10-Q 1 mlr-20220930x10q.htm 10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 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

September 30, 2022

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________________________________________ to ________________________________________

Commission file number

001-14124

MILLER INDUSTRIES, INC.

(Exact name of registrant as specified in its charter)

Tennessee

62-1566286

(State or other jurisdiction of incorporation or

(I.R.S. Employer Identification No.)

organization)

8503 Hilltop Drive

Ooltewah, Tennessee

37363

(Address of principal executive offices)

(Zip Code)

(423) 238-4171

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class

Trading Symbol

Name of Each Exchange on Which Registered

Common Stock, par value $0.01 per share

MLR

New York Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes         No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes         No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes         No

The number of shares outstanding of the registrant’s common stock, par value $.01 per share, as of October 31, 2022 was 11,416,716.

Graphic

Index

Page Number

PART I

FINANCIAL INFORMATION

Item 1.

Financial Statements.

Condensed Consolidated Balance Sheets as of September 30, 2022 and December 31, 2021

3

Condensed Consolidated Statements of Income for the Three and Nine Months Ended September 30, 2022 and 2021

4

Condensed Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2022 and 2021

5

Condensed Consolidated Statements of Shareholders’ Equity for the Three and Nine Months Ended September 30, 2022 and 2021

6

Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2022 and 2021

8

Notes to Condensed Consolidated Financial Statements

9

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

15

Item 3.

Quantitative and Qualitative Disclosures About Market Risk.

19

Item 4.

Controls and Procedures.

19

PART II

OTHER INFORMATION

Item 1.

Legal Proceedings.

20

Item 1A.

Risk Factors.

20

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds.

20

Item 3.

Defaults Upon Senior Securities.

20

Item 4.

Mine Safety Disclosures.

20

Item 5.

Other Information.

20

Item 6.

Exhibits.

21

SIGNATURES

23

FORWARD-LOOKING STATEMENTS

Certain statements in this Quarterly Report on Form 10-Q, including but not limited to statements made in Part I, Item 2–“Management’s Discussion and Analysis of Financial Condition and Results of Operations,” statements made with respect to future operating results, expectations of future customer orders and the availability of resources necessary for our business may be deemed to be forward-looking statements, as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by the use of words such as “may,” “will,” “should,” “could,” “continue,” “future,” “potential,” “believe,” “project,” “plan,” “intend,” “seek,” “estimate,” “predict,” “expect,” “anticipate,” “forecast,” “target” and similar expressions, or the negative of such terms, or other comparable terminology. Forward-looking statements also include the assumptions underlying or relating to any of the foregoing statements. Such forward-looking statements are made based on our management’s beliefs as well as assumptions made by, and information currently available to, our management. Our actual results may differ materially from the results anticipated in these forward-looking statements due to, among other things:

changes in price, delivery delays and decreased availability of component parts, chassis and raw materials, including aluminum, steel, petroleum-related products, including as a result of increased demand from improving market conditions, general inflation, the war in Ukraine, as further discussed below, the impact of the COVID-19 pandemic and related variants and supply chain difficulties;
economic and market conditions, including the negative impacts on the Company’s customers, suppliers and employees from increasing inflationary pressures, economic and geopolitical uncertainties (including the war in Ukraine) and the continuing and any potential future negative impacts of the COVID-19 pandemic;
our dependence upon outside suppliers for purchased component parts, chassis and raw materials, including aluminum, steel, and petroleum-related products;
increased employee turnover rates and the ability to attract and retain skilled labor to manufacture our products;
the potential negative impacts of various actions taken by the federal government in response to economic volatility and inflationary pressures, including the impact on our customers’ and end users’ access to capital and credit to fund purchases;
operational challenges caused by increased sales volumes as the economy and markets recover from the conditions related to the COVID-19 pandemic;
future impacts resulting from the war in Ukraine, which include or could include (among other effects) disruption in global commodity and other markets, increased prices for energy, supply shortages and supplier financial risk;
the cyclical nature of our industry and changes in consumer confidence;
special risks from our sales to U.S. and other governmental entities through prime contractors;
changes in fuel and other transportation costs, insurance costs and weather conditions;
changes in government regulations, including environmental and health and safety regulations;
failure to comply with domestic and foreign anti-corruption laws;
competition in our industry and our ability to attract or retain customers;
our ability to develop or acquire proprietary products and technology;
assertions against us relating to intellectual property rights;
a disruption in, or breach in security of, our information technology systems or any violation of data protection laws;

