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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
|X| Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended June 30, 2003
|_| Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission File No. 1-16263
MARINE PRODUCTS CORPORATION
(exact name of registrant as specified in its charter)
Delaware 58-2572419
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
2170 Piedmont Road, NE, Atlanta, Georgia 30324
(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code -- (404) 321-7910
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes X No
-- --
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 X No__
As of June 30, 2003, Marine Products Corporation had 17,089,401 shares of common
stock outstanding.
1
Marine Products Corporation.
Table of Contents
Part I. Financial Information Page
No.
Item 1. Financial Statements (Unaudited)
Consolidated balance sheets -
June 30, 2003 and December 31, 2002 3
Consolidated statements of income - Three and six months ended June 30, 2003 and 2002;
4
Consolidated statements of cash flows - Six months ended June 30, 2003 and 2002 5
Notes to consolidated financial statements 8
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9
Item 3. Quantitative and Qualitative Disclosure of Market Risk 15
Item 4. Controls and Procedures 15
Part II. Other Information
Item 1. Legal Proceedings 16
Item 2. Changes in Securities and Use of Proceeds 16
Item 3. Defaults upon Senior Securities 16
Item 4. Submission of Matters to a Vote of Security Holders 16
Item 5. Other Information 16
Item 6. Exhibits and Reports on Form 8-K 17
Signatures 18
2
MARINE PRODUCTS CORPORATION AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 2003 AND DECEMBER 31, 2002
(In thousands)
June 30, December 31,
2003 2002
(Unaudited) (Audited)
- ----------------------------------------------------------------------
ASSETS
Cash and cash equivalents $20,326 $17,280
Marketable securities 2,965 1,929
Accounts receivable, net 6,037 1,471
Inventories 18,172 20,685
Deferred income taxes 3,102 2,419
Prepaid expenses and other current assets 740 1,623
- ----------------------------------------------------------------------
Total current assets 51,342 45,407
Property, plant and equipment, net 18,017 16,216
Marketable securities 5,383 4,865
Intangibles, net 3,838 3,858
Other assets 1,320 717
- ----------------------------------------------------------------------
Total assets $79,900 $71,063
======================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $3,437 $3,414
Federal income taxes payable 1,951 1,889
Accrued expenses 9,329 7,536
- ----------------------------------------------------------------------
Total current liabilities 14,717 12,839
Deferred taxes and other liabilities 2,233 1,391
- ----------------------------------------------------------------------
Total liabilities 16,950 14,230
- ----------------------------------------------------------------------
Common stock 1,709 1,712
Capital in excess of par value 36,637 38,278
Deferred compensation (282) (334)
Earnings retained 24,861 17,074
Accumulated other comprehensive income 25 103
- ----------------------------------------------------------------------
Total stockholders' equity 62,950 56,833
- ----------------------------------------------------------------------
Total liabilities and stockholders' equity $79,900 $71,063
======================================================================
The accompanying notes are an integral part of these statements.
3
MARINE PRODUCTS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2003 AND 2002
(In thousands except per share data)
(Unaudited)
Three months Six months
ended June 30, ended June 30,
------------------------------------------------
2003 2002 2003 2002
- ----------------------------------------------------------------------------------------------------
Net sales $51,951 $47,193 $102,058 $85,516
Cost of goods sold 38,400 36,752 76,415 66,937
- ----------------------------------------------------------------------------------------------------
Gross profit 13,551 10,441 25,643 18,579
Selling, general and administrative expenses 6,022 4,781 11,675 9,064
- ----------------------------------------------------------------------------------------------------
Operating income 7,529 5,660 13,968 9,515
Interest income 222 165 335 321
- ----------------------------------------------------------------------------------------------------
Income before income taxes 7,751 5,825 14,303 9,836
Income tax provision 2,790 2,214 5,149 3,738
- ----------------------------------------------------------------------------------------------------
Net income $4,961 $3,611 $9,154 $6,098
====================================================================================================
Dividends paid per share $0.04 $0.02 $0.08 $0.04
=======================================================
Earnings per share
Basic $0.29 $0.21 $0.54 $0.36
====================================================================================================
Diluted $0.28 $0.20 $0.51 $0.34
====================================================================================================
Average shares outstanding
Basic 16,854 16,955 16,892 16,928
====================================================================================================
Diluted 17,757 17,950 17,826 17,855
====================================================================================================
The accompanying notes are an integral part of these statements.
