Q1 2020 Earnings Call

Good morning, Thank you for joining us for marine called the Corporation's first quarter Twentytwenty Financial earnings Conference call todays call will be hosted by Rick Hubbell, President and CEO and Ben Palmer, Chief Financial Officer, Oh, So far this is Jim Landers, Vice President corporate bonds.

All participants are in listen only mode.

Presentations, we will conduct a question answer session.

Stretches where people voted out that's hard to treat the queue up for questions, we'd like to advise everyone. But this conference call. It would be recorded people get started reading forward looking quickly.

Good morning, before we get started today I'd like to remind everyone that some of the statements that we will make on this call maybe 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 are 2019, Jim Carrey, another FCC filings, but I'm not sure.

Oh, which are available on our website <unk> marine products Cork Dot com.

If you're not received our press release and would like one please visit our website again at marine products <unk> Dot Com Rikabi.

You make a few comments about the quarter and then will be available for your questions now I'll turn the call over to our president and CEO Rick.

Hi, Jim Thank you.

Well you shoot earnings press release for the first quarter of 2020 this morning.

Ben Palmer, our CFO will discuss the financial results in more detail in a moment.

This time I will briefly discuss our operational highlights.

We decreased production in the first quarter in order to reduce dealer inventories.

We accomplished this cold is as dealers is dealer inventories declined almost 10% by the end of the first quarter compared to prior year.

Well. These are the fourth quarter, we had a good plans to increase production because of many indications with a strong retail selling season.

However is the impact of covert 19 pandemic began to emerge in mid March it became clear that macro events would disrupt voting retail selling season.

If the end of March we temporarily suspended or manufacturing operations.

Out of concern for employees their family in our community.

This time, we hope to resumed production in early May.

As we review our market share at the end of the first quarter I'm pleased to report that show up real continues to be a market share leader.

And that should drive recreational boat category.

Robalo also continues to be a market share leader in the outboard category.

And the combination of chaparral and robalo outboard models held the highest outboard.

Both market share in their size category.

We announced this morning that our board of directors declared a real regular quarterly dividends of eight cents per share.

Touching a four cents compared to the previous quarters dividends.

As a note during the first quarter, we did not repurchased any shares of common stock in the open market.

No you I'll turn it over to our CFO been pole like you're correct.

Net sales for the first quarter of 2020 were 59.1 billion, 28.8% decrease compared to first quarter last year.

Net sales declined by 28.5% during the core.

Average selling prices were unchanged.

Gross profit for the first quarter was 12.1 million a decrease of 35.3% compared to first quarter of 2019 gross.

Gross margin during the current quarter was 20.5% compared to 22.5% in the first quarter 2019.

Gross margin as percentage of net sales declined due to manufacturing cost inefficiencies caused by lower production in the first quarter of this year compared to the prior year.

Selling general and administrative expenses were 7.3 million in the first quarter of 2020, a decrease of 2.6 million compared to 9.8 million in the first quarter last year.

These expenses decreased due to expenses that vary with lower sales and profitability, including incentive compensation and warranty expenses.

These expenses were 12.3% of net sales in the first quarter of 2020 compared to 11.8% of net sales in the first quarter 2019.

For the quarter ended March 31, 2020, we reported net income of 4.2 million a decrease of 43.7%.

Compared to net income of 7.5 million in the first quarter 2019.

Diluted earnings per share were 12 cents and the first quarter this year compared to 22 cents and the first quarter 2019.

Our effective tax rate during the first quarter 2020 was 14.4% compared with 16.3% and the first quarter last year.

Our international sales decreased by 44.6% and accounted for 5.7% of trouble sales.

Our international sales to Canadian dealers only decreased moderately our sales to other international markets decreased much more significant.

Cash balances ended the first quarter was 20.1 billion, an increase of 1.7 million compared to cash and marketable securities of 18.3 million at the end of the first quarter 2019.

As Rick mentioned that ended the first quarter. This year dealer inventory levels were almost 10% lower.

Compared to the first quarter 2019, we will again to manage our backlog as we were saying production.

Although we temporarily shut down production at the end of March we did ship some boats in April which had been manufactured and firm and for which there were from dealer worse with that I'll turn it back over to work.

Thanks Ben.

Along with other companies across the globe, we have faced unprecedented and unexpected business challenges in the past two months. During this time, we are providing consistent communications.

Sure dealer network and have assisted their efforts to convert to conduct virtual walk throughs and private viewing a point.

We are managing through this just disruption in our president actions are guided by an enduring belief in the long term appeal or.

Recreational boating for the American consumer in fact, we're encouraged by reports that several of our dealers enjoyed very strong sales in March and April as families temporarily left homes in urban areas to shelter in place in areas offering.

Recreational boating is an opportunity for safe activities with the families and friends.

