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, 1998 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 (562)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, 1998.
Index to Exhibits - Page 11
1 of 11 Pages
<PAGE>
PART I
FINANCIAL INFORMATION
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<PAGE>
<TABLE> KIT MANUFACTURING COMPANY
STATEMENTS OF OPERATION
(Dollars in Thousands Except Per Share Amounts)
(Unaudited)
<CAPTION>
Three Months Ended Six Months Ended
April 30, April 30,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Sales $16,831 $23,134 $30,650 $39,723
Costs and expenses:
Cost of sales 15,317 22,108 28,235 37,365
Selling, general and
administrative expenses 1,429 2,198 2,612 4,085
16,746 24,306 30,847 41,450
Operating income (loss) 85 (1,172) (197) (1,727)
Other income
Interest income (expense), net 5 (77) 22 (68)
Income (loss) before income taxes 90 (1,249) (175) (1,795)
Expense (benefit) for income taxes
(Note A) 35 (512) (73) (736)
Net income (loss) $55 ($737) ($102) ($1,059)
Shares outstanding
(Note B) 1,110,934 1,110,934 1,110,934 1,110,934
Income (loss) before income
taxes per share
(Note B) $0.08 ($1.12) ($0.16) ($1.62)
Net income (loss) per share
(Note B) $0.05 ($0.66) ($0.09) ($0.95)
Dividends per share $ - $ - $ - $ -
<FN>
<F1>The accompanying notes are an integral part of these financial statements
</FN>
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</TABLE>
<PAGE>
<TABLE>
KIT MANUFACTURING COMPANY
BALANCE SHEET
(Dollars in thousands)
<CAPTION>
April 30, October 31,
1998 1997
<S> <C> <C>
ASSETS
(Unaudited)
Cash and cash investments $3,982 $3,673
Accounts receivable, net 4,424 4,533
Inventories:
Raw materials 1,826 1,876
Work in process 629 907
Finished goods 1,085 619
Total inventories 3,540 3,402
Prepaids and income tax refunds receivable 1,657 2,632
Total current assets 13,603 14,240
Property, plant and equipment, net 6,711 6,844
Other assets 58 53
Total assets $20,372 $21,137
LIABILITIES AND SHAREHOLDERS' EQUITY
Note payable to bank $1,445
Accounts payable 1,869 $2,697
Accrued payroll and related items 1,322 1,604
Accrued marketing programs 410 809
Accrued expenses 1,316 1,915
Total current liabilities 6,362 7,025
Deferred income taxes 1,487 1,487
Total liabilities 7,849 8,512
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 11,033 13,345
Net loss for period (102) (2,312)
Balance at end of period 10,931 11,033
Total shareholders' equity 12,523 12,625
Total liabilities and shareholders' equity $20,372 $21,137
<FN>
<F1>The accompanying notes are an integral part of these financial statements
</FN>
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</TABLE>
<PAGE>
<TABLE>
KIT MANUFACTURING COMPANY
STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
<CAPTION>
For the six months ended April 30,
1998 1997
<S> <C> <C>
Cash flows from operating activities:
Cash received from customers $30,760 $41,417
Interest received 62 37
Cash received from operations 30,822 41,454
Cash paid to suppliers and employees 32,770 44,288
Interest paid 41 106
Income taxes (received) paid (1,267) 35
Cash disbursed for operations 31,544 44,429
Net cash used in operating activities (722) (2,975)
Cash flows from investing activities:
Purchase of property, plant and equipment (779) (866)
Changes in other current and noncurrent assets 365 (98)
Net cash used in investing activities (414) (964)
Cash flows from financing activities:
Proceeds from line-of-credit borrowings 7,217 9,280
Principal payments on line-of-credit borrowings(5,772) (4,801)
Net cash provided by financing activities 1,445 4,479
Net increase in cash 309 540
Cash at beginning of year 3,673 2,281
Cash at end of period $3,982 $2,821
Reconciliation of net loss to net cash used in operating activities:
Net loss ($102) ($1,059)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation 323 336
Decrease in accounts receivable 109 1,694
Increase in inventories (138) (499)
Decrease in accounts payable and accrued liabilities (2,108) (2,676)
Increase (decrease) in income taxes payable 1,194 (771)
Net cash used in operating activities ($722) ($2,975)
<FN>
<F1>The accompanying notes are an integral part of these financial statements
</FN>
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</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. Options have not been included in the computations because
their effect would not be dilutive.
Note C - 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 D - The results of the period are not necessarily indicative of annual
results due to seasonality of the business.
Note E - Financial information contained herein is unaudited.
Note F - 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 G - In June 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (FAS) No. 130, "Reporting
Comprehensive Income". FAS 130 establishes standards for reporting and display
of comprehensive income and its components in a full set of general-purpose
financial statements. FAS 130 is effective for fiscal years beginning after
December 15, 1997. Management has not assessed the impact of adopting this
standard.
Note H - In June 1997, FASB issued FAS 131, "Disclosures about Segments of an
Enterprise and Related Information". FAS 131 requires that public business
enterprises report certain information about operating segments in complete sets
of financial statements of the enterprise and in condensed financial statements
of interim periods to shareholders. FAS 131 is effective for fiscal years
beginning after December 15, 1997. Management has not assessed the impact of
adopting this standard.