4
MARINE PRODUCTS CORPORATION AND MACROS SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2003 AND 2002
(In thousands)
(Unaudited)
Six months ended June 30,
-------------------------------------------
2003 2002
- ----------------------------------------------------------------------------------------------------------------------------
OPERATING ACTIVITES
Net income $9,154 $6,098
Noncash charges (credits) to earnings:
Depreciation and amortization 1,144 1,058
Deferred income tax benefit (653) (238)
(Increase) decrease in assets
Accounts receivable (4,566) (1,652)
Inventories 2,513 (425)
Prepaid expenses and other current assets 883 633
Federal income taxes receivable 0 831
Other non-current assets (671) 5
Increase (decrease) in liabilities:
Accounts payable 23 1,519
Federal income taxes payable 870 227
Other accrued expenses 1,864 1,554
- ----------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 10,561 9,610
- ----------------------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Capital expenditures (2,873) (916)
Net sale (purchase) of marketable securities (1,632) 4,578
- ----------------------------------------------------------------------------------------------------------------------------
Net cash (used for) provided by investing activities (4,505) 3,662
- ----------------------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Payment of dividends (1,366) (683)
Cash paid for common stock purchased and retired (2,046) (509)
Proceeds received upon exercise of stock options 402 309
- ----------------------------------------------------------------------------------------------------------------------------
Net cash used for financing activities (3,010) (883)
- ----------------------------------------------------------------------------------------------------------------------------
Net increase in cash and cash equivalents 3,046 12,389
Cash and cash equivalents at beginning of period 17,280 4,953
- ----------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $20,326 $17,342
============================================================================================================================
The accompanying notes are an integral part of these statements.
5
MARINE PRODUCTS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. GENERAL
The accompanying unaudited condensed financial statements have been
prepared in accordance with accounting principles generally accepted in
the United States for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a
fair presentation have been included. Operating results for the period
ended June 30, 2003 are not necessarily indicative of the results that
may be expected for the year ended December 31, 2003.
The balance sheet at December 31, 2002 has been derived from the
audited financial statements at that date but does not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements.
For further information, refer to the consolidated financial statements
and footnotes thereto included in the Company's annual report on Form
10-K for the year ended December 31, 2002.
Certain prior year balances have been reclassified to conform to the
current year presentation.
2. EARNINGS PER SHARE
Basic and diluted earnings per share are computed by dividing net
income by the respective weighted average number of shares outstanding
during the respective periods. A reconciliation of weighted shares
outstanding is as follows:
Three months ended Six months ended
(In thousands) June 30, June 30,
-------- --------
2003 2002 2003 2002
---- ---- ---- ----
Basic 16,854 16,955 16,892 16,928
Dilutive effect of stock
options and restricted shares 903 995 934 927
------------------------------------------------------------------------------------------------------
Diluted 17,757 17,950 17,826 17,855
======================================================================================================
6
3. RECENT ACCOUNTING PRONOUNCEMENTS
In December 2002, the FASB issued FASB Interpretation (FIN) No. 46,
Consolidation of Variable Interest Entities. The Interpretation
requires that a variable interest entity be consolidated by a company
if that company is subject to a majority of the risk of loss from the
variable interest entity's activities or entitled to receive a majority
of the entity's residual returns or both. The consolidation
requirements of FIN 46 apply immediately to variable interest entities
created after January 31, 2003. The consolidation requirements apply to
older entities in the first fiscal year or interim period beginning
after June 15, 2003. Certain of the disclosure requirements apply in
all financial statements issued after January 31, 2003, regardless of
when the variable interest entity was established. The Company believes
the adoption of the Interpretation will not have a material impact on
the financial position, results of operations or liquidity of the
Company.
4. COMPREHENSIVE INCOME
Total comprehensive income for the three months and six months ended
June 30, 2003 was $4,890,000 and $9,076,000, respectively, and was
$3,611,000 and $6,098,000 for the three and six months ended June 30,
2002. The difference between net income and comprehensive income is due
to changes in unrealized gain on marketable securities.
