SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 31, 2010
Commission File No. 1-5926
| MILLER INDUSTRIES, INC. |
(Exact Name of Registrant as Specified in its
Charter) |
| Florida | | 59-0996356 |
(State or Other Jurisdiction of Incorporation or Organization) | | (I.R.S. Employer Identification No.) |
16295 N.W. 13th Avenue, Miami, Florida 33169 |
| (Address of Principal Executive Offices |
| |
| (305) 621-0501 |
| (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 ¨ No þ
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer. or a “smaller reporting issuer.” See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ¨ Accelerated filer ¨ Non-accelerated filer ¨ Smaller reporting company þ
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ¨ No þ
The number of shares outstanding of each of the issuer’s classes of common stock, par value $.05 per share, as of July 31, 2010 is 2,982,662 shares.
MILLER INDUSTRIES, INC.
FORM 10-Q
July 31, 2010
INDEX
| | | | Page No. |
| | | | |
| PART I: | FINANCIAL INFORMATION | | |
| | | | |
| Item 1. | Financial Statements | | |
| | | | |
| | Balance Sheet as of July 31, 2010 | | | 3 |
| | | | | |
| | Balance Sheet of April 30, 2010 | | | 4 |
| | | | | |
| | Statement of Operations - Three Months Ended July 31, 2010 and 2009 | | | 5 |
| | | | | |
| | Statement of Cash Flows - Three Months Ended July 31, 2010 and 2009 | | | 6 |
| | | | | |
| | Notes to Financial Statements | | | 8 |
| | | | | |
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | | | |
| | | | | |
| Item 3. | Quantitative and Qualitative Disclosure about Market Risk | | | 9 |
| | | | | |
| Item 4. | Controls and Procedures | | | 10 |
| | | | | |
| PART II: OTHER INFORMATION | | | |
| | | | |
| Items 1 to 6 | | | 11 |
| | | | |
| Signatures | | | 11 |
MILLER INDUSTRIES, INC.
BALANCE SHEET
JULY 31, 2010
(UNAUDITED)
| ASSETS | | | | | | |
Investment Property: | | | | | | |
| Land | | $ | 161,443 | | | | |
| Building and Improvements | | | 1,049,908 | | | | |
| Machinery and Equipment | | | 11,106 | | | | |
| Furniture and Fixtures | | | 10,251 | | | | |
| Total Cost | | | | | | $ | 1,232,708 | |
| Less: Accumulated Depreciation | | | | | | | 880,560 | |
| Net Book Value | | | | | | $ | 352,148 | |
| | | | | | | | | |
Other Assets: | | | | | | | | |
| Cash and Cash Equivalents | | $ | 1,538,718 | | | | | |
| Accounts Receivable (less Allowance for Doubtful Accounts of $ 6,942) | | | - | | | | | |
| Deferred Tax Asset | | | 107,050 | | | | | |
| Prepaid Expenses and Other Assets | | | 8,012 | | | | | |
| Deferred Lease Incentive (Net of Accumulated Amortization - $ 32,131) | | | 19,369 | | | | | |
| Loan Costs, Less Accumulated Amortization of $ 735 | | | 10,000 | | | | | |
| Total Other Assets | | | | | | | 1,683,149 | |
| TOTAL ASSETS | | | | | | $ | 2,035,297 | |
| | | | | | | | | |
| LIABILITIES AND SHAREHOLDERS’ EQUITY | | | | | | | | |
Liabilities: | | | | | | | | |
| Mortgages and Notes Payable | | $ | 1,327,254 | | | | | |
| Accounts Payable and Accrued Expenses | | | 400,902 | | | | | |
| Tenant Security Deposits and Advanced Rent | | | 70,423 | | | | | |
| Total Liabilities | | | | | | $ | 1,798,579 | |
| | | | | | | | | |
Shareholders’ Equity: | | | | | | | | |
| Common Stock, $.05 par, 5,000,000 shares authorized,2,982,662 shares issued and outstanding | | $ | 149,133 | | | | | |
| Paid-in Capital | | | 1,191,929 | | | | | |
| Deficit | | | (1,104,344 | ) | | | | |
| Total Shareholders’Equity | | | | | | | 236,718 | |
| TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | | | | | | $ | 2,035,297 | |
See Accompanying Notes to Financial Statements.
MILLER INDUSTRIES, INC.
