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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934 (FEE REQUIRED)
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997
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COMMISSION FILE NUMBER 0-15582
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MINUTEMAN INTERNATIONAL, INC.
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS ARTICLES OF INCORPORATION)
ILLINOIS 36-2262931
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(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
111 SOUTH ROHLWING ROAD, ADDISON, ILLINOIS 60101
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 630-627-6900
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Securities registered pursuant to Section 12(g) of the Act:
Common stock, no par value
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(TITLE OF EACH CLASS)
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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 of 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. X Yes No
- -
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Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.
The aggregate market value of the voting stock held by non-affiliates of
the registrant as of March 2, 1998:
Common stock, no par value, $7,935,000
The number of shares outstanding of the issuer's class of common stock as of
March 2, 1998:
Common stock, no par value, 3,568,385 shares
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Annual Report for the year ended December 31, 1997, are
incorporated by reference into Parts I and II.
Portions of the Proxy Statement for the Annual Shareholders Meeting to be
held April 28, 1998, are incorporated by reference into Part III.
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PART I
Item 1. BUSINESS
General Development of Business
Minuteman International, Inc. an Illinois corporation incorporated in 1951 as
American Cleaning Equipment Corporation, manufactures and distributes one of
the most complete lines of commercial and industrial vacuums, floor and carpet
care, chemical cleaning and coating products and complementary accessories in
the United States and Canada. Its products are exported to countries around
the world.
Products
The Company's product line consists of hard surface floor care equipment,
carpet care and maintenance products, sweepers, scrubbers, commercial and
industrial specialized vacuums, and complementary accessories. Included in the
specialized vacuum area are the hazardous location/explosive environment
vacuums and the clean/room nuclear vacuums.
Multi-Clean, the chemical division of Minuteman International, Inc. formulates,
manufactures and distributes over 65 chemical cleaning and floor coating
products including multi-surface cleaners and degreasers, finishes and waxes,
carpet care products, concrete and wood coatings and finishes, plus a full
array of specialized chemicals.
Parker Sweeper Company, acquired in 1992, manufactures a full line of litter
vacuums as well as an extensive array of lawn and turf debris handling
equipment. Effective December 30, 1994, Parker Sweeper Company, formerly a
wholly-owned subsidiary, was merged into the Company and operates as a
division.
Additional information pertaining to new products is incorporated herein by
reference on pages 4 through 15 of the 1997 Annual Report for the year ended
December 31, 1997.
Marketing and Distribution
The Company manufactures and distributes its products throughout the world.
The distribution process in the United States is primarily through the more
than 300 active dealers and its two sales branches. The Company distributes
its products in Canada through Minuteman Canada, Inc. a wholly-owned
subsidiary. The Company sells its products to Hako-Werke subsidiaries in
Japan, Australia and certain European countries. Export of other products is
conducted through the headquarter office in Addison, Illinois. Sales to
affiliated and unaffiliated customers in foreign countries aggregated to
$12,062,000, $11,173,000 and $11,063,000 in 1997, 1996 and 1995, respectively.
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The Company's equipment is sold under Minuteman International, Minuteman and
Parker Sweeper trade names. The chemical cleaning and coating products are
manufactured by Minuteman International, Inc. and sold under Multi-Clean trade
name. Substantially all of the Company's commercial equipment is manufactured
at its Illinois production facilities in Addison and Hampshire. All of the
Company's industrial equipment is imported from Germany. All of the Company's
chemical cleaning and coating products are produced at its Shoreview, Minnesota
facility.
The manufacture, production and demand for the Company's products and services
are not considered to be seasonal in nature. No part of the Company business
depends on any one single customer, the loss of which would adversely affect
the Company. The Company does not believe any material portion of its business
to be subject to renegotiation of profits or termination of contracts at the
election of the Government.
Raw Materials
The Company purchases castings, electric motors, cord sets, switches, brushes,
wheels, injection molded plastics, sheet steel, paint pigment, chemicals and
other raw materials from a number of suppliers. The Company considers its
ability to obtain raw materials and supplies to be readily available. It does
not believe that the loss of any supplier would adversely affect the Company's
business.
Competition
Minuteman International, Inc. competes with many regional, national and
international manufacturers throughout the industry. These competitive markets
include industrial and plant maintenance, sanitation supply, critical filter,
floor coating and chemical fields. The principal competitive factors within
each of these markets are product quality, reliability, service and fair price.
The Company believes it will continue to compete effectively in the
marketplace and continue its sales growth in the future.
Patents and Trademarks
Currently, the Company has 19 United States and 23 international patents.
Although the Company generally seeks to obtain patents where appropriate, it
does not consider the successful conduct of its business in general to be
dependent on any of its patents or patent applications. By agreement dated
March 1, 1994, with Hako-Werke, the Company agreed to discontinue the use of
the "Hako" trademark on any products intended for sale in any country. It was
further agreed that the Company and Hako-Werke would be free to market and
distribute each of their products throughout the world.
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Minuteman International, Inc. is owner of the United States and Canadian
registrations for the Multi-Clean and Parker Sweeper trade names. The
Minuteman trademark is registered in the United States and Canada. The Parker
trademark is registered in the United States and Canada.
Working Capital
The Company had working capital of $19.9 million at December 31, 1997. Cash,
cash equivalents and short term investments represented 3.6% of the working
capital which when not in use, is invested in bank certificates of deposit,
Eurodollar certificate investments, a managed portfolio of high quality,
variable rate notes and tax exempt seven day bonds.
Backlog
The Company's backlog of orders was approximately $2.6 million at December 31,
1997 and $3.1 million at December 31, 1996. The Company anticipates that
substantially all of the 1997 backlog will be delivered during 1998. In the
opinion of Management, fluctuations in the amount of its backlog are not
necessarily indicative of intermediate or long-term trends in the Company's
business.
Research and Development
The Company expended approximately $1,102,000 $1,146,000 and $1,085,000 in
research and development activities during 1997, 1996 and 1995, respectively.
Employees
The Company has 268 full time employees. The facilities in Addison, Illinois
and Shoreview, Minnesota, have approximately 113 hourly paid employees who are
covered by local collective bargaining agreements. These agreements expire in
May 1998 and October 1998, respectively. The Company believes that the current
employee relations are excellent. The Company plans to hire additional
employees during 1998 as are justified by the needs of the business.
Environmental Matters
The Company's operations are subject to various federal, state and local laws
and regulations regarding the environmental aspects of the manufacture and
distribution of chemical components. The Company believes that it is currently
in compliance in all material respects with the environmental laws and
regulations affecting its operations. Capital expenditures for the purpose of
environmental protection are not expected to be material in amount for 1998 or
thereafter.
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Item 2. PROPERTIES
The Company owns or leases the following properties in its operations:
<TABLE>
<CAPTION> Owned
Location Size (sq. ft.) Use or Leased
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<S> <C> <C> <C>
Addison, IL 112,230 (Bldg.) Office, manufacturing,
254,300 (Land) Warehouse, sales, service Owned
Villa Park, IL 6,135 (Bldg.) Warehouse, sales service Leased
Hampshire, IL 100,000 (Bldg.) Manufacturing, warehouse
871,200 (Land) Owned
Shoreview, MN 34,952 (Bldg.) Office, manufacturing,
133,830 (Land) Warehouse, sales, service Owned
Glendale, CA 7,320 (Bldg.) Building held for sale
15,000 (Land) Owned
Nieuw-Vennep 9,957 (Bldg.) Warehouse, sales, service Leased
The Netherlands
Mississauga, 18,486 (Bldg.) Warehouse, sales, service Leased
Ontario, Canada
</TABLE>
Approximately 90% of the Company's Addison and Hampshire, Illinois facilities
and 85% of the Company's Shoreview, Minnesota facility are devoted to
manufacturing.
In October, 1993, the Company purchased 20 acres of vacant land in Hampshire,
Illinois. In July of 1994, a 50,000 square foot facility was completed and was
fully operational in December 1994 when manufacturing of Parker Sweeper
products were relocated from the former Springfield, Ohio location. In August
of 1995, a 50,000 square foot addition to this facility was completed. This
property provides the Company with the ability to expand services to meet
future business needs.
The Villa Park, Illinois lease term expires December 31, 2000. The
Nieuw-Vennep Netherlands lease term expires January 31, 2003. The Mississauga,
Ontario lease term expires on November 30, 2002. The Company believes that
failure to obtain the renewal of any lease would not have a material adverse
effect on its business.
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Item 3. LEGAL PROCEEDINGS
The Company is a party to various legal proceedings arising in the ordinary
course of its business. The outcome of these matters will not, in the opinion
of Management, have a material adverse effect on the business or financial
condition of the Company.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the fourth quarter of the fiscal year ended December 31, 1997, the
Company did not submit any matter to a vote of shareholders through the
solicitation of proxies or otherwise.
Part II
Item 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED SHAREHOLDER MATTERS
Common stock market prices and dividends on page 23 of the Annual Report for
the year ended December 31, 1997, are incorporated herein by reference.
Item 6. SELECTED CONSOLIDATED FINANCIAL DATA
The Selected Consolidated Financial Data on page 23 and the Notes to
Consolidated Financial Statements on pages 20 through 22 of the Annual Report
for the year ended December 31, 1997, are incorporated herein by reference.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
"Management's Discussion and Analysis of Results of Operations and Financial
Condition" on pages 16 and 17 of the Annual Report for the year ended December
31, 1997, are incorporated herein by reference.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Consolidated Financial Statements included on pages 17 through 19 and the
Notes to Consolidated Financial Statements on pages 20 through 22 of the Annual
Report for the year ended December 31, 1997, are incorporated herein by
reference.
Quarterly Results of Operations on page 22 of the Annual Report for the year
ended December 31, 1997, is incorporated herein by reference.
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Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There have been no changes in or disagreements with the Company's auditors on
accounting and financial disclosure.
