Marine Products(US:MPX)2019-04-24 23:54Financial Data and Key Metrics Changes - Net sales increased by 7.1% to $83.1 million in Q1 2019 compared to the same quarter last year [11] - Gross profit rose by 5.9% to $18.7 million, while gross margin slightly declined to 22.5% from 22.8% [12] - Net income decreased by 1.8% to $7.5 million, with diluted earnings per share remaining at $0.22 for both Q1 2019 and Q1 2018 [14] - Selling, general, and administrative (SG&A) expenses increased to $9.8 million, up from $8.6 million, leading to an increase in SG&A as a percentage of net sales to 11.8% from 11.1% [12][13] Business Line Data and Key Metrics Changes - Unit sales decreased by 6.8%, primarily due to a decline in sales of smaller boats, while parts and accessories sales increased by almost 10% [11][12] - The average selling prices increased by 14.8%, driven by strong sales of larger models [11][12] Market Data and Key Metrics Changes - International sales grew by 2.1%, representing 7.4% of net sales, down from 7.7% in the previous year [15] - Dealer inventories remained essentially unchanged compared to the prior year, with a slight decrease in unit backlog but a higher dollar backlog due to increased average selling prices [15][16] Company Strategy and Development Direction - The company is focusing on larger boats, which have shown stronger demand, and is investing in research and development for this segment [18][25] - The company is monitoring retail demand to ensure healthy dealer inventories in preparation for new models [18] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism for the 2019 retail-selling season but acknowledged the need to monitor demand trends closely [18] - There is uncertainty in the Canadian market due to tariffs, which may continue to affect demand [22] Other Important Information - The board declared a regular quarterly dividend of $0.12 per share, consistent with the previous quarter [9] - The company repurchased 263,805 shares of common stock during the first quarter [9] Q&A Session Summary Question: Is there any improvement in demand trends in Canada? - Management indicated that there are no definitive trends or improvements, and uncertainty may persist until tariffs are resolved [22] Question: What drove the weakness in smaller boats? - Management noted that smaller boats are more susceptible to short-term trends, and adverse weather conditions in February and March may have impacted sales [24] Question: Is there a macro slowdown in smaller entry-level boats? - Management discouraged making broad economic assumptions based on three months of sales data, emphasizing that production of smaller boats continues [30] Question: What caused the increase in SG&A expenses despite higher sales? - The increase was attributed to higher labor rates and R&D spending, as well as costs related to employee retention and quality improvement [32] Question: Are higher labor costs affecting production? - Management confirmed that the manufacturing plant in Georgia is facing challenges in hiring and retaining skilled labor, impacting financials [33]