May 2004 Stubbed Tow By Mary Fortune
In the decade since Ooltewah-based Miller Industries’ initial public offering, the world’s largest manufacturer of towing and recovery equipment has negotiated some very tough terrain.
An unlikely go-go stock of the mid-1990s, Miller shares reversed an initial 10-fold jump in price with a six-year, 97% deterioration brought on by an ill-advised foray into towing services and distribution. By mid-2003, auditors were hanging the dreaded “going concern” caveat on the company’s financial statements and the New York Stock Ex- change was threatening to de-list Miller shares.
It has been a very busy—and very productive—12 months since.
Scrambling to regain traction, Miller executives set about successfully divesting the company of its towing service and distribution businesses. They then struck a deal with the NYSE for an 18-month plan to bring the business back into compliance, and restructured $32 million in expensive debt to give Miller considerably more financial flexibility. This latter achievement required founder Bill Miller personally to partner with CIT Group in assuming the debt and paying off the company’s previous creditors. Chairman Miller upped his loans to the company to $12 million from $2 million, while existing creditor CIT increased its exposure to $20 million.
Chip Grayson, director of investment banking for Morgan Keegan & Co. in Memphis, says the company’s debt restructuring and renewed focus on manufacturing return Miller Industries to the position that made the time of its 1994 IPO one of tremendous optimism.
“The restructuring they did was great news for the company and the shareholders,” Grayson says. “The company seems to be really on the right track, getting back to their core business and getting their balance sheet fixed.”
Miller Co-CEO Jeff Badgley shares Grayson’s enthusiasm (despite having received bonus compensation in just one of the past four years).
“We never lost our optimism about the potential of this company,” Badgley says. Such faith is grounded in past performance. “This company has always been a market leader,” Chief Financial Officer Vince Mish adds. “It has always made money.”
Even as Badgley admits that the company’s entry into towing services proved a misstep, he points out that the towing services competition the company created with some of its towing equipment customers never cost Miller Industries any distributors. Now, with a simplified business plan, upper management should be able to refocus on the manufacturing operations, which are centered in Oolte- wah and include a plant in Greeneville. Increased demand since August is prompting the company to raise production about 25%, Badgley says.
One of America’s most astute money managers apparently was among the first to sense a turnaround amid otherwise disappointing financials. Peter Lynch, who delivered average annual returns of 29% during the 13 years he managed the Fidelity Magellan mutual fund, added 87,700 Miller shares in January to the 682,2000 shares he acquired in 2002 to amass an 8.2% stake. The stock price has borne out the wisdom of his move. From a low in 2002 near $2.50, the shares have climbed to a recent range of $8-$10. A spokesman for Lynch says he does not comment on individual stocks.
Some of that rebound can be attributed to Bill Miller’s return in October to the CEO post, which he shares with Badgley. Since forming the company in 1990 from the remnants of collapsed towing giants Century Wrecker, Chal- lenger Wrecker and Ernest Holmes Co., Miller has kept intact a management quartet that includes Badgley, Mish and General Counsel Frank Madonia. Even with things at their bleakest, none abandoned the company for more promising ventures.
“Through the history of this company, they’ve gone through a lot, and that has kind of molded them together,” says Badgley, who attributes the group’s perseverance to respect for each other and an abiding belief in the company.
Of course, the boys-and-their-toys thrill of building great big tow trucks can't be overlooked. “There’s an excitement about this industry,” he says. “It just gets in your blood.”
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