SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K /X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934. For the fiscal year ended April 30, 1999 Commission File No. 0-24298 MILLER INDUSTRIES, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) TENNESSEE ------------------------------------------------------------- (STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION) 62-1566286 ------------------------------------ (I.R.S. EMPLOYER IDENTIFICATION NO.) 8503 HILLTOP DRIVE, OOLTEWAH, TENNESSEE 37363 --------------------------------------------------- (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE) Registrant's telephone number, including area code: (423) 238-4171 Securities registered pursuant to Section 12(b) of the Act: Common Stock, Par Value $0.01 Per Share. ---------------------------------------- Name of each exchange on which registered: New York Stock Exchange. ------------------------ Securities registered pursuant to Section 12(g) of the Act: None. ----- 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 / x / No / / Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10K. [ ] The aggregate market value of the voting stock held by nonaffiliates of the Registrant as of July 27, 1999 was $133,550,000 based on the closing sale price of the Common Stock as reported by the New York Stock Exchange on such date. See Item 12. At July 27, 1999 there were 46,794,297 shares of Common Stock, par value $0.01 per share, outstanding. DOCUMENTS INCORPORATED BY REFERENCE: Portions of the Registrant's definitive Proxy Statement for the 1999 Annual Meeting of Shareholders are incorporated by reference into Part III. Pursuant to Rule 12b-25, the following Items have been omitted from this Form 10-K: Items 6, 7, 8, 14(a)(1), 14(a)(2), 14(c) and 14(d).
TABLE OF CONTENTS FORM 10-K ANNUAL REPORT PART I ITEM 1. BUSINESS............................................................ 1 ITEM 2. PROPERTIES.......................................................... 17 ITEM 3. LEGAL PROCEEDINGS................................................... 17 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS................. 18 PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS......................................... 18 ITEM 6. SELECTED FINANCIAL DATA............................................. 19 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS................................. 19 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA......................... 19 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE................................. 19 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.................. 20 -i-
ITEM 11. EXECUTIVE COMPENSATION.............................................. 21 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT...................................................... 22 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS...................... 23 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K......................................................... FINANCIAL STATEMENTS........................................................F-1 FINANCIAL STATEMENT SCHEDULES...............................................S-1 SIGNATURES.................................................................II-1 -ii-
PART I ITEM 1. BUSINESS GENERAL Miller Industries, Inc. (the "Company") is the world's leading integrated provider of vehicle towing and recovery equipment and services and has executive offices in Ooltewah, Tennessee and Atlanta, Georgia and manufacturing operations in Tennessee, Pennsylvania, France and England. The Company's business is divided into two segments: (i) manufacturing and distributing towing and recovery equipment and providing financial and related services to the towing and recovery industry and (ii) providing towing and specialized transportation services. The Company markets its towing and recovery equipment under several well-recognized brand names and markets its towing services under the national brand name of RoadOne(R). Since 1990 the Company has developed or acquired several of the most well-recognized brands in the fragmented towing and recovery equipment manufacturing industry. The Company's strategy has been to diversify its line of products and increase its market share in the industry through a combination of internal growth and development and acquisitions of complementary businesses. As a natural extension of its leading market position in manufacturing and strong brand name recognition, the Company has broadened its strategy to include vertical integration, with the goal of achieving operating efficiencies while becoming a leading worldwide manufacturer, distributor and financial services provider in the towing and recovery industry. The Company's owned distributors and its independent distributors form a North American distribution network for towing and recovery equipment as well as other specialty truck equipment and components. In February 1997, the Company formed its towing service division, RoadOne, to begin building a national towing service network. RoadOne offers a broad range of towing and transportation services, including towing, impounding and storing motor vehicles, conducting lien sales and auctions of abandoned vehicles, environmental clean-up services, and transporting new and used vehicles and heavy construction equipment. In fiscal 1999, the Company, through its RoadOne subsidiary, acquired 35 towing service companies with aggregate historical annual revenues of approximately $35.9 million. These acquisitions are part of the Company's plan to establish a national towing service network through owned companies in combination with an extensive group of affiliates. At July 23, 1999, the Company was operating over 200 facilities serving 49 markets in 27 states, and had relationships with over 2,184 RoadOne affiliates. The Company intends to continue its expansion into additional towing service markets. INCLUSION OF FORWARD-LOOKING STATEMENTS Certain statements in this Annual Report, including but not limited to "Management's Discussion and Analysis of Financial Condition and Results of Operations" may be deemed to be forward-looking statements, as defined in the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are made based on management's belief as well as assumptions made by, and information currently available to, management pursuant to "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. The
Company's actual results may differ materially from the results anticipated in these forward-looking statements due to, among other things, factors set forth below under the heading "Risk Factors," and in particular, the risks associated with acquisitions, including, without limitation, the risks that acquisitions do not close and the cost or difficulties related to the integration of the acquired businesses. The Company cautions that such factors are not exclusive. The Company does not undertake to update any forward-looking statement that may be made from time to time by, or on behalf of, the Company. RISK FACTORS UNCERTAINTIES IN INTEGRATING OPERATIONS AND ACHIEVING COST SAVINGS. The companies that the Company has recently acquired and that the Company plans to acquire have operations in many different markets. The success of any business combination is in part dependent on management's ability following the transaction to integrate operations, systems and procedures and thereby obtain business efficiencies, economies of scale and related cost savings. The challenges posed to the Company's management may be particularly significant because integrating the recently acquired companies must be addressed contemporaneously. There can be no assurance that future consolidated results will improve as a result of cost savings and efficiencies from any such acquisitions or proposed acquisitions, or as to the timing or extent to which cost savings and efficiencies will be achieved. RISKS ASSOCIATED WITH ACQUISITION STRATEGY. The Company has an aggressive acquisition strategy that has involved, and is expected to continue to involve, the acquisition of a significant number of additional companies. As a result, the Company's future success is dependent, in part, upon its ability to identify, finance and acquire attractive businesses and then to successfully integrate and/or manage such acquired businesses. Acquisitions involve special risks, including risks associated with unanticipated problems, liabilities and contingencies, diversion of management attention and possible adverse effects on earnings resulting from increased goodwill amortization, increased interest costs, the issuance of additional securities and difficulties related to the integration of the acquired business. Although the Company believes that it can identify and consummate the acquisitions of a sufficient number of businesses to successfully implement its growth strategies, there can be no assurance that such will be the case. Further, there can be no assurance that future acquisitions will not have an adverse effect upon the Company's operating results, particularly during periods in which the operations of acquired businesses are being integrated into the Company's operations. RISKS OF FOREIGN MARKETS. The Company's growth strategy includes the expansion of its operations in foreign markets. In January 1996 the Company acquired S.A. Jige International ("Jige"), a French manufacturer of wreckers and car carriers, and in April 1996 the Company acquired Boniface Engineering Limited ("Boniface"), a British manufacturer of towing and recovery equipment. Prior to these acquisitions, the Company had limited experience with sales and manufacturing operations outside North America. There is no assurance that the Company will be able to successfully integrate and expand its foreign operations. Furthermore, there is no assurance that the Company will be able to successfully expand sales outside of North America or compete in markets in which it is unfamiliar with cultural and business practices. The Company's foreign operations are subject to various political, economic and other uncertainties, including risks of restrictive taxation policies, foreign exchange restrictions and currency translations, changing political conditions and governmental regulations. RISKS OF ENTERING NEW LINES OF BUSINESS. The Company's growth strategy includes vertically integrating within the towing and recovery industry through a combination of acquisitions and internal growth. Implementation of its growth -2-
