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 October 2, 1999
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
3,336,193 Shares Outstanding at November 10, 1999
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 9-11
Part II. Other Information
Item 4. Submission of Matters to a vote of
Security Holders 11
Item 6. Exhibits and Reports on Form 8-K 12
Signatures 13
Index to Exhibits 14
Part I. Financial Information
Item 1. Financial Statements
MILLER BUILDING SYSTEMS, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
October 2, July 3,
1999 1999
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 83,580 $ 55,503
Receivables 12,561,837 12,837,571
Refundable income taxes - 16,200
Inventories 5,497,349 5,502,052
Deferred income taxes 218,000 218,000
Other current assets 478,194 143,984
TOTAL CURRENT ASSETS 18,838,960 18,773,310
PROPERTY, PLANT AND EQUIPMENT, at cost 14,518,428 14,962,620
Less, Accumulated depreciation and
amortization 5,708,524 5,731,885
PROPERTY, PLANT AND EQUIPMENT, NET 8,809,904 9,230,735
Deferred compensation plan investments 453,412 417,143
Excess acquisition cost over fair
value of acquired net assets, net 4,114,621 4,159,600
Other assets 189,569 194,398
TOTAL ASSETS $32,406,466 $32,775,186
See notes to condensed consolidated financial statements.
MILLER BUILDING SYSTEMS, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
October 2, July 3,
1999 1999
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term borrowings $ 200,000 $ 2,000,000
Current maturities of long-term debt 814,657 806,119
Accounts payable 4,496,159 3,954,923
Accrued income taxes 492,535 132,635
Accrued expenses and other 1,198,607 1,407,365
TOTAL CURRENT LIABILITIES 7,201,958 8,301,042
Long-term debt, less current maturities 5,148,954 5,276,854
Deferred compensation liabilities 453,412 417,143
Deferred income taxes 310,000 310,000
Other 11,547 13,300
TOTAL LIABILITIES 13,125,871 14,318,339
STOCKHOLDERS' EQUITY:
Preferred stock, $1.00 par value - -
Common stock, $.01 par value 42,506 42,506
Additional paid-in capital 13,847,920 13,847,920
Retained earnings 9,206,906 8,325,154
23,097,332 22,215,580
Less, Treasury stock, at cost 3,816,737 3,758,733
TOTAL STOCKHOLDERS' EQUITY 19,280,595 18,456,847
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $32,406,466 $32,775,186
See notes to condensed consolidated financial statements.
MILLER BUILDING SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended
October 2, September 26,
1999 1998
Net sales $16,883,211 $17,216,098
Costs and expenses:
Cost of products sold 13,652,765 14,144,448
Selling, general and administrative 1,908,330 1,816,224
Gain on sale of property
and equipment (208,329) -
Interest expense 115,317 158,090
Other income, principally interest (7,624) (7,228)
INCOME BEFORE INCOME TAXES 1,422,752 1,104,564
Income taxes 541,000 427,000
NET INCOME $ 881,752 $ 677,564
Earnings per share of common stock:
Basic $ .26 $ .19
Diluted $ .26 $ .19
Number of shares used in computation
of earnings per share:
Basic 3,360,481 3,533,143
Diluted 3,406,391 3,628,843
See notes to condensed consolidated financial statements.
MILLER BUILDING SYSTEMS, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended
October 2, September 26,
1999 1998
Net cash provided by
operating activities $ 1,121,264 $ 1,122,255
Cash flows provided by (used in)
investing activities:
Purchase of property, plant
and equipment (79,552) (781,097)
Decrease in unexpended industrial
revenue bond proceeds - 629,427
Proceeds from sale of property 1,000,000 -
Increase in deferred compensation
plan investments (36,269) (31,425)
Net cash provided by (used in)
investing activities 884,179 (183,095)
Cash flows (used in)
financing activities:
Proceeds from short-term borrowings 5,300,000 7,675,000
Reduction of short-term borrowings (7,100,000) (8,450,000)
Payments of long-term debt (119,362) (110,999)
Purchase of treasury stock (58,004) -
Proceeds from exercise of
stock options - 31,400
Net cash provided by (used in)
financing activities (1,977,366) (854,599)
Increase in cash
and cash equivalents 28,077 84,561
Cash and cash equivalents:
Beginning of period 55,503 111,620
End of period $ 83,580 $ 196,181
Noncash investing and financing activities:
Issuance of 227,082 shares of
common stock in connection
with business acquisition $ - $ 2,250,000
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" or the "Company"). 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 July 1, 2000. The
Annual Report on Form 10-K for the year ended July 3, 1999 should be
read in conjunction with these statements.
The July 3, 1999 condensed consolidated balance sheet was
derived from audited financial statements, but does not include all
disclosures required by generally accepted accounting principles.
