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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 March 31, 2004
Commission File No. 0-24298

MILLER INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)

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.

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

The number of shares outstanding of the registrant's Common Stock, $.01 par value, as of April 30, 2004 was 10,697,919.

INDEX

PART I.   FINANCIAL INFORMATION

Item 1.        Financial Statements (Unaudited)

MILLER INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)

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

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MILLER INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS

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

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

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MILLER INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)

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

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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 accounting principles generally accepted in the United States 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 December 31, 2003.

2.          Discontinued Operations

During the fourth quarter of the year ended December 31, 2002, the Company’s management and board of directors made the decision to divest of its remaining towing services segment, as well as the operations of the distribution group of the towing and recovery equipment segment. 

During the three months ended March 31, 2003, the Company disposed of substantially all of the assets in six towing service markets, as well as assets remaining from other markets of its towing services segment.  Total proceeds from the sales were $1.7 million which included $1.5 million in cash and $0.2 million in notes receivable.  Losses on the sales of discontinued operations were $1.0 million.  Subsequent to March 31, 2003, the Company disposed of assets in the last remaining towing services market.  As of March 31, 2004 there are miscellaneous assets remaining from previous towing services market sales. 

During the three months ended March 31, 2003, the Company sold one distributor location with total proceeds of approximately $1.9 million in cash and $0.8 million subordinated notes receivable.  The Company sold three distributor locations during the three months ended March 31, 2004.  Total proceeds from these sales were approximately $2.1 million in cash and $0.4 million in subordinated notes receivable.  In accordance with the board of directors decision to divest of the distribution group, the Company has entered into negotiations for the disposition of all of the five remaining locations of the distribution group. 

In accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”, the assets for the towing services segment and the distribution group are considered a “disposal group” and are no longer being depreciated.  All assets and liabilities and results of operations associated with these assets have been separately presented in the accompanying financial statements at March 31, 2004 and December 31, 2003.  The statements of operations and related financial statement disclosures for all prior years have been restated to present the towing services segment and the distribution group as discontinued operations separate from continuing operations.  Results of operations for the towing services segment and the distribution group reflect interest expense for debt directly attributing to these businesses, as well as an allocation of corporate debt based on intercompany balances.

The results of operations and loss on disposal associated with certain towing services markets, which were sold in June 2003, have been reclassified from discontinued operations to continuing operations given the Company's significant continuing involvement in the operations of the disposal components via a consulting agreement and the Company's ongoing interest in the cash flows of the operations of the disposal components via a long-term license agreement.  The Company applied this change retroactively by adjusting the Consolidated Statement of Operations and the Consolidated Statement of Cash Flows for the period ended March 31, 2003 as outlined below:

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The operating results for the discontinued operations of the towing services segment and the distributor group for the three months ended March 31, 2004 and 2003, were as follows (in thousands):

The following assets and liabilities are reclassified as held for sale at March 31, 2004 and December 31, 2003 (in thousands):

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3.           Net Income (Loss) Per Share

Basic net income (loss) per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding.  Diluted net income (loss) per share is calculated by dividing net income (loss) 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 92,000 and 8,000 potential dilutive common shares for the three months ended March 31, 2004 and 2003.

4.           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 for continuing operations at March 31, 2004 and December 31, 2003 consisted of the following (in thousands):

5.            Special Charges and Other Expenses

The Company periodically reviews the carrying amount of the long-lived assets and goodwill in both its towing services and towing equipment businesses to determine if those assets may be recoverable based upon the future operating cash flows expected to be generated by those assets.  The Company also reviewed the carrying values of goodwill associated with certain investments within its towing and recovery equipment segment.  This evaluation indicated that the recorded amounts of goodwill for certain of these investments were not fully recoverable.  Charges of $2,071,000 were recorded during fiscal 2003 to write-down the carrying value of certain long-lived assets in the towing services segment.  The related charges have been included in the loss from discontinued operations in the accompanying financial statements.

6.           Long-Term Obligations

2001 Credit Facility

Senior Credit Facility.  In July 2001, the Company entered into a new four year Senior Credit Facility (the "Senior Credit Facility") with a syndicate of lenders to replace the existing credit facility. As part of this agreement, the previous credit facility was reduced with proceeds from the Senior Credit Facility and amended to provide for a $14.0 million subordinated secured facility. The Senior Credit Facility originally consisted of an aggregate $102.0 million revolving credit facility and an $8.0 million term loan. The revolving credit facility provides for separate and distinct loan commitment levels for the Company's towing and recovery equipment segment and RoadOne segment, respectively. At March 31, 2004, $5.4 million and $0.1 million, respectively were outstanding under the towing and recovery equipment segment and RoadOne portions of the revolving credit facility. In addition, $16.7 million was outstanding under the senior term loan, and $9.7 million was outstanding under the subordinated secured facility.

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The Senior Credit Facility has been amended several times, including most recently on December 24, 2003 in connection with the restructuring of all of the Company’s debt obligations.  As amended, the Senior Credit Facility consists of an aggregate $32.0 million credit facility, including a $15.0 million revolving loan, a $5.0 million term loan and a $12.0 million term loan.  Borrowing availability under the revolving Senior Credit Facility is based on a percentage of eligible inventory and accounts receivable (determined on eligibility criteria set forth in the credit facility) and subject to a maximum borrowing limitation.  Borrowings under the term loans are collateralized by substantially all of the Company’s property, plant, and equipment.  The Company is required to make monthly amortization payments on the first term loan of $167,000, but the amortization payments due on November 1, 2003, December 1, 2003, and January 1, 2004 were deferred until the maturity date.  The Senior Credit Facility bears interest at the prime rate (as defined) plus 2.75%, subject to the rights of the senior lender agent or a majority of the lenders to charge a default rate equal to the prime rate (as defined) plus 4.75% during the continuance of any event of default under the Senior Credit Facility.

The Senior Credit Facility matures in July 2005. The Senior Credit Facility contains requirements relating to maintaining minimum excess availability at all times and minimum quarterly levels of earnings before income taxes, depreciation and amortization (as defined) and a minimum quarterly fixed charge coverage ratio (as defined). In addition, the Senior Credit Facility contains restrictions on capital expenditures, incurrence of indebtedness, mergers and acquisitions, distributions and transfers and sales of assets. The Senior Credit Facility also contains requirements related to weekly and monthly collateral reporting.

