10-Q/A 1 form10q_013101.txt AMENDED FORM 10-Q 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, 2001 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), 1,027,334 shares outstanding as of January 31, 2001. 1 of 12 Pages PART I FINANCIAL INFORMATION - 2 - KIT MANUFACTURING COMPANY STATEMENTS OF OPERATIONS (Dollars in Thousands Except Per Share Amounts) (Unaudited)
January 31, 2001 2000 Sales $6,225 $10,482 Sales to retail sales partnership 528 484 Costs and expenses: Cost of sales 6,662 9,255 Cost of sales to retail sales partnership 397 363 Selling, general and administrative expenses 1,098 1,010 Equity in loss of retail sales partnership 52 103 Operating (loss) income (1,456) 235 Other income (expense) Interest income 71 55 Interest expense (69) (17) (Loss) income before income taxes (1,454) 273 (Benefit) provision for income taxes (Note A) (588) 96 Net (loss) income $ (866) $ 177 Net (loss) income per share- basic and diluted ($0.84) $ 0.16 (Note B) Weighted-average shares 1,027,334 1,098,124 outstanding- basic and diluted (Note B) Dividends per share $ - $ - STATEMENT OF SHAREHOLDERS'EQUITY (Dollars in thousands) (Unaudited) Common Stock Additional Retained Shares Amount Paid-In Capital Earnings Total Balance, 10/31/00 1,027,334 $694 $775 $10,403 $11,872 Net loss (866) (866) _______ ____ _____ _______ ______ Balance, 01/31/01 1,027,334 $694 $775 $ 9,537 $11,006 ======== ===== ===== ====== ====== The accompanying notes are an integral part of these financial statements. -3-
KIT MANUFACTURING COMPANY BALANCE SHEETS (Dollars in Thousands) (Unaudited)
January 31, October 31, 2001 2000 ASSETS Cash and cash investments $ 7,145 $ 4,489 Accounts receivable, net 2,634 2,446 Accounts receivable from retail sales partnership 466 341 Inventories: Raw materials 1,902 1,664 Work in process 615 597 Finished goods 715 537 Total inventories 3,232 2,798 Prepaids and other assets 832 324 Deferred income taxes 1,025 1,025 Total current assets 15,334 11,423 Property, plant and equipment, net 5,502 5,637 Other assets 286 286 Total assets $ 21,122 $ 17,346 LIABILITIES AND SHAREHOLDERS' EQUITY Line of credit $ 3,979 - Accounts payable 1,840 $ 818 Accrued payroll and related items 760 903 Accrued marketing programs 434 471 Accrued expenses 1,533 1,699 Total current liabilities 8,546 3,891 Deferred income taxes 1,487 1,487 Losses in excess of investments in and advances to retail sales partnership 83 96 Total liabilities 10,116 5,474 Commitments and contingencies Shareholders'equity Common stock issued and outstanding 694 694 1,027,334 (January 31, 2001) and 1,110,934 (October 31, 2000) shares. Additional paid-in capital 775 775 Retained earnings 9,537 10,403 Total shareholders' equity 11,006 11,872 Total liabilities and shareholders' $ 21,122 $ 17,346 equity The accompanying notes are an integral part of these financial statements. -4-
KIT MANUFACTURING COMPANY STATEMENTS OF CASH FLOWS (Dollars in Thousands) (Unaudited)
For the three months ended January 31, 2001 2000 Cash flow from operating activities: Cash received from customers $ 6,531 $ 12,669 Interest received 71 55 Cash paid to suppliers and employees (7,787) (15,499) Interest paid (69) (17) Income taxes paid (1) - Net cash used in operating activities (1,255) (2,792) Cash flow from investing activities: Purchase of property, plant and equipment (3) (236) Advances to retail sales partnership (65) - Net cash used in investing activities (68) (236) Cash flow from financing activities: Proceeds from line-of-credit borrowings 4,822 4,087 Principal payments on line-of-credit (843) (1,988) borrowings Purchase of treasury stock - (126) Net cash provided by financing activities 3,979 1,973 Net increase (decrease) in cash 2,656 (1,055) Cash at beginning of period 4,489 4,731 Cash at end of period $ 7,145 $ 3,676 Reconciliation of net (loss) income to net cash used in operating activities: Net (loss) income $ (866) $ 177 Adjustments to reconcile net (loss) income to net cash used in operating activities: Depreciation 138 59 Equity in loss of retail sales partnership 52 103 Changes in operating assets and liabilities: Accounts receivable (313) 1,702 Inventories (434) (2,154) Prepaids and other assets 81 (629) Accounts payable and accruals 676 (2,146) Accrued income taxes (589) 96 Net cash used in operating activities $ (1,255) $ (2,792) The accompanying notes are an integral part of these financial statements.
