Knape & Vogt Manufacturing (KNAP) 10-K/A 2004 FY Annual report (amended)

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
(AMENDMENT NO. 1)

(Mark One)

[X] Annual report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended July 3, 2004 or

[  ] Transition report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from to

Commission file number 000-01859

KNAPE & VOGT MANUFACTURING COMPANY
(Exact name of registrant as specified in its charter)

Michigan
(State or other jurisdiction of incorporation or organization) 38-0722920
(I.R.S. Employer Identification No.)

2700 Oak Industrial Drive, N.E., Grand Rapids, MI     49505
(Address of principal executive offices)     (Zip Code)

(616) 459-3311
(Registrant’s telephone number, including area code)

Securities registered pursuant to 12(b) of the Act:

Title of each class

None Name of each exchange on which registered

None

Securities Registered pursuant to Section 12(g) of the Act:

Common Stock, par value $2.00 per share
(Title of class)

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 __.

Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes____ No  X  

The aggregate market value of voting stock held by nonaffiliates of the registrant was $53,970,371 as of December 27, 2003.

Number of shares outstanding of each class of common stock as of August 27, 2004: 2,339,617 shares of Common Stock, par value $2.00 per share, and 2,177,488 shares of Class B Common Stock, par value $2.00 per share.

Documents incorporated by reference. Certain portions of the Registrant’s Proxy Statement for the Annual Meeting of Shareholders to be held on October 15, 2004, are incorporated by reference into Part III of this Report.

EXPLANATORY NOTE

        Knape & Vogt Manufacturing Company (the “Company”) hereby amends Part I, Item 8, and Part IV, Item 15, of its Annual Report on Form 10-K for the fiscal year ended July 3, 2004, as originally filed with the Securities & Exchange Commission on August 30, 2004 (the “Original Form 10-K”). The Company is filing this Amendment No. 1 on Form 10-K/A (this “Amendment No. 1”) to do the following: (a) to add the conformed signature of its independent auditors Deloitte & Touche LLP to the Report of Independent Registered Public Accounting Firm, with respect to the Consolidated Balance Sheets of the Company as of July 3, 2004 and June 28, 2003 and the related Consolidated Statements of Operations, Stockholders Equity, and Cash Flows for each of the three years in the period ended July 3, 2004 and the related financial statement schedule (the “Report”); (b) to correct the reference in the last paragraph of the Report opining on the financial statement schedule from Item 14 to Item 15; (c) to delete the separate Report of Independent Registered Public Accounting Firm with respect to the financial statement schedule; and (d) to file an updated Consent of Independent Registered Public Accounting Firm, Exhibit 23.

        In accordance with the rules of the Securities and Exchange Commission, the Company has set forth the text of Item 8 and Item 15 in their entirety and included the updated Exhibit 23 consent. In addition, updated certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 have been added as Exhibits 31.1 and 31.2 and updated certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 have been added as Exhibits 32.1 and 32.2 to this Amendment No. 1.

        This Amendment No. 1 is limited in scope to the portions of the Original Form 10-K set forth above and does not amend, update, or change any other items or disclosures contained in the Original Form 10-K. Accordingly, all other items that remain unaffected are omitted in this filing. None of the amendments to the Original Form 10-K reflected in this Amendment No. 1 resulted in a change to or restatement of the financial statements or other financial information included in the Original Form 10-K.

        This Amendment No. 1 continues to speak as of the date of the original filing of the Original Form 10-K and we have not updated the disclosures contained therein to reflect any events that occurred at any subsequent date. The filing of this Amendment No. 1 shall not be deemed an admission that the Original Form 10-K, when filed, included any untrue statement of a material fact or omitted to state a material fact necessary to make a statement therein not misleading.

2

PART I
ITEM 8 — FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

        Immediately following are the consolidated balance sheets of the Company and its subsidiaries as of July 3, 2004 and June 28, 2003, and the related consolidated statements of operations, stockholders’ equity and cash flows for each of the three years in the period ended July 3, 2004, the notes thereto, and the report of independent registered public accounting firm.

3

Knape & Vogt Manufacturing Company and Subsidiaries Consolidated Statements of Operations
Year Ended	July 3, 2004	June 28, 2003		June 29, 2002
Net Sales	$148,977,742	$ 124,920,476		$ 131,481,631
Cost of Sales	118,249,399	97,638,310		100,648,746
Gross Profit	30,728,343	27,282,166		30,832,885
Expenses
Selling	19,312,542	17,961,595		17,626,073
Administrative and general	4,256,199	5,229,120		4,909,465
Other	-	271,325		935,000
Total Expenses	23,568,741	23,462,040		23,470,538
Operating Income	7,159,602	3,820,126		7,362,347
Other Expenses (Income)
Interest	1,632,201	1,458,580		1,484,868
Other, net	2,202	(255,854	)	(34,567	)
Total Other Expenses	1,634,403	1,202,726		1,450,301
Income Before Income Taxes	5,525,199	2,617,400		5,912,046
Income Taxes	1,790,267	386,501		2,123,000
Net Income	$    3,734,932	$     2,230,899		$     3,789,046
Basic and Diluted Earnings Per Share	$             0.83	$              0.49		$              0.83
Weighted-Average Shares Outstanding	4,516,245	4,516,706		4,569,942
Dividends Per Share
Common stock	$              .66	$               .66		$               .66
Class B common stock	$              .60	$               .60		$               .60

See accompanying notes to consolidated financial statements.

4

Knape & Vogt Manufacturing Company and Subsidiaries
Consolidated Balance Sheets

	July 3, 2004	June 28, 2003
Assets
Current Assets
Cash and equivalents	$  5,278,869	$  3,846,613
Accounts receivable, less allowances of $673,000 and $803,000,
respectively	19,959,442	16,820,600
Inventories, including inventory on consignment at customer
locations of $3,292,297 and $3,610,427, respectively	23,955,271	18,979,056
Prepaid expenses and other current assets	950,911	731,749
Total Current Assets	50,144,493	40,378,018
Property and Equipment
Land and improvements	1,175,614	1,175,614
Buildings	16,589,054	16,630,343
Machinery and equipment	66,043,000	65,368,888
Construction in progress	407,863	485,520
	84,215,531	83,660,365
Less accumulated depreciation	55,531,817	49,671,256
Net Property and Equipment	28,683,714	33,989,109
Goodwill, net of accumulated amortization of $1,099,000	4,772,837	4,772,837
Prepaid Pension Cost	12,088,937	12,503,491
Other Assets	561,345	705,374
	$96,251,326	$92,348,829

See accompanying notes to consolidated financial statements.

5

Knape & Vogt Manufacturing Company and Subsidiaries
Consolidated Balance Sheets

	July 3, 2004		June 28, 2003
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable	$ 11,299,675		$ 10,746,892
Accruals:
Income taxes	1,829,986		753,088
Accrued compensation	3,005,614		2,338,927
Accrued customer rebates and cooperative advertising	1,975,397		1,289,946
Other	4,695,036		4,791,896
Total Current Liabilities	22,805,708		19,920,749
Other Retirement Benefits	4,753,797		5,393,633
Long-Term Debt and Capital Leases	24,538,864		24,052,605
Deferred Income Taxes	5,896,000		5,665,000
Interest Rate Swap Agreement and Other Long-Term Liabilities	1,432,739		2,554,980
Total Liabilities	59,427,108		57,586,967
Stockholders' Equity
Stock:
Common, $2 par - 6,000,000 shares authorized; 2,331,860 and 2,293,433
issued and outstanding	4,663,720		4,586,866
Class B common, $2 par - 4,000,000 shares authorized; 2,184,489 and
2,222,202 issued and outstanding	4,368,978		4,444,404
Preferred - 2,000,000 shares authorized and unissued	-		-
Additional paid-in capital	7,544,749		7,538,684
Unearned stock grant	(94,500	)	(94,500	)
Accumulated other comprehensive loss:
Derivative instrument	(904,133	)	(1,660,980	)
Minimum SERP adjustment	(1,047,874	)	(1,255,168	)
Minimum pension adjustment	(250,015	)	(384,677	)
Foreign currency translation adjustment	396,156		325,836
Total accumulated other comprehensive loss	(1,805,866	)	(2,974,989	)
Retained earnings	22,147,137		21,261,397
Total Stockholders' Equity	36,824,218		34,761,862
	$ 96,251,326		$ 92,348,829

See accompanying notes to consolidated financial statements.

