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, 1999
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 ____
2,082,190 common shares were outstanding as of April 30, 1999.
2,249,290 Class B common shares were outstanding as of April 30, 1999.
The Exhibit Index appears on page 14.
KNAPE & VOGT MANUFACTURING COMPANY AND SUBSIDIARIES
INDEX
Page No.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
Condensed Consolidated Balance Sheets
--March 31, 1999 and June 30, 1998..................................2
Condensed Consolidated Statements of Income
--Nine Months and Three Months Ended March 31, 1999 and 1998........3
Condensed Consolidated Statements of Cash Flows
--Nine Months Ended March 31, 1999 and 1998.........................4
Notes to Condensed Consolidated Financial Statements..............5-6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations..............................7-10
Item 3. Quantitative and Qualitative Disclosures About Market Risk.....11
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K...............................12
SIGNATURES...................................................................13
EXHIBIT INDEX................................................................14
1
KNAPE & VOGT MANUFACTURING COMPANY AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited) (Audited)
March 31, 1999 June 30, 1998
--------------- --------------
Assets
Current assets
Cash and equivalents $ 1,115,151 $ 3,057,158
Accounts receivable - net 20,813,145 25,677,043
Inventories 14,121,690 12,808,532
Prepaid expenses and other 2,540,481 2,882,694
Net assets held for sale - 18,648,000
------------- -------------
Total current assets 38,590,467 63,073,427
------------- -------------
Property, plant and equipment 65,273,594 60,901,901
Less accumulated depreciation 30,273,381 24,247,181
------------- -------------
Net property, plant and equipment 35,000,213 36,654,720
------------- -------------
Other assets 3,940,380 4,304,940
------------- -------------
$ 77,531,060 $ 104,033,087
============= =============
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable $ 9,428,835 $ 17,765,610
Other accrued liabilities 8,332,290 7,031,650
------------- -------------
Total current liabilities 17,761,125 24,797,260
------------- -------------
Long-term debt 18,000,000 9,700,000
Deferred income taxes and other long-term liabilities 8,440,273 7,779,153
------------- -------------
Total liabilities 44,201,398 42,276,413
------------- -------------
Stockholders' Equity
Common stock 8,931,960 11,871,250
Additional paid-in capital 6,184,357 33,724,990
Restricted stock grants (59,063) -
Accumulated other comprehensive income:
Foreign currency translation adjustment (116,466) -
Minimum supplemental executive retirement plan
liability adjustment (447,714) -
Retained earnings 18,836,588 16,160,434
------------- ------------
Total stockholders' equity 33,329,662 61,756,674
------------- -------------
$ 77,531,060 $ 104,033,087
============= =============
See accompanying notes.
2
KNAPE & VOGT MANUFACTURING COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
For the Nine Months Ended For the Three Months Ended
Mar. 31, 1999 Mar. 31, 1998 Mar. 31, 1999 Mar. 31, 1998
------------- ------------- ------------- -------------
Net sales $ 116,075,990 $ 136,805,813 $ 36,038,270 $ 49,469,554
Cost of sales 88,583,489 103,503,505 27,092,969 37,914,628
-------------- ------------- ------------- -------------
Gross profit 27,492,501 33,302,308 8,945,301 11,554,926
Selling and administrative expenses 19,176,244 21,692,956 6,276,471 7,711,214
Impairment/restructuring loss 600,000 3,992,276 - 3,992,276
-------------- -------------- ------------- -------------
Operating income (loss) 7,716,257 7,617,076 2,668,830 (148,564)
Other expenses (income) (93,014) 1,081,662 237,713 335,258
-------------- -------------- ------------- -------------
Income (loss) from continuing operations
before income taxes 7,809,271 6,535,414 2,431,117 (483,822)
Income taxes - continuing operations 2,697,000 3,105,000 866,000 573,000
-------------- -------------- ------------- -------------
Income (loss) from continuing operations 5,112,271 3,430,414 1,565,117 (1,056,822)
Loss from discontinued operation,
net of taxes - (1,368,278) - (1,274,639)
-------------- -------------- ------------- --------------
Net income (loss) $ 5,112,271 $ 2,062,136 $ 1,565,117 $ (2,331,461)
============== ============== ============= ==============
Basic earnings per share:
Income (loss) from continuing operations $ 1.00 $ .58 $ .34 $ (.18)
Loss from discontinued operation - (.23) - (.21)
-------------- -------------- ------------- --------------
Net income (loss) per share $ 1.00 $ .35 $ .34 $ (.39)
============== ============== ============= ==============
Weighted average shares outstanding 5,129,301 5,919,601 4,622,142 5,924,435
Diluted earnings per share:
Income (loss) from continuing operations $ .99 $ .58 $ .34 $ (.17)
Loss from discontinued operation - (.23) - (.22)
-------------- -------------- ------------- --------------
Net income (loss) per share $ .99 $ .35 $ .34 $ (.39)
============== ============== ============= ==============
Weighted average shares outstanding 5,143,606 5,953,418 4,627,993 5,964,794
Cash dividend - common stock $ .495 $ .495 $ .165 $ .165
Cash dividend - Class B common stock $ .45 $ .45 $ .15 $ .15
See accompanying notes.
3
KNAPE & VOGT MANUFACTURING COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended
-----------------
Mar. 31, 1999 Mar. 31, 1998
------------- -------------
Operating Activities:
Net income $ 5,112,271 $ 2,062,136
Non-cash items:
Depreciation and amortization 4,597,447 5,911,058
Deferred income taxes (406,129) (1,732,000)
Other long-term liabilities 506,454 (315,137)
Loss on sale of the discontinued operation - 937,268
Write-off of foreign currency translation adjustment - 1,605,305
Impairment loss 600,000 -
Loss on disposal of fixed assets 101,086 -
Stock grants earned 177,187 -
Changes in operating assets and liabilities:
Accounts receivable 4,799,746 (3,000,045)
Inventories (1,208,158) (297,524)
Other current assets 1,132,684 610,815
Accounts payable and accrued expenses (7,331,151) 10,100,202
------------ -----------
Net cash provided by operating activities 8,081,437 15,882,078
------------ -----------
Investing Activities:
Additions to property, plant and equipment (3,066,746) (3,548,463)
Sale of property, plant and equipment - 1,693
Sale of Hirsh subsidiary 18,129,569 -
Disposition of discontinued operation - 1,920,352
Payments for other assets (133,074) 1,078,485
------------ -----------
Net cash provided by (used for) investing activities 14,929,749 (547,933)
------------ -----------
Financing Activities:
Cash dividends paid (2,436,117) (2,817,124)
Proceeds from issuance of common stock 570,096 401,670
Repurchase and retirement of common stock (31,333,723) -
Borrowings (payments) on long-term debt 8,300,000 (11,600,000)
------------ -----------
Net cash used for financing activities (24,899,744) (14,015,454)
------------ ------------
Effect of Exchange Rate Changes on Cash (53,449) (8,024)
------------ -----------
Net Increase (Decrease) in Cash and Equivalents (1,942,007) 1,310,667
Cash and equivalents, beginning of year 3,057,158 1,146,546
------------ -----------
Cash and equivalents, end of period $ 1,115,151 $ 2,457,213
============ ===========
Cash Paid During the Period - interest $ 509,390 $ 1,069,096
- income taxes $ 3,242,773 $ 2,474,702
See accompanying notes.
