SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 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 July 31, 1999 Commission File No. 0-24298 MILLER INDUSTRIES, INC. (Exact name of registrant as specified in its charter) TENNESSEE 62-1566286 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 8503 HILLTOP DRIVE OOLTEWAH, TENNESSEE 37363 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (423)238-4171 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 / / The number of shares outstanding of the registrant's Common Stock, $.01 par value, as of August 31, 1999 was 46,694,297.
MILLER INDUSTRIES, INC. INDEX <TABLE> PART I. FINANCIAL INFORMATION Page Number ----------- <CAPTION> Item 1. Financial Statements (Unaudited) -------------------------------- <S> <S> <C> Condensed Consolidated Balance Sheets - July 31, 1999 and April 30, 1999 3 Condensed Consolidated Statements of Income for the Three Months Ended July 31, 1999 and 1998 4 Condensed Consolidated Statements of Cash Flows for the Three Months Ended July 31, 1999 and 1998 5 Notes to Condensed Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial ------------------------------------------------- Condition and Results of Operations 9 ----------------------------------- PART II. OTHER INFORMATION Item 1 Legal Proceedings 13 ----------------- Item 6. Exhibits and Reports On Form 8-K 14 -------------------------------- SIGNATURES 14 </TABLE> 2
MILLER INDUSTRIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT SHARE DATA) (UNAUDITED) <TABLE> ASSETS JULY 31, APRIL 30, 1999 1999 --------- --------- <CAPTION> <S> <C> <C> CURRENT ASSETS: Cash and temporary investments $ 10,995 $ 9,331 Accounts receivable, net 81,279 81,109 Inventories 79,361 77,912 Deferred income taxes 4,343 4,244 Prepaid expenses and other 12,704 12,264 --------- --------- Total current assets 188,682 184,860 PROPERTY, PLANT AND EQUIPMENT, NET 95,443 95,984 GOODWILL, NET 104,108 103,292 OTHER ASSETS 7,296 8,344 --------- --------- $ 395,529 $ 392,480 ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Current portion of long-term debt $ 797 $ 4,170 Accounts payable 43,842 42,783 Accrued liabilities and other 20,622 16,458 --------- --------- Total current liabilities 65,261 63,411 --------- --------- LONG-TERM DEBT, LESS CURRENT PORTION 133,430 133,850 --------- --------- DEFERRED INCOME TAXES 8,116 7,916 --------- --------- SHAREHOLDERS' EQUITY (Note 2): Preferred stock, $.01 par value, 5,000,000 shares authorized; None issued or outstanding 0 0 Common stock, $.01 par value, 100,000,000 shares authorized; 46,694,297 and 46,679,783 shares issued and outstanding at July 31, 1999 and April 30, 1999, respectively 467 467 Additional paid-in capital 144,696 144,607 Retained earnings 44,512 43,068 Accumulated other comprehensive income (953) (839) --------- --------- Total shareholders' equity 188,722 187,303 --------- --------- $ 395,529 $ 392,480 ========= ========= See accompanying notes to condensed consolidated financial statements </TABLE>
MILLER INDUSTRIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED) <TABLE> THREE MONTHS ENDED JULY 31, --------------------------------- 1999 1998 -------- -------- <CAPTION> <S> <C> <C> NET SALES $134,336 $117,754 COSTS AND EXPENSES: Costs of operations 109,914 94,040 Selling, general, and administrative expenses 19,228 17,030 Interest expense, net 2,638 2,040 -------- -------- Total costs and expenses 131,780 113,110 -------- -------- INCOME BEFORE INCOME TAXES 2,556 4,644 INCOME TAXES 1,112 1,960 -------- -------- NET INCOME $ 1,444 $ 2,684 ======== ======== NET INCOME PER COMMON SHARE: BASIC $ 0.03 $ 0.06 ======== ======== DILUTED $ 0.03 $ 0.06 ======== ======== WEIGHTED AVERAGE SHARES OUTSTANDING: BASIC 46,689 46,064 ======== ======== DILUTED 47,290 47,195 ======== ======== See accompanying notes to condensed consolidated financial statements. </TABLE> 4
<TABLE> MILLER INDUSTRIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS) (UNAUDITED) THREE MONTHS ENDED JULY 31, --------------------------- 1999 1998 -------- -------- <CAPTION> <S> <C> <C> OPERATING ACTIVITIES: Net income $ 1,444 $ 2,684 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 4,282 2,964 Deferred income tax (benefit) provision (100) 214 Loss (gain) on disposals of property, plant, and equipment 86 (351) Changes in operating assets and liabilities: Accounts receivable (274) (637) Inventories (1,462) (6,435) Prepaid expenses and other (258) 968 Accrued liabilities 3,206 (1,444) Accounts payable 1,079 (939) Other assets (128) 547 -------- -------- Net cash provided by (used in) operating activities 7,875 (2,429) -------- -------- INVESTING ACTIVITIES: Purchases of property, plant, and equipment (1,900) (4,256) Proceeds from sales of property, plant, and equipment 585 705 Acquisition of businesses, net of cash acquired (998) (10,445) Other 95 (33) -------- -------- Net cash used in investing activities (2,218) (14,029) -------- -------- FINANCING ACTIVITIES: Net (repayment) borrowings under line of credit (2,000) 24,000 Repayment of long-term debt (2,046) (2,899) Proceeds from exercise of stock options 88 15 -------- -------- Net cash (used in) provided by financing activities (3,958) 21,116 -------- -------- EFFECT OF EXCHANGE RATE CHANGES ON CASH AND TEMPORARY INVESTMENTS (35) 14 -------- -------- NET INCREASE IN CASH AND TEMPORARY INVESTMENTS 1,664 4,672 CASH AND TEMPORARY INVESTMENTS, BEGINNING OF PERIOD 9,331 7,367 -------- -------- CASH AND TEMPORARY INVESTMENTS, END OF PERIOD $ 10,995 $ 12,039 ======== ======== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash payments for interest $ 2,673 $ 1,976 ======== ======== Cash payments for income taxes $ 540 $ 1,668 ======== ======== </TABLE> 5
