-----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, RLjeIKqL6rafpXhN+f15Ie5HvDKSr2NtsOH82eEUID89HkPJq3Tgzr+ZKY5IfWhM un8Q8ruYPqhzibHG34bwWQ== 0000940180-97-000651.txt : 19970730 0000940180-97-000651.hdr.sgml : 19970730 ACCESSION NUMBER: 0000940180-97-000651 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 19970430 FILED AS OF DATE: 19970729 SROS: NYSE 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-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 001-14124 FILM NUMBER: 97647481 BUSINESS ADDRESS: STREET 1: 900 CIRCLE 75 PARKWAY CITY: ATLANTA STATE: GA ZIP: 30339 BUSINESS PHONE: 7709880797 MAIL ADDRESS: STREET 1: 900 CIRCLE 75 PARKWAY STREET 2: SUITE 1250 CITY: ATLANTA STATE: GA ZIP: 30339 10-K405 1 ANNUAL REPORT - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ---------------- FORM 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. FOR THE FISCAL YEAR ENDED APRIL 30, 1997 COMMISSION FILE NO. 0-24298 ---------------- MILLER INDUSTRIES, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) TENNESSEE (STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION) 62-1566286 (I.R.S. EMPLOYER IDENTIFICATION NO.) 3220 POINTE PARKWAY, SUITE 100, NORCROSS, GEORGIA 30092 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (770) 446-6778 SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: COMMON STOCK, PAR ----------------- VALUE $0.01 PER SHARE. - --------------------- NAME OF EACH EXCHANGE ON WHICH REGISTERED: NEW YORK STOCK EXCHANGE. ----------------------- SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE. ---- ---------------- 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 . 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 10K. [X] The aggregate market value of the voting stock held by nonaffiliates of the Registrant as of July 18, 1997 was $607,062,270, based on the closing sale price of the Common Stock as reported by the New York Stock Exchange on such date. See Item 12. At July 18, 1997 there were 42,897,801 shares of Common Stock, par value $0.01 per share, outstanding. DOCUMENTS INCORPORATED BY REFERENCE Portions of the Registrant's definitive Proxy Statement for the 1997 Annual Meeting of Shareholders are incorporated by reference into Part III. - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- TABLE OF CONTENTS FORM 10-K ANNUAL REPORT PART I ITEM 1. BUSINESS...................................................... 1 ITEM 2. PROPERTIES.................................................... 9 ITEM 3. LEGAL PROCEEDINGS............................................. 10 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS........... 10 PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.......................................... 11 ITEM 6. SELECTED FINANCIAL DATA....................................... 12 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.................................... 14 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA................... 16 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE..................................... 16 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT............ 17 ITEM 11. EXECUTIVE COMPENSATION........................................ 17 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT................................................... 17 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS................ 17 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8- K............................................................ 18 FINANCIAL STATEMENTS.................................................... F-1 FINANCIAL STATEMENT SCHEDULES........................................... S-1 SIGNATURES.............................................................. II-1
i PART I ITEM 1. BUSINESS GENERAL Miller Industries, Inc. (the "Company") is the world's largest integrated provider of vehicle towing and recovery equipment, systems and services and has executive offices in Atlanta, Georgia and manufacturing operations in Tennessee, Pennsylvania, Mississippi, France and England. The Company markets its towing and recovery equipment under the well-recognized Century(R), Challenger(R), Holmes(R), Champion(R), Eagle(R), Jige(TM), Boniface(TM) and Vulcan(R) brand names and markets its towing services under the national brand name of RoadOne(TM). Since 1990 the Company has developed or acquired several of the most well- recognized brands in the fragmented towing and recovery equipment manufacturing industry. The Company's strategy has been to increase its market share in the industry through a combination of acquisitions and internal growth. The Company increased its domestic and international market share as a result of the acquisitions of three well-known brands during calendar 1996. In January 1996, the Company acquired S.A. Jige Lohr Wreckers ("Jige Lohr"), a leading European manufacturer of wreckers and car carriers, and in April 1996, the Company acquired Boniface Engineering Limited ("Boniface"), a leading manufacturer of large wreckers in the United Kingdom, thereby establishing itself as the market leader in Europe. In September 1996, the Company acquired Vulcan International, Inc., a leading domestic manufacturer of towing equipment. As a natural extension of its leading market position in manufacturing and strong brand name recognition, the Company has broadened its strategy to include vertical integration, with the goal of becoming the leading worldwide manufacturer, distributor and service provider in the towing and recovery industry. Since July 1996, the Company has acquired ten towing equipment distributors, which, together with its independent distributors, are intended to be part of a North American distribution network for towing and recovery equipment as well as other specialty truck equipment and components. Since February 1997, the Company, through its RoadOne subsidiary, has acquired 34 towing service companies with aggregate historical annual revenues of approximately $80 million. These acquisitions are part of the Company's plan to establish a national towing service network through owned companies in combination with an extensive group of affiliates. Also in fiscal 1997, the Company established its Financial Services Group to provide equipment financing and related services to its distributors and their customers. The Company intends to continue its expansion into the towing service and distribution markets in fiscal 1998. ACQUISITIONS The Company has been pursuing a growth strategy that has involved acquisitions of a significant number of companies. The Company uses an internal acquisition team, supplemented as needed by outside advisors, and its extensive contacts in the towing service industry, to identify, evaluate, acquire and integrate towing operators and towing equipment distributors. Acquisition candidates are evaluated based on stringent criteria in a comprehensive process which includes operational, legal and financial due diligence reviews. The Company expects to continue to pursue acquisitions in the towing service and towing equipment distribution markets and anticipates financing acquisitions with issuances of Common Stock, cash and/or borrowings under lines of credit. Towing Service Acquisitions During fiscal 1997, the Company acquired 29 towing service companies in separate transactions, none of which were individually material to the financial results of the Company. The Company issued an aggregate of approximately 1.6 million shares of Common Stock and paid approximately $7.5 million of cash in such transactions which have been accounted for under the purchase method of accounting, and issued an aggregate of approximately 2.2 million shares of Common Stock in such transactions which have been accounted for under the pooling-of-interests method of accounting. Subsequent to April 30, 1997, the Company acquired five additional towing service companies in separate transactions, issuing approximately 300,000 shares and paying approximately $2 million in cash, all of which transactions have been accounted for under the purchase method of accounting. At July 15, 1997, the Company had entered into letters of intent to acquire 20 additional towing service companies in transactions expected to close over the following twelve weeks. These transactions are subject to customary conditions, including completion of due diligence investigations and execution of definitive acquisition agreements, among others. The Company intends to continue to aggressively pursue additional purchases of towing service companies. TOWING EQUIPMENT DISTRIBUTOR ACQUISITIONS During fiscal 1997, the Company acquired six towing equipment distributors in separate transactions, none of which were individually material to the financial results of the Company. The Company issued an aggregate of approximately 140,000 shares of Common Stock in such transactions which have been accounted for under the purchase method of accounting, and issued an aggregate of approximately 175,000 shares of Common Stock in such transactions which have been accounted for under the pooling-of-interests method. Subsequent to April 30, 1997, the Company acquired four additional towing equipment distributors in separate transactions, issuing approximately 45,000 shares and paying approximately $865,000 in cash in transactions accounted for under the purchase method of accounting, and issuing approximately 151,000 shares of Common Stock in acquisitions accounted for under the pooling-of- interests method. The Company intends to continue to acquire additional towing equipment distributors, but is not currently a party to any agreement to acquire any other distributors. TOWING AND RECOVERY EQUIPMENT MANUFACTURING The Company offers a broad range of towing and recovery equipment products that meet most customer design, capacity and cost requirements. The Company manufactures the bodies of wreckers and car carriers, which are installed on truck chassis manufactured by third parties. 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 60-ton lifting capacities. Car carriers are specialized flat bed hauling 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. The Company's products are sold primarily through independent distributors that serve all 50 states, Canada and Mexico, and other foreign markets including Europe, Japan, Taiwan, Hong Kong, China and the Middle East. As a result of the acquisitions of Jige Lohr and Boniface, the Company significantly increased its distribution capabilities in Europe. While most of the Company's distributor agreements do not contain exclusivity provisions, management believes that approximately 70% of the Company's independent distributors sell the Company's products on an exclusive basis. In addition to selling the Company's products to towing operators, the distributors provide parts and service. The Company also has independent sales representatives that exclusively market the Company's products and provide expertise and sales assistance to distributors. Management believes the strength of the Company's distribution network and the breadth of its product offerings are two key advantages over its competitors. PRODUCT LINE The Company manufactures a broad line of wrecker and car carrier bodies to meet a full range of customer design, capacity and cost requirements. The products are marketed under the Century, Challenger, Holmes, Champion, Eagle, Jige, Boniface and Vulcan brand names. 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 60 ton lifting capacities. Wreckers are available with specialized features, including underlifts, L-arms and scoops, which lift disabled vehicles by 2 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 proprietary remote control devices for operating wreckers. In addition, certain light duty wreckers are equipped with the patented "Eagle Claw" automatic wheellift hookup device that allows operators to engage a disabled or unattended vehicle without leaving the cab of the wrecker. The Company's wreckers range in capacity from 8 to 60 tons, and are characterized as light duty and 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 commercial towing and recovery applications including overturned tractor trailers, buses, motor homes and other vehicles. Car Carriers. Car carriers are specialized flat bed hauling 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 long distances. In addition to transporting vehicles, car carriers may also be used for other purposes, including transportation of industrial equipment. In recent years, professional towing operators have added car carriers to their fleets to complement their towing capabilities. BRAND NAMES The Company manufactures and markets its wreckers and car carriers under eight separate brand names. Although certain of the brands overlap in terms of features, prices and distributors, each brand has its own distinctive image and customer base. Century(R). The Century brand is the Company's "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 the 8 ton light duty to the 60 ton heavy duty models and car carriers in lengths from 17 1/2 to 26 feet. Management believes that the Century brand has a reputation as the industry's leading product innovator. Vulcan(R). The Company's Vulcan product line, acquired in September 1996, includes a range of premium light and heavy duty wreckers, car carriers and other towing and recovery equipment. The Vulcan line is operated as an autonomous subsidiary with its own independent distribution network. Challenger(R). The Company's Challenger products compete with the Century and Vulcan products and constitute a third premium product line. Challenger products consist of light to heavy duty wreckers with capacities ranging from 8 to 60 tons, and car carriers with lengths ranging from 17 1/2 to 26 feet. The Challenger line was started in 1975 and is known for high performance heavy duty wreckers and aesthetic design. Holmes(R). The Company's Holmes product line includes mid-priced wreckers with 8 to 16 ton capacities and car carriers in 17 1/2 to 21 foot lengths. The Holmes wrecker was first produced in 1916. The Holmes name has been the most well-recognized and leading industry brand both domestically and internationally through most of this century. Champion(R). The Champion brand, which was introduced in 1991, includes car carriers which range in length from 17 1/2 to 21 feet. The Champion product line, which is generally lower-priced, allows the Company to offer a full line of car carriers at various competitive price points. In 1993, the Champion line was expanded to include a line of economy tow trucks with integrated boom and underlift. Eagle(R). The Company's Eagle products consist of light duty wreckers with a patented "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, which was patented in 1984, was originally developed for the repossession market. Since being acquired, the Company has upgraded its quality and features and expanded 3 its recovery capability. The Eagle line is now gaining increased popularity in the broader towing and recovery vehicle market. Jige(TM). The Company's Jige product line, acquired in January 1996, is comprised of a broad line of light and heavy duty wreckers and car carriers marketed primarily in Europe. Jige International is a market leader best known for its innovative designs of car carriers and light wreckers necessary to operate within the narrow confines of European cities. Boniface(TM). The Company's Boniface product line, acquired in April 1996, is comprised primarily of heavy duty wreckers. Boniface produces a wide range of heavy duty wreckers specializing in the long underlift technology required to tow modern European tour buses. The Company's 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. The Company's engineering staff, in consultation with manufacturing personnel, uses computer-aided design and stress analysis systems to test new product designs and to integrate various product improvements. In addition to offering product innovations, the Company focuses on developing or licensing new technology for its products. MANUFACTURING PROCESS The Company manufactures wreckers and car carriers at six manufacturing facilities located in the United States, France and England. The manufacturing process for the Company's products consists primarily of cutting and bending sheet steel or aluminum into parts that are welded together to form the wrecker or car carrier body. Components such as hydraulic cylinders, winches, valves and pumps, which are purchased by the Company from third-party suppliers, are then attached to the frame to form the completed wrecker or car carrier body. The completed body is either installed by the Company or shipped by common carrier to an independent distributor where it is then installed on a truck chassis. Generally, the wrecker or car carrier bodies are painted by the Company with a primer coat only, so that towing operators can select customized colors to coordinate with chassis colors or fleet colors. To the extent final painting is required before delivery, the Company contracts with independent paint shops for such services. The Company purchases raw materials and component parts from a number of sources. Although the Company has no long term supply contracts, management believes the Company has good relationships with its primary suppliers. The Company has experienced no significant problems in obtaining adequate supplies of raw materials and component parts to meet the requirements of its production schedules. Management believes that the materials used in the production of the Company's 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 the Company's business. TOWING AND RECOVERY EQUIPMENT DISTRIBUTION Management 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, municipal and federal governmental agencies, and repair shop or salvage company owners. The heavy duty market is dominated by professional wrecker operators serving the needs of commercial vehicle operators. The car carrier market, historically dominated by automobile salvage companies, has expanded to include equipment rental companies that offer delivery service and professional towing operators who desire to complement their existing towing capabilities. Management estimates that there are approximately 30,000 professional towing operators and 80,000 service station, repair shop and salvage operators comprising the overall towing and recovery market. 4 Since July 1996, the Company's distribution group has acquired 10 towing equipment distributors. These distributors are located in California, Colorado, Florida, Georgia, Illinois, Mississippi and Missouri and in British Columbia and Ontario, Canada. The Company intends to continue to acquire additional towing equipment distributors, but is not currently a party to any agreement to acquire any other distributors. The acquired distributors market the Company's products as well as other specialty transportation equipment, and the Company intends to expand the number and types of products distributed through its distributors. The Company-owned distributors generally do not compete in the same geographic markets as the Company's independent distributors. Vulcan, which operates as an autonomous subsidiary, distributes its products through a separate part of the Company's distribution network. The Company's sales force, which services the Company's distribution network, consists of 40 sales representatives, 34 of whom are Company employees whose responsibilities include providing administrative and sales support to the entire distributor base. The remaining 6 sales representatives are independent contractors who market the Company's products exclusively. Sales representatives receive commissions on direct sales based on product type and brand and generally are assigned specific territories in which to promote and solicit sales of the Company's products and to maintain customer relationships. The Company has developed a diverse customer base consisting of approximately 150 distributors in North America, who serve all 50 states, Canada and Mexico, and approximately 40 distributors that serve other foreign markets. During the fiscal year ended April 30, 1997, no single distributor accounted for more than 5% of the Company's sales. Management believes the Company's broad and diverse customer base provides it with the flexibility to adapt to market changes, lessens its dependence on particular distributors and reduces the impact of regional economic factors. To support sales and marketing efforts, the Company produces demonstrator models that are used by the Company's sales representatives and distributors. To increase exposure to its products, the Company also has served as the official recovery team for many automobile racing events, including the Daytona, Talladega, Atlanta and Darlington NASCAR races, the Grand Prix in Miami, Suzuka in Japan, the IMSA "24 Hours at Daytona" and Molson Indy races, among others. The Company routinely responds to requests for proposals or bid invitations in consultation with its local distributors. The Company has been selected by the United States General Services Administration as an approved source for certain federal and defense agencies. The Company intends to continue to pursue government contracting opportunities. The towing and recovery equipment industry places heavy marketing emphasis on product exhibitions at national and regional trade shows. In order to focus its marketing efforts and to control marketing costs, the Company has reduced its participation in regional trade shows and now concentrates its efforts on five of the major trade shows each year. The Company works with its distributor network to concentrate on various regional shows. FINANCIAL SERVICES The Company's Financial Services Group commenced operations in September 1996 to provide financial services to towing and recovery equipment distributors and towing service companies. The Company initially offered floor plan financing to distributors and purchase and lease financing to towing service operators. In April 1997, the Company entered into a strategic alliance with Associates Commercial Corporation to jointly market financing of the Company's products. Under the exclusive arrangement, the Company, through its owned and independent distributors, originates lease and loan financing for its end- customers, and Associates provides the financing and servicing of the leases and loans. In return for the Company's marketing activities, Associates pays a fee based on amounts financed. 