-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Pj4k4xz64sK5UnoeSnTHodWXs67q32HP78I1URmE/MHRYRu0gPkp9JSzoPj1epio xVaKsarXj3jJlgNSrrz63g== 0000056151-99-000003.txt : 19990201 0000056151-99-000003.hdr.sgml : 19990201 ACCESSION NUMBER: 0000056151-99-000003 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19981031 FILED AS OF DATE: 19990129 FILER: COMPANY DATA: COMPANY CONFORMED NAME: KIT MANUFACTURING CO CENTRAL INDEX KEY: 0000056151 STANDARD INDUSTRIAL CLASSIFICATION: MISCELLANEOUS TRANSPORTATION EQUIPMENT [3790] IRS NUMBER: 951525261 STATE OF INCORPORATION: CA FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 001-06257 FILM NUMBER: 99516915 BUSINESS ADDRESS: STREET 1: 530 E WARDLOW RD STREET 2: P O BOX 848 CITY: LONG BEACH STATE: CA ZIP: 90801 BUSINESS PHONE: 3105957451 MAIL ADDRESS: STREET 1: 530 EAST WARDLOW ROAD CITY: LONG BEACH STATE: CA ZIP: 90801 10-K 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED] For the fiscal year ended October 31, 1998 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] For the transition period from to . 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, Long Beach, California 90807 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (562) 595-7451 Securities registered pursuant to Section 12(b) of the Act: Title of class: Common Stock, no par value Name of each exchange on which registered: American Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None 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 Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] The approximate aggregate market value of voting stock held by non-affiliates of Registrant was $3,155,245 as of January 27, 1999. 1,110,934 (Number of shares of Common Stock outstanding as of January 22, 1998) Certain information called for by Parts I, II and IV is incorporated by reference to the registrant's Annual Report to shareholders for the fiscal year ended October 31, 1998 and the information called for by Part III is incorporated by reference to the registrant's definitive proxy statement to be filed with the Commission within 120 days after October 31, 1998. The Index to Exhibits appears on page 16. 35 pages in total. 1 PART I Item 1. Business General KIT Manufacturing Company ("Registrant") was incorporated in California in 1947, as the successor to a business founded in 1945. A description of Registrant's business during the last fiscal year appears on page 3 of Registrant's Annual Report to Shareholders for the fiscal year ended October 31, 1998, which is incorporated herein by reference. Principal Products Produced and Industry Segments Registrant designs, manufactures and sells manufactured housing (mobile homes) which are relocatable, factory-built dwellings of single, double and triple unit design. Constructed on wheel undercarriages, they are towed by truck to locations where they are set up and connected to utilities. Registrant also produces recreational vehicles designed as short-period accommodations for vacationers and travelers. These products are travel trailers designed to be towed behind pickup trucks and fifth wheel travel trailers designed to be towed behind and attached to special couplers in the beds of pickup trucks. Set forth below are the percentages of revenues contributed by each class of similar products for the last three fiscal years: Products Class Fiscal Year Manufactured Recreational Ended October 31, Housing Vehicles 1996 22% 78% 1997 31% 69% 1998 43% 57% Certain information regarding industry segments is set forth on page 10 of Registrant's Annual Report to Shareholders for the fiscal year ended October 31, 1998, which is incorporated herein by reference. Method of Product Distribution Registrant sells its products to approximately 167 dealers in 25 states and 21 dealers in Canada. Exclusive dealerships are not the pattern of the industry, and virtually all dealers also sell competing products. Registrant generally produces manufactured housing products only against orders received from dealers. Recreational vehicles are built for inventory particularly during the winter months in anticipation of increased demand during the spring months. (See "Seasonal Considerations" below.) Transportation charges are an important 2 Item 1. Continued factor in the cost of Registrant's products; therefore, distribution is generally a function of distance to the various markets and competitive conditions within these markets. (See Item 2, "Properties," for the locations of Registrant's principal plants.) Registrant is not dependent upon a single customer or a few customers and no dealer or group of dealers accounts for a substantial amount of Registrant's total sales. Competitive Conditions The recreational vehicle and manufactured housing industries are highly competitive. Registrant believes that the principal methods of competition in these industries are based upon quality, price, styling, warranty and service of products being offered. Registrant also believes that it competes favorably with respect to these factors in the manufactured housing group and has recently taken action with respect to the recreational vehicle product line to ensure it remains competitive in the marketplace. There are a large number of firms manufacturing and marketing products similar to those of Registrant within the geographical area in which Registrant's products are marketed. Several of the manufacturers within these industries are larger than Registrant in terms of total revenue and resources. Backlog Registrant does not consider the existence and level of backlog at any given date to be a significant factor affecting its business, except in establishing its production schedules. This is primarily due to the fact that orders may be cancelled up until the time the dealer takes delivery, although such cancellations have not been significant to date. The dollar amount of backlog, subject to the above described cancellation provision, was $3,830,356 and $8,303,771 at October 31, 1998 and 1997, respectively. All of the backlog existing at October 31, 1998 is expected to be filled within the current fiscal year. Sources and Availability of Raw Materials Registrant purchases raw materials and components from a number of alternative sources and is not dependent upon any particular supplier. Patents Although Registrant's products are marketed under various trade names, Registrant does not believe that patents, trademarks, licenses, franchises and concessions are of material importance to its business. 3 Item 1. Continued Research and Development Registrant periodically revises and redesigns its models in response to consumer demand. These revisions and redesigns can be extensive, if necessary, in order to obtain market acceptance. Registrant manufactures and sells manufactured housing and recreational vehicles and engages in new product development. Number of Employees On October 31, 1998, Registrant had 681 employees at its manufacturing plants and executive offices. Seasonal Considerations Registrant's sales and production volume traditionally increase during the second and third quarters of the fiscal year. During fiscal 1998, fifty-three percent of sales were achieved during the second and third fiscal quarters. Government Regulation The manufacture and distribution of Registrant's manufactured housing and recreational vehicle products are subject to governmental regulation in the United States and Canada at the federal, state, provincial and local levels. Compliance with those governmental regulations, including provisions regulating the discharge of materials into the environment or otherwise relating to the protection of the environment, is not expected to have a material adverse effect on Registrant. Business Risks Demand for Registrant's products is dependent upon the availability and cost of gasoline, weather conditions, available consumer credit and economic conditions. Relaxed consumer credit and the up-beat economy favorably affected dealers and retail purchasers of Registrant's manufactured housing products in fiscal 1998. Nevertheless, KIT's 1999 recreational vehicles models were well received by the dealers and KIT is optimistic about the favorable outcome of future operations of this segment. 