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, 2000
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), 1,084,234 shares
outstanding as of January 31, 2000.
Index to Exhibits - Page 12
1 of 12 Pages
<PAGE>
PART I
FINANCIAL INFORMATION
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<PAGE>
<TABLE>
KIT MANUFACTURING COMPANY
STATEMENTS OF OPERATIONS
(Dollars in Thousands Except Per Share Amounts)
(Unaudited)
<CAPTION>
Three Months
Ended
January 31,
2000 1999
<S> <C> <C>
Sales $10,966 $12,644
Costs and expenses:
Cost of sales 9,618 11,294
Selling, general and
administrative expenses 1,010 1,140
10,628 12,434
Operating income 338 210
Other:
Interest income 55 48
Interest expense (17) (36)
Equity in loss of retail sales
partnership (103) (34)
Income before income taxes 273 188
Provision for income taxes 96 61
(Note A)
Net income $ 177 $ 127
Net income per share-
basic and diluted $ 0.16 $ .11
(Note B)
Weighted-average shares 1,098,124 1,110,934
outstanding-
basic and diluted
(Note B)
Dividends per share $ - $ -
STATEMENT OF SHARHOLDERS'EQUITY
(Dollars in thousands)
(Unaudited)
Common Stock Additional Retained
Shares Amount Paid-In Capital Earnings Total
Balance, October 31, 1999 1,110,934 $750 $842 $11,049 $12,641
Purchase of treasury stock (26,700) (18) (20) (88) (126)
Net income 177 177
____________________________________________________
Balance, January 31, 2000 1,084,234 $732 $822 $11,138 $12,692
=====================================================
<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 SHEETS
(Dollars in thousands)
(Unaudited)
<CAPTION>
January 31 October 31,
2000 1999
<S> <C> <C>
ASSETS
Cash and cash investments $ 3,676 $ 4,731
Accounts receivable, net 3,245 4,947
Inventories:
Raw materials 2,288 1,792
Work in process 700 654
Finished goods 1,620 8
Total inventories 4,608 2,454
Prepaids and other assets 782 269
Deferred income taxes 737 721
Total current assets 13,048 13,122
Property, plant and equipment, net 6,726 6,549
Other assets 84 90
Total assets $ 19,858 $ 19,761
LIABILITIES AND SHAREHOLDERS' EQUITY
Line of credit $ 2,099 -
Accounts payable 1,323 $ 2,538
Accrued payroll and related items 685 1,191
Accrued marketing programs 142 402
Accrued expenses 1,443 1,515
Total current liabilities 5,692 5,646
Deferred income taxes 1,474 1,474
Total liabilities 7,166 7,120
Commitments and contingencies
Shareholders'equity
Common stock issued and outstanding 732 750
1,084,234 (January 31, 2000) and 1,110,934
(October 31, 1999) shares.
Additional paid-in capital 822 842
Retained earnings 11,138 11,049
Total shareholders' equity 12,692 12,641
Total liabilities and shareholders' $ 19,858 $ 19,761
equity
<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 three months ended January 31,
2000 1999
<S> <C> <C>
Cash flow from operating activities:
Cash received from customers $ 12,669 $ 13,339
Interest received 55 48
Cash paid to suppliers and employees (15,499) (14,555)
Interest paid (17) (36)
Net cash used in operating activities (2,792) (1,204)
Cash flow from investing activities:
Purchase of property, plant and equipment (236) (545)
Disposal of property, plant and equipment - 8
Net cash used in investing activities (236) (537)
Cash flow from financing activities:
Proceeds from line-of-credit borrowings 4,087 6,430
Principal payments on line-of-credit (1,988) (3,647)
borrowings
Purchase of treasury stock (126) -
Net cash provided by financing activities 1,973 2,783
Net decrease in cash (1,055) 1,042
Cash at beginning of period 4,731 3,230
Cash at end of period $ 3,676 $ 4,272
Reconciliation of net income to net cash
used in operating activities:
Net income $ 177 $ 127
Adjustments to reconcile net income to
net cash used in operating activities:
Depreciation 59 159
Equity in loss of retail sales partnership 103 34
Changes in operating assets and liabilities:
Accounts receivable 1,702 695
Inventories (2,154) (628)
Prepaids and other assets (629) (211)
Accounts payable and accruals (2,146) (1,442)
Accrued income taxes 96 62
Net cash used in operating activities $(2,792) $(1,204)
<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 conducted
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 Company's investment in and advances to the retail sales
partnership as of January 31, 2000 and 1999 are ($93,000) and $52,000,
respectively, and are included as a component of accrued liabilities
and other assets, respectively. The condensed unaudited financial
information of the partnership for the three-month periods ended
January 31, 2000 and 1999 is as follows:
January 31, January 31,
2000 1999
Condensed Statement of Income Information:
Sales $1,075,000 $675,000
Costs and expenses 1,222,000 723,000
Net loss $ (147,000) $(48,000)
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<PAGE>
KIT MANUFACTURING COMPANY
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
Note H - The Company evaluates the performance of its operating segments
based on operating income or losses. Each segment records direct expenses
related and allocable to its employees. The Company does not allocate income
taxes, interest income, interest expense or the equity in the retail sales
partnership to operating segments. Identifiable assets are primarily those
directly used in the operations of each segment. No individual customer
accounted for greater than 10% of net sales or accounts receivable for any
period or period-end presented.
