Earnings Call: Q1 2021

May 6, 2021

Good day, everyone, and welcome to the Miller Industries First Quarter 2021 Results Conference. Please note that today's call is being recorded. Now I'd like to turn the call over to Brendan Dunlap at FTI Consulting. Please go ahead. Thank you, and good morning, everyone. I'd like to welcome you to the Miller Industries conference call. We are here to discuss the company's 2021 Q1 results, which were released after the close of market yesterday. With us from the management team today are Bill Miller, Chairman of the Board Will Miller, President and Co CEO Jeff Badgley, Co CEO Debbie Whitmire, Executive Vice President and CFO and Frank Madonia, Executive Vice President, Secretary and General Counsel. Today's call will begin with formal remarks from management followed by a question and answer period. Please note in this morning's conference call, management may make forward looking statements in accordance with the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. I'd like to call your attention to the risks related to these statements, which are more fully described in the company's annual report filed on Form 10 ks and other filings with the Securities and Exchange Commission. At this time, I'd like to turn the call over to Jeff. Please go ahead, Jeff. Thank you, and good morning, everyone. When we begin the year, we are glad to put 2020 behind us and look forward to 2021. While the beginning of 2021 has had its own challenges, Will and I are pleased to say that we have put those challenges behind us as our business steadily improved as we progressed through the quarter. Additionally, the normalization of our business that we More specifically, in January, our operational performance was materially impacted by the rollout of our new enterprise software system as well as ongoing disruptions throughout our supply chain and limited availability of freight transportation, all of which resulted in delivery delays throughout our network. However, Will and I are pleased to report that we have completed the first phase of our enterprise software upgrades, and we are already beginning to benefit from enhanced operational efficiencies as we exited the Q1. Our sales for the Q1 fell 3.5% from the prior year period to $169,900,000 due to the delays caused by the software rollout and supply chain challenges in the first half of the quarter. Gross profit for the Q1 decreased 14.6 percent year over year to 15,800,000 dollars compared to $18,500,000 a year ago and gross margin contracted Approximately 120 basis points compared to the prior year period due to the decline in top line sales as well as increased costs associated with transportation and product shipments. In our international business, ongoing pandemic related restrictions in Europe and global shipping constraints primarily related to export sales weighed on performance. Despite those challenges, Underlying demand trends in the region remain favorable. Domestically, customer demand continues to improve as evidenced by our strong backlog and increasing order rates. However, transportation and freight availability were challenged, which increases the cost of shipping our products. We are aggressively working through those challenges to ensure that we can meet customer demand. Now I'll turn the call over to Debbie, who will review the Q1 financial results. Then I will provide some commentary about the current market environment and some closing remarks. Debbie? Thanks, Jeff, and good morning, everyone. Net sales for the Q1 of 2021 were $169,900,000 versus $176,100,000 for the Q1 of 2020, a 3.5% year over year decrease, driven by delivery delays associated with our enterprise software system rollout and ongoing COVID-nineteen impacts throughout our supply chain. Cost of operations decreased 2.2 percent to $154,100,000 for the Q1 2021 compared to $157,500,000 for the Q1 2020 due to the decline in our top line sales. Cost of operations as a percentage of net sales increased approximately 120 basis points to 90.7% from the prior year period. Gross profit was $15,800,000 or 9.3% of net sales for the Q1 2021 compared to $18,500,000 or 10.5 percent of net sales for the Q1 2020, largely driven by the impact of our enterprise system rollout as well as increased costs associated with shipping and transportation. SG and A expenses were $11,100,000 for the Q1 2021 compared with $11,000,000 for the Q1 2020. As a percentage of sales, SG and A increased approximately 30 basis points from 6.5% to 6.5% from 6.2% in the prior year period. Interest expense net for the Q1 2021 was $275,000 down from $359,000 for the Q1 2020 due to the elimination of our long term debt obligations in the Q3 of 2020, but is up from $197,000 last quarter due to an increase in customer floorplan financing costs. Other income and expense for the Q1 2021 was a net expense of $276,000 compared to a net expense of $91,000 for the Q1 of 2020 due to currency exchange rate fluctuations. Net income for the Q1 of 2021 was $3,200,000 or $0.28 per share. Net income for the Q1 of 2020 was $5,400,000 or $0.48 per share. Now turning to the balance sheet. Cash and temporary investments as of March 31, 2021 was $56,200,000 compared to $57,500,000 as of December 31, 2020 and $43,100,000 as of March 31, 2020. Accounts receivable at March 31, 2021, totaled $167,700,000 compared to $141,600,000 as of December 31, 2020 and $168,900,000 as of March 31, 2020. Inventories were $84,900,000 as of March 31, 2021 compared to $83,900,000 as of December 31, 2020 $92,600,000 as of March 31, 2020. Accounts payable at March 31, 2021 was $113,400,000 compared to $85,500,000 as of March 30 as of December 31, 2020 $96,800,000 as of March 31, 2020. As we begin to emerge from the COVID-nineteen pandemic, our diligent capital allocation priorities and strong balance sheet provide us with the financial flexibility to continue investing in our business and capitalize on strong industry demand trends. Lastly, the company also announced that its Board of Directors approved our quarterly cash dividend of $0.18 per share, payable June 14, 2021 to shareholders of record at the close of business on June 7, 2021. Now I'll turn the call back to Jeff for further remarks. Thank you, Debbie. While we are not yet through the pandemic, We are encouraged by the pace of the vaccine rollouts and the gradual normalization of the economy. Will and I are confident the investments we've made to streamline our operations and the unwavering commitment of our employees to deliver best in class customer service will drive our business forward. Along with our production and operational improvements, returning capital to shareholders remains a pillar of our capital allocation strategy, as evidenced by the Board's declaration of our 40 2nd consecutive quarterly dividend of $0.18 per share. Looking ahead, we are well positioned to capitalize on the positive momentum We experienced at the end of March and into April. Our healthy balance sheet and stringent cost controls provides us with the resources and the financial flexibility needed to continue investing in our business. Despite the lingering challenges associated with potential supply chain disruptions and escalating prices of raw materials And purchase component parts, we remain focused on the aspects of the business within our control so that we can continue to and generate shareholder value. In closing, Will and I would like to thank our employees, Thank you, again, for joining us this morning. Operator, please open the line for questions. Thank you. Thank you again for joining us on the call today, and we look forward to speaking with you again on our second