5. STOCK-BASED COMPENSATION
Marine Products accounts for its stock incentive plan using the
intrinsic value method prescribed by Accounting Principles Board
("APB") Opinion No. 25, "Accounting for Stock Issued to Employees." If
Marine Products had accounted for the stock incentive plans in
accordance with SFAS No. 123, reported net income per share would have
been as follows:
Three months ended Six months ended
June 30, June 30,
------------------- --------------------
(in thousands) 2003 2002 2003 2002
------------------------------------------------------------------------------------------------------
Net income - as reported $4,961 $3,611 $9,154 $6,098
Add: Stock-based employee compensation
cost, included in reported net income, net
of related tax effect 17 16 33 108
Deduct: Stock-based employee compensation
cost, computed using the fair value method
for all awards, net of related tax effect (101) (70) (195) (215)
-----------------------------------------------------------------------------------------------------
Pro forma net income $4,877 $3,557 $8,992 $5,991
==============================================
Pro forma earnings per share
Basic $0.29 $0.21 $0.53 $0.35
Diluted $0.27 $0.20 $0.50 $0.34
7
6. WARRANTY ACCRUALS
The Company warrants the entire boat, excluding the engine, against
defects in materials and workmanship for a period of one year. The
Company also warrants the entire deck and hull, including its bulk head
and supporting stringer system, against defects in materials and
workmanship for periods ranging from five to ten years. Activity in the
warranty accrual was as follows:
[in thousands]
- ------------------------------------------------------------
Balance at December 31, 2002 $ 1,944
Less: Payments made during the period 1,174
Add: Warranties issued during the period 1,501
Changes in warranties issued in prior periods 145
- ------------------------------------------------------------
Balance at June 30, 2003 $ 2,416
============================================================
7. BUSINESS SEGMENT INFORMATION
As the Company has only one reportable segment - its powerboat
manufacturing business - the majority of the disclosures required by
SFAS No. 131 do not apply to the Company. In addition, the Company's
results of operations and its financial condition are not significantly
reliant upon any single customer or on sales to international
customers.
8. INVENTORIES
Inventories consist of the following:
June 30, 2003 December 31, 2002
- --------------------------------------------------------------------------------------
[in thousands]
Raw materials and supplies $ 11,057 $ 6,617
Work in process 4,323 3,535
Finished goods 2,792 10,533
- --------------------------------------------------------------------------------------
Total inventories $ 18,172 $ 20,685
======================================================================================
8
MARINE PRODUCTS CORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
OVERVIEW
Marine Products' mission is to maximize the boating experience by providing its
customers with high-quality, innovative powerboats and related products and
services. Marine Products, through its wholly-owned subsidiary, Chaparral Boats,
Inc. ("Chaparral"), is a leading manufacturer of recreational fiberglass
powerboats. Chaparral competes in the sterndrive engine-powered sportboat,
deckboat and cruiser markets. The Company's Robalo brand, acquired in June 2001,
competes in the outboard engine powered offshore sport fishing boat market.
Robalo represented approximately seven percent of consolidated net sales in the
second quarter of 2003, compared to five percent in the second quarter of 2002.
CRITICAL ACCOUNTING POLICIES
The discussion of Critical Accounting Policies is incorporated herein by
reference from the Company's annual report on Form 10-K for the fiscal year
ended December 31, 2002. There have been no significant changes in the critical
accounting policies since year-end.
THREE MONTHS ENDED JUNE 30, 2003 COMPARED TO THREE MONTHS ENDED JUNE 30, 2002
Net sales for the three months ended June 30, 2003 increased $4,758,000 or
10.1 percent to $51,951,000 compared with $47,193,000 for the three months ended
June 30, 2002. The increase in net sales was due to a 3.4 percent increase in
the number of boats sold as well as a 5.6 percent increase in the average sales
price per boat. The number of boats sold increased among all models except
Chaparral's deckboat models, in which volume was relatively weaker. The increase
in average sales price was due to increases in sales of higher-priced models in
all product lines.
