**SECURITIES
AND EXCHANGE COMMISSION**


**WASHINGTON,
D.C. 20549**


**____________________**




**FORM
10-K**




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




For the
      fiscal year ended
    December 31, 2004Commission File No.
    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)




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




Title
      of Each Class
    
    Name
      of Each Exchange on Which RegisteredCommon
      Stock, par value $.01 per share
    
    New
      York Stock Exchange




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




None(Title
      of Class)





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 if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein and will not be contained, to the best of
Registrant’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.     o




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




x     Yes   o No .




The
aggregate market value of the voting stock for non-affiliates (which for
purposes hereof are all holders other than executive officers and directors) of
the Registrant as of June 30, 2004 (the last business day of the Registrant's
most recently completed second fiscal quarter) was $94,393,675 (based
on 9,573,395 shares held by non-affiliates at $9.86 per share, the last
sale price on the NYSE on June 30, 2004).




At March 9 , 2005
there were 11,194,782 shares of Common Stock, par value $0.01 per share,
outstanding.




**DOCUMENTS
INCORPORATED BY REFERENCE**




The
information called for by Part III (Items 10, 11, 12, 13 and 14) is incorporated
herein by reference to the Registrant’s definitive proxy statement for its 2005
Annual Meeting of Shareholders which is to be filed pursuant to Regulation
14A.














**TABLE
OF CONTENTS**


**FORM
10-K ANNUAL REPORT**




**PART
      I**ITEM
      1.
    BUSINESS
    1ITEM
      2.
    PROPERTIES
    11ITEM
      3.
    LEGAL
      PROCEEDINGS
    12ITEM
      4.
    SUBMISSION
      OF MATTERS TO A VOTE OF SECURITY HOLDERS
    12**PART
      II**ITEM
      5.
    MARKET
      FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS
      AND
      ISSUER PURCHASES OF EQUITY SECURITIES
    13ITEM
      6.
    SELECTED
      FINANCIAL DATA
    14ITEM
      7.
    MANAGEMENT’S
      DISCUSSION AND ANALYSIS OF FINANCIALCONDITION
      AND
      RESULTS OF OPERATIONSITEM
      7A.
    QUANTITATIVE
      AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    27ITEM
      8.
    FINANCIAL
      STATEMENTS AND SUPPLEMENTARY DATA
    27ITEM
      9.
    CHANGES
      IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
      ACCOUNTING
      AND FINANCIAL DISCLOSUREITEM
      9A.
    CONTROLS
      AND PROCEDURES
    27ITEM
      9B.
    OTHER
      INFORMATION
    28**PART
      III**ITEM
      10.
    DIRECTORS
      AND EXECUTIVE OFFICERS OF THE REGISTRANT
    29ITEM
      11.
    EXECUTIVE
      COMPENSATION
    29ITEM
      12.
    SECURITY
      OWNERSHIP OF CERTAIN BENEFICIAL OWNERS ANDMANAGEMENT
      AND RELATED STOCKHOLDER MATTERS
    29ITEM
      13.
    CERTAIN
      RELATIONSHIPS AND RELATED TRANSACTIONS
    29ITEM
      14.
    PRINCIPAL
      ACCOUNTANT FEES AND SERVICES
    29**PART
      IV**ITEM
      15.
    EXHIBITS
      AND FINANCIAL STATEMENT SCHEDULES
    30FINANCIAL
      STATEMENTS
    F-1FINANCIAL
      STATEMENT SCHEDULE
    S-1








i




**PART
I**




**ITEM** **1.**  **BUSINESS**




**General**




Miller
Industries, Inc. is the world’s largest manufacturer of vehicle towing and
recovery equipment, with executive offices in Ooltewah, Tennessee and Atlanta,
Georgia, domestic manufacturing operations in Tennessee and Pennsylvania, and
foreign manufacturing operations in France and the United Kingdom.




Since
1990, we have developed or acquired several of the most well-recognized brands
in the towing and recovery equipment manufacturing industry. Our strategy has
been to diversify our line of products and increase our presence in the industry
by combining internal growth and development with acquisitions of complementary
businesses.




In
February 1997, we formed RoadOne to offer a broad range of towing services.
We subsequently disposed of all towing services operations. In addition, we have
made the decision to sell our distribution group. As a result of these
decisions, we have classified both our towing services segment and our
distribution group as discontinued operations. As of December 31, 2004, we had
sold or closed all of our RoadOne towing locations and all but one of our
distributor locations.




**Towing
and Recovery Equipment**




We offer
a broad range of towing and recovery equipment products that meet most customer
design, capacity and cost requirements. We manufacture the bodies of wreckers
and car carriers, which are installed on truck chassis manufactured by third
parties. Wreckers generally are used to recover and tow disabled vehicles and
other equipment and range in type from the conventional tow truck to large
recovery vehicles with rotating hydraulic booms and 70-ton lifting capacities.
Car carriers are specialized flat bed vehicles with hydraulic tilt mechanisms
that enable a towing operator to drive or winch a vehicle onto the bed for
transport. Car carriers transport new or disabled vehicles and other equipment
and are particularly effective over longer distances.




Our
products primarily are sold through independent distributors that serve all 50
states, Canada and Mexico, and other foreign markets including Europe, the
Pacific Rim and the Middle East. Additionally, as a result of our ownership of
Jige in France and Boniface in the United Kingdom, we have substantial
distribution capabilities in Europe. While most of our distributor agreements do
not contain exclusivity provisions, management believes that approximately 65%
of our independent distributors sell our products on an exclusive basis. In
addition to selling our products to towing operators, our independent
distributors provide parts and service. We also utilize independent sales
representatives to exclusively market our products and provide expertise and
sales assistance to our independent distributors. Management believes the
strength of our distribution network and the breadth of our product offerings
are two key advantages over our competitors.




***Product
Lines***




We
manufacture a broad line of wrecker, car carrier and trailer bodies to meet a
full range of customer design, capacity and cost requirements.




*Wreckers.* Wreckers
are generally used to recover and tow disabled vehicles and other equipment and
range in type from the conventional tow truck to large recovery vehicles with
70-ton lifting capacities. Wreckers are available with specialized features,
including underlifts, L-arms and scoops, which lift disabled vehicles by the
tires or front axle to minimize front end damage to the towed vehicles. Certain
heavy duty wrecker models offer rotating booms, which allow heavy duty wreckers
to recover vehicles from any angle, and proprietary remote control devices for
operating wreckers. In addition, certain light duty wreckers are equipped with
the “Express” automatic wheellift hookup device that allow operators to engage a
disabled or unattended vehicle without leaving the cab of the
wrecker.







1





Our
wreckers range in capacity from 8 to 70 tons, and are characterized as light
duty and heavy duty, with wreckers of 16-ton or greater capacity being
classified as heavy duty. Light duty wreckers are used to remove vehicles from
accident scenes and vehicles illegally parked, abandoned or disabled, and for
general recovery. Heavy duty wreckers are used in commercial towing and recovery
applications including overturned tractor trailers, buses, motor homes and other
vehicles.




*Car
Carriers.* Car
carriers are specialized flat-bed vehicles with hydraulic tilt mechanisms that
enable a towing operator to drive or winch a vehicle onto the bed for transport.
Car carriers are used to transport new or disabled vehicles and other equipment
and are particularly effective for transporting vehicles or other equipment over
longer distances. In addition to transporting vehicles, car carriers may also be
used for other purposes, including transportation of industrial equipment. In
recent years, professional towing operators have added car carriers to their
fleets to complement their towing capabilities.




*Multi-Vehicle
Transport Trailers.* Multi-vehicle transport trailers are specialized auto transport trailers with
upper and lower decks and hydraulic ramps for loading vehicles. The trailers are
used for moving multiple vehicles for auto auctions, car dealerships, leasing
companies, and other similar applications. The trailers are easy to load with 6
to 7 vehicles, and with the optional cab rack, can haul up to 8 vehicles. The
vehicles can be secured to the transport quickly with ratchet and chain
tie-downs that are mounted throughout the frame of the transport. In recent
years, professional towing operators have added auto transport trailers to their
fleets to add to their towing capabilities.




***Brand
Names***




We
manufacture and market our wreckers, car carriers and trailers under ten
separate brand names. Although certain of the brands overlap in terms of
features, prices and distributors, each brand has its own distinctive image and
customer base.




*Century* ® . The
Century brand is our ‘‘top-of-the-line’’ brand and represents what management
believes to be the broadest product line in the industry. The Century line was
started in 1974 and produces wreckers ranging from 8-ton light duty to 70-ton
heavy duty models, and car carriers in lengths from 171⁄2 to 30 feet. Management
believes that the Century brand has a reputation as the industry’s leading
product innovator.




*Vulcan* *®* *.* Our
Vulcan product line includes a range of premium light and heavy duty wreckers,
car carriers and other towing and recovery equipment. The Vulcan line is sold
through its own independent distribution network.




*Challenger* ® *.* Our
Challenger products compete with the Century and Vulcan products and constitute
a third premium product line. Challenger products consist of light to heavy duty
wreckers with capacities ranging from 8 to 70 tons, and car carriers with
lengths ranging from 171⁄2 to 21 feet. The Challenger line was started in 1975 and
is known for high performance heavy duty wreckers and aesthetic
design.




*Holmes* ® . Our
Holmes product line includes mid-priced wreckers with 8 to 16 ton capacities and
car carriers in 171⁄2 to 21 foot lengths. The Holmes wrecker was first produced in
1916. The Holmes name has been the most well-recognized and leading industry
brand both domestically and internationally through most of this
century.




*Champion* ® . The
Champion brand, which was introduced in 1991, includes car carriers which range
in length from 171⁄2 to 21 feet. The Champion product line, which is generally
lower-priced, allows us to offer a full line of car carriers at various
competitive price points. In 1993, the Champion line was expanded to include a
line of economy tow trucks with integrated boom and underlift.




*Chevron* TM. Our
Chevron product line is comprised primarily of premium car carriers. Chevron
produces a range of premium single-car, multi-car and industrial carriers, light
duty wreckers and other towing and recovery equipment. The Chevron line is
operated autonomously with its own independent distribution network that focuses
on the salvage industry.







2





*Eagle* ® . Our
Eagle products consist of light duty wreckers with the ‘‘Eagle Claw’’ hook-up
system that allows towing operators to engage a disabled or unattended vehicle
without leaving the cab of the tow truck. The ‘‘Eagle Claw’’ hook-up system,
which was patented in 1984, was originally developed for the repossession
market. Since acquiring Eagle, we have upgraded the quality and features of the
Eagle product line and expanded its recovery capability.




*Titan* ® . Our
Titan product line is comprised of premium multi-vehicle transport trailers
which can transport up to 8 vehicles depending on configuration.




*Jige* TM *.* Our Jige
product line is comprised of a broad line of light and heavy duty wreckers and
car carriers marketed primarily in Europe. Jige is a market leader best known
for its innovative designs of car carriers and light wreckers necessary to
operate within the narrow confines of European cities.




*Boniface* TM *.* Our
Boniface product line is comprised primarily of heavy duty wreckers marketed
primarily in Europe. Boniface produces a wide range of heavy duty wreckers
specializing in the long underlift technology required to tow modern European
tour buses.




***Product
Development and Manufacturing***




Our
Holmes and Century brand names are associated with four of the major innovations
in the industry: the rapid reverse winch; the tow sling; the hydraulic lifting
mechanism; and the underlift with parallel linkage and L-arms. Our engineering
staff, in consultation with manufacturing personnel, uses computer-aided design
and stress analysis systems to test new product designs and to integrate various
product improvements. In addition to offering product innovations, we focus on
developing or licensing new technology for our products.




We
manufacture wreckers, car carriers and trailers at six manufacturing facilities
located in the United States, France and the United Kingdom. The manufacturing
process for our products consists primarily of cutting and bending sheet steel
or aluminum into parts that are welded together to form the wrecker, car carrier
body or trailer. Components such as hydraulic cylinders, winches, valves and
pumps, which are purchased by us from third-party suppliers, are then attached
to the frame to form the completed wrecker or car carrier body. The completed
body is either installed by us or shipped by common carrier to a distributor
where it is then installed on a truck chassis. Generally, the wrecker or car
carrier bodies are painted by us with a primer coat only, so that towing
operators can select customized colors to coordinate with chassis colors or
fleet colors. To the extent final painting is required before delivery, we
contract with independent paint shops for such services.




We
purchase raw materials and component parts from a number of sources. Although we
have no long-term supply contracts, management believes we have good
relationships with our primary suppliers. We have experienced no significant
problems in obtaining adequate supplies of raw materials and component parts to
meet the requirements of our production schedules. Management believes that the
materials used in the production of our products are available at competitive
prices from an adequate number of alternative suppliers. Accordingly, management
does not believe that the loss of a single supplier would have a material
adverse effect on our business.




***Sales,
Distribution and Marketing of Towing and Recovery
Equipment***




*Disposition
of Company-Owned Distributors*




During
2002, our board of directors and management made the decision to sell our
distribution group. As of December 31, 2004, our distribution group consisted of
one towing and recovery equipment distributor located in British Columbia,
Canada and had sold all other distributor locations. We intend to sell our
remaining distributor as quickly as possible. All assets, liabilities and
results of operations of the distribution group are now presented separately as
discontinued operations and all prior period financial information is presented
to conform to this treatment.







3





*Independent
Distributors and Sales*




Management
categorizes the towing and recovery market into three general product types:
light duty wreckers; heavy duty wreckers; and car carriers. The light duty
wrecker market consists primarily of professional wrecker operators,
repossession towing services, municipal and federal governmental agencies, and
repair shop or salvage company owners. The heavy duty market is dominated by
professional wrecker operators serving the needs of commercial vehicle
operators. The car carrier market, historically dominated by automobile salvage
companies, has expanded to include equipment rental companies that offer
delivery service and professional towing operators who desire to complement
their existing towing capabilities. Management estimates that there are
approximately 30,000 professional towing operators and 80,000 service station,
repair shop and salvage operators comprising the overall towing and recovery
market.




Our sales
force, which services our network of independent distributors, consists of sales
representatives whose responsibilities include providing administrative and
sales support to the entire base of independent distributors. Sales
representatives receive commissions on direct sales based on product type and
brand and generally are assigned specific territories in which to promote sales
of our products and to maintain customer relationships.




We have
developed a diverse network of independent distributors, consisting of
approximately 120 distributors in North America, who serve all 50 states, Canada
and Mexico, and approximately 50 distributors that serve other foreign markets.
During the year ended December 31, 2004, no single distributor accounted for
more than 5% of our sales. Management believes our broad and diverse network of
distributors provides us with the flexibility to adapt to market changes,
lessens our dependence on particular distributors and reduces the impact of
regional economic factors.




To
support sales and marketing efforts, we produce demonstrator models that are
used by our sales representatives and independent distributors. To increase
exposure to our products, we also have served as the official recovery team for
many automobile racing events, including the Daytona, Talladega, Atlanta and
Darlington NASCAR races, the Grand Prix in Miami, the Suzuka in Japan, the Rolex
Daytona 24 Hour Race, Molson Indy, the Brickyard, and the Indy 500 races, among
others.




We
routinely respond to requests for proposals or bid invitations in consultation
with our local distributors. Our products have been selected by the United
States General Services Administration as an approved source for certain federal
and defense agencies. We intend to continue to pursue government contracting
opportunities.




The
towing and recovery equipment industry places heavy marketing emphasis on
product exhibitions at national and regional trade shows. In order to focus our
marketing efforts and to control marketing costs, we have reduced our
participation in regional trade shows and now concentrate our efforts on five of
the major trade shows each year. We work with our network of independent
distributors to concentrate on various regional shows.




***Product
Warranties and Insurance***




We offer
a 12-month limited manufacturer’s product and service warranty on our wrecker
and car carrier products. Our warranty generally provides for repair or
replacement of failed parts or components. Warranty service is usually performed
by us or an authorized distributor. Management believes that we maintain
adequate general liability and product liability insurance.




***Backlog***




We
produce virtually all of our products to order. Our backlog is based upon
customer purchase orders that we believe are firm. The level of backlog at any
particular time, however, is not an appropriate indicator of our future
operating performance. Certain purchase orders are subject to cancellation by
the customer upon notification. Given our production and delivery schedules
management believes that the current backlog represents less than three months
of production.







4





***Competition***




The
towing and recovery equipment manufacturing industry is highly competitive for
sales to distributors and towing operators. Management believes that competition
in this industry focuses on product quality and innovation, reputation,
technology, customer service, product availability and price. We compete on the
basis of each of these criteria, with an emphasis on product quality and
innovation and customer service. Management also believes that a manufacturer’s
relationship with distributors is a key component of success in the industry.
Accordingly, we have invested substantial resources and management time in
building and maintaining strong relationships with distributors. Management also
believes that our products are regarded as high quality within their particular
price points. Our marketing strategy is to continue to compete primarily on the
basis of quality and reputation rather than solely on the basis of price, and to
continue to target the growing group of professional towing operators who as
end-users recognize the quality of our products.




Traditionally,
the capital requirements for entry into the towing and recovery manufacturing
industry have been relatively low. Management believes a manufacturer’s capital
resources and access to technological improvements have become a more integral
component of success in recent years. Certain of our competitors may have
greater financial and other resources and may provide more attractive dealer and
retail customer financing alternatives than we do.




**Towing
Services - RoadOne**




In
February 1997, we formed RoadOne to build a national towing services
network. During April 2000, we announced plans to accelerate our efforts to
aggressively reduce expenses in the towing services segment at the corporate
level, as well as in the field. During the quarter ended June 30, 2002, our
management and board of directors approved a plan to dispose of certain
identified assets, which primarily consisted of underperforming operations
of the towing services segment. In October 2002, we made the decision to sell
all remaining towing services operations. As of December 31, 2003, all of the
towing services operations had either been sold or closed.




In
accordance with SFAS No. 144, we began reporting the entire towing services
segment as discontinued operations as of the beginning of the fourth quarter of
2002. The results of operations and loss on disposal associated with certain
towing services operations which were sold in June 2003 have been
reclassified from discontinued to continuing operations given our significant
continuing involvement in the operations of the disposal components via a
consulting agreement and our ongoing interest in the cash flows of the
operations of the disposal components via a long-term license agreement.
Accordingly, the depreciation of fixed assets ceased on October 1, 2002. As of
such date, all assets, liabilities, and results of operations are separately
presented as discontinued operations and all prior period financial information
is presented to conform with this treatment.




**Employees**




As of
December 31, 2004, we employed approximately 840 people in our towing and
recovery equipment manufacturing and distribution operations. None of our
employees are covered by a collective bargaining agreement, though our employees
in France and the United Kingdom have certain similar rights provided by their
respective government’s employment regulations. We consider our employee
relations to be good.




**Intellectual
Property Rights**




Our
development of the underlift parallel linkage and L-arms in 1982 is considered
one of the most innovative developments in the wrecker industry in the last 25
years. This technology is significant primarily because it allows the
damage-free towing of newer aerodynamic vehicles made of lighter weight
materials. Patents for this technology were granted to one of our operating
subsidiaries, some of which have expired, and the remainder of which expire over
the next few years. This technology, particularly the L-arms, is used in a
majority of the commercial wreckers today. Management believes that, until these
patents expire, utilization of such devices without a license is an infringement
of such patents. We have successfully litigated infringement lawsuits in which
the validity of our patents on this technology was upheld, and successfully
settled other lawsuits. We also hold a







5





number of
other utility and design patents covering other products, the Vulcan ‘‘scoop’’
wheel-retainer and the car carrier anti-tilt device. We have also obtained the
rights to use and develop certain technologies owned or patented by others.
Pursuant to the terms of a consent judgment entered into in 2000 with the
Antitrust Division of the U.S. Department of Justice, we are required to offer
non-exclusive royalty-bearing licenses to certain of our key patents to all tow
truck and car carrier manufacturers.




Our
trademarks ‘‘Century,’’ ‘‘Holmes,’’ ‘‘Champion,’’ “Challenger,” ‘‘Formula I,’’
‘‘Eagle Claw Self-Loading Wheellift,’’ ‘‘Pro Star,’’ ‘‘Street Runner,’’
‘‘Vulcan,’’ ‘‘RoadOne,’’ “Right Approach” and “Extreme Angle,” among others, are
registered with the United States Patent and Trademark Office. Management
believes that our trademarks are well-recognized by dealers, distributors and
end-users in their respective markets and are associated with a high level of
quality and value.




**Government
Regulations and Environmental Matters**




Our
operations are subject to federal, state and local laws and regulations relating
to the generation, storage, handling, emission, transportation and discharge of
materials into the environment. Management believes that we are in substantial
compliance with all applicable federal, state and local provisions relating to
the protection of the environment. The costs of complying with environmental
protection laws and regulations has not had a material adverse impact on our
financial condition or results of operations in the past and is not expected to
have a material adverse impact in the future.




We are
also subject to the Magnuson-Moss Warranty Federal Trade Commission Improvement
Act which regulates the description of warranties on products. The description
and substance of our warranties are also subject to a variety of federal and
state laws and regulations applicable to the manufacturing of vehicle
components. Management believes that continued compliance with various
government regulations will not materially affect our operations.




**Certain
Factors Affecting Forward-Looking Statements**




Certain
statements in this Annual Report, including but not limited to Item 7,
“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 factors set forth
below, and, in particular, the risks associated with the terms and pending
maturity of our substantial indebtedness. 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.




***The
need to service our high level of indebtedness may affect the growth and
profitability of our business.***




As of
January 31, 2005 our debt included approximately $25.0 million under our senior
credit facility and $4.2 million under our junior credit facility. As a
consequence, a substantial portion of our cash flow from operations, as well as
from sales of our distributorships, has been and will continue to be dedicated
to service this debt. Using cash in this manner may affect our ability to grow
our business and to take advantage of opportunities for growth. In addition,
this substantial indebtedness may make us more vulnerable to general adverse
economic and industry conditions.




***The
requirements and restrictions imposed by our credit facilities restrict our
ability to operate our business, and failure to comply with these requirements
and restrictions could adversely affect our business.***




The terms
of our senior and junior credit facilities restrict our ability and our
subsidiaries’ ability to, among other things, incur additional indebtedness, pay
dividends or make certain other restricted payments or investments in certain
situations, consummate certain asset sales, enter into certain transactions with
affiliates, incur liens, or merge or consolidate with any other person or sell,
assign, transfer, lease, convey or otherwise dispose of all
or





6




substantially
all of our or their assets. Our credit facilities also require us to meet
certain financial tests, and to comply with certain other reporting, affirmative
and negative covenants.





