SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
Quarterly Report Under Section 13 or 15 (d)
of the Securities and Exchange Act of 1934
For the Quarter Ended November 30, 2000
Commission File Number 01-19001
MILLER DIVERSIFIED CORPORATION
----------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
Nevada 84-1070932
--------------------------- --------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
Mailing Address:
P. O. Box 237
La Salle, Colorado 80645
23360 Weld County Road 35
La Salle, Colorado 80645
--------------------------
(Address of Principal Executive Office)
(970) 284-5556
--------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
----- -----
Number of shares of Common Stock, par value $.0001, outstanding on January 31,
2001, 6,364,640.
Transitional Small Business Disclosure Format: YES NO X
----- -----
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
Report on Review by Independent Accountants
-------------------------------------------
To the Board of Directors
Miller Diversified Corporation
We have reviewed the accompanying consolidated balance sheet of Miller
Diversified Corporation and its subsidiary as of November 30, 2000, and the
related consolidated statements of operations for each of the three-month
periods ended November 30, 2000 and 1999, and the consolidated statement of cash
flows for the three-month periods ended November 30, 2000 and 1999. These
financial statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the accompanying consolidated interim financial statements for
them to be in conformity with generally accepted accounting principles.
We previously audited in accordance with generally accepted auditing
standards, the consolidated balance sheet as of August 31, 2000, and the related
consolidated statements of operations, of shareowners' equity, and of cash flows
for the year then ended (not presented herein), and in our report dated December
5, 2000 we expressed an unqualified opinion on those consolidated financial
statements. In our opinion, the information set forth in the accompanying
consolidated balance sheet information as of August 31, 2000 is fairly stated in
all material respects in relation to the consolidated balance sheet from which
it has been derived.
ANDERSON & WHITNEY, P.C.
Greeley, Colorado
January19,2001
2
MILLER DIVERSIFIED CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------
November 30, August 31,
2000 2000
- --------------------------------------------------------------------------------
ASSETS
Current Assets:
Cash $ 254,901 $ 388,545
Receivables:
Trade accounts 605,291 661,630
Accounts - related parties 102,442 161,716
Notes - cattle financing 243,773 --
Notes - cattle financing -related party -- 105,596
Tax refunds -- --
Inventories 3,782,435 4,487,594
Prepaid expenses 23,599 18,997
- --------------------------------------------------------------------------------
Total Current Assets 5,012,442 5,824,078
- --------------------------------------------------------------------------------
Property and Equipment:
Feedlot facility under capital lease -
related party 1,497,840 1,497,840
Equipment 206,974 206,974
Leasehold improvements 172,114 172,114
- --------------------------------------------------------------------------------
1,876,928 1,876,928
Less: Accumulated depreciation
and amortization 786,825 765,690
- --------------------------------------------------------------------------------
Total Property and Equipment 1,090,103 1,111,238
- --------------------------------------------------------------------------------
Other Assets:
Other investments 182,199 192,545
Notes receivable - related parties 563,000 549,000
Deferred income taxes 228,236 224,236
Deposits and other 11,495 9,616
- --------------------------------------------------------------------------------
Total Other Assets 984,930 975,397
- --------------------------------------------------------------------------------
TOTAL ASSETS $7,087,474 $7,910,713
================================================================================
Continued on next page
3
MILLER DIVERSIFIED CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS - Continued
November 30, August 31,
2000 2000
- --------------------------------------------------------------------------------
LIABILITIES
- -----------
Current Liabilities:
Bank overdraft $ -- $ --
Notes payable 3,141,372 3,813,797
Trade accounts payable 611,631 607,291
Accounts payable - related party 106,890 258,076
Accrued expenses 108,292 83,231
Customer advance feed contracts 14,907 14,907
Current portion of:
Capital Lease Obligations - related party 25,085 25,085
Long-Term Debt 6,392 6,392
Long-Term Debt-related party 53,333 53,333
- --------------------------------------------------------------------------------
Total Current Liabilities 4,067,901 4,862,112
Capital Lease Obligations - related party 924,835 930,851
Long-Term Debt 8,377 9,890
Long-Term Debt - related party 189,391 202,231
- --------------------------------------------------------------------------------
Total Liabilities 5,190,505 6,005,084
Commitments
- --------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY
Preferred Stock -- --
Common Stock, par value $.0001 per share;
25,000,000 shares authorized; 6,364,640
shares issued and outstanding 636 636
Additional Paid-in Capital 1,351,693 1,351,693
Retained Earnings 544,640 553,300
- --------------------------------------------------------------------------------
Total Stockholders' Equity 1,896,969 1,905,629
- --------------------------------------------------------------------------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $7,087,474 $7,910,713
- --------------------------------------------------------------------------------
See Accompanying Notes to Unaudited Consolidated Financial Statements.
