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, 1996
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 ______
3,314,269 common shares were outstanding as of May 3, 1996.
2,566,800 Class B common shares were outstanding as of May 3, 1996.
KNAPE & VOGT MANUFACTURING COMPANY AND SUBSIDIARIES
INDEX
Page No.
PART I FINANCIAL INFORMATION
Item 1. Financial Statements.
Condensed Consolidated Balance Sheets
- --March 31, 1996 (Unaudited) and June 30, 1995................................2
Condensed Consolidated Statements of Income (Unaudited)
- --Nine Months and Three Months Ended March 31, 1996 and 1995..................3
Condensed Consolidated Statements of Cash Flows (Unaudited)
- --Nine Months Ended March 31, 1996 and 1995...................................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 5. Other information.....................................................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
March 31, 1996 June 30, 1995
-------------- -------------
(Unaudited)
Assets
Cash and equivalents $ 1,010,791 $ 604,106
Accounts receivable - net 27,902,290 27,045,057
Inventories 28,371,925 28,347,023
Other current assets 3,640,239 3,210,231
----------------- -----------------
Total current assets 60,925,245 59,206,417
---------------- ----------------
Property, plant and equipment 91,393,683 85,729,838
Less accumulated depreciation 38,585,320 33,654,435
---------------- ----------------
Net property, plant and equipment 52,808,363 52,075,403
---------------- ----------------
Other assets 24,354,662 24,015,737
---------------- ----------------
$ 138,088,270 $ 135,297,557
================ ==============
Liabilities and Stockholders' Equity
Accounts payable $ 8,073,302 $ 7,552,129
Accrued income and other taxes 1,112,043 1,337,920
Other accrued liabilities 4,143,541 4,519,615
----------------- ----------------
Total current liabilities 13,328,886 13,409,664
Long-term debt 36,700,000 35,800,000
Deferred income taxes and other long-term liabilities 13,311,109 13,374,057
---------------- ----------------
Total liabilities 63,339,995 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 (1,169,879) (1,316,765)
Retained earnings 31,075,929 29,205,000
---------------- ----------------
Total stockholders' equity 74,748,275 72,713,836
---------------- ----------------
$ 138,088,270 $ 135,297,557
================ ==============
See accompanying notes.
KNAPE & VOGT MANUFACTURING COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended Three Months Ended Nine Months Ended Nine Months Ended
Mar. 31, 1996 Mar. 31, 1995 Mar. 31, 1996 Mar. 31, 1995
--------------- --------------- ----------------- -----------------
Net sales $ 134,103,174 $ 138,019,738 $ 48,583,411 $ 48,225,311
Cost of sales 101,934,595 103,498,248 36,662,138 36,417,293
---------------- --------------- ---------------- ----------------
Gross profit 32,168,579 34,521,490 11,921,273 11,808,018
Selling and
administrative expenses 22,796,553 23,013,720 8,020,276 7,859,055
---------------- --------------- ---------------- -----------------
Operating income 9,372,026 11,507,770 3,900,997 3,948,963
Other expenses 1,896,731 2,001,969 594,160 704,133
---------------- --------------- ---------------- -----------------
Income before income taxes 7,475,295 9,505,801 3,306,837 3,244,830
Income taxes 2,809,000 3,463,000 1,208,000 1,192,000
---------------- --------------- ---------------- -----------------
Net income $ 4,666,295 $ 6,042,801 $ 2,098,837 $ 2,052,830
================ =============== ================= =================
Per common share:
Net Income $ .79 $ 1.03 $ .35 $ .35
Cash Dividend - Common stock $ .495 $ .495 $ .165 $ .165
Cash Dividend - Class B common stock $ .45 $ .45 $ .15 $ .15
Weighted average shares outstanding 5,883,594 5,893,568 5,883,099 5,889,718
See accompanying notes.
