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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 September 30, 1998
[ ] 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
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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)
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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 3,271,483 shares of the registrant's Common Stock, par value
$.01 per share, outstanding on October 27, 1998.
TRANSITIONAL SMALL BUSINESS DISCLOSURE FORMAT (Check one:) Yes No x
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PART I: FINANCIAL INFORMATION
Item 1. Financial Statements
MITY-LITE, INC.
BALANCE SHEETS
(unaudited)
Sept. 30, March 31,
ASSETS 1998 1998
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Current assets:
Cash and cash equivalents. . . . . . . . $10,719,000 $ 9,266,000
Available-for-sale securities. . . . . . 1,398,000 1,207,000
Accounts receivable, less allowance of
$252,000 at Sept. 30, 1998 and $259,000
at March 31, 1998. . . . . . . . . . . 3,042,000 2,586,000
Inventories. . . . . . . . . . . . . . . 883,000 960,000
Prepaid expenses and other current
assets . . . . . . . . . . . . . . . . 109,000 324,000
Deferred income taxes. . . . . . . . . . 192,000 192,000
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Total current assets . . . . . . . . . . . . 16,343,000 14,535,000
Property and equipment, net. . . . . . . . . 1,909,000 1,912,000
Note receivable from affiliate . . . . . . . 1,025,000 1,000,000
Investment in affiliate. . . . . . . . . . . 1,347,000 1,108,000
Intangibles. . . . . . . . . . . . . . . . . -- 1,000
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Total assets . . . . . . . . . . . . . . . . $20,624,000 $18,556,000
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable . . . . . . . . . . . . $ 768,000 $ 1,144,000
Accrued expenses . . . . . . . . . . . . 911,000 496,000
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Total current liabilities. . . . . . . . . . 1,679,000 1,640,000
Deferred income tax liabilities. . . . . . . 185,000 97,000
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 3,261,350 at Sept. 30,
1998 and 3,260,585 at March 31, 1998 . 33,000 33,000
Additional paid-in capital . . . . . . . 7,817,000 7,721,000
Retained earnings. . . . . . . . . . . . 10,910,000 9,065,000
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Total stockholders' equity . . . . . . . . 18,760,000 16,819,000
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Total liabilities and stockholders' equity . $20,624,000 $18,556,000
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See accompanying notes to financial statements.
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MITY-LITE, INC.
STATEMENTS OF INCOME
(unaudited)
Three months ended Sept. 30,
1998 1997
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Net sales . . . . . . . . . . . . . . . . . . $ 7,361,000 $ 7,341,000
Cost of products sold . . . . . . . . . . . . 4,546,000 4,561,000
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Gross profit. . . . . . . . . . . . . . . . . 2,815,000 2,780,000
Expenses:
Selling . . . . . . . . . . . . . . . . . 995,000 1,025,000
General and administrative. . . . . . . . 281,000 245,000
Research and development. . . . . . . . . 115,000 122,000
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Total expenses. . . . . . . . . . . . . . . . 1,391,000 1,392,000
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Income from operations. . . . . . . . . . . . 1,424,000 1,388,000
Other income (expense):
Interest income . . . . . . . . . . . . . 117,000 85,000
Equity in income of affiliate . . . . . . 150,000 89,000
Other . . . . . . . . . . . . . . . . . . (7,000) --
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Total other income. . . . . . . . . . . . . . 260,000 174,000
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Income before provision for income taxes. . . 1,684,000 1,562,000
Provision for income taxes. . . . . . . . . . 623,000 578,000
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Net income. . . . . . . . . . . . . . . . . . $ 1,061,000 $ 984,000
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Basic earnings per share. . . . . . . . . . . $ 0.33 $ 0.31
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Weighted average number of common
shares - basic. . . . . . . . . . . . . . . 3,261,350 3,219,591
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Diluted earnings per share. . . . . . . . . . $ 0.31 $ 0.29
=========== ===========
Weighted average common and common
equivalent shares - diluted . . . . . . . 3,385,799 3,384,890
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See accompanying notes to financial statements.
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MITY-LITE, INC.
