SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A-2
CURRENT REPORT
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) February 27, 1998
MILLER BUILDING SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
Delaware 0-14651 36-3228778
(State or other (Commission File (I.R.S. Employee
jurisdiction of Number) Indentification
incorporation or Number)
organization)
58120 County Road 3 South 46517
Elkhart, Indiana
(Address of principle executive (Zip Code)
offices)
(219) 295-1214
(Registrant's telephone number, including area code)
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On February 27, 1998, Miller Building Systems, Inc., a
Delaware corporation ("Registrant"), executed a Stock Purchase
Agreement ("Agreement") among the Registrant, and David Newman
( David ) and Marc Newman ( Marc and, together with David,
Seller ), and related documents pursuant to which Registrant
acquired all of the issued and outstanding shares of common stock
of United Structures, Inc., a New York corporation ( United ).
United is headquartered in Vestal, New York and manufactures
lightweight telecommunications shelters. The Agreement replaced
the agreement made and entered into on January 29, 1998 between the
parties. Barry Newman executed the Agreement only with respect to
the provisions (i) regarding confidentiality and (ii) containing
a covenant not to compete (the "Covenant Not to Compete"). The
Covenant Not to Compete provides that David, Marc and Barry Newman
will not compete with United's and Registrant's business for a
period of 5 years, except such individuals can lease
telecommunication towers and construct modular structures for their
own use and not for sale to third parties. The Agreement also
provides for the continued employment of David through June 27,
1998. The acquisition of United is effective as of January 1, 1998.
The cash consideration portion of the Purchase Price paid by
the Registrant to the Seller under the agreement consists of
approximately $3,005,310, subject to a downward adjustment based on
the difference between (a) the amount of receivables shown on
United's balance sheet at December 31, 1997 and (b) the amount of
these receivables actually collected by United between January 1,
1998 and August 31, 1998. Registrant held back $125,000 of the
cash consideration for purposes of such adjustment. The maximum
amount of cash consideration payable to Seller by Registrant on
September 1, 1998 pursuant to such adjustment is $125,000.
As additional consideration paid by Registrant to Seller under
the Agreement, Seller will receive an aggregate number of shares of
Registrant's common stock (the "Shares") based on pre-tax profits
of United earned from January 1, 1998 to June 27, 1998 ("Pre-tax
Profits"), calculated as follows: (x) for Pre-tax Profit in excess
of $100,000 and including up to $500,000, Seller will receive an
aggregate of $10,000 in Shares for each full $2,000 in Pre-tax
Profit and (y) for Pre-tax Profit in excess of $500,000 and
including up to $750,000, Seller will receive an aggregate of
$2,000 in Shares for each full $2,000 of Pre-tax Profit. The value
of Registrant's common stock to be paid to Seller will be based on
the average closing price of Registrant's common stock during the
fifteen trading days prior to June 27, 1998 with a floor and a
ceiling. The maximum value of Registrant's common stock payable to
Seller under the Agreement is $2,250,000. Registrant has agreed to
register all Shares for resale under the Securities Act of 1933 as
soon as Registrant is legally able to effect such registration. In
the event that Registrant has not so registered the Shares by
October 31, 1998, Seller may cause Registrant to redeem the Shares
at a price equal to the aggregate value of such Shares as
originally delivered to Seller.
The sources of funds for the acquisition were the earnings of
Registrant and the proceeds of a draw on Registrant's existing line
of credit with NBD Bank, N.A., a national banking association.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial statements of business acquired.
The following financial statements of United are filed
herein.
Report of Independent Accountants
Balance Sheet as of December 31, 1997
Statement of Income and Retained Earnings for the year
ended December 31, 1997
Statement of Cash Flows for the year ended December 31,
1997
Notes to Financial Statements
(b) Pro forma financial information.
The following pro forma financial statements are filed
herein:
Pro Forma Condensed Consolidated Balance Sheet as of
December 28, 1997
Pro Forma Condensed Consolidated Statement of Income for
the six months ended December 28, 1997
Pro Forma Condensed Consolidated Statement of Income for
the year ended June 28, 1997
Notes to Pro Forma Condensed Consolidated Financial
Statements
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, Registrant has duly caused this report to be signed on its
behalf by the undersigned, hereunto duly authorized.
MILLER BUILDING SYSTEMS, INC.
