Matt Steinberg Jeffrey I. Badgley - Vice Chairman and Chief Executive Officer J. Vincent Mish - Chief Financial Officer, Principal Accounting Officer, Executive Vice President, Treasurer and President of Financial Services Group William G. Miller - Founder and Chairman

Richard G. D'Auteuil - Columbia Funds Series Trust I- Columbia Small Cap Core Fund Walter S. Lang - Avondale Partners, LLC Matt Sherwood

Hello. This is the Chorus Call operator. Welcome to the Miller Industries First Quarter 2013 Results Conference Call. [Operator Instructions] Please also note today's event is being recorded. At this time I would like to turn the conference call over to Mr. Matt Steinberg. Mr. Steinberg, you may begin.

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 2013 first quarter results, which were released after the close of the market yesterday. With us from management today are Bill Miller, Chairman of the Board; Jeff Badgley, CEO; Vince Mish, CFO; Frank Madonia, General Counsel; Debbie Whitmire , 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 that 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 would 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. Jeffrey I. Badgley: Thank you, and good morning. We achieved respectable sales and profitability levels against a challenging economic environment that continued to affect our customer base. Yesterday, we reported 2013 first quarter sales of $85 million compared to sales of $95 million in the prior-year period but up sequentially from $82.4 million reported in the 2012 fourth quarter. The decrease in year-over-year sales was primarily a result of changes in domestic product mix from year-to-year and softer demand in Europe, which continued to be plagued by economic uncertainties, decreased consumer confidence and limited credit availability. Also contributing to the decrease were parts and services for a government-related order, which did not repeat in the 2013 first quarter. We are encouraged that despite the overall uncertainty in the global economy, we have experienced sustained moderate demand improvement from our domestic commercial customers. We have recently increased our domestic production levels to meet this increased demand. We remain focused on cost control efforts and improved operational efficiencies. This focus helps us remain flexible and able to quickly adapt to a changing environment. It will also sustain our strong financial position and allow us to return value to our shareholders through our quarterly dividend, which was increased by 7.7% to $0.14 a share last quarter. Now I'll turn the call over to Vince, who will review the quarter's financial results. After that, I'll be back with some final comments, and then we'll go to Q&A. Vince? J. Vincent Mish: Thanks, Jeff, and good morning, everyone. As Jeff mentioned, net sales for the first quarter of 2013 were $85 million versus $95 million in the 2012 first quarter. Sales were down approximately 10.5% year-over-year, reflecting weaker demand conditions in Europe, changes in domestic product mix and parts and services sales for a government order in 2012 that did not repeat in the 2013 quarter, as Jeff described. Cost of operations decreased by 9.2% to $76.3 million in the 2013 first quarter compared to $84.1 million last year, primarily driven by the lower sales volumes. Gross profit was $8.6 million, or 10.2% of net sales, in the first quarter of 2013 compared to $10.9 million, or 11.5% of net sales, in the first quarter of 2012. The decrease in gross margin resulted from the lower sales volumes and domestic product mix shifts. SG&A expense decreased 4.3% to $6.7 million compared to $7.0 million in the first quarter of 2012. As a percentage of sales, SG&A increased to 7.9% from 7.4% over the prior-year period due to the fixed nature of certain expenses. Other income related to foreign currency transactions was a net gain of $23,000 in the first quarter 2013 compared to a net loss of $336,000 in the first quarter of 2012. Interest expense in the 2013 first quarter was $67,000 compared to $217,000 in the first quarter of 2012. Net income in the first quarter of 2013 included a net loss attributable to noncontrolling interest of $121,000 related to the startup of Delavan Automotive LLC. Excluding that loss, net income attributable to Miller Industries in the 2013 first quarter was $1.3 million, or $0.12 per diluted share, compared to $2 million, or $0.18 per diluted share, in the 2012 first quarter. Turning now to our balance sheet. Cash and cash equivalents as of March 31, 2013, were $47.4 million compared to $48.6 million as of December 31, 2012, and $37.6 million at March 31, 2012. Accounts receivable at March 31, 2013, totaled $64.1 million compared to $59.1 million at December 31, 2012, and $74.3 million at March 31, 2012. Inventories were $50 million at March 31, 2013, compared to $45 million at December 31, 2012, and $52.4 million at March 31, 2012. Accounts payable at March 31, 2013, were $39.7 million, compared to $30.7 million at December 31, 2012, and $46.1 million at March 31, 2012. We continued to operate with no borrowings under our $25 million unsecured revolving credit facility. Now I'll turn the call back to Jeff for further remarks. Jeffrey I. Badgley: Thanks, Vince. The 2013 first quarter results reflected the continued challenging economic conditions and sluggish consumer demand that have persisted for some time. However, our innovative product line will continue to be a trademark of the company and help us maintain our position as the industry leader. In attending the Florida Tow Show last month, we're pleased with the interest shown for our products despite the uncertain market conditions. To mitigate rising raw material cost, we announced a price increase during the first quarter. We expect to begin seeing the effects of this flowing through our backlog late in the second quarter. Looking ahead, we believe that through our operational and strategic initiatives, we have laid the foundation for future success as economic conditions improve around the world and demand levels increase. Our operational flexibility, combined with our cost control focus and outstanding customer service, gives us the tools to navigate the current challenging economic environment. We are encouraged by a recent demand improvement, both domestically and in Europe, early in 2013. As always, we will be closely monitoring the demand trends in the coming months and taking action as necessary to ensure our production levels are balanced with demand. We continue to view Europe as a strong, long-term growth opportunity despite the current challenges facing the region. We continue to make progress, expanding our distribution channels across new markets and reaching new customers for our products. By laying this groundwork, we will be well-positioned to take advantage of the eventual recovery in this region. Besides Europe, we remain committed to expanding the distribution of our products around the world and remain optimistic we will see the benefits of our efforts in an expanding global economy. I'm pleased to report that after months of successful testing, deliveries on our order with a prime contractor to provide towing and recovery equipment to the French military are on schedule to commence in the second quarter of 2013 and will continue through the end of 2014. As always, we will remain aggressive in bidding for government military tenders and building our relationships with prime contractors who are bidding the tenders, both domestically and abroad. Turning to our operational outlook. We continue to be financially flexible and agile despite the uncertain global marketplace. With a focus on cost management to drive operational efficiency, we remain confident in our ability to maximize our margin and profitability even under challenging circumstances. In addition to all our long-term and operational initiatives, we remain committed to the interest of our shareholders. Our solid balance sheet and strong free cash flows, combined with our recently increased quarterly dividend, ensures we are generating maximum shareholder value. In closing, I would like to thank our employees, our shareholders, suppliers and our customers for their ongoing support of Miller Industries. With that, we're ready to take your questions. Thank you.