4
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 the results of operations and consist of only normal recurring
adjustments. 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, 1998, 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 1998
annual report.
Note 2 - Common Stock and Per Share Information
Income per share is determined based on the weighted average number of shares
outstanding during each period. The numerator was the same for the calculation
of both basic and diluted earnings per share. The denominator was increased in
the diluted computation due to the recognition of stock options as common stock
equivalents.
Common stock is $2 par - shares authorized 6,000,000 of common stock and
4,000,000 of Class B common stock.
Note 3 - Inventories
Inventories are valued at the lower of FIFO (first-in, first-out) cost or
market. Inventories are summarized as follows:
Mar. 31, 1999 June 30, 1998
------------- -------------
Finished products $ 9,314,028 $ 7,369,923
Work in process 1,712,639 1,719,891
Raw materials 3,095,023 3,718,718
------------ -------------
Total $ 14,121,690 $ 12,808,532
============ =============
Note 4 - New Accounting Standards Not Yet Adopted
Statement of Accounting Standards (SFAS) No. 131, "Disclosures About Segments of
an Enterprise and Related Information" will be implemented by the Company for
the fiscal year ended June 30, 1999. The statement establishes standards for the
way that public enterprises report information about operating segments in
annual financial statements and requires reporting of selected information about
operating segments in interim financial statements issued to the public. It also
establishes standards for disclosures regarding products and services,
geographic areas and major customers. SFAS No. 131 defines operating segments as
components of an enterprise about which separate financial information is
available that is evaluated regularly by the chief operating decision maker in
deciding how to allocate resources and in assessing performance.
SFAS No. 132, "Employers' Disclosures About Pensions and Other Postretirement
Benefits" will be implemented by the Company for the fiscal year ended June 30,
1999. The statement revises existing disclosure requirements for pension and
other postretirement benefit plans. Its intent is to improve the
understandability of benefit disclosures, to eliminate certain requirements that
the Financial Accounting Standards Board believes are no longer necessary and to
standardize footnote disclosures.
The Company is currently evaluating the impact, if any, that SFAS No. 131 and
SFAS No. 132 may have on its financial statements.
5
Effective for fiscal years beginning after June 15, 1999, the Company must adopt
SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities".
The statement requires companies to recognize all derivative contracts as either
assets or liabilities in the balance sheet and to measure them at fair value.
Then based on certain conditions, it is determined whether the derivative is
considered to be a hedge instrument, which determines when the resulting gain or
loss on the derivative is recognized. Historically, the Company has not entered
into derivative contracts either to hedge existing risks or for speculative
purposes. Accordingly, the Company does not expect adoption of this new standard
to affect its financial statements.
Note 5 - Comprehensive Income
SFAS No. 130, "Reporting Comprehensive Income", issued in June 1997, was adopted
by the Company in the first quarter ended September 30, 1998. This statement
requires that all components of comprehensive income and total comprehensive
income be reported in one of the following: a statement of income and
comprehensive income, a statement of comprehensive income or a statement of
stockholders' equity. Comprehensive income is comprised of net income and all
changes to stockholders' equity, except those due to investments by owners and
distributions to owners.
Comprehensive income and its components consist of the following:
Nine Months Ended March 31, Three Months Ended March 31,
1999 1998 1999 1998
---- ---- ---- ----
Net income $ 5,112,271 $ 2,062,136 $ 1,565,117 $ (2,331,461)
Other comprehensive income:
Foreign currency translation adjustment (116,466) 1,345,978 40,987 1,719,348
Minimum SERP liability adjustment (447,714) - (525) -
------------ ------------ ------------ ------------
Comprehensive income $ 4,548,091 $ 3,408,114 $ 1,605,579 $ ( 612,113)
============ ============ ============ ============
Note 6 - Sale of The Hirsh Company
On September 1, 1998, the Company sold The Hirsh Company (Hirsh), a wholly-owned
subsidiary. This resulted in a pre-tax loss of $11,800,000, which was included
in the June 30, 1998, financial results. The loss included the write-off of the
unamortized balance of goodwill recorded in connection with the purchase of
Hirsh. In connection with the sale, the Company recognized an additional tax
cost of $1,000,000, resulting in a total loss related to the sale of Hirsh of
$12,800,000.
Note 7 - Stock Repurchase
On September 1, 1998, the Company announced its intention to purchase up to
1,200,000 shares of the Company's common stock pursuant to a Dutch Auction
self-tender offer at a price range of $19 to $22 per share. The Board of
Directors also approved the purchase in the open market or in privately
negotiated transactions, following the completion of the Dutch Auction, of
shares of common stock in an amount which when added to the number of shares of
common stock purchased in the Dutch Auction would equal 1,350,000. The Dutch
Auction was concluded on October 7, 1998, with the purchase of 1,230,784 shares
at a price of $21 per share.
At the January 22, 1999 Board of Directors meeting, the Board approved another
400,000 shares for the stock repurchase program. Utilizing both of the Board
authorizations, the Company has purchased an additional 287,354 shares through
the third quarter of fiscal 1999 for approximately $4.9 million with the price
per share ranging from approximately $14.63 to $18.75.
Note 8 - Impairment Loss
During the second quarter of fiscal 1999, the Company decided to re-deploy
certain drawer slide production assets to product lines considered to have
higher growth potential. This resulted in the write-down of the tooling ($.6
million pre-tax) and excess inventory ($.4 million pre-tax, charged directly to
cost of sales) related to the discontinued product lines.
6
KNAPE & VOGT MANUFACTURING COMPANY AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Certain matters discussed in this section include forward-looking statements
involving risks and uncertainties. When used in this document, the words
"believes," "expects," "anticipates," "goal," "think," "forecast," "project,"
and similar expressions identify forward-looking statements. Forward-looking
statements include, but are not limited to, statements concerning future revenue
growth, and the expected ability of the Company and its key customers, dealers
and suppliers to successfully manage Year 2000 issues. Such statements are
subject to certain risks and uncertainties which would cause actual results to
differ materially from those expressed or implied by such forward-looking
statements. Readers are cautioned not to place undue reliance on those
forward-looking statements which speak only as of the date of this report.
RESULTS OF OPERATIONS
Net Sales
The following table indicates the Company's sales (in millions) and percentage
of total sales by product category for the nine month and three month periods
ended March 31, 1999 and 1998:
Nine Months Ended March 31, Three Months Ended March 31,
1999 1998 1999 1998
---- ---- ---- ----
Shelving systems $44.2 38.0% $64.4 47.1% $12.8 35.4% $23.3 47.1%
Drawer slides 53.9 46.5% 50.9 37.2% 17.7 49.1% 19.0 38.4%
Hardware 18.0 15.5% 21.5 15.7% 5.5 15.5% 7.2 14.5%
------ ------ ------ ------ ----- ------ ----- ------
Total $116.1 100.0% $136.8 100.0% $36.0 100.0% $49.5 100.0%
====== ====== ====== ====== ===== ====== ===== ======
Net sales for the third quarter and first nine months of fiscal 1999 decreased
$13.4 million and $20.7 million, respectively, from the same periods in the
prior year. One of the primary reasons for the decline in net sales in both the
third quarter and the first nine months ended March 31, 1999, was the sale of
The Hirsh Company in September 1998. This was also the reason for the decline in
the sales of shelving systems. Excluding the contribution of the Hirsh sales,
sales for the nine month period increased by approximately one percent, while
sales for the third quarter decreased 8.7 percent.
