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 April 30,October 29, 2021 was 11,410,728.
Index
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Condensed Consolidated Balance Sheets |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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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:
● | the overall impact of the COVID-19 pandemic on the Company’s revenues, results of operations and financial condition; |
● | the duration and severity of the COVID-19 pandemic, including actions that may be taken by government authorities and others to address or otherwise mitigate the impact of the COVID-19 pandemic; |
● |
our dependence upon outside suppliers for our raw materials, including aluminum, steel, |
● | our recent supply chain challenges and our ability to manage our inventory and our workforce to adapt to the increased complexity in our supply chain; |
● | changes in price and availability (including as a result of the increased demand due to improving economic conditions, the impact of the COVID-19 pandemic and the imposition of additional tariffs) of aluminum, steel, petroleum-related products and other purchased component |
● | delays in receiving supplies of such materials or parts, including as a result of the impact of the COVID-19 pandemic; |
● | problems hiring or retaining skilled labor, which could be exacerbated by potential governmental vaccine mandates; |
● | the cyclical nature of our industry and changes in consumer confidence; economic and market conditions, including the negative impacts of the COVID-19 pandemic on global economies and the Company’s customers, suppliers and employees; |
● | our customers’ access to capital and credit to fund purchases; |
● | operational challenges caused by increased sales volumes in recent years, prior to the COVID-19 pandemic; |
● | various political, economic and other uncertainties relating to our international operations, including restrictive taxation and foreign currency fluctuation; |
● | special risks from our sales to U.S. and other governmental entities through prime contractors; |
● | our ability to secure new government orders; |
● | changes in fuel and other transportation costs, insurance costs and weather conditions; |
● | changes in government 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, 2020, as supplemented in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2021, which discussion is incorporated herein by this reference. |
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)
| | | | | | |
| | March 31, |
| | | |
| | 2021 | | December 31, | ||
|
| (Unaudited) |
| 2020 | ||
ASSETS | | | | | | |
CURRENT ASSETS: | | | | | | |
Cash and temporary investments | | $ | 56,199 | | $ | 57,521 |
Accounts receivable, net of allowance for doubtful accounts of $1,348 and $1,295 at March 31, 2021 and December 31, 2020, respectively | |
| 167,694 | |
| 141,642 |
Inventories, net | |
| 84,940 | |
| 83,939 |
Prepaid expenses | |
| 6,552 | |
| 3,167 |
Total current assets | |
| 315,385 | |
| 286,269 |
NONCURRENT ASSETS: | | | | | | |
Property, plant and equipment, net | |
| 98,734 | |
| 98,620 |
Right-of-use assets - operating leases | | | 1,431 | | | 1,468 |
Goodwill | |
| 11,619 | |
| 11,619 |
Other assets | |
| 491 | |
| 434 |
TOTAL ASSETS | | $ | 427,660 | | $ | 398,410 |
| | | | | | |
LIABILITIES AND SHAREHOLDERS’ EQUITY | | | | | | |
CURRENT LIABILITIES: | | | | | | |
Accounts payable | | $ | 113,351 | | $ | 85,534 |
Accrued liabilities | |
| 24,166 | |
| 24,773 |
Current portion of operating lease obligation | | | 371 | | | 354 |
Current portion of finance lease obligation | | | 22 | | | 21 |
Total current liabilities | |
| 137,910 | |
| 110,682 |
NONCURRENT LIABILITIES | | | | | | |
Noncurrent portion of operating lease obligation | |
| 1,061 | |
| 1,116 |
Noncurrent portion of finance lease obligation | | | 9 | | | 15 |
Deferred income tax liabilities | |
| 4,143 | |
| 4,144 |
Total liabilities | |
| 143,123 | |
| 115,957 |
| | | | | | |
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 March 31, 2021 and December 31, 2020, respectively | |
| 114 | |
| 114 |
Additional paid-in capital | |
| 151,449 | |
| 151,249 |
Accumulated surplus | |
| 135,003 | |
| 133,879 |
Accumulated other comprehensive loss | |
| (2,029) | |
| (2,789) |
Total shareholders’ equity | |
| 284,537 | |
| 282,453 |
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | | $ | 427,660 | | $ | 398,410 |
| | | | | | |
| | September 30, |
| | | |
| | 2021 | | December 31, | ||
|
| (Unaudited) |
| 2020 | ||
ASSETS | | | | | | |
CURRENT ASSETS: | | | | | | |
Cash and temporary investments | | $ | 50,407 | | $ | 57,521 |
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 |
Inventories, net | |
| 108,838 | |
| 83,939 |
Prepaid expenses | |
| 6,378 | |
| 3,167 |
Total current assets | |
| 296,931 | |
| 286,269 |
NONCURRENT ASSETS: | | | | | | |
Property, plant and equipment, net | |
| 98,324 | |
| 98,620 |
Right-of-use assets - operating leases | | | 1,231 | | | 1,468 |
Goodwill | |
| 11,619 | |
| 11,619 |
Other assets | |
| 520 | |
| 434 |
TOTAL ASSETS | | $ | 408,625 | | $ | 398,410 |
| | | | | | |
LIABILITIES AND SHAREHOLDERS’ EQUITY | | | | | | |
CURRENT LIABILITIES: | | | | | | |
Accounts payable | | $ | 87,793 | | $ | 85,534 |
Accrued liabilities | |
| 25,553 | |
| 24,773 |
Current portion of operating lease obligation | | | 349 | | | 354 |
Current portion of finance lease obligation | | | 21 | | | 21 |
Total current liabilities | |
| 113,716 | |
| 110,682 |
NONCURRENT LIABILITIES: | | | | | | |
Noncurrent portion of operating lease obligation | |
| 881 | |
| 1,116 |
Noncurrent portion of finance lease obligation | | | — | | | 15 |
Deferred income tax liabilities | |
| 4,159 | |
| 4,144 |
Total liabilities | |
| 118,756 | |
| 115,957 |
| | | | | | |
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 |
Additional paid-in capital | |
| 151,449 | |
| 151,249 |
Accumulated surplus | |
| 141,257 | |
| 133,879 |
Accumulated other comprehensive loss | |
| (2,951) | |
| (2,789) |
Total shareholders’ equity | |
| 289,869 | |
| 282,453 |
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | | $ | 408,625 | | $ | 398,410 |
The accompanying notes are an integral part of these financial statements.
