Good morning, and thank you for joining us for Marine Products Corporation's first quarter 2023 financial earnings conference call. Today's call will be hosted by Ben Palmer, President and CEO, and Mike Schmit, Chief Financial Officer. Also hosting is Jim Landers, Vice President of Corporate Services. At this time, all participants are in 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, Audra. 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 2022 Form 10-K and other SEC filings that outline those risks, all of which are available on our website at marineproductscorp.com. If you've not received our press release, please visit our website. On today's earnings release and conference call, we refer to EBITDA, which is a non-GAAP measure of operating performance. We use this non-GAAP measure because it allows us to compare performance consistently over various periods without regard to changes in our capital structure. We're also required to use EBITDA to report compliance with financial covenants under our credit facility.
Our press release issued this morning and our website contain a reconciliation of this non-GAAP financial measure to net income, which is the nearest GAAP financial measure. Please review this disclosure if you're interested in seeing how it's calculated. We'll make a few comments about this quarter and then be available for your questions. I will now turn the call over to our President and CEO, Ben Palmer.
Thanks, Jim, and thank you all for joining our call this morning. I will begin with a few highlights regarding our first quarter of 2023 earnings press release that was issued this morning. Marine Products Corporation once again generated record net sales during the first quarter as we experienced improvement in our supply chain issues and transportation availability relative to the prior year period. We were able to complete and ship a larger number of substantially completed boats in our inventory and deliver them to our dealers. Average selling prices increased primarily due to a favorable model mix at both Chaparral and Robalo. In addition, the increased unit shipments during the quarter allowed our dealers to begin building their inventory to prepare for the upcoming 2023 spring retail selling season. Dealer inventories are trending towards more normalized levels. However, inventory remains below pre-pandemic levels.
We also announced this morning that our board of directors declared a regular quarterly cash dividend of $0.14 per share. With that overview, I'll now turn the call over to Mike Schmit, our CFO.
Thanks, Ben. I'll begin with an overview of the company's first quarter 2023 financial results. Net sales for the first quarter of 2023 were a record $118.9 million, a 55% increase compared to the first quarter of last year. Unit sales increased by 40% and average selling prices of our boats increased by 12%. As Ben mentioned, these increases were driven by our ability to complete and ship a favorable mix of boats to satisfy both dealer and retail demand as we continue to see significant improvements in our supply chain. Gross profit in the first quarter of 2023 was $29 million, a 58% increase compared to the first quarter of last year.
Gross margin for the first quarter of 2023 was 24.4%, a slight improvement over the 24.0% for the first quarter of 2022, as we saw some benefits from manufacturing efficiencies. Selling, general, and administrative expenses for the first quarter of 2023 were $14.5 million, an increase of 57% compared to $9.2 million in the first quarter of last year. This increase is due to costs that typically increase with higher sales and profitability, such as incentive compensation, sales commissions, and warranty expenses. These first quarter of 2023 expenses also included a non-cash pension settlement charge of $2.1 million.
Selling, general, and administrative expenses were 12% of net sales in the first quarter of both years. They were 10% of net sales in the first quarter of this year, excluding that non-cash pension settlement charge. As we complete the final termination of our pension plan, which is expected in the second quarter, we do not expect to make any cash contributions in connection with the transfer of the plan liabilities to a third party because of the plan's fully funded status. EBITDA in the first quarter of 2023 was $15 million, an increase of $5.4 million or 56% compared to the first quarter of last year.
We reported a record quarterly net income of $11.5 million in the first quarter of this year, a 64% increase compared to $7.1 million the same quarter of last year. Diluted earnings per share were $0.34 in the first quarter of this year, compared to $0.21 in the first quarter of last year. Our international sales, which account for approximately 7% of our total sales, increased by 89% compared to last year. Our cash balance at the end of the first quarter of 2023 was $62.6 million, a $19.4 million increase compared to the cash balance at the end of last year.
This strong cash balance is the result of improvements in our logistical processes and availability of materials and components, which allow us to ship more boats than we produced during the quarter. Dealer inventories are increasing towards more normalized levels, continue to be lower than pre-pandemic levels. These moderately higher inventories will benefit our dealers as we enter into the height of the retail selling season. The outcome of the winter boat shows was generally favorable, our dealers continue to request boats they have already sold to retail customers, as well as additional inventory for the upcoming selling season. Having said that, we continue to monitor macro indicators such as consumer confidence, slowing economic activity, and increasing interest rates, all of which could weaken demand for recreational boats. I'll now turn it back over to Ben for a few closing remarks.