The remaining decline in net sales in the third quarter of fiscal 1999 was
attributable to three factors. First, the Company's retail and OEM customers
were negatively impacted by the harsh winter weather in January 1999 resulting
in lower sales to them. Second, and more importantly, the soft demand in the
office furniture market in early calendar 1999 led to lower-than-expected sales
volume to those customers. Finally, in the second quarter of fiscal 1999, faced
with growing competition from the Asian markets, the Company announced its plans
to re-deploy certain drawer slide production assets to drawer slide lines with
greater growth potential. This has initially resulted in lower, but more
profitable sales volume from those redeployed assets.
Gross Profit
Gross profit, as a percentage of net sales, was 24.8% for the third quarter and
23.7% for the nine months ended March 31, 1999, compared to 23.4% and 24.3%,
respectively, for the same periods in the prior year. The gross profit
improvement realized in the third quarter of fiscal 1999 reflects the Company's
restructuring efforts, including a focus on its manufacturing process, the sale
of The Hirsh Company, and its continued evaluation of customer and product line
profitability. The decrease in gross profit for the first nine months of fiscal
1999 was primarily attributable to the reserve of $400,000 recorded in the
second quarter of fiscal 1999 for potentially obsolete inventory related to
certain drawer slide lines that the Company had decided to discontinue.
7
KNAPE & VOGT MANUFACTURING COMPANY AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
Operating Expenses
Selling and administrative expenses, as a percentage of net sales, for the third
quarter of fiscal 1999 increased from 15.6% in the same period in the prior year
to 17.4%. For the nine month period ended March 31, 1999, selling and general
administrative expenses, as a percentage of net sales, were 16.5% compared to
15.9% in the prior year. During the third quarter of fiscal 1999, management
successfully lowered the total dollars spent in selling, general and
administrative expenses as compared to the prior year excluding Hirsh. The
increase, as a percentage of net sales, for the first nine months was primarily
attributable to severance payments and costs associated with the Company's
strategic planning effort. The increase on a quarter to quarter basis, as a
percentage of net sales, was due to the lower sales volume in the third quarter
of fiscal 1999.
As a result of the decision to re-deploy certain production assets, the Company
also recorded an impairment loss of $600,000 in the second quarter of fiscal
1999. This loss reflected the write-down of the related tooling assets to their
estimated fair value.
A restructuring charge of $3,992,276 was recorded in the third quarter of fiscal
1998 for Knape & Vogt Canada. Knape & Vogt announced in March 1998, its plans to
reorganize its Canadian operation, including the sale of the Company's
manufacturing facility and equipment in the Toronto area. Included in the
restructuring charge was a reduction of the foreign currency translation
adjustment account of $1,605,305. The Company continues to sell and distribute
its products in Canada and to maintain a sales office in the Toronto area. The
after-tax effect of the restructuring in the third quarter of fiscal 1998 was a
loss of $3,392,276 or $.57 per diluted share.
Other Expenses/(Income)
Interest expense was $228,013 for the quarter and $533,791 for the nine months
ended March 31, 1999, compared to $298,941 and $1,016,053, respectively, for the
same periods in the prior year. The decrease in interest expense was
attributable to the fact that the Company has reduced its average borrowing
level during fiscal 1999.
Other miscellaneous expense/(income) was $9,700 for the third quarter and
$(626,805) for the first nine months of fiscal 1999. This compares to other
expense of $36,317 and $65,609, respectively, for fiscal 1998. The income
recognized in fiscal 1999 reflects interest income received on Michigan Single
Business tax refunds and two patent infringement settlements.
Income Taxes
The effective tax rates for the quarter and nine months ended March 31, 1999,
were 35.6% and 34.5% compared with the rates of 118.4% and 47.5%, respectively,
for the same periods in the prior year. The prior year rates were higher due to
a possible restriction on fully utilizing the net operating losses generated in
Canada and the write-off of the cumulative foreign currency translation
adjustment for which there was no expected tax benefit, thereby reducing the tax
benefit recognized on the restructurin loss recorded for Knape & Vogt Canada.
Income from Continuing Operations
Income from continuing operations was $1,565,117 for the third quarter and
$5,112,271 for the first nine months of 1999. This compares to ($1,056,822) and
$3,430,414, respectively, for the same periods in the prior year. The prior year
results for both the third quarter and the first nine months included an
after-tax restructuring charge for Knape & Vogt Canada, which reduced income
from continuing operations by $3,392,276 or $.57 per diluted share.
8
KNAPE & VOGT MANUFACTURING COMPANY AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
Loss from Discontinued Operation
The third quarter and first nine months of fiscal 1999 do not include any
income, or loss, recorded on discontinued operation, due to the fact that the
discontinued operation, Roll-it, was sold in fiscal 1998. Loss from discontinued
operation for the third quarter of fiscal 1998 was $1,274,639 or $.22 per
diluted share and for the first nine months of fiscal 1998 was $1,368,278 or
$.23 per diluted share. Included in the fiscal 1998 loss from discontinued
operation is a third quarter fiscal 1998 loss of $937,268, or $.16 per diluted
share, which represents the difference between the original estimate and the
actual loss from the decision to sell Roll-it.
Net Income
For the quarter ended March 31, 1999, net income was $1,565,117 or $.34 per
diluted share compared to a net loss of $2,331,461 or $.39 per diluted share for
the third quarter of last year. Net income of $5,112,271, or $.99 per diluted
share was recorded for the first nine months of fiscal 1999 compared to
$2,062,136, or $.35 for the same period in the prior year. The prior year
results included an after-tax charge of $3,392,276 or $.57 per diluted share for
the restructuring of the Canadian operations. Additionally, as discussed in the
discontinued operation section, both the third quarter and the first nine months
of fiscal 1998 were reduced by the loss on the sale of Roll-it.
After adjusting the prior year results for the restructuring charge and for the
loss from the discontinued operation, the decline in fiscal 1999 net income for
the third quarter compared to fiscal 1998 was primarily attributable to the
lower sales volume in the third quarter of the current year. For the nine month
period, the decline reflects the lower sales volume combined with the second
quarter after-tax charge of $.7 million recorded for the write-off of tooling
assets and excess inventory associate with the redeployment of certain drawer
slide product lines.
Liquidity and Capital Resources
Net cash from operating activities for the first nine months provided $8,081,437
as compared to $15,882,078 for the first nine months of fiscal 1998. In fiscal
1999, the cash flows from the change in accounts payable and other accrued
liabilities are substantially lower than at June 30, 1998, due to two factors.