BALANCE SHEET
APRIL 30, 2010
| ASSETS | | | |
| | | | |
Investment Property: | | | |
| Land | | $ | 161,443 | |
| Building and Improvements | | | 1,049,908 | |
| Machinery and Equipment | | | 11,106 | |
| Furniture and Fixtures | | | 10,251 | |
| Total Cost | | $ | 1,232,708 | |
| Less: Accumulated Depreciation | | | 876,541 | |
| Net Book Value | | $ | 356,167 | |
| | | | | |
Other Assets: | | | | |
| Cash | | $ | 1,512,525 | |
| Accounts Receivable (Less Allowance for Doubtful Accounts of $ 6,942) | | | - | |
| Prepaid Expenses and Other Assets | | | 14,854 | |
| Deferred Lease Incentive (Net of Accumulated Amortization - $31,020) | | | 20,768 | |
| Loan Costs, Less Accumulated Amortization of $ 447 | | | 10,288 | |
| Deferred Tax Assets | | | 114,500 | |
| Total Other Assets | | $ | 1,672,935 | |
| TOTAL ASSETS | | $ | 2,029,102 | |
| | | | | |
| LIABILITIES AND SHAREHOLDERS’ EQUITY | | | | |
Liabilities: | | | | |
| Mortgage and Notes Payable | | $ | 1,338,399 | |
| Accounts Payable and Accrued Expenses | | | 403,545 | |
| Tenants’ and Customers’ Deposits | | | 70,423 | |
| | | | | |
| Total Liabilities | | $ | 1,812,367 | |
| | | | | |
Shareholders’ Deficiency: | | | | |
| Common Stock, $.05 par, 5,000,000 shares authorized,2,982,662 shares issued and outstanding | | $ | 149,133 | |
| Paid-in Capital | | | 1,191,929 | |
| Deficit | | | (1,124,327 | ) |
| Total Shareholders’ Equity | | $ | 216,735 | |
| TOTAL LIABILITIES AND | | | | |
| SHAREHOLDERS’ EQUITY | | $ | 2,029,102 | |
See Accompanying Notes to Financial Statements
MILLER INDUSTRIES, INC.
STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED JULY 31, 2010 AND 2009
(UNAUDITED)
| | | Three Months Ended | |
| | | 7/31/10 | | | 7/31/09 | |
| | | | | | | |
| Revenues: | | | | | | |
| Rental Income | | $ | 96,471 | | | $ | 92,618 | |
| Hardware Sales (Net) | | | 134 | | | | 83 | |
| Other Income | | | 1,555 | | | | 1,746 | |
| | | | | | | | | |
| Total Revenue | | $ | 98,160 | | | $ | 94,447 | |
Expenses: | | | | | | | | |
| Rental Expense (Except Interest) | | $ | 52,817 | | | $ | 47,519 | |
| Administrative | | | 10,372 | | | | 11,226 | |
| Interest | | | 7,538 | | | | 11,264 | |
| Total Expenses | | $ | 70,727 | | | $ | 70,009 | |
| Income Before Tax Provision | | $ | 27,433 | | | $ | 24,438 | |
| | | | | | | | | |
Provision for Income Tax: | | | | | | | | |
| Federal Income Tax | | $ | 6,000 | | | $ | 5,000 | |
| State Income Tax | | | 1,450 | | | | 1,500 | |
| Tax Benefits of Net Operating Loss | | | | | | | | |
| Carryforward and change in Valuation Allowace | | | - | | | | (13,500 | )- |
| Total Provision (Credit) for Income Tax | | | | | | | | |
| (Net of Tax Benefits and Change in Valuation Allowance) | | $ | 7,450 | | | $ | (7,000 | ) |
| | | | | | | | | |
| Net Income | | $ | 19,983 | | | $ | 31,438 | |
| | | | | | | | | |
| Income per Common Share | | $ | .01 | | | $ | .01 | |
| | | | | | | | | |
| Average Shares of Common Stock Outstanding | | | 2,982,662 | | | | 2,982,662 | |
See Accompanying Notes to Financial Statements.
MILLER INDUSTRIES, INC.
STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED JULY 31, 2010 AND 2009
(UNAUDITED)
| | | Three Months Ended | |
| | | 7/31/10 | | | 7/31/09 | |
| | | | | | | |
Cash Flows From Operating Activities: | | | | | | |
| | | | | | | |
| Net Income | | $ | 19,983 | | | $ | 31,438 | |
| Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: | | | | | | | | |
| Depreciation | | | 4,019 | | | | 4,232 | |
| Amortization | | | 1,686 | | | | 3,576 | |
| Deferred Tax Asset Valuation Adjustment | | | 7,450 | | | | (7,000 | ) |
| Changes in Operating Assets and Liabilities | | | 4,200 | | | | (23,553 | ) |
| Net Cash Provided by Operating Activities | | $ | 37,338 | | | $ | 8,693 | |
| | | | | | | | | |
Cash Flows From Investing Activities: | | | | | | | | |
| Acquisition of Property and Equipment | | $ | - | | | $ | - | |
| Net Cash (Used in) Investing Activities | | $ | - | | | $ | - | |
| | | | | | | | | |
Cash Flows From Financing Activities: | | | | | | | | |
| Principal Payments Under Borrowings | | $ | (11,145 | ) | | $ | (20,874 | ) |
| Addition to Debt | | | - | | | | 19,956 | |
| | | | | | | | | |
| Net Cash Provided by (Used in) Financing Activities | | $ | (11,145 | ) | | $ | (918 | ) |
| | | | | | | | | |
| Net Increase in Cash and Cash Equivalents | | $ | 26,193 | | | $ | 7,775 | |
| | | | | | | | | |
| Cash at the Beginning of Year | | | 1,512,525 | | | | 1,477,521 | |
| Cash at the End of Year | | $ | 1,538,718 | | | $ | 1,485,296 | |
| | | | | | | | | |
| Additional Cash Flow Information: | | | | | | | | |
| Cash Paid for Interest | | $ | 9,277 | | | $ | 13,889 | |
| Cash Paid for Income Tax | | $ | - | | | $ | - | |
MILLER INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
JULY 31, 2010
(UNAUDITED)
NOTE A - BASIS OF PRESENTATION:
The accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three month period ending July 31, 2010 are not necessarily indicative of results that may be expected for the year ended April 30, 2011.
