Earnings Call: Q4 2019

Mar 5, 2020

Good day, ladies and gentlemen, and welcome to the Miller Industries 4th Quarter 2019 Results Conference Call. Please note this event is being recorded. And now at this time, I would like to turn the call over to Brendan Dunlap of FTI Consulting. Please go ahead, sir. Thank you, and good morning, everyone. I would like to welcome you to the Miller Industries conference call. We are here to discuss the company's 2019 fourth 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 Badgley, Co CEO Debbie Whitmire, Executive Vice President and CFO and Frank Medonia, 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 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 K and other filings with Care Using 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. We are pleased to discuss our fourth quarter and full year results with you today. This has been a record breaking year for Miller Industries as we achieved the highest full year revenue and net income in our company's history. We finished the year with strong top line growth, gross margin expansion and an increase in earnings per share. Revenue during the 4th quarter increased 12.9% to $203,100,000 versus $180,000,000 a year ago, driven by broad based demand across our portfolio. Our domestic business continued its strong performance during the quarter as new order rates remain steady and our distributors continued to work at full capacity to deliver existing orders. Our international business also performed inline with our expectations on a year over year supply chain delays we experienced increased by 21.6 percent year over year to $26,900,000 and our gross margin expanded 100 basis points year over year to 13.3%. Which reflects strong demand, favorable mix and other cost reduction measures. Additionally during the quarter, We continue to realize benefits from our cost control initiatives as SG and A expenses as a percentage of sales decreased by approximately 20 basis points from the prior year period. Net income was $11,700,000 or $1.03 per share compared to net income of $10,800,000 or $0.95 per share in the fourth quarter of 2018. As we move into the first quarter of 2020, Our backlog remains healthy in both our domestic and international markets and we remain committed to providing best in class customer service while continuing to invest in our business as we continue to pay down debt and strategically deploy long term growth. Now I'll turn the call over to Debbie, who will review the fourth quarter financial results. After that, I'll be back with comments about the market environment and some closing remarks. Debbie? Thanks Jeff, and good morning, everyone. Net sales for the fourth quarter 2019 were $203,100,000 versus $180,000,000 for the fourth quarter of 2018, a 12.9% year over year increase, driven by broad based demand across our portfolio as well as some additional sales that were included in the 4th quarter as a result of supplier delay issues we experienced in the preceding quarter. Cost of operations increased 11.7 percent to $176,200,000 for the fourth quarter 2019, compared to $157,800,000 for the fourth quarter 2018, driven by our top line sales growth. However, cost of operations as a percentage of net sales contracted approximately 100 basis points to 86.7% from the prior year period Gross profit was $26,900,000 or 13.3 percent of net sales for the fourth quarter 2019, compared to $22,200,000 or 12.3 percent of net sales for the fourth quarter 2018, reflecting a favorable product mix SG and A expenses were $11,800,000 for the fourth quarter 2019 compared to $10,800,000 for the fourth quarter of 2018. As a percentage of sales, SG and A decreased approximately 20 basis points to 5.8% from 6% in the prior year period driven by our effective cost controls and increased operational efficiency across the organization. Interest expense net for the fourth quarter 2019 was $565,000, compared to $449,000 for the fourth quarter 2018 as an increase in customer floor plan financing costs more than offset lower long term debt related interest expense. Other income expense for the fourth quarter 2019 was a net gain of $211,000 compared to a net expense of $465,000 for the fourth quarter 2018, due primarily to currency exchange rate fluctuations. Net income for the fourth quarter 2019 was $11,700,000 or $1.03 per diluted share. Net income for the fourth quarter 2018 was $10,800,000 or $0.95 per diluted share. Now let me briefly review our results for the 12 months ended December 31, 2019. Net sales for the year were $818,200,000 compared to $711.7000000 in the prior year period, an increase of 15%. Gross profit for the year was $96,500,000, or 11.8 percent of net sales compared to $83,300,000 or 11.7 percent of net sales for 2018. SG and A expenses were $43,400,000 for 20 19 or 5.3 percent of net sales, compared to $39,500,000 or 5.6 percent of net sales for 2018. Net income for the year was $39,100,000 or $3.43 per diluted share, an increase of 15.9 percent compared to net income of $33,700,000 or $2.96 per diluted share in 2018. Now turning to our balance sheet. Cash and cash equivalents as of December 31, 2019, was $26,100,000, compared to $27,500,000 as of September 30, 2019, and $27,000,000 at December 31, 2018. Accounts receivable at December 31, 2019 totaled $168,600,000, compared to $165,800,000 as of September 30, 2019 and $149,100,000 at December 31, 2018. Inventories were $88,000,000 as of December 31, 2019, compared to $98,100,000 as of September 30, 2019, and $93,800,000 at December 31, 2018. Accounts payable at December 31, 2019 was $95,800,000, compared to $114,900,000 as of September 30, 2019, and $98,200,000 at December 31, 2018. During the quarter, we reduced our long term debt by approximately $5,000,000 from the prior