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, 2002
Commission File No. 0-24298

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

Registrant's telephone number, including area code:  (423)  238-4171

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    þ       NO ¨

The number of shares outstanding of the registrant's Common Stock, $.01 par value, as of April 30, 2001 was 9,341,436.

INDEX

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PART 1.       FINANCIAL INFORMATION
          ITEM 1.       Financial Statements (Unaudited)

MILLER INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)
(Unaudited)

ASSETS

See accompanying notes to condensed consolidated financial statements.

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MILLER INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)

                                    See accompanying notes to condensed consolidated financial statements.

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

See accompanying notes to condensed consolidated 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 Transition Report on Form 10-K for the eight months ended December 31, 2001.

2.                Liquidity

The towing and recovery equipment manufacturing and towing services industries are highly competitive.  Certain competitors may have substantially greater financial and other resources than the Company.  These industries are also subject to a number of external influences, such as general economic conditions, interest rate levels, consumer confidence, and general credit availability.  Demand for the Company’s equipment has been negatively impacted by cost pressures facing its customers.  Continuation of these pressures could impact the Company’s ability to service its debt. 

At March 31, 2002, the Company had shareholders’ equity of $62,364,000, which included an accumulated deficit of $80,143,000, and had incurred net losses of $22,047,000, $21,587,000, $6,434,000 and $73,143,000 during the three months ended March 31, 2002, the eight months ended December 31, 2001 and the two years ended April 30, 2001 and 2000, respectively.

The Company was in an over-advance position under its credit facility during the first quarter of 2002.  The Company negotiated certain amendments to the credit facility that waived the defaults and brought the Company back into compliance as of April 15, 2002, but the Company may continue to have difficulties in the future complying with such covenants, and in such event would have to seek additional waivers from its lenders.  Such waivers typically require payment of substantial additional fees, and there can be no assurance that the lenders will agree to any future waivers or amendments.  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 

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the operations of the Company. 

As more fully disclosed in Note 7, the April 15, 2002 amendments will substantially increase future interest rates at certain dates if amounts outstanding under the RoadOne portion of the revolving credit facility exceed defined thresholds.  The amendments also reduce the maximum RoadOne revolver amount from $36.0 million to $34.0 million as of August 12, 2002 and to $30.0 million as of October 12, 2002.  Commencing March 31, 2003, the borrowing limits will be further reduced by $3.0 million on a quarterly basis, with such reductions continuing until the limit reaches zero on June 30, 2005.

While management believes that the Company will be able to meet its debt service requirements during 2002, failure to achieve the Company’s cash flow projections could result in failure to comply with the amended debt service requirements.  Such non-compliance would result in an event of default, which if not waived by the lending groups would result in the acceleration of the amounts due under the credit facility as well as other remedies.

Further, the Company’s compliance with the quarterly reductions in the RoadOne revolver borrowing limits will most likely depend upon its ability to sell RoadOne assets at acceptable terms.  To the extent that the required reductions in the outstanding balance under the RoadOne revolver are not met through operating cash flows or sales of RoadOne assets, the Company would seek to refinance the remaining balances.  If the Company were unable to refinance the credit facility on acceptable terms or find an alternative source of repayment for the credit facility, the Company’s business and financial condition would be materially and adversely affected.  There is no assurance that the Company would be able to obtain any such refinancing or that it would be able to sell assets on terms that are acceptable to the Company or at all.

To improve liquidity and profitably, the Company has focused on cost reduction and expense control, as well as other opportunities for improving operating cash flows. The Company has also disposed of certain underperforming RoadOne assets and operations in order to improve liquidity and to reduce expenses and debt. The Company plans to continue these efforts. The Company also continues to investigate financial alternatives with respect to the overall towing services segment.

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.  Diluted net loss per share for the three months ended March 31, 2002 and 2001 does not assume exercise of any stock options as the effect would be anti-dilutive.

On October 1, 2001, the Company effected a one-for-five reverse common stock split.  All historical and per share amounts have been retroactively restated to reflect the reverse common stock split.