5 The Company expects to capitalize on its strong existing relationships with its distributors and their customers and its reputation for reliable service to develop the Financial Services Group. PRODUCT WARRANTIES AND INSURANCE The Company offers a 12-month limited manufacturer's product and service warranty on its wrecker and car carrier products. The Company's warranty generally provides for repair or replacement of failed parts or components. Warranty service is usually performed by the Company or an authorized distributor. Due to its emphasis on quality production, the Company's warranty expense in fiscal 1997 averaged less than 1% of net sales. Management believes that the Company maintains adequate general liability and product liability insurance. BACKLOG The Company produces virtually all of its products to order. The Company's backlog is based upon customer purchase orders that the Company believes are firm. The level of backlog at any particular time, however, is not an appropriate indicator of the future operating performance of the Company. Certain purchase orders are subject to cancellation by the customer upon notification. Given the Company's production and delivery schedules, as well as the recent plant expansions, management believes that the current backlog represents less than three months of production. TOWING SERVICES - ROADONE In February 1997, the Company formed its towing service subsidiary, RoadOne, to begin building a national towing service network. With the acquisition of 34 towing service companies to date, RoadOne has become the nation's largest towing service company. The newly acquired operations are located in Colorado, Florida, Georgia, Illinois, Indiana, Kentucky, Maryland, Massachusetts, Michigan, Mississippi, Missouri, New York, North Carolina, Ohio, Oregon, Texas and Washington. RoadOne's corporate offices are located in Chattanooga, Tennessee. Historically, the towing service industry has been highly fragmented, with an estimated 30,000 professional towing operators in the United States, many of whom are undercapitalized local operators with no viable means of realizing independently the economic value they have created for their businesses. As the Company continues to pursue the acquisition of towing service companies, management believes that these owned companies, along with affiliations established with other professional towing operations, will form an organization capable of offering commercial industries, as well as the general public, consistent, high quality service across the nation. The Company's strategy is to build brand loyalty among towing service customers by emphasizing consistently high quality and dependable service from multiple locations over a broad geographic area. The Company expects to market these services to organizations with widely dispersed fleets of vehicles that would benefit from a single source provider. The Company intends to acquire a significant number of additional towing service operators. The Company has targeted professional towers, and generally seeks operators who have good reputations in their markets and solid management willing to continue in the employment of the Company after the acquisition. As of July 25, 1997, the Company had acquired 34 towing service operators with aggregate historical annual revenues of approximately $80 million, and had entered into letters of intent to acquire 20 additional towing service operators. Upon consummation of these 20 acquisitions, RoadOne would have 54 operating companies with aggregate historical annual revenues of approximately $115 million. These transactions are subject to customary conditions, including completion of due diligence investigations and execution of definitive acquisition agreements, among others. In order to offer a nationwide towing service, the Company is establishing an affiliate program under which independent professional towers who meet the Company's criteria will provide towing services under the 6 RoadOne name as "affiliates." RoadOne affiliates will be offered many of the benefits of Miller-owned companies, such as product rebates, lower costs for financing and insurance, quantity buying advantages, national marketing strength and driver training. The Company's intention is eventually to sign agreements with a large number of RoadOne affiliates across the United States. COMPETITION The towing and recovery equipment manufacturing industry is highly competitive for sales to distributors and towing operators. Management believes that competition in the towing and recovery equipment industry is a function of product quality and innovation, reputation, technology, customer service, product availability and price. The Company competes 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, the Company has invested substantial resources and management time in building and maintaining strong relationships with distributors. Management also believes that the Company's products are regarded as high quality within their particular price points. The Company's 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 the Company's 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. Accordingly, management believes that the Company's ownership of patents on certain of the industry's leading technologies has given it a competitive advantage. Certain of the Company's competitors may have greater financial and other resources and may provide more attractive dealer and retail customer financing alternatives than the Company. Historically, the towing service industry has been highly fragmented, with an estimated 30,000 professional towing operators in the United States. The Company believes that its consolidation of a number of these companies will give it brand loyalty among towing service customers through an emphasis on consistently high quality and dependable service from multiple locations over a broad geographic area. The Company expects to market these services to organizations with widely dispersed fleets of vehicles that would benefit from a single source provider. However, the size of the towing service industry will mean that the Company's operations will face continued competition from many operators across the country. These operators could be consolidated by other individuals or entities, or they could enter into affiliate relationships with other companies. In addition, the Company's entry into the towing service industry presents the risk that its new business could be viewed as being in competition with other customers of the Company. PATENTS AND TRADEMARKS The development of the underlift parallel linkage and L-arms in 1982 is considered one of the most innovative developments in the wrecker industry in the last 25 years. This technology is significant primarily because it allows the damage-free towing of newer aerodynamic vehicles made of lighter weight materials. Patents for this technology were granted to an operating subsidiary of the Company in 1987 and 1989. These patents expire in mid-year 2004. This technology, particularly the L-arm device, is used in a majority of the commercial wreckers today. Management believes that utilization of such devices without a license is an infringement of the Company's patents. Recently, the Company successfully litigated an infringement suit in which the jury verdict confirmed the validity of the Company's patents on this technology, and successfully settled an infringement action it brought against another manufacturer. The Company also holds a number of other utility and design patents covering other products, including the "Eagle-Claw" hook up system, the Vulcan "scoop" wheel-retainer and the car carrier anti-tilt device. The Company has also obtained the rights to use and develop certain technologies owned or patented by others. 7 The Company's trademarks "Century," "Holmes," "Champion," "Challenger," "Formula I," "Eagle Claw SelfLoading Wheellift," "Pro Star," "Street Runner" and "Vulcan," among others, are registered with the United States Patent and Trademark Office. The Company has applied for trademark registration of "RoadOne," as well as other marks. Management believes that the Company's 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. EMPLOYEES At April 30, 1997, the Company employed approximately 2,200 people, including approximately 1,300 employees at RoadOne. None of the Company's employees is covered by a collective bargaining agreement, though its employees in France and England have certain similar rights provided by their respective government's employment regulations. The Company considers its employee relations to be good. GOVERNMENT REGULATIONS AND ENVIRONMENTAL MATTERS The Company's 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 the Company is 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 has not had a material adverse impact on the Company's financial condition or results of operations in the past and is not expected to have a material adverse impact in the future. The Company is 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 the Company's 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 the operations of the Company. The Financial Services Group is subject to regulation under various federal, state and local laws which limit the interest rates, fees and other charges that may be charged by it or prescribe certain other terms of the financing documents that it enters into with its customers. Management believes that the additional administrative costs of complying with these regulations will not materially affect the operations of the Company. EXECUTIVE OFFICERS OF THE REGISTRANT
NAME AGE POSITION WITH THE COMPANY ---- --- ------------------------- William G. Miller....... 50 Chairman of the Board and Co-Chief Executive Officer Jeffrey I. Badgley...... 45 President, Co-Chief Executive Officer and Director Adam L. Dunayer......... 30 Vice President, Treasurer and Chief Financial Officer Frank Madonia........... 48 Vice President, Secretary and General Counsel J. Vincent Mish......... 46 Vice President and President of Financial Services Group Daniel N. Sebastian..... 54 Vice President
William G. Miller has served as Chairman of the Board and Chief Executive Officer of the Company since April 1994 and spends substantially all of his time on Company matters. In June 1997, he was named Co-Chief Executive Officer, a title he shares with the Company's President, Jeffrey I. Badgley. Mr. Miller also served as President of the Company from April 1994 to June 1996. He served as Chairman of Miller Group, Inc., from August 1990 through May 1994, as its President from August 1990 to March 1993, and as its Chief Executive Officer from March 1993 until May 1994. Mr. Miller also serves as Chairman of Flow Measurement, Inc. ("Flow Measurement"), a maker of industrial flow meters, and served as its President from February 1987 until April 1994. Mr. Miller beneficially owns 80% of the capital stock of Flow Measurement. Prior to 1987, Mr. Miller 8 served in various management positions for Bendix Corporation, Neptune International Corporation, Wheelabrator-Frye Inc. and The Signal Companies, Inc. Jeffrey I. Badgley has served as President of the Company since June 1996 and as a director since January 1996. In June 1997, he was named Co-Chief Executive Officer of the Company, a title he shares with Mr. Miller. Mr. Badgley served as Chief Operating Officer from June 1996 to June 1997. In addition, Mr. Badgley serves as President of Miller Industries Towing Equipment. Mr. Badgley served as Vice President--Sales of Miller Industries Towing Equipment from 1988 to 1996. Mr. Badgley served for over five years as Vice President--Sales and Marketing of Challenger Wrecker Corporation, a position he held from 1982 until joining Miller Industries Towing Equipment. He served as Vice-President of the Company from April 1994 to June 1996. Adam L. Dunayer joined the Company in September 1996 and serves as Vice President, Treasurer and Chief Financial Officer. From 1989 to September 1996, Mr. Dunayer worked in investment banking with Bear, Stearns & Co. Inc., most recently as Vice-President. Mr. Dunayer has a wide range of experience in corporate finance, including equity and debt financings, as well as mergers and acquisitions and general advisory services. Frank Madonia has served as Vice President, General Counsel and Secretary of the Company since April 1994. Mr. Madonia served as Secretary and General Counsel to Miller Industries Towing Equipment 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., The Signal Companies, Inc. and Allied-Signal Inc. In addition, Mr. Madonia is registered to practice before the United States Patent and Trademark Office. J. Vincent Mish is a certified public accountant and has served as President of the Financial services Group since September 1996 and as a Vice President of the Company since April 1994. From April 1994 through September 1996, Mr. Mish served as Chief Financial Officer and Treasurer of the Company. Mr. Mish served as Vice President and Treasurer of Miller Industries Towing Equipment since its acquisition by Miller Group in 1990. From February 1987 through April 1994, Mr. Mish served as Vice President and Treasurer of Flow Measurement. Mr. Mish worked with Touche Ross & Company (now Deloitte and Touche) for over ten years before serving as Treasurer and Chief Financial Officer of DNE Corporation from 1982 to 1987. Mr. Mish is a member of the American Institute of Certified Public Accountants and the Tennessee, Georgia and Michigan Certified Public Accountant societies. Daniel N. Sebastian has served as Vice President of the Company since April 1994. Mr. Sebastian has also served as President of Champion Carrier Corporation ("Champion"), a wholly owned subsidiary of the Company, since July 1993. Mr. Sebastian served as Vice President of SAFEREC, Inc., a towing and recovery distributorship, from 1987 until 1988, at which time he became the operating manager of Champion. Mr. Sebastian has over 20 years of experience in the towing and recovery industry. ITEM 2. PROPERTIES The Company operates four manufacturing facilities in the United States. The facilities are located in (i) Ooltewah, Tennessee, (ii) Hermitage, Pennsylvania, (iii) Olive Branch, Mississippi, and (iv) Greeneville, Tennessee. The Ooltewah plant, containing approximately 150,000 square feet, produces light and heavy duty wreckers; the Hermitage plant, containing approximately 95,000 square feet, produces car carriers; the Olive Branch facility, containing approximately 120,000 square feet, produces light and heavy wreckers; and the Greeneville plant, which was acquired in January 1997, and contains approximately 100,000 square feet, primarily produces car carriers. The Company operates two foreign manufacturing facilities located in the Lorraine region of France, which contain, in the aggregate, approximately 100,000 square feet, and one in Norfolk, England, which contains approximately 22,500 square feet. 9 The Company recently added 22,500 square feet of production capacity at its Hermitage facility and approximately 15,000 square feet at the Ooltewah facility. Management believes that these plant expansions, together with the new car carrier manufacturing facility and additional training of personnel, will allow the Company to increase production to meet anticipated demand for its products. In connection with its acquisition of 34 towing service companies, the Company has acquired or entered into leases for property at over 100 locations in 16 states. These facilities are utilized as offices for administrative and dispatch operations, garages for repair and upkeep of towing vehicles, and lots for storage and impounding of towed cars. RoadOne's corporate offices are housed in 2,000 square feet of leased space in Chattanooga, Tennessee. In connection with its acquisition of 10 towing equipment distribution companies, the Company has acquired or entered into leases for property at over 12 locations in seven states and two Canadian provinces. These facilities are used for various distribution operations. ITEM 3. LEGAL PROCEEDINGS The Company is, from time to time, a party to litigation arising in the normal course of its business. Management believes that none of these actions, individually or in the aggregate, will have a material adverse effect on the financial position or results of operations of the Company. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to a vote of security holders of the Registrant during the fourth quarter of the fiscal year covered by this Report. 10 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The Registrant's Common Stock is traded on the New York Stock Exchange ("NYSE") under the symbol "MLR." The following table sets forth the quarterly range of high and low sales prices for the Common Stock for the period from May 1, 1995 through April 30, 1997. The following prices have been adjusted to reflect a 3-for-2 stock split effected in April 1996, a 2-for-1 stock split effected in September 1996, and a 3-for-2 stock split effected in December, 1996, each in the form of a stock dividend.
HIGH LOW ------ ------ FISCAL YEAR ENDED APRIL 30, 1996 First Quarter.................................................. $ 4.31 $ 3.67 Second Quarter................................................. $ 4.56 $ 3.61 Third Quarter.................................................. $ 6.44 $ 4.42 Fourth Quarter................................................. $10.29 $ 5.83 FISCAL YEAR ENDED APRIL 30, 1997 First Quarter.................................................. $12.17 $ 8.50 Second Quarter................................................. $17.33 $11.00 Third Quarter.................................................. $22.88 $14.67 Fourth Quarter................................................. $21.63 $ 9.75
The approximate number of holders of record and beneficial owners of Common Stock as of July 18, 1997 was 1,644 and 9,000, respectively. The Company has never declared cash dividends on the Common Stock. The Company intends to retain its earnings to finance the expansion of its business and does not anticipate paying cash dividends in the foreseeable future. Any future determination as to the payment of cash dividends will depend upon such factors as earnings, capital requirements, the Company's financial condition, restrictions in financing agreements and other factors deemed relevant by the Board of Directors. The payment of dividends by the Company is restricted by its revolving credit facility. RECENT SALES OF UNREGISTERED SECURITIES During the fiscal year ended April 30, 1997, the Company issued 4,170,680 shares of its Common Stock, par value $.01 per share, that were not registered under the Securities Act. The shares, in combination with cash, were issued as consideration in the acquisition of 29 towing service companies and five towing and recovery equipment distribution companies and were issued to approximately 60 individuals, entities and trusts. The market price on the date of issuance ranged from $10.375 per share to $14.375 per share. The Company has undertaken to file, as soon as practicable after publication of its financial statements for its fiscal year ended April 30, 1997, and use its reasonable best efforts to obtain the prompt effectiveness of, a registration statement under the Securities Act to register the resales of these shares, so that such shares may be offered and sold from time to time on the New York Stock Exchange or in privately negotiated transactions. The sales of the above securities are exempt from registration under the Securities Act pursuant to Section 4(2) of the Securities Act, or Regulation D promulgated thereunder, as transactions by an issuer not involving a public offering. 11 ITEM 6. SELECTED FINANCIAL DATA The following table sets forth the selected consolidated financial data of the Company, which should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and with the Company's Consolidated Financial Statements and Notes thereto. The selected consolidated financial data for the years ended April 30, 1997, 1996 and 1995 have been derived from the consolidated financial statements of the Company audited by Arthur Andersen LLP, independent public accountants. The selected consolidated financial data for the year ended July 31, 1993, the nine months ended April 30, 1994 and the twelve months ended April 30, 1994 have been derived from the unaudited consolidated financial statements of the Company which in the opinion of management, include all adjustments (which consist of only normal recurring adjustments) necessary for a fair presentation of the financial condition and results of operations of the Company for those periods. 12 MILLER INDUSTRIES, INC. AND SUBSIDIARIES SELECTED FINANCIAL DATA
TWELVE NINE MONTHS MONTHS YEAR ENDED ENDED ENDED YEARS ENDED APRIL 30, APRIL APRIL JULY ---------------------------- 30, 30, 31, 1997 1996 1995 1994(1) 1994(2) 1993 -------- -------- -------- ------- ------- ------- (IN THOUSANDS EXCEPT PER SHARE DATA) STATEMENTS OF INCOME DATA: Net sales............... $292,394 $180,463 $139,779 $94,601 $74,192 $71,554 Costs and expenses: Cost of operations.... 238,625 148,490 113,439 72,985 57,306 54,751 Selling, general and administrative expenses............. 29,740 17,629 14,750 15,273 11,508 13,188 Merger related expenses............. 452 Interest income (expense), net....... (620) (209) (370) (409) (338) (311) -------- -------- -------- ------- ------- ------- Total costs and expenses............... 269,437 166,328 128,559 88,667 69,152 68,250 Income before income taxes, extraordinary gain and cumulative effect of accounting change................. 22,957 14,135 11,220 5,934 5,040 3,304 Provision for income taxes.................. 8,436 5,108 3,736 1,644 1,620 100 -------- -------- -------- ------- ------- ------- Income before extraordinary gain and cumulative effect of accounting change...... 14,521 9,027 7,484 4,290 3,420 3,204 Extraordinary gain on debt retirement (less applicable income taxes of $175 in 1995 and $26 in 1994)............... 288 1,143 1,143 -- Cumulative effect of change in accounting for income taxes....... 781 781 Net income.............. 14,521 9,027 7,772 6,214 5,344 3,204 Preferred stock dividends.............. (66) (38) (111) -------- -------- -------- ------- ------- ------- Net income available for common stockholders.... $ 14,521 $ 9,027 $ 7,772 $ 6,148 $ 5,306 $ 3,093 ======== ======== ======== ======= ======= ======= Net income per common share(3): Before extraordinary gain and cumulative effect of accounting change............... $ 0.35 $ 0.26 $ 0.25 $ 0.20 $ 0.16 $ 0.15 Extraordinary gain on debt retirement...... 0.05 0.05 -- Cumulative effect of change in accounting for income taxes..... -- -- 0.01 0.04 0.04 -- -------- -------- -------- ------- ------- ------- $ 0.35 $ 0.26 $ 0.26 0.29 0.25 0.15 ======== ======== ======== ======= ======= ======= Weighted average number of common & common equivalent shares outstanding............ 41,454 34,102 29,428 21,072 21,072 21,072 ======== ======== ======== ======= ======= ======= BALANCE SHEET DATA (AT PERIOD END): Working capital......... $ 61,980 $ 52,438 $ 19,011 $ -- $ 9,382 $ 2,361 Total assets............ 215,297 123,978 66,018 -- 42,156 31,704 Long-term debt, less current portion........ 11,282 9,335 5,171 -- 17,848 12,746 Cumulative redeemable preferred stock........ -- -- -- -- 4,094 4,094 Common shareholders' equity (deficit)....... 138,783 71,913 32,320 -- 2,443 (201)
- -------- (1) The twelve month period ended April 30, 1994 is presented for comparison only. (2) In connection with the reorganization preceding the initial public offering, the Company adopted an April 30 year end. (3) Net income per common share and the weighted average number of common and common equivalent shares outstanding are computed after giving retroactive effect to the 3-for-2 stock split effected on April 12, 1996, the 2-for-1 stock split effected on September 30, 1996, the 3-for-2 stock split effected on December 30, 1996, and the issuance of 18,472,500 shares of common stock in connection with the reorganization in April 1994. 13 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion of the results of operations and financial condition of the Company should be read in conjunction with the Consolidated Financial Statements and Notes thereto. GENERAL Under the Company's accounting policies, sales are recorded when equipment is shipped to independent distributors or other customers. While the Company manufactures only the bodies of wreckers, which are installed on truck chassis manufactured by third parties, the Company sometimes purchases the truck chassis for resale to its customer. Sales of Company-purchased truck chassis are included in net sales. Revenue from Company owned distributors is recorded at the time equipment is shipped to customers or services are rendered. The towing services division recognizes revenue at the time services are performed. Margins are substantially lower on completed recovery vehicles containing Company-purchased chassis because the markup over the cost of the chassis is nominal. The Company's net sales have historically been lower in its first quarter when compared to the prior quarter due in part to decisions by purchasers of light duty wreckers to defer wrecker purchases near the end of the chassis model year. The Company's net sales have historically been relatively stronger in its fourth quarter due in part to sales made at the largest towing and recovery equipment trade show. INCLUSION OF FORWARD-LOOKING STATEMENTS Certain statements in this Annual Report, including but not limited to "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the "Letter To Our Shareholders" may be deemed to be forward- looking statements, as defined in the Private Securities Litigation Reform Act of 1995. Any forward-looking statements included herein have been included based upon facts available to management as of the date of the statement. Any forward-looking statement does, however involve a number of risks and uncertainties that could cause actual results to differ materially from any such statement, including the risks and uncertainties discussed in the Company's Prospectus dated November 6, 1996, under the caption "Risk Factors," which discussion is incorporated herein by this reference. RESULTS OF OPERATIONS The following table sets forth, for the periods indicated, the components of the consolidated statements of income expressed as a percentage of net sales.
