Max Dutcher - Investor Relations, FTI Consulting Jeffrey Badgley - Co CEO Bill Miller - President, Co CEO and Director Vincent Mish - CFO, EVP and Treasurer

James Lee - Procura Capital

Ladies and gentlemen. Please standby. We are about to begin. This is the ViaVid operator. Welcome to the Miller Industries' First Quarter 2016 Results Conference Call. As a reminder, all participants will be in a listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. At this time, I'd like to turn the conference over to Max Dutcher of FTI Consulting. Please go ahead, sir.

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 2016 first quarter results, which were released after close of market yesterday. With us from management today are Bill Miller, Chairman of the Board; Jeff Badgley, Co-CEO; Will Miller, President and Co-CEO; Vince Mish, Executive VP and CFO; Frank Madonia, Executive Vice President and Secretary and General Counsel; and Debbie Whitmire, Vice President and Corporate Controller. 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'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. With these formalities out of the way, I'd like to turn the call over to Jeff. Please go ahead, Jeff.

Thank you, and good morning. We are pleased to discuss our first quarter performance with you today. It was a strong quarter for Miller Industries in which we grew top line by over 17% and increased profitability all while expanding our capacity to meet demand and enhancing returns to our shareholders. The strong result continues to be driven by improving order trends, both domestically and internationally, and by successfully positioning ourselves to take advantage of increases in volume of activity. We remain committed to our efforts to grow our business and increase our capacity in order to meet our increasing demand. We reported 2016 first quarter sales of $148.8 million, an increase of 17% compared to $126.8 million in the prior-year period. Net income was $3.4 million or $0.30 per share compared to net income of $3.1 million or $0.27 per share in the 2015 first quarter. We have a healthy backlog and continue to invest in our production capability. More specifically, we remain on track to complete the consolidation and expansion of our Pennsylvania manufacturing operations. Also our capital project in Ooltewah, Tennessee plant is underway, and we are moving forward on our plans to improve capacity and operating efficiencies at the Greenville Tennessee facility also. Customer sentiment continues to be positive and our business is operating in a position of financial strength. Now I will turn the call over to Vince who will review the first quarter financial results. After that I'll be back with comments on the market environment and some closing remarks. Vince?

Thanks, Jeff. And good morning, everyone. Net sales for the first quarter of 2016 were $148.8 million versus $126.8 million for the 2015 first quarter, a 17.4% year-over-year increase. Cost of operations increased 18.3% to $435.8 million in the 2016 first quarter compared to $114.8 million last year, driven primarily by the higher sales volumes and the sales mix. Gross profit was $13 million or 8.7% of net sales in the first quarter of 2016 compared to $12 million or 9.4% of net sales in the first quarter of 2015. This decline in percentage was predominately due to our product mix. SG&A expenses were $8 million in the first quarter of 2016 compared to $7.4 million in the first quarter of 2015. As a percentage of sales, SG&A decreased to 5.4% from 5.9% in the prior-year period. Other income expense net for the first quarter was a net gain of $341,000 compared to a net loss of $56,000 in the first quarter of 2015. Interest expense in the 2016 first quarter was $198,000 compared to $163,000 in the first quarter of 2015. Net income in the 2015 first quarter was $3.4 million or $0.30 per diluted share compared to net income in the 2015 first quarter was $3.1 million or $0.27 per diluted share. Turning now to our balance sheet. Cash and cash equivalents as of March 31, 2016, were $33.3 million compared to $38.4 million as of December 31, 2015, and $38.3 million at March 31, 2015. Accounts receivable at March 31, 2016, totaled $128.3 million compared to $109.2 million as of December 31, 2015, and $116.1 million at March 31, 2015. Inventories were $71.4 million as of March 31, 2016, compared to $66.2 million as of December 31, 2015, and $61.8 million at March 31, 2015. The increase in inventory is attributable to our continued ramp up in production. Accounts payable at March 31, 2016, were $88.2 million compared to $73.4 million as of December 31, 2015, and $79.9 million at March 31, 2015. As of March 31, 2016 we borrowed $10 million under our $30 million unsecured revolving credit facility to help fund our three plant expansion projects. The company also announced that its Board of Directors approved our quarterly cash dividend of $0.17 per share payable June 20, 2016, to shareholders of record at the close of business on June 30, 2016. Now, I'll turn the call back to Jeff for further remarks.

Thank you, Mr. Mish. This quarter was a very good start to 2016. We continue to experience increased demand for our products and have ramped up production to meet up. The dedication of our employees to increase production levels in line with that demand yield solid revenue growth. Our order levels and backlogs were driven by healthy level of recording activity for our products. The ongoing interest in our offerings was recently featured at the Florida Tow Show where our industry leading product line was on full display. And once again drew very positive reactions and a lot of excitements from the show's participants. Overall, we are very pleased with our Q1 results and activity. We continue to see strong reporting in domestic market and healthy activity internationally despite the strength of the dollar. Our balance sheet is healthy and positions us well to operate our business to accelerate growth. We remain committed to enhance shareholder value to strong cash flow and our quarterly dividend which we grew to $0.17 per share this year. Additionally, our flexibility to further ramp up our operations has positioned us well to capitalize on current opportunities in our marketplace and to continue to aggressively seek out opportunities going forward. In closing, I'd like to thank our employees, our shareholders, our suppliers and certainly our customers for their ongoing support for Miller Industries. With that, we are ready to take your questions.

