Good morning, and thank you for joining us for Marine Products Corporation's third 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. Mike will get us started by reading the forward-looking disclaimer. Please go ahead.
Thank you, 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 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 have not received our press release, please visit our website. In 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 are also required to use EBITDA to report compliance with our financial covenants under our revolving credit facility.
Our press release, issued this morning on our website, contained 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'll now turn the call over to our President and CEO, Ben Palmer.
Thank you, Mike, and thank you all for joining our call this morning. I'll begin with a few highlights regarding our third quarter 2023 earnings press release that was issued this morning. Marine Products Corporation's third quarter results reflect a reduction in boat deliveries to dealers compared to the prior year that approximate our new production rates. The decreased production corresponds to the normalization of retail boat demand that has occurred during 2023, following the significant post-COVID demand. Our dealers expressed continued optimism, optimism at our recent annual dealer conference, bolstered by the launch of our new 2024 models. They did, however, note some concerns about potential economic slowdown and the impact of higher interest rates. On a positive note, supply chains continued to improve from earlier this year, but certain components remain challenging.
During the quarter, our dealers continued to rebuild their inventories, trending to more normalized levels, and we have asked them to return to a more typical ordering process to assist us in scheduling our production. Dealer inventory of Chaparral and Robalo models remains healthy and below pre-pandemic levels. We expect to manage our production to approximate retail demand over the coming quarters, so dealers are able to service demand out of planned inventory. 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 it back over to Mike Schmit, our CFO.
Thanks, Ben. I'll begin with an overview of the company's third quarter 2023 financial results. Net sales for the third quarter were $77.8 million, a 22% decrease compared to the third quarter of last year. Unit sales decreased by about 24%. Average selling price per boat increased by approximately 5% versus the prior year, primarily due to favorable model mix, and to a lesser extent, price increases to cover higher costs of materials and components. Production and sales were negatively impacted by about 3 days during the third quarter due to Hurricane Idalia. Gross profit in the third quarter was $19.2 million, a 23% decrease compared to the third quarter of 2022. The gross margin for the third quarter was 24.7%, a slight decrease over the 25% for the third quarter of last year.
Selling, general, and administrative expenses were $8.8 million in the third quarter of 2023, compared to $10.3 million in the third quarter of last year. These expenses decreased due to costs that vary with sales and profitability, such as incentive compensation, sales commissions, and warranty expense. We also reported a net gain on disposition of assets of $2 million during the quarter, which included $1.8 million related to a real estate transaction. EBITDA in the third quarter was $13 million, a 14% decrease compared to $15.2 million in the third quarter of 2022. EBITDA as a percentage of net sales was 16.7% in the third quarter of 2023, compared to 15.1% in the prior year....
We generated net income of $10.4 million in the third quarter, a 9% decrease compared to $11.5 million in the third quarter of 2022. Diluted earnings per share were $0.30 in the third quarter, compared to $0.34 in the third quarter of last year. Our international sales, which accounted for approximately 6% of our total sales during the third quarter, decreased by 12% compared to the third quarter of last year. As Ben mentioned, our dealer inventories are increasing toward more normalized levels and continue to be lower than pre-pandemic levels. These moderately higher inventories have allowed our dealers to meet current demand, as well as purchase our 2024 models. I'll now turn it back over to Ben for a few closing remarks. Thanks.
Our market share remains strong. I'm very pleased to report that the most recently reported data indicates that Chaparral sterndrive market share was number 2 in its size category. In addition, the combination of Chaparral and Robalo's outboards hold the third highest market share in their size category. We've received very positive feedback on our new 2024 models from our dealers. They are designed to appeal to the retail customer while allowing us to efficiently produce high-quality boats. Our new Chaparral 267 SSX will be featured on the upcoming cover of BoatUS Magazine. We, like our dealers, see additional uncertainty in the market over the coming quarters, but our field inventory remains healthy and backlogs, backlogs support our current production schedule into 2024. I'd like to thank you for joining us this morning, and we'll be happy to take any questions you have.
Thank you. If you have a question, please press star one on your telephone keypad. To withdraw your question, simply press star one again. Again, that is star one to ask a question. One moment, please. Your first question comes from the line of Brandon Rollé with D.A. Davidson. Please go ahead.
Good morning. Thank you for taking my questions. I guess to start, from a retail perspective, what have you seen over the last 30 days as we head into the winter months? And I guess, how are you thinking about retail in 2024 at this point?
Brandon, this is Jim. Maybe I can kick off with the answer there. The past 30 days have not been very different from, you know, the past few months, probably. People are a little bit concerned about interest rates. The economic slowdown issue is always a discussion, but, you know, it's just a seasonally slow time of the year. Our dealers, as everybody's mentioned, have been cautious. They haven't canceled any orders, but they're asking us to slow down a little bit. Part of that is interest rates on their part. You know, their carrying costs for inventory are higher than they were, so that order and delivery period is just extended a little bit. Don't know if anybody else has anything to add.
No, I think that's right, Brandon. You know, this time of year, obviously, the third quarter is a normal seasonally slow period, so it's a little bit difficult to gauge the future just based on, you know, the last 30, and not that you're saying that, but just on the last 30 days. As it relates to 2024, you know, we feel like we're being prudent about, you know, where we're setting our production rates. We feel really good about the level of field inventory of our models. Of course, many of our dealers carry inventory of other models as well. So there's only a certain amount of capacity that dealer have to take additional models.
