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Miller Industries Inc (MLR -1.13%)
Q4 2019 Earnings Call
Mar 5, 2020, 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 Fourth Quarter 2019 Results Conference Call. [Operator Instructions] And now, at this time, I would like to turn the call over to Brendan Dunlap of FTI Consulting. Please go ahead, sir.
Brendan Dunlap
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 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; 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 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 I. Badgley -- Co-Chief Executive Officer
Thank you and good morning, everyone. We are pleased to discuss our fourth quarter and full year results with you today. This has been a record-breaking year for Miller Industries as we achieved the highest full year revenue and net income in our Company's history. We finished the year with strong top line growth, gross margin expansion, and an increase in earnings per share.
Revenue during the fourth quarter increased 12.9% to $203.1 million versus $180 million a year ago, driven by broad-based demand across our portfolio. Our domestic business continued its strong performance during the quarter as new order rates remained steady and our distributors continued to work at full capacity to deliver existing orders. Our international business also performed in line with our expectations on a year-over-year basis. Additionally, our fourth quarter results benefited from a catch-up related to supply chain delays we experienced during the third quarter.
Quarterly gross profits increased by 21.6% year-over-year to $26.9 million and our gross margin expanded 100 basis points year-over-year to 13.3%, which reflects strong demand, favorable mix and other cost reduction measures. Additionally, during the quarter we continue to realize benefits from our cost control initiatives as SG&A expenses as a percentage of sales decreased by approximately 20 basis points from the prior year period.
Net income was $11.7 million or $1.03 per share compared to net income of $10.8 million or $0.95 per share in the fourth quarter of 2018. As we move into the first quarter of 2020, our backlog remains healthy in both our domestic and international markets, and we remain committed to providing best-in-class customer services while continuing to invest in our business and generating shareholder value. Further, our balance sheet remains healthy, as we continue to pay down debt and strategically deploy our resources to drive sustainable long-term growth.
Now, I will turn the call over to Debbie, who will review the fourth quarter financial results. After that, I'll be back with comments about the market environment and some closing remarks. Debbie?
Deborah L. Whitmire -- Chief Financial Officer, Treasurer & Executive Vice President
Thanks, Jeff, and good morning, everyone. Net sales for the fourth quarter 2019 were $203.1 million versus $180 million for the fourth quarter of 2018, a 12.9% year-over-year increase driven by broad-based demand across our portfolio, as well as some additional sales that were included in the fourth quarter as a result of supplier delay issues we experienced in the preceding quarter.
Cost of operations increased 11.7% to $176.2 million for the fourth quarter 2019 compared to $157.8 million for the fourth quarter 2018, driven by our top line sales growth. However, cost of operations as a percentage of net sales contracted approximately 100 basis points to 86.7% from the prior year period.
Gross profit was $26.9 million or 13.3% of net sales for the fourth quarter 2019 compared to $22.2 million or 12.3% of net sales for the fourth quarter 2018, reflecting a favorable product mix. SG&A expenses were $11.8 million for the fourth quarter 2019 compared to $10.8 million for the fourth quarter 2018. As a percentage of sales, SG&A decreased approximately 20 basis points to 5.8% from 6% in the prior year period, driven by our effective cost controls and increased operational efficiency across the organization.
Interest expense, net, for the fourth quarter 2019 was $565,000 compared to $449,000 for the fourth quarter 2018, as an increase in customer floor plan financing cost more than offset lower long-term debt-related interest expense. Other income expense for the fourth quarter 2019 was a net gain of $211,000 compared to a net expense of $465,000 for the fourth quarter 2018, due primarily to currency exchange rate fluctuations. Net income for the fourth quarter 2019 was $11.7 million or $1.03 per diluted share. Net income for the fourth quarter 2018 was $10.8 million or $0.95 per diluted share.
Now, let me briefly review our results for the 12 months ended December 31, 2019. Net sales for the year were $818.2 million compared to $711.7 million in the prior year period, an increase of 15%. Gross profit for the year was $96.5 million or 11.8% of net sales compared to $83.3 million or 11.7% of net sales for 2018. SG&A expenses were $43.4 million for 2019 or 5.3% of net sales compared to $39.5 million or 5.6% of net sales for 2018. Net income for the year was $39.1 million or $3.43 per diluted share, an increase of 15.9% compared to net income of $33.7 million or $2.96 per diluted share in 2018.
Now, turning to our balance sheet. Cash and cash equivalents as of December 31, 2019 was $26.1 million compared to $27.5 million as of September 30, 2019 and $27 million at December 31, 2018. Accounts receivable at December 31, 2019 totaled $168.6 million compared to $165.8 million as of September 30, 2019 and $149.1 million at December 31, 2018. Inventories were $88 million as of December 31, 2019, compared to $98.1 million as of September 30, 2019 and $93.8 million at December 31, 2018. Accounts payable at December 31, 2019 was $95.8 million compared to $114.9 million as of September 30, 2019 and $98.2 million at December 31, 2018.
During the quarter, we reduced our long-term debt by approximately $5 million from the prior quarter, bringing the balance to approximately $5 million as of December 31, 2019. Overall, our balance sheet remained strong and we continue to generate solid free cash flow, which provides us with financial flexibility to invest in our business and continue to drive long-term shareholder value. Lastly, the Company also announced that its Board of Directors approved our quarterly cash dividend of $0.18 per share payable March 23, 2020 to shareholders of record at the close of business on March 16, 2020.
Now, I'll turn the call back over to Jeff for further remarks.
