Mity Enterprises Inc. (MITY)
Interview with:
Paul Killpack, Chief Financial Officer and Treasurer
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and Information on their
innovative institutional furniture consisting of multipurpose room furniture and healthcare seating.

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MITY Enterprise has shown innovation in a traditional market by developing the first light-weight plastic table and an even more light-weight and durable next generation table

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Consumer Cyclical
Furniture and Fixtures

Mity Enterprises Inc.

1301 West 400 North
Orem, Utah 84057
Phone: 801-224-0589

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Paul Killpack
Chief Financial Officer
and Treasurer

Interview conducted by:
Lynn Fosse
Senior Editor
August 2003

Paul R. Killpack has been the Chief Financial Officer for MITY Enterprises, Inc. since May 2002.  He has served as Treasurer since August 1998.  He joined MITY in April 1997 and served as the Controller prior to being named Treasurer.  Mr. Killpack graduated from Brigham Young University with a Masters of Business Administration Degree.    He is a Certified Management Accountant and is Certified in Financial Management.

Company Profile:
MITY Enterprises designs, manufactures and markets innovative institutional furniture consisting of multipurpose room furniture and healthcare seating. The Company's multipurpose room furniture is manufactured and marketed through its wholly owned subsidiary, Mity-Lite, Inc. These products consist of lightweight, durable, folding leg tables, stacking chairs, folding chairs, lecterns and other related products used in multipurpose rooms. Through its wholly owned subsidiary, Broda Enterprises, Inc., the Company designs, manufactures and markets healthcare seating and accessories used in long term healthcare facilities located primarily in the United States and Canada.

The Company's strategy for future growth includes continued penetration into the domestic and international niche markets, introducing complementary products such as stacking and folding chairs, staging, and partitions into its existing distribution system, as well as acquiring synergistic businesses, and cost effectively enhancing its manufacturing process. Headquartered in Utah, MITY Enterprises, Inc. serves national and international customers directly and through distributors.

CEOCFOinterviews: Mr. Killpack, please give us a brief history of MITY Enterprises and the products you manufacture.

Mr. Killpack: “MITY Enterprises started about fifteen years ago as a plastic table manufacturer with a design for a plastic table that is both light-weight as well as durable. MITY took over much of the table market place that had been focused on either plywood or particle wood tables. In situations where customers need to set up and take down tables multiple times a day, they use our tables, which are more light-weight and durable, and it becomes a more cost effective solution for them. Tables continue to be a major portion of our business although we also have several chair lines including a folding chair that has unique characteristics and six patents. We also develop any kind of furniture that fits into a multi-purpose room application. We have acquired a company in Canada called Broda Enterprises, which makes a wheelchair that performs quite well and fits a niche market. MITY Enterprises went public almost ten years ago and continues to grow.”

CEOCFOinterviews: You mentioned that you have a unique, lightweight and durable product. Are other people making the same type of product?

Mr. Killpack: “Within the last four or five years, we have seen several companies come out with similar tables. In the early days, the only competition was the particleboard or plywood table. When the company was founded, there were not any other alternatives out there. Since that time, even though we have patents on our table for the corner design and other characteristics of the table, there have been other companies that have seen our success and tried to mimic it. They have been somewhat successful in developing other tables that are similar to ours even though they may not be quite as durable. Another competitive table that has come out is a blow-molded table that is done with a different technology than what we have. It is not as durable or strong as our table and has hit more in the traditional plywood or particleboard market because that table is cheaper than what we sell and priced more competitively.

A couple of years ago, we realized that some of our competitors were starting to catch up to us. We traditionally have had a spirit of innovation within the company and have spent quite a bit of resources over the last few years developing the next generation of our table. We are in the process of refining that and have made a few deliveries to customers. It is a lighter and more durable table than our previous table and from a cost stand point, we anticipate that it will be lower in cost than our traditional product.”

CEOCFOinterviews: How do you reach your customers? Are these typically one-time customers ?

Mr. Killpack: “We attract new and repeat business.  In fact, more than half of our business is repeat business. What happens is that an entity will have thirty or forty tables and some of them will need replacing so they will transition over to our tables by ordering a dozen or so up-front and then continue to order until they replace them all. We offer a twelve-year warranty on our tables and so we believe that they will be a long-term solution for our customers.

Another unique way that we go about approaching the market is through a direct sales force calling over the phone. Most of the other competitors are going through dealers or distributors and sacrificing margin or in the end having to charge a higher price than us. Because we are dealing directly with the customer, we are able to capture more of that margin as well as be more price sensitive than what the competitors are able to do.”

CEOCFOinterviews: Tell us about your customers.

Mr. Killpack: “The table market is generally focused on hotels, convention centers, churches, colleges, as well as high schools and elementary schools, and anywhere they are having meetings on a regular basis. There are quite a few applications. Our average order size is actually only twelve tables, so in selling over the phone, we are able to contact a lot more customers than if we had sales reps out in the field contacting customers. Our bread and butter sales are small churches and meeting centers. We do have our share of big business as well, like a convention center where we will ship them several hundred tables or universities where we will have large sales as well.”

CEOCFOinterviews: Do you ship outside the country as well?

