Miller Industries, Inc. — FY2022 Form 10-K
Reporting period: Year ended December 31, 2022. Amounts are in millions of U.S. dollars unless noted; financial statements were revised for prior-period errors described below. Miller manufactures towing and recovery equipment, selling mainly through independent distributors.
Financial performance and liquidity
| Metric | 2022 | 2021 | Change |
|---|---|---|---|
| Net sales | $848.5 | $717.5 | +18.3% |
| Gross profit / margin | $82.4 / 9.7% | $69.9 / 9.7% | Profit +18.0%; margin unchanged |
| Operating income / margin | $29.6 / 3.5% | $23.6 / 3.3% | Increased |
| Net income | $20.3 | $16.3 | +25.2% |
| Diluted EPS | $1.78 | $1.42 | +25.4% |
| Operating cash flow | $(19.2) | $15.3 | Turned negative |
| Capital expenditures | $28.9 | $9.2 | Increased |
Gross margin remained 9.7% as product price increases implemented during the second half helped offset higher component costs. SG&A rose to $52.8 million from $46.2 million, though declined as a share of sales to 6.2% from 6.4%. Net interest expense increased to $3.4 million from $1.4 million.
At year-end, cash and temporary investments were $40.2 million, down from $54.3 million; current assets were $376.0 million and current liabilities $156.1 million. The company had $45.0 million outstanding on its revolving credit facility, versus none in 2021, and reported $293.5 million in shareholders’ equity. The facility was expanded from $50 million to $100 million in 2022, matures May 2027, and carried a 5.47% rate at year-end. The company reported covenant compliance. Cash dividends were $0.72 per share for 2022.
Material changes and notable items
- Domestic sales increased to $765.3 million from $627.6 million; foreign sales declined to $83.1 million from $89.9 million.
- Supply-chain constraints and higher labor and material costs drove elevated inventory and working-capital requirements. Inventory grew to $153.7 million from $114.9 million; operating cash use reflected increased receivables, inventory purchases and production costs.
- Investing cash outflow was $28.9 million, including facility and manufacturing investments and an aircraft purchased for marketing, supplier relations and facility visits.
- One distributor represented 11.2% of 2022 sales. The filing states no other customer exceeded 10% of sales.
Outlook, risks and contingencies
The company gave no specific revenue or earnings guidance. Management said strong backlog, price actions and process improvements supported an improved finish to 2022, but anticipated supply-chain constraints, inflation and other economic and geopolitical factors would adversely affect production, results and cash flow during 2023, potentially beyond the first half. An 8% price increase took effect in the first quarter of 2023. Backlog remained historically high, and management expected supplier additions and product redesign efforts to help complete deliveries and reduce it.
Key risks include component and chassis availability and pricing, skilled-labor retention and costs, higher interest rates and reduced customer access to financing, cyclical demand, foreign-exchange exposure, and execution of production and capacity plans. Open purchase orders totaled $94.4 million, expected to be settled in 2023; property and equipment commitments were $6.4 million and remaining software commitments $2.6 million. The company also had potential distributor-product repurchase obligations capped at approximately $74.1 million; none were triggered in 2022. Management said ordinary-course litigation was not expected to materially affect financial position or results.
Accounting, controls and governance
The company revised prior-year statements after identifying historical intercompany-elimination errors originating between 1996 and 2006. It judged the errors immaterial to previously reported periods but said a current-period adjustment would be material; revisions reduced reported property, plant and equipment by $1.2 million, increased accounts payable by $2.7 million, and reduced accumulated surplus by $3.9 million. The auditor issued unqualified opinions on the financial statements and internal controls and reported no critical audit matters. Management concluded internal controls were effective. Separately, the company disclosed ongoing discussions with a shareholder concerning board refreshment and governance, with no agreement reached as of filing.
Investor verification priorities
- Review the revised comparative financial statements and the full reconciliation and scope of the prior-period accounting errors.
- Track whether backlog converts to shipments and cash, and whether operating cash flow recovers as inventory and receivables normalize.
- Assess the durability of pricing actions against inflation, supplier costs, labor expenses and any resulting demand or volume changes.
- Monitor credit-facility borrowing, interest costs, covenant headroom, and the company’s ability to maintain dividends alongside investment needs.
- Check customer concentration, distributor financing conditions, and any changes in the shareholder governance discussions.