UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 28, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to .
Commission file Number 0-14651
MILLER BUILDING SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
Delaware 36-3228778
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
58120 County Road 3 South
Elkhart, Indiana 46517
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (219) 295-1214
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes X No
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practical date:
Common Shares, Par Value $.01 Per Share
3,191,791 Shares Outstanding at February 3, 1997
The index to Exhibits is at page 13 in the sequential numbering
system. Total pages: 14
MILLER BUILDING SYSTEMS, INC.
CONTENTS
Pages
Part I. Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheets 3-4
Condensed Consolidated Statements of Income 5
Condensed Consolidated Statements of Cash Flows 6
Notes to Condensed Consolidated Financial
Statements 7-8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 9-10
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K 11
Signatures 12
Index to Exhibits 13
Part I. Financial Information
Item 1. Financial Statements
MILLER BUILDING SYSTEMS, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
December 28, June 29,
1996 1996
ASSETS
CURRENT ASSETS:
Cash and temporary cash investments $ 1,512,505 $ 165,329
Receivables 5,407,415 6,749,230
Refundable income taxes 14,844 241,158
Inventories 3,170,732 3,541,000
Deferred income taxes 252,000 252,000
Other current assets 297,946 83,087
TOTAL CURRENT ASSETS 10,655,442 11,031,804
PROPERTY, PLANT AND EQUIPMENT, at cost 11,085,497 10,401,137
Less, Accumulated depreciation and
amortization 4,409,647 4,627,438
6,675,850 5,773,699
OTHER ASSETS, net 116,370 114,855
TOTAL ASSETS $17,447,662 $16,920,358
See notes to condensed consolidated financial statements.
MILLER BUILDING SYSTEMS, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
December 28, June 29,
1996 1996
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term borrowings $ - $ 1,500,000
Current maturities of long-term debt
and capitalized lease obligations 182,556 115,000
Accounts payable 3,231,791 2,291,448
Accrued income taxes 444,099 79,438
Accrued expenses and other 757,079 974,698
Accrued nonrecurring items 108,917 129,167
TOTAL CURRENT LIABILITIES 4,724,442 5,089,751
LONG-TERM DEBT AND CAPITALIZED LEASE
OBLIGATIONS, less current maturities 1,366,444 1,270,000
DEFERRED INCOME TAXES 136,000 136,000
OTHER 20,019 20,019
TOTAL LIABILITIES 6,246,905 6,515,770
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value 40,235 40,235
Additional paid-in capital 11,454,903 11,454,903
Retained earnings 2,818,095 2,048,824
14,313,233 13,543,962
Less, Treasury stock, at cost 3,112,476 3,139,374
TOTAL STOCKHOLDERS' EQUITY 11,200,757 10,404,588
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $17,447,662 $16,920,358
See notes to condensed consolidated financial statements.
MILLER BUILDING SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended
December 28, December 30,
1996 1995
Net sales $10,007,430 $ 7,670,294
Costs and expenses:
Cost of products sold 8,049,776 6,394,902
Selling, general and administrative 1,481,089 1,220,152
Interest expense 27,007 25,239
Interest income ( 6,518) -
INCOME BEFORE INCOME TAXES 456,076 30,001
Income taxes 176,000 11,000
NET INCOME $ 280,076 $ 19,001
Earnings per share
of common stock $ .08 $ .01
Weighted average number of common
shares and equivalents outstanding 3,308,908 3,105,349
Six Months Ended
December 28, December 30,
1996 1995
Net sales $23,043,819 $17,742,442
Costs and expenses:
Cost of products sold 18,767,358 14,598,810
Selling, general and administrative 2,965,374 2,642,255
Interest expense 77,624 62,943
Interest income (36,383) (753)
INCOME BEFORE INCOME TAXES 1,269,846 439,187
Income taxes 485,000 167,000
NET INCOME $ 784,846 $ 272,187
Earnings per share
of common stock $ .24 $ .09
Weighted average number of common
shares and equivalents outstanding 3,290,513 3,105,674
See notes to the condensed consolidated financial statements.
