FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended July 31, 1995 Commission file number 2-31520
KIT MANUFACTURING COMPANY
(Exact name of registrant as specified in its charter)
California 95-1525261
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
530 East Wardlow Road, P.O. Box 848, Long Beach, California 90801
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code
(310) 595-7451
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 .
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer s
classes of common stock, as of the close of the period covered by
this report. Common Stock (no par value), 1,110,934 shares
outstanding as of July 31, 1995.
Index to Exhibits - Page 11
1 of 11 Pages
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PART I
FINANCIAL INFORMATION
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<TABLE>
KIT MANUFACTURING
STATEMENTS OF INCOME
(Dollars in Thousands Except Per Share Amounts)
(Unaudited)
<CAPTION>
Three Months Ended Six Months Ended
July 31, July 31,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Sales $27,537 $26,383 $75,813 $66,680
Costs and expenses
Cost of sales 25,236 23,460 68,541 58,934
Selling, general and
administrative expenses 2,027 2,254 5,965 5,976
------ ------ ------ ------
27,263 25,714 74,506 64,910
Operating income 274 669 1,307 1,770
Other income (expense)
Proceeds from business interruption claim 200 701
(Note I)
Interest income (expense), net (7) (35) 36 (60)
------ ------ ------ ------
Income before income taxes 467 634 2,044 1,710
Provision for income taxes
(Note A) 194 260 838 706
------ ------ ------ ------
Net income $273 $374 $1,206 $1,004
====== ====== ====== ======
Weighted average shares outstanding
(Note B) 1,110,934 1,110,93 1,110,934 1,200,297
========= ======== ========= =========
Net income per share
(Note B) $0.25 $0.34 $1.09 $0.84
===== ===== ===== =====
Dividends per share $ - $ - $ - $ -
====== ====== ====== ======
The accompanying notes are an integral part of these financial statements
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</TABLE>
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<TABLE>
KIT MANUFACTURING COMPANY
BALANCE SHEETS
(Dollars in thousands)
<CAPTION>
July October
1995 1994
ASSETS (Unaudited)
<S> <C> <C>
Cash and cash $ 809 $4,625
Accounts receivable, net 7,691 5,564
Notes and other receivables 67 577
Inventories:
Raw materials 3,474 2,317
Work in process 1,211 1,038
Finished goods 2,570 737
------ ------
Total inventories 7,255 4,092
Prepaids and deferred income 1,586 1,190
------ ------
Total current assets 17,408 16,048
Property, plant and equipment 6,058 5,762
Other assets 97 81
------ ------
Total assets $23,563 $21,891
====== ======
LIABILITIES AND SHAREHOLDERS'
Note payable to bank $1,000
Accounts payable 3,666 $4,486
Accrued payroll and related 2,005 2,005
Accrued marketing programs 615 592
Accrued expenses 1,095 1,185
Income taxes payable 511 158
------ ------
Total current liabilities 8,992 8,426
Deferred income taxes 1,308 1,308
------ ------
Total liabilities 10,200 9,734
Commitments and contingencies
Shareholders' equity
Common stock and additional paid-in capital,
issued and outstanding 1,110,934 shares 1,592 1,592
Retained earnings:
Balance at beginning of period 10,565 8,674
Net income for period 1,206 1,891
------ ------
Balance at end of period 11,771 10,565
------ ------
Total shareholders' equity 13,363 12,157
------ ------
Total liabilities and shareholders' equity $23,563 $21,891
====== ======
The accompanying notes are an integral part of these financial statements
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</TABLE>
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<TABLE>
KIT MANUFACTURING COMPANY
STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
<CAPTION>
For the nine months ended
July 31,
-------------------------
1995 1994
Cash flows from operating activities: ---- ----
<S> <C> <C>
Cash received from customers $74,392 $63,672
Interest received 75 77
------ ------
Cash received from operations 74,467 63,749
------ ------
Cash paid to suppliers and employees 77,998 65,100
Interest paid 39 138
Income taxes paid 809 387
------ ------
Cash disbursed for operations 78,846 65,625
------ ------
Net cash used in operating activities (4,379) (1,876)
------ ------
Cash flows from investing activities:
Purchase of property, plant and equipment (764) (629)
Changes in other current and non-current assets (374) (154)
------ ------
Net cash used in investing activities (1,138) (783)
------ ------
Cash flows from financing activities:
Funds used to repurchase common stock (3,615)
Proceeds from business interruption claim 701
Proceeds from line-of-credit borrowings 2,800 9,500
Principal payments on line-of-credit borrowings (1,800) (9,500)
------ ------
Net cash provided by (used in)financing activities 1,701 (3,615
------ ------
Net decrease in cash (3,816) (6,274)
Cash at beginning of year 4,625 8,484
------ ------
Cash at end of period $ 809 $2,210
====== ======
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Reconciliation of net income to net cash used in operating activities:
Net income $1,206 $1,004
Adjustments to reconcile net income to net cash
used in operating activities:
Proceeds from business interruption claim (701)
Depreciation 431 338
Increase in accounts receivable (1,616) (3,009)
Increase in inventories (3,163) (1,153)
(Decrease)increase in accounts payable and accrued liabilities (565) 625
Increase in income taxes payable 29 319
------ ------
Net cash used in operating activities ($4,379) ($1,876)
====== ======
The accompanying notes are an integral part of these financial statements
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</TABLE>
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KIT MANUFACTURING COMPANY
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
Note A - The provision or benefit for income taxes is calculated using the
Company's estimated annual effective tax rate.
