UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 29, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to .
Commission file Number 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
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
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practical date:
Common Shares, Par Value $.01 Per Share
3,215,447 Shares Outstanding at May 9, 1997
The index to Exhibits is at page 13 in the sequential numbering
system. Total pages: 14
MILLER BUILDING SYSTEMS, INC.
CONTENTS
Pages
Part I. Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheets 3-4
Condensed Consolidated Statements of Income 5
Condensed Consolidated Statements of Cash Flows 6
Notes to Condensed Consolidated Financial
Statements 7-8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 9-10
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K 11
Signatures 12
Index to Exhibits 13
Part I. Financial Information
Item 1. Financial Statements
MILLER BUILDING SYSTEMS, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
March 29, June 29,
1997 1996
ASSETS
CURRENT ASSETS:
Cash and temporary cash investments $ 78,043 $ 165,329
Receivables 6,822,447 6,749,230
Refundable income taxes - 241,158
Inventories 4,107,269 3,541,000
Deferred income taxes 252,000 252,000
Other current assets 271,829 83,087
TOTAL CURRENT ASSETS 11,531,588 11,031,804
PROPERTY, PLANT AND EQUIPMENT, at cost 11,487,507 10,401,137
Less, Accumulated depreciation and
amortization 4,594,622 4,627,438
6,892,885 5,773,699
OTHER ASSETS, net 108,946 114,855
TOTAL ASSETS $18,533,419 $16,920,358
See notes to condensed consolidated financial statements.
MILLER BUILDING SYSTEMS, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
March 29, June 29,
1997 1996
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term borrowings $ 200,000 $ 1,500,000
Current maturities of long-term debt
and capitalized lease obligations 182,721 115,000
Accounts payable 3,543,018 2,291,448
Accrued income taxes 480,444 79,438
Accrued expenses and other 960,435 974,698
Accrued nonrecurring items 105,939 129,167
TOTAL CURRENT LIABILITIES 5,472,557 5,089,751
LONG-TERM DEBT AND CAPITALIZED LEASE
OBLIGATIONS, less current maturities 1,361,982 1,270,000
DEFERRED INCOME TAXES 136,000 136,000
OTHER 20,019 20,019
TOTAL LIABILITIES 6,990,558 6,515,770
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value 40,235 40,235
Additional paid-in capital 11,454,903 11,454,903
Retained earnings 2,968,933 2,048,824
14,464,071 13,543,962
Less, Treasury stock, at cost 2,921,210 3,139,374
TOTAL STOCKHOLDERS' EQUITY 11,542,861 10,404,588
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $18,533,419 $16,920,358
See notes to condensed consolidated financial statements.
MILLER BUILDING SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended
March 29, March 30,
1997 1996
Net sales $10,235,248 $ 8,170,244
Costs and expenses:
Cost of products sold 8,448,883 6,832,057
Selling, general and administrative 1,507,723 1,271,859
Nonrecurring items - 334,820
Interest expense 33,323 22,773
Interest income (11,372) -
INCOME BEFORE INCOME TAXES 256,691 (291,265)
Income taxes 97,000 (111,000)
NET INCOME (LOSS) $ 159,691 $ (180,265)
Earnings (loss) per share
of common stock $ .05 $ (.06)
Weighted average number of common
shares and equivalents outstanding 3,384,734 3,100,963
Nine Months Ended
March 29, March 30,
1997 1996
Net sales $33,279,066 $25,912,686
Costs and expenses:
Cost of products sold 27,216,242 21,430,867
Selling, general and administrative 4,473,096 3,914,114
Nonrecurring items - 334,820
Interest expense 110,947 85,716
Interest income (47,755) (753)
INCOME BEFORE INCOME TAXES 1,526,536 147,922
Income taxes 582,000 56,000
NET INCOME $ 944,536 $ 91,922
Earnings per share
of common stock $ .28 $ .03
Weighted average number of common
shares and equivalents outstanding 3,330,960 3,110,904
See notes to the condensed consolidated financial statements.
