-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, PM0CZGQdiQvrRlinE9dQt49nRxORY0bYahBOk26v3amchqHannkIXSl3RbGqftN/ 1k7FVKnP2XPhCGUJmmOPoA== 0000910195-99-000695.txt : 19991216 0000910195-99-000695.hdr.sgml : 19991216 ACCESSION NUMBER: 0000910195-99-000695 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19991031 FILED AS OF DATE: 19991215 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MILLER INDUSTRIES INC /TN/ CENTRAL INDEX KEY: 0000924822 STANDARD INDUSTRIAL CLASSIFICATION: TRUCK & BUS BODIES [3713] IRS NUMBER: 621566286 STATE OF INCORPORATION: TN FISCAL YEAR END: 0430 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-14124 FILM NUMBER: 99775229 BUSINESS ADDRESS: STREET 1: 8503 HILLTOP DR STREET 2: STE 100 CITY: OOLTEWAH STATE: TN ZIP: 37363 BUSINESS PHONE: 4232384171 MAIL ADDRESS: STREET 1: 900 CIRCLE 75 PARKWAY STREET 2: SUITE 1250 CITY: ATLANTA STATE: GA ZIP: 30339 10-Q 1 OCTOBER 31, 1999 QUARTERLY REPORT SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended October 31, 1999 Commission File No. 0-24298 MILLER INDUSTRIES, INC. (Exact name of registrant as specified in its charter) TENNESSEE 62-1566286 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 8503 HILLTOP DRIVE OOLTEWAH, TN 37363 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (423) 238-4171 x238 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 /X/ NO / / The number of shares outstanding of the registrant's Common Stock, $.01 par value, as of November 30, 1999 was 46,697,625. MILLER INDUSTRIES, INC. INDEX PART I. FINANCIAL INFORMATION Page Number ---------- Item 1. Financial Statements (Unaudited) -------------------------------- Condensed Consolidated Balance Sheets - October 31, 1999 and April 30, 1999 3 Condensed Consolidated Statements of Income for the Three Months and Six Months Ended October 31, 1999 and 1998 4 Condensed Consolidated Statements of Cash Flows for the Six Months Ended October 31, 1999 and 1998 5 Notes to Condensed Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial ------------------------------------------------- Condition and Results of Operations 10 ----------------------------------- PART II. OTHER INFORMATION Item 1. Legal Proceedings 16 ----------------- Item 4. Submission of Matters to a Vote of Security Holders 17 -------------------------------- Item 6. Exhibits and Reports On Form 8-K 18 -------------------------------- SIGNATURES 19 MILLER INDUSTRIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT SHARE DATA) (UNAUDITED) ASSETS
OCTOBER 31, APRIL 30, 1999 1999 --------- --------- CURRENT ASSETS: Cash and temporary investments $ 9,883 $ 9,331 Accounts receivable, net 89,051 81,109 Inventories 83,740 77,912 Deferred income taxes 4,394 4,244 Prepaid expenses and other 5,152 12,264 --------- --------- Total current assets 192,220 184,860 PROPERTY, PLANT AND EQUIPMENT, net 94,982 95,984 GOODWILL, net 105,309 103,292 OTHER ASSETS, net 7,232 8,344 --------- --------- $ 399,743 $ 392,480 ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Current portion of long-term debt $ 2,971 $ 4,170 Accounts payable 50,316 42,783 Accrued liabilities and other 22,928 16,458 --------- --------- Total current liabilities 76,215 63,411 --------- --------- LONG-TERM DEBT, less current portion 127,679 133,850 --------- --------- DEFERRED INCOME TAXES 8,116 7,916 --------- --------- COMMITMENTS AND CONTINGENCIES (note 5) SHAREHOLDERS' EQUITY: Preferred stock, $.01 par value, 5,000,000 shares authorized; none issued or outstanding 0 0 Common stock, $.01 par value, 100,000,000 shares authorized; 46,698,797 and 46,679,783 shares issued and outstanding at October 31, 1999 and April 30, 1999, respectively 467 467 Additional paid-in capital 144,695 144,607 Retained earnings 43,362 43,068 Accumulated other comprehensive income (loss) (791) (839) --------- --------- Total shareholders' equity 187,733 187,303 --------- --------- $ 399,743 $ 392,480 ========= ========= See accompanying notes to condensed consolidated financial statements.
