SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-K
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000
-----------------------------------
Commission File No. 1-16263
MARINE PRODUCTS CORPORATION
DELAWARE 58-2572419
(STATE OF INCORPORATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)
2170 PIEDMONT ROAD, NE,
ATLANTA, GEORGIA 30324
(404) 321-2140
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
COMMON STOCK, $0.10 PAR VALUE AMERICAN STOCK EXCHANGE
(17,012,277 shares outstanding
as of February 28, 2001)
The aggregate market value of shares of common stock held by non-affiliates at
February 28, 2001 was $29,175,386
Securities registered pursuant to section 12(g) of the Act:
NONE
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
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
Documents Incorporated by Reference
Portions of the Registrant's Form 10 filed on February 13, 2001 are incorporated
by reference into Part III, Items 10 through 13 of this report.
PART I
References in this document to "we," "our", "us," "Marine Products," or "the
Company" mean Marine Products Corporation ("MPC") and its sole subsidiary,
Chaparral Boats, Inc. ("Chaparral").
FORWARD-LOOKING STATEMENTS
Certain statements made in this report that are not historical facts are
"forward-looking statements" under the Private Securities Litigation Reform Act
of 1995. Such forward-looking statements may include, without limitation,
statements that relate to our business strategy, plans and objectives, and our
beliefs and expectations regarding future demand for our products and services
and other events and conditions that may influence our 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. See "Risk Factors" below.
ITEM 1. BUSINESS
Marine Products is a Delaware corporation, incorporated on August 31, 2000, in
connection with a spin-off from RPC Inc. ("RPC").
In January 2000, RPC announced plans to spin-off Chaparral, the recreational
powerboat manufacturing business of RPC, to RPC's stockholders. RPC accomplished
the spin-off by contributing 100% of the issued and outstanding stock of
Chaparral to Marine Products, a newly formed wholly owned subsidiary of RPC, and
then distributing the common stock of Marine Products to RPC stockholders. As
part of the transaction, effective February 28, 2001 RPC's stockholders received
0.6 share of Marine Products common stock for every one share of RPC common
stock owned as of February 16, 2001, the record date for the spin-off.
Marine Products, through its wholly-owned subsidiary Chaparral, designs,
manufactures and sells recreational fiberglass powerboats in the sportboat,
deckboat and cruiser markets. Available industry statistics measure Chaparral as
the third largest sterndrive boatbuilder in the United States.
Chaparral sells its three lines of powerboats to an international network of
independent authorized dealers. These lines consist of sportboats, deckboats and
cruisers. A variety of new models are introduced each year; however; models are
generally in production for several years before being replaced, updated or
discontinued. Chaparral's dealer network now includes approximately 150 domestic
dealers and 30 international dealers.
Chaparral was founded in 1965 in Ft. Lauderdale, Florida. Chaparral's first boat
was a 15-foot tri-hull design with a retail price of less than $1,000. Over time
the company grew by offering exceptional quality and consumer value. In 1976
Chaparral moved to Nashville, Georgia where a manufacturing facility of a former
boat manufacturing company was available for purchase. This provided Chaparral
an opportunity to obtain additional manufacturing space and access to a trained
work force. With 35 years of boatbuilding experience, Chaparral continues to
improve the design and manufacturing of its product offerings to meet the
growing needs of discriminating recreational boaters.
Since RPC's purchase of Chaparral in 1986, Chaparral has been able to focus
primarily on improving operations and profitability without concerns about the
2
availability of capital. The management team has consistently improved
manufacturing efficiency, refined current products and evaluated future product
offerings, all of which have led to increasing revenue and profits. For the five
years ended December 31, 2000, Marine Products has generated 12 percent
compounded annual growth in net sales.
Marine Products' basic mission is to enhance its customers' boating experience
by providing them with high quality, innovative powerboats. Marine Products
intends to remain a leading manufacturer of recreational powerboats for sale to
a broad range of consumers worldwide. Marine Products was incorporated in 2000
and is intended to serve as a public holding company for Chaparral and other
operating companies that may be acquired in the future.
PRODUCTS
Marine Products offers a comprehensive range of motorized recreational boats.
Marine Products distinguishes itself by offering a wide range of products to the
family recreational market and cruiser market.
The following table provides a brief description of each of our brands and its
particular market focus:
APPROXIMATE
NUMBER OF OVERALL RETAIL
BRAND MODELS LENGTH PRICE RANGE DESCRIPTION
- --------------------------- ------------- -------------- ------------------ -----------------------------------------
Signature -- Cruisers 5 24'-35' $45,000 - Fiberglass, accommodation-focused
$201,000 cruisers. Marketed to experienced boat
owners through trade magazines and boat
show exhibitions.
SS -- Sportboats 15 18'-28' $16,000 - Fiberglass runabouts, cruisers and
$94,000 performance boats. Encompasses
affordable, entry-level to mid-range
sportboats. Marketed as high value
runabouts for family groups.
Sunesta -- Deckboats 5 21'-26' $30,000 - Fiberglass deck boats. Encompasses
$53,000 affordable, entry-level to mid-range
deck boats. Marketed as high value
family pleasure boats with the handling
of a runabout, the style of a sport boat
and the roominess of a cruiser.
MANUFACTURING
All of Chaparral's manufacturing facilities are located in Nashville, Georgia. A
total of five different plants are utilized to manufacture the interiors, design
new models and to create the fiberglass hulls and decks and to assemble the
various end products. Quality control is conducted throughout the manufacturing
process. When fully assembled and inspected, the boats are loaded onto either
company owned trailers or third party marine transport trailers for delivery to
the dealers.
The manufacturing process begins with design of the ultimate product. Plugs are
constructed in the research and development area from designs. Plugs are used to
create a mold from which prototype boats can be built. Adjustments are made to
the plug design until acceptable parameters are met. The final plug is used to
create the necessary number of production molds. Molds are used to produce the
fiberglass hulls and decks. Fiberglass components are made by applying the
outside finish or gelcoat to the mold. Then numerous layers of fiberglass and
resin are applied during the lamination process over the gelcoat. After curing,
the hulls and deck are removed from the molds and are trimmed and prepared for
final assembly, which includes the installation of electrical and plumbing
systems, engines, upholstery, accessories and graphics.
3
SUPPLIERS
Marine Products' two most significant components used in manufacturing boats,
based on cost, are engines and fiberglass. For each of these raw materials there
is an adequate supply available in the market. Marine Products has not
experienced any material shortages in any of these products. Temporary
shortages, when they do occur, usually involve manufacturers switching model
mixes or introducing new product lines. These temporary shortages have not
impacted sales. Marine Products obtains most of its fiberglass from a leading
domestic supplier. Marine Products believes that there are several alternative
suppliers if this supplier fails to provide adequate quantities.
Marine Products does not manufacture the engines installed in its boats. Engines
are generally specified by the dealers at the time of ordering, usually on the
basis of anticipated customer preferences or actual customer order. Marine
Products does not have any engine supply contracts. Engines are purchased
through the American Boatbuilders Association ("ABA"), which has entered into
engine supply arrangements with Mercury Marine and Volvo Penta, the two
currently existing suppliers of sterndrive engines. These arrangements contain
incentives and discount provisions, which may reduce the cost of the engines
purchased, if specified purchased volumes are met during specified periods of
time. Although no minimum purchases are required, Marine Products expects to
continue purchasing engines from the ABA on a voluntary basis in order to
receive purchase volume discounts. Marine Products does not have a supply
contract with the ABA. See "Growth Strategies" below.
In the event of a sudden interruption in the supply of engines from these
suppliers, our sales and profitability could be negatively impacted.
SALES AND DISTRIBUTION
Sales are made through approximately 150 dealers throughout the United States.
Marine Products also has approximately 30 international dealers. Most of these
dealers are not exclusive to Marine Products and carry the boats of other
companies, including some which may be competitive with Marine Products'
products. The territories served by any dealer are not exclusive to the dealer.
However, Marine Products uses discretion in locating new dealers in an effort to
protect the interests of the existing dealers. Eight independent field sales
representatives call upon existing dealers and develop new dealer relationships.
The field sales force is directed by Chaparral's National Sales Coordinator, who
is responsible for developing a full dealer organization for SS Sportboats,
Signature Cruisers and Deckboats. The marketing of boats to retail customers is
primarily the responsibility of the dealer, whose efforts are supplemented by
Marine Products through advertising in boating magazines and participation in
regional, national, and international boat shows.
Marine Products' sales orders are based on strong interest by its dealers.
Although cancelable at any time, substantially all boats are pre-sold to a
dealer before entering the production line. Historically, dealers have in most
cases taken delivery of all their orders. In the past, Marine Products has been
able to resell any boat for which the order has been cancelled. To date,
cancellations have not had any material effect on Marine Products.
Marine Products continues to seek new dealers in many areas throughout Europe,
South America, Asia and the Mideast. In general, Marine Products requires
payment in full or an irrevocable letter of credit from a domestic bank before
it will ship a boat overseas. Consequently, there is no credit risk associated
with its foreign sales nor risk related to foreign currency fluctuation. Marine
Products believes that within several years, foreign sales could produce
additional sales growth.
