<PAGE> 1
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U.S. Securities and Exchange Commission
Washington, D.C. 20549
------------------------------------------------------------
Form 10-Q/A
(Mark One)
[ x ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 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-LITE, 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
N/A
(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 5,070,167 shares of the registrant's Common Stock, par value
$.01 per share, outstanding on August 7, 2000.
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<PAGE> 2
PART I: FINANCIAL INFORMATION
The Company hereby amends Part I of its Quarterly Report on Form 10-Q for the
fiscal quarter ended June 30, 2000 to reflect the restatement of its unaudited
condensed consolidated financial statements as of and for the three month
period ended June 30, 2000. See Note 8 to the unaudited condensed
consolidated financial statements.
<PAGE> 3
ITEM 1. FINANCIAL STATEMENTS
MITY-LITE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
JUNE 30, MARCH 31,
2000 2000
------------ ------------
ASSETS (As restated, see
Note 8)
Current assets:
Cash and cash equivalents. . . . . . . . $ 714,000 $ 6,141,000
Accounts receivable, less allowances of
$1,258,000 at June 30, 2000 and
$1,179,000 at March 31, 2000 . . . . . 13,268,000 9,393,000
Inventories. . . . . . . . . . . . . . . 6,355,000 1,410,000
Prepaid expenses and other current
assets . . . . . . . . . . . . . . . . 1,750,000 1,152,000
Deferred income taxes, current . . . . . 887,000 234,000
------------ ------------
Total current assets . . . . . . . . . . . . 22,974,000 18,330,000
Property and equipment, net. . . . . . . . . 6,780,000 4,169,000
Investment in affiliate. . . . . . . . . . . -- 1,672,000
Note receivable from affiliate . . . . . . . 14,000 2,127,000
Deferred income taxes. . . . . . . . . . . . 770,000 --
Intangible assets, net . . . . . . . . . . . 4,369,000 3,134,000
------------ ------------
Total assets . . . . . . . . . . . . . . . . $34,907,000 $29,432,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Bank line of credit. . . . . . . . . . . $ 140,000 $ 319,000
Accounts payable . . . . . . . . . . . . 2,897,000 2,227,000
Accrued expenses and other current
liabilities. . . . . . . . . . . . . . 3,930,000 2,210,000
------------ ------------
Total current liabilities. . . . . . . . . . 6,967,000 4,756,000
Deferred income tax liabilities. . . . . . . -- 291,000
------------ ------------
Total liabilities. . . . . . . . . . . . . . 6,967,000 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, 5,070,167 at June 30,
2000 and 4,823,582 at March 31, 2000 . 51,000 48,000
Additional paid-in capital . . . . . . . 11,578,000 8,015,000
Retained earnings. . . . . . . . . . . . 16,223,000 16,187,000
Accumulated other comprehensive income . 88,000 135,000
------------ ------------
Total stockholders' equity . . . . . . . . 27,940,000 24,385,000
------------ ------------
Total liabilities and stockholders' equity . $34,907,000 $29,432,000
============ ============
See accompanying notes to unaudited condensed consolidated
financial statements.
<PAGE> 4
MITY-LITE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
THREE MONTHS ENDED JUNE 30,
----------------------------
2000 1999
------------ ------------
(As restated, see
Note 8)
Net sales . . . . . . . . . . . . . . . . . . $16,561,000 $11,223,000
Cost of products sold . . . . . . . . . . . . 12,055,000 6,959,000
------------ ------------
Gross profit. . . . . . . . . . . . . . . . . 4,506,000 4,264,000
Expenses:
Selling . . . . . . . . . . . . . . . . . 2,605,000 1,978,000
General and administrative. . . . . . . . 949,000 620,000
Research and development. . . . . . . . . 258,000 235,000
------------ ------------
Total expenses. . . . . . . . . . . . . . . . 3,812,000 2,833,000
------------ ------------
Income from operations. . . . . . . . . . . . 694,000 1,431,000
Other income (expense):
Interest expense. . . . . . . . . . . . . (21,000) (8,000)
Interest income . . . . . . . . . . . . . 23,000 64,000
Equity in income of affiliate . . . . . . -- 142,000
Other . . . . . . . . . . . . . . . . . . 9,000 (9,000)
------------ ------------
Total other income. . . . . . . . . . . . . . 11,000 189,000
------------ ------------
Income before provision for income taxes. . . 705,000 1,620,000
Provision for income taxes. . . . . . . . . . 274,000 604,000
------------ ------------
Net income. . . . . . . . . . . . . . . . . . $ 431,000 $ 1,016,000
============ ============
Basic earnings per share. . . . . . . . . . . $ 0.09 $ 0.21*
============ ============
Weighted average number of common
shares - basic. . . . . . . . . . . . . . . 5,070,167 4,800,405*
============ ============
Diluted earnings per share. . . . . . . . . . $ 0.08 $ 0.20*
============ ============
Weighted average common and common
equivalent shares - diluted . . . . . . . 5,291,797 5,019,935*
============ ============
* Retroactively restated for the 3-for-2 stock split distributed September 23,
1999.