3 MILLER INDUSTRIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (In thousands, except per share data) (Unaudited)
Three Months Ended Six Months Ended October 31, October 31, ------------------------- ------------------------ 1999 1998 1999 1998 --------- -------- -------- -------- NET SALES $ 148,738 $134,055 $283,074 $251,809 --------- -------- -------- -------- COSTS AND EXPENSES: Costs of operations 122,268 108,970 232,182 203,010 Selling, general, and administrative expenses 19,680 17,820 38,908 34,850 Non-recurring charges 6,041 -- 6,041 -- Interest expense, net 2,792 2,228 5,430 4,268 --------- -------- -------- -------- Total costs and expenses 150,781 129,018 282,561 242,128 --------- -------- -------- -------- INCOME (LOSS) BEFORE INCOME TAXES (2,043) 5,037 513 9,681 INCOME TAX PROVISION (BENEFIT) (892) 1,958 220 3,918 --------- -------- -------- -------- NET INCOME (LOSS) $ (1,151) $ 3,079 $ 293 $ 5,763 ========= ======== ======== ======== NET INCOME (LOSS) PER COMMON SHARE Basic $ (0.02) $ 0.07 $ 0.01 $ 0.12 ========= ======== ======== ======== Diluted $ (0.02) $ 0.07 $ 0.01 $ 0.12 ========= ======== ======== ======== WEIGHTED AVERAGE SHARES OUTSTANDING Basic 46,699 46,518 46,694 46,291 ========= ======== ======== ======== Diluted 46,878 47,323 47,066 47,283 ========= ======== ======== ======== See accompanying notes to condensed consolidated financial statements.
4
MILLER INDUSTRIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED statements of cash flows (IN THOUSANDS) (UNAUDITED) Six Months Ended October 31, ---------------------------- 1999 1998 -------- -------- OPERATING ACTIVITIES: Net income $ 293 $ 5,763 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 8,584 6,445 Deferred income tax provision (130) 212 Gain on sales of property, plant, and equipment (220) (589) Changes in operating assets and liabilities: Accounts receivable (7,744) (6,891) Inventories (5,763) (15,018) Prepaid expenses and other 3,815 1,022 Accrued liabilities and other 9,011 (6,805) Accounts payable 6,770 4,652 Other assets 316 (2,160) -------- -------- Net cash provided by (used in) operating activities 14,932 (13,369) -------- -------- INVESTING ACTIVITIES: Purchases of property, plant, and equipment (5,058) (9,504) Proceeds from sales of property, plant, and equipment 1,317 1,341 Acquisition of businesses, net of cash acquired (2,108) (9,611) Other 108 (21) -------- -------- Net cash used in investing activities (5,741) (17,795) -------- -------- FINANCING ACTIVITIES: Net (repayment) borrowings under line of credit (5,000) 37,500 Payments of long-term obligations (3,712) (4,699) Proceeds from exercise of stock options 88 77 Repurchase of common stock -- (857) -------- -------- Net cash (used in) provided by financing activities (8,624) 32,021 -------- -------- EFFECT OF EXCHANGE RATE CHANGES ON CASH AND TEMPORARY INVESTMENTS (15) 105 -------- -------- NET INCREASE IN CASH AND TEMPORARY INVESTMENTS 552 962 CASH AND TEMPORARY INVESTMENTS, beginning of period 9,331 7,367 -------- -------- CASH AND TEMPORARY INVESTMENTS, end of period $ 9,883 $ 8,329 ======== ======== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash payments for interest $ 5,264 $ 4,584 ======== ======== Cash payments for income taxes $ 829 $ 4,491 ======== ======== See accompanying notes to condensed consolidated financial statements.
