UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended July 1, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from ________ to ________.
Commission file No. 0-14651
MILLER BUILDING SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
Delaware 36-3228778
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
58120 County Road 3 South
Elkhart, Indiana 46517
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (219) 295-1214
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, Par Value $.01 Per Share
(Title of class)
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. (x) Yes ( ) No
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. (x)
Aggregate market value of voting stock held by nonaffiliates of the registrant,
based on the closing price of the stock as reported by the National Association
of Securities Dealers' Automated Quotation Systems, on August 31, 1995:
$8,081,136.
As of August 31, 1995, the Registrant had 3,100,963 shares of Common Stock
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
The following are incorporated into this Annual Report on Form 10-K:
o Portions of Registrant's Proxy Statement for its 1995 Annual Meeting of
Stockholders (the "Proxy Statement"), which will be filed with the
Securities and Exchange Commission no later than 120 days after the end of
the Registrant's fiscal year, are incorporated into Part III.
PART I
ITEM 1. BUSINESS
The Company
Miller Building Systems, Inc. ("Miller") is the parent of Miller
Structures, Inc. ("Structures") and Miller Telecom Services, Inc. ("Telecom").
All operations of Miller are conducted through its two wholly-owned subsidiaries
which design, manufacture, and market factory-built buildings. Miller ceased all
operations at PME Pacific Systems, Inc. ("PME") after its final contract was
completed in early 1994.
Miller originally was organized as an Indiana corporation in November 1982
under the name of "Graylyon Corp." and then merged, effective April 1983, into
a Delaware corporation named "Gray Lyon Company". In November 1986, the Company
amended its Certificate of Incorporation to change its name to "Modular
Technology, Inc." In November 1988, the Company again amended its Certificate
of Incorporation to change its name to "Miller Building Systems, Inc." All
references to Miller herein refer to Miller Building Systems, Inc., a Delaware
corporation, and its predecessor Indiana corporation.
Miller maintains its Executive Offices at 58120 County Road 3 South,
Elkhart, Indiana 46517; telephone number (219) 295-1214. The Executive Office
is Miller's principal operating office from which it manages and coordinates the
activities of Structures and Telecom.
STRUCTURES
Structures is headquartered in Elkhart, Indiana and operates all
administrative, sales and production from that location. The Structures office
controls manufacturing facilities in Bennington, Vermont, Elkhart, Indiana,
Leola, Pennsylvania, Sioux Falls, South Dakota and Patterson, California. A
Residential division, which operated as Miller Residential ("Residential") a
division of Structures was closed during the third quarter of fiscal 1995.
Miller has discontinued all operations of the Residential division and the plant
was closed with all substantially all assets disposed of by the end of fiscal
1995.
Structures - Modular and Mobile Office Buildings
Products
The buildings produced by Structures are generally movable or relocatable
and are composed of either single or multiple units often referred to as modular
units. Individual units are either 8, 10, 12, or 14 feet in width and up to 80
feet in length. These individual units can be combined into buildings varying
in size from several hundred to several thousand square feet. Although most
buildings are one story, they can be built to be two or three stories high
depending on user requirements.
The factory-built buildings produced by Structures meet the specialized
needs of users, which include architectural and engineering firms, churches,
construction companies, correctional or prison authorities, educational and
financial institutions, libraries, medical and dental facilities, military
installations, post offices, real estate firms, restaurants and retail
businesses. The cost of the building varies depending on its application or its
specifications and may, in certain instances, be less expensive than comparable
conventional site-built buildings. Structures' cost portion of a completed
building does not include transportation, site preparation, foundation and other
installation work which is the responsibility of the user and is often provided
and charged to the user by Structures' customer. In addition to all the
aforementioned costs, the price charged to the user by Structures' customer will
reflect a "mark-up" which is determined by Structures' customer and not by
Structures.
Buildings or units (modules) of buildings produced by Structures are
usually built on a steel frame. Attached to the frame, customarily, is a chassis
with wheels and axles. This chassis will either become a permanent portion of
the building, permitting it to be easily transported to another site, or be
removed at the building installation site. The chassis facilitates the
transportation of the individual units over the highways from Structures'
factory to either its customer's facilities or the user's installation site.
The floor, roof and walls of any building are constructed of conventional
building materials, primarily wood or comparable materials. The building or
module is fabricated in a process similar to conventional sitebuilt construction
with appropriate variations. Structures also produces buildings utilizing non-
combustible materials. For these types of buildings, the floor is made of
concrete. The wall studs and roof frame are made of steel and other components.
The buildings utilize various other non-combustible materials.
Interiors and exteriors of the buildings are completed to customer
specifications. Finished buildings or modules include required electrical
wiring, plumbing, heating and air conditioning, and floor coverings. Exteriors
are constructed of wood, aluminum or other specified exterior materials such as
brick facing, etc.
Buildings produced by Structures are designed and engineered before
production. Detailed plans and other documentation prepared by Structures are
submitted to its customers and users as well as to various regulatory agencies
for approval prior to commencement of construction. Structures maintains its own
engineering and design staff which is capable of handling virtually all types of
building orders. On occasion, however, Structures may retain the services of
outside engineering and design firms.
Marketing
Structures does not sell its buildings directly to ultimate users of the
buildings. Structures' customers do not represent Structures on an exclusive
basis. Structures competes for customer orders based on price, quality, timely
delivery, engineering capability and general reputation for reliability.
Structures sells its products to approximately 75 customers. Customers may be
national, regional or local in nature. Customers will sell, rent or lease the
buildings purchased from Structures to the users. Structures believes a
significant portion of its product is either rented or leased by the users from
its customers.
Structures' sales staff calls on prospective customers in addition to
maintaining continuing contact with existing customers. The sales staff assists
its customers and their prospective customers in developing building
specifications in order to facilitate the preparation by Structures of a
quotation. The sales staff, in conjunction with the engineering staff,
maintains ongoing contact with the customer base.
Certain customers maintain rental fleets of standardized units such as
construction-site buildings or buildings for general office space requirements.
These buildings are generally rented or leased for a specific requirement, and
when the requirement has been satisfied, the buildings are returned to
Structures' customer for re-renting or leasing to other users. Other buildings
are produced to a specific user's requirements and Structures' customer will
either lease it to its customer or sell it outright. As a result of
transportation costs, the effective distribution range of buildings produced by
Structures is limited to an area within 400-600 miles from each manufacturing
facility.
Structures believes that the various leasing plans offered to the users by
its customers are a significant benefit of factory-built buildings over similar
conventional site-built buildings. Other significant benefits to the customer
are the speed with which a factory-built building can be made available for use
compared to on-site construction and the ability to relocate the building to
another site if the customer's utilization requirements change.
Certain companies within the industry served by Structures, including some
who are customers of Structures, have their own manufacturing facilities to
provide all or a portion of their building requirements. Structures does not
believe there is any specific identifiable industry trend or direction of its
customers having their own captive manufacturing capabilities. Certain customers
have acquired or started their own manufacturing facilities and other customers
have closed or reduced their manufacturing capability. Structures believes that
its customers are best served by having the flexibility of outside product
sources and avoiding the possible inefficiencies of captive manufacturing
facilities.
