Good day, ladies and gentlemen, and welcome to the Miller Industries Third Quarter 2021 Results Conference Call. Please note this event is being recorded. And now, at this time, I’d like to turn the call over to Mike Gaudreau 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 2021 third 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 Co-CEO; Jeff Badgley, 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 session. Please note, 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 to 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 Jeff. Please go ahead, Jeff.

Thank you, and good morning, everyone. Our third quarter results are a testament to the perseverance of our workforce despite a precarious supply chain and labor shortages that are affecting nearly every company in the United States. Third quarter revenues were slightly lower year-over-year as increasing supply chain disruptions made it difficult to obtain all necessary materials to complete finished goods. More specifically, compared to the same period a year ago, our sales decreased 2.2% and to $164.7 million. Gross profit for the third quarter remained flat from the prior year period at $17.8 million, while gross margin in the third quarter increased approximately 23 basis points year-over-year, with an increase in efficiencies offset significantly by inflationary pressures on the cost of purchased materials and component parts. As a reminder, we continue to strive to pass on price increases to customers to cover the increased costs we are incurring. However, it takes time to reap the benefits of these price increases as we generally honor contract prices within our increasing backlog, which results in near-term margin pressure. In our domestic business, demand for our products sits at near all-time highs. However, shortages in raw materials and component parts resulting from supply chain issues have continued to impact the amount of finished goods we can produce and ship. As always, we continue to leverage all available resources to actively mitigate supply chain disruptions and inflationary pressures. In our international business, European recovery from COVID, which lagged recovery slightly here in the U.S., increased demand and our backlog in the third quarter. Notably, our European entities experienced a very strong quarter, while export activity from the U.S. has yet to reach pre-pandemic levels due to global shipping constraints. However, as these constraints are lifted, we hope to see continued growth in our international markets. We are seeing the operational benefits of our fabrication equipment upgrades implemented during 2020 and our enterprise software upgrades completed in the first quarter of 2021. Now that these upgrades are complete, we expect to be able to truly leverage the full capabilities of these enhancements. Now I’ll turn the call over to Debbie, who will review the third quarter financial results. And then I will finish by providing some commentary on the current market environment and some closing remarks. Debbie?

Thanks, Jeff, and good morning, everyone. Net sales for the third quarter 2021 were $164.7 million versus $168.4 million for the third quarter of 2020, a 2.2% year-over-year decrease driven largely by supply chain issues and raw material shortages. Cost of operations decreased 2.4% to $146.9 million for the third quarter 2021 compared to $150.5 million for the third quarter 2020 due to enhanced operational effectiveness stemming from our ERP and other initiatives and a slight year-over-year decline in sales. Cost of operations as a percentage of net sales decreased approximately 23 basis points to 89.2% from the prior year period. Gross profit was $17.8 million or 10.8% of net sales for the third quarter 2021 compared to $17.8 million or 10.6% of net sales for the third quarter 2020, largely driven by our operational enhancement. SG&A expenses were $12 million for the third quarter of 2021 compared to $9.2 million for the third quarter of 2020, resulting from costs associated with our ERP system rollout and increased investments in human capital to support the growth needs of the business. As a percentage of sales, SG&A increased approximately 180 basis points to 7.3% from 5.5% in the prior year period. Moving forward, we would expect our SG&A expense to return to a more normal typical run rate for the company. Interest expense net for the third quarter 2021 was $286,000, up from $230,000 for the third quarter 2020, resulting from an increase in customer floor plan financing cost to support our distribution network. Other income expense for the third quarter 2021 was a loss of $206,000 compared to income of $209,000 for the third quarter 2020. The increase was largely attributable to currency exchange rate fluctuations. Net income for the third quarter 2021 was $3.8 million or $0.34 per share compared to net income of $6.6 million or $0.57 per share in the third quarter of 2020. Now let me briefly review our results for the 9 months ended September 30, 2021. Net sales for the first 9 months of 2021 were $515.8 million compared to $472.9 million in the prior year period, an increase of 9.1%. Gross profit for the 9 months ended September 30, 2021, was $54.3 million or 10.5% of sales compared to $54.1 million or 11.4% of sales for the first 9 months of 2020. Net income for the first 9 months of 2021 was $13.5 million or $1.19 per share, a decrease of 23.7% compared to net income for the first 9 months of 2020 of $17.8 million or $1.56 per share. Now turning to the balance sheet. Cash and cash equivalents as of September 30, 2021, was $50.4 million compared to $53.9 million as of June 30, 2021, and $57.5 million as of December 31, 2020. Accounts receivable as of September 30, 2021, totaled $131.3 million compared to $161.8 million at June 30, 2021, and $141.6 million as of December 31, 2020. Inventories were $108.8 million as of September 30, 2021, compared to $92 million as of June 30, 2021, and $83.9 million as of December 31, 2020. Accounts payable as of September 30, 2021, was $87.8 million compared to $108.1 million as of June 30, 2021, and $85.5 million as of December 31, 2020. So as the supply chain issues present significant challenges, we continue to stick to our strategy of diligently allocating capital and preserving our cash. We believe that given our prudent capital allocation and our strong balance sheet, we have more than enough financial flexibility to invest in our business and capitalize on strong demand tailwinds when we move into a more normalized environment. And lastly, the company also announced that its Board of Directors approved our quarterly cash dividend of $0.18 per share payable December 13, 2021, to shareholders of record at the close of business on December 6, 2021. Now I’ll turn the call back to Jeff for closing remarks.

