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 January 1, 2000
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
3,194,198 Shares Outstanding at February 2, 2000
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 7-9
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 9-12
Part II. Other Information
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
January 1, July 3,
2000 1999
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 2,505,712 $ 55,503
Receivables 10,601,009 12,837,571
Refundable income taxes - 16,200
Inventories 5,571,403 5,502,052
Deferred income taxes 218,000 218,000
Other current assets 249,022 143,984
TOTAL CURRENT ASSETS 19,145,146 18,773,310
PROPERTY, PLANT AND EQUIPMENT, at cost 13,544,412 14,962,620
Less, Accumulated depreciation and
amortization 5,788,949 5,731,885
PROPERTY, PLANT AND EQUIPMENT, NET 7,755,463 9,230,735
Deferred compensation plan investments 587,901 417,143
Excess acquisition cost over fair
value of acquired net assets, net 4,069,642 4,159,600
Other assets 181,656 194,398
TOTAL ASSETS $31,739,808 $32,775,186
See notes to condensed consolidated financial statements.
MILLER BUILDING SYSTEMS, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
January 1, July 3,
2000 1999
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term borrowings $ - $ 2,000,000
Current maturities of long-term debt 786,619 806,119
Accounts payable 4,087,743 3,954,923
Accrued income taxes 75,510 132,635
Accrued expenses and other 1,498,519 1,407,365
TOTAL CURRENT LIABILITIES 6,448,391 8,301,042
Long-term debt, less current maturities 4,767,841 5,276,854
Deferred compensation liabilities 587,901 417,143
Deferred income taxes 310,000 310,000
Other 11,547 13,300
TOTAL LIABILITIES 12,125,680 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 10,459,473 8,325,154
24,349,899 22,215,580
Less, Treasury stock, at cost 4,735,771 3,758,733
TOTAL STOCKHOLDERS' EQUITY 19,614,128 18,456,847
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $31,739,808 $32,775,186
See notes to condensed consolidated financial statements.
MILLER BUILDING SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended
January 1, December 26,
2000 1998
Net sales $15,536,362 $16,400,935
Costs and expenses:
Cost of products sold 12,861,422 13,594,515
Selling, general and administrative 1,702,290 1,743,263
Gain on sale of property (1,225,828) -
Interest expense 91,436 162,994
Other income, principally interest (19,917) -
Nonrecurring item 101,391 -
INCOME BEFORE INCOME TAXES 2,025,568 900,163
Income taxes 769,000 355,000
NET INCOME $ 1,256,568 $ 545,163
Earnings per share of common stock:
Basic $ .38 $ .15
Diluted $ .38 $ .15
Number of shares used in computation
of earnings per share:
Basic 3,301,814 3,537,624
Diluted 3,340,920 3,612,489
Six Months Ended
January 1, December 26,
2000 1998
Net sales $32,419,573 $33,617,032
Costs and expenses:
Cost of products sold 26,514,187 27,738,963
Selling, general and administrative 3,610,620 3,559,487
Gain on sale of property
and equipment (1,434,157) -
Interest expense 206,752 321,084
Other income, principally interest (27,540) (7,228)
Nonrecurring item 101,391 -
INCOME BEFORE INCOME TAXES 3,448,320 2,004,726
Income taxes 1,310,000 782,000
NET INCOME $ 2,138,320 $ 1,222,726
Earnings per share of common stock:
Basic $ .64 $ .35
Diluted $ .63 $ .34
Number of shares used in computation
of earnings per share:
Basic 3,331,148 3,535,944
Diluted 3,373,687 3,622,127
See notes to condensed consolidated financial statements.
