Marine Products(MPX) - 2024 Q1 - Quarterly Results

First Quarter 2024 Earnings Press Release Marine Products Corporation reported a challenging first quarter 2024, with significant year-over-year declines in sales and profitability due to market normalization, high dealer inventory, and increased interest rates Executive Summary & Highlights Marine Products Corporation reported a challenging first quarter 2024, with significant year-over-year declines in sales and profitability due to market normalization, high dealer inventory, and increased interest rates Management Commentary Management acknowledged the market normalization and high inventory, implementing production adjustments and retail incentives, while expressing optimism for new products and returning capital to shareholders - Management noted that first quarter results reflect a normalization of post-pandemic demand, leading to unfavorable year-over-year financial comparisons[5] - The industry faces an uncertain demand environment, high retail channel inventory, and increased financing costs for consumers and dealers due to higher interest rates[5] - The Company has implemented retail incentive programs, modified boat production schedules to manage channel inventory, and adjusted its cost structure[5] - Despite challenges, the company was encouraged by Spring boat shows and new product excitement, particularly for larger, higher-priced boats, and remains optimistic about new boat sales[5] - The Board approved a special dividend of $0.70 per share, in addition to the regular quarterly dividend of $0.14 per share, returning approximately $29 million to shareholders[6][7] - With no debt and over $80 million in cash, the company maintains ample liquidity for organic growth investments and strategic acquisitions[7] First Quarter 2024 Key Highlights Key financial metrics for Q1 2024 showed substantial year-over-year declines in sales, net income, and EPS, reflecting softer demand and elevated inventory, despite significant cash returns to shareholders First Quarter 2024 Key Financial Highlights (YoY Comparison) | Metric | 1Q 2024 | 1Q 2023 | Change (YoY) | | :----- | :------ | :------ | :----------- | | Net Sales | $69.3 million | $118.9 million | -42% | | Net Income | $4.6 million | $11.5 million | -60% | | Diluted EPS | $0.13 | $0.34 | -61.8% | | Net Income Margin | 6.6% | 9.7% | -310 bps | | EBITDA | $5.9 million | $15.0 million | -61% | | EBITDA Margin | 8.5% | 12.6% | -410 bps | - Results were impacted by softer consumer demand, dealer ordering patterns due to higher interest rates, and elevated industry-wide channel inventory[6] - The Board of Directors approved a regular quarterly dividend of $0.14 per share and a special dividend of $0.70 per share, payable in 2Q:24, totaling approximately $29 million in cash return to shareholders[6][7] Consolidated Financial Results (Year-Over-Year Comparisons) Marine Products Corporation experienced a significant decline in its first quarter 2024 financial results compared to the prior year, driven by reduced net sales volume, lower gross margins due to manufacturing inefficiencies and retail incentives, and a corresponding drop in net income and EBITDA Net Sales Net sales decreased significantly year-over-year, primarily due to a 40% reduction in boat units sold and a 2% negative price/mix impact from retail incentives and dealer inventory reduction efforts Net Sales Performance (YoY) | Metric | 1Q 2024 | 1Q 2023 | Change (YoY) | | :----- | :------ | :------ | :----------- | | Net Sales | $69.3 million | $118.9 million | -42% | | Boats Sold | -40% | N/A | -40% | | Price/Mix | -2% | N/A | -2% | - The decrease in net sales was primarily due to a 40% decrease in the number of boats sold[8] - Price/mix was down 2%, reflecting retail incentives and lower average selling prices, further impacted by dealer efforts to reduce inventories due to higher floor plan carrying costs[8] Gross Profit Gross profit and margin declined year-over-year due to lower sales volumes, manufacturing inefficiencies, and higher retail incentives, though showing sequential improvement from the prior quarter Gross Profit Performance (YoY & QoQ) | Metric | 1Q 2024 | 1Q 2023 | Change (YoY) | 4Q 2023 | | :----- | :------ | :------ | :----------- | :------ | | Gross Profit | $14.0 million | $29.0 million | -52% | N/A | | Gross Margin | 20.2% | 24.4% | -420 bps | 19.0% | - The year-over-year gross margin change reflected lower sales volumes, associated manufacturing cost inefficiencies, and higher retail incentive costs[9] - Gross margin increased from 19.0% reported in 4Q:23, indicating some sequential improvement after the re-initiation of retail incentives[9] Selling, General and Administrative Expenses SG&A expenses decreased year-over-year, primarily driven by lower variable costs tied to sales and profitability, and the absence of a prior year pension settlement charge SG&A Expenses (YoY) | Metric | 1Q 2024 | 1Q 2023 | Change (YoY) | | :----- | :------ | :------ | :----------- | | SG&A Expenses | $8.7 million | $14.5 million | -40% | | SG&A as % of Net Sales | 12.6% | 12.2% | +40 bps | - The decrease in SG&A expenses was primarily due to costs that vary with sales and profitability, such as incentive compensation, sales commissions, and warranty expense[10] - Last year's first quarter results included a non-cash pension settlement charge of $2.1 million, which was not present