Jeffrey I. Badgley -- Co-Chief Executive Officer
Thank you, Debbie. We are very proud of our performance this quarter and our record setting year. Our performance this quarter was very encouraging as we returned solid year-over-year growth on both the top and bottom lines. Our steadfast commitment to operational excellence, disciplined cost control measures and strategic capital deployment grant us flexibility to invest in long-term growth of our business while generating shareholder value. Our quarterly dividend of $0.18 per share underscores our continued commitment to returning capital to our shareholders.
As we transition into this turbulent first quarter of 2020, we remain confident in the strength of our backlog and our underlying fundamentals in all our end markets. We will continue to monitor the developing situation with COVID-19, and the impact it may have on our supply chain and operations.
Finally, we are confident that our previous and ongoing capital investments in conjunction with our strong cash flows and healthy balance sheet have positioned us to best serve our customers, while providing us with the financial flexibility to pursue any future opportunities to grow our business. In closing, I'd like to thank our employees, customers, suppliers and shareholders for their ongoing support of Miller Industries.
Thank you again for joining us this morning. I'd like to turn the call over to Bill Miller for a few words before we take your questions. Bill?
William G. Miller -- Chairman
Yes. Jeff, thank you. I'd like to close by welcoming our two new Board members, Leigh Walton and Deborah Whitmire. Leigh Walton is an independent director and she has more than 40 years of experience, advising public companies on -- in the areas of corporate governance and corporate finance. Debbie Whitmire, as the Company's Executive Vice President, Chief Financial Officer and Treasurer, and has provided invaluable expertise and leadership to our senior management team over the last several years as a member of our executive committee. The leadership they will bring will be a valuable contribution, and I hope you all join me in congratulating them and welcoming them on the Board.
In addition, I'd like to just take one second to congratulate all the employees at Miller Industries and all of our vendors, suppliers and other partners, distributors for a phenomenal year, a record-breaking year after 30 years of $818 million in sales.
With that, Jeff, you have the floor for questions.
Jeffrey I. Badgley -- Co-Chief Executive Officer
Thank you, Bill. And as you said, we're now ready to field your questions.
Questions and Answers:
Operator
Thank you. [Operator Instructions] We'll take our first question from James Lee with Potrero Capital.
James Lee -- Potrero Capital -- Analyst
Thanks for taking my questions. Appreciate your commentary about backlog remaining healthy. But given the, I guess, COVID-19 at the development, its impact here in the US and Europe is just starting, have you heard anything changes in terms of the demand from your dealers here and then in the Europe?
Jeffrey I. Badgley -- Co-Chief Executive Officer
Will, I mean, you talk to our domestic dealers all the time.
William G. Miller -- President, Co-Chief Executive Officer & Director
Yes. From a domestic standpoint -- this is Will Miller. Our order intake remains consistent with the order intake we have seen over the last quarter, and customer sentiment and the communication that we're getting on a daily and weekly basis remains confident and strong at this time.
Jeffrey I. Badgley -- Co-Chief Executive Officer
And James, this is Jeff. Our international companies still have a very strong backlog, both in England and France. Their order entry rates seem to be remaining healthy. So at this point, no. But I understand your question completely. Things can change quick.
James Lee -- Potrero Capital -- Analyst
And regarding the supply chain, we've heard or read about the factory issues in China impacting the auto industry. Do you -- have you seen or do you anticipate that will also affect your ability to obtain your equipment?
Jeffrey I. Badgley -- Co-Chief Executive Officer
We have not seen any major impact at this point. Will has done a great job here in the US and our purchasing people in Europe have done a great job monitoring our supply chain. Our VP of Purchasing we met with yesterday, both of us. At this point, there are some spotty places, but none of them being major supply. He is digging deep into not only supplies coming out of China, also supplies coming out of the US or other countries in the world that have sub-components coming out of China. And at this point, we feel comfortable. But again, we all understand the issue and we all know that the world is not perfect and things can change, but we will continue to monitor.
William G. Miller -- Chairman
And Jeff [Phonetic], this is Bill. The bulk of our product is, number one, manufactured here, but our subcomponents, the bulk of them are from the United States. So we consider ourselves Made in America.
James Lee -- Potrero Capital -- Analyst
Got it. Lastly on the -- what is your capital -- capex plan for the year?
Jeffrey I. Badgley -- Co-Chief Executive Officer
Obviously, we think we will return back to normal levels of capex, but if you table, I think, we've talked about that we're instituting a new system in our operation. But if you look at normalized level, it should be somewhere around depreciation. I would tell you, we've been very successful at making investments in capex that increase our Company's sustainability. I think, we look at opportunities all the time.
James Lee -- Potrero Capital -- Analyst
Great. Thank you.
Operator
[Operator Instructions] And with that, that does conclude today's question-and-answer session. I'd like to turn the call back over to management for any additional or closing comments.
Jeffrey I. Badgley -- Co-Chief Executive Officer
Yes. We'd like to thank you for joining our call today and we look forward to talking to you to report our Q1 performance. Have a nice afternoon.
Operator
[Operator Closing Remarks]
Duration: 19 minutes
Call participants:
Brendan Dunlap
Jeffrey I. Badgley -- Co-Chief Executive Officer
Deborah L. Whitmire -- Chief Financial Officer, Treasurer & Executive Vice President
William G. Miller -- Chairman
William G. Miller -- President, Co-Chief Executive Officer & Director
James Lee -- Potrero Capital -- Analyst
