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 December 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 ______
3,311,146 common shares were outstanding as of January 19, 1996.
2,569,923 Class B common shares were outstanding as of January 19, 1996.
KNAPE & VOGT MANUFACTURING COMPANY AND SUBSIDIARIES
INDEX
Page No.
PART I FINANCIAL INFORMATION
Item 1. Financial Statements.
Condensed Consolidated Balance Sheets
--December 31, 1995 (Unaudited) and June 30, 1995............................2
Condensed Consolidated Statements of Income (Unaudited)
--Six Months and Three Months Ended December 31, 1995 and 1994...............3
Condensed Consolidated Statements of Cash Flows (Unaudited)
--Six Months Ended December 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 4. Submission of Matters to a vote of Security Holders..................8
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
Dec. 31, 1995 June 30, 1995
-------------- -------------
(Unaudited)
Assets
Cash and equivalents $ 333,557 $ 604,106
Accounts receivable - net 22,476,164 27,045,057
Inventories 28,751,067 28,347,023
Other current assets 3,547,739 3,210,231
---------------- ----------------
Total current assets 55,108,527 59,206,417
---------------- ----------------
Property, plant and equipment 88,612,949 85,729,838
Less accumulated depreciation 36,924,632 33,654,435
---------------- ----------------
Net property, plant and equipment 51,668,317 52,075,403
---------------- ----------------
Other assets 24,233,488 24,015,737
---------------- ----------------
$ 131,030,332 $ 135,297,557
================ ================
Liabilities and Stockholders' Equity
Accounts payable $ 5,045,640 $ 7,552,129
Accrued income and other taxes 954,940 1,337,920
Other accrued liabilities 3,302,503 4,519,615
---------------- ---------------
Total current liabilities 9,303,083 13,409,664
Long-term debt 35,000,000 35,800,000
Deferred income taxes and other long-term liabilities 13,196,988 13,374,057
---------------- ---------------
Total liabilities 57,500,071 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 (1,220,932) (1,316,765)
Retained earnings 29,908,968 29,205,000
---------------- ----------------
Total stockholders' equity 73,530,261 72,713,836
---------------- ----------------
$ 131,030,332 $ 135,297,557
================ ================
See accompanying notes.
KNAPE & VOGT MANUFACTURING COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended Six Months Ended
Dec. 31, 1995 Dec. 31, 1994 Dec. 31, 1995 Dec. 31, 1994
-------------- ------------- -------------- --------------
Net sales $ 85,519,763 $ 89,794,427 $ 40,371,133 $ 41,737,379
Cost of sales 65,272,457 67,080,955 31,084,300 31,504,609
----------------- ---------------- ---------------- ----------------
Gross profit 20,247,306 22,713,472 9,286,833 10,232,770
Selling and administrative expenses 14,776,277 15,154,665 6,928,539 7,313,222
---------------- ---------------- ----------------- ----------------
Operating income 5,471,029 7,558,807 2,358,294 2,919,548
Other expenses 1,302,571 1,297,836 658,547 660,935
----------------- ---------------- ----------------- -----------------
Income before income taxes 4,168,458 6,260,971 1,699,747 2,258,613
Income taxes 1,601,000 2,271,000 640,000 778,000
----------------- ---------------- ------------------ -----------------
Net income $ 2,567,458 $ 3,989,971 $ 1,059,747 $ 1,480,613
================= ================ ================== =================
Per common share:
Net Income $ .44 $ .68 $ .18 $ .25
Cash Dividend - Common stock $ .33 $ .33 $ .165 $ .165
Cash Dividend - Class B common stock $ .30 $ .30 $ .15 $ .15
Weighted average shares outstanding 5,884,452 5,896,632 5,885,144 5,900,769
See accompanying notes.
KNAPE & VOGT MANUFACTURING COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
Dec. 31, 1995 Dec. 31, 1994
------------- -------------
Operating Activities:
Net income $ 2,567,458 $ 3,989,971
Non-cash items:
Depreciation and amortization 3,819,232 3,666,888
Deferred income taxes 31,000 185,000
Other long-term liabilities (208,336) (168,299)
Changes in operating assets & liabilities:
Accounts receivable 4,615,423 3,354,196
Inventories (358,977) 1,386,194
Other current assets (333,178) (190,969)
Accounts payable & accrued expenses (4,153,304) (6,155,558)
--------------- ---------------
Net cash from operating activities 5,979,318 6,067,423
--------------- ---------------
Investing Activities:
Additions to property and equipment (2,952,611) (2,296,318)
Sale of property and equipment 93,756 3,334
Payments for other assets (754,532) (339,121)
--------------- ---------------
Net cash for investing activities (3,613,387) (2,632,105)
--------------- ---------------
Financing Activities:
Proceeds from issuance of common stock 16,624 30,848
Purchase of common stock 0 (10,548)
Payments on long-term debt (800,000) (1,700,000)
Cash dividends paid (1,863,490) (1,860,271)
--------------- ---------------
Net cash for financing activities (2,646,866) (3,539,971)
--------------- ---------------
Effect of Exchange Rate Changes on Cash 10,386 (38,418)
--------------- ---------------
Net Decrease in Cash & Equivalents (270,549) (143,071)
Cash and Equivalents:
Beginning of year 604,106 620,224
--------------- ---------------
End of period $ 333,557 $ 477,153
=============== ===============
Cash Paid During the Period - interest $ 1,189,725 $ 1,143,894
- income taxes $ 1,865,951 $ 2,138,342
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, 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: 3,311,146 of common stock;
2,569,923 of Class B stock at December 31, 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 at June 30, 1995 was $418,000
lower than it would have been under FIFO.