[Operator Instructions] And we will take our first question from James Lee with [Procura Capital]

Thanks. Is there any one time revenue let say from government or military in your quarterly number?

I am sorry. Would you repeat that question?

Okay. So for Q1 revenue, were there any one time order say from government or military that boosted your Q1 revenue?

I am sure there are some orders flowing through from military or government but nothing that was substantial. We have the GSA contract. So to say that we didn't build some carriers for GSA or few units for post office, but I think you are asking was there a huge order that flow through, and the answer to that is no.

Okay. And on the CapEx, given that the amount of CapEx you guys are spending this year, what is -- how much capacity, how much more capacity are you building versus today? Let say once you done with all the CapEx spending by the end of this year, is your 50% more production capacity versus what you have today?

And it really capacity I think is maybe the wrong question at least how management here looks at it. Certainly we are increasing capacity and for instance in Pennsylvania where we are doing planned expansion and consolidation on carriers, I think the overall capacity that we will have in Pennsylvania is on the low end of 50% increase. Our plan obviously is to increase our international exposure in the platform business, which to do that we need to reduce cost and this expansion helps us do so. But more than that I think our expansion plans in Tennessee and Greenville are to increase flexibility. So that when we see, for instance, high demand trailers or large wreckers, we can flip our demand to where we have the ability to build that product, and our CapEx projects in both Tennessee and Greenville gives us that capability.

When we think about this let say you guys are currently doing about $500 million or $600 million in annual revenue, once the expansion, a plant is completed, how much annual revenue do you guys can do potentially?

You, you are right.

Here come the orders.

Yes. I appreciate the question. I appreciate the question but as you know if you are shareholders, or if you follow the company, we are in a cyclical business. We are making the right moves to add capacity so we can grow internationally. Add capacity for large military projects if we are successful and domestic trends remain the same, but to say, hey, how much more will you do is a question that I would like to take when maybe somebody else wants to jump in. But that really depends on the economic trends in the industry. And again we are cyclical.

Who is the questioner? This is Bill? I miss your name at the beginning, who is asking the questions?

This is James Lee, Procura Capital.

Hi. James. Well, I just missed your name at the beginning. I didn't hear it. James, the only thing I would say and I think Jeff may have, Jeff, the other two plants were basically working on bottle mix. I guess that's what -- if you ask Will I would think he would say capacity would increase at the two plants, Greenville and Ooltewah basically because we have some bottle mix specifically in the area of paint and insulation because more and more of customers wants to do the work. So we are working on some things that would allow our bottle to go too quicker and would by definition give us more capacity. But I would still roll back to Jeff's point; we are trying to have all the capacity necessary, handle our customers demand, our distributors demand and our customers. And based upon what's happening around the world we want to also be able to do those projects without interfering with our domestic customers. So that's the objective here.

I am sorry, and you guys said I'll point that this is a very cyclical industry. And you guys have already doing very well right now, but how would you guys handle a potential slowdown demand given that you are now building your capacity, could you cut back on capacity would that hit your ability to --

Yes, obvious. James, are you shareholder? I don't know, I am just asking.

Yes. We are shareholder.

Okay. Well I was trying to figure out you have been around the long time. Because over the last 20 plus years, the one thing that we are most proud of it cyclicality. We keep that and that's why we keep flexibility in our operations. This is probably one of the -- and I would knock on wood on this because you never know but historically we have been -- we've not lost money on the downturn. We make less money but we don't lose money. So we have a pretty good way of handling it.

So would just say that dividend that you guys are paying that say regardless of the demand environment?

Yes. We have lot of cash.

Okay. This year you guys winning lot of money on CapEx. Do you expect that to ramp down in 2017?

Oh, yes. This is a historically CapEx project right now. We -- this should take care of us for some time as far as -- well, we see in the future, we haven't really done any substantial CapEx projects for maybe was it been 10 years guys. I am not sure but I think quite a while. And never, never like this. This is kind of creating a future for us. A consolidation up in Pennsylvania, is allowing us to use robot more and do some things that we take our cost effective and flexible for the future of the business.

And I am wondering given that level of CapEx you are going to have this year, and surely you have the cash right now but either you will be depleting the cash, how comfortable are you guys with the balance sheet and your ability to take dividend given the amount of CapEx you have this year?

I don't believe the Board would have increased the dividend if they didn't feel comfortable, but they could continue.

Yes. Last question is what's your manufacturing plant utilization level currently?

I think our plant utilization -- we are pretty -- we are getting very -- I would say we are -- what do you guy say, Will? I would say we are close to 100%

We are close to our max capacity. We don't run three shifts like normal company, we run two. So we run -- most of our plants in the areas where we have extreme bottlenecks or constraint are running 20 hours a day.

Great. Thank you.

Predominately is focus of the expansion and renovations.

[Operator Instructions] There are no further questions at this time. I'd like to turn the conference back over to management for closing remarks.

This is Jeff. We like to thank you for joining us on our Q1 conference call. And we look forward to talking to you again when we report Q2. Have a nice afternoon. Bye.

Ladies and gentlemen, this does conclude today's event. Thank you for attending today's presentation. You may now disconnect. Have a great rest of your day.