0000791905-95-000007.txt : 19950915 0000791905-95-000007.hdr.sgml : 19950915 ACCESSION NUMBER: 0000791905-95-000007 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19950701 FILED AS OF DATE: 19950913 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: MILLER BUILDING SYSTEMS INC CENTRAL INDEX KEY: 0000791905 STANDARD INDUSTRIAL CLASSIFICATION: PREFABRICATED METAL BUILDINGS & COMPONENTS [3448] IRS NUMBER: 363228778 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-14651 FILM NUMBER: 95573367 BUSINESS ADDRESS: STREET 1: 58120 COUNTY RD 3 S STREET 2: P O BOX 1283 CITY: ELKHART STATE: IN ZIP: 46517 BUSINESS PHONE: 2192951214 MAIL ADDRESS: STREET 1: 58120 COUNTRY ROAD 3 SOUTH CITY: ELKHART STATE: IN ZIP: 46517 FORMER COMPANY: FORMER CONFORMED NAME: MODULAR TECHNOLOGY INC /DE/ DATE OF NAME CHANGE: 19881120 10-K 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10K (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 1, 1995 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. (x) Aggregate market value of voting stock held by nonaffiliates 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 31, 1995: $8,081,136. As of August 31, 1995, the Registrant had 3,100,963 shares of Common Stock outstanding. DOCUMENTS INCORPORATED BY REFERENCE The following are incorporated into this Annual Report on Form 10-K: o Portions of Registrant's Proxy Statement for its 1995 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. PART I ITEM 1. BUSINESS The Company Miller Building Systems, Inc. ("Miller") is the parent of Miller Structures, Inc. ("Structures") and Miller Telecom Services, Inc. ("Telecom"). All operations of Miller are conducted through its two wholly-owned subsidiaries which design, manufacture, and market factory-built buildings. Miller ceased all operations at PME Pacific Systems, Inc. ("PME") after its final contract was completed in early 1994. 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. 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 Structures and Telecom. STRUCTURES Structures is headquartered in Elkhart, Indiana and operates all administrative, sales and production from that location. The Structures office controls manufacturing facilities in Bennington, Vermont, Elkhart, Indiana, Leola, Pennsylvania, Sioux Falls, South Dakota and Patterson, California. A Residential division, which operated as Miller Residential ("Residential") a division of Structures was closed during the third quarter of fiscal 1995. Miller has discontinued all operations of the Residential division and the plant was closed with all substantially all assets disposed of by the end of fiscal 1995. Structures - Modular and Mobile Office Buildings Products The buildings produced 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 produced 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 comparable conventional site-built buildings. 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 produced 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 sitebuilt construction with appropriate variations. Structures also produces 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 produced 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 produced 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 produced 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 July 1, 1995 and July 2, 1994, the following customer 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, represented 23% and 21% respectively. 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 Structures. 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 Telecom is located in Elkhart, Indiana and operates all administrative, sales and manufacturing activities from that location. Telecom manufactures specialized buildings which utilize modular construction techniques. Products Telecom manufactures modular factory-built buildings using pre-cast concrete, steel, 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 complete site installation of the building, 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. Marketing Telecom generally sells its product directly to the end user of the buildings, which has been principally telecommunication and utility companies, military bases and municipalities. Telecom also provides building transportation and site placement services, if required by the scope of the work. Telecom generally 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. 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 elements in providing a competitive advantage to Telecom. General (Applicable to all of Miller's principal markets) Backlog The backlog of orders by market at August 31, 1995 and 1994 was as follows: 1995 1994 Structures $4,791,000 $7,699,000 Telecom 1,895,000 950,000 Backlog is broadly defined as firm order commitments not yet produced into a final building product. The 38% decrease from the prior year's backlog position for the Structures' modular and mobile office buildings is a result of some slowness in certain parts of the economy and Miller's decision to shift sales toward the more profitable technical and specific use units. Structures' management believes it is to early to determine if the current decline in backlog related to the economic slowness will have a negative impact on future earnings. Telecom's backlog nearly doubled as this subsidiary continues to develop its reputation and customer base. The management of Telecom believes that their backlogs will continue to increase with the ongoing development of their customer bases. 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 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. Obtaining state approvals is generally the responsibility of the manufacturer. Some states also 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. Miller's subsidiaries, on occasion, have experienced regulatory delays in obtaining the various required building plan approvals. Miller's subsidiaries, in addition to some of its customers, 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. Patents and Trademarks Miller has a patent for non-combustible modular buildings. Seasonality Miller's subsidiaries historically 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 H of Notes to Consolidated Financial Statements. Employees As of August 31, 1995, Miller and its subsidiaries had approximately 325 employees of which approximately 240 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 77,500 61,500 16,000 Owned (1) Elkhart, IN 54,800 50,600 4,200 Owned (2) Leola, PA 61,900 58,900 3,000 Owned Sioux Falls, SD 36,100 34,200 1,900 Leased (3) Patterson, CA 44,600 41,400 3,200 Owned Bennington, VT 28,900 27,000 1,900 Owned _______________ _______ ______ _______ Total approximate square footage 303,800 273,600 30,200 (1) Structures' administrative, sales, engineering and manufacturing facility. The Executive offices of Miller are also at this location. (2) Telecom administrative, sales and manufacturing facility. (3) Leased until April 15, 1996 with three successive two-year renewal options. ITEM 3. LEGAL PROCEEDINGS Neither Miller, Structures, nor Telecom is 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 Steven F. Graver (age 43) has been a Director of Miller since April 1991 and was elected Chairman of the Board of Directors on August 11, 1994. Effective July 1, 1995, Graver, Bokhof & Goodwin ("GraverBokhof") became Graver, Bofhof, Goodwin & Sullivan ("GBGS") GBGS is a subsidiary of the Optimum Group which has over 800 million in assets under management. Mr. Graver is President and Chief Portfolio Manager of the Optimum Group. In July 1991, GraverReich & Company ("GraverReich"), merged with Graver, Bokhof & Goodwin, an investment management firm, and Mr. Graver became a General Partner of GraverBokhof. From December 1986 until July 1991, Mr. Graver was the President and Chief Executive Officer, and Executive Vice President from February 1981 until November 1986, of GraverReich, an investment management firm which Mr. Graver co-founded. Edward C. Craig (age 60) became the Chief Executive Officer of Miller and Vice Chairman of the Board of Directors of Miller effective on July 2, 1994. Mr. Craig was elected President of Miller on August 11, 1994. 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. Mr. Craig is a Director of Regional Building Systems. Thomas J. Martini (age 47) in April 1992 became the Secretary and Treasurer of Miller. Mr. Martini has been the Chief Financial Officer of Miller since February 1991. From May 1986 to February 1991, he was the Corporate Controller of Starcraft, Inc., a manufacturer of recreational vehicles. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK 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 "MTIK." The following table sets forth the quarterly range of high and low quotations for these securities as reported on the NASDAQ National Market System for the two most recent fiscal years. Fiscal 1995 Fiscal 1994 High Low High Low 1st Quarter 4 3 3 1/4 2 3/4 2nd Quarter 4 3 1/8 4 2 1/2 3rd Quarter 4 1/4 3 1/4 4 1/4 3 4th Quarter 4 2 5/8 3 3/4 3 As of August 31, 1995, Miller estimates there were approximately 1,600 stockholders of Miller's Common Stock. Of this total, approximately 250 were stockholders of record and shares for approximately 1,350 stockholders were held in street name. Harris Trust & Savings Bank, Chicago, is Miller's Transfer Agent and Registrar. Miller did not pay dividends on its Common Stock in fiscal 1995 or fiscal 1994, as the Board of Directors ceased the payment of dividends in the third fiscal quarter of 1993. Miller does not intend to pay 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 1, July 2, June 30, June 30, June 30, 1995 1994 1993 1992 1991 (In thousands, except per share data) Net sales $41,455 $38,569 $40,623 $40,757 $37,776 Net income (loss) 320(A) 312(A) (2,014)(A) (224) 1,951 Net income (loss) per share .10 .10 (.61) (.06) .52 Cash dividends per share - - .075 .10 .08 Total assets 16,522 15,308 16,411 17,954 17,491 Long-term debt, less current maturities 1,385 110 210 302 - (A) Miller's operating results were for fiscal years 1995, 1994 and 1993 were adversely impacted by nonrecurring items of $361,123, $159,252 and $2,345,363, respectively. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Fiscal 1995 Compared to Fiscal 1994 Net sales increased $2.9 million or approximately 7% in fiscal 1995 from the corresponding amount in fiscal 1994. Structures reported a $3.4 million or approximately an 11% increase in net sales. Net sales in the Eastern plants of Structures increased $4.4 million or approximately 20%, while net sales in the West decreased $1.0 million or approximately 14%. All Structures' Eastern plants experienced net sales growth as the economy in these markets remained strong. The decline in net sales in the West was the result of the continuing sluggishness in the California economy. Telecom recorded a $1.0 million or approximately 23% increase in net sales as this subsidiary continues to build its reputation and customer base. Net sales at the closed residential division of Structures was virtually unchanged. Miller's gross profit during the 1995 fiscal year approximated 15% of net sales compared to approximately 12% of net sales in fiscal 1994. During fiscal 1995 Miller was able to shift a portion of the sales from the low end fleet business to the more profitable technical and specific use applications. Miller plans to continue the expansion of the technical and specific use markets. Selling, general and administrative expenses increased $.7 million in fiscal 1995. These expenses were 12% of net sales in fiscal 1995 compared to 11% of net sales in fiscal 1994. The increase in administrative expenses was primarily the result of higher payroll and other administrative expenses related to the growth at both Structures and Telecom. During the year, Miller recorded nonrecurring items of $361,123. These nonrecurring items consist primarily of a $265,514 charge which resulted from the final resolution of disputed warranty issues with a customer, a charge of $186,198 for exit costs associated with the closing of the residential division, and the reversal of $90,589 of certain restructuring charges recorded in fiscal 1993. The earlier than anticipated exit from the lease at the Fontana plant, a favorable arbitration settlement and the reversal of warranty reserves at the closed PME operations, partially offset by additional interest expense for an IRS audit, were the principal causes for the reversal of restructuring costs. At July 1, 1995, $239,639 in nonrecurring items remain outstanding of which $193,857 is a current liability. These items consist of severance and noncompete agreements with former officers, interest payable on the Internal Revenue audit and worker's compensation and relocation reserves related to the closed Western plants. $45,782 related to the noncompete agreement with a former officer is reflected as long-term. Of this total, approximately $4,000 will be paid in fiscal 1996, with the balance payable through fiscal 2004. The increase in interest expense in fiscal 1995 compared to fiscal 1994 of $42,808 was the result of a $55,349 increase in interest expense for the industrial revenue bond issued to finance the plant expansion at Telecom. Lower debt outstanding on the revolving line of credit was the principal cause for a $12,541 offsetting decrease in interest expense. During fiscal 1995 Miller recorded an income tax provision of $189,000 or 37% of pre-tax profit. In fiscal 1994, Miller recorded an income tax credit of $66,000. A provision of $91,000 or 37% of the pre-tax profit was offset by a reversal of $157,000 for a provision of federal and state income taxes related to an Internal Revenue Service audit settled favorably by Miller. Fiscal 1994 Compared to Fiscal 1993 Net sales decreased $2.1 million in fiscal 1994 from the corresponding amount in fiscal 1993. Structures reported a $2.3 million or approximately a 7% decrease in net sales. Net sales in the Eastern plants of Structures remained virtually unchanged, while net sales in the West decreased $3.4 million or approximately 32%. The decline in net sales in the West was the result of closing the plants in Woodburn, Oregon and Fontana, California. Net sales in the residential division of Structures increased $1.2 million or approximately 68%. The increase at the residential division of Structures was the result of the development of the divisions' dealer/builder customer base. Telecom recorded a $2.1 million or approximately 90% increase in net sales as this subsidiary continues to build its customer base. Net sales at PME decreased $1.9 million or approximately 55% as a result of the closing of the subsidiary. Miller's gross profit during the 1994 fiscal year approximated 12% of net sales compared to approximately 13% of net sales in fiscal 1993. During 1994, the Company experienced a shift in demand away from the more profitable technical and specific use applications. Selling, general and administrative expenses decreased $.9 million in fiscal 1994. These expenses were 11% of net sales in fiscal 1994 compared to 13% of net sales in fiscal 1993. The decrease in administrative expenses was primarily the result of reduced expenses related to the closed West Coast plants and the phase-out of PME's operations. These reductions were partially offset by increased administrative costs related to the growth at Structures' residential division and Telecom. During the year, Miller recorded nonrecurring items of $159,252. These nonrecurring items consisted of $264,150 for a severance agreement with a former officer and the reversal of $104,898 in certain restructuring charges recorded in fiscal 1993. The earlier than anticipated sale of the Woodburn plant, eliminating property taxes and costs for the maintenance of the building, and the elimination of the office lease at the PME operations were the principle causes for the reversal of restructuring costs. A $193,242 gain on the sale of the Woodburn plant was recorded during the current fiscal year and is reflected in the gain on sale of property and equipment. At July 2, 1994, $612,594 in nonrecurring items remained outstanding of which $498,198 was classified as a current liability and $144,396 was reflected as long-term. These items consisted of severance and noncompete agreements with former officers, a lease commitment for the Fontana plant, warranty reserves related to the PME operations, interest payable on the Internal Revenue audit and worker's compensation and relocation reserves related to the closed Western plants. Miller recorded a $120,220 provision for doubtful receivables in fiscal 1994 (applicable to the closed PME operations). The allowance related to disputes over delays and change orders for the completed PME project at the Denver International Airport. The increase in interest expense in fiscal 1994 compared to fiscal 1993 of $15,942 was the result of higher interest rates and higher debt outstanding on the revolving line of credit. During fiscal 1994, Miller recorded an income tax credit of $66,000. A provision of $91,000 or 37% of the pre-tax profit was offset by a reversal of $157,000 for a provision of federal and state income taxes related to an Internal Revenue Service audit settled favorably by Miller. In fiscal 1993, Miller recorded an income tax credit of $593,000 or 23% of the pre-tax loss which included $309,000 for federal and state income taxes resulting from an Internal Revenue Service audit, which was being appealed. Liquidity and Capital Resources Miller's working capital as of July 1, 1995 was $5,254,456 compared to $5,373,230 as of July 2, 1994. The working capital ratio as of July 1, 1995 and July 2, 1994 was 2.0 to 1. During fiscal 1995, operations provided cash flows of $66,335 consisting primarily of net income and certain noncash charges offset by reductions in accounts payable and other accrued liabilities. Miller utilized cash of $1,959,893 in investing activities, consisting of the Telecom plant expansion to support the subsidiary's growth and other purchases of plant and equipment. The investments made by Miller were financed through increased borrowings on the revolving line of credit and the proceeds from the industrial revenue bond. An unsecured revolving credit agreement with a bank makes available advances up to $5,000,000 through November 30, 1995. There was $1,550,000 outstanding on the revolving credit line at July 1, 1995 and $525,000 at July 2, 1994. The $5,000,000 availability under the present loan agreement has been reduced by $134,344 for a standby letter of credit issued in connection with an obligation payable to a former officer. 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. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The information required by Item 8 of Part II is incorporated herein by reference to the Consolidated Financial Statements filed with this report; see Item 14 of Part IV. 