strategy has resulted in the Company's entry into several new lines of business. Historically, the Company's expertise has been in the manufacture of towing equipment and the Company had no prior operating experience in the lines of business it recently entered. During fiscal 1997, the Company entered three new lines of business through the acquisition of towing and recovery equipment distributors and towing service companies, and the establishment of the Company's Financial Services Group. The Company's operation of these businesses will be subject to all of the risks inherent in the establishment of a new business enterprise. Such acquisitions present the additional risk that newly-acquired businesses could be viewed as being in competition with other customers of the Company. Although the new businesses are closely related to the Company's towing equipment manufacturing business, there can be no assurance that the Company will be able to successfully operate these new businesses. CYCLICAL NATURE OF INDUSTRY, GENERAL ECONOMIC CONDITIONS AND WEATHER. The towing and recovery industry is cyclical in nature and has been affected historically by high interest rates and economic conditions in general. Accordingly, a downturn in the economy could have a material adverse effect on the Company's operations. The industry is also influenced by consumer confidence and general credit availability, and by weather conditions. FLUCTUATIONS IN PRICE AND SUPPLY OF MATERIALS AND COMPONENT PARTS. The Company is dependent upon outside suppliers for its raw material needs and other purchased component parts and, therefore, is subject to price increases and delays in receiving supplies of such materials and component parts. There can be no assurance that the Company will be able to pass any price increase on to its customers. Although the Company believes that sources of its materials and component parts will continue to be adequate to meet its requirements and that alternative sources are available, events beyond the Company's control could have an adverse effect on the cost or availability of such materials and component parts. Additionally, demand for the Company's products could be negatively affected by the unavailability of truck chassis, which are manufactured by third parties and are typically purchased separately by the Company's distributors or by towing operators and are sometimes supplied by the Company. COMPETITION. The towing and recovery equipment manufacturing industry is highly competitive. Competition for sales exists at both the distributor and towing-operator levels and is based primarily on product quality and innovation, reputation, technology, customer service, product availability and price. In addition, sales of the Company's products are affected by the market for used towing and recovery equipment. Certain of the Company's competitors may have substantially greater financial and other resources and may provide more attractive dealer and retail customer financing alternatives than the Company. Historically, the towing service industry has been highly fragmented, with an estimated 30,000 professional towing operators in the United States, therefore the Company's towing service operations will face continued competition from many operators across the country. The Company also faces competition in its consolidation of professional towing operators. These operators could be consolidated by other companies, individuals or entities, or they could enter into affiliate relationships with other companies. In addition, the Company's presence in the towing service industry presents the risk that it could be viewed as being in competition with other customers of the Company. The Company may also face significant competition from large competitors as it enters other new lines of business, including equipment distribution and financial services. -3-
DEPENDENCE ON PROPRIETARY TECHNOLOGY. Historically, the Company has been able to develop or acquire patented and other proprietary product innovations which have allowed it to produce what management believes to be technologically advanced products relative to most of its competition. Certain of the Company's patents expire in 2004 at which time the Company may not have a continuing competitive advantage through proprietary products and technology. The Company's historical market position has been a result, in part, of its continuous efforts to develop new products. The Company's future success and ability to maintain market share will depend, to an extent, on new product development. LABOR AVAILABILITY. The timely production of the Company's wreckers and car carriers requires an adequate supply of skilled labor. In addition, the operating costs of each manufacturing and towing service facility can be adversely affected by high turnover in skilled positions. Accordingly, the Company's ability to increase sales, productivity and net earnings will be limited to a degree by its ability to employ the skilled laborers necessary to meet the Company's requirements. There can be no assurance that the Company will be able to maintain an adequate skilled labor force necessary to efficiently operate its facilities. DEPENDENCE ON KEY MANAGEMENT. The success of the Company is highly dependent on the continued services of the Company's management team. The loss of services of one or more key members of the Company's senior management team could have a material adverse effect on the Company. Although the Company historically has been successful in retaining the services of its senior management, there can be no assurance that the Company will be able to retain such personnel in the future. PRODUCT LIABILITY AND INSURANCE. The Company is subject to various claims, including product liability claims arising in the ordinary course of business, and may at times be a party to various legal proceedings that constitute ordinary routine litigation incidental to the Company's business. The Company maintains reserves and liability insurance coverage at levels based upon commercial norms and the Company's historical claims experience. A successful product liability or other claim brought against the Company in excess of its insurance coverage or the inability of the Company to acquire insurance at commercially reasonable rates could have a material adverse effect upon the Company's business, operating results and financial condition. VOLATILITY OF MARKET PRICE. From time to time, there may be significant volatility in the market price for the Common Stock. Quarterly operating results of the Company, changes in earnings estimated by analysts, changes in general conditions in the Company's industry or the economy or the financial markets or other developments affecting the Company could cause the market price of the Common Stock to fluctuate substantially. In addition, in recent years the stock market has experienced significant price and volume fluctuations. This volatility has had a significant effect on the market prices of securities issued by many companies for reasons unrelated to their operating performance. POSSIBLE ADVERSE EFFECT OF FUTURE SALES OF COMMON STOCK. The Company has filed a shelf registration statement to register for sale, from time to time on a continuous basis, an aggregate of 5 million shares of Common Stock which the Company has issued and intends to issue in connection with certain of its acquisitions or in other transactions. Such securities may be subject to resale restrictions in accordance with the Securities Act and the regulations promulgated thereunder, as well as resale limitations imposed by tax laws and regulations or by contractual provisions negotiated by the Company. As such -4-
restrictions lapse, such securities may be sold to the public. In the event of the issuance and subsequent resale of a substantial number of shares of Common Stock, or a perception that such sales could occur, there could be a material adverse effect on the prevailing market price of Common Stock. CONTROL BY PRINCIPAL SHAREHOLDER. William G. Miller, the Chairman of the Company, beneficially owns approximately 15% of the outstanding shares of Common Stock. Accordingly, Mr. Miller has the ability to exert significant influence over the business affairs of the Company, including the ability to influence the election of directors and the result of voting on all matters requiring shareholder approval. ANTI-TAKEOVER PROVISIONS OF CHARTER AND BYLAWS; PREFERRED STOCK. The Company's Charter and Bylaws contain restrictions that may discourage other persons from attempting to acquire control of the Company, including, without limitation, prohibitions on shareholder action by written consent and advance notice requirements respecting amendments to certain provisions of the Company's Charter and Bylaws. In addition, the Company's Charter authorizes the issuance of up to 5,000,000 shares of preferred stock. The rights and preferences for any series of preferred stock may be set by the Board of Directors, in its sole discretion and without shareholder approval, and the rights and preferences of any such preferred stock may be superior to those of Common Stock and thus may adversely affect the rights of holders of Common Stock. TOWING AND RECOVERY EQUIPMENT The Company offers a broad range of towing and recovery equipment products that meet most customer design, capacity and cost requirements. The Company manufactures the bodies of wreckers and car carriers, which are installed on truck chassis manufactured by third parties. Wreckers generally are used to recover and tow disabled vehicles and other equipment and range in type from the conventional tow truck to large recovery vehicles with rotating hydraulic booms and 60-ton lifting capacities. Car carriers are specialized flat bed vehicles with hydraulic tilt mechanisms that enable a towing operator to drive or winch a vehicle onto the bed for transport. Car carriers transport new or disabled vehicles and other equipment and are particularly effective over longer distances. The Company's products are sold primarily through independent distributors that serve all 50 states, Canada and Mexico, and other foreign markets including Europe, the Pacific Rim and the Middle East. As a result of its ownership of Jige in France and Boniface in the United Kingdom, the Company has substantial distribution capabilities in Europe. While most of the Company's distributor agreements do not contain exclusivity provisions, management believes that approximately 65% of the Company's independent distributors sell the Company's products on an exclusive basis. In addition to selling the Company's products to towing operators, the distributors provide parts and service. The Company also has independent sales representatives that exclusively market the Company's products and provide expertise and sales assistance to distributors. Management believes the strength of the Company's distribution network and the breadth of its product offerings are two key advantages over its competitors. -5-