Part III
Item 10. DIRECTORS AND OFFICERS OF THE COMPANY
The information contained on pages 2 through 5 of Minuteman International,
Inc.'s Proxy Statement dated March 16, 1998, with respect to directors and
executive officers of the Company is incorporated herein by reference in
response to this item.
Item 11. EXECUTIVE COMPENSATION
The information contained on pages 5 and 6 of Minuteman International Inc.'s
Proxy Statement dated March 16, 1998, with respect to Executive Compensation
and transactions, is incorporated herein by reference in response to this item.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information contained on page 2 of Minuteman International Inc.'s Proxy
Statement dated March 16, 1998, with respect to security ownership of certain
beneficial owners and management, is incorporated herein by reference in
response to this item.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information contained on pages 2 through 7 of Minuteman International
Inc.'s Proxy Statement dated March 16, 1998, with respect to certain
relationships and related transactions, are incorporated herein by reference in
response to this item.
Part IV.
Item 14. EXHIBITS, FINANCIAL STATEMENTS AND SCHEDULE AND REPORTS ON FORM 8-K
(a) (1. and 2.) Financial Statements
The financial statements listed in the accompanying index to financial
statements are filed herewith.
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(a) (3) and (c) Exhibits
The Exhibits required by Item 601 of Regulation S-K and filed
herewith are listed in the Exhibit Index which follows the financial
statements and immediately precedes the exhibits filed.
(b) Reports on Form 8-K
No Reports on Form 8-K were filed in the fourth quarter of 1997;
(d) Financial Statement Schedule
The financial statement schedule listed in the accompanying index
to financial statements is filed herewith.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Minuteman International, Inc.
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(Registrant)
Date: March 16, 1998 By:
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Jerome E. Rau, President and
Chief Executive Officer
By:
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Thomas J. Nolan,
Chief Financial Officer,
Secretary and Treasurer
Pursuant to the requirements of the Securities and Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated.
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Jerome E. Rau
President, Chief Executive Officer,
and Director
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Tyll Necker, Director
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Frederick W. Hohage, Director
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Frank Reynolds, Director
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James C. Schrader, Jr. Director
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ANNUAL REPORT ON FORM 10-K
ITEM 14(a) (1) AND (2), (c) and (d)
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENTS SCHEDULE
CERTAIN EXHIBITS
FINANCIAL STATEMENT SCHEDULE
YEAR ENDED DECEMBER 31, 1997
MINUTEMAN INTERNATIONAL, INC.
ADDISON, ILLINOIS
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REPORT OF INDEPENDENT AUDITORS
Shareholders and Board of Directors
Minuteman International, Inc.
We have audited the accompanying consolidated balance sheets of Minuteman
International, Inc. and subsidiaries as of December 31, 1997 and 1996 and the
related consolidated statements of income, shareholders' equity and cash flows
for each of the three years in the period ended December 31, 1997. Our audits
also include the financial statement schedule listed in the Index at Item
14(a). These financial statements and schedule are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements and schedule based on our audits.
We conducted our audits 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 audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Minuteman International, Inc. and subsidiaries at December 31, 1997 and 1996,
and consolidated results of their operations and their cash flows for each of
the three years in the period ended December 31, 1997, in conformity with
generally accepted accounting principles. Also, in our opinion, the related
financial statements schedule, when considered in relation to the basic
financial statements taken as a whole, present fairly in all material respects
the information set forth therein.
Ernst & Young LLP
Chicago, Illinois
February 11, 1998
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ITEM 14(a) (1) AND (2)
LIST OF FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULE
MINUTEMAN INTERNATIONAL, INC. AND SUBSIDIARIES
December 31, 1997
The following consolidated financial statements of Minuteman International,
Inc. and subsidiaries, included in the Annual Report of the Registrant to its
shareholders for the year ended December 31, 1997, are incorporated by
reference in Item 8:
Consolidated Balance Sheets - December 31, 1997
and 1996
Consolidated Statements of Income - Years ended
December 31, 1997, 1996 and 1995
Consolidated Statements of Shareholders' Equity -
Years Ended December 31, 1997, 1996 and 1995
Consolidated Statements of Cash Flows -
Years Ended December 31, 1997, 1996 and 1995
Notes to Consolidated Financial Statements
The following consolidated financial statement schedule of Minuteman
International, Inc. and subsidiaries are included in Item 14(d):
Schedule II -- Valuation and Qualifying Accounts 14
All other schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable, and therefore have been omitted.
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SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
MINUTEMAN INTERNATIONAL, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D COL. E
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Additions Deductions
--------------------- ----------
Charged to
Balance at Charged to Other Balance
Beginning of Costs and Accounts - at End of
Description Period Expenses Describe Describe(1) Period
- ----------- ------------ ---------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Year Ended December 31, 1997
Reserves and allowances deducted from
asset accounts:
Allowance for uncollectible accounts $351,000 98,000 ------ 121,000 $328,000
Year Ended December 31, 1996
Reserves and allowances deducted from
asset accounts:
Allowance for uncollectible accounts $372,000 104,000 ------ 125,000 $351,000
Year Ended December 31, 1995
Reserves and allowances deducted from
asset accounts:
Allowance for uncollectible accounts $400,000 66,000 ------ 94,000 $372,000
</TABLE>
Note 1 --Uncollectible accounts written off, net of recoveries.
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MINUTEMAN INTERNATIONAL, INC.
EXHIBIT INDEX
(Pursuant to Item 601 of Regulations S-K)
NO. DESCRIPTION AND PAGE OR INCORPORATION REFERENCE
Certificate of Incorporation and By-Laws
3(a) Certificate of Incorporation (incorporated herein by reference to
Exhibit 3 (a) of the Registrant's Form S-18 Registration Statement,
Registration Number 33-11858).
3(b) By-laws (incorporated herein by reference to Exhibit 3 (b) of the
Registrant's Form S-18 Registration Statement, Registration Number
33-11858).
Instruments Defining the Rights of Security Holders,
Including Indentures
4(a) Specimen Certificate for Common Stock, no par value (incorporated
herein by reference to Exhibit 4 of the Registrant's For S-18 Registration
Statement, Registration Number 33-11858).
Material Contracts
10(a) Employment Agreement dated as of January 20, 1987, between the
Company and Jerome E. Rau (incorporated herein by reference to Exhibit 10
(a) of the Registrant's Form S-18 Registration Statement, Registration
Number 33-11858).
10(b) Amendment to Employment Agreement dated as of February 27, 1990,
between the Company and Jerome E. Rau (incorporated herein by reference to
Exhibit 10 (h) at Page 20 of Form 10K Annual Report for fiscal year ended
December 31, 1989).
10(c) Specimen form of Employment Agreement between the Company and its
executive officers (with the exception of the president) (incorporated
herein by reference to Exhibit 10 (c) at Page 18 of Form 10K Annual Report
for fiscal year ended December 31, 1991).
10(d) Employment Agreement dated as of March 22, 1990, between the Company
and Michael Gravelle (incorporated herein by reference to Exhibit 10 (d)
at Page 22 of Form 10K Annual Report for fiscal year ended December 31,
1991).
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10(e) Agreement dated as of February 9, 1987, with respect to trademark between
the Company and Hako-Werke International GmbH (incorporated herein by
reference to Exhibit 10 (c) of the Registrant's Form S-18 Registration
Statement, Registration Number 33-11858).
10(f) Agreement dated March 1, 1994 with respect to worldwide distribution/
marketing and trademarks between the Company and Hako-Werke International
GmbH. Incorporated herein by reference to Exhibit 10 (f) at Page 18 of
Form 10-K Annual Report for fiscal year ended December 31, 1994.
11 Statement re. Computation of Per Share Earnings
Statement re. computation of per share earnings. See Note B of the
Notes to Consolidated Financial Statements on Page 20 of the Annual
Report for the year ended December 31, 1997 (incorporated herein by
reference).
13 Annual Report to Security Holders
The Company's Annual Report to Shareholders for the year ended December
31, 1997, is incorporated herein by reference.
Subsidiaries of the Registrant
22(a) Subsidiaries of the Registrant
(included herein at Page 17).
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Minuteman International, Inc. will furnish any of the aforementioned exhibits
indicated above to requesting security holders upon written request.
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Exhibit 13
MINUTEMAN INTERNATIONAL, INC.
111 South Rohlwing Road
Addison, Illinois 60101
Telephone: (630) 627-6900
Mission Statement
A Commitment to Our Customers.
The core of Minuteman International is anchored by a single, straightforward
vision - to deliver exceptional floor cleaning equipment and chemicals combined
with a single-minded focus to anticipate and answer our customers' needs.
Answering those needs is just the beginning of a performance-driven philosophy
to help our distributors maximize profit and to provide outstanding service,
products and training to each Minuteman customer. That philosophy is combined
with the ongoing development of new and more cost effective methods of
manufacturing and product design to keep our customers on the leading edge of
floor care technology into the next century.
MINUTEMAN INTERNATIONAL: Unique Competitive Strengths
<TABLE>
<S> <C>
Contents
Dynamic Management 3
Worldwide Distribution 5
World-Class Customer Service 7
World-Class Marketing & Training 9
World-Class Innovative Products 11
World-Class Product Strength & Depth 13
World-Class Specialization 15
</TABLE>
Minuteman continues to outperform the market with unique competitive strengths
such as dynamic management, exceptional world-wide distribution,
state-of-the-art technology, world-class customer service and a cutting edge
product line that is both broad and deep.
Dynamic Management
President's Message
Dear Shareholders:
Customer demand for our products once again reached an all-time high, with
sales breaking the $50 million mark for the first time in our 17-year history.
In fact, our revenues exceeded $53 million, an 8.6% advance over the previous
record set last year. Both domestic and international operations contributed to
the gain.