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 report. ITEM 11. EXECUTIVE COMPENSATION The information required by this Item is set forth in the Compensation and 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 Principal Shareholder and Share Ownership of Director and Executive Officers 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 Transactions with Management and Others 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)(1) Consolidated Financial Statements of Miller Building Systems, Inc. and Subsidiaries Report of Independent Accountants........................................F-1 Consolidated Balance Sheets as of July 1, 1995 and July 2, 1994..........F-2 Consolidated Statements of Operations for the years ended July 1, 1995, July 2, 1994 and June 30,1993......................................F-3 Consolidated Statements of Stockholders' Equity for the years ended July 1, 1995, July 2, 1994 and June 30, 1993.......................F-4 Consolidated Statements of Cash Flows for the years ended July 1, 1994, July 2, 1994 and June 30, 1993.....................................F-5 Notes to Consolidated Financial Statements...............................F-6 (2) Financial Statement Schedule II - Valuation and Qualifying Accounts..................................F-13 All other schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission are not required under the related instructions, are inapplicable, or the information is included in the Notes to Consolidated Financial Statements, and therefore have been omitted. (3) See Index to Exhibits (b) Reports on Form 8-K filed in the fourth quarter of fiscal 1995: The following report on Form 8-K was filed during the three months ended July 1, 1995. May 19, 1995, reporting a Resolution adopted by the Board of Directors on April 27, 1995 to amend the By-Laws which increased the number of Directors from seven (7) to eight (8); and elected Myron C. Noble to the Board of Directors on April 27, 1995 filling the vacancy created by the foregoing amendment. 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 12, 1995 \Edward C. Craig Edward C. Craig 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 President, Chief September 12, 1995 Edward C. Craig Executive Officer and Director (Principal Executive Officer) \Thomas J. Martini Secretary and September 12, 1995 Thomas J. Martini Treasurer (Principal Financial and Accounting Officer) \Ronald L. Chez Director September 12, 1995 Ronald L. Chez \David E. Downen Director September 12, 1995 David E. Downen \Steven F. Graver Director September 12, 1995 Steven F. Graver \William P. Hall Director September 12, 1995 William P. Hall \Myron C. Noble Director September 12, 1995 Myron C. Noble \David H. Padden Director September 12, 1995 David H. Padden \Jeffrey C. Rubenstein Director September 12, 1995 Jeffrey C. Rubenstein REPORT OF INDEPENDENT ACCOUNTANTS To the Stockholders and Board of Directors of Miller Building Systems, Inc.: We have audited the consolidated financial statements and the financial statement schedule of Miller Building Systems, Inc. and subsidiaries listed in Item 14(a) of this Form 10-K. 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 in accordance with generally accepted auditing standard. Those standards 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. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Miller Buildings Systems, Inc. and subsidiaries as of July 1, 1995 and July 2, 1994, and the consolidated results of their operations and their cash flows for the years ended July 1, 1995, July 2, 1994 and June 30, 1993, in conformity with generally accepted accounting principles. In addition, in our opinion, the financial statement schedule referred to above, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information required to be included therein. \Coopers & Lybrand L.L.P. COOPERS & LYBRAND L.L.P. South Bend, Indiana August 15, 1995 F-1 MILLER BUILDING SYSTEMS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS July 1, July 2, 1995 1994 ASSETS CURRENT ASSETS Cash and temporary cash investments $ 351,860 $ 132,084 Receivables, less allowance for doubtful receivables of $59,000 in 1995 and $120,000 in 1994 5,960,110 6,186,820 Inventories: Raw materials 2,945,366 2,933,238 Work in process 441,366 287,106 Finished goods 146,887 152,060 3,533,619 3,372,404 Deferred federal income taxes 320,000 399,000 Other current assets 126,752 400,826 TOTAL CURRENT ASSETS 10,292,341 10,491,134 PROPERTY, PLANT AND EQUIPMENT Land 847,336 764,857 Buildings and leasehold improvements 5,357,144 4,208,163 Machinery and equipment 3,906,285 3,487,256 10,110,765 8,460,276 Less, Accumulated depreciation and amortization 4,083,640 3,666,270 6,027,125 4,794,006 OTHER ASSETS 202,166 22,887 TOTAL ASSETS $16,521,632 $15,308,027 The accompanying notes are a part of the consolidated financial statements. F-2 July 1, July 2, 1995 1994 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Short-term borrowings $ 1,550,000 $ 525,000 Current maturities of long-term debt 224,925 100,481 Accounts payable 2,074,510 3,202,938 Accrued income taxes 89,827 140,542 Accrued expenses and other 904,766 680,745 Accrued nonrecurring items 193,857 468,198 TOTAL CURRENT LIABILITIES 5,037,885 5,117,904 LONG-TERM DEBT, less current maturities 1,385,000 109,925 DEFERRED FEDERAL INCOME TAXES 134,000 146,000 OTHER 45,782 144,396 TOTAL LIABILITIES 6,602,667 5,518,225 COMMITMENTS AND CONTINGENCIES - Notes C and G STOCKHOLDERS' EQUITY Common stock, $.01 par value, issued 4,023,548 shares 40,235 40,235 Additional paid-in capital 11,454,903 11,454,903 Retained earnings 1,563,201 1,250,434 13,058,339 12,745,572 Less, Treasury stock, at cost 3,139,374 2,955,770 TOTAL STOCKHOLDERS' EQUITY 9,918,965 9,789,802 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $16,521,632 $15,308,027 F-2 MILLER BUILDING SYSTEMS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS Years Ended July 1, July 2, June 30, 1995 1994 1993 Net sales $41,454,500 $38,568,812 $40,622,923 Costs and expenses: Cost of products sold 35,373,322 33,791,773 35,489,137 Selling, general and administrative 5,018,490 4,362,530 5,281,693 Nonrecurring items 361,123 159,252 2,345,363 Provision for doubtful receivables 67,528 120,220 49,361 (Gain) loss on sale property and equipment 3,379 (183,910) (3,485) Interest expense 134,833 92,025 76,083 Interest income (13,087) (18,938) (7,990) INCOME (LOSS) BEFORE INCOME TAX CREDIT 508,912 245,860 (2,607,239) Income tax (credit) 189,000 (66,000) (593,000) NET INCOME (LOSS) $ 319,912 $ 311,860 $(2,014,239) Earnings (loss) per share of common stock, based upon weighted average number of common shares and equivalent shares outstanding $ .10 $ .10 $ (.61) WEIGHTED AVERAGE NUMBER OF COMMON SHARES AND EQUIVALENT SHARES OUTSTANDING 3,130,207 3,197,421 3,275,700 The accompanying notes are a part of the consolidated financial statements. F-3 MILLER BUILDING SYSTEMS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Common Stock Issued (Authorized - Additional Total 7,500,000 shares) Paid-In Retained Treasury Stock Stockholders' Shares Amount Capital Earnings Shares Amount Equity BALANCE, JULY 1, 1992 4,023,548 $40,235 $11,454,903 $3,198,519 712,970 $(2,506,091) $12,187,566 Treasury stock acquired - - - - 61,500 (175,500) (175,500) Cash dividends ($.075 per share) - - - (245,706) - - (245,706) Net loss - - - (2,014,239) - - (2,014,239) BALANCE, JUNE 30, 1993 4,023,548 40,235 11,454,903 938,574 774,470 (2,681,591) 9,752,121 Treasury stock acquired - - - - 90,500 (274,179) (274,179) Net income - - - 311,860 - - 311,860 BALANCE, JULY 2, 1994 4,023,548 40,235 11,454,903 1,250,434 864,970 (2,955,770) 9,789,802 Treasury stock acquired - - - - 80,000 (260,000) (260,000) Treasury stock sold - - - (2,572) (15,385) 52,573 50,001 Exercise of stock options using treasury stock - - - (4,573) (7,000) 23,823 19,250 Net income - - - 319,912 - - 319,912 BALANCE, JULY 1, 1995 4,023,548 $40,235 $11,454,903 $1,563,201 922,585 $(3,139,374) $9,918,965
The accompanying notes are a part of the consolidated financial statements. F-4 MILLER BUILDING SYSTEMS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended July 1, July 2, June 30, 1995 1994 1993 CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES: Net income (loss) $ 319,912 $ 311,860 $(2,014,239) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Nonrecurring items 361,123 159,252 2,345,363 Depreciation and amortization 612,359 574,243 626,323 Amortization of other assets 17,886 1,944 144,216 Deferred income taxes 67,000 (44,000) (297,000) (Gain) loss on sale of property and equipment 3,379 (183,910) (1,485) Changes in certain assets and liabilities: Receivables 226,710 (528,709) (877,320) Refundable income taxes - 684,000 (273,290) Inventories (161,215) 20,835 (545,225) Other current assets 274,074 (138,791) 650,763 Accounts payable (1,128,428) 297,474 353,361 Accrued income taxes (50,715) (145,394) 285,936 Accrued expenses and other 224,021 18,735 (240,038) Accrued nonrecurring items (699,771) (456,033) (162,273) Net cash provided by (used in) operating activities 66,335 571,506 (4,908) CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES: Proceeds from sale of property and equipment 51,268 1,155,412 31,750 Purchase of property, plant and equipment (1,934,432) (394,918) (351,437) Unexpended industrial revenue bond proceeds (76,729) - - Net cash provided by (used in) investing activities (1,959,893) 760,494 (319,687) CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES: Proceeds from short-term borrowings 19,838,000 18,772,000 17,344,000 Reduction of short-term borrowings (18,813,000) (19,649,000) (17,692,000) Proceeds from long-term debt 1,500,000 - - Bond issuance costs (120,436) - - Payments of long-term debt (100,481) (91,849) (83,957) Purchase of treasury stock (260,000) (274,179) (175,500) Proceeds from sale of treasury stock 50,001 - - Proceeds from exercise of stock options 19,250 - - Payment of cash dividends - - (245,706) Net cash provided by (used in) financing activities 2,113,334 (1,243,028) (853,163) Increase (decrease) in cash and temporary cash investments 219,776 88,972 (1,177,758) CASH AND TEMPORARY CASH INVESTMENTS Beginning of year 132,084 43,112 1,220,870 End of year $ 351,860 $ 132,084 $ 43,112 SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the year for: Interest $ 113,167 $ 87,664 $ 76,764 Income taxes (net of refunds) 172,715 (560,606) (315,003)
