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United States Securities and Exchange Commission
Washington, D.C. 20549
----------------------------------------------------------
Form 10-Q
(Mark One)
[ x ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2004
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)
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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 4,296,339 shares of the registrant's Common Stock, par value
$.01 per share, outstanding on July 27, 2004.
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PART I: FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MITY ENTERPRISES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
JUNE 30, MARCH 31,
ASSETS 2004 2004
----------- -----------
Current assets:
Cash and cash equivalents. . . . . . . . . . $ 4,704,000 $ 6,382,000
Available-for-sale securities. . . . . . . . 1,884,000 1,050,000
Accounts receivable, less allowances of
$398,000 at June 30, 2004 and
$339,000 at March 31, 2004 . . . . . . . . 5,841,000 5,586,000
Inventories. . . . . . . . . . . . . . . . . 3,092,000 2,339,000
Tax receivable . . . . . . . . . . . . . . . 127,000 781,000
Prepaid expenses and other current assets. . 494,000 477,000
Deferred income taxes, current . . . . . . . 646,000 568,000
----------- -----------
Total current assets . . . . . . . . . . . . . 16,788,000 17,183,000
Property and equipment, net. . . . . . . . . . 13,775,000 13,230,000
Deferred income taxes. . . . . . . . . . . . . - 63,000
Goodwill . . . . . . . . . . . . . . . . . . . 2,190,000 1,136,000
Other intangible assets, net . . . . . . . . . 255,000 264,000
Notes receivable, net. . . . . . . . . . . . . 71,000 80,000
----------- -----------
Total assets . . . . . . . . . . . . . . . . . $33,079,000 $31,956,000
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable . . . . . . . . . . . . . . $ 1,970,000 2,088,000
Accrued expenses and other current
liabilities. . . . . . . . . . . . . . . . 1,835,000 2,035,000
----------- -----------
Total current liabilities. . . . . . . . . . . 3,805,000 4,123,000
Deferred income tax. . . . . . . . . . . . . . 32,000 -
Minority interest. . . . . . . . . . . . . . . - 34,000
----------- -----------
Total liabilities. . . . . . . . . . . . . . . 3,837,000 4,157,000
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 4,294,628 at June 30,
2004 and 4,258,590 at March 31, 2004 . . 43,000 43,000
Additional paid-in capital . . . . . . . . 11,941,000 11,469,000
Retained earnings. . . . . . . . . . . . . 16,940,000 15,868,000
Accumulated other comprehensive income . . 318,000 419,000
----------- -----------
Total stockholders' equity . . . . . . . . . 29,242,000 27,799,000
----------- -----------
Total liabilities and stockholders' equity . . $33,079,000 $31,956,000
=========== ===========
See accompanying notes to unaudited condensed consolidated
financial statements.
3
MITY ENTERPRISES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
THREE MONTHS ENDED JUNE 30,
2004 2003
----------- -----------
Net sales . . . . . . . . . . . . . . . . . . . . $11,821,000 $11,357,000
Cost of products sold . . . . . . . . . . . . . . 7,680,000 6,916,000
----------- -----------
Gross profit. . . . . . . . . . . . . . . . . . . 4,141,000 4,441,000
Expenses:
Selling . . . . . . . . . . . . . . . . . . . . 1,732,000 1,499,000
General and administrative. . . . . . . . . . . 522,000 542,000
Research and development. . . . . . . . . . . . 284,000 336,000
----------- -----------
Total expenses. . . . . . . . . . . . . . . . . . 2,538,000 2,377,000
----------- -----------
Income from operations. . . . . . . . . . . . . . 1,603,000 2,064,000
Other income (expense)
Interest income . . . . . . . . . . . . . . . . 20,000 33,000
Other . . . . . . . . . . . . . . . . . . . . . 43,000 (71,000)
----------- -----------
Total other income (expense), net . . . . . . . . 63,000 (38,000)
----------- -----------
Income before provision for income taxes and
minority interest . . . . . . . . . . . . . . . 1,666,000 2,026,000
Provision for income taxes. . . . . . . . . . . . 617,000 776,000
----------- -----------
Net income before minority interest . . . . . . . 1,049,000 1,250,000
Minority interest . . . . . . . . . . . . . . . . 22,000 12,000
----------- -----------
Net income. . . . . . . . . . . . . . . . . . . . $ 1,071,000 $ 1,262,000
=========== ===========
Basic earnings per share. . . . . . . . . . . . . $ 0.25 $ 0.31
=========== ===========
Weighted average number of common shares - basic. 4,268,941 4,121,576
=========== ===========
Diluted earnings per share. . . . . . . . . . . . $ 0.24 $ 0.29
=========== ===========
Weighted average number of common and common
equivalent shares - diluted. . . . . . . . . . . 4,478,894 4,305,504
=========== ===========
See accompanying notes to unaudited condensed consolidated
financial statements.