4
Most of Marine Products' domestic shipments are made pursuant to commercial
dealer "floor plan financing" programs in which Marine Products participates on
behalf of its dealers. Under these arrangements, a dealer establishes lines of
credit with one or more third-party lenders for the purchase of showroom
inventory. When a dealer purchases a boat pursuant to a floor plan arrangement,
it draws against its line of credit and the lender pays the invoice cost of the
boat directly to Marine Products. Generally, payment is made to Marine Products
within 5 business days. When the dealer in turn sells the boat to a retail
customer, the dealer repays the lender, thereby restoring its available credit
line. Each dealer's floor plan credit facilities are secured by the dealer's
inventory, letters of credit, and perhaps other personal and real property. In
connection with the dealer's floor plan arrangements, Marine Products has agreed
to repurchase any of its boats which a lender repossesses from a dealer and
returns to Marine Products. In the event that a dealer defaults under a credit
line, the lender may then invoke the manufacturers' repurchase agreements with
respect to that dealer. In that event, all repurchase agreements of all
manufacturers supplying a defaulting dealer are generally invoked regardless of
the boat or boats with respect to which the dealer has defaulted. Marine
Products participates in floor plan arrangements with several major third-party
lenders on behalf of its dealers, most of whom have financing arrangements with
more than one lender. As of December 31, 2000, Marine Products' obligation to
repurchase boats under the floor plan financing programs described above was
approximately $3,481,000. Unlike Marine Products' obligation to repurchase boats
repossessed by lenders, Marine Products is under no obligation to repurchase
boats directly from dealers.
Marine Products' dealer incentive programs are designed to promote early
replenishment of the stock in dealer inventories depleted throughout the prime
spring and summer selling seasons and level out Marine Products' manufacturing
between the peak and offpeak periods. For the 2001 model year (which commenced
July 1, 2000), dealers had an option whereby Marine Products made arrangements
to pay all interest charged to dealers by certain floor plan lenders until April
1, 2001. This and other incentives to the dealers have resulted in relatively
level month to month production and sales. After the free interest program ends,
interest costs revert to the dealer at the rates set by the lender. The dealers
will make curtailment payments (principal payments) on the boats as required by
their particular commercial lenders. Similar sales promotion programs were in
effect during the past five years.
As of December 31, 2000, the sales order backlog was 1,470 boats with an
estimated revenue value of $41,400,000. This represents a fourteen week backlog
based on recent production levels. Marine Products normally does not manufacture
boats for inventory.
PRODUCT WARRANTY
Marine Products provides a five year transferable hull and deck structural
warranty against defects in material and workmanship. A one year warranty on
components is provided as well. The engine manufacturer warrants engines
included in the boats. Warranty costs of $1,483,000 or 1 percent of sales were
recorded in fiscal 2000. Warranty costs were $1,475,000 and $1,449,000 in 1999
and 1998, respectively, or 1 percent of sales in both years. Marine Products'
warranty costs as a percentage of sales are considered low relative to the
marine industry, reflecting Marine Products' superior construction of its boats.
RESEARCH AND DEVELOPMENT
Essentially the same technologies and processes are used to produce fiberglass
boats by all boat manufacturers. The most common method is open-face molding.
This is usually a labor-intensive, manual process whereby employees hand spray
and apply fiberglass and resin in layers on open molds to create boat hulls,
decks, stringers and other smaller fiberglass components. This process can
result in inconsistencies in the size and weight of parts, which may lead to
higher warranty costs. Open-face molding is typically capable of producing
approximately 3 hulls per week.
Chaparral has been a leading innovator in the recreational boating industry. One
of the Chaparral's most innovative designs is the full-length Extended V-Plane
running surface. Typically, sterndrive boats have a several foot gap on the
bottom rear of the hull where the engine enters the water. With Chaparral's
design, the running surface extends the full length to the rear of the boat. The
benefit of this innovation is more space, better performance and a more
comfortable ride.
5
Marine Products had research and development expenditures of $1,428,000,
$1,500,000, and $1,018,000 for the fiscal years ended December 31, 2000, 1999,
and 1998, respectively.
INDUSTRY OVERVIEW
The National Marine Manufacturers Association ("NMMA") estimates that the total
U.S. recreational boating industry generated approximately $26 billion in sales
in 2000, including retail sales of new and used boats, motors and engines,
accessories, and related boating expenditures, such as fuel, insurance, docking,
storage, and repairs.
The recreational boat manufacturing market remains highly fragmented with little
consolidation having occurred to date. We estimate that the boat manufacturing
industry includes more than 400 manufacturers, most of whom are small privately
held companies with varying degrees of professional management and manufacturing
skills.
The NMMA conducts various surveys of boating industry trends. It is estimated
that 72 million people in the United States participate in recreational boating.
There are currently over 16 million boats owned in the U.S. of which 1.7 million
are equipped with sterndrive engines.
According to the NMMA, sales of boats with sterndrive engines totaled 77,800
units in 2000 with a total retail value of $2.2 billion, or an average retail
price per boat of approximately $29,000. During the first six months of 2000,
sales of sterndrive boats in the 18 to 23 foot size range represented 60 percent
of the units and 42 percent of the factory value sold. Ten of the twenty-five
boat models currently offered by Chaparral fall within this range of sizes.
Management believes that the five largest states for boat sales are Michigan,
California, Florida, Minnesota, and Texas. Chaparral has dealers in each of
these states.
Sales trends in the recreational boating industry are influenced by several
factors, including general economic growth, consumer confidence, household
incomes, tax laws, and demographics. Interest rates and fuel prices also have a
direct impact on boat sales, as well as trends at the local, regional and
national level. Competition from other leisure and recreational activities, such
as vacation properties and travel, can also affect sales of recreational boats.
Management believes Chaparral is well positioned to take advantage of the
following conditions, which continue to characterize the industry:
o labor-intensive manufacturing processes that remain largely
unautomated;
o increasingly strict environmental standards derived from governmental
regulations and customer sensitivities;
o a lack of focus on coordinated customer service and support by dealers
and manufacturers; and
o a high degree of fragmentation and competition among the hundreds of
recreational boat manufacturers.
GROWTH STRATEGIES
Marine Products' operating strategy emphasizes innovative designs and high
quality manufacturing processes, by delivering a superior quality product while
lowering manufacturing costs through increased efficiencies in our facilities.
We have been leveraging our buying power through economies of scale. Chaparral
is one of the largest independent boat manufacturers that does not manufacture
its own engines. Management believes this, together with its membership in the
6
ABA, positions Chaparral as a significant third party customer of major engine
suppliers. Chaparral is a founding member of the ABA which collectively
represents 13 independent boat manufacturers which have formed a buying group to
pool their purchasing power in order to gain improved pricing on engines,
fiberglass, resin, and many other components. Chaparral intends to continue
seeking the most advantageous purchasing arrangements from its suppliers.
Chaparral is also a significant consumer of fiberglass materials, and management
intends to capitalize on relationships with fiberglass suppliers to assist
Marine Products' growth.
Our marketing strategy seeks to increase market share by enabling Marine
Products to expand its international presence by continuing to build dedicated
sales, marketing and distribution systems. Marine Products has a distribution
network of approximately 180 dealers located throughout the U.S. and
internationally. Our strategy is to increase the number and quality of our
dealers. Marine Products seeks to capitalize on this strong dealer network by
educating its dealers on the sales and servicing of our products and helping
them provide more comprehensive customer service, with the goal of increasing
customer satisfaction, customer retention and future sales. Marine Products
provides promotional and incentive programs to help its dealers increase product
sales. Marine Products intends to continue to strengthen its dealer network and
build brand loyalty with both dealers and customers.
As part of Marine Products' overall strategy, Marine Products will also consider
making strategic acquisitions in order to complement existing product Lines,
expand Marine Products' geographic presence in the marketplace and strengthen
capabilities.
COMPETITION
The recreational boat industry is highly fragmented, resulting in intense
competition for customers, quality products and boat show space. There is
significant competition both within markets we currently serve and in new
markets that we may enter. Chaparral competes with several large national or
regional manufacturers that have substantial financial, marketing and other
resources. However, we believe that our corporate infrastructure and marketing
and sales capabilities, our cost structure and our nationwide presence enable us
to compete effectively against these companies. In each of our markets, Marine
Products competes on the basis of responsiveness to customer needs and the
quality and range of products and services offered. Additionally, Marine
Products faces general competition from all other recreational businesses
seeking to attract consumers' leisure time and discretionary spending dollars.
According to Statistical Surveys, the following is a list of the top ten
(largest to smallest) sterndrive boat manufacturers in the United States based
on unit sales for the six months ended June 30, 2000. Several of theses
manufacturers are part of larger integrated boat building companies and are
marked with asterisks. Management believes the companies set forth below
represent approximately 65 percent of all U.S. retail sterndrive boat
registrations.
1. Bayliner*
2. Sea Ray*
3. Chaparral
4. Four Winns**
5. Crownline
6. Maxum*
7. Glastron***
8. Rinker
9. Stingray
10. Regal
- -----------
* a subsidiary of Brunswick Corporation
** a subsidiary of Outboard Marine Corporation
*** a subsidiary of Genmar Industries
7
ENVIRONMENTAL AND REGULATORY MATTERS
Certain materials used in boat manufacturing, including the resins used to make
the decks and hulls, are toxic, flammable, corrosive or reactive and are
classified by the federal and state governments as "hazardous materials."