Junior Credit Facility.  The $14.0 million Junior Credit Facility (the "Junior Credit Facility") is by its terms expressly subordinated only to the Senior Credit Facility.  The Junior Credit Facility is secured by certain specified assets and by a second priority lien and security interest in substantially all of the Company’s other assets.  The Junior Credit Facility contains requirements for certain fees to be paid at six month intervals beginning in January 2002 based on the outstanding balance of the facility at the time.  The Junior Credit Facility also contains provisions for the issuance of warrants for 0.5% of the outstanding shares of the Company’s common stock (47,417 shares) in July 2002 and an additional 1.5% (138,611 shares) on July 23, 2003 with an exercise price equal to the then fair market value of the Company’s common stock.  As amended, the Junior Credit Facility contains requirements for the maintenance of certain financial covenants.  It also imposes restrictions on capital expenditures, incurrence of indebtedness, mergers and acquisitions, distributions and transfers and sales of assets.

Contrarian Funds, LLC purchased all of the outstanding debt of the Junior Credit facility in a series of transactions during the second half of 2003.  As part of its purchase of the subordinated debt, Contrarian also purchased warrants, or the rights to receive warrants, to purchase 186,028 shares of the Company’s common stock. 

On November 24, 2003, Harbourside Investments, LLLP (Note 9) purchased from Contrarian 44.286% of the subordinated debt and the warrants. 

The Junior Credit Facility originally matured on July 23, 2003.  In connection with the restructuring of the Company’s debt, the facility has been amended.  As amended, the Junior Credit Facility, under which $16.7 million in principal, interest and fees was outstanding at December 31, 2003, matures on July 31, 2005 and bears interest at an effective blended rate of 14.0%. 

Default of Credit Facilities.  The Company's failure to repay all outstanding principal, interest and any other amounts due and owing under the Junior Credit Facility at its original July 23, 2003 maturity date constituted an event of default under the Junior Credit Facility and also triggered an event of default under the Senior Credit Facility cross-default provisions.  Additionally, the Company was in default of the EBITDA covenant under the Junior Credit Facility only for the first quarter of calendar 2003.  The Company was also in default under both the Senior and Junior Credit Facility as a result of the “going concern” explanatory paragraph included in the auditors’ report as well as the failure to file its Annual Report for the fiscal year ended December 31, 2002 prior to April 30, 2003.

Pursuant to the terms of the intercreditor agreement between the senior and junior lenders, the junior lender agent and the junior lenders were prevented from taking any enforcement action or exercising any remedies against the Company, its subsidiaries or its respective assets as a result of such events of default during a standstill period.  On July 29, 2003, the junior lender agent gave a notice of enforcement to the senior lender agent based upon the event of default for failure to repay the outstanding obligations under the Junior Credit Facility on the Junior Credit Facility’s maturity date.  On August 5, 2003, the senior agent gave a payment blockage notice to the junior agent based upon certain events of default under the Senior Credit Facility, thereby preventing the junior agent and junior lenders from receiving any payments from the Company in respect of the Junior Credit Facility while such blockage notice remains in effect. 

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2003 Amendments

On February 28, 2003, the Company entered into the Fifth Amendment to the Senior Credit Facility.  Pursuant to the Fifth Amendment, the date upon which the amount of certain used inventory taken in trade for collateral purposes is reduced to $-0- was extended from February 28, 2003 to March 31, 2003.  In addition, the Fifth Amendment revised the RoadOne revolving commitment reducing the amount to $9.0 million at February 28, 2003 and $-0- as of March 31, 2003. 

On April 1, 2003, the Company entered into the Sixth Amendment to Senior Credit Facility.  The Sixth Amendment, among other things, revised the RoadOne revolving commitment, extending the time for the reduction thereof to $-0- from March 31, 2003 to March 31, 2004.  The amountof availability that can be generated forused inventory considered as eligible inventory for collateral purposes was reduced to $2.7 million with no further required reductions. 

Subsequent to April 1, 2003, the Company was in default under certain covenants under its Senior and Junior Credit Facility agreements.  The Company's bank facilities are collateralized by liens on all of the Company's assets. The liens give the lenders the right to foreclose on the assets of the Company under certain defined events of default and such foreclosure could allow the lenders to gain control of the operations of the Company.

On October 31, 2003, the Company entered into a forbearance agreement with the lenders and the senior lender agent under the Senior Credit Facility, pursuant to which, among other things, the senior lenders agreed to forbear from exercising any remedies in respect of the defaults then existing under the Senior Credit Facility as a result of (i) the failure to timely deliver financial statements for fiscal year 2002 and the failure to deliver a report of the Company’s independent certified public accountants which is unqualified in any respect, as well as the event of default under the Senior Credit Facility caused by the event of default arising from such failure under the Junior Credit Facility; (ii) the failure to fulfill certain payment obligations to the junior lenders under the Junior Credit Facility; and (iii) the failure to fulfill certain financial covenants in the Junior Credit Facility for one or more of the fiscal quarters ending in fiscal year 2003, which failure would constitute an event of default under the Senior Credit Facility.  The forbearance period under the forbearance agreement was to expire on the earlier of (x) December 31, 2003, (y) the occurrence of certain bankruptcy type events in respect of the Company or any of its subsidiaries, and (z) the failure by the Company or any of its subsidiaries that are borrower parties under the Senior Credit Facility to perform the obligations under the Senior Credit Facility or the forbearance agreement.  Under the forbearance agreement, the senior lenders and the senior lender agent did not waive their rights and remedies with respect to the existing senior facility defaults, but agreed to forbear from exercising rights and remedies with respect to the existing senior facility defaults solely during the forbearance period.

Simultaneous with entering into the forbearance agreement on October 31, 2003, William G. Miller, the Chairman of the Board and Co-CEO of the Company, made a $2.0 million loan to the Company as a part of the Senior Credit Facility.  The loan to the Company and Mr. Miller’s participation in the Senior Credit Facility were effected by the seventh amendment to the credit agreement and a participation agreement between Mr. Miller and the Senior Credit Facility lenders.

On December 24, 2003, Mr. Miller increased his previous $2.0 million participation in the existing Senior Credit Facility by an additional $10.0 million.  These funds, along with additional funds from The CIT Group/Business Credit, Inc., were used to satisfy the obligations to two of the existing senior lenders with the result being that CIT, an existing senior lender, and Mr. Miller constituted the senior lenders to the Company, with CIT holding 62.5% of such loan and Mr. Miller participating in 37.5% of the loan.  Mr. Miller’s portion of the loan is subordinated to that of CIT. 

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In conjunction with Mr. Miller’s increased participation, the Senior Credit Facility was restructured and restated as a $15.0 million revolving facility and $12.0 million and $5.0 million term loans.  As a result of this restructuring, all previously existing defaults under the Senior Credit Facility were waived, the interest rate was lowered by 2% to reflect a non-default rate, fees attributable to RoadOne of $30,000 per month were eliminated, the financial covenants were substantially relaxed, and availability under the Facility was increased by approximately $5.0 million.  The senior lending group, consisting of CIT and Mr. Miller, earned fees of $850,000 in connection with the restructuring, including previously unpaid fees of $300,000 for the earlier forbearance agreement through December 31, 2003 and $550,000 for the restructuring of the loans described above.  Of these fees, 37.5% ($318,750) were paid to Mr. Miller and the remainder ($531,250) were paid to CIT.  In addition, the Company will pay additional interest at a rate of 1.8% on Mr. Miller’s portion of the loan, which is in recognition of the fact that Mr. Miller’s rights to payments and collateral are subordinate to those of CIT.  This transaction was approved by the Special Committee of the Board, as well as the full Board of Directors with Mr. Miller abstaining due to his personal interest in the transaction.

