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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended
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Dec. 31, 2018
Accounting Policies [Abstract] |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates in the Preparation of Financial Statements The preparation of financial statements in conformity with U.S. 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. The consolidated financial statements include accounts of certain subsidiaries whose fiscal closing dates differ from December 31st by 31 days (or less) to facilitate timely reporting. Cash and Temporary Investments Cash and temporary investments include all cash and cash equivalent investments with original maturities of three months or less. Accounts Receivable Receivables are stated at their estimated collectible amounts and consist of amounts billed and currently due from customers. The Company extends 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. Data by each major customer is regularly reviewed to evaluate the adequacy of the allowance for doubtful accounts and actual write-offs are charged against the allowance. Inventories Inventory costs include materials, labor and factory overhead. Inventories are stated at the lower of cost or 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. Inventories, net of reserves, at December 31, 2018 and 2017 consisted of the following:
|  | 2018 |  |  | 2017 |
Chassis |  | $ | 8,921 |  |  | $ | 7,525 |
Raw materials |  |  | 40,021 |  |  |  | 30,109 |
Work in process |  |  | 14,995 |  |  |  | 13,521 |
Finished goods |  |  | 29,830 |  |  |  | 17,412 |
|  | $ | 93,767 |  |  | $ | 68,567 |
Property, Plant and Equipment Property, plant and equipment are recorded at cost, less accumulated depreciation. 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. Internal labor is used in certain capital projects. Fully depreciated assets are retained in property, plant and equipment and accumulated depreciation until they are removed from service. When assets are retired or otherwise disposed of, the related costs and accumulated depreciation are removed from the consolidated balance sheets and any resulting gain or loss from disposition is recorded as other (income) expense, net in the consolidated statements of income in the period realized. Property, plant and equipment at December 31, 2018 and 2017 consisted of the following:
|  | 2018 |  |  | 2017 |
Land and improvements |  | $ | 11,807 |  |  | $ | 11,333 |
Buildings and improvements |  |  | 68,717 |  |  |  | 66,826 |
Machinery and equipment |  |  | 43,961 |  |  |  | 44,161 |
Furniture and fixtures |  |  | 7,786 |  |  |  | 10,227 |
Software costs |  |  | 5,695 |  |  |  | 10,345 |
|  |  | 137,966 |  |  |  | 142,892 |
Less accumulated depreciation |  |  | (55,116 | ) |  |  | (65,264 | )
|  | $ | 82,850 |  |  | $ | 77,628 |
The Company recognized $7,745, $6,147 and $4,828 in depreciation expense in 2018, 2017 and 2016, respectively. 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. Basic and Diluted Income Per Common Share Basic income per common share is computed by dividing net income by the weighted average number of common shares outstanding. Diluted income per common share is calculated by dividing net income by the weighted average number of common and potential dilutive common shares outstanding. Diluted income per common share takes into consideration the assumed exercise of outstanding stock options resulting in approximately 5,000, 17,000 and 28,000 potential dilutive common shares in 2018, 2017 and 2016, respectively. For 2018, 2017 and 2016, none of the outstanding stock options would have been anti-dilutive. Long-Lived Assets The Company periodically reviews the carrying amount of its long-lived assets to determine if those assets may not be recoverable based upon the future operating cash flows expected to be generated by those assets. Management believes that its long-lived assets are appropriately valued. Goodwill Goodwill consists of the excess of cost of acquired entities over the sum of the amounts assigned to identifiable assets acquired less liabilities assumed. Goodwill is not amortized. However, the Company evaluates the carrying value of goodwill for impairment at least annually or if an event or circumstance occurs that would indicate that the carrying amount had been impaired. Goodwill is reviewed for impairment utilizing a qualitative assessment and, if necessary, a quantitative assessment. If we perform a qualitative analysis of goodwill and determine that fair value more likely than not exceeds the carrying value of the reporting unit, no further testing is needed. Alternatively, if we elect to utilize a quantitative assessment, an impairment loss would be recognized to the extent that the carrying value of the reporting unit exceeds its fair value, not to exceed the carrying value of the goodwill. Accrued Liabilities Accrued liabilities consisted of the following at December 31, 2018 and 2017:
|  | 2018 |  |  | 2017 |
Accrued wages, commissions, bonuses and benefits |  | $ | 9,152 |  |  | $ | 8,632 |
Accrued products warranty |  |  | 3,752 |  |  |  | 3,147 |
Accrued taxes |  |  | 1,039 |  |  |  | 828 |
Other |  |  | 10,920 |  |  |  | 9,394 |
