SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
Quarterly Report Under Section 13 or 15 (d)
of the Securities and Exchange Act of 1934
For the Quarter Ended November 30, 1996
Commission File Number 01-19001
MILLER DIVERSIFIED CORPORATION
----------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
Nevada 84-107093
- ------------------------- ----------------------
(State or other jurisdic- (I.R.S. Employer
tion of incorporation or Identification Number)
organization)
Mailing Address:
P.O. Box 937
La Salle, Colorado 80645
23360 Weld County Road 35
La Salle, Colorado 80645
-------------------------------------
(Address of Principal Executive Office)
(970) 284-5556
--------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
----- -----
Number of shares of Common Stock, par value $.0001, outstanding on November 30,
1996, 6,364,640.
Transitional Small Business Disclosure Format: YES NO X
----- -----
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
MILLER DIVERSIFIED CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
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November 30, August 31,
1996 1996
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ASSETS
Current Assets:
Cash $ 69,189 $ 89,551
Trade accounts receivable 746,469 735,809
Trade accounts receivable - related parties 27,467 116,692
Account receivable - related party 168,797 81,102
Inventories 376,492 283,279
Prepaid expenses 27,709 21,725
Deposits on feeder cattle -- 14,520
-------------------------------------------------------------------------------
Total Current Assets 1,416,123 1,339,678
Property and Equipment:
Land held for sale 700,000 700,000
Feedlot facilities under capital lease
- related party 1,497,840 1,497,840
Equipment 82,251 81,007
Equipment under capital leases - related party 149,452 149,453
Leasehold improvements 78,815 72,173
----------------------
2,508,358 2,500,473
Less: Accumulated depreciation and amortization 533,489 506,964
-------------------------------------------------------------------------------
Total Property and Equipment 1,974,869 1,993,509
Other Assets:
Note receivable - related party 250,000 250,000
Water shares held for sale 120,000 120,000
Deferred income taxes 124,018 124,018
Deposits and other 1,500 1,500
--------------------
Total Other Assets 495,518 495,518
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TOTAL ASSETS $ 3,886,510 $ 3,828,705
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Continued on next page.
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<PAGE>
MILLER DIVERSIFIED CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS - Continued
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November 30, August 31,
1996 1996
------------------------------------------------------------------------------
LIABILITIES
Current Liabilities:
Bank overdraft $ 185,033 $ 16,710
Notes payable -- 160,000
Trade accounts payable 763,779 534,839
Accrued expenses 22,936 21,989
Accrued income taxes payable 22,227 86,579
Customer advance feed contracts 14,907 14,907
Customer advance feed contracts - related parties 40,892 175,263
Current portion of capital lease
obligations-related party 41,259 47,800
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Total Current Liabilities 1,091,033 1,058,167
Capital Lease Obligations - related party 1,037,966 1,044,551
-------------------------------------------------------------------------------
Total Liabilities 2,128,999 2,102,718
Commitments____________________________________________________________________
STOCKHOLDERS' EQUITY
Preferred Stock -- --
Common Stock, par value $.0001 per share; 25,000,000
shares authorized; 6,554,799 issued and outstanding 636 636
Additional Paid-In Capital 1,351,693 1,351,693
Retained Earnings 405,182 373,658
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Total Stockholders' Equity 1,757,511 1,725,987
-------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 3,866,510 $ 3,828,705
-------------------------------------------------------------------------------
See Accompanying Note to Unaudited Consolidated Financial Statements.
