<PAGE> 1
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U.S. Securities and Exchange Commission
Washington, D.C. 20549
------------------------------------------------------------
Form 10-Q
(Mark One)
[ x ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2000
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-23898
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MITY ENTERPRISES, INC.
(Exact name of registrant 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)
Registrant's telephone number: (801) 224-0589
Mity-Lite, Inc.
(Former name, former address and former fiscal year, if changed since last
report)
------------------------------------------------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such
filing requirements for the past 90 days. Yes x No
There were 5,077,823 shares of the registrant's Common Stock, par value
$.01
per share, outstanding on November 14, 2000.
<PAGE> 2
PART I: FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MITY ENTERPRISES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
September 30, March 31,
ASSETS 2000 2000
------------ ------------
Current assets:
Cash and cash equivalents. . . . . . . . $ 781,000 $ 6,141,000
Accounts receivable, less allowances of
$1,416,000 at September 30, 2000 and
$1,179,000 at March 31, 2000 . . . . . 12,121,000 9,393,000
Inventories. . . . . . . . . . . . . . . 5,528,000 1,410,000
Prepaid expenses and other current
assets . . . . . . . . . . . . . . . . 2,864,000 1,152,000
Deferred income taxes, current . . . . . 1,019,000 234,000
------------ ------------
Total current assets . . . . . . . . . . . . 22,313,000 18,330,000
Property and equipment, net. . . . . . . . . 7,284,000 4,169,000
Investment in affiliate. . . . . . . . . . . -- 1,672,000
Note receivable from affiliate . . . . . . . 14,000 2,127,000
Deferred income taxes. . . . . . . . . . . . 479,000 --
Intangible assets, net . . . . . . . . . . . 4,283,000 3,134,000
------------ ------------
Total assets . . . . . . . . . . . . . . . . $34,373,000 $29,432,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Bank line of credit. . . . . . . . . . . $ 1,049,000 $ 319,000
Accounts payable . . . . . . . . . . . . 2,744,000 2,227,000
Accrued expenses and other current
liabilities. . . . . . . . . . . . . . 2,742,000 2,210,000
------------ ------------
Total current liabilities. . . . . . . . . . 6,535,000 4,756,000
Deferred income tax liabilities. . . . . . . -- 291,000
------------ ------------
Total liabilities. . . . . . . . . . . . . . 6,535,000 5,047,000
COMMITMENTS AND CONTINGENCIES. . . . . . . . -- --
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 5,074,039 at September
30, 2000 and 4,823,582 at March 31, 2000 51,000 48,000
Additional paid-in capital . . . . . . . 11,621,000 8,015,000
Retained earnings. . . . . . . . . . . . 16,105,000 16,187,000
Accumulated other comprehensive income . 61,000 135,000
------------ ------------
Total stockholders' equity . . . . . . . . 27,838,000 24,385,000
------------ ------------
Total liabilities and stockholders' equity . $34,373,000 $29,432,000
============ ============
See accompanying notes to unaudited condensed consolidated
financial statements.
<PAGE> 3
MITY ENTERPRISES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
THREE MONTHS ENDED SEPT. 30,
-----------------------------
2000 1999
------------ ------------
Net sales . . . . . . . . . . . . . . . . . . $14,882,000 $10,979,000
Cost of products sold . . . . . . . . . . . . 11,113,000 6,419,000
------------ ------------
Gross profit. . . . . . . . . . . . . . . . . 3,769,000 4,560,000
Expenses:
Selling . . . . . . . . . . . . . . . . . 2,629,000 1,721,000
General and administrative. . . . . . . . 1,019,000 827,000
Research and development. . . . . . . . . 315,000 223,000
------------ ------------
Total expenses. . . . . . . . . . . . . . . . 3,963,000 2,771,000
------------ ------------
Income (loss) from operations . . . . . . . . (194,000) 1,789,000
Other income (expense):
Interest expense. . . . . . . . . . . . . (19,000) (7,000)
Interest income . . . . . . . . . . . . . 1,000 156,000
Equity in income of affiliate . . . . . . -- 29,000
Other . . . . . . . . . . . . . . . . . . (1,000) 1,000
------------ ------------
Total other income (expense). . . . . . . . . (19,000) 179,000
------------ ------------
Income (loss) before provision for income
taxes . . . . . . . . . . . . . . . . . . . (213,000) 1,968,000
Income tax expense (benefit). . . . . . . . . (95,000) 733,000
------------ ------------
Net income (loss) . . . . . . . . . . . . . . $ (118,000) $ 1,235,000
============ ============
Basic earnings (loss) per share . . . . . . . $ (0.02) $ 0.26
============ ============
Weighted average number of common
shares - basic. . . . . . . . . . . . . . . 5,074,039 4,809,989
============ ============
Diluted earnings (loss) per share . . . . . . $ (0.02) $ 0.24
============ ============
Weighted average common and common
equivalent shares - diluted . . . . . . . 5,213,106 5,134,128
============ ============
See accompanying notes to unaudited condensed consolidated
financial statements.
<PAGE> 4
MITY ENTERPRISES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
SIX MONTHS ENDED SEPT. 30,
-----------------------------
2000 1999
------------ ------------
Net sales . . . . . . . . . . . . . . . . . . $31,443,000 $22,202,000
Cost of products sold . . . . . . . . . . . . 23,168,000 13,378,000
------------ ------------
Gross profit. . . . . . . . . . . . . . . . . 8,275,000 8,824,000
Expenses:
Selling . . . . . . . . . . . . . . . . . 5,234,000 3,699,000
General and administrative. . . . . . . . 1,968,000 1,447,000
Research and development. . . . . . . . . 573,000 458,000
------------ ------------
Total expenses. . . . . . . . . . . . . . . . 7,775,000 5,604,000
------------ ------------
Income from operations. . . . . . . . . . . . 500,000 3,220,000
Other income (expense):
Interest expense. . . . . . . . . . . . . (40,000) (15,000)
Interest income . . . . . . . . . . . . . 24,000 220,000
Equity in income of affiliate . . . . . . -- 171,000
Other . . . . . . . . . . . . . . . . . . 8,000 (8,000)
------------ ------------
Total other income (expense). . . . . . . . . (8,000) 368,000
------------ ------------
Income before provision for income taxes. . . 492,000 3,588,000
Income tax expense. . . . . . . . . . . . . . 179,000 1,337,000
------------ ------------
Net income. . . . . . . . . . . . . . . . . . $ 313,000 $ 2,251,000
============ ============
Basic earnings per share. . . . . . . . . . . $ 0.06 $ 0.47
============ ============
Weighted average number of common
shares - basic. . . . . . . . . . . . . . . 5,072,103 4,805,199
============ ============
Diluted earnings per share. . . . . . . . . . $ 0.06 $ 0.44
============ ============
Weighted average common and common
equivalent shares - diluted . . . . . . . 5,252,452 5,077,034
============ ============
See accompanying notes to unaudited condensed consolidated
financial statements.