5 MILLER INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. Basis of Presentation The condensed consolidated financial statements of Miller Industries, Inc. and subsidiaries (the "Company") included herein have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. Nevertheless, the Company believes that the disclosures are adequate to make the financial information presented not misleading. In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments, which are of a normal recurring nature, to present fairly the Company's financial position, results of operations and cash flows at the dates and for the periods presented. Interim results of operations are not necessarily indicative of results to be expected for the fiscal year. These condensed consolidated financial statements should be read in conjunction with the Company's Annual Report on Form 10-K for the year ended April 30, 1999. 2. Net Income Per Share Basic net income per share is computed by dividing net income by the weighted average number of common shares outstanding. Diluted net income per share is calculated by dividing net income by the weighted average number of common and potential dilutive common shares outstanding. Diluted net income per share takes into consideration the assumed conversion of outstanding stock options resulting in .2 million and .8 million potential dilutive common shares for the three months ended October 31, 1999 and 1998, and .4 million and 1.0 million potential dilutive common shares for the six months ended October 31, 1999 and 1998, respectively. Per share amounts do not include the assumed conversion of stock options with exercise prices greater than the average share price because to do so would have been antidilutive for the periods presented. 3. Inventories Inventory costs include materials, labor and factory overhead. Inventories are stated at the lower of cost or market, determined on a first-in, first-out basis. Inventories at October 31, 1999 and April 30, 1999 consisted of the following (in thousands): 6 October 31, April 30, 1999 1999 ----------- --------- Chassis $16,744 $18,340 Raw Materials 20,186 16,348 Work in process 13,182 12,180 Finished goods 33,628 31,044 ------- ------- $83,740 $77,912 ======= ======= 4. Business Combinations During the six months ended October 31, 1999, the Company purchased three towing service companies for an aggregate purchase price of $2.8 million, which consisted of $2.0 million in cash and $0.8 million in promissory notes. These acquisitions were accounted for using the purchase method of accounting. The accompanying consolidated financial statements reflect the preliminary allocation of purchase price as the purchase price has not been finalized for all transactions. The excess of the aggregate purchase price over the estimated fair value of net identifiable assets acquired was approximately $1.7 million. 5. Legal Matters In January 1998, the Company received a letter from the Antitrust Division of the Department of Justice (the "Division") stating that it was conducting a civil investigation covering "competition in the tow truck industry". The letter asked that the Company preserve its records related to the tow truck industry, particularly documents related to sales and prices of products and parts, acquisition of other companies in the industry, distributor relations, patent matters, competition in the industry generally, and activities of other companies in the industry. In March 1998, the Company received a Civil Investigative Demand ("CID") issued by the Division as part of its continuing investigation of whether there are, have been or may be violations of the federal antitrust statutes in the tow truck industry. Under this CID, the Company has produced information and documents to assist in the investigation, has corresponded and met with the Division concerning the investigation, and is continuing to cooperate with the Division. It is unknown at this time what the eventual outcome of this investigation will be. During September, October and November 1997, five lawsuits were filed by certain persons who seek to represent a class of shareholders who purchased shares of the Company's common stock during the period from either October 15 or November 6, 1996 to September 11, 1997. Four of the suits were filed in the United States District Court for the Northern District of Georgia. The remaining suit was filed in the Chancery Court of Hamilton County, Tennessee. In general, the individual plaintiffs in all of the cases allege that they were induced to purchase the Company's common stock on the basis of allegedly actionable misrepresentations or omissions about the Company and its business and, as a result, were thereby damaged. Four of the complaints assert claims under Sections 10(b) and 20 of the Securities Act of 1934. The complaints name as the defendants the Company and various of its present and former directors and officers. The plaintiffs in the four actions which involved claims in Federal Court under the Securities Exchange Act of 1934 have consolidated those actions. The Company filed a motion to dismiss in the consolidated case which was granted in part and denied in part. The proposed class was certified by order dated May 27, 1999. The