ANNUAL REPORT 2022
GENERATIONS
OF QUALITY
AND PERFORMANCE
R180 n CENTER CONSOLE
R207 n DUAL CONSOLE
250 n OSX
347 n SSX
206 n CAYMAN BAY BOAT
21 SF n SSI
28 n SURF
MARINE PRODUCTS CORPORATION
(NYSE: MPX) designs, manufactures and distributes premium-branded
Chaparral sterndrive and outboard pleasure boats and Robalo outboard sport
fishing boats through 210 domestic and 88 international independent dealers
With premium brands, a solid capital structure and a strong independent
dealer network, Marine Products Corporation has consistently generated
strong financial performance and has created long-term stockholder value
Marine Products Corporation also seeks to utilize its financial strength to
capitalize on opportunities that profitably increase its market share and
broaden its product offerings within the pleasure boat market For more
information, visit our website at MarineProductsCorp com
For specific product information, please visit:
Featured on Front Cover: Chaparral 250 OSX
ChaparralBoats com
Robalo com
1994 SUNESTA 250
1984 198V XLC Bowrider
1990 2100 SX
1989 228 XL
01 2022 FINANCIAL HIGHLIGHTS
02 LETTER TO STOCKHOLDERS
04 ROBALO’S NEW R250 OUTBOARD CENTER CONSOLE
05 GENERATIONS OF CUSTOMER SATISFACTION
06 2023 PRODUCT OVERVIEW
07 2022 FORM 10-K
Inside Back Cover CORPORATE INFORMATION
2022 FINANCIAL HIGHLIGHTS
NET SALES
(in thousands)
NET INCOME
(in thousands)
6
1
6
,
8
9
2
$
6
3
1
,
2
9
2
$
5
2
8
,
9
3
2
$
4
1
0
,
8
9
2
$
5
9
9
,
0
8
3
$
8
8
4
,
8
2
$
9
3
2
,
8
2
$
4
4
4
,
9
1
$
6
2
0
,
9
2
$
7
4
3
,
0
4
$
2018
2018
2019
2019
2020
2020
2021
2021
2022
2018
2018
2019
2019
2020
2020
2021
2021
2022
TOTAL NUMBER OF BOATS SOLD
AVERAGE SELLING PRICE PER UNIT
(in thousands)
0
4
3
,
5
5
2
8
,
4
9
8
6
,
3
5
6
1
,
4
2018
2018
2019
2019
2020
2020
2021
2021
1
3
3
,
4
2022
9
4
$
3
5
$
6
5
$
2
6
$
2018
2018
2019
2019
2020
2020
2021
2021
7
7
$
2022
1992 Villain IV
1987 225 XLC
1986 Villain III
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
NET SALES
GROSS PROFIT
2018
2019
$ 298,616 $ 292,136
2020
$ 239,825
2021
2022
$ 298,014 $ 380,995
$ 66,323 $ 65,394
$ 53,605
$ 68,272 $ 93,717
OPERATING INCOME
$ 35,387 $ 34,135
$ 24,361
$ 36,392
NET INCOME
$ 28,488 $ 28,239
$ 19,444
$ 29,026
$ 51,796
$ 40,347
DILUTED EARNINGS PER SHARE
$
0.83 $
0.83
$
0.57
$
0.85
$
1.18
GROSS PROFIT MARGIN
OPERATING MARGIN
22.2%
11.9%
22.4%
11.7%
22.4%
22.9%
24.6%
10.2%
12.2%
13.6%
LETTER TO
STOCKHOLDERS
The year 2022 was the third year in which Marine Products
Corporation enjoyed historically stronger demand for
its products as American consumers continued to favor
recreational boating as an enjoyable, safe outdoor activity for
multiple generations of family and friends Despite on-going
supply chain challenges, we succeeded in producing more
boats in a streamlined model lineup that continues to gather
industry accolades We finished the year with improving
production processes and a dealer network that continues
to need inventory, while at the same time monitoring the
macroeconomic landscape for signs of a potential slowdown
that could reduce recreational boat demand
R266 SKY DECK
We also generated record net sales and net income for
Marine Products Corporation and a thirteenth straight year of
strong profitability in 2022 Net sales for 2022 were $381 0
million, an increase of 27 8 percent compared with $298 0
million in 2021 Net sales increased due to a 23 7 percent
increase in average selling prices and a 4 0 percent increase
in unit sales Selling prices among each of our Chaparral
and Robalo models increased as our customers’ preferences
continued to migrate to larger boats In addition, selling
prices increased as we were forced to pass increases in
materials, labor and transportation costs to our dealers and
retail customers Our best-selling models in both 2021 and
2022 were two of our Chaparral sterndrive sport boats Other
highlights included strong sales of several of our mid-range
Robalo center console models, as well as increased sales of
our largest boat, the Robalo 360 Center Console
Gross profit in 2022 was $93 7 million, an increase of 37 3
percent compared with $68 3 million in 2021 Gross margin
was 25 percent of net sales in 2022 compared to 23 percent
of net sales in 2021 Gross margin as a percentage of net
sales increased due to a model mix that continues to shift
toward larger boats as well as price increases instituted
during the year Selling, general and administrative expenses
increased to $41 9 million in 2022 compared to $31 9 million
Marine Products Corporation
generated record net income of
$40.3 million in 2022, 39 percent
higher than 2021 net income
of $29.0 million.
in 2021, due principally to expenses that vary with sales and
profitability, such as incentive compensation and warranty
expense Our costs used to support our dealers’ efforts in
boat shows increased as well, as more winter boat shows
were held in 2022 than in 2021 Operating income in 2022
was $51 8 million, or 14 percent of net sales, compared with
$36 4 million, or 12 percent of net sales, in 2021 Interest
income was $338 thousand in 2022, a significant increase
compared with $16 thousand in 2021 Interest income
increased due to higher interest yields earned on our cash
balances during 2022 Earnings before interest, taxes,
depreciation and amortization (EBITDA)(1) were $53 7 million
in 2022, an increase of $15 5 million or 41 percent compared
to $38 2 million in 2021
Marine Products Corporation generated record net income
of $40 3 million in 2022, 39 percent higher than 2021 net
income of $29 0 million Our effective tax rate was 23 percent
in 2022, slightly higher that the effective tax rate of 20
percent in 2021 Diluted earnings per share were a record
$1 18 in 2022, compared to $0 85 in 2021
During 2022 our Board of Directors continued the Company’s
regular quarterly cash dividend for the eleventh consecutive
year, increasing it in the fourth quarter of 2022 to $0 14 per
share Total cash dividends per share in 2022 were $0 50
per share, an increase of $0 04 per share or nine percent
compared to 2021 We continue to view our dividend policy
as a vital component of long-term shareholder value creation
and were pleased that we had the ability to increase our
dividend during 2022
Marine Products Corporation generated $49 3 million in
net cash provided by operating activities during 2022, a
significant increase compared to $457 thousand in 2021
The significant increase in cash provided by operating
activities was due to record net income and the result of our
success late in the year in managing inventory by completing
and shipping boats that had been near completion earlier
in the year As we begin 2023 we believe the supply chain
issues that caused our working capital increases are being
resolved, though we still have opportunities to improve our
production and inventory management and reduce inventory
to more normalized levels
(1) EBITDA is a financial measure that does not conform to generally accepted
accounting principles (GAAP) Additional disclosures regarding this non-GAAP
financial measure, including a reconciliation of EBITDA to net income, is found on
page 62 of this Marine Products Corporation 2022 Annual Report
Capital expenditures of $2 5 million were higher than capital
expenditures of $1 2 million in 2021 as we purchased some
new trailers and upgraded our information technology
systems and production facilities In addition, we distributed
$17 1 million in dividends, an increase of $1 4 million compared
to $15 6 million in 2021 As a result, we finished 2022 with
$43 2 million in cash, a $29 1 million increase compared to
$14 1 million in cash at the end of 2021 We are pleased with
this significant increase in cash and will continue to manage
our inventories and working capital to enhance our cash
position further during 2023
We are pleased to report continued strong market share
within our product lines During 2022 Robalo held a market
share of 4 2 percent within its size range in the outboard
fiberglass category, the third highest market share In
combination with Chaparral’s outboard products, Marine
Products’ outboard offerings held a market share of 5 4
percent Chaparral’s sterndrive market improved slightly to
19 8 percent during 2022 and it continued to rank second in
its size category
During May 2022 we announced leadership changes to
the Company when our longtime CEO, Richard A Hubbell
was named Executive Chairman of our Board of Directors,
I was named Chief Executive Officer, and we added
Michael L Schmit to the executive team as our new Chief
Financial Officer and Corporate Secretary The continuity of
the leadership team along with bringing new financial talent
into the Company has served us well as we maintain our
strong financial performance at Marine Products Corporation
270 OSX
Our priorities for 2023 include continuing to manage our
suppliers to optimize availability and deliveries of the raw
materials and fabricated components that constitute our
supply chain This continued management is critical to
product quality, efficiency and profitability, and working
capital requirements In addition, we will monitor all relevant
indicators of consumer demand during the critical 2023 retail
selling season should it be impacted by higher interest rates,
economic softening or declining consumer confidence
As we finish a second consecutive record year and look
toward 2023, we want to thank our employees who build
quality products and ensure that they reach our dealer
network We also commend our suppliers who worked with
us this year to solve availability issues and helped us lower
our working capital requirements and increase shipments to
our dealers Finally, we acknowledge and thank our dealers
and retail customers, many of whom have multi-generational
relationships with us Our retail customers continue to choose
recreational boating, along with Chaparral and Robalo’s
range of quality products, and our dealers continue to
dedicate their efforts to bringing our products to market and
providing a lifetime of service
Sincerely,
BEN M. PALMER
President and Chief Executive Officer
3
STEP ABOARD ROBALO’S R250 OUTBOARD CENTER CONSOLE
READY TO VENTURE OUT ON THE WATER?
Anglers and boating enthusiasts are coming on board to enjoy
Robalo’s newest model, the R250 Center Console The 25-foot
design was engineered with a wide beam of 9’ 2”, twin engine
configuration, and a 23-degree deadrise—the deepest in class
contributing to a smooth dry ride in rough water
The R250 also boasts a highly refined helm that keeps
full command at your fingertips The captain is surrounded
by a three-paned, fully tempered glass enclosure with an
electric opening vent ensuring protection from the elements
Optional Simrad® multifunction displays are available in a
variety of sizes and provide engine data, GPS chart plotter,
depth sounder, and more Push-button lighted stainless steel
switches, tilt steering wheel, lighted compass, and crisp, clean
digital gauges round out the expertly designed helm station
Even the most discriminating of captains won’t be disappointed
with details such as a double footrest to secure their feet
while piloting the boat, an innovative helm display, and an
optional fold-down backrest with leaning post that will convert
to provide additional seating options Both captain and crew
will enjoy their favorite music streaming from the integrated
recessed speakers connected to the standard premium stereo
system that includes AM/FM Bluetooth®, remote control, and
SiriusXM® Satellite
Designed with anglers in mind, there is an abundance of rod
storage including horizontal rod holders on each side of the
boat and vertical rod storage in the leaning post backrest,
across the back of the hardtop, and molded into the transom
Two large fully insulated fish boxes protect your catch, and
you will make great use of the 30-gallon live well with a clear
4
R250
lid, friction hinges, and LED lighting The captain and crew
will have easy arm-reach access to the bilge and electrical
components, including the pumps, battery charger, hoses, and
fuel water separator On the starboard side, walk through the
transom with a self-locking door to the swim platform access
The swim step of the R250 is covered with our diamond-
pattern non-skid and features a four-step stainless steel
re-boarding ladder that is flush mounted into the deck On
the port side, the standard side entry door provides excellent
access to and from the water and an easy step on and off a
floating dock
Invite your friends and family for a day of sun and fun on the
water while knowing that your Robalo was also designed to
focus on your safety and comfort The fiberglass hardtop with
powder-coated frame, stainless steel grab rails, dry storage
for extra life jackets, enhanced LED spreader and navigation
lighting, diamond pattern non-skid surface, and a four-step
telescoping boarding ladder with handle add to your safety
and comfort Integrated handles access storage compartments
with snap-in cushions, meaning no more lost cushions coming
off of the seat while underway The discriminating water
enthusiast will find quality construction of comfortable seating
for up to 11 passengers All Robalo models now feature
upholstery made from 100% SiO Silicone making it virtually
maintenance-free Experience this cutting-edge technology
that offers enhanced durability, robust scuffing and scratch
resistance, and the softest and most comfortable marine
seating surface available today
Experience the engineered design of the R250 We know
you’ll appreciate sharing that experience with your family
and friends See you out on the water!
GENERATIONS OF CUSTOMER SATISFACTION
BUILDING AND SERVICE EXPERTISE
PROMOTES GENERATIONS OF
CUSTOMER SATISFACTION
Consumers have discovered and appreciated boating for
several years as profoundly disruptive events have changed
how we work, live and play As families and groups of friends
either renew their interest in boating or discover it for the first
time, they are finding that recreational boating is one of the
few sports or leisure activities that can be fully enjoyed by
several generations at the same time Recreational boating
brings people together in a unique way
DEALER CONFERENCE
Boating’s appeal for multiple generations fits perfectly into
Marine Products Corporation’s DNA Chaparral and Robalo
have been building quality family boats for more than 50
years Many of these boats are still on the water, having
been passed down from one generation to the next We are
one of our region’s largest employers with a roster of over
900 employees housed in one of the largest single-site
boat manufacturers in our industry In an age of automation,
boat building is still a process completed by hand by
skilled craftsmen Many of our builders are second or third-
generation boat builders Our loyal dealer network includes
many dealerships that are operated by several generations
as well, providing continuity in the local market and product
knowledge, as well as superior service quality The teamwork
of our design team, craftsmen, and dealers creates an
excellent avenue to reach both avid, seasoned boating
enthusiasts and novice boaters interested in experiencing a
new outdoor adventure We appreciate each generation of
dealers and the relationships that we have developed over
the years We support them by continuing to innovate and
develop quality products for the marketplace
280 OSX
Generations of families continue to choose Chaparral and
Robalo boats for their outdoor recreational enjoyment of
fishing, skiing, swimming, and just relaxing on the water
Having a reputation for being reliable and durable in all
types of water conditions, our boats are constructed using
high-quality materials, including fiberglass hulls and stainless
steel hardware In addition to their sturdy construction, our
boats also have a strong customer support system in place
Offering warranty coverage on their hull construction and
hi-tech electrical components, both Chaparral and Robalo
have 14 consecutive years of awards for customer satisfaction
from the National Marine Manufacturers Association With
proper care and maintenance, many customers report having
their boats for decades, further testifying to the brand’s
reliability Overall, Chaparral and Robalo boats are a
trustworthy choice for any boating enthusiast
R317
5
2023 PRODUCT OVERVIEW
SSi SPORT BOATS
Chaparral’s SSi sport boat and premium bowrider is produced for the
quality and style-conscious recreational boater The 21 to 23 foot SSi
models continue to set a high standard for engineering excellence,
attractive styling, and quality materials and workmanship Our
fiberglass sterndrive and outboard-powered SSi’s are high-value
runabouts marketed to family groups The SSi is designed to feature
the handling of a runabout, with the style of a sport boat and open
concept layout Select models offer Ski & Fish options to meet specific
needs All lengths are marketed with National Advertised Prices
21 SSi 21 SSi SKI & FISH
21 SSi Outboard 21 SSi Outboard SKI & FISH
23 SSi 23 SSi Outboard
OSX OUTBOARD LUXURY SPORT BOATS
Chaparral’s OSX luxury sport line takes advantage of the growing
popularity of outboard power in larger boats to create a boat that
combines the generous seating of a large bowrider with the functional
advantages of a center console A seating area in the cockpit and a
helm station that rotates to one side of the cockpit provides plenty of
room for entertaining passengers The enclosed cabin provides many
amenities found in larger traditional cruisers The OSX is offered in
lengths from 25 to 30 feet
250 OSX 270 OSX 280 OSX 300 OSX
SSX LUXURY SPORT BOATS
For the 2023 model year, Chaparral offers 24 to 34 foot Luxury Sport
Boats Various SSX models are offered with an enclosed head, expanded
swim platform, transom sun lounge, and some have the option of a wet
bar in the cockpit The SSX series offers high-end performance with
premium components from bow to stern Additionally, multiple SSX
boats are standard with the award-winning Infinity Power Step for easy
onboarding and exiting to and from the water!
247 SSX 267 SSX 287 SSX
307 SSX 347 SSX
SURF SERIES
Endless wave, endless fun The SURF Series combines everything
you love about the SSi and SSX lines with the excitement of surfing
Wakesurfing is more thrilling and easier to enjoy than ever, thanks to
the Malibu Surf GateTM that lets you instantly adjust your wake—no
repositioning necessary! Powered by Volvo and Mercruiser forward-
facing drives, the SURF features a Simrad® touch-screen display that
makes controlling your ride easy and straightforward Fiberglass
multipurpose bowriders, the SURF Series models are marketed to
both experienced and value-conscious buyers These boats are
designed to enhance the wake of the boat to accommodate the
popular sport of wakesurfing Additionally, the 26, 28 and 30 SURF
are built standard with the award-winning Infinity Power Step for
easy onboarding and exiting to and from the water!
21 SURF 23 SURF 26 SURF
28 SURF 30 SURF
ROBALO CAYMAN BAY BOATS
The Cayman Series ranges from 20 to 26 feet and brings Robalo
quality, style and performance to a bay boat Robalo engineers have
successfully mixed a shallow water draft with a soft-riding Extended
V-PlaneTM hull design Robalo’s Cayman models offer rock-solid
stability; high-quality upholstery; high-tech, space-efficient cockpit; a
tower with upper station controls on the 246 and 266 Sky Deck; and a
wide array of fishing features at Reel Deal pricing
ROBALO EXPLORER – CENTER CONSOLES
The Explorer Series of Center Consoles embraces the classic design
of a center console, providing the perfect opportunity to enjoy a day
of water sports, pleasure cruising or landing a trophy fish Robalo’s
Explorer Series is equipped with center console versatility and
performance, and family comfort takes center stage These high-
quality boats are equipped with luxury standard touches and enough
space that the entire family will enjoy being on the water
206 226 246 246 SKY DECK
266 266 SKY DECK
R202EX R222EX R242EX
ROBALO CENTER CONSOLES
Robalo’s Reel Deal pricing is available for 18 to 36 foot models The
Kevlar® reinforcement and a seaworthy hull design on the Robalo
Center Console Series provides the serious boater with peace of mind
Whether you’re trolling with hooks in the water or motoring through the
tough stuff in search of a trophy catch, a powerful engine and Robalo’s
Hydro LiftTM hull design can speed you to the hottest fishing spots
ROBALO DUAL CONSOLES
Multi-purpose outboard fishing boats like the Robalo Dual Console with
Reel Deal pricing are enjoying increased popularity in today’s market!
Today’s fishermen want a boat that does more than just fish, and the
dual console does just that Serious anglers will appreciate the secure
rod storage, raw water wash down, self-bailing cockpit and standard
livewell Fish in the morning, tow the kids all afternoon and then cruise
as the sun sets
R180 R200 R222 R230
R250 R270 R302 R360
R207 R317
6
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2022
Commission file No. 1-16263
MARINE PRODUCTS CORPORATION
(Exact name of registrant as specified in its charter)
Delaware
(State of Incorporation)
58-2572419
(I.R.S. Employer Identification No.)
2801 Buford Highway NE, Suite 300
Atlanta, Georgia 30329
(404) 321-7910
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, $0.10 Par Value
MPX
The New York Stock Exchange
Securities registered pursuant to section 12(g) of the Act:
None.
Indicate by check mark
• Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
• Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
• Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
YES NO
• Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be
submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such
shorter period that the registrant was required to submit such files).
• Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,”
and emerging growth company in Rule 12b-2 of the Exchange Act. (Check one):
Large Accelerated Filer Accelerated filer Non-accelerated filer Smaller reporting company
Emerging growth company
• If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period
for complying with any new or revised financial accounting standards pursuant to Section 13(a) of the Exchange Act.
• Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the
effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b))
by the registered public accounting firm that prepared or issued its audit report.
• If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the
registrant included in the filing reflect the correction of an error to previously issued financial statements.
• Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-
based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to
§240.10D-1(b).
• Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
The aggregate market value of Marine Products Corporation common stock held by non-affiliates on June 30, 2022, the last business
day of the registrant’s most recent second fiscal quarter, was $78,408,619 based on the closing price on the New York Stock Exchange on
June 30, 2022 of $9.51 per share.
Marine Products Corporation had 34,437,678 shares of common stock outstanding as of February 17, 2023.
Portions of the Proxy Statement for the 2023 Annual Meeting of Stockholders of Marine Products Corporation are incorporated by reference into
Part III, Items 10 through 14 of this report.
DOCUMENTS INCORPORATED BY REFERENCE
(This page has been left blank intentionally)
Table of Contents
MARINE PRODUCTS CORPORATION
Form 10-K
For the Year Ended December 31, 2022
Table of Contents
Part I
Part III
ITEM 1.
Business ..................................................................................11
ITEM 10. Directors, Executive Officers and
ITEM 1.A. Risk Factors ........................................................................ 19
ITEM 1.B. Unresolved Staff Comments ........................................ 22
ITEM 2.
ITEM 3.
ITEM 4.
Properties ........................................................................... 23
Legal Proceedings .......................................................... 23
Mine Safety Disclosures ............................................... 23
Corporate Governance .................................................. 54
ITEM 11.
ITEM 12.
Executive Compensation ............................................... 54
Security Ownership of Certain Beneficial
Owners and Management and Related
Stockholder Matters ........................................................ 55
ITEM 13. Certain Relationships and Related Party
Transactions, and Director Independence .............. 55
ITEM 4.A.
Information About Our Executive Officers ............... 23
ITEM 14. Principal Accounting Fees and Services .................. 55
Part II
ITEM 5.
ITEM 6.
ITEM 7.
Part IV
Market for Registrant’s Common Equity,
Related Stockholder Matters and Issuer
Purchases of Equity Securities..................................... 24
[Reserved] .......................................................................... 25
Management’s Discussion and Analysis
of Financial Condition and Results
of Operations ..................................................................... 25
ITEM 15. Exhibits and Financial Statement
Schedules ........................................................................... 56
ITEM 16. Signatures ........................................................................... 58
Index to Consolidated Financial
Statements, Reports and Schedule ............................ 59
Schedule II .......................................................................... 60
ITEM 7.A. Quantitative and Qualitative Disclosures
about Market Risk ............................................................ 30
ITEM 8.
ITEM 9.
Financial Statements and
Supplementary Data ....................................................... 35
Changes in and Disagreements
with Accountants on Accounting and
Financial Disclosures ...................................................... 53
ITEM 9.A. Controls and Procedures .............................................. 53
ITEM 9.B. Other Information ............................................................. 53
ITEM 9.C. Disclosure Regarding Foreign
Jurisdictions that Prevent Inspections ....................... 53
Marine Products Corporation 2022 10-K
9
Part I
Forward-Looking Statements
Part I
References in this document to “we,” “our,” “us,” “Marine Products,” or “the Company” mean Marine Products Corporation (“MPC”) and its
subsidiaries, Chaparral Boats, Inc. (“Chaparral”) and Robalo Boats, LLC (“Robalo”), collectively or individually, except where the context
indicates otherwise.