MITY ENTERPRISES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
THREE MONTHS ENDED JUNE 30,
2004 2003
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income . . . . . . . . . . . . . . . . . . . $ 1,071,000 $ 1,262,000
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization. . . . . . . . 451,000 391,000
Deferred taxes . . . . . . . . . . . . . . . 16,000 101,000
Net gain on disposal of equipment. . . . . . (6,000) --
Tax benefit from exercise of stock options . 100,000 8,000
Changes in assets and liabilities:
Accounts receivable. . . . . . . . . . . . (231,000) (1,241,000)
Inventories. . . . . . . . . . . . . . . . (713,000) (405,000)
Prepaid expenses and other current assets. (12,000) (54,000)
Tax receivable . . . . . . . . . . . . . . 657,000 1,233,000
Accounts payable . . . . . . . . . . . . . (176,000) (347,000)
Accrued expenses and other current
liabilities . . . . . . . . . . . . . . . (288,000) 520,000
----------- -----------
Net cash provided by operating activities. . . . 869,000 1,468,000
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of available-for-sale securities . . . (844,000) (1,885,000)
Sales and maturities of available-for-sale
securities . . . . . . . . . . . . . . . . . . - 944,000
Proceeds from sales of property & equipment. . . 6,000 --
Decrease in notes receivable . . . . . . . . . . 9,000 12,000
Purchase of Versipanel . . . . . . . . . . . . . (1,201,000) --
Purchases of property and equipment. . . . . . . (850,000) (1,441,000)
----------- -----------
Net cash used in investing activities. . . . . . (2,880,000) (2,370,000)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from exercise of stock options and
issuance of shares to the 401(k) plan. . . . . 372,000 208,000
Minority interest. . . . . . . . . . . . . . . . (34,000) (12,000)
Purchase and retirement of common stock. . . . . - (336,000)
----------- -----------
Net cash provided by (used in) financing
activities . . . . . . . . . . . . . . . . . . 338,000 (140,000)
----------- -----------
Effect of exchange rate changes on cash. . . . . (5,000) 17,000
----------- -----------
Net decrease in cash and cash equivalents. . . . (1,678,000) (1,025,000)
Cash and cash equivalents at beginning of period 6,382,000 2,203,000
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD . . . $ 4,704,000 $ 1,178,000
=========== ===========
See accompanying notes to unaudited condensed consolidated
financial statements.
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SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
THREE MONTHS ENDED JUNE 30,
2004 2003
----------- -----------
Net cash paid during the period for income taxes . $ 52,000 $ 51,000
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
In April of 2004, the Company purchased the assets of Versipanel LLC for
$1,201,000. In conjunction with the acquisition, liabilities were assumed as
follows:
Fair value of assets acquired. . . . . . . . . . . . $ 219,000
Cost in excess of fair value of assets (goodwill). . 1,085,000
Cash paid for assets . . . . . . . . . . . . . . . . (1,201,000)
-----------
Liabilities assumed. . . . . . . . . . . . . . . . . $ 103,000
===========
See accompanying notes to unaudited condensed consolidated
financial statements.
