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EMPLOYEE BENEFIT PLANS

12 Months Ended

Dec. 31, 2021

EMPLOYEE BENEFIT PLANS

EMPLOYEE BENEFIT PLANS

NOTE 12: EMPLOYEE BENEFIT PLANS

Supplemental Executive Retirement Plan (“SERP”) - The Company permits selected highly compensated employees to defer a portion of their compensation into the SERP. The SERP assets are invested primarily in company-owned life insurance (“COLI”) policies as a funding source to satisfy the obligation of the SERP. The assets are subject to claims by creditors, and the Company can designate them to another purpose at any time. Investments in COLI policies consist of variable life insurance policies of $9.7 million as of December 31, 2021 and $8.6 million as of December 31, 2020. In the COLI policies, the Company is able to allocate assets across a set of choices provided by the insurance underwriter, including fixed income securities and equity funds. The COLI policies

are recorded at their net cash surrender values, which approximates fair value, as provided by the issuing insurance company, whose Standard & Poor’s credit rating was A+.

The Company classifies the SERP assets as trading securities as described in Note 1. The fair value of these assets totaled $12,264,000 as of December 31, 2021 and $10,622,000 as of December 31, 2020. 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. Trading gains related to the SERP assets totaled $1,643,000 in 2021, $906,000 in 2020 and $1,197,000 in 2019.

The SERP liabilities include participant deferrals net of distributions and are stated at a fair value of $15,564,000 as of December 31, 2021 and $12,524,000 as of December 31, 2020. The SERP liabilities are reported on the consolidated balance sheets in long-term pension liabilities and any change in the fair value is recorded as compensation cost within selling, general and administrative expenses in the consolidated statements of operations. Changes in the fair value of the SERP liabilities represented unrealized gains of $1,647,000 in 2021, $1,395,000 in 2020 and $1,501,000 in 2019.

Retirement Income Plan — Marine Products participates in the tax-qualified, defined benefit, noncontributory, trusteed retirement income plan sponsored by RPC that covers substantially all employees with at least one year of service prior to 2002.

During the fourth quarter of 2021, the Company initiated actions to terminate the defined benefit pension plan and as such, the year-end pension obligation has been valued on a termination basis. Specifically, the actuaries utilized an approach based on their experience with other plan terminations that (i) estimated a take rate for lump sums; (ii) for those participants electing a lump-sum, calculated the amount using the November 2021 IRS segment rates and (iii) for those participants with annuities purchased, calculated the amount using estimated insurance settlement rates. We do not currently expect the Company to make any contributions to the Retirement Income Plan in 2022.

The Company’s fair value of the plan assets exceeded the projected benefit obligation for its Retirement Income Plan by $1,038,000 and thus the plan was over-funded as of December 31, 2021. The following table sets forth the funded status of the Retirement Income Plan and the amounts recognized in Marine Products’ consolidated balance sheets:

​

​	​	​	​	​	​	​
December 31,		2021			2020
(in thousands)		​			​
ACCUMULATED BENEFIT OBLIGATION, END OF YEAR	​	$	5,832	​	$	5,576
​	​	​	​	​	​	​
CHANGE IN PROJECTED BENEFIT OBLIGATION:	​		​	​
Benefit obligation at beginning of year	​	$	5,576	​	$	6,433
Service cost	​		—	​		—
Interest cost	​		147	​		230
Actuarial loss	​		347	​		622
Benefits paid	​		(238)	​		(264)
Settlement	​	​	—	​	​	(1,445)
Projected benefit obligation at end of year	​	$	5,832	​	$	5,576
CHANGE IN PLAN ASSETS:	​		​	​
Fair value of plan assets at beginning of year	​	$	7,351	​	$	7,314
Actual return on plan assets	​		(243)	​		1,196
Employer contributions	​		—	​		550
Benefits paid	​		(238)	​		(264)
Settlements	​	​	—	​	​	(1,445)
Fair value of plan assets at end of year	​	$	6,870	​	$	7,351
Funded status at end of year	​	$	1,038	​	$	1,775

​

​	​	​	​	​	​	​
December 31,		2021			2020
(in thousands)	​	​	​	​	​	​
AMOUNTS RECOGNIZED IN THE CONSOLIDATED BALANCE SHEETS CONSIST OF:	​	​	​	​	​	​
Noncurrent assets	​	$	1,038	​	$	1,775
Current liabilities	​		—	​		—
Noncurrent liabilities	​		—	​		—
​	​	$	1,038	​	$	1,775

​

The funded status of the Retirement Income Plan was recorded in the consolidated balance sheets in other assets as of both December 31, 2021 and December 31, 2020.

