UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
_______________
FORM
10-Q
x |
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For the
quarterly period ended September
30, 2008
o |
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For the
transition period from
to
Commission
file number 001-14124
(Exact
name of registrant as specified in its charter)
|
|
|
(State
or other jurisdiction of incorporation or organization)
|
|
(I.R.S.
Employer Identification No.)
|
|
|
|
8503
Hilltop Drive
Ooltewah,
Tennessee
|
|
|
(Address
of principal executive offices)
|
|
(Zip
Code)
|
(Registrant’s
telephone number, including area code)
(Former
name, former address and former fiscal year, if changed since last
report)
Indicate
by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
x
Yes o No
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of “accelerated filer,” “large
accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange
Act:
Large
accelerated filer o
|
Accelerated
filer x
|
|
|
Non-accelerated
filer o
|
Smaller
reporting company o
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).
o Yes
x No.
The
number of shares outstanding of the registrant’s common stock, par value $.01
per share, as of October 31, 2008 was 11,593,798.
Index
PART
I
|
FINANCIAL
INFORMATION
|
Page
Number
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|
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|
|
|
Item
1.
|
Financial
Statements
|
|
|
|
|
|
|
|
Condensed
Consolidated Balance Sheets – September 30, 2008 and December 31,
2007
|
2
|
|
|
|
|
|
|
Condensed
Consolidated Statements of Income for the Three and Nine Months Ended
September 30, 2008 and 2007
|
3
|
|
|
|
|
|
|
Condensed
Consolidated Statements of Cash Flows for the Nine Months Ended
September 30, 2008 and 2007
|
4
|
|
|
|
|
|
|
Notes
to Condensed Consolidated Financial Statements
|
5
|
|
|
|
|
|
Item
2.
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
10
|
|
|
|
|
|
Item
3.
|
Quantitative
and Qualitative Disclosures About Market Risk
|
15
|
|
|
|
|
|
Item
4.
|
Controls
and Procedures
|
15
|
|
|
|
|
PART
II
|
OTHER
INFORMATION
|
|
|
|
|
|
Item
1.
|
Legal
Proceedings
|
16
|
|
|
|
|
|
Item
1A.
|
Risk
Factors
|
16
|
|
|
|
|
|
Item
6.
|
Exhibits
|
17
|
|
|
|
|
SIGNATURES
|
|
18
|
FORWARD-LOOKING
STATEMENTS
Certain
statements in this Form 10-Q, including but not limited to “Item 2–Management’s
Discussion and Analysis of Financial Condition and Results of Operations,” may
be deemed to be forward-looking statements, as defined in the Private Securities
Litigation Reform Act of 1995. Forward-looking statements can be
identified by the use of words such as “may,” “will,” “should,” “could,”
“continue,” “future,” “potential,” “believe,” “project,” “plan,” “intend,”
“seek,” “estimate,” “predict”, “expect”, “anticipate” and similar expressions,
or the negative of such terms, or other comparable
terminology. Forward-looking statements also include the assumptions
underlying or relating to any of the foregoing statements. Such
forward-looking statements are made based on our management’s beliefs as well as
assumptions made by, and information currently available to, our
management. Our actual results may differ materially from the results
anticipated in these forward-looking statements due to, among other things,
economic and capital markets conditions, the risks related to changes in fuel
and other transportation costs, the cyclical nature of our industry, the general
economic health of our customers and their access to capital and credit to fund
purchases, our dependence on outside suppliers of raw materials, changes in the
cost of aluminum, steel and related raw materials, and those other risks
referenced herein, including those risks referred to in this report, in Part II,
“Item 1A–Risk Factors” and those risks discussed in our other filings with the
SEC, including those risks discussed under the caption “Risk Factors” in our
Form 10-K for fiscal 2007, which discussion is incorporated herein by this
reference. Such factors are not exclusive. We do not
undertake to update any forward-looking statement that may be made from time to
time by, or on behalf of, our company.
PART
I. FINANCIAL INFORMATION
MILLER
INDUSTRIES, INC. AND SUBSIDIARIES
(In
thousands, except share data)
|
|
September 30,
2008
(Unaudited)
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
CURRENT
ASSETS:
|
|
|
|
|
|
|
Cash
and temporary investments
|
|
$ |
20,427 |
|
|
$ |
23,282 |
|
Accounts
receivable, net of allowance for doubtful accounts of $1,404 and $1,640 at
September 30, 2008 and December 31, 2007,
respectively
|
|
|
56,735 |
|
|
|
67,035 |
|
Inventories
|
|
|
44,538 |
|
|
|
39,313 |
|
Prepaid
expenses and other
|
|
|
3,000 |
|
|
|
1,775 |
|
Current
deferred income taxes
|
|
|
3,036 |
|
|
|
3,038 |
|
Total
current assets
|
|
|
127,736 |
|
|
|
134,443 |
|
PROPERTY, PLANT, AND EQUIPMENT,
net
|
|
|
35,486 |
|
|
|
33,807 |
|
GOODWILL
|
|
|
11,619 |
|
|
|
11,619 |
|
DEFERRED
INCOME TAXES
|
|
|
7,915 |
|
|
|
8,615 |
|
OTHER
ASSETS
|
|
|
382 |
|
|
|
558 |
|
|
|
$ |
183,138 |
|
|
$ |
189,042 |
|
LIABILITIES
AND SHAREHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES:
|
|
|
|
|
|
|
|
|
Current
portion of long-term obligations
|
|
$ |
1,901 |
|
|
$ |
1,802 |
|
Accounts
payable
|
|
|
33,317 |
|
|
|
39,926 |
|
Accrued
liabilities and other
|
|
|
10,505 |
|
|
|
10,623 |
|
Total
current liabilities
|
|
|
45,723 |
|
|
|
52,351 |
|
LONG-TERM OBLIGATIONS,
less current portion
|
|
|
2,860 |
|
|
|
4,203 |
|
COMMITMENTS AND CONTINGENCIES
(Notes 5 and 8)
|
|
|
|
|
|
|
|
|
SHAREHOLDERS’
EQUITY:
|
|
|
|
|
|
|
|
|
Preferred
stock, $.01 par value; 5,000,000 shares authorized, none issued or
outstanding
|
|
|
- |
|
|
|
- |
|
Common
stock, $.01 par value; 100,000,000 shares authorized, 11,593,798 and
11,588,179 outstanding at September 30, 2008 and December 31,
2007, respectively
|
|
|
116 |
|
|
|
116 |
|
Additional
paid-in capital
|
|
|
160,852 |
|
|
|
160,700 |
|
Accumulated
deficit
|
|
|
(29,318 |
) |
|
|
(32,208 |
) |
Accumulated
other comprehensive income
|
|
|
2,905 |
|
|
|
3,880 |
|
Total
shareholders’ equity
|
|
|
134,555 |
|
|
|
132,488 |
|
|
|
$ |
183,138 |
|
|
$ |
189,042 |
|
The
accompanying notes are an integral part of these financial
statements.
