UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
(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 3, 1999
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. ( )
Aggregate market value of voting stock held by nonaffiliated 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 27, 1999:
$20,589,883.
As of August 27, 1999, the Registrant had 3,358,393 shares of Common Stock
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents are incorporated by reference into this Annual Report on
Form 10-K:
Portions of Registrant's Proxy Statement for its 1999 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.
This Report contains certain statements that are "forward-looking statements"
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 ability to achieve
forecasted production levels through the second quarter of fiscal 2000 with
the current backlog of orders, 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, its suppliers and its customers to be
year 2000 compliant. Readers are cautioned that reliance on any forward-looking
statement involves risks and uncertainties. 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.
PART I
ITEM 1. BUSINESS
The Company
Miller Building Systems, Inc. ("Miller") is the parent of Miller Building
Systems of Indiana, Inc., Miller Building Systems of Pennsylvania, Inc., Miller
Building Systems of Kansas, Inc., United Structures, Inc.("United"), and Miller
Construction Services, Inc. ("Construction Services"). All operations of Miller
are conducted through its five wholly owned subsidiaries which design,
manufacture, market and service factory-built buildings. Miller has three
product lines, Structures, Telecom and Construction Services. The factory-built
buildings produced by Structures are modular and mobile buildings, which are
generally movable and relocatable, and designed to meet the specialized needs of
a wide variety of users. Structures products are sold to independent customers
who, in turn, sell or lease to the end users. The Structures division has
manufacturing facilities in Elkhart, Indiana; Leola, Pennsylvania; Sioux Falls,
South Dakota and Bennington, Vermont. The Telecom division manufactures
specialized buildings, which utilize modular construction techniques and pre-
cast concrete technology, and are designed principally for customers in the
telecommunications industry. Telecom's products are sold directly to the end
user. Telecom has manufacturing facilities in Elkhart, Indiana; Binghamton, New
York and Leola, Pennsylvania. Miller's Structures and Telecom products are sold
throughout the United States. Construction Services provides complete turnkey
services from site preparation through setting and installation.
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.
On August 20, 1999, Miller entered into an Asset Purchase Agreement with
Andrew Corporation to sell certain assets and the business operations of the
Burlington, Kansas facility and assign a lease agreement for the Kansas facility
to Andrew Corporation (See Note J of the Notes to Consolidated Financial
Statements).
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 their wholly owned subsidiaries.
STRUCTURES PRODUCT LINE
Sales and engineering for the Structures product line are headquartered in
Elkhart, Indiana. The sales and engineering staff support the manufacturing
facilities in Elkhart, Indiana; Leola, Pennsylvania; Sioux Falls, South Dakota
and Bennington, Vermont.
Structures - Modular and Mobile Office Buildings
Products
The buildings sold 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 sold 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 a
comparable conventional site-built building. 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 sold 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 site-built
construction with appropriate variations. Structures also sells 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 sold 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 sold 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 sold 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 June 27, 1998 and June 28, 1997, the following customers
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 ("GE Capital"), represented 13% of Miller's net sales for the fiscal
year ended June 27, 1998 and In-Roads, Inc. represented 15% for the fiscal year
ended June 28, 1997. There was no Structures customer that represented more
than 10% of Miller's net sales for the fiscal year ended July 3, 1999.
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 Miller. 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 PRODUCT LINE
Sales and engineering for the Telecom product line are located in Elkhart,
Indiana. Telecom provides all administrative, sales and production services
from that location. The sales and engineering staff support manufacturing
facilities in Elkhart, Indiana; Binghamton, New York and Leola, Pennsylvania.
Products
Telecom manufactures modular factory-built buildings using pre-cast
concrete, steel and concrete, 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
building transportation and complete site installation of the building and
equipment, 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.
Telecom has complemented the traditional pre-cast concrete technology with
a lightweight concrete/steel building which will reduce the overall building
weight by 40%. A Cam-Lock series of buildings has been developed which allows
speedy installation of interlocking steel and foam panels for difficult site
placement, such as rooftops, mountaintop, or inside an existing building. An
exportable Containerized Shelter, transforms a standard 20' and 40' steel
shipping container into a virtually indestructible completely outfitted
telecommunication shelter. Also, mobile shelters meet the challenge of light
weight, portable shelters for emergency communications, starter or test sites,
temporary facilities or for special events broadcasting.
Marketing
Telecom participates in an expanding market for telecommunication shelters
which service the cellular and personal communication industries. Telecom
expects the growth in these markets to continue. Telecom sells its product
directly to the end users of the buildings, which have been principally
telecommunication and utility companies, military bases and municipalities.
Telecom 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.
Telecom 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 3, 1999 and June 27, 1998, the following customer
represented 10% or more of net sales of Miller: Nextel Communication, Inc.,
represented 13% of Miller's net sales in each of the fiscal years ended July 3,
1999 and June 27, 1998. There was no Telecom customer that represented more
than 10% of Miller's net sales for the fiscal year ended June 28, 1997.
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 key elements in providing a competitive advantage to
Telecom.
Construction Services
Construction Services is located in Elkhart, Indiana and operates all
administrative, sales and service activities from that location. This office
manages the service crews that support the Telecom facilities in Elkhart,
Indiana; Leola, Pennsylvania and to some extent Binghamton, New York.
Services
Construction Services provides one contact point for complete turnkey
services for telecommunication site construction. These services include the
management and execution of the entire construction process, from site
preparation, equipment transportation, through building and tower setting and
installation, or any combination thereof.
The service crews are fully outfitted with service trucks and equipment to
handle any site construction, even in remote locations. The crews are highly
trained in all phases of construction and have experience with heavy equipment,
site civil work and permitting, steel fabrication, concrete and Cam-Lock
building installations, electrical and electronic hookups, tower erection,
antenna sets and fencing. Construction Services specializes in completing sites
in difficult remote locations or sites which must be completed in a short time
frame. The service crews can "quick turn" a building, principally Cam-Lock
buildings, in five days from the initiation of the field work. The traditional
concrete shelter can also be assembled and finished in remote locations where
the site is inaccessible to a building fully completed in the factory.
In addition to site preparation and installation, Construction Services is
developing a full maintenance program, not only for buildings supplied by Miller
but any building, whether site built or modular. These maintenance projects,
which include roof and fencing repair, have also been completed for businesses
outside the customary telecommunication industry, such as buildings utilized by
pipelines and power companies. The major maintenance projects are also
complemented by a general maintenance program. These programs allow a customer
to have routine maintenance and general preventive maintenance on equipment
performed by Construction Services while they concentrate on building new sites
and servicing their own customers needs.
Marketing
Construction Services primarily markets its services to the cellular and
personal communications industry. They contract directly with the end user of
the construction services being supplied. Most of Construction Services sales
contacts come from existing telecommunications' customers and the group competes
for projects by providing a quotation developed from specifications supplied by
the potential customer. Quality and speed are most often the prime
considerations of their customers. This allows Construction Services to obtain
a better margin on their projects than is customarily obtainable in the general
marketplace. The group has developed several close relationships with Telecom's
customers to supply site construction services.
Competition
Construction Services competes with national design-build firms which use
third-party subcontractors for the completion of turnkey service projects and
with various local contractors when bidding on specific portions of a site
project. The relationships and contacts that both the Structures and Telecom
divisions have developed with customers, while supplying buildings, has provided
Construction Services with key contacts and competitive advantages. In addition,
support from Miller's corporate engineering department also provides
Construction Services with in-house engineering specifications and state and
local code requirements.
General
(Applicable to all of Miller's principal markets)
Business Segment
Miller has one reportable segment, designing, manufacturing, marketing and
servicing factory-built buildings which includes three product lines:
Structures, Telecom and Construction services.