6

Knape & Vogt Manufacturing Company and Subsidiaries
Consolidated Statements of Stockholders’ Equity

	Common stock		Additional paid-in capital		Restricted stock grants		Accumulated other comprehensive income (loss)		Retained earnings		Total
Balance, June 30, 2001	$ 9,235,682		$ 8,502,727		$(94,500	)	$(1,476,092	)	$ 20,964,881		$ 37,132,698
Comprehensive income:
Net income	-		-		-		-		3,789,046		3,789,046
Foreign currency translation adjustment	-		-		-		930		-
Minimum SERP adjustment, net of
deferred taxes of $4,000	-		-		-		8,559		-
Loss on derivative instrument, net
of Deferred taxes of $371,000	-		-		-		(687,857	)	-
Other comprehensive loss	-		-		-		(678,368	)	-		(678,368	)
Comprehensive income	-		-		-		-		-		3,110,678
Cash dividends	-		-		-		-		(2,876,113	)	(2,876,113	)
Restricted stock issued (817 shares)	1,634		8,979		-		-		-		10,613
Repurchase and retirement of
shares of common stock (101,506
shares)	(203,012	)	(961,644	)	-		-		-		(1,164,656	)
Balance, June 29, 2002	9,034,304		7,550,062		(94,500	)	(2,154,460	)	21,877,814		36,213,220
Comprehensive income:
Net income	-		-		-		-		2,230,899		2,230,899
Foreign currency translation adjustment	-		-		-		411,635		-
Minimum SERP adjustment, net of
deferred taxes of $152,000	-		-		-		(227,665	)	-
Minimum pension adjustment, net of
deferred taxes of $302,000	-		-		-		(384,677	)	-
Loss on derivative instrument, net
of deferred taxes of $333,000	-		-		-		(619,822	)	-
Other comprehensive loss	-		-		-		(820,529	)	-		(820,529	)
Comprehensive income	-		-		-		-		-		1,410,370
Cash dividends	-		-		-		-		(2,847,316	)	(2,847,316	)
Restricted stock forfeited (50 shares)	(100	)	(601	)	-		-		-		(701	)
Restricted stock issued (813 shares)	1,626		8,612		-		-		-		10,238
Repurchase and retirement of
shares of common stock (2,280	(4,560	)	(19,389	)	-		-		-		(23,949	)
shares)
Balance, June 28, 2003	9,031,270		7,538,684		(94,500	)	(2,974,989	)	21,261,397		34,761,862
Comprehensive income:
Net income	-		-		-		-		3,734,932		3,734,932
Foreign currency translation adjustment	-		-		-		70,320		-
Minimum SERP adjustment, net of
deferred taxes of $103,000	-		-		-		207,294		-
Minimum pension adjustment, net of
deferred taxes of $157,000	-		-		-		134,662		-
Gain on derivative instrument, net
of deferred taxes of $407,000	-		-		-		756,847		-
Other comprehensive loss	-		-		-		1,169,123		-		1,169,123
Comprehensive income	-		-		-		-		-		4,904,055
Cash dividends	-		-		-		-		(2,849,192	)	(2,849,192	)
Restricted stock issued (714 shares)	1,428		6,065		-		-		-		7,493
Balance, July 3, 2004	$ 9,032,698		$ 7,544,749		$(94,500	)	$(1,805,866	)	$ 22,147,137		$ 36,824,218

See accompanying notes to consolidated financial statements.

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Knape & Vogt Manufacturing Company and Subsidiaries
Consolidated Statements of Cash Flows

Year Ended	July 3, 2004		June 28, 2003		June 29, 2002
Operating Activities
Net income	$ 3,734,932		$ 2,230,899		$   3,789,046
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation of property and equipment	6,306,890		6,605,516		6,260,983
Amortization of other assets	93,468		36,575		432,310
Deferred income taxes	(370,106	)	480,000		1,153,000
Increase (decrease) in supplemental retirement benefits	(23,709	)	13,284		(8,311	)
(Increase) decrease in prepaid pension cost	414,554		(4,276,691	)	(2,519,499	)
Loss on disposal of property and equipment	1,450		136,746		305,279
Other	42,098		50,000		935,000
Changes in operating assets and liabilities:
Accounts receivable	(3,107,525	)	439,638		1,030,341
Inventories	(4,976,215	)	(5,816,911	)	1,127,951
Other current assets	(218,626	)	898,337		141,012
Accounts payable	692,252		943,130		(495,865	)
Accruals	2,319,201		(1,229,205	)	1,203,046
Net cash provided by operating activities	4,908,664		511,318		13,354,293
Investing Activities
Additions to property and equipment	(1,199,398	)	(3,707,536	)	(3,935,470	)
Proceeds from sales of property and equipment	53,975		243,527		1,784,925
Other, net	(28,114	)	(62,282	)	(112,532	)
Net cash used for investing activities	(1,173,537	)	(3,526,291	)	(2,263,077	)
Financing Activities
Dividends paid	(2,849,192	)	(2,847,316	)	(2,876,113	)
Principal payments on capital lease obligations	(13,741	)	(6,080	)	-
Borrowings/(repayments) on long-term debt	500,000		4,000,000		(3,750,000	)
Repurchase and retirement of common stock	-		(23,949	)	(1,164,656	)
Net cash provided by (used for) financing activities	(2,362,933	)	1,122,655		(7,790,769	)
Effect of Exchange Rate Changes on Cash	60,062		308,388		16,156
Net Increase (Decrease) in Cash and Equivalents	1,432,256		(1,583,930	)	3,316,603
Cash and equivalents, beginning of year	3,846,613		5,430,543		2,113,940
Cash and equivalents, end of year	$ 5,278,869		$ 3,846,613		$   5,430,543
Supplemental Information:
Interest paid	$ 1,628,923		$ 1,448,663		$   1,512,746
Income taxes paid	934,411		316,000		2,015,000

See accompanying notes to consolidated financial statements.

8

Knape & Vogt Manufacturing Company and Subsidiaries
Notes to Consolidated Financial Statements

1.   Nature of Operations Knape & Vogt Manufacturing Company and its wholly owned subsidiaries (the Company) design, manufacture and distribute kitchen and bath storage solutions and office products for original equipment manufacturers, specialty distributors, hardware chains and major home centers. During fiscal 2004, the Company further defined its operating segments by the major markets that it serves. Products are sold worldwide through the Company’s own sales personnel and through independent sales representatives. The Company is headquartered in Grand Rapids, Michigan.

2.  Summary of Significant Accounting Policies Principles of Consolidation

The consolidated financial statements include the accounts of Knape & Vogt Manufacturing Company and its wholly owned domestic and foreign subsidiaries. All material intercompany balances, transactions and stockholdings have been eliminated in consolidation.

The Company utilizes a 52- or 53-week fiscal year, which ends on the Saturday nearest the end of June. The fiscal year ended July 3, 2004 contained 53 weeks and the fiscal years ended June 28, 2003 and June 29, 2002 each contained 52 weeks.

Revenue Recognition

The Company records revenue when title to the product and risk of ownership passes to the buyer. Sales are shown net of returns, discounts and any other form of sales incentive, including cooperative advertising, rebates and merchandising displays. In certain circumstances, the Company does provide buyback programs and markdown allowances to its customers. These amounts are fixed at the start of the contract period with the customer and accounted for in accordance with Statement of Position No. 93-7, “Reporting on Advertising Costs” and Emerging Issues Task Force No. 01-9, “Accounting for Consideration Given by a Vendor to a Customer”. The cost of these programs are either expensed at the time of the initial shipment of the goods or are expensed on a prorated basis over the sales of the contract, if the Company has a written commitment from the customer.

Concentration of Credit Risk

The Company performs ongoing credit evaluations and maintains reserves for potential credit losses.