Cost of goods sold for the three months ended June 30, 2003 was $38,400,000
compared to $36,752,000 for the three months ended June 30, 2002, an increase of
$1,648,000 or 4.5 percent. The increase in cost of goods sold was due to
increases in sales. Cost of goods sold, as a percentage of net sales, decreased
from 77.9 percent in 2002 to 73.9 percent in 2003. The decrease in cost of goods
sold as a percentage of net sales was due to efficiencies from higher overall
production volume, increased unit sales of Chaparral cruisers, which generate
higher profit margins, improvements at Robalo, and various adjustments to
accrual estimates that are routinely recorded in the second quarter as a result
of the completion of the current model year. The cumulative effect of these
adjustments to accrual estimates, including those impacting net sales, increased
gross profit by 2.2 percent of net sales, and increased quarterly earnings per
share by approximately $0.04. The gross profit improvement at Robalo was also
due to a 29.0% increase in unit sales over the second quarter of 2002.
9
Selling, general and administrative expenses for the three months ended June 30,
2003 were $6,022,000 compared to $4,781,000 for the three months ended June 30,
2002, an increase of $1,241,000, or 26.0 percent. The increase in selling,
general and administrative expenses was due to incremental costs that vary with
sales and profitability, including incentive compensation, sales commissions,
and warranty expense. Warranty expense has increased recently due to increased
customer service demands, a trend which the Company anticipates will continue.
Warranty expense increased by $435,000 to $907,000 during the three months
ending June 30, 2003, or 1.7 percent of net sales, compared to $472,000, or 1.0
percent of net sales for the three months ending June 30, 2002. Selling, general
and administrative expenses were 11.6 percent of net sales during the three
months ending June 30, 2003 and 10.1 percent of net sales during the three
months ending June 30, 2002. The increase in selling, general and administrative
expenses as a percentage of net sales was due to higher warranty expense and the
effect of higher overall profitability on incentive compensation expenses.
Operating income for the three months ended June 30, 2003 was $7,529,000, an
increase of $1,869,000 or 33.0 percent compared to operating income of
$5,660,000 for the comparable period in 2002. Operating income was higher due to
higher net sales, partially offset by higher cost of goods sold and selling,
general and administrative expenses during the period, as discussed above.
Interest income was $222,000 during the three months ended June 30, 2003
compared to $165,000 in the prior year period, an increase of $57,000 or 34.5
percent. This increase resulted from higher average balances of cash and
marketable securities, partially offset by lower investment returns during the
three months ended June 30, 2003 than the three months ended June 30, 2002.
Marine Products generates interest income from investment of its available cash
primarily in overnight and marketable debt securities.
Income tax provision for the three months ended June 30, 2003 reflects an
effective tax rate of 36 percent, compared to 38 percent for the three months
ended June 30, 2002. The decrease in rate reflects the effect of implementing
tax planning strategies. The income tax provision of $2,790,000 was $576,000 or
26.0 percent higher than the income tax provision of $2,214,000 for the three
months ended June 30, 2002 as a result of higher operating income, partially
offset by the lower effective tax rate.
Net income for the quarter ended June 30, 2003 was $4,961,000 or $0.28 diluted
earnings per share compared to $3,611,000 or $0.20 diluted earnings per share
for the quarter ended June 30, 2002.
10
SIX MONTHS ENDED JUNE 30, 2003 COMPARED TO SIX MONTHS ENDED JUNE 30, 2002
- -------------------------------------------------------------------------
Net sales for the six months ended June 30, 2003 increased $16,542,000 or
19.3 percent to $102,058,000 compared with $85,516,000 for the six months ended
June 30, 2002. The increase in net sales was due to a 10.9 percent increase in
the number of boats sold and a 7.2 percent increase in the average sales price
per boat. The number of boats sold increased except Chaparral's deckboat models,
in which volume was relatively weaker. The increase in unit sales of outboard
boats is partly due to the expansion of the product line and the availability of
more models during this six month period than in the comparable period last
year. The increase in average sales price was due to increases in sales of
higher-priced models in all product lines.
