Item 1. BUSINESS
General Development of Business
Minuteman International, Inc. an Illinois corporation incorporated in 1951 as American Cleaning Equipment Corporation, manufactures and distributes one of the most complete lines of commercial and industrial vacuums, floor and carpet care, chemical cleaning and coating products and complementary accessories in the United States and Canada. Its products are exported to countries around the world.
On November 23, 1998 the Company entered into an Asset Purchase Agreement with AAR PowerBoss, Inc. (PowerBoss) for the acquisition of substantially all of the net assets and the assumption of certain liabilities of PowerBoss. Additional information pertaining to this acquisition is incorporated by reference on page 20, Note C of the 1998 Annual Report and included in the Form 8-K and 8-K/A previously filed.
Products
The Company's product line consists of hard surface floor care equipment, carpet care and maintenance products, sweepers, scrubbers, commercial and industrial specialized vacuums, and complementary accessories. Included in the specialized vacuum area are the hazardous location/explosive environment vacuums and the clean/room nuclear vacuums.
Minuteman PowerBoss, Inc. (PowerBoss), acquired in 1998, is a wholly-owned subsidiary of Minuteman International, Inc. that designs, manufactures and distributes ride-on and walk-behind sweepers and scrubbers for hard-surface floor and carpet care for use in industrial applications.
Multi-Clean, the chemical division of Minuteman International, Inc. formulates, manufactures and distributes over 65 chemical cleaning and floor coating products including multi-surface cleaners and degreasers, finishes and waxes, carpet care products, concrete and wood coatings and finishes, plus a full array of specialized chemicals.
Parker Sweeper Company, acquired in 1992, manufactures a full line of litter vacuums as well as an extensive array of lawn and turf debris handling equipment. Effective December 30, 1994, Parker Sweeper Company, formerly a wholly-owned subsidiary, was merged into the Company and operates as a division.
Additional information pertaining to new products is incorporated herein by reference on pages 8 through 14 of the 1998 Annual Report for the year ended December 31, 1998.
Marketing and Distribution
The Company manufactures and distributes its products throughout the world. The distribution process in the United States is primarily through the more than 450 active dealers and its two sales branches. The Company distributes its products in Canada through Minuteman Canada, Inc. and in Europe through Minuteman European, B.V., both of which are wholly owned subsidiaries. The Company sells its products to Hako-Werke subsidiaries in Japan, Australia and certain European countries. Export of other products is conducted through the headquarter office in Addison, Illinois. Sales to affiliated and unaffiliated customers in foreign countries aggregated to $10,642,000, $12,062,000 and $11,173,000 in 1998, 1997 and 1996, respectively.
The Company's equipment is sold under Minuteman International, Minuteman, Minuteman PowerBoss and Parker Sweeper trade names. The chemical cleaning and coating products are manufactured by Minuteman International, Inc. and sold under Multi-Clean trade name. Substantially all of the Company's commercial equipment is manufactured at its Illinois production facilities in Addison and Hampshire. Substantially all of the Company's industrial equipment is manufactured at its Aberdeen, North Carolina production facilities. The remainder of the Company's industrial equipment is imported from Germany. All of the Company's chemical cleaning and coating products are produced at its Shoreview, Minnesota facility.
The manufacture, production and demand for the Company's products and services are not considered to be seasonal in nature. No part of the Company business depends on any one single customer, the loss of which would adversely affect the Company. The Company does not believe any material portion of its business to be subject to renegotiation of profits or termination of contracts at the election of the Government.
Raw Materials
The Company purchases castings, electric motors, cord sets, switches, brushes, wheels, injection molded plastics, sheet steel, paint pigment, chemicals and other raw materials from a number of suppliers. The Company considers its ability to obtain raw materials and supplies to be readily available. It does not believe that the loss of any supplier would adversely affect the Company's business.
Competition
Minuteman International, Inc. competes with many regional, national and international manufacturers throughout the industry. These competitive markets include industrial and plant maintenance, sanitation supply, critical filter, floor coating and chemical fields. The principal competitive factors within each of these markets are product quality, reliability, service and fair price. The Company believes it will continue to compete effectively in the marketplace and continue its sales growth in the future.