<PAGE> 5
MITY ENTERPRISES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
SIX MONTHS ENDED SEPT. 30,
---------------------------
2000 1999
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income . . . . . . . . . . . . . . . . . . . $ 313,000 $ 2,251,000
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization. . . . . . . . 709,000 417,000
Deferred tax expense (benefit) . . . . . . . (35,000) 36,000
Equity in income of affiliate. . . . . . . . -- (171,000)
Gain on disposal of equipment. . . . . . . . (1,000) (1,000)
Tax benefit from exercise of stock options . 633,000 11,000
Changes in assets and liabilities (net of
effects from purchase of CenterCore and DO
Group):
Accounts receivable. . . . . . . . . . . . 868,000 (712,000)
Inventories. . . . . . . . . . . . . . . . 365,000 61,000
Prepaid expenses and other current assets (1,630,000) (92,000)
Accounts payable . . . . . . . . . . . . . (1,384,000) 149,000
Accrued expenses and other current
liabilities . . . . . . . . . . . . . . . (1,620,000) (45,000)
------------ ------------
Net cash provided by (used in) operating
activities . . . . . . . . . . . . . . . . . . (1,782,000) 1,904,000
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of available-for-sale securities . . . -- (1,716,000)
Sales of available-for-sale securities . . . . . -- 3,645,000
Proceeds from sales of property & equipment. . . 2,000 259,000
Purchases of property and equipment. . . . . . . (1,536,000) (1,504,000)
Decrease in note receivable from affiliate . . . 8,000 17,000
Cash received from affiliate . . . . . . . . . . -- 53,000
Increase in acquisition advances . . . . . . . . -- (158,000)
Purchase of CenterCore, (net of cash acquired) . -- (5,349,000)
Purchase of DO Group, (net of cash acquired) . . (2,127,000) --
------------ ------------
Net cash used in investing activities. . . . . . (3,653,000) (4,753,000)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from exercise of stock options. . . 2,353,000 118,000
Purchase and retirement of common stock. . . . . (449,000) (601,000)
Increase (decrease) in bank line of credit . . . (1,775,000) 141,000
Decrease in long term debt . . . . . . . . . . . (53,000) (146,000)
------------ ------------
Net cash provided by (used in) financing
activities . . . . . . . . . . . . . . . . . . 76,000 (488,000)
------------ ------------
Effect of exchange rate changes on cash. . . . . (1,000) 1,000
------------ ------------
Net decrease in cash and cash equivalents. . . . (5,360,000) (3,336,000)
Cash and cash equivalents at beginning of period 6,141,000 8,029,000
------------ ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD . . . $ 781,000 $ 4,693,000
============ ============
See accompanying notes to unaudited condensed consolidated
financial statements.
<PAGE> 6
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Six months ended Sept. 30,
-----------------------------
2000 1999
------------ ------------
Cash paid during the period for
income taxes $962,000 $1,369,000
Cash paid during the period for interest 35,000 15,000
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
In April of 1999, the Company acquired certain assets and obligations of The
CenterCore Group, Inc. for $5,342,000. The fair value of the assets acquired
was
$3,767,000. The cost in excess of the fair value was $2,063,000. The
resulting
liabilities assumed totaled $488,000.
In April of 2000, the Company acquired the remaining 50.1 percent interest in
the
DO Group, Inc. for $2,127,000 in cash and approximately 41,000 shares of Mity-
Lite common stock valued at the date of purchase at $677,000. These amounts,
when added to Mity-Lite's previous net investment of $1,413,000, brought MITY
Enterprises' total investment to $4,217,000. The fair value of the assets
acquired was $12,101,000. The cost in excess of fair value of the assets was
$1,376,000. The resulting liabilities assumed totaled $9,260,000.
See accompanying notes to unaudited condensed consolidated
financial statements.
<PAGE> 7
MITY ENTERPRISES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. BASIS OF PRESENTATION
Interim Period Accounting Policies
In the opinion of the Company's management, the accompanying unaudited
condensed consolidated financial statements contain all normal recurring
adjustments necessary to present fairly the Company's financial position and
results of operations for the interim period. Results of operations for the
three months and six months ended September 30, 2000 are not necessarily
indicative of results to be expected for the full fiscal year ending March 31,
2001.
The accompanying unaudited condensed consolidated financial statements
have
been prepared in accordance with generally accepted accounting principles for
interim financial statements. Although the Company believes that the
disclosures
in these unaudited condensed consolidated financial statements are adequate to
make the information presented for the interim periods not misleading, certain
information and footnote information normally included in annual consolidated
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 consolidated financial
statements included in the Company's annual report to shareholders for the
fiscal
year ended March 31, 2000. Certain amounts in prior period financial
statements
have been reclassified to conform with current period presentations.
2. INVENTORIES
Inventories consisted of the following:
Sept. 30, March 31,
2000 2000
------------ -------------
Materials and supplies . . . . $ 4,391,000 $ 866,000
Work-in-progress . . . . . . . 665,000 170,000
Finished goods . . . . . . . . 472,000 374,000
------------ ------------
$ 5,528,000 $ 1,410,000
============ ============
<PAGE> 8
3. RECENTLY ISSUED FINANCIAL ACCOUNTING STANDARDS
On July 7, 1999, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 137, "Accounting for
Derivative Instruments and Hedging Activities-Deferral of the Effective Date
of
FASB Statement No. 133," an amendment of FASB Statement No. 133, which
establishes accounting and reporting standards for derivative instruments and
hedging activities and 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. SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," 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 SFAS's previously issued. SFAS No. 133, as amended
by
SFAS No. 137, is effective for all quarterly and annual financial statements
of
fiscal years beginning after June 15, 2000. Management does not believe this
statement will have a significant impact on the Company.
