2018 Annual Report
TO OUR SHAREHOLDERS
April 17, 2019
2018 was a very successful year for Miller industries, Inc. We continued to execute on
our strategic priorities and our capital projects, increasing our production capacity to
meet rising customer demand. Our performance was highlighted by strong year-over-year
revenue growth of 15.7%, reflecting our advantaged competitive position, healthy global
economic conditions, and positive consumer sentiment in all end-markets. Our balance
sheet remains strong and our backlog is solid. Despite increased uncertainty around
tariffs, we believe the market outlook is promising. In 2019, we expect to continue
delivering solid financial results and as always, to remain unwavering in our commitment
to enhance shareholder value.
Our profitability has also improved as we continue to realize the incremental benefits
associated with our increased production capacity and efficiency. Our commitment to
operational excellence continues to pay off, as evidenced by our 24.2% increase in gross
profit and our 46.6% increase in net income, both as compared to 2017. Gross profit was
also up to 11.7% of sales for 2018.
In addition to our solid operating performance in 2018, our balance sheet continues to
demonstrate our financial stability. We ended the year with cash and cash equivalents of
$27.0 million and $15.0 million in borrowings under our $50.0 million unsecured
revolving credit facility. These borrowings were used to fund working capital needs
during this period of strong demand and to fund capital expenditures.
In 2019, we expect to continue capitalizing on the increased production capabilities
created through our recent plant expansion and rationalization projects. We remain well-
positioned to handle any challenges related to increases in production costs, and we will
continue to monitor current discussions related to tariffs to determine the impact they
may have on business. We will also maintain our research and development efforts which
have produced and will continue to produce the most innovative towing and recovery
equipment in the industry. In summary, we expect our business and profitability to
continue to grow as we continue delivering our world class product offering to a larger
and increasingly global customer base. We look forward to bolstering our market position
as the world leader in towing and recovery equipment.
Demonstrating our commitment to enhancing shareholder value, our board of directors
approved a cash dividend of $0.18 per share during the first quarter of 2019.
We would like to extend our sincerest thanks to our employees, customers, suppliers, and
shareholders for their ongoing support of Miller Industries and look forward to our
continued success.
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)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2018
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
OR
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)
(423) 238-4171
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Common Stock, par value $.01 per share
Name of Each Exchange on Which Registered
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes No
None
(Title of Class)
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes 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.
Yes No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be
submitted 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).
Yes 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.
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
Non-accelerated Filer
Accelerated Filer
Smaller Reporting Company
Emerging Growth Company
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.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes 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 29, 2018
(the last business day of the registrant’s most recently completed second fiscal quarter) was $279,518,789 (based on 10,940,070
shares held by non-affiliates at $25.55 per share, the last sale price reported on the New York Stock Exchange on June 29, 2018).
At February 28, 2019 there were 11,400,102 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 2019 Annual Meeting of Shareholders which is to be filed pursuant to Regulation 14A.
TABLE OF CONTENTS
PART I
ITEM 1.
ITEM 1A.
ITEM 1B
ITEM 2.
ITEM 3.
ITEM 4.
BUSINESS
RISK FACTORS
UNRESOLVED STAFF COMMENTS
PROPERTIES
LEGAL PROCEEDINGS
MINE SAFETY DISCLOSURES
PART II
ITEM 5.
ITEM 6.
ITEM 7.
ITEM 7A.
ITEM 8.
ITEM 9.
ITEM 9A.
ITEM 9B.
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
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
CONTROLS AND PROCEDURES
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 ACCOUNTING FEES AND SERVICES
ITEM 15.
ITEM 16.
EXHIBITS, FINANCIAL STATEMENT SCHEDULES
FORM OF 10-K SUMMARY
PART IV
2
8
13
13
13
13
14
15
16
23
24
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27
30
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; operational challenges caused by our
increased sales volumes; 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; special risks
from our sales to U.S. and other governmental entities through prime contractors; our ability to secure new military orders;
competition and 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, or breach in
security of, 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 licensing new technologies, we have a continuing emphasis on research
and development to achieve product innovations.
We manufacture wreckers, car carriers and trailers at six 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 several 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 2018, 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.
We engage sales representatives who provide sales support to our entire network 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 representatives sell 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. 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 approximately five 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 1,240 people as of December 31, 2018. 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 was at the time considered one of the most innovative
developments in the wrecker industry. This technology continues to be significant primarily because it allows the damage-free
towing of aerodynamic vehicles made of lighter weight materials. This technology, particularly the L-arms, is still used in a majority
of commercial wreckers today. Our patents on the L-arm have expired, but we hold a number of utility and design patents for our
products. We have also obtained the rights to use and develop certain technologies owned or patented by others. Management
believes that, during the life of our patents on our technology, utilizing our patented technology without a license would be an
infringement of such patents.
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
72
66
40
70
53
62
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 President and Chief
Executive Officer from 1994 to 1996 and as Chief Executive Officer from 1996 to 1997. Mr. Miller also served as Co-Chief
Executive Officer from October 2003 to March 2011. Mr. Miller served as Chairman and President of Miller Group from 1990 to
1993 and as Chairman and CEO of Miller Group from 1993 to 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. Prior to serving as Co-Chief
Executive officer, Mr. Badgley served in various executive positions, including Vice President (1994 – 1996), President (1996 –
2011), Chief Executive Officer (1997 – 2003; 2011 – 2013), and Co-Chief Executive Officer (2003 – 2011). In addition, Mr. Badgley
served as a director from 1996 to 2014 and as Vice Chairman of the Board from 2011 to 2014. Mr. Badgley also served as Vice
President to Miller Industries Towing from 1988 to 1996 and has been their President since 1996.
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
We file annual, quarterly and current reports and other information with the SEC. The SEC maintains a website at
www.sec.gov that contains reports, proxy and information statements, and other information regarding issuers that file electronically
with the SEC.
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. Information
contained on our website is not part of this Annual Report on Form 10-K or our other filings with the SEC.
Our Corporate Governance Guidelines, Code of Business Conduct and Ethics and the charters of the Audit, Compensation
and Nominating Committees of the Board of Directors are also available on our website.
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 potential 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.
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, government
actions related to tariffs on imports and trade policies have impacted, and have the potential to further impact, pricing of raw
materials, such as steel and aluminum. For example, in 2018 the United States government imposed import tariffs of 25% on steel
products and 10% on aluminum products, as well as quantitative restrictions on imports of steel and aluminum products from various
countries. The Company uses a substantial amount of imported steel and aluminum in its products and experienced increases in
costs for these materials as a result of the tariffs and import quotas. To partially offset price increases for raw materials and
component parts, we have, from time to time, implemented general price increases and cost surcharges. While we have attempted
to pass these increased costs (including as a result of tariffs and import quotas) on to our customers, there can be no assurance that
we will be able to continue to do so. Any further price increases for these or any other materials that we use would require a long
lead time to implement while the higher material costs would be felt much sooner. In the future, if we experience increased prices
or shortages for key materials that are essential to our manufacturing operations, such as steel and aluminum (including as a result
of tariffs or import quotas), there is a substantial risk that the Company’s financial performance and competitive position could be
materially adversely impacted.
8
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 as our production levels have substantially increased over the last several years. 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.
Operational challenges caused by our increased sales volumes could result in material delays, increased costs and loss of
business opportunities, which could negatively impact our operating results and financial condition.
Substantially increased sales of our products over the last five years have caused a variety of operating challenges, including
supply chain constraints and production capacity limitations. The recent major additions and renovations to all our domestic
production facilities have allowed us to effectively address these challenges, but they have nevertheless caused increased production
costs and delayed deliveries to customers in some instances. These factors could in the future result in delay or termination of orders,
the loss of sales and a negative impact on our reputation with our customers, all of which could materially adversely affect our
business, financial condition and results of operations. In addition, our recent major additions and renovations to all our domestic
facilities may not achieve our intended objectives of lowering costs, improving manufacturing efficiencies and increasing
productivity, which could adversely affect our operating results and financial condition.
