Company Quick10K Filing
Quick10K
Marine Products
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$14.79 34 $505
10-Q 2019-06-30 Quarter: 2019-06-30
10-Q 2019-03-31 Quarter: 2019-03-31
10-K 2018-12-31 Annual: 2018-12-31
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-K 2017-12-31 Annual: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-K 2016-12-31 Annual: 2016-12-31
10-Q 2016-09-30 Quarter: 2016-09-30
10-Q 2016-06-30 Quarter: 2016-06-30
10-Q 2016-03-31 Quarter: 2016-03-31
10-K 2015-12-31 Annual: 2015-12-31
10-Q 2015-09-30 Quarter: 2015-09-30
10-Q 2015-06-30 Quarter: 2015-06-30
10-Q 2015-03-31 Quarter: 2015-03-31
10-K 2014-12-31 Annual: 2014-12-31
10-Q 2014-09-30 Quarter: 2014-09-30
10-Q 2014-06-30 Quarter: 2014-06-30
10-Q 2014-03-31 Quarter: 2014-03-31
10-K 2013-12-31 Annual: 2013-12-31
8-K 2019-10-08 Other Events, Exhibits
8-K 2019-10-01 Other Events, Exhibits
8-K 2019-07-24 Earnings, Exhibits
8-K 2019-07-24 Other Events, Exhibits
8-K 2019-07-01 Other Events, Exhibits
8-K 2019-07-01 Other Events, Exhibits
8-K 2019-06-11 Other Events, Exhibits
8-K 2019-04-25 Other Events, Exhibits
8-K 2019-04-24 Earnings, Exhibits
8-K 2019-04-24 Other Events, Exhibits
8-K 2019-04-23 Shareholder Vote
8-K 2019-04-01 Other Events, Exhibits
8-K 2019-04-01 Other Events, Exhibits
8-K 2019-03-26 Regulation FD, Exhibits
8-K 2019-01-23 Other Events, Exhibits
8-K 2019-01-23 Earnings, Exhibits
8-K 2019-01-02 Other Events, Exhibits
8-K 2019-01-02 Other Events, Exhibits
8-K 2018-10-24 Earnings, Exhibits
8-K 2018-10-09 Other Events, Exhibits
8-K 2018-10-02 Other Events, Exhibits
8-K 2018-07-25 Earnings, Exhibits
8-K 2018-07-02 Other Events, Exhibits
8-K 2018-04-24 Shareholder Vote
8-K 2018-04-03 Other Events, Exhibits
8-K 2018-04-02 Other Events, Exhibits
8-K 2018-01-24 Earnings, Exhibits
8-K 2018-01-02 Other Events, Exhibits
CCL Carnival 8,235
FRO Frontline 1,476
GLOG Gaslog 1,011
GLOP Gaslog Partners 860
SMHI Seacor Marine Holdings 286
NM Navios Maritime Holdings 80
NMCI Navios Maritime Containers 74
OMEX Odyssey Marine Exploration 40
TOPS Top Ships 9
GSL Global Ship Lease 0
MPX 2019-06-30
Part I. Financial Information
Item 1. Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II. Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
EX-31.1 mpx-20190630ex31105ff9a.htm
EX-31.2 mpx-20190630ex3124796ae.htm
EX-32.1 mpx-20190630ex3219d47e3.htm

Marine Products Earnings 2019-06-30

MPX 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

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Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended June 30, 2019

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 incorporation or organization)

(I.R.S. Employer Identification Number)

2801 Buford Highway, Suite 300, Atlanta, Georgia 30329

(Address of principal executive offices) (zip code)

Registrant’s telephone number, including area code -- (404) 321-7910

Securities registered pursuant to Section 12(b) of the Act:

Title of each class:

    

Trading Symbol(s)

    

Name of each exchange on which registered:

Common stock, par value $0.10

 

MPX

 

New York Stock Exchange

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 ⌧   No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ⌧ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging Growth Company  

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  No ⌧

As of July 19, 2019, Marine Products Corporation had 34,045,854 shares of common stock outstanding.

Table of Contents

Marine Products Corporation

Table of Contents

Page No.

Part I. Financial Information

Item 1.

