MILLER INDUSTRIES INC /TN/ - Quarter Report: 2005 September (Form 10-Q)

Form 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_______________

FORM 10-Q

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

For the quarterly period ended

September 30, 2005

o	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

0-24298

MILLER INDUSTRIES, INC.

(Exact Name of Registrant as Specified in Its Charter)

Tennessee	62-1566286
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)

8503 Hilltop Drive Ooltewah, Tennessee	37363
(Address of Principal Executive Offices)	(Zip Code)

(423) 238-4171

(Registrant’s Telephone Number, Including Area Code)

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.

x Yes o No

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

Yes o No x

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

x Yes o No

The number of shares outstanding of the registrant’s common stock, par value $.01 per share, as of October 31, 2005 was 11,276,382.

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Index

PART I	FINANCIAL INFORMATION		Page Number

	Item 1.	Financial Statements (Unaudited)

		Consolidated Balance Sheets - September 30, 2005 and December 31, 2004	3

		Consolidated Statements of Income for the Three and Nine Months Ended September 30, 2005 and 2004	4

		Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2005 and 2004	5

		Notes to Consolidated Financial Statements	6

	Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	14

	Item 4.	Controls and Procedures	21

PART II	OTHER INFORMATION

	Item 1.	Legal Proceedings	22

	Item 6.	Exhibits	22

SIGNATURES			23

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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)

MILLER INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

	September 30, 2005 (Unaudited)			December 31, 2004
ASSETS
CURRENT ASSETS:
Cash and temporary investments	$	7,703		$	2,812
Accounts receivable, net of allowance for doubtful accounts of $1,631 and $1,116 at September 30, 2005 and December 31, 2004, respectively		63,749			49,336
Inventories, net		36,902			34,994
Prepaid expenses and other		1,693			1,525
Current assets of discontinued operations held for sale		4,353			5,728
Total current assets		114,400			94,395
PROPERTY, PLANT, AND EQUIPMENT, net		17,410			18,762
GOODWILL, net		11,619			11,619
OTHER ASSETS		1,601			1,918
NONCURRENT ASSETS OF DISCONTINUED OPERATIONS HELD FOR SALE		663			1,128
	$	145,693		$	127,822
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Current portion of long-term obligations	$	1,618		$	2,052
Accounts payable		44,516			36,224
Accrued liabilities and other		7,820			5,736
Current liabilities of discontinued operations held for sale		7,551			10,405
Total current liabilities		61,505			54,417
LONG-TERM OBLIGATIONS, less current portion		24,772			24,345
NONCURRENT LIABILITIES OF DISCONTINUED OPERATIONS HELD FOR SALE		336			2,275
COMMITMENTS AND CONTINGENCIES (Notes 5 and 8)
SHAREHOLDERS’ EQUITY:
Preferred stock, $.01 par value: 5,000,000 shares authorized, none issued or outstanding		0			0
Common stock, $.01 par value: 100,000,000 shares authorized, 11,266,556 and 11,182,606 outstanding at September 30, 2005 and December 31, 2004, respectively		113			112
Additional paid-in capital		157,762			157,202
Accumulated deficit		(99,856	)		(112,468	)
Accumulated other comprehensive income		1,061			1,939
Total shareholders’ equity		59,080			46,785
	$	145,693		$	127,822

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

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MILLER INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share data)

(Unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2005			2004			2005			2004
NET SALES	$	89,480		$	63,300		$	259,314		$	169,107

COSTS AND EXPENSES:
Costs of Operations		76,051			55,435			223,426			145,758
Selling, general and administrative expenses		6,214			4,491			17,895			14,319
Interest expense, net		853			1,148			3,216			3,426
Total costs and expenses		83,118			61,074			244,537			163,503
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES		6,362			2,226			14,777			5,604
INCOME TAX PROVISION		910			233			2,055			437
INCOME FROM CONTINUING OPERATIONS		5,452			1,993			12,722			5,167
DISCONTINUED OPERATIONS:
Loss from discontinued operations, before taxes		(30	)		(331	)		(110	)		(1,140	)
Income tax provision		-			140			-			140
Loss from discontinued operations		(30	)		(471	)		(110	)		(1,280	)
NET INCOME	$	5,422		$	1,522		$	12,612		$	3,887
BASIC INCOME (LOSS) PER COMMON SHARE:
Income from continuing operations	$	0.49		$	0.18		$	1.14		$	0.47
Loss from discontinued operations		-			(0.04	)		(0.01	)		(0.12	)
Basic income per common share	$	0.49		$	0.14		$	1.13		$	0.35
DILUTED INCOME (LOSS) PER COMMON SHARE:
Income from continuing operations	$	0.47		$	0.18		$	1.11		$	0.47
Loss from discontinued operations		-			(0.04	)		(0.01	)		(0.12	)
Diluted income per common share	$	0.47		$	0.14		$	1.10		$	0.35
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic		11,234			11,179			11,209			10,920
Diluted		11,505			11,304			11,447			11,032

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

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MILLER INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

	Nine Months Ended September 30,
	2005			2004
OPERATING ACTIVITIES
Net income	$	12,612		$	3,887
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Loss from discontinued operations		110			1,280
Depreciation and amortization		2,322			2,467
Amortization of deferred financing costs		293			476
Provision for doubtful accounts		480			456
Issuance of non-employee director shares		75			328
Loss on disposal of property, plant and equipment		-			18
Deferred income tax provision		(49	)		-
Other		-			4
Changes in operating assets and liabilities:
Accounts receivable		(15,092	)		(10,342	)
Inventories		(2,722	)		(6,086	)
Prepaid expenses and other		(133	)		(357	)
Other assets		-			(690	)
Accounts payable		8,794			357
Accrued liabilities and other		2,177			1,339
Net cash provided by (used in) operating activities from continuing operations		8,867			(6,863	)
Net cash used in operating activities from discontinued operations		(1,523	)		(1,306	)
Net cash provided by (used in) operating activities		7,344			(8,169	)
INVESTING ACTIVITIES
Purchases of property, plant, and equipment		(831	)		(267	)
Proceeds from sale of property, plant and equipment		-			14
Payments received on notes receivables		164			84
Net cash used in investing activities from continuing operations		(667	)		(169	)
Net cash provided by investing activities from discontinued operations		123			4,262
Net cash (used in) provided by investing activities		(544	)		4,093
FINANCING ACTIVITIES
Net borrowings under senior credit facility		17,127			2,236
Borrowing under subordinated credit facility		5,707			-
Net payments under former credit facility		(21,401	)
Payments on long-term obligations		(1,558	)		(1,825	)
Additions to deferred financing costs		(386	)		(437	)
Termination of interest rate swap		57			72
Proceeds from issuance of common stock		-			4,320
Proceeds from the exercise of stock options		486			19
Net cash provided by financing activities from continuing operations		32			4,385
Net cash used in financing activities from discontinued operations		(2,140	)		(5,258	)
Net cash used in financing activities		(2,108	)		(873	)
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND TEMPORARY INVESTMENTS		(277	)		(209	)
NET CHANGE IN CASH AND TEMPORARY INVESTMENTS		4,415			(5,158	)
CASH AND TEMPORARY INVESTMENTS, beginning of period		2,812			5,240
CASH AND TEMPORARY INVESTMENTS-DISCONTINUED OPERATIONS, beginning of period		574			2,154
CASH AND TEMPORARY INVESTMENTS-DISCONTINUED OPERATIONS, end of period		98			473
CASH AND TEMPORARY INVESTMENTS, end of period	$	7,703		$	1,763
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Debt conversion	$	-		$	7,540
Cash payments for interest	$	3,032		$	3,090
Cash payments for income taxes	$	568		$	652

