UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 1995
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 2-18868
KNAPE & VOGT MANUFACTURING COMPANY
(Exact name of registrant as specified in its charter)
Michigan 38-0722920
(State of Incorporation) (IRS Employer Identification No.)
2700 Oak Industrial Drive, NE
Grand Rapids, Michigan 49505
(Address of principal executive offices) (Zip Code)
(616) 459-3311
(Telephone Number)
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 ______
2,585,400 common shares were outstanding as of April 28, 1995.
3,293,848 Class B common shares were outstanding as of April 28, 1995.
KNAPE & VOGT MANUFACTURING COMPANY AND SUBSIDIARIES
INDEX
Page No.
PART I FINANCIAL INFORMATION
Item 1. Financial Statements.
Condensed Consolidated Balance Sheets
- --March 31, 1995 (Unaudited) and June 30, 1994................................2
Condensed Consolidated Statements of Income (Unaudited)
- --Nine Months and Three Months Ended March 31, 1995 and 1994..................3
Condensed Consolidated Statements of Cash Flows (Unaudited)
- --Nine Months Ended March 31, 1995 and 1994...................................4
Notes to Condensed Consolidated Financial Statements (Unaudited)..............5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.........................................6-7
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K......................................8
SIGNATURES ...................................................................9
KNAPE & VOGT MANUFACTURING COMPANY AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
CONDENSED CONSOLIDATED BALANCE SHEETS
March 31, 1995 June 30, 1994
-------------- -------------
(Unaudited)
Assets
Cash and equivalents $ 644,257 $ 620,224
Accounts receivable - net 28,348,935 27,156,643
Inventories 29,355,469 29,812,594
Other current assets 2,462,946 1,595,047
---------------- --------------
Total current assets 60,811,607 59,184,508
---------------- --------------
Property, plant and equipment 88,608,963 84,944,438
Less accumulated depreciation 35,942,718 31,231,001
---------------- --------------
Net property, plant and equipment 52,666,245 53,713,437
---------------- --------------
Other assets 23,974,889 24,120,301
---------------- --------------
$ 137,452,741 $ 137,018,246
================ ==============
Liabilities and Stockholders' Equity
Accounts payable $ 7,442,607 $ 8,599,798
Accrued income taxes 382,335 262,789
Other accrued liabilities 6,071,152 7,749,918
Current portion of long-term debt 3,000,000 3,000,000
---------------- --------------
Total current liabilities 16,896,094 19,612,505
Long-term debt 36,900,000 37,000,000
Deferred income taxes and other long-term liabilities 12,497,063 12,431,851
---------------- --------------
Total liabilities 66,293,157 69,044,356
---------------- --------------
Stockholders' equity
Common stock 11,758,496 10,676,654
Additional paid-in capital 33,060,725 23,899,422
Foreign currency translation adjustment (1,593,611) (1,429,155)
Retained earnings 27,933,974 34,826,969
---------------- --------------
Total stockholders' equity 71,159,584 67,973,890
---------------- --------------
$ 137,452,741 $ 137,018,246
================ ==============
See accompanying notes.
KNAPE & VOGT MANUFACTURING COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Nine Months Ended Three Months Ended
Mar. 31, 1995 Mar. 31, 1994 Mar. 31, 1995 Mar. 31, 1994
---------------- ---------------- ------------- -------------
Net sales $ 138,019,738 $ 112,805,094 $ 48,225,311 $ 46,885,988
Cost of sales 103,498,248 83,334,046 36,417,293 34,893,243
---------------- ---------------- ---------------- ----------------
Gross profit 34,521,490 29,471,048 11,808,018 11,992,745
Selling and
administrative expenses 23,013,720 19,830,822 7,859,055 7,923,588
---------------- ---------------- ---------------- ----------------
Operating income 11,507,770 9,640,226 3,948,963 4,069,157
Other expenses 2,001,969 1,084,154 704,133 616,327
----------------- ---------------- ---------------- -----------------
Income before income taxes 9,505,801 8,556,072 3,244,830 3,452,830
Income taxes 3,463,000 3,022,000 1,192,000 1,179,000
----------------- ---------------- ---------------- ----------------
Net income $ 6,042,801 $ 5,534,072 $ 2,052,830 $ 2,273,830
================ ================ ================ ================
Per common share:
Net Income $ 1.03 $ .94 $ .35 $ .39
Cash Dividend - Common stock $ .495 $ .45 $ .165 $ .15
Cash Dividend - Class B common stock $ .45 $ .409 $ .15 $ .137
Weighted average shares outstanding 5,893,568 5,876,994 5,889,718 5,887,287
See accompanying notes.
