Good day, ladies and gentlemen, and welcome to the Miller Industries Third Quarter 2021 Results Conference Call. Please note this event is being recorded. And now, at this time, I’d like to turn the call over to Mike Gaudreau at FTI Consulting. Please go ahead, sir.

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 2021 third quarter results, which were released after the close of the 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 session. 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 to 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. At this time, I’d like to turn the call over to Jeff. Please go ahead, Jeff.

Thank you, and good morning, everyone. Our third quarter results are a testament to the perseverance of our workforce despite a precarious supply chain and labor shortages that are affecting nearly every company in the United States. Third quarter revenues were slightly lower year-over-year as increasing supply chain disruptions made it difficult to obtain all necessary materials to complete finished goods. More specifically, compared to the same period a year ago, our sales decreased 2.2% to $164.7 million. Gross profit for the third quarter remained flat from the prior year period at $17.8 million, while gross margin in the third quarter increased approximately 23 basis points year-over-year, with an increase in efficiencies offset significantly by inflationary pressures on the cost of purchased materials and component parts. As a reminder, we continue to strive to pass on price increases to customers to cover the increased costs we are incurring. However, it takes time to reap the benefits of these price increases as we generally honor contract prices within our increasing backlog, which results in near-term margin pressure. In our domestic business, demand for our products sits at near all-time highs. However, shortages in raw materials and component parts resulting from supply chain issues have continued to impact the amount of finished goods we can produce and ship. As always, we continue to leverage all available resources to actively mitigate supply chain disruptions and inflationary pressures. In our international business, European recovery from COVID, which lagged recovery slightly here in the U.S., increased demand and our backlog in the third quarter. Notably, our European entities experienced a very strong quarter, while export activity from the U.S. has yet to reach pre-pandemic levels due to global shipping constraints. However, as these constraints are lifted, we hope to see continued growth in our international markets. We are seeing the operational benefits of our fabrication equipment upgrades implemented during 2020 and our enterprise software upgrades completed in the first quarter of 2021. Now that these upgrades are complete, we expect to be able to truly leverage the full capabilities of these enhancements. Now I’ll turn the call over to Debbie, who will review the third quarter financial results. And then I will finish by providing some commentary on the current market environment and some closing remarks.

Thanks, Jeff, and good morning, everyone. Net sales for the third quarter 2021 were $164.7 million versus $168.4 million for the third quarter of 2020, a 2.2% year-over-year decrease driven largely by supply chain issues and raw material shortages. Cost of operations decreased 2.4% to $146.9 million for the third quarter 2021 compared to $150.5 million for the third quarter 2020 due to enhanced operational effectiveness stemming from our ERP and other initiatives and a slight year-over-year decline in sales. Cost of operations as a percentage of net sales decreased approximately 23 basis points to 89.2% from the prior year period. Gross profit was $17.8 million or 10.8% of net sales for the third quarter 2021 compared to $17.8 million or 10.6% of net sales for the third quarter 2020, largely driven by our operational enhancement. SG&A expenses were $12 million for the third quarter of 2021 compared to $9.2 million for the third quarter of 2020, resulting from costs associated with our ERP system rollout and increased investments in human capital to support the growth needs of the business. As a percentage of sales, SG&A increased approximately 180 basis points to 7.3% from 5.5% in the prior year period. Moving forward, we would expect our SG&A expense to return to a more normal typical run rate for the company. Interest expense net for the third quarter 2021 was $286,000, up from $230,000 for the third quarter 2020, resulting from an increase in customer floor plan financing costs to support our distribution network. Other income expense for the third quarter 2021 was a loss of $206,000 compared to income of $209,000 for the third quarter 2020. The increase was largely attributable to currency exchange rate fluctuations. Net income for the third quarter 2021 was $3.8 million or $0.34 per share compared to net income of $6.6 million or $0.57 per share in the third quarter of 2020. Now let me briefly review our results for the 9 months ended September 30, 2021. Net sales for the first 9 months of 2021 were $515.8 million compared to $472.9 million in the prior year period, an increase of 9.1%. Gross profit for the 9 months ended September 30, 2021, was $54.3 million or 10.5% of sales compared to $54.1 million or 11.4% of sales for the first 9 months of 2020. Net income for the first 9 months of 2021 was $13.5 million or $1.19 per share, a decrease of 23.7% compared to net income for the first 9 months of 2020 of $17.8 million or $1.56 per share. Now turning to the balance sheet. Cash and cash equivalents as of September 30, 2021, was $50.4 million compared to $53.9 million as of June 30, 2021, and $57.5 million as of December 31, 2020. Accounts receivable as of September 30, 2021, totaled $131.3 million compared to $161.8 million at June 30, 2021, and $141.6 million as of December 31, 2020. Inventories were $108.8 million as of September 30, 2021, compared to $92 million as of June 30, 2021, and $83.9 million as of December 31, 2020. Accounts payable as of September 30, 2021, was $87.8 million compared to $108.1 million as of June 30, 2021, and $85.5 million as of December 31, 2020. So as the supply chain issues present significant challenges, we continue to stick to our strategy of diligently allocating capital and preserving our cash. We believe that given our prudent capital allocation and our strong balance sheet, we have more than enough financial flexibility to invest in our business and capitalize on strong demand tailwinds when we move into a more normalized environment. And lastly, the company also announced that its Board of Directors approved our quarterly cash dividend of $0.18 per share payable December 13, 2021, to shareholders of record at the close of business on December 6, 2021. Now I’ll turn the call back to Jeff for closing remarks.