Patents and Trademarks
Currently, the Company has 29 United States and 22 international patents. Although the Company generally seeks to obtain patents where appropriate, it does not consider the successful conduct of its business in general to be dependent on any of its patents or patent applications. By agreement dated March 1, 1994, with Hako-Werke, the Company agreed to discontinue the use of the "Hako" trademark on any products intended for sale in any country. It was further agreed that the Company and Hako-Werke would be free to market and distribute each of their products throughout the world.
Minuteman International, Inc. is owner of the United States and Canadian registrations for the Multi-Clean and Parker Sweeper trade names. The Minuteman trademark is registered in the United States and Canada. The Parker trademark is registered in the United States and Canada.
Working Capital
The Company had working capital of $28.4 million at December 31, 1998. Cash, cash equivalents and short term investments represented 5.6% of the working capital which when not in use, is invested in bank certificates of deposit, Eurodollar certificate investments, a managed portfolio of high quality, variable rate notes and tax exempt seven day bonds.
Backlog
The Company's backlog of orders was approximately $2.7 million at December 31, 1998 and $2.6 million at December 31, 1997. The Company anticipates that substantially all of the 1998 backlog will be delivered during 1999. In the opinion of Management, fluctuations in the amount of its backlog are not necessarily indicative of intermediate or long-term trends in the Company's business.
Research and Development
The Company expended approximately $1,118,000, $1,102,000 and $1,146,000 in research and development activities during 1998, 1997 and 1996, respectively.
Employees
The Company has 384 full time employees. The facilities in Addison, Illinois and Shoreview, Minnesota, have approximately 101 hourly paid employees who are covered by local collective bargaining agreements. These agreements expire in May, 2003 and October, 2003, respectively. The Company believes that the current employee relations are excellent. The Company plans to hire additional employees during 1999 as are justified by the needs of the business.
Environmental Matters
The Company's operations are subject to various federal, state and local laws and regulations regarding the environmental aspects of the manufacture and distribution of chemical components. The Company believes that it is currently in compliance in all material respects with the environmental laws and regulations affecting its operations. Capital expenditures for the purpose of environmental protection are not expected to be material in amount for 1999 or thereafter.
Item 2.
Item 2. PROPERTIES
The Company owns or leases the following properties in its operations: Owned Location Size (sq. ft.) Use or Leased - ------------------------------------------------------------------------------- Aberdeen, NC 135,000 (Bldg.) Office, manufacturing, Leased Warehouse, sales, service
Addison, IL 112,230 (Bldg.) Office, manufacturing, 254,300 (Land) Warehouse, sales, service Owned
Villa Park, IL 6,135 (Bldg.) Warehouse, sales, service Leased
Taylor, MI 4,800 (Bldg.) Warehouse, sales, service Leased
Hampshire, IL 100,000 (Bldg.) Manufacturing, warehouse 871,200 (Land) Owned
Shoreview, MN 34,952 (Bldg.) Office, manufacturing, 133,830 (Land) Warehouse, sales, service Owned
Nieuw-Vennep 9,957 (Bldg.) Warehouse, sales, service Leased The Netherlands
Mississauga, 18,486 (Bldg.) Warehouse, sales, service Leased Ontario, Canada
Approximately 90% of the Company's Addison and Hampshire, Illinois facilities and 85% of the Company's Aberdeen, North Carolina and Shoreview, Minnesota facilities are devoted to manufacturing.
The Villa Park, Illinois lease term expires December 31, 2000. The Taylor, Michigan lease term expires February 28, 2002. The Nieuw-Vennep, Netherlands lease term expires January 31, 2003. The Mississauga, Ontario lease term expires on November 30, 2002. The Aberdeen, North Carolina lease term expires November 30, 2001. The Company believes that failure to obtain the renewal of any lease would not have a material adverse effect on its business.
Item 3.
Item 3. LEGAL PROCEEDINGS
The Company is a party to various legal proceedings arising in the ordinary course of its business. The outcome of these matters will not, in the opinion of Management, have a material adverse effect on the business or financial condition of the Company.
Item 4.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the fourth quarter of the fiscal year ended December 31, 1998, the Company did not submit any matter to a vote of shareholders through the solicitation of proxies or otherwise.
Part II - -------
Item 5.
Item 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED SHAREHOLDER MATTERS
Common stock market prices and dividends on page 23 of the Annual Report for the year ended December 31, 1998, are incorporated herein by reference.
Item 6.
Item 6. SELECTED CONSOLIDATED FINANCIAL DATA
The Selected Consolidated Financial Data on page 23 and the Notes to Consolidated Financial Statements on pages 19 through 22 of the Annual Report for the year ended December 31, 1998, are incorporated herein by reference.
