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Miller Industries Inc (MLR -1.13%)
Q1 2020 Earnings Call
May 7, 2020, 11:00 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 2020 Results Conference Call. Please note this event is being recorded. And now at this time, I would like to turn the call over to Brendan Dunlap, FTI Consulting. Please go ahead, sir.
Brendan Dunlap -- Investor Relations, FTI Consulting
Thank you and good morning everyone. I would like to welcome you to Miller Industries conference call. We are here today to discuss the company's 2020 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; 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. Before we discuss our first quarter financial results, let me start by saying that our thoughts are with all those affected by COVID-19. These are unprecedented and challenging times and I am deeply appreciative of the hard work and dedication of our employees. During March, we implemented significant actions to protect the health and well-being of our employees, as well as our suppliers and customers. Additionally, we took the necessary steps to adjust our operations that serve to balance health and safety with continued operations so that we can continue to serve our customers. I'd also like to say that we are thankful for the healthcare professionals and essential workers, which includes our employees and our customers on the frontline dedicated to moving America forward during this difficult time. As the country begins to heal, we remain committed to providing industry-leading products to help keep America's roadways clear.
Moving on to our financial results, our performance during the quarter was negatively impacted by disruptions in our supply chain, as well as production modifications and shutdowns and delayed deliveries associated with the onset of the COVID-19 pandemic. Revenue during the first quarter decreased 10.7% to $176.1 million versus $197.3 million a year ago as a result of rescheduled delivery of certain components within our supply chain and deferred delivery of units as a result of the cancellation of our largest trade show of the year due to COVID-19. Additionally, we experienced the temporary shutdown in our manufacturing facility at the end of the quarter and social distancing and shelter-in-place policies were implemented nationwide.
However, I am pleased to say that we were able to quickly adjust our business operations in order to resume production effectively and efficiently. Our domestic business was negatively impacted, however, our international business held constant quarter-over-quarter due to favorable contract delivery timing. Quarterly gross profits decreased by 18% year-over-year to $18.5 million and our gross margin contracted approximately 100 basis basis points year-over-year to 10.5%, reflecting reduced fixed cost absorption as a result of a decrease in top-line sales.
Net income was $5.4 million or $0.48 per share compared to net income of $8.7 million or $0.76 per share in the first quarter of 2019. Despite the challenging environment, we are confident in our ability to continue meeting the needs of our customers. The safety and well-being of our employees is our primary concern so as we move into the second quarter, we are maintaining current production levels to balance deliveries done on strong backlog, while following recommended social distancing guidelines and other CDC requirements in our facilities. We are also proactively working with our distribution network to maximize their inventory investment during these challenging times.
Further, we drew $25 million on our existing credit facility to strengthen our liquidity position as we manage the business through this crisis. Now I will turn the call over to Debbie, who will review the first quarter financial results. After that, I'll be back with comments about market environment and some closing remarks. Debbie?
Deborah L. Whitmire -- Executive Vice President, Chief Financial Officer and Treasurer
Thanks, Jeff and good morning, everyone. Net sales for the first quarter of 2020 were $176.1 million versus $197.2 million for the first quarter of 2019, a 10.7% year-over-year decrease driven by supplier delay issues imposed on deliveries resulting from COVID-19. Cost of operations decreased 9.8% to $157.5 million for the first quarter of 2020 compared to $174.6 million for the first quarter 2019 due to the decline in our top-line sales. Cost of operations as a percentage of net sales expanded approximately 100 basis points to 89.5% from the prior year period.
Gross profit was $18.5 million or 10.5% of [Technical Issues] reflecting reduced fixed cost absorption, resulting from the decline in top-line sales. SG&A expenses were $11 million for the first quarter of 2020 compared to $10.2 million for the first quarter of 2019. As a percentage of sales, SG&A increased approximately 100 basis points to 6.3% from 5.3% in the prior year period. Interest expense net for the first quarter of 2020 was $359,000 compared to $668,000 for the first quarter of 2019, as interest income from our distributor receivables increased and interest expense from the credit facility and distributor floor plan finance decreased. Other income and expense for the first quarter 2020 was a net expense of $91,000 compared to a net expense of $245,000 for the first quarter of 2019 due to currency exchange rate fluctuations.
Net income for the first quarter of 2020 was $5.4 million or $0.48 per diluted share. Net income for the first quarter of 2019 was $8.7 million or $0.76 per diluted share.
Turning now to our balance sheet, cash and cash equivalents as of March 31, 2020 was $43.1 million compared to $26.1 million as of December 31, 2019 and $19 million at March 31, 2019. Accounts receivable at March 31, 2020 totaled $168.9 million compared to $168.6 million as of December 31, 2019 and $183.8 million at March 31, 2019. Inventories were $92.6 million as of March 31, 2020 compared to $88 million as of March 31, 2019 [December 31, 2019] and $96.2 million at March 31, 2019. Accounts payable at March 31, 2020 was $96.8 million compared to $95.8 million as of December 31, 2019 and $107.8 million at March 31, 2019.
During the quarter, we drew $25 million from our existing credit facility in order to bolster our liquidity position amid the COVID-19 pandemic. Overall, our balance sheet remains strong and we believe we have sufficient financial flexibility to manage our business through this process. Lastly, the company also announced its Board of Directors approved our quarterly cash dividend of $0.18 per share payable June 15, 2020 to shareholders of record at the close of business on June 8, 2020. Now I'll turn the call back to Jeff for further remarks.
Jeffrey I. Badgley -- Co-Chief Executive Officer
Thank you very much, Debbie. I am extremely proud of our employees for their hard work and continued dedication during these unprecedented times. Despite the challenging environment, our commitment to operational excellence endured as we successfully maintained production levels to meet the needs of our customers. Further, we remain dedicated to returning capital to our shareholders as evidenced by our declared dividend of $0.18 per share. The strength of our balance sheet and our robust liquidity provides us the financial flexibility needed to preserve through these challenging times.
As we transition into the second quarter, we are still feeling the impact of the pandemic on our business, which we expect will persist, at least through the second quarter and it is unclear how long this will impact economic activity and thus our business. However, we will continue to monitor the ongoing pandemic and adjust our supply chain and operations accordingly. Finally, we are confident that our prior cost reduction initiatives and unwavering commitment to best-in-class customer service will continue to benefit us as we navigate through this crisis.
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 and with that, we're ready to answer your questions.
Questions and Answers:
Operator
[Operator Instructions] And we have no questions at this time.
Jeffrey I. Badgley -- Co-Chief Executive Officer
Thank you again for joining us on the call today, and we look forward to speaking with you again on our second quarter results conference call in the future. Stay safe, stay healthy.
Operator
[Operator Closing Remarks]
Duration: 13 minutes
Call participants:
Brendan Dunlap -- Investor Relations, FTI Consulting
Jeffrey I. Badgley -- Co-Chief Executive Officer
Deborah L. Whitmire -- Executive Vice President, Chief Financial Officer and Treasurer
