This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.
spk00: Good morning and thank you for joining us for Marine Products Corporation's fourth quarter and year-end 2021 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 Services. At this time, all participants are in a 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.
spk03: Thank you, April. 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 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 issue 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'll 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 and 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's calculated. If you have not received our press release, please visit our website, again, at marineproductscorp.com or 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.
spk04: Jim, thank you. Excuse me. We issued our earnings press release for the fourth quarter of 2021 this morning. Ben Palmer, our CFO, will discuss the financial results in more detail in a moment. Now a few highlights for the quarter. Marine Products Corporation's fourth quarter 2021 results reflect the strength and appeal of our 2022 model lineup. Model year prices increased and an improved model mix generated a 7.6 increase in net sales compared to the fourth quarter of 2020. dealer and consumer demand once again exceeded extended beyond the traditional selling season for recreational boats but our retail sales did not reflect the continuation of this positive trend because supply chain problems curtailed our production and deliveries the updated market share statistics for the 12 months ended September 30, 2021 indicates that the combination of Revalo and Chaparral outboards had a market share of 6.3%, the highest in the 18- to 36-foot outboard category, while the Revalo brand holding the second highest market share in this category. Chaparral held a market share of 19.4% in the 20- to 34-foot Stern Drive category, which is the second highest in this category. We also announced this morning that our board of directors declared a quarterly cash dividend of 12 cents per share. And I'm also pleased to report record 2021 net income of over $29 million, or 85 cents diluted earnings per share. With that overview, I will turn it over to our CFO, Ben Palmer.
spk02: Thanks, Rick. Net sales for the fourth quarter of 2021 were 76.5 million, a 7.6% increase compared to the fourth quarter of last year. Average selling prices increased by 21.1% due to model year price increases and a continued shift in model mix toward larger boats. Unit sales decreased by 11.1%, however, as supply chain problems and workforce issues impacted our production scheduling. Gross profit in the fourth quarter was $19.2 million, a 9.9% increase compared to the fourth quarter of 2020. Gross margin during the quarter increased to 25% compared to 24.5% in the fourth quarter of 2020. Gross margin improved due to 2022 model year price increases and a model mix comprised of larger votes. selling general and administrative expenses were $8.5 million in the fourth quarter of 2021, a slight increase of $149,000 compared to $8.3 million in the fourth quarter of last year. EBITDA in the fourth quarter was $11.1 million, an increase of $1.6 million or 16.8% compared to the fourth quarter of 2021. For the quarter into December 31, 2021, we reported net income of $8.4 million a 20.8% increase compared to $7 million in the fourth quarter of 2020. Diluted earnings per share were $0.25 compared to $0.21 diluted earnings per share in the fourth quarter of last year. Our effective tax rate during the fourth quarter was 20.7% compared to 23.1% in the fourth quarter of last year. We project a full year 2022 effective tax rate of approximately 20%. Our international sales accounted for 6.6% of total sales, representing a 20% increase compared to the fourth quarter of last year. Sales to our Canadian dealers increased significantly, but sales were flat year over year in other international markets. For the 12 months ended, December 31, 2021, our net sales increased by 24.3% compared to the prior year. Net income of $29 million increased by 49.3% compared to $19.4 million in 2020. Diluted earnings per share of $0.85 increased by 49.1% compared to $0.57 diluted earnings per share in 2020. 2021 net income and earnings per share were records for Marine Products' 20-year history as a public company. Our cash balance at the end of the fourth quarter improved to 14.1 million, a 4.5 million increase compared to the cash balance at the end of the third quarter. However, the year-end 21 cash balance is significantly lower than the 31.6 million balance at the end of the fourth quarter of 2020. The year-over-year decline is a direct result of higher inventories caused by delayed deliveries from suppliers of critical components and the resulting delayed shipments of substantially completed boats. Production scheduling will continue to be a focal point for us going into 2022. Dealer inventories are slightly lower than at the end of the third quarter of 2021 and significantly lower than at the end of 2020. Dealer inventories remain at historic lows and backlog or order backlog potential remains at historic highs. With that, I'll now turn it back over to Rick for a few closing remarks.
