UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
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☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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For the quarterly period ended |
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☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from ___________________________________________ to ________________________________________ |
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Commission file number | 001-14124 |
MILLER INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Tennessee | | 62-1566286 |
(State or other jurisdiction of incorporation or | | (I.R.S. Employer Identification No.) |
organization) | | |
| | |
8503 Hilltop Drive | | |
Ooltewah, Tennessee | | 37363 |
(Address of principal executive offices) | | (Zip Code) |
(423) 238-4171
(Registrant’s telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| | |
Title of Each Class | Trading Symbol | Name of Each Exchange on Which Registered |
Common Stock, par value $0.01 per share | MLR | New York Stock Exchange |
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:
| Large accelerated filer ☐ | Accelerated filer ☒ |
| | |
| Non-accelerated filer ☐ | Smaller reporting company ☐ |
| | |
| Emerging growth company ☐ | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐ No ☒
The number of shares outstanding of the registrant’s common stock, par value $.01 per share, as of OctoberJuly 29, 20212022 was 11,410,728.11,416,716.
Index
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Condensed Consolidated Balance Sheets as of | 3 | ||
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5 | |||
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8 | |||
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9 | |||
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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19 | |||
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FORWARD-LOOKING STATEMENTS
Certain statements in this Quarterly Report on Form 10-Q, including but not limited to statements made in Part I, Item 2–“Management’s Discussion and Analysis of Financial Condition and Results of Operations,” statements made with respect to future operating results, expectations of future customer orders and the availability of resources necessary for our business may be deemed to be forward-looking statements, as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by the use of words such as “may,” “will,” “should,” “could,” “continue,” “future,” “potential,” “believe,” “project,” “plan,” “intend,” “seek,” “estimate,” “predict,” “expect,” “anticipate” and similar expressions, or the negative of such terms, or other comparable terminology. Forward-looking statements also include the assumptions underlying or relating to any of the foregoing statements. Such forward-looking statements are made based on our management’s beliefs as well as assumptions made by, and information currently available to, our management. Our actual results may differ materially from the results anticipated in these forward-looking statements due to, among other things:
● | changes in price, delivery delays and decreased availability of component parts, chassis and raw materials, including aluminum, steel, petroleum-related products, including as a result of increased demand from improving market conditions, general inflation, the |
● | economic and market conditions, including the |
● | our dependence upon outside suppliers for |
● |
problems hiring or retaining skilled labor |
● | our customers’ and end users’ access to capital and credit to fund purchases; |
● | operational challenges caused by increased sales volumes |
● | various political, economic and other uncertainties relating to our international operations, including restrictive taxation and foreign currency |
● | the cyclical nature of our industry and changes in consumer confidence; |
● | special risks from our sales to U.S. and other governmental entities through prime contractors; |
● | changes in fuel and other transportation costs, insurance costs and weather conditions; |
● | changes in government regulations, including environmental and health and safety regulations; |
● | failure to comply with domestic and foreign anti-corruption laws; |
● | competition in our industry and our ability to attract or retain customers; |
● | our ability to develop or acquire proprietary products and technology; |
● | assertions against us relating to intellectual property rights; |
● | a disruption in, or breach in security of, our information technology systems or any violation of data protection laws; |
● | changes in the tax regimes and related government policies and regulations in the countries in which we operate; |
● | the effects of regulations relating to conflict minerals; |
● | the catastrophic loss of one of our manufacturing facilities; |
● | environmental and health and safety liabilities and requirements; |
● | loss of the services of our key executives; |
● | product warranty or product liability claims in excess of our insurance coverage; |
● | potential recalls of components or parts manufactured for us by suppliers or potential recalls of defective products; |
● | an inability to acquire insurance at commercially reasonable rates; |
● | and those other risks referenced herein, including those risks referred to in Part II, Item 1A–“Risk Factors” in this Quarterly Report on Form 10-Q and those risks discussed in our other filings with the Securities and Exchange Commission, including those risks discussed under the caption “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, |
Such factors are not exclusive. We do not undertake to update any forward-looking statement that may be made from time to time by, or on behalf of, the Company.
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MILLER INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
| | | | | | | | | | | | | |
| | September 30, |
| | | | June 30, |
| | | | ||
| | 2021 | | December 31, | | 2022 | | December 31, | | ||||
|
| (Unaudited) |
| 2020 |
| (Unaudited) |
| 2021 |
| ||||
ASSETS | | | | | | | | | | | | | |
CURRENT ASSETS: | | | | | | | | | | | | | |
Cash and temporary investments | | $ | 50,407 | | $ | 57,521 | | $ | 31,129 | | $ | 54,332 | |
Accounts receivable, net of allowance for doubtful accounts of $1,413 and $1,295 at September 30, 2021 and December 31, 2020, respectively | |
| 131,308 | |
| 141,642 | |||||||
Accounts receivable, net of allowance for credit losses of $1,230 and $1,155 at June 30, 2022 and December 31, 2021, respectively | |
| 191,246 | |
| 153,977 | | ||||||
Inventories, net | |
| 108,838 | |
| 83,939 | |
| 141,191 | |
| 114,908 | |
Prepaid expenses | |
| 6,378 | |
| 3,167 | |
| 7,446 | |
| 5,751 | |
Total current assets | |
| 296,931 | |
| 286,269 | |
| 371,012 | |
| 328,968 | |
NONCURRENT ASSETS: | | | | | | | | | | | | | |
Property, plant and equipment, net | |
| 98,324 | |
| 98,620 | |
| 113,550 | |
| 96,496 | |
Right-of-use assets - operating leases | | | 1,231 | | | 1,468 | | | 1,050 | | | 1,231 | |
Goodwill | |
| 11,619 | |
| 11,619 | |
| 11,619 | |
| 11,619 | |
Other assets | |
| 520 | |
| 434 | |
| 618 | |
| 533 | |
TOTAL ASSETS | | $ | 408,625 | | $ | 398,410 | | $ | 497,849 | | $ | 438,847 | |
| | | | | | | | | | | | | |
LIABILITIES AND SHAREHOLDERS’ EQUITY | | | | | | | | | | | | | |
CURRENT LIABILITIES: | | | | | | | | | | | | | |
Accounts payable | | $ | 87,793 | | $ | 85,534 | | $ | 137,702 | | $ | 119,029 | |
Accrued liabilities | |
| 25,553 | |
| 24,773 | |
| 25,397 | |
| 24,866 | |
Current portion of operating lease obligation | | | 349 | | | 354 | | | 326 | | | 361 | |
Current portion of finance lease obligation | | | 21 | | | 21 | | | 4 | | | 15 | |
Total current liabilities | |
| 113,716 | |
| 110,682 | |
| 163,429 | |
| 144,271 | |
NONCURRENT LIABILITIES: | | | | | | | | | | | | | |
Long-term obligations | |
| 40,000 | |
| — | | ||||||
Noncurrent portion of operating lease obligation | |
| 881 | |
| 1,116 | |
| 722 | |
| 870 | |
Noncurrent portion of finance lease obligation | | | — | | | 15 | |||||||
Deferred income tax liabilities | |
| 4,159 | |
| 4,144 | |
| 5,232 | |
| 5,170 | |
Total liabilities | |
| 118,756 | |
| 115,957 | |
| 209,383 | |
| 150,311 | |
| | | | | | | | | | | | | |
COMMITMENTS AND CONTINGENCIES (Note 7) | | | | | | | | | | | | | |
| | | | | | | | | | | | | |
SHAREHOLDERS’ EQUITY: | | | | | | | | | | | | | |
Preferred stock, $0.01 par value; 5,000,000 shares authorized, NaN issued or outstanding | |
| — | |
| — | |
| — | |
| — | |
Common stock, $0.01 par value; 100,000,000 shares authorized, 11,410,728 and 11,405,468, outstanding at September 30, 2021 and December 31, 2020, respectively | |
| 114 | |
| 114 | |||||||
Common stock, $0.01 par value; 100,000,000 shares authorized, 11,416,716 and 11,410,728 outstanding at June 30, 2022 and December 31, 2021, respectively | |
| 114 | |
| 114 | | ||||||
Additional paid-in capital | |
| 151,449 | |
| 151,249 | |
| 151,946 | |
| 151,449 | |
Accumulated surplus | |
| 141,257 | |
| 133,879 | |
| 143,631 | |
| 141,918 | |
Accumulated other comprehensive loss | |
| (2,951) | |
| (2,789) | |
| (7,225) | |
| (4,945) | |
Total shareholders’ equity | |
| 289,869 | |
| 282,453 | |
| 288,466 | |
| 288,536 | |
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | | $ | 408,625 | | $ | 398,410 | | $ | 497,849 | | $ | 438,847 | |
The accompanying notes are an integral part of these financial statements.
