Miller Industries, Inc. (NYSE:MLR) Q4 2020 Earnings Conference Call March 4, 2021 10:00 AM ET Company Participants Brendan Dunlap ??? Investor Relations, FTI Consulting Jeff Badgley ??? Co-Chief Executive Officer Debbie Whitmire ??? Executive Vice President and Chief Financial Officer Conference Call Participants Operator Good day, ladies and gentlemen, and welcome to the Miller Industries Fourth Quarter 2020 Results Conference Call. Please note, this event is being recorded. And now at this time, I would l ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2020 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File No. 001-14124 MILLER INDUSTRIES, INC. (Exact name of registrant as specified in its charter) Tennessee 62-1566286 (State or ot ...

Miller Industries, Inc. (NYSE:MLR) Q3 2020 Earnings Conference Call November 5, 2020 10:00 AM ET Company Participants Brendan Dunlap - Investor Relations, FTI Consulting Jeff Badgley - Co-Chief Executive Officer Debbie Whitmire - Executive Vice President & Chief Financial Officer Conference Call Participants Operator Good day, ladies and gentlemen, and welcome to the Miller Industries Third Quarter 2020 Results Conference Call. Please note this event is being recorded. And now at this time, I would like to ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 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 September 30, 2020 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ___________________________________________ to ________________________________________ Commission file number 001-14124 MILLER INDUSTRIES, INC. (Exac ...

Miller Industries Inc (NYSE:MLR) Q2 2020 Results Conference Call August 6, 2020 10:00 AM ET Company Participants Brendan Dunlap - Investor Relations Jeffrey Badgley - Co-Chief Executive Officer Deborah Whitmire - Chief Financial Officer Bill Miller - Chairman of the Board William Miller - President, Co-Chief Executive Officer & Director Conference Call Participants James Lee - Potrero Capital Operator Good day, ladies and gentlemen, and welcome to the Miller Industries Second Quarter 2020 Results Conferen ...

[FORM 10-Q Filing Information](index=1&type=section&id=FORM%2010-Q%20Filing%20Information) Provides key filing details for Miller Industries, Inc.'s Form 10-Q report - Miller Industries, Inc. filed its Quarterly Report on Form 10-Q for the period ended June 30, 2020, confirming its status as an accelerated filer and not a shell company[1](index=1&type=chunk) Condensed Consolidated Balance Sheets (in thousands) | Metric | Value | | :----- | :---- | | Commission file number | 001-14124 | | Shares outstanding (July 31, 2020) | 11,405,468 | | Securities registered | Common Stock, par value $0.01 per share (MLR on NYSE) | [FORWARD-LOOKING STATEMENTS](index=3&type=section&id=FORWARD-LOOKING%20STATEMENTS) Highlights inherent risks and uncertainties impacting forward-looking statements, including COVID-19 and industry factors - The report contains forward-looking statements, particularly in 'Management's Discussion and Analysis,' subject to risks like COVID-19 impact, industry cyclicality, raw material dependence, and regulatory changes, which could cause actual results to differ materially[6](index=6&type=chunk) [PART I FINANCIAL INFORMATION](index=4&type=section&id=PART%20I%20FINANCIAL%20INFORMATION) Presents the company's unaudited condensed consolidated financial statements and management's discussion and analysis [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) Presents unaudited condensed consolidated financial statements and their accompanying detailed notes [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Summarizes the company's financial position, showing changes in assets, liabilities, and equity Condensed Consolidated Balance Sheets (in thousands) | Item | June 30, 2020 | December 31, 2019 | | :-------------------------------- | :------------ | :---------------- | | **ASSETS** | | | | Total current assets | $256,894 | $287,452 | | Total noncurrent assets | $107,079 | $104,515 | | **TOTAL ASSETS** | **$363,973** | **$391,967** | | **LIABILITIES AND SHAREHOLDERS' EQUITY** | | | | Total current liabilities | $89,571 | $124,282 | | Total noncurrent liabilities | $9,514 | $9,758 | | **Total liabilities** | **$99,085** | **$134,040** | | Total shareholders' equity | $264,888 | $257,927 | | **TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY** | **$363,973** | **$391,967** | - Total assets decreased by **$27,994 thousand (7.1%)** from December 31, 2019, to June 30, 2020, primarily due to a decrease in accounts receivable[9](index=9&type=chunk) - Total liabilities decreased by **$34,955 thousand (26.1%)**, mainly driven by a reduction in accounts payable[9](index=9&type=chunk) - Shareholders' equity increased by **$6,961 thousand (2.7%)**[9](index=9&type=chunk) [Condensed Consolidated Statements of Income](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) Details the company's revenue, expenses, and net income performance over specified periods Condensed Consolidated Statements of Income (in thousands, except per share data) | Item | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net Sales | $128,529 | $222,346 | $304,583 | $419,559 | | Costs of Operations | $110,802 | $197,133 | $268,318 | $371,749 | | Gross Profit | $17,727 | $25,213 | $36,265 | $47,810 | | Operating Expenses (SG&A) | $10,067 | $10,968 | $21,041 | $21,183 | | Income Before Income Taxes | $7,506 | $13,467 | $14,620 | $24,927 | | Net Income | $5,826 | $10,683 | $11,257 | $19,343 | | Basic Income Per Common Share | $0.51 | $0.94 | $0.99 | $1.70 | | Cash Dividends Declared Per Common Share | $0.18 | $0.18 | $0.36 | $0.36 | - Net sales decreased significantly by **42.2%** for the three months and **27.4%** for the six months ended June 30, 2020, compared to the prior year, primarily due to COVID-19 impacts[11](index=11&type=chunk) - Net income also saw substantial declines, falling **45.4%** for the quarter and **41.8%** for the six-month period[11](index=11&type=chunk) [Condensed Consolidated Statements of Comprehensive Income](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) Reports net income and other comprehensive income components, including foreign currency adjustments Condensed Consolidated Statements of Comprehensive Income (in thousands) | Item | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net Income | $5,826 | $10,683 | $11,257 | $19,343 | | Foreign currency translation adjustment | $(312) | $(930) | $(384) | $(653) | | Comprehensive Income | $5,514 | $9,753 | $10,873 | $18,690 | - Comprehensive income decreased by **43.5%** for the three months and **41.8%** for the six months ended June 30, 2020, reflecting the decline in net income and continued foreign currency translation adjustments[14](index=14&type=chunk) [Condensed Consolidated Statements of Shareholders' Equity](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Shareholders'%20Equity) Outlines changes in shareholders' equity, including net income, dividends, and other adjustments Condensed Consolidated Statements of Shareholders' Equity (in thousands) | Item | Dec 31, 2019 | Mar 31, 2020 | June 30, 2020 | | :-------------------------------- | :----------- | :----------- | :------------ | | Common Stock | $114 | $114 | $114 | | Additional Paid-In Capital | $151,055 | $151,249 | $151,249 | | Accumulated Surplus | $112,261 | $115,639 | $119,412 | | Accumulated Other Comprehensive Loss | $(5,503) | $(5,575) | $(5,887) | | **Total Shareholders' Equity** | **$257,927** | **$261,427** | **$264,888** | Key Changes (Six Months Ended June 30, 2020) * Net income: $11,257 thousand * Foreign currency translation adjustments: $(384) thousand * Issuance of common stock to non-employee directors: $194 thousand * Dividends paid: $(4,106) thousand - Total shareholders' equity increased from **$257,927 thousand** at December 31, 2019, to **$264,888 thousand** at June 30, 2020, driven by net income partially offset by dividends paid and foreign currency translation adjustments[17](index=17&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Analyzes cash inflows and outflows from operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows (in thousands) | Activity | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Net cash flows from operating activities | $23,035 | $8,325 | | Net cash flows from investing activities | $(7,503) | $(8,430) | | Net cash flows from financing activities | $(4,300) | $702 | | Effect of exchange rate changes on cash | $(188) | $(398) | | **Net change in cash and temporary investments** | **$11,044** | **$199** | | Cash and temporary investments, beginning of period | $26,072 | $27,037 | | **Cash and temporary investments, end of period** | **$37,116** | **$27,236** | Supplemental Disclosure (in thousands) | Item | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Cash payments for interest | $1,203 | $1,655 | | Cash payments for income taxes, net of refunds | $1,710 | $5,249 | - Net cash provided by operating activities significantly increased to **$23,035 thousand** for the six months ended June 30, 2020, from **$8,325 thousand** in the prior year, primarily due to decreased cash usage for new production and continued receivables inflow[19](index=19&type=chunk) - Cash used in financing activities shifted from a net inflow of **$702 thousand** in 2019 to a net outflow of **$4,300 thousand** in 2020, mainly due to dividend payments and net repayments on credit facility[19](index=19&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Provides detailed explanations and disclosures for the condensed consolidated financial statements [1. BASIS OF PRESENTATION](index=9&type=section&id=1.%20BASIS%20OF%20PRESENTATION) Explains the basis for preparing the unaudited interim consolidated financial statements - The condensed consolidated financial statements are unaudited, prepared in accordance with SEC rules and GAAP, and include all normal recurring adjustments, with interim results not necessarily indicative of full fiscal year results[20](index=20&type=chunk) [2. RECENT ACCOUNTING PRONOUNCEMENTS](index=9&type=section&id=2.%20RECENT%20ACCOUNTING%20PRONOUNCEMENTS) Discusses the adoption and expected impact of recent accounting pronouncements - The Company adopted ASU 2018-15 (Intangibles – Goodwill and Other – Internal-Use Software) in Q1 2020, with no material impact[22](index=22&type=chunk) - ASU 2019-12 (Income Taxes) will be effective after December 15, 2020, and is not expected to have a material impact[23](index=23&type=chunk) [3. BASIC INCOME PER SHARE](index=9&type=section&id=3.%20BASIC%20INCOME%20PER%20SHARE) Defines the calculation method for basic income per share and capital structure - Basic income per share is calculated by dividing net income by the weighted average number of common shares outstanding, with the Company having a simple capital structure and no dilutive instruments[24](index=24&type=chunk) [4. REVENUE](index=10&type=section&id=4.%20REVENUE) Details revenue recognition policies and disaggregation of net sales by geographic region - Substantially all revenue is from sales of towing equipment, recognized when products are shipped or control transfers under bill and hold arrangements[26](index=26&type=chunk) - Revenue is disaggregated by geographic location[27](index=27&type=chunk) Net Sales by Geographic Location (in thousands) | Region | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | North America | $107,460 | $191,753 | $251,316 | $355,646 | | Foreign | $21,069 | $30,593 | $53,267 | $63,913 | | **Total Net Sales** | **$128,529** | **$222,346** | **$304,583** | **$419,559** | Contract Liabilities (in thousands) | Date | Balance | | :--- | :------ | | June 30, 2020 | $287 | | December 31, 2019 | $324 | - **$37 thousand** of contract liability recognized into earnings during the six months ended June 30, 2020[29](index=29&type=chunk) [5. INVENTORIES](index=10&type=section&id=5.%20INVENTORIES) Describes inventory valuation methods and composition, net of reserves - Inventories are valued at the lower of cost or net realizable value, using the first-in, first-out (FIFO) method, with costs including materials, labor, and factory overhead[31](index=31&type=chunk) Inventories, net of reserves (in thousands) | Category | June 30, 2020 | December 31, 2019 | | :------------- | :------------ | :---------------- | | Chassis | $6,816 | $6,561 | | Raw materials | $41,223 | $39,444 | | Work in process | $16,694 | $16,520 | | Finished goods | $26,169 | $25,440 | | **Total Inventories** | **$90,902** | **$87,965** | [6. LONG-TERM OBLIGATIONS](index=11&type=section&id=6.%20LONG-TERM%20OBLIGATIONS) Outlines the company's credit facilities and other long-term debt obligations - The Company maintains a **$50,000 thousand** unsecured revolving credit facility with First Horizon Bank, maturing May 31, 2022, and was in compliance with all covenants[33](index=33&type=chunk) - A French subsidiary has an unsecured fixed-rate loan of **$185 thousand** due September 30, 2020[36](index=36&type=chunk) Outstanding Borrowings (in thousands) | Obligation | June 30, 2020 | December 31, 2019 | | :-------------------------------- | :------------ | :---------------- | | Credit Facility | $5,000 | $4,998 | | French Subsidiary Loan | $185 | $368 | Credit Facility Activity (in thousands) * March 2020: Drew **$25,000** for working capital due to COVID-19 * Q2 2020: Repaid **$25,000** as cash position strengthened [7. COMMITMENTS AND CONTINGENCIES](index=11&type=section&id=7.%20COMMITMENTS%20AND%20CONTINGENCIES) Details the company's leasing activities, other commitments, and potential contingencies [Leasing Activities](index=11&type=section&id=Leasing%20Activities) Describes the company's operating and finance lease agreements and related obligations - The Company leases equipment and facilities under operating and finance lease agreements, expiring through 2026[37](index=37&type=chunk) - Right-of-use assets and lease obligations are recognized based on the present value of lease payments, using the incremental borrowing rate[38](index=38&type=chunk)[39](index=39&type=chunk) Lease Obligations and Costs (in thousands) | Item | June 30, 2020 | December 31, 2019 | | :-------------------------------- | :------------ | :---------------- | | Operating Lease Obligation | $1,430 | $1,807 (undiscounted) | | Finance Lease Obligation | $48 | $61 (undiscounted) | Total Lease Cost (in thousands) | Period | 2020 | 2019 | | :-------------------------------- | :--- | :--- | | Three Months Ended June 30 | $245 | $509 | | Six Months Ended June 30 | $466 | $967 | Weighted Average Lease Terms (June 30, 2020) * Operating leases: 5.1 years * Finance leases: 2.2 years [Other Commitments](index=14&type=section&id=Other%20Commitments) Presents the company's capital commitments for property, plant, equipment, and software licenses Commitments (in thousands) | Category | June 30, 2020 | December 31, 2019 | | :-------------------------------- | :------------ | :---------------- | | Property, Plant and Equipment | $11,964 | $3,583 | | ERP System Software License Fees | $6,179 | $8,430 | - Property, Plant and Equipment commitment includes **$10,000 thousand** for upgrading fabrication equipment at Greeneville, TN[44](index=44&type=chunk) [Contingencies](index=14&type=section&id=Contingencies) Discusses potential financial obligations from repurchase agreements and legal proceedings - The Company has repurchase agreements with third-party lenders for repossessed products from distributors, with a maximum potential repurchase amount of **$93,737 thousand** at June 30, 2020[45](index=45&type=chunk) - Litigation arising in the normal course of business is accrued for when probable and estimable, and management believes any excess liability will not materially impact financial position[48](index=48&type=chunk) [8. INCOME TAXES](index=16&type=section&id=8.