Marine Products(MPX) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS (UNAUDITED) This section presents Marine Products Corporation's unaudited consolidated financial statements and related notes Consolidated Balance Sheets – As of June 30, 2025, and December 31, 2024 This statement provides a snapshot of the company's assets, liabilities, and equity at specific points in time, highlighting changes in financial position Consolidated Balance Sheet Highlights (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :---------------- | | Cash and cash equivalents | $50,171 | $52,379 | | Total current assets | $131,136 | $109,994 | | Total assets | $173,245 | $171,247 | | Total current liabilities | $44,286 | $18,924 | | Total liabilities | $46,014 | $42,244 | | Total stockholders' equity | $127,231 | $129,003 | | Common stock outstanding (shares) | 34,996,050 | 34,707,304 | Consolidated Statements of Operations – for the three and six months ended June 30, 2025 and 2024 This statement details the company's revenues, expenses, and net income over specific periods, reflecting operational performance Consolidated Statements of Operations Highlights (in thousands, except per share data) | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :-------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Net sales | $67,698 | $69,547 | $126,700 | $138,887 | | Gross profit | $12,909 | $13,174 | $23,862 | $27,158 | | Operating income | $4,811 | $5,750 | $7,424 | $10,992 | | Net income | $4,162 | $5,585 | $6,368 | $10,182 | | Basic EPS | $0.12 | $0.14 | $0.18 | $0.28 | | Diluted EPS | $0.12 | $0.14 | $0.18 | $0.28 | - Net sales decreased by 2.7% for the three months ended June 30, 2025, and by 8.8% for the six months ended June 30, 2025, compared to the prior year periods[9] - Net income saw a significant decline, decreasing by 25.4% for the three-month period and 37.5% for the six-month period year-over-year[9] Consolidated Statements of Stockholders' Equity – for the three and six months ended June 30, 2025 and 2024 This statement outlines changes in the equity section of the balance sheet, including common stock, retained earnings, and other comprehensive income Consolidated Statements of Stockholders' Equity Highlights (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :---------------- | | Common Stock | $3,499 | $3,471 | | Retained Earnings | $123,732 | $125,532 | | Total Stockholders' Equity | $127,231 | $129,003 | Changes for Six Months Ended June 30, 2025: * Stock issued for stock incentive plans, net: $1,141 thousand * Stock purchased and retired: $(1,055) thousand * Net income: $6,368 thousand * Cash dividends paid: $(9,795) thousand - Total stockholders' equity decreased from $129,003 thousand at December 31, 2024, to $127,231 thousand at June 30, 2025[11] Consolidated Statements of Cash Flows – for the six months ended June 30, 2025 and 2024 This statement reports the cash generated and used by the company through its operating, investing, and financing activities Consolidated Statements of Cash Flows Highlights (in thousands) | Activity | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :-------------------------------- | :--------------------------- | :--------------------------- | | Net cash provided by operating activities | $9,165 | $19,737 | | Net cash used for investing activities | $(523) | $(1,661) | | Net cash used for financing activities | $(10,850) | $(34,897) | | Net decrease in cash and cash equivalents | $(2,208) | $(16,821) | | Cash and cash equivalents at end of period | $50,171 | $55,131 | - Net cash provided by operating activities decreased by $10.6 million (53.6%) year-over-year, primarily due to lower net income and unfavorable working capital changes[14][100][107] - Net cash used for financing activities significantly decreased due to a special dividend paid in the second quarter of 2024[14][109] Notes to Consolidated Financial Statements These notes provide detailed explanations of the accounting policies, significant judgments, and additional information supporting the financial statements - The unaudited interim financial statements are prepared in accordance with GAAP for interim information and Form 10-Q instructions, and operating results for the six months ended June 30, 2025, are not indicative of full-year results[16] - A group including directors Amy R. Kreisler and Timothy C. Rollins controls over 50% of the Company's voting power[19] - The Company is assessing the potential impact of ASU 2024-03 (Disaggregation of Income Statement Expenses), effective for 2027 annual reports[20] - Revenue is primarily