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 the Quarter Ended April 30, 2002
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
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 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 April 30, 2002.
PART I
FINANCIAL INFORMATION
KIT Manufacturing Company
Consolidated Statements of Operations
(Dollars in Thousands Except Share and Per Share Amounts)
(Unaudited)
Three months ended Six months ended
April 30, April 30,
2002 2001 2002 2001
Sales $12,593 $12,154 $24,400 $18,907
Costs and expenses
Cost of sales 11,494 11,583 22,644 18,642
Selling, general and admin. expense 1,301 1,680 2,673 2,829
Operating loss (202) (1,109) (917) (2,564)
Other income (expense)
Interest income 2 109 27 179
Interest expense (89) (79) (193) (148)
Loss before income taxes (289) (1,079) (1,083) (2,533)
Benefit for income taxes (117) (436) (438) (1,024)
Net loss (172) (643) (645) (1,509)
Net loss per share:
Basic and diluted ($0.17) ($0.63) ($0.63) ($1.47)
Weighted-average shares outstanding:
Basic and diluted 1,027,334 1,027,334 1,027,334 1,027,334
Consolidated Statements of Shareholders' Equity
(Dollars in Thousands Except Share Amounts)
(Unaudited)
Common Stock Additional Retained
Shares Amount Paid-In Capital Earnings Total
Balance, October 31, 2001 1,027,334 $694 $775 $7,876 $9,345
Net loss (645) (645)
Balance, April 30, 2002 1,027,334 $694 $775 $7,231 $8,700
The accompanying notes are an integral part of these consolidated financial statements.
KIT Manufacturing Company
Consolidated Balance Sheets
(Dollars in Thousands Except Share and Per Share Amounts)
(Unaudited)
April 30, October 31,
2002 2001
ASSETS
Current Assets
Cash and cash investments (restricted at
October 31, 2001) $1,740 $5,991
Accounts receivable, net 4,367 3,025
Inventories 6,375 6,441
Prepaids and other assets 263 120
Deferred income taxes 930 930
Total Current Assets 13,675 16,507
Property, plant and equipment, net 5,162 5,445
Deferred income taxes 618 180
Other assets 318 221
$19,773 $22,353
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Line of credit $3,473 $4,056
Accounts payable 2,488 2,629
Retail flooring liability 1,296 1,850
Note payable 120 300
Accrued payroll and payroll related liabilities 642 1,344
Accrued marketing programs 684 727
Accrued expenses 2,370 2,102
Total Current Liabilities 11,073 13,008
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 1,027,334 shares
at April 30, 2002 and October 31, 2001 694 694
Additional paid-in capital 775 775
Retained earnings 7,231 7,876
Total Shareholders' Equity 8,700 9,345
$19,773 $22,353
The accompanying notes are an integral part of these consolidated financial statements.
KIT Manufacturing Company
Consolidated Statements of Cash Flows
(Dollars in Thousands)
(Unaudited)
Six months ended
April 30,
2002 2001
Cash Flows From Operating Activities:
Cash received from customers $23,467 $17,933
Interest received 27 179
Cash paid to suppliers and employees (26,298) (19,758)
Interest paid (110) (148)
Income taxes paid - (3)
Net cash used in operating activities (2,914) (1,797)
Cash Flows From Investing Activities:
Purchase of property, plant and
equipment (20) (3)
Proceeds from disposals of property,
plant and equipment - 8
Cash from consolidation of
retail sales partnership - 94
Net cash (used in) provided by investing
activities (20) 99
Cash Flows From Financing Activities:
Proceeds from short-term borrowings 5,154 9,340
Principal payments on short-term
borrowings (6,471) (6,421)
Net cash (used in) provided by financing
activities (1,317) 2,919
Net (decrease) increase in cash and cash
investments (4,251) 1,221
Cash and cash investments at beginning of
period (restricted at October 31,
2001) 5,991 4,489
Cash and cash investments
at end of period 1,740 5,710
Reconciliation of Net Loss to Net Cash Used in Operating Activities:
Net loss $ (645) $ (1,509)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 303 304
Changes in operating assets and liabilities:
Accounts receivable (1,342) (496)
Inventories 66 (664)
Prepaids and other assets (240) (456)
Accounts payable and accruals (1,056) 2,051
Accrued income taxes - (1,027)
Net cash used in operating activities $(2,914) $(1,797)
The accompanying notes are an integral part of these consolidated financial statements.