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

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MILLER INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. BASIS OF PRESENTATION

The 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 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 consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K, as amended, for the year ended December 31, 2004.

2. DISCONTINUED OPERATIONS

During the fourth quarter of the year ended December 31, 2002, the Company’s management and board of directors made the decision to divest of its remaining towing services segment, as well as the operations of the distribution group of the towing and recovery equipment segment. The Company disposed of substantially all of the assets of its towing services segment in 2003, and as of September 30, 2005 there are miscellaneous assets remaining from previous towing services market sales. The Company sold all but one distributor location by the end of 2004, and as of September 30, 2005, the Company is in negotiations to sell the remaining location.

In accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”, the assets of the towing services segment and the distribution group are considered a “disposal group” and are no longer being depreciated. All assets and liabilities and results of operations associated with these assets have been separately presented in the accompanying financial statements at September 30, 2005 and December 31, 2004. The statements of operations and related financial statement disclosures for all prior periods have been restated to present the towing services segment and the distribution group as discontinued operations separate from continuing operations. Results of operations for the towing services segment and the distribution group reflect interest expense for debt directly attributed to these businesses, as well as an allocation of corporate debt based on collateralized assets, as defined.

It now appears that RoadOne, Inc. does not have assets sufficient to satisfy all of its continuing liabilities. As a result, during October 2005, RoadOne, Inc. filed for liquidation under Chapter 7 of the federal bankruptcy laws in the Bankruptcy Court of the Eastern District of Tennessee and a trustee was appointed. Although Miller Industries, Inc. is the largest creditor of RoadOne, Inc., the filing is not expected to have a material adverse effect on the consolidated financial position or results of operations of Miller Industries. At this time, management is not able to predict whether or not any liabilities of discontinued operations currently reflected in the consolidated financial statements of Miller Industries will be eliminated as a result of this case.

The operating results for the discontinued operations of the towing services segment and the distributor group for the three and nine months ended September 30, 2005 and 2004, were as follows (in thousands):

	Three Months Ended September 30, 2005								Three Months Ended September 30, 2004
	Dist.			Towing		Total			Dist.			Towing			Total
Net sales	$	3,238		$	-	$	3,238		$	8,228		$	-		$	8,228
Operating loss	$	(30	)	$	-	$	(30	)	$	(197	)	$	(9	)	$	(206	)
Loss from discontinued operations	$	(30	)	$	-	$	(30	)	$	(352	)	$	(119	)	$	(471	)

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	Nine Months Ended September 30, 2005								Nine Months Ended September 30, 2004
	Dist.			Towing		Total			Dist.			Towing			Total
Net sales	$	8,744		$	-	$	8,744		$	32,876		$	-		$	32,876
Operating income (loss)	$	(130	)	$	16	$	(114	)	$	(459	)	$	(122	)	$	(581	)
Loss from discontinued operations	$	(110	)	$	-	$	(110	)	$	(1,033	)	$	(247	)	$	(1,280	)

The following assets and liabilities are reclassified as held for sale at September 30, 2005 and December 31, 2004 (in thousands):

	September 30, 2005						December 31, 2004
	Dist.		Towing		Total		Dist.		Towing		Total
Cash and temporary investments	$	79	$	19	$	98	$	574	$	-	$	574
Accounts receivable, net		1,200		401		1,601		1,444		492		1,936
Inventories		2,603		-		2,603		3,144		-		3,144
Prepaid expenses and other current assets		51		-		51		74		-		74
Current assets of discontinued operations held for sale	$	3,933	$	420	$	4,353	$	5,236	$	492	$	5,728
Property, plant and equipment	$	16	$	647	$	663	$	16	$	1,112	$	1,128
Noncurrent assets of discontinued operations held for sale	$	16	$	647	$	663	$	16	$	1,112	$	1,128
Current portion of long-term debt	$	35	$	-	$	35	$	223	$	442	$	665
Other current liabilities		1,333		6,183		7,516		2,569		7,171		9,740
Current liabilities of discontinued operations held for sale	$	1,368	$	6,183	$	7,551	$	2,792	$	7,613	$	10,405
Long-term debt	$	336	$	-	$	336	$	2,275	$	-	$	2,275
Noncurrent liabilities of discontinued operations held for sale	$	336	$	-	$	336	$	2,275	$	-	$	2,275

3. BASIC AND DILUTED INCOME (LOSS) PER SHARE

Basic income (loss) per share is computed by dividing income (loss) by the weighted average number of common shares outstanding. Diluted income (loss) per share is calculated by dividing income (loss) by the weighted average number of common and potential dilutive common shares outstanding. Diluted income (loss) per share takes into consideration the assumed conversion of outstanding stock options resulting in approximately 271,000 and 125,000 potential dilutive common shares for the three months ended September 30, 2005 and 2004, respectively and 238,000 and 112,000 potential dilutive common shares for the nine months ended September 30, 2005 and 2004, respectively.

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.

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Inventories for continuing operations at September 30, 2005 and December 31, 2004 consisted of the following (in thousands):

	September 30, 2005		December 31, 2004
Chassis	$	2,824	$	2,556
Raw Materials		17,548		15,667
Work in process		9,333		10,338
Finished goods		7,197		6,433
	$	36,902	$	34,994

5. LONG-TERM OBLIGATIONS

Long-term obligations consisted of the following for continuing operations at September 30, 2005 and December 31, 2004 (in thousands):

	September 30, 2005			December 31, 2004
Outstanding borrowings under new Senior Secured Credit Facility	$	14,279		$	-
Outstanding borrowings under former Senior Secured Credit Facility		-			19,987
Outstanding borrowings under Junior Secured Credit Facility		10,000			4,211
Mortgage, equipment and other notes payable		2,111			2,199
		26,390			26,397
Less current portion		(1,618	)		(2,052	)
	$	24,772		$	24,345

The September 30, 2005 and December 31, 2004 figures do not include $0.4 million and $2.9 million, respectively, outstanding under the Company’s senior credit facilities relating to discontinued operations. Obligations under the Company’s senior credit facilities are allocated to discontinued operations based on collateralized assets, as defined. Certain equipment and manufacturing facilities are pledged as collateral under the mortgage and equipment notes payable.