The accompanying notes are a part of the consolidated financial statements. F-5 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS for the years ended July 1, 1995, July 2, 1994 and June 30, 1993 Note A: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES. Principles of Consolidation - The consolidated financial statements include the accounts of Miller Building Systems, Inc. and its subsidiaries, all of which are wholly-owned, (individually and collectively referred to herein as "Miller"). Fiscal Year - Effective July 1, 1993, Miller adopted a fiscal year ending on the Saturday closest to June 30. Prior to this change, Miller's fiscal year ended on June 30. Revenue Recognition - Miller generally recognizes revenues from the sales of its products upon the completion of manufacturing and the transfer of title. 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 the amortized over a future period. Capitalized software costs, for both internally developed and purchased software products, are amortized using the straight-line method over sixty months. As of July 1, 1995 and July 2, 1994, capitalized software costs, included with machinery and equipment, (and the related accumulated amortization) aggregated $199,007 ($8,251) and $148,010 ($27,222), respectively. Bond Issuance Cost - Bond issuance costs aggregating $120,436, which related to issuance of the industrial revenue bond, are being amortized using the straight-line method over the term of the bond. Income Taxes - Effective July 1, 1993, Miller adopted Statement of Financial Accounting Standards No. 109 ("SFAS No. 109"), "Accounting for Income Taxes," which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the years in which the differences are expected to reverse. As permitted by SFAS No. 109, Miller elected not to restate the financial statements of any prior years, and the adoption of SFAS No. 109 did not have a material effect on Miller's consolidated financial statements. Prior to July 1, 1993, the provision for income taxes was based on income and expenses included in the consolidated statements of operations. Differences between taxes so computed and taxes payable under applicable statutes and regulations were classified as deferred taxes arising from timing differences. F-6 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued for the years ended July 1, 1995, July 2, 1994 and June 30, 1993 Note A: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Concluded. Employee Benefit 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 discretionary matching contributions before the end of the Plan's calendar year-end. During the years ended July 1, 1995 and July 2, 1994, Miller expensed $17,237 and $17,017, respectively, under this Plan. No amounts were expensed for the fiscal year ended June 30, 1993. Earnings (Loss) Per Share - Per share amounts are based upon the weighted average number of common shares outstanding and common equivalent shares (dilutive stock options) assumed outstanding during each period. The common equivalent shares did not enter into the computation of loss per share for the year ended June 30, 1993 because their inclusion would have been antidilutive. Consolidated Statements of Cash Flows - Miller considers all highly liquid investments purchased with an original maturity of three months or less to be temporary cash investments for purposes of the consolidated statements of cash flows. Note B: NONRECURRING ITEMS. During the fiscal year ended July 1, 1995, Miller recorded a pre-tax charge of $265,514 which resulted from the final resolution of disputed warranty issues with a customer. Also, Miller recorded a pre-tax charge of $186,198 for exit costs associated with the closing of its residential division, which manufactured factory-built modular residential housing. During the fourth quarter of fiscal year ended July 2, 1994, Miller recorded a severance agreement with a former officer which consisted of seventeen months compensation and certain benefits. The agreement is payable monthly through December 31, 1995. During the fiscal year ended June 30, 1993, Miller commenced certain restructuring actions which resulted in a pre-tax restructuring charge of $2,345,363. The restructuring costs included the write-off of a non-compete agreement with a former officer and the closing of certain West coast operations. These included the plants in Woodburn, Oregon and Fontana, California and the termination of PME Pacific Systems, Inc. ("PME"). During fiscal 1995 and 1994 certain accruals for these restructuring costs, principally related to the closed Woodburn and Fontana plants and the PME operations were settled at amounts less than originally accrued. F-7 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued for the years ended July 1, 1995, July 2, 1994 and June 30, 1993 Note B: NONRECURRING ITEMS, Concluded. Years Ended July 1, July 2, June 30, 1995 1994 1993 Settled warranty issues $265,514 $ - $ - Residential exit costs 186,198 - - Severance agreement - 264,150 - Restructuring costs (90,589) (104,898) 2,345,363 $361,123 $ 159,252 $2,345,363 At July 1, 1995, $45,782 ($144,396 at July 2, 1994) of the accrual for liabilities and costs associated with the nonrecurring items is reflected as a long-term liability and the remaining accrual is classified as a current liability. Note C: DEBT. Short-term borrowings Miller maintains an unsecured revolving line of credit with a bank. The loan agreement makes available up to $5 million through November 30, 1995. Interest is payable monthly at prime or a margin over the London Interbank Offering Rate, depending on the pricing option selected by Miller. At July 1, 1995 and July 2, 1994, the weighted average interest rate on outstanding borrowings was 8.68% and 7.25%, respectively. As of July 1, 1995 and July 2, 1994, outstanding borrowings under the loan agreement aggregated $1,550,000 and $525,000, 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 1, July 2, 1995 1994 Industrial revenue bond, variable rate (4.15% at July 1, 1995), payable in annual installments of $115,000, with an installment of $120,000 at final maturity in November 2007. $1,500,000 $ - Obligation payable to a former officer of Miller payable in semi-monthly installments of $4,798 through June 15, 1996. Interest at 9% imputed for financial reporting purposes. 109,925 210,406 Total 1,609,925 210,406 Less, Current maturities 224,925 100,481 Long-term debt $1,385,000 $109,925 F-8 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued for the years ended July 1, 1995, July 4, 1994 and June 30, 1993 Note C: Debt, Concluded. Aggregate maturities of long-term debt for each of the next five years are as follows: 1996 - $224,925; 1997 - $115,000; 1998 - $115,000; 1999 -$115,000 and 2000 $115,000. In connection with the industrial revenue bond obligation, Miller obtained, as a credit enhancement for the bondholders, an irrevocable letter of credit in favor of the bond trustee. Miller, at its discretion, can convert the industrial revenue bond from a variable rate 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 the original maturity. In addition, in connection with the note payable to a former officer, Miller obtained an irrevocable letter of credit in favor of that officer approximating the outstanding principal balance. Availability under the $5 million bank line of credit agreement is reduced by the amount of this standby letter of credit. Note D: STOCKHOLDERS' EQUITY. On June 30, 1994, the Board of Directors adopted the Miller Building Systems, Inc. 1994 Stock Option Plan (the "1994 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 1991 Stock Option Plan (the "1991 Plan") under which 250,000 shares of common stock were reserved for future grant. The 1991 Plan expires August 26, 2001. The 1994 Plan and 1991 Plan 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 1994 Plan and 1991 Plan 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. Changes in options are summarized as follows: Number Per Share Of Shares Option Price Outstanding at July 1, 1992 129,500 $3.00 - $4.63 Granted 72,000 2.50 - 2.75 Outstanding at June 30, 1993 201,500 2.50 - 4.63 Canceled (41,500) 3.00 - 4.25 Outstanding at July 2, 1994 160,000 2.50 - 4.63 Granted 329,000 3.25 - 6.00 Exercised (7,000) 2.75 Canceled (88,000) 2.75 - 4.63 Outstanding at July 1, 1995 394,000 $2.50 - $6.00 Exercisable at July 1, 1995 188,600 F-9 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued for the years ended July 1, 1995, July 2, 1994 and June 30, 1993 Note E: INCOME TAXES. The provision (credit) for income taxes is summarized as follows: Years Ended July 1, July 2, June 30, 1995 1994 1993 Current: Federal $ 72,000 $(18,000) $(349,000) State 