong balance sheet, with $55.1 million in cash and no debt, provides a solid foundation to weather the storm. The continued payment of dividends, including a special dividend, demonstrates management's commitment to shareholder returns even in difficult times.

Looking ahead, the company's focus on new model launches and dealer support through promotional activities could help stimulate demand. However, the near-term outlook remains uncertain, with management expecting soft year-over-year comparisons to persist as the industry normalizes post-pandemic.

Market Research Analyst

The Q2 2024 results from Marine Products offer valuable insights into the current state of the recreational boating market. The 41% decrease in boats sold is a clear indicator of a significant market contraction, likely driven by macroeconomic factors such as high interest rates and inflation impacting consumer discretionary spending.

The company's mention of persistently high industry-wide channel inventories suggests that this is not an isolated issue but a broader trend affecting the entire boating industry. This oversupply situation, coupled with soft consumer demand, is forcing manufacturers like Marine Products to adjust their production schedules and implement cost-reduction measures.

The impact of high interest rates is twofold: it's increasing floorplan carrying costs for dealers and making financing more expensive for consumers. This double squeeze is likely contributing to the reluctance of dealers to place new orders, as evidenced by the company's reduced sales.

Looking forward, the company's focus on innovation and new model launches for the 2025 model year could potentially stimulate demand. However, the success of these initiatives will largely depend on broader economic conditions and consumer sentiment improving. The ongoing normalization of the industry following the post-pandemic demand surge suggests that we may see continued volatility in the near term before the market finds a new equilibrium.

ATLANTA, July 25, 2024 /PRNewswire/ -- Marine Products Corporation (NYSE: MPX) ("the Company"), a leading manufacturer of fiberglass boats, announced its unaudited results for the second quarter ended June 30, 2024.

^{* Non-GAAP measures, including EBITDA, EBITDA margin, and free cash flow are reconciled to the most comparable GAAP measures in the appendices of this earnings release.}

^{* All comparisons are year-over-year to 2Q:23 unless stated otherwise.}

Second Quarter 2024 Highlights

• Net sales decreased 40% year-over-year to $69.5 million
• Net income was $5.6 million, down 61% year-over-year and diluted Earnings Per Share (EPS) was $0.14; net income margin decreased 430 basis points to 8.0%
• Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) was $6.5 million, down 62% year-over-year; EBITDA margin decreased 540 basis points to 9.3%
• Results reflected continued weakness in dealer ordering patterns given persistently high industry-wide channel inventories and soft consumer demand; the Company continued to respond with actions to reduce costs, adjust production schedules and provide retail incentives

Management Commentary

"We continue to navigate a challenging environment impacted by high inventory levels in the dealer channel relative to current demand," stated Ben M. Palmer, Marine Products' President and Chief Executive Officer. "Interest rates also remain relatively high, resulting in elevated floorplan carrying costs for our dealers and financing costs for consumers. We continue to support our dealers with aggressive promotions and extending these programs in a collaborative effort to spur sales and reduce channel inventories. Operationally, we have continued to right-size our production to align with dealer demand, implementing reduced work schedules and taking other cost reduction measures."

"Despite the uncertainties we face, we remain enthusiastic around our 2025 model year launch, with new models, features and colors. We are continuously gathering feedback and proactively driving innovation to make sure each model year includes fresh and exciting options and responds to dealer and consumer preferences. We are eagerly looking forward to our August dealer conference in south Florida to unveil the new lineup and features and celebrate Chaparral's 60^th anniversary with our dealer partners."

"With no debt, strong cash generation, and more than $55 million in cash at the end of the second quarter, we can provide attractive tangible returns of capital through dividends while still leaving Marine Products with ample liquidity to pursue both organic growth investments and strategic acquisitions," concluded Palmer.

2Q:24 Consolidated Financial Results: Year-Over-Year (versus 2Q:23)

Net sales were $69.5 million, down 40%. The decrease in net sales was primarily due to a 41% decrease in the number of boats sold during the quarter. Price/mix was up 1%, driven by higher gross selling prices. Sales continued to be impacted by dealer efforts to reduce their inventories, due in part to higher floor plan carrying costs, as well as lower consumer demand. The Company believes its year-over-year comparisons will likely remain soft in the near term as the industry continues to normalize following high post-pandemic demand and dealers' unwinding of channel inventory.

