<PAGE> Page 1 of 10
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U.S. Securities and Exchange Commission
Washington, D.C. 20549
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Form 10-QSB
(Mark One)
/x/ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 1996
or
/ / TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1943
For the transition period from to
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Commission file number 0-23898
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MITY-LITE, INC.
(Exact name of small business issuer as specified in its charter)
Utah
(State or other jurisdiction of
incorporation or organization)
87-0448892
(I.R.S. Employer Identification No.)
1301 West 400 North
Orem, Utah 84057
(Address of principal executive offices)
Issuer's telephone number: (801) 224-0589
N/A
(Former name, former address and former fiscal year, if changed since last
report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes x No
There were 3,103,822 shares of the registrant's Common Stock, par value
$.01 per share, outstanding on July 26, 1996.
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TRANSITIONAL SMALL BUSINESS DISCLOSURE FORMAT (Check one:) Yes No x
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<PAGE> Page 2 of 10
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements
MITY-LITE, INC.
BALANCE SHEETS
ASSETS June 30,
1996 March 31,
(unaudited) 1996
--------------- ---------------
Current assets:
Cash and cash equivalents . . . . . . . . . $ 7,900,000 $ 7,346,000
Accounts receivable, less allowances of
$162,000 at June 30, 1996 and $132,000
at March 31, 1996 . . . . . . . . . . . . 2,055,000 1,608,000
Inventories . . . . . . . . . . . . . . . . 576,000 509,000
Related party receivable. . . . . . . . . . 273,000 353,000
Prepaid expenses and other current assets . 74,000 101,000
Deferred income taxes . . . . . . . . . . . 91,000 91,000
--------------- ---------------
Total current assets. . . . . . . . . . . . 10,969,000 10,008,000
Property and equipment, net . . . . . . . . . 1,402,000 1,313,000
--------------- ---------------
Total assets. . . . . . . . . . . . . . . . . $12,371,000 $11,321,000
=============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable. . . . . . . . . . . . . . $ 824,000 $ 747,000
Accrued expenses. . . . . . . . . . . . . . 715,000 343,000
--------------- ---------------
Total current liabilities. . . . . . . . . . 1,539,000 1,090,000
--------------- ---------------
Stockholders' equity:
Preferred stock, par value $.10 per share;
authorized 3,000,000 shares; no shares
issued and outstanding. . . . . . . . . . -- --
Common stock, par value $.01 per share;
authorized 10,000,000 shares; issued and
outstanding 3,101,808 shares at June 30,
1996 and 3,096,472 shares at March
31, 1996. . . . . . . . . . . . . . . . . 31,000 31,000
Additional paid-in capital. . . . . . . . . 6,709,000 6,697,000
Retained earnings . . . . . . . . . . . . . 4,092,000 3,503,000
--------------- ---------------
10,832,000 10,231,000
--------------- ---------------
Total liabilities and stockholders' equity. . $12,371,000 $11,321,000
=============== ===============
See accompanying notes to financial statements.
<PAGE> Page 3 of 10
MITY-LITE, INC.
STATEMENTS OF INCOME
(unaudited)
Three months ended June 30,
1996 1995
--------------- ---------------
Net sales . . . . . . . . . . . . . . . . . . $4,647,000 $3,835,000
Cost of products sold . . . . . . . . . . . . 2,641,000 2,249,000
--------------- ---------------
Gross profit. . . . . . . . . . . . . . . . . 2,006,000 1,586,000
Expenses:
Selling . . . . . . . . . . . . . . . . . . 812,000 514,000
General and administrative. . . . . . . . . 236,000 180,000
Research and development. . . . . . . . . . 120,000 186,000
--------------- ---------------
Total expenses. . . . . . . . . . . . . . . . 1,168,000 880,000
--------------- ---------------
Income from operations. . . . . . . . . . . . 838,000 706,000
Other income (expense):
Interest expense. . . . . . . . . . . . . . (1,000) (1,000)
Interest income . . . . . . . . . . . . . . 85,000 59,000
--------------- ---------------
Total other income. . . . . . . . . . . . . . 84,000 58,000
--------------- ---------------
Income before provision for income taxes. . . 922,000 764,000
Provision for income taxes. . . . . . . . . . 337,000 286,000
--------------- ---------------
Net income. . . . . . . . . . . . . . . . . . $ 585,000 $ 478,000
=============== ===============
Net income per share. . . . . . . . . . . . . $ 0.18 $ 0.15
=============== ===============
Weighted average common and common
equivalent shares . . . . . . . . . . . . . 3,243,005 3,231,784
=============== ===============
See accompanying notes to financial statements.
