SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 31, 1999
Commission File No. 0-24298
MILLER INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
TENNESSEE 62-1566286
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
8503 HILLTOP DRIVE
OOLTEWAH, TENNESSEE 37363
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (423)238-4171
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES /X/ NO / /
The number of shares outstanding of the registrant's Common Stock, $.01 par
value, as of August 31, 1999 was 46,694,297.
<PAGE>
MILLER INDUSTRIES, INC.
INDEX
<TABLE>
PART I. FINANCIAL INFORMATION Page Number
-----------
<CAPTION>
Item 1. Financial Statements (Unaudited)
--------------------------------
<S> <S> <C>
Condensed Consolidated Balance Sheets -
July 31, 1999 and April 30, 1999 3
Condensed Consolidated Statements of Income
for the Three Months Ended July 31, 1999 and 1998 4
Condensed Consolidated Statements of Cash Flows
for the Three Months Ended July 31, 1999 and 1998 5
Notes to Condensed Consolidated Financial
Statements 6
Item 2. Management's Discussion and Analysis of Financial
-------------------------------------------------
Condition and Results of Operations 9
-----------------------------------
PART II. OTHER INFORMATION
Item 1 Legal Proceedings 13
-----------------
Item 6. Exhibits and Reports On Form 8-K 14
--------------------------------
SIGNATURES 14
</TABLE>
2
<PAGE>
MILLER INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
<TABLE>
ASSETS
JULY 31, APRIL 30,
1999 1999
--------- ---------
<CAPTION>
<S> <C> <C>
CURRENT ASSETS:
Cash and temporary investments $ 10,995 $ 9,331
Accounts receivable, net 81,279 81,109
Inventories 79,361 77,912
Deferred income taxes 4,343 4,244
Prepaid expenses and other 12,704 12,264
--------- ---------
Total current assets 188,682 184,860
PROPERTY, PLANT AND EQUIPMENT, NET 95,443 95,984
GOODWILL, NET 104,108 103,292
OTHER ASSETS 7,296 8,344
--------- ---------
$ 395,529 $ 392,480
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $ 797 $ 4,170
Accounts payable 43,842 42,783
Accrued liabilities and other 20,622 16,458
--------- ---------
Total current liabilities 65,261 63,411
--------- ---------
LONG-TERM DEBT, LESS CURRENT PORTION 133,430 133,850
--------- ---------
DEFERRED INCOME TAXES 8,116 7,916
--------- ---------
SHAREHOLDERS' EQUITY (Note 2):
Preferred stock, $.01 par value, 5,000,000 shares authorized;
None issued or outstanding 0 0
Common stock, $.01 par value, 100,000,000 shares authorized; 46,694,297 and
46,679,783 shares issued and outstanding at
July 31, 1999 and April 30, 1999, respectively 467 467
Additional paid-in capital 144,696 144,607
Retained earnings 44,512 43,068
Accumulated other comprehensive income (953) (839)
--------- ---------
Total shareholders' equity 188,722 187,303
--------- ---------
$ 395,529 $ 392,480
========= =========
See accompanying notes to condensed consolidated financial statements
</TABLE>
<PAGE>
MILLER INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
THREE MONTHS ENDED
JULY 31,
---------------------------------
1999 1998
-------- --------
<CAPTION>
<S> <C> <C>
NET SALES $134,336 $117,754
COSTS AND EXPENSES:
Costs of operations 109,914 94,040
Selling, general, and administrative expenses 19,228 17,030
Interest expense, net 2,638 2,040
-------- --------
Total costs and expenses 131,780 113,110
-------- --------
INCOME BEFORE INCOME TAXES 2,556 4,644
INCOME TAXES 1,112 1,960
-------- --------
NET INCOME $ 1,444 $ 2,684
======== ========
NET INCOME PER COMMON SHARE:
BASIC $ 0.03 $ 0.06
======== ========
DILUTED $ 0.03 $ 0.06
======== ========
WEIGHTED AVERAGE SHARES OUTSTANDING:
BASIC 46,689 46,064
======== ========
DILUTED 47,290 47,195
======== ========
See accompanying notes to condensed consolidated financial statements.
