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 December 27, 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
3,258,463 Shares Outstanding at February 6, 1998
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 7-9
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 9-11
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
December 27, June 28,
1997 1997
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 167,232 $ 89,117
Receivables 7,140,998 8,450,479
Inventories 3,850,211 3,712,664
Deferred income taxes 448,000 448,000
Property held for sale 391,985 412,106
Other current assets 193,657 66,713
TOTAL CURRENT ASSETS 12,192,083 13,179,079
PROPERTY, PLANT AND EQUIPMENT, at cost 11,824,898 10,900,119
Less, Accumulated depreciation and
amortization 4,679,263 4,308,543
7,145,635 6,591,576
OTHER ASSETS 106,274 104,562
TOTAL ASSETS $19,443,992 $19,875,217
See notes to condensed consolidated financial statements.
MILLER BUILDING SYSTEMS, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
December 27, June 28,
1997 1997
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term borrowings $ 1,500,000 $ 1,870,000
Current maturities of long-term debt 133,484 207,971
Accounts payable 2,118,695 1,478,675
Accrued income taxes 282,413 1,072,464
Accrued expenses and other 805,827 1,561,979
TOTAL CURRENT LIABILITIES 4,840,419 6,191,089
LONG-TERM DEBT, less current maturities 1,232,960 1,357,374
DEFERRED INCOME TAXES 133,000 133,000
OTHER 16,601 16,601
TOTAL LIABILITIES 6,222,980 7,698,064
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value 40,235 40,235
Additional paid-in capital 11,454,903 11,454,903
Retained earnings 4,560,745 3,596,049
16,055,883 15,091,187
Less, Treasury stock, at cost 2,834,871 2,914,034
TOTAL STOCKHOLDERS' EQUITY 13,221,012 12,177,153
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $19,443,992 $19,875,217
See notes to condensed consolidated financial statements.
MILLER BUILDING SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended
December 27, December 28,
1997 1996
Net sales $10,405,750 $10,007,430
Costs and expenses:
Cost of products sold 8,448,860 8,049,776
Selling, general and administrative 1,401,182 1,481,089
Interest expense 48,357 27,007
Other income, principally interest - (6,518)
INCOME BEFORE INCOME TAXES 507,351 456,076
Income taxes 192,000 176,000
NET INCOME $ 315,351 $ 280,076
Earnings per share of common stock:
Basic $ .10 $ .09
Diluted $ .09 $ .09
Number of shares used in computation
of earnings per share:
Basic 3,253,319 3,116,851
Diluted 3,399,824 3,279,331
Six Months Ended
December 27, December 28,
1997 1996
Net sales $23,721,150 $23,043,819
Costs and expenses:
Cost of products sold 19,136,388 18,767,358
Selling, general and administrative 2,972,235 2,965,374
Interest expense 95,449 77,624
Other income, principally interest (498) (36,383)
INCOME BEFORE INCOME TAXES 1,517,576 1,269,846
Income taxes 576,000 485,000
NET INCOME $ 941,576 $ 784,846
Earnings per share of common stock:
Basic $ .29 $ .25
Diluted $ .28 $ .24
Number of shares used in computation
of earnings per share:
Basic 3,245,372 3,109,567
Diluted 3,397,435 3,270,901
See notes to condensed consolidated financial statements.
MILLER BUILDING SYSTEMS, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended
December 27, December 28,
1997 1996
Net cash provided by
operating activities $ 1,474,507 $ 2,553,168
Cash flows provided by (used in)
investing activities:
Purchase of property, plant
and equipment (924,779) (418,705)
Proceeds from sale of subsidiary - 1,516,390
Net cash provided by (used in)
investing activities (924,779) 1,097,685
Cash flows provided by (used in)
financing activities:
Proceeds from short-term borrowings 11,325,000 6,765,000
Payments on short-term borrowings (11,695,000) (8,265,000)
Payments of long-term debt and
capitalized lease obligations (198,901) (815,000)
Proceeds from exercise of
stock options 97,288 11,323
Net cash (used in)
financing activities (471,613) (2,303,677)
Increase in cash and
cash equivalents 78,115 1,347,268
Cash and cash equivalents:
Beginning of period 89,117 165,329
End of period $ 167,232 $ 1,512,505
Noncash investing and financing activities:
Building capitalized under capital
lease and the related capital
lease 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 27, 1998. The
1997 Miller Building Systems Annual Report on Form 10-K and Quarterly
Report on Form 10-Q for the quarter ended September 27, 1997, should
be read in conjunction with these statements.
The June 28, 1997 condensed consolidated balance sheet was
derived from audited financial statements, but does not include all
disclosures required by generally accepted accounting principles.