Our gross profit dollars were also up more than 8%, but our intensified
efforts this past year to increase market share involved larger selling
expenditures. As a result, our net profit was reduced compared with last year.
I should remind you, however, that of the nine-cent decline from last year's
earnings-per-share, all but one cent of that difference is attributable to a
non-recurring gain in 1996 from the sale of a former facility. So, the higher
sales expenses were almost entirely offset by profits from our higher volume,
even without price increases, and the benefits of our marketing actions will
accrue to Minuteman's advantage for many years to come.
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The higher selling expenses, which rose 15.5%, were largely for
promotional expenses of existing and new products, and for the cost of
establishing our Multi-Clean cleaning chemicals business as a separate
division. The greater outlays at Multi-Clean were spent hiring and training a
dedicated sales force. The incubation period is extensive before these new
members of the Minuteman family become productive, but the first "class" is
approaching top form and will begin to provide a high yield on our investment
in the new year.
While on the subject of profitability, it had been almost two years -
January 1996 - since we last were able to institute a price increase. Heavy
discounting by competitors imposed price constraints, but Minuteman held its
front-running share of the market by keeping its prices competitive without
sacrificing quality or service. Industry conditions now have improved enough
that we are finally able to share some of the supplier price increases we have
borne during this period. The positive effects of a new pricing schedule
announced in November should be evident in early 1998.
Our existing products elicited strong demand, both from North American
dealers and from international markets. Specialized promotions encouraged and
supported this interest. All lines experienced solid growth except Parker
Sweeper lawn and turf equipment, which suffered from sluggish industry
conditions.
Establishing our Multi-Clean chemicals operation as a separate division
was both a challenge and a source of satisfaction for us in 1997. At the
beginning of the year, we chose Multi-Clean to inaugurate a strategy of
specialization in our businesses. A dedicated sales force was developed,
beginning with the hiring and training of sales representatives, that is
separate from those who sell floor care equipment. It has its own support
staff, ample production facilities and modern research capabilities. We
finished the year with an increase in this unit's sales of more than 10%. While
this is one of several investments for the long term that boosted selling
expenses, we are seeing a payoff even in the year we instituted the
restructuring.
New products also were an important contributor to the year's sales
success. Several innovative designs were introduced at the International
Sanitary Supply Association's trade show in mid-October. Among the most
enthusiastically received equipment was the Mirage Series of heavy-duty propane
burnishers that have higher speed and greater pad pressure than any electric or
battery-powered buffers. Distributors and dealers appreciate such door-opening
creations.
ISSA is our industry's leading trade group with more than 4,000 members,
one-fourth from foreign countries. Because I was the 1997 ISSA president and
the first CEO of an equipment manufacturer to lead this organization in 40
years, Minuteman has gained enhanced visibility worldwide and I have had a
special insight into where the sanitation industry is headed in the years
immediately ahead.
International expansion continued in 1997, with Norway and Sweden added to
our roster of more than 40 other countries, which account for more than 20% of
our company's total revenues. A new corporation, Minuteman European B.V., will
better coordinate our activities on that continent, including our new warehouse
in the Netherlands for stocking EC-approved equipment. And our two Canadian
warehouses were consolidated in a larger, more efficient Toronto facility. It
should be noted that sales improvement abroad occurred despite strength in the
dollar.
All these growth tactics cited above are possible because Minuteman has
adhered to conservative fiscal practices. Our balance sheet is free of
long-term debt, we have almost $20 million of working capital, our ratio of
current assets to current liabilities is a robust
<PAGE> 3
7.2 to 1, and book value, at $8.15 per share, is approximately 75% of 1997's
closing share price.
Our good fortunes during 1997 were shared with our stockholders. In
February, the Board of Directors raised the quarterly dividend by 10% to 11
cents per share. The fourth-quarter dividend of 1997 represents our 37th
consecutive quarterly dividend payment.
Looking to 1998, several factors suggest greater profitability from our
rising sales pattern. A more productive Multi-Clean sales force, selective
price increases, more efficient international operations and a more favorable
year-to-year comparison without the distortion of extraordinary items should
return profit margins to the higher levels enjoyed by Minuteman in previous
years.
Shareholder value is best enhanced by improving market share. Value to our
customers is sustained by quality, innovative and responsive products,
partnering in an entrepreneurial spirit with distributors and dealers, fair
pricing and a widening international presence in a world of emerging markets.
Value to employees is represented by challenge, recognition and reward.
Minuteman's management is dedicated to providing value to all its
constituencies.
Sincerely,
Jerome E. Rau
President and Chief Executive Officer
March 16, 1998
Special guest Margaret Thatcher opens the 1997 ISSA Convention in Dallas where
Jerry Rau, outgoing President, reviewed an exciting and productive year.
Out-Performing The Market
Minuteman Grows 9% in a 2.5%* Growth Market Without Increasing Prices
Minuteman's continued success and performance is anchored by an unusual marker:
the ability to outpace the market without increasing prices.
Minuteman's success is possible because of an aggressive and
straightforward management position:
- - Maintain and foster an exceptional, seasoned management team,
- - Deliver a high-quality product on a global basis,
- - Utilize aggressive marketing programs,
- - Maintain cost structures while providing exceptional service and training to
the best distributors possible,
- - Continue designing and retooling products with innovative and cutting-edge
engineering and technology.
This aggressive and sound position allows Minuteman to build on each of
its world-class competitive strengths - strengths that combine to ensure
leadership and a front running position well into the next century.
In addition, the company continues to build on a solid and steady
financial backdrop incurring substantial profits in an unusual debt-free
company environment. Steady growth over the past decade has been possible not
just because of exceptional products and delivery systems, but because a
conservative management team excels in decision making based on research,
facts, intuition and 17 years of experience in the industry.
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Further, because Minuteman manufactures all products on-site in their own
facilities, the company is able to control quality and cost. This intuitive
management skill combined with Minuteman's on-site production, will see the
next century filled with opportunity and success for both customers and
shareholders.
* Based on International Sanitary Supply Association (ISSA) Estimate for 1997.
Worldwide Distribution
Global Powerhouse
Minuteman Exports Expertise, Skill and Sophisticated Products.
Minuteman continues to follow its commitment to build strong distribution
centers while working directly with dealers to establish and build on existing
strong networks of customers around the world. This world-wide distribution
channel is supported by on-site product training, direct follow-up with
distributors for progress checks, consistent distribution of new product
information and innovative, cost-effective products.
Minuteman Europe.
In addition to entering the new markets of Norway and Sweden, international
growth was enhanced in 1997 by the opening of a new European Corporation,
Minuteman European B.V. ("Minuteman Europe"). The new corporation, headed by
seasoned veteran Mike Gravelle, former President of Minuteman Canada, will
offer European customers Minuteman's well-known focus on proven growth
strategies, aggressive marketing efforts, direct customer service, cost
containment and the distribution channels of a world-wide market maker.
Minuteman's commitment to the international community is also represented
by the opening of a new warehouse in the Netherlands especially designed to
stock EC-approved machines to allow for more timely delivery to our European
customers and to establish a strong presence in this market.
Minuteman Canada.
Most recently, Minuteman's Canadian operation consolidated two warehouses into
one centrally located facility in Toronto. The new warehouse offers North
American customers a larger, more efficient and cost-effective operation from
which to place orders and receive timely shipments of product.
Minuteman will remain focused on exporting global expertise and
technologically advanced floor care products to a growing world market. The
company is committed to the unique needs of foreign markets and to the
development of even stronger professional working relationships with each of
our diverse customers worldwide.
Mike Gravelle, General Manager of Minuteman Europe and former President of
Minuteman Canada, brings over 30 years of professional experience to the new
company. Having started and grown the Canadian business in just 13 years, Mike
brings hands-on "know-how" to the European marketplace.
State-of-the-Art Engineering & Technology
Technological Sophistication
Better, More Durable, Long-Lasting Products.
<PAGE> 5
The best floor care products are created long before their construction. The
real "work" begins with a dedicated team of engineers and professional product
designers who work on specific categories of machines in select product areas
such as carpet, hard floors, concrete, specialty vacuums and propane. These
highly trained, specialized engineers begin each job with one goal in mind - to
design a product in the most efficient way that consistently performs at
Minuteman's high quality standards. This includes durability of the product,
cost, ergonomic design considerations, ease and clarity of use, and even the
"look" of the product in its final form. To reach these difficult goals the
Minuteman team combines field data with CAD-CAM technology with over 19
individual U.S. Patents, ISO 9001 Certifications and new more cost-effective
methods of manufacturing. Technological advances allow the engineers to
redesign and develop new and existing products so that customers benefit
through cost savings and more durable, long-lasting products.
The Minuteman PAMS(R) (Passive Air Management System)
Includes Five Unique Patented Features:
#1 Dust Cup: Traps both heavy dust and smaller particles in a filter that is
easy to empty and clean.
#2 Center Caster: Allows for over 90% pad contact while adjusting for
perfect pad pressure.
#3 Multi-Flex(R) Pad Driver: Adjusts to floor highs and lows while retarding
pad growth.
#4 Center Pad Locking Cup: Safely secures pad and can be snapped on or
screwed off with ease.
#5 Venturi Exciters in the Multi-Flex(R) Pad Driver: Creates 110 CFM to move
dust and air through the filter.
World-Class Customer Service
New Laser Cutter Adds Cutting-Edge Production
Minuteman's commitment to efficiency and quality is sharply demonstrated by the
recent purchase of a Mitsubishi laser cutter. Located in the company's
headquarters in Addison, Illinois, the new laser cutter greatly enhances
Minuteman's production and is based on a CO2 system of high speed cutting
power. The machine is unique in its ability to be programmed for any cut or
material, whether the cut is straight, curved like a fine ribbon, or if the
material is sheet metal, steel or aluminum up to 3U4" thick. In addition, the
laser cutter allows for the production of one to a multitude of pieces at one
time. Requiring very low maintenance and running 24 hours a day, there is
relatively no down time between jobs. Parts come off the machine ready to be
assembled - edges are smooth with no burrs, therefore eliminating costly
secondary finishing. Wasteful dies and painstaking setups are eliminated
because everything is electronically programmed. The new laser cutter combines
finesse, detail, flexibility and more options for today's productivity to
provide for greater future product efficiency.