​

​	​	​	​	​	​	​
December 31,		2021			2020
(in thousands)		​			​
AMOUNTS (PRE-TAX) RECOGNIZED IN ACCUMULATED OTHER COMPREHENSIVE LOSS CONSIST OF:		​			​
Net loss	​	$	3,303	​	$	2,496
Prior service cost (credit)	​		—	​		—
Net transition obligation (asset)	​		—	​		—
​	​	$	3,303	​	$	2,496

​

The accumulated benefit obligation for the Retirement Income Plan as of December 31, 2021 and 2020 has been disclosed above. The Company uses a December 31 measurement date for this qualified plan. As part of the plan termination, the Company expects to recognize a non-cash settlement charge for the remaining balance in the accumulated other comprehensive loss at that time.

Amounts recorded in the consolidated balance sheet as pension liabilities consist of:

​

​	​	​	​	​	​	​
December 31,		2021			2020
(in thousands)		​			​
SERP liability	​	$	(15,564)	​	$	(12,524)
Funded status of Retirement Income Plan	​		—	​		—
Pension liabilities	​	$	(15,564)	​	$	(12,524)

​

Marine Products’ funding policy is to contribute to the Retirement Income Plan the amount required, if any, under the Employee Retirement Income Security Act of 1974. The Company did not contribute to the plan in 2021 and contributed $550,000 in 2020. The components of net periodic benefit cost of the Retirement Income Plan are summarized as follows:

​

​	​	​	​	​	​	​	​	​	​
Years ended December 31,	​	2021		​	2020		​	2019
(in thousands)		​	​	​	​	​	​	​	​
Service cost for benefits earned during the period	​	$	—	​	$	—	​	$	—
Interest cost	​		147	​		230	​		255
Expected return on plan assets	​		(289)	​		(292)	​		(468)
Amortization of net losses	​		73	​		98	​		87
Settlement loss	​	​	—	​	​	647	​	​	—
Net periodic (benefit) cost	​	$	(69)	​	$	683	​	$	(126)

​

The Company recognized pre-tax decreases to the funded status in accumulated other comprehensive income (loss) of $806,000 in 2021, $(899,000) in 2020 and $213,000 in 2019. There were no previously unrecognized prior service costs during 2021, 2020 and 2019. In 2020, the Company offered a limited lump-sum payment window for vested terminated participants who had terminated employment before July 1, 2020 and for active employees who reached age 59 ½ by December 1, 2020, with a vested balance. The participants at their election, could received their vested balance either immediately as a lump-sum or a monthly annuity payment. Non-cash settlement charges of $0.6 million recorded for the year ended December 31, 2020 and shown above represent the

accelerated recognition of actuarial losses previously reflected in accumulated other comprehensive loss. The pre-tax amounts recognized in other comprehensive income for the years ended December 31, 2021, 2020 and 2019 are summarized as follows:

​

​	​	​	​	​	​	​	​	​	​
(in thousands)		2021			2020			2019
Net loss (gain)	​	$	879	​	$	(154)	​	$	300
Amortization of net loss	​		(73)	​		(98)	​		(87)
Net transition obligation (asset)	​		—	​		—	​		—
Settlement loss	​	​	—	​	​	(647)	​	​	—
Amount recognized in accumulated other comprehensive income (loss)	​	$	806	​	$	(899)	​	$	213

​

The weighted average assumptions as of December 31 used to determine the projected benefit obligation and net benefit cost were as follows:

​

​	​	​	​	​	​	​	​
December 31,		2021		2020		2019
PROJECTED BENEFIT OBLIGATION:							​
Discount rate		N/A	(1)	2.70	%	3.70	%
Rate of compensation increase		N/A		N/A		N/A
NET BENEFIT COST:
Discount rate		2.70	%	3.70	%	4.65	%
Expected return on plan assets		4.00	%	4.00	%	7.00	%
Rate of compensation increase		N/A		N/A		N/A

​

⁽¹⁾ Projected benefit obligation as of December 31, 2021 reflects proposed termination of the Plan and is calculated based on various assumptions in accordance with the Plan agreement.