changes in the tax regimes and related government policies and regulations in the countries in which we operate;
the effects of regulations relating to conflict minerals;
the catastrophic loss of one of our manufacturing facilities;
environmental and health and safety liabilities and requirements;
loss of the services of our key executives;
product warranty or product liability claims in excess of our insurance coverage;
potential recalls of components or parts manufactured for us by suppliers or potential recalls of defective products;
an inability to acquire insurance at commercially reasonable rates;
and those other risks referenced herein, including those risks referred to in Part II, Item 1A–“Risk Factors” in this Quarterly Report on Form 10-Q and those risks discussed in our other filings with the Securities and Exchange Commission, including those risks discussed under the caption “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021, which discussion is incorporated herein by this reference.

Given these uncertainties, you should not place undue reliance on these forward-looking statements. You should read this report and the documents that we reference in this report and have filed as exhibits to the report completely and with the understanding that our actual future results may be materially different from what we expect. Also, forward-looking statements represent our management’s beliefs and assumptions only as of the date of this report. Except as required by law, we assume no obligation to update these forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future.

PART I. FINANCIAL INFORMATION

ITEM 1.          FINANCIAL STATEMENTS

MILLER INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

September 30, 

    

2022

December 31, 

    

(Unaudited)

    

2021

    

ASSETS

CURRENT ASSETS:

Cash and temporary investments

$

33,208

$

54,332

Accounts receivable, net of allowance for credit losses of $1,268 and $1,155 at September 30, 2022 and December 31, 2021, respectively

 

167,887

 

153,977

Inventories, net

 

144,382

 

114,908

Prepaid expenses

 

6,053

 

5,751

Total current assets

 

351,530

 

328,968

NONCURRENT ASSETS:

Property, plant and equipment, net

 

112,545

 

96,496

Right-of-use assets - operating leases

944

1,231

Goodwill

 

11,619

 

11,619

Other assets

 

626

 

533

TOTAL ASSETS

$

477,264

$

438,847

LIABILITIES AND SHAREHOLDERS’ EQUITY

CURRENT LIABILITIES:

Accounts payable

$

107,477

$

119,029

Accrued liabilities

 

30,124

 

24,866

Current portion of operating lease obligation

316

361

Current portion of finance lease obligation

15

Total current liabilities

 

137,917

 

144,271

NONCURRENT LIABILITIES:

Long-term obligations

 

45,000

 

Noncurrent portion of operating lease obligation

 

628

 

870

Deferred income tax liabilities

 

5,195

 

5,170

Total liabilities

 

188,740

 

150,311

COMMITMENTS AND CONTINGENCIES (Note 7)

SHAREHOLDERS’ EQUITY:

Preferred stock, $0.01 par value; 5,000,000 shares authorized, none issued or outstanding

 

 

Common stock, $0.01 par value; 100,000,000 shares authorized, 11,416,716 and 11,410,728 outstanding at September 30, 2022 and December 31, 2021, respectively

 

114

 

114

Additional paid-in capital

 

152,169

 

151,449

Accumulated surplus

 

146,807

 

141,918

Accumulated other comprehensive loss

 

(10,566)

 

(4,945)

Total shareholders’ equity

 

288,524

 

288,536

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

$

477,264

$

438,847

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

3

MILLER INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share data)

(Unaudited)

Three Months Ended

Nine Months Ended

September 30

September 30

    

2022

    

2021

    

2022

    

2021

    

NET SALES

$

205,557

$

164,715

$

622,602

$

515,785

COSTS OF OPERATIONS

 

182,377

 

146,883

 

565,708

 

461,532

GROSS PROFIT

 

23,180

 

17,832

 

56,894

 

54,253

OPERATING EXPENSES:

 

  

 

  

 

  

 

  

Selling, general and administrative expenses

 

14,673

 

11,983

 

39,710

 

35,053

NON-OPERATING (INCOME) EXPENSES:

 

  

 

  

 

  

 

  

Interest expense, net

 

1,042

 

286

 

2,088

 

901

Other (income) expense, net

 

666

 

206

 

993

 

434

Total expense, net

 

16,381

 

12,475

 

42,791

 

36,388

INCOME BEFORE INCOME TAXES

 

6,799

 

5,357

 

14,103

 

17,865

INCOME TAX PROVISION

 