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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 at March 31, 2002 and December 31, 2001 consisted of the following (in thousands):

5.                 Special Charges and Disposition of Towing Services Assets

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.  As a result of such review during the eight months ended December 31, 2001 and the fiscal year ended April 30, 2000, the Company concluded that the carrying value of such assets in certain towing services markets and certain assets within the Company’s towing and recovery equipment segment were not fully recoverable.

Impairment charges of $10,778,000 and $50,542,000 were recorded in the eight months ended December 31, 2001 and the fiscal year ended April 30, 2000 to write-down the goodwill in certain towing services markets to their estimated fair value.  Additionally, charges of $2,644,000 and $18,576,000 were recorded for the eight months ended December 31, 2001 and the fiscal year ended April 30, 2000 to write-down the carrying value of certain fixed assets (primarily property and equipment) in related markets to estimated fair value.  The Company determined fair value for these assets on a market by market basis taking into consideration various factors affecting the valuation in each market.

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.  Impairment charges of $1,480,000 and $4,967,000 were recorded to reduce the carrying amount of goodwill to estimated fair value at December 31, 2001 and April 30, 2000.  The Company recorded $1,770,000 and $2,770,000 of additional costs related to the write-down of the carrying value of other long-lived assets of its towing and recovery equipment segment for the eight months ended December 31, 2001 and the fiscal year ended April 30, 2000.

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During the three months ended March 31, 2002, the Company continued efforts to reduce expenses in the towing services segment. As part of these efforts, the Company disposed of assets in two underperforming market, as well as certain assets in other markets.  Total proceeds from these sales were approximately $1,255,000. No significant gains or losses were realized upon the sale of these assets.  The Company continues to investigate financial alternatives with respect to the overall towing services segment in order to enhance shareholder value.

In accordance with SFAS No. 121 and APB No. 17, the Company wrote-off goodwill and long-lived assets of $3,250,000 and $7,737,000 associated with the towing and recovery equipment segment as of December 31, 2001 and April 30, 2000, respectively.  Additionally, during the eight months ended December 31, 2001 and the fiscal year ended April 30, 2000, the Company wrote-off goodwill and long-lived assets associated with the towing services segment of $13,422,000 and $69,118,000, respectively.  Management believes its long-lived assets are appropriately valued following the impairment charges.

6.             Goodwill and Other Long-Lived Assets

In June 2001, the FASB issued SFAS No. 141, “Business Combinations” and SFAS No. 142, “Goodwill and Other Intangible Assets” (collectively the “Standards”).  The Standards are effective for fiscal years beginning after December 15, 2001.  Companies with fiscal years beginning after March 15, 2001 may early adopt, but only as of the beginning of that fiscal year and only if all existing goodwill is evaluated for impairment by the end of that fiscal year.  SFAS No. 141 will require companies to recognize acquired identifiable intangible assets separately from goodwill if control over the future economic benefits of the asset results from contractual or other legal rights or the intangible asset is capable of being separated or divided and sold, transferred, licensed, rented, or exchanged.  The Standards will require the value of a separately identifiable intangible asset meeting any of the criteria to be measured at its fair value.  SFAS No. 142 will require that goodwill not be amortized and that amounts recorded as goodwill be tested for impairment.  Annual impairment tests will have to be performed at the lowest level of an entity that is a business and that can be distinguished, physically and operationally and for internal reporting purposes, from the other activities,operations, and assets of the entity.

Upon adoption of SFAS No. 142 in January 2002, the Company ceased to amortize goodwill.  In lieu of amortization, the Company is required to perform an initial impairment review of goodwill in 2002 and an annual impairment review thereafter.  As a result of impairment reviews, the Company wrote-off goodwill of $2,886,000 in the towing equipment segment and $18,926,000 in the towing services segment during the three months ended March 31, 2002.  The write-off has been accounted for as a cumulative effect of change in accounting method to reflect application of the new accounting standards.

In addition, in October 2001, the FASB issued SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” SFAS No. 144 addresses (i) the recognition and measurement of the impairment of long-lived assets to be held and used and (ii) the measurement of long-lived assets to be disposed of by sale.  SFAS No. 144 differs from SFAS No. 121 by clarifying impairment testing and excluding goodwill.  In addition, SFAS No. 144 supersedes the accounting and reporting provisions of APB No.

