Miller Industries, Inc. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024. Comparisons are with the three months ended March 31, 2023 unless otherwise noted. Miller Industries manufactures and sells towing and recovery equipment through distributor networks; it reports one operating segment.
Financial performance
| Metric | Q1 2024 | Q1 2023 | Change |
|---|---|---|---|
| Net sales | $349.9 million | $282.3 million | +23.9% |
| Gross profit | $44.2 million | $30.4 million | +45.5% |
| Gross margin | 12.6% | 10.8% | +1.8 percentage points |
| Net income | $17.0 million | $9.2 million | +84.6% |
| Diluted EPS | $1.47 | $0.81 | — |
| Operating cash flow | $9.0 million | $(6.8) million | Improved |
| Capital expenditures | $4.7 million | $1.7 million | Higher |
Net margin rose to 4.9% from 3.3%. SG&A increased 20.2% to $21.5 million, but declined as a share of sales to 6.2% from 6.3%. Interest expense, net, increased 23.0% to $1.2 million. The effective tax rate was 20.8%, versus 21.9%.
Operating cash flow improved primarily with higher earnings and more stable working-capital movements. Accounts receivable increased $52.7 million from year-end, while inventory declined $5.5 million. Cash and temporary investments were $26.8 million at March 31, down $3.1 million since year-end. The quarter’s approximate free cash flow, calculated as operating cash flow less capital expenditures, was $4.3 million.
Financial position and material changes
At March 31, 2024, total assets were $696.5 million and shareholders’ equity was $362.4 million. Current assets were $558.8 million and current liabilities $274.6 million. Credit-facility borrowings were $55.0 million, down from $60.0 million at December 31, 2023; the $100.0 million facility had $45.0 million available at quarter-end. The company reported covenant compliance. As of May 1, borrowings had increased to $65.0 million.
Revenue growth reflected higher production volumes amid improved component availability and continued strong customer demand. Gross margin benefited from pricing actions, productivity improvements, and stabilizing raw-material costs. North American sales rose 23.4% to $318.5 million; foreign sales rose 30.0% to $31.3 million. The 2023 acquisition of Southern Hydraulic Cylinder contributed approximately $1.9 million of Q1 2024 revenue and $0.1 million of pretax income.
Outlook, risks, and other notable items
Management gave no specific quantitative earnings or revenue guidance. It cited strong backlog, improved supply availability, pricing, and productivity as factors supporting continued operating improvement, while warning that supply-chain constraints, inflation, geopolitical developments, recession risk, and broader economic conditions could adversely affect production, results, and cash flows during 2024. Management believes available capital and projected operating cash flow are adequate for expected needs over the next 12 months.
- The board authorized a share repurchase program of up to $25.0 million on April 2, 2024; no shares had been repurchased as of April 30. Funding may use cash or credit-facility borrowings.
- On May 6, the board declared a $0.19-per-share dividend, payable June 10 to shareholders of record June 3.
- Capital spending commitments were approximately $5.8 million; software implementation commitments were approximately $1.4 million, payable through 2025.
- Lender arrangements expose the company to potential repurchases of repossessed products, with a maximum possible amount of $148.5 million. No repurchases occurred in the quarter, and management concluded a related liability was neither probable nor material.
- The company is subject to ordinary-course claims and lawsuits; management believes pending matters will not significantly affect financial position or results, while noting litigation is inherently uncertain.
Important facts for investors to verify
- Whether strong backlog and demand translate into continued production and sales growth as supply conditions evolve.
- Whether margin gains persist amid raw-material, labor, freight, and other cost pressures.
- Working-capital requirements, especially collections of the larger accounts-receivable balance, and their effect on cash generation.
- Borrowing needs and covenant headroom after the May 1 increase in facility debt, including any use of the new repurchase authorization.
- Potential exposure under product-repurchase arrangements and developments in litigation or other contingencies.