Hello, this is the Chorus Call operator. Welcome to the Miller Industries second quarter 2015 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. After today's presentation, there'll be an opportunity to ask questions. Please note this event is being recorded. At this time, I'd like to turn the conference over to Katie Pierro. Please go ahead.
Thank you. 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 2015 second quarter results, which were released after the close of market yesterday. With us from the management today are Bill Miller, Chairman of the Board, Jeff Badgley, Co-CEO, Will Miller, President and Co-CEO, Vince Misch, Executive VP and CFO, Frank Madonia, Executive Vice President, Secretary, and General Counsel, Debbie Whitmire, Vice President and Corporate Controller, and Allison Houghton, Director of Finance. 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 report our excellent performance in our second quarter of 2015, growing top and bottom-line results on a year-over-year and sequential basis. Our results were driven on the top line by strong domestic order levels, paired with strong operational execution, cost discipline, and continued progress on our strategic initiatives. We have capitalized on ongoing efforts to ramp up our production levels and keep ahead of demand. We reported 2015 second quarter sales of $151.5 million, approximately 24% higher than sales of $122.4 million in the prior year period. Net income of $5.9 million or $0.52 per share represents an increase of approximately 73% compared to net income of $3.4 million or $0.30 per share in the 2014 second quarter. Our operating profitability increased as well.
Gross margin for the quarter was 11.6% of net revenues, up from 10.2% in the prior year period. SG&A, as a percentage of net sales, was roughly 5% of net sales, down from 5.7% in the second quarter of 2014. Our order levels and backlog remain strong and overall quoting activity has been encouraging. Customer sentiment continues to improve, and our core business is operating in a position of financial strength. We continue to demonstrate our ability to react to shifts in the market and capitalize on opportunities as they emerge. I'll turn the call over to Vince, who will review the second quarter and six months financial results. After that, I'll be back with comments on the market environment and some closing remarks. We'll go to Q&A. Mr. Misch?
Thanks, Jeff, good morning, everyone. As Jeff mentioned, net sales for the second quarter of 2015 were $151.5 million, versus $122.4 million for the 2014 second quarter, a 23.8% year-over-year increase. The continued strong order flow from domestic and international markets led to our decision in previous quarters to ramp up production levels, which resulted in our significant revenue growth in the second quarter. Cost of operations increased 21.9% to $134 million in the 2015 second quarter, compared to $109.9 million last year, driven primarily by the higher sales volumes and costs relating to increasing production levels. Gross profit was $17.5 million or 11.6% of net sales in the second quarter of 2015 compared to $12.5 million or 10.2% of net sales in the second quarter of 2014, primarily due to the higher sales volumes.
SG&A expenses were $7.6 million in the second quarter of 2015 compared to $7 million in the second quarter of 2014. As a percentage of sales, SG&A decreased to 5% from 5.7% in the prior year period. Other income expense net for the second quarter was a loss of $265,000 related to foreign currency transaction losses, compared to a net loss of $55,000 in the second quarter of 2014. Interest expense in the 2015 second quarter was $245,000 compared to $126,000 in the second quarter of 2014. Net income attributable to Miller Industries in the 2015 second quarter was $5.9 million or $0.52 per diluted share. Net income attributable to Miller Industries in the 2014 second quarter was $3.4 million or $0.30 per diluted share. Let me briefly review our results for the six months ended June 30, 2015.
Net sales for the first six months of 2015 were $278.3 million compared to $226.6 million in the prior year period, an increase of 22.8%. Gross profit for the six months ended June 30, 2015, was $29.5 million, or 10.6% of sales, compared to $23.4 million or 10.4% of sales for the first six months of 2014. Net income attributable to Miller Industries in the first six months of 2015 was $8.9 million or $0.79 per diluted share, which is a 55.2% increase from net income in the first six months of 2014 of $5.7 million or $0.51 per diluted share. Turning to our balance sheet. Cash and cash equivalents as of June 30, 2015, were $36 million, compared to $38.3 million at March 31, 2015, and $39.6 million at December 31, 2014.
Accounts receivable at June 30, 2015, totaled $131.3 million, compared to $116.1 million at March 31, 2015, and $116.5 million at December 31, 2014. The increase in sales volume drove accounts receivable higher from the year-end levels. Inventories were $57.6 million as of June 30, 2015, compared to $61.8 million as of March 31, 2015, and $56.5 million at December 31, 2014. Accounts payable at June 30, 2015, were $81.8 million, compared to $79.9 million at March 31, 2015, and $70.6 million at December 31, 2014. On June 11, 2015, we renewed and extended the maturity date of our unsecured revolving credit facility to March 31, 2018, and increased the amount of the credit line from $25 million to $30 million. We continue to operate with no borrowings under our $30 million 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 September 21, 2015, to shareholders on the record at the close of business on September 14, 2015. I'll turn the call back to Jeff for further remarks.