In order to enter into this restructuring  of the Senior Credit Facility, CIT required that the junior lenders agree to extend the standstill and payment blockage periods, which were to expire at the end of April 2004, until July 31, 2005, which is after the July 23, 2005 maturity of the senior debt.  The junior facility lenders were unwilling to extend such standstill and payment blockage dates without  the conversion provisions described above having been committed to by the Company, subject only to shareholder approval of the conversion by Harbourside.  As a result, the restructuring of the senior debt facility and the conversion and exchange of subordinated debt and warrants described above were cross-conditioned upon each other and agreements effecting them were entered into simultaneously on December 24, 2003. 

To effectuate the conversion and exchange of the subordinated debt and warrants, the Company entered into a Binding Restructuring Agreement with Contrarian and Harbourside on December 24, 2003.  Pursuant to this agreement, Contrarian and Harbourside agreed to an exchange transaction where they would extend the maturity date of 70% of the outstanding principal amount of the junior debt, approximately $9.75 million, convert the remaining 30% of the outstanding principal, plus all accrued interest and fees, into the Company’s common stock and convert the warrants into the Company’s common stock.  This agreement contemplated that the conversions would be further documented in separate exchange agreements and also contemplated registration rights agreements.  The Binding Restructuring Agreement also outlined the terms for amending the Junior Credit Facility to extend its maturity date to July 31, 2005 (which is after the July 23, 2005 maturity date of the Senior Credit Facility), to provide for an interest rate on the remaining debt of Contrarian at 18% and the remaining debt of Harbourside at a reduced rate (which was ultimately agreed to be 9%), to provide for financial covenants that match those of the Senior Credit Facility and to make other amendments to the Junior Credit Facility consistent with amendments made to the Senior Credit Facility as it was amended on December 24, 2003.  The disparity in the interest rates to be earned by Contrarian and Harbourside is caused by Contrarian negotiating an interest rate of 18% as a condition to it entering into the Binding Restructuring Agreement, as a result of which Harbourside agreed to reduce the rate to be received by it to 9% so that the Company would continue to pay an effective blended interest rate of 14% on the aggregate of the subordinated debt following the exchange transactions.  At the same time, Contrarian and Harbourside entered into an agreement with the senior lenders to extend the maturity date of the subordinated debt that they would continue to hold.

As of January 14, 2004, the Company entered into separate exchange agreements with Contrarian and Harbourside, a registration rights agreement with Contrarian and Harbourside and an amendment to the Junior Credit Facility with Contrarian and Harbourside, all as contemplated in the Binding Restructuring Agreement.  Additional details regarding the specific terms of the exchange agreements can be found in Note 7 - “Related Party Transactions”.  Under the amendment to the Junior Credit Facility, the maturity of the remaining subordinated debt was extended and the interest rates thereon were altered and the financial covenants were amended to match those in the Senior Credit Facility, which had been substantially relaxed in the Company’s favor on December 24, 2003.

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7.           Related Party Transactions

Subordinated Debt and Warrant Conversion

Harbourside Investments, LLLP is a limited liability limited partnership of which several of the Company’s executive officers and directors are partners.  Specifically, William G. Miller is the general partner of, and controls, Harbourside.  Mr. Miller is the Company’s Chairman of the Board and Co-Chief Executive Officer, as well as the holder of approximately 16% of the Company’s outstanding common stock.  Mr. Miller, Jeffrey I. Badgley, the Company’s President and Co-Chief Executive Officer, J. Vincent Mish, the Company’s Executive Vice President and Chief Financial Officer, and Frank Madonia, the Company’s Executive Vice President, Secretary and General Counsel, are all limited partners in Harbourside.  In connection with the formation of Harbourside, Mr. Miller made loans to the other executive officers, the proceeds of which the other executive officers then contributed to Harbourside.  These loans from Mr. Miller to the other executive officers are secured by pledges of their respective limited partnership interests to Mr. Miller.

As partners of Harbourside, each of Messrs. Miller, Badgley, Mish and Madonia indirectly received shares of common stock in exchange for the subordinated debt and warrants held by Harbourside.  As general partner of Harbourside, Mr. Miller has sole voting power over the shares of common stock that Harbourside received in the exchange.  This transaction was approved by the Special Committee of the Board, as well as the full Board of Directors with Messrs. Miller and Badgley abstaining due to their personal interest in the transaction.  The transaction was subsequently approved by the Company’s shareholders at a meeting on February 12, 2004.  Other than the exchange, the Company has not engaged in any transactions with Harbourside.  Neither the Company nor Harbourside currently intend to engage in any other transactions in the future except as may be related to Harbourside’s continuing ownership of a portion of the subordinated debt.

On November 24, 2003, Harbourside purchased from Contrarian 44.286% of (i) the subordinated debt and (ii) the warrants to purchase 186,028 shares of the Company’s common stock.  Contrarian had previously purchased all of the Company’s outstanding subordinated debt in a series of transactions during the second half of 2003.  As a result of this transaction,  Harbourside acquired (x) approximately $6.13 million of the outstanding principal of subordinated debt plus accrued interest and fees attributable to this outstanding principal and (y) warrants to purchase an aggregate of 82,382 shares of the Company’s common stock, consisting of warrants to purchase up to 20,998 shares at an exercise price of $3.48 and 61,384 shares at an exercise price of $3.27.  Contrarian retained the remaining principal outstanding under the Junior Credit Facility, which is approximately $7.72 million, plus related interest and fees thereon of approximately $1.65 million, and the remaining warrants to purchase 103,646 shares of common stock.

On January 14, 2004, the Company entered into an exchange agreement with Harbourside, pursuant to which it later issued 583,556 shares of the Company’s common stock upon shareholder approval in exchange for approximately $1.8 million principal amount of, plus approximately $1.32 million of accrued interest and fees on, the outstanding subordinated debt and warrants to purchase 82,382 shares of the the Company’s common stock. 