50,000 (4,000) 53,000 122,000 (22,000) (296,000) Deferred tax (credit) 67,000 (44,000) (297,000) Total $189,000 $(66,000) $(593,000) The provision (credit) for income taxes included in the consolidated statements of operations differs from that computed by applying the federal statutory tax rate (34%) to income (loss) before income taxes as follows: Years Ended July 1, July 2, June 30, 1995 1994 1993 Computed federal income tax (credit) $173,000 $ 83,600 $(886,500) Increase (decrease) resulting from: Federal income taxes recorded (reversed) for Internal Revenue Service exam- ination - (120,400) 251,000 State income taxes, net of federal income tax impact 33,000 (2,600) 35,000 Other, net (17,000) (26,600) 7,500 Total $189,000 $ (66,000) $(593,000) F-10 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued for the years ended July 1, 1995, July 2, 1994 and June 30, 1993 Note E: INCOME TAXES, Continued Deferred income taxes reflect the estimated future net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The components of the net deferred tax asset and liability at July 1, 1995 and July 2, 1994 are as follows: July 1, July 2, 1995 1994 Current deferred tax asset: Inventories $ 140,000 $ 130,000 Accrued warranty 59,000 93,000 Accrued nonrecurring items 24,000 122,000 Allowance for doubtful receivables 76,000 49,000 Other 21,000 5,000 Total $ 320,000 $ 399,000 Long-term deferred tax asset (liability): Property, plant and equipment $ (149,000) $(205,000) Accrued nonrecurring items 15,000 59,000 Total $ (134,000) $(146,000) During the year ended June 30, 1993, the Internal Revenue Service ("IRS") completed an audit for Miller's federal income tax returns for the fiscal years 1989, 1990 and 1991 and the revenue agent proposed adjustments related to the valuation and amortization of certain intangible assets. During fiscal 1994, Miller settled these audit issues with the IRS and, accordingly, a federal and state tax benefit (reversal of previously accrued income taxes) of $157,000 was recorded in the year ended July 2, 1994. Note F: MAJOR CUSTOMERS. Miller's primary business involves the design and manufacture of factory built buildings. Miller sells its products primarily to independent customers who, in turn, sell or lease to the end users. One customer individually accounted for 23% of net sales in fiscal 1995, 21% of net sales in fiscal 1994 and 34% of net sales in fiscal 1993. At July 1, 1995, 15% of receivables is concentrated with this one customer and 37% concentrated in five other customers. At July 2, 1994, 28% of receivables was concentrated with this one customer and 33% was concentrated with five other customers. Note G: COMMITMENTS AND CONTINGENCIES. Lease Commitments: Miller leases certain real estate under a noncancellable operating lease expiring April 1996. The lease may be extended at Miller's option. Miller generally is responsible for utilities, taxes and insurance on the leased facility. Future minimum lease payments under this noncancellable lease are $35,833 in fiscal year 1996 with no commitments thereafter. Rental expense under all operating leases aggregated $159,225, $179,620 and $164,832 for the years ended July 1, 1995, July 2, 1994 and June 30, 1993, respectively. F-11 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Concluded for the years ended July 1, 1995, July 2, 1994 and June 30, 1993 Note H: UNAUDITED INTERIM FINANCIAL INFORMATION. Presented below is certain selected unaudited quarterly financial information for the years ended July 1, 1995 and July 2, 1994: Earnings Net Gross Net Income (Loss) Sales Profit (Loss) Per Share 1995: Fourth $11,298,949 $1,899,047 $ 263,885 $ .08 Third 9,225,932 1,131,982 (370,960) (.12) Second 9,691,497 1,440,865 118,817 .04 First 11,238,122 1,609,284 308,170 .10 Total $41,454,500 $6,081,178 $ 319,912 $ .10 1994: Fourth $10,804,983 $1,263,563 $ (87,561) $(.03) Third 8,279,366 773,141 23,624 .01 Second 7,232,812 973,156 53,351 .02 First 12,251,651 1,767,179 322,446 .10 Total $38,568,812 $4,777,039 $ 311,860 $ .10 F-12 MILLER BUILDING SYSTEM, 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 1, 1995: Allowance for doubtful receivables $120,220 $ 67,528 $ - $128,724 $ 59,024 Year ended July 2, 1994: Allowance for doubtful receivables $ 49,361 $120,220 $ - $ 49,361 $120,220 Property held for sale $153,259 $ - $ - $153,259 $ - Year ended June 30, 1993: Allowance for doubtful receivables $ - $ 49,361 $ - $ - $ 49,361 Property held for sale $ - $153,259 $ - $ - $153,259 Uncollectible accounts written off. Valuation allowance originally established in fiscal year 1993 to reflect "Property held for sale" at its net realizable value was utilized when the property was disposed of in fiscal year 1994.
F-13 MILLER BUILDING SYSTEMS, INC., AND SUBSIDIARIES INDEX TO EXHIBITS Exhibit Number Description of Exhibit 23.3 Consent of Independent Accountants 10.53 Employment agreement between Registrant and Edward C. Craig, dated July 1, 1994. 10.54 Agreement between Registrant and Ronald L. Chez, dated September 9, 1994. 10.55 Agreement to Terminate Lease between Miller Structures, Inc., an Indiana corporation, and Malcolm O. Koons dated June 12, 1995 with respect to property located at Elkhart, Indiana. 11 Statement regarding computation of per share earnings. 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) (d) (f) (i) (k) (l) (n) 4.1 Specimen Common Stock Certificate (e) 4.2 Certificate of Incorporation, Articles Fourth, Eighth, and Tenth; By-Laws, Articles II, VII, and IX (a) 10.9 Employee Incentive Stock Option Plan adopted by the Registrant's stockholders on April 11, 1983 and Form of Option Agreement (a) (b) (c) 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 (h) 10.12 Lease Agreement between Toboll properties and Miller Structures, Inc. (South Dakota) dated August 1, 1990 with respect to the lease of land in Sioux Falls, South Dakota (h) 10.14 Lease between Miller Structures, Inc.), a California corporation, and C&W dated as of March 20, 1985 with respect to property located in Fontana, California (a) 10.44 Employment Agreement between Registrant and John M. Davis, dated March 16, 1990 and effective as of February 1, 1990 (g) 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 (j) 10.48 1991 Stock Option Plan adopted by the Registrant's stockholders on October 30, 1991 and Form of Option Agreement (m) 10.49 Miller Building Systems, Inc. 401(k) Plan (o) 10.50 Letter to Frederick H. Goldberger, dated April 28, 1993, declaring the non-competition covenant, of the Agreement of May 6, 1991, to have no value (o) 10.51 First amendment to employment agreement between Registrant and John M. Davis, dated March 16, 1994 (q) 10.52 Commercial Lease and Option to Purchase between Miller Structures, Inc., and Indiana corporation, and Malcolm O. Koons dated March 2, 1993 with respect to property located at Elkhart, Indiana (q) 10.53 1994 Stock Option Plan adopted by the Registrant's stockholders on October 25, 1994 and For of Option Agreement (p) 21.1 Subsidiaries of the Registrant (o) ______________ (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 - November 1, 1988 (d) Form 8-K, Date of Report - July 20, 1989 (e) Form 10-K for year ended June 30, 1989 (f) Form 8-K, Date of Report - January 31, 1990 (g) Form 8-K, Date of Report - March 16, 1990 (h) Form 10-K for year ended June 30, 1990 (i) Form 8-K, Date of Report - April 23, 1991 (j) Form 8-K, Date of Report - May 6, 1991 (k) Form 8-K, Date of Report - July 25, 1991 (l) Form 8-K, Date of Report - August 26, 1991 (m) Form S-8, Date of Report - July 31,1992 (n) Form 8-K, Date of Report - April 22, 1993 (o) Form 10-K for year ended June 30, 1993 (p) Form S-8, Date of Report - Dated December 30, 1994 (q) Form 10-K, for year ended July 2, 1994 EX-27 2
5 YEAR JUL-01-1995 JUL-01-1995 351,860 0 5,960,110 0 3,533,619 10,292,341 10,110,765 4,083,640 16,521,632 5,037,885 1,385,000 40,235 0 0 0 16,521,632 41,454,500 41,454,500 35,373,322 40,391,812 0 0 134,833 508,912 189,000 319,912 0 0 0 319,912 .10 .10
EX-23 3 Exhibit 23.3 CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the incorporation by reference in the registration statements of Miller Building Systems, Inc. on Form S-8 (File Nos. 33-88158 and 33-50512), and in the related Prospectus, of our report dated August 15, 1995, on our audits of the consolidated financial statements and financial statement schedule of Miller Building Systems, Inc. and subsidiaries as of July 1, 1995 and July 2, 1994, and for the years ended July 1, 1995, July 2, 1994 and June 30, 1993, which report is included in this Annual Report on Form 10-K. \Coopers & Lybrand L.L.P. COOPERS & LYBRAND L.L.P. South Bend, Indiana September 12, 1995 EX-10 4 EXHIBIT 10.53 EMPLOYMENT AGREEMENT This Employment Agreement (this "Agreement") is entered into as of July 1, 1994 (the "Effective Date"), between Miller Building Systems, Inc., a Delaware corporation (the "Company") and Edward Craig (the "Employee"). RECITALS A. The Company's primary business is manufacturing and distributing factory built buildings having various commercial, residential, governmental, and telecommunication applications and uses (the "Business"). B. The Company desires to hire the employee as its Chief Executive Officer and Vice Chairman of the Board of Directors, and the Employee desires to perform such services for the Company. CLAUSES In consideration of the foregoing, and the covenants, duties, rights and obligations set forth below, the parties agree as follows: ARTICLE 1 EMPLOYMENT AND DUTIES 1.1 Duties. Subject to the terms and conditions of this Agreement, the Company employs the Employee as its Chief Executive Officer and Vice Chairman of the Board, located in Elkhart, Indiana, to perform the usual duties of such offices as described in the Company's by-laws. The Employee accepts such employment with the Company. The Employee shall devote his exclusive and full-time attention and best efforts to the Company's Business as is necessary for him to perform his duties. 