generated from selling fiberglass motorized boats and accessories and parts to independent dealers, recognized upon transfer of title[21][22] Net Sales Disaggregation (in thousands) | Category | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :-------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Boats and accessories | $66,216 | $68,166 | $123,890 | $136,629 | | Parts | $1,482 | $1,381 | $2,810 | $2,258 | | Total Net Sales | $67,698 | $69,547 | $126,700 | $138,887 | | Domestic Sales | $65,812 | $65,281 | $120,079 | $129,683 | | International Sales | $1,886 | $4,266 | $6,621 | $9,204 | - The effective tax rate for the six months ended June 30, 2025, increased to 23.7% from 20.0% in the prior year, primarily due to detrimental discrete adjustments[40] - The Company is evaluating the financial impact of the recently passed 'One Big Beautiful Bill Act' (OBBBA) on corporate taxation[41][112] Inventory Composition (in thousands) | Category | June 30, 2025 | December 31, 2024 | | :----------------------- | :------------ | :---------------- | | Raw materials and supplies | $31,353 | $29,686 | | Work in process | $12,094 | $9,950 | | Finished goods | $7,738 | $10,324 | | Total Inventories | $51,185 | $49,960 | - The Supplemental Executive Retirement Plan (SERP) was terminated in Q4 2024, with participant balances expected to be distributed within the next 12 months, reclassifying related assets and liabilities to current[47][115] - The Company has a $20.0 million revolving credit facility with Truist Bank, maturing November 12, 2026, with no outstanding borrowings as of June 30, 2025, and is in compliance with all covenants[53][57][58] - The aggregate maximum repurchase obligation under floor plan financing agreements with third-party lenders was $39.8 million as of June 30, 2025[63][121] - A regular cash dividend of $0.14 per share was declared on July 22, 2025, payable September 10, 2025[68][116] ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Management discusses financial condition, operations, key performance indicators, market trends, strategic responses, and outlook OVERVIEW This section provides a high-level summary of the company's business, recent financial performance, and strategic focus - Marine Products Corporation manufactures recreational fiberglass powerboats (Chaparral and Robalo) sold through independent dealers in the US and internationally[71] - Consolidated net sales decreased 2.7% in Q2 2025 year-over-year, driven by a 13% decrease in unit sales volume, partially offset by a 10% price/mix increase[74][82] - Net income for Q2 2025 decreased to $4.2 million ($0.12 diluted EPS) from $5.6 million ($0.14 diluted EPS) in Q2 2024[74][89] - The company is focusing on cost reduction and aligning production with lower demand levels amidst elevated interest rates and a more balanced market[74] OUTLOOK This section discusses the company's expectations for future performance, considering economic trends, market conditions, and strategic initiatives - Higher selling prices and rising interest rates have increased boat ownership costs, curbing consumer demand after several years of strong post-pandemic sales[75] - Production levels have been adjusted to align with expected demand, but dealers remain cautious about inventory levels[75] - Future financial results depend on economic trends, demand for discretionary products, interest rates, incentive programs, new model launches, and manufacturing cost management[76] - Further interest rate relief may be necessary to stimulate increased consumer demand for new boat purchases[76] HOW WE EVALUATE OUR OPERATIONS This section describes the key financial and non-GAAP metrics used by management to assess the company's operational performance and financial health - The Company evaluates operating performance using Earnings per share and non-GAAP financial measures: Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA), EBITDA margin, and free cash flow[78] - EBITDA and EBITDA margin are used for consistent performance comparison across periods, while free cash flow assesses the ability to generate additional cash from operations[78] - Non-GAAP measures should be considered in addition to, not as substitutes for, GAAP financial performance and liquidity measures[79] RESULTS OF OPERATIONS This section provides a detailed analysis of the company's financial performance, comparing current period results to prior periods Key Operating and Financial Statistics (in thousands, except per share and number of boats sold) | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :-------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Net