ITEM 1.           BUSINESS

GENERAL

            Miller Industries, Inc. (the “Company”) is the world’s leading integrated provider of vehicle towing and recovery equipment and services, with executive offices in Ooltewah, Tennessee and Atlanta, Georgia and manufacturing operations in Tennessee, Pennsylvania, France and England.  The Company’s business is divided into two segments: (i) towing and recovery equipment and (ii) towing services.  The Company markets its towing and recovery equipment under several well-recognized brand names and markets its towing services under the national brand name RoadOne ^® .

            Since 1990 the Company has developed or acquired several of the most well-recognized brands in the fragmented towing and recovery equipment manufacturing industry.  The Company’s strategy has been to diversify its line of products and increase its market share in the industry through a combination of internal growth and development and acquisitions of complementary businesses.

            As a natural extension of its leading market position and strong brand name recognition in manufacturing, the Company has broadened its strategy to include vertical integration, with the goal of achieving operating efficiencies while becoming a leading worldwide manufacturer and distributor in the towing and recovery equipment industry.  The Company’s owned and independent distributors form a North American distribution network for towing and recovery equipment as well as other specialty truck equipment and components.

            In February 1997, the Company formed its towing services division, RoadOne.  RoadOne offers a broad range of towing and transportation services, including towing, impounding and storing motor vehicles, conducting lien sales and auctions of abandoned vehicles, and transporting new and used vehicles and heavy construction equipment.  During the fourth quarter of fiscal 2000, the Company announced plans to accelerate its efforts to aggressively reduce expenses in the towing services segment at the corporate level, as well as in the field.  Since that time, the Company has disposed of assets and operations in a number of underperforming markets.  The Company continues to investigate all financial alternatives with respect to the overall towing services segment in order to enhance shareholder value.  At March 15, 2002, the Company was operating over 150 facilities serving 40 markets in 23 states, and had relationships with over 2,700 RoadOne affiliates. 

INCLUSION OF FORWARD-LOOKING STATEMENTS

            Certain statements in this Annual Report, including but not limited to “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 management’s belief as well as assumptions made by, and information currently available to, management pursuant to “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995.  The Company’s actual results may differ materially from the results anticipated in these forward-looking statements due to, among other things, factors set forth below under the heading “Risk Factors,” and in particular, the risks associated with acquisitions, including, without limitation, the costs and difficulties related to the integration of the acquired businesses, and risks associated with the terms of the Company’s substantial indebtedness.  The Company cautions that such factors are not exclusive.  The Company does not undertake to update any forward-looking statement that may be made from time to time by, or on behalf of, the Company.

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            Risk Factors

            Risks Associated with Substantial Indebtedness .  As of February 28, 2002 the Company’s long-term debt (net of current portion) totaled approximately $93.2 million.  As a consequence of its level of indebtedness a substantial portion of the Company’s cash flow from operations must be dedicated to debt service requirements. The terms of the Company’s outstanding indebtedness govern the ability of the Company and its subsidiaries 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 substantially all of their assets. They also require the Company to meet certain financial tests and comply with certain other reporting, affirmative and negative covenants.  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.

          The Company was in violation of certain of the covenants under its credit facilities during the first quarter of 2002.  The Company negotiated certain amendments to the credit facilities that modified certain of the covenants contained therein, waived existing events of default and brought the Company back into compliance as of April 15, 2002.  In connection with the April 2002 amendments, the amounts available for borrowing under the portion of the facility related to the Company’s RoadOne assets will be reduced on approximately a quarterly basis beginning in August 2002, from $36.0 million at April 15, 2002, to $27.0 million at March 31, 2003, and with quarterly reductions of $3.0 million each quarter thereafter through maturity in July 2005.  The reductions in amounts available will require the Company to make mandatory prepayments of outstanding amounts to comply with the reduced availability.  To the extent that cash flow from operations and sales of RoadOne properties are not sufficient to satisfy these repayment obligations, the Company would be in default under its credit facilities.  In addition, the interest rate charged on outstanding amounts under the credit facilities will escalate at generally quarterly intervals from prime plus 2.75% at April 15, 2002, to prime plus 14.00% at April 1, 2005, based on amounts outstanding under the credit facilities.