1.2 Term. (a) Scheduled Term. The term of the Employee's employment under this Agreement shall be for a period of two (2) years, commencing on July 1, 1994, and continuing through June 30, 1996 (the "Term"), unless terminated sooner for "Cause" under subsection 1.2(b) below. (b) Termination for Cause. The Company shall have the right, at any time during the Term of this Agreement, to terminate the Employee's employment under this Agreement without prior notice, if such termination is for "Cause". For purposes of this Agreement, "Cause" shall mean dishonesty, fraud, conviction of a felony or of any crime involving moral turpitude, willful refusal to perform the material duties under this Agreement, gross dereliction or gross neglect of duty, or material breach of the restrictive covenants set forth in Section 6 of this Agreement. ARTICLE 2 COMPENSATION 2.1 Base Salary. In consideration of the services to be rendered by the Employee to the Company under this Agreement, the Company shall pay the Employee an annual base salary (the "Base Salary") in the amount of one hundred thirty thousand dollars ($130,000). The Company shall pay the Base Salary to the Employee in equal installments in accordance with the Company's standard payroll practices, less all applicable payroll, FICA, withholding and other taxes. 2.2 Incentive Bonus. In addition to all other compensation payable to the Employee under this Agreement, for each fiscal year during the Term, the Company shall pay a bonus (the "Bonus") to the Employee, predicated on the Company's consolidated publicly reported pre-tax profits generated from continuing operations (and excluding non-recurring gains, profits and losses) ("Pre-Tax Profits"), as shown on the audited financial statements prepared by the Company's independent certified public accountants. Such determination of Pre-Tax Profits shall be final, conclusive and binding upon the parties. The Bonus shall be computed each fiscal year as follows: (a) If Pre-Tax Profits are between $0 and $500,000, the Employee shall receive no Bonus. (b) The Employee shall receive a Bonus of: one percent (1%) of the excess amount of Pre-Tax Profits over $500,000 up to $1,000,000; plus two percent (2%) of the excess amount of Pre-Tax Profits over $1,000,000 up to $1,500,000; plus three percent (3%) of the excess amount of Pre-Tax Profits over $1,500,000 up to $2,000,000; plus four percent (4%) of the excess amount of Pre-Tax Profits over $2,000,000 up to $3,000,000; plus five percent (5%) of the excess amount of Pre-Tax Profits over $3,000,000. The Bonus awarded to the Employee shall be paid within seventy-five (75) days after the end of each fiscal year. 2.3 Expense Reimbursement. The Company shall reimburse the Employee for those out-of-pocket expenses the Employee incurs while performing his obligations under this Agreement, including without limitation a car allowance for the use of his car in the performance of his duties as an employee of the Company, which: (i) are reasonable; (ii) conform with all applicable policies of the Company; and (iii) are evidenced by appropriate documentation. 2.4 Benefit Plans. During the Term of this Agreement, the Company shall provide the Employee with all medical and life, including accidental death and dismemberment coverage, insurance coverage under the Company's benefit programs or plans of any type or nature which the Company has in effect from time to time, in accordance with the provisions of such programs or plans. In addition, the Employee shall be included in any other benefit programs awarded to senior executives of the Company. 2.5 Vacation. The Employee shall be entitled to vacation in accordance with the Company's vacation policy for senior executives and shall be eligible, as of the effective date of this Agreement, to four (4) weeks of paid vacation. 2.6 Moving and Temporary Housing. The Company shall reimburse the Employee for those out-of-pocket expenses the Employee incurs in connection with: (i) moving from his current residence to Elkhart, Indiana, and (ii) temporary housing in Elkhart, Indiana for a period not to exceed the earlier of six (6) months or upon the Employee obtaining a permanent residence. ARTICLE 3 CERTAIN STOCK MATTERS 3.1 Treasury Stock. The Employee shall purchase fifty thousand dollars ($50,000) of the Company's treasury stock at its June 28, 1994 price of $3.25 per share and shall make full payment to the Company for such shares prior to August 15, 1994. The Company shall promptly register such shares with the Securities and Exchange Commission. 3.2 Option Plan. The Company will issue to the Employee stock options covering a total of 170,000 shares of the Company's stock pursuant to a Company Stock Option Agreement. The terms of such options shall be substantially as follows: (a) The Employee shall have the option to purchase the first 50,000 shares at an exercise price which shall be equal to $3.50 per share; (b) The Employee shall have the right to purchase the next 70,000 shares at an exercise price which shall be equal to $4.50 per share; and (c) The Employee shall have the right to purchase the last 50,000 shares at an exercise price which shall be equal to $6.00 per share. The vesting of the foregoing shares shall be as follows: (i) the first 25,000 shares shall vest as of the Effective Date; (ii) the next 40,000 shares shall vest twelve (12) months from the Effective Date; (iii) the next 55,000 shares shall vest twenty-four (24) months from the Effective Date and (iv) the remaining 50,000 shares shall vest thirty-six (36) months from the Effective Date. All vesting shall accelerate upon the sale of the Company or of substantially all of the Company's assets. ARTICLE 4 DISABILITY 4.1 Disability. If the Employee becomes disabled during the Term, this Agreement shall terminate; provided, however, that the Employee shall continue to be compensated at his then existing Base Salary for a period of six (6) months after inception of the Employee's "Disability" (as that term is defined below) or the expiration of the Term, whichever is earlier. For purposes of this Agreement, "Disability" shall mean that the Employee shall, because of a mental or physical condition that has existed for a period of at least thirty (30) consecutive days, be incapable of satisfactorily discharging his regular duties as required under this Agreement. The determination, from time to time, of whether the Employee has become disabled or is no longer disabled, shall be made by agreement of the parties, or if no agreement can be reached, the Employee shall, upon ten (10) days written notice from the Company, choose a physician and the Company shall likewise choose a physician, and each such physician shall, within five (5) days thereafter, agree on the appointment of a third physician who shall examine the Employee and determine from said examination if he has a Disability. The decision of such physician shall be binding on all parties. The physician so chosen shall be a licensed physician in the State of Indiana. ARTICLE 5 DEATH 5.1 Death. If the Employee dies during the Term, this Agreement shall terminate; provided, however, that the Employee's estate, or designated beneficiary, shall be paid his then existing monthly Base Salary for a period of six (6) months from the date of his death, or the balance of the Term, whichever is earlier. ARTICLE 6 RESTRICTIVE COVENANTS 6.1 Confidentiality. The Employee acknowledges that during the course of his association and employment with the Company, he will be in contact with suppliers and customers of the Company and will have access to trade secrets and other confidential and proprietary information with respect to the business and affairs of the Company and its affiliates and their respective operations, including without limitation, their properties, research and development, accounts, books and records, sales, know-how, techniques, profits, products, customer lists, requirements, suppliers, cost data, memoranda, devices, processes, methods, procedures, formulas, contract prices, pricing and other corporate activities (collectively, "Confidential Information"). Recognizing that the disclosure or improper use of such Confidential Information will cause serious and irreparable injury to the Company, the Employee agrees that he will not at any time, directly or indirectly, disclose Confidential Information to any third party or otherwise use Confidential Information for his own benefit or the benefit of others unless authorized by the Company. The restrictions set forth in this paragraph shall not apply to information known to the general public or reasonably ascertainable through general public knowledge. 