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, 1997 Commission
file number 2-31520
KIT MANUFACTURING COMPANY
-------------------------
(Exact name of registrant as specified in its charter)
California 95-1525261
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(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 (562) 595-7451
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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 .
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, 1997.
Index to Exhibits - Page 11
1 of 11 Pages
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<PAGE>
PART I
FINANCIAL INFORMATION
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<PAGE>
<TABLE>
STATEMENTS OF INCOME
(Dollars in Thousands Except Per Share Amounts)
(Unaudited)
<CAPTION>
Three Months Ended Six Months Ended
April 30, April 30,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Sales $23,134 $28,679 $39,723 $46,650
Costs and
Cost of sales 22,108 25,229 37,365 41,246
Selling, general and
administrative 2,198 2,585 4,085 4,527
------ ------ ------ ------
24,306 27,814 41,450 45,773
Operating (loss) (1,172) 865 (1,727) 877
Other expense:
Interest expense, net (77) (26) (68) (26)
----- ----- ----- -----
(Loss) income before income taxes (1,249) 839 (1,795) 851
(Benefit) provision for income taxes
(Note A) (512) 336 (736) 340
----- ----- ----- -----
Net (loss) income ($737) $503 ($1,059) $511
====== ====== ====== =====
Shares outstanding
(Note B) 1,110,934 1,110,934 1,110,934 1,110,934
========= ========= ========= =========
Net (loss) income per share
(Note B) ($0.66) $0.45 ($0.95) $0.46
======= ===== ===== =====
Dividends per share $ - $ - $ - $ -
</TABLE>
The accompanying notes are an integral part of these financial statements
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<PAGE>
<TABLE>
KIT MANUFACTURING COMPANY
BALANCE SHEETS
(Dollars in thousands)
<CAPTION>
April October
1997 1996
(Unaudited)
ASSETS
<S> <C> <C>
Cash and cash $2,821 $2,281
Accounts receivable, net 6,332 8,026
Inventories:
Raw 3,937 3,424
Work in process 927 1,234
Finished goods 2,805 2,511
----- -----
Total inventories 7,669 7,169
Prepaids and deferred income 1,292 1,241
Income taxes receivable 736 -
------ ------
Total current assets 18,850 18,717
Property, plant and 6,951 6,319
Other assets 57 103
------ ------
Total assets $25,858 $25,139
====== ======
LIABILITIES AND SHAREHOLDERS'
Note payable to bank $4,478 -
Accounts payable 2,839 $3,685
Accrued payroll and related 1,462 2,256
Accrued marketing programs 972 1,104
Accrued expenses 760 1,664
Income taxes payable - 24
------ -----
Total current 10,511 8,733
Deferred income taxes 1,469 1,469
------ ------
Total liabilities 11,980 10,202
Commitments and contingencies
Shareholders' equity
Common stock and additional paid-in capital,
issued and outstanding 1,110,934 1,592 1,592
Retained earnings:
Balance at beginning of period 13,345 11,914
Net (loss) income for (1,059) 1,431
------ ------
Balance at end of period 12,286 13,345
Total shareholders' equity 13,878 14,937
------ ------
Total liabilities and shareholders' equity $25,858 $25,139
====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements
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<PAGE>
<TABLE>
KIT MANUFACTURING COMPANY
STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
<CAPTION>
For the six months ended
April 30,
1997 1996
Cash flows from operating activities:
<S> <C> <C>
Cash received from customers $41,417 $46,149
Interest received 37 14
------ ------
Cash received from operations 41,454 46,163
------ ------
Cash paid to suppliers and employees 44,288 46,114
Interest paid 106 41
Income taxes paid 35 317
------ ------
Cash disbursed for operations 44,429 46,472
------ ------
Net cash used in operating activities (2,975) (309)
----- -----
Cash flows from investing activities:
Purchase of property, plant and equipment (866) (135)
Changes in other current and non-current assets (98) 28
----- ----
Net cash used in investing activities (964) (107)
----- ----
Cash flows from financing activities:
Proceeds from line-of-credit borrowings 9,280 1,400
Principal payments on line-of-credit borrowings (4,801) (400)
----- -----
Net cash provided by financing activities 4,479 1,000
----- -----
Net increase in cash 540 584
Cash at beginning of year 2,281 2,218
----- -----
Cash at end of period $2,821 $2,802
===== =====
Reconciliation of net income to net cash used in
Net (loss) ($1,059) $511
Adjustments to reconcile net income to net cash used
in operating activities:
Depreciation 336 332
Decrease (increase) in accounts 1,694 (502)
Increase in inventories (499) (1,948)
(Decrease) increase in accounts payable and (2,676 1,275
(Decrease) increase in income taxes (771) 23
------ -----
Net cash used in operating activities ($2,975) ($309)
======= ======
</TABLE>
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 benefit or provision 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
w h i c h 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 -In February 1997, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 128, Earnings
Per Share. FAS 128 specifies the computation, presentation, and
disclosure requirements for EPS. FAS 128 is effective for financial
statements issued for periods ending after December 15, 1997,
including interim periods. Management has assessed that the impact of
adopting this standard will have no effect on EPS.