            The Company may continue to have difficulties in the future complying with these covenants and in such event would have to seek additional waivers from its lenders.  Such waivers typically require payment of substantial additional fees, and there can be no assurance that the lenders will agree to any future waivers or amendments.

            Demand for the Company’s equipment has been negatively impacted by cost pressures facing its customers.  Continuation of these pressures could impact the Company’s ability to service its debt.  The Company’s bank facilities are collateralized by liens on all of the Company’s assets.  The liens give the lenders the right to foreclose on the assets of the Company under certain defined events of default and such foreclosure could allow the lenders to gain control of the operations of the Company.  The Company’s credit facilities include a junior secured facility with an aggregate principal amount outstanding of $14.0 million as of February 28, 2002.  The lenders under the junior secured facility are entitled to receive warrants to purchase shares of the Company’s Common Stock equal to up to 0.5% of the outstanding shares if the facility is not repaid by July 2002, and up to an additional 1.5% of the outstanding shares if the facility is not repaid by July 2003.  Such issuances would be dilutive to the Company’s other shareholders.

            If the Company were to fail to comply with the requirements under the credit facilities, such non-compliance would result in an event of default, which if not waived by the lending groups would result in the acceleration of the amounts due under the credit facility as well as other remedies.  Under these circumstances the Company could be required to find alternative funding sources, such as sale of assets or other financing sources.  If the Company were unable to refinance the credit facility on acceptable terms

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or find an alternative source of repayment for the credit facility, the Company’s business and financial condition would be materially and adversely affected.  There is no assurance that the Company would be  able to obtain any such refinancing or that it would be able to sell assets on terms that are acceptable to the Company or at all.  For more information regarding the impact of the Company’s substantial indebtedness on the Company’s liquidity, see “Management’s Discussion and Analysis of Financial Conditions and Results of Operations – Liquidity and Capital Resources,” and Notes 2 and 7 to the Company’s Consolidated Financial Statements for the transition period ended December 31, 2001.

            Risks Associated With Acquisitions; Difficulties In Integrating Operations And Achieving Cost Savings.   From 1996 to 1999, the Company pursued an aggressive acquisition strategy that involved the acquisition over 120 additional companies.  As a result, the Company’s success is dependent, in part, upon its ability to successfully integrate and manage such acquired businesses.  Acquisitions involve special risks, including risks associated with unanticipated problems, liabilities and contingencies, diversion of management attention and possible adverse effects on earnings resulting from increased goodwill amortization, increased interest costs, the issuance of additional securities and difficulties related to the integration of the acquired business.  To a certain extent, the Company has experienced each of these special risks in connection with some of its acquisitions, which has led to the selling of assets or closing of terminals in a number of underperforming markets, and continued difficulties in other markets.  There can be no assurance that any acquisitions will not have an adverse effect upon the Company’s operating results, particularly during periods in which the operations of acquired businesses are being integrated into the Company’s operations.

            The success of any business combination is in part dependent on management’s ability following the transaction to integrate operations, systems and procedures and thereby obtain business efficiencies, economies of scale and related cost savings.  The challenges posed to the Company’s management are particularly significant because integrating the acquired companies must be addressed contemporaneously.  The Company has incurred significant expenses in connection with its towing services acquisitions, and has had difficulty realizing cost savings and managing operating costs.  There can be no assurance that future consolidated results will improve as a result of cost savings and efficiencies from any such acquisitions or proposed acquisitions, or as to the timing or extent to which cost savings and efficiencies will be achieved, if at all.

