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

Eric Wold - B. Riley Ronald Bookbinder - IFS Securities.

Good morning, and thank you for joining us for Marine Products Corporation's Fourth 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, Cecilia, 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 2016 10-K, and other SEC filings that outline those risks. All of which are available on our website at www.marineproductscorp.com.

I also need to inform you that Marine Products Corporation has used the non-GAAP financial measures of net income and diluted earnings per share excluding the impact of tax reform in today’s earnings release. And we anticipate using these non-GAAP financial measures in today’s earnings conference call.

Management believes that presenting the operating results without the impact of tax reform enables us to compare our operating performance consistently for various time periods. Our press release issued today and website contains a reconciliation of these non-GAAP financial measures to net income which is the nearest GAAP financial measure.

If you have not received our press releases, please visit our website 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’ll turn the call over to our President and CEO, Rick Hubbell..

Thank you, Jim. We issued our earnings press release for the fourth quarter of 2017 this morning. Ben Palmer our CFO will discuss the financial results in more detail in a momentum. And this time, I will briefly discuss our operating highlights. Our net sales increased by 14.6% during the fourth quarter.

Net sales increased due to an improved model mix which included larger boats such as our Chaparral SSX, our Chaparral Surf Series and our Robalo Explorer models. All of these are new models in 2017. We continue to be pleased with the market share of all of our product categories.

Our Chaparral stern drive products continue to own the highest market share in their category, approximately 16.7% for the 12 months in the September 30, 2017 compared to 15.1% for the same period last year. Our Chaparral Vortex line continues to hold the number two position in the 20 to 24-foot jet boat category.

Robalo’s market share continues to grow as it is now ranked number four in the outboard sport fishing category. We also announced this morning that our Board of Directors yesterday declared a regular quarterly dividend of $0.10 per share, a 43% increase compared to last quarter’s dividend.

Also, during the fourth quarter we repurchased 193,476 shares of common stock in the open market. With that overview, I will now turn it over to our CFO, Ben Palmer..

Thank you, Rick. Net sales for the fourth quarter of 2017 were $65.6 million, an increase of 14.6% compared to the fourth quarter of 2016. Average selling prices during the quarter increased by 11.7% while unit sales increased by 4%. Gross profit in the fourth quarter was $14.1 million, an increase of 17.7% compared to the fourth quarter of last year.

Gross margin during the quarter improved slightly to 21.9%, compared to 21.3% in the fourth quarter of '16. Selling, general and administrative expenses were $6.9 million in the fourth quarter of this year, a slight decrease of approximately $73,000 compared to the fourth quarter of last year.

SG&A expenses were 10.5% of net sales during the fourth quarter, a decrease compared to 12.2% of net sales last year. The SG&A impediment during the quarter was the result of lower warranty expense consistent with favorable warranty claims experienced, partially offset by higher incentive compensation expense.

During the fourth quarter of 2017, Marine Products reported a net a net discrete tax provision of $1.7 million as a result of Tax Reform that was enacted in December of this year or December 17. The adjustment resulted primarily from the revaluation of deferred tax items using the lower corporate tax rates effective in 2018.

The quarter ended December 31, 2017 we reported net income of $3.4 million or $0.10 per diluted share. Net income for the quarter excluding the impact of Tax Reform was $5 million, an increase of 35.4% compared to $3.7 million for the fourth quarter of last year.

Diluted earnings per share excluding the impact of Tax Reform was $0.15, an increase of $0.05 per diluted share or 50% percent compared to the prior year. International sales represented 6.7% of total sales during the fourth quarter, as international sales as a percentage of total sales increased by 36.7% compared to the fourth quarter of last year.

They still represent a small percentage of our consolidated sales. Our cash and marketable securities balance increased to $20.7 million at the end of the fourth quarter of 2017 compared to $11.9 million at the end of the fourth quarter of last year.

This increase was due to strong net cash provided by operating activities during 2017, partially offset by dividend payments, cash used to repurchase common stock on the open market, and capital expenditures during 2017.

Marine Product's income tax provision during the fourth quarter was $4.154 million compared to $1.503 million in the fourth quarter of 2016.

Our effective tax rate was 55.3% in the fourth quarter of this year, resulting from the net discrete tax provision of $1.7 million we discussed earlier that was reported in the fourth quarter in connection with Tax Reform. Without the impact of Tax Reform, the effective tax rate was 32.9% compared to 28.8% in the fourth quarter of 2016.

During 2018, we estimate that our effective tax rate will be in the low 20% range.

Since we believe that we will continue to generate positive financial results we will benefit from this lower tax rate through increased earnings and operating cash flow in 2018 and the additional cash generated will support such initiatives as the higher quarterly dividend that Rick just mentioned.

As of December 31, 2017, dealer inventories and backlog were higher than at this time last year. As we compare to support our dealers higher demand during the 2018 model year. I will now turn the call back over to Rick for a few closing comments. .