Date: April 14, 1998
By: \Edward C. Craig
Edward C. Craig,
President and Chief
Executive Officer
UNITED STRUCTURES, INC.
Report on Audit of Financial Statements
For the year ended December 31, 1997
C O N T E N T S
Report of Independent Accountants
Financial Statements:
Balance Sheet
Statement of Income and Retained Earnings
Statement of Cash Flows
Notes to Financial Statements
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Board of Directors of
United Structures, Inc.:
We have audited the accompanying balance sheet of United Structures, Inc. as of
December 31, 1997, and the related statements of income and retained earnings
and cash flows for the year then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit. We conducted our
audit in accordance with generally accepted auditing standards. Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of United Structures, Inc. as of
December 31, 1997, and the results of its operations and its cash flows for the
year then ended, in conformity with generally accepted accounting principles.
As described in Note F, effective January 1, 1998 all of the Company's issued
and outstanding shares of common stock were acquired by Miller Building Systems,
Inc., and the Company became a wholly owned subsidiary of Miller Building
Systems, Inc.
/s/ Coopers & Lybrand L.L.P.
South Bend, Indiana
April 8, 1998
Balance Sheet
as of December 31, 1997
ASSETS
Current assets:
Cash and cash equivalents $ 294,576
Accounts receivable, less allowance
for doubtful receivables of $50,000 3,507,885
Inventories 1,169,462
Total current assets 4,971,923
Improvements and equipment, at cost:
Leasehold improvements 193,647
Machinery and equipment 130,086
Office equipment 16,555
Vehicles 139,911
480,199
Less, Accumulated depreciation and amortization 113,786
Improvements and equipment, net 366,413
Total assets $ 5,338,336
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowings $ 1,100,000
Current maturities of long-term debt 28,385
Accounts payable 1,467,885
Customer deposits and unearned revenue 1,090,547
Accrued sales taxes 279,391
Other current liabilities 76,326
Total current liabilities 4,042,534
Long-term debt, less current maturities 102,475
Total liabilities 4,145,009
Commitments and contingencies (Notes E and F)
Stockholders' equity:
Common stock, no par value: authorized 200 shares, issued
and outstanding 100 shares 1,000
Retained earnings 1,192,327
Total stockholders' equity 1,193,327
Total liabilities and stockholders' equity
$ 5,338,336
The accompanying notes are a part of the financial statements.
Statement of Income and Retained Earnings
for the year ended December 31, 1997
Net sales $ 10,513,031
Costs and expenses:
Cost of products sold 7,602,581
Selling, general and administrative 1,578,105
Provision for doubtful receivables 50,000
Interest expense 87,113
Interest income (14,504)
9,303,295
Net income 1,209,736
Retained earnings, beginning of year 71,163
Cash distributions to stockholders (88,572)
Retained earnings, end of year $ 1,192,327
The accompanying notes are a part of the financial statements.
Statement Of Cash Flows
for the year ended December 31, 1997
Cash flows provided by (used in) operating activities:
Net income $ 1,209,736
Adjustments to reconcile net income to
net cash (used in) operating activities:
Depreciation and amortization 54,883
Other 185
Changes in current assets and liabilities:
Accounts receivable (2,216,184)
Inventories (825,463)
Accounts payable 677,181
Customer deposits and unearned revenue 834,733
Accrued sales taxes 245,696
Other current liabilities 11,387
Net cash (used in) operating activities (7,846)
Cash flows provided by (used in) investing activities:
Purchase of improvements and equipment (263,447)
Advances to related party (254,773)
Collection of advances to related party 300,000
Net cash (used in) investing activities (218,220)
Cash flows provided by (used in) financing activities:
Proceeds from short-term borrowings 533,333
Proceeds from long-term debt 139,911
Payments of long-term debt (9,051)
Advances from related party 1,763,222
Payments of advances from related party (2,006,089)
Cash distributions to stockholders (88,572)
Net cash provided by financing activities 332,754
Increase in cash and cash equivalents 106,688
Cash and cash equivalents, beginning of year 187,888
Cash and cash equivalents, end of year $ 294,576
Supplemental disclosure of cash flow information:
Cash paid during the year for interest $ 73,532
Noncash investing and financing activities:
Improvements and equipment purchased and related
liability included in accounts payable 76,825
The accompanying notes are a part of the financial statements.
United Structures, Inc.