MILLER BUILDING SYSTEMS, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended
December 28, December 30,
1996 1995
Net cash provided by
operating activities $ 2,553,168 $ 1,683,402
Cash flows provided by (used in)
investing activities:
Purchase of property, plant
and equipment (418,705) (227,332)
Proceeds from sale of subsidiary 1,516,390 -
Net cash provided by (used in)
investing activities 1,097,685 (227,332)
Cash flows provided by (used in)
financing activities:
Proceeds from short-term borrowings 6,765,000 3,600,000
Payments on short-term borrowings (8,265,000) (5,150,000)
Payments of long-term debt and
capitalized lease obligations (815,000) (168,830)
Proceeds from exercise of
stock options 11,323 -
Net cash (used in)
financing activities (2,303,677) (1,718,830)
Increase (decrease) in cash and
temporary cash investments 1,347,176 (262,760)
Cash and temporary cash investments:
Beginning of period 165,329 351,860
End of period $ 1,512,505 $ 89,100
Noncash investing and financing activities:
Building capitalized under capital
lease and the related capital
obligation $ 979,000 $ -
See notes to condensed consolidated financial statements.
MILLER BUILDING SYSTEMS, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note A - BASIS OF PRESENTATION AND OPINION OF MANAGEMENT
The accompanying condensed consolidated financial statements
include the accounts of Miller Building Systems, Inc. and its
subsidiaries (individually and collectively referred to herein as
"Miller"). The unaudited interim condensed consolidated financial
statements have been prepared in accordance with the instructions to
Form 10-Q and, therefore, do not include all information and
disclosures necessary for a fair presentation of consolidated
financial position, results of operations and cash flows in
conformity with generally accepted accounting principles. In the
opinion of management, the information furnished herein includes all
adjustments (consisting of normal recurring accruals) necessary to
reflect a fair statement of the interim periods presented. Operating
results for the interim periods are not necessarily indicative of the
results that may be expected for the year ending June 28, 1997.
The June 29, 1996 condensed consolidated balance sheet was
derived from audited financial statements, but does not include all
disclosures required by generally accepted accounting principles.
Note B - INVENTORIES
Inventories consist of the following:
December 28, 1996 June 29, 1996
Raw materials $ 2,737,998 $ 2,875,527
Work in process 337,727 612,016
Finished goods 95,007 53,457
$ 3,170,732 $ 3,541,000
Note C - INCOME TAXES
The provision for income taxes includes estimated federal
and state income taxes computed using statutory rates in effect with
recognition given to various income tax versus financial reporting
differences. The provision for income taxes was 38.2% of income
before income taxes for the six-months ended December 28, 1996
compared to 38.0% in the comparable six-month period of fiscal 1996.
Note D - ACQUISITION OF KANSAS FACILITY
On August 12, 1996, Miller entered into a ten-year lease
agreement with the Board of County Commissioners of Coffey County,
Kansas to lease a 155,000 square foot manufacturing facility. The
lease agreement provides for payments of $2,500 per month with an
option to purchase the building at the end of the lease for a balloon
payment of $250,000. The balloon payment can be reduced if certain
full-time employee levels are attained during the term of the lease.
In connection with the lease agreement, Miller also entered into an
agreement with the current tenant of the property, whereby Miller
agreed to pay the tenant $750,000, in three installments ($400,000 on
August 12, 1996; $300,000 on October 24, 1996; and $50,000 five days
after the former tenant receives a signed acceptance and release
agreement from Coffey County). Miller has accounted for this
transaction as a capital lease whereby Miller recorded the leased
property under the capital lease and the related obligations on its
balance sheet.