%20INCOME%20TAXES) Provides information on the company's income tax position and carryforwards - As of June 30, 2020, the Company had no federal net operating loss carryforwards and no significant state operating loss carryforwards[49](index=49&type=chunk) [9. SUBSEQUENT EVENTS](index=16&type=section&id=9.%20SUBSEQUENT%20EVENTS) Reports significant events occurring after the balance sheet date, such as dividend declarations - On August 3, 2020, the Board of Directors declared a quarterly cash dividend of **$0.18 per share**, payable September 14, 2020, to shareholders of record as of September 7, 2020[50](index=50&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=17&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management's analysis of financial condition, operating results, COVID-19 impact, and liquidity [Executive Overview](index=17&type=section&id=Executive%20Overview) Provides an overview of the company's business, key performance indicators, and industry factors - Miller Industries is the world's largest manufacturer of towing and recovery equipment, operating globally under various brand names[53](index=53&type=chunk) - Management monitors revenue, operating income, gross margin, net income, EPS, capital expenditures, and cash flow, with revenue influenced by economic conditions, product demand, technological competitiveness, and raw material costs[54](index=54&type=chunk)[55](index=55&type=chunk) - The Company emphasizes innovation, investing in robotics, advanced manufacturing technologies, an R&D facility, and an ongoing ERP system migration[56](index=56&type=chunk) - The industry is cyclical, and the Company is concerned about factors like consumer confidence, credit market volatility, fuel/insurance costs, and raw material price changes[57](index=57&type=chunk)[58](index=58&type=chunk) [Impact of COVID-19](index=19&type=section&id=Impact%20of%20COVID-19) Assesses the operational and financial effects of the COVID-19 pandemic on the company - The COVID-19 pandemic led to operational modifications, including limited shutdowns and workforce rotations, to ensure employee safety[62](index=62&type=chunk) - The Company drew and subsequently repaid **$25,000 thousand** from its credit facility as a precautionary liquidity measure[63](index=63&type=chunk) - Material curtailments of new chassis deliveries and reduced product orders caused domestic and international plant shutdowns, negatively impacting Q2 revenues but strengthening the order backlog[64](index=64&type=chunk) - The future impact of COVID-19 on operations and financial performance remains highly uncertain, depending on the pandemic's duration, severity, and economic recovery[65](index=65&type=chunk) [Critical Accounting Policies](index=19&type=section&id=Critical%20Accounting%20Policies) Identifies key accounting policies requiring significant management judgment and their stability - The Company's critical accounting policies, requiring significant management judgment, include those related to accounts receivable, inventory, long-lived assets, warranty reserves, revenues, and income taxes, with no significant changes during the first six months of 2020[66](index=66&type=chunk) [Results of Operations – Three Months Ended June 30, 2020 Compared to Three Months Ended June 30, 2019](index=21&type=section&id=Results%20of%20Operations%20%E2%80%93%20Three%20Months%20Ended%20June%2030%2C%202020%20Compared%20to%20Three%20Months%20Ended%20June%2030%2C%202019) Compares financial performance for the three months ended June 30, highlighting key variances Financial Performance (Three Months Ended June 30, in thousands) | Item | 2020 | 2019 | Change (%) | | :-------------------------------- | :--- | :--- | :--------- | | Net Sales | $128,529 | $222,346 | -42.2% | | Costs of Operations | $110,802 | $197,133 | -43.8% | | Gross Profit | $17,727 | $25,213 | -29.7% | | SG&A Expenses | $10,067 | $10,968 | -8.3% | | Income Before Income Taxes | $7,506 | $13,467 | -44.3% | | Net Income | $5,826 | $10,683 | -45.4% | | Basic Income Per Common Share | $0.51 | $0.94 | -45.7% | - Net sales decreased due to COVID-19 related supply chain issues, shutdowns, and safety adjustments[69](index=69&type=chunk) - Costs of operations decreased as a percentage of sales (**86.2%** vs **88.7%**), reflecting enhanced margins from product mix changes[70](index=70&type=chunk) - SG&A expenses decreased in absolute terms but increased as a percentage of sales (**7.8%** vs **4.9%**) due to reduced fixed cost absorption[71](index=71&type=chunk) - Interest expense, net, decreased due to lower credit facility and floor plan interest[72](index=72&type=chunk) [Results of Operations – Six Months Ended June 30, 2020 Compared to Six Months Ended June 30, 2019](index=21&type=section&id=Results%20of%20Operations%20%E2%80%93%20Six%20Months%20Ended%20June%2030%2C%202020%20Compared%20to%20Six%20Months%20Ended%20June%2030%2C%202019) Compares financial performance for the six months ended June 30, detailing significant changes Financial Performance (Six Months Ended June 30, in thousands) | Item | 2020 | 2019 | Change (%) | | :-------------------------------- | :--- | :--- | :--------- | | Net Sales | $304,583 | $419,559 | -27.4% | | Costs of Operations | $268,318 | $371,749 | -27.8% | | Gross Profit | $36,265 | $47,810 | -24.2% | | SG&A Expenses | $21,041 | $21,183 | -0.7% | | Income Before Income Taxes | $14,620 | $24,927 | -41.3% | | Net Income | $11,257 | $19,343 | -41.8% | | Basic Income Per Common Share | $0.99 | $1.70 | -41.8% | - Net sales decreased due to COVID-19 impacts, including supply chain issues and shutdowns[75](index=75&type=chunk) - Costs of operations decreased as a percentage of sales (**88.1%** vs **88.6%**), primarily due to product mix differences[76](index=76&type=chunk) - SG&A expenses remained relatively flat in absolute terms but increased as a percentage of sales (**6.9%** vs **5.0%**)[77](index=77&type=chunk) - Interest expense, net, decreased due to lower credit facility and chassis interest[78](index=78&type=chunk) - Other (income) expense, net, shifted from a net loss of **$315 thousand** in 2019 to a net gain of **$189 thousand** in 2020, primarily from foreign currency exchange gains[79](index=79&type=chunk) [Liquidity and Capital Resources](index=23&type=section&id=Liquidity%20and%20Capital%20Resources) Analyzes the company's cash position, sources, and uses of capital, and future liquidity - Cash provided by operating activities increased significantly to **$23,035 thousand** for the six months ended June 30, 2020, from **$8,325 thousand** in 2019, due to reduced cash usage for new production while receivables from prior quarters continued to flow in[80](index=80&type=chunk) - Cash used in investing activities was **$7,503 thousand**, primarily for property, plant, and equipment purchases[81](index=81&type=chunk) - Cash used in financing activities was **$4,300 thousand**, mainly for cash dividends[82](index=82&type=chunk) Cash and Commitments (in thousands) | Item | June 30, 2020 | | :-------------------------------- | :------------ | | Cash and cash equivalents | $37,116 | | Commitments for property, plant and equipment | $11,964 | | Commitments for software license fees | $6,179 | | Cash held by foreign subsidiaries | $17,761 | - Expected sources of cash include operations, cash on hand, and credit facility borrowings, deemed sufficient for the next several years[84](index=84&type=chunk) [Credit Facilities and Other Obligations](index=23&type=section&id=Credit%20Facilities%20and%20Other%20Obligations) Details the company's credit facilities, outstanding debt, and other contractual obligations - The Company's **$50,000 thousand** unsecured revolving credit facility matures on May 31, 2022, with **$5,000 thousand** outstanding at June 30, 2020, and the Company was in compliance with all covenants[85](index=85&type=chunk)[88](index=88&type=chunk) - Non-cancelable operating lease obligations were **$1,587 thousand** and finance lease obligations were **$49 thousand** (undiscounted) at June 30, 2020[89](index=89&type=chunk) - A French subsidiary has a **$185 thousand** fixed-rate loan due September 30, 2020[90](index=90&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=25&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Discloses the company's exposure to market risks, including interest rate and foreign currency fluctuations [Interest Rate Risk](index=25&type=section&id=Interest%20Rate%20Risk) Assesses the company's exposure to interest rate fluctuations on its variable-rate debt - The Company is exposed to interest rate risk on its variable-rate credit facility, which bears interest at LIBOR plus 1.00% or 1.25%, though a one percent change would not materially impact financial results for the periods presented[92](index=92&type=chunk) [Foreign Currency Exchange Rate Risk](index=25&type=section&id=Foreign%20Currency%20Exchange%20Rate%20Risk) Evaluates the impact of foreign currency exchange rate fluctuations on international operations - International operations expose the Company to foreign currency exchange rate risk, managed through operating and financing activities and occasional forward contracts[93](index=93&type=chunk) - Fluctuations resulted in a **$312 thousand** decrease in foreign currency translation adjustment for the three months and a **$384 thousand** decrease for the six months ended June 30, 2020, recognized as unrealized losses[94](index=94&type=chunk) - Net foreign currency exchange gains were **$273 thousand** for the three months and **$189 thousand** for the six months ended June 30, 2020[95](index=95&type=chunk) [Item 4. Controls and Procedures](index=25&type=section&id=Item%204.%20Controls%20and%20Procedures) Reports on the effectiveness of disclosure controls and changes in internal control over financial reporting [Disclosure Controls and Procedures](index=25&type=section&id=Disclosure%20Controls%20and%20Procedures) Confirms the effectiveness of the company's disclosure controls and procedures - Management, including co-CEOs and CFO, concluded that the Company's disclosure controls and procedures were effective as of June 30, 2020, ensuring timely and accurate reporting[96](index=96&type=chunk)[97](index=97&type=chunk) [Changes in Internal Control over Financial Reporting](index=27&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) States that no significant changes in internal control over financial reporting occurred - There were no significant changes in internal control over financial reporting during the period covered by the report that materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting[98](index=98&type=chunk) [PART II OTHER INFORMATION](index=27&type=section&id=PART%20II%20OTHER%20INFORMATION) Presents other required information, including legal proceedings, risk factors, and exhibits [Item 1. Legal Proceedings](index=27&type=section&id=Item%201.%20Legal%20Proceedings) Discloses information regarding legal proceedings the company is involved in - The Company is periodically involved in litigation, with accruals established for probable and estimable matters, and management believes any liability exceeding insurance coverage will not materially adversely affect the Company's financial position or results of operations[100](index=100&type=chunk) [Item 1A. Risk Factors](index=27&type=section&id=Item%201A.%20Risk%20Factors) Supplements risk factors, emphasizing the uncertain adverse impacts of the COVID-19 pandemic - The COVID-19 pandemic poses significant risks, including disruptions to business operations, potential further adverse impacts on plant production levels due to safety measures, reduced demand from customers, and supply chain delays for chassis and other materials[102](index=102&type=chunk)[103](index=103&type=chunk)[104](index=104&type=chunk)[105](index=105&type=chunk) - The financial impact is uncertain but anticipated to be materially adverse[106](index=106&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=29&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) Reports on any unregistered sales of equity securities and the application of proceeds - There were no unregistered sales of equity securities or use of proceeds to report[107](index=107&type=chunk) [Item 3. Defaults Upon Senior Securities](index=29&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) Reports on any defaults concerning senior securities - There were no defaults upon senior securities to report[108](index=108&type=chunk) [Item 4. Mine Safety Disclosures](index=29&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) Provides disclosures related to mine safety, noting its inapplicability - Mine safety disclosures are not applicable to the Company[109](index=109&type=chunk) [Item 5. Other Information](index=29&type=section&id=Item%205.%20Other%20Information) Includes any other information not covered in preceding items - There was no other information to report[110](index=110&type=chunk) [Item 6. Exhibits](index=30&type=section&id=Item%206.%20Exhibits) Lists all exhibits filed as part of the Form 10-Q report - The report includes certifications from Co-Chief Executive Officers and Chief Financial Officer (Exhibits 31.1, 31.2, 31.3, 32.1, 32.2, 32.3) and Inline XBRL documents (Exhibits 101.INS, 101.SCH, 101.CAL, 101.DEF, 101.LAB, 101.PRE, 104)[112](index=112&type=chunk)[115](index=115&type=chunk) [SIGNATURES](index=33&type=section&id=SIGNATURES) Confirms the official signing and submission of the Form 10-Q report - The report was duly signed on behalf of Miller Industries, Inc. by Deborah L. Whitmire, Executive Vice President, Chief Financial Officer, and Treasurer, on August 5, 2020[117](index=117&type=chunk)[119](index=119&type=chunk)

Miller Industries, Inc. (NYSE:MLR) Q1 2020 Earnings Conference Call May 7, 2020 10:00 AM ET Company Participants Brendan Dunlap - FTI Consulting Jeff Badgley - Co-Chief Executive Officer Debbie Whitmire - Executive Vice President & Chief Financial Officer Conference Call Participants Operator Good day ladies and gentlemen and welcome to the Miller Industries' First Quarter 2020 Results Conference Call. Please note, this event is being recorded. And now, at this time, I would like to turn the call over to Br ...

