Max Dutcher - FTI Consulting Bill Miller - Chairman Jeff Badgley - Co-CEO Will Miller - President and Co-CEO Debbie Whitmire - EVP & CFO Frank Madonia - EVP, Secretary & General Counsel

James Lee - Potrero

Good day, and welcome to the Miller Industries First Quarter 2017 Results Conference Call. [Operator Instructions] Please note, this event is being recorded. At this time, I would like to turn the conference over to Max Dutcher at 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 2017 first quarter results, which were released after close of market yesterday. With us from the management team today are Bill Miller, Chairman of the Board; Jeff Badgley, Co-CEO; Will Miller, President and Co-CEO; 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 period. Please note in this morning's conference call, that 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 results with you today. This was another solid quarter for Miller Industries as we achieved profitability increases year-over-year, underpinning a consistent top line performance. Results this quarter were driven by a more favorable product mix and a healthy demand in our international and domestic markets. We are encouraged by trends overseas as international demand continues to positively impact our performance. We reported 2017 first quarter sales of $148.9 million, an increase of 0.001% compared to $148.8 million in the prior-year period. Net income was $3.8 million or $0.34 per share compared to net income of $3.4 million or $0.30 per share in the 2016 first quarter. Gross profit as a percentage of total sales this quarter was 10.3%, up from 8.7% in the first quarter of 2016. Concurrently, our cost of operations was down 1.7% year-over-year. The enhanced margins are a result of a favorable change in our product mix and our continuing efforts to increase operational efficiencies. To provide an update on our capital projects at Pennsylvania Manufacturing Consolidation and expansion is scheduled to be completed during the second quarter. The capital projects in Ooltewah, and Greeneville, Tennessee, remain on track to be completed in early 2018. We are pleased by the success of these undertakings and our efforts to increase our production capabilities in order to better meet our customer needs. We remain committed to maintaining a healthy balance sheet and deploying our resources in ways that promote organic growth, margin expansion and shareholder value. We are confident in our competitive position, and in our financial outlook. Now I'll turn the call over to Debbie, who will review the first quarter financial results. After that, I'll be back with comments on the market environment and some closing remarks. Then we'll go to Q&A. Debbie?

Thanks, Jeff, and good morning, everyone. Net sales for the 2017 first quarter were $148.9 million versus $148.8 million for the 2016 first quarter, a 0.1% increase year-over-year. Cost of operations decreased 1.7% to 200 - to $133.5 million for the 2017 first quarter compared to $135.8 million for the 2016 first quarter, driven primarily by the - by favorable changes in our product mix. Gross profit was $15.4 million or 10.3% of net sales for the 2017 first quarter compared to $13.0 million or 8.7% of net sales for the 2016 first quarter. SG&A expenses were $9.0 million for the 2017 first quarter compared to $8.0 million for the 2016 first quarter. As a percentage of sales, SG&A increased to 6.1% from 5.4% in the prior-year period, largely driven by increased headcount and employee benefit cost. Other income expense net for the 2017 first quarter was a net gain of $14,000 compared to a net gain of $341,000 for the 2016 first quarter. Interest expense for the 2017 first quarter was $378,000 compared to $198,000 for the 2016 first quarter, due to borrowings under the credit facility and for planned costs. Net income for the 2017 first quarter was $3.8 million or $0.34 per diluted share. Net income for the 2016 first quarter was $3.4 million or $0.30 per diluted share. Now turning to our balance sheet. Cash and cash equivalents as of March 31, 2017, were $24.5 million compared to $31.1 million as of December 31, 2016, and $33.3 million at March 31, 2016. Accounts receivable at March 31, 2017, totaled $132.7 million compared to $125.4 million as of December 31, 2016, and $128.3 million at March 31, 2016. Inventories were $67.6 million as of March 31, 2017, compared to $64.1 million as of March -- as of December 31, 2016, and $71.4 million at March 31, 2016. Accounts payable at March 31, 2017, were $87.3 million compared to $85.1 million as of December 31, 2016, and $88.2 million at March 31, 2016. As of March 31, 2017, we have borrowed $10 million under our $50 million unsecured revolving credit facility to help fund our 3 plant expansion projects. The company also announced that its Board of Directors approved our quarterly cash dividend of $0.18 per share, payable June 20, 2017, to shareholders of record at the close of business on June 13, 2017. Now I'll turn the call back to Jeff for further remarks.

Thanks, Deb. We are very pleased with our performance this quarter as 2017 gets off to a solid start. We continue our efforts to increase our manufacturing capacity, streamline our operations and enhance our operational productivity. These factors combined with more encouraging macro trends bode well for our company's long-term outlook. We are also encouraged by the quarter's healthy demand in our domestic and international markets. Disciplined balance sheet management and capital deployment remain central to our strategy. To underscore our commitment to returning shareholder value, we have declared our quarterly dividend to $0.18 per share. As we move into the second quarter, we will continue to deploy our resources in a manner that heightens our operational efficiencies, expands production capacity and maximizes shareholder value. In closing, I'd like to thank our employees, shareholders, suppliers and customers for their ongoing support of Miller Industries. With that, we are ready to take your questions.

[Operator Instructions] And we do have a question from James Lee with Potrero. Please go ahead.

Hi, good morning guys. Could you reconcile your positive comments about the end market again and domestically versus your flat sort of revenue to slightly down revenue in Q1 domestically?

From the standpoint of our positive outlook for demand? I guess what we would say is both for the entry levels and backlog are up year-over-year. And we see great comments from our customers, that being our distributors, about activity in the marketplace.

So why would the revenue...

This is Bill. Jeff, the reason why he wants know is why aren't we producing more. And the answer is...

Well, obviously, we are going through major, major efforts to revitalize our plants. And at the same time, run production. So if you were to come to any of our facilities, except Pennsylvania, is now very, very close in completion. We are expanding at the same time we are producing. So we do have a little bit of influence of construction processes influence -- influencing our build rate. I would say, however, in Pennsylvania, as we finish now in the middle of this quarter, we have been able to increase well our carrier production, some 15% or 20%. On a go forward basis.

I think that -- if I understood your question, this is Bill. We were basically capacity constrained to -- in all of our plants and we need to -- all of these projects improve our ability to increase our capacity to produce. And that's what we're kind of going through right now.

So does that answer your question?

Okay. Yes, very helpful. Second question is, could you comment on the current financing environment either at the buyer, at the end user or at the dealer side. If there's any -- have you seen any pullback in financing?

We have not seen any pullback at all in retail financing or wholesale financing for our distributors in terms of distributor for time in the marketplace.

Great. Thank you.

And with no more questions in the queue, I'll turn it back over to management for any additional or closing remarks.

This is Jeff again, and we would like to thank you for joining our Q1 conference call. And we look forward to talking to you in the future. Thank you very much.

And ladies and gentlemen, this does conclude today's conference. Thank you for your participation. You may now disconnect.