Notes To Financial Statements
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.
Nature of Business - United Structures, Inc. ("United") is engaged in the
business of designing, manufacturing and marketing factory built
structures, primarily for the telecommunications industry. During 1997,
United utilized two manufacturing/warehouse facilities located in Kirkwood
and Vestal, New York. Effective February 1998, all operations were
consolidated in a new leased facility in Kirkwood, New York.
The following is a summary of the accounting policies adopted by United
which have a significant effect on the financial statements.
Revenue Recognition and Concentration of Credit Risk - United generally
recognizes revenues from the sales of its products upon the completion of
manufacturing and the tranfer of title. United invoices certain of its
customers before and during the manufacturing process and certain customers
make advance payments on their orders. United records these amounts as
customer deposits and unearned revenue and the revenue is recognized when
the manufactured product is completed and the transfer of title occurs. At
December 31, 1997, 66% of accounts receivable were from United's largest
customer. The Company's two largest customers accounted for 29% and 24% of
United's net sales for the year ended December 31, 1997.
Cash and Cash Equivalents - United considers all highly liquid investments
purchased with an original maturity of three months or less to be cash
equivalents for purposes of the statement of cash flows.
Inventories - Inventories are stated at the lower of cost or market, with
cost determined under the first-in, first-out method.
Improvements and Equipment - Improvements and equipment are carried at cost
less accumulated depreciation and amortization. Depreciation of equipment
is computed using the straight-line method over the estimated useful lives
of the assets. Amortization of leasehold improvements is computed by the
straight-line method over the expected useful lives of the improvements.
Income Taxes - The stockholders of United have consented to United's
election to be taxed as a S-Corporation as provided by the Internal Revenue
Code. Accordingly, no provision or liability for federal and state income
taxes have been reflected in the accompanying financial statements.
Use of Estimates in the Preparation of Financial Statements - The
preparation of financial statements in conformity with 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.
United Structures, Inc.
Notes To Financial Statements, Continued
B. INVENTORIES.
Inventories consist of the following:
Raw materials $ 479,228
Work in process 690,234
$ 1,169,462
C. DEBT.
Short-Term Borrowings
Short-term borrowings at December 31, 1997 represent outstanding advances
under United's revolving bank line of credit. The credit agreement makes
available up to $1.1 million through December 10, 1998; however, the
maximum availability at any one time can not exceed the lesser of $1.1
million, or 80% of accounts receivable. Interest is payable monthly at the
lender's prime rate plus 1%. At December 31, 1997, the effective interest
rate was 9.5%. Borrowings under the line of credit are collateralized by
substantially all assets of United (see Note F).
Long-Term Debt
Long-term debt consists of the following:
Related party installment obligations:
Monthly payments of $843 including interest
at 7.95%, with final maturity in August 2001 $ 32,091
Monthly payments of $568 including interest
at 7.45%, with final maturity in May 2002 25,599
Monthly payments of $762 including interest
at 7.45%, with final maturity in June 2002 34,888
Installment loan, monthly payments of $950
including interest at 7.95%, with final
maturity in November 2001, collateralized by
specific vehicle 38,282
Total 130,860
Less, Current maturities 28,385
Long-term debt $ 102,475
The related party installment obligations are with Northeast United
Corporation (see Note D). Northeast acquired three vehicles, on behalf of
United, and financed the purchases with installment loans. The vehicles
are titled to Northeast; however, United is utilizing the vehicles in its
business operations, has informally assumed the obligations, and is making
the monthly installment payments directly to the lender.
United Structures, Inc.
Notes To Financial Statements, Continued
C. Debt, Concluded
Interest expense applicable to the related party installment obligations
aggregated $3,440 for the year ended December 31, 1997.
As of December 31, 1997, the annual maturities of the long-term debt are
as follows: 1998 - $28,385; 1999 - $30,662; 2000 - $33,122; 2001 - $31,424
and 2002 - $7,267.
D. RELATED PARTY TRANSACTIONS.
During the year ended December 31, 1997, United had related party
transactions with the following entities which are owned by United's
stockholder(s) and family members related to the two stockholders of
United : United Vestal L.L.C. ("Vestal"), United Kirkwood L.L.C.
