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spk02: Good day, ladies and gentlemen, and welcome to the Miller Industries first quarter 2022 results conference call. Please note, this event is being recorded. And now, at this time, I would like to turn the call over to Mike Goudreau at FTI Consulting. Please go ahead, sir.
spk00: Thank you, and good afternoon, everyone. I would like to welcome you to the Miller Industries conference call. We are here to discuss the company's 2022 first quarter 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, Frank Madonia, Executive Vice President, Secretary and General Counsel, Vince Tiano, Chief Revenue Officer, and Jameson Linden, Chief Manufacturing Officer. Today's call will begin with formal remarks from management, followed by a question and answer session. Please note, in this afternoon'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 Will. Please go ahead, Will.
spk01: Thank you, and good afternoon, everyone. Our first quarter results are reflective of the continued effects of the global supply chain crisis and related inflationary pressures on both raw materials and labor that we and other businesses have been experiencing over the past several quarters. Despite this, we were pleased to be able to deliver both sequential and year-over-year revenue growth due to the strong demand we continue to see for our products. Our sales increased 26.9% to $215.5 million compared to the first quarter last year and 6.9% compared to the fourth quarter of 2021. Gross profit for the first quarter was $15.3 million, a decrease of roughly 1.7% compared to the prior quarter, while gross margin in the first quarter dropped approximately 220 basis points year over year, driven by continuation of inflationary pressures on labor and materials, part shortages, and global supply chain inefficiencies. As we mentioned, last quarter we have enacted a series of price increases and material surcharges to our customers to cover the increased costs. Some of the increases went into effect during the first quarter, with more to follow in the second quarter, and we should begin to yield results as we move through the remainder of the year. We continue to experience a strong backlog and are seeing continued elevated demand as evidenced by not only our year-over-year revenue growth, but also our sequential revenue growth from the end of last year. As material shortages ease and our price increases go into effect, We are continuously optimistic about future top-line growth, prospects, and fully capturing demand. As for our international business, there is a cloud of uncertainty due to military conflict between Russia and Ukraine. Although demand remains strong, we have not experienced any order cancellations to date. The situation in Ukraine could potentially impact our businesses, but it is difficult to predict how how the conflict will evolve, and if it will ultimately impact our businesses at all. Now, I'll turn the call over to Debbie, who will review the first quarter financial results, and then I'll give a market update and provide some closing remarks. Debbie?
spk04: Thanks, Will, and good afternoon, everyone. Net sales for the first quarter of 2022 were $215.5 million versus $169.9 million for the first quarter of 2021. a 26.9% year-over-year increase, driven largely by strong market demand for our products and our elevated backlogs, along with a favorable comparison to the prior year period as a result of our enterprise software upgrades committed in the first quarter of 2021. Cost of operations increased 29.9% to $200.2 million for the first quarter of 2022 and compared to $154.1 million for the first quarter of 2021. The increase in our cost of operations is due to higher prices for our components, part scarcity resulting from supply chain challenges, and wage inflation. Cost of operations as a percentage of net sales increased approximately 220 basis points from the prior year period to 92.9%. Gross profit was $15.3 million, or 7.1% of net sales for the first quarter 2022, compared to $15.8 million, or 9.3% of net sales for the first quarter 2021. The decline in gross margin was driven by the inflationary and supply chain challenges referenced earlier. SG&A expenses were $12.4 million for the first quarter of 2022 compared to $11.1 million for the first quarter of 2021 due to greater investments in human capital to support the company's growth and increases in employee benefit costs. As a percentage of sales, SG&A decreased approximately 80 basis points to 5.7% from 6.5% in the prior year period. Interest expense net for the first quarter of 2022 decreased was $418,000 up from $275,000 for the first quarter of 2021, primarily due to increases in distributor floor plan financing, which, as a reminder, flex up and down with revenue levels. Other income expense for the first quarter of 2022 was a loss of $52,000 compared to a loss of $276,000 for the first quarter of 2021. The decrease was largely attributable currency exchange rate fluctuations. Net income for the first quarter of 2022 was $2.1 million, or 18 cents per diluted share, compared to net income of $3.2 million, or 28 cents per diluted share, in the first quarter of 2021. Turning to the balance sheet, cash and cash equivalents as of March 31, 2022, was $29.3 million, compared to 54.3 $54.3 million as of December 31st, 2021, and $56.2 million as of March 31st, 2021. Accounts receivable as of March 31st, 2022 totaled $193.9 million compared to $154 million as of December 31st, 2021, and $167.7 million as of March 31st, 2021. Inventories were $124.3 million as of March 31, 2022, compared to $114.9 million as of December 31, 2021, and $84.9 million as of March 31, 2021. Accounts payable as of March 31, 2022, was $139.3 million, compared to $119 million as of December 31, 2021, and $113.4 million as of March 31, 2021. During the quarter, we drew $10 million against our revolving credit facility to assist with the temporary working capital needs and then drew another $10 million in April as we continue to build inventory, including chassis, in order to mitigate the risk of supply chain delays. Challenges remain in the business, so we continue to exercise an abundance of caution and financial discipline should any foreseen circumstances arise. We are focused on maintaining a strong financial position that will provide us a solid platform for growth when more normalized market conditions return. Lastly, the Board of Directors approved our quarterly cash dividend of 18 cents per share, payable June 13, 2022, to shareholders of record at the close of business on June 6, 2022. marking the 46th consecutive quarter that the company has paid a dividend. I'd like to turn the call back to Will now for some closing remarks.