Control of these substances is regulated by the Environmental Protection Agency
("EPA") and state pollution control agencies which require reports and inspect
facilities to monitor compliance with their regulations. The Occupational Safety
and Health Administration ("OSHA") standards limit the amount of emissions to
which an employee may be exposed without the need for respiratory protection or
upgraded plant ventilation. Marine Products' manufacturing facilities are
regularly inspected by OSHA and by state and local inspection agencies and
departments. Marine Products believes that its facilities comply with
substantially all regulations. Marine Products' cost of compliance with
environmental regulations has not been material.
In connection with the expansion of the Signature Cruisers manufacturing
facility, Marine Products is spending approximately $700,000 to install an air
purification system. This equipment is designed to comply with OSHA and EPA
regulatory limits. Although capital expenditures related to compliance with
environmental laws are expected to increase during the coming years, we do not
currently anticipate that any material expenditures will be required to continue
to comply with existing environmental or safety regulations in connection with
our ongoing operations.
Recreational powerboats sold in the U.S. must be certified by the manufacturer
to meet U.S. Coast Guard specifications. In addition, boats manufactured for
sale in the European Community must be certified to meet CE Certification
standards. These certifications specify standards for the design and
construction of powerboats. All boats sold by Marine Products meet these
standards. In addition, their safety is subject to federal regulation under the
Boat Safety Act of 1971. The Boat Safety Act requires boat manufacturers to
recall products for replacement of parts or components that have demonstrated
defects affecting safety. While Marine Products has instituted recalls for
defective component parts produced by other manufacturers, there has never been
a safety related recall resulting from Chaparral's design or manufacturing
process. None of the recalls has had a material adverse effect on Marine
Products.
EMPLOYEES
As of December 31, 2000, Marine Products has approximately 800 employees, of
which five are management and 27 are administrative. None of Marine Products'
employees is party to a collective bargaining agreement. All of Marine Products'
workforce are currently employed in the U.S., and Marine Products believes that
its relations with its employees are good.
PROPRIETARY MATTERS
Marine Products owns a number of trademarks and trade names that Marine Products
believes are important to its business. Except for the Chaparral trademark,
however, Marine Products is not dependent upon any single trademark or trade
name or group of trademarks or trade names. The Chaparral trademark is currently
registered in the U.S.. The current duration for such registration ranges from
seven to 15 years in the U.S., but each registration may be renewed an unlimited
number of times. Other trademarks and trade names used in Marine Products'
business are registered and maintained in the U.S.
RISK FACTORS
Marine Products' Dependence On Its Network Of Independent Boat Dealers May
Affect Its Growth Plans And Revenues
Virtually all of Marine Products' revenue is derived from its network of
independent boat dealers. Marine Products has no long-term agreements with these
dealers. Dealer competition continues to increase based on the quality of
available products, the price and value of the products, and attention to
customer service. We face intense competition from other recreational powerboat
8
manufacturers in attracting and retaining independent boat dealers. The number
of independent boat dealers supporting the Chaparral trade name and the quality
of their marketing and servicing efforts are essential to Marine Products'
ability to generate revenue. A deterioration in the number or quality of Marine
Products' network of independent boat dealers would have a material adverse
effect on its powerboat sales. Marine Products' inability to attract new dealers
and retain those dealers, or its inability to increase sales with existing
dealers could substantially impair its ability to execute its growth plans.
Although Marine Products' management believes that the quality of its products
and services in the recreational powerboat market should permit it to maintain
its relationship with its dealers and its market position, there can be no
assurance that Marine Products will be able to sustain its current revenue
levels. In addition, independent dealers in the recreational boating industry
have experienced significant consolidation in recent years, which could result
in the loss of one or more of Marine Products' dealers in the future if the
surviving entity in any such consolidation purchases similar products from a
Marine Products competitor. See "Growth Strategies" above.
Marine Products Sales Are Affected By Weather Conditions
Marine Products' business is subject to weather patterns which may adversely
affect its sales. For example, drought conditions, or merely reduced rainfall
levels, or excessive rain, may close area boating locations or render boating
dangerous or inconvenient, thereby curtailing customer demand for our products.
In addition, unseasonably cool weather and prolonged winter conditions may lead
to a shorter selling season in some locations.
Marine Products Has Potential Liability for Personal Injury and Property Damage
Claims
The products we sell or service may expose Marine Products to potential
liabilities for personal injury or property damage claims relating to the use of
those products. Historically, the resolution of product liability claims has not
materially affected Marine Products' business. Marine Products will maintain
product liability insurance that it believes to be adequate. However, there can
be no assurance that Marine Products will not experience legal claims in excess
of its insurance coverage or that claims will be covered by insurance.
Furthermore, any significant claims against Marine Products could result in
negative publicity, which could cause Marine Products' revenues to decline.
Because Marine Products Relies On Third Party Vendors, Marine Products May Be
Unable To Obtain Adequate Raw Materials
Marine Products is dependent on third party vendors to provide raw materials and
components essential to the construction of its various powerboats. Especially
critical are the availability and cost of marine engines and commodity raw
materials used in the manufacture of Marine Products' boats. While Marine
Products' management believes that vendor relationships currently in place are
sufficient to provide the materials necessary to meet present production
demands, there can be no assurance that these relationships will continue or
that the quantity or quality of materials available from these vendors will be
sufficient to meet Marine Products' future needs irrespective of whether Marine
Products successfully implements its growth and acquisition strategies.
Disruptions in current vendor relationships or the inability of Marine Products
to continue to purchase construction materials in sufficient quantities and of
sufficient quality to meet ongoing production schedules could cause a decrease
in sales or a sharp increase in the cost of goods sold. Additionally, because of
this dependence, the volatility in commodity raw materials or current or future
price increases in construction materials or the inability of Marine Products'
management to purchase construction materials required to complete its growth
and acquisition strategies could cause a reduction in Marine Products' profit
margins or reduce the number of powerboats Marine Products may be able to
produce for sale.
9
Marine Products May Be Unable To Identify Or Complete Acquisitions
Marine Products intends to pursue acquisitions and form strategic alliances that
will enable Marine Products to acquire complementary skills and capabilities,
offer new products, expand its customer base and obtain other competitive
advantages. There can be no assurance, however, that Marine Products will be
able successfully to identify suitable acquisition candidates or strategic
partners, obtain financing on satisfactory terms, complete acquisitions or
strategic alliances, integrate acquired operations into its existing operations
or expand into new markets. Once integrated, acquired operations may not achieve
anticipated levels of revenue, profitability or otherwise perform as expected.
Acquisitions also involve special risks, including risks associated with
unanticipated problems, liabilities and contingencies, diversion of management
resources and possible adverse effects on earnings and earnings per share
resulting from increased goodwill amortization, increased interest costs, the
issuance of additional securities and difficulties related to the integration of
the acquired business. The failure to integrate acquisitions successfully may
divert management's attention from Marine Products' existing business and may
damage Marine Products' relationships with its key customers and suppliers.
Marine Products Success Will Depend On Its Key Personnel, And The Loss Of Any
Key Personnel May Affect Its Powerboat Sales
Marine Products' success will depend to a significant extent on the continued
service of key management personnel. The loss or interruption of the services of
any senior management personnel or the inability to attract and retain other
qualified management, sales, marketing and technical employees could disrupt
Marine Products' operations and cause a decrease in its sales and profit
margins.
Marine Products' Ability To Attract And Retain Qualified Employees Is Crucial To
Its Results Of Operations And Future Growth
Marine Products relies on the existence of an available hourly workforce to
manufacture its products. As with many businesses, we are challenged to find
qualified employees. There are no assurances that Marine Products will be able
to attract and retain qualified employees to meet current and/or future growth
needs.
If Marine Products Is Unable To Comply With Environmental And Other Regulatory
Requirements Its Business May Be Exposed to Liability and Fines
Marine Products' operations are subject to extensive regulation, supervision,
and licensing under various federal, state, and local statutes, ordinances, and
regulations. While Marine Products believes that it maintains all requisite
licenses and permits and is in compliance with all applicable federal, state,
and local regulations, there can be no assurance that Marine Products will be
able to continue to maintain all requisite licenses and permits. The failure to
satisfy these and other regulatory requirements could cause Marine Products to
incur fines or penalties or could increase the cost of operations. The adoption
of additional laws, rules and regulations could also increase Marine Products'
costs.
As with boat construction in general, our manufacturing processes involve the
use, handling, storage, and contracting for recycling or disposal of hazardous
or toxic substances or wastes. Accordingly, we are subject to regulations
regarding these substances, and the misuse or mishandling of such substances
could expose Marine Products to liability or fines.
Additionally, certain states have required or are considering requiring a
license in order to operate a recreational boat. While such licensing
requirements are not expected to be unduly restrictive, regulations may
discourage potential first-time buyers, thereby reducing future sales.
Marine Products Management Has A Substantial Ownership Interest; Public
Stockholders May Have No Effective Voice In Marine Products Management
Marine Products' executive officers, directors and their affiliates hold
directly or through indirect beneficial ownership, in the aggregate,
approximately 62 percent of Marine Products' outstanding common stock. As a
result, these stockholders will effectively control the operations of Marine
10
Products, including the election of directors and approval of significant
corporate transactions such as acquisitions. This concentration of ownership
could also have the effect of delaying or preventing a third party from
acquiring control over Marine Products at a premium. In addition, the
availability of Marine Products common stock to the investing public is limited
to those shares not held by the executive officers, directors and their
affiliates, which could negatively impact Marine Products' stock trading prices
and affect the ability of minority stockholders to sell their shares. Future
sales by executive officers, directors and their affiliates of all or a portion
of their shares could also negatively affect the trading price of Marine
Products common stock.