<PAGE> Page 4 of 10
MITY-LITE, INC.
STATEMENTS OF CASH FLOWS
(unaudited)
Three months ended June 30,
1996 1995
--------------- ---------------
Cash flows from operating activities:
Net income. . . . . . . . . . . . . . . . . $ 585,000 $ 478,000
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation. . . . . . . . . . . . . . 93,000 101,000
Deferred compensation . . . . . . . . . 2,000 2,000
Changes in assets and liabilities:
Accounts receivable . . . . . . . . . (447,000) (231,000)
Inventories . . . . . . . . . . . . . (67,000) (66,000)
Federal tax deposit . . . . . . . . . -- 313,000
Related party receivable. . . . . . . 80,000 117,000
Prepaid expenses and other current
assets. . . . . . . . . . . . . . . 27,000 27,000
Accounts payable. . . . . . . . . . . 77,000 16,000
Accrued expenses and other. . . . . . 372,000 267,000
--------------- ---------------
Net cash provided by operating activities . . 722,000 1,024,000
Cash flows from investing activities:
Receivable from sale of European sales
branch. . . . . . . . . . . . . . . . . . -- 272,000
Purchases of property and equipment . . . . (182,000) (130,000)
--------------- ---------------
Net cash provided by (used in) investing
activities. . . . . . . . . . . . . . . . . (182,000) 142,000
Cash flows from financing activities:
Issuance of common stock from stock options 12,000 10,000
Tax benefit from exercise of stock options. 2,000 --
--------------- ---------------
Net cash provided by financing activities . . 14,000 10,000
--------------- ---------------
Increase in cash and cash equivalents . . . . 554,000 1,176,000
Cash and cash equivalents at beginning of
period. . . . . . . . . . . . . . . . . . . 7,346,000 4,823,000
--------------- ---------------
Cash and cash equivalents at end of period. . $7,900,000 $5,999,000
=============== ===============
See accompanying notes to financial statements.
<PAGE> Page 5 of 10
MITY-LITE, INC.
NOTES TO FINANCIAL STATEMENTS
(unaudited)
1. Basis of Presentation
INTERIM PERIOD ACCOUNTING POLICIES
In the opinion of the Company's management, the accompanying unaudited
financial statements contain all normal recurring adjustments necessary to
present fairly the Company's financial position for the interim period.
Results of operations for the three months ended June 30, 1996 are not
necessarily indicative of results to be expected for the full fiscal year
ending March 31, 1997.
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for annual financial
statements. Although the Company believes that the disclosures in these
unaudited financial statements are adequate to make the information presented
for the interim periods not misleading, certain information and footnote
information normally included in annual financial statements prepared in
accordance with generally accepted accounting principles have been condensed
or omitted pursuant to the rules and regulations of the Securities and
Exchange Commission, and these financial statements should be read in
conjunction with the Company's audited financial statements included in the
Company's annual report for the year ended March 31, 1996.
2. Inventories
Inventories consisted of the following:
June 30,
1996 March 31,
(unaudited) 1996
--------------- ---------------
Materials and supplies. . . . . . $463,000 $432,000
Work-in-progress. . . . . . . . . 88,000 51,000
Finished goods. . . . . . . . . . 25,000 26,000
--------------- ---------------
$576,000 $509,000
=============== ===============
<PAGE> Page 6 of 10
Item 2.