Gross profit was $13.2 million, down 54%. Gross margin was 18.9%, down 580 basis points. The year-over-year gross margin change reflected lower sales volumes and associated manufacturing cost inefficiencies, coupled with the impact of reinstituting retail incentive programs. Production schedules and labor costs have been adjusted to more closely align with current demand.

Selling, general and administrative expenses were $7.4 million, down 39%, generally in line with the sales decline, and represented 10.7% of net sales, up 20 basis points. The decrease in SG&A expenses was due to costs that vary with sales and profitability, such as incentive compensation, sales commissions and warranty expense.

Interest income of $879 thousand increased due to higher cash balances and higher investment yields.

Income tax provision was $1.0 million, or 15.7% of income before income taxes, down 110 basis points.

Net income and diluted EPS were $5.6 million and $0.14, respectively, down from $14.3 million and $0.42, respectively, in 2Q:23. Net income margin was 8.0%, down 430 basis points. 

EBITDA was $6.5 million, down from $17.1 million; EBITDA margin was 9.3%, down 540 basis points.

Balance Sheet, Cash Flow and Capital Allocation

Cash and cash equivalents were $55.1 million at the end of 2Q:24, with no outstanding borrowings under the Company's $20 million revolving credit facility.

Net cash provided by operating activities and free cash flow were $19.7 million and $18.1 million, respectively, year-to-date through 2Q:24.

Payment of dividends totaled $34.0 million year-to-date through 2Q:24, including a special dividend of $0.70 per share paid during the second quarter. The Board of Directors declared a regular quarterly dividend of $0.14 per share payable on September 10, 2024, to common stockholders of record at the close of business on August 9, 2024.

Conference Call Information

Marine Products Corporation will hold a conference call today, July 25, 2024, at 8:00 a.m. Eastern Time to discuss the results for the quarter. Interested parties may listen in by accessing a live webcast in the investor relations section of Marine Products' website at www.marineproductscorp.com. Additionally, the live conference call can be accessed by calling (888) 660-6357, or (929) 201-6127 for international callers, and using conference ID number 9979064. A replay will be available in the investor relations section of Marine Products' website beginning approximately two hours after the call.

About Marine Products

Marine Products Corporation is a leading manufacturer of high-quality fiberglass boats under the brand names Chaparral and Robalo. Chaparral's sterndrive models include SSi Sportboats and SSX Luxury Sportboats, and the SURF Series. Chaparral's outboard offerings include OSX Luxury Sportboats and the SSi Outboard Bowriders. Robalo builds an array of outboard sport fishing models, which include Center Consoles, Dual Consoles and Cayman Bay Boats. The Company continues to diversify its product lines through product innovation. With these 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 generate superior financial performance to build long-term shareholder value. For more information on Marine Products Corporation visit our website at www.marineproductscorp.com.

Forward Looking Statements

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, hopes or strategies. In particular, such statements include, without limitation: our belief that we continue to navigate a challenging environment impacted by high inventory levels in the dealer channel relative to current demand;  our strategies to support our dealers with aggressive promotions and extending these programs in a collaborative effort to spur sales and reduce channel inventories, and to right-size our production to align with dealer demand by implementing reduced work schedules and taking other cost reduction measures, and any implied statements that such strategies will succeed in accomplishing our goals; our enthusiasm around our 2025 model year launch, our business strategy to continuously gather feedback, our goals to proactively drive innovation and provide fresh and exciting options that respond to dealer and consumer preferences every model year, and our positive outlook regarding our August dealer conference and the unveiling of our new lineup and features, as well as statements concerning having no debt and strong cash generation, and our ability to provide attractive tangible returns of capital through dividends while still leaving ample liquidity to pursue organic growth investments and strategic acquisitions, including implied statements that we may continue to be able to do so in the future and without incurring debt; any implied statements that a lowering of interesting rates and financing costs for consumers may lead to increased consumer demand; and statements regarding our ability to capitalize on opportunities to increase market share and generate superior financial performance to build long-term shareholder value.  Risk factors that could cause such future events not to occur or our strategies not to succeed as expected include the following: negative economic conditions, unavailability of credit and possible decreases in the level of consumer confidence impacting discretionary spending; business interruptions due to, e.g., adverse weather conditions, supply chain disruptions and/or further increased interest rates; our retail incentives and allowances may not successfully increase consumer demand as anticipated, due to negative impacts to the overall economy, industry or competition, our adjustments to production levels may not match demand; increased cost of boat ownership makes it more difficult to raise prices in the future to compensate for increased costs; our new model launches may not match dealer and consumer preferences, which are inherently uncertain; and our ability to manage manufacturing costs may be constrained in light of lower production levels. Additional factors that could cause the actual results to differ materially from management's projections, forecasts, estimates and expectations are contained in Marine Products' Annual Report on Form 10-K, filed with the U.S. Securities and Exchange Commission (the "SEC") for the year ended December 31, 2023.