Note E - SALE OF CALIFORNIA OPERATION
On October 21, 1996, Miller Structures, Inc.("Seller"), an
Indiana corporation and a wholly owned subsidiary of Miller, sold all
of its issued and outstanding stock of its wholly owned subsidiary,
Miller Structures, Inc.,("Company") a California corporation, to
MODTECH, Inc.("Buyer"). The sale was made pursuant to an Agreement
for Purchase and Sale of all of the outstanding Capital Stock of
Miller Structures, Inc., a Non-Competition Agreement and the
Supplemental Closing Agreement.
The consideration paid by the Buyer to the Seller consisted of
a cash purchase price of $1,516,390. Seller and Buyer also entered
into a three-year lease obligation for certain real property
("Property") which lease agreement requires the Buyer, as lessee, to
pay Seller rental payments of $4,500 per month. The lease obligation
is subject to cancellation if an expanded environmental report on the
Property is performed and is satisfactory to Buyer. Upon the
issuance of an acceptable expanded environmental report, Seller and
Buyer will mutually agree to cancel the lease agreement, and Buyer
will acquire the Property from Seller for a cash purchase price of
$450,000. The Non-Competition Agreement provides that the Seller
will not, at any time within a five-year period following closing,
engage in any business that manufactures and markets the products
currently manufactured by the Company in the states of California,
Nevada and Arizona.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Financial Condition - December 28, 1996 compared to June 29, 1996
At December 28, 1996, Miller's working capital was $5,931,000
compared to $5,942,053 at June 29, 1996. The working capital ratio
at December 28, 1996 was 2.3 to 1 compared to 2.2 to 1 at June 29,
1996.
Miller has an unsecured bank credit agreement which provides for
advances up to $5,000,000 through November 30, 1997. There were no
amounts outstanding under this agreement at December 28, 1996 and
$1,500,000 was outstanding at June 29, 1996.
Miller believes operating cash flows and the bank credit
agreement are sufficient to meet operating needs. The proceeds from
the sale of the California operation (see Note E of the Notes to
Condensed Consolidated Financial Statements) were used to fund the
acquisition of the Kansas facility (see Note D of the Notes to the
Condensed Consolidated Financial Statements).
Results of Operations - Three months ended December 28, 1996 compared
to the three months ended December 30, 1995
Net sales increased $2,337,136 during the second quarter of
fiscal 1997 or approximately 30.5% from the corresponding quarter in
fiscal 1996. The increase in sales volume for the quarter was the
result of strong business conditions at all of Millers' operating
locations. Net sales at Miller Structures, Inc. ("Structures")
increased 21.9% from the second quarter last year. All of the
Structures plants, except the South Dakota plant, participated in
significant sales increases. Structures current order backlog of
business is more than triple last year's backlog. Net sales at
Miller Telecom Services, Inc ("Telecom") increased 57.8% from the
second quarter last year. Telecom continues to increase its market
share in the telecommunication shelter business. Management believes
the growth at Telecom will continue during the current fiscal year.
During the three-month period ended December 28, 1996, cost of
products sold was 80.4% of net sales compared to 83.4% for the
comparable period of fiscal 1996. The 3% decline in gross profit for
the quarter can be attributed to a shift in mix at Structures to the
more profitable custom units, a larger percentage of unit sales at
Telecom which carry a higher profit margin, and a strong business
environment and order backlog which reduced the need to discount
units during the slow winter months. The decrease in the cost of
products sold percentage for the quarter ended December 28, 1996 is
not necessarily indicative of the trend in cost of sales anticipated
in future periods.
Selling, general and administrative expenses for the three-month
period ended December 28, 1996, increased 21.4% when compared to the
similar period of fiscal 1996. The higher selling, general and
administrative expenses were the result of higher salary and
incentive compensation expenses, advertising expenses, legal fees and
an increase in the provision for doubtful receivables. As a
percentage of net sales, selling, general and administrative expenses
for the three-month period ended September 29, 1996, were 14.8%,
compared to 15.9% in the comparable three-month period in fiscal
1996.
Interest expense increased $1,768 to $27,007 during the current
three-month period compared to the similar period of the prior year.