23
MILLER INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
(Unaudited)
| | | | | | |
| | Three Months Ended | ||||
| | March 31 | ||||
|
| 2021 |
| 2020 | ||
| | | | | | |
NET SALES | | $ | 169,912 | �� | $ | 176,054 |
COSTS OF OPERATIONS | |
| 154,081 | |
| 157,516 |
GROSS PROFIT | |
| 15,831 | |
| 18,538 |
| | | | | | |
OPERATING EXPENSES: | |
|
| |
|
|
Selling, general and administrative expenses | |
| 11,051 | |
| 10,974 |
| | | | | | |
NON-OPERATING (INCOME) EXPENSES: | |
|
| |
|
|
Interest expense, net | |
| 275 | |
| 359 |
Other expense, net | |
| 276 | |
| 91 |
Total expense, net | |
| 11,602 | |
| 11,424 |
| | | | | | |
INCOME BEFORE INCOME TAXES | |
| 4,229 | |
| 7,114 |
INCOME TAX PROVISION | |
| 1,051 | |
| 1,683 |
NET INCOME | | $ | 3,178 | | $ | 5,431 |
| | | | | | |
BASIC INCOME PER COMMON SHARE | | $ | 0.28 | | $ | 0.48 |
| | | | | | |
CASH DIVIDENDS DECLARED PER COMMON SHARE | | $ | 0.18 | | $ | 0.18 |
| | | | | | |
WEIGHTED AVERAGE SHARES OUTSTANDING: | |
|
| |
|
|
Basic | |
| 11,410 | |
| 11,405 |
| | | | | | | | | | | | |
| | 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 |
The accompanying notes are an integral part of these financial statements.
34
MILLER INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
(Unaudited)
| | | | | | |
| | Three Months Ended | ||||
| | March 31 | ||||
|
| 2021 |
| 2020 | ||
NET INCOME | | $ | 3,178 | | $ | 5,431 |
| | | | | | |
OTHER COMPREHENSIVE LOSS: | |
|
| |
|
|
Foreign currency translation adjustment | |
| 760 | |
| (72) |
Total other comprehensive loss | |
| 760 | |
| (72) |
| | | | | | |
COMPREHENSIVE INCOME | | $ | 3,938 | | $ | 5,359 |
| | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended | ||||||||
| | September 30 | | September 30 | ||||||||
|
| 2021 |
| 2020 |
| 2021 |
| 2020 | ||||
NET INCOME | | $ | 3,846 | | $ | 6,553 | | $ | 13,540 | | $ | 17,810 |
| | | | | | | | | | | | |
OTHER COMPREHENSIVE INCOME (LOSS): | |
|
| |
|
| |
|
| |
|
|
Foreign currency translation adjustment | |
| (1,501) | |
| 2,861 | |
| (162) | |
| 2,477 |
Total other comprehensive income (loss) | |
| (1,501) | |
| 2,861 | |
| (162) | |
| 2,477 |
| | | | | | | | | | | | |
COMPREHENSIVE INCOME | | $ | 2,345 | | $ | 9,414 | | $ | 13,378 | | $ | 20,287 |
The accompanying notes are an integral part of these financial statements.
45
MILLER INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(In thousands, except 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 |
| | | | | | | | | | | | | | | |
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 |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | |
| |
| | |
| 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 |
| | | | | | | | | | | | | | | |
The accompanying notes are an integral part of these financial statements.
The accompanying notes are an integral part of these financial statements.