Provisions In Marine Products' Certificate of Incorporation And Bylaws May
Inhibit A Takeover Of Marine Products
Marine Products' certificate of incorporation, bylaws and other documents
contain provisions that may make more difficult or expensive, or that may
otherwise discourage, a tender offer, change in control or takeover attempt that
is opposed by Marine Products' board of directors.
ITEM 2. PROPERTIES
Marine Products' principal executive office is located in Atlanta, Georgia. This
office is currently shared with RPC and is leased from a third party. The
monthly rent paid to the third party is allocated proportionately between Marine
Products and RPC. Under this arrangement, Marine Products pays approximately
$2,000 per month in rent. Marine Products may cancel this arrangement at any
time. Chaparral owns and maintains approximately 670,000 square feet of
manufacturing, research and development, warehouse, and sales office and
operations in Nashville, Georgia. Chaparral's operations are conducted among
twelve facilities located on its Nashville site. There are five main
manufacturing plants where Chaparral's boats are built. The largest of the
manufacturing plants, which was put into service in fiscal year 2000, sits on
approximately 10 acres and comprises 253,000 square feet. It is used to build
Marine Products' larger SS-Sportboat series boats, which are 22 to 28 feet in
length. Chaparral's total square footage under roof is allocated as follows:
manufacturing - 486,000, research and development - 65,000, warehousing -
75,000, office and other - 44,000.
ITEM 3. LEGAL PROCEEDINGS
Marine Products is involved in litigation from time to time in the ordinary
course of its business. Marine Products does not believe that the outcomes of
such litigation will have a material adverse effect on the financial position or
results of operations of Marine Products.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
11
ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT
Each of the executive officers of Marine Products was elected by the Board of
Directors to serve until the Board of Directors' meeting immediately following
the next annual meeting of stockholders or until his or her earlier removal by
the Board of Directors or his or her resignation. The following table lists the
executive officers of Marine Products and their ages, offices, and terms of
office.
Name and Office with Registrant Age Date First Elected
to Office
R. Randall Rollins
Chairman of the Board 69 2/28/01
Richard A. Hubbell
President
Chief Executive Officer 56 2/28/01
James A. Lane, Jr.
Executive Vice President 58 2/28/01
Linda H. Graham
Vice President
Secretary 64 2/28/01
Ben M. Palmer
Vice President
Chief Financial Officer,
Treasurer and Assistant Secretary 40 2/28/01
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
MPC common stock is listed on the American Stock Exchange under the ticker
symbol "MPX". At February 28, 2001 there were 17,012,277 shares of common stock
outstanding.
On August 31, 2000, in connection with the incorporation of Marine Products
Corporation ("Marine Products"), Marine Products issued 100 shares of its common
stock to RPC, Inc. in return for payment of $10.00. The exemption from
registration was pursuant to Section 4(2) of the Securities Act and the rules
and regulations promulgated under the Securities Act on the basis that the
transaction did not involve a public offering.
12
ITEM 6. SELECTED FINANCIAL DATA
The following table summarizes certain selected combined financial data of
Marine Products. The historical information may not be indicative of Marine
Products' future results of operations. This information set forth below should
be read in conjunction with "Management's Discussion And Analysis of Financial
Condition And Results of Operations," the Combined Financial Statements and the
notes thereto, included elsewhere in this document. Per share data has not been
presented since the companies that comprise Marine Products were wholly owned
subsidiaries of RPC and have been recapitalized as part of the spin-off.
YEARS ENDED DECEMBER 31,
-------------------------------------------------------------------------
(AUDITED) (UNAUDITED)
------------------------------------------------------- --------------
2000 1999 1998 1997 1996
---------- ----------- ----------- ---------- --------------
STATEMENT OF INCOME DATA:
Net Sales $ 148,276 $ 122,878 $ 103,497 $95,029 $ 86,225
Cost of Goods Sold 115,876 93,247 77,776 72,899 67,426
---------- ----------- ----------- ---------- --------------
Gross Profit 32,400 29,631 25,721 22,130 18,799
Selling , General and Administrative Expenses 16,945 15,147 13,578 11,716 10,765
---------- ----------- ----------- ---------- --------------
Operating Income 15,455 14,484 12,143 10,414 8,034
Interest Income 280 233 240 214 133
Gain on Settlement of Claim 6,817 -- -- -- --
---------- ----------- ----------- ---------- --------------
Income Before Income Taxes 22,552 14,717 12,383 10,628 8,167
Income Tax Provision 8,591 5,599 4,709 4,067 3,103
---------- ----------- ----------- ---------- --------------
NET INCOME $ 13,961 $ 9,118 $ 7,674 $ 6,561 $ 5,064
========== =========== =========== ========== ==============
OTHER FINANCIAL DATA:
Net Cash Provided by Operating Activities $ 15,464 $ 9,235 $ 8,382 $ 7,180 (a)
Net Cash Used for Investing Activities 4,198 1,665 2,192 667 (a)
Net Cash Used for Financing Activities 13,600 7,619 5,414 7,555 (a)
BALANCE SHEET DATA:
Total Assets $ 103,449 $ 88,168 $77,585 $68,452 $ 61,719
Total Stockholder's Equity 92,593 78,632 69,514 61,840 55,279
- ---------------------
(a) Not readily available.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion is based upon and should be read in conjunction with
"Selected Financial Data," "Combined Financial Statements", and the notes
thereto. See also "Forward-Looking Statements" above.
Marine Products, through its wholly-owned subsidiary Chaparral, is a leading
manufacturer of recreational fiberglass powerboats in the stern-drive,
sportboat, deckboat and cruiser markets. Marine Products' mission is to maximize
the boating experience by providing its customers with high quality, innovative
powerboats and related products and services.
RESULTS OF OPERATIONS
Year Ended December 31, 2000 Compared To Year Ended December 31, 1999
Net Sales. Marine Products generated net sales of $148,276,000 in 2000 compared
to $122,878,000 in 1999, a $25,398,000 or 21 percent increase. Despite recent
industry sales weakness, Chaparral has continued to generate sales increases by
gaining market share. The net sales increase in 2000 compared to 1999 resulted
13
primarily from a 19 percent increase in the volume of boats sold coupled with a
2 percent increase in the average sales price. Recent weakness in consumer
confidence caused by higher consumer borrowing costs and stock market volatility
is putting pressure on industry and Marine Products' sales.
Cost of Goods Sold. Cost of goods sold was $115,876,000 in 2000 compared to
$93,247,000 in 1999. The increase in cost of goods sold, as a percent of net
sales, from 76 percent in 1999 to 78 percent in 2000 is due primarily to lower
manufacturing efficiency caused by manufacturing space constraints. During the
third quarter of 2000, additional manufacturing space was opened to provide
needed capacity to efficiently build a larger number of boats.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses were $16,945,000 in 2000 compared to $15,147,000 in
1999, an increase of $1,798,000 or 12 percent. Selling, general and
administrative expenses were 11 percent and 12 percent of net sales in 2000 and
1999 respectively. Compensation costs increased $2,541,000 or 35 percent from
$7,288,000 in 1999 to $9,829,000 in 2000. The increase in compensation costs
resulted from an increase in commissions expense consistent with the increase in
net sales and an increase in officers' bonuses due to the increase in operating
income. The remaining increase relates to higher warranty expense consistent
with higher net sales.
Operating Income. Operating income was $15,455,000 in 2000, an increase of
$971,000 or 7 percent compared to $14,484,000 in 1999. The increase in operating
profit results from the improvement in net sales and gross margin offset
slightly by the increase in selling, general and administrative expenses.
Gain on Settlement of Claim. In the first quarter of 2000, Marine Products
recorded a pre-tax gain of $6,817,000 relating to settlement of a claim. The
gain is a result of Marine Products' receipt of its share of a non-refundable
$35 million settlement payment made by Brunswick Corporation, a major engine
supplier, to the members of the ABA.
Interest Income. Interest income was $280,000 in 2000 compared to $233,000 in
1999. Marine Products generates interest income from investment of its available
cash primarily in overnight securities. The amount of cash available for
investment has varied depending upon the cash requirements of Marine Products
and RPC.
Net Income. Net income was $13,961,000 in 2000 compared to $9,118,000 in 1999.
The improvement in net income was due to the increase in operating profit and
the impact of the after-tax gain on settlement of claim totaling $4,227,000
recognized in the first quarter of 2000. The income tax rate of 38 percent was
the same in both periods.
Year Ended December 31, 1999 Compared to Year Ended December 31, 1998
Net Sales. Marine Products generated net sales of $122,878,000 in 1999 compared
to $103,497,000 in 1998, a $19,381,000 or 19 percent increase. The total number
of boats sold by Marine Products in 1999 increased 8 percent compared to 1998
while the average sales price also increased 8 percent. The average sales price
increase resulted from selling a larger number of higher priced Cruisers and
Sunestas in 1999 compared to 1998. Lastly, there were price increases in July
1999 and December 1999 that averaged approximately 2 percent each, as a result
of higher materials costs, product upgrades and other product changes. In
addition, net sales in 1999 increased compared to 1998 as a result of increased
sales of parts and accessories and the favorable response to the dealer
incentive programs designed to encourage sales during the off season periods.