</TABLE>
4
<PAGE>
<TABLE>
MILLER INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
THREE MONTHS ENDED JULY 31,
---------------------------
1999 1998
-------- --------
<CAPTION>
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 1,444 $ 2,684
Adjustments to reconcile net income to net cash provided by (used in)
operating activities:
Depreciation and amortization 4,282 2,964
Deferred income tax (benefit) provision (100) 214
Loss (gain) on disposals of property, plant, and equipment 86 (351)
Changes in operating assets and liabilities:
Accounts receivable (274) (637)
Inventories (1,462) (6,435)
Prepaid expenses and other (258) 968
Accrued liabilities 3,206 (1,444)
Accounts payable 1,079 (939)
Other assets (128) 547
-------- --------
Net cash provided by (used in) operating activities 7,875 (2,429)
-------- --------
INVESTING ACTIVITIES:
Purchases of property, plant, and equipment (1,900) (4,256)
Proceeds from sales of property, plant, and equipment 585 705
Acquisition of businesses, net of cash acquired (998) (10,445)
Other 95 (33)
-------- --------
Net cash used in investing activities (2,218) (14,029)
-------- --------
FINANCING ACTIVITIES:
Net (repayment) borrowings under line of credit (2,000) 24,000
Repayment of long-term debt (2,046) (2,899)
Proceeds from exercise of stock options 88 15
-------- --------
Net cash (used in) provided by financing activities (3,958) 21,116
-------- --------
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND
TEMPORARY INVESTMENTS
(35) 14
-------- --------
NET INCREASE IN CASH AND TEMPORARY INVESTMENTS 1,664 4,672
CASH AND TEMPORARY INVESTMENTS, BEGINNING OF PERIOD
9,331 7,367
-------- --------
CASH AND TEMPORARY INVESTMENTS, END OF PERIOD $ 10,995 $ 12,039
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash payments for interest $ 2,673 $ 1,976
======== ========
Cash payments for income taxes $ 540 $ 1,668
======== ========
</TABLE>
5
<PAGE>
MILLER INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. Basis of Presentation
The condensed consolidated financial statements of Miller Industries,
Inc. and subsidiaries (the "Company") included herein have been
prepared by the Company pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote
disclosures normally included in annual financial statements prepared
in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations.
Nevertheless, the Company believes that the disclosures are adequate to
make the financial information presented not misleading. In the opinion
of management, the accompanying unaudited condensed consolidated
financial statements reflect all adjustments, which are of a normal
recurring nature, to present fairly the Company's financial position,
results of operations and cash flows at the dates and for the periods
presented. Cost of goods sold for interim periods for certain entities
in the towing and recovery equipment segment is determined based on
estimated gross profit rates. Interim results of operations are not
necessarily indicative of results to be expected for the fiscal year.
These condensed consolidated financial statements should be read in
conjunction with the Company's Annual Report on Form 10-K for the year
ended April 30, 1999.
2. Net Income Per Share
Basic net income per share is computed by dividing net income by the
weighted average number of common shares outstanding. Diluted net
income per share is calculated by dividing net income by the weighted
average number of common and potential dilutive common shares
outstanding. Diluted net income per share takes into consideration the
assumed conversion of outstanding stock options resulting in 0.6
million and 1.1 million potential dilutive common shares for the three
months ended July 31, 1999 and 1998, respectively. Per share amounts do
not include the assumed conversion of stock options with exercise
prices greater than the average share price because to do so would have
been antidilutive for the periods presented.
3. Inventories
Inventory costs include materials, labor and factory overhead.
Inventories are stated at the lower of cost or market, determined on a
first-in, first-out basis. Inventories at July 31, 1999 and April 30,
1999 consisted of the following (in thousands):
July 31, April 30,
1999 1999
------- -------
Chassis $16,895 $18,340
Raw Materials 16,942 16,348
Work in process 14,256 12,180
Finished goods 31,268 31,044
------- -------
$79,361 $77,912
======= =======
6
<PAGE>
4. Business Combinations
During the quarter ended July 31, 1999, the Company purchased one
towing services company for $1.2 million consisting of approximately
$0.7 million in cash and $0.5 million in promissory notes. This
acquisition was accounted for using the purchase method of accounting.
