Marine Products Corp (MPX) 2012 Q2 法說會逐字稿

Good morning, and thank you for joining us for Marine Products Corporation's second-quarter 2012 earnings conference call. Today's call will be hosted by Rick Hubbell, President and CEO, Ben Palmer, Chief Financial Officer. Also present is Jim Landers, Vice President of Corporate Finance.

At this time, all participants are in listen-only mode. Following the presentation, we will conduct a question-and-answer session. Instructions will be provided at that time for you to queue up for questions. I would like to advise everyone that this conference call is being recorded.

Jim will get us started by reading the forward-looking disclaimer.

Good morning. Before we get started today, I'd like to remind everyone that we are going to be discussing things that are not historical facts. Some of the statements that will be made on this call will be forward-looking in nature and reflect a number of known and unknown risks. I'd like to refer you to our press release issued today, the 2011 10-K, and our other SEC filings that outline those risks. All of these are available on our website at www.MarineProductsCorp.com. If you have not received our press release for any reason, please visit our website for a copy.

We will make a few comments about the quarter and then we will be available for your questions. Now, I'll turn the call over to our President and CEO, Rick Hubbell.

Jim, thank you. We issued our earnings press release for the second quarter of 2012 this morning. Ben Palmer, our CFO, will discuss the financial results in more detail in a moment. At this time, I will briefly discuss our operational highlights.

Net sales for the quarter were 32% higher than one year ago. Unit sales for the quarter increased almost 60% due primarily to the new value priced models, partially offset by a related decrease in the average selling price per boat. Gross profit and operating income increased along with the increase in net sales.

The overall industry environment has improved, and we participated in this positive development through the successful introduction of our entry-level models and the national pricing program. During the second quarter of 2012, we maintained production levels in order to ensure that our dealers have sufficient inventory to satisfy improving retail demand. At the end of the quarter, our dealer inventory was lower than at the end of the first quarter. Order backlog was lower as we work to fulfill dealer demand.

We have had a very good retail selling season and are pleased with moderately higher consumer confidence, lower fuel prices, and a few signs of an improving residential real estate market. However, we continue to monitor the economic environment for changes in market conditions that could impact our business plans.

With that overview, I'll turn it over to our CFO, Ben Palmer.

Thanks Rick. For the quarter ending June 30, 2012, we reported net income of $2.2 million compared to net income of $1.2 million last year. Our diluted earnings per share for the quarter were $0.06 compared to earnings per share of $0.03 in 2011.

Our unit sales to dealers increased by 58.6% compared to last year. Although unit sales increased by a large percentage, our average selling prices decreased by 18.1% compared to the prior year.

A significant driver of this decrease was sales of our H2O value-priced entry-level Chaparral and Robalo Sport fishing boat models which were introduced in the current model year. Average selling prices of our other larger models increased slightly compared to the prior year due to changes in model mix, although unit sales in these other product lines declined.

Sales activity in the larger Boat Market segment continues to struggle. This quarter's gross profit was $7.3 million, an increase of 48.7% compared to $4.9 million in 2011. Gross margin was 19% of net sales for the quarter compared to gross margin last year of 16.9%. Gross profit this quarter was higher due to improved sales, coupled with increased efficiencies that resulted from higher production levels.

Selling, General and Administrative expenses increased by 23% in the second quarter of 2012 compared to the prior year and were 11.8% of net sales. These costs increased due to expenses that vary with sales and profitability such as incentive compensation, sales commissions, and warranty expense.

US domestic net sales increased by 36.6% in the second quarter of 2012 compared to the second quarter of last year. International sales comprised 22.7% of consolidated net sales in the current second quarter, a decrease compared to 25.2% of consolidated net sales last year. International sales increased by 19.1% in the second quarter compared to the prior year. This increase was due entirely to increased sales in Canada as sales in our other international markets declined slightly.

Interest income during the second quarter was $253,000, essentially unchanged compared to the second quarter of last year.

Our balance sheet remains strong. At the end of the second quarter, our cash and marketable securities balance totaled $58.7 million, a $2.1 million increase compared to this time last year, although this balance declined by $1.2 million compared to the end of the first quarter. Inventories increased by $8 million compared to last year, consistent with higher production levels and timing of acquiring critical parts.

During the quarter, we repurchased 54,835 shares of our common stock. And this is the first time since 2008 that we have repurchased our stock on the open market.

We continue to closely monitor and manage our dealer inventories and backlog. At the end of the second quarter, our dealer inventory was lower than at the end of the first quarter, which indicates strong dealer sales during the 2012 retail selling season. Due to the levels of dealer demand, our feelings about the strength of this retail selling season and our recent production levels, backlog is lower at the end of the second quarter than the first quarter.

And with that I'll turn it back over to Rick for a few closing comments.

Thanks Jim. Excuse me. We are pleased with this retail selling season and the industry indicators that the selling environment for our products is growing stronger. While it will be a long time before overall industry sales return to pre-recession levels, we are very happy about the market's reception to our new products and the ability of our dealer network to take delivery of our products and sell them effectively to the retail boat buyer.

We are preparing for our dealer conference next month and at this annual event we will introduce our 2013 model lineup to our dealer network. For 2013, we will be introducing an expanded lineup of Chaparral H2Os and Robalo entry-level models, as well as some other new Chaparral and Robalo models which we believe will appeal to our target market.

I'd like to thank you for joining us this morning, and we'd be happy to take any questions at this time.

(Operator Instructions). Joe Hovorka, Raymond James.

Thanks guys. A couple of quick questions. What was your dealer inventory compared to the second quarter last year? Is it also down?

Dealer inventory year-over-year actually is up and fairly consistent with the increase in sales. That's a comfortable level.

Sure. Consistent with the increase that you have reported here in wholesale?

Yes.

Okay. Do you have an idea of what retail was in the second quarter for you? How much it was up versus last year?

This is Jim. That's a very good question. Not sure. We haven't done that calculation internally, although we could, and the market share stats, as you know, won't be out for a while. So I'm afraid I don't have that.

Okay. Then last question, your backlog. Is that -- how does that compare to the second quarter of '11?

It is a little lower. Backlog in dollars is slightly lower than this time last year.

That would imply probably up in units because the backlog is probably made up of H2O and things like that?

Yes, I think that's right. I believe that's correct.

Okay. Great, that's all I had right now.

Thanks Joe.

(Operator Instructions). It appears there are no further questions in the queue. I would like to turn the call back over to Jim Landers for closing remarks.

Joe, thanks for the question. Thanks to everybody else who has joined in this morning. We appreciate your interest in Marine Products and hope that you have a good day. Thanks again.

Thank you. As a reminder, this conference call will be replayed on the Company website within two hours of completion of the call.