We have
experienced difficulties meeting these financial tests in the past and may
continue to do so in the future. If we fail to comply with the requirements of
either of our credit facilities, such non-compliance would result in an event of
default. If not waived by the lending groups, such event of default would result
in the acceleration of the amounts due under the respective credit facility, and
may permit our lenders to foreclose on our assets that secure the credit
facilities.




***Our
credit facilities mature soon, and our inability to fully repay, or to refinance
or extend the final maturity dates of, either of these facilities may adversely
affect our business or cause us to seek bankruptcy court or other protection
from our creditors.***




Our
senior credit facility is scheduled to mature in July 2005, and our junior
credit facility matures in January 2006. We will be required to fully repay, or
to refinance or extend the maturity dates of, both of these credit facilities
when they mature. We have been granted an option, exercisable through July 10,
2005, to extend the maturity date of our senior credit facility until July 2006,
but there can be no assurance that we will be able to fully repay, or to
refinance or further extend, either of these credit facilities when they finally
mature. We currently are engaged in negotiations regarding refinancing our
senior credit facility, but there can be no assurance that we will be able to
complete any such transaction on satisfactory terms, if at all.




If we
fail to repay, when due, our obligations under either credit facility, such
failure would result in an event of default under such facility. Under these
circumstances, we could be required to find alternative funding sources or sell
assets, and there can be no assurance that we would be able to obtain any such
alternative funding or that we would be able to sell assets on terms that are
acceptable to us or at all. If we were unable to secure alternative funding or
sell assets, we might be required to seek bankruptcy court or other protection
from our creditors.




***Our
ability to service our credit facilities may be affected by fluctuations in
interest rates.***




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




***We
are subject to certain retained liabilities related to the wind down of our
towing services operations.***




We sold
or closed all remaining towing services businesses during 2003. As a result,
almost all of our former towing services businesses now operate under new
ownership, and in general the customary operating liabilities of these
businesses were assumed by the new owners. Our subsidiaries that sold these
businesses are 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, and Miller Industries is subject to some of such continuing
liabilities by virtue of certain direct parent guarantees. It is possible that
our towing services segment will not have assets sufficient to satisfy these
continuing liabilities.




***Our
business is subject to the cyclical nature of our industry, general economic
conditions and weather. Adverse changes with respect to any of these factors may
lead to a downturn in our business.***




The
towing and recovery industry is cyclical in nature and has been affected
historically by high interest rates, insurance costs, and economic conditions in
general. Accordingly, a downturn in the economy could have a material adverse
effect on our operations, as was the case during the recent general economic
downturn. The industry also is influenced by consumer confidence and general
credit availability, and by weather conditions, none of which is within our
control.







7





***Our
dependence upon outside suppliers for our raw materials, including steel, and
other purchased component parts, leaves us subject to price increases and delays
in receiving supplies of such materials or parts.***




We are
dependent upon outside suppliers for our raw material needs and other purchased
component parts, and although we believe that these suppliers will continue to
meet our requirements and specifications, and that alternative sources of supply
are available, events beyond our control could have an adverse effect on the
cost or availability of raw materials and component parts. Shipment delays,
unexpected price increases or changes in payment terms from our suppliers of raw
materials or component parts could impact our ability to secure necessary raw
materials or component parts, or to secure such materials and parts at favorable
prices. For example, recent increases in foreign demand for steel, as well as
disruptions in the supply of raw materials, has caused a lack of domestic
availability for certain types of steel, and has resulted in substantially
higher prices for steel and raw materials with high steel content. Partially to
offset these increases, we implemented general price increases in 2003 and 2004,
and steel cost surcharges in 2004. While we have attempted to pass these
increased costs on to our customers, there can be no assurance that we will be
able to continue to do so. Additionally, demand for our products could be
negatively affected by the unavailability of truck chassis, which are
manufactured by third parties and are frequently supplied by us, or are
purchased separately by our distributors or by towing operators. Although we
believe that sources of our raw materials and component parts will continue to
be adequate to meet our requirements and that alternative sources are available,
shortages, price increases or delays in shipments of our raw materials and
component parts could have a material adverse effect on our financial
performance, competitive position and reputation.





***Our
international operations are subject to various political, economic and other
uncertainties that could adversely affect our business results, including by
restrictive taxation or other government regulation and by foreign currency
fluctuation.***
  A
significant portion of our net sales and production in 2004 were outside the
United States, primarily in Europe. As a result, our operations are subject to
various political, economic and other uncertainties, including risks of
restrictive taxation policies, changing political conditions and governmental
regulations. Also, a substantial portion of our net sales derived outside the
United States, as well as salaries of employees located outside the United
States and certain other expenses, are denominated in foreign currencies,
including British pounds and the Euro. We are subject to risk of financial loss
resulting from fluctuations in exchange rates of these currencies against the
U.S. dollar.


***Our
competitors could impede our ability to attract new customers, or attract
current customers away from us.***




The
towing and recovery equipment manufacturing industry is highly competitive.
Competition for sales exists at both the distributor and towing-operator levels
and is based primarily on product quality and innovation, reputation,
technology, customer service, product availability and price. In addition, sales
of our products are affected by the market for used towing and recovery
equipment. Certain of our competitors may have substantially greater financial
and other resources and may provide more attractive dealer and retail customer
financing alternatives than us.




***Our
future success depends upon our ability to develop proprietary products and
technology*** **.**




Historically,
we have been able to develop or acquire patented and other proprietary product
innovations which have allowed us to produce what management believes to be
technologically advanced products relative to most of our competition. Certain
of our patents have expired, and others will expire in the next few years, and
as a result, we may not have a continuing competitive advantage through
proprietary products and technology. In addition, pursuant to the terms of a
consent judgment entered into in 2000 with the Antitrust Division of the U.S.
Department of Justice, we are required to offer non-exclusive royalty-bearing
licenses to certain of our key patents to all wrecker and car carrier
manufacturers. Our historical market position has been a result, in part, of our
continuous efforts to develop new products. Our future success and ability to
maintain market share will depend, to an extent, on new product
development.




***We
depend upon skilled labor to manufacture our products. If we experience problems
hiring and retaining skilled labor, our business may be negatively
affected.***




The
timely production of our wreckers and car carriers requires an adequate supply
of skilled labor, and the operating costs of our manufacturing facilities can be
adversely affected by high turnover in skilled positions. Accordingly, our
ability to increase sales, productivity and net earnings will be limited to a
degree by our ability to employ the skilled laborers necessary to meet our
requirements. There can be no assurance that we will be able to maintain an
adequate skilled labor force necessary to efficiently operate our facilities. In
addition, in connection with a representation petition filed by the United Auto
Workers Union with the National Labor Relations Board, a vote was held on union
representation for employees at our Ooltewah, Tennessee manufacturing plant in
2002. These employees voted against joining the United Auto Workers Union, but
the vote was subsequently overturned by the National Labor Relations Board.
Thereafter, a new vote was scheduled for February 2005, but this vote was
cancelled at the request of the United Auto Workers Union. While our employees
are not currently







8





members
of a union, there can be no assurance that the employees at our Ooltewah
manufacturing plant, or any other of our employees, may not choose to become
unionized in the future.


**


***If
our common stock was delisted from the New York Stock Exchange the market for
our common stock may be substantially less active and it may impair the ability
of our shareholders to buy and sell our common stock.***




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. 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 of December 31, 2004, our shareholders’
equity was $46.8 million and our 30-day average market capitalization was $123.7
million.




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. If
we are unable to comply with the NYSE’s continued listing standards during this
follow-up period, or thereafter, our common stock could be delisted from the New
York Stock Exchange. If our common stock is delisted, it is likely that the
trading market for our common stock would be substantially less active, and the
ability of our shareholders to buy and sell shares of our common stock would be
materially impaired. In addition, the delisting of our common stock could
adversely affect our ability to enter into future equity financing transactions.
In the event that our stock is delisted from the New York Stock Exchange, we
would pursue listing on an alternative national securities exchange or
association.




***Any
loss of the services of our key executives could have a material adverse impact
on our operations.***




Our
success is highly dependent on the continued services of our management team.
The loss of services of one or more key members of our senior management team
could have a material adverse effect on us.




***A
product liability claim in excess of our insurance coverage, or an inability to
acquire or maintain insurance at commercially reasonable rates, could have a
material adverse effect upon our business.***




We are
subject to various claims, including automobile and product liability claims
arising in the ordinary course of business, and may at times be a party to
various legal proceedings incidental to our business. We maintain reserves and
liability insurance coverage at levels based upon commercial norms and our
historical claims experience. A successful product liability or other claim
brought against us in excess of our insurance coverage, or the inability of us
to acquire or maintain insurance at commercially reasonable rates, could have a
material adverse effect upon our business, operating results and financial
condition.




***Continued
increases in our customers’ fuel costs, and the reduced availability of credit
for our customers, will have a material effect upon our
business.***




As a
result of the events of September 11, 2001 and other general economic factors,
our customers have experienced substantial increases in fuel and other
transportation costs. There can be no assurance that fuel and transportation
costs will not continue to increase for our customers in the future.
Additionally, our customers have experienced, and continue to experience,
reduced availability of credit, which negatively affects their ability to, and
capacity for, purchasing equipment. These increases in fuel and transportation
costs, and these reductions in the availability of credit, have had, and may
continue to have, a negative effect on our customers, and a material effect upon
our business and operating results.







9





***Our
stock price may fluctuate greatly as a result of the general volatility of the
stock market.***




From time
to time, there may be significant volatility in the market price for our common
sock. Our quarterly operating results, changes in earnings estimated by
analysts, changes in general conditions in our industry or the economy or the
financial markets or other developments affecting us could cause the market
price of the common stock to fluctuate substantially. In addition, in recent
years the stock market has experienced significant price and volume
fluctuations. This volatility has had a significant effect on the market prices
of securities issued by many companies for reasons unrelated to their operating
performance.




***Our
Chairman and Co-Chief Executive Officer owns a substantial interest in our
common stock. He may vote his shares in ways with which you
disagree.***




William
G. Miller, our chairman, beneficially owns approximately 20% of the outstanding
shares of common stock. Accordingly, Mr. Miller has the ability to exert
significant influence over our business affairs, including the ability to
influence the election of directors and the result of voting on all matters
requiring shareholder approval.




***Our
charter and bylaws contain anti-takeover provisions that may make it more
difficult or expensive to acquire us in the future or may negatively affect our
stock price.***




Our
charter and bylaws contain restrictions that may discourage other persons from
attempting to acquire control of us, including, without limitation, prohibitions
on shareholder action by written consent and advance notice requirements
respecting amendments to certain provisions of our charter and bylaws. In
addition, our charter authorizes the issuance of up to 5,000,000 shares of
preferred stock. The rights and preferences for any series of preferred stock
may be set by the board of directors, in its sole discretion and without
shareholder approval, and the rights and preferences of any such preferred stock
may be superior to those of common stock and thus may adversely affect the
rights of holders of common stock.




**Executive
Officers of the Registrant**




Information
relating to our executive officers as of the end of the period covered by this
Annual Report is set forth below. There are no family relationships among the
executive officers, directors or nominees for director, nor are there any
arrangements or understandings between any of the executive officers and any
other persons pursuant to which they were selected as executive
officers.




**Name**
    
    **Age**
    
    **Position**William
      G. Miller  . . . .
      . .
    
    58
    
    Chairman
      of the Board and Co-Chief Executive OfficerJeffrey
      I. Badgley. . . . . .
    
    52
    
    President
      and Co-Chief Executive OfficerFrank
      Madonia    . . . . .
      .
    
    56
    
    Executive
      Vice President, Secretary and General CounselJ.
      Vincent Mish   . . . . .
      .
    
    54
    
    Executive
      Vice President, Chief Financial Officer and
      President
      of Financial Services Group




***William
G. Miller*** has
served as Chairman of the Board since April 1994 and our Co-Chief Executive
Officer since October 2003. From January 2002 to August 2002, Mr. Miller served
as the Chief Executive Officer of Team Sports Entertainment, Inc. Mr. Miller
served as our Chief Executive Officer from April 1994 until June 1997. In June
1997, he was named Co-Chief Executive Officer, a title he shared with Jeffrey I.
Badgley until November 1997. Mr. Miller also served as our President from April
1994 to June 1996. He served as Chairman of Miller Group, Inc., from August 1990
through May 1994, as its President from August 1990 to March 1993, and as its
Chief Executive Officer from March 1993 until May 1994. Prior to 1987, Mr.
Miller served in various management positions for Bendix Corporation, Neptune
International Corporation, Wheelabrator-Frye Inc. and The Signal Companies,
Inc.







10







***Jeffrey
I. Badgley*** ** has
served as our Co-Chief Executive Officer with William G. Miller since October
2003, as our President since June 1996 and as a director since January 1996. Mr.
Badgley served as our Chief Executive Officer from November 1997 to October
2003. In June 1997, he was named our Co-Chief Executive Officer, a title he
shared with Mr. Miller until November 1997. Mr. Badgley served as our Vice
President from 1994 to 1996, and as our Chief Operating Officer from June 1996
to June 1997. In addition, Mr. Badgley has served as President of Miller
Industries Towing Equipment Inc. since 1996. Mr. Badgley served as Vice
President—Sales of Miller Industries Towing Equipment Inc. from 1988 to 1996. He
previously served as Vice President—Sales and Marketing of Challenger Wrecker
Corporation, from 1982 until joining Miller Industries Towing Equipment
Inc.




***Frank
Madonia*** ** has
served as our Executive Vice President, Secretary and General Counsel since
September 1998. From April 1994 to September 1998 Mr. Madonia served as our Vice
President, General Counsel and Secretary. Mr. Madonia served as Secretary and
General Counsel to Miller Industries Towing Equipment Inc. since its acquisition
by Miller Group in 1990. From July 1987 through April 1994, Mr. Madonia served
as Vice President, General Counsel and Secretary of Flow Measurement. Prior to
1987, Mr. Madonia served in various legal and management positions for United
States Steel Corporation, Neptune International Corporation, Wheelabrator-Frye
Inc., and The Signal Companies, Inc.




***J.
Vincent Mish*** ** is a
certified public accountant and has served as our Chief Financial Officer and
Treasurer since June 1999, a position he also held from April 1994 through
September 1996. In December 2002, Mr. Mish was appointed as our Executive Vice
President. He also has served as President of the Financial Services Group since
September 1996 and as a Vice President of Miller Industries since April 1994.
Mr. Mish served as Vice President and Treasurer of Miller Industries Towing
Equipment Inc. since its acquisition by Miller Group in 1990. From February 1987
through April 1994, Mr. Mish served as Vice President and Treasurer of Flow
Measurement. Mr. Mish worked with Touche Ross & Company (now Deloitte and
Touche) for over ten years before serving as Treasurer and Chief Financial
Officer of DNE Corporation from 1982 to 1987. Mr. Mish is a member of the
American Institute of Certified Public Accountants and the Tennessee and
Michigan Certified Public Accountant societies.




**Available
Information**




Our
Internet website address is www.millerind.com. We make available free of charge
through our website our Annual Reports on Form 10-K, Quarterly Reports on Form
10-Q and Current Reports on Form 8-K, and amendments to those reports, as soon
as reasonably practicable after we file them with, or furnish them to, the
Securities and Exchange Commission. Our Corporate Governance Guidelines and Code
of Business Conduct and Ethics are also available on our website and are
available in print to any shareholder who mails a request to: Corporate
Secretary, Miller Industries, Inc., 8503 Hilltop Drive, Ooltewah, Tennessee
37363. Other corporate governance-related documents can be found at our website
as well.




**ITEM
2.** **PROPERTIES**




We
operate four manufacturing facilities in the United States. The facilities are
located in (1) Ooltewah, Tennessee, (2) Hermitage, Pennsylvania, (3)
Mercer, Pennsylvania **,** and (4)
Greeneville, Tennessee. The Ooltewah plant, containing approximately 242,000
square feet, produces light and heavy duty wreckers; the Hermitage plant,
containing approximately 95,000 square feet, produces car carriers; the Mercer
plant, containing approximately 110,000 square feet, produces car carriers and
light duty wreckers; and the Greeneville plant, containing approximately 112,000
square feet, primarily produces car carriers and trailers.




We also
have manufacturing operations at two facilities located in the Lorraine region
of France, which have, in the aggregate, approximately 180,000 square feet, and
manufacturing operations in Norfolk, England, with approximately 30,000 square
feet.




We
believe that our existing manufacturing facilities will allow us to meet
anticipated demand for our products.







11





**ITEM
3.** **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
4.** **SUBMISSION
OF MATTERS TO A VOTE OF SECURITY HOLDERS**




No
matters were submitted to a vote of our security holders during the last three
months of the period covered by this Annual Report.







12





**PART
II**




**ITEM
      5.**
    **MARKET
      FOR REGISTRANT’S COMMON EQUITY, RELATED****STOCKHOLDER**
      **MATTERS
      AND ISSUER PURCHASES OF EQUITY
SECURITIES**







**Market
Price of and Dividends on the Registrant’s Common Equity and Related Stockholder
Matters**




Our
common stock is traded on the New York Stock Exchange under the symbol “MLR.”
The following table sets forth the quarterly range of high and low sales prices
for the common stock for the periods indicated.




**Price
      Range of Common Stock****Period**
    
    **High**
    
    **Low****Year
      Ended December 31, 2003**First
      Quarter
    
    $
    3.54
    
    $
    3.13Second
      Quarter
    
    
    3.98
    
    
    2.94Third
      Quarter
    
    
    4.71
    
    
    3.03Fourth
      Quarter
    
    
    7.80
    
    
    4.05**Year
      Ended December 31, 2004**First
      Quarter
    
    $
    10.80
    
    $
    7.20Second
      Quarter
    
    
    10.85
    
    
    8.20Third
      Quarter
    
    
    10.21
    
    
    8.55Fourth
      Quarter
    
    
    11.48
    
    
    8.90**Year
      Ending December 31, 2005**First
      Quarter (through March 11, 2005)
    
    $
    13.80
    
    $
    11.14




The
approximate number of holders of record and beneficial owners of common stock as
of December 31, 2004 was 1,830 and 10,000, respectively.




We have
never declared cash dividends on our common stock. We intend to retain our
earnings and do not anticipate paying cash dividends in the foreseeable future.
Any future determination as to the payment of cash dividends will depend upon
such factors as earnings, capital requirements, our financial condition,
restrictions in financing agreements and other factors deemed relevant by our
Board of Directors. The payment of dividends by us is restricted by our
revolving credit facility.




**Purchases
of Equity Securities by the Issuer and Affiliated
Purchasers**




We did
not repurchase any shares of our common stock during the three month period
ended December 31, 2004.







13




ITEM 6. **SELECTED
FINANCIAL DATA**




The
following table presents selected statement of operations data and selected
balance sheet data on a consolidated basis. We derived the selected historical
consolidated financial data for the years ended December 31, 2004, 2003, 2002
and April 30, 2001 and the eight months ended December 31, 2001 from our audited
consolidated financial statements and related notes. We derived the selected
historical consolidated financial data for the year ended April 30, 2000 from
our unaudited consolidated financial statements and related notes. You should
read this data together with Item 7 - “Management’s Discussion and Analysis of
Financial Condition and Results of Operation” and our consolidated financial
statements and related notes that are a part of this Annual Report on Form
10-K.