The increase in net sales during 1999 was similar to the overall industry
growth.
Cost of Goods Sold. Cost of goods sold was $93,247,000 in 1999 compared to
$77,776,000 in 1998. Cost of goods sold in 1999 increased $15,471,000 or 20
percent compared to 1998, which is comparable to the increase in net sales. As a
percent of net sales, cost of goods sold was 76 percent in 1999 compared to 75
percent in 1998. The one percent increase in cost of goods sold as a percentage
of net sales in 1999 compared to 1998 can be attributed to the introduction of
several new boat models with enhanced features, which were more expensive to
manufacture.
14
Selling, General and Administrative Expenses. Selling, general, and
administrative expenses were $15,147,000 in 1999 compared to $13,578,000 in
1998, a $1,569,000 or 12 percent increase. Compensation costs increased $963,000
or 15 percent from $6,325,000 in 1998 to $7,288,000 in 1999. Compensation costs
include payroll, sales commissions, and officers' bonuses. The increases in
compensation costs resulted from an increase in commissions expense consistent
with the increase in net sales and an increase in officers' bonuses due to the
increase in operating income. In addition, research and development expenses
increased $481,000 or 47 percent from $1,018,000 to $1,500,000 due to the
introduction of several new boat models with enhanced features. As a percent of
net sales, selling, general and administrative expenses was 12 percent in 1999
compared to 13 percent in 1998.
Operating Income. Operating income was $14,484,000 in 1999, an increase of
$2,341,000 or 19 percent compared to $12,143,000 in 1998. The increase in 1999
operating income resulted from increased net sales, partially offset by a
decrease in the gross margin percentage. However, operating income was also
favorably impacted by the reduction in Marine Products' selling, general, and
administrative expenses, as a percentage of net sales.
Interest Income. Interest income was $233,000 in 1999 compared to $240,000 in
1998. Marine Products has generated interest income from investment of its
available cash primarily in overnight securities. The amount of cash available
for investment has varied depending upon the cash requirements of Marine
Products and RPC.
Net Income. Net income was $9,118,000 for 1999 compared to $7,674,000 for 1998.
The increase in net income can be primarily attributed to the improvement in
1999 operating income compared to 1998. The income tax rate of 38 percent was
the same in 1999 and 1998.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities was $15,464,000 in 2000 compared to
$9,235,000 in 1999. The increase is primarily due to the increase in net income
for 2000 which included the $4,227,000 after tax gain on settlement of claim.
Net cash used for investing activities increased from $1,665,000 in 1999 to
$4,198,000 in 2000. This increase is due primarily to an increase in capital
expenditures relating to the purchase and renovation of an additional
manufacturing facility which opened on September 1, 2000. The remaining capital
expenditures relate to purchases of various other manufacturing equipment and
transport vehicles. During fiscal year 2001, Marine Products plans to construct
a 130,000 square foot manufacturing addition to accommodate the building of
Signature Cruisers up to 40 feet in length. This expansion, which is expected to
be completed during the third quarter of fiscal 2001, will cost approximately
$4,000,000. Funding for future capital requirements over the next twelve months
is expected to be provided by available cash and marketable securities and cash
flow from operations.
Net cash used for financing activities was $13,600,000 in 2000 compared to
$7,619,000 in 1999. The increase is due to the increase in the receivable from
RPC. See Footnote 5 to the Combined Financial Statements.
SEASONALITY
Marine Products' quarterly operating results are affected by weather and the
general economic conditions in the U.S. Although quarterly operating results for
the second quarter have historically recorded the highest sales volume for the
year, our quarterly operating results are generally distributed evenly
throughout the year. However, the results for any quarter are not necessarily
indicative of results to be expected in any future period.
15
INFLATION
Inflation has not had a material effect on Marine Product's operations. If
inflation increases, Marine Products will attempt to increase its prices to
offset its increased expenses. 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.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Marine Products does not utilize financial instruments for trading purposes and
holds no derivative financial instruments which could expose Marine Products to
significant market risk. Marine Products' primary market risk is interest rate
risk. Marine Products currently minimizes such risk by investing its available
cash in overnight securities. As a result, Marine Products believes it has no
material interest rate risk to manage.
16
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
COMBINED BALANCE SHEETS
MARINE PRODUCTS CORPORATION
(in thousands)
----------------------
DECEMBER 31, 2000 1999
- ------------ ---- ----
ASSETS
Cash and cash equivalents $ 1,097 $ 3,431
Accounts receivable, less allowance for
doubtful accounts of $67 and $69
in 2000 and 1999, respectively 1,746 1,417
Inventories 15,064 13,703
Deferred income taxes 2,425 2,642
Prepaid expenses and other current assets 668 551
----------- -----------
Current assets 21,000 21,744
Property, plant and equipment, net 9,796 6,714
Goodwill, net of accumulated amortization
of $9,695 in 2000 and $9,011 in 1999 3,992 4,676
Receivable from RPC, Inc. 68,276 54,676
Other assets 385 358
----------- -----------
Total assets $ 103,449 $ 88,168
=========== ===========
LIABILITIES AND STOCKHOLDER'S EQUITY
Accounts payable $ 2,910 $ 2,372
Other accrued expenses 7,602 6,858
----------- -----------
Current liabilities 10,512 9,230
Deferred income taxes 344 306
----------- -----------
Total liabilities 10,856 9,536
----------- -----------
Commitments and contingencies
RPC, Inc. equity investment 92,593 78,632
----------- -----------
Total stockholder's equity 92,593 78,632
----------- -----------
Total liabilities and stockholder's equity $ 103,449 $ 88,168
=========== ===========
The accompanying notes are an integral part of these statements.
17
COMBINED STATEMENTS OF INCOME
MARINE PRODUCTS CORPORATION
(in thousands)
-------------------------------------------
YEARS ENDED DECEMBER 31, 2000 1999 1998
Net sales $ 148,276 $ 122,878 $ 103,497
Cost of goods sold 115,876 93,247 77,776
Selling, general and administrative expenses 16,945 15,147 13,578
------------ ------------ -----------
Operating income 15,455 14,484 12,143
Gain on settlement of claim 6,817 - -
Interest income 280 233 240
------------ ------------ -----------
Income before income taxes 22,552 14,717 12,383
Income tax provision 8,591 5,599 4,709
------------ ------------ -----------
Net income $ 13,961 $ 9,118 $ 7,674
============ ============ ===========
PROFORMA EARNINGS PER SHARE (UNAUDITED)
Basic $ 0.82 $ 0.54 $ 0.45
============ ============ ===========
Diluted $ 0.82 $ 0.54 $ 0.45
============ ============ ===========
COMBINED STATEMENTS OF STOCKHOLDER'S EQUITY
MARINE PRODUCTS CORPORATION
(in thousands)
RPC, Inc. Equity
Investment
----------
Balance at December 31, 1997 $ 61,840
Net Income 7,674
------------
Balance at December 31,1998 69,514
Net Income 9,118
------------
Balance at December 31, 1999 78,632
Net Income 13,961
------------
Balance at December 31, 2000 $ 92,593
------------
The accompanying notes are an integral part of these statements.
18
COMBINED STATEMENTS OF CASH FLOWS
MARINE PRODUCTS CORPORATION
(in thousands)
----------------------------------
YEARS ENDED DECEMBER 31, 2000 1999 1998
- ------------------------ ---- ---- ----
OPERATING ACTIVITIES
Net income $ 13,961 $ 9,118 $ 7,674
Noncash charges (credits) to earnings:
Depreciation and amortization 1,800 1,545 1,399
Gain on sale of equipment and property - (141) -
Deferred income tax provision (benefit) 255 (166) (436)
(Increase) decrease in assets:
Accounts receivable (329) 769 (583)
Inventories (1,361) (3,015) (936)
Prepaid expenses and other current assets (117) (278) 109
Other noncurrent assets (27) (29) (31)
Increase (decrease) in liabilities:
Accounts payable 538 652 548
Other accrued expenses 744 780 638
--------- --------- ---------
Net cash provided by operating activities 15,464 9,235 8,382
--------- --------- ---------
INVESTING ACTIVITIES
Capital expenditures (4,198) (1,810) (2,192)
Proceeds from sale of equipment and property - 145 -
--------- --------- ---------
Net cash used for investing activities (4,198) (1,665) (2,192)
--------- --------- ---------
FINANCING ACTIVITIES
Increase in receivable from RPC, Inc. (13,600) (7,619) (5,414)
--------- --------- ---------
Net cash used for financing activities (13,600) (7,619) (5,414)
--------- --------- ---------
Net (decrease) increase in cash and cash equivalents (2,334) (49) 776
Cash and cash equivalents at beginning of year 3,431 3,480 2,704
--------- --------- ---------
Cash and cash equivalents at end of year $ 1,097 $ 3,431 $ 3,480
========== ========= =========
The accompanying notes are an integral part of these statements
19
NOTES TO COMBINED FINANCIAL STATEMENTS
MARINE PRODUCTS CORPORATION
YEARS ENDED DECEMBER 31, 2000, 1999, AND 1998
NOTE 1: RPC INC.'S SPIN-OFF OF ITS POWERBOAT MANUFACTURING BUSINESS
In January 2000, the Board of Directors of RPC, Inc. ("RPC") announced that it
planned to spin off to RPC stockholders the business conducted through Chaparral
Boats, Inc. ("Chaparral"), RPC's Powerboat Manufacturing Segment (the
"spin-off"). RPC's Board of Directors subsequently approved the spin-off on
February 12, 2001. RPC accomplished the spin-off by contributing 100% of the
issued and outstanding stock of Chaparral to Marine Products Corporation (a
Delaware corporation) ("Marine Products"), a newly formed wholly-owned
subsidiary of RPC, and then distributing the common stock of Marine Products to
RPC stockholders. RPC stockholders received 0.6 share of Marine Products Common
Stock for each share of RPC Common Stock owned as of the record date. Based on
an Internal Revenue Service Private Letter ruling, subject to certain
assumptions, the spin-off will be tax-free to RPC and RPC's stockholders, except
for cash received for any fractional shares. Immediately after the spin-off was
completed, RPC owned no shares of Marine Products Common Stock, and Marine
Products became an independent public company. A total of 17,012,277 shares of
Marine Products Common Stock were distributed in connection with the spin-off.
