1
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United States Securities and Exchange Commission
Washington, D.C. 20549
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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, 2003
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
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
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes No x
There were 4,144,859 shares of the registrant's Common Stock, par value
$.01 per share, outstanding on October 28, 2003.
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2
PART I: FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MITY ENTERPRISES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
SEPTEMBER 30, MARCH 31,
2003 2003
ASSETS ------------ -----------
Current assets:
Cash and cash equivalents. . . . . . . . . . $ 4,047,000 $ 2,203,000
Available-for-sale securities. . . . . . . . 850,000 2,336,000
Accounts receivable, less allowances of
$323,000 at September 30, 2003 and
$235,000 at March 31, 2003 . . . . . . . . 5,119,000 3,792,000
Inventories. . . . . . . . . . . . . . . . . 2,049,000 1,368,000
Tax receivable . . . . . . . . . . . . . . . 427,000 1,284,000
Prepaid expenses and other current assets. . 366,000 274,000
Deferred income taxes, current . . . . . . . 596,000 635,000
------------ -----------
Total current assets . . . . . . . . . . . . . 13,454,000 11,892,000
Property and equipment, net. . . . . . . . . . 13,101,000 11,656,000
Deferred income taxes. . . . . . . . . . . . . 239,000 376,000
Goodwill . . . . . . . . . . . . . . . . . . . 1,098,000 1,010,000
Notes receivable, net. . . . . . . . . . . . . 194,000 204,000
Other intangible assets. . . . . . . . . . . . 264,000 264,000
------------ -----------
Total assets . . . . . . . . . . . . . . . . . $28,350,000 $25,402,000
============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable . . . . . . . . . . . . . . $ 1,789,000 2,184,000
Accrued expenses and other current
liabilities. . . . . . . . . . . . . . . . 2,182,000 1,639,000
------------ -----------
Total current liabilities. . . . . . . . . . . 3,971,000 3,823,000
Minority interest. . . . . . . . . . . . . . . 90,000 125,000
------------ -----------
Total liabilities. . . . . . . . . . . . . . . 4,061,000 3,948,000
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 4,135,768 at September 30,
2003 and 4,115,181 at March 31, 2003 . . 41,000 41,000
Additional paid-in capital . . . . . . . . 10,222,000 9,925,000
Retained earnings. . . . . . . . . . . . . 13,680,000 11,376,000
Accumulated other comprehensive income . . 346,000 112,000
------------ -----------
Total stockholders' equity . . . . . . . . . 24,289,000 21,454,000
------------ -----------
Total liabilities and stockholders' equity . . $28,350,000 $25,402,000
============ ===========
See accompanying notes to unaudited condensed consolidated
financial statements.
3
MITY ENTERPRISES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
THREE MONTHS ENDED SEPT. 30,
2003 2002
------------ ------------
Net sales . . . . . . . . . . . . . . . . . . . . $11,277,000 $10,777,000
Cost of products sold . . . . . . . . . . . . . . 6,788,000 6,272,000
------------ ------------
Gross profit. . . . . . . . . . . . . . . . . . . 4,489,000 4,505,000
Expenses:
Selling . . . . . . . . . . . . . . . . . . . . 1,613,000 1,530,000
General and administrative. . . . . . . . . . . 478,000 707,000
Research and development. . . . . . . . . . . . 335,000 397,000
------------ ------------
Total expenses. . . . . . . . . . . . . . . . . . 2,426,000 2,634,000
------------ ------------
Income from operations. . . . . . . . . . . . . . 2,063,000 1,871,000
Other income:
Interest income . . . . . . . . . . . . . . . . 6,000 74,000
Other . . . . . . . . . . . . . . . . . . . . . 1,000 33,000
------------ ------------
Total other income, net . . . . . . . . . . . . . 7,000 107,000
------------ ------------
Income before provision for income taxes and
minority interest . . . . . . . . . . . . . . . 2,070,000 1,978,000
Provision for income taxes. . . . . . . . . . . . 789,000 775,000
------------ ------------
Net income before minority interest . . . . . . . 1,281,000 1,203,000
Minority interest . . . . . . . . . . . . . . . . 22,000 --
------------ ------------
Net income. . . . . . . . . . . . . . . . . . . . $ 1,303,000 $ 1,203,000
============ ============
Basic earnings per share. . . . . . . . . . . . . $ 0.32 $ 0.25
============ ============
Weighted average number of common shares - basic. 4,124,409 4,753,685
============ ============
Diluted earnings per share. . . . . . . . . . . . $ 0.30 $ 0.24
============ ============
Weighted average number of common and common
equivalent shares - diluted. . . . . . . . . . . 4,296,226 4,972,268
============ ============
See accompanying notes to unaudited condensed consolidated
financial statements.
4
MITY ENTERPRISES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
SIX MONTHS ENDED SEPT. 30,
2003 2002
------------ ------------
Net sales . . . . . . . . . . . . . . . . . . . . $22,634,000 $21,336,000
Cost of products sold . . . . . . . . . . . . . . 13,704,000 12,340,000
------------ ------------
Gross profit. . . . . . . . . . . . . . . . . . . 8,930,000 8,996,000
Expenses:
Selling . . . . . . . . . . . . . . . . . . . . 3,112,000 3,127,000
General and administrative. . . . . . . . . . . 1,020,000 1,714,000
Research and development. . . . . . . . . . . . 671,000 692,000
------------ ------------
Total expenses. . . . . . . . . . . . . . . . . . 4,803,000 5,533,000
------------ ------------
Income from operations. . . . . . . . . . . . . . 4,127,000 3,463,000
Other income (expense):
Interest income . . . . . . . . . . . . . . . . 39,000 174,000
Other . . . . . . . . . . . . . . . . . . . . . (70,000) (10,000)
------------ ------------
Total other income (expense), net . . . . . . . . (31,000) 164,000
------------ ------------
Income before provision for income taxes and
minority interest . . . . . . . . . . . . . . . 4,096,000 3,627,000
Provision for income taxes. . . . . . . . . . . . 1,565,000 1,419,000
------------ ------------
Net income before minority interest . . . . . . . 2,531,000 2,208,000
Minority interest . . . . . . . . . . . . . . . . 34,000 --
------------ ------------
Net income. . . . . . . . . . . . . . . . . . . . $ 2,565,000 $ 2,208,000
============ ============
Basic earnings per share. . . . . . . . . . . . . $ 0.62 $ 0.45
============ ============
Weighted average number of common shares - basic. 4,123,000 4,880,238
============ ============
Diluted earnings per share. . . . . . . . . . . . $ 0.60 $ 0.43
============ ============
Weighted average number of common and common
equivalent shares - diluted. . . . . . . . . . . 4,300,873 5,111,367
============ ============
See accompanying notes to unaudited condensed consolidated
financial statements.