For information about Marine Products Corporation or this event, please contact:

Michael L. Schmit
Chief Financial Officer
(404) 321-7910
irdept@marineproductscorp.com 

Mark Chekanow, CFA
Vice President, Investor Relations
(404) 419-3809
mchekano@marineproductscorp.com

 

MARINE PRODUCTS CORPORATION AND SUBSIDIARIES   CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands except per share data)
		Three Months Ended							Six Months Ended
June 30,		2024			2023				2024			2023
			(Unaudited)			(Unaudited)				(Unaudited)			(Unaudited)
Net sales		$	69,547		$	116,158			$	138,887		$	235,072
Cost of goods sold			56,373			87,502				111,729			177,394
Gross profit			13,174			28,656				27,158			57,678
Selling, general and administrative expenses			7,424			12,173				16,166			26,706
Operating income			5,750			16,483				10,992			30,972
Interest income, net			879			723				1,730			1,206
Income before income taxes			6,629			17,206				12,722			32,178
Income tax provision			1,044			2,885				2,540			6,308
Net income		$	5,585		$	14,321			$	10,182		$	25,870
EARNINGS PER SHARE (1)
Basic		$	0.14		$	0.42			$	0.28		$	0.75
Diluted		$	0.14		$	0.42			$	0.28		$	0.75
AVERAGE SHARES OUTSTANDING (2)
Basic			34,708			34,458				34,670			34,419
Diluted			34,708			34,458				34,670			34,419

(1) Earnings per share includes a reduction of $0.02 for the quarter and $0.01 for the six months ended June 30, 2024, resulting from the allocation of earnings attributable to participating securities under the two-class method required by GAAP.  The earnings attributable to participating securities was a reduction triggered by the second quarter 2024 special dividend as follows:  $719 for the quarter and $839 for the six months ended June 30, 2024.

(2) Includes participating securities which are share-based payment awards with non-forfeitable rights to dividends. Under the two-class method, average shares outstanding shown above were reduced by participating securities of 886 for the quarter and 883 for the six months ended June 30, 2024.

 

MARINE PRODUCTS CORPORATION AND SUBSIDIARIES   CONSOLIDATED BALANCE SHEETS
		(in thousands)
		June 30,			December 31,
		2024			2023
			(Unaudited)
ASSETS
Cash and cash equivalents		$	55,131		$	71,952
Accounts receivable, net			5,726			2,475
Inventories			53,080			61,611
Income taxes receivable			235			361
Prepaid expenses and other current assets			3,440			2,847
Total current assets			117,612			139,246
Property, plant and equipment, net			22,733			22,456
Goodwill			3,308			3,308
Other intangibles, net			465			465
Deferred income taxes			9,435			8,590
Retirement plan assets			17,365			15,379
Other assets			4,808			4,358
Total assets		$	175,726		$	193,802
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Accounts payable		$	7,955		$	6,071
Accrued expenses and other liabilities			16,598			16,496
Total current liabilities			24,553			22,567
Retirement plan liabilities			20,238			17,998
Other long-term liabilities			1,679			1,649
Total liabilities			46,470			42,214
Stockholders' Equity
Preferred stock			—			—
Common stock			3,472			3,447
Capital in excess of par value			—			—
Retained earnings			125,784			148,141
Total stockholders' equity			129,256			151,588
Total liabilities and stockholders' equity		$	175,726		$	193,802

 

MARINE PRODUCTS CORPORATION AND SUBSIDIARIES   CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
		(in thousands)
Six months ended June 30,			2024			2023
			(Unaudited)			(Unaudited)
OPERATING ACTIVITIES
Net income		$	10,182		$	25,870
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			1,384			1,140
Pension settlement loss			—			2,277
Working capital			6,799			10,341
Other operating activities			1,372			1,157
Net cash provided by operating activities			19,737			40,785
INVESTING ACTIVITIES
Capital expenditures			(1,661)			(7,194)
Net cash used for investing activities			(1,661)			(7,194)
FINANCING ACTIVITIES
Payment of dividends			(33,990)			(9,637)
Cash paid for common stock purchased and retired			(907)			(910)
Net cash used for financing activities			(34,897)			(10,547)
Net (decrease) increase in cash and cash equivalents			(16,821)			23,044
Cash and cash equivalents at beginning of period			71,952			43,171
Cash and cash equivalents at end of period		$	55,131		$	66,215