MILLER
INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF INCOME
(In
thousands, except per share data)
(Unaudited)
|
|
Three
Months Ended
September 30,
|
|
|
Nine
Months Ended
September 30,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
SALES
|
|
$ |
66,735 |
|
|
$ |
92,692 |
|
|
$ |
209,071 |
|
|
$ |
315,520 |
|
COSTS
AND EXPENSES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs
of operations
|
|
|
58,608 |
|
|
|
79,637 |
|
|
|
184,355 |
|
|
|
270,485 |
|
Selling,
general and administrative expenses
|
|
|
6,402 |
|
|
|
6,481 |
|
|
|
19,032 |
|
|
|
20,671 |
|
Interest
expense, net
|
|
|
254 |
|
|
|
1,018 |
|
|
|
1,046 |
|
|
|
2,612 |
|
Total
costs and expenses
|
|
|
65,264 |
|
|
|
87,136 |
|
|
|
204,433 |
|
|
|
293,768 |
|
INCOME
BEFORE INCOME TAXES
|
|
|
1,471 |
|
|
|
5,556 |
|
|
|
4,638 |
|
|
|
21,752 |
|
INCOME
TAX PROVISION
|
|
|
554 |
|
|
|
1,958 |
|
|
|
1,748 |
|
|
|
7,886 |
|
NET
INCOME
|
|
$ |
917 |
|
|
$ |
3,598 |
|
|
$ |
2,890 |
|
|
$ |
13,866 |
|
BASIC
INCOME PER COMMON SHARE
|
|
$ |
0.08 |
|
|
$ |
0.31 |
|
|
$ |
0.25 |
|
|
$ |
1.20 |
|
DILUTED
INCOME PER COMMON SHARE
|
|
$ |
0.08 |
|
|
$ |
0.31 |
|
|
$ |
0.25 |
|
|
$ |
1.19 |
|
WEIGHTED
AVERAGE SHARES OUTSTANDING:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
11,594 |
|
|
|
11,572 |
|
|
|
11,592 |
|
|
|
11,545 |
|
Diluted
|
|
|
11,601 |
|
|
|
11,667 |
|
|
|
11,618 |
|
|
|
11,661 |
|
The
accompanying notes are an integral part of these financial
statements.
MILLER
INDUSTRIES, INC. AND SUBSIDIARIES
(In
thousands)
(Unaudited)
|
|
Nine
Months Ended
September 30,
|
|
|
|
|
|
|
|
|
OPERATING
ACTIVITIES:
|
|
|
|
|
|
|
Net
income
|
|
$ |
2,890 |
|
|
$ |
13,866 |
|
Adjustments
to reconcile net income to net cash provided by operating
activities:
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
2,635 |
|
|
|
2,127 |
|
Amortization
of deferred financing costs
|
|
|
71 |
|
|
|
92 |
|
Provision
for doubtful accounts
|
|
|
135 |
|
|
|
225 |
|
Stock-based
compensation
|
|
|
77 |
|
|
|
231 |
|
Issuance
of non-employee director shares
|
|
|
75 |
|
|
|
75 |
|
Deferred
income tax provision
|
|
|
301 |
|
|
|
6,134 |
|
Gain
on disposals of property, plant and equipment
|
|
|
- |
|
|
|
(109 |
) |
Changes
in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
9,303 |
|
|
|
7,600 |
|
Inventories
|
|
|
(6,120 |
) |
|
|
7,211 |
|
Prepaid
expenses and other
|
|
|
(1,251 |
) |
|
|
(107 |
) |
Accounts
payable
|
|
|
(5,807 |
) |
|
|
(21,462 |
) |
Accrued
liabilities and other
|
|
|
660 |
|
|
|
(398 |
) |
Net
cash flows from operating activities
|
|
|
2,969 |
|
|
|
15,485 |
|
INVESTING
ACTIVITIES:
|
|
|
|
|
|
|
|
|
Purchases
of property, plant, and equipment
|
|
|
(4,495 |
) |
|
|
(7,401 |
) |
Proceeds
from sale of property, plant and equipment
|
|
|
2 |
|
|
|
143 |
|
Payments
received on notes receivables
|
|
|
153 |
|
|
|
391 |
|
Net
cash flows from investing activities
|
|
|
(4,340 |
) |
|
|
(6,867 |
) |
FINANCING
ACTIVITIES:
|
|
|
|
|
|
|
|
|
Payments
under Subordinated Credit Facility
|
|
|
- |
|
|
|
(5,000 |
) |
Payments
on long-term obligations
|
|
|
(1,391 |
) |
|
|
(1,324 |
) |
Borrowings
under long-term obligations
|
|
|
150 |
|
|
|
- |
|
Additions
to deferred financing costs
|
|
|
(2 |
) |
|
|
(42 |
) |
Proceeds
from the exercise of stock options
|
|
|
1 |
|
|
|
617 |
|
Net
cash flows from financing activities
|
|
|
(1,242 |
) |
|
|
(5,749 |
) |
EFFECT
OF EXCHANGE RATE CHANGES ON CASH AND TEMPORARY INVESTMENTS
|
|
|
(242 |
) |
|
|
231 |
|
NET
CHANGE IN CASH AND TEMPORARY INVESTMENTS
|
|
|
(2,855 |
) |
|
|
3,100 |
|
CASH
AND TEMPORARY INVESTMENTS, beginning of period
|
|
|
23,282 |
|
|
|
8,204 |
|
CASH
AND TEMPORARY INVESTMENTS, end of period
|
|
$ |
20,427 |
|
|
$ |
11,304 |
|
SUPPLEMENTAL
DISCLOSURE OF CASH FLOW INFORMATION:
|
|
|
|
|
|
|
|
|
Cash
payments for interest
|
|
$ |
1,481 |
|
|
$ |
3,233 |
|
Cash
payments for income taxes
|
|
$ |
1,724 |
|
|
$ |
2,157 |
|
The
accompanying notes are an integral part of these financial
statements.