Financial Statements (Unaudited)

Consolidated Balance Sheets – As of June 30, 2019 and December 31, 2018

3

Consolidated Statements of Operations – for the three and six months ended June 30, 2019 and 2018

4

Consolidated Statements of Comprehensive Income – for the three and six months ended June 30, 2019 and 2018

5

Consolidated Statements of Stockholders’ Equity – for the three and six months ended June 30, 2019

6

Consolidated Statements of Stockholders’ Equity – for the three and six months ended June 30, 2018

6

Consolidated Statements of Cash Flows – for the six months ended June 30, 2019 and 2018

8

Notes to Consolidated Financial Statements

9-22

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

23-29

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

29

Item 4.

Controls and Procedures

29

Part II. Other Information

Item 1.

Legal Proceedings

30

Item 1A.

Risk Factors

30

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

30

Item 3.

Defaults upon Senior Securities

30

Item 4.

Mine Safety Disclosures

31

Item 5.

Other Information

31

Item 6.

Exhibits

31

Signatures

32

2

Table of Contents

MARINE PRODUCTS CORPORATION AND SUBSIDIARIES

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

CONSOLIDATED BALANCE SHEETS

AS OF JUNE 30, 2019 AND DECEMBER 31, 2018

(In thousands)

(Unaudited)

    

June 30, 

    

December 31, 

2019

2018

ASSETS

 

 

(Note 1)

Cash and cash equivalents

$

12,967

$

8,745

Marketable securities

 

 

2,966

Accounts receivable, net of allowance for doubtful accounts of $20 in 2019 and $25 in 2018

 

14,752

 

3,872

Inventories

 

50,904

 

46,770

Income taxes receivable

 

122

 

452

Prepaid expenses and other current assets

 

1,389

 

1,795

Total current assets

 

80,134

 

64,600

Property, plant and equipment, net of accumulated depreciation of $27,224 in 2019 and $26,213 in 2018

 

15,244

 

14,552

Goodwill

 

3,308

 

3,308

Other intangibles, net

 

465

 

465

Marketable securities

 

 

4,699

Deferred income taxes

 

3,688

 

3,325

Other assets

 

11,015

 

9,931

Total assets

$

113,854

$

100,880

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

  

 

  

Accounts payable

$

9,265

$

4,673

Accrued expenses and other liabilities

 

16,199

 

13,494

Total current liabilities

 

25,464

 

18,167

Pension liabilities

 

8,770

 

7,045

Other long-term liabilities

 

544

 

456

Total liabilities

 

34,778

 

25,668

Common stock

 

3,404

 

3,433

Retained earnings

 

78,220

 

73,954

Accumulated other comprehensive loss

 

(2,548)

 

(2,175)

Total stockholders’ equity

 

79,076

 

75,212

Total liabilities and stockholders’ equity

$

113,854

$

100,880

The accompanying notes are an integral part of these consolidated statements.

3

Table of Contents

MARINE PRODUCTS CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2019 AND 2018

(In thousands except per share data)

(Unaudited)

Three months ended June 30, 

Six months ended June 30, 

    

2019

    

2018

    

2019

    

2018

Net sales

$

88,696

$

87,006

$

171,749

$

164,542

Cost of goods sold

 

68,272

 

67,534

 

132,626

 

127,419

Gross profit

 

20,424

 

19,472

 

39,123

 

37,123

Selling, general and administrative expenses

 

9,045

 

8,321

 

18,876

 

16,939

Operating income

 

11,379

 

11,151

 

20,247

 

20,184

Interest income

 

95

 

85

 

152

 

118

Income before income taxes

 

11,474

 

11,236

 

20,399

 

20,302

Income tax provision

 

2,101

 

2,246

 

3,557

 

3,703

Net income

$

9,373

$

8,990

$

16,842

$

16,599

Earnings per share

 

  

 

  

 

  

 

  

Basic

$

0.27

$

0.26

$

0.49

$

0.48

Diluted

$

0.27

$

0.26

$

0.49

$

0.48

Dividends paid per share

$

0.12

$

0.10

$

0.24

$

0.20

The accompanying notes are an integral part of these consolidated financial statements.

4

Table of Contents

MARINE PRODUCTS CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2019 AND 2018

(In thousands)

(Unaudited)

Three months ended June 30, 

Six months ended June 30, 

    

2019

    

2018

    

2019

    

2018

Net income

$

9,373

$

8,990

$

16,842

$

16,599

Other comprehensive income, net of taxes:

 

  

 

  

 

  

 

  

Pension adjustment

 

17

 

15

 

34

 

34

Unrealized gain on securities, net of reclassification adjustments

 

 

9

 

7

 

16

Comprehensive income

$

9,390

$

9,014

$

16,883

$

16,649

The accompanying notes are an integral part of these consolidated financial statements.

