SUSTAINED BRAND LEADERSHIP
SUSTAINED BRAND LEADERSHIP
SUSTAINED BRAND LEADERSHIP
2023 ANNUAL REPORT
2023 ANNUAL REPORT
2023 ANNUAL REPORT
MARINE PRODUCTS CORPORATION
(NYSE: MPX) designs, manufactures and
distributes premium-branded Chaparral sterndrive
and outboard pleasure boats and Robalo outboard
sport fishing boats through 203 domestic and 88
international independent dealers
With premium brands, a solid capital
structure and a strong independent
dealer network, Marine Products is a
market leader that has consistently
generated strong financial performance
and paid dividends to our stockholders
Marine Products 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
Featured on front cover: Robalo R360
Featured on back cover: Chaparral OSX 300
Featured above: Chaparral SSi 23 OB
For specific product information, please visit:
ChaparralBoats com
Robalo com
01 2023 FINANCIAL HIGHLIGHTS
02 LETTER TO STOCKHOLDERS
04 LEVERAGING TECHNOLOGY, INNOVATION AND EFFICIENCY
05 CHAPARRAL 310 OSX – THE LEGACY CONTINUES
06 2024 PRODUCT OVERVIEW
07 2023 FORM 10-K
Inside Back Cover CORPORATE INFORMATION
R180 n CENTER CONSOLE
206 n CAYMAN BAY BOAT
R207 n DUAL CONSOLE
21 SF n SSI
2023 FINANCIAL HIGHLIGHTS
NET SALES
(in thousands)
NET INCOME
(in thousands)
6
3
1
,
2
9
2
$
5
2
8
,
9
3
2
$
4
1
0
,
8
9
2
$
5
9
9
,
0
8
3
$
,
9
2
7
3
8
3
$
9
3
2
,
8
2
$
4
4
4
,
9
1
$
6
2
0
,
9
2
$
7
4
3
,
0
4
$
5
9
6
,
1
4
$
2019
2019
2020
2020
2021
2021
2022
2022
2023
2019
2019
2020
2020
2021
2021
2022
2022
2023
TOTAL NUMBER OF BOATS SOLD
AVERAGE SELLING PRICE PER UNIT
(in thousands)
5
2
8
,
4
9
8
6
,
3
5
6
1
,
4
1
3
3
,
4
2019
2019
2020
2020
2021
2021
2022
2022
9
3
1
,
4
2023
3
5
$
6
5
$
2
6
$
7
7
$
2019
2019
2020
2020
2021
2021
2022
2022
2
8
$
2023
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
NET SALES
GROSS PROFIT
2019
2020
$ 292,136 $ 239,825
2021
2022
2023
$ 298,014 $ 380,995
$ 383,729
$ 65,394 $ 53,605
$ 68,272
$ 93,717
$ 90,379
OPERATING INCOME
$ 34,135 $ 24,361
$ 36,392
NET INCOME
$ 28,239 $ 19,444
$ 29,026
$ 51,796 $ 49,202
$ 40,347 $ 41,695
DILUTED EARNINGS PER SHARE
$
0.83 $
0.57
$
0.85
$
1.18
$
1.21
GROSS PROFIT MARGIN
22.4%
22.4%
22.9%
24.6%
23.6%
250 n OSX
267 n SSX
28 n SURF
LETTER TO STOCKHOLDERS
During 2023, we saw positive operating momentum in the
first half of the year, followed by a softening of strong post-
COVID industry demand dynamics in the second half. Overall,
we delivered solid financial performance, increasing our net
sales, EPS and operating cash flow. We also continued to
pay an attractive dividend and maintained a highly liquid and
debt-free balance sheet. Economic uncertainty, higher interest
rates, and building inventories in our dealers’ showrooms have
clearly slowed the recent momentum boat manufacturers have
enjoyed during the past few years. However, our relentless
focus on product improvement and innovation, manufacturing
efficiencies, investments in our dealer network, and
conservative financial stewardship remain unchanged. We have
taken the appropriate actions to manage our cost structure
due to lower production levels, while still making investments
that are key to driving long-term profitable growth. In fact,
our discipline and focus on cash flow has resulted in a cash
accumulation of more than $70 million on the balance sheet.
This provides ample liquidity to make internal investments as
well as explore more significant strategic actions to increase
our scale and enhance our growth outlook.
SSX 267
For the full year 2023, net sales increased 1% to $383.7 million.
Unit sales decreased 4%, with strong order flow in the first
half of the year transitioning to softer order patterns in the
second half. Our price increases to cover higher costs and
shift to larger, higher-priced boats more than offset incentive
program activity to drive an overall net pricing and mix benefit.
We implemented retail incentive programs in the third quarter
to encourage sales at the retail level. Our best-selling models
in 2023 continued to be two of our 21- and 23-foot Chaparral
sterndrive sport boats, together representing about 20% of our
total units sold.
Gross profit in 2023 was $90.4 million, down from $93.7 million
last year, largely due to increased promotional activities, and
contracting production volume and associated manufacturing
inefficiencies. Gross margin was 23.6% of net sales in 2023,
compared with 24.6% in 2022. In response to easing demand,
2
We increased our net sales, EPS,
and operating cash flow and continued
to pay an attractive dividend while
maintaining a debt-free balance sheet.
we adjusted our variable labor costs and production schedules
to reflect current order patterns and customer indications.
Selling, general and administrative expenses increased slightly
to $43.2 million, up from $41.9 million last year. In addition to
general inflationary factors, we invested aggressively in dealer
sales and technical training, demonstrating our commitment
to these critical relationships. Operating income in 2023 was
$49.2 million or 12.8% of net sales, compared with $51.8 million
or 13.6% of net sales, in 2022.
Interest income was $2.9 million, up significantly from $0.3
million last year due to larger cash balances and higher earned
investment yields. Earnings before interest, taxes, depreciation
and amortization(1) (EBITDA) was $51.6 million in 2023,
compared with $53.7 million in 2022.
We generated net income of $41.7 million or $1.21 of diluted
earnings per share (EPS) in 2023, up from $40.3 million or $1.18
of diluted EPS last year. Our effective tax rate was 19.9% in
2023, slightly lower than the 22.6% from last year.
We are pleased to deliver another year of strong cash flow.
The company generated $56.8 million in net cash provided
by operating activities during 2023, up from $49.3 million in
2022. A significant contributor to cash flow growth was working
capital changes as easing supply chain constraints allowed us
to complete and ship units to reduce our inventories.
2023 capital expenditures of $10.2 million were higher than
capital expenditures of $2.5 million last year. We invested in
our fleet of trailers and our warehouses, driving the majority
of the increase. We are also making investments in our facility
in 2024 with the planned installation of a rooftop solar energy
system at our manufacturing site in Nashville, Georgia. Beyond
the environmental benefits of alternative energy sources, we
expect to derive cost savings from this investment. We plan
to continue increasing our selective use of robotics to ensure
consistency in our production processes and enhance the safe
working conditions for our employees.
During 2023 our Board of Directors continued the Company’s
regular quarterly cash dividends for the twelfth consecutive
year. We paid $19.3 million in dividends ($0.56 per share), an
increase of $2.2 million compared with $17.1 million in 2022.
(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 63 of this Marine Products Corporation 2023 Annual Report.
R250
As a result of our strong cash flows, we finished 2023 with
$72.0 million in cash, up from $43.2 million at the end of last
year. We view our dividend policy as a vital component of long-
term shareholder value creation and will continue to assess
our regular dividend as well as other means of distributing
excess capital to our shareholders.
During 2023, within its category and size range, Chaparral’s
retail market share ranked number one. During this same time,
Robalo held the third highest retail market share in its size
range. When combining the retail market share of Chaparral
and Robalo outboards, in the fiberglass boat category and
size range, Marine Products Corporation ranked number one
compared with all independent boat builders. We are proud
of these accomplishments and the consistency of the strong
market share results within our product lines in recent years.
Another consistent accomplishment relates to the recent
announcement that both Chaparral and Robalo won the CSI
Award for customer satisfaction for the 17th consecutive year.
As mentioned above, we are emerging from several years of
high demand in the recreational boating industry characterized
by a strong consumer appetite for outdoor activities post-
COVID and previously low interest rates. As the industry
returns to normalized conditions, dealers are facing less
consumer urgency for purchases, higher interest rates that
increase costs to consumers who finance purchases and
generally high inventory levels across the channel. All told,
we have adjusted our manufacturing operations costs and
implemented promotional incentives to stimulate demand and
de-stock the channel.
During this time, however, we will press forward on initiatives
to improve both near-term and long-term financial results and
position ourselves for success regardless of external factors.
These projects include efforts to improve our efficiency in our
manufacturing facilities, continued innovation and industry-
leading product designs and features, and ongoing partnerships
with our dealers to maximize our share of the market.
Furthermore, we have ample capital to invest in more
significant opportunities should they arise, particularly
potential acquisitions. We have remained disciplined over the
years and accumulated a substantial cash position. We believe
acquisitions could offer unique value creation opportunities
and a pathway to accelerated growth and increased scale.
Lastly, I want to thank all our stockholders, employees
and dealers for your continued support and commitment.
We believe we have some of the best boat makers in the
industry and that their commitment to their craft underpins
the outstanding reputation Chaparral and Robalo enjoy in the
marketplace. To our dealers, many of whom have been with
us for several decades, you represent our company to the
consumer, ultimately serving as our brand ambassadors. We
appreciate your support and partnership and look forward to
continued, shared success.
Sincerely,
BEN M. PALMER
President and Chief Executive Officer
3
R317
LEVERAGING INNOVATION,
TECHNOLOGY AND EFFICIENCY
With over 1.2 million square feet of manufacturing space at our
Nashville, Georgia campus, we are one of the largest single-
site recreational boat builders in the world. One of the keys
to our success is consistently investing in technology to drive
innovation, generate efficiencies and improve safety. Over
the years, we have invested in several initiatives to drive us
forward on these fronts.
Virtual reality design studio. New products are the lifeblood
of our company and our ability to deliver innovative boat
designs and features to our customers has been a hallmark
for both Chaparral and Robalo over the years. Our computer-
aided modeling capabilities leverage virtual reality technology
to allow our designers to build boats within the software and
perform 3D active “walk-throughs” using VR headsets. This
enables us to experience the boat virtually, enhance layouts
and features, identify potential improvements, and avoid
the time and expense of prototyping physical boats. This
investment delivered a step-change improvement in our design
and engineering capabilities. We currently have 6 high-end
graphics workstations for processing and modeling complex
boat assemblies.
3D printing machines. Our investment in 3D printing
capabilities has been crucial to our design and innovation
success, enabling us to produce custom machined parts
on site quickly. Having this asset in-house accelerates our
development processes, as we do not rely on third parties
for unique parts production. We are able to move from
conceptualized parts and molds to tangible prototypes in
real-time on the shop floor. These extrusion printers have been
used in developing key innovative features and designs used in
many of our boats today.
Manufacturing robotics. We are increasingly using robotics to
perform certain tasks, such as parts handling and cutting, to
leverage the skill of our craftsmen and reduce unnecessary
physical demands. This creates a safer production environment
and allows our workers to focus on areas that drive maximum
quality and consistency. While boat manufacturing is a truly
hands-on process requiring the skilled craftsmanship of all of
our production employees, we are always seeking to maximize
efficiency and will continue to invest selectively in automation
to improve quality and reduce costs.