[Operator Instructions] Our first question comes from Rich D'Auteuil from Columbia Management. Richard G. D'Auteuil - Columbia Funds Series Trust I- Columbia Small Cap Core Fund: Can you speak to the market share trends that you've seen over the last year or 2 with your product? Jeffrey I. Badgley: Well, Rick, I think we've talked several times in the past that there's really nothing out in the market that tracks those trends. So my comments are going to be comments that come from the gut rather than empirical research. My feeling, domestically, we have continued to increase market share. We've seen some weakness from our main competitor domestically. That can be tracked back a couple of years when 3 of their top -- I think it was 3 of their top 7 or 8 distributors, 3 of the top 7 or 8 distributors migrated to our product lines away from theirs. Internationally, we continue to grow. And although I cannot track market share specifically in any region, I do see our company continuing to attract new distribution, which says to me that the brand continues to have importance in other markets rather than just the domestic market. Richard G. D'Auteuil - Columbia Funds Series Trust I- Columbia Small Cap Core Fund: Okay. And with the -- how about quantifying the French military opportunity? I know it's over several quarters, but... Jeffrey I. Badgley: I think we've mentioned that on several other conference calls. The original tender called for 150 units with 3 tranches of 50. The PO was released for the first 50 and has not been released for the remaining 100. Although we have not been told that we will not get the balance of the order, I think that's totally dependent on the economic conditions in France. Richard G. D'Auteuil - Columbia Funds Series Trust I- Columbia Small Cap Core Fund: But the first 50 is a 7-quarter kind of delivery or... Jeffrey I. Badgley: Yes. Richard G. D'Auteuil - Columbia Funds Series Trust I- Columbia Small Cap Core Fund: Okay. And relative magnitude ASP on these, or any insights there? Jeffrey I. Badgley: You mean -- I'm sorry, I missed the question. Richard G. D'Auteuil - Columbia Funds Series Trust I- Columbia Small Cap Core Fund: Dollars, revenue dollar contribution as opposed to just units? J. Vincent Mish: I don't -- this is Vince. I'm not sure we can disclose that just based on the terms of the contract. I mean, this -- their price is -- they're large wreckers. It's a nice order. Richard G. D'Auteuil - Columbia Funds Series Trust I- Columbia Small Cap Core Fund: Okay. And when did -- like the U.S. business where the -- with respect to the chassis? Jeffrey I. Badgley: Yes. From back-end only. Richard G. D'Auteuil - Columbia Funds Series Trust I- Columbia Small Cap Core Fund: Repeat that again? J. Vincent Mish: It's back -- Bill said it was back-ends only. It's no chassis. Jeffrey I. Badgley: I don't think -- I don't have any problems telling you, Rick, that it's about $3.5 million a quarter.