Non-GAAP Measures

Marine Products Corporation has used the non-GAAP financial measures of EBITDA, EBITDA margin, and free cash flow in today's earnings release. These measures should not be considered in isolation or as a substitute for performance or liquidity measures prepared in accordance with GAAP. Management believes that presenting these non-GAAP measures enables investors to compare our operating performance consistently over various time periods, and in the case of EBITDA, without regard to changes in our capital structure. Management believes that free cash flow, which measures our ability to generate additional cash from our business operations, is an important financial measure for use in evaluating Marine Products' liquidity. Free cash flow should be considered in addition to, rather than as a substitute for, net cash provided by operating activities as a measure of our liquidity. Additionally, Marine Products' definition of free cash flow is limited, in that it does not represent residual cash flows available for discretionary expenditures, due to the fact that the measure does not deduct the payments required for debt service and other contractual obligations or payments made for business acquisitions. Therefore, management believes it is important to view free cash flow as a measure that provides supplemental information to our Condensed Consolidated Statements of Cash Flows.

A non-GAAP financial measure is a numerical measure of financial performance, financial position, or cash flows that either 1) excludes amounts, or is subject to adjustments that have the effect of excluding amounts, that are included in the most directly comparable measure calculated and presented in accordance with GAAP in the statement of operations, balance sheet or statement of cash flows, or 2) includes amounts, or is subject to adjustments that have the effect of including amounts, that are excluded from the most directly comparable measure so calculated and presented.

Set forth in the appendices below are reconciliations of these non-GAAP measures with their most directly comparable GAAP measures.  These reconciliations also appear on Marine Products Corporation's investor website, which can be found on the Internet at www.marineproductscorp.com.

Appendix A
(Unaudited)		Three Months Ended						Six Months Ended
		June 30,			June 30,			June 30,			June 30,
(In thousands)		2024			2023			2024			2023
Reconciliation of Net Income to EBITDA
Net income		$	5,585		$	14,321		$	10,182		$	25,870
Adjustments:
Add: Income tax provision			1,044			2,885			2,540			6,308
Add: Depreciation and amortization			702			617			1,384			1,140
Less: Interest income, net			879			723			1,730			1,206
EBITDA		$	6,452		$	17,100		$	12,376		$	32,112
Net sales		$	69,547		$	116,158		$	138,887		$	235,072
Net income margin(1)			8.0 %			12.3 %			7.3 %			11.0 %
EBITDA margin(1)			9.3 %			14.7 %			8.9 %			13.7 %

(1) Net income margin is calculated as net income divided by net sales. EBITDA margin is calculated as EBITDA divided by net sales.

 

Appendix B
(Unaudited)			Six Months Ended
			June 30,			June 30,
(In thousands)			2024			2023
Reconciliation of Operating Cash Flow to Free Cash Flow
Net cash provided by operating activities			$	19,737		$	40,785
Capital expenditures				(1,661)			(7,194)
Free cash flow			$	18,076		$	33,591

 

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SOURCE Marine Products Corporation

FAQ

What were Marine Products 's (MPX) Q2 2024 financial results?

Marine Products reported net sales of $69.5 million, down 40% year-over-year. Net income was $5.6 million, a 61% decrease, with diluted EPS at $0.14. EBITDA was $6.5 million, down 62% from the previous year.

How did Marine Products 's (MPX) boat sales perform in Q2 2024?

The number of boats sold by Marine Products decreased by 41% compared to the same quarter in the previous year, primarily due to weak dealer ordering patterns and soft consumer demand.

What dividend did Marine Products (MPX) declare for Q2 2024?

Marine Products declared a regular quarterly dividend of $0.14 per share, payable on September 10, 2024, to stockholders of record as of August 9, 2024.

How is Marine Products (MPX) addressing the challenging market conditions in 2024?

Marine Products is implementing cost reduction measures, adjusting production schedules, and providing retail incentives to support dealers and spur sales. The company is also preparing for its 2025 model year launch with new models, features, and colors.