-3-
<PAGE>
MILLER DIVERSIFIED CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF EARNINGS
- -------------------------------------------------------------------------------
Three Months Ended November 30, 1996 1995
- -------------------------------------------------------------------------------
Revenues:
Feed and other sales $ 2,598,191 $ 2,337,047
Feedlot services 451,094 333,626
Interest 3,817 17,379
Interest on note receivable related party 3,750 3,750
Other 25,153 103,342
------------------------------------------------------------------------------
Total Revenues 3,082,005 2,795,144
Costs and Expenses
Cost of feed and other sales 2,412,250 2,111,600
Cost of feedlot services 391,618 254,557
Selling, general and administrative 192,939 279,375
Interest 8,416 17,869
Interest on capital leases - related party 29,610 32,308
------------------------------------------------------------------------------
Total Costs and Expenses 3,034,833 2,695,709
Earnings before Income Taxes 47,172 99,435
Income Taxes 31,524 63,986
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NET EARNINGS $ 249,070 $ 62,578
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EARNINGS PER COMMON SHARE AND
COMMON EQUILAVENT SHARE $ Nil $ .01
- -------------------------------------------------------------------------------
Weighted Average Number of Common and
Common Equilavent Shares Outstanding 6,793,702 5,764,640
- -------------------------------------------------------------------------------
See Accompanying Note to Unaudited Consolidated Financial Statements.
-4-
<PAGE>
MILLER DIVERSIFIED CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
- -------------------------------------------------------------------------------
Three Months Ended November 30, 1996 1995
- --------------------------------------------------------------------------------
Cash Flows from Operating Activities:
Cash received from customers $ 3,104,670 $ 3,277,023
Cash paid to suppliers and employees (3,078,756) (2,354,378)
Interest received 7,567 21,129
Interest paid (34,004) (54,655)
Taxes paid (80,000) (30,307)
-------------------------------------------------------------------------------
Net Cash Provided (Used) by
Operating Activities (80,523) 858,812
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Cash Flows From Investing Activities:
Acquisition of property and equipment (7,885) (5,362)
Collections on loan to related parties -- 50,576
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Net Cash Provided (Used) by
Investing Activities (7,885) 45,214
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Cash Flows From Financing Activities:
Proceeds from notes payable 588,000 970,000
Principal payments on:
Short-term notes payable (748,000) (1,646,000)
Capital lease obligations - related party (13,206) (26,044)
Net increase (decrease) in short-term cattle financing 75,929 (135,674)
Increase in cash overdraft 168,323 --
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Net Cash Provided (Used) by
Financing Activities (17,362) 66,308
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Net Increase in Cash 118,858 96,098
Cash, Beginning of Period 86,551 72,272
Cash, End of Period $ 69,189 $ 138,580
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Continued on next page.
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<PAGE>
MILLER DIVERSIFIED CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS - Continued
- --------------------------------------------------------------------------------
Three Months Ended November 30, 1996 1995
- --------------------------------------------------------------------------------
RECONCILIATION OF NET EARNINGS TO NET
CASH PROVIDED BY OPERATING ACTIVITIES:
Net earnings $ 31,524 $ 63,986
Adjustments to reconcile net earnings to net
cash provided (used) by operating activities:
Depreciation and amortization expense 26,526 40,164
Amortization of deferred gain -- (4,654)
Changes in assets and liabilities net of
short-term cattle financing:
(Increase) decrease in:
Trade accounts receivable (10,660) 540,737
Trade accounts receivable - related parties 89,224 37,265
Accounts receivable - related party (87,695) 156,015
Inventories (171,122) (94,413)
Prepaid expense (5,984) (12,170)
Deposits and other -- (100)
Increase (decrease) in:
Trade accounts payable and accrued expenses 246,387 187,886
Income taxes payable (64,352) 5,143
Account payable - related party -- 9,295
Customer advance feed contracts -- (19,398)
Customer advance feed contracts-related parties (134,371) (50,944)
Obligation payable (240,289) --
------------------------
Net Cash Provided by Operating Activities $ (80,523)$ 858,812
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See Accompaning Note to Unaudited Consolidated Financial Statements.
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<PAGE>
MILLER DIVERSIFIED CORPORATION AND SUBSIDIARY
NOTE TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
The consolidated balance sheets as of November 30, 1996 and August 31,
1996, the consolidated statements of earnings for the three months ended
November 30, 1996 and 1995 and consolidated statements of cash flows for the
three months ended November 30, 1996 and 1995 have been prepared by the Company,
without audit, pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted as allowed by the rules and
regulations of the Securities and Exchange Commission.
