,
2017 Annual Report
TO OUR SHAREHOLDERS
April 18, 2018
Miller Industries, Inc. had another a successful year in 2017. During the year we
continued to grow our business and execute on our strategic objectives, and we
substantially completed our capital expansion projects. Our performance was highlighted
by growth in both our top line revenue of 2.3% and net income of 15.5%. In addition, we
have positioned ourselves to keep up with expected demand through our transformative
capital projects at our domestic facilities. Our balance sheet remains strong, our backlog
is full, and our market outlook is promising. In 2018, we expect to continue to deliver
solid financial results and remain unwavering in our commitment to enhance shareholder
value.
Net sales for 2017 were $615.1 million, an increase of 2.3% compared to $601.1 million
in 2016, which reflected continued strong economic conditions and positive consumer
sentiment both domestically and internationally. Gross profit for 2017 was $67.1 million,
or 10.9% of net sales, compared to $64.3 million, or 10.7% of net sales, in 2016. Net
income for 2017 was $23.0 million, or $2.02 per diluted share, compared to $19.9
million, or $1.75 per diluted share for 2016, an increase in net income of 15.5% year over
year, which increase was primarily due to income tax benefits.
In addition to our solid operating performance in 2017, our balance sheet continues to
demonstrate financial stability. We ended the year with cash and cash equivalents of
$21.9 million and only $10.0 million in borrowings under our $50.0 million unsecured
revolving credit facility. These borrowings were used to help fund our plant expansion
projects, all of which were substantially complete at December 31, 2017.
Demonstrating our commitment to enhancing shareholder value, our board of directors
once again approved a cash dividend of $0.18 per share during the first quarter of 2018.
Our backlog also remains strong, reflecting healthy and growing demand for our products
and positive customer sentiment.
In 2018, we intend to capitalize on the increased production capabilities that were created
through our plant expansion projects. We also remain poised to handle the challenges
related to increases in production costs. Our business continues to grow, as we deliver our
world class product offering to an increasing customer base. We look forward to
bolstering our market position as the world leader in towing and recovery equipment,
which reflects our strategic vision and the skills and expertise of our employees.
We would like to extend our sincerest thanks to our employees, shareholders, suppliers
and customers for their ongoing support of Miller Industries, and look forward to our
continued success in 2018.
Jeffrey I. Badgley
Co-Chief Executive Officer
William G. Miller, II
Co-Chief Executive Officer
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
(cid:95)(cid:3)(cid:3)ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended
December 31, 2017
OR
(cid:134)(cid:3)(cid:3)TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________________________ to __________________________
Commission File No.
001-14124
MILLER INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Tennessee
(State or other jurisdiction of incorporation or organization)
8503 Hilltop Drive, Ooltewah, Tennessee
(Address of principal executive offices)
62-1566286
(I.R.S. Employer Identification No.)
37363
(Zip Code)
Securities registered pursuant to Section 12(b) of the Act:
(423) 238-4171
(Registrant’s telephone number, including area code)
Title of Each Class
Name of Each Exchange on Which Registered
Common Stock, par value $.01 per share
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
(Title of Class)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
(cid:134) Yes (cid:95) No
(cid:134) Yes (cid:95) No
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.
(cid:95) Yes (cid:134) No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such
files).
(cid:95) Yes (cid:134) No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein and will not be contained, to the best of
registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. (cid:95)
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth
company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:
Large Accelerated Filer (cid:134)
Non-accelerated Filer (cid:134)
Accelerated Filer (cid:95)
Smaller Reporting Company (cid:134)
Emerging Growth Company (cid:134)
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised
financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.(cid:134)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
(cid:134) Yes (cid:95) No
The aggregate market value of the voting stock held by non-affiliates of the registrant (which for purposes hereof are all holders other than executive officers, directors
and holders of more than 10% of the registrant’s Common Stock) as of June 30, 2017 (the last business day of the registrant’s most recently completed second fiscal quarter) was
$203,918,653 (based on 8,205,982 shares held by non-affiliates at $24.85 per share, the last sale price reported on the New York Stock Exchange on June 30, 2017).
At February 28, 2018 there were 11,384,296 shares of the registrant’s common stock, par value $0.01 per share, outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
The information called for by Part III (Items 10, 11, 12, 13 and 14) is incorporated herein by reference to the Registrant’s definitive proxy statement for its 2018 Annual
Meeting of Shareholders which is to be filed pursuant to Regulation 14A.
2
8
13
13
13
13
14
16
17
24
24
24
24
27
28
28
28
28
28
29
32
TABLE OF CONTENTS
PART I
BUSINESS
ITEM 1.
ITEM 1A. RISK FACTORS
ITEM 1B. UNRESOLVED STAFF COMMENTS
ITEM 2.
ITEM 3.
ITEM 4.
PROPERTIES
LEGAL PROCEEDINGS
MINE SAFETY DISCLOSURES
PART II
ITEM 5.
ITEM 6.
ITEM 7.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES
SELECTED FINANCIAL DATA
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM 8.
ITEM 9.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
ITEM 9A. CONTROLS AND PROCEDURES
ITEM 9B. OTHER INFORMATION
PART III
ITEM 10.
ITEM 11.
ITEM 12.
ITEM 13.
ITEM 14.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
EXECUTIVE COMPENSATION
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
PRINCIPAL ACCOUNTANT FEES AND SERVICES
ITEM 15.
ITEM 16.
EXHIBITS, FINANCIAL STATEMENT SCHEDULES
FORM OF 10-K SUMMARY
PART IV
i
CERTAIN FACTORS AFFECTING FORWARD-LOOKING STATEMENTS
Certain statements in this Annual Report on Form 10-K, including but not limited to statements made in Part II–Item 7–
”Management’s Discussion and Analysis of Financial Condition and Results of Operations,” statements made with respect to future
operating results, expectations of future customer orders and the availability of resources necessary for our business 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: the cyclical nature of our industry and changes in consumer confidence;
economic and market conditions; our customers’ access to capital and credit to fund purchases; our dependence upon outside suppliers
for our raw materials, including aluminum, steel, petroleum-related products and other purchased component parts; changes in price
(including as a result of the imposition of tariffs) of aluminum, steel, petroleum-related products and other purchased component parts;
delays in receiving supplies of such materials or parts; changes in fuel and other transportation costs, insurance costs and weather
conditions; changes in government regulation; various political, economic and other uncertainties relating to our international
operations, including restrictive taxation and foreign currency fluctuation; failure to comply with domestic and foreign anti-corruption
laws; competitors could impede our ability to attract or retain customers; our ability to develop or acquire proprietary products and
technology; assertions against us relating to intellectual property rights; problems hiring or retaining skilled labor; a disruption in our
information technology systems or any violation of data protection laws; changes in the tax regimes and related government policies
and regulations in the countries in which we operate; the effects of regulations relating to conflict minerals; the catastrophic loss of
one of our manufacturing facilities; environmental and health and safety liabilities and requirements; loss of the services of our key
executives; product warranty or product liability claims in excess of our insurance coverage; potential recalls of components or parts
manufactured for us by suppliers or potential recalls of defective products; an inability to acquire insurance at commercially
reasonable rates; and those other risks referenced herein, including those risks referred to in this report, in Part I, Item 1A–”Risk
Factors” and those risks discussed in our filings with the Securities and Exchange Commission filed after this Annual Report. 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.
1
ITEM 1.
BUSINESS
General
PART I
Miller Industries is The World’s Largest Manufacturer of Towing and Recovery Equipment®, with executive offices in
Ooltewah, Tennessee, domestic manufacturing operations in Tennessee and Pennsylvania, and foreign manufacturing operations in
France and the United Kingdom.
In 1990, we began developing or acquiring several of the most well-recognized brands in the towing and recovery equipment
manufacturing industry. Our strategy has been to diversify our line of products and increase our presence in the industry by combining
internal growth and development with acquisitions of complementary products.
In this Annual Report on Form 10-K, the words “Miller Industries,” “the Company,” “we,” “our,” “ours” and “us” refer to
Miller Industries, Inc. and its subsidiaries or any of them.
Towing and Recovery Equipment
We offer a broad range of towing and recovery equipment products that meet most customer design, capacity and cost
requirements. We manufacture the bodies of wreckers and car carriers, which are installed on truck chassis manufactured by third
parties. We frequently purchase the truck chassis for resale to our customers. Wreckers generally are used to recover and tow disabled
vehicles and other equipment and range in type from the conventional tow truck to large recovery vehicles with rotating hydraulic
booms and up to 75-ton lifting capacities. Car carriers are specialized flatbed vehicles with hydraulic tilt mechanisms that enable a
towing operator to drive or winch a vehicle onto the bed for transport. Car carriers transport new or disabled vehicles and other
equipment and are particularly effective over longer distances. We also manufacture vehicle transport trailers.
Our products primarily are sold through independent distributors that serve all 50 states, Canada and Mexico, and other
foreign markets including Europe, the Pacific Rim, the Middle East, South America and Africa, and through prime contractors to
governmental entities. Additionally, as a result of our ownership of Jige International S.A. in France and Boniface Engineering, Ltd. in
the United Kingdom, we have substantial distribution capabilities in Europe. While most of our distributor agreements do not
generally contain exclusivity provisions, management believes that approximately 85% of our independent distributors choose to sell
our products on an exclusive basis. In addition to selling our products to towing operators, our independent distributors provide them
with parts and service. We also utilize sales representatives to inform prospective purchasers about our current product lines in an
effort to drive sales to independent distributors. Management believes the strength of our distribution network and the breadth of our
product offerings are two key advantages over our competitors.
Product Lines
We manufacture a broad line of wrecker, car carrier and trailer bodies to meet a full range of customer design, capacity and
cost requirements.
Wreckers. Wreckers are generally used to recover and tow disabled vehicles and other equipment and range in type from the
conventional tow truck to large recovery vehicles with up to 75-ton lifting capacities. Wreckers are available with specialized features,
including underlifts, L-arms, crossbars and scoops, which lift disabled vehicles by the tires or front axle to minimize front end damage
to the towed vehicles. Certain heavy duty wrecker models offer rotating booms, which allow heavy duty wreckers to recover vehicles
from any angle, and remote control devices for recovery equipment. In addition, certain light duty wreckers are equipped with
automatic wheellift hookup devices that allow operators to engage a disabled or unattended vehicle without leaving the cab of the
wrecker.
Our wreckers range in capacity from 4 to 75 tons, and are classified as either light duty or heavy duty, with wreckers of 16-
ton or greater capacity being classified as heavy duty. Light duty wreckers are used to remove vehicles from accident scenes and
vehicles illegally parked, abandoned or disabled, and for general recovery. Heavy duty wreckers are used in towing and recovery
applications including overturned tractor trailers, buses, motor homes and other large vehicles.
2
Car Carriers. Car carriers are specialized flat-bed vehicles with hydraulic tilt mechanisms that enable a towing operator to
drive or winch a vehicle onto the bed for transport. Car carriers are used to transport new or disabled vehicles and other equipment and
are particularly effective for transporting vehicles or other equipment over longer distances. In addition to transporting vehicles, car
carriers may also be used for other purposes, including transportation of industrial equipment. Most professional towing operators
have car carriers in their fleets to complement their towing capabilities.
Transport Trailers. Our multi-vehicle transport trailers are specialized auto transport trailers with upper and lower decks and
hydraulic ramps for loading vehicles. These trailers are used for moving multiple vehicles for auto auctions, car dealerships, leasing
companies and other similar applications. These trailers are easy to load and transport 6 to 7 vehicles. The vehicles can be secured to
transport quickly with ratchet and chain tie-downs that are mounted throughout the frame of the transport. Many professional towing
operators have added auto transport trailers to their fleets to add to their service offerings.
Brand Names
We manufacture and market our wreckers, car carriers and trailers under ten separate brand names. Although certain brands
overlap in terms of features, prices and distributors, each brand has its own distinctive image and customer base.
Century®. The Century® brand is our “top-of-the-line” brand and represents what management believes to be the broadest
product line in the industry. The Century® line was started in 1974 and produces wreckers ranging from 8-ton light duty to 75-ton
heavy duty models, and car carriers in lengths from 20 to 30 feet. Management believes that the Century® brand has a reputation as the
industry’s leading product innovator.
Vulcan®. Our Vulcan® product line includes a range of premium light duty and heavy duty wreckers, ranging from 8-ton light
duty to 75-ton heavy duty models, and car carriers.
Challenger®. Our Challenger® products compete with the Century® and Vulcan® products and constitute a third premium
product line. Challenger® products consist of heavy duty wreckers with capacities ranging from 25 to 75 tons. The Challenger® line
was started in 1975 and is known for high performance heavy duty wreckers and aesthetic design.
Holmes®. Our Holmes® product line includes mid-priced wreckers with 4 to 16 ton capacities, a 16-ton rotator and a
detachable towing unit (DTU). The Holmes® wrecker was first produced in 1916. Historically, the Holmes® name has been the most
well-recognized and leading industry brand both domestically and internationally.
Champion®. The Champion® brand, which was introduced in 1991, includes car carriers which range in length from 19 to 21
feet. The Champion® product line, which is generally lower-priced, allows us to offer a full line of car carriers at various competitive
price points.
Chevron™. Our Chevron™ product line is comprised primarily of premium car carriers. Chevron™ produces a range of
premium single-car, multi-car and industrial carriers, as well as wreckers ranging from 8-ton to 16-ton models.
Eagle®. Our Eagle® products consist of light duty wreckers with the “Eagle Claw®” hook-up system that allows towing
operators to engage a disabled or unattended vehicle without leaving the cab of the tow truck. The “Eagle Claw®” hook-up system was
originally developed for the repossession market. Since acquiring Eagle, we have upgraded the quality and features of the Eagle®
product line and expanded its recovery capability.
Titan®. Our Titan® product line is comprised of premium multi-vehicle transport trailers which can transport up to 7 vehicles
depending on configuration.
Jige™. Our Jige™ product line is comprised of a broad line of premium light duty and heavy duty wreckers and car carriers
marketed primarily in Europe. Jige™ is a market leader best known for its innovative designs of car carriers and light duty wreckers
necessary to operate within the narrow confines of European cities, as well as heavy duty wreckers.
Boniface™. Our Boniface™ product line is comprised primarily of premium heavy duty wreckers marketed primarily in
Europe. Boniface™ produces heavy duty wreckers specializing in the long underlift technology required to tow modern European tour
buses.
3
Product Development and Manufacturing
Our Holmes® and Century® brand names are associated with four of the major innovations in the industry: the rapid reverse
winch; the tow sling; the hydraulic lifting mechanism; and the underlift with parallel linkage and L-arms. Our engineering staff, in
consultation with manufacturing personnel, uses computer-aided design and stress analysis systems to test new product designs and to
integrate various product improvements. In addition to offering product innovations, we focus on developing or licensing new
technology for our products. Research and development costs amounted to approximately $1.9 million, $1.8 million and $1.6 million
for 2017, 2016 and 2015, respectively.
We manufacture wreckers, car carriers and trailers at seven manufacturing facilities located in the United States, France and
the United Kingdom. The manufacturing process for our products consists primarily of cutting and bending sheet steel or aluminum
into parts that are welded together to form the wrecker, car carrier body or trailer. In addition, during the past several years, we have
also begun to produce wrecker bodies using composites and other non-metallic materials. After the frame is formed, components such
as hydraulic cylinders, winches, valves and pumps, which are purchased by us from third-party suppliers, are attached to the frame to
form the completed wrecker or car carrier body. The completed body is either installed by us, or shipped by common carrier to a
distributor where it is then installed, on a truck chassis. Generally, the wrecker or car carrier bodies are painted and towing operators
can select customized colors to coordinate with chassis colors or customer fleet colors. To the extent final painting is required before
delivery, we either complete such painting or contract with independent paint shops for such services.
We purchase raw materials and component parts from a number of sources. Although we have no long-term supply contracts,
management believes we have good relationships with our primary suppliers. In recent years prices have fluctuated significantly, but
we have experienced no significant problems in obtaining adequate supplies of raw materials and component parts to meet the
requirements of our production schedules. Management believes that the materials used in the production of our products are available
at competitive prices from an adequate number of alternative suppliers. Accordingly, management does not believe that the loss of a
single supplier would have a material adverse effect on our business.
Sales, Distribution and Marketing
The industry categorizes the towing and recovery market into three general product types: light duty wreckers; heavy duty
wreckers; and car carriers. The light duty wrecker market consists primarily of professional wrecker operators, repossession towing
services, local and national governmental entities and repair shop or salvage company owners. The heavy duty market includes
professional wrecker operators serving the needs of commercial vehicle operators as well as governmental entities. The car carrier
market has expanded to include equipment rental companies that offer delivery service and professional towing operators who desire
to complement their existing towing capabilities.
We have developed a diverse network of independent distributors, consisting of approximately 80 distributors in North
America, who serve all 50 states, Canada and Mexico, and numerous distributors that serve other foreign markets. In 2017, no single
distributor accounted for more than 10% of our sales. Management believes our broad and diverse network of distributors provides us
with the flexibility to adapt to market changes, lessens our dependence on particular distributors and reduces the impact of regional
economic factors.
Our sales force services our network of independent distributors and consists of sales representatives whose responsibilities
include providing sales support to the entire base of independent distributors. Sales representatives receive commissions on direct
sales based on product type and brand and generally are assigned specific territories in which to promote sales of our products and to
maintain customer relationships. To support sales and marketing efforts, we produce demonstrator models that are used by our sales
representatives and independent distributors. In addition to providing services to our network of independent distributors, our sales
force sells our products to various governmental entities, including the U.S. federal government and foreign governments, through
prime contractors.