            Risks Of Entering New Lines Of Business.   The Company’s growth strategy includes vertically integrating within the towing and recovery industry through a combination of acquisitions and internal growth.  Implementation of its growth strategy has resulted in the Company’s entry into several new lines of business.  Historically, the Company’s expertise has been in the manufacture of towing and recovery equipment and the Company had no prior operating experience in the lines of business it recently entered.  Commencing during fiscal 1997, the Company entered three new lines of business through the acquisition of towing and recovery equipment distributors and towing service companies, and the establishment of the Company’s Financial Services Group.  The Company’s operation of these businesses is subject to all of the risks inherent in the establishment of a new business enterprise.  Such acquisitions present the additional risk that newly-acquired businesses could be viewed as being in competition with other customers of the Company.  Although the new businesses are closely related to the Company’s towing and recovery equipment manufacturing business, the Company has experienced difficulties and unexpected expenses establishing and operating these new businesses, and may continue to experience such difficulties and expenses.

            Cyclical Nature Of Industry, General Economic Conditions And Weather.   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

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adverse effect on the Company’s operations, as has been the case during the current general economic downturn.  The industry is also influenced by consumer confidence and general credit availability, and by weather conditions, none of which is within the control of the Company.

            Fluctuations In Price And Supply Of Materials And Component Parts.   The Company is dependent upon outside suppliers for its raw material needs and other purchased component parts and, therefore, is subject to price increases and delays in receiving supplies of such materials and component parts.  There can be no assurance that the Company will be able to pass any price increase on to its customers.  Although the Company believes that sources of its materials and component parts will continue to be adequate to meet its requirements and that alternative sources are available, events beyond the Company’s control could have an adverse effect on the cost or availability of such materials and component parts.  Additionally, demand for the Company’s products could be negatively affected by the unavailability of truck chassis, which are manufactured by third parties and are typically purchased separately by the Company’s distributors or by towing operators and are sometimes supplied by the Company.

            Competition.   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 the Company’s products are affected by the market for used towing and recovery equipment.  Certain of the Company’s competitors may have substantially greater financial and other resources and may provide more attractive dealer and retail customer financing alternatives than the Company.  Historically, the towing service industry has been highly fragmented, with an estimated 30,000 professional towing operators in the United States, therefore the Company’s towing services operations will face continued competition from many operators across the country.  The Company’s presence in the towing service industry presents the risk that it could be viewed as being in competition with other customers of the Company, which can negatively effect sales.  The Company may also face significant competition from large competitors as it enters other new lines of business, including equipment distribution and financial services.

            Dependence On Proprietary Technology.   Historically, the Company has been able to develop or acquire patented and other proprietary product innovations which have allowed it to produce what management believes to be technologically advanced products relative to most of its competition.  Certain of the Company’s patents expire in 2004 at which time the Company 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, the Company is required to offer non-exclusive royalty-bearing licenses to certain of the Company’s key patents to all tow truck and car carrier manufacturers.  The Company’s historical market position has been a result, in part, of its continuous efforts to develop new products.  The Company’s future success and ability to maintain market share will depend, to an extent, on new product development. 

            Labor Availability and Union Activity.   The timely production of the Company’s wreckers and car carriers requires an adequate supply of skilled labor.  In addition, the operating costs of each manufacturing and towing service facility can be adversely affected by high turnover in skilled positions.  Accordingly, the Company’s ability to increase sales, productivity and net earnings will be limited to a degree by its ability to employ the skilled laborers necessary to meet the Company’s requirements.  There can be no assurance that the Company will be able to maintain an adequate skilled labor force necessary to efficiently operate its facilities.  The United Auto Workers Union filed a representation petition with the National Labor Relations Board for the employees at the Company’s Ooltewah, Tennessee manufacturing plant.  A vote was held on such union representation on April 11, 2002.  There can be

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no assurance that the employees at the Ooltewah manufacturing plant or other Company employees may not choose to become unionized in the future.