STATEMENTS OF INCOME
(unaudited)
Six months ended Sept. 30,
1998 1997
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Net sales . . . . . . . . . . . . . . . . . . $15,025,000 $13,637,000
Cost of products sold . . . . . . . . . . . . 9,457,000 8,434,000
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Gross profit. . . . . . . . . . . . . . . . . 5,568,000 5,203,000
Expenses:
Selling . . . . . . . . . . . . . . . . . 1,977,000 1,965,000
General and administrative. . . . . . . . 585,000 495,000
Research and development. . . . . . . . . 234,000 226,000
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Total expenses. . . . . . . . . . . . . . . . 2,796,000 2,686,000
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Income from operations. . . . . . . . . . . . 2,772,000 2,517,000
Other income (expense):
Interest income . . . . . . . . . . . . . 228,000 170,000
Equity in income of affiliate . . . . . . 290,000 122,000
Other . . . . . . . . . . . . . . . . . . (20,000) --
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Total other income. . . . . . . . . . . . . . 498,000 292,000
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Income before provision for income taxes. . . 3,270,000 2,809,000
Provision for income taxes. . . . . . . . . . 1,210,000 1,039,000
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Net income. . . . . . . . . . . . . . . . . . $ 2,060,000 $ 1,770,000
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Basic earnings per share. . . . . . . . . . . $ 0.63 $ 0.55
=========== ===========
Weighted average number of common
shares - basic. . . . . . . . . . . . . . . 3,264,601 3,204,895
=========== ===========
Diluted earnings per share. . . . . . . . . . $ 0.61 $ 0.53
=========== ===========
Weighted average common and common
equivalent shares - diluted . . . . . . . 3,400,024 3,362,534
=========== ===========
See accompanying notes to financial statements.
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MITY-LITE, INC.
STATEMENTS OF CASH FLOWS
(unaudited)
Six months ended Sept. 30,
1998 1997
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CASH FLOWS FROM OPERATING ACTIVITIES
Net income . . . . . . . . . . . .. . . . . . $ 2,060,000 $ 1,770,000
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation . . . . . . . . . . . . . . . 272,000 231,000
Loss on disposal of equipment. . . . . . . 20,000 1,000
Deferred tax expense . . . . . . . . . . . 88,000 26,000
Equity in income of affiliate. . . . . . . (290,000) (122,000)
Tax benefit from exercise of stock options 43,000 254,000
Changes in assets and liabilities:
Accounts receivable. . . . . . . . . . . (456,000) (1,281,000)
Inventories. . . . . . . . . . . . . . . 77,000 (171,000)
Prepaid expenses and other current assets 251,000 (166,000)
Accounts payable . . . . . . . . . . . . (376,000) 197,000
Accrued expenses and other . . . . . . . 415,000 269,000
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Net cash provided by operating activities. . . 2,104,000 1,008,000
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CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of available-for-sale securities . . (501,000) --
Sales of available-for-sale securities . . . . 310,000 --
Proceeds from sales of property & equipment. . 10,000 --
Investment in and cash received from affiliate 51,000 44,000
Purchases of property and equipment. . . . . . (335,000) (425,000)
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Net cash used in investing activities. . . . . (465,000) (381,000)
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CASH FLOWS FROM FINANCING ACTIVITIES
Purchase and retirement of common stock . . . . (250,000) (104,000)
Increase in note receivable from affiliate. . . (25,000) --
Issuance of common stock from stock options . . 89,000 249,000
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Net cash provided by (used in) financing
activities. . . . . . . . . . . . . . . . . . (186,000) 145,000
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Net increase in cash and cash equivalents . . 1,453,000 772,000
Cash and cash equivalents at beginning of
period . . . . . . . . . . . . . . . . . . . 9,266,000 7,646,000
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Cash and cash equivalents at end of period . . $10,719,000 $ 8,418,000
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See accompanying notes to financial statements.
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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 and six months ended September 30,
1998 are not necessarily indicative of results to be expected for the full
fiscal year ending March 31, 1999.
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,
1998.