Under the Exchange Agreement, Harbourside retained 70% of the outstanding principal amount of the subordinated debt that it held and converted the remaining 30% of the outstanding principal amount of such debt plus all accrued interest and commitment fees thereunder into shares of the Company’s common stock.  Immediately prior to entering into the Exchange Agreement, Harbourside held approximately $7.45 million of the Company’s subordinated debt, consisting of approximately $6.13 million of outstanding principal and approximately $1.32 million of accrued interest and fees.  Harbourside continues to hold approximately $4.29 million principal amount of subordinated debt and converted approximately $3.16 million of the subordinated debt (30% of $6.13 million principal amount, plus approximately $1.32 million of accrued interest and fees) into 548,738 shares of the Company’s common stock.  In addition, Harbourside received 34,818 shares of the Company’s common stock in exchange for the warrants to purchase 82,382 shares of the Company’s common stock.

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The subordinated debt was originally issued pursuant to that certain Amended and Restated Credit Agreement, dated July 23, 2001, as amended, by and among the Company and Miller Industries Towing Equipment, Inc., a Delaware corporation and Bank of America, N.A. in its capacity as a lender, and certain other financial institutions.  This Junior Credit Facility and the notes issued pursuant to it are subordinate to the Senior Credit Facility which was also entered into on July 23, 2001.  The subordinated debt had an original aggregate principal amount of $14.0 million bearing interest at the prime rate plus 6.0% per annum and at the time of Contrarian’s purchases had an outstanding principal amount of approximately $13.9 million bearing interest at the default rate of 14% per annum.  The original maturity date of the subordinated debt was July 23, 2003.  The total amount outstanding on the subordinated debt as of January 14, 2004, including accrued interest and commitment fees, was approximately $16.8 million with an interest rate of 14% per annum continuing to apply. 

As a part of its purchases of the subordinated debt, Contrarian also purchased warrants, or the rights to receive warrants, to purchase 186,028 shares of the Company's common stock.  The Company issued these warrants to the initial lenders under the Junior Credit Facility pursuant to a Warrant Agreement, dated July 23, 2001, by and among the Company and the initial lenders.  The 186,028 total consists of warrants issued in July 2002 for the purchase of 47,417 shares of the Company’s common stock at an exercise price of $3.48 and warrants issued in October 2003 for 138,611 shares of common stock at an exercise price of $3.27.  Other than these transactions relating to the subordinated debt and the warrants, which it purchased without the Company's involvement, Contrarian has no relationship with the Company or Harbourside. 

Senior Credit Facility

Simultaneously with entering into a forbearance agreement on October 31, 2003 with respect to the Senior Credit Facility, Mr. Miller made a $2.0 million loan to the Company as a part of the Senior Credit Facility.  The loan to the Company and Mr. Miller’s participation in the Senior Credit Facility were effected by an amendment to the credit agreement and a participation agreement between Mr. Miller and the Senior Credit Facility lenders.

On December 24, 2003, Mr. Miller increased his $2.0 million participation in the existing Senior Credit Facility by an additional $10.0 million.  These funds, along with additional funds from The CIT Group/Business Credit, Inc.,  were used to satisfy the Company’s obligations to two of the existing senior lenders with the result being that CIT, an existing senior lender, and Mr. Miller constituted the senior lenders to the Company, with CIT holding 62.5% of such loan and Mr. Miller participating in 37.5% of the loan.  Mr. Miller’s portion of the loan is subordinated to that of CIT. 

In conjunction with Mr. Miller’s increased participation, the Senior Credit Facility was restructured and restated as a $15.0 million revolving facility and $12.0 million and $5.0 million term loans.  The senior lending group, consisting of CIT and Mr. Miller, earned fees of $850,000 in connection with the restructuring, including previously unpaid fees of $300,000 for the earlier forbearance agreement through December 31, 2003 and $550,000 for the restructuring of the loans described above.  Of these fees, 37.5% ($318,750) were paid to Mr. Miller and the remainder ($531,250) were paid to CIT.  In addition, the Company will pay additional interest at a rate of 1.8% on Mr. Miller’s portion of the loan, which is in recognition of the fact that Mr. Miller’s rights to payments and collateral are subordinate to those of CIT.  This transaction was approved by the Special Committee of the Board, as well as the full Board of Directors with Mr. Miller abstaining due to his personal interest in the transaction.

Stock Issuance to Non-Employee Directors

In accordance with the Non-Employee Director Stock Plan approved by the shareholders on February 12, 2004, the Company’s three non-employee directors were issued 33,966 shares of common stock based on the closing share price on that date.  The non-employee directors have all of the rights of a shareholder with respect to such common stock.  Going forward each non-employee director serving as such on January 1 of a year shall receive an award of a number of shares determined by dividing $25,000 by the closing price of the Company’s common stock on the first day of such calendar year that the stock is traded.  The Plan shall terminate on the day prior to the tenth anniversary of the effective date of the February 18, 2003.

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8.       Stock-Based Compensation

The Company accounts for its stock-based compensation plans under Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees". The Company has adopted the disclosure option of SFAS No. 123, "Accounting for Stock-Based Compensation". Accordingly, no compensation cost has been recognized for stock option grants since the options have exercise prices equal to the market value of the common stock at the date of grant.  There were no grants in the three months ended March 31, 2004 or 2003.

Had compensation cost for stock option grants been determined based on the fair value at the grant dates consistent with the method prescribed by SFAS No. 123, the Company's net income (loss) and net income (loss) per share would have been adjusted to the pro forma amounts indicated below:

		Three Months Ended March 31,
		2004		2003
Net income (loss) available to common stockholders, as reported	$	612	$	(559)
Add:  Stock-based employee compensation     expense included in reported net income (loss), net of     related tax effects
Deduct:  Total stock-based employee compensation     expense determined under fair value based method     for all awards, net of related tax effects		(21)		(82)
Net income (loss) available to common stockholders, pro forma	$	591	$	(641)
Income (loss) per common share:      Basic and diluted, as reported	$	0.06	$	(0.06)
Basic and diluted, pro forma	$	0.05	$	(0.07)

9.        Commitments and Contingencies

The Company is, from time to time, a party to litigation arising in the normal course of its business.  Litigation is subject to various inherent uncertainties, and it is possible that some of these matters could be resolved unfavorably to the Company, which could result in substantial damages against the Company.  The Company has established accruals for matters that are probable and reasonably estimable and maintains product liability and other insurance that management believes to be adequate.  Management believes that any liability that may ultimately result from the resolution of these matters in excess of available insurance coverage and accruals will not have a material adverse effect on the consolidated financial position or results of operations of the Company.

10.       Income Taxes

At December 31, 2002, the Company recorded a full valuation allowance against its net deferred tax asset from continuing and discontinuing operations totaling approximately $18.0 million.  The balance of the valuation allowance was $13.3 million at December 31, 2003.

