Miller Industries, Inc.

Good day everyone and welcome to the Miller Industries first quarter 2021 results conference. Please note that today's call is being recorded and now I'd like to turn the call over to Brendan Dunlap at FTI Consulting. Please go ahead.

Thank you and good morning everyone. I'd like to welcome you to the Miller Industries conference call. We are here to discuss the company's 2021 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, 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 file on Form 10-K and other filings with 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. When we begin the year, we are glad to put 2020 behind us and look forward to 2021. While the beginning of 2021 has had its own challenges, Will and I are pleased to say that we have put those challenges behind us as our business steadily improved as we progressed through the quarter. Additionally, the normalization of our business that we experienced towards the end of the first quarter has persisted into our second quarter. More specifically, in January, our operational performance was materially impacted by the rollout of our new enterprise software system, as well as ongoing disruptions throughout our supply chain and limited availability of freight transportation, all of which resulted in delivery delays throughout our network. However, Will and I are pleased to report that we have completed the first phase of our enterprise software upgrades and we are already beginning to benefit from enhanced operational efficiencies as we exited the first quarter. Our sales for the first quarter fell 3.5% from the prior year period to $169.9 million due to the delays caused by the software rollout and supply chain challenges in the first half of the quarter. Gross profit for the first quarter decreased 14.6% year-over-year to $15.8 million compared to $18.5 million a year ago, and gross margin contracted approximately 120 basis points compared to the prior year period due to the decline in top-line sales as well as increased costs associated with transportation and product shipments. In our international business, ongoing pandemic-related restrictions in Europe and global shipping constraints primarily related to export sales weighed on performance. Despite those challenges, underlying demand trends in the region remain favorable. Domestically, customer demand continues to improve, as evidenced by our strong backlog and increasing order rate. However, transportation and freight availability were challenged, which increased the cost of shipping our products. We are aggressively working through those challenges to ensure that we can meet customer demand. Now I'll turn the call over to Debbie, who will review the first quarter financial results. Then I will provide some commentary about the current market environment and some closing remarks. Debbie?

Thanks, Jeff, and good morning everyone. Net sales for the first quarter of 2021 were $169.9 million versus $176.1 million for the first quarter of 2020, a 3.5% year-over-year decrease driven by delivery delays associated with our enterprise software system rollout and ongoing COVID-19 impacts throughout our supply chain. Cost of operations decreased 2.2% to $154.1 million for the first quarter 2021 compared to $157.5 million for the first quarter 2020 due to the decline in our top line sales. Cost of operations as a percentage of net sales increased approximately 120 basis points to 90.7% from the prior year period. Gross profit was $15.8 million or 9.3% of net sales for the first quarter 2021, compared to $18.5 million, or 10.5% of net sales for the first quarter 2020, largely driven by the impact of our enterprise system rollout, as well as increased costs associated with shipping and transportation. SG&A expenses were $11.1 million for the first quarter 2021, compared with $11 million for the first quarter 2020. As a percentage of sales, SG&A increased approximately 30 basis points from 6.5% to 6.5% from 6.2% in the prior year period. Interest expense net for the first quarter 2021 was $275,000 down from $359,000 for the first quarter 2020 due to the elimination of our long-term debt obligations in the third quarter of 2020 but is up from $197,000 last quarter due to an increase in customer floor plan financing costs. Other income and expense for the first quarter of 2021 was a net expense of $276,000 compared to a net expense of $91,000 for the first quarter of 2020 due to currency exchange rate fluctuations. Net income for the first quarter of 2021 was $3.2 million or 28 cents per share. Net income for the first quarter of 2020 was $5.4 million or 48 cents per share. Now turning to the balance sheet, cash and temporary investments as of March 31st, 2021 was $56.2 million compared to $57.5 million as of December 31st, 2020 and $43.1 million as of March 31st, 2020. Accounts receivable in March 31st, 2021, totaled $167.7 million, compared to $141.6 million as of December 31st, 2020, and $168.9 million as of March 31st, 2020. Inventories were $84.9 million as of March 31st, 2021, compared to $83.9 million as of December 31st, 2020, and $92.6 million as of March 31st, 2020. Accounts payable in March 31st, 2021 was $113.4 million compared to $85.5 million as of December 31st, 2020, and $96.8 million as of March 31st, 2020. As we begin to emerge from the COVID-19 pandemic, Our diligent capital allocation priorities and strong balance sheet provide us with the financial flexibility to continue investing in our business and capitalize on strong industry demand trends. Lastly, the company also announced that its Board of Directors approved our quarterly cash dividend of 18 cents per share, payable June 14, 2021, to shareholders of record at the close of business on June 7, 2021. Now, I'll turn and call back to Jeff for further remarks.

Thank you, Debbie. While we are not yet through the pandemic, we are encouraged by the pace of the vaccine rollouts and the gradual normalization of the economy. Will and I are confident the investments we've made to streamline our operations and the unwavering commitment of our employees to deliver best-in-class customer service will drive our business forward. Along with our production and operational improvements, returning capital to shareholders remains a pillar of our capital allocation strategy, as evidenced by the Board's declaration of our 42nd consecutive quarterly dividend of 18 cents per share. Looking ahead, we are well positioned to capitalize on the positive momentum we experienced at the end of March and into April. Our healthy balance sheet and stringent cost controls provides us with the resources and the financial flexibility needed to continue investing in our business. Despite the lingering challenges associated with potential supply chain disruptions and escalating prices of raw materials and purchase component parts, we remain focused on the aspects of the business within our control so that we can continue to meet customer demand and generate shareholder value. In closing, Will and I would 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'd like to ask a question, simply press the star key followed by the digit 1 on your telephone keypad. Also, if you're using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Once again, star 1 at this time. We'll pause for a moment. And again, that is star one to ask a question or make a comment. It appears there are no further questions at this time. I'll turn the call back over to management for any additional or closing comments.

Thank you again for joining us on the call today, and we look forward to speaking with you again on our second quarter results conference call. Thank you.

That does conclude today's conference. Thank you all for your participation. You may now disconnect.