UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 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 ______
3,336,889 Common shares were outstanding as of November 8, 1996.
2,548,619 Class B common shares were outstanding as of November 8, 1996.
<PAGE>
KNAPE & VOGT MANUFACTURING COMPANY AND SUBSIDIARIES
INDEX
Page No.
PART I FINANCIAL INFORMATION
Item 1. Financial Statements.
Condensed Consolidated Balance Sheets
- --September 30, 1996 (Unaudited) and June 30, 1996............................2
Condensed Consolidated Statements of Income (Unaudited)
- --Three Months Ended September 30, 1996 and 1995..............................3
Condensed Consolidated Statements of Cash Flows (Unaudited)
- --Three Months Ended September 30, 1996 and 1995..............................4
Notes to Condensed Consolidated Financial Statements..........................5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.........................................6-7
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K......................................8
SIGNATURES ...................................................................8
<PAGE>
KNAPE & VOGT MANUFACTURING COMPANY AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<S> <C> <C>
September 30, 1996 June 30, 1996
------------------ -------------
(Unaudited)
Assets
Cash and equivalents $ 215,264 244,271
Accounts receivable - net 26,967,723 22,763,645
Refundable income taxes 1,271,549 1,860,191
Inventories 22,376,299 23,016,541
Other current asset 3,013,478 3,058,021
Net current assets of discontinued operation 1,773,215 1,790,740
---------------- ----------------
Total Current assets 55,617,528 52,733,409
---------------- ----------------
Property, plant and equipment 83,674,083 82,129,435
Less accumulated depreciation 33,307,550 31,747,827
---------------- ----------------
Net property, plant and equipment 50,366,533 50,381,608
---------------- ----------------
Net property, plant and equipment of discontinued operation 1,700,677 1,775,225
Other assets 24,219,515 24,334,917
---------------- ----------------
$ 131,904,253 $ 129,225,159
================ ================
Liabilities and Stockholder Equity
Accounts payable $ 6,166,386 $ 4,825,372
Other accrued liabilities 7,192,646 8,372,046
---------------- ----------------
Total current liabilities 13,359,032 13,197,418
Long-term debt 36,000,000 35,000,000
Deferred income taxes and other long-term liabilities 11,927,079 11,853,991
---------------- ----------------
Total liabilities 61,286,111 60,051,409
---------------- ----------------
Stockholders equity
Common stock 11,765,010 11,762,138
Additional paid-in capital 33,091,453 33,080,087
Foreign currency translation adjustment (1,195,524) (1,211,286)
Retained earnings 26,957,203 25,542,811
---------------- ----------------
Total stockholders equity 70,618,142 69,173,750
---------------- ----------------
$ 131,904,253 $ 129,225,159
================ ================
</TABLE>
See accompanying notes.
<PAGE>
KNAPE & VOGT MANUFACTURING COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended
Sept. 30, 1996 Sept. 30, 1995
Net Sales $ 44,848,318 $ 39,803,837
Cost of sales 33,366,959 30,336,370
---------------- ----------------
Gross profit 11,481,359 9,467,467
Selling and administrative expenses 7,286,081 6,928,915
---------------- ----------------
Operating income 4,195,278 2,538,552
Other expenses 534,686 654,125
---------------- ----------------
Income from continuing operations
before income taxes 3,660,592 1,884,427
Income taxes - continuing operations 1,314,000 738,000
---------------- ----------------
Income from continuing operations 2,346,292 1,146,427
Income from discontinued
operation, net of tax 0 361,284
---------------- ----------------
Net income $ 2,346,592 $ 1,507,711
================ ================
Per common shares:
Income from continuing operations $ .40 $ .20
Income from discontinued operation $ .00 $ .06
---------------- ----------------
Net income $ .40 $ .26
================ ================
Cash Dividend - Common stock $ .165 $ .165
Cash Dividend - Class B common stock $ .15 $ .15
Weighted average shares outstanding 5,882,280 5,885,466
See accompanying notes.
<PAGE>
KNAPE & VOGT MANUFACTURING COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<S> <C> <C>
Three Months Ended Sept. 30, 1996 Sept. 30, 1995
--------------- ---------------
Operating Activities:
Net income $ 2,346,592 $ 1,507,711
Non-cash items:
Depreciation and amortization 1,850,377 1,757,310
Deferred income taxes 171,000 238,000
Other long-term liabilities (98,019) (103,495)
Changes in operating assets & liabilities:
Accounts and other receivables (3,609,699) (1,521,191)
Inventories 642,811 (2,163,677)
Net assets of discontinued operation 100,095 (219,650)
Other current assets 44,643 (257,174)
Accounts payable & accrued expenses 158,147 20,188
-------------- ----------------
Net cash provided (used) by operating activities 1,605,947 (741,978)
-------------- ----------------
Investing Activities:
Additions to property, plant, and equipment (1,538,118) (766,371)
Payments for other assets (177,619) (437,855)
-------------- -----------------
Net cash used in investing activities (1,715,737) (1,204,226)
-------------- -----------------
Financing Activities:
Proceeds from sale of common stock 14,238 16,624
Additions to long-term debt 1,000,000 3,600,000
Cash dividends paid (932,200) (931,661)
-------------- -----------------
Net cash provided by financing activities 82,038 2,684,963
-------------- -----------------
Effect of Exchange Rate Changes on Cash (1,255) 4,153
-------------- -----------------
Net Increase (Decrease) in Cash & Equivalents (29,007) 742,912
Cash and Equivalents:
Beginning of year 244,271 534,280
-------------- -----------------
End of period $ 215,264 $ 1,277,192
============== =================
Cash Paid During the Period - interest $ 497,329 $ 209,603
- income taxes $ 1,721,642 $ 558,936
</TABLE>
<PAGE>
KNAPE & VOGT MANUFACTURING COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1 - Basis of Financial Statement Preparation
The accompanying unaudited condensed consolidated financial statements and
related notes have been prepared pursuant to the rules and regulations of the
Securities and Exchange Commission. The information furnished reflects all
adjustments which are, in the opinion of management, necessary for a fair
statement of results of operations. Interim results are not necessarily
indicative of the results for the year end and are subject to year end
adjustments, and audit by independent public accountants. The balance sheet at
June 30, 1996, 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 1996 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: 3,333,886 of common stock;
2,548,619 of Class B stock at September 30, 1996; and 3,327,918 of common stock
and 2,553,151 of Class B common stock at June 30, 1996.