Sales
Net sales by product line are as follows:
Years Ended
July 3, June 27, June 28,
1999 1998 1997
Structures $29,434,708 $31,826,019 $32,144,884
Telecom 33,807,292 21,086,105 13,406,757
Construction Services 2,395,040 1,787,536 735,129
$65,637,040 $54,699,660 $46,286,770
Backlog
The backlog of orders by market at August 31, 1999 and 1998 was as follows:
1999 1998
Structures $10,551,000 $ 5,877,000
Telecom 9,749,000 9,794,000
Construction Services 697,000 232,000
Total $20,997,000 $15,903,000
The increase in the Structures' backlog is the result of an order for
approximately $4,050,000 from a customer to build portable hospitality suites.
These suites will be built in the Elkhart, Indiana facility during the second
and third quarters of Miller's fiscal year 2000. The slight decline in the
Telecom backlog relates to a slow order rate during the third and fourth
quarters of Miller's last fiscal year, as consolidation within the industry
caused a delay in orders with several of our customers. The $21 million backlog
level is the highest in Miller's history and should provide the basis to achieve
forecasted production levels through the second quarter of fiscal 2000; however,
management believes it is too early to determine whether this current business
activity will extend to the second half of fiscal 2000.
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 building
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. Generally, obtaining state
approvals is the responsibility of the manufacturer. Some states 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.
On occasion, Miller's subsidiaries have experienced regulatory delays in
obtaining the various required building plan approvals. In addition to some of
its customers, Miller's subsidiaries 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.
Seasonality
Historically, Miller's subsidiaries 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 K of Notes to
Consolidated Financial Statements.
Employees
As of August 31, 1999, Miller and its subsidiaries had approximately 442
employees of which approximately 337 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 132,300 112,100 20,200 Owned (1)
Burlington, KS 155,000 150,000 5,000 Capital Lease (2)
Binghamton, NY 55,900 52,400 3,500 Leased (3)
Leola, PA 113,100 103,400 9,700 Owned
Sioux Falls, SD 36,100 34,200 1,900 Leased (4)
Bennington, VT 28,900 27,000 1,900 Owned
________________ _______ _______ ______
Total approximate
square footage 521,300 479,100 42,200
(1) Structures and Telecom administrative, sales, engineering and
manufacturing facilities. The Executive offices of Miller are also at
this location.
(2) On August 20, 1999, Miller entered into an Asset Purchase Agreement
with Andrew Corporation to sell certain assets and the business
operations of the Burlington, Kansas facility and assign a lease
agreement for the Kansas facility to Andrew Corporation (See Note J of
the Notes to Consolidated Financial Statements).
(3) Leased until December 31, 2002 with a five-year renewal option and an
option to purchase the facility after February 28, 2000.
(4) Leased until April 15, 2000 with a three-year renewal option.
ITEM 3. LEGAL PROCEEDINGS
Neither Miller or its operating subsidiaries are 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
Edward C. Craig (age 64) became the Chief Executive Officer of Miller
effective on July 3, 1994, was elected President of Miller on August 11, 1994
and on July 1, 1999 was elected Chairman of the Board of Directors of Miller.
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.
Rick J. Bedell (age 47) became the Executive Vice President of Miller
effective July 1, 1998. Mr. Bedell joined Miller in January 1989 as a Corporate
Sales Manager and became Vice President and General Manager of the Western
Division in February 1990. In November 1996, he became Vice President of
Miller's Kansas operation. Previously, Mr. Bedell worked for Modulaire
Industries, PBS Building Systems, Inc. and Meridian Corporation in various
management positions.
Thomas J. Martini (age 51) became the Vice President of Finance of
Miller in July 1994. Mr. Martini was elected Secretary and Treasurer of Miller
on April 28, 1992 and has been the Chief Financial Officer of Miller since
February 1991.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY 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
"MBSI." The following table sets forth the quarterly range of high and low
sales prices for these securities as reported on the NASDAQ National Market
System for the two most recent fiscal years.
Fiscal 1999 Fiscal 1998
High Low High Low
1st Quarter 10 1/16 6 1/2 10 1/16 5 1/2
2nd Quarter 8 1/2 5 1/8 9 3/4 8 1/4
3rd Quarter 8 3/4 6 10 3/4 9
4th Quarter 8 3/4 5 1/8 10 3/4 9 5/8
As of August 27, 1999, Miller estimates there were approximately 1,300
stockholders of Miller's Common Stock. Of this total, approximately 130 were
stockholders of record and shares for approximately 1,170 stockholders were held
in street name. Harris Trust & Savings Bank, Chicago, is Miller's Transfer
Agent and Registrar.
Miller did not pay cash dividends on its Common Stock from fiscal 1994
through fiscal 1999 as the Board of Directors ceased the payment of dividends in
the third fiscal quarter of 1993. Miller does not intend to pay cash 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 3, June 27, June 28, June 29, July 1,
1999 1998 1997 1996 1995
(In thousands,
except per share data)
Net sales $65,637 $54,700 $46,287 $37,858 $41,455
Net income 2,548 2,140 1,574 486 320
Earnings per common share:
Basic .72 .65 .50 .16 .10
Diluted .71 .62 .47 .16 .10
Total assets 32,775 30,478 19,813 16,920 16,522
Long-term debt, less
current maturities 5,277 6,094 1,357 1,270 1,385
(A) Net sales (in thousands) for fiscal years 1999 and 1998 include $15,440
and $7,523, respectively, for United, which was acquired January 1,
1998 (see Note I of Notes to Consolidated Financial Statements). Net
sales (in thousands) for fiscal years ended 1997, 1996 and 1995 include
$1,636, $5,787 and $6,414, respectively, of Miller's California
subsidiary which was sold on October 21, 1996. Net sales
(in thousands) for fiscal 1997 include $2,139 for the Kansas facility
which commenced operations in January 1997.
(B) Miller's operating results for fiscal years 1999, 1996 and 1995 were
adversely impacted by nonrecurring items (in thousands) of $107, $358
and $361, respectively.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Fiscal 1999 Compared to Fiscal 1998
Net sales increased $10.9 million, or 20%, in fiscal 1999 from the
corresponding period in fiscal 1998. Structures reported a $2.4 million, or a
7.5%, decrease in net sales during fiscal 1999. This decrease in net sales was
primarily the result of increased product complexity, poor weather conditions,
spotty backlogs and difficulty in hiring qualified personnel at the Indiana
plant. In addition, the decision to build only Telecom units at the Kansas plant
and softness in the markets served by the Vermont plant also contributed to the
decline in Structures' net sales. Telecom's net sales increased $12.7 million,
or 60%, during fiscal 1999. This increase was primarily the result of sales at
the acquired United operation, Telecom sales at the new expanded Pennsylvania
plant facilities and increased Telecom sales at the Kansas plant.
Miller's gross profit during the 1999 fiscal year was 18.3% of net
sales as compared to 18.8% in fiscal 1998. The decline in gross profit is
primarily the result of generally higher overhead costs, costs related to the
start-up operation at the Pennsylvania plant and higher overhead costs at the
Indiana plant.
Selling, general and administrative expenses increased $.6 million in
fiscal 1999. These expenses were 10.9% of net sales in fiscal 1999 compared to
12% of net sales in fiscal 1998. The increase in selling, general and
administrative expense was primarily the result of the addition of
administrative expense at the United and Pennsylvania operations and higher
overall staffing levels. These were partially offset by lower performance-based
compensation.