See accompanying notes to unaudited condensed consolidated
financial statements.
<PAGE> 5
MITY-LITE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
THREE MONTHS ENDED JUNE 30,
----------------------------
2000 1999
------------ ------------
(As restated, see
Note 8)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income . . . . . . . . . . . . . . . . . . . $ 431,000 $ 1,016,000
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization. . . . . . . . 354,000 205,000
Deferred tax (benefit) expense . . . . . . . (194,000) 39,000
Equity in income of affiliate. . . . . . . . -- (142,000)
Gain on disposal of equipment. . . . . . . . (1,000) (1,000)
Tax benefit from exercise of stock options 633,000 9,000
Changes in assets and liabilities (net of
effects from purchase of CenterCore and DO
Group):
Accounts receivable. . . . . . . . . . . . (269,000) (614,000)
Inventories. . . . . . . . . . . . . . . . (457,000) 36,000
Prepaid expenses and other current assets (698,000) (269,000)
Accounts payable . . . . . . . . . . . . . (1,235,000) 262,000
Accrued expenses and other current
liabilities . . . . . . . . . . . . . . . (251,000) 920,000
------------ ------------
Net cash provided by (used in) operating
activities . . . . . . . . . . . . . . . . . . (1,687,000) 1,461,000
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of available-for-sale securities . . . -- (447,000)
Sales of available-for-sale securities . . . . . -- 3,289,000
Proceeds from sales of property & equipment. . . 2,000 1,000
Purchases of property and equipment. . . . . . . (748,000) (287,000)
Decrease (increase) in note receivable from
affiliate. . . . . . . . . . . . . . . . . . . 8,000 (42,000)
Cash received from affiliate . . . . . . . . . . -- 27,000
Increase in acquisition advances . . . . . . . . -- (408,000)
Purchase of CenterCore, (net of cash acquired) . -- (5,342,000)
Purchase of DO Group, (net of cash acquired) . . (2,127,000) --
------------ ------------
Net cash used in investing activities. . . . . . (2,865,000) (3,209,000)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from exercise of stock options. . . 2,310,000 57,000
Purchase and retirement of common stock. . . . . (450,000) (601,000)
Increase (decrease) in bank line of credit . . . (2,683,000) 196,000
Decrease in long term debt . . . . . . . . . . . (52,000) (146,000)
------------ ------------
Net cash used in financing activities . . . . . (875,000) (494,000)
------------ ------------
<PAGE> 6
Effect of exchange rate changes on cash. . . . . -- 1,000
------------ ------------
Net decrease in cash and cash equivalents. . . . (5,427,000) (2,241,000)
Cash and cash equivalents at beginning of
period . . . . . . . . . . . . . . . . . . . . 6,141,000 8,029,000
------------ ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD . . . $ 714,000 $ 5,788,000
============ ============
See accompanying notes to unaudited condensed consolidated
financial statements.
<PAGE> 7
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
THREE MONTHS ENDED JUNE 30,
-----------------------------
2000 1999
------------ ------------
(As restated, see
Note 8)
Cash paid during the quarter for
income taxes $ 27,000 $221,000
Cash paid for interest 21,000 8,000
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,
brings Mity-Lite's 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> 8
MITY-LITE, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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 ended June 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 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 unaudited
condensed consolidated 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:
June 30, March 31,
2000 2000
------------ ------------
(As restated, see
Note 8)
Materials and supplies . . . . $ 4,812,000 $ 866,000
Work-in-progress . . . . . . . 877,000 170,000
Finished goods . . . . . . . . 666,000 374,000
------------ ------------
$ 6,355,000 $ 1,410,000
============ ============
<PAGE> 9
3. RECENTLY ISSUED FINANCIAL ACCOUNTING STANDARDS
On July 7, 1999, the Financial Accounting Standards Board (FASB) issued
Statement of 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.
