Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended

September 30, 20212022

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________________________________________ to ________________________________________

Commission file number

001-14124

MILLER INDUSTRIES, INC.

(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 (§232.405 of this chapter) 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 October 29, 202131, 2022 was 11,410,728.11,416,716.

Table of Contents

GraphicGraphic

Index

Page Number

PART I

FINANCIAL INFORMATION

Item 1.

Financial Statements.

Condensed Consolidated Balance Sheets as of September 30, 20212022 and December 31, 20202021

3

Condensed Consolidated Statements of Income for the Three and Nine Months Ended September 30, 20212022 and 20202021

4

Condensed Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 20212022 and 20202021

5

Condensed Consolidated Statements of Shareholders’ Equity for the Three and Nine Months Ended September 30, 20212022 and 20202021

6

Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 20212022 and 20202021

8

Notes to Condensed Consolidated Financial Statements

9

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

1415

Item 3.

Quantitative and Qualitative Disclosures About Market Risk.

1819

Item 4.

Controls and Procedures.

19

PART II

OTHER INFORMATION

Item 1.

Legal Proceedings.

1920

Item 1A.

Risk Factors.

1920

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds.

1920

Item 3.

Defaults Upon Senior Securities.

1920

Item 4.

Mine Safety Disclosures.

1920

Item 5.

Other Information.

1920

Item 6.

Exhibits.

2021

SIGNATURES

2223

Table of Contents

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”“anticipate,” “forecast,” “target” 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 overallwar in Ukraine, as further discussed below, the impact of the COVID-19 pandemic on the Company’s revenues, results of operations and financial condition;related variants and supply chain difficulties;
economic and market conditions, including the durationnegative impacts on the Company’s customers, suppliers and severity ofemployees from increasing inflationary pressures, economic and geopolitical uncertainties (including the COVID-19 pandemic, including actions that may be taken by government authoritieswar in Ukraine) and others to address or otherwise mitigate the impactcontinuing and any potential future negative impacts of the COVID-19 pandemic;
our dependence upon outside suppliers for ourpurchased component parts, chassis and raw materials, including aluminum, steel, and petroleum-related products and other purchased component parts, as well as truck chassis;products;
our recent supply chain challengesincreased employee turnover rates and ourthe ability to manage our inventoryattract 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 parts, as well as truck chassis;
delays in receiving supplies of such materials or parts, including as a result of the impact of the COVID-19 pandemic;
problems hiring or retainingretain skilled labor which could be exacerbated by potential governmental vaccine mandates;to manufacture our products;
the cyclical nature of our industry and changes in consumer confidence; economic and market conditions, including thepotential negative impacts of various actions taken by the COVID-19 pandemicfederal government in response to economic volatility and inflationary pressures, including the impact on global economies and the Company’s customers, suppliers and employees;
our customers’ and end users’ access to capital and credit to fund purchases;
operational challenges caused by increased sales volumes in recent years, prioras the economy and markets recover from the conditions related to the COVID-19 pandemic;
various political, economicfuture impacts resulting from the war in Ukraine, which include or could include (among other effects) disruption in global commodity and other uncertainties relating tomarkets, increased prices for energy, supply shortages and supplier financial risk;
the cyclical nature of our international operations, including restrictive taxationindustry and foreign currency fluctuation;changes in consumer confidence;
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, 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;

Table of Contents

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;

Table of Contents

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 areGiven these uncertainties, you should not exclusive. We do not undertakeplace undue reliance on these forward-looking statements. You should read this report and the documents that we reference in this report and have filed as exhibits to the report completely and with the understanding that our actual future results may be materially different from what we expect. Also, forward-looking statements represent our management’s beliefs and assumptions only as of the date of this report. Except as required by law, we assume no obligation to update anythese forward-looking statement that may be madestatements publicly, or to update the reasons actual results could differ materially from time to time by, or on behalf of,those anticipated in these forward-looking statements, even if new information becomes available in the Company.future.

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1.          FINANCIAL STATEMENTS

MILLER INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

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

September 30, 

    

2022

December 31, 

    

(Unaudited)

    

2021

    

ASSETS

CURRENT ASSETS:

Cash and temporary investments

$

33,208

$

54,332

Accounts receivable, net of allowance for credit losses of $1,268 and $1,155 at September 30, 2022 and December 31, 2021, respectively

 

167,887

 

153,977

Inventories, net

 

144,382

 

114,908

Prepaid expenses

 

6,053

 

5,751

Total current assets

 

351,530

 

328,968

NONCURRENT ASSETS:

Property, plant and equipment, net

 

112,545

 

96,496

Right-of-use assets - operating leases

944

1,231

Goodwill

 

11,619

 

11,619

Other assets

 

626

 

533

TOTAL ASSETS

$

477,264

$

438,847

LIABILITIES AND SHAREHOLDERS’ EQUITY

CURRENT LIABILITIES:

Accounts payable

$

107,477

$

119,029

Accrued liabilities

 

30,124

 

24,866

Current portion of operating lease obligation

316

361

Current portion of finance lease obligation

15

Total current liabilities

 

137,917

 

144,271

NONCURRENT LIABILITIES:

Long-term obligations

 

45,000

 