57
MILLER INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
| | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended | ||||||||
| | March 31 | | September 30 | ||||||||
|
| 2021 |
| 2020 |
| 2021 |
| 2020 | ||||
OPERATING ACTIVITIES: |
| |
|
| |
|
| |
|
| |
|
Net income | | $ | 3,178 | | $ | 5,431 | | $ | 13,540 | | $ | 17,810 |
Adjustments to reconcile net income to net cash flows from operating activities: | |
|
| |
|
| |
|
| |
|
|
Depreciation and amortization | |
| 2,440 | |
| 2,253 | |
| 8,124 | |
| 6,915 |
Loss on disposal of property, plant and equipment | |
| 5 | |
| 7 | |
| 7 | |
| 4 |
Provision for doubtful accounts | |
| 51 | |
| 50 | |
| 118 | |
| 148 |
Issuance of non-employee director shares | |
| 200 | |
| 194 | |
| 200 | |
| 194 |
Deferred tax provision | |
| (3) | |
| (30) | |
| 9 | |
| 399 |
Changes in operating assets and liabilities: | |
|
| |
|
| |
|
| |
|
|
Accounts receivable | |
| (25,812) | |
| (342) | |
| 10,312 | |
| 19,188 |
Inventories | |
| (568) | |
| (4,724) | |
| (24,990) | |
| 1,836 |
Prepaid expenses | |
| (3,377) | |
| (2,925) | |
| (3,209) | |
| 484 |
Other assets | |
| 37 | |
| 227 | |
| 190 | |
| 352 |
Accounts payable | |
| 27,557 | |
| 1,486 | |
| 2,204 | |
| (3,355) |
Accrued liabilities | |
| (861) | |
| (3,479) | |
| 531 | |
| 154 |
Net cash flows from operating activities | |
| 2,847 | |
| (1,852) | |
| 7,036 | |
| 44,129 |
INVESTING ACTIVITIES: | |
|
| |
|
| |
|
| |
|
|
Purchases of property, plant and equipment | |
| (2,489) | |
| (3,526) | |
| (7,857) | |
| (12,691) |
Proceeds from sale of property, plant and equipment | |
| — | |
| 10 | |
| 6 | |
| 43 |
Net cash flows from investing activities | |
| (2,489) | |
| (3,516) | |
| (7,851) | |
| (12,648) |
FINANCING ACTIVITIES: | |
|
| |
|
| |
|
| |
|
|
Net proceeds under credit facility | |
| — | |
| 25,000 | ||||||
Net payments under credit facility | |
| — | |
| (4,998) | ||||||
Payments of cash dividends | |
| (2,054) | |
| (2,053) | |
| (6,162) | | | (6,159) |
Net payments on other long-term obligations | |
| — | |
| (92) | |
| — | |
| (297) |
Finance lease obligation payments | | | (5) | | | (5) | | | (16) | | | (16) |
Net cash flows from financing activities | |
| (2,059) | |
| 22,850 | |
| (6,178) | |
| (11,470) |
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND TEMPORARY INVESTMENTS | |
| 379 | |
| (460) | |
| (121) | |
| 1,429 |
NET CHANGE IN CASH AND TEMPORARY INVESTMENTS | |
| (1,322) | |
| 17,022 | |
| (7,114) | |
| 21,440 |
CASH AND TEMPORARY INVESTMENTS, beginning of period | |
| 57,521 | |
| 26,072 | |
| 57,521 | |
| 26,072 |
CASH AND TEMPORARY INVESTMENTS, end of period | | $ | 56,199 | | $ | 43,094 | | $ | 50,407 | | $ | 47,512 |
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | |
|
| |
|
| |
|
| |
|
|
Cash payments for interest | | $ | 280 | | $ | 594 | | $ | 1,104 | | $ | 1,659 |
Cash payments for income taxes, net of refunds | | $ | 604 | | $ | 739 | | $ | 5,153 | | $ | 3,925 |
The accompanying notes are an integral part of these financial statements.
68
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. 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 Adopted Standards
During the first quarter of 2021, the Company adopted Accounting Standards Updated (“ASU”) 2019-12 Income Taxes (Topic 740), which among other things requires the Company to recognize franchise tax that is partially based on income as an income-based tax. The Company applied the amendments in the update on a modified retrospective basis, which did not have a material impact on the Company’s consolidated financial statements or related disclosures.
3. BASIC INCOME PER SHARE
The Company has a simple capital structure consisting of common stock and preferred stock, with only shares of common stock outstanding. The Company had 0 stock options or any other dilutive instruments outstanding forduring the three and nine months ended March 31,September 30, 2021 or 2020. Basic income per share is computed by dividing net income by the weighted average number of shares of common stock outstanding during the period.
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 Three Months Ended |
| For the Nine Months Ended | ||||||||||||
| | March 31, | | September 30, | | September 30, | ||||||||||||
|
| 2021 |
| 2020 |
| 2021 |
| 2020 |
| 2021 |
| 2020 | ||||||
Net Sales: |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
North America | | $ | 146,687 | | $ | 143,856 | | $ | 142,338 | | $ | 149,265 | | $ | 450,908 | | $ | 400,581 |
Foreign | |
| 23,225 | |
| 32,198 | |
| 22,377 | |
| 19,101 | |
| 64,877 | |
| 72,368 |
| | $ | 169,912 | | $ | 176,054 | | $ | 164,715 | | $ | 168,366 | | $ | 515,785 | | $ | 472,949 |
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,
79
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 March 31,September 30, 2021 and December 31, 2020, contract liability balances were each $272, and are included in accrued liabilities on the condensed consolidated balance sheets. NaN revenue related to contract liability balances was recognized during the three or nine months ended March 31,September 30, 2021 or during the three months ended March 31,September 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. The Company did 0t have any contract assets at March 31,September 30, 2021 or December 31, 2020. Terms on accounts receivable vary and are based on specific terms agreed upon with each customer. Write-offs of accounts receivable were not material during the three and nine months ended March 31,September 30, 2021 and 2020.