[FORWARD-LOOKING STATEMENTS](index=3&type=section&id=FORWARD-LOOKING%20STATEMENTS) This section outlines cautionary statements regarding future expectations, noting actual results may differ due to various factors - Forward-looking statements are identified by words such as "may," "will," "should," "expect," and "anticipate"[7](index=7&type=chunk) - Actual results may differ materially due to various factors, including the effects of COVID-19, industry cyclicality, economic conditions, raw material prices, and international operational uncertainties[7](index=7&type=chunk) - The company does not undertake to update these statements[7](index=7&type=chunk) [PART I. FINANCIAL INFORMATION](index=4&type=section&id=PART%20I%20FINANCIAL%20INFORMATION) This part presents the company's financial statements, management's discussion, market risk, and controls [ITEM 1. FINANCIAL STATEMENTS](index=4&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS) This section provides the company's unaudited condensed consolidated financial statements, including balance sheets, income, and cash flow [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This section presents the company's financial position, detailing assets, liabilities, and shareholders' equity Condensed Consolidated Balance Sheet Highlights (in thousands) | Metric | March 31, 2020 | December 31, 2019 | Change | | :----------------------------- | :------------- | :---------------- | :----- | | Cash and temporary investments | $43,094 | $26,072 | +$17,022 | | Total current assets | $312,355 | $287,452 | +$24,903 | | Total assets | $417,886 | $391,967 | +$25,919 | | Total current liabilities | $121,813 | $124,282 | -$2,469 | | Long-term obligations | $29,998 | $4,998 | +$25,000 | | Total liabilities | $156,459 | $134,040 | +$22,419 | | Total shareholders' equity | $261,427 | $257,927 | +$3,500 | [Condensed Consolidated Statements of Income](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) This section reports the company's financial performance, including net sales, costs, gross profit, and net income Condensed Consolidated Statements of Income Highlights (in thousands, except per share data) | Metric | 3 Months Ended Mar 31, 2020 | 3 Months Ended Mar 31, 2019 | YoY Change | | :----------------------------------- | :-------------------------- | :-------------------------- | :--------- | | Net Sales | $176,054 | $197,213 | -10.7% | | Costs of Operations | $157,516 | $174,616 | -9.8% | | Gross Profit | $18,538 | $22,597 | -17.9% | | Operating Expenses (SG&A) | $10,974 | $10,215 | +7.4% | | Income Before Income Taxes | $7,114 | $11,460 | -37.9% | | Net Income | $5,431 | $8,660 | -37.3% | | Basic Income Per Common Share | $0.48 | $0.76 | -36.8% | | Cash Dividends Declared Per Common Share | $0.18 | $0.18 | 0.0% | [Condensed Consolidated Statements of Comprehensive Income](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) This section details comprehensive income, including net income and other comprehensive income items Condensed Consolidated Statements of Comprehensive Income Highlights (in thousands) | Metric | 3 Months Ended Mar 31, 2020 | 3 Months Ended Mar 31, 2019 | YoY Change | | :-------------------------------- | :-------------------------- | :-------------------------- | :--------- | | Net Income | $5,431 | $8,660 | -37.3% | | Foreign currency translation adjustment | $(72) | $277 | N/A | | Comprehensive Income | $5,359 | $8,937 | -40.0% | [Condensed Consolidated Statements of Shareholders' Equity](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Shareholders'%20Equity) This section outlines changes in shareholders' equity, reflecting net income, dividends, and other adjustments Condensed Consolidated Statements of Shareholders' Equity Highlights (in thousands) | Metric | March 31, 2020 | December 31, 2019 | March 31, 2019 | | :------------------------------------ | :------------- | :---------------- | :------------- | | Total Shareholders' Equity | $261,427 | $257,927 | $234,602 | | Net Income (3 months) | $5,431 | N/A | $8,660 | | Foreign currency translation adjustments (3 months) | $(72) | N/A | $277 | | Dividends paid per share (3 months) | $0.18 | N/A | $0.18 | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This section summarizes cash inflows and outflows from operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows Highlights (in thousands) | Metric | 3 Months Ended Mar 31, 2020 | 3 Months Ended Mar 31, 2019 | YoY Change | | :----------------------------------- | :-------------------------- | :-------------------------- | :--------- | | Net cash flows from operating activities | $(1,852) | $(17,854) | +$16,002 | | Net cash flows from investing activities | $(3,516) | $(3,155) | -$361 | | Net cash flows from financing activities | $22,850 | $12,848 | +$10,002 | | Net change in cash and temporary investments | $17,022 | $(8,058) | +$25,080 | | Cash and temporary investments, end of period | $43,094 | $18,979 | +$24,115 | [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations and additional information supporting the condensed financial statements [1. Basis of Presentation](index=9&type=section&id=1.%20BASIS%20OF%20PRESENTATION) This note describes the accounting principles and rules used in preparing the unaudited condensed financial statements - The unaudited condensed consolidated financial statements are prepared in accordance with SEC rules and GAAP, with certain disclosures condensed[24](index=24&type=chunk) - Management believes they fairly present the financial position, results of operations, and cash flows[24](index=24&type=chunk) - Interim results are not necessarily indicative of full fiscal year results[24](index=24&type=chunk) [2. Recent Accounting Pronouncements](index=9&type=section&id=2.%20RECENT%20ACCOUNTING%20PRONOUNCEMENTS) This note discusses the impact of recently adopted and upcoming accounting standards on financial statements - ASU 2019-12 (Income Taxes), effective after December 15, 2020, is not expected to have a material impact on the financial statements[25](index=25&type=chunk) - ASU 2018-15 (Intangibles – Goodwill and Other – Internal-Use Software) was adopted in Q1 2020 and had no material impact on the financial statements[26](index=26&type=chunk) [3. Basic Income Per Share](index=9&type=section&id=3.%20BASIC%20INCOME%20PER%20SHARE) This note explains the calculation of basic income per share, based on net income and weighted average common shares - Basic income per share is computed by dividing net income by the weighted average number of common shares outstanding, as the company has a simple capital structure with no stock options[27](index=27&type=chunk) [4. Revenue](index=10&type=section&id=4.%20REVENUE) This note details revenue recognition policies and provides a breakdown of net sales by geographic location - Substantially all revenue is generated from sales of towing equipment, recognized when performance obligations are satisfied, typically upon shipment[29](index=29&type=chunk)[30](index=30&type=chunk) Net Sales by Geographic Location (in thousands) | Net Sales | For the Three Months Ended March 31, 2020 | For the Three Months Ended March 31, 2019 | | :---------- | :---------------------------------------- | :---------------------------------------- | | North America | $143,856 | $163,893 | | Foreign | $32,198 | $33,320 | | Total | $176,054 | $197,213 | [5. Inventories](index=10&type=section&id=5.%20INVENTORIES) This note describes the valuation method for inventories and provides a breakdown of inventory categories - Inventories are stated at the lower of cost or net realizable value, determined on a first-in, first-out (FIFO) basis[34](index=34&type=chunk) Inventories, net (in thousands) | Inventory Category | March 31, 2020 | December 31, 2019 | | :----------------- | :------------- | :---------------- | | Chassis | $7,721 | $6,561 | | Raw materials | $40,014 | $39,444 | | Work in process | $17,179 | $16,520 | | Finished goods | $27,727 | $25,440 | | Total Inventories, net | $92,641 | $87,965 | [6. Long-Term Obligations](index=11&type=section&id=6.%20LONG-TERM%20OBLIGATIONS) This note outlines the company's long-term debt, including credit facilities, borrowings, and covenant compliance - The company has a **$50,000 thousand** unsecured revolving credit facility with a maturity date of May 31, 2022, and has been in compliance with its covenants[36](index=36&type=chunk) - Borrowings under the credit facility during Q1 2020 were partially for working capital needs and partially as a precautionary measure due to operational disruptions from the COVID-19 pandemic[38](index=38&type=chunk) Outstanding Borrowings (in thousands) | Obligation | March 31, 2020 | December 31, 2019 | | :-------------------------------- | :------------- | :---------------- | | Outstanding borrowings under credit facility | $29,998 | $4,998 | | French subsidiary loan | $276 | $368 | [7. Commitments and Contingencies](index=11&type=section&id=7.%20COMMITMENTS%20AND%20CONTINGENCIES) This note discloses the company's contractual commitments, lease obligations, and contingent liabilities Total Lease Cost (in thousands) | Lease Cost | 3 Months Ended Mar 31, 2020 | 3 Months Ended Mar 31, 2019 | | :---------------------- | :-------------------------- | :-------------------------- | | Total finance lease cost | $6 | $6 | | Total operating lease cost | $102 | $200 | | Short-term lease cost | $113 | $252 | | Total lease cost | $221 | $458 | - The company had commitments of approximately **$3,067 thousand** for property, plant, and equipment, and **$7,949 thousand** for software license fees related to an ERP system migration as of March 31, 2020[46](index=46&type=chunk) - The maximum amount of collateral the company could be required to repurchase under distributor default arrangements was approximately **$76,751 thousand** at March 31, 2020[47](index=47&type=chunk) [8. Income Taxes](index=14&type=section&id=8.%20INCOME%20TAXES) This note provides information on the company's income tax position, including carryforwards and effective rates - As of March 31, 2020, the company had no federal net operating loss carryforwards and no significant state operating loss carryforwards[50](index=50&type=chunk) [9. Subsequent Events](index=14&type=section&id=9.%20SUBSEQUENT%20EVENTS) This note reports significant events that occurred after the balance sheet date but before statement issuance - On May 4, 2020, the Board of Directors declared a quarterly cash dividend of **$0.18 per share**, payable on June 15, 2020[51](index=51&type=chunk) [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=15&type=section&id=ITEM%202.%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) This section provides management's analysis of financial performance, condition, and key operational drivers [Executive Overview](index=15&type=section&id=Executive%20Overview) This overview introduces the company's business, key performance indicators, and factors influencing financial results - Miller Industries is the world's largest manufacturer of towing and recovery equipment, operating globally under various brand names[54](index=54&type=chunk) - Key indicators monitored by management include revenue, operating income, gross margin, net income, earnings per share, capital expenditures, and cash flow[54](index=54&type=chunk) - Revenues are sensitive to general economic conditions, demand for products, technological competitiveness, raw material costs (aluminum, steel, petroleum-related products), and competition[55](index=55&type=chunk) - The company emphasizes innovation, research and development, and manufacturing modernization, including the introduction of the M100, the world's largest tow truck, in late 2019[56](index=56&type=chunk) - The industry is cyclical, and the company is concerned about the continuing effects of economic factors and raw material price volatility[57](index=57&type=chunk)[58](index=58&type=chunk)[59](index=59&type=chunk) [Impact of COVID-19](index=16&type=section&id=Impact%20of%20COVID-19) This section details the operational and financial effects of the COVID-19 pandemic on the company's business - The COVID-19 pandemic led to limited shutdowns and safety modifications at all domestic facilities, including workforce rotation and sanitation efforts, which adversely impacted plant productivity[60](index=60&type=chunk) - In March 2020, the company drew **$25,000 thousand** on its credit facility for working capital and as a precautionary measure due to COVID-19 uncertainty[61](index=61&type=chunk) - Material curtailments of new chassis deliveries occurred due to supplier shutdowns in March 2020, with many facilities reopening at reduced capacity[62](index=62&type=chunk) - The full impact of the COVID-19 pandemic on operational and financial performance remains uncertain, depending on its duration, scope, and severity, though the company's backlog remains healthy despite some cancellations[63](index=63&type=chunk) [Critical Accounting Policies](index=16&type=section&id=Critical%20Accounting%20Policies) This section identifies accounting policies requiring significant management judgment and their financial reporting impact - Critical accounting policies, requiring significant management judgment, include those related to accounts receivable, inventory, long-lived assets, warranty reserves, revenues, and income taxes[64](index=64&type=chunk) - There have been no significant changes in critical accounting policies during the first three months of 2020[64](index=64&type=chunk) [Results of Operations – Three Months Ended March 31, 2020 Compared to Three Months Ended March 31, 2019](index=16&type=section&id=Results%20of%20Operations%20%E2%80%93%20Three%20Months%20Ended%20March%2031%2C%202020%20Compared%20to%20Three%20Months%20Ended%20March%2031%2C%202019) This section analyzes financial performance, comparing key revenue and expense metrics between the two periods Key Financial Performance Indicators (in thousands, except percentages) | Metric | 3 Months Ended Mar 31, 2020 | 3 Months Ended Mar 31, 2019 | YoY Change | | :----------------------------------- | :-------------------------- | :-------------------------- | :--------- | | Net Sales | $176,054 | $197,213 | -10.7% | | Costs of Operations | $157,516 | $174,616 | -9.8% | | Costs of Operations (% of sales) | 89.5% | 88.5% | +1.0 pp | | Selling, general and administrative expenses | $10,974 | $10,215 | +7.4% | | SG&A (% of sales) | 6.2% | 5.2% | +1.0 pp | | Interest expense, net | $359 | $668 | -46.3% | | Net foreign currency exchange loss | $84 | $252 | -66.7% | | Effective tax rate | 23.7% | 24.4% | -0.7 pp | - The decrease in net sales was largely attributable to modified production schedules, trade show cancellations, and supply chain issues due to the COVID-19 pandemic[66](index=66&type=chunk) - Costs of operations and SG&A expenses increased as a percentage of sales, reflecting inefficiencies from reduced fixed cost absorption and workforce reorganization in response to COVID-19[68](index=68&type=chunk)[69](index=69&type=chunk) [Liquidity and Capital Resources](index=17&type=section&id=Liquidity%20and%20Capital%20Resources) This section assesses the company's ability to generate and manage cash, including sources and uses of funds Cash Flow Activities (in thousands) | Cash Flow | 3 Months Ended Mar 31, 2020 | 3 Months Ended Mar 31, 2019 | YoY Change | | :----------------------------------- | :-------------------------- | :-------------------------- | :--------- | | Net cash flows from operating activities | $(1,852) | $(17,854) | +$16,002 | | Net cash flows from investing activities | $(3,516) | $(3,155) | -$361 | | Net cash flows from financing activities | $22,850 | $12,848 | +$10,002 | | Cash and cash equivalents, end of period | $43,094 | N/A | N/A | - Cash used in operating activities was impacted by a rise in finished goods inventory and slower revenues due to COVID-19 related supply chain issues[73](index=73&type=chunk) - Primary cash requirements include working capital, capital expenditures, declared cash dividends, and debt payments[76](index=76&type=chunk) - Expected sources are cash flows from operations, existing cash, and additional credit facility borrowings[76](index=76&type=chunk) - As of March 31, 2020, **$20,447 thousand** of the company's cash and temporary investments were held by foreign subsidiaries[77](index=77&type=chunk) [Credit Facilities and Other Obligations](index=18&type=section&id=Credit%20Facilities%20and%20Other%20Obligations) This section details the company's credit arrangements, outstanding borrowings, and contractual obligations - The company's **$50,000 thousand** unsecured revolving credit facility had **$29,998 thousand** outstanding at March 31, 2020, an increase from **$4,998 thousand** at December 31, 2019, and the company remains in compliance with all covenants[78](index=78&type=chunk)[79](index=79&type=chunk) - The French subsidiary has an unsecured fixed-rate loan with **$276 thousand** outstanding at March 31, 2020, maturing September 30, 2020[81](index=81&type=chunk) Non-cancelable Lease Obligations (in thousands) | Obligation | March 31, 2020 | December 31, 2019 | | :------------------------------- | :------------- | :---------------- | | Non-cancelable operating lease obligations | $1,728 | $1,807 | | Non-cancelable finance lease obligations | $55 | $61 | [ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=18&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) This section discusses the company's exposure to market risks from changes in interest rates and foreign currency exchange rates [Interest Rate Risk](index=18&type=section&id=Interest%20Rate%20Risk) This section analyzes the company's exposure to fluctuations in interest rates, particularly on variable-rate debt - The company is exposed to interest rate risk due to variable interest rates on its credit facility (LIBOR Market Index Rate plus 1.00% or 1.25% per annum)[83](index=83&type=chunk) - A one percent change in the interest rate on variable-rate debt would not have materially impacted the company's financial position, results of operations, or cash flows for the three months ended March 31, 2020[83](index=83&type=chunk) [Foreign Currency Exchange Rate Risk](index=18&type=section&id=Foreign%20Currency%20Exchange%20Rate%20Risk) This section addresses the company's exposure to foreign currency exchange rate fluctuations from international operations - The company is subject to foreign currency exchange rate risk from its international operations in Europe, which is managed through regular operating and financing activities and occasional forward foreign currency exchange contracts[84](index=84&type=chunk) Foreign Currency Impact (in thousands) | Metric | 3 Months Ended Mar 31, 2020 | 3 Months Ended Mar 31, 2019 | | :-------------------------------- | :-------------------------- | :-------------------------- | | Foreign currency translation adjustment | $(72) | $277 | | Net foreign currency exchange loss (P&L) | $84 | $252 | [ITEM 4. CONTROLS AND PROCEDURES](index=19&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) This section details the company's disclosure controls and procedures and internal control over financial reporting [Disclosure Controls and Procedures](index=19&type=section&id=Disclosure%20Controls%20and%20Procedures) This section describes the evaluation of the effectiveness of the company's disclosure controls and procedures - Management, including co-Chief Executive Officers and Chief Financial Officer, evaluated the effectiveness of disclosure controls and procedures as of March 31, 2020, and concluded they are effective[88](index=88&type=chunk) [Changes in Internal Control over Financial Reporting](index=19&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) This section reports any significant changes in internal control over financial reporting during the period - There were no significant changes in internal control over financial reporting during the period covered by the report that materially affected, or are reasonably likely to materially affect, internal control over financial reporting[89](index=89&type=chunk) [PART II. OTHER INFORMATION](index=19&type=section&id=PART%20II%20OTHER%20INFORMATION) This part includes information on legal proceedings, risk factors, equity sales, defaults, and exhibits [ITEM 1. LEGAL PROCEEDINGS](index=19&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) This section describes the company's involvement in litigation and management's assessment of potential financial impact - The company is a party to litigation in the normal course of business, but management believes any ultimate liability beyond insurance and accruals will not have a material adverse effect on its financial position or results of operations[91](index=91&type=chunk) [ITEM 1A. RISK FACTORS](index=19&type=section&id=ITEM%201A.%20RISK%20FACTORS) This section outlines significant risks, particularly the adverse effects of the COVID-19 pandemic on operations and financial condition - The COVID-19 outbreak may adversely affect revenues, results of operations, and financial condition due to stringent control measures, operational modifications impacting plant productivity, and reduced ability to meet customers from event cancellations[93](index=93&type=chunk)[94](index=94&type=chunk)[95](index=95&type=chunk) - The pandemic has caused material curtailments of new chassis deliveries and could negatively impact the supply chain, potentially leading to substantial harm to revenues and operations[97](index=97&type=chunk) - The ultimate impact of COVID-19 is unknown and highly uncertain, with potential for material adverse effects on business, financial condition, and results of operations, even after the pandemic subsides, due to economic recession or reduced travel[98](index=98&type=chunk) [ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS](index=20&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) This section confirms no unregistered sales of equity securities or use of proceeds during the period - No unregistered sales of equity securities or use of proceeds[99](index=99&type=chunk) [ITEM 3. DEFAULTS UPON SENIOR SECURITIES](index=20&type=section&id=ITEM%203.%20DEFAULTS%20UPON%20SENIOR%20SECURITIES) This section confirms no defaults upon senior securities during the reporting period - No defaults upon senior securities[100](index=100&type=chunk) [ITEM 4. MINE SAFETY DISCLOSURES](index=20&type=section&id=ITEM%204.%20MINE%20SAFETY%20DISCLOSURES) This section states that mine safety disclosures are not applicable to the company's operations - Mine Safety Disclosures are not applicable[101](index=101&type=chunk) [ITEM 5. OTHER INFORMATION](index=20&type=section&id=ITEM%205.%20OTHER%20INFORMATION) This section indicates that no other information requiring disclosure under this item is present - No other information[102](index=102&type=chunk) [ITEM 6. EXHIBITS](index=21&type=section&id=ITEM%206.%20EXHIBITS) This section lists all exhibits filed with the report, including certifications and XBRL financial data - Exhibits include certifications from Co-Chief Executive Officers and Chief Financial Officer (31.1-31.3, 32.1-32.3) and XBRL formatted financial statements (101)[104](index=104&type=chunk)[105](index=105&type=chunk) [SIGNATURES](index=23&type=section&id=SIGNATURES) This section provides the official signatures certifying the accuracy and completeness of the report - The report was signed on behalf of Miller Industries, Inc. by Deborah L. Whitmire, Executive Vice President, Chief Financial Officer, and Treasurer, on May 6, 2020[110](index=110&type=chunk)

Financial Data and Key Metrics Changes - Revenue for Q4 2019 increased by 12.9% to $203.1 million compared to $180 million in Q4 2018, driven by broad-based demand [7][11] - Quarterly gross profits rose by 21.6% year-over-year to $26.9 million, with gross margin expanding by 100 basis points to 13.3% [9][13] - Net income for Q4 2019 was $11.7 million or $1.03 per share, compared to $10.8 million or $0.95 per share in Q4 2018 [9][14] - For the full year 2019, net sales were $818.2 million, a 15% increase from $711.7 million in 2018, with net income rising by 15.9% to $39.1 million or $3.43 per diluted share [15] Business Line Data and Key Metrics Changes - Domestic business showed strong performance with steady new order rates and full capacity among distributors [7] - International business performed in line with expectations year-over-year, benefiting from a catch-up related to supply chain delays experienced in Q3 [8] Market Data and Key Metrics Changes - The backlog remains healthy in both domestic and international markets, indicating strong demand [10][23] - Customer sentiment remains confident and strong, with order intake consistent with previous quarters [32] Company Strategy and Development Direction - The company is committed to operational excellence, disciplined cost control, and strategic capital deployment to drive long-term growth [22][24] - A quarterly cash dividend of $0.18 per share was announced, reflecting the company's commitment to returning capital to shareholders [19][23] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strength of the backlog and underlying fundamentals despite potential impacts from COVID-19 [23][24] - The company is actively monitoring supply chain developments and has not yet seen major impacts from factory issues in China [34] Other Important Information - The company reduced long-term debt by approximately $5 million, maintaining a strong balance sheet and generating solid free cash flow [18] - New board members were welcomed, enhancing the company's governance and leadership [25][26] Q&A Session Summary Question: Impact of COVID-19 on demand from dealers - Management indicated that domestic order intake remains consistent and customer sentiment is strong [31][32] Question: Anticipated supply chain issues due to factory problems in China - Management has not seen major impacts and is actively monitoring the supply chain situation [34] Question: Capital expenditure plans for the year - Management expects to return to normal levels of CapEx, focusing on investments that enhance sustainability [36]