Thanks, Ben. The recreational boating market continues to be strong as we look ahead to 2018. Our Robalo sport fishing boats and specialized Chaparral models continue to positively drive our financial results. Our annual dealer conference delayed this year, because of Hurricane Irma.

But we held at a few months ago, but when we held at a few months ago our dealers were excited about our new 2018 models as well as selling environment for their products. We believe that the environment is improved since our dealer conference and indications from the early winter boat show support I believe the 2018.

Retail selling season will be another good. Thank you for joining us this morning and we’ll be happy to take any questions you may have. .

[Operator Instructions]. We will now take our first question from Eric Wold from B. Riley. Please go ahead. .

One just quick number’s question.

Can you give us the number of units on the quarter?.

Eric, we actually don’t disclose to that on a quarterly basis, we disclose the change in units, but we don’t disclose the number..

Okay.

Now is the 4%?.

Units are up 4%..

And you mentioned obviously the [indiscernible] has been positive and [indiscernible] continues to see optimism in underlying demand.

Can you give us a sense of any change in sentiment that you saw if any around, but it looked like tax perform was going to and when it did pass has that kind of impacted what you’re hearing from your dealers out there, what you see in the boat show? Is that not been as much of an impact to you maybe otherwise what you had thought?.

Eric, this is Jim. It’s a little early to tell. I mean, what Rick’s comments were a in general, the economy is getting better and I think the fact that people have more money in their pockets through several different means is a positive.

But we haven’t heard anybody say specifically that there were buying about, that they felt better about tax perform specifically. .

But as we pointed out obviously there is a clear benefit to the company and Marine Products Corporation. .

Definitely. And then final question, your [indiscernible] market share gains continuing with Chaparral. I guess, in general, I think about in the stern drive segment, you’ve continued to do well in that category but in general it’s been under pressure sometime on at industry level.

When do you think, we get to a point where those headwind pressures start to subside and get to more of a baseline demand level that could help you and [indiscernible]?.

This is Ben, you know it’s hard to tell. The industry overall has struggled. I think all we can continue to do is try to be innovative with our new products and try to meet the demand in the market. We -- it’s difficult to overcome trend, so we are not trying to deflect the trend but we’re trying to make every opportunity that we can.

We have a variety of different power sources on our boats, that gives us other opportunities as well. So, it’s a good question, a reasonable question. We still think there is certainly a good market for stern drive and I think our results recently in this quarter in particular show like with the Surf Series.

We can create some really strong demand in that particular market. It is a recent headwind that it is difficult to overcome. And will there be a strong shift back to stern drive? That’s unclear. One of the innovations with the forward-facing drive, that’s helped, that’s been paramount to making Surf Series successful.

So that sort of could be other innovations to come along as well to help the market. But don’t see anything in particular in the near term..

We will now take our next question from Ronald Bookbinder from IFS Securities. Please go ahead..

Good morning. And yes, congratulations on a nice quarter. I was wondering if you had some color on this inventory such as that the aging of the inventory. You said the dealers are excited about the 2018 models.

But what is the mix of your inventory of 2018 models as opposed to may be some leftover from 2017?.

It’s -- we do track that and it’s very strong, it’s been among the strongest it's been in several years. We feel very, very good about that. What I give you -- the particular statistics there is very few older models that are out in dealer inventory. .

Okay, great.

And also looking at the inventory, what about the mix compared to your product mix, kind of how do you feel about the stern drive mix versus the front drive and do you think you’re prepared for the spring products?.

Well the mix was good in this quarter as we talked about of some of the largest Chaparrals that have stern drives.

So, the mix is very good because it’s larger boats are doing very well and I think that may be that’s a combination of I think that’s being driven by the consumer that they are looking for the larger boats but it's also indicative that we come out with products that are quite appealing.

And typically for us and other customers [ph], the larger the boat, the opportunity you have to generate a larger margin and get some leverage on your manufacturing policy and things like that. So, we are pleased with the model mix tending towards larger boats..

And you specifically mentioned the forward-facing drives, we -- as Rick mentioned we sold a lot of those in the quarter and we responded to what we know as good market demand and we’re building more of those to meet retail demand that’s coming out.

So, we think the mix of products that’s in the dealer network and was in our production scheduling is what’s going to meet the right kind of demand in coming two months. .

[Operator Instructions]. There are no further questions. I would like to turn the call back to Jim Landers for any additional closing remarks..

Okay. Well, thank you. We appreciate everybody, who called in and questions. We appreciate your interest in our company and we hope everyone has a good day. Talk to you later..

Today’s conference will be replay on www.marineproductscorp.com within two hours following the completion of the call. That will conclude today’s conference call. Thank you for your participation ladies and gentlemen. You may now disconnect..