But again, our inventory is very healthy in terms of numbers and certainly the you know all almost virtually in the entire field inventory is very fresh models, so there's no concern about trying to move older models. So what we're looking for, the next point for us to really get a good idea about assessing demand is gonna come with the you know the winter boat shows. That'll start you know later this calendar year and into early next year. So at that point in time, we'll all reassess you know we'll reassess demand, reassess you know look at where dealer inventories stand and then we'll reassess what appropriate production rates are. But we feel okay about it. We feel like we are as well-positioned as possible at this point in time.
Okay, great. Just, back on the inventories, would you be able to quantify maybe the average weeks on hand for your dealers right now? I know you had said, current inventory levels are below 2019 levels, but from a dollar perspective, and taking into account, obviously, higher carrying costs for these dealers, do you feel like from a dollar perspective, dealers are carrying more inventory than they did pre-pandemic?
We don't have complete visibility into our dealers' total inventory, right? They don't readily share that with us, and certainly, the floor plan providers don't either. I would say that, you know, the average cost of boats is certainly up from pre-pandemic. For us, that's a combination of we're building and dealers are taking and ordering larger boats, so that tends to increase, obviously, the average selling price, and also just due with the cost of components and so forth, that's increased in the last two or three years. So I would, you know, it's up to the floor plan providers to determine, you know, the level of financing they're gonna provide the dealers. So I don't really...
I'm not aware of exactly what their dollar inventory levels are, but that certainly, at some level, maybe produces a little bit of headwind from the financing company's perspective. They wanna. They're thinking more about dollars, of course, than they are numbers of units, to your point.
From a unit perspective, just directionally, Brandon, you know, we are still below where we were pre-pandemic. During kind of the last few years, dealers were probably a little less than a third of what they were pre-pandemic on kind of total units. Now, we're probably a little bit about two-thirds plus of pre-pandemic levels. So we've, you know, probably double where we were this time last year. But we're not sure that dealers are going to get back to pre-pandemic levels because their carrying cost, as Ben mentioned, are so much higher because of higher interest rates.
So, also, you know, there's been better developments on our website and other boat manufacturers' websites, so they may not carry, you know, multiple colors of the same model because they can kind of pull it up on screen and show them, you know, different features and things like that. So we think some things may have fundamentally changed. We're not sure, you know, but we think that we're hearing that they're pretty comfortable where they're at now. But like I said, it's probably just a little over two-thirds where we were pre-pandemic, if that helps.
No, it does. Thank you. And, I know you said for this quarter, results kind of, reflected the reduction in production and delivery rates. Looking ahead to the fourth quarter, are you expecting a further reduction in production, given, you know, where inventories are at right now exiting the third quarter? Or I guess, how should we think about, production over the fourth quarter?
No, no, we are not. We've got it scheduled out based on dealer demand.
Yeah, we.
There's seasonality with holidays, but we don't look to reduce production during the next, you know, now, two and a half months.
Okay, great. And then just finally, you know, on the annual dealer conference, can you talk about where you were seeing the strongest orders for which products and maybe the mix of products that dealers or where you were seeing the strongest orders?
We didn't really see. Again, what they do at the dealer meeting is check out, you know, some of our existing models, but many of the newer models. Obviously, there's usually, and again, this year, a lot of buzz around some of our new models, like the 267 SSX. We haven't seen a shift in the size of the boats at this point in time. So I think that's a positive. We still have a good momentum and trend on dealers, you know, looking at and expecting to sell strongly with the larger boats, so we're pleased about that. No real major shifts at this point, sterndrive versus outboard or Robalo versus Chaparral.
I think it's just sort of, it's continuing on, and so no, no particular dramatic shift.
Okay, thank you. Just lastly, if I can squeeze one last one in. Just on the promotional support that you're providing to dealers at this point, can you talk about how that trended throughout the third quarter and any maybe step up in the fourth quarter or incremental promotional support you think is needed to the customer or to the dealer?
From the dealer's perspective, a little more support with respect to the building inventory, but not real significant from a retail perspective. We did have some small programs that we offered during the third quarter, but not really significant. We'll look at that issue and that question. It's a good question, but it's one we'll look at, again, as we're moving into the winter boat shows, right? We'll assess, we'll assess inventories, we'll assess, you know, our competition. We'll assess demand and make a decision about what level and type of support, and we'll design, you know, an appropriate incentive program that we think will help our dealers and help encourage some retail sales. We don't have that determined yet.
Certainly, again, that's another example of we and the industry returning, we expect returning to normal. You know, there's not, there's not, we have not needed to provide a lot of retail incentive support in the last, obviously, couple of years, but, but we do expect they'll, that, that we'll have some type of program in, in the winter.
Okay, great. And just, on the boat shows, outside of the Fort Lauderdale show, what other winter boat shows are you looking towards as, kind of indicators of demand and allowing you to better understand, what demand may look like in the upcoming year?
Well, I would say really, you know, all of them. We attend, you know, our, obviously, our salesmen are at all of the boat shows, and certainly all the major boat shows, and our management team attends many of the major boat shows. So, you know, and we regularly, you know, review how those sales are going and retail attitudes. So it'll be each and every one of them. We'll, you know, that's very key to us and the industry to, you know, have a good pulse on what's happening and where we feel demand is. And certainly, that influences how we design our incentive programs and how we set our production rates. So it's a great question, and we're interested in all.
Great. Thank you.
Thanks, Brandon.
Thank you, Brandon.
Again, ladies and gentlemen, if you have a question, it is star one. It appears there are no further questions. I will turn the call back over to Mike Schmit for closing remarks.
All right. Well, I just want to thank everyone for joining our call today, and we'll now end the call. Thank you very much.
This conference call will be replayed on marineproductscorp.com within two hours following the completion of the call. We thank you for joining. You may now disconnect your lines.