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, 1999
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, 1999.
Index to Exhibits - Page 11
1 of 11 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,
1999 1998
<S> <C> <C>
Sales $12,644 $13,819
Costs and expenses:
Cost of sales 11,294 12,918
Selling, general and administrative expenses 1,174 1,183
12,468 14,101
Operating income (loss) 176 (282)
Interest income, net 12 17
Income (loss) before income taxes 188 (265)
Provision(benefit) for income taxes 61 (108)
(Note A)
Net income (loss) $127 ($157)
Net income (loss) per share - basic and diluted $0.11 ($0.14)
(Note B)
Shares outstanding - basic and diluted 1,110,934 1,110,934
(Note B)
Dividends per share $ - $ -
<FN>
<F1>The accompanying notes are an integral part of these financial statements
</FN>
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</TABLE>
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<TABLE>
KIT MANUFACTURING COMPANY
BALANCE SHEETS
(Dollars in thousands)
<CAPTION>
January 31, October 31,
1999 1998
<S> <C> <C>
ASSETS (Unaudited)
Cash and cash investments $4,272 $3,230
Accounts receivable, net 3,346 4,041
Inventories:
Raw materials 1,988 1,758
Work in process 772 685
Finished goods 2,689 2,378
Total inventories 5,449 4,821
Prepaids and income tax refunds receivable 1,518 1,372
Total current assets 14,585 13,464
Property, plant and equipment, net 7,113 6,735
Other assets 121 152
Total assets $21,819 $20,351
LIABILITIES AND SHAREHOLDERS' EQUITY
Note payable to bank $2,783
Accounts payable 1,672 $2,688
Accrued payroll and related items 1,190 1,587
Accrued marketing programs 900 718
Accrued expenses 1,399 1,610
Total current liabilities 7,944 6,603
Deferred income taxes 1,480 1,480
Total liabilities 9,424 8,083
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 10,676 11,033
Net income (loss) for period 127 (357)
Balance at end of period 10,803 10,676
Total shareholders' equity 12,395 12,268
Total liabilities and shareholders' equity $21,819 $20,351
<FN>
<F1>The accompanying notes are an integral part of these financial statements
</FN>
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</TABLE>
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<TABLE>
KIT MANUFACTURING COMPANY
STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
<CAPTION>
For the three months ended January 31,
1999 1998
<S> <C> <C>
Cash flows from operating activities:
Cash received from customers $13,339 $13,874
Interest received 48 27
Cash received from operations 13,387 13,901
Cash paid to suppliers and employees 14,381 16,196
Interest paid 36 10
Cash disbursed for operations 14,417 16,206
Net cash used in operating activities (1,030) (2,305)
Cash flows from investing activities:
Purchase of property, plant and equipment (352) (685)
Changes in other current and non-current assets (359) 299
Net cash used in investing activities (711) (386)
Cash flows from financing activities:
Proceeds from line-of-credit borrowings 6,430 1,655
Principal payments on line-of-credit borrowings (3,647) 0
Net cash provided by financing activities 2,783 1,655
Net increase (decrease) in cash 1,042 (1,036)
Cash at beginning of year 3,230 3,673
Cash at end of period $4,272 $2,637
Reconciliation of net income (loss) to net cash used in operating
activities:
Net income (loss) $127 ($157)
Adjustments to reconcile net income (loss) to
net cash used in operating activities:
Depreciation 158 162
Decrease in accounts receivable 695 55
Increase in inventories (628) (2,599)
(Decrease) increase in accounts payable
and accrued liabilities (1,442) 344
Increase (decrease) in income taxes payable 60 (110)
Net cash used in operating activities ($1,030) ($2,305)
<FN>
<F1>The accompanying notes are an integral part of these financial statements
</FN>
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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 - The Financial Accounting Standards Board (FASB) has
issued Statement of Financial Accounting Standards (FAS) No. 131,
"Disclosures about Segments of an Enterprise and Related
Information". Management does not anticipate that the adoption
of these standards will have a significant effect on earnings or
the financial position of the Company.
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<PAGE>
KIT MANUFACTURING COMPANY
Management's Discussion and Analysis of Financial Condition
and Results of Operations
FINANCIAL CONDITION - JANUARY 31, 1999 COMPARED TO OCTOBER 31,
1998
Under first 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 decreased $220,000 due to the line of credit borrowings
for the inventory build-up. The current ratio was 1.8:1 at
January 31, 1999 compared to 2.0:1 at October 31, 1998.