4
MILLER DIVERSIFIED CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
- --------------------------------------------------------------------------------
First Quarter Ended November 30 2000 1999
- --------------------------------------------------------------------------------
Revenue:
Feed and related sales $ 1,030,044 $ 1,008,027
Fed cattle sales 3,488,882 1,012,490
Feedlot services 299,582 310,943
Interest income 14,043 13,381
Interest income - related party 10,884 4,700
Other 24,116 10,620
- --------------------------------------------------------------------------------
Total Revenue 4,867,551 2,360,161
- --------------------------------------------------------------------------------
Costs and Expenses:
Cost of:
Feed and related sales 827,270 889,117
Fed cattle sales 3,547,325 962,111
Feedlot services 239,417 336,437
Selling, general, and administrative 225,650 194,992
Equity in (earnings) loss of investee (5,239) 14,070
Interest 13,271 13,649
Interest on note payable - related party 6,283 7,435
Interest on capital leases- related party 26,234 27,006
- --------------------------------------------------------------------------------
Total Costs and Expenses 4,880,211 2,444,817
- --------------------------------------------------------------------------------
Income (Loss) Before Income Taxes (12,660) (84,656)
Income Tax Expense (Benefit) (4,000) (21,164)
- --------------------------------------------------------------------------------
NET INCOME (LOSS) $ (8,660) $ (63,492)
- --------------------------------------------------------------------------------
INCOME (LOSS) PER COMMON SHARE $ (0.00) $ (0.01)
- --------------------------------------------------------------------------------
Weighted Average Number of Common
Shares Outstanding 6,364,640 6,364,640
- --------------------------------------------------------------------------------
See Accompanying Notes to Unaudited Consolidated Financial Statements.
5
CONSOLIDATED STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------
First Quarter Ended November 30 2000 1999
- --------------------------------------------------------------------------------
Cash Flows from Operating Activities:
Cash received from customers $ 4,944,520 $ 2,508,426
Cash paid to suppliers and employees (4,250,984) (3,479,764)
Interest received 28,616 18,081
Interest paid (26,410) (43,023)
Income taxes paid -- --
- --------------------------------------------------------------------------------
Net Cash Provided by Operating Activities 695,742 (996,280)
- --------------------------------------------------------------------------------
Cash Flows from Investing Activities:
Acquisition of property and equipment -- (28,565)
Acquisition of other investments -- (15,405)
Loans to related party (14,000) (76,000)
Collections from cattle financing -- 188,216
Loans for cattle financing (138,177) (251,250)
Proceeds from cost basis reduction of
other investments 15,585 --
- --------------------------------------------------------------------------------
Net Cash Utilized by Investing Activities (136,592) (183,004)
- --------------------------------------------------------------------------------
Cash Flows from Financing Activities:
Proceeds from :
Short-term notes payable 3,771,131 4,136,075
Long-term note payable - related party -- 300,000
Principal payments on:
Short-term notes payable (4,443,556) (3,111,622)
Capital lease obligations - related party (6,016) (7,249)
Long-term note payable - related party (12,840) (11,687)
Long-term debt (1,513) --
Increase in cash overdraft -- 49,506
- --------------------------------------------------------------------------------
Net Cash Provided by Financing Activities (692,794) 1,355,023
- --------------------------------------------------------------------------------
Net Increase (Decrease) in Cash (133,644) 175,739
Cash, Beginning of Year 388,545 88,970
- --------------------------------------------------------------------------------
Cash, End of Period $ 254,901 $ 264,709
- --------------------------------------------------------------------------------
Continued on next page.
