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spk03: Good day, ladies and gentlemen, and welcome to the Miller Industries fourth quarter and full year 2021 results conference call. Please note this event is being recorded. And now at this time, I'd like to turn the call over to Mike Goudreau at FTI Consulting. Please go ahead, sir.
spk00: 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 2021 fourth quarter and full year results which were released after the close of the market yesterday. With us from the management team today are Bill Miller, Chairman of the Board, Will Miller, President and CEO, Jeff Badgley, President of International and Military, 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 session. 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. At this time, I'd like to turn the call over to Jeff. Please go ahead, Jeff.
spk04: Thank you, and good morning, everyone. Our fourth quarter results are reflective of the supply chain constraints, costing pressures, and labor shortages that continue to impact businesses across the globe. That said, we are pleased with the demand dynamics in our business as fourth quarter revenues increased year over year. Compared to the same period a year ago, our sales increased 13.1% to $201.7 million. Gross profit in the fourth quarter was $15.6 million, a decrease of roughly 35.7% compared to the prior year period. While gross margin in the fourth quarter dropped approximately 590 basis points year over year, driven by supply chain pressures, part shortages and effects of inflation on the cost of purchased materials and component parts. We have enacted a series of price increases to our customers to cover the increased costs. However, as we have mentioned previously, it takes time to realize the benefits from these price increases due to the increased backlog levels. As I alluded to earlier, we continue to see extremely high levels of demand in our domestic business and have been experiencing strong backlog growth. While we are encouraged by our year-over-year revenue growth, we have been unable to capture the new demand as a result of supply chain constraints and material shortages. We will continue to pursue all means available to us to actively mitigate these macro and economic disruptions as we move forward into 2022. We had another strong quarter in our international business driven by recovery in our European markets where we saw further increased demand and backlogged growth. While we are not at a stage where shipping and production has returned to pre-pandemic levels, the growth of our international segment in spite of these challenges makes us confident in its ability to create value in a more normalized environment. However, the current conflict between Russia and Ukraine presents additional concerns. Now I'll turn the call over to Debbie, who will review the fourth quarter financial results, and then Will is going to conclude with some remarks on our market environment. Debbie?
spk01: Thanks, Jeff. Good morning, everyone. Net sales for the fourth quarter 2021 were $201.7 million versus $178.3 million for the fourth quarter of 2020, a 13.1% year-over-year increase driven largely by strong market demand for our products and our elevated backlog levels. Cost of operations increased 20.8% to $186.1 million for the fourth quarter 2021, compared to $154.1 million for the fourth quarter 2020. The increase in our cost of operations are due to higher prices for our components, part scarcity resulting from supply chain challenges, and the unfavorable margin mix of our product sales. Cost of operations as a percentage of net sales increased approximately 590 basis points from the prior year period to 92.3%. Gross profit Gross profit was $15.6 million or 7.7% of net sales for the fourth quarter 2021 compared to $24.3 million or 13.6% of net sales for the fourth quarter 2020. A decline in gross profit was driven by the inflationary and supply chain challenges referenced earlier. SG&A expenses were $11.2 million for the fourth quarter 2021 compared to $9.4 million for the fourth quarter 2020. due to greater investments in human capital to support the company's growth and other inflationary pressures from the current economic climate. As a percentage of sales, SG&A increased approximately 20 basis points to 5.5% from 5.3% in the prior year period. Interest expense net for the fourth quarter 2021 was $454,000, up from $197,000 for the fourth quarter 2020. primarily due to decreases in our interest income on distributor receivables financing and increases in distributor floor plan financing costs. Other income and expense for the fourth quarter 2021 was a loss of $64,000 compared to a gain of $275,000 for the fourth quarter 2020. The increase was largely attributable to currency exchange rate fluctuations. Net income for the fourth quarter 2021 was $2.7 million or 24 cents per share compared to net income of $12 million or $1.05 per share in the fourth quarter of 2020. Now let me move to discussion of our financial results for the full year of 2021. Net sales for the full year of 2021 were $717.5 million compared to $651.3 million in the prior year period. an increase of 10.2%. Gross profit for the full year 2021 was $69.9 million or 9.7% of sales compared to $78.4 million or 12% of sales for the full year of 2020. Net income for the full year of 2021 was $16.3 million or $1.42 per share, a decrease of roughly 45.5% compared to net income for the full year of 2020 of $29.8 million or $2.62 per share. Turning to the balance sheet, cash and cash equivalents as of December 31st, 2021 was $54.3 million compared to $50.4 million as of September 30th, 2021 and $57.5 million as of December 31st, 2020. Accounts receivable as of December 31st, 2021 totaled $154 million compared to $131.3 million as of September 30th, 2021 and $141.6 million as of December 31st, 2020. Inventories were $114.9 million as of December 31st, 2021 compared to $108.8 million as of September 30th, 2021. and $83.9 million as of December 31st, 2020. Accounts payable as of December 31st, 2021 was $119 million compared to $87.8 million as of September 30th, 2021 and $85.5 million as of December 31st, 2020. Despite the challenges Jeff mentioned, we continued to exercise financial discipline. When more normal market conditions return, we believe that we had set up the business for success, given our inventory buildup for available parts and financial flexibility that comes with our strong balance sheet. Lastly, the company also announced its board of directors approved our quarterly cash dividends of 18 cents per share, payable March 28, 2022, to shareholders of record at the close of business on March 21, 2022. marking the 45th consecutive quarter that the company has paid the dividend. Now, I'd like to turn the call to Will for some closing remarks.
spk02: Thank you, Debbie. As we have said, we are extremely encouraged by the favorable demand dynamics in our markets, despite supply chain challenges and inflationary pressures that have significantly hampered our bottom line growth. We remain confident in the company's future prospects. Above all else, we remain committed to our best in class customer service, preserving our culture of operational excellence in the face of these challenges. Though we remain unsure of when the macroeconomic environment will return to normal, we continue to maintain a strong financial position that will allow us to quickly capitalize on improving market conditions and potential new growth areas that can generate stakeholder value in the quarters and years ahead. In closing, Jeff and I would like to thank our employees, customers, suppliers, and shareholders for their ongoing support of Miller Industries, especially during these challenging times. Thank you again for joining us this morning. Operator, please open the line for questions.
spk03: Thank you. If you'd like to ask a question, please signal by pressing star 1 on your telephone keypad. If you're using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, press star 1 to ask a question. And we'll pause for just a moment to allow everyone an opportunity to signal. And once again, it's star one if you'd like to ask a question. And it appears there are no questions at this time. I'd like to turn the call back to the management team for any additional or closing remarks.
spk02: I'd like to thank you all again for joining us on the call today. And we look forward to speaking with you on the first quarter 2022 conference call. Thank you.
spk03: And this does conclude today's conference call. We'd like to thank you again for your participation. You may now disconnect.
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