The increase in interest expense in fiscal 1999 compared to fiscal 1998
of $281,645 was primarily the result of higher levels of outstanding debt, which
was principally the result of the construction of an expansion of the
Pennsylvania plant facilities and debt incurred to finance the acquisition of
United.
During the fiscal year ended July 3, 1999, Miller recognized
nonrecurring expenses of $107,366 which related to costs associated with the
terminated efforts to explore possible merger and acquisition opportunities.
After careful review of several opportunities, the Board of Directors concluded
that the best options for Miller's stockholders was for Miller to remain focused
on its operations with the intent of continuing the profitable growth exhibited
by the past several years, while remaining open to an attractive merger
opportunity.
During fiscal 1999, Miller recorded an income tax provision of
$1,634,000 or 39% of pre-tax income compared to an income tax provision of
$1,306,000 or 38% of pre-tax income in fiscal 1998. The effective tax rate
varies from year to year depending on the levels of income in states where
Miller is subject to state income tax.
Fiscal 1998 Compared to Fiscal 1997
Net sales increased $8.4 million or 18.2% in fiscal 1998 from the
corresponding period in fiscal 1997. Structures reported a $.3 million, or
approximately a 1% decrease in net sales during fiscal 1998. The decrease in
net sales was primarily the result of lower sales in the Eastern markets which
were bolstered in the prior year by several large contracts, and the decline in
sales related to the California plant which was closed after the first quarter
of fiscal 1997. The California operation had net sales of $1.6 million in
fiscal 1997. Telecom's net sales increased $7.7 million, or nearly 57% during
fiscal 1998. Nearly all of the net sales gain in Telecom related to sales from
United which was acquired January 1, 1998. Net sales for United for the six
months ended June 27, 1998 were $7.5 million. During fiscal 1998, Telecom's
business was soft as the telecommunications industry slowed their shelter
orders. The industry concentrated on generating revenue by placing existing
infrastructure in service. These factors led to the small increase in Telecom
sales, excluding United for fiscal 1998.
Miller's gross profit during the 1998 fiscal year was 18.8% of net
sales which was a slight decrease from the 19.4% in fiscal 1997. During fiscal
1998, improved margins from United's lightweight, rooftop telecommunications
shelters, partially offset a decline in Structures' gross profit related to the
decline in higher margin custom projects. The gross profit from Telecom's
concrete shelter business in fiscal 1998 remained relatively unchanged from
fiscal 1997.
Selling, general and administrative expenses increased $.3 million in
fiscal 1998. These expenses were 12% of net sales in fiscal 1998 compared to
13.6% of net sales in fiscal 1997. The increase in administrative expense was
primarily the result of the addition of administrative expense at United. The
increased administrative expenses at United were partially offset by lower
administrative expenses at the closed California operation and lower
performance-based compensation.
The increase in interest expense in fiscal 1998 compared to fiscal 1997
of $134,771 was primarily the result of higher interest rates and higher debt
outstanding on the revolving line of credit. The Company funded the
construction of the Pennsylvania plant and the acquisition of United through its
line of credit until permanent long-term financing was put in place.
During fiscal 1998, Miller recorded an income tax provision of
$1,306,000 or 38% of pre-tax income compared to an income tax provision of
$1,006,000 or 39% of pre-tax income in fiscal 1997. The effective tax rate
varies from year to year depending on the levels of income in states where
Miller is subject to state income tax.
Liquidity and Capital Resources
Miller's working capital at July 3, 1999 was $10,472,268 compared to
$8,610,205 at June 27, 1998. The working capital ratio at July 3, 1999 and June
27, 1998 was 2.3 to 1 and 1.9 to 1, respectively.
For the fiscal year ended July 3, 1999, Miller's operating activities
provided net cash of $3,426,796. Increases in cash from operating activities
consisted primarily of net income, depreciation and amortization, decreases in
inventories and an increase in accounts payable. These increases were primarily
offset by the $1.7 million increase in receivables. Miller's investing
activities used net cash of $236,104. Capital expenditures of $1.2 million
consisted principally of the Pennsylvania plant addition which was financed with
the $1.1 million in unexpended industrial revenue bond proceeds obtained for the
project. Miller's financing activities used net cash of $3,246,809. Financing
cash flows consisted of $774,316 in payments on long-term debt, $1,550,000 in
net payments on the line of credit and $994,243 cash expended for the purchase
of treasury stock. The net decrease in cash and cash equivalents for the
fiscal year ended July 3, 1999 was $56,117 which resulted in cash and cash
equivalents at the end of the year of $55,503.
An unsecured revolving credit agreement with a bank makes available
advances up to $7,000,000 through November 30, 1999. Miller expects to renew
this credit facility. There was $2,000,000 outstanding on the revolving credit
line at July 3, 1999 and $3,550,000 at June 27, 1998.
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.
Year 2000 Compliance
Miller is continuing the process of identifying, evaluating, and
implementing changes to computer programs 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 computer
hardware and software programs are Year 2000 compliant and, therefore, does not
believe the cost of converting all internal systems to be Year 2000 compliant
will be material to its consolidated financial condition or results of
operations. Costs related to the Year 2000 issue are being expensed as incurred.
Costs incurred to date have been less than $50,000 and management does not
believe any material additional costs will be incurred.
Management has initiated a program to prepare Miller's manufacturing
and facility systems for the Year 2000. Miller is actively engaged in testing
and fixing applications such as security, environmental, desktop computers and
production equipment to ensure they are Year 2000 ready. Miller currently does
not expect remediation costs to be material nor does it expect any significant
interruption to its operations because of Year 2000 problems. Miller's products
do not have Year 2000 readiness issues because they do not contain date-
sensitive functions.
Miller is in the process of contacting all third parties with which it
has significant relationships, to determine the extent to which Miller could be
vulnerable to failure by any of them to obtain Year 2000 compliance. Some of
Miller's major suppliers, customers and financial institutions have confirmed
that they anticipate being Year 2000 compliant on or before December 31, 1999,
although many have only indicated that they have Year 2000 readiness programs.
To date, Miller is not aware of any significant third parties with a Year 2000
issue that could materially impact Miller's operations, liquidity or capital
resources. However, Miller has no means of ensuring that third parties will be
Year 2000 ready and the potential effect of third-party non-compliance is
currently not determinable.