Company filed a motion to dismiss in the 7 Tennessee case which was granted in its entirety. The plaintiffs in that case, with permission from the Court, amended and refiled their complaint, which was dismissed with prejudice by order of the Court dated March 11, 1999. On April 5, 1999 counsel for plaintiffs filed a notice of appeal and that appeal currently remains pending. In both these actions, the Company has denied liability and continues to vigorously defend itself. In addition to the shareholder litigation described above, the Company is, from time to time, a party to litigation arising in the normal course of its business. The ultimate disposition of such matters cannot be determined presently, but will not, in the opinion of management, based in part on the advice of legal counsel, have a material adverse effect on the financial position or results of operations of the Company. 6. Stock Repurchase Plan The Company's board of directors approved a share repurchase plan during fiscal 1998 under which the Company may repurchase up to 2,000,000 shares of common stock from time to time through March 10, 2000. It is expected that such repurchased shares would be issued as consideration in business acquisitions currently being negotiated pursuant to the Company's ongoing acquisition strategy. No shares have been repurchased under the plan during fiscal 2000. All shares purchased under the plan during fiscal 1999 (500,000 shares at a cost of $2.3 million) were reissued as consideration for towing services companies acquired prior to October 31, 1999. 7. Comprehensive Income Effective May 1, 1998, the company adopted Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income", which requires additional disclosure of amounts comprising comprehensive income. The Company has other comprehensive income and expenses in the form of cumulative translation adjustments which resulted in total comprehensive income (loss) of approximately $(1.0) million and $3.2 million for the three months ended October 31, 1999 and 1998, respectively; and $0.3 million and $5.7 million for the six months ended October 31, 1999 and 1998, respectively. 8 8. Segment Information The Company operates in two principal operating segments: (i) towing and recovery equipment and (ii) towing services. The table below presents information about reported segments (in thousands):
Towing and Recovery Towing Equipment Services Eliminations Consolidated --------- -------- ------------ ------------ FOR THE THREE MONTHS ENDED OCTOBER 1999 Net sales-external $ 96,262 $ 52,476 $ -- $ 148,738 Net sales-intersegment -- -- -- -- Operating income (loss) 6,054 (5,305) -- 749 Interest expense, net 1,338 1,454 -- 2,792 Income (loss) before income taxes 4,716 (6,759) -- (2,043) FOR THE THREE MONTHS ENDED OCTOBER 31, 1998 Net sales-external $ 88,190 $ 45,865 $ -- $ 134,055 Net sales-intersegment 1,985 -- (1,985) -- Operating income (loss) 5,943 1,388 (66) 7,265 Interest expense, net 840 1,388 -- 2,228 Income before income taxes 5,037 -- -- 5,037 FOR THE SIX MONTHS ENDED OCTOBER 31, 1999 Net sales-external $ 179,213 $ 103,861 $ -- $ 283,074 Net sales-intersegment -- -- -- -- Operating income (loss) 10,503 (4,560) -- 5,943 Interest expense, net 2,457 2,973 -- 5,430 Income (loss) before income taxes 8,046 (7,533) -- 513 FOR THE SIX MONTHS ENDED OCTOBER 31, 1998 Net sales-external $ 164,793 $ 87,016 $ -- $ 251,809 Net sales-intersegment 3,270 -- (3,270) -- Operating income 10,235 3,832 (118) 13,949 Interest expense, net 1,814 2,454 -- 4,268 Income before income taxes 8,303 1,378 -- 9,681
9 9. Non-Recurring Charges During the second quarter of fiscal 2000 the Company announced its plan to further rationalize its towing services operations. The Company recorded non-recurring charges in the amount of $6.0 million for costs related to this rationalization. These charges include the cost of early termination of certain employment contracts and facility leases, the loss on the disposal of certain excess equipment, and a casualty loss relating to one of the operations. At October 31, 1999 approximately $.3 million had been charged against the related reserves. 10. Reclassifications Certain amounts in the prior period financial information have been reclassified to conform to the current presentation. Item 2. Management's Discussion and Analysis of Financial Condition and Results ----------------------------------------------------------------------- of Operations Recent Developments --------------------------------- As more fully discussed in Note 4 to condensed consolidated financial statements, during the six months ended October 31, 1999, the Company acquired a total of three towing service companies. RESULTS OF OPERATIONS--THREE MONTHS ENDED OCTOBER 31, 1999 COMPARED TO THREE MONTHS ENDED OCTOBER 31, 1998 Net sales for the three months ended October 31, 1999, increased 11.0% to $148.7 million from $134.1 million for the comparable period in 1998. Net sales in the towing and recovery equipment segment increased 9.2% from $88.2 million to $96.2 million due primarily to higher unit sales of chassis and wreckers. Sales of new products, slide axle trailers and multi-car trailers, also contributed to the increase in sales for this segment. Net sales of the