KIT Manufacturing Company
Notes to Consolidated 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 consolidated
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 consolidated 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 - In fiscal 2001, the Company assumed significantly
all responsibility in connection with the daily operations of
the retail sales partnership. Although the original partnership
agreement governing the relationship between the Company and the
minority interest holder provided participating rights to the
minority holder and thus precluded the Company from
consolidating the retail sales partnership, the partnership's
recurring losses and need for continued funding required the
Company's attention. The retail sales partnership commenced
operations in fiscal 1998 and has continued to perform
substantially below expectations with losses trending
significantly higher in each successive year. While lenders'
tightened credit policies and industry-wide excess
inventory levels were partially responsible for the
partnership's poor performance, the Company's management raised
some concerns regarding the minority interest holder's
management of the partnership's operations in accordance with
the original agreement. The partnership agreement specifically
delegated day-to-day operating responsibility and decision
making authority to the minority interest holder and it is
management's belief that such responsibilities could have been
performed at a higher level, as evidenced by the poor operating
results previously mentioned. As a result, in fiscal 2001, the
Company continued to fund 100% of the partnership's working
capital needs and also became substantially involved in the
decision making process and its daily operations. Additionally,
the Company purchased the minority interest holder's 30% interest
in the partnership for $20,000 in cash and the assumption of
$40,000 in debt and has consolidated its investment effective
the beginning of fiscal 2001.
Note H - The Company designs, manufactures and sells manufactured homes, which
are relocatable, factory-built dwellings of single and multi-unit design.
The Company also produces recreational vehicles designed as short-period
accommodations for vacationers and truckers. As such, the Company's
reportable segments are based on product lines. The accounting policies of
the reportable segments are the same as those described in
Note 1 of the audited financial statements. The
Company evaluates the performance of its operating segments based on
operating income or losses. Each segment records expenses related and
allocable to its employees and its operations. 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 or accounts
receivable for any year or year-end presented.
Three months ended Six months ended
April 30, April 30,
2002 2001 2002 2001
(Dollars in thousands)
SALES
Manufactured homes $5,380 $6,141 $10,833 $9,167
Recreational vehicles 7,213 6,013 13,567 9,740
Total sales $12,593 $12,154 $24,400 $18,907
LOSS BEFORE INCOME TAXES
Operating loss
Manufactured homes $ (100) $ (295) (523) $ (939)
Recreational vehicles (102) (814) (394) (1,625)
Total operating loss (202) (1,109) (917) (2,564)
Interest income 2 109 27 179
Interest expense (89) (79) (193) (148)
Loss before income taxes $ (289) $(1,079) $(1,083) $(2,533)
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 plus accrued interest thereon in damages which was
upheld by the Idaho Supreme Court in June 2002. Additionally, the
Company will be liable for attorneys fees incurred by the plaintiff.
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.
Note J - In June 2001, the Company amended its line of credit with
a commercial bank which allowed the Company to borrow up to
$6,000,000 at the prime rate of interest (4.75 percent at
April 30, 2002) and is collateralized by the Companys accounts
receivable, inventory and cash. This line of credit
expired on June 30, 2002. The agreement required that the
Company pay unused commitment fees equal to one quarter of
one percent (0.25%) per annum on the average daily unused
amount of the line of credit. Major provisions of the
agreement included certain minimum requirements as to
the Companys working capital and debt-to-equity ratio and
minimum cash and cash investment deposit requirements with the
bank in an amount equal to or greater than the aggregate amount
borrowed against the line.In January 2002, the
Company amended its line of credit with the bank to
increase its permitted maximum borrowings to
$7,000,000, less commercial and standby letters of credit
totaling $450,000. All other terms and covenants, as described
above, were unchanged. This line of credit was replaced as
discussed below.
In February 2002, KIT entered into a line of credit agreement
with Farmers and Merchants Bank (FMB). Under the agreement
FMB has agreed to provide KIT with an aggregate credit line
of $3,500,000. The line of credit is secured by a first
trust deed on company-owned facilities, and a first lien
position on all of the Companys assets including, but not
limited to, accounts receivable, inventory, equipment and
intangibles. The interest rate is at FMBs prime rate
(4.75 percent at April 30, 2002) plus 1.5%,
with a minimum interest rate of 7.50%. Interest
payments are due monthly beginning March 15, 2002 during
the term of the agreement. The aggregate amount borrowed,
along with all accrued, but unpaid interest, under this
line of credit is due on demand, but only after November 1,
2002. If there are no demands after November 1, 2002, then
it is due on February 15, 2003. There are no loan fees or
borrowing covenants associated with this line of credit
agreement. However, reimbursement of FMBs out-of-pocket
expenses is required. Concurrent with the Company's
acceptance of this new credit facility, the Company has
paid off the existing line of credit with available restricted
cash and cash investments, as allowed under the existing
agreement. In the interim period between when the Company
paid off its existing line of credit and received funds in
connection with this new credit facility, the Company obtained
short-term funds of up to $2.5 million collateralized by
certain assets of the Chairman of the Company, which
were repaid in February 2002.
