Miller Industries, Inc. (MLR) Q1 2014 Earnings Report, Transcript and Summary

Hello. This is the Chorus Call operator. Welcome to the Miller Industries First Quarter 2014 Results Conference Call. [Operator Instructions] Please note, this event is being recorded. At this time, I would like to turn the conference over to Matt Steinberg. Mr. Steinberg, the floor is yours, 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 2014 first quarter results, which were released after the close of the market yesterday. With us from management today are Bill Miller, Chairman of the Board; Jeff Badgley, Co-CEO; Will Miller, Co-CEO; Vince Mish, CFO; Frank Madonia, Executive Vice President, Secretary and General Counsel; Vince Tiano, Vice President, North American Sales; 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 that 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 Badgley. Jeff, please go ahead.

Thank you, and good morning. We had a great start to 2014, and generated improved revenue and profitability growth compared to the prior year quarter. Our results were driven by positive order flow, strong operational execution and continued progress on our strategic initiatives. Our order growth benefited from continued positive trends in consumer sentiment and improved economic conditions, both domestically and internationally. To this end, we took advantage of the improving order flow by further ramping up our production to meet our customers' needs. As a result, we reported 2014 first quarter sales of $104.2 million compared to sales of $85 million in the prior year period, an increase of more than 22%. And a quarter -- first quarter net income of $2.4 million or $0.21 per share, which represents a 78.2% increase compared to the $1.3 million net income in the 2013 first quarter. We generated slightly higher gross margins from the year-ago period, based on higher sale volumes and product mix, partially offset by higher costs associated with the ramp-up in operations and costs associated with the closure of the Delavan joint venture, which I will discuss in further detail shortly. We were able to achieve solid quarterly growth despite contending with weather-related issues that impacted our business during the quarter. Our backlog grew, and we are seeing improving conditions across most of our markets. We continue to operate from a position of financial strength and will continue to invest in the growth of our company, while returning value to our shareholders. 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. Vince?

Thanks, Jeff, and good morning, everyone. As Jeff mentioned, net sales for the first quarter of 2014 were $104.2 million versus $85 million for the 2013 first quarter. Sales were up 22.6% year-over-year, reflecting a strong order flow from improving domestic and international commercial markets, as well as a pickup in government-related activity. To keep up with the increased order flow, we further ramped up production levels, which allowed us to capitalize on increasing demand and contributed to our revenue growth. Cost of operations increased 22.2% to $93.2 million in the 2014 first quarter compared to $76.3 million last year, driven primarily by the higher sales volumes and costs related to increasing production levels. Gross profit was $10.9 million or 10.5% of net sales in the first quarter of 2014 compared to $8.6 million or 10.2% of net sales in the first quarter of 2013. SG&A expenses were $7.2 million in the first quarter of 2014 compared to $6.7 million in the first quarter of 2013. As a percentage of sales, SG&A decreased to 6.9% from 7.9% over the prior year period, which primarily reflected our cost containment efforts. Other income expense net for the 3 months ended March 31, 2014, was a loss of $62,000 that includes a loss on deconsolidation of a subsidiary of $83,000, offset by foreign currency transaction gains of $21,000. This compares to foreign currency transaction gains of $23,000 in the first quarter of 2013. Interest expense in the 2014 first quarter was $70,000 compared to $67,000 in the first quarter of 2013. Income in the first quarter of 2014 included a net loss attributable to noncontrolling interest of $66,000 related to the Delavan joint venture. Excluding that loss, net income attributable to Miller Industries in the 2014 fourth (sic) [first] quarter was $2.4 million or $0.21 per diluted share, which is a 78.2% increase compared to net income of $1.3 million or $0.12 per diluted share in the 2013 first quarter. Turning now to our balance sheet. Cash and cash equivalents as of March 31, 2014, were $40.5 million compared to $42.9 million at December 31, 2013, and $47.4 million at March 31, 2013. Accounts receivable at March 31, 2014, totaled $82 million compared to $80.8 million at December 31, 2013, and $64.1 million at March 31, 2013. The increase in sales volume drove accounts receivable higher from the year-ago levels. Inventories were $56.7 million as of March 31, 2014, compared to $54.2 million at December 31, 2013, and $50 million at March 31, 2013. The increase in inventories was primarily associated with the products that we showcased at April's Florida Tow Show in addition to inventory for the French military order. Accounts payable at March 31, 2014, were $47.7 million compared to $47.4 million at December 31, 2013, and $39.7 million at March 31, 2013. The increase in payables over year-ago amounts reflects our higher production levels. We continue to operate with no borrowings under a $25 million unsecured revolving credit facility. Now I will turn the call back to Jeff for further remarks.

Thank you, Vince. The 2014 first quarter reflected positive economic activity across our domestic and international markets, which helped drive our revenue performance for the quarter. We are pleased with the growth we are seeing within our markets, particularly in our improving order flow. Our backlog continues to trend in a positive direction, and we are seeing more quoting activity for a wide range of our products. During the quarter, we continued to make inroads on our geographic expansion initiatives. We are seeing increasing interest domestically, as well as in Europe, Asia Pacific, the Middle East and Latin America. Our French military order remains on track as we continue our deliveries on this important order. Overall, we are strengthening our geographic diversity and see this as a long-term benefit for the company. With regards to the Delavan joint venture, on March 31, 2014, the company sold all of its interest to the Delavan joint venture to our joint venture partner. Our Greeneville facility has ceased the manufacturing of Delavan products and will now concentrate on increasing its production of wrecker and carrier products. The company does not expect any further losses from the venture. Overall, I am extremely pleased with our start to 2014. We continue to drive solid revenue and profitability growth. We generated good order intake levels and continued to execute on our strategic initiatives. Our flexibility to further ramp up our operations has positioned us to capitalize on current opportunities in our marketplace and continue to actively seek opportunities in the future. Our backlog of work is strong, and economic conditions across our markets continue to trend in a positive direction. In addition, our industry-leading product line was on full display at April's Florida Tow Show. Our new products generated a lot of excitement and were very well received by the show's participants and our distributors. These products will help us take advantage of future opportunities. We continue to operate from a position of financial strength. As Vince described earlier, our balance sheet is solid, and we're operating efficiently despite the weather-related problems we experienced during the first quarter. We generated strong levels of profitability and expanded our earnings significantly from the year-ago period. We remain committed to building value for our shareholders through our strong cash flow, solid balance sheet and quarterly dividend, which grew to $0.15 per share per quarter in 2014. I am very pleased with our first quarter results, and look for continued operational execution success for the company. In closing, I'd like to thank our employees, our shareholders, our suppliers and, lastly, our customers for their ongoing support of Miller Industries. With that, we're ready to take your questions.

[Operator Instructions] At this time, we do not have any questions. I would now like to turn the conference back over to management for any closing remarks.

Well, we'd again like to thank you, all, for your support, and we look forward to reporting our second quarter results to you in our upcoming quarterly conference call. Thank you very much.

And we thank you, sir, and to the rest of the management team for your time. This concludes today's event. We thank you for attending. At this time, you may disconnect your lines. Thank you, and take care.