Thank you, Debbie. While our market conditions continue to show strength and customer demand sits near all-time highs, supply chain constraints make our markets anything but normal. That said, we have positioned the company extremely well for when these adverse conditions eventually pass, and we remain committed to our best-in-class customer service and preserving our culture of operational excellence. Additionally, as Debbie mentioned, our financial position is strong, and we have more than enough financial flexibility to weather any storms caused by these issues and even further capitalize on the spike in demand from our customers when conditions normalize. While it is difficult to forecast when supply chain and transportation headwinds will subside, we are confident that the strength of our end markets, our operational effectiveness, and our strong financial position will allow us to efficiently capitalize on new growth prospects and generate long-term shareholder value in the quarters and years to come. As always, in closing, Will and I would like to thank our employees, customers, suppliers, and shareholders for their ongoing support of Miller Industries. Thank you again for joining us this morning. Operator, please open the line for questions.

And our first question today comes from Arnie Ursaner with Family Office.

Can you hear me okay?

Yes, sir.

Absolutely.

Great. My first question is have you attempted to estimate or guess the potential revenue impact that you’re seeing from the supply chain shortages.

If you look at the quarterly report, you'll notice that our inventory has significantly increased. The report shows that most of this increase is in both raw materials and work in progress at the end of the quarter. While it's difficult to determine the exact revenue impact, we recently identified around $13.5 million to $14 million in billable product at our Ooltewah facility that is currently delayed from moving to finished goods. This delay is primarily due to about $200,000 worth of parts and a couple of hundred hours of labor. I hope this addresses your question.

I believe it certainly emphasizes the significant challenges of managing a business today due to supply chain issues. We discussed this last quarter. I appreciate your commitment to treating your customers well, and I commend you for that. You chose not to adjust pricing on orders in backlog. However, my impression is that you will be addressing much of the underpriced or mispriced backlog by the middle of the year. You also mentioned potentially adding surcharges to ensure cost recovery. Can you provide an update on how you are managing pricing for your customers in this extremely challenging environment?

We have initiated 4 increases throughout this year. The first increase, I think we’re getting full benefit of now. The second increase will take place January 3 and April. But all in, I believe, by the middle of next year, we’ll capture all the increases we put in place this year.

Could you clarify whether you still have a backlog that doesn't reflect the current cost pressures you're experiencing, and if this situation is expected to continue for another 4 to 6 months? Is that an accurate interpretation?

Yes. Unfortunately, you understand that we deliver not only our product but chassis that go underneath our product. So managing the flow of our backlog is complicated and becomes somewhat a situation of what chassis show up when by what manufacturer of the chassis. So you can have some product that may be going on one manufacturer of a chassis that moves through the backlog quicker than another because the other manufacturer is behind schedule. So it’s really dependent on quite a few variables of how quick it flows through the backlog.