The accompanying consolidated financial statements reflect the
preliminary allocation of purchase price as the purchase price has not
yet been finalized for this transaction. The excess of the aggregate
purchase price over the estimated fair value of net assets acquired
was approximately $1.2 million.
5. Legal Matters
In January 1998, the Company received a letter from the Antitrust
Division of the Department of Justice (the "Division") stating that it
was conducting a civil investigation covering "competition in the tow
truck industry". The letter asked that the Company preserve its records
related to the tow truck industry, particularly documents related to
sales and prices of products and parts, acquisition of other companies
in the industry, distributor relations, patent matters, competition in
the industry generally, and activities of other companies in the
industry. In March 1998, the Company received a Civil Investigative
Demand ("CID") issued by the Division as part of its continuing
investigation of whether there are, have been or may be violations of
the federal antitrust statutes in the tow truck industry. Under this
CID, the Company has produced information and documents to assist in
the investigation, has corresponded and met with the Division
concerning the investigation, and is continuing to cooperate with the
Division. It is unknown at this time what the eventual outcome of this
investigation will be.
During September, October and November 1997, five lawsuits were filed
by certain persons who seek to represent a class of shareholders who
purchased shares of the Company's common stock during the period from
either October 15 or November 6, 1996 to September 11, 1997. Four of
the suits were filed in the United States District Court for the
Northern District of Georgia. The remaining suit was filed in the
Chancery Court of Hamilton County, Tennessee. In general, the
individual plaintiffs in all of the cases allege that they were induced
to purchase the Company's common stock on the basis of allegedly
actionable misrepresentations or omissions about the Company and its
business and, as a result, were thereby damaged. Four of the complaints
assert claims under Sections 10(b) and 20 of the Securities Act of
1934. The complaints name as the defendants the Company and various of
its present and former directors and officers. The plaintiffs in the
four actions which involved claims in Federal Court under the
Securities Exchange Act of 1934 have consolidated those actions. The
Company filed a motion to dismiss in the consolidated case which was
granted in part and denied in part. The proposed class was certified by
order dated May 27, 1999. The Company filed a motion to dismiss in the
Tennessee case which was granted in its entirety. The plaintiffs in
that case, with permission from the Court, amended and refiled their
complaint, which was dismissed with prejudice by order of the Court
dated March 11, 1999. On April 5, 1999 counsel for plaintiffs filed a
notice of appeal. In both these actions, the Company has denied
liability and will continue to vigorously defend itself.
7
<PAGE>
In addition to the shareholder litigation described above, the Company
is, from time to time, a party to litigation arising in the normal
course of its business. The ultimate disposition of such matters cannot
be determined presently, but will not, in the opinion of management,
based in part on the advice of legal counsel, have a material adverse
effect on the financial position or results of operations of the
Company.
6. Comprehensive Income
Effective May 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income", which
requires additional disclosure of amounts comprising comprehensive
income. The Company has other comprehensive income in the form of
cumulative translation adjustments which resulted in total
comprehensive income of approximately $1,330,000 and $2,593,000 for the
quarters ended July 31, 1999 and 1998, respectively.
7. Segment Information
The Company operates in two principal operating segments: (i) towing
and recovery equipment and (ii) towing services. The table below
presents information about reported segments for the three months ended
July 31, 1999 and 1998 (in thousands):
<TABLE>
Towing and
Recovery Towing
Equipment Services Eliminations Consolidated
--------- -------- ------------ ------------
<CAPTION>
<S> <C> <C> <C>
1999
Net sales-external $82,951 $51,385 $ -- $134,336
Net sales-intersegment -- -- -- --
Operating income 4,493 744 (43) 5,194
Interest expense, net 1,119 1,519 -- 2,638
Income (loss) before income taxes 3,331 (775) -- 2,556
1998
Net sales-external $76,603 $41,151 $ -- $117,754
Net sales-intersegment 1,285 -- (1,285) --
Operating income 4,290 2,445 (51) 6,684
Interest expense, net 958 1,082 -- 2,040
Income before income taxes 3,281 1,363 -- 4,644
</TABLE>
8. Reclassifications
Certain amounts in the prior period financial information have been
reclassified to conform to the current presentation.
