Earnings Call: Q3 2015

Nov 5, 2015

Good day, everyone, and welcome to the Miller Industries Third Quarter 2015 Earnings Conference Call. Today's call is being recorded. For opening remarks and introductions, I'll turn the call over to Katie Pyra. Katie, please go ahead. Thank you, and good morning, everyone. I would like to welcome you to the Miller Industries conference call. We're here to discuss the company's 2015 third quarter results. Which were released after the close of Marquis yesterday. With us from the management team today are Bill Miller, Chairman of the Board Jeff Badgley, co CEO Will Miller, President and Co CEO Vince Mysch, Executive Vice President and CFO Frank Medonia, Executive Vice President, Secretary And General Counsel. Debbie Whip, our Vice President And Corporate Controller and Allison Houghton, Director of Finance. Today's call will be again 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 1990 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 rather than 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, and good morning. We are pleased to discuss with you today our third quarter performance continuing the momentum that we have achieved. During the quarter, customer sentiment remained very positive and we continue to see high levels of quoting activity, both domestically and globally. During the quarter, we focused on improving our operations for of $126,200,000, approximately 7% higher than sales of 100 and $18,400,000 in the prior year period. Q3 2015 net income was $3,200,000 or $0.28 per share, which is a decrease of approximately $300,000 or 9 percent compared to net income of $3,500,000 or $0.31 per share in the 2014 3rd quarter. Gross margin for the quarter was 10.1% of net revenues, down from 11% in the prior year period, SG and A as a percentage 2014. Our order levels and backlog remains strong and overall quoting activity continues to drive our business forward. We continue to invest in our production capabilities and are working on our expansions of our manufacturing operations in Pennsylvania and Ultawatt, Tennessee to increase capacity and improve operating efficiencies. We are operating in a position of financial strength and we continue to demonstrate our ability to react to shifts in the market and capitalize on opportunities as they emerge Now, I'll turn the call over to Vince, who will review the third quarter 9 months financial results. After that, I'll be back with comments As Jeff mentioned, net sales for the third quarter of 2015 were $126,200,000 versus 118,400,000 for the 2014 third quarter, a 6.6% year over year increase. We've experienced strong continued domestic and international order flow and have been able to capitalize on that with our ramp up of production levels in recent quarters. Cost of operations increased 7.6 percent to $113,400,000 in the 2015 third quarter compared to 100 and $400,000 last year, driven primarily by the higher sales volumes and increasing production levels. Gross profit was $12,800,000 or 10.1 percent of net sales in the third quarter of 2015 compared to $13,000,000 or in the third quarter of 2014. SG and A expenses were $7,500,000 in the third quarter of 2015 compared to $7,200,000 in third quarter of 2014. As a percentage of sales, SG and A decreased to 6.0% from 6.1% in the prior year period. Other income expense net for the quarter was a net gain of $94,000 compared to a net compared to $178,000 in third quarter of 2014. Net income attributable to Miller Industries in the 2015 third quarter was $3,200,000 or $0.28 per diluted share. The income attributable to Miller Industries in the 2014 third quarter was $3,500,000 or $0.31 per diluted share. Now, let me briefly review Net sales for the 1st 9 months of 2015 point $0,000,000 in the prior year period, an increase of 17.3%. Gross profit for the 9 months ended September 30, 2015, was $42,300,000 or 10.5 percent of sales compared to $36,400,000 or 10.6 percent of sales for the 1st 9 months $100,000 or $1.07 per diluted share, which is an increase of 30.8% over net income in the 1st Turning now to our balance sheet. Cash and cash equivalents as of September 30, 2015 were 41 $10,000,000 compared to $36,000,000 at June 30, 2015, and $39,600,000 at December 31, 2014. Accounts receivable at September 30, 2015 totaled $115,400,000 compared to $131,300,000 at June 30, 2015 $116,500,000 at December 31, 2014. Inventories were $64,500,000 as of September 30, 2015, compared to $57,600,000 as of June 30, 2015 56,500,000 at December 31, 2014. The increase in inventories was attributable to the ramp up in production in recent quarters. Accounts payable at September 30, 2015 were $76,700,000 compared to $81,800,000 31 2014. We continue to operate with no borrowings under our $30,000,000 unsecured revolving credit facility. The company also announced that its Board of Directors has declared a quarterly cash dividend of $0.16 per share payable December 14, 2015 to shareholders of record at the close of business on December 7, 2015. Now, I'll turn the call back to Jeff for future remarks. Thank you, Vince. The momentum that we achieved throughout 2015 continued into the third quarter with a strong financial performance. During the quarter, we