            The Company’s Common Stock May be Delisted from The New York Stock Exchange if the Company Does Not Maintain Certain Listing Standards.  To remain listed on the New York Stock Exchange, the average closing price of the Company’s stock must not drop below $1.00 per share for 30 days or more.  The Company’s common stock price was below $1.00 per share for an extended period during 2001 and the common stock was in danger of being delisted.  A one-for-five reverse stock split was effected on October 1, 2001, and the price of the common stock has not been below $2.10 since that time.  If the Company’s common stock were to be delisted from the New York Stock Exchange, an active trading market for its common stock would likely no longer exist, and the ability of shareholders to buy and sell shares of the Company’s common stock would be materially impaired. In addition, the delisting of the Company’s stock could adversely affect the Company’s ability to enter into future equity financing transactions.

            Dependence On Key Management.   The success of the Company is highly dependent on the continued services of the Company’s management team.  The loss of services of one or more key members of the Company’s senior management team could have a material adverse effect on the Company. 

            Automobile And Product Liability Insurance.   The Company is 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 the Company’s business.  The Company maintains reserves and liability insurance coverage at levels based upon commercial norms and the Company’s historical claims experience.  A successful product liability or other claim brought against the Company in excess of its insurance coverage or the inability of the Company to acquire insurance at commercially reasonable rates could have a material adverse effect upon the Company’s business, operating results and financial condition. 

            Increased Insurance and Fuel Costs.   As a result of the events of September 11, 2001 and other general economic factors, the Company has experienced a substantial increase in its insurance costs and has experienced fluctuations in fuel and other transportation costs.  Its customers have also experienced reduced availability of credit for purchasing equipment.  There can be no assurance that these costs will not continue to increase for the Company.  Such increases have had, and may continue to have, a material effect upon the Company’s business and operating results.

            Volatility Of Market Price.   From time to time, there may be significant volatility in the market price for the Common Stock.  Quarterly operating results of the Company, changes in earnings estimated by analysts, changes in general conditions in the Company’s industry or the economy or the financial markets or other developments affecting the Company 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.

            Control By Principal Shareholder.   William G. Miller, the Chairman of the Company, beneficially owns approximately 16% of the outstanding shares of Common Stock.  Accordingly, Mr. Miller has the ability to exert significant influence over the business affairs of the Company, including the ability to influence the election of directors and the result of voting on all matters requiring shareholder approval.

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            Anti-Takeover Provisions Of Charter And Bylaws; Preferred Stock.   The Company’s Charter and Bylaws contain restrictions that may discourage other persons from attempting to acquire control of the Company, including, without limitation, prohibitions on shareholder action by written consent and advance notice requirements respecting amendments to certain provisions of the Company’s Charter and Bylaws. In addition, the Company’s 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.

TOWING AND RECOVERY EQUIPMENT

            The Company offers a broad range of towing and recovery equipment products that meet most customer design, capacity and cost requirements.  The Company manufactures 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.

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

            Product Line

            The Company manufactures a broad line of wrecker, car carrier and trailer bodies to meet a full range of customer design, capacity and cost requirements. The products are marketed under the Century, Vulcan, Challenger, Holmes, Champion, Chevron, Eagle, Miller Industries, Jige, and Boniface brand names.

            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 patented “Express” automatic wheellift hookup device that allow operators to engage a disabled or unattended vehicle without leaving the cab of the wrecker.

            The Company’s 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

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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 autos.  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

            The Company manufactures and markets its 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 the Company’s “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 the 8-ton light duty to the 70-ton heavy duty models and car carriers in lengths from 17½ to 26 feet.  Management believes that the Century brand has a reputation as the industry’s leading product innovator.

            Vulcan ^® .  The Company’s 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 operated autonomously with its own independent distribution network.

            Challenger ^® .  The Company’s 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 17½ to 26 feet.  The Challenger line was started in 1975 and is known for high performance heavy duty wreckers and aesthetic design.