MILLER INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 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. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with generally accepted accounting principles 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 entities in the towing and recovery equipment segment 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 April 30, 1999. 2. Net Income Per Share Basic net income per share is computed by dividing net income by the weighted average number of common shares outstanding. Diluted net income per share is calculated by dividing net income by the weighted average number of common and potential dilutive common shares outstanding. Diluted net income per share takes into consideration the assumed conversion of outstanding stock options resulting in 0.6 million and 1.1 million potential dilutive common shares for the three months ended July 31, 1999 and 1998, respectively. Per share amounts do not include the assumed conversion of stock options with exercise prices greater than the average share price because to do so would have been antidilutive for the periods presented. 3. Inventories Inventory costs include materials, labor and factory overhead. Inventories are stated at the lower of cost or market, determined on a first-in, first-out basis. Inventories at July 31, 1999 and April 30, 1999 consisted of the following (in thousands): July 31, April 30, 1999 1999 ------- ------- Chassis $16,895 $18,340 Raw Materials 16,942 16,348 Work in process 14,256 12,180 Finished goods 31,268 31,044 ------- ------- $79,361 $77,912 ======= ======= 6
4. Business Combinations During the quarter ended July 31, 1999, the Company purchased one towing services company for $1.2 million consisting of approximately $0.7 million in cash and $0.5 million in promissory notes. This acquisition was accounted for using the purchase method of accounting. The accompanying consolidated financial statements reflect the preliminary allocation of purchase price as the purchase price has not yet been finalized for this transaction. The excess of the aggregate purchase price over the estimated fair value of net assets acquired was approximately $1.2 million. 5. Legal Matters 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 Investigative Demand ("CID") issued by the Division as part of its continuing investigation of whether there are, have been or may be violations of the 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 this 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. 7
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. The ultimate disposition of such matters cannot be determined presently, but will not, in the opinion of management, based in part on the advice of legal counsel, have a material adverse effect on the financial position or results of operations of the Company. 6. Comprehensive Income Effective May 1, 1998, the Company adopted Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income", which requires additional disclosure of amounts comprising comprehensive income. The Company has other comprehensive income in the form of cumulative translation adjustments which resulted in total comprehensive income of approximately $1,330,000 and $2,593,000 for the quarters ended July 31, 1999 and 1998, respectively. 7. Segment Information The Company operates in two principal operating segments: (i) towing and recovery equipment and (ii) towing services. The table below presents information about reported segments for the three months ended July 31, 1999 and 1998 (in thousands): <TABLE> Towing and Recovery Towing Equipment Services Eliminations Consolidated --------- -------- ------------ ------------ <CAPTION> <S> <C> <C> <C> 1999 Net sales-external $82,951 $51,385 $ -- $134,336 Net sales-intersegment -- -- -- -- Operating income 4,493 744 (43) 5,194 Interest expense, net 1,119 1,519 -- 2,638 Income (loss) before income taxes 3,331 (775) -- 2,556 1998 Net sales-external $76,603 $41,151 $ -- $117,754 Net sales-intersegment 1,285 -- (1,285) -- Operating income 4,290 2,445 (51) 6,684 Interest expense, net 958 1,082 -- 2,040 Income before income taxes 3,281 1,363 -- 4,644 </TABLE> 8. Reclassifications Certain amounts in the prior period financial information have been reclassified to conform to the current presentation. 8