|  | $ | 24,863 |  |  | $ | 22,001 |
Income Taxes The Company’s income tax expense, deferred tax assets and liabilities and liabilities for unrecognized tax benefits reflect management’s best assessment of estimated current and future taxes to be paid. The Company is subject to income taxes in both the United States and foreign jurisdictions. Significant judgments and estimates are required in determining the consolidated income tax expense. The Company recognizes as deferred income tax assets and liabilities the future tax consequences of the differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. The Company considers the need to record a valuation allowance to reduce deferred tax assets to the amount that is more likely than not to be realized. Tax loss carryforwards, reversal of deferred tax liabilities, tax planning and estimates of future taxable income are considered in assessing the need for a valuation allowance. The Company records uncertain tax positions in accordance with ASC 740 on the basis of a two-step process whereby (1) the Company determines whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the positions and (2) for those tax positions that meet the more-likely-than-not recognition threshold, the Company recognizes the largest amount of tax benefit that is more than 50% likely to be realized upon ultimate settlement with the related tax authority. The Company recognizes interest and penalties related to unrecognized tax benefits within the income tax expense line in the accompanying consolidated statements of income. Accrued interest and penalties are included within the related tax liability line in the accompanying consolidated balance sheets. Stock-Based Compensation Stock compensation expense was $0 for 2018, 2017 and 2016. No options were granted during 2018 or 2017. The fair value of options granted in 2008 has been estimated as of the date of the grant using the Black-Scholes option-pricing model with the following weighted average assumptions: expected dividend yield of 0%; expected volatility of 44%; risk-free interest rate of 1.71%; and expected life of four years. Using these assumptions, the fair value of options granted in 2008 was $1,596, which was amortized as compensation expense over the vesting period. At December 31, 2018, the Company had no unrecognized compensation expense related to stock options. The Company issued 10,250 and 26,500 shares of common stock during 2018 and 2017, respectively, from the exercise of stock options. Product Warranty The Company generally 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. These estimates are established using historical information about the nature, frequency, and average cost of warranty claims. Warranty expense in 2018, 2017 and 2016, was $3,793, $2,618 and $1,750, respectively. The table below provides a summary of the warranty liability for December 31, 2018 and 2017:
|  | 2018 |  |  | 2017 |
Accrual at beginning of the year |  | $ | 3,147 |  |  | $ | 2,821 |
Provision |  |  | 3,793 |  |  |  | 2,618 |
Settlement and Other |  |  | (3,188 | ) |  |  | (2,292 | )
Accrual at end of year |  | $ | 3,752 |  |  | $ | 3,147 |
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. In addition, the Company limits the amount of credit exposure through the use of accounts and funds backed by the U.S. Government and its agencies. Trade accounts receivable are generally diversified due to the number of entities comprising the Company’s customer base and their dispersion across many geographic regions and by frequent monitoring of the creditworthiness of the customers to whom the credit is granted in the normal course of business. At December 31, 2018 and 2017 the Company had one customer with a trade account receivable balance greater than 10% of total accounts receivable. The account balance was 16% and 12% of total accounts receivable at December 31, 2018 and 2017, respectively. Revenue Recognition Revenue is recognized when obligations under the terms of a contract with a customer are satisfied. Generally, this occurs upon shipment, which is when control has transferred to independent distributors or other customers. From time to time, revenue is recognized under a bill and hold arrangement. Recognition of revenue on bill and hold arrangements occurs when control transfers to the customer. Our policy requires the reason for the bill and hold arrangement to be substantive, and the product to be separately identified as belonging to the customer, ready for physical transfer, and unavailable to be used or directed to another customer. Revenue is measured as the amount of consideration expected to be received in exchange for the transfer of products. Sales and other taxes collected concurrent with revenue-producing activities are excluded from revenue. Warranty related costs are recognized as an expense at the time products are sold. Depending on the terms of the arrangement, for certain contracts the Company may defer the recognition of a portion of the consideration received because a future obligation has not yet been satisfied, such as an extended service contract. An observable stand-alone selling price for separate performance obligations or a cost plus margin approach is utilized when one is not available. Shipping and Handling Fees and Cost The Company records revenues earned for shipping and handling as revenue, while the cost of shipping and handling is classified as cost of operations. Research and Development Research and development costs are expensed as incurred and included in cost of operations and to a lesser extent in selling, general and administrative expenses. Research and development costs amounted to $3,127, $1,943 and $1,797 for 2018, 2017 and 2016, respectively. 