Cost of goods sold for the six months ended June 30, 2003 was $76,415,000
compared to $66,937,000 for the six months ended June 30, 2002, an increase of
$9,478,000 or 14.2 percent. The increase in cost of goods sold was due to
increases in sales. Cost of goods sold, as a percentage of net sales, decreased
from 78.3 percent in 2002 to 74.9 percent in 2003. The decrease in cost of goods
sold as a percentage of net sales was due to efficiencies from higher overall
production volume, increased unit sales of Chaparral cruisers, which generate
higher profit margins, improvements at Robalo, and various adjustments to
accruals that were recorded in the second quarter of 2003 as a result of the
completion of the current model year. The gross profit improvement at Robalo was
also due to a 73.1% increase in unit sales compared to the six months ended June
30, 2002 because of improved distribution capabilities.
Selling, general and administrative expenses for the six months ended June 30,
2003 were $25,643,000 compared to $18,579,000 for the six months ended June 30,
2002, an increase of $7,064,000, or 38.0 percent. The increase in selling,
general and administrative expenses was due to incremental costs that vary with
sales and profitability, including incentive compensation, sales commissions and
warranty expense. Warranty expense has increased recently due to increased
customer service demands, a trend which the Company anticipates will continue.
Warranty expense increased by $800,000 to $1,655,000 during the six months
ending June 30, 2003, or 1.6 percent of net sales, compared to $855,000, or 1.0
percent of net sales for the six months ending June 30, 2002. Selling, general
and administrative expenses were 11.4 percent of net sales during the six months
ending June 30, 2003 and 10.6 percent of net sales during the six months ending
June 30, 2002. The increase in selling, general and administrative expenses as a
percentage of net sales was due to the higher warranty expense and the effect of
higher overall profitability on incentive compensation expenses.
11
Operating income for the six months ended June 30, 2003 was $13,968,000, an
increase of $4,453,000 or 46.8 percent compared to operating income of
$9,515,000 for the comparable period in 2002. Operating income was higher due to
higher net sales, partially offset by higher cost of goods sold and selling,
general and administrative expenses during the period, as discussed above.
Interest income was $335,000 during the six months ended June 30, 2003 compared
to $321,000 in the prior year period, an increase of $14,000, or 4.4 percent.
This increase resulted from higher average balances of cash and marketable
securities, partially offset by lower investment returns due to low market
interest rates during the six months ended June 30, 2003 than during the six
months ended June 30, 2002. Marine Products generates interest income from
investment of its available cash primarily in overnight and marketable debt
securities.
Income tax provision for the six months ended June 30, 2003 reflects an
effective tax rate of 36 percent, compared to 38 percent for the six months
ended June 30, 2002. The decrease in rate reflects the effect of implementing
tax planning strategies. The income tax provision of $5,149,000 was
$1,411,000 or 37.7 percent higher than the income tax provision of $3,738,000
for the six months ended June 30, 2002 as a result of higher income before
income taxes, partially offset by the lower effective tax rate.
Net income for the quarter ended June 30, 2003 was $9,154,000 or $0.51 per
diluted share compared to $6,098,000 or $0.34 per diluted share for the quarter
ended June 30, 2002.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
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. During the six months ended June
30, 2003, cash and cash equivalents and marketable securities increased by
$4,600,000.
Cash provided by operating activities for the six months ended June 30, 2003 was
$10,561,000 compared to $9,610,000 for the six months ended June 30, 2002, an
increase of $951,000. The increase resulted from increased net income coupled
with a reduction in inventories, partially offset by an increase in accounts
receivable resulting from higher sales volumes.
Cash (used for) provided by investing activities for the six months ended June
30, 2003 was net cash used of $4,505,000 for investing activities compared to
net cash provided by investing activities of $3,662,000 for the six months ended
June 30, 2002. The $8,167,000 increase in cash used resulted from capital
expenditures for the construction of an administrative office building, addition
of miscellaneous manufacturing assets and investments in marketable securities.
The construction of this administrative office building was completed as of June
30, 2003, and capital expenditures for the remainder of the year are not
projected to be materially different from the prior year.
12
Cash used for financing activities for the six months ended June 30, 2003 was
$3,010,000 compared to $883,000 for the six months ended June 30, 2002, an
increase in cash used of $2,127,000. The increase relates to cash used to
purchase on the open market the Company's common stock, and an increase in
dividend payments resulting from the Company's decision during the first quarter
to increase its dividend from $0.02 per share to $0.04 per share. During the
three months ended June 30, 2003, the Company repurchased 95,000 shares on the
open market. The Company has purchased a total of 292,034 shares on the open
market under a plan authorized by its Board of Directors, and can purchase up to
707,966 additional shares under this plan.
