<PAGE> 1
FORM 10 - K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
(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, 1999
COMMISSION FILE NUMBER 0-15582
MINUTEMAN INTERNATIONAL, INC.
- --------------------------------------------------------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS ARTICLES OF INCORPORATION)
ILLINOIS 36-2262931
- --------------------------------------------------------------------------------
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
111 SOUTH ROHLWING ROAD, ADDISON, ILLINOIS 60101
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 630-627-6900
-----------------------------
Securities registered pursuant to Section 12(g) of the Act:
Common stock, no par value
(TITLE OF EACH CLASS)
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
---- ----
<PAGE> 2
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 1, 2000:
Common stock, no par value, $8,891,000
- -----------------------------------------
The number of shares outstanding of the issuer's class of common stock as of
March 1, 2000:
Common stock, no par value, 3,568,385 shares
- ---------------------------------------------
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Annual Report for the year ended December 31, 1999, are
incorporated by reference into Parts I and II.
Portions of the Proxy Statement for the Annual Shareholders Meeting to be
held April 18, 2000, are incorporated by reference into Part III.
2
<PAGE> 3
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.
On November 23, 1998 the Company entered into an Asset Purchase Agreement with
AAR PowerBoss, Inc. (PowerBoss) for the acquisition of substantially all of the
net assets and the assumption of certain liabilities of PowerBoss. Additional
information pertaining to this acquisition is incorporated by reference on page
20, Note C of the 1999 Annual Report and included in the Form 8-K and 8-K/A
previously filed on December 8, 1998 and February 8, 1999, respectively.
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.
Minuteman PowerBoss, Inc. (PowerBoss), acquired in 1998, is a wholly-owned
subsidiary of Minuteman International, Inc. that designs, manufactures and
distributes ride-on and walk-behind sweepers and scrubbers for hard-surface
floor and carpet care for use in industrial applications.
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 8 through 13 of the 1999 Annual Report for the year ended
December 31, 1999.
3
<PAGE> 4
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 450
active dealers and its two sales branches. The Company distributes its products
in Canada through Minuteman Canada, Inc. and in Europe through Minuteman
European, B.V., both of which are wholly owned subsidiaries. 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 $16,351,000, $10,642,000, $12,062,000 in 1999, 1998 and
1997, respectively.
The Company's equipment is sold under Minuteman International, Minuteman,
Minuteman PowerBoss 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. Substantially all of the Company's industrial equipment is
manufactured at its Aberdeen, North Carolina production facilities. The
remainder 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.
4
<PAGE> 5
Patents and Trademarks
Currently, the Company has 29 United States and 25 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.
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 $30.3 million at December 31, 1999. Cash,
cash equivalents and short term investments represented 12.1% of the working
capital which when not in use, is invested in bank certificates of deposit and
Eurodollar certificate investments.
Backlog
The Company's backlog of orders was approximately $2.7 million at December 31,
1999 and $1.9 million at December 31, 1998. The Company anticipates that
substantially all of the 1999 backlog will be delivered during 2000. 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 $1,329,000, $1,118,000 and $1,102,000 in
research and development activities during 1999, 1998 and 1997, respectively.
Employees
The Company has 406 full time employees. The facilities in Addison, Illinois and
Shoreview, Minnesota, have approximately 107 hourly paid employees who are
covered by local collective bargaining agreements. These agreements expire in
May, 2003 and October, 2003, respectively. The Company believes that the current
employee relations are excellent. The Company plans to hire additional employees
during 2000 as are justified by the needs of the business.
5
<PAGE> 6
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 2000 or
thereafter.
Item 2. PROPERTIES
The Company owns or leases the following properties in its operations:
Owned
Location Size (sq. ft.) Use or Leased
- --------------------------------------------------------------------------------
Aberdeen, NC 135,000 (Bldg.) Office, manufacturing, Leased
Warehouse, sales, service
Addison, IL 112,230 (Bldg.) Office, manufacturing,
254,300 (Land) Warehouse, sales, service Owned
Villa Park, IL 18,000 (Bldg.) Warehouse, sales, service Leased
Taylor, MI 4,800 (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
Nieuw-Vennep 9,957 (Bldg.) Warehouse, sales, service Leased
The Netherlands
Mississauga, 18,486 (Bldg.) Warehouse, sales, service Leased
Ontario, Canada
Approximately 90% of the Company's Addison and Hampshire, Illinois facilities
and 85% of the Company's Aberdeen, North Carolina and Shoreview, Minnesota
facilities are devoted to manufacturing.
The Villa Park, Illinois lease term expires December 31, 2000. The Taylor,
Michigan lease term expires February 28, 2002. The Nieuw-Vennep, Netherlands
lease term expires January 31, 2003. The Mississauga, Ontario lease term expires
on November 30, 2002. The Aberdeen, North Carolina lease term expires November
30, 2001. The Company believes that failure to obtain the renewal of any lease
would not have a material adverse effect on its business.
6
<PAGE> 7
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, 1999, 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, 1999, 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 19 through 22 of the Annual Report
for the year ended December 31, 1999, 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 14 and 15 and related comments in the Chairman's letter on
Page 2 of the Annual Report for the year ended December 31, 1999, are
incorporated herein by reference.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Information appearing under the caption "Market Risk" appearing on page 15 of
the Annual Report for the year ended December 31, 1999 is incorporated herein by
reference (See Item 7. Management's Discussion and Analysis.)
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Report of Independent Auditors and the Consolidated Financial Statements,
including the Notes to the Consolidated Financial Statements, included on pages
15 through 24 of the Annual Report for the year ended December 31, 1999, are
incorporated herein by reference.
Quarterly Results of Operations on page 22 of the Annual Report for the year
ended December 31, 1999, is incorporated herein by reference.
7
<PAGE> 8
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 6 of Minuteman International,
Inc.'s Proxy Statement dated March 15, 2000, 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 4 through 6 of Minuteman International Inc.'s
Proxy Statement dated March 15, 2000, 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 15, 2000, 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 6 of Minuteman International Inc.'s
Proxy Statement dated March 15, 2000, 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.
8
<PAGE> 9
(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 and 8-K/A
A Report on Form 8-K was filed on December 8, 1998. A Report on Form
8-K/A was filed on February 8, 1999.
(d) Financial Statement Schedule
The financial statement schedule listed in the accompanying index to
financial statements is filed herewith.
9
<PAGE> 10
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.
-----------------------------
(Registrant)
Date: March 15, 2000 By: /s/ Jerome E. Rau
---------------------------------------
Jerome E. Rau, Chairman of the Board
and Chief Executive Officer
By: /s/ Thomas J. Nolan
---------------------------------------
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.
/s/ Jerome E. Rau
- --------------------------------------
Jerome E. Rau
Chairman of the Board, Chief Executive Officer,
and Director
/s/ Gregory J. Rau
- -------------------------
Gregory J. Rau
President and Director
/s/ Tyll Necker
- --------------------------------------
Tyll Necker, Director
/s/ Frederick W. Hohage
- --------------------------------------
Frederick W. Hohage, Director
/s/ Frank Reynolds
- --------------------------------------
Frank Reynolds, Director
/s/ James C. Schrader, Jr.
- --------------------------------------
James C. Schrader, Jr. Director
10
<PAGE> 11
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, 1999
MINUTEMAN INTERNATIONAL, INC.
ADDISON, ILLINOIS
11
<PAGE> 12
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, 1999 and 1998 and the
related consolidated statements of income, shareholders' equity and cash flows
for each of the three years in the period ended December 31, 1999. 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 auditing standards generally accepted
in the United States. 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, 1999 and 1998,
and consolidated results of their operations and their cash flows for each of
the three years in the period ended December 31, 1999, in conformity with
accounting principles generally accepted in the United States. 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.
/s/ Ernst & Young LLP
Ernst & Young LLP
Chicago, Illinois
February 8, 2000
12
<PAGE> 13
ITEM 14(a) (1) AND (2)
LIST OF FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULE
MINUTEMAN INTERNATIONAL, INC. AND SUBSIDIARIES
December 31, 1999
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, 1999, are incorporated by reference
in Item 8:
Consolidated Balance Sheets - December 31, 1999
and 1998
Consolidated Statements of Income - Years ended
December 31, 1999, 1998 and 1997
Consolidated Statements of Shareholders' Equity - Years Ended December
31, 1999, 1998 and 1997
Consolidated Statements of Cash Flows - Years Ended December 31, 1999,
1998 and 1997
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.
13
<PAGE> 14
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
MINUTEMAN INTERNATIONAL, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
Additions Deductions
---------------------- ----------
(2)
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, 1999
Reserves and allowances deducted from asset
accounts:
Allowance for uncollectible accounts $721,000 91,000 -- 343,000(3) $469,000
Year Ended December 31, 1998
Reserves and allowances deducted from asset
accounts:
Allowance for uncollectible accounts $328,000 203,000 310,000 120,000 $721,000
Year Ended December 31, 1997
Reserves and allowances deducted from asset
accounts:
Allowance for uncollectible accounts $351,000 98,000 -- 121,000 $328,000
</TABLE>
Note 1 -- Uncollectible accounts written off, net of recoveries.
Note 2 - Beginning balance of PowerBoss, acquired during 1998.
Note 3 - Includes adjustment of $(121,000) to beginning balance of PowerBoss.
14
<PAGE> 15
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).
15
<PAGE> 16
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.
10(g) Employment Agreement dated as of May 31, 1999, between the Company and
Gregory J. Rau is included herein as Exhibit 10(g) on Form 10K Annual
Report for fiscal year ended December 31, 1999.