sales | $67,698 | $69,547 | $126,700 | $138,887 | | Net income | $4,162 | $5,585 | $6,368 | $10,182 | | Net income margin | 6.1% | 8.0% | 5.0% | 7.3% | | Earnings per share | $0.12 | $0.14 | $0.18 | $0.28 | | Total number of boats sold | 641 | 737 | 1,266 | 1,507 | | Average gross selling price per boat | $94.1 | $85.7 | $89.7 | $83.0 | | EBITDA | $5,598 | $6,452 | $9,000 | $12,376 | | EBITDA margin | 8.3% | 9.3% | 7.1% | 8.9% | | Free cash flow | $(2,031) | $3,044 | $8,642 | $18,076 | THREE MONTHS ENDED JUNE 30, 2025 COMPARED TO THREE MONTHS ENDED JUNE 30, 2024 This subsection analyzes the financial performance for the second quarter of 2025 compared to the same period in the prior year - Net sales decreased by $1.8 million (2.7%) due to a 13% decrease in unit sales volume, partially offset by a 10% price/mix increase[82] - Cost of goods sold decreased by $1.6 million (2.8%), with COGS as a percentage of net sales improving slightly to 80.9% from 81.1% due to manufacturing cost efficiencies[85] - Selling, general and administrative expenses increased by $674 thousand (9.1%) to $8.1 million, primarily due to higher R&D investments and incentive compensation accruals[86] - Net income decreased to $4.2 million ($0.12 diluted EPS) from $5.6 million ($0.14 diluted EPS), with net income margin declining to 6.1% from 8.0%[89] - Net cash (used for) provided by operating activities decreased by $5.4 million to $(1.6) million, driven by lower net income and unfavorable working capital changes[91] SIX MONTHS ENDED JUNE 30, 2025 COMPARED TO SIX MONTHS ENDED JUNE 30, 2024 This subsection analyzes the financial performance for the first six months of 2025 compared to the same period in the prior year - Net sales decreased by $12.2 million (8.8%) due to a 16% decrease in unit sales volume, partially offset by a 7% price/mix increase[92] - Cost of goods sold decreased by $8.9 million (8.0%), with COGS as a percentage of net sales increasing to 81.2% from 80.4%[93] - Selling, general and administrative expenses increased by $272 thousand (1.7%) to $16.4 million, primarily due to higher R&D investments and incentive compensation accruals[95] - Net income decreased to $6.4 million ($0.18 diluted EPS) from $10.2 million ($0.28 diluted EPS), with net income margin declining to 5.0% from 7.3%[98] - Net cash provided by operating activities decreased by $10.6 million to $9.2 million, driven by lower net income and unfavorable working capital changes[100] Non-GAAP Financial Measures This section presents financial measures not prepared in accordance with GAAP, along with reconciliations to their most directly comparable GAAP measures - The Company provides reconciliations for non-GAAP measures (EBITDA, EBITDA margin, free cash flow) to their most directly comparable GAAP measures[101][104] Reconciliation of Net Income to EBITDA (in thousands) | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :-------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Net income | $4,162 | $5,585 | $6,368 | $10,182 | | Add: Income tax provision | $1,125 | $1,044 | $1,974 | $2,540 | | Add: Depreciation and amortization | $787 | $702 | $1,576 | $1,384 | | Less: Interest income, net | $476 | $879 | $918 | $1,730 | | EBITDA | $5,598 | $6,452 | $9,000 | $12,376 | | EBITDA margin | 8.3% | 9.3% | 7.1% | 8.9% | Reconciliation of Operating Cash Flow to Free Cash Flow (in thousands) | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :---------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Net cash (used for) provided by operating activities | $(1,604) | $3,822 | $9,165 | $19,737 | | Capital expenditures | $(427) | $(778) | $(523) | $(1,661) | | Free cash flow | $(2,031) | $3,044 | $8,642 | $18,076 | LIQUIDITY AND CAPITAL RESOURCES This section discusses the company's ability to generate and manage cash, its financial flexibility, and sources of funding - The Company believes its existing cash, strong capitalization, operating cash flow, and revolving credit facility will provide sufficient capital for at least the next twelve months[110] Cash Flows This subsection analyzes the company's cash inflows and outflows from operating, investing, and financing activities - Cash and cash equivalents decreased from $52.4 million at December 31, 2024, to $50.2 million at June 30, 2025[107] - Net cash provided by operating activities for the six months ended June 30, 2025, decreased by $10.6 million compared to the prior year, primarily due to lower net income and unfavorable working capital changes[107] - Net cash used for investing activities decreased