Solar panel installation. We have a significant solar panel
installation slated for 2024. Beyond the environmental benefits
of using alternative energy sources, we expect this project to
drive cash savings. This equipment will have the capability to
supply a sizable portion of our energy needs at our Nashville,
Georgia manufacturing site.
R250
4
CHAPARRAL 310 OSX – THE LEGACY CONTINUES
Premiering at the February 2024 Miami International Boat
Show, Chaparral announced the newest model to join the OSX
lineup. The Chaparral 310 OSX made its grand debut to avid
boating enthusiasts, revealing sleek new features and product
enhancements. The 310 OSX will meet many of your family’s
boating needs with an overall length of approximately 31
feet, and the deep bow providing one of the biggest and most
elegant rides that Chaparral has to offer. The extended size of
the boat brings a great experience to your family and friends
thanks to its yacht-certified passenger capacity.
Long weekends on the water are made easy thanks to many
of the detailed designs and enhanced technology provided
by the OSX. In addition to the spacious cabin, head and
wet bar, discriminating captains will appreciate the detailed
functionality of push-button lighted stainless-steel switches,
tilt steering wheel, lighted compass, and crisp, clean digital
gauges and the Simrad® multifunction engine data displays,
GPS chart plotter, depth sounder, and more.
One of the distinctive aspects of the 310 OSX is its design,
focused on maximizing comfort and space. The boat includes
a convenient side entry door, abundant seating, and extensive
storage solutions, catering to the needs and comfort of its
passengers by embodying luxury and innovation for day
boating enthusiasts. This design approach is in line with
Chaparral’s reputation for producing high-quality, luxury sport
boats that are both functional and stylish.
Although the specific details of the 310 OSX were highlighted
at the boat show, it shares lineage with the entire OSX series
known for its unique and striking design and efficient use of
space provided by innovative hull designs, enhancing the
onboard experience.
The 310 OSX will meet many of your
family’s boating needs with an overall length
of approximately 31 feet. The deep bow
provides one of the biggest and most elegant
rides that Chaparral has to offer.
The Chaparral 310 OSX represents a blend of luxury, innova-
tion, and performance, designed to meet the high standards
and expectations of day boaters looking for an exceptional
maritime experience. The 310 OSX further solidifies Chaparral
Boats’ reputation in the luxury sport boat market.
Locate a dealer near you and find an opportunity to climb
aboard, take a closer look at the 310 OSX and tour this huge
new addition to the Chaparral legacy.
OSX 310
2024 PRODUCT OVERVIEW
SSi SPORT BOATS
Chaparral’s SSi sport boat and premium bowrider is produced for the
quality and style-conscious recreational boater. The 19 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 models 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 include trailers and are marketed
with National Advertised Prices.
SSX LUXURY SPORT BOATS
For the 2024 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
19 SSI Outboard
21 SSi SKI & FISH
21 SSi Outboard SKI & FISH
23 SSi Outboard
21 SSi
21 SSi Outboard
23 SSi
OSX OUTBOARD LUXURY SPORT BOATS
Chaparral’s OSX luxury outboard sport boats combine everything an
avid boater loves about high-end pleasure cruising with the power of
an outboard motor. The model line stretches from 25 to 31 feet, packed
with generous seating options and plenty of room for entertaining
guests. An enclosed cabin with head, found on our larger OSX boats,
provides many amenities for long weekends on the water, while an
elegant, enclosed privacy head is found on our smaller models.
Enjoy abundant sun lounge options, premium performance silicone
upholstery, and yacht-like comfort.
250 OSX 270 OSX 280 OSX 310 OSX
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,
and a tower with upper station controls on the 246 and 266 Sky
Deck. Each model also includes a trailer and a wide array of fishing
features at Reel Deal pricing.
206 226 246 246 SKY DECK
266 266 SKY DECK
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 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 per-
formance, 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.
R202EX R222EX R232EX
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, 2023
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
Name of each exchange on which registered
Common Stock, $0.10 Par Value
MPX
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 provided 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, 2023, the last business
day of the registrant’s most recent second fiscal quarter, was $139,927,749 based on the closing price on the New York Stock Exchange on
June 30, 2023 of $16.86 per share.
Marine Products Corporation had 34,682,949 shares of common stock outstanding as of February 20, 2024.
Portions of the Proxy Statement for the 2024 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, 2023
Table of Contents
Part I
Part III
ITEM 1.
Business ................................................................................ 12
ITEM 10. Directors, Executive Officers and
ITEM 1A.
Risk Factors ....................................................................... 20
ITEM 1B. Unresolved Staff Comments ........................................ 24
ITEM 1C. Cybersecurity ................................................................... 24
Properties ........................................................................... 25
Legal Proceedings .......................................................... 25
Corporate Governance .................................................. 55
ITEM 11.
ITEM 12.
Executive Compensation ............................................... 55
Security Ownership of Certain Beneficial
Owners and Management and Related
Stockholder Matters ........................................................ 56
ITEM 13. Certain Relationships and Related Party
Transactions, and Director Independence .............. 56
Mine Safety Disclosures ............................................... 25
ITEM 14. Principal Accounting Fees and Services .................. 56
ITEM 2.
ITEM 3.
ITEM 4.
Part II
ITEM 5.
ITEM 6.
ITEM 7.
Market for Registrant’s Common Equity,
Related Stockholder Matters and Issuer
Purchases of Equity Securities..................................... 26
[Reserved] ...........................................................................27
Management’s Discussion and Analysis
of Financial Condition and Results
of Operations ......................................................................27
ITEM 7A. Quantitative and Qualitative Disclosures
about Market Risk ..............................................................31
ITEM 8.
ITEM 9.
Financial Statements and
Supplementary Data ....................................................... 32
Changes in and Disagreements
with Accountants on Accounting and
Financial Disclosures ...................................................... 54
ITEM 9A. Controls and Procedures .............................................. 54
ITEM 9B. Other Information ............................................................. 54
ITEM 9C. Disclosure Regarding Foreign
Jurisdictions that Prevent Inspections ....................... 54
Part IV
ITEM 15. Exhibits and Financial Statement
Schedules ............................................................................57
ITEM 16. Signatures ........................................................................... 59
Index to Consolidated Financial
Statements, Reports and Schedule ............................ 60
Schedule II – Valuation and
Qualifying Accounts ......................................................... 61
Marine Products Corporation 2023 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.
insightful,
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
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 belief that relevant supply
chains will continue to be less constrained than they were
immediately following the COVID-19 pandemic; 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 and expectation that
such discounts will continue to be made available; the Company’s
intention to continue to assess demand and dealer management to
manage production at appropriate levels, and its expectation that it
will be able to do so; and the Company’s belief that dealer inventories
of its boat models are more than sufficient to meet the current level
of retail customer demand; its estimates of sales order backlogs; 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 strategies described under “Business –
Strategies,” including but not limited to its goals of coordinating a
complex supply chain to ensure that raw materials and parts used in
manufacturing our products are delivered on a timely basis, and to
leverage its buying power through economies of scale and achieve
improved pricing on components; 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 to increase market share by expanding dedicated
sales, marketing and distribution systems; the Company’s plans to
continue providing incentives, sales education, technical training and
other support to its independent dealers in order to enhance their
effectiveness and customer retention; the Company’s belief that the
nationally advertised fixed retail pricing gives the consumer
confidence that they are getting the best possible price and
encourages consistent pricing across the Company’s dealer network;
the Company’s plan to manage production and dealer order backlog
to optimize operating results and reduce risk in the event of a
downturn in sales of our products, and that order backlog will be
used to match production levels with expected demand, ensuring
efficient cost management and productivity and its goal to achieve
such efficient cost management and productivity; the Company’s
plan to maintain a flexible, variable cost structure which can be
reduced quickly when deemed appropriate and its goal to achieve
such quick reductions; The Company’s goal to create a positive,
memorable experience for customers through the design of its
products and marketing, while meeting the challenges of an evolving
environment which calls for the increased use of technology to
conduct virtual marketing and product demonstration; The
Company’s strategy to monitor the recreational boat market for
strong complementary product lines which we may enter through
new product development or acquisition; The Company’s goal to
extend brand name recognition to enhance the success of new boat
models that complement our existing offerings; The Company’s goal
to improve sales and profits by increasing the utilization of our
manufacturing capacity; The Company’s strategy to monitor the
activities and financial condition of our dealers and of the third-party
floor plan lenders who finance our dealers’ inventories; the
Company’s goal to maximize 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; the Company’s goal
to align the interests of our management and stockholders; 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
currently, no material expenditure will be required 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, that the fourth quarter similarly often records the lowest sales
volume, and the implication that such traditional seasonal patterns
may be expected to hold true in the future, although they may not;
the Company’s belief that recent increases in interest rates has
reduced retail demand for smaller boats, and that purchasers of
smaller boats are more sensitive to increases in the cost of boat
ownership, and that such rate increases also impact dealers and
increase the Company’s costs due to the Company’s payment of a
portion of dealer floor plan interest costs; the Company’s assessment
that cost pressures have been eased due to recent declines in the
price of many raw materials and increased availability of, and
lowered cost of, transportation, and any implication that this trend
may continue; the Company’s belief that the cost of boat ownership
has risen enough to impact retail demand and that it will be more
difficult in future to raise prices to compensate for any increased cost
of raw materials and components that may occur in the future,
thereby impacting future sales and profit margins; 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
1 0 Marine Products Corporation 2023 10-K
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 belief that strong retail demand for new
recreational boats that began with the onset of the COVID-19
pandemic has subsided and stabilized in late 2023; Management’s
belief that year-over-year quarterly sales and profit comparisons will
remain challenged in 2024; the Company’s belief that consumers
are returning to pre-pandemic, routine lifestyles, that rising interest
rates are increasing costs of boat ownership and that higher interest
rates may discourage potential customers from purchasing boats;
the Company’s goal that certain retail incentives and other
allowances may attract more consumers; the Company’s belief that
its production levels align with current expected demand; the
Company’s belief that the average size of models the Company
produces is increasing in response to evolving retail demand and its
assessment that this trend will continue; the Company’s intention to
continue to focus on larger boats and expectations due to trends of
consumer demand, higher associated price points, and higher
margins; the expectation that supply chain disruptions and constraints
that occurred following the COVID-19 pandemic will continue to be
eased and that such disruptions and constraints will no longer impact
production; the Company’s belief that financial results during 2024
will depend on a number of factors, including economic trends,
demand for discretionary products, the impact of interest rates on
consumer financing options and dealer inventory carrying costs, the
effectiveness of the Company’s incentive programs, the success of
new product launches, and the Company’s ability to manage
manufacturing costs in light of expected lower demand versus 2023;
the Company’s expectation that capital expenditures during 2024
will be approximately $5.0 million; the Company’s expectation that
the reduction to its short-term cash incentive compensation expense
will favorably impact future operating cash flows; the Company’s
belief that the risk that it will be obligated to repurchase dealer
inventory will be mitigated by the value of the boats to be
repurchased; the Company’s belief that liquidity provided by existing
cash, cash equivalents, 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 belief that the fair value of its guarantee
liability is immaterial, and its adjustments to the guarantee liability,
which are ultimately based upon information provided by third party
floor plan lenders; 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
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, including its intention to invest primarily in money market
funds, that such funds are not subject to material interest rate risk,
Part I
Forward-Looking Statements
and that it does not expect material changes to its market risk
exposures or how those risks are managed.