11.       Recent Accounting Pronouncements

In December 2003, the FASB issued a revision of FIN 46, “Consolidation of Variable Interest Entities.”  FIN 46 applies to any business enterprise that has a controlling interest, contractual relationship or other business relationship with a variable interest entity.  FIN 46 provides guidance for determining when an entity should consolidate a variable interest entity.  The interpretation is effective for periods ending after December 31, 2003.  We have no contractual relationship or other business relationship with a variable interest entity, and therefore the adoption will not have an effect on our consolidated results of operations or financial position.

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Item 2.     Management's Discussion and Analysis of Financial Condition
                 and Results of Operations

Recent Developments

New York Stock Exchange Listing Standards

We received notification from the New York Stock Exchange (“NYSE”) on June 26, 2003 that, based on market information and information in the Company’s recent public filings, we were not in compliance with the NYSE’s continued listing standards.  The NYSE requires shareholders’ equity of not less than $50.0 million and a 30-day average market capitalization of $50.0 million.  Our shareholders’ equity was $40.7 million, as of June 30, 2003, $33.4 million as of September 30, 2003, $28.0 million as of December 31, 2003, and $37.0 million as of March 31, 2004.  As of March 31, 2004, we had a 30-day average market capitalization of $89.1 million.

We compiled a three-pronged plan for regaining compliance with the continued listing standards.  Our plan is to restructure our bank facilities and rationalize the timing of our debt service, dispose of our remaining RoadOne and distributor operations within the time period specified and focus all of our resources, manpower as well as financial, on returning the manufacturing operations to their historically profitable levels.  In September 2003, we were notified that the NYSE accepted the plan to regain compliance with the NYSE's continued listing standards related to shareholders' equity and market capitalization within an eighteen month timeframe.  With the approval by shareholders of the conversion of a portion of the subordinated debt into common stock, we completed the restructuring of its debt facilities.  We have also disposed of the remainder of our RoadOne operations and are in the process of disposing of the distributors.  During this timeframe, we will be subject to quarterly monitoring for compliance by the NYSE.

Discontinued Operations

During the year ended December 31, 2002, our management and our board of directors made the decision to divest of the remaining towing services segment, as well as the operations of the distribution group of the towing and recovery equipment segment. In accordance with SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets", the assets for the towing services segment and the distribution group are considered a "disposal group" and the assets are no longer being depreciated. All assets and liabilities and results of operations associated with these assets have been separately presented in the accompanying financial statements. The statements of operations and related financial statement disclosures for all prior years have been restated to present the towing services segment and the distribution group as discontinued operations separate from continuing operations. The analyses contained herein are of continuing operations, as restated, unless otherwise noted.

The results of operations and loss on disposal associated with certain towing services markets, which were sold in June 2003 have been reclassified from discontinued to continuing operations given our significant continuing involvement in the operations of the disposal components via a consulting agreement and our ongoing interest in the cash flows of the operations of the disposal components via a long-term license agreement.

Critical Accounting Policies

The consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America, which require us to make estimates.  Certain accounting policies are deemed “critical,” as they require management’s highest degree of judgment, estimates and assumptions.  A discussion of critical accounting policies, the judgments and uncertainties affecting their application and the likelihood that materially different amounts would be reported under different conditions or using different assumptions follows:

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Accounts receivable. 

We extend credit to customers in the normal course of business.  Collections from customers are continuously monitored and an allowance for doubtful accounts is maintained based on historical experience and any specific customer collection issues.  While such bad debt expenses have historically been within expectations and the allowance established, there can be no assurance that we will continue to experience the same credit loss rates as in the past. 

Valuation of long-lived assets and goodwill. 

Long-lived assets and goodwill are reviewed for impairment whenever events or circumstances indicate that the carrying amount of these assets may not be fully recoverable.  When a determination has been made that the carrying amount of long-lived assets and goodwill may not be fully recovered, the amount of impairment is measured by comparing an asset’s estimated fair value to its carrying value.  The determination of fair value is based on projected future cash flows discounted at a rate determined by management, or if available independent appraisals or sales price negotiations.  The estimation of fair value includes significant judgment regarding assumptions of revenue, operating costs, interest rates, property and equipment additions; and industry competition and general economic and business conditions among other factors.  We believe that these estimates are reasonable; however, changes in any of these factors could affect these evaluations.

Upon adoption of Financial Accounting Standard No. 142, Goodwill and Other Intangible Assets on January 1, 2002, we ceased to amortize goodwill.  In lieu of amortization, we are required to perform an initial impairment review of goodwill in 2002 and an annual impairment review thereafter.  For further detail of our impairment review and related write downs, See Note 5 to the Consolidated Financial Statements.

Warranty Reserves.

We estimate expense for product warranty claims at the time products are sold.  These estimates are established using historical information about the nature, frequency, and average cost of warranty claims.  We review trends of warranty claims and take actions to improve product quality and minimize warranty claims.  We believe the warranty reserve is adequate; however; actual claims incurred could differ from the original estimates, requiring adjustments to the accrual.

Income taxes.

We recognize deferred tax assets and liabilities based on differences between the financial statement carrying amounts and the tax bases of assets and liabilities.  We consider the need to record a valuation allowance to reduce deferred tax assets to the amount that is more likely than not to be realized.  We consider tax loss carrybacks, reversal of deferred tax liabilities, tax planning and estimates of future taxable income in assessing the need for a valuation allowance.  We established a deferred tax valuation allowance of $18.0 million as of December 31, 2002, representing a full valuation allowance against our net deferred tax assets from continuing and discontinuing operations.  The allowance reflects our recognition that continuing losses from operations and certain liquidity matters associated with our credit facility indicate that it is more likely than not that certain future tax benefits will not be realized through future taxable income.  The balance of the valuation allowance was $13.3 million at December 31, 2003.

Revenues.

Under our accounting policies, sales are recorded when equipment is shipped to independent distributors or other customers.  While we manufacture only the bodies of wreckers, which are installed on truck chassis manufactured by third parties, we sometimes purchases the truck chassis for resale to our customers.  Sales of company-purchased truck chassis are included in net sales.  Margins are substantially lower on completed recovery vehicles containing company-purchased chassis because the markup over the cost of the chassis is nominal.  Revenue from our owned distributors is recorded at the time equipment is shipped to customers or services are rendered.  The towing services division recognizes revenue at the time services are performed. 

Seasonality.

Our towing and recovery equipment segment has experienced some seasonality in net sales due in part to decisions by purchasers of light duty wreckers to defer wrecker purchases near the end of the chassis model year.  The segment’s net sales have historically been seasonally impacted due in part to sales made at the largest towing and recovery equipment trade show which is held in the spring. 