An outdoor city.

As another indicator of increased interest in our products. During this time, we're pleased to note that our web traffic and the number of social media engagements have increased significantly during the past few weeks, we look forward to resuming our production operations during the week of makes for.

Thank you for joining us this morning, a we'd be happy to take any questions you may have.

[noise] [noise], ladies and gentlemen that she would like to Q4 question signaled by pressing star one of your telephone keypad.

Sure you assumption is turned off your life signal to reach our equipment again, that's star one cubic questions.

I'll take my first question Mr., Eric Wold Riley. Please go ahead.

Thank you give anybody.

Couple of questions Eric.

Yes.

One of the plants were shut down the ended March.

<unk> the shipping reduction the quarter was due to your decision to reduce production levels you have to manage dealer inventories I guess.

Certainly stay on track for.

Oh, we may reopening of the plants, where they can explain.

What the impact production levels in Q2 would be if you lose those floors <unk> five to six weeks second quarter and get back to kind of reduced production that what you were at brought into place.

A this is Ben I [noise].

As you can imagine that's a very difficult question, but but we're going to do our best to get up as quickly as we can to do the prior production levels.

You know we plants have been in place you have to get the workforce.

Back on the timeframe that that we've discussed here yeah, we'll certainly have to be managing.

I'll now the supply chain and have been working on that that's dependent upon some of our key component manufacturers many of which we we think of resumed or making plans to resume their their production very soon so worthwhile question.

But oh, yeah difficult at this time to say I'm just kind of.

Ramp up is quickly and its comfortably yes, we can and we will see as we pointed out in our comments here. We we did have a number boats that in the normal course.

It had been manufactured that we did continue to ship and a little bit in late March, but but even into April even though production was shut down for the whole month. So there were some sales there again without manufacturing operations content.

Okay. That's helpful. I guess, what did the possibly a employees back and congrats again.

Yeah good employees.

You know kind of like Golden state like communication with them.

Maybe it's interesting the workforce and out how did want to the war was part of each of them.

Again, I can be fairly complicated, but we do have mechanisms you know that to be able to communicate with the employees and at this point I guess, it's been a little over a month sense.

We cease production, but but we are assisting them with a filing.

For unemployment and things like that so so we do have a communication channel with them, but but as you can imagine it will be.

It will be complex to get to each of them and have them come back in a coordinated manner, but but then working really hard to to make that happen then and though.

And we'll start to see how goes but but we we worked hard to have some kind of communication mechanism we were enough.

Community, we pointed out in our press release that the.

Majority shareholders and our chairman his family made a substantial gets to the to the community in which many of our employees live down there and and they were very appreciative of that and so that's a way to remain connected to the employees many of which again came a themselves with their families to get.

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And so that's another way to stay in contact and we're hopeful that will be.

Useful to and having seeing them more recently than than a month ago. So what's actually how guys.

Okay, and then just want to question for me.

No, it's kind of tough environment around demand you talking to some your dealer seeing good demand coming indeed, what that stay at home or that gets let's turn to the.

Your reacting to this environment or do you stay relatively firm on twice in getting that we're heading into.

The key send the period or are there are some discounting going to creeping into the next.

Hi, Eric This is Jim there, it's hard to say there may be some extra discounting, but in general we think of supply or demand is being barely inelastic right now either either you want to vote or you don't.

And also with dealer inventories across all product lines.

Climbing, we've actually found that our dealers inventories or in really good shape I eat lower so we don't see this is a discounting environment. We're more interested in what demand will be in being able to to meet that demand.

We're not hearing anything at this point about a significant additional discounting as you say you know going into the stronger retail selling season, I think dealers no for the most part had been holding Harman and Diaz haven't been placing lots of additional orders, but that certainly reasonable and understandable.

That's very moment, but but I think they're comfortable with their current inventory or working with the floor plan lenders and ER and we're comfortable to see how we come out of this and how everybody gets.

Backout get out of their houses and get back on the like in and it really has been.

Impressive then and and it feels good to see how many people are heading to the likes to get away from things and and that that has to be a good thing that many people are getting out and enjoying the lake and that has to.

Nice I saw that of foundation of demand for recreational boating. So we're pleased with that.

For all that was helpful. Thank you got.

Thanks, Eric.

As a reminder, if he would like to cheaper question today. Please take note by pressing star one.

It appears you have no further questions at this time I'd now like to them the pullback stitching on this for any closing remarks.

Thank you Eric Thanks for the questions and thanks for the other People's coal to listen in.

That will do it for US now, but everybody have a good day stay safe and we will talk to everyone. Soon thanks.

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Ladies and gentlemen, this concludes our called for today.

This call will be available for replay on marine product quote dot com and too I was the conclusion of today's call. Thank you very much for your participation engine in not just kind of.

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