**Years
      Ended December 31,**
    
    **Eight
      Months**
      **Ended**
      **December
      31,**
    
    **Years
      Ended April 30,****2004**
    
    **2003**
    
    **2002**
    
    **2001**
    
    **2001**
    
    **2000****(In
      thousands except per share data)****Statements
      of Income Data (1):**Net
      Sales:Towing
      and recovery equipment
    
    **$******
    ******236,308**
    
    $
    192,043
    
    $
    203,059
    
    $
    142,445
    
    $
    212,885
    
    $
    261,907Towing
      services
    
    
    **-**
    
    
    13,953
    
    
    28,444
    
    
    19,892
    
    
    31,992
    
    
    31,183**236,308**
    
    
    205,996
    
    
    231,503
    
    
    162,337
    
    
    244,877
    
    
    293,090Costs
      and expenses:Costs
      of operations:Towing
      and recovery equipment
    
    
    **205,021**
    
    
    168,390
    
    
    174,516
    
    
    122,753
    
    
    181,517
    
    
    220,602Towing
      services
    
    
    **-**
    
    
    10,618
    
    
    22,539
    
    
    15,250
    
    
    23,321
    
    
    22,345**205,021**
    
    
    179,008
    
    
    197,055
    
    
    138,003
    
    
    204,838
    
    
    242,947Selling,
      general, and administrative expenses
    
    
    **18,904**
    
    
    17,411
    
    
    19,540
    
    
    14,353
    
    
    23,925
    
    
    26,333Special
      charges (2)
    
    
    **-**
    
    
    682
    
    
    -
    
    
    6,376
    
    
    -
    
    
    2,770Interest
      expense, net
    
    
    **4,657**
    
    
    5,609
    
    
    4,617
    
    
    1,055
    
    
    2,137
    
    
    6,036Total
      costs and expenses
    
    
    **228,582**
    
    
    202,710
    
    
    221,212
    
    
    159,787
    
    
    230,900
    
    
    278,086Income
      from continuing operations before income taxes
    
    
    **7,726**
    
    
    3,286
    
    
    10,291
    
    
    2,550
    
    
    13,977
    
    
    15,004Income
      tax provision
    
    
    **740**
    
    
    1,216
    
    
    7,208
    
    
    2,522
    
    
    4,777
    
    
    8,704Income
      from continuing operations
    
    
    **6,986**
    
    
    2,070
    
    
    3,083
    
    
    28
    
    
    9,200
    
    
    6,300Discontinued
      operations:Loss
      from discontinued operations, before income taxes
    
    
    **(1,371**
    **)**
    
    (17,260
    )
    
    (29,697
    )
    
    (22,296
    )
    
    (23,585
    )
    
    (101,455
    )Income
      tax provision (benefit)
    
    
    **140**
    
    
    (1,037
    )
    
    (2,732
    )
    
    (681
    )
    
    (7,951
    )
    
    (22,012
    )Loss
      from discontinued operations, net of taxes
    
    
    **(1,511**
    **)**
    
    (16,223
    )
    
    (26,965
    )
    
    (21,615
    )
    
    (15,634
    )
    
    (79,443
    )Income
      (loss) before cumulative effect of change in accounting
      principle
    
    
    **5,475**
    
    
    (14,153
    )
    
    (23,882
    )
    
    (21,587
    )
    
    (6,434
    )
    
    (73,143
    )Cumulative
      effect of change in accounting principle
    
    
    **-**
    
    
    -
    
    
    (21,812
    )
    
    -
    
    
    -
    
    
    -Net
      income (loss)
    
    **$******
    ******5,475**
    
    $
    (14,153
    )
    $
    (45,694
    )
    $
    (21,587
    )
    $
    (6,434
    )
    $
    (73,143
    )Basic
      income (loss) per common share(3):Income
      from continuing operations
    
    **$******
    ******0.64**
    
    $
    0.22
    
    $
    0.34
    
    $
    -
    
    $
    0.98
    
    $
    0.67Loss
      from discontinued operations
    
    
    **(0.14**
    **)**
    
    (1.74
    )
    
    (2.89
    )
    
    (2.31
    )
    
    (1.67
    )
    
    (8.50
    )Cumulative
      effect of change in accounting principle
    
    
    **-**
    
    
    -
    
    
    (2.34
    )
    
    -
    
    
    -
    
    
    -Basic
      income (loss)
    
    **$******
    ******0.50**
    
    $
    (1.52
    )
    $
    (4.89
    )
    $
    (2.31
    )
    $
    (0.69
    )
    $
    (7.83
    )Diluted
      income (loss) per common share(3):Income
      from continuing operations
    
    **$******
    ******0.64**
    
    $
    0.22
    
    $
    0.34
    
    $
    -
    
    $
    0.98
    
    $
    0.67Loss
      from discontinued operations
    
    
    **(0.14**
    **)**
    
    (1.74
    )
    
    (2.89
    )
    
    (2.31
    )
    
    (1.67
    )
    
    (8.50
    )Cumulative
      effect of change in accounting principle
    
    
    **-**
    
    
    -
    
    
    (2.34
    )
    
    -
    
    
    -
    
    
    -Diluted
      income (loss)
    
    **$******
    ******0.50**
    
    $
    (1.52
    )
    $
    (4.89
    )
    $
    (2.31
    )
    $
    (0.69
    )
    $
    (7.83
    )Weighted
      average shares outstanding:Basic
    
    
    **10,860**
    
    
    9,342
    
    
    9,341
    
    
    9,341
    
    
    9,341
    
    
    9,339Diluted
    
    
    **10,982**
    
    
    9,385
    
    
    9,348
    
    
    9,345
    
    
    9,350
    
    
    9,426







14







**Years
      Ended December 31,**
    
    **Eight
      Months**
      **Ended**
      **December
      31,**
    
    **Years
      Ended April 30,****2004**
    
    **2003**
    
    **2002**
    
    **2001**
    
    **2001**
    
    **2000****(In
      thousands except per share data)****Balance
      Sheet Data (at period end):**Working
      capital (deficit)
    
    **$******
    ******39,978**
    
    $
    31,136
    
    $
    (10,174
    )
    $
    87,601
    
    $
    91,314
    
    $
    103,801Total
      assets
    
    
    **127,822**
    
    
    131,818
    
    
    162,177
    
    
    252,963
    
    
    281,287
    
    
    323,694Long-term
      obligations, less current portion
    
    
    **24,345**
    
    
    29,927
    
    
    1,214
    
    
    91,562
    
    
    99,121
    
    
    119,319Common
      shareholders' equity
    
    
    **46,785**
    
    
    27,997
    
    
    39,697
    
    
    84,843
    
    
    106,533
    
    
    113,821




____________________




(1)  The
results of operations and loss on disposal associated with certain towing
services operations, which were sold in June 2003, have been reclassified from
discontinued to continuing operations for all periods presented because of our
significant continuing involvement in the operations of the disposal components
through a consulting agreement and our ongoing interest in the cash flows of the
operations of the disposal components through a long-term licensing
agreement.




(2)  Special
charges include a loss on the sale of operations of $682 for the year ended
December 31, 2003, and asset impairment charges for continuing operations of
$6,376 and $2,770 for the eight months ended December 31, 2001 and the fiscal
year ended April 30, 2000, respectively. We recorded asset impairments and
special charges for discontinued operations of $11,828 for the year ended
December 31, 2002, $10,716 for the eight months ended December 31, 2001, and
$74,085 of special charges and $6,041 for the costs of rationalization of the
towing services segment for the fiscal year ended April 30, 2000. Special
charges and asset impairments related to discontinued operations are included in
Loss from Discontinued Operations.




(3)  Basic and
diluted net income per share and the weighted average number of common and
potential dilutive common shares outstanding are computed after giving
retroactive effect to the 1-for-5 reverse stock split effected on October 1,
2001.







15










**ITEM
      7.**
    **MANAGEMENT’S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND**
      **RESULTS
      OF OPERATIONS**




The
following discussion of our results of operations and financial condition should
be read in conjunction with the Consolidated Financial Statements and Notes
thereto.




**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 customer’s design,
capacity and cost requirements under our Century ® ,
Vulcan ® ,
Challenger ® ,
Holmes ® ,
Champion ® ,
ChevronTM, Eagle ® ,
Titan ® , JigeTM
and BonifaceTM brand names.




Overall,
our 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, our revenues were positively affected by a general increase in demand for
our products resulting from general economic improvements. In addition, we
commenced the manufacture of 63 heavy-duty towing and recovery units for the
Australian military as part of the largest single order for towing and recovery
equipment in our history. The first units under this contract were delivered in
late 2004, and the remaining units are scheduled for production and delivery
through mid-2005. We also began a project with DataPath, Inc. to assist in the
design and engineering of mobile communications trailers for military
application. We completed an initial order of 25 trailers in 2004, and will
begin the manufacture of up to an additional 145 trailers during the first half
of 2005. 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 carry into
2005.




We have
been and will continue to be affected by recent large increases in the prices
that we pay for 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. Partially to offset these increases, we implemented a steel
cost surcharge of 3% in January 2004, and in August 2004, we implemented another
general price increase of approximately 5%, and increased our steel cost
surcharge amount. We also began to develop alternatives to the steel and steel
components that we use in our production process, and have introduced several of
these alternatives to our major component part suppliers. Over the coming years
we will continue to monitor steel prices and availability in order to more
favorably position ourselves in this dynamic market.




Management
also continues to focus on reducing the overall debt levels under our senior and
junior credit facilities. In 2004, approximately $7.0 million of subordinated
debt and warrants was exchanged and converted into shares of our common stock.
In addition, during 2004, cash proceeds from the private placement of 480,000
shares of our common stock were used to retire significant portions of our
subordinated debt. While our debt levels have declined significantly over the
past year, our senior credit facility is scheduled to mature in July 2005, and
our junior credit facility matures on January 1, 2006. We have been granted an
option, exercisable through July 10, 2005, to extend the maturity date of our
senior credit facility until July 2006. We will be required to repay, refinance
or further extend the maturity dates of these facilities when they finally
mature. Management currently is engaged in negotiations that would result in a
longer term or new senior credit facility.







16





Also
during 2004, we substantially completed our strategic goal of disposing of
towing services businesses and distributor operations. As a result, at December
31, 2004, only miscellaneous assets remained in the RoadOne towing services
segment and only one distributor location remained in our distribution group. As
a result, our management team has renewed its 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 our
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. As of December 31, 2004,
our shareholders’ equity was $46.8 million and our 30-day average market
capitalization was $123.7 million.




**Discontinued
Operations**




During
2002, our management and 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 years 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.




The
results of operations and loss on disposal associated with certain towing
services operations, which were sold in June 2003 have been reclassified from
discontinued to continuing operations given our significant continuing
involvement in the operations of the disposal components via a consulting
agreement and our ongoing interest in the cash flows of the operations of the
disposal components via a long-term license agreement.




**Income
Taxes**




Differences
between the effective tax rate and the expected tax rate are due primarily to
changes in deferred tax asset valuation allowances for 2004 and
2002.




**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:







17





***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.




Upon
adoption of Financial Accounting Standard No. 142, Goodwill and Other Intangible
Assets on January 1, 2002, we ceased to amortize goodwill. In lieu of
amortization, we performed an initial impairment review of goodwill in 2002 and
have continued to perform annual impairment reviews thereafter. For further
detail of our impairment review and related write downs, See Note 5 to the
Consolidated Financial Statements.




***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 discontinuing 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. The balance of the
valuation allowance was $16.6 million at December 31, 2004 and $13.3 million at
December 31, 2003.




***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. The towing services division recognizes revenue at the
time services are performed.







18





***Seasonality***




Our
towing and recovery equipment segment has experienced some seasonality in net
sales due in part to decisions by purchasers of light duty wreckers to defer
wrecker 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**




The
following table sets forth, for the years indicated, the components of the
consolidated statements of operations expressed as a percentage of net
sales.




**2004**
    
    **2003**
    
    **2002**Continuing
      Operations:Net
      Sales
    
    
    **100.0**
    **%**
    
    100.0
    %
    
    100.0
    %Costs
      and expenses:Costs
      of operations
    
    
    **86.8**
    **%**
    
    86.9
    %
    
    85.1
    %Selling,
      general and administrative
    
    
    **8.0**
    **%**
    
    8.5
    %
    
    8.4
    %Special
      charges
    
    
    **0.0**
    **%**
    
    0.3
    %
    
    0.0
    %Interest
      expense, net
    
    
    **2.0**
    **%**
    
    2.7
    %
    
    2.0
    %Total
      costs and expenses
    
    
    **96.8**
    **%**
    
    98.4
    %
    
    95.5
    %Income
      before income taxes
    
    
    **3.2**
    **%**
    
    1.6
    %
    
    4.5
    %Discontinued
      Operations:Net
      Sales
    
    
    **100.0**
    **%**
    
    100.0
    %
    
    100.0
    %Costs
      and expenses:Costs
      of operations
    
    
    **92.5**
    **%**
    
    90.3
    %
    
    88.5
    %Selling,
      general and administrative
    
    
    **9.5**
    **%**
    
    13.8
    %
    
    14.7
    %Special
      charges
    
    
    **0.0**
    **%**
    
    11.3
    %
    
    10.0
    %Interest
      expense, net
    
    
    **1.6**
    **%**
    
    7.0
    %
    
    3.5
    %Total
      costs and expenses
    
    
    **103.6**
    **%**
    
    122.4
    %
    
    116.7
    %Loss
      before income taxes
    
    
    **(3.6**
    **)%**
    
    (22.4
    )%
    
    (16.7
    )%




***Year
Ended December 31, 2004 Compared to Year Ended December 31,
2003***




*Continuing
Operations*




Net sales
from continuing operations were $236.3 million for the year ended December 31,
2004 compared to $206.0 million for the year ended December 31, 2003. The
increase is primarily the result of overall improvements in market conditions,
with increases in demand leading to increases in production levels, and is
attributable to a lesser extent to price increases implemented during 2004.
There were no sales for the towing services segment in 2004 compared to $14.0
million for the comparable prior year as the remaining towing services entities
were sold during 2003.




Costs of
operations as a percentage of net sales decreased slightly to 86.8% for the year
ended December 31, 2004 from 86.9% for the year ended December 31, 2003.
Selling, general, and administrative expenses changed slightly as a percentage
of net sales from 8.5% for the year ended December 31, 2003 to 8.0% for the year
ended December 31, 2004, reflecting our ongoing focus to control costs of
continuing operations while disposing of our towing services segment and
distribution group.




Towing
services revenues and cost of operations reflect the sale of the final towing
services operations in 2003. These operations have been reclassified from
discontinued operations to continuing operations based on certain on-going cash
flows provided for under the disposal agreement.







19





Interest
expense for continuing operations for the years ended December 31, 2004 and 2003
was $4.7 million and $5.6 million, respectively. Interest expense for the year
ended December 31, 2003 includes commitment fees charged in conjunction with the
maturing of our junior credit facility in July 2003 and the write-off of
unamortized loan costs from our senior credit facility.




The
effective rate for the provision for income taxes for continuing operations was
9.6% for the year ended December 31, 2004 compared to 37.0% for the year ended
December 31, 2003. In prior years, we recorded a full valuation allowance
reflecting the recognition that continuing losses from operations and certain
liquidity matters indicated that it was unclear that certain future tax
benefits would be realized through future taxable income.




*Discontinued
Operations*




Net sales
of discontinued operations decreased to $37.8 million for the year ended
December 31, 2004 from $77.1 million for the year ended December 31, 2003. Net
sales of the distribution group were $37.8 million for the year ended December
31, 2004 compared to $68.7 million for the year ended December 31, 2003. There
were no net sales for the towing and recovery services segment during the year
ended December 31, 2004 compared to $8.4 million for the year ended December 31,
2003, as a result of all remaining towing services operations being sold during
2003.




Cost of
sales as a percentage of net sales for the distribution group was 92.5% for the
year ended December 31, 2004 compared to 92.3% for the year ended December 31,
2003. There were no costs of sales for the towing services segment during the
year ended December 31, 2004, compared to 73.2% for the year ended December 31,
2003.




Selling,
general, and administrative expenses as a percentage of sales was 9.3% for the
distribution group and 0.0% for the towing services segment for the year ended
December 31, 2004 compared to 8.2% and 59.9%, respectively for the year ended
December 31, 2003. Increases in the percentage of sales for the distribution
group were primarily the result of lower administrative expenses spread over a
smaller revenue base, as we continue to sell distribution
locations.




Net
interest expense for discontinued operations was $0.6 million for the year ended
December 31, 2004, compared to $5.4 million for the year ended December 31,
2003.




The
effective rate for the provision for income taxes for discontinued operations
was 10.2% for the year ended December 31, 2004, compared to 6.0% for the year
ended December 31, 2003.






***Year
Ended December 31, 2003 Compared to Year Ended December 31,
2002***




*Continuing
Operations*




Net sales
from continuing operations were $206.0 million for the year ended December 31,
2003 compared to $231.5 million for the year ended December 31, 2002. Demand for
our towing and recovery equipment continued to be negatively impacted by cost
pressures facing our customers and tightness in the current credit markets. In
addition, the war in Iraq at the beginning of the year had a negative impact on
revenues of continuing operations.




Costs of
operations as a percentage of net sales increased to 86.9% for the year ended
December 31, 2003 from 85.1% for the year ended December 31, 2002 due to the
fixed cost impact of lower sales volume for domestic manufacturing operations .
Selling, general, and administrative expenses changed slightly as a percentage
of net sales from 8.4% for the year ended December 31, 2002 to 8.5% for the year
ended December 31, 2003, reflecting the Company’s ongoing focus to control costs
of continuing operations while disposing of towing services segment and
distribution group.







20





Towing
services revenues and cost of operations reflect the change in status of certain
towing services operations, which were sold in June 2003. These operations have
been reclassified from discontinued operations to continuing operations based on
certain on-going cash flows provided for under the disposal
agreement.




In
January 2002, we adopted SFAS No. 142, “Goodwill and Other Intangible Assets”.
Upon adoption of SFAS No. 142, we ceased to amortize goodwill. In lieu of
amortization, we were required to perform an initial impairment review, which
resulted in the write-off of $1.7 million of goodwill attributable to continuing
operations and $20.1 million of goodwill attributable to discontinued
operations.




Interest
expense for continuing operations for the years ended December 31, 2003 and 2002
was $5.6 million and $4.6 million, respectively. Interest expense for the year
ended December 31, 2003 includes commitment fees charged in conjunction with the
maturing of the junior credit facility in July 2003 and the write-off of
unamortized loan costs from the senior credit facility.




The
effective rate for the provision for income taxes for continuing operations was
37.0% for the year ended December 31, 2003 compared to 70.0% for the year ended
December 31, 2002. In prior years, we recorded a full valuation allowance
reflecting the recognition that continuing losses from operations and certain
liquidity matters indicated that it was unclear that certain future
tax benefits would be realized through future taxable income.




*Discontinued
Operations*




Net sales
of discontinued operations decreased to $77.1 million for the year ended
December 31, 2003 from $178.5 million for the year ended December 31, 2002. Net
sales of the distribution group were $68.7 million for the year ended December
31, 2003 compared to $85.4 million for the year ended December 31, 2002. Net
sales of the towing services segment were $8.4 million for the year ended
December 31, 2003, compared to $93.1 million for the year ended December 31,
2002. Revenues of the discontinued operations were significantly reduced from
prior year as the Company continued its efforts to sell or close activities of
the discontinued operations.




Cost of
sales as a percentage of net sales for the distribution group was 92.3% for the
year ended December 31, 2003 compared to 92.1% for the year ended December 31,
2002. Cost of sales of the towing services segment decreased from 85.1% for the
year ended December 31, 2002, to 73.2% for the year ended December 31,
2003.




Selling,
general, and administrative expenses as a percentage of sales was 8.2% for the
distribution group and 59.9% for the towing services segment for the year ended
December 31, 2003, compared to 7.8% and 21.1%, respectively for the year ended
December 31, 2002. The decrease for the distribution group was the result of our
continued cost reduction efforts as we began implementation of our plans for
disposition of these operations. The increase in the towing services segment was
the result of expenses not decreasing as rapidly as revenues as businesses were
sold throughout the year as well as various expenses incurred in connection with
such dispositions.




Net
interest expense for discontinued operations was $5.4 million for the year ended
December 31, 2003, compared to $6.2 million for the year ended December 31,
2002.




The
effective rate for the provision for income taxes for discontinued operations
was 6.0% for the year ended December 31, 2003, compared to 9.2% for the year
ended December 31, 2002.




**Liquidity
And Capital Resources**




As of
December 31, 2004, we had cash and cash equivalents of $3.4 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 December 31, 2004 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.







21





Cash used
in operating activities was $5.7 million for the year ended December 31, 2004
compared to $13.4 million provided by operating activities for the year ended
December 31, 2003 and $19.6 million for the year ended December 31, 2002. The
cash used in operating activities for the year ended December 31, 2004 reflects
increases in accounts receivable and inventory levels, partially offset by
increases in accounts payable.




Cash
provided by investing activities was $3.9 million for the year ended December
31, 2004, compared to $8.9 million for the year ended December 31, 2003 and
$18.3 million for the year ended December 31, 2002. The cash provided by
investing activities for the year ended December 31, 2004 was primarily the
result of proceeds from the sale of distribution operations.




Cash used
in financing activities was $2.5 million for the year ended December 31, 2004,
compared to $20.3 million for the year ended December 31, 2003, and $44.4
million for the year ended December 31, 2002. The cash used in financing
activities in the year ended December 31, 2004 was primarily paydowns under our
credit facilities and repayment of other outstanding long-term debt and capital
lease obligations.




***Contractual
Obligations***




The
following is a summary of our contractual obligations for our continuing
operations as of December 31, 2004.




**Payment
      Due By Period (in thousands)****Contractual
      Obligations**
    
    
    **Total**
    
    
    **Less
      than**
      **1
      year**
    
    
    **1-3
      years**
    
    
    **3-5
      years**
    
    
    **More
      than**
      **5
      years**Outstanding
      Borrowings Under Senior Credit Facility
    
    $
    19,987
    
    $
    2,004
    
    $
    17,983
    
    $
    -
    
    $
    -Outstanding
      Borrowings Under Junior Credit Facility
    
    
    4,211
    
    
    -
    
    
    4,211
    
    
    -
    
    
    -Mortgage
      Notes Payable
    
    
    1,991
    
    
    112
    
    
    242
    
    
    1,637
    
    
    -Equipment
      Notes Payable (Capital Lease Obligations)
    
    
    133
    
    
    84
    
    
    43
    
    
    6
    
    
    -Other
      Notes Payable
    
    
    75
    
    
    75
    
    
    -
    
    
    -
    
    
    -Operating
      Lease Obligations
    
    
    1,598
    
    
    678
    
    
    756
    
    
    71
    
    
    93Purchase
      Obligations (1)
    
    
    32,300
    
    
    32,300
    
    
    -
    
    
    -
    
    
    -Total
    
    $
    60,295
    
    $
    35,253
    
    $
    23,235
    
    $
    1,714
    
    $
    93


____________________


(1)  Purchase
obligations represent open purchase orders for raw materials and other
components issued in the normal course of business.




***Credit
Facilities***


**


*Senior
Credit Facility*




In July
2001, we entered into a four year senior credit facility with a syndicate of
lenders to replace our existing credit facility. Our senior credit facility has
been amended several times. The current lenders under our senior credit facility
are William G. Miller, our Chairman of the Board and Co-Chief Executive Officer,
and CIT Group/Business Credit, Inc., with Mr. Miller’s portion of the loan being
subordinated to that of CIT. As discussed in further detail below, the senior
credit facility is scheduled to mature in July 2005, but we have been granted an
option, exercisable through July 10, 2005, to extend the maturity date to July
2006.




Currently,
our senior credit facility consists 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 provides for separate
and distinct loan commitment levels for our towing and recovery equipment
segment and RoadOne segment, respectively.







22










Borrowing
availability under the revolving portion of our senior credit facility is based
on a percentage of our eligible inventory and accounts receivable (determined on
eligibility criteria set forth in the credit facility) and is subject to a
maximum borrowing limitation. Borrowings under the term loans are collateralized
by substantially all of our property, plants, and equipment. We are required to
make monthly amortization payments of $167,000 on the first term loan, but the
amortization payments due on November 1, 2003, December 1, 2003, and January 1,
2004 were deferred until the maturity date. The senior credit facility bears
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
senior credit facility contains 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 senior credit
facility contains restrictions on capital expenditures, incurrence of
indebtedness, mergers and acquisitions, distributions and transfers and sales of
assets. The senior credit facility also contains requirements related to weekly
and monthly collateral reporting.




*Junior
Credit Facility*




Our
junior credit facility is, by its terms, expressly subordinated only to our
senior credit facility, and is secured by certain specified assets and by a
second priority lien and security interest in substantially all of our other
assets. As amended, the junior credit facility contains requirements for the
maintenance of certain financial covenants. It also imposes restriction on
capital expenditures, incurrence of indebtedness, mergers and acquisitions,
distributions and transfers and sales of assets.