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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 ended June 30,
2004 are not necessarily indicative of results to be expected for the full
fiscal year ending March 31, 2005.
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,
2004.
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:
7
THREE MONTHS ENDED June 30,
2004 2003
---------- ----------
Net income:
As reported $1,071,000 $1,262,000
Pro forma 1,018,000 1,228,000
Earnings per share - basic:
As reported $0.25 $0.31
Pro forma 0.24 0.30
Earnings per share - diluted:
As reported $0.24 $0.29
Pro forma 0.23 0.29
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 three months ended June 30, 2004: expected volatility of 43
percent, risk free interest rate of 2.57 percent, and expected lives of three
years. During the three months ended June 30, 2004, 10,000 options were
granted. No options were granted during the three months ended June 30, 2003.
Under SFAS No. 123, the weighted average fair value per share of options
issued during the three months ended June 30, 2004 was $5.47.
2. INVENTORIES
Inventories consisted of the following:
June 30, March 31,
2004 2004
----------- -----------
Materials and supplies . . . . $ 2,103,000 $ 1,486,000
Work-in-progress . . . . . . . 188,000 265,000
Finished goods . . . . . . . . 801,000 588,000
----------- -----------
$ 3,092,000 $ 2,339,000
=========== ===========
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 three
months ended June 30, 2004, net income exceeded comprehensive income by
$101,000, consisting of $91,000 in foreign currency translation losses and
$10,000 in unrealized losses on available for sale securities. For the three
months ended June 30, 2003, comprehensive income exceeded net income by
$237,000, consisting of $243,000 in foreign currency translation gains and
$6,000 in unrealized losses on available for sale securities.
8
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, portable partitions, 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 ended June 30, 2004 and
2003 is as follows:
THREE MONTHS ENDED JUNE 30,
2004 2003
----------- -----------
Net sales:
Multipurpose room furniture. . . . . . . . $10,300,000 $10,050,000
Healthcare seating . . . . . . . . . . . . 1,521,000 1,307,000
----------- -----------
$11,821,000 $11,357,000
=========== ===========
Income from operations:
Multipurpose room furniture. . . . . . . . $ 1,322,000 $ 1,836,000
Healthcare seating . . . . . . . . . . . . 281,000 228,000
----------- -----------
$ 1,603,000 $ 2,064,000
=========== ===========
Depreciation expense:
Multipurpose room furniture. . . . . . . . $ 404,000 $ 362,000
Healthcare seating . . . . . . . . . . . . 47,000 29,000
----------- -----------
$ 451,000 $ 391,000
=========== ===========
Capital expenditures, net:
Multipurpose room furniture. . . . . . . . $ 834,000 $ 1,371,000
Healthcare seating . . . . . . . . . . . . 16,000 70,000
----------- -----------
$ 850,000 $ 1,441,000
=========== ===========
June 30, March 31,
2004 2004
------------ ------------
Total assets:
Multipurpose room furniture. . . . . . . . $29,168,000 $28,042,000
Healthcare seating . . . . . . . . . . . . 3,911,000 3,914,000
------------ ------------
$33,079,000 $31,956,000
============ ============
Total goodwill:
Multipurpose room furniture. . . . . . . . $ 1,085,000 $ 1,136,000
Healthcare seating . . . . . . . . . . . . 1,105,000 --
------------ ------------
$ 2,190,000 $ 1,136,000
============ ============
9
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 ended June 30, 2004 and 2003, respectively.