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<PAGE>
KIT MANUFACTURING COMPANY
Management's Discussion and Analysis of Financial Condition
and Results of Operations
FINANCIAL CONDITION -APRIL 30, 1997 COMPARED TO OCTOBER 31, 1996
Under second quarter market conditions, the Company continued to
borrow on its line of credit to maintain inventory levels to provide
for the anticipated second quarter sales. The Company's working
capital decreased $1,645,000 due primarily to an increase in note
payable to bank. The current ratio was 1.8:1 at April 30, 1997 and
2.1:1 at October 31, 1996.
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, 1997 COMPARED TO
QUARTER ENDED APRIL 30, 1996
Total sales for the quarter ended April 30, 1997 were $23,134,000, a
19 percent decrease from sales of $28,679,000 for the same quarter of
the prior year. The increase consisted of a 26 percent decrease in
r e creational vehicle sales and an increase of 15 percent in
manufactured housing sales. RV sales saw an decrease as a result of a
slowing in retail market conditions due to severely poor weather
conditions in our market areas. Manufactured housing is continuing to
experience the results of a general resurgence in the housing market
in our sales territories.
Cost of sales decreased 12 percent from the same quarter of the prior
year due primarily to the decline in sales but increased 8 percent as
a percent of sales. The decrease in gross profit margins is chiefly
attributed to a temporary increase in production costs due to a
consolidation of the recreational vehicle plants in Caldwell, Idaho.
Selling, general and administrative expenses decreased 15 percent over
the same quarter of the prior year and rose less than one percent as a
percent of sales. The decrease was due to an decrease in marketing
costs.
Net interest expense increased nearly two times over the same quarter
in the prior fiscal year. This was a consequence of a significant
increase in the average net short-term borrowings.
The net loss from for the three months ended April 30, 1997 was
$737,000, or $0.66 per share, compared to net income of $503,000, or
$0.45 per share, for the same quarter of the prior year.
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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, 1997 COMPARED TO
SIX MONTHS ENDED APRIL 30, 1996
Total sales for the six months ended April 30, 1997 were $39,723,000,
a 15 percent decrease from sales of $46,650,000 for the same quarter
of the prior year. The decrease consisted of a 24 percent decrease in
recreational vehicle sales and a 25 percent increase in manufactured
housing sales. RV sales both in the Midwestern and Western sales
regions saw a decrease as a result of a significant decline in
consumer demand due to the severe winter and early spring weather
conditions. The manufactured housing sales increase was chiefly the
result of a rise in consumer demand for manufactured homes as well as
an increase in the number of dealers in our retail network.
Cost of sales decreased 9 percent from the same period of the prior
year due to the 15 percent decrease in sales volume, but increased 6
percent as a percent of sales. The decline in gross profit margins is
chiefly attributable to a temporary increase in production costs which
are the result of a consolidation of the RV plants in Caldwell, Idaho.
The restructuring was done to allow for the manufacture of all lines
o f the recreational vehicle products in one location thereby
increasing operational control and production efficiency.
Selling, general and administrative expenses decreased 10 percent over
the same period of the prior year but rose less than one percent as a
percent of sales. The decrease was primarily due to decreases in
marketing costs.
Net interest expense increased 160 percent. This was a consequence of
a significant increase in the average net short-term borrowing.
The net loss for the six months ended April 30, 1997 was $1,059,000,
or $.95 per share, compared to net income of $511,000, or $0.46 per
share, for the same period of the prior year.
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, Earnings Per
S h are. FAS 128 specifies the computation, presentation, and
disclosure requirements for EPS. FAS 128 is effective for financial
statements issued for periods ending after December 15, 1997,
including interim periods. Management has assessed that the impact of
adopting this standard will have no effect on EPS.
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<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 April
30, 1997.
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<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 June 2, 1997 /s/ Dan Pocapalia
Dan Pocapalia
Chairman of the Board,
Chief Executive Officer and President
(Principal Executive Officer)
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<PAGE>
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-31-1997
<PERIOD-END> APR-30-1997
<CASH> 2,821,000
<SECURITIES> 0
<RECEIVABLES> 6,332,000
<ALLOWANCES> 0
<INVENTORY> 7,669,000
<CURRENT-ASSETS> 18,850,000
<PP&E> 6,951,000
<DEPRECIATION> 0
<TOTAL-ASSETS> 25,858,000
<CURRENT-LIABILITIES> 10,511,000
<BONDS> 0
0
0
<COMMON> 1,592,000
<OTHER-SE> 12,286,000
<TOTAL-LIABILITY-AND-EQUITY> 25,858,000
<SALES> 39,723,000
<TOTAL-REVENUES> 39,723,000
<CGS> 37,365,000
<TOTAL-COSTS> 41,518,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,795,000)
<INCOME-TAX> (736,000)
<INCOME-CONTINUING> (1,059,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,059,000)
<EPS-PRIMARY> (0.95)
<EPS-DILUTED> 0
</TABLE>