Shipping and Handling Costs

Shipping and handling costs that are charged to and reimbursed by the customer are recognized as revenue, while the related expenses incurred by the Company are recorded as cost of sales in the consolidated statements of operations.

Foreign Currency Translation

The accounts of the foreign subsidiary are translated into U.S. dollars in accordance with Statement of Financial Accounting Standards (SFAS) No. 52. Assets and liabilities are translated at year-end exchange rates. Income and expense accounts are translated at average exchange rates in effect during the year. Translation adjustments resulting from fluctuations in the exchange rates are recorded in accumulated other comprehensive income, a separate component of stockholders’ equity. Foreign currency exchange gains were $149,398 in fiscal 2004, $6,432 in fiscal 2003 and $30,335 in fiscal 2002.

9

Knape & Vogt Manufacturing Company and Subsidiaries
Notes to Consolidated Financial Statements

Fair Value Disclosures of Financial Instruments

Financial instruments include cash and equivalents, accounts receivable, accounts payable, long-term debt and an interest rate swap agreement. The carrying amounts of cash and equivalents, accounts receivable, and accounts payable approximate fair value at July 3, 2004 and June 28, 2003, because of the short-term nature of these financial instruments. The estimated carrying value of long-term debt approximates its fair value at July 3, 2004 and June 28, 2003 due to variable interest rates associated with the revolving line of credit. The interest rate swap is valued based on a quoted market price.

Derivative Financial Instruments

The Company uses an interest rate swap agreement to modify a portion of the variable rate revolving line of credit to a fixed rate obligation, thereby reducing the exposure to market rate fluctuations. The interest rate swap agreement is designated as a hedge, and effectiveness is determined by matching the principal balance and terms with that specific obligation. Amounts currently due to or from interest rate swap counter parties are recorded in interest expense in the period in which they accrue. The derivative was recognized as a liability on the balance sheet at its fair value of $1,391,133 at July 3, 2004 and $2,554,980 at June 28, 2003.

Cash and Equivalents

Cash and equivalents consist of cash and highly liquid investments with an original maturity of three months or less at the date of purchase.

Inventories

Inventories are stated at the lower of FIFO (first-in, first-out) cost or market. The Company also has inventory provided to certain of its major customers on a consignment basis. When the Company receives notice that the customer has utilized the consigned inventory, it invoices the customer for the inventory and recognizes revenue on the sale of that inventory.

Property, Equipment and Depreciation

Property and equipment are stated at cost and depreciated, for financial reporting purposes, using the straight-line method over the estimated useful lives of the assets. For income tax purposes, accelerated depreciation methods and shorter useful lives are used. Management estimates that the cost to complete the items classified in construction in progress at July 3, 2004 was approximately $919,000. Estimated depreciable lives are as follows: land and improvements, 3 to 20 years; buildings, 3 to 40 years; machinery and equipment, 3 to 20 years.

Leased Property Under Capital Leases

Property under capital leases is amortized over the shorter of the lives of the respective leases or the estimated useful lives of the assets.

10

Knape & Vogt Manufacturing Company and Subsidiaries
Notes to Consolidated Financial Statements

Stock Based Compensation

The Company accounts for its stock option plans in accordance with APB Opinion 25,Accounting for Stock Issued to Employees. Since the exercise price of the Company’s employee stock options equals or exceeds the market price of the underlying stock on the date of the grant, no compensation cost is recognized under APB Opinion 25. In accordance with SFAS No. 123,Accounting for Stock-Based Compensation, the Company is required to provide pro forma information regarding net income and earnings per share as if compensation costs for the Company’s stock option plan had been determined using a fair value based estimate. Had SFAS No. 123 been adopted, there would be no change in either net income or earnings per share as no options have been granted to employees during the past three fiscal years.

Goodwill and Intangible Assets

Goodwill represents the excess of the purchase price over the fair value of net tangible and identifiable intangible assets of acquired businesses and effective June 30, 2002, is not amortized, however, in prior years it was amortized using the straight-line method over periods ranging from 15 to 40 years. The recorded goodwill primarily relates to the acquisition of Idea Industries. Other intangibles consist primarily of trademarks, brand names and patents that are being amortized using the straight-line method over periods up to 15 years.

Self-Insurance

The Company is partially self-insured for workers’ compensation and certain employee health benefits. The Company is self-insured for environmental issues. The Company purchases stop-loss coverage in order to limit its exposure to any significant levels of workers’ compensation or employee health benefit claims. Losses are recorded when reported and consist of individual case elements. Insurance reserves also include a provision for incurred but not reported losses determined using certain actuarial assumptions followed in the insurance industry and the Company’s own historical experience.

Income Taxes

The Company utilizes the liability method to account for deferred income taxes by applying statutory tax rates in effect at the balance sheet date to differences between the financial reporting and tax basis of assets and liabilities. The resulting deferred tax liabilities or assets are adjusted to reflect changes in tax laws or rates by means of charges or credits to income tax expense.

Advertising

The Company offers cooperative advertising to certain customers. The advertising costs are recorded in accordance with Statement of Position No. 93-7, “Reporting on Advertising Costs” and Emerging Issues Task Force No. 01-9, “Accounting for Consideration Given by a Vendor to a Customer”. The cost of these programs is expensed at the same time that the corresponding sales are recognized and are recorded as a reduction of gross sales. Advertising expense, including cooperative advertising, was $1,305,000 in 2004, $976,000 in 2003 and $1,889,000 in 2002.

11

Knape & Vogt Manufacturing Company and Subsidiaries
Notes to Consolidated Financial Statements

Earnings Per Share

Basic earnings per share (EPS) is computed by dividing net income by the weighted-average number of common shares outstanding in each year. Diluted EPS is computed by dividing net income by the weighted-average number of common shares outstanding, plus all shares that would have been outstanding if every potentially dilutive common share had been issued. The numerators and denominators used in the calculations of basic and diluted EPS for each of the last three years are as follows:

	2004	2003	2002
Numerators:
Numerator for both basic and
diluted EPS, net income	$3,734,932	$2,230,899	$3,789,046
Denominators:
Denominator for both basic and
diluted EPS, weighted-average
common shares outstanding	4,516,245	4,516,706	4,569,942

The following exercisable stock options were not included in the computation of diluted EPS because the option prices were greater than average quarterly market prices.

		2004	2003	2002
Exercise  $     13	Price .64	6,050	6,875	19,254
$     14	.09	7,700	8,525	19,800
$     16	.74	-	6,962	9,988
$     18	.18	5,500	6,325	9,075
$     18	.41	-	130,240	-
$     18	.48	-	206,183	-
$     26	.54	-	61,413	61,413

Comprehensive Income

Comprehensive income represents net income and other revenues, expenses, gains and losses that are excluded from net income and recognized directly as a component of stockholders’ equity.

12

Knape & Vogt Manufacturing Company and Subsidiaries
Notes to Consolidated Financial Statements

New Accounting Standards

In January 2004, the Financial Accounting Standards Board (“FASB”) issued FASB Staff Position (“FSP”) FAS 106-2, “Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003". This statement permits a sponsor of a postretirement health care plan that provides a prescription drug benefit to make a one-time election to defer accounting for the effects of the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (‘the Act”). The Act, signed into law in December 2003, introduces a prescription drug benefit under Medicare (“Medicare part D”) and a federal subsidy to sponsors of retiree health care benefit plans that provide a benefit that is at least actuarially equivalent to Medicare Part D. Given the cap on postretirement benefits introduced in fiscal 2002, the Act is not expected to have a material impact on the Company’s accumulated postretirement benefit obligation or the net postretirement benefit costs, however, the Company has elected to defer the adoption of FSP FAS 106-2 until the specific authoritative accounting guidance for the federal subsidy is issued.

In December 2003, the FASB issued a revision of Statement of Financial Accounting Standards (“SFAS”) No. 132, Employers’ Disclosures about Pensions and Other Postretirement Benefits,” to improve financial disclosures for defined benefit plans. The revised SFAS requires that companies provide more details about their plan assets, benefit obligations, cash flows, benefit costs and other relevant information. The Company is now required to provide additional disclosures, including, but not limited to, a breakdown of plan assets by category, a description of investment policies and strategies and target allocation percentages for these asset categories. The Company adopted the revised disclosure provisions in the third quarter of fiscal 2004.