            Holmes ^® .  The Company’s Holmes product line includes mid-priced wreckers with 8 to 16 ton capacities and car carriers in 17½ 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 17½ to 21 feet.  The Champion product line, which is generally lower-priced, allows the Company 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.

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            Chevron ™.  The Company’s 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.

            Eagle ^® .  The Company’s 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, the Company has upgraded the quality and features of the Eagle product line and expanded its recovery capability.

            Miller Industries ™. The Company’s Miller Industries product line is comprised of premium multi-vehicle transport trailers.  Miller Industries trailers, which can transport up to 8 vehicles depending on configuration, are marketed generally under the Titan™ model name.

            Jige ™ .  The Company’s 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 ™ .   The Company’s 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.

            The Company’s 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.  The Company’s 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, the Company focuses on developing or licensing new technology for its products.

            Manufacturing Process

            The Company manufactures wreckers, car carriers and trailers at six manufacturing facilities located in the United States, France and England.  The manufacturing process for the Company’s 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 the Company 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 the Company 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 the Company 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, the Company contracts with independent paint shops for such services.

            The Company purchases raw materials and component parts from a number of sources.  Although the Company has no long-term supply contracts, management believes the Company has good relationships with its primary suppliers.  The Company has experienced no significant problems in obtaining adequate supplies of raw materials and component parts to meet the requirements of its production schedules.  Management believes that the materials used in the production of the Company’s products are available at competitive prices from an adequate number of alternative suppliers.

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Accordingly, management does not believe that the loss of a single supplier would have a material adverse effect on the Company’s business.

            Towing and Recovery Equipment Sales and Distribution

            The Company’s distribution group owns nine towing and recovery equipment distributors located in California, Colorado, Florida, Illinois, Indiana and Missouri and in British Columbia and Ontario, Canada.  The owned distributors market the Company’s products as well as other specialty transportation equipment, and the Company intends to expand the number and types of products distributed through its distributors.  The Company does not currently intend to purchase any additional distributors.  The Company-owned distributors generally do not compete in the same geographic markets as the Company’s independent distributors. 

            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.

            The Company’s sales force, which services the Company’s distribution network, consists of sales representatives whose responsibilities include providing administrative and sales support to the entire distributor base.  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 the Company’s products and to maintain customer relationships.

            The Company has developed a diverse customer base consisting of approximately 175 distributors in North America, who serve all 50 states, Canada and Mexico, and approximately 50 distributors that serve other foreign markets. During the eight months ended December 31, 2001, no single distributor accounted for more than 5% of the Company’s sales.  Management believes the Company’s broad and diverse customer base provides it with the flexibility to adapt to market changes, lessens its dependence on particular distributors and reduces the impact of regional economic factors.

            To support sales and marketing efforts, the Company produces demonstrator models that are used by the Company’s sales representatives and distributors. To increase exposure to its products, the Company also has 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 IMSA “24 Hours at Daytona,’’ Molson Indy, the Brickyard, and the Indy 500 races, among others.

            The Company routinely responds to requests for proposals or bid invitations in consultation with its local distributors.  The Company’s products have been selected by the United States General Services Administration as an approved source for certain federal and defense agencies.  The Company intends 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 its marketing efforts and to control

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marketing costs, the Company has reduced its participation in regional trade shows and now concentrates its efforts on five of the major trade shows each year.  The Company works with its distributor network to concentrate on various regional shows.

            Product Warranties and Insurance

            The Company offers a 12-month limited manufacturer’s product and service warranty on its wrecker and car carrier products.  The Company’s warranty generally provides for repair or replacement of failed parts or components.  Warranty service is usually performed by the Company or an authorized distributor.  Management believes that the Company maintains adequate general liability and product liability insurance.

