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

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

Hello. This is the Chorus Call operator. Welcome to the Miller Industries Fourth Quarter and Full Year 2013 Results Conference Call. [Operator Instructions] Please note, this event is being recorded. At this time, I would like to turn the conference over to Mr. Matt Steinberg. Mr. Steinberg, 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 2013 fourth quarter and full year results that's released after the close of the market yesterday. With us from management today are Bill Miller, Chairman of the Board; Jeff Badgley, Co-CEO; Vince Mish, CFO; Frank Madonia, Executive Vice President, Secretary and General Counsel; Debbie Whitmire, Vice President and 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. I am pleased with our performance for the quarter, which reflected solid year-over-year revenue growth, driven by improving order trends and more positive sentiment from our customers, particularly in the commercial markets, both domestically and internationally. We took advantage of this improving economic landscape by increasing our production earlier in the year, thereby delivering on orders we would not have otherwise. As a result, we reported 2013 fourth quarter sales of $108.3 million compared to sales of $82.4 million in the prior year period, an increase of more than 31% and a Q4 net income of $2.4 million or $0.21 per share, a 41.9% increase compared to the $1.7 million net income in the 2012 fourth quarter. Our gross margin percentages were slightly lower from the year-ago period due to product mix, higher production cost and issues related to Delavan joint venture. Despite these items, our efforts to enhance our operational efficiencies and control our SG&A cost helped us achieve the results for the quarter. I believe our core business is operating in a position of strength and executing at a high level. Throughout the year, we have demonstrated our ability to anticipate shifts in the market and capitalize on opportunities as they emerge. This is particularly evident in our fourth quarter results, which reflected strong revenue and profitability levels. The quarter also saw us continue to return value to our shareholders through our quarterly dividend, which has been increased by our board to $0.15, beginning this month. Now I'll turn the call over to Vince, who'll review the quarters and the annual financial results. After that, I'll be back with comments on the market environment, an update at Delavan and some closing remarks, then we'll go to Q&A. Mr. Mish? J. Vincent Mish: Thanks, Jeff, and good morning, everyone. As Jeff mentioned, net sales for the fourth quarter of 2013 were $108.3 million versus $82.4 million for the 2012 fourth quarter. Sales were up 31.4% year-over-year, reflecting growth -- growing order trends from the improving domestic and international commercial market. Our efforts to ramp up production levels earlier in the year helped us achieve this revenue growth. Cost of operations increased 32.9% to $97.0 million in the 2013 fourth quarter compared to $73 million last year, driven primarily by the higher sales volumes, the sales mix and costs related to Delavan. Gross profit was $11.2 million or 10.4% of net sales in the fourth quarter of 2013 compared to $9.4 million or 11.4% of net sales in the fourth quarter of 2012. The decrease in gross margin percentage resulted from domestic product mix shifts in the quarter. SG&A expenses were $7.7 million in the fourth quarter of 2013 compared to $6.6 million in the fourth quarter of 2012. As a percentage of sales, SG&A decreased to 7.1% from 8.0% over the prior year period, which primarily reflected our cost-containment efforts, but did include some costs related to Delavan. Other income related to foreign currency transactions was a net gain of $103,000 in the fourth quarter of 2013 compared to a net gain of $15,000 in the fourth quarter of 2012. Interest expense in the 2013 fourth quarter was $116,000 compared to $89,000 in the fourth quarter of 2012. Income in the fourth quarter of 2013 included a net loss attributable to noncontrolling interest of $211,000 related to the Delavan joint venture. Excluding net loss, net income attributable to Miller Industries in the 2013 fourth quarter was $2.4 million or $0.21 per diluted share, which is a 41.9% increase compared to net income of $1.7 million or $0.15 per diluted share in the 2012 fourth quarter. Now let me briefly review our results for the full year period ended December 31, 2013. Net sales in 2013 were $404.2 million compared to $342.7 million in the prior year period, an increase of 17.9%. Gross profit in 2013 was $42.4 million, 10.5% of sales compared to $40.1 million or 11.7% of sales in 2012. The financial results for 2013 include losses before income taxes that are directly attributable to the Delavan joint venture of approximately $1.3 million. The company also generated additional indirect losses associated with the Greeneville, Tennessee facility, in connection with its manufacturing and supply agreement for the joint venture. Following a review and evaluation of operations related to the Delavan joint venture, the company made the decision to consider strategic alternatives with regard to the venture. On February 28, 2014, the company entered into an agreement to sell its interest in the Delavan joint venture to its joint venture partner, which is expected to close on March 31, 2014. Our Greeneville facility will cease the manufacturing of Delavan products by the end of the first quarter of 2014 as it winds down Delavan production. The company expects additional losses of approximately $0.5 million related to the Delavan joint venture in the first quarter of 2014. Excluding losses of noncontrolling interest, net income attributable to Miller Industries for the full year of 2013 was $9.2 million or $0.82 per diluted share compared to net income for the full year 2012 of $9.1 million or $0.82 per diluted share, keeping in mind that the 2012 numbers include $1.4 million or $0.12 per diluted share of income tax benefits from production activity deductions and research and development and other tax credits. Turning now to our balance sheet. Cash and cash equivalents as of December 31, 2013, were $42.9 million compared to $41.2 million as of September 30, 2013, and $48.6 million as of December 31, 2012. Accounts receivable at December 31, 2013, totaled $80.8 million compared to $83.0 million at September 30, 2013, and $59.1 million at December 31, 2012. The increase in sales volume drove accounts receivable higher from year-ago levels. Inventories were $54.2 million as of December 31, 2013, compared to $53.7 million at September 30, 2013, and $45 million at December 31, 2012. Accounts payable at December 31, 2013, were $47.4 million compared to $51.3 million at September 30, 2013, and $30.7 million at December 31, 2012. The increase in payables over year-ago amounts reflects our higher production levels. We continue to operate with no borrowing under our $25 million unsecured revolving credit facility. Now I will turn the call back to Jeff for further remarks. Jeffrey I. Badgley: Thank you, Vince. Before I get into more detail regarding our operations and outlook, I would first like to address our Delavan joint venture. As Vince mentioned, the financial results for 2013 include losses before income taxes that are directly attributable to Delavan joint venture of approximately $1.3 million. The company also generated additional indirect losses associated with the Greeneville, Tennessee facility in connection with its manufacturing and supply agreement for the joint venture. Following a review and evaluation of operations related to the Delavan joint venture, the company made a decision to consider strategic alternatives with regard to the venture. On February 28, 2014, the company entered into an agreement to sell its interest in the Delavan joint venture to its joint venture partner, which is expected to close on March 31, 2014. Our Greeneville facility will cease manufacturing of Delavan products by the end of the first quarter of 2014 as it winds down Delavan production. The company expects additional losses of approximately $500,000 related to the Delavan joint venture in the first quarter of 2014. With regards to the Delavan joint venture, we decided to sell our interest to our joint venture partner in an effort to minimize future losses. Although we incurred losses in 2013 from the joint venture that will extend into the first quarter of 2014, it did not and will not have a material impact on the core business of our company. Turning back to our performance. We are pleased with the revenue growth we achieved throughout 2013, which reflected several factors. Order trends improved and were driven by more positive economic data and consumer sentiment as macro conditions trended towards a more normalized environment. In addition, we were able to take advantage of this improving economic landscape by ramping up our operations in the first half of the year to deliver these orders as the year progressed. Finally, we continue to execute on our geographic expansion initiatives. Our order to a prime contractor to provide towing and recovery equipment to the French military has progressed. We also continue to make inroads across a variety of other regions in Europe, as well as the Asia-Pacific, Middle East and Latin America regions. We are starting to see more international orders flowing through our pipeline. During the fourth quarter, the combination of product mix and increased costs associated with the Delavan joint venture had a negative impact on our margins. We continue to remain active on controlling costs, and our actions were reflected on lower SG&A percentages from the year-ago period. Looking ahead to 2014, we are well positioned to continue our momentum, exiting 2013. The pipeline for our work is very good. The numerous long-term opportunities for our business is excellent. We are seeing more and more positive economic data, and our discussions with our customers further support that trend. While we were disappointed with the results of Delavan, we will emerge a stronger, more profitable company with a continued focus on our core competencies once the transaction is complete. We remain committed to building value for our shareholders through our strong cash flow, solid balance sheet and quarterly dividend, which the Board of Directors has increased to $0.15 per share beginning this month. Given the recent performance of our core business and dedicated team at Miller Industries, I am confident in the company's future prospects and look forward to achieving continued growth and delivering on our strategic objectives in 2014. In closing, I would like to thank our employees, our shareholders, our suppliers and our customers for their ongoing support of Miller Industries. With that, we're ready to take your questions, and thank you very much.