THREE MONTHS ENDED
JUNE 30,
2004 2003
----------- -----------
Net income as reported. . . . . . . . . . . . . $ 1,071,000 $ 1,262,000
=========== ===========
BASIC:
Weighted average number of common shares
outstanding . . . . . . . . . . . . . . . . . 4,268,941 4,121,576
=========== ===========
Basic net income per share . . . . . . . . . . $ 0.25 $ 0.31
=========== ===========
DILUTED:
Common and common equivalent shares
outstanding:
Weighted average number of common shares
outstanding . . . . . . . . . . . . . . . . . 4,268,941 4,121,576
Common stock equivalents from options
computed on the treasury-stock method using
the average fair market value of common
stock outstanding during the period . . . . 209,953 183,928
----------- -----------
Shares used in the computation . . . . . . . 4,478,894 4,305,504
=========== ===========
Diluted net income per share . . . . . . . . . $ 0.24 $ 0.29
=========== ===========
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
also extended a line of credit to the other owner of $125,000. During the
quarter ended June 30, 2004, the full credit line of $125,000 was repaid.
10
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 nine 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 $150,000 for this note receivable. At June 30, 2004,
the gross value of this note receivable was $233,000. At June 30, 2004,
$54,000 was the current portion of this note receivable, which is included in
prepaid expenses and other current assets. As of June 30, 2004, the dealer
was current on payments on this note receivable.
7. RECENTLY ISSUED FINANCIAL ACCOUNTING STANDARDS
In January 2003, the FASB issued Interpretation No. 46, "Consolidation of
Variable Interest Entities" ("FIN No. 46"), an interpretation of Accounting
Research Bulletin (ARB) No. 51. FIN No. 46 addresses consolidation by
business enterprises of variable interest entities. FIN No. 46 applies
immediately to variable interest entities created after January 31, 2003 and
to variable interest entities in which an enterprise obtains an interest after
that date. FIN No. 46 applies in the first year or interim period ending
after December 15, 2003 to variable interest entities in which an enterprise
holds a variable interest that it acquired before February 1, 2003. The
Company does not have an interest in any variable interest entity and
therefore the adoption of FIN No. 46 did not impact our consolidated financial
statements.
In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133
on Derivative Instruments and Hedging Activities," which amends and clarifies
accounting for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities under SFAS
No. 133. SFAS No. 149 is effective for contracts entered into or modified
after June 30, 2003 and for hedging relationships designated after June 30,
2003. The adoption of SFAS No. 149 did not have an impact on our consolidated
financial statements.
In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain
Financial Instruments with Characteristics of both Liability and Equity,"
which establishes standards for how an issuer classifies and measures certain
financial instruments with characteristics of both liability and equity in its
statement of financial position. SFAS No. 150 is effective for new or
modified financial instruments beginning June 1, 2003, and for existing
instruments beginning August 1, 2003. The adoption of SFAS No. 150 did not
have an impact on our consolidated financial statements.
11
In March 2004, the FASB reached a consensus on Emerging Issues Task Force
(EITF) Issue No.03-1, "The Meaning of Other-Than-Temporary Impairment and Its
Application to Certain Investments", which provides guidance to determine the
meaning of other-than-temporary impairment and its application to investments
classified as either available-for-sale or held-to-maturity (including
individual securities and investments in mutual funds), and investments
accounted for under the cost method or the equity method. The guidance for
evaluating whether an investment is other-than-temporarily impaired should be
applied in other-than-temporary impairment evaluations made in reporting
periods beginning after June 15, 2004. Management believes the adoption of
Issue No. 03-1 will not have a material impact on the consolidated financial
statements.
8. COMMITMENTS AND CONTINGENCIES
The Company has been named as defendant in certain lawsuits. While the
Company cannot predict the results of these actions, management believes,
based in part on the advice of legal counsel, that the liability, if any,
resulting from such litigation and claims will not have a material affect on
the consolidated financial statements.
The Company has certain alleged obligations of up to $2.3 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.