Thank you, Debbie. While our market conditions continue to show strength and customer demand sits near all-time highs, supply chain constraints make our markets anything but normal. That said, we have positioned the company extremely well for when these adverse conditions eventually pass, and we remain committed to our best-in-class customer service and preserving our culture of operational excellence. Additionally, as Debbie mentioned, our financial position is strong, and we have more than enough financial flexibility to weather any storms caused by these issues and even further capitalize on the spike in demand from our customers when conditions normalize. While it is difficult to forecast when supply chain and transportation headwinds will subside, we are confident that the strength of our end markets, our operational effectiveness and our strong financial position will allow us to efficiently capitalize on new growth prospects and generate long-term shareholder value in the quarters and years to come. As always, in closing, Will and I would like to thank our employees, customers, suppliers and shareholders for their ongoing support of Miller Industries. Thank you again for joining us this morning. Operator, please open the line for questions.

[Operator Instructions] And our first question today comes from Arnie Ursaner with Family Office.

Can you hear me okay?

Yes, sir.

Absolutely.

Great. My first question is have you attempted to estimate or guess the potential revenue impact that you’re seeing from the supply chain shortages.

Well, if you look at the Q, you can see that our inventory has increased quite a bit. And the breakdown in that Q reflects the increase -- the majority of the increase to be in both raw materials and WIP at the end of the quarter. We -- although it’s hard to estimate exact amount of revenue, we have seen, say, for in this facility in Ooltewah, as recently as last week, we had approximately $13.5 million, $14 million in billable product being held up from moving from WIP to finished goods, by about $200,000 worth of parts and maybe couple of hundred hours of labor, not a couple of hundred days but a couple of hundred hours of labor. So hopefully, that answers your question.

I think it certainly highlights the real challenges of running a business in today’s world with the supply chain issues. That’s -- we had talked last quarter. I know you have this incredible view that you must treat your customers right, and I applaud you for that. And you didn’t want to adjust pricing on orders you had in backlog. But the sense I got was that you’re going to run through a lot of the -- what I’m going to call, underpriced or mispriced backlog by the middle of the year. And you had even mentioned the possibility of adding surcharges to make sure you could recover your cost. Can you update us on how you’re handling the pricing to your customers given this incredibly challenging environment?

We have initiated 4 increases throughout this year. The first increase, I think we’re getting full benefit of now. Second increase will take place January 3 and April. But all in, I believe, by middle of next year, we’ll capture all the increases we put in place this year.

So could you please just clarify? You’re still taking on -- you still have backlog that does not really reflect the cost pressures you’re under now, and it sounds like that’s going to continue at least for another 4 to 6 months. Is that the right way to look at this?

Yes. Unfortunately, you understand that we deliver not only our product but chassis that go underneath our product. So managing the flow of our backlog is complicated and becomes somewhat a situation of what chassis show up when by what manufacturer of the chassis. So you can have some product that may be going on one manufacturer of a chassis that moves through the backlog quicker than another because the other manufacturer is behind schedule. So it’s really dependent on quite a few variables of how quick it flows through the backlog.

Okay. Can you -- without being unduly specific, could you mention how far out your backlog is in terms of delivery schedule?

We really don’t disclose our backlog amounts. I can tell you I’ve been here quite a while along with Bill Miller, our Chairman. I don’t think either one of us have seen the type of demand that we have seen over the last 5 or 6 months.

I guess if I could ask the question in a different way. Are you -- you mentioned you have a price increase in January and another one in April. The ones in April, those orders are -- the orders you have that might go out to April already, are they at the old price? Or are you able to get your volume back in 2022?

We’re doing everything we can in terms of price increases to get as much back as quickly as we possibly can [indiscernible].