PRODUCT LINE The Company manufactures a broad line of wrecker and car carrier bodies to meet a full range of customer design, capacity and cost requirements. The products are marketed under the Century, Vulcan, Challenger, Holmes, Champion, Chevron, Eagle, Jige, and Boniface brand names. WRECKERS. Wreckers are generally used to recover and tow disabled vehicles and other equipment and range in type from the conventional tow truck to large recovery vehicles with 60-ton lifting capacities. Wreckers are available with specialized features, including underlifts, L-arms and scoops, which lift disabled vehicles by the tires or front axle to minimize front end damage to the towed vehicles. Certain heavy duty wrecker models offer rotating booms, which allow heavy duty wreckers to recover vehicles from any angle, and proprietary remote control devices for operating wreckers. In addition, certain light duty wreckers are equipped with the patented "Eagle Claw" automatic wheellift hookup device that allows operators to engage a disabled or unattended vehicle without leaving the cab of the wrecker. The Company's wreckers range in capacity from 8 to 60 tons, and are characterized as light duty and heavy duty, with wreckers of 16-ton or greater capacity being classified as heavy duty. Light duty wreckers are used to remove vehicles from accident scenes and vehicles illegally parked, abandoned or disabled, and for general recovery. Heavy duty wreckers are used in commercial towing and recovery applications including overturned tractor trailers, buses, motor homes and other vehicles. CAR CARRIERS. Car carriers are specialized flat-bed vehicles with hydraulic tilt mechanisms that enable a towing operator to drive or winch a vehicle onto the bed for transport. Car carriers are used to transport new or disabled vehicles and other equipment and are particularly effective for transporting vehicles or other equipment over longer distances. In addition to transporting vehicles, car carriers may also be used for other purposes, including transportation of industrial equipment. In recent years, professional towing operators have added car carriers to their fleets to complement their towing capabilities. BRAND NAMES The Company manufactures and markets its wreckers and car carriers under nine separate brand names. Although certain of the brands overlap in terms of features, prices and distributors, each brand has its own distinctive image and customer base. CENTURY(R). The Century brand is the Company's "top-of-the-line" brand and represents what management believes to be the broadest product line in the industry. The Century line was started in 1974 and produces wreckers ranging from the 8-ton light duty to the 60-ton heavy duty models and car carriers in lengths from 17 1/2 to 26 feet. Management believes that the Century brand has a reputation as the industry's leading product innovator. VULCAN(R). The Company's Vulcan product line includes a range of premium light and heavy duty wreckers, car carriers and other towing and recovery equipment. The Vulcan line is operated autonomously with its own independent distribution network. -6-
CHALLENGER(R). The Company's Challenger products compete with the Century and Vulcan products and constitute a third premium product line. Challenger products consist of light to heavy duty wreckers with capacities ranging from 8 to 60 tons, and car carriers with lengths ranging from 17 1/2 to 26 feet. The Challenger line was started in 1975 and is known for high performance heavy duty wreckers and aesthetic design. HOLMES(R). The Company's Holmes product line includes mid-priced wreckers with 8 to 16 ton capacities and car carriers in 17 1/2 to 21 foot lengths. The Holmes wrecker was first produced in 1916. The Holmes name has been the most well-recognized and leading industry brand both domestically and internationally through most of this century. CHAMPION(R). The Champion brand, which was introduced in 1991, includes car carriers which range in length from 17 1/2 to 21 feet. The Champion product line, which is generally lower-priced, allows the Company to offer a full line of car carriers at various competitive price points. In 1993, the Champion line was expanded to include a line of economy tow trucks with integrated boom and underlift. CHEVRON(TM). The Company's Chevron product line is comprised primarily of premium car carriers. Chevron produces a range of premium single-car, multi-car and industrial carriers, light duty wreckers and other towing and recovery equipment. The Chevron line is operated autonomously with its own independent distribution network that focuses on the salvage industry. EAGLE(R). The Company's Eagle products consist of light duty wreckers with a patented "Eagle Claw" hook-up system that allows towing operators to engage a disabled or unattended vehicle without leaving the cab of the tow truck. The "Eagle Claw" hook-up system, which was patented in 1984, was originally developed for the repossession market. Since acquiring Eagle, the Company has upgraded the quality and features of the Eagle product line and expanded its recovery capability. The Eagle line is now gaining increased popularity in the broader towing and recovery vehicle market. JIGE(TM). The Company's Jige product line is comprised of a broad line of light and heavy duty wreckers and car carriers marketed primarily in Europe. Jige is a market leader best known for its innovative designs of car carriers and light wreckers necessary to operate within the narrow confines of European cities. BONIFACE(TM). The Company's Boniface product line is comprised primarily of heavy duty wreckers. Boniface produces a wide range of heavy duty wreckers specializing in the long underlift technology required to tow modern European tour buses. The Company's Holmes and Century brand names are associated with four of the major innovations in the industry: the rapid reverse winch, the tow sling, the hydraulic lifting mechanism, and the underlift with parallel linkage and L-arms. The Company's engineering staff, in consultation with manufacturing personnel, uses computer-aided design and stress analysis systems to test new product designs and to integrate various product improvements. In addition to offering product innovations, the Company focuses on developing or licensing new technology for its products. -7-
MANUFACTURING PROCESS The Company manufactures wreckers and car carriers at six manufacturing facilities located in the United States, France and England. The manufacturing process for the Company's products consists primarily of cutting and bending sheet steel or aluminum into parts that are welded together to form the wrecker or car carrier body. Components such as hydraulic cylinders, winches, valves and pumps, which are purchased by the Company from third-party suppliers, are then attached to the frame to form the completed wrecker or car carrier body. The completed body is either installed by the Company or shipped by common carrier to a distributor where it is then installed on a truck chassis. Generally, the wrecker or car carrier bodies are painted by the Company with a primer coat only, so that towing operators can select customized colors to coordinate with chassis colors or fleet colors. To the extent final painting is required before delivery, the Company contracts with independent paint shops for such services. The Company purchases raw materials and component parts from a number of sources. Although the Company has no long-term supply contracts, management believes the Company has good relationships with its primary suppliers. The Company has experienced no significant problems in obtaining adequate supplies of raw materials and component parts to meet the requirements of its production schedules. Management believes that the materials used in the production of the Company's products are available at competitive prices from an adequate number of alternative suppliers. Accordingly, management does not believe that the loss of a single supplier would have a material adverse effect on the Company's business. TOWING AND RECOVERY EQUIPMENT SALES AND DISTRIBUTION Management categorizes the towing and recovery market into three general product types: light duty wreckers, heavy duty wreckers and car carriers. The light duty wrecker market consists primarily of professional wrecker operators, repossession towing services, municipal and federal governmental agencies, and repair shop or salvage company owners. The heavy duty market is dominated by professional wrecker operators serving the needs of commercial vehicle operators. The car carrier market, historically dominated by automobile salvage companies, has expanded to include equipment rental companies that offer delivery service and professional towing operators who desire to complement their existing towing capabilities. Management estimates that there are approximately 30,000 professional towing operators and 80,000 service station, repair shop and salvage operators comprising the overall towing and recovery market. The Company's sales force, which services the Company's distribution network, consists of 40 sales representatives, 34 of whom are Company employees whose responsibilities include providing administrative and sales support to the entire distributor base. The remaining 6 sales representatives are independent contractors who market the Company's products exclusively. Sales representatives receive commissions on direct sales based on product type and brand and generally are assigned specific territories in which to promote sales of the Company's products and to maintain customer relationships. The Company has developed a diverse customer base consisting of approximately 175 distributors in North America, who serve all 50 states, Canada and Mexico, and approximately 50 distributors that serve other foreign markets. During the fiscal year ended April 30, 1999, no single distributor accounted for more than 5% of the Company's sales. Management believes the Company's broad and -8-