Contrarian
Funds, LLC purchased all of the outstanding debt of the junior credit facility
in a series of transactions during the second half of 2003. 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 (as described
in further detail below). In November 2003, Harbourside Investments, LLLP
purchased 44.286% of the subordinated debt and warrants from
Contrarian.




As
described in further detail below under the heading “2003 and 2004 Amendments
and Restructuring” in February 2004, Contrarian and Harbourside finalized the
conversion of approximately $7.0 million in subordinated debt for our common
stock. In connection with this purchase and restructuring of our debt, the
junior credit facility was amended to, among other things, extend its maturity
date and bear interest at an effective blended rate of 14.0%.




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. The proceeds
of this sale, together with additional borrowings under our senior credit
facility, were used to retire approximately $5.4 million principal amount of our
junior credit facility, and approximately $350,000 of accrued interest on such
debt. Our remaining junior credit facility obligations consist of approximately
$4.2 million principal amount bearing interest at an annual rate of
9.0%.




On
November 5, 2004, our junior credit facility was amended to extend its maturity
date to January 1, 2006.




*Maturity
of Credit Facilities*




Our
senior credit facility is scheduled to mature in July 2005, and our junior
credit facility matures in January 2006. We will be required to repay, refinance
or extend the maturity dates of these facilities when they mature. We have been
granted an option, exercisable through July 10, 2005, to extend the maturity
date of our senior credit facility until July 2006, but there can be no
assurance that we will be able to repay, refinance or further amend either of
our credit facilities when they finally mature. We currently are engaged in
negotiations regarding a transaction that would result in a longer term senior
credit facility, but there can be no assurance that we will be able to complete
any such transaction on satisfactory terms, if at all.







23





*Interest
Rate Sensitivity*




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




*Prior
Default of Credit Facilities*




Our
failure to repay all outstanding principal, interest and any other amounts due
and owing under our junior credit facility at its original July 23, 2003
maturity date constituted an event of default under our junior credit facility
and also triggered an event of default under the cross-default provisions of our
senior credit facility. Additionally, we were in default of the EBITDA covenant
under the junior credit facility for the first quarter of calendar 2003. We also
were in default under both the senior and junior credit facilities as a result
of the “going concern” explanatory paragraph included in the report of our prior
independent auditor (which going concern qualification was removed, and an
unqualified report subsequently delivered, in connection with the recent
re-audit of our 2002 financial statements by our current independent auditor) as
well as our failure to file our Annual Report for the fiscal year ended December
31, 2002 prior to April 30, 2003.




Pursuant
to the terms of the intercreditor agreement between the then-existing senior and
junior lenders, the junior lender agent and the junior lenders were prevented
from taking any enforcement action or exercising any remedies against us, our
subsidiaries or our respective assets as a result of such events of default
during a standstill period. On July 29, 2003, the junior lender agent gave a
notice of enforcement to the senior lender agent based upon the event of default
for failure to repay the outstanding obligations under the junior credit
facility on the junior credit facility’s maturity date. On August 5, 2003, the
senior agent gave a payment blockage notice to the junior agent based upon
certain events of default under the senior credit facility, thereby preventing
the junior agent and junior lenders from receiving any payments from us in
respect of the junior credit facility while such blockage notice remains in
effect.




*2003
and 2004 Amendments and Restructuring*




On
October 31, 2003, we entered into a forbearance agreement with the then-existing
lenders and the senior lender agent under our senior credit facility, pursuant
to which, among other things, the senior lenders agreed to forbear from
exercising any remedies in respect of the defaults then existing under the
senior credit facility as a result of (i) our failure to timely deliver
financial statements for fiscal year 2002 and our failure to deliver a report of
our independent certified public accountants which is unqualified in any
respect, as well as the event of default under the senior credit facility caused
by the event of default arising from such failure under the junior credit
facility; (ii) our failure to fulfill certain payment obligations to the junior
lenders under the junior credit facility; and (iii) our failure to fulfill
certain financial covenants in the junior credit facility for one or more of the
fiscal quarters ending in fiscal year 2003, which failure would constitute an
event of default under the senior credit facility. The forbearance period under
the forbearance agreement was to expire on the earlier of (x) December 31, 2003,
(y) the occurrence of certain bankruptcy type events in respect of us or any of
our subsidiaries, and (z) the failure by us or any of our subsidiaries that are
borrower parties under the senior credit facility to perform the obligations
under the senior credit facility or the forbearance agreement. Under the
forbearance agreement, the senior lenders and the senior lender agent did not
waive their rights and remedies with respect to the existing senior facility
defaults, but agreed to forbear from exercising rights and remedies with respect
to the existing senior facility defaults solely during the forbearance
period.




Simultaneous
with entering into the forbearance agreement, William G. Miller, our Chairman of
the Board and Co-Chief Executive Officer, made a $2.0 million loan to us as a
part of the senior credit facility. The loan and Mr. Miller’s participation in
the senior credit facility were effected by the Seventh Amendment to the credit
agreement and a participation agreement between Mr. Miller and the senior credit
facility lenders.







24





On
December 24, 2003, Mr. Miller increased his previous $2.0 million participation
in the existing senior credit facility by an additional $10.0 million. These
funds, along with additional funds from The CIT Group/Business Credit, Inc., an
existing senior lender, were used to satisfy the obligations to two of the other
existing senior lenders. This transaction resulted in CIT and Mr. Miller
constituting the senior lenders to us, with CIT holding 62.5% of such loan and
Mr. Miller participating in 37.5% of the commitment. Mr. Miller’s portion of the
loan is subordinated to that of CIT.




In
conjunction with Mr. Miller’s increased participation, the senior credit
facility was restructured and restated as a $15.0 million revolving facility and
$12.0 million and $5.0 million term loans. As a result of this restructuring,
all previously existing defaults under the senior credit facility were waived,
the interest rate was lowered by 2.0% to reflect a non-default rate, fees
attributable to RoadOne of $30,000 per month were eliminated, the financial
covenants were substantially relaxed, and availability under the senior credit
facility was increased by approximately $5.0 million. 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,
we will pay additional interest at a rate of 1.8% on Mr. Miller’s portion of the
loan, which is in recognition of the fact that Mr. Miller’s rights to payments
and collateral are subordinate to those of CIT. This transaction was approved by
the Special Committee of the Board, as well as the full Board of Directors, with
Mr. Miller abstaining due to his personal interest in the
transaction.




In order
to enter into this restructuring of the senior credit facility, CIT required
that the junior lenders agree to extend the standstill and payment blockage
periods, which were to expire at the end of April 2004, until July 31, 2005,
which is after the current July 23, 2005 maturity of the senior debt. The junior
facility lenders were unwilling to extend such standstill and payment blockage
dates without the conversion provisions described above having been committed to
by us, subject only to shareholder approval of the conversion by Harbourside. As
a result, the restructuring of the senior debt facility and the conversion and
exchange of subordinated debt and warrants described above were
cross-conditioned upon each other and agreements effecting them were entered
into simultaneously on December 24, 2003.




To
effectuate the conversion and exchange of the subordinated debt and warrants, we
entered into a Binding Restructuring Agreement with Contrarian and Harbourside
on December 24, 2003. Under this agreement, Contrarian and Harbourside agreed to
an exchange transaction where they would extend the maturity date of 70.0% of
the outstanding principal amount of the junior debt, approximately $9.75
million, convert the remaining 30.0% of the outstanding principal, plus all
accrued interest and fees, into our common stock and convert their warrants into
our common stock. This agreement contemplated that the conversions would be
further documented in separate exchange agreements and also contemplated
registration rights agreements. The Binding Restructuring Agreement also
outlined the terms for amending the junior credit facility to extend its
maturity date to July 31, 2005 (which is after the July 23, 2005 maturity date
of the senior credit facility), to provide for an interest rate on the remaining
debt of Contrarian at 18.0% and the remaining debt of Harbourside at a reduced
rate (which was ultimately agreed to be 9.0%), to provide for financial
covenants that match those of the senior credit facility and to make other
amendments to the junior credit facility consistent with amendments made to the
senior credit facility as it was amended on December 24, 2003. The disparity in
the interest rates to be earned by Contrarian and Harbourside is caused by
Contrarian negotiating an interest rate of 18.0% as a condition to it entering
into the Binding Restructuring Agreement, as a result of which Harbourside
agreed to reduce the rate to be received by it to 9.0% so that we would continue
to pay an effective blended interest rate of 14.0% on the aggregate of the
subordinated debt following the exchange transactions. At the same time,
Contrarian and Harbourside entered into an agreement with the senior lenders to
extend the maturity date of the subordinated debt that they would continue to
hold.




As of
January 14, 2004, we entered into separate exchange agreements with Contrarian
and Harbourside, a registration rights agreement with Contrarian and Harbourside
and an amendment to the junior credit facility with Contrarian and Harbourside,
all as contemplated in the Binding Restructuring Agreement. Under the amendment
to the junior credit facility, the maturity of the remaining subordinated debt
was extended and the interest rates thereon were altered and the financial
covenants were amended to match those in the senior credit facility, which had
been substantially relaxed in our favor on December 24, 2003.







25





*Outstanding
Borrowings*




Outstanding
borrowings under the senior and junior credit facilities as of December 31, 2004
and 2003 were as follows (in thousands):




**2004**
    
    **2003**Senior
      Credit FacilityManufacturing
    
    **$******
    ******7,322**
    
    $
    6,394Road
      One
    
    
    **-**
    
    
    451Term
      Loan
    
    
    **15,163**
    
    
    17,000Total
    
    
    **22,485**
    
    
    23,845Junior
      Credit Facility
    
    
    **4,211**
    
    
    16,743Total
      Outstanding Borrowings
    
    **$******
    ******26,696**
    
    $
    40,588




The
substantial reductions in our overall indebtedness reflected above were due to a
number of factors, including improved operating cash flow resulting from cost
reductions and expense controls, the conversion of a portion of such
indebtedness to shares of our common stock, and proceeds generated from the May
2004 private placement of shares of our common stock. In addition, dispositions
of RoadOne assets and distribution group operations improved liquidity and
generated proceeds and reduced expenses, which were used to further reduce
debt.




**Financial
Instruments**




SFAS No.
133, “Accounting for Derivative Instruments and Hedging Activities”, as amended,
is effective for fiscal years beginning after June 15, 2000. SFAS No. 133
establishes accounting and reporting standards requiring that every derivative
instrument (including certain derivative instruments 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
derivative’s fair value be recognized currently in earnings unless specific
hedge accounting criteria are met. Special accounting for qualifying hedges
allows a derivative’s gains and losses to offset related results on the hedged
item in the income statement, and requires that a company must formally
document, designate, and assess the effectiveness of transactions that receive
hedge accounting.




In
October 2001, we obtained interest rate swaps as required by terms in our senior
credit facility to hedge exposure to market fluctuations. The interest rate
swaps covered $40.0 million in notional amounts of variable rate debt and with
fixed rates ranging from 2.55% to 3.920%. The swaps expired annually from
October 2002 to October 2004. Upon expiration of these hedges, the amount
recorded in Other Comprehensive Loss will be reclassified into earnings as
interest. In 2002, the borrowing base was converted from LIBOR to prime, which
rendered the swap ineffective as a hedge. Accordingly, concurrent with the
conversion we prematurely terminated the swap in 2002 at a cost of $341,000. The
resulting loss was recorded in Other Comprehensive Loss at December 31, 2002 and
reclassified to earnings as interest expense over the term of our senior credit
facility.




Our
junior credit facility contains provisions for the issuance of warrants of up to
0.5% of the outstanding shares of our common stock in July 2002 and up to an
additional 1.5% in July 2003. The warrants were valued as of July 2001 based on
the relative fair value using the Black Scholes model with the following
assumptions: risk-free rate of 4.9% estimated life of 7 years, 72% volatility
and no dividend yield. Accordingly, we recorded a liability and made periodic
mark to market adjustments, which are reflected in the accompanying consolidated
statements of operations in accordance with EITF Issue 00-19, “Accounting for
Derivative Financial Instruments Indexed to, and Potentially Settled in, a
Company’s Own Stock.” The liability was extinguished when the warrants were
converted to stock as part of the restructuring of our junior credit
facility.







26





**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 our results of operations or
financial position.




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. As required
by SFAS No. 123R, we will adopt the new accounting standard effective July 1,
2005. We will transition the new guidance using the modified prospective method.
We expect the application of the expensing provision of SFAS No. 123R will
result in pretax expense of approximately $168,000 in the second half of 2005.
Applying the same assumptions used for the 2004 pro forma disclosure in Note 3
of our financial statements, we estimate our pretax expense associated with our
previous stock option grants to be approximately $308,000 in each of 2006 and
2007, and $77,000 in 2008.




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, we will adopt this new accounting
standard effective July 1, 2005. The adoption of SFAS No. 153 is not expected to
have a material impact on our financial statements.




**ITEM
7A.** **QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**




We
believe that our exposures to market risks are immaterial. We hold no market
risk sensitive instruments for trading purposes. At present, we do not employ
any derivative financial instruments, other financial instruments, or derivative
commodity instruments to hedge any market risk, and we have no plans to do so in
the future. To the extent we have borrowings outstanding under our credit
facilities, we are exposed to interest rate risk because of the variable
interest rate under the facility.




**ITEM
8.** **FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA**




The
response to this item is included in Part IV, Item 15 of this
Report.




**ITEM
      9.**
    **CHANGES
      IN AND DISAGREEMENTS WITH ACCOUNTANTS ON****ACCOUNTING
      AND**
      **FINANCIAL
      DISCLOSURE**





None.




**ITEM
9A.** **CONTROLS
AND PROCEDURES**




**Disclosure
Controls and Procedures**




We
carried out an evaluation, under the supervision and with the participation of
our management, including our chief executive and chief financial officers, of
the effectiveness of the design and operation of our disclosure controls and
procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities
Exchange Act of 1934, as of the end of the period covered by this report. Based
upon this evaluation, our Co-Chief Executive Officers and our Chief Financial
Officer have concluded that the disclosure controls and procedures were
effective as of the end of the period covered by this Annual Report to ensure
that information required to be disclosed in our 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.







27





**Internal
Control Over Financial Reporting**




Pursuant
to that certain Order of the Securities and Exchange Commission under Section 36
of the Securities Exchange Act of 1934 in Release No. 50754, dated November 30,
2004, which granted an exemption from specified provisions of Exchange Act Rules
13a-1 and 15d-1, an accelerated filer (as defined in Rule 12b-2 under the
Exchange Act) with a fiscal year ending on December 31, 2004 is permitted to
omit its report of management on internal control over financial reporting, and
the corresponding attestation of its independent registered public accounting
firm, from its Annual Report on Form 10-K, so long as, among other things, such
report and attestation are filed by amendment to such Annual Report on Form 10-K
not later than April 29, 2005.




In
accordance with such exemption, the report of the Company’s management on
internal control over financial reporting, and the corresponding attestation
report of Joseph Decosimo and Company, LLP, independent registered public
accounting firm, will be filed with the Securities and Exchange Commission by
amendment to this Annual Report on Form 10-K not later than April 29,
2005.




**Changes
in Internal Control Over Financial Reporting**




There
were no changes in our internal control over financial reporting that occurred
during our most recent fiscal quarter that have materially affected, or are
reasonably likely to materially affect, our internal control over financial
reporting.




**ITEM
9B.** **OTHER
INFORMATION**




None.







28





**PART
III**




**ITEM
10.** **DIRECTORS
AND EXECUTIVE OFFICERS OF THE REGISTRANT**




The Proxy
Statement for our Annual Meeting of Shareholders, to be filed with the
Securities and Exchange Commission, will contain information relating to our
directors and audit committee, compliance with Section 16(a) of the Exchange
Act, and our code of ethics applicable to our chief executive, financial and
accounting officers, which information is incorporated by reference herein.
Information relating to our executive officers is included in Item 1 of this
report.




**ITEM
11.** **EXECUTIVE
COMPENSATION**




The Proxy
Statement for our Annual Meeting of Shareholders, to be filed with the
Securities and Exchange Commission, will contain information relating to
director and executive officer compensation, which information is incorporated
by reference herein.




**ITEM
12.** **SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND** **MANAGEMENT**




The Proxy
Statement for our Annual Meeting of Shareholders, to be filed with the
Securities and Exchange Commission, will contain information relating to
security ownership of certain beneficial owners and management, which
information is incorporated by reference herein.




The Proxy
Statement will also contain information relating to our equity compensation
plans, which information is incorporated by reference herein.




**ITEM
13.** **CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS**




The Proxy
Statement for our Annual Meeting of Shareholders, to be filed with the
Securities and Exchange Commission, will contain information relating to certain
relationships and related transactions between us and certain of our directors
and executive officers, which information is incorporated by reference
herein.




**ITEM
14.** **PRINCIPAL
ACCOUNTANT FEES AND SERVICES**




The Proxy
Statement for our Annual Meeting of Shareholders, to be filed with the
Securities and Exchange Commission, will contain information relating to the
fees charged and services provided by Joseph Decosimo and Company and
PricewaterhouseCoopers LLP, our principal accountants during the last two fiscal
years, and our pre-approval policy and procedures for audit and non-audit
services, which information is incorporated by reference into this
report.







29





**PART
IV**




**ITEM
15.** **EXHIBITS,
FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM** **8-K**




**(a)** The
following documents are filed as part of this Report:




**1.** **Financial
Statements**




**Description**
    
    **Page
      Number**
      **in
      Report**Report
      of Independent Accountants
    
    F-1Consolidated
      Balance Sheets as of December 31, 2004 and 2003
    
    F-2Consolidated
      Statements of Operations for the years ended December 31, 2004, 2003 and
      2002
    
    F-3Consolidated
      Statements of Shareholders’ Equity for the years ended December 31, 2004,
      2003 and 2002
    
    F-4Consolidated
      Statements of Cash Flows for the years ended December 31, 2004, 2003 and
      2002
    
    F-5Notes
      to Consolidated Financial Statements
    
    F-6




**2.** **Financial
Statement Schedules**




The
following Financial Statement Schedule for the Registrant is filed as part of
this Report and should be read in conjunction with the Consolidated Financial
Statements:




**Description**
    
    **Page
      Number**
      **in
      Report**Schedule
      II - Valuation and Qualifying Accounts
    
    S-1




All
schedules, except those set forth above, have been omitted since the information
required is included in the financial statements or notes or have been omitted
as not applicable or not required.




**3.** **Exhibits**




The
following exhibits are required to be filed with this Report by Item 601 of
Regulation S-K:




**Description**
    
    **Incorporated
      by**
      **Reference
      to**
      **Registration
      File**
      **Number**
    
    **Form
      or**
      **Report**
    
    **Date
      of Report**
    
    **Exhibit**
      **Number
      in**
      **Report**3.1
    Charter,
      as amended, of the Registrant
    
    -
    
    10-K
    
    December
      31, 2001
    
    3.13.2
    Bylaws
      of the Registrant
    
    33-79430
    
    S-1
    
    August
      1994
    
    3.210.1
    Settlement
      Letter dated April 27, 1994 between Miller Group, Inc. and the Management
      Group
    
    33-79430
    
    S-1
    
    August
      1994
    
    10.710.5
    Participants
      Agreement dated as of April 30, 1994 between the Registrant, Century
      Holdings, Inc., Century Wrecker Corporation, William G. Miller and certain
      former shareholders of Miller Group, Inc.
    
    33-79430
    
    S-1
    
    August
      1994
    
    10.11





30








**Description**
    
    **Incorporated
      by**
      **Reference
      to**
      **Registration
      File**
      **Number**
    
    **Form
      or**
      **Report**
    
    **Date
      of Report**
    
    **Exhibit**
      **Number
      in**
      **Report**10.20
    Technology
      Transfer Agreement dated March 21, 1991 between Miller Group, Inc.,
      Verducci, Inc. and Jack Verducci
    
    33-79430
    
    S-1
    
    August
      1994
    
    10.2610.21
    Form
      of Noncompetition Agreement between the Registrant and certain officers of
      the Registrant
    
    33-79430
    
    S-1
    
    August
      1994
    
    10.2810.22
    Form
      of Nonexclusive Distributor Agreement
    
    33-79430
    
    S-1
    
    August
      1994
    
    10.3110.23
    Miller
      Industries, Inc. Stock Option and Incentive Plan**
    
    33-79430
    
    S-1
    
    August
      1994
    
    10.110.24
    Form
      of Incentive Stock Option Agreement**
    
    33-79430
    
    S-1
    
    August
      1994
    
    10.210.26
    Miller
      Industries, Inc. Non-Employee Director Stock Option Plan**
    
    33-79430
    
    S-1
    
    August
      1994
    
    10.410.27
    Form
      of Director Stock Option Agreement**
    
    33-79430
    
    S-1
    
    August
      1994
    
    10.510.28
    Employment
      Agreement dated October 14, 1993 between Century Wrecker Corporation and
      Jeffrey I. Badgley**
    
    33-79430
    
    S-1
    
    August
      1994
    
    10.2910.29
    First
      Amendment to Employment Agreement between Century Wrecker Corporation and
      Jeffrey I. Badgley**
    
    33-79430
    
    S-1
    
    August
      1994
    
    10.3310.30
    Form
      of Employment Agreement between Registrant and each of Messrs. Madonia and
      Mish**
    
    -
    
    Form
      10-K
    
    April
      30, 1995
    
    10.3710.31
    First
      Amendment to Miller Industries, Inc. Non-Employee Director Stock Option
      Plan**
    
    -
    
    Form
      10-K
    
    April
      30, 1995
    
    10.3810.32
    Second
      Amendment to Miller Industries, Inc. Non-Employee Director Stock Option
      Plan**
    
    -
    
    Form
      10-K
    
    April
      30, 1996
    
    10.3910.33
    Second
      Amendment to Miller Industries, Inc. Stock Option and Incentive
      Plan**
    
    -
    
    Form
      10-K
    
    April
      30, 1996
    
    10.4010.34
    Employment
      Agreement dated July 8, 1997 between the Registrant and William G.
      Miller**
    
    -
    
    Form
      10-Q/A
    
    July
      31, 1997
    
    1010.35
    Guaranty
      Agreement Among NationsBank of Tennessee, N.A. and certain subsidiaries of
      Registrant dated January 30, 1998.
    