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 and trade policies. This includes the uncertainty
surrounding the United Kingdom’s expected exit from the European Union, commonly referred to as “Brexit,” which is currently
scheduled to occur on March 29, 2019. The United Kingdom and the European Union have had ongoing negotiations with respect
to the United Kingdom’s withdrawal terms; however, there is continued uncertainty surrounding their future relationship and
whether a transition plan will be agreed. Brexit could adversely affect European or worldwide political, regulatory, economic or
market conditions and could contribute to instability in political institutions and regulatory agencies. Brexit could also have the
effect of disrupting the free movement of goods, services, and people between the United Kingdom, the European Union and
elsewhere.
In addition, 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.
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. Our inability to address any of the foregoing
concerns could seriously harm our business, financial condition and results of operations.
9
In addition, several of our substantial military projects are scheduled to be completed over the course of the next year. We
are continually seeking to secure new military orders, but these orders have long and complex approval processes so the success
and timing of any such efforts is difficult to predict. Our inability to replace sales generated from military orders as they are
completed would result in lower sales and have an adverse effect on our business, results of operations and financial condition.
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.
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.
While we are continuing to develop new technology and apply for patents, 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, or breach in security of, 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, our suppliers and our employees. We rely on IT systems to protect this information and to keep
financial records, process orders, manage inventory, coordinate shipments to customers, and operate other critical functions. 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 malfeasance; or security breaches caused by hacking, computer viruses, malware, ransomware
or other cyber-attacks.
10
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. In addition, if our
systems are improperly implemented, breached, damaged or cease to function properly, we may have to make significant
investments to fix or replace them. 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 became 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.
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 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.
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.
11
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.
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.
Our current credit facility could restrict our ability to operate our business and failure to comply with its terms could adversely
affect our business; our obligations to repurchase products from third-party lenders to our distributors could adversely impact
our future revenues and financial condition.
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 2018 and anticipate that we will continue to be in compliance during 2019. 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. The borrowings under the credit facility
in 2018 were primarily used to finance working capital and various capital expenditure projects.
We also have certain obligations to repurchase our products from third-party lenders if our distributors should default in
their obligations to those lenders. Such repurchases could result in reduced net revenue in future periods as we resell such products
and, if we are unable to sell the products, could adversely impact our financial condition.
12
We cannot assure you that we will continue to 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.
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 331,000
square feet (plus 51,000 square feet of leased property), produces light and heavy-duty wreckers; the Hermitage plant, containing
approximately 279,000 square feet, 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 2018, the Company completed construction of its administrative building in Ooltewah, Tennessee. For a discussion
of recent 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.” As of February 28, 2019, there
were approximately 444 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.
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, 2018.
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 Machinery & Heavy Trucks Index over
the period of time from December 31, 2013 through December 31, 2018. The respective returns assume reinvestment of dividends
paid.
12/31/2013
12/31/2014
12/31/2015
12/31/2016
12/31/2017
12/31/2018
Miller Industries, Inc.
NYSE Composite Index
S&P Construction
Machinery & Heavy Trucks
Index
100
100
100
112
104
96
117
98
72
142
106
101
138
123
146
145
109
126
14
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.
2018
Years Ended December 31,
2016
(In thousands except per share data)
2015
2017
2014
Statements of Income Data:
Net Sales
Costs of operations
Gross Profit
Operating Expenses:
$ 711,706
628,370
83,336
$ 615,101
548,000
67,101
$ 601,119 $ 540,966
536,840 483,353
57,613
64,279
$ 492,776
439,791
52,985
Selling, general and administrative expenses
39,542
35,561
32,318
31,491
28,496
Non-operating (Income) Expenses:
Interest expense, net
Other (income) expense, net
Total expense, net
Income before income taxes
Income tax provision
Net income
Net loss attributable to noncontrolling interests
Net income attributable to Miller Industries, Inc.
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
Other Data:
Cash dividend per common share
1,878
253
41,673
41,663
7,917
33,746
–‒
33,746
2.96
2.96
11,388
11,393
$
$
$
1,588
(387)
36,762
30,339
7,323
23,016
–‒
23,016
2.02
2.02
11,368
11,385
$
$
$
1,161
(277)
33,202
31,077
11,155
19,922
–‒
19,922 $
919
340
32,750
24,863
8,887
15,976
–‒
15,976
1.76 $
1.75 $
1.41
1.41
11,346
11,374
11,324
11,360
$
$
$
554
437
29,487
23,498
8,660
14,838
66
14,904
1.32
1.31
11,297
11,354
$
$
$
2018
2017
December 31,
2016
2015
2014
$ 149,830
368,184
15,838
227,563
$ 125,734
317,238
10,606
203,100
$ 119,797 $ 121,046
297,438 268,356
—
184,602 173,862
5,000
$ 126,713
262,355
—
168,454
2018
2017
December 31,
2016
2015
2014
$
0.72
$
0.72
$
0.68 $
0.64
$
0.60
(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.
15
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
history of innovation in the towing and recovery industry has been an important factor behind our growth over the last decade and
we believe that our continued emphasis on research and development will be a key factor in our future growth.
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:
● 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, including floor plan financing, for our customers and towing operators;
●
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
●
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. We are also very focused on efforts to
secure new orders that would replace several of our substantial military projects that are scheduled to be completed over the course
of the next year.
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. For example, in 2018 the U.S. government imposed import tariffs of 25% on steel products and 10% on aluminum
products, as well as quantitative restrictions on imports of steel and aluminum products from various countries, which resulted in
increases in the prices we paid for these materials. We have implemented price increases on our products to offset price increases
in the raw materials that we use. 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, 2018, the Company owed $15,000 under the credit facility. The borrowings under the credit facility
in 2018 were primarily used to finance working capital. As of December 31, 2018, the Company also owed $760 under a fixed rate
loan through 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:
16
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
and, if necessary, a quantitative assessment. If we perform a qualitative analysis of goodwill and determine that fair value more
likely than not exceeds the carrying value of the reporting unit, no further testing is needed. Alternatively, if we elect to utilize a
quantitative assessment, an impairment loss would be recognized to the extent that the carrying value of the reporting unit exceeds
its fair value, not to exceed the carrying value of the goodwill. 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 deductible or taxable 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.
The calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax laws and
regulations in multiple 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.
17
We (1) record unrecognized tax benefits as liabilities in accordance with ASC 740 and (2) adjust these liabilities when our
judgment changes because of the evaluation of new information not previously available to us. 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.
Revenues
Under our accounting policies, revenues are recognized when obligations under the terms of a contract with a customer are
satisfied. Generally, this occurs upon shipment, which is when control has transferred to independent distributors or other customers.
From time to time, revenue is recognized under a bill and hold arrangement. Recognition of revenue on bill and hold arrangements
occurs control transfers to the customer. Our policy requires the reason for the bill and hold arrangement to be substantive, and the
product to be separately identified as belonging to the customer, ready for physical transfer, and unavailable to be used or directed
to another customer.
Revenue is measured as the amount of consideration expected to be received in exchange for the transfer of products. Sales
and other taxes collected concurrent with revenue-producing activities are excluded from revenue. Warranty related costs are
recognized as an expense at the time products are sold. Depending on the terms of the arrangement, for certain contracts the
Company may defer the recognition of a portion of the consideration received because a future obligation has not yet been satisfied,
such as an extended service contract. An observable stand-alone selling price for separate performance obligations or a cost plus
margin approach is utilized when one is not available.
While we manufacture only the bodies of wreckers, which are installed on truck chassis manufactured by third parties, we
frequently purchase 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) expense, net 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
Non-operating (income) expenses
Interest expense, net
Other (income) expense, net
Total expenses, net
Income before income taxes
2018
2017
2016
100.0%
88.3%
11.7%
5.6%
0.3%
(0.1)%
5.8%
5.9%
100.0%
89.1%
10.9%
100.0%
89.3%
10.7%
5.8%
5.4%
0.3%
(0.1)%
6.0%
4.9%
0.2%
(0.1)%
5.5%
5.2%
Year Ended December 31, 2018 Compared to Year Ended December 31, 2017
Net sales were $711,706 for the year ended December 31, 2018, compared to $615,101 for the year ended December 31,
2017, an increase of 15.7%. The increase in revenue was primarily attributable to increased demand levels, continued strong
economic conditions and positive consumer sentiment in both domestic and international markets. Net domestic sales increased
during the period from $527,134 to $574,806, and net foreign sales increased from $87,967 to $136,900 during the same period.