First, in the prior year, the Company adopted a more aggressive payment policy
with its vendors which resulted in a higher accounts payable balance and a
significant one-time increase in cash flows. Second, even though the Company is
still utilizing the more aggressive payment policy with its vendors, payables
have decreased in fiscal 1999 due to the sale of The Hirsh Company.
Capital expenditures totaled $3,066,746 for the nine months ended March 31,
1999, compared to $3,548,463 for the nine months ended March 31, 1998. The
Company expects capital expenditures for the remainder of fiscal 1999 to
continue at a level similar to the first nine months. There were no significant
capital expenditure commitments existing at March 31, 1999. In fiscal 1999, the
Company recorded $18,129,569 of proceeds from the sale of the Hirsh subsidiary.
The related loss was recorded in fiscal 1998.
In early October 1998, the Company completed the Dutch Auction tender offer with
the repurchase of 1,230,784 shares of stock at $21 per share. Through the end of
the third quarter of fiscal 1999, the Company repurchased another 287,354 shares
on the open market. In total through March 31, 1999, the Company has spent $31.3
million for share repurchases and has another 231,862 shares remaining for
repurchase as authorized by the Board of Directors.
The Company has been able to successfully fund these repurchases while still
maintaining a long-term debt balance of $18.0 million at March 31, 1999. This
compares to a long-term debt balance of $17.4 million one year ago and $9.7
million at June 30, 1998. Most of the repurchases and dividends have been funded
by cash flows from operations and the cash received from the sale of The Hirsh
Company. The increase from the June 30, 1998 balance reflects amounts borrowed
to fund the Dutch Auction tender offer.
9
KNAPE & VOGT MANUFACTURING COMPANY AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
On September 30, 1998, the Company announced that beginning in the third quarter
of fiscal 1999, it intended to convert quarterly cash dividends to quarterly
stock dividends coupled with a plan to facilitate shareholder sales of the stock
dividends. At the January 22, 1999 meeting, the Board deferred a decision on
whether to authorize the replacement of the quarterly cash dividends with
quarterly stock dividends until fiscal 2000. The Board intends to further
evaluate the potential benefits of quarterly stock dividends before proceeding
and would request that the Company's shareholders decide the matter.
Anticipated cash flow from operations and available balances on the revolving
credit line will be utilized to fund working capital, capital expenditures and
dividend payments.
Year 2000
The Year 2000 issue is the result of computer systems that use two digits rather
than four to define the applicable year, which may prevent such systems from
accurately processing dates ending in the year 2000 and after. This could result
in system failures or in miscalculations, causing disruption of operations,
including, but not limited to, an inability to process transactions, to send and
receive electronic data, or to engage in routine business activities and
operations.
In 1995, the Company established a Year 2000 task force for Information
Technology ("IT") to develop and implement a Year 2000 readiness program. The
Company has developed a Year 2000 readiness plan, and has completed the audit,
assessment and scope phases of its plan. The Company has completed an inventory
of the software applications that it uses. The Company has also installed its
Corporate Information System software at its subsidiaries to improve efficiency
and to facilitate Year 2000 compliance. The Company estimates that the readiness
program phase is approximately 82% complete for the Company's IT systems. The
Company's readiness program includes installing software releases designed to
cause the software to be Year 2000 compliant. The Company is in the process of
testing its IT systems for Year 2000 compliance, and expects testing activities
to continue through June 1999. The Company hit its goal to be substantially Year
2000 compliant by December 1998, to allow for testing all systems during 1999.
In addition, in 1997 the Company began evaluating non-IT systems such as
imbedded chips in production equipment and personal computer hardware and
software. With respect to these non-IT systems, the Company has completed the
audit phase, and the assessment and scope phases are approximately 70% complete.
The Company is presently in the process of testing and implementation, and is
upgrading its non-IT systems to become Year 2000 compliant. The Company's goal
is to complete the remediation of non-IT systems by June 30, 1999.
In addition, to reviewing its internal systems, the Company has had formal
communications with its significant customers, vendors and freight companies
concerning Year 2000 compliance, including electronic commerce. There can be no
assurance that the systems of other companies that interact with the Company
will be sufficiently Year 2000 compliant so as to avoid an adverse impact on the
Company's operations, financial condition and results of operations. The Company
does not believe that its products an services involve any Year 2000 risks.
The Company does not presently anticipate that the costs to address the Year
2000 issue will have a material adverse effect on the Company's financial
condition, results of operations or liquidity. To date, the Company has spent
approximately $885,000 on the Year 2000 issue and expects to spend an additional
$112,000 to complete this work.
The Company presently anticipates that it will complete its Year 2000 assessment
and remediation by December 31, 1999. However, there can be no assurance that
the Company will be successful in implementing its Year 2000 remediation plan
according to the anticipated schedule. In addition, the Company may be adversely
affected by the inability of other companies whose systems interact with the
Company to become Year 2000 compliant and by potential interruptions of utility,
communication or transportation systems as a result of Year 2000 issues.
Although the Company expects its internal systems to be Year 2000 compliant as
described above, the Company intends to prepare a contingency plan that will
specify what it plans to do if it or important external companies are not Year
2000 compliant in a timely manner. The Company is preparing contingency plans
during the fourth quarter of fiscal 1999.
10
KNAPE & VOGT MANUFACTURING COMPANY AND SUBSIDIARIES
QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK
The Company is exposed to market risks, which include changes in U.S. interest
rates and changes in foreign currency exchange rates as measured against the
U.S. dollar.
Interest Rate Risk -- The interest payable for the Company's revolving credit
agreement is principally between 40 and 50 basis points above the federal funds
rate and therefore affected by changes in market interest rates. A hypothetical
increase or decrease of 2% in interest rates would not have a material impact on
the Company's financial condition or results of operations.
Foreign Currency Risk -- The Company has a sales office located in Canada. Sales
are typically denominated in Canadian dollars, thereby creating exposures to
changes in exchange rates. The changes in the Canadian/U.S. exchange rate may
positively or negatively affect the Company's sales, gross margins, and retained
earnings. The Company attempts to minimize currency exposure risk through
working capital management. There can be no assurance that such an approach will
be successful, especially in the event of a significant and sudden decline in
the value of the Canadian dollar. The Company does not hedge against foreign
currency risk.
11
KNAPE & VOGT MANUFACTURING COMPANY AND SUBSIDIARIES
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
See Exhibit Index
(b) Reports on Form 8-K
There were no reports on Form 8-K filed for the three months
ended March 31, 1999.
12
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 7, 1999 /s/ Allan E. Perry
Allan E. Perry
President and
Chief Executive Officer
Date: May 7, 1999 /s/ Jack D. Poindexter
Jack D. Poindexter
Chief Financial Officer,
Treasurer and Secretary
13
EXHIBIT INDEX
3.1 Bylaws of Knape & Vogt Manufacturing Company as amended April 23, 1999.
(27) Financial Data Schedule
14
EXHIBIT 3.1
ADOPTED: APRIL 23, 1999
AMENDED AND RESTATED B Y L A W S
OF
KNAPE & VOGT MANUFACTURING COMPANY
A Michigan corporation
ARTICLE I
OFFICES
1.1 Registered Office. The registered office of the corporation shall be
located at the address specified in the Articles of Incorporation or at such
other place as may be determined by the Board of Directors if notice thereof is
filed with the State of Michigan.