    -
    
    Form
      10-K
    
    April
      30, 1998
    
    10.3710.36
    Stock
      Pledge Agreement Between NationsBank of Tennessee, N.A. and the Registrant
      dated January 30, 1998.
    
    -
    
    Form
      10-K
    
    April
      30, 1998
    
    10.3810.37
    Stock
      Pledge Agreement Between NationsBank of Tennessee, N.A. and the certain
      subsidiaries of the Registrant dated January 30, 1998.
    
    -
    
    Form
      10-K
    
    April
      30, 1998
    
    10.39





31








**Description**
    
    **Incorporated
      by**
      **Reference
      to**
      **Registration
      File**
      **Number**
    
    **Form
      or**
      **Report**
    
    **Date
      of Report**
    
    **Exhibit**
      **Number
      in**
      **Report**10.40
    Form
      of Indemnification Agreement dated June 8, 1998 by and between the
      Registrant and each of William G. Miller, Jeffrey I. Badgley, A. Russell
      Chandler, Paul E. Drack, Frank Madonia, J. Vincent Mish, Richard H.
      Roberts, and Daniel N. Sebastian**
    
    -
    
    Form
      10-Q
    
    September
      14, 1998
    
    1010.41
    Employment
      Agreement between the Registrant and Jeffrey I. Badgley, dated September
      11, 1998**
    
    -
    
    Form
      10-Q
    
    December
      15, 1998
    
    10.110.42
    Employment
      Agreement between the Registrant and Frank Madonia, dated September 11,
      1998**
    
    -
    
    Form
      10-Q
    
    December
      15, 1998
    
    10.310.50
    Agreement
      between the Registrant and Jeffrey I. Badgley, dated September 11,
      1998**
    
    -
    
    Form
      10-Q
    
    December
      15, 1998
    
    10.410.51
    Agreement
      between the Registrant and Frank Madonia, dated September 11,
      1998**
    
    -
    
    Form
      10-Q
    
    December
      15, 1998
    
    10.610.60
    Credit
      Agreement among Bank of America, N.A., The CIT Group/Business Credit, Inc.
      and Registrant and its subsidiaries dated July 23, 2001
    
    -
    
    Form
      10-K
    
    April
      30, 2001
    
    10.610.61
    Security
      Agreement among the Registrant and its subsidiaries, The CIT
      Group/Business Credit, Inc. and Bank of America, N.A. dated July 23,
      2001
    
    -
    
    Form
      10-K
    
    April
      30, 2001
    
    10.6110.62
    Stock
      Pledge Agreement between Registrant and The CIT Group/Business Credit,
      Inc. dated July 23, 2001
    
    -
    
    Form
      10-K
    
    April
      30, 2001
    
    10.6210.70
    Amended
      and Restated Credit Agreement among the Registrant, its subsidiary and
      Bank of America, N.A. dated July 23, 2001
    
    -
    
    Form
      10-K
    
    April
      30, 2001
    
    10.710.71
    Promissory
      Note among Registrant, its subsidiary and SunTrust Bank dated July 23,
      2001
    
    -
    
    Form
      10-K
    
    April
      30, 2001
    
    10.7110.72
    Promissory
      Note among Registrant, its subsidiary and AmSouth Bank dated July 23,
      2001
    
    -
    
    Form
      10-K
    
    April
      30, 2001
    
    10.7210.73
    Promissory
      Note among Registrant, its subsidiary and Wachovia Bank, N.A. dated July
      23, 2001
    
    -
    
    Form
      10-K
    
    April
      30, 2001
    
    10.7310.74
    Promissory
      Note among Registrant, its subsidiary and Bank of America, N.A. dated July
      23, 2001
    
    -
    
    Form
      10-K
    
    April
      30, 2001
    
    10.7410.75
    Warrant
      Agreement dated July 23, 2001
    
    -
    
    Form
      10-K
    
    April
      30, 2001
    
    10.7510.80
    Forbearance
      Agreement and First Amendment to the Credit Agreement by and among the
      Company and its subsidiaries and The CIT Group/Business Credit, Inc. and
      Bank of America, N.A. dated February 28, 2002
    
    -
    
    Form
      10-K
    
    December
      31, 2001
    
    10.8





32








**Description**
    
    **Incorporated
      by**
      **Reference
      to**
      **Registration
      File**
      **Number**
    
    **Form
      or**
      **Report**
    
    **Date
      of Report**
    
    **Exhibit**
      **Number
      in**
      **Report**10.81
    Second
      Amendment to the Credit Agreement by and among the Company and its
      subsidiaries and The CIT Group/Business Credit, Inc. and Bank of America,
      N.A. dated February 28, 2002
    
    -
    
    Form
      10-K
    
    December
      31, 2001
    
    10.8110.82
    First
      Amendment to the Amended and Restated Credit Agreement among the
      Registrant, its subsidiary and Bank of America, N.A. dated July 23,
      2001
    
    -
    
    Form
      10-K
    
    December
      31, 2001
    
    10.8210.83
    Amended
      and Restated Intercreditor and Subordination Agreement by and among The
      CIT Group/Business Credit, Inc. and Bank of America, N.A.
    
    -
    
    Form
      10-K
    
    December
      31, 2001
    
    10.8310.84
    Third
      Amendment to the Credit Agreement by and among the Company and its
      Subsidiaries and the CIT Group/Business Credit, Inc. and Bank of America,
      N.A. dated September 13, 2002.
    
    -
    
    Form
      10-K
    
    December
      31, 2002
    
    10.8410.85
    Fourth
      Amendment to the Credit Agreement by and among the Company and its
      Subsidiaries and the CIT Group/Business Credit, Inc. and Bank of America,
      N.A. dated November 14, 2002.
    
    -
    
    Form
      10-Q/A
    
    September
      30, 2002
    
    10.110.86
    Fifth
      Amendment to the Credit Agreement by and among the Company and its
      Subsidiaries and the CIT Group/Business Credit, Inc. and Bank of America,
      N.A. dated February 28, 2003.
    
    -
    
    Form
      10-K
    
    December
      31, 2002
    
    10.8610.87
    Sixth
      Amendment to the Credit Agreement by and among the Company and its
      Subsidiaries and the CIT Group/Business Credit, Inc. and Bank of America,
      N.A. dated April 1, 2003.
    
    -
    
    Form
      10-K
    
    December
      31, 2002
    
    10.8710.88
    Seventh
      Amendment to Credit Agreement entered into by and among the Company and
      its Subsidiaries and CIT Group/Business Credit, Inc., and Bank of America,
      N.A. dated October 31, 2003
    
    -
    
    Form
      10-Q
    
    September
      30, 2003
    
    10.110.89
    Forbearance
      Agreement by and among the Company and its Subsidiaries and CIT
      Group/Business Credit, Inc. and Bank of American, N.A. dated October 31,
      2003.
    
    -
    
    Form
      10-Q
    
    September
      30, 2003
    
    10.210.90
    Participation
      Agreement by and among the Company and its Subsidiaries, CIT
      Group/Business Credit and Bank of America, N.A. and William G. Miller
      dated October 31, 2003.
    
    -
    
    Form
      10-Q
    
    September
      30, 2003
    
    10.310.91
    Eighth
      Amendment to the Credit Agreement by and among the Registrant, CIT Group,
      Inc. and Bank of America, N.A., dated December 24, 2003
    
    -
    
    Form
      8-K
    
    January
      20, 2004
    
    10.1





33








**Description**
    
    **Incorporated
      by**
      **Reference
      to**
      **Registration
      File**
      **Number**
    
    **Form
      or**
      **Report**
    
    **Date
      of Report**
    
    **Exhibit**
      **Number
      in**
      **Report**10.92
    Ninth
      Amendment to the Credit Agreement by and between the Registrant and CIT
      Group, Inc., dated December 24, 2003
    
    -
    
    Form
      8-K
    
    January
      20, 2004
    
    10.210.93
    Modification
      of First Amendment to the Amended and Restated Intercreditor and
      Subordination Agreement by and among CIT Group, Inc., Bank of America,
      N.A., and Contrarian Funds, LLC dated December 24, 2003
    
    -
    
    Form
      8-K
    
    January
      20, 2004
    
    10.310.94
    Second
      Amendment to the Amended and Restated Intercreditor and Subordination
      Agreement by and between CIT Group, Inc. and Contrarian Funds, LLC, dated
      December 24, 2003
    
    -
    
    Form
      8-K
    
    January
      20, 2004
    
    10.410.95
    Amended
      and Restated Participation Agreement by and among the Registrant, CIT and
      William G. Miller, dated December 24, 2003
    
    -
    
    Form
      8-K
    
    January
      20, 2004
    
    10.510.96
    Amendment
      No. 3 to Amended and Restated Credit Agreement by and among the
      Registrant, Contrarian Funds, LLC and Harbourside Investments, LLLP, dated
      as of January 14, 2004
    
    -
    
    Form
      8-K
    
    January
      20, 2004
    
    10.610.97
    Exchange
      Agreement by and between the Registrant and Contrarian Funds, LLC, dated
      as of January 14, 2004
    
    -
    
    Form
      8-K
    
    January
      20, 2004
    
    10.710.98
    Exchange
      Agreement by and between the Registrant and Harbourside Investments, LLLP,
      dated as of January 14, 2004
    
    -
    
    Form
      8-K
    
    January
      20, 2004
    
    10.810.99
    Registration
      Rights Agreement by and among the Registrant, Harbourside Investments,
      LLLP and Contrarian Funds, LLC, dated January 20, 2004
    
    -
    
    Form
      8-K
    
    January
      20, 2004
    
    10.910.100
    Consent
      and Tenth Amendment to Credit Agreement by and between the Registrant and
      The CIT Group/Business Credit, Inc., dated November 22, 2004*10.101
    Amendment
      No. 4 to Amended and Restated Credit Agreement by and among the
      Registrant, Miller Industries Towing Equipment, Inc., Harbourside
      Investments, LLLP and certain guarantors set forth on the signature pages
      thereto, dated November 5, 2004*10.102
    Non-Employee
      Director Stock Plan**
    
    -
    
    Schedule
      14A
    
    January
      23, 2004
    
    Annex
      A21
    Subsidiaries
      of the Registrant*23.1
    Consent
      of Joseph Decosimo and Company, LLP*24
    Power
      of Attorney (see signature page)*











34





**Description**
    
    **Incorporated
      by**
      **Reference
      to**
      **Registration
      File**
      **Number**
    
    **Form
      or**
      **Report**
    
    **Date
      of Report**
    
    **Exhibit**
      **Number
      in**
      **Report**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 Rules 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.




**  Management
contract or compensatory plan or arrangement.






**(b)**
    The
      Registrant hereby files as exhibits to this Report the exhibits set forth
      in Item 14(a)3 hereof.




**(c)**
    The
      Registrant hereby files as financial statement schedules to this Report
      the financial statement schedules set forth in Item 14(a)2
      hereof.







35





**INDEX
TO FINANCIAL STATEMENTS**
  REPORT
      OF INDEPENDENT ACCOUNTANTS
    F-1CONSOLIDATED
      BALANCE SHEETS AS OF DECEMBER 31, 2004 AND 2003
    F-2CONSOLIDATED
      STATEMENTS OF OPERATIONS FOR THE YEARS ENDED
      DECEMBER
      31, 2004, 2003 AND 2002
    F-3CONSOLIDATED
      STATEMENTS OF SHAREHOLDERS’ EQUITY FOR THE YEARS
      ENDED
      DECEMBER 31, 2004, 2003 AND 2002
    F-4CONSOLIDATED
      STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED
      DECEMBER
      31, 2004, 2003 AND 2002
    F-5NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS
    F-6SCHEDULE
      II - VALUATION AND QUALIFYING ACCOUNTS
    S-1
  
  **REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTANTING FIRM**

Board of
Directors and Shareholders
Miller
Industries, Inc.
Ooltewah,
Tennessee

We have
audited the accompanying consolidated balance sheets of Miller Industries, Inc.
and subsidiaries as of December 31, 2004 and 2003, and the related consolidated
statements of operations, shareholders’ equity, and cash flows for each of the
three years in the period ended December 31, 2004. These consolidated financial
statements and financial statement schedule are the responsibility of the
company's management. Our responsibility is to express an opinion on these
consolidated financial statements and financial statement schedule based on our
audits.

We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our
opinion.

In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the financial position of Miller Industries, Inc. and
subsidiaries as of December 31, 2004 and 2003, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 2004, in conformity with accounting principles generally accepted
in the United States of America. Also, in our opinion, the financial statement
schedule when considered in relation to the basic consolidated financial
statements taken as a whole, presents fairly, in all material respects, the
information set forth therein.

As
discussed in note 5 to the financial statements, the company changed its method
of accounting for intangible assets in 2002.

/s/
Joseph Decosimo and Company, PLLC


Chattanooga,
Tennessee
February
25, 2005, except for note 6 as to which
the date
is March 7, 2005
 
  F-1
  **MILLER
INDUSTRIES, INC. AND SUBSIDIARIES**
 **CONSOLIDATED
BALANCE SHEETS**
 **DECEMBER
31, 2004 AND 200** **3**
  **(In
thousands, except share data)**
  **2004**
    
    **2003****ASSETS****CURRENT
      ASSETS:**Cash
      and temporary investments
    
    **$**
    ******2,812**
    
    $
    5,240Accounts
      receivable, net of allowance for doubtful accounts of $1,116 and $1,062,
      at
      December
      31, 2004 and 2003, respectively
    
    
    **49,336**
    
    
    37,990Inventories,
      net
    
    
    **34,994**
    
    
    26,715Prepaid
      expenses and other
    
    
    **1,525**
    
    
    1,783Current
      assets of discontinued operations held for sale
    
    
    **5,728**
    
    
    23,757Total
      current assets
    
    
    **94,395**
    
    
    95,485**PROPERTY,
      PLANT, AND EQUIPMENT,**net
    
    
    **18,762**
    
    
    20,977**GOODWILL**
    
    
    **11,619**
    
    
    11,619**OTHER
      ASSETS**
    
    
    **1,918**
    
    
    1,783**NONCURRENT
      ASSETS OF DISCONTINUED OPERATIONS****HELD
      FOR SALE**
    
    
    **1,128**
    
    
    1,954**$**
    ******127,822**
    
    $
    131,818**LIABILITIES
      AND SHAREHOLDERS’ EQUITY****CURRENT
      LIABILITIES:**Current
      portion of long-term obligations
    
    **$**
    ******2,052**
    
    $
    2,050Accounts
      payable
    
    
    **36,224**
    
    
    34,164Accrued
      liabilities and other
    
    
    **5,736**
    
    
    4,371Current
      liabilities of discontinued operations held for sale
    
    
    **10,405**
    
    
    23,764Total
      current liabilities
    
    
    **54,417**
    
    
    64,349**LONG-TERM
      OBLIGATIONS**,
      less current portion
    
    
    **24,345**
    
    
    29,927**NONCURRENT
      LIABILITIES OF DISCONTINUED OPERATIONS HELD FOR
    SALE**
    
    
    **2,275**
    
    
    9,545**COMMITMENTS
      AND CONTINGENCIES**(Notes
      6, 8 and 10)**SHAREHOLDERS’
      EQUITY**:Preferred
      stock, $.01 par value; 5,000,000 shares authorized, none issued or
      outstanding
    
    
    **0**
    
    
    0Common
      stock, $.01 par value; 100,000,000 shares authorized, 11,182,606 and
      9,342,151
      outstanding
      at December 31, 2004 and 2003, respectively
    
    
    **112**
    
    
    93Additional
      paid-in capital
    
    
    **157,202**
    
    
    145,090Accumulated
      deficit
    
    
    **(112,468**
    **)**
    
    (117,943
    )Accumulated
      other comprehensive income
    
    
    **1,939**
    
    
    757Total
      shareholders’ equity
    
    
    **46,785**
    
    
    27,997**$**
    ******127,822**
    
    $
    131,818
  The
accompanying notes are an integral part of these consolidated balance
sheets.
  F-2
   **MILLER
INDUSTRIES, INC. AND SUBSIDIARIES**
 **CONSOLIDATED
STATEMENTS OF OPERATIONS**
 **FOR
THE YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002**
  **(In
thousands, except per share data)**
  **2004**
    
    **2003**
    
    **2002****NET
      SALES**Towing
      and recovery equipment
    
    **$******
    ******236,308**
    
    $
    192,043
    
    $
    203,059Towing
      services
    
    
    **-**
    
    
    13,953
    
    
    28,444**236,308**
    
    
    205,996
    
    
    231,503**COSTS
      AND EXPENSES**Costs
      of operationsTowing
      and recovery equipment
    
    
    **205,021**
    
    
    168,390
    
    
    174,516Towing
      services
    
    
    **-**
    
    
    10,618
    
    
    22,539**205,021**
    
    
    179,008
    
    
    197,055Selling,
      general, and administrative expenses
    
    
    **18,904**
    
    
    17,411
    
    
    19,540Loss
      on sale of business
    
    
    **-**
    
    
    682
    
    
    -Interest
      expense, net
    
    
    **4,657**
    
    
    5,609
    
    
    4,617Total
      costs and expenses
    
    
    **228,582**
    
    
    202,710
    
    
    221,212**INCOME
      FROM CONTINUING OPERATIONS BEFORE INCOME TAXES**
    
    
    **7,726**
    
    
    3,286
    
    
    10,291**INCOME
      TAX PROVISION**
    
    
    **740**
    
    
    1,216
    
    
    7,208**INCOME
      FROM CONTINUING OPERATIONS**
    
    
    **6,986**
    
    
    2,070
    
    
    3,083**DISCONTINUED
      OPERATIONS**Loss
      from discontinued operations, before taxes
    
    
    **(1,371**
    **)**
    
    (17,260
    )
    
    (29,697
    )Income
      tax provision (benefit)
    
    
    **140**
    
    
    (1,037
    )
    
    (2,732
    )Loss
      from discontinued operations, net of taxes
    
    
    **(1,511**
    **)**
    
    (16,223
    )
    
    (26,965
    )**INCOME
      (LOSS) BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING
      PRINCIPLE**
    
    
    **5,475**
    
    
    (14,153
    )
    
    (23,882
    )Cumulative
      effect of change in accounting principle
    
    
    **-**
    
    
    -
    
    
    (21,812
    )**NET
      INCOME (LOSS)**
    
    **$******
    ******5,475**
    
    $
    (14,153
    )
    $
    (45,694
    )**BASIC
      INCOME (LOSS) PER COMMON SHARE:**Income
      from continuing operations
    
    **$******
    ******0.64**
    
    $
    0.22
    
    $
    0.34Loss
      from discontinued operations
    
    
    **(0.14**
    **)**
    
    (1.74
    )
    
    (2.89
    )Cumulative
      effect of change in accounting principle
    
    
    **-**
    
    
    -
    
    
    (2.34
    )Basic
      income (loss)
    
    **$******
    ******0.50**
    
    $
    (1.52
    )
    $
    (4.89
    )**DILUTED
      INCOME (LOSS) PER COMMON SHARE:**Income
      from continuing operations
    
    **$******
    ******0.64**
    
    $
    0.22
    
    $
    0.34Loss
      from discontinued operations
    
    
    **(0.14**
    **)**
    
    (1.74
    )
    
    (2.89
    )Cumulative
      effect of change in accounting principle
    
    
    **-**
    
    
    -
    
    
    (2.34
    )Diluted
      income (loss)
    
    **$******
    ******0.50**
    
    $
    (1.52
    )
    $
    (4.89
    )**WEIGHTED
      AVERAGE SHARES OUTSTANDING:**Basic
    
    
    **10,860**
    
    
    9,342
    
    
    9,341Diluted
    
    
    **10,982**
    
    
    9,385
    
    
    9,348
  The
accompanying notes are an integral part of these consolidated
statements.
   F-3
   **MILLER
INDUSTRIES, INC. AND SUBSIDIARIES**
  **CONSOLIDATED
STATEMENTS OF SHAREHOLDERS’ EQUITY**
 **FOR
THE YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002**
  **(In
thousands, except share data)**
  **Common
      Stock**
    
    **Additional
      Paid**
      **In
      Capital**
    
    **Accumulated
      Deficit**
    
    **Accumulated
      Other Comprehensive**
      **Income
      (Loss)**
    
    **Total****BALANCE,
      December 31, 2001**
    
    $
    93
    
    $
    145,088
    
    $
    (58,096
    )
    $
    (2,242
    )
    $
    84,843Net
      loss
    
    
    0
    
    
    0
    
    
    (45,694
    )
    
    0
    
    
    (45,694
    )Other
      comprehensive, net of tax:Foreign
      currency translation adjustments
    
    
    0
    
    
    0
    
    
    0
    
    
    788
    
    
    788Unrealized
      loss on financial instruments
    
    
    0
    
    
    0
    
    
    0
    
    
    (240
    )
    
    (240
    )Comprehensive
      loss
    
    
    0
    
    
    0
    
    
    (45,694
    )
    
    548
    
    
    (45,146
    )**BALANCE,
      December 31, 2002**
    
    
    93
    
    
    145,088
    
    
    (103,790
    )
    
    (1,694
    )
    
    39,697Net
      loss
    
    
    0
    
    
    0
    
    
    (14,153
    )
    
    0
    
    
    (14,153
    )Other
      comprehensive, net of tax:Foreign
      currency translation adjustments
    
    
    0
    
    
    0
    
    
    0
    
    
    2,356
    
    
    2,356Unrealized
      gain on financial instruments
    
    
    0
    
    
    0
    
    
    0
    
    
    95
    
    
    95Comprehensive
      loss
    
    
    0
    
    
    0
    
    
    (14,153
    )
    
    2,451
    
    
    (11,702
    )Exercise
      of stock options
    
    
    0
    
    
    2
    
    
    0
    
    
    0
    
    
    2**BALANCE,
      December 31, 2003**
    
    
    93
    
    
    145,090
    
    
    (117,943
    )
    
    757
    
    
    27,997Net
      income
    
    
    0
    
    
    0
    
    
    5,475
    
    
    0
    
    
    5,475Other
      comprehensive, net of tax:Foreign
      currency translation adjustments
    