5
MITY ENTERPRISES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
SIX MONTHS ENDED SEPT. 30,
2003 2002
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income . . . . . . . . . . . . . . . . . . . $ 2,565,000 $ 2,208,000
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization. . . . . . . . 779,000 578,000
Deferred taxes . . . . . . . . . . . . . . . 178,000 52,000
Net loss on disposal of equipment. . . . . . -- 3,000
Tax benefit from exercise of stock options . 31,000 11,000
Changes in assets and liabilities:
Accounts receivable. . . . . . . . . . . . (1,242,000) (624,000)
Inventories. . . . . . . . . . . . . . . . (642,000) (153,000)
Prepaid expenses and other current assets. (86,000) (58,000)
Tax receivable . . . . . . . . . . . . . . 863,000 164,000
Accounts payable . . . . . . . . . . . . . (426,000) 224,000
Accrued expenses and other current
liabilities . . . . . . . . . . . . . . . 498,000 229,000
----------- -----------
Net cash provided by continuing operations . . . 2,518,000 2,634,000
Net cash provided by discontinued operations . . -- 1,129,000
----------- -----------
Net cash provided by operating activities. . . . 2,518,000 3,763,000
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of available-for-sale securities . . . (863,000) (1,657,000)
Sales and maturities of available-for-sale
securities . . . . . . . . . . . . . . . . . . 2,350,000 4,509,000
Proceeds from sales of property & equipment. . . -- 6,000
Decrease in notes receivable . . . . . . . . . . 39,000 277,000
Purchases of property and equipment. . . . . . . (2,189,000) (2,853,000)
----------- -----------
Net cash provided by (used in) continuing
operations . . . . . . . . . . . . . . . . . . (663,000) 282,000
Net cash used in discontinued operations . . . . -- (101,000)
----------- -----------
Net cash provided by (used in) investing
activities . . . . . . . . . . . . . . . . . . (663,000) 181,000
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from exercise of stock options and
issuance of shares to the 401(k) plan. . . . . 342,000 205,000
Minority interest. . . . . . . . . . . . . . . . (35,000) --
Purchase and retirement of common stock. . . . . (336,000) (10,824,000)
----------- -----------
Net cash used in financing activities. . . . . . (29,000) (10,619,000)
----------- -----------
6
Effect of exchange rate changes on cash. . . . . 18,000 3,000
----------- -----------
Net increase (decrease) in cash and cash
equivalents. . . . . . . . . . . . . . . . . . 1,844,000 (6,672,000)
Cash and cash equivalents at beginning of period 2,203,000 8,926,000
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD . . . $ 4,047,000 $ 2,254,000
=========== ===========
See accompanying notes to unaudited condensed consolidated
financial statements.
7
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Net cash paid during the period for income taxes . $ 468,000 $ 1,131,000
See accompanying notes to unaudited condensed consolidated
financial statements.
8
MITY ENTERPRISES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. BASIS OF PRESENTATION
Interim Period Accounting Policies
In the opinion of the management of MITY Enterprises, Inc. (the
"Company"), 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, 2003 are not necessarily indicative of results to be
expected for the full fiscal year ending March 31, 2004.
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with accounting principles generally accepted
in the United States of America 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 accounting principles generally
accepted in the United States of America 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,
2003.
STOCK-BASED COMPENSATION
In December 2002, the Financial Accounting Standards Board (FASB) issued
Statements of Financial Accounting Standards (SFAS) No. 148, "Accounting for
Stock-Based Compensation - Transition and Disclosure - an amendment of FASB
Statement No. 123" which provides alternative methods of transition for a
voluntary change to the fair value based method of accounting for stock-based
employee compensation. In addition, this Statement amends the disclosure
requirements of Statement No. 123 to require prominent disclosures in both
annual and interim financial statements about the method of accounting for
stock-based employee compensation and the effect of the method used on
reported results. SFAS No. 148 is effective for fiscal years ending after
December 15, 2002 and for financial reports containing financial statements
for interim periods beginning after December 15, 2002. The Company has
decided to continue applying APB Statement No. 25 (as permitted by SFAS No.
123 and SFAS no. 148). The required disclosure of the effects of SFAS No. 123
and SFAS No. 148 are included in the consolidated financial statements.
Accordingly, no compensation cost has been recognized for its stock option
plans. Had compensation cost of the Company's two stock-based compensation
plans been determined based on the fair value at the grant dates for awards
under those plans consistent with SFAS No. 123, the Company's net income and
earnings per share would have changed to the pro forma amounts indicated
below:
9
THREE MONTHS ENDED SEPT. 30,
2003 2002
----------- -----------
Net income:
As reported $1,303,000 $1,203,000
Pro forma 1,268,000 1,149,000
Earnings per share - basic:
As reported $0.32 $0.25
Pro forma 0.31 0.24
Earnings per share - diluted:
As reported $0.30 $0.24
Pro forma 0.30 0.23
SIX MONTHS ENDED SEPT. 30,
2003 2002
----------- -----------
Net income:
As reported $2,565,000 $2,208,000
Pro forma 2,496,000 2,101,000
Earnings per share - basic:
As reported $0.62 $0.45
Pro forma 0.61 0.43
Earnings per share - diluted:
As reported $0.60 $0.43
Pro forma 0.58 0.41
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option-pricing model with the following assumptions used for
grants in the six months ended September 30, 2003 and 2002 respectively:
expected volatility of 45 percent, risk free interest rates of 1.75 percent
and 2.52 percent, and expected lives of three to four years. During the six
months ended September 30, 2003 and 2002 respectively, 6,300 and 10,600
options were granted. Under SFAS No. 123, the weighted average fair value per
share of options issued during the six months ended September 30, 2003 and
2002 was $4.63 and $3.46 respectively.