In conjunction with the spin-off, RPC and Marine Products have entered into
various agreements that address the allocation of assets and liabilities between
the two companies and that define the companies' relationship after the
separation. These include the Distribution Agreement and Plan of Reorganization,
the Transition Support Services Agreement, the Employee Benefits Agreement, and
the Tax Sharing and Indemnification Agreement.
The Distribution Agreement and Plan of Reorganization provides for, among other
things, the principal corporate transactions required to effect the spin-off
including the distribution ratio of Marine Products shares to RPC shares, the
contribution of cash by RPC to Marine Products at the date of the spin-off, and
the cancellation of any remaining intercompany balances.
The Transition Support Services Agreement provides for RPC to provide certain
services, including financial reporting and income tax administration,
acquisition assistance, etc. to Marine Products until the agreement is
terminated by either party.
The Employee Benefits Agreement provides for, among other things, Marine
Products to continue participating subsequent to the spin-off in two RPC
sponsored benefit plans, specifically, the defined contribution 401(k) plan and
the defined benefit retirement income plan. It also sets forth the method of
handling the stock options and other stock incentive awards issued to RPC
employees that will be employed by Marine Products subsequent to the spin-off.
The Tax Sharing and Indemnification Agreement provides for, among other things,
the treatment of income tax matters for periods through the date of the spin-off
and responsibility for any adjustments as a result of audit by any taxing
authority. The general terms provide for the indemnification for any tax
detriment incurred by one party caused by the other party's action.
NOTE 2: SIGNIFICANT ACCOUNTING POLICIES
Basis of Combination and Presentation
The combined financial statements include the accounts of Marine Products and
substantially all of the assets, liabilities, revenues, and expenses of
Chaparral (collectively "Marine Products" or the "Company"). Marine Products,
through Chaparral, operates in a single industry segment as a leading
manufacturer of recreational powerboats and related products and services to a
broad range of consumers worldwide.
20
The combined financial statements have been prepared on the historical cost
basis, and present the Company's financial position, results of operations and
cash flows directly related to RPC, Inc.'s Powerboat Manufacturing Segment
operations.
The combined financial statements included herein may not necessarily be
indicative of the results of operations, financial position and cash flows of
Marine Products in the future or had it operated as a separate, independent
company during the periods presented. The combined financial statements included
herein do not reflect any changes that may occur in the financing and operations
of Marine Products as a result of the spin-off.
During 2000, 1999 and 1998, Marine Products was allocated $2,372,000, $1,966,000
and $1,777,000 respectively, of RPC, Inc. corporate costs. The allocation was
based on Marine Products' revenue as a percent of RPC, Inc.'s total revenue and
the allocated costs are included in Selling, General, and Administrative
expenses in the accompanying combined statements of income. Management believes
that such allocation methodology is reasonable. The costs allocated to Marine
Products for these services are not necessarily indicative of the costs that
would have been incurred if Marine Products had been a separate, independent
entity and had otherwise independently managed these functions. Going forward,
Marine Products will reimburse RPC, Inc. for its allocable share of costs
incurred for services rendered on behalf of Marine Products. The Company and
RPC, Inc. have entered into a Transition Support Services Agreement that sets
forth the basis for these cost allocations.
Nature of Operations
Marine Products is principally engaged in manufacturing powerboats and providing
related products and services. Marine Products distributes fiberglass
stern-drive boats through a network of domestic and foreign independent dealers.
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Segment Reporting
The Company has adopted Statement of Financial Accounting Standards ("SFAS") No.
131, "Disclosures About Segments of an Enterprise and Related Information." As
the Company has only one reportable segment - its power boat manufacturing
business - the majority of the disclosures required by SFAS No. 131 do not apply
to the Company. In regard to the general disclosures required by SFAS No. 131,
the Company's results of operations and its financial condition are not
significantly reliant upon any single customer or the Company's foreign
operations.
Revenue Recognition
The Company's revenue recognition policy is in accordance with the Securities
and Exchange Commission's recently released Staff Accounting Bulletin No. 101,
"Revenue Recognition in Financial Statements" which clarifies the basic criteria
for recognizing revenue. Marine Products recognizes revenue when an agreement
exists, prices are determinable, services and products are delivered and
collectibility is reasonably assured.
Cash Equivalents
Highly liquid investments with original maturities of 3 months or less are
considered to be cash equivalents.
21
Inventories
Inventories are stated at the lower of cost (first-in, first-out basis) or
market value.
Long-Lived Assets
Long-lived assets and goodwill are reviewed whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. The Company periodically reviews the values assigned to long-lived
assets, such as property, plant and equipment and goodwill, to determine if any
impairments are other than temporary. Management believes that the long-lived
assets and goodwill in the accompanying balance sheets are appropriately valued.
Property, Plant and Equipment
Property, plant, and equipment is carried at cost. Depreciation is provided
principally on a straight-line basis over the estimated useful lives of the
assets. The cost of assets retired or otherwise disposed of and the related
accumulated depreciation are eliminated from the accounts in the year of
disposal with the resulting gain or loss credited or charged to income.
Expenditures for additions, major renewals, and betterments are capitalized.
Depreciation expense on operating equipment used in production is included in
the "cost of goods sold" caption in the accompanying statements of income. All
other depreciation is included in selling, general and administrative expenses
in the accompanying combined statements of income.
Goodwill
Goodwill represents the excess of the purchase price over the fair value of net
assets of businesses acquired. Goodwill is presented net of accumulated
amortization and is being amortized using the straight-line method over 20
years. Amortization expense was $684,000 in 2000, $685,000 in 1999, and $684,000
in 1998.
Stock-Based Compensation
SFAS No. 123, "Accounting for Stock-Based Compensation" defines a fair
value-based method of accounting for an employee stock option plan or similar
equity instrument. However, it also allows an entity to continue to measure
compensation cost for those plans using the method of accounting prescribed in
Accounting Principles Board ("APB") Opinion No. 25. Entities electing to use APB
No. 25 must make pro forma disclosures of net income and earnings per share, as
if the fair value-based method of accounting defined in the statement had been
applied.
Accrued Dealer Discounts
Sales incentives including dealer discounts are provided for in the period the
related sales are recorded.
Allowance for Boat Repurchases
The Company is obligated under certain circumstances to repurchase boats from
finance companies where dealers have financed boats under floor plan finance
arrangements. The Company maintains an allowance for estimated losses on boats
repurchased.
Warranty Accruals
The Company warrants the entire deck and hull, including its bulkhead and
supporting stringer system, against defects in materials and workmanship for a
period of five years. The Company accrues for these estimated future warranty
costs at the time of the sale.
22
Insurance Accruals
The Company fully insures its risks related to general liability, product
liability, workers' compensation, and vehicle liability, whereas the health
insurance plan is self funded up to a maximum annual claim amount for each
covered employee and related dependents. The estimated cost of claims under the
self-insurance program is accrued as the claims are incurred and may
subsequently be revised based on developments relating to such claims.
Research and Development Costs
The Company expenses research and development costs for new products and
components as incurred. Research and development costs are included in selling,
general and administrative expenses and totaled $1,428,000 in 2000, $1,500,000
in 1999, and $1,018,000 in 1998.
Income Taxes
Deferred tax liabilities and assets are determined based on the difference
between the financial and tax bases of assets and liabilities using enacted tax
rates in effect for the year in which the differences are expected to reverse.
Income tax expense was calculated as if Marine Products filed separate income
tax returns.
Earnings Per Share
Proforma Earnings Per Share for all periods presented have been calculated using
17,012,277 shares outstanding, which was the number of shares distributed in
connection with the spin-off. While the actual number of outstanding stock
options and other stock awards cannot be calculated at this time, it is
anticipated that they will not have a material dilutive effect.
New Accounting Standards
SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities,"
establishes accounting and reporting standards for derivative instruments
including certain derivative instruments embedded in other contracts, and for
hedging activities. It requires entities to recognize all instruments as either
assets or liabilities in the balance sheet and measure those instruments at fair
value. As amended, SFAS No. 133 will be effective for all fiscal quarters of all
fiscal years beginning after June 15, 2000. The adoption of this statement on
January 1, 2001 did not have a material impact on the financial position or
results of operations of the Company.