In preparation of the above-described financial statements, all adjustments
of a normal and recurring nature have been made. The Company believes that the
accompanying unaudited financial statements contain all adjustments necessary to
present fairly the results of operations and cash flows for the periods
presented. Further, management believes that the disclosures are adequate to
make the information presented not misleading. It is suggested that these
financial statements be read in conjunction with the annual financial statements
and the notes thereto. The operations for the three months periods ended
November 30, 1996 are not necessarily indicative if the results to be expected
for the year.
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<PAGE>
Item 2 - Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
Operations for the treee months ended November 30, 1996, resulted in a net
profit of $31,524 as compared to a net profit of $63,986 for the same period the
previous year, an earnings decrease of $32,462.
The most significant factor that affects operating results is the average
head numbers of cattle per day ("average head days") in the Company's feedlot
because feed is sold and feedlot services are rendered to the cattle owners.
Sales of feed and feedlot services account for 95 % or more of the Company's
revenues. The average head days for the periods being compared were as follows:
Increase
Three Months Ended November 30, 1996 1995 (Decrease)
First quarter 16,377 15,782 595
The 595, or 3.8%, increase in average head days, impacts several areas, as
described below.
Another factor that affected earnings for the three months ended November
30, 1996 and 1995, and that did or will impact average head numbers and earnings
later in the fiscal year is the Company's "fall calf program". As a service to
customers, the Company purchases for them calves weaned in the fall and places
the calves with local farmer-feeders who feed and care for them until the
following February through April when they are transferred to the Company's
feedlot. This fall calf program is undertaken on essentially a breakeven basis;
that is, the amounts paid to the farmer-feeders are about the same as amounts
charged to the customers. The Company offers this service to improve placements
in February through April when cattle placements are usually low. The revenues
are recorded as sales of feedlot services and the costs as the cost of feedlot
services. Therefore, a high volume in the fall calf program can reduce the gross
profit percentage on sales of feedlot services. For the three months ended
November 30, 1996, the Company had 3,400 head in its fall calf program as
compared to 1,310 head the previous year. Therefore, the sales and costs for
1996 were about $111,100 more than for 1995, and did cause an decrease in the
gross profit percentage from sales of feedlot services.
Other key factors that affect earnings are the gross profit percentages on
feed and other sales, and on feedlot services. The following is a brief summary
of gross profit and gross profit percentages on feed and other sales:
Increase
Nine Months Ended November 30, 1996 1995 (Decrease)
-------------------------------------------------------------------------
Feed and other sales $2,598,191 $2,337,047 $ 261,144
Cost of feed and other sales 2,412,250 2,111,600 300,650
-------------------------------------------------------------------------
Gross Profit $ 185,941 $ 225,447 $ (39,506)
Gross profit percentage 7.2% 9.6% (2.4%)
Ingredients sold in rations are separately marked up so the gross profit
percentage on feed sales is affected by the mix of ingredients sold as well as
management's discretionary pricing decisions, and feed sold under future
delivery contracts at lower markups. The Company has altered both its pricing
structures and the type of ingredients fed to maintain its competitive edge by
keeping feeding costs down. This has resulted in a minor decrease in the gross
profit percentage, but management does not expect this decrease to have a major
impact on the Company's operations or profitability.
-8-
<PAGE>
The following is a brief summary of the gross profit and gross profit
percentages on sales of feedlot services:
Increase
Three Months Ended November 30, 1996 1995 (Decrease)
-----------------------------------------------------------------------
Sales of feedlot services $ 451,094 $ 333,626 $ 117,468
Cost of feedlot services 391,618 254,557 137,061
-----------------------------------------------------------------------
Gross profit $ 59,476 $ 79,069 $ (19,593)
Gross profit percentage 13.2% 23.7% (10.5%)
Sales of feedlot services consist primarily of yardage (pen rent) charged
to the owners of the cattle on feed and grain processing charged for the
processing of certain feed stuffs before then can be fed to the cattle. Yardage
charges and grain processing for the three months ended November 30, 1996
increased $6,400 or 2.3% from the same period the prior year due to the
increased head number and mix of ingredients as described above.