8
<PAGE>
9. Subsequent Events
Subsequent to the end of the quarter, the Company has closed three
additional acquisitions of towing services companies with aggregate
annual historical revenues of approximately $2.2 million. The
consideration for these transactions consists of approximately $1.9
million in cash, which includes the assumption of certain indebtedness,
and approximately $0.4 million in promissory notes.
Additionally, the Company has executed a letter of intent to acquire
one additional towing services company.
Item 2. Management's Discussion and Analysis of Financial Condition and
----------------------------------------------------------------
Results of Operations
---------------------
RECENT DEVELOPMENTS
As more fully discussed in Note 4 to condensed consolidated financial
statements, during the quarter ended July 31, 1999, the Company
acquired one towing services company.
Subsequent to the end of the quarter and as more fully discussed in
Note 9 to condensed consolidated financial statements, the Company has
closed three additional acquisitions of towing services companies.
Also, the Company has executed a letter of intent to purchase one
additional towing services company.
RESULTS OF OPERATIONS--THREE MONTHS ENDED JULY 31, 1999 COMPARED TO
THREE MONTHS ENDED JULY 31, 1998
Net sales for the three months ended July 31, 1999, increased 14.1% to
$134.3 million from $117.8 million for the comparable period in 1998.
Net sales in the towing and recovery equipment segment increased 8.3%
from $76.6 million to $83.0 million due primarily to higher unit sales
of chassis, large wreckers and car carriers. Sales of new
products-slide axle trailers and multi-car trailers, also contributed
to the increase in sales in this segment. Net sales in the towing
services segment increased 24.9% from $41.2 million to $51.4 million
due primarily to the inclusion of towing companies acquired subsequent
to the first quarter of fiscal 1999.
Costs of operations for the three months ended July 31, 1999, increased
16.9% to $109.9 million from $94.0 million for the comparable period in
1998. Costs of operations of the towing and recovery equipment segment
increased slightly as a percentage of net sales from 84.6% to 85.1%. In
the towing services segment, costs of operations as a percentage of net
sales increased from 71.0% to 76.7% due to increased labor costs of the
towing services operations along with the associated benefits and
worker's compensation costs, increased depreciation on additions to the
fleet and increased insurance costs due to loss experience.
Selling, general and administrative expenses for the three months ended
July 31, 1999, increased 12.9% to $19.2 million from $17.0 million for
the comparable period of 1998. In the towing and recovery equipment
segment, as a percentage of net sales, selling, general and
administrative expenses decreased slightly from 9.8% to 9.5%. In the
towing services segment, selling, general and administrative expenses
as a percentage of net sales decreased from 23.1% to 21.9%. The
decrease was due primarily to the increased revenue base and cost
reduction efforts.
9
<PAGE>
Net interest expense increased $0.6 million to $2.6 million for the
three-months ended July 31, 1999 from $2.0 million for the three months
ended July 31, 1998 primarily due to increased borrowings under the
Company's line of credit to fund working capital needs and additional
acquisitions of towing service companies.
Income taxes are accounted for on a consolidated basis and are not
allocated by segment. The effective rate of the provision for income
taxes was 43.5% for the three months ended July 31, 1999 and 42.2% for
the three months ended July 31, 1998. The difference between the
effective tax rate and the statutory tax rate is primarily due to
non-deductible goodwill amortization and state income taxes.
LIQUIDITY AND CAPITAL RESOURCES
Cash provided by operating activities was $7.9 million for the three
month-period ended July 31, 1999 compared to cash used in operating
activities of $2.4 million for the comparable period of 1998. The
increase in cash flows from operating activities was due primarily to
improved working capital balances.
Cash used in investing activities was $2.2 million for the three month
period ended July 31, 1999 compared to $14.0 million used in investing
activities for the comparable period in 1998. The cash used in
investing activities was primarily for capital expenditures and
acquisition of businesses, both of which were at significantly lower
levels in the current fiscal year quarter than in the comparable prior
year period.
Cash used in financing activities was $4.0 million for the three month
period ended July 31, 1999 and cash provided by financing activities
was $21.1 million for the comparable period in the prior year. The cash
was used primarily to reduce the Company's line of credit and other
outstanding long-term debt and capital leases.