FORWARD-LOOKING STATEMENTS
Certain statements made in this report that are not historical facts are
“forward-looking statements” under the Private Securities Litigation
Reform Act of 1995. Such forward-looking statements may include,
without limitation, statements regarding: the Company’s belief
that it intends to remain a leading manufacturer of recreational
powerboats for sale to a broad range of consumers worldwide;
the Company’s belief that Chaparral will continue to expand the
range of its offerings through insightful, innovative product design
and quality manufacturing processes to reach an increasingly
discerning recreational boating market; the Company’s belief
that there is currently an adequate supply of engines, resins and
fiberglass available in the market; the Company’s plans to continue
seeking the most advantageous purchasing arrangements from its
suppliers; the Company’s plans to continue purchasing sterndrive
engines through the American Boatbuilders Association (“ABA”)
on a voluntary basis in order to receive volume-based purchase
discounts; the Company’s belief that its allocation of production
among its dealers will continue during 2023 and its belief that it will
be able to continue to resell any boat for which an order has been
cancelled during the near term; the Company’s belief that dealer
inventories of its boat models are insufficient to meet the current level
of retail customer demand during the 2023 retail selling season; the
Company’s belief that its strong market share is primarily due to the
success of its larger SSX models and the Surf Series; the Company’s
belief that increases in the cost of certain components, international
tariffs, operating costs, and the impact of environmental regulation
have increased the cost of boats and boat ownership in recent
years and that these trends may continue; the Company’s belief
that it is well positioned to take advantage of industry conditions;
the Company’s belief that its membership in the ABA positions itself
as a significant third-party customer of major suppliers of sterndrive
engines; the Company’s belief that its corporate infrastructure and
marketing and sales capabilities, in addition to its financial strength,
and its nationwide presence, enable it to compete effectively
against its competitors; the Company’s marketing strategy seeks
to increase market share by enabling the Company to expand its
presence by building dedicated sales, marketing and distribution
systems; the Company’s plans to increase selectively the quantity
of its dealers to improve the quality and effectiveness of its dealer
network; the Company’s plans to capitalize on its strong dealer
network by educating its dealers on the sales and servicing of its
products and helping them provide more comprehensive customer
service, with the goal of increasing customer satisfaction, customer
retention and future sales; the Company’s belief that the nationally
advertised fixed retail pricing gives the consumer confidence
that they are getting the best possible price resulting in higher
customer satisfaction and encouraging consistent pricing across the
Company’s dealer network; the Company’s belief that it is leading
the way with marketing and branding that consistently presents
a luxury-oriented message and integrates the customer into the
boater’s entire experience; the Company’s plans to consider making
strategic acquisitions; the Company’s belief that its facilities comply
in all material aspects with the regulations of the EPA and OSHA;
the Company’s belief that it will not incur any material expenditures
to comply with existing environmental or safety regulations; the
Company’s belief that its health care program improves employee
well-being by facilitating access to healthcare; the Company’s
belief that, except for the Chaparral and Robalo trademarks, it is
not dependent upon any single trademark or trade name or group
of trademarks or trade names; the Company’s belief that quarterly
operating results for the second quarter traditionally record the
highest sales volume for the year because this corresponds with
the highest retail sales volume period; the Company’s belief that
price increases have had no discernible impact on the Company’s
sales due to high consumer demand and strong order backlogs,
so they have allowed the Company to maintain its profit margins;
the Company’s belief that while the recent increase in inflation
creates a risk to retail demand for recreational boats, such factors
are currently not expected to impact production and sales; the
Company’s belief that it maintains all requisite licenses and permits
and is in compliance with all applicable federal, state and local
regulations; the Company’s belief that the ultimate outcome of
any litigation will not have a material effect on its liquidity, financial
condition or results of operations; the Company’s plans to continue
to monitor retail demand, the actions of its competitors, dealer
inventory levels and the availability of dealer and consumer
financing for the purchase of its products and to adjust its production
levels as deemed appropriate; the Company’s plans to continue
to monitor its market share, but to continue to prioritize profit
maximization; the Company’s belief that strong retail demand for
new recreational boats will continue during 2023 though growth
may moderate as retail demand is satisfied and consumers return
to more normal lifestyles and the Company’s belief that recreational
boating’s appeal to U.S. consumers has grown because people
perceive it to be a safe outdoor activity; the Company’s belief that
retail demand will continue to exceed the recreational boating
industry’s production capacity for the foreseeable future, though it
notes that fuel prices, higher interest rates, and concerns regarding
a possible recession in 2023 may reduce consumer demand
during 2023; the Company’s belief that retail sales in 2021 and
2022 declined compared to comparable prior year periods
because of the industry’s supply chain and labor problems which
are preventing recreational boat manufacturers from producing
sufficient units to meet retail and consumer demand; the Company’s
plans to attend more boat shows during 2023 than during previous
years; the Company’s plans to continue to develop additional new
products for subsequent model years; the Company’s efforts to
concentrate on production scheduling in a way that will minimize
inventory levels to the extent possible; the Company’s expectation
that capital expenditures during 2023 will be approximately $4.0
million; the Company’s belief that liquidity provided by existing
cash, cash equivalents and marketable securities, its overall strong
1 0 Marine Products Corporation 2022 10-K
Part I
Item 1. — Business
capitalization, cash generated by operations and the Company’s
ability to sell up to approximately $150 million in shares of its
common stock under the Company’s shelf registration statement will
provide sufficient capital to meet the Company’s requirements for
at least the next twelve months; the Company’s belief that despite
its agreements with financial institutions, in certain situations, the
Company may decide for business reasons to repurchase boats
in excess of the contractual amounts outlined in such agreements;
the Company’s expectation that it does not plan to make any
contributions to its Retirement Income Plan in 2023; the Company’s
estimate of the amount and timing of future contractual obligations;
the Company’s judgments and estimates with respect to its critical
accounting policies and estimates; the Company’s expectation
about the impact of new accounting pronouncements on the
Company’s consolidated financial statements; the Company’s
plans to continually improve and refine its internal controls; and
the Company’s expectation regarding market risk of its investment
portfolio.
The words “may,” “should,” “will,” “expect,” “believe,” “anticipate,”
“intend,” “plan,” “seek,” “project,” “estimate,” and similar expressions
used in this document that do not relate to historical facts are intended
to identify forward-looking statements. Such statements are based
on certain assumptions and analyses made by our management
in light of its experience and its perception of historical trends,
current conditions, expected future developments and other factors
it believes to be appropriate. We caution you that such statements
are only predictions and not guarantees of future performance
and that actual results, developments and business decisions may
differ from those envisioned by the forward-looking statements.
Risk factors that could cause such future events not to occur as
expected include the following: economic conditions, availability of
credit and possible decreases in the level of consumer confidence
impacting discretionary spending, business interruptions due to
adverse weather conditions, increased interest rates, unanticipated
changes in consumer demand and preferences, deterioration in the
quality of Marine Products’ network of independent boat dealers
or availability of financing of their inventory, our ability to insulate
financial results against increasing commodity prices, the impact of
disruptions in current supplier relationships, our ability to purchase
construction materials in sufficient quantities and quality, our
ability to identify, complete or successfully integrate acquisitions
or strategic alliances, competition from other boat manufacturers
and dealers, our potential liability for personal injury and property
damage claims, our ability to comply with environmental and other
regulatory requirements, our dependence on our key personnel
and the loss or interruption of the services of such personnel, risks
related to cyber-attacks or other threats, as our operations are
dependent on digital technologies and services. We caution you
that such statements are only predictions and not guarantees of
future performance and that actual results, developments and
business decisions may differ from those envisioned by the forward-
looking statements. See “Risk Factors” on page 19 for a discussion
of factors that may cause actual results to differ from our projections.
ITEM 1.
BUSINESS
Marine Products manufactures fiberglass motorized boats distributed and marketed through its independent dealer network. Marine Products’
product offerings include Chaparral sterndrive and outboard pleasure boats and Robalo outboard sport fishing boats.
ORGANIZATION AND OVERVIEW
Marine Products is a Delaware corporation incorporated on
August 31, 2000, in connection with a spin-off from RPC, Inc. (NYSE:
RES) (“RPC”). Effective February 28, 2001, RPC accomplished the
spin-off by contributing 100 percent of the issued and outstanding
stock of Chaparral to Marine Products, a newly formed, wholly
owned subsidiary of RPC, and then distributing the common stock of
Marine Products to RPC stockholders.
Marine Products designs, manufactures and sells recreational
fiberglass powerboats in the sportboat and sport fishing boat
markets. The Company sells its products to a network of 210 domestic
and 88 international independent authorized dealers. Marine
Products’ mission is to enhance its customers’ boating experience
by providing them with high quality, innovative powerboats. The
Company intends to remain a leading manufacturer of recreational
powerboats for sale to a broad range of consumers worldwide.
Chaparral was founded in 1965 in Ft. Lauderdale, Florida. Chaparral’s
first boat was a 15-foot tri-hull design with a retail price of less than
$1,000. Over time Chaparral grew by offering exceptional quality and
consumer value. In 1976, Chaparral moved to Nashville, Georgia,
where a manufacturing facility of a former boat manufacturing
company was available for purchase. This provided Chaparral an
opportunity to obtain additional manufacturing space and access to
a trained workforce. With over 57 years of boatbuilding experience,
Chaparral continues to expand the range of its offerings through
insightful, innovative product design and quality manufacturing
processes in order to reach an increasingly discerning recreational
boating market.
The Company manufactures Chaparral sterndrive pleasure boats
including SSi and SSX models, and the Chaparral Surf Series. The
Company also manufactures Chaparral outboard pleasure boats
which include OSX Luxury Sportboats and SSi outboard models.
In addition to the outboard models manufactured by Chaparral, the
Company also manufactures Robalo outboard sport fishing boats.
Robalo was founded in 1969 and its first boat was a 19-foot center
console salt-water fishing boat, among the first of this type of boat
to have an “unsinkable” hull. The models manufactured under the
Robalo name include center consoles, dual consoles and Cayman
Bay Boats.
The most recent available industry statistics [source: Statistical
Surveys, Inc. report dated September 30, 2022] indicate that Robalo
Marine Products Corporation 2022 10-K
1 1
Part I
Item 1. — Business
is the third largest manufacturer of outboard boats in lengths from
18 to 36 feet in the United States with a market share of 4.2 percent.
Additionally, the combination of Robalo and Chaparral outboards
holds the second highest position in the outboard market of this size
range, with a market share of 5.4 percent.
PRODUCTS
Marine Products distinguishes itself by offering a wide range of
products to the family recreational markets through its Chaparral
brands and to the sport fishing market through its Robalo brands.
The following table provides a brief description of our product lines and their particular market focus:
Product Line
Number
of
Models
Overall
Length
Approximate
Retail
Price Range
Chaparral – SSi Sport Boats
6
21' – 23'
$55,000 – $91,000
Chaparral – SSX Sport Boats
5
24' – 34'
$126,000 – $546,000
Chaparral – Surf Series
5
21' – 30'
$75,000 – $312,000
Chaparral – OSX Sport Boats
4
25' – 30'
$136,000 – $433,000
Robalo – Center Consoles
11
18' – 36'
$47,000 – $627,000
Robalo – Cayman Bay Boats
6
20' – 26'
$53,000 – $198,000
Robalo – Dual Consoles
2
20' – 31'
$59,000 – $343,000
Description
Fiberglass sterndrive and outboard-powered, larger
sport boats marketed as high value runabout for larger
groups. Design features handling of a runabout, style
of a sportboat and open concept layout. Select models
offer Ski & Fish options to meet specific needs. All
marketed with National Advertised Prices.
Fiberglass sterndrive and outboard powered bowriders
that combine features of sportboats and bowriders.
Marketed as high value, luxury runabouts for family
groups.
This model line features a forward-facing sterndrive
engine. Fiberglass multipurpose bowriders, the Surf
Series models are marketed to both experienced and
value-conscious buyers. These boats are designed to
enhance the wake of the boat to accommodate the
popular sport of wake surfing.
Fiberglass, multipurpose sport boats with outboard
power featuring plentiful seating and entertaining
areas, cabin and bathroom accommodations, excellent
performance, and luxury finishes.
Fiberglass outboard sport fishing boats for large
freshwater lakes or saltwater use. Marketed to
experienced fishermen seeking family-friendly
amenities. Smaller models include a trailer, and all
models are marketed with a national fixed retail price.
The Explorer series features extra seating options.
Fiberglass outboard sport fishing boats for large
freshwater lakes or coastal saltwater use. Marketed
to experienced fishermen wanting inshore and
offshore capabilities. All models marketed with a
trailer at a national fixed retail price.
Multi-purpose fiberglass outboard-powered sport
fishing boats for large freshwater lakes or saltwater
use. Marketed with national fixed retail prices to
experienced fishermen and families looking for both
fishing and cruising features.
1 2 Marine Products Corporation 2022 10-K
MANUFACTURING
Marine Products’ manufacturing facilities are in Nashville, Georgia.
Marine Products utilizes five different plants to, among other things,
manufacture interiors, design new models, create fiberglass hulls
and decks, and assemble various end products. Quality control
is conducted throughout the manufacturing process. When fully
assembled and inspected, the boats are loaded onto either
Company-owned trailers or third-party marine transport trailers
for delivery to dealers. The manufacturing process begins with
the design of a product to meet dealer and customer needs. Plugs
are constructed in the research and development phase from
designs. Plugs are used to create a mold from which prototype
boats can be built. Adjustments are made to the plug design until
acceptable parameters are met. The final plug is used to create
the necessary number of production molds. Molds are used to
produce the fiberglass hulls and decks. Fiberglass components
are made by applying the outside finish or gel coat to the mold,
then numerous layers of fiberglass and resin are applied during the
lamination process over the gel coat. After curing, the hull and deck
are removed from the molds and are trimmed and prepared for final
assembly, which includes the installation of electrical and plumbing
systems, engines, upholstery, accessories and graphics.
PRODUCT WARRANTY
For our Chaparral and Robalo products, Marine Products provides a
lifetime limited structural hull warranty and a transferable one-year
limited warranty to the original owner. Chaparral also includes a
five-year limited structural deck warranty. Warranties for additional
items are provided for periods of one to five years and are not
transferrable. Additionally, as it relates to the first subsequent
owner, a five-year transferrable hull warranty and the remainder
of the original one-year limited warranty on certain components
are available. The five-year transferable hull warranty terminates
five years after the date of the original retail purchase. Claim costs
related to components are generally absorbed by the original
component manufacturer.
The manufacturers of the engines, generators, and navigation
electronics included on our boats provide and administer their own
warranties for various lengths of time.
SUPPLIERS
Marine Products’ three most significant cost components used in
manufacturing its boats are engines, resins and fiberglass. For each
of these, there is currently an adequate supply available in the
market. During the period beginning in the second quarter of 2020,
at various times Marine Products experienced significant shortages
in, and delayed shipments of, several of these raw materials
and component parts used in manufacturing its products. These
shortages have reduced our ability to meet the existing levels of
dealer and consumer demand and have also increased working
capital requirements during this period. During the third and fourth
quarters of 2022, however, many of these shortages or delays
began to ease, which allowed Marine Products to complete and
ship more boats. As a result, unit sales during the fourth quarter of
2022 were the highest of any quarter during the year, and working
capital requirements began to decline as well.
Part I
Item 1. — Business
Marine Products does not manufacture the engines installed in
its boats. Engines are generally specified by the dealers at the
time of ordering a boat, usually based on anticipated customer
preferences or actual customer orders. Sterndrive engines are
purchased through the American Boatbuilders Association (“ABA”),
which has entered into engine supply arrangements with Mercury
Marine and Volvo Penta, the two currently existing suppliers of
sterndrive engines. These arrangements contain incentives and
discount provisions, which may reduce the cost of the engines
purchased, if specified purchase volumes are met during specified
periods of time. Although no minimum purchases are required,
Marine Products expects to continue purchasing sterndrive engines
through the ABA on a voluntary basis in order to receive volume-
based purchase discounts. Marine Products does not have a long-
term supply contract with the ABA. Marine Products has outboard
engine supply contracts with Yamaha and Mercury Marine which
were not negotiated through the ABA. In the event of a sudden and
extended interruption in the supply of engines from any of these
suppliers, our sales and profitability could be negatively impacted.
See “Risk Factors” below.
Marine Products uses other raw materials in its manufacturing
processes. Among these are resins, made from hydrocarbon
feedstocks, as well as copper and steel. The costs of these
commodities fluctuate in response to changes in global economic
conditions.
SALES AND DISTRIBUTION
Domestic sales are generated through our independent dealer
network of approximately 73 Chaparral dealers, 47 Robalo dealers
and 90 dealers that sell both brands located in markets throughout
the United States. Marine Products also has 88 international
dealers. Most of our dealers also inventory and sell boat brands
manufactured by other companies, including some that compete
directly with our brands. The territories served by any dealer are not
exclusive to the dealer; however, Marine Products uses discretion in
establishing relationships with new dealers in an effort to protect the
mutual interests of the existing dealers and the Company. Marine
Products’ six independent field sales representatives call upon
existing dealers and develop new dealer relationships. The field
sales representatives are directed by a National Sales Coordinator,
who is responsible for developing the dealer distribution network
for the Company’s products. No single dealer accounted for
10 percent or more of net sales during 2022, 2021 or 2020. The
marketing of boats to retail customers is primarily the responsibility
of the dealer. Marine Products supports dealer marketing efforts by
supplementing local advertising, sales and marketing follow up in
boating magazines, and participation in selected regional, national,
and international boat show exhibitions. In addition, Marine Products
has developed virtual marketing programs which include online
product demonstrations and virtual reality software and hardware
which promote the features of its products. The Company’s virtual
marketing efforts have become increasingly important beginning
in 2020, when social distancing requirements resulting from the
COVID-19 pandemic limited customer interaction at boat dealers’
facilities and reduced in-person boat shows during the winter boat
show season.
Marine Products Corporation 2022 10-K
1 3
Part I
Item 1. — Business
Marine Products continues to seek new dealers in many areas
throughout the U.S., Canada, Europe, South America, Asia, and the
Middle East. In general, Marine Products requires full payment in
U.S. dollars prior to shipping a boat overseas. Consequently, there
is no credit risk associated with these international sales or risk
related to foreign currency fluctuation. The Company’s international
sales are affected by trends in consumer discretionary spending
and the value of the U.S. dollar on global currency markets, among
other things. During 2022, the Company’s international net sales
increased 61.2 percent compared to 2021 despite the impact of
trade tariffs enacted during 2018, most notably in Mexico and the
European Union which was lifted during the second quarter of 2022.
International net sales as a percentage of total net sales were 6.7
percent in 2022, 5.3 percent in 2021, and 4.9 percent in 2020.
Marine Products’ sales orders are indicators of strong interest from
its dealers. Historically, dealers have in most cases taken delivery of
all their orders. In a typical ordering, production and delivery cycle,
the Company monitors dealer inventory levels in order to inform
its production scheduling and to ensure that dealers do not hold
excess inventory. During 2021 and 2022, however, extraordinarily
high dealer and consumer demand combined with the Company’s
production delays caused by supply chain disruptions have
caused dealer inventories to fall to historic lows. The combination
of low inventory levels and continued high demand has forced the
Company to allocate its production to dealers to fulfill as many
orders as possible and rebuild dealer inventories to levels that both
the Company and its dealers believe to be appropriate. Marine
Products believes that this allocation of production will continue
during 2023. In the past, Marine Products has been able to resell
any boat for which an order has been cancelled and believes that
this ability will continue during the near term.
Approximately 58 percent of Marine Products’ domestic shipments
are made pursuant to “floor plan financing” programs in which
Marine Products’ subsidiaries participate on behalf of
their
dealers with major third-party financing institutions. The remaining
dealers finance their boat inventory with smaller regional financial
institutions in local markets or self-finance. Under these established
arrangements with qualified lending institutions, a dealer establishes
a line of credit with one or more of these lenders for the purchase
of boat inventory for sales to retail customers in their showroom or
during boat show exhibitions. In general, when a dealer purchases
and takes delivery of a boat pursuant to a floor plan financing
arrangement, it draws against its line of credit and the lender pays
the invoice cost of the boat directly to Marine Products generally
within ten business days. When the dealer in turn sells the boat to
a retail customer, the dealer repays the lender, thereby restoring
its available credit line. Each dealer’s floor plan credit facilities are
secured by the dealer’s inventory, letters of credit, and perhaps
other personal and real property. In connection with a dealer’s floor
plan financing arrangements with a qualified lending institution,
Marine Products or its subsidiaries have agreed to repurchase
inventory which the lender repossesses from a dealer and returns
to Marine Products in a “new and unused” condition subject to
normal wear and tear, as defined. The contractual agreements that
Marine Products or its subsidiaries have with these qualified lenders
contain the Company’s assumption of specified percentages of the
debt obligation on repossessed boats, up to certain contractually
determined dollar limits negotiated with the lender.
The Company currently has an agreement with one of the floor
plan lenders whereby the contractual repurchase limit, subject to
a minimum of $8.0 million, is based on a specified percentage of
the amount of the average net receivables financed by the floor
plan lender for our dealers less repurchases during the prior 12
month period, which was a repurchase limit of $8.0 million as of
December 31, 2022. The Company has contractual repurchase
agreements with additional lenders with an aggregate maximum
repurchase obligation of $4.3 million, with various expiration
and cancellation terms of less than one year. Accordingly, the
aggregate repurchase obligation with all financing institutions was
approximately $12.3 million as of December 31, 2022. In the event
that a dealer defaults on a credit line, the qualified lender may then
invoke the manufacturer’s repurchase obligation with respect to that
dealer. In that event, all repurchase agreements of all manufacturers
supplying a defaulting dealer are generally invoked regardless of
the boat or boats with respect to which the dealer has defaulted.
Unlike Marine Products’ obligation to repurchase boats repossessed
by qualified lenders, Marine Products is under no obligation to
repurchase boats directly from dealers. Marine Products does not
sponsor financing programs to the retail consumer; any consumer
financing promotions for a prospective boat purchaser would be the
responsibility of the dealer.
Marine Products’ dealer sales incentive programs are generally
designed to promote early replenishment of the stock in dealer
inventories depleted throughout the prime spring and summer
selling seasons, and to promote the sales of older models in dealer
inventory and particular models during specified periods. These
programs help to stabilize Marine Products’ manufacturing between
the peak and off-peak periods and promote sales of certain models.
For the 2023 model year (which commenced July 1, 2022), Marine
Products offered its dealers several sales incentive programs
based on dollar volume and timing of dealer purchases. Program
incentives offered include sales discounts and payment of floor
plan financing interest charged by qualified floor plan lenders to
dealers generally through April 30, 2023. After the interest payment
programs end, interest costs revert to the dealer at rates set by the
lender. A dealer makes periodic curtailment payments (principal
payments) on outstanding obligations against its dealer inventory
as set forth in the floor plan financing agreements between the
dealer and its particular lender.
We do not believe that dealer inventories of our boat models as of
December 31, 2022 are sufficient to meet the current level of retail
customer demand. The sales order backlog as of December 31,
2022 was 1,544 boats with estimated net sales of approximately
$115.0 million. This represents an approximate 16.6 week backlog
based on recent production levels. The sales order backlog as of
December 31, 2021 was 2,457 boats with estimated net sales of
approximately $166.0 million. This represented an approximate
30.0 week backlog based on production levels at that time. The
Company’s backlog measured in weeks at December 31, 2022
was less meaningful than in past periods because the Company is
allocating its productions to its dealers rather than manufacturing
boats in response to dealer orders as has been its past practice.
The Company will continue to monitor the number of boats in dealer
inventories and adjust its production levels as it deems necessary to
manage dealer inventory levels. Due to the high retail demand, over
96 percent of our boats have been in dealer inventory less than
1 4 Marine Products Corporation 2022 10-K
Part I
Item 1. — Business
12 months as of December 31, 2022. The Company typically does
not manufacture a significant number of boats for its own inventory.
The Company occasionally manufactures boats for its own inventory
because the number of boats required for immediate shipment is not
always the most efficient number of boats to produce in a given
production schedule.
RESEARCH AND DEVELOPMENT
Essentially the same technologies and processes are used to
produce fiberglass boats by all boat manufacturers. The most
common method to build fiberglass boats is with open-face
molding. This is usually a labor-intensive, manual process whereby
employees hand spray and apply fiberglass and resin in layers on
open molds to create boat hulls, decks and other smaller fiberglass
components. A single open-face mold is typically capable of
producing approximately three hulls per week.
Marine Products has been a leading innovator in the recreational
boating industry. One of the Company’s most innovative designs is
the full-length “Extended V-Plane” running surface on its Chaparral
boat models. Typically, sterndrive boats have a several foot gap
on the bottom rear of the hull where the engine enters the water.
With the Extended V-Plane, the running surface extends the full
length to the rear of the boat. The benefit of this innovation is more
deck space, better planing performance and a more comfortable
ride. Although the basic hull designs are similar, the Company has
historically introduced a variety of new models each year and
periodically replaces, updates or discontinues existing models.
Another hull design is the Hydro LiftTM used on the Robalo boat
models. This variable dead rise hull design provides a smooth
ride in rough water conditions. It increases the maximum speed
obtainable by a given engine horsepower and weight of the boat.
Robalo’s current models utilize the Hydro LiftTM design and we plan
to continue to provide this design on Robalo models.
In support of its new product development efforts, Marine Products
incurred research and development costs of $437 thousand in
2022, $776 thousand in 2021, and $751 thousand in 2020.
INDUSTRY OVERVIEW
The recreational marine market in the United States is a mature
market, with 2021 retail expenditures of approximately $57 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 with all other leisure activities for consumers’ limited
free time.
There are currently approximately 12 million recreational boats
owned in the United States, including outboard, inboard, sterndrive,
jet drive, sailboats and personal watercraft. Marine Products
competes in the sterndrive boating category with three lines of
Chaparral boats and in the outboard category with its Robalo sport
fishing boats, Chaparral OSX Sport Luxury, and selected Chaparral
SSi models. Management believes that the five largest states for
boat sales at the present time are Florida, Texas, Michigan, North
Carolina and Minnesota. Marine Products has dealers in each of
these states.