Miller will continue to devote the resources necessary to ensure that
all Year 2000 issues are properly addressed. However, there can be no assurance
that all Year 2000 problems are detected. Further, there can be no assurance
that Miller's assessment of its third party vendors and suppliers will be
accurate. Some of the potential worst-case scenarios that could occur include:
(1) corruption of data in Miller's internal systems; (2) failure of
infrastructure services provided by government agencies; and (3) health,
environmental and safety issues relating to Miller's facilities. If any of
these situations were to occur, Miller's operations in certain areas could be
temporarily interrupted. Miller intends to develop Year 2000 contingency plans
for continuing operations in the event such problems arise. Miller has
operations around the country and is considering shifting operations to
different facilities if there are interruptions to operations in a particular
region.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULE
1. Financial Statements:
Report of Independent Accountants .................................. 14
Consolidated Balance Sheets at July 3, 1999 and June 27, 1998 ...... 15
Consolidated Statements of Income for the years ended
July 3, 1999, June 27, 1998 and June 28, 1997 .................... 17
Consolidated Statements of Stockholders' Equity for the years
ended July 3, 1999, June 27, 1998 and June 28, 1997 .............. 18
Consolidated Statements of Cash Flows for the years ended
July 3, 1999, June 27, 1998 and June 28, 1997 .................... 20
Notes to Consolidated Financial Statements ......................... 21
2. Financial Statement Schedule:
Schedule II - Valuation and Qualifying Accounts for the years
ended July 3, 1999, June 27, 1998 and June 28, 1997 .............. 33
Schedules other than those listed above are omitted because
they are not applicable or the required information is shown
in the financial statements or notes thereto.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
Miller Building Systems, Inc.:
In our opinion, the consolidated financial statements listed in the accompanying
index present fairly, in all material respects, the financial position of Miller
Building Systems, Inc. and its subsidiaries at July 3, 1999 and June 27, 1998,
and the results of their operations and their cash flows for each of the three
fiscal years in the period ended July 3, 1999 in conformity with generally
accepted accounting principles. In addition, in our opinion, the financial
statement schedule listed in the accompanying index presents fairly, in all
material respects, the information set forth therein when read in conjunction
with the related consolidated financial statements. 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 of these statements in accordance with generally accepted auditing
standards which 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, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
South Bend, Indiana
July 30, 1999, except as to the information
presented in Notes C and J for which the date is
August 20, 1999
MILLER BUILDING SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
July 3, June 27,
1999 1998
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 55,503 $ 111,620
Receivables, less allowance for doubtful
receivables of $48,000 in 1999 and
$50,000 in 1998 12,837,571 11,126,444
Refundable income taxes 16,200 20,000
Inventories 5,502,052 6,140,647
Deferred income taxes 218,000 230,000
Other current assets 143,984 204,107
TOTAL CURRENT ASSETS 18,773,310 17,832,818
PROPERTY, PLANT AND EQUIPMENT
Land 1,106,156 1,106,156
Buildings and leasehold improvements 8,429,844 7,962,454
Machinery and equipment 5,426,620 5,084,595
14,962,620 14,153,205
Less, Accumulated depreciation
and amortization 5,731,885 5,141,452
PROPERTY, PLANT AND EQUIPMENT, NET 9,230,735 9,011,753
Unexpended industrial revenue bond proceeds - 1,115,854
Deferred compensation plan investments 417,143 248,537
Excess acquisition costs over fair value of acquired
net assets, net of accumulated amortization of
$210,879 in 1999 and $63,446 in 1998 4,159,600 2,058,409
Other assets 194,398 210,754
TOTAL ASSETS $32,775,186 $30,478,125
The accompanying notes are a part of the consolidated financial statements.
July 3, June 27,
1999 1998
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term borrowings $ 2,000,000 $ 3,550,000
Current maturities of long-term debt 806,119 762,900
Accounts payable 3,954,923 3,246,373
Accrued income taxes 132,635 17,469
Accrued expenses and other 1,407,365 1,645,871
TOTAL CURRENT LIABILITIES 8,301,042 9,222,613
Long-term debt, less current maturities 5,276,854 6,094,389
Deferred compensation liability 417,143 248,537
Deferred income taxes 310,000 316,000
Other 13,300 15,276
TOTAL LIABILITIES 14,318,339 15,896,815
COMMITMENTS AND CONTINGENCIES - Note H
STOCKHOLDERS' EQUITY
Preferred stock, $1.00 par value,
50,000 shares authorized, none issued - -
Common stock, $.01 par value, 7,500,000 shares
authorized, 4,250,630 and 4,023,548 shares
issued in 1999 and 1998, respectively 42,506 40,235
Additional paid-in capital 13,847,920 11,600,191
Retained earnings 8,325,154 5,770,243
22,215,580 17,410,669
Less, Treasury stock, at cost 3,758,733 2,829,359
TOTAL STOCKHOLDERS' EQUITY 18,456,847 14,581,310
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $32,775,186 $30,478,125
(This page intentionally left blank.)
MILLER BUILDING SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Years Ended
July 3, June 27, June 28,
1999 1998 1997
NET SALES $65,637,040 $54,699,660 $46,286,770
Costs and expenses:
Cost of products sold 53,655,356 44,434,537 37,323,073
Selling, general and
administrative 7,139,735 6,568,481 6,286,184
Provision for doubtful receivables 7,656 54,881 51,293
Gain on sale of property
and equipment (4,402) (63,628) (3,667)
Interest expense 571,701 290,056 155,285
Interest income (22,402) (30,719) (105,226)
Nonrecurring item 107,366 - -
INCOME BEFORE
INCOME TAXES 4,182,030 3,446,052 2,579,828
Income taxes 1,634,000 1,306,000 1,006,000
NET INCOME $ 2,548,030 $ 2,140,052 $ 1,573,828
Earnings per share of common stock:
Basic $ .72 $ .65 $ .50
Diluted $ .71 $ .62 $ .47
Shares used in the computation of
earnings per share:
Basic 3,535,435 3,268,344 3,157,706
Diluted 3,610,082 3,474,706 3,316,132
The accompanying notes are a part of the consolidated financial statements.
MILLER BUILDING SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Additional Total
Common Stock Paid -in Retained Treasury Stock Stockholders'
Shares Amount Capital Earnings Shares Amount Equity
BALANCE, JUNE 30, 1996 4,023,548 $ 40,235 $11,454,903 $2,048,824 922,585 $(3,139,374) $10,404,588
Treasury stock acquired - - - - 45,730 (351,063) (351,063)
Exercise of stock options using
treasury stock - - - (26,063) (162,200) 576,403 549,800
Net income - - - 1,573,828 - - 1,573,828
BALANCE, JUNE 28, 1997 4,023,548 40,235 11,454,903 3,596,049 806,115 (2,914,034) 12,177,153
Treasury stock acquired - - - - 39,312 (381,967) (381,967)
Exercise of stock options using
treasury stock - - - 34,142 (125,100) 466,642 500,784
Tax benefit arising from exercise
of stock options - - 145,288 - - - 145,288
Net income - - - 2,140,052 - - 2,140,052
BALANCE, JUNE 27, 1998 4,023,548 40,235 11,600,191 5,770,243 720,327 (2,829,359) 14,581,310
Issuance of common stock in connection
with business acquisition 227,082 2,271 2,247,729 - - - 2,250,000
Treasury stock acquired - - - - 178,410 (994,243) (994,243)
Exercise of stock options using
treasury stock - - - 6,881 (16,500) 64,869 71,750
Net income - - - 2,548,030 - - 2,548,030
BALANCE, JULY 3, 1999 4,250,630 $ 42,506 $13,847,920 $8,325,154 882,237 $(3,758,733) $18,456,847
The accompanying notes are a part of the consolidated financial statements.