quarter, bringing the balance to approximately $5,000,000 as of December 31, 2019. Overall, our balance sheet remains strong. And we continue to generate solid free cash flow, which provides us with financial flexibility to invest in our business and continue to drive long term shareholders Lastly, the company also announced that its Board of Directors approved our quarterly cash dividend of $0.18 per share payable March 23, 2020 to shareholders of record at the close of business on March 16, 2020. Now, turn the call back over to Jeff for further remarks. Thank you, Debbie. We are very proud of our performance this quarter and our record setting year. Our performance this quarter was on both the top and bottom lines. Our steadfast commitment to operational excellence, disciplined cost control measures, and strategic capital deployment grant us flexibility to invest in long term growth of our business while generating shareholder value. Our quarterly dividend of $0.18 per share our continued commitment quarter of 2020, we remain confident in the strength of our backlog and our underlying fundamentals in all our end markets. We will continue to monitor the developing situation and the impact it may Finally, we are confident that our previous and ongoing capital investments in conjunction with our strong cash flows and healthy balance sheet have positioned us to best serve our customers, while providing us with the financial flexibility to pursue any future opportunities to grow our business. In closing I'd like to thank our employees customers, suppliers, and shareholders for their ongoing support of Miller Industries. Thank you again for joining us this morning. I'd like to turn the call over to Bill Miller for a few words before we take your questions. Bill? Yes, Geoff. Thank you. I'd like to, close by welcoming our 2 new board members, Lee Walton and Deborah Whitmire. Lee Walton is an independent director, and she has more than 40 years of experience. Advising public companies on, in the areas of corporate Governance And Corporate Finance. Debbie Whitmire, as the company's executive vice president, chief financial officer and treasurer, and has provided, an invaluable, expertise and leadership to our senior management team, over the over the last several years, as a member of our executive committee. The leadership they will bring, will be a valuable contribution. And I hope you all join me in, congratulating them and welcoming you on the board. In addition, I'd like to just take one second to Congratulations all the employees at Miller Industries and all of our vendor suppliers and other partners, distributors, for a phenomenal, year, a record breaking year after 30 years of, $818,000,000 in sales. With that, Jeff, you have the other floor for questions. Thank you, Bill. And as you said, we're now ready We'll take our first question from James Lee with Portaro Capital. Thanks for taking my questions. Appreciate your commentary about backlog remaining healthy, but given the I guess, COVID-nineteen that the development that's impact here in the U. S. And Europe are just starting. Have you heard anything changes in terms of the demand from your dealers here in and in Europe? Will, I mean, you talk to our domestic dealers all the time? Yeah, from a, from a domestic standpoint, This is Will Miller. Our order intake remains consistent with the order intake we've seen over the last quarter. And customer sentiment and the communication that we're getting on a daily and weekly basis remains confident and strong. At this time. James, this is Jeff. Our international companies, still have a very strong backlog, both in England and France. Their order entry rates, seem to be remaining healthy So at this point no, but I understand your question completely. Things can change quick. And regarding the supply chain, we've heard or read about, the factory issues in China impacting the auto industry, do you have you seen or do you anticipate, that sales effect your ability to obtain your equipment? We have not seen any major impact at this point. Will has done a great job here in the U. S. And our purchasing people in Europe have done a great job monitoring our supply chain. Our VP of, purchasing, We met with yesterday, both of us. At this point, there are some spotty places, but none of them being major supply. He is digging deep into not only supplies coming out of China, also supplies coming out of the U. S. Or other countries in the world that have sub components coming out of China. And at this point, we feel comfortable. But again, We all understand the issue, and we all know that the world is not perfect and things can change, but we will continue to monitor. And and Jeff, this is Bill, Tom. The the bulk of our our product is, number 1, manufactured here, but our subcomponents, the bulk of them are from the United States. So We consider ourselves made in America. Got it. Lastly, on the, what is your capital CapEx plan for the year? Obviously, We think we will return back to normal levels of CapEx that, if you table, I think we've talked about that we're instituting a new system in our operation. But if you look at normalized level, should be somewhere around depreciation. I would tell you, we've been very successful at making investments in CapEx that increase, our company's sustainability. I think we look at opportunities Great. Thank you. And with that, that does conclude today's question and answer session. I'd like to turn the call back over to management for any additional or closing comments. Yes, we'd like to thank you for joining our call today. And we look forward to talking to you at to report our Q1 Thank you. And that concludes today's conference call. We'd like to thank you again for your participation. You may now disconnect.