Note K - The Company's consolidated financial statements
have been presented on the basis that it will continue as
a going-concern, which contemplates the realization of
assets and the satisfaction of liabilities in the normal
course of business. The Company has suffered net losses of
$645,000 for the six months ended April 30,2002, and $2,527,000
and $269,000 for the years ended October 31, 2001, and 2000,
respectively. The Company has used cash from
operating activities of $2,914,000 for the six months ended
April 30, 2002, and $2,311,000 and $1,720,000
for the years ended October 31, 2001 and 2000,
respectively.
The Company has funded its financial needs primarily
through operations and its previous line of credit, as
amended. At October 31, 2001, the Company had cash and
cash investments of $5,991,000, which was restricted
under its existing line of credit, as amended, and
working capital of $3,499,000. At April 30, 2002,
the Company had cash and cash investments of $1,740,000,
which was not restricted under its existing line of credit,
and working capital of $2,602,000. In
February 2002, the Company entered into a new $3,500,000
credit facility and, concurrently, paid off its existing
line of credit with available restricted cash and cash
investments (see Note J). The Company remains dependent
upon its ability to obtain outside financing either
through the issuance of additional shares of its common
stock or through borrowings until it achieves sustained
profitability through increased sales and improved product
margins. The Company's business continues to focus on the
manufacturing, marketing and selling of its manufactured
homes and recreational vehicles.
Management also plans to continue its internal cost
reduction initiatives that were implemented in previous
years. Additionally, management believes that sales will
increase and margins will improve, and with existing cash
reserves and funding provided under the long-term credit
facility entered into in February 2002, the Company
should have sufficient capital resources to sustain
its operations through fiscal year 2002. Should
the Company require further capital resources during 2002,
it would most likely address such requirement through a
combination of sales of its products, sales of equity
securities, and/or additional debt financings. If
circumstances changed, and additional capital was needed,
no assurance can be given that the Company would be able
to obtain such additional capital resources.
If unexpected events occur requiring the Company to
obtain additional capital and it is unable to do so,
it then might attempt to preserve its available
resources by deferring the creation or satisfaction
of various commitments, deferring the introduction of
various products or entry into various markets, or
otherwise scaling back its operations. If the Company
were unable to raise such additional capital or defer
certain costs as described above, such inability would
have an adverse effect on the financial position, results
of operations, cash flows and prospects of the Company.
KIT Manufacturing Company
Management's Discussion and Analysis of Results of Operations
and Financial Condition
In fiscal 2001, the Company assumed significantly
all responsibility in connection with the daily operations of
the retail sales partnership. Although the original partnership
agreement governing the relationship between the Company and the
minority interest holder provided participating rights to the
minority holder and thus precluded the Company from
consolidating the retail sales partnership, the partnership's
recurring losses and need for continued funding required the
Company's attention. The retail sales partnership commenced
operations in fiscal 1998 and has continued to perform
substantially below expectations with losses trending
significantly higher in each successive year. While lenders'
tightened credit policies and industry-wide excess
inventory levels were partially responsible for the
partnership's poor performance, the Company's management raised
some concerns regarding the minority interest holder's
management of the partnership's operations in accordance with
the original agreement. The partnership agreement specifically
delegated day-to-day operating responsibility and decision
making authority to the minority interest holder and it is
management's belief that such responsibilities could have
performed at a higher level, as evidenced by the poor operating
results previously mentioned. As a result, in fiscal 2001, the
Company continued to fund 100% of the partnership's working
capital needs and also became substantially involved in the
decision making process and its daily operations. Additionally,
the Company purchased the minority interest holder's 30% interest
in the partnership for $20,000 in cash and the assumption of
$40,000 in debt and has consolidated its investment effective
the beginning of fiscal 2001.