We routinely respond to requests for proposals or bid invitations in consultation with our local distributors. Our products
have been selected by the United States General Services Administration as an approved source for certain federal and defense
agencies. We intend to continue to pursue U.S. government and foreign government contracting opportunities.
The towing and recovery equipment industry places heavy marketing emphasis on product exhibitions at national, regional
and international trade shows. In order to focus our marketing efforts and to control marketing costs, we concentrate our efforts on the
major trade shows each year, and we work with our network of independent distributors to concentrate on various regional shows.
4
Product Warranties and Insurance
We generally offer a 12-month limited manufacturer’s product and service warranty on our wrecker and car carrier products.
Our warranty generally provides for repair or replacement of failed parts or components. Our independent distributor customers
regularly perform any needed warranty repair work themselves, rather than shipping products back to us, and then invoice us for the
cost of the parts and labor. Management believes that we maintain adequate general liability and product liability insurance.
Backlog
We produce virtually all of our products to order. Our backlog is based upon customer purchase orders that we believe are
firm. The level of backlog at any particular time, however, may not be an appropriate indicator of our future operating performance.
Certain purchase orders may be subject to cancellation by the customer upon notification. Given our production and delivery
schedules, management generally believes that the current backlog represents less than four months of production.
Competition
The towing and recovery equipment manufacturing industry is highly competitive for sales to distributors and towing
operators. Management believes that competition in this industry focuses on product quality and innovation, reputation, technology,
customer service, product availability and price. We compete on the basis of each of these criteria, with an emphasis on product
quality and innovation and customer service. Management also believes that a manufacturer’s relationship with distributors is a key
component of success in the industry. Accordingly, we have invested substantial resources and management time in building and
maintaining strong relationships with distributors. Management also believes that our products are regarded as high quality within
their particular price points. Our marketing strategy is to continue to compete primarily on the basis of quality and reputation rather
than solely on the basis of price, and to continue to target the growing group of professional towing operators who as end-users
recognize the quality of our products.
Traditionally, the capital requirements for entry into the towing and recovery manufacturing industry have been relatively
low. Management believes a manufacturer’s capital resources and access to technological improvements have become a more integral
component of success in recent years. Certain of our competitors may have greater financial and other resources and may provide
more attractive dealer and retail customer financing alternatives than we do.
Employees
We employed approximately 1,120 people as of December 31, 2017. None of our employees are covered by a collective
bargaining agreement, though our employees in France and the United Kingdom have certain similar rights provided by their
respective government’s employment regulations. We consider our employee relations to be good.
Intellectual Property Rights
Our development of the underlift parallel linkage and L-arms is considered one of the most innovative developments in the
wrecker industry. This technology is significant primarily because it allows the damage-free towing of newer aerodynamic vehicles
made of lighter weight materials. This technology, particularly the L-arms, is used in a majority of commercial wreckers today. We
hold a number of utility and design patents covering other of our products. We have also obtained the rights to use and develop certain
technologies owned or patented by others. Management believes that, until the patents on our technology expire, utilization of our
patented technology without a license is an infringement of such patents. We have successfully litigated infringement lawsuits in
which the validity of our patents on our technology was upheld, and successfully settled other lawsuits.
Our trademarks “Century®,” “Holmes®,” “Champion®,” “Challenger®,” “Pro Star®,” “Street Runner®,” “Vulcan®,” “Right
Approach®” and “Extreme Angle®,” among others, are registered with the United States Patent and Trademark Office. Management
believes that our trademarks are well-recognized by dealers, distributors and end-users in their respective markets and are associated
with a high level of quality and value.
5
Government Regulations and Environmental Matters
Our operations are subject to federal, state and local laws and regulations relating to the generation, storage, handling,
emission, transportation and discharge of materials into the environment. Management believes that we are in substantial compliance
with all applicable federal, state and local provisions relating to the protection of the environment. The costs of complying with
environmental protection laws and regulations have not had a material adverse impact on our financial condition or results of
operations in the past.
We act as a subcontractor for certain U.S. and other government programs. As a result, we are subject to extensive
regulations and requirements of the U.S. and other government agencies and entities that govern these programs, including with
respect to the award, administration and performance of contracts under such programs.
We are also subject to the additional diligence and disclosure requirements adopted by the Securities and Exchange
Commission (the “SEC”) in 2012 related to certain minerals sourced from the Democratic Republic of Congo or adjoining countries in
connection with the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”). The SEC rules impose
these obligations with respect to “conflict minerals,” defined as tin, tantalum, tungsten and gold, which are necessary to the
functionality of a product manufactured, or contracted to be manufactured, by an SEC reporting company. If any “conflict minerals”
that are necessary to the functionality of a product manufactured by an SEC reporting company originated in the Democratic Republic
of Congo or an adjoining country, the rules require the issuer to prepare and file a report addressing its efforts to exercise due
diligence on the source of such “conflict minerals” and their chain of custody.
We are also subject to the Magnuson-Moss Warranty Federal Trade Commission Improvement Act which regulates the
description of warranties on products. The description and substance of our warranties are also subject to a variety of federal and state
laws and regulations applicable to the manufacturing of vehicle components. Management believes that continued compliance with
various government regulations will not materially affect our operations.
Executive Officers of the Registrant
Information relating to our current executive officers is set forth below. William G. Miller, II is the son of William G. Miller.
Other than Messrs. Miller and Miller II, there are no family relationships among the executive officers, directors or nominees for
director, nor are there any arrangements or understandings between any of the executive officers and any other persons pursuant to
which they were selected as executive officers.
Name
Age
Position
William G. Miller
Jeffrey I. Badgley
William G. Miller, II
Frank Madonia
Deborah Whitmire
Josias W. Reyneke
71
65
39
69
52
61
Chairman of the Board
Co-Chief Executive Officer
President and Co-Chief Executive Officer
Executive Vice President, Secretary and General Counsel
Executive Vice President, Chief Financial Officer and Treasurer
Chief Information Officer
William G. Miller has served as Chairman of the Board since April 1994. Mr. Miller served as our Chief Executive Officer
from April 1994 until June 1997, and as our Co-Chief Executive Officer from October 2003 until March 2011. In June 1997, he was
named Co-Chief Executive Officer, a title he shared with Jeffrey I. Badgley until November 1997. Mr. Miller also served as our
President from April 1994 to June 1996. He served as Chairman of Miller Group, Inc. from August 1990 through May 1994, as its
President from August 1990 to March 1993, and as its Chief Executive Officer from March 1993 until May 1994. Prior to 1987, Mr.
Miller served in various management positions for Bendix Corporation, Neptune International Corporation, Wheelabrator-Frye, Inc.
and The Signal Companies, Inc.
6
Jeffrey I. Badgley has served as our Co-Chief Executive Officer since December 2013, after serving as our Chief Executive
Officer from March 2011 until December 2013, our President from June 1996 until March 2011, our Co-Chief Executive Officer from
October 2003 until March 2011 and our Chief Executive Officer from November 1997 to October 2003. Mr. Badgley served as a
director from 1996 to May 2014 and as Vice Chairman of the Board from March 2011 to May 2014. Mr. Badgley served as our Vice
President from 1994 to 1996, and as our Chief Operating Officer from June 1996 to June 1997. In addition, Mr. Badgley has served as
President of Miller Industries Towing Equipment Inc. since 1996. Mr. Badgley served as Vice President—Sales of Miller Industries
Towing Equipment Inc. from 1988 to 1996. He previously served as Vice President—Sales and Marketing of Challenger Wrecker
Corporation from 1982 until joining Miller Industries Towing Equipment Inc.
William G. Miller, II has served as a director since May 2014, our Co-Chief Executive Officer since December 2013 and
President since March 2011, after serving as a Regional Vice President of Sales of Miller Industries Towing Equipment Inc. from
November 2009 to February 2011. Mr. Miller II served as Vice President of Strategic Planning of the Company from October 2007
until November 2009. Mr. Miller II served as Light Duty General Manager from November 2004 to October 2007 and as a Sales
Representative of Miller Industries Towing Equipment Inc. from 2002 to 2004.
Frank Madonia has served as our Executive Vice President, Secretary and General Counsel since September 1998. From
April 1994 to September 1998 Mr. Madonia served as our Vice President, General Counsel and Secretary. Mr. Madonia served as
Secretary and General Counsel to Miller Industries Towing Equipment Inc. since its acquisition by Miller Group in 1990. From July
1987 through April 1994, Mr. Madonia served as Vice President, General Counsel and Secretary of Flow Measurement. Prior to 1987,
Mr. Madonia served in various legal and management positions for United States Steel Corporation, Neptune International
Corporation, Wheelabrator-Frye, Inc. and The Signal Companies, Inc.
Deborah Whitmire has served as our Executive Vice President, Chief Financial Officer and Treasurer since January 2017,
after serving as our Vice President and Corporate Controller from January 2014 to December 2016 and Corporate Controller to Miller
Industries Towing Equipment Inc. from March 2005 to January 2014. From April 2000 to March 2005, she also served as Director of
Finance – Manufacturing to Miller Industries Towing Equipment Inc. In addition, she served as Controller to Miller Industries Towing
Equipment Inc. from October 1997 to April 2000 and Accounting Manager to Miller Industries Towing Equipment Inc. from October
1996 to October 1997.
Josias W. Reyneke has served as our Chief Information Officer since January 2017, after serving as our Vice President of
Operations to Miller Industries Towing Equipment Inc. from July 2011 to December 2016. From 2002 to 2011, Mr. Reyneke served as
Director of Management Information Systems and Materials of Miller Industries Towing Equipment Inc. Mr. Reyneke joined Miller
Industries Towing Equipment Inc. as a consultant in 1997 to assist with the implementation of an enterprise resource planning system
and was subsequently offered the position of Director of Management Information Systems in 1998, a position he held until 2002.
Prior to 1998, Mr. Reyneke also served in various management positions for SE Technologies, Wheels of Africa and Toyota South
Africa.
Available Information
Our Internet website address is www.millerind.com. We make available free of charge through our website our Annual
Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, and amendments to those reports, as soon
as reasonably practicable after we file them with, or furnish them to, the Securities and Exchange Commission. Our Corporate
Governance Guidelines and Code of Business Conduct and Ethics are also available on our website. Other corporate governance-
related documents can be found at our website as well.
7
ITEM 1A.
RISK FACTORS
There are many factors that affect our business and the results of our operations, some of which are beyond our control. The
following is a description of all known material risks that may cause the actual results of our operations in future periods to differ
materially from those currently expected or desired. We encourage you to read this section carefully.
Our business is subject to the cyclical nature of our industry and changes in consumer confidence and in economic conditions in
general. Adverse changes or continued uncertainty with respect to these factors may lead to a downturn in our business.
The towing and recovery industry is cyclical in nature. In recent years, the overall demand for our products and resulting
revenues have been positively affected by recovering economic conditions and improving consumer sentiment. However, historically,
the overall demand for our products and our resulting revenues have at times been negatively affected by wavering levels of consumer
confidence; volatility and disruption in domestic and international capital and credit markets and the resulting decrease in the
availability of financing for our customers and towing operators and the overall effects of global economic conditions. We remain
concerned about the continuing effects of these factors on the towing and recovery industry, and we continue to monitor our overall
cost structure to see that it remains in line with business conditions. A prolonged economic downturn, and slow or negative growth in
the domestic and global economy, could have a material adverse effect on our business, financial condition and results of operations
for the foreseeable future.
Our demand from our customers and towing operators is affected by the availability of capital and access to credit.
The ability of our customers and of towing operators to purchase our products is affected by the availability of capital and
credit to them. Our independent distributor customers rely on floor plan financing in connection with the purchase of our products, and
the availability of that financing on acceptable terms has a direct effect on the volume of their purchases. Additionally, in many cases,
a towing operator’s decision to purchase our products from one of our distributors is dependent upon their ability to obtain financing
upon acceptable terms. Volatility and disruption in the capital and credit markets, principally in the U.S. and Europe, in the past has
decreased the availability of capital to, and credit capacity of, our customers and towing operators. In addition, in the past, certain
providers of floor plan financing have exited the market, which made floor plan financing increasingly difficult for our independent
distributor customers to secure at those times. This reduced availability of capital and credit has negatively affected the ability and
capacity of our customers and of towing operators to purchase towing and related equipment. This, in turn, has negatively impacted
sales of our products. If 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.
Our dependence upon outside suppliers for our raw materials, including aluminum, steel, petroleum-related products and other
purchased component parts, leaves us subject to changes in price (including as a result of the imposition of tariffs) and delays in
receiving supplies of such materials or parts.
We are dependent upon outside suppliers for our raw material needs and other purchased component parts, and events beyond
our control could have an adverse effect on the cost or availability of raw materials and component parts. Steel, aluminum, fuel and
other commodity prices have historically experienced high volatility depending on market conditions and global demand. Price
increases or changes in payment terms from our suppliers of raw materials or component parts could impact our ability to secure
necessary raw materials or component parts, or to secure such materials and parts at favorable prices. In addition, pricing of raw
materials, such as steel and aluminum, may be impacted by the level of tariffs imposed on imports. President Trump has indicated an
intention to impose tariffs on imported steel of 25% and on imported aluminum of 10%. The Company uses a substantial amount of
imported steel and aluminum in its products. Details regarding the applicability of any tariffs that may be enacted have not been
established at this time. If these tariffs are enacted and apply to materials imported by the Company, then the price of such imported
materials will increase substantially and the price of U.S. made steel and aluminum can also be expected to increase substantially. In
this case, the Company would consider attempting to offset these increases through price increases and cost surcharges to the extent
possible, as it has historically done to offset other price increases. However, it is uncertain how much of any price increases (including
as a result of new tariffs) could be offset in this manner. In any event, price increases require a long lead time for the Company to
implement with its customers while the higher material costs would be felt much sooner. As a result, there is a substantial risk that the
Company’s financial performance and competitive position could be materially adversely impacted by the imposition of these tariffs
and by higher prices generally.
Demand for our products also could be negatively affected by supply delays of truck chassis and other component parts used
in our products. Our third party suppliers’ ability to supply us with truck chassis and component parts is limited by their available
capacity to manufacture the component parts we require. We have experienced supply delays and limitations for component parts
during the latter part of 2017. If these delays continue or worsen, our customers may reduce their purchase levels with us and/or seek
alternative solutions to meet their demand. At this time, we believe that sources of our raw materials and component parts will
continue to be adequate to meet our requirements and that alternative sources are available. However, shortages, price increases or
delays in shipments of our raw materials and component parts could have a material adverse effect on our financial performance,
competitive position and reputation.
8
Overall demand from our customers may be affected by increases in their fuel and insurance costs and changes in weather
conditions.
In the past, our customers have experienced substantial increases in fuel and other transportation costs, and in the cost of
insurance. Our customers also have, from time to time, been subject to unpredictable and varying weather conditions which could,
among other things, impact the cost and availability of fuel and other materials. Any of these factors could negatively affect our
customers’ capacity for purchasing, towing and related equipment, and, consequently, have a material negative effect upon our
business and operating results.
Our international operations are subject to various political, economic and other uncertainties that could adversely affect our
business results, including by restrictive taxation or other government regulation and by foreign currency fluctuation.
Historically, a portion of our net sales occur outside the United States, primarily in Europe. In addition, we have
manufacturing operations at two facilities located in the Lorraine region of France and manufacturing operations in Norfolk, England.
As a result, our operations are subject to various political, economic and other uncertainties, including risks of restrictive taxation
policies, changing political conditions and governmental regulations. This includes, for example, the uncertainty surrounding the
implementation and effect of the United Kingdom’s June 23, 2016 referendum in which voters approved the United Kingdom’s exit
from the European Union, commonly referred to as “Brexit,” including changes to the legal and regulatory framework that apply to
the United Kingdom and its relationship with the European Union. On March 29, 2017, the UK notified the European Union of its
intention to withdraw pursuant to Article 50 of the Lisbon Treaty. The terms of the withdrawal are subject to a negotiation period that
could last at least two years from the withdrawal notification date. Also, a portion of our net sales derived outside the United States, as
well as salaries of employees located outside the United States and certain other expenses, are denominated in foreign currencies,
including the British pound and the Euro. We are, therefore, subject to risk of financial loss resulting from fluctuations in exchange
rates of these currencies against the U.S. dollar. Brexit has caused, and may continue to result in, significant volatility in global stock
markets and currency exchange rate fluctuations of the U.S. dollar relative to other foreign currencies in which we conduct business.
In addition, political unrest, terrorist acts, military conflict and disease outbreaks have increased the risks of doing business abroad in
general.
Failure to comply with domestic and foreign anti-corruption laws could have an adverse effect on our business.
Our international operations require us to comply with a number of U.S. and international laws and regulations, including
those involving anti-bribery and anti-corruption. Failure to comply with the Foreign Corrupt Practices Act (“FCPA”), the U.K.
Bribery Act, and other foreign anti-bribery laws could have an adverse effect on our business. Violations of these laws, or allegations
of such violations, could result in our incurring significant fees and having fines and criminal sanctions imposed on us or our
employees, and could adversely impact our business with government entities.
Our competitors could impede our ability to attract or retain customers.
The towing and recovery equipment manufacturing industry is highly competitive. Capital requirements for entry into the
towing and recovery manufacturing industry have been relatively low, which could result in an increase in the number of competitors
entering the industry. Competition for sales exists domestically and internationally at the manufacturer, distributor and towing-
operator levels and is based primarily on product quality and innovation, reputation, technology, customer service, product availability
and price. Competition for sales also comes from the market for used towing and recovery equipment. Certain of our competitors may
have substantially greater financial and other resources and may provide more attractive dealer and retail customer financing
alternatives than us. If these competitors are able to make it more difficult for us to attract or retain customers, it could have a negative
impact on our sales, revenue and financial performance.