Industry retail sales of new outboard boats in the United States
during 2022 totaled 47,099 units and accounted for approximately
71 percent of the total new fiberglass powerboats sold between 18
and 36 feet in hull length. Retail sales of new outboard boats had
an estimated total retail value of $3.7 billion, with an average retail
price per unit of approximately $79,000. Approximately 58 percent
of the Company’s unit sales to dealers in 2022 were outboard boats
compared to 62 percent in 2021. Retail sales of new sterndrive
boats in the United States during 2022 totaled 6,552 units and
accounted for approximately 10 percent of the total new fiberglass
powerboats sold in the 21 to 34 feet hull length. Retail sales of new
sterndrive boats had an estimated total retail value of $880 million,
with an average retail price per unit of approximately $134,000.
Approximately 42 percent of the Company’s unit sales to dealers in
2022 were sterndrive boats compared to 38 percent in 2021.
The table below reflects the estimated annual sales within the
recreational marine market segment by category for 2022 and 2021
(source: Info-Link Technologies, Inc.):
2022
2021
Boats
Sales
($ B)
6,552 $ 0.9
47,099
3.7
2.0
66,116 $ 6.6
12,465
Boats
7,165
53,471
12,871
73,507
Sales
($ B)
$ 0.8
3.8
1.8
$ 6.4
Sterndrive Boats
Outboard Boats
Inboard Boats
Total
Chaparral’s products are categorized as sterndrive boats and
outboard boats, and Robalo’s products are categorized as outboard
boats. Industry-wide sterndrive boat unit sales have declined
steadily during the last three years.
The recreational boat manufacturing market remains highly
fragmented, although several large public companies own, or
have started to acquire, a diversified group of recreational boat
manufacturers. We estimate that the boat manufacturing industry
includes fewer than 20 sterndrive manufacturers and approximately
75 outboard boat manufacturers with significant unit production, with
a large number representing small, privately held companies with
varying degrees of professional management and manufacturing
skill. According to estimates provided by Statistical Surveys, Inc.,
during the latest reported period ended September 30, 2022, the top
five outboard model manufacturers, which include Marine Products
Corporation’s Robalo brands, have a combined market share of
approximately 24 percent, compared to 28 percent during the
same period in the prior year. Also according to Statistical Surveys,
Inc., the top five sterndrive model manufacturers, – which includes
Chaparral, have a combined market share of approximately 74
percent, the same as during the same period in the prior year.
Chaparral’s market share in sterndrive units during this period was
approximately 19.8 percent, a slight increase compared to the same
period in the prior year.
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. As noted elsewhere, consumer demand
began to increase significantly during the second quarter of 2020
Marine Products Corporation 2022 10-K
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Part I
Item 1. — Business
as the COVID-19 pandemic encouraged American consumers to
seek safe outdoor activities involving a limited number of people.
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 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,
international tariffs, 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; and
> a lack of financial strength among retail boat dealers and
many manufacturers.
BUSINESS STRATEGIES
Recreational boating is a mature industry. According to Info-Link
Technologies, Inc., retail sales of new powerboats of all types
decreased at a compounded annual rate of approximately 2.3
percent between 2018 and 2022. During this period, Marine Products
experienced a compounded annual decline rate of approximately
5.1 percent in the number of boats sold. The Company has historically
grown its boat sales and net sales primarily through increasing
market share and by expanding its number of models and product
lines. At the end of 2022, the Company’s dealer inventories were
approximately 70.0 percent higher than they were at the end of
2021, and our unit order backlog was 37.2 percent lower than it was
at the end of 2021. In spite of high retail and dealer demand, and
historically low dealer inventories, our unit order backlog is lower
at the end of 2022 than at the end of 2021 because current supply
chain issues prevent us from forecasting our production accurately
during the near term. We believe that dealer inventories are not
sufficient to meet retail demand during the 2023 retail selling
season. Chaparral has grown its sterndrive market share in its size
category from 5.9 percent in fiscal 1996 to 19.8 percent during the
latest reported period ended September 30, 2022 (the most recent
information available to us from Statistical Surveys, Inc.).
During 2022, Marine Products generated its highest unit sales
volume to dealers within two of Chaparral’s sterndrive SSI models.
In general, our model mix during 2022 shifted to larger boats, which
generate higher average selling prices.
Our high-volume models support Marine Products’ overall operating
strategy, which emphasizes innovative designs and manufacturing
processes, and the production of a high-quality product, while also
seeking to lower manufacturing costs through increased efficiencies
in our facilities. In addition, we seek opportunities to leverage our
buying power through economies of scale. Management believes
its membership in the ABA positions Marine Products as a significant
third-party customer of major suppliers of sterndrive engines. Marine
Products’ Chaparral subsidiary is a founding member of the ABA,
which collectively represents 23 independent boat manufacturers
that have formed a buying group to pool their purchasing power
to achieve improved pricing on engines, fiberglass, resin and many
other components. Marine Products intends to continue seeking the
most advantageous purchasing arrangements from its suppliers.
Our marketing strategy seeks to increase market share by enabling
Marine Products to expand its presence by building dedicated
sales, marketing and distribution systems. Marine Products has a
distribution network of 298 independent dealers located throughout
the United States and in several international markets. Our strategy
is to increase selectively the quantity of our dealers, and to improve
the quality and effectiveness of our entire dealer network. Marine
Products seeks to capitalize on its strong dealer network by
educating its dealers on the sales and servicing of our products and
helping them provide more comprehensive customer service, with
the goal of increasing customer satisfaction, customer retention and
future sales. Marine Products provides promotional and incentive
programs to help its dealers increase product sales and customer
satisfaction. During 2022 we continued to develop our nationally
advertised fixed retail pricing strategy. We believe the nationally
advertised fixed retail pricing gives the consumer confidence that
that they are getting the best possible price resulting in higher
customer satisfaction and encourages consistent pricing across
our dealer network. Marine Products also realizes that innovative
marketing is an increasingly important component of the full
customer experience and is leading the way with marketing and
branding that consistently present a luxury-oriented message that
integrate themselves into the boater’s entire experience.
A component of Marine Products’ overall strategy is to consider
making strategic acquisitions which complement existing product
lines, expand its geographic presence in the marketplace and
strengthen its capabilities depending upon availability, price and
complementary product lines. We periodically review potential
acquisition targets.
COMPETITION
The recreational boat industry is highly fragmented, resulting in
intense competition for customers, dealers and boat show exhibition
space. There is significant competition both within markets we
currently serve and in new markets that we may enter. Marine
Products’ brands compete with several large national or regional
manufacturers that have substantial financial, marketing and other
resources. However, we believe that our corporate infrastructure
and marketing and sales capabilities, in addition to our financial
strength, and our nationwide presence, enable us to compete
effectively against these companies. In each of our markets, Marine
Products competes on the basis of responsiveness to customer
needs, the quality and range of models offered, and the competitive
pricing of those models. Additionally, Marine Products faces general
competition from all other recreational businesses seeking to attract
consumers’ leisure time and discretionary spending dollars.
According to Statistical Surveys, Inc., the following is a list of the
top ten (largest to smallest) outboard boat manufacturers in the
1 6 Marine Products Corporation 2022 10-K
United States based on retail unit sales in 2022. According to
Statistical Surveys, Inc., the companies set forth below represent
approximately 47 percent of all United States retail outboard boat
registrations with hull lengths of 18 to 36 feet for the 12-month period
ended September 30, 2022 (latest data available to us).
1. Brunswick Corporation 1
2. Sea Hunt Boats
3. Marine Products Corporation 2
4. Key West
5. Hurricane
6. Tahoe
7. Sportsman Boats
8. Nautic Star 3
9. Grady-White
10. Carolina Skiff
The sterndrive engine powered market encompasses a wide
variety of boats, accounting for approximately 10 percent of
traditional powerboat retail unit sales during 2022. Marine Products
Corporation’ Chaparral brand was the second largest manufacturer
of sterndrive boats in lengths from 21 to 34 feet during the 12-month
period ended September 30, 2022 and its share of the market during
this period was approximately 19.8 percent. Primary competitors for
Chaparral in the sterndrive market during 2022 included Cobalt4,
Sea Ray5, Regal, Crownline and Monterey.
1 Includes Bayliner, Boston Whaler and Sea Ray outboard units
2 Includes Robalo and Chaparral outboard units
3 Division or subsidiary of MasterCraft Boat Holdings, Inc.
4 Division or subsidiary of Malibu Boats, Inc.
5 Division or subsidiary of Brunswick Corporation
ENVIRONMENTAL AND REGULATORY
MATTERS
Certain materials used in boat manufacturing, including the resins
used to make the decks and hulls, are toxic, flammable, corrosive,
or reactive and are classified by the federal and state governments
as “hazardous materials.” Control of these substances is regulated
by the Environmental Protection Agency (“EPA”) and state pollution
control agencies, which require reports and facility inspections to
monitor compliance with their regulations. The Occupational Safety
and Health Administration (“OSHA”) standards limit the amount of
emissions to which an employee may be exposed without the need
for respiratory protection or upgraded plant ventilation. Marine
Products’ manufacturing facilities are regularly inspected by OSHA
and by state and local inspection agencies and departments.
Marine Products believes that its facilities comply in all material
aspects with these regulations. We do not currently anticipate that
any material expenditure will be required to continue to comply with
existing environmental or safety regulations in connection with our
existing manufacturing facilities.
Recreational powerboats sold in the United States must be
manufactured to meet the standards of certification required by the
United States Coast Guard. In addition, boats manufactured for sale
Part I
Item 1. — Business
in the European Community must be compliant with the International
for Standardization requirements which specify
Organization
standards for the design and construction of powerboats. All boats
sold by Marine Products meet these standards. In addition, safety
of recreational boats is subject to federal regulation under the Boat
Safety Act of 1971. The Boat Safety Act requires boat manufacturers
to recall products for replacement of parts or components that
have demonstrated defects affecting safety. Marine Products has
from time to time instituted recalls for defective component parts
produced by other manufacturers. None of the recalls has had a
material adverse effect on Marine Products.
The EPA has adopted regulations stipulating that many marine
propulsion engines meet an air emission standard that requires
fitting a catalytic converter to the engine. These regulations also
require, among other things, that the engine manufacturer provide
a warranty that the engine meets EPA emission standards. The
engines used in Marine Products’ Chaparral and Robalo product
lines are subject to these regulations. These regulations are similar
to regulations adopted by the California Air Resources Board in
2007 but apply to all U.S. states and territories. This regulation has
increased the cost to manufacture the majority of the Company’s
boat products. Compliance with these EPA regulations has increased
Marine Products’ cost and may also reduce Marine Products’ net
sales, because the increased cost of owning a boat may force
consumers to buy a smaller or less expensive boat.
HUMAN CAPITAL
The table below shows the number of employees at December 31,
2022 and 2021:
At December 31,
Employees
2022
935
2021
880
The recreational boating
therefore
industry
headcount is subject to change based on production levels which
are a function of dealer and consumer demand. The Company’s
key human capital management objectives are focused on fostering
talent in the following areas:
is cyclical and
Diversity and Equality – The Company’s workforce reflects the
diversity of the community in which it operates. Our dedicated
team of employees work toward a common purpose. We provide
employment in a small community which we have supported as
the largest employer since 1976 under the same management.
Our company is strong in its values, relationships and consistency
in management. The Board of Directors has a human capital
and compensation committee that, among other things, monitors
compliance with applicable non-discrimination laws related to
race, gender and other protected classes. The Committee provides
quarterly reports to the Board, including discussion of any significant
compliance matters.
Development and Training – The Company’s management team and
all its employees are expected to exhibit and promote honest, ethical
and respectful conduct in the workplace. We have implemented
and maintained a corporate compliance program to provide
guidance for everyone associated with the Company, including its
employees, officers and directors (the “Code”). Annual review of
Marine Products Corporation 2022 10-K
1 7
Part I
Item 1. — Business
the Code is required, and the Code prohibits unlawful or unethical
activity, including discrimination, and directs our employees, officers,
and directors to avoid actions that, even if not unlawful or unethical,
might create an appearance of illegality or impropriety. In addition,
the Company provides annual training for preventing, identifying,
reporting and stopping any type of unlawful discrimination.
Employee Retention – Marine Products monitors voluntary
employee turnover and reports these statistics to senior operational
management. From time to time, the Company has rewarded
employee tenure through various bonus programs for its hourly
employees based on attendance and job performance.
Compensation and Benefits – The Company focuses on attracting
and retaining employees by providing compensation and benefit
packages that are competitive in the market, taking into account
the location and responsibilities of the job. We provide competitive
financial benefits such as a 401(k) retirement plan with a company
match, and generally grant awards of restricted stock for certain of
our salaried employees.
The Company provides a health insurance option that includes
a local primary physician who provides immediate care or
medical consultation to its employees at reduced or no cost, as
well as certain maintenance medications at reduced or no cost.
Under this program, an employee with a health concern visits the
physician’s office, which is close to our manufacturing facility, and
either receives care or is referred to another facility for testing or
additional care. We believe that this program improves employee
well-being by facilitating their access to health care.
Safety – Marine Products monitors several safety measures and
reports them to senior operational management on a regular basis.
Management reviews safety incidents, and the Company works
to remediate operational issues that may be potential causes of
any frequent incidents. In addition, the Company awards safety
bonuses to the drivers of its company-owned vehicles based on
their driving records.
to
response
In
the COVID-19 pandemic, Marine Products
temporarily suspended manufacturing operations for five weeks at
the end of the first quarter of 2020, out of concern for the well-being
of its employees and their families, and at the recommendation
of local and state authorities. The Company also coordinated
testing for employees at a local physician’s office. The Company
has since resumed operations and implemented additional safety
measures for its employees including providing face masks and
hand sanitizer as well as social distancing where possible. The
Company encourages vaccinations and has created opportunities
for employees to conveniently receive vaccinations at their job site.
PROPRIETARY MATTERS
Marine Products owns several trademarks, trade names and
patents that it believes are important to its business. Except for the
Chaparral and Robalo trademarks, however, Marine Products is not
dependent upon any single trademark or trade name or group of
trademarks or trade names. The Chaparral and Robalo trademarks
are currently registered in the United States. The current duration
for such registration ranges from seven to 15 years but each
registration may be renewed an unlimited number of times.
1 8 Marine Products Corporation 2022 10-K
SEASONALITY
Marine Products’ quarterly operating results are affected by
weather and general economic conditions. Quarterly operating
results for the second quarter traditionally record the highest sales
volume for the year because this corresponds with the highest
retail sales volume period. For similar reasons, quarterly operating
results for the fourth quarter often record the lowest sales volume
for the year. However, in 2020 Marine Products recorded the lowest
quarterly sales volume of the year in the second quarter because of
our temporary production facility closure caused by the COVID-19
pandemic, and the highest sales volume of the year in the fourth
quarter of 2020, due to high retail demand which extended beyond
the traditional retail selling season for recreational boats. Marine
Products did not experience traditional seasonal sales patterns
during 2021 and 2022 because retail customers were concerned
about low dealer inventories and were willing to purchase a
boat outside of the typical boating season. In addition, Marine
Products recorded the highest quarterly sales volume of 2022
during the fourth quarter due to improvement in our supply chain
and transportation availability. Boat demand remained very high
throughout 2021 and 2022 and we believe that these consumer
behaviors will continue in 2023. The results for any quarter are not
necessarily indicative of results to be expected in any future period.
INFLATION
During 2021 and 2022, inflation in the general economy has
increased to its highest level in more than 40 years due to economic
growth following the COVID-19 pandemic, labor shortages and U.S.
fiscal policy. As a result, the market prices of the raw materials
used by the Company’s manufacturing processes increased during
these periods. In addition, the Company purchases components
of which there are a limited number of suppliers, most of whom
are experiencing significant customer orders impacting their
ability to provide needed supply quantities. The costs of most of
these components increased as demand from recreational boat
manufacturers has increased and supply chains have remained
constrained. These cost increases are exacerbated by higher
transportation costs, which are included in the total cost of these
components. In response to historically high consumer demand as
well as higher raw materials and components costs, the Company
increased the prices for its products periodically beginning in the
third quarter of 2021 and continuing through the beginning of the
2023 model year. During the third and fourth quarters of 2022, the
prices of many raw materials used in the Company’s manufacturing
processes began to decline, and transportation became more
available and less expensive, thus easing the Company’s cost
pressures. As of the end of 2022, the Company’s price increases
during this period have had no discernible impact on the Company’s
sales due to high consumer demand and strong order backlogs, so
they have allowed Marine Products to maintain its profit margins.
However, if in the future the Company is forced to raise the prices of
its products due to increased raw materials and component costs, it
may not be able to continue to pass these increased costs along to
dealers and consumers, which could impact the Company’s profit
margins. Furthermore, such higher product prices may compel
consumers to choose smaller boats, boats with fewer features or
delay the purchase of a boat altogether.
Part I
Item 1.A. — Risk Factors
New boat buyers typically finance their purchases. Higher inflation
typically results in higher interest rates that could translate into an
increased cost of boat ownership. The Company believes that the
recent increases in interest rates creates a risk to retail demand
for recreational boats. However, we do not believe that this risk
will impact production and sales in the near future due to other
factors, such as historically low dealer inventories, high dealer
order backlog, and indications of consumer demand that extend
into the 2023 retail selling season.
AVAILABILITY OF FILINGS
Marine Products makes available free of charge on its website,
MarineProductsCorp.com,
10-K,
the annual
quarterly reports on Form 10-Q, current reports on Form 8-K and all
amendments to those reports on the same day as they are filed with
the Securities and Exchange Commission.
report on Form
ITEM 1.A.
RISK FACTORS
RISKS RELATED TO OUR BUSINESS
Economic Conditions, Availability of Credit and Consumer
Confidence Levels Affect Marine Products’ Sales Because
Marine Products’ Products are Purchased with Discretionary
Income.
During an economic recession or when an economic recession is
perceived as a threat, Marine Products will be adversely affected
as consumers have less discretionary income or are more apt to
save their discretionary income rather than spend it. During times
of global political or economic uncertainty, Marine Products will
be negatively affected to the extent consumers forego or delay
large discretionary purchases pending the resolution of those
uncertainties. Historical volatility in the prices and financial returns
of investments and residential real estate may force consumers to
delay retirement, or to choose more modest lifestyles when they
do retire. In such a case, consumers may not purchase boats,
may purchase boats later in their lives, or may purchase smaller
or less expensive boats. Tight lending and credit standards, which
until recently have been in use by lenders in the United States,
can make loans for boats harder to secure, and such loans may
carry unfavorable terms, which may force consumers to forego
boat purchases. These factors have also resulted in the past, and
may continue to result in the future, in a reduction in the quality
and number of dealers upon which Marine Products relies to sell
its products.
Marine Products Relies upon Third-Party Dealer Floor
Plan Lenders Which Provide Financing to its Network of
Independent Dealers.
Marine Products sells its products to a network of independent
dealers, most of whom rely on one or more third-party dealer floor
plan lenders to provide financing for their inventory prior to its sale
to retail customers. In general, this source of financing is vital to
Marine Products’ ability to sell products to its dealer network. While
dealer floor plan credit is currently available for many of our dealers
during the 2023 model year, the Company’s sales and profitability
could be adversely affected in the event of a decline in floor plan
financing availability, or if financing terms change unfavorably.
Interest Rates and Fuel Prices Affect Marine Products’ Sales.
The Company’s products are often financed by our dealers and the
retail boat consumers. Higher interest rates increase the borrowing
costs and, accordingly, the cost of doing business for dealers and
the cost of boat purchases for consumers. Fuel costs can represent
a large portion of the costs to operate our products. Therefore,
higher interest rates and fuel costs can adversely affect consumers’
decisions relating to recreational boating purchases.
to
Marine Products’ Dependence on its Network of
Independent Boat Dealers May Affect its Operating Results
and Sales.
Virtually all Marine Products’ sales are derived from its network
of independent boat dealers. Marine Products has no long-term
agreements with these dealers. Competition for dealers among
recreational powerboat manufacturers continues
increase
based on the quality of available products, the price and value
of the products, and attention to customer service. The Company
faces intense competition from other recreational powerboat
manufacturers in attracting and retaining independent boat dealers.
The number of independent boat dealers supporting the Chaparral
and Robalo trade names and the quality of their marketing and
servicing efforts are essential to Marine Products’ ability to generate
sales. A deterioration in the number of Marine Products’ network of
independent boat dealers could have a material adverse effect on
its boat sales. Marine Products’ inability to attract new dealers and
retain those dealers, or its inability to increase sales with existing
dealers, could substantially impair its ability to execute its business
plans. Although Marine Products’ management believes that the
quality of its products and services in the recreational boating
market should permit it to maintain its relationship with its dealers
and its market position, there can be no assurance that Marine
Products will be able to sustain its current sales levels.
Marine Products’ Financial Condition and Operating Results
may be Adversely Affected by Boat Dealer Defaults.
The Company’s products are sold through independent dealers
and the financial health of these dealers is critical to the Company’s
continued success. The Company’s results can be negatively
affected if a dealer defaults because Marine Products or its
subsidiaries may be contractually required to repurchase inventory
up to certain limits, although for business reasons, the Company may
decide to purchase additional boats in excess of this contractual
obligation.
Marine Products’ Sales are Affected by Weather Conditions.
Marine Products’ business is subject to weather patterns that may
adversely affect its sales. For example, drought conditions, or
Marine Products Corporation 2022 10-K
1 9
Part I
Item 1.A. — Risk Factors
merely reduced rainfall levels, or excessive rain, may close area
boating locations or render boating dangerous or inconvenient,
thereby curtailing customer demand for our products. In addition,
unseasonably cool weather and prolonged winter conditions may
lead to a shorter selling season in some locations. Hurricanes and
other storms could cause disruptions of our operations or damage
to our boat inventories and manufacturing facilities.
Marine Products’ Single Operational Location Creates Risk
for its Sales, Profits and the Value of its Assets.
Marine Products’ manufacturing operations are conducted in a
single location in Nashville, Georgia. To support our operations,
several of our suppliers have also established facilities close to
our manufacturing facility to provide timely delivery of fabricated
components to us. Catastrophic weather, civil unrest or other
unanticipated events beyond our control may disrupt both our
and our suppliers’ ability to conduct manufacturing operations or
transport our finished boats to our dealer network. We do not own
or have access to alternate manufacturing locations. In the event
of such events or conditions, we may incur damage to our work-
in-process and finished goods inventory and will incur impairment
charges to the value of that inventory. Furthermore, our sales and
profits may be adversely affected during and immediately after
such events or conditions due to our inability to manufacture and
deliver boats to our dealer network.
Marine Products Encounters Intense Competition Which
Affects our Sales and Profits.
The recreational boat industry is highly fragmented, resulting in
intense competition for customers, dealers and boat show exhibition
space. This competition affects both the markets which we currently
serve and new markets that we may enter in the future. We compete
with several large national or regional manufacturers that have
substantial financial, marketing and other resources.
Because Marine Products Relies on Third-party Suppliers,
Marine Products may be Unable to Obtain Adequate Raw
Materials, Engines and Components Which Could Increase
our Working Capital Requirements and Adversely Affect
Sales and Profit Margins.
Marine Products is dependent on third-party suppliers to provide raw
materials, engines and components essential to the construction of
its various powerboats. Especially critical are the availability and
cost of marine engines and commodity raw materials used in the
manufacture of Marine Products’ boats. Marine Products has only
four suppliers for the three types of engines it purchases. While
Marine Products’ management believes that supplier relationships
currently in place are sufficient to provide the engines and materials
necessary to meet present production demands, there can be
no assurance that these relationships will continue, that these
suppliers will remain in operation or that the quantity or quality of
materials available from these suppliers will be sufficient to meet
Marine Products’ future needs. Disruptions in current supplier
relationships or the inability of Marine Products to continue to
purchase construction materials in sufficient quantities and of
sufficient quality at acceptable prices to meet ongoing production
schedules could cause a decrease in sales or a sharp increase in
the cost of goods sold. Additionally, because of this dependence,
the volatility in commodity raw materials or current or future price
increases in production materials or the inability of Marine Products’
2 0 Marine Products Corporation 2022 10-K
management to purchase engines and materials required to execute
its growth and acquisition strategies could reduce the number of
boats Marine Products may be able to produce for sale or cause a
reduction in Marine Products’ profit margins.
As noted, we rely on third parties to supply a number of raw materials
used in our manufacturing processes. Prices for these raw materials
fluctuate, often unpredictably, due to market forces beyond our
control. When prices of these raw materials increase, we attempt to
preserve our profit margins by increasing the prices of our products.
During 2021, we experienced increases in raw materials prices and
successfully preserved our profitability by increasing prices for our
products. However, if inflation continues in the prices of these or
other raw materials or parts and components, there is no assurance
that we can continue to increase the prices of our products and
preserve our profitability.
intends
to pursue acquisitions and
Marine Products may be Unable to Identify, Complete or
Successfully Integrate Acquisitions.
Marine Products
form
strategic alliances that will enable Marine Products to acquire
complementary skills and capabilities, offer new products, expand
its customer base, and obtain other competitive advantages.