    
    0
    
    
    0
    
    
    0
    
    
    1,085
    
    
    1,085Unrealized
      gain on financial instruments
    
    
    0
    
    
    0
    
    
    0
    
    
    97
    
    
    97Comprehensive
      income
    
    
    0
    
    
    0
    
    
    5,475
    
    
    1,182
    
    
    6,657Issuance
      of common stock for conversion and exchange of subordinated debt and
      warrants (1,317,700)
    
    
    13
    
    
    7,527
    
    
    0
    
    
    0
    
    
    7,540Issuance
      of common stock to unaffiliated private investors
(480,000)
    
    
    5
    
    
    4,230
    
    
    0
    
    
    0
    
    
    4,235Issuance
      of common stock to non-employee directors (33,966)
    
    
    1
    
    
    328
    
    
    0
    
    
    0
    
    
    329Exercise
      of stock options
    
    
    0
    
    
    27
    
    
    0
    
    
    0
    
    
    27**BALANCE,
      December 31, 2004**
    
    $
    112
    
    $
    157,202
    
    $
    (112,468
    )
    $
    1,939
    
    $
    46,785
  The
accompanying notes are an integral part of these consolidated
statements
   F-4
  **MILLER
INDUSTRIES, INC. AND SUBSIDIARIES**
 **CONSOLIDATED
STATEMENTS OF CASH FLOWS**
 **FOR
THE YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002**
  **(In
thousands)**
  **2004**
    
    **2003**
    
    **2002****OPERATING
      ACTIVITIES:**Net
      income (loss)
    
    **$******
    ******5,475**
    
    $
    (14,153
    )
    $
    (45,694
    )Adjustments
      to reconcile net income (loss) to net cash (used in) provided by operating
      activities:Loss
      from discontinued operations
    
    
    **1,511**
    
    
    16,223
    
    
    26,965Depreciation
      and amortization
    
    
    **3,232**
    
    
    3,715
    
    
    4,354Amortization
      of deferred financing costs
    
    
    **798**
    
    
    4,627
    
    
    2,878Provision
      for doubtful accounts
    
    
    **567**
    
    
    492
    
    
    563Issuance
      of non-employee director shares
    
    
    **329**
    
    
    -
    
    
    -Cumulative
      effect of change in accounting principle
    
    
    **-**
    
    
    -
    
    
    21,812Loss
      on disposition of business
    
    
    **-**
    
    
    682
    
    
    -(Gain)
      Loss on disposals of property, plant, and equipment
    
    
    **10**
    
    
    54
    
    
    (4
    )Deferred
      income tax provision
    
    
    **-**
    
    
    -
    
    
    3,726Paid
      in kind interest
    
    
    **-**
    
    
    -
    
    
    574Proceeds
      from tax refunds
    
    
    **-**
    
    
    -
    
    
    9,046Changes
      in operating assets and liabilities:Accounts
      receivable
    
    
    **(11,199**
    **)**
    
    7,393
    
    
    (1,290
    )Inventories
    
    
    **(7,288**
    **)**
    
    2,200
    
    
    5,286Prepaid
      expenses and other
    
    
    **285**
    
    
    (997
    )
    
    (80
    )Other
      assets
    
    
    **(864**
    **)**
    
    (277
    )
    
    (31
    )Accounts
      payable
    
    
    **1,271**
    
    
    7,942
    
    
    644Accrued
      liabilities and other
    
    
    **1,501**
    
    
    (2,231
    )
    
    (5,767
    )Net
      cash (used in) provided by operating activities from continuing
      operations
    
    
    **(4,372**
    **)**
    
    25,670
    
    
    22,982Net
      cash used in operating activities from discontinued
    operations
    
    
    **(1,341**
    **)**
    
    (12,292
    )
    
    (3,392
    )Net
      cash (used in) provided by operating activities
    
    
    **(5,713**
    **)**
    
    13,378
    
    
    19,590**INVESTING
      ACTIVITIES:**Purchases
      of property, plant, and equipment
    
    
    **(695**
    **)**
    
    (1,178
    )
    
    (2,647
    )Proceeds
      from sale of property, plant, and equipment
    
    
    **15**
    
    
    51
    
    
    52Proceeds
      from sale of business
    
    
    **-**
    
    
    3,645
    
    
    -Payments
      received on notes receivables
    
    
    **122**
    
    
    808
    
    
    142Net
      cash (used in) provided by investing activities from continuing
      operations
    
    
    **(558**
    **)**
    
    3,326
    
    
    (2,453
    )Net
      cash provided by investing activities from discontinued
      operations
    
    
    **4,454**
    
    
    5,530
    
    
    20,691Net
      cash provided by investing activities
    
    
    **3,896**
    
    
    8,856
    
    
    18,238**FINANCING
      ACTIVITIES:**Net
      borrowings (payments) under Senior Credit Facility
    
    
    **3,093**
    
    
    (1,569
    )
    
    (1,310
    )Payments
      on long-term obligations
    
    
    **(3,542**
    **)**
    
    (3,301
    )
    
    (4,948
    )Borrowings
      under long-term obligations
    
    
    **2,039**
    
    
    260
    
    
    1,007Additions
      to deferred financing costs
    
    
    **(522**
    **)**
    
    (3,080
    )
    
    (1,699
    )Termination
      of interest rate swap
    
    
    **96**
    
    
    97
    
    
    (239
    )Proceeds
      from issuance of common stock
    
    
    **4,235**
    
    
    -
    
    
    -Proceeds
      from exercise of stock options
    
    
    **27**
    
    
    2
    
    
    -Net
      cash provided by (used in) financing activities from continuing
      operations
    
    
    **5,426**
    
    
    (7,591
    )
    
    (7,189
    )Net
      cash used in financing activities from discontinued
    operations
    
    
    **(7,910**
    **)**
    
    (12,667
    )
    
    (37,161
    )Net
      cash used in financing activities
    
    
    **(2,484**
    **)**
    
    (20,258
    )
    
    (44,350
    )**EFFECT
      OF EXCHANGE RATE CHANGES ON CASH AND TEMPORARY
      INVESTMENTS**
    
    
    **293**
    
    
    1,569
    
    
    508**NET
      CHANGE IN CASH AND TEMPORARY INVESTMENTS**
    
    
    **(4,008**
    **)**
    
    3,545
    
    
    (6,014
    )**CASH
      AND TEMPORARY INVESTMENTS, beginning of year**
    
    
    **5,240**
    
    
    2,097
    
    
    9,863**CASH
      AND TEMPORARY INVESTMENTS-DISCONTINUED OPERATIONS, beginning of
      year**
    
    
    **2,154**
    
    
    1,752
    
    
    -**CASH
      AND TEMPORARY INVESTMENTS-DISCONTINUED OPERATIONS, end of
      year**
    
    
    **574**
    
    
    2,154
    
    
    1,752**CASH
      AND TEMPORARY INVESTMENTS, end of year**
    
    **$******
    ******2,812**
    
    $
    5,240
    
    $
    2,097**SUPPLEMENTAL
      DISCLOSURE OF CASH FLOW INFORMATION:**Debt
      conversion
    
    **$******
    ******7,540**
    
    $
    -
    
    $
    -Cash
      payments for interest
    
    **$******
    ******4,173**
    
    $
    5,060
    
    $
    7,392Cash
      payments for income taxes
    
    **$******
    ******815**
    
    $
    358
    
    $
    581
  The
accompanying notes are an integral part of these consolidated
statements
   F-5
 
  **MILLER
INDUSTRIES, INC. AND SUBSIDIARIES**
  **NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS**
  **1.**
    **ORGANIZATION
      AND NATURE OF OPERATIONS**
  Miller
Industries, Inc. and subsidiaries (“the Company”) was historically an integrated
provider of vehicle towing and recovery equipment. As further described in Note
2, during the year ended December 31, 2002, the Company’s management and board
of directors made the decision to divest of the remainder of its towing services
segment, as well as the operations of the distribution group of the towing and
recovery equipment segment. At December 31, 2004, the Company had substantially
completed this process. The principal markets for the Company’s towing and
recovery equipment are approximately 120 independent distributors and users of
towing and recovery equipment located primarily throughout North America and
other customers throughout the world. The Company’s products are marketed under
the brand names of Century, Challenger, Holmes, Champion, Eagle, Jige, Boniface,
Vulcan, and Chevron.
  **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.
  During
the year ended December 31, 2002, the Company disposed of assets of 29
underperforming towing service businesses, as well as assets of
other businesses in its towing services segment. Total proceeds from
the sales were $23.5 million which included $22.7 million in cash and $0.8
million in notes receivable. Losses on the sales of discontinued operations were
$5.1 million.
  During
the year ended December 31, 2003, the Company disposed of substantially all of
the assets of 16 towing service businesses, as well as assets of
other businesses in its towing services segment. Total proceeds from
the sales were $6.8 million which included $6.6 million in cash and $0.2 million
in notes receivable. Losses on the sales of discontinued operations were $3.8
million. As of March 1, 2005, only miscellaneous assets from previously sold
businesses remain.
  During
the year ended December 31, 2003, the Company sold one distributor location with
total proceeds of approximately $1.9 million in cash and $0.8 million
subordinated notes receivable. The Company sold seven distributor locations
during the year ended December 31, 2004. Total proceeds from these sales were
$3.3 million in cash and $0.9 million in notes receivable. In accordance with
the board of directors’ decision to divest of the distribution group, the
Company has entered into negotiations for the disposition of the one remaining
location.
  In
accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of
Long-Lived Assets”, the assets for 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 as of December 31, 2002 as discontinued operations. Results of
operations for the towing services segment and the distribution group reflect
interest expense for debt directly attributing to these businesses, as well as
an allocation of corporate debt based on intercompany balances.
  The
results of operations and loss on disposal associated with certain towing
services businesses, which were sold in June 2003, have been reclassified from
discontinued operations to continuing operations given the Company’s continuing
involvement in the operations of the disposal components via a consulting
agreement, and the Company’s ongoing interest in the cash flows of the
operations of the disposal components via a long-term license agreement that was
finalized at the time of the sale. The Company applied this change retroactively
by adjusting the Consolidated Statement of Operations and the Consolidated
Statements of Cash Flows.
   F-6
  The
operating results for the discontinued operations of the towing services segment
and the distributor group for the years ended December 31, 2004, 2003 and 2002
were as follows (in thousands):
  **2004**
    
    **2003**
    
    **2002****Dist.**
    
    
    **Towing**
    
    
    **Total**
    
    
    **Dist.**
    
    
    **Towing**
    
    
    **Total**
    
    
    **Dist.**
    
    
    **Towing**
    
    
    **Total**Net
      Sales
    
    **$******
    ******37,810**
    
    **$******
    ******-**
    
    **$******
    ******37,810**
    
    $
    68,724
    
    $
    8,356
    
    $
    77,080
    
    $
    85,353
    
    $
    93,124
    
    $
    178,477Operating
      income (loss)
    
    
    **(659**
    **)**
    
    **(111**
    **)**
    
    **(770**
    **)**
    
    (371
    )
    
    (2,764
    )
    
    (3,135
    )
    
    80
    
    
    (5,730
    )
    
    (5,650
    )Net
      loss before taxes
    
    
    **(1,244**
    **)**
    
    **(127**
    **)**
    
    **(1,371**
    **)**
    
    (6,449
    )
    
    (10,811
    )
    
    (17,260
    )
    
    (6,370
    )
    
    (23,327
    )
    
    (29,697
    )Loss
      from discontinued operations
    
    
    **(1,276**
    **)**
    
    **(235**
    **)**
    
    **(1,511**
    **)**
    
    (6,607
    )
    
    (9,616
    )
    
    (16,223
    )
    
    (6,930
    )
    
    (20,035
    )
    
    (26,965
    )
  The
following assets and liabilities are reclassified as held for sale at December
31, 2004 and 2003 (in thousands):
  **2004**
    
    **2003****Dist.**
    
    **Towing**
    
    **Total**
    
    **Dist.**
    
    **Towing**
    
    **Total**Cash
      and temporary investments
    
    **$******
    ******574**
    
    **$******
    ******-**
    
    **$******
    ******574**
    
    $
    2,154
    
    $
    -
    
    $
    2,154Accounts
      receivable, net
    
    
    **1,444**
    
    
    **492**
    
    
    **1,936**
    
    
    3,603
    
    
    1,150
    
    
    4,753Inventories
    
    
    **3,144**
    
    
    **-**
    
    
    **3,144**
    
    
    14,266
    
    
    -
    
    
    14,266Prepaid
      expenses and other current assets
    
    
    **74**
    
    
    **-**
    
    
    **74**
    
    
    157
    
    
    2,427
    
    
    2,584Current
      assets of discontinued operations held for sale
    
    **$******
    ******5,236**
    
    **$******
    ******492**
    
    **$******
    ******5,728**
    
    $
    20,180
    
    $
    3,577
    
    $
    23,757Property,
      plant and equipment
    
    
    **16**
    
    
    **1,112**
    
    
    **1,128**
    
    
    22
    
    
    1,932
    
    
    1,954Noncurrent
      assets of discontinued operations held for sale
    
    **$******
    ******16**
    
    **$******
    ******1,112**
    
    **$******
    ******1,128**
    
    $
    22
    
    $
    1,932
    
    $
    1,954Current
      portion of long-term debt
    
    
    **223**
    
    
    **442**
    
    
    **665**
    
    
    852
    
    
    928
    
    
    1,780Accounts
      payable
    
    
    **1,932**
    
    
    **4,596**
    
    
    **6,528**
    
    
    3,644
    
    
    8,416
    
    
    12,060Accrued
      liabilities and other
    
    
    **637**
    
    
    **2,575**
    
    
    **3,212**
    
    
    4,792
    
    
    5,132
    
    
    9,924Current
      liabilities of discontinued operations held for sale
    
    **$******
    ******2,792**
    
    **$******
    ******7,613**
    
    **$******
    ******10,405**
    
    $
    9,288
    
    $
    14,476
    
    $
    23,764Long-term
      debt
    
    
    **2,275**
    
    
    **-**
    
    
    **2,275**
    
    
    9,094
    
    
    451
    
    
    9,545Noncurrent
      liabilities of discontinued operations held for sale
    
    **$******
    ******2,275**
    
    **$******
    ******-**
    
    **$******
    ******2,275**
    
    $
    9,094
    
    $
    451
    
    $
    9,545
 
 **3.**
    **SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES**
  **Use
of Estimates in the Preparation of Financial Statements**
  The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
  **Consolidation**
  The
accompanying consolidated financial statements include the accounts of Miller
Industries, Inc. and its subsidiaries. All significant intercompany transactions
and balances have been eliminated.
  **Cash
and Temporary Investments**
  Cash and
temporary investments include all cash and cash equivalent investments with
original maturities of three months or less.
   F-7
  **Fair
Value of Financial Instruments**
  The
carrying values of cash and temporary investments, accounts receivable, accounts
payable, and accrued liabilities are reasonable estimates of their fair values
because of the short maturity of these financial instruments. The carrying
values of long-term obligations are reasonable estimates of their fair values
based on the rates available for obligations with similar terms and
maturities.
  **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 for continuing operations at December 31, 2004 and 2003 consisted of
the following (in thousands):
  **2004**
    
    **2003**Chassis
    
    **$******
    ******2,556**
    
    $
    4,286Raw
      materials
    
    
    **15,667**
    
    
    10,253Work
      in process
    
    
    **10,338**
    
    
    7,892Finished
      goods
    
    
    **6,433**
    
    
    4,284**$******
    ******34,994**
    
    $
    26,715
  **Property,
Plant, and Equipment**
  Property,
plant, and equipment are recorded at cost. Depreciation for financial reporting
purposes is provided using the straight-line method over the estimated useful
lives of the assets. Accelerated depreciation methods are used for income tax
reporting purposes. Estimated useful lives range from 20 to 30 years for
buildings and improvements and 5 to 10 years for machinery and equipment,
furniture and fixtures, and software costs. Expenditures for routine maintenance
and repairs are charged to expense as incurred. Expenditures related to major
overhauls and refurbishments of towing services equipment that extend the
related useful lives are capitalized. Internal labor is used in certain capital
projects.
  Property,
plant, and equipment for continuing operations at December 31, 2004 and 2003
consisted of the following (in thousands):
  **2004**
    
    **2003**Land
    
    **$******
    ******1,783**
    
    $
    1,764Buildings
      and improvements
    
    
    **19,207**
    
    
    18,956Machinery
      and equipment
    
    
    **12,153**
    
    
    11,500Furniture
      and fixtures
    
    
    **5,094**
    
    
    5,587Software
      costs
    
    
    **6,192**
    
    
    6,142**44,429**
    
    
    43,949Less
      accumulated depreciation
    
    
    **(25,667**
    **)**
    
    (22,972
    )**$******
    ******18,762**
    
    $
    20,977
  The
Company recognized $3,092,000, $3,570,000 and $4,192,000, in depreciation
expense for continuing operations in 2004, 2003 and 2002, respectively.
Depreciation expense for discontinued operations was $148,000 and $2,196,000 in
2003 and 2002, respectively, and is included in the loss from discontinued
operations in the consolidated statement of operations.
   F-8
   The
Company capitalizes costs related to software development in accordance with
established criteria, and amortizes those costs to expense on a straight-line
basis over five years. System development costs not meeting proper criteria for
capitalization are expensed as incurred.
  **Income
(Loss) Per Common Share**
  Basic
income (loss) per common share is computed by dividing net income (loss) by the
weighted average number of common shares outstanding. Diluted income (loss) per
common 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 common share takes into consideration the assumed exercise of
outstanding stock options resulting in approximately 122,000, 43,000 and 7,000,
potential dilutive common shares in 2004, 2003 and 2002,
respectively.
  **Goodwill
and Long-Lived Assets**
  Goodwill
is accounted for in accordance with SFAS No. 141 “Business Combinations” and
SFAS No. 142 “Goodwill and Other Intangible Assets”. Upon adoption of these
standards in January 2002, the Company ceased to amortize goodwill (see Note 5
for further discussion).
  In
accordance with SFAS No. 144, “Accounting for the Impairment of Long-Lived
Assets”, management evaluates the carrying value of long-lived assets when
significant adverse changes in economic value of these assets requires an
analysis, including property and equipment and other intangible assets. With the
adoption of SFAS No. 144, in January 2002, a long-lived asset is considered
impaired when its fair value is less than its carrying value. In that event, a
loss is calculated based on the amount the carrying value exceeds the fair value
which is estimated based on future cash flows. Prior to adopting SFAS No. 144, a
long-lived asset was considered impaired when undiscounted cash flows or fair
value, whichever was more readily determinable, to be realized from such asset
was less than the carrying value.
  **Patents,
Trademarks, and Other Purchased Product Rights**
  The cost
of acquired patents, trademarks, and other purchased product rights is
capitalized and amortized using the straight-line method over various periods
not exceeding 20 years. Total accumulated amortization of these assets was
$1,415,000 and $1,275,000, for continuing operations at December 31, 2004 and
2003, respectively. Amortization expense for continuing operations in 2004, 2003
and 2002 was $140,000, $145,000 and $162,000, respectively. Amortization expense
for discontinued operations was $149,000 in 2002, and is included in the loss
from discontinued operations in the consolidated statement of
operations . Based on
the current amount of intangible assets subject to amortization, the estimated
amortization expense for the succeeding five years are as follows: 2005 - $139,000; 2006 - $113,000; 2007 - $0; 2008 - $0; 2009 - $0 . As
acquisitions and dispositions of intangible assets occur in the future, these
amounts may vary.
  **Deferred
Financing Costs**
  All
deferred financing costs are included in other assets of continuing operations
and are amortized over the terms of the respective obligations. Total
accumulated amortization of deferred financing costs at December 31, 2004 and
2003 was $1,093,000 and $300,000 ,
respectively. Amortization expense in 2004, 2003 and 2002, was $798,000, $4,627,000
and $2,878,000 ,
respectively, and is included in interest expense in the accompanying
consolidated statements of operations.
   F-9
  **Accrued
Liabilities and Other**
  Accrued
liabilities and other consisted of the following for continuing operations at
December 31, 2004 and 2003 (in thousands):
  **2004**
    
    **2003**Accrued
      wages, commissions, bonuses, and benefits
    
    **$******
    ******3,317**
    
    $
    2,747Accrued
      income taxes
    
    
    **85**
    
    
    204Other
    
    
    **2,334**
    
    
    1,420**$******
    ******5,736**
    
    $
    4,371
  **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 grant using the Black-Scholes option-pricing model with the
following weighted average assumptions for grants in 2004 and 2002,
respectively: expected dividend yield of 0%; expected volatility of 43% and 84%;
risk-free interest rate of 2.94% and 3.84%; and expected lives of 5.5 years for
2004 and 3.0 years for 2002. Using these assumptions, the fair value of options
granted in 2004 and 2002 is approximately $1,242,000 and $53,000, respectively,
which would be amortized as compensation expense over the vesting period of the
options. No options were granted during 2003.
  Had
compensation cost for stock option grants in 2004, 2003 and 2002 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 (loss) and net income (loss) per
common share would have been adjusted to the pro forma amounts indicated below
(in thousands, except per share data):
  **2004**
    
    **2003**
    
    **2002**Net
      income (loss) available to common stockholders, as
reported
    
    **$******
    ******5,475**
    
    $
    (14,153
    )
    $
    (45,694
    )Deduct:
      Total stock-based employee compensation expense
      determined
      under fair value based method for all awards, net
      of
      related tax effects
    
    
    **(262**
    **)**
    
    (265
    )
    
    (400
    )Net
      income (loss) available to common stockholders, pro forma
    
    **$******
    ******5,213**
    
    $
    (14,418
    )
    $
    (46,094
    )Income
      (loss) per common share:Basic,
      as reported
    
    **$******
    ******0.50**
    
    $
    (1.52
    )
    $
    (4.89
    )Diluted,
      as reported
    
    **$******
    ******0.50**
    
    $
    (1.52
    )
    $
    (4.89
    )Basic,
      pro forma
    
    **$******
    ******0.48**
    
    $
    (1.54
    )
    $
    (4.93
    )Diluted,
      pro forma
    
    **$******
    ******0.48**
    
    $
    (1.54
    )
    $
    (4.93
    )
  **Product
Warranty**
  The
Company provides a one-year limited product and service warranty on certain of
its products. The Company provides for the estimated cost of this warranty at
the time of sale. Warranty expense for continuing operations in 2004, 2003 and
2002, was $1,520,000, $1,547,000 and $1,489,000, respectively.
   F-10
  The table
below provides a summary of the warranty liability for December 31, 2004 and
2003 (in thousands):
  **2004**
    
    **2003**Accrual
      at beginning of the year
    
    **$******
    ******639**
    
    $
    554Provision
    
    
    **1,520**
    
    
    1,547Settlement
    
    
    **(1,494**
    **)**
    
    (1,462
    )Accrual
      at end of year
    
    **$******
    ******665**
    
    $
    639
  **Credit
Risk**
  Financial
instruments that potentially subject the Company to significant concentrations
of credit risk consist principally of cash investments and trade accounts
receivable. The Company places its cash investments with high-quality financial
institutions and limits the amount of credit exposure to any one institution.
The Company’s trade receivables are primarily from independent distributors of
towing and recovery equipment and towing service customers. Such receivables are
generally not collateralized for towing service customers. The Company monitors
its exposure for credit losses and maintains allowances for anticipated
losses.
  **Revenue
Recognition**
  Revenue
is recorded by the Company when equipment is shipped to independent distributors
or other customers. Revenue from towing services (discontinued operations) is
recognized when services are performed.
  **Financial
Instruments**
  SFAS No.
133, “Accounting for Derivative Instruments and Hedging Activities”, establishes
accounting and reporting standards requiring that every derivative instrument
(including certain derivative instruments embedded in other contracts) be
recorded in the balance sheet as either an asset or liability measured at its
fair value. Changes in the derivative’s fair value are recognized currently in
earnings unless specific hedge accounting criteria are met. Special accounting
for qualifying hedges allows a derivative’s gains and losses to offset related
results on the hedged item in the income statement, and requires that a company
must formally document, designate, and assess the effectiveness of transactions
that receive hedge accounting. The adoption of SFAS No. 133 did not have a
material effect on the Company’s financial statements. See Note 8 for additional
discussions.
 