Can you share how far out your backlog is in terms of delivery schedule?

We really don’t disclose our backlog amounts. I can tell you I’ve been here quite a while along with Bill Miller, our Chairman. I don’t think either one of us have seen the type of demand that we have seen over the last 5 or 6 months.

If I could rephrase my question, you mentioned a price increase in January and another in April. For the orders scheduled to go out in April, will they be at the old price, or are you expecting to recover your volume from 2022?

We’re doing everything we can in terms of price increases to get as much back as quickly as we possibly can.

Okay. If I can shift gears on the supply issue to a different challenge that you’ve talked about, where are you these days on the labor issue? And are you able to get fully staffed or maybe an update on labor?

We have made some strides on our labor position. Those strides did cost some money. We had to do sign-on bonuses, et cetera, to get skilled workers into our facilities. But yes, we’ve made, I think, very good strides.

Great. Got a quick questions for...

Carefully staffed at this point.

Very quick question for Debbie if I can, the ERP cost and the impact on SG&A. And how long will that continue?

We disclosed in there it’s a multiyear arrangement with our business partner, so that will continue for the next 3 to 4 years as we continue to roll out different modules of the implementation and additional license costs go into SG&A. More details about that can be found in that disclosure of what that commitment is over the next 3 to 4 years.

Two more questions if I can quickly. Have you given any thought or a view towards your potential capital expenditures for 2022?

We have discussed our capital expenditures. We are assessing our current position to address these challenges. The company has implemented several price increases and is expanding our supply base. We are redesigning products to reduce reliance on single-source components. We are also aligning our production with the availability of labor at our facilities and have expanded our Greeneville operation to enhance our control over fabrication improvements and consolidate raw materials. If this strategy is successful, we may consider additional expenses, but it heavily depends on how we navigate the ongoing supply chain disruptions.

Okay. My final question...

And Jeff, this is Bill. From a Board perspective, there are opportunities out there. As we identify them, we will clearly take advantage of any opportunities that may arise during this challenging time, as we are prepared for that.

I imagine that the challenges you face are likely even more pronounced for your smaller competitors. You have successfully made acquisitions along the way, and I believe your shareholders would appreciate it if you can identify the right opportunities. My last question is directed to the Miller family. I became involved with your company when you went public at Bear Stearns nearly 30 years ago. My main inquiry is regarding your outstanding family business, which currently lacks public and research coverage. Can you share your thoughts on whether you seek public coverage and research coverage, and how you plan to better communicate your story to the investment community?

Bill, if you’d like to…

I believe they're directing that question to me. Yes, as a company, we’ve enjoyed significant success over the past 30 years, from our founding to our current state. The Board, which has been independent for over 25 years, is responsible for selecting all senior officers, and I do not partake in that process. The family retains about 3% of the company, making it the largest single individual shareholder, while most shares are held by various investment funds and individuals from Wall Street. Regarding our company’s outlook, I recall a point made by Warren Buffett, noting that the stock market is short-term like a voting booth, but long-term it depends on your ability to generate income and your valuation. With that in mind, we have experienced an internal growth rate exceeding 10% annually for the past 20 years, entirely driven by our own R&D and product development, as well as market penetration and the success of our distributors, without any acquisitions during that period. I believe our earnings and growth trajectory will lead to an appropriate valuation for our company. We intend to remain on this call to address any questions from analysts or shareholders as needed. However, we choose not to communicate between quarterly calls to ensure that every participant has the same information, preventing any advantage. We refrain from providing earnings projections to analysts or anyone else. Our approach is straightforward; while we welcome analysts, we will not pursue them, nor provide additional information to make us more appealing. Everyone receives the same information and has access to the call. We prefer not to offer extra info between calls, though you are welcome to visit our facilities at any time, understanding that our personnel will not share information not disclosed on this call. We are committed to maintaining this practice. That's our response.

And that does conclude today’s question-and-answer session. I’d like to turn the call back to management for any additional or closing comments.

We would like to thank you for joining our conference call today and look forward to talking to you when we report fourth quarter and year-end results. Appreciate your support.

Thank you.

And with that, ladies and gentlemen, this concludes today’s conference call. We’d like to thank you again for your participation. You may now disconnect.