towing services segment increased 14.4% to $52.5 million from $45.9 million due primarily to the revenue contribution of towing services companies acquired subsequent to the second quarter of fiscal 1999. Costs of operations for the three months ended October 31, 1999, increased 12.2% to $122.3 million from $109.0 million for the comparable period in 1998. Costs of operations of the towing and recovery equipment segment decreased slightly as a percentage of net sales from 85.2% to 84.7%. The towing services segment's cost of operations increased from 73.7% to 77.7% as a percentage of net sales. Increases are due to increased labor costs of the towing services operations along with the associated benefits and workers' compensation costs, and increased vehicle costs on additions to the fleet. 10 Selling, general and administrative expenses for the three months ended October 31, 1999, increased 10.4% to $19.7 million from $17.8 million for the comparable period in 1998. In the towing and recovery equipment segment, selling, general and administrative expenses increased slightly as a percentage of sales from 8.1% to 9.0%. As a percentage of sales, selling, general and administrative expenses for the towing services segment decreased to 20.9% from 23.3% primarily due to the increased revenue base and continued cost reduction efforts. During the second quarter of fiscal 2000, the Company recorded non-recurring charges of $6.0 million for the further rationalization of its towing services operations. See Note 9 above for further discussion. Net interest expense increased $.5 million to $2.7 million for three months ended October 31, 1999 from $2.2 million for the comparable period in 1998 primarily due to increased borrowings under the Company's line of credit to fund working capital needs and additional acquisitions of towing service companies. Income taxes are accounted for on a consolidated basis and are not allocated by segment. The effective rate for the provision (benefit) for income taxes was 43.7% for the three months ended October 31, 1999 and 38.9% for the three months ended October 31, 1998. The difference between the effective tax rate and the statutory tax rate is primarily due to the impact of non-deductible goodwill amortization and state income taxes. RESULTS OF OPERATIONS--SIX MONTHS ENDED OCTOBER 31, 1999 COMPARED TO SIX MONTHS ENDED OCTOBER 31, 1998 Net sales for the six months ended October 31, 1999 increased 12.4% to $283.1 million from $251.8 million for the comparable period in 1998. Net sales in the towing and recovery equipment segment increased 8.8% from $164.8 million to $179.2 million due primarily to higher unit sales of chassis, wreckers, and car carriers. Sales of new products, slide axle trailers and multi-car trailers, also contributed to the increase in sales for this segment. Net sales of the towing services segment increased 19.4% to $103.9 million from $87.0 million due primarily to the revenue contribution of towing services companies acquired subsequent to the second quarter of fiscal 1999. Costs of operations increased 14.4% to $232.2 million for the six months ended October 31, 1999 from $251.8 million for the comparable period in 1998. Costs of operations of the towing and recovery equipment segment decreased slightly as a percentage of net sales from 85.0% to 84.8%. The towing services segment's cost of operations increased from 72.4% to 77.2% as a percentage of net sales. Increases are due to increased labor costs of the towing services operations along with the associated benefits and workers' compensation costs and increased vehicle costs on additions to the fleet. 11 Selling, general and administrative expenses increased 11.6% to $38.9 million for the six months ended October 31, 1999 from $34.9 million for the comparable period of 1998. In the towing and recovery equipment segment, selling, general and administrative expenses decreased slightly as a percentage of sales from 9.3% to 8.9%. As a percentage of sales, selling, general and administrative expenses for the towing services segment decreased to 21.4% from 23.2% primarily due to the increased revenue base and continued cost reduction efforts. During the second quarter of fiscal 2000, the Company recorded non-recurring charges of $6.0 million for the further rationalization of its towing services operations. See Note 9 above for further discussion. Net interest expense increased $1.1 million to $5.4 million for the six months ended October 31, 1999 from $4.3 million for the six months ended October 31, 1998 primarily due to increased borrowings under the Company's line of credit to fund working capital needs and additional acquisitions of towing service companies. Income taxes are accounted for on a consolidated basis and are not allocated by segment. The effective rate for the provision for income taxes was 42.9% for the six months ended October 31, 1999 and 40.5% for the six months ended October 31, 1998. The difference between the effective tax rate and the statutory tax rate is primarily due to the impact of non-deductible goodwill amortization and state income taxes. LIQUIDITY AND CAPITAL RESOURCES The Company's primary capital requirements are for working capital, debt service and capital