9
Our future success depends upon our ability to develop or acquire proprietary products and technology and assertions against us
relating to intellectual property rights could harm our business.
Historically, we have been able to develop or acquire patented and other proprietary product innovations which have allowed
us to produce what management believes to be technologically advanced products relative to most of our competition. However,
certain of our patents have expired, and others will expire in the next few years, and as a result, we may not have a continuing
competitive advantage through proprietary products and technology. If we are unable to develop or acquire new products and
technology in the future, our ability to maintain market share, and, consequently, our revenues and operating results, may be
negatively affected.
Third parties may claim that our products infringe their patents or other intellectual property rights. If a competitor were to
challenge our patents, or assert that our products or processes infringe its patent or other intellectual property rights, we could incur
substantial litigation costs, be forced to design around their patents, pay substantial damages or even be forced to cease our operations,
any of which could be expensive and/or have an adverse effect on our operating results. Third party infringement claims, regardless of
their outcome, would not only consume our financial resources, but also would divert the time and effort of our management and
could result in our customers or potential customers deferring or limiting their purchase or use of the affected products or services
until resolution of the litigation.
We depend upon skilled labor to manufacture our products, and if we experience problems hiring and retaining skilled labor, our
business may be negatively affected.
The timely manufacture and delivery of our products requires an adequate supply of skilled labor, and the operating costs of
our manufacturing facilities can be adversely affected by high turnover in skilled positions. Accordingly, our ability to increase sales,
productivity and net earnings will be limited to a degree by our ability to employ the skilled laborers necessary to meet our
requirements. We must attract, train and retain skilled employees while controlling related labor costs and maintaining our core
values. Our ability to control labor costs is subject to numerous external factors, including prevailing wage rates and increases in
healthcare and other insurance costs. There can be no assurance that we will be able to maintain an adequate skilled labor force
necessary to efficiently operate our facilities. In addition, while our employees are not currently members of a union, there can be no
assurance that the employees at any of our facilities will not choose to become unionized in the future.
A disruption in our information technology (“IT”) systems or any violation of data protection laws could adversely impact our
business and operations.
We rely on the accuracy, capacity and security of our IT systems and our ability to update these systems in response to the
changing needs of our business. We use our IT systems to collect and store confidential and sensitive data, including information
about our business, our customers and our employees. Our IT systems may be disrupted or fail for a number of reasons, including
natural disasters, such as fires; power loss; software “bugs”, hardware defects or human error; or hacking, computer viruses, malware,
ransomware or other cyber attacks.
As technology continues to evolve, we anticipate that we will collect and store even more data in the future and that our
systems will increasingly use remote communication features that are susceptible to both willful and unintentional security breaches.
We have incurred costs and expect to incur significant additional costs in order to implement security measures that we feel are
appropriate to protect our IT systems. Despite these efforts, future attacks could result in our systems or data being breached and/or
damaged by computer viruses or unauthorized physical or electronic access. Such a breach could result in theft of our intellectual
property or trade secrets and/or unauthorized access to controlled data and personal information stored in connection with our human
resources function. In the event of a breach in security that allows third parties access to personal information, we are subject to a
variety of ever-changing laws on a global basis that may require us to provide notification to the data owners, and that may subject us
to lawsuits, fines and other means of regulatory enforcement or harm employee morale.
Any disruption, outage or breach of our IT systems could result in interruption of our business operations, damage to our
reputation and a loss of confidence in our security measures, all of which could adversely affect our business. To the extent that any
data is lost or destroyed or any confidential information is inappropriately disclosed or used, it could adversely affect our competitive
position or customer relationships, harm our business and possibly lead to significant claims, liability, or fines based upon alleged
breaches of contract or applicable laws. Regulators globally are also imposing greater monetary fines for privacy violations. For
example, in 2016, the European Union adopted a new law governing data practices and privacy called the General Data Protection
Regulation (“GDPR”), which becomes effective in May 2018. The law establishes new requirements regarding the handling of
personal data, and non-compliance with the GDPR may result in monetary penalties of up to 4% of worldwide revenue. The GDPR
and other changes in laws or regulations associated with the enhanced protection of certain types of sensitive data, such as healthcare
data or other personal information, could increase our cost of providing our products and services.
10
Changes in the tax regimes and related government policies and regulations in the countries in which we operate could adversely
affect our results and our effective tax rate.
As a result of our international operations, we are subject to various taxes in both U.S. and non-U.S. jurisdictions. Due to
economic and political conditions, tax laws, regulations and rates in these various jurisdictions may be subject to significant change.
Our future effective income tax rate could be affected by changes in the mix of earnings in countries with differing statutory tax rates,
changes in the valuation of deferred tax assets or changes in tax laws or their interpretation. Changes to long-standing tax principles in
the countries in which we operate could adversely affect our effective tax rate or result in higher cash tax liabilities. Increases in our
effective tax rate or tax liabilities could have a material adverse effect on us.
The effects of regulations relating to conflict minerals may adversely affect our business.
In 2012, the SEC adopted rules under the Dodd-Frank Wall Street Reform and Consumer Protection Act to improve
transparency and accountability concerning the supply of certain minerals, known as “conflict minerals”, originating from the
Democratic Republic of Congo and adjoining countries. These rules could adversely affect the sourcing, availability and pricing of
such minerals if they are found to be used in the manufacture of our products, as the number of suppliers who provide conflict-free
minerals may be limited. In addition, we have incurred and expect to incur additional costs to comply with the disclosure
requirements, including costs related to determining the source of any of the relevant minerals and metals used in our products. The
Company’s supply chain is complex. As a result, we have encountered and continue to expect significant difficulty in determining the
country of origin or the source and chain of custody for all “conflict minerals” used in our products and disclosing that our products
are “conflict free” (meaning that they do not contain “conflict minerals” that directly or indirectly finance or benefit armed groups in
the Democratic Republic of the Congo or an adjoining country). We may face reputational challenges from customers, investors or
others if we are unable to verify the origins for all “conflict minerals” used in our products. In such event, we may also face
difficulties in satisfying customers who may require that all of the components of our products be certified as conflict mineral free.
Our sales to U.S. and other governmental entities through prime contractors are subject to special risks.
We act as a subcontractor for certain U.S. and other government programs. As a result, we are subject to extensive
regulations and requirements of the U.S. and other government agencies and entities that govern these programs, including with
respect to the award, administration and performance of contracts under such programs. Our U.S. and other government business is
subject to the following risks, among others: (i) this business is susceptible to changes in government spending, which may reduce
future revenues; (ii) most of our contracts with governmental entities through prime contractors are fixed-price contracts, and our
actual costs on any of these contracts could exceed our projected costs, (iii) competition for the award of these contracts is intense, and
we may not be successful in bidding on future contracts, and (iv) the products we sell to governmental entities are subject to highly
technical requirements, and any failure to comply with these requirements could result in unanticipated retrofit costs, delayed
acceptance of products, late or reduced payment or cancellation of the contract. We continue to work to secure additional U.S. and
other governmental orders, but we cannot predict the success or timing of any such efforts.
The catastrophic loss of one of our manufacturing facilities could harm our business, financial condition and results of
operations.
While we manufacture our products in several facilities and maintain insurance covering our facilities, including business
interruption insurance to mitigate losses resulting from any production interruption or shutdown caused by an insured loss, a
catastrophic loss of the use of all or a portion of any one of our manufacturing facilities due to accident, labor issues, weather
conditions, natural disaster, civil unrest or otherwise, whether short or long-term, could materially harm our business, financial
condition and results of operations. Any recovery under our insurance policies may not offset the lost sales or increased costs that may
be experienced during the disruption of operations.
Environmental and health and safety liabilities and requirements could require us to incur material costs.
We are subject to various U.S. and foreign laws and regulations relating to environmental protection and worker health and
safety, including those governing discharges of pollutants into the ground, air and water; the generation, handling, use, storage,
transportation, treatment and disposal of hazardous substances and waste materials; and the investigation and cleanup of contaminated
properties. In certain cases, these regulatory requirements may limit the productive capacity of our operations.
Environmental and health-related requirements are complex, subject to change and have tended to become more and more
stringent. Future developments could cause us to incur various expenditures and could also subject us to fines or sanctions, obligations
to investigate or remediate contamination or restore natural resources, liability for third party property damage or personal injury
claims and the imposition of new permitting requirements and/or the modification or revocation of our existing operating permits,
among other effects. These and other developments could materially harm our business, financial condition and results of operation.
11
Any loss of the services of our key executives could have a material adverse impact on our operations.
Our success is highly dependent on the continued services of our management team. The loss of services of one or more key
members of our senior management team could have a material adverse effect on us.
A product warranty or product liability claim in excess of our insurance coverage, or an inability to acquire or maintain insurance
at commercially reasonable rates, could have a material adverse effect upon our business.
We are subject to various claims, including product warranty and product liability claims arising in the ordinary course of
business, and may at times be a party to various legal proceedings incidental to our business. We maintain reserves and liability
insurance coverage at levels based upon commercial norms and our historical claims experience. If we manufacture poor quality
products or receive defective materials, we may incur unforeseen costs in excess of what we have reserved in our financial statements.
A successful product warranty, product liability or other claim brought against us in excess of our insurance coverage, or the inability
of us to acquire or maintain insurance at commercially reasonable rates, could have a material adverse effect upon our business,
operating results and financial condition. In addition, we are subject to potential recalls of components or parts manufactured by
suppliers which we purchase and incorporate into our towing and recovery equipment products, as well as potential recalls of our
products from customers to cure manufacturing defects or in the event of a failure to comply with applicable regulatory standards or
customers’ order specifications. Moreover, the adverse publicity that may result from a product liability claim, perceived or actual
defect with our products or a product recall could have a material adverse effect on our ability to market our products successfully.
Our stock price may fluctuate greatly as a result of the general volatility of the stock market.
From time to time, there may be significant volatility in the market price for our common stock. Our quarterly operating
results, changes in earnings estimated by analysts, if any, changes in general conditions in our industry or the economy or the financial
markets or other developments affecting us, including our ability to pay dividends, could cause the market price of our common stock
to fluctuate substantially.
Our charter and bylaws contain anti-takeover provisions that may make it more difficult or expensive to acquire us in the future or
may negatively affect our stock price.
Our charter and bylaws contain restrictions that may discourage other persons from attempting to acquire control of us,
including, without limitation, prohibitions on shareholder action by written consent and advance notice requirements regarding
amendments to certain provisions of our charter and bylaws. In addition, our charter authorizes the issuance of up to 5,000,000 shares
of preferred stock. The rights and preferences for any series of preferred stock may be set by the board of directors, in its sole
discretion and without shareholder approval, and the rights and preferences of any such preferred stock may be superior to those of
common stock and thus may adversely affect the rights of holders of common stock.
The requirements and restrictions imposed by our current credit facility could restrict our ability to operate our business and
failure to comply with these requirements and restrictions could adversely affect our business.
Our current credit facility contains customary representations and warranties, events of default, and financial, affirmative and
negative covenants for loan agreements of this kind. In addition, covenants under our current credit facility restrict our ability to pay
cash dividends if the Company would be in violation of the minimum tangible net worth test or the leverage ratio test in the current
loan agreement as a result of the dividend, among various restrictions. We have been in compliance with these covenants throughout
2017 and anticipate that we will continue to be in compliance during 2018. If we fail to comply with the requirements of our current
credit facility, such non-compliance would result in an event of default. If not waived by the bank, such event of default would result
in the acceleration of any amounts due under the current credit facility. During 2017, we borrowed a total of $20 million under our
credit facility, of which we had repaid $15 million at December 31, 2017. The borrowings under the credit facility were primarily used
to finance our capital expenditure projects for our Pennsylvania manufacturing operations and at our Ooltewah, Tennessee and
Greeneville, Tennessee facilities. As of December 31, 2017 and March 6, 2018, we had $10 million in outstanding borrowings under
our credit facility.
We cannot assure you that we will declare dividends on our common stock.
Our board of directors approved a dividend policy in 2011 to consider and pay quarterly dividends on our common stock
subject to our ability to satisfy all applicable statutory requirements and our continued financial strength. While we currently intend to
pay a quarterly dividend on shares of our common stock, to the extent that we have sufficient funds available for such purpose, the
declaration, amount and payment of any future dividends on shares of common stock will be at the sole discretion of our board of
directors and we may reduce or discontinue entirely the payment of such dividends at any time. Our board of directors may take into
account general and economic conditions, our financial condition and operating results, capital requirements, restrictions in financing
agreements and such other factors as our board of directors may deem relevant from time to time.
12
ITEM 1B.
UNRESOLVED STAFF COMMENTS
None.
ITEM 2.
PROPERTIES
We operate four manufacturing facilities in the United States. The facilities are located in Ooltewah (Chattanooga),
Tennessee; Hermitage, Pennsylvania; and two in Greeneville, Tennessee. The Ooltewah plant, containing approximately 315,000
square feet (plus approximately 16,000 square feet under construction and 51,000 square feet of leased property), produces light and
heavy duty wreckers; the Hermitage plant, containing approximately 243,000 square feet (plus approximately 36,000 square feet of
leased property), produces car carriers; and the Greeneville plants, containing an aggregate of approximately 210,000 square feet,
produce car carriers, heavy duty wreckers and trailers.
During 2017, the Company substantially completed the consolidation and expansion of its Pennsylvania manufacturing
operations to increase capacity and improve operating efficiencies. The manufacturing operations of the two primary Pennsylvania
locations were consolidated at one expanded location. In June 2017, the Company sold the vacated plant location. A portion of the
sold facility was leased from the buyer through November 2017, while production of certain equipment and storage of raw materials
was relocated to the other Pennsylvania and Tennessee locations. Also in process are several capital projects involving machinery and
equipment and building improvements at the Company’s Ooltewah, Tennessee and Greeneville, Tennessee facilities. In addition, the
Company began construction on an administrative building at its Ooltewah, Tennessee facility in June 2017. For a discussion of these
capital projects, see “Liquidity and Capital Resources” in Item 7–”Management’s Discussion and Analysis of Financial Condition and
Results of Operations,” of this Annual Report on Form 10-K.
We also have two manufacturing facilities and one storage facility located in the Lorraine region of France, which have, in
the aggregate, approximately 205,000 square feet, and manufacturing operations in Norfolk, England, with approximately 48,000
square feet.
ITEM 3.
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.
ITEM 4.
MINE SAFETY DISCLOSURES
Not applicable.
13
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES
Market Price of and Dividends on the Registrant’s Common Equity and Related Stockholder Matters
Our common stock is traded on the New York Stock Exchange under the symbol “MLR.” The following table sets forth the
quarterly range of high and low sales prices for the common stock for the periods indicated.
Period
Year Ending December 31, 2016
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
Year Ending December 31, 2017
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
Price Range of Common Stock
High
Low
$
$
21.77 $
22.71
22.79
27.70
27.80 $
26.75
27.95
28.85
19.10
19.84
20.38
21.55
23.55
23.65
24.25
24.80
As of February 28, 2018, there were approximately 461 registered holders of record of our common stock. The number of
record holders does not include persons who held our common stock in nominee or “street name” accounts through brokers.
The Company has paid consecutive quarterly cash dividends since May 2011. Dividend payments made for 2017, 2016 and
2015 were as follows:
Payment
Record Date
Payment Date
Dividend
(per share)
Amount
(in thousands)
Q1 2015
Q2 2015
Q3 2015
Q4 2015
Total for 2015
Q1 2016
Q2 2016
Q3 2016
Q4 2016
Total for 2016
Q1 2017
Q2 2017
Q3 2017
Q4 2017
Total for 2017
March 20, 2015
June 15, 2015
September 14, 2015
December 7, 2015
March 23, 2015
June 19, 2015
September 21, 2015
December 11, 2015
March 21, 2016
June 13, 2016
September 12, 2016
December 5, 2016
March 28, 2016
June 20, 2016
September 19, 2016
December 12, 2016
March 27, 2017
June 13, 2017
September 11, 2017
December 4, 2017
April 3, 2017
June 20, 2017
September 18, 2017
December 11, 2017
$
$
$
$
$
$
0.16 $
0.16
0.16
0.16
0.64 $
0.17 $
0.17
0.17
0.17
0.68 $
0.18 $
0.18
0.18
0.18
0.72 $
1,809
1,814
1,815
1,815
7,253
1,929
1,929
1,928
1,929
7,715
2,043
2,048
2,048
2,049
8,188
14
Any future determination as to the payment of cash dividends will depend upon such factors as earnings, capital
requirements, our financial condition, restrictions in financing agreements and other factors deemed relevant by our board of directors.
Covenants under our current credit facility restrict the payment of cash dividends if the Company would be in violation of the
minimum tangible net worth test or the leverage ratio test in the current loan agreement as a result of the dividend, among various
other restrictions.
Sales of Unregistered Securities
We did not sell any unregistered securities during the year ended December 31, 2017.
Performance Graph
The following line graph compares the percentage change in the cumulative shareholder return of our common stock with
The New York Stock Exchange Composite Index and the Standard & Poor’s Construction Index over the period of time from
December 31, 2012 through December 31, 2017. The respective returns assume reinvestment of dividends paid.
200
150
100
50
0
S
R
A
L
L
O
D
Comparison of Cumulative Total Returns
Miller Industries, Inc.
NYSE Composite Index
S & P Construction Index
12/31/12
12/31/13
12/31/14
12/31/15
12/31/16
12/31/17
Miller Industries, Inc.