Structures is highly dependent on a limited number of customers, the loss
of which could have a material adverse effect on the operations of Miller. For
the fiscal years ended July 1, 1995 and July 2, 1994, the following customer
represented 10% or more of net sales of Miller: Transport International Pool,
Inc. d/b/a GE Capital Modular Space, a division of General Electric Capital
Corporation, represented 23% and 21% respectively.
Competition
Competition in the factory-built building industry is intense and
Structures competes with a number of entities, some of which may have greater
financial resources than Miller and Structures. To the extent that factory-built
buildings become more widely accepted as an alternative to conventional on-site
construction, competition from local contractors and manufacturers of other pre-
engineered building systems may increase. In addition to competition from firms
designing and constructing on-site buildings, Structures competes with numerous
factory-built building manufacturers that operate in particular geographical
regions.
Structures competes for orders from its customers primarily on the basis
of price, quality, timely delivery, engineering capability and reliability.
Structures believes that the principal basis on which it competes with on-site
construction is the combination of the timeliness of factory versus on-site
construction, the cost of its products relative to on-site construction, the
quality and appearance of its buildings, its ability to design and engineer
buildings to meet unique customer requirements (including local and state
regulatory compliance) and reliability in terms of completion time. The
manufacturing efficiencies and generally lower wage rates of factory
construction, even with the added transportation expense, in many instances
result in the cost of factory-built buildings being equal to or lower than the
cost of on-site construction of comparable quality. Quality, reliability and the
ability to comply with regulatory requirements in a large number of states and
localities depend upon the engineering and manufacturing expertise of the
management and staff of Structures. The relative importance of these factors
varies from customer to customer. Most of Structures' orders are awarded by its
customers on the basis of competitive bidding.
TELECOM
Telecom is located in Elkhart, Indiana and operates all administrative,
sales and manufacturing activities from that location. Telecom manufactures
specialized buildings which utilize modular construction techniques.
Products
Telecom manufactures modular factory-built buildings using pre-cast
concrete, steel, wood or fiberglass construction. Each building is custom-built
to the end users specifications and is typically finished to include electrical,
grounding, sensing alarm, mechanical and air conditioning systems.
The pre-cast concrete technology available through Telecom allows for
vandal-proof and environmental protection necessary for the telecommunication
industry. Telecom produces single and multiple module buildings with modules
ranging in size from 8' x 10' to modules as large as 14' x 30'. Telecom has
provided buildings, when assembled, consisting of a single module of 80 square
feet to multiple module buildings ranging up to 1,440 square feet. Multiple
story technology is currently being developed by Telecom. Telecom can provide
complete site installation of the building, if required by the customer
specifications. Opportunities in pre-cast concrete also exist for the
containment of hazardous material in specialized shelters and in correctional
facilities requiring pre-cast modular cells. The latter product can be provided
to existing customers of Structures.
Marketing
Telecom generally sells its product directly to the end user of the
buildings, which has been principally telecommunication and utility companies,
military bases and municipalities. Telecom also provides building transportation
and site placement services, if required by the scope of the work. Telecom
generally competes for orders by providing a quotation developed from
specifications received from the potential customer. While price is often a key
factor in the potential customer's purchase decision, other factors may also
apply, including delivery time, quality and prior experience with a certain
manufacturer. Several customers have designated Telecom as their nationwide
supplier. Telecom is prepared, if necessary, to provide a potential customer a
bid or performance bond to ensure Telecom's performance. The potential shipping
radius of these type of buildings is not as restrictive as that of Modular and
Mobile Office buildings; however, Telecom has concentrated its marketing efforts
in geographic areas where, Telecom believes, it has a freight advantage over a
significant portion of its competitors.
Competition
Telecom competes with a number of national and regional firms. Some of
these competitor companies may have greater financial strength or capabilities
than Miller and Telecom; however, Telecom believes Miller's financial strength,
engineering capabilities and experience in producing other types of factory-
built structures are elements in providing a competitive advantage to Telecom.
General
(Applicable to all of Miller's principal markets)
Backlog
The backlog of orders by market at August 31, 1995 and 1994 was as follows:
1995 1994
Structures $4,791,000 $7,699,000
Telecom 1,895,000 950,000
Backlog is broadly defined as firm order commitments not yet produced into
a final building product. The 38% decrease from the prior year's backlog
position for the Structures' modular and mobile office buildings is a result of
some slowness in certain parts of the economy and Miller's decision to shift
sales toward the more profitable technical and specific use units. Structures'
management believes it is to early to determine if the current decline in
backlog related to the economic slowness will have a negative impact on future
earnings. Telecom's backlog nearly doubled as this subsidiary continues to
develop its reputation and customer base. The management of Telecom believes
that their backlogs will continue to increase with the ongoing development of
their customer bases.
Regulation
Customers of Miller's factory-built buildings, or Miller's subsidiaries if
they complete the on site work, are generally required to obtain building
installation permits from applicable governmental agencies. In certain cases,
however, conditional use permits may be obtained in lieu of installation
permits. Conditional use permits usually are granted for a stated period and may
be renewable. Buildings completed by Miller's subsidiaries are manufactured and
installed in accordance with applicable building codes set forth by the
applicable state or local regulatory agencies.
State building code regulations applicable to factory-built buildings vary
from state to state. Many states have adopted codes that apply to the design and
manufacture of factory-built buildings, such as those manufactured by Miller's
subsidiaries, even if the units are manufactured outside the state and delivered
to a site within that state's boundaries. Obtaining state approvals is generally
the responsibility of the manufacturer. Some states also require certain
customers to be licensed in order to sell or lease factory-built buildings.
Additionally, certain states require a contractor's license from customers for
the construction of the foundation, building installation, and other on-site
work when this work is completed by the customer.
Miller's subsidiaries, on occasion, have experienced regulatory delays in
obtaining the various required building plan approvals. Miller's subsidiaries,
in addition to some of its customers, actively seek assistance from various
regulatory agencies in order to facilitate the approval process and reduce the
regulatory delays.
Raw Materials
Raw materials for products of Miller's subsidiaries are readily available
from multiple sources and the subsidiaries have not experienced any difficulty
in obtaining materials on a timely basis and in adequate quality and quantity.
Miller's subsidiaries, in certain instances, have entered into national purchase
arrangements with various suppliers. The benefit to Miller's subsidiaries of
these type of arrangements is often lower material costs and a higher level of
service and commitment.
Patents and Trademarks
Miller has a patent for non-combustible modular buildings.
Seasonality
Miller's subsidiaries historically have experienced greater sales during
the first and fourth fiscal quarters with lesser sales during the second and
third fiscal quarters. This reflects the seasonality of sales for products used
in various applications, including classrooms and other educational buildings,
and also the impact of weather on general construction related activities. See
unaudited interim financial information contained in Note H of Notes to
Consolidated Financial Statements.
Employees
As of August 31, 1995, Miller and its subsidiaries had approximately 325
employees of which approximately 240 were direct production employees.
Engineering and Design
Miller's subsidiaries engage in extensive engineering and design work to
meet customers' requirements, as well as to prepare bid proposals for new
projects. Engineering and design functions include structural, electrical, and
mechanical design and specifications work.