Noncurrent portion of operating lease obligation

 

628

 

870

Deferred income tax liabilities

 

5,195

 

5,170

Total liabilities

 

188,740

 

150,311

COMMITMENTS AND CONTINGENCIES (Note 7)

SHAREHOLDERS’ EQUITY:

Preferred stock, $0.01 par value; 5,000,000 shares authorized, none issued or outstanding

 

 

Common stock, $0.01 par value; 100,000,000 shares authorized, 11,416,716 and 11,410,728 outstanding at September 30, 2022 and December 31, 2021, respectively

 

114

 

114

Additional paid-in capital

 

152,169

 

151,449

Accumulated surplus

 

146,807

 

141,918

Accumulated other comprehensive loss

 

(10,566)

 

(4,945)

Total shareholders’ equity

 

288,524

 

288,536

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

$

477,264

$

438,847

The accompanying notes are an integral part of these financial statements.

3

Table of Contents

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

Nine Months Ended

September 30

September 30

    

2022

    

2021

    

2022

    

2021

    

NET SALES

$

205,557

$

164,715

$

622,602

$

515,785

COSTS OF OPERATIONS

 

182,377

 

146,883

 

565,708

 

461,532

GROSS PROFIT

 

23,180

 

17,832

 

56,894

 

54,253

OPERATING EXPENSES:

 

  

 

  

 

  

 

  

Selling, general and administrative expenses

 

14,673

 

11,983

 

39,710

 

35,053

NON-OPERATING (INCOME) EXPENSES:

 

  

 

  

 

  

 

  

Interest expense, net

 

1,042

 

286

 

2,088

 

901

Other (income) expense, net

 

666

 

206

 

993

 

434

Total expense, net

 

16,381

 

12,475

 

42,791

 

36,388

INCOME BEFORE INCOME TAXES

 

6,799

 

5,357

 

14,103

 

17,865

INCOME TAX PROVISION

 

1,567

 

1,511

 

3,049

 

4,325

NET INCOME

$

5,232

$

3,846

$

11,054

$

13,540

BASIC INCOME PER COMMON SHARE

$

0.46

$

0.34

$

0.97

$

1.19

DILUTED INCOME PER COMMON SHARE

$

0.46

$

0.34

$

0.97

$

1.19

CASH DIVIDENDS DECLARED PER COMMON SHARE

$

0.18

$

0.18

$

0.54

$

0.54

WEIGHTED AVERAGE SHARES OUTSTANDING:

 

  

 

  

 

  

 

  

Basic

 

11,417

 

11,411

 

11,417

 

11,411

Diluted

 

11,417

 

11,411

 

11,418

 

11,411

The accompanying notes are an integral part of these financial statements.

4

Table of Contents

MILLER INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

(Unaudited)

Three Months Ended

Nine Months Ended

Three Months Ended

Nine Months Ended

    

September 30

September 30

September 30

September 30

    

2021

    

2020

    

2021

    

2020

    

2022

    

2021

    

2022

    

2021

    

NET INCOME

$

3,846

$

6,553

$

13,540

$

17,810

$

5,232

$

3,846

$

11,054

$

13,540

OTHER COMPREHENSIVE INCOME (LOSS):

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

Foreign currency translation adjustment

 

(1,501)

 

2,861

 

(162)

 

2,477

 

(3,341)

 

(1,501)

 

(5,621)

 

(162)

Total other comprehensive income (loss)

 

(1,501)

 

2,861

 

(162)

 

2,477

 

(3,341)

 

(1,501)

 

(5,621)

 

(162)

COMPREHENSIVE INCOME

$

2,345

$

9,414

$

13,378

$

20,287

$

1,891

$

2,345

$

5,433

$

13,378

The accompanying notes are an integral part of these financial statements.

5

Table of Contents

MILLER INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(In thousands, except share data and per share data)

(Unaudited)

    

    

    

Accumulated

    

    

    

    

Accumulated

    

Additional

Other

Additional

Other

Common

Paid-In

Accumulated

Comprehensive

Common

Paid-In

Accumulated

Comprehensive

Stock

Capital

Surplus

 

Loss

Total

Stock

Capital

Surplus

 

Loss

Total

BALANCE, December 31, 2019

$

114

$

151,055

$

112,261

$

(5,503)

$

257,927

BALANCE, December 31, 2020

$

114

$

151,249

$

133,879

$

(2,789)

$

282,453

Components of comprehensive income:

Net income

5,431

5,431

3,178

3,178

Foreign currency translation adjustments

(72)

(72)

Foreign currency translation adjustment

760

760

Total comprehensive income

5,431

(72)

5,359

3,178

760

3,938

Issuance of common stock to non-employee directors (5,366)

194

194

Issuance of common stock to non-employee directors (5,260)

200

200

Dividends paid, $0.18 per share

(2,053)

(2,053)

(2,054)

(2,054)

BALANCE, March 31, 2020

114

151,249

115,639

(5,575)

261,427

BALANCE, March 31, 2021

114

151,449

135,003

(2,029)

284,537

Components of comprehensive income:

Net income

5,826

5,826

6,516

6,516

Foreign currency translation adjustments

(312)

(312)