The Company adopted SFAS No. 142 in the first quarter of fiscal 2003. The Company’s reported net income and earnings per share information, exclusive of goodwill amortization required under previous accounting standards on an after tax basis is as follows:

	Fiscal 2004	Fiscal 2003	Fiscal 2002
Reported net income	$3,734,932	$2,230,899	$3,789,046
Add: Goodwill amortization,
net of income taxes	-	-	237,159
Adjusted net income	$3,734,932	$2,230,899	$4,026,205
Adjusted EPS	$         0.83	$         0.49	$         0.88

The Company has performed the required impairment tests of goodwill and determined that the recorded goodwill is not impaired.

13

Knape & Vogt Manufacturing Company and Subsidiaries
Notes to Consolidated Financial Statements

Use of Estimates in Preparation of Financial Statements

The preparation of financial statements in accordance with accounting principles generally accepted in the United States 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 those estimates.

Reclassifications

Certain prior year information has been reclassified to conform to the current year presentation.

3.  Impairment/ Severance During 2003, the Company recorded $271,325 pre-tax of severance costs in other expense on the consolidated statement of operations, primarily related to the resignation of two of its executive officers in August 2002.

During fiscal 2002, the Company recorded an impairment charge of $690,000 in accordance with SFAS 144 for certain precision drawer slide tooling. While the Company will continue to produce the drawer slides, the estimated future cash flows associated with sales of this particular product line were less than the cost of the tooling recorded.

During fiscal 2002, the Company also decided to reduce its workforce in its Grand Rapids, Michigan facility. Those reductions were committed to by top management prior to the fiscal year end and occurred during the month of July 2002. The Company recorded $245,000 in severance costs at June 29, 2002 in other expense on the consolidated statement of operations.

4.  Inventories Inventories are valued at the lower of FIFO (first-in, first-out) cost or market. Inventories are summarized as follows:

	July 3, 2004	June 28, 2003
Finished products	$15,256,160	$10,309,184
Consignment	3,292,297	3,610,427
Work in process	2,062,060	1,745,812
Raw materials	3,344,754	3,313,633
	$23,955,271	$18,979,056

5.  Warranty The Company provides a limited lifetime warranty on most products sold. Depending on the product, the lifetime warranty is generally defined in a range of three to fifteen years. The Company does not sell or otherwise issue warranties or warranty extensions as stand alone products. The warranty issues replacement products as the resolution for any warranty claims. Reserves have been established for the various costs associated with the Company’s warranty program. General warranty reserves are based on historical claims experience and other currently available information and are periodically adjusted for business levels and other factors. Specific reserves are established if an issue is identified with the amounts for such reserves based on the estimated cost to correct the problem. The actual warranty expense could differ from the estimates made by the Company based on product performance. The following table presents the changes in the Company’s product warranty liability:

14

Knape & Vogt Manufacturing Company and Subsidiaries
Notes to Consolidated Financial Statements

	July 3, 2004		June 28, 2003
Accrued warranty costs at the
beginning of the year	$ 275,000		$ 235,000
Payments made for warranty costs	(216,000	)	(198,000	)
Accrual for product warranty	228,000		238,000
Accrued warranty costs at the end
of the year	$ 287,000		$ 275,000

6.  Long-Term Debt Long-term debt obligations are summarized as follows:

	July 3, 2004		June 28, 2003
Revolving credit agreement	$ 24,500,000		$ 24,000,000
Capital lease obligations	52,605		65,420
Less: Current portion of
capital lease obligation	(13,741	)	(12,815	)
	$ 24,538,864		$ 24,052,605

On August 28, 2003, the Company entered into a new $35 million revolving credit facility that matures on November 1, 2006. The new three-year revolving credit facility is unsecured and replaces a $45 million credit facility that would have expired in 2004. Interest rates on outstanding loans under the revolving credit facility are either based on the London Interbank Offering Rate (LIBOR), plus a negotiated spread over LIBOR, or at the U.S. prime rate. The new agreement requires the Company to pay a non-use fee on amounts not outstanding under the credit facility based on a ratio of the Company’s adjusted total debt (funded debt less cash and cash equivalents) to EBITDA (earnings before interest, income taxes, depreciation and amortization).

At July 3, 2004, there was a $24,500,000 balance outstanding under this agreement. The interest rate on the first $20,000,000 of the outstanding balance was 1.315% plus an additional 85 basis points credit spread. The interest rate is adjusted to market rates at the end of each interest period and is based on the 90 day LIBOR rate. The interest rate on the remaining balance of $4,500,000 was 1.369%, which was the 30-day LIBOR rate plus an additional 85 basis points credit spread. The agreement requires the Company to pay a non-use fee on amounts not outstanding under the credit facility. At July 3, 2004, the non-use fee was .15%. Both the interest rate and the non-use fees on this agreement fluctuate according to the ratio of the Company’s adjusted total debt (funded debt less cash and cash equivalents) to EBITDA (earnings before interest, income taxes, depreciation and amortization). Compensating balances are not required by this agreement. The Company is required under this agreement to maintain certain financial ratios and, at July 3, 2004, was in compliance with these covenants.

7.  Derivative Financial Instruments The Company has entered into an interest rate swap agreement designated as a partial hedge of the Company’s variable rate revolving credit agreement. The purpose of this swap is to fix the interest rate on the variable rate debt and reduce the exposure to interest rate fluctuations. At July 3, 2004, the notional amount of the swap was $20,000,000. Under this agreement, the Company pays the counterparty interest at a fixed rate of 6.25%, and the counterparty pays the Company interest at a variable rate equal to LIBOR. The LIBOR rate on this agreement was 1.31% at July 3, 2004.

Neither the Company nor the counterparty, which is a major U.S. bank, is required to collateralize its obligation under the swap. The Company is exposed to loss if the counterparty should default. At July 3, 2004, the Company had no exposure to credit loss on the interest rate swap. The Company does not believe that any reasonably likely change in interest rates would have a material adverse effect on the financial position, results of operations or cash flows of the Company.

15

Knape & Vogt Manufacturing Company and Subsidiaries
Notes to Consolidated Financial Statements

The Company has recognized an after-tax gain of $756,847 in fiscal 2004 and loss of $619,822 in fiscal 2003 in other comprehensive income on the swap agreement. The gain/(loss) is made up of the following components:

	July 3, 2004 Pre-Tax		After-Tax		June 28, 2003		After-Tax		June 29, 2002		After-Tax
Change in fair value
of interest rate swap	$ 2,177,697		$ 1,415,850		$(15,938	)	$(10,360	)	$  (344,273	)	$(223,356	)
Settlement to interest
expense	(1,013,850	)	(659,003	)	(936,884	)	(609,462	)	(714,584	)	(464,501	)
Other comprehensive
income	$ 1,163,847		$    756,847		$(952,822	)	$(619,822	)	$(1,058,857	)	$(687,857	)

8.  Lease Commitments The Company leases certain real property and equipment under various lease agreements. Future minimum lease payments under operating and capital leases that have initial or remaining noncancelable lease terms in excess of one year are summarized as follows:

Fiscal Year	Operating	Capital
2005	$134,966	$ 16,988
2006	101,142	16,988
2007	80,323	16,988
2008	77,588	8,494
2009 and thereafter	472,061	-
Total minimum payments	$866,080	$ 59,458
Less - interest on capital leases	-	(6,853	)
Total principal payable on capital leases
(included in Note 6)		$ 52,605

Rent expense under all operating leases was approximately $1,273,000, $1,017,000 and $868,000 in fiscal 2004, 2003 and 2002, respectively.

9. Retirement Plans The Company has several noncontributory defined benefit pension plans and defined contribution plans covering substantially all of its employees. The defined benefit plans provide benefits based on the participants’ years of service. The Company’s funding policy for defined benefit plans is to make annual contributions, which equal or exceed regulatory requirements. The pension and profit-sharing plans at July 3, 2004 and June 28, 2003 held a combined total of 284,637 shares of the Company’s Class B common stock.