MILLER
INDUSTRIES, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The
condensed consolidated financial statements of Miller Industries, Inc. and
subsidiaries (the “Company”) included herein have been prepared by the Company
pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally
included in annual financial statements prepared in accordance with accounting
principles generally accepted in the United States of America have been
condensed or omitted pursuant to such rules and
regulations. Nevertheless, the Company believes that the disclosures
are adequate to make the financial information presented not
misleading. In the opinion of management, the accompanying unaudited
condensed consolidated financial statements reflect all adjustments, which are
of a normal recurring nature, to present fairly the Company’s financial
position, results of operations and cash flows at the dates and for the periods
presented. Cost of goods sold for interim periods for certain
entities is determined based on estimated gross profit rates. Interim
results of operations are not necessarily indicative of results to be expected
for the fiscal year. These condensed consolidated financial
statements should be read in conjunction with the Company’s Annual Report on
Form 10-K for the year ended December 31, 2007.
2.
|
BASIC
AND DILUTED INCOME PER SHARE
|
Basic
income per share is computed by dividing income by the weighted average number
of common shares outstanding. Diluted income per share is calculated
by dividing income by the weighted average number of common and potential
dilutive common shares outstanding. Diluted income per share takes
into consideration the assumed conversion of outstanding stock options resulting
in approximately 7,000 and 95,000 potential dilutive common shares for the three
months ended September 30, 2008 and 2007, respectively, and 26,000 and
116,000 for the nine months ended September 30, 2008 and 2007,
respectively. Options to purchase approximately 6,000 and 35,000
shares, for the three and nine months ended September 30, 2008 and 2007, which
were outstanding during the period, were not included in the computation of
diluted earnings per share because the effect would have been
anti-dilutive.
Inventory
costs include materials, labor and factory overhead. Inventories are
stated at the lower of cost or market, determined on a first-in, first-out
basis. Inventories at September 30, 2008 and December 31,
2007 consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chassis
|
|
$ |
7,576 |
|
|
$ |
4,866 |
|
Raw
materials
|
|
|
19,326 |
|
|
|
16,555 |
|
Work
in process
|
|
|
11,199 |
|
|
|
12,145 |
|
Finished
goods
|
|
|
6,437 |
|
|
|
5,747 |
|
|
|
$ |
44,538 |
|
|
$ |
39,313 |
|
|
|
|
|
|
|
|
|
|
4.
|
GOODWILL
AND LONG-LIVED ASSETS
|
The
Company periodically reviews the carrying amount of the long-lived assets and
goodwill to determine if those assets may be recoverable based upon the future
operating cash flows expected to be generated by those
assets. Management believes that its long-lived assets are
appropriately valued.
Long-term
obligations consisted of the following at September 30, 2008 and
December 31, 2007 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding
borrowings under Senior Credit Facility
|
|
$ |
2,450 |
|
|
$ |
3,500 |
|
Mortgage,
equipment and other notes payable
|
|
|
2,311 |
|
|
|
2,505 |
|
|
|
|
4,761 |
|
|
|
6,005 |
|
Less
current portion
|
|
|
(1,901 |
) |
|
|
(1,802 |
) |
|
|
$ |
2,860 |
|
|
$ |
4,203 |
|
|
|
|
|
|
|
|
|
|
Certain
equipment and manufacturing facilities are pledged as collateral under the
mortgage and equipment notes payable.
Credit
Facilities and Other Obligations
Senior
Credit Facility
The
Company is party to a Credit Agreement (the “Senior Credit Agreement”) with
Wachovia Bank, National Association, for a $27.0 million senior secured credit
facility (the “Senior Credit Facility”). The Senior Credit Facility
consists of a $20.0 million revolving credit facility (the “Revolver”), and a
$7.0 million term loan (the “Term Loan”). The Senior Credit Facility
is secured by substantially all of the Company’s assets, and contains customary
representations and warranties, events of default and affirmative and negative
covenants for secured facilities of this type. Covenants under the
Senior Credit Facility restrict the payment of cash dividends if a default or
event of default under the Senior Credit Agreement has occurred or would result
from the dividends, or if the Company would be in violation of the consolidated
fixed charge coverage ratio test in the Senior Credit Agreement as a result of
the dividends, among various other restrictions. On July 11, 2007,
the Company and Wachovia agreed to make certain amendments to the Senior Credit
Agreement which are described below.
Formerly,
in the absence of a default, all borrowings under the Revolver bore interest at
the LIBOR Market Index Rate (as defined in the Senior Credit Agreement) plus a
margin of between 1.75% to 2.50% per annum that was subject to adjustment from
time to time based upon the Consolidated Leverage Ratio (as defined in the
Senior Credit Agreement), and the Term Loan bore interest at a 30-day adjusted
LIBOR rate plus a margin of between 1.75% to 2.50% per annum that was subject to
adjustment from time to time based upon the Consolidated Leverage
Ratio. The Revolver was scheduled to expire on June 15, 2008,
and the Term Loan was scheduled to mature on June 15, 2010.
Under the
amended Senior Credit Agreement, the non-default rate of interest under the
Revolver and Term Loan was reduced to be the LIBOR Market Index Rate plus a
margin of between 0.75% to 1.50% per annum that is subject to adjustment from
time to time based upon the Consolidated Leverage Ratio, and the maturity date
of the Revolver was extended to June 17, 2010. The amendments
also increased the ratio of leverage permitted under the Consolidated Leverage
Ratio covenant, and extended and modified certain of the negative covenants and
events of default set forth in the Senior Credit Agreement.
At
September 30, 2008 and December 31, 2007, the Company had no
outstanding borrowings under the Revolver.
Termination
of Junior Credit Facility
William
G. Miller was the sole lender under the Company’s former junior credit facility
(the “Junior Credit Facility”). In May 2006, the Company repaid $5.0
million of the subordinated debt under the Junior Credit Facility, and in May
2007, the Company repaid the remaining $5.0 million principal balance under the
Junior Credit Facility. With such payments, all loans under the
Junior Credit Facility were paid in full. In July 2007, in connection
with the amendments to the Senior Credit Facility, the Junior Credit Facility
was terminated.
Interest
Rate Risk
Changes
in interest rates affect the interest paid on indebtedness under the Senior
Credit Facility and the Company’s mortgage notes payable because the outstanding
amounts of indebtedness under the Senior Credit Facility and the mortgage notes
payable are subject to variable interest rates. Under the Senior
Credit Facility, the non-default rate of interest is equal to the LIBOR Market
Index Rate plus a margin of between 0.75% to 1.50% per annum (for a rate of
interest of 4.68% at September 30, 2008), and under the mortgage notes
payable, the rate of interest is equal to a LIBOR rate plus a margin of 2.25%
(for a rate of interest of 6.18% at September 30, 2008).