            Backlog

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

            Competition

            The towing and recovery equipment manufacturing industry is highly competitive for sales to distributors and towing operators.  Management believes that competition in the towing and recovery equipment industry is a function of product quality and innovation, reputation, technology, customer service, product availability and price.  The Company competes 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, the Company has invested substantial resources and management time in building and maintaining strong relationships with distributors.  Management also believes that the Company’s products are regarded as high quality within their particular price points.  The Company’s 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 the Company’s 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.  Accordingly, management believes that the Company’s ownership of patents on certain of the industry’s leading technologies has given it a competitive advantage.  Certain of the Company’s competitors may have greater financial and other resources and may provide more attractive dealer and retail customer financing alternatives than the Company.

            Employees

            At December 31, 2001, the Company employed approximately 1,075 people in its towing and recovery equipment manufacturing and distribution operations.  None of the Company’s employees is covered by a collective bargaining agreement, though its employees in France and England have certain similar rights provided by their respective government’s employment regulations.  The United Auto Workers Union filed a representation petition with the National Labor Relations Board for the employees

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at the Company’s Ooltewah, Tennessee plant.  A vote on such representation will take place in April 2002.  The Company considers its employee relations to be good.

TOWING SERVICES - ROADONE

            In February 1997, the Company formed its towing services division, RoadOne, to build a national towing service network.  RoadOne has become a leading towing service company with operations at over 150 locations in 23 states.  RoadOne’s corporate offices are located in Ooltewah, Tennessee.

            During April 2000, the Company announced plans to accelerate its efforts to aggressively reduce expenses in the towing services segment at the corporate level, as well as in the field.  Since that time, the Company has disposed of assets and closed terminals in 15 underperforming markets.  The Company continues to investigate all financial alternatives with respect to the overall towing services segment in order to enhance shareholder value. 

            Services Provided

            Services provided by RoadOne include towing and recovery and specialized transportation services.  RoadOne’s towing and recovery services primarily involve providing road-side assistance to disabled vehicles which allows such vehicles to proceed under their own power, or towing disabled or abandoned vehicles to a location designated by the customer.  RoadOne derives revenue from towing and recovery services based on distance, time or fixed charges and from storage services based on daily fees.  These services are primarily provided to commercial entities, such as fleet operators, automobile dealers, repair shops, automobile leasing companies, and automobile auction companies; public entities such as municipalities, police, sheriff and highway patrol departments, colleges and universities, and toll-road departments; motor clubs; and individual motorists.  RoadOne conducts lien and salvage sales of certain vehicles in conjunction with its towing and recovery services.  RoadOne also provides limited environmental clean-up services in some areas.

           RoadOne’s specialized transportation services primarily involve transporting new and used vehicles, construction equipment and industrial equipment.  RoadOne derives revenue from transport services based on distance, time or fixed charges.  These services are primarily provided to automobile leasing companies, automobile auction companies, automobile dealers, fleet operators, construction companies, and industrial manufacturers.

            Towing, Recovery and Road Services

            Commercial.   RoadOne provides commercial road services to a broad range of commercial customers, including automobile dealers and repair shops.  RoadOne typically charges a flat fee and a mileage premium for these towing services.  Commercial road services also include towing and recovery of heavy-duty trucks, recreational vehicles, buses and other large vehicles, typically for commercial fleet operators.  RoadOne charges an hourly rate based on the towing vehicle used for these specialized services.  RoadOne also provides private impound towing services to commercial customers, such as shopping centers, retailers and hotels, which engage RoadOne to tow vehicles that are parked illegally on their property.

            Municipal.   RoadOne also provides towing and recovery services to public entities such as municipalities and police, sheriff and highway patrol departments.  In a limited number of markets, RoadOne provides municipal freeway towing service to local transit districts and other transportation agencies through patrolling a preset route on heavily-used freeways and towing or otherwise assisting

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disabled vehicles.  These services are in some cases provided under contracts, typically for terms of five years or less, that are terminable for material breach and are typically subject to competitive bidding upon expiration.  In other cases, RoadOne provides these services without a long-term contract.  Whether pursuant to a contract or an ongoing relationship, these services are generally provided by RoadOne for a designated geographic area, or shared with one or more other companies on a rotation basis.