Item 7.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
"Management's Discussion and Analysis of Results of Operations and Financial Condition" on pages 15 and 16 and related comments in the President's letter on Page 2 of the Annual Report for the year ended December 31, 1998, are incorporated herein by reference.
Item 7A.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Information appearing under the caption "Market Risk" appearing on page 16 of the Annual Report for the year ended December 31, 1998 is incorporated herein by reference (See Item 7. Management's Discussion and Analysis.)
Item 8.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Report of Independent Auditors and the Consolidated Financial Statements, including the Notes to the Consolidated Financial Statements, included on pages 17 through 24 of the Annual Report for the year ended December 31, 1998, are incorporated herein by reference.
Quarterly Results of Operations on page 22 of the Annual Report for the year ended December 31, 1998, is incorporated herein by reference.
Item 9.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
There have been no changes in or disagreements with the Company's auditors on accounting and financial disclosure.
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Item 10.
Item 10. DIRECTORS AND OFFICERS OF THE COMPANY
The information contained on pages 2 through 6 of Minuteman International, Inc.'s Proxy Statement dated March 15, 1999, with respect to directors and executive officers of the Company is incorporated herein by reference in response to this item.
Item 11.
Item 11. EXECUTIVE COMPENSATION
The information contained on pages 4 through 6 of Minuteman International Inc.'s Proxy Statement dated March 15, 1999, with respect to Executive Compensation and transactions, is incorporated herein by reference in response to this item.
Item 12.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information contained on page 2 of Minuteman International Inc.'s Proxy Statement dated March 15, 1999, with respect to security ownership of certain beneficial owners and management, is incorporated herein by reference in response to this item.
Item 13.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information contained on pages 2 through 6 of Minuteman International Inc.'s Proxy Statement dated March 15, 1999, with respect to certain relationships and related transactions, are incorporated herein by reference in response to this item.
Part IV. - --------
Item 14.
Item 14. EXHIBITS, FINANCIAL STATEMENTS AND SCHEDULE AND REPORTS ON FORM 8-K
(a) (1. and 2.) Financial Statements
The financial statements listed in the accompanying index to financial statements are filed herewith.
(a) (3) and (c) Exhibits
The Exhibits required by Item 601 of Regulation S-K and filed herewith are listed in the Exhibit Index which follows the financial statements and immediately precedes the exhibits filed.
(b) Reports on Form 8-K and 8-K/A
A Report on Form 8-K was filed on December 8, 1998. A Report on Form 8-K/A was filed on February 8, 1999.
(d) Financial Statement Schedule
The financial statement schedule listed in the accompanying index to financial statements is filed herewith.
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.
Minuteman International, Inc. ----------------------------- (Registrant)
Date: March 15, 1999 By: ------------------------------------- Jerome E. Rau, President and Chief Executive Officer
By: ------------------------------------- Thomas J. Nolan, Chief Financial Officer, Secretary and Treasurer
Pursuant to the requirements of the Securities and 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 date indicated.
- -------------------------------------- Jerome E. Rau President, Chief Executive Officer, and Director
- -------------------------------------- Tyll Necker, Director
- -------------------------------------- Frederick W. Hohage, Director
- -------------------------------------- Frank Reynolds, Director
- -------------------------------------- James C. Schrader, Jr. Director
ANNUAL REPORT ON FORM 10-K
ITEM 14(a) (1) AND (2), (c) and (d)
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENTS SCHEDULE
CERTAIN EXHIBITS
FINANCIAL STATEMENT SCHEDULE
YEAR ENDED DECEMBER 31, 1998
MINUTEMAN INTERNATIONAL, INC.
ADDISON, ILLINOIS
ITEM 14(a) (1) AND (2)
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
MINUTEMAN INTERNATIONAL, INC. AND SUBSIDIARIES
December 31, 1998
The following consolidated financial statements of Minuteman International, Inc. and subsidiaries, included in the Annual Report of the Registrant to its shareholders for the year ended December 31, 1998, are incorporated by reference in Item 8:
Consolidated Balance Sheets - December 31, 1998 and 1997
Consolidated Statements of Income - Years ended December 31, 1998, 1997 and 1996
Consolidated Statements of Shareholders' Equity - Years Ended December 31, 1998, 1997 and 1996
Consolidated Statements of Cash Flows - Years Ended December 31, 1998, 1997 and 1996
Notes to Consolidated Financial Statements
The following consolidated financial statement schedule of Minuteman International, Inc. and subsidiaries are included in Item 14(d):
Schedule II -- Valuation and Qualifying Accounts 14
All other schedules for which provision is made in the applicable accounting regulation of the Securities and Exchange Commission are not required under the related instructions or are inapplicable, and therefore have been omitted.