ITEM 2. PROPERTIES
The principal office and production facilities of Miller and its
subsidiaries consist of the following:
Approximate Square Footage
Location Total Production Office Owned or Leased
Elkhart, IN 77,500 61,500 16,000 Owned (1)
Elkhart, IN 54,800 50,600 4,200 Owned (2)
Leola, PA 61,900 58,900 3,000 Owned
Sioux Falls, SD 36,100 34,200 1,900 Leased (3)
Patterson, CA 44,600 41,400 3,200 Owned
Bennington, VT 28,900 27,000 1,900 Owned
_______________ _______ ______ _______
Total approximate
square footage 303,800 273,600 30,200
(1) Structures' administrative, sales, engineering and manufacturing
facility. The Executive offices of Miller are also at this location.
(2) Telecom administrative, sales and manufacturing facility.
(3) Leased until April 15, 1996 with three successive two-year renewal
options.
ITEM 3. LEGAL PROCEEDINGS
Neither Miller, Structures, nor Telecom is subject to any material
pending litigation other than ordinary routine litigation incidental to the
business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
EXECUTIVE OFFICERS
Steven F. Graver (age 43) has been a Director of Miller since April 1991
and was elected Chairman of the Board of Directors on August 11, 1994. Effective
July 1, 1995, Graver, Bokhof & Goodwin ("GraverBokhof") became Graver, Bofhof,
Goodwin & Sullivan ("GBGS") GBGS is a subsidiary of the Optimum Group which has
over 800 million in assets under management. Mr. Graver is President and Chief
Portfolio Manager of the Optimum Group. In July 1991, GraverReich & Company
("GraverReich"), merged with Graver, Bokhof & Goodwin, an investment management
firm, and Mr. Graver became a General Partner of GraverBokhof. From December
1986 until July 1991, Mr. Graver was the President and Chief Executive Officer,
and Executive Vice President from February 1981 until November 1986, of
GraverReich, an investment management firm which Mr. Graver co-founded.
Edward C. Craig (age 60) became the Chief Executive Officer of Miller and
Vice Chairman of the Board of Directors of Miller effective on July 2, 1994. Mr.
Craig was elected President of Miller on August 11, 1994. From July 1991 until
April 1994, Mr. Craig was President and Chief Executive Officer of IBG, a
modular housing company. From April 1986 to July 1991, Mr. Craig was President
of Ryland Building Systems, a division of Ryland Homes, Inc. Mr. Craig is a
Director of Regional Building Systems.
Thomas J. Martini (age 47) in April 1992 became the Secretary and
Treasurer of Miller. Mr. Martini has been the Chief Financial Officer of Miller
since February 1991. From May 1986 to February 1991, he was the Corporate
Controller of Starcraft, Inc., a manufacturer of recreational vehicles.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
Miller's Common Stock is quoted on the National Association of Securities
Dealers' Automated Quotation (NASDAQ) system under the ticker symbol "MTIK." The
following table sets forth the quarterly range of high and low quotations for
these securities as reported on the NASDAQ National Market System for the two
most recent fiscal years.
Fiscal 1995 Fiscal 1994
High Low High Low
1st Quarter 4 3 3 1/4 2 3/4
2nd Quarter 4 3 1/8 4 2 1/2
3rd Quarter 4 1/4 3 1/4 4 1/4 3
4th Quarter 4 2 5/8 3 3/4 3
As of August 31, 1995, Miller estimates there were approximately 1,600
stockholders of Miller's Common Stock. Of this total, approximately 250 were
stockholders of record and shares for approximately 1,350 stockholders were held
in street name. Harris Trust & Savings Bank, Chicago, is Miller's Transfer Agent
and Registrar.
Miller did not pay dividends on its Common Stock in fiscal 1995 or
fiscal 1994, as the Board of Directors ceased the payment of dividends in the
third fiscal quarter of 1993. Miller does not intend to pay dividends in the
foreseeable future.
ITEM 6. SELECTED FINANCIAL DATA
The following selected consolidated financial data should be read in
conjunction with the Consolidated Financial Statements and the notes thereto
included elsewhere herein.
Years Ended
July 1, July 2, June 30, June 30, June 30,
1995 1994 1993 1992 1991
(In thousands, except per share data)
Net sales $41,455 $38,569 $40,623 $40,757 $37,776
Net income (loss) 320(A) 312(A) (2,014)(A) (224) 1,951
Net income (loss)
per share .10 .10 (.61) (.06) .52
Cash dividends per
share - - .075 .10 .08
Total assets 16,522 15,308 16,411 17,954 17,491
Long-term debt, less
current maturities 1,385 110 210 302 -
(A) Miller's operating results were for fiscal years 1995, 1994 and 1993
were adversely impacted by nonrecurring items of $361,123, $159,252 and
$2,345,363, respectively.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Fiscal 1995 Compared to Fiscal 1994
Net sales increased $2.9 million or approximately 7% in fiscal 1995
from the corresponding amount in fiscal 1994. Structures reported a $3.4
million or approximately an 11% increase in net sales. Net sales in the Eastern
plants of Structures increased $4.4 million or approximately 20%, while net
sales in the West decreased $1.0 million or approximately 14%. All Structures'
Eastern plants experienced net sales growth as the economy in these markets
remained strong. The decline in net sales in the West was the result of the
continuing sluggishness in the California economy. Telecom recorded a $1.0
million or approximately 23% increase in net sales as this subsidiary continues
to build its reputation and customer base. Net sales at the closed residential
division of Structures was virtually unchanged.
Miller's gross profit during the 1995 fiscal year approximated 15% of
net sales compared to approximately 12% of net sales in fiscal 1994. During
fiscal 1995 Miller was able to shift a portion of the sales from the low end
fleet business to the more profitable technical and specific use applications.
Miller plans to continue the expansion of the technical and specific use
markets.
Selling, general and administrative expenses increased $.7 million in
fiscal 1995. These expenses were 12% of net sales in fiscal 1995 compared to 11%
of net sales in fiscal 1994. The increase in administrative expenses was
primarily the result of higher payroll and other administrative expenses related
to the growth at both Structures and Telecom.
During the year, Miller recorded nonrecurring items of $361,123. These
nonrecurring items consist primarily of a $265,514 charge which resulted from
the final resolution of disputed warranty issues with a customer, a charge of
$186,198 for exit costs associated with the closing of the residential division,
and the reversal of $90,589 of certain restructuring charges recorded in fiscal
1993. The earlier than anticipated exit from the lease at the Fontana plant, a
favorable arbitration settlement and the reversal of warranty reserves at the
closed PME operations, partially offset by additional interest expense for an
IRS audit, were the principal causes for the reversal of restructuring costs.
At July 1, 1995, $239,639 in nonrecurring items remain outstanding of
which $193,857 is a current liability. These items consist of severance and
noncompete agreements with former officers, interest payable on the Internal
Revenue audit and worker's compensation and relocation reserves related to the
closed Western plants. $45,782 related to the noncompete agreement with a former
officer is reflected as long-term. Of this total, approximately $4,000 will be
paid in fiscal 1996, with the balance payable through fiscal 2004.