spk04: Mr. Ben, thanks. Although most winter boat shows were canceled this year, we still see many indications that the increased consumer demand that we began to see almost two years ago is continuing well past the 2022 model year. At this point, we are allocating production slots to dealers for a 2023 model year and doing everything we can to meet dealer and consumer demand. We also believe that our current production bottlenecks are transitory and we believe they will be resolved this year. We're very pleased by our dealers and consumers' reception of the 2022 models. One that we would like to highlight this morning is our Chaparral 287 SSX. This yacht-certified open cockpit bow rider provides spacious passenger areas and versatile seating configurations. The helm features a touchscreen glass dash and state-of-the-art electronics. The boat is agile and fast with stern drive power options ranging from 350 to 430 horsepower. The Infinity PowerStep, which provides effortless, access into the water for everyone in the family comes standard on this model we look forward to producing this and other 2022 models as the year proceeds during this era era of height of enduring high demand and unprecedented challenges we want to thank our employees for taking steps to safeguard their personal well-being and come to work every day to build quality products We also appreciate our dealers who have become very innovative over the past two years and continue to serve as wonderful ambassadors to our retail customers. I'd like to thank you for joining us this morning, and we'll be happy to take any questions you may have.
spk00: If you would like to ask a question, please press star, then the number one on your telephone keypad. And we'll pause for just a moment to compile the Q&A roster. Your first question is from Fred Whiteman with Wolf Research.
spk01: Hey, guys. Good morning. Thanks for taking the question. I was hoping you could just build out on the comments as far as the supply chain and labor disruption in the quarter. Have you seen any signs of that easing? And if you could just sort of explain on the supply chain front where you're seeing the most pressure.
spk03: Hey, Fred, it's Jim. Thanks for calling in. So in the fourth quarter, the labor issues were more indirect and a component of the supply chain issues, as so many of our vendors and suppliers had had problems with the labor force because of the COVID surge. We're seeing that in our plant. in uh in in early in in in the first quarter we've done a lot as we alluded to with on-site testing and on-site vaccinations so we're proud of that but it's still an issue as it is for for everybody um regarding actual components in various things and you and i've discussed this before it it just kind of moves around it's a it's a different issue every every week um luckily issues do get resolved but then others pop up i mean earlier in the in 2021 engines were a big problem. But now we're fine on engines. We've had a problem off and on with our very valued windshield supplier. Those issues kind of come and go. We've also had problems with some of the more basic raw materials like gel coat and some of the resins that you use. So those all sort of come and go. And unfortunately what they've done is forced us to partially or mostly complete boats and wait for that final final component. So if you ask us this week, we'll tell you one thing. If you ask us next next week, we'll tell you that maybe this week's issue was resolved. But there's there's perhaps a new one. We do think these these issues overall are going to ironed out this year, but it's been tough going the past number of months.
spk01: Okay, that's fair. And there was a comment, I think it was in the release, just talking about that production impact continuing into 1Q. Is the message that you think it will improve in 2Q, or it's just at some point this year, maybe it's in the back half, sort of tough to predict, you think it will improve?
spk02: Yeah. Yeah, Fred, this is Ben. I think that's right. It's difficult to predict. We're just hopeful with everybody throughout the the supply channel focused on trying to resolve the issue, that hopefully it will get to the point where it will get better. I expect there will be some lingering problems, but hopefully it will get ironed out, smoothed out, and get back to a little more normal activity in planning.
spk01: Sure. Okay. Totally fair. And then I guess the last one, if you think about some of that production uncertainty and totally understand that it's tough to predict when that's going to normalize, Any signs or concerns as far as consumers that are in that backlog pushing back on sort of the delivery horizons or, you know, people getting concerned that they might not get delivery ahead of the summer and thinking about, you know, other options? Any sort of signs that the backlog is being impacted from some of these disruptions?
spk02: Very appropriate question, but no signs that there's any pushback from customers or concern or delays. But there are significant lead times that are in place. That would be difficult to predict, but there's a lot of demand at the retail level, deposits being put down, which doesn't impact us directly, right, because that's at the dealer level. Right. But we know there's very, very strong demand, and, you know, everybody's looking for as many votes to be delivered as possible, and we're trying to meet as much of that demand as we can, but we are too focused on trying to maintain our quality, right? And so we do believe it will improve, but as we've indicated also in our comments or in the release that we're beginning even to, you know, take orders or allocate production slots even into the 23 model year. So people are, you know, their patience level is good and their desire for a new boat is very, very strong. So the fairway is very long and wide. So we're pleased with that. And again, looking forward to some supply chain issues getting worked out so that we can we can increase production and smooth things out a bit and, again, to meet some of that demand more quickly. Great. Thanks so much, guys.
spk01: Thanks, Greg.
spk00: Again, if you would like to ask a question, please press star, then the number 1 on your telephone keypad. And there are no further questions at this time. I will now turn the call back over to Jim for closing remarks.
spk03: Thank you, April. We appreciate everybody who called in and listened. We hope everyone has a good day. We look forward to talking to you soon. Thanks.
spk00: This concludes today's call. This conference call will be replayed on MarineProductsCorp.com within two hours following the completion of the call. Thank you for participating. You may now disconnect.
Disclaimer