Marine Products Corp (MPX) 2017 Q1 法說會逐字稿

Good morning, and thank you for joining us for the Marine Products Corporation's First Quarter 2017 Financial Earnings Conference Call. Today's call will be hosted by Rick Hubbell, President and CEO; and Ben Palmer, Chief Financial Officer. Also present is Jim Landers, Vice President of Corporate Finance. (Operator Instructions) I would like to advise everyone that this conference is being recorded. Jim will get us started by reading the forward-looking disclaimer.

Thank you, Kris, and good morning, everyone. Before we get started today, I'd like to remind everybody that some of the statements that we will make on this call may 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, our 2016 10-K and other SEC filings that outline those risks. All of these are available on our website at www.marineproductscorp.com.

If you've not received our press release, please visit our website again at www.marineproductscorp.com for a copy. We will make a few comments about the quarter, and then we'll be available for your questions.

Now I'll turn the call over to our President and CEO, Rick Hubbell.

Jim, thanks. We issued our earnings press release for the first quarter of 2017 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. Our net sales increased by 11.6% during the first quarter. Net sales improved due to the higher unit sales of Chaparral's H2O series and our Robalo outboard sport fishing boats. This quarter represented a continued overall improvement in the recreational boat market and a good start to 2017. We continue to be pleased with the market share of all of our product categories.

Our Chaparral sterndrive product continued to hold the highest market share in its category, approximately 15.2% for the 12 months ended December 31, 2016. Our Chaparral Vortex does hold the #2 position in the 24-foot jet boat category, and Robalo is the top 5 manufacturer in the outboard sportboat category. We also announced this morning that our Board of Directors yesterday declared a quarterly dividend of $0.07 per share, a continuation of the increased dividend declared last quarter.

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

Thank you, Rick. For the quarter ended March 31, 2017, we reported net income of $5.3 million, an increase of 34.2% compared to $3.9 million in the first quarter of 2016. Our diluted earnings per share for the quarter were $0.15, an increase of $0.05 compared to diluted earnings per share of $0.10 in 2016. A lower share count due to our tender offer completed last year contributed approximately $0.01 to our diluted EPS this quarter. In addition, the beneficial effect of a discrete tax item contributed approximately $0.02 to our diluted EPS this quarter.

Net sales for the first quarter of 2017 were $71 million, an increase of 11.6% compared to the first quarter of '16. For the quarter, our unit sales increased by 12.1%, and our parts and accessory sales increased as well. These increases were partially offset by a decrease in average selling price per boat, a decrease that was due to the mix of model sales during the quarter.

Gross profit in the first quarter was $14.9 million, an increase of 17.5% compared to the first quarter of 2016. Gross margin during the quarter improved to 21% due to manufacturing efficiencies compared to 19.9% in the first quarter of 2016.

Selling, general and administrative expenses were $8 million in the first quarter of this year, an increase of $1 million compared to the first quarter of 2016. SG&A expenses were 11.3% of net sales during the first quarter of '17 and 11.1% of net sales during the first quarter of the prior year.

U.S. domestic net sales were strong, increasing by 18.7% in the first quarter of 2017 compared to the first quarter of last year. However, international sales continued to be weak and represented only 5.4% of total sales during the first quarter of 2017, a decrease compared to the 11% of total sales during the first quarter of 2016.

Our cash and marketable securities balance decreased to $18 million at the end of the first quarter of 2017 compared to $49.1 million at the end of the first quarter of last year. This decrease was principally due to the funds required to fund our tender offer during the fourth quarter of last year. Compared to the end of 2016, however, our cash and marketable securities balance increased by $6.1 million.

Interest income during the first quarter was $51,000 compared to $92,000 in the first quarter of last year due to the marketable securities used to fund a portion of the tender offer. Marine Products income tax provision during the first quarter was $1,688,000 compared to $1,816,000 in the first quarter of 2016. Our effective tax rate was 24.3% in the first quarter of 2017 compared to 31.7% in the first quarter of 2016. The effective tax rate was lower during the first quarter of this year because of the beneficial discrete adjustment of $580,000 related to the required adoption of an accounting pronouncement in the quarter. The accounting pronouncement requires excess tax benefits and efficiencies related to share-based payment awards be recognized as a component of income tax expense rather than stockholder's equity as in prior periods. We project that our effective tax rate for the remainder of 2017 will be approximately 33%. As of March 31, 2017, dealer inventories and order backlog were higher than the prior year, reflecting our dealer's optimism for the upcoming retail selling season. We share our dealer's optimism, and our production going into the second quarter is higher than at this time last year.

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

Ben, thank you. As we approach the peak of the 2017 retail selling season, I am pleased to report strong initial sales of our new Surf Series, which we described in our last earnings call. Also, during the first quarter, we generated strong sales in our largest Vortex Jet Boat model and the new Robalo model with the extra seating configuration. We look forward to our dealer meeting in September, where we can demonstrate our new model development and celebrate our dealers' recent successes. I'd like to thank you for joining us this morning. And we'd be happy to take any questions you may have.

(Operator Instructions) And we'll take our first question from Jimmy Baker with B. Riley.

This is Austin on for Jimmy. So gross margins were strong in the quarter. What's your outlook for the year there with those?

This is Jim Landers. Similar. Margins did improve. We think that they will be that way for the rest of the year and what would drive strong margins. So certainly, the margins that we reported for this quarter would be high production levels, which we anticipate, and a model mix that yields some good margins. So we don't see commodity prices increasing in a way that would hurt our margins. So we think they're pretty steady for now.

Okay, I got it. It's helpful. And then any early read on Canada? And if we might see that market turn the corner for you here in 2017? And then just that market specifically, how did it perform in Q1 in terms of dealer orders?

This is Ben. In short, it is difficult to get a read on Canada. It continues to be a bit weak for us. We're hopeful that it may turn around. But as we've continued on this trend internationally, it's been weak. We would love for it to turn. We know that the European equity markets are doing a bit better, and we hope eventually that will translate into better sales. But we don't have any great current orders or indication to hang our hat on at this point.

All right, understood. And then just lastly for me. You called out the Surf Series in the press release. Can you just help us frame that a bit how often are your dealers and customers selecting that Surf package on the model that's offered?

Well, this is Jim, again. This is the first quarter that we reported sales of Surf Series boats. They actually help that model category a bit, but still small at this point. We sold some that were the 246 in SSi, the 227 and 257 in the SSX models and then some 244 and 264 Sunestas that were the Surf Series. So we're encouraged by the fact that they were slightly larger boats and across all 3 of those broader product categories. So it's kind of what we can report right now.

(Operator Instructions) And there are no further questions in the queue at this time.

Okay. Well, Kris, thank you, and thanks for people who called in to listen. That will conclude the call for us. We hope everybody has a good day. We'll talk to you soon.

And this concludes today's call. This call will be replayed on the website, www.marineproductscorp.com within 2 hours following the completion of the call.