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Results of Operations--Three Months Ended March 31, 2004 Compared to Three Months Ended March 31, 2003

Continuing Operations

Net sales of continuing operations for the three months ended March 31, 2004, decreased 3.6% to $46.2 million from $47.9 million for the comparable period in 2003.  Net sales for the towing and recovery equipment segment increased to $46.2 million for the three months ended March 31, 2004 from $40.7 million for the comparable prior year period.  The increase is primarily the result of overall improvements in market conditions, including increase in demand coupled with increases in production levels.  Net sales for the towing services segment were $0.0 million for the 2004 period compared to $7.2 million for the comparable prior year period as the remaining towing services entities were sold in June 2003.

Costs of operations of continuing operations for the three months ended March 31, 2004, decreased 2.2% to $39.4 from $40.2 million for the comparable period in 2003.  Cost of operations for the towing and recovery equipment segment increased $4.6 million from $34.8 million for the three months ended March 31, 2003 to $39.4 million for the comparable current year period.  Cost of operations decreased slightly as a percentage of sales from 85.5% to 85.3%.  Changes in cost of operation are attributed to the volume increase described above.

Towing services revenues and cost of operations reflect the change in status of certain towing services markets which were sold in June, 2003.  (See Note 2).  These operations have been reclassified from discontinued operations to continuing operations based on certain on-going cash flows provided for under the disposal agreement.

Selling, general, and administrative expenses for the three months ended March 31, 2004, increased slightly to $4.5 million from $4.3 million for the three months ended March 31, 2003.

Net interest expense increased $0.2 million to $1.0 million for the three months ended March 31, 2004 from $0.8 million for the three months ended March 31, 2003 as a result of commitment fees charged in conjunction with the maturity of the junior facility in July 2003. 

The provision for income taxes for continuing operations for the three months ended March 31, 2004 reflects the combined effective US federal and state tax rate of 14.4%, net of tax benefit related to our foreign tax liability.  The provision for the three months ended March 31, 2003 reflects a similar effective US federal and state rate, plus additional taxes on foreign income for the period.

Discontinued Operations

Net sales from discontinued operations decreased $5.9 million to $15.0 million for the three months ended March 31, 2004 from $20.9 million for the three months ended March 31, 2003.  Net sales of the distribution group were $15.0 million for the three months ended March 31, 2004 compared to $16.6 million for the three months ended March 31, 2003. Revenues were negatively impacted by the disposition of three distribution operations during the quarter.  Net sales for the towing and recovery services segment were $0.0 million for the three months ended March 31, 2004 compared to $4.3 million for the three months ended March 31, 2003.  Revenues of the towing services segment decreased as all remaining towing services markets were sold by the end of calendar 2003.

Cost of sales as a percentage of net sales for the distribution group was 93.4% for the three months ended March 31, 2004 compared to 93.5% for the three months ended March 31, 2003.  Cost of sales for the towing services segment was 0.0% for the three months ended March 31, 2004 compared to 81.4% for the three months ended March 31, 2003.  As explained above, all towing services operations have been sold.

Selling, general and administrative expenses as a percentage of sales was 7.5% for the distribution group and 0.0% for the towing services segment for the three months ended March 31, 2004 compared to 6.0% and 47.4% respectively, for the three months ended March 31, 2003.  Increases in the percentage of sales for the distribution group were primarily the result of lower administrative expenses spread over a smaller revenue base, as the Company continues to sell distribution locations.

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Net interest expense of discontinued operations decreased $0.7 million from $1.0 million for the three months ended March 31, 2003 to $0.3 million for the three months ended March 31, 2004 as a result of decreased borrowings under our RoadOne revolving credit facility. 

Liquidity and Capital Resources

Cash used in operating activities was $4.5 million for the three months ended March 31, 2004, compared to $0.2 million provided by operating activities for the comparable period of 2003.  The cash used in operating activities for the three months ended March 31, 2004 was primarily due to decreases in inventory and accounts payable, offset by decreases in accounts receivable.

Cash provided by investing activities was $2.7 million for the three months ended March 31, 2004, compared to $2.5 million provided by investing activities for the comparable period in 2003.  The cash provided by investing activities was primarily due to the sale of distribution operations.

Cash used in financing activities was $2.0 million for the three months ended March 31, 2004 and $1.4 million for the comparable period in the prior year.  The cash was used primarily to reduce borrowings under our credit facilities and other outstanding long-term debt and capital lease obligations.

Our primary capital requirements are for working capital, debt service, and capital expenditures.  Since 1996, we have financed its operations and growth from internally generated funds and debt financing.

Credit Facilities

Senior Credit Facility.

In July 2001, we entered into a new four year senior credit facility with a syndicate of lenders to replace our then existing credit facility. As part of this agreement, the previous credit facility was reduced with proceeds from the senior credit facility and amended to provide for a $14.0 million subordinated secured facility. The senior credit facility originally consisted of an aggregate $102.0 million revolving credit facility and an $8.0 million term loan. The revolving credit facility provides for separate and distinct loan commitment levels for our towing and recovery equipment segment and RoadOne segment, respectively. At March 31, 2004, $5.4 million and $0.1 million, respectively were outstanding under the towing and recovery equipment segment and RoadOne portions of the revolving credit facility. In addition, $16.7 million was outstanding under the senior term loan, and $9.7 million was outstanding under the subordinated secured facility.

The senior credit facility has been amended several times, including most recently on December 24, 2003 in connection with the restructuring of all our debt obligations.  As amended, the senior credit facility consists of an aggregate $32.0 million credit facility, including a $15.0 million revolving loan, a $5.0 million term loan and a $12.0 million term loan.  Borrowing availability under the revolving senior credit facility is based on a percentage of eligible inventory and accounts receivable (determined on eligibility criteria set forth in the credit facility) and subject to a maximum borrowing limitation.  Borrowings under the term loans are collateralized by our property, plant, and equipment.  We are required to make monthly amortization payments on the first term loan of $167,000, but the amortization payments due on November 1, 2003, December 1, 2003, and January 1, 2004 were deferred until the maturity date.  The senior credit facility bears interest at the prime rate (as defined) plus 2.75%, subject to the rights of the senior lender agent or the required lenders to charge a default rate equal to the prime rate (as defined) plus 4.75% during the continuance of any event of default under the senior credit facility, provided, however, that during the forbearance period the senior credit facility bears interest at the prime rate (as defined) plus 2.75% in accordance with the terms of the forbearance agreement.

The senior credit facility matures in July 2005 and is collateralized by substantially all the assets of the Company. The senior credit facility contains requirements relating to maintaining minimum excess availability at all times and minimum quarterly levels of earnings before income taxes, depreciation and amortization (as defined) and a minimum quarterly fixed charge coverage ratio (as defined). In addition, the senior credit facility contains restrictions on capital expenditures, incurrence of indebtedness, mergers and acquisitions, distributions and transfers and sales of assets. The senior credit facility also contains requirements related to weekly and monthly collateral reporting.

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Junior Credit Facility.