("Kirkwood"), Northeast United Corporation ("Northeast") and 434
Construction Corp. ("434 Corp."). In addition to the related party loans
(see Note C), United had the following related party transactions:
Advances to Related Party
During the year ended December 31, 1997, United made unsecured advances to
Kirkwood which aggregated $254,773. Interest income of $14,504 (computed at
9.5%) was accrued on these advances. United collected $300,000 from
Kirkwood on October 31, 1997 which resulted in a payable to Kirkwood of
$30,723 (included in other current liabilities) at December 31, 1997.
Accounts Payable
Accounts payable at December 31, 1997 include $175,924 payable to related
parties.
Short-Term Borrowings
At December 31, 1996, United had a $242,867 unsecured demand obligation
payable to Northeast. During the year ended December 31, 1997, United
received additional advances from Northeast which aggregated $1,763,222 and
made aggregate repayments of advances of $2,006,089. Interest expense
(computed at 9.5%) applicable to this related party borrowing arrangement
aggregated $6,087 for the year ended December 31, 1997.
D. RELATED PARTY TRANSACTIONS, Concluded.
Leases
For the year ended December 31, 1997, United leased its two (2)
manufacturing facilities and its office facility from related parties under
informal month-to-month lease arrangements. Related party rent expense for
1997 was as follows:
Lessor
Vestal $ 92,627
Kirkwood 64,600
Northeast 36,000
$ 193,227
In addition to the monthly lease payments, United was responsible for
insurance, real estate taxes and normal repairs.
Subcontracting Expense
During the year ended December 31, 1997, United subcontracted with related
party companies for labor and services. Subcontracting expenses (included
in cost of products sold) paid to related parties for 1997 aggregated
$336,946, and were paid to Northeast $286,788 and 434 Corp. - $50,158.
Subcontracting Income
United provided certain labor and services to related party companies
during 1997 and was reimbursed for these services. Subcontracting income
(netted against cost of products sold) from related parties aggregated
$230,096 for the year ended December 31, 1997.
E. COMMITMENTS AND CONTINGENCIES.
Lease Commitments
United leases a vehicle under an operating lease expiring April 24, 1999.
Future annual minimum lease payments under this noncancellable lease are as
follows: 1998 - $5,947 and 1999 - $1,982.
United Structures, Inc.
Notes To Financial Statements, Concluded
E. COMMITMENTS AND CONTINGENCIES, Concluded.
Rental expense for this vehicle lease aggregated $5,947 for the year ended
December 31, 1997.
Penalties and Interest
As of December 31, 1997, accrued sales taxes of $279,391 represents
unremitted sales taxes applicable to 1996 and 1997. Subsequent to the
acquisition by Miller (see Note F), United has established procedures for
timely remittance of sales taxes and is remitting all delinquent sales
taxes. It is possible that the states may assess United penalties and
interest in connection with the delinquent sales tax filings. United has
not accrued any amounts for penalties and interest because, in connection
with the sale transaction to Miller, United's stockholders agreed to
indemnify Miller for any unpaid taxes, penalties and interest.
F. SUBSEQUENT EVENTS.
Ownership Change
Effective January 1, 1998, the two stockholders of United sold all of
United's issued and outstanding common shares to Miller Building Systems,
Inc. ("Miller") and United became a wholly owned subsidiary of Miller.
Debt Restructuring
In connection with the acquisition of United by Miller, United's bank line
of credit was amended. The amendment extended the maturity date to March
10, 1999, adjusted the interest rate to the lender's prime rate plus .5%
and provided for a corporate guarantee by Miller.
In connection with Miller's acquisition of United, the installment
obligations of Northeast (see Note C) which were accounted for by United as
related party loans were formally assumed by United and title to the
related vehicles were transferred to United, subject to the lender's lien.
Lease Agreement
On February 27, 1998, United entered into a five-year lease agreement with
Kirkwood (see Note D) to lease a 55,900 square foot maufacturing/office
building in Kirkwood, New York. The lease agreement requires annual rental
payments of $220,805, has an option to renew for an additional five-year
term and contains an option to purchase the facility after February 28,
2000. United will also be responsible for real estate taxes, insurance and
normal repairs. Future minimum annual lease commitments under this lease
agreement, which aggregate $1,104,025, are payable as follows:
1998 - $220,805; 1999 - $220,805; 2000 - $220,805; 2001 - $220,805 and
2002 - $220,805.
MILLER BUILDING SYSTEMS, INC.
