Good day, ladies and gentlemen, welcome to the Miller Industries second quarter 2017 results conference call. As a reminder, all participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. Please note this event is being recorded. Now at this time, I'd like to turn the call over to Max Dutcher 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 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, 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 would like to turn the call over to Jeff. Please go ahead, Jeff.
Thank you, good morning. We're 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 $153.1 million, a decrease of 1.9% compared to $156.1 million 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 second highest quarterly sales level in our company's history.
Net income was $5.4 million, or $0.48 per share, compared to net income of $6.6 million 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 Ooltewah, 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 to date and the position of our business moving forward.
Overall, we are encouraged 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. I'll turn the call over to Debbie, who will review the second quarter and six 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 $153.1 million versus $156.1 million for the 2016 second quarter, a 1.9% year-over-year decrease compared to last year's record quarterly sales. Cost of operations was $135.5 million for the 2017 second quarter compared to $137.1 million for the 2016 second quarter. Gross profit was $17.6 million, or 11.5% of net sales for the 2017 second quarter compared to $19.0 million, or 12.2% of net sales for the 2016 second quarter. SG&A expenses were $9.1 million for the 2017 second quarter compared to $8.3 million for the 2016 second quarter, primarily due to increased personnel costs relating to rising employee benefit costs. As a percentage of sales, SG&A increased to 5.9% from 5.3% in the prior year period.
Other income expense for the 2017 second quarter was 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 the 2016 second quarter. Net income for the 2017 second quarter was $5.4 million, or $0.48 per diluted share. Net income for the 2016 second quarter was $6.6 million or $0.58 per diluted share. Let me briefly review our results for the six months ended June 30, 2017. Net sales for the first six months of 2017 were $302.0 million compared to $304.9 million in the prior year period, a decrease of 1%.
Gross profit for the six months ended June 30, 2017 was $33.0 million or 10.9% of sales, compared to $32.0 million or 10.5% of sales for the first six months of 2016. Net income for the first six months of 2017 was $9.3 million or $0.81 per diluted share, a decrease of 6.9% compared to net income for the first six months of 2016 of $9.9 million or $0.88 per diluted share. Now turning to our balance sheet, cash and cash equivalents as of June 30, 2017, were $32.0 million compared to $24.5 million as of March 31, 2017, and $31.1 million at December 31, 2016. Accounts receivable at June 30, 2017, totaled $134.2 million compared to $132.7 million as of March 31, 2017, and $125.4 million at December 31, 2016.
Inventories were $68.2 million as of June 30, 2017, compared to $67.6 million as of March 31, 2017, and $61.4 million at December 31, 2016. Accounts payable at June 30, 2017, were $82.6 million compared to $87.3 million as of March 31, 2017, and $85.1 million at December 31, 2016. As of June 30, 2017, we have borrowed $20 million under our $50 million 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 the 11th, 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 revenues, steady margins, and consistent demand. These factors, in addition to sturdy macroeconomic 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 2017, 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 their ongoing support of Miller Industries. With that, we're ready to take your questions.
Ladies and gentlemen, to ask a question, please press star then one on your telephone keypad. Please note that if you're on a speakerphone, please pick up the handset or depress your mute function to allow that signal to reach our equipment. Again, that is star one if you'd like to ask a question. We'll go first to James Lee of Potrero Capital.
Thanks. On the last earnings call, I recall that you guys mentioned revenue was flat because you were experiencing a capacity constraint due to a 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 chassis deliveries, particularly Class 8 from key suppliers. Our sales in Q1 were $148 or $149. We did click it up a little bit in Q2. I don't think we had capacity constraints, so to speak.
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 quarter was flat, your second quarter is down 2%. Looks like you might be coming up against tough comp again in the second half. Would you expect sales to grow from versus last year's second half, or is it going to be tough comp, and should we not expect sales growth to return until next year?
I think we'll see consistent levels to Q2, maybe a little increase.
Okay.
That obviously depends on the mix of products that are scheduled through the production cycle.
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?
Right
Gross margins second quarter of this year were higher than the average gross margin throughout 2016.
I'm referring to just Q2 of last year, Q2 of 2016.
Yeah. I guess I didn't study what we delivered during that one quarter, Q2 of 2016, more than likely it was a mix issue. 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 2016. I apologize.
All right. Thank you.
Yep.
With that does conclude today's question and answer session. I'd like 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 talking to you about Q3 results of 2017. Again, thank you much for joining us.
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.