Credit Facilities

New Senior Credit Facility. On June 17, 2005, the Company entered into a Credit Agreement (the “Senior Credit Agreement”) with Wachovia Bank, National Association, for a $27.0 million senior secured credit facility (the “New Senior Credit Facility”). Proceeds from the New Senior Credit Facility were used to repay The CIT Group/Business Credit, Inc. (“CIT”) and William G. Miller, the Company’s Chairman of the Board and Co-Chief Executive Officer, under the Company’s former senior credit facility. As a result, effective June 17, 2005, the Company’s former senior credit facility was satisfied and terminated, and Mr. Miller no longer holds any of the Company’s senior debt.

The New Senior Credit Facility consists of a $20.0 million revolving credit facility (the “Revolver”), and a $7.0 million term loan (the “Term Loan”). In the absence of a default, all borrowings under the Revolver bear interest at the LIBOR Market Index Rate (as defined in the Senior Credit Agreement) plus a margin of between 1.75% to 2.50% per annum that is subject to adjustment from time to time based upon the Consolidated Leverage Ratio (as defined in the Senior Credit Agreement), and the Term Loan bears interest at a 30-day adjusted LIBOR rate plus a margin of between 1.75% to 2.50% per annum that is subject to adjustment from time to time based upon the Consolidated Leverage Ratio (as defined in the Senior Credit Agreement). The Revolver expires on June 15, 2008, and the Term Loan matures on June 15, 2010. The New Senior Credit Facility is secured by substantially all of the Company’s assets, and contains customary representations and warranties, events of default and affirmative and negative covenants for secured facilities of this type.

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Junior Credit Facility. The Company’s junior credit facility (the “Junior Credit Facility”) is, by its terms, expressly subordinated only to the New Senior Credit Facility, and is secured by a second priority lien and security interest in substantially all of the Company’s other assets. The Junior Credit Facility contains requirements for the maintenance of certain financial covenants, and also imposes restrictions on capital expenditures, incurrence of indebtedness, mergers and acquisitions, distributions and transfers and sales of assets. As described in further detail below and in Note 6, the Junior Credit Facility has been amended several times, most recently on June 17, 2005.

During the second half of 2003, Contrarian Funds, LLC (“Contrarian”) purchased all of the outstanding debt of the Junior Credit Facility in a series of transactions. As part of its purchase, Contrarian also purchased warrants for shares of the Company’s common stock, which were subsequently exchanged for shares of the Company’s common stock. In November 2003, Harbourside Investments, LLLP (“Harbourside”) purchased 44.286% of the subordinated debt and warrants from Contrarian. In February 2004, Contrarian and Harbourside converted approximately $7.0 million in debt under the Junior Credit Facility into common stock of the Company. In May 2004, the Company completed the sale of 480,000 shares of its common stock at a price of $9.00 per share to a small group of unaffiliated private investors, and the proceeds of this sale, together with additional borrowings under the Company’s former senior credit facility, were used to retire the portion of the Junior Credit Facility owed to Contrarian (approximately $5.4 million of principal and approximately $350,000 of accrued interest). On May 31, 2005, Harbourside was dissolved and distributed all of its shares of the Company’s common stock to its partners. As a result, William G. Miller, as successor lender agent to Harbourside, became the sole lender under the Junior Credit Facility.

The June 17, 2005 amendment to the Junior Credit Facility provided for a new term loan, made by Mr. Miller as sole lender and successor lender agent, in the principal amount of approximately $5.7 million. As a result, on June 17, 2005, the total outstanding principal amount of term loans under the Junior Credit Facility was $10.0 million. The amendment also extended the maturity date of the Junior Credit Facility to September 17, 2008, and amended certain terms of the junior credit agreement to, among other things, make certain of the representations and warranties, covenants and events of default more consistent with the representations and warranties, covenants and events of default in the Senior Credit Agreement. In the absence of a default, all of the term loans outstanding under the Junior Credit Facility continue to bear interest at a rate of 9.0% per annum.

Former Senior Credit Facility. As amended, the Company’s former senior credit facility with CIT and Mr. Miller consisted of an aggregate $32.0 million credit facility, including a $15.0 million revolving loan, a $5.0 million term loan and a $12.0 million term loan. The revolving credit facility provided for separate and distinct loan commitment levels for the Company’s towing and recovery equipment segment and RoadOne towing services segment, respectively. Borrowing availability under the revolving portion of the former senior credit facility was based on a percentage of eligible inventory and accounts receivable (determined on eligibility criteria set forth in the credit facility), subject to a maximum borrowing limitation. Borrowings under the term loans were collateralized by substantially all of the Company’s domestic property, plants, and equipment. The former senior credit facility bore interest at the prime rate (as defined) plus 2.75%, subject to the rights of the senior lender agent or a majority of the lenders to charge a default rate equal to the prime rate (as defined) plus 4.75% during the continuance of any event of default thereunder. The former senior credit facility contained requirements relating to maintaining minimum excess availability at all times and minimum monthly levels of earnings before income taxes and depreciation and amortization (as defined) based on the most recently ended trailing three month period. In addition, the former senior credit facility contained restrictions on capital expenditures, incurrence of indebtedness, mergers and acquisitions, distributions and transfers and sales of assets. The former senior credit facility also contained requirements related to weekly and monthly collateral reporting.

Interest Rate Sensitivity. Because of the amount of obligations outstanding under the New Senior Credit Facility and the connection of the interest rate under the New Senior Credit Facility (including the default rates) to the LIBOR rate, an increase in the LIBOR rate could have a significant effect on the Company’s ability to satisfy its obligations under the New Senior Credit Facility and increase its interest expense significantly. Therefore, the Company’s liquidity and access to capital resources could be further affected by increasing interest rates.