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition in Financial
Statements." SAB 101 provides guidance on applying generally accepted
accounting
principles to revenue recognition issues in financial statements. The Company
is required to adopt SAB 101 in the fourth quarter of fiscal 2001. Management
is
evaluating the effect of SAB 101 on the Company's results of operations and
financial position.
4. RECENT ACQUISITIONS
On April 9, 1999, the Company acquired certain assets and obligations of
The
CenterCore Group, Inc. ("CenterCore"), a privately-owned designer,
manufacturer
and marketer of call center furniture, through a bank foreclosure.
Two wholly-owned subsidiaries of MITY Enterprises completed the
transactions. C Core, Inc., a Utah corporation, purchased the accounts
receivable, inventory, machinery and equipment, intellectual property and
certain
other assets of The CenterCore Group, Inc. for an estimated $5.3 million. C
Core
designs and markets call center furniture under the CenterCore name. Product
manufacturing has been transitioned to DO Group, Inc., a wholly-owned
subsidiary
of the Company. Included in the Company's prepaid expenses and other current
assets as of September 30, 2000 are $0.85 million in advances related to the
CenterCore acquisition. In October 2000, the Company entered into an
agreement
with CenterCore which finalized the purchase price related to the acquisition.
As a result, the Company was reimbursed approximately $0.96 million from funds
which had escrowed as part of the original purchase agreements, thereby paying
off the $0.85 million in advances related to the CenterCore acquisition.
BOCCC, Inc., also a Utah corporation and wholly-owned subsidiary of the
Company, purchased the outstanding subordinated debt obligations of CenterCore
for $0.50 million. The outstanding subordinated debt obligations of
CenterCore
totaled approximately $2.0 million at closing. Cash from the Company's
general
working capital was used to fund the purchases. The final allocation of the
purchase price resulted in approximately $2.1 million of goodwill.
<PAGE> 9
On April 1, 2000, MITY Enterprises acquired the remaining 50.1 percent
interest in the DO Group, Inc., a privately-held manufacturer of office
seating
and office panel systems headquartered in Elkhart, Indiana. DO Group markets
its
products under the Domore, DO3, JG, and Corel trade names.
MITY Enterprises exchanged approximately $2.1 million cash and 41,000
shares
of MITY Enterprises common stock valued at approximately $677,000 for the
remaining 50.1 percent of DO Group stock from the DO Group shareholders. In
addition, MITY Enterprises assumed approximately $2.5 million in a revolving
credit line. The acquisition has been treated for accounting purposes as a
step
acquisition. DO Group, Inc. has become a wholly-owned subsidiary of MITY
Enterprises, Inc. Cash from the Company's general working capital was used to
fund the purchase.
In conjunction with the DO Group acquisition, the Company merged C Core,
Inc. with DO Group, Inc. The new subsidiary retained the DO Group, Inc. name.
Both DO Group and C Core produce office systems in a shared manufacturing
facility in Marked Tree, Arkansas.
On April 1, 2000, the Company also created a new corporation called MLI
Acquisition, Inc. With the exception of cash, real property, certain deferred
tax obligations, and investments in and notes receivable from subsidiaries,
all
of the assets and liabilities of MITY Enterprises, Inc. (formerly known as
Mity-
Lite, Inc.) were transferred to MLI Acquisition, Inc. MLI Acquisition, Inc.
has
become the operating company for the multipurpose furniture operations and is
a
wholly-owned subsidiary of the Company. The Company intends to change the
name
of MLI Acquisition, Inc. to Mity-Lite, Inc. in the near future.
The unaudited pro forma results of operations of the Company for the
three
months and six months ended September 30, 2000 and 1999 (assuming the
acquisition
of DO Group, Inc. had occurred as of April 1, 1999) are as follows:
THREE MONTHS ENDED SEPT. 30,
------------------------------
2000 1999
------------ -------------
Net sales . . . . . . . . . . . . . . . . . . $14,882,000 $13,502,000
Net income. . . . . . . . . . . . . . . . . . (118,000) 1,163,000
Basic earnings per share. . . . . . . . . . . (0.02) 0.24
Diluted earnings per share. . . . . . . . . . (0.02) 0.22
SIX MONTHS ENDED SEPT. 30,
------------------------------
2000 1999
------------ -------------
Net sales . . . . . . . . . . . . . . . . . . $31,443,000 $27,416,000
Net income. . . . . . . . . . . . . . . . . . 313,000 2,254,000
Basic earnings per share. . . . . . . . . . . 0.06 0.47
Diluted earnings per share. . . . . . . . . . 0.06 0.44
<PAGE> 10
5. OTHER COMPREHENSIVE INCOME
The Company adopted SFAS No. 130, "Reporting Comprehensive Income,"
effective April 1, 1998, the beginning of its 1999 fiscal year. SFAS No. 130
establishes standards for reporting and display of comprehensive income and
its
components (revenues, expenses, gains, and losses) in a full set of general
purpose financial statements. The Company's other comprehensive income
consists
of foreign currency adjustments and unrealized gains and losses on
available-for-
sale securities. For the six months ended September 30, 2000, net income
exceeded comprehensive income by $74,000 related to foreign currency
adjustments
and unrealized gains and losses on available-for-sale securities. For the six
months ended September 30, 1999, comprehensive income exceeded net income by
$61,000. Of this amount, $(3,000) was related to a holding loss on available-
for-sale securities, and $64,000 was related to foreign currency adjustments.
6. BUSINESS SEGMENT INFORMATION
The Company adopted SFAS No. 131, "Disclosure about Segments of an
Enterprise and Related Information," effective with its 1999 fiscal year
beginning April 1, 1998. Management views the Company as being two business
segments: institutional furniture and healthcare seating with the former being
the principal business segment. The institutional furniture business segment
manufactures and markets lightweight, durable, folding leg tables, stacking
chairs, folding chairs, specialty office systems and seating, and other
related
products. The Company's healthcare seating segment manufactures and markets
healthcare chairs and related products. The Company's healthcare seating
segment
represents all of the Company's foreign based sales.
