Jim Landers - VP, Corporate Finance Rick Hubbell - President & CEO Ben Palmer - CFO.

Analysts:.

Good morning, and thank you for joining us for the Marine Products Corporation's Second Quarter 2017 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, and good morning. Before we get started today, I'd like to remind everybody 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 2016 10-K, and other SEC filings that outline those risks.

All of these are available on our website at www.marineproductscorp.com. If you have not received our press release 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 to answer 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 2017 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 increased by 9.9% during the second quarter.

Net sales improved due to higher unit sales of our Robalo outboard sport fishing boats, our Chaparral H2O outboards and our new Chaparral Surf Series models. This quarter represented continued growth in the recreational boat market and continues the good start to 2017. We continue to be pleased with the market share of all of our product categories.

Our Chaparral's stern drive product continued to hold the highest market share in its category, approximately 15.1% for the 12 months ended March 31, 2017. Our Chaparral Vortex continued to hold the number 2 position in the 20 to 24 foot jet boat category.

Robalo’s market share is growing and continues to be a top five manufacturer in the outboard sport fishing category. We also announced this morning that our Board of Directors yesterday declared a quarterly dividend of $0.07 per share, a continuation of this year’s higher dividends. With that overview, I will now turn it over to our CFO, Ben Palmer..

Thank you, Rick. For the quarter ended June 30, 2017, we reported net income of $6.1 million, an increase of 27% compared to $4.8 million in the second quarter of 2016. Our diluted earnings per share for the quarter were $0.18, an increase of $0.05 compared to diluted earnings per share of $0.13 in 2016.

A lower share count due to our tender offer completed last year contributed approximately $0.02 to our diluted EPS this quarter. Net sales for the second quarter of 2017 were $71.5 million, an increase of 9.9% compared to the second quarter of 2016. For the quarter, our unit sales increased by 3.3% and our parts and accessory sales increased as well.

Average selling prices increased by 5.1% due to a favourable sales mix within all of our product lines. Gross profit in the second quarter was $16.3 million, an increase of 18% compared to the second quarter of 2016. Gross margin during the quarter improved to 22.8%, due to manufacturing efficiencies compared to 21.2% in the second quarter of 2016.

Selling, general and administrative expenses were $7.6 million in the second quarter of this year, an increase of approximately $500,000 compared to second quarter of 2016. SG&A expenses were 10.6% of net sales during the second quarter of 2017 and 10.9% of net sales during the second quarter of the prior year.

US domestic net sales were strong, increasing by 12.9% in the second quarter of 2017 compared to the second quarter of last year. However, international sales decreased by 18.5%, and represented only 7.1% of total sales during the second quarter, a decrease compared to 9.6% of total sales during the second quarter of 2016.

Our cash and marketable securities balance decreased to $21.6 million at the end of the second quarter compared to $47.7 million at the end of the second quarter of last year. This decrease was principally due to the funds required to complete our tender offer during the fourth quarter of last year.

Compared to the end of the first quarter of 2017, however, our cash and marketable securities balance increased by $3.6 million. Interest income during the second quarter was $57,000 compared to $151,000 in the second quarter of last year, due to this lower marketable securities balance.

Marine Product's income tax provision during the second quarter was $2.7 million compared to $2 million in the second quarter of 2016. Our effective tax rate was 30.3% in the second quarter of this year, compared to 29.8% in the second quarter of 2016. We project that our effective tax rate for the remaining quarters of 2017 will be approximately 32%.

As of June 30, 2017, dealer inventories were higher than at the end of the second quarter of ‘16, and order backlog was comparable to the prior year. I'll now turn it back over to Rick for a few closing comments..

Thank you, Ben. We are pleased to be completing another successful retail selling season, and we are proud of the continued consumer appeal of our new models. We look forward to our dealer meeting in September where we can demonstrate our new 2018 models and spend quality time with our dealer partners.

Thank you for joining us this morning and we'll be happy to take any questions you may have..

Operator:.

Okay, Carey. Thank you. Thanks everyone. We appreciate you calling in and listening and we hope everyone has a good day. Talk to you soon..

As a reminder this conference call will be available for replay on www.marineproductscorp.com within two hours following the completion of the call. This concludes today's call. Thank you for your participation. You may now disconnect..