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30, “Reporting the Results of Operations - Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions,” for segments of a business to be disposed of.  However, SFAS No. 144 retains APB No. 30’s requirement that entities report discontinued operations separately from continuing operations and extends that reporting requirement to "a component of an entity" that either has been disposed of (by sale, abandonment, or in a distribution to owners) or is classified as "held for sale".  SFAS No. 144 is effective for fiscal years beginning after December 15, 2001.  The Company is currently assessing the impact of the adoption of SFAS No. 144.

7.              Long-Term Obligations

In July 2001, the Company entered into a new four year senior credit facility (the “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 Credit Facility and amended to provide for a $14.0 million subordinated secured facility.  The 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, 2002, $38.8 million and $35.9 million, respectively were outstanding under the towing and recovery segment and RoadOne portions of the revolving credit facility.  In addition, $6.4 million was outstanding under the senior term loan, and $14.0 million was outstanding under the subordinated secured facility. 

Availability under the revolving Credit Facility is based on a formula of eligible accounts receivable, inventory and fleet vehicles as separately calculated for the towing and recovery equipment segment and the RoadOne segment, respectively.  Borrowings under the term loan are collateralized by the Company’s property, plant, and equipment.  The Company is required to make monthly amortization payments on the term loan of $167,000.  The Credit Facility bears interest at the option of the Company at either the rate of LIBOR plus 2.75% or prime rate (as defined) plus 0.75% on the revolving portion and LIBOR plus 3.0% or prime rate (as defined) plus 1.0% on the term portion.

The Credit Facility matures in July 2005 and is collateralized by substantially all the assets of the Company.  The 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 Credit Facility contains restrictions on capital expenditures, incurrence of indebtedness, mergers and acquisitions, distributions and transfers and sales of assets.  The Credit Facility also contains requirements related to weekly and monthly collateral reporting.

The subordinated secured credit facility contains, among other restrictions, requirements for the maintenance of certain financial covenants and imposes restrictions on capital expenditures, incurrence of indebtedness, mergers and acquisitions, distributions and transfers and sales of assets.

2002 Amendments

The Company was in an over-advance position under its credit facility during the first quarter of 2002.  On February 28, 2002 the Company entered into a Forbearance

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Agreement and First Amendment to Credit Agreement with the lenders under the Credit Facility, as amended by that certain Amendment to Forbearance Agreement dated as of March 18, 2002 and that certain Second Amendment to the Forbearance Agreement dated as of March 29, 2002 (as so amended, the “Forbearance Agreement”).  As a result of a revised asset appraisal conducted by the senior lenders, the senior lenders determined that the amounts outstanding under the Credit Facility should be lowered below the amount then outstanding under the Credit Facility, causing the Company to be over-advanced on its line of credit which resulted in the occurrence of an event of default under the Credit Facility and a corresponding event of default under the Junior Credit Facility.  The Forbearance Agreement and subsequent amendments waived the Company’s overadvance under the Credit Facility and amended the terms of the credit agreement to, among other things, (i) permanently reduce the commitment levels to $42.0 million for the towing and recovery equipment segment and $36.0 million for the RoadOne segment portion of the revolving credit facility and $6,611,000 for the term loan facility, (ii) eliminate the Company’s ability to borrow funds at a LIBOR rate of interest, and (iii) increase the interest rate to a floating rate of interest equal to the prime rate plus 2.75%.