Note B - Per share amounts are based on the weighted average number of
common shares outstanding. Common stock equivalents have not been included
in the computations because their effect would not be dilutive.
Note C - During the period reported on, there were no sales of securities.
Note D - In the opinion of management, all material adjustments which are
necessary for a fair statement of financial position, results of operations
and cash flows have been included in these financial statements.
Note E - The results of the period are not necessarily indicative of annual
results due to seasonality of the business.
Note F - Financial information contained herein is unaudited.
Note G - The Company is contingently liable to various financial
institutions on repurchase agreements in connection with wholesale inventory
financing. In general, inventory is repurchased by the Company upon default
by a dealer with a financing institution and then resold through normal
distribution channels. In addition, the Company is contingently liable to
financial institutions for letters of credit which were established to
satisfy the self-insured workers' compensation regulations of the states in
which the Company conducts manufacturing operations.
Management does not expect that losses, if any, from the contingencies
described above will be of material importance to the financial condition or
earnings of the Company.
Note H - During the first quarter of fiscal 1994, the Company repurchased
361,455 shares of common stock for $10.00 per share from the family of one of
the founders of KIT who died in 1989.
Note I - During the second quarter of fiscal 1995, the Company received
$501,000 in insurance proceeds on a business interruption claim relative to
the 1992 tornado damage at the McPherson, Kansas manufactured housing
facility and during the third quarter the Company received an additional
$200,000 in insurance proceeds from the same business interruption claim.
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KIT MANUFACTURING COMPANY
Management's Discussion and Analysis of Financial Condition
and Results of Operations
FINANCIAL CONDITION - JULY 31, 1995 COMPARED TO OCTOBER 31, 1994
Under third quarter market conditions, the Company continued to
borrowed on its line of credit to maintain inventory levels to
provide for the third quarter increase in sales. The Company's
working capital increased $894,000 due primarily to an increase in
inventories and an increase in accounts receivable due to an increase
in sales. The current ratio was 1.9:1 at April 30, 1995 and at
October 31, 1994.
The Company's liquidity position as reflected in the current ratio
described above, capital resources, including excess plant capacity,
working capital, and line of credit, are considered to be adequate to
provide for near term anticipated growth.
RESULTS OF OPERATIONS - QUARTER ENDED JULY 31, 1995 COMPARED TO
QUARTER ENDED JULY 31, 1994
Total sales for the quarter ended July 31, 1995 were $27,537,000, a
four percent increase from sales of $26,383,000 for the same quarter of
the prior year. The increase consisted of a ten percent increase in
manufactured housing sales and a two percent increase in recreational
vehicle sales. RV sales saw an increase as a result of demand for the
entry-level Sportmaster product. However, Western regional RV sales are
down due to lackluster retail sales causing dealers to adjust their
inventories. Manufactured housing sales are experiencing competitive
pricing pressures resulting in lower margins and rising selling costs.
Cost of sales increased eight percent from the same quarter of the
prior year due primarily to the four percent increase in sales volume,
and increased three percent as a percent of sales. The decline
in gross profit margins is chiefly attributed to production costs at
our new recreational vehicle production facility in Caldwell, Idaho
and sales of lower margin RV's and manufactured homes.
Selling, general and administrative expenses decreased 10 percent
over the same quarter of the prior year and declined one percent as a
percent of sales. The decrease was due to a reduction in insurance
expense.
