Summary of MILLER INDUSTRIES INC /TN/

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Executive Overview

Miller Industries, Inc. is the world's largest manufacturer of vehicle towing and recovery equipment, with domestic manufacturing subsidiaries in Tennessee and Pennsylvania, and foreign manufacturing subsidiaries in France and the United Kingdom. We offer a broad range of equipment to meet our customers' design, capacity and cost requirements under our Century®, Vulcan®, Challenger®, Holmes®, Champion®, Chevron™, Eagle®, Titan®, Jige™ and Boniface™ brand names. In this Item 2 - "Management's Discussion and Analysis of Financial Condition and Results of Operations," the words "Miller Industries," "the Company," "we," "our," "ours" and "us" refer to Miller Industries, Inc. and its subsidiaries or any of them.

Our management focuses on a variety of key indicators to monitor our overall operating and financial performance. These indicators include measurements of revenue, operating income, gross margin, 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 including general economic conditions as well as demand for, and price of, our products, our technological competitiveness, our reputation for providing quality products and reliable service, competition within our industry, and the cost of raw materials (including aluminum, steel and petroleum-related products).

Our industry is cyclical in nature and in recent years the overall demand for our products and our resulting revenues continued to be negatively affected by:

? wavering levels of consumer confidence;

? volatility and disruption in domestic and international capital and credit markets and the resulting decrease in the availability of financing, including floor plan financing, for our customers and towing operators;

? significant periodic increases in fuel and insurance costs and their negative effect on the ability of our customers to purchase towing and related equipment;

? the overall effects of the global economic downturn; and

? currently, the slow economic recovery.

We remain concerned about the continuing effects of these factors on the towing and recovery industry have continued certain steps implemented in 2009 to lower costs in response to these uncertainties. These steps included headcount reductions for certain non-production personnel and reductions in certain administrative expenses. Due to increased demand for our domestic products and higher production of follow-on government orders through prime contracts during 2010 and the first nine months of 2011, production hours at all facilities were restored and reduced work weeks and furloughs were eliminated. We will continue to monitor our overall cost structure to ensure that it remains in line with business conditions.

In addition, we have been and will continue to be affected by changes in the prices that we pay for raw materials, particularly aluminum, steel, petroleum-related products and other raw materials, which represent a substantial part of our total costs of operations. In the past, as we have determined necessary, we have implemented price increases to offset these higher costs. We also developed alternatives to some of the components used in our production process that incorporate these raw materials, and our suppliers have implemented these alternatives in the production of our component parts. We continue to monitor raw material prices and availability in order to more favorably position the Company in this dynamic market.

During the second half of 2008, we began to secure follow-on governmental orders through prime contractors for which we now expect production to be completed during the fourth quarter of 2011. Through these follow-on orders, along with continued performance in the governmental and international marketplace, we were able to somewhat offset significantly lower demand from our commercial customers which began in the second half of 2008. Although demand from our commercial customers has not recovered to pre-2008 levels, we have seen strengthening demand from these customers during 2010 and 2011. However, the increase in revenues in the first nine months of 2011 is due primarily to the impact of our follow-on government orders. For the three months ended September 30, 2011, 22.3% of our consolidated sales were made to prime contractors for government-related orders, as compared to 22.3% during the second quarter of 2011, 41.6% during the first quarter of 2011 and 17.6% during the fourth quarter of 2010. We expect deliveries on our follow-on orders to continue at roughly current levels through the end of this year, but at this time we do not expect to receive additional follow-on government-related orders in the near term. We continue to work to secure additional domestic and foreign governmental orders, but we cannot predict the success or timing of any such efforts.

There were no borrowings under the current credit facility at September 30, 2011.