The Company’s Board of Directors annually approves contributions to the defined contribution plans. Expense for the discretionary profit-sharing plan amounted to $700,666, $667,192 and $750,261 in fiscal 2004, 2003 and 2002, respectively.

The Company also has a nonqualified supplemental retirement program (“SERP”) for designated officers of the Company, which includes death and disability benefits. The plan is funded from the general assets of the Company.

The postretirement health-care plan covers substantially all employees. The plan is unfunded and contributory. During fiscal 2002, the Company amended the plan to place a cap on the Company paid portion of health-care premiums for retirees.

The Company also provides a 401(k) plan for all of its employees. Employees may contribute up to 100 percent of their pay up to Internal Revenue Service limits. For all hourly employees, the Company will match 50 percent of the first 4 percent that an employee contributes. The amount expensed for the Company match provision of the plan was $218,481, $225,473, and $246,229 in fiscal 2004, 2003 and 2002, respectively.

16

Knape & Vogt Manufacturing Company and Subsidiaries

Notes to Consolidated Financial Statements

The Company uses a June 30 measurement date for the majority of its plans. The following provides a reconciliation of benefit obligations, plan assets and funded status of the Company’s noncontributory pension plans, SERP and postretirement plans:

	Penison Benefits						SERP Benefits						Postretirement Health-Care Benefits
		2004			2003			2004			2003			2004			2003
Change in benefit obligations
Benefit obligations
at beginning   of year	$	20,324,552		$	15,790,925		$	3,511,333		$	3,153,183		$	2,346,600		$	1,869,855
Service cost		492,019			348,632			7,022			1,850			88,547			64,437
Interest cost		1,101,529			1,111,277			195,358			191,440			125,997			135,608
Actuarial
(gains)		(1,994,348			3,829,278			(31,959	)		485,108			(136,613	)		449,288
losses
Benefits paid		(827,264	)		(807,430	)		(322,615	)		(326,314	)		(171,906	)		(172,588	)	)
Plan amendment		-			-			-			-			-			-
Other		2,861			51,870			-			6,066			-			-
Benefit obligation at end of year	$	19,099,349		$	20,324,552		$	3,359,139		$	3,511,333		$	2,252,625		$	2,346,600
Change in plan assets
Fair value of plan
assets at   beginning of year	$	20,028,261		$	15,945,339		$	-		$	-		$	-		$	-
Actual return
on plan assets		2,383,935			439,211			-			-			-			-
Employer
contributions		187,887			4,451,141			322,615			326,314			171,906			172,588
Benefits paid		(827,264	)		(807,430	)		(322,615	)		(326,314	)		(171,906	)		(172,588	)
Fair value of plan assets at end of year	$	21,772,819		$	20,028,261		$	-		$	-		$	-		$	-
		2004			2003			2004			2003			2004			2003
Funded status	$	2,673,470		$	(296,291	)		($3,359,139	)	$	(3,511,333	)	$	(2,252,625	)	$	(2,346,600	)
Unrecognized
transition amount		(11,039	)		(34,368	)		-			-			384,302			432,339
Unrecognized net
actuarial loss		9,197,332			12,371,129			1,905,281			2,077,436			2,747,136			3,067,335
Unrecognized prior
service cost		537,759			676,522			(123,211	)		(132,190	)		(2,339,897	)		(2,561,877	)
Net amount recognized	$	12,397,522		$	12,716,992		$	(1,577,069	)	$	(1,566,087	)	$	(1,461,084	)	$	(1,408,803	)
Amounts recognized in the consolidate balance sheet consist of:
Prepaid pension
cost	$	12,088,937		$	12,503,491		$	-		$	-		$	-		$	-
Other retirement
benefits		(90,092	)		(473,496	)		(3,202,620	)		(3,511,333	)		(1,461,084	)		(1,408,803	)
Accumulated other
comprehensive
income		398,677			686,997			1,625,551			1,945,246			-			-
Net amount recognized	$	12,397,522		$	12,716,992		$	(1,577,069	)	$	(1,566,087	)	$	(1,461,084	)	$	(1,408,803	)

17

Knape & Vogt Manufacturing Company and Subsidiaries
Notes to Consolidated Financial Statements

	Pension Benefits				SERP Benefits				Postretirement Health-Care Benefits
Weight-average assumptions	2004		2003		2004		2003		2004		2003
Discount rate	6	.25%	5	.5%	6	.25%	5	.5%	6	.25%	5	.5%
Expected return on
plan assets	8	.0%	8	.0%		N/A		N/A		N/A		N/A

The net periodic benefit cost related to the defined benefit plans is made up of the following components:

	Pension Benefits						SERP Benefits
	2004		2003		2002		2004	2003	2002
Service cost	$    492,019		$    348,632		$    330,579		$    7,022	$    1,850	$    1,747
Interest cost	1,101,529		1,111,277		1,056,040		195,358	191,440	225,298
Expected return on
plan assets	(1,771,387	)	(1,561,435	)	(1,389,192	)	-	-	-
Net amortization	681,875		275,976		152,033		144,191	123,876	99,708
Net periodic benefit cost	$    504,036		$    174,450		$    149,460		$346,571	$317,166	$326,753

	Postretirement Health-Care Benefits
	2004	2003		2002
Service cost	$  88,547	$   64,437		$174,406
Interest cost	125,997	135,608		230,373
Net amortization	9,643	(4,739	)	67,335
Net periodic benefit cost	$224,187	$ 195,306		$472,114

The health care cost trend rate used to determine the postretirement health-care benefit obligation was 9.0% for 2004 and gradually decreases to 5.0% in 2008. The trend rate is a significant factor in determining the amounts reported. A one-percentage-point change in these assumed health-care cost trend rates would have the following effect:

One-Percentage Point	Increase	Decrease
Effect on total of service and interest
cost components	$  1,628	$(1,504	)
Effect on postretirement health-care
benefit obligation	$29,347	$(27,136	)

The expected long-term rate of return used to determine the net periodic benefit cost was 8.0% for both years. The Company’s pension plan weighted-average asset allocation, by asset category was as follows:

	2004		2003
Equity securities	57	.2%	39	.5%
Debt securities	6	.0%	39	.3%
Money market, stable
value funds and cash	36	.8%	21	.2%
Total	100	.0%	100	.0%

18

Knape & Vogt Manufacturing Company and Subsidiaries
Notes to Consolidated Financial Statements

The Company employs a total return investment approach whereby a mix of equities and fixed income investments are used to maximize the long-term return of plan assets for a prudent level of risk. Risk tolerance is established through careful consideration of plan liabilities, plan funded status, and corporate financial condition. The investment portfolio is comprised of a diversified blend of equity investments, including a mix of large and small capital mutual funds, as well as growth, value, international mutual funds and Company stock. Fixed income investments include both individual debt issues, along with short-term and intermediate term bond funds.

The Company reviews historical market data and long-term historical relationships, along with current market factors, such as inflation and interest rates when determining the long-term rate of return for plan assets. Peer data and historical returns are also reviewed to check the reasonableness and appropriateness of the long-term rates.

The Company expects to contribute $189,000 to its defined benefit pension plan, $324,000 to its SERP plan and $203,000 to its other post retirement benefit plan in fiscal 2005. Our estimated future benefit payments under our benefit plans are as follows:

	Pension	SERP	Postretirement Health-Care
2005	$   934,909	$   322,895	$   217,087
2006	937,657	319,161	196,594
2007	978,141	315,081	182,226
2008	1,039,758	310,632	182,305
2009	1,092,865	305,805	184,338
2010-2014	6,307,388	1,435,414	967,575

10.  Income Taxes Income tax expense (benefit) consists of:

Year Ended	July 3, 2004		June 28, 2003		June 29, 2002
Current:
United States	$ 1,991,267		$  (581,499	)	$   716,000
Foreign, state and local	437,942		(53,000	)	12,000
Total current	2,429,209		(634,499	)	728,000
Deferred:
United States	(638,000	)	508,000		1,266,000
Foreign	(100,942	)	499,000		83,000
State and local	100,000		14,000		46,000
Total deferred	(638,942	)	1,021,000		1,395,000
Income tax expense	$ 1,790,267		$    386,501		$2,123,000

19

Knape & Vogt Manufacturing Company and Subsidiaries
Notes to Consolidated Financial Statements

The difference between the federal statutory tax rate and the effective tax rate on continuing operations was as follows:

Year Ended	July 3, 2004		June 28, 2003		June 29, 2002
Federal income taxes at the
statutory rate	$ 1,879,000		$ 890,000		$2,010,000
Foreign earnings taxed at
foreign statutory rate	-		113,000		19,000
State and local income taxes	22,000		(15,000	)	19,000
Tax audit settlement	(169,000	)	-		-
Utilization of previously
disallowed loss	-		(607,000	)	-
Other	58,267		5,501		75,000
Income tax expense	$ 1,790,267		$ 386,501		$2,123,000

During fiscal 2003, the Company amended its income tax returns previously filed for fiscal years 1997 and 1999. A change in the federal tax law allowed the Company to utilize a portion of its capital loss from fiscal 1999 that had been previously disallowed. As a result of this change, the Company recognized an income tax benefit of $607,000.