NOTE 3: INVENTORIES
Inventories consist of the following:
December 31, 2000 1999
- ------------ ---- ----
(in thousands)
Raw materials $7,320 $7,584
Work in process 1,474 1,977
Finished goods 6,270 4,142
------- -------
Total inventories $15,064 $13,703
======= =======
23
NOTE 4: PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are presented at cost net of accumulated
depreciation and consist of the following:
Estimated
December 31, Useful Lives 2000 1999
- ------------ ------------ ---- ----
(in thousands)
-------------------
Operating equipment and property 5-10 $ 5,506 $ 3,842
Buildings 20 7,679 5,109
Furniture and fixtures 5-7 744 363
Vehicles 5 2,790 2,655
Land N/A 329 278
Construction in progress N/A - 603
-------- -------
Gross property, plant and equipment 17,048 12,850
Less: accumulated depreciation 7,252 6,136
-------- -------
Net property, plant and equipment $ 9,796 $ 6,714
======== =======
Depreciation expense was $1,116,000 in 2000, $860,000 in 1999, and $715,000 in
1998.
NOTE 5: RECEIVABLE FROM RPC, INC.
At December 31, 2000 and 1999, the combined balance sheets reflect a
Receivable from RPC, Inc. This represents the amount of cash transferred from
the Company to RPC, Inc. since RPC Inc.'s acquisition of Chaparral in 1986. At
the spin-off, RPC, Inc. established a cash balance at Marine Products of
approximately $15 million by contributing approximately $13.8 million. The
remaining Receivable from RPC, Inc. totaling approximately $53.6 million was
cancelled.
NOTE 6: OTHER ACCRUED EXPENSES
Other accrued expenses at December 31, 2000 and 1999 consisted of the following:
December 31 2000 1999
- ----------- ---- ----
(in thousands)
----------------------------
Accrued payroll and related expenses $ 1,039 $ 967
Accrued dealer discounts 2,532 2,285
Accrued insurance expenses 928 597
Accrued warranty expenses 2,363 2,214
Allowance for repurchases 500 500
Other 240 295
--------- --------
Other accrued expenses $ 7,602 $ 6,858
========= ========
NOTE 7: INCOME TAXES
The following table lists the components of the provision for income taxes:
Year ended December 31, 2000 1999 1998
- ----------------------- ---- ---- ----
(in thousands)
--------------
Current:
Federal $ 7,639 $ 5,304 $ 4,753
State 697 461 392
Deferred 255 (166) (436)
---------- ------------ ----------
Total income tax provision $ 8,591 $ 5,599 $ 4,709
========== ============ ==========
24
A reconciliation between the federal statutory rate and Marine Products'
effective tax rate is as follows:
Year ended December 31, 2000 1999 1998
- ----------------------- ------ ------ ------
Federal statutory rate 35.0% 35.0% 35.0%
State income taxes 3.0 2.0 2.1
Goodwill amortization 1.2 3.0 3.6
Benefit of foreign sales corporation (0.5) (1.2) (1.5)
Other (0.6) (0.8) (1.2)
------- ------- -------
Effective tax rate 38.1% 38.0% 38.0%
======= ======= =======
The components of the net deferred tax assets (liabilities) are as follows:
December 31, 2000 1999
- ------------ ---- ----
(in thousands)
--------------
Current deferred tax assets:
State, local & other taxes $ 54 $ 269
Accrued warranty expenses 1,006 1,139
Accrued dealer discounts 135 235
Allowance for repurchases 190 190
All others 1,040 809
--------- ---------
Total current deferred tax assets $ 2,425 $ 2,642
========= =========
Noncurrent deferred tax assets (liabilities):
Self-insurance reserves $ 107 $ 172
Depreciation (451) (478)
--------- ---------
Total noncurrent deferred tax liabilities $ (344) $ (306)
========= =========
RPC, Inc. has paid substantially all income taxes historically on behalf of
Marine Products.
The Company and RPC, Inc. have entered into a tax-sharing and indemnification
agreement whereby any subsequent income tax adjustments resulting in a change in
income tax assets or liabilities of either RPC, Inc. or Marine Products prior to
spin-off will be settled through an exchange of cash.
NOTE 8: COMMITMENTS AND CONTINGENCIES
Lawsuits
The Company is a defendant in some lawsuits, which allege that plaintiffs have
been damaged as a result of the use of the Company's products. The Company is
vigorously contesting these actions. Management is of the opinion that the
outcome of these lawsuits will not have a material adverse effect on the
financial position or results of operations or liquidity of Marine Products.
Dealer Floor Plan Financing
To assist dealers in obtaining financing for the purchase of its boats, the
Company has entered into agreements with various dealers and financing
institutions to guarantee varying amounts of the dealers' purchase debt
obligations. 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 the unpaid debt obligation on those boats. As of
December 31, 2000, guarantees outstanding totaled $3,481,000.
25
Employment Agreements
The Company has an agreement with two employees, which provides for a monthly
payment to each of the employees equal to 10% of profits (defined as pretax
income before goodwill amortization and certain allocated corporate expenses).
During the years ended December 31, 2000, 1999, and 1998 the expense associated
with this profit-sharing plan totaled $6,402,000, $4,342,000, and $3,711,000,
respectively, and is included in selling, general and administrative expenses in
the accompanying combined statements of income.
NOTE 9: EMPLOYEE BENEFIT PLANS
Retirement Plan
Marine Products participates in a tax-qualified defined benefit,
noncontributory, trusteed retirement income plan sponsored by RPC, Inc. that
covers substantially all employees with at least one year of service. Benefits
are based on an employee's years of service and compensation near retirement.
The Company has the right to terminate or modify the plan at any time. The
Company's funding policy is to contribute to the retirement income plan the
amount required, if any, under the Employee Retirement Income Security Act of
1974. No contributions were required by the Company in 2000, 1999 and 1998.
401(k) Plan
Marine Products participates in a defined contribution 401(k) plan sponsored by
RPC, Inc. that is available to substantially all full-time employees with more
than six months of service. This plan allows employees to make tax-deferred
contributions of up to 15 percent of their annual compensation, not exceeding
the permissible deduction imposed by the Internal Revenue Code. The Company
matches 40 percent of each employee's contributions up to 3 percent of the
employee's compensation. Employees vest in the Company contributions after five
years of service. The charges to expense for Marine Products' contributions to
the 401(k) plan were $76,000 in 2000, $74,000 in 1999, and $74,000 in 1998.
Employee Stock Incentive Plan
Historically, certain RPC employees, including employees of Marine Products,
have participated in the RPC, Inc. Employee Stock Incentive Plan (the "Plan").
In conjunction with the spin-off, Marine Products has adopted a ten year
Employee Stock Incentive Plan under which 2,000,000 shares of common stock have
been reserved for issuance to Marine Products employees. This plan provides for
the issuance of various forms of stock incentives, including, among others,
incentive stock options and restricted stock. Following the spin-off,
outstanding stock option grants under the Plan held by Marine Products employees
will be replaced with Marine Products stock option grants. The Marine Products
grants will have the same relative ratio of the exercise price per option to the
market value per share, the same aggregate difference between market value and
exercise price and the same vesting provisions, option periods and other
applicable terms and conditions as the RPC stock option grants being replaced.
At December 31, 2000 there were 246,664 RPC stock options held by Marine
Products employees subject to replacement with Marine Products stock option
grants. Marine Products cannot determine the number of shares of its common
stock that will be subject to substitute grant.
Marine Products adopted the disclosure provisions of SFAS No.123, "Accounting
for Stock-Based Compensation," but continues to measure stock-based compensation
cost in accordance with APB Opinion No. 25 and its related interpretations. If
Marine Products had measured compensation cost for the RPC, Inc. stock options
granted to its employees under the fair value based method prescribed by SFAS
123, Marine Products' reported net income and pro forma net income would have
been as follows:
2000 1999 1998
---- ---- ----
Net income as reported $ 13,961 $ 9,118 $ 7,674
Pro forma 13,863 9,022 7,599
26
The fair value of RPC, Inc. stock options granted to Marine Products employees
used to compute pro forma net income disclosures was estimated on the date of
grant using the Black-Scholes option pricing model as prescribed by SFAS No. 123
based on the following weighted average assumptions used by RPC, Inc:
2000 1999 1998
---- ---- ----
Risk free interest rate N/A 4.6% 5.4%
Expected dividend yield N/A 1% 2%
Expected lives N/A 7 years 7 years
Expected volatility N/A 34-37% 31-34%
The weighted-average fair value of RPC, Inc. stock options granted to Marine
Products employees during 1999 and 1998 were $159,000, and $361,000,
respectively. There were no options granted in 2000. The pro forma amounts above
are not necessarily representative of the effects of stock-based awards on
future pro forma net income because (1) future grants of employee stock options
by Marine Products management may not be comparable to awards made to employees
while Marine Products was a part of RPC, Inc. and (2) the assumptions used to
compute the fair value of any stock option awards will be specific to Marine
Products and therefore may not be comparable to the RPC, Inc. assumptions used.