1,567

 

1,511

 

3,049

 

4,325

NET INCOME

$

5,232

$

3,846

$

11,054

$

13,540

BASIC INCOME PER COMMON SHARE

$

0.46

$

0.34

$

0.97

$

1.19

DILUTED INCOME PER COMMON SHARE

$

0.46

$

0.34

$

0.97

$

1.19

CASH DIVIDENDS DECLARED PER COMMON SHARE

$

0.18

$

0.18

$

0.54

$

0.54

WEIGHTED AVERAGE SHARES OUTSTANDING:

 

  

 

  

 

  

 

  

Basic

 

11,417

 

11,411

 

11,417

 

11,411

Diluted

 

11,417

 

11,411

 

11,418

 

11,411

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

4

MILLER INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

(Unaudited)

Three Months Ended

Nine Months Ended

    

September 30

September 30

    

2022

    

2021

    

2022

    

2021

    

NET INCOME

$

5,232

$

3,846

$

11,054

$

13,540

OTHER COMPREHENSIVE INCOME (LOSS):

 

  

 

  

 

  

 

  

Foreign currency translation adjustment

 

(3,341)

 

(1,501)

 

(5,621)

 

(162)

Total other comprehensive income (loss)

 

(3,341)

 

(1,501)

 

(5,621)

 

(162)

COMPREHENSIVE INCOME

$

1,891

$

2,345

$

5,433

$

13,378

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

5

MILLER INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

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

(Unaudited)

    

    

    

Accumulated

    

Additional

Other

Common

Paid-In

Accumulated

Comprehensive

Stock

Capital

Surplus

 

Loss

Total

BALANCE, December 31, 2020

$

114

$

151,249

$

133,879

$

(2,789)

$

282,453

Components of comprehensive income:

Net income

3,178

3,178

Foreign currency translation adjustment

760

760

Total comprehensive income

3,178

760

3,938

Issuance of common stock to non-employee directors (5,260)

200

200

Dividends paid, $0.18 per share

(2,054)

(2,054)

BALANCE, March 31, 2021

114

151,449

135,003

(2,029)

284,537

Components of comprehensive income:

Net income

6,516

6,516

Foreign currency translation adjustment

579

579

Total comprehensive income

6,516

579

7,095

Dividends paid, $0.18 per share

(2,054)

(2,054)

BALANCE, June 30, 2021

114

151,449

139,465

(1,450)

289,578

Components of comprehensive income:

Net income

3,846

3,846

Foreign currency translation adjustment

(1,501)

(1,501)

Total comprehensive income

3,846

(1,501)

2,345

Dividends paid, $0.18 per share

(2,054)

(2,054)

BALANCE, September 30, 2021

$

114

$

151,449

$

141,257

$

(2,951)

$

289,869

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

6

Table of Contents

MILLER INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (Continued)

(In thousands, except share data)

(Unaudited)

BALANCE, December 31, 2021

$

114

$

151,449

$

141,918

$

(4,945)

$

288,536

Components of comprehensive income:

Net income

2,065

2,065

Foreign currency translation adjustment

25

25

Total comprehensive income

2,065

25

2,090

Issuance of common stock to non-employee directors (5,988)

200

200

Stock-based compensation on nonvested restricted stock units

75

75

Dividends paid, $0.18 per share

(2,055)

(2,055)

BALANCE, March 31, 2022

114

151,724

141,928

(4,920)

288,846

Components of comprehensive income:

Net income

3,757

3,757

Foreign currency translation adjustment

(2,305)

(2,305)

Total comprehensive income

3,757

(2,305)

1,452

Stock-based compensation on nonvested restricted stock units

222

222

Dividends paid, $0.18 per share

(2,054)

(2,054)

BALANCE, June 30, 2022

114

151,946

143,631

(7,225)

288,466

Components of comprehensive income:

Net income

5,232

5,232

Foreign currency translation adjustment

(3,341)

(3,341)

Total comprehensive income

5,232

(3,341)

1,891

Stock-based compensation on nonvested restricted stock units

223

223

Dividends paid, $0.18 per share

(2,056)

(2,056)

BALANCE, September 30, 2022

$

114

$

152,169

$

146,807

$

(10,566)

$

288,524

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

7

MILLER INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

Nine Months Ended

September 30

    

2022

    

2021

    

OPERATING ACTIVITIES:

 

  

