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Miller Industries Inc (MLR 0.16%)
Q4 2018 Earnings Conference Call
March 07, 2019, 10:00 a.m. ET
Contents:
- Prepared Remarks
- Questions and Answers
- Call Participants
See all our earnings call transcripts.
Prepared Remarks:
Operator
Good day ladies and gentlemen and welcome to the Miller Industries Fourth Quarter 2018 Results Conference call. Please note this event is being recorded.
And now at this time, I would like to turn the conference over to Mr. Ben Herskowitz at FTI Consulting. Please go ahead, sir.
Ben Herskowitz -- Senior Consultant
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 2018 fourth quarter results, which were released after the close of market yesterday. With us from the management team today are Bill Miller, Chairman of the Board; 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 period.
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 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.
Jeffrey Badgley -- Co-Chief Executive Officer
Thank you and good morning. We are pleased to discuss our fourth quarter and full year results with you today. This was another strong quarter for Miller Industries as we achieved strong year-over-year top line growth, gross margin expansion, and an increase in earnings per share. Our profitability has improved as we continue to realize the incremental benefits associated with the increased production capacity. Our commitment to operational excellence continues to pay-off as evidenced by our 20.1% increase in gross profit and our 16.2% increase in net income as compared to the fourth quarter of 2017. Results this quarter were driven by the continued strong demand in our domestic and international markets. We reported 2018 fourth quarter sales of $180 million, an increase of 12.7% compared to the $159.7 million in the prior year period.
Net income was $10.8 million or $0.95 per share compared to net income of $9.3 million or $0.81 per share in the 2017 fourth quarter. Gross profit as a percentage of total sales this quarter was 12.3%, up from 11.6% in the fourth quarter of 2017. Concurrently, selling, general and administrative expenses increased 40 basis points as a percentage of total sales to 6%.
Our balance sheet remains healthy and we continue to strategically deploy our resources to drive or grant organic growth and profitability. We remain confident in both our competitive position and in our financial outlook.
Now I'll turn the call over to Debbie, who will review the fourth 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?
Deborah Whitmire -- Chief Financial Officer, Executive Vice President, Corporate Controller, Treasurer
Thanks Jeff and good morning everyone. Net sales for the 2018 fourth quarter were $180 million versus $159.7 million for the 2017 fourth quarter, a 12.7% increase year-over-year. Cost of operations increased 11.7% to $157.8 million for the 2018 fourth quarter compared to $141.3 million for the 2017 fourth quarter, reflecting increased costs associated with higher demand. However, cost of operations as a percentage of net sales contracted approximately 80 basis points to 87.7% from the prior-year period, reflecting our continued cost management efforts. Gross profit was $22.2 million or 12.3% of net sales for the 2018 fourth quarter compared to $18.5 million or 11.6% of sales of net sales for the 2017 fourth quarter.
SG&A expenses were $10.8 million for the 2018 fourth quarter, compared to $8.9 million for the 2017 fourth quarter. As a percentage of sales, SG&A increased to 6% from 5.6% in the prior year period. Other income expense net for the 2018 fourth quarter was an expense of $465,000 compared to an expense of $203,000 for the 2017 fourth quarter, reflecting unfavorable currency transactions. Interest expense for the 2018 fourth quarter was $449,000 compared to $426,000 for the 2017 fourth quarter, primarily due to increased distributor floor plan activity. Net income for the 2018 fourth quarter was $10.8 million or $0.95 per diluted share. Net income for the 2017 fourth quarter was $9.3 million or $0.81 per diluted share.
Now, let me briefly review our results for the 12 months ended December 31st, 2018. Net sales for the year were $711.7 million compared to $615.1 million in the prior year period, an increase of 15.7%. Gross profit for the year was $83.3 million or 11.7% of sales compared to $67.1 million or 10.9% of sales in 2017. Net income for the year was $33.7 million or $2.96 per diluted share, an increase of 46.6% compared to net income of $23 million or $2.02 per diluted share in 2017.