Thank you, Vince. The second quarter of 2015 was an excellent quarter for Miller Industries as we continued to see high levels of quoting activity, particularly in domestic markets, and healthy activity internationally, despite the effects of the strength of the dollar. The dedication of our employees to increase production levels in line with demand yielded solid revenue and income growth for the second quarter. Our work to control costs and improve operating efficiencies over the past several quarters further enhanced our results. Customer sentiment for our products remains positive, and we expect demand to remain healthy throughout the remainder of 2015. During the quarter, we continued to expand our product offerings in existing markets, as well as broaden our international footprint.
We rolled out new products this year that have been well received by our customers, controlled cost and operational efficiency to scale with our business, and maintained a strong backlog. Overall, we are very pleased with our performance in the second quarter of 2015. We continued to build upon the momentum and strength of our business and achieve solid revenue and profitability growth. Our balance sheet remains strong, and we continue to operate from a position of financial strength. We remain committed to enhancing shareholder value through strong cash flow and our quarterly dividend of $0.16 per share. As we move into the third quarter, we are well-positioned to take advantage of the opportunities that we see in our marketplace. In closing, I'd like to thank our employees, our shareholders, our suppliers, and certainly our customers for their ongoing support of Miller Industries.
With that, we're ready to take your questions.
Thank you. We will now begin the question and answer session. To ask a question, you may press star then one on your touch-tone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. At this time, we'll pause momentarily to assemble our roster. The first question comes from Rick D'Etienne of Columbia. Please go ahead.
Good morning. Great quarter.
Thanks, Rick. Thank you.
If you could just generally comment on the manufacturing efficiencies. I know a quarter ago you were using some overtime. As you've ramped up production, have you mitigated that some? How do you feel about it? From the margin standpoint, it looks like things are improving, but in general, how would you characterize it?
Well, Rick, this is Jeff. We're certainly still using overtime. We probably decreased that overtime amount a little bit in the third quarter. Demand, our customers, our distributors are dependent upon our deliveries. It's really market-driven that we continue to utilize overtime somewhat and continue to drive it down, but it hasn't gone away yet, that's for sure.
Okay. Also, you talked about the impact of a price increase helping Q2, but it would be fully impacting Q3. Is that still the thought process? How much incremental help are you going to get in Q3 on price versus Q2?
Rick, I wish I was smart enough to go back and see what kind of cost increases we've seen from our suppliers over the last couple of quarters. I don't think there's been any major, but I think there's probably been some incremental. I'm really not in a position to answer honestly, without doing some studying. I think we'll see some, but to quantify it, I'm not in a position to do that today.
You had talked about progress on adding worldwide distribution. Do you have any things that you'd like to speak to specifically on that?
Well, we've added distribution in South America. We continue to add distribution in the Middle East. We have not had much success in adding distribution in the European markets with American product due to the strength of the dollar. Yes, it's ongoing.
Okay. Also, on the Q4 calls, you spoke to some purchase orders for design work in a small European country and then another prototype design in another country. I don't know what the duration is between design and prototype work and commercial orders. Are those opportunities progressing?
Yes, they are. We feel very good about those opportunities. As of today, the prototypes are still being built, not tested. The firmness of the orders for the production run won't take place until we have the units tested in the field. We believe that the progress is very strong, but I certainly do not want to mislead anybody because things can go wrong. We feel good about it. Whether or not you want to count it at this point is questionable until we have that firm order.
Oh, to the extent they're in Europe, I would think, again, you got currency disadvantages, right?
We certainly have currency disadvantages. In our tenders, we attempt to take away a little bit of that currency disadvantage. We do buy some of the supplies we need for European fill of contracts and kind of split currency in the bid, $ and EUR. We do our best to mitigate that disadvantage, knowing we are going to pay some of our suppliers in EUR, not $.
Okay. I know on this call you talked about continued strong commercial quoting activity. A quarter ago, you also talked about worldwide military quoting being strong. Any wins there? Was there any military business in this quarter that you just reported?