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 19 of the Annual Report for
the year ended December 31, 1999 (incorporated herein by reference).
13 Annual Report to Security Holders
The Company's Annual Report to Shareholders for the year ended December
31, 1999, is incorporated herein by reference.
Subsidiaries of the Registrant
22(a) Subsidiaries of the Registrant (included herein at Page 49).
- -------------------------------------------------------------------------------
Minuteman International, Inc. will furnish any of the aforementioned exhibits
indicated above to requesting security holders upon written request.
16
<PAGE> 1
EXHIBIT 10(g)
EMPLOYMENT AGREEMENT
Agreement is made as of the 31st day of May, 1999, between Minuteman
International, Inc., and Illinois corporation, hereinafter called "Employer",
and Gregory J. Rau, hereinafter called "Employee".
1. Employer hereby employs Employee and Employee hereby accepts employment
upon the terms and conditions hereinafter set forth.
2. TERM. Employer agrees to employ Employee and Employee agrees to be so
employed in the capacity of President and Chief Operating Officer, for a term of
three (3) years effective January 15, 2000, and terminating January 14, 2003. In
addition, effective January 15, 2001 he will also be employed in the additional
capacity of Chief Executive Officer. This Employment Agreement shall
automatically be extended for an additional three (3) year term commencing
January 15, 2003, and terminating January 14, 2006, unless Employer has sent
written notice to Employee of its intent not to have this Employment Agreement
so extended prior to January 15, 2002. The parties recognize the need to provide
for a twelve (12) month period to obtain a qualified person to assume the duties
of Employee who agrees to assist in the job search and to train said
replacement. For the second three year term, the compensation paid to Employee
as well as all of the other terms and conditions shall remain unchanged except
that the parties shall mutually review the salary as set forth in Paragraph
Five. Thereafter, this Agreement will continue to automatically renew itself for
successive three (3) year terms unless either party sends written notice of his
intent not to have the contract renew and this notice is sent prior to 12
Page 1 of 6
<PAGE> 2
months before the end of the current term. This Agreement shall be subject to
the following terms and conditions:
3. RESTRICTIVE COVENANTS. Upon the termination of the Agreement the
Employee agrees not to compete with the Company in the United States and Canada
for twelve (12) months in the event that the Employee terminates this Agreement
and for six (6) months in the event the Employer terminates the Agreement.
Without the previous written consent of the Employer, the Employee agrees not to
become employed either directly or indirectly as the employee, agent or
consultant nor to become a shareholder or partner directly or indirectly for any
business entity, company or firm that directly or indirectly competes for
business with the Company in the industrial and commercial floor cleaning and
maintenance industry. The Employee further agrees not to solicit any person,
firm or company that has done business with the Company during the preceding
twelve (12) months prior to the termination of this Agreement, provided,
however, nothing contained herein shall prohibit the Employee from doing
business or being employed either as an agent of employee of any business entity
not related to or similar to the Company's business as herein defined.
In the event that Hako-Werke International GmbH sells its controlling
interest in the Company then the restrictions set forth herein shall forthwith
terminate and shall be null and void.
4. Employee shall be responsible for all corporate activities and shall
report directly to the Chairman of the Board of the Employer.
Page 2 of 6
<PAGE> 3
5. COMPENSATION.
A. For all services rendered by Employee during the first one (1) year
period of the Agreement, Employer shall pay Employee a salary of $120,000 per
year, payable in equal semi-monthly installments on the normal payroll dates of
Employer. This salary shall be reviewed by Compensation Committee of Employer
for upward adjustment on a yearly basis. In addition to his salary, Employee
shall be eligible to be considered for discretionary bonuses to be determined by
the Compensation Committee of Employer.
B. The Employee shall be entitled to a commission of 0.1% of all
Minuteman International, Inc. consolidated net sales, which excludes any
intercompany sales between Minuteman International Inc. and it subsidiaries, but
including net sales to other companies of the Hako group. This commission shall
be paid one month after the end of each quarter.
C. The Employee shall be entitled to receive .5% of the consolidated
profit before income taxes Minuteman International Inc. calculated on a LIFO
Basis as reported on the annual audited Financial Statements of the Company.
This amount shall be paid when the audited Financial Statements are prepared and
have been submitted to the Board of Directors or by April 15th, whichever event
is first.
D. As deferred compensation, the Employer has agreed to continue the
Employee's salary at his highest monthly rate after the Employee is separated
from the Company based upon a formula that will pay the Employee one month of
salary as defined in Paragraph 5 A. for each year or fraction thereof that the
Employee is employed by the Company. For example, if the Employee remains
employed until January 14, 2010, he will
Page 3 of 6
<PAGE> 4
have been employed for ten (10) years and will be entitled to receive his salary
for an additional ten (10) months after his retirement or the termination of
this Employment agreement.
E. In addition to the aforesaid salary, Employee shall be entitled to
all of the insurance benefits presently in full force and effect covering
employees and executives of the Employer. Employee shall be entitled to the use
of a full sized automobile to be approved by the Chairman of the Board with all
business expenses relating to the automobile to be paid by Employer. Employee
shall be entitled to all other standard company benefits.
6. EXPENSES.
The Employee is authorized to incur reasonable expenses for promoting
the business of the Employer, including expenses for business travel, business
entertainment and similar items. Airline travel will generally be other than
first class except when business reasons require otherwise. The Employer will
reimburse for all work related expenses upon the weekly presentation by Employee
of adequate itemized receipts as may be required by tax laws or regulations.
7. VACATION. Employee shall be entitled to vacation in accordance with the
terms of the Company's Vacation Policy that covers all Minuteman International,
Inc. Non-Union Employees. While in the employ of Employer, Employee shall devote
his entire time to the business of Employer.
8. SHAREHOLDER APPROVAL. In the conduct of his activities for the Employer,
the Employee is required to obtain majority approval of the Board of Directors
of the Employer prior to committing to any of the following:
Page 4 of 6
<PAGE> 5
A. Purchase, sale or mortgaging of any real property
B. Granting of any proxies;
C. Committing the Employer to any single liability in excess of One
Hundred Thousand ($100,000) Dollars;
D. Granting any employee advance payments of salary in excess of two
months normal salary for the employee;
E. Establishing a subsidiary relationship or acquiring all or part of
any supplier or any other company;
F. Any single investment of Fifty Thousand ($50,000) Dollars which is
not included in the annual budget or business plan.
G. Declaration and Issuance of Dividends
H.The promotion of Associates to position of Corporate Officer
9. This Agreement shall be binding upon and shall inure to the benefit of
the parties, their personal representatives, successors and assigns.
10. TERMINATION. After the initial three (3) year term, Employer may
terminate this Agreement at any time by sending written notice to Employee. In
this case Employer shall continue to pay the agreed compensation to Employee as
set forth in the Agreement for the balance of the three (3) year term from the
date of the notice until the regular termination of the three (3) year term
except that the compensation shall be computed at 75% of the salary, commission
and profit bonus based on the last full years audited Annual Report. In the
event Hako-Werke International GmbH sells its controlling interest in the
Company this compensation shall be paid at 100%. All other benefits shall remain
in effect for the balance of the contract.
11. The validity, constructions and enforceability of this Agreement shall
be governed in all respects by the laws of Illinois.
Page 5 of 6
<PAGE> 6
12. This Agreement may be executed in counterpart copies, any one of which,
when executed, may be deemed to be an original.
13. Any notices required to be given hereunder shall be deemed received as
of the postmark date when mailed first class, postage prepaid, registered,
certified or regular mail and when sent to:
Employer: Minuteman International, Inc.
111 South Rohlwing Road
Addison, Illinois 60101
Employee: Gregory J. Rau
#3 Brom Court
Sleepy Hollow, IL 60118
Either party may notify the other of a change of address by notice as set forth
above.
In Witness Whereof, the parties have executed this Agreement on the date
hereinabove set forth.
Employer: Minuteman International, Inc.
By: /s/ JEROME E. RAU
--------------------------------------
Jerome E. Rau,
President and Chief Executive Officer
Employee: /s/ GREGORY J. RAU
--------------------------------------
Gregory J. Rau
Attest: /s/ T. J. NOLAN
----------------------------
Page 6 of 6
<PAGE> 1
EXHIBIT 13
1999 Minuteman Annual Report
"Total Solutions"
Contents
From the Chairman of the Board 2
PowerBoss Profitable for First Time 4
Front Runner Propels Industry 4-7
Visionary Products Expand the Horizon 8
Total Solutions Minuteman's Full Line 9-11
Multi-Clean Dazzles 12
Minuteman Parker 12-13
Financial Report 14
Locations and Corporate Information 25
Mission Statement
A Steadfast 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 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's record sales are driven by Total Solutions approach to servicing
customers including:
- - One of the industry's deepest, most varied lines of commercial and
industrial floor, carpet, lawn-care equipment and chemicals in the
market
- - Long-held stable customer relationships
- - Innovative cost controls
- - Targeted marketing and aggressive promotions
- - Exceptional customer service
- - State-of-the-art technology
- - Visionary management
This dynamic market position propels Minuteman into the new Millennium with
confidence and a vigilant determination to remain the front runner of the
industry.
Multi-Clean's UV-22 Dazzles the ISSA Show.
"People wanted to touch the floor" Mike Rau, Vice-President, Multi-Clean.
