Good day, ladies and gentlemen, and welcome to the Miller Industries First Quarter 2018 Results Conference Call. Please note this event is being recorded. Now at this time, I'd like to turn the call over to Ben Herskowitz 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're here to discuss the company's 2018 first quarter results, which were released after the close of market yesterday. With us from the management team today are Bill Miller, the Chairman of the Board; Jeff Badgley , Co-CEO; Will Miller, President and Co-CEO; Debbie Whitmire, Executive Vice President, CFO, and Treasurer; 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 Jeff. Please go ahead, Jeff.
Thank you, good morning. We are pleased to discuss our first quarter results with you today. This was another solid quarter for Miller Industries as we achieved significant profitability increases year-over-year for the period and consistent top-line performance. We increased our profitability through careful cost management and a disciplined execution of our plant consolidation and expansion efforts. Our commitment to operational excellence continues to pay off, as evidenced by our 19.7% jump in gross profit from the 2017 first quarter. Results this quarter were driven by strength across our domestic and international markets. We are encouraged by the trends overseas as strong international demand continues to favorably impact our performance. Specifically, we're seeing a strong pickup in activity in our Boniface facility located in the U.K. We reported 2018 first quarter sales of $159.2 million, an increase of 6.9% compared to $148.9 million in the prior year period.
Net income was $6.7 million or $0.59 per share, compared to net income of $3.8 million or $0.34 per share in the 2017 first quarter. Gross profit as a percentage of total sales this quarter was 11.6%, up from 10.3% in the first quarter of 2017. Concurrently, total expenses were down 3.3% year-over-year. Our plant expansion and consolidation efforts are largely complete. We believe that these efforts will help us continue to meet our increased customer demand. Our balance sheet remains strong, and we continue to deploy our resources to promote organic growth and margin expansion in order to create shareholder value. We remain confident in our competitive position and our financial outlook. Now I'll turn the call over to Debbie, who will review first quarter financial results. After that, I'll be back with comments on the market environment and some closing remarks. We'll go to Q&A.
Debbie?
Thanks, Jeff. Good morning, everyone. Net sales for the 2018 first quarter were $159.2 million versus $148.9 million for the 2017 first quarter, a 6.9% year-over-year increase. Cost of operations increased 5.4% to $140.7 million for the 2018 first quarter, compared to $133.5 million for the 2017 first quarter, reflecting modest raw materials inflation. However, cost of operations as a percentage of net sales contracted approximately 130 basis points to 88.4% from the prior year period, reflecting continued cost management efforts. Gross profit was $18.4 million or 11.6% of net sales for the 2018 first quarter, compared to $15.4 million or 10.3% of net sales for the 2017 first quarter. SG&A expenses were $9.6 million for the 2018 first quarter, compared to $9 million for the 2017 first quarter. As a percentage of sales, SG&A decreased to 6.0% from 6.1% in the prior year period.
The income tax provision was $2.7 million for an effective tax rate of 28.5% in the first quarter of 2018, compared to the income tax provision of $2.1 million and an effective tax rate of 35.9% in the prior year period. This was reflected of the lower tax rates under recently enacted tax laws. Other income expense net for the 2018 first quarter was a net gain of $915,000 compared to a net gain of $14,000 for the 2017 first quarter. Interest expense for the 2018 first quarter was $420,000 compared to $378,000 for the 2017 first quarter, due to increases in interest on distributor floor planning and decreases in net foreign interest income. Net income for the 2018 first quarter was $6.7 million, or $0.59 per diluted share. Net income for the 2017 first quarter was $3.8 million, or $0.34 per diluted share.