And our next question comes from Walter Lang from Avondale Partners. Walter S. Lang - Avondale Partners, LLC: A few questions. Are you willing to quantify the year-over-year differential in revenues attributable to Europe? So the $95 million this year (sic) [last year] versus $85 million this year, how much of the $10 million differential was to attribute to Europe? Jeffrey I. Badgley: Actually, I can do that, Walter. It's about -- I believe it was about $3 million to $3.5 million of the $10 million. Walter S. Lang - Avondale Partners, LLC: Okay. All right. And then secondarily, on your press release you said that current domestic commercial backlog has reached levels not sustained in the past 3 years. Jeffrey I. Badgley: Yes. Walter S. Lang - Avondale Partners, LLC: So the domestic trends, and they continue to be -- it seems like encouraging moving into the second quarter here. Jeffrey I. Badgley: Yes. I would -- I was -- the domestic trends remain very good. And just to make a comment, we started to see the increase in the demand trends early in the first quarter. We made a decision to raise production levels. So, obviously, that requires getting raw material in to increase production levels at our domestic facilities, which normally takes, depending on the type of component, anywhere between 4 to 8 weeks. So I think it's fair to say that myself and the rest of the management team at Miller Industries feels the first quarter, in terms of revenue, would be the lowest quarter you'll see throughout the year, if that's the question, Walter. William G. Miller: And, Jeff, you might comment a little bit about your Florida show and what kind of feel you got out of that and anything else you'd like to say about that, because that's the most recent and the biggest show. Jeffrey I. Badgley: Well, the Florida show, actually, the attendance at the Florida show, we believe, was down just a hair. But the -- that was easily explained by the fact that there was a very late, late winter in 2 parts of the U.S., the Midwest and the Northeast, so we missed those customers, not all of them, but those that we normally see just because they were home hopefully making money. But in terms of those customers that were there, they felt a little more positive about the demand trends on the service side of the industry. Walter S. Lang - Avondale Partners, LLC: And then both you, Jeff, and Vince in your prepared remarks referred to the changes in domestic product mix year-over-year. Can you amplify on that? Jeffrey I. Badgley: Yes. There was a change both in product type and a change in the relativity between chassis and units from first quarter of last year to first quarter of this year. Walter S. Lang - Avondale Partners, LLC: And the product types being, can you talk about that? That change? Jeffrey I. Badgley: We saw, well, actually we saw a little bit more heavy-duty, so -- but not a great deal in delivery, and we saw a lot more carriers. William G. Miller: And Jeff, weren't parts down quarter versus... Jeffrey I. Badgley: Yes. We mentioned in the call that we've got a huge parts order in the first quarter from international for the past contracts that didn't repeat in the first quarter of 2013. Walter S. Lang - Avondale Partners, LLC: The military order, right? Jeffrey I. Badgley: Yes, you're right. Walter S. Lang - Avondale Partners, LLC: And to Rick's question, if that military order did not -- that was back end only as well, correct? Jeffrey I. Badgley: That is correct. Walter S. Lang - Avondale Partners, LLC: And the change in product mix, is that by design, say, on the carrier side? Jeffrey I. Badgley: No, no. I think it's -- I mean, we change. As I've said, we're -- we've become a very flexible manufacturer and we are able to move where demand takes us.