            Motor Club.   RoadOne provides towing and recovery services under contract to national motor clubs for the disabled vehicles of their members.  Roadside assistance is provided and, if necessary, vehicles are towed to repair facilities for a flat fee paid by either the individual motorist or the motor club.

            Consumer Towing and Recovery.   RoadOne provides towing and recovery services to individual motorists for their disabled vehicles.  Roadside assistance is provided and, if necessary, vehicles are towed to repair facilities for a flat fee paid by the individual motorist.

            Lien and Salvage Sales.  In conjunction with providing towing and recovery services, vehicles may be towed to a Company facility where the vehicle is impounded and placed in storage.  Such a vehicle will remain in storage until its owner pays the towing fee, which is typically based on an hourly charge, and any daily storage fees to the Company, as well as any fines due to law enforcement agencies.  If the vehicle is not claimed within a period prescribed by law (typically between 30 and 90 days), RoadOne may complete lien proceedings and sell the vehicle at auction or to a scrap metal facility, depending on the value of the vehicle.

            Specialized Transportation

            Construction Equipment.   RoadOne provides construction equipment transport services to construction companies, contractors, municipalities and equipment leasing companies for mobile cargo such as cranes, bulldozers, forklifts and other heavy construction equipment.  Service fees are based on the vehicle used and the distance traveled.

            Industrial Equipment.  RoadOne provides industrial equipment transport services to manufacturing companies, construction companies, contractors, municipalities and equipment leasing companies for immobile cargo such as engines, industrial generators and heavy construction materials.  Service fees may be based on the vehicle used and the distance traveled or may be determined using an hourly rate based on the towing vehicle used for these specialized services.

            New and Used Automobile.   RoadOne provides automobile transport services to leasing companies, automobile dealers, automobile auction companies, long-distance transporters, brokers and individuals.  Services typically are provided as needed by particular customers and charged according to pre-set rates based on mileage.  RoadOne provides transport services for dealers with used cars coming off lease and who transfer new cars from one region to another based on demand.  The Company also provides local collection and delivery support to long-haul automobile transporters.

            Dispatch Systems

            RoadOne currently dispatches its towing and recovery and specialized transportation services via existing local dispatch systems operated by its individual subsidiaries.  Some of these subsidiaries utilize computerized positioning systems which identify and track vehicle location and status in a localized area.  RoadOne intends to continue to use these existing dispatch systems, while developing and implementing a national computerized dispatch system that will more efficiently support its national, regional and local customers in allocating and utilizing assets on every level.

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            Affiliate Program

            In order to offer a nationwide towing service, the Company has established an affiliate program under which independent professional towers who meet the Company’s criteria provide towing services under the RoadOne name as “affiliates.”  RoadOne affiliated companies offered many of the benefits of owned companies, such as product rebates, lower costs for financing, quantity buying advantages, national marketing strength and driver training.  As of March 15, 2002, the Company had over 2,700 signed agreements with RoadOne affiliates in all 50 states, Puerto Rico and six provinces in Canada.

            Competition

            Historically, the towing service industry has been highly fragmented, with an estimated 30,000 professional towing operators in the United States.  The Company believes that having towing service operations in many locations will foster brand loyalty among towing service customers through an emphasis on consistently high quality and dependable service from multiple locations over a broad geographic area.  The Company expects to market these services to organizations with widely dispersed fleets of vehicles that would benefit from a single source provider.  However, the size of the towing service industry will mean that the Company’s operations will face continued competition from many operators across the country.  These operators could be consolidated by other companies, individuals or entities, or they could enter into affiliate relationships with other companies.  In addition, the Company’s presence in the towing service industry presents the risk that it could be viewed as being in competition with other customers of the Company.