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Future maturities of long-term obligations at September 30, 2005 are as follows (in thousands):

	Continuing Operations		Discontinued Operations		Total
2006	$	1,618	$	35	$	1,653
2007		1,581		-		1,581
2008		9,198		336		9,534
2009		11,537		-		11,537
2010		2,456		-		2,456
	$	26,390	$	371	$	26,761

6. RELATED PARTY TRANSACTIONS

Subordinated Debt and Warrant Conversion

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

On November 24, 2003, Harbourside purchased from Contrarian 44.286% of (i) the Company’s subordinated debt under its Junior Credit Facility and (ii) warrants to purchase 186,028 shares of the Company’s common stock held by Contrarian. Contrarian had previously purchased all of the Company’s outstanding subordinated debt in a series of transactions during the second half of 2003. As a result of this transaction, Harbourside acquired (x) approximately $6.1 million of the outstanding principal of subordinated debt plus accrued interest and fees attributable to this outstanding principal and (y) warrants to purchase an aggregate of 82,382 shares of the Company’s common stock, consisting of warrants to purchase up to 20,998 shares at an exercise price of $3.48 and 61,384 shares at an exercise price of $3.27. Contrarian retained the remaining principal outstanding under the Junior Credit Facility, which was approximately $7.7 million, plus related interest and fees thereon of approximately $1.7 million, and the remaining warrants to purchase 103,646 shares of common stock.

On January 14, 2004, the Company entered into an exchange agreement with Harbourside (the “Exchange Agreement”). Under the Exchange Agreement, Harbourside converted approximately $3.2 million of the Company’s subordinated debt (30% of the total $6.1 million principal amount then held by Harbourside, plus approximately $1.3 million of accrued interest and fees thereon) into 548,738 shares of the Company’s common stock, exchanged warrants to purchase 82,382 shares of the Company’s common stock for 34,818 shares of the Company’s common stock, and retained the remaining 70% of the outstanding principal amount of the subordinated debt that it held under the Junior Credit Facility.

As partners of Harbourside, under the Exchange Agreement, each of Messrs. Miller, Badgley, Mish and Madonia indirectly received shares of common stock in exchange for the subordinated debt and warrants held by Harbourside, and as the general partner of Harbourside, Mr. Miller had sole voting power over the shares of common stock that Harbourside received in the exchange. This transaction was approved by a special committee of the Company’s Board of Directors, as well as the full Board of Directors with Messrs. Miller and Badgley abstaining due to their personal interest in the transaction. The transaction was subsequently approved by the Company’s shareholders at a meeting on February 12, 2004.

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On May 31, 2005, Harbourside was dissolved, and it distributed all of its shares of the Company’s common stock to its partners. As partners of Harbourside, in the distribution Messrs. Miller and Badgley each received 109,899 shares of the Company’s common stock, Messrs. Mish and Madonia each received 21,980 shares of the Company’s common stock, and Mr. Miller, as successor lender agent to Harbourside, became the sole lender under the Junior Credit Facility.

Other than the transactions under the Exchange Agreement, the Company did not engage in any transactions with Harbourside. The Company paid Harbourside approximately $211,000 and $178,000 in interest expense on the subordinated holdings during the nine months ended September 30, 2005 and 2004, respectively.

Other than the transactions relating to the subordinated debt and the warrants, which it purchased without the Company’s involvement, Contrarian has no relationship with the Company or Harbourside.

Credit Facilities

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

On December 24, 2003, Mr. Miller increased his $2.0 million participation in the former senior credit facility by an additional $10.0 million. These funds, along with additional funds from CIT, were used to satisfy the Company’s obligations to two of the existing senior lenders with the result being that CIT, an existing senior lender, and Mr. Miller constituted the senior lenders to the Company, with CIT holding 62.5% of such loan and Mr. Miller participating in 37.5% of the loan. Mr. Miller’s portion of the loan was subordinated to that of CIT. The Company paid Mr. Miller approximately $664,000 and $667,000 in interest expense related to his portion of the former senior credit facility during the nine months ended September 30, 2005 and 2004, respectively.

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

New Senior Credit Facility. On June 17, 2005, the Company entered into the Senior Credit Agreement with Wachovia Bank, National Association, for the New Senior Credit Facility (as described in Note 5). Proceeds from the New Senior Credit Facility were used to repay CIT and Mr. Miller under the Company’s former senior credit facility, with CIT receiving $14.1 million and Mr. Miller receiving $12.0 million. As a result, effective June 17, 2005, the Company’s former senior credit facility was satisfied and terminated, and Mr. Miller no longer holds any of the Company’s senior debt. This transaction was approved by the Audit Committee of the Company’s Board of Directors, as well as the full Board of Directors with Mr. Miller abstaining due to his personal interest in the transaction.

Amendments to Junior Credit Facility. On May 31, 2005, Harbourside was dissolved, and it distributed all of its shares of the Company’s common stock to its partners. In connection therewith, Mr. Miller, as successor lender agent to Harbourside, became the sole lender under the Junior Credit Facility. On June 17, 2005, the Company and Mr. Miller amended the Junior Credit Facility to provide for a new term loan, made by Mr. Miller as sole lender and successor lender agent, in the principal amount of approximately $5.7 million. As a result, on June 17, 2005, the total outstanding principal amount of term loans under the Junior Credit Facility was $10.0 million. This transaction was approved by the Audit Committee of the Company’s Board of Directors, as well as the full Board of Directors with Mr. Miller abstaining due to his personal interest in the transaction. The Company paid Mr. Miller approximately $188,000 in interest on the new junior debt for the quarter and nine months ended September 30, 2005. Additionally, approximately $75,000 is included in accrued liabilities for unpaid interest on this new junior debt at September 30, 2005.

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7. STOCK-BASED COMPENSATION

The Company accounts for its stock-based compensation plans under Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees”. The Company has adopted the disclosure option of SFAS No. 123, “Accounting for Stock-Based Compensation”. Accordingly, no compensation cost has been recognized for stock option grants since the options have exercise prices equal to the market value of the common stock at the date of grant. For SFAS No. 123 purposes, the fair value of each option grant has been estimated as of the date of the grant using the Black-Scholes option-pricing model with the following weighted average assumptions for the grants in the first quarter of 2004: expected dividend yield of 0%; expected volatility of 43%; risk-free interest rate of 2.94%; and expected lives of 5.5 years. Using these assumptions, the fair value of options granted in March 2004 was approximately $1,242,000, which would be amortized as compensation expense over the vesting period of the options. No options were granted during the nine months ended September 30, 2005. During the nine months ended September 30, 2005 and 2004, options were exercised on a total of 79,163 and 6,750 shares of our common stock, respectively.