Management's Discussion and Analysis of Financial Condition
and Results of Operations
GENERAL
The Company designs, manufactures and markets lightweight, durable, folding
leg tables stacking chairs, and other related products used in multi-purpose
rooms of educational, recreational, hotel and hospitality, government, office,
health care, religious and other public assembly facilities. Historically,
the Company's growth has come from an expanding base of new customers and from
increasing sales to existing customers. The Company's current and future
growth is largely dependent upon its ability to continue increasing table
sales to new and existing customers and its ability to successfully introduce
and market new product lines of multi-purpose room furniture such as chairs,
staging, flooring, partitions, podiums, risers and bench seating. The Company
anticipates that over the next 12 months, its primary business strategy and
emphasis will be on acquiring and introducing chair products while continuing
to expand its share of the folding leg table market.
The Company currently markets five lines of stacking chairs, the Mity-
Tuff(TM), the MityStack(TM), the MityFlex(TM), the MityDeluxe(TM), and the Mity-
Lite 900 Series(TM). The MityTuff(TM), MityStack(TM), and Mity-Lite 900
Series(TM) chairs are distributed by the Company under original equipment
manufacturer (OEM) arrangements with the chair manufacturers. Portions of the
MityFlex(TM) and the MityDeluxe(TM) chairs are manufactured by the Company. In
addition, the Company performs final assembly on these two chair lines.
Net sales of the Company's table products have increased during the three
months ended June 30, 1996 as compared to the three months ended June 30,
1995. Management expects, but cannot assure, that this trend will continue.
It is not anticipated that gross profit on table products as a percent of
table sales will increase significantly above current levels. Gross margins
and expenses associated with chairs and other new product lines are difficult
to predict. The Company believes that profitability rates less than those
achieved on table products will be realized on complementary products.
However, no assurance can be given that these results will be realized.
COMPARISON OF THE THREE MONTHS ENDED JUNE 30, 1995 AND 1996
Net sales were $3,835,000 and $4,647,000 for the three months ended June
30, 1995 and June 30, 1996, respectively, representing an increase of
approximately 21%. This increase was primarily due to an increase in the unit
volume of tables sold. In addition, the Company had chair line sales during
the three months ended June 30, 1995 and 1996 totaling approximately 3% and 5%
of net sales, respectively.
Gross profit increased approximately 26% from $1,586,000 for the three
months ended June 30, 1995, to $2,006,000 for the three months ended June 30,
1996. The increase in gross profit was due to increased sales, higher average
unit sales prices on the Company's tables, and labor and manufacturing
efficiencies from higher unit volumes. Gross profit as a percent of net sales
increased from 41.4% in the prior period to 43.2% in the current period.
<PAGE> Page 7 of 10
Selling expenses were $514,000 and $812,000 in the three months ended June
30, 1995 and June 30, 1996, respectively, and represented approximately 13.4%
and 17.5% of net sales. The increase in selling expenses was primarily
attributable to personnel additions, commissions paid to sales personnel and
additional trade show activities during the current period. At the beginning
of the current period, the Company hired eight additional sales people,
bringing the total to 26 in-house sales representatives. For future periods,
the Company expects that selling expenses as a percentage of net sales will be
less than that experienced in the current quarter.
General and administrative expenses increased by $56,000, from $180,000 in
the three months ended June 30, 1995 to $236,000 in the three months ended
June 30, 1996. General and administrative expense as a percentage of net
sales increased slightly, from 4.7% in the prior period to 5.1% in the current
period. The increase resulted primarily from increases in personnel related
expenses.
Research and development expenses were $186,000 and $120,000 in the three
months ended June 30, 1995 and June 30, 1996, respectively, and represented
approximately 4.9% and 2.6% of net sales. The decrease in research and
development expenditures primarily resulted from one-time expenses incurred in
the June 1995 quarter associated with the development of the Company's Tesla
folding chair and the Mity-Lite Elite and Mity-Lite Aluminum tables. These
new product lines were introduced at the Neocon Trade Show and significant
development resources were expended during that quarter to prepare for the
trade show. The Company postponed developing further the Tesla , but began
selling the Mity-Lite Elite and Mity-Lite Aluminum tables during the
previous fiscal year.
For the reasons stated above, income from operations increased by $132,000,
or 19% from $706,000 for the three months ended June 30, 1995 to $838,000 for
the three months ended June 30, 1996.
Other income and expense was $58,000 and $84,000 for the three months ended
June 30, 1995 and 1996, respectively. The increase primarily resulted from
additional interest income earned on excess cash invested in highly liquid
securities.
