Hello, this is the Chorus Call operator. Welcome to the Miller Industries first 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 Daniel Hagan. Mr. Hagan, please go ahead.
Thank you. Good morning, everyone. I would like to welcome you to the Miller Industries, Inc. conference call. We are here to discuss the company's 2015 first quarter results, which were released after the close of market 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 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 would like to turn the call over to Jeff Badgley. Jeff, please go ahead.
Thank you. Good morning. We had a strong start to 2015 with solid revenue growth and improved profitability compared to the first quarter of last year. Our results were driven by solid order flow, strong operational execution, and continued progress on our strategic initiatives. As we have communicated in recent quarters, we continued to actively increase our production levels in order to deliver on our orders, as well as stay ahead of overall demand. During the quarter, we remained focused on improving the business and strengthening our operations. As a result, we recorded 2015 first-quarter sales of $126.8 million, compared to sales of $104.2 million in the prior year period, an increase of nearly 22%.
Q1 net income was $3.1 million or $0.27 per diluted share, which represents a 29.5% increase as compared to the $2.4 million or $0.21 per share in net income in the 2014 first quarter. We also remained encouraged by our commercial backlog levels and overall quoting activity. The activity we are seeing in the marketplace, in addition to steadily improving customer settlement, gives us confidence in the future prospects of the business and in our ability to capitalize on the long-term opportunities that lie ahead. We believe our growth opportunities come from continuing to expand geographically and to advance our product offerings in order to meet the evolving needs of our customer. Now I'll turn the call over to Vince, who will review the quarter's financial results. After that, I'll be back with comments on the market environment and some closing remarks.
We'll go to questions and answers. Vince?
Thanks, Jeff, and good morning, everyone. As Jeff mentioned, net sales for the first quarter of 2015 were $126.8 million versus $104.2 million for the 2014 first quarter. This 21.7% year-over-year increase reflected a strong order flow from improving domestic and international commercial markets. To account for the increased order flow, we further ramped up production levels, which contributed significantly to our revenue growth. Cost of operations increased 23.2% to $114.8 million in the 2015 first quarter, compared to $93.2 million last year, driven primarily by the higher sales volumes and costs related to increasing production levels. Gross profit was $12.0 million or 9.4% of net sales in the first quarter of 2015, compared to $10.9 million or 10.5% of net sales in the first quarter of 2014, mainly due to product mix.
SG&A expenses were $7.4 million in the first quarter of 2015, compared to $7.2 million in the first quarter of 2014. As a percentage of sales, SG&A decreased to 5.9% from 6.9% over the prior year period. Other expense related to foreign currency transactions was a net loss of $56,000 in the first quarter of 2015, compared to a net loss of $62,000 in the first quarter of 2014. Interest expense in the 2015 first quarter was $163,000 compared to $70,000 in the first quarter of 2014. Additionally, the lower effective tax rate in the first quarter this year was primarily due to the lower corporate tax rates on the earnings of the European subsidiaries and the impact of U.S. federal domestic production activity deductions.
Net income attributable to Miller Industries in the 2015 first quarter was $3.1 million, or $0.27 per diluted share, an increase of 29.5% over Q1 2014. Excluding the net loss attributable to the non-controlling interest of $66,000, net income attributable to Miller Industries in the 2014 first quarter was $2.4 million, or $0.21 per diluted share. Turning now to our balance sheet. Cash and cash equivalents as of March 31st, 2015, were $38.3 million, compared to $39.6 million at December 31st, 2014, and $40.5 million at March 31st, 2014. Accounts receivable at March 31st, 2015, totaled $116.1 million, compared to $116.5 million at December 31st, 2014, and $82.0 million at March 31st, 2014. The increase in sales volume drove accounts receivable higher from the year-ago levels.
Inventories were $61.8 million as of March 31st, 2015, compared to $56.5 million at December 31st, 2014, and $56.7 million at March 31st, 2014. The increase in inventory was attributable to our decision to ramp up production in recent quarters, and to a lesser extent, the product showcases at April's Florida Tow Show. Accounts payable at March 31st, 2015, were $79.9 million, compared to $70.6 million at December 31st, 2014, and $47.7 million at March 31st, 2014. We continue to operate with no borrowings under our $25 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 June 22nd, 2015, to shareholders of record at the close of business on June 15th, 2015. I'll turn the call back to Jeff for further remarks.