The $14.0 million junior credit facility is by its terms expressly subordinated only to the senior credit facility.  The junior credit facility is secured by certain specified assets and by a second priority lien and security interest in substantially all of our other assets.  The junior credit facility contains requirements for certain fees to be paid at six month intervals beginning in January 2002 based on the outstanding balance of the facility at the time.  The junior credit facility also contains provisions for the issuance of warrants for 0.5% of the outstanding shares of our common stock (47,417 shares) in July 2002 and an additional 1.5% (138,611 shares) on July 23, 2003 with an exercise price equal to the then fair market value of our common stock.  As amended, the junior credit facility contains requirements for the maintenance of certain financial covenants.  It also imposes restrictions on capital expenditures, incurrence of indebtedness, mergers and acquisitions, distributions and transfers and sales of assets.

Contrarian Funds, LLC purchased all of the outstanding debt of the junior credit facility in a series of transactions during the second half of 2003.  As part of its purchase of the subordinated debt, Contrarian also purchased warrants, or the rights to receive warrants, to purchase 186,028 shares of our common stock. 

On November 24, 2003, Harbourside Investments, LLLP (Note 7) purchased from Contrarian 44.286% of the subordinated debt and the warrants. 

The junior credit facility originally matured on July 23, 2003.  In connection with the restructuring of our debt, the facility has been amended.  As amended, the junior credit facility, under which $16.7 million in principal, interest and fees was outstanding at December 31, 2003, matures on July 31, 2005 and bears interest at an effective blended rate of 14.0%. 

Default of Credit Facilities.

Our failure to repay all outstanding principal, interest and any other amounts due and owing under the junior credit facility at the original July 23, 2003 maturity date constituted an event of default under the junior credit facility and also triggered an event of default under the senior credit facility cross-default provisions.  Additionally, we were in default of the EBITDA covenant under the junior credit facility only for the first quarter of calendar 2003.  We were also in default under both the senior and junior credit facility as a result of the “going concern” explanatory paragraph included in the auditors’ report as well as the failure to file our Annual Report prior to April 30, 2003.

Pursuant to the terms of the intercreditor agreement between the senior and junior lenders, the junior lender agent and the junior lenders were prevented from taking any enforcement action or exercising any remedies against us, our subsidiaries or our respective assets in respect of such event of default during a standstill period.  On July 29, 2003, the junior lender agent gave a notice of enforcement to the senior lender agent based upon the event of default for failure to repay the outstanding obligations under the junior credit facility on the junior credit facility’s maturity date.  On August 5, 2003, the senior agent gave a payment blockage notice to the junior agent based upon certain events of default under the senior credit facility, thereby preventing the junior agent and junior lenders from receiving any payments from us in respect of the junior credit facility while such blockage notice remains in effect.

2003 Amendments

On February 28, 2003, we entered into the Fifth Amendment to the senior credit facility.  Pursuant to the Fifth Amendment, the date upon which the amount of certain used inventory taken in trade for collateral purposes is reduced to $-0- was extended from February 28, 2003 to March 31, 2003.  In addition, the Fifth Amendment revised the RoadOne revolving commitment reducing the amount to $9.0 million at February 28, 2003 and $-0- as of March 31, 2003. 

On April 1, 2003, we entered into the Sixth Amendment to senior credit facility.  The Sixth Amendment, among other things, revised the RoadOne revolving commitment, extending the time for the reduction thereof to $-0- from March 31, 2003 to March 31, 2004.  The amountof availability that can be generated forused inventory considered as eligible inventory for collateral purposes was reduced to $2.7 million with no further required reductions. 

Subsequent to April 1, 2003, we were in default under certain covenants under our senior and junior credit facility agreements.  Accordingly, amounts outstanding under these facilities were presented as current liabilities in the December 31, 2002 consolidated balance sheet.  Our bank facilities are collateralized by liens on all of our assets. The liens give the lenders the right to foreclose on our assets under certain defined events of default and such foreclosure could allow the lenders to gain control of our operations.

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On October 31, 2003, we entered into a forbearance agreement with the lenders and the senior lender agent under the senior credit facility, pursuant to which, among other things, the senior lenders agreed to forbear from exercising any remedies in respect of the defaults then existing under the senior credit facility as a result of (i) the failure to timely deliver financial statements for fiscal year 2002 and the failure to deliver a report of our independent certified public accountants which is unqualified in any respect, as well as the event of default under the senior credit facility caused by the event of default arising from such failure under the junior credit facility; (ii) the failure to fulfill certain payment obligations to the junior lenders under the junior credit facility; and (iii) the failure to fulfill certain financial covenants in the junior credit facility for one or more of the fiscal quarters ending in fiscal year 2003, which failure would constitute an event of default under the senior credit facility.  The forbearance period under the forbearance agreement was to expire on the earlier of (x) December 31, 2003, (y) the occurrence of certain bankruptcy type events in respect of us or any of our subsidiaries, and (z) the failure by us or any of our subsidiaries that are borrower parties under the senior credit facility to perform the obligations under the senior credit facility or the forbearance agreement.  Under the forbearance agreement, the senior lenders and the senior lender agent did not waive their rights and remedies with respect to the existing senior facility defaults, but agreed to forbear from exercising rights and remedies with respect to the existing senior facility defaults solely during the forbearance period.

Simultaneous with entering into the forbearance agreement on October 31, 2003, William G. Miller, the Chairman of the Board and Co-CEO of the Company, made a $2.0 million loan to us as a part of the senior credit facility.  The loan to us and Mr. Miller’s participation in the senior credit facility were effected by the seventh amendment to the credit agreement and a participation agreement between Mr. Miller and the senior credit facility lenders.

On December 24, 2003, Mr. Miller increased his previous $2.0 million participation in the existing senior credit facility by an additional $10.0 million.  These funds, along with additional funds from The CIT Group/Business Credit, Inc.,  were used to satisfy the obligations to two of the existing senior lenders with the result being that CIT, an existing senior lender, and Mr. Miller constituted the senior lenders to us, with CIT holding 62.5% of such loan and Mr. Miller participating in 37.5% of the loan.  Mr. Miller’s portion of the loan is subordinated to that of CIT. 

In conjunction with Mr. Miller’s increased participation, the senior credit facility was restructured and restated as a $15.0 million revolving facility and $12.0 million and $5.0 million term loans.  As a result of this restructuring, all previously existing defaults under the senior credit facility were waived, the interest rate was lowered by 2% to reflect a non-default rate, fees attributable to RoadOne of $30,000 per month were eliminated, the financial covenants were substantially relaxed, and availability under the Facility was increased by approximately $5.0 million.  The senior lending group, consisting of CIT and Mr. Miller, earned fees of $850,000 in connection with the restructuring, including previously unpaid fees of $300,000 for the earlier forbearance agreement through December 31, 2003 and $550,000 for the restructuring of the loans described above.  Of these fees, 37.5% ($318,750) were paid to Mr. Miller and the remainder ($531,250) were paid to CIT.  In addition, we will pay additional interest at a rate of 1.8% on Mr. Miller’s portion of the loan, which is in recognition of the fact that Mr. Miller’s rights to payments and collateral are subordinate to those of CIT.  This transaction was approved by the Special Committee of the Board, as well as the full Board of Directors with Mr. Miller abstaining due to his personal interest in the transaction.

