Miller Industries Inc (MLR) 2015 Q1 法說會逐字稿

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. (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 would 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 Mish, Executive VP and CFO, Frank Madonia, 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 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.

Thank you, good morning. We had a strong start to 2015 with solid revenue growth and improved profitability compared to the first quarter of last year. Our results were driven by solid order flow, strong operational execution, and continued progress on our strategic initiatives.

As we have communicated in recent quarters, 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 recorded 2015 first-quarter sales of $126.8 million compared to sales of $104.2 million in the prior year period, an increase of nearly 22%. Q1 net income was $3.1 million or $0.27 per diluted share, which represents a 29.5% increase as compared to the $2.4 million 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 are seeing in the marketplace, in addition to steadily improving customer sentiment, gives us confidence in the future prospects of the business and in our ability to capitalize on the long-term opportunities that lie ahead.

We believe our growth opportunities come from continuing to expand geographically, and to advance our product offerings in order to meet the evolving needs of our customer.

Now I'll turn the call over to Vince who will review the quarter's financial results. After that I will be back with comments on the market environment and some closing remarks. Then we will go to questions and answers. Vince?

Thanks, Jeff, and good morning, everyone. As Jeff mentioned, net sales for the first-quarter 2015 were $126.8 million versus $104.2 million for the 2014 first quarter. This 21.7% year-over-year increase reflected a strong order flow from improving domestic and international commercial markets. To account for the increased order flow we further ramped up production levels, which contributed significantly to our revenue growth. Cost of operations increased 23.2% to $114.8 million in the 2015 first quarter compared to $93.2 million last year, driven primarily by the higher sales volumes and costs related to increasing production levels.

Gross profit was $12.0 million or 9.4% of net sales in the first quarter of 2015 compared to $10.9 million or 10.5% of net sales in the first quarter of 2014, mainly due to product mix. SG&A expenses were $7.4 million in the first quarter of 2015 compared to $7.2 million in the first quarter of 2014. As a percentage of sales SG&A decreased to 5.9% from 6.9% over the prior year period.

Other expense related to foreign currency transactions 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 2014.

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 US federal domestic production activity deductions. Net income attributable to Miller Industries in the 2015 first quarter was $3.1 million or $0.27 per diluted share, an increase of 29.5% over Q1 2014. Excluding the net loss attributable to the noncontrolling interest of $66,000, net income attributable to Miller Industries in the 2014 first quarter was $2.4 million or $0.21 per diluted share.

Turning now to our balance sheet. Cash and cash equivalents as of March 31, 2015, were $38.3 million compared to $39.6 million at December 31, 2014, and $40.5 million at March 31, 2014. Accounts Receivable at March 31, 2015 totaled $116.1 million compared to $116.5 million at December 31, 2014, and $82.0 million at March 31, 2014. The increase in sales volume drove Accounts Receivable higher from the year-ago levels.

Inventories were $61.8 million as of March 31, 2015, compared to $56.5 million at December 31, 2014, and $56.7 million 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 $79.9 million, compared to $70.6 million at December 31, 2014, and $47.7 million at March 31, 2014.

We continue to operate with no borrowings under our $25 million 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 will turn the call back to Jeff for further remarks.

Thank you, Vince. 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 levels as well as our backlog were driven by a healthy level of quoting activity for our products. The ongoing interest in our offerings was recently featured at the April Florida Tow Show where our industry-leading product line was on full display, 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 in this area, we are further positioning the Company for long-term success.

Overall, I am pleased with our start to 2015. We continued to make great progress on our strategic and operational initiatives which are driving solid revenue and profitability growth and strong order intake levels. 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.

We remain committed to delivering value to our shareholders through our strong cash flow, solid balance sheet and quarterly dividend, which grew to $0.16 per share last quarter. Additionally, our flexibility to further ramp up our operations has positioned us well to capitalize on current opportunities in our marketplace, and to continue to aggressively seek out opportunities going forward.

To reiterate, both Will and myself are pleased with 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 are ready to take your questions. Thank you.

(Operator Instructions). Walter Lang, Avondale.

Good morning, congratulations on a very strong quarter, guys. Can you comment further or expand upon the activity you're seeing in Europe? There's so many crosscurrents we are hearing in Europe. What you are seeing over there.

Walter, we are seeing -- it depends on what part of Europe you're talking about. 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 US. In the England area, we've seen a pickup in order intake. So, it really depends on which part of (technical difficulty) European region you're talking about.

