<PAGE> 1
U.S. Securities and Exchange Commission
Washington, D.C. 20549
--------------------------------------------------
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, 1997
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1943
For the transition period from to
Commission file number 0-23898
--------------------------------------------------
MITY-LITE, INC.
(Exact name of small business issuer as specified in its charter)
Utah 87-0448892
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) 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 3,191,023 shares of the registrant's Common Stock, par value
$.01 per share, outstanding on July 29, 1997.
TRANSITIONAL SMALL BUSINESS DISCLOSURE FORMAT (Check one:) Yes No x
<PAGE> 2
MITY-LITE, INC.
INDEX
Part I. Financial Information
Item 1. Financial Statements (Unaudited)
Balance Sheets as of June 30, 1997 and March 31, 1997. . . . . . 3
Statements of Income for the three months ended
June 30, 1997 and June 30, 1996 . . . . . . . . . . . . . . . 4
Statements of Cash Flows for the three months ended
June 30, 1997 and June 30, 1996 . . . . . . . . . . . . . . . 5
Notes to Financial Statements. . . . . . . . . . . . . . . . . . 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations. . . . . . . . . . . . . . . . . . . . 8
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . 12
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
<PAGE> 3
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements
MITY-LITE, INC.
BALANCE SHEETS
(unaudited)
June 30, March 31,
ASSETS 1997 1997
----------- -----------
Current assets:
Cash and cash equivalents. . . . . . . . $ 8,402,000 $ 7,646,000
Accounts receivable, less allowance of
$213,000 at June 30, 1997 and $161,000
at March 31, 1997. . . . . . . . . . . 2,836,000 2,196,000
Inventories. . . . . . . . . . . . . . . 838,000 700,000
Deferred income taxes. . . . . . . . . . 127,000 129,000
Prepaid expenses and other current
assets . . . . . . . . . . . . . . . . 115,000 88,000
----------- -----------
Total current assets . . . . . . . . . . . . 12,318,000 10,759,000
Property and equipment, net. . . . . . . . . 1,718,000 1,629,000
Note receivable from affiliate . . . . . . . 1,000,000 1,000,000
Investment in affiliate. . . . . . . . . . . 876,000 862,000
Intangibles. . . . . . . . . . . . . . . . . 1,000 1,000
----------- -----------
Total Assets . . . . . . . . . . . . . . . . $15,913,000 $14,251,000
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable . . . . . . . . . . . . $ 1,015,000 $ 833,000
Accrued expenses . . . . . . . . . . . . 974,000 485,000
----------- -----------
Total current liabilities. . . . . . . . . . 1,989,000 1,318,000
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 3,190,198 at June 30,
1997 and 3,161,359 at March 31, 1997 . 32,000 32,000
Additional paid-in capital . . . . . . . 7,157,000 6,952,000
Retained earnings. . . . . . . . . . . . 6,735,000 5,949,000
----------- -----------
Total stockholders' equity . . . . . . . . 13,924,000 12,933,000
----------- -----------
Total liabilities and stockholders' equity . $15,913,000 $14,251,000
=========== ===========
See accompanying notes to financial statements.
<PAGE> 4
MITY-LITE, INC.
STATEMENTS OF INCOME
(unaudited)
Three months ended June 30,
1997 1996
----------- -----------
Net sales . . . . . . . . . . . . . . . . . . $ 6,296,000 $ 4,647,000
Cost of products. . . . . . . . . . . . . . . 3,873,000 2,641,000
----------- -----------
Gross profit. . . . . . . . . . . . . . . . . 2,423,000 2,006,000
Expenses:
Selling . . . . . . . . . . . . . . . . . 940,000 812,000
General and administrative. . . . . . . . 250,000 236,000
Research and development. . . . . . . . . 104,000 120,000
----------- -----------
Total expenses. . . . . . . . . . . . . . . . 1,294,000 1,168,000
----------- -----------
Income from operations. . . . . . . . . . . . 1,129,000 838,000
Other income (expense):
Interest expense. . . . . . . . . . . . . -- (1,000)
Interest income . . . . . . . . . . . . . 85,000 85,000
Equity in income of affiliate . . . . . . 33,000 --
----------- -----------
Total other income. . . . . . . . . . . . . . 118,000 84,000
----------- -----------
Income before provision for income taxes. . . 1,247,000 922,000
Provision for income taxes. . . . . . . . . . 461,000 337,000
----------- -----------
Net income. . . . . . . . . . . . . . . . . . $ 786,000 $ 585,000
=========== ===========
Net income per share. . . . . . . . . . . . . $ 0.24 $ 0.18
=========== ===========
Weighted average common and common
equivalent shares . . . . . . . . . . . . 3,340,175 3,243,005
=========== ===========
See accompanying notes to financial statements.