2. INVENTORIES
Inventories consisted of the following:
SEPTEMBER 30, MARCH 31,
2003 2003
------------ ------------
Materials and supplies . . . . $ 1,661,000 $ 980,000
Work-in-progress . . . . . . . 207,000 268,000
Finished goods . . . . . . . . 181,000 120,000
------------ ------------
$ 2,049,000 $ 1,368,000
============ ============
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3. COMPREHENSIVE INCOME
In accordance with SFAS No. 130, "Reporting Comprehensive Income," the
Company's comprehensive income consists of foreign currency adjustments and
unrealized gains and losses on available-for-sale securities. For the six
months ended September 30, 2003, comprehensive income exceeded net income by
$234,000, consisting of $232,000 in foreign currency translation gains and
$2,000 in unrealized gains on available for sale securities. For the six
months ended September 30, 2002, comprehensive income exceeded net income by
$25,000, consisting of $24,000 in foreign currency translation gains and
$1,000 in unrealized gains on available for sale securities.
4. BUSINESS SEGMENT INFORMATION
In accordance with SFAS No. 131, "Disclosure about Segments of an
Enterprise and Related Information," management views the Company as being
two continuing business segments: multipurpose room furniture and healthcare
seating, with multipurpose room furniture being the principal business
segment. The multipurpose room furniture business segment manufactures and
markets lightweight, durable, folding leg tables, folding chairs, stacking
chairs, lecterns, 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 of continuing operations reconciled to the
consolidated financial statements for the three months and six months ended
September 30, 2003 and 2002 is as follows:
THREE MONTHS ENDED SEPTEMBER 30,
2003 2002
----------- -----------
Net sales:
Multipurpose room furniture. . . . . . . . $ 9,780,000 $ 9,542,000
Healthcare seating . . . . . . . . . . . . 1,497,000 1,235,000
----------- -----------
$11,277,000 $10,777,000
=========== ===========
Income from operations:
Multipurpose room furniture. . . . . . . . $ 1,690,000 $ 1,575,000
Healthcare seating . . . . . . . . . . . . 373,000 296,000
----------- -----------
$ 2,063,000 $ 1,871,000
=========== ===========
Depreciation expense:
Multipurpose room furniture. . . . . . . . $ 356,000 $ 271,000
Healthcare seating . . . . . . . . . . . . 32,000 20,000
----------- -----------
$ 388,000 $ 291,000
=========== ===========
Capital expenditures, net:
Multipurpose room furniture. . . . . . . . $ 739,000 $ 545,000
Healthcare seating . . . . . . . . . . . . 9,000 10,000
----------- -----------
$ 748,000 $ 555,000
=========== ===========
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SIX MONTHS ENDED SEPTEMBER 30,
2003 2002
----------- -----------
Net sales:
Multipurpose room furniture. . . . . . . . $19,830,000 $18,871,000
Healthcare seating . . . . . . . . . . . . 2,804,000 2,465,000
----------- -----------
$22,634,000 $21,336,000
=========== ===========
Income from operations:
Multipurpose room furniture. . . . . . . . $ 3,526,000 $ 2,910,000
Healthcare seating . . . . . . . . . . . . 601,000 553,000
----------- -----------
$ 4,127,000 $ 3,463,000
=========== ===========
Depreciation expense:
Multipurpose room furniture. . . . . . . . $ 718,000 $ 538,000
Healthcare seating . . . . . . . . . . . . 61,000 40,000
----------- -----------
$ 779,000 $ 578,000
=========== ===========
Capital expenditures, net:
Multipurpose room furniture. . . . . . . . $ 2,110,000 $ 2,794,000
Healthcare seating . . . . . . . . . . . . 79,000 59,000
----------- -----------
$ 2,189,000 $ 2,853,000
=========== ===========
SEPTEMBER 30, MARCH 31,
2003 2003
------------ ------------
Total assets:
Multipurpose room furniture. . . . . . . . $24,705,000 $22,364,000
Healthcare seating . . . . . . . . . . . . 3,645,000 3,038,000
------------ ------------
$28,350,000 $25,402,000
============ ============
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5. COMPUTATION OF NET INCOME PER SHARE
The following is the Company's reconciliation of basic and diluted net income
per share for the three months and six months ended September 30, 2003 and
2002, respectively.
THERE MONTHS ENDED SIX MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
2003 2002 2003 2002
----------- ----------- ----------- -----------
Net income as reported. . . .$ 1,303,000 $ 1,203,000 $ 2,565,000 $ 2,208,000
=========== =========== =========== ===========
BASIC:
Weighted average number of
common shares outstanding . 4,124,409 4,753,685 4,123,000 4,880,238
=========== =========== =========== ===========
Basic net income per share . $ 0.32 $ 0.25 $ 0.62 $ 0.45
=========== =========== =========== ===========
DILUTED:
Common and common equivalent
shares outstanding:
Weighted average number of
common shares outstanding . 4,124,409 4,753,685 4,123,000 4,880,238
Common stock equivalents
from options computed on
the treasury-stock method
using the average fair
market value of common
stock outstanding during
the period . . . . . . . 171,817 218,583 177,873 231,129
----------- ----------- ----------- -----------
Shares used in the
computation . . . . . . . 4,296,226 4,972,268 4,300,873 5,111,367
=========== =========== =========== ===========
Diluted net income per share $ 0.30 $ 0.24 $ 0.60 $ 0.43
=========== =========== =========== ===========
6. NOTES RECEIVABLE AND INVESTMENT IN SUBSIDIARY
During the quarter ended March 31, 2002, the Company paid $50,000 as a
good faith deposit for technology to be used in a separate startup development
company to investigate the commercial development of a new technology. During
the quarter ended December 31, 2002, the Company paid an additional $82,000.