9. RECENT ACQUISITION
On April 1, 2004, the Company announced the acquisition of the assets of
Versipanel LLC, a privately-owned designer, manufacturer and marketer of a
variety of portable partitions based in Phoenix, Arizona. The transaction was
treated for accounting purposes as a purchase and accordingly, the Company has
included the operating results of Versipanel in the financial statements from
April 1, 2004.
In conjunction with this acquisition, the Company paid $1,201,000 in
cash. The acquisition resulted in goodwill of $1,085,000 all of which is
deductible for tax purposes. Up to an additional $200,000 of the purchase
price is contingently payable based on obtaining certain sales growth targets
on the Versipanel product line through April 26, 2005. If achieved, goodwill
will be increased by the amount paid out. The actual amount of goodwill
recorded will also vary based upon the final purchase price allocation
resulting from post-closing purchase price adjustments which may result from
any breaches of sellers' representations, warranties or covenants.
The unaudited pro forma results of operations of the Company for the
three months ended June 30, 2003 and 2004 (assuming the acquisition of
Versipanel had occurred as of April 1, 2003) are as follows:
12
THREE MONTHS ENDED
JUNE 30,
2004 2003
----------- -----------
Net sales . . . . . . . . . . . . . . . . . . . $11,821,000 $11,705,000
Net income. . . . . . . . . . . . . . . . . . . 1,071,000 1,271,000
Basic earnings per share. . . . . . . . . . . . 0.25 0.31
Diluted earnings per share. . . . . . . . . . . 0.24 0.30
13
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 of MITY Enterprises, Inc. (the "Company")
and the notes thereto and with the Company's Annual Report on Form 10-K for
the fiscal year ended March 31, 2004.
The Company designs and manufactures institutional furniture and markets
its products in niche markets. The Company's current 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, portable partitions, 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.
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 recent
years. Continued 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 4 percent for calendar year 2003. Industry
experts predict a recovery in calendar year 2004, with shipments projected to
be up by 3 percent. 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 June 30, 2004
performed near industry estimates as sales volumes increased 2 percent as
compared to the prior year.
14
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 it believes is stronger, lighter, more durable and better able to
withstand outdoor use than its current multipurpose room tables. The Company
believes that it has developed a product that will meet most if not all of
these criteria. During the past year, the Company has started shipping
limited quantities of this new table to a few customers. The Company has
struggled with perfecting its process to consistently produce tables that meet
its quality expectations. The Company is continuing to work to improve the
process and believes that it will be able to create a repeatable manufacturing
process to produce these tables. The Company anticipates moving forward with
a general product launch in the next six to nine months. However, because of
the continued difficulties that the Company is facing in refining this
process, it can give no assurance that the launch will take place in that time
frame or that it will be successful in creating a repeatable process. If
successful, the Company currently 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, it
may be able to capture additional market share.
During the past few years, chair sales have begun to make up a larger
portion of the multipurpose room operations sales. Although table sales still
predominate the volume of this operation, most of the increases in sales can
be attributed to increases in chair sales. During the past fiscal year, the
Company launched a new line of stacking chairs to complement its existing
chair lines. The Company anticipates developing additional complementary
chair lines to continue to grow this portion of its business as well as
further penetrating its existing marketplace with its current line of chairs.
However, there can be no assurance that the Company will be able to
successfully develop and launch such chair lines or further penetrate its
existing marketplace.
The Company has a 50 percent equity ownership interest in a separate
startup development company (the "Startup Development Company") that is
investigating the commercial development of a new technology related to the
manufacturing process the Company is using for its next generation 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 Company's
next generation 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.
On April 1, 2004, the Company announced the acquisition of the assets of
Versipanel LLC, a privately-owned designer, manufacturer and marketer of a
variety of portable partitions based in Phoenix, Arizona. Versipanel
specializes in the production of a unique and innovative line of portable
partitions, moveable walls, sight barriers, sound barriers, and other
applications. The partitions are constructed of sound absorbing lightweight
materials, making them easily portable. They can be used to create instant
classrooms, portable dressing rooms and trade show meeting rooms. For the
year ended December 31, 2003, Versipanel generated sales of approximately $1.5
million. During the quarter ended June 30, 2004, Versipanel was integrated
into the multipurpose room furniture operation. The Company plans to sell the
Versipanel products through its multipurpose room furniture sales system to
existing customers.
