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 First Quarter 2015 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 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..

Thank you, Tina, and good morning. Before we get started today, I need 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 2014 10-K and our other SEC filings that outline those risks. All of these are available on our website at www.marineproductscorp.com. If you not received our press release this morning and would like one, please visit our website 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. So now I will turn the call over to our President and CEO, Rick Hubbell..

Thank you, Jim. We issued our earnings press release for the first quarter of 2015 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. Our net sales increased by more than 6% during the first quarter. That sale is improved due to higher unit sales.

Robalo, our Vortex Jet Boats and our new Chaparral SunCoast outboard all contribute to our sales growth for this quarter. Gross margin improved because of production efficiencies and a good model mix. Our Chaparral's sterndrive brand continues to hold the number one market share in its category.

The latest available data for the 12 months ended December 31, 2014 indicated the Chaparral had a 14.4% of the 18 to 33 boat sterndrive market. We continue to be pleased with our dealers and customers reception of our Chaparral SunCoast outboard deck boat.

We also sold -- we sold a higher number of these boats during the quarter and look forward to introducing two additional models for the 2016 model year. We also announced this morning that our Board of Directors yesterday voted to pay a regular quarterly dividend of $0.04 per share. With that overview, I'll turn it over to our CFO, Ben Palmer..

Thank you, Rick. For the quarter ended March 31, 2014, we reported net income of $2.9 million, an increase of 48.1% compared to $2 million in the first quarter of 2014. Our diluted earnings per share for the quarter were $0.08 compared to earnings per share of $0.05 in 2014.

During the current quarter we benefited from higher unit sales of Chaparral Vortex Jet Boats and the 26 foot SunCoast outboard as well as continued unit sales growth in our Robalo's sport fishing boats.

While we sold a few Chaparral SunCoast outboards in the fourth quarter of 2014, this model contributed more significantly to our sales in the first quarter of 2015. We increased production by strong dealer and customer interest. And look forward to a strong retail selling season for this new boat.

As Rick mentioned, we have a 21 and 23 foot SunCoast in development for the 2016 model year as well. Gross profit in the first quarter was $10.2 million, an increase of 15.5% compared to the first quarter of 2014. Gross margin during the quarter was 20.2% compared to 18.5% last year.

With higher unit production, we also realized production efficiencies which generated higher margins. Our unit sales were comprised of a favorable model mix and we realized cost benefits from lower raw material prices.

Selling, general and administrative expenses were $6 million in the first quarter of 2015, a decrease of approximately $100 million compared to the first quarter of 2014. This included adjustments to the warranty reserve due to positive warranty claim experiences in recent quarters. U.S.

domestic net sales increased by 12.5% in the first quarter of 2015 compared to the first quarter of last year, while international sales declined by 21.9%. International sales comprised 13.6% of consolidated net sales in the first quarter of 2015, a decrease compared to 18.4% of consolidated net sales last year.

This continues a recent trend of declining international sales due in part to a strong U.S. dollar which makes our exported manufactured products more expensive than the customers' local currency. Interest income during the first quarter was $117,000, similar to the amount that we recognized in the first quarter of 2014.

Marine Products’ income tax provision during the first quarter was $1,442,000 compared to $912,000 in the first quarter of 2014. The provision increased due to higher income and slightly higher effective tax rate of 33% compared to 31.6% in the first quarter of last year. Our balance sheet remained strong.

Our cash and marketable securities balance decreased to $44 million at the end of the first quarter compared to $49.3 million at the end of first quarter of last year.

Our cash and marketable securities balance declined primarily because of the increase in inventories and accounts receivable which is a direct result of higher sales this quarter compared to last year. At March 31, 2015, our dealer inventory and units was comparable to this time last year.

Also order backlog is higher than it at this time last year and comparable to the end of the fourth quarter of 2014. We are encouraged by this higher order backlog at this point in the retail selling season.

Based on this statistics as well as indications of strong retail selling season, we've decided to increase production during the second quarter, which will cover the remainder of our 2015 model year orders.

To support increase production and maintain our production efficiencies, we have reopened a previously idle manufacturing plant and hired additional manufacturing employees. This facility will allow us to increase our production by as much as 20%. And with that, I'll turn it back over to Rick for a couple of closing comments. .

Thanks, Ben. We are pleased with our progress during the first quarter. Our industry enjoyed a good winter boat show season. And with the exception of a long winter in the Northeast which is hindered retail sales. We feel very good about this retail selling season.

Our Chaparral sterndrive boat continues to maintain the dominant market share in their category. Our Vortex Jet Boats and Robalo sales continue to grow and it become a strong contributor to this year's financial results. And as both Ben and I have said, our new Chaparral SunCoast outboard is selling well in 2015.

