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 September 26, 1998
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
3,537,103 Shares Outstanding at November 4, 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 4. Submission of Matters to a Vote of
Security Holders 12
Item 6. Exhibits and Reports on Form 8-K 12
Signatures 13
Index to Exhibits 14
- -
Part I. Financial Information
Item 1. Financial Statements
MILLER BUILDING SYSTEMS, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
September 26, June 27,
1998 1998
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 196,181 $ 111,620
Receivables 12,602,159 11,126,444
Refundable income taxes 20,000 20,000
Inventories 6,465,945 6,140,647
Deferred income taxes 230,000 230,000
Other current assets 318,647 204,107
TOTAL CURRENT ASSETS 19,832,932 17,832,818
PROPERTY, PLANT AND EQUIPMENT, at cost 14,934,302 14,153,205
Less, Accumulated depreciation and
amortization 5,343,548 5,141,452
PROPERTY, PLANT AND EQUIPMENT, NET 9,590,754 9,011,753
Unexpended industrial revenue bond
proceeds 486,427 1,115,854
Excess acquisition cost over fair
value of acquired net assets, net 4,273,846 2,058,409
Other assets 192,314 210,754
TOTAL ASSETS $34,376,273 $30,229,588
See notes to condensed consolidated financial statements.
MILLER BUILDING SYSTEMS, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
September 26, June 27,
1998 1998
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term borrowings $ 2,775,000 $ 3,550,000
Current maturities of long-term debt 763,169 762,900
Accounts payable 5,169,356 3,246,373
Accrued income taxes 323,916 17,469
Accrued expenses and other 1,490,161 1,645,871
TOTAL CURRENT LIABILITIES 10,521,602 9,222,613
Long-term debt, less current maturities 5,983,121 6,094,389
Deferred income taxes 316,000 316,000
Other 15,276 15,276
TOTAL LIABILITIES 16,835,999 15,648,278
STOCKHOLDERS' EQUITY:
Preferred stock, $1.00 par value - -
Common stock, $.01 par value 42,506 40,235
Additional paid-in capital 13,847,920 11,600,191
Retained earnings 6,452,497 5,770,243
20,342,923 17,410,669
Less, Treasury stock, at cost 2,802,649 2,829,359
TOTAL STOCKHOLDERS' EQUITY 17,540,274 14,581,310
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $34,376,273 $30,229,588
See notes to condensed consolidated financial statements.
MILLER BUILDING SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended
September 26, September 27,
1998 1997
Net sales $17,216,098 $13,315,399
Costs and expenses:
Cost of products sold 14,144,448 10,687,529
Selling, general and administrative 1,816,224 1,571,052
Interest expense 158,090 47,092
Other income, principally interest (7,228) (498)
INCOME BEFORE INCOME TAXES 1,104,564 1,010,224
Income taxes 427,000 384,000
NET INCOME $ 677,564 $ 626,224
Earnings per share of common stock:
Basic $ .19 $ .19
Diluted $ .19 $ .18
Number of shares used in computation
of earnings per share:
Basic 3,533,143 3,237,426
Diluted 3,628,843 3,402,733
See notes to condensed consolidated financial statements.
MILLER BUILDING SYSTEMS, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended
September 26, September 27,
1998 1997
Net cash provided by (used in)
operating activities $ 1,090,830 $ (408,377)
Cash flows provided by (used in)
investing activities:
Purchase of property, plant
and equipment (781,097) (111,008)
Decrease in unexpended industrial
revenue bond proceeds 629,427 -
Net cash (used in)
investing activities (151,670) (111,008)
Cash flows provided by (used in)
financing activities:
Proceeds from short-term borrowings 7,675,000 5,235,000
Reduction of short-term borrowings (8,450,000) (4,805,000)
Payments of long-term debt (110,999) (4,419)
Proceeds from exercise of
stock options 31,400 94,773
Net cash provided by (used in)
financing activities (854,599) 520,354
Increase in cash and cash equivalents 84,561 969
Cash and cash equivalents:
Beginning of period 111,620 89,117
End of period $ 196,181 $ 90,086
Noncash investing and financing activities:
Issuance of 227,082 shares of
common stock in connection
business acquisition $ 2,250,000 $ -
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 July 3, 1999. The
1998 Miller Building Systems Annual Report on Form 10-K should be
read in conjunction with these statements.