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

	Three Months Ended September 30,						Nine Months Ended September 30,
	2005			2004			2005			2004
Net income available to common shareholders, as reported	$	5,422		$	1,522		$	12,612		$	3,887
Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects		(84	)		(149	)		(252	)		(315	)
Net income available to common shareholders, pro forma	$	5,338		$	1,373		$	12,360		$	3,572
Income per common share:
Basic, as reported	$	0.49		$	0.14		$	1.13		$	0.35
Basic, pro forma	$	0.48		$	0.12		$	1.10		$	0.32
Diluted, as reported	$	0.47		$	0.14		$	1.10		$	0.35
Diluted, pro forma	$	0.46		$	0.12		$	1.08		$	0.32

8. COMMITMENTS AND CONTINGENCIES

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

9. INCOME TAXES

The Company maintains a full valuation allowance against its net deferred tax asset from continuing and discontinued operations. The allowance reflects the Company’s recognition that continuing tax losses from operations and certain liquidity matters indicate that it is unclear whether certain future tax benefits will be realized through future taxable income. Differences between the effective tax rate and the expected tax rate are due primarily to changes in the valuation allowance. The balance of the valuation allowance was $12.3 and $16.2 million at September 30, 2005 and December 31, 2004, respectively.

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10. COMPREHENSIVE INCOME (LOSS)

The Company had comprehensive income (loss) of $(0.1) million and $(0.0) million for the three months ended September 30, 2005 and 2004, respectively; and $(0.9) million and $0.2 million for the nine months ended September 30, 2005 and 2004, respectively.

11. GEOGRAPHIC AND CUSTOMER INFORMATION

Net sales and long-lived assets (property, plant and equipment and goodwill and intangible assets) by region for continuing operations were as follows (revenue is attributed to regions based on the locations of customer) (in thousands):

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2005		2004		2005		2004
Net Sales:
North America	$	71,335	$	51,830	$	205,717	$	136,642
Foreign		18,145		11,470		53,597		32,465
	$	89,480	$	63,300	$	259,314	$	169,107

	September 30, 2005		December 31, 2004
Long Lived Assets:
North America	$	29,176	$	28,026
Foreign		2,469		2,607
	$	31,645	$	30,633

No single customer accounted for 10% or more of consolidated net sales for the three and nine months ended September 30, 2005 and 2004.

12. RECENT ACCOUNTING PRONOUNCEMENTS

In November 2004, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (“SFAS”) No. 151, “Inventory Costs - an amendment of ARB No. 43, Chapter 4”. This statement clarifies the accounting for abnormal amounts of idle facility expense, freight, handling costs and spoilage. This statement also requires the allocation of fixed production overhead costs be based on normal production capacity. The provisions of SFAS No. 151 are effective for inventory costs beginning in January 2006, with adoption permitted for inventory costs incurred beginning in January 2005. The adoption of this statement will not have a material impact on the Company’s consolidated financial statements.

In December 2004, the FASB issued SFAS No. 123R, “Share-Based Payment”. This statement requires the determination of the fair value of share-based compensation at the grant date and the recognition of the related compensation expense over the period in which the share-based compensation vests. In compliance with a Securities and Exchange Commission amendment to this statement, the Company will adopt the new accounting standard effective January 1, 2006. The Company will transition the new guidance using the modified prospective method. Applying the same assumptions used for the 2005 and 2004 pro forma disclosure in Note 7 of the Company’s financial statements, the Company estimates its pretax expense associated with its previous stock option grants to be approximately $308,000 in each of 2006 and 2007, and $77,000 in 2008.

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In December 2004, the FASB issued SFAS No. 153, “Exchanges of Nonmonetary Assets-an amendment of APB Opinion No. 29”. SFAS No. 153 addresses the measurement of exchanges of nonmonetary assets. It eliminates the exception from fair value measurement for nonmonetary exchanges of similar productive assets in paragraph 21(b) of APB Opinion No. 29 “Accounting for Nonmonetary Transactions” and replaces it with an exception for exchanges that do not have commercial substance. A nonmonetary exchange has commercial substance if the future cash flows of the entity are expected to change significantly as a result of the exchange. As required by SFAS No. 153, the Company adopted this new accounting standard effective July 1, 2005. The adoption of SFAS No. 153 did not have a material impact on the Company’s consolidated financial statements.

In May 2005, the FASB issued SFAS No. 154. “Accounting Changes and Error Corrections” (“SFAS No. 154”), which replaces Accounting Principles Board (“APB”) No. 20 “Accounting Changes”, and SFAS No. 3. “Reporting Accounting Changes in Interim Financial Statements”. SFAS No. 154 changes the requirements for the accounting for and reporting of a change in accounting principle. The statement applies to all voluntary changes in accounting principle as well as changes required by an accounting pronouncement. SFAS No. 154 requires retrospective application to prior periods’ financial statements of a voluntary change in accounting principle unless it is impracticable to determine the period-specific effects or the cumulative effect of the change. The statement is effective as of January 1, 2006. The adoption of SFAS No. 154 is not expected to have a material impact on the Company’s consolidated financial statements.

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Executive Overview

Miller Industries, Inc. is the world’s largest manufacturer of vehicle towing and recovery equipment, with domestic manufacturing subsidiaries in Tennessee and Pennsylvania, and foreign manufacturing subsidiaries in France and the United Kingdom. We offer a broad range of equipment to meet our customers’ design, capacity and cost requirements under our Century^®, Vulcan^®, Challenger^®, Holmes^®, Champion^®, Chevron™, Eagle^®, Titan^®, Jige™ and Boniface™ brand names.

Overall, management focuses on a variety of key indicators to monitor our operating and financial performance. These indicators include measurements of revenue, operating income, gross margin, income from continuing operations, earnings per share, capital expenditures and cash flow.

We derive revenues primarily from product sales made through our network of domestic and foreign independent distributors. Our revenues are sensitive to a variety of factors, such as demand for, and price of, our products, our technological competitiveness, our reputation for providing quality products and reliable service, competition within our industry, the cost of raw materials (including steel) and general economic conditions.

During 2004 and the first nine months of 2005, our revenues were positively affected by a general increase in demand for our products resulting from general economic improvements. In addition, we continued the manufacture of heavy-duty towing and recovery units for the Australian military as part of the largest single order for towing and recovery equipment in the Company’s history. The first units under this contract were delivered in late 2004, and the remaining units were produced and delivered by the end of the third quarter of 2005. We also began a project with DataPath, Inc. to assist in the design and engineering of mobile communications trailers for military application. In March 2005, we entered into a new agreement with DataPath calling for us to manufacture and sell to them all of their requirements for this type of equipment during the five-year term of the agreement. As a result of these projects, as well as the general increase in demand for our products, we have a strong backlog that we expect to continue through the remainder of the year.

We have been and will continue to be affected by recent large increases in the prices that we pay for raw materials, particularly steel and components with high steel content. Like all manufactures, we have experienced shortages in the availability of steel. Steel costs represent a substantial part of our total costs of operations, and management expects steel prices to remain at historically high levels for the foreseeable future. As we determined necessary, we implemented price increases to offset these steel surcharges. We also began to develop alternatives to the steel and steel components that we use in our production process. We have shared several of these alternatives with our major component part suppliers, some of whom have begun to implement them in the production of our component parts. We continue to monitor steel prices and availability in order to more favorably position the Company in this dynamic market.