 

  

 

Net income

$

11,054

$

13,540

Adjustments to reconcile net income to net cash flows from operating activities:

 

  

 

  

Depreciation and amortization

 

8,628

 

8,124

(Gain) Loss on disposal of property, plant and equipment

 

(52)

 

7

Provision for credit losses

 

126

 

118

Issuance of non-employee director shares

 

200

 

200

Stock-based compensation on nonvested restricted stock units

520

Deferred tax provision

 

19

 

9

Changes in operating assets and liabilities:

 

  

 

  

Accounts receivable

 

(15,147)

 

10,312

Inventories

 

(32,625)

 

(24,990)

Prepaid expenses

 

(359)

 

(3,209)

Other assets

 

51

 

190

Accounts payable

 

(10,190)

 

2,204

Accrued liabilities

 

6,173

 

531

Net cash flows from operating activities

 

(31,602)

 

7,036

INVESTING ACTIVITIES:

 

  

 

  

Purchases of property, plant and equipment

 

(25,127)

 

(7,857)

Proceeds from sale of property, plant and equipment

 

8

 

6

Net cash flows from investing activities

 

(25,119)

 

(7,851)

FINANCING ACTIVITIES:

 

  

 

  

Net borrowings under credit facility

 

45,000

 

Payments of cash dividends

 

(6,165)

(6,162)

Finance lease obligation payments

(15)

(16)

Net cash flows from financing activities

 

38,820

 

(6,178)

EFFECT OF EXCHANGE RATE CHANGES ON CASH AND TEMPORARY INVESTMENTS

 

(3,223)

 

(121)

NET CHANGE IN CASH AND TEMPORARY INVESTMENTS

 

(21,124)

 

(7,114)

CASH AND TEMPORARY INVESTMENTS, beginning of period

 

54,332

 

57,521

CASH AND TEMPORARY INVESTMENTS, end of period

$

33,208

$

50,407

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

 

  

 

  

Cash payments for interest

$

1,902

$

1,104

Cash payments for income taxes, net of refunds

$

1,277

$

5,153

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

8

MILLER INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(in thousands, except as otherwise noted)

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 (the “SEC”). Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) 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. 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, 2021. The condensed consolidated financial statements include accounts of certain subsidiaries whose fiscal closing dates differ from December 31st by 31 days (or less) to facilitate timely reporting.

2.          RECENT ACCOUNTING PRONOUNCEMENTS

Recently Issued Standards

In October 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2021-08, Business Combinations (Topic 805). The update provides guidance on how to measure and recognize contract assets and contract liabilities when purchased as part of a business combination.  According to the guidance, the acquirer must follow ASC Topic 606 in accounting for the contract asset or contract liability being purchased.  The amendments in the update will be effective for financial statements beginning after December 15, 2022, including interim periods within those fiscal years.  The Company will apply the amendments prospectively.  The adoption of this update will not have a material impact on the Company’s consolidated financial statements and related disclosures.

In March 2022, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2022-02, Financial Instruments – Credit Losses (Topic 326).  The update will require entities with financing receivables to disclose gross write-offs by year of origination of the receivable. The amendments in the update will be effective for financial statements beginning after December 15, 2022, including interim periods within those fiscal years, and will be applied prospectively. The adoption of this update will not have a material impact on the Company’s consolidated financial statements and related disclosures.

Recently Adopted Standards

During the first quarter of 2022, the Company adopted ASU 2021-10, Government Assistance (Topic 832), which requires certain disclosures about transactions with a government that are accounted for by applying a grant or contribution accounting model by analogy.  The amendments require disclosure of information about the nature of the transactions and the related accounting policy used to account for the transactions, information regarding the line items within the consolidated financial statements that are affected by the transactions, and significant terms and conditions of the transactions.  The adoption of this update did not have a material impact on the Company’s condensed consolidated financial statements and related disclosures.