3
MILLER INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
(Unaudited)
| | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended | ||||||||
| | September 30 | | September 30 | ||||||||
|
| 2021 |
| 2020 |
| 2021 |
| 2020 | ||||
| | | | | | | | | | | | |
NET SALES | | $ | 164,715 | | $ | 168,366 | | $ | 515,785 | | $ | 472,949 |
COSTS OF OPERATIONS | |
| 146,883 | |
| 150,523 | |
| 461,532 | |
| 418,841 |
GROSS PROFIT | |
| 17,832 | |
| 17,843 | |
| 54,253 | |
| 54,108 |
| | | | | | | | | | | | |
OPERATING EXPENSES: | |
|
| |
|
| |
|
| |
|
|
Selling, general and administrative expenses | |
| 11,983 | |
| 9,231 | |
| 35,053 | |
| 30,272 |
| | | | | | | | | | | | |
NON-OPERATING (INCOME) EXPENSES: | |
|
| |
|
| |
|
| |
|
|
Interest expense, net | |
| 286 | |
| 230 | |
| 901 | |
| 1,018 |
Other (income) expense, net | |
| 206 | |
| (209) | |
| 434 | |
| (393) |
Total expense, net | |
| 12,475 | |
| 9,252 | |
| 36,388 | |
| 30,897 |
| | | | | | | | | | | | |
INCOME BEFORE INCOME TAXES | |
| 5,357 | |
| 8,591 | |
| 17,865 | |
| 23,211 |
INCOME TAX PROVISION | |
| 1,511 | |
| 2,038 | |
| 4,325 | |
| 5,401 |
NET INCOME | | $ | 3,846 | | $ | 6,553 | | $ | 13,540 | | $ | 17,810 |
| | | | | | | | | | | | |
BASIC INCOME PER COMMON SHARE | | $ | 0.34 | | $ | 0.57 | | $ | 1.19 | | $ | 1.56 |
| | | | | | | | | | | | |
CASH DIVIDENDS DECLARED PER COMMON SHARE | | $ | 0.18 | | $ | 0.18 | | $ | 0.54 | | $ | 0.54 |
| | | | | | | | | | | | |
WEIGHTED AVERAGE SHARES OUTSTANDING: | |
|
| |
|
| |
|
| |
|
|
Basic | |
| 11,411 | |
| 11,405 | |
| 11,411 | |
| 11,405 |
| | | | | | | | | | | | | |
| | Three Months Ended | | Six Months Ended | | ||||||||
| | June 30 | | June 30 | | ||||||||
|
| 2022 |
| 2021 |
| 2022 |
| 2021 |
| ||||
| | | | | | | | | | | | | |
NET SALES | | $ | 201,500 | | $ | 181,158 | | $ | 417,045 | | $ | 351,070 | |
COSTS OF OPERATIONS | |
| 183,126 | |
| 160,568 | |
| 383,331 | |
| 314,649 | |
GROSS PROFIT | |
| 18,374 | |
| 20,590 | |
| 33,714 | |
| 36,421 | |
| | | | | | | | | | | | | |
OPERATING EXPENSES: | |
|
| |
|
| |
|
| |
|
| |
Selling, general and administrative expenses | |
| 12,651 | |
| 12,019 | |
| 25,037 | |
| 23,070 | |
| | | | | | | | | | | | | |
NON-OPERATING (INCOME) EXPENSES: | |
|
| |
|
| |
|
| |
|
| |
Interest expense, net | |
| 628 | |
| 340 | |
| 1,046 | |
| 615 | |
Other (income) expense, net | |
| 275 | |
| (48) | |
| 327 | |
| 228 | |
Total expense, net | |
| 13,554 | |
| 12,311 | |
| 26,410 | |
| 23,913 | |
| | | | | | | | | | | | | |
INCOME BEFORE INCOME TAXES | |
| 4,820 | |
| 8,279 | |
| 7,304 | |
| 12,508 | |
INCOME TAX PROVISION | |
| 1,063 | |
| 1,763 | |
| 1,482 | |
| 2,814 | |
NET INCOME | | $ | 3,757 | | $ | 6,516 | | $ | 5,822 | | $ | 9,694 | |
| | | | | | | | | | | | | |
BASIC INCOME PER COMMON SHARE | | $ | 0.33 | | $ | 0.57 | | $ | 0.51 | | $ | 0.85 | |
DILUTED INCOME PER COMMON SHARE | | $ | 0.33 | | $ | 0.57 | | $ | 0.51 | | $ | 0.85 | |
| | | | | | | | | | | | | |
CASH DIVIDENDS DECLARED PER COMMON SHARE | | $ | 0.18 | | $ | 0.18 | | $ | 0.36 | | $ | 0.36 | |
| | | | | | | | | | | | | |
WEIGHTED AVERAGE SHARES OUTSTANDING: | |
|
| |
|
| |
|
| |
|
| |
Basic | |
| 11,417 | |
| 11,411 | |
| 11,417 | |
| 11,411 | |
Diluted | |
| 11,417 | |
| 11,411 | |
| 11,421 | |
| 11,411 | |
The accompanying notes are an integral part of these financial statements.
4
MILLER INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended | | Three Months Ended | | Six Months Ended |
| ||||||||||||||||
| | September 30 | | September 30 | | June 30 | | June 30 | | ||||||||||||||||
|
| 2021 |
| 2020 |
| 2021 |
| 2020 |
| 2022 |
| 2021 |
| 2022 |
| 2021 |
| ||||||||
NET INCOME | | $ | 3,846 | | $ | 6,553 | | $ | 13,540 | | $ | 17,810 | | $ | 3,757 | | $ | 6,516 | | $ | 5,822 | | $ | 9,694 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
OTHER COMPREHENSIVE INCOME (LOSS): | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
Foreign currency translation adjustment | |
| (1,501) | |
| 2,861 | |
| (162) | |
| 2,477 | |
| (2,305) | |
| 579 | |
| (2,280) | |
| 1,339 | |
Total other comprehensive income (loss) | |
| (1,501) | |
| 2,861 | |
| (162) | |
| 2,477 | |
| (2,305) | |
| 579 | |
| (2,280) | |
| 1,339 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
COMPREHENSIVE INCOME | | $ | 2,345 | | $ | 9,414 | | $ | 13,378 | | $ | 20,287 | | $ | 1,452 | | $ | 7,095 | | $ | 3,542 | | $ | 11,033 | |
The accompanying notes are an integral part of these financial statements.
5
MILLER INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(In thousands, except share data and per share data)
(Unaudited)
| | | | | | | | | | | | | | | |
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | |
| |
| | |
| Accumulated |
| | | ||
| | | | | Additional | | | | | Other | | | | ||
| | Common | | Paid-In | | Accumulated | | Comprehensive | | | | ||||
| | Stock | | Capital | | Surplus |
| Loss | | Total | |||||
BALANCE, December 31, 2019 | | $ | 114 | | $ | 151,055 | | $ | 112,261 | | $ | (5,503) | | $ | 257,927 |
Components of comprehensive income: | | | | | | | | | | | | | | | |
Net income | | | — | | | — | | | 5,431 | | | — | | | 5,431 |
Foreign currency translation adjustments | | | — | | | — | | | — | | | (72) | | | (72) |
Total comprehensive income | | | — | | | — | | | 5,431 | | | (72) | | | 5,359 |
Issuance of common stock to non-employee directors (5,366) | | | — | | | 194 | | | — | | | — | | | 194 |
Dividends paid, $0.18 per share | | | — | | | — | | | (2,053) | | | — | | | (2,053) |
BALANCE, March 31, 2020 | | | 114 | | | 151,249 | | | 115,639 | | | (5,575) | | | 261,427 |
Components of comprehensive income: | | | | | | | | | | | | | | | |
Net income | | | — | | | — | | | 5,826 | | | — | | | 5,826 |
Foreign currency translation adjustments | | | — | | | — | | | — | | | (312) | | | (312) |
Total comprehensive income | | | — | | | — | | | 5,826 | | | (312) | | | 5,514 |
Dividends paid, $0.18 per share | | | — | | | — | | | (2,053) | | | — | | | (2,053) |
BALANCE, June 30, 2020 | | | 114 | | | 151,249 | | | 119,412 | | | (5,887) | | | 264,888 |
Components of comprehensive income: | | | | | | | | | | | | | | | |
Net income | | | — | | | — | | | 6,553 | | | — | | | 6,553 |
Foreign currency translation adjustments | | | — | | | — | | | — | | | 2,861 | | | 2,861 |
Total comprehensive income | | | — | | | — | | | 6,553 | | | 2,861 | | | 9,414 |
Dividends paid, $0.18 per share | | | — | | | — | | | (2,053) | | | — | | | (2,053) |
BALANCE, September 30, 2020 | | $ | 114 | | $ | 151,249 | | $ | 123,912 | | $ | (3,026) | | $ | 272,249 |
|
6
MILLER INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (Continued)
(In thousands, except share data)
(Unaudited)
| | | | | | | | | | | | | | | |
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | |
| |
| | |
| Accumulated |
| | | ||
| | | | | Additional | | | | | Other | | | | ||
| | Common | | Paid-In | | Accumulated | | Comprehensive | | | | ||||
| | Stock | | Capital | | Surplus |
| Loss | | Total | |||||
BALANCE, December 31, 2020 | | $ | 114 | | $ | 151,249 | | $ | 133,879 | | $ | (2,789) | | $ | 282,453 |
Components of comprehensive income: | | | | | | | | | | | | | | | |
Net income | | | — | | | — | | | 3,178 | | | — | | | 3,178 |
Foreign currency translation adjustments | | | — | | | — | | | — | | | 760 | | | 760 |
Total comprehensive income | | | — | | | — | | | 3,178 | | | 760 | | | 3,938 |
Issuance of common stock to non-employee directors (5,260) | | | — | | | 200 | | | — | | | — | | | 200 |
Dividends paid, $0.18 per share | | | — | | | — | | | (2,054) | | | — | | | (2,054) |
BALANCE, March 31, 2021 | | | 114 | | | 151,449 | | | 135,003 | | | (2,029) | | | 284,537 |
Components of comprehensive income: | | | | | | | | | | | | | | | |
Net income | | | — | | | — | | | 6,516 | | | — | | | 6,516 |
Foreign currency translation adjustments | | | — | | | — | | | — | | | 579 | | | 579 |
Total comprehensive income | | | — | | | — | | | 6,516 | | | 579 | | | 7,095 |
Dividends paid, $0.18 per share | | | — | | | — | | | (2,054) | | | — | | | (2,054) |
BALANCE, June 30, 2021 | | | 114 | | | 151,449 | | | 139,465 | | | (1,450) | | | 289,578 |
Components of comprehensive income: | | | | | | | | | | | | | | | |
Net income | | | — | | | — | | | 3,846 | | | — | | | 3,846 |
Foreign currency translation adjustments | | | — | �� | | — | | | — | | | (1,501) | | | (1,501) |
Total comprehensive income | | | — | | | — | | | 3,846 | | | (1,501) | | | 2,345 |
Dividends paid, $0.18 per share | | | — | | | — | | | (2,054) | | | — | | | (2,054) |
BALANCE, September 30, 2021 | | $ | 114 | | $ | 151,449 | | $ | 141,257 | | $ | (2,951) | | $ | 289,869 |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | |
| |
| | |
