Miller Industries, Inc.

Ladies and gentlemen, and welcome to the Miller Industries fourth quarter 2020 results conference call. Please note this event is being recorded. And now at this time, I'd like to turn the conference call over to Mr. Brendan Dunlop at FTI Consulting. Please go ahead, sir.

Thank you. Good morning, everyone. I would like to welcome you to the Miller Industries conference call. We are here to discuss the company's 2020 fourth quarter and full year results, which were released after the close of market yesterday. With us from the management team today are Bill Miller, Chairman of the Board, Will Miller, President and Co-CEO, Jeff Badgley, Co-CEO, Debbie Whitmire, Executive Vice President 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 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 of the Securities and Exchange Commission. At this time, I'd like to turn the call over to Jeff. Please go ahead, Jeff.

Thank you, and good morning, everyone. To begin today's call, I would like to first acknowledge the extraordinary dedication of our employees during one of the most challenging years in our company's history. COVID-19 has disrupted nearly every facet of everyday life and has required our employees to show a tremendous amount of flexibility in order to continue meeting the needs of our customers. During the fourth quarter, we experienced steady improvement, and I continue to be encouraged by the underlying strength of our business, as well as the resilience of our customers despite the ongoing impact of the COVID-19 pandemic. While we are encouraged to finish the year with such strong operating results, the start to the first quarter of 2021 has not been without its challenges. During the first half of the first quarter of 2021, we experienced delays in deliveries to our distributors caused by changes we made to our legacy business processes during the implementation of our new enterprise software system. In addition, we experienced supply chain disruptions related to the impacts of COVID-19, as well as product delivery delays due to extreme weather conditions across parts of the US and tightening availability of freight trucks. These factors have caused substantial downward pressures on our revenues, margins, and earnings during the first half of the first quarter of 2021. Despite these headwinds, based on our strong backlog and the current status of our process improvements, We believe we have the opportunity to substantially improve our operating results in 2021 beyond the first quarter and will continue to capitalize on all future growth opportunities. As you recall, last quarter we announced that we started repurposing our existing Greenville, Tennessee facility to bring specific production capabilities in-house to mitigate future supply chain constraints. I am happy to announce that the facility transition has progressed as scheduled, and we anticipate that we will begin to see improvements in our production efficiency as we finalize the project and gain momentum through 2021. Now I'll turn the call over to Debbie, who will review the fourth quarter financial results. After that, I'll be back with comments about the market environment and some closing remarks.

Thanks, Jeff, and good morning, everyone. Net sales for the fourth quarter of 2020 were $178.3 million versus $203.1 million for the fourth quarter of 2019, a 12.2 year-over-year decrease driven by ongoing impacts from the COVID-19 pandemic, but a 5.9% improvement from the third quarter as production levels and deliveries continue to expand throughout the quarter. Cost of operations decreased 12.6% to $154.1 million for the fourth quarter 2020, compared to $176.2 million for the fourth quarter 2019 due to the decline in our top line sales. Cost of operations as a percentage of net sales decreased approximately 30 basis points to 86.4% from the prior year period. Gross profit was $24.3 million or 13.6% of net sales for the fourth quarter 2020, compared to $26.9 million, or 13.3% of net sales for the fourth quarter 2019, largely driven by our continued cost mitigation efforts. FD&A expenses were $9.4 million for the fourth quarter 2020, compared to $11.8 million for the fourth quarter 2019, resulting from significantly reduced employee travel and trade show related expenses. As a percentage of sales, SG&A decreased approximately 50 basis points to 5.3% or 5.8% in the prior year period. Interest expense net for the fourth quarter of 2020 was $197,000 compared to $565,000 for the fourth quarter of 2019. due to decreases in interest on distributor floor plan activity and decreases in interest on the credit facility. Other income expense for the fourth quarter 2020 was a net income of $275,000 compared to a net income of $211,000 for the fourth quarter 2019 due to currency exchange rate fluctuations. Net income for the fourth quarter 2020 was $12 million or $1.05 per share. Net income for the fourth quarter of 2019 was $11.7 million, or $1.03 per share. Now let me briefly review our results for the year ended December 31, 2020. Net sales for the year were $651.3 million, compared to $818.2 million in the prior year period, a decrease of 20.4%. Gross profit for the year was $78.4 million, or 12% of sales, compared to $96.5 million, or 11.8% of sales, for 2019. Net income for the year was $29.8 million, or $2.62 per share, a decrease of 23.7% compared to net income of $39.1 million, or $3.43 per share, for 2019. Now turning to the balance sheet, cash and cash equivalents as of December 31st, 2020 was $57.5 million compared to $47.5 million as of September 30th, 2020 and $26.1 million as of December 31st, 2019. Accounts receivable at December 31st, 2020 totaled $141.6 million compared to $149.8 million as of September 30, 2020, and $168.6 million as of December 31, 2019. Inventories were $83.9 million as of December 31, 2020, compared to $87.4 million as of September 30, 2020, and $88 million as of December 31, 2019. Accounts payable at December 31st, 2020 was $85.5 million compared to $93 million as of September 30th, 2020, and $95.8 million as of December 31st, 2019. As you recall, during the third quarter, we retained the remaining $5 million of our long-term obligations as of September 30th. Despite the ongoing uncertainty related to the pandemic, our balance sheet remains strong, and we are confident that we have adequate capital resources to drive the business forward through these challenging times while continuing to strategically invest in our business. Lastly, the company also announced that its board of directors approved our quarterly cash dividend of $0.18 per share, payable March 22, 2021, to shareholders of record at close of business on March 15, 2021. Now, I'll turn the call back to Jeff for further remarks.

Thank you, Debbie. Over the last year, we were presented with one of the toughest operating environments in our company's history. I'm extremely proud of our employees and their ongoing commitment to operational excellence and industry-leading customer service. Despite the challenging circumstances, over the last 12 months we took steps to optimize our production capabilities while following guidelines to keep our employees safe. Further enhanced our internal cost controls and continued to strengthen our balance sheet to ensure we have the financial flexibility to capitalize on future growth opportunities. Along with our operational improvements, we remain committed to returning capital to shareholders as evidenced by the declaration of our 41st consecutive quarterly dividend of 18 cents per share. As we move into 2021, COVID-related uncertainty persists and visibility remains challenged. We are hopeful that vaccine rollouts continue to gain traction and global economies continue on the path to normalization. Going forward, our strong backlog, optimized production capabilities, and healthy balance sheet position us favorably to capitalize on strengthening customer demand. In closing, I'd like to thank our employees, customers, suppliers, and shareholders for their ongoing support of Miller Industries. Thank you again for joining us this morning. Operator, please open the line for questions.

Thank you. If you would like to ask a question, please signal by pressing star 1 on your telephone keypad. If you are using a speakerphone, please make sure that your mute function is turned off to allow your signal to reach our equipment. I'm seeing that as star 1. If you'd like to ask a question, we'll pause for just a moment to allow everyone an opportunity to signal. Once again, that is star one if you'd like to ask a question. And with that, that does conclude today's question and answer session. I'd like to go ahead and turn the call back over to management for any additional or closing remarks.

Thank you again for joining us on the call today. And we look forward to speaking with you again on our first quarter results conference call. Good day.

Thank you. And that does conclude today's conference. We do thank you for your participation.