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In June 2005, we entered into a new $27.0 million senior credit facility with Wachovia Bank, National Association. Proceeds from this new senior credit facility were used to repay The CIT Group/Business Credit, Inc. and William G. Miller, our Chairman and Co-Chief Executive Officer, under our former senior credit facility, and as a result, our former senior credit facility was satisfied and terminated, and Mr. Miller no longer holds any of our senior debt. The interest rates under the new senior credit facility reflect substantial reductions from the rates on our former senior credit facility. In addition, in June 2005, we amended our junior credit facility by adding an additional loan which increased our subordinated debt from $4.2 million to $10.0 million. The maturity date on the junior credit facility was extended to September 17, 2008, and the loans under the facility continue to bear interest at a rate equal to 9.0%. Mr. Miller, as successor to Harbourside Investments, LLLP (an entity that he controlled until its liquidation and distribution in May 2005) is now the sole lender under our amended junior credit facility.

At September 30, 2005, we continued to hold only miscellaneous assets in the RoadOne towing services segment and only one distributor location in our distribution group. Management continues its renewed focus on our core business - the manufacture of towing and recovery equipment.

Compliance with New York Stock Exchange Continued Listing Standards

In June 2003, we received notification from the New York Stock Exchange that we were not in compliance with the NYSE’s continued listing standards because we did not have sufficient shareholders’ equity or an adequate 30-day average market capitalization. In response, we implemented a plan for regaining compliance with the continued listing standards which focused on restructuring our bank facilities and rationalizing the timing of our debt service, disposing of our remaining RoadOne and distributor operations, and returning our manufacturing operations to their historically profitable levels. With the approval by our shareholders of the conversion of a portion of our subordinated debt into common stock, we completed the restructuring of our bank facilities. We also disposed of the remainder of our RoadOne operations and are in the process of disposing of our remaining distributor location.

In December 2004, the NYSE notified us that, as a result of our compliance plan, we had regained compliance with the NYSE’s continued listing standards and had been approved as a “company in good standing” with the NYSE. As a condition to the NYSE’s approval, we are subject to a 12-month follow-up period with the NYSE to ensure continued compliance with the continued listing standards, and will be subject to the NYSE’s routine monitoring procedures.

Discontinued Operations

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

In general, the customary operating liabilities of these disposed businesses were assumed by the new owners. Our subsidiaries that sold these businesses are nevertheless subject to some continuing liabilities with respect to their pre-sale operations, including, for example, liabilities related to litigation, certain trade payables, workers compensation and other insurance, surety bonds, and real estate. Except in the case of direct guarantees, these are not obligations of Miller Industries, Inc. and Miller Industries, Inc. would expect to take whatever steps it deems appropriate to protect itself from any such liabilities.

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Critical Accounting Policies

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

Accounts receivable

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

Valuation of long-lived assets and goodwill

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

Warranty Reserves

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

Income taxes

We recognize deferred tax assets and liabilities based on differences between the financial statement carrying amounts and the tax bases of assets and liabilities. We consider the need to record a valuation allowance to reduce deferred tax assets to the amount that is more likely than not to be realized. We consider tax loss carrybacks, reversal of deferred tax liabilities, tax planning and estimates of future taxable income in assessing the need for a valuation allowance. We currently have a full valuation allowance against our net deferred tax assets from continuing and discontinued operations. The allowance reflects our recognition that continuing tax losses from operations and certain liquidity matters indicate that it is unclear whether certain future tax benefits will be realized through future taxable income. Differences between the effective tax rate and the expected tax rate are due primarily to changes in deferred tax asset valuation allowances. The balance of the valuation allowance was $12.3 and $16.2 million at September 30, 2005 and December 31, 2004, respectively.

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Revenues

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

Seasonality

Our towing and recovery equipment segment has experienced some seasonality in net sales due in part to decisions by purchasers of towing and recovery equipment to defer purchases near the end of the chassis model year. The segment’s net sales have historically been seasonally impacted due in part to weather conditions.

Foreign Currency Translation

The functional currency for our foreign operations is the applicable local currency. The translation from the applicable foreign currencies to U.S. dollars is performed for balance sheet accounts using current exchange rates in effect at the balance sheet date, historical rates for equity and the weighted average exchange rate during the period for revenue and expense accounts. The gains or losses resulting from such translations are included in shareholders’ equity. For intercompany debt denominated in a currency other than the functional currency, the remeasurement into the functional currency is also included in stockholders’ equity as the amounts are considered to be of a long-term investment nature.

Results of Operations-Three Months Ended September 30, 2005 Compared to Three Months Ended September 30, 2004

Continuing Operations

Net sales of continuing operations for the three months ended September 30, 2005, increased 41.3% to $89.5 million from $63.3 million for the comparable period in 2004. The increase is primarily the result of overall improvements in market conditions, with increases in demand leading to increases in production levels, production and delivery of units under our contract with the Australian military and production of mobile communications trailers for DataPath. To a lesser extent, this increase also is attributable to price increases that we implemented during 2004 and 2005.

Costs of sales of continuing operations for the three months ended September 30, 2005, increased 37.4% to $76.1 million from $55.4 million for the comparable period in 2004. Costs of continuing operations decreased as a percentage of sales, due to improvements in manufacturing efficiencies, from 87.6% to 84.9%.

Selling, general, and administrative expenses for the three months ended September 30, 2005, increased to $6.2 million from $4.5 million for the three months ended September 30, 2004. As a percentage of sales, selling, general, and administrative expenses decreased slightly to 6.9% for the three months ended September 30, 2005 from 7.1% for the three months ended September 30, 2004.

The provision for income taxes for continuing operations for the three months ended September 30, 2005 reflects the combined effective US federal, state and foreign tax rate of 14.3%. The provision for the three months ended September 30, 2004 reflects a lower effective US federal and state rate, plus additional taxes on foreign income for the period.

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Discontinued Operations

Net sales from the distribution group of the discontinued operations decreased $5.0 million to $3.2 million for the three months ended September 30, 2005 from $8.2 million for the three months ended September 30, 2004. Revenues were negatively impacted by the disposition of seven distribution operations during 2004. There were no net sales for the towing and recovery services segment during the three months ended September 30, 2005 and 2004, as a result of all remaining towing services markets being sold by the end of calendar 2003.

Costs of sales as a percentage of net sales for the distribution group was 91.5% for the three months ended September 30, 2005 compared to 93.8% for the three months ended September 30, 2004. There were no costs of sales for the towing services segment during the three months ended September 30, 2005 or 2004. As explained above, all towing services markets were sold by the end of calendar 2003.

