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Miller Industries Inc (MLR -1.45%)
Q1 2019 Earnings Call
May. 9, 2019, 10:00 a.m. ET
Contents:
- Prepared Remarks
- Questions and Answers
- Call Participants
Prepared Remarks:
Operator
Good day ladies and gentlemen and welcome to the Miller Industries First Quarter 2019 Results Conference call. Please note this event is being recorded.
And now at this time, I would like to turn the call over to Mr. Brendan Dunlap at FTI Consulting. Please go ahead sir.
Brendan Dunlap -- 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 2019 first 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 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. Please go ahead, Jeff.
Jeffrey Badgley -- Co-Chief Executive Officer
Thank you and good morning. We are pleased to discuss our first quarter results with you today. This was another strong quarter for Miller Industries, as we achieved strong revenue and profitability growth and an increase in earnings per share.
Our profitability continues to improve as we realized incremental benefits associated with increased production capacity and efficiency gains. Our commitment to operational excellence continues to pay-off, as evidenced by our 22.6% increase in gross profit and our 29.8% increase in net income as compared to the first quarter of 2018. Results this quarter were driven by the continued strong demand in our domestic and international markets. We reported 2019 first quarter sales of $197.2 million, an increase of 23.9%, compared to $159.2 million in the prior year period.
Net income was $8.7 million or $0.76 per share compared to net income of $6.7 million or $0.59 per share in the first quarter of 2018. Gross profit, as a percentage of total sales contracted slightly to this quarter to 11.5% down 10 basis points from 11.6% in the first quarter of 2018.
However, selling general and administrative expenses, as a percentage of total sales decreased 80 basis points to 5.2%, as we continued to focus on cost-cutting and realized workflow efficiencies. Our balance sheet remains healthy and we continue to strategically deploy our resources to drive or grant organic growth and profitability to create sustainable shareholder value. We remain confident in both our competitive position and in our financial outlook.
Now I will turn the call 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 will go to Q&A. Debbie?
Deborah L. Whitmire -- Executive Vice President, Chief Financial Officer and Treasurer
Thanks, Jeff and good morning everyone. Net sales for the first quarter 2019 were $197.2 million versus $159.2 million for the first quarter of 2018, a 23.9% year-over-year increase. Cost of operations increased 24.1% to $174.6 million for the first quarter 2019, compared to $140.7 million for the first quarter 2018, reflecting increased cost associated with higher demand.
Cost of operations, as a percentage of net sales expanded approximately 10 basis points to 88.5% from the prior year period, as we ramped up production in order to meet higher demand. Gross profit was $22.6 million or 11.5% of net sales for the first quarter 2019, compared to $18.4 million or 11.6% of net sales for the first quarter 2018.
SG&A expenses were $10.2 million for the first quarter 2019 compared to $9.6 million for the first quarter 2018. As a percentage of sales, SG&A decreased 80 basis points to 5.2% from 6% in the prior year period. Other income expense net for the first quarter 2019, was a net expense of $254,000 compared to a net gain of $916,000 (ph) for the first quarter 2018, reflecting unfavorable currency exchange transactions.
Interest expense for the first quarter 2019 was $668,000 compared to $420,000 for the first quarter 2018, due to an increase in long-term debt outstanding and increased interest on distributor floor plan. Net income for the first quarter 2019 was $8.7 million or $0.76 per diluted share. Net income for the first quarter 2018 was $6.7 million or $0.59 per diluted share.
Now turning to our balance sheet. Cash and cash equivalents, as of March 31, 2019 were $19 million compared to $27 million. As of December 31st, 2018 and $15.1 (ph) million at March 31st, 2018. Accounts receivable at March 31st, 2019 totaled $183.8 million compared to $149.1 million as of December 31, 2018 and $136.7 million at March 31st, 2018. Inventories were $96.2 million, as of March 31st, 2019 compared to $93.8 million as of December 31st, 2018 and $77.7 million at March 31st, 2018.