Reportable segment data reconciled to the consolidated financial
statements
for the six months ended September 30, 2000 and 1999 is as follows:
SIX MONTHS ENDED SEPT. 30,
-----------------------------
2000 1999
------------ ------------
Net sales:
Institutional furniture $29,340,000 $20,618,000
Healthcare seating 2,103,000 1,584,000
----------- -----------
$31,443,000 $22,202,000
=========== ===========
Income from operations:
Institutional furniture $ 84,000 $ 3,089,000
Healthcare seating 416,000 131,000
----------- -----------
$ 500,000 $ 3,220,000
=========== ===========
Total assets:
Institutional furniture $31,350,000 $22,923,000
Healthcare seating 3,023,000 3,018,000
----------- -----------
$34,373,000 $25,941,000
=========== ===========
<PAGE> 11
Depreciation & amortization expense:
Institutional furniture $ 624,000 $ 333,000
Healthcare seating 85,000 84,000
----------- -----------
$ 709,000 $ 417,000
=========== ===========
Capital expenditures, net:
Institutional furniture $ 1,493,000 $ 1,491,000
Healthcare seating 43,000 13,000
----------- -----------
$ 1,536,000 $ 1,504,000
=========== ===========
7. COMPUTATION OF NET INCOME PER SHARE
The following is the Company's reconciliation of basic and diluted net
income per share for the three and six months ended September 30, 2000 and
1999
respectively.
Three months ended Six months ended
September 30, September 30,
-------------------- --------------------
2000 1999 2000 1999
---------- ---------- --------- ----------
Net income as reported . . . . . $ (118,000)$1,235,000 $ 313,000 $2,251,000
========= ========= ========= =========
BASIC:
Weighted average number of
common shares outstanding. . 5,074,039 4,809,989 5,072,103 4,805,199
========= ========= ========= =========
Basic net income per share . . . $(0.02) $ 0.26 $ 0.06 $ 0.47
========= ========= ========= =========
DILUTED:
Common and common equivalent shares
outstanding:
Weighted average number of
common shares outstanding. . 5,074,039 4,809,989 5,072,103 4,805,199
Common stock equivalents from
options computed on the
treasury-stock method using
the average fair market
value of common stock
outstanding during the
period . . . . . . . . . . . 139,067 324,139 180,349 271,835
--------- --------- --------- ---------
Shares used in the
computation. . . . . . . . . 5,213,106 5,134,128 5,252,452 5,077,034
========= ========= ========= =========
Diluted net income per share . . $(0.02) $ 0.24 $ 0.06 $ 0.44
========= ========= ========= =========
<PAGE> 12
8. DO GROUP, INC. SUBSIDIARY
The Office Systems division of DO Group, Inc. has experienced various
operational challenges. Most of these challenges relate to the Company's
office
systems division located in Marked Tree, Arkansas. Material costs for the
office
systems division increased as a percent of sales primarily because of
outsourcing
of component fabrication, increasing obsolescence reserves, increasing
customer
services costs, and lower material order quantities. Small component orders
have
been more expensive than large productions runs might have been. Labor costs
as
a percentage of net sales have increased primarily because of operational
inefficiencies, lower sales volumes, and increased customer service costs
related
to completing incomplete orders, replacing freight damaged products, and
resolving customer complaints. Overhead costs have increased both as a
percentage of sales and in the aggregate primarily because of lower sales
volumes, higher freight costs and higher personnel costs resulting from these
operational difficulties. The average sales prices of the Company's products
have declined during the last six months as a result of discounting on a few
large orders and offering some limited customer service discounts. In
addition,
the operation's management information systems have not yet been adequately
implemented to fully support the operations. The operational inefficiencies,
information system problems, and their related costs have significantly and
adversely impacted the Company's gross margin and customer service levels. As
a result, the Office System division has been expediting incoming materials
and
product shipments to customers, shipping orders late and sometimes incomplete,
incurring additional warranty and customer services costs, and generally
incurring additional costs as a result of the inefficiencies. Because of
these
problems, DO Group's sales have declined and losses have grown.
During the quarter ended June 30, 2000, the Company began the process of
restructuring the DO Group management team and implementing information system
policies and controls which the Company believes will better allow it to
control
and manage the Office Systems operations. The changes and improvements being
made are ongoing and will likely continue for at least the next several
months.
Because of the problems described above, the Office System division has lost
some
customer orders and its sales base has deteriorated. Traditionally, the
Company
has experienced strong order volume in its General Service Administration
(GSA)
or government market segment during its second fiscal quarter each year,
especially from Europe and Asia. During the quarter ended September 30, 1999,
the Company booked approximately $3.2 million in the GSA markets. During the
current fiscal quarter, GSA orders were less than $0.6 million, with limited
orders coming from Europe and Asia. In addition, one of the Company's major
OEM
customers, which historically has purchased approximately $2 million annually
from the Company, is implementing product design changes. These changes have
caused this customer to delay further purchases until the design is complete.
The Company is in the process of renegotiating the contract for the new
product
design and believes it will be successful in obtaining the contract. However,
the Company cannot guarantee that it will be successful in obtaining the new
contract.
<PAGE> 13
Since acquiring and taking over the direct management of the DO Group
subsidiary, the Company has worked to identify and resolve operational and
other
problems. The Company has taken action to reduce the amount of losses being
incurred at its DO Group subsidiary by reducing personnel costs through
layoffs.
The Company has devoted additional management as well as outside consulting
resources to the resolution of these problems. In spite of these cutbacks and
other management initiatives, the DO Group subsidiary continues to sustain
losses. The changes and improvements being made in the DO Group subsidiary
are
ongoing and will likely continue for at least the next several months. The
Company cannot assure that management will be successful in turning around the
operations and restoring the Office System division's customer base. In light
of this, the Company is currently actively evaluating all strategic
alternatives
related to the Office Systems division. While the Company is working
diligently
to correct these operational problems, the Company has not yet decided to
pursue
a specific strategic alternative.
<PAGE> 14
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
The Company designs and manufactures institutional furniture and markets
these products in niche markets. The Company's product lines consist of
multipurpose room furniture, healthcare seating, call center furniture,
specialty
office seating, office systems and dispatch furniture.