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. No one customer made up greater than 10% of total company sales.sales during the three or six months ended September 30, 2021 and 2020. There were also no customers with a trade account receivable greater than 10% of total accounts receivable at March 31,September 30, 2021 or December 31, 2020.
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-out 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 March 31,September 30, 2021 and December 31, 2020 consisted of the following:
| | | | | | | | | | | | |
|
| 2021 |
| 2020 |
| 2021 |
| 2020 | ||||
Chassis | | $ | 5,767 | | $ | 6,859 | | $ | 6,493 | | $ | 6,859 |
Raw materials | |
| 38,298 | |
| 36,161 | |
| 51,897 | |
| 36,161 |
Work in process | |
| 27,167 | |
| 16,282 | |
| 33,932 | |
| 16,282 |
Finished goods | |
| 13,708 | |
| 24,637 | |
| 16,516 | |
| 24,637 |
| | $ | 84,940 | | $ | 83,939 | | $ | 108,838 | | $ | 83,939 |
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 2020 and during the first quarternine months of 2021, and it is anticipated that the Company will continue to be in compliance during the remainder of 2021.
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.
8
At March 31,September 30, 2021 and December 31, 2020, 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 March 31,September 30, 2021, the Company had cash and temporary investments of $56,199.$50,407.
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. 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 March 31,September 30, 2021 and December 31, 2020.
| | | | | | | | | | | | |
|
| 2021 |
| 2020 |
| 2021 |
| 2020 | ||||
Finance lease right-of-use assets | | $ | 78 | | $ | 78 | | $ | 78 | | $ | 78 |
Accumulated amortization | |
| (48) | |
| (42) | |
| (57) | |
| (42) |
Finance lease right-of-use assets, net | | $ | 30 | | $ | 36 | | $ | 21 | | $ | 36 |
A maturity analysis of the undiscounted cash flows of operating and finance lease obligations is as follows:
| | | | | | |
| | Operating Lease Obligation | | Finance Lease Obligation | ||
Remaining lease payments to be paid during the year ended December 31, | | | | | | |
2021 |
| $ | 315 | | $ | 17 |
2022 | |
| 360 | |
| 15 |
2023 | |
| 285 | |
| 0 |
2024 | |
| 229 | |
| 0 |
2025 | |
| 217 | |
| 0 |
Thereafter | |
| 79 | |
| 0 |
Total lease payments | | | 1,485 | | | 32 |
Less Imputed Interest | | | (53) | | | (1) |
Lease obligation at March 31, 2021 | | $ | 1,432 | | $ | 31 |
| | | | | | |
| | Operating Lease Obligation | | Finance Lease Obligation | ||
Remaining lease payments to be paid during the year ended December 31, | | | | | | |
2021 |
| $ | 100 | | $ | 6 |
2022 | |
| 377 | |
| 15 |
2023 | |
| 295 | |
| 0 |
2024 | |
| 239 | |
| 0 |
2025 | |
| 226 | |
| 0 |
Thereafter | |
| 82 | |
| 0 |
Total lease payments | | | 1,319 | | | 21 |
Less Imputed Interest | | | (89) | | | 0 |
Lease obligation at September 30, 2021 | | $ | 1,230 | | $ | 21 |
911
The lease cost and certain other information during the three and nine months ended March 31,September 30, 2021 and 2020 were as follows:
| | | | | | | | | | | | | ||||||
| | Three Months Ended | | Nine Months Ended | ||||||||||||||
| | | | | | | | September 30 | | September 30 | ||||||||
|
| 2021 |
| 2020 |
| 2021 |
| 2020 |
| 2021 |
| 2020 | ||||||
Lease Cost | | | | | | | | | | | | | | | | | | |
Finance lease cost: | | | | | | | | | | | | | | | | | | |
Amortization of right-of-use assets | | $ | 5 | | $ | 5 | | $ | 5 | | $ | 6 | | $ | 16 | | $ | 16 |
Interest on lease obligation | |
| 1 | |
| 1 | |
| 0 | |
| 0 | |
| 1 | |
| 1 |
Total finance lease cost | | | 6 | | | 6 | | | 5 | | | 6 | | | 17 | | | 17 |
Total operating lease cost | |
| 106 | |
| 200 | |
| 107 | |
| 103 | |
| 320 | |
| 304 |
Short-term lease cost | |
| 127 | |
| 252 | |
| 116 | |
| 118 | |
| 362 | |
| 372 |
Total lease cost | | $ | 239 | | $ | 458 | | $ | 228 | | $ | 227 | | $ | 699 | | $ | 693 |
| | | | | | | | | | | | | | | | | | |
Other Information | | | | | | | | | | | | | | | | | | |
Cash paid for amounts included in the measurement of lease obligation: | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
Operating cash flows from operating leases | | $ | 106 | | $ | 200 | | $ | 107 | | $ | 102 | | $ | 320 | | $ | 301 |
Financing cash flows from finance leases | |
| 5 | |
| 5 | |
| 5 | |
| 6 | |
| 16 | |
| 16 |
| | | | | | | | | | | | | | | | | | |
Right-of-use assets obtained in exchange for new finance lease obligations | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 |
Right-of-use assets obtained in exchange for new operating lease obligations | |
| 0 | |
| 0 | |
| 6 | |
| 20 | |
| 6 | |
| 46 |
The weighted average remaining lease term for operating leases and finance leases at March 31,September 30, 2021 was 4.44.0 years and 1.70.9 years, respectively. The weighted average remaining lease term for operating leases and finance leases at December 31, 2020 was 4.6 years and 1.9 years, respectively. The weighted average discount rate for operating leases and finance leases at March 31,September 30, 2021 was 3.3% and 4.0%, respectively. The weighted average discount rate for operating leases and finance leases at December 31, 2020 was 3.2% 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 March 31,September 30, 2021 and 2020 of $56$59 and $57,$55, respectively, and related lease costs during the nine months ended September 30, 2021 and 2020 of $172 and $157, respectively. The Company’s French subsidiary leased a fleet of vehicles from a related party with related lease costs of $28$27 and $30$28 during the three months ended March 31,September 30, 2021 and 2020, respectively, and related lease costs during the nine months ended September 30, 2021 and 2020 of $83 and $84, respectively.
