Jim Landers - VP of Corporate Finance Rick Hubbell - CEO Ben Palmer - CFO.

Jimmy Baker - B. Riley & Co..

Good morning and thank you for joining us for the Marine Products Corporation's Fourth Quarter 2014 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. 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 is being recorded. Jim will get us started by reading the forward-looking disclaimer..

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 issued today, our 2013 10-K and our other SEC filings that outline those risks.

All of these are available on our Web site at www.marineproductscorp.com. If you not received our press release and would like one, please visit our Web site 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 will turn the call over to our President and CEO, Rick Hubbell..

Jim thanks. We issued our earnings press release for the fourth quarter of 2014 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 decreased by approximately 6% during the fourth quarter due to lower unit sales.

Lower unit sales among our Chaparral models was partially offset by increased unit sales of our Robalo sport fishing boats and sales of our Vortex jet boats, which we introduced during the first quarter of 2014. Gross margins, as a percentage of net sales, increased this quarter compared to the prior year because of the favorable model mix.

We also sold our first Chaparral SunCoast outboards in the fourth quarter. We are pleased to be reentering the outboard market with this Chaparral model. For the 12-months ended September 30, 2014, our Chaparral sterndrive brand continues to hold a number one market share in its category.

The most recent report indicates that Chaparral had 13.7% of the 18-to-35-foot sterndrive markets during the period. Robalo’s market share grew and reached 3.2% of the coastal offshore sport fishing boat market during this period.

In 2015, winter boat show season is getting underway and we are pleased with the attendance and sales thus far in the season. We also announced this morning that our Board of Directors yesterday voted to pay a regular quarterly dividend of $0.04 per share. This represents a 33% increase compared to the dividend of $0.03 last quarter.

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

Thank you, Rick. At quarter ended December 31, 2014, we reported net income of 2 million, a decrease of 4.7% or just 101,000 compared to 2.1 million in the fourth quarter of 2013. Our diluted earnings per share were $0.05 in the fourth quarter of this year, a decline of $0.01 compared to the fourth quarter of last year.

Unit sales decreased approximately 6% during the fourth quarter of this year compared to last year. Gross profit in the fourth quarter was 7.4 million, a decrease of 2.9% compared to 7.7 million in the fourth quarter of 2013. Gross profit declined due to lower sales.

This decline was partially offset by an increase in gross margin, which improved from 19.2% in the fourth quarter of last year to 19.9% this year. This increase was due to a favorable model mix and efficient production schedule.

On a relative basis, we saw more of the larger SSX sport boats and Signature cruisers ending the fourth quarter of last year.

Selling, general and administrative expenses were essentially unchanged in the fourth quarter of this compared to the prior year and increased from 12.3% of net sales last year to 13.1% of net sales in the fourth quarter of this year. U.S.

domestic net sales decreased by 2.2% in the fourth quarter compared to last year, while international sales decreased by 33%. International sales comprised just 8.5% of consolidated net sales in the fourth quarter of this year, a decrease compared to 12% of consolidated net sales last year.

International sales continue to struggle consistent with international economies. The strength in the U.S. dollar has also been a headwind. Interest income during the fourth quarter was $162,000, an increase compared to $114,000 in the fourth quarter of last year. The increase was due to realized gains during the fourth quarter of this year.

Marine Products’ income tax provision during the fourth quarter was $658,000 compared to $728,000 in the fourth quarter of last year. The effective tax rate was 24.4% this year, slightly lower than the 25.4% effective rate in the fourth quarter of last year. Our balance sheet remained strong.

Our cash and marketable securities balance of 41.6 million is approximately equal to the cash and marketable securities balance at the end of the fourth quarter last year. It declined compared to the third quarter, however, primarily because of increased inventories resulting from higher engine purchases.

As of December 31, 2014, our dealer inventory was approximately the same as it was at this same time last year. But order backlog has increased. With that, I’ll turn it back over to Rick for a few closing comments..

Thank you, Ben. We have several reasons to be optimistic about the upcoming retail selling season. From a macro point of view, we believe that the steep decline in fuel prices and favorable data points regarding consumer confidence and unemployment hold positive implications with discretionary purchases such as pleasure boats.

Furthermore, we are experiencing a good start to the winter boat show season with high attendance, good sales and a favorable model mix with the products we sell. We continue to be pleased about our Vortex jet boat sales and are optimistic about the market’s reception to our SunCoast outboards for 2015.

Based on these factors, we are increasing production during the first quarter of this year. Thank you for joining us this morning. And we’ll be happy to take any questions you may have..

Thank you (Operator Instructions). And we have our first question. It comes from Jimmy Baker from B. Please go ahead. Your line is open..

Good morning guys. Thanks for taking my questions.