by $1.1 million due to lower capital expenditures[109] - Net cash used for financing activities significantly decreased due to a special dividend paid in Q2 2024[109] Financial Condition and Liquidity This subsection assesses the company's overall financial health, including its assets, liabilities, and ability to meet short-term obligations - The Company filed a Form S-3 shelf registration statement on April 23, 2025, effective May 5, 2025, allowing for up to $150 million in securities offerings[111] - The Company is evaluating the financial impact of the 'One Big Beautiful Bill Act' (OBBBA) on corporate taxation[112] Cash Requirements This subsection details the company's anticipated future cash needs for capital expenditures, dividends, and other operational activities - Expected capital expenditures for 2025 are approximately $2.0 to $3.0 million, with $523 thousand spent through June 30, 2025[113] - 1,570,428 shares remain available for repurchase under the Company's stock repurchase program; no shares were repurchased in Q2 2025 or Q2 2024[114] - The Company plans to distribute Supplemental Executive Retirement Plan (SERP) participant balances within the next 12 months[115] - A regular quarterly cash dividend of $0.14 per share was declared on July 22, 2025[116] OFF BALANCE SHEET ARRANGEMENTS This section describes contractual arrangements that have a material effect on the company's financial position but are not recognized on the balance sheet - The Company guarantees varying amounts of dealer debt for floor plan financing with third-party lenders, with obligations becoming effective upon dealer default[117] - The aggregate maximum repurchase obligation with all floor plan financing institutions was $39.8 million as of June 30, 2025[121] - No material financial impact was associated with repurchases under these contractual agreements during the six months ended June 30, 2025, and 2024[119] CERTAIN RELATED PARTY TRANSACTIONS This section discloses transactions between the company and its affiliates, management, or other related parties - RPC, Inc. charged the Company $552 thousand for administrative costs for the six months ended June 30, 2025 (vs $590 thousand in 2024)[123] - Net operating costs for the jointly owned corporate aircraft (255 RC, LLC) were $76 thousand for the six months ended June 30, 2025 (vs $82 thousand in 2024)[124] - A group including directors Amy R. Kreisler and Timothy C. Rollins controls over 50% of the Company's voting power[125] - A Form S-3 shelf registration was filed for the resale of up to 24,419,029 shares of common stock held by LOR, Inc. and its affiliates[126] CRITICAL ACCOUNTING POLICIES This section highlights accounting policies that require significant judgment and estimation, which could materially impact financial results - There have been no significant changes to the critical accounting policies since the Company's annual report on Form 10-K for the year ended December 31, 2024[130] IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS This section discusses the potential effects of newly issued accounting standards on the company's financial statements - Refer to Note 2 of the Consolidated Financial Statements for details on recent accounting pronouncements, including expected adoption dates and effects[131] SEASONALITY This section explains how seasonal factors, such as weather and consumer behavior, influence the company's quarterly operating results - Quarterly operating results are affected by weather and general economic conditions, with the second quarter historically recording the highest sales volume and the fourth quarter the lowest[132] - Results for any single quarter are not necessarily indicative of results to be expected in future periods[132] INFLATION This section addresses the impact of inflation on the company's costs, pricing strategies, and consumer demand - Increases in interest rates, linked to higher inflation, have reduced retail demand for smaller boats and increased carrying costs for dealers[133] - Market prices of raw materials and components remain elevated due to post-pandemic supply chain disruptions and general inflation, leading to historically high product prices[134] - The rising cost of boat ownership may make it difficult to raise prices further, potentially impacting sales and profit margins[134] FORWARD-LOOKING STATEMENTS This section provides cautionary language regarding statements about future events, which are subject to risks and uncertainties - This section contains forward-looking statements based on management's assumptions, which are predictions