<PAGE> 5
MITY-LITE, INC.
STATEMENTS OF CASH FLOWS
(unaudited)
Three months ended June 30,
1997 1996
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income . . . . . . . . . . . .. . . . . . $ 786,000 $ 585,000
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation . . . . . . . . . . . . . . . 113,000 93,000
Deferred compensation. . . . . . . . . . . -- 2,000
Deferred tax expense . . . . . . . . . . . 2,000 --
Equity in income of affiliate. . . . . . . (33,000) --
Tax benefit from exercise of stock options 100,000 2,000
Changes in assets and liabilities:
Accounts receivable. . . . . . . . . . . (640,000) (447,000)
Inventories. . . . . . . . . . . . . . . (138,000) (67,000)
Related party receivable . . . . . . . . -- 80,000
Prepaid expenses and other current assets (2,000) 27,000
Accounts payable . . . . . . . . . . . . 182,000 77,000
Accrued expenses and other . . . . . . . 489,000 372,000
----------- -----------
Net cash provided by operating activities. . . 859,000 724,000
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in affiliate. . . . . . . . . . . . (6,000) --
Purchases of property and equipment. . . . . . (202,000) (182,000)
----------- -----------
Net cash used in investing activities. . . . . (208,000) (182,000)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of common stock from stock options . 105,000 12,000
----------- -----------
Net cash provided by financing activities . . 105,000 12,000
----------- -----------
Net increase in cash and cash equivalents . . 756,000 554,000
Cash and cash equivalents at beginning of
period . . . . . . . . . . . . . . . . . . . 7,646,000 7,346,000
----------- -----------
Cash and cash equivalents at end of period . . $ 8,402,000 $ 7,900,000
=========== ===========
See accompanying notes to financial statements.
<PAGE> 6
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, 1997 are not
necessarily indicative of results to be expected for the full fiscal year
ending March 31, 1998.
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 to shareholders for the fiscal year ended March 31,
1997.
2. Inventories
Inventories consisted of the following:
June 30, March 31,
1997 1997
----------- -----------
Materials and supplies . . . . $ 720,000 $ 611,000
Work-in-progress . . . . . . . 47,000 58,000
Finished goods . . . . . . . . 71,000 31,000
----------- -----------
838,000 $ 700,000
=========== ===========
<PAGE> 7
3. Recently Issued Financial Accounting Standards
In February 1997, the Financial Accounting Standards Board issued SFAS
No. 128, Earnings Per Share (SFAS No. 128), which establishes standards for
computing and presenting earnings per share (EPS). SFAS No. 128 is required
for the Company's fiscal year 1998 financial statements. Early adoption is
not permitted. SFAS No. 128 replaces the presentation of primary and fully
diluted EPS with the presentation of basic and diluted EPS. Basic earnings
per common share excludes dilution and is computed by dividing net income by
the weighted average number of shares of common stock outstanding during the
period. Diluted earnings per common share includes the potential dilution
that could occur if stock options or other securities were converted into
common stock. Based on SFAS No. 128, basic EPS and diluted EPS would be as
follows:
Three months ended June 30,
1997 1996
----------- -----------
Basic EPS. . . . . . . . . . . . $ 0.25 $ 0.19
Diluted. . . . . . . . . . . . . $ 0.24 $ 0.18
<PAGE> 8
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
MityTuff(TM), the MityStack(TM), the MityFlex(TM), the MityDeluxe(TM), and the
MityHost(TM). The MityTuff(TM) and MityStack(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. The MityHost(TM) is manufactured by
the Company in its Orem, Utah facility.