The words “may,” “should,” “will,” “expect,” “believe,” “anticipate,”
“intend,” “plan,” “seek,” “project,” “estimate,” “aim,” “continue,”
“continually,” “could,” “likely,” “design,” “strategies,” “outlook,”
“trend,” the negative of such terms and different forms thereof (e.g.,
different tenses or number or principle parts, as well as gerunds and
other parts of speech such as adjectives, adverbs and nouns derived
therefrom), and similar expressions used in this document that do
not relate to historical facts are intended to identify forward-looking
statements. Forward-looking statements also include any other
statement that projects, indicates or implies future results, events,
performance or achievements, and statements concerning future
financial performance (including future sales, earnings or growth
rates), descriptions of our ongoing business strategies or prospects
(including but not limited to those set forth under “Management’s
Discussion and Analysis of Financial Condition and Results of
Operations — Outlook” and “Business — Business Strategies”), and
possible actions to be taken by us or our subsidiaries, as well as
statements and descriptions of the assumptions that underlie or
relate to such statements. Our forward-looking 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: changes in global and/or national
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, unanticipated disruptions to and
constraints in supply chain for key components, and fluctuations in
costs of key components such as engines, resins and fiberglass,
and unanticipated changes to the Company’s relationship with
the American Boatbuilders Association, or disruptions in its supply
from the ABA, Yamaha and/or Mercury Marine. 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 section titled “Risk Factors” included in our Annual
Report Form 10-K for a discussion of these and additional factors that
may cause actual results to differ from our projections and plans.
Marine Products Corporation 2023 10-K
1 1
Part I
Item 1. — Business
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% 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 sport boat and sport fishing boat
markets. The Company sells its products to a network of 203 domestic
and 87 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 58 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. Marine Products’ 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, 2023 and its share of the
market during this period was approximately 26.9%.
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, 2023] indicate that Robalo
is the third largest manufacturer of outboard boats in lengths from
18 to 36 feet in the United States with a market share of 4.5%.
Additionally, Marine Products, with the combination of Robalo and
Chaparral outboards, holds the third highest position in the outboard
market of this size range, with a market share of 6.2%.
1 2 Marine Products Corporation 2023 10-K
Part I
Item 1. — Business
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
7
19' – 23'
$48,000 – $107,000
Chaparral – SSX Sport Boats
5
24' – 34'
$128,000 – $564,000
Chaparral – Surf Series
5
21' – 30'
$76,000 – $338,000
Chaparral – OSX Sport Boats
4
25' – 30'
$140,000 – $483,000
Robalo – Center Consoles
11
18' – 36'
$46,000 – $654,000
Robalo – Cayman Bay Boats
6
20' – 26'
$55,000 – $227,000
Robalo – Dual Consoles
2
20' – 31'
$61,000 – $363,000
Description
Fiberglass sterndrive and outboardpowered sport boats
marketed as high value runabout for smaller to larger
groups. Design features include 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 fixed retail prices.
Fiberglass sterndrive and outboard powered models 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 national fixed retail prices.
The Explorer series features extra seating options.
Fiberglass outboard powered 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 national fixed retail prices.
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.
Marine Products Corporation 2023 10-K
1 3
Part I
Item 1. — Business
MANUFACTURING
Marine Products’ manufacturing facilities located in Nashville,
Georgia are utilized to 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
transferable. Additionally, as it relates to the first subsequent
owner, a five-year transferable 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. While supply chains were constrained following the
COVID-19 pandemic, by late 2022, many shortages and delays
began to ease.
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 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
1 4 Marine Products Corporation 2023 10-K
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 Item 1A
“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 global
economic conditions.
to changes
response
in
SALES AND DISTRIBUTION
Domestic sales are generated through our independent dealer
network of approximately 64 Chaparral dealers, 49 Robalo dealers
and 90 dealers that sell both brands located in markets throughout
the United States. Marine Products also has 87 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%
or more of net sales during 2023, 2022 or 2021. 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.
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 2023, the Company’s international net sales
decreased 12.2% compared to 2022 due primarily to a decline in
unit sales. International net sales as a percentage of total net sales
were 5.9% in 2023, 6.7% in 2022, and 5.3% in 2021.
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 resulting from supply chain disruptions caused
dealer inventories to fall to historic lows. The combination of low
inventory levels and high demand through the first half of 2023
forced the Company to allocate its production to dealers to fulfill as
many orders as possible and rebuild dealer inventories. Beginning
in the second half of 2023, demand moderated and inventories
were fully replenished. The Company continues to assess demand
and dealer inventories to manage production levels.
their boat
Approximately 71% 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
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 is based on
the highest of the following criteria: (i) a specified percentage of the
amount of the average net receivables financed by the floor plan
lender for our dealers, (ii) the total average net receivables financed
by the floor plan lender for our two highest dealers during the prior
three month period, or (iii) $8.0 million, less repurchases during the
prior 12 month period. As defined by the agreement, the repurchase
limit for this lender was $18.9 million as of December 31, 2023. The
Company has contractual repurchase agreements with additional
lenders with an aggregate maximum repurchase obligation of
$7.7 million, with various expiration and cancellation terms of less
than one year. Accordingly, the aggregate repurchase obligation
with all financing institutions was approximately $26.6 million as
of December 31, 2023. 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
Part I
Item 1. — Business
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 offers both dealer and retail sales incentive
programs 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 2024 model year (which commenced July
1, 2023), Marine Products offered its dealers several sales incentive
programs based on dollar volume and timing of dealer purchases.
With regard to retail incentives, the Company initiated promotional
programs during the fourth quarter of 2023. While retail incentives
were limited from 2020 to 2022 due to high post-COVID-19 demand,
the normalization of retail demand has prompted the Company to
return to traditional retail incentive programs to stimulate sales.
We believe that dealer inventories of our boat models as of
December 31, 2023 are sufficient to meet the current level of retail
customer demand. The sales order backlog as of December 31, 2023
was 1,243 boats with estimated net sales of approximately $92.3
million. This represents an approximate 20.7 week backlog based on
recent production levels. The sales order backlog as of December
31, 2022 was 1,544 boats with estimated net sales of approximately
$115.0 million. This represented an approximate 16.6 week backlog
based on production levels at that time. 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. 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
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.
Marine Products Corporation 2023 10-K
1 5
Part I
Item 1. — Business
A proprietary and patented feature available on many Chaparral
sterndrive models is the Infinity Power StepTM. This mechanical
feature allows a portion of the stern to automatically descend
underwater, creating a “step-down” staircase effect, giving boaters
the ability to step down from the stern into the water. The step also
functions as seating, creating a semi-submerged bench.
In support of its new product development efforts, Marine Products
incurred research and development costs of $757 thousand in
2023, $437 thousand in 2022, and $776 thousand in 2021.
INDUSTRY OVERVIEW
The recreational marine market in the United States is a mature
market, with 2022 retail expenditures of approximately $59.3
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”).
There are currently approximately 16 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 2023 totaled 41,357 units and accounted for approximately
72% 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 $89,000. Approximately 63% of
the Company’s unit sales to dealers in 2023 were outboard boats
compared to 58% in 2022. Retail sales of new sterndrive boats in
the United States during 2023 totaled 5,830 units and accounted
for approximately 10% 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 $900 million, with an average
retail price per unit of approximately $154,000. Approximately 37%
of the Company’s unit sales to dealers in 2023 were sterndrive
boats compared to 42% in 2022.
The table below reflects the estimated annual sales within the
recreational marine market segment by category for 2023 and
2022 (source: Info-Link Technologies, Inc.):
2023
2022
Boats
Sales
($ B)
5,830 $ 0.9
41,357
3.7
1.7
57,280 $ 6.3
10,093
Boats
6,552
47,099
12,465
66,116
Sales
($ B)
$ 0.9
3.7
2.0
$ 6.6
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 some publicly traded companies own
a diversified group of recreational boat brands. We estimate
that the boat manufacturing industry includes fewer than 15
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, 2023, the top five outboard
model manufacturers, which includes Marine Products Corporation’s
brands, have a combined market share of approximately 36%,
consistent with the same period in the prior year. Also, according to
Statistical Surveys, Inc., the top five sterndrive model manufacturers,
which includes Marine Products’ Chaparral brand, have a combined
market share of approximately 85%, compared to 82% during the
same period in the prior year. Chaparral’s market share in sterndrive
units during this period was approximately 26.9%, compared to
25.2% in the same period in the prior year.
fuel prices, tax
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,
laws,
demographics and consumers’ leisure time. As noted elsewhere,
consumer demand began to increase significantly during the
second quarter of 2020 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.
1 6 Marine Products Corporation 2023 10-K
Part I
Item 1. — Business
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
6.3% between 2019 and 2023. The Company has historically
aimed to grow its boat sales, net sales and market share by
differentiating our product lines through industry-leading feature
innovations and designs.
We manage our Company by focusing on the execution of the
following business and financial strategies:
> Manufacturing and marketing 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,
> Leveraging our buying power through economies of scale and
achieving improved pricing on engines, fiberglass, resin and
many other components,
> Increasing market share by expanding dedicated sales,
marketing and distribution systems; Marine Products has
a distribution network of approximately 290 independent
dealers, to whom we provide sales education, technical
training, and other support to enhance their effectiveness and
success, and their customers’ satisfaction and retention,
> Providing promotional and incentive programs to help dealers
increase sales and customer satisfaction,
> Maintaining a nationally advertised fixed retail pricing strategy
on certain of our models, which we believe gives consumers
confidence that they are getting the best possible price and
encourages consistent pricing across our dealer network,
> 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; the Company’s operations leaders use
our order backlog to align production levels with expected
demand, ensuring efficient cost management and productivity,
> 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
demonstrations,
> 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,
> Exploring potential acquisitions that could increase our scale,
expand our product line and brand portfolio, and deliver
attractive financial returns,
> 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.
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.
Marine Products Corporation 2023 10-K
1 7
Part I
Item 1. — Business
According to Statistical Surveys, Inc., the following is a list of the top
ten (largest to smallest) outboard boat manufacturers in the United
States based on retail unit sales in 2023. According to Statistical
Surveys, Inc., the companies set forth below represent approximately
55% of all United States retail outboard boat sales with hull lengths
of 18 to 36 feet for the 12-month period ended September 30, 2023
(latest data available to us).
1. Brunswick Corporation 1
2. Sea Hunt Boats
3. Marine Products Corporation 2
4. Malibu Boats, Inc.
5. Key West
6. White River Marine Group
7. Sportsman Boats
8. Carolina Skiff
9. Grady-White
10. Tidewater
The sterndrive engine powered market encompasses a wide variety
of boats, accounting for approximately 10% of traditional powerboat
retail unit sales during 2023. Primary competitors for Chaparral
in the sterndrive market during 2023 included Cobalt 3, Sea Ray 4,
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 Malibu Boats, Inc.
4 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 number 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
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
1 8 Marine Products Corporation 2023 10-K
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. These regulations
have 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,
2023 and 2022:
At December 31,
Employees
2023
690
2022
935
The recreational boating industry is cyclical and therefore headcount
is subject to change based on production levels which are a function
of dealer and consumer demand. Beginning in the second half of
2023, the Company adjusted its production levels and employee
headcount in response to lower dealer and retail demand. The
Company’s key human capital management objectives are focused
on fostering talent in the following areas:
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 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.
Part I
Item 1. — Business
volume period. For similar reasons, quarterly operating results for
the fourth quarter often record the lowest sales volume for the year.
The results for any quarter are not necessarily indicative of results
to be expected in any future period.