The Company believes that the liquidity provided by existing cash, cash
equivalents and marketable securities, its overall strong capitalization, and
cash expected to be generated from operations, will provide sufficient capital
to meet the Company's requirements for at least the next twelve months. The
Company believes that the liquidity will allow it the ability to continue to
grow and provide the opportunity to take advantage of business opportunities
that may arise.
The Company has an insignificant amount of obligations and commitments that
require future payments. Consistent with customary industry practices, the
Company has agreements with third-party dealer floor plan lenders to repurchase
up to a specified limit any of its boats that are repossessed by the lenders.
The Company's obligation under its guarantee becomes effective in the case of
default in payments by the dealer. The agreements provide for the return of all
repossessed boats to the Company in new condition, in exchange for the Company's
assumption of specified percentages of the unpaid debt obligation on those
boats. As of June 30, 2003, the maximum payable by the Company under these
agreements was $2,579,000.
The Company warrants the entire boat, excluding the engine, against defects in
materials and workmanship for a period of one year. The Company also warrants
the entire deck and hull, including its bulk head and supporting stringer
system, against defects in materials and workmanship for periods ranging from
five to ten years. See Note 6 to the Consolidated Financial Statements for a
detail of activity in the warranty accrual account during the six months ended
June 30, 2003.
SEASONALITY
- -----------
Marine Products' quarterly operating results are affected by weather and the
general economic conditions in the United States. Quarterly operating results
for the second quarter historically have reflected the highest quarterly sales
volume during the year with the first quarter being the next highest sales
quarter. However, the results for any quarter are not necessarily indicative of
results to be expected in any future period.
INFLATION
- ---------
Inflation has not had a material effect on Marine Products' operations. If
inflation increases, Marine Products will attempt to increase its prices to
offset its increased costs. No assurance can be given, however, that the Company
will be able to adequately increase its prices in response to inflation.
Inflation can also impact Marine Products' sales and profitability. New boat
buyers typically finance their purchases. Because higher inflation results in
higher interest rates, the cost of boat ownership increases. Prospective buyers
may choose to delay their purchases or buy a less expensive boat.
13
FORWARD-LOOKING STATEMENTS
- --------------------------
Certain statements made in this report that are not historical facts are
"forward-looking statements" under Section 21E of the Securities Exchange Act of
1934 and the Private Securities Litigation Reform Act of 1995. Such
forward-looking statements may include, without limitation, statements that
relate to the Company's business strategy, plans and objectives, market risk
exposure, adequacy of capital resources and funds, opportunity for continued
growth, ability to effect future price increases, estimates regarding boat
repurchase obligations, and the impact of FIN 46 and the Company's beliefs and
expectations regarding future demand for the Company's products and services and
other events and conditions that may influence the Company's performance in the
future.
The words "may," "should," "will," "expect," "believe," "anticipate," "intend,"
"plan," "believe," "seek," "project," "estimate," and similar expressions used
in this document that do not relate to historical facts are intended to identify
forward-looking statements. Such statements are based on certain assumptions and
analyses made by our management in light of its experience and its perception of
historical trends, current conditions, expected future developments and other
factors it believes to be appropriate. We caution you that such statements are
only predictions and not guarantees of future performance and that actual
results, developments and business decisions may differ from those envisioned by
the forward-looking statements. Risk factors that could cause such future events
not to occur as expected include those described in the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 2002 and the following:
Marine Products' dependence on its network of independent boat dealers, which
may affect its growth plans and net sales, weather conditions, personal injury
or property damage claims, inability to obtain adequate raw materials, inability
to increase the production of the Robalo product line, realization of repurchase
obligations under agreements with third-party dealer floor plan lenders, the
effects of the economy on the demand for power boats, competitive nature of the
recreational boat industry, inability to complete acquisitions, loss of key
personnel, or ability to attract and retain qualified personnel.