The June 27, 1998 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:
September 26, 1998 June 27, 1998
Raw materials $ 4,914,970 $ 4,604,615
Work in process 1,341,529 1,215,552
Finished goods 209,446 320,480
$ 6,465,945 $ 6,140,647
Note C - EARNINGS PER SHARE
The number of shares used in the computation of basic and
diluted earnings per share are as follows:
Three Months Ended
September 26, September 27,
1998 1997
Weighted average number
of common shares outstanding
(used for basic earnings
per share) 3,533,143 3,237,426
Effect of dilutive
securities:
Stock options 95,700 165,308
Diluted shares outstanding
(used for diluted earnings
per share) 3,628,843 3,402,733
Note D - ACQUISITION OF NEW YORK OPERATION
Effective January 1, 1998, Miller acquired all of the issued and
outstanding shares of common stock of United Structures, Inc.
("United"), a New York corporation. United is engaged in the business
of designing, manufacturing and marketing factory-built structures
primarily for the telecommunications industry. The purchase price
(the "minimum purchase price"), including direct acquisition costs,
consisted of cash of $3.1 million and assumed liabilities of $4.1
million. In addition to the minimum purchase price, Miller agreed to
pay the seller a contingent purchase price ("contingent purchase
price"), payable in shares of Miller's common stock, based on United's
earnings for the six-month period ended June 27, 1998. United's
earnings for the six-month period ended June 27, 1998 exceeded the
targeted amount and, accordingly, on September 4, 1998 Miller paid
the maximum additional contingent purchase price of $2,250,000
(227,082 shares of Miller's common stock). The contingent purchase
price was recorded as additional goodwill. The acquisition of United
was accounted for using the purchase method and United's operating
results have been included in Miller's consolidated financial
statements since the acquisition date of January 1, 1998. The
following unaudited pro forma financial information for the quarter
ended September 27, 1997 was developed assuming United had been
acquired at the beginning of the 1998 fiscal year. The unaudited pro
forma earnings per share (basic and diluted) reflect the issuance of
227,082 additional shares as though these shares were issued and
outstanding during the period.
Note D - ACQUISITION OF NEW YORK OPERATION, continued
Three Months Ended
September 27, 1997
Net sales $ 15,943,000
Net income 794,000
Earnings per share:
Basic .23
Diluted .22
The unaudited pro forma financial information is not necessarily
indicative of what actually would have occurred if the acquisition
had been completed as of the beginning of the 1998 fiscal year, nor
is it indicative of future operating results.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Report contains certain statements that are "forward-looking" within
the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934, as amended. Those statements are dependent on
certain risks and uncertainties. Such factors, among others, are the mix between
products with varying profit margins, the belief that previous growth rates in
the telecommunication shelter market will continue, the awarding of contracts,
the expected profitability of the new Pennsylvania operation, the strength of
the economy in the various sections of the country served by the Company, the
impact of our competitors on the profitability of our products, the future
availability of raw materials, the anticipated adequacy of the Company's
operating cash flows and credit facilities to finance operations, capital
expenditures and other needs of its business and the ability of the Company and
its customers and vendors to become year 2000 compliant. Readers are cautioned
that reliance on any forward-looking statements contained herein are based on
reasonable assumptions, any of which could prove to be inaccurate given the
inherent uncertainties as to the occurrence or nonoccurrence of future events.
There can be no assurance that the forward-looking statements contained in this
Report will prove to be accurate. The inclusion of a forward-looking statement
herein should not be regarded as a representation by the Company that the
Company's objectives will be achieved.
Financial Condition - September 26, 1998 compared to June 27, 1998
At September 26, 1998, Miller's working capital was $9,311,330
compared to $8,610,205 at June 27, 1998. The working capital ratio
was 1.9 to 1 at September 26, 1998 and at June 27, 1998.
Miller has an unsecured bank credit agreement which provides for
advances up to $5,000,000 through November 30, 1998, and Miller
expects this credit facility will be renewed through November 30,
1999. Outstanding borrowings under this credit agreement were
$2,775,000 at September 26, 1998 compared to $3,550,000 at June 27,
1998.
Miller believes operating cash flows and the bank credit
agreement are sufficient to meet operating needs.