Our ability to increase sales in response to continued strong demand was enhanced by the production capabilities gained from our
recently completed capital projects at all of our domestic facilities.
18
Costs of operations increased 14.7% to $628,370 for the year ended December 31, 2018 from $548,000 for the year ended
December 31, 2017, which was attributable to increased production resulting from the strong demand levels. Overall, costs of
operations as a percentage of net sales decreased from 89.1% for the year ended December 31, 2017 to 88.3% for the year ended
December 31, 2018, primarily due to product mix and continued efforts to increase production efficiencies and monitor costs while
meeting customer demand.
Selling, general and administrative expenses for the year ended December 31, 2018 increased to $39,542 from $35,561 for
the year ended December 31, 2017, primarily due to increases in expenses related to engineering, commissions, and depreciation.
As a percentage of net sales, selling, general and administrative expenses decreased to 5.6% for 2018 from 5.8% for 2017, primarily
due to efficiencies gained from our recently completed capital projects and a continual focus on the enhancement of production
capabilities.
Interest expense, net increased to $1,878 for the year ended December 31, 2018 from $1,588 for the year ended December
31, 2017. Increases in interest expense, net were primarily due to increases in interest on distributor floor planning and borrowings
under the credit facility.
When the Company has transactions that are denominated in a currency other than its functional currency, the Company is
exposed to foreign currency transaction risk and must record gains and losses through other (income) expense when the related
balance sheet items are remeasured in the functional currency of the Company. Other (income) expense, net is composed primarily
of these foreign currency exchange gains and losses, with the remainder being composed of gains and losses on disposals of
equipment. The Company experienced a net foreign currency exchange loss of $97 for 2018 compared to a net exchange loss of
$221 for 2017.
The provision for income taxes for the years ended December 31, 2018 and 2017 reflects a combined federal, state and
foreign tax rate of 19.0% and 24.1%, respectively, which corresponds to a tax provision of $7,917 for 2018 as compared to $7,323
for 2017. Our tax rate was favorably impacted by the provisions of the Tax Cuts and Jobs Act (“TCJA”). The TCJA included a
reduction in the corporate tax rate from a top rate of 35% to a flat rate of 21%, thus decreasing the effective tax rate. The realization
of a foreign derived intangible income deduction (generated by domestic earnings from export sales) and a favorable adjustment to
the deemed repatriation tax also contributed to the decrease in the effective tax rate. For more information on the effective tax rate,
see Note 6 to our Consolidated Financial Statements.
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.
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 (income) expense, net is composed primarily of foreign currency exchange gains and losses, with the remainder
being composed of gains and losses on disposals of equipment. The Company experienced a net foreign currency exchange loss of
$221 for 2017 compared to a net exchange gain of $295 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 corporate tax rate reductions of TCJA, 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.
19
Liquidity and Capital Resources
Cash provided by operating activities during 2018 was $21,897, compared to $13,953 and $20,926 provided during 2017
and 2016, respectively. Cash provided by operating activities is generally attributable to the receipt of payments from our customers
as settlement of their contractual obligation once we have fulfilled all performance obligations related to our contracts with them.
These cash receipts are netted with payments for purchases of inventory, payments for materials used in manufacturing, and other
payments that are necessary in the ordinary course of our operations, such as those for utilities and taxes. When compared to 2017,
cash from operations was favorably impacted in 2018 by increases in production and gross profit margin, partially offset by timing
differences between revenue recognition and cash receipts from customers. When compared to 2016, cash from operations was
unfavorably impacted in 2017 by an increase in cash payments on purchases of inventory, partially offset by an increase in sales.
Cash used in investing activities during 2018 was $13,201, compared to $23,390 and $25,023 used during 2017 and 2016,
respectively. The cash used in investing activities for 2018, 2017, and 2016 was primarily for the purchase of property, plant and
equipment relating to the capital projects described below.
Cash used in financing activities during 2018 was $2,965, compared to $2,436 and $2,712 used during 2017 and 2016,
respectively. The cash used in financing activities in 2018 was primarily attributable to dividend payments of $8,200, partially offset
by net borrowings on the credit facility of $5,000, net proceeds on debt from one of our foreign subsidiaries, and exercises of stock
options. 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.
During 2018, we borrowed an additional $5,000 under our current credit facility, bringing the balance to $15,000 at
December 31, 2018. The borrowings under the credit facility were primarily used to finance working capital and various capital
expenditure projects. Over the past year, we have largely 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, 2018, we had cash and cash equivalents of $27,037, not including $35,000 of unused availability under
our credit facility. Our primary cash requirements include working capital, capital expenditures, the funding of any declared cash
dividends and principal and interest payments on indebtedness. At December 31, 2018, we had commitments of approximately
$7,053 for construction and acquisition of property and equipment. We expect our primary sources of cash to be cash flow from
operations and cash and cash equivalents on hand at December 31, 2018, with additional borrowings under our credit facility being
available as needed. We expect these sources to be sufficient to satisfy our cash needs during 2019 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, 2018 and 2017, $15,815 and $12,650, respectively, of the Company’s cash and temporary investments
were held by foreign subsidiaries based in the local currency. We do not currently have plans to repatriate undistributed foreign
earnings to the United States and have not determined any timeline or amount for any such future distributions.
During 2017, the Company completed capital expenditure projects relating to its Pennsylvania and Tennessee
manufacturing facilities. In addition, the Company completed the construction of an administrative building at its Ooltewah,
Tennessee facility during 2018. With the completion of these projects, management currently expects 2019 capital expenditures to
be lower than in 2017 and 2016 and more comparable to 2018 levels.
20
Contractual Obligations
The following is a summary of our contractual obligations as of December 31, 2018.
Contractual Obligations (1)(2)
Operating Lease Obligations
Purchase Obligations (2)
Revolving Credit Facility
Other Long-term Obligations
Commitments for construction and acquisition of plant
and equipment (3)
Total
$
$
Payment Due By Period (in thousands)
Less than
1 year
$
1-3 years 3-5 years
870 $
—
—
475
352
—
15,000
—
1,072
51,508
—
285
$
Total
2,658
51,508
15,000
760
7,053
76,979
$
7,053
59,918
$
—
1,345 $
—
15,352
$
More than
5 years
$
364
—
—
—
—
364
(1) Amounts do not include potential contingent obligations of $49,694 under repurchase commitments with third-party lenders in
the event of independent distributor customer default.
(2) Purchase obligations represent open purchase orders for raw materials and other components issued in the normal course of
business.
(3) Represents commitments to various capital projects and equipment acquisitions.
Credit Facility and Other Obligations
Credit Facility
On December 20, 2018, we amended and restated our loan agreement with First Tennessee Bank National Association,
which governs our existing $50,000 unsecured revolving credit facility, to (i) renew and extend the maturity date to May 31, 2022
and make certain other conforming changes, (ii) reduce the interest rate on outstanding loans from one month LIBOR rate plus 150
basis points to one month LIBOR rate plus an applicable margin of either 1.00% or 1.25% depending on the Company’s Leverage
Ratio (as such term is defined in the amended and restated master revolving credit note), which margin adjusts periodically from
time to time based on changes in such Leverage Ratio, and make certain other changes to the interest rate provisions, (iii) amend
the tangible net worth covenant to increase the minimum required compliance level thereunder from $130 million to $160 million
(the Company’s tangible net worth at December 31, 2018 was approximately $216 million) and (iv) modify certain definitions and
other terms thereof. The 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 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
2018 and anticipate that we will continue to be in compliance during 2019.