Foreign currency translation adjustment

579

579

Total comprehensive income

5,826

(312)

5,514

6,516

579

7,095

Dividends paid, $0.18 per share

(2,053)

(2,053)

(2,054)

(2,054)

BALANCE, June 30, 2020

114

151,249

119,412

(5,887)

264,888

BALANCE, June 30, 2021

114

151,449

139,465

(1,450)

289,578

Components of comprehensive income:

Net income

6,553

6,553

3,846

3,846

Foreign currency translation adjustments

2,861

2,861

Foreign currency translation adjustment

(1,501)

(1,501)

Total comprehensive income

6,553

2,861

9,414

3,846

(1,501)

2,345

Dividends paid, $0.18 per share

(2,053)

(2,053)

(2,054)

(2,054)

BALANCE, September 30, 2020

$

114

$

151,249

$

123,912

$

(3,026)

$

272,249


The accompanying notes are an integral part of these financial statements.

BALANCE, September 30, 2021

$

114

$

151,449

$

141,257

$

(2,951)

$

289,869

The accompanying notes are an integral part of these financial statements.

6

Table of Contents

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

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

Components of comprehensive income:

Net income

5,232

5,232

Foreign currency translation adjustment

(3,341)

(3,341)

Total comprehensive income

5,232

(3,341)

1,891

Stock-based compensation on nonvested restricted stock units

223

223

Dividends paid, $0.18 per share

(2,056)

(2,056)

BALANCE, September 30, 2022

$

114

$

152,169

$

146,807

$

(10,566)

$

288,524

The accompanying notes are an integral part of these financial statements.

7

Table of Contents

MILLER INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

Nine Months Ended

Nine Months Ended

September 30

September 30

    

2021

    

2020

    

2022

    

2021

    

OPERATING ACTIVITIES:

 

  

 

  

 

  

 

  

 

Net income

$

13,540

$

17,810

$

11,054

$

13,540

Adjustments to reconcile net income to net cash flows from operating activities:

 

  

 

  

 

  

 

  

Depreciation and amortization

 

8,124

 

6,915

 

8,628

 

8,124

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

 

(52)

 

7

Provision for credit losses

 

126

 

118

Issuance of non-employee director shares

 

200

 

194

 

200

 

200

Stock-based compensation on nonvested restricted stock units

520

Deferred tax provision

 

9

 

399

 

19

 

9

Changes in operating assets and liabilities:

 

  

 

  

 

  

 

  

Accounts receivable

 

10,312

 

19,188

 

(15,147)

 

10,312

Inventories

 

(24,990)

 

1,836

 

(32,625)

 

(24,990)

Prepaid expenses

 

(3,209)

 

484

 

(359)

 

(3,209)

Other assets

 

190

 

352

 

51

 

190

Accounts payable

 

2,204

 

(3,355)

 

(10,190)

 

2,204

Accrued liabilities

 

531

 

154

 

6,173

 

531

Net cash flows from operating activities

 

7,036

 

44,129

 

(31,602)

 

7,036

INVESTING ACTIVITIES:

 

  

 

  

 

  

 

  

Purchases of property, plant and equipment

 

(7,857)

 

(12,691)

 

(25,127)

 

(7,857)

Proceeds from sale of property, plant and equipment

 

6

 

43

 

8

 

6

Net cash flows from investing activities

 

(7,851)

 

(12,648)

 

(25,119)

 

(7,851)

FINANCING ACTIVITIES:

 

  

 

  

 

  

 

  

Net payments under credit facility

 

 

(4,998)

Net borrowings under credit facility

 

45,000

 

Payments of cash dividends

 

(6,162)

(6,159)

 

(6,165)

(6,162)

Net payments on other long-term obligations

 

 

(297)

Finance lease obligation payments

(16)

(16)

(15)

(16)

Net cash flows from financing activities

 

(6,178)

 

(11,470)

 

38,820

 

(6,178)

EFFECT OF EXCHANGE RATE CHANGES ON CASH AND TEMPORARY INVESTMENTS

 

(121)

 

1,429

 

(3,223)

 

(121)

NET CHANGE IN CASH AND TEMPORARY INVESTMENTS

 

(7,114)

 

21,440

 

(21,124)

 

(7,114)

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

$

33,208

$

50,407

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

 

  

 

  

 

  

 

  

Cash payments for interest

$

1,104

$

1,659

$

1,902

$

1,104

Cash payments for income taxes, net of refunds

$

5,153

$

3,925

$

1,277

$

5,153

The accompanying notes are an integral part of these financial statements.

