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 May 31, 2000
Commission File Number 01-19001
MILLER DIVERSIFIED CORPORATION
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(Exact Name of Registrant as Specified in its Charter)
Nevada . 84-1070932 .
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(State or other jurisdiction (I.R.S. Employer Identification
of incorporation or organization Number)
Mailing Address:
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P. O. Box 237
La Salle, Colorado 80645
23360 Weld County Road 35
La Salle, Colorado 80645 .
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(Address of Principal Executive Office)
(970) 284-5556 .
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(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
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Number of shares of Common Stock, par value $.0001, outstanding on August 21,
2000, 6,364,640.
Transitional Small Business Disclosure Format: YES NO X
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<PAGE>
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
Report on Review by Independent Accountants
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To the Stockholders and Directors
Miller Diversified Corporation
We have reviewed the accompanying consolidated balance sheet of Miller
Diversified Corporation and its subsidiary as of May 31, 2000, and the related
consolidated statements of operations for each of the three-month and nine-month
periods ended May 31, 2000 and 1999, and the consolidated statement of cash
flows for the nine-month period ended May 31, 2000. These financial statements
are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the accompanying consolidated interim financial statements for
them to be in conformity with generally accepted accounting principles.
We previously audited in accordance with generally accepted auditing
standards, the consolidated balance sheet as of August 31, 1999, and the related
consolidated statements of operations, of shareowners' equity, and of cash flows
for the year then ended (not presented herein), and in our report dated November
17, 1999 we expressed an unqualified opinion on those consolidated financial
statements. In our opinion, the information set forth in the accompanying
consolidated balance sheet information as of August 31, 1999, is fairly stated
in all material respects in relation to the consolidated balance sheet from
which it has been derived.
ANDERSON & WHITNEY, P.C.
Greeley, Colorado
August 24, 2000
<PAGE>
MILLER DIVERSIFIED CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
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May 31, August 31,
2000 1999
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ASSETS
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Current Assets:
Cash $ 163,442 $ 88,970
Receivables:
Trade accounts 750,730 875,260
Accounts - related parties -- 309,812
Notes - cattle financing 181,293 150,756
Notes - cattle financing -related party 81,865 90,083
Inventories 4,345,263 1,657,045
Prepaid expenses 17,701 21,320
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Total Current Assets 5,539,994 3,193,246
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Property and Equipment:
Feedlot facility under capital lease -
related party 1,497,840 1,497,840
Equipment 142,532 100,336
Equipment under capital leases -
related party 30,649 30,649
Leasehold improvements 169,214 138,297
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1,840,235 1,767,122
Less: Accumulated depreciation
and amortization 732,237 668,751
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Total Property and Equipment 1,107,998 1,098,371
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Other Assets:
Other investments 240,344 322,286
Notes receivable - related parties 535,000 300,000
Deferred income taxes 233,741 165,051
Deposits and other 5,397 5,397
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Total Other Assets 1,014,482 792,734
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TOTAL ASSETS $7,662,474 $5,084,351
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Continued on next page
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MILLER DIVERSIFIED CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS - Continued
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May 31, August 31,
2000 1999
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LIABILITIES
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Current Liabilities:
Bank overdraft $ 207,070 $ 34,501
Notes payable 3,579,297 1,394,760
Trade accounts payable 412,358 522,468
Accounts payable - related party 267,559 --
Accrued expenses 86,618 32,247
Customer advance feed contracts 17,270 93,433
Current portion of note payable-related party 44,436 --
Current portion of capital lease obligations -
related party 22,770 28,496
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Total Current Liabilities 4,637,378 2,105,905
Note payable - related party 223,686 --
Capital Lease Obligations - related party 939,691 955,936
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Total Liabilities 5,800,755 3,061,841
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Commitments
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STOCKHOLDERS' EQUITY
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Preferred Stock -- --
Common Stock, par value $.0001 per share;
25,000,000 shares authorized; 6,364,640
shares issued and outstanding 636 636
Additional Paid-in Capital 1,351,693 1,351,693
Retained Earnings 509,390 670,181
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Total Stockholders' Equity 1,861,719 2,022,510
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TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $7,662,474 $5,084,351
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See Accompanying Notes to Unaudited Consolidated Financial Statements.