The cost of feedlot services consists largely of feedlot operating
expenses. Although the cost of feedlot services increased $137,061 for the three
months ended November 30, 1996 compared to the same period the prior year this
increase is reduced by the cost of the "fall calf program" as described above,
of $111,066. This results in a net increase in the cost of feedlot services of
$25,995. Primarily as a result of the increase in average head days labor costs
increased $18,300 and equipment repair costs increased $13,500. The net balance
of the change is due to increases and decreases in various expenses.
The decrease in gross profit percentage of feedlot services is a
combination of the increase in revenues and expenses and the decrease in the
"fall calf program" as noted above.
Other revenues decreased $78,189 primarily as the result of the revenues
generated by the Company's two commodity brokerage subsidiaries, LaSalle
Commodity and Cattle Services Co. and Miller Trading Co. which were sold in May
1996. Commission revenues earned by these two former subsidiaries for the period
ended November 30, 1996 totaled $69,500. This decline in revenues is offset by
correcponding decreases in expenses as described below. Commissions earned by
the Company's remaining subsidiary, Miller Feeders, Inc. decreased about $10,700
for the period ended November 30, 1996 as compared to the same period the prior
year. Although this decrease in revenue is not offset by any decrease in
expenses, management does not believe that it will have any significant impact
on the Company's operations. The balance of the net decrease is the result of
increases and decreases in various accounts.
Interest income increased $13,562 or 78.1% for the three months ended
November 30, 1996 over the same period the prior year. The majority of the
interest income generated is from customers whose feed charges have been
"carried" or financed by the Company. The Company financed fewer customers' feed
charges for the period ended November 30, 1996 than for the same period the
prior year.
Selling, general, and administrative expenses decreased $86,436 for the
three months ended November 30, 1996 over the same period the prior year.
Payroll expenses related to the increase in the commission revenues as described
above decreased $37,734, while telephone and advertising expenses, the two most
prevalent expenses for the commodity brokerage subsidiaries, decreased $12,248.
Legal and accounting fees decreased $25,400 for the period ended November 30,
1996 as compared to the same period the previous year. During the period ended
November 30, 1995, the Company was involved in litigation with the past
president of Genetic Engineering, Inc., which had merged with the Company,
concerning debts allegedly owed to him. A settlement was reached in April 1996.
The balance of the net decrease in selling, general, and administrative expenses
are various increases and decreases in several accounts.
-9-
<PAGE>
Income taxes are directly related to the net earnings before income taxes
and certain assumptions made with the estimations. For the three months ended
November 30, 1996, income taxes decreased $19,801 or 55.9% from the same period
the prior year while pretax profits decreased $52,263 or 52.6%.
Liquidity and Capital Resources
For the three months ended November 30, 1995, the internally-generated
funds from operating activities were $858,812 compared to a funds use of $80,523
for the period ended November 30, 1996, an increase in funds used of $939,335.
Cash received from customers for the period ended November 30, 1996 decreased
$172,353, while cash paid to suppliers and employees increased $724,378, for a
total cash decrease of $896,731. Interest received for the period decreased
$13,562, while interest paid decreased $20,651, for a total cash increase of
$34,213. For the period ended November 30, 1996, income tax payments increased
of $49,693.
For the period ended November 30, 1996, cash used by investing activities
of $7,885 compared cash provided by investing activities for the same period the
prior year of $45,214, a cash decrease of $53,099. Collections on loans from
related parties decreased $50,576. The loan on which the related party had been
making payments was paid in full in March 1996.
The net cash provided by financing activities was $71,046 for the three
months ended November 30, 1996, an increase of $908,764 over the use of $837,718
for the same period the prior year. This change is the result of three main
factors: 1) there was a decrease in borrowings of $382,000 and a decrease in
repayments of $898,000 for the period ended November 30, 1996 as compared to the
prio year, a net cash provided increase of $516,000: 2) cash provided by the net
change in short-term cattle financing is as an increase in cash of $211,603
compared to the cash used the prior year of $135,674; 3) cash provided by the
increase in the cash overdraft of $168,323 for the period ended November 30,
1996 compared to no funds either used or provided by a cash overdraft for the
same period the previous year.