2. Inventories
Inventories consisted of the following:
Sept. 30, March 31,
1998 1998
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Materials and supplies . . . . $ 750,000 $ 812,000
Work-in-progress . . . . . . . 47,000 58,000
Finished goods . . . . . . . . 86,000 90,000
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$ 883,000 $ 960,000
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3. Recently Issued Financial Accounting Standards
Effective April 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income." This
Statement establishes standards for reporting and displaying comprehensive
income and its components (revenues, expenses, gains and losses) in a full set
of general-purpose financial statements. This Statement requires the
classification of items of comprehensive income by their nature in a financial
statement and the accumulated balance of other comprehensive income separately
from retained earnings and additional paid-in capital in the equity section of
the balance sheet. For the three months and six months ended September 30,
1998 and 1997, comprehensive income is the same as net income since the fair
value of available-for-sale securities approximates their cost.
In June 1997, the FASB issued SFAS No. 131, "Disclosure about Segments of
an Enterprise and Related Information," which supersedes FASB Statement No.
14, "Financial Reporting for Segments of a Business Enterprise" and changes
the way public companies report information about operating segments. SFAS No.
131, which is based on the management approach to segment reporting,
establishes requirements to report selected segment information quarterly and
to report entity-wide disclosures about products and services, major customers
and the material countries in which the entity holds assets and reports
revenue. Management is currently evaluating the effects of this change on its
reporting of segment information. The Company will adopt SFAS No. 131 for its
fiscal year ending March 31, 1999.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which supersedes SFAS No. 80, "Accounting
for Future Contracts," SFAS No. 105, "Disclosure of Information about
Financial Instruments with Off-Balance-Sheet Risk and Financial Instruments
with Concentration of Credit Risk," and SFAS No. 119, "Disclosure about
Derivative Financial Instruments and Fair Value of Financial Instruments," and
also amends certain aspects of other SFASs previously issued. This statement
is effective for all fiscal quarters of fiscal years beginning after June 15,
1999. This statement establishes accounting and reporting standards for
derivative instruments and hedging activities. It requires that an entity
recognize all derivatives as either assets or liabilities in the statement of
financial position and measure those instruments at fair value. Management
does not believe this statement will have a significant impact on the Company.
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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 continues to actively pursue acquisitions of product
lines or companies that will be complementary to the Company's business.
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 six
months ended September 30, 1998 as compared to the six months ended September
30, 1997. 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 and Six Months Ended September 30, 1998 and
1997
NET SALES. The Company's second quarter of fiscal 1999 net sales of
$7,361,000 were up 0.3 percent as compared with the second quarter net sales
in the prior fiscal year. Domestic and international chair sales represented
12.5 percent and 9.2 percent of net sales for the second quarter ended
September 30, 1998 and 1997, respectively, while international table and chair
sales represented 7.7 percent and 8.4 percent of net sales for the same
respective time periods. Historical growth rates have slowed mainly due to
softening sales growth in the hospitality and education market segments.
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For the six month period ended September 30, 1998, the Company's net
sales of $15,025,000 represented an increase of 10 percent over the same
period in the prior fiscal year. The increase reflected sales growth of 9
percent in the table product lines and 15 percent in the chair product lines.
Domestic and international chair sales represented 9.8 percent and 9.4 percent
of net sales for the six month period ended September 30, 1998 and 1997,
respectively, while international table and chair sales represented 9.7
percent and 7.4 percent of net sales for the same respective time periods.
The overall sales increase has resulted mainly from increased sales in the
hospitality, church, and government market segments.
GROSS PROFIT. Gross profit as a percentage of net sales increased
slightly over the prior year by 0.3 percentage points, to 38.2 percent for the
three months ended September 30, 1998. The majority of the increase was the
result of a higher average sales price on table and chair products, lower
material costs, and increasing labor productivity partially offset by higher
freight costs and increasing chair sales which, when compared to table
products, have lower gross profit margins.
Gross profit as a percentage of net sales decreased over the prior year by
1.1 percentage points, to 37.1 percent for the six months ended September 30,
1998. The majority of the decrease was caused by increasing material costs
related to the implementation of a new bonding process, increasing labor
rates, and increasing chair sales which have lower gross profit margins.
These increasing costs have been partially offset by increases in the average
unit sales revenue for table and chair products.