5

Table of Contents

MARINE PRODUCTS CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2019

(In thousands)

(Unaudited)

Six Months Ended June 30, 2019

Accumulated

Capital in

Other

Common Stock

Excess of

Retained

Comprehensive

    

Shares

    

Amount

    

Par Value

    

Earnings

    

Income (Loss)

    

Total

Balance, December 31, 2018

 

34,328

$

3,433

$

$

73,954

$

(2,175)

$

75,212

Adoption of accounting standard (Note 2)

 

 

 

 

414

 

(414)

 

Stock issued for stock incentive plans, net

 

141

 

14

 

524

 

 

 

538

Stock purchased and retired

 

(344)

 

(34)

 

(524)

 

(4,338)

 

 

(4,896)

Net income

 

 

 

 

7,469

 

 

7,469

Pension adjustment, net of taxes

 

 

 

 

 

17

 

17

Unrealized gain on securities, net of taxes and reclassification adjustment

 

 

 

 

 

7

 

7

Dividends paid

 

 

 

 

(4,117)

 

 

(4,117)

Balance, March 31, 2019

34,125

$

3,413

$

$

73,382

$

(2,565)

$

74,230

Stock issued for stock incentive plans, net

(11)

(1)

545

544

Stock purchased and retired

(69)

(8)

(545)

(443)

(996)

Net income

9,373

9,373

Pension adjustment, net of taxes

17

17

Unrealized gain on securities, net of taxes and reclassification adjustment

Dividends paid

(4,092)

(4,092)

Balance, June 30, 2019

 

34,045

$

3,404

$

$

78,220

$

(2,548)

$

79,076

The accompanying notes are an integral part of these consolidated statements.

6

Table of Contents

MARINE PRODUCTS CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2018

(In thousands)

(Unaudited)

Six Months Ended June 30, 2018

Accumulated

Capital in

Other

Common Stock

Excess of

Retained

Comprehensive

    

Shares

    

Amount

    

Par Value

    

Earnings

    

Income (Loss)

    

Total

Balance, December 31, 2017

 

34,572

$

3,457

$

$

68,127

$

(1,980)

$

69,604

Stock issued for stock incentive plans, net

 

194

 

20

 

496

 

 

 

516

Stock purchased and retired

 

(200)

 

(20)

 

(496)

 

(2,419)

 

 

(2,935)

Net income

 

 

 

 

7,609

 

 

7,609

Pension adjustment, net of taxes

 

 

 

 

 

19

 

19

Unrealized gain on securities, net of taxes and reclassification adjustment

 

 

 

 

 

7

 

7

Dividends paid

 

 

 

 

(3,465)

 

 

(3,465)

Balance, March 31, 2018

34,566

$

3,457

$

$

69,852

$

(1,954)

$

71,355

Stock issued for stock incentive plans, net

(1)

(1)

529

528

Stock purchased and retired

(17)

(1)

(529)

259

(271)

Net income

8,990

8,990

Pension adjustment, net of taxes

15

15

Unrealized gain on securities, net of taxes and reclassification adjustment

9

9

Dividends paid

(3,455)

(3,455)

Balance, June 30, 2018

 

34,548

$

3,455

$

75,646

$

(1,930)

$

77,171

The accompanying notes are an integral part of these consolidated statements.

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MARINE PRODUCTS CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30, 2019 AND 2018

(In thousands)

(Unaudited)

Six months ended June 30, 

    

2019

    

2018

OPERATING ACTIVITIES

 

  

 

  

Net income

$

16,842

$

16,599

Adjustments to reconcile net income to net cash provided by operating activities:

 

  

 

  

Depreciation and amortization

 

1,027

 

849

(Accretion) of discount/amortization of premium related to marketable securities, net

 

(5)

 

152

Stock-based compensation expense

 

1,082

 

1,044

Deferred income tax (benefit)/provision

 

(375)

 

253

(Increase) decrease in assets:

 

  

 

  

Accounts receivable

 

(10,880)

 

(5,471)

Inventories

 

(4,134)

 

497

Prepaid expenses and other current assets

 

406

 

