Earnings Call: Q1 2015

May 7, 2015

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 0. 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, and 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 Mysch, Executive VP and CFO Frank Medonia, 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, 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. Thanks. Good morning. We had a strong start of last year. Our results were driven and continued progress on our strategic initiatives. 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 reported 2015 first quarter sales, of $126,800,000 compared to sales of $104,200,000 in the prior year period. An increase of nearly 22%. Q1 net income was 3,100,000 or $0.27 per diluted share, which represents a 29.5% increase as compared to the $2,400,000 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 gives us confidence in the future prospects that lie ahead. We believe our growth opportunities come from continuing and to advance our product offerings in order to meet the evolving needs of our customer. Now, I'll Arment and some closing remarks. Then 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 $126,800,000, which is $104,200,000 for the 2014 first quarter. This 21.7% year over year increase reflected a strong order levels, which contributed significantly to our revenue growth. Positive operations increased 23.2% to $114,800,000 in the 2015 first quarter compared to $93,200,000 last year, driven primarily by the higher sales volumes and costs related to increasing production levels. Gross profit was $12,000,000 sales in the first quarter of 2015 compared to in the first quarter of 2014, mainly due to product mix. SG and A expenses were $7,400,000 in the first quarter of 2015 compared to $7,200,000 in the first quarter of 2014. Percent from 6 point actions 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 20 14. 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 $3,100,000 or $0.27 per diluted share an increase of 29.5 of $66,000 net income attributable to Miller Industries and the 2014 first quarter was $2,400,000 or $0.21 per diluted share. Turning now to our balance sheet, cash and cash equivalents as of March 31, 2015, were $38,300,000 compared to $39,600,000 at December 30 1, $2014,500,000 at March 31, 2014. Accounts receivable at March 31, 2015 totaled $116,100,000, compared to $116,500,000 at December 30 1, $2014,82,000,000 at March 31, 2014. The increase in sales volume drove accounts receivable higher from the year ago levels. Inventories were $61,800,000 as of March 31, 2015, compared to $56,500,000 at December 31, 20 $1456,700,000 at March 31, 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 31, 2015 were $79,900,000 compared to $70,600,000 at December 31, 2014 $47,700,000 at March 31, 2014. We continue to operate with no borrowings under our $25,000,000 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 June 22 2015 to shareholders of record at the close of business on June 15, 2015. Now I'll turn the call back to Jeff for further remarks. Thank you, 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 The ongoing interest in our offerings was recently featured at the April Florida Tow Show where our industry leading product line was on full to play. And once again, drew very positive reactions and a lot of excitement from the show's participants. Additionally, 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. Overall, we are pleased with the progress that we are making on a global scale. By the moves we are making area we are further positioning the company for long term success. Overall, I am pleased with our start to 2015. We continue to make great progress on our strategic and operational initiatives. Which are driving solid 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. Solid balance sheet and quarterly dividend which grew to $0.16 per share last quarter. Additionally, our flexibility to further in our marketplace and to continue to aggressively seek out opportunities 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 Our first question is from Walter Lang of Avondale. Please go ahead. Good morning. Congratulations on a very strong quarter, guys. Can you comment further or expand upon the activity you're seeing in Europe? Is this there's so many cross currents we're hearing in Europe? What you're seeing over there? While that we're seeing, it depends on what part of Europe you're talking about, are 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 pickup in order intake. So it really depends on which part of Do you want to continue to drift lower or You're a you're a REITs and you're talking about? And and then can it it seemed to me just my sense is on in your prepared remarks, you have more verbiage devoted to you know, like, capitalize on long term opportunities, is Is it more developing there than it has been in the past, or is it just that, you know, years years of effort are starting to account for something occurring this year on overseas? For years, we have attempted to enter, different military arenas in Europe. And we got successful, with Max Pro here in the U S, which I think vaulted us into a position of acceptability in European militaries. I wish I could say, well, you know, I got moved to international last year, and it's all been me. But in reality, And the historic, the historic performance of our products in various arenas that have given us opportunities become more involved with European OEMs, to enhance our activity on the military side. Okay. And then then you mentioned South Africa. Is that new or is that just maybe a new joint venture there or 