4 Item 1. Continued Working Capital Accounts receivable balances fluctuate generally with the timing of shipments during the month since the majority of sales are either on C.O.D. terms or are financed by dealers through flooring arrangements with financial institutions. Recreational vehicle finished goods inventory balances are subject to seasonal variations. (See "Method of Product Distribution" and "Seasonal Considerations" above.) A short delivery lead time exists for the majority of recreational vehicle and manufactured housing raw material purchases, thereby allowing Registrant to maintain low levels of raw materials inventory. Registrant is a party to an unsecured revolving credit agreement with a bank that provides financing of seasonal working capital requirements. 5 Item 2. Properties Registrant leases general executive and administrative offices in Long Beach, California. The lease expires on March 14, 1999. Registrant owns an 11,160 square foot building, situated on 1.2 acres, housing operational offices in Caldwell, Idaho. The following table sets forth certain information about the property and facilities utilized by Registrant for manufacturing and plant administrative purposes, and the property leased to others (all property is owned by Registrant unless otherwise noted):
Approximate Approximate Facility And Location Acres Square Feet Recreational vehicle plants: Caldwell, Idaho (R2) 15.7 55,200 Caldwell, Idaho (R1) 15.8 53,000 Caldwell, Idaho (RSA) 10.9 67,800 (1) Caldwell, Idaho (Chassis) .5 9,000 McPherson, Kansas 23.0 47,400 (4) McPherson, Kansas 12.5 67,600 (4) Chino, California 10.0 47,700 (2) Manufactured housing plants: Caldwell, Idaho 9.5 99,100 (3) Caldwell, Idaho 2.1 13,200 (1)
(1)81,000 square foot Production Facility is being utilized by recreational vehicles and by manufactured housing. (2)Production Facility is leased to third party. (3)In 1997, 6,600 square foot storage area was added and 28,500 square foot building addition was also added to the existing 64,000 square foot Production Facility. (4)In April of 1998, the production activities at this plant location were permanently idled. 6 Item 3. Legal Proceedings Not applicable. Item 4. Submission of Matters to a Vote of Security Holders Not applicable. 7 PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters Information in response to this item is incorporated by reference from the information appearing in Registrant's Annual Report to Shareholders for the fiscal year ended October 31, 1998, at pages 1 and 12. Item 6. Selected Financial Data Information in response to this item is incorporated by reference from the information appearing in Registrant's Annual Report to Shareholders for the fiscal year ended October 31, 1998, at page 14. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Information in response to this item is incorporated by reference from the information appearing in Registrant's Annual Report to Shareholders for the fiscal year ended October 31, 1998, at pages 4 and 5. Item 8. Financial Statements and Supplementary Data Information in response to this item is incorporated by reference from the Financial Statements and the Notes to Financial Statements in Registrant's Annual Report to Shareholders for the fiscal year ended October 31, 1998, at pages 6 through 11 and pages 13 through 15 of the Registrant's Annual Report. Item 9. Disagreements on Accounting and Financial Disclosure Not applicable. 8 PART III Item 10. Directors and Executive Officers of the Registrant Information with respect to this item is incorporated by reference from Registrant's definitive Proxy Statement to be filed with the Commission within 120 days after the close of Registrant's fiscal year. Item 11. Executive Compensation Information with respect to this item is incorporated by reference from Registrant's definitive Proxy Statement to be filed with the Commission within 120 days after the close of Registrant's fiscal year. Item 12. Security Ownership of Certain Beneficial Owners and Management Information with respect to this item is incorporated by reference from Registrant's definitive Proxy Statement to be filed with the Commission within 120 days after the close of Registrant's fiscal year. Item 13. Certain Relationships and Related Transactions Information with respect to this item is incorporated by reference from Registrant's definitive Proxy Statement to be filed with the Commission within 120 days after the close of Registrant's fiscal year. 9 PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K (a) (1) Financial Statements Annual Report Page(s) Balance Sheets at October 31, 1998 and 1997 6 Statements of Income for each of the three years in the period ended October 31, 1998 7 Statements of Shareholders' Equity for each of the three years in the period ended October 31, 1998 7 Statements of Cash Flows for each of the three years in the period ended October 31, 1998 8 Notes To Financial Statements 9-11 Report of Independent Accountants 12 The financial statements and the Report of Independent Accountants listed in the above index which are included in Registrant's Annual Report to Shareholders for the fiscal year ended October 31, 1998 are hereby incorporated by reference. With the exception of the items referred to above and in Items 1, 5, 6, 7 and 8, Registrant's Annual Report to Shareholders for the fiscal year ended October 31, 1998 is not to be deemed filed as part of this report. 10 Item 14. Continued (a) (2) Financial Statement Schedules FORM 10-K PAGE Report of Independent Accountants on Schedules 12 Schedules: For each of the three years in the period ended October 31, 1998 VIII Valuation and Qualifying Accounts 13 Schedules other than those listed above are omitted for the reason that they are not required or are not applicable, or the required information is shown in the financial statements or notes thereto. Columns omitted from schedules filed have been omitted because the information is not applicable. (a) (3) Exhibits (3) Articles of Incorporation and By-Laws adopted by Registrant. (10) Material Contracts. (A) 1. Incentive Bonus Plan. (13) Annual report to security holders. (b) Reports on Form 8-K No reports on Form 8-K were filed during the fiscal quarter ended October 31, 1998. 11 REPORT OF INDEPENDENT ACCOUNTANTS ON SCHEDULES To the Shareholders and Board of Directors of KIT Manufacturing Company Our report on the financial statements of KIT Manufacturing Company has been incorporated by reference in this Form 10-K from page 12 of the 1998 Annual Report to Shareholders of KIT Manufacturing Company. In connection with our audits of such financial statements, we have also audited the related financial statement schedules listed in the index on page 11 of this Form 10-K. In our opinion, the financial statement schedules referred to above, when considered in relation to the basic financial statements taken as a whole, present fairly, in all material respects, the information required to be included therein. /s/PricewaterhouseCoopers LLP PRICEWATERHOUSECOOPERS LLP Los Angeles, California December 15, 1998 12 KIT MANUFACTURING COMPANY SCHEDULE VIII VALUATION AND QUALIFYING ACCOUNTS For The Years Ended October 31, 1998, 1997 And 1996
Col. A Col. B Col. C Col. D Col. E Additions (1) (2) Charged To Charged To Balance At Costs Other Balance At Beginning Of And Accounts Deductions End Of Description Period Expenses Describe Describe Period Allowance for doubtful accounts: Year ended October 31, 1996 $44,000 - $1,000(A) $43,000 Year ended October 31, 1997 $43,000 - $1,000(A) $42,000 Year ended October 31, 1998 $42,000 - $5,000(A) $37,000 (A)Write-off of uncollectible accounts.