8

Table of Contents

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

Table of Contents

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

Nine Months Ended

September 30

September 30

    

2022

    

2021

    

2022

    

2021

Net Income

$

5,232

$

3,846

$

11,054

$

13,540

 

 

 

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

 

 

 

1

 

Weighted Average Common Shares Outstanding - Diluted

11,417

11,411

11,418

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 September 30, 2022, all 160 nonvested restricted stock units would have been anti-dilutive. For the nine months ended September 30, 2022, none of the nonvested restricted stock units would have been anti-dilutive. There were no nonvested restricted stock units granted or outstanding during the period.three or nine months ended September 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 Nine Months Ended

September 30, 

September 30, 

September 30, 

September 30, 

    

2021

    

2020

    

2021

    

2020

    

2022

    

2021

    

2022

    

2021

Net Sales:

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

North America

$

142,338

$

149,265

$

450,908

$

400,581

$

182,249

$

142,338

$

562,235

$

450,908

Foreign

 

22,377

 

19,101

 

64,877

 

72,368

 

23,308

 

22,377

 

60,367

 

64,877

$

164,715

$

168,366

$

515,785

$

472,949

$

205,557

$

164,715

$

622,602

$

515,785

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

Table of Contents

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 September 30, 20212022, and December 31, 2020,2021, contract liability balances were each $272,$274 and $257, respectively, and are included in accrued liabilities on the condensed consolidated balance sheets. NaNNo revenue related to contract liability balances was

10

Table of Contents

recognized during the three orand nine months ended September 30, 20212022, or during the three months ended September 30, 2020. During theand 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 0tnot have any contract assets at September 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 nine months ended September 30, 20212022 and 2020.during the three and nine months ended September 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 one customer made up approximately 12% and 11% of total Company sales during the three and nine months ended September 30, 2022, respectively. No one customer made up greater than 10% of total companyCompany sales during the three or sixnine months ended September 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 September 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 September 30, 20212022 and December 31, 20202021 consisted of the following:

    

2021

    

2020

    

2022

    

2021

Chassis

$

6,493

$

6,859

$

14,974

$

5,753

Raw materials

 

51,897

 

36,161

 

70,531

 

59,651

Work in process

 

33,932

 

16,282

 

44,334

 

33,994

Finished goods

 

16,516

 

24,637

 

14,543

 

15,510

$

108,838

$

83,939

$

144,382

$

114,908

6.          LONG-TERM OBLIGATIONS

Credit Facility

On October 28, 2022, the Company and Other Long-Term Obligations

Credit Facility

The Company’s current loan agreementcertain of its subsidiaries entered into (a) a First Amendment to Amended and Restated Loan Agreement with First Horizon Bank which governs its existing $50,000 unsecured revolving credit facility(successor in interest to First Tennessee Bank National Association, “First Horizon”) and (b) an Amended and Restated Master Revolving Credit Note, dated as of October 28, 2022, in the maximum principal amount of $100.0 million, with a maturity date of May 31, 2027 contains customary representations(the “Amended Note” and warranties, events of default, and financial, affirmative and negative covenants for loan agreements of this kind. together with the Amended Note, collectively, the “Amendment Documents”).

The Amendment Documents amend the Company’s existing credit facility restrictsevidenced by the paymentAmended and Restated Loan Agreement dated as of cash dividends ifDecember 21, 2020 (the “Prior Credit Agreement”) which had provided a $50.0 million unsecured revolving credit facility with First Horizon (the “Prior Credit Facility”) to, among other things: (i) provide for revolving credit availability up to a maximum principal amount of $100.00 million, (ii) make certain technical and operational adjustments necessary to implement one (1) month Term SOFR as the payment would cause the Company to be in violationprimary interest rate index and (iii) include a new asset coverage financial covenant test. All other material terms and conditions of the minimum tangible net worth test orPrior Credit Facility as evidenced by the leverage ratio test inPrior Credit Agreement remain unchanged, including the loan agreement, among various other customary covenants. The Company has been in compliance with these covenants throughout 2020 and duringmaturity date of May 31, 2027.

During the first nine months of 2021, and it is anticipated that2022, the Company will continue to bedrew $45,000 on its credit facility for working capital needs and retained $45,000 in compliance duringoutstanding borrowings under its credit facility at September 30, 2022. At December 31, 2021, the remainder of 2021.Company had $0 in outstanding

1011

Table of Contents

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, 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 September 30, 2021,2022 and December 31, 2022, the Company had cash and temporary investments of $50,407.$33,208 and $54,332, respectively.

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 September 30, 2021 and December 31, 2020.

    

2021

    

2020

Finance lease right-of-use assets

$

78

$

78

Accumulated amortization

 

(57)

 

(42)

Finance lease right-of-use assets, net

$

21

$

36

sheets.

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

Remaining lease payments to be paid during the year ended December 31,

2021

    

$

100

$

6

2022

 

377

 

15

    

$

96

2023

 

295

 

0

 

323

2024

 

239

 

0

 

274

2025

 

226

 

0

 

239

2026

 

87

Thereafter

 

82

 

0

 

1

Total lease payments

1,319

21

1,020

Less Imputed Interest

(89)

0

Lease obligation at September 30, 2021

$

1,230

$

21

Less imputed interest

(76)

Lease obligation at September 30, 2022

$

944

1112

Table of Contents

The lease cost and certain other information during the three and nine months ended September 30, 20212022 and 20202021 were as follows:

Three Months Ended

Nine Months Ended

Three Months Ended

Nine Months Ended

September 30

September 30

September 30

September 30

    

2021

    

2020

    

2021

    

2020

    

2022

    

2021

    

2022

    

2021

    

Lease Cost

Finance lease cost:

Amortization of right-of-use assets

$

5

$

6

$

16

$

16

$

4

$

5

$

14

$

16

Interest on lease obligation

 