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<PAGE>
KIT MANUFACTURING COMPANY
Management's Discussion and Analysis of Financial Condition
and Results of Operations
FINANCIAL CONDITION - APRIL 30, 1998 COMPARED TO OCTOBER 31, 1997
Under second quarter market conditions, the Company borrowed on its line of
credit to maintain its inventory levels to provide for anticipated second
quarter sales. The Company's working capital increased $16,000 due to the net
effect of the receipt of prior year's income tax refunds and the increase in
line of credit borrowings for inventory build-up. The current ratio was 2.14:1
at April 30, 1998 compared to 2.0:1 at October 31, 1997.
The Company's liquidity position as reflected in the current ratio described
above, capital resources, including excess plant capacity, working capital, and
unused line of credit, are considered to be adequate to provide for near term
anticipated growth.
RESULTS OF OPERATIONS - QUARTER ENDED APRIL 30, 1998 COMPARED TO
QUARTER ENDED APRIL 30, 1997
Total sales for the quarter ended April 30, 1998 were $16,831,000, a 27%
decrease from sales of $23,134,000 for the same quarter of the prior year. The
decrease consisted of a 5% increase in manufactured housing sales and a 38%
decrease in recreational vehicle (RV) sales. Manufactured housing sales
increased due to increased marketing efforts, more competitive product pricing,
and continued offerings of a wide range of products. RV sales decreased due to
the continued shift to sales of lower priced entry level products and the
closure of the RV plant in Kansas.
Cost of sales decreased 31% from the same quarter of the prior year and
decreased 5% as a percent of sales due primarily to the decline in sales volume.
The resulting increase in gross profit margins compared to the first quarter of
fiscal 1997 is chiefly attributed to the cost containments associated with the
successful introduction of the Company's new RV models for the entry level
market.
Selling, general and administrative expenses decreased 35% over the same quarter
of the prior year and decreased 1% as a percent of sales. This was due primarily
to the continued planned reductions in marketing costs and overhead costs.
Net interest income for the current quarter was $5,000 compared to net interest
expense of $77,000 in the same quarter of the prior year. This was a result of
an increase in the average net short-term investments and lower average
borrowing levels due to a decline in material purchases.
The net income for the three months ended April 30, 1998 was $55,000, or $0.05
per share, compared to net loss of $737,000, or $0.66 per share, for the same
quarter of the prior year.
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<PAGE>
KIT MANUFACTURING COMPANY
Management's Discussion and Analysis of Financial Condition
and Results of Operations
RESULTS OF OPERATIONS - SIX MONTHS ENDED APRIL 30, 1998 COMPARED TO SIX
MONTHS ENDED APRIL 30, 1997
Total sales for the six months ended April 30, 1998 were $30,650,000, a 23%
decrease from sales of $39,723,000 for the same quarter of the prior year. The
decrease consisted of a 13% increase in manufactured housing sales and a 36%
decrease in recreational vehicle (RV) sales. Manufactured housing sales
increased due to increased marketing efforts, more competitive product pricing,
and continued offerings of a wide range of products. RV sales decreased due to
the continued shift to sales of lower priced entry level products and the
closure of the RV plant in Kansas.
Cost of sales decreased 24% from the same six months of the prior year and
decreased 2% as a percent of sales due primarily to the decline in sales volume.
The resulting increase in gross profit margins compared to the prior year is
chiefly attributed to the cost containments associated with the successful
introduction of the Company's new RV models for the entry level market.
Selling, general and administrative expenses decreased 36% over the same six
months of the prior year and decreased 2% as a percent of sales. This was due
primarily to the continued planned reductions in marketing costs and overhead
costs.
Net interest income for the current six months was $22,000 compared to net
interest expense of $68,000 in the same six months of the prior year. This was a
result of an increase in the average net short-term investments and lower
average borrowing levels due to a decline in material purchases.
The net loss for the six months ended April 30, 1998 was $102,000, or $0.09 per
share, compared to net loss of $1,059,000, or $0.95 per share, for the same six
months of the prior year.
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<PAGE>
PART II
OTHER INFORMATION
Item 6 (a).
See Index to Exhibits on page 10.
Item 6 (b).
Form 8-K was not required to be filed during the quarter ended April 30, 1998.
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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 5/29/98 /s/ Dan Pocapalia
Dan Pocapalia
Chairman of the Board,
Chief Executive Officer and President
(Principal Executive Officer)
DATE 5/29/98 /s/ Bruce K. Skinner
Bruce K. Skinner
Vice President and Treasurer
(Principal Financial and Accounting Officer)
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<PAGE>
KIT MANUFACTURING COMPANY
INDEX TO EXHIBITS
Item:
(27) Financial Data Schedule
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<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from SEC 10Q and
is qualified in its intirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-END> APR-30-1998
<CASH> 3,982,000
<SECURITIES> 0
<RECEIVABLES> 4,424,000
<ALLOWANCES> 0
<INVENTORY> 3,540,000
<CURRENT-ASSETS> 13,603,000
<PP&E> 6,711,000
<DEPRECIATION> 0
<TOTAL-ASSETS> 20,372,000
<CURRENT-LIABILITIES> 6,361,000
<BONDS> 0
0
0
<COMMON> 1,592,000
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 20,372,000
<SALES> 16,831,000
<TOTAL-REVENUES> 16,831,000
<CGS> 15,317,000
<TOTAL-COSTS> 16,746,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (5,000)
<INCOME-PRETAX> 90,000
<INCOME-TAX> 35,000
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 55,000
<EPS-PRIMARY> .05
<EPS-DILUTED> .05
</TABLE>