Other Commitments
At March 31,September 30, 2021 the Company had commitments of approximately $5,190 for construction and acquisition of property, plant and equipment, including a commitment of approximately $791 for the purpose of upgrading fabrication equipment at our Greeneville, Tennessee location. At December 30, 2020, the Company had commitments of approximately $5,933 and $7,068, 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 doneimplemented over the next twothree years. Related to this project, at March 31,September 30, 2021 and December 31, 2020, the Company had commitments of approximately $5,247$3,754 and $5,266, 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 company 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 $43,836$46,183 at March 31,September 30, 2021, and $56,822 at December 31, 2020. 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 liability under these arrangements and concluded that the liability associated with these potential repurchase obligations was not probable and thus not material at March 31,September 30, 2021 or December 31, 2020.
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
12
product liability and other insurance that management believes to be adequate. Management believes that any liability that may ultimately
10
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 March 31,September 30, 2021, the Company had 0 federal net operating loss carryforwards and 0 significant state net operating loss carryforwards.
9. SUBSEQUENT EVENTS
Dividends
On May 3,November 1, 2021, the Company’s Board of Directors declared a quarterly cash dividend of $0.18 per share. The dividend is payable June 14,December 13, 2021 to shareholders of record as of June 7,December 6, 2021.
1113
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®, 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®, Vulcan®, Challenger®, Holmes®, Champion®, Chevron™, Eagle®, 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 through 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 raw materials (including aluminum, steel and petroleum-related products), purchased component parts and component parts.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 to substantially improve our administrative efficiency and customer service levels. 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 2016 to 2020, as we have invested over $97,000 on property, plant and equipment over this five-year period, including approximately $25,000 on our Pennsylvania consolidation and expansion project and approximately $29,000 on building andmost recent fabrication equipment improvementsupgrades at our twoGreeneville, Tennessee locations.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 have 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.
1214
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. Prices in raw materials can be affected by tariffs and quantitative restrictions, such as those that were imposed by the U.S. government in 2018. 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 of the COVID-19 virus during 2020 has caused an economic downturn on a global scale, as well as significant volatility in the financial markets. During the month 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, and have designated periods of non-production time for sanitation efforts, and 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 and the first quarter of 2021 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. However, during 2020 wepandemic, but repaid the balance in full later in 2020, as our cash position was stronger than anticipated. At March 31,September 30, 2021, we had cash and temporary investments of $56,199. Although our cash position is strong, we continue to consider other steps that could be implemented to conserve liquidity in these uncertain times.$50,407.
While duringDuring 2020 we experienced nodid not experience material disruptions in our supply of parts, components and materials due to the COVID-19 pandemic, but we haddid 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. During the second quarter of 2020, most of these facilities were operating at a reduced capacity, but returned to operating at levels sufficient to meet our requirements by the end of the third quarter of 2020. We also experienced reductions in orders for our products sinceat the beginning of the pandemic, although demand has steadily improved since the second quarter of 2020.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 now reopened,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. This decrease in our production levels, coupled with our health and safety-related adjustments to operations, materially negatively impacted our revenues during 2020, but also served to strengthen our current backlog of orders. Our revenues have recovered substantially from the second quarter of 2020 levels.