0

 

0

 

1

 

1

 

 

 

1

 

1

Total finance lease cost

5

6

17

17

4

5

15

17

Total operating lease cost

 

107

 

103

 

320

 

304

Short-term lease cost

 

116

 

118

 

362

 

372

Total long-term operating lease cost

 

95

 

107

 

300

 

320

Total short-term operating lease cost

 

141

 

116

 

424

 

362

Total lease cost

$

228

$

227

$

699

$

693

$

240

$

228

$

739

$

699

Other Information

Cash paid for amounts included in the measurement of lease obligation:

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

Operating cash flows from operating leases

$

107

$

102

$

320

$

301

$

95

$

107

$

301

$

320

Financing cash flows from finance leases

 

5

 

6

 

16

 

16

 

4

 

5

 

15

 

16

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

 

67

 

6

 

135

 

6

The weighted average remaining lease term for operating leases and finance leases at September 30, 20212022 was 4.0 years and 0.9 years, respectively.3.3 years.  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 September 30, 20212022 was 3.3% and 4.0%, respectively.3.1%. 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 September 30, 2022 and 2021 of $50 and 2020 of $59, and $55, respectively, and related lease costs during the nine months ended September 30, 2022 and 2021 of $158 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 $27$38 and $28$27 during the three months ended September 30, 20212022 and 2020,2021, respectively, and related lease costs of $109 and $83 during the nine months ended September 30, 20212022 and 2020 of $83 and $84,2021, respectively.

Other Commitments

At September 30, 20212022 and December 30, 2020,31, 2021, the Company had commitments of approximately $5,933$5,616 and $7,068,$5,052, respectively, for construction and acquisition of property, plant and equipment. The Company is also migratingmigrated its enterprise resource planning (ERP) system to a multi-tenant cloud environment which includes global ERP,in 2021 and is continuing to implement additional modules such as enterprise performance management, human capital management, data analytics and the use of artificial intelligence.  Phase 1During the implementation of this migration was completed duringthese modules we are conducting an examination of historical information to confirm accuracy of information being migrated to our new systems.  Any adjustments identified and recorded as a result of the first quarterexamination are not expected to have a material adverse effect on the consolidated financial position or results of 2021 andoperations of the 2 remaining phases will be implemented over the next three years.Company. Related to thisthe continuing implementation project, at September 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$72,863 at September 30, 2021,2022, and $56,822$47,883 at December 31, 2020.2021. The increase during 2022 is due to increases in sales and supply chain issues that delay payment until all parts and components are received. 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 September 30, 20212022 or December 31, 2020.2021.

13

Table of Contents

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

Table of Contents

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 the consolidated financial position or results of operations of the Company.

8.          INCOME TAXES

As of September 30, 2021,2022, the Company had 0no federal net operating loss carryforwards and 0 significant statecarryforwards. State net operating loss carryforwards.carryforwards were not significant at September 30, 2022.

9.          SUBSEQUENT EVENTS

Credit Facility

Subsequent to September 30, 2022, the Company and certain of its subsidiaries entered into (a) a First Amendment to Amended and Restated Loan Agreement with First Horizon Bank (successor in interest to First Tennessee Bank National Association, “First Horizon”) and (b) an Amended and Restated Master Revolving Credit Note, dated as of October 28, 2022, in the maximum principal amount of $100.0 million, with a maturity date of May 31, 2027 (the “Amended Note” and together with the Amended Note, collectively, the “Amendment Documents”). See Note 6 for more information.

Dividends

On November 1, 2021,7, 2022, the Company’s Board of Directors declared a quarterly cash dividend of $0.18 per share. The dividend is payable December 13, 202112, 2022, to shareholders of record as of December 6, 2021.5, 2022.

1314

Table of Contents

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.thereto included elsewhere in this Quarterly Report on Form 10-Q and with our audited financial statements and other information presented in our Annual Report on Form 10-K filed with the SEC for the year ended December 31, 2021.  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 to 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, theThe 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.

1415

Table of Contents

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, and 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 have 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 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, 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, significant supplySupply 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 impactingwere generally lessening as 2022 began but the operationsimpact of many companies on a global scale. We continued to experience these criticalthe war in Ukraine, lingering effects of COVID-19 in the U.S. and abroad and general economic conditions have slowed this improvement over the course of 2022. While the overall impact of supply chain disruptions and workforce retention challenges lessened during the third quarter of 2021, which impacted2022, these challenges continued to reduce our ability to obtain on a timely basis various raw materialscomplete finished goods without timing delays and purchased component parts that are necessary to increase our production processes, including our abilitycosts of operations. In addition, general inflationary pressures coupled with rising interest rates have substantially increased throughout the first three quarters of 2022. Finally, the rapid strengthening of the US Dollar in comparison to obtain chassis from third party 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, whichcertain other currencies has caused increased recruiting, trainingfluctuations within accumulated other comprehensive loss in our condensed consolidated balance sheet and retention costs. These supply chain and workforce headwinds generally worsened over the courserecognition of the third quarter. significant losses in our condensed consolidated statement of income.

