Marine Products Corp. reports 7 percent gain in Q1 sales

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Sales of larger boats like Chaparral's 300 OSX Sport Luxury outboards helped boost gross profit.

Sales of larger boats like Chaparral's 300 OSX Sport Luxury outboards helped boost gross profit.

Chaparral and Robalo parent company Marine Products Corp. generated net sales of $83 million for its first quarter, a 7.1 percent increase compared to $77.5 million in the same quarter a year ago.

The increase in net sales was due to a 14.8 percent increase in average selling prices and an increase in parts and accessories sales, partially offset by a 6.8 percent decrease in the number of units sold. In general, sales of smaller boats accounted for the decrease in unit sales during the quarter.

Gross profit for the first quarter of 2019 was $18.7 million, a 5.9 percent increase compared to gross profit of $17.7 million in the same period of the prior year, due to higher net sales.

Gross margin as a percentage of net sales was 22.5 percent in the first quarter of 2019, compared with 22.8 percent in the first quarter of 2018 — a drop the company chalked up to higher labor costs.

Net income for the first quarter of 2019 was nearly $7.5 million, a decrease of $140,000, or 1.8 percent, compared with net income of $7.6 million in the first quarter of 2018.

Diluted earnings per share were $0.22 in the first quarters of 2019 and 2018. The effective tax rate for the first quarter of 2019 was 16.3 percent, approximately the same as the effective tax rate of 16.1 percent for the first quarter of the prior year.

"During the first quarter, we sold fewer of our small boats to our dealer network, resulting in a 6.8 percent decrease in unit sales,” said Marine Products president and CEO Richard Hubbell in a statement.

“Sales declines were concentrated in our smallest Robalo models and Chaparral H2O models,” said Hubbell. “By contrast, we realized increased sales of larger Chaparral H2O models, larger Chaparral SSX and Robalo models, and generated our first sales of Chaparral's 300 OSX Sport Luxury outboards. The model mix that resulted from these shifts allowed us to generate an increase in net sales and gross profit.”

Operating profit for the first quarter of 2019 was just under $8.9 million, a decrease of 1.8 percent compared with operating profit of more than $9 million in the first quarter of last year.

"We believe that the remainder of the 2019 retail selling season will be fairly strong, but we are closely monitoring retail demand among our various products,” said Hubbell. “At the end of the first quarter, our dealer inventories were comparable to inventory levels at the same time in 2018.”

Unit order backlog was moderately lower at the end of the quarter, so the company has reduced production slightly to maintain healthy dealer inventory levels.

“During the first quarter of 2019 we repurchased 263,805 shares of our common stock on the open market,” said Hubbell. “In spite of this use of cash, we finished the quarter with $18.3 million in cash, an increase of $1.9 million compared to cash and marketable securities at the end of 2018.”

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