Mr. Killpack: “About 10% of our sales are outside the U.S. through dealers and distributors that we have set up in several countries. We have one in Australia that has done quite well for us recently. We have a dealer in Canada that does very well, and we sell quite a bit in Latin America as well as in Europe and Asia.”

CEOCFOinterviews: Is the brand name important? Do people know the name and should they?

Mr. Killpack: “Brand name is very important because we were the first to market with the table. The Mity-Lite name immediately describes the product to the customers to the point where it is a brand image of a classic light weight table. We have heard of situation where some customers said “I got some of those Mity-Lite tables from XYZ Company,” which is a competitor of ours, and we had to say “no, that table is ours.”

CEOCFOinterviews: How do you manufacture the tables?

Mr. Killpack: “Our manufacturing facility is located in Orem, Utah, which is where our sales force is located as well. The tables are manufactured using a thermaforming process. Essentially the top and bottom pieces start out as a sheet piece of plastic, are heated and then pulled down over a mold and a vacuum sucks the air out so that it forms a particular shape for the table top and bottom. On the inside, we have specially engineered wood to give it structure for strength. We attach the legs with T-nuts so that the attachment and the leg itself are very durable. We then complete the process with trim and glue to put the whole thing together.”

CEOCFOinterviews: Are your facilities running to capacity, and is there any need for anything new in the near future?

Mr. Killpack: “We are now in the transition phase with our new generation of table and have completed a 60,000 square foot facility where we will be manufacturing that product. As far as our existing table and our existing run rates, we have been running two shifts for some time. We have additional capacity for probably a 30-40% increase and we could probably double our capacity with our current facilities. With the new tables coming in, we will be transitioning to that and we will be determining whether the new table will replace the current table. We suspect that it will be a transition to the new table since it has the better characteristics and lower cost. The other expansion that we have done recently is with a facility to manufacture our chairs. There is probably room for a 60-70% increase in sales there. We have enough capacity for growth in the area we are located and have additional space where we can expand by adding on facilities or building new facilities.”

CEOCFOinterviews: Please tell us about Broda Enterprises.

Mr. Killpack: “We purchased Broda Enterprises in November of 1998. They are located in Waterloo, Ontario Canada, northwest of Toronto. What attracted us to them is that they are a niche player. They have a wheelchair that is unique and used in special situations, where the patient has a disease or disability that confines them to bed. This wheelchair allows them a lot more maneuverability particularly by the caregiver. The chair has straps to allow their skin to breathe so that they can avoid getting bedsores. It allows more mobility to the patient. At the time that we acquired them, about two-thirds of their sales were in Canada, and a third in the U.S. Much of our focus has been largely to penetrate into the U.S. to the point now where there is a 60/40 split, with 60% of their sales being in the U.S., and 40% in Canada. There still is a tremendous growth opportunity in the United States. Their chairs are different than others out there, and in specific applications, those are the chairs that the customer needs and wants. There are not a lot of other possibilities out there, so they are able to command a high price and have been very successful.”

CEOCFOinterviews: Do you see additional acquisitions?

Mr. Killpack: “Since the company went public, we had a focus on looking for other potential acquisitions. We actually did a couple of acquisitions four or five years ago, but they did not turn out so well. We finalized the selling off of those last year and that has made us a little leery of what acquisition we might be willing to jump into. But we are still considering acquisitions if they are the right fit for us, particularly as the economic conditions recently have caused some businesses to run into difficulties. At the same time, we are quite enthusiastic about this next generation of table and the technology we are using to produce it. There are many opportunities and we are investigating whether we can develop other products, perhaps even outside of the furniture industry.”

CEOCFOinterviews: How has MITY been affected by the economic conditions?

Mr. Killpack: “Because a lot of our business is focused on the hospitality industry, after 9/11 the level of new construction in that industry has declined. Capital expenditures have fallen back and it has been a slower time for us. There has not been a dramatic decrease for us, but more of a leveling off, whereas previously we had seen a 20-30% growth year-over-year. It has been disappointing to see our growth slow like that, but as we look at others in the same industry, the furniture industry has been down double digits for the last three years. We are seeing signs of recovery and bookings have picked up. We are predicting a five to ten percent increase in the most recent quarter. We believe the new product introductions will enhance our growth as well.”

CEOCFOinterviews: In closing, why should potential investors be interested in MITY Enterprises?

Mr. Killpack: “MITY is a small public company, but our growth has consistently outpaced the industry throughout our history.  In an industry where there are not a lot of interesting and new things going on, we have been innovative. We introduced the plastic table and we are getting ready to introduce a new generation of plastic tables. We have a folding chair with six patents and we are focusing on continuing to develop new products to challenge existing products. In an industry that traditionally has been not nearly as growth oriented, we have a focus on that growth. Because of the market that we focus on, we are able to command higher margins. We typically have a 15-20% operating margin, where others in our industry typically are often in the single digits or just over 10% yielding a real opportunity there for investors. We feel strongly about our core values  based on integrity, innovation and excelling. We keep our books very clean and run a tight ship. We run the company as though we are the shareholders, and a lot of the ownership of the company are the operators of the company; the operators and the board own almost half of the company. There is clearly an interest by those involved in the operation of the company to build a company and continue to move it forward into the future.”

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