(6,925)

Income taxes receivable

 

330

 

603

Other non-current assets

 

(860)

 

(996)

Increase (decrease) in liabilities:

 

  

 

  

Accounts payable

 

4,592

 

9,244

Accrued expenses and other liabilities

 

2,659

 

537

Other long-term liabilities

 

1,679

 

1,730

Net cash provided by operating activities

 

12,363

 

18,116

INVESTING ACTIVITIES

 

  

 

  

Capital expenditures

 

(1,719)

 

(721)

Purchases of marketable securities

 

(299)

 

(12,350)

Sales of marketable securities

 

7,530

 

5,714

Maturities of marketable securities

 

448

 

1,188

Net cash provided by (used for) investing activities

 

5,960

 

(6,169)

FINANCING ACTIVITIES

 

  

 

  

Payment of dividends

 

(8,209)

 

(6,920)

Cash paid for common stock purchased and retired

 

(5,892)

 

(3,206)

Net cash used for financing activities

 

(14,101)

 

(10,126)

Net increase in cash and cash equivalents

 

4,222

 

1,821

Cash and cash equivalents at beginning of period

 

8,745

 

7,684

Cash and cash equivalents at end of period

$

12,967

$

9,505

Supplemental information:

 

  

 

  

Income tax payments, net

$

3,526

$

2,709

The accompanying notes are an integral part of these consolidated statements.

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MARINE PRODUCTS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1.    GENERAL

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America 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 accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments (all of which consisted of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and six months ended June 30, 2019 are not necessarily indicative of the results that may be expected for the year ending December 31, 2019.

The consolidated balance sheet at December 31, 2018 has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements.

For further information, refer to the consolidated financial statements and footnotes thereto included in the annual report of Marine Products Corporation (“Marine Products,” the “Company” or “MPC”) on Form 10-K for the year ended December 31, 2018.

A group that includes the Company’s Chairman of the Board, R. Randall Rollins and his brother Gary W. Rollins, who is also a director of the Company, and certain companies under their control, controls in excess of fifty percent of the Company’s voting power.

2.    RECENT ACCOUNTING STANDARDS

Recently Adopted Accounting Standards:

Accounting Standards Update (ASU) 2016-02, Leases (Topic 842). The Company adopted ASC 842, Leases and all the related amendments (“new lease standard”) on January 1, 2019 by recognizing on its balance sheet, a right-of-use asset and lease liabilities each totaling approximately $200 thousand, for all of its leases with terms greater than 12 months. The Company adopted the standard on January 1, 2019 using the optional transition method with no cumulative-effect adjustment to the opening balance of retained earnings. The comparative information has not been restated and continues to be reported under the accounting standards that were in effect for those periods. The adoption of the standard did not have a material impact on the Company’s consolidated statements of operations and consolidated statements of cash flows. See “Leases” in the Notes to Consolidated Financial Statements for expanded disclosures.
ASU No. 2017-08 —Receivables —Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities. The amendments shorten the amortization period for certain callable debt securities held at a premium and requires the premium to be amortized to the earliest call date. The amendments are to be applied on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. The Company adopted the standard in the first quarter of 2019 and adoption did not have a material impact on its consolidated financial statements, since the Company changed its investment strategy in the first quarter of 2019 and no longer holds investments in callable debt securities.
ASU No. 2018-02—Income Statement—Reporting Comprehensive Income (Topic 220)—Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. The amendments provide an option to

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MARINE PRODUCTS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

reclassify stranded tax effects within AOCI to retained earnings in each period in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act is recorded. The Company adopted the standard in the first quarter of 2019 and elected to reclassify approximately $414 thousand of stranded tax effects related to its pension plan and unrealized gain on its available-for-sale debt securities from AOCI to retained earnings.
ASU No. 2018-07 —Compensation —Stock Compensation (Topic 718) —Improvements to Nonemployee Share-Based Payment Accounting. The amendments expand the scope of ASU 718 to include share-based payments issued to nonemployees for goods or services, thereby substantially aligning the accounting for share-based payments to nonemployees and employees. The Company adopted these provisions in the first quarter of 2019 and the adoption did not have a material impact on its consolidated financial statements.