There can be no assurance, however, that Marine Products will
be able to successfully identify suitable acquisition candidates or
strategic partners, obtain financing on satisfactory terms, complete
acquisitions or strategic alliances, integrate acquired operations into
its existing operations, or expand into new markets. Once integrated,
acquired operations may not achieve anticipated levels of sales or
profitability, or otherwise perform as expected. Acquisitions also
involve special risks, including risks associated with unanticipated
problems, liabilities and contingencies, diversion of management
resources, and possible adverse effects on earnings and earnings
per share resulting from increased interest costs, the issuance of
additional securities, and difficulties related to the integration of the
acquired business. The failure to integrate acquisitions successfully
may divert management’s attention from Marine Products’ existing
operations and may damage Marine Products’ relationships with its
key customers and suppliers.
Increasing Expectations from Customers, Investors and Other
Stakeholders Regarding Our Environmental, Social and
Governance (ESG) Practices may affect Our Business, may
Create Additional Costs for us, or Expose Us to Related Risks.
Many companies are receiving greater attention from stakeholders
regarding their ESG practices, as well as their oversight of relevant
ESG
issues. The various stakeholders are placing growing
importance on our potential environmental and social issue risk
exposure and the impact of our choices. This trend appears likely to
continue. Increased focus on ESG and related decision-making may
negatively impact us as customers, investors and other stakeholders
may choose to not work with us or reallocate capital or decline to
make an investment as a result of their assessment of our ESG
practices. Companies that do not comport with, or do not adapt to,
these evolving investor and stakeholder ESG-related expectations
and standards, or that are assessed as not having responded
appropriately to the growing focus on ESG matters, may have their
brand and reputation harmed, and we or our stock price may be
adversely affected even though we may be in full compliance with
all relevant laws and regulations.
Part I
Item 1.A. — Risk Factors
RISK MANAGEMENT RISKS
Marine Products has Potential Liability for Personal Injury
and Property Damage Claims.
The products we sell or service may expose Marine Products to
potential liabilities for personal injury or property damage claims
relating to the use of those products. Historically, the resolution of
product liability claims has not materially affected Marine Products’
business. Marine Products maintains product liability insurance that
it believes to be adequate. However, there can be no assurance
that Marine Products will not experience legal claims in excess of
its insurance coverage or that claims will be covered by insurance.
Furthermore, any significant claims against Marine Products could
result in negative publicity, which could cause Marine Products’
sales to decline.
If Marine Products is Unable to Comply with Environmental
and Other Regulatory Requirements, its Business may be
Exposed to Liability and Fines.
Marine Products’ operations are subject to extensive regulation,
supervision and licensing under various federal, state and local
statutes, ordinances and regulations. While Marine Products
believes that it maintains all requisite licenses and permits and is in
compliance with all applicable federal, state and local regulations,
there can be no assurance that Marine Products will be able to
continue to maintain all requisite licenses and permits and comply
with applicable laws and regulations. The failure to satisfy these
and other regulatory requirements could cause Marine Products
to incur fines or penalties or could increase the cost of operations.
The adoption of additional laws, rules and regulations could also
increase Marine Products’ costs.
The U.S. Environmental Protection Agency (EPA) has adopted
regulations affecting many marine propulsion engines. This
regulation has increased the cost of boats subject to the regulation,
which may either reduce the Company’s profitability or reduce
sales.
As with boat construction in general, our manufacturing processes
involve the use, handling, storage and contracting for recycling or
disposal of hazardous or toxic substances or wastes. Accordingly,
we are subject to regulations regarding these substances, and the
misuse or mishandling of such substances could expose Marine
Products to liability or fines.
Additionally, certain states have required or are considering
requiring a license to operate a recreational boat. While such
licensing requirements are not expected to be unduly restrictive,
regulations may discourage potential first-time buyers, thereby
reducing future sales.
RISKS RELATED TO OUR LABOR FORCE
Marine Products’ Success Will Depend on its Key Personnel,
and the Loss of any Key Personnel may Affect its Powerboat
Sales.
Marine Products’ success will depend to a significant extent on
the continued service of key management personnel. The loss or
interruption of the services of any senior management personnel or
the inability to attract and retain other qualified management, sales,
marketing and technical employees could disrupt Marine Products’
operations and cause a decrease in its sales and profit margins.
Marine Products’ Ability to Attract and Retain Qualified
Employees is Crucial to its Results of Operations and
Future Growth.
Marine Products relies on the existence of an available hourly
workforce to manufacture its products. As with many businesses,
we are challenged at times to find qualified employees. There are
no assurances that Marine Products will be able to attract and retain
qualified employees to meet current and/or future growth needs.
GENERAL RISKS
Marine Products’ Stock Price has been Volatile.
Historically, the market price of common stock of companies
engaged in the discretionary consumer products industry has been
highly volatile. Likewise, the market price of our common stock has
varied significantly in the past. In addition, the availability of Marine
Products common stock to the investing public is limited to the extent
that shares are not sold by the executive officers, directors and their
affiliates, which could negatively impact the trading price of Marine
Products’ common stock, increase volatility and affect the ability of
minority stockholders to sell their shares. Future sales by executive
officers, directors and their affiliates of all or a substantial portion of
their shares could also negatively affect the trading price of Marine
Products’ common stock. We currently have an effective Form S-3
registration statement on file with the Securities and Exchange
Commission that would allow the sale of significant blocks of our
common stock by us and certain of our largest shareholders.
RISKS RELATED TO OUR CAPITAL AND
OWNERSHIP STRUCTURE
Marine Products’ Executive Officers, Directors and Their
Affiliates Together Have a Substantial Ownership Interest,
and Public Stockholders may have no Effective Voice in
Marine Products’ Management.
The Company has elected the “Controlled Corporation” exemption
under Section 303A of the New York Stock Exchange (“NYSE”) Listed
Company Manual. The Company is a “Controlled Corporation”
because a group that includes Gary W. Rollins, Pamela R. Rollins,
Amy Rollins Kreisler and Timothy C. Rollins, each of whom is a
director of the Company, controls in excess of fifty percent of
the Company’s voting power. As a “Controlled Corporation,” the
Company need not comply with certain NYSE rules including those
requiring a majority of independent directors and independent
nominating and compensation committees.
Marine Products’ executive officers, directors and their affiliates hold
directly or through indirect beneficial ownership, in the aggregate,
approximately 76 percent of Marine Products’ outstanding shares
of common stock. As a result, these stockholders effectively
control the operations of Marine Products, including the election of
directors and approval of significant corporate transactions such as
acquisitions. This concentration of ownership could also have the
effect of delaying or preventing a third-party from acquiring control
of Marine Products at a premium.
Marine Products Corporation 2022 10-K
2 1
RISKS RELATED TO DIGITAL
OPERATIONS, CYBERSECURITY AND
BUSINESS DISRUPTION
Our operations rely on digital systems and processes that
are subject to cyber-attacks or other threats that could have
a material adverse effect on our business, consolidated
results of operations and consolidated financial condition.
Our operations are dependent on digital technologies and services.
We use these technologies and services for internal purposes,
including data storage, processing and transmissions, as well as in
our interactions with customers and suppliers. Digital technologies
are subject to the risk of cyber-attacks, both from internal and
external threats. Internal threats in cybersecurity are caused by
the misuse of access to networks and assets by individuals within
the Company by maliciously or negligently disclosing, modifying
or deleting sensitive information. Individuals within the Company
include current employees, contractors and partners. External
threats in cybersecurity are caused by unauthorized parties
attempting to gain access to our networks and assets by exploiting
security vulnerabilities or through the introduction of malicious code,
such as viruses, worms, Trojan horses and ransomware. In response
to the risk of cyber-attacks, we regularly review and update
processes to prevent unauthorized access to our networks and
assets and misuse of data. We provide security awareness training
for all employees, and closely manage the accounts and privileges
of all employees and contractors. We also maintain an up-to-date
incident response plan to quickly address cybersecurity incidents.
If our systems for protecting against cybersecurity risks prove to
be insufficient, we could be adversely affected by, among other
things, loss of or damage to intellectual property, proprietary or
confidential information, or customer, supplier, or employee data,
as well as, interruption of our business operations and increased
costs required to prevent, respond to, or mitigate cybersecurity
attacks. These risks could harm our reputation and our relationships
with customers, suppliers, employees and other third parties, and
may result in claims against us. These risks could have a material
adverse effect on our business, consolidated results of operations
and consolidated financial condition.
Part I
Item 1.B — Unresolved Staff Comments
Our Executive Officers, Directors and Their Affiliates
Together Have a Substantial Ownership Interest, and the
Availability of Marine Products’ Common Stock to the
Investing Public May be Limited.
The availability of Marine Products’ common stock to the investing
public may be limited to those shares not held by the executive
officers, directors and their affiliates, which could negatively impact
Marine Products’ stock trading prices and affect the ability of
minority stockholders to sell their shares. Future sales by executive
officers, directors and their affiliates of all or a portion of their shares
could also negatively affect the trading price of our common stock.
The Controlling Group Could Take Actions That Could
Negatively Impact Our Results of Operations, Financial
Condition or Stock Price.
The Controlling Group may from time to time and at any time, in their
sole discretion, acquire or cause to be acquired, additional equity
or other instruments of the Company, its subsidiaries or affiliates,
or derivative instruments the value of which is linked to Company
securities, or dispose or cause to be disposed, such equity or
other securities or instruments, in any amount that the Controlling
Group may determine in their sole discretion, through open market
transactions, privately negotiated transactions or otherwise. In
addition, depending upon a variety of factors, the Controlling Group
may at any time engage in discussions with the Company and its
affiliates, and other persons, including retained outside advisers,
concerning
the Company’s business, management, strategic
alternatives and direction, and in their sole discretion, consider,
formulate and implement various plans or proposals intended to
enhance the value of their investment in the Company. In the event
the Controlling Group were to engage in any of these actions, our
common stock price could be negatively impacted, such actions
could cause volatility in the market for our common stock or could
have a material adverse effect on our results of operations and our
financial condition.
Provisions in Marine Products’ Certificate of Incorporation
and Bylaws may Inhibit a Takeover of Marine Products.
Marine Products’ certificate of
incorporation, bylaws and
other documents contain provisions including advance notice
requirements for stockholder proposals and director nominations,
and staggered terms of office for the Board of Directors. These
provisions may make a tender offer, change in control or takeover
attempt that is opposed by Marine Products’ Board of Directors
more difficult or expensive.
.
ITEM 1.B.
UNRESOLVED STAFF COMMENTS
None.
2 2 Marine Products Corporation 2022 10-K
Part I
Item 2. — Properties
ITEM 2.
PROPERTIES
Marine Products’ corporate offices are in Atlanta, Georgia. These offices are currently shared with RPC and are leased. The monthly rent
paid is allocated between Marine Products and RPC. Under this arrangement, Marine Products pays approximately $4,200 per month in rent.
Marine Products may cancel this arrangement at any time after giving a 30-day notice.
Chaparral owns and maintains approximately 1,162,000 square feet of space utilized for manufacturing, research and development,
warehouse, sales office and operations in Nashville, Georgia. In addition, the Company owns 83,000 square feet of manufacturing space
in Valdosta, Georgia. Marine Products’ total square footage under roof is allocated as follows: manufacturing — 724,700, research and
development — 68,500, warehousing — 315,700, office and other — 136,100.
ITEM 3.
LEGAL PROCEEDINGS
Marine Products is involved in litigation from time to time in the ordinary course of its business. Marine Products does not believe that the
ultimate outcome of such litigation will have a material adverse effect on its liquidity, financial condition or results of operations.
ITEM 4.
MINE SAFETY DISCLOSURES
Not applicable.
ITEM 4A.
INFORMATION ABOUT OUR EXECUTIVE OFFICERS
The Executive Officers of the Company have been elected by the Board of Directors to serve until the April 2023 Board of Directors’ meeting,
or until their earlier removal by the Board of Directors or their resignation. The following table lists the Executive Officers of Marine Products
and their ages, offices, and terms of office.
Name and Office with Registrant
Richard A. Hubbell (1)
Executive Chairman of the Board
Ben M. Palmer (2)
President and Chief Executive Officer
Michael L. Schmit (3)
Vice President, Chief Financial Officer and Corporate Secretary
Age
78
62
50
Date First Elected to Present Office
5/17/22
5/17/22
5/17/22
(1) Richard A. Hubbell has been Executive Chairman of the Board since May 17, 2022. Prior to that, he served as the President and Chief Executive Officer of Marine Products
since it was spun off in 2001. He is also the Executive Chairman of the Board at RPC, Inc. and previously served as its President since 1987 and Chief Executive Officer
since 2003. Mr. Hubbell serves on the Board of Directors of both companies.
(2) Ben M. Palmer has been President and Chief Executive Officer of the Company since May 17, 2022. Previously, he served as Vice President, Chief Financial Officer and
Treasurer of Marine Products since it was spun off in 2001 and assumed responsibility as Corporate Secretary in 2018. He is also the President and Chief Executive
Officer of RPC, Inc. and previously served as its Vice President, Chief Financial Officer, Treasurer and Corporate Secretary. Mr. Palmer serves on the Board of Directors
of both companies.
(3) Michael L. Schmit has been Vice President, Chief Financial Officer and Corporate Secretary of Marine Products since May 17, 2022. He is also the Vice President, Chief
Financial Officer and Corporate Secretary of RPC, Inc.
Marine Products Corporation 2022 10-K
2 3
Part II
Item 5. — Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Part II
ITEM 5.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER
MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Marine Products’ common stock is listed for trading on the New York Stock Exchange under the symbol “MPX.” As of February 17, 2023, there
were 34,437,678 shares of common stock outstanding and approximately 5,100 beneficial holders of our Company’s common stock.
ISSUER PURCHASES OF
EQUITY SECURITIES
The Company has a stock buyback program initially adopted in
2001 and subsequently amended in 2013 and 2019 that authorizes
the aggregate repurchase of 8,250,000 shares in the open market.
The Company did not repurchase any shares under this program in
2022 and 2021. There are 1,570,428 shares that remain available
for repurchase as of December 31, 2022. The program does not
have a predetermined expiration date.
PERFORMANCE GRAPH
The
the
following graph shows a five-year comparison of
cumulative total stockholder return based on the performance of
the stock of the Company, assuming dividend reinvestment, as
compared with both a broad equity market index and an industry
or peer group index. The indices included in the following graph are
the Russell 2000 Index (“Russell 2000”) and a peer group which
includes companies that are considered peers of the Company
(“Peer Group”). The companies included in the Peer Group have
been weighted according to each respective issuer’s stock market
capitalization at the end of each year. The companies in the Peer
Group are Brunswick Corporation, MarineMax, Inc., Malibu Boats,
Inc. and Mastercraft Boat Holdings, Inc.
The Russell 2000 is used because the Company is a component
of the Russell 2000, and because the Russell 2000 is a stock
index representing small capitalization U.S. stocks. During 2022,
the components of the Russell 2000 had an average market
capitalization of $2.8 billion, and a median market capitalization of
$950 million.
The graph below assumes the value of $100.00 invested on
December 31, 2017.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
300
250
200
150
100
50
0
12/30/2017
12/31/2018
12/31/2019
12/31/2020
12/31/2021
12/31/2022
Marine Products Corporation
Common Stock
Peer
Group
Russell
2000 Index
* Assumes Reinvestment of Dividends
2 4 Marine Products Corporation 2022 10-K
Part II
Item 6. — Reserved
ITEM 6.
RESERVED
ITEM 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
PRESENTATION
The following discussion should be read in conjunction with the
Consolidated Financial Statements included elsewhere in this
document. See also “Forward-Looking Statements” on page 10.
Discussions of 2021 items and year-to-year comparisons of 2021
and 2020 that are not included in this Form 10-K can be found in
“Management’s Discussion and Analysis of Financial Condition
and Results of Operations” in Part II, Item 7 of our Annual Report
on Form 10-K for the year ended December 31, 2021, which Item is
incorporated herein by reference.
OVERVIEW
Marine Products, through our wholly owned subsidiaries Chaparral
and Robalo, is a leading manufacturer of recreational fiberglass
powerboats. Our sales and profits are generated by selling the
products that we manufacture to a network of independent dealers
who in turn sell the products to retail consumers. These dealers are
located throughout the continental United States and in several
international markets. Dealers either remit payment upon receipt
of the product or finance their inventory through third-party floor
plan lenders, who pay Marine Products generally within ten days of
delivery of the products to the dealers.
We manage our Company by focusing on the execution of the
following business and financial strategies:
> Manufacturing high-quality, stylish, and innovative powerboats
for our dealers and retail consumers which are competitive in
the market,
> Coordinating a complex supply chain to ensure that raw
materials and parts used in manufacturing our products are
delivered on a timely basis,
> Providing our independent dealer network appropriate
incentives, training, and other support to enhance their success
and their customers’ satisfaction, thereby facilitating their
continued relationship with us,
> Managing our dealer’s expectations regarding our production
allocations during periods in which dealer demand exceeds
our production capacity,
> Managing our production and dealer order backlog to optimize
operating results and reduce risk in the event of a downturn in
sales of our products,
> Maintaining a flexible, variable cost structure which can be
reduced quickly when deemed appropriate,
> Designing our products and marketing strategies to create
a positive, memorable experience for our customers, within
an evolving environment which calls for the increased use
of technology to conduct virtual marketing and product
demonstration,
> Monitoring the recreational boat market for strong
complementary product lines which we may enter through new
product development or acquisition,
> Extending our brand name recognition to enhance the success
of new boat models that complement our existing offerings,
> Improving our sales and profits by increasing the utilization of
our manufacturing capacity,
> Monitoring the activities and financial condition of our dealers
and of the third-party floor plan lenders who finance our
dealers’ inventories,
> Maximizing stockholder return by optimizing the balance
of cash invested in the Company’s productive assets, the
payment of dividends to stockholders, and the repurchase of
the Company’s common stock on the open market, and
> Aligning the interests of our management and stockholders.
In executing these strategies and attempting to optimize our
financial returns, management closely monitors dealer orders
and inventories, the production mix of various models, and
indications of near term demand such as consumer confidence,
evolving customer preferences for socially distanced recreational
activities, interest rates, dealer orders placed at our annual dealer
conferences, and retail attendance and orders at annual winter
boat show exhibitions and through virtual marketing events. We
also consider trends related to certain key financial and other data,
including our historical and forecasted financial results, market
share, unit sales of our products, average selling price per boat,
and gross profit margins, among others, as indicators of the success
of our strategies. Marine Products’ financial results are affected
by consumer confidence and preferences, because pleasure
boating is a discretionary expenditure and consumers have many
competing activities for their leisure time. Pleasure boating is also
impacted by interest rates, the availability of financing and shifting
consumer preferences towards safe activities which do not involve
large crowds.
During 2022, aggregate retail sales of the boating segments in which
Marine Products operates increased by approximately 3.5 percent
compared to the prior year. Our consolidated net sales increased in
2022 compared to 2021 due to a 4.0 percent increase in unit sales
to dealers coupled with a 23.7 percent increase in the average
gross selling price per boat. Management will continue to monitor
retail demand among the various segments in the recreational boat
market, the actions of our competitors, dealer inventory levels and
Marine Products Corporation 2022 10-K
2 5
Part II
Item 7. — Management’s Discussion and Analysis of Financial Condition and Results of Operations
the availability of dealer and consumer financing for the purchase
of our products and adjust our production levels as deemed
appropriate.
We periodically monitor our market share in various categories
as one indicator of the success of our strategies and the market’s
acceptance of our products. For the 12 month period ended
September 30, 2022 (latest data available to us), Robalo’s share of
the 18 to 36 foot outboard sport fishing boat market was 4.2 percent,
the third highest market share within this category. Chaparral’s
market share in the 19 to 34 foot sterndrive category was 19.8 percent,
an increase in comparison to the same period in the prior year and
the second highest market share in this category during this period.
Marine Products Corporation’s share of the outboard recreational
market, including both Robalo and Chaparral’s outboard units,
was 5.4 percent of the total market within its size range for the 12
months ended September 30, 2022 which was the third highest
share among manufacturers of various outboard brands during this
period. We will continue to monitor our market share and believe it
to be important, but we believe that maximizing profitability takes
precedence over growing our market share. Furthermore, as we
continue to expand the breadth of our product offerings within our
core category and new categories, we consider our overall market
share across the various powerboat categories to be of greater
importance to the long-term health of our company than our market
share within any specific type of recreational boat.
OUTLOOK
We believe that the strong retail demand for new recreational
boats which began with the onset of the COVID-19 pandemic will
continue through 2023 though growth may moderate as retail
demand is satisfied and consumers return to more normal lifestyles
coupled with economic concerns and other factors such as interest
rates. Beginning in the second quarter of 2020, many consumers
chose recreational boating when they left urban areas to spend
time in vacation homes or in smaller groups, often located near
recreational bodies of water. Recreational boating is a leisure
activity that supports this transition because people perceive it
to be a safe outdoor activity which does not involve large groups
of people. We believe that retail demand will continue to exceed
the recreational boating industry’s production capacity for the
foreseeable future, though we note that fuel prices, higher interest
rates, and concerns regarding a possible recession in 2023 may
reduce consumer demand during 2023. Since many recreational
boat buyers finance their purchases, higher interest rates may force
them to choose smaller, less expensive boats or forgo the purchase
of a boat altogether.
In spite of strong consumer demand, industry retail unit sales in
2021 and 2022 declined compared to comparable prior year
periods. The Company believes that these declines have been
caused by the industry’s supply chain and labor problems which
are preventing recreational boat manufacturers from producing
sufficient units to meet retail and consumer demand. The overall
cost of boat ownership has increased over the last several years.
In particular, the cost to purchase a boat has increased because
of increased materials and labor costs and higher interest rates,
which increase the financing costs of boat ownership. In addition,
the price of fuel has fluctuated over the past several years,
creating uncertainty regarding the cost of operating a boat. The
higher cost of boat ownership may discourage consumers from
purchasing recreational boats. For years, Marine Products and
other boat manufacturers have been improving their customer
service capabilities, marketing strategies and sales promotions to
attract more consumers to recreational boating as well as improve
consumers’ boating experiences. The Company provides financial
incentives to its dealers for receiving favorable customer satisfaction
surveys. In addition, the recreational boating industry conducts a
promotional program which involves advertising and consumer
targeting efforts, as well as other activities designed to increase the
potential consumer market for pleasure boats. Many manufacturers,
including Marine Products, participate in this program. Management
believes that these efforts have incrementally benefited the industry
and Marine Products. Since the 2021 model year, Marine Products
has produced a smaller number of models than in previous years in
order to increase production efficiency. In addition, the average size
of the models the Company is producing has increased in response
to evolving retail demand, although concern regarding higher fuel
prices may encourage consumers to purchase smaller boats, which
use less fuel.
In a typical year, Marine Products and its dealers present our new
models to retail customers during the winter boat show season,
which takes place during the fourth and first calendar quarters. The
industry will conduct more boat shows in 2023 than in the previous
two years due to the easing of COVID-19 – related restrictions, so
we plan to attend more boat shows during 2023 than during the
previous two years.
Due to strong demand across the recreational sector, key materials
and components are in tight supply. Supply chain disruptions have
delayed the receipt of both raw materials and key components
used in our manufacturing process, thus delaying production and
deliveries to our dealers. Although these disruptions began to
moderate during the fourth quarter of 2022, they still impact our
ability to meet dealer and retail demand. Transportation shortages
have further impacted our ability to deliver finished products to our
dealers, though these issues began to moderate during the third
and fourth quarters of 2022. These production and shipment delays
caused our working capital requirements to increase significantly
starting in the third quarter of 2021, although our inventory levels
began to decline during the fourth quarter of 2022 as these issues
began to improve.
Our financial results during 2023 will depend on a number of factors,
including our ability to meet dealer and consumer demand in the
face of ongoing supply chain challenges which have impacted our
manufacturing operations. Additional factors that could impact our
results include the availability and cost of credit to our dealers and
consumers, increasing fuel costs, the continued acceptance of our
new products in the recreational boating market, the near-term
effectiveness of our marketing efforts, the availability and cost of
labor and certain of our raw materials and key components used
in manufacturing our products and the availability of qualified
employee and contract drivers to deliver our finished products
to dealers.
2 6 Marine Products Corporation 2022 10-K
Part II
Item 7. — Management’s Discussion and Analysis of Financial Condition and Results of Operations
RESULTS OF OPERATIONS
Total number of boats sold
Average gross selling price per boat (in thousands)
Net sales (in thousands)
Gross profit margin percent
Percentage of selling, general and administrative expenses to net sales
Operating income (in thousands)
Warranty expense (in thousands)
YEAR ENDED DECEMBER 31, 2022
COMPARED TO YEAR ENDED
DECEMBER 31, 2021
Net Sales. Marine Products’ net sales increased by $83.0 million
or 27.8 percent in 2022 compared to 2021. The increase was
primarily due to a 4.0 percent increase in the number of boats sold,
as well as an increase in parts and accessories sales, coupled
with a 23.7 percent increase in the average gross selling price per
boat. Unit sales increased in all of our Chaparral models as well
as many Robalo models during 2022 compared to the prior year
due to our success in finishing and shipping substantially completed
boats from inventory as a result of improvement of supply chain
issues. Average selling prices increased compared to the prior
year primarily due to a favorable model mix coupled with price
increases to cover increased costs including primarily materials and
components. Domestic net sales were $355.4 million, an increase
of 26.0 percent compared to the prior year. In 2022, international
net sales were $25.6 million, an increase of 61.2 percent compared
to the prior year.