The Company has a revolving credit facility of $175 million (the
"Credit Facility") for working capital and other general corporate
purposes. Borrowings under the Credit Facility bear interest at a rate
equal to the London Interbank Offered Rate of 2.50% or the prime rate
plus 1.25%, as elected by the Company. The Credit Facility is
collateralized by substantially all of the assets and properties of the
Company and its domestic subsidiaries. At July 31, 1999, $123 million
was outstanding under the Credit Facility. The Credit Facility imposes
restrictions on the Company with respect to the maintenance of certain
financial ratios, the incurrence of indebtedness, the sale of assets,
capital expenditures and mergers and acquisitions. On May 1, 1998, the
Company entered into an interest swap agreement covering the notional
amount of $50 million of variable rate debt to fix the interest rate at
5.68% plus the applicable margin. The agreement expires at the end of
three years unless cancelled by the bank at the end of two years.
As described in Note 4 to condensed consolidated financial statements,
the Company has expended approximately $1.2 million for the purchase of
a towing services company during the quarter ended July 31, 1999.
Capital expenditures remaining for the dispatch system described below
are expected to be approximately $0.9 million. Excluding the capital
commitments set forth above, the Company has no other material capital
commitments. The Company believes that cash on hand, cash flows from
operations and unused borrowing capacity under the Credit Facility will
be sufficient to fund its operating needs, capital expenditures and
debt service requirements for the next fiscal year. Management
continually evaluates potential strategic acquisitions. Although the
Company believes that its financial resources will enable it to
consider potential acquisitions, additional debt or equity financing
may be necessary. No assurance in this regard can be given, however,
since future cash flows and the availability of financing will depend
on a number of factors, including prevailing economic conditions and
financial, business and other factors beyond the Company's control.
10
<PAGE>
STRATEGIC AND FINANCIAL ALTERNATIVES STUDY
The Company announced in May 1999 that its Board of Directors had
concluded its study of potential strategic and financial alternatives
for the Company and had ratified its Special Committee's recommendation
to investigate and pursue the possibility of separating the Company's
RoadOne towing services segment from its towing and recovery equipment
segment through a tax-free spinoff which would result in the formation
of two public companies. The Company engaged J.C. Bradford & Co. as its
financial advisor with respect to these matters.
Completing any such separation of the two businesses through a tax-free
spinoff transaction would entail the satisfaction of numerous
significant conditions which at this time are uncertain. These
conditions include, but are not limited to, securing an IRS private
letter ruling, an SEC no-action letter, satisfactory banking
arrangements, the approval of the Company's shareholders and a final
decision to proceed by the Board of Directors. The Company can give no
assurance that any such transaction will occur. The Company currently
expects that the spinoff transaction, if completed, would not occur any
sooner than during the fourth quarter of the fiscal year ending
April 30, 2000.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities," effective for fiscal years beginning after June 15, 1999.
In June 1999, the FASB issued SFAS No. 137, which delayed the effective
date of SFAS No. 133 until June 15, 2000. SFAS No. 133 establishes
accounting and reporting standards requiring that every derivative
instrument (including certain derivative instruments embedded in other
contracts) be recorded in the balance sheet as either an asset or
liability measured at its fair value. SFAS No. 133 requires that
changes in the derivative's fair value be recognized currently in
earnings unless specific hedge accounting criteria are met. Special
accounting for qualifying hedges allows a derivative's gains and losses
to offset related results on the hedged item in the income statement,
and requires that a company must formally document, designate, and
assess the effectiveness of transactions that receive hedge accounting.
The Company has not yet quantified the impact of adopting SFAS No. 133
on its financial statements and has not determined the timing of or
method of adoption of SFAS No. 133. However, SFAS No. 133 could
increase volatility in earnings and other comprehensive income.
YEAR 2000
The "Year 2000" issue refers to the possibility that some
date-sensitive computer software was written with two digits rather
than four to define the applicable year. This software will not
interpret the "00" year correctly, and may experience problems. In
addition, any equipment that has time sensitive embedded chips may have
similar date-related problems. If not corrected, these computer
programs or embedded chips could possibly cause systems to fail or
other errors, leading to possible disruptions in operations or creation
of erroneous results.