The increase in interest expense in fiscal 1995 compared to fiscal 1994
of $42,808 was the result of a $55,349 increase in interest expense for the
industrial revenue bond issued to finance the plant expansion at Telecom. Lower
debt outstanding on the revolving line of credit was the principal cause for a
$12,541 offsetting decrease in interest expense.
During fiscal 1995 Miller recorded an income tax provision of $189,000
or 37% of pre-tax profit. In fiscal 1994, Miller recorded an income tax credit
of $66,000. A provision of $91,000 or 37% of the pre-tax profit was offset by a
reversal of $157,000 for a provision of federal and state income taxes related
to an Internal Revenue Service audit settled favorably by Miller.
Fiscal 1994 Compared to Fiscal 1993
Net sales decreased $2.1 million in fiscal 1994 from the corresponding
amount in fiscal 1993. Structures reported a $2.3 million or approximately a 7%
decrease in net sales. Net sales in the Eastern plants of Structures remained
virtually unchanged, while net sales in the West decreased $3.4 million or
approximately 32%. The decline in net sales in the West was the result of
closing the plants in Woodburn, Oregon and Fontana, California. Net sales in the
residential division of Structures increased $1.2 million or approximately 68%.
The increase at the residential division of Structures was the result of the
development of the divisions' dealer/builder customer base. Telecom recorded a
$2.1 million or approximately 90% increase in net sales as this subsidiary
continues to build its customer base. Net sales at PME decreased $1.9 million
or approximately 55% as a result of the closing of the subsidiary.
Miller's gross profit during the 1994 fiscal year approximated 12% of
net sales compared to approximately 13% of net sales in fiscal 1993. During
1994, the Company experienced a shift in demand away from the more profitable
technical and specific use applications.
Selling, general and administrative expenses decreased $.9 million in
fiscal 1994. These expenses were 11% of net sales in fiscal 1994 compared to 13%
of net sales in fiscal 1993. The decrease in administrative expenses was
primarily the result of reduced expenses related to the closed West Coast plants
and the phase-out of PME's operations. These reductions were partially offset
by increased administrative costs related to the growth at Structures'
residential division and Telecom.
During the year, Miller recorded nonrecurring items of $159,252. These
nonrecurring items consisted of $264,150 for a severance agreement with a former
officer and the reversal of $104,898 in certain restructuring charges recorded
in fiscal 1993. The earlier than anticipated sale of the Woodburn plant,
eliminating property taxes and costs for the maintenance of the building, and
the elimination of the office lease at the PME operations were the principle
causes for the reversal of restructuring costs. A $193,242 gain on the sale of
the Woodburn plant was recorded during the current fiscal year and is reflected
in the gain on sale of property and equipment.
At July 2, 1994, $612,594 in nonrecurring items remained outstanding of
which $498,198 was classified as a current liability and $144,396 was reflected
as long-term. These items consisted of severance and noncompete agreements with
former officers, a lease commitment for the Fontana plant, warranty reserves
related to the PME operations, interest payable on the Internal Revenue audit
and worker's compensation and relocation reserves related to the closed Western
plants.
Miller recorded a $120,220 provision for doubtful receivables in fiscal
1994 (applicable to the closed PME operations). The allowance related to
disputes over delays and change orders for the completed PME project at the
Denver International Airport.
The increase in interest expense in fiscal 1994 compared to fiscal 1993
of $15,942 was the result of higher interest rates and higher debt outstanding
on the revolving line of credit.
During fiscal 1994, Miller recorded an income tax credit of $66,000. A
provision of $91,000 or 37% of the pre-tax profit was offset by a reversal of
$157,000 for a provision of federal and state income taxes related to an
Internal Revenue Service audit settled favorably by Miller. In fiscal 1993,
Miller recorded an income tax credit of $593,000 or 23% of the pre-tax loss
which included $309,000 for federal and state income taxes resulting from an
Internal Revenue Service audit, which was being appealed.
Liquidity and Capital Resources
Miller's working capital as of July 1, 1995 was $5,254,456 compared to
$5,373,230 as of July 2, 1994. The working capital ratio as of July 1, 1995 and
July 2, 1994 was 2.0 to 1.
During fiscal 1995, operations provided cash flows of $66,335 consisting
primarily of net income and certain noncash charges offset by reductions in
accounts payable and other accrued liabilities. Miller utilized cash of
$1,959,893 in investing activities, consisting of the Telecom plant expansion to
support the subsidiary's growth and other purchases of plant and equipment. The
investments made by Miller were financed through increased borrowings on the
revolving line of credit and the proceeds from the industrial revenue bond.
An unsecured revolving credit agreement with a bank makes available
advances up to $5,000,000 through November 30, 1995. There was $1,550,000
outstanding on the revolving credit line at July 1, 1995 and $525,000 at July 2,
1994. The $5,000,000 availability under the present loan agreement has been
reduced by $134,344 for a standby letter of credit issued in connection with an
obligation payable to a former officer.
Miller believes it has adequate resources available to fund the
continuation of its internal growth during the coming fiscal year. The
unsecured revolving credit line assures that resources will be available for
future growth.
Impact of Inflation
Inflation has not had an identifiable effect on Miller's operating
margins during the last three fiscal years. Product selling prices are quoted
reflecting current material prices and other related costs and expenses.
Accordingly, any impact of inflation is reflected in the product selling prices.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by Item 8 of Part II is incorporated herein by
reference to the Consolidated Financial Statements filed with this report; see
Item 14 of Part IV.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
(a) Identification of Directors
Information with respect to the Directors of Miller is set forth in the
Election of Directors section of the Proxy Statement to be filed pursuant to
Regulation 14A and is incorporated herein by reference.
(b) Executive Officers
Information regarding the executive officers of Miller is set forth in
Part I of this report.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item is set forth in the Compensation
and Executive Officers section of the Proxy Statement to be filed pursuant to
Regulation 14A and is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item is set forth in the Principal
Shareholder and Share Ownership of Director and Executive Officers section of
the Proxy Statement to be filed pursuant to Regulation 14A and is incorporated
herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item is set forth in the Transactions
with Management and Others section of the Proxy Statement to be filed pursuant
to Regulation 14A and is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a)(1) Consolidated Financial Statements of Miller Building Systems,
Inc. and Subsidiaries
Report of Independent Accountants........................................F-1
Consolidated Balance Sheets as of July 1, 1995 and July 2, 1994..........F-2
Consolidated Statements of Operations for the years ended July 1,
1995, July 2, 1994 and June 30,1993......................................F-3
Consolidated Statements of Stockholders' Equity for the years
ended July 1, 1995, July 2, 1994 and June 30, 1993.......................F-4
Consolidated Statements of Cash Flows for the years ended July 1,
1994, July 2, 1994 and June 30, 1993.....................................F-5
Notes to Consolidated Financial Statements...............................F-6
(2) Financial Statement Schedule
II - Valuation and Qualifying Accounts..................................F-13
All other schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required under the
related instructions, are inapplicable, or the information is included in the
Notes to Consolidated Financial Statements, and therefore have been omitted.
(3) See Index to Exhibits
(b) Reports on Form 8-K filed in the fourth quarter of fiscal 1995:
The following report on Form 8-K was filed during the three months
ended July 1, 1995.
