Miller Industries, Inc. (MLR) Q4 2016 Earnings Report, Transcript and Summary

Good day. And welcome to the Miller Industries' Fourth Quarter 2016 Results Conference Call. As a reminder, all participants will be in a listen-only mode. [Operator Instructions] After today's presentation, there will 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 Max Dutcher of FTI Consulting.

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 2016 fourth quarter and full year results, which were released after close of market yesterday. With us from the management team today are Bill Miller, Chairman of the Board; Will Miller, President and Co-CEO; Debbie Whitmire, Executive VP and CFO; and Frank Madonia, Executive Vice President, Secretary and General Counsel. 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 Will. Please go ahead, Will.

Thank you and good morning. Jeff is not able to join us today, as he is recovering from minor back surgery and he is expected to be back in the office in a couple of weeks. We're pleased to discuss with you our fourth quarter and full year 2016 performance. 2016 was a solid year in which we grew our top line revenue by 11%, including an 8.9% revenue growth in the fourth quarter. Our results were driven by positive order trends across our customer base and our ability to successfully capitalize on this increased activity. We also made significant progress on our plan expansion projects, which have already impacted our production levels. Our profitability was up for the year as we have effectively managed costs while continuing our extensive expansion efforts. We reported 2016 fourth quarter sales of $148.6 million, an increase of 8.9% compared to $136.4 million in the prior year period. Net income increased 14.8% to $4.5 million or $0.38 per share, compared to net income of $3.9 million or $0.34 per share in the 2015 fourth quarter. Our backlog remains strong reflecting healthy demand for our products and positive customer sentiment. Looking forward, we look to enhance productivity and drive long-term shareholder value. Now, I'll turn the call over to Debbie who will review the fourth quarter and 2016 full year results. After that I'll be back with comments on the market environment and some closing remarks.

Thanks, Will, and good morning everyone. Net sales for the 2016 fourth quarter were $148.6 million versus $136.4 million for the 2015 fourth quarter, an 8.9% year-over-year increase. Cost of operations also increased 10.2% to $133.4 million for the 2016 fourth quarter, compared to $121.1 million for the 2015 fourth quarter, largely due to costs associated with our plan expansions and the scale of operations with increased revenues. Gross profit was $15.2 million or 10.2% of net sales for the 2016 fourth quarter, compared to $15.3 million or 11.2% of net sales for the 2015 fourth quarter. SG&A expenses were $7.5 million for the 2016 fourth quarter, compared to $8.9 million for the 2015 fourth quarter. As a percentage of sales, SG&A decreased to 5.0% from 6.5% in the prior year period. Other income expense net for the 2016 fourth quarter was a net gain of $174,000, compared to a net gain of $113,000 for the 2015 fourth quarter. Interest expense for the 2016 fourth quarter was $345,000, compared to $220,000 for the fourth quarter of 2015. Net income for the 2016 fourth quarter increased 14.8% to $4.5 million or $0.38 per diluted share. Net income for the 2015 fourth quarter was $3.9 million or $0.34 per diluted share. Now let me briefly review our results for the full year ended December 31, 2016. Net sales for the 2016 full year were $601.1 million compared to $541.0 million for the 2015 full year, an increase of 11.1%. Gross profit for 2016 was $64.3 million or 10.7% of sales, compared to $57.6 million or 10.7% of sales in 2015. Net income for the 2016 full year was $19.9 million or $1.75 per diluted share, which is an increase of 24.7% over net income for the 2015 full year of $16.0 million or $1.41 per diluted share. Turning now to our balance sheet, cash and cash equivalents as of December 31, 2016, were $31.1 million compared to $32.8 million as of September 30, 2016, and $38.4 million at December 31, 2015. Accounts receivable at December 31, 2016 totaled $125.4 million compared to $125.9 million as of September 30, 2016, and $109.2 million at December 31, 2015. Inventories were $64.1 million as of December 31, 2016, compared to $64.8 million as of September 30, 2016, and $66.2 million at December 31, 2015. Accounts payable at December 31, 2016, were $85.1 million compared to $69.2 million as of September 30, 2016, and $73.4 million at December 31, 2015. As of December 31, 2016, we owed $5 million under our $50 million unsecured revolving credit facility, a $15 million decrease from $20 million at September 30, 2016. Current borrowings under the revolving credit facility were $15 million. The company also announced that its Board of Directors approved our quarterly cash dividend of $0.18 per share, an increase of 5.9% compared to the fourth quarter of 2016. The dividend is payable April 3, 2017 to shareholders of record at the close of business on March 27, 2017. Now, I'll turn the call back to Will for further remarks.

Thank you, Debbie. Our progress in 2016 reflects our relentless commitment to deliver strong financial results, return shareholder value and position our business for long-term success. We continue to be pleased with our team's dedication and ability to grow revenues this year and ramp up production to meet demand. We are also pleased with our strategic accomplishments as the expansion of our Pennsylvania manufacturing plant is in its final phases of completion and our capital projects in Ooltewah, Tennessee and Greeneville, Tennessee remain on track. As we move forward, we will continue to execute our commitment to enhance production capacity and streamline operations. Our backlog has grown both internationally and domestically reflecting solid demand from our product offerings. We remain committed to maintain a healthy balance sheet and an efficient cost structure. We are optimistic that we will continue to grow our business, expand our capabilities, and deliver shareholder value as we move forward into the New Year. In closing, I would like to thank our employees, our shareholders, our suppliers, and our customers for your ongoing support of Miller Industries. With that, we're ready for your questions.

We appreciate you joining the call today and we look forward to reporting our first quarter earnings for 2017 in the near future. Thank you.

And that will conclude today's conference. We appreciate your participation. You may now disconnect.