PART I [Business](index=4&type=section&id=ITEM%201.%20BUSINESS) Miller Industries is the world's largest manufacturer of towing and recovery equipment, globally distributing diverse products under ten brand names - Miller Industries is The World's Largest Manufacturer of Towing and Recovery Equipment, with domestic manufacturing operations in Tennessee and Pennsylvania, and foreign operations in France and the United Kingdom[11](index=11&type=chunk) - The company manufactures a broad range of towing and recovery equipment, including wreckers, car carriers, and vehicle transport trailers, which are installed on third-party truck chassis[13](index=13&type=chunk) - Products are sold through independent distributors across 50 states, Canada, Mexico, Europe, the Pacific Rim, the Middle East, South America, and Africa, and directly to governmental entities through prime contractors[14](index=14&type=chunk) - The company markets its products under **ten brand names**, including Century, Vulcan, Challenger, Holmes, Champion, Chevron™, Eagle, Titan, Jige™, and Boniface™[20](index=20&type=chunk)[21](index=21&type=chunk)[22](index=22&type=chunk) - Miller Industries has a long history of innovation, including the rapid reverse winch, tow sling, hydraulic lifting mechanism, and the underlift with parallel linkage and L-arms. A new R&D facility opened in Chattanooga in 2019, leading to the introduction of the **M100, believed to be the world's largest tow truck**[24](index=24&type=chunk)[114](index=114&type=chunk) - From 2015 to 2019, the company invested **over $92 million** in property, plant, and equipment for domestic facility expansion and modernization, including sophisticated robotics, to increase production capacity, enhance safety, and reduce environmental impact[25](index=25&type=chunk)[115](index=115&type=chunk) - As of December 31, 2019, the company employed approximately **1,310 people** and emphasizes workforce engagement, productivity, and safety through training programs like Welding School and Miller University[38](index=38&type=chunk)[39](index=39&type=chunk) - The company holds utility and design patents for its products and registered trademarks for its brand names, which are associated with high quality and value[40](index=40&type=chunk)[41](index=41&type=chunk) - Operations are subject to federal, state, and local environmental, health, safety, privacy, data protection, and anti-corruption laws and regulations, with management believing the company is in substantial compliance[42](index=42&type=chunk)[43](index=43&type=chunk)[44](index=44&type=chunk)[45](index=45&type=chunk)[47](index=47&type=chunk) [Risk Factors](index=15&type=section&id=ITEM%201A.%20RISK%20FACTORS) The company faces various material risks, including industry cyclicality, economic downturns, supply chain dependencies, and international operational challenges - The business is subject to the cyclical nature of the industry and general economic conditions, with adverse changes potentially leading to a downturn[59](index=59&type=chunk) - Dependence on outside suppliers for raw materials (aluminum, steel, petroleum-related products) and component parts exposes the company to price changes, tariffs, and supply delays, with the COVID-19 outbreak posing an additional risk[60](index=60&type=chunk)[62](index=62&type=chunk)[63](index=63&type=chunk)[64](index=64&type=chunk) - Customer demand is affected by the availability of capital and access to credit for distributors and towing operators, with volatility in credit markets potentially impacting sales[65](index=65&type=chunk) - Increased sales volumes have caused operational challenges, including supply chain constraints and production capacity limitations, which could lead to delays, increased costs, and loss of business opportunities[66](index=66&type=chunk) - International operations are subject to political, economic, and regulatory uncertainties, including Brexit's impact on European conditions and foreign currency fluctuations (British pound sterling and euro)[67](index=67&type=chunk)[68](index=68&type=chunk) - Sales to governmental entities through prime contractors carry special risks, such as susceptibility to changes in government spending, fixed-price contract cost overruns, intense competition, and strict technical requirements[70](index=70&type=chunk)[71](index=71&type=chunk) - The highly competitive industry focuses on product quality, innovation, reputation, technology, customer service, availability, and price. Competitors may have greater financial resources and offer more attractive financing[36](index=36&type=chunk)[37](index=37&type=chunk)[76](index=76&type=chunk) - Future success depends on developing or acquiring proprietary products and technology, while assertions against the company relating to intellectual property rights could lead to substantial litigation costs or operational disruptions[77](index=77&type=chunk)[78](index=78&type=chunk) - Disruptions or breaches in IT system security or violations of data protection laws (e.g., GDPR, CCPA) could adversely impact business operations, reputation, and lead to significant costs, liabilities, or fines[80](index=80&type=chunk)[81](index=81&type=chunk)[82](index=82&type=chunk)[83](index=83&type=chunk) - The company's credit facility contains covenants that restrict its ability to operate and pay dividends, and failure to comply could lead to acceleration of debt. Obligations to repurchase products from third-party lenders in case of distributor default could also impact future revenues and financial condition[93](index=93&type=chunk)[94](index=94&type=chunk)[95](index=95&type=chunk) [Unresolved Staff Comments](index=26&type=section&id=ITEM%201B.%20UNRESOLVED%20STAFF%20COMMENTS) The company reported no unresolved staff comments from the SEC - No unresolved staff comments were reported[96](index=96&type=chunk) [Properties](index=26&type=section&id=ITEM%202.%20PROPERTIES) Miller Industries operates four manufacturing facilities in the US and three internationally, including a new R&D facility in Chattanooga - The company operates **four manufacturing facilities in the United States**: Ooltewah (Chattanooga), Tennessee (343,000 sq ft for light and heavy-duty wreckers); Hermitage, Pennsylvania (279,000 sq ft for car carriers); and two in Greeneville, Tennessee (aggregate 210,000 sq ft for car carriers, heavy-duty wreckers, and trailers)[97](index=97&type=chunk) - A free-standing R&D facility (**34,000 sq ft**) was opened in Chattanooga in 2019[97](index=97&type=chunk) - International facilities include **two manufacturing and one storage facility in Lorraine, France** (aggregate 205,000 sq ft), and manufacturing operations in Norfolk, England (48,000 sq ft)[99](index=99&type=chunk) - All domestic facilities underwent substantial expansion and modernization projects from 2015 to 2019[98](index=98&type=chunk) [Legal Proceedings](index=26&type=section&id=ITEM%203.%20LEGAL%20PROCEEDINGS) The company is involved in routine litigation, maintaining accruals and insurance, and expects no material adverse financial impact - The company is a party to litigation arising in the normal course of business[100](index=100&type=chunk) - Accruals are established for probable and reasonably estimable matters, and product liability and other insurance are maintained[100](index=100&type=chunk) - Management believes that any liability exceeding insurance coverage and accruals will not materially adversely affect consolidated financial position or results of operations[100](index=100&type=chunk) [Mine Safety Disclosures](index=28&type=section&id=ITEM%204.%20MINE%20SAFETY%20DISCLOSURES) This item is not applicable to Miller Industries, Inc - Not applicable[101](index=101&type=chunk) PART II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=29&type=section&id=ITEM%205.%20MARKET%20FOR%20REGISTRANT%27S%20COMMON%20EQUITY%2C%20RELATED%20STOCKHOLDER%20MATTERS%20AND%20ISSUER%20PURCHASES%20OF%20EQUITY%20SECURITIES) Miller Industries' common stock trades on the NYSE under 'MLR', with quarterly cash dividends paid since May 2011 - Miller Industries' common stock is traded on the New York Stock Exchange under the symbol '**MLR**'[103](index=103&type=chunk) - As of February 28, 2020, there were approximately **435 registered holders** of common stock[103](index=103&type=chunk) - The Company has paid consecutive quarterly cash dividends since May 2011. Future dividend payments are at the discretion of the board of directors and subject to financial conditions and credit facility covenants[104](index=104&type=chunk)[95](index=95&type=chunk) - No unregistered securities were sold during the year ended December 31, 2019[105](index=105&type=chunk) Cumulative Shareholder Return (December 31, 2014 - December 31, 2019) | Index | 12/31/2014 | 12/31/2015 | 12/31/2016 | 12/31/2017 | 12/31/2018 | 12/31/2019 | | :-------------------------------- | :--------- | :--------- | :--------- | :--------- | :--------- | :--------- | | Miller Industries, Inc. | 100 | 105 | 127 | 124 | 130 | 179 | | NYSE Composite Index | 100 | 94 | 102 | 118 | 105 | 128 | | S&P Construction Machinery & Heavy Trucks Index | 100 | 74 | 105 | 151 | 131 | 148 | [Selected Financial Data](index=30&type=section&id=ITEM%206.%20SELECTED%20FINANCIAL%20DATA) This section provides a five-year summary of selected consolidated financial data, including statements of income and balance sheet data Selected Statements of Income Data (2015-2019, in thousands except per share data) | Statements of Income Data: | 2019 | 2018 | 2017 | 2016 | 2015 | | :------------------------- | :----- | :----- | :----- | :----- | :----- | | Net Sales | $818,166 | $711,706 | $615,101 | $601,119 | $540,966 | | Costs of operations | 721,678 | 628,370 | 548,000 | 536,840 | 483,353 | | Gross Profit | 96,488 | 83,336 | 67,101 | 64,279 | 57,613 | | Selling, general and administrative expenses | 43,394 | 39,542 | 35,561 | 32,318 | 31,491 | | Interest expense, net | 2,378 | 1,878 | 1,588 | 1,161 | 919 | | Other (income) expense, net | 331 | 253 | (387) | (277) | 340 | | Income before income taxes | 50,385 | 41,663 | 30,339 | 31,077 | 24,863 | | Income tax provision | 11,274 | 7,917 | 7,323 | 11,155 | 8,887 | | Net income | $39,111 | $33,746 | $23,016 | $19,922 | $15,976 | | Basic income per common share | $3.43 | $2.96 | $2.02 | $1.76 | $1.41 | | Diluted income per common share | $3.43 | $2.96 | $2.02 | $1.75 | $1.41 | | Weighted average shares outstanding (Basic) | 11,400 | 11,388 | 11,368 | 11,346 | 11,324 | | Weighted average shares outstanding (Diluted) | 11,400 | 11,393 | 11,385 | 11,374 | 11,360 | Selected Balance Sheet Data (2015-2019, in thousands) | Balance Sheet Data: | 2019 | 2018 | 2017 | 2016 | 2015 | | :------------------ | :----- | :----- | :----- | :----- | :----- | | Working capital | $163,170 | $149,830 | $125,734 | $119,797 | $121,046 | | Total assets | 391,967 | 368,184 | 317,238 | 297,438 | 268,356 | | Long-term obligations | 7,061 | 15,838 | 10,606 | 5,000 | — | | Common shareholders' equity | 257,927 | 227,563 | 203,100 | 184,602 | 173,862 | Other Data (2015-2019) | Other Data: | 2019 | 2018 | 2017 | 2016 | 2015 | | :---------- | :----- | :----- | :----- | :----- | :----- | | Cash dividend per common share | $0.72 | $0.72 | $0.72 | $0.68 | $0.64 | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=31&type=section&id=ITEM%207.%20MANAGEMENT%27S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) This section analyzes Miller Industries' financial performance, liquidity, and capital resources, discussing key drivers, risks, and accounting policies [Executive Overview](index=31&type=section&id=Executive%20Overview) Miller Industries, the world's largest towing equipment manufacturer, drives growth through innovation and R&D, while managing cyclical industry risks and raw material costs - Miller Industries is The World's Largest Manufacturer of Towing and Recovery Equipment, with a broad range of products sold under **ten brand names**[112](index=112&type=chunk) - Revenues are primarily from product sales through domestic and foreign independent distributors, influenced by economic conditions, product demand, technological competitiveness, reputation, competition, and raw material costs[113](index=113&type=chunk) - The company's growth is supported by a history of innovation, continued R&D emphasis (including a new R&D facility opened in 2019), and the introduction of new products like the **M100 tow truck**[114](index=114&type=chunk) - Over **$92 million** was invested in property, plant, and equipment from 2015-2019 for domestic facility expansion and modernization, increasing production capacity and optimizing manufacturing processes with advanced technologies[115](index=115&type=chunk) - The industry is cyclical, with recent positive demand influenced by favorable economic conditions. Concerns include wavering consumer confidence, capital/credit market volatility, increased fuel/insurance costs, and global economic/health conditions (e.g., COVID-19)[116](index=116&type=chunk)[119](index=119&type=chunk) - Raw material price changes (aluminum, steel, petroleum-related products) significantly affect costs. Tariffs in 2018 led to price increases, which the company offset through product price adjustments and component alternatives[118](index=118&type=chunk) Outstanding Borrowings under Primary Credit Facility (in thousands) | As of December 31, | 2019 | 2018 | | :----------------- | :----- | :----- | | Owed under primary credit facility | $4,998 | $15,000 | [Critical Accounting Policies](index=33&type=section&id=Critical%20Accounting%20Policies) The company's critical accounting policies involve significant judgments for accounts receivable, inventory, asset impairment, warranty reserves, income taxes, and revenue recognition - Accounts Receivable: An allowance for doubtful accounts is maintained based on historical experience and specific customer issues, with continuous monitoring of collections[122](index=122&type=chunk)[230](index=230&type=chunk) - Inventory: Stated at the lower of cost or net realizable value (FIFO basis), with consideration for obsolescence and valuation[123](index=123&type=chunk)[231](index=231&type=chunk) - Long-Lived Assets: Reviewed for impairment when circumstances indicate carrying amounts may not be recoverable, with impairment measured by comparing fair value (based on discounted future cash flows) to carrying value[124](index=124&type=chunk)[237](index=237&type=chunk) - Goodwill: Tested for impairment annually or when circumstances indicate impairment, using qualitative or quantitative assessments[125](index=125&type=chunk)[126](index=126&type=chunk)[238](index=238&type=chunk) - Warranty Reserves: Estimated at the time of sale using historical data on claim nature, frequency, and cost. Trends are reviewed to minimize claims[127](index=127&type=chunk)[246](index=246&type=chunk) - Income Taxes: Expense, deferred tax assets/liabilities, and unrecognized tax benefits reflect management's assessment of current and future taxes, involving significant judgment in applying complex tax laws[128](index=128&type=chunk)[129](index=129&type=chunk)[130](index=130&type=chunk)[131](index=131&type=chunk)[240](index=240&type=chunk)[241](index=241&type=chunk)[242](index=242&type=chunk) - Revenues: Recognized when performance obligations are satisfied, generally upon shipment (transfer of control). Bill-and-hold arrangements require substantive reasons and product identification. Sales of company-purchased truck chassis are included in net sales but have substantially lower margin percentages[132](index=132&type=chunk)[133](index=133&type=chunk)[134](index=134&type=chunk)[249](index=249&type=chunk)[250](index=250&type=chunk) - Foreign Currency Translation: Functional currency for foreign operations is local currency. Translation adjustments are included in shareholders' equity, while gains/losses from foreign currency transactions are in other (income) expense, net[135](index=135&type=chunk)[253](index=253&type=chunk) [Results of Operations](index=36&type=section&id=Results%20of%20Operations) In 2019, net sales