We continue to monitor these disruptionspressures closely and, when possible, attempt to mitigate the risk associated with them, including by implementing several price increases and surcharges during 2022 and announcing an 8% price increase effective in the first quarter of 2023, 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 in the production of small carrier units), by monitoring currency rates and purchasing currency denominations at advantageous times, and by relying more heavily on our in-house fabrication capabilities, which were significantly expanded in 2020.

Based on our strong backlog, the surcharge and price increases we have implemented and the current status of our process improvements, our operating results have improved during the third quarter of 2022, and we believe we are well positioned to continue enhancing operating results.  However, our performance will be heavily influenced by whether supply chain constraints and inflationary pressures worsen, the continuing impact of the war in Ukraine or other geopolitical factors, and the threat of recession and general economic factors, among other reasons.  The impact of these disruptionsfactors remains largely out of our control, and we currently anticipate that these factors will continue to have a materialan adverse impact on our production at our facilities duringcapabilities and net income over the remainder of 20212022 and into 2023.

At December 31, 2021, the Company owed $0 under its primary credit facility.  During the first halfnine months of 2022, the Company drew $45,000 for working capital needs and retains a balance on its credit facility of $45,000 at November 8, 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 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 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.

15

Table of Contents

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 nine 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 reportAnnual Report on Form 10-K for the year ended December 31, 2020.2021.

Results of Operations – Three Months Ended September 30, 20212022 Compared to Three Months Ended September 30, 20202021

Net sales for the three months ended September 30, 2021 decreased 2.2%2022 increased 24.8% to $164,715$205,557 from $168,366$164,715 for the comparable period in 2020.2021. The decreaseincrease in revenue reflectsis primarily the ongoing challengesresult of navigating certainthe realization of price increases and increases in production volume due to steady supply chain disruptions and bottlenecks during the third quarter of 2021.improvements. Net domestic sales decreasedincreased during the three-month periodthree months ended September 30, 20212022 to $142,338$182,249 from $149,265$142,338 for the comparable period in 2020,2021, while net foreign sales increased to $22,377$23,308 from $19,101$22,377 during the same three-month period.

Costs of operations for the three months ended September 30, 2021 decreased 2.4%2022 increased 24.2% to $146,883$182,377 from $150,523$146,883 for the comparable period in 2020. Costs2021, primarily due to higher prices for components, parts scarcity resulting from supply chain challenges, and wage inflation. However,

16

Table of Contents

costs of operations decreased as a percentage of sales to 89.2%88.7%, compared to 89.4%89.2% for the comparable period in 2020,2021, primarily due to changes in product mix.the recognition of price increases on sales to customers.

Selling, general and administrative expenses for the three months ended September 30, 20212022 increased to $11,983$14,673 from $9,231$11,983 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.certain other non-recurring charges. As a percentage of sales, selling, general and administrative expenses for the three months ended September 30, 2021 increased2022 decreased to 7.3%7.1% from 5.5%7.3% 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$1,042 from $230$286 for the three months ended September 30, 20212022 as compared to the prior year period. Increases in interest expense, net were primarily due to increased borrowings on our credit facility and increases in floor plan interest payments.

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 September 30, 20212022 the Company experiencedrecognized a net foreign currency exchange loss of $198,$633, compared to a net gainloss of $208$198 for the three months ended September 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 September 30, 20212022 and 20202021 reflects a combined effective U.S. federal, state and foreign tax rate of 28.2%23.0% and 23.7%28.2%, 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, 20212022 Compared to Nine Months Ended September 30, 20202021

Net sales for the nine months ended September 30, 20212022 increased 9.1%20.7% to $515,785$622,602 from $472,949$515,785 for the comparable period in 2020, which was materially negatively impacted by the COVID-19 pandemic.2021. 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 bygeneral economic recovery, supply chain disruptionsimprovement in certain of our product classes, and bottlenecksrealization of price increases during the third quarter of 2021, thus tempering long-term sales recovery.2022. Net domestic sales increased during the nine-month periodnine months ended September 30, 20212022 to $450,908$562,235 from $400,581$450,908 for the comparable period in 2020,2021, while net foreign sales decreased to $64,877$60,367 from $72,368$64,877 during the same nine-month period, primarily attributable to significant decreases in export sales during the first nine months of 2021.period.

16

Table of Contents

Costs of operations for the nine months ended September 30, 20212022 increased 10.2%22.6% to $461,532$565,708 from $418,841$461,532 for the comparable period in 2020.2021, primarily due to higher prices for components, parts scarcity resulting from supply chain challenges, and wage inflation. Costs of operations increased as a percentage of sales to 89.5%90.9%, compared to 88.6%89.5% for the comparable period in 2020, which reflects reduced sales resulting from supply chain disruptions and2021, primarily due to the time lag in recognizing price increases in raw materials prices caused by supply chain disruptions and escalating inflation.through the backlog.

Selling, general and administrative expenses for the nine months ended September 30, 20212022 increased to $35,053$39,710 from $30,272$35,053 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 nine months ended September 30, 2021 increased2022 decreased to 6.8%6.4% from 6.4%6.8% in the comparable period in 2020.2021.