13 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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 By:/s/Dan Pocapalia Dan Pocapalia Chairman of the Board, Chief Executive Officer and President Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated: /s/Dan Pocapalia Jan.28, 1999 /s/John W.H. Hinrichs Jan.28, 1999 Dan Pocapalia John W.H. Hinrichs Chairman of the Board, Director Chief Executive Officer and President (Principal Executive Officer) /s/John F. Zaccaro Jan.28, 1999 /s/Frank S. Chan Jan.28, 1999 John F. Zaccaro Frank S. Chan Director Director /s/Bruce K. Skinner Jan.28, 1999 /s/Fred W. Chel Jan.28, 1999 Bruce K. Skinner Fred W. Chel Vice President - Treasurer Director (Principal Financial and Accounting Officer) 14 INDEX TO EXHIBITS EXHIBITS REQUIRED BY ITEM 601 OF REGULATION S-K Sequential Page Number (3) Articles of Incorporation and By-Laws adopted by Registrant 17 (10) Material Contracts (A) 1. Incentive Bonus Plan 18 (13) Annual Report to Shareholders * * Incorporated by reference 15 (3) Articles of Incorporation and By-Laws The amended and restated Articles of Incorporation and By-Laws of the Registrant are hereby incorporated by reference from the exhibits to Form 10-K (File No. 2-31520) as filed for the fiscal year ended October 31, 1987. 16 (10) Material Contracts (A) 1. Incentive Bonus Plan Registrant maintains an Incentive Bonus Plan under which incentive bonuses may be paid to key management personnel pursuant to individual agreements relating to the profitability of the participant's area of responsibility. The amount of the bonus paid generally increases as the profitability of the area of responsibility increases. Time periods for which performance is measured include fiscal quarters and in some cases fiscal years. Payments are typically made within 75 days after the time period for which performance is measured. The agreements are reviewed annually and may be terminated at will by either party. 17 KIT Manufacturing Company 1998 Annual Report 18 KIT Manufacturing Company Financial Highlights
(Dollars in thousands except per share amounts) 1998 1997 1996 1995 1994 Operating Results for the Year Ended October 31 Sales $61,030 $76,465 $97,158 $101,462 $89,722 Net (loss) income $(357) $(2,312) $1,431(1) $1,349(2) $1,891(3) Net (loss) income per share: Basic ($0.32) ($2.08) $1.29(1) $1.21(2) $1.61(3) Diluted ($0.32) ($2.08) $1.27(1) $1.21(2) $1.59(3) Weighted-average shares outstanding: Basic 1,110,934 1,110,934 1,110,934 1,110,934 1,177,283 Diluted 1,110,934 1,110,934 1,130,433 1,110,934 1,189,308 Working capital $6,861 $7,215 $9,984 $8,427 $7,622 (1) Includes gain on business interruption claim of $373,000, net of related income taxes, or $0.34 per share. (2) Includes gain on business interruption claim of $423,000, net of related income taxes, or $0.38 per share. (3) Includes gain on involuntary conversion of plant facility and equipment and business interruption claim $671,000, net of related income taxes, or $0.57 per share.
About the Company: KIT Manufacturing Company produces manufactured housing and recreational vehicles marketed by an independent dealer network in 25 states in the West, Midwest, South and Southeast, as well as Canada and Japan. KIT homes are permanent living structures that are built utilizing materials similar to conventional housing. KIT recreational vehicle products are used primarily for camping or vacation travel and provide a variety of living accommodations. 19 To Our Shareholders: Fiscal 1998 was an extremely challenging year for the Company. Sales for recreational vehicles declined 34 percent. This decline was due to several factors. The primary reason was the fact that the recreational vehicle operation in McPherson, Kansas was terminated in March 1998 for economic reasons. Despite the decrease in overall RV sales and the significant costs incurred to shut down the McPherson, Kansas plant, the results from operations for this division improved significantly in comparison to fiscal 1997. This was due to cost reductions and design changes incorporated in the RV products which improved overall margins and made the RVs more market competitive. In addition, the Company revised its recreational vehicle marketing programs during fiscal 1998 to capture increased market share. The Company restructured a number of key management positions and made a number of operational facility changes in the RV Division in fiscal 1997 and 1998. Management believes that the realignment of the RV Division will provide for a more competitive operating environment which should result in improved performance in fiscal 1999. Currently, KIT has initiated a search for a Chief Operating Officer to complete the planned reorganization of the Company. This position will be key to the ongoing operational improvements currently underway for future growth and expansion of the RV and Manufactured Housing Divisions. The National RV show in Louisville, Kentucky held during the latter part of 1998 provided management with an optimistic view of what lies ahead for fiscal 1999. Our restyled recreational vehicle lines, enhanced by our low and mid-line products, were extremely well received by the dealers. Manage- ment believes, based on the enthusiastic response by our dealer body, that the Company will meet the demands of this highly competitive market where the challenge is to provide moderately-priced, high-value products. During the latter part of fiscal 1997, the Manufactured Housing Division completed its plant expansion, giving this facility a production capacity increase of 40 percent during fiscal 1998. The expansion now gives this division a competitive edge to produce at maximum volume with improved labor efficiencies. As evidence of the changes, operational results for this division improved 125 percent during fiscal 1998 in comparison to fiscal 1997. The Manufactured Housing Division began participation in a retail sales partnership during fiscal 1998. The performance of this arrangement has exceeded all of managements' expectations. The division is now reviewing plans for participation in a second retail sales operation which should be completed by March of 1999. A third retail joint venture is currently in the development stage and should be completed by the end of fiscal 1999. The Company's financial position remains strong. KIT has no long-term debt and its line of credit remains unused at fiscal year-end. Working capital, despite a 5 percent decline, is more than sufficient to provide the Company with funds necessary for operational maintenance and growth. Fiscal 1999 will see the Company continue to concentrate on expanding its market share by providing high quality, high value, innovative products. First quarter operations will see our normal seasonal slowdown, however, management believes that the balance of the fiscal year should yield profitable operating results. Sincerely, /s/Dan Pocapalia Dan Pocapalia Chairman, President and