INFLATION
New boat buyers typically finance their purchases. The Company
believes that the recent increase in interest rates (which is generally
linked to higher inflation) has reduced retail demand for smaller
boats, since purchasers of smaller boats are typically more sensitive
to increases in the cost of boat ownership. Higher interest rates also
impact our dealers, as their boat purchases are financed and they
bear much of the carrying costs of holding inventories. Lastly, the
Company incurs higher costs from rising interest rates because we
often pay a portion of dealer floor plan interest costs.
During 2021 and 2022, inflation in the general economy had
increased to its highest level in more than 40 years due to economic
labor shortages,
growth following the COVID-19 pandemic,
supply chain constraints, and U.S. fiscal policy. As a result, the
market prices of the raw materials and components used by the
Company’s manufacturing processes increased during these
periods. In response to historically high consumer demand as
well as higher raw materials and components costs, the Company
increased the prices for its products. During 2023 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.
However, the Company believes the cost of boat ownership has
risen enough to impact retail demand. Therefore, it will be more
difficult to raise prices in the future to compensate for increased
costs of raw materials and components, which could impact the
Company’s sales and profit margins.
AVAILABILITY OF FILINGS
Marine Products makes available free of charge on its website,
10-K,
the annual
MarineProductsCorp.com,
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
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 care physician who provides immediate care or
medical consultation to its employees at a reduced or no cost, as
well as certain maintenance medications at a reduced or no cost.
Under this program, an employee with a health concern visits the
physician’s office, which is close to our manufacturing facilities, 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.
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, 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.
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
Marine Products Corporation 2023 10-K
1 9
Part I
Item 1A. — Risk Factors
ITEM 1A.
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 2024 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 ownership 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.
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
to
recreational powerboat manufacturers continues
increase
based on the quality of available products, the price and value
of the products, and attention to customer service, and individual
dealers frequently also sell boats manufactured by our competitors.
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,
Which May Involve Long-term Impact from Global Warming.
Marine Products’ business is subject to weather patterns that may
adversely affect its sales. For example, drought conditions, or
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. Catastrophic weather, civil unrest, natural disasters 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
2 0 Marine Products Corporation 2023 10-K
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 at Reasonable
Prices or at All, 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
three 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’
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. There is no assurance that we will be able to increase
the prices of our products and preserve our profitability in the event
of future inflation and cost increases.
Part I
Item 1A. — Risk Factors
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 dealers 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.
Marine Products Corporation 2023 10-K
2 1
Part I
Item 1A. — Risk Factors
RISK MANAGEMENT RISKS
RISKS RELATED TO OUR LABOR FORCE
Marine Products Has Potential Liability for Personal Injury
and Property Damage Claims.
The products or services we sell 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.
REGULATORY RISKS
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.
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.
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, and certain companies under their
control (the “Controlling Group”), 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 71% 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.
2 2 Marine Products Corporation 2023 10-K
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.
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.
Part I
Item 1A. — Risk Factors
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,
information technology assets and misuse of data. We provide
security awareness training for appropriate employees, and
closely manage the information system accounts and privileges
of all employees and contractors. We also maintain an up-to-date
incident response plan to quickly address cybersecurity incidents.
We have experienced unsuccessful cyber-attack attempts to gain
unauthorized access to our network. To date, these attacks have not
had a material impact on our operations.
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.
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.
Marine Products Corporation 2023 10-K
2 3
Part I
Item 1B. — Unresolved Staff Comments
ITEM 1B.
UNRESOLVED STAFF COMMENTS
None.
ITEM 1C.
CYBERSECURITY
RISK MANAGEMENT AND STRATEGY
Marine Products approaches cybersecurity as an enterprise-
wide risk and has created a Cybersecurity Risk and Compliance
Program that outlines governance programs in place and outlines
efforts undertaken to mitigate cyber risks. We have implemented
policies and processes designed to detect, prevent, and respond
to cybersecurity incidents. To help guide its overall program,
the Company uses the Center for Internet Security (CIS) Controls
framework to provide best practices for securing IT systems and
data. We have implemented a majority of version 8.0 of the CIS
Controls which supports a Zero Trust architecture.
The Company has several security policies that are published
and accessible to all employees. All these policies are reviewed
annually and updated as needed to address emerging risks or gaps
in compliance. Marine Products has not experienced a material
cybersecurity incident to date. If a material cybersecurity breach
occurs, the incident will be reviewed to determine whether further
escalation is appropriate. Any incident assessed as potentially
being or becoming material will immediately be escalated for
further assessment and reported to designated members of our
executive leadership team and if deemed necessary, the Board of
Directors. We plan to consult with outside counsel as appropriate,
including on materiality analysis and disclosure matters, and make
the final materiality determination regarding disclosure and other
compliance decisions. We also plan to keep our independent public
accounting firm informed of such incidents as appropriate. While
the Company is currently self-insured for cybersecurity risks, we
are evaluating a cyber liability insurance policy that may provide
coverage for expenses, business losses, business interruption, and
fines and penalties associated with a data breach or other similar
incident. The Company has a periodic touchpoint with all third-party
information technology service providers to identify materials risks
from cybersecurity threats.
Our business strategy, results of operations and financial condition
have not been materially affected by risks from cybersecurity
threats, including as a result of previously identified cybersecurity
incidents, but we cannot provide assurance that they will not be
materially affected in the future by such risks or any future material
incidents. For more information on our cybersecurity related risks
see Item 1A Risk Factors of this Annual Report on Form 10-K.
2 4 Marine Products Corporation 2023 10-K
GOVERNANCE
Role of the Board
The Board is responsible for overseeing overall risk management
for the Company, including review and approval of the enterprise
risk management approach and processes
implemented by
management to identify, assess, manage, and mitigate risk, at least
annually. The Board has delegated its responsibility for oversight of
the Company’s cybersecurity and information security framework
and risk management to the Audit Committee. The Audit Committee
receives information and updates at least quarterly and actively
engages with senior leaders with respect to the effectiveness of the
Company’s cybersecurity and information security framework, data
privacy, and risk management. In addition, the Audit Committee
receives reports summarizing threat detection and mitigation
plans, audits of internal controls, training and certification, and
other cyber priorities and initiatives, as well as timely updates from
senior leaders on material incidents relating to information systems
security, including cybersecurity incidents. The Audit Committee
includes members with experience in risk management including
cybersecurity.
Role of Management
Company management has established a Cybersecurity
Governance Committee that is comprised of the Information
Technology Manager and senior members of management. The
Committee meets periodically to discuss cybersecurity program
updates and challenges, watch for potential threats from both
external and internal sources, monitor compliance in existing
or emerging business practices, and respond to stakeholder
inquiries. The Information Technology department is comprised
of professionals with extensive expertise and led by its manager
with over 20 years of experience in various aspects including
cybersecurity. The manager is continuously monitoring trends and
stays current with the various cybersecurity threats and related
mitigation opportunities. The Company periodically engages a
third-party service provider to perform an external vulnerability
scan of the Company network to identify known threats and to
date no critical vulnerabilities have been identified during these
assessments.
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 $4,300 per month in rent.
Marine Products may cancel this arrangement at any time after giving a 30-day notice.
Chaparral owns and maintains approximately 1,284,000 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 — 729,400, research and
development — 68,500, warehousing — 446,900, office and other — 122,200.
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.
Marine Products Corporation 2023 10-K
2 5
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 20, 2024, there
were 34,682,949 shares of common stock outstanding and approximately 6,400 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 authorized
the repurchase of 8,250,000 shares, in the aggregate, in the open
market. The Company did not repurchase any shares under this
program in 2023 and 2022. There are 1,570,428 shares that remain
available for repurchase as of December 31, 2023. 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.
The graph below assumes the value of $100.00 invested on
December 31, 2018.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN*
300
250
200
150
100
50
0
12/31/2018
12/31/2019
12/31/2020
12/31/2021
12/31/2022
12/31/2023
Marine Products Corporation
Common Stock
Peer
Group
Russell
2000 Index
* Assumes Reinvestment of Dividends
Company/Index
2018
2019
2020
2021
2022
2023
Base Period
Marine Products Corporation Common Stock
Peer Group
Russell 2000 Index
100
100
100
88
126
123
92
161
146
81
228
166
80
162
131
77
205
147
December 31,
2 6 Marine Products Corporation 2023 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” in Part I included
in this Form 10-K. Discussions of 2022 items and year-to-year
comparisons of 2022 and 2021 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,
2022, which Item is incorporated herein by reference.
OVERVIEW
Consolidated net sales increased slightly in 2023 compared to
2022 due to a 7.3% increase in the average gross selling price per
boat due to model mix, partially offset by increased promotional
costs and a 4.4% decrease in unit sales to dealers. 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 the availability of dealer and consumer
financing for the purchase of our products and adjust our production
levels as deemed appropriate. Gross profit decreased to $90.4
million in 2023, from $93.7 million in 2022 due to higher promotional
costs coupled with manufacturing cost inefficiencies as boat
demand moderated and dealer orders decreased year-over-year.
Operating income decreased to $49.2 million, from $51.8 million
in the prior year. Net income increased to $41.7 million, from $40.3
million in the prior year, as higher interest income offset the decline
in operating income. Diluted earnings per share was $1.21 in 2023,
up from $1.18 in 2022.
.
OUTLOOK
We believe that the strong retail demand for new recreational boats
which began in 2020 with the onset of the COVID-19 pandemic
has subsided and has now normalized. In addition, consumers are
returning to pre-pandemic routine lifestyles and rising interest rates
are contributing to higher costs of boat ownership. Since some
buyers of recreational boats finance their purchases, higher interest
rates may discourage them from the purchase of a boat. In light
of the normalization of demand and higher interest rates, we have
reinstituted certain retail incentives and other allowances to attract
more consumers to address lower demand compared to the first
half of 2023. We have adjusted production levels to more closely
align with expected demand.
During the past three model years, Marine Products has produced a
smaller number of boat designs than in previous years to increase
production efficiency. In addition, the average size of the models
the Company is producing has increased in response to evolving
retail demand, and this trend is expected to continue. The Company
intends to continue its focus on larger boats given this trend, higher
associated price points and higher margins.
Due to strong demand across the recreational sector following the
COVID-19 pandemic, key materials and components had been in
tight supply. Supply chain disruptions and constraints negatively
impacted our operations in 2022 and early 2023 including our
production volumes and manufacturing inefficiencies, however,
these issues have improved and are no longer impacting production.
Our financial results during 2024 will depend on a number of factors,
including economic trends, demand for discretionary products, the
impact of interest rates on consumer financing options and dealer
inventory carrying costs, the effectiveness of the Company’s
incentive programs, the success of new model launches, and the
Company’s ability to manage manufacturing costs in light of lower
production levels compared to early 2023.
Marine Products Corporation 2023 10-K
2 7
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)
Years ended December 31,
2023
4,139
82.4
383,729
23.6%
11.3%
49,202
5,829
$
$
$
$
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
$
$
$
$
Year Ended December 31, 2023 Compared to Year Ended
December 31, 2022
Net Sales. Marine Products’ net sales increased slightly by
$2.7 million or 0.7% in 2023 compared to 2022. The increase was
primarily due to a 7.3% increase in the average gross selling price
per boat, partially offset by increased promotional costs and a
4.4% decrease in the number of boats sold. Unit sales decreased
in most of our Chaparral models as well as many Robalo models
during 2023 compared to the prior year. Unit sales during 2023
in comparison to the prior year were negatively impacted by a
normalization of demand relative to high post-COVID levels and
higher interest rates. Average selling prices increased compared
to the prior year primarily due to a favorable model mix partially
offset by an increase in retail incentive costs for a new program
announced during the fourth quarter of 2023. Domestic net sales
were $361.2 million, an increase of 1.7% compared to the prior year.