Turning to the balance sheet. Cash and cash equivalents as of March 31st, 2018, were $15.1 million, compared to $21.9 million as of December 31st, 2017, and $24.5 million at March 31st, 2017. Accounts receivable at March 31st, 2018, totaled $136.7 million, compared to $132.7 million as of December 31st, 2017, and $132.7 million at March 31st, 2017. Inventories were $77.7 million as of March 31st, 2018, compared to $68.6 million as of December 31st, 2017, and $67.6 million at March 31st, 2017. Accounts payable at March 31st, 2018, were $82.7 million, compared to $79.3 million as of December 31st, 2017, and $87.3 million at March 31st, 2017. As of April 30th, 2018, we have borrowed $15 million under our $50 million unsecured revolving credit facility to help fund our remaining plant expansion and consolidation efforts, as well as working capital needs to meet our increased customer demand.
Company also announced that its board of directors approved our quarterly cash dividend of $0.18 per share, payable June 18th, 2018, to shareholders of record at the close of business on June 11th, 2018. I'll turn the call back to Jeff for further remarks.
Thank you, Debbie. We are very pleased with our performance this quarter, as 2018 is off to a solid start. We have enhanced our operational efficiency while increasing our production capacity. Our business is becoming more streamlined and profitable while our capabilities continue to expand. These factors, combined with more encouraging macro trends, bode well for our company's long-term outlook. Disciplined balance sheet management and capital deployment remain central to our strategy. To underscore our commitment to returning shareholder value, we have declared our quarterly dividend of $0.18 per share. As we move into the second quarter, we will continue to deploy our resources in a manner that heightens our operational efficiency, expands production capacity, and maximizes shareholder value.
We will also monitor the political environment as it relates to tariffs on steel and aluminum in order to determine the impact they may have on our raw material costs in the future and any adjustments that will need to be made to our business. While we are concerned about the potential impact of any tariffs, it is too early to make any meaningful assessment. In closing, I'd like to thank our employees, shareholders, suppliers, and customers for their ongoing support of Miller Industries. With that, we're ready to take your questions.
Thank you. If you'd like to ask a question, please signal by pressing *1 on your telephone keypad. If you're using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, press *1 to ask a question, and we'll go first to James Lee with Potrero Capital.
Thank you.
Good morning.
Good morning. Could you talk about the raw material price increase? I know you mentioned last quarter. Is what you're seeing this quarter, is it worse than last quarter, or is it about the same?
We started seeing increases, I believe, the last part of last quarter with political announcements regarding tariffs. I don't think it's any worse. I think we hit some ebbs and tides based on just information that hits the marketplace with our suppliers trying to react to situational events that aren't quite clear to them yet. Tariffs will start next month. Now we're going to delay a month. I think we hit ebbs and tides. Now, overall, the supply chain is constrained, not just for our business, but I think for a lot of industries. My belief is that you will see some acceleration in cost increases over time.
What kind of cost increase are you guys seeing in terms of %?
It depends on supplier. I did not run an average, if I gave you an average, it would probably be based on just bits and pieces I've heard from the purchasing department. I'd rather not do that. I would tell you that we did institute a 3% price increase in the first quarter to negate cost increases. If necessary, if those increases get out of hand, we certainly will have to take a look at another increase.
The 3% price increase, was this what you talked about last time, the January, February, the action you took?
Yes.
Okay. Any update on, I think last time we talked about the, as you mentioned in the 10-K, there's a delay in supply of truck chassis late in 2017. Is that still going on, or has that improved?
Well, I think the suppliers are becoming better with on-time delivery, but their lead times now have stretched out considerably in terms of time of order entry to time of delivery.
Has that impacted ability to obtain chassis?
No, it's forced us into a position to look stronger at how much chassis inventory we keep.
Okay. Thank you.
Yep.
As a reminder, if you'd like to ask a question today, it is star one on your telephone keypad. Star one. As a reminder, that is star one for any questions today. Star one. There are no further phone questions at this time. I'd like to turn the call back to management for any additional or closing remarks today.
Again, we'd like to thank our shareholders, our suppliers, and customers for the support of Miller Industries, and we look forward to reporting our Q2 earnings in the near future. Thank you.