Jeffrey I. Badgley- Co-chief Executive Officer and President
Vince Mitchell- EVP, CFO and Treasurer
Eric Boyriven- Investor Relations
Miller Industries, Inc. (MLR) Q1 2008 Earnings Call May 13, 2008 10:00 AM ET
Good morning, my name is Bobbie Joe and I will be your conference operator today. At this time I would like to welcome everyone to Miller Industries 2008 First Quarter Conference call.
I would now like to turn the call over to Mr. Eric Boyriven of FD. Sir, you may begin.
Good morning everyone, I am Eric of FD and I would like to welcome you to the Miller Industries conference call. We are here to discuss the company’s results which were released after the close of market yesterday. With this from management today are Bill Miller, Chairman of the Board and Co-CEO; Jeff Badgley, President and Co-CEO; Vince Mish, CFO; Frank Madonia, General Counsel; Debbie Whitmire, 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 mornings' call management may reiterate forward-looking statements. In accordance with the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995, we would 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 10K and on 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?
Good morning and thank you Eric. Net sales for the 2008 first quarter declined about 20% from fourth quarter levels to $67.6 million, reflecting the impact of the softening economic environment and the uncertainties associated with it, and their effects on our customer demand levels.
Our performance also reflects the absence of some significant government related contracts that we worked to deliver through the first half of last year. In response to the economic conditions, we have continued to adjust our production levels, and we were successful in bringing our cost of operations down as sales levels declined. We have also continue to experience cost pressures as a result of rising raw materials prices for steel, aluminum, and petroleum-related products and we have taken steps to mitigate the impact of these cost increases.
In order to properly align our operating structure with current demand levels during the quarter, we reduced production levels, and our cost base, and as a result of these actions, our cost-of-goods sold, and sales each declined relatively and proportionately. At the same time, we took steps to mitigate the effect of increased raw materials cost on our business, and in April we implemented price increases across all our product lines. This should begin flowing through our backlog as the year progresses, but we expect continued increases in raw materials costs which will mitigate the effect of our price increases relative to margins. Now I will turn the call over to Vince who will review the first quarter 2008 financial results in greater detail. After that, I will be back to add some comments, following which we will take your questions. Vince?
Thanks Jeff and Good morning everyone. As Jeff mentioned, net sales in the first quarter were $67.6 million versus $114.0 million in last years’ first quarter. While sales were down approximately 40.7% year-over-year, cost of operations also decreased by 39.3% to $59.4 million in the 2008 first quarter, compared to $97.8 million in the first quarter of 2007. This resulted in gross profit of $8.3 million, or 12.2% of net sales in 2008 first quarter, compared to$16.3 million, which was 14.3% of net sales in the first quarter of 2007. The declining gross margins reflected the impact of lower sales, and was somewhat offset by our cost reduction efforts and the steps we have taken to take production rates more in-line with the demand levels.
In the first quarter of 2008, SG&A expenses decreased 11.6% to $6.3 million, compared to $7.2 million for the same period a year ago. As percentage of sales, SG&A was 9.4% for the first quarter of 2008, versus 6.3% in the prior year period, reflecting lower sales levels in the first quarter.
Total interest expense in the 2008 first quarter was $454,000, compared to $712,000 in the first quarter of last year, reflecting the elimination of junior debt, reduced bank debt levels, lower interest rates, and less chassis interest expense. Earnings before interest and taxes in the first quarter 2008 were $1.9 million, or 2.9% of net sales, compared with 9.1$ million or 8.0% of net sales in the prior year period. Net income was $900,000., or $.08 per diluted share. This compares to $5.4 million, or $.46 per diluted share for the first quarter of 2007.
Turning now to the balance sheet, accounts receivable at March 31, 2008 were $54.1 million compared to $67.0 million at December 31st, 2007 and $85.6 million at March 31st, 2007. Accounts payable at March 31st, 2008 were $32.8 million, compared to $39.9 million at December 31st, 2007, and $59.2 million at March 31st, 2007.
Inventories were at $42.2 million at March 31st, 2008, compared to $39.3 million at December 31st, 2007, and $45.0 million at March 31st of 2007. Increase of inventory results primarily from the timing of chasses purchases.
Total senior debt at March 31st, 2008 was $3.2 million, which was down from $3.5 million at year end, and down from $9.6 million of senior/junior debt at March 31st, 2007. The only remaining senior debt continues to be the term loan on the property plant equipment. Now I will turn it back to you, Jeff, for further remarks.
Thanks Vince. Since the last economic downturn, Miller Industries has repositioned itself in the marketplace, focusing on our core operations. We have also significantly improved the efficiency, and flexibility of our operations, and strengthened our financial positioned. Today we are a different company, more capable of riding out the cycles in the marketplace. Despite a significant decrease in sales during the first quarter, we still generated solid cash flows, which we continue to use to invest in the business, and we are working toward the completion of the modernization of our heavy-duty wrecker facility in Ooltewah, TN, which will further enhance the efficiency of our operations when completed. This project, and the other upgrades we have conducted in the past year, positions the company to provide improved service and product quality to our customers going forward, and to more effectively compete in the international marketplace. Though the full benefit of these actions will not be seen until economic conditions improve, the steps we have taken are already improving the efficiency and flexibility of our operations.
While the economic downturn has impacted demand from our customers, we do see some positive trends for the future. Last month we did attend the annual Florida Tow Show, in which we featured many of our new products. Although order levels were somewhat tempered by current conditions, we saw significant interest in our products, particularly from customers outside the traditional U.S. market, which we believe provides us with opportunities to further broaden our business over the long term. We expect that tough economic conditions will continue in the near term, and we remain cautious regarding the effects of the economy on our customer base in the coming quarters. Additionally, we continue to experience cost-pressures from our suppliers on commodities, such as steel, aluminum, and petroleum-based products. We are working closely with our suppliers, and will continue to take steps to mitigate these challenges wherever and whenever possible.
As always, we will continue to focus on keeping our overall costs of production levels in-line with demand, without sacrificing the quality of our product and our position as the market leader. While economic challenges will likely persist in the coming quarters, the order levels from our core customer base have remained stable in the recent months. We are very proud that we have the highest quality people, products, facilities, and distribution network in the necessary. The steps we have taken over the past two year to improve our operations and our financial strength will put us in an even better position for the eventual rebound in our market.
In closing I would like to thank our employees, shareholders, suppliers, and customers for their continued support of our company. We are now ready to take your questions.
(Operator Instructions) At this time, sir, there are no questions. I would like to turn the call back over to management for closing remarks.
We would like to thank you for joining our call, and we look forward to talking to you in the near future about our second quarter results.
And if they have any other questions, Jeff, just have them call us directly.
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