SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q/A
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 31, 1998
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, 1998 was 46,525,455.
<PAGE>
MILLER INDUSTRIES, INC.
INDEX
PART I. FINANCIAL INFORMATION Page Number
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets -
July 31, 1998 and April 30, 1998 3
Condensed Consolidated Statements of Income
for the Three Months Ended July 31, 1998 and 1997 4
Condensed Consolidated Statements of Cash Flows
for the Three Months Ended July 31, 1998 and 1997 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 11
-----------------
Item 6. Exhibits and Reports on Form 8-K 12
--------------------------------
SIGNATURES 12
<PAGE>
MILLER INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
(Unaudited)
<TABLE>
<CAPTION>
ASSETS
July 31, April 30,
1998 1998
Restated
(Note 2)
--------- ---------
<S> <C> <C>
CURRENT ASSETS:
Cash and temporary investments $ 12,039 $ 7,367
Accounts receivable, net 68,766 67,008
Inventories 78,335 71,839
Deferred income taxes 4,222 4,217
Prepaid expenses and other 4,294 5,362
--------- ---------
Total current assets 167,656 155,793
PROPERTY, PLANT AND EQUIPMENT, net 94,372 85,849
GOODWILL, net 88,392 81,605
OTHER ASSETS 8,909 6,483
--------- ---------
$ 359,329 $ 329,730
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $ 3,468 $ 4,900
Accounts payable 27,062 27,883
Accrued liabilities and other 17,350 18,236
--------- ---------
Total current liabilities 47,880 51,019
--------- ---------
LONG-TERM DEBT, less current portion 120,136 95,778
--------- ---------
DEFERRED INCOME TAXES 2,724 2,697
--------- ---------
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;
46,495,863 and 45,941,814 shares issued and outstanding at
July 31, 1998 and April 30, 1998, respectively 465 459
Additional paid-in capital 145,235 139,480
Retained earnings 43,545 40,862
Accumulated other comprehensive income (656) (565)
--------- ---------
Total shareholders' equity 188,589 180,236
--------- ---------
$ 359,329 $ 329,730
========= =========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE>
MILLER INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
(Unaudited)
Three Months Ended
July 31,
--------------------
1998 1997
Restated
(Note 2)
--------- -------
NET SALES $117,754 $85,353
COSTS AND EXPENSES:
Costs of operations 94,040 67,229
Selling, general, and administrative expenses 17,030 10,200
Interest expense, net 2,040 271
-------- -------
Total costs and expenses 113,110 77,700
-------- -------
INCOME BEFORE INCOME TAXES 4,644 7,653
INCOME TAXES 1,960 2,855
-------- -------
NET INCOME $ 2,684 $ 4,798
======== =======
NET INCOME PER COMMON SHARE:
BASIC $ 0.06 0.11
======== ====
DILUTED $ 0.06 0.11
======== ====
WEIGHTED AVERAGE SHARES OUTSTANDING:
BASIC 46,064 43,037
======== =======
DILUTED 47,195 45,214
======== =======
See accompanying notes to condensed consolidated financial statements.
4
<PAGE>
<TABLE>
<CAPTION>
MILLER INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
Three Months Ended July 31,
---------------------------
1998 1997
Restated
(Note2)
-------- --------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 2,684 $ 4,798
Adjustments to reconcile net income to net cash used in
operating activities:
Depreciation and amortization 2,964 1,686
Deferred income tax provision 214 108
Gain on disposals of property, plant, and equipment (351) --
Changes in operating assets and liabilities:
Accounts receivable (637) (4,878)
Inventories (6,435) (2,523)
Prepaid expenses and other 968 (376)
Accrued liabilities (1,444) 1,302
Accounts payable (939) (6,854)
Other assets 547 161
-------- --------
Net cash used in operating activities (2,429) (6,576)
-------- --------
INVESTING ACTIVITIES:
Purchases of property, plant, and equipment (4,256) (5,893)
Proceeds from sales of property, plant, and equipment 705 290
Acquisition of businesses, net of cash acquired (10,445) (2,929)
Funding of finance receivables -- (1,067)
Other (33) --
-------- --------
Net cash used in investing activities (14,029) (9,599)
-------- --------
FINANCING ACTIVITIES:
Net borrowings under line of credit 24,000 16,530
Repayment of long-term debt (2,899) (7,481)
Proceeds from exercise of stock options 15 379
-------- --------
Net cash provided by financing activities 21,116 9,428
-------- --------
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND
TEMPORARY INVESTMENTS 14 (23)
-------- --------
NET INCREASE (DECREASE) IN CASH AND TEMPORARY INVESTMENTS 4,672 (6,770)
CASH AND TEMPORARY INVESTMENTS, beginning of period 7,367 8,508
-------- --------
CASH AND TEMPORARY INVESTMENTS, end of period $ 12,039 $ 1,738
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash payments for interest $ 1,976 $ 184
======== ========
Cash payments for income taxes $ 1,668 $ 1,608
======== ========
</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. 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,
1998.