In the absence of a default, all borrowings under the credit facility bear interest at the LIBOR Rate plus 1.00% or 1.25%
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, 2018, the Company owed $15,000 under the credit facility. The borrowings under the credit facility
in 2018 were primarily used to finance working capital and various capital expenditure projects. During the first quarter of 2019,
the Company borrowed an additional $5,000 on its credit facility for working capital needs, which increased the balance to $20,000
at March 4, 2019.
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, 2018, the Company had $760 in outstanding borrowings under the loan agreement,
of which $475 and $285 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.
21
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 1.00% or 1.25% per annum, depending on our leverage ratio (for a rate of
interest of 3.52% at December 31, 2018). 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, 2018.
Other Long-Term Obligations
We had approximately $2,658 in non-cancellable operating lease obligations at December 31, 2018.
Recent Accounting Pronouncements
Recently Issued Standards
The Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2016-02 Leases (Topic
842) on February 25, 2016 and is intended to improve financial reporting on leasing transactions. The update affects all companies
and other organizations that lease assets such as real estate, airplanes, and manufacturing equipment. The amendments will require
lessees to recognize on the balance sheet the assets and liabilities for the rights and obligations created by their lease agreements.
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 will depend primarily 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 amendments will require both types of leases (i.e. operating and finance) to be recognized on the balance sheet. The lessee
accounting model prescribed by the update will require a finance lease to be accounted for in substantially the same manner as
capital leases under existing GAAP. An 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 right-of-use asset on the balance sheet during the lease term.
The amendments 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 “Credit Facilities and Other Obligations”
within Item 2 for the Company’s current lease commitments. The Company plans to use the modified retrospective approach and
will elect to initially apply the update with a cumulative-effect adjustment to the opening balance of retained earnings at the date of
adoption. The Company has substantially completed its evaluation of lease agreements and the review of its current accounting
policies and practices to identify potential differences that would result from applying the requirements of the ASU to the Company’s
leases. The Company does not expect the adoption of this update to have a material impact on the Company’s consolidated financial
statements. For an estimate of the impact of the ASU to balances at January 1, 2019, see Note 2 to our Consolidated Financial
Statements.
In August 2018, the FASB issued ASU 2018-15 Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-
40) to align the requirements for capitalizing implementation costs incurred in cloud computing arrangements that are service
contracts with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The update
will be effective for financial statements issued for annual periods, and interim periods within these annual periods, beginning after
December 15, 2019, with early adoption permitted. The Company plans to apply the amendments in the update prospectively to all
implementation costs incurred after the date of the adoption. The adoption of this update will not have a material impact on the
Company’s consolidated financial statements and related disclosures.
Recently Adopted Standards
In May 2014, the FASB issued ASU 2014-09, Revenue—Revenue from Contracts with Customers. The Company has
adopted the update and all related amendments with an effective date of January 1, 2018 using the modified retrospective method,
thus recognizing the cumulative effect of adopting the update as an adjustment to the opening balance of retained earnings. The
Company applied the amendments to contracts that were not completed as of the adoption date. Comparative information has not
been restated and continues to be reported under the accounting standards in effect for the periods prior to the effective date.
As a result of the adoption, effective January 1, 2018, the Company began including the costs of painting activities as
performance obligations within each contract, which results in a delay in recognition of revenue until such activities are complete
and the product is shipped. With the exception of certain extended service contracts on a small percentage of units sold, the
Company’s performance obligations are complete and sales revenue is recognized when products are shipped from the Company’s
facilities.
22
The cumulative effect adjustment to the consolidated balance sheets as of January 1, 2018 was as follows:
Assets
Accounts Receivable, net
Inventories, net
Liabilities and Shareholders' Equity
Accrued Liabilities
Accumulated Surplus
Balance at
December 31, 2017
Cumulative Effect
Adjustment
Balance at
January 1, 2018
$
132,699
68,567
$
(2,496) $
1,996
22,001
55,580
(176)
(324)
130,203
70,563
21,825
55,256
As a result of the adoption, we changed our accounting policy. See Note 2 for further information.
In January 2017, the FASB issued ASU No. 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test
for Goodwill Impairment. The update eliminates the second step in the goodwill impairment test which required an entity to
determine the implied fair value of the reporting unit’s goodwill. Instead, an entity will now 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 Company elected to adopt the update in the first quarter of
2018, with an effective date of January 1, 2018. The adoption of this guidance did not have a material impact on its consolidated
financial statements and related disclosures.
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 Company adopted
the amendments in the first quarter of 2018, with an effective date of January 1, 2018. The adoption of this guidance did not have a
material impact on the Company’s consolidated financial statements and related disclosures.
In August 2018, the SEC issued a final rule to amend certain redundant or outdated disclosure requirements to simplify
compliance with financial reporting. In an effort to reduce such duplicative disclosures, many requirements of the SEC were either
eliminated or reduced where GAAP had identical or similar disclosure provisions for the notes to financial statements. In other
instances, disclosure requirements were enhanced to improve transparency. The company adopted the amendments in the fourth
quarter of 2018. The adoption did not have a material impact on the Company’s consolidated financial statements and related
disclosures.
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 1.00% or 1.25% per annum, depending on our leverage
ratio (for a rate of interest of 3.52% at December 31, 2018). 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, 2018.
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, 2018, and 2017, the impact of foreign currency exchange rate changes on our results
of operations and cash flows was a net foreign currency exchange loss of $97 and $221, respectively, and a net exchange gain of
$295 in 2016.
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 2018, we recognized a $965 decrease in our foreign currency translation adjustment account
because of the strengthening of the U.S. dollar against certain foreign currencies, compared to an increase of $3,374 during 2017
and a decrease of $1,566 during 2016.
23
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 Co-Chief
Executive Officers and our Chief Financial Officer, 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.
Changes in Internal Control over Financial Reporting
Beginning January 1, 2018, we implemented ASU 2014-09, Revenue from Contracts with Customers. Although the new
revenue standard is expected to have an immaterial impact on our ongoing net income, we implemented changes to our processes
related to revenue recognition and the control activities within them. These changes included training, ongoing contract review
requirements, and gathering of required information for disclosures.
During the fourth quarter of 2018, there were no other changes in our internal controls over financial reporting that have
materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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 Co-Chief Executive Officers and our Chief Financial Officer, conducted an evaluation of the
effectiveness of our internal control over financial reporting as of December 31, 2018. 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, 2018, 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, 2018, which appears herein.
March 6, 2019
24
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, 2018, 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, 2018, 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, 2018 and 2017, 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, 2018, and
the related notes and financial statement schedule listed in the index at Item 15, of the Company and our report dated March 6, 2019,
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 6, 2019
25
ITEM 9B. OTHER INFORMATION
On March 4, 2019, the Board of Directors of the Company adopted and approved, effective immediately, the Second
Amended and Restated Bylaws of the Company (the “Bylaws”). The Bylaws include, among other things, the following
amendments:
Section 1.8 (Voting) of the Bylaws has been amended to provide for majority voting in uncontested director
elections (as well as conforming changes to certain other sections of the Bylaws);
Section 1.13 (No Written Consent of Shareholders in Lieu of Meeting) was updated to eliminate reference to
shareholder actions by written consent that were permitted under the Bylaws only prior to the Company’s initial
public offering (which occurred in 1994); and
Section 2.9 (Honorary Directors) was eliminated from the Bylaws. This section previously permitted directors
who have resigned or retired to serve as honorary directors at the direction of the Board.
The foregoing description is qualified in its entirety by the Bylaws, which are attached hereto as Exhibit 3.2 and
incorporated herein by reference.
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
pursuant to Regulation 14A not later than 120 days after the end of our 2018 fiscal year, 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 Part I, 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
pursuant to Regulation 14A not later than 120 days after the end of our 2018 fiscal year, will contain our compensation committee
report, information relating to director and executive officer compensation and information relating to compensation committee
interlocks and insider participation, each of which 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
pursuant to Regulation 14A not later than 120 days after the end of our 2018 fiscal year, 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
pursuant to Regulation 14A not later than 120 days after the end of our 2018 fiscal year, 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 ACCOUNTING FEES AND SERVICES
The Proxy Statement for our Annual Meeting of Shareholders, to be filed with the Securities and Exchange Commission
pursuant to Regulation 14A not later than 120 days after the end of our 2018 fiscal year, 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, and our pre-
approval policy and procedures for audit and non-audit services, which information is incorporated by reference into this report.
