Earnings Call: Q3 2020

Nov 5, 2020

Good day, ladies and gentlemen, and welcome to the Miller Industries Third Quarter 2020 Results Conference Call. Please note this event is being recorded. And now at this time, I'd like to turn the call over to Mr. Brendan Dunlap at FTI Consulting. Please go ahead, sir. Thank you, and good morning, everyone. I would like to welcome you to Miller Industries conference call. We are here to discuss the company's 2023rd quarter 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 Badgerley, Co CEO Debbie Whitmire, Executive Vice President and CFO and Frank Mondonia, 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 Ten K and other filings with the Securities And Exchange Commission. With these formalities out of the way, I'd like to turn the call over to Jeff Please go ahead, Jeff. Thank you, and good morning, everyone. I don't think I'll surprise anyone by saying that 2020 has been a challenging year for our communities, our customers and our employees. However, I can say with confidence that our employees have risen to the occasion and continue to provide our customers with the best in class service during this pandemic. With that said, I am extremely encouraged by the changes that we made during the first half of 2020 to help us operate more effectively and safely during this pandemic. These changes, coupled with the beginnings of the reopening of the economy, helped drive the significant sequential improvement that we experienced during the third quarter. More specifically, revenue during the third quarter decreased 13.9 percent $1,000,000 a year ago as the impacts of COVID 19 continued to weigh on our production levels. However, our revenue increased 31% compared to the second quarter of 2020 as our business began to rebound from the sharp declines experienced during that period. Quarterly gross profits decreased by 17.9 percent year over year to $17,800,000, while gross margin contracted 50 basis points to standard approximately 10 basis points year to date, reflecting operational improvements in stringent cost controls. Net income was $6,600,000 or $0.57 per share compared to net income of 8,100,000 or $0.71 per share in the third quarter of 2019. Despite the ongoing uncertainty in the macro environment, we continue to invest in our business during the quarter by repurposing a portion of our existing Greenville, Tennessee facility to bring certain production capabilities capabilities in house to mitigate future supply chain constraints. We expect to begin phasing these production improvements by the end of the year and are confident that these investments will further enhance our production capabilities going forward. Before I turn the call over to Debbie, Will Miller and I would like to take a moment to thank our employees for their incredible efforts and outstanding commitment to operational excellence and best in class customer service during these difficult times. Now I'll turn the call over to Debbie who will review the third quarter financial results. After that, I'll be back with comments about market environment and some closing remarks. Debbie? Thanks, Jeff, and good morning, everyone. Net sales for the third quarter 2020 were $168,400,000, versus $195,500,000 for the third quarter of 2019, a 13.9% year over year decrease driven by ongoing impacts from the COVID 19 pandemic, but a 31% improvement from the second quarter 2020. Cost of operations decreased 13.4 percent to $150,500,000, the third quarter 2020 compared to $173,700,000 for the third quarter 2019 due to the decline in our top line sales. Cost of operations as a percentage of net sales increased approximately 50 basis points to 89.4 percent from the prior year period. Gross profit was $17,800,000, or 10.6 percent of net sales for the third quarter 2020 compared to $21,700,000 or 11.1% of net sales for the third quarter 2019, reflecting a slightly unfavorable product mix. SG and A expenses were $9,200,000 for the third quarter 2020 compared to $10,500,000 for the third quarter 2019. As a percentage of sales, SG and A increased approximately 20 basis points to 5.5% from 5.3% in the prior year period. Interest expense net for the third quarter of 2020 was $230,000, compared to $424,000 for the third quarter 2019 as we paid down our credit facility and saw decreases in floor plan interest payments. Other income expense for the third quarter of 2020 is a net income of $209,000 compared to a net expense of $231,000 for the third quarter 2019 due to currency exchange rate fluctuations. Net income for the third quarter of 2020 was $6,600,000 or $0.57 per share. Net income for the third quarter 2019 was $8,100,000, or $0.71 per share. Now let me briefly review our results for the 9 months ended September 30, 2020. Net sales for the 1st 9 months of 2020 were $472,900,000 compared to $615,000,000 in the prior 30, 2020 was $54,100,000 or 11.4 percent of sales compared to $69,600,000 or 11.3% of sales for the 1st 9 months of 2019. Net income for the 1st 9 months of 2020 was $17,800,000 or $1.56 per share, a decrease of 35% compared to net income for the 1st 9 months of 20.19 of $27,400,000 or $2.41 per share. Turning now to our balance sheet. Cash and cash equivalents as of September 30, 2020 was $47,500,000, compared to $37,100,000 as of June 30, 2020 $26,100,000 as of December 31, 2019. Accounts receivable at September 30, 2020 totaled $149,800,000 compared to $123,200,000 as of June 30, 2020 and $168,600,000 as of December 31, 2019. Inventories were $87,400,000 as of September 30, 2020. Compared to $90,900,000 as of June 30, 2020 $88,000,000 as of December 31, 2019. Accounts payable at September 30, 2020 was $93,000,000 compared to $59,500,000 as of June 30, 2020 $95,800,000 as of December 31, 2019. During the third quarter, we repaid the remaining $5,000,000 on our existing credit facility, eliminating all long term obligations as of September 30, and are confident that our financial position provides us with the strength and flexibility to mitigate any future impact related to the pandemic. Overall, our balance sheet remains strong and we believe we have sufficient capital resources to handle the challenging environment while continuing to invest in our business. Lastly, the company also announced that its Board of Direct approved our quarterly cash dividend of $0.18 per share, payable December 14, 2020, to shareholders of record at the close of business on December 7, 2020. Now, I'll turn the call back to Jack for further remarks. Thank you, Debbie. Through the 1st 9 months of the year, we have been sharply focused on the aspects of our business within our control. Will and I are very proud of in class service to our customers. Going forward, we will continue to prioritize the health and safety of our employees as well as continuing to supply Additionally, we remain dedicated to returning capital to shareholders as evidenced by our declared dividend of $0.18 per share. Looking into the 4th quarter, visibility remains challenged as many regions around the world are experiencing an uptick in COVID 19 cases. As a result, we anticipate the pandemic will continue to However, we will respond as needed in order to actively mitigate any future impacts on our business. While the operating environment remains challenged, we are confident that our operational improvements, healthy balance sheet and industry leading product portfolio positions us favorably to capitalize on future growth opportunities. In closing, Will and I would like to thank our employees, customers, suppliers, and shareholders for their ongoing support you. You. It will pause for just a moment to allow everyone an opportunity to signal. For any additional or closing remarks. Yes, thank you again for joining us on the call today. And we look forward to speaking with you again on our fourth quarter results conference call. Thanks. Thank you. That does conclude today's conference. Thank you all for your participation. And you may now disconnect.