And we believe we will become another example of our ability to leverage our strong brand name and product design capability into a successful new product. I'd like to thank you for joining us this morning. And we will be happy to take any questions you may have. .

[Operator Instructions] We will take our first question from Jimmy Baker with B. Riley & Co..

Hi, good morning. Thanks for taking my questions. Just geographically, you know you talked about some unfavorable weather in the Northeast impacting retail sales.

Can you just talk a little bit more about where you are seeing outside strength if any and what you are seeing from, let say Canada and Texas, some of the more oil producing regions?.

Jimmy, this is Ben. Yes, again you refer to the Northeast is off to a slow start for us and international, yes, we had some turnover and some of our dealers up in Canada maybe contributing some to the weakness there.

But strength of the dollar I think is one of the biggest and just that economies -- other economies around the world are suffering a bit. Relative to the oil patch we have not yet seen a tremendous amount of impact this retail season. Good question that something we expected but we haven't seen direct indication of that.

I'd expect to have some incremental impact but we've not heard a lot of anecdotes about that in particular of oil patch. At least for our business seems to be, be holding and it maybe later on that it has more of an impact. .

Okay. And then you generated some pretty incredible operating leverage here in the quarter with op income up 54% on a 6% increase in sales. Can you just help us think about what level of operating leverage is sustainable as you fill this additional capacity this coming online. .

Jimmy, this is Jim. Thank you for the comment. That's nice comment. Our operating leverage came from some efficiency, production efficiency from higher production levels, and no doubt about that. And we did some things during the first quarter which will continue to -- or which will continue to enhance that.

We also got a little bit of raw materials price decline which helped our margins. In general, it is hard to get a whole lot of operating leverage in our business because a lot of our SG&A is in fact variable. It's things like warranty approvals and sales commissions and things like that. Our actual fixed, purely fixed costs are fairly low.

So I think we will continue to see some operating leverage that will come down to the operating margin line in the next few quarters as sales hold but it is going to be hard to get a whole lot, a whole lot of real leverage there. .

Okay. That’s helpful. And then could you just help us quantify let say your capacity today in terms of revenue capacity prior to the recently announced expansion and kind of how we should be thinking about that the timing of that and incremental capacity coming online. .

Well, the incremental capacity is actually online today very recently. So we refer to the fact that, that amount of space we could increase production about 20%. We certainly have not increased to that, not yet but that capacity has become available to us.

With that response, it is available, we have moved into it and have move some of our production, segregated some of the productions and moved into that particular plant and we think that will be a good thing.

We think that will continue to allow us to capture some efficiency so we will have little bit more run to operate and be a little more focused plant by plant. .

Okay. And then just trying to ballpark the annual revenue capacity prior to that expansion. Is it kind of in a $220 million or $230 million range? Is that reasonable? I understand it depends on model mix and so forth but just kind of a ballpark number. .

Jimmy, this is Jim. It does depend on model mix. Just to give some historical perspective in the plant, in the total manufacturing facility that we have today, eight or nine years ago it was configured to produce probably 40% more than it's producing right now. This reconfiguration, it happened in the first quarter.

It has to do with quality and increasing efficiencies and frankly we have more different kinds of models now than we had 10 years ago. So while it does increase our capacity, the strategic intent had more to do with efficiency and quality. We could produce -- we are probably at 60% of capacity right now and that's just Jim's guess.

So we could produce a lot more boats in the facility that we have at this point. .

And still there is another facility; there is another facility we have that's still idle as well. No near term plans to explore that but that's available too. And was available to us before though, the last big downturn. .

Okay, great. And then just lastly, can you just kind of give us a sense for how you expect your average selling price to trend throughout the year as you look at kind of what's selling well for you early on here and where you are expecting to ramp capacity? Or ramp production rather. .

Jimmy, we think that average selling prices ought to be within a pretty narrow band as the next few quarters' progress. This SunCoast has a higher average selling price than our company average. The Vortex which is Rick mentioned has grown a lot, has a slightly lower average selling price.

Cruisers have a much higher average selling price but that volume is extremely low and based on everything that we know right now we think it will continue to be low. So to think about average selling prices moving, great question, it is a metric that we managed by. But there is a not a lot that's going to move that we believe in the coming quarter.

So the average selling price we have today is probably one we are going to have for the next few quarters. .

Okay, great. Well, nice quarter guys. And thanks a lot for the time. Good luck in a selling season..

[Operator Instructions] It appears we have no further questions at this time. Mr. Landers, I'd like to turn the conference back over to you for any additional or closing remarks. .

Okay, Tina. Thank you. Jimmy thanks for your questions. Thanks everybody else who called in. We see lot of you soon and we look forward to talking to you next quarter. Have a good day. Bye, bye. .

As a reminder, this conference will be available for replay at www.marineproductscorp.com within two hours following the completion of this call. This does conclude today's conference. And thank you for your participation..