On April 15, 2002 the Company amended the Credit Facility, pursuant to which, among other things: (i) the senior lenders waived the overadvance event of default and other events of default, (ii) interest on advances will be charged at the prime rate (as defined) plus 2.75% on the revolving portion and the term portion, subject to substantial upward adjustments in the interest rate on and after certain specified dates based on the amounts outstanding under the revolving loan commitment relating to RoadOne (escalating at generally quarterly intervals from prime plus 4.50% as of October 1, 2002 to prime plus 14.00% as of April 1, 2005) and (iii) the revolving loan commitment amount relating to RoadOne is subject to mandatory reductions over time commencing August 12, 2002, which reductions will require a mandatory repayment of portions of outstanding loans at specified dates and the failure to timely make such repayments shall result in an event of default under the bank credit agreements.  The RoadOne revolving commitment amount, which was set at $36.0 million through the April 15, 2002 amendment, is scheduled to be reduced as follows:  August 12, 2002 – to $34.0 million; October 12, 2002 – to $30.0 million; March 31, 2003 – to $27.0 million; thereafter – quarterly reductions of $3.0 million through June 30, 2005.  On April 15, 2002 the Company also amended the Junior Credit Facility, pursuant to which, among other things, (i) the junior lenders waived the events of default, and (ii) extended the time for payment of certain scheduled amortization payments.  On April 15, 2002, the junior lender agent, the senior lender agent and the Company entered into an Amended and Restated  Intercreditor and Subordination Agreement, pursuant to which, among other things, subject to certain terms and conditions, the junior lenders have agreed to defer the required payment of amortization payments under the Junior Credit Facility until November 20, 2002, April 5, 2003 and May 20, 2003. 

The Company may continue to have difficulties in the future making the mandatory repayments and complying with such covenants, and in such event would have to seek additional waivers from its lenders.  Such waivers typically require payment of substantial additional fees, and there can be no assurance that the lenders will agree to any future waivers or amendments.  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. 

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The Company believes that it will be able to maintain compliance with the financial covenants established by the April 2002 credit facility amendment, which will allow the Company to maintain sufficient liquidity in 2002 to fund operations.  Failure to achieve the Company’s revenue and income projections could result in failure to comply with the amended debt service requirements.  Such non-compliance would result in an event of default, which if not waived by the lending groups would result in the acceleration of the amounts due under the credit facility as well as other remedies.  Under these circumstances the Company could be required to find alternative funding sources, such as sale of assets or other financing sources.  If the Company were unable to refinance the credit facility on acceptable terms or find an alternative source of repayment for the credit facility, the Company’s business and financial condition would be materially and adversely affected.  There is no assurance that the Company would be able to obtain any such refinancing or that it would be able to sell assets on terms that are acceptable to the Company or at all.

8.                 Commitments and Contingencies

The Company is, from time to time, a party to litigation arising in the normal course of its business.  Management believes that the Company maintains adequate insurance coverage and as a result, none of these actions, individually or in the aggregate are expected to have a material adverse effect on the financial position or operations of the Company.

9.                 Income Taxes

As of March 31, 2002, the Company had net deferred tax assets of $9.3 million.  A deferred tax asset valuation allowance of $7.1 million was established as of December 31, 2001.  The allowance reflects the Company's recognition that continuing losses from operations and certain liquidity matters discussed in Note 2 indicate that it is more likely than not certain future tax benefits will not be realized as a result of future taxable income.

10.              Comprehensive Income

The Company has other comprehensive income (loss) in the form of cumulative translation adjustments and amortization of losses on early termination of interest rate swap transaction as more fully discussed in Note 11.  Total other comprehensive income (loss) of approximately $(432,000) and $28,000 were recorded for the three months ended March 31, 2002 and 2001, respectively.

11.              Financial Instruments And Hedging Activities

SFAS No. 133 “Accounting for Derivative Instruments and Hedging Activities”, establishes accounting and reporting standards requiring that every derivative instrument (including certain derivatives embedded in other contracts) be recorded in the balance sheet as either an asset or liability measured at its fair value.  SFAS No. 133 requires that changes in the derivatives fair value be recognized currently in earnings unless specific hedge criteria are met.  Special accounting for qualifying hedges allows a derivative’s gains and losses to offset related results on the hedged item on the income statement, and

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requires that the Company must formally document, designate, and assess the effectiveness of transactions that receive hedge accounting.