​

The Company’s expected return on assets assumption is derived from a detailed periodic assessment by its management and investment advisor. It includes a review of anticipated future long-term performance of individual asset classes and consideration of the appropriate asset allocation strategy given the anticipated requirements of the plan to determine the average rate of earnings expected on the funds invested to provide for the pension plan benefits. While the assessment considers recent fund performance and historical returns, the rate of return assumption is derived primarily from a long-term, prospective view. Based on its assessment, the Company has concluded that its expected long-term return assumption of four percent is reasonable.

The plan’s weighted average asset allocation at December 31, 2021 and 2020 by asset category along with the target allocation for 2022 are as follows:

​

​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	Percentage of	​	Percentage of
​	​	​	​	​	​	​	Plan Assets as of	​	Plan Assets as of
​	​	Target Allocation				​	December 31,	​	December 31,
Asset Category		for 2022					2021		2020
Cash and Cash Equivalents		0	%	-	5.0	%	1.4	%	2.0	%
Fixed Income Securities		15.0	%	-	100.0	%	98.6		98.0	​
Total		​	​	​	​	​	100.0	%	100.0	%

​

The Company’s investments consist primarily of fixed-income securities that include corporate bonds, mortgage-backed securities, sovereign bonds, and U.S. Treasuries. For each of the asset categories in the pension plan, the investment strategy is identical – maximize the long-term rate of return on plan assets while minimizing the level of risk to minimize the cost of providing pension benefits. The investment policy establishes a target allocation for each asset class which is rebalanced as required. The plan utilizes a number of investment approaches, including but not limited to fixed income funds in which the underlying securities are marketable, to achieve this target allocation.

The following tables present our plan assets using the fair value hierarchy as of December 31, 2021 and 2020. The fair value hierarchy has three levels based on the reliability of the inputs used to determine fair value. See Note 10 for a brief description of the three levels under the fair value hierarchy.

Fair Value Hierarchy as of December 31, 2021:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Investments (in thousands)

​

​

Total

Level 1

Level 2

Cash and Cash Equivalents

​

(1)

​

$

87

​

$

87

​

$

—

Fixed Income Securities

​

(2)

​

6,783

​

—

​

6,783

Total Assets in the Fair Value Hierarchy

​

​

​

​

$

6,870

​

$

87

​

$

6,783

​

Fair Value Hierarchy as of December 31, 2020:

​

​

​

​

​

​

​

​

​

​

​

​

​

Investments (in thousands)

​

​

Total

Level 1

Level 2

Cash and Cash Equivalents

​

(1)

​

$

138

​

$

138

​

$

—

Fixed Income Securities

​

(2)

​

7,213

​

—

​

7,213

Total Assets in the Fair Value Hierarchy

​

​

​

​

$

7,351

​

$

138

​

$

7,213

​

(1) Cash and cash equivalents, which are used to pay benefits and plan administrative expenses, are held in Rule 2a-7 money market funds.

(2) Fixed income securities are primarily valued using a market approach with inputs that include broker quotes, benchmark yields, base spreads and reported trades.

​

The Company estimates that the future benefits payable for the Retirement Income Plan over the next ten years are as follows:

​

​	​	​	​
(in thousands)			​
2022	​	$	1,829
2023	​		4,192
2024	​		—
2025	​		—
2026	​		—
2027-2031	​	$	—

​

401(k) Plan— Marine Products participates in a defined contribution 401(k) plan sponsored by RPC that is available to substantially all full-time employees with more than 90 days of service. Effective January 1, 2019, the Company began matching 100 percent of employee’s contributions for each dollar of a participant’s contribution to the 401(k) Plan for the first three percent of his or her annual compensation, and fifty percent for each dollar of a participant’s contribution to the 401(k) Plan for the next three percent of his or her annual compensation. Employees vest in the Company’s contributions after three years of service. The charges to expense for Marine Products’ contributions to the 401(k) plan were $976,000 in 2021, $603,000 in 2020 and $796,000 in 2019.