9

3.          BASIC AND DILUTED INCOME PER COMMON SHARE

Basic and diluted income per common share were calculated using the following:

Three Months Ended

Nine Months Ended

September 30

September 30

    

2022

    

2021

    

2022

    

2021

Net Income

$

5,232

$

3,846

$

11,054

$

13,540

 

 

 

Basic and Diluted Common Shares

Weighted Average Shares Outstanding - Basic

11,417

11,411

 

11,417

 

11,411

Dilution for Assumed Exercises of Nonvested Restricted Stock Units

 

 

 

1

 

Weighted Average Common Shares Outstanding - Diluted

11,417

11,411

11,418

11,411

Basic income per common share is computed by dividing net income by the weighted average number of common shares outstanding. Diluted income per common share is calculated by dividing net income by the weighted average number of common and potential dilutive common shares outstanding. The Company uses the treasury stock method to account for the effect of nonvested restricted stock units on the computation of diluted income per share. For the three months ended September 30, 2022, all 160 nonvested restricted stock units would have been anti-dilutive. For the nine months ended September 30, 2022, none of the nonvested restricted stock units would have been anti-dilutive. There were no nonvested restricted stock units granted or outstanding during the three or nine months ended September 30, 2021.

4.          REVENUE

Substantially all of our revenue is generated from sales of towing and recovery equipment. As such, disaggregation of revenue by product line would not provide useful information because all product lines have substantially similar characteristics. However, revenue streams are tracked by the geographic location of customers. This disaggregated information is presented in the table below.

For the Three Months Ended

    

For the Nine Months Ended

September 30, 

September 30, 

    

2022

    

2021

    

2022

    

2021

Net Sales:

 

  

 

  

 

  

 

  

North America

$

182,249

$

142,338

$

562,235

$

450,908

Foreign

 

23,308

 

22,377

 

60,367

 

64,877

$

205,557

$

164,715

$

622,602

$

515,785

Revenue is recognized when obligations under the terms of a contract with a customer are satisfied. Except for certain extended service contracts on a small percentage of units sold, the Company’s performance obligations are satisfied, and sales revenue is recognized when products are shipped from the Company’s facilities. From time to time, revenue is recognized under a bill and hold arrangement. Recognition of revenue on bill and hold arrangements occurs when control transfers to the customer. The bill and hold arrangement must be substantive, and the product must be separately identified as belonging to the customer, ready for physical transfer, and unavailable to be used or directed to another customer.

Revenue is measured as the amount of consideration expected to be received in exchange for the transfer of products. Sales and other taxes collected concurrent with revenue-producing activities are excluded from revenue. Warranty related costs are recognized as an expense at the time products are sold and a reserve is established. Depending on the terms of the arrangement, for certain contracts the Company may defer the recognition of a portion of the consideration received because a future obligation has not yet been satisfied, such as an extended service contract. An observable price is used to determine the stand-alone selling price for separate performance obligations or a cost plus margin approach is utilized when one is not available.

Contract assets primarily relate to the Company’s rights to consideration for work completed but not billed at the reporting date. The contract assets are transferred to receivables when the rights become unconditional. Contract liabilities primarily relate to performance obligations to be satisfied in the future. As of September 30, 2022, and December 31, 2021, contract liability balances were $274 and $257, respectively, and are included in accrued liabilities on the condensed consolidated balance sheets. No revenue related to contract liability balances was

10

recognized during the three and nine months ended September 30, 2022, or during the three and nine months ended September 30, 2021. The Company did not have any contract assets at September 30, 2022 or December 31, 2021.

The Company extends credit to customers in the normal course of business. Collections from customers are continuously monitored and an allowance for credit losses is maintained based on historical experience adjusted for current conditions and forecasts capturing country and industry-specific economic factors. The Company also considers any specific customer collection issues. Since the Company’s trade receivables are largely similar, the Company evaluates its allowance for credit losses as one portfolio segment. At origination, the Company evaluates credit risk based on a variety of credit quality factors including prior payment experience, customer financial information, credit ratings, probabilities of default, industry trends and other internal metrics. On an ongoing basis, data by each major customer is regularly reviewed based on past-due status to evaluate the adequacy of the allowance for credit losses and actual write-offs are charged against the allowance. Terms on accounts receivable vary and are based on specific terms agreed upon with each customer. Write-offs of accounts receivable were de minimis during the three and nine months ended September 30, 2022 and during the three and nine months ended September 30, 2021.  

Trade accounts receivable are generally diversified due to the number of entities comprising the Company’s customer base and their dispersion across many geographic regions. The Company also frequently monitors the creditworthiness of the customers to whom the credit is granted in the normal course of business. Sales from one customer made up approximately 12% and 11% of total Company sales during the three and nine months ended September 30, 2022, respectively. No one customer made up greater than 10% of total Company sales during the three or nine months ended September 30, 2021. Accounts receivable from no one customer made up greater than 10% of total Company trade accounts receivable at September 30, 2022 or December 31, 2021.