SELLING EXPENSES. Selling expenses were 13.5 percent of net sales in the
second quarter of fiscal 1999 as compared to 14.0 percent for the second
quarter of the prior fiscal year. Actual spending decreased by 2.9 percent,
or $30,000, resulting from lower advertising and promotional expenses
partially offset by increased market research activities.
Selling expenses were 13.2 percent of net sales in the six months ended
September 30, 1998 as compared to 14.4 percent for the same period in the
prior fiscal year. The decrease in selling expenses as a percentage of net
sales resulted from overhead leverage from the increase in sales. Actual
spending increased by 0.6 percent, or $12,000, resulting from higher personnel
and commission related costs and increased market research activities
partially offset by lower advertising and promotional expenses.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
were 3.8 percent of net sales in the second quarter of fiscal 1999 as compared
to 3.3 percent for the second quarter of the prior fiscal year. Actual
spending increased by 14.7 percent, or $36,000, resulting from additional
personnel related expenses, the addition of the total quality management and
training position to the administrative staff, and increased investor
relations spending.
General and administrative expenses were 3.9 percent of net sales in the
six months ended September 30, 1998, as compared to 3.6 percent for the same
period in the prior fiscal year. Actual spending increased by 18.2 percent,
or $90,000, resulting from reasons stated above.
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RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses
were 1.6 percent of net sales in the second quarter of fiscal 1999 as compared
to 1.7 percent for the second quarter of the prior fiscal year. Actual
spending decreased by 5.7 percent, or $7,000.
Research and development expenses were 1.6 percent of net sales in the
six months ended September 30, 1998, as compared to 1.7 percent for the same
period in the prior fiscal year. Research and development expenses as a
percentage of net sales decreased slightly as a result of overhead leverage
from the increased sales base. Actual spending increased by 3.5 percent, or
$8,000, resulting from increased personnel related expenses. Management
expects to increase its research and development expenses over current levels
by $30,000 to $70,000 per quarter for the remaining two quarters in the
Company's fiscal year.
OTHER INCOME AND EXPENSE. Other income and expense netted to $260,000 in
the second quarter of fiscal 1999. Second quarter interest income was
$117,000, an increase of $32,000 from the second quarter of the prior fiscal
year. The increase was due to interest earned on the Company's increasing
cash and investment balances. The Company also recognized income of $150,000
from its investment in DO Group, Inc. The Company bought a 49.9 percent
interest in the DO Group on March 31, 1997. The $150,000, an increase of
$61,000 over the prior year, represents Mity-Lite's proportionate share of DO
Group's net income for the three months ended September 30, 1998. In
addition, the Company recognized a loss of $7,000 on the disposal of certain
fixed assets.
Other income and expense netted to $498,000 in the six months ended
September 30, 1998. Six month interest income was $228,000, an increase of
$58,000 from the same period in the prior fiscal year. The increase was due
to interest earned on the Company's increasing cash and investment balances.
The Company also recognized income of $290,000 from its investment in DO
Group, Inc. The $290,000, an increase of $168,000 over the same period last
year, represents Mity-Lite's proportionate share of DO Group's net income for
the six months ended September 30, 1998. In addition, the Company recognized
a loss of $20,000 on the disposal of certain fixed assets.
NET INCOME. For reasons stated above, the Company's second quarter of
fiscal 1999 net income of $1,061,000 increased $77,000, or 7.8 percent over
second quarter net income in the prior fiscal year. The Company's net income
of $2,060,000 for the six month period ended September 30, 1998 increased
$290,000, or 16.4 percent over same period in the prior fiscal year.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents, which consist primarily of high-quality
municipal bonds and tax-advantaged money market instruments, totaled $10.72
million at September 30, 1998 as compared to $9.27 million at March 31, 1998.
In addition, the Company holds available-for-sale securities totaling $1.40
million at September 30, 1998 as compared to $1.21 million at March 31, 1998.
The increase in cash and cash equivalents was due primarily to cash generated
from operations ($2.10 million), net proceeds related to the exercise of stock
options ($0.09 million), and interest received from affiliate ($0.05 million).
This increase was partially offset by net cash used to purchase highly liquid
available-for-sale securities ($0.19 million), to purchase manufacturing and
computer equipment, furniture, and make certain leasehold improvements ($0.34
million) and to buy back small amounts of the Company's common stock ($0.25
million).