YEARS ENDED APRIL 30, ------------------- 1997 1996 1995 ----- ----- ----- Net sales................................................ 100.0% 100.0% 100.0% Costs and expenses: Costs of operations.................................... 81.6% 82.3% 81.2% Selling, general and administrative.................... 10.2% 9.8% 10.6% Merger related expenses................................ 0.1% Interest expense, net.................................. -0.2% 0.1% -0.2% ----- ----- ----- Total cost and expenses.................................. 92.1% 92.2% 92.0% Income before income taxes and extraordinary gain........ 7.9% 7.8% 8.0% Provision for income taxes............................... 2.9% 2.8% 2.6% ----- ----- ----- Income before extraordinary gain......................... 5.0% 5.0% 5.4% Extraordinary gain on debt retirement (Less applicable income taxes of $175)................................... 0.0% 0.0% 0.2% ----- ----- ----- Net income............................................... 5.0% 5.0% 5.6% ===== ===== =====
14 Year Ended April 30, 1997 Compared to Year Ended April 30, 1996 Net sales for the year ended April 30, 1997 increased 62.0 % to $292.4 million from $180.5 million for the comparable period in 1996. The increase in net sales was primarily the result of (i) higher unit sales in all of the Company's manufacturing product lines, (ii) the inclusion for a full year of sales of the two European manufacturing operations acquired in January and April 1996, (iii) the inclusion since the acquisition dates in fiscal 1997 of sales from the distributors and towing service companies acquired via purchase transactions, (iv) a higher level of sales by the Company-owned distributors and the towing service companies acquired in fiscal 1997 in pooling-of- interests transactions and, (v) an increase in sales of truck chassis sold by the domestic manufacturing operations to third parties. Costs of operations as a percentage of net sales decreased slightly to 81.6% for the year ended April 30, 1997 from 82.3% for the comparable prior year period. This reduction was primarily a result of the Company's towing service division, which generally has a lower level of operating costs than the manufacturing and distribution division, accounting for a higher proportion of revenue in fiscal 1997. Selling, general and administrative expenses for fiscal 1997 increased 68.7% to $29.7 million from $17.6 million for the comparable period of fiscal 1996. The increase was due primarily to the impact of the significant expansion of the Company's business referred to above and to incremental resources added to support the Company's growth. As a percentage of net sales, selling, general and administrative expenses increased slightly from 9.8% in fiscal 1996 to 10.2% in fiscal 1997 primarily as a result of the Company's towing services division, which generally has a higher level of selling, general and administrative costs than the manufacturing and distribution division. Net interest expense for fiscal 1997 increased $.4 million to $.6 million from $.2 million for fiscal 1996 primarily due to interest expense of the businesses acquired in fiscal 1997 exceeding the interest income from the investment of available cash balances. The effective rate of the provision for income taxes was 36.7% for fiscal 1997 and 36.1% for fiscal 1996. Year Ended April 30, 1996 Compared to Year Ended April 30, 1995 Net sales for the year ended April 30, 1996 increased 29.1 % to $180.5 million from $139.8 million for the comparable period in 1995. The increase in net sales was primarily the result of (i) higher unit sales in all of the Company's manufacturing product lines, (ii) the inclusion of sales in fiscal 1996 of sales of Jige Lohr following its acquisition in January 1996, (iii) a higher level of sales by the Company-owned distributors and the towing service companies acquired in fiscal 1997 in pooling-of-interests transactions and, (iv) an increase in sales of truck chassis sold by the domestic manufacturing operations to third parties. Costs of operations as a percentage of net sales increased slightly to 82.3% for the year ended April 30, 1996 from 81.2% for the comparable prior year period due primarily to the impact of truck chassis cost of sales being at a higher relative level in fiscal 1996 than in fiscal 1995. Selling, general and administrative expenses for fiscal 1996 increased 19.5% to $17.6 million from $14.8 million for the comparable period of fiscal 1995. The increase was due primarily to the impact of higher expenses in the towing service companies accounted for using the pooling-of-interests method of accounting, higher commission expenses resulting from higher sales, and higher general and administrative expenses incurred to support the increased sales and the Company's fiscal 1996 acquisitions. As a percentage of net sales, selling, general and administrative expenses decreased slightly from 9.8% in fiscal 1996 from 10.6% in fiscal 1995. Net interest expense for fiscal 1996 decreased $.2 million to $.2 million from $.4 million for fiscal 1995 primarily due to the investment of cash generated from the January 1996 stock offering. 15 The effective rate of the provision for income taxes was 36.1% for fiscal 1996 and 33.3% for fiscal 1995. The increase was due primarily to the higher level of taxes incurred in fiscal 1996 by the towing service companies accounted for using the pooling-of-interests method of accounting. 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. The net proceeds of the public offerings were used to repay long-term debt, including that of acquired companies, redeem cumulative preferred stock of a wholly owned subsidiary, increase working capital, provide funds for capital expenditures, acquisition of businesses, and other general corporate purposes. Capital used in operating activities was $11.0 million for the year ended April 30, 1997 as compared to $1.6 million provided by operations for the comparable period of 1996. The cash used in operating activities in fiscal 1997 was primarily for the purpose of supporting the growth of the business in both manufacturing and distribution. Cash used in investing activities was $22.9 million for the year ended April 30, 1997 compared to $13.6 million for the year ended April 30, 1996. The cash used in investing activities was primarily for the acquisition of companies and for capital expenditures, including the acquisition of a car carrier production plant in fiscal 1997, and equipment purchases. Cash provided by financing activities was $17.3 million for the year ended April 30, 1997 compared to $33.3 million for the comparable period in 1996. In November 1996, the company completed a public offering of its Common Stock which resulted in net proceeds after underwriting discounts and offering expenses of $29.2 million. The net proceeds were used to repay debt, including that of acquired companies, purchase a car carrier production plant in January 1997, for other capital expenditures, for working capital, for the acquisition of companies, and for other general corporate purposes. The Company has a $50 million unsecured revolving credit facility with NationsBank of Tennessee, N.A. (the "Credit Facility"). Borrowings under the Credit Facility bear interest at a rate equal to the 30-day LIBOR rate plus 0.8%. At April 30, 1997, there were no borrowings 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, mergers, capital expenditures, and the payment of dividends. RECENT ACCOUNTING PRONOUNCEMENTS In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per Share," which establishes new standards for computing and presenting earnings per share ("EPS"). SFAS No. 128 is effective for financial statements issued for periods ending after December 15, 1997, including interim periods. Early adoption is not permitted and upon initial application, all prior period EPS data is required to be restated. The adoption of SFAS No. 128 will not have a material effect on the Company's EPS amounts. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The response to this item is included in Part IV, Item 14 of this Report. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Not applicable. 16 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The information contained under the heading "PROPOSAL 1: ELECTION OF DIRECTORS" in the definitive Proxy Statement used in connection with the solicitation of proxies for the Registrant's Annual Meeting of Shareholders to be held August 29, 1997, filed with the Commission, is hereby incorporated herein by reference. Pursuant to Instruction 3 to Paragraph (b) of Item 401 of Regulation S-K, information relating to the executive officers of the Registrant is included in Item 1 of this Report. ITEM 11. EXECUTIVE COMPENSATION The information contained under the heading "EXECUTIVE COMPENSATION" in the definitive Proxy Statement used in connection with the solicitation of proxies for the Registrant's Annual Meeting of Shareholders to be held August 29, 1997, filed with the Commission, is hereby incorporated herein by reference. The information contained in the Proxy Statement under the headings "Compensation Committee Report on Executive Compensation" and "Performance Graph" shall not be deemed incorporated herein by such reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information contained under the heading "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT" in the definitive Proxy Statement used in connection with the solicitation of proxies for the Registrant's Annual Meeting of Shareholders to be held August 29, 1997, filed with the Commission, is hereby incorporated herein by reference. For purposes of determining the aggregate market value of the Registrant's voting stock held by nonaffiliates, shares held by all current directors and executive officers of the Registrant have been excluded. The exclusion of such shares is not intended to, and shall not, constitute a determination as to which persons or entities may be "affiliates" of the Registrant as defined by the Securities and Exchange Commission. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information contained under the heading "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS" in the definitive Proxy Statement used in connection with the solicitation of proxies for the Registrant's Annual Meeting of Shareholders to be held August 29, 1997, filed with the Commission, is hereby incorporated herein by reference. 17 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) The following documents are filed as part of this Report: 1. FINANCIAL STATEMENTS
PAGE NUMBER DESCRIPTION IN REPORT - ----------- ----------- Report of Independent Public Accountants.......................... F-1 Consolidated Balance Sheets as of April 30, 1997 and 1996......... F-2 Consolidated Statements of Income for the years ended April 30, 1997, 1996, and 1995............................................. F-3 Consolidated Statements of Shareholders' Equity for the years ended April 30, 1997, 1996, and 1995............................. F-4 Consolidated Statements of Cash Flows for the years ended April 30, 1997, 1996, and 1995......................................... F-5 Notes to Consolidated Financial Statements........................ F-6
2. FINANCIAL STATEMENT SCHEDULES 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:
PAGE NUMBER DESCRIPTION IN REPORT - ----------- ----------- Report of Independent Public Accountants............................ S-1 Schedule II--Valuation and Qualifying Accounts...................... S-2
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:
INCORPORATED BY REFERENCE TO FORM EXHIBIT REGISTRATION OR FILE OR DATE OF NUMBER IN DESCRIPTION NUMBER REPORT REPORT REPORT ------------------------------- -------------------- ------ ----------- --------- 3.2 Charter of the * * * 3.2 Registrant 3.2 Bylaws of the Registrant 33-79430 S-1 August 1994 3.2 10.1 Settlement Letter dated 33-79430 S-1 August 1994 10.7 April 27, 1994 between Miller Group, Inc. and the Management Group 10.5 Participants Agreement 33-79430 S-1 August 1994 10.11 dated as of April 30, 1994 between the Registrant, Century Holdings, Inc., Century Wrecker Corporation, William G. Miller and certain former shareholders of Miller Group, Inc. 10.20 Technology Transfer 33-79430 S-1 August 1994 10.26 Agreement dated March 21, 1991 between Miller Group, Inc., Verducci, Inc. and Jack Verducci
18
INCORPORATED BY REFERENCE TO FORM EXHIBIT REGISTRATION OR FILE OR DATE OF NUMBER IN DESCRIPTION NUMBER REPORT REPORT REPORT ------------------------------- -------------------- ------ ----------- --------- 10.21 Form of Noncompetition 33-79430 S-1 August 1994 10.28 Agreement between the Registrant and certain officers of the Registrant 10.22 Form of Nonexclusive 33-79430 S-1 August 1994 10.31 Distributor Agreement 10.23 Loan Agreement dated as 33-79430 S-1 August 1994 10.35 of June 28, 1994 among NationsBank of Tennessee, N.A., the Registrant and certain subsidiaries of the Registrant 10.24 $15 million Revolving 33-79430 S-1 August 1994 10.36 Line of Credit Note dated as of June 28, 1994 from the Registrant to NationsBank of Tennessee, N.A. 10.25 Form of Guaranty 33-79430 S-1 August 1994 10.37 Agreement among NationsBank of Tennessee, N.A., and certain subsidiaries of the Registrant dated as of June 28, 1994 10.26 Negative Pledge 33-79430 S-1 August 1994 10.38 Agreement dated as of June 28, 1994 among NationsBank of Tennessee, N.A., the Registrant and certain subsidiaries of the Registrant 10.27 Miller Industries, Inc. 33-79430 S-1 August 1994 10.1 Stock Option and Incentive Plan** 10.28 Form of Incentive Stock 33-79430 S-1 August 1994 10.2 Option Agreement** 10.29 Miller Industries, Inc. 33-79430 S-1 August 1994 10.3 Cash Bonus Plan** 10.30 Miller Industries, Inc. 33-79430 S-1 August 1994 10.4 Non-Employee Director Stock Option Plan** 10.31 Form of Director Stock 33-79430 S-1 August 1994 10.5 Option Agreement** 10.32 Form of Amended and 33-79430 S-1 August 1994 10.6 Restated Settlement and Restriction Agreement dated as of April 27, 1994 between Miller Group, Inc., Century Holdings, Inc. and Jeffrey S. Badgley, Thomas L. Cox, Marvin J. Griffin, Frank Madonia, J. Vincent Mish, H. Patrick Mullen, L. Stanley Neely and Daniel N. Sebastian (the "Management Group") 10.33 Employment Agreement 33-79430 S-1 August 1994 10.29 dated October 14, 1993 between Century Wrecker Corporation and Jeffrey I. Badgley
19
INCORPORATED BY REFERENCE TO EXHIBIT REGISTRATION OR FILE FORM OR NUMBER IN DESCRIPTION NUMBER REPORT DATE OF REPORT REPORT ------------------------------- -------------------- --------- -------------- --------- 10.35 First Amendment to 33-79430 S-1 August 1994 10.33 Employment Agreement between Century Wrecker Corporation and Jeffrey I. Badgley** 10.37 Form of Employment -- Form 10-K April 30, 1995 10.37 Agreement between Registrant and each of Messrs. Madonia and Mish** 10.38 First Amendment to -- Form 10-K April 30, 1995 10.38 Miller Industries, Inc. Non-Employee Director Stock Option Plan** 10.39 Second Amendment to -- Form 10-K April 30, 1996 10.39 Miller Industries, Inc. Non-Employee Director Stock Option Plan** 10.40 Second Amendment to -- Form 10-K April 30, 1996 10.40 Miller Industries, Inc. Stock Option and Incentive Plan** 10.41 Stock Purchase Agreement 33-99888 S-1 December 1995 10.1 dated November 1, 1995 between Jean and Monique Georges, S.A. Lohr and Miller Industries International, Inc. 10.42 Renewal and Modification 33-99888 S-1 December 1995 10.33 of Revolving Line of Credit Note dated December 29, 1995 10.43 Third Amended Loan 33-99888 S-1 December 1995 10.34 Agreement and Amendment to Guaranty Agreement Among NationsBank of Tennessee, N.A., the Registrant and certain subsidiaries of Registrant dated December 29, 1995 10.44 Guaranty Agreement by 33-99888 S-1 December 1995 10.35 and between Miller Industries International, Inc. and NationsBank of Tennessee, N.A. dated December 29, 1995 10.45 Fourth Amended Loan * Agreement among Nationsbank of Tennessee, N.A. the Registrant and certain subsidiaries of the Registrant dated June 28, 1994 10.46 Fifth Amendment to Loan * Agreement and Amendment to Guaranty Agreements Among NationsBank of Tennessee, N.A., the Registrant and certain subsidiaries of Registrant dated April 30, 1997 10.47 Second Renewal and * Modification of Revolving Line of Credit Note dated April 30, 1997 10.48 Amended Negative Pledge * Agreement Among NationsBank of Tennessee, N.A., the Registrant and certain subsidiaries of Registrant dated April 30, 1997
20
INCORPORATED BY REFERENCE TO FORM DATE EXHIBIT REGISTRATION OR FILE OR OF NUMBER IN DESCRIPTION NUMBER REPORT REPORT REPORT ---------------------------- -------------------- ------ ------ --------- 22 Subsidiaries of the * Registrant 23 Consent of Arthur * Andersen LLP 24 Power of Attorney (see * signature page) 27 Financial Data Schedule *
- -------- * Filed herewith. ** Management contract or compensatory plan or arrangement (b) No reports on Form 8-K were filed by the Registrant during the fourth quarter of the Registrant's 1997 fiscal year. (c) The Registrant hereby files as exhibits to this Report the exhibits set forth in Item 14(a)3 hereof. (d) The Registrant hereby files as financial statement schedules to this Report the financial statement schedules set forth in Item 14(a)2 hereof. 21 MILLER INDUSTRIES, INC. AND SUBSIDIARIES INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE ---- Report of Independent Public Accountants................................. F-1 Consolidated Balance Sheets as of April 30, 1997 and 1996................ F-2 Consolidated Statements of Income for the years ended April 30, 1997, 1996, and 1995.......................................................... F-3 Consolidated Statements of Stockholders' Equity (Deficit) for the years ended April 30, 1997, 1996, and 1995.................................... F-4 Consolidated Statements of Cash Flows for the years ended April 30, 1997, 1996, and 1995.......................................................... F-5 Notes to Consolidated Financial Statements............................... F-6
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Board of Directors and Shareholders of Miller Industries, Inc.: We have audited the accompanying consolidated balance sheets of MILLER INDUSTRIES, INC. (a Tennessee corporation) AND SUBSIDIARIES as of April 30, 1997 and 1996 and the related consolidated statements of income, shareholders' equity, and cash flows for each of the three years in the period ended April 30, 1997. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Miller Industries, Inc. and subsidiaries as of April 30, 1997 and 1996 and the results of their operations and their cash flows for each of the three years in the period ended April 30, 1997 in conformity with generally accepted accounting principles. Arthur Andersen LLP Chattanooga, Tennessee July 15, 1997 F-1 MILLER INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS APRIL 30, 1997 AND 1996 (IN THOUSANDS, EXCEPT SHARE DATA)
1997 1996 -------- -------- ASSETS CURRENT ASSETS: Cash and temporary investments........................... $ 8,508 $ 25,117 Accounts receivable, net of allowance for doubtful accounts of $1,774 and $1,265 in 1997 and 1996, respectively............................................ 49,844 33,650 Inventories.............................................. 60,574 32,432 Deferred income taxes.................................... 4,541 1,485 Prepaid expenses and other............................... 1,885 1,614 -------- -------- Total current assets................................... 125,352 94,298 PROPERTY, PLANT, AND EQUIPMENT, net........................ 49,171 23,309 GOODWILL, net.............................................. 36,916 5,107 PATENTS, TRADEMARKS, AND OTHER PURCHASED PRODUCT RIGHTS, net....................................................... 908 976 OTHER ASSETS............................................... 2,950 288 -------- -------- $215,297 $123,978 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Current portion of long term obligations................. $ 4,479 $ 1,414 Line of credit........................................... 0 1,301 Accounts payable......................................... 38,548 28,017 Accrued liabilities and other............................ 20,345 11,128 -------- -------- Total current liabilities.............................. 63,372 41,860 -------- -------- LONG TERM OBLIGATIONS, less current portion................ 11,282 9,335 -------- -------- DEFERRED INCOME TAXES...................................... 1,860 870 -------- -------- COMMITMENTS AND CONTINGENCIES (Notes 3, 7, 8 and 10) 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, 42,480,202 and 37,312,478 shares issued and outstanding at 1997 and 1996, respectively.............. 425 373 Additional paid-in capital............................... 110,773 54,808 Retained earnings........................................ 28,027 16,749 Cumulative translation adjustment........................ (442) (17) -------- -------- Total shareholders' equity............................. 138,783 71,913 -------- -------- $215,297 $123,978 ======== ========