Thanks, Mike. Our market share remains strong. Chaparral sterndrive market share remains number two in its size category. The combination of Chaparral and Robalo's outboard sell the third-highest market share in their size category. Our successive quarters of record sales is a result of the hard work of the Chaparral-Robalo management team and our other dedicated employees, as well as our strong dealer network, as well as the appeal of the quality and design of our products. I'd like to thank you for joining us this morning, and we'll be happy to take any questions that you have.
Thank you. At this time, I would like to remind everyone, in order to ask a question, please press star then the number one on your telephone keypad. We'll go first to Craig Kennison at Baird.
Well, thanks, and good morning, everybody.
Good morning.
Congratulations on the progress on your pension as well. My question was on the just the availability of credit. I'm wondering if there's been any change in credit availability in the wake of the recent bank collapses.
Craig, this is Ben. We certainly, the credit line providers to the dealers have. I would describe it as they've not been proactive in increasing the lines, but we've been successful at coordinating with them, the service line providers, to increase them as appropriate. We have not heard that there's any particular references or delays in increasing credit lines because of the issues in the market. That's not to say that there may be some of that going on in the background, but we're not hearing that directly.
Anything on the consumer side in terms of either, you know, significantly higher rates in the wake of that collapse or just not approving at the same rate on applications?
We have not. With our model mix, it continues to be kind a higher-end boats, and most of those purchasers are cash-only buyers who are not as sensitive to rates. We've not seen any significant impact on our results or, you know, any of the dealers', you know, attitudes or reactions to any particular types of boats that they're looking to receive from us. None that we've seen so far.
Perfect. Thank you. I'm curious just about inflation. I'm not sure what visibility you have on the actual retail selling price of the boats that you sell, but, you know, I know, you know, during the pandemic, dealers had an opportunity to get full MSRP perhaps, or even better. Now it's the more competitive environment. I'm just curious from a consumer perspective, what are boat prices look like in some of your models? Are you seeing inflation, I guess, fade a little bit from a consumer perspective?
I would say, again, this is Ben, that, you know, the higher rates, we are incurring slightly higher dealer incentives because of the, you know, the floor plan pro-program that we have in place where we, you know, share or pay for a period of time some of the interest. That is an impact between, you know, us and the it hasn't impacted us yet, but it's impacting our margins. That's something that we're helping the dealers with respect to rebuilding their inventories. Not really any other.
This is Mike . Obviously, the rate of inflation was increasing quite rapidly during the pandemic and shortly thereafter. Some of that was driven by the material cost of making the boats and the supply chain issues. As those have cleared up, some of those are, you know, the rate of inflation there for our manufacturing has slowed. So that's, you know, just passed along to the customer. So it's not... We don't anticipate the boats increasing at the same rate they had. Then, you know, as Ben mentioned, at the same time, we're seeing incentives and for the dealers and so things are getting, I guess, a little bit easier for customers to buy the boats than maybe they were. Part of that's just supply and demand, and some of that is just passing along costs.
As our costs normalize, I think the cost and rate of increase of boats for the end customer will normalize also.
Yeah. We're seeing on kind of the material side, we've seen some reduction in some of the costs. Some of the many of the manufacturing components aren't coming down, as much, or certainly nearly as fast. Ultimately, as Mike said, that hopefully there won't be a need for large increases going forward. I guess where I was going with my earlier comment, was that, you know, we have not seen any pressure to put any additional incentives in the system. As you also referred to, we don't have direct visibility into what the dealers are charging the end consumer, in all cases. We expect that there will be some moderation, there will be some more normalized discounting by dealers as we move forward.
I would expect that to happen. That'll normalize, I think, in the same way deal inventory will normalize.
That's great. Thank you so much.
Thanks, Craig.
Thank you.
As a reminder, if you would like to ask a question, please press star one. We'll go next to Fred Wightman at Wolfe.
Hey, guys. Good morning. I wanted to follow up the comment in the release and the prepared remarks was that the winter boat shows were generally favorable, which doesn't sound great, honestly. Can you just give a little bit more detail on the retail environment, how it compares to sort of what you would have expected entering the start of the calendar year or anything else maybe more recent than the winter boat shows?