Net sales of the Company's table products have increased during the three
months ended June 30, 1997 as compared to the three months ended June 30,
1996. Management expects, but cannot assure, that this trend will continue.
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, 1997 AND 1996
NET SALES. The Company's first quarter of fiscal 1998 net sales of
$6,296,000 represented an increase of 35 percent over first quarter net sales
in the prior fiscal year. The increase reflected sales growth of 31 percent in
the table product lines and 144 percent in the chair product lines. Domestic
and international chair sales represented 9.6 percent and 5.3 percent of net
sales for the first quarter ended June 30, 1997 and 1996, respectively, while
international table and chair sales represented 5.5 percent and 4.3 percent of
net sales for the same respective time periods. The sales increase has
resulted mainly from increased sales in the public assembly, hospitality, and
church market segments.
<PAGE> 9
GROSS PROFIT. Gross profit as a percentage of net sales decreased over
the prior year by 4.7 percentage points, to 38.5 percent for the three months
ended June 30, 1997. The majority of the decrease was caused by increased
production costs related to the implementation of a new bonding process,
additional production and labor costs associated with startup of a second
production shift, increasing labor rates, and increasing chair sales which,
when compared to table products, have lower gross profit margins.
SELLING EXPENSES. Selling expenses were 14.9 percent of net sales in the
first quarter of fiscal 1998 as compared to 17.5 percent for the first quarter
of the prior fiscal year. The decrease in selling expenses as a percentage of
net sales resulted from one-time costs incurred in the prior year fiscal
quarter related to a new sales incentive program. Actual spending increased
by 15.8 percent, or $128,000, resulting from higher personnel and commission
related costs and higher advertising costs.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
were 4.0 percent of net sales in the first quarter of fiscal 1998 as compared
to 5.1 percent for the first quarter of the prior fiscal year. General and
administrative expenses as a percentage of net sales decreased as a result of
the increased sales base. Actual spending increased by 5.9 percent, or
$14,000, resulting from additional personnel related expenses.
RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses
were 1.7 percent of net sales in the first quarter of fiscal 1998 as compared
to 2.6 percent for the first quarter of the prior fiscal year. Research and
development expenses as a percentage of net sales decreased as a result of
lower spending and the increased sales base. Actual spending decreased by
13.3 percent, or $16,000, resulting from decreased personnel related expenses.
OTHER INCOME AND EXPENSE. Other income and expense netted to $118,000 in
the first quarter of fiscal 1998. First quarter interest income was $98,000,
an increase of $13,000 from the first quarter of the prior fiscal year. The
increase was due to a greater average balance of cash and cash equivalents.
In addition, the Company recognized income of $20,000 from its investment in
DO Group, Inc. The Company bought a 49.9 percent interest in the DO Group on
March 31, 1997. The $20,000 represents Mity-Lite's proportionate share of DO
Group's net income for the three months ended June 30, 1997.
NET INCOME. For reasons stated above, the Company's first quarter of
fiscal 1998 net income of $786,000 increased $201,000, or 34.4 percent over
first quarter net income in the prior fiscal year.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents, which consist primarily of high-quality
municipal bonds and tax-advantaged and non-tax-advantaged money market
instruments, totaled $8.4 million at June 30, 1997 compared to $7.6 million at
March 31, 1997. The increase in cash and cash equivalents was due primarily
to cash generated from operations ($0.9 million) and proceeds from the
exercise of stock options ($0.1 million). This increase was partially offset
by cash used to purchase manufacturing, furniture and computer equipment and
software ($0.2 million).
<PAGE> 10
The Company has historically financed its growth through cash from
operations and borrowings under a revolving credit facility. The Company has
credit facilities with Zions First National Bank and First Security Bank of
Utah, N.A. The agreements, which expire on December 5, 1997, and October 27,
1997, respectively, allow the Company to draw up to an aggregate $4.0 million
under the credit facilities. As of June 30, 1997, 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, 1997.