Recently Issued Accounting Standards Not Yet Adopted:

To be adopted in 2020 and later:

ASU No. 2016-13, Financial Instruments —Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The amendments affect loans, debt securities, trade receivables, net investments in leases, off-balance sheet credit exposures, reinsurance receivables, and any other financial assets not excluded from the scope that have the contractual right to receive cash. The amendments require the credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration to be presented as an allowance rather than a write-down. It also allows recording of credit loss reversals in current period net income. The amendments are effective starting in the first quarter of 2020 with early application permitted. The Company is currently evaluating the impact of adopting these provisions on its consolidated financial statements.
ASU No. 2017-04 —Intangibles —Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. To simplify the subsequent measurement of goodwill, the amendments eliminate Step 2 from the goodwill impairment test. The annual, or interim, goodwill impairment test is performed by comparing the fair value of a reporting unit with its carrying amount. An impairment charge should be recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. The amendments are effective for annual or any interim goodwill impairment tests beginning in 2020 applied on a prospective basis. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company is currently evaluating the impact of adopting these provisions on its consolidated financial statements.
ASU No. 2018-15 —Intangibles —Goodwill and Other —Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. The amendments reduce the complexity for the accounting for costs of implementing a cloud computing service arrangement and align the requirements for capitalizing implementation costs that are incurred in a hosting arrangement that is a service contract with the costs incurred to develop or obtain internal-use software. The provisions may be applied prospectively or retrospectively. The amendments are effective starting in the first quarter of 2020, with early adoption permitted. The Company is currently evaluating the impact of adopting these provisions on its consolidated financial statements.

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MARINE PRODUCTS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

3.    NET SALES

Accounting Policy:

MPC’s contract revenues are generated principally from selling: (1) fiberglass motorized boats and accessories and (2) parts to independent dealers. Revenue is recognized when obligations under the terms of a contract with our customer are satisfied. Satisfaction of contract terms occur with the transfer of title of our boats, accessories, and parts to our dealers. Net sale is measured as the amount of consideration we expect to receive in exchange for transferring the goods to the dealer. The amount of consideration we expect to receive consists of the sales price adjusted for dealer incentives. The expected costs associated with our base warranties continue to be recognized as expense when the products are sold as they are deemed to be assurance-type warranties (see Note 7). Incidental promotional items that are immaterial in the context of the contract are recognized as expense. Fees charged to customers for shipping and handling are included in net sales in the accompanying consolidated statements of operations and the related costs incurred by the Company are included in cost of goods sold.

Nature of goods:

MPC’s performance obligations within its contracts consists of: (1) boats and accessories and (2) parts. The Company transfers control and recognizes revenue on the satisfaction of its performance obligations (point in time) as follows:

Boats and accessories (domestic sales) – upon delivery and acceptance by the dealer
Boats and accessories (international sales) – upon delivery to shipping port
Parts – upon shipment/delivery to carrier

Payment terms:

For most domestic customers, MPC manufactures and delivers boats and accessories and parts ahead of payment - i.e., MPC has fulfilled its performance obligations prior to submitting an invoice to the dealer. MPC invoices the customer when the products are delivered and receives the related compensation, typically within seven to ten business days after invoicing. For some domestic customers and all international customers, MPC requires payment prior to transferring control of the goods. These amounts are classified as deferred revenue and recognized when control has transferred, which generally occurs within three months of receiving the payment.

When the Company enters into contracts with its customers, it generally expects there to be no significant timing difference between the date the goods have been delivered to the customer (satisfaction of the performance obligation) and the date cash consideration is received. Accordingly, there is no financing component to the Company’s arrangements with its customers.

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MARINE PRODUCTS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Significant judgments:

Determining the transaction price

The transaction price for MPC’s boats and accessories is the invoice price adjusted for dealer incentives. The Company utilizes the expected value method to estimate the variable consideration related to dealer incentives. Key inputs and assumptions in determining variable consideration includes:

Inputs: Current model year boat sales, total potential program incentive percentage, prior model year results of dealer incentive activity (i.e. incentive earned as a percentage of total incentive potential)
Assumption: Current model year incentive activity will closely reflect prior model year actual results, adjusted as necessary for dealer purchasing trends or economic factors

Other:

Our contracts with dealers do not provide them with a right of return. Accordingly, we do not have any obligations recorded for returns or refunds.