This technology investment of $132,000 was contributed to a startup
development company for which the Company received a 50 percent equity
ownership interest. The other 50 percent interest in the technology was
contributed by the other 50 percent owner. The Company has entered into a
royalty agreement with the other 50 percent owner of the startup development
company for some of the products sold by the startup company. The Company has
also extended a line of credit of $125,000 to the other 50 percent owner,
which is secured by such owner's interest in the company and future royalty
payments. The line of credit, which bears interest at the prime rate
(adjusted monthly) as published by the Wall Street Journal, requires an
initial payment of the accrued interest six months after the line was
extended. Thereafter, monthly payments of interest only are required from
June 1, 2003 until November 30, 2004 at which time, the full amount of the
13
outstanding line is due and payable. As of September 30, 2003, the full
credit line of $125,000 was outstanding and all interest payments are current.
During the quarter ended March 31, 2002, the Company entered into an
agreement with a dealer for the Company's multipurpose room furniture in
Australia and created a note receivable for $365,000. This note, which bears
interest at the prime rate, requires monthly payments of interest and
principal in the amount of $6,000 and is being amortized over a six and one
half year period. The note is secured by all of the assets of the dealership
and by personal guarantees from the principals of the dealership. The Company
has created a reserve of $180,000 for this note receivable. At September 30,
2003, the gross value of this note receivable was $280,000. At September 30,
2003, $56,000 was the current portion of this note receivable, which is
included in prepaid expenses and other current assets. As of September 30,
2003, the dealer was current on payments on this note receivable.
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
The following discussion should be read in conjunction with the attached
consolidated financial statements and the notes thereto and with MITY
Enterprises, Inc.'s (the "Company's") Annual Report on Form 10-K for the
fiscal year ended March 31, 2003.
The Company designs and manufactures institutional furniture and markets
its products in niche markets. The Company's current ongoing product lines
consist of multipurpose room furniture and healthcare seating. In addition,
the Company continues to pursue development of new products and the
acquisition of product lines or companies that will be complementary to the
Company's businesses.
MULTIPURPOSE ROOM FURNITURE. The Company's multipurpose room furniture
line consists of lightweight, durable, folding leg tables, stacking chairs,
folding chairs, lecterns, 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. Historically, growth in this segment has come from an expanding
base of new customers, from increasing sales to existing customers and from
expansion of the Company's multipurpose room product line. The current and
future growth of the Company's multipurpose room furniture operations depends
largely upon conditions in the industry, the Company's ability to successfully
introduce and market new product lines of multipurpose room furniture and its
ability to profitably increase its market penetration into existing and new
markets.
14
MULTIPURPOSE ROOM FURNITURE OUTLOOK. The downturn in the domestic and
international economy, particularly the downturn in the furniture industry and
some of the Company's target markets such as education and recreation, has
negatively impacted the Company's historical sales growth rates in fiscal 2003
and 2002. The events of September 11, 2001 as well as subsequent terror
threats and military conflicts have also negatively impacted many of the
Company's markets, particularly travel-related markets such as the hotel and
hospitality, recreational and public assembly markets. Industry experts
reported a decline in the U.S. office furniture market of 19 percent for
calendar year 2002 and are predicting further declines of 8 percent in
calendar year 2003. Through July 2003, industry experts reported a 7 percent
decline. The Company has also seen significant competitive pressure in its
multipurpose room table markets from lower-priced thermo-formed and
blow-molded tables and expects this pressure to continue. The Company's
multipurpose room operations for the quarter ended September 30, 2003
performed better than industry estimates as sales volumes increased 2 percent
as compared to the prior year. Despite this increase, the Company anticipates
that weakness in furniture demand will continue until overall business
conditions improve.
The Company is preparing to launch its next generation of multipurpose
room table. During the past few years, the Company has been developing a
table that is stronger, lighter, more durable and better able to withstand
outdoor use. The Company believes that it has developed a product that will
meet most if not all of these criteria. During the past quarter, the Company
shipped some initial prototype tables to one of its customers. Upon further
consultation with this customer as well as further internal testing, the
Company initiated some revisions in the design of the table requiring some
rework of the initial design and manufacturing process. The Company has
completed the redesign and now believes that it has a repeatable manufacturing
process to produce these tables. The Company anticipates sending some
additional prototype tables during the current quarter, and, pending a review
of their performance, moving forward with a general product launch in the next
six to twelve months. The Company believes that its next generation table
will largely replace its existing table sales over a period of one to two
years. The Company also believes that if all of the performance criteria are
met that it may be able to capture additional market share.
The Company has a 50 percent equity ownership interest in a separate
startup development company that is investigating the commercial development
of a new technology related to the process anticipated to be used on its next
generation of tables. The Company believes that this technology may be used
for the internal development and/or licensing of new products which may be
outside of its current multipurpose room marketplace. Pending the launch of
the next generation of table, the Company will continue to evaluate potential
applications of this process to determine which new products, if any, would be
best suited for the Company to start developing. There is no guarantee that
the Company will be able to find other suitable applications for this
technology.
15
HEALTHCARE SEATING. Through its wholly owned subsidiary, Broda
Enterprises, Inc., the Company markets a line of healthcare seating products
to customers in Canada and the United States. Broda's operations are based in
Waterloo, Ontario, Canada. Broda focuses on providing products which assist
long-term care patients with advanced needs due to a debilitating condition or
disease, and has developed a line of premium-priced geriatric seating
products. Broda chairs serve a very specific niche in the healthcare market
and thus do not compete in the commodity-oriented general healthcare seating
market.