9. Subsequent Events Subsequent to the end of the quarter, the Company has closed three additional acquisitions of towing services companies with aggregate annual historical revenues of approximately $2.2 million. The consideration for these transactions consists of approximately $1.9 million in cash, which includes the assumption of certain indebtedness, and approximately $0.4 million in promissory notes. Additionally, the Company has executed a letter of intent to acquire one additional towing services company. Item 2. Management's Discussion and Analysis of Financial Condition and ---------------------------------------------------------------- Results of Operations --------------------- RECENT DEVELOPMENTS As more fully discussed in Note 4 to condensed consolidated financial statements, during the quarter ended July 31, 1999, the Company acquired one towing services company. Subsequent to the end of the quarter and as more fully discussed in Note 9 to condensed consolidated financial statements, the Company has closed three additional acquisitions of towing services companies. Also, the Company has executed a letter of intent to purchase one additional towing services company. RESULTS OF OPERATIONS--THREE MONTHS ENDED JULY 31, 1999 COMPARED TO THREE MONTHS ENDED JULY 31, 1998 Net sales for the three months ended July 31, 1999, increased 14.1% to $134.3 million from $117.8 million for the comparable period in 1998. Net sales in the towing and recovery equipment segment increased 8.3% from $76.6 million to $83.0 million due primarily to higher unit sales of chassis, large wreckers and car carriers. Sales of new products-slide axle trailers and multi-car trailers, also contributed to the increase in sales in this segment. Net sales in the towing services segment increased 24.9% from $41.2 million to $51.4 million due primarily to the inclusion of towing companies acquired subsequent to the first quarter of fiscal 1999. Costs of operations for the three months ended July 31, 1999, increased 16.9% to $109.9 million from $94.0 million for the comparable period in 1998. Costs of operations of the towing and recovery equipment segment increased slightly as a percentage of net sales from 84.6% to 85.1%. In the towing services segment, costs of operations as a percentage of net sales increased from 71.0% to 76.7% due to increased labor costs of the towing services operations along with the associated benefits and worker's compensation costs, increased depreciation on additions to the fleet and increased insurance costs due to loss experience. Selling, general and administrative expenses for the three months ended July 31, 1999, increased 12.9% to $19.2 million from $17.0 million for the comparable period of 1998. In the towing and recovery equipment segment, as a percentage of net sales, selling, general and administrative expenses decreased slightly from 9.8% to 9.5%. In the towing services segment, selling, general and administrative expenses as a percentage of net sales decreased from 23.1% to 21.9%. The decrease was due primarily to the increased revenue base and cost reduction efforts. 9
Net interest expense increased $0.6 million to $2.6 million for the three-months ended July 31, 1999 from $2.0 million for the three months ended July 31, 1998 primarily due to increased borrowings under the Company's line of credit to fund working capital needs and additional acquisitions of towing service companies. Income taxes are accounted for on a consolidated basis and are not allocated by segment. The effective rate of the provision for income taxes was 43.5% for the three months ended July 31, 1999 and 42.2% for the three months ended July 31, 1998. The difference between the effective tax rate and the statutory tax rate is primarily due to non-deductible goodwill amortization and state income taxes. LIQUIDITY AND CAPITAL RESOURCES Cash provided by operating activities was $7.9 million for the three month-period ended July 31, 1999 compared to cash used in operating activities of $2.4 million for the comparable period of 1998. The increase in cash flows from operating activities was due primarily to improved working capital balances. Cash used in investing activities was $2.2 million for the three month period ended July 31, 1999 compared to $14.0 million used in investing activities for the comparable period in 1998. The cash used in investing activities was primarily for capital expenditures and acquisition of businesses, both of which were at significantly lower levels in the current fiscal year quarter than in the comparable prior year period. Cash used in financing activities was $4.0 million for the three month period ended July 31, 1999 and cash provided by financing activities was $21.1 million for the comparable period in the prior year. The cash was used primarily to reduce the Company's line of credit and other outstanding long-term debt and capital leases. The Company has a revolving credit facility of $175 million (the "Credit Facility") for working capital and other general corporate purposes. Borrowings under the Credit Facility bear interest at a rate equal to the London Interbank Offered Rate of 2.50% or the prime rate plus 1.25%, as elected by the Company. The Credit Facility is collateralized by substantially all of the assets and properties of the Company and its domestic subsidiaries. At July 31, 1999, $123 million was outstanding under the Credit Facility. The Credit Facility imposes restrictions on the Company with respect to the maintenance of certain financial ratios, the incurrence of indebtedness, the sale of assets, capital expenditures and mergers and acquisitions. On May 1, 1998, the Company entered into an interest swap agreement covering the notional amount of $50 million of variable rate debt to fix the interest rate at 5.68% plus the applicable margin. The agreement expires at the end of three years unless cancelled by the bank at the end of two years. As described in Note 4 to condensed consolidated financial statements, the Company has expended approximately $1.2 million for the purchase of a towing services company during the quarter ended July 31, 1999. Capital