Miller Industries' (MLR) CEO Jeff Badgley on Q2 2016 Results - Earnings Call Transcript

| About: Miller Industries (MLR)

Miller Industries, Inc. (NYSE:MLR)

Q2 2016 Earnings Conference Call

August 04, 2016 10:00 AM ET

Executives

Max Dutcher - FTI Consulting

Bill Miller - Chairman of the Board

Jeff Badgley - Co-CEO

Will Miller - President and Co-CEO

Vince Mish - Executive VP and CFO

Frank Madonia - EVP, Secretary & General Counsel

Debbie Whitmire - VP & Corporate Controller

Analysts

Walter Lang - Avondale Partners

Operator

Please standby. We are about to begin. Good day, ladies and gentlemen. This is your ViaVid operator. Welcome to the Miller Industries' Second 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. Please go ahead, Max.

Max Dutcher

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 second quarter results, which were released after close of market yesterday.

With us from management today are Bill Miller, Chairman of the Board; Jeff Badgley, Co-CEO; Will Miller, President and Co-CEO; Vince Mish, Executive VP and CFO; Frank Madonia, Executive Vice President and Secretary and General Counsel; and Debbie Whitmire, Vice President and Corporate Controller. 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. Please go ahead, Jeff.

Jeff Badgley

Thank you, and good morning. We are pleased to discuss our second quarter performance with you today. It was a solid quarter for Miller Industries one which we built on our strong start to 2016. Demand for our products has remained healthy which led to a solid top and bottom line financial performance in the quarter. Results were driven by a solid pipeline of business which led to growth in revenue achieved during the quarter based on recovering economic conditions and improving customer sentiment.

We reported 2016 second quarter sales of $156.1 million compared to $151.5 million in the prior year period. Net income was $6.6 million, or $0.58 per share, compared to net income of 5.9 million, or $0.52 per share in 2015 second quarter. We remain on track with our initiatives to consolidate and expand our Pennsylvania manufacturing operations. Furthermore, our projects to enhance our Ooltewah and Greeneville Tennessee plants have been initiated.

Now 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. Mr. Mish?

Vince Mish

Thanks, Jeff. And good morning, everyone. Net sales for the second quarter of 2016 were $156.1 million versus 151.5 million for the 2015 second quarter, a 3.0% year-over-year increase.

Cost of operations increased 2.3% to 137.1 million in the 2016 second quarter compared to $134 million last year. Gross profit was 19.0 million or 12.2% of net sales in the second quarter of 2016 compared to 17.5 million or 11.6% of net sales in the second quarter of 2015.

SG&A expenses were $8.3 million in the second quarter of 2016 compared to $7.6 million in the second quarter of 2015. As a percentage of sales, SG&A increased to 5.3% from 5% in the prior-year period. The income in expense was primarily related to increases more staffing levels.

Other income expense net for the second quarter was a net gain of $128,000 compared to a net gain of 256,000 in the second quarter of 2015. Interest expense in the 2016 second quarter was $259,000 compared to $245,000 in the second quarter of 2015.

Net income in the 2016 second quarter was $6.6 million or $0.58 per diluted share. Net income in the 2015 second quarter was $5.9 million or $0.52 per diluted share.

Now, let me briefly review our results for the six months ended June 30, 2016. Net sales for the first six months of 2016 were $304.9 million compared to $278.3 million in the prior year period, an increase of 9.6%. Gross profit for the six months ended June 30, 2016 was $32.0 million or 10.5% of sales compared to $29.5 million or 10.6% sales for the first six months of 2015.

Net income in the first six months of 2016 was $9.9 million or $0.88 per diluted share, which is an increase of 11.4% over net income in the first six months of 2015 of $8.9 million, or $0.79 per diluted share.

Turning now to our balance sheet, cash and cash equivalents as of June 30, 2016, were $29.6 million compared to $33.3 million at March 31, 2016, and $38.4 million at December 31, 2015. Accounts receivable at June 30, 2016, totaled $138.4 million compared to $129.1 million as of March 31, 2016, and $109.2 million at December 31, 2015.

Inventories were $69.3 million as of June 30, 2016, compared to $71.4 million as of March 31, 2016, and $66.2 million at December 31, 2015. Accounts payable at June 30, 2016, were $79.2 million compared to $88.2 million as of March 31, 2016, and $73.2 million at December 31, 2015.

As of June 31, 2016, we borrowed $20 million under our $50 million unsecured revolving credit facility as part of the financing of our capital projects.

The Company also announced that its Board of Directors approved our quarterly cash dividend of $0.17 per share payable September 19, 2016, to shareholders of record at the close of business on September 12, 2016.

Now, I'll turn the call back to Jeff for further remarks.

Jeff Badgley

Thank you, Vince. The second quarter was about a strong first half of the year for Miller Industries. Demand continues to be strong in our domestic markets based on recovering economic conditions and improving customer sentiment. To enhance our operations, we're continuing to execute on multiple capital projects to expand our production capabilities. Overall, we're very pleased with the quarter. We maintained a strong balance sheet that puts us in a position of strength to operator our business. We remain committed to enhancing shareholder value through our strong cash flow and our quarterly dividend of $0.17.

As we move into the third quarter, we retained our positive outlook knowing we're well poisoned to take advantage of the attractive 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 for Miller Industries.

With that, we are ready to take your questions. Thank you.

Question-and-Answer Session

Operator

[Operator Instructions] All right, it looks like our first question of the day comes from Walter Lang with Avondale Partners.

Walter Lang

You commentary on positive sentiment from customers, does that extend to now non-domestic customers as well?

Jeff Badgley

Various in the region worldwide on we're seeing expense towards the end of the second quarter, we're seeing a not so positive in the U.S. but we really haven’t seen any changes in Western, I am sorry in the French market in Germany. We see still strong demand in the Asian markets Japan, so it varies.

Walter Lang

And then your credit facility extended first to 30 million now you've taken it up to 50 million, do you envision accessing that entire line?

Vince Mish

This is Vince. Walter, I wouldn’t anticipate accessing the entire line but a lot of it depends on timing just as it has no matter when the capital improvements come on board and how much business we have and how much receivables go up as we get things out the door. But I can't anticipate -- I don't anticipate we'll get the whole.

Walter Lang

You have buffering there. And then hypothetically, what if the work had been complete at the end of -- in Pennsylvania had been completed as of the end of June, what could you take advantage right now the increase capacity throughput? I know it's hypothetical.

Jeff Badgley

Yes, extremely hypothetical. The two plants in Pennsylvania got a great job during this process of planning expansion and consolidation, certainly the plant that we're building will increase capacity greatly. I don’t know that if completed at the end of June that you would recognize immediate results because obviously you got to get your suppliers online, you've got people to train a little bit. So and you'd see some of those while there you're not going to explode.

Bill Miller

But Jeff, this is Bill and actually Greenville has actually picked some of their added capacity from a standpoint of the current periods in the interim switching from other products. So we've had pick up even before we're finished.

Walter Lang

Okay and then the last question on Vince, Vince commented on increased staffing levels so I assume that's a result of increased demand right it equate?

Jeff Badgley

That’s a good assumption, yes.

Operator

All right, ladies and gentlemen, it looks like we have no further questions from the audience. I'd like to turn the floor back to management for any additional and closing remarks.

Jeff Badgley

We certainly are very happy with our performance during the first half of 2016 and we look forward to reporting the Q3 results in the near future. Thank you very much.

Operator

Ladies and gentlemen, this does conclude today's event. Thank you for attending this presentation. You may now disconnect.

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