increased by **15.0%** to **$818,166 thousand**, driven by domestic demand, while the effective tax rate rose to **22.4%** Consolidated Statements of Income as Percentage of Net Sales | | 2019 | 2018 | 2017 | | :-------------------------------- | :----- | :----- | :----- | | Net Sales | 100.0 % | 100.0 % | 100.0 % | | Costs of operations | 88.2 % | 88.3 % | 89.1 % | | Gross Profit | 11.8 % | 11.7 % | 10.9 % | | Selling, general and administrative | 5.3 % | 5.6 % | 5.8 % | | Interest expense, net | 0.3 % | 0.3 % | 0.3 % | | Other (income) expense, net | — % | (0.1)% | (0.1)% | | Total expenses, net | 5.6 % | 5.8 % | 6.0 % | | Income before income taxes | 6.2 % | 5.9 % | 4.9 % | Net Sales Comparison (2019 vs. 2018, in thousands) | Metric | 2019 | 2018 | Change (%) | | :---------------- | :------- | :------- | :--------- | | Total Net Sales | $818,166 | $711,706 | 15.0% | | Net Domestic Sales | $697,002 | $574,806 | 21.3% | | Net Foreign Sales | $121,164 | $136,900 | -11.5% | - Costs of operations increased by **14.8%** to **$721,678 thousand** in 2019 (from $628,370 thousand in 2018) due to increased production, but decreased as a percentage of net sales from **88.3% to 88.2%** due to product mix and efficiency efforts[139](index=139&type=chunk) - Selling, general and administrative expenses increased to **$43,394 thousand** in 2019 (from $39,542 thousand in 2018) due to marketing, software, salary, and professional fees, but decreased as a percentage of net sales from **5.6% to 5.3%** due to efficiencies[140](index=140&type=chunk) - Interest expense, net, increased to **$2,378 thousand** in 2019 (from $1,878 thousand in 2018) primarily due to higher interest on distributor floor planning, chassis suppliers, and increased credit facility borrowings[141](index=141&type=chunk) - Other (income) expense, net, included a net foreign currency exchange loss of **$274 thousand** in 2019, compared to a loss of $97 thousand in 2018[142](index=142&type=chunk) Income Tax Provision and Effective Tax Rate | Metric | 2019 | 2018 | | :-------------------- | :------- | :------- | | Income tax provision | $11,274 | $7,917 | | Combined tax rate | 22.4% | 19.0% | | Reason for change | Unfavorable adjustment to deemed repatriation tax liability in 2018 no longer applies. | Favorable adjustment to deemed repatriation tax liability. | [Liquidity and Capital Resources](index=37&type=section&id=Liquidity%20and%20Capital%20Resources) Operating cash flow increased to **$35,132 thousand** in 2019, funding capital expenditures, dividends, and debt repayment, with **$26,072 thousand** cash on hand Cash Flow Summary (in thousands) | Activity | 2019 | 2018 | | :-------------------------- | :------- | :------- | | Operating Activities | $35,132 | $21,897 | | Investing Activities | $(17,063) | $(13,201) | | Financing Activities | $(18,597) | $(2,965) | - Cash from operations in 2019 was favorably impacted by revenue growth from increased production capacities and favorable changes in inventory levels[145](index=145&type=chunk) - Cash used in financing activities in 2019 was primarily due to net payments on the credit facility (**$10,002 thousand**) and dividend payments (**$8,208 thousand**)[147](index=147&type=chunk) - As of December 31, 2019, cash and cash equivalents totaled **$26,072 thousand**. Primary cash requirements include working capital, capital expenditures, dividends, and debt payments[148](index=148&type=chunk) - The company had commitments of approximately **$3,583 thousand** for property and equipment and **$8,430 thousand** for software license fees as of December 31, 2019[148](index=148&type=chunk) - Foreign subsidiaries held **$18,103 thousand** in cash as of December 31, 2019, with no current plans to repatriate undistributed foreign earnings[149](index=149&type=chunk) - Total capital expenditures for an administrative building and R&D facility in Chattanooga during 2018 and 2019 were approximately **$4,219 thousand**[150](index=150&type=chunk) [Contractual Obligations](index=39&type=section&id=Contractual%20Obligations) As of December 31, 2019, total contractual obligations were **$70,560 thousand**, with **$58,668 thousand** due within one year, including potential repurchase commitments Contractual Obligations as of December 31, 2019 (in thousands) | Contractual Obligations | Total | Less than 1 year | 1-3 years | 3-5 years | More than 5 years | | :------------------------ | :------ | :--------------- | :-------- | :-------- | :---------------- | | Operating and Finance Lease Obligations | $1,868 | $404 | $687 | $487 | $290 | | Purchase Obligations | 51,313 | 51,313 | — | — | — | | Revolving Credit Facility | 4,998 | — | 4,998 | — | — | | Other Long-term Obligations | 368 | 368 | — | — | — | | Software License Fees | 8,430 | 3,000 | 2,172 | 2,172 | 1,086 | | Capital Projects | 3,583 | 3,583 | — | — | — | | **Total** | **$70,560** | **$58,668** | **$7,857** | **$2,659** | **$1,376** | - The company has potential contingent obligations of **$73,958 thousand** under repurchase commitments with third-party lenders in the event of independent distributor customer default, but no repurchases were required in 2019 or 2018[153](index=153&type=chunk)[269](index=269&type=chunk) [Credit Facility and Other Obligations](index=39&type=section&id=Credit%20Facility%20and%20Other%20Obligations) The **$50,000 thousand** unsecured revolving credit facility was amended in 2018, with **$4,998 thousand** outstanding at year-end 2019, and the company remained compliant with covenants - The **$50,000 thousand** unsecured revolving credit facility was amended in December 2018, extending maturity to May 31, 2022, reducing interest rates, and increasing the minimum tangible net worth covenant to **$160,000 thousand** (actual **$246,000 thousand** at December 31, 2019)[154](index=154&type=chunk)[257](index=257&type=chunk) - The company was in compliance with all credit facility covenants throughout 2018 and 2019[154](index=154&type=chunk)[257](index=257&type=chunk) Outstanding Borrowings under Credit Facility (in thousands) | As of December 31, | 2019 | 2018 | | :----------------- | :----- | :----- | | Credit facility | $4,998 | $15,000 | | French subsidiary loan | $368 | $760 | - The French subsidiary's unsecured fixed-rate loan (**0.3% per annum**) matures September 30, 2020, with **$368 thousand** outstanding at December 31, 2019[156](index=156&type=chunk)[260](index=260&type=chunk) - A one percent change in the interest rate on variable-rate debt would not have materially impacted financial position, results of operations, or cash flows for 2019[157](index=157&type=chunk)[261](index=261&type=chunk) - Other long-term obligations include approximately **$1,807 thousand** in non-cancellable operating lease obligations and **$61 thousand** in non-cancellable finance lease obligations at December 31, 2019[158](index=158&type=chunk) - The company has **$8,430 thousand** in remaining contractual payments for an enterprise software solution, extending through 2025[159](index=159&type=chunk) [Recent Accounting Pronouncements](index=40&type=section&id=Recent%20Accounting%20Pronouncements) The company adopted ASU 2016-02 (Leases) in Q1 2019, recognizing right-of-use assets and lease liabilities, with no material impact expected from other new standards - Recently Issued Standards: ASU 2019-12 (Income Taxes) and ASU 2018-15 (Intangibles – Goodwill and Other – Internal-Use Software) are effective after December 15, 2020, and December 15, 2019, respectively. The company plans to adopt them on a modified retrospective or prospective basis, with no material impact expected[160](index=160&type=chunk)[161](index=161&type=chunk)[254](index=254&type=chunk)[255](index=255&type=chunk) - Recently Adopted Standards: ASU 2016-02 (Leases) was adopted in Q1 2019 using a modified retrospective approach. This required recognizing right-of-use assets and lease liabilities for leases with terms over twelve months on the balance sheet[162](index=162&type=chunk)[256](index=256&type=chunk) Cumulative Effect Adjustment for ASU 2016-02 Adoption (January 1, 2019, in thousands) | | Balance at Dec 31, 2018 | Cumulative Effect Adjustment | Balance at Jan 1, 2019 | | :-------------------------------- | :---------------------- | :--------------------------- | :--------------------- | | Right-of-use assets - operating leases | $— | $2,268 | $2,268 | | Current portion of operating lease obligation | — | 1,358 | 1,358 | | Noncurrent portion of operating lease obligation | — | 905 | 905 | | Deferred income tax liabilities | 1,700 | 1 | 1,701 | | Accumulated surplus | 81,354 | 4 | 81,358 | [Quantitative and Qualitative Disclosures About Market Risk](index=41&type=section&id=ITEM%207A.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) Miller Industries is exposed to interest rate and foreign currency risks, with a strengthening U.S. dollar decreasing foreign currency translation adjustments in 2019 - The company is exposed to market risk from changes in interest rates and foreign currency exchange rates[163](index=163&type=chunk) - Interest Rate Risk: Variable interest rates on the credit facility (LIBOR Market Index Rate plus **1.00% or 1.25%**) expose the company to interest rate changes. A one percent change in the interest rate would not have materially impacted 2019 financial position, results of operations, or cash flows[164](index=164&type=chunk) - Foreign Currency Risk: Arises from international operations in Europe. Managed through operating and financing activities, and sometimes forward foreign currency exchange contracts[165](index=165&type=chunk) Impact of Foreign Currency Exchange Rate Changes (in thousands) | Year Ended December 31, | Net Foreign Currency Exchange Loss | | :---------------------- | :------------------------------- | | 2019 | $274 | | 2018 | $97 | | 2017 | $221 | - Foreign currency translation adjustment decreased by **$693 thousand** in 2019 due to the strengthening U.S. dollar against certain foreign currencies, primarily the euro[166](index=166&type=chunk)[167](index=167&type=chunk) [Financial Statements and Supplementary Data](index=42&type=section&id=ITEM%208.%20FINANCIAL%20STATEMENTS%20AND%20SUPPLEMENTARY%20DATA) This item refers to the consolidated financial statements and supplementary data, which are included in Part IV, Item 15 of this report - The financial statements and supplementary data are included in Part IV, Item 15 of this Report[168](index=168&type=chunk) [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=42&type=section&id=ITEM%209.%20CHANGES%20IN%20AND%20DISAGREEMENTS%20WITH%20ACCOUNTANTS%20ON%20ACCOUNTING%20AND%20FINANCIAL%20DISCLOSURE) The company reported no changes in or disagreements with accountants on accounting and financial disclosure matters - No changes in or disagreements with accountants on accounting and financial disclosure were reported[169](index=169&type=chunk) [Controls and Procedures](index=43&type=section&id=ITEM%209A.%20CONTROLS%20AND%20PROCEDURES) Management concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2019 - Disclosure Controls and Procedures: Management concluded that disclosure controls and procedures were effective as of December 31, 2019[171](index=171&type=chunk) - Changes in Internal Control over Financial Reporting: No significant changes occurred during the most recent fiscal quarter that materially affected internal control over financial reporting[172](index=172&type=chunk) - Management's Report on Internal Control over Financial Reporting: Management assessed and concluded that the company maintained effective internal control over financial reporting as of December 31, 2019, based on the COSO framework[172](index=172&type=chunk)[174](index=174&type=chunk) - Report of Independent Registered Public Accounting Firm: Elliott Davis, LLC issued an unqualified opinion on the effectiveness of the company's internal control over financial reporting as of December 31, 2019[177](index=177&type=chunk)[178](index=178&type=chunk) [Other Information](index=45&type=section&id=ITEM%209B.%20OTHER%20INFORMATION) The company reported no other information required to be disclosed - No other information was reported[185](index=185&type=chunk) PART III [Directors, Executive Officers and Corporate Governance](index=45&type=section&id=ITEM%2010.%20DIRECTORS%2C%20EXECUTIVE%20OFFICERS%20AND%20CORPORATE%20GOVERNANCE) Information on directors, executive officers, and corporate governance is incorporated by reference from the 2020 proxy statement - Information relating to directors, executive officers, corporate governance, and Section 16(a) compliance is incorporated by reference from the 2020 Annual Meeting of Shareholders proxy statement[187](index=187&type=chunk) [Executive Compensation](index=45&type=section&id=ITEM%2011.%20EXECUTIVE%20COMPENSATION) Executive compensation details are incorporated by reference from the company's definitive proxy statement for its 2020 Annual Meeting - Information relating to executive compensation, compensation committee report, and director/executive officer compensation is incorporated by reference from the 2020 Annual Meeting of Shareholders proxy statement[188](index=188&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=45&type=section&id=ITEM%2012.%20SECURITY%20OWNERSHIP%20OF%20CERTAIN%20BENEFICIAL%20OWNERS%20AND%20MANAGEMENT%20AND%20RELATED%20STOCKHOLDER%20MATTERS) Security ownership and equity compensation plan information is incorporated by reference from the 2020 Annual Meeting proxy statement - Information relating to security ownership of beneficial owners and management, and equity compensation plans, is incorporated by reference from the 2020 Annual Meeting of Shareholders proxy statement[189](index=189&type=chunk)[190](index=190&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=45&type=section&id=ITEM%2013.%20CERTAIN%20RELATIONSHIPS%20AND%20RELATED%20TRANSACTIONS%2C%20AND%20DIRECTOR%20INDEPENDENCE) Information on related party transactions and director independence is incorporated by reference from the 2020 Annual Meeting proxy statement - Information relating to certain relationships and related transactions, and director independence, is incorporated by reference from the 2020 Annual Meeting of Shareholders proxy statement[191](index=191&type=chunk) [Principal Accounting Fees and Services](index=45&type=section&id=ITEM%2014.