The accompanying notes are an integral part of these consolidated balance sheets. F-2 MILLER INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME FOR THE YEARS ENDED APRIL 30, 1997, 1996, AND 1995 (IN THOUSANDS, EXCEPT PER SHARE DATA)
1997 1996 1995 -------- -------- -------- NET SALES.......................................... $292,394 $180,463 $139,779 -------- -------- -------- COSTS AND EXPENSES: Costs of operations.............................. 238,625 148,490 113,439 Selling, general, and administrative expenses.... 29,740 17,629 14,750 Merger related expenses.......................... 452 0 0 Interest expense, net............................ 620 209 370 -------- -------- -------- Total Costs and Expenses....................... 269,437 166,328 128,559 -------- -------- -------- INCOME BEFORE INCOME TAXES AND EXTRAORDINARY GAIN.. 22,957 14,135 11,220 PROVISION FOR INCOME TAXES......................... 8,436 5,108 3,736 -------- -------- -------- INCOME BEFORE EXTRAORDINARY GAIN................... 14,521 9,027 7,484 EXTRAORDINARY GAIN ON DEBT RETIREMENT (less applicable income taxes of $175).................. 0 0 288 -------- -------- -------- NET INCOME......................................... $ 14,521 $ 9,027 $ 7,772 ======== ======== ======== NET INCOME PER SHARE: Before extraordinary gain on debt retirement..... $ 0.35 $ 0.26 $ 0.25 Extraordinary gain on debt retirement............ 0.00 0.00 0.01 -------- -------- -------- $ 0.35 $ 0.26 $ 0.26 ======== ======== ======== WEIGHTED AVERAGE COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING................................ 41,454 34,102 29,428 ======== ======== ========
The accompanying notes are an integral part of these consolidated statements. F-3 MILLER INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY FOR THE YEARS ENDED APRIL 30, 1997, 1996, AND 1995 (IN THOUSANDS, EXCEPT SHARE DATA)
ADDITIONAL CUMULATIVE COMMON PAID-IN RETAINED TRANSLATION STOCK CAPITAL EARNINGS ADJUSTMENT TOTAL ------ ---------- -------- ----------- -------- BALANCE, April 30, 1994....... $211 $ 1,188 $ 1,747 $ 0 $ 3,146 Issuance of 10,735,314 common shares through initial public offering.... 107 22,103 0 0 22,210 Unamortized restructuring credit from redemption of preferred stock............ 0 694 0 0 694 Distributions to former shareholders of Pooled Entities................... 0 0 (789) 0 (789) Net income.................. 0 0 7,772 0 7,772 ---- -------- ------- ----- -------- BALANCE, April 30, 1995....... 318 23,985 8,730 0 33,033 Issuance of 5,400,000 common shares through a public offering................... 54 30,124 0 0 30,178 Issuance of 80,502 shares in acquisition................ 1 614 0 0 615 Exercise of stock options... 0 37 0 0 37 Other stock issuance........ 0 48 0 0 48 Distributions to former shareholders of Pooled Entities................... 0 0 (1,008) 0 (1,008) Net income.................. 0 0 9,027 0 9,027 Net translation adjustments................ 0 0 0 (17) (17) ---- -------- ------- ----- -------- BALANCE, April 30, 1996....... 373 54,808 16,749 (17) 71,913 Exercise of stock options... 6 540 0 0 546 Tax benefit of exercise of stock options.............. 0 630 0 0 630 Issuance of 1,943,028 common shares through a public offering................... 19 29,225 0 0 29,244 Issuance of 2,709,503 common shares in acquisitions..... 27 25,570 (2,530) 0 23,067 Distributions to former shareholders of Pooled Entities................... 0 0 (713) 0 (713) Net income.................. 0 0 14,521 0 14,521 Net translation adjustments................ 0 0 0 (425) (425) ---- -------- ------- ----- -------- BALANCE, April 30, 1997....... $425 $110,773 $28,027 $(442) $138,783 ==== ======== ======= ===== ========
The accompanying notes are an integral part of these consolidated statements. F-4 MILLER INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED APRIL 30, 1997, 1996, AND 1995 (IN THOUSANDS)
1997 1996 1995 -------- -------- -------- OPERATING ACTIVITIES: Net income...................................... $ 14,521 $ 9,027 $ 7,772 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization................. 5,782 2,762 2,017 Gain on disposals of property, plant, and equipment.................................... (170) (161) (130) Extraordinary gain on debt retirement......... 0 0 (288) Deferred income tax (benefit) provision....... (703) 373 140 Changes in operating assets and liabilities: Accounts receivable......................... (10,385) (9,836) (9,894) Inventories................................. (20,442) (6,857) (9,187) Prepaid expenses and other.................. 1,312 (454) (211) Accounts payable............................ (1,124) 5,827 9,501 Accrued liabilities and other............... 200 900 (657) Other assets................................ 0 18 (20) -------- -------- -------- Net cash (used in) provided by operating activities............................... (11,009) 1,599 (957) -------- -------- -------- INVESTING ACTIVITIES: Purchases of property, plant, and equipment..... (11,073) (10,407) (4,032) Proceeds from sales of property, plant, and equipment...................................... 297 449 165 Payment received on notes receivable............ 0 0 39 Proceeds from sale of finance receivables....... 24,596 0 0 Acquisition of businesses, net of cash acquired....................................... (7,701) (3,567) 0 Funding of finance receivables.................. (28,679) 0 0 Other........................................... (304) (91) (165) -------- -------- -------- Net cash used in investing activities..... (22,864) (13,616) (3,993) -------- -------- -------- FINANCING ACTIVITIES: Proceeds from issuance of common stock.......... 29,244 30,178 22,210 Proceeds from exercise of stock options......... 546 37 0 Net borrowings (payments) under line of credit.. (5,236) (522) 1,564 Borrowings under long term obligations.......... 1,374 6,346 1,176 Payments on long term obligations............... (7,365) (1,771) (13,219) Redemption of preferred stock................... 0 0 (3,400) Distributions to former shareholders of Pooled Entities....................................... (713) (1,008) (789) Other........................................... (560) 0 (225) -------- -------- -------- Net cash provided by financing activities............................... 17,290 33,260 7,317 -------- -------- -------- EFFECT OF EXCHANGE RATE CHANGES ON CASH AND TEMPORARY INVESTMENTS.......................... (26) (2) 0 -------- -------- -------- NET INCREASE (DECREASE) IN CASH AND TEMPORARY INVESTMENTS.................................... (16,609) 21,241 2,367 CASH AND TEMPORARY INVESTMENTS, beginning of year........................................... 25,117 3,876 1,509 -------- -------- -------- CASH AND TEMPORARY INVESTMENTS, end of year..... $ 8,508 $ 25,117 $ 3,876 ======== ======== ======== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash payments for interest.................... $ 1,298 $ 430 $ 388 ======== ======== ======== Cash payments for income taxes................ $ 7,898 $ 4,826 $ 3,027 ======== ======== ========
The accompanying notes are an integral part of these consolidated statements. F-5 MILLER INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS APRIL 30, 1997 AND 1996 1. ORGANIZATION AND NATURE OF OPERATIONS Miller Industries, Inc. and subsidiaries ("the Company") is an integrated provider of vehicle towing and recovery equipment, systems and services. The principal markets for the towing and recovery equipment are independent distributors and users of towing and recovery equipment located primarily throughout the United States, Canada, Europe, Asia, and the Middle East. The Company's products are marketed under the brand names of Century, Challenger, Holmes, Champion, Eagle, Jige, Boniface, and Vulcan. The truck chassis on which towing and recovery equipment are installed are either purchased by Miller or provided by customers. The Company markets its towing and recovery services in the United States through its wholly owned subsidiary Road One, Inc. ("Road One"). At various dates during 1997, the Company acquired certain companies in separate transactions that have been accounted for as poolings of interests. These companies are referred to collectively as the "Pooled Entities." Prior periods have been restated to include the operating results of all material pooling-of-interests transactions. See Note 3, Business Combinations, for further discussion of these transactions. On August 9, 1994, the Company completed an initial public offering of 10,735,314 shares of its common stock at $2.33 per share (the "Offering"). The net proceeds of the Offering were used to repay long-term obligations, redeem cumulative preferred stock of a wholly owned subsidiary, increase working capital, and provide funds for capital additions and other general corporate purposes. On January 31, 1996, the Company completed a public offering of 5,400,000 shares of previously unissued common stock at $6.11 per share. The net proceeds were used to repay long-term obligations, increase working capital, and provide funds for capital additions and other general corporate purposes. On November 12, 1996, the Company completed a public offering of 1,943,028 shares of previously unissued common stock at $16.17 per share. The net proceeds were used to fund Road One acquisitions and increase working capital. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS The preparation of financial statements in conformity with 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. CASH AND TEMPORARY INVESTMENTS Cash and temporary investments include all cash and cash equivalent investments with original maturities of three months or less, primarily consisting of repurchase agreements. F-6 MILLER INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 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 April 30, 1997 and 1996 consisted of the following (in thousands):
1997 1996 ------- ------- Chassis.................................................... $18,837 $ 7,188 Raw materials.............................................. 16,257 11,505 Work in process............................................ 7,843 7,155 Finished goods............................................. 17,637 6,584 ------- ------- $60,574 $32,432 ======= =======
PROPERTY, PLANT, AND EQUIPMENT Property, plant, and equipment are recorded at cost. 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 purposes. Estimated useful lives range from 20 to 30 years for buildings and improvements and 5 to 10 years for machinery and equipment and furniture, fixtures, and vehicles. Expenditures for maintenance and repairs are charged to expense as incurred. Property, plant, and equipment at April 30, 1997 and 1996 consisted of the following (in thousands):
1997 1996 -------- -------- Land................................................... $ 3,181 $ 1,852 Buildings and improvements............................. 16,550 12,472 Machinery and equipment................................ 39,302 17,439 Furniture, fixtures, and vehicles...................... 9,402 2,210 Construction in progress............................... 1,193 781 -------- -------- 69,628 34,754 Less accumulated depreciation.......................... (20,457) (11,445) -------- -------- Property, plant, and equipment, net.................... $ 49,171 $ 23,309 ======== ========
NET INCOME PER SHARE Net income per share is calculated using the weighted average number of common and common equivalent shares outstanding. In April 1996, September 1996, and December 1996, the Company effected a three-for-two, a two-for-one, and a three-for-two common stock split, respectively, each in the form of a stock dividend. All historical share and per share amounts have been retroactively restated to reflect the common stock splits. In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per Share," which establishes new standards for computing and presenting earnings per share ("EPS"). SFAS No. 128 is effective for financial statements issued for periods ending after December 15, 1997, including interim periods. Early adoption is not permitted, and upon initial application, all prior period EPS data is required to be restated. The adoption of SFAS No. 128 will not have a material effect on the Company's EPS amounts. F-7 MILLER INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) GOODWILL Goodwill is being amortized on a straight-line basis over 40 years. The Company periodically evaluates whether events and circumstances have occurred which would indicate that the goodwill is not recoverable. Accumulated amortization of goodwill was $831,000 and $578,000 at April 30, 1997 and 1996, respectively. Amortization expense for 1997, 1996, and 1995 was $253,000, $101,000, and $100,000, respectively. PATENTS, TRADEMARKS, AND OTHER PURCHASED PRODUCT RIGHTS The cost of acquired patents, trademarks, and other purchased product rights are capitalized and amortized using the straight-line method over 20 years. Total accumulated amortization of these assets at April 30, 1997 and 1996 was $315,000 and $251,000, respectively. Amortization expense for 1997, 1996, and 1995 was $64,000, $73,000, and $64,000, respectively. ACCRUED LIABILITIES AND OTHER Accrued liabilities and other consisted of the following at April 30, 1997 and 1996 (in thousands):
1997 1996 ------- ------- Accrued wages, commissions, bonuses, and benefits......... $ 4,153 $ 2,565 Accrued income taxes...................................... 3,159 2,217 Other..................................................... 13,033 6,346 ------- ------- $20,345 $11,128 ======= =======
PRODUCT WARRANTY The Company 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. Warranty expense for 1997, 1996, and 1995 was $1,057,000, $618,000, and $941,000, respectively. STOCK-BASED COMPENSATION Effective May 1, 1996, the Company adopted SFAS No. 123, "Accounting for Stock-Based Compensation." This statement defines a fair value based method of accounting for an employee stock option or similar equity instrument. However, it also allows an entity to continue to measure compensation for these plans using the intrinsic value based method of accounting prescribed by Accounting Principles Board Opinion No. 25 ("APB No. 25"). The Company has elected to continue to account for its stock compensation plans under APB No. 25. Pro forma disclosures of net income and net income per share, as if the fair value based method of accounting defined in SFAS No. 123 had been applied, are presented in Note 6. 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 and limits the amount of credit exposure to any one institution. The Company's trade receivables are primarily from independent distributors of towing and recovery equipment, and such receivables are generally not collateralized. The Company monitors its exposure for credit losses and maintains allowances for anticipated losses. REVENUE RECOGNITION Revenue is recorded by the Company when equipment is shipped to independent distributors or other customers. Revenue from towing services is recognized when services are performed. F-8 MILLER INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 3. BUSINESS COMBINATIONS During fiscal 1996, the Company purchased all of the outstanding capital stock of two European manufacturers of towing and recovery equipment at a total purchase price of $4,641,000, consisting of $4,026,000 in cash and $615,000 (80,502 shares) of newly issued common stock. These acquisitions have been accounted for under the purchase method, and their operating results have been included in the Company's consolidated results of operations from their respective dates of acquisition. The impact of the acquisitions on consolidated pro forma net sales, net income, and net income per share as if the acquisitions had taken place at the beginning of fiscal 1995, was not significant for 1996 and 1995. In September 1996, the Company acquired all of the outstanding capital stock of Vulcan International, Inc. ("Vulcan"), a manufacturer of towing and recovery equipment, for $8,690,000 (761,193 shares) of newly issued common stock. The acquisition was accounted for under the pooling-of-interests method. Accordingly, prior periods have been restated to include Vulcan's operating results. During fiscal 1997, the Company purchased all of the outstanding capital stock of 3 distributors of towing and recovery equipment in separate transactions for an aggregate purchase price of $4,073,000 which consisted of 318,157 shares of common stock. The Company also purchased all of the outstanding common stock of 13 towing service companies in separate transactions for an aggregate purchase price of $29,239,000 which consisted of $7,479,000 in cash and $21,760,000 (1,639,491 shares) of common stock. These acquisitions have been accounted for using the purchase method of accounting, and their operating results have been included in the Company's consolidated results of operations from the respective dates of acquisition. The 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 assets acquired of approximately $32,062,000 has been recognized as a component of goodwill in the accompanying consolidated balance sheet at April 30, 1997. Also during fiscal 1997, the Company purchased all of the outstanding capital stock of an additional 3 distributors of towing and recovery equipment in separate transactions for an aggregate purchase price of $4,395,000 which consisted of 371,320 shares of common stock. The Company also purchased all of the outstanding common stock of 16 towing service companies in separate transactions for an aggregate purchase price of $21,523,000 which consisted of $250,000 in cash and $21,273,000 (2,217,680 shares) of common stock. These acquisitions were accounted for using the pooling-of-interests method of accounting. Prior periods have been restated to include the operating results of all material pooling-of-interests transactions. The impact of the restatement for the Pooled Entities on the consolidated results of operations of the Company for 1996 and 1995 is as follows (in thousands):
1997 1996 1995 -------- -------- -------- Net sales: As previously reported....................... $182,741 $125,706 $ 94,722 Pooled Entities.............................. 109,653 54,757 45,057 -------- -------- -------- As restated................................ $292,394 $180,463 $139,779 ======== ======== ======== Income before extraordinary gain: As previously reported....................... $ 10,416 $ 7,793 $ 5,406 Pooled Entities.............................. 4,105 1,234 2,078 -------- -------- -------- As restated................................ $ 14,521 $ 9,027 $ 7,484 ======== ======== ======== Net income: As previously reported....................... $ 10,416 $ 7,793 $ 5,694 Pooled Entities.............................. 4,105 1,234 2,078 -------- -------- -------- As restated................................ $ 14,521 $ 9,027 $ 7,772 ======== ======== ========
F-9 MILLER INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) The following unaudited pro forma summary combines the results of operations of all 1997 purchase combinations, the immaterial pooling-of-interests combinations, and the Company as if these combinations had occurred at the beginning of fiscal 1996 after giving effect to certain adjustments, including amortization of intangible assets and related income tax effects. The pro forma summary does not necessarily reflect the results of operations as they would have been if the Company and these acquisitions had constituted a single entity during these periods (in thousands, except share data).