<PAGE>
MILLER DIVERSIFIED CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
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Nine Months Ended May 31 2000 1999
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Revenue:
Feed and related sales $ 3,047,729 $ 5,070,556
Fed cattle sales 4,401,929 1,577,505
Feedlot services 1,218,334 1,111,521
Other 20,942 53,316
Interest income 40,711 38,902
Interest income - related party 21,275 13,500
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Total Revenue 8,750,920 7,865,300
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Costs and Expenses:
Cost of:
Feed and related sales 2,615,305 4,366,623
Fed cattle sales 4,364,663 1,498,874
Feedlot services 1,144,229 1,097,403
Selling, general, and administrative 636,226 574,548
Equity in loss of investee 74,962 --
Interest 43,481 37,188
Interest - related parties 99,819 82,727
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Total Costs and Expenses 8,978,685 7,657,363
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Income (Loss) Before Income Taxes (227,765) 207,937
Income Tax Expense (Benefit) (66,974) 75,356
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NET INCOME (LOSS) $ (160,791) $ 132,581
INCOME (LOSS) PER COMMON SHARE $ (.03) $ .02
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Weighted Average Number of Common
Shares Outstanding 6,364,640 6,364,640
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See Accompanying Notes to Unaudited Consolidated Financial Statements.
<PAGE>
MILLER DIVERSIFIED CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
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Three Months Ended May 31 2000 1999
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Revenue:
Feed and related sales $ 1,010,772 $ 1,661,251
Fed cattle sales 2,338,673 276,934
Feedlot services 434,091 476,649
Other 3,315 14,544
Interest income 11,699 18,015
Interest income - related party 8,655 4,500
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Total Revenue 3,807,205 2,451,893
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Costs and Expenses:
Cost of:
Feed and related sales 870,349 1,407,264
Fed cattle sales 2,330,922 257,420
Feedlot services 357,820 425,941
Selling, general, and administrative 227,205 208,793
Equity in loss of investee 37,422 --
Interest 13,724 4,102
Interest - related parties 33,735 27,392
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Total Costs and Expenses 3,871,177 2,330,912
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Loss Before Income Taxes (63,972) 120,981
Income Tax Expense (Benefit) (22,587) 46,685
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NET LOSS $ (41,385) $ 74,296
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LOSS PER COMMON SHARE $ (.01) $ .01
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Weighted Average Number of Common
Shares Outstanding 6,364,640 6,364,640
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See Accompanying Notes to Unaudited Consolidated Financial Statements.
<PAGE>
MILLER DIVERSIFIED CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
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Nine Months Ended May 31 2000 1999
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Cash Flows from Operating Activities:
Cash received from customers $ 8,737,302 $ 7,689,070
Cash paid to suppliers and employees (10,763,160) (7,734,351)
Interest received 61,986 52,402
Interest paid (239,745) (104,387)
Income taxes paid (1,716) --
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Net Cash Utilized by Operating Activities (2,205,333) (97,266)
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Cash Flows from Investing Activities:
Acquisition of property and equipment (73,113) (22,882)
Acquisition of other investments -- (190,069)
Distribution received from other investment 6,980 --
Loans to related party (235,000) --
Loans for cattle financing (610,606) (440,461)
Collections from cattle financing 588,287 --
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Net Cash Utilized by Investing Activities (323,452) (653,413)
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Cash Flows from Financing Activities:
Proceeds from :
Short-term notes payable 11,433,574 4,292,206
Long-term note payable - related party 300,000 --
Principal payments on:
Short-term notes payable (9,249,037) (3,568,057)
Long-term note payable - related party (31,878) --
Capital lease obligations - related party (21,971) (20,040)
Increase in cash overdraft 172,569 40,089
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Net Cash Provided by Financing Activities 2,603,257 744,198
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Net Increase (Decrease) in Cash 74,472 (6,481)
Cash, Beginning of Year 88,970 63,656
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Cash, End of Period $ 163,442 $ 57,175
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Continued on next page.