In October 2001, the Company obtained interest rate swaps as required by terms in its Credit Facility to hedge exposure to market fluctuations.  The interest rate swaps cover $40.0 million in notional amounts of variable rate debt and with fixed rates ranging from 2.535% to 3.920%.  The swaps expire annually from October 2002 to October 2004.  Because the Company hedges only with derivatives that have high correlation with the underlying transaction pricing, changes in derivatives fair values and the underlying pricing largely offset.  The hedges were deemed to be fully effective resulting in a pretax loss of $12,000 recorded in Other Comprehensive Loss at December 31, 2001.  Upon expiration of these hedges, the amount recorded in Other Comprehensive Loss will be reclassified into earnings as interest.  During the first quarter of 2002, the borrowing base was converted from LIBOR to prime, which rendered the swap ineffective as a hedge.  Accordingly, concurrent with the conversion, the Company prematurely terminated the swap in February 2002 at a cost of $341,000.  The resulting loss was recorded in Other Comprehensive Loss in February 2002 and will be reclassified to earning as interest expense over the term of the Credit Facility.

At March 31, 2002, the Company had no other derivative instruments or hedging transactions.

12.               Recent Accounting Pronouncements

In September 2000, the Emerging Issues Task Force (“EITF”) of the Financial Accounting Standards Board (“FASB”) reached a final consensus on Issue No. 00-10, “Accounting for Shipping and Handling Fees and Costs”.  EITF 00-10 is effective for fiscal year 2001 and addresses the income statement classification of amounts charged to customers for shipping and handling, as well as costs incurred related to shipping and handling.  The Company classifies shipping and handling costs billed to the customer as revenues and costs incurred related to shipping and handling as cost of sales, which is in accordance with the consensus in EITF 00-10.

13.              Segment Information

The Company operates in two principal operating segments:  (i) towing and recovery equipment and (ii) towing services.  The table below presents information about reported segments for the three months ended March 31, 2002 and 2001 (in thousands):

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Recent Developments

Towing Services Initiatives

During the three months ended March 31, 2002, the Company continued its efforts to reduce expenses in the towing services segment.   As part of these efforts, the Company disposed of assets in two underperforming markets, as well as assets in certain other markets for proceeds of approximately $1,255,000.  No significant gains or losses were realized upon the sale of these assets.  The Company continues to investigate all financial alternatives with respect to the overall towing services segment in order to enhance shareholder value.

Change in Fiscal Year

On September 25, 2001, the Company announced that its Board of Directors had approved a change in the Company’s fiscal year, from April 30 to December 31, effective December 31, 2001.  The change to a December 31 fiscal year will enable the Company to report results on a conventional calendar basis beginning in 2002.  As a result of the change in fiscal year, the Company filed a transition report for the eight month period ended December 31, 2001.

Results of Operations--Three Months Ended March 31, 2002 Compared to Three Months Ended March 31, 2001.

Net sales for the three months ended March 31, 2002, decreased 9.4% to $104.3 million from $115.1 million for the comparable period in 2001.  Net sales in the towing and recovery equipment segment decreased 4.6% from $73.7 million to $70.3 million as demand for the Company’s towing and recovery equipment continued to be negatively

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 impacted by the cost pressures facing its customers.  Net sales in the towing services segment decreased 17.8% from $41.4 million to $34.0 million.  Revenues in the towing services segment continued to be negatively impacted during the three months ended March 31, 2002 by the impact on the overall transportation industry following the events of September 11^th, as well as the sale of several towing services markets.

Costs of operations for the three months ended March 31, 2002, decreased 8.3% to $89.8 from $98.0 million for the comparable period in 2000.  Costs of operations of the towing and recovery equipment segment decreased slightly as a percentage of net sales from 87.9% to 87.7%.  In the towing services segment, costs of operations as a percentage of net sales increased from 80.1% to 82.7% primarily due to declines in revenue of certain underperforming markets. 

Selling, general, and administrative expenses for the three months ended March 31, 2002, decreased 21.2% to $12.4 million from $15.8 million for the comparable period of 2001.  The decrease was due primarily to the continued cost reduction efforts implemented in prior fiscal years.

Net interest expense decreased $2.0 million to $2.1 million for the three months ended March 31, 2002 from $4.1 million for the three months ended March  31, 2001.  During the three months ended March 31, 2002, the Company incurred lower interest expense as a result of  refinancing its line of credit at more favorable rates in July 2001, as well as a decrease in debt levels.

