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 January 31, 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 January 31, 1998.
Index to Exhibits - Page 10
1 of 10 Pages
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PART I
FINANCIAL INFORMATION
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<TABLE>
KIT MANUFACTURING COMPANY
STATEMENTS OF OPERATIONS
(Dollars in Thousands Except Per Share Amounts)
(Unaudited)
<CAPTION>
Three Months Ended
January 31,
1998 1997
<S> <C> <C>
Sales $13,819 $16,589
Costs and expenses:
Cost of sales 12,918 15,257
Selling, general and
administrative expenses 1,183 1,887
14,101 17,144
Operating loss (282) (555)
Other income
Interest income, net 17 9
Loss before income taxes (265) (546)
Benefit for income taxes
(Note A) (108) (224)
Net loss ($157) ($322)
Shares outstanding
(Note B) 1,110,934 1,110,934
Net operating loss per share
(Note B) ($0.25) ($0.50)
Net loss per share
(Note B) ($0.14) ($0.29)
Dividends per share $ - $ -
The accompanying notes are an integral part of these financial statements
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</TABLE>
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KIT MANUFACTURING COMPANY
BALANCE SHEETS
(Dollars in thousands)
January 31, October 31,
1998 1997
(Unaudited)
[S] [C] [C]
ASSETS
Cash and cash investments $2,637 $3,673
Accounts receivable, net 4,478 4,533
Inventories:
Raw materials 2,370 1,876
Work in process 985 907
Finished goods 2,646 619
Total inventories 6,001 3,402
Prepaids and income tax refunds receivable 3,011 2,632
Total current assets 16,127 14,240
Property, plant and equipment, net 6,798 6,844
Other assets 54 53
Total assets $22,979 $21,137
LIABILITIES AND SHAREHOLDERS' EQUITY
Note payable to bank $1,655
Accounts payable 3,045 $2,697
Accrued payroll and related items 1,374 1,604
Accrued marketing programs 1,032 809
Accrued expenses 1,918 1,915
Total current liabilities 9,024 7,025
Deferred income taxes 1,487 1,487
Total liabilities 10,511 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 (157) (2,312)
Balance at end of period 10,876 11,033
Total shareholders' equity 12,468 12,625
Total liabilities and shareholders' equity $22,979 $21,137
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 3 months ended January 31,
1998 1997
<S> <C> <C>
Cash flows from operating activities:
Cash received from customers $13,874 $19,708
Interest received 27 15
Cash received from operations 13,901 19,723
Cash paid to suppliers and employees 16,196 21,990
Interest paid 10 7
Income taxes paid - 35
Cash disbursed for operations 16,206 22,032
Net cash used in operating activities (2,305 (2,309)
Cash flows from investing activities:
Purchase of property, plant and equipment (685) (699)
Changes in other current and non-current assets 299 (158)
Net cash used in investing activities (386) (857)
Cash flows from financing activities:
Proceeds from line-of-credit borrowings 1,655 3,300
Net cash provided by financing activities 1,655 3,300
Net increase (decrease) in cash (1,036 134
Cash at beginning of year 3,673 2,281
Cash at end of period $2,637 $2,415
Reconciliation of net loss to net cash used in
operating activities:
Net loss ($157) ($322)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation 162 169
Decrease in accounts receivable 55 3,118
Increase in inventories (2,599) (3,394)
Increase (decrease) in accounts payable and
accrued liabilities 344 (1,621)
Decrease in income taxes payable (110) (259)
Net cash used in operating activities ($2,305) ($2,309)
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. 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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KIT MANUFACTURING COMPANY
Management's Discussion and Analysis of Financial Condition
and Results of Operations
FINANCIAL CONDITION - JANUARY 31, 1998 COMPARED TO OCTOBER 31, 1997
Under first quarter market conditions, the Company borrowed on its line of
credit to increase its inventories to prepare for the spring selling season.
The Company's working capital decreased $112,000 due to the decrease in
accounts receivable because of the decline in sales and the increase in current
liabilities because of build up of inventories during the first quarter. The
current ratio was 1.8:1 at January 31, 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 JANUARY 31, 1998 COMPARED TO
QUARTER ENDED JANUARY 31, 1997
Total sales for the quarter ended January 31, 1998 were $13,819,000, a 17%
decrease from sales of $16,589,000 for the same quarter of the prior year.
The decrease consisted of a 21% increase in manufactured housing sales and a 34%
decrease in recreational vehicle 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 in sales of lower priced entry level products.
Cost of sales decreased 15% from the same quarter of the prior year due
primarily to the decline in sales volume, but increased 2% as a percent of
sales. The decline in gross profit margins compared to the first quarter of
fiscal 1997 is chiefly attributed to increased sales of lower margin RV's in the
entry level market.
Selling, general and administrative expenses decreased 37% over the same quarter
of the prior year and decreased 3% as a percent of sales. This was due primarily
to planned reductions in marketing costs.
Net interest income for the current quarter increased in comparison to net
interest income 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.
The net loss for the three months ended January 31, 1998 was $157,000, or $0.14
per share, compared to net loss of $322,000, or $0.29 per share, for the same
quarter of the prior year.
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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 January 31, 1998.
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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 3/9/98 /s/ Dan Pocapalia
Dan Pocapalia
Chairman of the Board,
Chief Executive Officer and President
(Principal Executive Officer)
DATE 3/9/98 /s/ Bruce K. Skinner
Bruce K. Skinner
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> 3-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-END> JAN-31-1998
<CASH> 2,367,000
<SECURITIES> 0
<RECEIVABLES> 4,478,000
<ALLOWANCES> 42,000
<INVENTORY> 6,001,000
<CURRENT-ASSETS> 16,127,000
<PP&E> 6,798,000
<DEPRECIATION> 5,913,000
<TOTAL-ASSETS> 22,979,000
<CURRENT-LIABILITIES> 9,024,000
<BONDS> 0
0
0
<COMMON> 1,592,000
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 22,979,000
<SALES> 13,819,000
<TOTAL-REVENUES> 13,819,000
<CGS> 12,918,000
<TOTAL-COSTS> 14,101,000
<OTHER-EXPENSES> 1,183,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 17,000
<INCOME-PRETAX> (265,000)
<INCOME-TAX> (108,000)
<INCOME-CONTINUING> (157,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (157,000)
<EPS-PRIMARY> .14
<EPS-DILUTED> .14
</TABLE>