Three Months Ended
(Dollars in Thousands) January 31,
2000 1999
Sales
Manufactured housing $ 6,071 $7,558
Recreational vehicles 4,895 5,086
Total sales $10,966 $12,644
====== =======
Income before income taxes
Operating income
Manufactured housing $ 332 $ 658
Recreational vehicles (97) (482)
Total operating income 235 176
Interest income 55 48
Interest expense (17) (36)
Income before income taxes $ 273 $ 188
===== ====
Note I - On September 14, 1999, the Board of Directors authorized the Company
to repurchase up to 100,000 common shares on the open market during a period
of not more than 12 months. The 100,000 common shares authorized for
repurchase represent 9% of the outstanding common stock of the Company.
The Company plans to purchase the shares from time to time, depending
on market conditions. During the quarter ended January 31, 2000 the
Company repurchased 26,700 common shares.
Note J - During February 2000, the Company sold land and buildings
located in Chino, California for consideration of $1,685,000, resulting
in a gain of $1,484,000.
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<PAGE>
KIT MANUFACTURING COMPANY
Management's Discussion and Analysis of Financial Condition
and Results of Operations
FINANCIAL CONDITION - JANUARY 31, 2000 COMPARED TO OCTOBER 31, 1999
Under first quarter market conditions, the Company borrowed on its line
of credit to increase its inventory levels to provide for anticipated
second quarter sales. The Company's working capital decreased $43,000
due to theline of credit borrowings for the inventory build-up. The current
ratio remained at 2.3:1 at January 31, 2000 compared to 2.3:1 at October 31,
1999. The current ratio is the result of dividing current assets by current
liabilities. It is a financial measure that indicates the ability of a
company to pay its current obligations with its current assets.
The Company's liquidity position as reflected in the current ratio
described above, capital resources, including excess plant capacity,
working capital, and $1,901,000 unused line of credit, are considered to be
adequate to provide for near term cash needs.
RESULTS OF OPERATIONS - QUARTER ENDED JANUARY 31, 2000 COMPARED TO
QUARTER ENDED JANUARY 31, 1999
Total sales for the quarter ended January 31, 2000 were $10,966,000, a
13% decrease from sales of $12,644,000 for the same quarter of the
prior year. The decrease consisted of a 20% decrease in manufactured
housing sales and a 4% decrease in recreational vehicle (RV) sales.
The decline in manufactured housing sales was caused by excess open
units and repossessions in the marketplace as a result of a number
of manufacturers over producing. In addition, although there was also a
decline in RV sales this division continues to improve its selling margins and
operating results through improved production cost controls and efficiencies.
Also, strategically planned marketing continues to increase sales of a wide
range of high margin travel trailers.
Cost of sales for the quarter ended January 31, 2000 was $9,618,000, a
15% decrease from $11,294,000 for the same quarter of the prior year,
and a 2% decrease as a percent of sales. The resulting increase in
gross profit margins compared to the first quarter of fiscal 1999 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 7% during the
quarter to $1,076,000, compared to $1,162,000 for the same period of the
prior year. The decrease was due primarily to the continued controls over
marketing and overhead costs.
Interest income for the current quarter was $55,000 compared to $48,000
in the same quarter of the prior year. This was due to an increase in
average short-term investments in conjunction with higher average rates
of return. Interest expense for the current quarter was $17,000
compared to $36,000 in the same quarter of the prior year. This change was the
result of a decrease in average borrowings.
The net income for the three months ended January 31, 2000 was
$177,000, or $0.16 per share, compared to net income of $127,000, or
$0.11 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
The Company instituted a program to determine whether its
computer information systems were able to interpret dates beyond
the year 1999 (the "Year 2000 Compliance Program") and
implemented programming modifications to its main operational and
financial reporting systems to address these issues. The Company
also contacted its major suppliers, service vendors and customers
regarding Year 2000 compliance and to date, has not been alerted
to any Year 2000 compliant issues as a result of these inquiries.
The total cost of the Year 2000 Compliance Program was
approximately $50,000.
Although management believes the Company adequately addressed
Year 2000 compliant issues, there can be no assurance that such
problems will not be identified in the future. However, the
Company believes that it has sufficient resources and that any
such problems subsequently identified will not be material to the
Company's financial position or results of operations.
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<PAGE>
PART II
OTHER INFORMATION
Item 6 (a).
See Index to Exhibits on page 12.
Item 6 (b).
Form 8-K was not required to be filed during the quarter ended
January 31, 2000.
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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 1/31/00 /s/ Dan Pocapalia
Dan Pocapalia
Chairman of the Board,
Chief Executive Officer and President
(Principal Executive Officer)
DATE 1/31/00 /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
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-31-2000
<PERIOD-END> JAN-31-2000
<CASH> 3,676,000
<SECURITIES> 0
<RECEIVABLES> 3,245,000
<ALLOWANCES> 35,000
<INVENTORY> 4,608,000
<CURRENT-ASSETS> 19,858,000
<PP&E> 6,726,000
<DEPRECIATION> 6,547,000
<TOTAL-ASSETS> 19,858,000
<CURRENT-LIABILITIES> 5,692,000
<BONDS> 0
0
0
<COMMON> 1,554,000
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 19,858,000
<SALES> 10,966,000
<TOTAL-REVENUES> 10,966,000
<CGS> 9,618,000
<TOTAL-COSTS> 10,731,000
<OTHER-EXPENSES> 103,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 17,000
<INCOME-PRETAX> 273,000
<INCOME-TAX> 96,000
<INCOME-CONTINUING> 177,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 177,000
<EPS-BASIC> .16
<EPS-DILUTED> .16
</TABLE>