May 19, 1995, reporting a Resolution adopted by the Board of
Directors on April 27, 1995 to amend the By-Laws which increased
the number of Directors from seven (7) to eight (8); and elected
Myron C. Noble to the Board of Directors on April 27, 1995 filling
the vacancy created by the foregoing amendment.
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.
MILLER BUILDING SYSTEMS, INC.
September 12, 1995 \Edward C. Craig
Edward C. Craig
President and Chief
Executive Officer
(Principal Executive Officer)
Pursuant to the requirements of the Securities 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 dates indicated.
Signature Title Date
\Edward C. Craig President, Chief September 12, 1995
Edward C. Craig Executive Officer
and Director
(Principal Executive
Officer)
\Thomas J. Martini Secretary and September 12, 1995
Thomas J. Martini Treasurer (Principal
Financial and
Accounting Officer)
\Ronald L. Chez Director September 12, 1995
Ronald L. Chez
\David E. Downen Director September 12, 1995
David E. Downen
\Steven F. Graver Director September 12, 1995
Steven F. Graver
\William P. Hall Director September 12, 1995
William P. Hall
\Myron C. Noble Director September 12, 1995
Myron C. Noble
\David H. Padden Director September 12, 1995
David H. Padden
\Jeffrey C. Rubenstein Director September 12, 1995
Jeffrey C. Rubenstein
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Board of Directors
of Miller Building Systems, Inc.:
We have audited the consolidated financial statements and the financial
statement schedule of Miller Building Systems, Inc. and subsidiaries listed in
Item 14(a) of this Form 10-K. These financial statements and financial statement
schedule are the responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements and financial statement
schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standard. 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 Miller Buildings
Systems, Inc. and subsidiaries as of July 1, 1995 and July 2, 1994, and the
consolidated results of their operations and their cash flows for the years
ended July 1, 1995, July 2, 1994 and June 30, 1993, in conformity with generally
accepted accounting principles. In addition, in our opinion, the financial
statement schedule referred to above, when considered in relation to the basic
financial statements taken as a whole, presents fairly, in all material
respects, the information required to be included therein.
\Coopers & Lybrand L.L.P.
COOPERS & LYBRAND L.L.P.
South Bend, Indiana
August 15, 1995
F-1
MILLER BUILDING SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
July 1, July 2,
1995 1994
ASSETS
CURRENT ASSETS
Cash and temporary cash investments $ 351,860 $ 132,084
Receivables, less allowance for doubtful
receivables of $59,000 in 1995 and
$120,000 in 1994 5,960,110 6,186,820
Inventories:
Raw materials 2,945,366 2,933,238
Work in process 441,366 287,106
Finished goods 146,887 152,060
3,533,619 3,372,404
Deferred federal income taxes 320,000 399,000
Other current assets 126,752 400,826
TOTAL CURRENT ASSETS 10,292,341 10,491,134
PROPERTY, PLANT AND EQUIPMENT
Land 847,336 764,857
Buildings and leasehold improvements 5,357,144 4,208,163
Machinery and equipment 3,906,285 3,487,256
10,110,765 8,460,276
Less, Accumulated depreciation
and amortization 4,083,640 3,666,270
6,027,125 4,794,006
OTHER ASSETS 202,166 22,887
TOTAL ASSETS $16,521,632 $15,308,027
The accompanying notes are a part of the consolidated financial statements.
F-2
July 1, July 2,
1995 1994
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term borrowings $ 1,550,000 $ 525,000
Current maturities of long-term debt 224,925 100,481
Accounts payable 2,074,510 3,202,938
Accrued income taxes 89,827 140,542
Accrued expenses and other 904,766 680,745
Accrued nonrecurring items 193,857 468,198
TOTAL CURRENT LIABILITIES 5,037,885 5,117,904
LONG-TERM DEBT, less current maturities 1,385,000 109,925
DEFERRED FEDERAL INCOME TAXES 134,000 146,000
OTHER 45,782 144,396
TOTAL LIABILITIES 6,602,667 5,518,225
COMMITMENTS AND CONTINGENCIES - Notes C and G
STOCKHOLDERS' EQUITY
Common stock, $.01 par value, issued
4,023,548 shares 40,235 40,235
Additional paid-in capital 11,454,903 11,454,903
Retained earnings 1,563,201 1,250,434
13,058,339 12,745,572
Less, Treasury stock, at cost 3,139,374 2,955,770
TOTAL STOCKHOLDERS' EQUITY 9,918,965 9,789,802
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $16,521,632 $15,308,027
F-2
MILLER BUILDING SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Years Ended
July 1, July 2, June 30,
1995 1994 1993
Net sales $41,454,500 $38,568,812 $40,622,923
Costs and expenses:
Cost of products sold 35,373,322 33,791,773 35,489,137
Selling, general and
administrative 5,018,490 4,362,530 5,281,693
Nonrecurring items 361,123 159,252 2,345,363
Provision for doubtful receivables 67,528 120,220 49,361
(Gain) loss on sale property
and equipment 3,379 (183,910) (3,485)
Interest expense 134,833 92,025 76,083
Interest income (13,087) (18,938) (7,990)
INCOME (LOSS) BEFORE
INCOME TAX CREDIT 508,912 245,860 (2,607,239)
Income tax (credit) 189,000 (66,000) (593,000)
NET INCOME (LOSS) $ 319,912 $ 311,860 $(2,014,239)
Earnings (loss) per share of common
stock, based upon weighted average
number of common shares and
equivalent shares outstanding $ .10 $ .10 $ (.61)
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES AND EQUIVALENT SHARES
OUTSTANDING 3,130,207 3,197,421 3,275,700
The accompanying notes are a part of the consolidated financial statements.
F-3
MILLER BUILDING SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Common Stock Issued
(Authorized - Additional Total
7,500,000 shares) Paid-In Retained Treasury Stock Stockholders'
Shares Amount Capital Earnings Shares Amount Equity
BALANCE, JULY 1, 1992 4,023,548 $40,235 $11,454,903 $3,198,519 712,970 $(2,506,091) $12,187,566
Treasury stock acquired - - - - 61,500 (175,500) (175,500)
Cash dividends ($.075 per share) - - - (245,706) - - (245,706)
Net loss - - - (2,014,239) - - (2,014,239)
BALANCE, JUNE 30, 1993 4,023,548 40,235 11,454,903 938,574 774,470 (2,681,591) 9,752,121
Treasury stock acquired - - - - 90,500 (274,179) (274,179)
Net income - - - 311,860 - - 311,860
BALANCE, JULY 2, 1994 4,023,548 40,235 11,454,903 1,250,434 864,970 (2,955,770) 9,789,802
Treasury stock acquired - - - - 80,000 (260,000) (260,000)
Treasury stock sold - - - (2,572) (15,385) 52,573 50,001
Exercise of stock options using
treasury stock - - - (4,573) (7,000) 23,823 19,250
Net income - - - 319,912 - - 319,912
BALANCE, JULY 1, 1995 4,023,548 $40,235 $11,454,903 $1,563,201 922,585 $(3,139,374) $9,918,965
The accompanying notes are a part of the consolidated financial statements.