In order to enter into this restructuring  of the senior credit facility, CIT required that the junior lenders agree to extend the standstill and payment blockage periods, which were to expire at the end of April 2004, until July 31, 2005, which is after the July 23, 2005 maturity of the senior debt.  The junior facility lenders were unwilling to extend such standstill and payment blockage dates without  the conversion provisions described above having been committed to by us, subject only to shareholder approval of the conversion by Harbourside.  As a result, the restructuring of the senior debt facility and the conversion and exchange of subordinated debt and warrants described above were cross-conditioned upon each other and agreements effecting them were entered into simultaneously on December 24, 2003. 

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To effectuate the conversion and exchange of the subordinate debt and warrants, we entered into a Binding Restructuring Agreement with Contrarian and Harbourside on December 24, 2003.  Pursuant to this agreement, Contrarian and Harbourside agreed to an exchange transaction where they would extend the maturity date of 70% of the outstanding principal amount, approximately $9.75 million, convert the remaining 30% of the outstanding principal, plus all accrued interest and fees, into our common stock and convert the warrants into our common stock.  This agreement contemplated that the conversions would be further documented in separate exchange agreements and also contemplated registration rights agreements.  The Binding Restructuring Agreement also outlined the terms for amending the junior credit facility to extend its maturity date to July 31, 2005 (which is after the July 23, 2005 maturity date of the senior credit facility), to provide for an interest rate on the remaining debt of Contrarian at 18% and the remaining debt of Harbourside at a reduced rate (which was ultimately agreed to be 9%), to provide for financial covenants that match those of the senior credit facility and to make other amendments to the junior credit facility consistent with amendments made to the senior credit facility as it was amended on December 24, 2003.  The disparity in the interest rates to be earned by Contrarian and Harbourside is caused by Contrarian negotiating an interest rate of 18% as a condition to it entering into the Binding Restructuring Agreement, as a result of which Harbourside agreed to reduce the rate to be received by it to 9% so that we would continue to pay an effective blended interest rate of 14% on the aggregate of the subordinated debt following the exchange transactions.  At the same time, Contrarian and Harbourside entered into an agreement with the senior lenders to extend the maturity date of the subordinated debt that they would continue to hold.

As of January 14, 2004, we entered into separate exchange agreements with Contrarian and Harbourside, a registration rights agreement with Contrarian and Harbourside and an amendment to the Junior Credit Facility with Contrarian and Harbourside, all as contemplated in the Binding Restructuring Agreement.  Additional details regarding the specific terms of the exchange agreements can be found in Note 7 - “Related Party Transactions”.  Under the amendment to the junior credit facility, the maturity of the remaining subordinated debt was extended and the interest rates thereon were altered and the financial covenants were amended to match those in the senior credit facility, which had been substantially relaxed in our favor on December 24, 2003.

In addition to the borrowings under the senior and junior credit facilities described above, we had approximately $2.6 million of mortgage notes payable, equipment notes payable and other long-term obligations at March 31, 2004.  We also had approximately $5.8 million in non-cancellable operating lease obligations, $4.5 million of which relates to truck and building leases of discontinued operations. 

Certain statements in this Form 10-Q, 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 our actual results may differ materially from the results anticipated in these forward-looking statements due to, among other things, the risks referenced herein and the risk factors set forth under the heading “Risk Factors” in our Annual Report on Form 10-K, filed on March 26, 2004, and in particular, the risks associated with the wind down of the towing services segment and the risks associated with the terms of our substantial indebtedness.  We caution that such factors are not exclusive.  We do not undertake to update any forward-looking statement that may be made from time to time by, or on behalf of, us.

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Item 4.       Controls and Procedures

Within 90 days prior to the filing date of this report, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Chief Executive Officer (CEO) and Chief Financial Officer (CFO), of the effectiveness of the design and operation of its disclosure controls and procedures as defined in Rules 13a-14(c) under the Securities Exchange Act of 1934.  Based upon this evaluation, the Company’s CEO and CFO have concluded that the disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act are recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms.

There were no significant changes in the Company’s internal controls or in other factors that could significantly affect internal controls subsequent to the date of this evaluation.

PART II.       OTHER INFORMATION

Item 1.       Legal Proceedings

The Company commenced an action against Oshkosh Truck Corp. in Federal District Court in Wisconsin on May 6, 2004 to enforce its rights under a confidentiality agreement entered into with Oshkosh in connection with discussions that were held in late 2003 regarding a potential business transaction.  The Company believes that its proprietary, confidential information has been used and will continue to be used for purposes not allowed under such agreement.  It has brought suit to protect its rights in its information, including those rights under the agreement, and to seek damages for any violations of its rights that may be found to have occurred, or which may occur.  The extent of the misuse of the Company’s information is not known at this time.

In addition, the Company is, from time to time, a party to litigation arising in the normal course of its business.  Litigation is subject to various inherent uncertainties, and it is possible that some of these matters could be resolved unfavorably to the Company, which could result in substantial damages against the Company.  The Company has established accruals for matters that are probable and reasonably estimable and maintains product liability and other insurance that management believes to be adequate.  Management believes that any liability that may ultimately result from the resolution of these matters in excess of available insurance coverage and accruals will not have a material adverse effect on the consolidated financial position or results of operations of the Company.

Item 4.       Submission of Matters to a Vote of Security Holders

The Annual Meeting of Shareholders was held on Thursday, February 12, 2004 in Atlanta, Georgia, at which the following matters were submitted to a vote of the shareholders:

1. Votes cast for or withheld regarding the election of five (5) Directors for a term of one (1) year were as follows:

2. Approved a Non-Employee Director Stock Plan by a vote of 5,457,447 FOR, 426,660 AGAINST and 9,762 ABSENTIONS.  There were no broker non-votes on this matter.

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3.  Approved an Exchange Proposal, which entailed the issuance of shares of our Common Stock to an entity owned by certain executive officers of the Company in exchange for subordinated notes and warrants of the Company by a vote of 5,713,611 FOR; 165,818 AGAINST and 14,441 ABSENTIONS.  There were no broker non-votes on this matter.

Item 6.       Exhibits and Reports on Form 8-K

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SIGNATURES

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

Date:    May 14, 2004