Critical Accounting Policies and Estimates
Our discussion and analysis of our financial condition and
results of operations are based upon our consolidated financial
statements, which have been prepared in accordance with
accounting principles generally accepted in the United
States. The preparation of these financial statements
requires us to make estimates and judgments that affect
the reported amount of assets and liabilities and disclosure
of contingent assets and liabilities at the date of the
financial statements and the reported amount of revenues
and expenses for each period.
The following represents a summary of our critical accounting
policies, defined as those policies that we believe are: (a)
the most important to the portrayal of our financial condition
and results of operations, and (b) that require our most
difficult, subjective or complex judgments, often as a
result of the need to make estimates about the effects
of matters that are inherently uncertain.
Revenue Recognition. Product sales and related cost of sales
are recognized as revenues provided the Company has received
a purchase order, the price is fixed or determinable,
collectibility of the resulting receivable is reasonably
assured, returns are reasonably estimable and there are no
remaining obligations. For the recreational vehicle division,
shipping terms are FOB destination. Title and risk of
ownership are transferred when the unit has been delivered
to the customer/dealer, at which time the sale is recognized
as revenue. For the manufactured homes division, shipping
terms are FOB shipping point and title and risk of ownership
are transferred to the customer/dealer at that time.
Accordingly, sales are recognized as revenue at the time units
are shipped. The Company provides for estimated future
returns of inventory under the narrowly defined terms in
which the Company may be required to repurchase such
inventory and the estimated costs of warranty
at the time of sale based on historical experience.
Actual results have been within management's expectations.
Insurance. The Company is self-insured for workers' compensation
for its plant locations, officers' and directors' liability,
and product liability. The Company has recognized an estimated
potential liability for known claims and incurred but
not reported claims.
Litigation and Other Contingencies. We regularly evaluate our
exposure to threatened or pending litigation and other business
contingencies. Because of the uncertainties related to the
amount of loss from litigation and other business contingencies,
the recording of losses relating to such exposures requires
significant judgment about the potential range of outcomes.
To date, we have not been affected by any litigation or other
contingencies that have had, or are currently anticipated to
have, a material impact on our results of operations or financial
position. As additional information about current or future
litigation or other contingencies becomes available, we will
assess whether such information warrants the recording of
additional expense relating to its contingencies. Such
additional expense could potentially have a material impact
on our results of operations and financial position.
FINANCIAL CONDITION APRIL 30, 2002 COMPARED TO OCTOBER 31, 2001
Since October 31, 2001, the Company has borrowed on its line of
credit to maintain its inventory levels to provide for continued
sales growth and to fund the seasonal increase in accounts
receivable. Although there have been increases in the Company's
prepaids and other assets ($143,000) and accounts receivable
($1,342,000), among other things since October 31, 2001, working
capital has decreased by $897,000. This decrease in working
capital is primarily due to offsetting increases in the
short-term borrowings ($1,317,000) and accrued liabilities
($477,000), among other things. The current ratio decreased
to 1.2:1 at April 30, 2002 from 1.3:1 at October
31, 2001. 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, working capital, $1,740,000 in cash and cash
equivalents, $27,000 available under its line of
credit and $253,000 available under the retail flooring
liability are considered adequate to meet present and reasonably
foreseeable working capital requirements through fiscal 2002.
The Company's consolidated financial statements
have been presented on the basis that it will continue as
a going-concern, which contemplates the realization of
assets and the satisfaction of liabilities in the normal
course of business. The Company has suffered net losses
of $645,000 for the six months ended April 30, 2002, and $2,527,000
and $269,000 for the years ended October 31, 2001, and 2000,
respectively. The Company has used cash from
operating activities of $2,914,000 for the six months ended
April 30, 2002, and $2,311,000 and $1,720,000
for the years ended October 31, 2001 and 2000,
respectively.
The Company has funded its financial needs primarily
through operations and its previous line of credit, as
amended. At October 31, 2001, the Company had cash and
cash investments of $5,991,000, which was restricted
under its existing line of credit, as amended, and
working capital of $3,499,000. At April 30, 2002,
the Company had cash and cash investments of $1,740,000,
which was not restricted under its existing line of credit,
and working capital of $2,602,000. In
February 2002, the Company entered into a new $3,500,000
credit facility and, concurrently, paid off its existing
line of credit with available restricted cash and cash
investments (see Note J). The Company remains dependent
upon its ability to obtain outside financing either
through the issuance of additional shares of its common
stock or through borrowings until it achieves sustained
profitability through increased sales and improved product
margins. The Company's business continues to focus on the
manufacturing, marketing and selling of its manufactured
homes and recreational vehicles.