Income taxes are accounted for on a consolidated basis and are not allocated by segment.  Tax expenses for the quarter relate primarily to income taxes of foreign subsidiaries.  The effective rate of the provision for (benefit from) income taxes was not meaningful  for the three months ended March 31, 2002 and (31.4)% for the three months ended March 31, 2001.

Liquidity and Capital Resources

Cash provided by operating activities was $1.2 million for the three months ended March 31, 2002 compared to $7.8 million for the comparable period of 2001.  The cash provided by operating activities for the three months ended March 31, 2002 was primarily the result of slight increases in accounts payable, offset by increases in inventory in preparation for the industry’s largest trade show.

Cash used in investing activities was $0.4 million for the three months ended March 31, 2002 compared to $0.2 million for the comparable period in 2001.  The cash used in investing activities was primarily for the purchase of equipment in the towing services segment.

Cash used in financing activities was $4.1 million for the three months ended March 31, 2002 and $10.9 million for the comparable period in the prior year.  The cash was used primarily to reduce borrowings under Company's credit facilities and other outstanding long-term debt and capital lease obligations.

In July 2001, the Company entered into a new four year senior credit facility (the “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 Credit Facility and amended to provide for a $14.0 million subordinated secured facility.  The 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

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loan commitment levels for the Company’s towing and recovery equipment segment and RoadOne segment, respectively.  At March 31, 2002, $38.8 million and $35.9 million, respectively were outstanding under the towing and recovery segment and RoadOne portions of the revolving credit facility.  In addition, $6.4 million was outstanding under the senior term loan, and $14.0 million was outstanding under the subordinated secured facility. 

Availability under the revolving Credit Facility is based on a formula of eligible accounts receivable, inventory and fleet vehicles as separately calculated for the towing and recovery equipment segment and the RoadOne segment, respectively.  Borrowings under the term loan are collateralized by the Company’s property, plant, and equipment.  The Company is required to make monthly amortization payments on the term loan of $167,000.  The Credit Facility bears interest at the option of the Company at either the rate of LIBOR plus 2.75% or prime rate (as defined) plus 0.75% on the revolving portion and LIBOR plus 3.0% or prime rate (as defined) plus 1.0% on the term portion.

The Credit Facility matures in July 2005 and is collateralized by substantially all the assets of the Company.  The 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 Credit Facility contains restrictions on capital expenditures, incurrence of indebtedness, mergers and acquisitions, distributions and transfers and sales of assets.  The Credit Facility also contains requirements related to weekly and monthly collateral reporting.

The subordinated secured facility is by its terms expressly subordinated only to the Credit Facility.  The subordinated secured facility matures in July 2003 and bears interest at 6.0% over the prime rate.  The Company is required to make quarterly amortization payments on the subordinated secured facility of $875,000 beginning not later than May 2002 provided that certain conditions are met, including satisfying a fixed charge coverage ratio test and a minimum availability limit.  The subordinated secured facility is collateralized by certain specified assets of the Company and by a second priority lien and security interest in substantially all other assets of the Company.  The subordinated secured facility contains requirements for certain fees to be paid at six month intervals beginning in January 2002 based on the outstanding balance of the subordinated secured facility at the time.  The subordinated secured facility also contains provisions for the issuance of warrants for up to 0.5% of the outstanding shares of the Company’s common stock in July 2002 and up to an additional 1.5% in July, 2003.  The number of warrants which may be issued would be reduced pro rata as the balance of the subordinated secured facility is reduced.

The subordinated secured credit facility contains, among other restrictions, requirements for the maintenance of certain financial covenants and imposes restrictions on capital expenditures, incurrence of indebtedness, mergers and acquisitions, distributions and transfers and sales of assets.