6.2 Non-Competition. The Employee agrees that during the term of his employment with the Company and for a period of twelve (12) months following the termination of such employment, he will not, directly or indirectly, alone or in association with others, either as a principal, agent, owner, shareholder, officer, director, partner, employee, investor, consultant, manager or in any other capacity, divert, take away, solicit or interfere with any of the customers, accounts or employees of the Company or its affiliates existing as of the Effective Date or thereafter acquired by the Company or its affiliates during the Term. 6.3 Damages. (a) Money Damages. If the Employee breaches the restrictive covenants contained in this Agreement, the Employee shall pay the Company's actual, direct, indirect and consequential damages which arise from or are associated with such breach. (b) Continuing Nature of Damages. The Employee acknowledges that upon breaching the restrictive covenants contained in this Agreement, the Employee will cause damages of an irreparable and continuing nature to the Company, for which money damages will not provide adequate relief. Therefore, the Employee agrees that in addition to money damages, the Company is also entitled to obtain an injunction (including but not limited to a temporary restraining order) for the remainder of the period specified in the restrictive covenant which the Employee breached. The Company shall have the right to obtain such injunctive relief without having to post any bond or prove any specific damages. 6.4 Cumulative Remedies. The remedies contained in this Agreement are in addition to and not to the exclusion of any other remedies whether specified in this Agreement, available at law, in equity or otherwise. 6.5 Survival of Covenants. The Employee's duties and obligations under this Agreement shall survive the termination of this Agreement or any of its provisions. 6.6 Return of Material. Upon the termination of the Employee's employment with the Company for any reason, with or without Cause, the Employee immediately shall deliver to the Company all documents, instruments and/or electronic, magnetic or other media which in any way contain any information involving the Confidential Information, or other information, materials, equipment or items of the Company. The Employee shall not retain any copies of the preceding. ARTICLE 7 GENERAL 7.1 Termination of Agreement. This Agreement shall terminate pursuant to Sections 1.2(b), 4.1 or 5.1, or upon the execution of any instrument which both the parties sign that specifically terminates this Agreement. Nothing contained in this Section shall affect or impair any rights or obligations which arise prior to or at the time this Agreement terminates, or which may arise due to any event which causes this Agreement to terminate. 7.2 Notices. All notices concerning this Agreement shall be given in writing, as follows: (i) by actual delivery of the notice into the hands of the party entitled to receive it, in which case such notice shall be effective upon such delivery; (ii) by mailing such notice by registered or certified mail, return receipt requested, in which case the notice shall be deemed given four (4) days from the date of its mailing; (iii) by Federal Express or any other overnight carrier, in which case the notice shall be deemed to be given on the date next succeeding the date of its transmission; or (iv) by Facsimile, in which case the notice shall be deemed given as of the date it is sent. All notices which concern this Agreement shall be addressed as follows: If to the Company: If to the Employee: Miller Building Systems, Inc. Edward Craig 58120 County Road 3 South _________________________ Elkhart, IN 46517 _________________________ Attn.: Ronald Chez with a copy to: Jeffrey C. Rubenstein Much, Shelist, Freed, Denenberg & Ament, P.C. 200 N. LaSalle St. Suite 2100 Chicago, IL 60601-1095 7.3 Binding Effect. This Agreement shall be binding upon and inure to the benefit of the Company and its respective successors and assigns and the Employee and his respective heirs, personal representatives and assigns. 7.4 Complete Understanding. This Agreement constitutes the complete understanding between the parties. No alteration or modification of any of this Agreement's provisions shall be valid unless made in writing and signed by the parties to this Agreement. 7.5 Applicable Law. The laws of the State of Indiana shall govern all aspects of this Agreement, irrespective of the fact that one or more of the parties now is or may become a resident of a different state, or that the Company relocates its principal office outside the State of Indiana. 7.6 Descriptive Headings. All section headings, titles and subtitles are inserted in this Agreement for the convenience of reference only, and are to be ignored in any construction of this Agreement's provisions. 7.7 Severability. If a court of competent jurisdiction rules that any one or more of this Agreement's provisions are invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any of this Agreement's other provisions, and this Agreement shall be construed as if it had never contained such invalid, illegal or unenforceable provision. 7.8 Prior Agreements Superseded. This Agreement supersedes any prior understandings, written agreements or oral arrangements among the parties respecting the subject matter of this Agreement. The parties have executed this Agreement as of the Effective Date. THE EMPLOYEE: THE COMPANY: Miller Building Systems, Inc., a Delaware corporation \Edward Craig By: \Ronald Chez Edward Craig, Individually Ronald Chez, Chairman of the Board EX-10 5 EXHIBIT 10.54 MILLER BUILDING SYSTEMS, INC. AGREEMENT THIS AGREEMENT, made as of this 9th day of September, 1994, by and between Ronald L. Chez (hereinafter called "Chez") and Miller Building Systems, Inc., a Delaware corporation (hereinafter called the "Company"); WITNESSETH: WHEREAS, Chez has recently served the Company as its Chairman of the Board of Directors; and WHEREAS, both Chez and the Company, based on circumstances which changed subsequent to the meeting of the Board of Directors of the Company on June 30, 1994, believed that their separate interests were best served if such service were terminated upon the terms and conditions hereinafter set forth; NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, it is agreed as follows: 1. The service of Chez as Chairman of the Board of Directors of the Company (as well as his services, if any, for or in behalf of the Company in all other capacities, whether as officer, agent, representative or otherwise) terminated as of August 11, 1994; it being understood and agreed, however, that the service of Chez as a member of the Board of Directors of the Company, as the chairman of its executive committee and as a member of its nominating committee were not terminated as of such date. 2. The Company as partial compensation for such services described in paragraph 1 hereof has paid to Chez (by way of wire transfer to Ronald L. Chez, Inc., a wholly-owned corporation of Chez) the sum of $29,000.00, receipt whereof is hereby acknowledged. 3. The Company as further compensation for such services and for the termination described in paragraph 1 hereof and for all compensation pursuant to the "Terms of Ronald Chez's Position as the Chairman of the Board of Miller Building Company, Inc.", as approved by the Company's Board of Directors on June 30, 1994, hereby grants to Chez options to purchase Common Stock, par value $0.01 per share, of the Company, as follows: Number of Shares of Common Stock Exercise Subject to Option Price (A) 25,000 $3.50 (B) 25,000 $3.50 (C) 15,000 $4.50, all such options (i) to be granted and fully vested under the Company's 1994 stock option plan, (ii) not to be qualified incentive options under Section 422A of the Internal Revenue Code, as amended, (iii) as to the option covering 25,000 shares of Common Stock referred to in clause (A) of the foregoing table, to be exercised at any time and from time to time in whole or in part during the period from and after the date hereof until July 1, 1999, and, as to the options covering the 40,000 shares of Common Stock referred to in clauses (B) and (C) of the foregoing table, to be exercised at any time and from time to time in whole or in part during the period from and after June 30, 1995 until July 1, 1999, (iv) as to the options covering the 40,000 shares of Common Stock referred to in clauses (B) and (C) of the foregoing table, to become null and void to the extent unexercised immediately as of the occurrence of a "Termination Event" (as hereinafter defined), and (v) to be evidenced by a stock option agreement, dated the date of this Agreement, in form similar to the Company's standard form of stock option agreement with such changes thereto as shall be necessary to evidence the parties' agreement with respect thereto as set forth in this paragraph 3 and paragraph 5 hereof. 4. The Company will slate Chez at the Company's 1994 Annual Meeting of Stockholders as a nominee for election to one three year term as a member of the Company's Board of Directors. 