MILLER BUILDING SYSTEMS, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended
January 1, December 26,
2000 1998
Net cash provided by (used in)
operating activities $ 2,666,297 $ (28,967)
Cash flows provided by (used in)
investing activities:
Purchase of property, plant
and equipment (212,358) (928,828)
Decrease in unexpended industrial
revenue bond proceeds - 1,049,763
Proceeds from sale of property
and equipment 3,500,000 -
Increase in deferred compensation
plan investments (170,758) (99,660)
Net cash provided by
investing activities 3,116,884 21,275
Cash flows provided by (used in)
financing activities:
Proceeds from short-term borrowings 6,150,000 15,105,000
Reduction of short-term borrowings (8,150,000) (14,805,000)
Payments of long-term debt (351,933) (341,506)
Purchase of treasury stock (986,039) -
Proceeds from exercise of
stock options 5,000 43,100
Net cash provided by (used in)
financing activities (3,332,972) 1,594
Increase in cash
and cash equivalents 2,450,209 (6,098)
Cash and cash equivalents:
Beginning of period 55,503 111,620
End of period $ 2,505,712 $ 105,522
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 and the
Quarterly Report on Form 10-Q for the quarter ended October 2, 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. Year-
to-Date net sales by product line are as follows:
Six Months Ended
January 1, 2000 December 26, 1998
Structures $ 13,615,910 $15,083,013
Telecom 17,415,102 17,576,396
Construction Services 1,388,561 957,623
$32,419,573 $33,617,032
Note C - INVENTORIES
Inventories consist of the following:
January 1, 2000 July 3,1999
Raw materials $ 3,491,809 $ 4,369,472
Work in process 1,834,153 885,957
Finished goods 245,441 246,623
$ 5,571,403 $ 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
January 1, December 26,
2000 1998
Weighted average number
of common shares outstanding
(used for basic earnings
per share) 3,301,814 3,537,624
Effect of dilutive
stock options 39,106 74,865
Diluted shares outstanding
(used for diluted earnings
per share) 3,340,920 3,612,489
Six Months Ended
January 1, December 26,
2000 1998
Weighted average number
of common shares outstanding
(used for basic earnings
per share) 3,331,148 3,535,944
Effect of dilutive
stock options 42,539 86,183
Diluted shares outstanding
(used for diluted earnings
per share) 3,373,687 3,622,127
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 provided for the assignment of Miller's lease of its
Kansas facility. The purchase price consisted of $3.5 million in
cash 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 pre-tax gains on the sale of certain Kansas
assets of $208,329 in the quarter ended October 2, 1999 and
$1,225,828 in the quarter ended January 1, 2000.
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 - January 1, 2000 compared to July 3, 1999
At January 1, 2000, Miller's working capital was $12,696,755
compared to $10,472,268 at July 3, 1999. The working capital ratio
was 3.0 to 1 at January 1, 2000 and 2.3 to 1 at July 3, 1999.
Miller has an unsecured bank credit agreement which provides for
advances up to $8,000,000 through November 30, 2000. There were no
outstanding borrowings under this credit agreement at January 1, 2000
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 January 1, 2000 compared
to the three months ended December 26, 1998
Net sales for the second quarter of fiscal 2000 declined 5.3%
from the corresponding quarter in fiscal 1999. Net sales for the
Structures product line ("Structures") decreased 14.3% from the
second quarter last year. This decrease was primarily the result of
lower sales at the Indiana operation which was prototyping and
converting production lines to produce luxury sports suites and the
loss of sales at the Kansas operation which was sold on August 20,
1999. Net sales for the Telecom product line ("Telecom") decreased
slightly from the second quarter last year. This decrease was
primarily the result of lost sales from the Kansas operation,
partially offset by increased sales at the United and Pennsylvania
Telecom operations. The Structures business remains strong and its
third quarter results should be favorably impacted from the full
production of the luxury sports suites. The order rate for the
Telecom business continues to increase. The Telecom backlog is 56%
higher than last year, excluding last year's backlog at the Kansas
plant. The current backlogs should provide the basis for Miller to
improve fiscal 2000 third quarter sales and earnings over the prior
year. We believe United and the Pennsylvania Telecom facility will
continue to be strong contributors to Miller's overall profitability
during the remainder of fiscal 2000.
During the three-month period ended January 1, 2000, cost of
products sold was 82.8% of net sales compared to 82.9% for the
comparable period of fiscal 1999. This difference is not considered
material.