MILLER BUILDING SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended
July 3, June 27, June 28,
1999 1998 1997
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 2,548,030 $ 2,140,052 $ 1,573,828
Adjustments to reconcile net income to
net cash provided by (used in)
operating activities:
Depreciation and amortization of
plant and equipment 968,772 769,186 636,287
Amortization of intangible assets
and deferred bond issuance costs 225,602 51,983 10,293
Deferred compensation 168,606 203,790 44,747
Deferred income taxes 6,000 294,000 (92,000)
Other (4,402) (24,040) (6,612)
Changes in certain assets and
liabilities, net of effect of
acquisition and disposition
of businesses:
Receivables (1,711,127) 831,920 (2,591,757)
Refundable income taxes 3,800 (20,000) 241,158
Inventories 638,595 (1,258,521) (991,266)
Other assets (314) (341,184) (33,196)
Accounts payable 708,550 299,813 (431,901)
Accrued income taxes 115,166 (947,995) 886,026
Accrued expenses and other (240,482) (1,284,907) 552,530
Net cash provided by (used in)
operating activities 3,426,796 714,097 (201,863)
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property
and equipment 23,584 457,700 7,250
Purchase of property, plant
and equipment (1,206,936) (3,023,732) (1,123,324)
Acquisition of business, net of
$294,576 cash acquired - (2,710,734) -
Proceeds from sale of subsidiary - - 1,516,390
Increase in deferred compensation
plan investments (168,606) (203,790) (44,747)
Unexpended industrial revenue
bond proceeds 1,115,854 (1,115,854) -
Net cash provided by (used in)
investing activities (236,104) (6,596,410) 355,569
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from short-term borrowings 28,305,000 26,860,000 14,695,000
Reduction of short-term borrowings (29,855,000) (26,280,000) (14,325,000)
Proceeds from long-term debt - 5,500,000 -
Payments of long-term debt (774,316) (300,635) (798,655)
Bond issuance costs - (138,654) -
Purchase of treasury stock (994,243) (381,967) (351,063)
Proceeds from exercise of stock options 71,750 500,784 549,800
Tax benefit from stock options
exercised - 145,288 -
Net cash provided by (used in)
financing activities (3,246,809) 5,904,816 (229,918)
Increase (decrease) in cash and
cash equivalents (56,117) 22,503 (76,212)
CASH AND CASH EQUIVALENTS
Beginning of year 111,620 89,117 165,329
End of year $ 55,503 $ 111,620 $ 89,117
SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION:
Cash paid during the year for:
Interest, net of capitalized
interest in 1998 $ 506,416 $ 198,435 $ 151,783
Income taxes (net of refunds) 1,509,034 1,839,254 (29,184)
NONCASH INVESTING AND FINANCING
ACTIVITIES:
Acquisition of United
Structures, Inc.:
Liabilities assumed - 4,108,000 -
Unpaid cash portion of
purchase price - 125,000 -
Issuance of common stock 2,250,000
Building capitalized under capital
lease and related capital
lease obligation - - 979,000
The accompanying notes are a part of the consolidated financial statements.
Note A: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.
Miller Building Systems, Inc. ("Miller") is the parent of Miller Building
Systems of Indiana, Inc., Miller Building Systems of Pennsylvania, Inc.,
Miller Building Systems of Kansas, Inc., United Structures, Inc., and
Miller Construction Services, Inc. All operations of Miller are
conducted through its five wholly owned subsidiaries which design,
manufacture, market and service factory-built buildings. Miller has
three product lines, Structures, Telecom and Construction Services. The
factory-built buildings produced by Structures are modular and mobile
buildings, which are generally movable and relocatable, and designed to
meet the specialized needs of a wide variety of users. Structures'
products are sold to independent customers who, in turn, sell or lease
to the end users. The Structures division has manufacturing facilities
in Elkhart, Indiana; Leola, Pennsylvania; Sioux Falls, South Dakota and
Bennington, Vermont. The Telecom division manufactures specialized
buildings, which utilize modular construction techniques and pre-cast
concrete technology, and are designed principally for customers in the
telecommunications industry. Telecom's products are sold directly to the
end user. Telecom has manufacturing facilities in Elkhart, Indiana;
Burlington, Kansas; Leola, Pennsylvania and Binghamton, New York.
Miller's Structures and Telecom products are sold throughout the United
States. Miller Construction Services, Inc. provides complete turnkey
services from site preparation through setting and installation.
The following is a summary of the significant accounting policies used
in the preparation of the accompanying consolidated financial statements.
Fiscal Year - Miller's fiscal year is a 52 or 53 week period ending on
the Saturday closest to June 30. Fiscal year 1999 included 53 weeks
whereas fiscal years 1998 and 1997 each consisted of 52 weeks.
Principles of Consolidation - The consolidated financial statements
include the accounts of Miller Building Systems, Inc. and its wholly
owned subsidiaries.
Business Segments - Miller has adopted Statement of Financial Accounting
Standards ("SFAS") No. 131, "Disclosures about Segments of an Enterprise
and Related Information", which revises reporting and disclosure
requirements for operating segments. Miller has one reportable segment,
designing, manufacturing, marketing and servicing factory-built
buildings, which includes three product lines: Structures, Telecom and
Construction Services. Net sales by product line are as follows:
Years Ended
July 3, June 27, June 28,
1999 1998 1997
Structures $29,434,708 $31,826,019 $32,144,884
Telecom 33,807,292 21,086,105 13,406,757
Construction Services 2,395,040 1,787,536 735,129
$65,637,040 $54,699,660 $46,286,770
Use of Estimates in the Preparation of Financial Statements - The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
Note A: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued.
financial statements, and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Revenue Recognition and Concentration of Credit Risk - Miller recognizes
revenues from the sales of its products upon the completion of
manufacturing and the transfer of title. One customer individually
accounted for 13% of net sales in fiscal 1999, two customers, including
the one above, each accounted for 13% of net sales in fiscal 1998 and a
third customer accounted for 15% of net sales in fiscal 1997. At July
3, 1999, 24% of receivables is concentrated with Miller's largest
customer and at June 27, 1998, 20% of receivables was concentrated with
Miller's largest customer.
Cash and Cash Equivalents - Miller considers all highly liquid
investments purchased with an original maturity of three months or less
to be cash equivalents.
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 are amortized using the straight-line method
over sixty months. As of July 3, 1999 and June 27, 1998, capitalized
software costs, included with machinery and equipment, (and the related
accumulated amortization) aggregated $345,921 ($204,319), and $265,587
($148,766), respectively. Interest is capitalized in connection with the
construction of major facilities. The capitalized interest is recorded
as part of the asset to which it relates and is amortized over the
asset's estimated useful life. Capitalized interest costs were $63,933
during the year ended June 27, 1998. No interest was capitalized in
fiscal years 1999 and 1997.
Excess Acquisition Costs over Fair Value of Acquired Net Assets - Excess
acquisition costs over fair value of acquired net assets (goodwill) are
amortized using the straight-line method over periods ranging from 20 to
30 years. The carrying value of goodwill is reviewed, as circumstances
warrant, by Miller based on the expected future undiscounted operating
cash flows of the related business unit. Miller believes no material
impairment of goodwill exists at July 3, 1999.
Bond Issuance Costs - Bond issuance costs aggregating $230,389, which
related to issuance of the industrial revenue bonds, are being amortized
using the straight-line method over the terms of the bonds.
Income Taxes - Deferred income taxes are determined using the liability
method.
Earnings Per Share - Basic earnings per share is computed by dividing net
income by the weighted average number of shares of common stock
outstanding during the period. Diluted earnings per share is computed
by dividing net income by the weighted average number of shares of common
stock outstanding plus the effect of potential dilutive common shares
outstanding during the reporting period. Shares used in the computation
Note A: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Concluded.
of basic and diluted earnings per share ("EPS") are as follows:
1999 1998 1997
Weighted average number of common
shares (used for basic EPS) 3,535,435 3,268,344 3,157,706
Effect of dilutive securities:
Stock options 74,647 138,022 158,426
Contingently issuable
shares (see Note I) - 68,340 -
Shares used for diluted EPS 3,610,082 3,474,706 3,316,132
Fair Value of Financial Instruments - The carrying amounts of cash and
cash equivalents, receivables, short-term borrowings and accounts payable
approximated their fair value as of July 3, 1999 and June 27, 1998
because of the relatively short maturities of these instruments. The
carrying amount of long-term debt, including current maturities,
approximated fair value as of July 3, 1999 and June 27, 1998 based upon
terms and conditions currently available to Miller in comparison to the
terms and conditions of the outstanding long-term debt. Miller has
investments in life insurance contracts to fund obligations under
deferred compensation agreements (see Note D). At July 3, 1999 and June
27, 1998, the carrying amount of these policies, which equaled their fair
value, was $417,143 and $248,537 respectively.