| Accumulated |
| | | ||
| | | | | Additional | | | | | Other | | | | ||
| | Common | | Paid-In | | Accumulated | | Comprehensive | | | | ||||
| | Stock | | Capital | | Surplus |
| Loss | | Total | |||||
BALANCE, December 31, 2020 | | $ | 114 | | $ | 151,249 | | $ | 133,879 | | $ | (2,789) | | $ | 282,453 |
Components of comprehensive income: | | | | | | | | | | | | | | | |
Net income | | | — | | | — | | | 3,178 | | | — | | | 3,178 |
Foreign currency translation adjustment | | | — | | | — | | | — | | | 760 | | | 760 |
Total comprehensive income | | | — | | | — | | | 3,178 | | | 760 | | | 3,938 |
Issuance of common stock to non-employee directors (5,260) | | | — | | | 200 | | | — | | | — | | | 200 |
Dividends paid, $0.18 per share | | | — | | | — | | | (2,054) | | | — | | | (2,054) |
BALANCE, March 31, 2021 | | | 114 | | | 151,449 | | | 135,003 | | | (2,029) | | | 284,537 |
Components of comprehensive income: | | | | | | | | | | | | | | | |
Net income | | | — | | | — | | | 6,516 | | | — | | | 6,516 |
Foreign currency translation adjustment | | | — | | | — | | | — | | | 579 | | | 579 |
Total comprehensive income | | | — | | | — | | | 6,516 | | | 579 | | | 7,095 |
Dividends paid, $0.18 per share | | | — | | | — | | | (2,054) | | | — | | | (2,054) |
BALANCE, June 30, 2021 | | $ | 114 | | $ | 151,449 | | $ | 139,465 | | $ | (1,450) | | $ | 289,578 |
| |||||||||||||||
BALANCE, December 31, 2021 | | $ | 114 | | $ | 151,449 | | $ | 141,918 | | $ | (4,945) | | $ | 288,536 |
Components of comprehensive income: | | | | | | | | | | | | | | | |
Net income | | | — | | | — | | | 2,065 | | | — | | | 2,065 |
Foreign currency translation adjustment | | | — | | | — | | | — | | | 25 | | | 25 |
Total comprehensive income | | | — | | | — | | | 2,065 | | | 25 | | | 2,090 |
Issuance of common stock to non-employee directors (5,988) | | | — | | | 200 | | | — | | | — | | | 200 |
Stock-based compensation on nonvested restricted stock units | | | — | | | 75 | | | — | | | — | | | 75 |
Dividends paid, $0.18 per share | | | — | | | — | | | (2,055) | | | — | | | (2,055) |
BALANCE, March 31, 2022 | | $ | 114 | | $ | 151,724 | | $ | 141,928 | | $ | (4,920) | | $ | 288,846 |
Components of comprehensive income: | | | | | | | | | | | | | | | |
Net income | | | — | | | — | | | 3,757 | | | — | | | 3,757 |
Foreign currency translation adjustment | | | — | | | — | | | — | | | (2,305) | | | (2,305) |
Total comprehensive income | | | — | | | — | | | 3,757 | | | (2,305) | | | 1,452 |
Stock-based compensation on nonvested restricted stock units | | | — | | | 222 | | | — | | | — | | | 222 |
Dividends paid, $0.18 per share | | | — | | | — | | | (2,054) | | | — | | | (2,054) |
BALANCE, June 30, 2022 | | $ | 114 | | $ | 151,946 | | $ | 143,631 | | $ | (7,225) | | $ | 288,466 |
| | | | | | | | | | | | | | | |
The accompanying notes are an integral part of these financial statements.
6
MILLER INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (Continued)
(In thousands, except share data)
(Unaudited)
7
MILLER INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
| | | | | | | | | | | | | |
| | Nine Months Ended | | Six Months Ended | | ||||||||
| | September 30 | | June 30 | | ||||||||
|
| 2021 |
| 2020 |
| 2022 |
| 2021 |
| ||||
OPERATING ACTIVITIES: |
| |
|
| |
|
| |
|
| |
|
|
Net income | | $ | 13,540 | | $ | 17,810 | | $ | 5,822 | | $ | 9,694 | |
Adjustments to reconcile net income to net cash flows from operating activities: | |
|
| |
|
| |
|
| |
|
| |
Depreciation and amortization | |
| 8,124 | |
| 6,915 | |
| 5,623 | |
| 5,334 | |
Loss on disposal of property, plant and equipment | |
| 7 | |
| 4 | |||||||
Provision for doubtful accounts | |
| 118 | |
| 148 | |||||||
(Gain) Loss on disposal of property, plant and equipment | |
| (36) | |
| (1) | | ||||||
Provision for credit losses | |
| 81 | |
| 71 | | ||||||
Issuance of non-employee director shares | |
| 200 | |
| 194 | |
| 200 | |
| 200 | |
Stock-based compensation on nonvested restricted stock units | | | 297 | | | — | | ||||||
Deferred tax provision | |
| 9 | |
| 399 | |
| 56 | |
| 113 | |
Changes in operating assets and liabilities: | |
|
| |
|
| |
|
| |
|
| |
Accounts receivable | |
| 10,312 | |
| 19,188 | |
| (37,708) | |
| (19,784) | |
Inventories | |
| (24,990) | |
| 1,836 | |
| (27,482) | |
| (7,314) | |
Prepaid expenses | |
| (3,209) | |
| 484 | |
| (1,716) | |
| (4,270) | |
Other assets | |
| 190 | |
| 352 | |
| 34 | |
| 104 | |
Accounts payable | |
| 2,204 | |
| (3,355) | |
| 19,194 | |
| 22,115 | |
Accrued liabilities | |
| 531 | |
| 154 | |
| 808 | |
| (1,043) | |
Net cash flows from operating activities | |
| 7,036 | |
| 44,129 | |
| (34,827) | |
| 5,219 | |
INVESTING ACTIVITIES: | |
|
| |
|
| |
|
| |
|
| |
Purchases of property, plant and equipment | |
| (7,857) | |
| (12,691) | |
| (22,840) | |
| (5,418) | |
Proceeds from sale of property, plant and equipment | |
| 6 | |
| 43 | |
| 8 | |
| 4 | |
Net cash flows from investing activities | |
| (7,851) | |
| (12,648) | |
| (22,832) | |
| (5,414) | |
FINANCING ACTIVITIES: | |
|
| |
|
| |
|
| |
|
| |
Net payments under credit facility | |
| — | |
| (4,998) | |||||||
Net borrowings under credit facility | |
| 40,000 | |
| — | | ||||||
Payments of cash dividends | |
| (6,162) | | | (6,159) | |
| (4,109) | | | (4,108) | |
Net payments on other long-term obligations | |
| — | |
| (297) | |||||||
Finance lease obligation payments | | | (16) | | | (16) | | | (11) | | | (11) | |
Net cash flows from financing activities | |
| (6,178) | |
| (11,470) | |
| 35,880 | |
| (4,119) | |
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND TEMPORARY INVESTMENTS | |
| (121) | |
| 1,429 | |
| (1,424) | |
| 727 | |
NET CHANGE IN CASH AND TEMPORARY INVESTMENTS | |
| (7,114) | |
| 21,440 | |
| (23,203) | |
| (3,587) | |
CASH AND TEMPORARY INVESTMENTS, beginning of period | |
| 57,521 | |
| 26,072 | |
| 54,332 | |
| 57,521 | |
CASH AND TEMPORARY INVESTMENTS, end of period | | $ | 50,407 | | $ | 47,512 | | $ | 31,129 | | $ | 53,934 | |
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | |
|
| |
|
| |
|
| |
|
| |
Cash payments for interest | | $ | 1,104 | | $ | 1,659 | | $ | 1,022 | | $ | 663 | |
Cash payments for income taxes, net of refunds | | $ | 5,153 | | $ | 3,925 | | $ | 1,496 | | $ | 3,585 | |
The accompanying notes are an integral part of these financial statements.
8
MILLER INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(in thousands, except share data and except as otherwise noted)
1. BASIS OF PRESENTATION
The condensed consolidated financial statements of Miller Industries, Inc. and subsidiaries (the “Company”) included herein have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted pursuant to such rules and regulations. Nevertheless, the Company believes that the disclosures are adequate to make the financial information presented not misleading. In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments, which are of a normal recurring nature, to present fairly the Company’s financial position, results of operations and cash flows at the dates and for the periods presented. Cost of goods sold for interim periods for certain activities is determined based on estimated gross profit rates. Interim results of operations are not necessarily indicative of results to be expected for the fiscal year.
These condensed consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.2021. The condensed consolidated financial statements include accounts of certain subsidiaries whose fiscal closing dates differ from December 31st by 31 days (or less) to facilitate timely reporting.
2. RECENT ACCOUNTING PRONOUNCEMENTS
Recently AdoptedIssued Standards
During the first quarter ofIn October 2021, the Company adoptedFinancial Accounting Standards UpdatedBoard (“FASB”) issued Accounting Standards Update (“ASU”) 2019-12 Income Taxes2021-08, Business Combinations (Topic 740), which among other things requires805). The update provides guidance on how to measure and recognize contract assets and contract liabilities when purchased as part of a business combination. According to the Company to recognize franchise tax that is partially based on income as an income-based tax.guidance, the acquirer must follow ASC Topic 606 in accounting for the contract asset or contract liability being purchased. The Company applied the amendments in the update on a modified retrospective basis, which didwill be effective for financial statements beginning after December 15, 2022, including interim periods within those fiscal years. The Company will apply the amendments prospectively. The adoption of this update will not have a material impact on the Company’s consolidated financial statements orand related disclosures.