HEALTHCARE SEATING OUTLOOK. The Company believes that the specialty
healthcare seating market is less subject to economic pressures than the
Company's multipurpose room furniture operations. For the quarter ended
September 30, 2003, the Company's healthcare seating operations have not been
significantly impacted by the downturn in the U.S. and world economies.
However, the medical and healthcare industry is more subject to regulatory
changes that could affect the demand for Broda's products. The Company is not
aware of any regulatory changes in the near future that would have a
substantial and negative impact on this business. The Company's healthcare
seating operation's future growth depends largely upon increasing its market
penetration into the U.S. and other foreign markets as well as its ability to
successfully introduce and market new product lines.
GENERAL OUTLOOK. Based on the reasons stated above, the Company
anticipates that sales volumes during the quarter ending December 31, 2003
will be up to 5 percent higher as compared to the prior year's third quarter.
Despite these trends, the Company, for a variety of reasons including those
described elsewhere herein, may not be successful in achieving this sales
level in the third quarter.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
This discussion and analysis of financial condition and results of
operations is based upon the Company's consolidated financial statements which
have been prepared in accordance with accounting principles generally accepted
in the United States of America. These principles require the use of
estimates and assumptions that affect amounts reported and disclosed in the
financial statements and footnotes. The critical accounting policies for the
Company which require management to make assumptions about matters that are
uncertain at the time of the estimate include the allowance for doubtful
accounts receivable, reserve for obsolete inventory, accruals for warranty
expense, values for the discontinued operations, goodwill and other intangible
assets, notes receivable, income taxes, and pension liability.
ALLOWANCE FOR DOUBTFUL ACCOUNTS RECEIVABLE: The Company exercises considerable
judgment in determining the ultimate collectability of its accounts
receivable. Several factors are used in making these judgments including the
customer credit quality, historical write-off experience and current economic
trends. The Company reviews these factors quarterly, and the allowance is
adjusted accordingly. If the financial condition of the Company's customers
were to deteriorate, an additional allowance may be required.
16
RESERVE FOR OBSOLETE INVENTORY: Inventories are stated at the lower of cost,
on a first in, first out basis, or market. Additionally, the Company
evaluates its inventory reserves in terms of excess and obsolete exposures.
This evaluation includes such factors as anticipated usage, inventory turnover
and ultimate product sales value.
ACCRUALS FOR WARRANTY EXPENSE: The Company provides for the estimated cost of
product warranties at the time revenue is recognized. This warranty
obligation is affected by failure rates, the introduction of new products, and
the costs of material and labor to repair or replace the product. The Company
regularly assesses the adequacy of its accrual for warranty expense based upon
historical warranty rates and anticipated future warranty rates.
GOODWILL AND OTHER INTANGIBLE ASSETS: The Company reviews annually the
carrying value of its goodwill and other intangible assets. The goodwill
arose from the Broda acquisition and the other intangible asset is
intellectual property related to a startup development company in which the
Company has invested. During the quarter ended June 30, 2003, the Company
reviewed the goodwill related to the Broda acquisition. This review is
performed using estimates of future cash flows. If the carrying value of the
intangible asset is considered impaired, an impairment charge is recorded for
the amount by which the carrying value of the intangible asset exceeds its
fair value. No impairment charges have been recorded related to Broda
goodwill or the intellectual property related to the startup development
company.
NOTES RECEIVABLE: The Company reviews its notes receivable to determine likely
collectability. Since the notes are with entities without a history of an
ability to create future cash flows, the Company bases its belief in their
collectability upon its understanding of the potential future success of the
products being developed or on the Company's belief of what the liquidation
value of the operation would be. At this time, the Company has created
reserves on some of these notes receivable. Due to the high level of
uncertainty in the success of these products, these notes receivable may not
be ultimately realized.
INVESTMENT IN AFFILIATE: The Company has an investment in a startup
development company of $132,000. The Company consolidates this entity within
its financial statements and eliminates the other owner's 50 percent interest
in the net profits or losses in the income statement. For the quarter ended
September 30, 2003, this entity realized a net loss of $45,000 of which 50
percent or $22,000 was eliminated as a minority interest.
INCOME TAXES: The Company has not provided a valuation allowance against the
deferred tax assets recorded in the financial statements. The Company
evaluates quarterly the realizability of its deferred tax assets based upon
expected future taxable income. Management believes that it is more likely
than not that future earnings will be sufficient to recover deferred tax
assets.
PENSION LIABILITY: The Company has certain alleged obligations of up to $1
million related to a defined benefit pension plan resulting from exiting and
selling its specialty office seating and systems business. The Company does
not believe that it is liable for this amount and plans to vigorously defend
its position. At this time, the Company is unable to determine what its
liability will be, if any.
17
COMPARISON OF OPERATIONS FOR THE THREE MONTHS AND SIX MONTHS ENDED SEPTEMBER
30, 2003 AND 2002
NET SALES. The Company's second quarter fiscal 2004 net sales of
$11,277,000 were up 5 percent as compared with the second quarter net sales in
the prior fiscal year. For the quarter ended September 30, 2003, the increase
reflects sales increases, as compared to the quarter ended September 30, 2002,
of 21 percent in the Company's healthcare chair operations and 2 percent in
the Company's multipurpose room operations. The Company's total international
sales represented 12 percent of net sales for the quarter ended September 30,
2003 as compared to 10 percent in the second quarter of fiscal 2003. The
Company attributes most of the increase in sales in the multipurpose room
operations to a 3 percent increase in chair sales, and a 1 percent increase in
table sales. The Company expects that its overall net sales will be up to 5
percent higher in the third quarter of fiscal 2004 as compared to the third
quarter of fiscal 2003.