1997 1996 --------------------- --------------------- AS REPORTED PRO FORMA AS REPORTED PRO FORMA ----------- --------- ----------- --------- Net sales...................... $292,394 $341,668 $180,463 $276,323 ======== ======== ======== ======== Net income..................... $ 14,521 $ 13,727 $ 9,027 $ 10,008 ======== ======== ======== ======== Net income per share........... $ 0.35 $ 0.32 $ 0.26 $ 0.28 ======== ======== ======== ========
Subsequent to April 30, 1997, the Company acquired an additional four distributors of towing and recovery equipment and five towing service companies in separate transactions, issuing in the aggregate approximately 497,000 shares of common stock and paying approximately $2,875,000 in cash. These transactions have been accounted for under the purchase method of accounting. 4. GAIN ON EARLY RETIREMENT OF DEBT AND PREFERRED STOCK REDEMPTION Upon consummation of the initial public offering, the Company retired certain obligations including previously restructured long-term obligations, which resulted in a gain of $288,000. Such amount is reflected as an extraordinary gain in the accompanying statement of income for 1995. Additionally, upon consummation of the initial public offering, the Company redeemed its cumulative redeemable preferred stock for $3,400,000, resulting in a gain of $694,000, which was reflected as a credit to paid-in capital in 1995. 5. LONG-TERM OBLIGATIONS AND LINES OF CREDIT LONG-TERM OBLIGATIONS Long-term obligations consisted of the following at April 30, 1997 and 1996 (in thousands):
1997 1996 ------- ------ Mortgage notes payable, interest at rates from 3% to 6.88%, payable in monthly installments, maturing 2003 to 2011.................................................... $ 2,344 $2,510 Equipment notes payable, interest at rates from 6.5% to 13.75%, payable in monthly installments, maturing 1997 to 2005................................................. 12,015 5,539 Other notes payable...................................... 1,402 2,700 ------- ------ 15,761 10,749 Less current portion..................................... (4,479) (1,414) ------- ------ $11,282 $9,335 ======= ======
F-10 MILLER INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) At April 30, 1997, maturities of long-term obligations (excluding future cash outflows for interest) for the next five fiscal years are as follows (in thousands): 1998.................................. $4,479 1999.................................. 3,982 2000.................................. 2,545 2001.................................. 1,662 2002.................................. 977
Certain equipment and manufacturing facilities are pledged as collateral under the mortgage notes payable. LINE OF CREDIT At April 30, 1997, the Company had an unsecured revolving credit facility of $50,000,000 (the "Revolver") for working capital and other general corporate purposes. Borrowings under the Revolver bear interest at rate LIBOR plus 0.8%, (6.69% at April 30, 1997) and include a commitment fee on the daily unused balance. The weighted average interest rate for borrowings outstanding under the Revolver during 1997 was approximately 6.88%. Interest is payable monthly and the Revolver is renewable on an annual basis. There were no borrowings outstanding under the Revolver at April 30, 1997. The Revolver imposes restrictions on the company with respect to the maintenance of certain financial ratios, the incurrence of indebtedness, the sale of assets, mergers, capital expenditures, and the payment of dividends. 6. STOCK-BASED COMPENSATION PLANS Although the Company adopted SFAS No. 123 during 1997, it elected to continue to account for compensation expense under its stock compensation plans under APB No. 25. Accordingly, no compensation cost has been recognized for stock option grants since the options have exercise prices equal to the market value of the common stock at the date of grant. 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 nonemployee directors of the Company. Options vest ratably over a four-year period beginning on the grant date and expire ten years from the date of grant. Shares available for granting options at April 30, 1997 and 1996 were 2.3 million and 3.8 million, respectively. For SFAS No. 123 purposes, the fair value of each option grant has been estimated as of the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions for grants in 1997 and 1996: expected dividend yield of 0%, expected volatility of 42%, risk-free interest rates of 6.33% and 6.08%, and expected lives of 5.5 years. Using these assumptions, the fair value of options granted in 1997 and 1996 is approximately $7,457,000 and $1,639,000, respectively, which would be amortized as compensation expense over the vesting period of the options. F-11 MILLER INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) Had compensation cost for 1997 and 1996 stock option grants been determined based on the fair value at the grant dates consistent with the method prescribed by SFAS No. 123, the Company's net income and net income per share would have been adjusted to the pro forma amounts indicated below:
1997 1996 ------- ------ Net income (in thousands): As reported............................................. $14,521 $9,027 Pro forma............................................... 13,624 8,864 Net income per share: As reported............................................. $ 0.35 $ 0.26 Pro forma............................................... 0.33 0.26
The pro forma effect on net income in this disclosure is not representative of the pro forma effect on net income in future years because it does not take into consideration pro forma compensation expense related to grants made prior to 1996. A summary of the activity of stock options during 1997, 1996, and 1995 is presented below (shares in thousands):
1997 1996 1995 ---------------- ---------------- ---------------- WEIGHTED WEIGHTED WEIGHTED SHARES AVERAGE SHARES AVERAGE SHARES AVERAGE UNDER EXERCISE UNDER EXERCISE UNDER EXERCISE OPTION PRICE OPTION PRICE OPTION PRICE ------ -------- ------ -------- ------ -------- Outstanding at Beginning of Year...................... 2,776 $ 2.98 1,915 $2.36 0 $0.00 Granted.................. 1,529 11.28 898 4.29 1,929 2.36 Exercised................ (515) 2.55 (18) 2.33 0 0 Forfeited................ (22) 6.67 (19) 2.77 (14) 2.33 ----- ------ ----- ----- ----- ----- Outstanding at End of Year...................... 3,768 $ 6.39 2,776 $2.98 1,915 $2.36 ===== ====== ===== ===== ===== ===== Options exercisable at year-end.................. 811 $ 3.25 509 $2.38 0 $0.00 ===== ====== ===== ===== ===== ===== $ 5.54 $2.06 N/A ====== ===== =====
A summary of the exercise prices for options outstanding under the Company's stock-based compensation plans at April 30, 1997 is presented below (shares in thousands):
WEIGHTED AVERAGE EXERCISE SHARES WEIGHTED PRICE OF EXERCISE UNDER AVERAGE SHARES SHARES PRICE RANGE OPTION REMAINING LIFE EXERCISABLE EXERCISABLE ---------------- ------ -------------- ----------- ----------- $ 2.33 $ 3.37 1,425 7.27 577 $ 2.41 3.78 5.48 722 8.28 188 4.19 5.75 7.64 95 8.80 16 6.96 8.79 12.88 1,395 9.41 30 11.66 13.38 18.00 131 9.81 0 0.00 ----- ---- --- ------ Total....... 3,768 8.38 811 $ 3.25 ===== ==== === ======
7. LEASE COMMITMENTS The Company has entered into various operating leases for buildings and office equipment. Rental expense under these leases was $455,000, $892,000, and $908,000 for 1997, 1996, and 1995, respectively. F-12 MILLER INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) At April 30, 1997, future minimum lease payments under noncancellable operating leases for the next five fiscal years are as follows (in thousands): 1998.................................. $1,570 1999.................................. 1,524 2000.................................. 1,399 2001.................................. 1,225 2002.................................. 1,080
8. LITIGATION The Company is party to certain proceedings incidental to 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 Company's financial position or results of operations. In January 1996, the Company was awarded a judgment in a patent infringement suit in the United States District Court for the Northern District of Iowa at Sioux City, Iowa in which the jury found the defendant manufacturer and distributor of towing equipment willfully infringed both the Company's underlift parallel linkage and L-arm patents and that the common owner of the manufacturer and distributor induced the infringement. The judgment was paid to the Company in August 1996 in the amount of approximately $1.8 million, which included enhanced damages for willfulness and pre-judgment and post- judgment interest and a broad permanent injunction against future infringement by the defendants. Defendants were not granted a license to use the Company's L-arm technology. With this payment, both the Company and the defendants withdrew their appeals, and the judgment, therefore, became a final judgment. During the year ended April 30, 1995, Vulcan reached an agreement to settle its patent infringement litigation against another towing equipment manufacturer. As part of the settlement, Vulcan received $600,000 in cash from the manufacturer in June 1995. 9. INCOME TAXES Deferred tax assets and liabilities are determined based on the differences between the financial and tax bases of existing assets and liabilities using the currently enacted tax rates in effect for the year in which the differences are expected to reverse. The provision for income taxes consisted of the following for 1997, 1996, and 1995 (in thousands):
1997 1996 1995 ------ ------ ------ Current: Federal........................................... $7,973 $4,041 $3,045 State............................................. 938 570 551 Foreign........................................... 228 124 0 ------ ------ ------ 9,139 4,735 3,596 ------ ------ ------ Deferred: Federal........................................... (612) 388 112 State............................................. (72) (11) 28 Foreign........................................... (19) (4) 0 ------ ------ ------ (703) 373 140 ------ ------ ------ $8,436 $5,108 $3,736 ====== ====== ======
F-13 MILLER INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) The principal differences between the federal statutory tax rate and the consolidated effective tax rate for 1997, 1996, and 1995 were as follows:
1997 1996 1995 ---- ---- ---- Federal statutory tax rate............................... 34.0% 34.0% 34.0% State taxes, net of federal tax benefit.................. 4.0 4.0 4.0 Effect of S corporations acquired........................ (3.1) (1.7) (2.5) Other.................................................... 1.8 (0.2) (2.2) ---- ---- ---- Effective tax rate....................................... 36.7% 36.1% 33.3% ==== ==== ====
Deferred income taxes and liabilities for 1997 and 1996 reflect the impact of temporary differences between the amounts of assets and liabilities for financial reporting and income tax reporting purposes. Temporary differences and carryforwards which give rise to deferred tax assets and liabilities at April 30, 1997 and 1996 are as follows (in thousands):
1997 1996 ------ ----- Deferred tax assets: Allowance for doubtful accounts............................ $ 621 $ 245 Accruals and reserves...................................... 4,105 1,149 Inventory and related reserves............................. 185 25 Tax credit carryforwards................................... 0 127 Other...................................................... 12 74 ------ ----- Total deferred tax assets................................ 4,923 1,620 ------ ----- Deferred tax liabilities: Property, plant, and equipment............................. 2,060 998 Other...................................................... 182 7 ------ ----- Total deferred tax liabilities........................... 2,242 1,005 ------ ----- Net deferred tax asset....................................... $2,681 $ 615 ====== =====
In management's opinion, the net deferred tax asset will be realized through the recognition of taxable income in future periods. 10. SALE OF FINANCE RECEIVABLES In April 1997, the Company entered into an agreement to sell certain finance receivables to a third party leasing company for $24,596,000. The resulting gain on the sale did not have a material impact on the Company's financial statements. The agreement contingently obligates the Company to indemnify the leasing company for any losses it incurs up to specified amounts in the event the lessee defaults. The Company believes that any equipment returned as a result of lessee defaults could be sold to third parties at amounts approximating the debt obligations under the lease. The Company's aggregate potential liability under the agreement as of April 30, 1997 was $6,280,000. Management believes its reserves for such recourse provisions are adequate to cover its exposures under the agreement. No payments have been required under these arrangements to date. 11. PREFERRED STOCK The Company has authorized 5,000,000 shares of undesignated preferred stock 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 have been issued. F-14 MILLER INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 12. EMPLOYEE BENEFIT PLAN During 1996, the Company established a contributory retirement plan (the "401(k) Plan") for all full-time employees with at least 90 days of service. The 401(k) 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 401(k) Plan provides that each participant may contribute up to 15% of his or her salary. The Company matches 33.33% of the first 3% of participant contributions. Matching contributions vest over a period of five years. All funds contributed by the participants are immediately vested. Under the terms of the 401(k) Plan, the Company may also make discretionary profit- sharing contributions. Profit-sharing contributions are allocated among participants based on their annual compensation. Each participant has the right to direct the investment of his or her funds among certain named investment options. Upon death, disability, retirement, or the termination of employment, participants may elect to receive periodic or lump-sum payments. Additionally, amounts may be withdrawn in cases of demonstrated hardship. Company contributions to the 401(k) Plan were not significant in 1997. 13. SEGMENT INFORMATION The Company operates in two principal industry segments: (i) manufacturing and distribution and (ii) towing services.