<PAGE> 11
In recent history, the Company has financed its growth through cash from
operations. In addition, the Company has revolving credit facilities with
Zions First National Bank and First Security Bank of Utah, N.A. The
agreements, which expire on December 1, 1998 and October 25, 1998,
respectively, allow the Company to draw up to a combined $5,000,000 under the
credit facilities. As of September 30, 1998, the Company had no amounts drawn
under these facilities. The credit facilities require the maintenance of
certain financial ratios and levels of working capital, all of which were met
as of September 30, 1998. The Company expects to renew these credit
facilities prior to their respective expiration dates.
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. The
Company is actively pursuing acquisitions of product lines or companies with
complementary product lines and is currently considering the acquisition of
another company. The Company's working capital requirements may significantly
increase following consummation of an acquisition. No assurances can be given
as to the sufficiency of the Company's working capital to support the
Company's future operations following 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 September 30, 1998, the proceeds which
would have been received by the Company upon exercise of outstanding options
which were exercisable on that date were approximately $629,000. There is no
assurance that such options will be exercised.
The Company's material cash commitments at September 30, 1998 consisted
primarily of current liabilities to be repaid from funds generated from
operations. At September 30, 1998, the Company had total current liabilities
of $1.68 million as compared to $1.64 million at March 31, 1998. 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 $17,100 per
month through March 2000. In addition, in October 1998 the Company was
authorized by the board of directors to repurchase up to 100,000 shares of
Mity-Lite common stock.
INFORMATION SYSTEMS AND THE YEAR 2000
The year 2000 problem is the result of computer programs being written
using two digits rather than four digits to define an applicable year. Any of
the Company's computer programs that have date sensitive software may
recognize a date using "00" as the year 1900 rather than the year 2000. This
could result in a system failure or miscalculation causing disruptions of
operations, including, but not limited to, a temporary inability to process
transactions, send invoices, track supplies and status of manufacturing
activities, or engage in similar business activities.
<PAGE> 12
The Company is in the process of addressing the impact of the Year 2000
problem on its operations. The Company is currently engaged in a
comprehensive project to upgrade its information, technology, manufacturing
and facilities computer software to programs that will consistently and
properly recognize the Year 2000. Many of the Company's systems include new
hardware and packaged software recently purchased from large vendors who have
represented that these systems are already Year 2000 compliant. The Company
is in the process of testing these systems and obtaining assurances from
vendors that timely updates will be made available to make all remaining
purchased software and upgrades Year 2000 compliant.
The Company will utilize internal resources to test all of its software
for Year 2000 compliance and, where necessary, upgrade or replace noncompliant
systems. The Company expects to complete the project in early 1999. The
estimated cost of this project, including the cost of new systems which will
be capitalized, is less than $50,000. To date, $20,000 of this amount has
been expensed, and $5,000 has been capitalized. This cost will be funded
though operating cash flows. Failure by the Company and/or vendors and
customers to complete Year 2000 compliance work in a timely manner could have
a material adverse effect on certain of the Company's operations. In the
event of such failure, the Company may lose certain customers, vendors and
suppliers, and such third parties may not be able to perform their obligations
to the Company in a timely and efficient manner. The Company may also suffer
a decrease in manufacturing efficiency and manufacturing and inventory control
efficiency. The Company is currently assessing and evaluating back-up plans
in the event the Year 2000 problem does materially affect the Company's
operations.
The costs of the project and the date on which the Company believes it
will complete the Year 2000 modifications are based on management's best
current estimates, which were derived utilizing numerous assumptions of future
events, including the continued availability of certain technical resources,
the success of customers and vendors in addressing the Year 2000 problem,
third party modification plans and other factors. Certain statements made
under the caption "Information System and the Year 2000" are "forward-looking
statements" as defined in the next paragraph below. Such forward-looking
statements relate to: (i) the Company's ability to timely and adequately test
its systems affected by the Year 2000 problem, and (ii) the Company's ability
to remedy the material Year 2000 problems in the early part of 1999 and in a
manner that will not materially affect the Company's financial condition or
results of operations. There can be no guarantee that these estimates will be
achieved and actual results could differ materially from those anticipated.