The Company's multipurpose room furniture is marketed under the Mity-Lite
trade name and consists of lightweight, durable, folding leg tables, stacking
chairs, folding chairs, and other related products. These products are used
in
multipurpose rooms of educational, recreational, hotel and hospitality,
government, office, healthcare, religious and other public assembly
facilities.
The Company's stacking chairs are marketed under the MityTuff(R),
MityStack(TM),
and MityHost(TM) trade names. Some of these chairs are distributed by
Mity-Lite
under original equipment manufacturer (OEM) arrangements with other chair
manufacturers, while others are manufactured and/or assembled in the Company's
Orem, Utah facility. In November 1999, the Company introduced a new line of
folding chairs. This chair line is manufactured in-house and is marketed
under
the SwiftSet(TM) trade name. Historically, the multipurpose room operation's
growth has come from an expanding base of new customers and from increasing
sales
to existing customers in this segment of the business. The multipurpose room
operation's current and future growth is largely dependent upon its ability to
successfully introduce and market new product lines of multipurpose room
furniture such as chairs, staging, flooring, partitions, podiums, risers and
bench seating and its ability to continue increasing its market penetration
into
existing markets.
The Company's healthcare seating operations were acquired in November
1998.
The Company acquired all of the outstanding stock of Broda Enterprises Inc.
for
$2.5 million. Broda's products are marketed under the Broda(TM) trade name
primarily in the Canadian and U.S. markets. Its operations are based in
Waterloo, Ontario, Canada.
On April 9, 1999, the Company acquired certain assets and obligations of
The
CenterCore Group, Inc. ("CenterCore"), a privately-owned designer,
manufacturer
and marketer of pod style and panel systems furniture marketed to call centers
and other high density office use environments. Two wholly-owned subsidiaries
of MITY Enterprises completed the transactions. C Core, Inc., a Utah
corporation
("C Core"), purchased the accounts receivable, inventory, machinery and
equipment, intellectual property and certain other assets of The CenterCore
Group, Inc. for approximately $5.3 million. C Core designs and markets call
center and panel systems furniture under the CenterCore name. Product
manufacturing was transitioned to DO Group, Inc., a wholly-owned subsidiary of
the Company.
BOCCC, Inc., also a Utah corporation and wholly-owned subsidiary of the
Company, purchased the outstanding subordinated debt obligations of CenterCore
for $0.5 million. The outstanding subordinated debt obligations of CenterCore
totaled approximately $2.0 million at closing. Cash from the Company's
general
working capital was used to fund the purchases.
<PAGE> 15
Effective April 1, 2000, the Company acquired the remaining 50.1 percent
equity interest in DO Group, Inc. making DO Group, Inc. a wholly-owned
subsidiary
of the Company. DO Group, Inc., headquartered in Elkhart, Indiana,
manufactures
specialty office seating and office panel systems. DO Group markets its
products
under the Domore(TM), Corel(TM), JG(TM) and DO3(TM) trade names and has
manufacturing facilities in Elkhart, Indiana and Marked Tree, Arkansas.
MITY Enterprises exchanged approximately $2.1 million cash and 41,000
shares
of MITY Enterprises common stock valued at $677,000 to purchase the remaining
50.1 percent of DO Group stock from the DO Group shareholders. In addition,
MITY
Enterprises assumed approximately $2.5 million in a revolving credit line.
The
acquisition was treated for accounting purposes as a step acquisition. DO
Group,
Inc. has become a wholly-owned subsidiary of MITY Enterprises, Inc. Cash from
the Company's general working capital was used to fund the purchase. The
significant increases in accounts receivable and inventories as compared to
the
balances at March 31, 2000 are a direct result of this acquisition.
In conjunction with the DO Group acquisition, the Company merged C Core,
Inc. with DO Group, Inc. The new subsidiary retained the DO Group, Inc. name.
Both DO Group and C Core produce office systems in a shared manufacturing
facility in Marked Tree, Arkansas ("Office Systems Division").
The Office Systems Division located in Marked Tree, Arkansas has
experienced
various operational challenges. Material costs for the Office Systems
Division
increased as a percent of sales primarily because of outsourcing of component
fabrication, increasing obsolescence reserves, increasing customer services
costs, and lower material order quantities. Small component orders have been
more expensive than large productions runs might have been. Labor costs as a
percentage of net sales have increased primarily because of operational
inefficiencies, lower sales volumes, and increased customer service costs
related
to completing incomplete orders, replacing freight damaged products, and
resolving customer complaints. Overhead costs have increased both as a
percentage of sales and in the aggregate primarily because of lower sales
volumes, higher freight costs and higher personnel costs resulting from these
operational difficulties. The average sales prices of the Company's products
have declined during the last six months as a result of discounting on a few
large orders and offering some limited customer service discounts. In
addition,
the operation's management information systems have not yet been adequately
implemented to fully support the operations. The operational inefficiencies,
information system problems, and their related costs have significantly and
adversely impacted the Company's gross margin and customer service levels. As
a result, the Office System Division has been expediting incoming materials
and
product shipments to customers, shipping orders late and sometimes incomplete,
incurring additional warranty and customer services costs, and generally
incurring additional costs as a result of the inefficiencies. Because of
these
problems, DO Group's sales have declined and losses have grown.
<PAGE> 16
During the quarter ended June 30, 2000, the Company began the process of
restructuring the DO Group management team and implementing information system
policies and controls which the Company believes will better allow it to
control
and manage the Office Systems operations. The changes and improvements being
made are ongoing and will likely continue for at least the next several
months.
Because of the problems described above, the Office System division has lost
some
customer orders and its sales base has deteriorated. Traditionally, the
Company
has experienced strong order volume in its General Service Administration
(GSA)
or government market segment during its second fiscal quarter each year,
especially from Europe and Asia. During the quarter ended September 30, 1999,
the Company booked approximately $3.2 million in the GSA markets. During the
current fiscal quarter, GSA orders were less than $0.6 million, with limited
orders coming from Europe and Asia. In addition, one of the Company's major
OEM
customers, which historically has purchased approximately $2 million annually
from the Company, is implementing product design changes. These changes have
caused this customer to delay further purchases until the design is complete.
The Company is in the process of renegotiating the contract for the new
product
design and believes it will be successful in obtaining the contract. However,
the Company cannot guarantee that it will be successful in obtaining the new
contract.