6
MILLER DIVERSIFIED CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS -Continued
- --------------------------------------------------------------------------------
First Quarter Ended November 30, 2000 1999
- --------------------------------------------------------------------------------
Reconciliation of Net Income (Loss) to Net
Cash Provided by Operating Activities:
Net income (Loss) $ (8,659) $ (63,492)
Adjustments:
Depreciation and amortization 21,135 21,216
Equity in loss of investee (5,239) 14,070
Deferred income taxes (4,000) (21,164)
Changes in assets and liabilities:
(Increase) decrease in:
Trade accounts receivable 56,339 224,872
Accounts receivable - related party 59,274 309,812
Inventories 705,159 (1,443,385)
Prepaid expenses (4,602) 4,707
Deposits and other (1,879) --
Increase (decrease) in:
Trade accounts payable and accrued
expenses 29,401 (56,310)
Accounts payable - related party (151,186) 71,920
Customer advance feed contracts -- (58,526)
- --------------------------------------------------------------------------------
Net Cash Provided (Utilized) by
Operating Activities $ 695,742 $ (996,280)
- --------------------------------------------------------------------------------
See Accompanying Notes to Unaudited Consolidated Financial Statements
7
MILLER DIVERSIFIED CORPORATION AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
- ---------------------
The consolidated balance sheets as of November 30, 2000 and August 31, 2000, the
consolidated statements of earnings for the three months ended November 30, 2000
and 1999 and the consolidated statements of cash flows for the three months
ended November 30, 2000 and 1999 have been prepared by the Company, without
audit, pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally included in
financial statements have been condensed or omitted as allowed by the rules and
regulations of the Securities and Exchange Commission.
In preparation of the above-described financial statements, all adjustments of a
normal and recurring nature have been made. The Company believes that the
accompanying unaudited financial statements contain all adjustments necessary to
present fairly the results of operations and cash flows for the periods
presented. Further, management believes that the disclosures are adequate to
make the information presented not misleading. It is suggested that these
financial statements be read in conjunction with the annual financial statements
and the notes thereto. The operations for the three month period ended November
30, 2000 are not necessarily indicative of the results to be expected for the
year.
8
Item 2 - Management's Discussion and Analysis of Financial Condition and
------------------------------------------------------------------------
Results of Operations
---------------------
Results of Operations
- ---------------------
During the fall of 1999, the Company implemented a policy of retaining ownership
of a majority of the cattle in the Company's feedlot. This is a change from the
primary focus being on custom feeding of customers' cattle and feeding
company-owned cattle to slaughter on an as-needed basis. The change is an effort
to (1) maintain high numbers in the feedlot, (2) lessen the effect of major
customers, and (3) benefit from what is currently perceived as a good future for
the cattle market. It is anticipated that most, if not all of the Company's
inventory of cattle fed to slaughter will be price protected or hedged to
protect the Company on the down side of market fluctuations.
Quarter Ended November 30, 2000:
Total revenue for the quarter ended November 30, 2000 increased $2,507,390 or
106% over the quarter ended November 30, 1999, which reflects the change to
feeding company cattle. Fed cattle sales increased $2,476,392 and represented
72% of revenue for the quarter ended November 30, 2000 compared to 43% for the
quarter ended November 30, 1999. This increase is 99% due to cattle sales as
feed and related sales, were basically the same with only a 2% increase in
sales.