The Company, in an enterprise-wide effort, is taking steps to ensure
that its systems are secure from such failures. Our Year 2000 plan
addresses the anticipated impacts of the Year 2000 problem on our
information technology (IT) systems and on non-IT systems involving
embedded chip technologies. We are also surveying key third parties to
determine the status of their Year 2000 compliance programs. In
addition, we are developing contingency plans specifying what the
Company will do if it or important third parties experience disruptions
as a result of the Year 2000 problem.
Our Year 2000 plan is subject to modification, and is revised
periodically as additional information is developed. The Company
currently believes that its Year 2000 plan will be completed for all
key aspects prior to the anticipated Year 2000 failure dates.
With respect to IT systems, our Year 2000 plan includes programs
relating to (i) computer applications, including those for servers,
client server systems, and personal computers and (ii) IT
infrastructure, including hardware, software, network technology, and
voice and data communications. In case of non-IT systems, our Year 2000
plan includes programs related to equipment and processes required to
produce our products in our manufacturing plants.
11
<PAGE>
With respect to its applications programs, the Company's manufacturing
plants began implementing a Year 2000 compliant ERP system in 1997.
Although this project included initiatives outside of the scope of the
Year 2000, the new system replaced an older non-compliant system. The
Company's largest manufacturing facility has completed its
implementation. The remaining plants are scheduled to complete the
implementation of their computerized functions prior to the anticipated
Year 2000 failure dates. The new ERP system also contains the Company's
financial applications, with implementation completed in Fiscal 1999.
These implementations were not accelerated due to Year 2000 issues and,
therefore, their costs are not included in the discussion of Year 2000
costs below.
The Company's towing services segment began development in 1998 of a
new dispatch system which will assist in resolving its Year 2000
issues. Approximately $1.5 million of the cost of this system is being
accelerated to assist in resolving Year 2000 issues and is included in
the discussion of Year 2000 costs below. This segment has also
initiated a remediation plan for some of the existing dispatch
applications. In addition, it is developing a contingency plan which
will address locations not remediated prior to January 1, 2000. This
segment completed its implementation of financial systems on a Year
2000 compliant ERP system in Fiscal 1999.
With respect to its infrastructure program, the inventory and
assessment phase is substantially complete. The implementation phase is
on-going, with many components being replaced as part of the Company's
support for the implementation of a new ERP system for manufacturing
and financial applications. The new dispatch system that the towing
services segment is implementing will centralize all processing to one
location. This new processing infrastructure to support the dispatch
application is constructed. RoadOne will continue to assess and replace
client infrastructure at each of its field locations as the dispatch
application is rolled out.
With respect to its non-IT program, the Company is identifying embedded
chip technology at all manufacturing locations. A limited amount of
operating equipment is date sensitive. Manufacturers of the affected
equipment are being contacted. The Company is evaluating the suggested
modifications and replacements. The plan is to complete remediation of
these systems by the end of the year.
The Company has initiated inquiries of major business partners to
assess their state of readiness regarding Year 2000 issues that could
materially and adversely impact the Company. These major business
partners include, but are not limited to suppliers, financial
institutions, benefit providers, payroll services, and customers, as
well as potential failures in public and private infrastructure
services, including electricity, water, transportation and
communications. The Company has requested those third parties respond
in writing that they will be Year 2000 compliant by the end of 1999.
The Company is reviewing the responses as received and is assessing the
third parties' efforts in addressing Year 2000 issues. Further, the
Company is in the process of determining its vulnerability if these
third parties fail to remediate their Year 2000 problems. Contingency
plans are being developed and include, but are not limited to, using
alternate vendors, manual interfaces, and hard copies. There can be no
guarantee that the systems of third parties will be remediated on a
timely basis, or that such parties' failure to remediate Year 2000
issues would not have a material adverse effect on the Company.