Results of Operations - Three months ended September 26, 1998
compared to the three months ended September 27, 1997
As discussed in Note D of Notes to Condensed Consolidated
Financial Statements, effective January 1, 1998, Miller acquired
United Structures, Inc. ("United") which was accounted for as a
purchase transaction. Miller's operating results for the current
quarter include the operating results of United. Pro forma financial
information for last year's first quarter is included in Note D.
Net sales increased $3,900,699 during the first quarter of
fiscal 1999 or approximately 29.3% from the corresponding quarter in
fiscal 1998. Net sales for the Structures product line,
("Structures") decreased 9.2% from the first quarter last year. The
net sales decrease at Structures was primarily the result of
increased product complexity and difficulty in hiring qualified
personnel at the Indiana plant, the decision to build only Telecom
units at the Kansas plant and softness in the markets served by the
Vermont and South Dakota plants. Net sales for the Telecom product
line, ("Telecom") increased 113.6% from the first quarter last year.
This increase was the result of sales at the newly acquired United
operation and Telecom sales at the recently opened Pennsylvania
plant. Although we see a softness in the Structures business,
several large contracts, in excess of $3,000,000, have been bid
and if awarded could reverse this trend. The Telecom business has
rebounded and their backlogs, excluding United, have more than
tripled last year. The increase in Telecom orders and the
continuation of the previously announced Michigan State Police
project should create strong Telecom sales during the remainder of
our fiscal year. We believe United will continue to be a profitable
addition to Miller. The newly completed Leola, Pennsylvania facility
is expected to begin contributing to Miller's overall profitability
in the second fiscal quarter.
During the three-month period ended September 26, 1998, cost of
products sold was 82.2% of net sales compared to 80.3% for the
comparable period of fiscal 1998. This increase is primarily the
result of costs related to the start-up operation at the Pennsylvania
plant. The increase in the cost of products sold percentage for the
quarter ended September 26, 1998 is not necessarily indicative of the
trend in cost of sales anticipated in future periods.
Selling, general and administrative expense for the three-month
period ended September 26, 1998, increased 15.6% when compared to the
similar period of fiscal 1998. The higher selling, general and
administrative expense was generally the result of the additional
administrative costs at the United and Pennsylvania operations and
higher overall staffing levels. As a percentage of net sales,
selling, general and administrative expenses for the three-month
period ended September 26, 1998, were 10.5%, compared to 11.8% in the
comparable three-month period in fiscal 1998.
Interest expense increased $110,998 to $158,090 during the
current three-month period compared to the similar period of the
prior year. The increase was attributable to higher levels of
outstanding debt, which was principally the result of the
construction of the new Pennsylvania facility and the acquisition of
United.
The provision for income taxes was 38.7% of income before income
taxes for the three months ended September 26, 1998 and 38.0% for the
comparable three-month period of fiscal 1998.
Accounting and Regulatory Developments
In June 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards ("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.
Year 2000 Compliance
Miller is continuing the process of identifying, evaluating, and
implementing changes necessary to address the year 2000 issue. This
issue affects computer systems that have date-sensitive programs that
may not properly recognize the year 2000. Systems that do not
properly recognize such information could generate erroneous data or
cause a system to fail, resulting in business interruption. Miller
believes its current systems are year 2000 compliant and, therefore,
does not believe the cost of converting any internal systems to be
year 2000 compliant will be material to its consolidated financial
condition or results or operations. Costs related to the year 2000
issue have been expensed as incurred. The year 2000 issue is
expected to affect the systems of various entities with which Miller
interacts, including customers and vendors. There can be no
assurance that the systems of other companies on which Miller's
systems rely will be timely converted, or that a failure by another
company's systems to be year 2000 compliant would not have a material
adverse effect on Miller. Based on information currently available,
management believes its systems will be year 2000 compliant.
Part II. Other Information
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) Annual Meeting held on November 4, 1998, proxies for which
were solicited pursuant to Regulation 14 under the
Securities and Exchange Act of 1934, as amended.
(b) Matters voted upon at Annual Meeting:
Votes Cast
For Withheld
1. Election of Directors
David E. Downen 2,886,979 12,418
Kenneth H. Granat 2,886,979 12,418
William P. Hall 2,886,979 12,418
2. Appointment of For 2,885,444
PricewaterhouseCoopers LLP Against 11,644
Withheld 2,309
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 September 26, 1998.
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: November 6, 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
(27) Financial Data Schedule