Selling, general and administrative expenses for the three-month
period ended January 1, 2000 decreased 2.4% when compared to the
similar period of fiscal 1999. The lower selling, general and
administrative expenses were generally the result of lower
administrative expenses at the sold Kansas operation and lower
incentive compensation, partially offset by higher group health and
prototyping expenses. As a percentage of net sales, selling, general
and administrative expenses for the three-month period ended January
1, 2000 were 11.0%, compared to 10.6% in the comparable three-month
period in fiscal 1999.
During the three-month period ended January 1, 2000, Miller
recognized nonrecurring expenses of $101,391 related to costs
associated with a discontinued merger opportunity.
Interest expense decreased $71,558 to $91,436 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 January 1, 2000 and 39.4% for the
comparable three-month period of fiscal 1999.
Results of Operations - Six months ended January 1, 2000 compared to
the six months ended December 26, 1998
Net sales decreased $1,197,459 during the first six months of
fiscal 2000 or approximately 3.6% from the corresponding period in
fiscal 1999. Net sales for the Structures product line decreased
9.7% from the first six months last year. This decrease at
Structures was primarily the result of lost sales from the sold
Kansas facility and lower production levels at the Indiana facility
caused by the conversion of the production line to build luxury
sports suites. Net sales for the Telecom product line decreased
slightly from the first six months last year. This decrease was the
primarily the result of lost sales volume from the sale of the Kansas
facility, which was partially offset by increased sales at the United
and Pennsylvania facilities.
During the six-month period ended January 1, 2000, cost of
products sold was 81.8% of net sales compared to 82.5% for the
comparable period of fiscal 1999. This decrease from the comparable
period last year is primarily the result of a higher mix of Telecom
products, which carry a higher gross profit than Structures products.
Selling, general and administrative expense for the six-month
period ended January 1, 2000 increased 1.4% when compared to the
similar period of fiscal 1999. The higher selling, general and
administrative expense was generally the result of higher group
insurance costs, travel expenses, consulting fees and prototyping
expense. As a percentage of net sales, selling, general and
administrative expenses for the six-month period ended January 1,
2000 were 11.1%, compared to 10.6% in the comparable six-month period
in fiscal 1999.
Interest expense decreased $114,332 to $206,752 during the
current six-month period compared to the similar period of the prior
year. The decrease was attributable to lower levels of outstanding
debt.
The provision for income taxes was 38.0% of income before income
taxes for the six months ended January 1, 2000 and 39.0% for the
comparable six-month period of fiscal 1999.
Year 2000 Compliance
Miller has completed the process of identifying, evaluating and
implementing changes to its computer programs necessary to address
the Year 2000 issue. Miller's current computer hardware and software
programs are Year 2000 compliant. Costs related to the Year 2000
issue have been 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.
Miller has not experienced 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 has completed 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 be
Year 2000 compliant. Miller is not aware of any 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 all third parties are Year 2000 compliant 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 will be detected.
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
There were no reports on Form 8-K filed during the three
months ended January 1, 2000.
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 2, 2000 \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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<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUL-01-2000
<PERIOD-END> JAN-01-2000
<CASH> 2,505,712
<SECURITIES> 0
<RECEIVABLES> 10,601,009
<ALLOWANCES> 0
<INVENTORY> 5,571,403
<CURRENT-ASSETS> 19,145,146
<PP&E> 13,544,412
<DEPRECIATION> 5,788,949
<TOTAL-ASSETS> 31,739,808
<CURRENT-LIABILITIES> 6,448,391
<BONDS> 3,725,000
0
0
<COMMON> 42,506
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 31,739,808
<SALES> 32,419,573
<TOTAL-REVENUES> 32,419,573
<CGS> 26,514,187
<TOTAL-COSTS> 28,971,253
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 91,436
<INCOME-PRETAX> 3,448,320
<INCOME-TAX> 1,310,000
<INCOME-CONTINUING> 2,138,320
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,138,320
<EPS-BASIC> .64
<EPS-DILUTED> .63
</TABLE>
