Earnings Call: Q2 2017

Aug 10, 2017

Good day, ladies and gentlemen, and welcome to the Miller Industry Second Quarter Twenty 17 Conference Call. Please note this event is being recorded. And now at this time, I'd like to turn the call over to Max Dutcher 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 2017 second quarter results. Which were released after close of market yesterday. With us from management team today are Bill Miller, Chairman of the Board Jeff Badgley, co CEO Will Miller, President and 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 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 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 would like to turn the call over to Jeff. Please go ahead, Jeff. Thank you, and good morning. We are pleased to discuss our second quarter performance with you today. It was another solid quarter for Miller Industries, building upon a strong start to the year. Our top line results were consistent with historical levels, driven by healthy demand and a favorable macro environment. We continue to see positive trends across our domestic and international businesses, both in terms of backlog and customer sentiment. In addition, we are executing upon our strategic objectives to support future revenue growth We reported 2017 second quarter sales of 153,100,000 a decrease of 1.9% compared to $156,100,000 in the prior year period. Which was an exceptionally strong comparable quarter for us. In the second quarter of 2016, we posted our largest quarterly sales ever. With that in mind, this past quarter represents our 2nd highest quarterly sales level in our company's history. Net income was $5,400,000 or $0.48 per share, compared to net income of $6,600,000 or $0.58 per share in the 2016 second quarter. Driven by the aforementioned comparable top line performance. Our margins were consistent year over year, a testament to our disciplined cost management efforts and emphasis on operational efficiency. Gross profit as a percentage of total sales this quarter was 11.5% compared to 12.2% in the second quarter of 2016. Our capital projects continue to progress nicely. We have completed construction on our Pennsylvania Manufacturing Facility and our projects in Greenville, Tennessee and ULTua, Tennessee are progressing well and still on track for completion in early 2018. As a result of these undertakings, we are further improving our production capacity and efficiency. I am pleased by our efforts courage by the trends that are driving our organization, both internally and on the industry level. We remain committed to enhancing our operational efficiency, increasing sales volume and maintaining a healthy balance sheet. Customer sentiment remains positive as our products continue to resonate in the marketplace. We remain well positioned to capitalize on market opportunities and to foster sustained organic growth. Now, I'll turn the call over to Debbie, who will review the second quarter 6 months results. After that, I'll be back with comments on the market environment and some closing remarks. Debbie? Thanks Jeff and good morning everyone. Net sales for the 2017 second quarter were $153,100,000 versus $156,100,000 for the 2016 second quarter. A 1.9% year over year decrease compared to last year's record quarterly sales. Cost of operations was $135,500,000 for the 2017 second quarter, compared to $137,100,000 for the 2016 second quarter. Gross profit was $17,600,000 or 11.5 percent of net sales for the 2017 second quarter compared to $19,000,000 or 12.2 percent of net sales for the 2016 second quarter. SG and A expenses were $9,100,000, the 2017 second quarter compared to $8,300,000 for the 2016 second quarter primarily due to increased personnel costs relating to rising employee benefit costs. As a percentage of sales, SG and A increased to 5.9% from 5.3% in the prior year period. Other income expense for the 2017 second quarter with a net gain of $470,000 compared to a net gain of $128,000 for the 2016 second quarter. This consisted of a gain on the sale of the Pennsylvania property of $601,000, offset by a foreign currency translation net loss of $131,000. Interest expense for the 2017 second quarter was $315,000 compared to $259,000 for dollars or $0.48 per diluted share. Net income for the 2016 second quarter was $6,600,000 or $0.58 per diluted share. Now let me briefly review for the 1st 6 months of 2017 were $302,000,000 compared to $304,900,000 in the prior year period. A decrease of 1%. Gross profit for the 6 months ended June 30, 2017 was $33,000,000 or 10.9 percent of sales compared to $32,000,000 or 10.5 