Intuitive, State-of-the-Art Customer Attention
Minuteman Defines Customer Service for The Industry.
Customer service combines the resources of the entire Minuteman staff. In fact,
it is the backbone of our business - always at the forefront, always the best
resource we have to continue our dedicated long-term relationships with
satisfied customers. Customer service
<PAGE> 6
can be as straightforward as a prompt response to a question or the delivery
of a new ordering system that helps all customers receive information about
products and services faster and more effectively. For example, in 1997
Minuteman introduced "Parts Express", a CD-ROM electronic parts catalog built
around Minuteman products and designed to help distributors access products,
parts, instruction manuals, sales literature, technical service bulletins and
pricing - all at the touch of a finger. This graphics-based electronic catalog
is easy for distributors to use, shortens lead time, increases productivity,
reduces ordering errors and offers direct faxing of orders. Distributors have
complete parts, service information, pricing, service bulletins and other
information - all at their fingertips - on one simple CD-ROM. "Parts Express"
is just one example of Minuteman's commitment to helping customers, everyday,
meet their floor care needs.
Minuteman's new Mitsubishi laser cutter cuts any metal with finesse and
strength.
"Parts Express"
Minuteman's new graphics-based CD-ROM electronic catalog system offers complete
and instant access to parts and service information - at the touch of a finger.
World-Class Distributors
Over 500 Minuteman Distributors Add to Their Bottom Line
Minuteman distributors are growing. The reason for this success is twofold:
first, Minuteman believes in profits. The company actively encourages
distributors to make a good, solid profit when working with them. There are no
gimmicks involved - just an exceptional floor care product that will guarantee
the best value for the price. In turn, distributors recognize the value of a
manufacturer who will work with them to be successful. Second, many Minuteman
products have patent protection. This means that distributors have a distinct
advantage because the parts and the products they use are protected and can be
easily repaired and replaced.
Minuteman's ET (TM) is a powerful extraction tool that delivers precision
cleaning on stairs, upholstery, carpets, wall dividers and more.
Minuteman sales professionals enjoyed an enthusiastic response from
distributors and customers at this year's Annual ISSA Trade Show held in
Dallas, Texas, in October.
World-Class Marketing & Training
Hand-in-Hand Marketing
Sales Climb, Distributors Profit with Creative Marketing.
Minuteman's highly focused customer service-oriented business is accentuated by
strong, creative marketing efforts that help Minuteman and distributors
flourish. For example, marketing programs such as "Automatically...The Best!",
an incentive-based Automatic Scrubber Sales Program, was geared to enhance
automatic scrubber sales in the first half of 1997. This promotion helped many
dealers increase their sales of automatic scrubbers in markets where they were
not previously represented. In fact, the promotion drew participants from
around the country, large and small, and included some dealers who had never
before purchased an automatic scrubber from Minuteman. Dealers capitalized on
the program because equipment was made available for them to demonstrate and
sell directly
<PAGE> 7
off the floor. In fact, 63% of the customers purchased an automatic scrubber
within 2 weeks of the demonstration. Successful marketing also includes direct
sales opportunities for distributors. National advertising supports both the
Minuteman product line and distributors through extended market visibility and
by direct response leads gathered from industry publications. Direct leads are
distributed to appropriate distributors for added sales opportunities.
Sales Professionals
Minuteman Distributors Stand Out.
Minuteman remains dedicated to world-class training that allows our
distributors to stand out as professionals in a competitive industry. Minuteman
firmly believes that well prepared distributors maintain solid long-term
relationships with customers.
Minuteman's new state-of-the-art training facility is located at the
Hampshire manufacturing facility and includes 3,000 sq. ft. of exceptional
training area. The facility is equipped with multiple flooring materials to
enhance demonstrations of the various machines. There is also a modern
audio/visual system that is well suited for overhead presentations, as well as
complex computer-driven conferences. Sales training programs are extensive and
run from 3 to 4 days, including hands-on sessions, break-out groups and formal
course sessions specially designed for Minuteman's distributor network. The
curriculum at the innovative MASTERS (Minuteman Academy of Sales Training and
Equipment Repair Services) Training Center includes such items as: service
classes, sales demonstration techniques, how to target new markets and more.
Minuteman's dedication to training helps professional distributors learn to
combine sales skills with product knowledge for greater profits and increased
sales volume.
Aggressive advertising in trade publications helps Minuteman stay on top.
World-Class Distributors
Aggressive New Products Open New Markets
Propane Burnishers Power to Success.
Tapping into the nearly $30 million dollar propane-powered floor machine
market, Minuteman introduced a new line of floor care equipment in the Fall of
1997 - the Mirage(R) Propane Burnisher Series. The new line will allow Minuteman
to target new markets and offer distributors more avenues for increased profits
while adding depth to Minuteman's full line of floor care equipment. In
addition to propane burnishers, Minuteman unveiled a microprocessor based dust
control battery burnisher and a unique motorized carpet hand tool to further
expand its product line.
World-Class Innovative Products
Mirage(R) Propane Burnishers
Maximum Power for The Deepest Shine.
Minuteman's Mirage Propane Burnisher Series delivers high-speed performance in
less time and with greater results than other electric or battery powered
burnishers. In fact, these remarkable and powerful burnishers are the select
choice for many contractors working in schools, supermarkets, large retail
facilities and any other location where outstanding performance is necessary.
These heavy-duty burnishers range in size from 21 to 28 inches, offer an
impressive 50 lbs. of pad pressure and include a 3300 rpm engine. A single
operator can now produce from 25,000 sq. ft. per hour to 34,000 sq. ft. per
hour of
<PAGE> 8
polished, wet-look floors as compared with the more traditional 4,000 sq. ft.
per hour performance of a typical 1,000 rpm burnisher - a pale comparison in
productivity. Higher rpms and increased pad pressure mean longer durability of
shine, less repeated applications, scrubbing and stripping. The cost savings in
both labor and chemicals is substantial. Minuteman Mirage Propane Burnishers
are available in a number of engine packages with both water and air cooled
systems. Minuteman Certified Emission Control System (MCECS) and a
sound-deadening Catalytic Muffler make the water-cooled Mirage propane
burnisher the safest and most reliable propane burnisher in the industry.
ET(TM)
A Powerful Extraction Tool with Precision Cleaning.
For powerful extraction on stairs, upholstery, carpets, wall dividers,
automobiles, boat interiors and much more, Minuteman's new ET is designed to
enhance carpet spotting by combining a motorized, lightweight, compact
powerhead with precision extraction. The ET features a two brush speed design
for both upholstery and commercial carpet applications and includes a soft
nylon brush for fine rugs and upholstery plus a stiff nylon brush for
commercial uses. Weighing just 3.25 lbs., the ET's light weight is maintained
by its construction of glass-reinforced nylon housing, plus an extension handle
for increased use. The ET is designed to coordinate with the Gotcha(R),
Ambassador Jr., or the 50 psi Ambassador that includes a unique plug adapter.
The ET may also be used with a universal standard 115 volt wall plug on any 50
psi extractor.
Safety First
EPA and CARB Certified.
Minutemen Certified Emission Control System (MCECS).
MCECS regulates the air/fuel ratio of the propane burnisher. The system is
designed to carefully reduce carbon monoxide emissions, improve fuel economy
and warn the operator if the carburetion system is out of adjustment. The MCECS
system works in conjunction with a catalytic exhaust system. The combination of
these two elements is designed to exceed current EPA and CARB emissions
standards.
ET(TM) features a 32" extension wand for stand-up cleaning which increases
operator comfort.
Pushing the Envelope
M2700-ABS Automatic Burnishing System
High Speed Performance in a Sleek, State-of-the-Art Dust Control Battery
Burnisher. Minuteman's new M2700 ABS (Automatic Burnishing System) utilizes
state-of-the-art technology and Minuteman's exclusive patented PAMS(R) (Passive
Air Management System) Dust Control System. PAMS(R) helps to reduce the need for
dust mopping after burnishing by capturing finish compound and dust particles.
This powerful combination provides high productivity, dust control, and
increased labor savings, all in a quiet, traction drive battery burnisher. The
2700 features a 20" burnishing pad, with brush speeds up to 2700 rpms and a 2.5
hp pad drive motor. This sturdy ergonomically-designed machine features a
unique, patent-pending Automatic Burnishing System (ABS) that controls pad
pressure at the touch of a finger. The 2700's electronic system is controlled
by a sophisticated microprocessor which automatically controls pad pressure
through varying floor conditions. High productivity, dust control and increased
labor savings combine to
<PAGE> 9
make a quiet, traction drive battery burnisher ideal for use in hospitals,
nursing homes, schools, office buildings and environments that require a high
productivity burnisher.
Entire burnishing head can electronically raise and rotate 90! for easy pad
replacement.
World-Class Product Strength & Depth
Minuteman's Full Line of Dynamic Floor Care Products
Minuteman's direct control over design, production, product updates,
manufacturing technologies, distribution and quality control, allows them to
produce a full line of exceptional, cost-efficient, high-quality maintenance
products for industrial, commercial and institutional facilities.
Automatic Scrubbers
Scrubbers Continue Their First Line of Attack on Floors.
Minuteman offers a wide variety of scrubbers with cleaning paths ranging from
17" to 34" and coverage from 18,000 to 34,000 sq. ft. per hour. Each of
Minuteman's automatic scrubbers is designed to fill a specific floor care need.