Chief Executive Officer 20 Recreational Vehicles KIT is one of the major manufacturers of towable travel trailers and fifth-wheels in the United States. KIT's position in the industry is the result of 54 years of consistently producing and delivering high quality, high value products to our customers. KIT products are well known for their reliability and their retained value and at "trade-in" time. KIT RVs are in high demand in the second time entry-level buyer market and the more knowledgeable buyer. The baby-boomer generation and younger families are discovering the affordability and comfort of recreational vehicle travel. The Company's philosophy of uncompromising quality control standards has driven KIT to new heights in retail customer loyalty from the oldest to the newest members of RV life-style. KIT's RV products incorporate high quality, reliable name-brand appliances, interior components and accessories. In our 1999 product lines, the Company has introduced many new innovations in our all-new model lineup in response to our customers' demands. In addition to new interiors and external graphics, the 1999 floor plans have been further enhanced to attract a broader base of consumers. These changes will significantly improve KIT dealer base opportunities. KIT produces a wide range of recreational vehicle products in its manufacturing facilities in Caldwell, Idaho. KIT RV's measure from 19 to 38 feet in length, are more than eight feet wide and provide sleeping accommodations for 2 to 10 persons. KIT produces its travel trailers and fifth-wheels under the brand names of Espre', Road Ranger, SunChaser, Companion, Millennium and Patio Hauler. The entry level Sun Chaser and Espre' brands have been extremely well received by the dealer body. KIT expects that the retail buyers' enthusiastic reaction will be to choose those products for the many quality features and their low price point. The Road Ranger and Companion lines, with over thirty-eight models, are in the mid-priced market. These models are configured with a wide range of features. The all-new Millennium is our high-end product offering. This line has four different models and they provide the largest living and storage areas and feature benefits in their price range. They appeal to the discerning buyer and full-time RVers with a vast selection of features as standard equipment. Designed for adventure, the Patio Hauler features a cargo area for hauling off-road vehicles and other sporting equipment. The cargo area then converts to an enclosed patio when the "toys" are removed. The four available floor plans all feature the patio concept as well as provide the buyer with a fully appointed living area separate from the patio. Retail prices for the more than 38 KIT floor plans range from $8,500 to $58,000. This range covers approximately 80 percent of the travel trailer and fifth-wheel market. More than 120 independent dealers now distribute KIT recreational vehicles to the retail consumer throughout the western United States and Western Canada. The Millennium and Patio Hauler models are retailed throughout the continental United States. KIT provides its dealer network system with national media advertising, sales literature, training and special support programs, along with its national reputation for product quality and service. RV use is a flourishing source of recreation and relaxation for many Americans regardless of age or economic background. Over the past 54 years, KIT has supplied this growing market with the quality and affordability that fulfills the desires of people who enjoy this type of comfort and convenience. The Company continues to strive for excellence in its products and service in its quest to make the RV experience a most enjoyable one for its many satisfied customers. Manufactured Housing The manufactured housing division's recent growth continues to run higher than industry average. Value pricing coupled with a continuing emphasis on reducing operating costs has had a positive effect on this division. Manufactured housing builds both single and multi-sectioned dwellings designed to be transported to a prepared homesite. Multi-sectioned homes offer the appearance and living space of traditional site-built housing and have become the dominant portion of our sales. KIT homes are built in a controlled environment which minimizes the variables inherent in outdoor construction. By standardizing models we can build homes with greater efficiency, and consequently at lower cost, than site-built homes with the same features. The manufactured housing division continues to aggressively develop new products that incorporate innovative floor plans, modern colors and functional design. KIT manufactured homes are distributed from production facilities in Caldwell, Idaho through a network of approximately 68 dealers located in 9 Western states. KIT's homes are marketed in five product lines. The Oakcrest 14' wide home offers gracious, convenient living in modest floor space. The Royal Oaks home appeals to buyers with an interest in deluxe entry-level housing. Our Sierra XL homes are generally larger and provide a wide array of styles and custom features. The Golden State line, our most elegant series of homes, provides outstanding value for individuals who place a premium on comfort and luxury. Living space in the 52 available floor plans range from about 530 to more than 2,500 square feet. Retail prices, exclusive of land costs, range from approximately $20,000 to $120,000. In fiscal 1998, KIT homes enjoyed a greater share of the single family home subdivision sites. With an additional 40% production capacity now available, our future in this market should support KIT's housing division expansion. As the nation continues to search for solutions to the problem of affordable, single-family housing, KIT stands ready to provide attractive, energy-efficient homes at competitive prices. 21 KIT Manufacturing Company Management's Discussion And Analysis of Results of Operations and Financial Condition Results of Operations Fiscal 1998 Compared to 1997 Sales declined 20% to $61.0 million compared to fiscal 1997. The net loss was $357,000, or $0.32 per share, in comparison to a net loss in fiscal 1997 of $2,312,000, or $2.08 per share. The net losses were primarily from operational losses in the RV division. These losses were the result of a significant decline in sales due to competitive pricing issues in 1998 and 1997 and the costs associated with the closure of the McPherson, Kansas RV plant in fiscal 1998. The manufactured housing division implemented modest price increases in 1998 and 1997 to counter increases in raw material costs. Recreational vehicle division sales decreased 34% to $34.6 million. The overall decrease in RV shipments was 30%, down to 2,511 units. This decline consisted of a decrease in fifth-wheel model shipments from 1,774 units in 1997 to 1,056 units in fiscal 1998 and travel trailer shipments of 