expenditures remaining for the dispatch system described below are expected to be approximately $0.9 million. Excluding the capital commitments set forth above, the Company has no other material capital commitments. The Company believes that cash on hand, cash flows from operations and unused borrowing capacity under the Credit Facility will be sufficient to fund its operating needs, capital expenditures and debt service requirements for the next fiscal year. Management continually evaluates potential strategic acquisitions. Although the Company believes that its financial resources will enable it to consider potential acquisitions, additional debt or equity financing may be necessary. No assurance in this regard can be given, however, since future cash flows and the availability of financing will depend on a number of factors, including prevailing economic conditions and financial, business and other factors beyond the Company's control. 10
STRATEGIC AND FINANCIAL ALTERNATIVES STUDY The Company announced in May 1999 that its Board of Directors had concluded its study of potential strategic and financial alternatives for the Company and had ratified its Special Committee's recommendation to investigate and pursue the possibility of separating the Company's RoadOne towing services segment from its towing and recovery equipment segment through a tax-free spinoff which would result in the formation of two public companies. The Company engaged J.C. Bradford & Co. as its financial advisor with respect to these matters. Completing any such separation of the two businesses through a tax-free spinoff transaction would entail the satisfaction of numerous significant conditions which at this time are uncertain. These conditions include, but are not limited to, securing an IRS private letter ruling, an SEC no-action letter, satisfactory banking arrangements, the approval of the Company's shareholders and a final decision to proceed by the Board of Directors. The Company can give no assurance that any such transaction will occur. The Company currently expects that the spinoff transaction, if completed, would not occur any sooner than during the fourth quarter of the fiscal year ending April 30, 2000. RECENT ACCOUNTING PRONOUNCEMENTS In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," effective for fiscal years beginning after June 15, 1999. In June 1999, the FASB issued SFAS No. 137, which delayed the effective date of SFAS No. 133 until June 15, 2000. SFAS No. 133 establishes accounting and reporting standards requiring that every derivative instrument (including certain derivative instruments embedded in other contracts) be recorded in the balance sheet as either an asset or liability measured at its fair value. SFAS No. 133 requires that changes in the derivative's fair value be recognized currently in earnings unless specific hedge accounting criteria are met. Special accounting for qualifying hedges allows a derivative's gains and losses to offset related results on the hedged item in the income statement, and requires that a company must formally document, designate, and assess the effectiveness of transactions that receive hedge accounting. The Company has not yet quantified the impact of adopting SFAS No. 133 on its financial statements and has not determined the timing of or method of adoption of SFAS No. 133. However, SFAS No. 133 could increase volatility in earnings and other comprehensive income. YEAR 2000 The "Year 2000" issue refers to the possibility that some date-sensitive computer software was written with two digits rather than four to define the applicable year. This software will not interpret the "00" year correctly, and may experience problems. In addition, any equipment that has time sensitive embedded chips may have similar date-related problems. If not corrected, these computer programs or embedded chips could possibly cause systems to fail or other errors, leading to possible disruptions in operations or creation of erroneous results. The Company, in an enterprise-wide effort, is taking steps to ensure that its systems are secure from such failures. Our Year 2000 plan addresses the anticipated impacts of the Year 2000 problem on our information technology (IT) systems and on non-IT systems involving embedded chip technologies. We are also surveying key third parties to determine the status of their Year 2000 compliance programs. In addition, we are developing contingency plans specifying what the Company will do if it or important third parties experience disruptions as a result of the Year 2000 problem. Our Year 2000 plan is subject to modification, and is revised periodically as additional information is developed. The Company currently believes that its Year 2000 plan will be completed for all key aspects prior to the anticipated Year 2000 failure dates. With respect to IT systems, our Year 2000 plan includes programs relating to (i) computer applications, including those for servers, client server systems, and personal computers and (ii) IT infrastructure, including hardware, software, network technology, and voice and data communications. In case of non-IT systems, our Year 2000 plan includes programs related to equipment and processes required to produce our products in our manufacturing plants. 11