Cost of Goods Sold. Cost of goods sold increased 25.0 percent in
2022 compared to 2021 consistent with the increase in net sales.
As a percentage of net sales, cost of goods sold decreased to
75.4 percent in 2022 compared to 77.1 percent in 2021 primarily
LIQUIDITY AND CAPITAL RESOURCES
Years ended December 31,
2022
4,331
76.8
380,995
24.6%
11.0%
51,796
5,903
$
$
$
$
2021
4,165
62.1
298,014
22.9%
10.7%
36,392
3,702
$
$
$
$
2020
3,689
56.1
239,825
22.4%
12.2%
24,361
2,845
$
$
$
$
due to price increases and a favorable model mix during 2022
compared to the prior year.
Selling, General and Administrative Expenses. Selling, general
and administrative expenses increased by 31.5 percent in 2022
compared to 2021 primarily due to an increase in costs that vary
with sales and profitability, such as incentive compensation, sales
commissions and warranty expense. In addition, the Company
recorded a $1.2 million pension settlement charge in 2022
associated with its defined benefit pension plan. Selling, general
and administrative expenses as a percentage of net sales were
11.0 percent in 2022 compared to 10.7 percent in 2021. As a
percentage of net sales, warranty expense was 1.5 percent in 2022
and 1.2 percent in 2021.
Interest Income, Net. Interest income, net increased due to
an increased cash balance and higher investment yields to
$338 thousand in 2022 compared to $16 thousand in 2021. Marine
Products generated interest income primarily from investments of
excess cash in money market funds. Additionally, interest expense
is recorded for the revolving credit facility, including fees on the
unused portion of the facility.
Income Tax Provision. The income tax provision increased to
$11.8 million in 2022 compared to $7.4 million in 2021. The effective
tax rate increased slightly from 22.6 percent in 2022 to 20.3 percent
in 2021.
Cash and Cash Flow
The Company’s cash and cash equivalents were $43.2 million at December 31, 2022, $14.1 million at December 31, 2021 and
$31.6 million at December 31, 2020. The following table sets forth the historical cash flows for the twelve months ended December 31:
(in thousands)
Net cash provided by operating activities
Net cash used in investing activities
Net cash used in financing activities
2022
$
49,348
$
(2,500)
(17,779)
2021
457
(1,248)
(16,680)
2020
$
29,874
(2,065)
(16,040)
Cash provided by operating activities in 2022 increased $48.9 million
compared to 2021. The net cash provided by operating activities in
2022 includes net income of $40.3 million coupled with a favorable
change in other accrued expenses of $4.0 million and net favorable
changes in other components of our working capital (including
accounts receivable, inventory and accounts payable) totaling
$2.2 million. The net favorable changes in accrued expenses and
accounts payable are primarily due to higher production levels and
profitability. Additionally, the favorable change in inventory is due to
finishing and shipping substantially completed boats from inventory
Marine Products Corporation 2022 10-K
2 7
Part II
Item 7. — Management’s Discussion and Analysis of Financial Condition and Results of Operations
as a result of improvement of supply chain issues in the current
year in comparison to the prior year which was negatively impacted
by supply chain disruptions of critical components needed to
complete boats.
Cash used for investing activities in 2022 was $2.5 million compared
to $1.2 million for the same period in 2021. This increase is primarily
due to higher capital expenditures in 2022 in comparison to the
same period of the prior year.
Cash used for financing activities in 2022 increased $1.1 million
compared to 2021 primarily due to increased dividends paid to
common shareholders, partially offset by a reduction in the cost of
stock repurchases related to the vesting of restricted shares.
Cash Requirements
Management expects that capital expenditures during 2023 will be
approximately $4.0 million.
The Company participates in a multiple employer Retirement
Income Plan (“Plan”), sponsored by RPC. The Company did not
make any cash contributions to this plan in 2022. During 2021, the
Company initiated actions to terminate the defined benefit pension
plan which are expected to be completed in early 2023. We do
not currently expect the Company to make any contributions to the
Plan in 2023.
On January 24, 2023, the Board of Directors approved a
quarterly cash dividend of $0.14 per common share payable
March 10, 2023 to stockholders of record at the close of business
on February 10, 2023.
The Company has a contractual agreement with one employee
that provides for a monthly payment equal to a percentage of
profits (defined as pretax income before goodwill amortization and
certain allocated corporate expenses) which effective June 1, 2022
was revised to seven percent of profits, as defined, compared to
10 percent of profits in the prior periods.
The Company has a stock buyback program initially adopted in
2001 and subsequently amended in 2013 and 2019 that authorizes
the aggregrate repurchase of 8,250,000 shares in the open market.
The Company did not repurchase any shares under this program in
2022 and 2021. There are 1,570,428 shares that remain available
for repurchase as of December 31, 2022. The program does not
have a predetermined expiration date.
The Company has entered into agreements with third-party floor
plan lenders where it has agreed, in the event of default by a
qualifying dealer, to repurchase MPC boats repossessed from the
dealer. These arrangements are subject to maximum repurchase
amounts and the associated risk is mitigated by the value of the
boats repurchased. The Company had no repurchases of dealer
inventory in 2022 and 2021. See further information regarding
repurchase obligations
11: COMMITMENTS AND
CONTINGENCIES” of the Consolidated Financial Statements which
is incorporated herein by reference.
in “NOTE
The Company believes that the liquidity provided by existing cash,
cash equivalents and marketable securities, its overall strong
capitalization, cash generated by operations and the Company’s
ability to sell up to approximately $150 million in shares of its
common stock under the Company’s shelf registration statement
will provide sufficient capital to meet the Company’s requirements
for at least the next twelve months. The Company’s decisions about
the amount of cash to be used for investing and financing purposes
are influenced by its capital position and the expected amount
of cash to be provided by operations. The Company also has a
revolving line of credit facility to increase its flexibility for managing
its investment in its working capital.
On November 12, 2021, the Company obtained a $20 million
revolving credit facility that matures November 2026. The facility
contains customary terms and conditions, including restrictions
on indebtedness, dividend payments, business combinations and
other related items. The facility includes (i) a $5 million sublimit for
swingline loans, (ii) a $2.5 million aggregate sublimit for all letters
of credit, and (iii) a committed accordion which can increase the
aggregate commitments by the greater of $35 million and EBITDA
over the most recently completed twelve month period at the time
of incurrence. As of December 31, 2022, the Company had no
outstanding borrowings under the revolving credit agreement. For
additional information with respect to MPC’s facility, see Note 7:
Notes Payable to Banks of the Consolidated Financial Statements
included in this report and which is incorporated herein by reference.
include our credit
CONTRACTUAL OBLIGATIONS
The Company’s obligations and commitments that require future
payments
facility, certain non-cancelable
operating leases, amounts related to the usage of corporate aircraft
and other long-term liabilities. For additional information with respect
to MPC’s contractual obligations, see Note 7: Long-term debt and
Note 14: Leases of the Consolidated Financial Statements included
in this report and which is incorporated herein by reference.
FAIR VALUE MEASUREMENTS
The Company’s assets and liabilities measured at fair value are
classified in the fair value hierarchy (Level 1, 2 or 3) based on the
inputs used for valuation. Assets and liabilities that are traded on
an exchange with a quoted price are classified as Level 1. Assets
and liabilities that are valued using significant observable inputs
in addition to quoted market prices are classified as Level 2. The
Company currently has no assets or liabilities measured on a
recurring basis that are valued using unobservable inputs and
therefore no assets or liabilities measured on a recurring basis are
classified as Level 3. For defined benefit plan and Supplemental
Executive Retirement Plan (“SERP”) investments measured at net
asset value, the values are computed using inputs such as cost,
discounted future cash flows, independent appraisals and market
based comparable data or on net asset values calculated by the
investment fund and not publicly available.
OFF BALANCE SHEET ARRANGEMENTS
To assist dealers in obtaining financing for the purchase of their
boats for inventory, the Company has entered into agreements
with various third-party floor plan lenders whereby the Company
guarantees varying amounts of debt for qualifying dealers on
boats in dealer inventory. The Company’s obligation under these
guarantees becomes effective in the case of a default under the
financing arrangement between the dealer and the third-party lender.
The agreements typically provide for the return of all repossessed
2 8 Marine Products Corporation 2022 10-K
Part II
Item 7. — Management’s Discussion and Analysis of Financial Condition and Results of Operations
boats in “new and unused” condition subject to normal wear and
tear, as defined, to the Company, in exchange for the Company’s
assumption of specified percentages of the debt obligation on those
boats, up to certain contractually determined dollar limits which vary
by lender. The Company had no repurchases of dealer inventory
under contractual agreements during 2022 and 2021.
Management continues to monitor the risk of additional defaults
and resulting repurchase obligations based primarily upon
information provided by the third-party floor plan lenders and to
adjust the guarantee liability at the end of each reporting period
based on information reasonably available at that time. As of
December 31, 2022, the Company believes the fair value of its
guarantee liability is immaterial. See further information regarding
repurchase obligations
11: COMMITMENTS AND
CONTINGENCIES” of the Consolidated Financial Statements which
is incorporated herein by reference.
in “NOTE
The Company currently has an agreement with one of the floor
plan lenders whereby the contractual repurchase limit, subject to
a minimum of $8.0 million, is based on a specified percentage of
the amount of the average net receivables financed by the floor
plan lender for our dealers less repurchases during the prior 12
month period, which was a repurchase limit of $8.0 million as of
December 31, 2022. The Company has contractual repurchase
agreements with additional lenders with an aggregate maximum
repurchase obligation of $4.3 million, with various expiration
and cancellation terms of less than one year. Accordingly, the
aggregate repurchase obligation with all financing institutions was
approximately $12.3 million as of December 31, 2022. Although
the Company has these agreements with financial institutions, in
certain situations, the Company may decide for business reasons to
repurchase boats in excess of these contractual amounts.
RELATED PARTY TRANSACTIONS
See “NOTE
the
Consolidated Financial Statements, which is incorporated herein by
reference, for a description of related party transactions.
13: RELATED PARTY TRANSACTIONS” of
CRITICAL ACCOUNTING POLICIES
AND ESTIMATES
The consolidated financial statements are prepared in accordance
with accounting principles generally accepted in the United States
of America, which require significant judgment by management in
selecting the appropriate assumptions for calculating accounting
estimates. These judgments are based on our historical experience,
terms of existing contracts, trends in the industry, and information
available from other outside sources, as appropriate. Senior
management has discussed the development, selection and
disclosure of its critical accounting policies that require significant
judgments or estimates with the Audit Committee of our Board of
Directors. The Company believes that, of its significant accounting
policies and estimates, the following may involve a higher degree of
judgment and complexity.
Sales incentives and discounts – The Company sells its boats
through its network of independent dealers and recognizes
the
revenues
its customers based on
from contracts with
consideration received in exchange for the goods sold. The
Company records incentives as a reduction of sales or as a cost
of sales as appropriate. Using historical trends and management
estimates, adjusted for current changes, the Company estimates the
amount of incentives that will be paid in the future on boats sold
and accrues an estimated liability. The Company offers various
incentives that promote sales to dealers, and to a lesser extent,
retail customers. These incentives are designed to encourage
timely replenishment of dealer inventories after peak selling
seasons, stabilize manufacturing volumes throughout the year,
and improve production model mix. The dealer incentive programs
are a combination of annual volume commitment discounts, and
additional discounts at time of invoice for those dealers who do
not finance their inventory through specified floor plan financing
agreements. The annual dealer volume discounts are primarily
based on July 1 through June 30 model year purchases. In addition,
the Company offers at various times other time-specific or model-
specific incentives.
The factors that complicate the calculation of the cost of these
incentives are the ability to estimate incentive payments of the
Company, the volume and timing of inventory financed by specific
dealers, and the identification of boats sold subject to certain
incentives. Settlement of the incentives generally occurs from three
to twelve months after the sale. The Company regularly analyzes
the historical incentive trends and adjusts recorded liabilities for
changes in trends and terms of incentive programs. Total cost of
incentives recorded in net sales as a percentage of gross sales was
5.6 percent in 2022, 5.8 percent in 2021, and 6.7 percent in 2020.
A 0.25 percentage point change in cost of incentives as a percentage
of gross sales during 2022 would have increased or decreased
net sales, gross margin and operating income by approximately
$0.8 million.
Warranty costs – The Company records as part of selling, general
and administrative expenses an experience-based estimate of the
future warranty costs to be incurred when sales are recognized. The
Company evaluates its warranty obligation for each product line
on a model year basis. The Company provides warranties against
manufacturing defects for various components of the boats, primarily
the fiberglass deck and hull, with warranty periods extending up to
a lifetime. Warranty costs, if any, on other components of the boats
are generally absorbed by the original component manufacturer.
Warranty costs can vary depending upon the size and number
of components in the boats sold, the pre-sale warranty claims,
and the desired level of customer service. While we focus on
high quality manufacturing programs and processes, including
actively monitoring the quality of our component suppliers and
managing the dealer and customer service warranty experience
and reimbursements, our estimated warranty obligation is based
upon the warranty terms and the Company’s enforcement of those
terms over time, manufacturing defects or issues, repair costs, and
the volume and mix of boat sales. The estimate of warranty costs
is regularly analyzed and is adjusted based on several factors
including the actual claims that occur. Warranty expense as a
percentage of net sales was 1.5 percent in 2022, 1.2 percent in
2021 and 2020. A 0.10 percentage point increase in the estimated
warranty expense as a percentage of net sales during 2022 would
have increased selling, general and administrative expenses and
reduced operating income by approximately $0.4 million.
Marine Products Corporation 2022 10-K
2 9
Part II
Item 7A. — Quantitative and Qualitative Disclosures about Market Risk
IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS
See “NOTE 1: SIGNIFICANT ACCOUNTING POLICIES” of the Consolidated Financial Statements, which is incorporated herein by reference, for
a description of recent accounting pronouncements, including the expected dates of adoption and expected effects on results of operations
and financial condition, if known.
ITEM 7.A.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Marine Products holds no derivative financial instruments which could expose the Company to significant market risk. Marine Products
maintains investments primarily in money market funds which are not subject to material interest rate risk exposure. Marine Products does not
expect any material changes in market risk exposures or how those risks are managed.
3 0 Marine Products Corporation 2022 10-K
MANAGEMENT’S REPORT ON INTERNAL CONTROL
OVER FINANCIAL REPORTING
To the Stockholders of Marine Products Corporation:
The management of Marine Products Corporation is responsible for establishing and maintaining adequate internal control over financial
reporting for the Company. Marine Products Corporation maintains a system of internal accounting controls designed to provide reasonable
assurance, at a reasonable cost, that assets are safeguarded against loss or unauthorized use and that the financial records are adequate
and can be relied upon to produce financial statements in accordance with accounting principles generally accepted in the United States
of America. The internal control system is augmented by written policies and procedures, an internal audit program and the selection and
training of qualified personnel. This system includes policies that require adherence to ethical business standards and compliance with all
applicable laws and regulations.
There are inherent limitations to the effectiveness of any controls system. A controls system, no matter how well designed and operated,
can provide only reasonable, not absolute, assurance that the objectives of the controls system are met. Also, no evaluation of controls can
provide absolute assurance that all control issues and any instances of fraud, if any, within the Company will be detected. Further, the design
of a controls system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their
costs. The Company intends to continually improve and refine its internal controls.
Under the supervision and with the participation of our management, including our principal executive officer and principal financial
officer, we conducted an evaluation of the effectiveness of the design and operations of our internal control over financial reporting, as of
December 31, 2022 based on criteria established in 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission. Based on this evaluation, management’s assessment is that Marine Products Corporation
maintained effective internal control over financial reporting as of December 31, 2022.
The independent registered public accounting firm, Grant Thornton LLP, has audited the consolidated financial statements as of and for
the year ended December 31, 2022, and has also issued their report on the effectiveness of the Company’s internal control over financial
reporting, included in this report on page 32.
Ben M. Palmer
President and Chief Executive Officer
Atlanta, Georgia
February 27, 2023
Michael L. Schmit
Vice President, Chief Financial Officer and
Corporate Secretary
Marine Products Corporation 2022 10-K
3 1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Stockholders
Marine Products Corporation
OPINION ON INTERNAL CONTROL OVER FINANCIAL REPORTING
We have audited the internal control over financial reporting of Marine Products Corporation (a Delaware corporation) and subsidiaries
(the “Company”) as of December 31, 2022, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). In our opinion, the Company maintained, in all material
respects, effective internal control over financial reporting as of December 31, 2022, based on criteria established in the 2013 Internal
Control—Integrated Framework issued by COSO.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the
consolidated financial statements of the Company as of and for the year ended December 31, 2022, and our report dated February 27, 2023
expressed an unqualified opinion on those financial statements.
BASIS FOR OPINION
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of
the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control over
Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.
We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance
with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our
audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists,
testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other
procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
DEFINITION AND LIMITATIONS OF INTERNAL CONTROL OVER FINANCIAL
REPORTING
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide
reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally
accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of
management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions,
or that the degree of compliance with the policies or procedures may deteriorate.
GRANT THORNTON LLP
Atlanta, Georgia
February 27, 2023
3 2 Marine Products Corporation 2022 10-K
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Stockholders
Marine Products Corporation
OPINION ON THE FINANCIAL STATEMENTS
We have audited the accompanying consolidated balance sheets of Marine Products Corporation (a Delaware corporation) and subsidiaries
(the “Company”) as of December 31, 2022 and 2021, the related consolidated statements of operations, comprehensive income, stockholders’
equity, and cash flows for each of the three years in the period ended December 31, 2022, and the related notes and financial statement
schedule included under Item 15(2) (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly,
in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its
cash flows for each of the three years in the period ended December 31, 2022, in conformity with accounting principles generally accepted
in the United States of America.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the
Company’s internal control over financial reporting as of December 31, 2022, based on criteria established in the 2013 Internal Control—
Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), and our report dated
February 27, 2023 expressed an unqualified opinion.
BASIS FOR OPINION
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s
financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent
with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities
and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error
or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding
the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant
estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits
provide a reasonable basis for our opinion.
CRITICAL AUDIT MATTER
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was
communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to
the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit
matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical
audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
WARRANTY LIABILITY
As described further in Note 1 to the consolidated financial statements, the Company provides a lifetime limited structural hull warranty, a
five-year structural deck warranty, and a one-year limited warranty to the original owner for all boats sold to dealers. The estimated cost of
warranty claims is recorded by the Company at the time of the boat sale based on historical claims experience and may subsequently be
adjusted based on items such as production quality. We identified the warranty liability ("warranty") as a critical audit matter.
The principal consideration for our determination that warranty is a critical audit matter is that the warranty liability has a higher degree of
estimation uncertainty related to the estimation of anticipated future warranty claims. The estimation uncertainty and subjectivity in determining
the liability resulted in the need for significant auditor judgement when assessing the reasonableness of the inputs and assumptions utilized
by the Company.
Marine Products Corporation 2022 10-K
3 3
Our audit procedures related to this matter included the following, among others.
> We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s warranty
liability estimation process. For example, we tested controls over the development of the assumptions and the verification of the
completeness and accuracy of the information used in developing the warranty liability.
> We tested the process used to develop the estimate using information related to recent production trends and the historical experience of
the Company.
> We compared the Company’s prior year warranty liability related to anticipated claims in the current year to actual claims paid in the
current year to evaluate the historical accuracy of the Company’s estimate.
GRANT THORNTON LLP
We have served as the Company’s auditor since 2004.
Atlanta, Georgia
February 27, 2023
3 4 Marine Products Corporation 2022 10-K
Part II
Item 8. — Financial Statements and Supplementary Data
ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
CONSOLIDATED BALANCE SHEETS
MARINE PRODUCTS CORPORATION AND SUBSIDIARIES
(in thousands except share information)
December 31,
ASSETS
Cash and cash equivalents
Accounts receivable, net of allowance for credit losses of $12 in 2022 and 2021
Inventories
Income taxes receivable
Pension plan assets
Prepaid expenses and other current assets
Total current assets
Property, plant and equipment, net of accumulated depreciation of $33,055 in 2022
and $31,878 in 2021
Goodwill
Other intangibles, net
Deferred income taxes
Other assets
Total assets
LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES
Accounts payable
Accrued expenses and other liabilities
Total current liabilities
Pension and retirement plans liabilities
Other long-term liabilities
Total liabilities
Commitments and contingencies (Note 11)
STOCKHOLDERS’ EQUITY
Preferred stock, $0.10 par value, 1,000,000 shares authorized, none issued
Common stock, $0.10 par value, 74,000,000 shares authorized, issued and outstanding –
34,217,582 shares in 2022 and 33,992,054 shares in 2021
Capital in excess of par value
Retained earnings
Accumulated other comprehensive loss
Total stockholders’ equity
Total liabilities and stockholders’ equity
$
2022
43,171
5,340
73,015
28
356
3,088
124,998
14,965
3,308
465
6,027
13,952
$
2021
14,102
3,262
73,261
10
—
2,474
93,109
14,370
3,308
465
4,392
17,197
$
163,715
$
132,841
$
8,250
$
15,340
23,590
14,440
1,304
39,334
—
3,422
—
122,954
(1,995)
124,381
6,771
11,298
18,069
15,564
683
34,316
—
3,399
—
97,702
(2,576)
98,525
$
163,715
$
132,841
The accompanying notes are an integral part of these statements.
Marine Products Corporation 2022 10-K
3 5
Part II
Item 8. — Financial Statements and Supplementary Data
CONSOLIDATED STATEMENTS OF OPERATIONS
MARINE PRODUCTS CORPORATION AND SUBSIDIARIES
(in thousands except per share data)
Years ended December 31,
Net sales
Cost of goods sold
Gross profit
Selling, general and administrative expenses
Operating income
Interest income, net
Income before income taxes
Income tax provision
Net income
Earnings per share
Basic
Diluted
Dividends paid per share
2022
2021
2020
$
380,995
$
298,014
$
239,825
287,278
229,742
93,717
41,921
51,796
338
52,134
11,787
40,347
1.18
1.18
0.50
$
$
$
68,272
31,880
36,392
16
36,408
7,382
29,026
0.85
0.85
0.46
$
$
$
186,220
53,605
29,244
24,361
95
24,456
5,012
19,444
0.57
0.57
0.40
$
$
$
The accompanying notes are an integral part of these statements.
3 6 Marine Products Corporation 2022 10-K
Part II
Item 8. — Financial Statements and Supplementary Data
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
MARINE PRODUCTS CORPORATION AND SUBSIDIARIES
(in thousands)
Years ended December 31,
Net income
Other comprehensive income (loss), net of taxes:
Pension adjustment
Comprehensive income
2022
2021
2020
$
40,347
$
29,026
$
19,444
581
(629)
801
$
40,928
$
28,397
$
20,245
The accompanying notes are an integral part of these statements.
Marine Products Corporation 2022 10-K
3 7
Part II
Item 8. — Financial Statements and Supplementary Data
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
MARINE PRODUCTS CORPORATION AND SUBSIDIARIES
(in thousands)
Common Stock
Shares
Amount
Capital in
Excess of
Par Value
Retained
Earnings
Accumulated
Other
Comprehensive
Income (Loss)
Total
Balance, December 31, 2019
33,870
$
3,387
$
— $
76,573
$
(2,748) $
77,212
Stock issued for stock incentive plans, net
Stock purchased and retired
Net income
Pension adjustment, net of taxes
Dividends
173
(174)
—
—
—
17
(17)
—
—
—
3,085
(3,085)
—
—
—
—
612
19,444
—
(13,550)
—
—
—
801
—
3,102
(2,490)
19,444
801
(13,550)
Balance, December 31, 2020
33,869
$
3,387
$
— $
83,079
$
(1,947) $
84,519
Stock issued for stock incentive plans, net
Stock purchased and retired
Net income
Pension adjustment, net of taxes
Dividends
188
(64)
—
—
—
18
(6)
—
—
—
2,271
(2,271)
—
—
—
—
1,226
29,026
—
(15,629)
—
—
—
2,289
(1,051)
29,026
(629)
(629)
—
(15,629)
Balance, December 31, 2021
33,993
$
3,399
$
— $
97,702
$
(2,576) $ 98,525
Stock issued for stock incentive plans, net
Stock purchased and retired
Net income
Pension adjustment, net of taxes
Dividends
285
(60)
—
—
—
29
(6)
—
—
—
2,678
(2,678)
—
—
—
—
1,982
40,347
—
(17,077)
—
—
—
581
—
2,707
(702)
40,347
581
(17,077)
Balance, December 31, 2022
34,218
$ 3,422
$
— $
122,954
$
(1,995) $ 124,381
The accompanying notes are an integral part of these statements.
