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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
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(STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION)
62-1566286
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(I.R.S. EMPLOYER IDENTIFICATION NO.)
8503 HILLTOP DRIVE, OOLTEWAH, TENNESSEE 37363
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(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.
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Name of each exchange on which registered: New York Stock Exchange.
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Securities registered pursuant to Section 12(g) of the Act: None.
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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
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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
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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
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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.
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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
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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.
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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.
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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.
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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
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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.
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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
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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,
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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
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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
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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.
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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.
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EXECUTIVE OFFICERS OF THE REGISTRANT
NAME AGE POSITION WITH THE COMPANY
---- --- -------------------------
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
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
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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
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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.
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HIGH LOW
---- ----
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
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.
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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,
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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.
AMOUNT AND NATURE
OF BENEFICIAL PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER OWNERSHIP CLASS
- ------------------------------------ ------------- ---------
William G. Miller 6,369,409 13.61%
Jeffrey I. Badgley 364,756 *
Frank Madonia 323,756 *
J. Vincent Mish 325,631 *
James A. McKinney - *
Adam L. Dunayer 83,500 *
A. Russell Chandler, III 95,919 *
Paul E. Drack 95,918 *
Richard H. Roberts 80,918 *
Daniel N. Sebastian 296,956 *
All Executive Officers and Directors as a Group 8,036,763 17.17%
(10 persons)
- ----------------------------
* Less than one percent
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.
Mr. Miller's business address is c/o Miller Industries, Inc., 3220 Pointe
Parkway, Suite 100, Norcross, Georgia 30092.
Includes 546,444 shares held by the Miller Family Foundation, Inc., a
Georgia non-profit corporation of which Mr. Miller is the sole director.
Includes 288,179 shares which are issuable pursuant to options which are
exercisable within sixty days of the date set forth above.
Includes 245,679 shares which are issuable pursuant to options which are
exercisable within sixty days of the date set forth above.
Includes 247,554 shares which are issuable pursuant to options which are
exercisable within sixty days of the date set forth above.
Includes 83,500 shares which are issuable pursuant to options which are
exercisable within sixty days of the date set forth above.
Includes 95,919 shares which are issuable pursuant to options which are
exercisable within sixty days of the date set forth above.
Includes 95,918 shares which are issuable pursuant to options which are
exercisable within sixty days of the date set forth above.
Includes 80,918 shares which are issuable pursuant to options which are
exercisable within sixty days of the date set forth above.
Includes 221,521 shares which are issuable pursuant to options which are
exercisable within sixty days of the date set forth above.
Includes 1,364,688 shares which are issuable pursuant to options which are
exercisable within sixty days of the date set forth above.
-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:
INCORPORATED BY
REFERENCE TO EXHIBIT
REGISTRATION OR FILE FORM OR REPORT DATE OF REPORT NUMBER IN
DESCRIPTION NUMBER REPORT
- ------------ ----------------------------------------- ------------------------ ------------------- --------------------------------
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-
INCORPORATED BY
REFERENCE TO EXHIBIT
REGISTRATION OR FILE FORM OR REPORT DATE OF REPORT NUMBER IN
DESCRIPTION NUMBER REPORT
- ------------ ----------------------------------------- ------------------------ ------------------- --------------------------------
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-
INCORPORATED BY
REFERENCE TO EXHIBIT
REGISTRATION OR FILE FORM OR REPORT DATE OF REPORT NUMBER IN
DESCRIPTION NUMBER REPORT
- ------------ ----------------------------------------- ------------------------ ------------------- --------------------------------
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
- ------------ ----------------------------------------- ------------------------ ------------------- --------------------------------
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-
INCORPORATED BY
REFERENCE TO EXHIBIT
REGISTRATION OR FILE FORM OR REPORT DATE OF REPORT NUMBER IN
DESCRIPTION NUMBER REPORT
- ------------ ----------------------------------------- ------------------------ ------------------- --------------------------------
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)
- -----------------------------------------------------
* 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)