The 170 and 200 compact walk-behind scrubbers clean small to mid-sized floors
with easy operation, increased maneuverability and high performance. The 260
and 320 automatic scrubbers maneuver at the touch of a hand and offer
simplified, user-friendly controls. The brush propelled 260 and the traction
driven 260/320 are powerful, versatile and economical. Operator comfort and
easy serviceability are a Minuteman trademark with all automatic scrubbers.
These popular and aggressive machines outperform the competition and continue
to provide a solid foundation for Minuteman.
Floor Care Machines & Burnishers
Competitively Priced to Endure Demanding Conditions. Minuteman Burnishers with
PAMS(R) Dust Control.
Minuteman's 17" or 20" Front Runner Series floor machines combine high
durability and operator safety with a competitive pricing structure.
Minuteman's burnishers feature a non-fatigue design and offer a patented
Passive Air Management System (PAMS). PAMS keeps Minuteman's popular 1500, 2400
and 2600 burnishers leading the market, year after year. In addition to high
productivity and increased labor savings, propane burnishers offer a new
dimension and added depth to the Minuteman product line by offering high-speed
burnishers that deliver exceptional performance with greater results.
Carpet Care Machines
Power-packed and User-Friendly.
Minuteman's carpet care equipment is a powerful choice for carpet maintenance
that requires excellent cleaning power and minimum operator fatigue. All
Minuteman's carpet care machines from the Rugmaster and Ambassador Series
extractors to the daily dependability of the Multi-Purpose Vacuum (MPV(R))
upright vacuum are designed to be user-friendly by improving visibility and
reducing operator fatigue.
Minuteman has the unique ability to answer market needs quickly, economically
and efficiently.
<PAGE> 10
2400 Series Burnisher reduces dust mopping by using PAMS(R), Minuteman's unique
patented Passive Air Management System.
The Back Pack Vacuum (BPV) is a lightweight and portable vacuum that answers
customer requests for a unit that is easy to use, comfortable and can go just
about anywhere.
Pursues Largest Share of The Marketplace
World-Class Specialization
Multi-Clean(R) Roars
Specialization, A New Aggressive Sales Force and First Rate Chemicals Propel
Multi-Clean.
With chemical sales accounting for 38.3% of the total sanitary supply market,
or a total of $5.8 billion*, it's easy to understand the sharp focus placed on
Multi-Clean over the past several years and the interest in tapping into the
deep and lucrative chemical sales market. This quiet chemical powerhouse has
been delivering and developing some of the most effective and efficient
chemical products for all floor types including resilient tile, hard floors,
carpet, concrete and wood for over 50 years. Multi-Clean's penchant for high
quality extends to its state-of-the-art research and development lab where
chemists formulate and engineer maintenance chemicals designed to work with all
floor care equipment.
Multi-Clean's edge in the chemical manufacturing industry is also evident by
the introduction of 40 new products in 1997 from more powerful cleaners and
strippers to more effective disinfectants. In addition, innovative Multi-Blenda
dilution control stations are specifically designed to fit customer space
requirements while dispensing exact chemical proportions of one pure chemical
at a time. Long-time customers include large and small industrial customers,
cleaning contractors and governmental agencies.
It's no surprise to find Multi-Clean's long-term goals beginning to take shape.
Plans to build a separate sales force are well under way. These professional
sales representatives specifically target and service chemical customers
utilizing an individual ordering department and a separate support staff.
Multi-Clean's new, independent profile will build a greater presence in the
chemical sales arena, grow the business, add to shareholder value and aid
customers with their overall floor care business.
*"Sanitary Supply Distributor Sales", 1995 Market Report; Joint Research Study
Conducted by Sanitary Maintenance Magazine and the International Sanitary
Supply Association.
Innovative Multi-Blend(TM) dilution control stations dispense exact chemical
proportions of one pure chemical at a time. Select from a wide variety of
sizes.
Indoor/Outdoor Sweepers
Quick, Thorough and Efficient.
Minuteman's Kleen Sweep(R) 27 and Kleen Sweep(R) 35 sweepers are just two
examples of the strength and depth of the Minuteman product line. The Kleen
Sweep 27 is ideal for machine shops, stock rooms, parks, small yards, parking
areas and loading ramps as well
<PAGE> 11
as indoors on large carpet areas. The Kleen Sweep 27 is a cost-effective
option cleaning up to 31,000 sq. ft. per hour; while the Kleen Sweep 35 covers
an area of 55,440 sq ft. per hour offering easy maintenance, exceptional
performance, a dust filter system and efficient ergonomic design. Constructed
of durable, noncorrosive polyethylene, these two powerhouses sweep five to
seven times faster than manual sweeping, offering substantial labor savings.
Critical Filter Vacuums
Safe, Efficient with Absolute Filtration.
Critical Filter Vacuums require both safety and efficiency. To guarantee
efficiency, Critical Filter Vacuums are designed to be easy to use, are
available in a wide variety of sizes and are created for specific hazardous
waste applications. Users are able to select the Minuteman vacuum that best
suits their unique hazardous waste removal needs. For example, the CRVa Clean
Room Vacuum was specifically designed for Class 1 through Class 100,000
cleanrooms, pharmaceutical labs, gowning areas, air showers, biological labs
and computer rooms. These Explosion-Proof Vacuums are designed for the
containment of flammable materials, and the Mercury Vacuum series is for
handling and disposing of mercury-based residue.
Parker Sweeper(R)
The Choice of Professional Landscapers for Over a Century.
Parker Sweeper offers a wide variety of lawn, turf and industrial maintenance
equipment. Located at Minuteman's Hampshire facility, Parker Sweeper products
include lawn sweepers, litter vacuums, dethatchers, wheeled blowers,
chipper/shredder vacuums and portable truck loaders. This exciting product line
brings diversity and strength to Minuteman by selling its products through, but
not limited to, the janitorial and cleaning industries. Parker products are
also offered to customers through lawn and garden, roofing and paving
distribution channels. Parker products have been the choice of professional
landscapers and discriminating consumers for well over a century. Their
distinguished reputation in the market is well known and continues to add
substantial value to Minuteman.
Parker Sweeper 16hp Truck Loader.
1997 Minuteman International Financial Report
Management's Discussion and Analysis of Results of Operations and Financial
Condition
Results of Operations
Earnings
Net Income for the year 1997 was $2,847,000 or $.80 per share compared with
$3,161,000 or $.89 per share for the year 1996.
The current year sales increase of 8.6% was fueled by strong dealer demand
both domestically and internationally. Response to our product introductions
was strong as were sales across most product lines. 1997 margin as a percent to
sales was approximately the same as 1996 in spite of the Company not having
raised prices since early 1996, while having absorbed vendor price increases.
Operating profits were adversely affected due to higher promotional expenses
aimed at gaining market share and the costs associated with our establishing
Multi-Clean as a separate division to handle our entire line of chemical
<PAGE> 12
cleaning products. The reorganization should improve profitability in the years
to come. The benefits received in other income in 1996 due to the sale of the
remaining portion of our former St. Paul manufacturing facility likewise
contributed to this earnings decline, primarily accounting for the decrease in
earnings per share from 1996. In November, 1997 the Company announced a price
increase of approximately five percent, the positive effects of which should be
evident in early 1998.
During 1996 leveraged by higher sales revenues, operating profits
benefited from continued cost containment efforts and a five percent price
increase announced in January. The sales increase was fueled by strong dealer
demand both domestically and internationally and was strong across all product
lines except for Parker Sweeper Company's litter vacuums and lawn care
products, which had been unfavorably affected by inclement weather during the
first half of 1996. The benefits received in other income in 1996 due to the
sale of the remaining portion of our former St. Paul manufacturing facility
likewise contributed to this earnings increase.
Sales
Net sales increased 8.6% or $4,226,000 in 1997 compared to 1996. The Company's
commercial product line, substantially all of which is domestically
manufactured, increased $4,532,000 or 9.5% compared to 1996. This increase is
due primarily to the sales of new products, our continued expansion in overseas
markets and by strong sales to our North American dealer organization.
Net sales increased 6.1% or $2,820,000 in 1996 compared to 1995. The
Company's commercial product line, substantially all of which is domestically
manufactured, increased $2,810,000 or 6.2% compared to 1995. This increase is
due primarily to the sales of new products, our continued expansion in overseas
markets and by strong sales to our North American dealer organization.
Gross Profit
As a percent to net sales, 1997 gross profit was approximately the same as in
1996. The effects of higher volume were offset in part by the Company not
having raised prices since early 1996 and absorbing vendor price increases.
As a percent to net sales, 1996 gross profit was approximately the same as
in 1995. The effects of higher volume combined with the current year price
increase were offset in part by additional overhead costs associated with our
new production facility in Hampshire, Illinois and an unfavorable change in
product mix.
Selling Expenses
Selling expenses, as a percent to net sales, increased from 17.4% in 1996 to
18.5% in 1997. The increase resulted primarily from higher promotional expenses
aimed at gaining market share, increased personnel expenses and the costs
associated with our establishing Multi-Clean as a separate division to handle
our entire line of chemical cleaning products.
Selling expenses, as a percent to net sales, decreased from 18.2% in 1995
to 17.4% in 1996. This decrease resulted primarily from containing expenses
proportionately with the increase in sales. The increase in total expenses in
1996 was primarily attributable to additional personnel expenses necessary to
meet the needs of specific expanding domestic and international markets.
General and Administrative Expenses
<PAGE> 13
For 1997 these expenses increased 4.7% from 1996 due primarily to higher
personnel expenses and professional fees.
For 1996 these expenses increased 14.9% from 1995 due primarily to higher
personnel expenses and professional fees.
Other Income
The Company's interest income decreased $1,000 in 1997 and $26,000 in 1996 due
to lower investable funds.
In 1997 the Company incurred interest expense of $57,000 on short-term
debt resulting primarily from purchases of inventory and capital expenditures.