diverse customer base provides it with the flexibility to adapt to market changes, lessens its dependence on particular distributors and reduces the impact of regional economic factors. To support sales and marketing efforts, the Company produces demonstrator models that are used by the Company's sales representatives and distributors. To increase exposure to its products, the Company also has served as the official recovery team for many automobile racing events, including the Daytona, Talladega, Atlanta and Darlington NASCAR races, the Grand Prix in Miami, the Suzuka in Japan, the IMSA "24 Hours at Daytona" Molson Indy, the Brickyard, and the Indy 500 races, among others. The Company routinely responds to requests for proposals or bid invitations in consultation with its local distributors. The Company has been selected by the United States General Services Administration as an approved source for certain federal and defense agencies. The Company intends to continue to pursue government contracting opportunities. The towing and recovery equipment industry places heavy marketing emphasis on product exhibitions at national and regional trade shows. In order to focus its marketing efforts and to control marketing costs, the Company has reduced its participation in regional trade shows and now concentrates its efforts on five of the major trade shows each year. The Company works with its distributor network to concentrate on various regional shows. TOWING EQUIPMENT DISTRIBUTOR ACQUISITIONS During fiscal years 1997 and 1998, the Company's distribution group acquired 10 towing equipment distributors. These distributors are located in California, Colorado, Florida, Georgia, Illinois, Missouri and Mississippi and in British Columbia and Ontario, Canada. The acquired distributors market the Company's products as well as other specialty transportation equipment, and the Company intends to expand the number and types of products distributed through its distributors. The Company-owned distributors generally do not compete in the same geographic markets as the Company's independent distributors. The Company may acquire additional towing equipment distributors from time to time and anticipates financing such acquisitions with issuances of Common Stock, cash and/or borrowings under lines of credit, but is not currently a party to any agreement to acquire any other distributors. The Company uses an internal acquisition team, supplemented as needed by outside advisors, and its extensive contacts in the towing service industry, to identify, evaluate, acquire and integrate towing equipment distributors. Acquisition candidates are evaluated based on stringent criteria in a comprehensive process which includes operational, legal and financial due diligence reviews. FINANCIAL SERVICES The Company's Financial Services Group commenced operations in September 1996 to provide financial services to towing and recovery equipment distributors and towing service companies. The Company initially offered floor plan financing to distributors and purchase and lease financing to towing service operators. In addition to financing services, the Financial Services Group now provides insurance coverage, extended warranties and related services to purchasers of the Company's products. -9-
The Company has entered into business relationships with Associates Commercial Corporation, and others (the "Lenders") to jointly market financing of the Company's products. As part of these relationships, the Company, through its owned and independent distributors, originates lease and loan financing for its end-consumers, and the Lenders provide the financing and servicing of the leases and loans. In return for the Company's marketing activities, the Lenders pay a fee based on amounts financed. The Company expects to capitalize on its strong existing relationships with its distributors and their customers and its reputation for reliable service to develop the Financial Services Group. PRODUCT WARRANTIES AND INSURANCE The Company offers a 12-month limited manufacturer's product and service warranty on its wrecker and car carrier products. The Company's warranty generally provides for repair or replacement of failed parts or components. Warranty service is usually performed by the Company or an authorized distributor. Due to its emphasis on quality production, the Company's warranty expense in fiscal 1999 averaged less than 1% of net sales. Management believes that the Company maintains adequate general liability and product liability insurance. BACKLOG The Company produces virtually all of its products to order. The Company's backlog is based upon customer purchase orders that the Company believes are firm. The level of backlog at any particular time, however, is not an appropriate indicator of the future operating performance of the Company. Certain purchase orders are subject to cancellation by the customer upon notification. Given the Company's production and delivery schedules, as well as the recent plant expansions, management believes that the current backlog represents less than three months of production. COMPETITION The towing and recovery equipment manufacturing industry is highly competitive for sales to distributors and towing operators. Management believes that competition in the towing and recovery equipment industry is a function of product quality and innovation, reputation, technology, customer service, product availability and price. The Company competes on the basis of each of these criteria, with an emphasis on product quality and innovation and customer service. Management also believes that a manufacturer's relationship with distributors is a key component of success in the industry. Accordingly, the Company has invested substantial resources and management time in building and maintaining strong relationships with distributors. Management also believes that the Company's products are regarded as high quality within their particular price points. The Company's marketing strategy is to continue to compete primarily on the basis of quality and reputation rather than solely on the basis of price, and to continue to target the growing group of professional towing operators who as end-users recognize the quality of the Company's products. Traditionally, the capital requirements for entry into the towing and recovery manufacturing industry have been relatively low. Management believes a manufacturer's capital resources and access to technological improvements have become a more integral component of success in recent years. Accordingly, management believes that the Company's ownership of patents on certain of the -10-
industry's leading technologies has given it a competitive advantage. Certain of the Company's competitors may have greater financial and other resources and may provide more attractive dealer and retail customer financing alternatives than the Company. EMPLOYEES At April 30, 1999, the Company employed approximately 1,287 people in its towing and recovery equipment manufacturing and distribution operations. None of the Company's employees is covered by a collective bargaining agreement, though its employees in France and England have certain similar rights provided by their respective government's employment regulations. The Company considers its employee relations to be good. TOWING SERVICES - ROADONE In February 1997, the Company formed its towing services division, RoadOne, to begin building a national towing service network. With the acquisition of 112 towing service companies as of July 23, 1999, RoadOne has become a leading towing service company with operations at over 200 locations in 27 states. RoadOne's corporate offices are located in Chattanooga, Tennessee. Historically, the towing service industry has been highly fragmented, with an estimated 30,000 professional towing operators in the United States, many that are undercapitalized local operators with no viable means of independently realizing the economic value they have created for their businesses. As the Company continues to pursue the acquisition of towing service companies, management believes that these owned companies, along with affiliations established with non-owned professional towing operations, will form an organization capable of offering commercial industries, as well as the general public, consistent, high quality service across the nation. The Company's strategy is to build brand loyalty among towing service customers by emphasizing consistently high quality and dependable service from multiple locations throughout a broad geographic area. The Company intends to market these services to organizations with widely dispersed fleets of vehicles that would benefit from a single source provider. SERVICES PROVIDED Services provided by RoadOne include towing and recovery and specialized transportation services. RoadOne's towing and recovery services primarily involve providing road-side assistance to disabled vehicles which allows such vehicles to proceed under their own power, or towing disabled or abandoned vehicles to a location designated by the customer. RoadOne derives revenue from towing and recovery services based on distance, time or fixed charges and from storage services based on daily fees. These services are primarily provided to commercial entities, such as fleet operators, automobile dealers, repair shops, automobile leasing companies, and automobile auction companies; public entities such as municipalities, police, sheriff and highway patrol departments, colleges and universities, and toll-road departments; motor clubs; and individual motorists. RoadOne conducts lien and salvage sales of certain vehicles in conjunction with its towing and recovery services. RoadOne also provides limited environmental clean-up services in some areas. RoadOne's specialized transportation services primarily involve transporting new and used vehicles, construction equipment and industrial equipment. RoadOne derives revenue from transport services based on distance, -11-
