Good day, ladies and gentlemen, and welcome to Miller Industries' third quarter 2018 results conference call. Please note this event is being recorded. Now, at this time, I would like to turn the call over to Brendan Dunlap at FTI Consulting. Please go ahead, sir.
Thank you. Good morning, everyone. I would like to welcome you to the Miller Industries conference call. We are here to discuss the company's 2018 third quarter results, which were released after the close of market yesterday. With us from the management team today are Chairman of the Board, Will Miller, President and Co-CEO, Deborah Whitmire, Executive Vice President, 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-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 Will. Please go ahead.
Thank you. Good morning. Unfortunately, our Co-CEO, Jeff Badgley, will be unable to join us today as his father passed away earlier this week. Please keep Jeff and his family in your prayers. We are pleased to discuss our third quarter results with you today. This was another strong quarter for Miller Industries as we achieved solid top-line growth, gross margin expansion, and an increase in earnings per share. Our profitability continues to be improved as a result of our disciplined cost management as we realized incremental benefits associated with increased production capacity and efficiency gains on the back of our plant consolidation and expansion efforts. Our commitment to operational excellence continues to pay off, as evidenced by our 37.2% increase in gross profit and our 94.7% increase in net income as compared to the third quarter of 2017.
Results this quarter were driven by the continued strong demand in our domestic and international markets. We continue to see strong activity in international markets as our backlog continues to strengthen. We reported 2018 third quarter sales of $195.7 million, an increase of 27.6% compared to the $153.4 million in the prior year period. Net income was $8.7 million, or $0.76 per share, compared to net income of $4.5 million, or $0.39 per share in the 2017 third quarter. Gross profit as a percentage of total sales this quarter was 11%, up from 10.2% in the third quarter of 2017. Concurrently, selling, general, and administrative expenses decreased 80 basis points as a percentage of the total sales to 4.8%. As of September 30th, our plant expansion and consolidation efforts are complete, which has increased efficiency and boosted production levels, allowing us to meet increased customer demand.
Our balance sheet remains healthy. We continue to strategically deploy our resources to drive organic growth and profitability to create sustainable shareholder value. We remain confident in our competitive position and in our financial outlook. I'll turn the call over to Debbie, who will review the third quarter financial results. After that, I will be back with comments on the market environment and some closing remarks. We'll go to Q&A. Debbie?
Thanks, Will. Good morning, everyone. Net sales for the 2018 third quarter were $195.7 million versus $153.4 million in the 2017 third quarter, a 27.6% year-over-year increase. Cost of operations increased 26.5% to $174.2 million for the 2018 third quarter, compared to $137.7 million for the 2017 third quarter, reflecting increased costs associated with higher demand. Cost of operations as a percentage of net sales contracted approximately 80 basis points to 89% from prior year period, reflecting our continued cost management efforts. Gross profit was $21.5 million, or 11% of net sales for the 2018 third quarter, compared to $15.7 million or 10.2% of net sales for the 2017 third quarter. SG&A expenses were $9.5 million for the 2018 third quarter, compared to $8.6 million for the 2017 third quarter. As a percentage of sales, SG&A decreased to 4.8% from 5.6% in the prior year period.
Other income and expense net for the 2018 third quarter was an expense of $76,000, compared to income of $106,000 for the 2017 third quarter, reflecting unfavorable currency translation. Interest expense for the 2018 third quarter was $525,000, compared to $469,000 for the 2017 third quarter due to increased interest on distributor floor planning. Net income for the 2018 third quarter was $8.7 million, or $0.76 per diluted share. Net income for the 2017 third quarter was $4.5 million, or $0.39 per diluted share. Let me briefly review our results for the nine months ended September 30th, 2018. Net sales for the first nine months of 2018 were $531.7 million, compared to $455.4 million in the prior year period, an increase of 16.8%.
Gross profit for the nine months ended September 30th, 2018 was $61.2 million, or 11.5% of sales, compared to $48.6 million, or 10.7% of sales for the first nine months of 2017. Net income for the first nine months of 2018 was $22.9 million, or $2.01 per diluted share, an increase of 67.3% to net income for the first nine months of 2017 of $13.7 million, or $1.21 per diluted share. Turning now to our balance sheet. Cash and cash equivalents as of September 30th, 2018 were $18.7 million, compared to $19.7 million as of June 30th, 2018, and $21.9 million at December 31st, 2017. Accounts receivable at September 30th, 2018 totaled $155.7 million, compared to $148 million as of June 30th, 2018, and $132.7 million at December 31st, 2017.