1.2 Other Offices. The business of the corporation may be transacted at
such locations other than the registered office, within or outside the State of
Michigan, as the Board of Directors may from time to time determine or as the
business of the corporation may require.
ARTICLE II
CAPITAL SHARES
2.1 Share Certificates. Certificates representing shares of the corporation
shall be in such form as is approved by the Board of Directors. Certificates
shall be signed in the name of the corporation by the Chairman of the Board of
Directors, the President or a Vice President, and by the Treasurer or Secretary
of the corporation, and shall be sealed with the seal of the corporation if one
is adopted. If an officer who has signed a certificate ceases to be such officer
before the certificate is issued, it may be issued by the corporation with the
same effect as if he or she were such officer at the date of issue. The Board of
Directors may authorize the issuance of some or all of the shares of any or all
classes or series without certificates. Any such authorization shall not affect
shares already represented by certificates until the certificates are
surrendered. Within a reasonable time after the issuance or transfer of shares
without certificates, the corporation shall send or cause to be sent to the
shareholder a written statement including the following information: (a) the
corporation is formed under the laws of the State of Michigan, (b) the name of
the person to whom the shares have been issued, (c) the number and class of
shares, and the designation of the series, if any, issued, and (d) a statement
that the corporation will furnish to the shareholder upon request and without
charge a full statement of the designation, relative rights, preferences, and
limitations of the shares of each class authorized to be issued, and if the
corporation is authorized to issue any class of shares in series, the
designation, relative rights, preferences, and limitations of each series so far
as the same have been prescribed and the authority of the Board to designate and
prescribe the relative rights, preferences, and limitations of other series. If
applicable, the statement shall also set forth any restriction on transfer or
registration of transfer of the shares issued.
2.2 Replacement of Lost or Destroyed Certificates. If a share certificate
is lost or destroyed, no new certificate shall be issued in place thereof until
the corporation has received such assurances, representations, warranties, or
guarantees from the registered holder as the Board of Directors, in its sole
discretion, deems advisable and until the corporation receives such
indemnification against any claim that may be made on account of the lost or
destroyed certificate, or the issuance of any new certificate in place thereof,
including an indemnity bond in such amount and with such sureties, if any, as
the Board of Directors, in its sole discretion, deems advisable. Any new
certificate issued in place of any lost or destroyed certificate shall be
plainly marked "duplicate" upon its face.
2.3 Transfer of Shares; Shareholder Records. The Board of Directors may
appoint a transfer agent or a registrar of transfer and, upon such appointment,
capital shares of the corporation shall be transferable only upon the books of
the transfer agent or registrar of transfer. The old certificates shall be
surrendered by delivery to the transfer agent or registrar, properly endorsed
for transfer, and the old certificates shall be canceled before a new
certificate is issued. The signatures of the officers required by Section 2.1
hereof and the corporate seal, if any, may be facsimiles if the certificate is
countersigned by a transfer agent or registered by a registrar other than the
corporation itself or its employees. If an officer whose facsimile signature has
been placed upon a certificate ceases to be such officer before the certificate
is issued, it may be issued by the corporation with the same effect as if he or
she were such officer at the date of issue. The transfer agent or the registrar
of transfer shall keep records containing the names and addresses of all
shareholders, the number, class, and series of shares held by each, and the
dates when they respectively became holders of record thereof. The corporation
shall be entitled to treat the person in whose name any share, right, or option
is registered as the owner thereof for all purposes and shall not be bound to
recognize any equitable or other claim, regardless of any notice thereof, except
as may be specifically required by the laws of the State of Michigan.
2.4 Rules Governing Share Certificates. Subject to Article III of the
Articles of Incorporation, the Board of Directors shall have the power and
authority to make such rules and regulations as they may deem expedient
concerning the issue, transfer, and registration of share certificates.
2.5 Record Date for Share Rights. The Board of Directors may fix in advance
a date not exceeding sixty (60) days preceding the date of payment of any
dividend or other distribution, or the date for the allotment of rights, or the
date when any change or conversion or exchange of capital shares shall go into
effect, as a record date for the determination of the shareholders entitled to
receive payment of any such dividend or other distribution, or any such
allotment of rights, or to exercise rights with respect to any such change,
conversion, or exchange of capital shares and, in such case, only shareholders
of record on the date so fixed shall be entitled to receive payment of such
dividend or other distribution, or allotment of rights, or exercise such rights,
as the case may be, notwithstanding the transfer of any shares on the books of
the corporation after such record date. If the Board of Directors shall fail to
fix a record date, the record date for the purposes specified herein shall be
the close of business on the date on which the resolution of the Board of
Directors relating thereto is adopted.
-2-
2.6 Dividends. The Board of Directors, in its discretion, may from time to
time declare and direct payment of dividends or other distributions upon the
corporation's outstanding shares out of funds legally available for such
purposes, which dividends may be paid in cash, the corporation's bonds, or the
corporation's property, including the shares or bonds of other corporations. In
the event a dividend is paid or any other distribution made, in any part, from
sources other than earned surplus, payment, or distribution thereof shall be
accompanied by written notice to the shareholders: (a) disclosing the amounts by
which the dividend or distribution affects stated capital, capital surplus, and
earned surplus; or (b) if such amounts are not determinable at the time of the
notice, disclosing the approximate effect of the dividend or distribution upon
stated capital, capital surplus, and earned surplus and stating that the amounts
are not yet determinable.
In addition to the declaration of dividends or other distributions provided
in the preceding paragraph of this Section 2.6, the Board of Directors, in its
discretion, may from time to time declare and direct payment of a dividend in
shares of this corporation, upon its outstanding shares, in accordance with and
subject to the provisions of the Articles of Incorporation and the Business
Corporation Act of Michigan. A share dividend or other distribution of shares of
the corporation shall be accompanied by a written notice to shareholders: (a)
disclosing the amounts by which the distribution affects stated capital, capital
surplus, and earned surplus; or (b) if such amounts are not determinable at the
time of the notice, disclosing the approximate effect of the distribution upon
stated capital, capital surplus, and earned surplus and stating that the amounts
are not yet determinable.
ARTICLE III
SHAREHOLDERS
3.1 Place of Meetings. Meetings of shareholders shall be held at the
registered office of the corporation or at such other place, within or outside
the State of Michigan, as may be determined from time to time by the Board of
Directors; provided, however, that if a shareholders meeting is to be held at a
place other than the registered office, the notice of the meeting shall
designate such place.
3.2 Annual Meeting. Annual meetings of shareholders for election of
directors and for such other business as may come before the meeting shall be
held on the third Friday of October in each year, but if such day is a legal
holiday, then the meeting shall be held on the first business day following, at
such time as may be fixed by the Board of Directors, or at such other date and
time within the four (4) months next succeeding the end of the corporation's
fiscal year as may be designated by the Board of Directors and stated in the
notice of the meeting. If the annual meeting
-3-
is not held on the date specified, the Board of Directors shall cause the
meeting to be held as soon thereafter as convenient.