Future
maturities of long-term obligations at September 30, 2008 are as follows
(in thousands):
|
|
|
|
|
2009
|
|
$ |
1,901 |
|
2010
|
|
|
2,849 |
|
2011
|
|
|
11 |
|
|
|
$ |
4,761 |
|
|
|
|
|
|
6.
|
RELATED
PARTY TRANSACTIONS
|
Mr.
Miller was the sole lender under the Company’s former Junior Credit
Facility. The Company paid Mr. Miller approximately $228,000 in
interest expense under the Junior Credit Facility for the nine months ended
September 30, 2007. In May 2007, the Company repaid the
remaining $5.0 million of subordinated debt under the Junior Credit
Facility. This payment was approved by the Audit Committee of the
Company’s Board of Directors and by the full Board of Directors with Mr. Miller
abstaining due to his personal interest in the transaction. In July
2007, the Junior Credit Facility was terminated.
7.
|
STOCK-BASED
COMPENSATION
|
Stock
compensation expense for the three months ending September 30, 2008 and
2007 was $0 and $77,000, respectively, and $77,000 and $231,000, respectively,
for the nine months ended September 30, 2008 and 2007 and is included in
selling, general and administrative expenses in the accompanying consolidated
statements of income. The Company did not issue any stock options
during the three months or nine months ended September 30,
2008. As of September 30, 2008, the Company had no remaining
unrecognized compensation expense related to stock options. For
additional disclosures related to the Company’s stock-based compensation refer
to Notes 2 and 5 of the Notes to the Consolidated Financial Statements in the
Company’s Annual Report on Form 10-K for the year ended December 31,
2007.
8.
|
COMMITMENTS
AND CONTINGENCIES
|
Commitments
The
Company has entered into arrangements with third-party lenders where it has
agreed, in the event of default by a customer, to repurchase from the
third-party lender Company products repossessed from the
customer. These arrangements are typically subject to a maximum
repurchase amount. The maximum amount of collateral that the Company
could be required to purchase was approximately $25.0 million at
September 30, 2008, and $33.4 million at December 31,
2007. However, the Company’s risk under these arrangements is
mitigated by the value of the products that would be repurchased as part of the
transaction. The Company considered the fair value at inception of
its liability under these arrangements in accordance with the provisions of
Financial Accounting Standards Board Interpretation No. 45 “Guarantor’s
Accounting and Disclosure Requirements for Guarantees, including Indirect
Guarantees of Indebtedness of Others” and concluded that the liability
associated with these potential repurchase obligations is not
material.
At
September 30, 2008, the modernization project at the Company’s domestic
facilities was substantially complete. The Company had commitments of
approximately $0.3 million for completion of these projects.
Contingencies
The
Company is, from time to time, a party to litigation arising in the normal
course of its business. Litigation is subject to various inherent
uncertainties, and it is possible that some of these matters could be resolved
unfavorably to the Company, which could result in substantial damages against
the Company. The Company has established accruals for matters that
are probable and reasonably estimable and maintains product liability and other
insurance that management believes to be adequate. Management
believes that any liability that may ultimately result from the resolution of
these matters in excess of available insurance coverage and accruals will not
have a material adverse effect on the consolidated financial position or results
of operations of the Company.
The
Company adopted the provisions of Financial Accounting Standards Board
Interpretation No. 48, “Accounting for Uncertainty in Income Taxes – an
interpretation of FASB No. 109” (“FIN 48”) on January 1, 2007. At
September 30, 2008 and December 31, 2007, the Company had no
unrecognized tax positions recorded. The Company does not expect its
unrecognized tax positions to change significantly in the next twelve
months. If unrecognized tax positions existed, the interest and
penalties related to the unrecognized tax positions would be recorded as income
tax expense in the consolidated statement of operations.
The
Company is subject to United States federal income taxes, as well as income
taxes in various states and foreign jurisdictions. The Company’s tax
years 2005 through 2007 remain open to examination for U.S. Federal income
taxes. With few exceptions, the Company is no longer subject to state
or non-U.S. income tax examinations prior to 2005.
The
Company had a comprehensive loss of $0.5 million and comprehensive income of
$3.9 million for the three months ended September 30, 2008 and 2007,
respectively; and comprehensive income of $1.9 million and $14.5 million for the
nine months ended September 30, 2008 and 2007,
respectively. Components of the Company’s other comprehensive income
consist primarily of foreign currency translation adjustments.
11.
|
GEOGRAPHIC
AND CUSTOMER INFORMATION
|
Net sales
and long-lived assets (property, plant and equipment and goodwill and intangible
assets) by region was as follows (revenue is attributed to regions based on the
locations of customers) (in thousands):
|
|
|
|
|
|
|
|
|
For
the Three Months Ended September 30,
|
|
|
For
the Nine Months Ended September 30,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Sales:
|
|
|
|
|
|
|
|
|
|
|
|
|
North
America
|
|
$ |
44,388 |
|
|
$ |
70,968 |
|
|
$ |
146,884 |
|
|
$ |
256,029 |
|
Foreign
|
|
|
22,347 |
|
|
|
21,724 |
|
|
|
62,187 |
|
|
|
59,491 |
|
|
|
$ |
66,735
|
|
|
$ |
92,692
|
|
|
$ |
209,071
|
|
|
$ |
315,520
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long
Lived Assets:
|
|
|
|
|
|
|
North
America
|
|
$ |
43,886 |
|
|
$ |
42,430 |
|
Foreign
|
|
|
3,219 |
|
|
|
2,996 |
|
|
|
$ |
47,105 |
|
|
$ |
45,426 |
|
|
|
|
|
|
|
|
|
|
No single
customer accounted for 10% or more of consolidated net sales for the three and
nine months ended September 30, 2008 and 2007.
12.
|
RECENT
ACCOUNTING PRONOUNCEMENTS
|
Recently
Adopted Standards
In June
2006, the FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in
Income Taxes – an interpretation of FASB Statement No. 109” (“FIN
48”). FIN 48 clarifies the accounting for uncertainty in income taxes
by prescribing a recognition threshold and measurement attribute for the
financial statement recognition and measurement of a tax position taken or
expected to be taken in a tax return. The interpretation also gives
guidance on derecognition, classification, interest and penalties, accounting in
interim periods, and disclosure. FIN 48 was effective January 1, 2007
and did not have a material impact on the Company’s financial
statements.
In
September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS
No. 157”). SFAS No. 157 provides a framework for measuring fair value
in accordance with generally accepted accounting principles, and expands
disclosures regarding fair value measurements and the effect on
earnings. SFAS No. 157 was effective January 1, 2008 and did not have
a material impact on the Company’s financial statements.