3 8 Marine Products Corporation 2022 10-K
CONSOLIDATED STATEMENTS OF CASH FLOWS
MARINE PRODUCTS CORPORATION AND SUBSIDIARIES
(in thousands)
OPERATING ACTIVITIES
Net income
Adjustments to reconcile net income to net cash provided by (used for) operating
activities:
Depreciation and amortization
Stock-based compensation expense
Gain on sale of assets
Deferred income tax benefit
Pension settlement loss
(Increase) decrease in assets:
Accounts receivable
Income taxes receivable
Inventories
Prepaid expenses and other current assets
Other non-current assets
Increase (decrease) in liabilities:
Accounts payable
Accrued expenses and other liabilities
Other long-term liabilities
Net cash provided by operating activities
INVESTING ACTIVITIES
Capital expenditures
Proceeds from sale of assets
Net cash used for investing activities
FINANCING ACTIVITIES
Payment of dividends
Cash paid for common stock purchased and retired
Net cash used for financing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
Supplemental information:
Income tax payments, net
Part II
Item 8. — Financial Statements and Supplementary Data
2022
2021
2020
$
40,347
$
29,026
$
19,444
1,905
2,707
—
(1,798)
1,180
(2,078)
(18)
246
(614)
2,675
1,479
4,042
(725)
49,348
(2,500)
—
(2,500)
(17,077)
(702)
(17,779)
29,069
14,102
43,171
13,022
$
$
1,816
2,289
—
(140)
—
1,444
(10)
(30,951)
(527)
(1,889)
692
(4,287)
2,994
457
(1,248)
—
(1,248)
(15,629)
(1,051)
(16,680)
(17,471)
31,573
14,102
7,493
$
$
1,954
3,102
(31)
(311)
647
1,901
907
(757)
109
(4,428)
2,193
2,426
2,718
29,874
(2,099)
34
(2,065)
(13,550)
(2,490)
(16,040)
11,769
19,804
31,573
4,099
$
$
The accompanying notes are an integral part of these consolidated financial statements.
Marine Products Corporation 2022 10-K
3 9
Part II
Item 8. — Financial Statements and Supplementary Data
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Marine Products Corporation and Subsidiaries
Years ended December 31, 2022, 2021 and 2020
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES
Basis of Consolidation and Presentation
The consolidated financial statements include the accounts of
Marine Products Corporation (a Delaware corporation) and its wholly
owned subsidiaries (“Marine Products”, “MPC” or the “Company”).
The consolidated financial statements included herein may not
necessarily be indicative of the future results of operations, financial
position and cash flows of Marine Products.
The Company has one reportable segment — its Powerboat
Manufacturing business. The Company’s results of operations and
its financial condition are not significantly reliant upon any single
customer or product model. No single dealer accounted for 10
percent or more of net sales during 2022, 2021 or 2020. Net sales
to the Company’s international dealers were approximately $25.6
million in 2022, $15.9 million in 2021, and $11.8 million in 2020.
Common Stock
Marine Products is authorized to issue 74,000,000 shares of
common stock, $0.10 par value. Holders of common stock are
entitled to receive dividends when, as, and if declared by our Board
of Directors out of legally available funds. Each share of common
stock is entitled to one vote on all matters submitted to a vote of
stockholders. Holders of common stock do not have cumulative
voting rights. In the event of any liquidation, dissolution or winding
up of the Company, holders of common stock are entitled to
ratable distribution of the remaining assets available for distribution
to stockholders.
Preferred Stock
Marine Products is authorized to issue up to 1,000,000 shares of
preferred stock, $0.10 par value. As of December 31, 2022, there
were no shares of preferred stock issued. The Board of Directors is
authorized, subject to any limitations prescribed by law, to provide
for the issuance of preferred stock as a class without series or, if so
determined from time to time, in one or more series, and by filing a
certificate pursuant to the applicable laws of the state of Delaware
and to fix the designations, powers, preferences and rights,
exchangeability for shares of any other class or classes of stock.
Any preferred stock to be issued could rank prior to the common
stock with respect to dividend rights and rights on liquidation.
Share Repurchases
The Company records the cost of share repurchases in stockholders’
equity as a reduction to common stock to the extent of par value
of the shares acquired and the remainder is allocated to capital
in excess of par value and retained earnings if capital in excess
of par value is depleted. The Company tracks capital in excess
of par value on a cumulative basis and for each reporting period,
discloses the excess over capital in excess of par value as part
of stock purchased and retired in the consolidated statements of
stockholders’ equity.
Dividend
On January 24, 2023, the Board of Directors declared a regular
cash dividend of $0.14 per share payable March 10, 2023 to
stockholders of record at the close of business on February 10,
2023. Subject to industry conditions and Marine Products’ earnings,
financial condition, and other relevant factors, the Company expects
to continue to pay regular quarterly cash dividends to common
stockholders.
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America
requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure
of contingent assets and liabilities at the date of the financial
statements and the reported amounts of sales and expenses during
the reporting period. Actual results could differ from those estimates.
Significant estimates are used in the determination of sales, sales
incentives and discounts, and warranty costs.
Sales Recognition
Marine Products recognizes revenues from contracts with its
customers based on the amount of consideration it receives in
exchange for the goods sold. See Note 2: Net Sales for
additional information.
Advertising
Advertising expenses are charged to expense during the period
in which they are incurred. Expenses associated with product
brochures and other
inventoriable marketing materials are
deferred and amortized over the related model year which
approximates the consumption of these materials. The Company
had prepaid expenses related to unamortized product brochure
costs of $194,000 as of December 31, 2022 and $132,000 as of
December 31, 2021. Advertising expenses totaled approximately
$2,147,000 in 2022, $1,645,000 in 2021 and $2,013,000 in 2020
and are recorded in selling, general and administrative expenses.
Cash and Cash Equivalents
Highly liquid investments with original maturities of three months
or less when acquired are considered to be cash equivalents. The
Company maintains its cash in bank accounts which, at times, may
exceed federally insured limits. MPC maintains cash equivalents
and investments in one or more large financial institutions, and
MPC’s policy restricts investment in any securities rated less than
“investment grade” by national rating services.
Accounts Receivable
The majority of the Company’s accounts receivable is due
from dealers located in markets throughout the United States.
Approximately 58 percent of Marine Products’ domestic shipments
are made pursuant to “floor plan financing” programs in which
Marine Products’ subsidiaries participate on behalf of their dealers
with various major third-party financing institutions. Under these
4 0 Marine Products Corporation 2022 10-K
arrangements, a dealer establishes lines of credit with one or more
of these third-party lenders for the purchase of boat inventory for
sales to retail customers in their show room or during boat show
exhibitions. When a dealer purchases and takes delivery of a boat
pursuant to a floor plan financing arrangement, it draws against
its line of credit and the lender pays the invoice cost of the boat
directly to Marine Products within approximately ten business days.
The Company determines its credit loss allowance by considering
a number of factors, including the length of time trade accounts
receivable are past due, the Company’s previous loss history, the
customer’s current ability to pay its obligation to the Company, and
the condition of the general economy and the industry as a whole.
The Company writes-off accounts receivable when they become
uncollectible, and payments subsequently received on such
receivables are credited to the allowance.
Inventories
Inventories are stated at the lower of cost (determined on a first-
in, first-out basis) and net realizable value. When evidence exists
that the net realizable value of inventory is lower than its cost,
the Company recognizes the difference as a loss in earnings in
the period in which it occurs. Net realizable value is the estimated
selling price in the ordinary course of business, less reasonably
predictable costs of completion, disposal, and transportation.
Property, Plant and Equipment
Property, plant and equipment is carried at cost. Depreciation is
provided principally on a straight-line basis over the estimated
useful lives of the assets. The cost of assets retired or otherwise
disposed of and the related accumulated depreciation are
eliminated from the accounts in the year of disposal with the
resulting gain or loss credited or charged to income. Expenditures
for additions, major renewals, and betterments are capitalized while
expenditures for routine maintenance and repairs are expensed as
incurred. Depreciation expense on operating equipment used in
production is included in cost of goods sold in the accompanying
consolidated statements of operations. All other depreciation is
included in selling, general and administrative expenses in the
accompanying consolidated statements of operations. Property,
plant and equipment are reviewed for impairment when indicators
of impairment exist.
Goodwill and Other Intangibles
Intangibles consist primarily of goodwill and trade names related
to businesses acquired. Goodwill represents the excess of the
purchase price over the fair value of net assets of businesses
acquired. The carrying amount of goodwill was $3,308,000 as of
December 31, 2022 and 2021. The Company evaluates whether
goodwill is impaired by comparing its market capitalization based
on its closing stock price (Level 1 input) to the book value of its equity
on the annual evaluation date. The Company also periodically
performs a valuation of its indefinite – lived trade names and has
concluded that the fair value of these assets is not impaired. Based
on these evaluations, the Company concluded that no impairment
of its goodwill or trade names has occurred for the years ended
December 31, 2022, 2021 and 2020.
Part II
Item 8. — Financial Statements and Supplementary Data
Investments
The Company maintains certain securities in the non-qualified
Supplemental Executive Retirement Plan that have been classified
as trading. See Note 12: Employee Benefit Plans for further
information regarding these securities.
Warranty Costs
The Company provides a lifetime limited structural hull warranty, a
five-year limited structural deck warranty, and a transferable one-
year limited warranty to the original owner. Warranties for additional
items are provided for periods of one to five years and are not
transferrable. Additionally, as it relates to the first subsequent
owner, a five-year transferrable hull warranty and the remainder
of the original one-year limited warranty on certain components
are available. The five-year transferable hull warranty terminates
five years after the date of the original retail purchase. Claim costs
related to components are generally absorbed by the original
component manufacturer. The Company accrues for estimated
future warranty costs at the time of the sale based on its historical
claims experience. An analysis of the warranty accruals for the
years ended December 31, 2022 and 2021 is as follows:
(in thousands)
2022
2021
Balance at beginning of year
$
4,641
$ 5,030
Less: Payments made during the year
(4,845)
(4,091)
Add: Warranty provision for the
current year
Changes to warranty provision for
prior years
5,737
3,817
166
(115)
Balance at end of year
$ 5,699
$
4,641
Insurance Accruals
The Company fully insures its risks related to general liability,
product liability and vehicle liability, whereas the health insurance
plan up to a maximum annual claim amount for each covered
employee and related dependents and workers’ compensation
are self-funded. The estimated cost of claims under the self-
insurance program is accrued as the claims are incurred and
may subsequently be revised based on developments relating to
such claims.
Research and Development Costs
The Company expenses research and development costs for new
products and components as incurred. Research and development
costs are included in selling, general and administrative expenses
and totaled $437,000 in 2022, $776,000 in 2021, and $751,000
in 2020.
Repurchase Obligations
The Company has entered into agreements with third-party floor
plan lenders where it has agreed, in the event of default by the
dealer, to repurchase MPC boats repossessed from the dealer.
These arrangements are subject to maximum repurchase amounts
and the associated risk is mitigated by the value of the boats
repurchased. The Company accrues estimated losses when a loss,
due primarily to the default of one of our dealers, is determined to be
probable and the amount of the loss can be reasonably estimated.
Marine Products Corporation 2022 10-K
4 1
Part II
Item 8. — Financial Statements and Supplementary Data
Income Taxes
Deferred tax liabilities and assets are determined based on the
difference between the financial and tax bases of assets and
liabilities using enacted tax rates in effect for the year in which the
differences are expected to reverse. The Company establishes
a valuation allowance against the carrying value of deferred tax
assets if the Company concludes that it is more likely than not
that the asset will not be realized through future taxable income.
Leases
The Company determines at contract inception, if an arrangement is
a lease or contains a lease based on whether the Company obtains
the right to control the use of specifically identifiable property, plant
and equipment for a period of time in exchange for consideration.
The Company has elected not to separate non-lease components
from lease components for its leases. Variable lease payments are
recognized as expense when incurred.
Retirement Income Plan (“Plan”)
Marine Products participates in the tax-qualified, defined benefit,
noncontributory, trusteed retirement income plan sponsored by RPC,
Inc. (“RPC”) that provides monthly benefits upon normal retirement
at age 65, or reduced early retirement benefits at age 59 ½ or at
age 55 or older with 15 or more years of service, to substantially all
employees with at least one year of service prior to 2002. In 2002,
RPC’s Board of Directors approved a resolution to cease all future
retirement benefit accruals under the defined benefit pension plan.
During 2021, the Company initiated actions to terminate the defined
benefit pension plan. See Note 12: Employee Benefit Plans for a full
description and status of this plan and the related accounting and
funding policies.
Stock-Based Compensation
Stock-based compensation expense is recognized for all share-
based payment awards, net of an estimated forfeiture rate. Thus,
compensation cost is amortized for those shares expected to vest
on a straight-line basis over the requisite service period of the award.
See Note 12: Employee Benefit Plans for additional information.
Earnings per Share
Basic and diluted earnings per share are computed by dividing net income by the weighted average number of shares outstanding during
the respective periods. In addition, the Company has periodically issued share-based payment awards that contain non-forfeitable rights
to dividends and are therefore considered participating securities. See Note 12: Employee Benefit Plans for further information on restricted
stock granted to employees.
Restricted shares of common stock (participating securities) outstanding and a reconciliation of weighted average shares outstanding is as
follows:
(in thousands)
Net income available for stockholders:
2022
2021
2020
$ 40,347
$ 29,026
$
19,444
Less: Adjustments for earnings attributable to participating securities
(858)
(566)
(416)
Net income used in calculating earnings per share
$ 39,489
$ 28,460
$
19,028
Weighted average shares outstanding (including participating securities)
Adjustment for participating securities
Shares used in calculating basic and diluted earnings per share
34,183
(743)
33,440
33,984
(672)
33,312
33,926
(734)
33,192
Fair Value of Financial Instruments
The Company’s financial instruments consist primarily of cash
and cash equivalents, accounts receivable, accounts payable
and marketable securities. The carrying value of cash and
cash equivalents, accounts receivable and accounts payable
approximate their fair values because of the short-term nature of
such instruments. The Company’s marketable securities are held in
the non-qualified Supplemental Executive Retirement Plan (“SERP”)
which are classified as trading securities. All of these securities are
carried at fair value in the accompanying consolidated balance
sheets. See Note 10: Fair Value Measurements for further information
regarding the fair value measurement of assets and liabilities.
Concentration of Suppliers
The Company has only four suppliers for the three types of engines
it purchases. This concentration of suppliers could impact our sales
and profitability in the event of a sudden interruption in the delivery
of these engines.
Recent Accounting Pronouncements
The FASB issued the following Accounting Standards Updates
(“ASU”s):
Recently Adopted Accounting Standards
ASU No. 2020-04 — Reference Rate Reform (Topic 848): The
amendments in this ASU provide optional guidance for a limited time
to ease the impact of the reference rate reform on financial reporting.
The amendments, which are elective, provide expedients to contract
modifications, affected by reference rate reform if certain criteria are met.
The amendments apply only to contracts and hedging relationships that
reference London Interbank Offered Rate (“LIBOR”) or other reference
rate that is expected to be discontinued due to reference rate reform.
The Company adopted these provisions in the second quarter of 2022
and expects to replace LIBOR, currently used to accrue interest in its
revolving credit agreement, with the Term Secured Overnight Financing
Rate (“SOFR”) based on the occurrence of any of the triggering events
in the agreement. Adoption of these provisions did not have a material
impact on the Company’s consolidated financial statements.
4 2 Marine Products Corporation 2022 10-K
Recently Issued Accounting Standards Not Yet Adopted
ASU No. 2021-08 — Business Combinations
(Topic 805):
Accounting for Contract Assets and Contract Liabilities from
Contracts with Customers. The amendments in this ASU address
diversity in practice related to the accounting for revenue contracts with
customers acquired in a business combination, by adopting guidance
requiring an acquirer to recognize and measure contract assets and
contract liabilities acquired in a business combination in accordance
with Topic 606. At the acquisition date, an acquirer would recognize
and measure the acquired contract assets and contract liabilities
in the same manner that they were recognized and measured in the
acquiree's financial statements before the acquisition. The Company
plans to adopt these provisions prospectively to business combinations
occurring after January 1, 2023 and does not expect adoption to have a
material impact on its consolidated financial statements.
NOTE 2: NET SALES
Accounting Policy
MPC’s contract revenues are generated principally from selling:
(1) fiberglass motorized boats and accessories and (2) parts to
independent dealers. Revenue is recognized when obligations
under the terms of a contract with our customer are satisfied.
Satisfaction of contract terms occur with the transfer of title of our
boats, accessories, and parts to our dealers. Net sales are measured
as the amount of consideration we expect to receive in exchange for
transferring the goods to the dealer. The amount of consideration
we expect to receive consists of the sales price adjusted for dealer
incentives. The expected costs associated with our base warranties
continue to be recognized as expense when the products are sold
as they are deemed to be assurance-type warranties (see Note 1:
Significant Accounting Policies). Incidental promotional items that
are immaterial in the context of the contract are recognized as
expense. Fees charged to customers for shipping and handling are
included in net sales in the accompanying consolidated statements
of operations and the related costs incurred by the Company are
included in cost of goods sold.
Nature of Goods
MPC’s performance obligations within its contracts consists of: (1)
boats and accessories and (2) parts. The Company transfers control
and recognizes revenue on the satisfaction of its performance
obligations (point in time) as follows:
> Boats and accessories (domestic sales) — upon delivery and
acceptance by the dealer.
> Boats and accessories (international sales) — upon delivery to
shipping port.
> Parts – upon shipment/delivery to carrier.
Payment Terms
For most domestic customers, MPC manufactures and delivers
boats and accessories and parts ahead of payment — i.e., MPC has
fulfilled its performance obligations prior to submitting an invoice
to the dealer. MPC invoices the customer when the products are
delivered and receives the related compensation, typically within
seven to ten business days after invoicing. For some domestic
customers and all international customers, MPC requires payment
Part II
Item 8. — Financial Statements and Supplementary Data
prior to transferring control of the goods. These amounts are
classified as deferred revenue and recognized when control has
transferred, which generally occurs within three months of receiving
the payment.
When the Company enters into contracts with its customers, it
generally expects there to be no significant timing difference
between the date the goods have been delivered to the customer
(satisfaction of the performance obligation) and the date cash
consideration is received. Accordingly, there is no financing
component to the Company’s arrangements with its customers.
Significant Judgments
Determining the transaction price — The transaction price for
MPC’s boats and accessories is the invoice price adjusted for dealer
incentives. Key inputs and assumptions utilized in determining
variable consideration related to dealer incentives include:
> Inputs: Current model year boat sales, total potential program
incentive percentage, prior model year results of dealer
incentive activity (i.e., incentive earned as a percentage of total
incentive potential).
> Assumption: Current model year incentive activity will closely
reflect prior model year actual results, adjusted as necessary
for dealer purchasing trends or economic factors.
Other — Our contracts with dealers do not provide them with a right
of return. Accordingly, we do not have any obligations recorded for
returns or refunds.
Disaggregation of Revenues
The following table disaggregates our sales by major source:
(in thousands)
Boats and
accessories
Parts
Net sales
2022
2021
2020
$ 375,912
$ 293,312
5,083
4,702
$ 380,995
$ 298,014
$
$
235,097
4,728
239,825
The following table disaggregates our revenues between domestic
and international:
(in thousands)
2022
2021
Domestic
$ 355,371
$
282,117
International
25,624
15,897
Net sales
$ 380,995
$ 298,014
2020
228,092
11,733
239,825
$
$
Contract Balances
Amounts received from international and certain domestic dealers
toward the purchase of boats are classified as deferred revenue
and are included in accrued expenses and other liabilities on the
consolidated balance sheets.
(in thousands)
Deferred revenue
2022
$
1,989
$
2021
1,313
Substantially all of the amounts of deferred revenue as of
December 31, 2022 and December 31, 2021 were or will be
recognized as sales during the immediately following quarters,
when control is transferred.
Marine Products Corporation 2022 10-K
4 3
Part II
Item 8. — Financial Statements and Supplementary Data
NOTE 3: ACCOUNTS RECEIVABLE
NOTE 6: ACCRUED EXPENSES AND
Accounts receivable consist of the following:
OTHER LIABILITIES
(in thousands)
December 31,
2022
2021
Trade receivables
$ 4,047
$
2,454
Other
Total
Less: allowance for credit losses
1,305
5,352
(12)
820
3,274
(12)
Net accounts receivable
$ 5,340
$
3,262
Trade receivables consist primarily of balances related to the
sales of boats which are shipped pursuant to “floor-plan financing”
programs with qualified lenders. Other receivables consist primarily
of rebate receivables from various suppliers in 2022 and 2021.
Changes in the Company’s allowance for credit losses are disclosed
in Schedule II on page 60 of this report.
NOTE 4: INVENTORIES
Inventories consist of the following:
(in thousands)
December 31,
2022
2021
Raw materials and supplies
$
37,210
$
42,231
Work in process
Finished goods
Total inventories
14,190
21,615
14,390
16,640
$
73,015
$
73,261
NOTE 5: PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are presented at cost, net of
accumulated depreciation, and consist of the following:
Estimated
Useful
Lives
N/A
7-40
3-15
5-7
5-10
(in thousands)
December 31,
Land
Buildings
Operating equipment and
property
Furniture and fixtures
Vehicles
Gross property, plant and
equipment
Less: accumulated
depreciation
Net property, plant and
equipment
2022
$
895 $
2021
878
21,567
21,275
14,292
13,455
2,991
8,275
2,779
7,861
48,020
46,248
(33,055)
(31,878)
$ 14,965 $ 14,370
Depreciation expense was $1,905,000 in 2022, $1,816,000 in
2021 and $1,954,000 in 2020. The Company’s accounts payable
for purchases of property and equipment was immaterial as of
December 31, 2022, December 31, 2021 and December 31, 2020.
4 4 Marine Products Corporation 2022 10-K
Accrued expenses and other liabilities consist of the following:
(in thousands)
December 31,
2022
Accrued payroll and related expenses
$ 3,753
$
Accrued sales incentives and
discounts
Accrued warranty costs
Deferred revenue
Income taxes payable
Other
Total accrued expenses and
other liabilities
2021
3,119
1,214
4,641
1,313
217
794
2,485
5,699
1,989
342
1,072
$ 15,340
$
11,298
NOTE 7: NOTES PAYABLE TO BANKS
On November 12, 2021, the Company entered into a revolving credit
agreement with Truist Bank which provides for a commitment of up
to $20 million. The agreement includes (i) a $5 million sublimit for
swingline loans, (ii) a $2.5 million aggregate sublimit for all letters
of credit, and (iii) a committed accordion which can increase the
aggregate commitments by the greater of $35 million and EBITDA
over the most recently completed twelve month period at the time of
incurrence. The facility is secured by a first priority security interest
in and lien on substantially all personal property of MPC and the
guarantors including, without limitation, all accounts, inventory,
equipment, general intangibles, goods, documents, contracts,
trademarks, patents, copyrights, intercompany obligations, stock,
securities and notes owned by borrower or any guarantor. The
agreement will terminate on November 12, 2026.
Revolving borrowings under the agreement will accrue interest at
a rate equal to one-month LIBOR plus the applicable percentage,
as defined. The applicable percentage will be between 150 and
250 basis points for all loans based on MPC’s net leverage ratio.
In addition, the Company pays facility fees under the agreement
ranging from 25 to 45 basis points, based on MPC’s net leverage
ratio, on the unused revolving commitment.
The credit agreement contains certain financial covenants including:
(i) a maximum consolidated leverage ratio of 2.50:1.00 and (ii) a
minimum consolidated fixed charge coverage ratio of 1.25:1.00 both
determined as of the end of each fiscal quarter. Additionally, the
agreement contains customary covenants including affirmative and
negative covenants and events of default (each with customary
exceptions, thresholds and exclusions). As of December 31, 2022,
the Company was in compliance with these covenants.
The Company has incurred total loan origination fees and other
debt related costs associated with this revolving credit facility
in the aggregate of $195,000 in 2022. These costs are being
amortized to interest expense over the remaining term of the loan,
and the remaining net balance is classified as part of non-current
other assets. As of December 31, 2022, MPC had no outstanding
borrowings under the revolving credit facility.
Interest incurred, which includes facility fees on the unused portion
of the revolving credit facility and the amortization of loan costs,
on the credit facility were $90,000 in 2022 and $10,000 in 2021.
Interest paid was $32,000 in 2022 and there were no payments
made in 2021.