The sources of the net deferred income tax liability were as follows:

	July 3, 2004		June 28, 2003
Property and equipment	$ 6,592,000		$ 7,097,000
Pension accrual	4,594,000		4,533,000
Supplemental retirement plan	(1,213,000	)	(1,208,000	)
Benefit related accruals	(1,000,000	)	(1,445,000	)
Inventory reserves	(2,145,000	)	(1,607,000	)
Rebates, advertising and royalty accrual	(251,000	)	(186,000	)
Derivative instrument	(487,000	)	(894,000	)
Other	(503,325	)	(1,013,000	)
	$ 5,586,675		$ 5,277,000

No provision has been made for taxes that may result from future remittances of $3.5 million in undistributed earnings of foreign subsidiaries as of July 3, 2004 because it is expected that such earnings will be reinvested overseas indefinitely. Determination of the amount of any unrecognized deferred income tax liability on earnings not remitted is not practicable.

11.  Stock Option Plans The 1987 Stock Option Plan provided for the grant of options to key employees of the Company, which provided the ability to purchase shares of common stock. Options were granted at or above the market price of the Company’s common stock on the date of the grant, were exercisable from that date and terminated 10 years from the grant date. The plan, as amended in October 1991 and in October 1994, authorized a total of 300,000 shares to be available for issuance under the plan. Grants can no longer be made under the 1987 Stock Option Plan.

20

Knape & Vogt Manufacturing Company and Subsidiaries
Notes to Consolidated Financial Statements

Under the Company’s 1997 Stock Incentive plan, up to 660,000 shares of the Company’s common stock are available for issuance. Issuance can be in the form of stock options or restricted stock; however, no more than 55,000 shares can be issued as restricted stock. Stock options can be granted as incentive stock options or nonqualified stock options. The number of shares of common stock subject to an option granted to a participant under this plan is determined based on the amount of the participant’s election under the Company’s bonus plan. Each participant may elect to receive options by electing to forego a portion of the cash bonus that may be earned by the participant, with the option price determined in accordance with the plan. The exercise price per share of common stock purchasable under an option is a single fixed exercise price equal to 100% of the fair market value of the common stock at the award date increased by a fixed percentage (based on U.S. Treasury Securities plus 2% less a projected dividend yield) compounded annually over the term of the option. In general, the options vest three years after the date the option was granted and expire five years after the grant date. During fiscal 2004, 2003 and 2002, no options were granted to participants.

The Executive Compensation Committee, subject to the approval of the Board of Directors, determines the eligible persons to whom restricted shares are granted and the price (if any) to be paid by the participant, the conditions under which the participants’ interest in the stock may be forfeited and the period of time during which the participant is not permitted to sell, transfer, pledge, or assign the shares of the restricted stock awarded under this Plan. Except as provided above, upon issuance of the restricted stock, the participant will have all the rights of a shareholder with respect to the shares, including the right to vote them and to receive all dividends and other related distributions. If termination of employment occurs within the restricted period, all shares of stock still subject to restriction will vest or be forfeited in accordance with the terms and conditions established by the Committee.

The Company’s CEO has 6,600 shares of restricted common stock and the option to purchase an additional 27,500 shares of the Company’s common stock at a price of $14.43 per share. The grant and the options will vest if the Company achieves specific financial objectives within a five-year performance period. During the performance period, the CEO may vote and receive dividends on the restricted shares, but the shares are subject to transfer restrictions and are forfeited if the CEO terminates employment or the Company does not achieve its financial objectives.

Transactions under the plans are as follows:

Year Ended	July 3, 2004		Weighted- Average Exercise Price		June 28, 2003		Weighted- Average Exercise Price		June 29, 2002		Weighted- Average Exercise Price
Options outstanding,
beginning of year	454,023		$     19	.12	548,848		$     18	.80	563,214		$     18	.73
Forfeited	(201,090	)	$     20	.92	(94,825	)	$     17	.26	(14,366	)	$     16	.34
Options outstanding at end
of year	252,933		$     17	.78	454,023		$     19	.12	548,848		$     18	.80
Options exercisable at end
of year	225,433		$     18	.19	220,340		$     20	.30	119,530		$     20	.94
Options available for
grant, end of year	443,275				240,657				175,262

21

Knape & Vogt Manufacturing Company and Subsidiaries
Notes to Consolidated Financial Statements

A summary of stock options outstanding at July 3, 2004 follows:

Outstanding				Exercisable
Price Ranges	Shares	Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Life (Years)	Shares	Weighted-Average Exercise Price
$12.50 - $14.50	41,250	$     14	.25	1.98	13,750	$     13	.89
$16.50 - $18.50	211,683	$     18	.47	1	211,683	$     18	.47
	252,933	$     17	.78	1.0	225,433	$     18	.19

The Company uses the Black-Scholes option-pricing model to determine the fair value of each option at the grant date, however no options have been granted for the years presented above.

12.  Stockholder' Equity The Company has three classes of stock: common stock, Class B common stock and unissued preferred stock. Each share of common stock entitles the holder thereof to one vote on all matters submitted to the shareholders. Each share of Class B common stock entitles the holder to 10 votes on all such matters, except that the holders of common stock are entitled to elect, voting separately as a class, at least one-quarter of the Company’s directors to be elected at each meeting held for the election of directors. In all other instances, holders of common stock and Class B common stock vote together, except for matters affecting the powers, preferences or rights of the respective classes or as otherwise required under the Michigan Business Corporation Act. With respect to dividend rights, each share of common stock is entitled to cash dividends at least 10% higher than those payable on each share of Class B common stock. Class B common stock is subject to certain restrictions on transfer, but is convertible into common stock on a share-for-share basis at any time.

The Company has a stock repurchase program under which it purchased no shares in fiscal 2004 and 2,280 shares during fiscal 2003 with the price per share ranging from approximately $9 to $11. At July 3, 2004, the Company has remaining authorization to repurchase an additional 272,202 shares.

13.  Business Segments During the fourth quarter of fiscal 2004, management began managing the business and reviewing financial information by market channel rather than by the previous Home & Commercial Products and Office Products divisions.

22

Knape & Vogt Manufacturing Company and Subsidiaries
Notes to Consolidated Financial Statements

The Office Products division was segregated into two market channels: OEM and dealer. The OEM market channel sells precision drawer slides, hardware and ergonomic products to original equipment office furniture manufacturers. The dealer market channel sells ergonomic products to independent office furniture dealers. These dealers purchase product from office furniture manufacturers and resell the furniture along with design and installation services to the end customer.

The Home & Commercial Products division was segregated into two market channels: consumer and distribution/other. The consumer market channel sells to a majority of the Company’s product lines to retailers. The distribution/other market channel sells many of the Company’s product lines to kitchen and bath OEM manufacturers and full line woodworking distributors.

Management has limited its review of the channels to net sales to external customers and operating profit before administrative costs as shown below. In accordance with SFAS No. 131, “Disclosures about Segments of an Enterprise and Related Information”, only those measures prepared on an ongoing basis and reviewed by the chief operating decision maker are disclosed. Due to the complexity in obtaining this information for prior years, restatement of prior year results by channel is impracticable.