For further information, refer to the financial statements and footnotes thereto of the Company as of April 30, 2010 and for the year ended April 30, 2010.
NOTE B – Earnings Per Share:
In accordance with Financial Accounting Standards No. 128, basic earnings per share is computed based on the weighted-average number of common shares outstanding during each year and excludes any potential dilution. Diluted earning per share is based on the weighted-average number of common shares outstanding as well as potentially dilutive common shares, which in the Company’s case include shares issuable under the stock option agreement. The Company’s outstanding options are not included in the computation of basic or diluted earnings per share since they are anti-dilutive. At July 31, 2010 potentially dilutive securities consist of an option that could be converted into 2,017,338 common shares.
NOTE C – Use of Estimates –
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes Actual results could differ from those estimates. The most significant estimates included in the preparation of the financial statements are related to income taxes, asset lives, accruals and valuation allowances.
NOTE D – Stock Option Agreement:
On June 30, 2005, the Company issued stock options to Angelo Napolitano in exchange for the benefits he has provided to the Company through his personal guarantee of the Company’s bank loan, and the services rendered by Mr. Napolitano in his capacity as the Company’s sole officer and director. The options vest 100% at the grant date and expire in 10 years from the grant date. The Company granted options to Mr. Napolitano to purchase up to 2,017,338 shares of the Company’s common stock during the term of the options at a price equal to $0.18 per share (Exercise Price).
Miller Industries, Inc.
Notes to Financial Statements
The average fair values of the options granted during fiscal 2006 were estimated at $0.0324, using the Black-Scholes options-pricing model, which included the following assumptions:
| Stock Price | | $ | 0.05 | |
| Strike Price | | | 0.18 | |
| Expected Life | | 9.17 | Years |
| Risk-Free Interest Rate | | | 3.80 | % |
| Volatility | | | 79.23 | % |
Approximately $65,400 was recorded as compensation expense for fiscal 2006 related to this grant.
On February 22, 2010 the Company modified the option previously granted to Angelo Napolitano that entitle him to acquire 2,017,338 shares of the Company’s common stock. Under the terms of the modification, the exercise price for the options was reduced from $0.18 per share to $0.06 per share. The Company reduced the exercise price of the option in consideration of Mr. Napolitano’s guarantee of the Company’s bank loan and his services as the Company’s president. The average fair values of the options modified during fiscal 2010 were estimated at $.0130 using the Black-Scholes options-pricing model, which included the following assumptions
| | | 2010 | |
| Stock Price | | $ | .04 | |
| Strike Price | | $ | .06 | |
| Expected Life | | 5.17 | Years |
| Risk-Free Interest Rate | | | 3.78 | % |
| Volatility | | | 44.6 | % |
The approximate compensation value of the modified option at February 22, 2010 is $26,000 which is less than the $65,000 compensation cost of the original option. Under FASB Statement 123R, the accounting for a modification, total compensation cost for the award should generally not be less than the awards original fair value. Therefore, if the fair value of the modified award is less than the fair value of the original award on the modification date, the grant date value is not reduced.
A summary of the status of the Company’s stock option agreement as of April 30, 2010 and 2009, and changes during the years then ended were as follows:
Miller Industries, Inc.