 **Foreign
Currency Translation**
  The
functional currency for the Company’s 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.
  **Recent
Accounting Pronouncements**
  In
November 2004, the Financial Accounting Standards Board (FASB) issued 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 results of operations or financial position.
  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. As required
by SFAS No. 123R, the Company will adopt the new accounting standard effective
July 1, 2005. The Company will transition the new guidance using the modified
prospective method. The Company expects the application of the expensing
provision of SFAS No. 123R will result in pretax expense of approximately
$168,000 in the second half of 2005. Applying the same assumptions used for the
2004 pro forma disclosure in Note 3, the Company estimates its pretax expense
associated with previous stock option grants to be approximately $308,000 in
each of 2006 and 2007, and $77,000 in 2008.
   F-11
  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 will adopt this new
accounting standard effective July 1, 2005. The adoption of SFAS No. 153 is not
expected to have a material impact on the Company’s financial
statements.
  **Reclassifications**
  Certain
prior year amounts have been reclassified to conform to current year
presentation, with no impact on previously reported shareholders’ equity or net
income (loss).
  **4.**
    **SPECIAL
      CHARGES**
   The
Company periodically reviews the carrying amount of long-lived assets and
goodwill in both its towing services and towing equipment segments 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, the
Company concluded that the carrying value of such assets of certain towing
services businesses and certain assets within the Company’s towing and
recovery equipment segment were not fully recoverable.
  Charges
of $3,792,000 and $10,191,000 were recorded in 2003 and 2002, respectively, to
write-down the carrying value of certain long-lived assets (primarily property
and equipment) and other special changes 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 the 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. The Company recorded $1,113,000 and
$1,637,000 of additional costs related to the write-down of the carrying value
of other long-lived assets of its towing and recovery equipment segment in 2003
and 2002, respectively.
  Management
believes its long-lived assets are appropriately valued following the impairment
charges.
  **5.**
    **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 were effective for fiscal years beginning after December 15, 2001.
SFAS No. 141 requires 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 require the value of a separately
identifiable intangible asset meeting any of the criteria to be measured at its
fair value. SFAS No. 142 requires that goodwill not be amortized and that
amounts recorded as goodwill be tested for impairment. Annual impairment tests
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 performed an initial impairment
review of goodwill in 2002 and annual impairment reviews 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 2002. The write-off has been accounted for as a cumulative effect of
change in accounting principle to reflect application of the new accounting
standards.
   F-12
  **6.**  **LONG-TERM
OBLIGATIONS AND LINE OF CREDIT**
  **Long-Term
Obligations**
  Long-term
obligations consisted of the following for continuing operations at December 31,
2004 and 2003 (in thousands):
  **2004**
    
    **2003**Outstanding
      borrowings under Senior Credit Facility
    
    **$******
    ******19,987**
    
    $
    13,448Outstanding
      borrowings under Junior Credit Secured Facility
    
    
    **4,211**
    
    
    16,743Mortgage
      notes payable, weighted average interest rate of 5.25%,
      payable
      in monthly installments, maturing 2005 to 2009
    
    
    **1,991**
    
    
    1,304Equipment
      notes payable, weighted average interest rate of 9.97%,
      payable
      in monthly installments, maturing 2005 to 2009
    
    
    **133**
    
    
    349Other
      notes payable, weighted average interest rate of 6.38%,
      payable
      in monthly installments, maturing 2005 to 2006
    
    
    **75**
    
    
    133**26,397**
    
    
    31,977Less
      current portion
    
    
    **(2,052**
    **)**
    
    (2,050
    )**$******
    ******24,345**
    
    $
    29,927
  The
December 31, 2004 and 2003 figures do not include $2.9 million and $10.4
million, respectively, outstanding under the Senior Credit Facility relating to
discontinued operations. Obligations under the Senior Credit Facility are
allocated to discontinued operations based on the assets used to determine
borrowing availability for collateral reporting. Certain equipment and
manufacturing facilities are pledged as collateral under the mortgage and
equipment notes payable.
  **2001
Credit Facility**
  *Senior
Credit Facility* . In July
2001, the Company entered into a four year Senior Credit Facility (the “Senior
Credit Facility”) with a syndicate of lenders to replace its existing credit
facility. The Senior Credit Facility has been amended several times. The current
lenders under the Senior Credit Facility are William G. Miller, the Company’s
Chairman of the Board and Co-Chief Executive Officer, and CIT Group/Business
Credit, Inc. (“CIT”), with Mr. Miller’s portion of the loan being subordinated
to that of CIT. As discussed in further detail below, the Senior Credit Facility
is scheduled to mature in July 2005, but the Company has been granted an option,
exercisable through July 10, 2005, to extend the maturity date to July
2006.
  As
amended, the Senior Credit Facility consists 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 provides for
separate and distinct loan commitment levels for the Company’s towing and
recovery equipment segment and RoadOne segment, respectively.
  Borrowing
availability under the revolving portion of the Senior Credit Facility is 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 are collateralized by
substantially all of the Company’s domestic property, plants, and equipment. The
Company is required to make monthly amortization payments of $167,000 on the
first term loan, but the amortization payments due on November 1, 2003, December
1, 2003, and January 1, 2004 were deferred until the maturity date. The Senior
Credit Facility bears 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.
   F-13
  The
Senior Credit Facility contains 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 Senior Credit
Facility contains restrictions on capital expenditures, incurrence of
indebtedness, mergers and acquisitions, distributions and transfers and sales of
assets. The Senior Credit Facility also contains requirements related to weekly
and monthly collateral reporting.
  *Junior
Credit Facility* . The
Company’s Junior Credit Facility (the “Junior Credit Facility”) is, by its
terms, expressly subordinated only to the Senior Credit Facility, and is secured
by certain specified assets and by a second priority lien and security interest
in substantially all of the Company’s other assets. As amended, the Junior
Credit Facility contains requirements for the maintenance of certain financial
covenants. It also imposes restriction on capital expenditures, incurrence of
indebtedness, mergers and acquisitions, distributions and transfers and sales of
assets.
  Contrarian
Funds, LLC (“Contrarian”) purchased all of the outstanding debt of the Junior
Credit facility in a series of transactions during the second half of 2003. 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 as described in further detail below and in Note 7. In
November 2003, Harbourside Investments, LLLP (“Harbourside”) purchased 44.286%
of the subordinated debt and warrants from Contrarian.(See Note 7
below).
  As
described in further detail below under the heading “2003 and 2004 Amendments
and Restructuring” in February 2004, Contrarian and Harbourside finalized the
conversion of approximately $7.0 million in subordinated debt for common stock
of the Company. In connection with this purchase and restructuring of the
Company’s debt, the Junior Credit Facility was amended to, among other things,
extend its maturity date and bear interest at an effective blended rate of
14.0%.
  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. The
proceeds of this sale, together with additional borrowings under the Senior
Credit Facility, were used to retire approximately $5.4 million principal amount
of the Junior Credit Facility and approximately $350,000 of accrued interest on
such debt. The Company’s remaining Junior Credit Facility obligations consist of
approximately $4.2 million principal amount bearing interest at an annual rate
of 9.0%.
  In
November 2004, the Junior Credit Facility was amended to extend its maturity
date to January 1, 2006.
  *Maturity
of Credit Facilities* . The
Senior Credit Facility is scheduled to mature in July 2005, and the Junior
Credit Facility matures in January 2006. The Company will be required to repay,
refinance or extend the maturity dates of these Facilities when they mature. The
Company has been granted an option, exercisable through July 10, 2005, to extend
the maturity date of the Senior Credit Facility until July 2006, but there can
be no assurance that the Company will be able to repay, refinance or further
amend either of these Facilities when they finally mature. The Company currently
is engaged in negotiations that would result in a longer term senior credit
facility, but there can be no assurance that the Company will be able to
complete any such transaction on satisfactory terms, if at all.
  *Interest
Rate Sensitivity* . Because
of the amount of obligations outstanding under the Senior and Junior Credit
Facilities and the connection of the interest rate under each Facility
(including the default rates) to the prime rate, an increase in the prime rate
could have a significant effect on the Company’s ability to satisfy its
obligations under the Facilities and increase its interest expense
significantly. Therefore, the Company’s liquidity and access to capital
resources could be further affected by increasing interest rates.
  *Prior
Default of Credit Facilities* . The
Company’s failure to repay all outstanding principal, interest and any other
amounts due and owing under the Junior Credit Facility at its original July 23,
2003 maturity date constituted an event of default under the Junior Credit
Facility and also triggered an event of default under the cross default
provisions of the Senior Credit Facility . Additionally, the Company was in
default of the EBITDA covenant under the Junior Credit Facility only for the
first quarter of calendar 2003. The Company was also in default under both the
Senior and Junior Credit Facility as a result of the “going concern” explanatory
paragraph included in the report of our prior auditor (which going concern
qualification was removed, and an unqualified report subsequently delivered, in
connection with the recent re-audit of the Company’s 2002 financial statements
by its current auditor), as well as the failure to file its Annual Report for
the fiscal year ended December 31, 2002 prior to April 30, 2003.
   F-14
  Pursuant
to the terms of the intercreditor agreement between the then-existing senior and
junior lenders, the junior lender agent and the junior lenders were prevented
from taking any enforcement action or exercising any remedies against the
Company, its subsidiaries or its respective assets as a result of such events of
default during a standstill period. On July 29, 2003, the junior lender agent
gave a notice of enforcement to the senior lender agent based upon the event of
default for failure to repay the outstanding obligations under the Junior Credit
Facility on the Junior Credit Facility’s maturity date. On August 5, 2003, the
senior agent gave a payment blockage notice to the junior agent based upon
certain events of default under the Senior Credit Facility, thereby preventing
the junior agent and junior lenders from receiving any payments from the Company
in respect of the Junior Credit Facility while such blockage notice remains in
effect.
  *2003
and 2004 Amendments and Restructuring* . On
October 31, 2003, the Company entered into a forbearance agreement with the
then-existing lenders and the senior lender agent under the Senior Credit
Facility, pursuant to which, among other things, the senior lenders agreed to
forbear from exercising any remedies in respect of the defaults then existing
under the Senior Credit Facility as a result of (i) the failure to timely
deliver financial statements for fiscal year 2002 and the failure to deliver a
report of the Company’s independent certified public accountants which is
unqualified in any respect, as well as the event of default under the Senior
Credit Facility caused by the event of default arising from such failure under
the Junior Credit Facility; (ii) the failure to fulfill certain payment
obligations to the junior lenders under the Junior Credit Facility; and (iii)
the failure to fulfill certain financial covenants in the Junior Credit Facility
for one or more of the quarters ending in 2003, which failure would constitute
an event of default under the Senior Credit Facility. The forbearance period
under the forbearance agreement was to expire on the earlier of (x) December 31,
2003, (y) the occurrence of certain bankruptcy type events in respect of the
Company or any of its subsidiaries, and (z) the failure by the Company or any of
its subsidiaries that are borrower parties under the Senior Credit Facility to
perform the obligations under the Senior Credit Facility or the forbearance
agreement. Under the forbearance agreement, the senior lenders and the senior
lender agent did not waive their rights and remedies with respect to the
existing senior facility defaults, but agreed to forbear from exercising rights
and remedies with respect to the existing senior facility defaults solely during
the forbearance period.
  Simultaneous
with entering into the forbearance agreement, William G. Miller, the Chairman of
the Board and Co-Chief Executive Officer of the Company, made a $2.0 million
loan to the Company as a part of the Senior Credit Facility. The loan and Mr.
Miller’s participation in the Senior Credit Facility were effected by the
Seventh Amendment to the credit agreement and a participation agreement between
Mr. Miller and the Senior Credit Facility lenders.
  On
December 24, 2003, Mr. Miller increased his previous $2.0 million participation
in the existing Senior Credit Facility by an additional $10.0 million. These
funds, along with additional funds from CIT, an existing senior lender, were
used to satisfy the obligations to two of the other existing senior lenders.
This transaction resulted in CIT and Mr. Miller constituting the senior lenders
to the Company, with CIT holding 62.5% of such loan and Mr. Miller participating
in 37.5% of the commitment. Mr. Miller’s portion of the loan is subordinated to
that of CIT.
  In
conjunction with Mr. Miller’s increased participation, the Senior Credit
Facility was restructured and restated as a $15.0 million revolving facility and
$12.0 million and $5.0 million term loans. As a result of this restructuring,
all previously existing defaults under the Senior Credit Facility were waived,
the interest rate was lowered by 2.0% to reflect a non default rate, fees
attributable to RoadOne of $30,000 per month were eliminated, the financial
covenants were substantially relaxed, and availability under the Senior Credit
Facility was increased by approximately $5.0 million. 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 will pay additional interest at a rate of 1.8% on Mr. Miller’s
portion of the loan, which is in recognition of the fact that Mr. Miller’s
rights to payments and collateral are subordinate to those of CIT. This
transaction was approved by the Special Committee of the Board, as well as the
full Board of Directors with Mr. Miller abstaining due to his personal interest
in the transaction.
   F-15
  In order
to enter into this restructuring of the Senior Credit Facility, CIT required
that the junior lenders agree to extend the standstill and payment blockage
periods, which were to expire at the end of April 2004, until July 31, 2005,
which is after the July 23, 2005 maturity of the senior debt. The junior
facility lenders were unwilling to extend such standstill and payment blockage
dates without the conversion provisions described above having been committed to
by the Company, subject only to shareholder approval of the conversion by
Harbourside. As a result, the restructuring of the senior debt facility and the
conversion and exchange of subordinated debt and warrants described above were
cross conditioned upon each other and agreements effecting them were entered
into simultaneously on December 24, 2003.
  To
effectuate the conversion and exchange of the subordinated debt and warrants,
the Company entered into a Binding Restructuring Agreement with Contrarian and
Harbourside on December 24, 2003. Under this agreement, Contrarian and
Harbourside agreed to an exchange transaction where they would extend the
maturity date of 70.0% of the outstanding principal amount of the junior debt,
approximately $9.75 million, convert the remaining 30.0% of the outstanding
principal, plus all accrued interest and fees, into the Company’s common stock
and convert the warrants into the Company’s common stock. This agreement
contemplated that the conversions would be further documented in separate
exchange agreements and also contemplated registration rights agreements. The
Binding Restructuring Agreement also outlined the terms for amending the Junior
Credit Facility to extend its maturity date to July 31, 2005 (which is after the
July 23, 2005 maturity date of the Senior Credit Facility), to provide for an
interest rate on the remaining debt of Contrarian at 18.0% and the remaining
debt of Harbourside at a reduced rate (which was ultimately agreed to be 9.0%),
to provide for financial covenants that match those of the Senior Credit
Facility and to make other amendments to the Junior Credit Facility consistent
with amendments made to the Senior Credit Facility as it was amended on December
24, 2003. The disparity in the interest rates to be earned by Contrarian and
Harbourside is caused by Contrarian negotiating an interest rate of 18.0% as a
condition to it entering into the Binding Restructuring Agreement, as a result
of which Harbourside agreed to reduce the rate to be received by it to 9.0% so
that the Company would continue to pay an effective blended interest rate of
14.0% on the aggregate of the subordinated debt following the exchange
transactions. At the same time, Contrarian and Harbourside entered into an
agreement with the senior lenders to extend the maturity date of the
subordinated debt that they would continue to hold.
  In
January 2004, the Company entered into separate exchange agreements with
Contrarian and Harbourside, a registration rights agreement with Contrarian and
Harbourside and an amendment to the Junior Credit Facility with Contrarian and
Harbourside, all as contemplated in the Binding Restructuring Agreement.
Additional details regarding the specific terms of the exchange agreements can
be found in Note 7 “Related Party Transactions”. Under the amendment to the
Junior Credit Facility, the maturity of the remaining subordinated debt was
extended and the interest rates thereon were altered and the financial covenants
were amended to match those in the Senior Credit Facility, which had been
substantially relaxed in the Company’s favor on December 24, 2003.
  Future
maturities of long-term obligations at December 31, 2004 are as follows (in
thousands):
  **Continuing
      Operations**
    
    **Discontinued
      Operations**
    
    **Total**2005
    
    $
    2,052
    
    $
    665
    
    $
    2,7172006
    
    
    22,573
    
    
    2,275
    
    
    24,8482007
    
    
    129
    
    
    -
    
    
    1292008
    
    
    135
    
    
    -
    
    
    1352009
    
    
    1,508
    
    
    -
    
    
    1,508Thereafter
    
    
    -
    
    
    -
    
    
    -$
    26,397
    
    $
    2,940
    
    $
    29,337
     F-16
   **7.**
    **RELATED
      PARTY TRANSACTIONS**
  **Subordinated
Debt and Warrant Conversion**
  Harbourside
Investments LLLP is a limited liability limited partnership of which several of
the Company’s executive officers and directors are partners. Specifically,
William G. Miller is the general partner of, and controls, 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, are 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 are secured by pledges of their respective limited
partnership interests to Mr. Miller.
  As
partners of Harbourside, 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. As general partner of Harbourside, Mr. Miller
has sole voting power over the shares of common stock that Harbourside received
in the exchange. This transaction was approved by the Special Committee of the
Board, 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. Other than the exchange, the Company has not engaged in any
transactions with Harbourside. Neither the Company nor Harbourside currently
intend to engage in any other transactions in the future except as may be
related to Harbourside’s continuing ownership of a portion of the subordinated
debt.
  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 is 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, pursuant to which it later issued 583,556 shares of the Company’s
common stock upon shareholder approval in exchange for approximately $1.8
million principal amount of, plus approximately $1.3 million of accrued interest
and fees thereon.
  Under the
Exchange Agreement, Harbourside retained 70% of the outstanding principal amount
of the subordinated debt that it held and converted the remaining 30% of the
outstanding principal amount of such debt plus all accrued interest and
commitment fees thereunder into shares of the Company’s common stock.
Immediately prior to entering into the Exchange Agreement, Harbourside held
approximately $7.5 million of the Company’s subordinated debt, consisting of
approximately $6.1 million of outstanding principal and approximately $1.3
million of accrued interest and fees. Harbourside continues to hold
approximately $4.3 million principal amount of subordinated debt and converted
approximately $3.2 million of the subordinated debt (30% of $6.1 million
principal amount, plus approximately $1.3 million of accrued interest and fees)
into 548,738 shares of the Company’s common stock. In addition, Harbourside
received 34,818 shares of the Company’s common stock in exchange for the
warrants to purchase 82,382 shares of the Company’s common stock. The Company
paid Harbourside approximately $65,000 in interest expense on the subordinated
holdings.
  The
subordinated debt was originally issued pursuant to that certain Amended and
Restated Credit Agreement, dated July 23, 2001, as amended, by and among the
Company and Miller Industries Towing Equipment, Inc., a Delaware corporation and
Bank of America, N.A. in its capacity as a lender, and certain other financial
institutions. This Junior Credit Facility and the notes issued pursuant to it
are subordinate to the Senior Credit Facility which was also
   F-17
  entered
into on July 23, 2001. The subordinated debt had an original aggregate principal
amount of $14.0 million bearing interest at the prime rate plus 6.0% per annum
and at the time of Contrarian’s purchases had an outstanding principal amount of
approximately $13.9 million bearing interest at the default rate of 14% per
annum. The original maturity date of the subordinated debt was July 23, 2003.
The total amount outstanding on the subordinated debt as of January 14, 2004,
including accrued interest and commitment fees, was approximately $16.8 million
with an interest rate of 14% per annum continuing to apply.
  As a part
of its purchases of the subordinated debt, Contrarian also purchased warrants,
or the rights to receive warrants, to purchase 186,028 shares of the Company’s
common stock. The Company issued these warrants to the initial lenders under the
Junior Credit Facility pursuant to a Warrant Agreement, dated July 23, 2001, by
and among the Company and the initial lenders. The 186,028 total consists of
warrants issued in July 2002 for the purchase of 47,417 shares of the Company’s
common stock at an exercise price of $3.48 and warrants issued in October 2003
for 138,611 shares of common stock at an exercise price of $3.27. Other than
these 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.
  **Senior
Credit Facility**
  Simultaneously
with entering into a forbearance agreement on October 31, 2003 with respect to
the Senior Credit Facility, Mr. Miller made a $2.0 million loan to the Company
as a part of the Senior Credit Facility. The loan to the Company and Mr.
Miller’s participation in the Senior Credit Facility were effected by an
amendment to the credit agreement and a participation agreement between Mr.
Miller and the Senior Credit Facility lenders.
  On
December 24, 2003, Mr. Miller increased his $2.0 million participation in the
existing 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 is subordinated to that of
CIT. The Company paid Mr. Miller approximately $.09 million in interest expense
related to his portion of the senior credit facility.
  In
conjunction with Mr. Miller’s increased participation, the 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 will pay additional interest at a rate of 1.8% on Mr. Miller’s
portion of the loan, which is in recognition of the fact that Mr. Miller’s
rights to payments and collateral are subordinate to those of CIT. This
transaction was approved by the Special Committee of the Board, as well as the
full Board of Directors with Mr. Miller abstaining due to his personal interest
in the transaction.
  **8.**
    **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 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 Senior 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 expired
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.
Upon expiration of these hedges, the amount recorded in Other Comprehensive Loss
will be reclassified into earnings as interest. In
   F-18
  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 2002 at a cost of $341,000. The resulting
loss was recorded in Other Comprehensive Loss in 2002 and is being reclassified
to earning as interest expense over the term of the Senior Credit
Facility.
  As
described in Note 7, the Junior Credit Facility contains provisions for the
issuance of warrants of 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
warrants were valued as of July 2001 based on the estimated relative fair value
using the Black Scholes model with the following assumptions: risk-free rate of
4.9% estimated life of 7 years, 72% volatility and no dividend yield.
Accordingly, the Company recorded a liability and made periodic mark to market
adjustments, which are reflected in the accompanying consolidated statements of
operations in accordance with EITF Issue 00-19, “Accounting for Derivative
Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own
Stock”. At December 31, 2003, the related liability was $349,000 and is included
in accrued liabilities in the accompanying consolidated financial
statements.
  As
described in Note 7 - “Related Party Transactions”, in 2004, the warrants were
exchanged for shares of the Company’s common stock and are no longer
outstanding.
  **9.**
    **STOCK-BASED
      COMPENSATION PLANS**
  In
accordance with the Company’s stock-based compensation plans, the Company may
grant incentive stock options as well as non-qualified and other stock-related
incentives to officers, employees, and non-employee directors of the Company.
Options vest ratably over a two to four-year period beginning on the grant date
and expire ten years from the date of grant. Shares available for granting
options at December 31, 2004, 2003 and 2002 were approximately 0.6 million, 0.5
million and 0.5 million, respectively.
  A summary
of the activity of stock options for the years ended December 31, 2004, 2003 and
2002, is presented below (shares in thousands):
  **2004**
    