In 2023, international net sales were $22.5 million, a decrease of
12.2% compared to the prior year.
Cost of Goods Sold. Cost of goods sold increased 2.1% in 2023
compared to 2022 due to higher materials and labor costs. As a
percentage of net sales, cost of goods sold increased to 76.4%
in 2023 compared to 75.4% in 2022 primarily due to higher
promotional costs coupled with manufacturing inefficiencies as boat
demand moderated and dealer orders decreased in the current
year compared to the prior year.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased by $1.3 million or 3.1% in 2023
compared to 2022. The increase was primarily due to higher non-
cash settlement losses recorded of $2.4 million in 2023 compared
to $1.2 million in 2022 related to the termination of the defined
benefit pension plan. Selling, general and administrative expenses
as a percentage of net sales were 11.3% in 2023 compared to 11.0%
in 2022. As a percentage of net sales, warranty expense was 1.5%
in both 2023 and 2022. The Company incurred lower incentive
compensation costs in 2023 compared to 2022 due to lower
profitability for the full year. Management expects the reduction
in anticipated incentive compensation to be paid to selected non-
executive employees described in the Notes to the Consolidated
Financial Statements in note titled Commitments and Contingencies,
to favorably impact selling, general and administrative expenses for
future periods.
Gain on disposition of assets, net for 2023 was $2.0 million due
primarily to a $1.8 million gain related to a real estate transaction
recorded during the third quarter of 2023.
Interest Income, net. Interest income, net increased to $2.9 million
in 2023 compared to $338 thousand in 2022 due to higher cash
balances and higher investment yields. 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, primarily related to fees on the unused
portion of the facility.
Income Tax Provision. The income tax provision decreased to
$10.4 million in 2023 compared to $11.8 million in 2022. The
effective tax rate decreased to 19.9% in 2023 from 22.6% in
2022. The decrease in the 2023 effective tax rate is primarily
due to favorable permanent and beneficial discrete adjustments
compared to unfavorable permanent and detrimental discrete
adjustments in 2022.
2 8 Marine Products Corporation 2023 10-K
Part II
Item 7. — Management’s Discussion and Analysis of Financial Condition and Results of Operations
LIQUIDITY AND CAPITAL RESOURCES
Cash and Cash Flow
The Company’s cash and cash equivalents were $72.0 million at December 31, 2023, $43.2 million at December 31, 2022 and $14.1 million at
December 31, 2021. 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 for investing activities
Net cash used for financing activities
in 2023
Cash provided by operating activities
increased
$7.5 million compared to 2022. The net cash provided by operating
activities in 2023 includes net income of $41.7 million and an
adjustment for a non-cash pension settlement loss of $2.4 million,
coupled with a net favorable change in inventory of $11.4 million.
These favorable changes are coupled with a net favorable change
in other components of our working capital (including accounts
receivable less accounts payable and accrued expenses) totaling
$1.8 million, partially offset by an unfavorable change in other non-
current assets. The net favorable change in inventory during 2023
was primarily due to clearing inventory of partially completed boats
as supply chain disruptions of critical components improved during
2023 in comparison to the prior year. The net favorable change in
other components of our working capital was primarily a result of
a decrease in accounts receivable of $2.9 million consistent with a
decrease in sales during the fourth quarter of 2023, partially offset
by a net decrease in accounts payable and accrued expenses
consistent with the decline in production levels during the fourth
quarter of 2023 compared to the same period in the period year.
The net unfavorable change in other non-current assets is due
primarily to an employer contribution of $4.0 million during 2023 to
the supplemental retirement plan.
Cash used for investing activities in 2023 increased $5.4 million
in comparison to the same period in 2022 due to higher capital
expenditures including transportation equipment and warehouse
space partially offset by proceeds from sale of assets.
Cash used for financing activities in 2023 increased $2.4 million
compared to 2022 primarily due to increased dividends paid to
common shareholders, coupled with an increase in the cost of stock
repurchases related to the vesting of restricted shares.
Cash Requirements
Management expects that capital expenditures during 2024 will be
approximately $5.0 million.
The Company participated in a multiple employer Retirement
Income Plan (“Plan” ), sponsored by RPC. During 2023, the Plan was
fully terminated through a liquidation of the assets held in a trust.
On January 23, 2024, the Board of Directors approved a quarterly
cash dividend of $0.14 per common share payable March 11, 2024
to stockholders of record at the close of business on February 9,
2024. 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.
2023
2022
$
56,846
$
49,348
$
(7,871)
(20,194)
(2,500)
(17,779)
2021
457
(1,248)
(16,680)
Effective October 1, 2023, the Company began recording short-
term cash incentive compensation expense to selected employees
in an annual amount equal to nine percent of pre-tax profit (PTP
incentive), defined as pretax income before goodwill adjustments
and certain allocated corporate expenses. Through the third quarter
of 2023, this PTP incentive was 16% in the aggregate per year and
was subject to either a contractual arrangement or a discretionary
determination. The PTP incentive under a contractual agreement
with one employee, in the amount of seven percent per year, was
discontinued as of September 30, 2023. Management expects this
reduction to continue to favorably impact operating cash flow in
future periods.
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
2023 and 2022. There are 1,570,428 shares that remain available
for repurchase as of December 31, 2023. 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 material repurchases
of dealer inventory in 2023 and 2022. See further information
regarding repurchase obligations in note titled Commitments
and Contingencies in the Notes of the Consolidated Financial
Statements.
The Company believes that the liquidity provided by existing cash,
cash equivalents, 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 be sufficient 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 or for
funding other purposes.
The revolving credit agreement with Truist Bank provides a credit
facility of $20.0 million which is scheduled to mature on November
12, 2026. The facility includes (i) a $5 million sublimit for swingline
loans, (ii) a $2.5 million aggregate sublimit for all letters of credit,
Marine Products Corporation 2023 10-K
2 9
Part II
Item 7. — Management’s Discussion and Analysis of Financial Condition and Results of Operations
and (iii) a committed accordion which can increase the aggregate
commitments by the greater of $35 million and adjusted EBITDA
(as calculated under the Credit Agreement) over the most recently
completed twelve-month period. The revolving credit facility
includes a full and unconditional guarantee by the Company and
its consolidated domestic subsidiaries and is subject to certain
financial and other customary covenants. As of December 31, 2023,
the Company had no outstanding borrowings under the revolving
credit agreement.
CONTRACTUAL OBLIGATIONS
The Company’s obligations and commitments that require future
payments
include our credit 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 notes titled Notes
Payable to Banks and Leases in the Notes of the Consolidated
Financial Statements.
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.
The Supplemental Executive Retirement Plan (“SERP”) investments
are measured at net asset value, which is computed using inputs
such as cost, discounted future cash flows, independent appraisals
and market based comparable data or net asset values calculated
by the investment fund which are 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 provide for the return of repossessed boats
to the Company in new and unused condition, subject to normal
wear and tear, in exchange for the Company’s assumption of the
debt obligation on those boats, as contractually defined by each
lender. The Company had no material repurchases of dealer
inventory under contractual agreements during 2023 and 2022.
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, 2023, the Company believes the fair value of its guarantee
liability is immaterial. See further information regarding repurchase
obligations in note titled Commitments and Contingencies in the
Notes of the Consolidated Financial Statements.
The Company currently has an agreement with one of the floor
plan lenders whereby the contractual repurchase limit is based on
the highest of the following criteria: (i) a specified percentage of the
amount of the average net receivables financed by the floor plan
lender for our dealers, (ii) the total average net receivables financed
by the floor plan lender for our two highest dealers during the prior
three month period, or (iii) $8.0 million, less repurchases during the
prior 12 month period. As defined by the agreement, the repurchase
limit for this lender was $18.9 million as of December 31, 2023. The
Company has contractual repurchase agreements with additional
lenders with an aggregate maximum repurchase obligation of
$7.7 million, with various expiration and cancellation terms of less
than one year. Accordingly, the aggregate repurchase obligation
with all financing institutions was approximately $26.6 million as of
December 31, 2023. 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 titled Related Party Transactions in the Notes of the
Consolidated Financial Statements for a description of related party
transactions.
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 revenues from contracts with its customers
based on the consideration received in exchange for the goods
sold. The Company records incentives as a reduction of sales. 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
3 0 Marine Products Corporation 2023 10-K
Part II
Item 7A. — Quantitative and Qualitative Disclosures about Market Risk
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 estimating the cost of incentives are
the ability to estimate incentive payments of the Company, the
volume and timing of inventory financed by specific dealers, and the
notification 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 7.3% in 2023, 5.6%
in 2022, and 5.8% in 2021. A 0.25 percentage point change in cost
of incentives as a percentage of gross sales during 2023 would
have increased or decreased net sales, gross margin and operating
income by approximately $0.9 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. Additionally, 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% in 2023, 1.5% in 2022 and
1.2% in 2021. A 0.10 percentage point increase in the estimated
warranty expense as a percentage of net sales during 2023 would
have increased selling, general and administrative expenses and
reduced operating income by approximately $0.4 million.
IMPACT OF RECENT ACCOUNTING
PRONOUNCEMENTS
See note titled Significant Accounting Policies in the Notes of the
Consolidated Financial Statements 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 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is subject to interest rate risk exposure through borrowings on its revolving credit agreement. As of December 31, 2023, there
were no outstanding interest-bearing advances under our credit facility which bore interest at a floating rate.
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.
Marine Products Corporation 2023 10-K
3 1
Part II
Item 8. — Financial Statements and Supplementary Data
ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
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.
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,
2023 based on criteria established in the 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, 2023.
The independent registered public accounting firm, Grant Thornton LLP, has audited the consolidated financial statements as of and for
the year ended December 31, 2023, and has also issued their report on the effectiveness of the Company’s internal control over financial
reporting, included in this report on page 33.
Ben M. Palmer
President and Chief Executive Officer
Atlanta, Georgia
February 28, 2024
Michael L. Schmit
Vice President, Chief Financial Officer and
Corporate Secretary
3 2 Marine Products Corporation 2023 10-K
Part II
Item 8. — Financial Statements and Supplementary Data
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, 2023, 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, 2023, 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, 2023, and our report dated February 28, 2024
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 28, 2024
Marine Products Corporation 2023 10-K
3 3
Part II
Item 8. — Financial Statements and Supplementary Data
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, 2023 and 2022, 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, 2023, and the related notes and financial statement
schedule included under Item 15(a) (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, 2023 and 2022, and the results of its operations and its
cash flows for each of the three years in the period ended December 31, 2023, 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, 2023, 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 28, 2024 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.
3 4 Marine Products Corporation 2023 10-K
Part II
Item 8. — Financial Statements and Supplementary Data
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 projected future warranty claims 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 28, 2024
Marine Products Corporation 2023 10-K
3 5
Part II
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 $11 in 2023 and $12 in 2022
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 $32,789 in 2023
and $33,055 in 2022
Goodwill
Other intangibles, net
Deferred income taxes
Retirement plan assets
Other assets
Total assets
LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES
Accounts payable
Accrued expenses and other liabilities
Total current liabilities
Retirement plan 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 –
34,466,726 shares in 2023 and 34,217,582 shares in 2022
Capital in excess of par value
Retained earnings
Accumulated other comprehensive loss
Total stockholders’ equity
Total liabilities and stockholders’ equity
2023
2022
$
71,952
$
2,475
61,611
361
—
2,847
139,246
22,456
3,308
465
8,590
15,379
4,358
43,171
5,340
73,015
28
356
3,088
124,998
14,965
3,308
465
6,027
9,881
4,071
$ 193,802
$
163,715
$
6,071
$
16,496
22,567
17,998
1,649
42,214
—
3,447
—
148,141
—
151,588
8,250
15,340
23,590
14,440
1,304
39,334
—
3,422
—
122,954
(1,995)
124,381
$ 193,802
$
163,715
The accompanying notes are an integral part of these statements.