Reclassification - Miller's obligations under deferred compensation
agreements were previously netted against the related investments used
to fund these obligations (see Note D). The consolidated balance sheet
at June 27, 1998 and the consolidated statements of cash flows for the
years ended June 27, 1998 and June 28, 1997 have been restated to present
the investment in life insurance contracts, the obligation under deferred
compensation agreements and the related cash flows.
Note B: INVENTORIES.
Inventories consist of the following:
July 3, June 27,
1999 1998
Raw materials $4,369,472 $4,604,615
Work in process 885,957 1,215,552
Finished goods 246,623 320,480
Total $5,502,052 $6,140,647
Note C: DEBT.
Short-Term Borrowings
Miller maintains an unsecured revolving line of credit with a bank. The
loan agreement makes available up to $7 million through November 30,
1999. As of July 3, 1999 and June 27, 1998, outstanding borrowings under
the loan agreement aggregated $2,000,000 and $3,550,000, respectively.
Interest is payable monthly at prime or a margin over the London
Interbank Offering Rate ("LIBOR"), depending on the pricing option
selected by Miller. At July 3, 1999 and June 27, 1998, the weighted
Note C: Debt, Continued.
average interest rate on outstanding borrowings was 8.00% and 7.47%,
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 3, June 27,
1999 1998
Bank term note, payable in monthly installments
of $50,000 including interest at a variable
rate, as determined by prime or a margin over
LIBOR (6.89% at July 3, 1999), final maturity
in June 2003, unsecured $2,059,784 $2,500,000
Industrial revenue bond, variable rate (3.65%
at July 3, 1999), principal payable in annual
installments of $200,000 through June 2004
and $300,000 thereafter until final maturity
in June 2010 2,800,000 3,000,000
Industrial revenue bond, variable rate
(3.65% at July 3, 1999), principal
payable in annual installments of
$115,000 with an installment of $120,000
at final maturity in November 2007 1,040,000 1,155,000
Capitalized lease, interest imputed at
5.63%, payable monthly through
December 2006 183,189 202,289
Total 6,082,973 6,857,289
Less, Current maturities 806,119 762,900
Long-term debt $5,276,854 $6,094,389
In connection with the industrial revenue bond obligations, Miller
obtained, as a credit enhancement for the bondholders, irrevocable letters
of credit in favor of the bond trustees. Miller, at its discretion, can
convert the industrial revenue bonds from a variable rate, as determined
by the current market rate for this type of debt instrument, 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 original maturity.
On August 12, 1996, Miller entered into a ten-year lease agreement with
the Board of County Commissioners of Coffey County, Kansas ("Coffey
County") to lease a 155,000 square foot manufacturing facility (the
"Kansas 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 is 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
paid the tenant $750,000 to obtain the property. Miller accounted for
Note C: Debt, Concluded.
this lease transaction as a capital lease whereby Miller recorded the
leased property under the capital lease and the related obligation on its
balance sheet. At July 3, 1999 and June 27, 1998, the cost of the
capitalized lease property was $979,000 and the accumulated amortization
was $77,707 in 1999 and $46,230 in 1998.
At July 3, 1999, the future minimum lease payments under the capitalized
lease obligation are as follows:
Fiscal Years Capitalized
Ending Lease
2000 $ 30,000
2001 30,000
2002 30,000
2003 30,000
2004 30,000
Thereafter 75,000
225,000
Less: Amount representing interest 41,811
$183,189
In August 1999, in connection with Miller's sale of certain assets of its
Kansas facility and the assignment of the lease agreement for the Kansas
facility to the buyer (see Note J), Miller and Coffey County entered into
two new lease agreements for the Kansas facility. The first lease
agreement, which has a five-year term, provides for the same monthly rent
payments and contains five renewal options for additional five-year terms
at the same monthly rent. The second lease agreement, which also has a
five-year term and provides for the same amount of monthly rent payments,
includes a new purchase option (balloon payment) of $175,000 which is
reduced up to a maximum of $35,000 per year based upon the attainment of
certain annual full-time employee levels. The second lease agreement,
which includes the purchase option, is subject to the approval of the
Board of Directors of Coffey County. Upon approval of the second lease
agreement, the first lease agreement will terminate. At July 3, 1999, the
obligation under the capital lease and the related leased asset have not
been adjusted for the effect of the new leases and the effect will be
recognized in the gain on the sale of the Kansas facility.
At July 3, 1999, the annual maturities of long-term debt, excluding
payments under the capitalized lease, for each of the next five fiscal
years are as follows: 2000 - $785,917; 2001 - $819,887; 2002 - $856,309;
2003 - $857,671 and 2004 - $315,000.
Note D: EMPLOYEE BENEFIT PLANS.
401(k)Savings 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
Note D: EMPLOYEE BENEFIT PLANS, Concluded.
discretionary matching contributions before the end of the Plan's calendar
year-end. During the years ended July 3, 1999, June 27, 1998 and June 28,
1997, Miller expensed $72,560, $64,408 and $70,796, respectively, under
this Plan.
Non-Qualified Deferred Compensation Plan
In September 1996, Miller established a non-qualified deferred
compensation plan for the benefit of certain of its officers and salaried
employees. Miller's obligation under the deferred compensation plan is
equal to compensation amounts deferred by employees, employer
contributions and investment earnings on such amounts. Miller has
established a trust, which is the property of Miller, to fund the
obligations under the deferred compensation contracts. The trust has
invested the employee deferred amounts and Miller's employer contributions
in life insurance contracts. Miller's investment in such insurance
contracts is valued using the cash surrender value method and the value
of these insurance contracts approximates Miller's obligations under the
deferred compensation contracts. Deferred compensation expense aggregated
$20,119, $25,557 and $3,229 for fiscal years 1999, 1998 and 1997,
respectively.
Note E: STOCK COMPENSATION PLANS.
Stock Option Plans
On November 5, 1997, Miller's stockholders approved the Miller Building
Systems, Inc. 1997 Stock Option Plan under which 500,000 shares of common
stock were reserved for future grant. The 1997 Plan expires February 20,
2007. On June 30, 1994, the Board of Directors adopted the Miller
Building Systems, Inc. 1994 Stock Option 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
Miller Building Systems, Inc. 1991 Stock Option Plan under which 250,000
shares of common stock were reserved for future grant. The 1991 Plan
expires August 26, 2001.
Miller's stock option plans 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 stock option plans 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.
The following table summarizes stock option activity:
Number Weighted Average
of Shares Exercise Price
Outstanding at June 30, 1996 483,000 $3.87
Granted 58,000 6.29
Exercised (162,200) 3.39
Outstanding at June 28, 1997 378,800 4.45
Granted 291,500 9.95
Canceled (15,200) 5.00
Exercised (125,100) 4.00
Note E: STOCK COMPENSATION PLANS, Continued.
Outstanding at June 27, 1998 530,000 7.56
Granted 69,500 7.50
Canceled (71,000) 9.77
Exercised (16,500) 4.35
Outstanding at July 3, 1999 512,000 7.35
Exercisable at July 3, 1999 316,700 6.59
Options outstanding at July 3, 1999 are exercisable at prices ranging from
$2.50 to $11.25 per share and have a weighted average remaining
contractual life of 6.20 years. The following table summarizes
information about stock options outstanding at July 3, 1999.