Thank you, Vince. The 2015 first quarter reflected positive economic activity across our markets and the continued dedication of our employees to increase production levels to drive overall profitability. We are pleased with the growth we are making within our markets. Our order levels, as well as our backlog, were driven by a healthy level of quoting activity for our products. The ongoing interest in our offerings was recently featured at the April Florida Tow Show, where our industry-leading product line was on full display, and once again, drew very positive reactions and a lot of excitement from the show's participants. The conversations with our customers at the show have remained quite positive, and general indications are that the marketplace remains very active.
During the quarter, we continued to make inroads on our geographic expansion initiatives in various markets, including Europe, the Asia Pacific, the Middle East, Latin America, and South Africa. As anticipated, we recently delivered the last units for our French and Danish military orders and continue to have high levels of quoting activity in the military arena, both domestically and internationally. We are pleased with the progress that we are making on a global scale. By the moves we are making in this area, we are further positioning the company for long-term success. I am pleased with our start to 2015. We continue to make great progress on our strategic and operational initiatives, which are driving solid revenue and profitability growth and strong order intake levels.
As Vince detailed earlier, our balance sheet remains solid, and we have continued to generate strong cash flow and operate from a position of financial strength. We remain committed to delivering value to our shareholders through our strong cash flow, solid balance sheet, and quarterly dividend, which grew to $0.16 per share last quarter. Additionally, our flexibility to further ramp up our operations has positioned us well to capitalize on current opportunities in our marketplace and to continue to aggressively seek out opportunities going forward. To reiterate, both Will and myself are pleased with the performance in the first quarter and anticipate continued operational execution and success. 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.
Thank you. We will now begin the question and answer session. To ask a question, you may press star then one on your touchtone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star and then two. At this time, we'll pause momentarily to assemble our roster. Again, if you have a question, please press star then one. Our first question is from Walter Ling of Avondale. Please go ahead.
Good morning. Congratulations on another very strong quarter, guys. Can you comment further or expand upon the activity you're seeing in Europe? There are so many cross-currents we're hearing in Europe. What you're seeing over there?
Walter, we're seeing, it depends on what part of Europe you're talking about. Our French operation, obviously in the Eurozone, order intake has slowed down a little bit because a lot of their volume in dollars has come historically from product built in the U.S. In the England area, we've seen a pickup in order intake. It really depends on which part of European region you're talking about.
Mm-hmm. Then it seemed to me, just my senses in your prepared remarks, you have more verbiage devoted to capitalize on long-term opportunities. Is there more developing there than there has been in the past, or is it just that years and years of effort are starting to account for something occurring this year overseas?
For years, we have attempted to enter different military arenas in Europe, and we got successful with MaxxPro here in the U.S., which I think vaulted us into a position of acceptability in European militaries. I wish I could say, "Well, I got moved to international last year, and it's all been me." In reality, it's been the historic performance of our products in various arenas that have given us opportunities to become more involved with European OEMs to enhance our activity on the military side.
Okay. Then you mentioned South Africa. Is that new, or is that just maybe a new joint venture there or a dealership or?
No, that's a distributor that has been around for a few years, that has decided. He's also in the towing business. He recently has decided to put more effort on his sales side, and it's paying off.
Okay. Thank you. Again, congratulations on a great quarter.
Thanks, Walter.
Our next question is from Richard Taft of Columbia. Please go ahead.
Also, I echo Walter's comments on nice quarter. The gross profit decline year-over-year on a significant increase in revenues, is that just a mix of military with and without chassis impact?
Yeah. Rick, I appreciate the question because Will, myself, and Bill had talked about that. Obviously, we would've liked to have seen a higher gross margin in the first quarter of 2015. However, after reviewing 2015 to 2014, mix is the predominant reason. However, there were other concerns. One was just overall weather as it affected our plants particularly in the month of February, and our suppliers thereafter trying to catch up, which forced us to work more overtime than we would've liked to have worked. Additionally, we had some currency impact from USD to EUR in the final sale at our French operation.