Note B - BUSINESS SEGMENTS
Miller has one reportable segment, designing, manufacturing,
marketing and servicing factory-built buildings, which includes three
product lines: Structures, Telecom and Construction Services. Net
sales by product line are as follows:
October 2, 1999 September 26, 1998
Structures $ 7,784,411 $ 8,277,080
Telecom 8,439,333 8,478,439
Construction Services 659,467 460,579
$16,883,211 $17,216,098
Note C - INVENTORIES
Inventories consist of the following:
October 2, 1999 July 3,1999
Raw materials $ 4,077,884 $ 4,369,472
Work in process 1,411,451 885,957
Finished goods 8,014 246,623
$ 5,497,349 $ 5,502,052
Note D - EARNINGS PER SHARE
The number of shares used in the computation of basic and
diluted earnings per share are as follows:
Three Months Ended
October 2, September 26,
1999 1998
Weighted average number
of common shares outstanding
(used for basic earnings
per share) 3,360,481 3,533,143
Effect of dilutive
stock options 45,910 95,700
Diluted shares outstanding
(used for diluted earnings
per share) 3,406,391 3,628,843
Note E - SALE OF KANSAS ASSETS
On August 20, 1999, Miller entered into an Asset Purchase Agreement
with Andrew Corporation (the "Buyer") to sell certain assets used in
the business operations of its Kansas facility. The Asset Purchase
Agreement also provides for the assignment of Miller's lease of its
Kansas facility. The purchase price consisted of $3.5 million from
the Buyer plus the Buyer's assumption of certain liabilities of the
Kansas operation. The $3.5 million consisted of a $1.0 million base
purchase price, which was paid at closing on August 20, 1999, and a
contingent purchase price of $2.5 million which was paid by the Buyer
to Miller with the assignment and transfer of a lease agreement for
the Kansas facility on November 9, 1999. Miller reported a pre-tax
gain on the sale of certain Kansas assets of $208,329 in the quarter
ended October 2, 1999. Miller expects to report an additional gain
of approximately $1.3 million during the quarter ending January 1,
2000, based on the assignment and transfer of the lease agreement.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Report contains certain statements that are "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933
and Section 21E of the Securities Exchange Act of 1934, as amended. Those
statements are dependent on certain risks and uncertainties. Such factors,
among others, are the mix between products with varying profit margins, the
ability to achieve forecasted production levels through the second half of
fiscal 2000, the strength of the economy in the various sections of the
country served by the Company, the impact of our competitors on the
profitability of our products, the future availability of raw materials, the
anticipated adequacy of the Company's operating cash flows and credit
facilities to finance operations, capital expenditures and other needs of its
business and the ability of the Company, its suppliers and its customers to
be year 2000 compliant. Readers are cautioned that reliance on any
forward-looking statement involves risks and uncertainties. Forward-looking
statements contained herein are based on reasonable assumptions, any of which
could prove to be inaccurate given the inherent uncertainties as to the
occurrence or nonoccurrence of future events. There can be no assurance that
the forward-looking statements contained in this Report will prove to be
accurate. The inclusion of a forward-looking statement herein should not be
regarded as a representation by the Company that the Company's objectives
will be achieved.
Financial Condition - October 2, 1999 compared to July 3, 1999
At October 2, 1999, Miller's working capital was $11,637,002
compared to $10,472,268 at July 3, 1999. The working capital ratio
was 2.6 to 1 at October 2, 1999 and 2.3 to 1 at July 3, 1999.
Miller has an unsecured bank credit agreement which provides for
advances up to $7,000,000 through November 30, 1999 and Miller
expects this credit facility will be renewed through November 30,
2000. There was $200,000 of outstanding borrowings under this credit
agreement at October 2, 1999 compared to $2,000,000 at July 3, 1999.
Miller believes operating cash flows and the bank credit
agreement are sufficient to meet its operating needs.
Results of Operations - Three months ended October 2, 1999 compared
to the three months ended September 26, 1998
Net sales for the first quarter of fiscal 2000 declined slightly
(less than 2%) from the corresponding quarter in fiscal 1999. Net
sales for the Structures product line, ("Structures") decreased 6.0%
from the first quarter last year. This decrease was primarily the
result of lower sales at the Kansas operation which was sold on
August 20, 1999. Net sales for the Telecom product line, ("Telecom")
decreased slightly (less than 1%) from the first quarter last year.
This decrease was also the result of lower sales at the Kansas
operation, partially offset by increased sales at the United and
Pennsylvania Telecom operations. The Structures business remains
strong as their backlog is 71% higher than last year at this time.
The order rate for the Telecom business has also increased. The
Telecom backlog is 61% higher than last year, excluding last year's
backlog at the Kansas plant. The current backlogs will provide a
solid production base well into Miller's third fiscal quarter. We
believe United and the Leola, Pennsylvania Telecom facility will also
continue to be strong contributors to Miller's overall profitability
during the remainder of fiscal 2000.
During the three-month period ended October 2, 1999, cost of
products sold was 80.9% of net sales compared to 82.2% for the
comparable period of fiscal 1999. This decrease is primarily the
result of a higher mix of Telecom product, which carry a higher gross
profit than Structures products, when compared to the same quarter
last year.