MILLER BUILDING SYSTEMS, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended
March 29, March 30,
1997 1996
Net cash provided by
operating activities $ 1,138,302 $ 1,022,958
Cash flows provided by (used in)
investing activities:
Purchase of property, plant
and equipment (820,715) (256,644)
Proceeds from sale of subsidiary 1,516,390 -
Net cash provided by (used in)
investing activities 695,675 (256,644)
Cash flows provided by (used in)
financing activities:
Proceeds from short-term borrowings 7,765,000 4,600,000
Payments on short-term borrowings (9,065,000) (5,435,000)
Payments of long-term debt and
capitalized lease obligations (815,000) (196,735)
Proceeds from exercise of
stock options 193,737 -
Net cash (used in)
financing activities (1,921,263) (1,031,735)
Increase (decrease) in cash and
temporary cash investments (87,286) (265,421)
Cash and temporary cash investments:
Beginning of period 165,329 351,860
End of period $ 78,043 $ 86,439
Noncash investing and financing activities:
Building capitalized under capital
lease and the related capital
obligation $ 979,000 $ -
See notes to condensed consolidated financial statements.
MILLER BUILDING SYSTEMS, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note A - BASIS OF PRESENTATION AND OPINION OF MANAGEMENT
The accompanying condensed consolidated financial statements
include the accounts of Miller Building Systems, Inc. and its
subsidiaries (individually and collectively referred to herein as
"Miller"). The unaudited interim condensed consolidated financial
statements have been prepared in accordance with the instructions to
Form 10-Q and, therefore, do not include all information and
disclosures necessary for a fair presentation of consolidated
financial position, results of operations and cash flows in
conformity with generally accepted accounting principles. In the
opinion of management, the information furnished herein includes all
adjustments (consisting of normal recurring accruals) necessary to
reflect a fair statement of the interim periods presented. Operating
results for the interim periods are not necessarily indicative of the
results that may be expected for the year ending June 28, 1997.
The June 29, 1996 condensed consolidated balance sheet was
derived from audited financial statements, but does not include all
disclosures required by generally accepted accounting principles.
Note B - INVENTORIES
Inventories consist of the following:
March 29, 1997 June 29, 1996
Raw materials $ 3,515,045 $ 2,875,527
Work in process 404,234 612,016
Finished goods 187,990 53,457
$ 4,107,269 $ 3,541,000
Note C - INCOME TAXES
The provision for income taxes includes estimated federal
and state income taxes computed using statutory rates in effect with
recognition given to various income tax versus financial reporting
differences. The provision for income taxes was 38.1% of income
before income taxes for the nine-months ended March 29, 1997 compared
to 37.9% in the comparable nine-month period of fiscal 1996.
Note D - ACQUISITION OF KANSAS FACILITY
On August 12, 1996, Miller entered into a ten-year lease
agreement with the Board of County Commissioners of Coffey County,
Kansas to lease a 155,000 square foot manufacturing facility. The
lease agreement provides for payments of $2,500 per month with an
option to purchase the building at the end of the lease for a balloon
payment of $250,000. The balloon payment can be reduced if certain
full-time employee levels are attained during the term of the lease.
In connection with the lease agreement, Miller also entered into an
agreement with the then current tenant of the property, whereby
Miller agreed to pay the tenant $750,000, in three installments
($400,000 on August 12, 1996; $275,000 on October 24, 1996; and
$75,000 five days after the former tenant received a signed
acceptance and release agreement from Coffey County). Miller has
accounted for this transaction as a capital lease whereby Miller
recorded the leased property under the capital lease and the related
obligations on its balance sheet.
Note E - SALE OF CALIFORNIA OPERATION
On October 21, 1996, Miller Structures, Inc.("Seller"), an
Indiana corporation and a wholly owned subsidiary of Miller, sold all
of its issued and outstanding stock of its wholly owned subsidiary,
Miller Structures, Inc.,("Company") a California corporation, to
MODTECH, Inc.("Buyer"). The sale was made pursuant to an Agreement
for Purchase and Sale of all of the outstanding Capital Stock of
Miller Structures, Inc., a Non-Competition Agreement and the
Supplemental Closing Agreement.
The consideration paid by the Buyer to the Seller consisted of
a cash purchase price of $1,516,390. Seller and Buyer also entered
into a three-year lease obligation for certain real property
("Property") which lease agreement requires the Buyer, as lessee, to
pay Seller rental payments of $4,500 per month. The lease obligation
is subject to cancellation if an expanded environmental report on the
Property is performed and is satisfactory to Buyer. Upon the
issuance of an acceptable expanded environmental report, Seller and
Buyer will mutually agree to cancel the lease agreement, and Buyer
will acquire the Property from Seller for a cash purchase price of
$450,000. The Non-Competition Agreement provides that the Seller
will not, at any time within a five-year period following closing,
engage in any business that manufactures and markets the products
currently manufactured by the Company in the states of California,
Nevada and Arizona.
