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 April 30, 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 April 30, 1996.
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)
Three Months Ended Six Months Ended
April 30, April 30,
1996 1995 1996 1995
<CAPTION>
<S> <C> <C> <C> <C>
Sales $28,679 $26,425 $46,650 $48,276
Costs and
Cost of sales 25,229 23,662 41,246 43,305
Selling, general and
administrative 2,585 2,142 4,527 3,935
27,814 25,804 45,773 47,240
Operating income 865 621 877 1,036
Other income
Proceeds from business 501 501
(Note
Interest income (26) 14 (26) 43
Income before income taxes 839 1,136 851 1,580
Provision for income taxes 336 462 340 644
Net income $503 $674 $511 $936
(Note A)
Weighted average shares 1,110,934 1,110,93 1,110,9 1,110,9
(Note B)
Net income per share $0.45 $0.61 $0.46 $0.84
(Note B)
Dividends per share $ - $ - $ $
The accompanying notes are an integral part of these financial statements
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<TABLE>
KIT MANUFACTURING COMPANY
BALANCE SHEETS
(Dollars in thousands)
<CAPTION>
April October
1996 1995
(Unaudited)
ASSETS
<S> <C> <C>
Cash and cash investments $2,802 $2,218
Accounts receivable, net 7,851 7,350
Inventories:
Raw Material 3,303 2,543
Work in Process 1,127 1,055
Finished goods 3,185 2,069
Total inventories 7,615 5,667
Prepaids and deferred income taxes 1,161 1,589
Total current assets 19,429 16,824
Property, plant and 6,182 6,388
Other assets 236 90
Total assets $25,847 $23,302
LIABILITIES AND SHAREHOLDERS'
Note payable to bank $1,000
Accounts payable 5,655 $3,954
Accrued payroll and related 1,881 2,203
Accrued marketing programs 368 741
Accrued expenses 1,254 1,309
Income taxes payable 273 190
Total current liabilities 10,431 8,397
Deferred income taxes 1,399 1,399
Total liabilities 11,830 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 11,914 10,565
Net income for period 511 1,349
Balance at end of period 12,425 11,914
Total shareholders' 14,017 13,506
Total liabilities and shareholders' equity $25,847 $23,302
The accompanying notes are an integral part of these financial statements
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<TABLE>
KIT MANUFACTURING COMPANY
STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
<CAPTION>
For the six months
April 30,
1996 1995
Cash flows from operating activities:
<S> <C> <C>
Cash received from customers $46,14 $47,708
Interest received 14 59
Cash received from operations 46,163 47,767
Cash paid to suppliers and employees 46,114 52,038
Interest paid 41 16
Income taxes paid 317 489
Cash disbursed for operations 46,472 52,543
Net cash used in operating activities (309) (4,776) Net cash used in operating activities
Cash flows from investing activities:
Purchase of property, plant and equipment (135) (398)
Changes in other current and non-current assets 28 (52)
Net cash used in investing activities (107) (450)
Cash flows from financing activities:
Proceeds from business interruption claim 0 501
Proceeds from line-of-credit borrowings 1,400 2,100
Principal payments on line-of-credit borrowings (400) (1,000)
Net cash provided by financing activities 1,000 1,601
Net increase (decrease) in cash 584 (3,625) Net increase (decrease) in cash
Cash at beginning of year 2,218 4,625
Cash at end of period $2,802 $1,000 Cash at end of period
Reconciliation of net income to net cash used in
Net income $511 $936
Adustments to reconcile net income to net cash used in operating activities:
Proceeds from business interruption claim (501)
Depreciation 332 275
Increase in accounts receivable (502) (568)
Increase in inventories (1,948) (4,589)
(Decrease) increase in accounts payable and 1,275 (485)
Increase in income taxes payable 23 156
Net cash used in operating activities ($309) ($4,776) Net cash used in operating activities
The accompanying notes are an integral part of these financial statements
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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 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.