Multi-Clean's revolutionary Ultra Violet Single Floor Coat System for tile, wood
and concrete dazzled the ISSA Show for the second year in a row. As distributors
clamor to establish themselves as an exclusive distributor of the new UV-22,
Multi-Clean and Minuteman International continue to create new opportunities
through stunning and innovative new products.
Successful Integration of Powerboss Yields Profit in First Year. Minuteman's
successful integration of Powerboss showed profits in the first year after
acquisition of the North Carolina company. Effective integration was possible
through operational restructuring as well as skillful blending with Minuteman's
purchasing, production, sales and marketing programs.
<PAGE> 2
From the Chairman of the Board
Dear Shareholders:
What better news can I tell you than that Minuteman International had another
record year, both for sales and earnings, in 1999. The principal source of the
revenue gain was provided by the PowerBoss subsidiary. This maker of industrial
floor-care equipment that we acquired in November of 1998 contributed 12 months
of sales in 1999 versus only one month in the prior year. This division yielded
a profit in its first year as a Minuteman operating unit. PowerBoss's rider
industrial equipment has certainly added a new dimension to Minuteman's
operations, but we should not overlook the excellent performance of our North
American dealers for their support of our Minuteman walk-behind commercial
products throughout 1999. For the year, net income was up 20.3% to the highest
profit in our 19-year history. It also was the first time our earnings per share
have exceeded one dollar, reaching $1.12 per share. Sales rose 34.7%, putting us
above $76 million, a level that seemed so far away only a short time ago.
The more we assimilated PowerBoss, the more efficient operations became, so that
by the fourth quarter, our gross-profit margin expanded to 32.8% of sales
compared with 30.9% for the final three months of 1998 and our net margin for
the 1999 quarter was 6.7% versus 4.2% for the like period a year ago. On the
subject of profitability, operating income was up 34.8 percent for the year but,
as a percent of sales, held level at 8.9 percent. Selling expenses were lower
proportionately than last year owing to the higher volume and despite generous
outlays for personnel and promotional expenses. But administrative costs rose
sharply (60.7 percent) due primarily to higher professional fees related to the
successful settlement of patent litigation as well as incremental expenses
attributable to the operation of PowerBoss in 1999. Interest expense also was
higher in 1999 from debt incurred in conjunction with the PowerBoss acquisition.
The Minuteman brand of commercial floor cleaning and polishing machines enjoyed
a banner year as domestic dealers exhibited their customary strong demand. This
was aided importantly by recent additions to the company's ever-expanding
product line. Among the newest products, a 38-inch riding floor scrubber that is
the company's widest model ever and the Kleen Sweep 45, a compact rider sweeper
designed for narrow spaces at a price affordable for small businesses, were
particular standouts. The successful integration of PowerBoss affords the
company an opportunity to cross-sell many Minuteman commercial products into
PowerBoss' industrial marketplace, and vice-versa. Its addition gives Minuteman
unchallenged product breadth and depth, from rider and walk-behind equipment to
backpack and handheld devices. And unification with Minuteman's purchasing,
production, sales and marketing programs will leverage savings. But it's not a
one-way street. For example, production of Minuteman's 38-inch scrubber was
moved to the PowerBoss plant because that facility was better equipped to handle
larger, rider-operated equipment. Multi-Clean chemical sales increased an
impressive 16 percent in 1999. Multi-Clean's Ultra Violet Single Floor Coat
System dazzled the International Sanitary Supply Association trade show for the
second year in a row. Initial shipments just began in September of 1999.
And Minuteman Parker's century-old lawn care equipment division further extends
our company's total solutions reputation and our position as the front runner in
the sanitary cleaning industry. International sales rebounded from 1998, when
economic and currency turmoil in the Pacific Rim depressed overseas volume.
Minuteman European, entering its third year of operation from its base in the
Netherlands, now provides European customers with timely delivery of CE-approved
machines. Minuteman's marketing programs will also strengthen and invigorate the
PowerBoss line in the marketplace. The company's financial condition also
strengthened by the end of 1999, Minuteman's net worth increased more that 8
percent to $33.3 million, a book value of $9.32 per share, roughly equivalent to
our share price. Working capital reached $30.3 million, up $1.9 million from
last year, representing a current ratio of 4.7 to 1. Meeting arising needs is a
sign of good management but targeting actions that will accelerate the company's
growth is aggressive management. This latter approach requires that we conserve
and allocate our cash wisely. So let me discuss a change we are making in our
dividend policy. Management has elected to reduce the amount of the dividend
payment, to seven cents per share from 11 cents per share previously, despite
the higher profitability, in order to use those funds more productively for the
growth of the company.
We have concluded that a lower dividend should create greater shareholder value
for investors. Specifically, we plan to spend some of those retained earnings
for debt reduction to realize savings on interest payments. The company's debt
increased substantially in late 1998 when we acquired PowerBoss. Consequently,
interest expense in 1999 was $863,000 compared with only $196,000 for 1998.
Other uses of funds we foresee to stimulate earnings growth include, possibly,
selected acquisitions, capital spending to achieve greater efficiency, the
development of new products and expanding the company's market penetration,
both here and abroad. The Company will make its new dividend payment of seven
cents per share on May 15, 2000 to shareholders of record May 1, 2000. We hope
you will appreciate our purpose in trying to increase the total return from
your investment in Minuteman International. For 2000, we see another year of
progress.
Among the positive factors in our outlook are:
- - Continuing growth and still greater efficiency at PowerBoss as we
cross-sell into complimentary markets and further integrate the acquired
company,
- - Higher sales for Minuteman products led by new product introductions
and dynamic promotions,
- - More-of-the-same success for hard-charging Multi-Clean and
- - Minuteman European capitalizing on an improving international economy.
Sincerely,
Jerome E. Rau,
Chairman of the Board and Chief Executive Officer
<PAGE> 3
March 15, 2000
Gregory J. Rau Slated As New Minuteman President
In a planned management succession, Gregory J. Rau assumed the offices of
President and Chief Operating Officer effective January 15, 2000. Jerome E. Rau,
will remain as Chairman of the Board and continue as Chief Executive Officer.
Greg held the position of Executive Vice President of Minuteman since August
1997. His 16 year career with Minuteman began in 1983 primarily in the sales
arena and offered Greg a wide-ranging view of customers, industry matters, the
technology of the product line and the interpretation of key financial and
statistical statements.
"Imagine any facility grocery store, school, hospital, office building and
visualize any floor surface, indoor or outdoor. Minuteman has the floor care
equipment and chemicals to do the job. We call it Total Solutions for all
applications." Greg Rau, President and COO, Minuteman International Minuteman
International Intuitive, Customer-Focused Front Runner Propels Industry.
Total Solutions Total Applications Minuteman's Total Solutions approach yields
35% sales growth worldwide. Minuteman continues a trend to capture an
increasingly greater share of the marketplace with a solid 35% growth in sales
worldwide. This solid, controlled growth is significant because it represents a
"Total Solutions" approach to customer cleaning needs through the well-planned
development of a deep and broad product line unlike any other in the Sanitary
Cleaning industry. Total Solutions means that Minuteman customers with any floor
type, indoor or outdoor, can find floor care equipment and chemicals perfectly
suited to their individual cleaning needs. Intuitive products combined with a
knowledgeable sales and engineering staff that listens carefully to customers
and responds with a solution, will continue to bolster Minuteman's position as
the front runner poised to lead a competitive industry into the next decade.
Competitive Advantages Solidify Minuteman's Position as a Market Leader
Unchallenged product breadth and depth. Minuteman's unusual product breadth is
marked by the greatest variety of commercial and industrial floor, carpet and
lawn care equipment for both indoor and outdoor floor surfaces in the industry.
From rider and walk behind equipment to backpack and handheld devices, Minuteman
continues to be an easy front runner when meeting customer cleaning needs. The
depth of each product line is among the deepest in the industry offering
customers a wide variety of sizes, price options and function selection.
PowerBoss Profitable for the first time in company history. Minuteman's
effective integration of PowerBoss revealed profits in the first year after
acquisition of the North Carolina company. PowerBoss rider-operated industrial
floor/surface maintenance equipment differs from Minuteman's machines, which are
traditional walk-behind commercial units. The effective integration of PowerBoss
offers Minuteman greater visibility and expansion opportunities into new
distribution channels such as industrial markets.
<PAGE> 4
In 1999, the new industrial floor care equipment allowed the company to
cross-sell many Minuteman products into the PowerBoss market and vice versa. In
addition, successful integration was possible through operational restructuring
as well as unification with Minuteman's purchasing, production, sales and
marketing programs. For example, PowerBoss billing, parts and inventory control
was transferred to Minuteman's time-tested computer tracking system. This made
tracking, ordering, shipping and purchasing analysis more efficient and timely.
Combined purchasing with Minuteman increased volume and therefore offered
greater economies of scale. Quality control assurances were shifted to
Minuteman's existing high quality control standards in all areas including
engineering, production and transportation.
In addition to quality control enhancements, Minuteman was able to utilize the
strengths of both the Minuteman and the PowerBoss manufacturing facilities to
provide the most cost effective method of manufacturing specific pieces of floor
cleaning equipment. For example, production of Minuteman's 3800 rider scrubber
was moved to the PowerBoss plant because the facility was better equipped to
handle larger, rider-operated equipment. In addition, the acquired company was
streamlined to procedurally comply with Minuteman's proven operations system.
Everywhere you are, we've probably cleaned there. Visit a commercial or
industrial facility. Imagine any floor or upholstery surface. Minuteman has
probably been there. Follow our simple chart to fully understand the depth and
breadth of Minuteman's total cleaning solutions for customers.