Disaggregation of revenues:

The following table disaggregates our sales by major source (in thousands):

Three months ended

Six months ended

(in thousands)

    

June 30, 2019

    

June 30, 2018

    

June 30, 2019

    

June 30, 2018

Boats and accessories

$

87,304

$

85,697

$

169,369

$

162,352

Parts

 

1,392

 

1,309

 

2,380

 

2,190

Net sales

$

88,696

$

87,006

$

171,749

$

164,542

The following table disaggregates our revenues between domestic and international (in thousands):

Three months ended

Six months ended

(in thousands)

    

June 30, 2019

    

June 30, 2018

    

June 30, 2019

    

June 30, 2018

Domestic

$

83,190

$

77,752

$

160,130

$

149,298

International

 

5,506

 

9,254

 

11,619

 

15,244

Net sales

$

88,696

$

87,006

$

171,749

$

164,542

Timing of revenue recognition for each of the periods presented is shown below:

Three months ended

Six months ended

(in thousands)

    

June 30, 2019

    

June 30, 2018

    

June 30, 2019

    

June 30, 2018

Products transferred at a point in time

$

88,696

$

87,006

$

171,749

$

164,542

Products transferred over time

 

 

 

 

Net sales

$

88,696

$

87,006

$

171,749

$

164,542

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MARINE PRODUCTS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Contract balances:

Amounts received from international and certain domestic dealers toward the purchase of boats are classified as deferred revenue and are included in accrued expenses and other liabilities on the Consolidated Balance Sheets.

    

June 30, 

    

December 31, 

    

June 30, 

    

December 31, 

(in thousands)

2019

2018

2018

2017

Deferred revenue

$

332

$

496

$

638

$

864

Substantially all of the amounts of deferred revenue disclosed above were recognized as sales during the immediately following quarters, respectively, when control transferred.

4.    EARNINGS PER SHARE

Basic and diluted earnings per share are computed by dividing net income by the weighted average number of shares outstanding during the respective periods. In addition, the Company has periodically issued share-based payment awards that contain non-forfeitable rights to dividends and are therefore considered participating securities. Restricted shares of common stock (participating securities) outstanding and a reconciliation of weighted average shares outstanding is as follows:

Three months ended

Six months ended

June 30, 

June 30,

(In thousands)

    

2019

    

2018

    

2019

    

2018

Net income available for stockholders:

$

9,373

$

8,990

$

16,842

$

16,599

Less: Adjustments for earnings attributable to participating securities

 

(225)

 

(246)

 

(408)

 

(465)

Net income used in calculating earnings per share

$

9,148

$

8,744

$

16,434

$

16,134

Weighted average shares outstanding (including participating securities)

 

34,090

 

34,561

 

34,166

 

34,584

Adjustment for participating securities

 

(832)

 

(953)

 

(848)

 

(995)

Shares used in calculating basic and diluted earnings per share

 

33,258

 

33,608

 

33,318

 

33,589

5.    STOCK-BASED COMPENSATION

The Company reserved 3,000,000 shares of common stock under the 2014 Stock Incentive Plan with a term of ten years expiring in April 2024. All future equity compensation awards by the Company will be issued under the 2014 plan. This plan provides for the issuance of various forms of stock incentives, including among others, incentive and non-qualified stock options and restricted shares. As of June 30, 2019, there were approximately 1,741,200 shares available for grant.

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MARINE PRODUCTS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Stock-based compensation for the three and six months ended June 30, 2019 and 2018 were as follows:

Restricted Stock

Three months ended June 30, 

Six months ended June 30, 

(in thousands)

    

2019

    

2018

    

2019

    

2018

Pre – tax cost

$

544

$

528

$

1,082

$

1,044

After tax cost

$

424

$

411

$

844

$

814

The following is a summary of the changes in non-vested restricted shares for the three months ended June 30, 2019:

Weighted

Average

Grant-Date

    

Shares

    

Fair Value

Non-vested shares at December 31, 2018

 

947,710

$

9.41

Granted

 

141,600

 

17.21

Vested

 

260,770

 

7.65

Forfeited

 

(11,300)

 

12.47

Non-vested shares at June 30, 2019

 

817,240

11.28

The total fair value of shares vested was approximately $3,818,000 during the six months ended June 30, 2019 and approximately $4,289,000 during the six months ended June 30, 2018.

Other Information

As of June 30, 2019, total unrecognized compensation cost related to non-vested restricted shares was approximately $8,428,000. This cost is expected to be recognized over a weighted-average period of 2.6 years.