NYSE Composite Index
S&P Construction Index
12/31/2012
12/31/2013
12/31/2014
12/31/2015
12/31/2016
12/31/2017
100
100
100
122
123
98
136
128
94
143
120
70
173
131
99
169
152
142
15
ITEM 6.
SELECTED FINANCIAL DATA
The following table presents selected statements of income data and selected balance sheet data on a consolidated basis. We
derived the selected historical consolidated financial data from our audited consolidated financial statements and related notes. You
should read this data together with Item 7–”Management’s Discussion and Analysis of Financial Condition and Results of Operations”
and our consolidated financial statements and related notes that are a part of this Annual Report on Form 10-K.
Statements of Income Data:
Net Sales
Costs of operations
Gross Profit
Operating Expenses:
2017
Years Ended December 31,
2016
2014
2015
(In thousands except per share data)
2013
$
615,101 $
548,000
67,101
601,119 $
536,840
64,279
540,966 $
483,353
57,613
492,776 $
439,791
52,985
404,170
361,734
42,436
Selling, general, and administrative expenses
35,561
32,318
31,491
28,496
28,323
Non-operating Expenses:
Interest expense, net
Other expense (income)
Total expenses
Income before income taxes
Income tax provision
Net income
Net loss attributable to noncontrolling interests
Net income attributable to Miller Industries,
Inc.
$
1,588
(387)
36,762
30,339
7,323
23,016
--
1,161
(277)
33,202
31,077
11,155
19,922
--
919
340
32,750
24,863
8,887
15,976
--
554
437
29,487
23,498
8,660
14,838
66
369
(119)
28,573
13,863
5,175
8,688
542
23,016
$
19,922
$
15,976
$
14,904
$
9,230
Basic income per common share
Diluted income per common share
Weighted average shares outstanding:
Basic
Diluted
Balance Sheet Data:
Working capital (1)
Total assets
Long-term obligations (2)
Common shareholders’ equity
$
$
2.02 $
2.02 $
1.76 $
1.75 $
1.41 $
1.41 $
1.32 $
1.31 $
0.82
0.82
11,368
11,385
11,346
11,374
11,324
11,360
11,297
11,354
11,233
11,324
2017
2016
December 31,
2015
2014
2013
$
125,734 $
317,238
10,606
203,100
$
119,797
297,438
5,000
184,602
121,046
268,356
--
173,862
$
$
126,713
262,355
--
168,454
120,821
226,669
--
161,713
2017
2016
December 31,
2015
2014
2013
Other Data:
Cash dividend per common share
$
0.72
$
0.68
$
0.64
$
0.60
$
0.56
(1) Working capital consists of current assets less current liabilities.
(2) Long-term obligations consist of outstanding balances on credit facility and other long-term loans, including current portions.
Noncurrent taxes payable and deferred income tax liability are excluded.
16
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussion of our results of operations and financial condition should be read in conjunction with the
Consolidated Financial Statements and Notes thereto. Unless the context indicates otherwise, all dollar amounts in this Management’s
Discussion and Analysis of Financial Condition and Results of Operations are in thousands.
Executive Overview
Miller Industries, Inc. is The World’s Largest Manufacturer of 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.
Our management focuses on a variety of key indicators to monitor our overall operating and financial performance. These
indicators include measurements of revenue, operating income, gross margin, net income, 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 including general economic conditions as well as demand for, and price
of, our products, our technological competitiveness, our reputation for providing quality products and reliable service, competition
within our industry, and the cost of raw materials (including aluminum, steel and petroleum-related products).
Our industry is cyclical in nature. In recent years, the overall demand for our products and resulting revenues have been
positively affected by favorable economic conditions, such as lower fuel prices, and positive consumer sentiment in our industry.
However, historically, the overall demand for our products and our resulting revenues have at times been negatively affected by:
(cid:404) wavering levels of consumer confidence;
(cid:404) volatility and disruption in domestic and international capital and credit markets and the resulting decrease in the
availability of financing, including floor plan financing, for our customers and towing operators;
(cid:404)
significant periodic increases in fuel and insurance costs and their negative effect on the ability of our customers to
purchase towing and related equipment; and
(cid:404)
the overall effects of global economic conditions.
We remain concerned about the continuing effects of these factors on the towing and recovery industry, and we continue to
monitor our overall cost structure to see that it remains in line with business conditions.
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, which represent a substantial part of our total cost of operations.
In the past, as we have determined necessary, we have implemented price increases to offset higher costs. We also developed
alternatives to some of the components used in our production process that incorporate these raw materials, and our suppliers have
implemented these alternatives in the production of our component parts. We continue to monitor raw material prices and availability
in order to more favorably position the Company in this dynamic market.
As of December 31, 2017 and March 6, 2018, the Company owed $10,000 under the credit facility. The borrowings under the
credit facility were primarily used to finance our capital expenditure projects for our Pennsylvania manufacturing operations and at
our Ooltewah, Tennessee and Greeneville, Tennessee facilities. As of December 31, 2017, the Company also owed $606 under a fixed
rate loan to its French subsidiary, Jige International S.A. These borrowings are being used primarily for capital expenditure projects at
our operating facilities in France.
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, estimations 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:
17
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.
Inventory
Inventory costs include materials, labor and factory overhead. Inventories are stated at the lower of cost or net realizable
value, determined on a first-in, first-out basis. Appropriate consideration is given to obsolescence, valuation and other factors in
determining net realizable value. Revisions of these estimates could result in the need for adjustments.
Long-Lived Assets
Long-lived assets 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 asset 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 estimates, we believe that our long-lived assets are appropriately valued.
Goodwill
Goodwill is tested for impairment annually or if an event or circumstance occurs that would more likely than not reduce the
fair value of the reporting unit below the carrying amount. Goodwill is reviewed for impairment utilizing a qualitative assessment or a
two-step process. If we choose to perform a qualitative analysis of goodwill and determine that fair value more likely than not exceeds
the carrying value, no further testing is needed. If we choose the two-step approach, the first step identifies potential impairment by
comparing the fair value of the reporting unit with its carrying value. If the fair value exceeds the carrying value the second step is not
necessary. If the carrying value is more than the fair value, the second step of testing is performed to compare the fair value of the
goodwill with its carrying value. An impairment loss would be recognized to the extent that the carrying value of the goodwill exceeds
its fair value. We cannot predict the occurrence of certain events or changes in circumstances that might adversely affect the carrying
value of goodwill. Such events might include, but are not limited to, the impact of the economic environment or a material change in a
relationship with significant customers.
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
Our income tax expense, deferred tax assets and liabilities and liabilities for unrecognized tax benefits reflect management’s
best assessment of estimated current and future taxes to be paid. We are subject to income taxes in both the United States and foreign
jurisdictions. Significant judgments and estimates are required in determining the consolidated income tax expense.
Deferred income taxes arise from temporary differences between the tax basis of assets and liabilities and their reported
amounts in the financial statements, which will result in taxable or deductible amounts in the future. In evaluating our ability to
recover our deferred tax assets within the jurisdiction from which they arise, we consider all available positive and negative evidence,
including scheduled reversals of deferred tax liabilities, projected future taxable income, tax-planning strategies, and results of recent
operations. The assumptions about future taxable income require significant judgment and are consistent with the plans and estimates
we use to manage the underlying businesses.
18
The calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax laws and
regulations in multiple foreign jurisdictions. Accounting Standards Codification (“ASC”) 740 states that a tax benefit from an
uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination,
including resolutions of any related appeals or litigation process, on the basis of the technical merits.
We (1) record unrecognized tax benefits as liabilities in accordance with ASC 740 and (2) adjust these liabilities when our
judgment changes as a result of the evaluation of new information not previously available. Because of the complexity of some of
these uncertainties, the ultimate resolution may result in a payment that is materially different from our current estimate of the
unrecognized tax benefit liabilities. These differences will be reflected as increases or decreases to income tax expense in the period in
which new information is available.
We plan to repatriate a portion of our undistributed foreign earnings to the United States. However, we are still in the process
of determining the timing and the amount of such distributions.
Revenues
Under our accounting policies, revenues are recorded when the risk of ownership for products has transferred to independent
distributors or other customers, which generally occurs on shipment. From time to time, revenue is recognized under a bill and hold
arrangement. Recognition of revenue on bill and hold arrangements occurs when risk of ownership has passed to the customer, a fixed
written commitment has been provided by the customer, the goods are complete and ready for shipment, the goods are segregated
from inventory, no performance obligation remains and a schedule for delivery has been established. 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. Margin percentages are substantially
lower on completed recovery vehicles containing company-purchased chassis.
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. Foreign
currency translation adjustments are included in shareholders’ equity. Intercompany transactions denominated in a currency other than
the functional currency are remeasured into the functional currency. Gains and losses resulting from foreign currency transactions are
included in other income and expense in our consolidated statements of income.
Results of Operations
The following table sets forth, for the years indicated, the components of the consolidated statements of income expressed as
a percentage of net sales.
Net Sales
Costs of operations
Gross Profit
Operating Expenses:
Selling, general and administrative
Interest expense, net
Other expense (income)
Total operating expenses
Income before income taxes
2017
2016
2015
100.0%
89.1%
10.9%
5.8%
0.3%
(0.1)%
6.0%
4.9%
100.0 %
89.3 %
10.7 %
5.4 %
0.2 %
(0.1 )%
5.5 %
5.2 %
100.0%
89.4%
10.6%
5.8%
0.1%
0.1%
6.0%
4.6%
Year Ended December 31, 2017 Compared to Year Ended December 31, 2016
Net sales were $615,101 for the year ended December 31, 2017, compared to $601,119 for the year ended December 31,
2016, an increase of 2.3%. The increase in revenue was primarily attributable to increased demand levels in our international markets
and continued strong economic conditions and positive consumer sentiment in both domestic and international markets. Foreign net
sales for the period increased from $63,811 to $87,967 offset by a decrease in domestic net sales for the period from $537,308 to
$527,134.
Costs of operations increased 2.1% to $548,000 for the year ended December 31, 2017 from $536,840 for the year ended
December 31, 2016, which was attributable to increased production as a result of the strong demand levels. Overall, costs of
operations as a percentage of net sales decreased from 89.3% for the year ended December 31, 2016 to 89.1% for the year ended
December 31, 2017 primarily due to product mix.
19
Selling, general and administrative expenses for the year ended December 31, 2017 increased to $35,561 from $32,318 for
the year ended December 31, 2016. The increase in expenses was primarily attributable to increased personnel costs related to rising
employee benefit costs. As a percentage of net sales, selling, general and administrative expenses increased to 5.8% for 2017 from
5.4% for 2016.
Interest expense, net increased to $1,588 for the year ended December 31, 2017 from $1,161 for the year ended December 31,
2016. Increases in interest expense, net were primarily due to increases in interest on distributor floor planning and borrowings under
the credit facility.
Other expense (income) generally relates to foreign currency transaction gains and losses. However, during 2017, we realized
a gain of $601 on the sale of one of our Pennsylvania buildings and recognized the gain in other expense (income). The net gain was
$387 for 2017 compared to a net gain of $277 for 2016.
The provision for income taxes for the years ended December 31, 2017 and 2016 reflects a combined federal, state and
foreign tax rate of 24.1% and 35.8%, respectively, which corresponds to a tax provision of $7,323 for 2017 as compared to $11,155
for 2016. Our tax rate was primarily affected by the provisions of the Tax Cuts and Jobs Act (“TCJA”), which was signed into law by
the President on Friday December 22, 2017. The TCJA included a reduction in the corporate tax rate from a top rate of 35% to a flat
rate of 21%, thus causing significant remeasurements of our deferred tax liabilities and assets. The release of the liability for our
previous unrecognized tax benefit also contributed $1,157 to the decrease in the income tax provision, which contributed to the
decreased tax rate. These decreases in the tax provision were partially offset by the deemed repatriation of our accumulated foreign
earnings imposed by the TCJA of $1,102. For more information on the effective tax rate, see Note 6 to our Consolidated Financial
Statements.
Year Ended December 31, 2016 Compared to Year Ended December 31, 2015
Net sales were $601,119 for the year ended December 31, 2016, compared to $540,966 for the year ended December 31,
2015, an increase of 11.1%. The increase in revenue was primarily attributable to strong demand levels in our domestic markets based
on positive consumer sentiment accompanied by increases in production levels. Domestic net sales for the period increased from
$467,161 to $537,308 offset by a decrease in foreign net sales for the period from $73,805 to $63,811.
Costs of operations increased 11.1% to $536,840 for the year ended December 31, 2016 from $483,353 for the year ended
December 31, 2015, which was attributable to increased production as a result of the strong demand levels. Overall, costs of
operations as a percentage of net sales decreased from 89.4% for the year ended December 31, 2015 to 89.3% for the year ended
December 31, 2016 primarily due to product mix.
Selling, general and administrative expenses for the year ended December 31, 2016 increased to $32,318 from $31,491 for
the year ended December 31, 2015. The increase in expenses was primarily attributable to increased personnel costs related to an
increase in staffing levels. As a percentage of net sales, selling, general and administrative expenses decreased to 5.4% for 2016 from
5.8% for 2015 due to higher sales volume and production levels.
Interest expense, net increased to $1,161 for the year ended December 31, 2016 from $919 for the year ended December 31,
2015. Increases in interest expense, net were primarily due to borrowings under the credit facility and increases in interest on
distributor floor planning and on chassis purchases.
Other expense (income) generally relates to foreign currency transaction gains and losses. During 2016, the net gain was
$277 compared to a net loss of $340 for 2015.
The provision for income taxes for the years ended December 31, 2016 and 2015 reflects a combined federal, state and
foreign tax rate of 35.8% and 35.7%, respectively. Our tax rate was affected by recurring items, such as tax rates in foreign
jurisdictions and the relative amounts of income we earned in those jurisdictions. It was also affected by discrete items that occur in
any given year, but are not consistent from year to year. For more information on the effective tax rate, see Note 6 to our Consolidated
Financial Statements.
Liquidity and Capital Resources
Cash provided by operating activities during 2017 was $13,975, compared to $20,926 and $20,165 provided during 2016 and
2015, respectively. Cash provided by operating activities for 2017, 2016 and 2015 was primarily attributed to consolidated net income.
For 2017, cash provided by operating activities reflects decreases to prepaid expenses and increases to accrued liabilities, offset by
increases to accounts receivable and inventories, and decreases in accounts payable. For 2016, cash provided by operating activities
reflects decreases in inventory and increases to accounts payable, offset by increases in accounts receivable and prepaid expenses, and
decreases to accrued expenses. For 2015, cash provided by operating activities reflects decreases in accounts receivable and increases
in accounts payables and accrued liabilities, offset by increases in other components of working capital, including inventory.
20
Cash used in investing activities during 2017 was $23,390, compared to $25,023 and $11,899 used during 2016 and 2015,
respectively. The cash used in investing activities for 2017, 2016 and 2015 was primarily for the purchase of property, plant and
equipment relating to the capital projects described below.
Cash used in financing activities during 2017 was $2,436, compared to $2,712 and $7,067 used during 2016 and 2015,
respectively. The cash used in financing activities for 2017 resulted primarily from cash used to pay dividends of $8,188, partially
offset by net borrowings on the credit facility of $5,000, a small amount of borrowings by one of our foreign subsidiaries, and
exercises of stock options. The cash used in financing activities for 2016 resulted primarily from cash used to pay dividends for 2016
of $7,715, partially offset by net borrowings on the credit facility of $5,000. The cash used in financing activities in 2015 was
primarily to pay cash dividends, offset in a small amount by proceeds from the exercise of stock options.
During 2017, we borrowed a total of $20,000 under our current credit facility, of which we had repaid $15,000 at December
31, 2017. The borrowings under the credit facility were primarily used to finance our capital expenditure projects for our Pennsylvania
manufacturing operations and our Ooltewah, Tennessee and Greeneville, Tennessee facilities. Over the past year, we generally have
used available cash flow from operations to pay for capital expenditures, to pay dividends and to repay debt under our credit facility.
As of December 31, 2017, we had cash and cash equivalents of $21,895, not including $40,000 of unused availability under
our credit facility. At March 6, 2018, our outstanding borrowings under the credit facility remained at the December 31, 2017 balance
of $10,000. Our primary cash requirements include working capital, capital expenditures, the funding of any declared cash dividends
and principal payments on indebtedness. At December 31, 2017, we had commitments of approximately $11,083 for construction and
acquisition of property and equipment. We expect our primary sources of cash to be cash flow from operations, cash and cash
equivalents on hand at December 31, 2017, with additional borrowings under our credit facility being available as needed. We expect
these sources to be sufficient to satisfy our cash needs during 2018 and for the next several years. However, our ability to satisfy our
cash needs will substantially depend upon a number of factors including our future operating performance, taking into account the
economic, regulatory and other factors discussed above and elsewhere in this Annual Report, as well as financial, business and other
factors, many of which are beyond our control.
At December 31, 2017 and 2016, $12,650 and $21,675, respectively, of the Company’s cash and temporary investments were
held by foreign subsidiaries based in the local currency.
During 2017, the Company substantially completed the consolidation and expansion of its Pennsylvania manufacturing
operations to increase capacity and improve operating efficiencies. The manufacturing operations of the two primary Pennsylvania
locations were consolidated at one expanded location and, in June 2017, the Company sold the remaining plant location and realized a
net gain of $601 on the property. A portion of the sold facility was leased from the buyer through November 2017, while production
of certain equipment and storage of raw materials was relocated to the other Pennsylvania and Tennessee locations. As of December
31, 2017, only a de minimis amount of costs were remaining of the $24,700 total project costs. These project costs are included in
property, plant and equipment, net on the consolidated balance sheets.