in 1Q 2024[10] Interest Income, Income Tax, Net Income and EBITDA Interest income increased due to higher cash balances, while income tax provision, net income, and EBITDA all saw significant year-over-year declines reflecting the overall challenging financial performance Profitability Metrics (YoY) | Metric | 1Q 2024 | 1Q 2023 | Change (YoY) | | :----- | :------ | :------ | :----------- | | Interest Income, net | $0.851 million | $0.483 million | +76.2% | | Income Tax Provision | $1.5 million | $3.4 million | -55.9% | | Income Tax Rate | 24.6% | 22.9% | +1.7 pp | | Net Income | $4.6 million | $11.5 million | -60% | | Diluted EPS | $0.13 | $0.34 | -61.8% | | Net Income Margin | 6.6% | 9.7% | -310 bps | | EBITDA | $5.9 million | $15.0 million | -61% | | EBITDA Margin | 8.5% | 12.6% | -410 bps | - Interest income increased due to higher cash balances and interest rates[11] Balance Sheet, Cash Flow and Capital Allocation Marine Products Corporation maintains a strong financial position with significant cash reserves and no debt, enabling robust cash generation from operations, and demonstrated its commitment to shareholder returns through substantial dividends Balance Sheet and Liquidity Overview The company ended Q1 2024 with strong liquidity, holding over $81 million in cash and no outstanding debt, reflecting a solid financial foundation despite market challenges Key Balance Sheet Items | Metric | March 31, 2024 | December 31, 2023 | | :----- | :------------- | :---------------- | | Cash and cash equivalents | $81.2 million | $72.0 million | | Total current assets | $148.0 million | $139.2 million | | Total assets | $204.0 million | $193.8 million | | Total current liabilities | $31.5 million | $22.6 million | | Total liabilities | $52.7 million | $42.2 million | | Total stockholders' equity | $151.4 million | $151.6 million | - The company ended 1Q:24 with $81.2 million in cash and cash equivalents and no outstanding borrowings under its $20 million revolving credit facility, indicating strong liquidity[12] Cash Flow and Dividend Declaration Operating cash flow remained strong, supporting the declaration of both regular and special dividends totaling approximately $29 million, underscoring the company's commitment to shareholder returns Cash Flow Performance (YoY) | Metric | 1Q 2024 | 1Q 2023 | | :----- | :------ | :------ | | Net cash provided by operating activities | $15.9 million | $26.9 million | | Free cash flow | $15.0 million | $25.2 million | | Payment of dividends | $4.9 million | $4.8 million | - The Board of Directors declared a regular quarterly dividend of $0.14 per share and a special dividend of $0.70 per share, both payable on June 10, 2024[13] - These dividends represent an aggregate return of approximately $29 million of cash to shareholders[6][7] Company Information Marine Products Corporation is a leading manufacturer of high-quality fiberglass boats under the Chaparral and Robalo brands, committed to product innovation and market share growth, while providing standard disclosures regarding forward-looking statements and investor contacts About Marine Products Corporation Marine Products Corporation manufactures high-quality Chaparral and Robalo fiberglass boats, aiming for market share growth and superior financial performance through innovation and a strong dealer network - Marine Products Corporation manufactures high-quality fiberglass boats under the Chaparral and Robalo brand names[15] - Chaparral models include SSi Sportboats, SSX Luxury Sportboats, SURF Series, OSX Luxury Sportboats, and SSi Outboard Bowriders[15] - Robalo builds outboard sport fishing models, including Center Consoles, Dual Consoles, and Cayman Bay Boats[15] - The company aims to increase market share and generate superior financial performance through product innovation, a solid capital structure, and a strong independent dealer network[15] Forward-Looking Statements This section outlines forward-looking statements regarding future expectations and potential risks, including uncertain demand, inventory levels, and economic conditions, in compliance with the Private Securities Litigation Reform Act of 1995 - This section includes statements that look forward in time or express management's beliefs, expectations, or hopes, as per the Private Securities Litigation Reform Act of 1995[16] - Key forward-looking statements include expectations of continued uncertain demand, high inventory levels, company efforts to support dealers and adjust costs, optimism for new products, ample liquidity for growth, and sales normalization[16] - Risk factors that could cause actual results to differ include supply chain disruptions, negative economic conditions, unavailability of credit, decreased consumer confidence, adverse weather, and increased interest rates[16] Conference Call Information & Investor Contact Details for the Q1 2024 earnings conference call and investor relations contacts are provided, facilitating stakeholder access to company discussions and information - A conference call to discuss Q1 2024 results was held on April 25, 2024, at 8:00 a.m. Eastern Time[14] - Interested parties could access a live webcast via the investor relations section of Marine Products' website or by phone[14] - Investor relations contacts are Michael L. Schmit (CFO) and Mark Chekanow (VP, Investor Relations)[17] Unaudited Consolidated Financial Statements This section