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 cash needs.
RESULTS OF OPERATIONS - QUARTER ENDED JANUARY 31, 1999 COMPARED
TO QUARTER ENDED JANUARY 31, 1998
Total sales for the quarter ended January 31, 1999 were
$12,644,000, a 9% decrease from sales of $13,819,000 for the same
quarter of the prior year. The decrease consisted of an 18%
increase in manufactured housing sales and a 31% 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 closure of the Kansas RV
plant in April 1998.
Cost of sales decreased 13% from the same quarter of the prior
year and decreased 4% as a percent of sales. The resulting
increase in gross profit margins compared to the first quarter of
fiscal 1998 is chiefly attributed to the material and labor cost
containments associated with the controls over recreational
vehicle and manufactured housing production.
Selling, general and administrative expenses decreased less than
1% and remained at approximately 9% of sales in comparison to the
same quarter of the prior year. This was due primarily to the
continued controls over marketing and overhead costs.
Net interest income for the current quarter was $12,000 compared
to net interest income of $17,000 in the same quarter of the
prior year. This was a result of an increase in the average net
short-term borrowings.
The net income for the three months ended January 31, 1999 was
$127,000, or $0.11 per share, compared to net loss of $157,000,
or $0.14 per share, for the same quarter of the prior year.
The Company has instituted a program to determine whether its
computer information systems are able to interpret dates beyond
the year 1999 (the "Year 2000 Compliance Program") and has
implemented programming modifications to its main operational and
financial reporting systems that will address these issues. All
modified programming is currently operational. The Company
believes that its present computer information systems software
and hardware is Year 2000 compliant and
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intends to obtain certification of such for any future purchases
of computer software and hardware.
The Company is also in the process of evaluating non-information
technology systems, which would include telephone equipment, time-
keeping equipment and surveillance equipment. The Company expects
this evaluation to be completed by early 1999.
The Company is in the process of contacting its major suppliers,
service vendors and customers regarding Year 2000 compliance and
anticipates that this phase of the Year 2000 Compliance Program
will be completed early in fiscal 1999.
The total cost of the Year 2000 Compliance Program is not
expected to be material to the Company's financial position or
results of operations. To date, the Company has spent less than
$25,000 on Year 2000 compliance. The Company believes that the
cost of ensuring Year 2000 compliance for its own operational and
financial systems will be less than $50,000.
Although management believes the Company has an adequate plan to
be Year 2000 compliant, there can be no assurance that this
program will ultimately be successful. The Company believes that
it has sufficient resources to implement new and modified
computer systems and programming to address the Year 2000 issue,
and, accordingly, has not to date identified the need for any
contingency planning. However, the Company's ongoing assessment
of its financial and operations systems and non-information
technology systems may reveal the need for contingency planning
in the future.
To date, based on the progress of the "Year 2000 Compliance
Program", management believes the Company's computer information
systems will be capable of interpreting dates beyond the year
1999 before fiscal year end. Also, management does not anticipate
any Year 2000 problems within its non-information technology
systems nor from its suppliers, service vendors and customers
based on the data gathered during the compliance program testwork
completed.
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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
January 31, 1999.
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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 1/31/99 /s/ Dan Pocapalia
Dan Pocapalia
Chairman of the Board,
Chief Executive Officer and President
(Principal Executive Officer)
DATE 1/31/99 /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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<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> 3-MOS
<FISCAL-YEAR-END> OCT-31-1999
<PERIOD-END> JAN-31-1999
<CASH> 4,272,000
<SECURITIES> 0
<RECEIVABLES> 3,346,000
<ALLOWANCES> 37,000
<INVENTORY> 5,449,000
<CURRENT-ASSETS> 14,585,000
<PP&E> 7,113,000
<DEPRECIATION> 6,045,000
<TOTAL-ASSETS> 21,819,000
<CURRENT-LIABILITIES> 7,943,000
<BONDS> 0
0
0
<COMMON> 773,000
<OTHER-SE> 819,000
<TOTAL-LIABILITY-AND-EQUITY> 21,819,000
<SALES> 12,644,000
<TOTAL-REVENUES> 12,644,000
<CGS> 11,162,000
<TOTAL-COSTS> 12,455,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (12,000)
<INCOME-PRETAX> 189,000
<INCOME-TAX> 62,000
<INCOME-CONTINUING> 127,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 127,000
<EPS-PRIMARY> 0.11
<EPS-DILUTED> 0.11
</TABLE>