Turning now to our balance sheet. Cash and cash equivalents as of December 31st, 2018 were $27 million compared to $18.7 million as of September 30th 2018 and $21.9 million at December 31st 2017. Accounts receivable at December 31st 2018 totaled $149.1 million compared to $155.7 million as of September 30th 2018 and $132.7 million at December 31st, 2017. Inventories were $93.8 million as of December 31st 2018 compared to $84.1 million as of September 30th 2018 and $68.6 million at December 31st, 2017. Accounts payable at December 31st 2018 were $98.2 million compared to $100.9 million as of September 30th 2018 and $79.3 million at December 31st 2017. We increased the balance of our unsecured revolving credit facility by $5 million during the 2018 fourth quarter, the balance of which was $15 million as of December 31st 2018 and $20 million as of March 4th, 2019. Borrowings were used to help fund our working capital needs as as we work to meet customer demand. The company also announced that its Board of Directors approved our quarterly cash dividend of $0.18 per share payable March 25th, 2019 to shareholders of record at the close of business on March 18th, 2019.
Now I will turn the call back to Jeff for further remarks.
Jeffrey Badgley -- Co-Chief Executive Officer
Thank you, Debbie. Our performance this quarter was very encouraging as the effects of our capital projects better allowed us to meet increasing demand, which resulted in strong sales as well as growth and operating margin expansion. Our increased production capacity has resulted in increased operating leverage and profitability.
As always, disciplined operations, cost reduction, balance sheet management and targeted capital deployment remain central to our strategy. To underscore our continued commitment to returning shareholder value, we have declared our quarterly dividend of $0.18 per share. As we move into 2019, our backlog remains strong and underlying activity in all our end markets continues to be positive. Offsetting some of these positive fundamentals are cost pressures related to raw materials and employee benefit costs, which we will continue to track and attempt to actively mitigate. We will also continue to monitor current discussions related to tariffs in order to determine the impact they may have on raw material costs in the future.
Lastly, we are positioned for a healthy performance as we realize the incremental benefits on the back of our plant consolidation and expansion efforts. We will continue to deploy our resources in a manner that heightens our operational efficiency, allows us to sufficiently meet growing demand for our products and maximize the shareholder value. In closing, I'd like to thank our employees, our customers, our suppliers and our shareholders for their ongoing support of Miller Industries.
With that, we're ready to take your questions.
Deborah Whitmire -- Chief Financial Officer, Executive Vice President, Corporate Controller, Treasurer
We do have one question come in from a shareholder that I'll go ahead and address before we start the Q&A session.
They wanted a little more flavor on the use of the working capital and the increase in the inventory balance at the end of the year. And the use of the funds drawn on the credit facility. In the fourth quarter as we increased our production levels over the course of the year. Our single supplier of heavy duty tool boxes was not able to meet the increased production schedule. We have now obtained the intellectual property from the supplier and have an additional supplier providing delivery of these boxes. We are now current on our box received and are working diligently to integrate them with the units that were produced during the prior year and held an inventory as of the end of the year, so that we can get those delivered to our end user customers. So the draw on the line is basically providing the working capital for the increased inventory levels and production of units waiting on the delivery of these boxes.
Hopefully, that gives a little more insight on that. So we'll turn it back over to the moderator to accept your additional questions.
Questions and Answers:
Operator
Thank you. (Operator Instructions) It appears there are no questions at this time. I'd like to turn the call back to management for any additional or closing remarks.
Jeffrey Badgley -- Co-Chief Executive Officer
We thank you for joining us for our 2018 fourth quarter conference call and we look forward to reporting our earnings in the first quarter of 2019. Thank you.
Operator
And with that ladies and gentlemen, that concludes today's conference call. We'd like to thank you again for your participation. You may now disconnect.
Duration: 14 minutes
Call participants:
Ben Herskowitz -- Senior Consultant
Jeffrey Badgley -- Co-Chief Executive Officer
Deborah Whitmire -- Chief Financial Officer, Executive Vice President, Corporate Controller, Treasurer
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