In
February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
Financial Assets & Financial Liabilities – Including an Amendment of SFAS
No. 115” (“SFAS No. 159”). SFAS No. 159 will create a fair value
option under which an entity may irrevocably elect fair value as the initial and
subsequent measurement attribute for certain financial assets and liabilities on
a contract by contract basis, with changes in fair values recognized in earnings
as these changes occur. SFAS No. 159 was effective January 1, 2008
and did not have a material impact on the Company’s financial
statements.
Recently
Issued Standards
In
December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
Consolidated Financial Statements, and amendment of ARB No. 51” (“SFAS No.
160”). This standard requires all entities to report minority
interests in subsidiaries as equity in the consolidated financial statements,
and requires that transactions between entities and noncontrolling interests be
treated as equity. SFAS No. 160 is effective for fiscal years
beginning after December 15, 2008, which for the Company is fiscal
2009. The Company is currently evaluating the impact of SFAS No. 160
on our consolidated financial position and results of operations but does not
expect the adoption of SFAS No. 160 to have an effect on its financial
statements.
In March
2008, the FASB issued SFAS No. 161, “Disclosures About
Derivative Instruments and Hedging Activities—an amendment of FASB Statement
No. 133” (“SFAS No. 161”). SFAS No. 161
expands quarterly disclosure requirements in SFAS No. 133 about an entity’s
derivative instruments and hedging activities. SFAS No. 161 is
effective for fiscal years beginning after November 15,
2008. The Company is currently assessing the impact of SFAS No. 161
on its financial position and results of operations but does not expect the
adoption of SFAS No. 161 to have an effect on its financial
statements.
In May
2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted
Accounting Principles” (“SFAS No. 162”). SFAS No. 162 identifies the
sources of accounting principles and the framework for selecting the principles
used in the preparation of the financial statements that are presented in
conformity with generally accepted accounting principles in the United
States. SFAS No. 162 is effective 60 days following the SEC’s
approval of the Public Company Oversight Board amendments to AU Section 411,
“The Meaning of Present Fairly in Conformity With Generally Accepted Accounting
Principles”. The Company does not expect the adoption of SFAS No. 162
to have an effect on its financial statements.
In May
2008, the FASB issued Staff Position No. APB 14-1, “Accounting for Convertible
Debt Instruments that May be Settled in Cash Upon Conversion (Including Partial
Cash Settlement)” (“APB 14-1”). APB 14-1 requires that the liability
and equity components of convertible debt instruments that may be settled in
cash (or other assets) upon conversion (including partial cash settlement) be
separately accounted for in a manner that reflects an issuer’s nonconvertible
debt borrowing rate. The resulting debt discount is amortized over
the period the convertible debt is expected to be outstanding as additional
non-cash interest expense. APB 14-1 is effective for the Company at
the beginning of its 2010 fiscal year and early adoption is not
permitted. Retrospective application to all periods presented is
required except for instruments that were not outstanding during any of the
periods that will be presented in the annual financial statements for the period
of adoption but were outstanding during an earlier period. The
Company is currently evaluating the impact adoption of this statement could have
on its financial statements.
In June
2008, the FASB ratified Emerging Issues Task Force (“EITF”) Issue No. 07-5,
“Determining Whether an Instrument (or an Embedded Feature) Is Indexed to an
Entity’s Own Stock” (“EITF 07-5”). EITF 07-5 provides that an entity
should use a two step approach to evaluate whether an equity-linked financial
instrument (or embedded feature) is indexed to its own stock, including
evaluating the instrument’s contingent exercise and settlement
provisions. It also clarifies on the impact of foreign currency
denominated strike prices and market-based employee stock option valuation
instruments on the evaluation. EITF 07-5 is effective for the Company
at the beginning of its 2010 fiscal year and cannot be adopted
early. The Company is currently assessing the impact that EITF 07-5
will have on its consolidated financial position and results of
operations.
ITEM
2.
|
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
|
Executive
Overview
Miller
Industries, Inc. is the world’s largest manufacturer of vehicle towing and
recovery equipment, with domestic manufacturing subsidiaries in Tennessee and
Pennsylvania, and foreign manufacturing subsidiaries in France and the United
Kingdom. We offer a broad range of equipment to meet our customers’
design, capacity and cost requirements under our Century®,
Vulcan®,
Challenger®,
Holmes®,
Champion®,
Chevron™, Eagle®,
Titan®, Jige™
and Boniface™ brand names.
Overall,
management focuses on a variety of key indicators to monitor our operating and
financial performance. These indicators include measurements of
revenue, operating income, gross margin, income from operations, earnings per
share, capital expenditures and cash flow.
We derive
revenues primarily from product sales made through our network of domestic and
foreign independent distributors. Our revenues are sensitive to a
variety of factors, such as demand for, and price of, our products, our
technological competitiveness, our reputation for providing quality products and
reliable service, competition within our industry, the cost of raw materials
(including aluminum, steel and petroleum related products), the availability of
capital and credit to our customers and general economic
conditions.
Our
industry is cyclical in nature and, through the end of the third quarter 2008,
the demand for our products, and our resulting revenues, continued to be
negatively affected by low levels of consumer confidence, disruptions in the
capital and credit markets, high fuel and insurance costs, and overall economic
conditions. The recent turmoil in global financial markets has
increased uncertainty and made credit harder to secure, which has impacted the
decisions of potential purchasers of significant capital assets such as the
products we offer. We remain concerned about general economic
conditions and the availability of credit, and the effect they could have on
customer demand in the towing and recovery industry. Accordingly, we
will continue to adjust our production levels as needed to match demand for our
products.
In the
first half of 2007, we completed orders under several municipal and military
contracts. Follow-on orders under these contracts were minimal until the
second quarter 2008, when we secured additional export and government orders
which we began producing in the third quarter. Through these additional
orders, along with continued good performance in the government and
international markertplace, we were able to somewhat offset lower demand from
our core customers during the third quarter. We continue to work to secure
export and governmental orders, but we cannot predict the success or timing of
any such orders.
In
addition, we have been and will continue to be affected by changes in the prices
that we pay for raw materials, particularly aluminum, steel, petroleum-related
products and other raw materials. Raw material costs represent a
substantial part of our total costs of operations, and aluminum and steel prices
were at historically high levels during the first three quarters of
2008. In the past, we have implemented price increases to offset
these higher costs as we have determined necessary. We continue to
monitor raw material prices and availability as well as fuel prices and their
impact on the economy in order to more favorably position the Company in this
dynamic market.