The accounting policies of the business segments are the same as those described in the summary of significant accounting policies.

	Office Products OEM		Office Products Dealer	Consumer	Distribution and Other	Manufacturing	Corporate and Other		Consolidated Total
Year Ended July 3, 2004:   Net sales to
external customers	$ 37,278,233		$9,141,248	$38,138,743	$64,419,518	-	$               -		$148,977,742
Operating profit
before administrative
costs, other expenses      and income taxes	(2,521,640	)	1,279,954	1,402,569	10,456,455	798,463	-		11,415,801
Administrative costs,
other expenses	-		-	-	-	-	5,890,602		5,890,602
Income tax expense
(benefit)	-		-	-	-	-	1,790,267		1,790,267
Net income (loss)	(2,314,788	)	1,279,954	1,402,569	10,456,455	591,411	(7,680,669	)	3,734,932

In fiscal year 2003, the Company segregated its business segments into the Office Products and Home & Commercial Products divisions. This information is provided below:

	Office Products		Home and Commercial Products	Corporate and Other		Consolidated Total
Year Ended June 28, 2003:   Net sales to external
customers	$ 35,659,838		$89,260,638	-		$124,920,476
Income tax expense
(benefit)	(37,000	)	4,751,000	(4,327,499	)	386,501
Net income (loss)	(76,048	)	7,964,928	(5,657,981	)	2,230,899

23

Knape & Vogt Manufacturing Company and Subsidiaries
Notes to Consolidated Financial Statements

Geographic information related to net sales, based on location of our customers is summarized between domestic and foreign locations as follows:

Year Ended	July 3, 2004	June 28, 2003	June 29, 2002
Net sales:
United States	$131,448,845	$109,926,057	$115,948,838
Canada	12,450,557	10,048,356	9,552,947
Other foreign	5,078,340	4,946,063	5,979,846

All property and equipment is held in the United States.

The Company does not believe that it is dependent upon any single customer, however the Company’s largest customer accounts for approximately 12% of consolidated gross sales.

14.  Quarterly Results (Unaudited) The table below sets forth summary unaudited information on a quarterly(Unaudited) basis. The first three quarters of fiscal 2004 each contained 13 weeks and the fourth quarter contained 14 weeks.

Year Ended July 3, 2004	1st Quarter	2nd Quarter	3rd Quarter	4th Quarter
Net sales	$ 36,013,012	$ 34,342,986	$ 36,859,638	$ 41,762,106
Gross profit	$   7,052,310	$   7,160,611	$   7,947,384	$   8,568,038
Operating income	$   1,264,086	$   1,253,817	$   2,204,333	$   2,437,366
Net income	$      669,874	$      441,905	$   1,138,341	$   1,484,812
Earnings per share-basic
and diluted	$            0.15	$            0.10	$            0.25	$            0.33
Cash dividend-common stock	$          0.165	$          0.165	$          0.165	$          0.165
Cash dividend-Class B
common stock	$            0.15	$            0.15	$            0.15	$            0.15
Year Ended June 28, 2003	1st Quarter	2nd Quarter	3rd Quarter	4th Quarter
Net sales	$ 30,931,347	$ 30,117,755	$ 31,956,451	$ 31,914,923
Gross profit	$   6,987,093	$   6,478,520	$   6,611,658	$   7,204,895
Operating income	$      632,164	$   1,659,205	$      322,579	$   1,206,178
Net income	$      194,963	$      851,730	$      395,387	$      788,819
Earnings per share-basic
and diluted	$            0.04	$            0.19	$            0.09	$            0.17
Cash dividend-common stock	$          0.165	$          0.165	$          0.165	$          0.165
Cash dividend-Class B
common stock	$            0.15	$            0.15	$            0.15	$            0.15

15.  Commitments and Contingencies The Canada Customs and Revenue Agency (“CCRA”) has performed an audit of the Company’s sales to its wholly-owned subsidiary, Knape & Vogt Canada.

Preliminary results from a joint review by the Company and its customs broker indicate that the Company may be liable for certain customs transactions, however, the amount of any such potential liability is unknown at this time. The Company is defending its position that Knape & Vogt Canada is the importer of record for all Knape & Vogt goods shipped into Canada and management believes, that based on the information available at this time, any liability owed to the CCRA will not have a material adverse effect on the Company’s earnings.

24

Knape & Vogt Manufacturing Company and Subsidiaries
Notes to Consolidated Financial Statements

The Company was sued in the Kent County, Michigan Circuit Court in 1997 by a former employee seeking additional benefits under an executive retirement plan. The Circuit Court ruled in favor of the plaintiff, but in June 2002, the Circuit Court was reversed on the Company’s appeal to the Michigan Court of Appeals. A delayed request for leave to appeal to the Michigan Supreme Court which the plaintiff filed was denied during the fourth quarter of fiscal 2003. In August 2002, the plaintiff filed a lawsuit seeking these retirement benefits in the Federal District Court for the Western District of Michigan. The Company moved to dismiss the federal litigation based on the statute of limitations. In September 2003, the Federal District Court dismissed the litigation. In October 2003, the plaintiff appealed the dismissal to the Sixth Circuit Court of Appeals. That appeal is pending. Management believes that any liability resulting from this case will not have a material adverse affect on the Company’s earnings.

The Company is also subject to other legal proceedings and claims, which arise in the ordinary course of business.

In the opinion of management, based on the information presently known and taking into account established accruals of approximately $455,000 at July 3, 2004, the ultimate liability for these matters will not have a material adverse effect on the Company’s financial position or the results of its operations.

25

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors
Knape & Vogt Manufacturing Company
Grand Rapids, Michigan

We have audited the accompanying consolidated balance sheets of Knape & Vogt Manufacturing Company and subsidiaries (the “Company”) as of July 3, 2004 and June 28, 2003 and the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the three years in the period ended July 3, 2004. 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 the standards of the Public Company Accounting Oversight Board (United States). 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, such consolidated financial statements present fairly, in all material respects, the financial position of the Company as of July 3, 2004 and June 28, 2003, and the results of its operations and its cash flows for each of the three years in the period ended July 3, 2004, in conformity with accounting principles generally accepted in the United States of America.

Our audits also included the financial statement schedule of Knape & Vogt Manufacturing Company, listed in Item 15. This financial statement schedule is the responsibility of the Company’s management. Our responsibility is to express an opinion based on our audits. In our opinion, such financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

/s/ Deloitte & Touche LLP
Grand Rapids, Michigan
August 6, 2004

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PART IV

ITEM 15 — EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

      (a)      (1) Financial Statements

                  The following financial statements, all of which are set forth in Item 8, are filed as part of this report.

	Page Number in Form 10-K/A Report Amendment No. 1
Consolidated Statements of Operations	4
Consolidated Balance Sheets	5-6
Consolidated Statements of Stockholders' Equity	7
Consolidated Statements of Cash Flows	8
Notes to Consolidated Financial Statements	9-25
Report of Independent Registered Public Accounting Firm	26

                (2)   Financial Statement Schedule

                  The following financial statement schedule is included in this Form 10-K/A on the page noted.

	Page Number in Form 10-K/A Report Amendment No. 1
Schedule II - Valuation and Qualifying Accounts and Reserves	29

        All other schedules are not submitted because they are not applicable or not required, or because the required information is included in the financial statements or notes thereto.

                (3)  Exhibits

                  Reference is made to the Exhibit Index, which is found on pages 31 and 32 of this Form 10-K/A Amendment No. 1.

27

(b)    Reports on Form 8-K

        Knape & Vogt filed the following Report on Form 8-K during the quarter ended July 3, 2004.

Date of Report

April 22, 2004 Filing Date

April 22, 2004 Items Reported

Under Item 9, this Form 8-K included a press release that reported Knape & Vogt’s financial results for the third quarter of fiscal 2004, which ended March 27, 2004.

The press release included summary consolidated financial data for the quarters ended March 27, 2004 and March 29, 2003 and the year-to-date periods ended March 27, 2004 and March 29, 2003. The press release also contained balance sheet information as of March 27, 2004 and March 29, 2003.

