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

Jimmy Baker - B. Riley & Co.

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

Thank you, Eric, and 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 2014 10-K and our other SEC filings all of which outline those risks. These documents are available on our Web site at www.marineproductscorp.com. If you’ve not received our press release, please visit our Web site again at www.marineproductscorp.com for a copy of it.

We will make a few comments about the quarter and then we’ll be available for your questions. Now I’ll turn the call over to our President and CEO, Rick Hubbell..

Jim, thanks. We issued our earnings press release for the second quarter of 2015 this morning. Ben Palmer, our CFO, will discuss the financial results in more detail in a moment. This time, I’ll briefly discuss our operational highlights. Our net sales increased by 24% during the second quarter.

Net sales improved due to higher unit sales of our Vortex Jet Boats as well as continued growth in our Robalo outboard sport fishing boats and a contribution from our SunCoast Sportdeck outboards, which are new for the 2015 retail selling season. Gross margin improved because of production efficiencies and a favorable model mix.

We are happy about the continued strong reception of our Vortex Jet Boats by dealers and customers and believe that this product share that the Jet boat market is growing considerably. We also announced this morning that our Board of Directors yesterday voted to pay a record 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 June 30, 2015, we reported net income of $4.4 million, an increase of 47% compared to $3 million in the second quarter of 2014. Our diluted earnings per share for the quarter were $0.12 compared to earnings per share of $0.08 in 2014.

As Rick mentioned, during the current quarter, we benefited from higher unit sales of our Chaparral Vortex Jet Boats and Robalo outboard sport fishing boats. In addition, sales of the -- of new Chaparral SunCoast outboard Sportdeck has been growing and contributed to our second quarter 2015 results.

Gross profit in the second quarter was $12.6 million, an increase of 33.6% compared to the second quarter of 2014. Gross margin during the quarter was 21.2% compared to 19.7% last year. With higher unit production, we realized production efficiencies which contributed to higher margins.

Our model mix also included a higher percentage of the large Robalo’s and Sunesta’s as well the SunCoast we just mentioned. These models carry higher selling prices and margins. Selling, general and administrative expenses were $6.2 million in the second quarter of 2015, an increase of $874,000 compared to the second quarter of 2014.

These expenses increased due to costs that increase with sales and profitability such as sales commissions and incentive compensation. These increases were partially offset by a decrease in warranty expense, which declined due to continued favorable warranty experience. U.S.

domestic net sales increased by 32.9% in the second quarter of 2015 compared to the second quarter of last year, while international sales declined by 14.3%. This trend of declining international sales is due in part to the strong U.S. dollar which makes our exported manufactured products more expensive and the customers' local currency.

Interest income during the first quarter was $105,000, a slight decline compared to $121,000 in the second quarter of last year. Marine Products’ income tax provision during the second quarter was $2,099,000 compared to $1,233 in the second quarter of 2014.

Our income tax provision increased due to higher income and slightly higher effective tax rate of 33.2% compared to 29% in the second quarter of last year. Our balance sheet remained strong.

Our cash and marketable securities balance decreased slightly to $45.8 million at the end of the second quarter compared to $46.9 million at the end of the second quarter of last year. Our capital expenditures during the current quarter were $2.2 million, which is much higher than in previous periods.

During the quarter, we replace the majority of our trucking fleet which we used to deliver most of our boats to our dealers.

We believe that these capital expenditures will generate higher financial returns in the form of lower maintenance and fuel expenses, more reliable deliveries to our dealer network and the ability to deliver increased unit volumes to our network. At June 30, 2015, our dealer inventory and units was comparable to this time last year.

Order backlog is substantially higher than this time last year which is encouraging. As always we monitor these indicators closely and may adjust production during the third quarter based on seasonal retail trends and indications from our upcoming dealer conference. With that, I’ll now turn it over to Rick for a few closing comments..

Thanks, Ben. We are preparing for our annual dealer conference in the few weeks and looking forward to introducing our new models for the 2016 model year to our dealer network. This morning, I’d like to tell you about two of them. For the 2016 model year, we’re introducing the Robalo 16, the smallest center console we’ve ever produced.

This Robalo has all the same appointments, quality and value of our larger Robalo’s but offers an alternative to boaters who want a smaller boat with the sturdiness and seaworthiness of a large -- another large boat.