Inventories were $84.1 million as of September 30th, 2018, compared to $81.2 million as of June 30th, 2018, and $68.6 million at December 31st, 2017. Accounts payable at September 30th, 2018 were $100.9 million compared to $92 million as of June 30th, 2018, and $79.3 million at December 31st, 2017. We decreased the balance of the unsecured revolving credit facility by $5 million during the 2018 third quarter. As of November 1st, 2018, we have borrowed $10 million under the $50 million credit facility to help fund our working capital needs as we work to meet customer demand. The company also announced that its board of directors approved our quarterly cash dividend of $0.18 per share, payable December 10th, 2018, to shareholders of record at the close of business on December 3rd, 2018. I'll turn the call back to Will for further remarks.
Thank you, Debbie. Our performance this quarter was very encouraging as the effects of our capital projects allow us to better meet increasing demand, which has resulted in strong sales growth and margin expansion. Associated enhanced operational efficiency and increased production capacity has resulted in increased profitability. These factors, combined with continued strong demand globally, bode well for the company's long-term outlook. As always, disciplined operations, cost reduction, balance sheet management, and targeted capital deployment continue to remain central to our strategy. To underscore our commitment to returning shareholder value, our board of directors declared a quarterly dividend of $0.18 per share. We move into the fourth quarter, 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.
While our growth and profitability has yet to be affected, the effects from steel and aluminum tariffs on raw material pricing are increasingly noticeable. We will continue to monitor current dynamics related to tariffs on steel and aluminum to determine any further impacts they may have on our raw material costs in the future. While we are concerned about the potential impact of tariffs and remain in constant communication with our customers and suppliers, we continue to be disciplined in our cost management efforts and will respond as needed. In closing, I'd like to thank our employees, shareholders, suppliers, and customers for their ongoing support of Miller Industries. With that, we are ready to take your questions. Thank you.
We will now begin the question and answer session. To ask a question, you may press star then one on your touch tone phone. If you're using speakerphone, please pick up your handset before pressing the key. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. At this time, we'll pause momentarily to assemble our roster. The first question comes from Bruce Baumann of Franklin.
Good morning.
Morning.
Thanks for taking my question. Thanks for taking my question, and congratulations on another very nice quarter. Also, my sympathy to Jeff.
Thank you.
My question has to do with CapEx. Would you walk us through the spending you've done over the last couple of years? I guess beginning at the end of 2015. What were you spending it on? What was the result? Then what are CapEx plans for the next couple of years? Thank you.
Since 2015, we have spent a significant amount of money, Debbie, I think the number is about $54 million, on CapEx revolving mostly around production capacity in our Pennsylvania facility. We expanded that facility from 100,000 square feet to 227,000 square feet and implemented state-of-the-art robotics and fabrication equipment to increase our overall capacity. As well, in Ooltewah, we spent significant money on focusing on our bottlenecks, which revolved predominantly around our paint process, so that we could increase production and throughput out of our facility in Ooltewah, Tennessee. At this time, we believe that our future capital expenditures will go back to a more normalized rate.
Great. Thank you.
Thank you.
The next question comes from the line of James Lee of Potrero Capital.
Hi, guys. On the gross margin, when do you expect raw material price increase to start hitting the gross margin, and by how much?
James, I believe we've already started to see increases in the raw material pricing starting back in August of last year. To try to counter that, we did put in, effective August, a price increase to try to help combat those raw material prices.
Okay. In terms of chassis, one of your peers talked about not getting enough supply of chassis. Have you guys seen that issue, whether you'll be able to get enough supply of chassis to meet demand?
We've done a very good job of meeting with our suppliers from all the major chassis OEMs, and I believe that we have looked far enough in the future that we shouldn't have any major issues with the supply for our needs.
Great. Thank you.
Thank you.
Again, if you have a question, please press star then one. This concludes our question and answer session. I would like to turn the conference back over to Brendan Dunlap for closing remarks.
Thank you.
Thank you again. Go ahead, Ben, or I'll take it.
Go ahead.
Thank you again. We look forward to discussing our Q4 and full year 2018 results with you in March. Thank you.
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.