expenditures. The Company has financed its operations and growth from internally generated funds and debt financing and, since August 1994, in part from the proceeds from its initial public offering and its subsequent public offerings completed in January 1996 and November 1996. Cash flows provided by operating activities were $14.9 million for the six months ended October 31, 1999 as compared to $13.4 million used in operations for the comparable period of 1998. The increase in cash flows from operating activities was due primarily to improved working capital balances. Cash used in investing activities was $5.7 million for the six months ended October 31, 1999 compared to $17.8 million for the comparable period in 1998. The cash used in investing activities was primarily for capital expenditures for equipment, building expansion and acquisitions of businesses. Cash used in financing activities was $8.6 million for the six months ended October 31, 1999 as compared to $32.0 million provided by financing activities for the comparable period in the prior year. The cash was used primarily to reduce the Company's line of credit and other outstanding long-term debt and capital lease obligations. 12 The Company has a revolving credit facility of $175 million ( the "Credit Facility") for working capital and other general corporate purposes. Borrowings under the Credit Facility bear interest at a rate equal to the London Interbank Offered Rate plus a margin of 2.50% or the prime rate plus 1.25%, as elected by the Company. The Credit Facility is collateralized by substantially all of the assets and properties of the Company and its domestic subsidiaries. At October 31, 1999, $120 million was outstanding under the Credit Facility. The Credit Facility imposes restrictions on the Company with respect to the maintenance of certain financial ratios, the incurrence of indebtedness, the sale of assets, capital expenditures and mergers and acquisitions. On May 1, 1998, the Company entered into an interest rate swap agreement covering the notional amount of $50 million of variable rate debt to fix the interest rate at 5.68% plus the applicable margin. The agreement expires at the end of three years unless cancelled by the bank at the end of two years. As described in Note 4 to condensed consolidated financial statements, the Company has expended approximately $2.8 million for the purchase of towing services companies during the six months ended October 31, 1999. Capital expenditures remaining for the dispatch system for the towing services segment are expected to be approximately $0.9 million. Excluding the capital commitments set forth above, the Company has no other material capital commitments. The Company believes that cash on hand, cash flows from operations and unused borrowing capacity under the Credit Facility will be sufficient to fund its operating needs, capital expenditures and debt service requirements for the next fiscal year. Management continually evaluates potential strategic acquisitions. Although the Company believes that its financial resources will enable it to consider potential acquisitions, additional debt or equity financing may be necessary. No assurance in this regard can be given, however, since future cash flows and the availability of financing will depend on a number of factors, including prevailing economic conditions and financial, business and other factors beyond the Company's control. STRATEGIC AND FINANCIAL ALTERNATIVES STUDY The Company announced in May 1999 that its Board of Directors had concluded its study of potential strategic and financial alternatives for the Company and had ratified its Special Committee's recommendation to investigate and pursue the possibility of separating the Company's RoadOne towing services segment from its towing and recovery equipment segment through a tax-free spinoff which would result in the formation of two public companies. The Company engaged J.C. Bradford & Co. as its financial advisor with respect to these matters. 13 Completing any such separation of the two businesses through a tax-free spinoff transaction would entail the satisfaction of numerous significant conditions which at this time are uncertain. These conditions include, but are not limited to, securing an IRS private letter ruling, an SEC no-action letter, satisfactory banking arrangements, the approval of the Company's shareholders and a final decision to proceed by the Board of Directors. The Company can give no assurance that any such transaction will occur. The Company currently expects that the spinoff transaction, if completed, would not occur any sooner than during the fourth quarter of the fiscal year ending April 30, 2000. RECENT ACCOUNTING PRONOUNCEMENTS In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," effective for fiscal years beginning after June 15, 1999. In June 1999, the FASB issued SFAS No. 137, which delayed the effective date of SFAS No. 133 until June 15, 2000. SFAS No. 133 establishes accounting and reporting standards requiring that every derivative instrument (including certain derivative instruments embedded in other contracts) be recorded in the balance sheet as either an asset or liability measured at its fair value. SFAS No. 133 requires that