In February 2002, KIT entered into a line of credit agreement
with Farmers and Merchants Bank (FMB). Under the agreement
FMB has agreed to provide KIT with an aggregate credit line
of $3,500,000. The line of credit is secured by a first
trust deed on company-owned facilities, and a first lien
position on all of the Companys assets including, but not
limited to, accounts receivable, inventory, equipment and
intangibles. The interest rate is at FMBs prime rate
(4.75 percent at April 30, 2002) plus 1.5%,
with a minimum interest rate of 7.50%. Interest
payments are due monthly beginning March 15, 2002 during
the term of the agreement. The aggregate amount borrowed,
along with all accrued, but unpaid interest, under this
line of credit is due on demand, but only after November 1,
2002. If there are no demands after November 1, 2002, then
it is due on February 15, 2003. There are no loan fees or
borrowing covenants associated with this line of credit
agreement. However, reimbursement of FMBs out-of-pocket
expenses is required. Concurrent with the Company's
acceptance of this new credit facility, the Company has
paid off the existing line of credit with available restricted
cash and cash investments, as allowed under the existing
agreement. In the interim period between when the Company
paid off its existing line of credit and received funds in
connection with this new credit facility, the Company obtained
short-term funds of up to $2.5 million collateralized by
certain assets of the Chairman of the Company, which
was repaid in February 2002.
Management also plans to continue its internal cost
reduction initiatives that were implemented in previous
years. Additionally, management believes that sales will
increase and margins will improve, and with the additional
funding provided under a new long-term credit facility,
the Company should have sufficient capital resources to
sustain its operations through fiscal year 2002. Should
the Company require further capital resources during 2002,
it would most likely address such requirement through a
combination of sales of its products, sales of equity
securities, and/or additional debt financings. If
circumstances changed, and additional capital was needed,
no assurance can be given that the Company would be able
to obtain such additional capital resources.
In May 2002, the Company retained the investment bank SG
Capital to assist with an evaluation of strategic
alternatives designed to enhance KITs shareholder value.
The action was recommended by a special committee of
the board of directors, composed of two of the board's
outside members, which was organized for the purpose of
selecting an advisor.
If unexpected events occur requiring the Company to
obtain additional capital and it is unable to do so,
it then might attempt to preserve its available
resources by deferring the creation or satisfaction
of various commitments, deferring the introduction of
various products or entry into various markets, or
otherwise scaling back its operations. If the Company
were unable to raise such additional capital or defer
certain costs as described above, such inability would
have an adverse effect on the financial position, results
of operations, cash flows and prospects of the Company.
RESULTS OF OPERATIONS FOR THE QUARTER ENDED APRIL 30, 2002
COMPARED TO QUARTER ENDED APRIL 30, 2001
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 April 30, 2002 were $12,593,000,
a 4% increase from sales of $12,154,000 for the same quarter of
the prior year. The increase consisted of a 12% decrease in
manufactured home sales and a 20% increase in recreational vehicle
(RV) sales. Sales increases in the RV division have been
favorably impacted by improved marketing efforts and
the introduction of an RV product that has been
in high demand. In addition, this division's
sales were favorably impacted by a wider range of
product offerings and overall increase in the dealer base.
Sales of manufactured homes have decreased during the current
quarter. Sales are lower primarily due to sales to an
individual customer in the amount of $1,760,000 which were
recorded in the quarter ended April 30, 2001.
Cost of sales for the quarter ended April 30, 2002 was $11,494,000,
a 1% decrease from cost of sales of $11,583,000 for the same
quarter of the prior year. This decrease is due principally to
greater efficiencies attributed to both divisions.
Cost of sales as a percent of sales decreased 4% from
95% in the second quarter of fiscal 2001 to 91% in the
second quarter of fiscal 2002. The resulting increase in gross
profit margins compared to the first quarter of fiscal
2001 is chiefly attributed to sales of higher margin products,
cost containments associated with the controls over
recreational vehicle and manufactured homes production and
higher production and sales volumes.
Selling, general and administrative expenses for the quarter ended
April 30, 2002 decreased to 10% of sales in comparison to 14% of
sales for the same quarter of the prior year. The selling, general
and administrative dollars decreased 23%, or $379,000, from
$1,680,000 for the quarter ended April 30, 2001 to $1,301,000 for
the quarter ended April 30, 2002. This decrease is primarily
due to internal cost reduction initiatives including a decrease
in the number of sales personnel in the manufactured housing
division.