NOTE 8: INCOME TAXES
The following table lists the components of the provision for
income taxes:
(in thousands)
Current provision:
Federal
State
Deferred (benefit)
provision:
Federal
State
Total income tax
provision
2022
2021
2020
$ 12,225
$
1,360
$
7,176
346
4,741
582
(1,687)
(111)
(248)
108
(410)
99
$ 11,787
$
7,382
$
5,012
A reconciliation between the federal statutory rate and Marine
Products’ effective tax rate is as follows:
Federal statutory rate
State income taxes, net of
federal benefit
Research and
experimentation credit
Non-deductible expenses
Change in contingencies
Adjustments related to
vesting of restricted stock
Other
2022
21.0%
2021
21.0%
2020
21.0%
1.3
(0.7)
0.3
0.8
(0.1)
—
0.9
(0.9)
(0.8)
0.4
(1.0)
0.7
1.4
(1.5)
0.1
0.1
(1.5)
0.9
Effective tax rate
22.6%
20.3%
20.5%
Significant components of the Company’s deferred tax assets and
liabilities are as follows:
(in thousands)
December 31,
Deferred tax assets:
Warranty costs
Stock-based compensation
Pension
State NOL’s
Capitalized research and
development
All others, net
Total deferred tax assets
Deferred tax liabilities:
2022
2021
$
1,254
$
866
3,099
221
1,300
789
7,529
1,021
780
3,196
283
—
589
5,869
Depreciation and amortization
expense
Basis differences in joint venture
(1,092)
(410)
(1,033)
(444)
Net deferred tax assets
$
6,027
$
4,392
Part II
Item 8. — Financial Statements and Supplementary Data
Total net income tax payments were $13,022,000 in 2022,
$7,493,000 in 2021, and $4,099,000 in 2020. As of December 31,
2022, the Company had net operating loss carryforwards related
to state income taxes of approximately $4.6 million (gross) that will
expire between 2030 and 2034. The Company does not have a
valuation allowance related to net operating loss carryforwards due
to implemented tax planning strategies.
The Company’s policy is to record interest and penalties related to
income tax matters as income tax expense. Accrued interest and
penalties were immaterial as of December 31, 2022 and 2021.
During 2022, the Company recognized an increase in its liability
for unrecognized tax benefits related primarily to prior year
positions and disclosed as part of other long-term liabilities on the
consolidated balance sheet. This liability, if released, would affect
our effective rate. A reconciliation of the beginning and ending
amount of unrecognized tax benefits is as follows:
(in thousands)
2022
2021
Balance at beginning of the year
$
539
$
401
Additions based on tax positions related
to the current year
Additions for tax positions of prior years
393
126
32
106
Balance at end of the year
$ 1,058
$
539
It is reasonably possible that the amount of the unrecognized benefits
with respect to the Company’s unrecognized tax positions will
increase or decrease in the next 12 months. These changes may be
the result of, among other things, state tax settlements under voluntary
disclosure agreements, or conclusions of ongoing examinations or
reviews. However, quantification of an estimated range cannot be
made at this time.
The Company and its subsidiaries are subject to U.S. federal
and state income tax in multiple jurisdictions. In many cases, the
uncertain tax positions are related to tax years that remain open
and subject to examination by the relevant taxing authorities.
In general, the Company’s 2019 through 2021 tax years remain
open to examination. Additional years may be open to the extent
attributes are being carried forward to an open year.
NOTE 9: ACCUMULATED OTHER
COMPREHENSIVE LOSS
Accumulated other comprehensive loss consists of changes related
to the pension plan for the years ended December 31, 2022 and
2021 as follows:
(in thousands)
2022
2021
Balance at beginning of the year
$
(2,576)
$
(1,947)
Change during the year:
Before-tax amount
Tax benefit
Reclassification adjustment,
net of taxes
Amortization of net loss
Total activity in the year
632
(139)
88
581
(879)
193
57
(629)
Balance at end of the year
$
(1,995)
$
(2,576)
Marine Products Corporation 2022 10-K
4 5
Part II
Item 8. — Financial Statements and Supplementary Data
NOTE 10: FAIR VALUE MEASUREMENTS
The various inputs used to measure assets at fair value establish
a hierarchy that distinguishes between assumptions based on
market data (observable inputs) and the Company’s assumptions
(unobservable inputs). The hierarchy consists of three broad levels
as follows:
1.
2.
Level 1 – Quoted market prices in active markets for identical
assets or liabilities.
Level 2 – Quoted prices for similar instruments in active
markets, quoted prices for identical or similar instruments
in markets that are not active, and model-based valuation
techniques
for which all significant assumptions are
observable in the market or can be corroborated by
observable market data for substantially the full term of the
assets or liabilities.
3.
Level 3 – Unobservable inputs developed using the
Company’s estimates and assumptions, which reflect those
that market participants would use.
The Company determines the fair value of the marketable securities
that are available-for-sale through quoted prices for similar
instruments in active markets or quoted prices for identical or similar
instruments in markets that are not active. There are no available-
for-sale securities held as of December 31, 2022 and 2021. Trading
securities are comprised of SERP assets, as described in Note 12, and
are recorded primarily at their net cash surrender values calculated
using their net asset values, which approximate fair value, as
provided by the issuing insurance company. The expected holding
period for these assets measured at net asset value is unknown.
Trading securities were $9,881,000 as of December 31, 2022 and
$12,264,000 as of December 31, 2021. Significant observable inputs,
in addition to quoted market prices, were used to value the trading
securities. The Company’s policy is to recognize transfers between
levels at the beginning of quarterly reporting periods. For the year
ended December 31, 2022 there were no significant transfers in or
out of levels 1, 2 or 3.
The carrying amount of other financial instruments reported in the
balance sheet for current assets and current liabilities approximate
their fair values because of the short-term maturity of these
instruments. The Company currently does not use the fair value
option to measure any of its existing financial instruments and has
not determined whether or not it will elect this option for financial
instruments it may acquire in the future.
NOTE 11: COMMITMENTS AND CONTINGENCIES
Lawsuits – The Company is a defendant in certain lawsuits which
allege that plaintiffs have been damaged as a result of the use of the
Company’s products. The Company is vigorously contesting these
actions. Management, after consultation with legal counsel, is of the
opinion that the outcome of these lawsuits will not have a material
adverse effect on the financial position, results of operations or
liquidity of Marine Products.
Dealer Floor Plan Financing – To assist dealers in obtaining
financing for the purchase of its boats for inventory, the Company
has entered into agreements with various dealers and selected
third-party floor plan lenders to guarantee varying amounts of
qualifying dealers’ debt obligations. The Company’s obligation
under these guarantees becomes effective in the case of a default
under the financing arrangement between the dealer and the third
party lender. The agreements provide for the return of repossessed
boats to the Company in new and unused condition subject to
normal wear and tear as defined, in exchange for the Company’s
assumption of specified percentages of the debt obligation on
those boats, up to certain contractually determined dollar limits
by lender. The Company had no repurchases of dealer inventory
under contractual agreements during 2022 and 2021 as a result of
dealer defaults.
Management continues to monitor the risk of additional defaults
and resulting repurchase obligations based in part on information
provided by the third-party floor plan lenders and will adjust the
guarantee liability at the end of each reporting period based on
information reasonably available at that time.
The Company currently has an agreement with one of the floor
plan lenders whereby the contractual repurchase limit, subject to
a minimum of $8.0 million, is based on a specified percentage of
the amount of the average net receivables financed by the floor
plan lender for our dealers less repurchases during the prior 12
month period, which was $8.0 million as of December 31, 2022. The
Company has contractual repurchase agreements with additional
lenders with an aggregate maximum repurchase obligation of
approximately $4.3 million, with various expiration and cancellation
terms of less than one year. Accordingly, the aggregate repurchase
obligation with all financing institutions was approximately $12.3
million as of December 31, 2022. This repurchase obligation risk is
mitigated by the value of the boat repurchased.
Income Taxes – The amount of income taxes the Company pays is
subject to ongoing audits by federal and state tax authorities, which
often result in proposed assessments. Other long-term liabilities
included the Company’s estimated liabilities for these probable
assessments and totaled approximately $1,058,000 as of December
31, 2022 compared to $539,000 as of December 31, 2021.
Employment Agreement – The Company has a contractual
agreement with one employee, that provides for a monthly payment
to the employee equal to a percentage of profits (defined as
pretax income before goodwill adjustments and certain allocated
corporate expenses) in addition to a base salary. As of June 1, 2022,
this agreement was revised to seven percent of profits, as defined,
compared to ten percent of profits in the prior periods. The expense
in connection with this employment agreement was approximately
$5,508,000 in 2022, $4,765,000 in 2021 and $3,586,000 in 2020
and is included in selling, general and administrative expenses in
the accompanying consolidated statements of operations.
NOTE 12: EMPLOYEE BENEFIT PLANS
Supplemental Executive Retirement Plan (“SERP”)
The Company permits selected highly compensated employees to
defer a portion of their compensation into the SERP. The SERP assets
are invested primarily in company-owned life insurance (“COLI”)
policies as a funding source to satisfy the obligation of the SERP.
The assets are subject to claims by creditors, and the Company can
designate them to another purpose at any time. Investments in COLI
policies consist of variable life insurance policies of $7.1 million as
4 6 Marine Products Corporation 2022 10-K
Part II
Item 8. — Financial Statements and Supplementary Data
of December 31, 2022 and $9.7 million as of December 31, 2021. In
the COLI policies, the Company is able to allocate assets across a
set of choices provided by the insurance underwriter, including fixed
income securities and equity funds. The COLI policies are recorded
at their net cash surrender values, which approximates fair value,
as provided by the issuing insurance company, whose Standard &
Poor’s credit rating was A+.
The Company classifies the SERP assets as trading securities as
described in Note 1. The fair value of these assets totaled $9,881,000
as of December 31, 2022 and $12,264,000 as of December 31, 2021.
The SERP assets are reported in other non-current assets on the
consolidated balance sheets and changes to the fair value of the
assets are reported in selling, general and administrative expenses
in the consolidated statements of operations. Trading (losses) gains
related to the SERP assets totaled $(2,383,000) in 2022, $1,643,000
in 2021 and $906,000 in 2020.
The SERP liabilities include participant deferrals net of distributions
and are stated at a fair value of $14,440,000 as of December 31,
2022 and $15,564,000 as of December 31, 2021. The SERP liabilities
are reported on the consolidated balance sheets in long-term
pension liabilities and any change in the fair value is recorded
as compensation cost within selling, general and administrative
expenses in the consolidated statements of operations. Changes
in the fair value of the SERP liabilities represented unrealized
(losses) gains of $(2,315,000) in 2022, and $1,647,000 in 2021 and
$1,395,000 in 2020.
Retirement Income Plan (“Plan”)
Marine Products participates in the tax-qualified, defined benefit,
noncontributory, trusteed retirement income plan sponsored by
RPC that covers substantially all employees with at least one year
of service prior to 2002.
During 2021, the Company initiated actions to terminate the
defined benefit pension plan and as such, the year-end pension
obligation has been valued on a termination basis. As part of the
termination process, the Company offered a lump-sum window in
the fourth quarter of 2022 and used the following assumptions to
calculate the projected benefit obligation as of December 31, 2022
- (i) updated census data and removed participants who elected
to receive a lump-sum during the lump-sum window; (ii) annuities
to be purchased for all remaining participants effective March 1,
2023 and (iii) using appropriate discount rates and mortality tables
for participants depending on their pay status. We do not currently
expect the Company to make any contributions to the Plan in
2023. A $1.2 million settlement loss representing the accelerated
recognition of actuarial losses was recognized in the fourth quarter
of 2022 and is recorded as part of selling, general and administrative
expenses. During the first quarter of 2023, the Company expects
to recognize a pre-tax, non-cash settlement charge representing
the unamortized net loss in the Plan which was approximately $2.6
million as of December 31, 2022. The final amount is subject to
change based on the actual return on plan assets and the periodic
actuarial updates of the net losses in the Plan. For the year ending
December 31, 2022, the Company has utilized an expected return
on plan assets of zero percent based on the current short-term rates
and investment horizon as a result of the expected Plan termination.
Subsequent to December 31, 2022, the Company completed an
annuity purchase to transfer risk from the Plan to a commercial
annuity provider for all of the remaining Plan participants through
the liquidation of its investments in the Plan.
The Company’s fair value of the plan assets exceeded the projected
benefit obligation for its Plan by $356,000 and thus the Plan was
over-funded as of December 31, 2022. The following table sets forth
the funded status of the Plan and the amounts recognized in Marine
Products’ consolidated balance sheets:
(in thousands)
December 31,
Accumulated benefit obligation at end of year
Change in projected benefit obligation:
Benefit obligation at beginning of year
Service cost
Interest cost
Actuarial loss
Benefits paid
Settlement
Projected benefit obligation at end of year
Change in plan assets:
Fair value of plan assets at beginning of year
Actual return on plan assets
Benefits paid
Settlements
Fair value of plan assets at end of year
Funded status at end of year
2022
3,146
$
$
5,832
—
133
(1,045)
(322)
(1,452)
$
3,146
$
6,870
(1,594)
(322)
(1,452)
3,502
356
$
$
2021
5,832
5,576
—
147
347
(238)
—
5,832
7,351
(243)
(238)
—
6,870
1,038
$
$
$
$
$
$
Marine Products Corporation 2022 10-K
4 7
Part II
Item 8. — Financial Statements and Supplementary Data
(in thousands)
December 31,
Amounts recognized in the consolidated balance sheets consist of:
Pension plan assets
Noncurrent other assets
2022
356
—
356
$
$
2021
—
1,038
1,038
$
$
The funded status of the Plan was recorded in the consolidated balance sheets in pension plan assets as of both December 31, 2022 and
other noncurrents assets as of December 31, 2021.
(in thousands)
December 31,
Amounts (pre-tax) recognized in accumulated other comprehensive loss consist of:
Net loss
Prior service cost (credit)
2022
$
$
2,558
—
2,558
2021
3,303
—
3,303
$
$
The accumulated benefit obligation for the Plan as of December 31, 2022 and 2021 has been disclosed above. The Company uses a
December 31 measurement date for this qualified plan. As part of the plan termination, the Company expects to recognize a non-cash
settlement charge for the remaining balance in the accumulated other comprehensive loss at that time.
Amounts recorded in the consolidated balance sheet as pension liabilities consist of:
(in thousands)
December 31,
SERP liability
2022
2021
$ (14,440)
$
(15,564)
Marine Products’ funding policy is to contribute to the Plan the amount required, if any, under the Employee Retirement Income Security Act of
1974. The Company did not contribute to the plan in 2022 and 2021. The components of net periodic benefit cost of the Plan are summarized
as follows:
(in thousands)
Service cost for benefits earned during the period
$
$
2022
—
133
—
113
1,180
$
1,426
$
2021
—
147
(289)
73
—
(69)
2020
—
230
(292)
98
647
683
$
$
Interest cost
Expected return on plan assets
Amortization of net losses
Settlement loss
Net periodic cost (benefit)
The Company recognized pre-tax decreases to the funded status in accumulated other comprehensive income (loss) of $(744,000) in 2022,
$806,000 in 2021 and $(899,000) in 2020. There were no previously unrecognized prior service costs during 2022, 2021 and 2020. Non-
cash settlement charges shown above represent the accelerated recognition of actuarial losses previously reflected in accumulated other
comprehensive loss related to the lump-sum window offered in each of the years.
The pre-tax amounts recognized in other comprehensive income for the years ended December 31, 2022, 2021 and 2020 are summarized
as follows:
(in thousands)
Net loss (gain)
Amortization of net loss
Settlement loss
$
2022
549
(113)
(1,180)
Amount recognized in accumulated other comprehensive income (loss)
$
(744)
2021
879
(73)
—
806
$
$
2020
(154)
(98)
(647)
(899)
$
$
4 8 Marine Products Corporation 2022 10-K
Part II
Item 8. — Financial Statements and Supplementary Data
The weighted average assumptions as of December 31 used to determine the projected benefit obligation and net benefit cost were as
follows:
December 31,
Projected Benefit Obligation:
Discount rate
Rate of compensation increase
Net Benefit Cost:
Discount rate
Expected return on plan assets
Rate of compensation increase
2022
2021
2020
Note (1)
N/A
Note (1)
—%
N/A
Note (1)
N/A
2.70%
4.00%
N/A
2.70%
N/A
3.70%
4.00%
N/A
(1) Projected benefit obligation as of December 31, 2022 reflects proposed termination of the Plan and is calculated based on various assumptions in accordance with the
Plan agreement.
The plan’s weighted average asset allocation at December 31, 2022 and 2021 by asset category along with the target allocation for 2023
are as follows:
Asset Category
Cash and cash equivalents
Fixed income securities
Total
Target Allocation
for 2023
0% - 5%
15% - 100%
Percentage of Plan Assets
as of December 31
2022
3.7%
96.3
100.0%
2021
1.4%
98.6
100.0%
The Company’s Plan investments consist primarily of fixed-income securities that include corporate bonds, mortgage-backed securities,
sovereign bonds, and U.S. Treasuries. For each of the asset categories in the Plan, the investment strategy is intended to minimize the level
of risk as compared to the Plan’s liability and to minimize the cost of providing pension benefits. The investment policy establishes a target
allocation for each asset class which is rebalanced as required. While not limited in approach, the Plan utilizes fixed income funds in which
the underlying securities are marketable, to achieve this target allocation.
The Company’s investments consist primarily of fixed-income securities that include corporate bonds, mortgage-backed securities, sovereign
bonds, and U.S. Treasuries. For each of the asset categories in the pension plan, the investment strategy is identical – maximize the long-
term rate of return on plan assets while minimizing the level of risk to minimize the cost of providing pension benefits. The investment policy
establishes a target allocation for each asset class which is rebalanced as required. The plan utilizes a number of investment approaches,
including but not limited to fixed income funds in which the underlying securities are marketable, to achieve this target allocation.
The following tables present our plan assets using the fair value hierarchy as of December 31, 2022 and 2021. The fair value hierarchy has
three levels based on the reliability of the inputs used to determine fair value. See Note 10: Fair Value Measurements for a brief description of
the three levels under the fair value hierarchy.
Investments (in thousands)
Fair Value Hierarchy as of December 31, 2022:
Cash and Cash Equivalents (1)
Fixed Income Securities (2)
Total Assets in the Fair Value Hierarchy
Investments (in thousands)
Fair Value Hierarchy as of December 31, 2021:
Cash and Cash Equivalents (1)
Fixed Income Securities (2)
Total Assets in the Fair Value Hierarchy
Total
Level 1
Level 2
$
129
3,373
$ 3,502
Total
$
87
6,783
$
6,870
$
$
$
$
129
—
129
$
—
3,373
$ 3,373
Level 1
Level 2
87
—
87
$
$
—
6,783
6,783
(1) Cash and cash equivalents, which are used to pay benefits and plan administrative expenses, are held in Rule 2a-7 money market funds.
(2) Fixed income securities are primarily valued using a market approach with inputs that include broker quotes, benchmark yields, base spreads and reported trades.
Subsequent to December, 31, 2022, these securities were liquidated to fund the annuity purchase.
Marine Products Corporation 2022 10-K
4 9
Part II
Item 8. — Financial Statements and Supplementary Data
The Company estimates that the future benefits payable for the
Plan are as follows:
(in thousands)
2023
401(k) Plan
$
3,171
Marine Products participates in a defined contribution 401(k)
plan sponsored by RPC that is available to substantially all full-
time employees with more than 90 days of service. Effective
January 1, 2019, the Company began matching 100 percent
of employee’s contributions for each dollar of a participant’s
contribution to the 401(k) Plan for the first three percent of his or
her annual compensation, and fifty percent for each dollar of
a participant’s contribution to the 401(k) Plan for the next three
percent of his or her annual compensation. Employees vest in the
Company’s contributions after two years of service. The charges to
expense for Marine Products’ contributions to the 401(k) plan were
$1,170,000 in 2022, $976,000 in 2021 and $603,000 in 2020.
Stock Incentive Plans
The Company reserved 3,000,000 shares of common stock under
the 2014 Stock Incentive Plan with a term of ten years expiring in April
2024. All future equity compensation awards by the Company will
be issued under the 2014 plan. This plan provides for the issuance
of various forms of stock incentives, including among others,
incentive and non-qualified stock options and restricted shares. As of
December 31, 2022, there were 1,095,547 shares available for grant.
The Company recognizes compensation expense for the unvested
portion of awards outstanding over the remainder of the service
period. The compensation cost recorded for these awards will be
based on their fair value at grant date less the cost of estimated
forfeitures. Forfeitures are estimated at the time of grant and revised,
if necessary, in subsequent periods to reflect actual forfeitures.
Pre-tax stock-based employee compensation expense was
approximately $2,707,000 ($2,111,000 after tax) for 2022, $2,289,000
($1,785,000 after tax) for 2021, and $3,102,000 (2,420,000 after tax)
for 2020.
We have not issued any stock options since 2003 and have no
immediate plans to issue additional stock options.
Restricted Stock
Marine Products grants selected employees and directors time
lapse restricted stock that vest after a certain stipulated number of
years from the grant date, depending on the terms of the issue. The
time lapse restricted shares granted by the Company in 2023 will
vest ratably over a period of four years and the shares granted in
2022 will vest ratably over a period of five years. Prior to 2022,
the time lapse restricted shares vested one-fifth per year beginning
on the second anniversary of the grant date. During these years,
grantees receive all dividends declared and retain voting rights for
the shares.
The agreements under which the restricted stock is issued provide
that shares awarded may not be sold or otherwise transferred until
restrictions established under the stock plans have lapsed. Upon
termination of employment from the Company, with the exception
of death (fully vests), disability or retirement (partially vests based
on duration of service), shares with restrictions are forfeited in
accordance with the plan.
The following is a summary of the changes in non-vested restricted shares for the year ended December 31, 2022:
Non-vested shares at January 1, 2022
Granted
Vested
Forfeited
Non-vested shares at December 31, 2022
Shares
671,370
311,703
(193,403)
(25,500)
764,170
The following is a summary of the changes in non-vested restricted shares for the year ended December 31, 2021:
Non-vested shares at January 1, 2021
Granted
Vested
Forfeited
Non-vested shares at December 31, 2021
5 0 Marine Products Corporation 2022 10-K
Shares
678,220
189,750
(194,800)
(1,800)
671,370
Weighted-
Average
Grant-Date
Fair Value
$ 14.70
11.61
11.96
14.11
$ 14.15
Weighted-
Average
Grant-Date
Fair Value
$ 12.89
16.55
10.25
11.76
$ 14.70
Part II
Item 8. — Financial Statements and Supplementary Data
The fair value of restricted stock awards is based on the market
price of the Company’s stock on the date of grant and is amortized
to compensation expense on a straight-line basis over the requisite
service period. The weighted average grant date fair value of these
restricted stock awards was $11.61 in 2022, $16.55 in 2021 and $15.00
in 2020. The total fair value of shares vested was approximately
$2,241,000 in 2022, $3,174,000 in 2021 and $4,431,000 during 2020.
For the year ending December 31, 2022 approximately $68,000
of excess tax benefits for stock-based compensation awards were
recorded as a discrete tax adjustment and classified within operating
activities in the consolidated statements of cash flows compared to
approximately $341,000 for the year ending December 31, 2021.
Other Information
As of December 31, 2022 total unrecognized compensation
cost related to non-vested restricted shares was approximately
$7,157,000 which is expected to be recognized over a weighted-
average period of 3.3 years.
NOTE 13: RELATED PARTY TRANSACTIONS
In conjunction with its spin-off from RPC in 2001, the Company and
RPC entered into various agreements that define the companies’
relationship after the spin-off.
The Transition Support Services Agreement provides for RPC
to provide certain services, including financial reporting and
income tax administration, acquisition assistance, etc., to Marine
Products until the agreement is terminated by either party. Marine
Products reimbursed RPC for its estimated allocable share of
administrative costs incurred for services rendered on behalf of
Marine Products totaling $922,000 in 2022, $867,000 in 2021,
and $846,000 in 2020. The Company’s payable to RPC for these
services was $26,000 as of December 31, 2022 and $87,000 as of
December 31, 2021. Many of the Company’s directors are also
directors of RPC and the Company’s executive officers are
employees of both the Company and RPC.
RPC and Marine Products own 50 percent each of a limited liability
company called 255 RC, LLC that was created for the joint purchase
and ownership of a corporate aircraft. The purchase was funded
primarily by a $2,554,000 contribution by each company to 255
RC, LLC. Each of RPC and Marine Products is currently a party to
an operating lease agreement with 255 RC, LLC for a period of
five years. Marine Products recorded certain net operating costs
comprised of rent and an allocable share of fixed costs of $160,000
in 2022, $160,000 in 2021 and $160,000 2020 for the corporate
aircraft. The Company has a payable to 255 RC LLC of $1.6 million
as of December 31, 2022 and $1.4 million as of December 31, 2021.
The Company accounts for this investment using the equity method
and its proportionate share of income or loss is recorded in selling,
general and administrative expenses. As of December 31, 2022, the
investment closely approximates the underlying equity in the net
assets of 255 RC, LLC and the undistributed earnings represented in
retained earnings was approximately $580,000.