In July
2007, we amended our Senior Credit Agreement with Wachovia to, among other
things, reduce the non default rate of interest under the revolving and term
portions of our senior credit facility, increase the ratio of leverage permitted
under the Consolidated Leverage Ratio covenant, extend the maturity date of the
revolver, and modify certain of the negative covenants and events of
default. Total senior debt at September 30, 2008 was $2.5
million, which represents a significant decrease in our overall indebtedness
from prior periods.
In May
2007, we repaid the remaining $5.0 million principal balance under our junior
credit facility and with such payment, all loans under our junior credit
facility were paid in full. In July 2007, in connection with the
amendments to our Senior Credit Agreement, the junior credit facility was
terminated.
In 2007
we completed our modernization and expansion projects of our manufacturing
facility in Hermitage, Pennsylvania. A similar project at our
Ooltewah, Tennessee manufacturing facility was substantially complete at the end
of the third quarter of 2008. We believe these modernization and
expansion efforts will position us to more effectively face the challenges of
the global marketplace in the future.
Critical
Accounting Policies
Our
consolidated financial statements are prepared in accordance with accounting
principles generally accepted in the United States of America, which require us
to make estimates. Certain accounting policies are deemed “critical,”
as they require management’s highest degree of judgment, estimates and
assumptions. A discussion of critical accounting policies, the
judgments and uncertainties affecting their application and the likelihood that
materially different amounts would be reported under different conditions or
using different assumptions follows:
Accounts
receivable
We extend
credit to customers in the normal course of business. Collections
from customers are continuously monitored and an allowance for doubtful accounts
is maintained based on historical experience and any specific customer
collection issues. While such bad debt expenses have historically
been within expectations and the allowance established, there can be no
assurance that we will continue to experience the same credit loss rates as in
the past.
Valuation
of long-lived assets and goodwill
Long-lived
assets and goodwill are reviewed for impairment whenever events or circumstances
indicate that the carrying amount of these assets may not be fully
recoverable. When a determination has been made that the carrying
amount of long-lived assets and goodwill may not be fully recovered, the amount
of impairment is measured by comparing an asset’s estimated fair value to its
carrying value. The determination of fair value is based on projected
future cash flows discounted at a rate determined by management or, if available
independent appraisals or sales price negotiations. The estimation of
fair value includes significant judgment regarding assumptions of revenue,
operating costs, interest rates, property and equipment additions; and industry
competition and general economic and business conditions among other
factors. We believe that these estimates are reasonable; however,
changes in any of these factors could affect these evaluations. Based
on these estimations, we believe that our long-lived assets are appropriately
valued.
Warranty
Reserves
We
estimate expense for product warranty claims at the time products are
sold. These estimates are established using historical information
about the nature, frequency, and average cost of warranty claims. We
review trends of warranty claims and take actions to improve product quality and
minimize warranty claims. We believe the warranty reserve is
adequate; however, actual claims incurred could differ from the original
estimates, requiring adjustments to the accrual.
Income
taxes
We
recognize deferred tax assets and liabilities based on differences between the
financial statement carrying amounts and the tax bases of assets and
liabilities. Differences between the effective tax rate and the
expected tax rate are due primarily to losses from advances to and investments
in certain discontinued operations and changes in deferred tax asset valuation
allowances. We consider the need to record a valuation allowance to
reduce deferred tax assets to the amount that is more likely than not to be
realized. We consider tax loss carryforwards, reversal of deferred
tax liabilities, tax planning and estimates of future taxable income in
assessing the need for a valuation allowance. If unrecognized tax
positions exist, we record interest and penalties related to the unrecognized
tax positions as income tax expense in our consolidated statement of
operations.
Revenues
Under our
accounting policies, revenues are recorded when risk of ownership has
transferred to independent distributors or other customers, which generally
occurs on shipment. While we manufacture only the bodies of wreckers,
which are installed on truck chassis manufactured by third parties, we
frequently purchase the truck chassis for resale to our
customers. Sales of company-purchased truck chassis are included in
net sales. Margins are substantially lower on completed recovery
vehicles containing company-purchased chassis because the markup over the cost
of the chassis is nominal.
Foreign
Currency Translation
The
functional currency for our foreign operations is the applicable local
currency. The translation from the applicable foreign currencies to
U.S. dollars is performed for balance sheet accounts using current exchange
rates in effect at the balance sheet date, historical rates for equity and the
weighted average exchange rate during the period for revenue and expense
accounts. The gains or losses resulting from such translations are
included in shareholders’ equity. For intercompany debt denominated
in a currency other than the functional currency, the remeasurement into the
functional currency is also included in shareholders’ equity as the amounts are
considered to be of a long-term investment nature.
Results
of Operations–Three Months Ended September 30, 2008 Compared to Three
Months Ended September 30, 2007
Net sales
for the three months ended September 30, 2008 decreased 28.0% to $66.7
million from $92.7 million for the comparable period in 2007. This
decrease was attributable to lower production levels in response to decreased
demand due to deteriorating economic conditions and limited customer access to
credit.
Costs of
operations for the three months ended September 30, 2008 decreased 26.4% to
$58.6 million from $79.6 million for the comparable period in 2007, which was
attributable to lower overall production levels in the third quarter of 2008
compared to the comparable period in 2007 as described above. Overall, costs of
operations increased as a percentage of sales from 85.9% to 87.8% because of
product mix as well as higher raw material costs.
Selling,
general, and administrative expenses for the three months ended
September 30, 2008 decreased to $6.4 million from $6.5 million for the
three months ended September 30, 2007. The decrease is
attributable to lower sales volume as well as lower personnel-related
expenses. As a percentage of sales, selling, general, and
administrative expenses increased to 9.6% for the three months ended
September 30, 2008 from 7.0% for the three months ended September 30,
2007 due to the fixed nature of certain of these expenses.
The
provision for income taxes for the three months ended September 30, 2008
and 2007 reflects the combined effective U.S. federal, state and foreign tax
rate of 37.7% and 35.2%, respectively.
Total
interest expense decreased to $0.3 million for the three months ended
September 30, 2008 from $1.0 million for the comparable year-ago
period. Decreases in interest expense were primarily the result of
lower debt levels.
Results
of Operations–Nine Months Ended September 30, 2008 Compared to Nine Months
Ended September 30, 2007
Net sales
for the nine months ended September 30, 2008 decreased 33.7% to $209.1
million from $315.5 million for the comparable period in 2007. This
decrease was attributable to lower production levels in response to decreased
demand due to current economic conditions and limited customer access to credit
as well as the absence of any significant follow-on orders during the first half
of 2008 under certain governmental and military contracts for which orders were
completed during the first three quarters of 2007.