In March 2022, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2022-02, Financial Instruments – Credit Losses (Topic 326). The update will require entities with financing receivables to disclose gross write-offs by year of origination of the receivable. The amendments in the update will be effective for financial statements beginning after December 15, 2022, including interim periods within those fiscal years, and will be applied prospectively. The adoption of this update will not have a material impact on the Company’s consolidated financial statements and related disclosures.
Recently Adopted Standards
During the first quarter of 2022, the Company adopted ASU 2021-10, Government Assistance (Topic 832), which requires certain disclosures about transactions with a government that are accounted for by applying a grant or contribution accounting model by analogy. The amendments require disclosure of information about the nature of the transactions and the related accounting policy used to account for the transactions, information regarding the line items within the consolidated financial statements that are affected by the transactions, and significant terms and conditions of the transactions. The adoption of this update did not have a material impact on the Company’s condensed consolidated financial statements and related disclosures.
9
3. BASIC AND DILUTED INCOME PER COMMON SHARE
The Company has a simple capital structure consisting ofBasic and diluted income per common stock and preferred stock, with only shares of common stock outstanding. The Company had 0 stock options or any other dilutive instruments outstanding duringshare were calculated using the three and nine months ended September 30, 2021 or 2020. following:
| | | | | | | | | | | | |
| | Three Months Ended | | Six Months Ended | ||||||||
| | June 30 | | June 30 | ||||||||
|
| 2022 |
| 2021 |
| 2022 |
| 2021 | ||||
| | | | | | | | | | | | |
Net Income | | $ | 3,757 | | $ | 6,516 | | $ | 5,822 | | $ | 9,694 |
| |
| | |
| | |
| | | | |
Basic and Diluted Common Shares | | | | | | | | | | | | |
Weighted Average Shares Outstanding - Basic | | | 11,417 | | | 11,411 | |
| 11,417 | |
| 11,411 |
Dilution for Assumed Exercises of Nonvested Restricted Stock Units | |
| — | |
| — | |
| 4 | |
| — |
Weighted Average Common Shares Outstanding - Diluted | | | 11,417 | | | 11,411 | | | 11,421 | | | 11,411 |
Basic income per common share is computed by dividing net income by the weighted average number of common shares outstanding. Diluted income per common share is calculated by dividing net income by the weighted average number of common and potential dilutive common shares outstanding. The Company uses the treasury stock method to account for the effect of nonvested restricted stock units on the computation of diluted income per share. For the three months ended June 30, 2022, all 160 thousand nonvested restricted stock units would have been anti-dilutive. For the six months ended June 30, 2022, NaN of the nonvested restricted stock units would have been anti-dilutive. There were 0 nonvested restricted stock units granted or outstanding during the period.three or six months ended June 30, 2021.
4. REVENUE
Substantially all of our revenue is generated from sales of towing and recovery equipment. As such, disaggregation of revenue by product line would not provide useful information because all product lines have substantially similar characteristics. However, revenue streams are tracked by the geographic location of customers. This disaggregated information is presented in the table below.
| | | | | | | | | | | | | | | | | | | | | | | | |
| | For the Three Months Ended |
| For the Nine Months Ended | | For the Three Months Ended |
| For the Six Months Ended | ||||||||||||||||
| | September 30, | | September 30, | | June 30, | | June 30, | ||||||||||||||||
|
| 2021 |
| 2020 |
| 2021 |
| 2020 |
| 2022 |
| 2021 |
| 2022 |
| 2021 | ||||||||
Net Sales: |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
North America | | $ | 142,338 | | $ | 149,265 | | $ | 450,908 | | $ | 400,581 | | $ | 185,635 | | $ | 161,882 | | $ | 379,986 | | $ | 308,570 |
Foreign | |
| 22,377 | |
| 19,101 | |
| 64,877 | |
| 72,368 | |
| 15,865 | |
| 19,276 | |
| 37,059 | |
| 42,500 |
| | $ | 164,715 | | $ | 168,366 | | $ | 515,785 | | $ | 472,949 | | $ | 201,500 | | $ | 181,158 | | $ | 417,045 | | $ | 351,070 |
Revenue is recognized when obligations under the terms of a contract with a customer are satisfied. Except for certain extended service contracts on a small percentage of units sold, the Company’s performance obligations are satisfied, and sales revenue is recognized when products are shipped from the Company’s facilities. From time to time, revenue is recognized under a bill and hold arrangement. Recognition of revenue on bill and hold arrangements occurs when control transfers to the customer. The bill and hold arrangement must be substantive,
9
and the product must be separately identified as belonging to the customer, ready for physical transfer, and unavailable to be used or directed to another customer.
Revenue is measured as the amount of consideration expected to be received in exchange for the transfer of products. Sales and other taxes collected concurrent with revenue-producing activities are excluded from revenue. Warranty related costs are recognized as an expense at the time products are sold and a reserve is established. Depending on the terms of the arrangement, for certain contracts the Company may defer the recognition of a portion of the consideration received because a future obligation has not yet been satisfied, such as an extended service contract. An observable price is used to determine the stand-alone selling price for separate performance obligations or a cost plus margin approach is utilized when one is not available.
Contract assets primarily relate to the Company’s rights to consideration for work completed but not billed at the reporting date. The contract assets are transferred to receivables when the rights become unconditional. Contract liabilities primarily relate to performance obligations to be satisfied in the future. As of SeptemberJune 30, 20212022, and December 31, 2020,2021, contract liability balances were each $272,$257, and are included in accrued liabilities on the condensed consolidated balance sheets. NaN revenue related to contract liability balances was recognized during the
10
three or nineand six months ended SeptemberJune 30, 20212022, or during the three and six months ended SeptemberJune 30, 2020. During the nine months ended September 30, 2020, the Company recognized $37 of contract liabilities into earnings after satisfaction of related performance obligations.2021. The Company did 0t have any contract assets at SeptemberJune 30, 20212022 or December 31, 2020. 2021.
The Company extends credit to customers in the normal course of business. Collections from customers are continuously monitored and an allowance for credit losses is maintained based on historical experience adjusted for current conditions and forecasts capturing country and industry-specific economic factors. The Company also considers any specific customer collection issues. Since the Company’s trade receivables are largely similar, the Company evaluates its allowance for credit losses as one portfolio segment. At origination, the Company evaluates credit risk based on a variety of credit quality factors including prior payment experience, customer financial information, credit ratings, probabilities of default, industry trends and other internal metrics. On an ongoing basis, data by each major customer is regularly reviewed based on past-due status to evaluate the adequacy of the allowance for credit losses and actual write-offs are charged against the allowance. Terms on accounts receivable vary and are based on specific terms agreed upon with each customer. Write-offs of accounts receivable were not materialde minimis during the three and ninesix months ended SeptemberJune 30, 20212022 and 2020.during the three and six months ended June 30, 2021.
Trade accounts receivable are generally diversified due to the number of entities comprising the Company’s customer base and their dispersion across many geographic regions. The Company also frequently monitors the creditworthiness of the customers to whom the credit is granted in the normal course of business. Sales from 1 customer made up approximately 10% of total Company sales during the three and six months ended June 30, 2022. No one customer made up greater than 10% of total companyCompany sales during the three or six months ended SeptemberJune 30, 2021 and 2020. There were also2021. Accounts receivable from no customers with a trade account receivableone customer made up greater than 10% of total Company trade accounts receivable at SeptemberJune 30, 20212022 or December 31, 2020.2021.
5. INVENTORIES
Inventory costs include materials, labor and factory overhead. Inventories are stated at the lower of cost or net realizable value, determined on a first-in, first-outmoving average unit cost basis. Appropriate consideration is given to obsolescence, valuation and other factors in determining net realizable value. Revisions of these estimates could result in the need for adjustments. Inventories, net of reserves, at SeptemberJune 30, 20212022 and December 31, 20202021 consisted of the following:
| | | | | | | | | | | | |
|
| 2021 |
| 2020 |
| 2022 |
| 2021 | ||||
Chassis | | $ | 6,493 | | $ | 6,859 | | $ | 10,655 | | $ | 5,753 |
Raw materials | |
| 51,897 | |
| 36,161 | |
| 66,843 | |
| 59,651 |
Work in process | |
| 33,932 | |
| 16,282 | |
| 43,229 | |
| 33,994 |
Finished goods | |
| 16,516 | |
| 24,637 | |
| 20,464 | |
| 15,510 |
| | $ | 108,838 | | $ | 83,939 | | $ | 141,191 | | $ | 114,908 |
6. LONG-TERM OBLIGATIONS
Credit Facility and Other Long-Term Obligations
Credit Facility
The Company’s current loan agreement with First Horizon Bank, which governs its existing $50,000 unsecured revolving credit facility with a maturity date of May 31, 2027, contains customary representations and warranties, events of default, and financial, affirmative and negative covenants for loan agreements of this kind. The credit facility restricts the payment of cash dividends if the payment would cause the Company to be in violation of the minimum tangible net worth test or the leverage ratio test in the loan agreement, among various other customary covenants. The Company has been in compliance with these covenants throughout 20202021 and during the first ninesix months of 2021,2022, and it is anticipated that the Company will continue to be in compliance duringfor the remainder of 2021.foreseeable future.
10
In the absence of a default, all borrowings under the credit facility bear interest at the LIBOR Rate plus 1.00% or 1.25% per annum, depending on the leverage ratio. The Company pays a non-usage fee under the current loan agreement at a rate per annum equal to between 0.15% and 0.35% of the unused amount of the credit facility, which fee is paid quarterly.