The Company also continued several capital projects during 2017 involving machinery and equipment and building
improvements at its Ooltewah, Tennessee and Greeneville, Tennessee facilities that it currently estimates will cost in total
approximately $21,200. Approximately $21,000 of these costs were incurred as of December 31, 2017 and are included in property,
plant and equipment, net on the consolidated balance sheets. The remainder of these costs are expected to be incurred during the first
quarter of 2018. In addition, the Company began construction on an administrative building at its Ooltewah, Tennessee facility in June
2017. The current estimated costs of this project are approximately $4,200. Approximately $1,581 of these costs were incurred as of
December 31, 2017, and the remaining costs are expected to be incurred during the first half of 2018. The timing and cost of these
projects are subject to change.
Contractual Obligations
The following is a summary of our contractual obligations as of December 31, 2017.
Contractual Obligations (1)(2)
Operating Lease Obligations
Purchase Obligations (3)
Revolving Credit Facility
Other Long-term Obligations
Commitments for construction and acquisition
of plant and equipment (4)
Total
Payment Due By Period (in thousands)
Less than
1 year
$
$
Total
1,938
33,463
10,000
606
$
752
33,463
--
394
1-3 years
488
--
10,000
212
$
$
3-5 years
251
--
--
--
11,083
57,090
$
11,083
45,692
$
--
10,700
$
$
--
251
$
21
More than
5 years
447
--
--
--
--
447
(1) Amounts do not include potential contingent obligations of $54,093 under repurchase commitments with third-party lenders in the
event of independent distributor customer default.
(2) Amounts do not include approximately $1,102 noncurrent taxes payable relating to the deemed repatriation of foreign income
required by the Tax Cuts and Jobs Act. We are currently in the process of determining the timing and amounts of these payments.
For more information on the deemed repatriation tax, see Note 6 to our Consolidated Financial Statements.
(3) Purchase obligations represent open purchase orders for raw materials and other components issued in the normal course of
business.
(4) Represents commitments to various capital projects and equipment acquisitions.
Credit Facility and Other Obligations
Credit Facility
On June 11, 2015, the credit facility pursuant to our Loan Agreement with First Tennessee Bank National Association was
renewed to extend the maturity date to March 31, 2018 and our unsecured revolving credit facility was increased to $30,000. On June
22, 2016, the credit facility was further increased to $50,000 to give the Company greater flexibility to finance capital expenditure
projects. On April 5, 2017, the credit facility was further renewed to extend the maturity date to May 31, 2019. The current credit
facility contains customary representations and warranties, events of default, and financial, affirmative and negative covenants for
loan agreements of this kind. Covenants under the current credit facility restrict the payment of cash dividends if the Company would
be in violation of the minimum tangible net worth test or the leverage ratio test in the current loan agreement as a result of the
dividend, among various restrictions. We have been in compliance with these covenants throughout 2017 and anticipate that we will
continue to be in compliance during 2018.
In the absence of a default, all borrowings under the credit facility bear interest at the LIBOR Rate plus 1.50% per annum.
The Company will pay a non-usage fee under the current loan agreement at a rate per annum equal to between 0.15% and 0.35% of
the unused amount of the credit facility, which fee is paid quarterly.
Outstanding Borrowings
As of December 31, 2017 and March 6, 2018, the Company owed $10,000 under the credit facility. The borrowings under the
credit facility were primarily used to finance our capital expenditure projects for our Pennsylvania manufacturing operations and at
our Ooltewah, Tennessee and Greeneville, Tennessee facilities.
During November 2017, our French subsidiary, Jige International S.A., entered into an agreement with Banque Européenne
du Crédit Mutuel for a $1,000 unsecured fixed rate loan with a maturity date of September 30, 2020. All borrowings under this loan
bear interest at 0.3% per annum. At December 31, 2017, the Company had $606 in outstanding borrowings under the loan agreement,
of which $212 and $394 were classified as long-term obligations and long-term obligations due within one year, respectively, on the
consolidated balance sheets. These borrowings are being used primarily for the purchase of land and routine repairs to the operating
facilities in France. The loan agreement contains no material covenants.
Interest Rate Sensitivity
Changes in interest rates affect the interest paid on indebtedness under our credit facility because the outstanding amounts of
indebtedness under our current credit facility are subject to variable interest rates. Under our credit facility, the non-default rate of
interest is equal to the LIBOR Market Index Rate plus 1.50% per annum (for a rate of interest of 3.07% at December 31, 2017). 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 year ended December 31, 2017.
Other Long-Term Obligations
We had approximately $1,938 in non-cancellable operating lease obligations at December 31, 2017.
22
Recent Accounting Pronouncements
Recently Issued Standards
In May 2014, the Financial Accounting Standards Board (“FASB”) issued guidance to change the recognition of revenue
from contracts with customers. The core principle of the new guidance is that an entity should recognize revenue to reflect the transfer
of goods and services to customers in an amount equal to the consideration the entity receives or expects to receive. In addition, during
2016 the FASB issued additional guidance to clarify certain implementation guidance previously issued and to rescind certain SEC
guidance effective upon an entity’s adoption of the new standard. The guidance will be effective for the Company for reporting
periods beginning after December 15, 2017. The Company expects to use the modified retrospective approach to implement the
standard. The Company has substantially completed its evaluation of revenue streams and the review of its current accounting policies
and practices to identify potential differences that would result from applying the requirements of the new standard to the Company’s
revenue recognition policy. In addition, the Company has implemented appropriate changes to business processes, information
technology systems and internal controls to support recognition and disclosure under the new standard. The Company does not expect
the adoption of the new revenue standard to have a material impact on the amount and timing of revenue recognized in the Company’s
consolidated financial statements. For an estimate of the impact to shareholders’ equity, see Note 2 to our Consolidated Financial
Statements.
The FASB's new leases standard Accounting Standard Update (“ASU”) 2016-02 Leases (Topic 842) was issued on February
25, 2016 and is intended to improve financial reporting about leasing transactions. The standard affects all companies and other
organizations that lease assets such as real estate, airplanes, and manufacturing equipment. The standard will require organizations that
lease assets referred to as “Lessees” to recognize on the balance sheet the assets and liabilities for the rights and obligations created by
those leases. An organization is to provide disclosures designed to enable users of financial statements to understand the amount,
timing, and uncertainty of cash flows arising from leases. These disclosures include qualitative and quantitative requirements
concerning additional information about the amounts recorded in the financial statements. Under the new guidance, a lessee will be
required to recognize assets and liabilities for leases with lease terms of more than 12 months. Consistent with current GAAP, the
recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee primarily will depend on its
classification as a finance or operating lease. However, unlike current GAAP which requires only capital leases to be recognized on
the balance sheet, the new standard will require both types of leases (i.e. operating and finance) to be recognized on the balance sheet.
The FASB lessee accounting model will continue to account for both types of leases. The finance lease will be accounted for in
substantially the same manner as capital leases are accounted for under existing GAAP. The operating lease will be accounted for in a
manner similar to operating leases under existing GAAP, except that lessees will recognize a lease liability and a lease asset for all of
those leases.
The standard will be effective for financial statements issued for annual periods, and interim periods within these annual
periods, beginning after December 15, 2018, with early adoption permitted. See Note 5 to our Consolidated Financial Statements for
the Company’s current lease commitments. The Company plans to use the modified retrospective approach to implement the standard
and is currently evaluating the effect that implementation will have on its consolidated financial position, results of operations and
cash flows.
In May 2017, the FASB amended the requirements in the Compensation—Stock Compensation Topic of the ASC related to
changes to the terms or conditions of a share-based payment award. The amendments provide guidance about which changes to the
terms or conditions of a share-based payment award require an entity to apply modification accounting. The amendments will be
effective for the Company for annual periods, and interim periods within those annual periods, beginning after December 15, 2017.
Early adoption is permitted. The Company does not expect these amendments to have a material effect on its financial statements.
In January 2017, the FASB issued ASU No. 2017-04, “Intangibles—Goodwill and Other (Topic 350): Simplifying the Test
for Goodwill Impairment”. The standard eliminates the second step in the goodwill impairment test which requires an entity to
determine the implied fair value of the reporting unit’s goodwill. Instead, an entity should recognize an impairment loss if the carrying
value of the net assets assigned to the reporting unit exceeds the fair value of the reporting unit, with the impairment loss not to exceed
the amount of goodwill allocated to the reporting unit. The standard is effective for annual and interim goodwill impairment tests
conducted in fiscal years beginning after December 15, 2019, with early adoption permitted. The Company does not anticipate the
adoption of this guidance to have a material impact on its consolidated financial statements and related disclosures.
Recently Adopted Standards
In July 2015, the FASB issued amendments to the Inventory topic of the ASC to require inventory to be measured at the
lower of cost and net realizable value. Other than the change in the subsequent measurement guidance from the lower of cost or
market to the lower of cost and net realizable value for inventory, there are no other substantive changes to the guidance on
measurement of inventory. The Company prospectively adopted these amendments in the first quarter of 2017. The adoption did not
have a material effect on its consolidated financial statements.
23
In March 2016, the FASB issued guidance to simplify several aspects of the accounting for share-based payment award
transactions including the income tax consequences, the classification of awards as either equity or liabilities, and the classification on
the statement of cash flows. Additionally, the guidance simplifies two areas specific to entities other than public business entities
allowing them apply a practical expedient to estimate the expected term for all awards with performance or service conditions that
have certain characteristics and also allowing them to make a one-time election to switch from measuring all liability-classified
awards at fair value to measuring them at intrinsic value. The Company adopted these amendments in the first quarter of 2017. The
adoption did not have a material effect on its consolidated financial statements.
ITEM 7A. 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. Unless the context indicates otherwise, all dollar
amounts in this “Item 7A. Quantitative and Qualitative Disclosures About Market Risk” are in thousands.
Interest Rate Risk
Changes in interest rates affect the interest paid on indebtedness under our current credit facility because the outstanding
amounts of indebtedness under our current credit facility are subject to variable interest rates. Under our current credit facility, the
non-default rate of interest is equal to the LIBOR Market Index Rate plus 1.50% per annum (for a rate of interest of 3.07% at
December 31, 2017). 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 year ended December 31, 2017.
Foreign Currency 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.
Additionally, from time to time, we enter into certain forward foreign currency exchange contracts.
During the years ended December 31, 2017, 2016 and 2015, the impact of foreign currency exchange rate changes on our
results of operations and cash flows was a net loss of $214, a net gain of $277 and a net loss of $340, respectively.
Because we report in U.S. dollars on a consolidated basis, foreign currency exchange fluctuations could have a translation
impact on our financial position. During 2017, we recognized a $3,374 increase in our foreign currency translation adjustment account
because of the weakening of the U.S. dollar against certain foreign currencies, compared to decreases of $1,566 and $3,703 during
2016 and 2015, respectively.
ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The response to this item is included in Part IV, Item 15 of this Report.
ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
We carried out an evaluation, under the supervision and with the participation of our management, including our chief
executive and chief financial officers, of the effectiveness of the design and operation of our disclosure controls and procedures, as
defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as of the end of the period covered by this
report. Based upon this evaluation, our Co-Chief Executive Officers and our Chief Financial Officer have concluded that the
disclosure controls and procedures were effective as of the end of the period covered by this Annual Report to ensure that information
required to be disclosed in our 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.
24
Management’s Report on Internal Control over Financial Reporting
Management of Miller Industries, Inc. is responsible for establishing and maintaining adequate internal control over financial
reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act). Our internal control over financial reporting is a
process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated
financial statements for external purposes in accordance with accounting principles generally accepted in the United States of
America. The Company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the
maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the
Company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial
statements in accordance with U.S. generally accepted accounting principles, and that receipts and expenditures of the Company are
being made only in accordance with authorizations of management and directors of the Company; and (3) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could
have a material effect on the consolidated financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may be inadequate because of
changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management, including our principal executive officers and principal financial officer, conducted an evaluation of the
effectiveness of our internal control over financial reporting as of December 31, 2017. In making this assessment, management used
the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in “Internal Control—Integrated
Framework” (2013). Based on our assessment under those criteria, we concluded that, as of December 31, 2017, we maintained
effective internal control over financial reporting.
Elliott Davis, LLC, the independent registered public accounting firm who audited the Company’s consolidated financial
statements included in this report, has issued an audit report on the effectiveness of the Company’s internal control over financial
reporting as of December 31, 2017, which appears herein.
March 7, 2018
25
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of Miller Industries, Inc.:
Opinion on the Internal Control Over Financial Reporting
We have audited Miller Industries, Inc.’s and its subsidiaries (the Company) internal control over financial reporting as of
December 31, 2017, based on criteria established in Internal Control — Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission in 2013. In our opinion, the Company maintained, in all material respects,
effective internal control over financial reporting as of December 31, 2017, based on the criteria established in Internal Control —
Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the consolidated balance sheets as of December 31, 2017 and 2016, the related consolidated statements of income,
comprehensive income, shareholders' equity and cash flows for each of the three years in the period ended December 31, 2017, and
the related notes and financial statement schedule listed in the index at Item 15, of the Company and our report dated March 7, 2018,
expressed an unqualified opinion.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting in the accompanying Management’s Report on Internal
Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial
reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with
respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and
Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material
weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our
audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit
provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1)
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the
assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being
made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance
regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company's assets that could have a
material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of
changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Elliott Davis, LLC
Chattanooga, Tennessee
March 7, 2018
26
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting that occurred during our most recent fiscal quarter that
have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
ITEM 9B. OTHER INFORMATION
None.
27
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The Proxy Statement for our Annual Meeting of Shareholders, to be filed with the Securities and Exchange Commission, will
contain information relating to our directors and audit committee, compliance with Section 16(a) of the Exchange Act, and our code of
ethics applicable to our chief executive, financial and accounting officers, which information is incorporated by reference herein.
Information relating to our executive officers is included in Item 1 of this report.
ITEM 11. EXECUTIVE COMPENSATION
The Proxy Statement for our Annual Meeting of Shareholders, to be filed with the Securities and Exchange Commission, will
contain information relating to director and executive officer compensation, which information is incorporated by reference herein.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
The Proxy Statement for our Annual Meeting of Shareholders, to be filed with the Securities and Exchange Commission, will
contain information relating to security ownership of certain beneficial owners and management, which information is incorporated by
reference herein.
The Proxy Statement will also contain information relating to our equity compensation plans, which information is
incorporated by reference herein.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The Proxy Statement for our Annual Meeting of Shareholders, to be filed with the Securities and Exchange Commission, will
contain information relating to certain relationships and related transactions between us and certain of our directors and executive
officers, which information is incorporated by reference herein.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The Proxy Statement for our Annual Meeting of Shareholders, to be filed with the Securities and Exchange Commission, will
contain information relating to the fees charged and services provided by Elliott Davis, LLC (f/k/a Elliott Davis Decosimo, LLC), our
principal accountants during 2015, 2016 and 2017, and our pre-approval policy and procedures for audit and non-audit services, which
information is incorporated by reference into this report.
28
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
(a)
1.
The following documents are filed as part of this Report:
Financial Statements
PART IV
Description
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of December 31, 2017 and 2016
Consolidated Statements of Income for the years ended December 31, 2017, 2016 and 2015
Consolidated Statements of Comprehensive Income for the years ended December 31, 2017, 2016 and 2015
Consolidated Statements of Shareholders’ Equity for the years ended December 31, 2017, 2016 and 2015
Consolidated Statements of Cash Flows for the years ended December 31, 2017, 2016 and 2015
Notes to Consolidated Financial Statements
2.
Financial Statement Schedules
Page
Number
in Report
F-2
F-3
F-4
F-5
F-6
F-7
F-8
The following Financial Statement Schedule for the Registrant is filed as part of this Report and should be read in
conjunction with the Consolidated Financial Statements:
Description
Schedule II - Valuation and Qualifying Accounts
Page
Number
in Report
F-20
All schedules, except those set forth above, have been omitted since the information required is included in the financial
statements or notes or have been omitted as not applicable or not required.
3.
Exhibits
The following exhibits are required to be filed with this Report by Item 601 of Regulation S-K:
Description
3.1
3.2
Charter, as amended, of the Registrant
Amended and Restated Bylaws of the
Registrant
Incorporated
by Reference
to Registration
File Number
Form or
Report
Date of Report
—
—
Form 10-K
April 22, 2002
Form 10-Q
November 8, 2007
Exhibit
Number in
Report
3.1
3.2
10.1
Form of Noncompetition Agreement between
33-79430
S-1
August 1994
10.28
the Registrant and certain officers of the
Registrant
10.2
Employment Agreement dated as of December
30, 2008 between the Registrant and William
G. Miller**
29
—
Form 10-Q
May 6, 2009
10.1
Description
Incorporated
by Reference
to Registration
File Number
Form or
Report
Date of Report
Exhibit
Number in
Report
10.3
Form of Indemnification Agreement by and
—
Form 10-Q
September 14, 1998
10
between the Registrant and each of Theodore
H. Ashford, III, Jeffrey I. Badgley, A. Russell
Chandler, III, Frank Madonia, William G.
Miller, William G. Miller, II, and Richard H.
Roberts **
10.4
Employment Agreement, dated as of
—
Form 10-Q
May 6, 2009
10.2
December 30, 2008, between the Registrant
and Jeffrey I. Badgley**
Agreement between the Registrant and Jeffrey
I. Badgley, effective December 30, 2008**
Letter Agreement, dated as of November 27,
2013 between the Registrant and William G.
Miller, effective as of December 31, 2013,
amending the Employment Agreement dated
as of December 30, 2008**
Letter Agreement, dated as of November 27,
2013 between the Registrant and Jeffrey I.