Since acquiring and taking over the direct management of the DO Group
subsidiary, the Company has worked to identify and resolve operational and
other
problems. The Company has taken action to reduce the amount of losses being
incurred at its DO Group subsidiary by reducing personnel costs through
layoffs.
The Company has devoted additional management as well as outside consulting
resources to the resolution of these problems. In spite of these cutbacks and
other management initiatives, the DO Group subsidiary continues to sustain
losses. The changes and improvements being made in the DO Group subsidiary
are
ongoing and will likely continue for at least the next several months. The
Company cannot assure that management will be successful in turning around the
operations and restoring the Office System Division's customer base. In light
of this, the Company is currently actively evaluating all strategic
alternatives
related to the Office Systems Division. While the Company is working
diligently
to correct these operational problems, the Company has not yet decided to
pursue
a specific strategic alternative.
On April 1, 2000, the Company also created a new corporation called MLI
Acquisition, Inc. With the exception of cash, real property, certain deferred
tax obligations, and investments in and notes receivable from subsidiaries,
all
of the assets and liabilities of MITY Enterprises, Inc. (formerly known as
Mity-
Lite, Inc.) were transferred to MLI Acquisition, Inc. MLI Acquisition, Inc.
has
become the operating company for the multipurpose room furniture operations
and
is a wholly-owned subsidiary of the Company. At the Annual Meeting of the
shareholders of MITY Enterprises, Inc. held on August 17, 2000, the
shareholders
of the Company approved changing the name of Mity-Lite, Inc. to MITY
Enterprises,
Inc. The Company intends to change the name of MLI Acquisition, Inc. to Mity-
Lite, Inc. in the near future.
<PAGE> 17
COMPARISON OF THE THREE MONTHS AND SIX MONTHS ENDED SEPTEMBER 30, 2000 AND
1999
NET SALES. The Company's second quarter fiscal 2001 net sales of
$14,882,000 were up 36 percent as compared with the second quarter net sales
in
the prior fiscal year. For the quarter ended September 30, 2000, the increase
reflects sales growth, as compared to the second quarter of fiscal 2000, of 15
percent in the Company's multipurpose room markets and 56 percent in the
healthcare chair market partially offset by declining sales of 12 percent in
the
office systems market related to C Core sales. Specialty office seating and
systems sales, related to the DO Group purchase, represented 15 percent of net
sales for the second quarter of fiscal 2001. The Company's total
international
sales represented 13 percent of net sales for the second quarter ended
September
30, 2000 as compared to 10 percent in the second quarter of fiscal 2000.
For the six months ended September 30, 2000, the Company's net sales of
$31,443,000 represented an increase of 42 percent over the same period in the
prior fiscal year. For the six months ended September 30, 2000, the increase
reflected sales growth, as compared to the first six months of fiscal 2000, of
15 percent in the Company's multipurpose room markets, 33 percent in the
healthcare chair market, and 6 percent in the office systems market related to
C Core sales. Specialty office seating and systems sales, related to the DO
Group purchase, represented 19 percent of net sales for the six months ended
September 30, 2000. International sales represented 13 percent of net sales
for
the six months ended September 30, 2000 as compared to 10 percent in the same
period of fiscal 2000.
GROSS PROFIT. Gross profit as a percentage of net sales decreased over
the
prior year by 17 percentage points, to 25 percent for the quarter ended
September
30, 2000. During the quarter, the Company continued to experience various
operational problems with its recently acquired DO Group subsidiary.
Specifically, the Company has experienced increasing labor, material and
overhead
costs, lower sales prices, operational inefficiencies, information system
problems, and other related costs which have significantly and adversely
impacted
the Company's gross margin and customer service levels. As a result, the
Company
has been expediting incoming materials and shipments to customers, shipping
orders late and sometimes incomplete, and generally incurring additional costs
as a result of the inefficiencies. In addition, the decrease in gross margin
included an additional inventory reserve related to its DO Group subsidiary of
$340,000 which was recorded during the quarter. The majority of the decrease
in
gross profit margins was due to these problems at the DO Group subsidiary. In
addition, the Company experienced a 5 percentage point decrease in gross
margins
in its multipurpose room products. This decrease primarily resulted from
increasing chair sales (which are sold at lower gross margins) and increasing
material, labor, freight, personnel and facility costs related to the
Company's
table sales. With increasing fuel prices and a tightening labor market, the
Company may continue to experience further pressures on its gross margins.
For reasons stated above, gross profit as a percentage of net sales
decreased over the prior year by 14 percentage points to 26 percent for the
six
month period ended September 30, 2000.
SELLING EXPENSES. Selling expenses were 18 percent of net sales in the
second quarter of fiscal 2001 as compared to 16 percent for the second quarter
of the prior fiscal year. Actual expenses increased by $908,000 or 53
percent.
The increase in actual expenses was primarily due to selling costs related to
the
recent DO Group acquisition and the mulitpurpose room operations.
Multipurpose
room furniture selling costs increased by $366,000 over the prior fiscal year.
This increase resulted from higher costs for commissions and salaries due to
the
higher sales volume, and higher trade show costs.
<PAGE> 18
Selling expenses were 17 percent of net sales in the six months ended
September 30, 2000 as compared to 17 percent for the same period in the prior
fiscal year. Actual expenses increased by $1,535,000 or 41 percent. The
increase in actual expenses was primarily due to selling costs related to the
recent DO Group acquisition and the multipurpose room operations. Health care
seating expenses decreased by $11,000 over the prior fiscal year due to lower
costs for outside commissions and advertising. Multipurpose room furniture
selling costs increased by $596,000 over the prior year. This increase
resulted
from higher costs for commissions and salaries due to the higher sales volume,
and higher trade show costs.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
were 7 percent of net sales for the second quarter of fiscal 2001 as compared
to
8 percent for the second quarter of the prior fiscal year. Actual spending
increased by 23 percent, or $192,000. The increase was mainly due to
additional
reserves for bad debt recorded in the DO Group subsidiary of $150,000 and
other
general and administrative costs associated with DO Group.
General and administrative expenses were 6 percent of net sales in the
six
months ended September 30, 2000, as compared to 7 percent for the same period
in
the prior fiscal year. Actual spending increased 36 percent, or $521,000.