Earnings per Share - In February 1997, the Financial Accounting
Standards Board ("FASB") issued Statement of Financial Accounting
Standards ("SFAS") No. 128, "Earnings per Share." This Statement
establishes standards for computing and presenting earnings per
share, simplifies the standards for computation and makes the
calculation comparable to international accounting standards. Under
SFAS No. 128, "Primary earnings per share" was replaced by "basic"
earnings per share. In addition, "basic" and "diluted" earnings per
share are required to be presented on the face of the income
statement. SFAS No. 128 is effective for periods ending after
December 15, 1997, and restatement of prior periods must occur upon
adoption. Basic earnings per share is computed by dividing net
income by the weighted average number of shares of common stock.
Diluted earnings per share is computed by dividing net income by the
weighted average number of shares of common stock outstanding plus
the dilutive effect of outstanding stock options. The number of
shares used in the computation of basic and diluted earnings per
share are shown on the face of the statements of income.
Note B - INVENTORIES
Inventories consist of the following:
December 27, 1997 June 28, 1997
Raw materials $ 3,125,054 $ 3,133,958
Work in process 423,804 578,706
Finished goods 301,353 -
$ 3,850,211 $ 3,712,664
Note C - SALE OF CALIFORNIA OPERATION
On October 21, 1996, Miller sold all of the issued and
outstanding stock of its wholly owned California subsidiary, to
MODTECH, Inc. ("Buyer"). The California subsidiary manufactured
modular and mobile buildings in Patterson, California.
The consideration paid by the Buyer to Miller consisted of a
cash purchase price of $1,516,390. Miller and the Buyer also entered
into a three-year lease obligation for certain real property (the
"Patterson Property") which lease agreement requires the Buyer, as
lessee, to pay Miller rental payments of $4,500 per month. On
January 16, 1998, with the issuance of an acceptable expanded
environmental report on the Patterson Property, Miller and the Buyer
mutually agreed to cancel the lease agreement, and the Buyer acquired
the Patterson Property from Miller for a cash purchase price of
$450,000. The carrying value of the Patterson Property of $391,985
is reflected as a current asset (Property held for sale) at December
27, 1997.
In connection with this sale transaction, Miller entered into a
non-competition agreement with the Buyer which provides that Miller
will not, at any time within a five-year period following closing,
engage in any business that manufactures and markets the products
which were previously manufactured by Miller's former California
subsidiary in the states of California, Nevada and Arizona.
Note D - SUBSEQUENT EVENT
On January 29, 1998, Miller executed a Memorandum Agreement
("Agreement") to acquire all of the issued and outstanding stock of
United Structures, Inc. ("United"), a New York corporation. The
Agreement dated as of December 30, 1997, codified an agreement made
and entered on December 30, 1997, between Miller and the sole
shareholder of United. The parties anticipate closing the purchase
transaction, effective January 1, 1998, in February 1998. The
purchase price will consist of $2.8 million in cash paid at closing
and a contingent purchase price based on United's earnings for the
six months ending June 27, 1998, which will be payable in shares of
Miller's common stock.
Note E - Accounting and Regulatory Developments
In June 1997, FASB issued SFAS No. 131, "Disclosure About
Segments of an Enterprise and Related Information," which Miller will
be required to adopt in its fiscal 1999 year-end financial
statements. SFAS No. 131 specifies revised guidelines for
determining operating segments and the type and level of information
to be disclosed. Miller has not yet determined what changes in its
disclosures, if any, will be required by SFAS No. 131.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Some matters set forth herein are forward looking statements
that are dependent on certain risks and uncertainties. Such factors,
among others, are the mix between fleet and custom products, the
strength of the economy in the various sections of the country served
by Miller and the bidding and quoting process, where our competitors
can impact the profitability of our products. At times, Miller's
actual performance differs materially from its projections and
estimates regarding the economy, the modular building and
telecommunications shelter industries and other key performance
indicators. Miller's actual results could vary significantly from
the performance projected in the forward looking statements.
Financial Condition - December 27, 1997 compared to June 28, 1997
At December 27, 1997, Miller's working capital was $7,351,664
compared to $6,987,990 at June 28, 1997. The working capital ratio
was 2.5 to 1 at December 27, 1997 and 2.1 to 1 at June 28, 1997.
Miller has an unsecured bank credit agreement which provides for
advances up to $5,000,000 through November 30, 1998. Outstanding
borrowings under this credit agreement were $1,500,000 at December
27, 1997 compared to $1,870,000 at June 28, 1997.
Miller believes operating cash flows and the bank credit
agreement are sufficient to meet operating needs.
Results of Operations - Three months ended December 27, 1997 compared
to the three months ended December 28, 1996
Net sales increased $398,320 during the second quarter of fiscal
1998 or approximately 4.0% from the corresponding quarter in fiscal
1997. Net sales for the Structures product line, ("Structures")
increased 7.4% from the second quarter last year. The net sales
increase at Structures was primarily the result of higher sales at
the Burlington, Kansas facility which did not begin operation until
January of fiscal year 1997. Net sales for the Telecom product line,
("Telecom") decreased 9.3% from the second quarter last year. This
decrease was the result of lower sales volume at the Elkhart
facility, partially offset by increased sales volume at the Kansas
facility. The Structures' business is steady as our backlogs remain
strong. The Telecom business has been soft for the past five months
as the Telecommunications industry slowed their shelter orders. The
industry has concentrated on generating revenue by placing existing
infrastructure in service. These factors led to the overall decline
in Telecom sales in the second qurter. We believe that this trend
will reverse in early 1998. The anticipated increase in Telecom
orders and the continuation of the previously announced Michigan
State Police project should create strong Telecom sales during the
second half of our fiscal year. The new Leola, Pennsylvania facility
is under construction and is expected to be in operation late in
Miller's fourth fiscal quarter.