1,455 units down from 1,808 shipped in 1997. The model mix tended toward lower priced units in fiscal 1998. Because of the results of operations during fiscal 1997, the Company made key management changes and realigned the RV operations to be more competitive in fiscal 1998. Based on these changes, during fiscal 1998, the RV division improved its operating results by 46%. Management believes that this division is fully prepared to achieve profitable operating results in fiscal 1999. Manufactured housing sales increased 11% to $26.4 million. This increase reflected a 6% rise in shipments of single-section homes to 103 units and a 20% increase in shipments of multi-section homes to 677 units. Total unit shipments increased 18% to 780 homes in fiscal 1998. Gross profit as a percent of sales increased to 8% in comparison to 4% in 1997. The primary reasons for the increase were an increase in operating efficiencies in both divisions and increased sales volume in manufactured housing. Selling, general and administrative expenses remained at 9% of sales in comparison to fiscal 1997. The Company increased its selling costs as a percentage of sales in RV's in order to maintain market share as competition increased, offset by decreases in administrative expenses. Net interest income of $55,000 in 1998, as compared to net interest expense of $36,000 in 1997, was the result of higher average cash investments and lower average borrowings in fiscal 1998 as compared to fiscal 1997. Fiscal 1997 compared to 1996 Sales declined 21% to $76.5 million compared to fiscal 1996. The net loss was $2,312,000, or $2.08 per share, in comparison to net income in fiscal 1996 of $1,431,000, or $1.29 per share. Net income in 1996 included an after-tax gain from insurance proceeds on a business interruption claim of $373,000, or $0.34 per share. The manufactured housing division implemented modest price increases in 1997 and 1996 to counter increases in raw material costs. Recreational vehicle division sales decreased 30% to $52.7 million. The overall decrease in RV shipments was 31% down to 3,582 units in 1997. This decline consisted of a decrease in fifth-wheel model shipments from 2,501 units in 1996 to 1,774 units in fiscal 1997 and travel trailer shipments of 1,808 units down from 2,728 shipped in 1996. The model mix moved toward lower priced units in fiscal 1997. Management believes that the Company is fully prepared to meet this continuing trend by offering lower priced units in fiscal 1998. Manufactured housing sales increased 10% to $23.8 million. This increase reflected a 64% rise in shipments of single-section homes to 97 units and an 8% increase in shipments of multi-section homes to 563 units. Total unit shipments increased 14% to 660 homes in fiscal 1997. Gross profit as a percent of sales decreased to 4% in comparison to 11% in 1996. The primary reasons for the decrease were a decrease in operating efficiencies, lower sales volume and increased material costs. Selling, general and administrative expenses remained at 9% of sales in comparison to fiscal 1996. The Company increased its selling costs in RV's in order to maintain market share as competition increased, offset by decreases in administrative costs. Net interest expense of $36,000 in 1997, as compared to net interest expense of $13,000 in 1996, was the result of higher average borrowing levels as the Company maintained its inventories at a higher average level than in fiscal 1996. 22 Liquidity and Capital Resources The financial position of the Company remains strong. The current ratio at fiscal-year end 1998 remained at 2.0 in comparison to fiscal 1997. In addition to funding capital requirements with available funds, the Company, through financing activities, funds seasonal working capital requirements with cash from periodic borrowings on its unsecured revolving line of credit. See Note 4 of the Notes to Financial Statements for discussion of the line of credit. There were no borrowings against the line of credit at fiscal year-end 1998 or 1997. The Company believes that available funds, supplemented as needed with funds available on its line of credit, will provide it with sufficient resources to meet present and reasonably foreseeable working capital requirements and other cash needs. Other In 1997, the Financial Accounting Standards Board ("FASB") issued Statement No. 130, Reporting Comprehensive Income. This statement, which must be adopted by the Company in fiscal 1999, establishes standards for the reporting and display of comprehensive income and its components (revenues, expenses, gains and losses) in a full set of general-purpose financial statements. Also in 1997, the FASB issued Statement No. 131, Disclosures About Segments of an Enterprise and Related Information, which establishes standards for the way that companies report information about operating segments in annual financial statements, and requires that those companies report selected information about operating segments in interim financial reports issued to shareholders. This statement must also be adopted in fiscal 1999. The Company believes that the adoption of these two new standards will not have a material impact on its reported results of operations. 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 intends to obtain certification of such for any 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. 23 KIT Manufacturing Company Balance Sheets
October 31, 1998 1997 ASSETS Current Assets Cash and cash investments $3,230,000 $3,673,000 Accounts receivable, net of allowance for doubtful accounts of $37,000 in 1998 and $42,000 in 1997 4,041,000 4,533,000 Inventories 4,821,000 3,402,000 Prepaids, income taxes receivable and deferred 1,372,000 2,632,000 Total Current Assets 13,464,000 14,240,000 Property, Plant and Equipment, at cost Land 492,000 492,000 Buildings and improvements 7,931,000 7,047,000 Machinery and equipment 3,866,000 4,148,000 Construction in progress 402,000 1,055,000 12,691,000 12,742,000 Less accumulated depreciation (5,956,000) (5,898,000) 6,735,000 6,844,000 Other Assets 152,000 53,000 $20,351,000 $21,137,000 LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities Accounts payable $2,688,000 $2,697,000 Accrued payroll and payroll related liabilities 1,587,000 1,604,000 Accrued marketing programs 718,000 809,000 Accrued expenses 1,610,000 1,915,000 Total Current Liabilities 6,603,000 7,025,000 Deferred Income Taxes 1,480,000 1,487,000 8,083,000 8,512,000 Commitments and Contingencies Shareholders' Equity Preferred stock, $1 par value; authorized 1,000,000 shares; none issued Common stock, without par value; authorized 5,000,000 shares; issued and outstanding 1,110,934 shares in 1998 and 1997 750,000 750,000 Additional paid-in capital 842,000 842,000 Retained earnings 10,676,000 11,033,000 Total Shareholders' Equity 12,268,000 12,625,000 $20,351,000 $21,137,000 The accompanying notes are an integral part of these financial statements.