And it seemed to me, just my sense is, in prepared remarks, you have more verbiage (technical difficulty) capitalize on long-term opportunities. Is there more developing there than there has been in the past or is it just years and years of effort are starting to account for something occurring this year on overseas?

You know, for years we have attempted to enter different military arenas in Europe. And we got successful with Max Pro here in the US, which I think vaulted us into a position of acceptability in European militaries.

I wish I could say I got moved international last year (technical difficulty) but in reality, it's been historic -- the historic performance of our products in various arenas that have given us opportunity to become more involved with European OEMs to enhance our activity on the military side.

And then you mentioned South Africa. Is that new, or is that -- maybe a new joint venture there or dealership?

That's a distributor that has been around for a few years. It has decided he is also in the towing business, he is 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.

Rick D'Auteuil, Columbia.

Also I echo Walter's comments, nice quarter. The gross profit decline year over year on significant increase in revenues, is that just the mix of military with and without chassis impact?

Rick, I appreciate the question, because Will, myself and Bill have talked about that. Obviously, we would've liked to have seen higher gross margin in the first quarter of 2015. However, after reviewing 2015 to 2014, mix is the predominant reason.

However, there were other concerns. One was just overall weather as it affected our plants, and particularly in the month of February. And our suppliers thereafter are trying to catch up, which forced us to work more over time than we would like 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 dramatically the operation of that carrier and cause for new fixtures, new processes, which affected not so much the revenue coming out of those plants, but again the overtime to keep up with demand.

That's a lot of components. But it's more than half of it is related to the mix.

I would say yes.

Are you up the learning curve on the new product that you just spoke of?

Yes sir.

As you've ramped production, often there are hiring people that need to come up the learning curve. Where do you think you are in that process? In obtaining maximum efficiencies?

I think, given the fact that we have a very, very strong backlog, I think Will and the team here in North America has done a great job anticipating, and I think we've kind of leveled off at this point with new hires. And last week, see even further increase in demand.

But, I think we can -- obviously we did have some learning curve in late fourth and first quarter, but I think we are beyond that.

So we ought to -- good. The mix impact on gross margin will continue to be overhang 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 sounds like.

Yes, except for that impact of currency in the Eurozone. But you're correct.

Thank you, good quarter.

Mike Hughes, SGF.

Good morning. A 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 revenue number, the $18.3 million that you reported overseas. Do you have kind of --

Yes it was.

Do you have 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, Vince, for that quarter. (multiple speakers)

The biggest impact of that is the follow-up with the end of the French and Danish sale that -- military sales. And that's probably the biggest piece, less of (multiple speakers).

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? Was it down to (multiple speakers)?

On a dollar level or year-over-year level?

You have to do it on a dollar level because we are answering here in dollars. (multiple speakers)

Your European backlog dropped about 5.6%. In from fourth-quarter levels. And so --

Versus last year, we didn't have a versus last year.

But I think when you look at the military in Q1 of 2014, going back and looking at it, you delivered for French military, and you delivered three in Q1 of 2015. Is that -- the biggest difference, as I look at it, in European operations, is although the chunks of revenue because what's built here in the states is 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 platforms, small records that they build themselves where they don't have that currency impact. So -- but that's got you just traveling over there and looking at what is happening.

That's good color. Just hitting 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 operations. 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 correct. We had some wild swings.

Vince, you might as well tell them how that happened because of the kroner (technical difficulty)

We had some things going one way with the Danish kroner and coming back on the other side on the US dollar. The kroner as well as the euro. I mean they were but something in the close to $400,000, $500,000 going either direction. The net, (multiple speakers)

We were offset.

Had a little bit of a natural hedge in there as we had hoped. And that went down to just $56,000.

Okay, that's all I have on FX. I think, over the last couple quarters, you put in place maybe a price increase. Can you just speak to how that's been received in the marketplace, and then I know that you honor your backlog typically at the lower price level. So will we start to see the positive impact from the price increase flowing through over the next few quarters?

We were asked that question on the last call. And we believe that we will 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 guessing you won't want to do this, but do you care to quantify the potential positive impact on gross margins from that?

You guessed correctly.

Thank you very much.

Seeing 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.

We would like to thank you again for joining our Q1 call and we look forward to talking to you to report our Q2 earnings in the near future. Thank you.

The conference has now concluded. Thank you for attending today's presentation, you may now disconnect.