Selling, general and administrative expenses as a percentage of sales were 9.3% for the distribution group and 0.0% for the towing services segment for the three months ended September 30, 2005 compared to 8.6% and 0.0%, respectively, for the three months ended September 30, 2004. The increase in the percentage of sales for the distribution group was primarily the result of certain administrative expenses spread over a smaller revenue base as we continue to sell distributor locations.

Interest Expense

Our total interest expense for continuing and discontinued operations decreased to $0.9 million for the three months ended September 30, 2005 from $1.3 million for the comparable year-ago period. Interest expense was $0.9 million for continuing operations and $0.0 million for discontinued operations for the three months ended September 30, 2005, compared to $1.2 million for continuing operations and $0.1 million for discontinued operations for the comparable prior year period. Decreases in interest expense were due to lower interest rates on the new senior credit facility, as well as overall decreases in debt levels.

Results of Operations-Nine Months Ended September 30, 2005 Compared to Nine Months Ended September 30, 2004

Continuing Operations

Net sales of continuing operations for the nine months ended September 30, 2005, increased 53.3% to $259.3 million from $169.1 million for the comparable period in 2004. The increase is primarily the result of overall improvements in market conditions, with increases in demand leading to increases in production levels, production and delivery of units under our contract with the Australian military and production of mobile communications trailers for DataPath. To a lesser extent, this increase also is attributable to price increases that we implemented during 2004 and 2005.

Costs of sales of continuing operations for the nine months ended September 30, 2005, increased 53.2% to $223.4 million from $145.8 million for the comparable period in 2004. Costs of continuing operations remained constant as a percentage of sales at 86.2% for both periods.

Selling, general, and administrative expenses for the nine months ended September 30, 2005, increased to $17.9 million from $14.3 million for the nine months ended September 30, 2004. As a percentage of sales, selling, general, and administrative expenses decreased to 6.9% for the nine months ended September 30, 2005 from 8.5% for the nine months ended September 30, 2004 due to the fixed nature of certain of these expenses spread over the higher sales volume.

The provision for income taxes for continuing operations for the nine months ended September 30, 2005 reflects the combined effective US federal, state and foreign tax rate of 13.9%. The provision for the nine months ended September 30, 2004 reflects a lower effective US federal and state rate, plus additional taxes on foreign income for the period.

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Discontinued Operations

Net sales from the distribution group of the discontinued operations decreased $24.2 million to $8.7 million for the nine months ended September 30, 2005 from $32.9 million for the nine months ended September 30, 2004. Revenues were negatively impacted by the disposition of seven distribution operations during 2004. There were no net sales for the towing and recovery services segment during the nine months ended September 30, 2005 and 2004, as a result of all remaining towing services markets being sold by the end of calendar 2003.

Costs of sales as a percentage of net sales for the distribution group was 90.6% for the nine months ended September 30, 2005 compared to 92.8% for the nine months ended September 30, 2004. There were no costs of sales for the towing services segment during the nine months ended September 30, 2005 or 2004. As explained above, all towing services markets were sold by the end of calendar 2003.

Selling, general and administrative expenses as a percentage of sales was 10.8% for the distribution group and 0.0% for the towing services segment for the nine months ended September 30, 2005 compared to 8.6% and 0.0%, respectively, for the nine months ended September 30, 2004. The increase in the percentage of sales for the distribution group was primarily the result of certain administrative expenses spread over a smaller revenue base, as we continue to sell distribution locations.

Interest Expense

Our total interest expense for continuing and discontinued operations decreased to $3.2 million for the nine months ended September 30, 2005 from $4.0 million for the comparable year-ago period. Interest expense was $3.2 million for continuing operations and $0.0 million for discontinued operations for the nine months ended September 30, 2005, compared to $3.5 million for continuing operations and $0.5 million for discontinued operations for the comparable prior year period. Decreases in interest expense were due to lower interest rates on the new senior credit facility, as well as overall decreases in debt levels.

Liquidity and Capital Resources

As of September 30, 2005, we had cash and cash equivalents of $7.8 million, exclusive of unused availability under our credit facilities. Our primary cash requirements include working capital, interest and principal payments on indebtedness under our credit facilities and capital expenditures. We expect our primary sources of cash to be cash flow from operations, cash and cash equivalents on hand at September 30, 2005 and borrowings from unused availability under our credit facilities. Over the past year, we generally have used available cash flow, and the proceeds from a private placement of 480,000 shares of our common stock completed in May 2004, to reduce the outstanding balance on our credit facilities and to pay down other long-term debt and capital lease obligations. In addition, our working capital requirements have been and will continue to be significant in connection with the increase in our manufacturing output to meet recent increases in demand for our products. We anticipate capital expenditures of from $5 million to $7 million for plant expansion and equipment modernization during 2006.

Cash provided by operating activities was $7.3 million for the nine months ended September 30, 2005, compared to $8.2 million used in operating activities for the comparable period of 2004. The cash provided by operating activities for the nine months ended September 30, 2005 was primarily due to the earnings during the period offset by changes in working capital.

Cash used in investing activities was $0.5 million for the nine months ended September 30, 2005, compared to $4.1 million provided by investing activities for the comparable period in 2004. The cash used in investing activities in 2005 was primarily due to purchases of fixed assets, and the cash provied by investing activities in 2004 was primarily the result of sales of the assets of discontinued operations.

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Cash used in financing activities was $2.1 million for the nine months ended September 30, 2005 compared to $0.9 million used in the comparable period in the prior year. The cash was used to repay borrowings under our credit facility and other long-term obligations.

Credit Facilities and Other Obligations

New Senior Credit Facility

On June 17, 2005, we entered into a Credit Agreement with Wachovia Bank, National Association, for a $27.0 million senior secured credit facility. Proceeds from this new senior credit facility were used to repay The CIT Group/Business Credit, Inc. and William G. Miller, our Chairman of the Board and Co-Chief Executive Officer, under our former senior credit facility. As a result, effective June 17, 2005, our former senior credit facility was satisfied and terminated, and Mr. Miller no longer holds any of our senior debt.

The new senior credit facility consists of a $20.0 million revolving credit facility, and a $7.0 million term loan. In the absence of a default, all borrowings under the revolving credit facility bear interest at the LIBOR Market Index Rate (as defined in the Credit Agreement) plus a margin of between 1.75% to 2.50% per annum that is subject to adjustment from time to time based upon the Consolidated Leverage Ratio (as defined in the Credit Agreement), and the term loan bears interest at a 30-day adjusted LIBOR rate plus a margin of between 1.75% to 2.50% per annum that is subject to adjustment from time to time based upon the Consolidated Leverage Ratio (as defined in the Credit Agreement). The revolving credit facility expires on June 15, 2008, and the term loan matures on June 15, 2010. The new senior credit facility is secured by substantially all of our assets, and contains customary representations and warranties, events of default and affirmative and negative covenants for secured facilities of this type.