MANUFACTURING TOWING AND DISTRIBUTION SERVICES CONSOLIDATED ---------------- -------- ------------ 1997 Net sales $254,977 $37,417 $292,394 Operating earnings.................. 21,200 2,377 23,577 Interest expense (income), net...... (271) 891 620 Earnings before income taxes and extraordinary gain.................. 21,471 1,486 22,957 Depreciation and amortization....... 2,983 2,799 5,782 Capital expenditures................ 7,996 3,077 11,073 Identifiable assets................. 149,740 65,557 215,297 1996 Net sales 163,810 16,653 180,463 Operating earnings.................. 12,903 1,441 14,344 Interest expense, net............... 31 178 209 Earnings before income taxes and extraordinary item.................. 12,747 1,388 14,135 Depreciation and amortization....... 1,259 1,503 2,762 Capital expenditures................ 7,246 3,161 10,407 Identifiable assets................. 114,054 9,924 123,978 1995 Net sales 125,899 13,880 139,779 Operating earnings.................. 10,016 1,574 11,590 Interest expense, net............... 228 142 370 Earnings before income taxes and extraordinary item.................. 9,788 1,432 11,220 Depreciation and amortization....... 781 1,236 2,017 Capital expenditures................ 2,100 1,932 4,032 Identifiable assets................. 58,989 7,029 66,018
F-15 MILLER INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 14. FAIR VALUE OF FINANCIAL INSTRUMENTS The carrying values of cash and temporary investments, accounts receivable, accounts payable, and accrued liabilities are reasonable estimates of their fair values because of the short maturity of these financial instruments. The carrying values of long-term obligations is a reasonable estimate of their fair values based on the rates available for obligations with similar terms and maturities. 15. QUARTERLY FINANCIAL INFORMATION The following is a summary of the unaudited quarterly financial information for the years ended April 30, 1997 and 1996 (in thousands, except per share data):
INCOME PER COMMON SHARE INCOME BEFORE BEFORE EXTRAORDINARY EXTRAORDINARY NET INCOME NET SALES ITEM ITEM NET INCOME PER SHARE --------- ------------- ------------- ---------- ---------- Year ended April 30, 1997: First quarter......... $ 60,963 2,857 $0.07 $ 2,857 $0.07 Second quarter........ 74,061 3,516 0.09 3,516 0.09 Third quarter......... 80,261 3,852 0.09 3,852 0.09 Fourth quarter........ 77,109 4,296 0.10 4,296 0.10 -------- ------- ----- ------- ----- Total............... $292,394 $14,521 $0.35 $14,521 $0.35 ======== ======= ===== ======= ===== Year ended April 30, 1996: First quarter......... $ 40,463 $ 1,591 $0.05 $ 1,591 $0.05 Second quarter........ 43,720 2,268 0.07 2,268 0.07 Third quarter......... 45,979 2,436 0.07 2,436 0.07 Fourth quarter........ 50,301 2,732 0.07 2,732 0.07 -------- ------- ----- ------- ----- Total............... $180,463 $ 9,027 $0.26 $ 9,027 $0.26 ======== ======= ===== ======= =====
16. RECLASSIFICATIONS Certain reclassifications have been made to prior years' financial information to conform with the 1997 presentation. F-16 FINANCIAL STATEMENT SCHEDULES REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Directors and Stockholders of Miller Industries, Inc.: We have audited in accordance with generally accepted auditing standards, the consolidated financial statements of Miller Industries, Inc. and subsidiaries included in this Form 10-K and have issued our report thereon dated July 15, 1997. Our audit was made for the purpose of forming an opinion on the basic financial statements taken as a whole. The schedule listed in the index is the responsibility of the Company's management and is presented for purposes of complying with the Securities and Exchange Commissions's rules and is not part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole. ARTHUR ANDERSEN LLP Chattanooga, Tennessee July 15, 1997 S-1 MILLER INDUSTRIES, INC. AND SUBSIDIARIES SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
BALANCE AT BALANCE AT BEGINNING CHARGED TO CHARGED TO ACCOUNTS END OF PERIOD EXPENSES OTHER WRITTEN OFF OF PERIOD ---------- ---------- ---------- ----------- ---------- (IN THOUSANDS) Year ended April 30, 1995: Deduction from asset accounts: Allowance for doubtful accounts.. $ 679 147 0 (57) $ 769 Year ended April 30, 1996: Deduction from asset accounts: Allowance for doubtful accounts.. $ 769 160 413(a) (77) $1,265 Year ended April 30, 1997: Deduction from asset accounts: Allowance for doubtful accounts.. $1,265 174 474(a) (139) $1,774
- -------- (a) The other addition to the allowance for doubtful accounts results from the acquisitions in fiscal 1996 and 1997 which were accounted for under the purchase method of accounting. S-2 SIGNATURES 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 29TH DAY OF JULY, 1997. Miller Industries, Inc. By: /s/ William G. Miller --------------------------------- WILLIAM G. MILLER CHAIRMAN AND CO-CHIEF EXECUTIVE OFFICER POWER OF ATTORNEY Know all men by these presents, that each person whose signature appears below constitutes and appoints William G. Miller and Adam L. Dunayer, and either of them, as attorneys-in-fact, with 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 may 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 29TH DAY OF JULY, 1997. SIGNATURE TITLE --------- ----- /s/ William G. Miller Chairman of the Board and - ------------------------------------- Co-Chief Executive Officer WILLIAM G. MILLER /s/ Jeffrey I. Badgley President, Co-Chief - ------------------------------------- Executive Officer and JEFFREY I. BADGLEY Director /s/ Adam L. Dunayer Vice President, Treasurer - ------------------------------------- and Chief Financial Officer ADAM L. DUNAYER (Principal Financial and Accounting Officer) /s/ A. Russell Chandler, III Director - ------------------------------------- A. RUSSELL CHANDLER, III /s/ Paul E. Drack Director - ------------------------------------- PAUL E. DRACK /s/ Stephen A. Furbacher Director - ------------------------------------- STEPHEN A. FURBACHER /s/ Richard H. Roberts Director - ------------------------------------- RICHARD H. ROBERTS II-1 EX-3.2 2 ARTICLES OF AMENDMENT OF MILLER INDUSTRIES ARTICLES OF AMENDMENT OF MILLER INDUSTRIES, INC. 1. The name of the corporation is Miller Industries, Inc. (the "Corporation"). 2. The Charter of the Corporation is amended by striking the first paragraph of Article 8 of the Charter in its entirety and inserting in lieu thereof the following: The maximum number of shares of capital stock which the Corporation shall have the authority to issue is One Hundred Five Million (105,000,000) shares, of which One Hundred Million (100,000,000) shares are designated Common Stock with a part value of one cent ($.01) per share, and Five Million (5,000,000) shares are designated Preferred Stock with a par value of one cent ($.01) per share. 3. The Charter of the Corporation is further amended by striking the second sentence of the first paragraph of Article 9 of the Charter in its entirety and inserting in lieu thereof the following: The number of directors of the Corporation shall not be less than three (3) nor more than fifteen (15), the exact number to be fixed by, or in the manner provided in, the Bylaws. 4. Both of the foregoing amendments to the Charter were duly adopted by the shareholders of the Corporation on August 30, 1996. IN WITNESS WHEREOF, the Corporation has caused these Articles of Amendment to be executed by its duly authorized officer this 5th day of September, 1996. MILLER INDUSTRIES, INC. By: /s/ Frank Madonia --------------------------------- Name: Frank Madonia ------------------------------- Title: Vice President ------------------------------ CHARTER ------- OF -- MILLER INDUSTRIES, INC. ----------------------- The undersigned person, having capacity to contract and acting as the incorporator of a corporation under the Tennessee Business Corporation Act, (the "Act"), adopts the following Charter for the corporation named above (the "Corporation"): 1. The name of the Corporation is: Miller Industries, Inc. 2. (a) The street address and zip code of the initial registered office of the Corporation is: 8503 Hilltop Drive Ooltewah, Tennessee 37363 (b) The initial registered office of the Corporation is located in Hamilton County, Tennessee. (c) The initial registered agent in the registered office is: Frank Madonia 3. The name, address, and zip code of the incorporator is: Richard H. Roberts, Esq. Baker, Worthington, Crossley, Stansberry & Woolf 1700 Nashville City Center 511 Union Street Nashville, Tennessee 37219 4. The street address and zip code of the principal office of the Corporation in the State of Tennessee is: 8503 Hilltop Drive Ooltewah, Tennessee 37363 5. The Corporation is for profit. 6. The powers of the incorporator are to terminate upon filing of the Charter and the name and address of the individual who is to serve as the initial director of the Corporation is as follows: William G. Miller 8503 Hilltop Drive Ooltewah, Tennessee 37363 7. The purposes for which the Corporation is organized are to do any and all things and to exercise any and all powers, rights, and privileges which a corporation may now or hereafter be organized to do, or to exercise, under the Act, as such is amended, from time to time. 8. The maximum number of shares of capital stock which the Corporation shall have the authority to issue is twenty-five million (25,000,000) shares, of which twenty million (20,000,000) shares are designated Common Stock with a par value of one cent ($.01) per share, and five million (5,000,000) shares are designated Preferred Stock with a par value of one cent ($.01) per share. The designations, preferences, privileges and powers and relative, participating, optional or other special rights and qualifications, limitations or restrictions of the above classes of capital stock shall be as follows: (a) Preferred Stock. --------------- (1) Shares of Preferred Stock may be divided into and issued in one or more series at such time or times and for such consideration as the Board of Directors may determine. All shares of any one series shall be of equal rank and identical in all respects. (2) Authority is hereby expressly granted to the Board of Directors to fix and determine from time to time, by resolution or resolutions providing for the establishment and/or issuance of any series of Preferred Stock, the designation of such series and the powers, preferences, and rights of the shares of such series, and the qualifications, limitations or restrictions thereof, as the Board of Directors may deem advisable and to the fullest extent now or hereafter permitted by the laws of the State of Tennessee. The resolution or resolutions providing for the establishment and/or issuance of such series of Preferred Stock shall set forth: (i) the designation and number of shares comprising each series; (ii) the rate of dividends, if any, and whether such dividends shall be noncumulative, cumulative to the extent earned, or cumulative and, if cumulative, from which date or dates; (iii) whether the shares shall be redeemable and, if so, the terms and conditions of such redemption; (iv) whether there shall be a sinking fund for the redemption; (v) the rights to which the holders of the shares shall be entitled in the event of voluntary or involuntary liquidation, dissolution or winding-up of the Corporation, and the priority of payment of shares in any such event; (vi) whether the shares shall be convertible into or exchangeable for shares of any other class or any other series and the terms thereof; and (vii) all other preferences, privileges and powers and relative, participating, optional or other special rights and qualifications, limitations or restrictions of such series. -2- (3) The shares of Preferred Stock shall have no voting power or voting rights with respect to any matter whatsoever, except as may be otherwise required by law or may be provided in the resolution or resolutions of the Board of Directors creating the series of which such shares are a part. (4) Authority is hereby expressly granted to the Board of Directors to make any change in the designations, terms, limitations or relative rights or preferences of any series of Preferred Stock in the same manner as provided for in the issuance of Preferred Stock, so long as no shares of such series are outstanding at such time. (b) Common Stock. ------------ (1) After the requirements with respect to preferential dividends, if any, on any series of Preferred Stock (fixed pursuant to resolutions as provided in Article 8(a) above) shall have been met, and after the Corporation shall have complied with all requirements, if any, with respect to the setting aside of sums in a sinking fund for the purchase or redemption of shares of any series of Preferred Stock (fixed pursuant to resolutions as provided in Article 8(a) above), then, and not otherwise, the holders of Common Stock shall receive, to the extent permitted by law and to the extent the Board of Directors shall determine, such dividends as may be declared from time to time by the Board of Directors. (2) After distribution in full of the preferential amount, if any (fixed pursuant to resolutions as -provided in Article 8(a) ------------ above), to be distributed to the holders of any series of Preferred Stock in the event of the voluntary or involuntary liquidation, dissolution or winding-up of the Corporation, the holders of the Common Stock shall be entitled to receive such of the remaining assets of the Corporation of whatever kind available for distribution to the extent the Board of Directors shall determine. (3) Except as may be otherwise required by law or by the Charter of the Corporation, as amended, each holder of Common Stock shall have one vote in respect of each share of such stock held by him on all matters voted upon by the shareholders. (c) Preemptive Rights. No holder of shares of the ----------------- Corporation of any class, now or hereafter authorized, shall have any preferential or preemptive right to subscribe for, purchase or receive any shares of stock of the Corporation of any class, now or hereafter authorized, or any options or warrants for such shares, or any rights to subscribe to or purchase such shares, or any securities convertible into or exchangeable for such shares, which may at any time or from time to time be issued, sold or offered for sale by the Corporation. 9. All corporate powers shall be exercised by or under the authority of, and the business and affairs of the Corporation shall be managed under the direction of, a Board of Directors. The number of directors of the Corporation shall be not less than three nor more than seven, the exact number to be fixed by, or in the manner provided in, the Bylaws. The Board of Directors shall be divided into three classes serving staggered three-year terms, as nearly equal in number as possible, respectively designated "Class I", "Class II" and "Class III" directors. The initial Class I, Class II and Class III directors shall be elected by the shareholders of the -3- Corporation. The initial Class I directors shall hold office until the 1995 annual meeting of shareholders, the initial Class II directors shall hold office until the 1996 annual meeting of shareholders and the initial Class III directors shall hold office until the 1997 annual meeting of shareholders. In each case, directors shall serve until their respective successors shall have been elected and qualified, subject to their earlier death, resignation, or removal. At each annual meeting of shareholders commencing with the 1995 annual meeting of shareholders, directors to replace the Class whose term of office expires at such meeting shall be elected to hold office for three year terms, and in each case until their respective successors shall have been elected and qualified, subject to their earlier death, resignation or removal. If the number of directors is changed, any increase or decrease shall be apportioned among the classes so as to maintain the number of directors in each class as nearly equal as possible, but in no case will a decrease in the number of directors shorten the term of any incumbent director. Any vacancy on the Board of Directors that results from an increase in the number of directors shall be filled only by a majority of the Board of Directors then in office, and any other vacancy occurring in the Board of Directors shall be filled only by a majority of the directors then in office, although less than a quorum, or by a sole remaining director. Any director may be removed from office but only for cause and only by (a) the affirmative vote of the holders of a majority of the voting power of the shares entitled to vote for the election of directors, considered for this purpose as one class, unless a vote of a specific voting group is otherwise required by law, or (b) the affirmative vote of a majority of the entire Board of Directors then in office. Notwithstanding the foregoing, whenever the holders of any one or more classes or series of preferred stock issued by the Corporation shall have the right, voting separately, by class or series, to elect directors at an annual or special meeting of shareholders, the election, term of office, filling of vacancies, and other features of such directorships shall be governed by the terms of this Charter applicable thereto, and such directors so elected shall not be divided into classes pursuant to this Article 9 unless expressly provided by such terms. In the event of a vacancy among the directors so elected by the holders of preferred stock, the remaining directors elected by the holders of preferred stock may fill the vacancy. Notwithstanding any other provisions of this Charter, the affirmative vote of holders of 66 2/3% of the voting power of the shares entitled to vote at an election of directors shall be required to amend, alter, change, or repeal, or to adopt any provision as part of this Charter or as part of the Corporation's Bylaws inconsistent with the purpose and intent of, this Article 9. 10. The Corporation shall have and exercise all powers necessary or convenient to effect any or all of the purposes for which the Corporation is organized and shall likewise have the powers provided by the Act, or as the same shall hereafter be amended. -4- 11. (a) To the fullest extent permitted by the laws of the State of Tennessee, including without limitation, the Act, as it exists on the date hereof or as it may hereafter be amended, no director of the Corporation shall be personally liable for monetary damages to the Corporation or its shareholders for any breach of fiduciary duty as a director. If the laws of the State of Tennessee, including, without limitation, the Act, are amended after approval of this Charter to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the Act, as so amended. Any repeal or modification of this Article 11 by the shareholders shall not adversely affect any right or protection of a director existing at the time of such repeal or modification or with respect to events occurring prior to such time. (b) The Corporation shall have the power to indemnify any director, officer, employee, agent of the Corporation, or any other person who is serving at the request of the Corporation in any such capacity with another corporation, partnership, joint venture, trust, or other enterprise to the fullest extent permitted by the law of the State of Tennessee as it exists on the date hereof or as it may hereafter be amended, and any such indemnification may continue as to any person who has ceased to be a director, officer, employee or agent and may inure to the benefit of the heirs, executors and administrators of such person. 12. The directors of the Corporation shall have the right to take any action required or permitted by vote without a meeting on written consent to the fullest extent permitted by the Act, or as the same shall hereafter be amended. 13. In taking or not taking any action in response to an Acquisition Proposal (as defined below), the Board of Directors of the Corporation may consider the social and economic effects of consummation of the Acquisition Proposal on the employees, customers, suppliers, and other constituents of the Corporation and its subsidiaries and on the communities in which the Corporation and its subsidiaries operate or are located and the desirability of maintaining the Corporation's independence from other entities. For purposes of this Article 13, "Acquisition Proposal" means an offer of any person or entity (other than the Corporation) to (a) make a tender or exchange offer for any equity security of the Corporation or any other security of the Corporation convertible into an equity security, (b) merge or consolidate the Corporation with another person or entity, or (c) purchase or otherwise acquire all or substantially all of the properties and assets of the Corporation and its subsidiaries. 