Interest expense, net decreasedincreased to $901$2,088 from $1,018$901 for the nine months ended September 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 nine months ended September 30, 20212022 the Company experienced a net foreign currency exchange loss of $427,$1,097, compared to a net gainloss of $397$427 for the nine months ended September 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 nine months ended September 30, 20212022 and 20202021 reflects a combined effective U.S. federal, state and foreign tax rate of 24.2%21.6% and 23.3%24.2%, 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 $7,036 Favorable tax adjustments in foreign jurisdictions drove the decrease in the effective tax rate for the nine months ended September 30, 2021,2022.

Liquidity and Capital Resources

Cash used in operating activities was $31,602 for the nine months ended September 30, 2022, compared to cash provided by operating activities of $44,129$7,036 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

17

Table of Contents

expenses that are necessary in the ordinary course of our operations, such as utilities and taxes. The change in net cash provided byflows from operating activities during the nine months ended September 30, 20212022, in comparison to the nine months ended September 30, 2020,2021, is primarily due to the increaserecent increases in cash from operating activities during the secondinventory 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 pandemic during the second and third quarters of 2020 caused less cashreceivables related to be usedrecent increases 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.sales.

Cash used in investing activities was $7,851$25,119 for the nine months ended September 30, 20212022 compared to $12,648$7,851 for the comparable period in 2020.2021. The cash used in investing activities for the nine months ended September 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 in the production of small carriers.

Cash used inprovided by financing activities was $6,178$38,820 for the nine months ended September 30, 2021,2022, compared to cash used in financing activities of $11,470$6,178 for the comparable period in 2020. The2021. Net cash usedflows from financing activities for the nine months ended September 30, 2022 resulted from advances from our credit facility with First Horizon Bank (as discussed elsewhere in this Quarterly Report on Form 10-Q) of $45,000, partially offset by the payment of cash dividends of $6,165 and an immaterial amount of payments on finance lease obligations. Net cash flows from financing activities for the nine months ended September 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, and an immaterial amount of payments on finance lease obligations.

As of September 30, 2021,2022, we had cash and cash equivalentstemporary investments of $50,407.$33,208, and an additional $5,000 in available borrowings under our existing credit facility. Subsequent to September 30, 2022 the available borrowings increased to $55,000 after the amendment to the existing facility which is discussed in “Credit Facilities and Other Obligations – Credit Facility” below. Our primary cash requirements include working capital, capital expenditures, the funding of any declared cash dividends and principal and interest payments on indebtedness. At September 30, 2021,2022, the Company had commitments of approximately $5,933$5,616 for the acquisition of property, plant and equipment.  At September 30, 2021,2022, we also had a commitment of approximately $3,754$2,874 in software license fees. fees related to the migration of our enterprise resource planning (ERP) system. During the implementation of additional modules for this project, we are conducting an examination of historical information to confirm accuracy of information being migrated to our new systems. Any adjustments identified and recorded as a result of the examination are not expected to have a material adverse effect on the consolidated financial position or results of operations of the Company.

We expect our primary sources of cash to be cash flows from operations, cash and cash equivalentstemporary investments on hand at September 30, 20212022 and borrowings under our credit facility as needed.needed, including the increase of our existing unsecured credit facility as described above in Note 6 and 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-19 related

17

Table of Contents

supply chain, economic and other factors discussed above and elsewhere in this Quarterly Report on Form 10-Q, as well as financial, business and other factors, many of which are beyond our control.

As of September 30, 20212022 and December 31, 2020, $25,0802021, $18,394 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 agreementOn October 28, 2022, the Company and certain of its subsidiaries entered into (a) a First Amendment to Amended and Restated Loan Agreement with First Horizon Bank which governs its existing $50,000 unsecured revolving credit facility(successor in interest to First Tennessee Bank National Association, “First Horizon”) and (b) an Amended and Restated Master Revolving Credit Note, dated as of October 28, 2022, in the maximum principal amount of $100.0 million, with a maturity date of May 31, 2027 contains customary representations(the “Amended Note” and warranties, events of default, and financial, affirmative and negative covenants for loan agreements of this kind. together with the Amended Note, collectively, the “Amendment Documents”).

The Amendment Documents amend the Company’s existing credit facility restrictsevidenced by the paymentAmended and Restated Loan Agreement dated as of cash dividends ifDecember 21, 2020 (the “Prior Credit Agreement”) which had provided a $50.0 million unsecured revolving credit facility with First Horizon (the “Prior Credit Facility”) to, among other things: (i) provide for revolving credit availability up to a maximum principal amount of $100.00 million, (ii) make certain technical and operational adjustments necessary to implement one (1) month Term SOFR as the payment would cause the Company to be in violationprimary interest rate index and (iii) include a new asset coverage financial covenant test. All other material terms and conditions of the minimum tangible net worth test orPrior Credit Facility as evidenced by the leverage ratio test inPrior Credit Agreement remain unchanged, including the loan agreement, among various other customary covenants. maturity date of May 31, 2027.

18

Table of Contents

The Company has been in compliance with these covenants throughout 2020had $45,000 and during the first nine months of 2021, and it is anticipated that the Company will continue to be in compliance during the remainder of 2021.

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, the Company had $0, respectively, in outstanding borrowings under the credit facility.facility at September 30, 2022 and December 31, 2021.  