24 KIT Manufacturing Company Statements of Income
For the Years Ended October 31, 1998 1997 1996 Sales $61,030,000 $76,465,000 $97,158,000 Costs and expenses Cost of sales 55,920,000 73,176,000 86,473,000 Selling, general and admin. expenses 5,583,000 7,074,000 8,911,000 61,503,000 80,250,000 95,384,000 Operating (loss) income (473,000) (3,785,000) 1,774,000 Other income (expense) Interest (expense) income, net 55,000 (36,000) (13,000) Equity in loss of retail sales partnership (54,000) Gain on business interruption claim 620,000 (Loss) income before income taxes (472,000) (3,821,000) 2,381,000 (Benefit) provision for income taxes (115,000) (1,509,000) 950,000 Net (loss) income $(357,000) $(2,312,000) $1,431,000 Net (loss) income per share: Basic ($0.32) ($2.08) $1.29 Diluted ($0.32) ($2.08) $1.27 Weighted-average shares outstanding: Basic 1,110,934 1,110,934 1,110,934 Diluted 1,110,934 1,110,934 1,130,433
Statements of Shareholders' Equity Common Stock Additional Retained Shares Amount Paid-In Capital Earnings Total Balance, October 31, 1995 1,110,934 $750,000 $842,000 $11,914,000 $13,506,000 Net income 1,431,000 1,431,000 Balance, October 31, 1996 1,110,934 $750,000 $842,000 $13,345,000 $14,937,000 Net loss (2,312,000) (2,312,000) Balance, October 31, 1997 1,110,934 $750,000 $842,000 $11,033,000 $12,625,000 Net loss (357,000) (357,000) Balance, October 31, 1998 1,110,934 $750,000 $842,000 $10,676,000 $12,268,000 The accompanying notes are an integral part of these financial statements.
25 KIT Manufacturing Company Statements of Cash Flows
For the Years Ended October 31, 1998 1997 1996 Cash Flows From Operating Activities: Cash received from customers $61,523,000 $79,958,000 $96,711,000 Life Insurance proceeds 72,000 Interest received 166,000 105,000 53,000 Cash received from operations 61,689,000 80,135,000 96,764,000 Cash paid to suppliers and employees 62,710,000 77,565,000 95,593,000 Interest paid 111,000 141,000 66,000 Income taxes (received) paid (1,263,000) (47,000) 1,073,000 Cash disbursed for operations 61,558,000 77,659,000 96,732,000 Net cash provided by operating activities 131,000 2,476,000 32,000 Cash Flows From Investing Activities: Purchase of property, plant and equipment, net (780,000) (969,000) (434,000) Insurance proceeds from business interruption claim 620,000 Changes in other current and non-current assets 206,000 (115,000) (155,000) Net cash (used in) provided by investing activities (574,000) (1,084,000) 31,000 Cash Flows From Financing Activities: Proceeds from line-of-credit borrowings 17,790,000 12,374,000 4,900,000 Principal payments on line-of-credit borrowings (17,790,000) (12,374,000) (4,900,000) Net cash used in financing activities -- -- -- Net (decrease) increase in cash (443,000) 1,392,000 63,000 Cash and cash investments at beginning of year 3,673,000 2,281,000 2,218,000 Cash and cash investments at end of year $3,320,000 $3,673,000 $2,281,000 _______________________________________________________________________________________________________ Reconciliation of Net (Loss) Income to Net Cash Provided by (Used in) Operating Activities: Net (loss) income $(357,000) $(2,312,000) $1,431,000 Adjustments to reconcile net (loss) income to net cash provided by operating activities: Depreciation 639,000 677,000 670,000 Gain on business interruption claim -- -- (620,000) Decrease (increase) in accounts receivable 492,000 3,493,000 (676,000) (Increase)decrease in inventories (1,419,000) 3,767,000 (1,501,000) (Decrease) increase in accounts payable and accruals (429,000) (1,667,000) 894,000 Change in accrued income taxes 1,205,000 (1,482,000) (166,000) Net cash provided by operating activities $131,000 $2,476,000 $32,000 The accompanying notes are an integral part of these financial statements.
26 KIT Manufacturing Company Notes to Financial Statements 1. Summary of Significant Accounting Policies Cash and Cash Investments The Company invests its cash in high quality financial instruments, all of which are considered cash equivalents. The Company considers all highly liquid financial instruments with a maturity of three months or less at the time of purchase to be cash equivalents. Cash equivalents are carried at cost, which approximates market. The Company also maintains deposits at financial institutions in amounts in excess of federally insured limits. Management believes that credit risk related to its investments is limited due to the quality of the investments and the Company's policy which limits credit exposure to any one financial institution. Valuation of Inventories Inventories are stated at the lower of cost (last-in, first-out for material and first-in, first-out for labor and overhead) or market. Depreciation and Amortization For financial reporting purposes, depreciation and amortization of property, plant and equipment is generally provided for on a straight-line basis, using estimated useful lives of 10 years for land improvements, 20 to 33-1/3 years for buildings and improvements, 3 to 10 years for equipment and lease terms for leasehold improvements. Upon sale or disposition of assets, any gain or loss is included in the statement of income. Expenditures for maintenance, repairs and minor renewals are charged to expense as incurred; expenditures for betterments and major renewals are capitalized. Income Taxes The Company follows Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes, ("SFAS 109"), which requires the recognition of deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax liabilities and assets are determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted rates in effect for the year in which the differences are expected to reverse. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. Basic and Diluted Loss or Income Per Share In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 128, Earnings Per Share ("SFAS 128"), which was adopted by the Company effective for the year ended October 31, 1998, as required by the statement. SFAS 128 requires the presentation of both basic and diluted loss or income per share on the Statements of Income. Basic loss or income per share is computed based on the weighted-average number of shares outstanding during each year. Diluted loss or income per share is computed based on the sum of the weighted-average number of share outstanding plus potential common share arising out of stock options issued in 1994, unless the inclusion of such options would result in antidilution. Loss or income per share information has been restated to conform to the requirements of the statement. The Company's loss or income amounts used for per share calculations are the same for both the basic and diluted methods. There were no potential common shares included in the calculation of diluted loss per share for