    **2003**
    
    **2002******
    
    
    **Shares**
      **Under**
      **Option**
    
    
    **Weighted**
      **Average**
      **Exercise**
      **Price**
    
    
    **Shares**
      **Under**
      **Option**
    
    
    **Weighted**
      **Average**
      **Exercise**
      **Price**
    
    
    **Shares**
      **Under**
      **Option**
    
    
    **Weighted**
      **Average**
      **Exercise**
      **Price**Outstanding
      at Beginning of Period
    
    
    **745**
    
    **$******
    ******19.90**
    
    
    761
    
    $
    19.58
    
    
    948
    
    $
    19.49Granted
    
    
    **340**
    
    
    **8.31**
    
    
    -
    
    
    -
    
    
    28
    
    
    3.37Exercised
    
    
    **(9**
    **)**
    
    **3.15**
    
    
    (1
    )
    
    3.05
    
    
    -
    
    
    -Forfeited
      and cancelled
    
    
    **(271**
    **)**
    
    **17.99**
    
    
    (15
    )
    
    5.02
    
    
    (215
    )
    
    16.91Outstanding
      at End of Period
    
    
    **805**
    
    **$******
    ******15.46**
    
    
    745
    
    $
    19.90
    
    
    761
    
    $
    19.58Options
      exercisable at year end
    
    
    **455**
    
    **$******
    ******21.12**
    
    
    714
    
    $
    20.64
    
    
    648
    
    $
    22.22Weighted
      average fair value of options granted
    
    
    
    
    **$**
    **3.65**
    
    
    
    
    
    -
    
    
    
    
    $
    1.88
  A summary
of options outstanding under the Company’s stock-based compensation plans at
December 31, 2004 is presented below (shares in thousands):
 
 **Exercise
      Price Range**
    
    
    **Shares
      Under Option**
    
    
    **Weighted**
      **Average**
      **Exercise**
      **Price
      of**
      **Options**
      **Outstanding**
    
    
    **Weighted**
      **Average**
      **Remaining**
      **Life**
    
    
    **Options**
      **Exercisable**
    
    
    **Weighted**
      **Average**
      **Exercise**
      **Price
      of**
      **Shares**
      **Exercisable**$
    3.05
    -
    $
    3.37
    
    
    87
    
    $
    3.15
    
    
    7.0
    
    
    74
    
    $
    3.174.60
    -
    
    5.63
    
    
    37
    
    
    4.62
    
    
    6.5
    
    
    37
    
    
    4.627.01
    -
    
    8.31
    
    
    370
    
    
    8.19
    
    
    8.9
    
    
    33
    
    
    7.0210.62
    -
    
    11.67
    
    
    41
    
    
    10.94
    
    
    4.7
    
    
    41
    
    
    10.9417.50
    -
    
    22.50
    
    
    152
    
    
    19.36
    
    
    1.5
    
    
    152
    
    
    19.3628.74
    -
    
    38.20
    
    
    57
    
    
    34.50
    
    
    2.7
    
    
    57
    
    
    34.5043.95
    -
    
    63.55
    
    
    42
    
    
    53.38
    
    
    1.7
    
    
    42
    
    
    53.3870.00
    -
    
    82.50
    
    
    19
    
    
    73.28
    
    
    2.4
    
    
    19
    
    
    73.28Total
    
    
    805
    
    $
    15.46
    
    
    6.0
    
    
    455
    
    $
    21.12
 
  F-19
   **10.**
    **COMMITMENTS
      AND CONTINGENCIES**
  *Commitments*
  The
Company has entered into various operating leases for buildings, office
equipment, and trucks. Rental expense under these leases for continuing
operations was $850,000, $1,928,000 and $2,729,000 in 2004, 2003 and 2002,
respectively. Rental expense under these leases for discontinued operations was
$551,000, $2,011,000 and $8,153,000 in 2004, 2003 and 2002,
respectively.
  At
December 31, 2004, future minimum lease payments under non-cancelable operating
leases for the next five fiscal years are as follows (in
thousands):
  **Continuing
      Operations**
    
    **Discontinued
      Operations**
    
    **Total**2005
    
    $
    678
    
    $
    246
    
    $
    9242006
    
    
    462
    
    
    220
    
    
    6822007
    
    
    294
    
    
    168
    
    
    4622008
    
    
    51
    
    
    98
    
    
    1492009
    
    
    20
    
    
    -
    
    
    20Thereafter
    
    
    93
    
    
    -
    
    
    93
  *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.
  **11.**
    **INCOME
      TAXES**
  Deferred
tax assets and liabilities are determined based on the differences between the
financial and tax basis of existing assets and liabilities using the currently
enacted tax rates in effect for the year in which the differences are expected
to reverse.
  The
(benefit) provision for income taxes on income from continuing operations
consisted of the following in 2004, 2003 and 2002, (in thousands):
  **2004**
    
    **2003**
    
    **2002**Current:Federal
    
    **$**
    **-**
    
    $
    839
    
    $
    (256
    )State
    
    
    **317**
    
    
    246
    
    
    297Foreign
    
    
    **423**
    
    
    131
    
    
    533**740**
    
    
    1,216
    
    
    574Deferred:Federal
    
    
    **-**
    
    
    (290
    )
    
    6,620State
    
    
    **-**
    
    
    288
    
    
    (177
    )Foreign
    
    
    **-**
    
    
    2
    
    
    191****
    
    
    
    
    
    -
    
    
    6,634**$**************
    **************740**
    
    $
    1,216
    
    $
    7,208
  
   F-20
   The
principal differences between the federal statutory tax rate and the income
expense (benefit) from continuing operations in 2004, 2003 and
2002:
  **2004**
    
    **2003**
    
    **2002**Federal
      statutory tax rate
    
    
    **34.0**
    **%**
    
    34.0
    %
    
    34.0
    %State
      taxes, net of federal tax benefit
    
    
    **4.0**
    **%**
    
    4.0
    %
    
    5.5
    %Change
      in deferred tax asset valuation allowance
    
    
    **(34.0**
    **%)**
    
    0.0
    %
    
    26.1
    %Excess
      of foreign tax over US tax on foreign income
    
    
    **4.9**
    **%**
    
    0.0
    %
    
    5.0
    %Other
    
    
    **0.7**
    **%**
    
    (1.0
    %)
    
    (0.6
    )%Effective
      tax rate
    
    
    **9.6**
    **%**
    
    37.0
    %
    
    70.0
    %
  Deferred
income tax assets and liabilities at December 31, 2004, 2003 and 2002 reflect
the impact of temporary differences between the amounts of assets and
liabilities for financial reporting and income tax reporting purposes. Temporary
differences and carry forwards which give rise to deferred tax assets and
liabilities at December 31, 2004, 2003 and 2002 are as follows (in
thousands):
  **2004**
    
    **2003**
    
    **2002**Deferred
      tax assets:Allowance
      for doubtful accounts
    
    **$******
    ******423**
    
    $
    377
    
    $
    305Accruals
      and reserves
    
    
    **1,496**
    
    
    1,463
    
    
    1,326Federal
      net operating loss carryforward
    
    
    **14,146**
    
    
    10,078
    
    
    8,118Deductible
      goodwill and impairment charges
    
    
    **(18**
    **)**
    
    (22
    )
    
    9,391Other
    
    
    **-**
    
    
    1,957
    
    
    272Total
      deferred tax assets
    
    
    **16,047**
    
    
    13,853
    
    
    19,412Less
      valuation allowance
    
    
    **(14,834**
    **)**
    
    (9,001
    )
    
    (13,601
    )Net
      deferred tax asset
    
    
    **1,213**
    
    
    4,852
    
    
    5,811Deferred
      tax liabilities:Property,
      plant, and equipment
    
    
    **1,213**
    
    
    4,852
    
    
    5,811Total
      deferred tax liabilities
    
    
    **1,213**
    
    
    4,852
    
    
    5,811Net
      deferred tax asset
    
    **$**
    -
    
    $
    -
    
    $
    -
  Included
in the Company’s noncurrent assets of discontinued operations at December 31,
2004 and 2003, is a net noncurrent deferred tax asset of $1.4 million and $4.1
million, respectively, relating primarily to tax deductible goodwill and
reserves that are not deductible for tax purposes until paid. In addition, the
Company’s noncurrent liabilities of discontinued operations at December 31, 2004
and 2003, include noncurrent deferred tax liability of $0.0 million and $0.2
million, respectively, related primarily to differences in the book and tax
bases of fixed assets. The net deferred tax assets of the discontinued
operations of $1.4 and $4.3 million have a full valuation
allowance.
  As of
December 31, 2004, the Company had federal net operating loss carryforwards of
approximately $37.2 million which will expire between 2005 and 2024. While the
majority of these loss carryforwards are associated with the Company’s
discontinued operations, the Company has classified the related deferred tax
asset and valuation allowance as a component of continuing operations since it
believes it will be able to retain these tax attributes. In addition, the
Company had charitable contributions of $0.3 million that may be carried forward
through 2007 and an AMT credit carryforward of approximately $0.2 million, which
may be carried forward indefinitely.
  The
valuation allowance reflects the Company’s recognition that continuing losses
from operations and certain liquidity matters indicate that it is unclear
whether certain future tax benefits will be realized as a result of future
taxable income. At December 31, 2004, 2003 and 2002, the Company recorded a full
valuation allowance against its net deferred tax asset from continuing and
discontinuing operations totaling approximately $16.2 million, $13.3 million and
$18.0 million, respectively.
   F-21
  As of
December 31, 2004, the Company has state net operating loss carryforwards of
approximately $97.0 million. As the Company believes that realization of the
benefit of these state losses is remote because the Company no longer has
operations in many of these states, it has not recorded deferred tax assets
associated with these losses.
  The
Company received federal tax refunds of approximately $8.8 million during 2002,
which was used to reduce the RoadOne revolver and cured the over-advance
position that existed at that time.
  **12.**
    **PREFERRED
      STOCK**
  The
Company has authorized 5,000,000 shares of undesignated preferred stock which
can be issued in one or more series. The terms, price, and conditions of the
preferred shares will be set by the board of directors. No shares have been
issued.
  **13.**
    **EMPLOYEE
      BENEFIT PLANS**
  During
1996, the Company established a contributory retirement plan for all full-time
employees with at least 90 days of service. Effective January 1, 1999, the
Company split the plan into two identical plans by operating segment. As a
result of the Company’s decision to dispose of its towing services operations
the two separate plans were combined to form a consolidated plan effective
January 1, 2003. These plans are designed to provide tax-deferred income to the
Company’s employees in accordance with the provisions of Section 401 (k) of the
Internal Revenue Code.
  These
plans provide that each participant may contribute up to 15% of his or her
salary. The Company matches 33.33% of the first 3% of participant contributions.
Matching contributions vest over the first five years of employment. Company
contributions to the plans were not significant in 2004, 2003 and
2002.
  **14.**
    **GEOGRAPHIC
      AND CUSTOMER INFORMATION**
   Net sales
and long-lived assets (property, plant and equipment and goodwill and intangible
assets) by region was as follows (revenue is attributed to regions based on the
locations of customers) (in thousands):
  **2004**
    
    **2003**
    
    **2002****Net
      Sales**
    
    **Long-Lived
      Assets**
    
    **Net
      Sales**
    
    **Long-Lived
      Assets**
    
    **Net
      Sales**
    
    **Long-Lived
      Assets**North
      America
    
    $
    196,902
    
    $
    28,026
    
    $
    171,627
    
    $
    30,086
    
    $
    199,620
    
    $
    32,341Foreign
    
    
    39,406
    
    
    2,607
    
    
    34,369
    
    
    2,902
    
    
    31,883
    
    
    2,934$
    236,308
    
    $
    30,633
    
    $
    205,996
    
    $
    32,988
    
    $
    231,503
    
    $
    35,275
  No single
customer accounted for 10% or more of consolidated net sales in 2004, 2003 or
2002.
  **15.**
    **QUARTERLY
      FINANCIAL INFORMATION (UNAUDITED)**
  The
following is a summary of the unaudited quarterly financial information for the
years ended December 31, 2004 and 2003 (in thousands, except per share
data):
  **Net
      Sales**
    
    **Operating**
      **Income**
      **(Loss)**
    
    **Loss
      From**
      **Discontinued**
      **Operations**
    
    **Net
      Income**
      **(Loss)(a)**
    
    **Basic
      Income**
      **(Loss)
      Per**
      **Share**
    
    **Diluted**
      **Income**
      **(Loss)
      Per**
      **Share***2004*First
      Quarter
    
    $46,158
    
    $2,329
    
    $(488)
    
    $612
    
    $0.06
    
    $0.06Second
      Quarter
    
    59,648
    
    3,327
    
    (322)
    
    1,753
    
    0.16
    
    0.16Third
      Quarter
    
    63,300
    
    3,376
    
    (471)
    
    1,522
    
    0.14
    
    0.14Fourth
      Quarter
    
    67,202
    
    3,351
    
    (230)
    
    1,588
    
    0.14
    
    0.14Total
    
    $236,308
    
    $12,383
    
    $(1,511)
    
    $5,475
    
    $0.50
    
    $0.50*2003*First
      Quarter
    
    $
    47,893
    
    $
    3,310
    
    $
    (2,302
    )
    $
    (559
    )
    $
    (0.06
    )
    $
    (0.06
    )Second
      Quarter
    
    
    57,962
    
    
    3,217
    
    
    (2,136
    )
    
    (493
    )
    
    (0.05
    )
    
    (0.05
    )Third
      Quarter
    
    
    50,321
    
    
    1,439
    
    
    (4,845
    )
    
    (6,835)(b
    )
    
    (0.74
    )
    
    (0.74
    )Fourth
      Quarter
    
    
    49,820
    
    
    1,611
    
    
    (6,940
    )
    
    (6,266)(b
    )
    
    (0.67
    )
    
    (0.67
    )Total
    
    $
    205,996
    
    $
    9,577
    
    $
    (16,223
    )
    $
    (14,153
    )
    $
    (1.52
    )
    $
    (1.52
    )
  (a) The
income tax provision (benefit) has been allocated by quarter based on the
effective rate for the twelve months ended December 31, 2004 and
2003.
  (b) The
results of operations reflect asset impairments and other special charges as
discussed in Notes 4 and 5.
   F-22
  **MILLER
INDUSTRIES, INC. AND SUBSIDIARIES**
  **SCHEDULE
II -VALUATION AND QUALIFYING ACCOUNTS**
  **Balance
      at**
      **Beginning**
      **of
      Period**
    
    **Charged
      to**
      **Expenses**
    
    **Charged
      to**
      **Other**
    
    **Accounts**
      **Written
      Off**
    
    **Balance
      at**
      **End
      of**
      **Period****(In
      Thousands)**Year
      ended December 31, 2002:Deduction
      from asset accounts:Allowance
      for doubtful accounts
    
    $
    576
    
    
    563
    
    
    -
    
    
    (334
    )
    $
    805Year
      ended December 31, 2003:Deduction
      from asset accounts:Allowance
      for doubtful accounts
    
    $
    805
    
    
    492
    
    
    -
    
    
    (235
    )
    $
    1,062Year
      ended December 31, 2004:Deduction
      from asset accounts:Allowance
      for doubtful accounts
    
    $
    1,062
    
    
    567
    
    
    -
    
    
    (513
    )
    $
    1,116
 
 
 
 **Balance
      at**
      **Beginning
      of**
      **Period**
    
    **Charged
      to**
      **Expense**
    
    **Claims**
    
    **Balance
      at**
      **End
      of Period****(In
      Thousands)**Year
      ended December 31, 2002:Product
      Warranty Reserve:
    
    $
    926
    
    
    1,489
    
    
    (1,861
    )
    $
    554Year
      ended December 31, 2003:Product
      Warranty Reserve:
    
    $
    554
    
    
    1,547
    
    
    (1,462
    )
    $
    639Year
      ended December 31, 2004:Product
      Warranty Reserve:
    
    $
    639
    
    
    1,520
    
    
    (1,494
    )
    $
    665
 
  S-1
  
 **Balance
      at**
      **Beginning
      of**
      **Period**
    
    **Additions**
      **(Reductions)**
    
    **Balance
      at**
      **End
      of**
      **Period****(In
      Thousands)**Year
      ended December 31, 2002:Deferred
      Tax Valuation Allowance:
    
    $
    6,011
    
    
    12,021
    
    $
    18,032Year
      ended December 31, 2003:Deferred
      Tax Valuation Allowance:
    
    $
    18,032
    
    
    (4,733
    )
    $
    13,299Year
      ended December 31, 2004:Deferred
      Tax Valuation Allowance:
    
    $
    13,299
    
    
    2,889
    
    $
    16,188
  Note:
    The
      Allowance for Doubtful Accounts and Product Warranty Reserve tables above
      reflect activity for continuing operations for the years ended December
      31, 2004, 2003 and 2002. The Deferred Tax Valuation Allowance table
      reflects consolidated operations for all periods
presented.









S-2










**SIGNATURES**




Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the Registrant has duly caused this Report to be signed on its behalf by
the undersigned, thereunto duly authorized, on the 14 th day of
March, 2005.




****MILLER
      INDUSTRIES, INC.****By:
    /s/ Jeffrey
      I. BadgleyJeffrey
      I. Badgley
      President,
      Co-Chief Executive Officer and Director




Know all
men by these presents, that each person whose signature appears below
constitutes and appoints Jeffrey I. Badgley as attorney-in-fact, with power of
substitution, for him in any and all capacities, to sign any amendments to this
Report on Form 10-K, and to file the same, with exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
hereby ratifying and confirming all that said attorney-in-fact may do or cause
to be done by virtue hereof.




Pursuant
to the requirements of the Securities Exchange Act of 1934, this Report has been
signed below by the following persons on behalf of the Registrant in the
capacities indicated on the 14 th day of
March, 2005.




**Signature**
    
    **Title**/s/
      William G. Miller
      William G. Miller
    
    Chairman
      of the Board of Directors and Co-Chief
      Executive
      Officer/s/
      Jeffrey I. Badgley
      Jeffrey I. Badgley
    
    President,
      Co-Chief Executive Officer and Director/s/
      J. Vincent Mish
      J. Vincent Mish
    
    Executive
      Vice President, Treasurer and Chief Financial
      Officer
      (Principal Financial and Accounting Officer)/s/
      A. Russell Chandler, III
      A. Russell Chandler, III
    
    Director/s/
      Paul E. Drack
      Paul E. Drack
    
    Director/s/
      Richard H. Roberts
      Richard H. Roberts
    
    Director











**EXHIBIT
INDEX**




**Exhibit
      Number**
    
    **Description**10.100
    
    Consent
      and Tenth Amendment to Credit Agreement by and between the Registrant and
      The CIT Group/Business Credit, Inc., dated November 22, 200410.101
    
    Amendment
      No. 4 to Amended and Restated Credit Agreement by and among the
      Registrant, Miller Industries Towing Equipment, Inc., Harbourside
      Investments, LLLP and certain guarantors set forth on the signature pages
      thereto, dated November 5, 200421
    
    Subsidiaries
      of the Registrant23.1
    
    Consent
      of Joseph Decosimo and Company, LLP24
    
    Power
      of Attorney (see signature page)31.1
    
    Certification
      Pursuant to Rules 13a-14(a) or 15d-14(a) by Co-Chief Executive
      Officer31.2
    
    Certification
      Pursuant to Rules 13a-14(a) or 15d-14(a) by Co-Chief Executive
      Officer31.3
    
    Certification
      Pursuant to Rules 13a-14(a) or 15d-14(a) by Chief Financial
      Officer32.1
    
    Certification
      Pursuant to 18 U.S.C. Section 1350 by Co-Chief Executive
      Officer32.2
    
    Certification
      Pursuant to 18 U.S.C. Section 1350 by Co-Chief Executive
      Officer32.3
    
    Certification
      Pursuant to 18 U.S.C. Section 1350 by Chief Financial Officer