14
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Marine Products does not utilize financial instruments for trading purposes and,
as of June 30, 2003, did not hold derivative financial instruments which could
expose the Company to significant market risk. Also, as of June 30, 2003, the
Company's investment portfolio, comprised of United States Government, corporate
and municipal debt securities, is subject to interest rate risk exposure. This
risk is managed through conservative policies to invest in high-quality
obligations. Marine Products has performed an interest rate sensitivity analysis
using a duration model over the near term with a 10 percent change in interest
rates. Marine Products' portfolio is not subject to material interest rate risk
exposure based on this analysis. Marine Products does not expect any material
changes in market risk exposures or how those risks are managed.
ITEM 4. CONTROLS AND PROCEDURES
Under the supervision and 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 disclosure
controls and procedures, as defined in rules 13a-15(e) and 15d-15(e) under the
Securities Exchange Act of 1934, as of June 30, 2003. Based on this evaluation,
our principal executive officer and principal financial officer concluded that
our disclosure controls and procedures were effective such that the material
information required to be included in our Securities and Exchange Commission
("SEC") reports is recorded, processed, summarized and reported within the time
periods specified in SEC rules and forms relating to Marine Products
Corporation, including our consolidated subsidiaries, and was made known to them
by others within those entities, particularly during the period when this report
was being prepared.
In addition, there were no significant changes in our internal control over
financial reporting that could significantly affect these controls during the
quarter. We have not identified any significant deficiency or material
weaknesses in our internal controls, and therefore there were no corrective
actions taken.
15
PART II. OTHER INFORMATION
ITEM 1. 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 outcomes of
such litigation will have a material adverse effect on the financial position or
results of operations of Marine Products.
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company's Annual Meeting of Stockholders was held on April 22, 2003. At the
meeting, stockholders elected two Class II directors to the Board of Directors
for the terms expiring in 2006. Results of the voting were as follows:
Names of Nominees For Withheld
----------------------------------------------------------------------------------
Richard A. Hubbell 16,379,579 18,052
Linda H. Graham 16,379,410 18,221
ITEM 5. OTHER INFORMATION
None
16
PART II. OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit Number Description
------------- -----------
3.1 Marine Products Corporation Articles of Incorporation
(incorporated herein by reference to Exhibit 3.1 to the
Registrant's Registration Statement on Form 10 filed on
February 13, 2001).
3.2 By-laws of Marine Products Corporation (incorporated herein
by reference to Exhibit 3.2 to the Registrant's Registration
Statement on Form 10 filed on February 13, 2001).
4 Form of Stock Certificate (incorporated herein by reference to
Exhibit 4.1 to the Registrant's Registration Statement on Form 10
filed on February 13, 2001).
99.1 Certification of Chief Executive Officer Pursuant to Item
601(b)(31) of Regulation S-K.
99.2 Certification of Chief Financial Officer Pursuant to Item
601(b)(31) of Regulation S-K.
99.3 Certification of Chief Executive Officer Pursuant to item 601(b)
(32) of Regulation S-K.
99.4 Certification of Chief Financial Officer Pursuant to item 601(b)
(32) of Regulation S-K.
(b) Reports on Form 8-K during the quarter ended June 30, 2003
- ------------------------ -------------------------- -----------------------------------------------------------
Date Filed Date of earliest event Description of event
reported
- ------------------------ -------------------------- -----------------------------------------------------------
April 15, 2003 April 10, 2003 Registrant issued a press release entitled "Marine
Products Corporation Reports Stock Buyback"
- ------------------------ -------------------------- -----------------------------------------------------------
April 23, 2003 April 23, 2003 Registrant issued a press release entitled "Marine
Products Corporation Reports 2003 First Quarter Earnings"
- ------------------------ -------------------------- -----------------------------------------------------------
April 23, 2003 April 23, 2003 Registrant issued a press release entitled "Marine
Products Corporation Announces First Quarter Cash
Dividend"
- ------------------------ -------------------------- -----------------------------------------------------------
17
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MARINE PRODUCTS CORPORATION
/s/ Richard A. Hubbell
-------------------------------
Date: July 25, 2003 Richard A. Hubbell
President and Chief Executive Officer
(Principal Executive Officer)
/s/ Ben M. Palmer
-------------------------------
Date: July 25, 2003 Ben M. Palmer
Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
18