At SeptemberDuring the first six months of 2022, the Company drew $40,000 on its credit facility for working capital needs and retained $40,000 in outstanding borrowings under its credit facility at June 30, 2021 and2022. At December 31, 2020,2021, the Company had $0 in outstanding borrowings under the credit facility. In March 2020, the Company drew $25,000 on its existing credit facility for working capital needs and as a precautionary measure to ensure future short-term cash flow requirements were met due to operational disruptions resulting from the COVID-19 pandemic. However, during the second and third quarters of 2020, the Company repaid the balance in full, as its cash position was stronger than anticipated. At SeptemberJune 30, 2021,2022, the Company had cash and temporary investments of $50,407.$31,129.
11
7. COMMITMENTS AND CONTINGENCIES
Leasing Activities
The Company leases certain equipment and facilities under long-term non-cancellable operating and finance lease agreements. The leases expire at various dates through 2026.2027. Certain of the lease agreements contain renewal options. For those leases that have renewal options, the Company included these renewal periods in the lease term if the Company determined it was reasonably certain to exercise the renewal option. Lease payments during such renewal periods were also considered in the calculation of right-of-use assets and lease obligations.
Right-of-use assets represent the Company’s right to use an underlying asset for the lease term and lease obligations represent the Company’s obligation to make lease payments arising from the lease. Lease obligations are recognized at the commencement date based on the present value of lease payments over the lease term. Right-of-use assets are recognized at the commencement date as the initial measurement of the lease liability, plus payments made prior to lease commencement and any initial direct costs. As most of the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Expense is recognized on a straight-line basis over the lease term for operating leases. For finance leases, expense is recognized as the expense from straight-line amortization of the right-of-use asset plus the periodic interest expense from the lease obligation. Short-term leases have a lease term of twelve months or less. The Company recognizes short-term leases on a straight-line basis and does not record a related right-of-use asset or lease obligation for such contracts.
Right-of-use assets related to finance leases are included as a component of property, plant and equipment, net on the condensed consolidated balance sheets and had the following values at SeptemberJune 30, 20212022 and December 31, 2020.2021.
| | | | | | | | | | | | |
|
| 2021 |
| 2020 |
| 2022 |
| 2021 | ||||
Finance lease right-of-use assets | | $ | 78 | | $ | 78 | | $ | 78 | | $ | 78 |
Accumulated amortization | |
| (57) | |
| (42) | |
| (74) | |
| (64) |
Finance lease right-of-use assets, net | | $ | 21 | | $ | 36 | | $ | 4 | | $ | 14 |
A maturity analysis of the undiscounted cash flows of operating and finance lease obligations is as follows:
| | | | | | | | | | | | |
| | Operating Lease Obligation | | Finance Lease Obligation | | Operating Lease Obligation | | Finance Lease Obligation | ||||
Remaining lease payments to be paid during the year ended December 31, | | | | | | | | | | | | |
2021 |
| $ | 100 | | $ | 6 | ||||||
2022 | |
| 377 | |
| 15 |
| $ | 191 | | $ | 4 |
2023 | |
| 295 | |
| 0 | |
| 319 | |
| 0 |
2024 | |
| 239 | |
| 0 | |
| 268 | |
| 0 |
2025 | |
| 226 | |
| 0 | |
| 234 | |
| 0 |
2026 | |
| 87 | |
| 0 | ||||||
Thereafter | |
| 82 | |
| 0 | |
| 1 | |
| 0 |
Total lease payments | | | 1,319 | | | 21 | | | 1,100 | | | 4 |
Less Imputed Interest | | | (89) | | | 0 | ||||||
Lease obligation at September 30, 2021 | | $ | 1,230 | | $ | 21 | ||||||
Less imputed interest | | | (52) | | | 0 | ||||||
Lease obligation at June 30, 2022 | | $ | 1,048 | | $ | 4 |
1112
The lease cost and certain other information during the three and ninesix months ended SeptemberJune 30, 20212022 and 20202021 were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended | | Three Months Ended | | Six Months Ended | | ||||||||||||||||
| | September 30 | | September 30 | | June 30 | | June 30 | | ||||||||||||||||
|
| 2021 |
| 2020 |
| 2021 |
| 2020 |
| 2022 |
| 2021 |
| 2022 |
| 2021 |
| ||||||||
Lease Cost | | | | | | | | | | | | | | | | | | | | | | | | | |
Finance lease cost: | | | | | | | | | | | | | | | | | | | | | | | | | |
Amortization of right-of-use assets | | $ | 5 | | $ | 6 | | $ | 16 | | $ | 16 | | $ | 5 | | $ | 6 | | $ | 10 | | $ | 11 | |
Interest on lease obligation | |
| 0 | |
| 0 | |
| 1 | |
| 1 | |
| — | |
| — | |
| 1 | |
| 1 | |
Total finance lease cost | | | 5 | | | 6 | | | 17 | | | 17 | | | 5 | | | 6 | | | 11 | | | 12 | |
Total operating lease cost | |
| 107 | |
| 103 | |
| 320 | |
| 304 | |||||||||||||
Short-term lease cost | |
| 116 | |
| 118 | |
| 362 | |
| 372 | |||||||||||||
Total long-term operating lease cost | |
| 99 | |
| 107 | |
| 205 | |
| 213 | | ||||||||||||
Total short-term operating lease cost | |
| 117 | |
| 119 | |
| 283 | |
| 246 | | ||||||||||||
Total lease cost | | $ | 228 | | $ | 227 | | $ | 699 | | $ | 693 | | $ | 221 | | $ | 232 | | $ | 499 | | $ | 471 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Other Information | | | | | | | | | | | | | | | | | | | | | | | | | |
Cash paid for amounts included in the measurement of lease obligation: | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
Operating cash flows from operating leases | | $ | 107 | | $ | 102 | | $ | 320 | | $ | 301 | | $ | 99 | | $ | 107 | | $ | 206 | | $ | 213 | |
Financing cash flows from finance leases | |
| 5 | |
| 6 | |
| 16 | |
| 16 | |
| 5 | |
| 6 | |
| 11 | |
| 11 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Right-of-use assets obtained in exchange for new finance lease obligations | | | 0 | | | 0 | | | 0 | | | 0 | |||||||||||||
Right-of-use assets obtained in exchange for new operating lease obligations | |
| 6 | |
| 20 | |
| 6 | |
| 46 | |
| 37 | |
| — | |
| 68 | |
| — | |
The weighted average remaining lease term for operating leases and finance leases at SeptemberJune 30, 20212022 was 4.03.5 years and 0.90.2 years, respectively. The weighted average remaining lease term for operating leases and finance leases at December 31, 20202021 was 4.63.9 years and 1.90.7 years, respectively. The weighted average discount rate for operating leases and finance leases at SeptemberJune 30, 20212022 was 3.3%3.1% and 4.0%, respectively. The weighted average discount rate for operating leases and finance leases at December 31, 20202021 was 3.2%3.1% and 4.0%, respectively. The Company’s subsidiary in the United Kingdom leased facilities used for manufacturing and office space from a related party with related lease costs during the three months ended SeptemberJune 30, 2022 and 2021 of $53 and 2020 of $59 and $55,$57, respectively, and related lease costs during the ninesix months ended SeptemberJune 30, 2022 and 2021 of $108 and 2020 of $172 and $157,$113, respectively. The Company’s French subsidiary leased a fleet of vehicles from a related party with related lease costs of $27$38 and $28 during the three months ended SeptemberJune 30, 20212022 and 2020,2021, respectively, and related lease costs of $71 and $56 during the ninesix months ended SeptemberJune 30, 20212022 and 2020 of $83 and $84, respectively.2021.
Other Commitments
At SeptemberJune 30, 20212022 and December 30, 2020,31, 2021, the Company had commitments of approximately $5,933$8,769 and $7,068,$5,052, respectively, for construction and acquisition of property, plant and equipment. The Company is also migrating its enterprise resource planning (ERP) system to a multi-tenant cloud environment which includes global ERP, human capital management, data analytics and the use of artificial intelligence. Phase 1 of this migration was completed during the first quarter of 2021 and the 2 remaining phases will be implemented over the next three years. Related to this project, at SeptemberJune 30, 20212022 and December 31, 2020,2021, the Company had commitments of approximately $3,754$2,874 and $5,266,$3,751, respectively, in software license fees payable in installments through 2025.
Contingencies
The Company has entered into arrangements with third-party lenders where it has agreed, in the event of default by a distributor within the independent distributor network, to repurchase from the third-party lender companyCompany products repossessed from the independent distributor customer. These arrangements are typically subject to a maximum repurchase amount. The maximum amount of collateral that the Company could be required to purchase was approximately $46,183$57,319 at SeptemberJune 30, 2021,2022, and $56,822$47,883 at December 31, 2020.2021. The Company’s risk under these arrangements is mitigated by the value of the products that would be repurchased as part of the transaction. The Company considered the fair value at inception of its liabilitycommitment under these arrangements and concluded that the liabilitythere is no probable loss associated with these potential repurchase obligations was not probable and thus not materialno associated liability was recognized at SeptemberJune 30, 20212022 or December 31, 2020.2021.
The Company is, from time to time, a party to litigation arising in the normal course of its business. Litigation is subject to various inherent uncertainties, and it is possible that some of such matters could be resolved unfavorably to the Company, which could result in substantial damages against the Company. The Company establishes accruals for matters that are probable and reasonably estimable and maintains
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product liability and other insurance that management believes to be adequate. Management believes that any liability that may ultimately
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result from the resolution of any such matters in excess of available insurance coverage and accruals will not have a material adverse effect on the consolidated financial position or results of operations of the Company.
8. INCOME TAXES
As of SeptemberJune 30, 2021,2022, the Company had 0 federal net operating loss carryforwards and 0 significant statecarryforwards. State net operating loss carryforwards.carryforwards were not significant at June 30, 2022.
9. SUBSEQUENT EVENTS
Credit Facility
Subsequent to June 30, 2022, the Company received a commitment from First Horizon Bank to expand its existing loan agreement from $50,000 to $100,000 on substantially the same terms and with the same May 31, 2027 maturity date. This commitment is subject only to the completion of customary documentation amending the existing loan agreement. The Company drew an additional $5,000 on its credit facility subsequent to June 30, 2022, which increased the balance to $45,000 at August 3, 2022.
