MILLER INDUSTRIES INC /TN/

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The condensed consolidated financial statements of Miller Industries, Inc. include the accounts of all consolidated subsidiaries (the “Company”). All significant intercompany transactions and amounts have been eliminated. The results of businesses acquired or disposed of are included in the condensed consolidated financial statements from the date of the acquisition or up to the date of disposal, respectively.

References to “we”, “our”, and similar pronouns in this Quarterly Report on Form 10-Q for the quarter ended March 31, 2025 (this “Form 10-Q”) are to Miller Industries, Inc. and its consolidated subsidiaries unless the context requires otherwise.

Our condensed consolidated financial statements have been prepared in accordance with the U.S. Securities and Exchange Commission (“SEC”) instructions to Quarterly Reports on Form 10-Q and include the information and disclosures required by accounting principles generally accepted in the United States (“GAAP”) for interim financial reporting. The preparation of financial statements in conformity with GAAP requires us to make estimates, judgments, and assumptions that affect amounts reported in the condensed consolidated financial statements and the accompanying notes. Actual amounts may differ from these estimated amounts.

In the opinion of management, all adjustments necessary for a fair presentation of the condensed consolidated financial statements have been included. Except as disclosed elsewhere in this Form 10-Q, all such adjustments are of a normal and recurring nature. Financial results presented for this fiscal 2025 interim period are not necessarily indicative of the results that may be expected for the full fiscal year ending December 31, 2025. These condensed consolidated financial statements are unaudited and, accordingly, should be read in conjunction with the audited consolidated financial statements and related notes contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024.

The condensed consolidated financial statements include accounts of certain subsidiaries whose fiscal closing dates differ from the applicable period end (December 31 st or March 31 st) by 31 days (or less) to facilitate timely reporting.

Significant Accounting Policies

A description of the Company’s significant accounting policies is included in the notes to the audited consolidated financial statements within its Annual Report on Form 10-K for the fiscal year ended December 31, 2024. There have been no material changes in the Company’s significant accounting policies during the three months ended March 31, 2025.

Recently Adopted Accounting Standards

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires an entity to disclose significant segment expenses and other segment items on an annual and interim basis and to provide in interim periods all disclosures about a reportable segment’s profit or loss and assets that are currently required annually. ASU 2023-07 also requires entities with a single reportable segment to provide all segment disclosures under Accounting Standards Codification (ASC) 280, including the new disclosures under this ASU. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The Company adopted the guidance in the fiscal year beginning January 1, 2024, and included additional disclosures as required in Note 1 of the Annual Report on Form 10-K for the fiscal year ended December 31, 2024. There was no impact on the Company’s reportable segments identified.

There were no new material accounting standards adopted in the three months ended March 31, 2025.

Recently Issued Accounting Standards

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires enhanced annual disclosures for specific categories in the rate reconciliation and income taxes paid disaggregated by federal, state, and foreign taxes. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024, with early adoption permitted for annual financial statements that have not been issued or made available for issuance. The Company is currently evaluating the impact this standard will have on its disclosures including the method and timing of adoption.

Segment Disclosures

The Company hasone reportable segment identified as towing and recovery equipment, which is manufactured in the United States, United Kingdom, and France. The Company designs and manufactures bodies of car carriers and wreckers, which are installed on chassis (manufactured by third parties) and sold to our customers. Net sales is primarily derived from the sale of towing and recovery equipment through our distributor network or directly to end-user customers.

The Company’s Chief Operating Decision Maker (the “CODM”) is the President and Chief Executive Officer. The CODM assesses performance for the segment and decides how to allocate resources based on consolidated net income as reported on the consolidated statements of income. The CODM also uses current market conditions to evaluate income generated from segment assets in deciding whether to recommend reinvesting profits into the segment or into other parts of the entity, such as for acquisitions or to pay dividends. Net income is used to monitor budget versus actual results. The CODM also uses net income in competitive analysis by benchmarking to the Company’s competitors. The competitive analysis and the monitoring of budgeted versus actual results are used in assessing the segment’s performance.

The accounting policies of the segment are the same as those described in the summary of significant accounting policies included in Note 1 of the Annual Report on Form 10-K for the fiscal year ended December 31, 2024. The measure of segment assets is reported on the consolidated balance sheet as total consolidated assets.

The following tables contain information reviewed by the CODM:

2. INVENTORIES

Inventory costs include materials, labor, and factory overhead. Inventories are stated at the lower of cost or net realizable value, primarily determined on a moving average unit cost basis. Appropriate consideration is given to obsolescence, valuation, and other factors in determining net realizable value. Revisions of these estimates could result in the need for adjustments.

Inventories, net of reserves, consisted of the following:

For the three months ended March 31, 2025 and 2024, the Company didnot recognize impairment of inventory.

As of March 31, 2025 and December 31, 2024, the Company’s balances are presented net of inventory reserves of$6.1 million and$5.2 million, respectively.

3. PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consisted of the following:

For the three months ended March 31, 2025 and 2024, depreciation expense related to property, plant and equipment was$3.7 million and$3.5 million, respectively.