26
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
(a)
The following documents are filed as part of this Report:
PART IV
1.
Financial Statements
Description
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of December 31, 2018 and 2017
Consolidated Statements of Income for the years ended December 31, 2018, 2017 and 2016
Consolidated Statements of Comprehensive Income for the years ended December 31, 2018, 2017 and 2016
Consolidated Statements of Shareholders’ Equity for the years ended December 31, 2018, 2017 and 2016
Consolidated Statements of Cash Flows for the years ended December 31, 2018, 2017 and 2016
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-19
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
Incorporated
by Reference
to Registration
File Number
Form or
Report
Date of Report
Exhibit
Number in
Report
Charter, as amended, of the Registrant
—
Form 10-K
April 22, 2002
3.1
Second Amended and Restated Bylaws of the
Registrant*
Form of Noncompetition Agreement between the
Registrant and certain officers of the Registrant
33-79430
S-1
August 1994
10.28
3.1
3.2
10.1
27
Description
10.2
Form of Indemnification Agreement by and
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 **
10.3
Miller Industries, Inc. 2005 Equity Incentive Plan**
10.4
2013 Non-Employee Director Stock Plan**
10.5
10.6
10.7
10.8
10.9
Amended and Restated Loan Agreement, 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
Amended and Restated Master Revolving Credit
Note dated as of June 22, 2016 from the Registrant
payable to First Tennessee Bank National
Association
Amendment No. 1 to Miller Industries, Inc. 2013
Non-Employee Director Stock Plan**
Amended and Restated Loan Agreement, 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
Amended and Restated Master Revolving Credit
Note dated as of April 5, 2017 from the Registrant
payable to First Tennessee Bank National
Association
10.10 Miller Industries, Inc. 2016 Stock Incentive Plan **
10.11
10.12
Amended and Restated Loan Agreement, dated as
of July 19, 2018, by and among the Registrant,
certain of the Registrant’s wholly-owned
subsidiaries, and First Tennessee Bank National
Association
Amended and Restated Master Revolving Credit
Note dated as of July 19, 2018 from the Registrant
payable to First Tennessee Bank National
Association
Incorporated
by Reference
to Registration
File Number
Form or
Report
Date of Report
Exhibit
Number in
Report
—
Form 10-Q
September 14,
1998
10
—
—
—
Schedule 14A May 2, 2005 Annex B
Schedule 14A April 22, 2013 Annex A
Form 8-K
June 24, 2016
10.1
—
Form 8-K
June 24, 2016
10.2
—
—
Form 8-K
March 15,
10.1
2017
Form 8-K
April 11, 2017
10.1
—
Form 8-K
April 11, 2017
10.2
—
—
Schedule 14A April 19, 2017 Appendix A
Form 8-K
July 25, 2018
10.1
—
Form 8-K
July 25, 2018
10.2
28
Incorporated
by Reference
to Registration
File Number
Form or
Report
Date of Report
Exhibit
Number in
Report
—
Form 8-K
December 26,
2018
10.1
—
Form 8-K
December 26,
2018
10.2
Description
10.13
10.14
Amended and Restated Loan Agreement, dated as
of December 20, 2018, by and among the
Registrant, certain of the Registrant’s wholly-
owned subsidiaries, and First Tennessee Bank
National Association
Amended and Restated Master Revolving Credit
Note dated as of December 20, 2018 from the
Registrant payable to First Tennessee Bank
National Association
21
Subsidiaries of the Registrant*
23.1
Consent of Elliott Davis, LLC*
24
Power of Attorney (see signature page)*
31.1
31.2
31.3
32.1
32.2
32.3
Certification Pursuant to Rules 13a-14(a)/15d-14(a)
by Co-Chief Executive Officer*
Certification Pursuant to Rules 13a-14(a)/15d-14(a)
by Co-Chief Executive Officer*
Certification Pursuant to Rule 13a-14(a)/15d-14(a)
by Chief Financial Officer*
Certification Pursuant to Section 1350 of Chapter
63 of Title 18 of United States Code by Co-Chief
Executive Officer±
Certification Pursuant to Section 1350 of Chapter
63 of Title 18 of United States Code by Co-Chief
Executive Officer±
Certification Pursuant to Section 1350 of Chapter
63 of Title 18 of United States Code by Chief
Financial Officer±
29
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, 2018, formatted in
XBRL (eXtensible Business Reporting Language):
(i) Consolidated Balance Sheets as of December 31,
2018 and December 31, 2017, (ii) Consolidated
Statements of Income for the years ended
December 31, 2018, 2017 and 2016, (iii)
Consolidated Statements of Comprehensive Income
for the years ended December 31, 2018, 2017 and
2016, (iv) Consolidated Statements of
Shareholder’s Equity for the years ended December
31, 2018, 2017 and 2016, (v) Consolidated
Statements of Cash Flows for the years ended
December 31, 2018, 2017 and 2016, 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.
(c) 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.
30
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2018 AND 2017
CONSOLIDATED STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31, 2018, 2017 AND
2016
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31,
2018, 2017 AND 2016
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY FOR THE YEARS ENDED DECEMBER 31,
2018, 2017 AND 2016
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2018, 2017
AND 2016
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-19
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, 2018 and 2017, 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, 2018, and the related notes and financial statement
schedule listed in the index at Item 15 (collectively, the financial statements). In our opinion, the financial statements present fairly,
in all material respects, the financial position of the Company as of December 31, 2018 and 2017, and the results of its operations
and its cash flows for each of the three years in the period ended December 31, 2018, 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, 2018, 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 6, 2019 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.
We have served as the Company’s auditor since 2003.