Could you just talk a little bit more about what regions internationally were particularly weak for you? And then could you just remind us how significant Canada is for your business? And if you’re seeing international dealers reducing inventory positions at this point or making any other adjustments to count for the fundamental weakness in excess of just the current moves..

That’s good question. Canada is a pretty significant portion of our international business and it has struggled I think due to the strong U.S. dollar. We’ve also had a bit of disruption with one of our primary dealers in Canada. So that’s something that we’re trying to address as well.

Relative to changes in inventory levels, it’s something that’s a bit -- we don’t have a lot, I don’t have a lot of information in front of me on that. But obviously, the international economy is struggling. Russia it’s been a pretty good market for us obviously.

They are struggling at this point in time with the weakness in oil prices that’s significantly impacting their economy, so that certainly not looking it at this point in time. But we expect it will probably continue to struggle for a while..

Okay.

So is it fair to say that the weakness for you is primarily being in Canada and Russia those are the two, I guess, most acute regions of softness?.

I think that’s right. Probably Russia more going forward, hopefully Canada maybe -- will see some improvement in the coming quarters..

Okay, understood. And then you talked about seeing strength in some of larger sterndrive boats.

So I am just interested is that more weighted at all towards the SSX line of bay boats versus that Signature line of cruisers? And can you maybe just help us better frame the magnitude of production increases we expect from you year-over-year here in Q1?.

Jimmy, this is Jim. Ben used the word relative strength, and I will repeat that delta. But we had -- and on the analytical degree while we have a 31-foot sport boat sold better in the fourth quarter of 2014 and fourth quarter 2013.

Cruiser sales continue to be weak but on a relative basis we saw a few more of our larger cruisers and a few less of the smaller cruisers. So, it’s probably more just specific customer preferences than meaning discernible trend. Although what we have seen in the boat shows thus far this year is a preference for slightly bigger boats.

So, that’s encouraging. It’s hard to say exactly how much of our production increase we will run through the P&L in the first quarter. But it’s probably in the magnitude of about 15% production increase, which as it works its way through -- should impact revenue if anything change..

Okay, great. And then the positive data points that you’re picking up from early season shows.

Is that pretty well spread across geographies or any kind of specific standout there?.

That indicated some of the Canadian shows we’re particularly strong and we did have, for Canada, relatively some pretty good shipments in early 2015 up north. But yes, it’s been relatively consistent I would say of the 10 or so shows so far 80% of them have been year-over-year particularly strong. Whether those are outliers or not is uncertain.

But overall, again, it appears to be a very nice trend. Again, the larger boats, maybe it’s due to the decrease in the oil prices may be about 3.5, I guess, just the fact that sales have taken quite a while to pick up with U.S. economy sided having improved.

Maybe we’re finally reaching that inflection point where people are feeling they need to replace their older boats with newer boats. So, again, we’re generally optimistic and prepared to take advantage, if and when, or as orders continue to improve..

Okay, great. Last question from me, could you just talk a little bit about the progress you’re making on the Vortex line. The boats really looks great and well traffic in the shows we’ve been too this year. I am just interest if you have any data on the demographics of that Vortex buyer.

It seems like your dealers are really highlighting the surfing capability of that line.

Or are you -- would you say you’re successfully capturing some water sports enthusiast there, and might have been otherwise considering a tournament tow boat? And then I guess separately, can you talk about how many dealers are retailing that line or at least how close you are to reaching your target level of domestic distribution?.

Jimmy this is Jim again. Great questions, you know I talked about the tow boat substitution part of this. It’s too early to tell to really have a good demographic picture. We know that the average jet boat buyer is nine-year younger than the average sterndrive buyer.

So we’ve been trying to make that the person’s first boat be a Chaparral and capture some of these roughly 9-10 years younger than the sterndrive buyer. But that’s not a specific Marine Products comment. We don’t yet have any consumer feedback that says that people are buying a Vortex instead of a tow boat.

So, I am going to hold off on saying that’s the case until we know it is. I don’t know how many dealers are selling the Vortex right now and I’ve have seen two of them, but I don’t know..

I have we’ve had pretty good penetration. We’re generally pleased with it. And sales had improved steadily throughout 2014, so we’re very pleased we think the boat does look great. We think there is a backing left when the ERP exited the market.

And we think we’re particularly well positioned at this point in time, and looking forward to continuing to do very well for us..

Thanks very much for the time..

(Operator Instructions) As there are no further questions at this time, I would now like to turn the call back to Mr. Jim Landers for closing..

Thank you, Operator. Jimmy thanks for the questions. We appreciate everybody else who called in and listened. And we hope you have a good day. Talk to you soon..

That will conclude today's conference call. Please note that this conference call will be replayed on www.marineproductscorp.com within two hours following the completion of the call. Thank you for participating. You may now disconnect..