KNAPE & VOGT MANUFACTURING COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended
Mar. 31, 1995 Mar. 31, 1994
---------------- ----------------
Operating Activities:
Net income $ 6,042,801 $ 5,534,072
Non-cash items:
Depreciation and amortization 5,567,285 4,734,875
Deferred income taxes 324,000 125,000
Other long-term liabilities (250,209) (27,519)
Changes in operating assets & liabilities:
Accounts receivable (1,235,839) 275,510
Inventories 388,481 (1,076,925)
Other current assets (871,063) (98,715)
Accounts payable & accrued expenses (2,682,880) (2,993,204)
----------------- -----------------
Net cash from operating activities 7,282,576 6,473,094
----------------- -----------------
Investing Activities:
Additions to property, plant, and equipment (3,811,283) (3,088,300)
Sale of property, plant, and equipment 6,427 40,317
Payments for purchase of subsidiaries (28,605,859)
Payments for other assets (639,054) (539,312)
------------------ ----------------
Net cash used in investing activities (4,443,910) (32,193,154)
------------------ ----------------
Financing Activities:
Proceeds from sale of common stock 109,400 201,799
Additions to long-term debt - 28,250,000
Payments on long-term debt (100,000) -
Cash dividends paid (2,802,051) (2,528,557)
------------------ ----------------
Net cash from (for) financing activities (2,792,651) 25,923,242
------------------ ----------------
Effect of Exchange Rate Changes on Cash (21,982) (67,133)
------------------ ----------------
Net Increase (Decrease) in Cash & Equivalents 24,033 136,049
Cash and Equivalents:
Beginning of year 620,224 630,681
------------------ ----------------
End of period $ 644,257 $ 766,730
================== ================
Cash Paid During the Period - interest $ 1,707,909 $ 730,937
- income taxes $ 3,027,454 $ 1,370,541
KNAPE & VOGT MANUFACTURING COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1 - Basis of Financial Statement Preparation
The accompanying unaudited condensed consolidated financial statements and
related notes have been prepared pursuant to the rules and regulations of the
Security and Exchange Commission. The information furnished reflects all
adjustments which are, in the opinion of management, necessary for a fair
statement of results of operations. Interim results are not necessarily
indicative of the results for the year end and are subject to year end
adjustments, and audit by independent public accountants. The balance sheet at
June 30, 1994, has been taken from the audited financial statements at that
date. The condensed consolidated financial statements and notes should be read
in conjunction with the Company's 1994 annual report.
Note 2 - Common Stock and Per Share Information
Income per share is determined based on weighted average number of shares
outstanding during each period.
Average common shares and per share amounts on the income statement have been
adjusted to reflect the 10% stock dividend paid in September, 1994.
Common stock is $2 par - shares authorized 6,000,000 of common stock and
4,000,000 of Class B common stock. Shares issued: 3,293,848 of common stock;
2,585,400 of Class B stock at March 31, 1995; and 2,976,027 of common stock and
2,362,300 of Class B common stock at June 30, 1994.
Note 3 - Inventories
Inventories are valued at the lower of FIFO (first-in, first-out) cost or market
for 85% and 87% of the inventories at March 31, 1995 and June 30, 1994,
respectively. The Company has one subsidiary on LIFO (last-in, first-out) cost,
the inventory value of which was $ 370,750 and $417,000 lower than it would have
been under FIFO at March 31, 1995 and June 30, 1994, respectively.
Inventories are summarized as follows:
Mar. 31, 1995 June 30, 1994
------------- -------------
Finished products $ 16,306,503 $ 17,567,512
Work in process 3,728,053 3,855,509
Raw Materials 9,320,913 8,389,573
-------------- ----------------
Total $ 29,355,469 $ 29,812,594
============== ==============
KNAPE & VOGT MANUFACTURING COMPANY AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Net Sales
Net sales for the third quarter and nine months of fiscal year 1995 increased
2.9% and 22.4%, respectively, over the comparable periods of fiscal year 1994.
The acquisition of The Hirsh Company contributed $17.2 million, or 68%, of the
increase for the nine months over the comparable period of fiscal year 1994 that
included only four months of Hirsh sales. Shelving sales increased to $22.5
million during the quarter compared to $20.8 million last year, due to strong
sales of shelving products to new customers. Twelve customers that were
either customers of Knape & Vogt or Hirsh at the time we acquired Hirsh are now
purchasing some of the other companies products. The projected additional
volume is approximately $11 million per year. Most of this additional business
was added in the 3rd quarter. Drawer slide sales increased to $14.5 million
for the quarter from $13.8 million last year primarily due to the
increases in sales of the 8400 line of precision drawer slides. Store
fixtures and hardware product line sales decreased during the
quarter to $10.3 million from $10.5 million last year, due to fewer sales of
store fixture products by Roll-it to their largest customer. Furniture component
sales decreased during the quarter to $.9 million compared to $1.8 million last
year as Modar concentrated on producing wood products for Hirsh and meeting the
increased demand for wood shelving.