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited pro forma condensed consolidated financial statements
(the "Pro Forma Statements") are required by the rules of the Securities and
Exchange Commission and are provided for informational purposes only. The Pro
Forma Statements should not be considered indicative of the results that would
have been or will be attained since they are based on historical rather than
prospective information and include certain assumptions which are subject to
change.
The Pro Forma Statements illustrate the effects of the transactions between
Miller Building Systems, Inc. (the "Registrant") and United Structures, Inc.
("United"), and are based on the historical financial statements of the
Registrant for the year ended June 28, 1997 and as of and for the six months
ended December 28, 1997 and the historical financial statements of United as of
December 31, 1997, for the twelve-month period ended June 30, 1997 and for the
six-month period ended December 31, 1997. These Pro Forma Statements reflect
how the Registrant's consolidated balance sheet might have appeared if the
transaction had occurred on December 28, 1997 and how the Registrant's
consolidated statements of income for the year ended June 28, 1997 and the six-
months ended December 28, 1997 might have appeared if the transactions had
occurred at the beginning of each respective period. The Registrant will
account for the acquisition of United using the purchase method of accounting.
The Pro Forma Statements are unaudited and should be read in conjunction with
the accompanying notes thereto and with the historical financial statements and
related notes of the Registrant and United. The pro forma purchase adjustments
are based on assumptions and estimates made specifically for the purpose of
preparing these Pro Forma Statements. In the opinion of the Registrant's
management, these Pro Forma Statements are reasonable under the circumstances.
MILLER BUILDING SYSTEMS, INC.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
As of December 28, 1997
(Unaudited)
(In Thousands)
Historical Pro Forma
Miller Building United
ASSETS Systems, Inc. Structures, Inc.
12/28/97 12/31/97 Adj. Consolidated
Current assets:
Cash and cash equivalents $ 167 $ 295 $ - $ 462
Receivables 7,141 3,508 - 10,649
Inventories 3,850 1,169 - 5,019
Deferred income taxes 448 - - 448
Property held for sale 392 - - 392
Other current assets 194 - - 194
Total current assets 12,192 4,972 - 17,164
Property, plant and
equipment net 7,146 366 (219)(1) 7,293
Goodwill 18 - 3,363 (2) 3,381
Other assets 88 - - 88
Total assets $ 19,444 $ 5,338 $ 3,144 $ 27,926
LIABILITIES AND STOCKHOLDERS EQUITY
Current liabilities:
Short-term borrowings $ 1,500 $ 1,100 $ 2,000 (3) $ 4,600
Current maturities of
long-term debt 133 28 (9)(1) 152
Accounts payable 2,119 1,468 - 3,712
Accrued income taxes 282 - - 282
Accrued expenses and other 806 1,447 125 (3) 2,253
Total current liabilities 4,840 4,043 2,116 10,999
Long-term debt, less
current maturities 1,233 102 (29)(1) 1,306
Deferred income taxes 133 - - 133
Other 17 - - 17
Total liabilities 6,223 4,145 2,087 12,455
Stockholders equity
Common stock 40 1 (1)(4) 40
Additional paid-in capital 11,455 - - 11,455
Retained earnings 4,561 1,192 223 (3)(4) 5,976
Treasury stock, at cost (2,835) - 835 (3) (2,000)
Total stockholders' equity 13,221 1,193 1,057 15,471
Total Liabilities and
stockholders' equity $ 19,444 $ 5,338 $ 3,144 $ 27,926
See accompanying notes to pro forma condensed consolidated financial statements
MILLER BUILDING SYSTEMS, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
For the six months ended December 28, 1997
(Unaudited)
(In thousands, except per share data)
Historical Pro Forma
Miller Building United
Systems, Inc. Structures, Inc.
Six Months Ended Six Months Ended
12/28/97 12/31/97 Adj. Consolidated
Net sales $ 23,721 $ 6,847 $ - $ 30,568
Costs and expenses:
Cost of products sold 19,136 4,414 84 (5) 23,634
Selling, general
and admin. 2,972 1,492 - 4,464
Interest expense 95 56 85 (6) 236
Other income - (15) - (15)
INCOME BEFORE INCOME TAXES 1,518 900 (169) 2,249
Income taxes 576 342 (7) (64)(8) 854
NET INCOME $ 942 $ 558 $ (105) $ 1,395
Earnings per share
of common stock:
Basic $ 0.29 $ 0.40
Diluted $ 0.28 $ 0.39
Number of shares used in
computation of earnings
per share:
Basic 3,245,372 3,470,372
Diluted 3,397,435 3,622,435
See accompanying notes to pro forma condensed consolidated financial statements
MILLER BUILDING SYSTEMS, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME
For the year ended June 28, 1997
(Unaudited)
(In thousands, except per share data)
Historical Pro Forma
Miller Building United
Systems, Inc. Structures, Inc.