The Company's working capital (current assets minus current liabilities)
increased by $43,579 during the three months ended November 30, 1996 from
$281,511 at August 31, 1996 to $325,090 at November 30, 1996. There were
offsetting increases and decreases to several current assets and current
liabilities as shown on the consolidated balance sheets.
Trade accounts receivable - related parties was reduced by $89,225 for the
three months ended November 30, 1996 due to decreased sales to related parties.
Inventories increased $93,213 due to an increase in the level of feed
ingredient inventories on hand. Due to managements expectations of higher prices
and the availability of an abundance of local corn and storage facilities, the
corn inventory was increased about $100,000 abouve normal levels.
Deposits on feeder cattle decreased $14,520 due to the fact that the cattle
for which the deposits had been made have been delivered to the feedlot, and the
deposits made for them was applied against the purchase price.
Notes payable decreased $160,000 for the three months ended November 30,
1996 primarily due to the increase in the bank overdraft of $168,323. The
$228,940 increase in trade accounts payable is partially the result of the
increase in inventories as described above and the timing of deliveries and
payments of various expense items.
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<PAGE>
The Company has a revolving line of credit of $200,000 from a local bank
that matured December 31, 1996 and bore interest at 2% over the prime rate
(actual rate of 10.25% at November 30, 1996). There was no outstanding balance
at November 30, 1996 which meant that the Company could generate an additional
$200,000 cash if needed under this line of credit. The note is secured by feed
accounts receivable, feed inventories, and equipment. Miller Feeders, Inc. (MFI)
has a $300,000 revolving line of credit at the same local bank for the
procurement of feeder cattle for resale to customers. The line matured on
December 31, 1996 and bore interest at 2% over the prime rate (actual rate of
10.25% at November 30, 1996). There was no outstanding balance at November 30,
1996 which meant that MFI could borrow up to $300,000 to purchase feeder cattle
for resale to customers. The line is secured by feeder cattle inventories and
feeder cattle accounts receivable. Management is confident the bank will renew
both lines of credit under similiar terms.
The Company has signed a contract for the sale of the land held for sale
for $700,000. Closing on this contract is expected to be in February 1997.
The Company had no material commitments for capital expenditures at
November 30, 1996.
Management believes it has adequate financial resources to conduct
operations at present and reasonably anticipated levels.
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<PAGE>
PART II - OTHER INFORMATION
Items 1 through 6 - None
-12-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MILLER DIVERSIFIED CORPORATION
(Registrant)
Date: January 16, 1997 \s\ JAMES E. MILLER
-------------------------------------
James E. Miller
President,Chief Executive Officer
Chief Financial Officer
Date: January 16, 1997 \s\ STEPHEN R. STORY
-------------------------------------
Stephen R. Story
Secretary-Treasurer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-QSB
FOR THE PERIOD ENDED NOVEMBER 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> AUG-31-1997
<PERIOD-END> NOV-30-1996
<CASH> 69,189
<SECURITIES> 0
<RECEIVABLES> 773,939
<ALLOWANCES> 0
<INVENTORY> 376,492
<CURRENT-ASSETS> 1,416,123
<PP&E> 2,508,358
<DEPRECIATION> 533,489
<TOTAL-ASSETS> 3,886,510
<CURRENT-LIABILITIES> 1,091,033
<BONDS> 0
0
0
<COMMON> 636
<OTHER-SE> 1,756,875
<TOTAL-LIABILITY-AND-EQUITY> 3,886,510
<SALES> 2,598,191
<TOTAL-REVENUES> 3,082,005
<CGS> 2,412,250
<TOTAL-COSTS> 2,803,868
<OTHER-EXPENSES> 192,939
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 38,026
<INCOME-PRETAX> 47,172
<INCOME-TAX> 15,648
<INCOME-CONTINUING> 31,524
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 31,524
<EPS-PRIMARY> .005
<EPS-DILUTED> .005
</TABLE>