14. The Corporation shall hold a special meeting of shareholders only in the event (a) of a call of the Board of Directors of the Corporation or the officers authorized to do so by the Bylaws of the Corporation, or (b) the holders of at least fifteen percent of all the votes entitled to be cast on any issue proposed to be considered at the proposed special meeting sign, date, and deliver to the Corporation's secretary one or more written demands for the meeting describing the purpose or purposes for which it is to be held. 15. The Corporation shall enjoy and be subject to such benefits, privileges and immunities and such restrictions, liabilities and obligations as are provided with respect to -5- corporations for profit generally by the laws of the land and which are held applicable to corporations for profit organized under the Act, or as the same shall hereafter be amended. Dated this 28th day of April, 1994. /s/ Richard H. Roberts ---------------------------------------- Richard H. Roberts Incorporator -6- EX-10.45 3 FOURTH AMENDMENT TO THE LOAN AGREEMENT FOURTH AMENDMENT TO LOAN AGREEMENT DATED JUNE 28, 1994 ------------------------------------------------------ This Fourth Amendment to Loan Agreement is hereby made and entered into on this 29th day of February, 1996, by and between NationsBank of Tennessee, N.A. (hereinafter referred to as "Lender") and Miller Industries, Inc. (hereinafter referred to as "Borrower") and Century Holdings, Inc., Champion Carrier Corporation, Miller Industries Towing Equipment, Inc. f/k/a Century Wrecker Corporation and Century Finance Group, Inc. (hereinafter collectively referred to as "Guarantor") and Miller Industries International, Inc. (hereinafter referred to as "New Guarantor"); W I T N E S S E T H - - - - - - - - - - WHEREAS, Lender, Century Wrecker Corporation, Century Holdings, Inc. and Champion Carrier Corporation, as Guarantors, and Miller Industries, Inc., as Borrower, entered into a Loan Agreement dated June 28, 1994 (hereinafter referred to as the "Loan Agreement") whereby Lender agreed to loan to Borrower up to Fifteen Million Dollars ($15,000,000) (hereinafter referred to as the "Loan"), and whereby Century Holdings, Inc., Champion Carrier Corporation and Century Wrecker Corporation agreed to guarantee all of the Obligations (as that term is defined in the Loan Agreement) of the Borrower to Lender by each separately executing Guaranty Agreements (hereinafter referred to as the "Guaranty Agreements"); and WHEREAS, pursuant to an Amendment to Certain Loan Documents dated December 30, 1994, by and between Lender and Miller Industries Towing Equipment, Inc. f/k/a Century Wrecker Corporation and Century Finance Group, Inc., the Loan Agreement was amended to reflect the merger of Century Wrecker Corporation and Century Finance Group, Inc. and the name change of the merged entities to Miller Industries Towing Equipment, Inc., to recognize the liability and obligation of Miller Industries Towing Equipment, Inc., as a Guarantor under the Loan Agreement and Loan Documents in the place of Century Wrecker Corporation and to amend Section 7.6 of the Loan Agreement to allow the merger and name change; and ----------- WHEREAS, on or about March 30, 1995, the Lender, Borrower and Guarantors entered into a Second Amended Loan Agreement whereby the interest rate payable by Borrower to Lender on the Revolving Line of Credit was amended; and WHEREAS, on or about December 29, 1995, Lender, Borrower, Guarantors and New Guarantor entered into a Third Amended Loan Agreement and Amendment to Guaranty Agreements whereby the amount of indebtedness under the Loan was increased from $15,000,000 to an amount up to $25,000,000, the interest rate was amended, the financial covenants were revised, the Guarantors affirmed and confirmed their guaranty of the Obligations of Borrower to Lender including the increase in the indebtedness to an amount up to $25,000,000 and New Guarantor agreed to guarantee all of the Obligations of Borrower to Lender and to be bound by the terms of the Loan Agreement and all amendments thereto; and WHEREAS, Lender has agreed to loan to Guarantor Champion Carrier Corporation the principal sum of Seven Hundred Thousand Dollars ($700,000) for the purchase of an existing facility which is located in Hermitage, Pennsylvania plus five acres in addition to completing a 22,500 square foot expansion of the existing facility and such loan is contemplated in the Loan Agreement as a permitted lien (hereinafter the "$700,000 Loan"); and WHEREAS, New Guarantor, Guarantors, Lenders and Borrower desire that an event of default under the $700,000 Loan from Lender to Guarantor Champion Carrier Corporation and the loan documents executed pursuant thereto (hereinafter the "$700,000 Loan Documents") constitute an event of default under this Loan Agreement. NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, the parties do hereby agree as follows: 1. The Loan Agreement is hereby amended to add an event of default as follows: (a) Section 9.1 of the Loan Agreement is amended to add Section 9.1(p) ----------- -------------- which states as follows: Section 9.1(p). There occurs an event of default under the terms and -------------- conditions of the Loan Agreement executed by and between Lender and Guarantor Champion Carrier Corporation dated _____________________, 1996, or under the terms and conditions of any of the Loan Documents (as such term is defined in the Loan Agreement dated ______________, 1996) executed pursuant to such Loan Agreement. 2. All of the terms and conditions of the Loan Agreement and Amendment to Certain Loan Documents not specifically amended herein, are hereby incorporated by reference and are confirmed by the Borrower, Miller Industries Towing Equipment, Inc., Champion Carrier Corporation, Century Holdings, Inc. and Miller Industries International, Inc. to remain in full force and effect. IN WITNESS WHEREOF, the parties hereby have executed this Agreement on the date first above written. 2 NATIONSBANK OF TENNESSEE, N.A. By: /s/ ------------------------------- Title: Senior Vice President ---------------------------- LENDER CENTURY HOLDINGS, INC. By: /s/ ------------------------------- Title: ---------------------------- GUARANTOR CHAMPION CARRIER CORPORATION By: /s/ ------------------------------- Title: ---------------------------- GUARANTOR MILLER INDUSTRIES INTERNATIONAL, INC. By: /s/ ------------------------------- Title: ---------------------------- 3 MILLER INDUSTRIES TOWING EQUIPMENT, INC. f/k/a Century Wrecker Corporation and Century Finance Group, Inc. By: /s/ ------------------------------- Title: ---------------------------- GUARANTOR MILLER INDUSTRIES, INC. By: /s/ ------------------------------- Title: ---------------------------- BORROWER 4 EX-10.46 4 FIFTH AMENDMENT TO THE LOAN AGREEMENT FIFTH AMENDMENT TO LOAN AGREEMENT AND ------------------------------------- AMENDMENT TO GUARANTY AGREEMENTS -------------------------------- This Fifth Amendment to Loan Agreement and Amendment to Guaranty Agreements is hereby made and entered into as of the 30th day of April, 1997, by and between NationsBank of Tennessee, N.A., a national banking association (hereinafter referred to as "Lender") and Miller Industries, Inc., a Tennessee corporation, (hereinafter referred to as "Borrower") and Century Holdings, Inc. ("Century Holdings"), a Tennessee corporation and a wholly-owned subsidiary of Borrower, Champion Carrier Corporation ("Champion"), a Delaware corporation and a wholly-owned subsidiary of Century Holdings, Miller Industries Towing Equipment, Inc. f/k/a Century Wrecker Corporation and Century Finance Group, Inc. ("Towing Equipment"), a Delaware corporation and a wholly-owned subsidiary of Century Holdings and Miller Industries International, Inc. ("International") (Century Holdings, Champion, Towing Equipment and International are collectively hereinafter referred to as "Guarantors"); W I T N E S S E T H - - - - - - - - - - WHEREAS, Lender, Century Wrecker Corporation, Century Holdings and Champion, as Guarantors, and Miller Industries, Inc., as Borrower, entered into a Loan Agreement dated June 28, 1994 (hereinafter referred to as the "Loan Agreement") whereby Lender agreed to loan to Borrower up to Fifteen Million Dollars ($15,000,000) (hereinafter referred to as the "Loan"), and whereby Century Holdings, Champion and Century Wrecker Corporation agreed to guarantee all of the Obligations (as that term is defined in the Loan Agreement) of the Borrower to Lender by each separately executing Guaranty Agreements (hereinafter referred to as the "Guaranty Agreements"); and WHEREAS, pursuant to an Amendment to Certain Loan Documents dated December 30, 1994, by and between Lender and Miller Industries Towing Equipment, Inc. f/k/a Century Wrecker Corporation and Century Finance Group, Inc., the Loan Agreement was amended to reflect the merger of Century Wrecker Corporation and Century Finance Group, Inc. and the name change of the merged entities to Miller Industries Towing Equipment, Inc., to recognize the liability and obligation of Miller Industries Towing Equipment, Inc., as a Guarantor under the Loan Agreement and Loan Documents in the place of Century Wrecker Corporation and to amend Section 7.6 of the Loan Agreement to allow the merger and name change; and ----------- WHEREAS, on or about March 30, 1995, the Lender, Borrower and Century Holdings, Champion and Towing Equipment, as Guarantors, entered into a Second Amended Loan Agreement whereby the interest rate payable by Borrower to Lender on the Revolving Line of Credit was amended; and WHEREAS, on or about December 29, 1995, Lender, Borrower and Guarantors entered into a Third Amended Loan Agreement and Amendment to Guaranty Agreements whereby the amount of indebtedness under the Loan was increased from $15,000,000 to an amount up to $25,000,000, the interest rate was amended, the financial covenants were revised, the Guarantors affirmed and confirmed their guaranty of the Obligations of Borrower to Lender including the increase in the indebtedness to an amount up to $25,000,000 and Guarantor International agreed to guarantee all of the Obligations of Borrower to Lender and to be bound by the terms of the Loan Agreement and all amendments thereto; and WHEREAS, on or about February 29, 1996, Lender, Borrower and Guarantors entered into a Fourth Amended Loan Agreement whereby the Loan Agreement was amended to add that an event of default under the $700,000 loan from Lender to Guarantor Champion constituted an event of default under the Loan Agreement; and WHEREAS, Lender, Borrower and Guarantors desire to enter into this Fifth Amendment to Loan Agreement and Amendment to Guaranty Agreements to increase the amount of indebtedness under the Revolving Line of Credit Note, to extend the maturity date, to amend the interest rate, to revise financial covenants, to revise reporting requirements and to make other amendments that will be set forth more particularly herein, and to affirm and confirm the guaranty of the Guarantors of the increase in the amount of the indebtedness from $25,000,000 to $50,000,000; NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, the parties do hereby agree as follows: 1. The Loan Agreement as amended, is hereby further amended as follows: (a) Any reference in the Loan Agreement, or in any amendment thereto, to the term "Termination Date" or "Maturity Date" shall now mean September 1, 1998. (b) Any reference in the Loan Agreement, or in any amendment thereto, to $25,000,000 as the maximum aggregate principal amount outstanding under the Revolving Line of Credit shall be deleted and the amount of $50,000,000 shall be inserted in its place. (c) The definition of "Applicable LIBOR Rate Margin" set forth in Section ------- 1.1 of the Loan Agreement, as amended in the Second Amended Loan --- Agreement and the Third Amended Loan Agreement, shall be amended and restated in its entirety as follows: "Applicable LIBOR Rate Margin" shall mean eighty (80) basis points. (d) Section 2.3(a) regarding the interest rate shall be amended and -------------- restated in its entirety as follows: Section 2.3. Interest Rate, Payment Date and Default Rate. --------------------------------------------- 2 (a) The Revolving Line of Credit Note shall bear interest for each day during the Interest Period with respect thereto at a rate per annum equal to the LIBOR Rate plus the applicable LIBOR Rate Margin (80 basis points). Section 2.3(b) and Section 2.3(c) shall remain unchanged as set forth -------------- -------------- in the Loan Agreement. (e) Section 2.5 shall be amended and restated in its entirety as follows: ----------- Section 2.5. Use of Proceeds. Borrower shall use the proceeds of the ---------------- Revolving Line of Credit Note for short term working capital needs, bridge financing for acquisitions and issuance, amendment or modification of stand-by letters of credit not to exceed a one year tenure. (f) Section 6.2 entitled Financial Statements, as amended in the Third ----------- -------------------- Amended Loan Agreement, shall be amended and restated in its entirety as follows: Section 6.2. Financial Statements. Furnish to Lender (i) as soon as -------------------- practicable and in any event within one hundred twenty (120) days after the end of each fiscal year of Borrower, a consolidated balance sheet of Borrower and Guarantors as of the close of such fiscal year, and an income statement prepared in accordance with generally accepted accounting principals on an audited basis by an independent certified public accountant acceptable to the Lender, including statements of financial condition, income, cash flows and changes in shareholders' equity; (ii) within the same time frame as (i) above, a covenant calculation certificate for the period ending with the fiscal year; (iii) within forty-five (45) days after each quarterly period of each fiscal year of Borrower, internally prepared financial statements of the Borrower, including a balance sheet and income statement and a covenant compliance calculation certificate; (iv) promptly upon receipt thereof, copies of all financial reports, in addition to those provided pursuant to clauses (i), (ii) and (iii) hereinabove, submitted to Borrower and Guarantors by independent certified public accountant; and (v) with reasonable promptness such other data as Lender may request. (g) Section 7.1 of the Loan Agreement entitled Financial Condition ----------- ------------------- Covenants shall be amended as follows: --------- Section 7.1(a) entitled Maintenance of Consolidated Net Worth shall be -------------- ------------------------------------- deleted in its entirety. Section 7.1(b) entitled Maintenance of Consolidated Working Capital -------------- ------------------------------------------- shall be amended and restated in its entirety as follows: (b) Maintenance of Consolidated Working Capital. Permit ------------------------------------------- Consolidated Working Capital to be less than $20,000,000 at any time. 3 Section 7.1(c) entitled Ratio of Total Liabilities to Tangible Net -------------- ------------------------------------------ Worth shall be deleted in its entirety and replaced with the ----- following: (c) Total Debt to Tangible Net Worth. Permit the ratio of -------------------------------- Consolidated Total Liabilities to Consolidated Tangible Net Worth to be greater than 1.09 as of the end of each of Borrower's fiscal quarter. Section 7.1(d) entitled Consolidated Debt Coverage shall be deleted -------------- -------------------------- and replaced with the following: (d) Fixed Charge Ratio. Permit the Fixed Charge Ratio to be less ------------------- than 2 as of the end of each fiscal quarter. Fixed Charge Ratio is defined as earnings before interest, taxes, depreciation, amortization and rents divided by cash interest expense for the applicable period plus scheduled funded debt payments for the applicable period plus dividends and rents. Section 7.1(e) entitled Maintenance of Profitability shall be amended -------------- ---------------------------- and restated in its entirety as follows: (e) Maintenance of Profitability. Permit Consolidated Net Income ---------------------------- to be less than $1,000,000 as of the end of each fiscal year. Section 7.1(f) entitled Funded Debt Ratio shall be added to Section -------------- ----------------- ------- 7.1 and shall state as follows: --- (f) Funded Debt Ratio. Permit the ratio of total funded debt to ----------------- earnings before interest, taxes, depreciation and amortization to be greater than 3.15 as of the end of each fiscal quarter. (h) Section 7.6, as amended by the Amendment to Certain Loan Documents, ----------- entitled Merger, Name Change shall be amended and restated in its ------------------- entirety as follows: Section 7.6. Merger. Name Change. Merge or consolidate with any other ------------------- entity, or change their name, other than a merger between Guarantors, or between a Guarantor and other affiliate or subsidiary of Borrower or affiliate or subsidiary of any of the Guarantors and subsequent name change pursuant to such merger; provided, however, Borrower, -------- ------- Guarantors, or any subsidiary thereof, may merge with, consolidate with or acquire the stock or substantially all of the assets of another entity, but only if the aggregate purchase price of each such merger, consolidation or acquisition shall not exceed $10,000,000 in value. 2. Borrower and Guarantors hereby affirm and confirm that the representations and warranties contained in Article IV of the Loan Agreement remain in full ---------- force and effect 4 and such representations and warranties contained in Article IV are hereby ---------- incorporated by reference as if fully restated herein. 3. The Guarantors, by executing this Fifth Amendment to Loan Agreement and Amendment to Guaranty Agreements hereby amend the Guaranty Agreements, including the Guaranty Agreement executed by International dated December 29, 1995, to affirm and confirm their guaranty of the Obligations (as defined in the Loan Agreement, as amended from time to time) of Borrower to Lender and specifically to affirm and confirm each Guarantor's guaranty of the increase in the indebtedness of Borrower to Lender from $25,000,000 to an amount up to $50,000,000. 4. All of the terms and conditions of the Loan Agreement and all amendments thereto, the Guaranty Agreements, including the Guaranty Agreement executed by International dated December 29, 1995, and any amendments thereto, not specifically amended herein, are hereby incorporated herein by reference and are confirmed by the Borrower and Guarantors to remain in full force and effect. IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date first above written. NATIONSBANK OF TENNESSEE, N.A. By: /s/ Adam Dunayer ----------------------------- Title: Vice President, CFO -------------------------- LENDER CENTURY HOLDINGS, INC. By: /s/ Jeffrey Badgley ----------------------------- Title: Director -------------------------- GUARANTOR CHAMPION CARRIER CORPORATION By: /s/ Jeffrey Badgley ----------------------------- Title: Director -------------------------- GUARANTOR 5 MILLER INDUSTRIES INTERNATIONAL, INC. By: /s/ Jeffrey Badgley ----------------------------- Title: Director -------------------------- GUARANTOR MILLER INDUSTRIES TOWING EQUIPMENT, INC. f/k/a Century Wrecker Corporation and Century Finance Group, Inc. By: /s/ David Tatum ----------------------------- Title: Vice President of Finance -------------------------- GUARANTOR MILLER INDUSTRIES, INC. By: /s/ Adam Dunayer ----------------------------- Title: Vice President, CFO -------------------------- BORROWER 6 EX-10.47 5 SECOND RENEWAL AND MODIFICATION OF REVOLVING LINE SECOND RENEWAL AND MODIFICATION OF ---------------------------------- REVOLVING LINE OF CREDIT NOTE ----------------------------- $50,000,000 April 30, 1997 FOR VALUE RECEIVED, Miller Industries, Inc., a Tennessee corporation (hereinafter referred to as "the Maker"), hereby renews that certain Revolving Line of Credit Note dated June 28, 1994, by and between Maker and NationsBank of Tennessee, N.A. (hereinafter referred to as the "Payee" or "Holder"), in the original principal amount of $15,000,000, which Revolving Line of Credit Note was renewed and modified to increase the principal indebtedness from $15,000,000 to $25,000,000 pursuant to that certain Renewal and Modification of Revolving Line of Credit Note dated December 29, 1995, by and between Maker and Holder, (the "Renewal Note") (the Revolving Line of Credit Note and Renewal Note shall collectively be referred to herein as the "Note"), and hereby modifies said Note to increase the principal indebtedness from $25,000,000 to $50,000,000, and to change the interest rate to the LIBOR Rate plus 80 basis points, and hereby promises to pay to the order of NationsBank of Tennessee, N.A., a national banking association, whose address is 633 Chestnut Street, Chattanooga, Tennessee 37450 (hereinafter referred to as "the Payee"; the Payee and any subsequent holders of this Note being hereinafter referred to collectively as "the Holder"), at the address of the Payee set forth above, or such other place as the Holder shall designate to the Maker in writing from time to time, the principal sum of Fifty Million Dollars ($50,000,000.00) (or, if less, the aggregate unpaid principal amount of all advances made hereunder pursuant to that certain Loan Agreement dated as of June 28, 1994, by and between Maker and Holder, as amended by that certain Amendment to Certain Loan Documents dated December 30, 1994, as further amended by that certain Second Amended Loan Agreement dated March 30, 1995, as further amended by that certain Third Amended Loan Agreement dated December 29, 1995, as further amended by that certain Fourth Amendment to Loan Agreement dated February 29, 1996, and as further amended by that certain Fifth Amendment to Loan Agreement dated as of the date hereof, as these documents may be amended, modified, renewed, restated, extended or supplemented from time to time). (The Loan Agreement and all amendments thereto shall be collectively referred to herein as the "Loan Agreement"). Such principal payment shall be due and payable on September 1, 1998, or such earlier date as may be determined in accordance with the Loan Agreement ("the Termination Date"), together with all accrued and unpaid interest on said principal sum or the principal balance thereof. During the period from the date of this Note through the Termination Date, this Note may revolve and the Maker may borrow up to the maximum principal amount hereof, and repay all or any portion thereof and reborrow up to such amount on a revolving basis, subject to the terms and conditions set forth herein and in the Loan Agreement. All payments of principal and interest shall be in immediately available funds of the United States of America. Interest (calculated on the basis of a year of 360 days) shall accrue from the date of this Note on the daily amount of the unpaid principal balance of this 1 Note from time to time outstanding, at a rate per annum equal to the LIBOR Rate (as defined in the Loan Agreement) plus the Applicable LIBOR Rate Margin (80 basis points) (as defined in the Loan Agreement). The Payee will, upon request of Maker and as soon as practicable, advise the Maker of each determination of the LIBOR Rate. Any change in the interest rate resulting from a change in the Reserve Requirements (as defined in the Loan Agreement) shall become effective as of the opening of business on the day on which such change in the Reserve Requirements becomes effective. The Lender will, upon request of Payee and as soon as practicable, notify the Payee of the effective date and the amount of such change in interest rate. Interest which accrues during the term of this Note shall be due and payable in arrears on each Interest Payment Date (as defined and set forth in the Loan Agreement) until all the principal amount and interest under this Note have been paid in full. All payments made pursuant to this Note shall first be applied to pay the accrued interest and the balance shall be applied to the payment of the principal. Principal