3 6 Marine Products Corporation 2023 10-K
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
Gain on disposition of assets, net
Operating income
Interest income, net
Income before income taxes
Income tax provision
Net income
Earnings per share
Basic
Diluted
Dividends paid per share
2023
2022
2021
$
383,729
$
380,995
$
298,014
293,350
287,278
90,379
43,213
(2,036)
49,202
2,860
52,062
10,367
41,695
1.21
1.21
0.56
$
$
$
93,717
41,921
—
51,796
338
52,134
11,787
40,347
1.18
1.18
0.50
$
$
$
229,742
68,272
31,880
—
36,392
16
36,408
7,382
29,026
0.85
0.85
0.46
$
$
$
The accompanying notes are an integral part of these statements.
Marine Products Corporation 2023 10-K
3 7
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, net of taxes:
Pension adjustment
Comprehensive income
2023
2022
2021
$
41,695
$
40,347
$
29,026
1,995
581
(629)
$
43,690
$
40,928
$
28,397
The accompanying notes are an integral part of these statements.
3 8 Marine Products Corporation 2023 10-K
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, 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
Stock issued for stock incentive plans, net
Stock purchased and retired
Net income
Pension adjustment, net of taxes
Dividends
318
(69)
—
—
—
32
(7)
—
—
—
3,679
(3,679)
—
—
—
—
2,776
41,695
—
—
—
—
1,995
3,711
(910)
41,695
1,995
(19,284)
—
(19,284)
Balance, December 31, 2023
34,467
$
3,447
$
— $
148,141
$
— $ 151,588
The accompanying notes are an integral part of these statements.
Marine Products Corporation 2023 10-K
3 9
Part II
Item 8. — Financial Statements and Supplementary Data
CONSOLIDATED STATEMENTS OF CASH FLOWS
MARINE PRODUCTS CORPORATION AND SUBSIDIARIES
(in thousands)
Years ended December 31,
OPERATING ACTIVITIES
Net income
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
Stock-based compensation expense
Gain on disposition of assets, net
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
2023
2022
2021
$
41,695
$
40,347
$
29,026
2,416
3,711
(2,036)
(3,126)
2,363
2,865
(333)
11,404
792
(5,658)
(2,179)
1,130
3,802
1,905
2,707
—
(1,798)
1,180
(2,078)
(18)
246
(614)
2,675
1,479
4,042
(725)
56,846
49,348
(10,174)
2,303
(7,871)
(19,284)
(910)
(20,194)
28,781
43,171
71,952
13,911
$
$
(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
The accompanying notes are an integral part of these consolidated financial statements.
4 0 Marine Products Corporation 2023 10-K
Part II
Item 8. — Financial Statements and Supplementary Data
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Marine Products Corporation and Subsidiaries
Years ended December 31, 2023, 2022 and 2021
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%
or more of net sales during 2023, 2022 or 2021. Net sales to the
Company’s international dealers were approximately $22.5 million
in 2023, $25.6 million in 2022, and $15.9 million in 2021.
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, 2023, 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, and
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.
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 titled 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
$117 thousand as of December 31, 2023 and $194 thousand as of
December 31, 2022. Advertising expenses totaled approximately
$2.3 million in 2023, $2.1 million in 2022 and $1.6 million in 2021 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 71% 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
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
Marine Products Corporation 2023 10-K
4 1
Part II
Item 8. — Financial Statements and Supplementary Data
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, 2023 and 2022. 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, 2023, 2022 and 2021.
Investments
The Company maintains certain securities in the non-qualified
Supplemental Executive Retirement Plan that have been classified
as trading. See note titled 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
4 2 Marine Products Corporation 2023 10-K
additional items are provided for periods of one to five years and
are not transferable. Additionally, as it relates to the first subsequent
owner, a five-year transferable 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 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, 2023 and 2022 is as follows:
(in thousands)
2023
2022
Balance at beginning of year
$ 5,699
$
4,641
Less: Payments made during the year
(4,450)
(4,845)
Add: Warranty provision for the
current year
Changes to warranty provision for
prior years
5,864
5,737
(35)
166
Balance at end of year
$ 7,078
$ 5,699
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 $757 thousand in 2023, $437 thousand in 2022, and
$776 thousand in 2021.
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.
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.
Part II
Item 8. — Financial Statements and Supplementary Data
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 expenses when incurred.
Retirement Income Plan (“Plan”)
Marine Products participated in a multiemployer Retirement
Income Plan (“Plan”), trusteed retirement income plan sponsored by
RPC, Inc. (“RPC”) that provided monthly benefits to its participants
based on the various provisions contained therein. The Company
initiated actions to terminate the Plan in 2021, and it was fully
terminated in 2023. See note titled Employee Benefit Plans for
details on the termination and related settlement.
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 titled 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 titled 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:
2023
2022
2021
$ 41,695
$
40,347
$ 29,026
Less: Adjustments for earnings attributable to participating securities
(999)
(858)
(566)
Net income used in calculating earnings per share
$ 40,696
$
39,489
$ 28,460
Weighted average shares outstanding (including participating securities)
Adjustment for participating securities
Shares used in calculating basic and diluted earnings per share
34,443
(834)
33,609
34,183
(743)
33,440
33,984
(672)
33,312
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 values 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, held
in the non-qualified Supplemental Executive Retirement Plan
(“SERP”), are classified as trading securities. All of these securities
are carried at fair value in the accompanying consolidated
balance sheets. See note titled Fair Value Measurements for
further information regarding the fair value measurement of assets
and liabilities.
Concentration of Suppliers
The Company has three 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 Financial Accounting Standards Board issued the following
Accounting Standards Updates (“ASU”s):
Recently Adopted Accounting Standards
ASU No. 2021-08 — Business Combinations
(Topic 805):
Accounting for Contract Assets and Contract Liabilities from
Contracts with Customers. The amendments in this ASU require that
at the acquisition date, an acquirer needs to 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 adopted these
provisions in the first quarter of 2023 prospectively to future business
combinations and the adoption did not have a material impact on its
consolidated financial statements.
Recently Issued Accounting Standards Not Yet Adopted
ASU No. 2023-07 — Segment Reporting (Topic 280): Improvements
to Reportable Segment Disclosures. The amendments in this ASU
require an entity to disclose the title and position of the Chief Operating
Decision Maker (CODM) and the significant segment expenses that are
regularly provided to the CODM and included within each reported
measure of segment profit or loss. These amendments are effective for
annual disclosures beginning in 2024 and interim disclosures beginning
in the first quarter of 2025, with early adoption permitted. These
amendments are effective retrospectively to all prior periods presented
in the financial statements. The Company has one reportable segment
and is currently evaluating the impact of adopting these provisions on its
consolidated financial statements.
Marine Products Corporation 2023 10-K
4 3
Part II
Item 8. — Financial Statements and Supplementary Data
ASU No. 2023-09 — Income Taxes (Topic 740): Improvements
to Income Tax Disclosures. The amendments in this ASU require
an entity to include consistent categories and greater disaggregation
of information in the rate reconciliation and income taxes paid,
disaggregated by jurisdiction. These amendments are effective for
annual disclosures beginning in 2025, with early adoption permitted
for annual financial statements that have not yet been issued. The
Company is currently evaluating the impact of adopting these provisions
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 occurs with the transfer of the 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
titled 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 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
2023
2022
2021
$ 378,321
$ 375,912
5,408
5,083
$ 383,729
$ 380,995
$
$
293,312
4,702
298,014
The following table disaggregates our revenues between domestic
and international:
(in thousands)
2023
2022
Domestic
$ 361,221
$ 355,371
International
22,508
25,624
Net sales
$ 383,729
$ 380,995
2021
282,117
15,897
298,014
$
$
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
2023
$
654
$
2022
1,989
Substantially all of the amounts of deferred revenue as of December 31,
2023 and December 31, 2022 were or will be recognized as sales
during the immediately following quarters, when control is transferred.
4 4 Marine Products Corporation 2023 10-K
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,
Trade receivables
Other
Total
Less: allowance for credit losses
2023
$ 1,348
$
1,138
2,486
(11)
2022
4,047
1,305
5,352
(12)
Net accounts receivable
$ 2,475
$
5,340
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 2023 and 2022.
Changes in the Company’s allowance for credit losses are disclosed
in Schedule II Valuation and Qualifying Accounts.
NOTE 4: INVENTORIES
Inventories consist of the following:
(in thousands)
December 31,
2023
2022
Raw materials and supplies
$ 40,340
$
37,210
Work in process
Finished goods
Total inventories
10,601
10,670
14,190
21,615
$
61,611
$
73,015
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
2023
2022
$
1,024 $
895
26,069
21,567
15,872
14,292
3,290
8,990
2,991
8,275
55,245
48,020
(32,789)
(33,055)
$ 22,456 $ 14,965
Depreciation expense was $2.4 million in 2023, $1.9 million in
2022 and $1.8 million in 2021. The Company’s accounts payable
for purchases of property and equipment was immaterial as of
December 31, 2023, December 31, 2022 and December 31, 2021.
Accrued expenses and other liabilities consist of the following:
(in thousands)
December 31,
2023
2022
Accrued payroll and related expenses
$ 2,591
$
3,753
Accrued sales incentives and
discounts
Accrued warranty costs
Deferred revenue
Income taxes payable
Other
Total accrued expenses and
other liabilities
4,517
7,078
654
—
1,656
2,485
5,699
1,989
342
1,072
$ 16,496
$ 15,340
NOTE 7: NOTES PAYABLE TO BANKS
On November 12, 2021, the Company entered into a revolving
credit agreement with Truist Bank which provides a credit facility of
$20.0 million. The facility includes (i) a $5.0 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 $35.0 million and
adjusted EBITDA (as calculated under the Credit Agreement) over
the most recently completed twelve-month period. 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, certain assets owned by the Company. The facility is
scheduled to mature on November 12, 2026.
Effective July 1, 2023, revolving borrowings under the facility accrue
interest at a rate equal to Term Secured Overnight Financing Rate
(“SOFR”) plus the applicable percentage, as defined. During the
second quarter of 2023, the Company was notified by Truist Bank
that SOFR replaced LIBOR for all borrowings under the facility. The
new applicable percentage is between 150 and 250 basis points for
all loans based on MPC’s net leverage ratio plus a SOFR adjustment
of 11.45 basis points. 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 at 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, 2023
and 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 thousand in 2021. 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, 2023 and 2022, MPC had no
outstanding borrowings under the revolving credit facility.