Let's take the last question first. The quasi-military which could be defined either civil defense or military, there was a minor contract delivered to Oman in this quarter. Other than that, it was commercial business, so to speak. As far as quoting activity in other areas of military opportunities, they continue. Have we been awarded anything in the quarter? As in, did we get anything awarded during the quarter? The answer is no.
Okay. The way you phrased that, does that imply you want something in July or?
I'm sorry.
Okay.
I didn't mean to insinuate that. I'm saying that I just tripped over words, I guess, is a good way.
Okay. Not a problem. I just wanted to make sure I asked the right question. All right. That's it for me. Thank you.
That was a quick catch, Rick.
Our next question is from Walter Young, Avondale Partners. Please go ahead.
Good morning. Congratulations on a great quarter.
Thank you, Walter.
I read in May that U.S. motorists drove a record amount of miles, according to the FHWA, and I can only assume that's being topped in June. That topped the previous record set back in I'm sorry, 2007. I know your demands started picking up steadily over a year ago. Is this enhancing the U.S. demand for your products. Secondarily on the capital commitment that you're allocating towards production on the Carriers product lines, do you have a specific return in invested capital goal on that money, and is it measurable?
Of course, we can buy them.
Car's on my way.
Is that another question in the background?
No, that's it. No, that's it. Yeah.
Are you getting coached in the background, Walter?
No.
Let's talk about miles driven, I'll turn over the call on return on investment and the expansion in Pennsylvania to other people in the room. Miles driven obviously plays on demand in all markets. Obviously, as you cited, that continues to rise. Now, our demand is extremely strong. I'm not too sure we're not seeing some pent-up demand from past years and filling that pent-up demand along with what's happening with miles driven, Walter. Does it help? Absolutely. It makes the tower obviously feel busy because they are busy, and it puts them in a position of the desire and/or the need to buy trucks. Second question, Will, you want to take over what we're doing in PA, and then ROI, Vince?
Sure. The goal for the Pennsylvania expansion is to truly create the largest, most efficient state-of-the-art Carriers manufacturing facility in the world. We are focusing a lot of our time and effort in the design process of the new plant into automation and robotics. Our plan is to have the capabilities from a total Carriers production of approximately 700 Carriers a month when we're completed in the first to second quarter of next year. With regards to the ROI, I will let Vince handle most of that question, but there is absolutely some measurable items when we look into automation and robotics as far as the ROI.
Some of the things that our people are finding equipment-wise, look like, we're still sorting out what the return's going to be, but it's pretty spectacular stuff. Internally, we try to get at least a 20% ROI, and it may be even better than that by the time we're done sorting it all out. That's our internal goal, at least that.
Is the throughput of 700 a month, is that a material increase from current production levels?
Yes.
Yes.
That's a yes?
That is a yes.
That is a yes.
Yeah, the answer to that one is it's probably close to double.
Yeah, Walter, obviously, the production rate is twice with the new facility. Probably the toughest competition in terms of worldwide competition, you find the platform used or the Carriers used throughout the world. To compete in that arena, we have to increase our efficiency and take some cost out of the process because you're normally competing with smaller local manufacturers. You're building a better product, but you're competing with some people that are price-driven.
A local manufacturer, they're competitive from a pricing standpoint?
Well, they don't. When you talk about a local manufacturer, I have to compete in, let's call it Brazil. I've got freight, I've got some expenses that they don't have, obviously. We're trying to drive our efficiencies and costs down to expand our world footprint.
A big part of your goal here is driven by the intention to expand globally.
No, I'm adding that from an international flavor. Our goal here is to obviously improve our efficiencies, improve our profitability, and increase our production capabilities.
Quality.
Quality. There's lots of goals.
Walter, this is Bill.
Walter, this is Bill. Obviously, the objective is to reduce the cost, improve the quality, but most importantly, we have to meet the demand. There's no way our volume is jumping the way you guys see it unless we're taking business somewhere. We have to increase our production to be able to stay with that because we've been very successful with a lot of new products, with a lot of new customers. That's due to a great team.
Okay. I appreciate it. Again, great quarter. Thank you.
Thank you.
Thanks, Walter.
Again, if you have a question, please press star then one at this time. Seeing no additional questions, this concludes the question and answer session. I'd like to turn the conference back over to Jeff Badgley for any closing remarks.
Well, we certainly are excited with our performance of our last quarter, and we look forward to joining you again with our results of our third quarter results. Thank you very much for joining the call. Goodbye.
This concludes today's event. Thank you for attending today's presentation. You may now disconnect.