4. LONG-TERM OBLIGATIONS

Credit Facility

The Company’s loan agreement with First Horizon Bank, which governs its$100.0 million amended unsecured revolving credit facility with a maturity date of May 31, 2027, contains customary representations and warranties, events of default, and financial, affirmative, and negative covenants for loan agreements of this kind. The credit facility restricts the payment of cash dividends if the payment would cause the Company to be in violation of the minimum tangible net worth test or the leverage ratio test in the loan agreement, among various other customary covenants. In the absence of default, all borrowings under the credit facility bear interest at the one-month Term Secured Overnight Financing Rate (SOFR) plus 1.00% or 1.25% per annum.

We were in compliance with all covenants under the credit facility throughout 2024 and during the first three months of 2025. The Company pays a quarterly non-usage fee under the current loan agreement at a rate per annum equal to between 0.15% and 0.35% of the unused amount of the credit facility.

Forthe three months ended March 31, 2025 and 2024, interest expense on the credit facility was$1.0 million and$0.9 million, respectively. The Company had outstanding borrowings of$75.0 million and$65.0 million under the credit facility as of March 31, 2025 and December 31, 2024, respectively.

5. INCOME TAXES

As of March 31, 2025, the Company hadno federal net operating loss carryforwards. As of March 31, 2025 and December 31, 2024, state net operating loss carryforwards were$8.9 million.

6. LEASES

We have lease agreements for equipment and facilities under long-term, non-cancellable leases. We determine if an arrangement is a lease at inception by evaluating whether the arrangement conveys the right to use an identified asset and whether we obtain substantially all of the economic benefits from, and have the ability to direct, the use of the asset. Our lease agreements generally do not contain any material residual value guarantees or material restrictive covenants.

Operating leases are included in operating lease right-of-use assets, current operating lease liabilities, and long-term operating lease liabilities in our condensed consolidated balance sheets. Operating lease right-of-use assets and corresponding operating lease liabilities are recognized at the commencement date based on the present value of lease payments over the lease term, plus payments made prior to lease commencement and any initial direct costs. Operating lease expense for operating lease assets is recognized on a straight-line basis over the lease term. As most of our leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments.

We also have elected to apply a practical expedient for short-term leases whereby we do not recognize a lease liability or a right-of-use asset for leases with a term of 12 months or less. The Company recognizes short-term leases on a straight-line basis and does not record a related right-of-use asset or lease obligation for such contracts. Our leases have remaining lease terms that expire at various dates through 2029. Some of our lease terms may include options to extend or terminate the lease, and the Company includes those leases when it is reasonably certain we will exercise that option.

The following table summarizes the components of lease cost:

The following table summarizes supplemental cash flow information related to leases:

The following table presents other lease information related to the Company’s leases:

Future lease payments under non-cancellable leases as of March 31, 2025 were as follows:

Related Party Leases

The Company’s subsidiary in the United Kingdom leased facilities used for manufacturing and office space from a related party with related lease costs during the three months ended March 31, 2025 and 2024 of$0.1 million and$0.1 million, respectively. The Company’s French subsidiary leased a fleet of vehicles from a related party with related lease costs of$0.1 million and$0.1 million during the three months ended March 31, 2025 and 2024, respectively.

7. COMMITMENTS AND CONTINGENCIES

Commitments

As of March 31, 2025 and December 31, 2024, the Company had commitments of approximately$10.0 million and$14.2 million, respectively, for construction and acquisition of property, plant and equipment. During the first quarter of 2025, the Company continued its investments in automation and the use of robotics in its production processes to streamline efficiency.

The Company migrated its enterprise resource planning (ERP) system to a multi-tenant cloud environment in 2021 and has continued to implement additional modules such as enterprise performance management, human capital management, cybersecurity, data analytics, and the use of closed-loop artificial intelligence. As of March 31, 2025 and December 31, 2024, the Company had commitments related to the continuing implementation project of approximately$0.5 million and$0.5 million in software license fees, respectively, payable in installments through the remainder of 2025.

In addition to these commitments, in March 2025, the Company’s Board of Directors authorized approximately $9.1 million (€8.0 million) for an expansion at one of our facilities in France which is expected to begin in the third quarter of 2025.

Contingencies

The Company has entered into arrangements with third-party lenders where it has agreed to repurchase products that are repossessed from the independent distributor customer in the event of default. These arrangements are typically subject to a maximum repurchase amount. For the three months ended March 31, 2025 and year ended December 31, 2024, the maximum amount of collateral the Company could be required to purchase was$154.1 million and$154.9 million, respectively. The Company’s financial exposure under these arrangements is limited to the difference between the amount paid to third-party lenders for repurchases of inventory and the amount received upon subsequent resale of the repossessed product. The Company had no repurchases of inventory during the three months ended March 31, 2025 and year ended December 31, 2024 and concluded the liability associated with potential repurchase obligations was neither probable, nor material.