Total Cleaning Solutions
Example: Discount Store
Floor Type Floor Care Equipment Chemical
Terrazzo 320 Automatic Scrubber Decade 90
Tile Mirage Propane Burnisher Ultra Brite
Ultra Violet Coating
Employee Lounge MPV-Vacuum and Carpet Spotting Kit
Carpeted Gotcha-Portable Extractor and Extraction Shampoo
Restroom Floor 170 Automatic Scrubber with Ful Trole
Patented Off-Aisle Scrub Wand Disinfectant/Cleaner
- --------------------------------------------------------------------------------
Parking Lot Power Boss
Armadillo Sweeper
- --------------------------------------------------------------------------------
Sidewalks Parker Vac-35 Litter Vacuum
"Technical knowledge, relationship building, a global focus and energy, will
determine which competitors will dominate our markets. Minuteman is in a
dominant position today and I intend to see that position of superiority extend
in the years ahead." Greg Rau, President and COO, Minuteman International
Superior, Creative People Getting it right for the customer, every time. From
the beginning, one of Minuteman's most important competitive advantages has been
superior people who are measured by their creativity, dedication, performance,
vision, management finesse and commitment to getting it right, every time, for
the customer. Each team member brings a quick reaction time, an intuitive
understanding of the market place and is a motivated player in helping customers
decide on the best product for their individual floor cleaning needs. This
dedicated group is the core of Minuteman's ability to deliver an aggressive,
straightforward brand position to deliver high quality products, maintain cost
structures and design and retool innovative products with cutting-edge
engineering and technology. This customer-focused attitude is what our loyal
customers depend on every day.
<PAGE> 5
Front Runner Vision Oracle ushers in a new information age.Minuteman has
selected Oracle, one of the finest operational software programs for
manufacturers, as its operational software. Oracle offers the ability to custom
design programs specifically suited to Minuteman International. Plans to have
the new system operational in the 4th quarter of 2000 are well underway. Oracle
will allow top management to analyze and forecast more clearly as well as offer
quicker access to more comprehensive sales data, customer information,
manufacturing and production output. The new system will enable the company and
subsidiaries to comfortably expand within the software for many years.
Creative Promotions Distributor success and profit. Maintaining solid
relationships with distributors is a key element in the success of the company.
Minuteman firmly believes that when distributors flourish, so will Minuteman.
Outstanding marketing savvy includes creative promotional efforts such as sales
incentive, targeted end-user advertising campaigns, and direct sales
opportunities for distributors in conjunction with national advertising
campaigns which bolster both distributor and Minuteman profits. Minuteman's
proven relationship building skills and support network for distributors is
enhanced by training, consistent distribution of new product information and
innovative, cost-effective products designed to help distributor's customers
thrive.
Minuteman's Popular Web Site www.minutemanintl.com "Hit's" on Minuteman's web
site continue to increase, with more repeat, longer-staying visitors. To date
the web site boasts thousand's of visits per day and offers shareholders and
visitors complete information about Minuteman Floor Cleaning Equipment including
the exciting new PowerBoss floor cleaning equipment, Multi-Clean chemicals,
Minuteman Parker as well as new product releases, international news, site
locations, company history, financial reports and current information and notes
from across the floor cleaning industry. The site is designed to directly
generate new business by increasing product knowledge and offering immediate
access to Minuteman through the site. The site is a quick, easy to access and
convenient way for customers to match the right product to the right cleaning
application.
Worldwide Opportunities Expand As the world's economies become increasingly tied
to one another, Minuteman European, a fully operational company providing
European customers with Minuteman's exceptional focus on growth strategies,
customer service, marketing and cost efficiencies, remains well positioned to
take advantage of expanding opportunities for growth. As the group enters their
3rd year of operation, opportunities for greater expansion into Minuteman
European's marketplace include enhancing a growing brand name presence through
deliberate marketing and sales promotions, and reinforcing timely delivery to
European customers of CE-approved machines through the maintenance and success
of a Netherlands warehouse.
200X Performance, Maneuverability, Power Minuteman's newly designed 200X
Scrubber is highly maneuverable and designed to scrub up to 21,500 square feet
per hour with it's large 20 gallon tank capacity. In just one 20" wide pass, the
200X Automatic Scrubber wet scrubs, deep cleans and dry vacuums with power and
finesse. This sleek scrubber is just one example of Minuteman's intuitive
solutions developed by a customer-focused front line.
"We focused on what we know and do best. Our skills are sharply honed in the
floor, carpet and lawn-care cleaning arena. We know what products will best
serve our customers, and, if we don't have it, we develop it for them. It's that
simple." Jerry Rau, Chairman of the Board and CEO Minuteman International
<PAGE> 6
New Products Enhance Worldwide Leadership Position
Visionary Products Expand the Horizon.
3200 Rider Scrubber High performance with a tighter scrub path. Rugged,
maneuverable and powerful, the new 3200 rider scrubber is one of the smallest,
most compact rider scrubbers on the market today. Designed to clean a tight 32"
scrub path while scrubbing and dry vacuuming in a single pass up to 44,000
square feet per hour, the new model combines the convenience of a rider with
maximum maneuverability in tight locations to clean close to walls, into corners
and up and down narrow aisles. The 3200 Rider Scrubber's 35 gallon molded
polyethylene solution/recovery tank provides easy tank filling/flushing and
automatic vacuum shut off. A two inch drain hose allows for quick and easy
emptying of the recovery tank. A curved, squeegee breaks away from the machine
to prevent damage. In addition, the operator station provides maximum visibility
and is equipped with a safety seat that will not allow the scrubber to move
unless the operator is seated behind a convenient control panel which constantly
monitors operation. Minuteman's dependable 3200 Rider Scrubber digs down deep to
clean even the tightest, most difficult-to-clean floor.
200X Automatic Floor Scrubber User-friendly power at the touch of a hand.
Minuteman's newly designed 200X Automatic Scrubber wet scrubs, deep cleans and
dry vacuums in one 20" wide pass for maximum efficiency and productivity in
large, high traffic areas. The highly maneuverable, walk-behind scrubber is
designed to scrub up to 21,500 square feet per hour and is easily serviced
thanks to stainless hinged, polyethylene 20 gallon solution/recovery tanks with
a patented Maxi-Wall_ bladder. The brush deck features a quick-release
spring-loaded foot lever making pad or brush replacement quick and easy. A
user-friendly control panel, individual forward and reverse bail levers and
powerful heavy-duty battery packs with extended running time, make the 200X
Automatic Floor Scrubber the right choice for any high volume traffic area.
Kleen Sweep 45 New sweeper rides in comfort and sweeps with speed. The Kleen
Sweep 45 is a compact Rider Sweeper designed for sweeping narrow spaces and
reducing maintenance costs and cleaning time. Sweeping a big 84,000 square feet
per hour, the Kleen Sweep 45 includes retractable side brooms, a floating
self-leveling main brush, hydrostatic drive, drum brakes, low turning radius~39
inches (1m), a large filter surface area, a convenient large 3.4 cu. ft. hopper
which reduces emptying and increases productivity and a fast, efficient
operational speed. Perfect for small businesses with limited budgets, Kleen
Sweep 45 offers the efficiency of a larger sweeper at an affordable price.
Total Solutions Minuteman's Full Line of Customer Focused Dynamic Floor Care
Products. Total Solutions and Total Applications expand the Minuteman horizon
toward even greater product depth, breadth and services to answer any cleaning
customer's needs. With an eager global market and a full line of exceptional
maintenance products for industrial, commercial and institutional facilities,
Minuteman's unique, direct-control-over-design, production, product updates,
manufacturing technologies, distribution and quality control positions the
company to stand as the front runner in providing Total Solutions in a
customer-focused, competitive marketplace.
Carpet Care Machines Dependable, reliable results guide users to Minuteman's
power-packed carpet care machines. Designed to be user-friendly as well as a
powerful choice for carpet maintenance, Minuteman's carpet care equipment
minimizes operator fatigue and offers a myriad of machine and floor care
equipment for every application. From the daily dependability of the
Multi-Purpose Vacuum (MPV) upright, to the total care approach of the
AmbassadorTM Series extractors, each of these dependable workhorses feature
excellent operator visibility and reliable results, every time.
3200 Aggressive, High Performance From a Compact Rider Scrubber. Scrubbing up to
44,000 square feet per hour in a tight 32" scrub path while scrubbing and dry
vacuuming in a single pass, the new 3200 Rider Scrubber model combines the
convenience of a rider with the maximum maneuverability in tight locations. The
visionary 3200 Rider Scrubber digs down deep to clean close to walls, into
corners and up and down narrow aisles. This unusual compact rider scrubber opens
new markets for Minuteman and further bolsters Minuteman's unchallenged
leadership position in the floor care industry.
<PAGE> 7
Automatic Scrubbers Minuteman offers one of the largest varieties of dynamic
scrubbers on the market.Minuteman's wide variety of scrubbers feature cleaning
paths from 17" to 38" and coverage from 18,000 to 44,000 sq. ft. per hour. Each
of Minuteman's automatic scrubbers is designed to fill a specific customer 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, 320 and 380 Automatic Scrubbers maneuver at the touch of a
hand and offer simplified, user-friendly controls. All Minuteman automatic
scrubbers are ergonomically designed to allow for greater operator comfort and
control. Recent additions to the automatic scrubber line, such as the 200X and
the 3200 Rider Scrubber, support Minuteman's dedication to focus on customer
needs and provide a wide variety of solutions for every floor cleaning need.
