Good morning and thank you for joining us for Marine Products Corporation Second Quarter 2021 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 Services.

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, Charlotte, 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 2020 10-K and other SEC filings that outline those risks. All of these are available on our website at www.marineproductscorp.com. If you’ve not received our press release and would like one, please visit our website, again, at marineproductscorp.com for a copy.

We’ll 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, thank you. We issued our earnings press release for the second quarter of 2021 this morning. Ben Palmer, our CFO, will discuss the financial results in more detail in a moment. Now, a few highlights on the quarter.

Marine Products Corporation’s second quarter 2021 results reflect the continuation of extraordinary high demand, which we expect beyond the 2021 retail selling season. Recently reported data indicate that retail sales in our product categories have increased 28% so far this year.

We have participated in that growth, and I am pleased to report continued strong market share in both of our brands. Unit sales to our dealers during the second quarter were almost 59% higher than in the second quarter of last year.

While we have to remember that our manufacturing facility was closed for almost half of the second quarter last year due to COVID-related safety concerns, this retail sales growth – unit sales growth is still very strong and speaks to the strength of the recreational boating market, our management team, our dealer network and the appeal of our products.

Our backlog of firm orders and other retail indications remain at historically high levels, and our dealers report that they have the lowest inventory in years. These are positive indicators – excuse me, especially at the end of what was traditionally the retail selling season.

The recently reported market share statistics for the 12 months ended March 31, 2021 indicate that both our outboard and sterndrive market shares increased compared to the previous reporting period. Robalo continues to hold the highest market share in the 16- to 36-foot outboard category.

And the combination of Robalo and Chaparral outboards hold 6.9% of that market. Our Chaparral’s sterndrives hold 17.1% of the market in their size range, a slight increase from the previous reporting period. The Chaparral brand counting both outboard and sterndrive boats hold the highest market share among sport boats in its size range.

We also announced this morning that our Board of Directors yesterday declared a regular quarterly dividend of $0.12 per share. With that overview, I’ll now turn it over to our CFO, Ben Palmer..

Thank you, Rick. Net sales for the second quarter of 2021 were $67.3 million, a 64.8% increase compared to the second quarter of last year. Unit sales increased by 58.8% during the quarter as we generated higher sales across all our models. Average selling prices increased by 7.5% due to a model mix, which included more larger boats.

Gross profit in the second quarter was $14.6 million, an increase of 86.5% compared to the second quarter of 2020. Gross margin during the quarter was 21.7% compared to 19.2% in the second quarter of 2020.

Gross margin as a percentage of net sales increased due to the efficiency benefits of higher production, but partially offset by continued supply chain disruptions and higher material costs as a percentage of net sales.

Selling, general and administrative expenses were $7.2 million in the second quarter, an increase of $1.5 million compared to $5.8 million in the second quarter of last year. These expenses were higher due to expenses which vary with sales and profitability, such as sales commissions, incentive compensation and warranty expense.

The quarter ended June 30, 2021, we reported net income of $5.8 million, an increase of more than 200% compared to net income of $1.7 million in the second quarter of 2020. Diluted earnings per share were $0.17 in the second quarter of 2021, 3 times the $0.05 diluted earnings per share that we recorded in the second quarter of last year.

Our effective tax rate during the second quarter of 2021 was 21.4% compared to 18.3% in the second quarter of the prior year, and we project a full year 2021 effective tax rate of approximately 20%. Our international sales accounted for 5.1% of total sales during the quarter and increased 73.2% compared to the second quarter of last year.

Our cash balance at the end of the second quarter was $28.6 million, an increase of $6 million compared to $22.6 million at the end of the second quarter of 2020.

While cash flow is strong, we note that our inventories on hand at the end of the second quarter of 2021 were significantly higher than normal, reflecting delayed shipments of substantially completed boats due to supply chain disruptions.

Partially offsetting this increased inventory balance was lower accounts receivable from sales – from rapid sales of dealer inventory and very prompt floorplan lender payments.

We estimate that our delayed shipments during the second quarter negatively impacted our net sales and earnings by 10% to 15%, and we believe that during the next quarter, all of these units will be completed and shipped to dealers, resulting in higher sales and earnings than would otherwise be generated by current third quarter production levels.

As Rick mentioned, our order backlog has remained at historically high levels and dealer inventories are extremely low. With that, I’ll turn it back over to Rick for a few closing remarks..

Thanks, Ben. The extraordinary global developments that have ushered in a new level of demand in recreational boating are continuing into the second half of 2021. Unfortunately, supply chain constraints are another though temporary component of the same macro developments that are positively affecting us.

We are managing these issues by coordinating with our suppliers to maximize our production while maintaining quality and minimizing inefficiencies. We are focused on communicating effectively with our dealers regarding their delivery expectations.

We are coordinating order flow and planning our production out over the next nine months to allocate it equitably to our dealer network to maintain our relationship with them and ensure the highest dealer in retail customer satisfaction possible.

We are introducing our 2022 model lineup this month, and we have streamlined it by about 25% in order to create more efficient production and delivery schedules while maintaining a product lineup with strong consumer appeal. I’d like to thank you for joining us this morning, and we’ll be happy to take any questions you may have..

Operator:.

Thank you, Charlotte, and thanks for everyone who called and is listening in and watching. We appreciate it. Before we hang up, I’m going to ask – we told you about our corporate website at the beginning of this. I will ask you if you’re interested in a new boat, do visit our product websites, chaparralboats.com and robalo.com.

Inventory is very low, but we have a great build-to-boat feature on there, so it might be fun to get on that and figure out a kind of boat you want and send it to your local dealer and get in line for a new boat. We think that’s a great idea. So thank you again. Everybody, have a good day. Talk to you soon..

Participants, the conference will be replayed on marineproductscorp.com within 2 hours following the completion of the call. This concludes today’s conference call. Thank you for participating. You may now disconnect..