28

Knape & Vogt Manufacturing Company and Subsidiaries
Schedule II — Valuation and Qualifying Accounts and Reserves

Column A	Column B	Column C		Column D	Column E
Description	Balance beginning of period	Charged to costs and expenses		Deductions	Balance end of period
Year ended July 3, 2004:
Allowance for:
Doubtful accounts	$   658,000	$   (54,000	)	$   142,000	$   462,000
Cash discounts	145,000	1,753,000		1,686,000	212,000
	803,000	1,699,000		1,828,000	674,000
Returned goods reserve	184,000	1,455,000		1,309,000	330,000
Warranty reserve	275,000	228,000		216,000	287,000
Inventory obsolescence	1,144,000	1,203,000		699,000	1,648,000
Year ended June 28, 2003:
Allowance for:
Doubtful accounts	$   633,000	$      80,000		$     55,000	$   658,000
Cash discounts	122,000	1,169,000		1,146,000	145,000
	755,000	1,249,000		1,201,000	803,000
Returned goods reserve	147,000	656,000		619,000	184,000
Warranty reserve	235,000	238,000		198,000	275,000
Inventory obsolescence	1,439,000	213,000		508,000	1,144,000

29

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.

KNAPE & VOGT MANUFACTURING COMPANY


By/s/ William R. Dutmers
William R. Dutmers, Chairman of the Board
and Chief Executive Officer

By/s/ Leslie J. Cummings
Leslie J. Cummings, Vice President of Finance
and Treasurer

Date: October 15, 2004

        Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below on October 15, 2004, by the following persons on behalf of the registrant in the capacities indicated. Each director of the registrant, whose signature appears below, hereby appoints William R. Dutmers and Leslie J. Cummings, and each of them severally, as his attorney-in-fact, to sign in his name and on his behalf, as a director of the registrant, and to file with the Commission any and all Amendments to this Report on Form 10-K.

/s/ William R. Dutmers
William R. Dutmers, Chairman of the Board and
Chief Executive Officer

                                          
Thomas A. Hilborn, Director

/s/ Richard S. Knape
Richard S. Knape, Director

/s/ Gregory Lambert
Gregory Lambert, Director /s/ John E. Fallon
John E. Fallon, Director


/s/ Michael J. Kregor
Michael J. Kregor, Director

/s/ Robert J. Knape
Robert J. Knape, Director

/s/ Christopher Norman
Christopher Norman, Director

30

KNAPE & VOGT MANUFACTURING COMPANY
FORM 10-K/A AMENDMENT NO. 1 TO
ANNUAL REPORT ON FORM 10-K

EXHIBIT INDEX

3(a) Certificate of Amendment to the Articles of Incorporation, and the Restated Articles of Incorporation of the Company, which were filed as Exhibit 3(a) of the Registrant’s Form 10-K Annual Report for the fiscal year ended June 30, 1987, are incorporated by reference.

3(b) Bylaws as amended April 23, 1999, filed as Exhibit 3.1 of the Registrant’s Form 10-Q Third Quarter Report for the fiscal year ended June 30, 1999, are incorporated by reference.

10(a) Supplemental Executive Retirement Plan, which was filed as Exhibit 10 of the Registrant’s Form 10-K Annual Report for the fiscal year ended June 30, 1981, is incorporated by reference.

10(b) Knape & Vogt Manufacturing Company 1987 Stock Option Plan, effective October 16, 1987, which was filed as Exhibit I to Registrant’s definitive Proxy Statement dated September 23, 1987, is incorporated by reference.

10(c) Knape & Vogt Manufacturing Company Employees’ Retirement Savings Plan (July 1, 1989 Restatement), as amended, which was filed as Exhibit 99 to Registrant’s Registration Statement on Form S-8 (Reg. No. 33-88212), is incorporated by reference.

10(d) Loan agreement with Comerica Bank dated August 28, 2003, which was filed as Exhibit 10(a) of the Registrant’s Form 10-Q Quarterly Report for the first quarter ended September 27, 2003, is incorporated by reference.

10(h) Interest swap agreement with Bank One dated June 1, 1999, which was filed as Exhibit 10(e) of the Registrant’s Form 10-K Annual Report for the fiscal year ended June 30, 1999, is incorporated by reference.

10(i) Knape & Vogt Manufacturing Company 1997 Stock Incentive Plan, which was filed as Appendix A to the Registrant’s proxy statement dated September 17, 1997, is incorporated by reference.

10(j) Restricted Share Grant Agreement dated February 1, 2000, between Knape & Vogt Manufacturing Company and William R. Dutmers, filed as Exhibit 10.1 of the Registrant’s Form 10-Q Third Quarter Report of the fiscal year ended July 1, 2000, is incorporated by reference.

31

10(k) Stock Option Agreement for Nonqualified Stock Option dated February 1, 2000, between Knape & Vogt Manufacturing Company and William R. Dutmers, filed as Exhibit 10.2 of the Registrant’s Form 10-Q Third Quarter Report for the fiscal year ended July 1, 2000, is incorporated by reference.

21 Subsidiaries of Registrant by reference to the 2004 Form 10-K, Exhibit 21, as originally filed.

23 Consent of Deloitte & Touche LLP, independent registered public accounting firm.*

31.1 Certificate of the Chairman of the Board and Chief Executive Officer of Knape & Vogt Manufacturing Company pursuant to 15 U.S.C. Section 7241, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*

31.2 Certificate of the Executive Vice President of Finance and Treasurer of Knape & Vogt Manufacturing Company pursuant to 15 U.S.C. Section 7241, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*

32.1 Certificate of the Chairman of the Board and Chief Executive Officer of Knape & Vogt Manufacturing Company pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*

32.2 Certificate of the Vice President of Finance and Treasurer of Knape & Vogt Manufacturing Company pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*

*Filed herewith

32

EXHIBIT 23

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in Registration Statement Nos. 33-20227, 33-43794 and 33-88212 of Knape & Vogt Manufacturing Company on Form S-8 of our report dated August 6, 2004, appearing in this Form 10-K/A Amendment No. 1 to the Annual Report on Form 10-K of Knape & Vogt Manufacturing Company for the year ended July 3, 2004.

/s/ Deloitte & Touche LLP
Grand Rapids, Michigan
October 18, 2004

33

EXHIBIT 31.1

I, William R. Dutmers, certify that:

1. I have reviewed this Form 10-K/A Amendment No. 1 to the annual report on Form 10-K of Knape & Vogt Manufacturing Company;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we have:

(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(c) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting;

Date: October 15, 2004

/s/ William R. Dutmers
William R. Dutmers
Chairman of the Board and Chief Executive Officer

34

EXHIBIT 31.2

I, Leslie J. Cummings, certify that:

1. I have reviewed this Form 10-K/A Amendment No. 1 to the annual report on Form 10-K of Knape & Vogt Manufacturing Company;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we have:

(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(c) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting;

Date: October 15, 2004

/s/ Leslie J. Cummings
Leslie J. Cummings
Vice President of Finance and Treasurer

35

EXHIBIT 32.1

In connection with Form 10-K/A Amendment No. 1 to the Annual Report on Form 10-K of Knape & Vogt Manufacturing Company for the fiscal year ended July 3, 2004 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, William R. Dutmers, Chairman of the Board and Chief Executive Officer of Knape & Vogt Manufacturing Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) the Report which this statement accompanies fully complies with the requirements of Section 13(a) or 15(d) of the Securities Act of 1934, and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Knape & Vogt Manufacturing Company.

Date: October 15, 2004

/s/ William R. Dutmers
William R. Dutmers
Chairman of the Board and Chief Executive Officer

36

EXHIBIT 32.2

In connection with Form 10-K/A Amendment No. 1 to the Annual Report on Form 10-K of Knape & Vogt Manufacturing Company for the fiscal year ended July 3, 2004 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Leslie J. Cummings, Vice President of Finance and Treasurer of Knape & Vogt Manufacturing Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) the Report which this statement accompanies fully complies with the requirements of Section 13(a) or 15(d) of the Securities Act of 1934, and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Knape & Vogt Manufacturing Company.

Date: October 15, 2004

/s/ Leslie J. Cummings
Leslie J. Cummings
Vice President of Finance and Treasurer

37