percent of sales for the 1st 6 months of 2016. Net income for the 1st 6 months of 2017 was $9,300,000 or $0.81 per diluted share a decrease of 6.9% compared to net income for the 1st 6 months of 2016 of $9,900,000 or $0.88 per diluted share. Now turning to our balance sheet, cash and cash equivalents as of June 30, 2017 were $32,000,000 compared to $24,500,000 as of March 31, 2017. And $31,100,000 at December 31, 2016. Accounts receivable at June 30, 2017 totaled $134,200,000 compared to $132,700,000 as of March 31, 2017. And $125,400,000 at December 31, 2016. Inventories were $68,200,000 as of June 30, 2017 compared $1,000,000 as of March 31, 2017, and $61,400,000 at December 31, 2016. Accounts payable at June 30, 2017 were $82,600,000 compared to $87,300,000 as of March 31, 2017, and $85,100,000 at December 31, 2016. As of June 30, 2017, we borrowed $20,000,000 under our $50,000,000 unsecured revolving credit facility to help fund our ongoing capital projects. The company also announced that its Board of Directors approved our quarterly cash dividend of $0.18 per share, payable September 18, 2017 to shareholders of record at the close of business on September 11, 2017. Now, I'll turn the call back over to Jeff for further remarks. Thank you very much, Debbie. Overall, we are pleased with our performance this quarter as we continue to see strong revenue, steady margins and consistent demand. These factors in addition to sturdy microeconomic environment contributed to one of our most successful quarters to date. Our underlying fundamentals remain solid. Reflecting our healthy balance sheet and strong backlog. Our capital projects continue to positively impact our business. And enhance our growth prospects. Also to reiterate, our commitment to delivering shareholder value We are once again declaring our quarterly dividend of $0.18 per share. As we enter the second half of twenty seventeen, we look to build upon our momentum generated year to date. We will continue to capitalize on market opportunities. And position our business for future success. In closing, both Will and I would like to once again thank our employees shareholders, suppliers and customers for the ongoing support of Miller Industries. With that, we're ready to take your questions. You. And we'll go first to James Lee of Patero Capital. Thanks. On the last earnings calls, I recall that you guys mentioned revenue was flat because you were experiencing experiencing our capacity constraint due to manufacturing upgrade. Did that impact sales this quarter? I think we had some things that impacted sales, but I don't think it was capacity constraint. We did have some delays in, In chassis deliveries, particularly Class 8 from key suppliers, But our sales in Q1 were $148,000,000 or 149, We did click it up a little bit in Q2. So, I don't think we had capacity constraints, so to speak. So then would you expect sales to pick back up in the second half of the year? Well, when you say pick back up, what do you mean? Because Well, your first your first quarter was flat. Your second quarter is down 2%. It looks like you might be coming up against tough comp again in the second half, would you expect sales to to grow from versus last year's second half? Or is it going to be tough comp? Should we not expect sales growth to return until next year? I think we'll see, consistent levels to Q2, maybe a little increase. That obviously depends on the mix. Products that are scheduled through the production cycle And on the gross margin side, was it lower due primarily because of product mix or was there also cost pressure? Are you talking about lower to Q2 of last year because actually gross margins Gross margin second quarter of this year were higher than the average gross margin throughout 2016. I'm referring to the Q2 of last year. Q2 of I guess I didn't study what we delivered during that 1 quarter, Q2 of 2016, but more than likely, it was a mix issue. I'm I didn't go back and look, we were happy with the fact that we see margins ticking up over historical levels. So, I didn't go back and do a comparable to Q2 of 'sixteen. I apologize. All right. Thank you. Yes. And with that, that does conclude today's question and answer session. To turn the call back to management for any additional or closing comments. Well, we'd like to thank you for joining our conference call and look forward to to talking to you about Q3 results of 2017. Again, thank you much. For joining us. And with that ladies and gentlemen, that does conclude today's conference call. We'd like to thank you again for your participation. You may now disconnect.