[Operator Instructions] Our first question is from Rich D'Auteuil with Columbia Management. Richard G. D'Auteuil - Columbia Funds Series Trust I - Columbia Small Cap Core Fund: You didn't disclose the terms of the JV sale. Was there any consideration paid for your interest? Jeffrey I. Badgley: Rick, I would say that I have to point you back to the press release. We've entered into an agreement to sell our interest in the Delavan JV to our partner, but the agreement has an obligation of confidentiality. So I must refer you to the statements we made in our press release. Richard G. D'Auteuil - Columbia Funds Series Trust I - Columbia Small Cap Core Fund: Okay. What happened to the Greeneville facility after Q1? Are there utilization issues there? Or -- I'm just curious whether there is an indirect overhang post March 31. Jeffrey I. Badgley: No, there is no indirect overhang. We are blessed with the fact that market demand revolves always to carriers. We have a good demand for that carrier production, and we'll slide carriers in there, along with some components of large record. So it's moving forward. Richard G. D'Auteuil - Columbia Funds Series Trust I - Columbia Small Cap Core Fund: Okay. And any -- was the ramp in the French military order this quarter or is it steady? Jeffrey I. Badgley: It's steady. Richard G. D'Auteuil - Columbia Funds Series Trust I - Columbia Small Cap Core Fund: Remind me of the duration of that again. Jeffrey I. Badgley: Will last through the end of this current year. Richard G. D'Auteuil - Columbia Funds Series Trust I - Columbia Small Cap Core Fund: Okay. Is there any discussion with any other militaries, including the U.S. at this point or... Jeffrey I. Badgley: They're in the press release. As I've alluded to in our comments on the call, we have lots of military opportunities throughout the world with more European based than U.S. based, but we -- yes, there are lots of opportunities being discussed but not closed. Richard G. D'Auteuil - Columbia Funds Series Trust I - Columbia Small Cap Core Fund: Great. Are they new? Would these represent new customers or you've done business with them in the past? Jeffrey I. Badgley: They would represent in variance of supply to the new countries. Some of them would have the prime contractor being the same prime contractor we have provided with -- have worked with in the past.

