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 September 30, 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 ______
3,299,918 common shares were outstanding as of November 3, 1995.
2,581,151 Class B common shares were outstanding as of November 3, 1995.
KNAPE & VOGT MANUFACTURING COMPANY AND SUBSIDIARIES
INDEX
Page No.
PART I FINANCIAL INFORMATION
Item 1. Financial Statements.
Condensed Consolidated Balance Sheets
- --September 30, 1995 (Unaudited) and June 30, 1995............................2
Condensed Consolidated Statements of Income (Unaudited)
- --Three Months Ended September 30, 1995 and 1994..............................3
Condensed Consolidated Statements of Cash Flows (Unaudited)
- --Three Months Ended September 30, 1995 and 1994..............................4
Notes to Condensed Consolidated Financial Statements..........................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 ...................................................................8
KNAPE & VOGT MANUFACTURING COMPANY AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, 1995 June 30, 1995
------------------- ---------------
(Unaudited)
Assets
Cash and equivalents $ 1,332,513 $ 604,106
Accounts receivable - net 28,305,857 27,045,057
Inventories 30,087,933 28,347,023
Other current asset 3,296,146 3,210,231
---------------- ----------------
Total Current assets 63,022,449 59,206.417
---------------- ----------------
Property, plant and equipment 86,766,575 85,729,838
Less accumulated depreciation 35,373,803 33,654,435
---------------- ----------------
Net property, plant and equipment 51,392,772 52,075,403
---------------- ----------------
Other assets 24,202,322 24,015,737
---------------- ----------------
$ 138,617,543 $ 135.297,557
================ ================
Liabilities and Stockholder Equity
Accounts payable $ 6,986,105 $ 7,552,129
Accrued income and other taxes 1,120,561 1,337,920
Other accrued liabilities 3,982,190 4,519,615
---------------- ----------------
Total current liabilities 12,088,856 13,409,664
Long-term debt 39,400,000 35,800,000
Deferred income taxes and other long-term liabilities 13,509,744 13,374,057
---------------- ----------------
Total liabilities 64,998,600 62,583,721
---------------- ----------------
Stockholders equity
Common stock 11,762,138 11,759,828
Additional paid-in capital 33,080,087 33,065,773
Foreign currency translation adjustment (1,004,332) (1,316,765)
Retained earnings 29,781,050 29,205,000
---------------- ----------------
Total stockholders equity 73,618,943 72,713,836
---------------- ----------------
$ 138,617,543 $ 135,297,557
================ ================
See accompanying notes.
KNAPE & VOGT MANUFACTURING COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended
Sept. 30, 1995 Sept. 30, 1994
Net Sales $ 45,148,630 $ 48,057,048
Cost of sales 34,188,157 35,576,346
---------------- ----------------
Gross profit 10,960,473 12,480,702
Selling and administrative expenses 7,847,738 7,841,443
---------------- ----------------
Operating income 3,112,735 4,639,259
Other expenses 644,024 636,901
---------------- ----------------
Income before income taxes 2,468,711 4,002,358
Income taxes 961,000 1,493,000
---------------- ----------------
Net income $ 1,507,711 $ 2,509,358
================ ================
Per common shares:
Net Income $ .26 $ .43
Cash Dividend - Common Stock $ .165 $ .165
Cash Dividend - Class B Common Stock $ .15 $ .15
Weighted average shares outstanding 5,885,466 5,893,444
See accompanying notes.
KNAPE & VOGT MANUFACTURING COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Three Months
Ended Ended
Sept. 30, 1995 Sept. 30, 1994
--------------- ----------------
Operating Activities:
Net income $ 1,507,711 $ 2,509,358
Non-cash items:
Depreciation and amortization 1,884,525 1,820,263
Deferred income taxes 238,000 230,000
Other long-term liabilities (103,495) (82,926)
Changes in operating assets & liabilities:
Accounts receivable and other receivables (1,144,020) (1,068,021)
Inventories (1,586,114) 984,684
Other current assets (76,641) (65,323)
Accounts payable & accrued expenses (1,427,487) (3,352,853)
----------------- ----------------
Net cash from (for) operating activities (707,521) 975,182
----------------- ----------------
Investing Activities:
Additions to property, plant, and equipment (815,333) (942,322)
Sale of property, plant, and equipment 0 3,334
Payments for other assets (437,855) (141,623)
----------------- ----------------
Net cash for investing activities (1,253,188) (1,080,611)
----------------- ----------------
Financing Activities:
Proceeds from sale of common stock 16,624 12,438
Purchase of common stock 0 (10,548)
Additions to long-term debt 3,600,000 1,300,000
Payments on long-term debt 0 0
Cash dividends paid (931,661) (930,028)
----------------- ----------------
Net cash from financing activities 2,684,963 371,862
----------------- ----------------
Effect of Exchange Rate Changes on Cash 4,153 39,873
----------------- ----------------
Net Increase (Decrease) in Cash & Equivalents 728,407 306,306
Cash and Equivalents:
Beginning of year 604,106 620,224
----------------- -----------------
End of period $ 1,332,513 $ 926,530
================= =================
Cash Paid During the Period - interest $ 603,355 $ 491,433
- income taxes $ 1,598,430 $ 1,261,740
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
Securities 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, 1995, 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 1995 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.