Net interest expense for the quarter decreased 79 percent in comparison
to net interest expense in the same quarter of the prior year. This
was a consequence of a significant decrease in the average net
short-term borrowing.
Net income for the three months ended July 31, 1995 was $273,000, or
$0.25 per share, compared to net income of $374,000, or $0.34 per
weighted average share, for the same quarter of the prior year. Net
income for the quarter ended July 31, 1995 included an after tax gain
on a business interruption claim of $117,000, or $0.11 per share.
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RESULTS OF OPERATIONS - NINE MONTHS ENDED JULY 31, 1995 COMPARED TO
NINE MONTHS ENDED JULY 31, 1994
Total sales for the nine months ended July 31, 1995 were $75,813,000,
a 14 percent increase from sales of $66,680,000 for the same quarter
of the prior year. The increase consisted of a 15 percent increase in
manufactured housing sales and a 13 percent increase in recreational
vehicle sales. RV sales in the Midwestern region saw an increase as a
result of consumer demand for our entry-level RV product. The Western
region recreational vehicle sales are down for the nine months due to
lackluster retail sales in 1995 causing dealers to adjust their
inventories. The manufactured housing sales increase was
chiefly the result of an increase in manufacturing capacity from the
new production facility in Caldwell, Idaho. However, manufactured
housing in the Northwest is experiencing increased competitive pricing
pressures resulting in lower margins and rising selling costs.
Cost of sales increased 16 percent from the same period of the prior
year due principally to the 14 percent increase in sales volume, and
increased two percent as a percent of sales. The decline in
gross profit margins is chiefly attributed to production costs at the
new RV production facility and increased sales of lower margin
recreational vehicles and manufactured homes.
Selling, general and administrative expenses decreased less than
one percent over the same period of the prior year due and declined
one percent as a percent of sales. The decrease was primarily due
to a reduction in insurance costs.
Net interest income for the current quarter as opposed to net interest
expense in the same period of the prior year, increased 159 percent.
This was a consequence of a significant decrease in the average net
short-term borrowing. In the first nine months of 1994, the Company
used its available cash to expand its plant facilities and repurchase
its common stock thereby increasing its average short-term borrowings.
Net income for the nine months ended July 31, 1995 was $1,206,000, or
$1.09 per share, compared to net income of $1,004,000, or $0.84 per
weighted average share, for the same period of the prior year. Net
income for the nine months ended July 31, 1995 included an after-tax
gain from a business interruption claim of $414,000, or $0.37 per
share.
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PART II
OTHER INFORMATION
Item 6 (a).
See Index to Exhibits on page 11.
Item 6 (b).
Form 8-K was not required to be filed during the quarter ended July
31, 1995.
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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.
KIT MANUFACTURING COMPANY
s interruption claim relative to
the 1992 tornado damage atDATE September 11, 1995 /s/ Dan Pocapalia
------------------ -------------------------------------
Dan Pocapalia
Chairman of the Board,
Chief Executive Officer and President
(Principal Executive Officer)
DATE September 11, 1995 /s/ Dale J. Gonzalez
------------------ --------------------------------------
Dale J. Gonzalez
Senior Vice President and Treasurer
(Principal Financial and Accounting Officer
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KIT MANUFACTURING COMPANY
INDEX TO EXHIBITS
Item:
(27) Financial Data Schedule
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted
from SEC Form 10Q and is qualified in its entirety by reference
to such financial statements.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-END> APR-30-1995
<CASH> 1000
<SECURITIES> 0
<RECEIVABLES> 6753
<ALLOWANCES> 44
<INVENTORY> 8681
<CURRENT-ASSETS> 17602
<PP&E> 10496
<DEPRECIATION> 4648
<TOTAL-ASSETS> 23599
<CURRENT-LIABILITIES> 9522
<BONDS> 0
<COMMON> 1592
0
0
<OTHER-SE> 11501
<TOTAL-LIABILITY-AND-EQUITY> 23599
<SALES> 26425
<TOTAL-REVENUES> 26425
<CGS> 23662
<TOTAL-COSTS> 23662
<OTHER-EXPENSES> 1619
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8
<INCOME-PRETAX> 1136
<INCOME-TAX> 462
<INCOME-CONTINUING> 674
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 674
<EPS-PRIMARY> .61
<EPS-DILUTED> 0
</TABLE>