/s/ Elliott Davis, LLC
Chattanooga, Tennessee
March 6, 2019
F-2
MILLER INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2018 AND 2017
(In thousands, except share data)
ASSETS
CURRENT ASSETS:
Cash and temporary investments
Accounts receivable, net of allowance for doubtful accounts of $1,112 and $1,038, at
December 31, 2018 and 2017, 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
Total liabilities
COMMITMENTS AND CONTINGENCIES (Notes 3 and 5)
SHAREHOLDERS’ EQUITY:
Preferred stock, $0.01 par value; 5,000,000 shares authorized, none issued or outstanding
Common stock, $0.01 par value; 100,000,000 shares authorized, 11,394,546 and 11,378,482,
outstanding at December 31, 2018 and 2017, respectively
Additional paid-in capital
Accumulated surplus
Accumulated other comprehensive loss
Total shareholders’ equity
2018
2017
$
27,037 $
21,895
149,142
93,767
3,272
273,218
82,850
11,619
497
$
368,184 $
98,220 $
24,863
305
123,388
15,533
—
1,700
140,621
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
114,138
—
—
114
150,905
81,354
(4,810)
227,563
368,184 $
114
150,699
55,580
(3,293)
203,100
317,238
$
$
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, 2018, 2017 AND 2016
(In thousands, except per share data)
NET SALES
COSTS OF OPERATIONS
GROSS PROFIT
OPERATING EXPENSES:
Selling, general and administrative expenses
NON-OPERATING (INCOME) EXPENSES
Interest expense, net
Other (income) expense, net
Total expense, net
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
$
$
$
$
$
2018
2017
2016
$
711,706
628,370
83,336
615,101 $
548,000
67,101
601,119
536,840
64,279
39,542
35,561
32,318
1,878
253
41,673
41,663
7,917
33,746
$
1,588
(387)
36,762
30,339
7,323
23,016 $
2.96
$
2.02 $
2.96
$
2.02 $
0.72
$
0.72 $
1,161
(277)
33,202
31,077
11,155
19,922
1.76
1.75
0.68
11,388
11,393
11,368
11,385
11,346
11,374
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, 2018, 2017 AND 2016
(In thousands)
NET INCOME
OTHER COMPREHENSIVE INCOME (LOSS):
Foreign currency translation adjustment
Total other comprehensive income (loss)
2018
2017
2016
$
33,746
$
23,016 $
19,922
(965)
(965)
3,374
3,374
(1,566)
(1,566)
COMPREHENSIVE INCOME
$
32,781
$
26,390 $
18,356
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, 2018, 2017 AND 2016
(In thousands, except share data)
BALANCE, December 31, 2015
$
113 $
150,305 $
28,545 $
(5,101) $
173,862
Common
Stock
Additional
Paid-In
Capital
Accumulated
Surplus
Accumulated
Other
Comprehensive
Income (Loss)
Total
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
Cumulative effect adjustment for adoption
of ASU 2014-09
BALANCE, January 1, 2018
Prior period accounting reclassification
Components of comprehensive income:
Net income
Foreign currency translation adjustments
Total comprehensive income
Issuance of common stock to non-
employee directors (5,814)
Exercise of stock options (10,250)
Dividends paid, $0.72 per share
BALANCE, December 31, 2018
—
—
—
—
—
—
113
—
—
—
—
1
—
114
—
114
—
—
—
—
—
—
—
96
3
—
150,404
—
—
—
150
145
—
150,699
—
150,699
—
—
—
—
19,922
—
19,922
—
—
(7,715)
40,752
23,016
—
23,016
—
—
(8,188)
55,580
(324)
55,256
552
33,746
—
34,298
—
(1,566)
(1,566)
—
—
—
(6,667)
—
3,374
3,374
—
—
—
(3,293)
—
(3,293)
(552)
—
(965)
(1,517)
—
—
—
114 $
150
56
—
150,905 $
—
—
(8,200)
81,354 $
—
—
—
(4,810) $
$
19,922
(1,566)
18,356
96
3
(7,715)
184,602
23,016
3,374
26,390
150
146
(8,188)
203,100
(324)
202,776
—
33,746
(965)
32,781
150
56
(8,200)
227,563
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, 2018, 2017 AND 2016
(In thousands)
OPERATING ACTIVITIES:
Net income
Adjustments to reconcile net income to net cash flows from operating
activities:
Depreciation
(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
Other assets
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
Net 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
$
$
$
2018
2017
2016
$
33,746
$
23,016 $
19,922
7,745
156
568
214
150
(19,353)
(23,865)
60
989
19,425
2,062
21,897
(13,342)
141
(13,201)
5,000
(8,200)
56
179
(2,965)
(589)
5,142
21,895
27,037
2,437
7,457
6,147
(608)
(868)
86
150
(6,668)
(2,844)
8
765
(5,806)
575
13,953
(24,693)
1,303
(23,390)
5,000
(8,188)
146
606
(2,436)
2,653
(9,220)
31,115
21,895 $
2,219 $
7,815 $
$
$
$
4,828
18
3,219
(462)
96
(17,253)
1,018
(70)
(3,361)
12,931
40
20,926
(25,026)
3
(25,023)
5,000
(7,715)
3
—
(2,712)
(525)
(7,334)
38,449
31,115
1,877
11,605
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, 2018 and 2017 consisted of the following:
Chassis
Raw materials
Work in process
Finished goods
Property, Plant and Equipment
2018
2017
8,921 $
40,021
14,995
29,830
93,767 $
7,525
30,109
13,521
17,412
68,567
$
$
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. Fully depreciated assets are retained in property,
plant and equipment and accumulated depreciation until they are removed from service. When assets are retired or otherwise
disposed of, the related costs and accumulated depreciation are removed from the consolidated balance sheets and any resulting gain
or loss from disposition is recorded as other (income) expense, net in the consolidated statements of income in the period realized.
F-8
Property, plant and equipment at December 31, 2018 and 2017 consisted of the following:
Land and improvements
Buildings and improvements
Machinery and equipment
Furniture and fixtures
Software costs
Less accumulated depreciation
2018
2017
11,807 $
68,717
43,961
7,786
5,695
137,966
(55,116)
82,850 $
11,333
66,826
44,161
10,227
10,345
142,892
(65,264)
77,628
$
$
The Company recognized $7,745, $6,147 and $4,828 in depreciation expense in 2018, 2017 and 2016, 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 5,000, 17,000 and 28,000 potential dilutive common shares in 2018, 2017
and 2016, respectively. For 2018, 2017 and 2016, 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. Goodwill is
reviewed for impairment utilizing a qualitative assessment and, if necessary, a quantitative assessment. If we perform a qualitative
analysis of goodwill and determine that fair value more likely than not exceeds the carrying value of the reporting unit, no further
testing is needed. Alternatively, if we elect to utilize a quantitative assessment, an impairment loss would be recognized to the extent
that the carrying value of the reporting unit exceeds its fair value, not to exceed the carrying value of the goodwill.
Accrued Liabilities
Accrued liabilities consisted of the following at December 31, 2018 and 2017:
Accrued wages, commissions, bonuses and benefits
Accrued products warranty
Accrued taxes
Other
2018
2017
9,152 $
3,752
1,039
10,920
24,863 $
8,632
3,147
828
9,394
22,001
$
$
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.
F-9
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 2018, 2017 and 2016.
No options were granted during 2018 or 2017. 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, 2018, the Company had no unrecognized compensation expense related to stock options. The Company issued
10,250 and 26,500 shares of common stock during 2018 and 2017, respectively, from the exercise of stock options.
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 2018, 2017 and 2016, was $3,793, $2,618 and $1,750,
respectively.
The table below provides a summary of the warranty liability for December 31, 2018 and 2017:
Accrual at beginning of the year
Provision
Settlement and Other
Accrual at end of year
2018
2017
$
$
3,147 $
3,793
(3,188)
3,752 $
2,821
2,618
(2,292)
3,147
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, 2018 and 2017 the Company had one
customer with a trade account receivable balance greater than 10% of total accounts receivable. The account balance was 16% and
12% of total accounts receivable at December 31, 2018 and 2017, respectively.
Revenue Recognition
Revenue is recognized when obligations under the terms of a contract with a customer are satisfied. Generally, this occurs upon
shipment, which is when control has transferred to independent distributors or other customers. From time to time, revenue is
recognized under a bill and hold arrangement. Recognition of revenue on bill and hold arrangements occurs when control transfers
to the customer. Our policy requires the reason for the bill and hold arrangement to be substantive, and the product to be separately
identified as belonging to the customer, ready for physical transfer, and unavailable to be used or directed to another customer.
F-10
Revenue is measured as the amount of consideration expected to be received in exchange for the transfer of products. Sales and
other taxes collected concurrent with revenue-producing activities are excluded from revenue. Warranty related costs are recognized
as an expense at the time products are sold. Depending on the terms of the arrangement, for certain contracts the Company may
defer the recognition of a portion of the consideration received because a future obligation has not yet been satisfied, such as an
extended service contract. An observable stand-alone selling price for separate performance obligations or a cost plus margin
approach is utilized when one is not available.
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 $3,127, $1,943 and $1,797 for 2018, 2017 and 2016,
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, net in our consolidated statements of income.
Recent Accounting Pronouncements
Recently Issued Standards
The Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2016-02 Leases (Topic 842)
on February 25, 2016 and is intended to improve financial reporting on leasing transactions. The update affects all companies and
other organizations that lease assets such as real estate, airplanes, and manufacturing equipment. The amendments will require
lessees to recognize on the balance sheet the assets and liabilities for the rights and obligations created by their lease agreements.
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 will depend primarily 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 amendments will require both types of leases (i.e. operating and finance) to be recognized on the balance sheet. The lessee
accounting model prescribed by the update will require a finance lease to be accounted for in substantially the same manner as
capital leases under existing GAAP. An 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 right-of-use asset on the balance sheet during the lease term.
The amendments 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 “Credit Facilities and Other Obligations” within Item 2 for
the Company’s current lease commitments. The Company plans to use the modified retrospective approach and will elect to initially
apply the update with a cumulative-effect adjustment to the opening balance of retained earnings at the date of adoption. The
Company has substantially completed its evaluation of lease agreements and the review of its current accounting policies and
practices to identify potential differences that would result from applying the requirements of the ASU to the Company’s leases. At
January 1, 2019, the Company expects to increase lease related assets and liabilities by approximately $2,300. A de minimis
difference between the lease assets and liabilities will be booked to accumulated surplus and deferred income tax liabilities.
