Marine Products Corp (MPX) Q4 2018 Earnings Conference Call Transcript

Selling, general and administrative expenses were $7 million in the fourth quarter of 2018, relatively unchanged compared with $6.9 million in the fourth quarter of last year. As a percentage of net sales, SG&A expenses increased to 11.3% in the fourth quarter of 2018 from 10.5% in the fourth quarter of last year. SG&A for the full-year of 2018 was 10.4% of net sales.

Net income and earnings per share for 2018 include the benefit of lower corporate tax rates due to tax reform. For the quarter ended December 31, 2018, we reported net income of $4.7 million, a decrease of $313,000 or 6.2% compared to net income excluding the impact of tax reform of $5 million in the fourth quarter of 2017.

Diluted earnings per share of $0.14 decreased by $0.01 compared to diluted earnings per share excluding the impact of tax reform of $0.15 during the fourth quarter of 2017.

Our effective tax rate during the fourth quarter of 2018 was 22%, which is also our estimated full-year effective rate for 2019.

International sales represented 3.2% of net sales during the fourth quarter, compared to 6.7% of net sales in the fourth quarter of last year. International sales decreased significantly during the third and fourth quarters of 2018 due to the trade tariffs, most notably for us in Canada, the European Union and Mexico.

Our cash and marketable securities balance at the end of the fourth quarter was $16.4 million, a decrease of $4.3 million compared to the end of 2017. Our cash and marketable securities balance decreased because of higher working capital, as well as higher dividends and increased cost of share repurchases during 2018 as compared with 2017.

As of December 31, 2018, dealer inventories were essentially unchanged compared to the prior year, which is positive given our full-year sales growth. Backlog at the end of the year was higher than at this same time last year, reflecting our dealers' confidence about the remainder of the 2019 model year and supportive of our planned increase in production levels.

With that, I'll turn it back over to Rick.

Richard Hubbell -- President and Chief Executive Officer

Thanks, Ben. Several times this morning we mentioned larger boats and higher selling prices, the appeal of our new designs to consumers and their contribution to our financial results. One of the Chaparral models that is meant a lot to us during the end of this year is the Chaparral 347 SSX. This is our largest sterndrive model and is both a super-sized bowrider and a big boat with full beam in closed cabin. The full beam cabin really distinguishes this boat from its comparably sized peers.

We have some other large boats that we'll be showing at the winter boat shows in the upcoming retail selling season. We are as excited about these boats as we are about the 347 SSX and we look forward to talking with you about them soon.

Thank you for joining us this morning. And we'll be happy to take any questions you may have.

Questions and Answers:

Operator

Thank you. (Operator Instructions) And at this time we'll hear from Ronald Bookbinder of IFS Securities.

Ronald Bookbinder -- IFS Securities -- Analyst

Good morning and thank you for taking my questions.

James Landers -- Vice President, Corporate Finance

Sure, Ron.

Ben Palmer -- Vice President, Chief Financial Officer, Treasurer and Corporate Secretary

Good morning.

Ronald Bookbinder -- IFS Securities -- Analyst

I was wondering on out -- the supply of outboard engines, the supply was fairly tight. During this off-season, have the manufacturers been able to build inventory for demand?

Ben Palmer -- Vice President, Chief Financial Officer, Treasurer and Corporate Secretary

This is Ben. For us, yes, we're in much better shape today. In fact, part of the reason that our inventories are up a bit and working capital is up because we've bought a few engines ahead and to protect ourselves in that regard. So, we're generally in good shape at this point.

Ronald Bookbinder -- IFS Securities -- Analyst

And in the international sector, has that improved lately with no agreements in North America?

James Landers -- Vice President, Corporate Finance

Ron, this is Jim. Not as of this moment. International sales can -- are weak, as Ben mentioned, and there is nothing at this moment that has improved.

Ben Palmer -- Vice President, Chief Financial Officer, Treasurer and Corporate Secretary

This is Ben. Luckily for us, of course, in the fourth quarter -- over the last couple of quarters it's been very low-single-digit percentage of our total sales. So that's the good news. But we would love for it to be addressed and free back up, that would be good for everybody, including us. But no real change at this point, given that it's a relatively small portion of our total sales. We would not see any new momentum or anything based on any changes recently.

Ronald Bookbinder -- IFS Securities -- Analyst

And lastly, on the gross margin, labor has been -- the labor market is just tight everywhere, and this has been going on for several quarters now. Do you see anything that's going to change that, or should we be looking to be conservative on the labor costs going forward?

Ben Palmer -- Vice President, Chief Financial Officer, Treasurer and Corporate Secretary

Well, I think for -- labor is a constant issue, something we were always working to try to address to keep enough of the right people and train people and all that. It is a big challenge for everybody, and we're certainly not excluded from that. During the last few quarters, we've attempted to again recruit and train some new people, that sort of shows up, as you know, again it shows up as -- in some of those, or creating some of those inefficiencies that we're talking about. We hope it's going to stabilize, there are few programs that we have in place, or that we're developing to try to address, again the overall quality of the workforce and having the right people in the right places to hopefully improve -- the expectation is to improve the margins over time. But it'll continue to be a challenge for us for at least another couple of quarters.

Ronald Bookbinder -- IFS Securities -- Analyst

Okay, great. Thank you and good luck in the New Year.

Ben Palmer -- Vice President, Chief Financial Officer, Treasurer and Corporate Secretary

Thank you.

James Landers -- Vice President, Corporate Finance

Thank you, Ron.

Operator

(Operator Instructions) And at this time, there are no further questions in the queue. I would now like to turn the call back to Jim Landers for any additional or closing remarks.

James Landers -- Vice President, Corporate Finance

Thank you very much. We appreciate the people who called in to listen and I appreciate the question. Look forward to seeing everybody soon. Have a good day.

Operator

And to remind everyone, the conference call will be replayed on www.marineproductscorp.com within two hours following the completion of this call. We do thank you for your participation today.

Duration: 12 minutes

Call participants:

James Landers -- Vice President, Corporate Finance

Richard Hubbell -- President and Chief Executive Officer

Ben Palmer -- Vice President, Chief Financial Officer, Treasurer and Corporate Secretary

Ronald Bookbinder -- IFS Securities -- Analyst