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 has also, he recently has decided to put more effort on the sales side and it's paying off. Thank you. Again, congratulations on a great quarter. Thanks, Walter. Our next question is from Rick The Tall of Columbia. Please go ahead. Also, I echo the Walter's comment on night quarter. The gross profit, declined year over year on a significant increase in revenues. Is that just a mix military with and without chassis, impact? Yeah. Rick, I appreciate the question because, Will, myself and Bill had talked about that. Obviously, we would have liked to have seen a higher gross margin in the first quarter of 2015. However, after reviewing 15 to 14, 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 over time than we would have liked to have worked. Additionally, we had some currency impact, from dollars to euros in the final sale, at our French operation. And lastly, we introduced a new product, in the carrier line, which changed change dramatically the operation of that carrier and cause for new fixtures new processes, which, affected not so much the revenue coming out of those plans. But again, the overtime to keep up with the demand. Okay. That's a lot of components, but it's more than half of it is related to the mix? Yes. I would say yes. Are you up the learning curve on the new product that you just spoke of? Yes, sir. Yes, sir. As you ramp production often there are, you know, 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 a very, very strong backlog. I think Will and the team here in North America has done a great job anticipating I think we've kind of leveled off at this point with new hires. Unless we see even further increase in demand. But I think we can, obviously, we did have some learning curve in late fourth or 1st quarter, but I think we're beyond that. So we ought to that the mix impact on gross margin will continue to be overhanging, in the next few quarters, I would think. But other than that, obviously weather should be better. And, the other elements of margin pressure, should be largely behind you. It's not like Yeah, except for, that impact of currency, in the Eurozone. But you're correct. Okay. Thank you. Good quarter. Thank you. Our next question is from Mike Hughes of FGF. 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 euro was a headwind to the to the revenue number, the 18,300,000 that you reported overseas, do you have kind of a Yes. It was. Okay. Do do you have a a 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. Around the record? No, I mean, we hadn't. We the biggest impact of that is the follow-up of the with the end of the French and Danish sales that we military sales. And that's probably the biggest piece less of when the currency. Hey, Jeff. Jeff, this is Bill. What did we have in, the board presentation of how far what the change in your backlog was because of the change in currency? On a dollar level or year over year level? Well, you'd have to do it on a dollar level because we're we're we're answering here in dollars. Your European backlog, dropped about 5.6%, in from 4th quarter levels. And so Versus last year, we didn't have a versus last year, but Right. But, I think when you look at the military, in Q1 of 2014, Going back and looking at it, you delivered 4 French military, and you delivered 3 in Q1 of 15. But, the, the biggest difference as I look at it in European operations is, although the chance of revenue, because what's built here in the states in large units for European operations. So the dollar has impacted the price of those big chunks of revenue. And the European operations are providing to the market more, platform small records that they build themselves where they don't have that currency impact. So But that's I forgot just traveling over there and looking to looking at what what it's happening. Okay. That's good color. Just on the just staying on the FX topic for another minute, just the currency impact negative impact on the bottom line. Just reading your 10 Q, it mentions a $56,000 negative impact to operation. So Is it a $56,000 negative impact to operating income? Is it that small a number or am I reading that incorrectly? That is that is that is correct. Now we've had some wild swings. Yeah. Vince, you might as well tell them how that happened because of the because of the corona, Rona. Yeah. Well, we had I mean, we had some things going one way with the Danish Corona and then coming back on the other side, on the, on the U. S. Dollar and Corona as well as the euro. And, I mean, there were something in the coast $400,000 or $500,000 going either direction. But the net, we kind of We were offset. Yeah. Yeah. It's a little bit of a natural hedge in there as we had hoped. And they've netted down to 5th just 56,000. Okay. That that's all I have on FX. I I I think over the last couple of quarters, you put in place maybe a price increase. Can you just, speak to how that's been received in the marketplace? And then when we start, I know that you honor your back log typically at the lower price level. So will we start to see the positive impact from the pricing keep flowing through over the next few quarters? I think we, we, we were asked that question on the last call and we, we believe that we'll begin to see a more positive impact on the price increase in Q2 and then finally realizing all of it probably in Q3. And I'm I'm I'm guessing you won't want to do this, but do you care to quantify if it's show positive impact on gross margins from that? You you guessed correctly. Okay. Thank you very much. So, 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.