Notes to Financial Statements
| | | 2010 | | | 2009 | |
| | | Shares | | | Exercise | | | Shares | | | Excise | |
| | | Subject | | | Price Per | | | Subject | | | Price Per | |
| | | To Option | | | Share | | | To Option | | | Share | |
| Outstanding, May 1 | | | 2,017,338 | | | $ | .18 | | | | 2,017,338 | | | $ | .18 | |
| Granted | | | - | | | | - | | | | - | | | | - | |
| Modification | | | (.12 | ) | | | - | | | | - | | | | | |
| Exercised | | | - | | | | - | | | | - | | | | - | |
| Cancelled | | | - | | | | - | | | | - | | | | - | |
| Outstanding/Exercisable, April 30 | | | 2,017,338 | | | $ | .06 | | | | 2,017,338 | | | $ | .18 | |
The following summarized information concerning currently outstanding and exercisable options at July 31, 2010.
| | | | Options Outstanding/Exercisable | |
| Exercise Price | | | Number Outstanding at 7/31/10 | | | Average Remaining Life | |
| | | | | | | | |
| $ | 0.06 | | | | 2,017,338 | | | | 4.9 | |
Miller Industries, Inc.
Notes to Financial Statements
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations (First Quarter of 2010 Fiscal Year compared to First Quarter of 2011 Fiscal Year)
Rental Income. The Company’s results of operations are primarily dependent upon the rental income which it receives from leasing space in its building. Rental income is a function of the percentage of the building which is occupied and the level of rental rates. Rental income during the first quarter of the 2010 fiscal year was $93,000, compared with $96,000 in the first quarter of 2011.
Hardware Sales (Net). The Company receives revenue from the sale of replacement parts for the sliding glass doors and windows formerly manufactured by the Company. The Company utilizes its existing inventory of these parts to support these sales. Net sales were immaterial in 2010 and in 2011.
Other Income. The Company generated other income of $2,000 in the first quarter of fiscal year 2010 and 2011. Other income in these quarters consisted of interest income and miscellaneous income.
Rental Expense (Excluding Interest). The Company incurs rental expense in connection with the leasing of its building. These expenses consist of management fees, insurance, real estate taxes, depreciation and amortization, insurance, maintenance and repairs, utility costs and outside services. Rental expenses were $48,000 in the first quarter of fiscal year 2010 and $53,000 in the first quarter of 2010. The increase was primarily due to higher insurance premiums and management fees.
Administrative Expenses. The Company’s administrative expenses were $11,000 in the first quarter of fiscal years 2010 and $10,000 in 2010.
Interest Expense. The Company pays interest on the mortgage loan on its building. Interest expense on the loan was $14,000 in the first quarter of fiscal year 2010 compared to $9,000 in 2010. The decrease in the amount of interest was attributable to an decrease in the interest rate on the Company’s base loan.
Provision for Income Taxes. The Company had a tax provision of $7,000 in the first quarter of fiscal 2010 and $8,000 in 2011. The provision in 2010 was more than offset by the Company’s net operation loss carry forward.
Net Income. As a result of the foregoing factors, the Company had net income of $31,000 in the first quarter of fiscal year 2010, compared to $20,000 in the first quarter of 2011.
Miller Industries, Inc.
Notes to Financial Statements
Liquidity and Capital Resources
The Company’s cash increased by $7,000 during the first three months of the 2010 fiscal year compared to an increase of $26,000 during the first three months of fiscal year 2011. The increase in cash in 2011 was due to cash flow from operations. As of July 31, 2010, the Company’s cash position was approximately $1,539,000.
Current Operations
The Company operates as a real estate investment and management company. The Company is currently seeking to obtain additional commercial tenants for its existing building.
The Company’s principal operating expenses consist of management and professional fees associated with the administration of the Company, interest expense on the Company’s new mortgage loan, real estate taxes and insurance.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
We are a smaller reporting issuer as defined in Item 10 of Regulation S-K and are not required to report the quantitative and qualitative measures of market risk specified in Item 305 of Regulation S-K.
ITEM 4. CONTROLS AND PROCEDURES
In connection with the filing of this Form 10-Q, the Company’s Chief Executive Officer and Chief Financial Officer evaluated the effectiveness of the Company’s disclosure controls and procedures as of July 31, 2010. The Company’s Chief Executive Officer and Chief Executive Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of July 31, 2010.
There were no changes in the Company’s internal controls over financial reporting that materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting during the fiscal quarter ended July 31, 2010.
Miller Industries, Inc.
Notes to Financial Statements
PART II. OTHER INFORMATION
| ITEM 6. | EXHIBITS AND REPORTS ON FORM 8-K |
| | Exhibit No. | | Description |
| | | | |
| | (31.1) | | Certification of Chief Executive Officer pursuant to Rule 13a-14(a). |
| | | | |
| | (31.2) | | Certification of Chief Financial Officer pursuant to Rule 13a-14(a). |
| | | | |
| | (32.1) | | Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
Not applicable.
SIGNATURE
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 INDUSTRIES, INC. |
| | | (Registrant) |
| | | |
| Dated: January 10, 2011 | | By: | /s/ Angelo Napolitano |
| | | | Angelo Napolitano |
| | | | Chairman of the Board of Directors |
| | | | Chief Executive Officer |
| | | | Principal Financial Officer |