%20PRINCIPAL%20ACCOUNTING%20FEES%20AND%20SERVICES) Details on principal accounting fees and services, including the pre-approval policy, are incorporated by reference from the 2020 proxy statement - Information relating to principal accounting fees and services, and pre-approval policy for audit/non-audit services, is incorporated by reference from the 2020 Annual Meeting of Shareholders proxy statement[192](index=192&type=chunk) PART IV [Exhibits, Financial Statement Schedules](index=45&type=section&id=ITEM%2015.%20EXHIBITS%2C%20FINANCIAL%20STATEMENT%20SCHEDULES) This section lists the financial statements, schedules, and various exhibits filed as part of the 10-K report, including auditor's report and consolidated financials - The report includes the Report of Independent Registered Public Accounting Firm, Consolidated Balance Sheets, Consolidated Statements of Income, Consolidated Statements of Comprehensive Income, Consolidated Statements of Shareholders' Equity, Consolidated Statements of Cash Flows, and Notes to Consolidated Financial Statements[195](index=195&type=chunk)[206](index=206&type=chunk) - Financial Statement Schedule II – Valuation and Qualifying Accounts is filed as part of the report[196](index=196&type=chunk)[206](index=206&type=chunk) - Various exhibits are filed, including the company's charter, bylaws, noncompetition agreements, indemnification agreements, equity incentive plans, loan agreements, subsidiaries list, consent of auditor, power of attorney, and certifications[197](index=197&type=chunk)[198](index=198&type=chunk)[199](index=199&type=chunk)[203](index=203&type=chunk) [Form 10-K Summary](index=49&type=section&id=ITEM%2016.%20FORM%2010-K%20SUMMARY) The company does not provide a separate Form 10-K summary - No Form 10-K Summary is provided[201](index=201&type=chunk) INDEX TO CONSOLIDATED FINANCIAL STATEMENTS [Report of Independent Registered Public Accounting Firm](index=51&type=section&id=REPORT%20OF%20INDEPENDENT%20REGISTERED%20PUBLIC%20ACCOUNTING%20FIRM) Elliott Davis, LLC issued unqualified opinions on Miller Industries' consolidated financial statements and internal control over financial reporting - Elliott Davis, LLC issued an unqualified opinion on the consolidated financial statements for the years ended December 31, 2019, 2018, and 2017, stating they present fairly the financial position and results of operations in conformity with GAAP[207](index=207&type=chunk) - The firm also issued an unqualified opinion on the effectiveness of the company's internal control over financial reporting as of December 31, 2019, based on the COSO framework[208](index=208&type=chunk) - Elliott Davis, LLC has served as the company's auditor since 2003[211](index=211&type=chunk) [Consolidated Balance Sheets December 31, 2019 and 2018](index=52&type=section&id=CONSOLIDATED%20BALANCE%20SHEETS%20DECEMBER%2031%2C%202019%20AND%202018) The consolidated balance sheets show Miller Industries' financial position, with changes in cash, receivables, inventories, and a reduction in long-term obligations Consolidated Balance Sheets (in thousands) | ASSETS | 2019 | 2018 | | :------------------------------------------------------------------------------------------------ | :----- | :----- | | Cash and temporary investments | $26,072 | $27,037 | | Accounts receivable, net | 168,619 | 149,142 | | Inventories, net | 87,965 | 93,767 | | Prepaid expenses | 4,796 | 3,272 | | Total current assets | 287,452 | 273,218 | | Property, plant and equipment, net | 90,735 | 82,850 | | Right-of-use assets - operating leases | 1,640 | — | | Goodwill | 11,619 | 11,619 | | Other assets | 521 | 497 | | TOTAL ASSETS | $391,967 | $368,184 | | LIABILITIES AND SHAREHOLDERS' EQUITY | | | | Accounts payable | $95,750 | $98,220 | | Accrued liabilities | 27,813 | 24,863 | | Current portion of operating lease obligation | 330 | — | | Current portion of finance lease obligation | 21 | 20 | | Long-term obligations due within one year | 368 | 285 | | Total current liabilities | 124,282 | 123,388 | | Long-term obligations | 4,998 | 15,475 | | Noncurrent portion of operating lease obligation | 1,307 | — | | Noncurrent portion of finance lease obligation | 37 | 58 | | Deferred income tax liabilities | 3,416 | 1,700 | | Total liabilities | 134,040 | 140,621 | | Common stock | 114 | 114 | | Additional paid-in capital | 151,055 | 150,905 | | Accumulated surplus | 112,261 | 81,354 | | Accumulated other comprehensive loss | (5,503) | (4,810) | | Total shareholders' equity | 257,927 | 227,563 | | TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $391,967 | $368,184 | [Consolidated Statements of Income for the Years Ended December 31, 2019, 2018 and 2017](index=53&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20INCOME%20FOR%20THE%20YEARS%20ENDED%20DECEMBER%2031%2C%202019%2C%202018%20AND%202017) Net sales and net income consistently increased from 2017 to 2019, with stable cash dividends declared per common share Consolidated Statements of Income (in thousands, except per share data) | | 2019 | 2018 | 2017 | | :------------------------------------ | :------- | :------- | :------- | | NET SALES | $818,166 | $711,706 | $615,101 | | COSTS OF OPERATIONS | 721,678 | 628,370 | 548,000 | | GROSS PROFIT | 96,488 | 83,336 | 67,101 | | Selling, general and administrative expenses | 43,394 | 39,542 | 35,561 | | Interest expense, net | 2,378 | 1,878 | 1,588 | | Other (income) expense, net | 331 | 253 | (387) | | Total expense, net | 46,103 | 41,673 | 36,762 | | INCOME BEFORE INCOME TAXES | 50,385 | 41,663 | 30,339 | | INCOME TAX PROVISION | 11,274 | 7,917 | 7,323 | | NET INCOME | $39,111 | $33,746 | $23,016 | | BASIC INCOME PER COMMON SHARE | $3.43 | $2.96 | $2.02 | | DILUTED INCOME PER COMMON SHARE | $3.43 | $2.96 | $2.02 | | CASH DIVIDENDS DECLARED PER COMMON SHARE | $0.72 | $0.72 | $0.72 | | WEIGHTED AVERAGE SHARES OUTSTANDING (Basic) | 11,400 | 11,388 | 11,368 | | WEIGHTED AVERAGE SHARES OUTSTANDING (Diluted) | 11,400 | 11,393 | 11,385 | [Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2019, 2018 AND 2017](index=54&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20COMPREHENSIVE%20INCOME%20FOR%20THE%20YEARS%20ENDED%20DECEMBER%2031%2C%202019%2C%202018%20AND%202017) Net income consistently increased, while foreign currency translation adjustments resulted in losses in 2018 and 2019, impacting total comprehensive income Consolidated Statements of Comprehensive Income (in thousands) | | 2019 | 2018 | 2017 | | :-------------------------------- | :------- | :------- | :------- | | NET INCOME | $39,111 | $33,746 | $23,016 | | OTHER COMPREHENSIVE INCOME: | | | | | Foreign currency translation adjustment | (693) | (965) | 3,374 | | Total other comprehensive income | (693) | (965) | 3,374 | | COMPREHENSIVE INCOME | $38,418 | $32,781 | $26,390 | [Consolidated Statements of Shareholders' Equity for the Years Ended December 31, 2019, 2018 AND 2017](index=55&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20SHAREHOLDERS%27%20EQUITY%20FOR%20THE%20YEARS%20ENDED%20DECEMBER%2031%2C%202019%2C%202018%20AND%202017) Total shareholders' equity consistently increased, driven by net income, with adjustments for dividends and foreign currency translation Consolidated Statements of Shareholders' Equity (in thousands, except share data) | | Common Stock | Additional Paid-In Capital | Accumulated Surplus | Accumulated Other Comprehensive Income (Loss) | Total | | :------------------------------------------ | :----------- | :------------------------- | :------------------ | :-------------------------------------------- | :------ | | BALANCE, December 31, 2016 | $113 | $150,404 | $40,752 | $(6,667) | $184,602 | | Net income (2017) | — | — | 23,016 | — | 23,016 | | Foreign currency translation adjustments (2017) | — | — | — | 3,374 | 3,374 | | Issuance of common stock to non-employee directors (2017) | — | 150 | — | — | 150 | | Exercise of stock options (2017) | 1 | 145 | — | — | 146 | | Dividends paid (2017) | — | — | (8,188) | — | (8,188) | | BALANCE, December 31, 2017 | 114 | 150,699 | 55,580 | (3,293) | 203,100 | | Cumulative effect adjustment for adoption of ASU 2014-09 | — | — | (324) | — | (324) | | BALANCE, January 1, 2018 | 114 | 150,699 | 55,256 | (3,293) | 202,776 | | Prior period accounting reclassification | — | — | 552 | (552) | - | | Net income (2018) | — | — | 33,746 | — | 33,746 | | Foreign currency translation adjustments (2018) | — | — | — | (965) | (965) | | Issuance of common stock to non-employee directors (2018) | — | 150 | — | — | 150 | | Exercise of stock options (2018) | — | 56 | — | — | 56 | | Dividends paid (2018) | — | — | (8,200) | — | (8,200) | | BALANCE, December 31, 2018 | 114 | 150,905 | 81,354 | (4,810) | 227,563 | | Cumulative effect adjustment for adoption of ASU 2016-02 | — | — | 4 | — | 4 | | BALANCE, January 1, 2019 | 114 | 150,905 | 81,358 | (4,810) | 227,567 | | Net income (2019) | - | - | 39,111 | - | 39,111 | | Foreign currency translation adjustments (2019) | - | - | - | (693) | (693) | | Issuance of common stock to non-employee directors (2019) | - | 150 | - | - | 150 | | Dividends paid (2019) | - | - | (8,208) | - | (8,208) | | BALANCE, December 31, 2019 | $114 | $151,055 | $112,261 | $(5,503) | $257,927 | [Consolidated Statements of Cash Flows for the Years Ended December 31, 2019, 2018 AND 2017](index=56&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS%20FOR%20THE%20YEARS%20ENDED%20DECEMBER%2031%2C%202019%2C%202018%20AND%202017) Cash from operating activities increased significantly in 2019, while investing activities consistently used cash for property, plant, and equipment Consolidated Statements of Cash Flows (in thousands) | | 2019 | 2018 | 2017 | | :------------------------------------------ | :------- | :------- | :------- | | OPERATING ACTIVITIES: | | | | | Net income | $39,111 | $33,746 | $23,016 | | Depreciation and amortization | 9,127 | 7,745 | 6,147 | | Changes in operating assets and liabilities (net) | (13,115) | (20,012) | (15,209) | | Net cash flows from operating activities | 35,132 | 21,897 | 13,953 | | INVESTING ACTIVITIES: | | | | | Purchases of property, plant and equipment | (17,391) | (13,342) | (24,693) | | Proceeds from sale of property, plant and equipment | 328 | 141 | 1,303 | | Net cash flows from investing activities | (17,063) | (13,201) | (23,390) | | FINANCING ACTIVITIES: | | | | | Net proceeds (payments) under credit facility | (10,002) | 5,000 | 5,000 | | Payments of cash dividends | (8,208) | (8,200) | (8,188) | | Net proceeds (payments) on other long-term obligations | (367) | 56 | 146 | | Finance lease obligation payments | (20) | — | — | | Proceeds from exercise of stock options | — | 179 | 606 | | Net cash flows from financing activities | (18,597) | (2,965) | (2,436) | | EFFECT OF EXCHANGE RATE CHANGES ON CASH AND TEMPORARY INVESTMENTS | (437) | (589) | 2,653 | | NET CHANGE IN CASH AND TEMPORARY INVESTMENTS | (965) | 5,142 | (9,220) | | CASH AND TEMPORARY INVESTMENTS, beginning of period | 27,037 | 21,895 | 31,115 | | CASH AND TEMPORARY INVESTMENTS, end of period | $26,072 | $27,037 | $21,895 | | SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | | | | | Cash payments for interest | $3,249 | $2,437 | $1,877 | | Cash payments for income taxes, net of refunds | $10,067 | $7,457 | $11,605 | [Notes to Consolidated Financial Statements](index=57&type=section&id=NOTES%20TO%20CONSOLIDATED%20FINANCIAL%20STATEMENTS) These notes provide detailed information supporting the consolidated financial statements, covering accounting policies, obligations, and recent pronouncements [1. Organization and Nature of Operations](index=57&type=section&id=1.%20ORGANIZATION%20AND%20NATURE%20OF%20OPERATIONS) Miller Industries, Inc. is the world's largest manufacturer of towing and recovery equipment, serving global independent distributors and end-users - Miller Industries, Inc. is The World's Largest Manufacturer of Towing and Recovery Equipment[227](index=227&type=chunk) - Principal markets are approximately **80 independent distributors** and users of towing and recovery equipment primarily in North America and globally[227](index=227&type=chunk) - Products are marketed under brand names including Century, Challenger, Holmes, Champion, Eagle, Titan, Jige, Boniface, Vulcan, and Chevron[227](index=227&type=chunk) [2. Summary of Significant Accounting Policies](index=57&type=section&id=2.