and interest not paid when due, by acceleration or otherwise, may, at the option of the Holder, accrue interest at the Default Rate (as defined in the Loan Agreement) or the highest rate allowed by applicable law, whichever is less. In no event shall the amount of interest due and payable under this Note exceed the maximum rate of interest allowed by applicable law, and in the event any such payment is paid by the Maker or received by the Holder, then such excess sum shall be credited as a payment of principal, unless the Maker shall notify the Holder, in writing, that the Maker elects to have such excess sum returned to the Maker. It is the express intent of this Note that the Maker not pay and the Holder not receive, directly or indirectly, in any manner whatsoever, interest in excess of that which may be lawfully paid by the Maker under applicable law. This Note is the second renewal and modification of the Revolving Line of Credit Note referred to in the Loan Agreement and all the duties, responsibilities and obligations of the Maker and the rights of the Holder under the Loan Agreement, any other contract, agreement and instrument previously entered into, now executed or hereafter entered into in connection with any of the foregoing, or pursuant to any other instrument evidencing or securing any other past, present or future indebtedness of the Maker to the Holder (all of the foregoing including the Loan Agreement and this Note being hereinafter referred to as the "Loan Documents") shall continue until all the principal amount and interest under this Note have been paid in full. Terms used in this Note without definition are used as defined in the Loan Agreement. All rights, benefits and terms under the Loan Agreement shall inure to the benefit of the Holder. Any default under the Loan Agreement or the other Loan Documents, all of which are hereby incorporated herein by reference, shall be an event of default under this Note, including but specifically not limited to a failure to promptly pay the principal or interest due under this Note on any due date or the failure to promptly pay when due, whether by acceleration or otherwise, any and all other obligations 2 and indebtedness of the Maker and any other obligor, including endorsers, guarantors and sureties, to the Holder, however and whenever incurred, acquired or evidenced, whether due or to become due, direct or indirect, absolute or contingent, joint or several, now existing or hereafter arising, including, but not limited to, commercial debt, consumer debt, residential construction debt, commercial construction debt and any and all other classes of debt, and such failure to pay continues for a period of ten (10) days after the date the payment is due, (all of the foregoing, including the principal and interest due under this Note, being referred to in this Note collectively as the "Obligations"). Presentment for payment, demand, protest, indulgences in collection and notice of demand, protest, non-payment and dishonor and each and every other kind of notice, defense, technical requirement, possible irregularity and formality which might otherwise be required, or used or raised to avoid or otherwise diminish in any way the Obligations, including, without limitation, the indebtedness evidenced by this Note, or to hinder the collection of the Obligations by the Holder in full from the Maker pursuant to the provisions of this Note are hereby waived by the Maker and all other persons, corporations or other entities now or at any time liable, whether primarily or secondarily for the payment of all or any part of the Obligations, including endorsers, sureties and guarantors, if any. The Maker represents and warrants to the Holder that the Obligations, including, without limitation, indebtedness evidenced by this Note, have been incurred exclusively for the business purposes of the Maker. No delay or failure on the part of the Holder in the exercise of any power or right under this Note or under any of the other Loan Documents, including, but not limited to, the failure to accelerate the debt evidenced by this Note by reason of an event of default under this Note, acceptance of a past-due installment or indulgences granted from time to time shall be construed (i) as a novation of this Note or as a reinstatement of the indebtedness evidenced by this Note or as a waiver of such right of acceleration or the right of the Holder thereafter to insist upon strict compliance with the terms of this Note or (ii) to prevent the exercise of such right of acceleration or any other right granted under this Note or under the other Loan Documents or by the laws of the State of Tennessee; and the Maker hereby expressly waives the benefit of any statute or rule of law or equity now provided, which may hereafter be provided, which would produce a result contrary to or in conflict with the foregoing. No extension of time for the payment of this Note or any installment due under this Note made with any obligor, including endorsers, guarantors, sureties and Maker, shall operate to release, discharge, modify, change or affect the original liability of the Maker under this Note, either in whole or in part, unless the Holder agrees otherwise in writing. The Holder may enforce its rights against any obligor, including endorsers, guarantors or sureties, without enforcing any other right or remedies against any other obligor, including Maker, endorsers, guarantors or sureties. The Maker hereby waives and renounces for itself, its successors and assigns, all rights to benefits of any statute of limitations and any moratorium, reinstatement, marshalling, forbearance, valuation, stay, extension, redemption, appraisement, exemption 3 and homestead now provided, or which may hereafter be provided by the Constitution and laws of the United States of America and of any state thereof, both as to itself and in and to all of its property, real and personal, against the enforcement and collection of the Obligations, including indebtedness evidenced by this Note. The Maker hereby transfers, conveys and assigns to the Holder a sufficient amount of such homestead or exemption as may be set apart in bankruptcy, to pay the indebtedness evidenced by this Note and the other Obligations in full, with all costs of collection, and does hereby direct any trustee in bankruptcy having possession of such homestead or exemption to deliver to the Holder a sufficient amount of property or money set apart as exempt to pay the indebtedness evidenced by this Note and the other Obligations and does hereby appoint the Holder the attorney-in-fact for the Maker to claim any and all homestead exemptions allowed by law. In the Event of Default as defined in this Note or as defined in the Loan Agreement, the Holder may at any time and from time to time, without demand or notice, appropriate, set-off against and apply the deposit balances, accounts, items, certificates of deposit and monies of Maker in the possession of or on deposit with the Holder to the Obligations, including, without limitation, the indebtedness evidenced by this Note whether due by acceleration or otherwise. Time is of the essence of this Note. In the event this Note, or any part thereof, is collected by or through an attorney at law, or under advice therefrom, the Maker agrees to pay all costs of collection including reasonable attorneys' fees. This Note may not be changed orally, but only in writing, signed by the party against whom enforcement of any waiver, change, modification or discharge is sought. The remedies of the Holder as provided in this Note and in the Loan Documents, or any of them, or at law or in equity, shall be cumulative and concurrent, not exclusive, and may be pursued singly, successively, or together at the sole discretion of the Holder, and may be exercised as often as the occasion therefore shall occur. Any notice required or permitted under this Note shall be given to the Maker or the Holder at the address set forth above (or at such other address as such party shall designate to the other party or parties in writing) in accordance with the terms set forth in the Loan Agreement. If any of the provisions of this Note shall contravene or be invalid or unenforceable under the laws of any jurisdiction where it is in effect, such contravention, invalidity or unenforceability shall not invalidate this entire Note and this Note shall be construed as if it did not contain the particular provision or provisions held to be illegal, invalid or unenforceable, and all the rights of the Holder and obligations of the Maker shall be construed and enforced accordingly; always provided, however, that such invalid 4 provision or provisions do not go to the essence of this Note so that its or their invalidity relieves the Maker from the obligation of rendering substantial performance under this Note. This Note shall be construed and enforced in accordance with the laws of the State of Tennessee, without regard to the conflict of laws of such State. Maker hereby agrees that suit on this Note and any of the Loan Documents may be brought in any State or Federal Court having jurisdiction over the person or any property of Maker and in any event in any State or Federal Court of or located in the State of Tennessee, and Maker irrevocably covenants and agrees to waive any objection to the jurisdiction of any such court and affirmatively consents and agrees to the jurisdiction of any such court, and appoints Payee at its address set forth above, as agent for service of process on the Maker in the State of Tennessee. As used herein, the terms "the Maker" and "the Holder" shall be deemed to include their respective heirs, successors, legal representatives and assigns, whether by voluntary action of the parties or by operation of law. In the event that more than one person, partnership, corporation or entity is a Maker under this Note, then all references to "the Maker" shall be deemed to refer equally to each of said persons, partnerships, corporations or entities, all of whom shall be jointly and severally liable for all of the obligations of the Maker under this Note. MILLER INDUSTRIES, INC. a Tennessee corporation ATTEST: By: /s/ Adam Dunayer VP CFO ----------------------------- Title /s/ David Tatum Director of Finance - -------------------------------------- Title 5 EX-10.48 6 AMENDED NEGATIVE PLEDGE AGREEMENT AMENDED NEGATIVE PLEDGE AGREEMENT --------------------------------- This Amended Agreement is entered into by and among MILLER INDUSTRIES, INC., a Tennessee corporation with its principal offices in Chattanooga, Tennessee (the "Borrower"), CENTURY HOLDINGS, INC., a Tennessee corporation and wholly-owned subsidiary of Borrower ("Century Holdings"), MILLER INDUSTRIES TOWING EQUIPMENT, INC., a Delaware corporation and a wholly-owned subsidiary of Century Holdings ("Towing Equipment"), CHAMPION CARRIER CORPORATION, a Delaware corporation and a wholly-owned subsidiary of Century Holdings, Inc. ("Champion") and MILLER INDUSTRIES INTERNATIONAL, INC. ("International") (Century Holdings, Towing Equipment, Champion and International are collectively referred to herein as "Guarantors"), and NATIONSBANK OF TENNESSEE, N.A., a national banking association with its offices in Chattanooga, Tennessee ("NationsBank") (hereinafter referred to as "Lender"). W I T N E S S E T H: ------------------- That WHEREAS, Borrower and Guarantors entered into that certain Loan Agreement dated June 28, 1994, with NationsBank (the "Loan Agreement"); and WHEREAS, NationsBank issued to the Borrower a Commitment Letter providing that NationsBank would make available to the Borrower a Revolving Line of Credit Loan in the maximum aggregate principal amount of Fifteen Million Dollars ($15,000,000.00), depending upon the amount received by Borrower pursuant to the Public Offering (as defined in the Loan Agreement) as more specifically set forth in the Loan Agreement; and WHEREAS, pursuant to the Loan Agreement, the Lender advanced the Revolving Line of Credit Loan (as defined in the Loan Agreement) pursuant to the terms and conditions of the Loan Agreement, and the Borrower has used the proceeds of the Revolving Line of Credit Loan as provided in the Loan Agreement; and WHEREAS, as one of the conditions of the Loan Agreement, Borrower and Guarantors agreed to execute a Negative Pledge Agreement whereby Borrower and Guarantors agreed that they would not sell, convey, transfer, pledge, mortgage, grant a security interest in nor encumber in any manner any of their accounts receivable, inventory and equipment owned by either Borrower or Guarantors, whether now existing or acquired in the future, nor sell, convey, transfer, pledge, mortgage, grant a security interest in nor encumber any capital stock of the Guarantors, without the prior written consent of Lender; so long as any Obligation (as that term is defined in the Loan Agreement) of the Borrower and Guarantors to the Lender remains outstanding, except as specifically allowed in the Loan Agreement (the "Negative Pledge Agreement"); and WHEREAS, on or about December 30, 1994, Towing Equipment and Lender entered into an Amendment to Certain Loan Documents amending the Loan Agreement and Negative Pledge Agreement to reflect the merger of Century Wrecker Corporation with an entity called Century Finance Group, Inc. and the name change of the merged entities to Miller Industries Towing Equipment, Inc. and to recognize the liability and obligation of Towing Equipment as new guarantor under the Loan Agreement and Negative Pledge Agreement and the Loan Documents; and WHEREAS, on or about March 30, 1995 the Lender, Borrower and Century Holdings, Towing Equipment and Champion (as Guarantors) entered into a Second Amended Loan Agreement whereby the interest rate payable by Borrower to Lender on the Revolving Line of Credit was amended; and WHEREAS, on or about December 29, 1995, Lender, Borrower and Guarantors entered into a Third Amended Loan Agreement and Amendment to Guaranty Agreements whereby the amount of indebtedness was increased from $15,000,000 to an amount up to $25,000,000, the interest rate was amended, the financial covenants were revised, and the Guarantors affirmed and confirmed their guaranty of the Obligations (as defined in the Loan Agreement, as amended) of Borrower to Lender including the increase in indebtedness to an amount up to $25,000,000; and WHEREAS, on or about February 29, 1996, Lender, Borrower and Guarantors entered into a Fourth Amendment to Loan Agreement whereby the Loan Agreement was amended to add an event of default; and WHEREAS, Borrower has requested and Lender has agreed to increase the it-evolving Line of Credit Loan available to Borrower from $25,000,000 to an amount up to $50,000,000 pursuant to a Renewal and Modification of Revolving Line of Credit Note, and Lender, Borrower and Guarantors have entered into a Fifth Amendment to Loan Agreement and Amendment to Guaranty Agreements to increase the amount of indebtedness under the Revolving Line of Credit Note, to extend the maturity date, to amend the interest rate, to revise financial covenants and to make other amendments that will be set forth therein and to affirm and confirm the guaranty by the Guarantors of the increase in the amount of the indebtedness from $25,000,000 to up to $50,000,000; and WHEREAS, as one of the conditions to increasing the amount of indebtedness under the Revolving Line of Credit Note, Borrower and Guarantors have agreed to execute this Amended Negative Pledge Agreement to affirm and reaffirm Borrower and Guarantors' agreement that they will not sell, convey, transfer, pledge, mortgage, grant a security interest in or encumber in any manner any of their accounts receivable, inventory and equipment owned by either Borrower or Guarantors and any capital stock of the Guarantors, whether now existing or acquired in the future, without the prior written consent of Lender, so long as any Obligation (as that term is defined in the Loan Agreement) including, but not limited to, the increase in indebtedness of up to $50,000,000, of the Borrower and Guarantors to the Lender remains outstanding, except as specifically allowed in the Loan Agreement, as it may be amended from time to time; and -2- WHEREAS, in consideration of the mutual covenants and conditions set forth herein and in consideration of the Lenders increase in the Revolving Line of Credit Loan to Borrower and Guarantors contemplated under the Fifth Amended Loan Agreement and Amendment to Guaranty Agreements executed in relation thereto, the legal sufficiency of which are irrevocably acknowledged, the parties hereto, intending to be legally bound, agree as follows: 1. All terms and condition of the Negative Pledge Agreement executed by Borrower and Guarantors on June 24, 1994, as amended, shall remain in full force and effect and are incorporated by reference herein and shall extend and apply to the increase in indebtedness of Borrower to Lender from $25,000,000 to an amount up to $50,000,000. IN WITNESS WHEREOF, the parties intending to be legally bound have executed this Second Amended Negative Pledge Agreement as of this 30th day of April, 1997. MILLER INDUSTRIES, INC. By: /s/ Adam Dunayer Vice President, CFO ------------------------------------------- Title STATE OF TENNESSEE ) ) COUNTY OF HAMILTON ) BEFORE ME personally appeared Adam Dunayer, with whom I am personally acquainted (or proved to me on the basis of satisfactory evidence), and who, upon oath, acknowledged himself to be Vice President, CFO of Miller Industries, Inc., the within-named corporation, and that he as such officer, executed the foregoing instrument for the purpose therein contained, by signing the name of the corporation by himself as such officer. WITNESS my hand and seal, at office, on this 23rd day of July, 1997. /s/ Nancy E. Pantee ---------------------------------------- Notary Public My Commission Expires: December 11, 1999 -3- CENTURY HOLDINGS, INC. By: /s/ Jeffrey Badgley President ------------------------------------- Title STATE OF TENNESSEE ) ) COUNTY OF HAMILTON ) BEFORE ME personally appeared Jeffrey Badgley, with whom I am personally acquainted (or proved to me on the basis of satisfactory evidence), and who, upon oath, acknowledged himself to be President of Century Holdings, Inc., the within-named corporation, and that he as such officer, executed the foregoing instrument for the purpose therein contained, by signing the name of the corporation by himself as such officer. WITNESS my hand and seal, at office, on this 23rd day of July, 1997. /s/ Nancy E. Pantee --------------------------------------- Notary Public My Commission Expires: December 11, 1999 -4- MILLER INDUSTRIES TOWING EQUIPMENT, INC. By: /s/ David Tatum Vice President of Finance ------------------------------------------------- Title STATE OF TENNESSEE ) ) COUNTY OF HAMILTON ) BEFORE ME personally appeared David Tatum, with whom I am personally acquainted (or proved to me on the basis of satisfactory evidence), and who, upon oath, acknowledged himself to be VP of Finance of Miller Industries Towing, Inc., the within-named corporation, and that he as such officer, executed the foregoing instrument for the purpose therein contained, by signing the name of the corporation by himself as such officer. WITNESS my hand and seal, at office, on this 23rd day of July, 1997. /s/ Nancy E. Pantee ------------------------------------ Notary Public My Commission Expires: December 11, 1999 -5- CHAMPION CARRIER CORPORATION By: /s/ Jeffrey Badgley Director --------------------------------------- Title STATE OF TENNESSEE ) ) COUNTY OF HAMILTON ) BEFORE ME personally appeared Jeffrey Badgley, with whom I am personally acquainted (or proved to me on the basis of satisfactory evidence), and who, upon oath, acknowledged himself to be Director of Champion Carrier Corporation, the within-named corporation, and that he as such officer, executed the foregoing instrument for the purpose therein contained, by signing the name of the corporation by himself as such officer. WITNESS my hand and seal, at office, on this 23rd day of July, 1997. /s/ Nancy E. Pantee ------------------------------------ Notary Public My Commission Expires: December 11, 1999 -6- MILLER INDUSTRIES, INTERNATIONAL, INC. By: /s/ David Tatum Assistant Secretary ------------------------------------------- Title STATE OF TENNESSEE ) ) COUNTY OF HAMILTON ) BEFORE ME personally appeared David Tatum, with whom I am personally acquainted (or proved to me on the basis of satisfactory evidence), and who, upon oath, acknowledged himself to be Assistant Secretary of Miller Industries International, Inc., the within-named corporation, and that he as such officer, executed the foregoing instrument for the purpose therein contained, by signing the name of the corporation by himself as such officer. WITNESS my hand and seal, at office, on this 23rd day of July, 1997. /s/ Nancy E. Pantee -------------------------------------- Notary Public My Commission Expires: December 11, 1999 -7- EX-21 7 SUBSIDIARIES OF THE REGISTRANT EXHIBIT 21 ---------- Subsidiaries of the Registrant ------------------------------
Name State of Organization - ---- --------------------- Century Holdings, Inc. Tennessee Champion Carrier Corporation Delaware Miller Industries Towing Equipment, Inc. Delaware Century Wrecker (Canada) Ltd. Ontario, Canada Miller Industries International, Inc. Tennessee Boniface Engineering Limited England and Wales Jige International France Miller Financial Services Group, Inc. Delaware Miller/Greeneville, Inc. Tennessee Vulcan Equipment Company, Inc. Mississippi Vulcan International, Inc. Mississippi Financial Services Group Tennessee
The Registrant owns 33 towing service subsidiaries operating in the United States. The Registrant owns 8 towing equipment distributor subsidiaries operating in the United States and 2 towing equipment subsidiaries operating in foreign countries. EX-23 8 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS EXHIBIT 23 ---------- CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation of our reports included in this Form 10-K, into the Company's previously filed Registration Statement on Form S-8 (File No. 33-82282). ARTHUR ANDERSEN LLP Chattanooga, Tennessee July 28, 1997 EX-27 9 FINANCIAL DATA SCHEDULE
5 1,000 U.S. DOLLARS YEAR APR-30-1997 MAY-01-1996 APR-30-1997 1 8,508 0 49,844 0 60,574 125,352 69,628 (20,457) 215,297 63,372 11,282 0 0 425 138,358 215,297 292,394 292,394 238,625 268,817 0 0 620 22,957 8,436 14,521 0 0 0 14,521 0.35 0.35
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