            Employees

            At December 31, 2001, the Company employed approximately 1,954 people at RoadOne.  None of the Company’s RoadOne employees are covered by a collective bargaining agreement.  The Company considers its employee relations to be good.

PATENTS AND TRADEMARKS

            The 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 an operating subsidiary of the Company in 1987 and 1989.  These patents expire in mid-year 2004.  This technology, particularly the L-arms, is used in a majority of the commercial wreckers today.  Management believes that utilization of such devices without a license is an infringement of the Company’s patents.  The Company has successfully litigated infringement lawsuits in which the validity of the Company’s patents on this technology was upheld, and successfully settled other lawsuits.  The Company also holds a number of other utility and design patents covering other products, the Vulcan “scoop’’ wheel-retainer and the car carrier anti-tilt device.  The Company has 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, the Company is required to offer non-exclusive royalty-bearing licenses to certain of the Company’s key patents to all tow truck and car carrier manufacturers.

            The Company’s trademarks “Century,’’ “Holmes,’’ “Champion,’’ “Challenger,” “Formula I,’’ “Eagle Claw Self-Loading Wheellift,’’ “Pro Star,’’ “Street Runner,’’ “Vulcan,’’ and “RoadOne,’’ among others, are registered with the United States Patent and Trademark Office.  Management believes that the Company’s 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. 

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GOVERNMENT REGULATIONS AND ENVIRONMENTAL MATTERS

            The Company’s 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 the Company is 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 the Company’s financial condition or results of operations in the past and is not expected to have a material adverse impact in the future.

            The Company is 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 the Company’s 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 the operations of the Company.

            The Financial Services Group is subject to regulation under various federal, state and local laws which limit the interest rates, fees and other charges that may be charged by it or prescribe certain other terms of the financing documents that it enters into with its customers.  Management believes that the additional administrative costs of complying with these regulations will not materially affect the operations of the Company.

            William G. Miller has served as Chairman of the Board since April 1994.  In January 2002, Mr. Miller became the Chief Executive Officer of Team Sports Entertainment, Inc., an OTC Bulletin Board company engaged in the business of sports and entertainment marketing and management, as well as Team Sports Entertainment’s subsidiary, Team Racing Auto Circuit.  Mr. Miller served as Chief Executive Officer of the Company from April 1994 to June 1997, as Co-Chief Executive Officer of the Company from June 1997 to November 1997, and as President of the Company 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.

            Jeffrey I. Badgley has served as Chief Executive Officer of the Company since November 1997, as President since June 1996, and as a director since January 1996.  Mr. Badgley served as Co-Chief Executive Officer of the Company from June 1997 to November 1997, as Chief Operating Officer of the Company from June 1996 to June 1997 and as Vice-President of the Company from April 1994 to June 1996.  In addition, Mr. Badgley serves as President of Miller Industries Towing Equipment Inc.  Mr. Badgley served as Vice President - Sales of Miller Industries Towing Equipment Inc. from 1988 to 1996.

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Mr. Badgley served as Vice President - Sales and Marketing of Challenger Wrecker Mfg., Inc., from 1982 until joining Miller Industries Towing Equipment Inc.

            Frank Madonia has served as Executive Vice President, General Counsel and Secretary of the Company since September 1998.  From April 1994 to September 1998 Mr. Madonia served as Vice President, General Counsel and Secretary of the Company.  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., The Signal Companies, Inc. and Allied-Signal Inc.  In addition, Mr. Madonia is registered to practice before the United States Patent and Trademark Office.

            J. Vincent Mish is a certified public accountant and has served as Chief Financial Officer and Treasurer of the Company since June 1999, a position he also held from April 1994 through September 1996.  He also has served as President of the Financial Services Group since September 1996 and as a Vice President of the Company 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.