The
increase was mainly due to increased general and administrative costs
associated
with DO Group including the additional bad debt reserve of $150,000.
Healthcare
seating general and administrative costs increased by $57,000 or 33 percent
due
to additional personnel related expenses.
RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses
were
2 percent of net sales for the second quarter of fiscal 2001 as compared to 2
percent for the second quarter of the prior fiscal year. Actual spending
increased by 41 percent, or $92,000. The increase was due to additional
research
and development costs associated with DO Group as well as increased personnel
costs in the multipurpose room operations. The increase was partially offset
by
lower personnel costs associated with healthcare seating.
Research and development expenses were 2 percent of net sales for the six
months ended September 30, 2000 as compared to 2 percent for the same period
of
the prior fiscal year. Actual spending increased by 25 percent, or $115,000.
The increase was due to additional research and development costs associated
with
DO Group as well as increased personnel costs in the multipurpose room
operations. The increase was partially offset by lower personnel costs
associated with healthcare seating.
OTHER INCOME AND EXPENSE. Other income and expense netted to $(19,000)
for
the second quarter of fiscal 2001. Second quarter interest income was $1,000,
a decrease of $155,000 from the second quarter of the prior fiscal year. The
decrease was due to less interest earned on the lower cash balance held in the
current fiscal year resulting from cash being used for the DO Group
acquisition
and to support operating losses at the Company's DO Group subsidiary. The
Company had interest expense of $19,000 for the second quarter of fiscal 2001
as
compared to $7,000 in the prior year's second quarter. In the second quarter
of
the prior fiscal year, the Company also recognized income of $29,000 from its
investment in DO Group, Inc. accounted for using the equity method of
accounting.
Since the Company acquired the remaining 50.1 percent interest in the DO Group
at the beginning of this fiscal year, DO Group sales and income are fully
consolidated into the Company's financial statements rather than using the
equity
method as in prior years. In addition, the Company recognized a loss of
$2,000
on currency exchange.
<PAGE> 19
Other income and expense netted to $(8,000) for the six months ended
September 30, 2000. Six month interest income was $24,000, a decrease of
$196,000 from the same period in the prior fiscal year. The Company had
interest
expense of $40,000 for the six months ended September 30, 2000 as compared to
$15,000 for the six months ended September 30, 1999. In the six months ended
September 30, 1999, the Company also recognized income of $171,000 from its
investment in DO Group, Inc. In addition, the Company recognized a gain of
$1,000 on the disposal of certain fixed assets and a gain of $6,000 on
currency
exchange.
NET INCOME. For reasons stated above, the Company's fiscal 2001 second
quarter net loss of $(118,000) decreased $1,353,000 over the second quarter
net
income in the prior fiscal year. The Company's net income of $313,000 for the
six month period ended September 30, 2000 decreased $1,938,000 over the same
period of the prior year.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents, which consist primarily of repurchase
agreements
collateralized with U.S. Treasury securities, totaled $0.78 million at
September
30, 2000 as compared to $6.14 million at March 31, 2000. The decrease in cash
and cash equivalents was due primarily to the reduction in the line of credit
($1.78 million), the DO Group acquisition ($2.13 million) in April 2000, cash
used in operating activities ($1.78 million), purchases of property and
equipment
($1.54 million), and the purchase and retirement of common stock ($0.45
million).
This decrease was partially offset by net proceeds related to the exercise of
stock options ($2.35 million).
Historically, the Company has financed its growth primarily through cash
from operations. The Company also has a revolving credit facility with Zions
First National Bank. The agreement, which expires on May 25, 2001, allows the
Company to draw up to $4.0 million under the credit facility. As of September
30, 2000, the Company had $1.05 million drawn under this facility. The
Company's
subsidiary, Broda Enterprises, also has a line of credit. The limit on this
facility is $0.67 million. As of September 30, 2000, no amount was drawn
under
this facility. Both credit facilities require the maintenance of certain
financial ratios and levels of working capital. As of September 30, 2000, the
Company is in full compliance with the loan covenants related to the Broda
Enterprises credit facility. However, as of September 30, 2000, the Company
did
not meet the minimum quarterly net income required in the Zions First National
Bank credit facility. The Company has obtained a waiver of this requirement
from
Zions First National Bank. The Company cannot assure that it will be able to
satisfy this covenant in future quarters or obtain additional waivers from its
lender. The Company's liquidity is partially dependent upon the availability
of
its credit facility.
<PAGE> 20
The Company currently believes that cash flow from its current operations
together with existing cash reserves and available lines of credit 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 have significantly increased because of the DO Group
acquisition, losses in the DO Group operations and the construction of a new
manufacturing facility, and may further increase as a result of continuing
losses
in its DO Group subsidiary. As a result of the operational challenges in the
Company's DO Group subsidiary, the Company anticipates continuing to access
the
Company's line of credit from time to time on a short term basis to meet cash
flow requirements for the business as a whole. No assurances are given as to
the
sufficiency of the Company's working capital to support the Company's
operations
particularly in light of current problems in the DO Group operations.
Substantial investment of capital and management resources will be required
regardless of the strategic alternatives pursued by the Company with respect
to
the DO Group operations. If the existing cash reserves, cash flow from
operations and debt financing are insufficient or if working capital
requirements
are greater than currently 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, 2000, the proceeds which would have
been
received by the Company upon exercise of outstanding options which were
exercisable on that date were approximately $1.3 million. There is no
assurance
that such options will be exercised.
The Company's material cash commitments at September 30, 2000 include
current liabilities of $6.54 million to be repaid from funds generated from
operations. Current liabilities consist of $1.05 million in a bank line of
credit, $2.74 million in accounts payable, $1.62 million in accrued payroll,
$0.05 million in income tax payable, $0.80 million in accrued expenses, $0.26
million in checks in excess of bank balance and $0.01 million in other
accruals.
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 2005. The Company has also entered into two lease
agreements
for Broda's production and office facilities under which it is obligated to
pay
$10,519 Canadian (approximately US $7,000) per month through August 2002. The
Company also leases a facility in Elkhart, Indiana. The Company entered into
a
five year lease agreement on April 1, 1997 with monthly payments of $11,800.