[Operator Instructions] And our next question is from Walter Lang with Avondale Partners. Walter S. Lang - Avondale Partners, LLC: Just a clarification on Delavan. If -- the loss incurred during 2013 is $1.3 million, is that correct? Associated with Delavan? J. Vincent Mish: Yes. I mean, it's $1.3 million -- but yes. Walter S. Lang - Avondale Partners, LLC: And is this correct, of which -- the $211,000, was that born in the fourth quarter? Is that -- am I hearing that correctly? J. Vincent Mish: The $211,000? That's the share of the joint venture partners during the fourth quarter. Walter S. Lang - Avondale Partners, LLC: Okay, okay, all right. So the $1.3 million is spread between Qs 3 and 4? J. Vincent Mish: No, it's for the year. Walter S. Lang - Avondale Partners, LLC: For the year, but we didn't -- I don't think primarily over third quarter and fourth quarter, correct? J. Vincent Mish: Yes. Walter S. Lang - Avondale Partners, LLC: And you're breaking out how much each quarter? J. Vincent Mish: You've got -- you got the numbers by quarter, substantials. Walter S. Lang - Avondale Partners, LLC: All right. And then beyond Q1, there will be no impact or be de minimis? Jeffrey I. Badgley: Yes, that's correct, Walter. Walter S. Lang - Avondale Partners, LLC: Okay. And then given your comments, Jeff, on domestic commercial business and the severity of the winter, do you plan on taking more equipment to Orlando this year than you had in past years -- in the recent past? Jeffrey I. Badgley: Well, I have to say I'm -- we're looking forward to Orlando this year. And I'd like to give you some flavor, but -- and we have to apologize, unfortunately, Will was going to be on the call, he is out on the road and his plane got delayed. So I'll attempt to explain where we're at in North America to the best of my ability. We won't be taking more trucks to the Florida sale because we put our schedules -- our scheduled amount to build for Florida in the schedule late in the third quarter. As the winter progressed, our booked orders increased and our production lead times have again extended out. So we are going to fulfill our sold orders prior to building trucks for sale at Florida, quite honestly. Walter S. Lang - Avondale Partners, LLC: So the weather clearly has been a benefit. Jeffrey I. Badgley: The weather has been a benefit. In fact, while there -- our domestic backlog is up 13% from third quarter to fourth quarter. And although I don't have exact percentages, I can tell you it's up again in the first quarter over the fourth quarter. And European backlog is up approximately the same amount. Walter S. Lang - Avondale Partners, LLC: Yes. I was going to ask, on an international basis, and you noted that in your comments, that that's improving as well. Is there anything -- is it just overall economic activity driving demand there or are there any other factors? Jeffrey I. Badgley: Yes, when you look at the -- especially Europe, it's just coming back to normalized levels. Obviously, our operations in the U.K. and France got somewhat hammered by the economic problems the last couple of years in terms of demand levels, and we're starting to see that come back to a normalized level. Walter S. Lang - Avondale Partners, LLC: Okay. And any new distribution agreements internationally in any countries? Jeffrey I. Badgley: We are expanding our distribution base, both in Europe and -- I'm a little worried about our new distributor in Russia. Walter S. Lang - Avondale Partners, LLC: In Russia, yes. Jeffrey I. Badgley: With his ability to buy our product. But we're also doing that in South America and Latin America.

This concludes our question-and-answer session. I would like to turn the conference back over to management for closing remarks. Jeffrey I. Badgley: I'd like to thank you all for joining our conference call. And we look forward to discussing our activities at the end of the first quarter. Have a great afternoon.

This concludes today's event. Thank you for attending today's presentation, and please disconnect your lines.