KNAPE & VOGT MANUFACTURING COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended Nine Months Ended
Mar. 31, 1996 Mar. 31, 1995
----------------- -----------------
Operating Activities:
Net income $ 4,666,295 $ 6,042,801
Non-cash items:
Depreciation and amortization 5,759,478 5,567,285
Deferred income taxes 264,000 324,000
Other long-term liabilities (327,445) (250,209)
Changes in operating assets & liabilities:
Accounts receivable (805,604) (1,235,839)
Inventories 42,755 388,481
Other current assets (425,698) (871,063)
Accounts payable & accrued expenses (127,127) (2,682,880)
------------------ -----------------
Net cash from operating activities 9,046,654 7,282,576
------------------ -----------------
Investing Activities:
Additions to property, plant, and equipment (5,756,953) (3,811,283)
Sale of property, plant, and equipment 109,771 6,427
Payments for other assets (1,125,822) (639,054)
------------------ -----------------
Net cash used in investing activities (6,773,004) (4,443,910)
------------------ -----------------
Financing Activities:
Proceeds from sale of common stock 16,624 98,852
Additions to long-term debt 900,000 --
Payments on long-term debt -- (100,000)
Cash dividends paid (2,795,366) (2,791,503)
------------------ -----------------
Net cash for financing activities (1,878,742) (2,792,651)
------------------ -----------------
Effect of Exchange Rate Changes on Cash 11,777 (21,982)
------------------ -----------------
Net Increase (Decrease) in Cash & Equivalents 406,685 24,033
Cash and Equivalents:
Beginning of year 604,106 620,224
------------------ -----------------
End of period $ 1,010,791 $ 644,257
================== =================
Cash Paid During the Period - interest $ 1,760,294 $ 1,707,909
- income taxes $ 2,799,432 $ 3,027,454
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: 3,314,269 of common stock;
2,566,800 of Class B stock at March 31, 1996; 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 his subsidiary at June 30, 1995 was $417,000
lower than it would have been under FIFO.
Inventories are summarized as follows:
Mar. 31, 1996 June 30, 1995
------------- -------------
Finished products $ 16,340,889 $ 16,187,481
Work in process 3,332,942 3,538,217
Raw Materials 8,698,094 8,621,325
-------------- --------------
Total $ 28,371,925 $ 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 third quarter of fiscal year 1996 increased .7% to $48.6
million compared to $48.2 million for the same quarter last year. This is the
first quarter in fiscal year 1996 that showed an increase in sales over the
prior year. For the nine months ended March 31, 1996 sales were $134.1 million a
decrease of 2.8% compared to $138.0 million for the same period in fiscal year
1995. Drawer slide sales increased to $15.2 million for the quarter from $14.5
million last year due to increases in sales of precision drawer slides. Store
fixture and hardware product line sales increased during the quarter to $10.7
million from $10.3 million last year, due to more sales of store fixture
products by Roll-it to their largest customer. Shelving sales decreased to $21.9
million during the quarter compared to $22.5 million last year, due primarily to
decreased sales of wall mounted shelving products. Furniture component sales
decreased slightly during the quarter to $.8 million compared to $.9 million
last year. Based on internal forecasts, the Company anticipates that sales in
the fourth quarter may show a slight decrease compared to the same period in
fiscal 1995 when store fixture sales were very strong.
Costs and Expenses
Cost of sales was 75.5% of sales for the third quarter and 76.0% of sales for
the first nine months of fiscal year 1996 compared to 75.5% and 75.0% of sales
for the third quarter and first nine months of fiscal year 1995, respectively.
Price decreases in steel and particle board prices accounted for most of the
improvement in cost as a percentage of sales for the quarter compared to the
costs for the nine months. The increase in the cost of sales for the nine months
ended March 31, 1996 compared to last year is mainly due to material price
increases throughout the last six months of fiscal year 1995 and the first six
month of fiscal year 1996.