12
<PAGE>
The total cost of the Company's Year 2000 project includes costs for
installing certain new hardware and software upgrades in both of its
business segments of approximately $0.5 million and the cost of
acceleration of a portion of its new dispatch software in its towing
services segment of $1.5 million. The total cost of our Year 2000
efforts is expected to be about $2.0 million, which is being expensed
as incurred except for hardware or software replacement costs that have
been or will be capitalized. About $0.1 million of the total amount was
incurred through July 31, 1999, and approximately an additional $1.9
million will be incurred in the remainder of calendar 1999. The timing
and amount of these future expenditures are forward-looking and subject
to uncertainties relating to the Company's ongoing assessment of the
Year 2000 issue, and appropriate remediation efforts, contingency plans
and responses to any problems that may arise. The Company's Year 2000
expenses are paid out of its annual budget for information services.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In January 1998, the Company received a letter from the Antitrust
Division of the Department of Justice (the "Division") stating that it
was conducting a civil investigation covering "competition in the tow
truck industry." The letter asked that the Company preserve its records
related to the tow truck industry, particularly documents related to
sales and prices of products and parts, acquisition of other companies
in the industry, distributor relations, patent matters, competition in
the industry generally, and activities of other companies in the
industry. In March 1998, the Company received a Civil Investigative
Demand ("CID") issued by the Division as part of its continuing
investigation of whether there are, have been or may be violations of
the federal antitrust statutes in the tow truck industry. Under this
CID, the Company has produced information and documents to assist in
the investigation, has corresponded and met with the Division
concerning the investigation, and is continuing to cooperate with the
Division. It is unknown at this time what the eventual outcome of the
investigation will be.
During September, October and November 1997, five lawsuits were filed
by certain persons who seek to represent a class of shareholders who
purchased shares of the Company's common stock during the period from
either October 15 or November 6, 1996 to September 11, 1997. Four of
the suits were filed in the United States District Court for the
Northern District of Georgia. The remaining suit was filed in the
Chancery Court of Hamilton County, Tennessee. In general, the
individual plaintiffs in all of the cases allege that they were induced
to purchase the Company's common stock on the basis of allegedly
actionable misrepresentations or omissions about the Company and its
business and, as a result, were thereby damaged. Four of the complaints
assert claims under Sections 10(b) and 20 of the Securities Act of
1934. The complaints name as the defendants the Company and various of
its present and former directors and officers. The plaintiffs in the
four actions which involved claims in Federal Court under the
Securities Exchange Act of 1934 have consolidated those actions. The
Company filed a motion to dismiss in the consolidated case which was
granted in part and denied in part. The proposed class was certified by
order dated May 27, 1999. The Company filed a motion to dismiss in the
Tennessee case which was granted in its entirety. The plaintiffs in
that case, with permission from the Court, amended and refiled their
complaint, which was dismissed with prejudice by order of the Court
dated March 11, 1999. On April 5, 1999, counsel for plantiffs filed a
notice of appeal. In both these actions, the Company has denied
liability and will continue to vigorously defend itself.
13
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
Exhibit 27 - Financial Data Schedule (For SEC use only)
(b) Reports on Form 8-K - No reports on Form 8-K were filed by
the Company during the first quarter of the fiscal year.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Miller Industries, Inc. has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
MILLER INDUSTRIES, INC.
By: /s/ J. Vincent Mish
J. Vincent Mish
Vice President and
Chief Financial Officer
Date: September 14, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000924822
<NAME> MILLER INDUSTRIES, INC. /TN
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> APR-30-2000
<PERIOD-START> MAY-01-1999
<PERIOD-END> JUL-31-1999
<CASH> 10,995
<SECURITIES> 0
<RECEIVABLES> 81,279
<ALLOWANCES> 0
<INVENTORY> 79,361
<CURRENT-ASSETS> 188,682
<PP&E> 136,025
<DEPRECIATION> 40,582
<TOTAL-ASSETS> 395,529
<CURRENT-LIABILITIES> 65,261
<BONDS> 133,430
0
0
<COMMON> 467
<OTHER-SE> 188,255
<TOTAL-LIABILITY-AND-EQUITY> 395,529
<SALES> 134,336
<TOTAL-REVENUES> 134,336
<CGS> 109,914
<TOTAL-COSTS> 129,142
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,638
<INCOME-PRETAX> 2,556
<INCOME-TAX> 1,112
<INCOME-CONTINUING> 1,444
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,444
<EPS-BASIC> .03
<EPS-DILUTED> .03
</TABLE>