A group that includes Gary W. Rollins, Pamela R. Rollins, Amy Rollins
Kreisler and Timothy C. Rollins, each of whom is a director of the
Company, and certain companies under their control, controls in
excess of fifty percent of the Company’s voting power.
NOTE 14: LEASES
The Company recognizes leases with a duration greater than
12 months on the balance sheet with a Right-Of-Use (“ROU”)
asset and liability at the present value of lease payments over
the term. Renewal options are factored into the determination of
lease payments when appropriate. There are no residual value
guarantees on the existing leases. The Company estimates its
incremental borrowing rate, at lease commencement, to determine
the present value of lease payments, since most of the Company’s
leases do not provide an implicit rate of return. ROU assets exclude
lessor incentives received. The Company’s lease population consists
primarily of office equipment. During the year ended December 31,
2022, the Company entered into new leases or modified existing
leases that resulted in an increase of ROU assets in exchange for
operating lease liabilities as disclosed below.
leases. As of
The Company does not have any finance
December 31, 2022, the Company had no operating leases that
had not yet commenced.
Lease position
The table below presents the assets and liabilities related to operating leases recorded on the balance sheet:
(in thousands)
Assets:
Classification on Consolidated Balance Sheet
Operating lease right-of-use assets
Other assets
Liabilities:
Current portion of operating lease liabilities
Long-term operating lease liabilities
Accrued expenses and other liabilities
Other long-term liabilities
Total lease liabilities
December 31,
2022
239
57
180
237
$
$
$
2021
72
54
17
71
$
$
$
Marine Products Corporation 2022 10-K
5 1
Part II
Item 8. — Financial Statements and Supplementary Data
Lease costs
The components of lease expense are included in selling, general and administrative expenses in the consolidated statements of operations
as disclosed below:
(in thousands)
Operating lease cost
Short-term lease cost
Total lease cost
Other information
As of December 31,
Cash paid for amounts included in the measurement of operating lease liabilitiess (in thousands)
ROU assets obtained in exchange for operating lease liabilities (in thousands)
Weighted average remaining lease term – operating leases (years)
Weighted average discount rate – operating leases
Lease Commitments
Maturity of lease liabilities – Operating Leases:
(in thousands)
As of December 31,
2022
2023
2024
2025
2026
2027
Total lease payments
Less: Amounts representing interest
Present value of lease liabilities
2022
59
—
59
2022
55
222
4.2
$
$
$
$
2021
55
—
55
2021
52
—
1.6
4.97%
3.40%
2022
2021
—
68
58
56
55
26
263
(26)
237
$
$
55
13
3
1
—
—
72
(1)
71
$
$
$
$
$
$
The Company is party to an operating lease as the lessor for certain real estate leased to a third party with an initial term of 36 months
that was renewed in 2022 for an additional 36 months. The lease requires fixed monthly payments and does not contain clauses for future
rent escalations or renewal options. There are no terms and conditions under which the lessee has the option to purchase this asset. As of
December 31, 2022, projected future lease income on this lease totaled $540,000 scheduled to be received as follows: 2023 — $240,000,
2024 — $240,000 and 2025 — $60,000. The Company recorded rental income of $239,000 during 2022, $236,000 during 2021 and
$236,000 in 2020 that is classified as part of selling, general and administrative expenses on the consolidated statements of operations.
5 2 Marine Products Corporation 2022 10-K
Part II
Item 9. — Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None.
ITEM 9A.
CONTROLS AND PROCEDURES
Evaluation of disclosure controls and procedures — The Company maintains disclosure controls and procedures that are designed to
ensure that information required to be disclosed in its Exchange Act reports is recorded, processed, summarized and reported within the
time periods specified in the Commission’s rules and forms, and that such information is accumulated and communicated to its management,
including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
As of the end of the period covered by this report, December 31, 2022 (the “Evaluation Date”), the Company carried out an evaluation,
under the supervision and with the participation of its management, including the Chief Executive Officer and Chief Financial Officer, of the
effectiveness of the design and operation of its disclosure controls and procedures. Based upon this evaluation, the Chief Executive Officer
and the Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective at a reasonable assurance
level as of the Evaluation Date.
Management’s report on internal control over financial reporting — Management is responsible for establishing and maintaining adequate
internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Management’s report on internal
control over financial reporting is included on page 31 of this report. Grant Thornton LLP, the Company’s independent registered public
accounting firm, has audited the effectiveness of internal control as of December 31, 2022 and issued a report thereon which is included on
page 32 of this report.
Changes in internal control over financial reporting — Management’s evaluation of changes in internal control did not identify any changes
in the Company’s internal control over financial reporting that occurred during the Company’s most recent fiscal quarter that have materially
affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
ITEM 9B.
OTHER INFORMATION
None.
ITEM 9C.
DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT
INSPECTIONS
Not Applicable.
Marine Products Corporation 2022 10-K
5 3
Part III
Item 10. — Directors, Executive Officers and Corporate Governance
Part III
ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Information concerning directors and director nominees will be included in the Marine Products Proxy Statement for its 2023 Annual
Meeting of Stockholders, in the section titled “Information Regarding Director Nominees and Continuing Directors.” Information regarding
procedures by which security holders may recommend nominees to the Company’s board of directors will be set forth in the Proxy
Statement in the section titled “Corporate Governance and Board of Directors, Committees And Meetings — Director Nominations.”
This information is incorporated herein by reference. Information about executive officers is contained under Item 4A of Part I of
this document.
AUDIT COMMITTEE AND AUDIT COMMITTEE FINANCIAL EXPERT
Information concerning the Audit Committee of the Company and the Audit Committee Financial Expert(s) will be included in the Marine
Products Proxy Statement for its 2023 Annual Meeting of Stockholders, in the section titled “Board of Directors and Corporate Governance,
Meetings and Committees of the Board of Directors — Audit Committee.” This information is incorporated herein by reference.
CODE OF ETHICS
Marine Products has a Code of Business Conduct that applies to all employees. In addition, the Company has a Code of Business Conduct
and Ethics for Directors and Executive Officers and Related Party Transaction Policy. Both of these documents are available on the Company’s
website at MarineProductsCorp.com. Copies are also available at no extra charge by writing to Attn: Human Resources, Marine Products
Corporation, 2801 Buford Highway NE, Suite 300, Atlanta, Georgia 30329. Marine Products intends to satisfy the disclosure requirement
under Item 5.05 of Form 8-K regarding an amendment to, or waiver from, a provision of its code of ethics that relates to any elements of the
code of ethics definition enumerated in SEC rules by posting such information on its internet website, the address of which is provided above.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Information regarding compliance with Section 16(a) of the Exchange Act will be included under “Section 16(a) Beneficial Ownership Reporting
Compliance” in the Company’s Proxy Statement for its 2023 Annual Meeting of Stockholders, which is incorporated herein by reference.
ITEM 11.
EXECUTIVE COMPENSATION
Information concerning director and executive compensation will be included in the Marine Products Proxy Statement for its 2023 Annual
Meeting of Stockholders, in the sections titled “Human Capital Management and Compensation Committee Interlocks and Insider Participation,”
“Director Compensation,” “Compensation Discussion and Analysis,” “Human Capital Management and Compensation Committee Report”
and “Executive Compensation.” This information is incorporated herein by reference.
5 4 Marine Products Corporation 2022 10-K
Part III
Item 12. — Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED STOCKHOLDER MATTERS
Information concerning security ownership of certain beneficial owners and management, and all directors and executive officers as a group,
will be included in the Marine Products Proxy Statement for its 2023 Annual Meeting of Stockholders in the section titled “Stock Ownership of
Certain Beneficial Owners and Management.” This information is incorporated herein by reference. Arrangements known to the Company, if
any, the operation of which may at a subsequent date result in a change in control of the Company will be included in the Marine Products
Proxy Statement for its 2023 Annual Meeting of Stockholders in the section titled “Certain Relationships and Related Party Transactions.”
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
The following table sets forth certain information regarding equity compensation plans as of December 31, 2022.
(in thousands)
Equity compensation plans
approved by securityholders
Equity compensation plans not
approved by securityholders
Total
(A)
Number of Securities
To Be Issued Upon
Exercise of Outstanding
Options, Warrants and Rights
(B)
Weighted Average
Exercise Price of
Outstanding Options,
Warrants and Rights
(C)
Number of Securities Remaining
Available for Future Issuance Under
Equity Compensation Plans
(Excluding Securities
Reflected in Column (A))
—
—
—
$
$
—
—
—
1,095,547 (1)
—
1,095,547
(1) All of the securities can be issued in the form of restricted stock or other stock awards.
See “NOTE 12: EMPLOYEE BENEFIT PLANS” to the Consolidated Financial Statements for information regarding the material terms of the
equity compensation plans.
ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS,
AND DIRECTOR INDEPENDENCE
Information concerning certain relationships and related party transactions will be included in the Marine Products Proxy Statement for its
2023 Annual Meeting of Stockholders, in the section titled “Certain Relationships and Related Party Transactions.” Information regarding
director independence will be included in the Marine Products Proxy Statement for its 2023 Annual Meeting of Stockholders in the section
titled “Director Independence and NYSE Requirements.” This information is incorporated herein by reference.
ITEM 14.
PRINCIPAL ACCOUNTING FEES AND SERVICES
Information regarding principal accountant fees and services will be included in the section titled, “Audit Matters — Independent Registered
Public Accounting Firm” in the Marine Products Proxy Statement for its 2023 Annual Meeting of Stockholders. This information is incorporated
herein by reference.
Marine Products Corporation 2022 10-K
5 5
Part IV
Item 15. — Exhibits and Financial Statement Schedules
Part IV
ITEM 15.
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
Consolidated Financial Statements, Financial Statement Schedule and Exhibits
1.
Consolidated financial statements listed in the accompanying Index to Consolidated Financial Statements and Schedule are filed as part
of this report.
2.
3.
The financial statement schedule listed in the accompanying Index to Consolidated Financial Statements and Schedule is filed as part
of this report.
Exhibits listed in the accompanying Index to Exhibits are filed as part of this report. The following such exhibits are management contracts
or compensatory plans or arrangements:
Exhibit No.
Exhibit Description
10.5
10.6
10.7
10.8
10.9
10.10
10.11
10.12
10.13
10.14
Marine Products Corporation 2004 Stock Incentive Plan (incorporated herein by reference to Appendix B to the Definitive
Proxy Statement filed on March 24, 2004).
Form of time lapse restricted stock grant agreement under the 2004 Stock Incentive Plan (incorporated herein by
reference to Exhibit 10.2 to the Form 10-Q filed on November 1, 2004).
Form of performance restricted stock grant agreement under the 2004 Stock Incentive Plan (incorporated herein by
reference to Exhibit 10.3 to the Form 10-Q filed on November 1, 2004).
Supplemental Retirement Plan (incorporated herein by reference to Exhibit 10.16 to the Form 10-K filed on March 15,
2005).
First Amendment to 2001 Employee Stock Incentive Plan and 2004 Stock Incentive Plan (incorporated by reference to
Exhibit 10.19 to the Form 10-K filed on March 2, 2007).
Summary of ‘At-Will’ compensation arrangements with the Executive Officers as of February 28, 2009 (incorporated
herein by reference to Exhibit 10.20 to the Form 10-K filed on March 5, 2009).
Form of time lapse restricted stock agreement under the 2004 Stock Incentive Plan (incorporated herein by reference to
Exhibit 10.1 to the Form 10-Q filed on May 2, 2013).
Summary of compensation arrangements with non-employee directors (incorporated herein by reference to Exhibit 10.16
to the Form 10-K filed on February 28, 2019).
2014 Stock Incentive Plan (incorporated herein by reference to Appendix A to the Registrant’s definitive Proxy Statement
filed on March 17, 2014).
Marine Products Corporation Cash Based Incentives (Discretionary) Acknowledgement of Cash Based Incentives for
Executive Officers (incorporated herein by reference to Exhibit 10.18 to the Form 10-K filed on February 28, 2017).
Exhibits (inclusive of item 3 above):
Exhibit No.
Exhibit Description
3.1
3.2
4.1
4.2
(a) Articles of Incorporation of Marine Products Corporation (incorporated herein by reference to Exhibit 3.1 to the Form 10 filed
on February 13, 2001).
(b) Certificate of Amendment of Certificate of Incorporation of Marine Products Corporation executed on June 8, 2005
(incorporated herein by reference to Exhibit 99.1 to the current report on Form 8-K filed on June 9, 2005).
Amended and Restated Bylaws of Marine Products Corporation (incorporated herein by reference to Exhibit 99 to the
Form 8-K filed on February 2, 2021).
Form of Common Stock Certificate of Marine Products Corporation (incorporated herein by reference to Exhibit 4.1 to the
Form 10 filed on February 13, 2001).
Description of Registrant’s Securities (incorporated herein by reference to Exhibit 4.2 to the Form 10-K filed on February 28,
2020).
5 6 Marine Products Corporation 2022 10-K
Part IV
Item 15. — Exhibits and Financial Statement Schedules
Exhibit No.
Exhibit Description
10.1
10.2
10.3
10.4
10.5
10.6
10.7
10.8
10.9
10.10
10.11
10.12
10.13
10.14
21
23
24
31.1
31.2
32.1
Agreement Regarding Distribution and Plan of Reorganization, dated February 12, 2001, by and between RPC, Inc. and
Marine Products Corporation (incorporated herein by reference to Exhibit 10.2 to the Form 10 filed on February 13, 2001).
Employee Benefits Agreement, dated February 12, 2001, by and between RPC, Inc., Chaparral Boats, Inc. and Marine Products
Corporation (incorporated herein by reference to Exhibit 10.3 to the Form 10 filed on February 13, 2002).
Transition Support Services Agreement, dated February 12, 2001, by and between RPC, Inc. and Marine Products Corporation
(incorporated herein by reference to Exhibit 10.4 to the Form 10 filed on February 13, 2001).
Tax Sharing Agreement, dated February 12, 2001, by and between RPC, Inc. and Marine Products Corporation (incorporated
herein by reference to Exhibit 10.5 to the Form 10 filed on February 13, 2001).
Marine Products Corporation 2004 Stock Incentive Plan (incorporated herein by reference to Appendix B to the Definitive
Proxy Statement filed on March 24, 2004).
Form of time lapse restricted stock grant agreement under the 2004 Stock Incentive Plan (incorporated herein by reference
to Exhibit 10.2 to the Form 10-Q filed on November 1, 2004).
Form of performance restricted stock grant agreement under the 2004 Stock Incentive Plan (incorporated herein by reference
to Exhibit 10.3 to the Form 10-Q filed on November 1, 2004).
Supplemental Retirement Plan (incorporated herein by reference to Exhibit 10.16 to the Form 10-K filed on March 15, 2005).
First Amendment to 2001 Employee Stock Incentive Plan and 2004 Stock Incentive Plan (incorporated herein by reference to
Exhibit 10.19 to the Form 10-K filed on March 2, 2007).
Summary of ‘At-Will’ compensation arrangements with the Executive Officers as of February 28, 2009 (incorporated herein by
reference to Exhibit 10.20 to the Form 10-K filed on March 5, 2009).
Form of time lapse restricted stock agreement under the 2004 Stock Incentive Plan (incorporated herein by reference to
Exhibit 10.1 to the Form 10-Q filed on May 2, 2013).
Summary of compensation arrangements with non-employee directors (incorporated herein by reference to Exhibit 10.16 to
the Form 10-K filed on February 28, 2019).
2014 Stock Incentive Plan (incorporated herein by reference to Appendix A to the Registrant’s definitive Proxy Statement filed
on March 17, 2014).
Marine Products Corporation Cash Based Incentives (Discretionary) Acknowledgement of Cash Based Incentives for Executive
Officers (incorporated herein by reference to Exhibit 10.18 to the Form 10-K filed on February 28, 2017).
Subsidiaries of Marine Products Corporation (incorporated herein by reference to Exhibit 21 to the Form 10-K filed on March
4, 2008).
Consent of Grant Thornton LLP
Powers of Attorney for Directors
Section 302 certification for Chief Executive Officer
Section 302 certification for Chief Financial Officer
Section 906 certification for Chief Executive Officer and Chief Financial Officer
101.INS
Inline XBRL Instance Document
101.SCH
Inline XBRL Taxonomy Extension Schema Document
101.CAL
Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB
Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF
Inline XBRL Taxonomy Extension Definition Linkbase Document
104
The cover page from the Company’s Annual Report for the year ended December 31, 2022, formatted in Inline XBRL
Any schedules not shown above have been omitted because they are not applicable.
Marine Products Corporation 2022 10-K
5 7
Part IV
Signatures
Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Marine Products Corporation
Ben M. Palmer
President and Chief Executive Officer
Date:
February 27, 2023
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of
the Registrant and in the capacities and on the dates indicated.
By:
By:
Ben M. Palmer
President and Chief Executive Officer
(Principal Executive Officer)
Michael L. Schmit
Vice President, Chief Financial Officer
and Corporate Secretary
(Principal Financial and Accounting Officer)
Date:
February 27, 2023
Date:
February 27, 2023
The Directors of Marine Products Corporation (listed below) executed a power of attorney, appointing Ben M. Palmer their attorney-in-fact,
empowering him to sign this report on their behalf.
Richard A. Hubbell, Director
Gary W. Rollins, Director
Jerry W. Nix, Director
Timothy C. Rollins, Director
Susan R. Bell, Director
Pamela R. Rollins, Director
Patrick J. Gunning, Director
John F. Wilson, Director
Amy R. Kreisler, Director
Ben M. Palmer
Director and as Attorney-in-fact
February 27, 2023
5 8 Marine Products Corporation 2022 10-K
Part IV
Index To Consolidated Financial Statements, Reports and Schedule
Index To Consolidated Financial Statements,
Reports and Schedule
The following documents are filed as part of this report.
FINANCIAL STATEMENTS AND REPORTS
Management’s Report on Internal Control Over Financial Reporting
Report of Independent Registered Public Accounting Firm (PCAOB ID Number 248) on
Internal Control Over Financial Reporting
Report of Independent Registered Public Accounting Firm (PCAOB ID Number 248) on
Consolidated Financial Statements
Consolidated Balance Sheets as of December 31, 2022 and 2021
Consolidated Statements of Operations for each of the three years ended December 31, 2022
Consolidated Statements of Comprehensive Income for each of the three years ended December 31, 2022
Consolidated Statements of Stockholders’ Equity for each of the three years ended December 31, 2022
Consolidated Statements of Cash Flows for each of the three years ended December 31, 2022
Notes to Consolidated Financial Statements
SCHEDULE
Schedule II – Valuation and Qualifying Accounts
PAGE
31
32
33
35
36
37
38
39
40-52
60
Schedules not listed above have been omitted because they are not applicable or the required information is included in the Consolidated
Financial Statements or notes thereto.
Marine Products Corporation 2022 10-K
5 9
Part IV
Schedule II – Valuation and Qualifying Accounts
Schedule II – Valuation and Qualifying Accounts
MARINE PRODUCTS CORPORATION AND SUBSIDIARIES
(in thousands)
Description
Year ended December 31, 2022
Credit loss allowance for accounts receivable
Year ended December 31, 2021
Credit loss allowance for accounts receivable
Deferred tax asset valuation allowance
Year ended December 31, 2020
Credit loss allowance for accounts receivable
Deferred tax asset valuation allowance
For the years ended
December 31, 2022, 2021 and 2020
Balance at
Beginning
of Period
Charged to
Costs and
Expenses
Net
(Write-Offs)/
Recoveries
Balance
at End of
Period
$
$
$
$
$
12
16
1,818
20
1,818
$
$
$
$
$
—
—
—
8
—
$
$
$
$
$
—
(4)
(1,818)
(12)
—
$
$
$
$
$
12
12
—
16
1,818
6 0 Marine Products Corporation 2022 10-K
This page has been left blank intentionally
MARINE PRODUCTS CORPORATION 2022 ANNUAL REPORT
RECONCILIATION OF NON-GAAP FINANCIAL MEASURE TO
NEAREST GAAP FINANCIAL MEASURE
Non-GAAP Financial Measure
Marine Products Corporation uses the following non-GAAP financial measure:
• Earnings before interest, taxes, depreciation and amortization (EBITDA)
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 below are reconciliations of these non-GAAP measures with their most comparable GAAP measures:
Reconciliation of Net Income (Loss) to EBITDA
Net Income (Loss)
Add:
Income tax provision (benefit)
Depreciation and amortization
Less:
Interest income
EBITDA
6 2 Marine Products Corporation 2022 10-K
CORPORATE INFORMATION
OFFICERS
RICHARD A. HUBBELL
Executive Chairman of the Board
BEN M. PALMER
President and Chief Executive Officer
MICHAEL L. SCHMIT
Vice President, Chief Financial Officer and
Corporate Secretary
DIRECTORS
RICHARD A. HUBBELL (1)
Executive Chairman of the Board, RPC, Inc
JERRY W. NIX (2)
Former Vice Chairman, Executive Vice President
and Chief Financial Officer of Genuine Parts Company
SUSAN R. BELL (3)
Retired Partner, Ernst & Young LLP
PATRICK J. GUNNING (4)
Retired Partner, Ernst & Young LLP
AMY R. KREISLER (5)
Executive Director, The O Wayne Rollins Foundation
BEN M. PALMER (6)
President and Chief Executive Officer, RPC, Inc
GARY W. ROLLINS
Chairman of the Board and Chairman of the Executive
Committee, Rollins, Inc
PAMELA R. ROLLINS
Community Leader
TIMOTHY C. ROLLINS (5)
Vice President, LOR, Inc
JOHN F. WILSON (7)
Vice Chairman, Rollins, Inc
(1) Chairman of the Executive Committee
(2) Lead Independent Director; Chairman of the Human
Capital Management and Compensation Committee;
Chairman of the Nominating and Corporate Governance
Committee; and Member of the Audit Committee
(3) Member of the Audit Committee
(4) Chairman of the Audit Committee; Member of the
Human Capital Management and Compensation
Committee; and Member of the Nominating and
Corporate Governance Committee
(5) Member of the Nominating and Corporate Governance
Committee
(6) Member of the Executive Committee
(7) Member of the Audit Committee; Human Capital
Management and Compensation Committee; and
Nominating and Corporate Governance Committee
STOCKHOLDER INFORMATION
CORPORATE OFFICES
Marine Products Corporation
2801 Buford Highway NE, Suite 300
Atlanta, Georgia 30329
Telephone: (404) 321-7910
STOCK LISTING AND TICKER SYMBOL
New York Stock Exchange - NYSE: MPX
INVESTOR RELATIONS WEBSITE
MarineProductsCorp com
TRANSFER AGENT AND REGISTRAR
For inquiries related to stock certificates, including changes of address,
please contact:
AMERICAN STOCK TRANSFER & TRUST COMPANY, LLC
SHAREHOLDER SERVICES DEPARTMENT
6201 15th Avenue
Brooklyn, NY 11219
Telephone: (877) 864-5055
Help@ASTFinancial com
ASTFinancial com
ANNUAL MEETING
The Annual Meeting of Marine Products Corporation will be held at 12:00 p m ,
April 25, 2023, at 2170 Piedmont Road, NE, Atlanta, GA 30324
CAUTION CONCERNING FORWARD-LOOKING STATEMENTS
The Annual Report contains statements that constitute “forward-looking
statements” under the Private Securities Litigation Reform Act of 1995,
including all statements that look forward in time or express management’s
beliefs, expectations or hopes In particular, such statements include,
without limitation: our view that our dividend policy is a vital component
of long-term shareholder value creation; our belief that the supply chain
issues which caused our working capital increases are being resolved;
our belief that we still have opportunities to improve our production and
inventory management and reduce inventory to more normalized levels;
our belief that the significant increase in cash will continue to manage our
inventories and working capital to enhance our cash position further during
2023; our continued belief that the continuity of the leadership team along
with bringing new financial talent into the Company has served us well as
we maintain our strong financial performance; our plan in 2023 to continue
to prioritize managing our suppliers to optimize availability and deliveries
of the raw materials and fabricated components that constitute our supply
chain; our belief that this continued management is critical to product
quality, efficiency and profitability, and working capital requirements; our
plan to monitor all relevant indicators of consumer demand during the
critical 2023 retail selling season should it be impacted by higher interest
rates, economic softening, or declining consumer confidence The actual
results of the Company could differ materially from those indicated by the
forward-looking statements because of various risks and uncertainties,
including, without limitation, those identified under the title “Risk Factors” in
the Company’s Annual Report on Form 10-K included as part of this Annual
Report All of the foregoing risks and uncertainties are beyond the ability
of the Company to control, and in many cases the Company cannot predict
the risks and uncertainties that could cause its actual results to differ
materially from those indicated in the forward-looking statements The
Company does not undertake to update these forward-looking statements
2801 Buford Highway NE, Suite 300
Atlanta, Georgia 30329
(404) 321-7910
©© 2023 Marine Products Corporation
All rights reserved The names of other companies and products
mentioned herein may be the trademarks of their respective owners