F-4
MILLER BUILDING SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended
July 1, July 2, June 30,
1995 1994 1993
CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES:
Net income (loss) $ 319,912 $ 311,860 $(2,014,239)
Adjustments to reconcile net income (loss) to
net cash provided by (used in) operating activities:
Nonrecurring items 361,123 159,252 2,345,363
Depreciation and amortization 612,359 574,243 626,323
Amortization of other assets 17,886 1,944 144,216
Deferred income taxes 67,000 (44,000) (297,000)
(Gain) loss on sale of property
and equipment 3,379 (183,910) (1,485)
Changes in certain assets and liabilities:
Receivables 226,710 (528,709) (877,320)
Refundable income taxes - 684,000 (273,290)
Inventories (161,215) 20,835 (545,225)
Other current assets 274,074 (138,791) 650,763
Accounts payable (1,128,428) 297,474 353,361
Accrued income taxes (50,715) (145,394) 285,936
Accrued expenses and other 224,021 18,735 (240,038)
Accrued nonrecurring items (699,771) (456,033) (162,273)
Net cash provided by (used in)
operating activities 66,335 571,506 (4,908)
CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES:
Proceeds from sale of property
and equipment 51,268 1,155,412 31,750
Purchase of property, plant and equipment (1,934,432) (394,918) (351,437)
Unexpended industrial revenue bond proceeds (76,729) - -
Net cash provided by (used in)
investing activities (1,959,893) 760,494 (319,687)
CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES:
Proceeds from short-term borrowings 19,838,000 18,772,000 17,344,000
Reduction of short-term borrowings (18,813,000) (19,649,000) (17,692,000)
Proceeds from long-term debt 1,500,000 - -
Bond issuance costs (120,436) - -
Payments of long-term debt (100,481) (91,849) (83,957)
Purchase of treasury stock (260,000) (274,179) (175,500)
Proceeds from sale of treasury stock 50,001 - -
Proceeds from exercise of stock options 19,250 - -
Payment of cash dividends - - (245,706)
Net cash provided by (used in)
financing activities 2,113,334 (1,243,028) (853,163)
Increase (decrease) in cash and temporary
cash investments 219,776 88,972 (1,177,758)
CASH AND TEMPORARY CASH INVESTMENTS
Beginning of year 132,084 43,112 1,220,870
End of year $ 351,860 $ 132,084 $ 43,112
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest $ 113,167 $ 87,664 $ 76,764
Income taxes (net of refunds) 172,715 (560,606) (315,003)
The accompanying notes are a part of the consolidated financial statements.
F-5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
for the years ended July 1, 1995, July 2, 1994 and June 30, 1993
Note A: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.
Principles of Consolidation - The consolidated financial statements include
the accounts of Miller Building Systems, Inc. and its subsidiaries,
all of which are wholly-owned, (individually and collectively referred to
herein as "Miller").
Fiscal Year - Effective July 1, 1993, Miller adopted a fiscal year ending
on the Saturday closest to June 30. Prior to this change, Miller's
fiscal year ended on June 30.
Revenue Recognition - Miller generally recognizes revenues from the sales
of its products upon the completion of manufacturing and the transfer
of title.
Inventories - Inventories are stated at the lower of cost or market, with
cost determined under the first-in, first-out method.
Property, Plant and Equipment - Property, plant and equipment are carried
at cost less accumulated depreciation and amortization. Depreciation
and amortization of plant and equipment are computed using the straight-
line method over the estimated useful lives of the assets. Costs of
purchased software and, under certain conditions, internal software
development costs are capitalized and the amortized over a future period.
Capitalized software costs, for both internally developed and purchased
software products, are amortized using the straight-line method over sixty
months. As of July 1, 1995 and July 2, 1994, capitalized software costs,
included with machinery and equipment, (and the related accumulated
amortization) aggregated $199,007 ($8,251) and $148,010 ($27,222),
respectively.
Bond Issuance Cost - Bond issuance costs aggregating $120,436, which
related to issuance of the industrial revenue bond, are being amortized
using the straight-line method over the term of the bond.
Income Taxes - Effective July 1, 1993, Miller adopted Statement of
Financial Accounting Standards No. 109 ("SFAS No. 109"), "Accounting for
Income Taxes," which requires recognition of deferred tax assets and
liabilities for the expected future tax consequences of events that have
been included in the financial statements or tax returns. Under this method,
deferred tax assets and liabilities are determined based on the differences
between the financial statement and tax bases of assets and liabilities
using enacted tax rates in effect for the years in which the differences
are expected to reverse. As permitted by SFAS No. 109, Miller elected not
to restate the financial statements of any prior years, and the adoption of
SFAS No. 109 did not have a material effect on Miller's consolidated
financial statements.
Prior to July 1, 1993, the provision for income taxes was based on income
and expenses included in the consolidated statements of operations.
Differences between taxes so computed and taxes payable under applicable
statutes and regulations were classified as deferred taxes arising from
timing differences.
F-6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
for the years ended July 1, 1995, July 2, 1994 and June 30, 1993
Note A: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Concluded.
Employee Benefit Plan - Miller maintains a simplified 401(k) savings plan
(the "Plan") for eligible participating employees of Miller. The Plan
is a defined contribution plan under which employees may voluntarily
contribute a percentage of their compensation. The Plan allows Miller to
make discretionary matching contributions before the end of the Plan's
calendar year-end. During the years ended July 1, 1995 and July 2, 1994,
Miller expensed $17,237 and $17,017, respectively, under this Plan. No
amounts were expensed for the fiscal year ended June 30, 1993.
Earnings (Loss) Per Share - Per share amounts are based upon the weighted
average number of common shares outstanding and common equivalent shares
(dilutive stock options) assumed outstanding during each period. The
common equivalent shares did not enter into the computation of loss per
share for the year ended June 30, 1993 because their inclusion would have
been antidilutive.
Consolidated Statements of Cash Flows - Miller considers all highly liquid
investments purchased with an original maturity of three months or less to
be temporary cash investments for purposes of the consolidated statements of
cash flows.
Note B: NONRECURRING ITEMS.
During the fiscal year ended July 1, 1995, Miller recorded a pre-tax charge
of $265,514 which resulted from the final resolution of disputed warranty
issues with a customer. Also, Miller recorded a pre-tax charge of $186,198
for exit costs associated with the closing of its residential division,
which manufactured factory-built modular residential housing.
During the fourth quarter of fiscal year ended July 2, 1994, Miller recorded
a severance agreement with a former officer which consisted of seventeen
months compensation and certain benefits. The agreement is payable monthly
through December 31, 1995.
During the fiscal year ended June 30, 1993, Miller commenced certain
restructuring actions which resulted in a pre-tax restructuring charge of
$2,345,363. The restructuring costs included the write-off of a non-compete
agreement with a former officer and the closing of certain West coast
operations. These included the plants in Woodburn, Oregon and Fontana,
California and the termination of PME Pacific Systems, Inc. ("PME").
During fiscal 1995 and 1994 certain accruals for these restructuring costs,
principally related to the closed Woodburn and Fontana plants and the PME
operations were settled at amounts less than originally accrued.