time or fixed charges. These services are primarily provided to automobile leasing companies, automobile auction companies, automobile dealers, fleet operators, construction companies, and industrial manufacturers. TOWING, RECOVERY AND ROAD SERVICES COMMERCIAL. RoadOne provides commercial road services to a broad range of commercial customers, including automobile dealers and repair shops. RoadOne typically charges a flat fee and a mileage premium for these towing services. Commercial road services also include towing and recovery of heavy-duty trucks, recreational vehicles, buses and other large vehicles, typically for commercial fleet operators. RoadOne charges an hourly rate based on the towing vehicle used for these specialized services. RoadOne also provides private impound towing services to commercial customers, such as shopping centers, retailers and hotels, which engage RoadOne to tow vehicles that are parked illegally on their property. MUNICIPAL. RoadOne also provides towing and recovery services to public entities such as municipalities and police, sheriff and highway patrol departments. In a limited number of markets, RoadOne provides municipal freeway service towing to local transit districts and other transportation agencies through patrolling a preset route on heavily-used freeways and towing or otherwise assisting disabled vehicles. These services are in some cases provided under contracts, typically for terms of five years or less, that are terminable for material breach and are typically subject to competitive bidding upon expiration. In other cases, RoadOne provides these services without a long-term contract. Whether pursuant to a contract or an ongoing relationship, these services are generally provided by RoadOne for a designated geographic area, or shared with one or more other companies on a rotation basis. MOTOR CLUB. RoadOne provides towing and recovery services under contract to national motor clubs for the disabled vehicles of their members. Roadside assistance is provided and, if necessary, vehicles are towed to repair facilities for a flat fee paid by either the individual motorist or the motor club. CONSUMER TOWING AND RECOVERY. RoadOne provides towing and recovery services to individual motorists for their disabled vehicles. Roadside assistance is provided and, if necessary, vehicles are towed to repair facilities for a flat fee paid by the individual motorist. LIEN AND SALVAGE SALES. In conjunction with providing towing and recovery services, vehicles may be towed to a Company facility where the vehicle is impounded and placed in storage. Such a vehicle will remain in storage until its owner pays the towing fee, which is typically based on an hourly charge, and any daily storage fees to the Company, as well as any fines due to law enforcement agencies. If the vehicle is not claimed within a period prescribed by law (typically between 30 and 90 days), RoadOne may complete lien proceedings and sell the vehicle at auction or to a scrap metal facility, depending on the value of the vehicle. ENVIRONMENTAL CLEANUP. RoadOne also provides environmental cleanup services to a range of commercial customers in some markets. These services are typically provided when there is a spill of a petroleum product in conjunction with a wrecked vehicle requiring towing and recovery services, but may also involve an isolated spill. RoadOne does not cleanup spills of materials designated as Hazardous Materials by the Environmental Protection Agency. There -12-
are fixed and variable components to the fees charged by RoadOne for its environmental cleanup services. SPECIALIZED TRANSPORTATION CONSTRUCTION EQUIPMENT. RoadOne provides construction equipment transport services to construction companies, contractors, municipalities and equipment leasing companies for mobile cargo such as cranes, bulldozers, forklifts and other heavy construction equipment. Service fees are based on the vehicle used and the distance traveled. INDUSTRIAL EQUIPMENT. RoadOne provides industrial equipment transport services to manufacturing companies, construction companies, contractors, municipalities and equipment leasing companies for immobile cargo such as engines, industrial generators and heavy construction materials. Service fees may be based on the vehicle used and the distance traveled or may be determined using an hourly rate based on the towing vehicle used for these specialized services. NEW AND USED AUTOMOBILE. RoadOne provides automobile transport services to leasing companies, automobile dealers, automobile auction companies, long-distance transporters, brokers and individuals. Services typically are provided as needed by particular customers and charged according to pre-set rates based on mileage. RoadOne provides transport services for dealers with used cars coming off lease and who transfer new cars from one region to another based on demand. The Company also provides local collection and delivery support to long-haul automobile transporters. DISPATCH SYSTEMS RoadOne currently dispatches its towing and recovery and specialized transportation services via existing local dispatch systems operated by its individual subsidiaries. Some of these subsidiaries utilize computerized positioning systems which identify and track vehicle location and status in a localized area. RoadOne intends to continue to use these existing dispatch systems, while developing and implementing a national computerized dispatch system that will more efficiently support its national, regional and local customers in allocating and utilizing assets on every level. TOWING SERVICE ACQUISITIONS The Company intends to continue to acquire additional towing service operations. The Company has targeted professional towers, and generally seeks operators who have good reputations in their markets and solid management willing to continue in the employment of the Company after the acquisition. The Company uses an internal acquisition team, supplemented as needed by outside advisors, and its extensive contacts in the towing service industry, to identify, evaluate, acquire and integrate towing operators. Acquisition candidates are evaluated based on criteria in a comprehensive process which includes operational, legal and financial due diligence reviews. The Company expects to utilize Common Stock, cash, or both as consideration for future acquisitions. During fiscal 1999, the Company acquired 35 towing service companies in separate transactions, none of which were individually material to the financial results of the Company. The Company issued an aggregate of approximately 1.2 million shares of Common Stock and paid approximately $22.3 million in cash in such transactions which have been accounted for under the purchase method of -13-
accounting. Subsequent to April 30, 1999, the Company has acquired one additional towing service company as of July 23, 1999, paying approximately $1.3 million in cash. This transaction was accounted for under the purchase method of accounting. At July 23, 1999, the Company had entered into letters of intent to acquire six additional towing service companies in transactions expected to close over the following several weeks. These transactions are subject to customary conditions, including completion of due diligence investigations and execution of definitive acquisition agreements, among others. The Company intends to continue to aggressively pursue additional purchases of towing service companies. AFFILIATE PROGRAM In order to offer a nationwide towing service, the Company has established an affiliate program under which independent professional towers who meet the Company's criteria provide towing services under the RoadOne name as "affiliates." RoadOne affiliated companies will be offered many of the benefits of owned companies, such as product rebates, lower costs for financing and insurance, quantity buying advantages, national marketing strength and driver training. The Company's intention is eventually to sign agreements with a large number of RoadOne affiliates across North America. As of July 23, 1999, the Company had signed 2,184 agreements with RoadOne affiliates in all 50 states, Puerto Rico and five provinces in Canada. COMPETITION Historically, the towing service industry has been highly fragmented, with an estimated 30,000 professional towing operators in the United States. The Company believes that its consolidation of a number of these companies will give it brand loyalty among towing service customers through an emphasis on consistently high quality and dependable service from multiple locations over a broad geographic area. The Company expects to market these services to organizations with widely dispersed fleets of vehicles that would benefit from a single source provider. However, the size of the towing service industry will mean that the Company's operations will face continued competition from many operators across the country. The Company also faces competition in its consolidation of professional towing operators. These operators could be consolidated by other companies, individuals or entities, or they could enter into affiliate relationships with other companies. In addition, the Company's presence in the towing service industry presents the risk that it could be viewed as being in competition with other customers of the Company. EMPLOYEES At April 30, 1999, the Company employed approximately 3,022 people at RoadOne. None of the Company's RoadOne employees are covered by a collective bargaining agreement. The Company considers its employee relations to be good. -14-
