Earnings Call: Q1 2017

May 4, 2017

Good day and welcome to the Miller Industries First Quarter 2017 Results Conference Call. As a reminder, all participants will be in a listen only After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. At this time, I would like to turn the conference over to Max Dutcher of 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 first 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 question and answer period. Please note in this morning's conference call that management may make forward looking statements in accordance with the Safe Harbor provisions 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 Ten 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 first quarter results with you today. This was another solid quarter for Miller Industries, as we achieved profitability increases year over year, underpinning a consistent top line performance. Results this quarter were driven by a more favorable product mix and a healthy demand in our international and domestic markets. We are encouraged by trends overseas as international demand continues to positively impact our performance. We reported 2017 1st quarter sales of $148,900,000 an increase of 1 10th of the percent compared to $148,800,000 in the prior year period. Net income was $3,800,000 or $0.34 per share compared to net income of $3,400,000 or $0.30 per share in the 2016 first quarter. Gross profit as a percentage of total sales quarter was 10.3%, up from 8.7% in the first quarter of 2016. Concurrently, our cost of operations was down 1.7% year over year. The enhanced margins are a result of a favorable change in our product mix and our continuing efforts to increase operational efficiency. To provide an update on our capital projects, the Pennsylvania manufacturing consolidation and expansion is scheduled to be completed during the second quarter. The capital projects in ULTAWA and Greenville, Tennessee remain on track to be completed in early 2018. In order to better meet our customer needs. And deploying our resources in ways that promote organic growth, margin expansion and shareholder value. We are confident over to Debbie, who will review the first quarter financial results. After that, I'll be back with comments on the market environment and some closing remarks. Then we'll go to Q And A. Debbie? Thanks, Jeff, and good morning, everyone. Net sales for the 2017 first quarter or $148,900,000 versus $148,800,000 for the 2016 first quarter. A 0.1% increase year over year. Cost of operations decreased 1.7% to 2 to $133,500,000 for the 2017 first quarter compared to $135,800,000 for the 2016 first quarter, driven primarily by the by favorable changes in our product mix. Gross profit was $15,400,000 or 10.3 percent of net sales for the 2017 first quarter compared to 13,000,000 or 8.7 percent of net sales for the 2016 first quarter. SG and A expenses were $9,000,000 for the 2017 first quarter compared to $8,000,000 for the 2016 first quarter. As a percentage of sales SG and A increased to 6.1% from 5.4% in the prior year period, largely driven by increased headcount and employee benefit cost. Other income expense net for the 2017 first quarter was a net gain of $14,000 compared to a net gain interest expense for the 2017 first quarter was $378,000 compared to $198,000 for the 2016 first quarter. Due to borrowings under the credit facility and floor plan costs. Net income for the 2017 first quarter was $3,800,000 or $0.34 per diluted share. Net income for the 2016 first quarter was $3,400,000 or $0.30 per diluted share. Now turning to our balance sheet. Cash and cash equivalents as of March 31, 2017 were $24,500,000 compared to $31,100,000 as of December 31, 2016 $33,300,000 at March 31, 2016. Accounts receivable at March 31, 2017 totaled $132,700,000 compared to 120 31, 2016. Inventories were $67,600,000 as of March 31, 2017, compared to $64,100,000 as of March as of December 31, 2016, and $71,400,000 at March 31, 2016. Accounts payable at March 31, 2017 were $87,300,000, compared to $85,100,000 as of December 31, 2016, and $88,200,000 at March 31, 2016. As of March 31, 2017, we have borrowed $10,000,000 under our facility to help fund our 3 plant expansion projects. The company also announced that its Board of Directors approved our quarterly cash dividend of $0.18 per share payable June 20, 2017 to shareholders of record at the close of business on June 13, 2017. Now I'll turn the call back to Jeff for further remarks. Thanks, Doug. We are very pleased with our performance this quarter capacity, streamline our operations and enhance our operational productivity. These factors combined with more encouraging couraging macro trends bode well for our company's long term outlook. We are also in encouraged by the quarter's healthy demand in our domestic and international markets. Discipline balance sheet management and capital deployment remains central to our strategy. To underscore our commitment to returning shareholder value, we have declared our quarterly quarterly dividend to $0.18 per share. As we move into the 2nd quarter, we will continue to deploy our resources in a manner that heightens our operational efficiencies, expands production capacity and maximizes shareholder value. In closing, I'd like to thank our employees, shareholders, suppliers and customers for their ongoing support of Miller Industries. With that, and we'll pause for just a moment to give everyone an opportunity to signal. And we do have a question from James Lee with Protero. Please go ahead. Hi, good morning guys. Could you reconcile your positive comments about the end market demand in domestically versus your flat sort of revenue to slightly down revenue? In Q1 domestically? From the standpoint of our positive outlook for demand. I guess what we would say is both quarter entry levels and backlog are, up year over year. And we extremators about activity in the marketplace. So why would the, Jeff, he wants to, this is Bill, Jeff, theories, what he wants to know is, why aren't we producing more in the answer is? Well, obviously, we're going through major, major efforts to revitalize our plants. And at the same time, run production. So if you were to come to any of our facilities, except Pennsylvania is now very, very close. In completion. We are expanding at the same time we are producing. So we do have a little bit of influence of construction processes, influencing our build rate. I would say, however, in Pennsylvania, as we finish now, in the middle of this quarter, we have been able to increase will our carrier production some 15% or 20%. Correct, on a go forward basis. Yes, I think that just, and I understood your question, this is Bill. We were basically capacity constrained through, in all of our plants. And we need to all of these projects improve our ability, to increase our capacity to produce And that's what we're kind of going through right now. Very helpful. 2nd question is, could you comment on the current financing environment either at the buyer at the end user or at the dealer side, whether there's any have you seen any pullback in financing We have not seen any pullback at all in retail financing or wholesale financing for our distributors in terms of distributor workflow in the marketplace. Great. Thank you. Yes. And with no more questions in the queue, I'll turn it back over to management for any additional or closing remarks. This is Jeff again, and we would like to thank you for joining our Q1 conference call. And we look forward to talking And ladies and gentlemen, this does conclude today's conference. Thank you for your participation. You may now disconnect