As the economy continues to improve in 2021, significant supply chain challenges such as shortages and delivery delays in semiconductors and other component parts and price increases on many materials, including record high steel prices, are impacting the operations of many companies on a global scale. SuchWe continued to experience these critical supply chain disruptions during the firstthird quarter of 2021, which impacted our ability to obtain certainon 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.suppliers, and also resulted in substantial price increases for many 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. These supply chain and workforce headwinds generally worsened over the course of the third quarter. We continue to monitor these disruptions and attempt to mitigate the risk associated with them, such as throughincluding by implementing several price increases and surcharges, and by relying more heavily on our recent purchases of certain raw materials and component partsin-house fabrication capabilities, which were significantly expanded in excess of normal required levels.2020. However, the impact of possiblethese disruptions remains largely out of our control and the risk of an unfavorablewe currently anticipate that these factors will continue to have a material adverse impact on production at any of our facilities will likely continue throughout 2021.during the remainder of 2021 and into the first half of 2022.
The impact 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 extenteffect of the pandemic’s effectpandemic 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 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. We are continuingactivity, the ability of the economy to monitor orders fromresolve supply chain disruptions and the timing of such efforts, and the success and timing of the general economy and our customers for COVID-19 pandemic related changes.suppliers in resolving supply chain disruptions. While we
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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.
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 threenine months of 2021.
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.
Results of Operations – Three Months Ended March 31,September 30, 2021 Compared to Three Months Ended March 31,September 30, 2020
During the first half of the first quarter of 2021, we experienced significant delays in deliveries to our distributors caused by changes we made to our legacy business processes during the implementation of our new enterprise software system as well as supply chain and weather related disruptions. The business process changes during the first half of the quarter had a significant impact on deliveries, particularly of higher margin products. Continued implementation of the software system is not expected to have this level of impact on our manufacturing processes, as they were due primarily to the initial data conversion and deployment of a newly created information framework. This framework is the foundation of our migration to a multi-tenant cloud environment which includes global ERP, human capital management, data analytics and artificial intelligence. As first mentioned in our third quarter 2019 Form 10-Q, this migration and upgrade will be done in three phases over three years and this implementation marks the successful completion of phase one of this long-term investment in our future. We expect to substantially improve our administrative efficiency and customer service levels as the full capabilities of our new software system are rolled out.
The supply chain disruptions we experienced during the first half of the first quarter of 2021 were due primarily to continued impacts from COVID-19. In addition, extreme weather conditions across parts of the U.S and tightening availability of freight trucks caused delays in delivering products to our facilities as well as to our customers. These factors along with our new software system implementation caused substantial downward pressures on our revenues, margins and earnings during the first half of the first quarter of 2021. The business process improvements critical to developing our new software system are now operational, and our delivery schedule had returned to meeting current customer demand by the end of the first quarter. Based on our strong backlog and the current status of our process improvements, we believe we have the opportunity to substantially improve our operating results in 2021 beyond the first quarter.
Net sales for the three months ended March 31,September 30, 2021 decreased 3.5%2.2% to $169,912$164,715 from $176,054$168,366 for the comparable period in 2020, which was materially negatively impacted by the COVID-19 pandemic.2020. The decrease in our revenue stream was largely attributable toreflects the impacts from the ERP software implementation andongoing challenges of navigating certain supply chain disruptions resulting from inclement weather and COVID-19 related restrictions described above.bottlenecks during the third quarter of 2021. Net domestic sales increaseddecreased during the three-month period ended March 31,September 30, 2021 to $146,687$142,338 from $143,856$149,265 for the comparable period in 2020, while net foreign sales decreasedincreased to $23,225$22,377 from $32,198$19,101 during the same three-month period, primarily attributable to significant decreases in export sales.period.
Costs of operations for the three months ended March 31,September 30, 2021 decreased 2.2%2.4% to $154,081$146,883 from $157,516$150,523 for the comparable period in 2020. Costs of operations increaseddecreased as a percentage of sales to 90.7%89.2%, compared to 89.5%89.4% for the comparable period in 2020, which reflects margin differencesprimarily due to changes in product mix.
Selling, general and administrative expenses for the three months ended March 31,September 30, 2021 increased to $11,051$11,983 from $10,974$9,231 for the three months ended March 31,comparable period in 2020 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. As a percentage of sales, selling, general and administrative expenses for the three months ended March 31,September 30, 2021 increased to 6.5%7.3% from 6.2%5.5% in the comparable period in 2020, due primarily to reduced fixed cost absorption.as a result of the decrease in revenue and these increases in personnel and travel related expenses.
Interest expense, net decreasedincreased to $275$286 from $359$230 for the three months ended March 31,September 30, 2021 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 interest on the credit facility.payments.
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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 March 31,September 30, 2021 the Company experienced a net foreign currency exchange loss of $271,$198, compared to a net lossgain of $84$208 for the three months ended March 31,September 30, 2020.