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. Foreign currency translation adjustments resulting from such translations are included in shareholders’ equity. Intercompany transactions denominated in a currency other than the functional currency are remeasured into the functional currency. Gains and losses resulting from foreign currency transactions are included in other (income) expense, net in our consolidated statements of income. Recent Accounting Pronouncements Recently Issued Standards The Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2016-02 Leases (Topic 842) on February 25, 2016 and is intended to improve financial reporting on leasing transactions. The update affects all companies and other organizations that lease assets such as real estate, airplanes, and manufacturing equipment. The amendments will require lessees to recognize on the balance sheet the assets and liabilities for the rights and obligations created by their lease agreements. An organization is to provide disclosures designed to enable users of financial statements to understand the amount, timing, and uncertainty of cash flows arising from leases. These disclosures include qualitative and quantitative requirements concerning additional information about the amounts recorded in the financial statements. Under the new guidance, a lessee will be required to recognize assets and liabilities for leases with lease terms of more than 12 months. Consistent with current GAAP, the recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee will depend primarily on its classification as a finance or operating lease. However, unlike current GAAP, which requires only capital leases to be recognized on the balance sheet, the amendments will require both types of leases (i.e. operating and finance) to be recognized on the balance sheet. The lessee accounting model prescribed by the update will require a finance lease to be accounted for in substantially the same manner as capital leases under existing GAAP. An operating lease will be accounted for in a manner similar to operating leases under existing GAAP, except that lessees will recognize a lease liability and a right-of-use asset on the balance sheet during the lease term. The amendments will be effective for financial statements issued for annual periods, and interim periods within these annual periods, beginning after December 15, 2018, with early adoption permitted. See “Credit Facilities and Other Obligations” within Item 2 for the Company’s current lease commitments. The Company plans to use the modified retrospective approach and will elect to initially apply the update with a cumulative-effect adjustment to the opening balance of retained earnings at the date of adoption. The Company has substantially completed its evaluation of lease agreements and the review of its current accounting policies and practices to identify potential differences that would result from applying the requirements of the ASU to the Company’s leases. At January 1, 2019, the Company expects to increase lease related assets and liabilities by approximately $2,300. A de minimis difference between the lease assets and liabilities will be booked to accumulated surplus and deferred income tax liabilities. In August 2018, the FASB issued ASU 2018-15 Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40) to align the requirements for capitalizing implementation costs incurred in cloud computing arrangements that are service contracts with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The update will be effective for financial statements issued for annual periods, and interim periods within these annual periods, beginning after December 15, 2019, with early adoption permitted. The Company plans to apply the amendments in the update prospectively to all implementation costs incurred after the date of the adoption. The adoption of this update will not have a material impact on the Company’s consolidated financial statements and related disclosures. Recently Adopted Standards In May 2014, the FASB issued ASU 2014-09, Revenue—Revenue from Contracts with Customers. The Company has adopted the update and all related amendments with an effective date of January 1, 2018 using the modified retrospective method, thus recognizing the cumulative effect of adopting the update as an adjustment to the opening balance of retained earnings. The Company applied the amendments to contracts that were not completed as of the adoption date. Comparative information has not been restated and continues to be reported under the accounting standards in effect for the periods prior to the effective date. As a result of the adoption, effective January 1, 2018, the Company began including the costs of painting activities as performance obligations within each contract, which results in a delay in recognition of revenue until such activities are complete and the product is shipped. With the exception of certain extended service contracts on a small percentage of units sold, the Company’s performance obligations are complete and sales revenue is recognized when products are shipped from the Company’s facilities. We do not anticipate the adoption of the update to have a material impact on an ongoing basis to the Company’s consolidated financial statements and related disclosures. The cumulative effect adjustment to the consolidated balance sheets as of January 1, 2018 was as follows:
|  | Balance at December 31, 2017 |  |  | Cumulative Effect Adjustment |  |  | Balance at January 1, 2018 |
Assets |  |  |  |  |  |  |  |  |  |  |  |
Accounts Receivable, net |  | $ | 132,699 |  |  | $ | (2,496 | ) |  | $ | 130,203 |
Inventories, net |  |  | 68,567 |  |  |  | 1,996 |  |  |  | 70,563 |
Liabilities and Shareholders' Equity |  |  |  |  |  |  |  |  |  |  |  |
Accrued Liabilities |  |  | 22,001 |  |  |  | (176 | ) |  |  | 21,825 |
Accumulated Surplus |  |  | 55,580 |  |  |  | (324 | ) |  |  | 55,256 |
In accordance with the new revenue standard requirements, the impact of the adoption to the consolidated statement of income during the year ended December 31, 2018 and the consolidated balance sheet as of December 31, 2018 was as follows:
|  | Year Ended December 31, 2018 |
|  | As Reported |  |  | Balances Without Adoption of ASU 2014-09 |  |  | Effect of Adoption Increase/(Decrease) |
Statement of Income |  |  |  |  |  |  |  |  |  |  |  |
Revenues |  |  |  |  |  |  |  |  |  |  |  |
Net Sales |  | $ | 711,706 |  |  | $ | 711,672 |  |  | $ | 34 |
Costs and Expenses |  |  |  |  |  |  |  |  |  |  |  |
Costs of Operations |  |  | 628,370 |  |  |  | 628,343 |  |  |  | 27 |
Income Tax Provision |  |  | 7,917 |  |  |  | 7,916 |  |  |  | 1 |
Net Income |  |  | 33,746 |  |  |  | 33,740 |  |  |  | 6 |
|  | December 31, 2018 |
|  | As Reported |  |  | Balances Without Adoption of ASU 2014-09 |  |  | Effect of Adoption Increase/(Decrease) |
Balance Sheet |  |  |  |  |  |  |  |  |  |  |  |
Assets |  |  |  |  |  |  |  |  |  |  |  |
Accounts Receivable, net |  | $ | 149,142 |  |  | $ | 149,108 |  |  | $ | 34 |
Inventories, net |  |  | 93,767 |  |  |  | 93,794 |  |  |  | (27 | )
Liabilities and Shareholders’ Equity |  |  |  |  |  |  |  |  |  |  |  |
Accrued Liabilities |  |  | 24,863 |  |  |  | 24,862 |  |  |  | 1 |
Accumulated Surplus |  |  | 81,354 |  |  |  | 81,348 |  |  |  | 6 |
As a result of the adoption, we changed our accounting policy. See preceding information in Note 2 for further information. In January 2017, the FASB issued ASU No. 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. The update eliminates the second step in the goodwill impairment test which required an entity to determine the implied fair value of the reporting unit’s goodwill. Instead, an entity will now recognize an impairment loss if the carrying value of the net assets assigned to the reporting unit exceeds the fair value of the reporting unit, with the impairment loss not to exceed the amount of goodwill allocated to the reporting unit. The Company elected to adopt the update in the first quarter of 2018, with an effective date of January 1, 2018. The adoption of this guidance did not have a material impact on its consolidated financial statements and related disclosures. In May 2017, the FASB amended the requirements in the Compensation—Stock Compensation Topic of the ASC related to changes to the terms or conditions of a share-based payment award. The amendments provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting. The Company adopted the amendments in the first quarter of 2018, with an effective date of January 1, 2018. The adoption of this guidance did not have a material impact on the Company’s consolidated financial statements and related disclosures. In August 2018, the SEC issued a final rule to amend certain redundant or outdated disclosure requirements to simplify compliance with financial reporting. In an effort to reduce such duplicative disclosures, many requirements of the SEC were either eliminated or reduced where GAAP had identical or similar disclosure provisions for the notes to financial statements. In other instances, disclosure requirements were enhanced to improve transparency. The company adopted the amendments in the fourth quarter of 2018. The adoption did not have a material impact on the Company’s consolidated financial statements and related disclosures.

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- Definition The entire disclosure for the basis of presentation and significant accounting policies concepts. Basis of presentation describes the underlying basis used to prepare the financial statements (for example, US Generally Accepted Accounting Principles, Other Comprehensive Basis of Accounting, IFRS). Accounting policies describe all significant accounting policies of the reporting entity. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -URI http://asc.fasb.org/topic&trid=2122369 + Details
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