For the six months ended June 30, 2019, approximately $456,000 of excess tax benefit for stock-based compensation awards has been recorded as a discrete tax adjustment and classified within operating activities in the consolidated statements of cash flows compared to approximately $583,000 as of June 30, 2018.

6.    MARKETABLE SECURITIES

During the first quarter of 2019, the Company changed its investment strategy and as of June 30, 2019, no longer held investments in marketable securities. The Company held investments in marketable securities for a short duration in the first quarter of 2019. During 2018, Marine Products’ marketable securities were held with a large, well-capitalized financial institution. Management determined the appropriate classification of debt securities at the time of purchase and reevaluated such designations as of each balance sheet date. Debt securities were classified as available-for-sale because the Company did not have the intent to hold the securities to maturity. Available-for-sale debt securities were stated at their fair values, with the unrealized gains and losses, net of tax, reported as a separate component of stockholders’ equity. The cost of securities sold was based on the specific identification method. Realized gains and losses, declines in value judged to be other than temporary, interest and dividends on available-for-sale debt securities have been included in interest income.

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MARINE PRODUCTS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The net realized gains (losses) and the reclassification of net realized gains (losses) from other comprehensive income are as follows:

Three months ended

Six months ended

June 30, 

June 30,

(in thousands)

    

2019

    

2018

    

2019

    

2018

Net realized gain (loss)

$

0

$

(1)

$

4

$

(20)

Reclassification of net realized gains from other comprehensive income

$

0

$

(1)

$

4

$

(20)

Gross unrealized gains (losses) on marketable securities are as follows:

June 30, 2019

December 31, 2018

Gross unrealized

Gross unrealized

(in thousands)

    

Gains

    

(Losses)

    

Gains

    

(Losses)

Municipal Obligations

$

$

$

2

$

(2)

Corporate Obligations

 

 

 

1

 

(10)

$

$

$

3

$

(12)

There were no available-available-for sale securities as of June 30, 2019. The amortized cost basis, fair value and net unrealized gains on the available-for-sale debt securities as of December 31, 2018 are as follows:

December 31, 2018

Net

Amortized

Fair

Unrealized

Type of Securities

    

Cost Basis

    

Value

    

Losses

(in thousands)

 

  

 

  

 

  

Municipal Obligations

$

1,490

$

1,490

$

Corporate Obligations

 

6,184

 

6,175

 

(9)

Total

$

7,674

$

7,665

$

(9)

7.    WARRANTY COSTS AND OTHER CONTINGENCIES

Warranty Costs:

For its Chaparral and Robalo products, Marine Products provides a lifetime limited structural hull warranty and a transferable one-year limited warranty to the original owner. Chaparral also includes a five-year limited structural deck warranty. Warranties for additional items are provided for periods of one to five years and are not transferrable. Additionally, as it relates to the second subsequent owner, a five-year transferrable hull warranty and the remainder of the original one-year limited warranty on certain components are available. The five-year transferable hull warranty terminates five years after the date of the original retail purchase. Claim costs related to components are generally absorbed by the original component manufacturer.

The manufacturers of the engines, generators, and navigation electronics included on our boats provide and administer their own warranties for various lengths of time.

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MARINE PRODUCTS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

An analysis of the warranty accruals for the six months ended June 30, 2019 and 2018 is as follows:

(in thousands)

    

2019

    

2018

Balance at beginning of period

$

5,607

$

5,373

Less: Payments made during the period

 

(2,002)

 

(1,945)

Add: Warranty provision for the period

 

2,191

 

2,093

Changes to warranty provision for prior periods

 

93

 

52

Balance at June 30

$

5,889

$

5,573

The warranty accruals are reflected in accrued expenses and other liabilities on the consolidated balance sheets.

Repurchase Obligations:

The Company is a party to various agreements with third party lenders that provide floor plan financing to qualifying dealers whereby the Company guarantees varying amounts of debt on boats in dealer inventory. The Company’s obligation under these guarantees becomes effective in the case of a default under the financing arrangement between the dealer and the third party lender. The agreements provide for the return of repossessed boats to the Company in new and unused condition subject to normal wear and tear as defined, in exchange for the Company’s assumption of specified percentages of the debt obligation on those boats, up to certain contractually determined dollar limits by the lenders. The Company had no material repurchases of inventory under contractual agreements during the six months ended June 30, 2019 and June 30, 2018.