PATENTS AND TRADEMARKS The development of the underlift parallel linkage and L-arms in 1982 is considered one of the most innovative developments in the wrecker industry in the last 25 years. This technology is significant primarily because it allows the damage-free towing of newer aerodynamic vehicles made of lighter weight materials. Patents for this technology were granted to an operating subsidiary of the Company in 1987 and 1989. These patents expire in mid-year 2004. This technology, particularly the L-arms, is used in a majority of the commercial wreckers today. Management believes that utilization of such devices without a license is an infringement of the Company's patents. The Company has successfully litigated infringement lawsuits in which the validity of the Company's patents on this technology was upheld, and successfully settled other lawsuits. The Company also holds a number of other utility and design patents covering other products, including the "Eagle-Claw" hook up system, the Vulcan "scoop" wheel-retainer and the car carrier anti-tilt device. The Company has also obtained the rights to use and develop certain technologies owned or patented by others. The Company's trademarks "Century," "Holmes," "Champion," "Challenger," "Formula I," "Eagle Claw Self-Loading Wheellift," "Pro Star," "Street Runner," "Vulcan," and "RoadOne," among others, are registered with the United States Patent and Trademark Office. Management believes that the Company's trademarks are well-recognized by dealers, distributors and end-users in their respective markets and are associated with a high level of quality and value. GOVERNMENT REGULATIONS AND ENVIRONMENTAL MATTERS The Company's operations are subject to federal, state and local laws and regulations relating to the generation, storage, handling, emission, transportation and discharge of materials into the environment. Management believes that the Company is in substantial compliance with all applicable federal, state and local provisions relating to the protection of the environment. The costs of complying with environmental protection laws and regulations has not had a material adverse impact on the Company's financial condition or results of operations in the past and is not expected to have a material adverse impact in the future. The Company is also subject to the Magnuson-Moss Warranty Federal Trade Commission Improvement Act which regulates the description of warranties on products. The description and substance of the Company's warranties are also subject to a variety of federal and state laws and regulations applicable to the manufacturing of vehicle components. Management believes that continued compliance with various government regulations will not materially affect the operations of the Company. The Financial Services Group is subject to regulation under various federal, state and local laws which limit the interest rates, fees and other charges that may be charged by it or prescribe certain other terms of the financing documents that it enters into with its customers. Management believes that the additional administrative costs of complying with these regulations will not materially affect the operations of the Company. -15-
EXECUTIVE OFFICERS OF THE REGISTRANT <TABLE> <CAPTION> NAME AGE POSITION WITH THE COMPANY ---- --- ------------------------- <S> <C> <S> William G. Miller...................... 52 Chairman of the Board Jeffrey I. Badgley..................... 48 President, Chief Executive Officer and Director James A. McKinney...................... 54 Chief Executive Officer - RoadOne, Inc. and Director Frank Madonia.......................... 50 Executive Vice President, Secretary and General Counsel J. Vincent Mish........................ 48 Vice President, Chief Financial Officer and President of Financial Services Group Daniel N. Sebastian.................... 56 Vice President </TABLE> WILLIAM G. MILLER has served as Chairman of the Board since April 1994. Mr. Miller served as Chief Executive Officer of the Company from April 1994 to June 1997, as Co-Chief Executive Officer of the Company from June 1997 to November 1997, and as President of the Company from April 1994 to June 1996. He served as Chairman of Miller Group, Inc., from August 1990 through May 1994, as its President from August 1990 to March 1993, and as its Chief Executive Officer from March 1993 until May 1994. Prior to 1987, Mr. Miller served in various management positions for Bendix Corporation, Neptune International Corporation, Wheelabrator-Frye Inc. and The Signal Companies, Inc. JEFFREY I. BADGLEY has served as Chief Executive Officer of the Company since November 1997, as President since June 1996, and as a director since January 1996. Mr. Badgley served as Co-Chief Executive Officer of the Company from June 1997 to November 1997, as Chief Operating Officer of the Company from June 1996 to June 1997 and as Vice-President of the Company from April 1994 to June 1996. In addition, Mr. Badgley serves as President of Miller Industries Towing Equipment Inc. Mr. Badgley served as Vice President - Sales of Miller Industries Towing Equipment Inc. from 1988 to 1996. Mr. Badgley served as Vice President - Sales and Marketing of Challenger Wrecker Manufacturing, Inc., from 1982 until joining Miller Industries Towing Equipment Inc. JAMES A. MCKINNEY has served as Chief Executive Officer of RoadOne, Inc. since June 1999, and as a director of the Company since June 1999. From August 1998 through June 1999, Mr. McKinney served as Executive Vice President of Rollins, Inc.. From January 1997 through May 1998, Mr. McKinney served as the Chief Executive Officer of Skywire. From 1993 to 1997 he served as Senior Vice President for Federal Express. FRANK MADONIA has served as Executive Vice President, General Counsel and Secretary of the Company since September 1998. From April 1994 to September 1998 Mr. Madonia served as Vice President, General Counsel and Secretary of the Company. Mr. Madonia served as Secretary and General Counsel to Miller Industries Towing Equipment Inc. since its acquisition by Miller Group in 1990. From July 1987 through April 1994, Mr. Madonia served as Vice President, General Counsel and Secretary of Flow Measurement. Prior to 1987, Mr. Madonia served in various legal and management positions for United States Steel Corporation, Neptune International Corporation, Wheelabrator-Frye Inc., The Signal Companies, Inc. and Allied-Signal Inc. In addition, Mr. Madonia is registered to practice before the United States Patent and Trademark Office. J. VINCENT MISH is a certified public accountant and has served as President of the Financial Services Group since September 1996 and as a Vice President of the Company since April 1994. From April 1994 through September 1996, Mr. Mish served as Chief Financial Officer and Treasurer of the Company, a -16-
position he reassumed in June, 1999. Mr. Mish served as Vice President and Treasurer of Miller Industries Towing Equipment Inc. since its acquisition by Miller Group in 1990. From February 1987 through April 1994, Mr. Mish served as Vice President and Treasurer of Flow Measurement. Mr. Mish worked with Touche Ross & Company (now Deloitte and Touche) for over ten years before serving as Treasurer and Chief Financial Officer of DNE Corporation from 1982 to 1987. Mr. Mish is a member of the American Institute of Certified Public Accountants and the Tennessee, Georgia and Michigan Certified Public Accountant societies. DANIEL N. SEBASTIAN has served as Vice President of the Company since April 1994. Mr. Sebastian has also served as President of Champion Carrier Corporation ("Champion"), a wholly owned subsidiary of the Company, since July 1993. Mr. Sebastian served as Vice President of SAFEREC, Inc., a towing and recovery distributorship, from 1987 until 1988, at which time he became the operating manager of Champion. Mr. Sebastian has over 25 years of experience in the towing and recovery industry. ITEM 2. PROPERTIES The Company operates four manufacturing facilities in the United States. The facilities are located in (i) Ooltewah, Tennessee, (ii) Hermitage, Pennsylvania, (iii) Mercer, Pennsylvania, and (iv) Greeneville, Tennessee. The Ooltewah plant, containing approximately 208,000 square feet, produces light and heavy duty wreckers; the Hermitage plant, containing approximately 95,000 square feet, produces car carriers; the Mercer plant, which was acquired in December 1997, contains approximately 100,000 square feet, produces car carriers and light duty wreckers; and the Greeneville plant, containing approximately 100,000 square feet, primarily produces car carriers. The Company operates two foreign manufacturing facilities located in the Lorraine region of France, which contain, in the aggregate, approximately 100,000 square feet, and one in Norfolk, England, which contains approximately 22,500 square feet. Management believes that its existing manufacturing facilities will allow the Company to meet anticipated demand for its products. In connection with its acquisition of over 112 towing service companies, the Company has acquired or entered into leases for property at over 200 locations in 27 states. These facilities are utilized as offices for administrative and dispatch operations, garages for repair and upkeep of towing vehicles, and lots for storage and impounding of towed cars. RoadOne's corporate offices are housed in 10,000 square feet of leased space in Chattanooga, Tennessee. ITEM 3. LEGAL PROCEEDINGS In January 1998, the Company received a letter from the Antitrust Division of the Department of Justice (the "Division") stating that it was conducting a civil investigation covering "competition in the tow truck industry." The letter asked that the Company preserve its records related to the tow truck industry, particularly documents related to sales and prices of products and parts, acquisition of other companies in the industry, distributor relations, patent matters, competition in the industry generally, and activities of other companies in the industry. In March 1998, the Company received a Civil Investigation Demand ("CID") issued by the Division as part of its continuing investigation of whether there are, have been or may be violations of the -17-
federal antitrust statutes in the tow truck industry. Under this CID, the Company has produced information and documents to assist in the investigation, has corresponded and met with the Division concerning the investigation, and is continuing to cooperate with the Division. It is unknown at this time what the eventual outcome of the investigation will be. During September, October and November 1997, five lawsuits were filed by certain persons who seek to represent a class of shareholders who purchased shares of the Company's common stock during the period from either October 15 or November 6, 1996 to September 11, 1997. Four of the suits were filed in the United States District Court for the Northern District of Georgia. The remaining suit was filed in the Chancery Court of Hamilton County, Tennessee. In general, the individual plaintiffs in all of the cases allege that they were induced to purchase the Company's common stock on the basis of allegedly actionable misrepresentations or omissions about the Company and its business and, as a result were thereby damaged. Four of the complaints assert claims under Sections 10(b) and 20 of the Securities Act of 1934. The complaints name as the defendants the Company and various of its present and former directors and officers. The plaintiffs in the four actions which involved claims in Federal Court under the Securities Exchange Act of 1934 have consolidated those actions. The Company filed a motion to dismiss in the consolidated case which was granted in part and denied in part. The proposed class was certified by order dated May 27, 1999. The Company filed a motion to dismiss in the Tennessee case which was granted in its entirety. The plaintiffs in that case, with permission from the Court, amended and refiled their complaint, which was dismissed with prejudice by order of the Court dated March 11, 1999. On April 5, 1999 counsel for plaintiffs filed a notice of appeal. In both these actions, the Company has denied liability and will continue to vigorously defend itself. In addition to the shareholder litigation described above, the Company is, from time to time, a party to litigation arising in the normal course of its business. Management believes that none of these actions, individually or in the aggregate, will have a material adverse effect on the financial position or results of operations of the Company. ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to a vote of security holders of the Registrant during the fourth quarter of the fiscal year covered by this Report. PART II ITEM 5 MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The Registrant's Common Stock is traded on the New York Stock Exchange ("NYSE") under the symbol "MLR." The following table sets forth the quarterly range of high and low sales prices for the Common Stock for the period from May 1, 1997 through April 30, 1999. -18-