Year Ended Twelve Months Ended
6/28/97 6/30/97 Adj. Consolidated
Net sales $ 46,287 $ 6,595 $ - $ 52,882
Costs and expenses:
Cost of products sold 37,323 5,564 168 (5) 43,055
Selling, general
and admin. 6,334 321 - 6,655
Interest expense 155 60 166 (6) 381
Other income (105) - - (105)
INCOME BEFORE INCOME TAXES 2,580 650 (334) 2,896
Income taxes 1,006 247 (7) (127)(8) 1,126
NET INCOME $ 1,574 $ 403 $ (207) $ 1,770
Earnings per share
of common stock:
Basic $ 0.50 $ 0.52
Diluted $ 0.47 $ 0.49
Number of shares used in
computation of earnings
per share:
Basic 3,157,706 3,382,706
Diluted 3,355,540 3,580,540
See accompanying notes to pro forma condensed consolidated financial statements.
MILLER BUILDING SYSTEMS, INC.
NOTES TO PRO FORMA
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For purposes of the unaudited pro forma condensed consolidated balance sheet, it
is assumed the transaction occurred on December 28, 1997. For purposes of the
unaudited pro forma consolidated statements of income, it is assumed the
transaction occurred at the beginning of each respective period presented.
A summary of the acquisition of United by the Registrant and the related pro
forma adjustments reflected in the accompanying Pro Forma Statements are as
follows:
Cost of acquisition (in thousands):
Purchase Price of all of the issued and
outstanding common stock of United:
Cash $ 2,000
Common stock of the Registrant 2,250
Estimated acquisition costs 125
$ 4,375
Net assets acquired (in thousands):
Stockholders' equity of United as of December 31, 1997 $ 1,193 (4)
(Assets) and liabilities retained by stockholders of
United
Leasehold improvements (188) (1)
Equipment (39) (1)
Accumulated depreciation 8 (1)
Current maturities of long-term debt 9 (1)
Long-term debt 29 (1)
Goodwill 3,363 (2)
$ 4,375
(1) Adjustment for the retention of certain assets and liabilities by
stockholders of United.
(2) To record goodwill associated with the acquisition of United by the
Registrant.
(3) To reflect the issuance by Registrant of 225,000 shares of Common Stock at
$10.00 per share (market value) from treasury stock (cost $3.71 per share),
the borrowing of $2,000,000 on the Registrant's revolving line of credit
and the accrual of $125,000 of direct acquisition costs.
(The issuance of 225,000 shares of Common Stock assumes the maximum earnout
provisions contained in the Stock Purchase Agreement).
(4) Elimination of the stockholders' equity of United.
MILLER BUILDING SYSTEMS, INC.
NOTES TO PRO FORMA
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, Continued
(5) To record increased amortization expense resulting from the recording of
goodwill in the amount of $3,363,000. Goodwill is being amortized using
the straight-line method over a 20-year period.
(6) To reflect interest expense resulting from the Registrant's borrowing on
its revolving line of credit. For the year ended June 28, 1997, the
amount of interest expense is based upon an outstanding principle balance
of $2,000,000 and an effective borrowing rate of 8.3%. For the six months
ended December 28, 1997, the amount of interest expense is based upon an
outstanding principle balance of $2,000,000 and an interest rate of 8.5%.
The interest rate reflects the rate the Registrant believes it would have
incurred during the period based on the terms of its borrowing
arrangements.
(7) To apply federal and state income taxes to the pre-tax income of United
assuming an effective tax rate of 38%. United previously had elected to
be taxed as a S Corporation and, accordingly, no provision for income taxes
had been made in United's historical financial statements.
(8) Income tax effect of adjustments (5) and (6). The Registrant intends to
make a Section 338 election to treat this stock purchase as an asset
purchase and, accordingly, goodwill will be deductible over a fifteen-year
period.