Common stock is $2 par - shares authorized 6,000,000 of common stock and
4,000,000 of Class B common stock. Shares issued: 3,299,918 of common stock;
2,581,151 of Class B stock at September 30, 1995; and 3,295,496 of common stock
and 2,584,418 of Class B common stock at June 30, 1995.
Note 3 - Inventories
Inventories are valued at the lower of FIFO (first-in, first-out) cost or
market. The Company has one subsidiary on LIFO (last-in, first-out) cost. The
Company has decided to change to FIFO cost for this subsidiary during fiscal
year 1996. The inventory value at this subsidiary was $209,000 and $418,000
lower than it would have been under FIFO at September 30, 1995 and June 30, 1995
respectively.
Inventories are summarized as follows:
September 30, 1995 June 30, 1995
------------------ -------------
Finished products $ 16,851,035 $ 16,187,481
Work in process 3,954,046 3,538,217
Raw Materials 9,282,852 8,621,325
---------------- ----------------
Total $ 30,087,933 $ 28,347,023
============== ==============
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 first quarter of fiscal year 1996 decreased $2.9 million, or
6.1%, over the comparable period of fiscal year 1995. Drawer slide sales
decreased by $1.9 million. Continued growth in precision drawer slides was
offset by the decline in sales of utility slides. Furniture component sales
decreased $1.0 million compared to the first quarter of fiscal year 1995. In
the first quarter of fiscal year 1995 the Company had not completed it's
consolidation of the wood lamination operations at Modar and furniture component
sales were filling this capacity. Store fixture and hardware product line sales
decreased $0.5 million primarily due to a decline in store fixture sales to
Roll-it's largest customer. Shelving sales increased by $0.5 million compared to
the first quarter of fiscal year 1995 due to an increase in sales of free
standing shelving.
Costs and Expenses
Cost of sales was 75.7% of sales for the quarter compared to 74.0% of sales for
the first quarter of 1995. The higher cost of sales is due to increases in raw
material prices that could not be passed along to our customers. Sales
price decreases to obtain new business and maintain existing relationships also
contributed to the reduction in margins compared to the first quarter of fiscal
1995.
Selling and administrative expenses increased to 17.4% of sales compared to
16.3% for the period ended September 30, 1994. Expenses actually only increased
by $6,295. Selling expense increased due to co-op advertising arrangements with
customers but were offset by decreases in administrative expense related to
Michigan taxes.
Other Expenses
Interest expense was $598,405 for the quarter compared to $579,948 for the
quarter ended September 30, 1994. The Company has reduced its level of borrowing
to $39,400,000 at September 30, 1995 from $41,300,000 at September 30, 1994
while interests rates were higher during the first quarter of fiscal 1996
compared to the same period in fiscal 1995.
Income Taxes
The effective tax rate for the quarter ended September 30, 1995 was 38.9%
compared to 37.3% for the quarter ended September 30, 1994. Lower pretax income
for the quarter ended September 30, 1995 increased the impact of permanent
differences, such as amortization of goodwill, when computing the effective tax
rate.
Net Income
Net income of $1,507,711 for the first quarter of 1996 was 3.3% of sales for the
quarter compared to 5.2% of sales in the first quarter last year. Earnings per
share decreased 39.5% to $.26 compared to $.44 in the first quarter of last
year.
KNAPE & VOGT MANUFACTURING COMPANY AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
Liquidity and Capital Resources
The Company's net cash position improved during the first three months to
$1,332,513 from $604,106 at June 30, 1995. Net cash from operating activities
was negatively effected by an increase in inventory balances as production could
not be slowed in conjunction with sales. Introductions of Lumber Loc and Space
Solution products also increased inventory levels. Accounts payable and accrued
expenses decreased during the quarter which is common for the first quarter due
to the timing of when payments are due. Accounts receivable also increased
during the quarter particularly at our Hirsh subsidiary since September is one
of the largest sales months.
Capital expenditures totaled $815,333 for the three months ended September 30,
1995, compared to $942,322 last year. The debt increased $3,600,000 due to the
cash used in operating activities during the quarter ended September 30, 1995.
Debt levels are expected to decrease during the remainder of fiscal year 1996.
The Company's working capital of $50,933,593 and current ratio of 5.2 to 1 at
September 30, 1995, remains strong and increased from the $45,796,753 of working
capital and 4.4 to 1 current ratio at June 30, 1995.
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 September 30, 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: November 6, 1995 s/Raymond E. Knape
--------------------
Raymond E. Knape
Chairman, President and
Chief Executive Officer
Date: November 6, 1995 s/Richard C. Simkins
--------------------
Richard C. Simkins
Vice President -
Finance, Secretary,
and Treasurer