Marine Products Corporation, the parent of the Chaparral and Robalo boat brands, reported that fourth-quarter net sales came in at $70.9 million, down 35 percent from the prior year’s corresponding quarter.
The decrease in net sales was primarily due to a 34 percent decrease in boats sold during the quarter. A 4 percent increase in gross average selling price was offset by higher retail incentives for a new program announced during the quarter.
The incentive program is effective for boats sold during the fourth quarter and in prior periods remaining in dealer inventory. The company said it believes a normalization of high post-COVID demand and higher interest rates has also impacted net sales. Management also believes that while boat production and sales have stabilized, year-over-year comparisons will likely remain soft in the near term.
Gross margin was down 620 basis points year-over-year (YoY) to 19.0 percent of net sales in the quarter, which was said to reflect lower sales volumes and associated manufacturing cost inefficiencies, coupled with the impact of higher retail incentives. The retail incentive program resulted in a pronounced impact on gross margin in the fourth quarter, given the terms of the program. Production schedules and labor costs were reportedly adjusted to align with demand.
SG&A expenses were $7.7 million, down 38 percent YoY, and represented 10.9 percent of net sales, down 60 basis points from the prior-year corresponding quarter. The decrease in SG&A expenses was due to costs that vary with sales and profitability, such as incentive compensation, sales commissions and warranty expense.
Interest income of $794 thousand increased due to higher cash balances and interest rates.
Income tax provision was $1.2 million, or 18.0 percent of income before income taxes.
Net income was $5.4 million, or 16 cents per diluted share, in Q4, compared to $11.9 million, or 35 cents a share, in Q4 2022. Net income margin was 7.7 percent, down 320 basis points YoY.
EBITDA (earnings before interest, taxes, depreciation and amortization) was $6.5 million, down from $15.3 million in Q4 2022; EBITDA margin was 9.2 percent, down 490 basis points YoY.
“Our fourth quarter results reflect soft retail boat demand for the second consecutive quarter as the industry has normalized from elevated post-COVID demand,” stated Ben M. Palmer, president and CEO of Marine Products Corporation. “While the boating market has added new retail customers since 2020, the industry has recently been grappling with economic uncertainty, rising interest rates and generally higher levels of dealer inventory.
“Beginning in the third quarter of 2023, we adjusted our production schedules, variable cost structure, and retail incentive programs to align with reset volume expectations. We are comfortable with the level of our product in field inventories and excited about our new 2024 product launches, but we are prepared for near-term industry softness and overall channel de-stocking. In this environment, we will focus on product innovation, maximize our dealer relationships, and aggressively manage costs. We look forward to the winter boat shows in the next few weeks as an opportunity to showcase our newest products and gauge retail demand ahead of the 2024 retail selling season.”
For the Full Year:
- Net sales increased 1 percent YoY to $383.7 million;
- Net income was $41.7 million, up 3 percent YoY, and diluted EPS was $1.21;
- Net income margin was 10.9 percent of sales;
- EBITDA was $51.6 million, down 4 percent YoY, with an EBITDA margin of 13.5 percent of sales; and
- Net cash flow provided by operating activities was $56.8 million and free cash flow was $46.7 million.
“We generated strong cash flow in 2023, and our balance sheet now boasts over $70 million in cash. We will continue to pay an attractive dividend while evaluating potential acquisitions to increase our scale and options to return additional capital to our shareholders,” concluded Palmer.
The company remains debt-free and paid $19.3 million in dividends in 2023
Cash and cash equivalents were $72.0 million at the end of the year, with no outstanding borrowings under the company’s $20 million revolving credit facility.
Payment of dividends in 2023 totaled $19.3 million. The Board of Directors declared a regular quarterly cash dividend of 14 cents per share, payable on March 11, 2024, to common stockholders of record at the close of business on February 9, 2024.
Image courtesy Robalo/Marine Products Corp.