2. Restatement
In connection with its annual physical inventory counts which were
taken as of April 30, 1999, the Company identified certain adjustments
that it deemed necessary to more accurately state the previously filed
fiscal 1999 quarterly financial statements. During the interim periods,
the Company records inventory using estimated margins. While this
method has proven to be reliable in the past, this year's physical
inventory counts revealed aggregate adjustments which the Company
believes to be attributable to material, production, and other
inventory costs being higher, and the related utilization being less
efficient than estimated during the year.
The Company's financial statements for the three months ended July 31,
1998 have been restated to reflect these adjustments. A summary of the
effect of the adjustments for the three months ended July 31, 1998 on
certain previously reported amounts is as follows (in thousands, except
per share data):
6
<PAGE>
Three Months
Previously Restated
Reported
--------- --------
Costs of operations $ 92,312 $ 94,040
Total costs and expenses 111,382 113,110
Income before income taxes 6,372 4,644
Income taxes 2,676 1,960
Net income 3,696 2,684
Earnings per share:
Basic $ 0.08 $ 0.06
Diluted 0.08 0.06
July 31, 1998
-------------
Inventories $ 79,683 $ 78,335
Property, plant and equipment, net 94,414 94,372
Accrued liabilities and other 17,727 17,350
Retained Earnings 44,558 43,545
3. 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 takes into consideration the assumed conversion of
outstanding stock options resulting in 1.1 million and 2.2 million
potential dilutive common shares for the three months ended July 31,
1998 and 1997, respectively. Diluted net income per share is calculated
by dividing net income by the weighted average number of common and
potential dilutive common shares outstanding. 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.
4. 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, 1998 and April 30,
1998 consisted of the following (in thousands):
July 31, April 30,
1998 1998
-------- ---------
Chassis $18,217 $14,211
Raw Materials 23,631 22,027
Work in process 10,217 11,470
Finished goods 26,270 24,131
------- -------
$78,335 $71,839
======= =======
5. Business Combinations
During the quarter ended July 31, 1998, the Company purchased all the
outstanding common stock of 9 towing service companies and
substantially all of the assets of 8 towing service companies through
the issuance of approximately 539,300 shares of common stock and cash
7
<PAGE>
payments of approximately $8.0 million. These acquisitions were
accounted for using the purchase method of accounting. The pro forma
impact of these acquisitions on net income and earnings per share was
not significant for the periods presented herein.
6. 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 is required to produce information and documents to
assist the Division in its investigation. It is unknown at this time
what the eventual outcome of this investigation will be. The Company is
continuing to cooperate with the government in its investigation.
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 Company filed a motion to
dismiss in the Tennessee case which was granted in its entirety,
however, the plaintiffs in that case have been granted permission by
the Court to amend and refile their complaint. In both these actions,
the Company denies liability and continues to vigorously defend itself.
In addition to the shareholder litigation described above, the Company
is, from time to time, a party to litigation arising in the normal
course of its business. 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.
7. Comprehensive Income
Effective May 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income", which
requires additional disclosure of amounts comprising comprehensive
income. The Company has other comprehensive income (expense) in the
form of cumulative translation adjustments which resulted in total
comprehensive income (expense) of approximately $(91,000) and $(7,000)
for the quarters ended July 31, 1998 and 1997, respectively.
8
<PAGE>
8. Reclassifications
Certain amounts in the prior period financial information have been
reclassified to conform to the current presentation.
Item 2. Management's Discussion and Analysis of Financial Condition and
-------------------------------------------------------------------
Results of Operations
---------------------
Recent Developments
As more fully discussed in Note 5 to condensed consolidated financial
statements, during the quarter ended July 31, 1998, the Company
acquired a total of 17 towing service companies.
RESULTS OF OPERATIONS--THREE MONTHS ENDED JULY 31, 1998 COMPARED TO
THREE MONTHS ENDED JULY 31, 1997
Net sales for the three months ended July 31, 1998, increased 38.0% to
$117.8 million from $85.4 million for the comparable period in 1997.
The increase in net sales was primarily the result of higher sales from
the towing and recovery segment, including higher sales of truck
chassis and sales from Chevron, the towing and recovery equipment
manufacturer acquired in December, 1997, and the inclusion for the the
quarter ended July 31, 1998 of sales of towing service companies
acquired since July 31, 1997.
Costs of operations for the three months ended July 31, 1998, increased
39.9% to $94.0 million from $67.2 million for the comparable period in
1997. Costs of operations as a percentage of net sales increased to
79.9% from 78.8%. The increase was primarily a result of the impact of
a relative increase in the costs of operations as a percentage of net
sales incurred in the expansion of the business of the towing services
segment over the comparable prior year period.