changes in the derivative's fair value be recognized currently in earnings unless specific hedge accounting criteria are met. Special accounting for qualifying hedges allows a derivative's gains and losses to offset related results on the hedged item in the income statement, and requires that a company must formally document, designate, and assess the effectiveness of transactions that receive hedge accounting. The Company has not yet quantified the impact of adopting SFAS No. 133 on its financial statements and has not determined the timing of or method of adoption of SFAS No. 133. However, SFAS No. 133 could increase volatility in earnings and other comprehensive income. YEAR 2000 The "Year 2000" issue refers to the possibility that some date-sensitive computer software was written with two digits rather than four to define the applicable year. This software will not interpret the "00" year correctly, and may experience problems. In addition, any equipment that has time sensitive embedded chips may have similar date-related problems. If not corrected, these computer programs or embedded chips could possibly cause systems to fail or other errors, leading to possible disruptions in operations or creation of erroneous results. The Company, in an enterprise-wide effort, is taking steps to ensure that its systems are secure from such failures. Our Year 2000 plan addresses the anticipated impacts of the Year 2000 problem on our information technology (IT) systems and on non-IT systems involving embedded chip technologies. We are also surveying key third parties to determine the status of their Year 2000 compliance programs. In addition, we are developing contingency plans specifying what the Company will do if it or important third parties experience disruptions as a result of the Year 2000 problem. 14 Our Year 2000 plan is subject to modification, and is revised periodically as additional information is developed. The Company currently believes that its Year 2000 plan will be completed for all key aspects prior to the anticipated Year 2000 failure dates. With respect to IT systems, our Year 2000 plan includes programs relating to (i) computer applications, including those for servers, client server systems, and personal computers and (ii) IT infrastructure, including hardware, software, network technology, and voice and data communications. In case of non-IT systems, our Year 2000 plan includes programs related to equipment and processes required to produce our products in our manufacturing plants. With respect to its applications programs, the Company's manufacturing plants began implementing a Year 2000 compliant ERP system in 1997. Although this project included initiatives outside of the scope of the Year 2000, the new system replaced an older non-compliant system. The Company's largest manufacturing facilities have completed their implementation. The new ERP system also contains the Company's financial applications, with implementation completed in fiscal 1999 and early fiscal 2000. Additionally, the Company upgraded the manufacturing system of one of its facilities to a Year 2000 compliant version. These implementations were not accelerated due to Year 2000 issues and, therefore, their costs are not included in the discussion of Year 2000 costs below. With respect to its infrastructure program, the inventory and assessment phase is complete. The implementation phase is complete as well, with many components being replaced as part of the Company's support for the implementation of a new ERP system for manufacturing and financial applications. With respect to its non-IT program, the Company has identified embedded chip technology at all manufacturing locations. A limited amount of operating equipment is date sensitive. Manufacturers of the affected equipment have been contacted. The Company has evaluated and made the suggested modifications and replacements. The total cost of compliance for the towing and recovery equipment segment is approximately $0.1 million. The Company's towing services segment has expended approximately $0.2 million in hardware and software upgrades to its operating systems to ensure Year 2000 compliance. The installation of these upgrades is approximately 95% complete and the remainder is expected to be completed prior to December 31, 1999. In addition, it is developing a contingency plan which will address locations not remediated prior to January 1, 2000. This segment completed its implementation of financial systems on a Year 2000 compliant ERP system in Fiscal 1999. 