spk01: Thank you, Debbie. We are very encouraged by our revenue growth and strong demand for our products, as evidenced by our growing backlog levels. Inflationary pressures and supply chain challenges have persisted longer than any of us had anticipated. but we are hopeful that our pricing initiatives will mitigate at least some of these impacts. As always, we are committed to working in tandem with our customers and suppliers to deliver best-in-class products that we are known for. While the military conflict in Ukraine has only exacerbated the uncertainty, especially in our international business, we have yet to see any order cancellations or a reduction in the pace of new orders in our domestic or international markets. By focusing on the things within our control, we have maintained our strong financial position, improved our operational discipline, and grown our sales both year over year and sequentially. We are more confident than ever in the infrastructure we have in place to deliver improved performance when market conditions normalize. To close, the entire management team at Miller Industries would like to thank our employees, customers, suppliers, and shareholders for their ongoing support. Thank you again for joining us this afternoon, and at this time, we'd like to take any questions.
spk02: We will now begin the question and answer session. To ask a question, you may press star, then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star, then 2. At this time, we will pause momentarily to assemble our roster. Our first question is from Arnie Ursainer with the Ursainer Family Office.
spk03: Please go ahead. Hi, good afternoon, and thank you for taking my question. My first question is, in your former press release, you indicated you'll pull all necessary levers to achieve these goals. Could you perhaps expand on that sentence a little bit and give us a feel for the types of actions you're contemplating? Thanks.
spk01: Well, I think, you know, first and foremost, obviously dealing with the costing pressures that we've seen over the last 12 months was to put out a total of three price increases and then increasing our surcharges noted from 3% to 11% to cover those costs. From an operational standpoint, we are working diligently to expand our supply chain and and find alternatives where our current suppliers are not meeting demand for our operations.
spk03: Okay. And you've highlighted several times two specific areas of challenge, chassis and labor. Could you update us on your thinking on both of those items, please?
spk01: From the chassis perspective, We were definitely seeing significant reduction in chassis availability at the end of 2021. In 2022, chassis availability with our forecast and orders that we put out early last year in anticipation have come through. And at the moment, we are seeing a decent amount of chassis flow for all of our product lines. From a labor perspective, It's definitely a challenge. We are basically fully staffed at all of our facilities from an hourly labor standpoint. However, new employees are taking a little bit more time to train. They don't have necessarily the skill sets and level of skill sets that we've seen in the past with incoming employees. So it's taking a little bit longer time periods to get them up to speed. And we're still continuing to see a significant turnover rate with new hires. But we are doing a good job at maintaining a full staff. Okay.
spk03: On prior calls, you've indicated literally a handful of components in the $100 or $200 range were causing you to be unable to complete your work. Have you made progress on those limited number of components that were really impacting your business?
spk01: I think today in the heavy equipment manufacturing segment, hydraulic components and electrical components still seem to be our biggest stumbling blocks. Those are areas where we've gone out and in certain cases we've already found additional suppliers for PTOs, pumps, cylinders, and currently working on an additional supply chain for valve bodies and electrical components. So I can't say that we've solved all of the major stumbling blocks, but our team is working diligently to find as many problems additional suppliers as possible at this time.
spk03: My final question, which you certainly can choose to answer under Reg FD, but I'll leave it to you, is what actions do you believe are needed to return to pre-pandemic margins, and what do you believe is a likely timetable to achieve that goal? Thank you very much.
spk04: Well, obviously, as Will said, we're doing all that we can to mitigate the cost increases that we've seen over the last two years. Demand is certainly strong today. So I believe with the price increases that we have put in place, the supply chain issue and rising cost from the impact of the conflict, will be a driving factor, but I think we have everything in place today with all the visibility that we have to return to those levels once the supply chain is back to a normalized state.
spk03: Maybe one more quick one, if I could. Just in terms of the backlog you now have and the price increases and surcharges, By the middle to latter part of this year, on a product basis, will you be returning to more normalized margins?
spk01: Thank you. Assuming that our current pricing level and assuming that we don't see continued increases throughout the year in surcharges and rising material costs, I believe that we have implemented enough price increases at this time to get back to normalized margins.
spk03: Excellent. Thank you very much.
spk02: This concludes our question and answer session. I would like to turn the conference back over to Will Miller for any closing remarks.
spk01: I'd like to thank you all again for joining us on the call today, and we look forward to speaking with you on our second quarter conference call. Thank you.
spk02: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.
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