Outstanding Exercisable
Number Weighted Number
Outstanding Average Weighted Exercisable Weighted
Range of at Remaining Average at Average
Exercise July 3, Contractual Exercise July 3, Exercise
Price 1999 Life Price 1999 Price
$2.50 - $4.00 121,000 4.92 $3.42 113,800 $3.43
4.01 - 5.50 5,000 3.27 5.38 2,000 5.38
5.51 - 7.00 98,000 3.99 6.24 56,800 6.25
7.01 - 8.50 95,000 5.92 7.70 26,100 7.45
8.51 - 10.00 68,000 8.33 9.18 68,000 9.18
10.01 - 11.25 125,000 8.32 10.85 50,000 10.25
512,000 316,700
At June 27, 1998 and June 28, 1997, there were exercisable options to
purchase 150,100 and 180,600 shares at weighted average exercise prices
of $4.85 and $4.00 per share, respectively. The weighted average grant
date fair value of options granted during the years ended July 3, 1999,
June 27, 1998 and June 28, 1997 were $3.46, $3.53 and $2.89, respectively.
As of July 3, 1999, 227,200 shares were reserved for the granting of
future stock options, compared with 225,700 shares at June 27, 1998. Had
Miller adopted the provisions of SFAS No. 123, "Accounting for Stock-Based
Compensation," Miller's net income and earnings per share would have been:
July 3, June 27, June 28,
1999 1998 1997
Pro forma net income $2,307,878 $1,881,853 $1,458,654
Pro forma diluted earnings
per share .66 .56 .44
The pro forma amounts shown above and the weighted-average grant-date fair
value of options granted are estimated using the Black-Scholes option-
pricing model with the following assumptions:
Risk free interest rate 4.68% 5.64% 6.30%
Expected life 4.0 years 3.4 years 3.3 years
Expected volatility 53% 50% 50%
Note E: STOCK COMPENSATION PLANS, Concluded.
Stock Purchase Plan
Miller has an employee stock purchase plan under which a total of 500,000
shares of Miller's common stock are reserved for purchase by full-time
employees through payroll deductions at a price equal to 85% of the fair
market value on the purchase date. Certain restrictions in the plan limit
the amount of payroll deductions and the amount of ownership in Miller an
employee may acquire under the plan. At July 3, 1999, Miller has not
implemented the employee stock purchase plan.
Note F: INCOME TAXES
The provision for income taxes is summarized as follows:
Years Ended
July 3, June 27, June 28,
1999 1998 1997
Federal:
Current $1,335,000 $ 833,000 $ 934,000
Deferred tax (credit) 5,000 239,000 (71,000)
1,340,000 1,072,000 863,000
State:
Current 293,000 179,000 164,000
Deferred tax (credit) 1,000 55,000 (21,000)
294,000 234,000 143,000
Total $1,634,000 $1,306,000 $1,006,000
The provision for income taxes included in the consolidated statements of
income differs from that computed by applying the federal statutory tax
rate (34%) to income before income taxes as follows:
Years Ended
July 3, June 27, June 28,
1999 1998 1997
Computed federal income
tax $1,422,000 $1,172,000 $ 877,000
Increase (decrease)
resulting from:
State income taxes, net
of federal income tax
benefit 194,000 154,000 94,000
Other, net 18,000 (20,000) 35,000
Total $1,634,000 $1,306,000 $1,006,000
Deferred income taxes reflect the estimated future net tax effects of
temporary differences between the carrying amounts of assets and liabili-
ties for financial reporting purposes and the amounts used for income tax
purposes. The components of the net deferred tax asset and liability at
July 3, 1999 and June 27, 1998 are as follows:
Note F: INCOME TAXES, Concluded.
July 3, June 27,
1999 1998
Current deferred tax asset (liability):
Receivables $ (22,000) $ (20,000)
Inventories 106,000 110,000
Accrued warranty 52,000 42,000
Other accrued liabilities 82,000 98,000
Total $ 218,000 $ 230,000
Long-term deferred tax asset (liability):
Receivables $(112,000) $(168,000)
Property, plant and equipment (129,000) (150,000)
Goodwill (75,000) (14,000)
Other 6,000 16,000
Total $(310,000) $(316,000)
Note G: NONRECURRING ITEM.
During the fiscal year ended July 3, 1999, Miller recognized nonrecurring
expenses of $107,366 which related to costs associated with the terminated
efforts to explore possible merger and acquisition opportunities.
Note H: COMMITMENTS AND CONTINGENCIES.
Share Repurchase Program
On June 8, 1999, the Board of Directors authorized the repurchase of up to
$2 million of Miller's outstanding common stock. Shares may be purchased
from time to time, depending on market conditions and other factors, on
the open market or through privately negotiated transactions. As of July
3, 1999, Miller has acquired 177,000 shares under the share repurchase
program.
Lease Commitments
Miller leases two of its manufacturing facilities under noncancellable
operating leases expiring through December 2002. The lease for the Sioux
Falls, South Dakota facility may be extended at Miller's option. The
lease for the Kirkwood, New York facility has an option to renew for an
additional five-year term and contains an option to purchase the facility
after February 28, 2000. Miller generally is responsible for utilities,
taxes and insurance on the leased facilities. Future minimum lease
payments under these noncancellable leases aggregate $816,055 and are
payable as follows: 2000 - $264,042; 2001 - $220,805; 2002 - $220,805 and
2003 - $110,403.
Rental expense under all operating leases aggregated $338,951, $196,277
and $97,654 for the years ended July 3, 1999, June 27, 1998 and June 28,
1997, respectively.
Note H: COMMITMENTS AND CONTINGENCIES, Concluded.
Self-Insurance
Miller is self-insured for the portion of its employee health care costs
not covered by insurance. Miller is liable for medical claims up to
$40,000 per eligible employee annually, and aggregate annual claims up to
approximately $1,169,000. The aggregate annual deductible is determined
by the number of eligible covered employees during the year and the
coverage they elect. Miller accrues for the estimated losses occurring
from both asserted and unasserted claims. The estimate of the liability
for unasserted claims arising from incurred, but not reported, claims is
based on an analysis of historical claims data.
Note I: ACQUISITION AND DISPOSITION OF BUSINESSES.
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. The excess of the
minimum purchase price over the fair value of acquired tangible assets
aggregated $2.1 million and was allocated to goodwill and is being
amortized on a straight-line basis over 30 years. In addition to the
minimum purchase price, Miller agreed to pay the seller a contingent
purchase price ("contingent purchase price"), which was payable in shares
of Miller's common stock, based on United's earnings exceeding a targeted
amount 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
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
years ended June 27, 1998 and June 28, 1997 were developed assuming
United had been acquired at the beginning of each of the respective
fiscal years. The unaudited pro forma earnings per share (basic and
diluted) reflect the issuance of 227,082 additional shares issued as
contingent purchase price, as though these shares were issued and
outstanding during each of the periods presented.
Years Ended
June 27, 1998 June 28, 1997
Net sales $61,547,000 $52,882,000
Net income 2,493,000 1,733,000
Earnings per share:
Basic .71 .51
Diluted .69 .49
Note I: ACQUISITION AND DISPOSITION OF BUSINESSES, Concluded.
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 each of the respective fiscal
periods presented, nor is it indicative of future operating results.
Disposition 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, which approximated the
carrying value of the underlying net assets and, accordingly, there was
no gain or loss on the sale. Miller and the Buyer also entered into a
three-year lease obligation for certain real property (the "Patterson
Property") which lease agreement required 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 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, which resulted in a $37,894 gain on
sale of property held for sale.
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 J: SUBSEQUENT EVENTS.