<TABLE> <CAPTION> HIGH LOW ---- ---- <S> <C> <C> FISCAL YEAR ENDED APRIL 30, 1998 First Quarter $17.63 $11.88 Second Quarter $18.25 $ 9.00 Third Quarter $12.00 $ 9.06 Fourth Quarter $11.44 $ 6.19 FISCAL YEAR ENDED APRIL 30, 1999 First Quarter $ 8.88 $ 6.19 Second Quarter $ 7.44 $ 3.75 Third Quarter $ 7.00 $ 4.00 Fourth Quarter $ 6.31 $ 4.19 </TABLE> The approximate number of holders of record and beneficial owners of Common Stock as of July 27, 1999 was 1,874 and 10,000, respectively. The Company has never declared cash dividends on the Common Stock. The Company intends to retain its earnings to finance the expansion of its business and does not anticipate paying cash dividends in the foreseeable future. Any future determination as to the payment of cash dividends will depend upon such factors as earnings, capital requirements, the Company's financial condition, restrictions in financing agreements and other factors deemed relevant by the Board of Directors. The payment of dividends by the Company is restricted by its revolving credit facility. ITEM 6. SELECTED FINANCIAL DATA Pursuant to Rule 12b-25, this item has been omitted from this Form 10-K and will be filed by subsequent amendment. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULT OF OPERATIONS Pursuant to Rule 12b-25, this item has been omitted from this Form 10-K and will be filed by subsequent amendment. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Pursuant to Rule 12b-25, this item has been omitted from this Form 10-K and will be filed by subsequent amendment. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Not applicable. -19-
PART III ITEM 10 DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT DIRECTORS NAME OF DIRECTOR BACKGROUND INFORMATION Jeffrey I. Badgley Mr. Badgley, 48, has served as Chief Executive Officer of the Company since November 1997, as President of the Company since June 1996 and as a director since January 1996. In June 1997, he was named Co-Chief Executive Officer of the Company, a title he shared with Mr. Miller until November 1997. Mr. Badgley served as Vice President of the Company from 1994 to 1996, and as Chief Operating Officer of the Company from June 1996 to June 1997. In addition, Mr. Badgley has served as President of Miller Industries Towing Equipment Inc. since 1996. Mr. Badgley served as Vice President - Sales of Miller Industries Towing Equipment Inc. from 1988 to 1996. He previously served as Vice President - Sales and Marketing of Challenger Wrecker Corporation ("Challenger Wrecker"), from 1982 until joining Miller Industries Towing Equipment Inc. A. Russell Chandler, III Mr. Chandler, 54, has served as a director of the Company since April 1994. He currently serves as Chairman of Amplified.Com, an internet music provider, and is founder and Chairman of Whitehall Group Ltd., a private investment firm based in Atlanta, Georgia. Mr. Chandler served as the Mayor of the Olympic Village for the Atlanta Committee for the Olympic Games from 1990 through August 1996. From 1987 to 1993, he served as Chairman of United Plastic Films, Inc., a manufacturer and distributor of plastic bags. He founded Qualicare, -20-
Inc., a hospital management company, in 1972 and served as President and Chief Executive Officer until its sale in 1983. In addition, Mr. Chandler serves on a number of community advisory boards, including the Wharton Graduate Advisory Board and the Georgia Tech Foundation Board of Trustees. Paul E. Drack Mr. Drack, 70, has served as a director of the Company since April 1994. Mr. Drack is also a director of Euramax International PLC. Mr. Drack retired in December 1993 as President and Chief Operating Officer of AMAX Inc., positions he held since August 1991. From 1985 to 1991, Mr. Drack served in various capacities for operating subsidiaries of AMAX Inc. including Chairman, President and Chief Executive Officer of Alumax Inc. and President of Kawneer Company. He was a director of AMAX Inc. from 1988 to 1993. Prior to its acquisition by another entity in November 1993, AMAX Inc. was a producer of aluminum and manufactured aluminum products with interests in domestic energy and gold production. James A. McKinney Mr. McKinney, 54, has served as Chief Executive Officer of RoadOne, Inc. since June 1999, and as a director of the Company since June 1999. From August 1998 through June 1999, Mr. McKinney served as Executive Vice President of Rollins, Inc.. From January 1997 through May 1998, Mr. McKinney served as the Chief Executive Officer of Skywire. From 1993 to 1997 he served as Senior Vice President for Federal Express. William G. Miller Mr. Miller, 52, has served as Chairman of the Board since April 1994. He served as Chief Executive Officer of the Company from April 1994 until June 1997. In June 1997, he was named Co-Chief Executive Officer, a title he shared with the Company's President, Jeffrey I. Badgley until November 1997. Mr. Miller also served as President of the Company from April 1994 to June 1996. He served as Chairman of Miller Group, Inc., from August 1990 through May 1994, as its President from August 1990 to March 1993, and as its Chief Executive Officer from March 1993 until May 1994. Prior to 1987, Mr. Miller served in various management positions for Bendix Corporation, Neptune International Corporation, Wheelabrator-Frye Inc. and The Signal Companies, Inc. Richard H. Roberts Mr. Roberts, 45, has served as a director of the Company since April 1994. Mr. Roberts currently serves as Senior Vice President, Secretary and General Counsel of Forward Corporation. Mr. Roberts has also served as Senior Vice President, Secretary and General Counsel of Landair Corporation, a position he has held since September 1998. Mr. Roberts was partner in the law firm of Baker, Worthington, Crossley & Stansberry from January 1991 to August 1994 and prior thereto was an associate of the firm. Mr. Roberts has served as a director of Forward Air Corporation and Laindair Corporation. EXECUTIVE OFFICERS Information relating to the executive officers of the Registrant is included in Item 1 of this Report. ITEM 11. EXECUTIVE COMPENSATION The information contained under the heading "EXECUTIVE COMPENSATION" in the definitive Proxy Statement used in connection with the solicitation of proxies for the Registrant's Annual Meeting of Shareholders to be filed with the Commission, is hereby incorporated herein by reference. Pursuant to Instruction 3 to Paragraph (b) of Item 401 of Regulation S-K, information relating to the executive officers of the Registrant is included in Item 1 of this Report. -21-
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth, as of July 27, 1999, certain information with respect to (a) all shareholders known to be "beneficial owners" (as that term is defined in the rules of the Securities and Exchange Commission) of more than five percent of the Common Stock; and (b) the Common Stock "beneficially owned" (i) by each director or nominee for director, (ii) by the executive officers named above under "Executive Officers of the Registrant," and (iii) all executive officers and directors of the Company as a group. Except as otherwise indicated, the shareholders listed in the table have sole voting and investment powers with respect to the Common Stock owned by them. <TABLE> AMOUNT AND NATURE OF BENEFICIAL PERCENT OF NAME AND ADDRESS OF BENEFICIAL OWNER OWNERSHIP<F1> CLASS<F1> - ------------------------------------ ------------- --------- <S> <C> <C> William G. Miller<F2> 6,369,409<F3> 13.61% Jeffrey I. Badgley 364,756<F4> * Frank Madonia 323,756<F5> * J. Vincent Mish 325,631<F6> * James A. McKinney - * Adam L. Dunayer 83,500<F7> * A. Russell Chandler, III 95,919<F8> * Paul E. Drack 95,918<F9> * Richard H. Roberts 80,918<F10> * Daniel N. Sebastian 296,956<F11> * All Executive Officers and Directors as a Group 8,036,763<F12> 17.17% (10 persons) - ---------------------------- <FN> * Less than one percent <F1> The Percent of Class column represents the percentage that the named person or group would beneficially own if such person or group, and only such person or group, exercised all currently exercisable options and rights to acquire shares of Common Stock held by such person or group. <F2> Mr. Miller's business address is c/o Miller Industries, Inc., 3220 Pointe Parkway, Suite 100, Norcross, Georgia 30092. <F3> Includes 546,444 shares held by the Miller Family Foundation, Inc., a Georgia non-profit corporation of which Mr. Miller is the sole director. <F4> Includes 288,179 shares which are issuable pursuant to options which are exercisable within sixty days of the date set forth above. <F5> Includes 245,679 shares which are issuable pursuant to options which are exercisable within sixty days of the date set forth above. <F6> Includes 247,554 shares which are issuable pursuant to options which are exercisable within sixty days of the date set forth above. <F7> Includes 83,500 shares which are issuable pursuant to options which are exercisable within sixty days of the date set forth above. <F8> Includes 95,919 shares which are issuable pursuant to options which are exercisable within sixty days of the date set forth above. <F9> Includes 95,918 shares which are issuable pursuant to options which are exercisable within sixty days of the date set forth above. <F10> Includes 80,918 shares which are issuable pursuant to options which are exercisable within sixty days of the date set forth above. <F11> Includes 221,521 shares which are issuable pursuant to options which are exercisable within sixty days of the date set forth above. <F12> Includes 1,364,688 shares which are issuable pursuant to options which are exercisable within sixty days of the date set forth above. </FN> </TABLE> -22-