Badgley, effective as of December 31, 2013,
amending the Employment Agreement dated
as of December 30, 2008 and the Change in
Control Agreement effective December 30,
2008**
Non-Employee Director Stock Plan**
Miller Industries, Inc. 2005 Equity Incentive
Plan**
10.5
10.6
10.7
10.8
10.9
10.10
Amended and Restated Loan Agreement,
dated December 30, 2014, by and among the
Registrant, certain of the Registrant’s wholly-
owned subsidiaries, and First Tennessee Bank
National Association
First Amendment to Amended and Restated
Loan Agreement, dated as of June 11, 2015,
by and among the Registrant, certain of the
Registrant’s wholly-owned subsidiaries, and
First Tennessee Bank National Association
Master Revolving Credit Note dated as of June
11, 2015 from the Registrant payable to First
Tennessee Bank National Association
10.11
10.12
—
—
Form 10-Q
May 6, 2009
10.5
Form 10-K
March 5, 2014
10.18
—
Form 10-K
March 5, 2014
10.19
—
—
—
Schedule 14A
January 23, 2004
Annex A
Schedule 14A
May 2, 2005
Annex B
Form 10-K
March 4, 2015
10.25
—
Form 8-K
June 17, 2015
10.1
—
Form 8-K
June 17, 2015
10.2
10.13
Amended and Restated Loan Agreement,
Form 8-K
June 24, 2016
10.1
dated as of June 22, 2016, by and among the
Registrant, certain of the Registrant’s wholly-
owned subsidiaries, and First Tennessee Bank
National Association
30
Description
Incorporated
by Reference
to Registration
File Number
Form or
Report
Date of Report
Exhibit
Number in
Report
10.14
Amended and Restated Master Revolving
Form 8-K
June 24, 2016
10.2
Credit Note dated as of June 22, 2016 from the
Registrant payable to First Tennessee Bank
National Association
10.15
Amended and Restated Loan Agreement,
Form 8-K
April 11, 2017
10.1
dated as of April 5, 2017, by and among the
Registrant, certain of the Registrant’s wholly-
owned subsidiaries, and First Tennessee Bank
National Association
10.16
Amended and Restated Master Revolving
Form 8-K
April 11, 2017
10.2
Credit Note dated as of April 5, 2017 from the
Registrant payable to First Tennessee Bank
National Association
10.17
Miller Industries, Inc. 2016 Stock Incentive
Schedule 14A
April 19, 2017
Appendix A
21
23.1
24
31.1
Plan **
Subsidiaries of the Registrant*
Consent of Elliott Davis, LLC*
Power of Attorney (see signature page)*
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±
31
Incorporated
by Reference
to Registration
File Number
Form or
Report
Date of Report
Exhibit
Number in
Report
101
Description
The following financial information from
Miller Industries, Inc.’s Annual Report on
Form 10-K for the year ended December 31,
2017, formatted in XBRL (eXtensible
Business Reporting Language): (i)
Consolidated Balance Sheets as of December
31, 2017 and December 31, 2016, (ii)
Consolidated Statements of Income for the
years ended December 31, 2017, 2016 and
2015, (iii) Consolidated Statements of
Comprehensive Income for the years ended
December 31, 2017, 2016 and 2015, (iv)
Consolidated Statements of Shareholder’s
Equity for the years ended December 31,
2017, 2016 and 2015, (v) Consolidated
Statements of Cash Flows for the years ended
December 31, 2017, 2016 and 2015, and
(vi) the Notes to Consolidated Financial
Statements.*
* Filed herewith.
± Exhibit is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Exchange Act, or otherwise subjected
to the liabilities of that Section. This exhibit shall not be incorporated by reference into any given registration statement or other
document pursuant to the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such a
filing.
** Management contract or compensatory plan or arrangement.
(b)
The Registrant hereby files as exhibits to this Report the exhibits set forth in Item 15(a)3 hereof.
I
The Registrant hereby files as financial statement schedules to this Report the financial statement schedules set forth in Item
15(a)2 hereof.
ITEM 16. FORM 10-K SUMMARY
None.
32
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2017 AND 2016
CONSOLIDATED STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31, 2017, 2016 AND 2015
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2017,
2016 AND 2015
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY FOR THE YEARS ENDED DECEMBER 31, 2017,
2016 AND 2015
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2017, 2016 AND
2015
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SCHEDULE II –VALUATION AND QUALIFYING ACCOUNTS
F-2
F-3
F-4
F-5
F-6
F-7
F-8
F-20
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Directors of Miller Industries, Inc.:
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Miller Industries, Inc. and its subsidiaries (the Company)
as of December 31, 2017 and 2016, and the related consolidated statements of income, comprehensive income, shareholders' equity
and cash flows for each of the three years in the period ended December 31, 2017, and the related notes and financial statement
schedule listed in the index at Item 15. In our opinion, the financial statements present fairly, in all material respects, the financial
position of the Company as of December 31, 2017 and 2016, and the results of its operations and its cash flows for each of the three
years in the period ended December 31, 2017, in conformity with accounting principles generally accepted in the United States of
America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the Company's internal control over financial reporting as of December 31, 2017, based on criteria established in Internal
Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013, and
our report dated March 7, 2018 expressed an unqualified opinion on the effectiveness of the Company's internal control over financial
reporting.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion
on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are
required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error
or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether
due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis,
evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting
principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial
statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ Elliott Davis, LLC
We have served as the Company’s auditor since 2003.
Chattanooga, Tennessee
March 7, 2018
F-2
MILLER INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2017 AND 2016
(In thousands, except share data)
ASSETS
CURRENT ASSETS:
Cash and temporary investments
Accounts receivable, net of allowance for doubtful accounts of $1,038 and $1,004, at
December 31, 2017 and 2016, respectively
Inventories, net
Prepaid expenses
Total current assets
PROPERTY, PLANT AND EQUIPMENT, net
GOODWILL
OTHER ASSETS
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable
Accrued liabilities
Long-term obligations due within one year
Total current liabilities
LONG-TERM OBLIGATIONS
NONCURRENT TAXES PAYABLE
DEFERRED INCOME TAX LIABILITIES
COMMITMENTS AND CONTINGENCIES (Notes 3 and 5)
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, 11,378,482 and 11,346,060,
outstanding at December 31, 2017 and 2016, respectively
Additional paid-in capital
Accumulated surplus
Accumulated other comprehensive income (loss)
Total shareholders’ equity
2017
2016
$
21,895 $
31,115
132,699
68,567
4,272
227,433
77,628
11,619
558
317,238 $
79,304 $
22,001
394
101,699
10,212
1,102
1,125
125,383
64,136
5,006
225,640
59,613
11,619
566
297,438
85,116
20,727
--
105,843
5,000
--
1,993
--
--
114
150,699
55,580
(3,293)
203,100
317,238 $
113
150,404
40,752
(6,667)
184,602
297,438
$
$
$
The accompanying notes are an integral part of these consolidated statements.
F-3
MILLER INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 2017, 2016 AND 2015
(In thousands, except per share data)
NET SALES
COSTS OF OPERATIONS
GROSS PROFIT
OPERATING EXPENSES:
Selling, general, and administrative expenses
NON-OPERATING EXPENSES
Interest expense, net
Other expense (income)
Total expenses
INCOME BEFORE INCOME TAXES
INCOME TAX PROVISION
NET INCOME
BASIC INCOME PER COMMON SHARE
DILUTED INCOME PER COMMON SHARE
CASH DIVIDENDS DECLARED PER COMMON SHARE
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic
Diluted
$
2017
615,101 $
548,000
67,101
2016
601,119 $
536,840
64,279
2015
540,966
483,353
57,613
35,561
32,318
31,491
1,588
(387)
36,762
1,161
(277)
33,202
30,339
7,323
23,016 $
31,077
11,155
19,922 $
2.02 $
1.76 $
2.02 $
1.75 $
0.72 $
0.68 $
919
340
32,750
24,863
8,887
15,976
1.41
1.41
0.64
11,368
11,385
11,346
11,374
11,324
11,360
$
$
$
$
The accompanying notes are an integral part of these consolidated statements.
F-4
MILLER INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE YEARS ENDED DECEMBER 31, 2017, 2016 AND 2015
(In thousands)
NET INCOME
OTHER COMPREHENSIVE INCOME (LOSS):
Foreign currency translation adjustment
Total other comprehensive income (loss)
2017
2016
2015
$
23,016 $
19,922 $
15,976
3,374
3,374
(1,566)
(1,566)
(3,703)
(3,703)
COMPREHENSIVE INCOME
$
26,390 $
18,356 $
12,273
The accompanying notes are an integral part of these consolidated statements.
F-5
MILLER INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2017, 2016 AND 2015
(In thousands, except share data)
BALANCE, December 31, 2014
Components of comprehensive income:
Net income
Foreign currency translation
adjustments
Total comprehensive income
Issuance of common stock to non-
employee directors (4,620)
Exercise of stock options (34,000)
Excess tax effect for stock-based
compensation
Dividends paid, $0.64 per share
BALANCE, December 31, 2015
Components of comprehensive income:
Net income
Foreign currency translation
adjustments
Total comprehensive income
Issuance of common stock to non-
employee directors (4,410)
Exercise of stock options (500)
Dividends paid, $0.68 per share
BALANCE, December 31, 2016
Components of comprehensive income:
Net income
Foreign currency translation
adjustments
Total comprehensive income
Issuance of common stock to non-
employee directors (5,922)
Exercise of stock options (26,500)
Dividends paid, $0.72 per share
BALANCE, December 31, 2017
Common
Stock
Additional
Paid-In
Capital
Accumulated
Surplus
Accumulated
Other
Comprehensive
Income (Loss)
113
149,917
19,822
(1,398)
Total
168,454
--
--
--
--
--
--
--
113
--
--
--
--
--
--
113
--
--
--
--
1
--
114 $
$
--
--
--
96
186
106
--
150,305
--
--
--
96
3
--
150,404
--
--
--
150
145
--
150,699 $
15,976
--
15,976
--
--
--
(7,253)
28,545
19,922
--
19,922
--
--
(7,715)
40,752
23,016
--
23,016
--
--
(8,188)
55,580 $
--
15,976
(3,703)
(3,703)
(3,703)
12,273
--
--
--
--
(5,101)
96
186
106
(7,253)
173,862
--
19,922
(1,566)
(1,566)
--
--
--
(6,667)
(1,566)
18,356
96
3
(7,715)
184,602
--
23,016
3,374
3,374
--
--
--
(3,293) $
3,374
26,390
150
146
(8,188)
203,100
The accompanying notes are an integral part of these consolidated statements.
F-6
MILLER INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2017, 2016 AND 2015
(In thousands)
OPERATING ACTIVITIES:
Net income
Adjustments to reconcile net income to net cash flows used in operating
2017
2016
2015
$
23,016 $
19,922 $
15,976
activities:
Depreciation and amortization
(Gain) Loss on disposals of property and equipment
Deferred tax provision
Provision for doubtful accounts
Issuance of non-employee director shares
Changes in operating assets and liabilities:
Accounts receivable
Inventories
Prepaid expenses
Accounts payable
Accrued liabilities
Net cash flows from operating activities
INVESTING ACTIVITIES:
Purchases of property, plant, and equipment
Proceeds from sale of property and equipment
Net cash flows from investing activities
FINANCING ACTIVITIES:
Net borrowings under credit facility
Payments of cash dividends
Proceeds from exercise of stock options
Proceeds from other long-term obligations
Net cash flows from financing activities
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND
TEMPORARY INVESTMENTS
NET CHANGE IN CASH AND TEMPORARY INVESTMENTS
CASH AND TEMPORARY INVESTMENTS, beginning of year
CASH AND TEMPORARY INVESTMENTS, end of year
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash payments for interest
Cash payments for income taxes, net of refunds
$
$
$
6,147
(608)
(868)
86
150
(6,668)
(2,844)
765
(5,806)
583
13,953
(24,693)
1,303
(23,390)
5,000
(8,188)
146
606
(2,436)
4,828
18
3,219
(462)
96
(17,253)
1,018
(3,361)
12,931
(30)
20,926
(25,026)
3
(25,023)
5,000
(7,715)
3
--
(2,712)
2,653
(9,220)
31,115
21,895 $
(525)
(7,334)
38,449
31,115 $
4,317
74
573
282
96
5,736
(11,015)
(31)
3,819
338
20,165
(11,900)
1
(11,899)
--
(7,253)
186
--
(7,067)
(2,347)
(1,148)
39,597
38,449
2,219 $
7,815 $
1,877 $
11,605 $
1,432
8,566
The accompanying notes are an integral part of these consolidated statements.
F-7
MILLER INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share data and except as otherwise noted)
1.
ORGANIZATION AND NATURE OF OPERATIONS
Miller Industries, Inc. and subsidiaries (the “Company”) is The World’s Largest Manufacturer of Towing and Recovery Equipment.®
The principal markets for the Company’s towing and recovery equipment are approximately 80 independent distributors and the users
of towing and recovery equipment located primarily throughout North America, and other customers throughout the world. The
Company’s products are marketed under the brand names of Century®, Challenger®, Holmes®, Champion®, Eagle®, Titan®, JigeTM,
BonifaceTM, Vulcan®, and ChevronTM.
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
Consolidation
The accompanying consolidated financial statements include the accounts of Miller Industries, Inc. and its subsidiaries. All significant
intercompany transactions and balances have been eliminated.
The consolidated financial statements include accounts of certain subsidiaries whose fiscal closing dates differ from December 31st by
31 days (or less) to facilitate timely reporting.
Cash and Temporary Investments
Cash and temporary investments include all cash and cash equivalent investments with original maturities of three months or less.
Accounts Receivable
Receivables are stated at their estimated collectible amounts and consist of amounts billed and currently due from customers. The
Company extends 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. Data by
each major customer is regularly reviewed to evaluate the adequacy of the allowance for doubtful accounts and actual write-offs are
charged against the allowance.
Inventories
Inventory costs include materials, labor and factory overhead. Inventories are stated at the lower of cost or net realizable value,
determined on a first-in, first-out basis. Appropriate consideration is given to obsolescence, valuation and other factors in determining
net realizable value. Revisions of these estimates could result in the need for adjustments. Inventories, net of reserves, at December
31, 2017 and 2016 consisted of the following:
Chassis
Raw materials
Work in process
Finished goods
2017
2016
7,525 $
30,109
13,521
17,412
68,567 $
8,524
26,322
11,620
17,670
64,136
$
$
F-8
Property, Plant and Equipment
Property, plant and equipment are recorded at cost, less accumulated depreciation. Depreciation for financial reporting purposes is
provided using the straight-line method over the estimated useful lives of the assets. Accelerated depreciation methods are used for
income tax reporting purposes. Estimated useful lives range from 20 to 30 years for buildings and improvements and 5 to 10 years for
machinery and equipment, furniture and fixtures, and software costs. Expenditures for routine maintenance and repairs are charged to
expense as incurred. Internal labor is used in certain capital projects. Gains and losses on disposals of property, plant and equipment
are recorded as other expense (income) in the consolidated statements of income.
Property, plant and equipment at December 31, 2017 and 2016 consisted of the following:
Land and improvements
Buildings and improvements
Machinery and equipment
Furniture and fixtures
Software costs
Less accumulated depreciation
2017
2016
$
$
11,333 $
66,826
44,161
10,227
10,345
142,892
(65,264)
77,628 $
10,027
57,697
34,984
9,243
10,281
122,232
(62,619 )
59,613
The Company recognized $6,147, $4,828 and $4,317 in depreciation expense in 2017, 2016 and 2015, respectively.
The Company capitalizes costs related to software development in accordance with established criteria, and amortizes those costs to
expense on a straight-line basis over five years. System development costs not meeting proper criteria for capitalization are expensed
as incurred.
Basic and Diluted Income Per Common Share
Basic income per common share is computed by dividing net income by the weighted average number of common shares outstanding.
Diluted income per common share is calculated by dividing net income by the weighted average number of common and potential
dilutive common shares outstanding. Diluted income per common share takes into consideration the assumed exercise of outstanding
stock options resulting in approximately 17,000, 28,000 and 36,000 potential dilutive common shares in 2017, 2016 and 2015,
respectively. For 2017, 2016 and 2015, none of the outstanding stock options would have been anti-dilutive.
Long-Lived Assets
The Company periodically reviews the carrying amount of its long-lived assets to determine if those assets may not 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.
Goodwill
Goodwill consists of the excess of cost of acquired entities over the sum of the amounts assigned to identifiable assets acquired less
liabilities assumed. Goodwill is not amortized. However, the Company evaluates the carrying value of goodwill for impairment at
least annually or if an event or circumstance occurs that would indicate that the carrying amount had been impaired. The Company
reviews goodwill for impairment utilizing a qualitative assessment or a two-step process. If the qualitative analysis of goodwill is
utilized and it is determined that fair value more likely than not exceeds the carrying value, no further testing is needed. If the two-step
approach is chosen, first, the carrying value of the entity is compared to the fair value. If the fair value is less, a comparison of the
carrying value of goodwill to the fair value of goodwill is performed to determine if a write-down is required.
F-9
Patents, Trademarks and Other Purchased Product Rights
The cost of acquired patents, trademarks and other purchased product rights is capitalized and amortized using the straight-line
method over various periods not exceeding 20 years. Total accumulated amortization of these assets was $1,547 at December 31, 2017
and 2016. At December 31, 2017 and 2016, all intangible assets subject to amortization were fully amortized. As acquisitions and
dispositions of intangible assets occur in the future, the amortization amounts may vary.