For the six months ended September 30, 2003, the Company's net sales of
$22,634,000 represented an increase of 6 percent over the same period in the
prior fiscal year. For the six months ended September 30, 2002, the increase
reflects sales increases, as compared to the six months ended September 30,
2002, of 14 percent in the Company's healthcare chair operations and 5 percent
in the Company's multipurpose room operations. The Company's total
international sales represented 12 percent of net sales for the six months
ended September 30, 2002 as compared to 10 percent in the prior year's period.
The 5 percent increase in the Company's multipurpose room operations is
attributed to a 15 percent increase in chair sales and a 2 percent increase in
table sales.
GROSS PROFIT. Gross profit as a percentage of net sales in the quarter
ended September 30, 2003 decreased by 2 percentage points over the same
quarter in the prior fiscal year to 40 percent. This decrease was due to
higher overhead and labor costs associated with the startup of the
manufacturing operation for the Company's next generation table and higher
overhead costs at the Company's healthcare seating operations. This decrease
was partially offset by lower material costs at the Company's healthcare
seating operations and slightly lower material costs at the Company's
multipurpose room operations.
Gross profit as a percentage of net sales in the six months ended
September 30, 2003 decreased by 3 percentage points over the same period in
the prior fiscal year to 39 percent. This decrease was due to higher labor
and overhead costs associated with the startup of the manufacturing operation
for the Company's next generation table, higher overhead costs at both the
Company's multipurpose room and healthcare seating operations. This decrease
was partially offset by lower material costs at the Company's healthcare
seating operations.
SELLING EXPENSES. Selling expenses were 14 percent of net sales in the
second quarter of fiscal 2004 which was relatively flat as compared to the
second quarter of the prior fiscal year. Actual expenses increased by
$83,000. Multipurpose room furniture selling costs decreased by $14,000 over
the prior fiscal year. This decrease resulted primarily from lower personnel
costs. Selling expenses at the healthcare seating operations increased by
$97,000 over the prior fiscal year due primarily to higher personnel and
commission costs on the increased sales volume.
18
Selling expenses were 14 percent of net sales for the six months ended
September 30, 2003, a decrease of 1 percentage point as compared to the
comparable period in the prior fiscal year. Actual expenses decreased by
$15,000. Multipurpose room furniture selling costs decreased by $121,000 over
the prior fiscal year. This decrease resulted primarily from lower costs for
personnel, trade shows, and literature. Selling expenses at the healthcare
seating operations increased by $106,000 over the prior fiscal year due
primarily to higher personnel and commission costs on the increased sales
volume.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
were 4 percent of net sales for the second quarter of fiscal 2004 as compared
to 7 percent for the second quarter of the prior fiscal year. Actual spending
decreased by 32 percent or $229,000. The decrease was primarily due to a
charge in the prior fiscal year of $183,000 that fully reserved the September
30, 2002 balance in a note receivable to a startup development company. The
decrease was also due to lower professional fees.
General and administrative expenses were 5 percent of net sales for the
six months ended September 30, 2003 as compared to 8 percent for the same
period of the prior fiscal year. Actual spending decreased by 40 percent or
$694,000. The decrease was primarily due to a charge in the prior fiscal year
of $683,000 that fully reserved the September 30, 2002 balance in a note
receivable to a startup development company. The decrease was also due to
lower professional fees.
RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses
were 3 percent of net sales for the second quarter of fiscal 2004 as compared
to 4 percent for the second quarter of the prior fiscal year. Actual spending
decreased by $62,000 primarily due to lower costs for outside services and
production supplies at the Company's multipurpose room operations. This
decrease was partially offset by increased spending at the Company's
healthcare seating operations.
Research and development expenses were 3 percent of net sales for the six
months ended September 30, 2003, roughly flat as compared to the same period
of the prior fiscal year. Actual spending decreased by $21,000 primarily due
to lower costs for outside services at the Company's multipurpose room
operations. This decrease was partially offset by increased spending at the
Company's healthcare seating operations.
OTHER INCOME AND EXPENSE. Other income and expense netted to $7,000 for
the second quarter of fiscal 2004. Second quarter interest income was $6,000,
a decrease of $68,000 from the second quarter of the prior fiscal year. The
decrease was due to a lower rate of return on a lower cash balance held in the
current fiscal year. Other income totaled $1,000 for the current quarter.
Other income and expense netted to a net expense of $31,000 for the six
months ended September 30, 2003. Interest income was $39,000, a decrease of
$135,000 from the same period of the prior fiscal year. The decrease was due
to a lower rate of return on a lower cash balance held in the current fiscal
year. Other expenses, which totaled $70,000 for the six months ended
September 30, 2003, consisted of $71,000 in realized foreign currency exchange
losses and other income of $1,000.
19
MINORITY INTEREST. During the quarter ended September 30, 2003, the
startup development company that the Company has a 50 percent equity interest
in realized a net loss of $45,000. Since the Company consolidates this entity
within its financial statements and eliminates the other owner's 50 percent
interest in the net profits or losses, 50 percent of the loss, or $22,000, was
eliminated as a minority interest.
For the six months ended September 30, 2003, the startup development
company realized a net loss of $68,000. Upon consolidation, 50 percent of the
loss, or $34,000, was eliminated as a minority interest.
NET INCOME. For the reasons stated above, the Company's fiscal 2004
second quarter net income of $1,303,000 increased $100,000 or 8 percent over
the second quarter net income in the prior fiscal year.
For the reasons stated above, net income for the six months ended
September 30, 2003 was $2,565,000, an increase of $357,000 or 16 percent over
the same period of the prior fiscal year.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents, which consist primarily of high-quality
commercial paper and repurchase agreements collateralized with U.S. Treasury
securities, totaled $4.05 million at September 30, 2003 as compared to $2.20
million at March 31, 2003.