Costs of
operations for the nine months ended September 30, 2008 decreased 31.8% to
$184.4 million from $270.5 million for the comparable period in 2007, which was
attributable to lower production levels as described above. Overall,
costs of operations increased as a percentage of sales from 85.7% to 88.2%
because of product mix as well as higher raw material costs, partially offset by
past pricing actions.
Selling,
general, and administrative expenses for the nine months ended
September 30, 2008 decreased to $19.0 million from $20.7 million for the
nine months ended September 30, 2007. The decrease is
attributable to lower sales volume as well as lower personnel-related
expenses. As a percentage of sales, selling, general, and
administrative expenses increased to 9.1% for the nine months ended
September 30, 2008 from 6.6% for the nine months ended September 30,
2007 due to the fixed nature of certain of these expenses.
The
provision for income taxes for the nine months ended September 30, 2008 and
2007 reflects the combined effective U.S. federal, state and foreign tax rate of
37.7% and 36.3%, respectively.
Our total
interest expense decreased to $1.0 million for the nine months ended
September 30, 2008 from $2.6 million for the comparable year-ago
period. Decreases in interest expense were primarily the result of
lower debt levels.
Liquidity
and Capital Resources
Cash
provided by operating activities was $3.0 million for the nine months ended
September 30, 2008, compared to $15.5 million for the comparable period in
2007. The cash provided by operating activities for the nine months
ended September 30, 2008 reflects decreases in accounts receivable offset
by decreases in accounts payable reflecting lower volume levels in response to
lower demand. Increases in inventory also offset the cash provided by
operating activities. Inventory increases resulted from purchases of
materials to manufacture export and government orders, which will be built
throughout the remainder of the year.
Cash used
in investing activities was $4.3 million for the nine months ended
September 30, 2008, compared to $6.9 million for the comparable period in
2007. The cash used in investing activities was for the purchase of
property, plant and equipment.
Cash used
in financing activities was $1.2 million for the nine months ended
September 30, 2008, compared to $5.7 million for the comparable period in
2007. The cash used in financing activities paid down our term loan
under our senior credit facility, and repaid other outstanding long-term
debt.
Over the
past year, we generally have used available cash flow from operations to reduce
the outstanding balance on our credit facilities, to pay down other long-term
debt and to pay for capital expenditures related to our plant
modernization.
At
September 30, 2008, the modernization of the Company’s domestic facilities
was substantially complete. The Company had commitments of
approximately $0.3 million for completion of these projects.
Our
primary cash requirements include working capital, completion of our
modernization and expansion project, other capital expenditures and interest and
principal payments on indebtedness under our senior credit
facility. We expect our primary sources of cash to be cash flow from
operations, cash and cash equivalents on hand at September 30, 2008 and
borrowings from unused availability under our senior credit
facility. We expect these sources to be sufficient to satisfy our
cash needs for the foreseeable future. However, our ability to
satisfy our cash needs will depend upon a number of factors, including our
future operating performance, taking into account the economic and other factors
discussed above and elsewhere in this Quarterly Report, as well as financial,
business and other factors, many of which are beyond our control.
Credit
Facilities and Other Obligations
Senior
Credit Facility
We are
party to a Credit Agreement with Wachovia Bank, National Association for a $27.0
million senior secured credit facility. The senior credit facility
consists of a $20.0 million revolving credit facility, and a $7.0 million term
loan. The senior credit facility is secured by substantially all of
our assets, and contains customary representations and warranties, events of
default and affirmative and negative covenants for secured facilities of this
type. Covenants under the senior credit facility restrict the payment
of cash dividends if a default or event of default under the Credit Agreement
has occurred or would result from the dividends or if the Company would be in
violation of the consolidated fixed charge coverage ratio test in the Credit
Agreement as a result of the dividends, among various other
restrictions. On July 11, 2007, we agreed with Wachovia to make
certain amendments to the Credit Agreement which are described
below.
Formerly,
in the absence of a default, all borrowings under the revolving credit facility
bore interest at the LIBOR Market Index Rate (as defined in the Credit
Agreement) plus a margin of between 1.75% to 2.50% per annum that was subject to
adjustment from time to time based upon the Consolidated Leverage Ratio (as
defined in the Credit Agreement), and the term loan bore interest at a 30-day
adjusted LIBOR rate plus a margin of between 1.75% to 2.50% per annum that was
subject to adjustment from time to time based upon the Consolidated Leverage
Ratio. The revolving credit facility was scheduled to expire on June
15, 2008, and the term loan was scheduled to mature on June 15,
2010.
Under the
amended Credit Agreement, the non-default rate of interest under the revolving
credit facility and term loan was reduced to be the LIBOR Market Index Rate plus
a margin of between 0.75% to 1.50% per annum that is subject to adjustment from
time to time based upon the Consolidated Leverage Ratio, and the maturity date
of the revolving credit facility was extended to June 17, 2010. The
amendments also increased the ratio of leverage permitted under the Consolidated
Leverage Ratio covenant, and extended and modified certain of the negative
covenants and events of default set forth in the Credit Agreement.
At
September 30, 2008 and December 31, 2007, the Company had no
outstanding borrowings under the revolving credit facility.
Termination
of Junior Credit Facility
In May
2006, we repaid $5.0 million of the subordinated debt under our junior credit
facility with William G. Miller, and in May 2007, we repaid the remaining $5.0
million principal balance under the junior credit facility. With such
payments, all loans under our junior credit facility were paid in
full. In July 2007, in connection with the amendments to the senior
credit facility, the junior credit facility was terminated.
Other
Long-Term Obligations
In
addition to the borrowings under the senior credit facility described above, we
had approximately $2.3 million of mortgage notes payable, equipment notes
payable and other long-term obligations at September 30,
2008. We also had approximately $1.7 million in non-cancelable
operating lease obligations.
ITEM
3.
|
QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
|
In the
normal course of our business, we are exposed to market risk from changes in
interest rates and foreign currency exchange rates that could impact our results
of operations and financial position.
Interest
Rate Risk
Changes
in interest rates affect the interest paid on indebtedness under our senior
credit facility and our mortgage notes payable because the outstanding amounts
of indebtedness under our senior credit facility and the mortgage notes payable
are subject to variable interest rates. Under our senior credit
facility, the non-default rate of interest is equal to the LIBOR Market Index
Rate plus a margin of between 0.75% to 1.50% per annum (for a rate of interest
of 4.68% at September 30, 2008), and under the mortgage notes payable, the
rate of interest is equal to a LIBOR rate plus a margin of 2.25% (for a rate of
interest of 6.18% at September 30, 2008). A one percent change
in the interest rate on our variable-rate debt would not have materially
impacted our financial position, results of operations or cash flows for the
quarter ended September 30, 2008.