Dividends
On NovemberAugust 1, 2021,2022, the Company’s Board of Directors declared a quarterly cash dividend of $0.18 per share. The dividend is payable December 13, 2021September 12, 2022, to shareholders of record as of December 6, 2021.September 5, 2022.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of our results of operations and financial condition should be read in conjunction with the condensed consolidated financial statements and the notes thereto. Unless the context indicates otherwise, all dollar amounts in this Management’s Discussion and Analysis of Financial Condition and Results of Operations are in thousands.
Executive Overview
Miller Industries, Inc. is The World’s Largest Manufacturer of Towing and Recovery Equipment®Equipment®, with domestic manufacturing subsidiaries in Tennessee and Pennsylvania, and foreign manufacturing subsidiaries in France and the United Kingdom. We offer a broad range of equipment to meet our customers’ design, capacity and cost requirements under our Century®Century®, Vulcan®Vulcan®, Challenger®Challenger®, Holmes®Holmes®, Champion®Champion®, Chevron™, Eagle®Eagle®, Titan®Titan®, Jige™ and Boniface™ brand names. In this Item 2 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” the words “Miller Industries,” “the Company,” “we,” “our,” “ours” and “us” refer to Miller Industries, Inc. and its subsidiaries or any of them.
Our management focuses on a variety of key indicators to monitor our overall operating and financial performance. These indicators include measurements of revenue, operating income, gross margin, net income, earnings per share, capital expenditures and cash flow.
We derive revenues primarily from product sales made throughto our network of domestic and foreign independent distributors. Our revenues are sensitive to a variety of factors including general economic conditions as well as demand for, and price of, our products, our technological competitiveness, our reputation for providing quality products and reliable service, competition within our industry, and the cost and availability of purchased component parts, truck chassis and raw materials (including aluminum, steel and petroleum-related products), purchased component parts and truck chassis..
Our history of innovation in the towing and recovery industry has been an important factor behind our growth over the last decade and we believe that our continued emphasis on research and development will be a key factor in our future growth. Our domestic plant expansion and modernization projects have installed sophisticated robotics and implemented other advanced technologies to optimize our manufacturing processes. We completed phase one of the implementation of an enterprise software solution during the first quarter of 2021, which we expect towill substantially improve our administrative efficiency and customer service levels. As we retain our focus toward modernization, we continue to invest in robotics and automated material handling equipment across all of our domestic manufacturing facilities.
We opened our free-standing R&D facility in Chattanooga in 2019, where we pursue various innovations in our products and manufacturing processes, some of which are intended to enhance the safety of our employees and reduce our environmental impact. Our latest new product, the M100, which we believe to be the world’s largest tow truck, was introduced in the fall of 2019.
All of our domestic facilities have undergone substantial expansion and modernization projects during the period 20162017 to 2020, as we have2021. We invested over $97,000$82,000 on property, plant and equipment overduring this five-year period, including our most recent fabrication equipment upgrades at our Greeneville, Tennessee facilities. These projects not only increased our production capacity, but also included installing sophisticated robotics and implementing other advanced technologies to optimize our manufacturing process.
Our industry is cyclical in nature. Until the onset of the COVID-19 pandemic, the overall demand for our products and resulting revenues in recent years have been positively affected by favorable economic conditions, such as lower fuel prices, and positive consumer sentiment in our industry. However, historically, the overall demand for our products and our resulting revenues havehas at times been negatively affected by:
● | wavering levels of consumer confidence; |
● | volatility and disruption in domestic and international capital and credit markets and the resulting decrease in the availability of financing, including floor plan financing, for our customers and towing operators; |
● | significant periodic increases in fuel and insurance costs and their negative effect on the ability of our customers to purchase towing and related equipment; and |
● | the overall effects of global, political, economic and health conditions. |
We remain concerned about the continuing effects of these factors on the towing and recovery industry, and we continue to monitor our overall cost structure to see that it remains in line with business conditions.
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In addition, we have been and will continue to be affected by changes in the prices that we pay for raw materials, particularly aluminum, steel, petroleum-related products and other raw materials, which represent a substantial part of our total cost of operations. Historically, we have implemented price increases on our products to offset price increases in the raw materials that we use. We also developed alternatives to some of the components used in our production process that incorporate these raw materials, and our suppliers have implemented these alternatives in the production of our component parts. We continue to monitor raw material prices and availability in order to more favorably position the Company in this dynamic market.
Impact of COVID-19 and Recent Developments
The spread ofDespite the COVID-19 virus during 2020 caused an economic downturn on a global scale, as well as significant volatility ineconomy improving over the financial markets. During the monthcourse of March 2020, we enacted limited shutdowns of all of our domestic facilities to make appropriate modifications to our operations because of COVID-19, which allowed us to continue to serve our customers, while taking precautions to provide a safe work environment for our employees and customers. Since that time and through the present, we have been rotating the majority of our workforce every four days, have designated periods of non-production time for sanitation efforts, have adjusted work schedules to maximize our capacity while adhering to recommended precautions such as social distancing, and have established and implemented work from home provisions where possible. As part of our ongoing safety measures, we may temporarily suspend operations from time to time to clean and disinfect areas within our facilities. We enacted such limited suspensions from time to time during 2020 at certain of our domestic facilities. Our international operations have also been affected by various comparable requirements of governmental agencies and safety related operational adjustments. These safety modifications continue to have an adverse impact on our plant productivity, although the impact has been less severe as we have become more accustomed to working under them. We are unable to predict when we may be able to safely relax these new operating measures that were adopted as a result of the COVID-19 pandemic.
In March 2020, we drew $25,000 on our existing credit facility for working capital needs and as a precautionary measure to ensure future short-term cash flow requirements were met during the heightened uncertainty resulting from the COVID-19 pandemic, but repaid the balance in full later in 2020, as our cash position was stronger than anticipated. At September 30, 2021, we had cash and temporary investments of $50,407.
During 2020 we did not experience material disruptions in our supply of parts, components and materials due to the COVID-19 pandemic, but we did experience material curtailments of new chassis deliveries due to shutdowns and production slowdowns at our suppliers’ facilities during the second and third quarters of 2020. We also experienced reductions in orders for our products at the beginning of the pandemic. This depressed demand along with the decreases in deliveries of chassis caused us to temporarily shut our domestic plants in Pennsylvania and Greeneville, Tennessee for several weeks at the end of the second quarter of 2020 and for the first few weeks of the third quarter of 2020. Our international plants also were adversely impacted and experienced shutdowns during the second quarter of 2020. While all of our plants have been open for all of 2021, the possibility of new shutdowns of one or more of our facilities due to the COVID-19 pandemic remains.
As the economy continues to improve in 2021,increasingly significant supply chain challenges such as shortages and delivery delays in semiconductors and other component parts and price increases on manyraw materials including record high steel prices, are impacting the operations of many companies on a global scale. We continued to experience these critical supply chain disruptions during the third quarter of 2021, which impacted our ability to obtain on a timely basis various raw materials and purchased component parts that are necessary to our production processes, including our ability to obtain chassis from third party suppliers, and also resulted inas well as substantial price increases for many of these materials and component parts. We also continued to experience in the third quarter of 2021 increases in employee turnover rates and difficulties in hiring new workers for our skilled workforce, which has caused increased recruiting, training and retention costs.costs during this period. These supply chain difficulties were generally lessening as 2022 began but the impact of the war in Ukraine, lingering effects of COVID-19 in the U.S. and workforce headwinds generally worsenedabroad and general economic conditions have slowed this improvement over the course of 2022.
We implemented several price increases and surcharges for our products during 2021 and the third quarter.first six months of 2022. In an effort to address the accelerating price increases for materials and component parts that we experienced in the first and second quarters of 2022 (particularly after the commencement of the war in Ukraine), we increased our surcharge from 3% to 11% on April 1, 2022, and our previously announced 5% price increase became effective on June 1, 2022. However, these price increases were implemented during the second quarter of 2022, while the higher costs for raw materials and purchased component parts that we use were felt much sooner. These factors had a substantial adverse impact on our net income during the second half of 2021 and first half of 2022, and they likely will continue to have such adverse impact if prices for our materials and component parts continue to increase over the course of 2022.
Supply chain disruptions and workforce retention challenges continued to significantly reduce our ability to complete finished goods without timing delays during the second quarter of 2022 and to increase our costs of operations. In addition, general inflationary pressures have substantially increased in the first half of 2022. These factors significantly impacted our inventory levels, particularly with increases to work in process inventory. We continue to monitor these supply chain disruptions and inflationary pressures (including the impact of the Russia conflict with Ukraine) and attempt to mitigate the risk associated with them, including by implementing several price increases and surcharges,(including those described above), by pursuing additional production capabilities through capital deployment, such as our first quarter 2022 purchase of an additional small facility in Ooltewah, TN to be used for the production of small carrier units, and by relying more heavily on our in-house fabrication capabilities, which were significantly expanded in 2020. However,
Based on our strong backlog, surcharge and price increases and the current status of our process improvements, we believe we are well positioned to improve our operating results over the course of 2022, but our performance will be heavily influenced by whether supply chain constraints and inflationary pressures worsen due to the war in Ukraine or other geopolitical factors, the lingering effects of COVID-19, the threat of recession and general economic factors or any other reason. The impact of these disruptionsfactors remains largely out of our control, and we currently anticipate that these factorsthey will continue to have a material adverse impact on our production at our facilities duringcapabilities and net income over the remainder of 2021 and into the first halfcourse of 2022.
