Miller Industries(MLR) - 2018 Q4 - Annual Report

PART I Business Miller Industries is the world's largest manufacturer of towing and recovery equipment, operating globally with diverse products - Miller Industries is the world's largest manufacturer of towing and recovery equipment, with operations in the US, France, and the UK[16] - The company manufactures wreckers, car carriers, and vehicle transport trailers, which are installed on third-party truck chassis[19] - Products are sold through independent distributors across North America, Europe, and other international markets, and to governmental entities via prime contractors[20][38][39] - Approximately 85% of independent distributors sell Miller Industries' products exclusively[20][38][39] - The company markets its products under ten brand names, including Century, Vulcan, Challenger, Holmes, Champion, Chevron™, Eagle, Titan, Jige™, and Boniface™[26][27][28][29][30][31][32][33] - Manufacturing involves cutting and bending steel/aluminum, welding parts, attaching third-party components, and increasingly using composites and non-metallic materials[35] - The company generally offers a 12-month limited manufacturer's product and service warranty, with distributors performing most repair work[42] - As of December 31, 2018, the company employed approximately 1,240 people, none covered by a collective bargaining agreement in the US[46] - The company holds utility and design patents for its products and trademarks for its brand names, which are considered well-recognized and associated with high quality[47][48] Executive Officers of Miller Industries, Inc. (as of December 31, 2018) | Name | Age | Position | | :---------------- | :-- | :---------------------------------------------- | | William G. Miller | 72 | Chairman of the Board | | Jeffrey I. Badgley| 66 | Co-Chief Executive Officer | | William G. Miller, II | 40 | President and Co-Chief Executive Officer | | Frank Madonia | 70 | Executive Vice President, Secretary and General Counsel | | Deborah Whitmire | 53 | Executive Vice President, Chief Financial Officer and Treasurer | | Josias W. Reyneke | 62 | Chief Information Officer | Risk Factors The company faces risks from industry cyclicality, economic conditions, raw material prices, international operations, and competition - The towing and recovery industry is cyclical, and demand for products is sensitive to consumer confidence and general economic conditions[65] - Customer purchases are affected by the availability of capital and credit, including floor plan financing for distributors[66] - Dependence on outside suppliers for raw materials (aluminum, steel, petroleum-related products) and component parts exposes the company to price changes, including 25% tariffs on steel and 10% on aluminum in 2018, and supply delays[67][68] - Increased sales volumes have led to operational challenges, including supply chain constraints and production capacity limitations, which could result in delays and increased costs[69] - International operations, particularly in Europe, are subject to political, economic, and foreign currency fluctuation risks, including uncertainties related to Brexit[71][72] - Sales to governmental entities through prime contractors carry special risks, such as changes in government spending, fixed-price contract challenges, intense competition, and strict technical requirements[73] - The company faces intense competition based on product quality, innovation, reputation, technology, customer service, availability, and price, with some competitors having greater financial resources[77] - Future success depends on the ability to develop or acquire proprietary products and technology; intellectual property infringement claims could lead to substantial litigation costs or operational disruption[78][79] - Disruptions or breaches in IT systems, including cyber-attacks, could lead to business interruptions, reputational damage, and significant costs related to data protection laws like GDPR[81][83][84] - The company's credit facility contains covenants (e.g., minimum tangible net worth, leverage ratio) that restrict operations, including dividend payments; failure to comply could accelerate debt repayment[94] - The declaration and payment of future cash dividends are at the sole discretion of the board and are not assured[96] Unresolved Staff Comments There are no unresolved staff comments from the SEC - No unresolved staff comments were reported[97] Properties Miller Industries operates four manufacturing facilities in the United States and three in Europe, including an administrative building completed in 2018 - The company operates four manufacturing facilities in the United States: Ooltewah, Tennessee (331,000 sq ft, plus 51,000 sq ft leased, 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)[98] - International manufacturing operations include two facilities and one storage facility in Lorraine, France (aggregate 205,000 sq ft), and one manufacturing operation in Norfolk, England (48,000 sq ft)[100] - Construction of the administrative building in Ooltewah, Tennessee, was completed during 2018[99] Legal Proceedings Miller Industries is periodically involved in litigation, maintaining accruals and insurance, and does not expect material financial impact beyond current coverage - The company is a party to litigation arising in the normal course of business[101] - Accruals are established for probable and reasonably estimable matters, and adequate product liability and other insurance is maintained[101] - Management believes that any liability from these matters in excess of insurance and accruals will not have a material adverse effect on consolidated financial position or results of operations[101] Mine Safety Disclosures This item is not applicable to Miller Industries, Inc - Mine Safety Disclosures are not applicable to the registrant[102] PART II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Miller Industries' common stock trades on the NYSE, with future dividends subject to board discretion and financing agreement restrictions - Miller Industries' common stock is traded on the New York Stock Exchange under the symbol 'MLR'[105] - As of February 28, 2019, there were approximately 444 registered holders of common stock[105] - Future cash dividends are at the discretion of the board of directors and are subject to financial conditions and restrictions in financing agreements, such as minimum tangible net worth and leverage ratio tests[106] - No unregistered securities were sold during the year ended December 31, 2018[107] Cumulative Shareholder Return (December 31, 2013 – December 31, 2018) | | 12/31/2013 | 12/31/2014 | 12/31/2015 | 12/31/2016 | 12/31/2017 | 12/31/2018 | | :-------------------------------- | :--------- | :--------- | :--------- | :--------- | :--------- | :--------- | | Miller Industries, Inc. | 100 | 112 | 117 | 142 | 138 | 145 | | NYSE Composite Index | 100 | 104 | 98 | 106 | 123 | 109 | | S&P Construction Machinery & Heavy Trucks Index | 100 | 96 | 72 | 101 | 146 | 126 | Selected Financial Data This section provides a five-year summary of key consolidated financial data, showing consistent growth in net sales and net income Selected Statements of Income Data (Years Ended December 31, in thousands except per share data) | Metric | 2018 | 2017 | 2016 | 2015 | 2014 | | :------------------------------------ | :-------- | :