the years ended October 31, 1998 and 1997, because the effect would have decreased the loss per share amount and therefore been antidilutive. Potential common shares included in the calculation of diluted income per share were approximately 19,000 for the year ended October 31, 1996. Insurance The Company is self-insured for workers' compensation for its plant locations, officers and directors, and product liability. The Company has recognized an estimated potential liability for incurred but not reported claims. The Company recognized experience refunds from its medical insurance carrier amounting to $230,000 in 1996. Estimates The preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. Stock Options In October 1995, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 123, Accounting for Stock Based Compensation ("SFAS 123"), which is effective for transactions entered into in fiscal years that begin after December 15, 1995. The Company has determined that this method of accounting for stock based compensation has no effect on the financial statements as presented since the most recent stock option grants occurred in 1994. Retail Sales Partnership The Company's investment in the Retail Sales Partnership is accounted for under the equity method of accounting. 27 2. Business Interruption Claim In mid-June, 1992, the McPherson, Kansas manufactured housing plant facility was destroyed by a tornado. In addition, all of the manufacturing equipment and inventories were lost to water and wind damage. The storm also destroyed the finished goods inventory of the RV plant facility in the same location. The Company recorded a gain in 1996 of $620,000 for a business interruption claim related to this matter. 3. Stock Options During June 1994, the Company granted to five officers of the Company, options to purchase up to 96,944 shares of the Company's common stock, at 100% of the then fair value, or $10.38 per share. Also in June 1994, the Company granted to one such officer an additional option to purchase up to 35,056 shares of the Company's common stock, at 110% of the then fair value, or $11.41 per share. Options granted vest in four equal annual installments beginning one year after the date of the grant. The options to purchase the 96,944 shares of the Company's common stock stock remains outstanding (subject to termination of employment, death or permanent disability of the holder, as set forth in the option agreements) for a period of 10 years from the date of grant. The option to purchase the 35,056 additional shares of the Company's common stock remains outstanding (subject to termination of employment, death or permanent disability of the holder, as set forth in the option agreements) for a period of 5 years from the date of grant. On October 31, 1998, 1997 and 1996, total unexercised options were 132,000, of which 132,000, 99,000 and 66,000 options, respectively, were exercisable. 4. Bank Credit Line The Company is party to an unsecured revolving credit agreement with a bank that provides financing of seasonal working capital requirements. There are no compensating balance requirements under the agreement. Major provisions of the agreement include interest at the lesser of the bank's prime rate or market rate, and certain minimum requirements as to the Company's working capital and debt-to-equity relationships. At October 31, 1998, there was no outstanding balance on the revolving credit line, and the maximum borrowing permitted was the lesser of $4,000,000 or the sum of 80% of eligible trade receivables and 50% of inventories, less any commercial and standby letters of credit outstanding up to a maximum of $1,000,000. Interest costs charged to expense for the fiscal years 1998, 1997 and 1996 were $111,000, $141,000 and $66,000, respectively. 5. Commitments and Contingencies The Company was contingently liable at October 31, 1998 to various financial institutions on repurchase agreements in connection with wholesale inventory financing. In general, inventory is repurchased by the Company upon customer default with a financing institution and then resold through normal distribution channels. The total value of finished units subject to such agreements as of October 31, 1998 and 1997 was approximately $9,826,000 and $12,312,000, respectively. In addition, the Company is contingently liable to financial institutions for standby letters of credit totalling $778,000 as of October 31, 1998 and 1997, respectively. These letters of credit 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.
7. Inventories Inventories are summarized as follows: October 31, 1997 1996 Raw material $1,758,000 $1,876,000 Work in process 685,000 907,000 Finished goods 2,378,000 619,000 $4,821,000 $3,402,000 The excess of current replacement cost over last-in, first-out cost was $852,000 at October 31, 1998 and $1,189,000 at October 31, 1997.
7. Industry Segment Information Information about the Company's operations within industry segments for the years ended October 31, 1998, 1997, and 1996 is presented on page 13. 28 KIT Manufacturing Company Notes to Financial Statements
8. Income Taxes The components of the (benefit) provision for income taxes are as follows: For the year ended October 31, 1998 1997 1996 Current: Federal $(58,000) $(1,263,000) $712,000 State (266,000) 195,000 (58,000) (1,529,000) 907,000
Deferred: Federal (46,000) 54,000 47,000 State (11,000) (34,000) (4,000) (57,000) 20,000 43,000 $ (115,000) $(1,509,000) $950,000
The sources of deferred taxes were as follows: October 31, 1998 1997 1996 Accrued warranty costs $197,000 $(160,000) $(52,000) Workers' compensation reserves 76,000 (60,000) 31,000 State income and franchise taxes (102,000) 167,000 7,000 Inventory cost capitalization (44,000) 105,000 (16,000) Net operating loss carryforwards (55,000) Other (129,000) (32,000) 73,000 $(57,000) $20,000 $43,000
Reconciliation of the effective tax rates and the U.S. statutory tax rate is summarized as follows: October 31, 1998 1997 1996 Statutory tax rate (34.0%) 34.0% 34.0% State tax provision, net of federal tax effect (1.5) (1.8) 4.1 Tax exempt interest (8.3) (0.2) (0.3) Adjustment of prior years income tax accruals 16.9 Other 2.5 (3.5) 2.1 (24.4%) (39.5%) 39.9%
The components of the deferred tax asset and liability are as follows : October 31, 1998 1997 Deferred tax asset: Allowance for doubtful accounts $20,000 $20,000 Inventory adjustment 77,000 33,000 Accrued expenses 766,000 862,000 State income taxes 32,000 (70,000) $895,000 $845,000 Deferred tax liability: Accelerated depreciation $385,000 $392,000 Involuntary conversion of plant facility and equipment 1,095,000 1,095,000 $1,480,000 $1,487,000 The Company did not record a valuation allowance against the deferred tax asset in fiscal 1998 or 1997.