3.3 Special Meetings. Special meetings of shareholders may be called by the
Chairman of the Board, the President, or the Secretary and shall be called by
one of them pursuant to resolution therefor by the Board of Directors.
3.4 Record Date for Notice and Vote. The Board of Directors may fix in
advance a date not more than sixty (60) nor less than ten (10) days before the
date of a shareholders meeting as the record date for the purpose of determining
shareholders entitled to notice of and to vote at the meeting or adjournments
thereof or to express consent or to dissent from a proposal without a meeting.
If the Board of Directors fails to fix a record date as provided in this Section
3.4, the record date for determination of shareholders entitled to notice of or
to vote at a shareholders meeting shall be the close of business on the day on
which notice is given or, if no notice is given, the day next preceding the day
on which the meeting is held, and the record date for determining shareholders
entitled to express consent or to dissent from a proposal without a meeting
shall be the close of business on the day on which the resolution of the Board
of Directors relating to the proposal is adopted.
3.5 Notice of Meetings. Written notice of the time, place, and purpose of
any shareholders meeting shall be given to shareholders entitled to vote thereat
not less than ten (10) nor more than sixty (60) days before the date of the
meeting; provided, however, that not less than twenty (20) days notice shall be
given if a plan of merger or consolidation or a sale, lease, exchange, or other
disposition of all, or substantially all, the property and assets, with or
without the goodwill, of the corporation, if not in the usual and regular course
of its business as conducted by the corporation, is to be submitted for approval
at a shareholders meeting. Such notice may be given either by delivery in person
to shareholders or by mailing such notice to shareholders at their addresses as
the same appear in the records of the corporation; provided, however, that
attendance of a person at a shareholders meeting, in person or by proxy,
constitutes a waiver of notice of the meeting, except when the shareholder
attends the meeting for the express purpose of objecting, at the beginning of
the meeting, to the transaction of any business because the meeting is not
lawfully called or convened.
3.6 Voting Lists. The corporation's officer or the agent having charge of
its share transfer books shall prepare and certify a complete list of the
shareholders entitled to vote at a shareholders meeting or any adjournment
thereof, which list shall be arranged alphabetically within each class and
series and shall show the address of, and number of shares held by, each
shareholder. The list shall be produced at the time and place of the
shareholders meeting and be subject to inspection, but not copying, by any
shareholder at any time during the meeting for the purpose of determining who is
entitled to vote at the meeting. If for any reason the requirements with respect
to the shareholder list specified in this Section 3.6 have not been complied
with, any shareholder, either in person or by proxy, who in good faith
challenges the existence of sufficient votes to carry any action at the meeting,
may demand that the meeting be adjourned and the same shall be adjourned until
the
-4-
requirements are complied with; provided, however, that failure to comply with
such requirements does not affect the validity of any action taken at the
meeting before such demand is made.
3.7 Voting. Except as may be otherwise provided in the Articles of
Incorporation, each shareholder entitled to vote at a shareholders meeting, or
to express consent or dissent without a meeting, shall be entitled to one vote,
in person or by written proxy, for each share entitled to vote held by such
shareholder; provided, however, that no proxy shall be voted after three (3)
years from its date unless the proxy provides for a longer period. A vote may be
cast either orally or in writing as announced or directed by the person
presiding at the meeting prior to the taking of the vote. When an action other
than the election of directors is to be taken by vote of the shareholders, it
shall be authorized by a majority of the votes cast by the holders of shares
entitled to vote thereon, unless a greater plurality is required by the express
provisions of the Michigan Business Corporation Act or the Articles of
Incorporation. Except as otherwise expressly required by the Articles of
Incorporation, directors shall be elected by a plurality of the votes cast at an
election.
3.8 Quorum. Except as may be otherwise provided in the Articles of
Incorporation, issued and outstanding shares entitled to cast a majority of the
votes at a meeting, excluding treasury shares, represented in person or by
proxy, shall constitute a quorum at a meeting. Where holders of a class or
series of shares are entitled to vote separately on an item of business, a
quorum shall be present for that item if issued and outstanding shares of that
class or series entitled to cast a majority of votes on the item are represented
in person or by proxy, excluding treasury shares. Meetings at which less than a
quorum is represented may be adjourned by a vote of a majority of the shares
present to a future date without further notice other than the announcement at
such meeting and, when a quorum shall be present upon such adjourned date, any
business may be transacted which might have been transacted at the meeting as
originally called. Shareholders present in person or by proxy at any
shareholders meeting may continue to do business until adjournment,
notwithstanding the withdrawal of shareholders to leave less than a quorum.
3.9 Conduct of Meetings. The officer who is to preside at meetings of
shareholders pursuant to Article V of these Bylaws, or his or her designee,
shall determine the agenda and the order in which business shall be conducted
unless the agenda and the order of business have been fixed by the Board of
Directors. Such officer or designee shall call meetings of shareholders to order
and shall preside unless otherwise determined by the affirmative note of a
majority of all the noting shares of the corporation issued and outstanding,
other than treasury shares. The secretary to the Board of Directors, if one is
appointed, shall act as secretary of all meetings of shareholders. In the
absence of the secretary to the Board of Directors or his or her inability to
act as secretary, or if a secretary to the Board of Directors has not been
appointed, the secretary of the corporation shall act as secretary of all
meetings of shareholders, but in the absence of the secretary at any
shareholders meeting, or his or her inability or refusal to act as secretary,
the presiding officer may appoint any person to act as secretary of the meeting.
3.10 Inspector of Elections. The Board of Directors may, in advance of a
shareholders meeting, appoint one or more inspectors to act at the meeting or
any adjournment thereof. In the event inspectors are not so appointed, or an
appointed inspector fails to appear or act, the person
-5-
presiding at the shareholders meeting may, and on request of a shareholder
entitled to vote thereat, shall, appoint one or more persons to fill such
vacancy or vacancies or to act as inspector. The inspectors shall determine the
number of shares outstanding and the voting power of each, the shares
represented at the meeting, the existence of a quorum, the validity and effect
of proxies, and shall receive votes, ballots, or consents, hear and determine
challenges and questions arising in connection with the right to vote, count,
and tabulate votes, ballots, or consents, determine the results, and do such
acts as are proper to conduct the election or vote with fairness to all
shareholders.
3.11 Action by Shareholders Without a Meeting. Any action which is required
to be taken or which may be taken at any annual or special shareholders meeting
may be taken without a meeting, without prior notice, and without a vote if all
of the shareholders entitled to vote thereon consent thereto in writing.
ARTICLE IV
DIRECTORS
4.1 Board of Directors. Except as may otherwise be provided in the Articles
of Incorporation or these Bylaws, the business and affairs of the corporation
shall be managed by a Board of Directors. The Board of Directors shall consist
of nine (9) members or such other number as may be specified in compliance with
Article VII of the Articles of Incorporation. Commencing with the annual meeting
of shareholders to be held in 1985, the Board of Directors shall be divided into
three (3) classes as provided in Article VII of the Articles of Incorporation to
be elected in accordance with that Article and Article III of the Articles of
Incorporation. Directors shall serve until their respective terms expire and
their successors are elected and qualified or until their earlier resignation or
removal. Directors of the corporation need not be shareholders.