Inventories are summarized as follows:
Dec. 31, 1995 June 30, 1995
------------- -------------
Finished products $ 16,284,274 $ 16,187,481
Work in process 3,929,908 3,538,217
Raw Materials 8,536,885 8,621,325
---------------- ----------------
Total $ 28,751,067 $ 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 second quarter and six months of fiscal year 1996 decreased
$1.3 million, or 3.3%, and $4.3 million, or 4.8%, respectively, over the
comparable periods of fiscal year 1995. Shelving sales decreased by $.2 million
for the quarter, due primarily to the competitive retail markets which demanded
lower prices for our products. Drawer slide sales decreased by $.2 million for
the quarter. Continued increases in the precision drawer slides did not offset
the decrease in sales of utility slides. Store fixture and hardware product line
sales decreased during the quarter by $.2 million from last year, due to lower
sales of hardware products by Knape & Vogt Canada in the Canadian market.
Furniture component sales decreased during the quarter by $.7 million compared
to last year as Modar concentrated on producing wood products for Hirsh and
Knape & Vogt. Based on internal forecasts, the Company anticipates that sales
may match the results of the third and fourth quarters of fiscal year 1995.
Costs and Expenses
Cost of sales was 77.0% of sales for the second quarter and 76.3% of sales for
the first six months of fiscal year 1996 compared to 75.5% and 74.7% of sales
for the second quarter and first six months of fiscal year 1995, respectively.
Discounting of prices to retail customers and increases in raw material prices
accounted for the majority of the increase in cost as a percentage of sales for
the quarter. The impact of recent decreases in steel prices should reduce costs
as a percentage of sales during the second half of fiscal year 1996.
Selling and administrative expenses for the quarter decreased $384,683, and
decreased as a percentage of sales to 17.2% from 17.5% last year, mainly due to
decreases in administrative expenses such as the Michigan single business tax.
Selling and administrative expense for the six months decreased $378,388, but
increased to 17.3% of sales compared to 16.9% in fiscal year 1995.
Other Expenses
Interest expense was $594,740 for the quarter ended December 31, 1995 compared
to $601,835 for the quarter ended December 31, 1994. The decrease was due to
lower borrowing levels. Interest expense for the six months ended December 31,
1995 was $1,193,145 compared to $1,181,783 last year.
Income Taxes
The effective tax rate for the quarter and six months ended December 31, 1995,
was 37.6% and 38.4% compared to 34.4% and 36.2% for the quarter and six months
ended December 31, 1994. The effective tax rate in the second quarter of fiscal
year 1995 was lower than normal due to reductions in Illinois state taxes
relating to the Hirsh Company.
KNAPE & VOGT MANUFACTURING COMPANY AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
Net Income
Net income of $1,059,747 for the second quarter was 28.4% lower than the
$1,480,613 reported a year ago. For the six months ended December 31, 1995 net
income was $2,567,458 which is 35.7% lower than the $3,989,971 reported for the
same period last year. Earnings per share for the quarter and six months was
$.18 and $.44, respectively, compared to $.25 and $.68 for the same periods last
year. Net income was 2.6% and 3.0% of sales for the quarter and six months,
respectively.
The decrease in net income was mainly due to higher cost of sales.
Liquidity and Capital Resources
The Company's net cash position decreased during the first six months to
$333,557 from $604,106 at June 30, 1995. Net cash from operating activities was
positively affected by decreases in accounts receivable, but partially offset by
an increase in accounts payable. Accounts receivable balances were lower at the
end of December than at the end of June because sales in December were lower
than in June. Payable balances increased because purchases related to January
1996 production and sales which were higher than the June purchases related to
July 1995 production and sales.
Capital expenditures were $2,952,611 for the six months ended December 31, 1995.
The Company is currently forecasting capital expenditures to be approximately $8
million for the fiscal year. The Company had total debt of $35,000,000 at
December 31, 1995, a decrease of $800,000 from total debt of $35,800,000 at June
30, 1995. It is estimated that debt levels will remain at approximately these
levels in the second half of the fiscal year due to the increase in capital
expenditures.
The Company's balance sheet remained strong with working capital of $45,805,444
and current ratio of 5.9 to 1 at December 31, 1995, compared to the $45,796,753
of working capital and a 4.4 to 1 current ratio at June 30, 1995.
KNAPE & VOGT MANUFACTURING COMPANY AND SUBSIDIARIES
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
(a) Knape & Vogt Manufacturing Company's Annual Meeting of
Shareholders was held on October 20, 1995.
(b) Proxies were distributed by Knape & Vogt Manufacturing Company
pursuant to Regulation 14A under the Securities Exchange Act
of 1934. There was no opposition to management's nominees as
listed in the proxy statement, and all nominees were elected.
The vote on the nominees was:
For Against Abstain Non-vote
Raymond E. Knape (1) (2) 26,443,381 -- 29,043 --
Herbert F. Knape (1) (2) 26,442,281 -- 30,143 --
Richard C. Simkins (1) (3) 2,717,071 -- 28,983 --
(1) Term expires in 1998.
(2) Elected by vote of holders of Common stock and Class B
common stock voting as a class. (3) Elected by vote of holders
of Common stock voting as a class.
Members of the board of directors whose terms have not yet
expired are Allen E. Perry, term expiring in 1997, John E.
Fallon, term expiring in 1997, Robert T. Kroon, term expiring
in 1997, Richard S. Knape, term expiring in 1996 and Mary Rita
Cuddohy, term expiring in 1996.
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 December 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: January 26, 1996 s/Raymond E. Knape
Raymond E. Knape
Chairman and
Chief Executive Officer
Date: January 26, 1996 s/Richard C. Simkins
Richard C. Simkins
Vice President - Finance, Secretary
and Treasurer