29 REPORT OF INDEPENDENT ACCOUNTANTS To the Shareholders and Board of Directors of KIT Manufacturing Company We have audited the accompanying balance sheets of KIT Manufacturing Company as of October 31, 1998 and 1997, and the related statements of income, shareholders' equity, and cash flows for each of the three years in the period ended October 31, 1998. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of KIT Manufacturing Company as of October 31, 1998 and 1997, and the results of its operations and its cash flows for each of the three years in the period ended October 31, 1998, in conformity with generally accepted accounting principles. Los Angeles, California /s/ PricewaterhouseCoopers LLP December 15, 1998 30 KIT Manufacturing Company Industry Segment Information
October 31, 1998 1997 1996 (Dollars in thousands) SALES Manufactured housing $26,410 $23,807 $21,580 Recreational vehicles 34,620 52,658 75,578 Total sales $61,030 $76,465 $97,158 (LOSS) INCOME BEFORE INCOME TAXES Operating (loss) income Manufactured housing $2,021 $876 $933 Recreational vehicles (2,494) (4,661) 841 Total operating (loss) income (473) (3,785) 1,774 Interest (expense) income, net 55 (36) (13) Equity in loss of retail sales partnership (54) Gain on business interruption claim -- -- 620 (Loss) income before income taxes $(472) $(3,821) $2,381 IDENTIFIABLE ASSETS Manufactured housing $8,983 $8,019 $7,207 Recreational vehicles 11,368 13,118 17,932 Total assets $20,351 $21,137 $25,139 DEPRECIATION Manufactured housing $289 $259 $234 Recreational vehicles 350 418 436 Total depreciation $639 $677 $670 CAPITAL EXPENDITURES Manufactured housing $337 $872 $127 Recreational vehicles 443 97 307 Total capital expenditures $780 $969 $434 Operating (loss) income represents (loss) income before net interest income (expense), equity in loss of retail sales partnership, gain on business interruption claim and income taxes. Non-direct operating expenses are allocated to industry segments based on a percentage of sales. Identifiable assets, depreciation and capital expenditures are those items that are used in the operations in each industry segment, with jointly used items being allocated based on a percentage of sales.
31 KIT Manufacturing Company Selected Financial Data
October 31, 1998 1997 1996 1995 1994 (Dollars in thousands except per share amounts) FISCAL YEAR Sales $61,030 $76,465 $97,158 $101,462 $87,722 Net (loss) income $(357) $(2,312) $1,431(1) $1,349(2) $1,891(3) Cash dividends paid $ $ $ $ $ Capital expenditures $780 $969 $434 $1,251 $3,622 Depreciation $639 $677 $670 $597 $478 AT YEAR-END Working capital $6,861 $7,215 $9,984 $8,427 $7,622 Current ratio 2.0:1 2.0:1 2.1:1 2.0:1 1.9:1 Ppty, plnt & equip, net $6,735 $6,844 $6,319 $6,388 $5,762 Total assets $20,351 $21,137 $25,139 $23,302 $21,891 Long-term obligations $ $ $ $ $ Shareholders' equity $12,268 $12,625 $14,937 $13,506 $12,157 PER SHARE Basic net (loss) income $(0.32) $(2.08) $1.29(1) $1.21(2)$1.61(3) Diluted net (loss) income $(0.32) $(2.08) $1.27(1) $1.21(2)$1.59(3) Shareholders' equity $11.04 $11.36 $13.45 $12.16 $10.94 (1) Includes gain on a business interruption claim of $373,000, net of related income taxes, or $0.34 per share. (2) Includes gain on a business interruption claim of $423,000, net of related income taxes, or $0.38 per share. (3) Includes gain on involuntary conversion of plant facility and equipment and a business interruption claim of $671,000, net of related income taxes, or $0.57 per share.
32 KIT Manufacturing Company Quarterly Statistics (Dollars in thousands except per share amounts) (Unaudited)
Fiscal 1998 First Quarter Second Quarter Third Quarter Fourth Quarter Sales $13,819 $16,831 $15,328 $15,052 Gross profit 901 1,514 1,601 1,094 (Loss) income before income tax benefit (265) 90 116 (413) Net (loss) income (157) 55 74 (329) Basic and diluted net (loss) income per share ($0.14) $0.05 $0.07 ($0.30) Fiscal 1997 Sales $16,589 $23,134 $20,811 $15,931 Gross profit 1,332 1,026 867 64 Loss before income taxes (546) (1,249) (741) (1,285) Net loss (322) (737) (437) (816) Basic and diluted net loss per share ($0.29) ($0.66) ($0.39) ($0.74)
Market Prices of Common Stock Fiscal 1998 First Quarter Second Quarter Third Quarter Fourth Quarter High 9 1/8 8 1/8 7 7/8 6 1/2 Low 6 3/8 6 3/4 6 1/4 4 5/8 Fiscal 1997 High 11 7/8 12 3/8 10 3/4 9 9/16 Low 11 10 1/2 9 1/2 8 1/8 KIT common stock is traded on the American Stock Exchange. The above table reflects the high and low sales prices for each quarterly fiscal period in the past two years. There are approximately 346 shareholders of record on January 8, 1999.
33 Corporate Information Directors Stock Registrar and Transfer Agent Dan Pocapalia ChaseMellon Shareholder Services, L.L.C. Chairman of the Board, Ridgefield Park, New Jersey President and Chief Executive Officer of KIT Fred W. Chel Legal Counsel Business Consultant, O'Melveny & Myers Custom Fibreglass Los Angeles, California Manufacturing Company Frank S. Chan, Jr. Certified Public Accountant, Partner, Accountants Frank S. Chan & Company PricewaterhouseCoopers LLP Los Angeles, California John W. H. Hinrichs Senior Vice President & Cashier, Farmers & Merchants Bank of Long Beach Form 10-K A copy of the Company's current annual John F.Zaccaro report filed with the Securities and Vice Chairman, Exchange Commission (SEC) on Form 10-K, Empower Health Corporation exclusive of exhibits, will be furnished to shareholders without charge upon written request to Marlyce A. Faldetta, Corporate Secretary, KIT Manufacturing Officers Company, Post Office Box 848, Long Beach Dan Pocapalia California 90801. Chairman of the Board, President and Chief Executive Officer Executive Offices Gerald R. Wannamaker KIT Manufacturing Company Executive Vice President - Operations 530 East Wardlow Road, P.O. Box 848 Long Beach, California 90801 Bruce K. Skinner (562) 595-7451 Vice President and Treasurer Matthew S. Pulizzi Annual Meeting of Shareholders Vice President - Customer Relations Tuesday, March 9, 1999, 9:00 A.M. Long Beach Marriott Marlyce A. Faldetta 4700 Airport Plaza Drive Corporate Secretary Long Beach, California 34 EX-27 2
5 This schedule contains summary financial information extracted from SEC FORM 10K and is qualified in its entirety by reference to such financial statements. 12-MOS OCT-31-1998 OCT-31-1998 3,230,000 0 4,041,000 37,000 4,821,000 13,464,000 12,691,000 5,956,000 20,351,000 6,603,000 0 0 0 750,000 842,000 20,351,000 61,030,000 61,030,000 55,920,000 61,503,000 0 0 55,000 (472,000) (115,000) (357,000) 0 0 0 (357,000) (0.32) (0.32)
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