For purposes of determining the aggregate market value of the Registrant's voting stock held by nonaffiliates, shares held by all current directors and executive officers of the Registrant have been excluded. The exclusion of such shares is not intended to, and shall not, constitute a determination as to which persons or entities may be "affiliates" of the Registrant as defined by the Securities and Exchange Commission. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS None. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (A)(1) Pursuant to Rule 12b-25, this item has been omitted from this Form 10-K and will be filed by subsequent amendment. (A)(2) Pursuant to Rule 12b-25, this item has been omitted from this Form 10-K and will be filed by subsequent amendment. -23-
(A)(3) EXHIBITS The following exhibits are required to be filed with this Report by Item 601 of Regulation S-K: <TABLE> <CAPTION> INCORPORATED BY REFERENCE TO EXHIBIT REGISTRATION OR FILE FORM OR REPORT DATE OF REPORT NUMBER IN DESCRIPTION NUMBER REPORT - ------------ ----------------------------------------- ------------------------ ------------------- -------------------------------- <C> <S> <C> <C> <S> <C> 3.1 Charter of the Registrant (composite - 10-K April 30, 1998 3.1 conformed copy) 3.2 Bylaws of the Registrant 33-79430 S-1 August 1994 3.2 10.1 Settlement Letter dated April 27, 1994 33-79430 S-1 August 1994 10.7 between Miller Group, Inc. and the Management Group 10.5 Participants Agreement dated as of 33-79430 S-1 August 1994 10.11 April 30, 1994 between the Registrant, Century Holdings, Inc., Century Wrecker Corporation, William G. Miller and certain former shareholders of Miller Group, Inc. 10.20 Technology Transfer Agreement dated 33-79430 S-1 August 1994 10.26 March 21, 1991 between Miller Group, Inc., Verducci, Inc. and Jack Verducci 10.21 Form of Noncompetition Agreement 33-79430 S-1 August 1994 10.28 between the Registrant and certain officers of the Registrant 10.22 Form of Nonexclusive Distributor 33-79430 S-1 August 1994 10.31 Agreement 10.23 Miller Industries, Inc. Stock Option 33-79430 S-1 August 1994 10.1 and Incentive Plan** 10.24 Form of Incentive Stock Option 33-79430 S-1 August 1994 10.2 Agreement** 10.25 Miller Industries, Inc. Cash Bonus 33-79430 S-1 August 1994 10.3 Plan** 10.26 Miller Industries, Inc. Non-Employee 33-79430 S-1 August 1994 10.4 Director Stock Option Plan** -24-
<CAPTION> INCORPORATED BY REFERENCE TO EXHIBIT REGISTRATION OR FILE FORM OR REPORT DATE OF REPORT NUMBER IN DESCRIPTION NUMBER REPORT - ------------ ----------------------------------------- ------------------------ ------------------- -------------------------------- <C> <S> <C> <C> <C> <C> 10.27 Form of Director Stock Option 33-79430 S-1 August 1994 10.5 Agreement** 10.28 Employment Agreement dated October 14, 33-79430 S-1 August 1994 10.29 1993 between Century Wrecker Corporation and Jeffrey I. Badgley** 10.29 First Amendment to Employment Agreement 33-79430 S-1 August 1994 10.33 between Century Wrecker Corporation and Jeffrey I. Badgley** 10.30 Form of Employment Agreement between - Form 10-K April 30, 1995 10.37 Registrant and each of Messrs. Madonia and Mish** 10.31 First Amendment to Miller Industries, - Form 10-K April 30, 1995 10.38 Inc. Non-Employee Director Stock Option Plan** 10.32 Second Amendment to Miller Industries, - Form 10-K April 30, 1996 10.39 Inc. Non-Employee Director Stock Option Plan** 10.33 Second Amendment to Miller Industries, - Form 10-K April 30, 1996 10.40 Inc. Stock Option and Incentive Plan** 10.34 Employment Agreement dated July 8, 1997 0-24298 Form 10-Q/A July 31, 1997 10 between the Registrant and William G. Miller** 10.35 Credit Agreement Among NationsBank of - Form 10-K April 30, 1998 10.35 Tennessee, N.A., the Registrant and certain subsidiaries of Registrant dated January 30, 1998. 10.36 Negative Pledge Agreement Among - Form 10-K April 30, 1998 10.36 NationsBank of Tennessee, N.A., the Registrant and certain subsidiaries of Registrant dated January 30, 1998. -25-
<CAPTION> INCORPORATED BY REFERENCE TO EXHIBIT REGISTRATION OR FILE FORM OR REPORT DATE OF REPORT NUMBER IN DESCRIPTION NUMBER REPORT - ------------ ----------------------------------------- ------------------------ ------------------- -------------------------------- <C> <S> <C> <C> <C> <C> 10.37 Guaranty Agreement Among NationsBank of - Form 10-K April 30, 1998 10.37 Tennessee, N.A. and certain subsidiaries of Registrant dated January 30, 1998. 10.38 Stock Pledge Agreement Between - Form 10-K April 30, 1998 10.38 NationsBank of Tennessee, N.A. and the Registrant dated January 30, 1998. 10.39 Stock Pledge Agreement Between - Form 10-K April 30, 1998 10.39 NationsBank of Tennessee, N.A. and the certain subsidiaries of the Registrant dated January 30, 1998. 10.40 Revolving Note Among NationsBank of - Form 10-K April 30, 1998 10.40 Tennessee, N.A., the Registrant and certain subsidiaries of Registrant dated January 30, 1998. 10.41 Revolving Note Among Bank of America, - Form 10-K April 30, 1998 10.41 FSB, the Registrant and certain subsidiaries of Registrant dated January 30, 1998. 10.42 Revolving Note Among Wachovia Bank, - Form 10-K April 30, 1998 10.42 N.A., the Registrant and certain subsidiaries of Registrant dated January 30, 1998. 10.43 Revolving Note Among First American - Form 10-K April 30, 1998 10.43 National Bank, the Registrant and certain subsidiaries of Registrant dated January 30, 1998. 10.44 Swing Line Note Among NationsBank of - Form 10-K April 30, 1998 10.44 Tennessee, N.A., the Registrant and certain subsidiaries of Registrant dated January 30, 1998. 10.45 LC Account Agreement Among NationsBank - Form 10-K April 30, 1998 10.45 of Tennessee, N.A., the Registrant and certain subsidiaries of Registrant dated January 30, 1998. -26-
INCORPORATED BY REFERENCE TO EXHIBIT REGISTRATION OR FILE FORM OR REPORT DATE OF REPORT NUMBER IN DESCRIPTION NUMBER REPORT - ------------ ----------------------------------------- ------------------------ ------------------- -------------------------------- <C> <S> <C> <C> <C> <C> 10.46 Amendment No. 1 to the Credit Agreement - Form 10-K April 30, 1998 10.46 Among NationsBank of Tennessee, N.A., the Registrant and certain subsidiaries of Registrant dated January 31, 1998. 10.47 Form of Indemnification Agreement dated - Form 10-Q September 14, 1998 10 June 8, 1998 by and between the Registrant and each of William G. Miller, Jeffrey I. Badgley, A. Russell Chandler, Paul E. Drack, Adam L. Dunayer, Stephen Furbacher, Frank Madonia, J. Vincent Mish, Richard H. Roberts, and Daniel N. Sebastian** 10.48 Employment Agreement between the - Form 10-Q December 15, 1998 10.1 Registrant and Jeffrey I. Badgley, dated September 11, 1998** 10.49 Employment Agreement between the - Form 10-Q December 15, 1998 10.2 Registrant and Adam L. Dunayer, dated September 11, 1998** 10.50 Employment Agreement between the - Form 10-Q December 15, 1998 10.3 Registrant and Frank Madonia, dated September 11, 1998** 10.51 Agreement between the Registrant and - Form 10-Q December 15, 1998 10.4 Jeffrey I. Badgley, dated September 11, 1998** 10.52 Agreement between the Registrant and - Form 10-Q December 15, 1998 10.5 Adam L. Dunayer, dated September 11, 1998** 10.53 Agreement between the Registrant and - Form 10-Q December 15, 1998 10.6 Frank Madonia, dated September 11, 1998** 10.54 Employment Agreement between the * Registrant and James A McKinney, dated May 12, 1999** -27-
<CAPTION> INCORPORATED BY REFERENCE TO EXHIBIT REGISTRATION OR FILE FORM OR REPORT DATE OF REPORT NUMBER IN DESCRIPTION NUMBER REPORT - ------------ ----------------------------------------- ------------------------ ------------------- -------------------------------- <C> <S> <S> 10.55 Agreement between the Registrant and * James A. McKinney, dated May 12, 1999** 10.56 Amendment No. 3 to the Credit Agreement * Among Bank of America, N.A. d/b/a NationsBank, N.A. successor to NationsBank, N.A., the Registrant, and Certain Subsidiaries of Registrant dated July 27, 1999. 21 Subsidiaries of the Registrant * 23 Consent of Arthur Andersen LLP (to be filed by amendment) 24 Power of Attorney (see signature page) * 27 Financial Data Schedule (to be filed by amendment) - ----------------------------------------------------- </TABLE> * Filed herewith. ** Management contract or compensatory plan or arrangement (B) None. (C) Pursuant to Rule 12b-25, this item has been omitted from this Form 10-K and will be filed by subsequent amendment. (D) Pursuant to Rule 12b-25, this item has been omitted from this Form 10-K and will be filed by subsequent amendment. -28-
SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized, on the 29th day of July, 1999. MILLER INDUSTRIES, INC. By: /s/ Jeffrey I. Badley Jeffrey I. Badgley, President, Chief Executive Officer and Director POWER OF ATTORNEY Know all men by these presents, that each person whose signature appears below constitutes and appoints Jeffrey I. Badgley and J. Vincent Mish, and either of them, as attorneys-in-fact, with power of substitution, for him in any and all capacities, to sign any amendments to this Report on Form 10-K, and to file the same, with exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that said attorneys-in-fact may do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant in the capacities indicated on the 29th day of July, 1999. Signature Title /s/ William G. Miller Chairman of the Board of Directors William G. Miller /s/ Jeffrey I. Badgley President, Chief Executive Officer Jeffrey I. Badgley and Director /s/ J. Vincent Mish Vice President, Treasurer and J. Vincent Mish Chief Financial Officer (Principal Financial and Accounting Officer) /s/ A. Russell Chandler, III Director A. Russell Chandler, III /s/ Paul E. Drack Director Paul E. Drack /s/ Richard H. Roberts Director Richard H. Roberts /s/ James A. McKinney Chief Executive Officer James A. McKinney - RoadOne, Inc. and Director II-1
EXHIBIT INDEX EXHIBIT DESCRIPTION 10.54 Employment Agreement between the Registrant and James A. McKinney, dated May 12, 1999. 10.55 Agreement between the Registrant and James A. McKinney, dated May 12, 1999. 10.56 Amendment No. 3 to the Credit Agreement among Bank of America, N.A. d/b/a NationsBank, N.A. successor to NationsBank, N.A., the Registrant, and certain Subsidiaries of the Registrant, dated July 27, 1999. 21 Subsidiaries of the Registrant 24 Power of Attorney (see signature page)