Other Long-Term Obligations

Prior to applying a discount rate to our lease liabilities, at September 30, 20212022 and December 31, 2020,2021, we had approximately $1,319$1,020 and $1,575$1,328 in non-cancelable operating lease obligations, respectively, and $21$0 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 4.14% at September 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 September 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 nine months ended September 30, 2021,2022, we recognized a $1,501 decrease$3,341 unrealized loss and a $162 decrease,$5,621 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 nine months ended September 30, 2021, we recognized a $2,861 increase$1,501 unrealized loss and a $2,477 increase, for the respective prior year periods.$162 unrealized loss, 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 September 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 $198,$633 and net gain of $208,$198, respectively. For the nine months ended September

18

Table of Contents

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$1,097 and a net gain of $397,$427, 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 reportQuarterly 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.

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.

19

Table of Contents

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 changesMacroeconomic trends, including inflation and rising interest rates could adversely affect our business, results of operation or financial condition, as well as our customers’ ability to fund purchases of our products.

Global economic events and other factors, such as accommodative monetary and fiscal policy and the risk factorsimpacts of the COVID-19 pandemic, as we discussed in the Risk Factors included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020,2021, have contributed to significant inflation in many of the markets in which we operate. In order to combat inflation and restore price stability, the U.S. Federal Reserve and central banks worldwide have raised interest rates and are expected to keep increasing interest rates in 2022 and 2023. Increased inflation and interest rates may hinder the economic growth in the U.S. and in the global economy. This economic weakness in the economy and the possibility of a global recession has had, and may continue to have, a negative effect on our business and financial condition.

Further, the continued slowdown, or a recession, in the global economy or in a particular region or industry, inflation or a tightening of the credit markets could negatively impact our business, financial condition and liquidity, including our (as well as supplemented by our Quarterlycustomers’ and end users’) ability to continue to access preferred sources of liquidity, and our and their borrowing costs could increase.

In addition to the risk factor set forth above, you should read and consider the risk factors discussed in Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-Q10-K filed with the SEC for the quarteryear ended June 30, 2021.December 31, 2021, which could materially affect our business, financial condition, or future results of operation. The risks described in such report are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may eventually prove to have a material adverse effect on our business, financial condition and/or future operating results.

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 were included as an exhibit to the Report on Form 10-Q filed by the Company on August 3, 2022.

1920

Table of Contents

ITEM 6.          EXHIBITS

    

Description

    

Incorporated by
Reference to
Registration File
Number

    

Form or
Report

    

Date of Report

    

Exhibit 
Number in
Report

 

 

 

 

10.1

First Amendment to the Amended and Restated Loan Agreement, dated October 28, 2022, by and among the Company, certain of the Company’s wholly-owned subsidiaries, and First Horizon Bank

001-14124

Form 8-K

November 3, 2022

10.1

10.2

Amended and Restated Master Revolving Credit Note, dated October 28, 2022, issued by the Company to First Horizon Bank

001-14124

Form 8-K

November 3, 2022

10.2

 

 

 

 

31.1

Certification Pursuant to Rules 13a-14(a)/15d-14(a) by Chief Executive Officer*

 

 

 

 

 

 

 

 

31.2

Certification Pursuant to Rules 13a-14(a)/15d-14(a) by Chief Financial Officer*

 

 

 

 

 

 

 

 

32.1

Certification Pursuant to Section 1350 of Chapter 63 of Title 18 of United States Code by Chief Executive Officer±

 

 

 

 

 

 

 

 

32.2

Certification Pursuant to Section 1350 of Chapter 63 of Title 18 of United States Code by Chief Financial Officer±

 

 

 

 

 

 

 

 

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

101.SCH

Inline XBRL Taxonomy Extension Schema Document

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document

21

Table of Contents

Description

Incorporated by
Reference to
Registration File
Number

Form or
Report

Date of Report

Exhibit 
Number in
Report

31.1

Certification Pursuant to Rules 13a-14(a)/15d-14(a) by Co-Chief Executive Officer*

31.2

Certification Pursuant to Rules 13a-14(a)/15d-14(a) by Co-Chief Executive Officer*

31.3

Certification Pursuant to Rules 13a-14(a)/15d-14(a) by Chief Financial Officer*

32.1

Certification Pursuant to Section 1350 of Chapter 63 of Title 18 of United States Code by Co-Chief Executive Officer±

32.2

Certification Pursuant to Section 1350 of Chapter 63 of Title 18 of United States Code by Co-Chief Executive Officer±

32.3

Certification Pursuant to Section 1350 of Chapter 63 of Title 18 of United States Code by Chief Financial Officer±

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

101.SCH

Inline XBRL Taxonomy Extension Schema Document

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB

Inline XBRL Taxonomy Extension Label Linkbase Document

20

Table of Contents

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document

104

The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2021,2022, has been formatted in Inline XBRL.

 

 

 

 

*     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.

2122

Table of Contents

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Miller Industries, Inc. has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

MILLER INDUSTRIES, INC.

 

 

 

 

By:

/s/ Deborah L. Whitmire

 

 

Deborah L. Whitmire

 

 

Executive Vice President, Chief Financial Officer and Treasurer

Date: November 3, 2021

9, 2022

2223