Floor Machines and Burnishers Unique, competitively priced to endure demanding
conditions and expectations. Minuteman's 17" or 20" Front Runner Series floor
machines combine high durability and operator safety with a competitive pricing
structure. Minuteman burnishers feature a non-fatigue design and offer a
patented Passive Air Management System (PAMS_). PAMS_ keeps Minuteman's popular
1500, 2400, 2600 and 2700 ABS burnishers leading the market, year after year. In
addition to high productivity and increased labor savings, Mirage_ propane
burnishers offer added depth and greater efficiencies to the Minuteman product
line. More powerful and dynamic engines combined with Minuteman's exceptional
performance and engineering, deliver some of the most powerful propane
burnishers on the market today.
Indoor/Outdoor Sweepers Sweepers add another dimension to Minuteman's Total
Solution product line. High quality, efficient performers, Minuteman's Kleen
Sweep_27 and Kleen Sweep_ 35 and the new Kleen Sweep_ 45 are examples of the
strength and depth of the Minuteman product line. Kleen Sweep 27 is ideal for
machine shops, stock rooms, parks, small yards, parking areas and loading ramps
as well as indoors on large carpeted areas. Kleen Sweep 27 is a cost effective
option cleaning up to 31,000 sq. ft. per hour. 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. The Kleen Sweep 45 is a
compact Rider Sweeper designed for sweeping narrow spaces and reducing
maintenance costs and cleaning time. Sweeping a big 84,000 square feet per hour,
the Kleen Sweep 45 includes retractable side brooms, a floating self-leveling
main brush, hydrostatic drive, drum brakes, low turning radius- 39 inches (1m),
a large filter surface area, a convenient large 3.4 cu. ft. hopper which reduces
emptying and increases productivity and a fast, efficient operational speed.
Kleen Sweep 45 is another powerful example of Minuteman's commitment to outpace
the competition and lead the way to providing Total Solutions for customers.
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. For
example, the 55 Gallon Explosion-Proof Vacuum is designed for use where
flammable gases, vapors or finely pulverized dust may be present. The CRV_ Clean
Room Vacuum is specifically applicable to Class 1 through Class 100,000
cleanrooms, pharmaceutical labs, gowning areas, air showers, biological labs and
computer rooms. The Mercury Vacuum series is designed for the handling and
disposing of mercury-based residue. The vacuums are easy to use, available in a
wide variety of sizes and are created for specific hazardous waste applications.
Kleen Sweep 45 Rides in Comfort, Sweeps with Speed and Efficiency. Kleen Sweep
45 rides in comfort, sweeps with speed and offers the efficiency of a larger
sweeper at an affordable price. Designed for sweeping narrow spaces and reducing
maintenance costs and cleaning time, the Kleen Sweep sweeps an enormous 84,000
square feet per hour. Perfect for small businesses with limited budgets, Kleen
Sweep 45 represents Minuteman's customer-focused, ongoing, development of floor
care products designed to provide Total Solutions for each customer.
"Even I was surprised at the durability of the UV Floor Care System and how well
it maintains a long-lasting, high, glossy, deep finish."
Mike Rau, Vice-President, Multi-Clean
<PAGE> 8
Multi-Clean First, In History. First, In Innovation. Chemical Powerhouse
Multi-Clean Sales Grow 16%. New Products, Dynamic Sales Force, State-of-the-Art
Research, Drive Sales Growth Multi-Clean's aggressive sales performance
continues to build on 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. Multi-Clean's edge in the chemical
manufacturing industry is evidenced by a 16% solid sales growth in 1999. Steady
growth is supported by innovative new products such as the Ultra Violet Floor
Care System, Poli-Mirro 450, and through strengthening residual sales of
recently introduced products such as Multi-Fresh, Multi-Stat ESD, Bio-Power Plus
and the Dilution Control System. Many of these innovative products are examples
of a growing target market segment~customers who re-order replacement chemicals
for dispensing systems. Continued growth is also made possible through
Multi-Clean's long-held dedication to high quality state-of-the-art research and
development, where talented chemists and professional engineers are supported by
a dynamic sales staff and a senior management team dedicated to delivering the
very best floor care available.
For the second year in a row Multi-Clean's Ultra Violet Floor Care System
dazzled the audience at the ISSA show. Multi-Clean's revolutionary Ultra Violet
Single Floor Care System dazzled the ISSA Show for the second year in a row.
After the initial unveiling at the 1998 ISSA Show, response and interest was
immediate from distributors seeking potential distributorships. Assignment of
exclusive distributorships is progressing well while enthusiasm for the product
continues its unheralded excitement. Shipment of the first product began in
September of 1999. Additionally, as distributors clamor to establish themselves
as an exclusive distributor, the innovative floor care system generates
cross-sell opportunities into new markets such as commercial cleaning
contractors and national retail accounts.
First in History The revolutionary, one-of-a-kind UV-22, Ultra Violet Curing
Unit represents the first time in history this unique technology has been
introduced to the floor cleaning industry outside a controlled factory
environment. The unique Ultra Violet Chemical cures instantly with the specially
designed UV-22 machine so you can walk on it immediately. This unique one coat,
floor coating delivers a long-lasting wet-look that is resilient and durable
with a finish that lasts on tile, wood and concrete.
Minuteman Parker The Professional Landscapers Choice For Quality and
Performance.Minuteman Parker adds depth to Minuteman's customer-focused, Total
Solutions package.Minuteman Parker offers a wide variety of lawn, turf and
industrial maintenance equipment. Located at Minuteman's Hampshire facility,
Parker products include high quality lawn sweepers, litter vacuums, dethatchers,
wheeled blowers, chipper shredder vacuums and portable truck loaders. This
exciting product line continues to bring diversity and strength to Minuteman by
selling its products through, but not limited to, the janitorial and cleaning
industries as well as lawn/garden and roofing/paving distribution channels.
These additional distribution channels offer Minuteman another avenue through
which to answer customer needs and support Minuteman's Total Solution promise to
customers. Parker products have been the choice of professional landscapers and
discriminating consumers for over a century. Parker's distinguished reputation
in the market is well known and continues to add substantial value to the
Minuteman brand.
New! Poli-Mirro 450 Ideal for Gym Floors Poli-Mirro 450 is an exceptional oil
modified polyurethane wood floor finish ideal for gym floors. Offering a high
solid content, the new product offers superior gloss and durability because a
thicker wear layer is applied with each coat. Designed for gym floors and
compliance with new Federal VOC Regulations, Poli-Mirro 450 resists black
marking and scuffing from athletic shoes and is easily applied.
<PAGE> 9
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
EARNINGS
The Company achieved record net sales and net income during 1999. For the year
net income increased 20.3% to $4,007,000 or $1.12 per share compared with
$3,332,000 or $.93 per share in 1998. Record net sales in 1999 increased 34.7%
to $76,060,000 as compared to 1998. This increase was due primarily to the
inclusion of twelve months of revenue related to the products of PowerBoss,
acquired in November 1998, compared to only one month in 1998. This increase
also was attributed to strong domestic sales of commercial products in 1999 as
well as a rebound in some international markets, which were depressed in 1998.
Gross profit during 1999 as a percent to net sales was 31.1% reflecting lower
margins on PowerBoss industrial products but offset in part by higher volume and
improved margins on commercial products. As a result, operating income improved
34.8%, from $5,017,000 to $6,763,000, which was reduced by interest expense of
$863,000 (related principally to the debt from the PowerBoss acquisition).
Included in 1999 other income/expense is the non-recurring gain related to the
successful settlement of patent litigation.
For 1998 net sales increased 5.9% or $3,139,000 in 1998 compared to 1997. The
Company's commercial product line substantially all of which is domestically
manufactured, increased $836,000 or 1.6% compared to 1997. This increase was due
primarily to the favorable response to our product introductions, strong sales
across most product lines and was fueled by strong domestic dealer demand, as
domestic sales increased 11% over the comparable period. These results were
hampered by a decline in international business due primarily to the economic
and currency turmoil experienced in the Pacific Rim. Gross profit during 1998
increased as a percent to net sales to 32.0% from 30.8% in 1997. The positive
effects of higher volume, combined with cost containment efforts and selective
price increases made at the end of 1997 to compensate for vendor price
increases, accounted primarily for this increase but were partially offset by
the negative impact of product mix changes. Operating profits increased 18% due
to these cost containment efforts in spite of increases in the cost of new
product introductions and marketing initiatives aimed at gaining market share.
The benefits received in other income in 1998 due to the pre-tax gain of
$428,000 recognized on the sale of our former Glendale, California warehouse
facility during 1998, offset in part by interest expense incurred relative to
the net asset purchase of PowerBoss, accounted for the increase in other income
compared to 1997.
SELLING EXPENSES
Selling expenses, as a percent to net sales, decreased from 18.7% in 1998 to
17.0% in 1999. The decrease resulted primarily from an increase in sales over
1998, which more than offset higher personnel and promotional expenses as well
as incremental PowerBoss expenses in 1999.
Selling expenses, as a percent to net sales, increased from 18.5% in 1997 to
18.7% in 1998. The increase resulted primarily from higher promotional expenses
aimed at gaining market share and increased personnel expenses.
GENERAL AND ADMINISTRATIVE EXPENSES
For 1999 these expenses increased 60.7% from 1998 due primarily to higher
professional fees related to litigation and personnel expenses, as well as
incremental PowerBoss expenses in 1999.