Junior Credit Facility

Our junior credit facility is, by its terms, expressly subordinated only to the new senior credit facility, and is secured by a second priority lien and security interest in substantially all of our other assets. The junior credit facility contains requirements for the maintenance of certain financial covenants, and also imposes restrictions on capital expenditures, incurrence of indebtedness, mergers and acquisitions, distributions and transfers and sales of assets. The Junior Credit Facility has been amended several times, most recently on June 17, 2005.

During the second half of 2003, Contrarian Funds, LLC purchased all of the outstanding debt of the junior credit facility in a series of transactions. As part of its purchase, Contrarian also purchased warrants for shares of our common stock, which were subsequently exchanged for shares of our common stock. In November 2003, Harbourside Investments, LLLP purchased 44.286% of the subordinated debt and warrants from Contrarian. In February 2004, Contrarian and Harbourside converted approximately $7.0 million in debt under the junior credit facility into shares of our common stock. In May 2004, we completed the sale of 480,000 shares of our common stock at a price of $9.00 per share to a small group of unaffiliated private investors, and the proceeds of this sale, together with additional borrowings under our former senior credit facility, were used to retire the portion of the junior credit facility owed to Contrarian (approximately $5.4 million of principal and approximately $350,000 of accrued interest). On May 31, 2005, Harbourside was dissolved and distributed all of its shares of our common stock to its partners. As a result, William G. Miller, as successor lender agent to Harbourside, became the sole lender under the junior credit facility.

The June 17, 2005 amendment to the junior credit facility provided for a new term loan, made by Mr. Miller as sole lender and successor lender agent, in the principal amount of approximately $5.7 million. As a result, on June 17, 2005, the total outstanding principal amount of term loans under the junior credit facility was $10.0 million. The amendment also extended the maturity date of the junior credit facility to September 17, 2008, and amended certain terms of the junior credit agreement to, among other things, make certain of the representations and warranties, covenants and events of default more consistent with the representations and warranties, covenants and events of default in the Credit Agreement for our new senior credit facility. In the absence of a default, all of the term loans outstanding under the junior credit facility continue to bear interest at a rate of 9.0% per annum.

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Former Senior Credit Facility

As amended, our former senior credit facility with CIT and Mr. Miller consisted of an aggregate $32.0 million credit facility, including a $15.0 million revolving loan, a $5.0 million term loan and a $12.0 million term loan. The revolving credit facility provided for separate and distinct loan commitment levels for our towing and recovery equipment segment and RoadOne towing services segment, respectively. Borrowing availability under the revolving portion of the former senior credit facility was based on a percentage of eligible inventory and accounts receivable (determined on eligibility criteria set forth in the credit facility) and subject to a maximum borrowing limitation. Borrowings under the term loans were collateralized by substantially all of our domestic property, plants, and equipment. The former senior credit facility bore interest at the prime rate (as defined) plus 2.75%, subject to the rights of the senior lender agent or a majority of the lenders to charge a default rate equal to the prime rate (as defined) plus 4.75% during the continuance of any event of default thereunder. The former senior credit facility contained requirements relating to maintaining minimum excess availability at all times and minimum monthly levels of earnings before income taxes and depreciation and amortization (as defined) based on the most recently ended trailing three month period. In addition, the former senior credit facility contained restrictions on capital expenditures, incurrence of indebtedness, mergers and acquisitions, distributions and transfers and sales of assets. The former senior credit facility also contained requirements related to weekly and monthly collateral reporting.

Interest Rate Sensitivity

Because of the amount of obligations outstanding under the new senior credit facility and the connection of the interest rate under such facility (including the default rates) to the LIBOR rate, an increase in the LIBOR rate could have a significant effect on our ability to satisfy our obligations under this facility and increase our interest expense significantly. Therefore, our liquidity and access to capital resources could be further affected by increasing interest rates.

Other Long-Term Obligations

In addition to the borrowings under the senior and junior credit facilities described above, we had approximately $2.1 million of mortgage notes payable, equipment notes payable and other long-term obligations at September 30, 2005. We also had approximately $2.1 million in non-cancellable operating lease obligations, $0.6 million of which relates to building leases of discontinued operations at that date.

Forward-Looking Statements

Certain statements in this Form 10-Q, including but not limited to Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” may be deemed to be forward-looking statements, as defined in the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are made based on our management’s belief as well as assumptions made by, and information currently available to, our management pursuant to “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. Our actual results may differ materially from the results anticipated in these forward-looking statements due to, among other things, the risks related to the need to service our high level of indebtedness; the wind down of operations of our RoadOne towing services segment; our dependence on outside suppliers of raw materials and recent increases in the cost of steel and other raw materials; general economic conditions and the economic health of our customers; those risks referenced herein and those risks discussed in our other filings with the SEC, including those risks discussed under the caption "Certain Factors Affecting Forward-Looking Statements" in our Form 10-K for fiscal 2004, which discussion is incorporated herein by this reference. Such factors are not exclusive. We do not undertake to update any forward-looking statement that may be made from time to time by, or on behalf of, our company.

ITEM 4.

CONTROLS AND PROCEDURES

Within 90 days prior to the filing date of this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Co-Chief Executive Officers (Co-CEOs) and Chief Financial Officer (CFO), of the effectiveness of the design and operation of our disclosure controls and procedures as defined in Rules 13a14(c) under the Securities Exchange Act of 1934. Based upon this evaluation, our Co-CEOs and CFO have concluded that the disclosure controls and procedures are effective to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act are recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms.

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

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

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

ITEM 6. EXHIBITS

31.1

Certification Pursuant to Rules 13a-14(a)/15d-14(a) by Co-Chief Executive Officer*

31.2

Certification Pursuant to Rules 13a-14(a)/15d-14(a) by Co-Chief Executive Officer*

31.3

Certification Pursuant to Rule 13a-14(a)/15d-14(a) by Chief Financial Officer*

32.1

Certification Pursuant to Section 1350 of Chapter 63 of Title 18 of United States Code by Co-Chief Executive Officer*

32.2

Certification Pursuant to Section 1350 of Chapter 63 of Title 18 of United States Code by Co-Chief Executive Officer*

32.3

Certification Pursuant to Section 1350 of Chapter 63 of Title 18 of United States Code by Chief Financial Officer*

______________

* Filed herewith

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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.

MILLER INDUSTRIES, INC.

By: /s/ J. Vincent Mish

J. Vincent Mish

Executive Vice President and Chief Financial Officer

Date: November 8, 2005