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KIT MANUFACTURING COMPANY
Management's Discussion and Analysis of Financial Condition
and Results of Operations
FINANCIAL CONDITION -APRIL 30, 1996 COMPARED TO OCTOBER 31, 1995
Under second quarter market conditions, the Company continued to
borrow on its line of credit to maintain inventory levels to provide
for the second quarter increase in sales. The Company's working
capital increased $571,000 due primarily to an increase in accounts
receivable due to an increase in sales. The current ratio was 1.9:1
at April 30, 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 APRIL 30, 1996 COMPARED TO
QUARTER ENDED APRIL 30, 1995
Total sales for the quarter ended April 30, 1996 were $28,679,000, a
nine percent increase from sales of $26,425,000 for the same quarter
of the prior year. The increase consisted of a 16 percent increase in
recreational vehicle sales and a decrease of 18 percent in
manufactured housing sales. RV sales saw an increase as a result of
continued demand for the entry-level product as well as a significant
contribution in sales of KIT s newest product line. Manufactured
housing sales are continuing to experience a general slowing in our
market territory.
Cost of sales increased seven percent from the same quarter of the
prior year due primarily to the nine percent increase in sales volume,
but decreased two 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 21 percent over
the same quarter of the prior year and rose one percent as a percent
of sales. The increase was due to an increase in marketing costs.
Net interest expense as opposed to net interest income for the current
quarter increased nearly three times. This was a consequence of a
significant increase in the average net short-term borrowing.
Net income from operations for the three months ended April 30, 1996
was $503,000, or $0.45 per share, compared to $373,000, or $0.34 per
share, for the same quarter of the prior year. Net income for the
quarter ended April 30, 1995 included an after tax gain on a business
interruption claim of $301,000, or $0.27 per share.
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KIT MANUFACTURING COMPANY
Management's Discussion and Analysis of Financial Condition
and Results of Operations
RESULTS OF OPERATIONS - SIX MONTHS ENDED APRIL 30, 1996 COMPARED TO
SIX MONTHS ENDED APRIL 30, 1995
Total sales for the six months ended April 30, 1996 were $46,650,000,
a three percent decrease from sales of $48,276,000 for the same
quarter of the prior year. The decrease consisted of a 36 percent
decrease in manufactured housing sales and a nine percent increase in
recreational vehicle sales. RV sales in the Midwestern region saw an
increase as a result of continued consumer demand for our entry-level
RV product. The Western region recreational vehicle sales are up due
to an increase in sales of our newest product line. The manufactured
housing sales decrease was chiefly the result of an overall slowing in
our market territory.
Cost of sales decreased five percent from the same period of the prior
year due principally to the three percent decrease in sales volume,
and decreased one 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 15 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 160 percent. This was a
consequence of a significant increase in the average net short-term
borrowing.
Net income from operations for the six months ended April 30, 1996 was
$511,000, or $.46 per share, compared to $635,000, or $0.57 per share,
for the same period of the prior year. Net income for the six months
ended April 30, 1995 included an after-tax gain from a business
interruption claim of $301,000, or $0.27 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 April
30, 1996.
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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
(Registrant)
DATE JUNE 10, 1996 /s/DAN POCAPALIA______
Dan Pocapalia
Chairman of the Board,
Chief Executive Officer and President
(Principal Executive Officer)
DATE JUNE 10, 1996 /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>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-END> APR-30-1996
<CASH> 2,802,000
<SECURITIES> 0
<RECEIVABLES> 7,895,000
<ALLOWANCES> 44,000
<INVENTORY> 7,615,000
<CURRENT-ASSETS> 19,429,000
<PP&E> 11,440,682
<DEPRECIATION> 5,258,251
<TOTAL-ASSETS> 25,847,979
<CURRENT-LIABILITIES> 11,831,386
<BONDS> 0
0
0
<COMMON> 1,591,656
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 25,847,979
<SALES> 46,650,366
<TOTAL-REVENUES> 46,650,366
<CGS> 40,971,376
<TOTAL-COSTS> 45,799,451
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 26,431
<INCOME-PRETAX> 850,915
<INCOME-TAX> 340,366
<INCOME-CONTINUING> 510,549
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 510,549
<EPS-PRIMARY> .46
<EPS-DILUTED> .46
</TABLE>