For 1998 these expenses increased 7.4% from 1997 due primarily to higher
personnel expenses.
OTHER INCOME/EXPENSE
In 1999 and 1998 the Company incurred interest expense of $863,000 and $196,000
respectively on debt resulting primarily from purchases of inventory and capital
expenditures as well as long-term debt resulting from the purchase of the net
assets of PowerBoss.
In 1999 other income, net decreased $84,000 compared to 1998 due primarily to
the gain recognized on the sale of our former Glendale California warehouse
facility in 1998, offset in part by the successful settlement of patent
infringement litigation against an industry competitor.
In 1998 other income, net increased $293,000 over 1997 due primarily to the
aforementioned gain recognized on the California warehouse sale.
<PAGE> 10
INCOME TAXES
The effective tax rate was 36.3%, 36.7% and 34.6% for 1999, 1998 and 1997,
respectively. The decrease in the 1999 rate is caused principally by increased
benefits received from our Foreign Sales Corporation, which includes the
incremental effects of the PowerBoss export business during 1999. The increase
in the 1998 rate is caused principally by reduced benefits received from our
Foreign Sales Corporation during 1998.
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 $30.3 million and $28.4 million at December
31, 1999 and 1998, respectively. This represented a current ratio of 4.7 and 5.6
for those years respectively.
Cash, cash equivalents and short-term investments represented 12.1% and 5.6% of
this working capital at December 31, 1999 and 1998, respectively. This increase
in 1999 was due primarily to improved collection of receivables during 1999.
This increase in 1998 was due to receipts of cash relative to the newly acquired
receivables from PowerBoss.
At December 31, 1999 and 1998, the Company had shareholders' equity of $33.3
million and $30.8 million, respectively, which when compared to total
liabilities represented an equity to liability ratio of 1.6 and 1.5,
respectively.
The Company has 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.
INTANGIBLE ASSETS
Intangible assets represent 10.9% and 12.1% of total assets and 17.5% and 19.9%
of shareholders' equity December 31, 1999 and 1998, respectively. These assets
were primarily the result of the November, 1998 PowerBoss acquisition (see note
C to the consolidated financial statements). The Company does not believe there
has been any impairment in this asset at December 31, 1999 and 1998, in
accordance with Statements of Financial Accounting Standards No. 121 "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
of". If it became probable that the projected future undiscounted cash flows of
acquired assets were less than the carrying value of intangible assets, the
company would recognize an impairment loss in accordance with the provisions of
SFAS no. 121.
MARKET RISK
The Company's earnings and cash flow are subject to fluctuations due to changes
in foreign currency exchange rates. Currently these earnings and foreign
currency translation adjustments have not been material to the overall financial
results of the Company.
The Company has also entered into an interest rate swap agreement to obtain a
fixed interest rate on variable rate debt to reduce certain exposures to
interest rate fluctuations. In the event that a counterparty fails to meet the
terms of the interest rate swap agreement, the Company's exposure is limited to
the interest rate differential. The Company manages the credit risk of
counterparties by dealing only with institutions that the Company considers
financially sound. The Company considers the risk of nonperformance to be
remote.
<PAGE> 11
YEAR 2000 READINESS DISCLOSURE
In prior years, the Company discussed the nature and progress of its plans to
become Year 2000 ready. In late 1999, the Company completed its remediation and
testing of systems. As a result of those planning and implementation efforts,
the Company experienced no significant disruptions in mission critical
information technology and non-information technology systems and believes those
systems successfully responded to the Year 2000 date change. The total costs
associated with the Company's Year 2000 remediation was not material to the
Company's financial position or results of operation and was funded through
operating cash flows. The Company is not aware of any material problems
resulting from Year 2000 issues, either with its products, its internal systems,
or the products and services of third parties. The Company will continue to
monitor its mission critical computer applications and those of its suppliers
and vendors throughout the year 2000 to ensure that any latent year 2000 matters
that may arise are addressed promptly.
<PAGE> 12
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31
1999 1998
------------ ------------
<S> <C> <C>
ASSETS
CURRENTS ASSETS
Cash and cash equivalents $ 322,000 $ 1,590,000
Short-term investments 3,332,000 1,000
Accounts receivable, less allowances of
$469,000 in 1999 and $721,000 in 1998 14,935,000 14,725,000
Due from affiliates 354,000 308,000
Inventories 18,527,000 17,339,000
Prepaid expenses 228,000 187,000
Refundable income taxes 267,000 111,000
Deferred income taxes 420,000 320,000
------------ ------------
TOTAL CURRENT ASSETS 38,385,000 34,581,000
PROPERTY, PLANT AND EQUIPMENT
Land 820,000 820,000
Building and improvements 5,983,000 5,983,000
Machinery and equipment 10,866,000 10,548,000
Office furniture and equipment 3,265,000 2,833,000
Transportation equipment 1,472,000 1,191,000
------------ ------------
22,406,000 21,375,000
Accumulated depreciation (12,993,000) (11,423,000)
------------ ------------
9,413,000 9,952,000
INTANGIBLE ASSETS-Net of amortization of
$442,000 in 1999 and $130,000 in 1998 5,825,000 6,137,000
------------ ------------
$ 53,623,000 $ 50,670,000
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of long term debt $ 1,500,000 $
Accounts payable 3,359,000 3,269,000
Accrued expenses 3,235,000 2,952,000
------------ ------------
TOTAL CURRENT LIABILITIES 8,094,000 6,221,000
LONG-TERM DEBT, less current maturities 12,000,000 13,500,000
DEFERRED INCOME TAXES 265,000 175,000
SHAREHOLDERS' EQUITY
Common stock, no-par value
Authorized shares - 10,000,000
Issued and outstanding shares-
3,568,385 in 1999 and 1998 6,396,000 6,396,000
Retained earnings 27,060,000 24,624,000
Cumulative foreign currency translation adjustments (192,000) (246,000)
------------ ------------
33,264,000 30,774,000
------------ ------------
$ 53,623,000 $ 50,670,000
============ ============
</TABLE>
See notes to consolidated financial statements.
<PAGE> 13
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Year Ended December 31
--------------------------------------------
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Net sales $ 76,060,000 $ 56,485,000 $ 53,346,000
Cost of sales 52,412,000 38,438,000 36,917,000
------------ ------------ ------------
Gross profit 23,648,000 18,047,000 16,429,000
Operating expenses
Selling 12,896,000 10,548,000 9,869,000
General and administrative 3,989,000 2,482,000 2,310,000
------------ ------------ ------------
Operating expenses 16,885,000 13,030,000 12,179,000
------------ ------------ ------------
INCOME FROM OPERATIONS 6,763,000 5,017,000 4,250,000
Other income (expense)
Interest income 72,000 32,000 53,000
Interest expense (863,000) (196,000) (57,000)
Other - net 316,000 400,000 107,000
------------ ------------ ------------
Other income (expense) (475,000) 236,000 103,000
------------ ------------ ------------
INCOME BEFORE INCOME TAXES 6,288,000 5,253,000 4,353,000
Provision (credit) for income taxes
Current 2,291,000 1,766,000 1,566,000
Deferred (10,000) 155,000 (60,000)
------------ ------------ ------------
PROVISION FOR INCOME TAXES 2,281,000 1,921,000 1,506,000
------------ ------------ ------------
NET INCOME $ 4,007,000 $ 3,332,000 $ 2,847,000
============ ============ ============
Net income per common share-basic and diluted $ 1.12 $ .93 $ .80
============ ============ ============
</TABLE>
See notes to consolidated financial statements.
<PAGE> 14
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Years Ended December 31, 1997, 1998 and 1999
-----------------------------------------------------------------------
Cumulative
Common Stock Foreign
------------------------ Currency
Number of Retained Translation
Shares Amount Earnings Adjustments Total
-----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
BALANCE AT JANUARY 1, 1997 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)
------------
Comprehensive income 2,798,000
--------- ------------ ------------ ------------ ------------
BALANCE AT DECEMBER 31, 1997 3,568,385 6,396,000 22,862,000 (176,000) 29,082,000
Dividends (.44 per share) (1,570,000) (1,570,000)
Net income 3,332,000 3,332,000
Translation adjustment (70,000) (70,000)
------------
Comprehensive income 3,262,000
--------- ------------ ------------ ------------ ------------
BALANCE AT DECEMBER 31, 1998 3,568,385 6,396,000 24,624,000 (246,000) 30,774,000
Dividends (.44 per share) (1,571,000) (1,571,000)
Net income 4,007,000 4,007,000
Translation adjustment 54,000 54,000
------------
Comprehensive income 4,061,000
--------- ------------ ------------ ------------ ------------
BALANCE AT DECEMBER 31, 1999 3,568,385 $ 6,396,000 $ 27,060,000 $ (192,000) $ 33,264,000
========= ============ ============ ============ ============
</TABLE>
See notes to consolidated financial statements.
