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, 1996 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, 1996.
Index to Exhibits - Page 11
1 of 11 Pages
______________________________________________________________________________
<PAGE>
PART I
FINANCIAL INFORMATION
- 2 -
______________________________________________________________________________
<PAGE>
<TABLE>
KIT MANUFACTURING
STATEMENTS OF INCOME
(Dollars in Thousands Except Per Share Amounts)
(Unaudited)
Three Months Ended Nine Months Ended
July 31, July 31,
<CAPTION>
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Sales $23,924 $27,537 $70,575 $75,813
Costs and
Cost of sales 20,718 25,236 61,965 68,541
Selling, general and
administrative 2,413 2,027 6,939 5,965
23,131 27,263 68,904 74,506
Operating income 793 274 1,671 1,307
Other income (expense)
Proceeds from business interruption claim 610 200 610 701
(Note I)
Interest income (expense), net 12 (7) (15) 36
Income before income taxes 1,415 467 2,266 2,044
Provision for income taxes
(Note A) 589 194 929 838
Net income $826 $273 $1,337 $1,206
Weighted average shares
(Note B) 1,110,934 1,110,93 1,110,9 1,110,9
Net income per share
(Note B) $0.74 $0.25 $1.20 $1.09
Dividends per share $ - $ - $ $
The accompanying notes are an integral part of these financial statements
-3-
</TABLE>
______________________________________________________________________________
<PAGE>
<TABLE>
KIT MANUFACTURING COMPANY
BALANCE SHEETS
(Dollars in thousands)
July 31 October
<CAPTION>
1996 1995
ASSETS (Unaudited)
<S> <C> <C>
Cash and cash investments $2,924 $2,218
Accounts receivable, net 5,150 7,350
Inventories:
Raw 4,118 2,543
Work in process 1,178 1,055
Finished goods 4,496 2,069
Total inventories 9,792 5,667
Prepaids and deferred income 1,039 1,589
Total current assets 18,905 16,824
Property, plant and equipment, net 6,136 6,388
Other assets 258 90
Total assets $25,299 $23,302
LIABILITIES AND SHAREHOLDERS' EQUITY
Note payable to bank $1,100
Accounts payable 3,612 $3,954
Accrued payroll and related 1,869 2,203
Accrued marketing programs 648 741
Accrued expenses 1,513 1,309
Income taxes payable 315 190
Total current liabilities 9,057 8,397
Deferred income taxes 1,399 1,399
Total liabilities 10,456 9,796
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 11,914 10,565
Net income for period 1,337 1,349
Balance at end of period 13,251 11,914
Total shareholders' equity 14,843 13,506
Total liabilities and shareholders' equity $25,299 $23,302
The accompanying notes are an integral part of these financial statements
-4-
</TABLE>
______________________________________________________________________________
<PAGE>
<TABLE>
KIT MANUFACTURING COMPANY
STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
For the nine months ended
July 31,
<CAPTION>
1996 1995
Cash flows from operating activities:
<S> <C> <C>
Cash received from customers $72,974 $74,392
Interest received 28 75
Cash received from operations 73,002 74,467
Cash paid to suppliers and employees 72,977 77,998
Interest paid 43 39
Income taxes paid 802 809
Cash disbursed for operations 73,822 78,846
Net cash used in operating activities (820) (4,379)
Cash flows from investing activities:
Purchase of property, plant and equipment (252) (764)
Changes in other current and non-current assets 68 (374)
Net cash used in investing activities (184) (1,138)
Cash flows from financing activities:
Proceeds from business interruption claim 610 701
Proceeds from line-of-credit borrowings 2,700 2,800
Principal payments on line-of-credit borrowings (1,600) (1,800)
Net cash provided by financing activities 1,710 1,701
Net increase (decrease) in cash 706 (3,816)
Cash at beginning of year 2,218 4,625
Cash at end of period $2,924 $809
Reconciliation of net income to net cash used in operating activities:
Net income $1,337 $1,206
Adjustments to reconcile net income to net cash used in operating activities:
Proceeds from business interruption (610) (701)
Depreciation 495 431
Decrease (increase) in accounts 2,197 (1,616)
Increase in inventories (4,124) (3,163)
Decrease in accounts payable and accrued (242) (565)
Increase in income taxes payable 127 29
Net cash used in operating activities ($820) ($4,379)
The accompanying notes are an integral part of these financial statements
-5-
</TABLE>
______________________________________________________________________________
<PAGE>
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 third quarter of fiscal 1995 and 1996, the Company
received $200,000 and $610,000 in insurance proceeds, respectively, on a
business interruption claim relative to the 1992 tornado damage at the
McPherson, Kansas manufactured housing facility.
- 6 -
______________________________________________________________________________
<PAGE>
KIT MANUFACTURING COMPANY
Management's Discussion and Analysis of Financial Condition
and Results of Operations
FINANCIAL CONDITION -JULY 31, 1996 COMPARED TO OCTOBER 31, 1995
Under third quarter market conditions, the Company continued to borrow
on its line of credit to maintain inventory levels to provide for
third quarter sales. The Company's working capital increased
$1,421,000 due primarily to an increase in inventories. The current
ratio was 2.1:1 at July 31, 1996 and 2.0:1 at October 31, 1995.