The provision for income taxes for the three months ended March 31,September 30, 2021 and 2020 reflects a combined effective U.S. federal, state and foreign tax rate of 24.9%28.2% and 23.7%, 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 – Nine Months Ended September 30, 2021 Compared to Nine Months Ended September 30, 2020
Net sales for the nine months ended September 30, 2021 increased 9.1% to $515,785 from $472,949 for the comparable period in 2020, which was materially negatively impacted by the COVID-19 pandemic. The increase in revenue reflects 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 by supply chain disruptions and bottlenecks during the third quarter of 2021, thus tempering long-term sales recovery. Net domestic sales increased during the nine-month period ended September 30, 2021 to $450,908 from $400,581 for the comparable period in 2020, while net foreign sales decreased to $64,877 from $72,368 during the same nine-month period, primarily attributable to significant decreases in export sales during the first nine months of 2021.
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Costs of operations for the nine months ended September 30, 2021 increased 10.2% to $461,532 from $418,841 for the comparable period in 2020. Costs of operations increased as a percentage of sales to 89.5%, compared to 88.6% for the comparable period in 2020, which reflects reduced sales resulting from supply chain disruptions and increases in raw materials prices caused by supply chain disruptions and escalating inflation.
Selling, general and administrative expenses for the nine months ended September 30, 2021 increased to $35,053 from $30,272 for the comparable period in 2020 due to increases in software fees, personnel related costs, and a normalization in spending in comparison to the cutbacks from the prior year comparable period. As a percentage of sales, selling, general and administrative expenses for the nine months ended September 30, 2021 increased to 6.8% from 6.4% in the comparable period in 2020.
Interest expense, net decreased to $901 from $1,018 for the nine months ended September 30, 2021 as compared to the prior year period. Decreases in interest expense, net were primarily due to decreases in floor plan interest payments and decreases in interest on the 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 nine months ended September 30, 2021 the Company experienced a net foreign currency exchange loss of $427, compared to a net gain of $397 for the nine months ended September 30, 2020.
The provision for income taxes for the nine months ended September 30, 2021 and 2020 reflects a combined effective U.S. federal, state and foreign tax rate of 24.2% and 23.3%, 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.
Liquidity and Capital Resources
Cash provided by operating activities was $2,847$7,036 for the threenine months ended March 31,September 30, 2021, compared to cash used inprovided by operating activities of $1,852$44,129 in the comparable period in 2020. 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 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 cash from operating activities during the second and third quarters of 2020, as the decrease in production from the impacts of the COVID-19 pandemic during the second and third quarters 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.
Cash used in investing activities was $2,489$7,851 for the threenine months ended March 31,September 30, 2021 compared to $3,516$12,648 for the comparable period in 2020. The cash used in investing activities for the threenine months ended March 31,September 30, 2021 was for purchases of property, plant and equipment.
Cash used in financing activities was $2,059$6,178 for the threenine months ended March 31,September 30, 2021, compared to cash provided byused in financing activities of $22,850$11,470 for the comparable period in 2020. The cash used in financing activities for the threenine months ended March 31,September 30, 2021 resulted from the payment of cash dividends of $2,054$6,162 and an immaterial amount of payments on finance lease obligations. The cash provided byused in financing activities for the threenine months ended March 31,September 30, 2020 resulted primarily from net borrowings on the credit facility of $25,000, partially offset by the payment of cash dividends of $2,053,$6,159, payments on our French subsidiary’s loan of $92,long-term obligations of $5,295, and an immaterial amount of payments on finance lease obligations.
As of March 31,September 30, 2021, we had cash and cash equivalents of $56,199.$50,407. Our primary cash requirements include working capital, capital expenditures, the funding of any declared cash dividends and principal and interest payments on indebtedness. At March 31,September 30, 2021, the Company had commitments of approximately $5,190$5,933 for the acquisition of property, plant and equipment, including a commitment of approximately $791 for the purpose of upgrading fabrication equipment at our Greeneville, Tennessee location.equipment. At March 31,September 30, 2021, we also had a commitment of approximately $5,247$3,754 in software license fees. We expect our primary sources of cash to be cash flows from operations, cash and cash equivalents on hand at March 31,September 30, 2021 and borrowings under our credit facility as needed. We expect these sources to be sufficient to satisfy our cash needs during the remainder of 2021 and for the next several years. However, our ability to satisfy our cash needs will substantially depend upon several factors, including our future operating performance, taking into account the COVID-19 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 March 31,September 30, 2021 and December 31, 2020, $24,415$25,080 and $22,787, 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 2020 and during the first quarternine months of 2021, and it is anticipated that the Company will continue to be in compliance during the remainder of 2021.
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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 March 31,September 30, 2021 and December 31, 2020, the Company had $0 in outstanding borrowings under the credit facility.
Other Long-Term Obligations
Prior to applying a discount rate to our lease liabilities, at March 31,September 30, 2021 and December 31, 2020, we had approximately $1,485$1,319 and $1,575 in non-cancelable operating lease obligations, and $32$21 and $38 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 1.11%1.08% at March 31,September 30, 2021. 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 for the three or nine months ended March 31,September 30, 2021.