Litigation

We are subject to a variety of claims and lawsuits that arise from time to time in the ordinary course of business. 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. Although management believes that any pending claims and lawsuits will not have a significant impact on the Company’s consolidated financial position or results of operations, the adjudication of such matters is subject to inherent uncertainties and management’s assessment may change depending on future events.

8. SHAREHOLDERS’ EQUITY** **

2016 Stock Incentive Plan

Effective August 2016, the Company adopted the Miller Industries, Inc. 2016 Stock Incentive Plan (the “2016 Plan”). Pursuant to the 2016 Plan, the Board of Directors may grant up to 800,000 shares of common stock under share-based awards to officers, directors, and employees, as well as consultants or advisors who provide services to the Company or a subsidiary. The 2016 Plan provides for the issuance of non-qualified stock options, incentive stock options, stock appreciation rights, restricted stock, restricted stock units, stock awards, performance shares, performance units, and other stock-based awards or any combination thereof. The 2016 Plan will terminate on August 1, 2026.

2023 Non-Employee Director Stock Plan

Effective May 2023, the Company adopted the Miller Industries, Inc. 2023 Non-Employee Director Stock Plan (the “2023 Plan”). Pursuant to the 2023 Plan, the Board of Directors may grant up to 125,000 shares under share-based awards to non-employee directors of the Company. The 2023 Plan provides for the issuance of restricted stock, restricted stock units, unrestricted shares of common stock and non-statutory stock options or any combination thereof on the first business day after each annual meeting of shareholders of the Company. The 2023 Plan will terminate on May 26, 2033.

2025 Stock Incentive Plan

On March 31, 2025, the Company’s Board of Directors approved the Miller Industries, Inc. 2025 Stock Incentive Plan (the “2025 Plan”). The 2025 Plan will become effective if approved by the Company’s shareholders at the Company’s 2025 annual meeting of shareholders, to be held on May 23, 2025.

Restricted Stock Units

Restricted stock units, once granted, are subject only to time-based service conditions. Executive officer awards vest ratably over three tofive years (depending on award granted) and non-employee director awards cliff-vest afterone year.

The following table summarizes all transactions related to restricted stock units granted under the 2016 Plan and the 2023 Plan for the three months ended March 31, 2025:

The following table provides additional data related to restricted stock unit grants under the 2016 Plan and the 2023 Plan:

Stock-based compensation expense is included as a component of selling, general and administrative expenses in the condensed consolidated statements of income.

Stock Repurchase Program

On April 2, 2024, the Company’s Board of Directors approved a stock repurchase program authorizing the Company to purchase up to$25.0 million of the Company’s common stock with no expiration date (the “Repurchase Program”). Repurchases under the Repurchase Program may be made on the open market, in privately negotiated transactions, block purchases, or otherwise as permitted by the federal securities laws and other legal and contractual requirements and are expected to comply with Rule 10b-18 under the Securities Exchange Act of 1934, as amended. The number of shares to be repurchased and the timing of any repurchases will depend on a number of factors, including share price, economic and market conditions, and corporate requirements, among others. The Company may choose to suspend or discontinue the Repurchase Program at any time. The cost of the shares repurchased will be funded from our available cash and temporary investments and borrowings under our credit facility.

For accounting purposes, common stock repurchased under the Repurchase Program is recorded based upon the settlement date of the applicable trade. During the three months ended March 31, 2025 the Company repurchased 46,817 shares of common stock pursuant to the Repurchase Program. The total cost of the shares repurchased during the first quarter was$2.1 million with an average price of$44.90 per share.

9. REVENUE

All of our operating revenue is generated from contracts with customers. Our primary source of revenue is generated from sales of towing and recovery equipment. Because our product lines have substantially similar characteristics, the Company has identifiedone operating segment regularly reviewed to assess performance and allocate resources. Alternatively, the Company uses a geographic approach to track revenues by geographic regions.

Net revenues by geographic region are as follows:

Concentrations of Credit Risk

Financial instruments that potentially expose us to concentrations of credit risk consist primarily of cash and temporary investments and trade accounts receivable. As of March 31, 2025 and December 31, 2024, the Company had cash depositednet of outstanding checks of$27.4 million and$24.3 million, respectively, held in multiple high-credit quality financial institutions. We attempt to limit our credit risk associated with accounts receivable by performing ongoing credit evaluations of our customers and maintaining adequate allowances for potential credit losses.

No single customer accounted for more than 10% of total revenues for the three months ended March 31, 2025 or the comparable period in 2024.

As of March 31, 2025, there wasone customer with a trade accounts receivable of 12.5% of the Company’s total trade receivable. As of December 31, 2024 there wasone customer with a trade accounts receivable of 14.9% of the Company’s total trade receivable.

10. EARNINGS PER SHARE

The following table reconciles the number of shares of common stock used to compute basic and diluted earnings per share of common stock:

11. SUBSEQUENT EVENTS

Dividends

On May 5, 2025, the Board of Directors of the Company declared a quarterly cash dividend of$0.20 per share. The dividend is payable June 9, 2025, to shareholders of record as of June 2, 2025.