Stock Incentive Plan— 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 December 31, 2021, there were 1,382,000 shares available for grant.

The Company recognizes compensation expense for the unvested portion of awards outstanding over the remainder of the service period. The compensation cost recorded for these awards will be based on their fair value at grant date less the cost of estimated forfeitures. Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods to reflect actual forfeitures.

Pre-tax stock-based employee compensation expense was approximately $2,289,000 ($1,785,000 after tax) for 2021, $3,102,000 ($2,420,000 after tax) for 2020, and $2,123,000 ($1,656,000 after tax) for 2019.

Stock Options— Stock options are granted at an exercise price equal to the fair market value of the Company’s common stock at the date of grant except for grants of incentive stock options to owners of greater than 10 percent of the Company’s voting securities which must be made at 110 percent of the fair market value of the Company’s common stock. Options generally vest ratably over a period of five years and expire in 10 years, except to owners of greater than 10 percent of the Company’s voting securities, which expire in five years.

The Company estimates the fair value of stock options as of the date of grant using the Black-Scholes option pricing model. The Company has not granted stock options to employees since 2004. There were no options exercised in 2021, 2020 or 2019 and there are no stock options outstanding as of December 31, 2021.

Restricted Stock— Marine Products grants selected employees time lapse restricted stock that vest after a certain stipulated number of years from the grant date, depending on the terms of the issue. The Company has currently issued time lapse restricted shares that vest in 20 percent increments starting with the second anniversary of the grant, over the six-year period beginning on the date of grant. During these years, grantees receive all dividends declared and retain voting rights for the shares.

The agreements under which the restricted stock is issued provide that shares awarded may not be sold or otherwise transferred until restrictions established under the stock plans have lapsed. Upon termination of employment from the Company, with the exception of death (fully vests), disability or retirement (partially vests based on duration of service), shares with restrictions are forfeited in accordance with the plan.

The following is a summary of the changes in non-vested restricted shares for the year ended December 31, 2021:

​

​	​	​	​	​	​
​	​	​	​	Weighted Average
​	​	​	​	Grant-Date Fair
​		Shares		Value
Non-vested shares at January 1, 2021		678,220	​	$	12.89
Granted		189,750	​	​	16.55
Vested		(194,800)	​	​	10.25
Forfeited		(1,800)	​	​	11.76
Non-vested shares at December 31, 2021		671,370	​	$	14.70

​

The following is a summary of the changes in non-vested restricted shares for the year ended December 31, 2020:

​

​	​	​	​	​	​
​	​	​	​	Weighted Average
​	​	​	​	Grant-Date Fair
​		Shares		Value
Non-vested shares at January 1, 2020		815,540	​	$	11.29
Granted		179,000	​	​	15.00
Vested		(310,520)	​	​	9.91
Forfeited		(5,800)	​	​	13.09
Non-vested shares at December 31, 2020		678,220	​	$	12.89

​

The fair value of restricted stock awards is based on the market price of the Company’s stock on the date of grant and is amortized to compensation expense on a straight-line basis over the requisite service period. The weighted average grant date fair value of these restricted stock awards was $16.55 in 2021, $15.00 in 2020 and $17.21 in 2019. The total fair value of shares vested was approximately $3,174,000 in 2021, $4,431,000 in 2020 and $3,818,000 during 2019.

For the year ending December 31, 2021 approximately $341,000 of excess tax benefits for stock-based compensation awards were recorded as a discrete tax adjustment and classified within operating activities in the consolidated statements of cash flows compared to approximately $363,000 for the year ending December 31, 2020.

Other Information— As of December 31, 2021 total unrecognized compensation cost related to non-vested restricted shares was approximately $7,821,000 which is expected to be recognized over a weighted-average period of 3.3 years.

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The entire disclosure for retirement benefits.

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