Yeah. Hey, Fred, this is Jim. Yeah, that comment was intentional. It was mixed. I mean, we had some boat shows where we sold more boats at the show, more Chaparrals and Robalos than in the previous year. Those were very strong, plus a lot of follow-up. As you know, you know, there are a lot of sales that are sort of initiated at boat shows but not consummated. There were a few others that were not as good. There's no geographic or demographic trend to identify there. In some cases, it might have been weather and things like that.
We also have noted that the spring is coming kind of late, both where you live and where we live and some other places as well. That is, you know, delaying the impulse buyer coming in. Yeah, the boat show season was generally favorable. We'll repeat that language. There was no, you know, there was no geographic or demographic kind of trend to note there.
Geographic, I think that's where I think some of the larger shows were a little bit better than some of the.
Yeah.
-smaller shows. Some of the smaller shows were a little more lackluster, if you will. Not bad, but just not as strong as some of the larger.
Yeah. We attended a few of them. Like Jim and I went to Miami and you wouldn't have thought there was a need. You know, like, what you...
Right.
How many people were at that show? We saw it through our numbers, too. We with all those boats really well there. Same story here in Atlanta. The boat show here was pretty successful. Of course, it's more kind of Chaparral-focused here. We heard some of the smaller boat shows maybe weren't as strong as they were maybe pre-pandemic, so. I'd say the bigger ones, at least the ones that we attended in this room, seemed great. Yeah, mixed like Jim said.
Yeah.
Really helpful. I guess just sort of outside of shows, right, sort of the normal day-to-day, sort of the color you're hearing from dealers, is that in line with sort of what they were thinking? Maybe a little bit softer given some of the weather issues? How would you sort of characterize the non-boat show retail demand?
I think, from the dealer's perspective, you know, them just looking locally at their current, you know, orders in hand and their expectations for the spring, we have little to no pushback on, you know, the boats that we plan to ship to the dealers, right? When we're talking to the dealers about what's gonna be available in the coming weeks, we've had little to no, if you wanna call it, cancellations or deferrals on those. They're still willing to accept, you know, as many boats as we can reasonably ship to them. I think that bodes well overall, you know, across our dealership that they
The current demand seems to be good enough, and they have enough confidence at this point in time, as I said, to continue to take, you know, new boats. Our field inventory has, you know, it's up, but it's probably only half to 2/3 as large as it was kind of pre-pandemic. There's still a lot of room there. You know, we're hopeful that there'll be a lot of sell-through and those inventory levels, you know, typically come down, you know, after you move through the selling season. Hopefully we'll see that, and there'll still be plenty of room for them to take normal amounts of inventory, you know, past the normal retail selling season and, you know, into the end of the year.
We still are very positive on the rest of the year, but as we mentioned in our comments, we're certainly watching very closely all of the things that we're talking about here in terms of dealer behavior, you know, economic weakness, and all those sorts of things. Right now, we see it remaining quite strong.
Great. Just the last one. You guys mentioned some improvement in supply chain and improved component availability. Like, where are the specific items that you're seeing some relief? Is it on outboard engines, windshields, sort of wire harnesses? Like, where are you seeing the biggest improvement?
Yeah. I can jump in. I'd say all of the above, it's kind of two steps forward, one step back. We have significant improvement, we'll have issues getting outboard engines, for instance, they'll flush. It's much, much better than it was, the last few quarters, which is why we were able to complete and ship more boats than we manufactured. We're still not 100% through the woods, it's just sort of all over the place. It's not just one thing. It's like a game of Whac-A-Mole. As soon as something gets fixed here-
Yeah.
..the next thing pops up.
Yeah. Yeah. Also, Fred, it's Jim. Transportation is better.
Yeah, that's a great point.
Yeah. Without exception, transportation's better, so that's helpful.
Great. Thanks a lot, guys.
Thank you.
Thanks, Fred.
Thanks, Fred.
There are no further questions at this time. I would like to turn the conference over to Jim Landers for closing remarks.
Okay. Thank you, Audra. We appreciate everybody who called in and the questions. We hope everybody has a good day. We will talk to you soon.
This concludes today's conference call. A replay of today's conference will be available on marineproductscorp.com within two hours following the completion of the call. Thank you for your participation. You may now disconnect.