NOTE 10: GAIN ON SETTLEMENT OF CLAIM
In the first quarter of 2000, RPC recorded an after-tax gain of $4,227,000. The
gain is a result of Chaparral Boats' receipt, in the first quarter of 2000, of
its share of a non-refundable $35 million settlement payment made by Brunswick
Corporation (Brunswick), a major engine supplier, to the members of the American
Boatbuilders Association (ABA), a buying group which includes Chaparral Boats.
Under the terms of this agreement between the ABA and Brunswick, additional
payments were to be made to the ABA depending on the final judgment or
settlement of a lawsuit brought by Independent Boatbuilders Association (IBBI),
another buying group supplied engines by Brunswick. In March 2000, the U.S.
Court of Appeals for the Eighth Circuit ordered the trial court to enter a
judgment for Brunswick, thereby reversing the initial decision in favor of IBBI.
It is unlikely that any additional payments will be received by the Company in
connection with this settlement.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
27
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information concerning directors and executive officers is incorporated by
reference to the Information Statement attached as Annex A to the Marine
Products Form 10 filed with the SEC on February 13, 2001. Certain information
about executive officers is contained on page 12 of this document.
ITEM 11. EXECUTIVE COMPENSATION
The response to Item 11 is incorporated by reference to the Information
Statement attached as Annex A to the Marine Products Form 10 filed with the SEC
on February 13, 2001.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The response to Item 12 is incorporated by reference to the Information
Statement attached as Annex A to the Marine Products Form 10 filed with the SEC
on February 13, 2001.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The response to Item 13 is incorporated by reference to the Information
Statement attached as Annex A to the Marine Products Form 10 filed with the SEC
on February 13, 2001.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
The following documents are filed as part of this report.
FINANCIAL STATEMENTS PAGE
- -------------------- ----
Combined Balance Sheets as of December 31, 2000 and 1999 17
Combined Statements of Income for the three years ended December 31, 2000 18
Combined Statements of Stockholder's Equity for the three years ended December 31, 2000 18
Combined Statements of Cash Flows for the three years ended December 31, 2000 19
Notes to Combined Financial Statements 20
SCHEDULES
- ---------
Schedule II - Valuation and Qualifying Accounts 30
28
EXHIBITS
Exhibit
Number Description
- -------- -----------
3.1 Articles of Incorporation of Marine Products Corporation (incorporated
here in by reference to exhibit 3.1 to the Form 10 filed on February
13, 2001).
3.2 Bylaws of Marine Products Corporation (incorporated herein by
reference to Exhibit 3.2 to the Form 10 filed on February 13, 2001).
4 Form of Common Stock Certificate of Marine Products Corporation
(incorporated herein by reference to Exhibit 4.1 to the Form 10 filed
on February 13, 2001).
10.1 Marine Products Corporation 2001 Employee Stock Incentive Plan
(incorporated herein by reference to Exhibit 10.1 to the Form 10 filed
on February 13, 2001).
10.2 Agreement Regarding Distribution and Plan of Reorganization, dated
February 12 2001, by and between RPC, Inc. and Marine Products
Corporation (incorporated herein by reference to Exhibit 10.2 to the
Form 10 filed on February 13, 2001).
10.3 Employee Benefits Agreement, dated February 12, 2001, by and between
RPC, Inc., Chaparral Boats, Inc. and Marine Products Corporation
(incorporated herein by reference to Exhibit 10.3 to the Form 10 filed
on February 13, 2001).
10.4 Transition Support Services Agreement, dated February 12, 2001, by and
between RPC, Inc. and Marine Products Corporation (incorporated herein
by reference to Exhibit 10.4 to the Form 10 filed on February 13,
2001).
10.5 Tax Sharing Agreement, dated February 12, 2001, by and between RPC,
Inc. and Marine Products Corporation (incorporated herein by reference
to Exhibit 10.5 to the Form 10 filed on February 13, 2001).
10.6 Compensation Agreement between James A. Lane, Jr. and Chaparral Boats,
Inc. (incorporated herein by reference to Exhibit 10.6 to the Form 10
filed on February 13, 2001).
21 Subsidiaries of Marine Products Corporation.
24 Powers of Attorney for Directors
REPORTS ON FORM 8-K
No reports on Form 8-K were required to be filed by Marine Products for the
quarter ended December 31, 2000. Any schedules or exhibits not shown above have
been omitted because they are not applicable.
29
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
MARINE PRODUCTS CORPORATION AND SUBSIDIARIES (in thousands of dollars)
For the years ended December 31, 2000, 1999 and 1998
Balance at Charged to Net Balance
Beginning Costs and (Write-Offs)/ at End of
Description of Period Expenses Recoveries Period
- ----------- --------- -------- ---------- ------
Year ended December 31, 2000
Allowance for Doubtful Accounts $ 69 $ - $ (2) $ 67
Year ended December 31, 1999
Allowance for Doubtful Accounts $ 77 $ - $ (8) $ 69
Year ended December 31, 1998
Allowance for Doubtful Accounts $ 79 $ - $ (2) $ 77
Signatures
Pursuant to the requirements of Section 13 of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
Marine Products Corporation
By:
/s/ R. Randall Rollins
--------------------------------------------
R. Randall Rollins
Chairman of the Board of Directors
March 26, 2001
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed by the following persons on behalf of the Registrant and in the
capacities and on the dates indicated.
/s/ R. Randall Rollins /s/ Richard A. Hubbell /s/ Ben M. Palmer
- ---------------------- ---------------------- ----------------------
R. Randall Rollins Richard A. Hubbell Ben M. Palmer
Chairman of The Board President Chief Financial Officer
of Directors (Principal Executive (Principal Financial and
Officer) Accounting Officer)
March 26, 2001 March 26, 2001 March 26, 2001
The Directors of RPC, Inc. (listed below) executed a power of attorney
appointing Richard A. Hubbell their attorney-in-fact, empowering him to sign
this report on their behalf.
Wilton Looney, Director James B. Williams, Director
Gary W. Rollins, Director James A. Lane, Jr., Director
Henry B. Tippie, Director Linda H. Graham, Director
/s/ Richard A. Hubbell
- ------------------------------
Richard A. Hubbell
Director and as Attorney-in-fact
March 26, 2001
30
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Marine Products Corporation:
We have audited the accompanying combined balance sheets of the business
conducted through RPC's Powerboat Manufacturing Segment, which was reorganized
as Marine Products Corporation (a Delaware corporation) as of December 31, 2000
and 1999, and the related combined statements of income, stockholder's equity,
and cash flows for each of the three years in the period ended December 31,
2000. These financial statements and schedule referred to below are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and schedule based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free from material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the business conducted
through RPC's Powerboat Manufacturing Segment as of December 31, 2000 and 1999,
and the results of their operations and their cash flows for each of the three
years in the period ended December 31, 2000, in conformity with accounting
principles generally accepted in the United States.
Our audit was made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in Item 14 is
presented for the purposes of complying with the Securities and Exchange
Commission's rules and is not part of the basic financial statements. This
schedule has been subjected to the auditing procedures applied in our audit of
the basic financial statements and, in our opinion, fairly states in all
material respects, the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
Atlanta, Georgia Arthur Andersen LLP
February 26, 2001
31
UNAUDITED QUARTERLY DATA
- ----------------------------------------------------------------
Quarter First Second Third Fourth
- ----------------------------------------------------------------
2000
Net sales $ 37,885 $ 42,608 $ 35,080 $32,703
Net income 6,696 3,121 2,332 1,812
1999
Net sales $ 31,233 $ 35,135 $ 25,244 $31,266
Net income 2,382 2,866 1,614 2,256
OFFICERS AND DIRECTORS
OFFICERS DIRECTORS
- -------- ---------
R. Randall Rollins R. Randall Rollins
Chairman of the Board of directors Chairman of the Board and
Chief Executive Officer,
Rollins, Inc.(consumer services)
Richard A. Hubbell Henry B. Tippie*+
President and Chief Chairman of the Board and
Executive Officer Chief Executive Officer,
Tippie Services, Inc.
(management services)
James A. Lane, Jr. Wilton Looney*
Executive Vice President Honorary Chairman of the
Board, Genuine Parts Company
(automotive parts distributor)
Linda H. Graham James B. Williams*
Vice President and Secretary Chairman of the Executive
Committee, SunTrust Banks, Inc.
(bank holding company)
Ben M. Palmer Gary W. Rollins
Vice President, Chief Financial Officer, President and Chief Operating
Treasurer and Assistant Secretary Officer, Rollins, Inc.
(consumer services)
Richard A. Hubbell
James A. Lane Jr.
Linda H. Graham
* Member of the Audit Committee and Executive Compensation Committee
+ Chairman of the Audit Committee and Executive Compensation Committee
32
STOCKHOLDER INFORMATION
CORPORATE OFFICES
Marine Products Corporation
2170 Piedmont Road, NE
Atlanta, Georgia 30324
Telephone: (404) 321-2140
STOCK LISTING
American Stock Exchange
TICKER SYMBOL--MPX
INVESTOR RELATIONS WEB-SITE
www.marineproductscorp.com
www.marineproductscorp.net
TRANSFER AGENT AND REGISTRAR For inquiries related to stock certificates,
including changes of address, please contact:
SunTrust Bank, Atlanta
Stock Transfer Department
PO Box 4625
Atlanta, GA 30302
Telephone: (404) 588-7817
33
1343066