At December 31, 2021, the Company owed $0 under its primary credit facility. During the first six months of 2022, the Company drew $40,000 for working capital needs. The impactCompany also drew an additional $5,000 from the credit facility for working capital needs subsequent to June 30, 2022 and retains a balance on its credit facility of the COVID-19 pandemic continues to unfold and certain countries, states and localities continue to experience surges in COVID-19 cases from time to time. The effect of the pandemic and related supply chain disruptions on our operational and financial performance will depend in large part on future developments, which cannot be predicted with confidence$45,000 at this time. Future developments include the duration, scope and severity of the ongoing pandemic, including as a result of the emergence of new strains of the virus and any future resurgences of COVID-19 or variant strains, the actions taken to contain or mitigate its impact, the impact on governmental programs and budgets, the success of vaccination programs, the development of treatments or other vaccines, the demand for new equipment from towing equipment operators and the resumption of widespread economic activity, the ability of the economy to resolve supply chain disruptions and the timing of such efforts, and the success and timing of the general economy and our suppliers in resolving supply chain disruptions. While we know that COVID-19 related changes to our operating processes have and will continue to impact our production levels for so long as they are in place, due to the inherent uncertainty of the unprecedented and rapidly evolving situation, we are unable to predict with any confidence the likely impact of the continuing COVID-19 pandemic and supply chain disruptions on our future operations.
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Even after the COVID-19 pandemic has subsided, we may experience materially adverse impacts to our business due to any resulting economic recession or depression, or to continuing or worsening supply chain disruptions and workforce turnover, or to a general reduction in miles driven on roadways due to a decrease in travel.August 3, 2022.
Critical Accounting Policies
Our condensed consolidated financial statements are prepared in accordance with GAAP, which require us to make estimates. Certain accounting policies are deemed “critical,” as they require management’s highest degree of judgment, estimations and assumptions. The accounting policies deemed to be most critical to our financial position and results of operations are those related to accounts receivable, inventory, long-lived assets, warranty reserves, revenues, and income taxes. There have been no significant changes in our critical accounting policies during the first ninesix months of 2021.2022.
For additional information, refer to our summary of significant accounting policies in Note 2 of the "Notes to Consolidated Financial Statements" in Part IV, Item 15 and "Critical Accounting Policies" in Part II, Item 7 of our annual report on Form 10-K for the year ended December 31, 2020.2021.
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Results of Operations – Three Months Ended SeptemberJune 30, 20212022 Compared to Three Months Ended SeptemberJune 30, 20202021
Net sales for the three months ended SeptemberJune 30, 2021 decreased 2.2%2022 increased 11.2% to $164,715$201,500 from $168,366$181,158 for the comparable period in 2020.2021. The decreaseincrease in revenue reflects the ongoing challenges of navigating certaineconomic recovery and some supply chain disruptions and bottlenecks during the third quarterimprovement in certain of 2021.our product classes. Net domestic sales decreasedincreased during the three-month periodthree months ended SeptemberJune 30, 20212022 to $142,338$185,635 from $149,265$161,882 for the comparable period in 2020,2021, while net foreign sales increaseddecreased to $22,377$15,865 from $19,101$19,276 during the same three-month period.
Costs of operations for the three months ended SeptemberJune 30, 2021 decreased 2.4%2022 increased 14.0% to $146,883$183,126 from $150,523$160,568 for the comparable period in 2020.2021. Costs of operations decreasedincreased as a percentage of sales to 89.2%90.9%, compared to 89.4%88.6% for the comparable period in 2020,2021, primarily due to changes in product mix.higher prices for components, parts scarcity resulting from supply chain challenges, and wage inflation.
Selling, general and administrative expenses for the three months ended SeptemberJune 30, 20212022 increased to $11,983$12,651 from $9,231$12,019 for the comparable period in 20202021 due to increased personnel related costs and a normalization in spending in comparison to the cutbacks on marketing and travel during the third quarter of 2020.costs. As a percentage of sales, selling, general and administrative expenses for the three months ended SeptemberJune 30, 2021 increased2022 decreased to 7.3%6.3% from 5.5%6.6% in the comparable period in 2020,2021, as a result of the decreaseincrease in revenue and these increases in personnel and travel related expenses.revenue.
Interest expense, net increased to $286$628 from $230$340 for the three months ended SeptemberJune 30, 20212022 as compared to the prior year period. Increases in interest expense, net were primarily due to increases in floor plan interest payments.payments and increased borrowings on our credit facility.
When the Company has transactions that are denominated in a currency other than its functional currency, the Company is exposed to foreign currency transaction risk and must record gains and losses through other (income) expense when the related balance sheet items are remeasured in the functional currency of the Company. Other (income) expense, net is composed primarily of these foreign currency exchange gains and losses, with the remainder being composed of gains and losses on disposals of equipment. For the three months ended SeptemberJune 30, 20212022 the Company experiencedrecognized a net foreign currency exchange loss of $198,$311, compared to a net gain of $208$42 for the three months ended SeptemberJune 30, 2020.2021, reflecting foreign currency gains and loss on transactions denominated in a currency other than the local entity’s functional currency.
The provision for income taxes for the three months ended SeptemberJune 30, 20212022 and 20202021 reflects a combined effective U.S. federal, state and foreign tax rate of 28.2%22.1% and 23.7%21.3%, respectively. The principal differences between the federal statutory tax rate and the effective tax rate consist primarily of state taxes, domestic tax credits, and tax differences on foreign earnings.
Results of Operations – NineSix Months Ended SeptemberJune 30, 20212022 Compared to NineSix Months Ended SeptemberJune 30, 20202021
Net sales for the ninesix months ended SeptemberJune 30, 20212022 increased 9.1%18.8% to $515,785$417,045 from $472,949$351,070 for the comparable period in 2020, which was materially negatively impacted by the COVID-19 pandemic.2021. The increase in revenue reflects economic recovery from the adverse impacts of the COVID-19 pandemic during the second and third quarters of 2021. However, these increases in revenue were largely offset bysome supply chain disruptions and bottlenecks during the third quarterimprovement in certain of 2021, thus tempering long-term sales recovery.our product classes. Net domestic sales increased during the nine-month periodsix months ended SeptemberJune 30, 20212022 to $450,908$379,986 from $400,581$308,570 for the comparable period in 2020,2021, while net foreign sales decreased to $64,877$37,059 from $72,368$42,500 during the same nine-month period, primarily attributable to significant decreases in export sales during the first nine months of 2021.six-month period.
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Costs of operations for the ninesix months ended SeptemberJune 30, 20212022 increased 10.2%21.8% to $461,532$383,331 from $418,841$314,649 for the comparable period in 2020.2021. Costs of operations increased as a percentage of sales to 89.5%91.9%, compared to 88.6%89.6% for the comparable period in 2020, which reflects reduced sales2021, primarily due to higher prices for components, part scarcity resulting from supply chain disruptionschallenges, and increases in raw materials prices caused by supply chain disruptions and escalatingwage inflation.
Selling, general and administrative expenses for the ninesix months ended SeptemberJune 30, 20212022 increased to $35,053$25,037 from $30,272$23,070 for the comparable period in 20202021 due to increases inincreased software fees,licensing and personnel related costs, and a normalization in spending in comparison to the cutbacks from the prior year comparable period.costs. As a percentage of sales, selling, general and administrative expenses for the ninesix months ended SeptemberJune 30, 2021 increased2022 decreased to 6.8%6.0% from 6.4%6.6% in the comparable period in 2020.2021, as a result of the increase in revenue.
Interest expense, net decreasedincreased to $901$1,046 from $1,018$615 for the ninesix months ended SeptemberJune 30, 20212022 as compared to the prior year period. DecreasesIncreases in interest expense, net were primarily due to decreasesincreases in floor plan interest payments and decreases in interestincreased borrowings on theour credit facility.
When the Company has transactions that are denominated in a currency other than its functional currency, the Company is exposed to foreign currency transaction risk and must record gains and losses through other (income) expense when the related balance sheet items are remeasured in the functional currency of the Company. Other (income) expense, net is composed primarily of these foreign currency exchange gains and losses, with the remainder being composed of gains and losses on disposals of equipment. For the ninesix months ended SeptemberJune 30, 20212022 the Company experienced a net foreign currency exchange loss of $427,$363, compared to a net gainloss of $397$229 for the ninesix months ended SeptemberJune 30, 2020.2021, reflecting foreign currency gains and losses on transactions denominated in a currency other than the local entity’s functional currency.
The provision for income taxes for the ninesix months ended SeptemberJune 30, 20212022 and 20202021 reflects a combined effective U.S. federal, state and foreign tax rate of 24.2%20.3% and 23.3%22.5%, respectively. The principal differences between the federal statutory tax rate and the effective tax rate consist primarily of state taxes, domestic tax credits, and tax differences on foreign earnings. Favorable tax adjustments in foreign jurisdictions drove the decrease in the effective tax rate for the six months ended June 30, 2022.
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Liquidity and Capital Resources
Cash provided byused in operating activities was $7,036$34,827 for the ninesix months ended SeptemberJune 30, 2021,2022, compared to cash provided by operating activities of $44,129$5,219 in the comparable period in 2020.2021. Cash provided by or used in operating activities is generally attributable to the receipt of payments from our customers as settlement of their contractual obligation once we have fulfilled all performance obligations related to our contracts with them. These cash receipts are netted with payments for purchases of inventory, materials used in manufacturing, and other expenses that are necessary in the ordinary course of our operations, such as utilities and taxes. The change in net cash provided by operating activities during the nine months ended September 30, 2021 in comparison to the nine months ended September 30, 2020, is primarily due to the increase in cashflows from operating activities during the secondsix months ended June 30, 2022, in comparison to the six months ended June 30, 2021, is primarily due to recent increases in inventory purchases associated with increased production levels and third quarters of 2020, as the decreasenecessary to mitigate supply chain constraints, coupled with increases in production from the impacts of the COVID-19 pandemicreceivables related to increases in sales during the second and third quartersfirst half of 2020 caused less cash to be used in production, while pre-pandemic receivables continued to be collected. However, during the nine months ended September 30, 2021, production activities increased with customer demand, thus requiring more cash to be used in operations.2022.