Accrued Liabilities
Accrued liabilities consisted of the following at December 31, 2017 and 2016:
Accrued wages, commissions, bonuses and benefits
Accrued products warranty
Accrued taxes
Other
2017
2016
8,632 $
3,147
828
9,394
22,001 $
7,452
2,821
2,887
7,567
20,727
$
$
Income Taxes
The Company’s income tax expense, deferred tax assets and liabilities and liabilities for unrecognized tax benefits reflect
management’s best assessment of estimated current and future taxes to be paid. The Company is subject to income taxes in both the
United States and foreign jurisdictions. Significant judgments and estimates are required in determining the consolidated income tax
expense.
The Company recognizes as deferred income tax assets and liabilities the future tax consequences of the differences between the
financial statement carrying amounts of existing assets and liabilities and their respective tax bases. The Company considers the need
to record a valuation allowance to reduce deferred tax assets to the amount that is more likely than not to be realized. Tax loss
carryforwards, reversal of deferred tax liabilities, tax planning and estimates of future taxable income are considered in assessing the
need for a valuation allowance.
The Company records uncertain tax positions in accordance with ASC 740 on the basis of a two-step process whereby (1) the
Company determines whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of
the positions and (2) for those tax positions that meet the more-likely-than-not recognition threshold, the Company recognizes the
largest amount of tax benefit that is more than 50% likely to be realized upon ultimate settlement with the related tax authority. The
Company recognizes interest and penalties related to unrecognized tax benefits within the income tax expense line in the
accompanying consolidated statements of income. Accrued interest and penalties are included within the related tax liability line in the
accompanying consolidated balance sheets.
Stock-Based Compensation
Stock compensation expense was $0 for 2017, 2016 and 2015.
No options were granted during 2017 or 2016. The fair value of options granted in 2008 has been estimated as of the date of the grant
using the Black-Scholes option-pricing model with the following weighted average assumptions: expected dividend yield of 0%;
expected volatility of 44%; risk-free interest rate of 1.71%; and expected life of four years. Using these assumptions, the fair value of
options granted in 2008 was $1,596, which was amortized as compensation expense over the vesting period.
At December 31, 2017, the Company had no unrecognized compensation expense related to stock options. The Company issued
approximately 26,500 and 500 shares of common stock during 2017 and 2016, respectively, from the exercise of stock options.
F-10
Product Warranty
The Company generally provides a one-year limited product and service warranty on certain of its products. The Company provides
for the estimated cost of this warranty at the time of sale. These estimates are established using historical information about the nature,
frequency, and average cost of warranty claims. Warranty expense in 2017, 2016 and 2015, was $2,618, $1,750 and $3,076,
respectively.
The table below provides a summary of the warranty liability for December 31, 2017 and 2016:
Accrual at beginning of the year
Provision
Settlement and Other
Accrual at end of year
2017
2016
$
$
2,821 $
2,618
(2,292)
3,147 $
3,140
1,750
(2,069 )
2,821
Credit Risk
Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash
investments and trade accounts receivable. The Company places its cash investments with high-quality financial institutions. In
addition, the Company limits the amount of credit exposure through the use of accounts and funds backed by the U.S. Government
and its agencies. Trade accounts receivable are generally diversified due to the number of entities comprising the Company’s customer
base and their dispersion across many geographic regions and by frequent monitoring of the creditworthiness of the customers to
whom the credit is granted in the normal course of business. At December 31, 2017, the Company had one customer with a trade
account receivable balance comprising 12% of total accounts receivable. This was the only account with a balance greater than 10% of
total accounts receivable at December 31, 2017. There were no accounts at December 31, 2016 with a balance greater than 10% of
total receivables.
Revenue Recognition
Revenue is recorded by the Company when the risk of ownership for products has transferred to the independent distributors or other
customers, which is generally upon shipment. From time to time, revenue is recognized under a bill and hold arrangement.
Recognition of revenue on bill and hold arrangements occurs when risk of ownership has passed to the customer, a fixed written
commitment has been provided by the customer, the goods are complete and ready for shipment, the goods are segregated from
inventory, no performance obligation remains, and a schedule for delivery has been established.
Shipping and Handling Fees and Cost
The Company records revenues earned for shipping and handling as revenue, while the cost of shipping and handling is classified as
cost of operations.
Research and Development
Research and development costs are expensed as incurred and included in cost of operations and to a lesser extent in selling, general
and administrative expenses. Research and development costs amounted to $1,943, $1,797 and $1,595 for 2017, 2016 and 2015,
respectively.
Foreign Currency Translation
The functional currency for the Company’s 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. Foreign
currency translation adjustments resulting from such translations are included in shareholders’ equity. Intercompany transactions
denominated in a currency other than the functional currency are remeasured into the functional currency. Gains and losses resulting
from foreign currency transactions are included in other (income) expense in our consolidated statements of income.
Derivative Financial Instruments
The Company periodically enters into certain forward foreign currency exchange contracts that are designed to mitigate foreign
currency risk.
F-11
Recent Accounting Pronouncements
Recently Issued Standards
In May 2014, the Financial Accounting Standards Board (“FASB”) issued guidance to change the recognition of revenue from
contracts with customers. The core principle of the new guidance is that an entity should recognize revenue to reflect the transfer of
goods and services to customers in an amount equal to the consideration the entity receives or expects to receive. In addition, during
2016 the FASB issued additional guidance to clarify certain implementation guidance previously issued and to rescind certain SEC
guidance effective upon an entity’s adoption of the new standard. The guidance will be effective for the Company for reporting
periods beginning after December 15, 2017. The Company expects to use the modified retrospective approach to implement the
standard. The Company has substantially completed its evaluation of revenue streams and the review of its current accounting policies
and practices to identify potential differences that would result from applying the requirements of the new standard to the Company’s
revenue recognition policy. In addition, the Company has implemented appropriate changes to business processes, information
technology systems and internal controls to support recognition and disclosure under the new standard. As a result of the adoption, the
Company will include the costs of painting activities as performance obligations, thus causing timing differences regarding when such
performance obligations will be considered complete. The Company expects the adoption of the new revenue standard will result in a
cumulative effect decrease in shareholders’ equity as of January 1, 2018 of approximately $324. This cumulative reduction in
shareholders’ equity will reverse through income in 2018, for a net impact of $0.
The FASB's new leases standard Accounting Standard Update (“ASU”) 2016-02 Leases (Topic 842) was issued on February 25, 2016
and is intended to improve financial reporting about leasing transactions. The standard affects all companies and other organizations
that lease assets such as real estate, airplanes, and manufacturing equipment. The standard will require organizations that lease assets
referred to as “Lessees” to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those
leases. An organization is to provide disclosures designed to enable users of financial statements to understand the amount, timing,
and uncertainty of cash flows arising from leases. These disclosures include qualitative and quantitative requirements concerning
additional information about the amounts recorded in the financial statements. Under the new guidance, a lessee will be required to
recognize assets and liabilities for leases with lease terms of more than 12 months. Consistent with current GAAP, the recognition,
measurement, and presentation of expenses and cash flows arising from a lease by a lessee primarily will depend on its classification
as a finance or operating lease. However, unlike current GAAP which requires only capital leases to be recognized on the balance
sheet, the new standard will require both types of leases (i.e. operating and finance) to be recognized on the balance sheet. The FASB
lessee accounting model will continue to account for both types of leases. The finance lease will be accounted for in substantially the
same manner as capital leases are accounted for under existing GAAP. The operating lease will be accounted for in a manner similar
to operating leases under existing GAAP, except that lessees will recognize a lease liability and a lease asset for all of those leases.
The standard will be effective for financial statements issued for annual periods, and interim periods within these annual periods,
beginning after December 15, 2018, with early adoption permitted. See Note 5 for the Company’s current lease commitments. The
Company plans to use the modified retrospective approach to implement the standard and is currently evaluating the effect that
implementation will have on its consolidated financial position, results of operations and cash flows.
In May 2017, the FASB amended the requirements in the Compensation—Stock Compensation Topic of the Accounting Standards
Codification (“ASC”) related to changes to the terms or conditions of a share-based payment award. The amendments provide
guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification
accounting. The amendments will be effective for the Company for annual periods, and interim periods within those annual periods,
beginning after December 15, 2017. Early adoption is permitted. The Company does not expect these amendments to have a material
effect on its financial statements.
In January 2017, the FASB issued ASU No. 2017-04, “Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for
Goodwill Impairment.” The standard eliminates the second step in the goodwill impairment test which requires an entity to determine
the implied fair value of the reporting unit’s goodwill. Instead, an entity should recognize an impairment loss if the carrying value of
the net assets assigned to the reporting unit exceeds the fair value of the reporting unit, with the impairment loss not to exceed the
amount of goodwill allocated to the reporting unit. The standard is effective for annual and interim goodwill impairment tests
conducted in fiscal years beginning after December 15, 2019, with early adoption permitted. The Company does not anticipate the
adoption of this guidance to have a material impact on its consolidated financial statements and related disclosures.
F-12
Recently Adopted Standards
In July 2015, the FASB issued amendments to the Inventory topic of the ASC to require inventory to be measured at the lower of cost
and net realizable value. Other than the change in the subsequent measurement guidance from the lower of cost or market to the lower
of cost and net realizable value for inventory, there are no other substantive changes to the guidance on measurement of inventory.
The Company prospectively adopted these amendments in the first quarter of 2017. The adoption did not have a material effect on its
consolidated financial statements.
In March 2016, the FASB issued guidance to simplify several aspects of the accounting for share-based payment award transactions
including the income tax consequences, the classification of awards as either equity or liabilities, and the classification on the
statement of cash flows. Additionally, the guidance simplifies two areas specific to entities other than public business entities allowing
them apply a practical expedient to estimate the expected term for all awards with performance or service conditions that have certain
characteristics and also allowing them to make a one-time election to switch from measuring all liability-classified awards at fair value
to measuring them at intrinsic value. The Company adopted these amendments in the first quarter of 2017. The adoption did not have
a material effect on its consolidated financial statements.
Reclassifications
Certain prior year amounts have been reclassified to conform to current year presentation, with no impact on previously reported
shareholders’ equity or net income.
3.
LONG-TERM OBLIGATIONS
Long-Term Obligations
Credit Facility. On June 11, 2015, the credit facility pursuant to our Loan Agreement with First Tennessee Bank National Association
was renewed to extend the maturity date to March 31, 2018 and our unsecured revolving credit facility was increased to $30,000. On
June 22, 2016, the credit facility was further increased to $50,000 to give the Company greater flexibility to finance capital
expenditure projects. On April 5, 2017, the credit facility was further renewed to extend the maturity date to May 31, 2019. The
current credit facility contains customary representations and warranties, events of default, and financial, affirmative and negative
covenants for loan agreements of this kind. Covenants under the current credit facility restrict the payment of cash dividends if the
Company would be in violation of the minimum tangible net worth test or the leverage ratio test in the current loan agreement as a
result of the dividend, among various restrictions. We have been in compliance with these covenants throughout 2017 and anticipate
that we will continue to be in compliance during 2018.
In the absence of a default, all borrowings under the credit facility bear interest at the LIBOR Rate plus 1.50% per annum. The
Company will pay a non-usage fee under the current loan agreement at a rate per annum equal to between 0.15% and 0.35% of the
unused amount of the credit facility, which fee is paid quarterly. Interest expense on the credit facility was $492 and $341 for the years
ended December 31, 2017 and 2016, respectively.
The Company had $10,000 and $5,000 in outstanding borrowings under the credit facility at December 31, 2017 and 2016,
respectively.
During November 2017, our French subsidiary, Jige International S.A., entered into an agreement with Banque Européenne du Crédit
Mutuel for a $1,000 unsecured fixed rate loan with a maturity date of September 30, 2020. All borrowings under this loan bear interest
at 0.3% per annum. At December 31, 2017, Company had $606 in outstanding borrowings under the loan agreement, of which $212
and $394 were classified as long-term and long-term obligations due within one year, respectively, on the consolidated balance sheets.
These borrowings are being used primarily for the purchase of land and routine repairs to the operating facilities in France. The loan
agreement contains no material covenants.
Interest Rate Sensitivity. Changes in interest rates affect the interest paid on indebtedness under our credit facility because the
outstanding amounts of indebtedness under our credit facility are subject to variable interest rates. Under our credit facility, the non-
default rate of interest is equal to the LIBOR Market Index Rate plus 1.50% per annum (for a rate of interest of 3.07% at
December 31, 2017). 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 year ended December 31, 2017.
F-13
4.
STOCK-BASED COMPENSATION PLANS
In accordance with the Company’s stock-based compensation plans, the Company may grant incentive stock options as well as non-
qualified and other stock-related incentives to officers, employees and non-employee directors of the Company. Options vest ratably
over a two to four-year period beginning on the grant date and expire ten years from the date of grant. Shares available for granting
options at December 31, 2017, 2016 and 2015 were 800,000, 0 and 0, respectively. Equity incentive awards were previously granted
under the Company’s 2005 Equity Incentive Plan; however this plan expired on April 27, 2015. At the Annual Meeting of
Shareholders of the Company held on May 26, 2017, the Company’s shareholders voted to approve the Miller Industries, Inc. 2016
Stock Incentive Plan, pursuant to which 800,000 shares of common stock are available for issuance pursuant to awards granted under
the plan. No awards may be granted under the Company’s 2016 Stock Incentive Plan on or after August 1, 2026.
A summary of the activity of stock options for the years ended December 31, 2017, 2016 and 2015, is presented below (shares in
thousands):
2017
2016
2015
Shares
Under
Option
Weighted
Average
Exercise
Price
Shares
Under
Option
Weighted
Average
Exercise
Price
Shares
Under
Option
Weighted
Average
Exercise
Price
37 $
--
(26 )
--
11 $
11 $
5.49
--
5.49
--
5.49
5.49
38 $
--
(1)
--
37 $
37 $
5.49
--
5.49
--
5.49
5.49
72 $
--
(34)
--
38 $
38 $
5.49
--
5.49
--
5.49
5.49
Outstanding at Beginning of
Period
Granted
Exercised
Forfeited and cancelled
Outstanding at End of Period
Options exercisable at year end
A summary of options outstanding under the Company’s stock-based compensation plans at December 31, 2017 is presented below
(in thousands):
Exercise Price
Shares
Under
Option
Weighted
Average
Exercise Price
of
Options
Outstanding
Weighted
Average
Remaining
Life
Options
Exercisable
Weighted
Average
Exercise Price
of
Shares
Exercisable
Aggregate
Intrinsic
Value
$
5.49
11.0 $
5.49
0.86
11.0 $
5.49 $
223
F-14
5.
COMMITMENTS AND CONTINGENCIES
Commitments
The Company has entered into various operating leases for buildings and for office and computer equipment. Rental expense under
these leases was $1,736, $1,730 and $1,533 in 2017, 2016 and 2015, respectively.
At December 31, 2017 future minimum lease payments under non-cancelable operating leases for the next five years and in the
aggregate are as follows:
2018
2019
2020
2021
2022
Thereafter
$
$
752
337
151
129
122
447
1,938
The Company has also entered into arrangements with third-party lenders where it has agreed, in the event of a default by the
independent distributor customer, to repurchase from the third-party lender Company products repossessed from the independent
distributor customer. These arrangements are typically subject to a maximum repurchase amount. The Company’s risk under these
arrangements is mitigated by the value of the products repurchased as part of the transaction. The maximum amount of collateral the
Company could be required to purchase was approximately $54,093 and $45,196 at December 31, 2017 and 2016, respectively. No
repurchases of products were required during 2017 or 2016.
During 2017, the Company substantially completed the consolidation and expansion of its Pennsylvania manufacturing operations to
increase capacity and improve operating efficiencies. The manufacturing operations of the two primary Pennsylvania locations were
consolidated at one expanded location and, in June 2017, the Company sold the remaining plant location and realized a net gain of
$601 on the property. As of December 31, 2017, only a de minimis amount of costs were remaining of the $24,700 total project costs.
These project costs are included in property, plant and equipment, net on the consolidated balance sheets.
The Company also continued several capital projects during 2017 involving machinery and equipment and building improvements at
its Ooltewah, Tennessee and Greeneville, Tennessee facilities that it currently estimates will cost in total approximately $21,200.
Approximately $21,000 of these costs were incurred as of December 31, 2017 and are included in property, plant and equipment, net
on the consolidated balance sheets. The remainder of these costs are expected to be incurred during the first quarter of 2018. In
addition, the Company began construction on an administrative building at its Ooltewah, Tennessee facility in June 2017. The current
estimated costs of this project are approximately $4,200. Approximately $1,581 of these costs were incurred as of December 31, 2017,
and the remaining costs are expected to be incurred during the first half of 2018. The timing and cost of these projects are subject to
change.
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.
F-15
6.
INCOME TAXES
The Tax Cuts and Jobs Act (TCJA) was signed into law by the President on Friday December 22, 2017. The TCJA creates a territorial
tax system, which will generally allow companies to repatriate future foreign earnings without incurring additional U.S. taxes. It also
includes a reduction in the corporate tax rate from a top rate of 35% to a flat rate of 21%, changes in business deductions, and many
international provisions.
One of the main provisions of the TCJA requires the Company to compute a tax based on a deemed repatriation of deferred foreign
income, whether or not actually distributed. The Company has computed a reasonable estimate of this amount to be $1,102, net of
foreign tax credits, and has reflected it as a component of income tax provision in the consolidated statements of income during 2017.
The Company has elected to pay the total amount of deemed repatriation tax annually over eight installment periods, and has reflected
these payments as noncurrent taxes payable in the consolidated balance sheets as of December 31, 2017.