and not guarantees of future performance[135][139] - Actual results, developments, and business decisions may differ from forward-looking statements due to various risk factors[139] - Key risk factors include economic conditions, credit availability, consumer confidence, business interruptions, increased interest rates, supply chain disruptions, competition, and regulatory changes[139][142] ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company is exposed to interest rate risk through its revolving credit facility but had no outstanding interest-bearing advances as of June 30, 2025. It does not use derivative financial instruments and anticipates no material changes in market risk exposures or management - The Company is subject to interest rate risk from its credit facility but had no outstanding interest-bearing advances as of June 30, 2025[143] - Marine Products does not hold derivative financial instruments and does not expect any material changes in market risk exposures or how those risks are managed[144] ITEM 4. CONTROLS AND PROCEDURES Management, including the CEO and CFO, evaluated the effectiveness of the Company's disclosure controls and procedures as of June 30, 2025, concluding they were effective at a reasonable assurance level. No material changes in internal control over financial reporting occurred during the second quarter of 2025 - The Company's disclosure controls and procedures were evaluated and deemed effective at a reasonable assurance level as of June 30, 2025[146] - No material changes in internal control over financial reporting were identified during the second quarter of 2025[147] PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS Marine Products is involved in routine litigation but does not anticipate that the outcome of these proceedings will have a material adverse effect on its financial position, results of operations, or liquidity - The Company is involved in litigation in the ordinary course of business[149] - Management believes the outcome of such litigation will not have a material adverse effect on the Company's financial position, results of operations, or liquidity[149] Item 1A. RISK FACTORS There have been no material changes to the risk factors previously disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2024 - No material changes from the risk factors previously disclosed in the Company's 2024 Annual Report on Form 10-K[150] ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS There were no unregistered sales of equity securities or use of proceeds to report during the period - None[151] ITEM 3. DEFAULTS UPON SENIOR SECURITIES There were no defaults upon senior securities to report during the period - None[152] ITEM 4. MINE SAFETY DISCLOSURES This item is not applicable to Marine Products Corporation - Not Applicable[153] ITEM 5. OTHER INFORMATION This section reports that no directors or officers adopted or terminated Rule 10b5-1 trading arrangements during Q2 2025. Additionally, the Board of Directors approved amended and restated bylaws on July 22, 2025, which include various procedural and disclosure enhancements - No director or officer adopted or terminated a Rule 10b5-1 trading arrangement during the three months ended June 30, 2025[154] - The Board of Directors approved and adopted amended and restated bylaws on July 22, 2025, which became effective the same day[155] - Amendments to the bylaws include deleting provisions for closing stock transfer books, removing fee shifting provisions, enhancing stockholder nomination/proposal procedures, and providing flexibility for stock certificate signatures and record dates[155][156] ITEM 6. Exhibits This item lists all exhibits filed with the Form 10-Q, including corporate governance documents, certifications, and XBRL data files - Exhibit 3.2 is the Amended and Restated By-laws of Marine Products Corporation dated July 22, 2025[158] - Includes Section 302 certifications for the Chief Executive Officer and Chief Financial Officer, and Section 906 certifications for both[158] - Includes Inline XBRL Instance Document and related taxonomy extension documents[158] Signatures The report is duly signed on behalf of Marine Products Corporation by its President and Chief Executive Officer, Ben M. Palmer, and its Vice President, Chief Financial Officer and Corporate Secretary, Michael L. Schmit, on July 24, 2025 - The report was signed by Ben M. Palmer, President and Chief Executive Officer, and Michael L. Schmit, Vice President, Chief Financial Officer and Corporate Secretary[162] - The signing date for the report was July 24, 2025[162]