Costs and Expenses
Cost of sales was 75.5% of sales for the third quarter and 75.0% of sales for
the first nine months of fiscal year 1995 compared to 74.4% and 73.9% of sales
for the third quarter and first nine months of fiscal year 1994, respectively.
Increases in steel and particle board prices accounted for a 2.3% increase in
cost as a percentage of sales for the quarter with operating efficiencies
offsetting part of the increased material cost. The increase in cost as a
percentage of sales for the nine months is due to material price increases
throughout the period and that fiscal year 1994 only included four months of
Hirsh product sales which are lower margin products.
Selling and administrative expenses for the quarter decreased $64,533 and as a
percentage of sales decreased to 16.3% from 16.9% last year mainly due to
decreases in expenses at Hirsh. Selling and administrative expense for the nine
months decreased to 16.7% of sales compared to 17.6% in fiscal year 1994 due to
the decrease in expense at Hirsh and higher sales.
Other Expenses
Interest expense was $646,043 for the quarter ended March 31, 1995 compared
to $533,655 for the quarter ended March 31, 1994 due to an increase in interest
rates. In fiscal year 1994 debt levels in the months prior to the Hirsh
acquisition were lower. This along with the increase in interest rates caused
interest expense to reach $1,827,826 for the nine months ended March 31, 1995
compared to $1,017,964 last year.
Income Taxes
The effective tax rate for the quarter and nine months ended March 31, 1995,
was 36.7% and 36.4% compared to 34.1% and 35.3% for the quarter and nine months
ended March 31, 1994. The effective tax rate in the third quarter of fiscal
year 1994 was lower than normal due to amended tax returns lowering the
Canadian taxes.
KNAPE & VOGT MANUFACTURING COMPANY AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
Net Income
Net income of $2,052,830 for the third quarter was 9.7% lower than the
$2,273,830 reported a year ago. For the nine months ended March 31, 1995 net
income was $6,042,801 which is 9.2% greater than the $5,534,072 reported for the
same period last year. Earnings per share for the quarter and nine months was
$.35 and $1.03, respectively, compared to $.39 and $.94 for the same periods
last year. Net income was 4.3% and 4.4% of sales for the quarter and nine
months, respectively, compared to 4.8% and 4.9% of sales for the same periods
last year. The decrease in net income as a percentage of sales was mainly due
to higher cost of sales and the increase in interest expense.
Liquidity and Capital Resources
The Company's net cash position increased slightly during the first nine months
to $644,257 from $620,224 at June 30, 1994. Net cash from operating activities
was positively affected by decreases in inventory, but partially offset by an
increase in accounts recievable due to dating that increased the days
sales outstanding.
Capital expenditures were $3,811,283 for the nine months ended March 31, 1995.
The Company is currently forecasting capital expenditures to be approximately
$5.4 million for the fiscal year. The cash dividends for the nine months
of $2,802,051 increased $273,494 from last year as a result of the stock
dividend raising the number of shares outstanding. The Company had total
debt of $39,900,000 at December 31, 1994, a decrease of $100,000 from total
debt of $40,000,000 at June 30, 1994 and a decrease of $1,100,000 from total
debt of $41,000,000 at March 31, 1994 .
The Company's balance sheet remained strong with working capital of $43,915,513
and current ratio of 3.6 to 1 at December 31, 1994, compared to the $39,572,003
of working capital and a 3.0 to 1 current ratio at June 30, 1994.
KNAPE & VOGT MANUFACTURING COMPANY AND SUBSIDIARIES
PART II. OTHER INFORMATION
Item 6. Exhibits and reports on Form 8-K
(a) Exhibits - None
(b) Reports on Form 8-K
There were no reports on Form 8-K filed for the three months
ended March 31, 1995.
SIGNATURES
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.
Knape & Vogt Manufacturing Company
(Registrant)
Date: May 1, 1995 s/Raymond E. Knape
-----------------------------------
Raymond E. Knape
Chairman and
Chief Executive Officer
Date: May 1, 1995 s/Richard C. Simkins
-----------------------------------
Richard C. Simkins
Vice President - Finance, Secretary
and Treasurer