Two wholly-owned subsidiaries of Mity-Lite 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. The final purchase
price is still being determined and will be based on final asset values at
closing. C Core will continue to design and market 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 June 30, 2000 are
$854,000 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 $500,000. The outstanding subordinated debt obligations of CenterCore
totaled approximately $2,000,000 million at closing. Cash from the Company's
general working capital was used to fund the purchases.
The preliminary allocation of the purchase price resulted in
approximately $2,063,000 of goodwill. The actual amount of goodwill recorded
will vary based on the final purchase price allocation resulting from
preacquisition contingencies related principally to post-closing purchase
price adjustments which may result from the final determination of asset
values and from any breaches of the sellers' representations, warranties or
covenants.
<PAGE> 10
On April 1, 2000, Mity-Lite 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-Lite exchanged approximately $2.1 million cash and 41,000 shares of
Mity-Lite common stock valued at $677,000 for the remaining 50.1 percent of DO
Group stock from the DO Group shareholders. In addition, Mity-Lite 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-Lite, 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 will retain 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-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 unaudited pro forma results of operations of the Company for the
three months ended June 30, 2000 and 1999 (assuming the acquisition of DO
Group, Inc. had occurred as of April 1, 1999) are as follows:
THREE MONTHS ENDED JUNE 30,
----------------------------
2000 1999
------------ ------------
(As restated, see
Note 8)
Net sales . . . . . . . . . . . . . . . . . . $16,561,000 $13,914,000
Net income. . . . . . . . . . . . . . . . . . 431,000 1,091,000
Basic earnings per share. . . . . . . . . . . 0.09 0.23
Diluted earnings per share. . . . . . . . . . 0.08 0.22
5. OTHER COMPREHENSIVE INCOME
The Company adopted SFAS 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 three months ended June 30,
2000, net income exceeded comprehensive income by $47,000 related to foreign
currency adjustments. For the three months ended June 30, 1999, comprehensive
income exceeded net income by $43,000. Of this amount, $(10,000) was related
to a holding loss on available-for-sale securities, and $53,000 was related to
foreign currency adjustments.
<PAGE> 11
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 three months ended June 30, 2000 and 1999 is as follows:
Three months ended June 30,
-----------------------------
2000 1999
------------ ------------
(As restated, see
Note 8)
Net sales:
Institutional furniture $15,599,000 $10,372,000
Healthcare seating 962,000 851,000
----------- -----------
$16,561,000 $11,223,000
=========== ===========
Income from operations:
Institutional furniture $ 530,000 $ 1,342,000
Healthcare seating 164,000 89,000
----------- -----------
$ 694,000 $ 1,431,000
=========== ===========
Total assets:
Institutional furniture $32,010,000 $22,500,000
Healthcare seating 2,897,000 3,082,000
----------- -----------
$34,907,000 $25,582,000
=========== ===========
Depreciation & amortization expense:
Institutional furniture $ 310,000 $ 163,000
Healthcare seating 44,000 42,000
----------- -----------
$ 354,000 $ 205,000
=========== ===========
Capital expenditures, net:
Institutional furniture $ 711,000 $ 282,000
Healthcare seating 37,000 5,000
----------- -----------
$ 748,000 $ 287,000
=========== ===========
<PAGE> 12
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 months ended June 30, 2000 and 1999 respectively.
Three months ended
June 30,
-----------------------
2000 1999
---------- ----------
Net income as reported . . . . . . . . . $ 431,000 $1,016,000
========== ==========
BASIC:
Weighted average number of
common shares outstanding. . . . . 5,070,167 4,800,405
========== ==========
Basic net income per share . . . . . . $0.09 $0.21
========== ==========
DILUTED:
Common and common equivalent shares
outstanding:
Weighted average number of
common shares outstanding. . . . . 5,070,167 4,800,405
Common stock equivalents from
options computed on the
treasury-stock method using
the average fair market
value of common stock
outstanding during the
period . . . . . . . . . . . . . . 221,630 219,530
---------- ----------
Shares used in the
computation. . . . . . . . . . . . 5,291,797 5,019,935
========== ==========
Diluted net income per share . . . . . $0.08 $0.20
========== ==========
All number of shares data has been retroactively restated to reflect a 3-for-2
stock split distributed September 23, 1999.