focused on improving our operations for the future. Which necessitated a 1 week shutdown of manufacturing operations at our highest volume facility in Ultau, Tennessee for a plant reorganization. This plant reorganization and the work on the expansion of the facilities in Pennsylvania also had an impact on high levels of quoting activity, both domestically and globally. And we have a healthy pipeline of business as we enter the fourth quarter and beyond. During the quarter, we continued to work on several new tenders that are along lived in nature. We did not we did receive some awards from yond in some cases. Overall, we are very pleased with our performance in the quarter. Quarter and ended 2016, our outlook is very positive as we continue to bid on new to to deploying our assets to enhance shareholder value. In closing, I'd like to thank our employees our shareholders, our suppliers, and our customers for their ongoing support of Miller Industries. With that, we're ready to take your questions. Thank you. If you are using a speaker phone, be sure to disengage your mute function so that your signal will reach our equipment. Will pause just a moment to assemble the roster. Once again ladies and gentlemen, And we'll take our question from Walter Lang with Avondale Partners. Good morning. Congratulations on another strong quarter. The reorganization in Uruguay, is that independent of what you're doing in Pennsylvania? And then secondly, could you expand upon the new tenders that have long lived in nature? Question 1, Walter. Yes, it is independent. Obviously, business is strong. Old to law, and you've been here it and those on the call that have not, you know, the layout of the plan, you also know that, you can't just put a new new building up to expand capacity. We're already working in key areas, 20 hours a day with 2:10 hour shifts. So, the, my co CEO, Will Miller, met with our production people, reorganized the plan to enhance our deliveries in the future. Pennsylvania is the construction of a new a new facility, but in that construction process, they also had to begin reorganizing the current plant for future blasts and pain operations. So they are independent, but they both had an impact on revenue for the order. Question 2, commenting about the long lived tenders first off, I think it's pretty apparent if you follow our company and you follow, international it was announced that international defense or Navistar Defense, excuse me, I'm still old school calling International or Navistar International, but Navistar Defense had received an order, which they announced part of that order would be built in Ultawatt, Tennessee, and part of that order would be built in Mercer, Pennsylvania, which to the public would mean records and carriers. They announced the value of that tender, which was fairly high because for their customer. The impact for Miller Industries is great, but it's not significant. And it will hit in majority will hit in 2016 and it's approximately somewhere between $10,000,000 $12,000,000 in revenue. The other tenders we're working on are much longer, delivery periods. And in fact, Walder, it's hard for me to give you, a breakout year after year after year because the delivery step for the, for that particular tender has not been sentenced down. But As I look at the tender, I would suppose, a majority of that tender would probably hit in In 2019, And I think on a yearly basis, although it will be a very nice order is a very nice order. I don't want to disclose where going. I don't want to disclose who the prime is. It would have similar impacts on a yearly basis that Navistar Defense has. So nice order, but not big clumps of revenue in a 1 year period. Finally, we also got, 84 units from a prime who bid to the United States post service. Those are small units and, revenue will hit in 2016. And it's, you know, a couple of $1,000,000. Okay. The work in Ooltewah, is that complete then? You know, the work in Ulta will be ongoing, but the the work that, will have scheduled out, we probably can explain it better than I can. Is not inside the walls that we currently have. It's outside the walls. So, it should have less impact going forward. Will, do you want to add anything? Walter, the expansion projects we're doing here, we had to prep for after that point, we're going to do it in phases. There's 3 separate phases of the project and our plan with our project manager for that is to minimize the impact on production as much as possible going forward probably somewhere over the next 9 months for completion. And the reorganization in Pennsylvania will continue for another 2 quarters, 3 quarters Probably somewhere in that neighborhood. Okay. Weather will have an impact. Yeah. Weather dependent. Okay, great. I appreciate your time answering my questions. No problem, Oliver. We appreciate your support. Thank you. Certainly, we'd like to thank you for joining our conference call with us reporting our 3rd quarter results. Again, I'd like to mention that Our backlog is extremely strong. We're very excited about the sentiment we see with our customers in the market. And we look forward Ladies and gentlemen, thank you for your participation. This does conclude today's conference