F-11
In August 2018, the FASB issued ASU 2018-15 Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40) to
align the requirements for capitalizing implementation costs incurred in cloud computing arrangements that are service contracts
with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The update will be
effective for financial statements issued for annual periods, and interim periods within these annual periods, beginning after
December 15, 2019, with early adoption permitted. The Company plans to apply the amendments in the update prospectively to all
implementation costs incurred after the date of the adoption. The adoption of this update will not have a material impact on the
Company’s consolidated financial statements and related disclosures.
Recently Adopted Standards
In May 2014, the FASB issued ASU 2014-09, Revenue—Revenue from Contracts with Customers. The Company has adopted the
update and all related amendments with an effective date of January 1, 2018 using the modified retrospective method, thus
recognizing the cumulative effect of adopting the update as an adjustment to the opening balance of retained earnings. The Company
applied the amendments to contracts that were not completed as of the adoption date. Comparative information has not been restated
and continues to be reported under the accounting standards in effect for the periods prior to the effective date.
As a result of the adoption, effective January 1, 2018, the Company began including the costs of painting activities as performance
obligations within each contract, which results in a delay in recognition of revenue until such activities are complete and the product
is shipped. With the exception of certain extended service contracts on a small percentage of units sold, the Company’s performance
obligations are complete and sales revenue is recognized when products are shipped from the Company’s facilities.
We do not anticipate the adoption of the update to have a material impact on an ongoing basis to the Company’s consolidated
financial statements and related disclosures. The cumulative effect adjustment to the consolidated balance sheets as of January 1,
2018 was as follows:
Assets
Accounts Receivable, net
Inventories, net
Liabilities and Shareholders' Equity
Accrued Liabilities
Accumulated Surplus
Balance at
December 31, 2017
Cumulative Effect
Adjustment
Balance at
January 1, 2018
$
132,699
68,567
$
(2,496) $
1,996
22,001
55,580
(176)
(324)
130,203
70,563
21,825
55,256
In accordance with the new revenue standard requirements, the impact of the adoption to the consolidated statement of income
during the year ended December 31, 2018 and the consolidated balance sheet as of December 31, 2018 was as follows:
Statement of Income
Revenues
Net Sales
Costs and Expenses
Costs of Operations
Income Tax Provision
Net Income
Balance Sheet
Assets
Accounts Receivable, net
Inventories, net
Liabilities and Shareholders’ Equity
Accrued Liabilities
Accumulated Surplus
Year Ended December 31, 2018
Balances Without
Adoption of ASU 2014-09
Effect of Adoption
Increase/(Decrease)
As Reported
$
711,706 $
628,370
7,917
33,746
711,672 $
628,343
7,916
33,740
34
27
1
6
December 31, 2018
Balances Without
Adoption of ASU 2014-09
Effect of Adoption
Increase/(Decrease)
As Reported
$
149,142 $
93,767
24,863
81,354
149,108 $
93,794
24,862
81,348
34
(27)
1
6
As a result of the adoption, we changed our accounting policy. See preceding information in Note 2 for further information.
F-12
In January 2017, the FASB issued ASU No. 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for
Goodwill Impairment. The update eliminates the second step in the goodwill impairment test which required an entity to determine
the implied fair value of the reporting unit’s goodwill. Instead, an entity will now 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 Company elected to adopt the update in the first quarter of 2018, with
an effective date of January 1, 2018. The adoption of this guidance did not have a material impact on its consolidated financial
statements and related disclosures.
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 Company adopted
the amendments in the first quarter of 2018, with an effective date of January 1, 2018. The adoption of this guidance did not have
a material impact on the Company’s consolidated financial statements and related disclosures.
In August 2018, the SEC issued a final rule to amend certain redundant or outdated disclosure requirements to simplify compliance
with financial reporting. In an effort to reduce such duplicative disclosures, many requirements of the SEC were either eliminated
or reduced where GAAP had identical or similar disclosure provisions for the notes to financial statements. In other instances,
disclosure requirements were enhanced to improve transparency. The company adopted the amendments in the fourth quarter of
2018. The adoption did not have a material impact on the Company’s consolidated financial statements and related disclosures.
3.
LONG-TERM OBLIGATIONS
Long-Term Obligations
Credit Facility. On December 20, 2018, we amended and restated our loan agreement with First Tennessee Bank National
Association, which governs our existing $50,000 unsecured revolving credit facility, to (i) renew and extend the maturity date to
May 31, 2022 and make certain other conforming changes, (ii) reduce the interest rate on outstanding loans from one month LIBOR
rate plus 150 basis points to one month LIBOR rate plus an applicable margin of either 1.00% or 1.25% depending on the Company’s
Leverage Ratio (as such term is defined in the amended and restated master revolving credit note), which margin adjusts periodically
from time to time based on changes in such Leverage Ratio, and make certain other changes to the interest rate provisions, (iii)
amend the tangible net worth covenant to increase the minimum required compliance level thereunder from $130 million to $160
million (the Company’s tangible net worth at December 31, 2018 was approximately $216 million) and (iv) modify certain
definitions and other terms thereof. The 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 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 2018 and anticipate that we will continue to be in compliance during 2019.
In the absence of a default, all borrowings under the credit facility bear interest at the LIBOR Rate plus 1.00% or 1.25% per annum,
depending on the leverage ratio. 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 $512 and $492 for the years ended December 31, 2018 and 2017, respectively.
The Company had $15,000 and $10,000 in outstanding borrowings under the credit facility at December 31, 2018 and 2017,
respectively. Subsequent to December 31, 2018, the Company borrowed an additional $5,000 on the credit facility, bringing the
total balance to $20,000 as of March 4, 2019.
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, 2018 and 2017, Company had $760 and $606 in outstanding borrowings under
the loan agreement, respectively. At December 31, 2018 $475 and $285 were classified as long-term obligations and long-term
obligations due within one year, respectively, on the consolidated balance sheets. At December 31, 2017, $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 were 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 1.00% or 1.25% per annum, depending on the leverage ratio
(for a rate of interest of 3.52% at December 31, 2018). 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, 2018.
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, 2018, 2017 and 2016 were 800,000, 800,000 and 0, respectively. 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, 2018, 2017 and 2016, is presented below (shares in
thousands):
Outstanding at Beginning of Period
Granted
Exercised
Forfeited and cancelled
Outstanding at End of Period
Options exercisable at year end
2018
2017
2016
Shares
Under
Option
Weighted
Average
Exercise
Price
Shares
Under
Option
Weighted
Average
Exercise
Price
Shares
Under
Option
Weighted
Average
Exercise
Price
$
11
—
(10)
(1)
— $
— $
5.49
—
5.49
5.49
—
—
37
—
(26)
—
11
11
$
$
$
5.49
—
5.49
—
5.49
5.49
38
—
(1)
—
37
37
$
$
$
5.49
—
5.49
—
5.49
5.49
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 $1,937, $1,736 and $1,730 in 2018, 2017 and 2016, respectively.
At December 31, 2018 future minimum lease payments under non-cancelable operating leases for the next five years and in the
aggregate are as follows:
2019
2020
2021
2022
2023
Thereafter
$
$
1,072
483
387
185
167
364
2,658
At December 31, 2018, the Company had commitments of approximately $7,053 for construction and acquisition of property and
equipment.
Contingencies
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 $49,694 and $54,093 at December 31, 2018 and 2017, respectively.
No repurchases of products were required during 2018 or 2017.
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-14
6.
INCOME TAXES
The Tax Cuts and Jobs Act (TCJA) was signed into law by the President in 2017. The TCJA created a territorial tax system, which
generally allows 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. At December 31, 2017, the Company had computed a reasonable estimate of this amount
to be $1,102, net of foreign tax credits, and reflected it as a component of income tax provision in the consolidated statements of
income during 2017. During 2018, the Company gathered additional information which demonstrated that the Company had over-
accrued for this tax at December 31, 2018. Due to the inherent complexity of the calculation for the deemed repatriation tax, the
Company followed elective guidance in SEC Staff Accounting Bulletin (SAB) 118, which allows for measurement period
adjustments to be reflected in the current reporting period and reduced the liability to $625 for this tax, which amount was paid
during 2018.