<PAGE> 13
8. RESTATEMENT
Subsequent to the issuance of the Company's unaudited condensed consolidated
financial statements as of and for the three months ended June 30, 2000, the
Company's management discovered discrepancies in the Company's information
systems which resulted in inaccurate standard material and other costs being
recorded in the unaudited condensed consolidated financial statements as of
June 30, 2000. Additionally, the Company failed to record certain
installation and freight costs during the quarter ended June 30, 2000.
Accordingly, the accompanying unaudited condensed consolidated financial
statements of the Company as of and for the three months ended June 30, 2000
have been restated from amounts previously reported. A summary of the
significant effects of the restatement is as follows:
As Previously As
Reported Restated
------------- ------------
AS OF JUNE 30, 2000:
Inventories. . . . . . . . . . . . . . . . $ 6,967,000 $ 6,355,000
Prepaid expenses and other current assets. 1,478,000 1,750,000
Accrued expenses and other current
liabilities. . . . . . . . . . . . . . . 3,831,000 3,930,000
Retained earnings. . . . . . . . . . . . . 16,662,000 16,223,000
FOR THE THREE MONTHS ENDED JUNE 30, 2000:
Cost of products sold. . . . . . . . . . . $11,347,000 $12,055,000
Provision for income taxes . . . . . . . . 543,000 274,000
Net income . . . . . . . . . . . . . . . . 870,000 431,000
Basic earnings per share . . . . . . . . 0.17 0.09
Diluted earnings per share . . . . . . . 0.16 0.08
<PAGE> 14
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
and Results of Operations
GENERAL
As discussed in Note 8 to the Unaudited Condensed Consolidated Financial
Statements, the unaudited condensed consolidated financial statements as of
and for the three months ended June 30, 2000 have been restated. The
accompanying discussion and analysis gives effect to the restatement. In
order to preserve the nature and character of the disclosures set forth in the
Company's Form 10-Q for the fiscal quarter ended June 30, 2000 as originally
filed, no attempt has been made in this Form 10-Q/A to modify or update such
disclosures except as required to reflect the effects of the restatement.
The Company is filing this amended Form 10-Q for the first fiscal
quarter ended June 30, 2000 because of inventory and cost accounting
discrepancies recently discovered in the Company's office systems division
located in Marked Tree, Arkansas. The Company has since determined that the
inventory balance at June 30, 2000 was overstated by approximately $611,000.
The Company has experienced information systems problems in the office systems
division which resulted in inaccurate standard material and other costs being
reported in the Company's previous Form 10-Q for the June 30, 2000 quarter.
In addition, the Company had additional installation and freight costs
totaling $97,000 which should have been recorded in this period. The impact
of the restatement has resulted in a decrease in the Company's operating
profit of $708,000 and a decrease in net income of $439,000, or $0.08 per
basic and diluted share for the first fiscal quarter ended June 30, 2000.
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. In addition,
the Company continues to pursue acquisitions of product lines or companies
that will be complementary to the Company's businesses.
The Company's multipurpose room furniture is marketed under the Mity-Lite
trade name. It 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 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 the 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, Mity-
Lite'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.
<PAGE> 15
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 trade
name. 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-Lite 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. The final purchase price will be
determined based on asset values at closing and will be adjusted dollar for
dollar for increases and/or decreases in the closing book values of accounts
receivable, inventory, and machinery and equipment. 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.
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-Lite exchanged approximately $2.1 million cash and 41,000 shares of
Mity-Lite 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-
Lite 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-Lite, 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 will retain the DO Group, Inc.
name. Both DO Group and C Core produce office systems in a shared
manufacturing facility in Marked Tree Arkansas.
During the June 2000 quarter, the Company experienced various operational
challenges with its recently acquired DO Group subsidiary. Specifically, the
DO Group subsidiary has experienced increasing labor, material and overhead
costs, lower sales prices, operational inefficiencies, information system
problems, and nonrecurring costs which have significantly impacted the
Company's gross margin and customer service. As a result, DO Group has been
expediting incoming materials and product shipments to customers, shipping
orders late and sometimes incomplete, and generally incurring additional costs
as a result of the inefficiencies. Because of these problems, DO Group's
inventory and accounts receivable have significantly increased.