There was no interest expense in 1996.
In 1997 other income decreased $379,000 due primarily to the gain
recognized on the sale of the remaining portion of our former St. Paul
manufacturing facility in 1996. In 1996 other income increased $404,000 for the
same gain recognized in 1996.
Income Taxes
The effective tax rate was 34.6%, 36.4% and 31.2% for 1997, 1996 and 1995,
respectively. The decrease in the 1997 rates is caused principally by lower
state income taxes. The increase in the 1996 tax rate from 1995 is caused
principally by a reduction in research and development tax credits in 1996 and
increased benefit received from our Foreign Sales Corporation during 1995.
Inflation
Inflation has not had a significant impact on the Company's business during the
past three years.
Financial Condition
Liquidity and Capital Resources and Financial Position
The Company had working capital of $19.9 million and $19.2 million at December
31, 1997 and 1996, respectively. This represented a current ratio of 7.2 and
7.6 for those years respectively.
Cash, cash equivalents and short-term investments represented 3.6% and
18.8% of this working capital at December 31, 1997 and 1996, respectively. This
decrease in 1997 was due to capital expenditures and inventory buildup.
At December 31, 1997 and 1996, the Company had shareholders' equity of
$29.1 million and $27.9 million, respectively, which when compared to total
liabilities represented an equity to liability ratio of 8.5 and 8.9,
respectively.
The Company has no debt, more than sufficient capital resources and is in
a strong financial position to meet business and liquidity needs as they arise.
The Company foresees no unusual future events that will materially change the
aforementioned summarization.
Impact of Year 2000
The Year 2000 Issue is the result of computer programs being written using two
digits rather than four to define the applicable year. Any of the Company's
computer programs that have time-sensitive software may recognize a date using
"00" as the year 1900 rather than the year 2000. This could result in a system
failure or miscalculations causing disruptions of operations, including among
other things, a temporary inability to process transactions, send invoices, or
engage in similar normal business activities.
<PAGE> 14
Based on a recent assessment, the Company determined that it will be
required to modify or replace significant portions of its software so that its
computer systems will function properly with respect to dates in the year 2000
and thereafter. The Company presently believes that with modifications to
existing software and conversions to new software, the Year 2000 Issue will not
pose significant operations problems for its computer systems. However, if such
modifications and conversions are not made, or are not completed timely, the
Year 2000 Issue could have a material impact on the operations of the Company.
The Company has initiated formal communications with all of its
significant suppliers and large customers to determine the extent to which the
Company's interface systems are vulnerable to those third parties' failure to
remediate their own Year 2000 Issues. The Company's total Year 2000 project
cost and estimates to complete include the estimated costs and time associated
with the impact of third party Year 2000 Issues based on presently available
information. However, there can be no guarantee that the systems of other
companies on which the Company's systems rely will be timely converted and
would not have an adverse effect on the Company's systems. The Company has
determined it has no exposure to contingencies related to the Year 2000 Issue
for the products it has sold.
The Company will utilize both internal and external resources to
reprogram, or replace, and test the software for Year 2000 modifications. The
Company anticipates completing the Year 2000 project within one year but no
later than March 31, 1999, which is prior to any anticipated impact on its
operating systems. The total cost of the Year 2000 project is not estimated to
be material, should not have a material effect on the results of operations and
is being funded through operating cash flows.
The costs of the project and the date on which the Company believes it
will complete the Year 2000 modifications are based on management's best
estimates, which were derived utilizing numerous assumptions of future events,
including the continued availability of certain resources, third party
modification plans and other factors. However, there can be no guarantee that
these estimates will be achieved and actual results could differ materially
from those anticipated. Specific factors that might cause such material
differences include, but are not limited to, the availability and cost of
personnel trained in this area, the ability to locate and correct all relevant
computer codes, and similar uncertainties.
<PAGE> 15
<TABLE>
<CAPTION>
Consolidated Statements of Income
Year Ended December 31
1997 1996 1995
<S> <C> <C> <C>
Net sales $53,346,000 $49,120,000 $46,300,000
Cost of sales 36,917,000 33,932,000 31,957,000
----------- ----------- -----------
Gross profit 16,429,000 15,188,000 14,343,000
Operating expenses
Selling 9,869,000 8,548,000 8,431,000
General and administrative 2,310,000 2,207,000 1,920,000
----------- ----------- -----------
Operating expenses 12,179,000 10,755,000 10,351,000
----------- ----------- -----------
Income From Operations 4,250,000 4,433,000 3,992,000
</TABLE>
<TABLE>
<S> <C> <C> <C>
Other income
Interest income 53,000 54,000 80,000
Interest expense (57,000) (50,000)
Other - net 107,000 486,000 82,000
----------- ----------- -----------
Other income 103,000 540,000 112,000
----------- ----------- -----------
Income Before Income Taxes 4,353,000 4,973,000 4,104,000
Provision (credit) for income taxes
Current 1,566,000 1,882,000 1,228,000
Deferred (60,000) (70,000) 52,000
----------- ----------- -----------
Provision For Income Taxes 1,506,000 1,812,000 1,280,000
----------- ----------- -----------
Net Income $ 2,847,000 $ 3,161,000 $ 2,824,000
=========== =========== ===========
Net income per common share $ .80 $ .89 $ .79
===== ===== =====
</TABLE>
See notes to consolidated financial statements.
<PAGE> 16
<TABLE>
<CAPTION>
Consolidated Balance Sheets
December 31
1997 1996
<S> <C> <C>
Assets
Currents Assets
Cash and cash equivalents $ 564,000 $ 1,475,000
Short-term investments 158,000 2,141,000
Accounts receivable, less allowances of
$328,000 in 1997 and $351,000 in 1996 9,961,000 8,957,000
Due from affiliates 447,000 356,000
Inventories 11,396,000 8,591,000
Prepaid expenses 86,000 138,000
Deferred income taxes 500,000 440,000
----------- -----------
Total Current Assets 23,112,000 22,098,000
----------- -----------
Property, Plant and Equipment
Land 867,000 867,000
Building and improvements 6,112,000 6,112,000
Machinery and equipment 9,270,000 8,054,000
Office furniture and equipment 2,012,000 1,781,000
Transportation equipment 1,092,000 989,000
----------- -----------
19,353,000 17,803,000
Accumulated depreciation (10,179,000) (9,155,000)
----------- -----------
9,174,000 8,648,000
Other Assets 207,000 222,000
</TABLE>
<TABLE>
<S> <C> <C>
$32,493,000 $30,968,000
=========== ===========
Liabilities and Shareholders' Equity
Current Liabilities
Accounts payable $ 1,312,000 $ 1,061,000
Accrued expenses 1,802,000 1,762,000
Income taxes payable 97,000 91,000
----------- -----------
Total Current Liabilities 3,211,000 2,914,000
----------- -----------
Deferred Income Taxes 200,000 200,000
Shareholders' Equity
Common stock, no-par value
Authorized shares - 10,000,000
Issued and outstanding shares -
3,568,385 in 1997 and 1996 6,396,000 6,396,000
Retained earnings 22,862,000 21,585,000
Currency translation adjustments (176,000) (127,000)
----------- -----------
29,082,000 27,854,000
----------- -----------
$32,493,000 $30,968,000
=========== ===========
</TABLE>
See notes to consolidated financial statements.
<PAGE> 17
Consolidated Statements of Shareholders' Equity
Years Ended December 31, 1995, 1996 and 1997
<TABLE>
<CAPTION>
Common Stock Currency
Number of Retained Translation
Shares Amount Earnings Adjustments Total
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1995 3,568,385 $ 6,396,000 $ 18,454,000 $ (151,000) $ 24,699,000
Dividends (.40 per share) (1,427,000) (1,427,000)
Net income 2,824,000 2,824,000
Translation adjustment 29,000 29,000
--------- ----------- ----------- --------- ------------
Balance at December 31, 1995 3,568,385 6,396,000 19,851,000 (122,000) 26,125,000
Dividends (.40 per share) (1,427,000) (1,427,000)
Net income 3,161,000 3,161,000
Translation adjustment (5,000) (5,000)
--------- ----------- ----------- --------- ------------
Balance at December 31, 1996 3,568,385 6,396,000 21,585,000 (127,000) 27,854,000
Dividends (.44 per share) (1,570,000) (1,570,000)
Net income 2,847,000 2,847,000
Translation adjustment (49,000) (49,000)
Balance at December 31, 1997 3,568,385 $ 6,396,000 $ 22,862,000 $ (176,000) $ 29,082,000
========= =========== ============ ========== ============
</TABLE>
Consolidated Statements of Cash Flows
Year Ended December 31
<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
Operating Activities
Net income $ 2,847,000 $ 3,161,000 $ 2,824,000
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 1,435,000 1,317,000 1,288,000
Deferred income taxes (credit) (60,000) (70,000) 52,000
Other (49,000) (5,000) 29,000
Cash provided (used) due to changes in operating
assets and liabilities:
Accounts receivable and due from affiliates (1,095,000) (1,093,000) (1,236,000)
Inventories (2,805,000) 1,966,000 (871,000)
Prepaid expenses 52,000 (38,000) 42,000
Accounts payable, accrued expenses and income taxes 297,000 (261,000) (10,000)
---------- ----------- ----------
Net Cash Provided by Operations 622,000 4,977,000 2,118,000
Investing Activities
Purchases of property, plant and equipment, net (1,946,000) (1,004,000) (2,796,000)
Purchases of short-term investments (1,883,000) (130,000)
Maturities of short-term investments 1,983,000 2,392,000
---------- ----------- ----------
Net Cash Provided by (used in) Investing Activities 37,000 (2,887,000) (534,000)
Financing Activities
Dividends paid (1,570,000) (1,427,000) (1,427,000)
---------- ----------- ----------
Net Cash Used in Financing Activities (1,570,000) (1,427,000) (1,427,000)
Increase (Decrease) in Cash and Cash Equivalents (911,000) 663,000 157,000
Cash and Cash Equivalents at Beginning of Year 1,475,000 812,000 655,000
---------- ----------- ----------
Cash and Cash Equivalents at End of Year $ 564,000 $ 1,475,000 $ 812,000
========== =========== ==========
</TABLE>
See notes to consolidated financial statements.