Specific factors that might cause such material differences include, but are
not limited to, the availability and cost of personnel trained in resolving
the Year 2000 problem, the ability to locate and correct all relevant computer
codes, the success of customers and vendors in addressing the Year 2000
problem, and similar uncertainties.
<PAGE> 13
FORWARD-LOOKING STATEMENTS AND FACTORS THAT MAY AFFECT FUTURE RESULTS OF
OPERATIONS
Certain statements made above in this Form 10-QSB are "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995 (the "Reform Act"). In addition, when used in this filing, the words
or phrases "may," "will," "Management believes," "Company believes," "Company
intends," "estimates," "projects," "anticipates," "expects" and similar
expressions are intended to identify "forward-looking statements" within the
meaning of the Reform Act.
Forward-looking statements contained herein include plans and objectives
of management for future operations, including plans and objectives relating
to the products, marketing, customers, product line expansions, manufacturing
process and potential acquisitions. These forward-looking statements involve
risks and uncertainties and are based on certain assumptions that may not be
realized. Actual results and outcomes may differ materially from those
discussed or anticipated. The forward-looking statements and associated risks
set forth herein and elsewhere in this filing relate to: (i) the Company's
expectation that it will be able to continue to increase net sales of table
products and expand its share of the market for lightweight, durable, folding
leg tables, (ii) the Company's anticipation that it will be able to attract
new customers, (iii) the Company's intentions to expand into new markets,(iv)
the Company's expectation that it will be able to consummate acquisitions, (v)
the Company's ability to locate and consummate acquisitions of product lines
or companies on terms acceptable to the Company and integrate such
acquisitions into the Company's operations following consummation thereof,
(vi) the Company's expectations that it will be able to successfully address
any issues relating to the Year 2000 problem, including (a) the Company's
ability to timely and adequately test its systems affected by the Year 2000
problem, and (b) the Company's ability to remedy the material Year 2000
problems in the early part of 1999 and remedy such problems in a manner that
will not materially affect the Company's financial condition or results of
operations, (vii) the Company's intention to expand and introduce new product
lines to existing customers, and (viii) the Company's expectation that it will
be able to expand into new market segments by developing new products or
acquiring other products or businesses in such segments.
<PAGE> 14
All forward-looking statements involve predictions and are subject to
known and unknown risks and uncertainties, including, without limitation,
those discussed below as well as general economic and business conditions,
that could cause actual results to differ materially from historical earnings
and those presently anticipated or projected. Readers should not place undue
reliance on any such forward-looking statements, which speak only as of the
date made. The considerations listed below and elsewhere in this filing could
affect the Company's financial performance and could cause the Company's
actual results for future periods to differ materially from any views or
statements expressed with respect to future periods. Important factors and
risks that might cause such differences, include, but are not limited to (a)
lower than expected revenue, revenue growth and cash flow from operations
because of adverse economic or business conditions or the Company's inability,
for any reason, to introduce new products or implement its marketing
strategies, (b) management's ability to manage effectively the Company's
growth, (c) the Company's ability to expand successfully into new markets, (d)
import restrictions and economic conditions in the Company's foreign markets,
(e) increased competition in the Company's existing and future markets, (f)
increased expenditures required to address the Year 2000 issue and a material
adverse impact on the Company's material suppliers, customers or manufacturing
partners resulting from the Year 2000 problem, (g) the market's acceptance of
additional products such as multi-purpose room furniture, (h) the Company's
ability to maintain relatively low cost labor rates in a period of lower
unemployment, (i) the Company's ability to source acceptable raw materials at
current prices, (j) increased product warranty service costs if warranty
claims increase as a result of the Company's new manufacturing bonding process
or for any other reason, (k) the Company's ability to refine and enhance the
quality and productivity of its manufacturing process, (l) the Company's
ability to manufacture and market at current margins high quality, high
performance products at competitive prices, and (m) the Company's ability to
locate and consummate acquisitions of complementary product lines or companies
on terms acceptable to the Company and integrate such acquisitions into the
Company's operations.
In light of the significant uncertainties inherent in forward-looking
statements, 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. The Company disclaims any obligation or
intent to update any such factors or forward-looking statements to reflect
future events or developments.