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 June
30, 2004, 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 September 30, 2004
will be up to 10 percent higher as compared to the prior year's second
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 second 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. Management bases its estimates on
historical experience and on various other assumptions that are believed to be
reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying values of assets and liabilities that are
not readily apparent from other sources. The Company's critical accounting
policies 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 its acquisitions of Broda Enterprises and Versipanel and the other
intangible asset is intellectual property related to the Startup Development
Company. During the quarter ended June 30, 2004, the Company reviewed the
goodwill related to the Broda acquisition and the intellectual property
related to the Startup Development Company. 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 what the liquidation value of the
operations 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 the 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
June 30, 2004, this entity realized a net loss of $83,000, of which 50 percent
or $41,000 was eliminated as a minority interest. However, the $41,000
elimination amount exceeded the amount of minority interest represented by the
other partner's capital contribution by $7,000. Consequently, the full amount
of the overage portion of the loss was recognized. The net amount of minority
interest after-tax recognized for the quarter was $22,000.
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.
18
Pension liability: The Company has certain alleged obligations of up to $2.3
million related to a defined benefit pension plan resulting from exiting and
selling its specialty office seating and systems business. The Company is
investigating this matter and 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.
COMPARISON OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 2004 AND 2003
NET SALES. The Company's first quarter fiscal 2005 net sales of
$11,821,000 were up 4 percent as compared with the first quarter net sales in
the prior fiscal year. For the quarter ended June 30, 2004, the increase
reflects sales increases, as compared to the quarter ended June 30, 2003, of
16 percent in the Company's healthcare chair operations and 3 percent in the
Company's multipurpose room operations. The Company's total international
sales represented 13 percent of net sales for the quarter ended June 30, 2004
and 2003. The Company attributes most of the increase in sales in the
multipurpose room operations to a 17 percent increase in chair sales. This
was partially offset by a 4 percent decline in table sales. The Company
expects that its overall net sales will be up to 10 percent higher in the
second quarter of fiscal 2005 as compared to the second quarter of fiscal
2004.
GROSS PROFIT. Gross profit as a percentage of net sales in the quarter
ended June 30, 2004 decreased by 4 percentage points over the same quarter in
the prior fiscal year to 35 percent. This decrease was due to higher overhead
and labor costs associated primarily with the startup of the manufacturing
operation for the Company's next generation table as well as higher freight
costs at the multipurpose room furniture operation. The gross margin decrease
was partially offset by lower material costs at the Company's healthcare
seating operations.
SELLING EXPENSES. Selling expenses were 15 percent of net sales in the
first quarter of fiscal 2005, an increase of 2 percentage points from the
first quarter of the prior fiscal year. Actual expenses increased by
$233,000. Multipurpose room furniture selling costs increased by $169,000
over the prior fiscal year. This increase resulted primarily from higher
personnel and marketing literature costs. Selling expenses at the healthcare
seating operations increased by $64,000 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 first quarter of fiscal 2005 as compared
to 5 percent for the first quarter of the prior fiscal year. Actual spending
decreased by 4 percent or $20,000. The decrease was primarily due to lower
costs for professional and legal fees.
RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses
were 2 percent of net sales for the first quarter of fiscal 2005 as compared
to 3 percent for the first quarter of the prior fiscal year. Actual spending
decreased by $52,000 primarily due to lower costs for personnel, legal fees
and prototyping at the Company's multipurpose room operations.