<PAGE> 18
Notes to Consolidated Financial Statements
Note A - Business Information
The Company operates primarily in one business segment, which consists of the
development, manufacture and marketing of commercial and industrial floor
maintenance equipment and related products. The Company sells to a multitude of
regional, national and international customers, primarily within the sanitary
supply industry. No single customer accounted for a significant amount of net
sales in 1997, 1996 or 1995.
The Company sells to affiliated (see Note E) and unaffiliated customers in
foreign countries. For 1997, 1996, and 1995, these sales aggregated
$12,062,000, $11,173,000 and $11,063,000, respectively, and were principally to
customers in Canada, the Pacific Rim, the Middle East, Europe, and Latin
America.
Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of cash equivalents and trade
receivables. The Company places its cash equivalents with high credit quality
financial institutions, which are Federally insured up to prescribed limits.
However, the amount of cash equivalents at any one institution may exceed the
Federally insured prescribed limits. Concentrations of credit risks with regard
to trade receivables are limited due to the large number of customers
comprising the Company's customer base. The Company performs ongoing credit
evaluations of its customers and maintains allowances for potential credit
losses which, when incurred, have been within the range of management
expectations.
Note B - Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of the Company (an
Illinois corporation) and its wholly-owned subsidiaries, Multi-Clean, Minuteman
Canada, Inc., Minuteman European B.V. and Minuteman International Foreign
Sales Corporation. Significant intercompany accounts and transactions have been
eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the amounts reported in the financial statements and accompanying
notes. Actual results could differ from those estimates.
Inventories
Inventories are stated at the lower of cost or market using the last-in,
first-out (LIFO) cost method for a majority (1997-77%, 1996-76%) of inventories
and the first-in, first-out (FIFO) method for the remainder. Inventories at
December 31, 1997 and 1996 consist of the following:
<PAGE> 19
<TABLE>
<CAPTION>
1997 1996
Inventories at FIFO cost:
<S> <C> <C>
Finished goods $ 4,361,000 $ 3,136,000
Work in process 7,983,000 6,374,000
Raw materials 1,079,000 1,053,000
--------------- -------------
13,423,000 10,563,000
Less LIFO reserve (2,027,000) (1,972,000)
--------------- -------------
Total Inventories $ 11,396,000 $ 8,591,000
=============== =============
</TABLE>
Property, Plant and Equipment
Property, plant and equipment are stated on the basis of cost. Depreciation is
computed by both the straight line and accelerated methods for financial
reporting purposes and by the accelerated method for tax purposes.
Income Taxes
Income taxes have been provided using the liability method in accordance with
FASB Statement 109, Accounting for Income Taxes. Under this method deferred tax
assets and liabilities are determined based on differences between financial
reporting and tax bases of assets and liabilities, and are measured using the
enacted tax rates and laws that will be in effect when the differences are
expected to reverse.
Net Income Per Common Share
Net income per common share is based on the weighted average number of common
shares outstanding during each year (3,568,385 in 1997, 1996 and 1995).
Foreign Currency Translation
The balance sheet accounts of the foreign subsidiary have been translated into
United States dollars using the current exchange rate at the balance sheet
date. Income statement amounts have been translated using the average exchange
rate for the year. Gains and losses resulting from the change in exchange rates
have been classified as a separate component of shareholders' equity.
Cash Equivalents
The Company considers all bank certificates of deposit and Eurodollar
certificate investments with a maturity of three months or less when purchased
to be cash equivalents.
Short-Term Investments
Short-term investments have been categorized as available for sale and are
stated at cost, which approximates fair value. Investments include certificates
of deposit, Eurodollar and treasury certificates, and a managed portfolio of
high quality liquid variable rate notes and tax exempt seven day bonds all with
domestic commercial banks.
Note C -Short-Term Debt
The Company entered into an unsecured Line of Credit arrangement for short term
debt with a financial institution which expires May, 1998. Under the terms of
this agreement the Company may borrow up to $5 million on terms mutually
agreeable to the Company and financial institution. There are no requirements
for compensating balances or restrictions of any kind involved in this
arrangement.
At December 31, 1997 there were no borrowings outstanding. The Company did
not have any borrowings under this arrangement during 1996. During 1997 the
maximum
<PAGE> 20
and average borrowings and the weighted average interest rate on short
term borrowings were:
<TABLE>
<S> <C>
Maximum borrowings
at month end: $1,800,000
----------
Average borrowings
outstanding during year: $ 905,000
----------
Weighted average interest rate: 6.3%
----
Interest paid in 1997, 1996 and 1995 was $57,000, $0 and $50,000, respectively.
</TABLE>
Note D - Income Taxes
Deferred income taxes primarily relate to temporary differences in the
recognition of depreciation expense and other accrued expenses for financial
reporting and income tax purposes. The temporary differences between the
financial statement carrying amounts and the tax bases of assets and
liabilities that result in significant amounts of deferred taxes in the
consolidated balance sheets at December 31, 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Accounts receivable $ 300,000 $ 325,000
Property, plant & equipment (545,000) (516,000)
Accrued expenses & other 1,152,000 963,000
----------- -----------
$ 907,000 $ 772,000
=========== ===========
</TABLE>
The effective income tax rate on income taxes differed from the Federal
statutory rate as follows:
<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
Federal statutory rate 34.0% 34.0% 34.0%
State income taxes, net
of Federal tax benefit 3.7 4.6 4.3
Foreign Sales
Corporation benefit (2.4) (2.1) (2.7)
Research and Development Tax Credits ( .6) ( .6) (5.2)
Other, net ( .1) .5 .8
----- ----- -----
34.6% 36.4% 31.2%
===== ===== =====
</TABLE>
The Company paid income taxes of $1,592,000, $1,933,000 and $1,208,000 in 1997,
1996 and 1995, respectively. State income taxes amounted to $294,000, $344,000
and $269,000 for 1997, 1996 and 1995, respectively. Foreign income taxes
amounted to $21,000, $22,000 and $55,000 for 1997, 1996 and 1995, respectively.
Note E - Related Party Transactions
Hako-Werke GmbH & Co. (a German corporation) owns 70.73% of the outstanding
common stock of the Company through a subsidiary.
The Company purchased inventories of approximately $58,000, $198,000 and
$578,000 from Hako-Werke in 1997, 1996 and 1995, respectively. Amounts due to
Hako-Werke, which relate to these purchases, are due within 90 days from the
date of shipment.
The Company sold approximately $1,968,000, $1,807,000 and $2,369,000 of
merchandise to Hako-Werke and certain of its subsidiaries during 1997, 1996 and
1995, respectively. Amounts due from
<PAGE> 21
affiliates, which relate to these sales, are due within 90 days from the date
of sale.
Note F - Employment Agreements
The Company has employment agreements with the executive officers of the
Company which expire through 2000. The agreements contain customary provisions,
including severance pay in the event the Company terminates their employment.
Note G - Employee Benefit Plans
The Company maintains a participatory defined contribution plan for
substantially all employees under Section 401(a) of the Internal Revenue Code.
In addition to a discretionary contribution, the Company also matches employee
contributions based upon a formula up to a specified maximum. Contributions to
the plan and related expense were $268,000, $237,000 and $250,000 for the years
ended 1997, 1996 and 1995 respectively.
NOTE H - Quarterly Results of Operations (Unaudited)
The following is a summary of the quarterly results of operations for the years
ended December 31, 1997 and 1996:
<TABLE>
<CAPTION>
Three Months Ended
March 31 June 30 September 30 December 31
(Thousands of dollars, except per share data)
<S> <C> <C> <C> <C>
1997
Net sales $ 14,094 $ 14,003 $ 13,316 $ 11,933
Gross profit 4,362 4,568 4,015 3,484
Net income 748 858 640 601
Net income per
common share $ .21 $ .24 $ .18 $ .17
=========== =========== ========== =========
1996
Net sales $ 12,835 $ 12,127 $ 12,607 $ 11,551
Gross profit 4,084 3,953 3,918 3,233
Net income 1,073 820 703 565
Net income per
common share $ .30 $ .23 $ .20 $ .16
=========== =========== ========== =========
</TABLE>
Fourth quarter adjustments, primarily related to inventories, resulted in an
increase in net income and net income per common share of $53,000 or $.01 per
share, respectively in 1997 and a reduction of $15,000 or $.01 per share,
respectively in 1996.
Note I - Research and Development Expenses
Research and development expense for 1997, 1996 and 1995, approximated
$1,102,000, $1,146,000, $1,085,000, respectively.
Note J - Assets Held For Resale
The Company has listed a former distribution facility (net book value of
$98,000) for sale and anticipates that a gain, net of income taxes, will
result.
<PAGE> 22
Markets For The Company's Securities and Related Matters
On March 2, 1998 the last reported sales price of the common stock on the
Nasdaq systems was $10 1/8. The approximate number of holders of common stock
was 1,100.
Since 1988 the Board of Directors has declared regular quarterly dividends
and the fourth quarter dividend in 1997 represents the thirty-seventh
consecutive dividend paid to shareholders. Future dividend policy will be
determined by the Board of Directors in light of prevailing financial needs and
earnings of the Company and other relevant factors.