[Operator Instructions] Our next question comes from Matt Sherwood from Cooper Creek Partners.

I just had a quick question on the gross profit margin. I guess last year, the sort of commentary was that there were a lot of chassis in the mix so the gross profit margin was depressed, but then I guess I'm looking at this year's gross profit margin and it's down 130 basis points versus that gross profit margin. Just curious what's going on. J. Vincent Mish: Well, we still had chassis in the mix this year, which has an impact. Beyond that, just on the overall lower margins, including coming out of Europe, that was a -- that's a big piece of that, with that being off.

And then I guess just looking back historically, I guess my original impression was that the government business had -- order had completed in Q4 of '11. But it sounds like it sort of had run into '12. Was there any other benefit to any of the other quarters in '12 from the government order other than Q1? Jeffrey I. Badgley: No, but I'd like to go back to your question, Matt, about first quarter. I think you ought to keep in mind that, A, we started up the French military. Obviously, that has an effect when you're starting up a project and gross margins you're not quite as efficient. You're going from a mockup design and a prototype into normal production runs. B, we had the Florida show units that were built in the first quarter but not sold until the second quarter, which was a little different this year over last year, where a majority of those units, the cost involved in building them, absorbed in the first quarter because they got sold in the quarter they were built. And lastly, we are in the midst, in one of our facilities, of integrating a brand-new product line, and that product line is Delavan. So that had an impact on margin also. I hope that answers your question.

Great. That's helpful. So how much did the French military and Delavan contribute to the top line in this quarter, give or take? Jeffrey I. Badgley: The French military had no top line.

Just cost? Jeffrey I. Badgley: No significant top line, just cost. And Delavan have some minor part sales but no trailer deliveries. They won't start until the second quarter.

And we do have a follow-up question from Rich D'Auteuil from Columbia Management. Richard G. D'Auteuil - Columbia Funds Series Trust I- Columbia Small Cap Core Fund: Just actually digging in a little bit on this margin. So you just said that the domestic -- I'm sorry, that the Q1 will be your lowest revenue quarter. It seems to me, with the mix of French military that's back end only, that's traditionally been higher margin, right, that -- you don't include those sort of the pass through on the chassis. And then the lesser impact from the startup costs for that, the Delavan business improving, price increases put in, in the quarter, my guess is you're going to have a materially better margins for the rest of the year, is that -- am I on target with the trends? Jeffrey I. Badgley: I don't know how you define materials materially, that's always questionable. But that would be the plan. That would be our plan, yes. But keep in mind that the price increase in total, and I should have mentioned the fact that first quarter was probably hit a little bit by rising costs that we didn't recover in a price increase, but that total price increase will not drop. We'll have improved margin from this point on, but it is to cover both costs that we haven't seen and cost increases that we know are coming. Right?

And, ladies and gentlemen, at this time, I'm showing no additional questions and would like to turn the conference back over for any closing remarks. Jeffrey I. Badgley: We'd like to thank you as a company for supporting Miller Industries, and we look forward to talking to you again at the end of next quarter. Thank you very much.

And, everyone, that concludes today's conference call. We do thank you for attending. You may now disconnect your telephone lines.