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, 1996 COMPARED TO
QUARTER ENDED JULY 31, 1995
Total sales for the quarter ended July 31, 1996 were $23,924,000, a 13
percent decrease from sales of $27,537,000 for the same quarter of the
prior year. The decrease consisted of a 5 percent decrease in
recreational vehicle sales and a decrease of 33 percent in
manufactured housing sales. RV sales saw a decrease as a result of a
decline in dealer inventories as they adjusted for a moderate slowing
in retail demand. Manufactured housing sales are continuing to
experience a general slowing in our market territory.
Cost of sales decreased 18 percent from the same quarter of the prior
year due primarily to the 13 percent decrease in sales volume, but
also decreased 5 percent as a percent of sales. The increase in gross
profit margins is chiefly attributed to lower overall production costs
at our new recreational vehicle production facility and at our
consolidated manufactured housing plant, both in Caldwell, Idaho.
Selling, general and administrative expenses increased 19 percent over
the same quarter of the prior year and rose three percent as a percent
of sales. The increase was due to an increase in marketing costs.
Net interest income as opposed to net interest expense for the current
quarter increased nearly three times. This was a consequence of a
significant increase in the average net short-term investments.
Net income for the three months ended July 31, 1996 was $826,000, or
$0.74 per share, compared to $273,000, or $0.25 per share, for the
same quarter of the prior year. Net income for the quarter ended July
31, 1996 included an after tax gain on a business interruption claim
of $360,000, or $0.32 per share. 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.
-7-
______________________________________________________________________________
<PAGE>
KIT MANUFACTURING COMPANY
Management's Discussion and Analysis of Financial Condition
and Results of Operations
RESULTS OF OPERATIONS - NINE MONTHS ENDED JULY 31, 1996 COMPARED TO
NINE MONTHS ENDED JULY 31, 1995
Total sales for the nine months ended July 31, 1996 were $70,575,000,
a seven percent decrease from sales of $75,813,000 for the same period
of the prior year. The decrease consisted of a 35 percent decrease in
manufactured housing sales and a four percent increase in recreational
vehicle sales. RV sales in the Western region saw an increase as a
result of consumer demand for our newest RV product. The manufactured
housing sales decrease was chiefly the result of an overall slowing in
our market territory.
Cost of sales decreased 10 percent from the same period of the prior
year due principally to the seven percent decrease in sales volume,
and decreased three percent as a percent of sales. The rise in gross
profit margins is chiefly attributed to reduced production costs at
the new consolidated manufactured homes plant in Caldwell, Idaho.
Selling, general and administrative expenses increased 16 percent over
the same period of the prior year and rose two percent as a percent of
sales. The increase was primarily due to increases in marketing costs.
Net interest expense as opposed to net interest income in the same
period of the prior year, increased 142 percent. This was a
consequence of a significant increase in the average net short-term
borrowing.
Net income for the nine months ended July 31, 1996 was $1,337,000, or
$1.20 per share, compared to $1,206,000, or $1.09 per share, for the
same period of the prior year. Net income for the nine months ended
July 31, 1996 included an after-tax gain from a business interruption
claim of $360,000, or $0.32 per share. 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.
-8-
______________________________________________________________________________
<PAGE>
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, 1996.
- 9 -
______________________________________________________________________________
<PAGE>
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
(Registrant)
DATE September 4, 1996 /s/ Dan Pocapalia
Dan Pocapalia
Chairman of the Board,
Chief Executive Officer and President
(Principal Executive Officer)
DATE September 4, 1996 /s/ Dale J. Gonzalez
Dale J. Gonzalez
Senior Vice President and Treasurer
(Principal Financial and Accounting Officer)
- 10 -
______________________________________________________________________________
<PAGE>
KIT MANUFACTURING COMPANY
INDEX TO EXHIBITS
Item:
(27) Financial Data Schedule
- 11 -
______________________________________________________________________________
<PAGE>
<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>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-END> JUL-31-1996
<CASH> 2,924,000
<SECURITIES> 0
<RECEIVABLES> 5,186,000
<ALLOWANCES> 36,000
<INVENTORY> 9,792,000
<CURRENT-ASSETS> 18,905,000
<PP&E> 11,534,000
<DEPRECIATION> 5,398,000
<TOTAL-ASSETS> 25,299,000
<CURRENT-LIABILITIES> 9,057,000
<BONDS> 0
0
0
<COMMON> 1,592,000
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 25,299,000
<SALES> 70,575,000
<TOTAL-REVENUES> 70,575,000
<CGS> 61,965,000
<TOTAL-COSTS> 68,309,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 43,000
<INCOME-PRETAX> 2,266,000
<INCOME-TAX> 929,000
<INCOME-CONTINUING> 1,337,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,337,000
<EPS-PRIMARY> 1.20
<EPS-DILUTED> 1.20
</TABLE>