<PAGE> 15
PART II: OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
An Annual Meeting of the shareholders of Mity-Lite, Inc. was held on
August 20, 1998. At the Annual Meeting, Gregory L. Wilson, Ralph E. Crump,
Peter Najar and C. Lewis Wilson were elected to serve as directors of the
Company until the next annual meeting or until their successors are elected.
The results of the voting were as follows:
Shares Shares Shares
Voted in Favor Withheld Not Voted
-------------- -------- ---------
Gregory L. Wilson 3,034,955 16,076 208,903
Ralph E. Crump 3,035,055 15,976 208,903
Peter Najar 3,034,855 16,176 208,903
C. Lewis Wilson 3,035,055 15,976 208,903
In addition, the shareholders approved an amendment to the Company's 1997
Stock Incentive Plan increasing the number of shares reserved for issuance
upon exercise of stock options granted thereunder to 500,000. The 1997 Stock
Incentive Plan provides for the grant to directors, officers, consultants and
employees of the Company and its affiliates of incentive stock options
("ISO's"), non-qualified stock options ("NQSO's"), awards of Company stock
("Awards"), and direct purchases of Company stock ("Purchases"). 2,853,415
shares were voted in favor of adopting the plan, 175,971 shares were voted
against adopting the plan, 21,645 shares abstained, and 208,903 shares were
not voted.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
11 Computation of Net Income per Share
27 Financial Data Schedule
(b) None
<PAGE> 16
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: November 11, 1998 /s/ Gregory L. Wilson
-------------------------------------
Gregory L. Wilson
Chairman of the Board, President,
and Director (Principal Executive
Officer)
Date: November 11, 1998 /s/ Bradley T Nielson
-------------------------------------
Bradley T Nielson
Chief Financial Officer
(Principal Financial and Accounting
Officer)
<TABLE>
<CAPTION>
Three months ended Six months ended
September 30, September 30,
1998 1997 1998 1997
---------- --------- ---------- ----------
<S> <C> <C> <C> <C>
Net income as reported . . . . $1,061,000 $984,000 $2,060,000 $1,770,000
========== ========= ========== ==========
BASIC:
Weighted average number of
common shares outstanding 3,261,350 3,219,591 3,264,601 3,204,895
========== ========= ========== ==========
Basic net income per share. $0.33 $0.31 $0.63 $0.55
========== ========= ========== ==========
DILUTED:
Common and common equivalent shares
outstanding:
Weighted average number of
common shares outstanding 3,261,350 3,219,591 3,264,601 3,204,895
Common stock equivalents from
options computed on the
treasury-stock method using
the average fair market
value of common stock
outstanding during the
period . . . . . . . . . 124,499 165,299 135,423 157,639
---------- --------- ---------- ----------
Shares used in the
computation. . . . . . . 3,385,799 3,384,890 3,400,024 3,362,534
========== ========= ========== ==========
Diluted net income per
share. . . . . . . . . . . $0.31 $0.29 $0.61 $0.53
========== ========= ========== ==========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Balance Sheet at September 30, 1998 (unaudited) and Statements of Income for
the three months ended September 30, 1998 (unaudited) and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> SEP-30-1998
<CASH> 10,719,000
<SECURITIES> 1,398,000
<RECEIVABLES> 3,294,000
<ALLOWANCES> 252,000
<INVENTORY> 883,000
<CURRENT-ASSETS> 16,343,000
<PP&E> 3,781,000
<DEPRECIATION> (1,872,000)
<TOTAL-ASSETS> 20,624,000
<CURRENT-LIABILITIES> 1,679,000
<BONDS> 0
0
0
<COMMON> 7,850,000
<OTHER-SE> 10,910,000
<TOTAL-LIABILITY-AND-EQUITY> 20,624,000
<SALES> 7,361,000
<TOTAL-REVENUES> 7,361,000
<CGS> 4,546,000
<TOTAL-COSTS> 4,546,000
<OTHER-EXPENSES> 1,391,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,684,000
<INCOME-TAX> 623,000
<INCOME-CONTINUING> 1,061,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,061,000
<EPS-PRIMARY> .33
<EPS-DILUTED> .31
</TABLE>