%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This section details the company's significant accounting policies, including estimates for receivables, inventory, assets, taxes, and revenue recognition, and the adoption of ASU 2016-02 - Financial statements are prepared using U.S. GAAP, requiring management estimates and assumptions[228](index=228&type=chunk) - Consolidated financial statements include Miller Industries, Inc. and its subsidiaries, with intercompany transactions eliminated[229](index=229&type=chunk) - Cash and temporary investments include cash and cash equivalents with original maturities of three months or less[229](index=229&type=chunk) - Accounts receivable are stated at estimated collectible amounts, with an allowance for doubtful accounts based on historical experience and specific customer issues[230](index=230&type=chunk) Inventories, net (in thousands) | | December 31, 2019 | December 31, 2018 | | :-------------- | :---------------- | :---------------- | | Chassis | $6,561 | $8,921 | | Raw materials | 39,444 | 40,021 | | Work in process | 16,520 | 14,995 | | Finished goods | 25,440 | 29,830 | | **Total** | **$87,965** | **$93,767** | - Property, plant and equipment are recorded at cost, depreciated using the straight-line method over estimated useful lives (**20-30 years for buildings, 5-10 years for machinery/equipment/software**)[233](index=233&type=chunk) Property, Plant and Equipment, net (in thousands) | | 2019 | 2018 | | :-------------------------- | :------- | :------- | | Land and improvements | $13,953 | $11,807 | | Buildings and improvements | 73,121 | 68,717 | | Machinery and equipment | 50,235 | 43,961 | | Furniture and fixtures | 9,172 | 7,786 | | Software costs | 6,033 | 5,695 | | Less accumulated depreciation | (61,779) | (55,116) | | **Total, net** | **$90,735** | **$82,850** | - Depreciation and amortization expense was **$9,127 thousand** in 2019, **$7,745 thousand** in 2018, and **$6,147 thousand** in 2017[234](index=234&type=chunk) - Goodwill is tested for impairment annually or when circumstances indicate impairment, using qualitative or quantitative assessments[238](index=238&type=chunk) Accrued Liabilities (in thousands) | | 2019 | 2018 | | :------------------------------------ | :------- | :------- | | Accrued wages, commissions, bonuses and benefits | $12,382 | $9,152 | | Accrued products warranty | 3,859 | 3,752 | | Accrued taxes | 2,079 | 1,039 | | Other | 9,493 | 10,920 | | **Total** | **$27,813** | **$24,863** | - Stock compensation expense was **$150 thousand** for 2019, 2018, and 2017. No options were granted in these years, and no shares were issued from stock option exercises in 2019[243](index=243&type=chunk)[244](index=244&type=chunk)[245](index=245&type=chunk) Product Warranty Liability Summary (in thousands) | | 2019 | 2018 | | :-------------------------- | :------- | :------- | | Accrual at beginning of the year | $3,752 | $3,147 | | Provision | 2,483 | 3,793 | | Settlement and Other | (2,376) | (3,188) | | **Accrual at end of year** | **$3,859** | **$3,752** | - Revenue is recognized when performance obligations are satisfied, generally upon shipment. Sales of company-purchased truck chassis are included in net sales but have lower margin percentages[249](index=249&type=chunk)[250](index=250&type=chunk)[134](index=134&type=chunk) - Research and development costs were **$3,702 thousand** in 2019, **$3,127 thousand** in 2018, and **$1,943 thousand** in 2017, expensed as incurred[252](index=252&type=chunk) - ASU 2016-02 (Leases) was adopted in Q1 2019, requiring recognition of right-of-use assets and lease liabilities for leases over 12 months. A cumulative-effect adjustment was made to retained earnings[256](index=256&type=chunk) [3. Long-Term Obligations](index=64&type=section&id=3.%20LONG-TERM%20OBLIGATIONS) The **$50,000 thousand** unsecured revolving credit facility was amended in 2018, with **$4,998 thousand** outstanding at year-end 2019, and the company remained compliant with covenants - The **$50,000 thousand** unsecured revolving credit facility was amended in December 2018, extending maturity to May 31, 2022, reducing interest rates, and increasing the minimum tangible net worth covenant to **$160,000 thousand**[257](index=257&type=chunk) - The company was in compliance with credit facility covenants throughout 2018 and 2019[257](index=257&type=chunk) Outstanding Borrowings (in thousands) | | December 31, 2019 | December 31, 2018 | | :-------------------------- | :---------------- | :---------------- | | Credit facility | $4,998 | $15,000 | | French subsidiary loan | $368 | $760 | - Interest expense on the credit facility was **$684 thousand** in 2019, **$512 thousand** in 2018, and **$492 thousand** in 2017[258](index=258&type=chunk) - A one percent change in the interest rate on variable-rate debt would not have materially impacted financial position, results of operations, or cash flows for 2019[261](index=261&type=chunk) [4. Stock-Based Compensation Plans](index=64&type=section&id=4.%20STOCK-BASED%20COMPENSATION%20PLANS) The 2016 Stock Incentive Plan authorized **800,000 shares** for awards, with **$150 thousand** in stock compensation expense annually from 2017-2019 - The 2016 Stock Incentive Plan authorizes **800,000 shares** of common stock for awards[262](index=262&type=chunk) - Stock compensation expense was **$150 thousand** for 2019, 2018, and 2017[243](index=243&type=chunk) - No options were granted during 2019, 2018, or 2017[244](index=244&type=chunk)[263](index=263&type=chunk) - No shares were issued from the exercise of stock options during 2019. In 2018, **10,250 shares** were issued, and in 2017, **26,500 shares** were issued[245](index=245&type=chunk)[263](index=263&type=chunk) [5. Commitments and Contingencies](index=66&type=section&id=5.%20COMMITMENTS%20AND%20CONTINGENCIES) The company leases equipment and facilities, recognizing right-of-use assets and lease obligations, and has potential repurchase commitments of **$73,958 thousand** - The company leases equipment and facilities under long-term non-cancellable operating and finance lease agreements, expiring through 2026[264](index=264&type=chunk) - Right-of-use assets and lease obligations are recognized on the balance sheet, with lease costs expensed over the lease term[265](index=265&type=chunk) Lease Cost and Other Information (2019, in thousands) | Lease Cost | 2019 | | :-------------------------- | :----- | | Finance lease cost | $23 | | Total operating lease cost | 585 | | Short-term lease cost | 1,231 | | **Total lease cost** | **$1,839** | | Cash paid for operating leases | $582 | | Cash paid for finance leases | $20 | | Right-of-use assets obtained (new operating leases) | $265 | - The weighted average remaining lease term for operating leases was **5.6 years** and for finance leases was **2.7 years** at December 31, 2019[268](index=268&type=chunk) - The company has contingent obligations to repurchase products from third-party lenders in case of distributor default, with a maximum repurchase amount of approximately **$73,958 thousand** at December 31, 2019[269](index=269&type=chunk) - No repurchases of products were required during 2019 or 2018[269](index=269&type=chunk) - The company is involved in litigation, for which accruals and insurance are maintained, with management believing no material adverse effect will result beyond current coverage[270](index=270&type=chunk) [6. Income Taxes](index=68&type=section&id=6.%20INCOME%20TAXES) The TCJA of 2017 impacted tax calculations, with the effective tax rate increasing to **22.4%** in 2019 due to a prior year adjustment - The Tax Cuts and Jobs Act (TCJA) of 2017 introduced a territorial tax system, reduced the corporate tax rate to **21%**, and included provisions like GILTI and FDII, impacting the company's tax calculations[271](index=271&type=chunk)[273](index=273&type=chunk) Income Before Income Taxes by Component (in thousands) | | 2019 | 2018 | 2017 | | :------------ | :------- | :------- | :------- | | United States | $41,220 | $34,220 | $22,695 | | Foreign | 9,165 | 7,443 | 7,644 | | **Total** | **$50,385** | **$41,663** | **$30,339** | Provision for Income Taxes (in thousands) | | 2019 | 2018 | 2017 | | :---------- | :------- | :------- | :------- | | Current | $9,558 | $7,342 | $8,191 | | Deferred | 1,716 | 575 | (868) | | **Total** | **$11,274** | **$7,917** | **$7,323** | Effective Tax Rate Reconciliation | | 2019 | 2018 | 2017 | | :------------------------------------------ | :----- | :----- | :----- | | Federal statutory tax rate | 21.0 % | 21.0 % | 35.0 % | | State taxes, net of federal tax benefit | 0.1 % | (0.8)% | 1.0 % | | Excess of (decreases in) foreign tax over US tax on foreign income | 2.5 % | 2.9 % | 2.9 % | | Remeasurement of deferred taxes under TCJA | — % | — % | (8)% | | Deemed repatriation tax | — % | (1.1)% | 3.6 % | | Domestic tax deductions and credits | (0.4)% | (0.4)% | (3.1)% | | Foreign Derived Intangible Income deduction | (1.1)% | (1.3)% | — % | | Release of unrecognized tax benefit | — % | — % | (6)% | | Other | 0.3 % | (1.3)% | (1.8)% | | **Effective tax rate** | **22.4 %** | **19.0 %** | **24.1 %** | Deferred Income Tax Assets and Liabilities (in thousands) | | 2019 | 2018 | | :-------------------------- | :------- | :------- | | Total deferred tax assets | $2,513 | $2,987 | | Total deferred tax liabilities | 5,929 | 4,687 | | **Net deferred tax (liability)** | **$(3,416)** | **$(1,700)** | - The company has no federal net operating loss carryforwards as of December 31, 2019[277](index=277&type=chunk) - Unrecognized tax benefits were **$0** at December 31, 2019 and 2018, following a release of **$1,157 thousand** liability in 2017 due to new information[279](index=279&type=chunk) [7. Shareholders Equity](index=70&type=section&id=7.%20SHAREHOLDERS%20EQUITY) The company is authorized to issue **100,000,000 common shares** and **5,000,000 preferred shares**, consistently paying **$0.72** annual cash dividends per share - Common Stock: Authorized to issue up to **100,000,000 shares** with a par value of one cent per share[281](index=281&type=chunk) - Preferred Stock: Authorized to issue up to **5,000,000 shares** of undesignated preferred stock, with no shares issued or outstanding[282](index=282&type=chunk) Cash Dividends Declared Per Common Share | Year | Dividend (per share) | Amount (in thousands) | | :--- | :------------------- | :-------------------- | | 2019 | $0.72 | $8,208 | | 2018 | $0.72 | $8,200 | | 2017 | $0.72 | $8,188 | - Accumulated Other Comprehensive Loss: A net foreign currency gain of **$552 thousand** related to discontinued operations was reclassified from accumulated other comprehensive loss to accumulated surplus in 2018[285](index=285&type=chunk) [8. Employee Benefit Plans](index=71&type=section&id=8.%20EMPLOYEE%20BENEFIT%20PLANS) Miller Industries maintains a contributory 401(k) plan, matching **50%** of the first **5%** of contributions, with company contributions of **$1,030 thousand** in 2019 - The company maintains a contributory 401(k) retirement plan for full-time employees with at least 90 days of service[286](index=286&type=chunk) - The company matches **50%** of the first **5%** of participant contributions, with matching contributions vesting over five years[287](index=287&type=chunk) Company Contributions to 401(k) Plan (in thousands) | Year | Contribution | | :--- | :----------- | | 2019 | $1,030 | | 2018 | $917 | | 2017 | $833 | [9. Revenue and Long-Lived Assets](index=71&type=section&id=9.%20REVENUE%20AND%20LONG-LIVED%20ASSETS) Substantially all revenue is from towing equipment sales, with North America accounting for the majority of net sales and long-lived assets - Substantially all revenue is generated from sales of towing equipment; disaggregation by product line is not useful[288](index=288&type=chunk) Net Sales and Long-Lived Assets by Region (in thousands) | Region | 2019 Net Sales | 2019 Long-Lived Assets | 2018 Net Sales | 2018 Long-Lived Assets | 2017 Net Sales | 2017 Long-Lived Assets | | :----------- | :------------- | :--------------------- | :------------- | :--------------------- | :------------- | :--------------------- | | North America | $697,002 | $97,650 | $574,806 | $90,036 | $527,134 | $85,707 | | Foreign | 121,164 | 6,344 | 136,900 | 4,433 | 87,967 | 3,540 | | **Total** | **$818,166** | **$103,994** | **$711,706** | **$94,469** | **$615,101** | **$89,247** | - Contract liabilities were **$324 thousand** at December 31, 2019, and **$331 thousand** at December 31, 2018, primarily related to future performance obligations. No contract assets were held[289](index=289&type=chunk) [10. Customer Information](index=72&type=section&id=10.%20CUSTOMER%20INFORMATION) No single customer accounted for **10% or more** of consolidated net sales for 2017, 2018, and 2019 - No single customer accounted for **10% or more** of consolidated net sales for 2019, 2018, and 2017[290](index=290&type=chunk) [11. Quarterly Financial Information (Unaudited)](index=72&type=section&id=11.%20QUARTERLY%20FINANCIAL%20INFORMATION%20(UNAUDITED)) Unaudited quarterly financial data for 2019 and 2018 show generally upward trends in net sales and net income, with consistent quarterly dividends Unaudited Quarterly Financial Information (2019, in thousands except per share data) | 2019 | Net Sales | Operating Income | Net Income | Basic Income Per Share | Diluted Income Per Share | Cash Dividends Declared Per Share | | :------------- | :-------- | :--------------- | :--------- | :--------------------- | :----------------------- | :-------------------------------- | | First Quarter | $197,213 | $12,382 | $8,660 | $0.76 | $0.76 | $0.18 | | Second Quarter | 222,346 | 14,245 | 10,683 | 0.94 | 0.94 | 0.18 | | Third Quarter | 195,467 | 11,293 | 8,076 | 0.71 | 0.71 | 0.18 | | Fourth Quarter | 203,140 | 15,174 | 11,692 | 1.03 | 1.03 | 0.18 | Unaudited Quarterly Financial Information (2018, in thousands except per share data) | 2018 | Net Sales | Operating Income | Net Income | Basic Income Per Share | Diluted Income Per Share | Cash Dividends Declared Per Share | | :------------- | :-------- | :--------------- | :--------- | :--------------------- | :----------------------- | :-------------------------------- | | First Quarter | $159,160 | $8,838 | $6,670 | $0.59 | $0.59 | $0.18 | | Second Quarter | 176,888 | 11,601 | 7,600 | 0.67 | 0.67 | 0.18 | | Third Quarter | 195,690 | 12,026 | 8,677 | 0.76 | 0.76 | 0.18 | | Fourth Quarter | 179,968 | 11,329 | 10,799 | 0.95 | 0.95 | 0.18 | [12. Subsequent Events](index=72&type=section&id=12.%20SUBSEQUENT%20EVENTS) On March 2, 2020, the board declared a quarterly cash dividend of **$0.18 per share**, payable March 23, 2020 - On March 2, 2020, the board of directors declared a quarterly cash dividend of **$0.18 per share**, payable March 23, 2020, to shareholders of record as of March 16, 2020[292](index=292&type=chunk) [Schedule II –Valuation and Qualifying Accounts](index=73&type=section&id=SCHEDULE%20II%20%E2%80%93VALUATION%20AND%20QUALIFYING%20ACCOUNTS) Schedule II summarizes changes in the allowance for doubtful accounts from 2017 to 2019, showing relatively stable balances with minor adjustments Allowance for Doubtful Accounts (in thousands) | Year Ended December 31, | Balance at Beginning of Period | Charged to Expense | Accounts Written Off | Balance at End of Period | | :------------------------ | :----------------------------- | :----------------- | :------------------- | :----------------------- | | 2017 | $1,004 | 86 | (52) | $1,038 | | 2018 | $1,038 | 214 | (140) | $1,112 | | 2019 | $1,112 | 15 | (21) | $1,106 |