Critical Accounting Policies

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

Accounts receivable

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

Inventory

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

Long-lived assets

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

Goodwill

Goodwill is tested for impairment annually or if an event or circumstance occurs that would more likely than not reduce the fair value of the reporting unit below the carrying amount. We assess the fair value of goodwill using impairment testing generally based on a two-step test. The first step identifies potential impairment by comparing the fair value of the reporting unit with its carrying value. If the fair value exceeds the carrying value the second step is not necessary. If the carrying value is more than the fair value, the second step of testing is performed to compare the fair value of the goodwill with its carrying value. An impairment loss would be recognized to the extent that the carrying value of the goodwill exceeds it fair value. We cannot predict the occurrence of certain events or changes in circumstances that might adversely affect the carrying value of goodwill. Such events might include, but are not limited to, the impact of the economic environment or a material change in a relationship with significant customers.

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. If unrecognized tax positions exist, we record interest and penalties related to the unrecognized tax positions as income tax expense in our consolidated statement of income.

Revenues

Under our accounting policies, revenues are recorded when the risk of ownership for products has transferred to independent distributors or other customers, which generally occurs on shipment. From time to time, revenue is recognized under a bill and hold arrangement. Recognition of revenue on bill and hold arrangements occurs when risk of ownership has passed to the customer, a fixed written commitment has been provided by the customer, the goods are complete and ready for shipment, the goods are segregated from inventory, no performance obligation remains, and a schedule for delivery has been established. 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.

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. Foreign currency translation adjustments are included in shareholders' equity. Intercompany debt denominated in a currency other than the functional currency, is remeasured into the functional currency. Gains and losses resulting from foreign currency transactions are included in other income and expense in our consolidated statement of income.

Results of Operations-Three Months Ended September 30, 2011 Compared to Three Months Ended September 30, 2010

Net sales for the three months ended September 30, 2011 increased 31.4% to $96.8 million from $73.7 million for the comparable period in 2010. This increase was primarily attributable to increased revenues from a prime contractor for a government-related order discussed above, as well as increased activity from our commercial customers.

Costs of operations for the three months ended September 30, 2011 increased 30.4% to $81.2 million from $62.3 million for the comparable period in 2010, which was attributable to the increase in domestic and governmental sales described above. Overall, costs of operations decreased as a percentage of sales from 84.5% to 83.9%, primarily due to product mix during the quarter consisting of a lower percentage of lower margin chassis sales.

Selling, general, and administrative expenses for the three months ended September 30, 2011 increased to $7.5 million from $6.5 million for the three months ended September 30, 2010. This increase was attributable to higher sales levels during the period, as well as increased sales commissions and incentives and medical costs. As a percentage of sales, selling, general, and administrative expenses decreased to 7.7% for the three months ended September 30, 2011 from 8.8% for the three months ended September 30, 2010 due to the fixed nature of certain of these expenses.

Total interest expense increased to $0.2 from $0.1 million for the three months ended September 30, 2011 as compared to the comparable period in 2010. Increases in interest expense were primarily due to increases in interest on chassis purchases.

Other income and expense relate to foreign currency transaction gains and losses. During the three months ended September 30, 2011, the gain was $9,000 compared to a loss of $37,000 for the prior year period.

The provision for income taxes for the three months ended September 30, 2011 and 2010 reflects a combined effective U.S. federal, state and foreign tax rate of 38.9% and 39.3%, respectively.

Results of Operations-Nine Months Ended September 30, 2011 Compared to Nine Months Ended September 30, 2010

Net sales for the nine months ended September 30, 2011 increased 33.5% to $303.3 million from $227.2 million for the comparable period in 2010. This increase was primarily attributable to increased revenues from a prime contractor for a government-related order discussed above, which order was completed during the first quarter of 2011, as well as an add on order for this prime contractor. The increase was also partially attributable to increased activity from our commercial customers.

Costs of operations for the nine months ended September 30, 2011 increased 28.6% to $249.4 million from $193.9 million for the comparable period in 2010, which was attributable to the increase in domestic and governmental sales described above. Overall, costs of operations decreased as a percentage of sales from 85.4% to 82.3% primarily due to product mix during the first nine months of 2011 consisting of a lower percentage of lower margin chassis sales.