Management continues to monitor the risk of defaults and resulting repurchase obligations based in part on information provided by third-party floor plan lenders and will adjust the guarantee liability at the end of each reporting period based on information reasonably available at that time.

The Company currently has an agreement with one of the floor plan lenders whereby the contractual repurchase limit is 16 percent of the amount of the average net receivables financed by the floor plan lender for our dealers during the prior 12 month period, which was $15.9 million as of June 30, 2019. The Company has contractual repurchase agreements with additional lenders with an aggregate maximum repurchase obligation of approximately $6.2 million with various expiration and cancellation terms of less than one year, for an aggregate repurchase obligation with all floor plan financing institutions of approximately $22.1 million as of June 30, 2019.

8.    BUSINESS SEGMENT INFORMATION

The Company has only one reportable segment, its powerboat manufacturing business; therefore, the majority of segment-related disclosures are not relevant to the Company. In addition, the Company’s results of operations and its financial condition are not significantly reliant upon any single customer or product model.

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MARINE PRODUCTS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

9.    INVENTORIES

Inventories consist of the following:

    

June 30, 

    

December 31, 

(in thousands)

2019

2018

Raw materials and supplies

$

33,940

$

26,874

Work in process

 

8,903

 

10,671

Finished goods

 

8,061

 

9,225

Total inventories

$

50,904

$

46,770

10.  INCOME TAXES

The Company determines its periodic income tax provision based upon the current period income and the annual estimated tax rate for the Company adjusted for discrete items including tax credits and changes to prior year estimates. The estimated tax rate is revised, if necessary, as of the end of each successive interim period during the fiscal year to the Company’s current annual estimated tax rate.

Income tax provision for the second quarter of 2019 reflects an effective tax rate of 18.3 percent, compared to an effective tax rate of 20.0 percent for the comparable period in the prior year. For the six months ended June 30, 2019, the effective tax rate reflects an income tax provision of 17.4 percent compared to 18.2 percent for the comparable period in the prior year. The slight decrease in effective rate is primarily due to an increase in tax exempt investment gains in 2019 as compared to the same period in 2018. The effective rate in both periods includes the effect of beneficial permanent differences including discrete adjustments related to restricted stock dividends and liabilities related to state income taxes.

11.  EMPLOYEE BENEFIT PLANS

The Company participates in a multiple employer pension plan. The following represents the net periodic benefit cost and related components for the plan:

Three months ended

Six months ended

(in thousands)

June 30, 

June 30, 

    

2019

    

2018

    

2019

    

2018

Interest cost

$

64

$

62

$

128

$

125

Expected return on plan assets

 

(118)

 

(125)

 

(235)

 

(250)

Amortization of net losses

 

22

 

21

 

44

 

41

Net periodic benefit

$

(32)

$

(42)

$

(63)

$

(84)

The Company did not make a contribution to this plan during the six months ended June 30, 2019.

The Company permits selected highly compensated employees to defer a portion of their compensation into a non-qualified Supplemental Executive Retirement Plan (“SERP”). The Company maintains certain securities in the SERP that have been classified as trading. The SERP assets are stated at fair value and totaled approximately $6,278,000 as of June 30, 2019 and $5,518,000 as of December 31, 2018. The SERP assets are reported in other non-current assets on the consolidated balance sheets and changes to the fair value of the assets are reported in selling, general and administrative expenses in the consolidated statements of operations.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Trading gains related to the SERP assets totaled approximately $738,000 during the six months ended June 30, 2019, compared to trading gains of approximately $40,000 during the six months ended June 30, 2018.

12.  FAIR VALUE MEASUREMENTS

The various inputs used to measure assets at fair value establish a hierarchy that distinguishes between assumptions based on market data (observable inputs) and the Company’s assumptions (unobservable inputs). The hierarchy consists of three broad levels as follows:

1.Level 1 – Quoted market prices in active markets for identical assets or liabilities.
2.Level 2 – Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
3.Level 3 – Unobservable inputs developed using the Company’s estimates and assumptions, which reflect those that market participants would use.

The following table summarizes the valuation of financial instruments measured at fair value on a recurring basis on the balance sheet as of June 30, 2019 and December 31, 2018:

 

Fair Value Measurements at June 30, 2019 with: 

 

Quoted prices in

Significant

active markets

other

Significant

for

observable