Note F - NONRECURRING ITEMS
During the third quarter of fiscal 1996, Miller recorded a pre-
tax charge of $256,792, related to costs associated with the
terminated acquisition of Whitley Manufacturing Company, and a pre-
tax charge of $78,028 for warranty and other costs at the closed PME
and Residential operations.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Financial Condition - March 29, 1997 compared to June 29, 1996
At March 29, 1997, Miller's working capital was $6,059,031
compared to $5,942,053 at June 29, 1996. The working capital ratio
at March 29, 1997 was 2.1 to 1 compared to 2.2 to 1 at June 29, 1996.
Miller has an unsecured bank credit agreement which provides for
advances up to $5,000,000 through November 30, 1997. Outstanding
borrowings under this credit agreement were $200,000 at March 29,
1997 compared to $1,500,000 at June 29, 1996.
Miller believes operating cash flows and the bank credit
agreement are sufficient to meet operating needs. The proceeds from
the sale of the California operation (see Note E of the Notes to
Condensed Consolidated Financial Statements) were used to fund the
acquisition of the Kansas facility (see Note D of the Notes to the
Condensed Consolidated Financial Statements).
Results of Operations - Three months ended March 29, 1997 compared to
the three months ended March 30, 1996
Net sales increased $2,065,004 during the third quarter of
fiscal 1997 or approximately 25.3% from the corresponding quarter in
fiscal 1996. The increase in sales volume for the quarter was the
result of strong business conditions at all of Millers' operating
locations, particularly in the Northeast. Net sales at Miller
Structures, Inc. ("Structures") increased 23.0% from the third
quarter last year. The increase in net sales was achieved despite
the decline in sales related to the California operation which was
sold during the current year's first fiscal quarter. Structures'
current order backlog of business remains more than double last
year's backlog. The new Kansas plant, which began production during
the quarter, also contributed to the increased sales volume. Net
sales at Miller Telecom Services, Inc. ("Telecom") increased 4.1%
over the third quarter last year. Telecom's Elkhart plant is now
producing close to capacity. The addition of the Kansas plant will
provide the capacity to sustain the greater growth rates anticipated
in the telecommunications industry.
During the three-month period ended March 29, 1997, cost of
products sold was 82.5% of net sales compared to 83.6% for the
comparable period of fiscal 1996. The increase in gross profit and
the gross profit percentage for the quarter can be attributed to a
shift in mix at Structures to the more profitable custom units, a
larger percentage of unit sales at Telecom which carry a higher
profit margin, and a strong business environment and order backlog
which reduced the need to discount units during the slow winter
months. The decrease in the cost of products sold percentage for the
quarter ended March 29, 1997 is not necessarily indicative of the
trend in cost of sales anticipated in future periods.
Selling, general and administrative expenses for the three-month
period ended March 29, 1997, increased 18.5% when compared to the
similar period of fiscal 1996. The higher selling, general and
administrative expenses were the result of additional headcount and
performance based compensation and start-up expenses at the Kansas
plant. As a percentage of net sales, selling, general and
administrative expenses for the three-month period ended March 29,
1997, were 14.7%, compared to 15.6% in the comparable three-month
period in fiscal 1996.
Interest expense increased $10,550 to $33,323 during the current
three-month period compared to the similar period of the prior year.
The increase was attributable to higher levels of debt outstanding.
The provision for income taxes was 37.8% of income before income
taxes for the three months ended March 30, 1997 compared to a 38.1%
credit for income taxes in the comparable three-month period of
fiscal 1996.
Results of Operations - Nine months ended March 29, 1997 compared to
the nine months ended March 29, 1996
Net sales increased $7,366,380 during the nine-month period
ended March 29, 1997 or 28.4% from the corresponding period in fiscal
1996. Structures, Telecom and the new Kansas operation all
contributed to the net sales increase. Net sales at Structures
increased 25.3% and Telecom increased 26.9% from the nine-month
period last year.