<PAGE> 16
During the quarter, the Company started the process of restructuring the
management team and implementing information system policies and controls
which will better allow it to control the DO Group operations. The changes
being made are ongoing and management currently believes that it will take
another six to nine months before the changes are fully in effect. Because of
the problems described above, DO Group has lost some customer orders. The
Company believes that it can solve the challenges described above, restore
customer confidence, and make the DO Group operations profitable. However,
there can be no assurance that management will be successful in turning around
the operations and restoring the DO Group customer base.
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-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. The Company intends to change the name of Mity-Lite, Inc. to
MITY Enterprises, Inc. and MLI Acquisition, Inc. to Mity-Lite, Inc.
COMPARISON OF THE THREE MONTHS ENDED JUNE 30, 2000 AND 1999
NET SALES. The Company's first quarter fiscal 2001 net sales of
$16,561,000 were up 48 percent as compared with the first quarter net sales in
the prior fiscal year. For the quarter ended June 30, 2000, the increase
reflected sales growth, as compared to the first quarter of fiscal 2000, of 16
percent in the Company' multipurpose room markets, 13 percent in the
healthcare chair market and 15 percent in the systems market related to
CenterCore sales. Specialty office seating and systems sales, related to the
DO Group purchase, represented 22 percent of net sales for the first quarter
of fiscal 2001. International sales represented 13 percent of net sales for
the first quarter ended June 30, 2000 as compared to 11 percent in the first
quarter of fiscal 2000.
GROSS PROFIT. Gross profit as a percentage of net sales decreased over
the prior year by 11 percentage points, to 27 percent for the three months
ended June 30, 2000. During the quarter, the company experienced various
operational problems with its recently acquired DO Group subsidiary.
Specifically, the Company has experienced increasing labor, material, freight,
installations and overhead costs, lower sales prices, operational
inefficiencies, information system problems, and one time related costs which
have significantly impacted the Company's gross margin and customer service.
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. The majority of
the decrease in gross profit margins was due to these problems and higher
material and labor costs on multi-purpose room products.
SELLING EXPENSES. Selling expenses were 16 percent of net sales in the
first quarter of fiscal 2001 as compared to 18 percent for the first quarter
of the prior fiscal year. Actual expenses increased by $627,000 or 32
percent. The increase in actual expenses was primarily due to selling costs
related to the recent DO Group acquisition. The increase was offset by lower
selling costs for healthcare seating due to lower costs for outside
commissions and advertising. Multipurpose room furniture selling costs
increased by $229,000 over the prior fiscal year. This increase resulted from
higher costs for commissions and salaries due to the higher sales volume,
partially offset by lower costs for advertising.
<PAGE> 17
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
were 6 percent of net sales for the first quarter of fiscal 2001 as compared
to 6 percent for the first quarter of the prior fiscal year. Actual spending
increased by 53 percent, or $329,000. This increase was primarily due to
increased general and administrative costs associated with DO Group.
Multipurpose room furniture and healthcare seating costs increased by $53,000
or 12 percent due to additional personnel related expenses.
RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses
were 2 percent of net sales for the first quarter of fiscal 2001 as compared
to 2 percent for the first quarter of the prior fiscal year. Actual spending
increased by 10 percent, or $23,000. The increase was due to increased
personnel costs in the multipurpose room operations, as well as additional
research and development costs associated with DO Group. The increase was
partially offset by lower prototyping and outside services costs in the
multipurpose operation as well as lower personnel costs associated with
healthcare seating.
OTHER INCOME AND EXPENSE. Other income and expense netted to $11,000 for
the first quarter of fiscal 2001. First quarter interest income was $23,000,
a decrease of $41,000 from the first quarter of the prior fiscal year. The
decrease was due to interest earned on the lower cash balance held in the
current fiscal year due to cash being used for the DO Group acquisition. The
Company had interest expense of $21,000 for the first quarter of fiscal 2001
as compared to $8,000 in the prior year's first quarter. In the first quarter
of the prior fiscal year, the Company also recognized income of $142,000 from
its investment in DO Group, Inc. 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 gain of $1,000 on the disposal of certain
fixed assets and a gain of $8,000 on currency exchange.