F-7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
for the years ended July 1, 1995, July 2, 1994 and June 30, 1993
Note B: NONRECURRING ITEMS, Concluded.
Years Ended
July 1, July 2, June 30,
1995 1994 1993
Settled warranty issues $265,514 $ - $ -
Residential exit costs 186,198 - -
Severance agreement - 264,150 -
Restructuring costs (90,589) (104,898) 2,345,363
$361,123 $ 159,252 $2,345,363
At July 1, 1995, $45,782 ($144,396 at July 2, 1994) of the accrual for
liabilities and costs associated with the nonrecurring items is reflected
as a long-term liability and the remaining accrual is classified as a current
liability.
Note C: DEBT.
Short-term borrowings
Miller maintains an unsecured revolving line of credit with a bank. The
loan agreement makes available up to $5 million through November 30, 1995.
Interest is payable monthly at prime or a margin over the London Interbank
Offering Rate, depending on the pricing option selected by Miller. At
July 1, 1995 and July 2, 1994, the weighted average interest rate on
outstanding borrowings was 8.68% and 7.25%, respectively. As of July 1, 1995
and July 2, 1994, outstanding borrowings under the loan agreement aggregated
$1,550,000 and $525,000, respectively. The loan agreement contains, among
other provisions, certain covenants including: maintenance of a required
current ratio, tangible net worth and liabilities to tangible net worth
ratio.
Long-term debt
Long-term debt consists of the following:
July 1, July 2,
1995 1994
Industrial revenue bond, variable rate
(4.15% at July 1, 1995), payable in annual
installments of $115,000, with an
installment of $120,000 at final maturity
in November 2007. $1,500,000 $ -
Obligation payable to a former officer
of Miller payable in semi-monthly installments
of $4,798 through June 15, 1996. Interest at
9% imputed for financial reporting purposes. 109,925 210,406
Total 1,609,925 210,406
Less, Current maturities 224,925 100,481
Long-term debt $1,385,000 $109,925
F-8
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
for the years ended July 1, 1995, July 4, 1994 and June 30, 1993
Note C: Debt, Concluded.
Aggregate maturities of long-term debt for each of the next five years are as
follows: 1996 - $224,925; 1997 - $115,000; 1998 - $115,000; 1999 -$115,000 and
2000 $115,000.
In connection with the industrial revenue bond obligation, Miller obtained,
as a credit enhancement for the bondholders, an irrevocable letter of credit
in favor of the bond trustee. Miller, at its discretion, can convert the
industrial revenue bond from a variable rate to a fixed rate. The fixed rate
would be determined contemporaneously with the decision to convert. Miller
may redeem the bonds at any time in increments of $100,000. In the event the
bonds have been converted to a fixed rate, such redemption is at a premium
determined by the number of years from conversion to the original maturity.
In addition, in connection with the note payable to a former officer, Miller
obtained an irrevocable letter of credit in favor of that officer
approximating the outstanding principal balance. Availability under the
$5 million bank line of credit agreement is reduced by the amount of this
standby letter of credit.
Note D: STOCKHOLDERS' EQUITY.
On June 30, 1994, the Board of Directors adopted the Miller Building Systems,
Inc. 1994 Stock Option Plan (the "1994 Plan") under which 300,000 shares of
common stock were reserved for future grant. The 1994 Plan expires June 30,
2004. On August 26, 1991, the Board of Directors adopted the 1991 Stock
Option Plan (the "1991 Plan") under which 250,000 shares of common stock were
reserved for future grant. The 1991 Plan expires August 26, 2001. The
1994 Plan and 1991 Plan provide that options can be granted by Miller at a
price not less than 100% of fair market value (or 110% of fair market value if
the optionee owns 10% or more of Miller's common stock). The term of an
option granted under the 1994 Plan and 1991 Plan cannot exceed ten years, and
options are either exercisable upon grant or contain a specific vesting
schedule, except in the event of a change of control, as defined, at which
time all outstanding options become fully exercisable by the optionee.
Changes in options are summarized as follows:
Number Per Share
Of Shares Option Price
Outstanding at July 1, 1992 129,500 $3.00 - $4.63
Granted 72,000 2.50 - 2.75
Outstanding at June 30, 1993 201,500 2.50 - 4.63
Canceled (41,500) 3.00 - 4.25
Outstanding at July 2, 1994 160,000 2.50 - 4.63
Granted 329,000 3.25 - 6.00
Exercised (7,000) 2.75
Canceled (88,000) 2.75 - 4.63
Outstanding at July 1, 1995 394,000 $2.50 - $6.00
Exercisable at July 1, 1995 188,600
F-9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
for the years ended July 1, 1995, July 2, 1994 and June 30, 1993
Note E: INCOME TAXES.
The provision (credit) for income taxes is summarized as follows:
Years Ended
July 1, July 2, June 30,
1995 1994 1993
Current:
Federal $ 72,000 $(18,000) $(349,000)
State 50,000 (4,000) 53,000
122,000 (22,000) (296,000)
Deferred tax (credit) 67,000 (44,000) (297,000)
Total $189,000 $(66,000) $(593,000)
The provision (credit) for income taxes included in the consolidated
statements of operations differs from that computed by applying the federal
statutory tax rate (34%) to income (loss) before income taxes as follows:
Years Ended
July 1, July 2, June 30,
1995 1994 1993
Computed federal income
tax (credit) $173,000 $ 83,600 $(886,500)
Increase (decrease)
resulting from:
Federal income taxes recorded
(reversed) for Internal
Revenue Service exam-
ination - (120,400) 251,000
State income taxes, net
of federal income tax
impact 33,000 (2,600) 35,000
Other, net (17,000) (26,600) 7,500
Total $189,000 $ (66,000) $(593,000)
F-10
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
for the years ended July 1, 1995, July 2, 1994 and June 30, 1993
Note E: INCOME TAXES, Continued
Deferred income taxes reflect the estimated future net tax effects of
temporary differences between the carrying amounts of assets and liabilities
for financial reporting purposes and the amounts used for income tax purposes.
The components of the net deferred tax asset and liability at July 1, 1995
and July 2, 1994 are as follows:
July 1, July 2,
1995 1994
Current deferred tax asset:
Inventories $ 140,000 $ 130,000
Accrued warranty 59,000 93,000
Accrued nonrecurring items 24,000 122,000
Allowance for doubtful receivables 76,000 49,000
Other 21,000 5,000
Total $ 320,000 $ 399,000
Long-term deferred tax asset (liability):
Property, plant and equipment $ (149,000) $(205,000)
Accrued nonrecurring items 15,000 59,000
Total $ (134,000) $(146,000)
During the year ended June 30, 1993, the Internal Revenue Service ("IRS")
completed an audit for Miller's federal income tax returns for the fiscal
years 1989, 1990 and 1991 and the revenue agent proposed adjustments related
to the valuation and amortization of certain intangible assets.
During fiscal 1994, Miller settled these audit issues with the IRS and,
accordingly, a federal and state tax benefit (reversal of previously accrued
income taxes) of $157,000 was recorded in the year ended July 2, 1994.
Note F: MAJOR CUSTOMERS.