<PAGE>
MILLER DIVERSIFIED CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS -Continued
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Nine Months Ended May 31 2000 1999
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Reconciliation of Net Income (Loss) to Net
Cash Provided by Operating Activities:
Net income (Loss) $ (160,791) $ 132,581
Adjustments:
Depreciation and amortization 63,486 64,174
Equity in loss of investee 74,962 --
Deferred income taxes (68,690) --
Changes in assets and liabilities:
(Increase) decrease in:
Trade accounts receivable 124,530 (257,403)
Accounts receivable - related party 309,812 (167,005)
Inventories (2,688,218) (64,461)
Prepaid expenses 3,919 (4,231)
Deposits and other -- 14,385
Increase (decrease) in:
Trade accounts payable and accrued
expenses (55,739) (26,238)
Accounts payable - related party 267,559 --
Accrued income taxes payable -- 75,356
Customer advance feed contracts (76,163) 133,576
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Net Cash Provided (Utilized) by
Operating Activities $(2,205,333) $ (97,267)
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See Accompanying Notes to Unaudited Consolidated Financial Statements.
<PAGE>
MILLER DIVERSIFIED CORPORATION AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
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The consolidated balance sheets as of May 31, 2000 and August 31, 1999, the
consolidated statements of earnings for the three months and nine months ended
May 31, 2000 and 1999 and the consolidated statements of cash flows for the nine
months ended May 31, 2000 and 1999 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 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 nine month period ended May 31,
2000 are not necessarily indicative of the results to be expected for the year.
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<PAGE>
Item 2 - Management's Discussion and Analysis of Financial Condition
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and Results of Operations
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Results of Operations
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During the fall of 1999, the Company implemented a policy of retaining ownership
of a majority of the cattle in the Company's feedlot. This is a change from the
primary focus being on custom feeding of customers' cattle and feeding
company-owned cattle to slaughter on an as-needed basis. The change is an effort
to (1) maintain high numbers in the feedlot, (2) lessen the effect of major
customers, and (3) benefit from what is currently perceived as a good future for
the cattle market. It is anticipated that most, if not all of the Company's
inventory of cattle fed to slaughter will be price protected or hedged to
protect the Company on the down side of market fluctuations.
Quarter Ended May 31, 2000:
Total revenue for the quarter ended May 31, 2000 increased $1,355,000 or 55%
over the quarter ended May 31, 1999, which reflects the change to feeding
company cattle. Fed cattle sales increased $2,062,000 and represented 61% of
revenue for the quarter ended May 31, 2000 compared to 11% for the quarter ended
May 31, 1999. The increase is partially offset by a $660,000 decrease in feed
and related sales, which is also due to the shift from custom feeding to feeding
company-owned cattle to slaughter.
Gross profit was $225,000 for the quarter ended May 31, 2000, a decrease of
$100,000 from the corresponding quarter in 1999. The gross profit percentages
were 6% and 13.5%, respectively, for the quarters ended May 31, 2000 and 1999.
The decrease in gross profit percentages is due to the change in composition of
gross sales and the relative gross profit percentages for the sources of
revenue. The gross profit percentages for fed cattle sales were .3% and 7%,
respectively, for the quarters ended May 31, 2000 and 1999, the decrease being a
result of the higher cost of feeder cattle. Feed and related sales maintained a
14% gross profit percentage, but generated $113,000 less in gross profits due to
the lower volume.
Selling, general, and administrative expenses increased $18,000 to $227,000 for
the quarter ended May 31, 2000 compared to the corresponding quarter of 1999.
The increase is attributed to $31,000 paid to a related party for losses
incurred from feeding cattle in the Company's feedlot.
The Company's share of the loss from a water filtering and dispensing company
was $37,000 for the quarter ended May 31, 2000. This 50% investee is a start up
company and profitable operations are not anticipated for another eighteen
months.
Interest expense increased $16,000 for the quarter ended May 31, 2000 over the
corresponding quarter a year earlier as a result of increased borrowing.
<PAGE>
The net loss of $41,000 for the quarter ended May 31, 2000 contrasts the net
income of $74,000 for the quarter ended May 31, 1999 and is a result of the
items mentioned above.
Nine Months Ended May 31, 2000:
Total revenue for the nine months ended May 31, 2000 increased $886,000 or 11%
over the nine months ended May 31, 1999. Fed cattle sales increased $2,824,000
and represented 50% of total revenue for the nine months ended May 31, 2000
compared to 20% of total revenue for the nine months ended May 31, 1999. The
increase is partially offset by a $2,023,000 decrease in feed and related sales.