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. During the three and nine months ended March 31,September 30, 2021, we recognized a $760 increase$1,501 decrease and a $162 decrease, respectively, in our foreign currency translation adjustment account because of the fluctuations in valuation of the U.S. dollar against the Euro and British pound, compared to a $72 decrease$2,861 increase and a $2,477 increase, for the respective prior year period.periods. 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 March 31,September 30, 2021 and 2020, the impacts of foreign currency exchange rate changes on our results of operations and cash flows were a net foreign currency exchange loss of $271$198, and $84,net gain of $208, respectively. For the nine months ended September
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30, 2021 and 2020, the impacts of foreign currency exchange rate changes on our results of operations and cash flows were a net foreign currency exchange loss of $427 and a net gain of $397, 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-Chief Executive Officers (CEOs) 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 CEOs 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.
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.
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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
The Company is supplementingThere have been no material changes to the risk factors previously disclosed under Item 1A, “Risk Factors,” of the Company’sincluded in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020, withas supplemented by our Quarterly Report on Form 10-Q for the risk factor set forth below.
Our dependence upon outside suppliers for our raw materials, including aluminum, steel, petroleum-related products and other purchased component parts, leaves us subject to changes in price and availability (including as a result of increased demand due to improving economic conditions, the impact of the COVID-19 pandemic and the imposition of additional tariffs) and delays in receiving supplies of such materials or parts.
We are dependent upon outside suppliers for our raw material needs and other purchased component parts, and events beyond our control could have an adverse effect on the cost or availability of raw materials and purchased component parts. Steel, aluminum, fuel and other commodity prices have from time to time experienced high volatility depending on market conditions and global demand. For example, steel prices increased considerably during the first quarter of 2021 as a result of the improving global economy and remain at record highs. In addition, government actions related to tariffs on imports and trade policies have previously impacted, and have the potential to further impact, pricing of raw materials, such as steel and aluminum. For example, in 2018 the United States government imposed import tariffs and restrictions on imports for steel products and aluminum products. The Company uses a substantial amount of imported steel and aluminum in its products. Price increases or changes in payment terms from our suppliers of raw materials or purchased component parts could impact our ability to secure necessary raw materials or purchased component parts, or to secure such materials and parts at favorable prices.
In addition, our third party suppliers’ ability to supply us with truck chassis and component parts is limited by their available capacity to manufacture the component parts we require. As the impact of the COVID-19 pandemic declines, suppliers ramping up from reduced operating levels have experienced supply chain challenges and have been at times, and may in the future be, unable to meet our requirements for purchased component parts. For example, during the first quarter of 2021, supply chain disruptions impacted our ability to obtain certain raw materials and purchased component parts that are necessary to our production processes, including our ability to obtain chassis from third party suppliers. Demand for our products could also be negatively affected by supply delays of truck chassis and other purchased component parts used in our products. In the past, we have also experienced supply delays and limitations for component parts from time to time as a result of the continuing COVID-19 pandemic and, prior to the COVID-19 pandemic, as our production levels had substantially increased over the last several years prior to the start of the pandemic. If delays and other limitations for raw materials and purchased component parts continue, recur or worsen, they may have a material adverse effect on our production at any of our facilities, and customers may reduce their purchase levels with us and/or seek alternative solutions to meet their demand. Shortages, price increases or delays in shipments of our raw materials and purchased component parts could have a material adverse effect on our financial performance, competitive position and reputation.
To partially offset price increases for raw materials and purchased component parts, we have, from time to time, implemented general price increases and cost surcharges. While we have in the past attempted to pass these increased costs on to our customers, there can be no assurance that we will be able to continue to do so in the future. Any further price increases for these or any other materials or purchased component parts that we use would require a long lead time to implement while the higher material costs would be felt much sooner. If we continue to experience increased prices or shortages for key materials that are essential to our manufacturing operations, such as steel and purchased component parts, there is a substantial risk that the Company’s financial performance and competitive position could be materially adversely impacted.ended June 30, 2021.
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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
On May 3, 2021, the Compensation Committee (the “Compensation Committee”) of the Board of Directors of the Company adopted a new cash bonus program for four executive officers of the Company, including (i) Deborah L. Whitmire, the Company’s Executive Vice President, Chief Financial Officer and Treasurer, and (ii) Josias W. Reyneke, the Company’s Vice President and Chief Information Officer. This new cash bonus program provides that each of the four participating officers shall be entitled to share equally in an annual cash bonus pool by receiving a cash award pursuant to the following formula if the Company’s income before income taxes (excluding any currency adjustments) (“Pretax Income”) exceeds $10 million for the most recently completed fiscal year:
This new cash bonus program is effective for the annual cash bonus to be determined based on the Company’s 2021 financial results. The Company retains the right to modify, amend or terminate such cash bonus program at any time.
In addition, on May 3, 2021, the Compensation Committee approved an annual base salary increase for (i) each of Jeffrey I. Badgley, the Company’s Co-Chief Executive Officer, and William G. Miller II, the Company’s President and Co-Chief Executive Officer, from $519,046 to $569,046, (ii) Ms. Whitmire from $284,109 to $309,109, (iii) Frank Madonia, the Company’s Executive Vice President, Secretary and General Counsel, from $284,109 to $309,109 and (iv) Mr. Reyneke, from $218,545 to $243,545, each effective as of January 1, 2021.None.
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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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* 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.
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| Executive Vice President, Chief Financial Officer and Treasurer |
Date: May 5,November 3, 2021
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