10-Q 1 a4441422.txt MARINE PRODUCTS 10-Q 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