18
OTHER INCOME AND EXPENSE. Other income and expense netted to $63,000 for
the first quarter of fiscal 2005 as compared to a net expense of $38,000 for
the first quarter of fiscal 2004. First quarter interest income was $20,000
as compared to $33,000 in the first quarter of the prior fiscal year. Other
income totaled $43,000 for the current quarter and consisted of $6,000 in gain
on asset disposal, $36,000 in realized foreign currency exchange gains, and
$1,000 in other income.
MINORITY INTEREST. During the quarter ended June 30, 2004, the Startup
Development Company in which the Company has a 50 percent equity interest
realized a pre-tax net loss of $83,000. 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
$41,000, was eliminated as a minority interest. However, the $41,000
elimination amount exceeded the amount of minority interest represented by the
other partner's capital contribution by $7,000. Consequently, the full amount
of the overage portion of the loss was recognized. The net amount of minority
interest after-tax recognized for the quarter was $22,000.
NET INCOME. For the reasons stated above, the Company's fiscal 2005
first quarter net income $1,071,000 decreased $191,000 or 15 percent over the
first quarter net income in 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 $4.70 million at June 30, 2004 as compared to $6.38
million at March 31, 2004.
The following table highlights certain key cash flow and capital
information pertinent to the discussion that follows:
THREE MONTHS ENDED
JUNE 30, 2004
------------------
Net cash provided by operating activities. . . . $ 869,000
Purchases of available-for-sale securities . . . (844,000)
Purchase of the assets of Versipanel, LLC. . . . (1,201,000)
Purchases of property and equipment. . . . . . . (850,000)
Net proceeds from exercise of stock options. . . 372,000
The decrease in cash and cash equivalents was due primarily to the
purchase of Versipanel ($1.20 million), purchases of property and equipment
($0.85 million), and the purchase of available-for-sale securities ($0.84
million). The decrease was partially offset by cash provided by operating
activities ($0.87 million) and net proceeds related to the exercise of stock
options ($0.37 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 June 30,
2004, no amount was drawn under this facility. This credit facility requires
the maintenance of certain financial ratios and levels of working capital. As
of June 30, 2004, 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.
19
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 June 30, 2004, the proceeds which would have been
received by the Company upon exercise of outstanding options which were
exercisable on that date were approximately $2.94 million. There is no
assurance that such options will be exercised.
The Company's material cash commitments at June 30, 2004 include current
liabilities of $3.81 million to be repaid from funds generated from
operations. Current liabilities consist of the following:
JUNE 30, MARCH 31,
2004 2004
----------- -----------
Accounts payable. . . . . . . . . . . . . . . . $1,970,000 $2,088,000
Accrued payroll . . . . . . . . . . . . . . . . 914,000 1,236,000
Accrued warranty expense. . . . . . . . . . . . 436,000 416,000
Other accruals. . . . . . . . . . . . . . . . . 485,000 383,000
----------- -----------
Total current liabilities . . . . . . . . . . . $3,805,000 $4,123,000
=========== ===========
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 $12,000) per month through August 2005.
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
also extended a line of credit to the other owner of $125,000. During the
quarter ended June 30, 2004, the full credit line of $125,000 was repaid.
20
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 that 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, if they occur, will reduce the Company's
liquidity.
In connection with the development and anticipated launch of the
Company's next generation multipurpose room table, the Company has completed
the construction of a new 63,000 square foot facility which is being used to
manufacture the next generation tables. In addition, the Company is both
purchasing and developing machinery and equipment to be used in this new
process. As of June 30, 2004, the Company had invested, project to date,
approximately $2.7 million for the building and $2.8 million for the capital
equipment. The Company anticipates additional capital expenditures of
approximately $0.7 million over the next 3 to 6 months for equipment. 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.
The Company has certain alleged obligations of up to $2.3 million related
to a defined benefit pension plan resulting from exiting and selling its
specialty office seating and systems business. The Company is investigating
this matter and 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. However, if the Company is
obligated for any or all of this amount, it would reduce the Company's
liquidity.