Okay. If I can shift gears on the supply issue to a different challenge that you’ve talked about, where are you these days on the labor issue? And are you able to get fully staffed or maybe an update on labor?

We have made some strides on our labor position. Those strides did cost some money. We had to do sign-on bonuses, et cetera, to get skilled workers into our facilities. But yes, we’ve made, I think, very good strides.

Great. Got a quick questions for...

Carefully staffed at this point.

Very quick question for Debbie if I can, the ERP cost and the impact on SG&A. And how long will that continue?

We disclosed in there it’s a multiyear arrangement with our business partner, so that will continue for the next 3 to 4 years as we continue to roll out different modules of the implementation and additional license costs go into SG&A. More details about that can be found in that disclosure of what that commitment is over the next 3 to 4 years.

Two more questions if I can quickly. Have you given any thought or a view towards your potential capital expenditures for 2022?

We have generally discussed those capital expenditures. We certainly look at the position we are in today, obviously, to solve those problems. The company has used multiple price increases. We’re expanding our supply base. We’re actually redesigning product to move out of sole sourcing on certain components. We’re aligning production to labor availability within our facilities and discussing or, as you know, we expanded our Greeneville operation to put ourselves in a better position to control our destination in fabrication enhancements and also to consolidate raw materials. Now if those -- if that final strategy works, we may look at more expense. But it’s really -- it really depends on how we move through the rest of this supply chain disruption.

Okay. My final question...

And Jeff, this is Bill. The other -- from a Board standpoint, there are opportunities out there. And as we see them, which may become available, that could -- we will clearly take advantage of other opportunities that might come available in this very difficult time, so -- because we’re prepared for that.

I would imagine that the challenges you have, your smaller competitors must have even bigger challenges. So -- and you have very successfully added acquisitions along the way, so I think your shareholders would be pretty happy if you find the right ones. Last question is for the Miller family. I first got involved with your company when you went public at Bear Stearns [ph], about 30 years ago. And I guess my real question for the Miller family is you’ve run a great family company, but at the moment, really don’t have public coverage, research coverage. Can you discuss your view of if you want public coverage, research coverage and how you might get your story better told to the investment community?

Bill, if you’d like to…

I think they’re passing that question to me.

Absolutely.

Absolutely. Okay. Well, as the company sits, as you said, we’ve had a very successful company over the last 30 years as we built it from the beginning as a Founder to its current position. The Board, as you know, we’ve been public for over 25 years, and we have an independent Board who selects all of our senior officers. I don’t get involved in that. So as far as the company goes as a family originally developed and I -- and the family still owns 3% of the company, which is probably the largest single individual shareholder. But the bulk of the shares are controlled by probably various investment funds about -- that are involved in Wall Street and individuals. As far as the question of how we look at this company, we -- I will take a line from Warren Buffett who gave me this onetime. His partner, we were sitting together at one time, and he said the stock market is on a short term like a voting booth and on the long term based upon your ability to generate income and a multiple of that. Understanding that, I think that we have had an internal growth rate for the last 20 years probably well in excess of 10% per year. We haven’t had an acquisition in that period. So all of our growth comes from our -- we generate it from R&D and the new product development, things that serve this market or by market penetration and success of our distributors. I look at all that, and I think that from a stock standpoint, as I was -- as I said, I think our earnings and our growth rate will generate the proper multiple for our company and be out there. I personally give -- as we are talking now, we will stay on the line and talk on this conference call and answer any questions that any analysts or anybody that wants to follow us or any shareholder as long as we have to. On the other hand, we choose not to talk in between conference calls, quarterly conference calls because we want to make sure everybody has exactly the same information, whether you’re an analyst and you follow us or if you’re a shareholder. No one should have an advantage. And we -- at the same time, we do not put out earning projections to analysts and -- or to anyone else that asks. We just -- as they like to say in football, we -- or golf, we play it as it lies. So I would say analysts are very welcome, but we are not going to chase you, and we are not going to give them added information that makes them want to follow us because we don’t believe that’s fair. We just -- everybody gets the same information. Everybody gets the access to this conference call. And in between this, we try to give no information, although you’re welcome to visit our plants anytime you want. You’re welcome to talk to our people, but they will not give you any additional information we don’t put out on this call. And we will continue to act that way. That’s our answer.

And that does conclude today’s question-and-answer session. I’d like to turn the call back to management for any additional or closing comments.

We would like to thank you for joining our conference call today and look forward to talking to you when we report fourth quarter and year-end results. Appreciate your support.

Thank you.

And with that, ladies and gentlemen, this concludes today’s conference call. We’d like to thank you again for your participation. You may now disconnect.