The following table highlights certain key cash flow and capital
information pertinent to the discussion that follows:
SIX MONTHS ENDED
SEPTEMBER 30, 2003
------------------
Net cash provided by operating activities. . . . $ 2,518,000
Net sales of available-for-sale securities . . . 1,487,000
Purchases of property and equipment. . . . . . . (2,189,000)
Net proceeds from exercise of stock options. . . 341,000
Purchase and retirement of common stock. . . . . (336,000)
The increase in cash and cash equivalents was due primarily to cash
provided by operating activities ($2.52 million), the net sales of
available-for-sale securities ($1.49 million), and net proceeds related to the
exercise of stock options ($0.34 million). This increase was partially offset
by the purchases of property and equipment ($2.19 million), and the purchase
and retirement of common stock ($0.34 million).
Historically, the Company has financed its growth primarily through cash
flow from its operations. The Company's subsidiary, Broda Enterprises, has a
line of credit. The limit on this facility is $0.74 million. As of September
30, 2003, no amount was drawn under this facility. This credit facility
requires the maintenance of certain financial ratios and levels of working
capital. As of September 30, 2003, the Company was in full compliance with
the loan covenants related to Broda's credit facility. The Company's
liquidity depends only partially upon the availability of the Broda credit
facility.
20
The Company currently believes that cash flow from its current operations
together with existing cash reserves and available line of credit will be
sufficient to support its working capital requirements for its existing
operations for at least the next 12 months. 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 that 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, 2003, the proceeds which would have
been received by the Company upon exercise of outstanding options which were
exercisable on that date were approximately $3.13 million. There is no
assurance that such options will be exercised.
The Company's material cash commitments at September 30, 2003 include
current liabilities of $3.97 million to be repaid from funds generated from
operations. Current liabilities consist of the following:
SEPTEMBER 30, MARCH 31,
2003 2003
------------ ------------
Accounts payable. . . . . . . . . . . . . . . . $1,789,000 $2,184,000
Accrued payroll . . . . . . . . . . . . . . . . 1,361,000 931,000
Accrued warranty expense. . . . . . . . . . . . 416,000 365,000
Other accruals. . . . . . . . . . . . . . . . . 405,000 343,000
------------ ------------
Total current liabilities . . . . . . . . . . . $3,971,000 $3,823,000
============ ============
The Company has also entered into two lease agreements for Broda's
production and office facilities under which it is obligated to pay $16,000
Canadian (approximately US $11,000) per month through August 2004.
During the quarter ended March 31, 2002, the Company paid $50,000 as a
good faith deposit for technology to be used in a separate startup development
company to investigate the commercial development of a new technology. During
the quarter ended December 31, 2002, the Company paid an additional $82,000.
This technology investment of $132,000 was contributed to a startup
development company for which the Company received a 50 percent equity
ownership interest. The other 50 percent interest in the technology was
contributed by the other 50 percent owner. The Company has entered into a
royalty agreement with the other 50 percent owner of the startup development
company for some of the products sold by the startup company. The Company has
also extended a line of credit of $125,000 to the other 50 percent owner of
the startup development company, which is secured by such owner's interest in
the company and future royalty payments. The line of credit, which bears
interest at the prime rate (adjusted monthly) as published by the Wall Street
Journal, requires an initial payment of the accrued interest six months after
the line was extended. Thereafter, monthly payments of interest only are
required from June 1, 2003 until November 30, 2004 at which time, the full
amount of the outstanding line is due and payable. As of September 30, 2003,
the full credit line of $125,000 was outstanding and all interest payments are
current.
21
On September 24, 2001, the Company announced its intention to repurchase
up to 125,000 shares of the Company's common stock. On February 14, 2002, the
Company announced its intention to repurchase up to an additional 150,000
shares, bringing the total number of shares approved for repurchase to
275,000. During the quarter ended June 30, 2003, the Company completed the
repurchase of 275,000 shares. The board of directors further authorized an
additional 10,000 shares to be repurchased during the first quarter. This
authorization was fulfilled as well. The Company does not currently have a
share repurchase authorization. However, the Company may do additional
repurchases in the future which will reduce the Company's liquidity.
The Company is in the process of developing new products including a new
generation of multipurpose room tables. In connection with this, the Company
has constructed a new 63,000 square foot facility which will be used for the
manufacturing of its next generation of multipurpose room tables. In
addition, the Company is both purchasing and developing machinery and
equipment to be used in this new process. As of September 30, 2003, the
Company had invested approximately $4.5 million for the building and capital
equipment. The Company anticipates additional capital expenditures of
approximately $1.6 million over the next 3 to 6 months. The Company
anticipates funding these capital expenditures using existing capital reserves
as well as using cash from operations. However, there is no assurance that
such resources will be sufficient and that the Company will not need to raise
additional capital.
FORWARD-LOOKING STATEMENTS AND FACTORS THAT MAY AFFECT FUTURE RESULTS OF
OPERATIONS
Certain statements made above in this filing that are not historical
facts are "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995 (the "Reform Act"). When used in
this filing, the words or phrases "may," "will," "Management believes,"
"Company believes," "Company intends," "estimates," "projects," "anticipates,"
"expects" and similar expressions are intended to identify "forward-looking
statements" within the meaning of the Reform Act.