These changes reflect the shift from custom feeding to feeding company-owned
cattle to slaughter.
Gross profit was $544,000 for the nine months ended May 31, 2000, a decrease of
$254,000 from the corresponding quarter in 1999. The gross profit percentages
were 6% and 10%, respectively, for the nine-month periods ended May 31, 2000 and
1999. The decrease in gross profit percentages is due to the change in
composition of gross sales and the relative gross profit percentages for the
sources of revenue. The gross profit percentages for fed cattle sales were .8%
and 5%, respectively, for the nine months ended May 31, 2000 and 1999, the
decrease being a result of the higher cost of feeder cattle. Feed and related
sales maintained a 14% gross profit percentage, but generated $271,000 less in
gross profits due to the lower volume.
Selling, general, and administrative expenses increased $61,000 to $636,000 for
the nine months ended May 31, 2000 compared to the corresponding period of 1999.
The increase is primarily attributed to a $47,000 increase for managerial staff
to co-ordinate and monitor the program of feeding cattle to slaughter for the
Company's account and $31,000 paid to a related party for losses incurred from
feeding cattle in the Company's feedlot.
The Company's share of the loss from a water filtering and dispensing company
was $75,000 for the nine months ended May 31, 2000. This 50% investee is a start
up company and profitable operations are not anticipated for another eighteen
months.
Interest expense increased $23,000 for the nine months ended May 31, 2000 over
the corresponding period a year earlier as a result of increased borrowing.
Interest of $145,000 incurred on borrowings to finance Company-owned cattle has
bee included as a cost of cattle inventory during the nine months ended May 31,
2000.
The net loss of $161,000 for the nine months ended May 31, 2000 contrasts the
net income of $133,000 for the quarter ended May 31, 1999 and is a result of the
items mentioned above.
<PAGE>
Liquidity and Capital Resources
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For the nine months ended May 31, 2000 operating activities utilized
$2,205,000. Much of this is from a $2,888,000 increase in Company-owned cattle
inventory, financed primarily from short-term notes payable. Working capital at
May 31, 2000 was $903,000.
Investing activities used $323,000, primarily for equipment and facility
improvements totaling $73,000 and a $235,000 loan to the water filtering and
dispensing company in which the Company has a 50% interest. The loan is
scheduled for repayment in three years. Borrowing $300,000 from a related-party
financing company provided the funds for this loan.
Cash flow provided by financing activities amounted to $2,603,000 for the nine
months ended May 31, 2000. Of this amount, $2,185,000 was provided from
short-term notes used to finance the inventory of Company-owned cattle on feed.
The Company believes that internally generated funds and the available borrowing
under its existing credit facilities will provide sufficient liquidity and
enable it to meet its current and foreseeable working capital requirements. The
Company's $300,000 operating line of credit had an outstanding balance of
$165,000 at May 31, 2000 and the $4 million revolving line of credit for
purchase and feed cattle to slaughter had an outstanding balance at May 31, 2000
of $3,119,000. At May 31, 2000, there was also $788,000 available on the line of
credit for financing qualified customers' cattle feeding programs.
The Company had no material commitments for capital expenditures at May 31,
2000.
New Accounting Pronouncements
The effective date of SFAS No. 133, Accounting for Derivative Instruments and
Hedging Activities, has been deferred by SFAS No. 137, and will now be
implemented for the first quarter of fiscal year 2001. Management is presently
evaluating the impact SFAS No. 133 will have on the Company's financial
statements and related disclosures.
<PAGE>
PART II OTHER INFORMATION
Items 1 through 5 None.
Item 6 (b)- Exhibits and Reports on Form 8-K On February 3, 1999, the Company
filed an amended Form 8-K which discloses that the Company has entered into an
amended exchange agreement with Miller Feed Lots, Inc. (MFL) pursuant to which
the Company will issue 7,000,000 shares of its common stock to acquire all of
the issued and outstanding common shares of MFL. The proposed transaction with
MFL is subject to shareholder approval.
<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: August 29, 2000 By: /s/ JAMES E MILLER
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James E. Miller
President, Chief Executive
Officer, Chief Financial
Officer
Date: August 29, 2000 By: /s/ STEPHEN R. STORY
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Stephen R. Story
Secretary-Treasurer