The common stock of Minuteman International, Inc. is quoted on The Nasdaq
Stock Market and its trading symbol is "MMAN". The following tables set forth
for 1997 and 1996 the range of bid prices for the Company's common stock as
reported in the Nasdaq systems for the period indicated:
<TABLE>
<CAPTION>
Dividends
High Low Per
Share
<S> <C> <C> <C>
1997
1st Quarter 10 1/4 8 $.11
2nd Quarter 9 1/4 8 1/4 $.11
3rd Quarter 11 8 3/4 $.11
4th Quarter 11 3/4 10 $.11
1996
1st Quarter 10 7 1/4 $.10
2nd Quarter 10 7 3/4 $.10
3rd Quarter 9 3/8 8 1/4 $.10
4th Quarter 9 3/8 8 1/4 $.10
</TABLE>
<PAGE> 23
Selected Consolidated Financial Data
See "Management's Discussion and Analysis of Results of Operations and
Financial Condition", and "Notes to Consolidated Financial Statements"
<TABLE>
<CAPTION>
Year Ended December 31,
1997 1996 1995 1994 1993
(In thousands, except share and per share data)
<S> <C> <C> <C> <C> <C>
Income Statement Data
Net sales $ 53,346 $ 49,120 $ 46,300 $ 41,518 $ 38,237
Cost of sales 36,917 33,932 31,957 27,540 25,357
-------- -------- -------- -------- --------
Gross profit 16,429 15,188 14,343 13,978 12,880
Selling expenses 9,869 8,548 8,431 7,675 7,241
General and administrative expenses 2,310 2,207 1,920 2,024 1,897
-------- -------- -------- -------- --------
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C>
Income from operations 4,250 4,433 3,992 4,279 3,742
Interest income (expense), net (4) 54 30 99 92
Other, net 107 486 82 737 10
--------- --------- --------- --------- ---------
Income before income taxes 4,353 4,973 4,104 5,115 3,844
Income tax expense 1,506 1,812 1,280 1,912 1,495
--------- --------- --------- --------- ---------
Net income $ 2,847 $ 3,161 $ 2,824 $ 3,203 $ 2,349
========= ========= ========= ========= =========
Per Share Data
Cash dividends $ .44 $ .40 $ .40 $ .34 $ .28
Net income per common share .80 .89 .79 .90 .66
Weighted average number of shares
outstanding 3,568,385 3,568,385 3,568,385 3,568,385 3,568,385
Balance Sheet Data
Working capital $ 19,901 $ 19,184 $ 17,142 $ 17,207 $ 16,745
Total assets 32,493 30,968 29,500 28,067 25,643
Shareholders' equity 29,082 27,854 26,125 24,699 22,767
</TABLE>
<PAGE> 24
Report of Independent Auditors
To The Shareholders of Minuteman International, Inc.
We have audited the accompanying consolidated balance sheets of Minuteman
International, Inc. and subsidiaries as of December 31, 1997 and 1996 and the
related consolidated statements of income, shareholders' equity and cash flows
for each of the three years in the period ended December 31, 1997. 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 audits.
We conducted our audits 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 audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Minuteman
International, Inc. and subsidiaries at December 31, 1997 and 1996, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1997, in conformity with
generally accepted accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois
February 11, 1998
<PAGE> 25
Report of Management
The management of Minuteman International, Inc. is responsible for the
integrity of the information presented in this Annual Report, including the
Company's financial statements. These statements have been prepared in
conformity with generally accepted accounting principles and include, where
necessary, informed estimates and judgments by management.
The Company maintains systems of accounting and internal controls designed
to provide assurance that assets are properly accounted for, as well as to
insure that the financial records are reliable for preparing financial
statements. The systems are augmented by qualified personnel and are reviewed
on a periodic basis.
The Company maintains high standards when selecting, training, and
developing personnel, to ensure that management's objectives of maintaining
strong, effective internal accounting controls and unbiased, uniform reporting
standards are attained. The Company believes its policies and procedures
provide reasonable assurance that operations are conducted in conformity with
law and with the Company's commitment to a high standard of business conduct.
Our independent auditors, Ernst & Young LLP, conduct annual audits of our
financial statements in accordance with generally accepted auditing standards
which include the review of internal controls for the purpose of establishing
their audit scope, and issue an opinion of the fairness of such financial
statements.
The Board of Directors pursues its responsibility for the quality of the
Company's financial reporting primarily through its Audit Committee which is
composed of three outside directors. The Audit Committee meets periodically
with management and the independent auditors to review the manner in which they
are performing their responsibilities and to discuss auditing, internal
accounting controls, and financial reporting matters. The independent auditors
periodically meet alone with the Audit Committee and have full and free access
to the Audit Committee at any time.
Thomas J. Nolan Jerome E. Rau
Chief Financial Officer, President, Chief Executive Officer
Secretary & Treasurer
Board of Directors
Jerome E. Rau
President & Chief Executive Officer Minuteman International, Inc.
Tyll Necker
Chief Executive Officer
Hako-Werke International
GmbH & Co.
Frederick W. Hohage
Former President
Robert Bosch Corporation,
Sales Group
James C. Schrader, Jr.
President
Precision Enterprises, Ltd.
Frank R. Reynolds
Attorney
Law Offices of Reynolds
& Reynolds, Ltd.
Operating Officers
Jerome E. Rau
President & Chief Executive Officer
Gregory J. Rau
Executive Vice President
Michael Y. Gravelle
General Manager
Minuteman European B.V.
Thomas J. Nolan
Chief Financial Officer,
Secretary & Treasurer
Michael A. Rau
Vice President
Multi-Clean Division
Dean W. Theobold
Vice President
Manufacturing
Corporate Information
General Counsel
Law Offices of Reynolds &
Reynolds, Ltd.
Chicago, Illinois
<PAGE> 26
Independent Auditors
Ernst & Young LLP
Chicago, Illinois
Transfer Agent
ChaseMellon Shareholder
Services, L.L.C.
85 Challenger Road, Overpeck Centre
Ridgefield Park, New Jersey 07660
1-800-288-9541 Shareholders Information
1-800-231-5469 TDD (Telecommunications Device for the Deaf)
Stock Listing
Traded over-the-counter on The Nasdaq Stock Market under the symbol "MMAN"
Annual Meeting
April 28, 1998 at 10:00 a.m.
at Bank of America
231 South LaSalle Street
21st Floor
Shareholders' Meeting Room
Chicago, Illinois 60697
Form 10-K
Minuteman International, Inc. will send
a copy of its Form 10-K report for fiscal 1997 as filed with the Securities and
Exchange Commission upon written request to Thomas J. Nolan, Chief Financial
Officer, at the corporate office.
Locations
Corporate Offices and
World Headquarters
Minuteman International, Inc.
111 South Rohlwing Road
Addison, Illinois 60101
(630) 627-6900
Manufacturing Facilities
Minuteman International, Inc.
111 South Rohlwing Road
Addison, Illinois 60101
(630) 627-6900
Minuteman International, Inc.
14N845 U.S. Route 20
Hampshire, Illinois 60140
(847) 683-5210
<PAGE> 27
Multi-Clean,
Division of Minuteman
International, Inc.
600 Cardigan Road
Shoreview, Minnesota 55126
(612) 481-1900
Sales Offices
United States
Minuteman International, Inc.
111 South Rohlwing Road
Addison, Illinois 60101
(630) 627-6900
Parker Sweeper
111 South Rohlwing Road
Addison, Illinois 60101
(630) 627-6900
Minuteman International, Inc.
1190 North Villa Avenue
Villa Park, Illinois 60181
(630) 530-0007
Canada
Minuteman Canada, Inc.
2210 Drew Road
Mississauga, Ontario
Canada L5S 1B1
(905) 67S-3222
FAX: (905) 673-5161
Europe
Minuteman European B.V.
Haver Straat 31
2153 GB Nieuw-Vennep
The Netherlands
(31) 252-623000
FAX: (31) 252-623001
<PAGE> 1
EXHIBIT 22 (a)
SUBSIDIARIES
OF
MINUTEMAN INTERNATIONAL, INC.
Multi-Clean Division of Minuteman International, Inc.
600 Cardigan Road
Shoreview, Minnesota 55126
Minuteman Canada, Inc.
2210 Drew Road
Mississauga
Ontario L5S 1B1 Canada
Minuteman International Foreign Sales Corporation
c/o Ernst & Young Services, Ltd.
P.O. Box 261 Bay Street
Bridgetown, Barbados
Minuteman European B.V.
Haverstraat 31
2153 GB Nieuw-Vennep
The Netherlands
17
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000810876
<NAME> MINUTEMAN INTERNATIONAL, INC.
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1997
<PERIOD-START> SEP-30-1997 JAN-01-1997
<PERIOD-END> DEC-31-1997 DEC-31-1997
<CASH> 564 564
<SECURITIES> 158 158
<RECEIVABLES> 10,408 10,408
<ALLOWANCES> 328 328
<INVENTORY> 11,369 11,369
<CURRENT-ASSETS> 23,112 23,112
<PP&E> 19,353 19,353
<DEPRECIATION> 10,179 10,179
<TOTAL-ASSETS> 32,493 32,493
<CURRENT-LIABILITIES> 3,211 3,211
<BONDS> 0 0
6,396 6,396
0 0
<COMMON> 0 0
<OTHER-SE> 22,686 22,686
<TOTAL-LIABILITY-AND-EQUITY> 32,493 32,493
<SALES> 11,933 53,346
<TOTAL-REVENUES> 11,933 53,346
<CGS> 8,449 36,917
<TOTAL-COSTS> 11,248<F1> 49,096<F1>
<OTHER-EXPENSES> (52) 107
<LOSS-PROVISION> (24)<F1> 98<F1>
<INTEREST-EXPENSE> 17 4
<INCOME-PRETAX> 720 4,353
<INCOME-TAX> 119 1,506
<INCOME-CONTINUING> 601 2,847
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 601 2,847
<EPS-PRIMARY> .17 .80
<EPS-DILUTED> .17 .80
<FN>
Loss provision for doubtful accounts is included in total costs.
</FN>
</TABLE>