Forward-looking statements contained herein include plans and objectives
of management for future operations, including plans and objectives relating
to the products, marketing, customers, product line expansions or cost
reductions to preserve margins. These forward-looking statements involve
risks and uncertainties and are based on certain assumptions that may not be
realized. Actual results and outcomes may differ materially from those
discussed or anticipated. The forward-looking statements and associated risks
set forth herein and elsewhere in this filing relate to:
- references to predicted declines in the institutional furniture and U.S.
office furniture markets, and the Company's belief that weakness in furniture
demand will continue;
- statements that the Company is getting ready to launch its next
generation table product that is stronger, lighter, more durable and more able
to withstand outdoor use than its current table products;
- statements that the Company believes that it has a production-ready
process for its next generation table, and its belief that this table will
largely replace its existing table as well as its belief that it may be able
to capture additional market share;
22
- statements about the use of the commercial development of a new
technology and the Company's desire and ability to apply this technology to
develop new products;
- statements that the Company anticipates that its sales volumes during the
third quarter of fiscal 2004 will be up to 5 percent higher as compared to the
sales levels of the third quarter of fiscal 2003;
- references to anticipated continued competitive pressure in multipurpose
room table markets;
- the statement that the Company's healthcare seating operations are less
subject to economic pressures than its multipurpose room furniture operations
but more subject to changes in the regulatory environment;
- statements relating to the Company's belief that cash flow from its
current operations, existing cash reserves, and available line of credit will
be sufficient to support its working capital requirements to fund existing
operations for at least the next 12 months;
- 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;
- statements related to anticipated capital expenditures; and
- statements related to the Company's belief that it is not liable for
certain alleged obligations of up to $1 million related to a defined benefit
pension plan resulting from exiting and selling its specialty office seating
and systems business.
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. 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 continued downturn in domestic and international economies and business
conditions specifically in the institutional furniture industry;
- continued global tension and U.S. military actions related thereto and
continued acts of terror and threats of terrorism;
- increased competition in the Company's core businesses;
- loss of important customer contracts through increased price-based and
product quality competition especially in the Company's multipurpose room
furniture segment;
- limited management and key employee resources;
- declines in sales volumes and profit margins in the Company's
businesses;
- lower than expected revenue, revenue growth, cash flow and gross margins
from the multipurpose room and healthcare seating operations, higher materials
and labor costs, or the Company's inability, for any reason, to profitably
introduce new products or implement its marketing strategies in the healthcare
seating and multipurpose room markets;
- management's inability for any reason to manage effectively the Company's
operations;
- the Company's inability for any reason to develop new products and expand
successfully into new markets;
23
- the Company's ability to effectively produce its next generation table
products;
- the Company's ability to effectively address all unresolved design
challenges with respect to its next generation table products and launch such
table products by the anticipated launch date;
- the market's acceptance of products currently being developed by the
Company including its next generation multipurpose room tables;
- the Company's ability to manufacture and market at current margins high
quality, high performance products at competitive prices;
- import restrictions and economic conditions in the Company's foreign
markets and foreign currency risks associated therewith;
- the Company's ability to maintain relatively low cost labor rates;
- the Company's ability to source a sufficient volume of acceptable raw
materials at current prices;
- 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;
- the Company's ability to refine and enhance the quality and productivity
of its manufacturing process;
- the Company's ability to locate and successfully consummate and integrate
acquisitions, if any, of complementary product lines or companies on terms
acceptable to the Company;
- the Company's ability to retain and maintain relationships with key
customers;
- the Company's ability to raise capital, if needed;
- the availability of insurance funding for the Company's healthcare
seating products; and
- regulatory developments that adversely affect demand for the Company's
products, particularly the Company's healthcare seating products.
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.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company manufactures its products in the United States and Canada and
sells its products in those markets as well as in other countries. The
majority of the Company's sales and expenses are transacted in U.S. dollars
with limited transactions occurring in Canadian dollars or other foreign
currencies. Foreign currency exchange rate fluctuations did not have a
material impact on the financial results of the Company during the quarter
ended September 30, 2003. The Company has occasionally entered into forward
contracts for specific US$ denominated accounts receivable related to its
healthcare seating operations. As of September 30, 2003, no forward contracts
were outstanding. The economic impact of foreign exchange rate movements on
the Company is complex because such changes are often linked to variability in
real growth, inflation, interest rates, governmental actions and other
factors.
24
ITEM 4. CONTROLS AND PROCEDURES
Under the supervision and with the participation of the Company's
management, including the Company's Chief Executive Officer and Chief
Financial Officer, the Company evaluated the effectiveness of the design and
operation of the Company's disclosure controls and procedures (as defined in
Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based upon that
evaluation, the Chief Executive Officer and Chief Financial Officer concluded
that, as of the end of the period covered by this report, the Company's
disclosure controls and procedures were effective in timely alerting them to
the material information relating to the Company (or its consolidated
subsidiaries) required to be included in the reports the Company files or
submits under the Exchange Act.
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 19, 2003. At the Annual Meeting, Gregory L. Wilson, Ralph E. Crump,
Peter Najar, C. Lewis Wilson, and Hal B. Heaton were elected to serve as
directors of the Company until the next annual meeting or until their
successors are elected. The results of the voting were as follows:
Shares Shares Shares
Voted in Favor Withheld Not Voted
Gregory L. Wilson 3,983,572 30,250 91,961
Ralph E. Crump 3,996,047 17,775 91,961
Peter Najar 3,998,297 15,525 91,961
C. Lewis Wilson 3,989,164 24,658 91,961
Hal B. Heaton 3,997,747 16,075 91,961
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
31.1 Certification of Bradley T Nielson, President and Chief
Executive Officer, pursuant to Rule 13a-14(a) of the
Exchange Act, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
31.2 Certification of Paul R. Killpack, Chief Financial
Officer, pursuant to Rule 13a-14(a) of the Exchange
Act, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
32.1 Certification of Bradley T Nielson, President and Chief
Executive Officer, pursuant to Section 1350, Chapter 63
of Title 18, United States Code, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
32.2 Certification of Paul R. Killpack, Chief Financial
Officer, pursuant to Section 1350, Chapter 63 of Title
18, United States Code, as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002.
25
(b) Reports on Form 8-K
On July 30, 2003 the Company filed a current report on Form
8-K announcing its financial results for the first fiscal
quarter of fiscal year 2004.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MITY Enterprises, Inc.
Date: October 29, 2003 /s/ Bradley T Nielson
-----------------------------------
Bradley T Nielson
President and Chief Executive Officer
(Principal Executive Officer)
Date: October 29, 2003 /s/ Paul R. Killpack
-----------------------------------
Paul R. Killpack
Chief Financial Officer
(Principal Financial and Accounting
Officer)