During the second quarter of fiscal 2000, the Company completed building a new
facility with office and manufacturing space. A total of $2.1 million was
spent
on the land and facility. During the second quarter, the Company also started
constructing additional manufacturing space on the new facility. As of
September
30, 2000, $0.1 million had been spent on this new addition. The Company
anticipates additional spending of approximately $0.4 million for a total of
$0.5
million in capital expenditures. These additional expenditures are
anticipated
to be completed by the end of the fourth quarter of fiscal 2001 and will be
funded with cash from operations and draws under the bank line of credit.
<PAGE> 21
FORWARD-LOOKING STATEMENTS AND FACTORS THAT MAY AFFECT FUTURE RESULTS OF
OPERATIONS
Certain statements made above in this filing 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," "plans," "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 the Company's efforts to
turnaround
the DO Group Office Systems operations, and objectives relating to the
Company's
products, marketing, customers, product line expansions, and enhancements of
the
Company's manufacturing processes. 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 quarterly report relate to: (i) references to an
expanding base of new customers and increasing sales to new customers related
to
the Company's multi-purpose room furniture operations; (ii) references to
current
and future growth in the Company's multi-purpose room operations being largely
dependent upon the Company's ability to successfully introduce and market new
product lines; (iii) statements that changes and improvements in the Company's
Do Group subsidiary are being made and continue to be made and are likely to
continue for at least the next several months; (iv) references to the
Company's
efforts to restructure management of the DO Group subsidiary; (v) statements
related to the Company's efforts to renegotiate a key contract for a major OEM
customer and the Company's belief that it will be successful in obtaining the
contract; (vi) statements relating to the Company's efforts and plans to
evaluate
all strategic alternatives related to the DO Group subsidiary and that the
Company has not yet decided to pursue a specific strategic alternative; (vii)
statements indicating that increasing fuel prices and a tightening labor
market
may continue to put pressure on the Company's gross margins; (viii) statements
relating to the Company's beliefs that cash flow from its current operations,
existing cash reserves, and available lines of credit will be sufficient to
support its working capital requirements to fund existing operations for at
least
the next twelve months; (ix) statements relating to continuing losses in the
Company's DO Group subsidiary and working capital requirements related
thereto;
(x) the Company's anticipation that it will access the Company's line of
credit
from time to time to meet the cash flow requirements for the business as a
whole;
(xi) the Company's anticipation that substantial investment of capital and
management resources will be required to improve DO Group's operations
regardless
of the strategic alternatives pursued by the Company; (xii) statements
relating
to the Company's possible need to raise additional capital if its cash flow
from
operations and debt financing are insufficient to fund the Company's working
capital requirements; and (xiii) other statements of the Company related to
the
operational difficulties in its DO Group subsidiary.
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 results 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.
<PAGE> 22
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) the inability of
management
to successfully install in a timely manner and operate adequate management
information systems in its Do Group subsidiary leading to manufacturing
inefficiencies, higher material and labor costs, lower gross margins and
profitability, inefficient or inaccurate inventory management and continuing
customer dissatisfaction; (b) the Company's inability to increase sales,
increase
consumer confidence and restore the Do Group customer base; (c) the Company's
inability to fund continuing losses in its Do Group subsidiary; (d) the
Company's
inability for any reason to pursue a satisfactory strategic alternative with
respect to the Do Group subsidiary; (e) loss of important customer contracts;
(f)
limited management and key employee resources; (g) the Company's inability to
reduce the accounts receivable and inventory balances in its Do Group
subsidiary;
(h) the Company's inability to effectively restructure Do Group's management
team; (i) declines in sales volumes and profit margins in the Company's core
businesses; (j) lower than expected revenue, revenue growth, cash flow and
gross
margins from operations because of recent acquisitions (particularly DO Group,
Inc.) and any operating and post acquisition integration challenges related
thereto, adverse economic or business conditions or the Company's inability,
for
any reason, to profitably introduce new products or implement its marketing
strategies in the healthcare seating, call center, and specialty seating and
office panel systems markets, (k) management's ability to manage effectively
the
Company's growth, (l) the Company's ability to expand successfully into new
markets such as in the healthcare seating and seating accessories, call
center,
specialty seating and office panel systems markets, (m) import restrictions
and
economic conditions in the Company's foreign markets and foreign currency
risks
associated therewith, (n) increased competition in the Company's existing and
future markets, (o) the market's acceptance of products currently being
developed
by the Company, (p) the Company's ability to maintain relatively low cost
labor
rates in a period of lower unemployment, (q) the Company's ability to source a
sufficient volume of acceptable raw materials at current prices, (r) increased
product warranty service costs if warranty claims increase as a result of the
Company's new product introductions or acquisitions or for any other reason,
(s)
the Company's ability to refine and enhance the quality and productivity of
its
manufacturing process and build its new manufacturing facility on a cost
effective and timely basis, (t) the Company's ability to manufacture and
market
at current margins high quality, high performance products at competitive
prices,
(u) the Company's ability to locate and successfully consummate and integrate
acquisitions of complementary product lines or companies on terms acceptable
to
the Company and effectively integrate such acquisitions into the Company's
operations, and (v) the continued availability of credit facilities. No
assurance can be given that the Company will be able to correct the current DO
Group, Inc. operational problems.
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> 23
PART II: OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
An Annual Meeting of the shareholders of MITY Enterprises, Inc. was held
on
August 17, 2000. 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 4,825,926 10,569 220,037
Ralph E. Crump 4,827,026 9,469 220,037
Peter Najar 4,827,776 8,719 220,037
C. Lewis Wilson 4,826,576 9,919 220,037
At the Annual Meeting of the shareholders, the shareholders voted to
change
the name of the Company from Mity-Lite, Inc. to MITY Enterprises, Inc. The
results of the voting were as follows:
Shares Shares Shares Shares
Voted in Favor Voted Against Abstained Not Voted
4,791,454 38,649 6,392 220,037
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
11.1 Computation of Net Income per Share
27 Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended
September 30, 2000.
<PAGE> 24
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 Enterprises, Inc.
Date: November 20, 2000 /s/ Gregory L. Wilson
-------------------------------------
Gregory L. Wilson
Chairman of the Board, President,
and Director (Principal Executive
Officer)
Date: November 20, 2000 /s/ Bradley T Nielson
-------------------------------------
Bradley T Nielson
Chief Financial Officer
(Principal Financial and Accounting
Officer)