15 The Company has initiated inquiries of major business partners to assess their state of readiness regarding Year 2000 issues that could materially and adversely impact the Company. These major business partners include, but are not limited to suppliers, financial institutions, benefit providers, payroll services, and customers, as well as potential failures in public and private infrastructure services, including electricity, water, transportation and communications. The Company has requested those third parties respond in writing that they will be Year 2000 compliant by the end of 1999. The Company is reviewing the responses as received and is assessing the third parties' efforts in addressing Year 2000 issues. Further, the Company is in the process of determining its vulnerability if these third parties fail to remediate their Year 2000 problems. Contingency plans are being developed and include, but are not limited to, using alternate vendors, manual interfaces, and hard copies. There can be no guarantee that the systems of third parties will be remediated on a timely basis, or that such parties' failure to remediate Year 2000 issues would not have a material adverse effect on the Company. The total cost of the Company's Year 2000 project includes costs for installing certain new hardware and software upgrades in both of its business segments of approximately $0.3 million. The total cost is being expensed as incurred except for hardware or software replacement costs that have been or will be capitalized. The Company's Year 2000 expenses are paid out of its annual budget for information services. PART II. OTHER INFORMATION Item 1. Legal Proceedings In January 1998, the Company received a letter from the Antitrust Division of the Department of Justice (the "Division") stating that it was conducting a civil investigation covering "competition in the tow truck industry." The letter asked that the Company preserve its records related to the tow truck industry, particularly documents related to sales and prices of products and parts, acquisition of other companies in the industry, distributor relations, patent matters, competition in the industry generally, and activities of other companies in the industry. In March 1998, the Company received a Civil Investigative Demand ("CID") issued by the Division as part of its continuing investigation of whether there are, have been or may be violations of the federal antitrust statutes in the tow truck industry. Under this CID, the Company has produced information and documents to assist in the investigation, has corresponded and met with the Division concerning the investigation, and is continuing to cooperate with the 16 Division. It is unknown at this time what the eventual outcome of the investigation will be. During September, October and November 1997, five lawsuits were filed by certain persons who seek to represent a class of shareholders who purchased shares of the Company's common stock during the period from either October 15 or November 6, 1996 to September 11, 1997. Four of the suits were filed in the United States District Court for the Northern District of Georgia. The remaining suit was filed in the Chancery Court of Hamilton County, Tennessee. In general, the individual plaintiffs in all of the cases allege that they were induced to purchase the Company's common stock on the basis of allegedly actionable misrepresentations or omissions about the Company and its business and, as a result, were thereby damaged. Four of the complaints assert claims under Sections 10(b) and 20 of the Securities Act of 1934. The complaints name as the defendants the Company and various of its present and former directors and officers. The plaintiffs in the four actions which involved claims in Federal Court under the Securities Exchange Act of 1934 have consolidated those actions. The Company filed a motion to dismiss in the consolidated case which was granted in part and denied in part. The proposed class was certified by order dated May 27, 1999. The Company filed a motion to dismiss in the Tennessee case which was granted in its entirety. The plaintiffs in that case, with permission from the Court, amended and refiled their complaint, which was dismissed with prejudice by order of the Court dated March 11, 1999. On April 5, 1999, counsel for plantiffs filed a notice of appeal and that appeal currently remains pending. In both these actions, the Company has denied liability and continues to vigorously defend itself. Item 4. Submission of Matters to a Vote of Security Holders The Annual Meeting of Shareholders was held on Friday, October 15, 1999 in Norcross, Georgia, at which the following matter was submitted to a vote of the shareholders: (a) Votes cast for or withheld regarding the election of six (6) Directors for a term of one (1) year were as follows: FOR WITHHELD --- -------- Jeffrey I. Badgley 32,273,250 584,453 A. Russell Chandler III 32,353,593 504,110 B. Paul E. Drack 32,352,249 505,454 James A. McKinney 32,290,621 567,082 William G. Miller 32,275,639 582,064 Richard H. Roberts 32,355,337 502,366 17 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits. Exhibit 27 - Financial Data Schedule (For SEC use only) (b) Reports on Form 8-K - No reports on Form 8-K were filed by the Company during the second quarter of the fiscal year. 18 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Miller Industries, Inc. has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. MILLER INDUSTRIES, INC. By: /s/ J. Vincent Mish --------------------- J. Vincent Mish Vice President and Chief Financial Officer Date: December 15, 1999 EX-27 2 FINANCIAL DATA SCHEDULE
5 0000924822 MILLER INDUSTRIES/TN 1,000 6-MOS APR-30-2000 MAY-01-1999 OCT-31-1999 9,883 0 89,051 0 83,740 192,220 139,045 (44,063) 399,743 76,215 127,679 0 0 467 187,266 399,743 238,074 238,074 232,182 277,131 0 0 5,430 513 220 293 0 0 0 293 0.01 0.01
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