Marine Products Corporation 2023 10-K
4 5
Part II
Item 8. — Financial Statements and Supplementary Data
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 was $90 thousand in 2023, $90 thousand in 2022
and $10 thousand in 2021. Interest paid was $76 thousand in 2023
and $32 thousand in 2022 and none was paid 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
2023
2022
2021
$ 12,384
$ 12,225
$
1,109
1,360
(3,047)
(79)
(1,687)
(111)
7,176
346
(248)
108
$ 10,367
$
11,787
$
7,382
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
2023
21.0%
2022
21.0%
2021
21.0%
1.2
(1.3)
(0.7)
0.5
(0.1)
(0.7)
1.3
(0.7)
0.3
0.8
(0.1)
—
0.9
(0.9)
(0.8)
0.4
(1.0)
0.7
Effective tax rate
19.9%
22.6%
20.3%
Significant components of the Company’s deferred tax assets and
liabilities are as follows:
(in thousands)
December 31,
Deferred tax assets:
Warranty costs
Sales incentives and discounts
Stock-based compensation
Long-term retirement plan
Capitalized research and
development
All others, net
Total deferred tax assets
Deferred tax liabilities:
Depreciation and amortization
expense
2023
2022
$
1,557
$
1,254
570
824
3,960
2,900
465
10,276
110
866
3,099
1,300
490
7,119
Total net income tax payments were $13.9 million in 2023,
$13.0 million in 2022, and $7.5 million in 2021. As of December 31,
2023, the Company had net operating loss carryforwards related
to state income taxes of approximately $1.2 million (gross) that will
expire in 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 part of income tax expense. Accrued interest
and penalties were immaterial as of December 31, 2023 and 2022.
During 2023, the Company recognized an increase in its liability
for unrecognized tax benefits related primarily to prior year
positions and recorded it 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)
2023
2022
Balance at beginning of the year
$ 1,058
$
539
Additions based on tax positions related
to the current year
Additions for tax positions of prior years
236
55
393
126
Balance at end of the year
$ 1,349
$ 1,058
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 2020 through 2022 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, 2023 and
2022 as follows:
(in thousands)
2023
2022
Balance at beginning of the year
$
(1,995)
$
(2,576)
Change during the year:
Before-tax amount
Tax benefit
Reclassification adjustment,
net of taxes
Amortization of net loss
2,536
(558)
17
1,995
632
(139)
88
581
(1,686)
(1,092)
Total activity in the year
Net deferred tax assets
$
8,590
$
6,027
Balance at end of the year
$
— $
(1,995)
4 6 Marine Products Corporation 2023 10-K
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. Level 1 – Quoted market prices in active markets for identical
assets or liabilities.
2. 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, 2023 and 2022.
Trading securities are comprised of SERP assets, as described in
note titled Employee Benefit Plans, 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
valued at $15.4 million as of December 31, 2023 and $9.9 million
as of December 31, 2022. 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 years ended
December 31, 2023 and 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 injured or incurred damages 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
Part II
Item 8. — Financial Statements and Supplementary Data
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, in
exchange for the Company’s assumption of the debt obligation on
those boats, as contractually defined by each lender. The Company
had no material repurchases of dealer inventory under contractual
agreements during 2023 and 2022 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 is based on
the highest of the following criteria: (i) a specified percentage of the
amount of the average net receivables financed by the floor plan
lender for our dealers, (ii) the total average net receivables financed
by the floor plan lender for our two highest dealers during the prior
three month period, or (iii) $8.0 million, less repurchases during the
prior 12 month period. As defined by the agreement, the repurchase
limit for this lender was $18.9 million as of December 31, 2023. The
Company has contractual repurchase agreements with additional
lenders with an aggregate maximum repurchase obligation of
approximately $7.7 million, with various expiration and cancellation
terms of less than one year. Accordingly, the aggregate repurchase
obligation with all financing
institutions was approximately
$26.6 million as of December 31, 2023. This repurchase obligation
risk is mitigated by the value of any boats 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 $1.3 million as of December 31, 2023
compared to $1.1 million as of December 31, 2022.
Short-term Cash Incentive Compensation
In addition to recording discretionary Short-term Cash Incentive
(STCI) compensation expense for executive officers, STCI expense
has been recorded for four non-executive employees based on
a percentage of Pre-Tax Profit (PTP incentive), defined as pretax
income before goodwill adjustments and certain allocated
corporate expenses. During 2021 and through the third quarter of
2023, this PTP incentive was 16% in the aggregate per year and
was subject to either a contractual arrangement or a discretionary
determination. The PTP incentive under a contractual agreement
with one employee, in the amount of seven percent per year, was
discontinued as of September 30, 2023. As a result, effective
October 1, 2023, the PTP incentive, subject to a discretionary
determination, will be nine percent in the aggregate per year for
three employees.
Total STCI expense for the reported years was as follows:
(in thousands)
STCI expense
2023
2022
2021
$ 10,651
$ 12,039
$
8,535
These amounts are included in Selling, general and administrative
expenses
the accompanying Consolidated Statements of
Operations.
in
Marine Products Corporation 2023 10-K
4 7
Part II
Item 8. — Financial Statements and Supplementary Data
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 liabilities related
to these deferrals are recognized as Retirement plan liabilities on the Consolidated Balance Sheets. 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 for another purpose at any time. Investments in COLI policies consist of variable life
insurance policies of $8.5 million as of December 31, 2023 and $7.1 million as of December 31, 2022. 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+ in 2023.
The Company classifies the SERP assets as trading securities as described in note titled Significant Accounting Policies. The fair value of these
assets totaled $15.4 million as of December 31, 2023 and $9.9 million as of December 31, 2022. The SERP assets are reported in retirement
plan 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 gains (losses) related to the SERP assets totaled $1.5 million in 2023, $(2.4
million) in 2022 and $1.6 million in 2021.
The SERP liabilities include participant deferrals net of distributions and are stated at a fair value of $18.0 million as of December 31,
2023 and $14.4 million as of December 31, 2022. The SERP liabilities are reported on the consolidated balance sheets in retirement plan
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 gains (losses) of $1.8 million
in 2023, and $(2.3 million) in 2022 and $1.6 million in 2021.
Retirement Income Plan (“Plan”)
The Company initiated actions to terminate the Plan in 2021 and it was fully terminated in 2023 As part of termination, the Company
settled its participant liabilities in one of the following ways – (i) through a lump-sum settlement at the election of the participants; or (ii)
transfer to a commercial annuity provider or a government agency. The Company funded this transfer through the liquidation of
investments in the Plan assets. The Company recognized a pre-tax, non-cash settlement charge of $2.4 million during 2023, which
represents the accelerated recognition of net actuarial loss that was previously recorded in accumulated other comprehensive
loss (net of tax) and deferred taxes (tax effect). In addition, RPC utilized funds related to the Company’s plan assets to settle its
participant liabilities, since it was a multiemployer Plan. See note titled Related Party Transactions for additional information.
(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
Transfer of assets
Settlements
Fair value of plan assets at end of year
Funded status at end of year
$
$
2023
—
3,146
—
5
(243)
(131)
(2,777)
$
—
$
3,502
(70)
(131)
(524)
(2,777)
—
—
$
$
2022
3,146
5,832
—
133
(1,045)
(322)
(1,452)
3,146
6,870
(1,594)
(322)
—
(1,452)
3,502
356
$
$
$
$
$
$
The accumulated benefit obligation for the Plan as of December 31, 2023 and 2022 has been disclosed above. The Company uses a
December 31 measurement date for this qualified plan. The funded status of the Plan was recorded as Pension plan assets in the current
assets section of the Consolidated Balance sheets as of December 31, 2022.
4 8 Marine Products Corporation 2023 10-K
Part II
Item 8. — Financial Statements and Supplementary Data
(in thousands)
December 31,
Amounts (pre-tax) recognized in accumulated other comprehensive loss consist of:
Net loss
Prior service cost (credit)
The components of net periodic benefit cost of the Plan are summarized as follows:
(in thousands)
Service cost for benefits earned during the period
$
Interest cost
Expected return on plan assets
Amortization of net losses
Settlement loss
Net periodic cost
$
$
$
2023
—
5
—
22
2,363
$
2,390
$
2023
2022
—
—
—
2022
—
133
—
113
1,180
1,426
$
$
$
$
2,558
—
2,558
2021
—
147
(289)
73
—
(69)
The pre-tax amounts recognized in other comprehensive income for the years ended December 31, 2023, 2022 and 2021 are summarized
as follows:
(in thousands)
Net loss (gain)
Amortization of net loss
Settlement loss
$
2023
(173)
(22)
(2,363)
Amount recognized in accumulated other comprehensive income (loss)
$
(2,558)
2022
549
(113)
(1,180)
(744)
$
$
2021
879
(73)
—
806
$
$
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
2023
2022
2021
Note (1)
—
—
—
—
Note (1)
N/A
Note (1)
—
N/A
Note (1)
N/A
2.70%
4.00%
N/A
(1) As of December 31, 2023, there was no liability in the Plan and therefore, a discount rate does not apply. Projected benefit obligation as of December 31, 2022, and
December 31, 2021 reflects termination of the Plan and is calculated based on various assumptions in accordance with the Plan agreement.
Marine Products Corporation 2023 10-K
4 9
Part II
Item 8. — Financial Statements and Supplementary Data
The Plan’s weighted average asset allocation at December 31, 2022 by asset category was as follows:
Asset category
Cash and Cash Equivalents
Fixed Income Securities
Total
Percentage of Plan Assets
as of December 31
2022
3.7%
96.3
100.0%
The following tables present our Plan assets using the fair value hierarchy as of December 31, 2022. The fair value hierarchy has three levels
based on the reliability of the inputs used to determine fair value. See note titled 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
Total
Level 1
Level 2
$
129
3,373
$ 3,502
$
$
129
—
129
$
—
3,373
$ 3,373
(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.
401(k) Plan
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% of employee 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 50% 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 $1.2 million in 2023, $1.2 million in 2022
and $1.0 million in 2021.
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. 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, 2023, there were 777,199 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 $3.7 million ($2.9 million after tax) for 2023, $2.7 million
($2.1 million after tax) for 2022, and $2.3 million ($1.8 million after tax) for 2021.
We have not issued any stock options since 2003 and have no immediate plans to issue additional stock options.
5 0 Marine Products Corporation 2023 10-K
Part II
Item 8. — Financial Statements and Supplementary Data
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 in the case of employees and that vest immediately for non-employee directors, depending on the terms of the issue. The time
lapse restricted shares granted by the Company in 2023 to employees 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.
In the first quarter of 2023, the Company issued time-lapse restricted shares to certain employees that will vest ratably over a period of
four years. In addition, the Company granted performance share unit awards to its executive officers that vest based on the achievement of
pre-established performance targets. The awards will be issued at different levels based on the performance achieved with a cliff vesting at
the end of calendar year 2025. The Company evaluated the portions of the awards that are probable to vest and accordingly has accrued
estimated compensation expense equal to 100% of the target awards.
The following is a summary of the changes in non-vested restricted shares for the year ended December 31, 2023:
Non-vested shares at January 1, 2023
Granted
Vested
Non-vested shares at December 31, 2023
Shares
764,170
318,348
(243,468)
839,050
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
Weighted-
Average
Grant-Date
Fair Value
$ 14.15
13.25
14.16
$ 13.81
Weighted-
Average
Grant-Date
Fair Value
$ 14.70
11.61
11.96
14.11
$ 14.15
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 $13.25 in 2023, $11.61 in 2022 and $16.55 in 2021. The total fair value of shares vested was approximately
$3.2 million in 2023, $2.2 million in 2022 and $3.2 million in 2021. The above table does not include any activity related to performance
share unit awards since they are not currently issued or vested.
For the year ending December 31, 2023 approximately $57 thousand 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
$68 thousand for the year ending December 31, 2022.
Other Information
As of December 31, 2023 total unrecognized compensation cost related to non-vested restricted shares was approximately $7.7 million which
is expected to be recognized over a weighted-average period of 2.7 years.