Net income was $478,000 and $585,000 in the three months ended June 30,
1995 and 1996, respectively. This represents an increase of over 22% in net
income and a slight increase in net income as a percentage of net sales from
12.5% to 12.6%.
LIQUIDITY AND CAPITAL RESOURCES
The Company has historically financed its growth through cash from
operations and borrowings under a revolving credit facility. Net cash
provided by operating activities equaled $1,024,000 and $722,000 during the
three months ended June 30, 1995 and 1996, respectively. The Company has
revolving credit facilities with Zions Bank and First Security Bank of Utah,
N.A. The agreements, which expire on December 5, 1996 and October 27, 1996,
respectively, allow the Company to draw up to a combined $4,000,000 under the
credit facilities. As of June 30, 1996, the Company had no amounts drawn
under the credit facilities. The credit facilities require the maintenance of
certain financial ratios and levels of working capital, all of which were met
as of June 30, 1996.
<PAGE> Page 8 of 10
The Company believes that cash flow from its current operations together
with existing cash reserves will be sufficient to support its working capital
requirements for its existing operations for at least the next 12 months.
However, the Company's working capital requirements may significantly increase
if an acquisition is consummated. No assurances can be given as to the
sufficiency of the Company's working capital to support the Company's
operations following any such acquisition. If the existing cash reserves,
cash flow from operations and debt financing are insufficient or if working
capital requirements are greater than estimated, the Company could be required
to raise additional capital. There can be no assurance the Company will be
capable of raising additional capital or that the terms upon which such
capital will be available to the Company will be acceptable. Additional
sources of equity capital are available to the Company through the exercise by
holders of outstanding options. At June 30, 1996, the proceeds which would be
received by the Company upon exercise of outstanding options which were
exercisable on that date were approximately $472,000. There is no assurance
that such options will be exercised. The Company is also evaluating strategic
business and product line acquisitions.
The Company's material cash commitments at June 30, 1996 consisted
primarily of current liabilities to be repaid from funds generated from
operations. At June 30, 1996, the Company had total current liabilities of
$1,539,000. The Company has also entered into a lease agreement from a
related party for its production and office facility under which it is
obligated to pay $15,000 per month through March 2000. The Company incurred
certain capital costs related to the construction of additional office and
manufacturing space at its current facility. The unreimbursed portion of
these construction costs, totaling approximately $273,000 as of June 30, 1996,
has been recorded as a related party receivable. This amount will be
reimbursed to the Company once the additional facility is substantially
complete.
FORWARD-LOOKING STATEMENTS AND FACTORS THAT MAY AFFECT FUTURE RESULTS OF
OPERATIONS
All forward-looking statements contained herein are deemed by the Company
to be covered by and to qualify for the safe harbor protection provided by the
Private Securities Litigation Reform Act of 1995 (the "1995 Act"). Investors
and prospective investors in the Company should understand that several
factors govern whether any forward-looking statement contained herein will be
or can be achieved. Any one of those factors could cause actual results to
differ materially from those projected herein. These forward-looking
statements include plans and objectives of management for future operations,
including plans and objectives for products, marketing, customers, product
line expansions, enhancements to its manufacturing process, and potential
acquisitions. The forward-looking statements included herein are based on
current expectations that involve a number of risks and uncertainties. These
forward-looking statements are based on assumptions, among others, that the
Company a) will be able to successfully increase its share of the table
market, introduce new product lines to existing customers, market products
directly to end users, enter new markets, and continue enhancing its
manufacturing process, b) will continue to manufacture and market at current
margins high quality, high performance products at competitive prices, c) will
continue to profitably sell products to The Church of Jesus Christ of Latter-day
Saints, d) can continue to source acceptable raw materials at current
prices, e) will continue to experience current levels or lesser levels of
warranty service costs, f) will successfully implement its new sales incentive
<PAGE> Page 9 of 10
program and management information system, and g) will reduce sales costs as a
percentage of net sales from the current levels. Assumptions relating to the
foregoing involve judgments with respect to, among other things, future
economic, competitive and market conditions and future business decisions, all
of which are difficult or impossible to predict accurately and many of which
are beyond the control of the Company. Although the Company believes that the
assumptions underlying the forward-looking statements contained herein are
reasonable, any of those assumptions could prove inaccurate and, therefore,
there is and can be no assurance that the results contemplated in any such
forward-looking statement will be realized. Budgeting and other management
decisions are subjective in many respects and thus susceptible to
interpretations and periodic revision. The impact of actual experience and
business developments may cause the Company to alter its marketing, capital
expenditure plans or other budgets, which may in turn affect the Company's
result of operations. In light of the significant uncertainties inherent in
the forward-looking statement included herein, the inclusion of any such
statement should not be regarded as a representation by the Company or any
other person that the objectives or plans of the Company will be achieved.