The increase was attributable to higher levels of debt outstanding.
The provision for income taxes was 38.6% of income before income
taxes for the three months ended December 28, 1996 compared to 36.7%
in the comparable three-month period of fiscal 1996.
Results of Operations - Six months ended December 28, 1996 compared
to the six months ended December 30, 1995
Net sales increased $5,301,377 during the six-month period ended
December 28, 1996 or 29.9% from the corresponding period in fiscal
1996. Both Structures and Telecom contributed to the net sales
increase. Net sales at Structures increased 26.1% and Telecom
increased 41.7% from the six-month period last year.
During the six-month period ended December 28, 1996, cost of
products sold was 81.4% of net sales compared to 82.3% for the
comparable period of fiscal 1996. The shift in mix to more
profitable custom units at Structures, the larger percentage of unit
sales at Telecom which carry a higher profit margin and the lack of
unit discounting during the second quarter contributed to the
reduction in the cost of products sold percentage for the six-month
period.
Selling, general and administrative expenses for the six-month
period ended December 28, 1996, increased 12.2% when compared to the
similar period of fiscal 1996. The higher selling, general and
administrative expenses was the result of higher salary and incentive
compensation expenses, advertising expense, legal fees and an
increase in the allowance for doubtful receivables. As a percentage
of net sales, selling, general and administrative expenses for the
six-month period ended December 28, 1996, were 12.9%, compared to
14.9% in the comparable six-month period in fiscal 1996.
Interest expense increased $14,681 to $77,624 during the current
six-month period compared to the similar period of the prior year.
The increase was attributable to higher levels of debt outstanding.
The provision for income taxes was 38.2% of income before income
taxes for the six-months ended December 28, 1996 compared to 38.0% in
the comparable six-month period of fiscal 1996.
Part II. Other Information
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits. See Index to Exhibits
(b) Reports on Form 8-K
The following report on Form 8-K was filed during the three
months ended December 28, 1996.
October 21, 1996, reporting the sale by Miller Structures,
Inc., an Indiana corporation, of all of the issued and
outstanding shares of common stock of Miller Structures,
Inc., a California corporation, to MODTECH, Inc.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
MILLER BUILDING SYSTEMS, INC.
(Registrant)
DATE: February 6, 1997 \Edward C. Craig
Edward C. Craig
President and Chief Executive
Officer
(Principal Executive
Officer)
\Thomas J. Martini
Thomas J. Martini
Secretary and Treasurer
(Principal Financial and
Accounting Officer)
MILLER BUILDING SYSTEMS, INC.
AND SUBSIDIARIES
FORM 10-Q
INDEX TO EXHIBITS
Number Assigned
in Regulation S-K
Item 601 Description of Exhibit
(11) Statement regarding computation of
per share earnings
Exhibit 11
MILLER BUILDING SYSTEMS, INC.
AND SUBSIDIARIES
Statement Regarding Computation of Per Share Earnings
Three Months Ended Six Months Ended
December December December December
1996 1995 1996 1995
Calculation of primary earnings
per common share:
Net income $ 280,076 $ 19,001 $ 784,846 $ 272,187
Shares outstanding, net of
treasury shares, at beginning of
the fiscal year 3,102,963 3,100,963 3,100,963 3,100,963
Additional shares assuming
exercise as of the beginning of
the fiscal year of dilutive stock
options, based on the treasury
stock method using the average
market price for the period 192,057 4,386 180,946 4,711
Weighted average number of shares
issued as a result of exercise
of stock options 26,456 - 14,755 -
Weighted average number of shares
acquired as treasury stock (12,568) - (6,151) -
Weighted average shares and
equivalent shares outstanding 3,308,908 3,105,349 3,290,513 3,105,674
Primary earnings per share: $ .08 $ .01 $ .24 $ .09
Fully dilutive earnings per share do not differ materially from primary
earnings per share.
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<PERIOD-END> DEC-28-1996
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