Accounts payable on March 31st, 2019 were $107.8 million compared to $98.2 million, as of December 31st, 2018 and $82.7 million at March 31st, 2018. We increased our long-term debt outstanding by approximately $15 million during the first quarter of 2019, in order to meet working capital needs associated with the increases in production during the period. The Company also announced that its Board of Directors, approved our quarterly cash dividend of $0.18 per share, payable June 17, 2019 to shareholders of record, at the close of business on June 10, 2019.
Now I'll 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 growth and increased production capacity, ultimately increasing earnings. 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 continue 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, which we will continue to track and to actively mitigate. We also continue to monitor current discussions, related to tariffs and the impact they may have on our business.
Lastly, we are hopeful for continued strong 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 maximizes shareholder value.
In closing, I would like to thank our employees, our customers, our suppliers and shareholders for their ongoing support of Miller industries.
With that we are ready to take your questions.
Questions and Answers:
Operator
Thank you, sir. (Operator Instructions) We will now take our first question from James Lee from Potrero Capital. Please go ahead, your line is open.
James Lee -- Potrero Capital -- Analyst
Hi, guys. This is the first time -- I think, in over a year that your gross margin has expanded year-over-year. Could you explain why and the trend going forward?
Jeffrey Badgley -- Co-Chief Executive Officer
Obviously, I think we've been quite visible and transparent in the fact that raw materials are increasing. But I would say, Jim that we instituted a price increase to cover the raw material increase and tariffs. Last September, our backlog was large enough that we didn't get full effect of that increase, as the cost of material hit us. We will work through that increase I believe by mid third-quarter of this year, so.
So, Jeff, I think you might -- there was a subtle (ph) product mix shift there still.
Yeah, certainly mix--.
James Lee -- Potrero Capital -- Analyst
Because of the increased volume we ended up the roll (ph) and the mixed percentage was slightly different?
Jeffrey Badgley -- Co-Chief Executive Officer
Yes.
James Lee -- Potrero Capital -- Analyst
But sounds like, given -- with the price increase, you instituted you should be able to see a positive effect starting Q3 this year on gross margin.
Jeffrey Badgley -- Co-Chief Executive Officer
Well, I think yeah, I think, we'll see depending on what the mix is in Q3 but we'll pick-up more percentage of our orders, we will have new prices versus orders that were in the backlog at old price. Correct.
James Lee -- Potrero Capital -- Analyst
All right. And I notice there's a spike in your accounts receivable your day sales outstanding. Could you explain that and then the need for working capital going forward?
Jeffrey Badgley -- Co-Chief Executive Officer
As far as the spike in account receivables obviously, as volume increase as your receivables are going up. Remember we sell through a distribution network, that distribution network does have terms with Miller Industries.
I would say that looking at our distributor network and their payables or our receivables from them, we are not concerned at all, they seem to be within term except maybe 3% to 4%. So I think, from a capital standpoint, we've probably hit a peak not because of receivables but more because of the problem we had with our tool box supplier that was explained I think, in the fourth quarter. Their lack of delivery, which clogged-up some inventory -- and clogged-up some inventory that wouldn't allow us to deliver product complete. So I think, from a cash standpoint, we should be fine going forward.
James Lee -- Potrero Capital -- Analyst
Got it. Thank you.
Operator
(Operator Instructions) It appears no further participants are queuing for 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'd like to thank you for joining our conference call and look forward to speaking to you as we will report our next quarter very soon. Thank you very much.
Operator
And with that ladies and gentlemen that concludes today's conference call. We would like to thank you again for your participation. You may now disconnect.
Duration: 16 minutes
Call participants:
Brendan Dunlap -- Consultant
Jeffrey Badgley -- Co-Chief Executive Officer
Deborah L. Whitmire -- Executive Vice President, Chief Financial Officer and Treasurer
James Lee -- Potrero Capital -- Analyst