REPORT OF INDEPENDENT AUDITORS ------------------------------
Shareholders and Board of Directors Minuteman International, Inc.
We have audited the accompanying consolidated balance sheets of Minuteman International, Inc. and subsidiaries as of December 31, 1998 and 1997 and the related consolidated statements of income, shareholders' equity and cash flows for each of the three years in the period ended December 31, 1998. Our audits also include the financial statement schedule listed in the Index at Item 14(a). These financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. 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 consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Minuteman International, Inc. and subsidiaries at December 31, 1998 and 1997, and consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1998, in conformity with generally accepted accounting principles. Also, in our opinion, the related financial statements schedule, when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth therein.
Ernst & Young LLP Chicago, Illinois February 12, 1999
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
MINUTEMAN INTERNATIONAL, INC. AND SUBSIDIARIES
MINUTEMAN INTERNATIONAL, INC.
EXHIBIT INDEX -----------------------------
(Pursuant to Item 601 of Regulations S-K)
NO. DESCRIPTION AND PAGE OR INCORPORATION REFERENCE - --- -----------------------------------------------
Certificate of Incorporation and By-Laws
3 (a) Certificate of Incorporation (incorporated herein by reference to Exhibit 3 (a) of the Registrant's Form S-18 Registration Statement, Registration Number 33-11858).
3 (b) By-laws (incorporated herein by reference to Exhibit 3 (b) of the Registrant's Form S-18 Registration Statement, Registration Number 33-11858).
Instruments Defining the Rights of Security Holders, Including Indentures --------------------
4 (a) Specimen Certificate for Common Stock, no par value (incorporated herein by reference to Exhibit 4 of the Registrant's For S-18 Registration Statement, Registration Number 33-11858).
Material Contracts ------------------
10 (a) Employment Agreement dated as of January 20, 1987, between the Company and Jerome E. Rau (incorporated herein by reference to Exhibit 10 (a) of the Registrant's Form S-18 Registration Statement, Registration Number 33-11858).
10 (b) Amendment to Employment Agreement dated as of February 27, 1990, between the Company and Jerome E. Rau (incorporated herein by reference to Exhibit 10 (h) at Page 20 of Form 10K Annual Report for fiscal year ended December 31, 1989).
10 (c) Specimen form of Employment Agreement between the Company and its executive officers (with the exception of the president) (incorporated herein by reference to Exhibit 10 (c) at Page 18 of Form 10K Annual Report for fiscal year ended December 31, 1991).
10 (d) Employment Agreement dated as of March 22, 1990, between the Company and Michael Gravelle (incorporated herein by reference to Exhibit 10 (d) at Page 22 of Form 10K Annual Report for fiscal year ended December 31, 1991).
10 (e) Agreement dated as of February 9, 1987, with respect to trademark between the Company and Hako-Werke International GmbH (incorporated herein by reference to Exhibit 10 (c) of the Registrant's Form S-18 Registration Statement, Registration Number 33-11858).
10 (f) Agreement dated March 1, 1994 with respect to worldwide distribution/marketing and trademarks between the Company and Hako-Werke International GmbH. Incorporated herein by reference to Exhibit 10 (f) at Page 18 of Form 10-K Annual Report for fiscal year ended December 31, 1994.
11 Statement re. Computation of Per Share Earnings -----------------------------------------------
Statement re. computation of per share earnings. See Note B of the Notes to Consolidated Financial Statements on Page 20 of the Annual Report for the year ended December 31, 1998 (incorporated herein by reference).
13 Annual Report to Security Holders ---------------------------------
The Company's Annual Report to Shareholders for the year ended December 31, 1998, is incorporated herein by reference.
Subsidiaries of the Registrant ------------------------------
22 (a) Subsidiaries of the Registrant (included herein at Page 17).
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Minuteman International, Inc. will furnish any of the aforementioned exhibits indicated above to requesting security holders upon written request.