Due to the inherent complexity of the calculation for the deemed repatriation tax, the Company intends to follow the elective guidance
outlined in SEC Staff Accounting Bulletin (SAB) 118, which allows for a measurement period to adjust for the financial reporting
impacts of the TCJA. While we believe our estimate of the deemed repatriation tax and related liability to be reasonable, the
calculation of accumulated income from our foreign subsidiaries, and the precise application and amount of the foreign tax credit are
subject to change as new information becomes available. As new information is collected, the initial estimate of the deemed
repatriation tax disclosed above might require adjustment. Any such adjustment will be reflected in the same reporting period as the
actual adjustment and disclosed in accordance with SAB 118.
An additional provision of the TCJA is the implementation of the Global Intangible-Low Taxed Income Tax, or “GILTI”. The tax is
effective for years beginning after December 31, 2017, and the Company believes it may be subject to the GILTI provisions. The
Company has implemented a policy to account for the impact of GILTI in the period in which the tax actually applies to the Company.
Accordingly, no direct impacts of the GILTI have been included in the consolidated financial statements for the period ended
December 31, 2017. The Company does not expect for such provisions to have a material impact on its consolidated financial
statements in 2018.
Income before income taxes includes the following components:
United States
Foreign
Total
2017
2016
2015
$
$
22,695 $
7,644
30,339 $
25,038 $
6,039
31,077 $
19,850
5,013
24,863
The provision for income taxes on income consisted of the following in 2017, 2016 and 2015:
Current:
Federal
Federal – Deemed Repatriation
State
Foreign
Deferred:
Federal
State
Foreign
2017
2016
2015
$
$
4,871 $
1,102
(1,435)
3,653
8,191
(919)
150
(99)
(868)
7,323 $
5,016 $
--
955
1,965
7,936
3,057
205
(43)
3,219
11,155 $
5,778
--
913
1,623
8,314
548
47
(22)
573
8,887
F-16
The principal differences between the federal statutory tax rate and the income tax expense in 2017, 2016 and 2015:
Federal statutory tax rate
State taxes, net of federal tax benefit
Excess of (decreases in) foreign tax over US tax on foreign income
Remeasurement of deferred taxes under TCJA
Deemed repatriation tax
Domestic tax deductions and credits
Release of unrecognized tax benefit
Other
Effective tax rate
2017
2016
2015
35.0%
1.0%
2.9%
(7.7)%
3.6%
(3.1)%
(5.8)%
(1.8)%
24.1%
35.0 %
3.8 %
(0.5 )%
-- %
-- %
(2.7 )%
-- %
0.2 %
35.8 %
35.0%
3.0%
(1.1)%
--%
--%
(1.2)%
--%
--%
35.7%
Deferred tax assets and liabilities are determined based on the differences between the financial and tax basis of existing assets and
liabilities using the currently enacted tax rates in effect for the year in which the differences are expected to reverse.
Deferred income tax assets and liabilities reflect the impact of temporary differences between the amounts of assets and liabilities for
financial reporting and income tax reporting purposes. Temporary differences and carry forwards which give rise to deferred tax assets
and liabilities at December 31, 2017 and 2016 are as follows:
Deferred tax assets:
Allowance for doubtful accounts
Accruals and reserves
Other
Total deferred tax assets
Deferred tax liabilities:
Property, plant, and equipment
Investments in foreign subsidiaries
Total deferred tax liabilities
Valuation Allowance
Net deferred tax asset/(liability)
2017
2016
$
181 $
1,673
644
2,498
3,579
--
3,579
(44)
(1,125) $
$
58
2,552
259
2,869
3,610
1,215
4,825
(37)
(1,993)
Deferred tax assets represent the future tax benefit of future deductible differences and, if it is more likely than not that a tax asset will
not be realized, a valuation allowance is required to reduce the recorded deferred tax assets to net realizable value. The Company has
evaluated positive and negative evidence to assess the realizability of its deferred taxes. Based on the evidence, the Company believes
it is more likely than not that its deferred tax assets will be realizable. Accordingly, the Company has not included a valuation
allowance against its deferred tax assets at this time.
The deferred tax liability for undistributed investments in foreign subsidiaries was reversed in 2017 due to the elimination of the tax
resulting from the tax provisions passed as part of the TCJA. We plan to repatriate a portion of our undistributed foreign earnings to
the United States. However, we are still in the process of determining the timing and the amount of such distributions.
As of December 31, 2017, the Company had no federal net operating loss carryforwards, but had a state net operating loss
carryforward of $865.
Tax positions are evaluated in a two-step process. The Company first determines whether it is more likely than not that a position will
be sustained upon examination. If a tax position meets the more-likely-than-not recognition threshold, it is then measured to determine
the amount of benefit to recognize in the financial statements. The tax position is measured as the largest amount of benefit that is
greater than 50% likely of being recognized.
A summary of the activity of the unrecognized tax benefits for the years ended December 31, 2017, 2016 and 2015, is presented
below:
Unrecognized tax benefits – January 1
Gross increases – tax positions in prior period
Gross decreases – tax positions in prior period
Unrecognized tax benefits – December 31
2017
2016
2015
1,037
120
(1,157)
792
245
--
$
-- $
1,037 $
526
266
--
792
F-17
During 2016, the Company accrued interest of $19 and penalties of $198 related to the unrecognized tax benefits in the chart above.
The liability in total for the interest and penalties at December 31, 2016 was $217. During 2017, the Company accrued additional
interest of $1 and penalties of $61 related to the unrecognized tax benefit, but subsequently released the $1,157 liability for the
unrecognized tax benefits in full, including all related interest and penalties, due to changes in judgment resulting from the evaluation
of new information not previously available.
The tax benefits identified in the chart above would affect our effective tax rate if recognized.
The Company is subject to United States federal income taxes, as well as income taxes in various states and foreign jurisdictions. The
Company’s 2016 and later tax years remain open to examination by the tax authorities. With few exceptions, as of December 31,
2017, the Company is no longer subject to U.S. federal, state or non-U.S. income tax examinations prior to 2014.
7.
SHAREHOLDERS EQUITY
Common Stock
The Company is authorized to issue up to 100,000,000 shares of common stock with a par value of one cent per share.
Preferred Stock
The Company is authorized to issue up to 5,000,000 shares of undesignated preferred stock with a par value of one cent per share and
which can be issued in one or more series. The terms, price and conditions of the preferred shares will be set by the board of directors.
No shares of preferred stock have been issued.
Dividends
The Company has paid consecutive quarterly cash dividends since May 2011. Dividend payments made for 2017, 2016 and 2015 were
as follows:
Payment
Record Date
Payment Date
Dividend
(per share)
Amount
Q1 2015
Q2 2015
Q3 2015
Q4 2015
Total for 2015
Q1 2016
Q2 2016
Q3 2016
Q4 2016
Total for 2016
Q1 2017
Q2 2017
Q3 2017
Q4 2017
Total for 2017
March 20, 2015
June 15, 2015
September 14, 2015
December 7, 2015
March 23, 2015
June 19, 2015
September 21, 2015
December 11, 2015
March 21, 2016
June 13, 2016
September 12, 2016
December 5, 2016
March 28, 2016
June 20, 2016
September 19, 2016
December 12, 2016
March 27, 2017
June 13, 2017
September 11, 2017
December 4, 2017
April 3, 2017
June 20, 2017
September 18, 2017
December 11, 2017
$
$
$
$
$
$
0.16 $
0.16
0.16
0.16
0.64 $
0.17 $
0.17
0.17
0.17
0.68 $
0.18 $
0.18
0.18
0.18
0.72 $
1,809
1,814
1,815
1,815
7,253
1,929
1,929
1,928
1,929
7,715
2,043
2,048
2,048
2,049
8,188
F-18
8.
EMPLOYEE BENEFIT PLANS
The Company maintains a contributory retirement plan for all full-time employees with at least 90 days of service. The plan is
designed to provide tax-deferred income to the Company’s employees in accordance with the provisions of Section 401(k) of the
Internal Revenue Code.
The plan provides that each participant may contribute the maximum allowable under Internal Revenue Service regulations. For 2017,
2016 and 2015, the Company matched 50% of the first 5% of participant contributions. Matching contributions vest over the first five
years of employment. Company contributions to the plan were $833, $697 and $619 in 2017, 2016 and 2015, respectively.
9.
GEOGRAPHIC INFORMATION
Net sales and long-lived assets (property, plant and equipment and goodwill and intangible assets) by region were as follows (net sales
are attributed to regions based on the locations of customers):
2017
2016
2015
Long-
Lived
Assets
Net Sales
Long-
Lived
Assets
Net Sales
Long-
Lived
Assets
Net Sales
North America
$
527,134 $
85,707
$
537,308
$
68,556 $
467,161
$
48,589
Foreign
87,967
3,540
63,811
2,676
73,805
2,505
$
615,101 $
89,247
$
601,119
$
71,232 $
540,966
$
51,094
10.
CUSTOMER INFORMATION
No single customer accounted for 10% or more of consolidated net sales for 2017, 2016 and 2015.
11.
QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
The following is a summary of the unaudited quarterly financial information for the years ended December 31, 2017 and 2016:
Net Sales
Operating
Income
Net
Income
Basic
Income
Per Share
Diluted
Income Per
Share
Cash
Dividends
Declared
Per Share
2017
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
Total
2016
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
Total
$
$
$
$
148,933 $
153,089
153,363
159,716
615,101 $
148,815 $
156,113
147,597
148,594
601,119 $
6,351
8,537
7,070
9,582
31,540
4,960
10,719
8,621
7,661
31,961
$
$
$
$
3,839
5,425
4,456
9,296
23,016
3,360
6,587
5,522
4,453
19,922
$
$
$
$
0.34 $
0.48
0.39
0.81
2.02 $
0.30 $
0.58
0.49
0.39
1.76 $
0.34
0.48
0.39
0.81
2.02
0.30
0.58
0.49
0.38
1.75
$
$
$
$
0.18
0.18
0.18
0.18
0.72
0.17
0.17
0.17
0.17
0.68
12.
SUBSEQUENT EVENTS
On March 5, 2018, the Company’s board of directors declared a quarterly cash dividend of $0.18 per share. The dividend is payable
March 26, 2018 to shareholders of record as of March 19, 2018.
F-19
MILLER INDUSTRIES, INC. AND SUBSIDIARIES
SCHEDULE II –VALUATION AND QUALIFYING ACCOUNTS
Year ended December 31, 2015
Deduction from asset accounts:
Allowance for doubtful accounts
Year ended December 31, 2016
Deduction from asset accounts:
Allowance for doubtful accounts
Year ended December 31, 2017
Deduction from asset accounts:
Allowance for doubtful accounts
(in thousands)
Balance at
Beginning
of Period
Charged to
Expense
Accounts
Written
Off
Balance at
End of
Period
$
$
$
1,850
282
(268) $
1,864
1,864
(462)
(398) $
1,004
1,004
86
(52) $
1,038
F-20
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused
this Report to be signed on its behalf by the undersigned, thereunto duly authorized, on the 7th day of March, 2018.
SIGNATURES
MILLER INDUSTRIES, INC.
By: /s/ Jeffrey I. Badgley
Jeffrey I. Badgley
Co-Chief Executive Officer
Know all men by these presents, that each person whose signature appears below constitutes and appoints Jeffrey I. Badgley,
William G. Miller, II and Frank Madonia, and each or any one of them, as attorney-in-fact and agent, with full power of substitution,
for him in any and all capacities, to sign any amendments to this Report on Form 10 K, and to file the same, with exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their or his substitutes or substitute, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following
persons on behalf of the Registrant in the capacities indicated on the 7th day of March, 2018.
Signature
Title
/s/ William G. Miller
William G. Miller
/s/ Jeffrey I. Badgley
Jeffrey I. Badgley
/s/ William G. Miller, II
William G. Miller, II
/s/ Deborah L. Whitmire
Deborah L. Whitmire
/s/ Theodore H. Ashford, III
Theodore H. Ashford, III
/s/ A. Russell Chandler, III
A. Russell Chandler, III
/s/ Richard H. Roberts
Richard H. Roberts
Chairman of the Board of Directors
Co-Chief Executive Officer
President, Co-Chief Executive Officer and Director
Executive Vice President, Chief Financial Officer and Treasurer
(Principal Financial and Accounting Officer)
Director
Director
Director
S-1
Exhibit Number
EXHIBIT INDEX
Description
21*
Subsidiaries of the Registrant
23.1*
Consent of Elliott Davis, LLC
24*
Power of Attorney (see signature page)
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 Rules 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
101
The following financial information from Miller Industries, Inc.’s Annual Report on Form 10-K for the year
ended December 31, 2017, formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated
Balance Sheets as of December 31, 2017 and December 31, 2016, (ii) Consolidated Statements of Income for
the years ended December 31, 2017, 2016 and 2015, (iii) Consolidated Statements of Comprehensive Income
for the years ended December 31, 2017, 2016 and 2015, (iv) Consolidated Statements of Shareholder’s Equity
for the years ended December 31, 2017, 2016 and 2015, (v) Consolidated Statements of Cash Flows for the
years ended December 31, 2017, 2016 and 2015, and (vi) the Notes to Consolidated Financial Statements.
* Filed herewith.
± Exhibit is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Exchange Act, or otherwise subjected
to the liabilities of that Section. This exhibit shall not be incorporated by reference into any given registration statement or other
document pursuant to the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such a
filing.
SUBSIDIARIES
Name of Entity
APACO, Inc.
Boniface Engineering, Ltd.
Champion Carrier Corporation
Jige International S.A.
Miller Financial Services Group, Inc.
Miller/Greeneville, Inc.
Miller Industries Distributing, Inc.
Miller Industries International, Inc.
Miller Industries Towing Equipment Inc.
Exhibit 21
Jurisdiction of
Incorporation
Delaware
United Kingdom
Delaware
France
Tennessee
Tennessee
Delaware
Tennessee
Delaware
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Exhibit 23.1
We consent to the incorporation by reference in the following Registration Statements:
(1)
(2)
(3)
Registration Statement on Form S-8 (File No. 333-127481);
Registration Statement on Form S-8 (File No. 333-188898); and
Registration Statement on Form S-8 (File No. 333-219288).
of Miller Industries, Inc. and subsidiaries of our reports dated March 7, 2018, relating to our audits of the consolidated financial
statements, the financial statement schedule and effectiveness of internal control over financial reporting, which appear in the Annual
Report on Form 10-K of Miller Industries, Inc. and subsidiaries for the year ended December 31, 2017.
/s/ Elliott Davis, LLC
Chattanooga, Tennessee
March 7, 2018
Exhibit 31.1
I, Jeffrey I. Badgley, certify that:
1.
2.
3.
4.
I have reviewed this annual report on Form 10-K of Miller Industries, Inc.;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading
with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods
presented in this report;
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rule 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being
prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this
report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred
during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons
performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and
report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant
role in the registrant’s internal control over financial reporting.
Date: March 7, 2018
/s/ Jeffrey I. Badgley
Jeffrey I. Badgley
Co-Chief Executive Officer
Exhibit 31.2
I, William G. Miller, II, certify that:
1.
2.
3.
4.
I have reviewed this annual report on Form 10-K of Miller Industries, Inc.;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading
with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods
presented in this report;
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rule 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being
prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this
report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred
during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons
performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and
report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant
role in the registrant’s internal control over financial reporting.
Date: March 7, 2018
/s/ William G. Miller, II
William G. Miller, II
President and Co-Chief Executive Officer
Exhibit 31.3
I, Deborah L. Whitmire, certify that:
1.
2.
3.
4.
I have reviewed this annual report on Form 10-K of Miller Industries, Inc.;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading
with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods
presented in this report;
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rule 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being
prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this
report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred
during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons
performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and
report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant
role in the registrant’s internal control over financial reporting.
Date: March 7, 2018
/s/ Deborah L. Whitmire
Deborah L. Whitmire
Executive Vice President, Chief Financial Officer and Treasurer
Exhibit 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350
In connection with the Annual Report of Miller Industries, Inc. (the “Company”) on Form 10-K for the period ended
December 31, 2017 filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Jeffrey I. Badgley, Co-
Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350 as adopted by § 906 of the Sarbanes-Oxley Act of
2002, that:
(1)
(2)
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
The information contained in the Report fairly presents, in all material respects, the financial condition and results of
operations of the Company.
Dated: March 7, 2018
/s/ Jeffrey I. Badgley
Jeffrey I. Badgley
Co-Chief Executive Officer
Exhibit 32.2
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350
In connection with the Annual Report of Miller Industries, Inc. (the “Company”) on Form 10-K for the period ended
December 31, 2017 filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, William G. Miller, II,
Co-Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350 as adopted by § 906 of the Sarbanes-Oxley Act of
2002, that:
(1)
(2)
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
The information contained in the Report fairly presents, in all material respects, the financial condition and results of
operations of the Company.
Dated: March 7, 2018
/s/ William G. Miller, II
William G. Miller, II
President and Co-Chief Executive Officer
Exhibit 32.3
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350
In connection with the Annual Report of Miller Industries, Inc. (the “Company”) on Form 10-K for the period ended
December 31, 2017 filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Deborah L. Whitmire,
Executive Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350 as adopted by § 906 of
the Sarbanes-Oxley Act of 2002, that:
(1)
(2)
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
The information contained in the Report fairly presents, in all material respects, the financial condition and results of
operations of the Company.
Dated: March 7, 2018
/s/ Deborah L. Whitmire
Deborah L. Whitmire
Executive Vice President, Chief Financial Officer and Treasurer