5. During the period from the date hereof until July 1, 1995, neither Chez nor any Affiliate or Associate (as those terms are defined in Rule 405 under the Securities Act of 1933) of Chez (regardless of whether such person or entity is an Affiliate or Associate on the date hereof) will (i) make, or in any way participate, directly or indirectly, in any "solicitation" of "proxies" to vote (as such terms are used in the proxy rules of the Securities and Exchange Commission), or solicit any person or entity with respect to the voting of any voting securities of the Company, (ii) form, join or in any way participate in any "group" within the meaning of Section 13(d)(3) of the Securities Exchange Act of 1934 with respect to any voting securities of the Company, or (iii) other than solely in Chez's capacity as a member of the Company's Board of Directors, act, alone or in concert with others, directly or indirectly, to seek to control the management, board of directors or policies of the Company (the occurrence of any event covered by any of the foregoing clauses (i) through (iii), but only if such event is "hostile" within the meaning of the definition set forth in the following sentence, being herein called a "Termination Event"). For the purposes of the foregoing sentence the word "hostile" shall mean any event or series of events which may fall within the scope of any of the aforementioned clauses (i) through (iii) of the foregoing sentence, other than communications by Chez to any member or members of the Board of Directors of the Company, which the Board of Directors of the Company in good faith by resolution within a reasonable time determines to be materially adverse to the best interests of the Company and its stockholders; provided, however, if Chez shall in advance notify (in person, by telephonic means or in writing) the Chairman of the Board of Directors of the Company or the President of the Company of any event or series of events which may fall within the scope of any of the aforementioned clauses (i) through (iii) of the foregoing sentence and which Chez proposes to effectuate or commence to effectuate within the following 20 days and if such Chairman or President shall in writing take a "no objection" position with respect thereto within 72 hours thereafter, then the Board of Directors of the Company may not thereafter resolve such event or series of events to be materially adverse to the best interests of the Company and its stockholders within the meaning of this sentence. No resolution of the Board of Directors pursuant to the foregoing sentence shall in any manner preclude the Company from asserting in any judicial proceeding any right or remedy which the Company may have against Chez for any event or series of events which may be resolved to be "hostile" as aforesaid. 6. All representations, warranties and covenants contained herein shall survive the execution of this Agreement and the consummation of the transactions contemplated hereby. 7. This Agreement shall be binding upon, and inure to the benefit of, the parties hereto and their respective heirs, personal representatives, successors, assigns, Affiliates and Associates, but shall not be assignable by any party hereto without the prior written consent of the other party hereto. 8. Except as set forth in the last sentence of paragraph 5 hereof, any notice or other communication provided for herein or given hereunder to a party hereto shall be in writing and shall be given by delivery, by telex, telecopier or by mail (registered or certified mail, postage prepaid, return receipt requested) to the respective parties as follows: If to the Company: Miller Building Systems, Inc. 58120 County Road 3 South P.O. Box 1283 Elkhart, Indiana 46515 Attention: Chief Executive Officer If to Chez: Ronald L. Chez c/o Ronald L. Chez, Inc. 555 West Madison Street Suite 3508, Tower 1 Chicago, IL 60661 or to such other address with respect to a party as such party shall notify the other in writing. 9. No party may waive any of the terms or conditions of this Agreement, except by a duly signed writing referring to the specific provision to be waived. 10. This Agreement shall be governed by, and construed and enforced in accordance with, the laws of the State of Delaware. 11. The parties hereto acknowledge that, except as set forth in this Agreement, there are no written or oral understandings, arrangements or agreements between them or pursuant to which they have any rights or obligations. 12. This agreement constitutes the entire agreement, and supersedes all other and prior agreements, arrangements and understandings, both written and oral, among the parties hereto. 13. This Agreement may be executed in three counterparts, each of which shall be deemed an original but both of which shall constitute one and the same instrument. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed and delivered on the day and year first above written. MILLER BUILDING SYSTEMS, INC. By:\Edward C. Craig Title: President and Chief Executive Officer By:\Steven F. Graver Title: Chairman of the Board of Directors /Ronald L. Chez RONALD L. CHEZ EX-10 6 Exhibit 10.55 AGREEMENT TO TERMINATE LEASE THIS AGREEMENT is made and entered into this 12th day of June, 1995, by and between Malcolm O. Koons (hereafter referred to as "Koons") and Miller Structures, Inc. (hereinafter referred to as "Miller"). W I T N E S S E T H : WHEREAS, on or about March 2, 1993, Koons (as the "Lessor") and Miller (as the "Lessee") entered into a Commercial Lease and Option to Purchase (hereinafter referred to as the "Lease"), and a Memorandum pertaining to the Lease was recorded in the Office of the Recorder of Elkhart County, Indiana, on March 8, 1993, as Document Number 93004990; and WHEREAS, by the Lease, Koons agreed to lease to Miller, and Miller agreed to lease from Koons, the real estate commonly known as 28384 County Road 20 West, Elkhart, Indiana, which real estate is more fully described on Exhibit "A" attached hereto and is hereinafter referred to as the "Property"; and WHEREAS, Koons has entered into an agreement to sell the Property, and Koons and Miller wish to enter into this written Agreement to memorialize their agreements and understandings with respect to the Property and the termination of the Lease. NOW, THEREFORE, in consideration of the mutual terms and provisions contained herein, the parties hereto agree as follows: 1. Effective upon the execution of this Agreement and the payment of the amounts to be paid by Miller to Koons specified in paragraph 2 hereof, the Lease shall be deemed terminated in all respects, and Koons and Miller shall have no further liability, obligation and/or duties with respect to each other by virtue of the Lease. 2. Miller agrees to pay certain obligations totalling $100,000.00 to or on behalf of Koons. This shall be paid by a direct cash payment by Miller to Koons in the amount of $ 37,500.00, at the time of the closing when Koons sells the Property, plus Miller's agreement to pay the real estate commission in the amount of $ 62,500.00 arising from Koons' sale of the Property. 3. Except for the payments to be made by Miller specified in the preceding paragraph, Koons and Miller hereby completely release and discharge each other from any and all claims, obligations, liabilities, duties and causes of action of each and every nature and description, now existing or arising in the future, that either of them has or may have against the other arising from or relating in any way to the Lease and/or the Property. 4. Time is of the essence in the performance of all obligations provided for herein. In the event of any litigation arising from or pertaining to this Agreement, the prevailing party shall be entitled to recover its costs and attorney fees from the non-prevailing party. IN WITNESS WHEREOF, the parties hereunto have executed this Agreement in Elkhart, Indiana, on the day and year first above written. "KOONS" \Malcolm O. Koons Malcolm O. Koons "MILLER" MILLER STRUCTURES, INC. By: \Edward Craig Edward Craig, President STATE OF INDIANA ) ) SS: COUNTY OF ELKHART ) Before me, the undersigned, a Notary Public in and for said County and State, personally appeared Malcolm O. Koons for and on his own behalf, and acknowledged the execution of the above and foregoing document this 13 day of June, 1995. IN WITNESS WHEREOF, I have hereunto set my hand and official seal. \Rita A. Merrill Notary Public Rita A. Merrill Print Name Residing in St. Joseph County, Indiana My Commission Expires: 3-25-98 STATE OF INDIANA ) ) SS: COUNTY OF ELKHART ) Before me, the undersigned, a Notary Public in and for said County and State, personally appeared Edward Craig, President of Miller Structures, Inc., and on behalf of said corporation acknowledged the execution of the above and foregoing document this 13 day of June, 1995. IN WITNESS WHEREOF, I have hereunto set my hand and official seal. \Rita A. Merrill Notary Public Rita A. Merrill Print Name Residing in St. Joseph County, Indiana My Commission Expires: 3-25-98 This instrument prepared by: Steven L. Hostetler, Thorne, Grodnik, Ransel, Duncan, Byron & Hostetler, P.O. Box 1210, Mishawaka, Indiana 46546-1210. EX-11 7 Exhibit 11 MILLER BUILDING SYSTEMS, INC. AND SUBSIDIARIES Statement Regarding Computation of Per Share Earnings Twelve Months Ended July 1, July 2, 1995 1994 Calculation of primary earnings per common share: Net income $ 319,912 $ 311,860 ========== ========== Shares outstanding, net of treasury shares, at beginning of period 3,158,578 3,249,078 Weighted average number of shares arising from the exercise of stock options 4,507 - Additional shares assuming exercise as of the beginning of the fiscal year of dilutive stock options, based on the treasury stock method using the average market price for the period 19,868 18,214 Weighted average number of shares from the sale of treasury stock 13,446 - Weighted average number of shares purchased as treasury stock (66,192) (69,871) ---------- ---------- Weighted average shares and equivalent shares outstanding 3,130,207 3,197,421 ========== ========== Primary earnings per share: $ .10 $ .10 ========== ========== Fully dilutive earnings per share do not differ from primary earnings per share.