Selling and administrative expenses for the quarter increased as a percentage of
sales to 16.5% from 16.3% last year primarily due to selling expenses associated
with the start up of the retail program at Feeny. Selling and administrative
expense for the nine months decreased by $217,167 mainly due to lower
administrative expenses, but increased to as a percentage of sales to 17.0%
compared to 16.7% last year due to the lower sales levels in fiscal year 1996.
Other Expenses
Interest expense decreased to $554,595 for the quarter ended March 31, 1996
compared to $646,043 for the quarter ended March 31, 1995 due to lower interest
rates. Interest expense for the nine months ended March 31, 1996 was $1,747,740
compared to $1,827,826 last year.
Income Taxes
The effective tax rate for the quarter and nine months ended March 31, 1996, was
36.5% and 37.6% compared to 36.7% and 36.4% for the quarter and nine months
ended March 31, 1995. The effective tax rate for the nine months of fiscal year
1995 is slightly lower due to a reduction in Illinois state taxes relating to
the Hirsh Company in the second quarter.
KNAPE & VOGT MANUFACTURING COMPANY AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
Net Income
Net income of $2,098,837 for the third quarter was 2.2% higher than the
$2,052,830 reported a year ago. For the nine months ended March 31, 1996 net
income was $4,666,295 which is 22.8% lower than the $6,042,801 reported for the
same period last year. Earnings per share for the quarter and nine months were
$.35 and $.79, respectively, compared to $.35 and $1.03 for the same periods
last year. Net income was 4.3% and 3.5% of sales for the quarter and nine
months, respectively, compared to 4.3% and 4.4% of sales for the same periods
last year.
Liquidity and Capital Resources
The Company's net cash position increased during the first nine months to
$1,010,791 from $604,106 at June 30, 1995. Net cash from operating activities
for the nine months ended March 31, 1996 was $1,764,078 better than the same
period last year due to the decreases in the accounts payable and accruals in
fiscal year 1995 that did not occur in fiscal year 1996 due to keeping these
balances low at June 30, 1995.
Capital expenditures were $5,756,953 for the nine months ended March 31, 1996.
The Company is currently forecasting capital expenditures to be approximately $8
million for the fiscal year with the largest expenditures for drawer slide
production equipment and sawing and edgebanding equipment. The Company had total
debt of $36,700,000 at March 31, 1996, an increase of $900,000 from the balance
at June 30, 1995 of $35,800,000 due to the high level of capital expenditures
this fiscal year.
KNAPE & VOGT MANUFACTURING COMPANY AND SUBSIDIARIES
PART II. OTHER INFORMATION
Item 5. Other information:
Raymond E. Knape, Chairman and Chief Executive Officer, announced his
retirement at the April 19, 1996 Board of Directors meeting of Knape &
Vogt Manufacturing Company. Mr. Knape will remain as a member of the
Board. The Board decided to leave the posistion of Chaiman of the Board
vacant.
Allan E. Perry was elected by the Board of Directors to the position of
President and Chief Executive Officer. He previously held the position
of President and Chief Operating Officer. Richard C. Simkins was
elected by the Board of Directors to the position of Executive Vice
President, Chief Financial Officer, Secretary and Treasurer. He
previously held the title of Vice President-Finance, Secretary and
Treasurer.
The Board of Directors also announced that it has increased its size
from eight directors to ten with the election of
William R. Dutmers and Michael J. Kregor, who represent the fourth
generation of the Knape family to serve on the board. William R.
Dutmers, 39, owns G&L Inc. of Muskegon, Michigan, a business consulting
firm. Michael J. Kregor, 44, of Valencia, California, has nearly two
decades of sales and marketing experience with Nestle, and currently is
Vice President, Marketing, Nestle Brands.
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, 1996.
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 9, 1996 s\Allan E. Perry
Allan E. Perry
President and
Chief Executive Officer
Date: May 9, 1996 s\Richard C. Simkins
Richard C. Simkins
Executive Vice President, Chief Financial
Officer, Secretary and Treasurer