Lastly, we introduced a new product in the Carriers line, which changed dramatically the operation of that Carriers and caused for new fixtures, new processes, which affected not so much the revenue coming out of those plants, again, the overtime to keep up with the demand.
Okay. That's a lot of components, more than half of it is related to the mix?
Yeah. I would say yes.
Are you up the learning curve on the new product that you just spoke of?
Yes, sir.
As you ramp production, often you're hiring people that need to come up the learning curve. Where do you think you are in that process in obtaining maximum efficiencies?
Well, I think given the fact that we have a very strong backlog, I think Will and the team here in North America has done a great job anticipating, and I think we've kind of leveled off at this point with new hires, unless we see even further increase in demand. Obviously, we did have some learning curve in late fourth and first quarter, but I think we're beyond that.
Good. The mix impact on gross margin will continue to be overhang in the next few quarters, I would think. Other than that, obviously, weather should be better and the other elements of margin pressure should be largely behind you, it sounds like.
Yeah, except for that impact of currency in the Eurozone.
Okay.
You're correct.
Okay. Thank you. Good quarter.
Thank you.
Our next question is from Mike Hughes of SGS. Please go ahead.
Good morning. Couple of questions for you. Just first on the overseas sales, down 14% year-over-year. Do you have a constant currency number for that?
What do you mean by constant currency? I'm sorry.
I would assume the EUR was a headwind to the revenue number, the EUR 18.3 million that you reported overseas. Do you have kind of?
Yes, it was.
Okay. Do you have a rough number of how much of a headwind that was?
In other words, we have to adjust for what our currency rate was last year to this year, Vince, for that quarter. Yes. No, the biggest impact of that is the fall off with the end of the French and Danish military sales. That's probably the biggest piece. Less so with the currency.
Okay.
Jeff, this is Bill. What did we have in the board presentation of how far the change in your backlog was because of the change in currency? Was it down? On a dollar level or year-over-year level? You'd have to do it on a dollar level because we're answering here in dollars. We had a change. Your European backlog dropped about 5.6% from fourth quarter levels. Versus last year. We didn't have a versus last year. Right. I think when you look at the military in Q1 of 2014 going back and looking at it, you delivered four French military, and you delivered three in Q1 of 2015. Right. The biggest difference as I look at it in European operations is although the chunks of revenue, because what's built here in the States is large units for European operations.
The dollar has impacted the price of those big chunks of revenue, and the European operations are providing to the market more platforms, small wreckers that they build themselves where they don't have that currency impact. That's a gut, just traveling over there and looking at what is happening.
Okay. That's good color. Just staying on the FX topic for another minute. The currency impact, negative impact on the bottom line, reading your 10-Q, it mentions a $56,000 negative impact to operations. Is it a $56,000 negative impact to operating income? Is it that small a number or am I reading that incorrectly?
No, that is correct. We've had some wild swings. Vince, you might as well tell him how that happened because of the DKK. We had some things going one way with the Danish DKK and coming back on the other side on the US dollar. The DKK as well as the EUR. There were something in the close to $400,000 or $500,000 going either direction, but the net, we were offset. A little bit of a natural hedge in there as we had hoped, and it netted down to just $56,000.
Okay. That's all I have on FX. I think over the last couple of quarters you've put in place maybe a price increase. Can you just speak to how that's been received in the marketplace? I know that you honor your backlog typically at the lower price level. Will we start to see the positive impact from the price increase flowing through over the next few quarters?
I think we were asked that question on the last call. We believe that we'll begin to see a more positive impact on the price increase in Q2, finally realizing all of it probably in Q3.
I'm guessing you won't want to do this. Do you care to quantify the potential positive impact on gross margins from that?
You guessed correctly.
Okay. Thank you very much.
Thanks.
Seeing no further questions, this concludes the question and answer session. I'd like to turn the conference back over to management for any closing remarks.
Well, we'd like to thank you again for joining our Q1 call and look forward to talking to you to report our Q2 earnings in the near future. Thank you.
The conference has now concluded. Thank you for attending today's presentation.