Selling, general and administrative expenses for the three months ended
July 31, 1998, increased 67.0% to $17.0 million from $10.2 million for
the comparable period of 1997. As a percentage of sales, selling,
general and administrative expenses increased from 12.0% for the three
months ended July 31, 1997 to 14.5% for the three months ended July 31,
1998. This increase was primarily a result of the Company's towing
service segment, which generally has a higher level of selling, general
and administrative costs as a percentage of sales than the towing and
recovery equipment segment.
Net interest expense increased $1.7 million to $2.0 million for the
three months ended July 31, 1998 from $.3 million for the three months
ended July 31, 1997 primarily due to increased borrowings under the
Company's line of credit to fund working capital needs and additional
acquisitions of towing service companies.
9
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Cash flows used in operating activities were $2.4 million for the three
month period ended July 31, 1998 as compared to $6.6 million for the
comparable period of 1997. The cash flows used in operating activities
were used primarily to fund working capital needed to support the
growth of the businesses.
Cash used in investing activities was $14.0 million for the three month
period ended July 31, 1998 compared to $9.6 million used in investing
activities for the comparable period in 1997. The cash used in
investing activities was primarily for capital expenditures and
acquisition of businesses.
Cash provided by financing activities was $21.1 million for the three
month period ended July 31, 1998 and $9.4 million for the comparable
period in the prior year. The cash was provided primarily by borrowing
under the Company's lines of credit.
The Company has an unsecured revolving credit facility of $150,000,000
( the "Credit Facility") for working capital and other general
corporate purposes. Borrowings under the Credit Facility bear interest
at a rate equal to the London Interbank Offered Rate plus a margin
ranging from 0.625% to 1.5% based on a specified ratio of funded
indebtedness to earnings or the prime rate, as elected by the Company.
At July 31, 1998, $109 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.
The Company is currently increasing the capacity of its plant in
Ooltewah, Tennessee. Capital expenditures remaining for this expansion
and additional equipment are expected to be approximately $2.9 million.
As described in Note 5 to condensed consolidated financial statements,
the Company has expended approximately $8.0 million for the purchase of
towing service companies during the quarter ended July 31, 1998.
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.
RECENT ACCOUNTING PRONOUNCEMENTS
The Company has adopted the provisions of Statement of Financial
Accounting No. 131, "Disclosures about Segments of an Enterprise and
Related Information". The adoption will not have a significant impact
on the condensed consolidated financial statements.
10
<PAGE>
YEAR 2000
The Company utilizes software and related technologies throughout its
businesses that will be affected by the date change in the year 2000.
The Company is currently reviewing its systems for year 2000 compliance
in its design, purchase and installation processes. Anticipated costs
of systems modifications for compliance are not expected to have
material impact on the Company's consolidated results of operations.
The Company does not currently have any information concerning the year
2000 compliance status of its suppliers and customers. In the event
that any of the Company's significant suppliers or customers does not
successfully and timely achieve year 2000 compliance, the Company's
business or operations could be adversely affected.
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 is required to produce information and documents to
assist the Division in its investigation. It is unknown at this time
what the eventual outcome of the investigation will be. The Company is
continuing to cooperate with the government in its investigation.
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 Company filed a motion to
dismiss in the Tennessee case which was granted in its entirety,
however, the plaintiffs in that case have been granted permission by
the Court to amend and refile their complaint. In both these actions,
the Company denies liability and continues to vigorously defend itself.
11
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
Exhibit 10 - Form of Indemnification Agreement dated June 8,
1998 by and between Miller Industries, Inc. and
each of William G. Miller, Jeffrey I. Badgley,
A. Russell Chandler, Paul E. Drack, Adam L.
Dunayer, Stephen Furbacher, Frank Madonia, J.
Vicent Mish, Richard H. Roberts, and Daniel N.
Sebastian.*
Exhibit 27 - Restated Financial Data Schedule (For SEC use only)
_____________________
*Previously filed.
(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: August 12, 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-30-1999
<PERIOD-START> MAY-01-1998
<PERIOD-END> JUL-31-1998
<CASH> 12,039
<SECURITIES> 0
<RECEIVABLES> 68,766
<ALLOWANCES> 0
<INVENTORY> 78,335
<CURRENT-ASSETS> 167,656
<PP&E> 125,451
<DEPRECIATION> 31,079
<TOTAL-ASSETS> 359,329
<CURRENT-LIABILITIES> 47,880
<BONDS> 120,136
0
0
<COMMON> 465
<OTHER-SE> 188,124
<TOTAL-LIABILITY-AND-EQUITY> 359,329
<SALES> 117,754
<TOTAL-REVENUES> 117,754
<CGS> 94,040
<TOTAL-COSTS> 111,070
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,040
<INCOME-PRETAX> 4,644
<INCOME-TAX> 1,960
<INCOME-CONTINUING> 2,684
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,684
<EPS-BASIC> 0.06
<EPS-DILUTED> 0.06
</TABLE>