Marine Products Corporation 2023 10-K
5 1
Part II
Item 8. — Financial Statements and Supplementary Data
NOTE 13: RELATED PARTY TRANSACTIONS
In conjunction with its spin-off from RPC, 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 and acquisition assistance, 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 $1.1 million in 2023, $0.9 million in 2022 and $0.9 million
in 2021. The Company’s payable to RPC for these services was
$120 thousand as of December 31, 2023 and $26 thousand as
of December 31, 2022. In addition, the Company was owed
$524 thousand from RPC, for using Marine Products’ assets in
the Plan to settle its participant liabilities. Of the total amounts
owed, RPC reimbursed the Company $482 thousand during 2023.
All 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% 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 $2.6 million 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 for the
corporate aircraft comprised of rent and an allocable share of fixed
costs of approximately $160 thousand for each year in 2023, 2022
and 2021. The Company has a payable to 255 RC LLC of $1.8 million
as of December 31, 2023 and $1.6 million as of December 31, 2022.
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, 2023, 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 $639 thousand.
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, 2023, 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.
The Company does not have any finance leases. As of December 31, 2023, 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
2023
2022
December 31,
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
$
$
$
295
77
220
297
$
$
$
239
57
180
237
5 2 Marine Products Corporation 2023 10-K
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
Variable lease cost
Total lease cost
Other information:
As of December 31,
Cash paid for amounts included in the measurement of operating lease liabilities (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,
2023
2024
2025
2026
2027
2028
Total lease payments
Less: Amounts representing interest
Present value of lease liabilities
2023
2022
93
—
3
96
2023
77
127
3.7
$
$
$
59
—
—
59
2022
55
222
4.2
4.85%
4.97%
2023
2022
—
89
88
85
55
6
323
(26)
297
$
$
68
58
56
55
26
—
263
(26)
237
$
$
$
$
$
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, 2023, projected future
lease income on this lease totaled $300 thousand scheduled
to be received as follows: 2024 — $240 thousand and 2025 —
$60 thousand. The Company recorded rental income of $240
thousand in 2023, $239 thousand in 2022 and $236 thousand in
2021 that is recorded as part of selling, general and administrative
expenses on the consolidated statements of operations.
During 2023, the Company entered into a lease agreement related
to a warehouse as a lessor for a period of less than a year that
provided the lessee with an option to purchase the asset at the
end of the lease term. The consideration included required weekly
payments with a purchase price of $2.0 million less lease payments.
The lessee was reasonably certain to exercise this purchase
option and therefore, the Company concluded that the agreement
qualified to be a sales type lease. As part of this transaction, the
Company recognized a gain of approximately $1.8 million which has
been reported as part of Gain on disposition of assets, net on the
Consolidated Statement of Operations. The purchase option was
exercised in December 2023.
NOTE 15: SUBSEQUENT EVENT
On January 23, 2024, the Board of Directors declared a regular cash
dividend of $0.14 per share payable March 11, 2024 to stockholders
of record at the close of business on February 9, 2024.
Marine Products Corporation 2023 10-K
5 3
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, 2023 (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 32 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, 2023 and issued a report thereon which is included on
page 33 of this report.
Changes in internal control over financial reporting — There were no changes in the Company’s internal control over financial reporting
during the fourth quarter of 2023 which were identified in connection with management’s evaluation required by paragraph (d) of Rules 13a-15
and 15d-15 under the Exchange Act, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control
over financial reporting.
ITEM 9B.
OTHER INFORMATION
During the quarter ended December 31, 2023, no director or officer, as defined in Rule 16a-1(f) under the Securities Exchange Act of 1934, as
amended, of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each
term is defined in Item 408(a) of Regulation S-K.
ITEM 9C.
DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT
INSPECTIONS
Not applicable.
5 4 Marine Products Corporation 2023 10-K
Part III
Item 10. — Directors, Executive Officers and Corporate Governance
Part III
ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Information concerning directors, director nominees and executive officers will be included in the Marine Products Proxy Statement for its 2024
Annual Meeting of Stockholders, in the sections titled Information Regarding Director Nominees, Continuing Directors and Executive Officers.
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 2024 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 2024 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 2024 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.
Marine Products Corporation 2023 10-K
5 5
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 2024 Annual Meeting of Stockholders in the section titled “Stock Ownership of
Certain Beneficial Owners and Management.” This information is incorporated herein by reference.
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
The following table sets forth certain information regarding equity compensation plans as of December 31, 2023.
Plan Category
Equity compensation plans
approved by security holders
Equity compensation plans not
approved by security holders
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))
—
—
—
$
$
—
—
—
777,199 (1)
—
777,199
(1) All of the securities can be issued in the form of restricted stock or other stock awards.
See note titled Employee Benefit Plans for information regarding the material terms of the equity compensation plans.
ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS,
AND DIRECTOR INDEPENDENCE
Information concerning certain relationships and related party transactions will be included in the Marine Products Proxy Statement for its
2024 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 2024 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 2024 Annual Meeting of Stockholders. This information is incorporated
herein by reference.
5 6 Marine Products Corporation 2023 10-K
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
10.13
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, 2012).
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).
Marine Products Corporation 2023 10-K
5 7
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
10.13
10.14
21
23
24
31.1
31.2
32.1
97.1
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, 2001).
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, 2012).
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
Policy relating to recovery of erroneously awarded compensation
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, 2023, formatted in Inline XBRL
5 8 Marine Products Corporation 2023 10-K
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.
Part IV
Signatures
Marine Products Corporation
Ben M. Palmer
President and Chief Executive Officer
Date:
February 28, 2024
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 28, 2024
Date:
February 28, 2024
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 28, 2024
Marine Products Corporation 2023 10-K
5 9
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, 2023 and 2022
Consolidated Statements of Operations for each of the three years ended December 31, 2023
Consolidated Statements of Comprehensive Income for each of the three years ended December 31, 2023
Consolidated Statements of Stockholders’ Equity for each of the three years ended December 31, 2023
Consolidated Statements of Cash Flows for each of the three years ended December 31, 2023
Notes to Consolidated Financial Statements
SCHEDULE
Schedule II – Valuation and Qualifying Accounts
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.
PAGE
32
33
34
36
37
38
39
40
41-53
61
6 0 Marine Products Corporation 2023 10-K
Part IV
Schedule II – Valuation and Qualifying Accounts
Schedule II – Valuation and Qualifying Accounts
MARINE PRODUCTS CORPORATION AND SUBSIDIARIES
(in thousands of dollars)
Description
Year ended December 31, 2023
Credit loss allowance for accounts receivable
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
For the years ended
December 31, 2023, 2022 and 2021
Balance at
Beginning
of Period
Charged to
Costs and
Expenses
Net
(Write-Offs)/
Recoveries
Balance
at End of
Period
$
$
$
$
12
12
16
1,818
$
$
$
$
—
—
—
—
$
$
$
$
(1)
—
(4)
(1,818)
$
$
$
$
11
12
12
—
Any schedules not shown above have been omitted because they are not applicable.
Marine Products Corporation 2023 10-K
6 1
This page has been left blank intentionally
6 2 Marine Products Corporation
MARINE PRODUCTS CORPORATION 2023 ANNUAL REPORT
Non-GAAP Financial Measures and Reconciliations
Marine Products Corporation has used the non-GAAP financial measure of EBITDA in this document. This measure should not be considered
in isolation or as a substitute for a performance measure prepared in accordance with GAAP. Management believes that presenting this
non-GAAP measure enables investors to compare our operating performance consistently over various time periods net of unusual or non-
recurring charges and without regard to changes in our capital structure.
A non-GAAP financial measure is a numerical measure of financial performance, financial position, or cash flows that either 1) excludes
amounts, or is subject to adjustments that have the effect of excluding amounts, that are included in the most directly comparable measure
calculated and presented in accordance with GAAP in the statement of operations, balance sheet or statement of cash flows, or 2) includes
amounts, or is subject to adjustments that have the effect of including amounts, that are excluded from the most directly comparable measure
so calculated and presented.
Set forth in the table below is a reconciliation of Net Income to EBITDA. This reconciliation also appears on Marine Products Corporation's
investor website, which can be found on the Internet at www.marineproductscorp.com.
Reconciliation of Net Income to EBITDA
(Unaudited)
(in thousands)
Net income
Adjustments:
Add: Income tax provision
Add: Depreciation and amortization
Less: Interest income, net
EBITDA
Year ended December 31,
2023
2022
$
41,695
$
40,347
10,367
2,416
2,860
11,787
1,905
338
$
51,618
$
53,701
Marine Products Corporation
6 3
MARINE PRODUCTS CORPORATION 2023 ANNUAL REPORT
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 use of robotics creates a safer production environment and allows our workers to focus on
areas that drive maximum quality and consistency, our belief that we will be able to continue to maximize efficiency, and will continue
to invest selectively in automation to improve quality and reduce costs, our belief that we will effect a significant solar panel installation in
2024 that will drive cost and cash savings and will have the capability to supply a sizeable portion of our energy needs at our Nashville,
Georgia manufacturing site, our view that we have taken the appropriate actions to manage our cost structure due to lower production levels,
while still making investments that are key to driving long-term profitable growth and that our cash position provides ample liquidity to make
internal investments as well as explore more significant strategic actions to increase our scale and enhance our growth outlook, our belief
that the retail incentive programs we implemented in the third quarter will encourage sales at the retail level, our belief that we have ample
capital to invest in more significant opportunities should they arise, particularly potential acquisitions, our belief that acquisitions could offer
unique value creation opportunities and a pathway to accelerated growth and increased scale, our belief that our initiatives to improve both
near-term and long-term financial results will position us for success regardless of external factors, and our belief that we will succeed in
our efforts to improve our efficiency in our manufacturing facilities and maximize our share of the market. 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 at Item 1A “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.
6 4 Marine Products Corporation
CORPORATE INFORMATION
RICHARD A. HUBBELL
Executive Chairman of the Board
BEN M. PALMER
President and Chief Executive Officer
MICHAEL L. SCHMIT
Vice President, Chief Financial Officer,
Treasurer and Corporate Secretary
OFFICERS
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
DIRECTORS
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
Executive Chairman of the Board,
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
(3) Member of the Audit Committee
(5) Member of the Nominating and Corporate
(2) Lead Independent Director; Chairman
(4) Chairman of the Audit Committee; Member
of the Human Capital Management and
Compensation Committee; Chairman
of the Nominating and Corporate
Governance Committee; and Member of
the Audit Committee
of the Human Capital Management
and Compensation Committee; and
Member of the Nominating and Corporate
Governance Committee
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
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)
STOCKHOLDER INFORMATION
TRANSFER AGENT AND
REGISTRAR
For inquiries related to stock certificates,
including changes of address,
please contact:
EQUINITI TRUST COMPANY, LLC
PO Box 500
Newark, NJ 07101
(877) 864-5055
www equiniti com/us/ast-access/
individuals/
INVESTOR RELATIONS
WEBSITE
MarineProductsCorp com
ANNUAL MEETING
The Annual Stockholders Meeting of
Marine Products Corporation will be
held at 12:00 p m , April 23, 2024, at
2170 Piedmont Road NE,
Atlanta, GA 30324
2801 Buford Highway NE, Suite 300
Atlanta, Georgia 30329
(404) 321-7910
©© 2024 Marine Products Corporation
All rights reserved The names of other companies and products
mentioned herein may be the trademarks of their respective owners