NET INCOME. For reasons stated above, the Company's fiscal 2000 first
quarter net income of $431,000 decreased $585,000, or 58 percent over first
quarter net income in the prior fiscal year.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents, which consist primarily of repurchase
agreements collateralized with U.S. Treasury securities, totaled $0.71 million
at June 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 associated with DO Group ($2.68 million), the DO Group acquisition
($2.13 million) in April 2000, cash used in operating activities ($1.69
million), purchases of property and equipment ($0.75 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
($2.31 million).
<PAGE> 18
Historically, the Company has financed its growth 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 $4,000,000 under the credit facility. As of June 30,
2000, the Company had no amounts drawn under this facility. The Company's
subsidiary, Broda Enterprises, also has a line of credit. The limit on this
facility is $670,000. As at June 30, 2000, $140,000 of this line was
outstanding. Both credit facilities require the maintenance of certain
financial ratios and levels of working capital. As of June 30, 2000, the
Company is in full compliance with the loan covenants related to the Broda
Enterprises credit facility. However, the Company did not meet the minimum
quarterly net income requirement related to the Zions First National Bank
credit facility. The Company has obtained a waiver of this requirement from
the Bank.
The Company 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 and the
construction of a new manufacturing facility and may further increase if other
acquisitions are consummated. As a result of the operational challenges in
the Company's DO Group subsidiary, the Company anticipates needing 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 can be
given as to the sufficiency of the Company's working capital to support the
Company's 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 June 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 $1.9 million. There is no
assurance that such options will be exercised.
The Company's material cash commitments at June 30, 2000 include current
liabilities of $6.97 million to be repaid from funds generated from
operations. Current liabilities consist of $0.14 million in a bank line of
credit, $2.90 million in accounts payable, $2.36 million in accrued payroll,
$0.02 million in income tax payable, $0.38 in accrued expenses, $1.16 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 $7,218 Canadian (approximately US $4,900) per month through
August 2000. The Company also leases a facility in Elkhart, Indiana under
which it is obligated to pay $11,800 per month through April 1, 2002.
The Company is in the process of building a new facility with office and
manufacturing space at its Orem, Utah location. As of June 30, 2000, $1.6
million had been spent on the land and facility. The Company anticipates
additional spending of approximately $0.4 million for a total of $2.0 million
in capital expenditures. These additional expenditures are anticipated to be
completed by the end of the second quarter of fiscal 2001 and will be funded
with cash from operations and a bank line of credit.
<PAGE> 19
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," "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 Company's 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
quarterly report relate to: (i) the Company's expectation that it will be able
to continue to increase net sales of its products, expand its share of the
multipurpose room market and achieve and maintain expected levels of
profitability over time, (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 ability to locate and consummate acquisitions of
product lines or companies on terms acceptable to the Company and successfully
integrate such acquisitions into the Company's operations following
consummation thereof, (v) the Company's ability to successfully integrate the
business operations of Broda Enterprises, Inc., CenterCore and DO Group, Inc.
into the Company's operations, (vi) the Company's intention to expand and
introduce new product lines to existing customers, (vii) 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, (viii) the Company's expectation that it will have sufficient
capital resources for the next 12 months,(ix) the Company's expectations
regarding its new manufacturing facility and related capital expenditures, and
(x) the Company's expectation that it will be able to correct operational
deficiencies at DO Group, Inc.
<PAGE> 20
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, 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, (b) management's ability to manage effectively
the Company's growth, (c) 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, (d) import
restrictions and economic conditions in the Company's foreign markets and
foreign currency risks associated therewith, (e) increased competition in the
Company's existing and future markets, (f) the market's acceptance of products
currently being developed by the Company, (g) the Company's ability to
maintain relatively low cost labor rates in a period of lower unemployment,
(h) the Company's ability to source a sufficient volume of acceptable raw
materials at current prices, (i) 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, (j) 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, (k) the Company's ability to manufacture and
market at current margins high quality, high performance products at
competitive prices, (l) 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,
(m) the Company's ability to reduce DO Group's accounts receivable and
inventory balances, (n) the Company's ability to increase DO Group's gross
margin to previous levels, (o) the Company's ability to restore customer
confidence with respect to the DO Group operations, and (p) the Company's
ability to restructure DO Group's management team. 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> 21
PART II: OTHER INFORMATION
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
None
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 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)