<PAGE> 15
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended December 31
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 4,007,000 $ 3,332,000 $ 2,847,000
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 1,636,000 1,547,000 1,420,000
Amortization 312,000 39,000 15,000
Deferred income taxes (credit) (10,000) 155,000 (60,000)
Other 54,000 (70,000) (49,000)
Changes in operating assets and liabilities:
Accounts receivable and due from affiliates (127,000) (2,691,000) (1,095,000)
Inventories (1,511,000) (1,056,000) (2,805,000)
Prepaid expenses and refundable income taxes (209,000) (142,000) 52,000
Accounts payable, accrued expenses and income taxes 579,000 1,126,000 297,000
------------ ------------ ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 4,731,000 2,240,000 622,000
INVESTING ACTIVITIES
Purchase of AAR PowerBoss (11,631,000)
Purchases of property, plant and equipment, net (1,097,000) (1,670,000) (1,946,000)
Purchases of short-term investments (3,331,000)
Maturities of short-term investments 157,000 1,983,000
----------- ----------- -----------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (4,428,000) (13,144,000) 37,000
FINANCING ACTIVITIES
Proceeds from long-term debt 13,500,000
Dividends paid (1,571,000) (1,570,000) (1,570,000)
------------ ------------ ------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (1,571,000) 11,930,000 (1,570,000)
------------ ------------ ------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (1,268,000) 1,026,000 (911,000)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 1,590,000 564,000 1,475,000
------------ ------------ ------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 322,000 $ 1,590,000 $ 564,000
============ ============ ============
</TABLE>
See notes to consolidated financial statements.
<PAGE> 16
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - BUSINESS INFORMATION
Minuteman International, Inc. (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
more than ten percent of net sales in 1999, 1998 or 1997.
The Company sells to affiliated (see Note H) and unaffiliated customers in
foreign countries. For 1999, 1998, and 1997, these sales aggregated $16,351,000,
$10,642,000 and $12,062,000, respectively, and were principally to customers in
Canada, the Pacific Rim, the Middle East, Europe, and Latin America.
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
PowerBoss, Inc., Minuteman Canada, Inc., Minuteman European B.V. and Minuteman
International Foreign Sales Corporation. Significant intercompany accounts and
transactions have been eliminated in consolidation.
REVENUE RECOGNITION
The Company recognizes sales upon the shipment of its products net of applicable
provisions for discounts and allowances. The Company also provides for its
estimate of warranty and bad debts at the time of sales.
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States 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) method for a majority (1999-54%, 1998-56%) of inventories and
the first in, first out (FIFO) method for the remainder. Inventories at December
31, 1999 and 1998 consist of the following:
1999 1998
------------ ------------
Inventories at FIFO cost:
Finished goods $ 7,760,000 $ 7,285,000
Work in process 8,451,000 8,257,000
Raw materials 4,403,000 3,898,000
------------ ------------
20,614,000 19,440,000
Less LIFO reserve (2,087,000) (2,101,000)
------------ ------------
Total Inventories $ 18,527,000 $ 17,339,000
============ ============
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. Estimated
useful lives for buildings and improvements range from 15 to 40 years. All other
property, plant and equipment lives range from 3 to 7 years.
<PAGE> 17
INTANGIBLE ASSETS
The Company has classified as intangible assets the cost in excess of the fair
value of net assets of businesses acquired. Amortization is computed on a
straight line basis over twenty years.
The Company does not believe there has been any impairment in this asset at
December 31, 1999 and 1998, in accordance with Statement of Financial Accounting
Standards (SFAS) No. 121 "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to be Disposed of". If it became probable that the
projected future undiscounted cash flows of acquired assets were less than the
carrying value of intangible assets, the Company would recognize an impairment
loss in accordance with the provisions of SFAS No. 121.
INCOME TAXES
Income taxes have been provided using the liability method. 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 1999, 1998 and 1997). Basic
and fully diluted earnings per share are the same amounts.
FOREIGN CURRENCY TRANSLATION
The functional currency of the Company's foreign subsidiaries is the local
currency. Accordingly, the balance sheet accounts of the foreign subsidiaries
have been translated into United States dollars using the current exchange rate
at the balance sheet date and income statement amounts have been translated
using the average exchange rate for the year. Foreign currency translation
adjustments 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, all of which are
with domestic commercial banks, include certificates of deposit and Eurodollar
and treasury certificates.
RESEARCH AND DEVELOPMENT EXPENSES
Research and development expense for 1999, 1998 and 1997, approximated
$1,329,000, $1,118,000 and $1,102,000 respectively.
NEW ACCOUNTING PRONOUNCEMENTS
During 1998, the Financial Accounting Standards Board issued Statement No. 133,
"Accounting for Derivative Instruments and Hedging Activities" (the Statement),
which was amended by SFAS No. 137. Provisions of the Statement are required to
be adopted for years beginning after June 15, 2000 and will require the Company
to recognize all derivatives in the balance sheet at fair value. The Company
will adopt the Statement effective January 1, 2001, and estimates that the
adoption of the Statement will not be material to its result of operations,
financial position or cash flows.
<PAGE> 18
NOTE C - ACQUISITION
On November 23, 1998, the Company entered into an Asset Purchase Agreement with
AAR PowerBoss, Inc., ("PowerBoss") for the acquisition of substantially all of
the net assets and assumption of certain liabilities of PowerBoss. PowerBoss
designs, manufactures, and repairs ride-on and walk-behind sweepers and
scrubbers for floor and carpet care for use in industrial applications. The cash
purchase price, including related acquisition costs, was $11,494,000, after
final purchase price adjustment. The acquisition was accounted for as a
purchase. Accordingly, the assets and liabilities of the acquired business are
included in the Consolidated Balance Sheet at December 31, 1998. The results of
PowerBoss's operations are included in the Consolidated Statements of Income
from the date of acquisition. The acquisition was financed with borrowed funds
from the long-term debt agreement entered into on November 18, 1998 (see Note
D). The aggregate consideration has been allocated to the assets of PowerBoss
based upon their respective fair market values. The excess of the purchase price
over the fair value of the net assets acquired (intangible assets) in 1998
approximated $5,950,000 and is being amortized over 20 years. The unaudited pro
forma combined historical results, as if PowerBoss had been acquired at the
beginning of the years 1998 and 1997 respectively, are estimated to be:
1998 1997
----------- -----------
Net sales $74,891,000 $76,105,000
Net Income 2,687,000 2,526,000
Net Income per Common Share $ .75 $ .71
These pro forma results of operations have been prepared for comparative
purposes only and do not purport to be indicative of the results of operations
which actually would have resulted had the acquisition occurred on the date
indicated or which may result in the future.
NOTE D - DEBT
SHORT TERM DEBT
The Company entered into an unsecured Line of Credit arrangement for short-term
debt with a financial institution which expires in November, 2000. Under the
terms of this agreement the Company may borrow up to $5 million on terms
mutually agreeable to the Company and the financial institution. There are no
requirements for compensating balances or restrictions of any kind involved in
this arrangement. At December 31, 1999 and 1998 there were no borrowings
outstanding.
LONG TERM DEBT
The Company financed the PowerBoss acquisition (See Note C) by entering into a
term loan agreement with a financial institution on November 18, 1998 for
$13,500,000. This unsecured credit facility provides for an interest rate at
LIBOR plus an applicable margin based upon the ratio of debt outstanding to the
Company's earnings before interest, taxes, depreciation and amortization and
ranges from .70% to 1.15%. The margin rate on this debt at December 31, 1999 and
December 31, 1998 was .80% (see Note F). The effective interest rate on this
debt at December 31, 1999 was 6.20%. The Company agreed to maintain certain
minimum financial ratios. Maturities of long term debt are as follows:
1999
-----------
Due 2000 $ 1,500,000
2001 1,500,000
2002 1,500,000
2003 1,500,000
2004 and thereafter 7,500,000
-----------
13,500,000
Less current maturities 1,500,000
-----------
$12,000,000
===========
Interest paid for short-term and long-term debt obligations in 1999, 1998 and
1997 was $847,000, $110,000 and $57,000, respectively.
<PAGE> 19
NOTE E - 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, 1999 and 1998 are as follows:
Deferred Tax Asset (Liabilities)
December 31
1999 1998
--------- ---------
Accounts receivable allowance $ 100,000 $ 108,000
Property, plant & equipment tax
depreciation in excess of book (230,000) (175,000)
Accrued expenses & other 285,000 212,000
--------- ---------
$ 155,000 $ 145,000
========= =========
The effective income tax rate on income taxes differed from the Federal
statutory rate as follows:
1999 1998 1997
- ---------------------------------------------------------------
Federal statutory rate 34.0% 34.0% 34.0%
State income taxes, net
of Federal tax benefit 3.4 3.1 3.7
Foreign Sales
Corporation benefit (2.3) (1.5) (2.4)
Research and Development Tax Credits (1.2) (.3) (.6)
Other, net 2.4 1.4 (.1)
- ---------------------------------------------------------------
36.3% 36.7% 34.6%
===============================================================
The components of the provision (benefit) for income taxes are:
1999 1998 1997
- ----------------------------------------------------
Federal $ 1,775,000 $ 1,693,000 $ 1,200,000
State 450,000 328,000 285,000
Foreign 56,000 (100,000) 21,000
- ----------------------------------------------------
$ 2,281,000 $ 1,921,000 $ 1,506,000
====================================================
The Company paid income taxes of $2,421,000, $1,975,000 and $1,592,000 in 1999,
1998 and 1997, respectively.
NOTE F - FINANCIAL INSTRUMENTS
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.
In 1998, the Company entered into an interest rate swap agreement to obtain a
fixed interest rate on variable rate debt and reduce certain exposures to
interest rate fluctuations. At December 31, 1999 and 1998, the Company had
interest rate swaps with a notional amount of $13,500,000. The swaps will
terminate on the same basis as the long-term debt repayment schedule ending
November, 2005 (See Note D). The swaps result in fixed rate payments at an
effective interest rate of 6.20%. Variable rate payments are based on LIBOR
interest rate plus an applicable margin (See Note D).