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:
21
- statements that the Company continues to pursue new product
development and acquisitions of product lines or companies that would be
complementary to the Company's businesses;
- references to predicted increases in the institutional furniture and
U.S. office furniture markets;
- statements that the Company is getting ready to generally launch in
the next six to nine months 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 will be able to create a
repeatable manufacturing process for its next generation table, and its belief
that this table will largely replace its existing table over the next one to
two years as well as its belief that it may be able to capture additional
market share;
- statements that the Company anticipates developing additional
complementary chair lines and further penetrating its existing marketplace
with its current line of chairs;
- statements about the Company's belief that the Startup Development
Company's technology may be used to develop and/or license the development of
new products outside of the Company's current multipurpose room marketplace;
- statements that the Company anticipates that its sales volumes during
the second quarter of fiscal 2005 will be up to 10 percent higher as compared
to the sales levels of the second quarter of fiscal 2004;
- references to anticipated continued competitive pressure in
multipurpose room table markets;
- the statement that the Company plans to sell Versipanel products
through its multipurpose room furniture sales system to existing customers;
- 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;
- the statement that future growth in the Company's healthcare seating
operation 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;
- statements that management believes it is more likely than not that
future earnings will be sufficient to recover deferred tax assets;
- 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;
22
- statements related to anticipated capital expenditures related to the
Company's next generation table and the Company's ability to fund such
expenditures; and
- statements related to the Company's belief that it is not liable for
certain alleged obligations of up to $2.3 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:
- downturns or improvements 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;
- the Company's ability to effectively produce and sell its next
generation multipurpose room table products;
- the Company's ability to effectively address any unanticipated design
and manufacturing challenges with respect to its next generation table
products and generally launch such table products by the anticipated launch
dates;
23
- 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;
- the risk that the Company may become liable for certain alleged
obligations of up to $2.3 million related to a defined benefit pension plan
resulting from exiting and selling its specialty office seating and systems
business; and
- regulatory developments that adversely affect demand for the Company's
products, particularly the Company's healthcare seating products.
In light of the significant uncertainties inherent in forward-looking
statements, the inclusion of any such statement should not be regarded as a
representation by the Company or any other person that the objectives or plans
of the Company will be achieved. The Company disclaims any obligation or
intent to update any such factors or forward-looking statements to reflect
future events or developments.
24
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company manufactures its products in the United States and Canada and
sells its products in those markets as well as in other countries. The
majority of the Company's sales and expenses are transacted in U.S. dollars
with limited transactions occurring in Canadian dollars or other foreign
currencies. Foreign currency exchange rate fluctuations did not have a
material impact on the financial results of the Company during the quarter
ended June 30, 2004. The Company has occasionally entered into forward
contracts for specific US$ denominated accounts receivable related to its
healthcare seating operations. As of June 30, 2004, 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.
ITEM 4. CONTROLS AND PROCEDURES.
Evaluation of disclosure 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.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
During the most recent fiscal quarter covered by this report, there has
been no change in the Company's internal control over financial reporting (as
defined in Rule 13a-15(f) or 15d-15(f) under the Exchange Act) that has
materially affected, or is reasonably likely to materially affect, the
Company's internal control over financial reporting.
25
PART II: OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
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.
(b) Reports on Form 8-K
On April 2, 2004 the Company filed a current report on
Form 8-K announcing its purchase of Versipanel, LLC and
increasing its fourth quarter net sales growth estimate.
On May 20, 2004 the Company filed a current report on Form
8-K announcing its financial results for the fourth fiscal
quarter and year end of fiscal year 2004.
26
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: July 28, 2004 /s/ Bradley T Nielson
-----------------------------------
Bradley T Nielson
President and Chief Executive Officer
(Principal Executive Officer)
Date: July 28, 2004 /s/ Paul R. Killpack
-----------------------------------
Paul R. Killpack
Chief Financial Officer
(Principal Financial and Accounting
Officer)