5.          INVENTORIES

Inventory costs include materials, labor and factory overhead. Inventories are stated at the lower of cost or net realizable value, 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, at September 30, 2022 and December 31, 2021 consisted of the following:

    

2022

    

2021

Chassis

$

14,974

$

5,753

Raw materials

 

70,531

 

59,651

Work in process

 

44,334

 

33,994

Finished goods

 

14,543

 

15,510

$

144,382

$

114,908

6.          LONG-TERM OBLIGATIONS

Credit Facility

On October 28, 2022, the Company and certain of its subsidiaries entered into (a) a First Amendment to Amended and Restated Loan Agreement with First Horizon Bank (successor in interest to First Tennessee Bank National Association, “First Horizon”) and (b) an Amended and Restated Master Revolving Credit Note, dated as of October 28, 2022, in the maximum principal amount of $100.0 million, with a maturity date of May 31, 2027 (the “Amended Note” and together with the Amended Note, collectively, the “Amendment Documents”).

The Amendment Documents amend the Company’s existing credit facility evidenced by the Amended and Restated Loan Agreement dated as of December 21, 2020 (the “Prior Credit Agreement”) which had provided a $50.0 million unsecured revolving credit facility with First Horizon (the “Prior Credit Facility”) to, among other things: (i) provide for revolving credit availability up to a maximum principal amount of $100.00 million, (ii) make certain technical and operational adjustments necessary to implement one (1) month Term SOFR as the primary interest rate index and (iii) include a new asset coverage financial covenant test. All other material terms and conditions of the Prior Credit Facility as evidenced by the Prior Credit Agreement remain unchanged, including the maturity date of May 31, 2027.

During the first nine months of 2022, the Company drew $45,000 on its credit facility for working capital needs and retained $45,000 in outstanding borrowings under its credit facility at September 30, 2022. At December 31, 2021, the Company had $0 in outstanding

11

borrowings under the credit facility.  At September 30, 2022 and December 31, 2022, the Company had cash and temporary investments of $33,208 and $54,332, respectively.

7.          COMMITMENTS AND CONTINGENCIES

Leasing Activities

The Company leases certain equipment and facilities under long-term non-cancellable operating and finance lease agreements.  The leases expire at various dates through 2027.  Certain of the lease agreements contain renewal options.  For those leases that have renewal options, the Company included these renewal periods in the lease term if the Company determined it was reasonably certain to exercise the renewal option. Lease payments during such renewal periods were also considered in the calculation of right-of-use assets and lease obligations.

Right-of-use assets represent the Company’s right to use an underlying asset for the lease term and lease obligations represent the Company’s obligation to make lease payments arising from the lease. Lease obligations are recognized at the commencement date based on the present value of lease payments over the lease term. Right-of-use assets are recognized at the commencement date as the initial measurement of the lease liability, plus payments made prior to lease commencement and any initial direct costs. As most of the Company’s 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. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Expense is recognized on a straight-line basis over the lease term for operating leases. For finance leases, expense is recognized as the expense from straight-line amortization of the right-of-use asset plus the periodic interest expense from the lease obligation. Short-term leases have a lease term of twelve 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.

Right-of-use assets related to finance leases are included as a component of property, plant and equipment, net on the condensed consolidated balance sheets.

A maturity analysis of the undiscounted cash flows of operating lease obligations is as follows:

Operating Lease Obligation

Remaining lease payments to be paid during the year ended December 31, 

2022

    

$

96

2023

 

323

2024

 

274

2025

 

239

2026

 

87

Thereafter

 

1

Total lease payments

1,020

Less imputed interest

(76)

Lease obligation at September 30, 2022

$

944

12

The lease cost and certain other information during the three and nine months ended September 30, 2022 and 2021 were as follows:

Three Months Ended

Nine Months Ended

September 30

September 30

    

2022

    

2021

    

2022

    

2021

    

Lease Cost

Finance lease cost:

Amortization of right-of-use assets

$

4

$

5

$

14

$

16

Interest on lease obligation

 

 

 

1

 

1

Total finance lease cost

4

5

15

17

Total long-term operating lease cost

 

95

 

107

 

300

 

320

Total short-term operating lease cost

 

141

 

116

 

424

 

362

Total lease cost

$

240

$

228

$

739

$

699