This Robalo comes with a [indiscernible] three choices of out more power and is available to boaters at a nationally advertised price of $120,000. We believe that this will open up the Robalo line to the new generation of first time boaters.

Another new model for 2016 is the Chaparral 237 SSX, the largest -- the latest addition to our premium quality sportboat line. It incorporates many of the features of the larger SSX and features great interior styling and a lot of store space. We are excited about our new models and look forward to the dealer feedback in a few weeks.

I’d like to thank you for joining us this morning, and we’d be happy to take any questions you may have..

Thank you. [Operator Instructions] And we will take our first question from Jimmy Baker with B. Riley & Co..

Hi. Good morning and congrats on the quarter..

Thanks, Jimmy..

Thanks..

Could you just speak to your latest sterndrive market share? And then I know its early days, but do you have an estimate for where you sit in terms of jet boats share either in the quarter or the selling season?.

Yes. Hi, Jimmy. This is Jim. We didn’t call it out specifically this quarter. In terms of sterndrive market share, the latest data available to us which of course is retail sell-through for people who aren’t familiar with it is that we still have the large -- the highest market share.

It might have slipped a couple of basis points, but we’re still number one on -- in the market share. Then regarding jet boats, we need to see the retail sell-through before we can go to the statistical surveys -- static for everybody. But we believe it will be significant.

We believe that we will probably be number two in the jet boat space with some pretty significant market share, once you see the retail sell-through happen..

Would that likely imply that your jet share is already ahead of your sterndrive market share?.

The math would work that way, yes. Again, we’re just preconservative, just won’t be hesitant about telling that ….

Sure. Understood..

Some [indiscernible]..

So could you maybe just speak to the investment that a dealer is making if they’ve never carried a jet line before either in terms of service tax or just cumulatively and if there has been any let’s say initial resistance to that investment that maybe strong sales figures might help overcome?.

Jim this is Ben. There is -- in certain instances the engines and lot of the technology on these jet boats are the same as the [indiscernible] it’s the same engine and the same power.

So some of our dealers already had exposure to that particular type of technology, so the investment in that case is not as significant, but that certainly has been a headwind, strong -- I wont say reluctance, but a little bit of hesitation, the taking on [indiscernible] if they don’t understand it, but its -- we expect that there would be some start-up time maybe it’s a little more extended than we expected, but we believe this beginning to take hold now and its very good product.

And I think our sales and success today where we’ve been able to place in a dealer network is an indication of times to come. So we’re real pleased with it and also building up the line up to where we now have the -- a decent compliment of models, we started out which is one model initially. So that helps us well.

So we think that will also help us to build some momentum. So we’re really pleased with it..

Okay, great.

Can you speak to maybe lets say you expected Vortex dealer count for the 16 selling season versus what you had this year?.

Jim, it’s a great question. I don’t think we know right at this moment..

Okay. Then I just have one last one here, looking at your working capital, it’s up less than 2% year-over-year on this 24% jump in sales, just very impressive new cash generation throughout the growth really over the past few years. I’m assuming more recently you’ve had kind of a raw material cost tailwind to working capital there.

So can you help us just understand kind of what’s a sustainable assumption in terms of incremental sales dropping to working capital as we move forward here?.

If you go back and look, historically that’s something we’ve always focused on and been able to manage that very, very closely some OIBDA [ph] obviously at the end of each quarter can be driven by timing of payments obviously that could be between cash and AR, I mean AP and that sort of cancels itself out, but we’re not aware.

We think they will be very close to historical ratios and support with working capital. I don’t see any particular thing driving that.

Also at sometimes with some of the key products, engines and things like that will -- we will buy those ahead and [indiscernible] so that might in any particular quarters [indiscernible] little bit, but we don’t see a change incrementally.

We don’t think that anything we can do to move the metric tremendously, but we’ve been pleased historically with where we’ve been able to maintain that ratios..

Okay. Very good. Thanks for the time..

Okay, Jimmy. Thanks..

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

Okay. Eric, thank you. Thanks for the people who called in to listen. And we look forward to seeing all of you soon and talking to you next quarter. Thank you..

This concludes today's call. The replay of this call will be available at www.marineproductscorp.com in two hours. Thank you for your participation..