Interest income decreased $107,000, or 98%, from $109,000 for the
quarter ended April 30, 2001 to $2,000 for the quarter ended
April 30, 2002. The decrease was due primarily to moderately
lower interest rates and a decrease in average balances of
invested funds compared to the same quarter of the prior year.
Interest expense increased $10,000, or 13%, from $79,000 for the
quarter ended April 30, 2001 to $89,000 for the quarter ended
April 30, 2002. This increase was primarily the result of an
increase in average short-term borrowings in fiscal 2002,
partially offset by moderately lower interest rates.
The net loss for the three months ended April 30, 2002 was
$172,000, or $0.17 per share, compared to a net loss of $643,000,
or $0.63 per share, for the same quarter of the prior year.
RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED APRIL 30, 2002
COMPARED TO SIX MONTHS ENDED APRIL 30, 2001
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 six months ended April 30, 2002 were $24,400,000,
a 29% increase from sales of $18,907,000 for the same period of
the prior year. The increase consisted of an 18% increase in
manufactured home sales and a 39% increase in recreational vehicle
(RV) sales. Sales increases in the RV division have been
favorably impacted by improved marketing efforts and
the introduction of an RV product that has been
in high demand. In addition, this division's
sales were favorably impacted by a wider range of
product offerings and overall increase in the dealer base.
Sales of manufactured homes have also increased during the current
period. They have also been favorably impacted by increased
marketing efforts and somewhat higher consumer confidence.
In addition, this division's sales were also favorably impacted
by revamped product offerings and an overall increase in the
dealer base, as well as a decrease of the industry-wide excess
finished goods inventory levels.
Cost of sales for the six months ended April 30, 2002 was $22,644,000,
a 21% increase from cost of sales of $18,642,000 for the same
period of the prior year. This increase is due principally to
the increase in sales attributed to both divisions.
Cost of sales as a percent of sales decreased 6% from
99% in the first six months of fiscal 2001 to 93% in the
same period of fiscal 2002. The resulting increase in gross
profit margins compared to the first six months of fiscal
2001 is chiefly attributed to sales of higher margin products,
cost containments associated with the controls over
recreational vehicle and manufactured homes production and
improved absorption of fixed overhead costs brought about
by higher production and sales volumes.
Selling, general and administrative expenses for the six months ended
April 30, 2002 decreased to 11% of sales in comparison to 15% of
sales for the same period of the prior year. The selling, general
and administrative dollars decreased 6%, or $156,000, from
$2,829,000 for the six months ended April 30, 2001 to $2,673,000 for
the six months ended April 30, 2002. This decrease is primarily
due to internal cost reduction initiatives including a decrease
in the number of sales personnel in the manufactured housing
division.
Interest income decreased $152,000, or 85%, from $179,000 for the
six months ended April 30, 2001 to $27,000 for the six months ended
April 30, 2002. The decrease was due primarily to moderately
lower interest rates and a decrease in average balances of
invested funds compared to the same quarter of the prior year.
Interest expense increased $45,000, or 31%, from $148,000 for the
six months ended April 30, 2001 to $193,000 for the six months ended
April 30, 2002. This increase was primarily the result of an
increase in average short-term borrowings in fiscal 2002,
partially offset by moderately lower interest rates.
The net loss for the six months ended April 30, 2002 was
$645,000, or $0.63 per share, compared to a net loss of $1,509,000,
or $1.47 per share, for the same period of the prior year.
PART II
OTHER INFORMATION
Item 6 (b)
The Company filed a Current Report on Form 8-K on March 12, 2002
in connection with statements made related to the results of
operations for the quarter ended January 31, 2002 at the annual
shareholders meeting.
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
DATE 6/14/02 /s/ Dan Pocapalia
Dan Pocapalia
Chairman of the Board,
Chief Executive Officer,
President
(Principal Executive Officer)
DATE 6/14/02 /s/ Bruce K. Skinner
Vice President and Treasurer
(Principal Financial and
Accounting Officer)
June 14, 2002
Securities and Exchange Commission
450 5th Street, N.W.
Washington, D.C. 20549
Ladies and Gentlemen:
Attached is the EDGAR submission of Form 10-Q for KIT
Manufacturing Company for the fiscal quarter ended
January 31 2002, as required by the Securities and
Exchange Act of 1934.
Sincerely,
/s/Bruce K. Skinner
Bruce K. Skinner
Vice President & Treasurer
BKS/s
Enc.