During the nine-month period ended March 29, 1997, cost of
products sold was 81.8% of net sales compared to 82.7% for the
comparable period of fiscal 1996. The shift in mix to more
profitable custom units at Structures, the larger percentage of unit
sales at Telecom which carry a higher profit margin and the lack of
unit discounting during the second quarter contributed to the
reduction in the cost of products sold percentage for the comparable
nine-month period.
Selling, general and administrative expenses for the nine-month
period ended March 29, 1997, increased 14.3% when compared to the
similar period of fiscal 1996. The higher selling, general and
administrative expenses was the result of additional headcount and
performance based compensation; start-up expenses at the Kansas
plant; increased advertising expense; disposition related legal fees
and an increase in the allowance for doubtful receivables. As a
percentage of net sales, selling, general and administrative expenses
for the nine-month period ended March 29, 1997, were 13.4%, compared
to 15.1% in the comparable nine-month period in fiscal 1996.
Interest expense increased $25,231 to $110,947 during the
current nine-month period compared to the similar period of the prior
year. The increase was attributable to higher levels of debt
outstanding.
The provision for income taxes was 38.1% of income before income
taxes for the nine-months ended March 29, 1997 compared to 37.9% in
the comparable nine-month period of fiscal 1996.
In February 1997, Statement of Financial Accounting Standards
("SFAS") No. 128, "Earnings Per Share" was issued by the Financial
Accounting Standards Board. The Company is required to initially
adopt this pronouncement during its fiscal 1998 second quarter ending
December 26, 1998. SFAS No. 128 will require the Company to make a
dual presentation of basic and fully diluted earnings per share on
the face of the income statement. The Company does not presently
anticipate that SFAS No. 128 will have a significant impact on the
Company's historically reported earnings per share.
Part II. Other Information
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits. See Index to Exhibits
(b) Reports on Form 8-K
The following report on Form 8-K/A was filed during the
three months ended March 29, 1997.
The October 21, 1996 Form 8-K was amended to report that
the Registrant, after further review of the preliminary
financial information and the assumptions relating to the
final terms of the Miller Structures Sale, had determined
that the Miller Structures Sale did not involve the
disposition of a significant amount of assets pursuant to
Instruction 4 of Item 2 for Form 8-K and should be reported
under "Item 5. Other Events." Also, the Form 8-K/A was
filed to report that no proforma financial information was
required to be filed under Item 7 for Form 8-K.
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 BUILDING SYSTEMS, INC.
(Registrant)
DATE: May 8, 1997 \Edward C. Craig
Edward C. Craig
President and Chief Executive
Officer
(Principal Executive
Officer)
\Thomas J. Martini
Thomas J. Martini
Secretary and Treasurer
(Principal Financial and
Accounting Officer)
MILLER BUILDING SYSTEMS, INC.
AND SUBSIDIARIES
FORM 10-Q
INDEX TO EXHIBITS
Number Assigned
in Regulation S-K
Item 601 Description of Exhibit
(11) Statement regarding computation of
per share earnings
Exhibit 11
MILLER BUILDING SYSTEMS, INC.
AND SUBSIDIARIES
Statement Regarding Computation of Per Share Earnings
Three Months Ended Nine Months Ended
March 29, March 30, March 29, March 30,
1997 1996 1997 1996
Calculation of primary earnings
(loss)per common share:
Net income (loss) $ 159,691 $ (180,265) $ 944,536 $ 91,922
Shares outstanding, net of
treasury shares, at beginning
of the fiscal period 3,159,991 3,100,963 3,100,963 3,100,963
Additional shares assuming
exercise as of the beginning
of the fiscal period of
dilutive stock options, based
on the treasury stock method
using the average market
price for the period 190,292 (a)- 192,924 9,941
Weighted average number of
shares issued as a result of
exercise of stock options 35,205 - 56,221 -
Weighted average number of
shares acquired as treasury
stock (754) - (19,148) -
Weighted average shares and
equivalent shares outstanding 3,384,734 3,100,963 3,330,960 3,110,904
Primary earnings (loss)
per share: $ .05 $ (.06) $ .28 $ .03
(a) Common stock equivalents not considered since effect is antidilutive.
Fully dilutive earnings (loss) per share do not differ materially from
primary earnings (loss) per share.