Marine Products Corp (MPX) 2021 Q3 法說會逐字稿

Good morning, and thank you for joining us for Marine Products Corporation's Third Quarter 2021 Financial Earnings Conference Call. Today's call will be hosted by Rick Hubbell, President and CEO; and Ben Palmer, Chief Financial Officer. Also presenting for today is Mr. Jim Landers, Vice President of Corporate Services. (Operator Instructions) 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 is being recorded.

Jim will get us started by reading the forward-looking disclaimer. Sir, please go ahead.

Thank you, and good morning.

Before we get started today, I'd like to remind everyone that some of the statements that we'll make on this call may be forward-looking in nature and reflect a number of known and unknown risks. I'd like you -- like to refer you to our press release issued today, our 2020 10-K and other SEC filings that outline those risks. All of these are available on our website at marineproductscorp.com.

Also in today's earnings release and conference call, we refer to EBITDA, which is a non-GAAP measure of operating performance. We use this non-GAAP measure because it allows us to compare performance consistently over various periods without regard to changes in our capital structure. Our press release issued today in our website contain a reconciliation of this non-GAAP financial measure to net income, which is the nearest GAAP financial measure. Please review this disclosure if you're interested in seeing how it is [reconciled].

If you've not received our press release and would like one, please visit our website, again, at 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 third quarter of 2021 this morning. Ben Palmer, our CFO, will discuss the financial results in more detail in a moment.

Now a few highlights on the quarter. Marine Products Corporation's third quarter 2021 results reflect both high demand for our products and continued supply chain challenges, which prevented us from shipping as many boats as we had planned. As we experienced in 2020, retail and dealer demand continued beyond the traditional selling season for recreational boats. As a result of these challenges, we cut production during the third quarter. In spite of this cut, we increased unit sales to our dealers during the period by 5.3% compared to the third quarter of 2020.

Average selling prices increased slightly during the quarter due to a favorable model mix, but this increase was less than it might have been because we honored prior model year pricing for the vast majority of our shipments during the quarter.

The recently reported market share statistics for the 12 months ended June 30, 2021, indicate that Robalo continues to hold the highest market share in the 16- to 36-foot outboard category. Chaparral also holds leading market share among its peers who manufacture both sterndrive and outboard boats.

We also announced this morning that our Board of Directors declared a regular quarterly dividend of $0.12 per share.

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

Thank you, Rick.

Net sales for the third quarter of 2021 were $75.8 million, a 10.3% increase compared to the third quarter of last year. Unit sales increased by 5.3% during the quarter. Average selling prices increased by slightly more than 1% due to a model mix which included larger boats. Net sales also improved during the quarter because of lower incentive costs due to higher demand and shipments to dealers during the quarter of prior back-ordered engines.

Gross profit in the third quarter was $16 million, a slight decrease compared to the third quarter of 2020. Gross margin during the quarter decreased to 21.2% compared to 23.6% in the third quarter of 2020. Gross margin as a percentage of net sales declined due to higher raw materials and component costs as well as the accompanying higher freight costs. Supply chain disruptions also impacted operations during the quarter, which resulted in labor cost inefficiencies.

Selling, general and administrative expenses were $7.7 million in the third quarter of 2021, a slight decrease of $185,000 compared to $7.9 million in the third quarter of last year. EBITDA in the third quarters of both 2021 and 2020 was $8.8 million.

For the quarter ended September 30, 2021, we reported net income of $6.7 million, approximately the same as net income of $6.5 million in the third quarter of 2020. Diluted earnings per share were $0.20 in the third quarter of 2021 compared to $0.19 earnings per share in the third quarter of last year.

Our effective tax rate during the current quarter was 19.9% compared to 21.8% in the third quarter of the prior year. And we project the full year 2021 effective tax rate of approximately 20%.

Our international sales accounted for 4.5% of total sales during the quarter and increased by 57.6% compared to the third quarter of last year. Sales to our Canadian dealers increased modestly, but sales increased significantly in several other international markets.

Cash balance at the end of the third quarter was $9.6 million, a significant decrease compared to $29 million at the end of the third quarter of 2020. This decline in our cash balance was due to the negative impacts of the significant increase in inventories caused by delayed deliveries of critical components and the resulting delayed shipments of substantially completed boats. Several of these critical bottlenecks have eased. And as a result, our working capital requirements are now declining, and our cash balance will be increasing during the coming months.

Dealer inventories are similar to the second quarter of 2021 but significantly lower than at this time last year. Order backlog potential remains at historic highs.

With that, I'll now turn it back over to Rick for a few closing remarks.

Thank you, Ben.

Along with the rest of the recreational boating industry and any manufacturer that relies on an extensive supply chain, we are experiencing unprecedented disruptions in our manufacturing processes which are negatively impacting our sales and profitability. I am pleased to let you know that several of these critical bottlenecks have eased, and our labor efficiencies are improving. We also continue to coordinate our suppliers' delivery schedules and our own production schedules so that we can optimize our efficiencies while meeting as much of this continued unprecedented demand as possible.

We honored existing agreements with dealers and retail customers during the third quarter by fulfilling remaining 2021 model year orders. As we enter the fourth quarter, we are shipping almost exclusively 2022 model year boats, reflecting model year price increases. Also, the 2022 model year lineup has larger average sizes and is more streamlined to improve manufacturing efficiencies. The selling price increases and model portfolio changes should serve as a catalyst for improving financial results.

We are approaching the 2022 winter boat shows season and are monitoring which in-person shows will take place. We are dedicated to maintaining a strong presence in this important part of the retail selling season as well as continuing to develop innovative marketing efforts to keep our brands' images in front of our customers.

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) We don't have any questions over the phone. And with that, this concludes today's conference call. And please be advised that the conference will be replayed on marineproductscorp.com within 2 hours following the completion of the call.

Thank you, everyone, for joining us. Have a good day.