2002 Amendments

The Company was in an over-advance position under its credit facility during the first quarter of 2002.  On February 28, 2002 the Company entered into a Forbearance Agreement and First Amendment to Credit Agreement with the lenders under the Credit Facility, as amended by that certain Amendment to Forbearance Agreement dated as of March 18, 2002 and that certain Second Amendment to the Forbearance Agreement dated

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as of March 29, 2002 (as so amended, the “Forbearance Agreement”).  As a result of a revised asset appraisal conducted by the senior lenders, the senior lenders determined that the amounts outstanding under the Credit Facility should be lowered below the amount then outstanding under the Credit Facility, causing the Company to be over-advanced on its line of credit which resulted in the occurrence of an event of default under the Credit Facility and a corresponding event of default under the Junior Credit Facility.  The Forbearance Agreement and subsequent amendments waived the Company’s overadvance under the Credit Facility and amended the terms of the credit agreement to, among other things, (i) permanently reduce the commitment levels to $42.0 million for the towing and recovery equipment segment and $36.0 million for the RoadOne segment portion of the revolving credit facility and $6,611,000 for the term loan facility, (ii) eliminate the Company’s ability to borrow funds at a LIBOR rate of interest, and (iii) increase the interest rate to a floating rate of interest equal to the prime rate plus 2.75%.

On April 15, 2002 the Company amended the Credit Facility, pursuant to which, among other things: (i) the senior lenders waived the overadvance event of default and other events of default, (ii) interest on advances will be charged at the prime rate (as defined) plus 2.75% on the revolving portion and the term portion, subject to substantial upward adjustments in the interest rate on and after certain specified dates based on the amounts outstanding under the revolving loan commitment relating to RoadOne (escalating at generally quarterly intervals from prime plus 4.50% as of October 1, 2002 to prime plus 14.00% as of April 1, 2005) and (iii) the revolving loan commitment amount relating to RoadOne is subject to mandatory reductions over time commencing August 12, 2002, which reductions will require a mandatory repayment of portions of outstanding loans at specified dates and the failure to timely make such repayments shall result in an event of default under the bank credit agreements.  The RoadOne revolving commitment amount, which was set at $36.0 million through the April 15, 2002 amendment, is scheduled to be reduced as follows:  August 12, 2002 – to $34.0 million; October 12, 2002 – to $30.0 million; March 31, 2003 – to $27.0 million; thereafter – quarterly reductions of $3.0 million through June 30, 2005.  On April 15, 2002 the Company also amended the Junior Credit Facility, pursuant to which, among other things, (i) the junior lenders waived the events of default, and (ii) extended the time for payment of certain scheduled amortization payments.  On April 15, 2002, the junior lender agent, the senior lender agent and the Company entered into an Amended and Restated  Intercreditor and Subordination Agreement, pursuant to which, among other things, subject to certain terms and conditions, the junior lenders have agreed to defer the required payment of amortization payments under the Junior Credit Facility until November 20, 2002, April 5, 2003 and May 20, 2003. 

The Company may continue to have difficulties in the future making the mandatory repayments and complying with such covenants, and in such event would have to seek additional waivers from its lenders.  Such waivers typically require payment of substantial additional fees, and there can be no assurance that the lenders will agree to any future waivers or amendments.  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. 

The Company believes that it will be able to maintain compliance with the financial covenants established by the April 2002 credit facility amendment, which will allow the Company to maintain sufficient liquidity in 2002 to fund operations.  Failure to achieve the Company’s revenue and income projections could result in failure to comply with

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the amended debt service requirements.  Such non-compliance would result in an event of default, which if not waived by the lending groups would result in the acceleration of the amounts due under the credit facility as well as other remedies.  Under these circumstances the Company could be required to find alternative funding sources, such as sale of assets or other financing sources.  If the Company were unable to refinance the credit facility on acceptable terms or find an alternative source of repayment for the credit facility, the Company’s business and financial condition would be materially and adversely affected.  There is no assurance that the Company would be able to obtain any such refinancing or that it would be able to sell assets on terms that are acceptable to the Company or at all.

The Company believes that cash on hand, cash flows from operations and unused borrowing capacity under the Credit Facility will be sufficient to fund its operating needs, capital expenditures and debt service requirements for the remainder of the current fiscal year.  No assurance in this regard can be given, however, since future cash flows and the availability of financing will depend on a number of factors, including prevailing economic conditions and financial, business and other factors beyond the Company’s control.

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PART II.       OTHER INFORMATION

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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 15, 2002

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