- 5 - KIT MANUFACTURING COMPANY NOTES TO 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. Certain amounts in prior period financial statements have been reclassified to conform to current period presentation. 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, net of the Company's pro rata share of cumulative equity in losses, is reflected as a noncurrent liability totaling $83,000 and $96,000 at January 31, 2001 and October 31, 2000, respectively. The retail sales partnership has reflected all advances from the Company as a component of current liabilities equal to $690,000 and $80,000 at January 31, 2001 and October 31, 2000, respectively. The condensed unaudited financial information of the partnership is as follows: - 6 - KIT MANUFACTURING COMPANY NOTES TO FINANCIAL STATEMENTS (Unaudited)
January 31, (Dollars in Thousands) 2001 2000 Condensed Statement of Income Information: Sales $1,156 $1,075 Cost of sales 952 959 Selling, general and administrative expenses 188 229 Interest expense 68 50 Net loss $ (52) $(163) January 31, October 31, 2001 2000 Condensed Balance Sheet Information: Current assets $2,773 $2,601 Noncurrent assets 373 390 $3,146 $2,991 Current liabilities $3,891 $3,662 Noncurrent liabilities 28 50 Members' deficit (773) (721) $3,146 $2,991
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 or interest expense 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 for any period presented. Except for the retail sales partnership, no individual customer accounted for greater than 10% of net accounts receivable for period-end presented. Three Months Ended (Dollars in Thousands) January 31,
2001 2000 Sales Manufactured homes $ 3,026 $ 6,071 Recreational vehicles 3,727 4,895 Total sales $ 6,753 $10,966 Income/(loss) before income taxes Operating (loss) income Manufactured homes $ (644) $ 332 Recreational vehicles (812) (97) Total operating (loss) income (1,456) 235 Interest income 71 55 Interest expense (69) (17) (Loss) income before income taxes $(1,454) $ 273
- 7 - KIT MANUFACTURING COMPANY NOTES TO FINANCIAL STATEMENTS (Unaudited) Note I On December 15, 1998, the Company was named as a defendant in a lawsuit filed by one of its former dealers. A jury awarded the plaintiff $370,000 in damages, however, the verdict is currently under appeal with the Idaho State Supreme Court. The outcome of the appeal is not known at this time but the Company intends to defend it position vigorously. The Company, in its normal course of business is party to other pending lawsuits or may be subject to other threatened lawsuits. While the outcome of pending or threatened lawsuits cannot be predicted with certainty, and an unfavorable outcome could have a negative impact on the Company, at this time, in the opinion of management, the ultimate resolution of these matters will not have a material effect on the Company's financial position, results of operation or liquidity. Management does not expect that losses, if any, from the contingencies described above will be of material importance to the financial condition or future earnings of the Company. - 8 - KIT MANUFACTURING COMPANY Management's Discussion and Analysis of Financial Condition and Results of Operations FINANCIAL CONDITION JANUARY 31, 2001 COMPARED TO OCTOBER 31, 2000 Under first quarter market conditions, the Company borrowed on its line of credit to maintain its inventory levels to provide for anticipated first quarter sales and to pay down certain current liabilities. The Company's working capital decreased $744,000 primarily due to the increase in the line of credit and accounts payable for expenses incurred during the quarter ended January 31, 2001. The current ratio decreased to 1.8:1 at January 31, 2001 compared to 2.9:1 at October 31, 2000. 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, working capital, and $368,000 unused line of credit, is considered to be adequate to provide for near term cash needs. RESULTS OF OPERATIONS QUARTER ENDED JANUARY 31, 2001 COMPARED TO QUARTER ENDED JANUARY 31, 2000 The nature of the Company's business is seasonal. Historically, sales in the second and third quarters have been higher than sales achieved in the other fiscal quarters of the year. Thus, expenses and, to a greater extent, operating income vary by quarter. Caution, therefore, is advised when appraising results for a period shorter than a full year, or when comparing any period other than to the same period of the previous year. Total sales for the quarter ended January 31, 2001 were $6,753,000, a 38% decrease from sales of $10,966,000 for the same quarter of the prior year. The decrease consisted of a 50% decrease in manufactured home sales and a 24% decrease in recreational vehicle (RV) sales. Sales decreases in the RV division have been significantly impacted from rising interest rates and higher fuel costs. Sales of manufactured homes have been impacted unfavorably by lender's tightened credit standards as well as industry-wide excess finished goods inventory levels. Cost of sales for the quarter ended January 31, 2001 was $7,059,000, a 27% decrease from cost of sales of $9,618,000 for the same quarter of the prior year. This decrease is due principally to the reduction of sales attributed to the manufactured homes division and to a lesser degree, the recreational vehicle division. Cost of sales as a percent of sales increased 17% when compared to the same quarter of the prior year, which resulted in the Company reporting a negative gross profit margin for the quarter ended January 31, 2001. Although product margins for both divisions are marginally lower to those of the same period in 2001, the disproportional reduction in gross profit compared to sales is due principally to the under absorption of fixed overhead costs brought about by lower production and sales volumes. -9- KIT MANUFACTURING COMPANY Management's Discussion and Analysis of Financial Condition and Results of Operations Selling, general and administrative expenses for the quarter ended January 31, 2001 increased to 16% of sales in comparison to 9% of sales for the same quarter of the prior year. The selling, general and administrative dollars increased 9%, or $88,000, from $1,010,000 for the quarter ended January 31, 2000 to $1,098,000 for the quarter ended January 31, 2001 primarily due increased legal expenses for the current quarter. Interest income for the current quarter was $71,000 compared to $55,000 in the same quarter of the prior year. The increase was due primarily to an increase in average balances of invested funds (from the proceeds of the sales of the Chino, California, and McPherson, Kansas properties in second and third quarters of fiscal 2000), compared to the same quarter of the prior year. Interest expense for the current quarter was $69,000 compared to $17,000 in the same quarter of the prior year. This change was primarily the result of an increase in average short-term borrowings. The net loss for the three months ended January 31, 2001 was $866,000, or $0.84 per share, compared to net income of $177,000, or $0.16 per share, for the same quarter of the prior year. 10 PART II OTHER INFORMATION Item 6 (b). Form 8-K was not required to be filed during the quarter ended January 31, 2001. 11 Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. KIT MANUFACTURING COMPANY (Registrant) DATE 3/12/01 /s/ Dan Pocapalia Dan Pocapalia Chairman of the Board, Chief Executive Officer (Principal Executive Officer) DATE 3/12/01 /s/ Bruce K. Skinner Bruce K. Skinner Vice President and Treasurer (Principal Financial and Accounting Officer) 12