During the three-month period ended December 27, 1997, cost of
products sold was 81.2% of net sales compared to 80.4% for the
comparable period of fiscal 1997. This increase can be attributed to
the lower than anticipated telecommunications sales volume at the
Kansas facility, coupled with a larger percentage of unit sales at
Structures which carry a lower profit margin. The increase in the
cost of products sold percentage for the quarter ended December 27,
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 December 27, 1997, decreased 5.4% when compared to the
similar period of fiscal 1997. The lower selling, general and
administrative expenses was generally the result of lower advertising
and incentive compensation costs. As a percentage of net sales,
selling, general and administrative expenses for the three-month
period ended December 27, 1997, were 13.5%, compared to 14.8% in the
comparable three-month period in fiscal 1997.
Interest expense increased $21,350 to $48,357 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
and slightly higher interest rates. The higher debt level was
principally the result of funding construction costs at the new
Pennsylvania facility and the delay in collecting certain accounts
receivable which have been placed in escrow.
The provision for income taxes was 37.8% of income before income
taxes for the three months ended December 27, 1997 and 38.6% for the
comparable three-month period of fiscal 1997.
Results of Operations - Six months ended December 27, 1997 compared
to the six months ended December 28, 1996
Net sales increased $677,331 during the first six-months of
fiscal 1998 or approximately 2.9% from the corresponding period in
fiscal 1997. Net sales for the Structures product line,
("Structures") was essentially unchanged from the first six-months
last year. The $1.6 million of lost revenue related to the
Patterson, California operation, which was sold during the first
quarter of fiscal 1997, was offset by increased sales volume at the
Structures' Elkhart and Kansas facilities. Net sales for the Telecom
product line, ("Telecom") increased 8.2% over the first six-months
last year. This increase was the result of sales at the new Kansas
facility, partially offset by the decline in sales volume at the
Elkhart facility.
During the six-month period ended December 27, 1997, cost of
products sold was 80.7% of net sales compared to 81.4% for the
comparable period of fiscal 1997. The increase in gross profit for
the period can be attributed to a shift in mix at Structures to the
more profitable custom units, and a larger percentage of unit sales
at Telecom which carry a higher profit margin. The decrease in the
cost of products sold percentage for the period ended December 27,
1997 is not necessarily indicative of the trend in cost of sales
anticipated in future periods.
Selling, general and administrative expenses for the six-month
period ended December 27, 1997, increased slightly from the similar
period of fiscal 1997. The overall increase in selling, general and
administrative expenses related to inflationary and cost of living
increases was offset by a decrease in incentive compensation costs.
As a percentage of net sales, selling, general and administrative
expenses for the six-month period ended December 27, 1997, were
12.5%, compared to 12.9% in the comparable six-month period in fiscal
1997.
Interest expense increased $17,825 to $95,449 during the current
six-month period compared to the similar period of the prior year.
The increase was attributable to higher levels of debt outstanding
during the period and slightly higher interest rates.
The provision for income taxes was 38.0% of income before income
taxes for the six months ended December 27, 1997 and the comparable
six-month period of fiscal 1997.
Other Matters
As disclosed in Note D of the condensed consolidated financial
statements; Miller executed on January 29, 1998, an agreement to acquire
all the issued and outstanding common shares of United Structures,
Inc.
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
There were no reports on Form 8-K filed during the three
months ended December 27, 1997.
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: February 9, 1998 \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 Six Months Ended
December December December December
1997 1996 1997 1996
Net income $ 315,351 $ 280,076 $ 941,576 $ 784,846
Shares outstanding, net of
treasury shares, at beginning of
the fiscal period 3,217,433 3,100,963 3,217,433 3,100,963
Weighted average number of shares
issued as a result of exercise
of stock options 46,881 27,851 37,102 14,755
Weighted average number of shares
acquired as treasury stock (10,995) (11,963) (9,163) (6,151)
Weighted average number of shares
outstanding during the period
(used in the calculation of basic
earnings per share) 3,253,319 3,116,851 3,245,372 3,109,567
Additional shares assuming
exercise as of the beginning of
the fiscal period of dilutive
stock options, based on the
treasure stock method using the
average market price for
the period 146,505 162,480 152,063 161,334
Weighted average number of shares
outstanding, including dilutive
shares, (used in the calculation
of diluted earnings per share) 3,399,824 3,279,331 3,397,435 3,270,901
Basic earnings per share $ .10 $ .09 $ .29 $ .25
Diluted earnings per share $ .09 $ .09 $ .28 $ .24