4.2 Resignation and Removal. A director may resign by written notice to the
corporation, which resignation is effective upon its receipt by the corporation
or at a subsequent time as set forth in the notice. Any director or the entire
Board of Directors may be removed in the manner specified in Article VII of the
Articles of Incorporation.
4.3 Vacancies and Increase in Number. Vacancies on the Board of Directors
occurring for any reason, including an increase in the number of directors, may
be filled in the manner specified in Article VII of the Articles of
Incorporation. A director chosen to fill a vacancy occurring for any reason,
including an increase in the number of directors, shall hold office until the
next election of directors by the shareholder or until his or her earlier
resignation or removal.
4.4 Place of Meetings and Records. The directors shall hold their meetings
and maintain the minutes of the proceedings of meetings of shareholders, the
Board of Directors, and committees of the Board of Directors, if any, and keep
the books and records of account for the corporation in such place or places,
within or outside the State of Michigan, as the Board of Directors may from time
to time determine.
-6-
4.5 Annual Meetings. The annual meeting of the Board of Directors shall be
held, without notice other than this Section 4.5, at the same place and
immediately after the annual shareholders meeting. If such meeting is not so
held, whether because a quorum is not present or for any other reason, or if the
directors were elected by written consent without a meeting, the annual meeting
of the Board of Directors shall be called in the same manner as hereinafter
provided for special meetings of the Board of Directors.
4.6 Regular Meetings. Regular meetings of the Board of Directors may be
held without notice at such time and place as shall from time to time be
determined by the Board. Any notice given of a regular meeting need not specify
the business to be transacted or the purpose of the meeting.
4.7 Special Meetings. Special meetings of the Board of Directors may be
called by the Chairman of the Board, the president or the secretary and shall be
called by one of them on the written request of any five (5) directors, upon at
least two (2) days written notice to each director, or twenty-four (24) hours
notice, given personally or by telephone or telegram or facsimile or electronic
mail. The notice does not need to specify the business to be transacted or the
purpose of the special meeting. Attendance of a director at a special meeting
constitutes a waiver of notice of the meeting, except where a director attends
the meeting for the express purpose of objecting at the beginning of the meeting
to the transaction of any business because the meeting is not lawfully called or
convened.
4.8 Quorum and Vote. A majority of the members of the Board then in office
constitutes a quorum for the transaction of business and the vote of a majority
of the members present at any meeting at which a quorum is present constitutes
the action of the Board of Directors, unless the vote of a larger number is
specifically required by the Articles of Incorporation or these Bylaws. If a
quorum is not present, the members present may adjourn the meeting from time to
time and to another place, without notice other than announcement at the
meeting, until a quorum is present.
4.9 Action Without a Meeting. Any action required or permitted to be taken
pursuant to authorization voted at a meeting of the Board of Directors, or any
committee thereof, may be taken without a meeting if, before or after the
action, all members of the Board of Directors, or such committee, consent
thereto in writing. The written consent shall be filed with the minutes of the
proceedings of the Board of Directors or committee and the consent shall have
the same effect as a vote of the Board of Directors or committee for all
purposes.
4.10 Report to Shareholders. The Board of Directors shall cause a financial
report of the corporation for the preceding fiscal year to be made and
distributed to each shareholder within four months after the end of each fiscal
year. The report shall include the corporation's statement of income, its
year-end balance sheet, and, if prepared by the corporation, its statement of
source and application of funds.
4.11 Corporate Seal. The Board of Directors may authorize a suitable
corporate seal, which seal shall be kept in the custody of the Secretary and
used by the Secretary.
-7-
4.12 Compensation of Directors. By resolution of the Board of Directors,
the directors may be paid their expenses, if any, of attendance at meetings of
the Board or of any committee of which they are a member. In addition thereto or
in lieu thereof, as determined by resolution of the Board of Directors, a
director may be paid a fixed sum for attendance at each meeting of the Board, or
of a committee thereof, or may be paid a stated salary for serving as a director
as well as an additional stated salary for serving on any committee of the
Board.
4.13 Committees. The Board of Directors may, by resolution passed by a
majority of the whole Board, designate an executive committee consisting of one
or more of the directors of the corporation. At all meetings of the executive
committee, a majority of the members of the committee shall constitute a quorum
and the act of a majority of the members present at any executive committee
meeting at which there is a quorum present shall be the act of the executive
committee. The executive committee, to the extent provided in said resolution or
in these Bylaws, shall have and may exercise the powers of the Board of
Directors in the management of the business and affairs of the corporation and
may authorize the seal of the corporation to be affixed to all papers which may
require it. The Board may designate one or more other committees which shall
have such powers and duties as may be determined by the Board. All committees
shall keep regular minutes of their proceedings and report to the Board when
required. No committee shall have the power or authority to amend the Articles
of Incorporation, adopt an agreement of merger or consolidation, recommend to
the shareholders the sale, lease, or exchange of all or substantially all of the
corporation's property and assets, recommend to the shareholders a dissolution
of the corporation or a revocation of a dissolution, fill vacancies in the Board
of Directors, fix compensation of the directors for serving on the Board or on a
committee, amend these Bylaws, or declare a dividend or authorize the issuance
of shares, unless the power to declare a dividend or to authorize the issuance
of shares is granted to such committee by specific resolution of the Board of
Directors.
4.14 Meeting Participation by Use of Communication Equipment. Members of
the Board of Directors, or of any committee designated by the Board, may
participate in a meeting of the Board or committee, as the case may be, by using
a conference telephone or similar communications equipment by means of which all
persons participating in the meeting can hear each other. Participation in a
meeting pursuant to this Section 4.14 shall constitute presence at the meeting.
ARTICLE V
OFFICERS
5.1 Officers. The officers of the corporation shall be a president, a
treasurer, and a secretary, all of whom shall be elected by the Board of
Directors. In addition, the Board of Directors may elect a chairman and one or
more vice presidents who shall also be officers of the corporation if elected.
Each officer shall hold office until his or her successor is elected and
qualified or until his or her earlier resignation or removal. None of the
officers of the corporation, other than the chairman, need be directors. The
officers shall be elected at the first meeting of the Board of Directors after
each annual shareholders meeting. Any two (2) or more offices may be held by the
same person, but an officer shall not execute, acknowledge, or verify any
instrument in more than
-8-
one capacity if the instrument is required by law to be executed, acknowledged,
or verified by two (2) or more officers.
5.2 Other Officers and Agents. The Board of Directors may appoint such
other officers and agents as it may deem advisable, who shall hold their offices
for such terms and shall exercise such powers and perform such duties as shall
be determined from time to time by the Board of Directors. The Board may, by
specific resolution, empower the chairman, the president, or the executive
committee, if such a committee has been designated by the Board, to appoint such
subordinate officers or agents and to determine their powers and duties.
5.3 Removal. The chairman, president, any vice president, secretary, and
treasurer may be removed at any time, with or without cause, but only by the
affirmative vote of a majority of the whole Board of Directors. Any assistant
secretary or assistant treasurer, or subordinate officer or agent appointed
pursuant to Section 5.2, may be removed at any time, with or without cause, by
action of the Board of Directors or by the committee or officer, if any,
empowered to appoint such assistant secretary or assistant treasurer or
subordinate officer or agent.