Cash used in investing activities was $7,851$22,832 for the ninesix months ended SeptemberJune 30, 20212022 compared to $12,648$5,414 for the comparable period in 2020.2021. The cash used in investing activities for the ninesix months ended SeptemberJune 30, 20212022 was for purchases of property, plant and equipment.equipment, including the purchase of an aircraft, fabrication equipment, and an additional facility in Ooltewah, TN to be used for the production of small carriers.
Cash used inprovided by financing activities was $6,178$35,880 for the ninesix months ended SeptemberJune 30, 2021,2022, compared to cash used in financing activities of $11,470$4,119 for the comparable period in 2020. The2021. Net cash used inflows from financing activities for the ninesix months ended SeptemberJune 30, 2022 resulted from advances from the credit facility of $40,000, partially offset by the payment of cash dividends of $4,109 and an immaterial amount of payments on finance lease obligations. Net cash flows from financing activities for the six months ended June 30, 2021 resulted from the payment of cash dividends of $6,162 and an immaterial amount of payments on finance lease obligations. The cash used in financing activities for the nine months ended September 30, 2020 resulted primarily from the payment of cash dividends of $6,159, payments of long-term obligations of $5,295,$4,108 and an immaterial amount of payments on finance lease obligations.
As of SeptemberJune 30, 2021,2022, we had cash and cash equivalentstemporary investments of $50,407.$31,129, and an additional $10,000 in available borrowings under our existing credit facility ($45,000 as of August 3, 2022). Our primary cash requirements include working capital, capital expenditures, the funding of any declared cash dividends and principal and interest payments on indebtedness. At SeptemberJune 30, 2021,2022, the Company had commitments of approximately $5,933$8,769 for the acquisition of property, plant and equipment. At SeptemberJune 30, 2021,2022, we also had a commitment of approximately $3,754$2,874 in software license fees. We expect our primary sources of cash to be cash flows from operations, cash and cash equivalentstemporary investments on hand at SeptemberJune 30, 20212022 and borrowings under our credit facility as needed.needed, including the increase of our existing unsecured credit facility as described below under “Credit Facilities and Other Obligations – Credit Facility.” We expect these sources to be sufficient to satisfy our cash needs during the remainder of 2021 and for at least the next several years.year. However, our ability to satisfy our cash needs will substantially depend upon several factors, including our future operating performance, taking into account the COVID-19supply chain related
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economic and other factors discussed above and elsewhere in this Quarterly Report, as well as financial, business and other factors, many of which are beyond our control.
As of SeptemberJune 30, 20212022 and December 31, 2020, $25,0802021, $21,960 and $22,787,$28,983, respectively, of the Company’s cash and temporary investments were held by foreign subsidiaries and their holdings are generally based in the local currency.
Credit Facilities and Other Obligations
Credit Facility
The Company’s current loan agreement with First Horizon Bank, which governs its existing $50,000 unsecured revolving credit facility with a maturity date of May 31, 2027, contains customary representations and warranties, events of default, and financial, affirmative and negative covenants for loan agreements of this kind. The credit facility restricts the payment of cash dividends if the payment would cause the Company to be in violation of the minimum tangible net worth test or the leverage ratio test in the loan agreement, among various other customary covenants. The Company has been in compliance with these covenants throughout 20202021 and during the first nine monthshalf of 2021,2022, and it is anticipated that the Company will continue to be in compliance duringfor the remainder of 2021.foreseeable future.
In the absence of a default, all borrowings under the credit facility bear interest at the LIBOR Rate plus 1.00% or 1.25% per annum, depending on the leverage ratio. The Company pays a non-usage fee under the current loan agreement at a rate per annum equal to between 0.15% and 0.35% of the unused amount of the credit facility, which fee is paid quarterly.
At September 30, 2021 and December 31, 2020, theThe Company had $40,000 and $0, respectively, in outstanding borrowings under the credit facility.facility at June 30, 2022 and December 31, 2021. Subsequent to June 30, 2022, the Company drew an additional $5,000 for working capital needs and had $45,000 in outstanding borrowings at August 3, 2022.
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The Company recently received a commitment from First Horizon Bank to expand our existing loan agreement from $50,000 to $100,000 on substantially the same terms and with the same May 31, 2027 maturity date. This commitment is subject only to the completion of customary documentation amending the existing loan agreement.
Other Long-Term Obligations
Prior to applying a discount rate to our lease liabilities, at SeptemberJune 30, 20212022 and December 31, 2020,2021, we had approximately $1,319$1,100 and $1,575$1,328 in non-cancelable operating lease obligations, and $21$4 and $38$15 in non-cancelable finance lease obligations, respectively.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
In the normal course of our business, we are exposed to market risk from changes in interest rates and foreign currency exchange rates that could impact our results of operations and financial position.
Interest Rate Risk
Changes in interest rates affect the interest paid on indebtedness under the credit facility because outstanding amounts of indebtedness under the credit facility are subject to variable interest rates. Under the credit facility, the non-default rate of interest is equal to the LIBOR Market Index Rate plus 1.00% or 1.25% per annum, depending on the leverage ratio, for a rate of interest 1.08%of 2.79% at SeptemberJune 30, 2021.2022. A one percent change in the interest rate on our variable-rate debt would not have materially impacted our financial position, results of operations or cash flows as of and for the three or nine months ended SeptemberJune 30, 2021.2022.
Foreign Currency Exchange Rate Risk
We are subject to risk arising from changes in foreign currency exchange rates related to our international operations in Europe. We manage our exposure to our foreign currency exchange rate risk through our regular operating and financing activities. Additionally, from time to time, we enter into certain forward foreign currency exchange contracts.
Because we report in U.S. dollars on a consolidated basis, foreign currency exchange fluctuations could have a translation impact on our financial position.position and results of operations. During the three and ninesix months ended SeptemberJune 30, 2021,2022, we recognized a $1,501 decrease$2,305 unrealized loss and a $162 decrease,$2,280 unrealized loss, respectively, in our foreign currency translation equity adjustment account because of the fluctuations in valuation of the U.S. dollar against the Euro and British pound, compared topound. During the three and six months ended June 30, 2021, we recognized a $2,861 increase$579 unrealized gain and a $2,477 increase, for the respective prior year periods.$1,339 unrealized gain, respectively. These amounts were recognized as unrealized gains and losses in accumulated other comprehensive loss on the condensed consolidated balance sheets.
For the three months ended SeptemberJune 30, 20212022 and 2020,2021, the impacts of foreign currency exchange rate changes on our results of operations and cash flows were a net foreign currency exchange loss of $198,$311 and neta $42 gain, of $208, respectively. For the ninesix months ended September
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June 30, 20212022 and 2020,2021, the impacts of foreign currency exchange rate changes on our results of operations and cash flows were a net foreign currency exchange losslosses of $427$363 and a net gain of $397,$229, respectively.
ITEM 4. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
We carried out an evaluation, as of the end of the period covered by this report on Form 10-Q, under the supervision and with the participation of our management, including our co-ChiefChief Executive Officers (CEOs)Officer (CEO) and Chief Financial Officer (CFO), of the effectiveness of the design and operation of our disclosure controls and procedures as defined in Rules 13a-14(c) under the Securities Exchange Act of 1934. Based upon this evaluation, our CEOsCEO and CFO have concluded that the disclosure controls and procedures are effective to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act are recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms.
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Changes in Internal Control over Financial Reporting
There were no significant changes in our internal controls over financial reporting during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We are, from time to time, a party to litigation arising in the normal course of our business. Litigation is subject to various inherent uncertainties, and it is possible that some of such matters could be resolved unfavorably to us, which could result in substantial damages against us. We establish accruals for matters that are probable and reasonably estimable and maintain product liability and other insurance that management believes to be adequate. Management believes that any liability that may ultimately result from the resolution of any such matters in excess of available insurance coverage and accruals will not have a material adverse effect on our consolidated financial position or results of operations.
ITEM 1A. RISK FACTORS
There have been no material changes to the risk factors included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020, as supplemented by our Quarterly Report on Form 10-Q for the quarter ended June 30, 2021.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
None.On August 1, 2022, the Board of Directors of the Company adopted and approved, effective immediately, the Third Amended and Restated Bylaws of the Company (the “Bylaws”), which amended Section 1.8 (Voting) of the Bylaws to provide for plurality voting in director elections. The foregoing description is qualified in its entirety by the Bylaws, which are attached hereto as Exhibit 3.1 and incorporated herein by reference.
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ITEM 6. EXHIBITS
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| Commitment Letter from First Horizon Bank to the Registrant dated August 2, 2022* | | | | | | | | | |
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| Certification Pursuant to Rules 13a-14(a)/15d-14(a) by Chief Financial Officer* |
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101.INS | | Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document | | | | | | | | |
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101.SCH | | Inline XBRL Taxonomy Extension Schema Document | | | | | | | | |
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101.CAL | | Inline XBRL Taxonomy Extension Calculation Linkbase Document | | | | | | | | |
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101.DEF | | Inline XBRL Taxonomy Extension Definition Linkbase Document | | | | | | | | |
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101.LAB | | Inline XBRL Taxonomy Extension Label Linkbase Document | | | | | | | | |
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101.PRE | | Inline XBRL Taxonomy Extension Presentation Linkbase Document | | | | | | | | |
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104 | | The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended |
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* Filed herewith
± Exhibit is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subjected to the liabilities of that Section. This exhibit shall not be incorporated by reference into any given registration statement or other document pursuant to the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such a filing.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Miller Industries, Inc. has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| MILLER INDUSTRIES, INC. | |
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| By: | /s/ Deborah L. Whitmire |
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| Deborah L. Whitmire |
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| Executive Vice President, Chief Financial Officer and Treasurer |
Date: NovemberAugust 3, 2021
2022
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