Earnings Call: Q4 2018

Mar 7, 2019

Good day, ladies and gentlemen, and welcome to the Miller Industries Fourth Quarter 2018 Results Conference Call. Please note this event is being recorded. I now at this time, I would like to turn the conference over to Mr. Ben Harskowitz at 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 2018 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 Jeff Badri Co's 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 for 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 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 are more fully described in the company's annual report filed on Form 10 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. We are pleased to discuss our 4th quarter and full year results with you today. This was another strong quarter for Miller Industries, as we achieved strong year over Our profitability has improved as we continue to realize the incremental benefits associated with increased production capacity. Our commitment to operational excellence continues to pay off as evidenced by our 20.1% increase in gross profit and our 16.2 percent increase in net income as compared to the fourth quarter of 2017. Results this quarter were driven by the continued strong demand in our and $80,000,000, an increase of 12.7% compared to 159.7 $1,000,000 in the prior compared to net income of 9.3 in the 2017 fourth quarter. Gross profit as a percentage of total sales this quarter was 12.3%. Up from 11.6% in fourth quarter of 2017. Concurrently selling general and administrative expenses increased forty basis points as a percentage of total sales to 6%. Our balance sheet remains healthy and we continue to strategically deploy our resources to drive organic growth and profitability. We remain confident 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 on the market environment and some closing remarks. Then we'll go Net sales for the 2018 fourth quarter were $180,000,000 versus $159,700,000 for the 2017 fourth quarter, a 12.7% increase year over year. Cost of operations increased 11.7 percent to $157,800,000 for the 2018 fourth quarter, compared to $141,300,000 for the 2017 fourth quarter, reflecting increased costs associated with higher demand. However, cost of operations as a percentage of net sales contracted approximately 80 basis points to 87.7 percent from the prior year period, reflecting our continued cost management efforts. Gross profit was $22,200,000 or 12.3 percent of net sales for the 2018 fourth quarter compared to $18,500,000 or 11.6% of sales of net sales for the 2017 fourth quarter. SG and A expenses were $10,800,000, for the 2018 fourth quarter compared to $8,900,000 for the 2017 fourth quarter. As a percentage of sales, SG and A increased to 6.6% from 5.6% in the prior year period. Other income expense net for the 2018 fourth quarter was an expense of $465,000, compared to an expense of $203,000 for Interest expense for the 2018 fourth quarter was $449,000 compared to $426,000 for the 2017 fourth quarter, primarily due to increased distributor floor plan activity. Net income for the 2018 fourth quarter was $10,800,000 or $0.95 per diluted share. Net income for the 2017 fourth quarter was $9,300,000 or $0.81 per diluted share. Now let me briefly review our results for the 12 months ended December 31, 2018. Net sales for the year were $711,700,000 compared to $615,100,000 in the prior year period. An increase of 15.7 percent. Gross profit for the year was $83,300,000 or 11.7 percent of sales, compared to $67,100,000 or 10.9 percent of sales in 2017. Net income for the year was $33,700,000 or $2.96 per diluted share, an increase of 46.6% compared to net income of 20 Turning now to our balance sheet. Cash and cash equivalents as of December 31, 2018 were $27,000,000 compared to $18,700,000 as of September 30, 201821.9000000 at December 31, 2017. Accounts receivable at December 31, 2018 totaled $149,100,000 compared to $155,700,000 as of September 30, 2018, and $132,700,000 at December 31, 2017. Inventories were $93,800,000 as of December 31, 2018, compared to $84,100,000 as of September 30, 2018, and $68,600,000 at December 31, 2017. Accounts payable at December 31, 2018 were $98,200,000 compared to $100,900,000 as of September 30, 2018, and $79,300,000 at December 30 1, 2017. We increased the balance of our unsecured revolving credit facility by $5,000,000 during the 2018 fourth quarter The balance of which was $15,000,000 as of December 31, 2018 $20,000,000 as of March 4, 2019. Borrowings were used to help fund our working capital needs Board of Directors approved our quarterly cash dividend of $0.18 per share, payable March 25, 2019, to shareholders of record at the close of business on March 18, 2019. Now, I'll turn the call back to Jeff for further remarks. Thank you, Debbie. Our performance this quarter was very encouraging as the effects of our capital projects better allowed us to meet increasing demand, which resulted in strong sales as well as gross and operating margin expansion. Our increased production capacity has resulted in increased operating leverage and profitability As always, disciplined operations, cost reduction, balance sheet management, and targeted capital deployment remains central to our strategy. To underscore our continued commitment to returning shareholder value, we have declared our quarterly dividend of $0.18 per share. As we move into 2019, our backlog remains strong underlying activity in all our end markets continues to be positive. Offsetting some of these positive fundamentals our cost pressures related to raw materials and employee benefit costs, which we will continue to track and attempt to actively mitigate. We will also continue to monitor current discussions related to tariffs in order to determine the impact they may as we realize the incremental benefits on the back of our plant consolidation and expansion efforts we will continue to deploy our resources in a manner that heightens our operational efficiency allows us to sufficiently meet growing demand for our products and maximize shareholder value. In closing, I'd like to thank our employees, our customers, our suppliers and our shareholders for their ongoing support of Miller Industries. With that, we're ready to take your question. Us. We did have one question come in from a shareholder that I'll go ahead and address before we start the Q And A session. They wanted a little more flavor on the use of the working capital and the increase in the inventory balance at the end of the year. And the use of the funds drawn on the credit facility. In the fourth quarter, as we increased our production levels over the course of the year, Our single supplier heavy duty toolboxes was not able to meet the supplier and have an additional supplier providing delivery of these boxes. We're now current on our box receipts and are working diligently to integrate them with the units that were produced during the prior year and held in inventory as of the end of the year so that we can get those delivered to our end user customers. So the draw on the line is basically providing the working capital for the increased inventory levels. And production of units waiting Hopefully, that gives a little more insight on that. So we'll turn it back over to the moderator to accept your additional questions. Thank please. You. It appears there are no questions at this time. I'd like to turn call back to management for any additional or closing remarks. We thank you for joining us for our 2018 fourth quarter conference call, and we look forward to reporting our earnings in the And with that ladies and gentlemen, that concludes today's conference call. We'd like to thank you again your participation. You may now disconnect.