With respect to its applications programs, the Company's manufacturing plants began implementing a Year 2000 compliant ERP system in 1997. Although this project included initiatives outside of the scope of the Year 2000, the new system replaced an older non-compliant system. The Company's largest manufacturing facility has completed its implementation. The remaining plants are scheduled to complete the implementation of their computerized functions prior to the anticipated Year 2000 failure dates. The new ERP system also contains the Company's financial applications, with implementation completed in Fiscal 1999. These implementations were not accelerated due to Year 2000 issues and, therefore, their costs are not included in the discussion of Year 2000 costs below. The Company's towing services segment began development in 1998 of a new dispatch system which will assist in resolving its Year 2000 issues. Approximately $1.5 million of the cost of this system is being accelerated to assist in resolving Year 2000 issues and is included in the discussion of Year 2000 costs below. This segment has also initiated a remediation plan for some of the existing dispatch applications. In addition, it is developing a contingency plan which will address locations not remediated prior to January 1, 2000. This segment completed its implementation of financial systems on a Year 2000 compliant ERP system in Fiscal 1999. With respect to its infrastructure program, the inventory and assessment phase is substantially complete. The implementation phase is on-going, with many components being replaced as part of the Company's support for the implementation of a new ERP system for manufacturing and financial applications. The new dispatch system that the towing services segment is implementing will centralize all processing to one location. This new processing infrastructure to support the dispatch application is constructed. RoadOne will continue to assess and replace client infrastructure at each of its field locations as the dispatch application is rolled out. With respect to its non-IT program, the Company is identifying embedded chip technology at all manufacturing locations. A limited amount of operating equipment is date sensitive. Manufacturers of the affected equipment are being contacted. The Company is evaluating the suggested modifications and replacements. The plan is to complete remediation of these systems by the end of the year. The Company has initiated inquiries of major business partners to assess their state of readiness regarding Year 2000 issues that could materially and adversely impact the Company. These major business partners include, but are not limited to suppliers, financial institutions, benefit providers, payroll services, and customers, as well as potential failures in public and private infrastructure services, including electricity, water, transportation and communications. The Company has requested those third parties respond in writing that they will be Year 2000 compliant by the end of 1999. The Company is reviewing the responses as received and is assessing the third parties' efforts in addressing Year 2000 issues. Further, the Company is in the process of determining its vulnerability if these third parties fail to remediate their Year 2000 problems. Contingency plans are being developed and include, but are not limited to, using alternate vendors, manual interfaces, and hard copies. There can be no guarantee that the systems of third parties will be remediated on a timely basis, or that such parties' failure to remediate Year 2000 issues would not have a material adverse effect on the Company. 12
The total cost of the Company's Year 2000 project includes costs for installing certain new hardware and software upgrades in both of its business segments of approximately $0.5 million and the cost of acceleration of a portion of its new dispatch software in its towing services segment of $1.5 million. The total cost of our Year 2000 efforts is expected to be about $2.0 million, which is being expensed as incurred except for hardware or software replacement costs that have been or will be capitalized. About $0.1 million of the total amount was incurred through July 31, 1999, and approximately an additional $1.9 million will be incurred in the remainder of calendar 1999. The timing and amount of these future expenditures are forward-looking and subject to uncertainties relating to the Company's ongoing assessment of the Year 2000 issue, and appropriate remediation efforts, contingency plans and responses to any problems that may arise. The Company's Year 2000 expenses are paid out of its annual budget for information services. PART II. OTHER INFORMATION ITEM 1. 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 Investigative Demand ("CID") issued by the Division as part of its continuing investigation of whether there are, have been or may be violations of the 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 plantiffs filed a notice of appeal. In both these actions, the Company has denied liability and will continue to vigorously defend itself. 13
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits. Exhibit 27 - Financial Data Schedule (For SEC use only) (b) Reports on Form 8-K - No reports on Form 8-K were filed by the Company during the first quarter of the fiscal year. 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/ J. Vincent Mish J. Vincent Mish Vice President and Chief Financial Officer Date: September 14, 1999