Interest rate differentials paid or received under this agreement are recognized
as an adjustment to interest expense. The Company does not hold or issue
interest rate swap agreements for trading purposes.
<PAGE> 20
In the event that a counterparty fails to meet the terms of the interest rate
swap agreement, the Company's exposure is limited to the interest rate
differential. The Company manages the credit risk of counterparties by dealing
only with institutions that the Company considers financially sound. The Company
considers the risk of nonperformance to be remote. The net carrying amounts and
fair values of the Company's financial instruments are approximately the same.
NOTE G - LEASE COMMITMENTS
The Company and its subsidiaries lease certain manufacturing, warehousing and
other facilities and equipment. The leases generally provide for the lessee to
pay taxes, maintenance, insurance and certain other operating costs of the
leased property. The leases on most of the properties contain renewal
provisions. The following is a summary of future minimum payments under
operating leases that have initial or remaining noncancelable lease terms in
excess of one year at December 31, 1999:
2000 $ 486,000
2001 322,000
2002 124,000
2003 5,000
----------
$ 937,000
==========
Rental expense for operating leases amounted to $451,000, $219,000 and $128,000,
in 1999, 1998 and 1997, respectively.
NOTE H - RELATED PARTY TRANSACTIONS
Hako-Werke GmbH & Co. (a German corporation) owns 69.0% of the outstanding
common stock of the Company through a subsidiary.
The Company sold approximately $1,460,000, $1,403,000 and $1,968,000 of
merchandise to Hako Werke and certain of its subsidiaries during 1999, 1998 and
1997, respectively. Amounts due from affiliates, which relate to these sales,
are due within 90 days from the date of sale.
NOTE I - 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 $403,000, $284,000 and $268,000 for the years
ended 1999, 1998 and 1997 respectively.
NOTE J - QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The following is a summary of the quarterly results of operations for the years
ended December 31, 1999 and 1998:
Three Months Ended
----------------------------------------------
March 31 June 30 September 30 December 31
-------- ------- ------------ -----------
(Thousands of dollars, except per share data)
1999
- ----
Net Sales $19,119 $19,578 $20,653 $16,710
Gross profit 5,682 6,155 6,333 5,478
Net income 772 966 1,147 1,122
Net income per common share $ .22 $ .27 $ .32 $ .31
1998
- ----
Net Sales $15,101 $14,485 $13,962 $12,937
Gross profit 4,941 4,753 4,350 4,003
Net income 901 930 954 547
Net income per common share $ .25 $ .26 $ .27 $ .15
<PAGE> 21
MARKETS FOR THE COMPANY'S SECURITIES AND RELATED MATTERS
On March 1, 2000 the last reported sales price of the common stock on the NASDAQ
systems was $10.50. The approximate number of holders of common stock was 1100.
Since 1988 the Board of Directors has declared regular quarterly dividends and
the fourth quarter dividend in 1999 represents the forty-fifth 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 1999
and 1998 the range of bid prices for the Company's common stock as reported in
the NASDAQ systems for the period indicated:
Dividends
High Low Per Share
---- --- ---------
1999
----
1st Quarter 13 3/4 10 1/8 $.11
2nd Quarter 10 1/2 7 3/4 $.11
3rd Quarter 10 1/2 7 1/2 $.11
4th Quarter 10 1/4 7 1/2 $.11
1998
----
1st Quarter 10 3/4 9 7/8 $.11
2nd Quarter 11 3/4 10 $.11
3rd Quarter 11 3/4 10 3/8 $.11
4th Quarter 12 3/4 9 5/8 $.11
<PAGE> 22
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,
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
(In thousands, except share and per share data)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Net sales $ 76,060 $ 56,485 $ 53,346 $ 49,120 $ 46,300
Cost of sales 52,412 38,438 36,917 33,932 31,957
----------- ----------- ----------- ----------- -----------
Gross profit 23,648 18,047 16,429 15,188 14,343
Selling expenses 12,896 10,548 9,869 8,548 8,431
General and administrative expenses 3,989 2,482 2,310 2,207 1,920
----------- ----------- ----------- ----------- -----------
Income from operations 6,763 5,017 4,250 4,433 3,992
Interest income (expense), net (791) (164) (4) 54 30
Other, net 316 400 107 486 82
----------- ----------- ----------- ----------- -----------
Income before income taxes 6,288 5,253 4,353 4,973 4,104
Income tax expense 2,281 1,921 1,506 1,812 1,280
----------- ----------- ----------- ----------- -----------
Net income $ 4,007 $ 3,332 $ 2,847 $ 3,161 $ 2,824
=========== =========== =========== =========== ===========
PER SHARE DATA
Cash dividends $ .44 $ .44 $ .44 $ .40 $ .40
Net income per common share 1.12 .93 .80 .89 .79
Weighted average number of shares
outstanding 3,568,685 3,568,385 3,568,385 3,568,385 3,568,385
BALANCE SHEET DATA
Working capital $ 30,291 $ 28,360 $ 19,901 $ 19,184 $ 17,142
Total assets 53,623 50,670 32,493 30,968 29,500
Long-term debt 12,000 13,500
Shareholders' equity 33,264 30,774 29,082 27,854 26,125
</TABLE>
<PAGE> 23
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, 1999 and 1998 and the
related consolidated statements of income, shareholders' equity and cash flows
for each of the three years in the period ended December 31, 1999. 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 auditing standards generally accepted
in the United States. 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, 1999 and 1998, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1999, in conformity with accounting
principles generally accepted in the United States.
/s/ Ernst & Young LLP
ERNST & YOUNG LLP
Chicago, Illinois
February 8, 2000
<PAGE> 24
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
accounting principles generally accepted in the United States 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 auditing standards generally accepted in
the United States 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.
/s/ Thomas J. Nolan
Thomas J. Nolan
Chief Financial Officer,
Secretary & Treasurer
/s/ Jerome E. Rau
Jerome E. Rau
Chairman of the Board and
Chief Executive Officer
<PAGE> 25
Operating Officers
Jerome E. Rau
Chairman of the Board &
Chief Executive Officer
Gregory J. Rau
President & Chief
Operating Officer
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
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"
<PAGE> 26
Annual Meeting
April 18, 2000 at 10:00 a.m.
at LaSalle National Bank
135 South LaSalle Street
Forty-third Floor
Conference Room ABC
Chicago, Illinois 60603
Form 10-K
Minuteman International, Inc. will send a copy of its Form 10-K report for
fiscal 1999 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
Minuteman PowerBoss, Inc.
175 Anderson Street
Aberdeen, North Carolina 28315
(910) 944-2105
Multi-Clean, Division of Minuteman
International, Inc.
600 Cardigan Road
Shoreview, Minnesota 55126
(651) 481-1900
Sales Offices
United States
Minuteman International, Inc.
111 South Rohlwing Road
Addison, Illinois 60101
(630) 627-6900
Minuteman Parker
111 South Rohlwing Road
Addison, Illinois 60101
(630) 627-6900
Minuteman PowerBoss
1190 North Villa Avenue
Villa Park, Illinois 60181
(630) 530-0007
Minuteman PowerBoss
27223 North Line Road
Taylor, Michigan 48180
(734) 941-5662
Canada
Minuteman Canada, Inc.
2210 Drew Road
Mississauga, Ontario
Canada L5S 1B1
(905) 673-3222
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
Board of Directors
Jerome E. Rau
Chairman of the Board
& Chief Executive Officer
Minuteman International, Inc.
Gregory J. Rau
President
& Chief Operating Officer
Minuteman International, Inc.
Tyll Necker
Chief Executive Officer
Hako-Werke International
GmbH & Co.
Frederick W. Hohage
President
BSH Home Appliances
A Subsidiary of Robert Bosch
Corporation, Sales Group
James C. Schrader, Jr.
President
Precision Enterprises, Ltd.
Frank R. Reynolds
Attorney
Law Offices of Reynolds
& Reynolds, Ltd.
<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
Minuteman PowerBoss, Inc.
175 Anderson Street
Aberdeen, North Carolina 28315
<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-31-1999 DEC-31-1999
<PERIOD-START> SEP-30-1999 JAN-01-1999
<PERIOD-END> DEC-31-1999 DEC-31-1999
<CASH> 322 322
<SECURITIES> 3,332 3,332
<RECEIVABLES> 15,289 15,289
<ALLOWANCES> 469 469
<INVENTORY> 18,527 18,527
<CURRENT-ASSETS> 38,385 38,385
<PP&E> 22,406 22,406
<DEPRECIATION> 12,993 12,993
<TOTAL-ASSETS> 53,623 53,623
<CURRENT-LIABILITIES> 8,094 8,094
<BONDS> 0 0
0 0
0 0
<COMMON> 6,396 6,396
<OTHER-SE> 26,868 26,868
<TOTAL-LIABILITY-AND-EQUITY> 53,623 53,623
<SALES> 16,710 76,060
<TOTAL-REVENUES> 16,710 76,060
<CGS> 11,232 52,412
<TOTAL-COSTS> 14,925 69,297
<OTHER-EXPENSES> (1) (316)
<LOSS-PROVISION> (70) 91
<INTEREST-EXPENSE> 192 791
<INCOME-PRETAX> 1,594 6,288
<INCOME-TAX> 472 2,281
<INCOME-CONTINUING> 1,122 4,007
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 1,122 4,007
<EPS-BASIC> .31 1.12
<EPS-DILUTED> .31 1.12
</TABLE>