5.4 Compensation of Officers. Compensation of officers for services
rendered to the corporation shall be established by the Board of Directors.
5.5 Chairman. The Chairman of the Board of Directors, if one be elected,
shall be elected by the directors from among the directors then serving. The
Chairman of the Board, or his or her designee, shall preside at all meetings of
the shareholders and at all meetings of the Board of Directors and shall perform
such other duties as may be determined by resolution of the Board of Directors
including, if the Board shall so determine, acting as the chief executive
officer of the corporation, in which case the Chairman shall have general
supervision, direction, and control of the business of the corporation and shall
have the general powers and duties of management usually vested in or incident
to the office of the chief executive officer of a corporation.
5.6 President. Unless the Board shall determine otherwise, the President
shall be the chief executive officer as well as the chief operating officer of
the corporation and shall have general supervision, direction, and control of
the business of the corporation as well as the duty and responsibility to
implement and accomplish the objectives of the corporation. In the absence or
nonelection of a chairman, the president shall preside at all meetings of
shareholders and at all meetings of the Board of Directors. The president shall
perform such other duties as may be assigned by the Board of Directors.
5.7 Vice Presidents. The vice presidents, in the order of their seniority,
unless otherwise determined by the Board of Directors, shall, in the event of
the absence or disability of the president, perform the duties and exercise the
powers of the president. Each vice president shall have such other power and
shall perform such other duties as may be assigned by the Board of Directors or
the chief executive officer and may be designated by such special titles as the
Board of Directors or the chief executive officer shall approve.
-9-
5.8 Treasurer. The treasurer shall have custody of the corporate funds and
securities and shall keep full and accurate account of receipts and
disbursements in books belonging to the corporation. The treasurer shall deposit
all money and other valuables in the name and to the credit of the corporation
in such depositories as may be selected by the Board of Directors. The treasurer
shall disburse the funds of the corporation as may be ordered by the Board of
Directors, or the chief executive officer, taking proper vouchers for such
disbursements. In general, the treasurer shall perform all duties incident to
the office of treasurer and such other duties as may be assigned by the Board of
Directors.
5.9 Secretary. The Secretary shall give or cause to be given notice of all
meetings of shareholders and directors and all other notices required by law or
by these Bylaws; provided, however, that in the case of the Secretary's absence,
or refusal or neglect to do so, any such notice may be given by any person so
directed by the Chief Executive Officer or by the directors, or by the
shareholders upon whose requisition the meeting is called, as provided in these
Bylaws. If the Board has not appointed a Secretary to the Board, the Secretary
shall record all the proceedings of meetings of shareholders and of the
directors in one or more books provided for the purpose. The Secretary shall
perform all other duties incident to the office of Secretary and such other
duties as may be assigned by the Board of Directors.
5.10 Assistant Treasurers and Assistant Secretaries. Assistant treasurers
and assistant secretaries, if any shall be appointed, shall have such powers and
shall perform such duties as shall be assigned to them by the Board of Directors
or by the officer or committee who shall have appointed such assistant treasurer
or assistant secretary.
5.11 Bonds. If the Board of Directors shall require, the treasurer, any
assistant treasurer, or any other officer or agent of the corporation shall give
bond to the corporation in such amount and with such surety as the Board of
Directors may deem sufficient, conditioned upon the faithful performance of his
or her respective duties and offices.
5.12 Secretary to the Board. The Board of Directors may also appoint a
Secretary to the Board of Directors who shall not be an executive officer of the
Corporation. The Secretary to the Board, if one is appointed, shall record all
the proceedings of the meetings of the shareholders and of the directors in one
or more books provided for that purpose. The Secretary to the Board shall also
attend, and record the proceedings of, such meetings of Committees of the Board
as may be requested, on a meeting by meeting basis, by the Chairman of the
Board, the President or the Chair of the Committee.
ARTICLE VI
CONTRACTS, LOANS, CHECKS, AND DEPOSITS
6.1 Contracts. The Board of Directors may authorize any officer, or
officers, or agent, or agents, to enter into any contract or execute and deliver
any instrument in the name of and on behalf of the corporation and such
authority may be general or confined to specific instances.
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6.2 Loans. No loans shall be contracted on behalf of the corporation and no
evidences of indebtedness shall be issued in its name, unless authorized by a
resolution of the Board of Directors. Such authorization may be general or
confined to specific instances.
6.3 Checks. All checks, drafts, or other orders for the payment of money,
notes, or other evidences of indebtedness issued in the name of the corporation
shall be signed by such officer, or officers, or agent, or agents, of the
corporation and in such manner as shall from time to time be determined by
resolution of the Board of Directors.
6.4 Deposits. All funds of the corporation, not otherwise employed, shall
be deposited to the credit of the corporation in such banks, trust companies, or
other depositories as the Board of Directors may select.
ARTICLE VII
MISCELLANEOUS
7.1 Fiscal Year. The fiscal year of this corporation shall end on the
Saturday nearest June 30 of each year.
7.2 Notices. Whenever any written notice is required to be given under the
provisions of any law, the Articles of Incorporation, or by these Bylaws, it
shall not be construed or interpreted to mean personal notice, unless expressly
so stated, and any notice so required shall be deemed to be sufficient if given
in writing by mail, by depositing the same in a Post Office box, postage
prepaid, addressed to the person entitled thereto at his or her address as it
appears in the records of the corporation. Such notice shall be deemed to have
been given at the time and on the day of such mailing. Shareholders not entitled
to vote shall not be entitled to receive notice of any meetings, except as
otherwise provided by law or these Bylaws.
7.3 Waiver of Notice. Whenever any notice is required to be given under the
provisions of any law, the Articles of Incorporation, or these Bylaws, a waiver
thereof in writing, signed by the person or persons entitled to said notice,
whether before or after the time stated therein, shall be deemed equivalent
thereto.
7.4 Voting of Securities. Securities of another corporation, foreign or
domestic, standing in the name of this corporation, which are entitled to vote
may be voted, in person or by proxy, by the chairman or the president of this
corporation or by such other or additional persons as may be designated by the
Board of Directors.
7.5 Compensation Repayment. If the compensation paid to any officer of the
corporation for any fiscal year is challenged by the Internal Revenue Service as
excessive so as to call into question the corporation's deduction of such
compensation for federal income tax purposes and, if such challenge is resolved,
either by compromise or litigation, in a manner which disallows the deduction,
or any part thereof, then such officer shall repay said compensation to the
corporation to the extent the corporation's deduction therefor has been
disallowed.
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ARTICLE VIII
AMENDMENTS
These Bylaws may be amended or repealed or new Bylaws adopted by a majority
vote of the Board of Directors at any regular or special meeting, without prior
notice of intent to do so, or by vote of the holders of a majority of the
outstanding voting shares of the corporation at any annual or special meeting if
notice of the proposed amendment, repeal, or adoption is contained in the notice
of the meeting.
These are the Amended and Restated Bylaws of Knape & Vogt Manufacturing
Company as in effect April 23, 1999.
_____________________________
Jack Poindexter, Secretary
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