Selling, general, and administrative expenses for the nine months ended September 30, 2011 increased to $23.3 million from $19.7 million for the nine months ended September 30, 2010. This increase was attributable to higher sales levels during the period, as well as increased sales commissions and incentives and medical costs. As a percentage of sales, selling, general, and administrative expenses decreased to 7.7% for the nine months ended September 30, 2010 from 8.7% for the nine months ended September 30, 2010 due to the fixed nature of certain of these expenses.

Total interest expense increased to $0.5 million for the nine months ended September 30, 2011 from $0.2 million for the comparable prior year period. Increases in interest expense were primarily due to increases in interest on chassis purchases.

Other income and expense relate to foreign currency transaction gains and losses. During the nine months ended September 30, 2011, the gain was $18,000 compared to a loss of $0.1 million for the prior year period.

The provision for income taxes for the nine months ended September 30, 2011 and 2010 reflects a combined effective U.S. federal, state and foreign tax rate of 39.7% and 38.9%, respectively.

Liquidity and Capital Resources

Cash provided by operating activities was $3.9 million for the nine months ended September 30, 2011, compared to $13.8 million for the comparable period in 2010. The cash provided by operating activities for the 2011 period is attributable to higher net income and increases in accounts payable and accrued liabilities partially offset by increases in accounts receivable and inventory. These increases are attributable to the increased demand for our products as well as higher levels of production of follow-on governmental orders through prime contractors discussed above.

Cash used in investing activities was $0.3 million for the nine months ended September 30, 2011 compared to $4.1 million for the comparable period in 2010. The cash used in investing activities for the first nine months of 2011 was primarily for the purchase of property, plant and equipment offset by proceeds on the sale of certain fixed assets.

Cash used in financing activities was $15.3 million for the nine months ended September 30, 2011, compared to $1.0 million for the comparable period in 2010. The cash used in financing activities for the 2011 period was primarily for share repurchases, and also to pay cash dividends, partially offset by proceeds from the exercise of stock options.

As of September 30, 2011, we had cash and cash equivalents of $35.7 million, exclusive of unused availability under our current credit facility. Our primary cash requirements include working capital, capital expenditures, the funding of any declared cash dividends, the repurchase of shares of the Company's common stock and interest and principal payments on indebtedness, if any, under our current credit facility. At September 30, 2011, the Company had commitments of approximately $1.3 million for construction and acquisition of property and equipment. We expect our primary sources of cash to be cash flow from operations and cash and cash equivalents on hand at September 30, 2011, with borrowings under our current credit facility being available if needed. We expect these sources to be sufficient to satisfy our cash needs during 2011 and for the next several years. However, our ability to satisfy our cash needs will substantially depend upon a number of factors including our future operating performance, taking into account the economic and other factors discussed above and elsewhere in this Quarterly Report, as well as financial, business and other factors, many of which are beyond our control.

Credit Facilities and Other Obligations

Current Credit Facility

On April 6, 2010, the Company entered into a Loan Agreement with First Tennessee Bank National Association for a $20.0 million unsecured revolving credit facility. The current credit facility contains customary representations and warranties, events of default, and financial, affirmative and negative covenants for loan agreements of this kind. Covenants under the current credit facility restrict the payment of cash dividends if the Company would be in violation of the minimum tangible net worth test or the leverage ratio test in the current loan agreement as a result of the dividends, among various other restrictions.

In the absence of a default, all borrowings under the current credit facility bear interest at the LIBOR Rate plus 1.75% per annum. The Company will pay a non-usage fee under the current loan agreement in an annual amount between 0.15% and 0.35% of the unused amount of the current credit facility, which fee shall be paid quarterly. The current credit facility is scheduled to expire on March 31, 2013.

At September 30, 2011 and December 31, 2010, the Company had no outstanding borrowings under the current credit facility.

Previous Credit Facility

On April 6, 2010, in connection with the consummation of the current credit facility, the Company terminated its Credit Agreement with Wachovia Bank, National Association, which provided for a $27.0 million senior secured credit facility.

Other Long-Term Obligations

At September 30, 2011, we had approximately $1.1 million in non-cancelable operating lease obligations.