Due to factors noted above and elsewhere in Management's Discussion and
Analysis of Financial Condition and Results of Operations, the Company's
future earnings and stock price may be subject to significant volatility,
particularly on a quarterly basis. Past financial performance should not be
considered a reliable indicator of future performance and investors should not
use historical trends to anticipate results or trends in future periods. Any
shortfall in net sales or earnings from the levels anticipated by securities
analysts could have an immediate and significant effect on the trading price
of the Company's common stock in any given period. Additionally, the Company
may not learn of such shortfalls until late in a fiscal quarter, which could
result in an even more immediate and adverse effect on the trading price of
the Company's common stock.
PART II: OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
11 Computation of Net Income per Share
27 Financial Data Schedule
(b) Reports on Form 8-K:
None
<PAGE> 10 of 10
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
MITY-LITE, INC.
Date: July 31, 1996 /s/ Gregory L. Wilson
----------------------------
Gregory L. Wilson
Chairman of the Board, President,
and Director (Principal Executive
Officer)
Date: July 31, 1996 /s/ Bradley T Nielson
----------------------------
Bradley T Nielson
Chief Financial Officer
(Principal Financial and Accounting
Officer)
Three months ended June 30,
1996 1995
--------------- ---------------
Net income as reported. . . . . . . . . . . . $585,000 $478,000
=============== ===============
Primary:
Common and common equivalent shares
outstanding:
Weighted average number of common shares
outstanding . . . . . . . . . . . . . 3,101,808 3,074,848
Common stock equivalents from options
computed on the treasury-stock method
using the average fair market value of
common stock during the period. . . . . 141,197 156,936
--------------- ---------------
Shares used in the computation. . . . . . . . 3,243,005 3,231,784
=============== ===============
Primary net income per share. . . . . . . . . $0.18 $0.15
=============== ===============
Fully Diluted:
Common and common equivalent shares
outstanding:
Weighted average number of common shares
outstanding . . . . . . . . . . . . . . 3,101,808 3,074,848
Common stock equivalents from options
computed on the treasury-stock method
using the higher of the average fair
market value of common stock during the
period or at the end of the period. . . 141,197 167,626
--------------- ---------------
Shares used in the computation. . . . . . . . 3,243,005 3,242,474
=============== ===============
Fully diluted net income per share. . . . . . $0.18 $0.15
=============== ===============
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Balance Sheet at June 30, 1996 (unaudited) and Statements of Income for the
three months ended June 30, 1996 (unaudited) and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> JUN-30-1996
<CASH> 7,900,000
<SECURITIES> 0
<RECEIVABLES> 2,217,000
<ALLOWANCES> (162,000)
<INVENTORY> 576,000
<CURRENT-ASSETS> 10,969,000
<PP&E> 2,519,000
<DEPRECIATION> (1,117,000)
<TOTAL-ASSETS> 12,371,000
<CURRENT-LIABILITIES> 1,539,000
<BONDS> 0
0
0
<COMMON> 6,740,000
<OTHER-SE> 4,092,000
<TOTAL-LIABILITY-AND-EQUITY> 12,371,000
<SALES> 4,647,000
<TOTAL-REVENUES> 4,647,000
<CGS> 2,641,000
<TOTAL-COSTS> 2,641,000
<OTHER-EXPENSES> 1,168,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,000
<INCOME-PRETAX> 922,000
<INCOME-TAX> 337,000
<INCOME-CONTINUING> 585,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 585,000
<EPS-PRIMARY> .18
<EPS-DILUTED> .18
</TABLE>