Foreign
Currency Exchange Rate Risk
We are
subject to risk arising from changes in foreign currency exchange rates related
to our international operations in Europe. We manage our exposure to
our foreign currency exchange rate risk through our regular operating and
financing activities, and not through the use of any financial or derivative
instruments, forward contracts or hedging activities. Because we
report in U.S. dollars on a consolidated basis, foreign currency exchange
fluctuations could have a translation impact on our financial
position. At September 30, 2008, we recognized $0.9 million decrease
in our foreign currency translation adjustment account compared with December
31, 2007 because of strengthening of the U.S. dollar against certain foreign
currencies. During the three and nine months ended September 30,
2008, the impact of foreign currency exchange rate changes on our results of
operations and cash flows was not material.
ITEM
4.
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CONTROLS
AND PROCEDURES
|
Within 90
days prior to the filing date of this report, we carried out an evaluation,
under the supervision and with the participation of our management, including
our Co-Chief Executive Officers (Co-CEOs) and Chief Financial Officer (CFO), of
the effectiveness of the design and operation of our disclosure controls and
procedures as defined in Rules 13a14(c) under the Securities Exchange Act of
1934. Based upon this evaluation, our Co-CEOs and CFO have concluded
that the disclosure controls and procedures are effective to ensure that
information required to be disclosed by us in reports that we file or submit
under the Exchange Act are recorded, processed, summarized and reported within
the time periods specified in Securities and Exchange Commission rules and
forms.
There
were no significant changes in our internal controls or in other factors that
could significantly affect internal controls subsequent to the date of this
evaluation.
PART
II. OTHER INFORMATION
ITEM
1.
|
LEGAL
PROCEEDINGS
|
We are,
from time to time, a party to litigation arising in the normal course of our
business. Litigation is subject to various inherent uncertainties,
and it is possible that some of these matters could be resolved unfavorably to
us, which could result in substantial damages against us. We have
established accruals for matters that are probable and reasonably estimable and
maintain product liability and other insurance that management believes to be
adequate. Management believes that any liability that may ultimately
result from the resolution of these matters in excess of available insurance
coverage and accruals will not have a material adverse effect on our
consolidated financial position or results of operations.
Other
than with respect to the risk factors below, there have been no material changes
to the Risk Factors disclosed in our Annual Report on Form 10-K for the fiscal
year ended December 31, 2007. Portions of the risk factors below were
included as the first two risk factors in the “Risk Factors” section of our Form
10-K, which are hereby replaced by the below risk factors. These risk
factors are being updated to address new risks associated with the current
global economic downturn and the current volatility and uncertainty in the
global capital and credit markets.
Our
business is subject to the cyclical nature of our industry, consumer confidence,
changes in economic conditions in general and fluctuations in interest
rates. Adverse changes with respect to these factors may lead to a
downturn in our business.
The
towing and recovery industry is cyclical in nature and historically the industry
has been affected by consumer confidence and changes in economic conditions in
general. The current global financial crisis has caused extreme
volatility and disruption in domestic and international capital and credit
markets and caused significant erosion in consumer confidence. As a
result, the overall demand for our products has been materially and negatively
affected, and the level of future sales of our products is
uncertain. A prolonged economic downturn, and slow or negative growth
in the domestic and global economy, may continue to have a material adverse
effect on our business, financial condition and results of operations for the
foreseeable future.
Overall
demand from our customers is affected by the availability of capital and access
to credit.
The
ability of our customers to purchase our products is affected by the
availability of capital and credit to them. In many cases, their
decisions to purchase our products are dependent upon their ability to obtain
financing upon acceptable terms. Recent volatility and disruption in
the capital and credit markets, principally in the U.S. and Europe, has
decreased the availability of liquidity and credit capacity for certain of our
customers. This reduced availability of capital and credit has
negatively affected the ability and capacity of our customers to purchase towing
and related equipment, which has negatively impacted sales of our
products. If our customers are unable to access capital or credit, it
could materially and adversely affect our ability to sell our products, and as a
result, could negatively affect our business and operating results.
Overall
demand from our customers may be affected by increases in their fuel and
insurance costs and changes in weather conditions.
In recent
years, our customers have experienced substantial increases in fuel and other
transportation costs, and in the cost of insurance, and there can be no
assurance that these costs will not continue to increase for our customers in
the future. Additionally, our customers also have, from time to time,
been subject to unpredictable and varying weather conditions which could impact
the cost and availability of fuel. All of these factors could
negatively affect the ability of our customers to purchase, and their capacity
for purchasing, towing and related equipment. Increases in operating
costs and unpredictable weather conditions have had, and may continue to have, a
negative effect on our customers, and, consequently, a material effect upon our
business and operating results.
ITEM
6.
|
EXHIBITS
|
|
|
3.1
|
Charter,
as amended, of the Registrant (incorporated by reference to Exhibit 3.1 to
the Registrant’s Annual Report on Form 10-K, filed with the Commission on
April 22, 2002)
|
3.2
|
Amended
and Restated Bylaws of the Registrant (incorporated by reference to
Exhibit 3.2 to the Registrant’s Quarterly Report on Form 10-Q, filed with
the Commission on November 8, 2007)
|
31.1
|
Certification
Pursuant to Rules 13a-14(a)/15d-14(a) by Co-Chief Executive
Officer*
|
31.2
|
Certification
Pursuant to Rules 13a-14(a)/15d-14(a) by Co-Chief Executive
Officer*
|
31.3
|
Certification
Pursuant to Rule 13a-14(a)/15d-14(a) by Chief Financial
Officer*
|
32.1
|
Certification
Pursuant to Section 1350 of Chapter 63 of Title 18 of United States Code
by Co-Chief Executive Officer*
|
32.2
|
Certification
Pursuant to Section 1350 of Chapter 63 of Title 18 of United States Code
by Co-Chief Executive Officer*
|
32.3
|
Certification
Pursuant to Section 1350 of Chapter 63 of Title 18 of United States Code
by Chief Financial Officer*
|
______________
* Filed
herewith
SIGNATURES
Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, Miller Industries, Inc. has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
|
MILLER
INDUSTRIES, INC. |
|
|
|
|
|
|
|
|
By:
|
/s/ J. Vincent Mish
|
|
|
|
J.
Vincent Mish
|
|
|
|
Executive
Vice President and Chief Financial
Officer
|
Date: November
5, 2008
18