Miller's primary business involves the design and manufacture of factory
built buildings. Miller sells its products primarily to independent
customers who, in turn, sell or lease to the end users.
One customer individually accounted for 23% of net sales in fiscal 1995,
21% of net sales in fiscal 1994 and 34% of net sales in fiscal 1993.
At July 1, 1995, 15% of receivables is concentrated with this one customer
and 37% concentrated in five other customers. At July 2, 1994, 28% of
receivables was concentrated with this one customer and 33% was concentrated
with five other customers.
Note G: COMMITMENTS AND CONTINGENCIES.
Lease Commitments:
Miller leases certain real estate under a noncancellable operating lease
expiring April 1996. The lease may be extended at Miller's option.
Miller generally is responsible for utilities, taxes and insurance on the
leased facility. Future minimum lease payments under this noncancellable
lease are $35,833 in fiscal year 1996 with no commitments thereafter.
Rental expense under all operating leases aggregated $159,225, $179,620 and
$164,832 for the years ended July 1, 1995, July 2, 1994 and June 30, 1993,
respectively.
F-11
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Concluded
for the years ended July 1, 1995, July 2, 1994 and June 30, 1993
Note H: UNAUDITED INTERIM FINANCIAL INFORMATION.
Presented below is certain selected unaudited quarterly financial
information for the years ended July 1, 1995 and July 2, 1994:
Earnings
Net Gross Net Income (Loss)
Sales Profit (Loss) Per Share
1995:
Fourth $11,298,949 $1,899,047 $ 263,885 $ .08
Third 9,225,932 1,131,982 (370,960) (.12)
Second 9,691,497 1,440,865 118,817 .04
First 11,238,122 1,609,284 308,170 .10
Total $41,454,500 $6,081,178 $ 319,912 $ .10
1994:
Fourth $10,804,983 $1,263,563 $ (87,561) $(.03)
Third 8,279,366 773,141 23,624 .01
Second 7,232,812 973,156 53,351 .02
First 12,251,651 1,767,179 322,446 .10
Total $38,568,812 $4,777,039 $ 311,860 $ .10
F-12
MILLER BUILDING SYSTEM, INC. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
Col. A Col. B Col. C Col. D Col. E
Additions Additions
Balance at Charged to Charged to Balance
Beginning Costs and Other at End
Description of Period Expenses Accounts Deductions of Period
Year ended July 1, 1995:
Allowance for
doubtful receivables $120,220 $ 67,528 $ - $128,724 <F1> $ 59,024
Year ended July 2, 1994:
Allowance for
doubtful receivables $ 49,361 $120,220 $ - $ 49,361 <F1> $120,220
Property held
for sale $153,259 $ - $ - $153,259 <F2> $ -
Year ended June 30, 1993:
Allowance for
doubtful receivables $ - $ 49,361 $ - $ - $ 49,361
Property held
for sale $ - $153,259<F2> $ - $ - $153,259
<FN>
<F1>
Uncollectible accounts written off.
<F2>
Valuation allowance originally established in fiscal year 1993 to reflect "Property
held for sale" at its net realizable value was utilized when the property was
disposed of in fiscal year 1994.
</FN>
F-13
MILLER BUILDING SYSTEMS, INC., AND SUBSIDIARIES
INDEX TO EXHIBITS
Exhibit
Number Description of Exhibit
23.3 Consent of Independent Accountants
10.53 Employment agreement between Registrant and Edward C. Craig, dated
July 1, 1994.
10.54 Agreement between Registrant and Ronald L. Chez, dated September 9,
1994.
10.55 Agreement to Terminate Lease between Miller Structures, Inc., an
Indiana corporation, and Malcolm O. Koons dated June 12, 1995 with
respect to property located at Elkhart, Indiana.
11 Statement regarding computation of per share earnings.
The exhibits listed below are filed as part of this report and incorporated by
reference as indicated.
3.1 Certificate of Incorporation, as amended (a)
3.2 By-Laws, as amended (a) (d) (f) (i) (k) (l) (n)
4.1 Specimen Common Stock Certificate (e)
4.2 Certificate of Incorporation, Articles Fourth, Eighth, and Tenth;
By-Laws, Articles II, VII, and IX (a)
10.9 Employee Incentive Stock Option Plan adopted by the Registrant's
stockholders on April 11, 1983 and Form of Option Agreement (a) (b)
(c)
10.11 Lease Agreement between Sioux Falls Structures, Inc. (now known as
Miller Structures, Inc.), a South Dakota corporation, and Toboll
Corporation dated April 15, 1985 with respect to property located in
Sioux Falls, South Dakota (a) and Amendments thereto dated February
3, 1988 and December 31, 1989 (h)
10.12 Lease Agreement between Toboll properties and Miller Structures, Inc.
(South Dakota) dated August 1, 1990 with respect to the lease of land
in Sioux Falls, South Dakota (h)
10.14 Lease between Miller Structures, Inc.), a California corporation, and
C&W dated as of March 20, 1985 with respect to property located in
Fontana, California (a)
10.44 Employment Agreement between Registrant and John M. Davis, dated March
16, 1990 and effective as of February 1, 1990 (g)
10.47 Agreement between Registrant and Frederick H. Goldberger, dated May 6,
1991, which replaces an employment agreement dated April 26, 1988
and amendments thereto which was to expire on June 30, 1995 (j)
10.48 1991 Stock Option Plan adopted by the Registrant's stockholders on
October 30, 1991 and Form of Option Agreement (m)
10.49 Miller Building Systems, Inc. 401(k) Plan (o)
10.50 Letter to Frederick H. Goldberger, dated April 28, 1993, declaring the
non-competition covenant, of the Agreement of May 6, 1991, to have no
value (o)
10.51 First amendment to employment agreement between Registrant and John M.
Davis, dated March 16, 1994 (q)
10.52 Commercial Lease and Option to Purchase between Miller Structures,
Inc., and Indiana corporation, and Malcolm O. Koons dated March 2,
1993 with respect to property located at Elkhart, Indiana (q)
10.53 1994 Stock Option Plan adopted by the Registrant's stockholders on
October 25, 1994 and For of Option Agreement (p)
21.1 Subsidiaries of the Registrant (o)
______________
(a) Registration Statement on Form S-1, as amended (File No. 0-14651)
(b) Form S-8, Date of Report - October 28, 1987
(c) Form 8-K, Date of Report - November 1, 1988
(d) Form 8-K, Date of Report - July 20, 1989
(e) Form 10-K for year ended June 30, 1989
(f) Form 8-K, Date of Report - January 31, 1990
(g) Form 8-K, Date of Report - March 16, 1990
(h) Form 10-K for year ended June 30, 1990
(i) Form 8-K, Date of Report - April 23, 1991
(j) Form 8-K, Date of Report - May 6, 1991
(k) Form 8-K, Date of Report - July 25, 1991
(l) Form 8-K, Date of Report - August 26, 1991
(m) Form S-8, Date of Report - July 31,1992
(n) Form 8-K, Date of Report - April 22, 1993
(o) Form 10-K for year ended June 30, 1993
(p) Form S-8, Date of Report - Dated December 30, 1994
(q) Form 10-K, for year ended July 2, 1994