Selling, general and administrative expenses for the three-month
period ended October 2, 1999, increased 5.1% when compared to the
similar period of fiscal 1999. The higher selling, general and
administrative expenses were generally the result of higher incentive
compensation, travel expenses and consulting fees. As a percentage
of net sales, selling, general and administrative expenses for the
three-month period ended October 2, 1999, were 11.3%, compared to
10.5% in the comparable three-month period in fiscal 1999.
Interest expense decreased $42,773 to $115,317 during the
current three-month period compared to the similar period of the
prior year. The decrease was attributable to lower levels of
outstanding debt during the period.
The provision for income taxes was 38.0% of income before income
taxes for the three months ended October 2, 1999 and 38.7% for the
comparable three-month period of fiscal 1999.
Year 2000 Compliance
Miller is finalizing the process of identifying, evaluating, and
implementing changes to computer programs necessary to address the
Year 2000 issue. This issue affects computer systems that have
date-sensitive programs that may not properly recognize the Year 2000.
Systems that do not properly recognize such information could
generate erroneous data or cause a system to fail, resulting in
business interruption. Miller believes its current computer hardware
and software programs are Year 2000 compliant. Costs related to the
Year 2000 issue are being expensed as incurred. Costs incurred to
date have been less than $50,000 and management does not believe any
material additional costs will be incurred.
Management has completed a program to prepare Miller's
manufacturing and facility systems for the Year 2000. Miller has
tested and fixed applications such as security, environmental,
desktop computers and production equipment to ensure they are Year
2000 ready. Miller currently does not expect any significant
interruption to its operations because of Year 2000 problems.
Miller's products do not have Year 2000 readiness issues because they
do not contain date-sensitive functions.
Miller is finalizing the process of contacting all third parties
with which it has significant relationships, to determine the extent
to which Miller could be vulnerable to failure by any of them to
obtain Year 2000 compliance. Some of Miller's major suppliers,
customers and financial institutions have confirmed that they
anticipate being Year 2000 compliant on or before December 31, 1999,
although many have only indicated that they have Year 2000 readiness
programs. To date, Miller is not aware of any significant third
parties with a Year 2000 issue that could materially impact Miller's
operations, liquidity or capital resources. However, Miller has no
means of ensuring that third parties will be Year 2000 ready and the
potential effect of third-party non-compliance is currently not
determinable.
Miller will continue to devote the resources necessary to ensure
that all Year 2000 issues are properly addressed. However, there can
be no assurance that all Year 2000 problems are detected. Further,
there can be no assurance that Miller's assessment of its third party
vendors and suppliers will be accurate. Some of the potential
worst-case scenarios that could occur include: (1) corruption of data in
Miller's internal systems; (2) failure of infrastructure services
provided by government agencies; and (3) health, environmental and
safety issues relating to Miller's facilities. If any of these
situations were to occur, Miller's operations in certain areas could
be temporarily interrupted. Miller is finalizing its Year 2000
contingency plans for continuing operations where they believe
potential problems may arise. These plans would include increasing
inventory levels for critical raw materials where we believe
suppliers may not be Year 2000 compliant or shift the production if
a critical material shortage occurs. Miller has operations around
the country and is prepared to shift production to different
facilities if there are significant interruptions to operations in a
particular region.
Part II. Other Information
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) Annual Meeting of Stockholders held on November 3, 1999,
proxies for which were solicited pursuant to Regulation 14
under the Securities and Exchange Act of 1934, as amended.
(b) Matters voted upon at Annual Meeting:
Votes Cast
For Withheld
1. Election of Directors
Edward C. Craig 2,890,276 95,821
Steven F. Graver 2,675,901 310,196
2. Appointment of For 2,920,315
PricewaterhouseCoopers LLP Against 21,500
As independent accountants Withheld 44,282
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits. See Index to Exhibits
(b) Reports on Form 8-K
There were no reports on Form 8-K filed during the three
months ended October 2, 1999.
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: November 11, 1999 \Edward C. Craig
Edward C. Craig
Chairman, 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
(27) Financial Data Schedule
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<FISCAL-YEAR-END> JUL-01-2000
<PERIOD-END> OCT-02-1999
<CASH> 83,580
<SECURITIES> 0
<RECEIVABLES> 12,561,837
<ALLOWANCES> 0
<INVENTORY> 5,497,349
<CURRENT-ASSETS> 18,838,960
<PP&E> 14,518,428
<DEPRECIATION> 5,708,524
<TOTAL-ASSETS> 32,406,466
<CURRENT-LIABILITIES> 7,201,958
<BONDS> 3,840,000
0
0
<COMMON> 42,506
<OTHER-SE> 0
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<SALES> 16,883,211
<TOTAL-REVENUES> 16,883,211
<CGS> 13,652,765
<TOTAL-COSTS> 15,345,142
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
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<INCOME-PRETAX> 1,422,752
<INCOME-TAX> 541,000
<INCOME-CONTINUING> 881,572
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
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