On August 20, 1999, Miller entered an Asset Purchase Agreement with
Andrew Corporation (the "Buyer") to sell certain assets used in the
business operations of its Kansas facility. The Asset Purchase
Agreement also provides for the assignment of Miller's lease of its
Kansas facility (see Note C). The purchase price consisted of $3.5
million from the Buyer plus the Buyer's assumption of certain
liabilities of the Kansas operation. The $3.5 million consisted of a
$1.0 million base purchase price, which was paid at closing on August
20, 1999, and a contingent purchase price of $2.5 million to be paid by
the Buyer to Miller upon the assignment and transfer of a lease
agreement for the Kansas facility. The assignment and transfer of the
lease agreement for the Kansas facility by Miller to the Buyer is
subject to approval by the lessor, Coffey County. The assignment and
transfer must occur no later than May 31, 2000. Miller expects to
report a pre-tax gain on the sale of the Kansas business operations and
assets of approximately $1.8 million in fiscal 2000.
Note K: UNAUDITED INTERIM FINANCIAL INFORMATION.
Presented below is certain selected unaudited quarterly financial
information for the years ended July 3, 1999 and June 27, 1998:
Net Gross Net Earnings Per Share
Sales Profit Income Basic Diluted
1999:
Fourth $17,694,243 $3,613,760 $834,796 $.24 $.23
Third 14,325,764 2,489,854 490,507 .14 .14
Second 16,400,935 2,806,420 545,163 .15 .15
First 17,216,098 3,071,650 677,564 .19 .19
1998:
Fourth $16,528,679 $3,312,056 $919,497 $.28 $.25
Third 14,449,832 2,368,307 278,980 .08 .08
Second 10,405,750 1,956,890 315,351 .10 .09
First 13,315,399 2,627,870 626,224 .19 .18
The sum of quarterly diluted earnings per share for the four quarters of
fiscal 1998 may not equal annual diluted earnings per share due to the
effect of dilutive securities.
MILLER BUILDING SYSTEMS, 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 3, 1999:
Allowance for
doubtful receivables $ 50,394 $ 7,656 $ - $ 10,048(A) $ 48,002
Year ended June 27, 1998:
Allowance for
doubtful receivables $ 48,239 $ 54,881 $ - $ 52,726(A) $ 50,394
Year ended June 28, 1997:
Allowance for
doubtful receivables $ 53,605 $ 51,293 $ - $ 56,659(A) $ 48,239
(A) Uncollectible accounts written off.
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 Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item is set forth in the Compensation
of 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 Ownership of
Miller Building Systems, Inc. Common Stock 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 Certain
Relationships and Related Transactions 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) The following consolidated financial statements and financial statement
schedule are included in Item 8 herein.
(1) Financial Statements:
Report of Independent Accountants
Consolidated Balance Sheets at July 3, 1999 and June 27, 1998
Consolidated Statements of Income for the years ended July 3, 1999,
June 27, 1998 and June 28, 1997
Consolidated Statements of Stockholders' Equity for the years
ended July 3, 1999, June 27, 1998 and June 28, 1997
Consolidated Statements of Cash Flows for the years ended
July 3, 1999, June 27, 1998 and June 28, 1997
Notes to Consolidated Financial Statements
(2) Financial Statement Schedule:
II - Valuation and Qualifying Accounts
(3) Exhibits - See Index to Exhibits
(b) Reports on Form 8-K filed:
No reports on Form 8-K were filed by the registrant in the last quarter
of the 1999 fiscal year.
MILLER BUILDING SYSTEMS, INC., AND SUBSIDIARIES
INDEX TO EXHIBITS
Exhibit
Number Description of Exhibit
10.70 Second Amendment to Employment Agreement between Registrant and Edward
C. Craig, dated September 22, 1998.
10.71 Asset Purchase Agreement between Registrant and Andrew Corporation,
dated August 20, 1999.
10.72 Trust Agreement for the Executive Deferred Compensation Plan, dated
September 12, 1996.
21 Subsidiaries of the Registrant
23 Consent of Independent Accountants
27 Financial Data Schedule
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) (b) (d) (f) (h) (I) (k)
4.1 Specimen Common Stock Certificate
4.2 Certificate of Incorporation, Articles Fourth, Eighth, and Tenth;
By-Laws, Articles II, VII, and IX (a)
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 (f)
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 (h)
10.48 1991 Stock Option Plan adopted by the Registrant's stockholders on
October 30, 1991 and Form of Option Agreement (k)
10.49 Miller Building Systems, Inc. 401(k) Plan (m)
10.53 1994 Stock Option Plan adopted by the Registrant's stockholders on
October 25, 1994 and Form of Option Agreement (n)
10.57 Employment agreement between Registrant and Edward C. Craig, dated
February 29, 1996 (p) (I)
10.58 Lease agreement between the Board of County Commissioners of Coffey
County, Kansas dated August 12, 1996 with respect to property located
in Burlington, Kansas (p)
10.59 Agreement between Registrant and American Quality Manufacturing, Inc.
dated July 25, 1996, to vacate the leased property located in
Burlington, Kansas (p)
10.60 Lease agreement between Toboll Property Limited Partnership and Miller
Structures, Inc. dated May 21, 1996, with respect to the lease of land
in Sioux Falls, South Dakota (p)
10.64 Stock Purchase Agreement, dated February 27, 1998, between Registrant
and David Newman and Marc Newman to purchase all of the issued and
outstanding shares of capital stock of United Structures, Inc., a New
York Corporation (q)
10.65 1997 Stock Option Plan adopted by the Registrant's stockholders on
November 5, 1997 (r)
10.66 Registration Statement to register 227,082 shares of the Registrants
common stock owned by David and Marc Newman (s)
10.67 Third Amendment to Lease Agreement between Toboll Properties Limited
Partnership and Sioux Fall Structures, Inc. (now known as Miller
Building Systems of South Dakota, Inc.) dated August 20, 1997, with
respect to the leased property at Sioux Falls, South Dakota. (t)
10.68 First Amendment to Employment Agreement between Registrant and Edward
C. Craig, dated October 22, 1997. (t)(I)
10.69 Lease agreement between United Kirkwood, L.L.C. and United Structures,
Inc., with respect to the leased property at Kirkwood, New York. (t)
(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 - July 20, 1989
(d) Form 10-K for year ended June 30, 1989
(e) Form 8-K, Date of Report - January 31, 1990
(f) Form 10-K for year ended June 30, 1990
(g) Form 8-K, Date of Report - April 23, 1991
(h) Form 8-K, Date of Report - May 6, 1991
(i) Form 8-K, Date of Report - July 25, 1991
(j) Form 8-K, Date of Report - August 26, 1991
(k) Form S-8, Date of Report - July 31,1992
(l) Form 8-K, Date of Report - April 22, 1993
(m) Form 10-K for year ended June 30, 1993
(n) Form S-8, Date of Report - Dated December 30, 1994
(o) Form 10-K, for year ended July 1, 1995
(p) Form 10-K, for year ended June 29, 1996
(q) Form 8-K/A-1, Date of Report - February 27, 1998
(r) Form S-8, Date of Report - March 20, 1998
(s) Form S-3, Date of Report - August 5, 1998
(t) Form 10-K, for year ended June 27, 1998
(I) Indicates a management contract or compensation plan or arrangement.
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 20, 1999 \Edward C. Craig
Edward C. Craig
Chariman, 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 Chairman, President, September 13, 1999
Edward C. Craig Chief Executive Officer
and Director
(Principal Executive
Officer)
\Thomas J. Martini Secretary and September 13, 1999
Thomas J. Martini Treasurer (Principal
Financial and
Accounting Officer)
\David E. Downen Director September 13, 1999
David E. Downen
\Steven F. Graver Director September 13, 1999
Steven F. Graver
\William P. Hall Director September 13, 1999
William P. Hall
\Kenneth H. Granat Director September 13, 1999
Kenneth H. Granat
\David H. Padden Director September 13, 1999
David H. Padden
\Jeffrey C. Rubenstein Director September 13, 1999
Jeffrey C. Rubenstein