Gross profit was $204,496 for the quarter ended November 30, 2000, an increase
of $60,701 from the corresponding quarter in 1999. The gross profit percentages
were 4.2% and 6.2%, respectively, for the quarters ended November 30, 2000 and
1999. The decrease in gross profit percentages is due to the change in
composition of gross sales and the relative gross profit percentages for the
sources of revenue. The gross profit percentages for fed cattle sales were
(1.7%) and 5.0%, respectively, for the quarters ended November 30, 2000 and
1999, the decrease being a result of the higher cost of feeder cattle. Feed and
related sales gross profit percentage increased 7.9% while generating $83,864
more in gross profit due to higher volume. Feedlot services generated $60,165 in
gross profit for the first quarter compared to losing $25,494 the quarter ended
November 30, 1999. Feedlot improvements that were performed in 1999 and the
upgrade in accounting software led to reduced costs for these services.
Selling, general, and administrative expenses increased $30,658 to $225,650 for
the quarter ended November 30, 2000 compared to the corresponding quarter of
1999. The increase in costs were due to finders fees that were paid in the first
quarter in 2000 but were not paid until the second quarter in 1999. The other
significant increase came when accounting personnel were increased to finish
with the installation of the new accounting software.
The Company's share of the profit from a water filtering and dispensing company,
a 50% investee, was $5,239 for the quarter ended November 30, 2000, compared to
a loss of $14,070 for the quarter ended November 30, 1999. This is a developing
company, which enjoyed its first profitable quarter.
9
Interest expense decreased $2,302 for the quarter ended November 30, 2000 over
the corresponding quarter a year earlier as a result of decreased borrowing.
The net loss of $8,660 for the quarter ended November 30, 2000 is significantly
less than the $63,492 for the quarter ended November 30, 1999 and is generally a
result of more cattle numbers in the feedlot.
Liquidity and Capital Resources
- -------------------------------
For the three months ended November 30, 2000 operating activities provided
$695,742. Much of this is from a $509,779 decrease in Company-owned cattle
inventory, financed primarily from short-term notes payable. Working capital at
November 30, 2000 was $944,541.
Investing activities used $136,592, primarily for loans on cattle for outside
investors totaling $138,177.
Cash flow Utilized by financing activities amounted to $692,794 for the three
months ended November 30, 2000. Of this amount, $259,111 was provided from
short-term notes used to finance the inventory of Company-owned cattle on feed,
$299,975 was provided by the operating line from feeders, $260,400 was provided
by the operating line for MDC, and $157,747 was utilized by the investor line
for MDC.
The Company believes that internally generated funds and the available borrowing
under its existing credit facilities will provide sufficient liquidity and
enable it to meet its current and foreseeable working capital requirements. The
Company's $300,000 operating line of credit had an outstanding balance of
$29,192 at November 30, 2000 and the $4 million revolving line of credit for
purchase and feed cattle to slaughter had an outstanding balance at November 30,
2000 of $2,852,977. At November 30, 2000, there was also $741,797 available on
the line of credit for financing qualified customers' cattle feeding programs.
The Company had no material commitments for capital expenditures at November 30,
2000.
New Accounting Pronouncements
The effective date of SFAS No. 133, Accounting for Derivative Instruments and
Hedging Activities, has been deferred by SFAS No. 137, and has been implemented
for the first quarter of fiscal year 2001.
10
PART II OTHER INFORMATION
Items 1 through 6 None.
11
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MILLER DIVERSIFIED CORPORATION
------------------------------
(Registrant)
Date: February 1, 2001 By: /s/ JAMES E MILLER
---------------------------------
James E. Miller
President, Chief Executive
Officer, Chief Financial
Officer
Date: February 1, 2001 By: /s/ CLARK A MILLER
---------------------------------
Clark A. Miller
Secretary-Treasurer
12