Q4 2019 Earnings Call
Good morning, and thank you for joining us for the Marine products Corporation fourth quarter 2019 financial earnings Conference call.
Today's call will be hosted by Rick Hubbell, President and CEO and Ben Palmer Chief Financial Officer off also present is Jim Landers, Vice President corporate finance.
At this time all participants are in a listen only mode. Following the presentation. We will conduct a question answer session and 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.
Thank you and good morning, before you started today I'd like to remind everyone 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 for 2018, 10-K and or other SEC filings that outlook.
Those risks.
All of these are available on our website at green products Corp. Dot com.
She's not received our press release, please visit our website again at marine products Corp. Dot com for a copy.
We'll make a few comments about the quarter and then we'll be available for your questions now I will turn the call over to our president and CEO Rick Hubbell.
Jim Thank you.
We issued our earnings press release for the fourth quarter 2019. This morning.
Ben Palmer CFO will discuss the financial results in more detail in a moment. This time I will briefly discuss our operational highlights.
As previously announced we reduced our headcount and lowered our production during the fourth quarter.
As a result, Nick sales during the fourth quarter decreased 22.4% over the fourth quarter of the prior year.
Net sales decreased due to a 21% decrease in the number of units sold during the quarter.
Average selling prices decreased slightly due to model mix.
We maintain high market share in all of our major categories.
Our chaparral sterndrive products.
Hi, this the second highest market share in their category approximately 16.2%.
For the 12 months ending September Thirtyth 2019.
Revolver maintained its position as the second largest brands in its category with market share of 5.3%.
And the combination of robot low.
And chaperone outboards continues to hold the highest position in the overall outboard market, where the market share of 6.5%.
We announced this morning that our board of directors declared a regular quarterly cash dividends of 12 cents per share.
Also during the fourth quarter, we repurchased 88983 shares of common stock on the open markets with that ill review, our turn it over to our CFO been Palmer. Thanks, Rick.
Net sales for the fourth quarter 2019 were 48.2 million.
22.4% decrease compared to the fourth quarter last year.
It's Rick said unit sales declined about 21% during the quarter, an average selling plywood prices declined slightly.
Mix.
Gross profit in the fourth quarter was 10.5 million a decrease of 19.2% compared with fourth quarter of 2018.
Gross margin during the quarter was slightly higher at 21.8% compared with 21% in the fourth quarter of 2018.
Selling general and administrative expenses were 6.3 million in the fourth quarter of this year, a decrease of 657000 compared with 7 million in the fourth quarter last year.
These expenses decreased due to expenses that vary with sales and profitability, including warranty and incentive compensation as well as lower research and development expenses incurred during the fourth quarter of 2019.
Interest income during the fourth quarter of this year was 88000, an increase compared with 48000 in the fourth quarter 2018.
For the quarter ended December 31, 2019, we reported net income of 3.5 million.
A decrease of 25.1% compared to net income of $4.7 million and the fourth quarter of 2018.
Diluted earnings per share were 10 cents in the fourth quarter of 2019, compared with 14 cents in the fourth quarter of 2018.
Our effective tax rate.
During the current quarter was 17% compared with 22% in the fourth quarter of 2018.
Our effective tax rate decrease due to favorable permanent adjustments reflected in the fourth quarter of 2019.
For 2020, we project an effective tax rate of approximately 22%.
While our marine products domestic sales decreased during the fourth quarter of 2019, our international sales increased by 17.4%.
Accounted for 4.8% of total sales.
Our international sales increase because of significantly higher sales to our Canadian dealers.
Our sales to other international markets were flat compared to the fourth quarter last year.
For the 12 months ended December 31, 2019, net sales of $292.1 million decrease by only 2.2% compared to the prior year.
Net income for the 12 month period was 28.2 million essentially the same as the prior year.
Diluted earnings per share were 83 cents in both years.
Our cash balance at the end of the fourth quarter was $19.8 million, an increase of 3.4 million or 20.7% compared to cash and marketable securities of $16.4 million at the end of the fourth quarter of 2018.
As we discussed at the end of the third quarter, our dealer inventories that increase to a level that prompted us to adjust production to be more aligned with field inventories as we prepared for the 2020 retail selling season.
At the end of the fourth quarter of 2019 dealer inventory levels had improved to be approximately the same as the fourth quarter of 2018 with that I'll turn it back over to Rick.
Thanks Ben.
Our fourth quarter results show the route.
The result of our decision to reduce production in order to align field inventories with backlog and objective we achieved by the end of the year.
We continue to monitor field inventories as we always do and at this time, we have an increasingly positive outlook for 2020.
Early winter boat shows have been well attended and more sales are being closed with shows than in previous years.
We're also noticing more shift more sales of larger boats, which is a positive bill.
We are presently planning to increase production early in the in the first quarter as will respond to these positive indicators of 2020 demands.
Thank you for joining us this morning, and we'd be happy to take any questions you may have.
Thank you Sir you would like to ask a question. Please signal by pressing star one on your telephone keypad. If you are using a speakerphone. Please make sure. Your mute function is turned off to allow your signal to reach our equipment.
Please press star one to ask a question.
Pause for just a moment to allow everyone the opportunity to signal for questions.
Our first question will come from Eric Wold of B. Riley.
Thank you and good morning.
Hey, our questions I guess one.
Hey, so getting inventory down to.
Flat with year ago period.
Obviously strong move doing now, yes, I guess, one I guess.
What level of discounting did you kind of was necessary to to move that inventory need it out a year ago period and have you.
As that discounting now no ended as you as you moved into.
Q1.
Eric a spin up we didnt have any.
Particular strong discounting I think.
It was kind of normal year over year and for the period.
The clearing out of inventory was solely due solely due to the fact off so that we shipped a lot fewer fewer boats during the fourth quarter.
So there which is nortel through it.
The other like that.
Okay. Thank you Ben and then and then.
On the comedy said kind of ramp ramp production backup.
During Q1.
What are your you're going to retail growth expectations for 2020, there kind of.
Using within Youre going to production plans for these early next year I think that through the year, given what happened last year.
Eric This is Jim we don't have a good handle on that we've all at this point seen retail sales from prudently 19, the preliminary numbers anyway, and they were they were flat to down.
Rick's comments about how good the boat shows look and.
The activity in the reception.
From our dealers and our retail customers for the larger boats is is very valid and thats. What we are using to plan or production increase in in the first quarter. So.
We don't have any global assumptions about retail demand in 2020 were just responding tactically to what looks like a very strong winter boat show season at this point.
Perfect. Thank you guys.
Thanks, Eric.
Thank you Sir at this time I'm showing no additional questions and I'd like to turn it back over to Jim Landers for closing remarks.
Thank you very much we appreciate everybody who call who listened in and we appreciate the question hope everyone has a good day and we will talk to you sense. Thanks.
Thank you, ladies and gentlemen, as a reminder, today's call will be replaced at the company's website Www Dot Marine products Corp, Dot com within two hours. This concludes today's teleconference.