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 other acquisitions are 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, 1997, the proceeds which would
have been received by the Company upon exercise of outstanding options which
were exercisable on that date were approximately $609,000. 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, 1997, consisted
primarily of current liabilities to be repaid from funds generated from
operations. At June 30, 1997, the Company had total current liabilities of
$1,989,000. The Company has also entered into a lease agreement with a
related party for its production and office facility under which it is
obligated to pay $17,100 per month through March 2000.
<PAGE> 11
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, cash flow availability, enhancements to the Company's
manufacturing process, increasing table sales, 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) can continue to source
acceptable raw materials at current prices, d) will continue to experience
current levels of warranty service costs, and e) will realize a return on
investment from the DO Group, Inc. acquisition. 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 statements 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 project 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.
<PAGE> 12
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
The Company has filed two reports on Form 8-K during the last
quarter. A Current Report on Form 8-K dated March 31, 1997 included
an Item 2 disclosure, "Acquisition or Disposition of Assets"
detailing Mity-Lite's purchase of a 49.9 percent equity interest in
DO Group, Inc. The Company filed a Current Report on Form 8-K/A on
June 13, 1997 which included an Item 2 disclosure, "Acquisition or
Disposition of Assets" detailing Mity-Lite's purchase of a 49.9
percent equity interest in DO Group, Inc., and an Item 7 disclosure,
"Financial Statements, Pro Forma Financial Information, and
Exhibits," providing the required disclosures of the aforementioned
investment in DO Group, Inc.
<PAGE> 13
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: August 5, 1997 /s/ Gregory L. Wilson
------------------------------------
Gregory L. Wilson
Chairman of the Board, President,
and Director (Principal Executive
Officer)
Date: August 5, 1997 /s/ Bradley T Nielson
------------------------------------
Bradley T Nielson
Chief Financial Officer
(Principal Financial and Accounting
Officer)
STATEMENT OF COMPUTATION
OF NET INCOME PER SHARE
Three months ended June 30,
1997 1996
----------- -----------
Net income as reported. . . . . . . . . . . $ 786,000 $ 585,000
=========== ===========
Primary:
Common and common equivalent shares
outstanding:
Weighted average number of common shares
outstanding . . . . . . . . . . . . . 3,190,198 3,101,808
Common stock equivalents from options
computed on the treasury-stock method
using the average fair market value of
common stock during the period. . . . 149,977 141,197
----------- -----------
Shares used in the computation. . . . . 3,340,175 3,243,005
=========== ===========
Primary net income per share. . . . . . . . $ 0.24 $ 0.18
=========== ===========
Fully Diluted:
Common and common equivalent shares
outstanding:
Weighted average number of common shares
outstanding . . . . . . . . . . . . . 3,190,198 3,101,808
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. . 154,975 141,197
----------- -----------
Shares used in the computation. . . . . 3,345,173 3,243,005
=========== ===========
Fully diluted net income per share. . . . . $ 0.23 $ 0.18
=========== ===========
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Balance Sheet at June 30, 1997 (unaudited) and Statements of Income for the
three months ended June 30, 1997 (unaudited) and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-END> JUN-30-1997
<CASH> 8,402,000
<SECURITIES> 0
<RECEIVABLES> 3,049,000
<ALLOWANCES> (213,000)
<INVENTORY> 838,000
<CURRENT-ASSETS> 12,318,000
<PP&E> 3,084,000
<DEPRECIATION> (1,366,000)
<TOTAL-ASSETS> 15,913,000
<CURRENT-LIABILITIES> 1,989,000
<BONDS> 0
0
0
<COMMON> 7,189,000
<OTHER-SE> 6,735,000
<TOTAL-LIABILITY-AND-EQUITY> 15,913,000
<SALES> 6,296,000
<TOTAL-REVENUES> 6,296,000
<CGS> 3,873,000
<TOTAL-COSTS> 3,873,000
<OTHER-EXPENSES> 1,294,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,247,000
<INCOME-TAX> 461,000
<INCOME-CONTINUING> 786,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 786,000
<EPS-PRIMARY> .24
<EPS-DILUTED> .23
</TABLE>