presents the unaudited consolidated financial statements for Marine Products Corporation, including the Statements of Operations, Balance Sheets, and Statements of Cash Flows, providing detailed financial performance and position for the first quarter of 2024 and comparative periods Consolidated Statements of Operations The Consolidated Statements of Operations detail the company's revenues, costs, and profitability for the three months ended March 31, 2024, and 2023, highlighting significant year-over-year declines Consolidated Statements of Operations (Three Months Ended March 31, in thousands) | Metric | 2024 | 2023 | | :-------------------- | :--- | :--- | | Net sales | $69,340 | $118,914 | | Cost of goods sold | $55,356 | $89,892 | | Gross profit | $13,984 | $29,022 | | Selling, general and administrative expenses | $8,742 | $14,533 | | Operating income | $5,242 | $14,489 | | Interest income, net | $851 | $483 | | Income before income taxes | $6,093 | $14,972 | | Income tax provision | $1,496 | $3,423 | | Net income | $4,597 | $11,549 | | Diluted EPS | $0.13 | $0.34 | | Average Diluted Shares Outstanding | 34,632 | 34,379 | Consolidated Balance Sheets The Consolidated Balance Sheets provide a snapshot of the company's assets, liabilities, and equity as of March 31, 2024, and December 31, 2023, reflecting its financial position Consolidated Balance Sheets (as of March 31, 2024 and December 31, 2023, in thousands) | Metric | March 31, 2024 | December 31, 2023 | | :-------------------- | :------------- | :---------------- | | Cash and cash equivalents | $81,225 | $71,952 | | Accounts receivable, net | $7,749 | $2,475 | | Inventories | $55,210 | $61,611 | | Total current assets | $147,956 | $139,246 | | Property, plant and equipment, net | $22,657 | $22,456 | | Total assets | $204,038 | $193,802 | | Accounts payable | $13,064 | $6,071 | | Accrued expenses and other liabilities | $18,442 | $16,496 | | Total current liabilities | $31,506 | $22,567 | | Total liabilities | $52,656 | $42,214 | | Total stockholders' equity | $151,382 | $151,588 | | Total liabilities and stockholders' equity | $204,038 | $193,802 | Condensed Consolidated Statements of Cash Flows The Condensed Consolidated Statements of Cash Flows illustrate the sources and uses of cash from operating, investing, and financing activities for the three months ended March 31, 2024, and 2023 Condensed Consolidated Statements of Cash Flows (Three Months Ended March 31, in thousands) | Metric | 2024 | 2023 | | :-------------------- | :--- | :--- | | Net income | $4,597 | $11,549 | | Net cash provided by operating activities | $15,915 | $26,946 | | Capital expenditures | $(883) | $(1,789) | | Net cash used for investing activities | $(883) | $(1,789) | | Payment of dividends | $(4,852) | $(4,817) | | Cash paid for common stock purchased and retired | $(907) | $(910) | | Net cash used for financing activities | $(5,759) | $(5,727) | | Net increase in cash and cash equivalents | $9,273 | $19,430 | | Cash and cash equivalents at end of period | $81,225 | $62,601 | Non-GAAP Measures and Reconciliations This section provides definitions and explanations for non-GAAP financial measures used by Marine Products Corporation, including EBITDA, EBITDA margin, and free cash flow, along with detailed reconciliations to their most directly comparable GAAP measures Explanation of Non-GAAP Measures This section clarifies the purpose and limitations of non-GAAP financial measures like EBITDA and free cash flow, emphasizing their role in providing consistent views of operating performance and cash generation - Marine Products Corporation uses non-GAAP financial measures such as EBITDA, EBITDA margin, and free cash flow to provide investors with a consistent view of operating performance across periods and to evaluate the ability to generate additional cash[20] - These non-GAAP measures should not be considered in isolation or as a substitute for GAAP measures, and free cash flow does not represent residual cash flows available for discretionary expenditures[20] - A non-GAAP financial measure either excludes amounts included in GAAP or includes amounts excluded from GAAP, with reconciliations provided to the most directly comparable GAAP measures[21][22] Reconciliation of Net Income to EBITDA This section provides a detailed reconciliation of net income to EBITDA for the three months ended March 31, presenting a non-GAAP view of the company's core operating profitability Reconciliation of Net Income to EBITDA (Three Months Ended March 31, in thousands) | Metric | 2024 | 2023 | | :----- | :--- | :--- | | Net income | $4,597 | $11,549 | | Add: Income tax provision | $1,496 | $3,423 | | Add: Depreciation and amortization | $682 | $523 | | Less: Interest income, net | $851 | $483 | | EBITDA | $5,924 | $15,012 | | Net income margin | 6.6% | 9.7% | | EBITDA margin | 8.5% | 12.6% | Reconciliation of Operating Cash Flow to Free Cash Flow This section reconciles net cash provided by operating activities to free cash flow for the three months ended March 31, offering insight into the cash available after capital expenditures Reconciliation of Operating Cash Flow to Free Cash Flow (Three Months Ended March 31, in thousands) | Metric | 2024 | 2023 | | :----- | :--- | :--- | | Net cash provided by operating activities | $15,915 | $26,946 | | Capital expenditures | $(883) | $(1,789) | | Free cash flow | $15,032 | $25,157 |