Additional provisions of the TCJA are the Global Intangible-Low Taxed Income tax, or "GILTI" and the Foreign Derived Intangible
Income deduction, or “FDII”. The provisions are effective for tax years beginning after December 31, 2017. The Company has
implemented a policy to account for the impact of book to tax differences resulting from GILTI in the period in which the tax applies
to the Company. The impact of GILTI and FDII were considered in the calculation of income tax for the year ended December 31,
2018.
Income before income taxes includes the following components:
United States
Foreign
Total
2018
2017
2016
$
$
34,220 $
7,443
41,663 $
22,695 $
7,644
30,339 $
25,038
6,039
31,077
The provision for income taxes on income consisted of the following in 2018, 2017 and 2016:
Current:
Federal
Federal – Deemed Repatriation
State
Foreign
Deferred:
Federal
State
Foreign
2018
2017
2016
$
$
5,480 $
(477)
(380)
2,719
7,342
571
(55)
59
575
7,917 $
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
The principal differences between the federal statutory tax rate and the income tax expense in 2018, 2017 and 2016:
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
Foreign Derived Intangible Income deduction
Release of unrecognized tax benefit
Other
Effective tax rate
2018
2017
2016
21.0%
(0.8)%
2.9%
—%
(1.1)%
(0.4)%
(1.3)%
—%
(1.3)%
19.0%
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%
F-15
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, 2018 and 2017 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
Other
Total deferred tax liabilities
Valuation Allowance
Net deferred tax asset/(liability)
2018
2017
$
$
213 $
1,963
811
2,987
4,686
1
4,687
—
(1,700) $
181
1,673
644
2,498
3,579
—
3,579
(44)
(1,125)
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. During 2018, the Company released $44 from its valuation allowance
related to a deferred tax asset on a state net operating loss carryforward.
We do not currently have plans to repatriate undistributed foreign earnings to the United States and have not determined any timeline
or amount for any such future distributions.
As of December 31, 2018, the Company had no federal net operating loss carryforwards, but had a state net operating loss
carryforward of $834.
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, 2018, 2017 and 2016, 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
2018
2017
2016
—
—
—
— $
1,037
120
(1,157)
— $
792
245
—
1,037
$
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 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, 2018, the Company is no longer subject to U.S. federal, state or non-U.S. income tax examinations prior to 2015.
F-16
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 2018, 2017 and 2016
were as follows:
Payment
Record Date
Payment Date
Dividend
(per share) Amount
Q1 2016
Q2 2016
Q3 2016
Q4 2016
Total for 2016
Q1 2017
Q2 2017
Q3 2017
Q4 2017
Total for 2017
Q1 2018
Q2 2018
Q3 2018
Q4 2018
Total for 2018
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
March 19, 2018
June 11, 2018
September 10, 2018
December 3, 2018
March 26, 2018
June 18, 2018
September 17, 2018
December 10, 2018
$
$
$
$
$
$
0.17 $
0.17
0.17
0.17
0.68 $
0.18 $
0.18
0.18
0.18
0.72 $
0.18 $
0.18
0.18
0.18
0.72 $
1,929
1,929
1,928
1,929
7,715
2,043
2,048
2,048
2,049
8,188
2,049
2,049
2,051
2,051
8,200
Accumulated Other Comprehensive Loss
During the year ended December 31, 2018, the Company reclassified a net foreign currency gain related to operations discontinued
in previous years of $552 from accumulated other comprehensive loss to accumulated surplus.
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
2018, 2017 and 2016, 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 $917, $833 and $697 in 2018, 2017 and 2016, respectively.
F-17
9.
REVENUE AND LONG-LIVED ASSETS
Substantially all of our revenue is generated from sales of towing equipment. As such, disaggregation of revenue by product line
would not provide useful information because all product lines have substantially similar characteristics. However, revenue streams
are tracked by the geographic location of customers. 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:
North America
Foreign
2018
2017
2016
Net Sales
$
574,806 $
Long-
Lived
Assets
Net Sales
Long-
Lived
Assets
Net Sales
Long-
Lived
Assets
90,036
$
527,134
$
85,707
$
537,308 $
68,556
136,900
4,433
87,967
3,540
63,811
2,676
$
711,706 $
94,469
$
615,101
$
89,247
$
601,119 $
71,232
Contract assets primarily relate to the Company’s rights to consideration for work completed but not billed at the reporting date.
The contract assets are transferred to receivables when the rights become unconditional. Contract liabilities primarily relate to
performance obligations to be satisfied in the future. As of January 1, 2018 and December 31, 2018, contract liability balances
related to extended service contracts were $154 and $331, respectively, and are included in accrued liabilities on the consolidated
balance sheets. During the year ended December 31, 2018, the Company increased contract liabilities by $1,391 related to extended
service contracts. However, during the fourth quarter of 2018, the Company settled $1,214 of this liability with a contract credit in
lieu of satisfaction of these obligations. The Company did not have any contract assets at January 1, 2018 or December 31, 2018.
Terms on account receivables vary and are based on specific terms agreed upon with each customer. Impairment losses on account
receivables were de minimis during the year ended December 31, 2018.
10.
CUSTOMER INFORMATION
No single customer accounted for 10% or more of consolidated net sales for 2018, 2017 and 2016.
11.
QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
The following is a summary of the unaudited quarterly financial information for the years ended December 31, 2018 and 2017:
Net Sales
Operating
Income
Net
Income
Basic
Income
Per Share
Diluted
Income Per
Share
Cash
Dividends
Declared
Per Share
$
$
159,160 $
176,888
195,690
179,968
148,933 $
153,089
153,363
159,716
$
$
8,838
11,601
12,026
11,329
6,351
8,537
7,070
9,582
$
$
6,670
7,600
8,677
10,799
3,839
5,425
4,456
9,296
$
$
0.59
0.67
0.76
0.95
0.34
0.48
0.39
0.81
0.59 $
0.67
0.76
0.95
0.34 $
0.48
0.39
0.81
0.18
0.18
0.18
0.18
0.18
0.18
0.18
0.18
2018
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
2017
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
12.
SUBSEQUENT EVENTS
On March 4, 2019, the Company’s board of directors declared a quarterly cash dividend of $0.18 per share. The dividend is payable
March 25, 2019 to shareholders of record as of March 18, 2019.
During the first quarter of 2019, the Company borrowed an additional $5,000 on its credit facility for working capital needs, which
increased the balance to $20,000 at March 4, 2019.
F-18
MILLER INDUSTRIES, INC. AND SUBSIDIARIES
SCHEDULE II –VALUATION AND QUALIFYING ACCOUNTS
(in thousands)
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
Year ended December 31, 2018
Deduction from asset accounts:
Allowance for doubtful accounts
Balance at
Beginning
of Period
Charged to
Expense
Accounts
Written
Off
Balance at
End of
Period
$
$
$
1,864
(462)
(398) $
1,004
1,004
86
(52) $
1,038
1,038
214
(140) $
1,112
F-19
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 6th day of March, 2019.
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 6th day of March, 2019.
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 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in the following Registration Statements:
(1) Registration Statement on Form S-8 (File No. 333-127481);
(2) Registration Statement on Form S-8 (File No. 333-188898); and
(3) Registration Statement on Form S-8 (File No. 333-219288).
of Miller Industries, Inc. and subsidiaries of our reports dated March 6, 2019, 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, 2018.
/s/ Elliott Davis, LLC
Chattanooga, Tennessee
March 6, 2019
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 6, 2019
/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 6, 2019
/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 6, 2019
/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, 2018 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 6, 2019
/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, 2018 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 6, 2019
/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, 2018 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 6, 2019
/s/ Deborah L. Whitmire
Deborah L. Whitmire
Executive Vice President, Chief Financial Officer and
Treasurer