Note 3 - Inventories
Inventories are valued at the lower of FIFO (first-in, first-out) cost or
market. Inventories are summarized as follows:
September 30, 1996 June 30, 1996
------------------ ----------------
Finished products $ 11,932,126 $ 13,189,032
Work in process 2,656,702 2,665,754
Raw Materials 7,787,471 7,161,755
-------------- --------------
Total $ 22,376,299 $ 23,016,541
============== ==============
<PAGE>
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
which include risks and uncertainties including but not limited to economic,
competitive, governmental and technological factors affecting Knape & Vogt
Manufacturing Companies operations, markets, products, services and prices.
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 three month periods ended September
30, 1996 and 1995:
Three Months ended September 30,
1996 1995
----------------------- ----------------------
Shelving systems $ 22.4 50.0% $ 21.6 54.3%
Drawer slides 15.1 33.7% 11.1 27.9%
Hardware 6.4 14.3% 6.3 15.8%
Furniture components 0.9 2.0% 0.8 2.0%
---------- ------ -------- ------
Total $ 44.8 100.0% $ 39.8 100.0%
========== ====== ========== ======
Net sales for the first quarter of fiscal year 1997 increased $5.0 million, or
12.7%, over the comparable period of fiscal year 1996. Shelving sales increased
by $0.8 million, or 3.7%, compared to the first quarter of fiscal year 1996
primarily due to an increase in sales of wall attached shelving. Drawer slide
sales increased by $4.0 million, or 36%. The increase in drawer slide sales was
primarily due to increases in the sale of precision drawer slides. Hardware
sales increased slightly compared to the prior year with kitchen products
manufactured by Feeny continuing to be introduced into the retail market.
Furniture component sales increased slightly. This category of sales is expected
to decrease in the future, as the Company announced on October 24, 1996 it
signed a letter of intent to sell Modar to Fournier Furniture.
Costs and Expenses
Cost of sales was 74.4% of sales for the quarter compared to 76.2% of sales for
the first quarter of 1996. The lower cost of sales is due to decreases in raw
material prices, and improved absorption of overhead costs due to the higher
sales volumes.
Selling and administrative expenses decreased to 16.2% of sales compared to
17.4% for the period ended September 30, 1995. The Company was able to maintain
selling expense at approximately the same level as the prior year with a large
increase in sales. Administrative expense relating to Michigan taxes increased
compared to the prior year when the expense was low due overpayments in fiscal
year 1995.
Other Expenses
Interest expense was $503,307 for the quarter compared to $592,655 for the
quarter ended September 30, 1995. The Company has reduced its level of borrowing
to $36,000,000 at September 30, 1996 from $39,400,000 at September 30, 1995.
<PAGE>
KNAPE & VOGT MANUFACTURING COMPANY AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
Income Taxes
The effective tax rate for the quarter ended September 30, 1996 was 35.9%
compared to 39.2% for the quarter ended September 30, 1995. Lower pretax income
for the quarter ended September 30, 1995 increased the impact of permanent
differences, when computing the effective tax rate.
Income from Continuing Operations
Income from continuing operations of $2,346,592 for the first quarter of 1997
was a first quarter record. Earnings per share from continuing operations
increased 100.0% to $.40 compared to $.20 in the first quarter of last year.
Income from Discontinued Operation
The estimated loss on discontinued operation recorded at June 30, 1996 include
an estimate of the operating loss until the Roll-it facility is disposed of.
There was no income, or loss, recorded on discontinued operation for the quarter
ended September 30, 1996. For the first quarter of last year the discontinued
operation earned $361,284, or $0.06 per share.
Net Income
Net income for the quarter of $2,346,592, was 5.2% of sales compared to
$1,507,711, for the first quarter of last year which was 3.8% of sales. Net
income per share increased by 53.8% to $0.40 compared to $0.26 for the first
quarter of fiscal year 1996.
Liquidity and Capital Resources
The Company's net cash position decreased during the first three months to
$215,264 from $527,572 at June 30, 1996. Net cash from operating activities
provided $1,605,947. Higher earnings and a decrease in accounts payable was
partially offset by an increase in accounts receivable due to the sales terms
offered to customers and the higher sales levels.
Capital expenditures totaled $1,538,118 for the three months ended September 30,
1996, compared to $766,371 last year. Capital expenditures for the fiscal year
are expected to be at approximately the same levels as last year. The debt
increased $1,000,000 due to the increase in accounts receivable and the capital
expenditures. Debt levels are expected to decrease during the remainder of
fiscal year 1997. Anticipated cash flow from operations will substantially fund
working capital, capital expenditures and dividend payments.
<PAGE>
KNAPE & VOGT MANUFACTURING COMPANY AND SUBSIDIARIES
PART II. OTHER INFORMATION
Item 6. Exhibits and reports on Form 8-K
(a) Exhibits - none
(b) Reports on Form 8-K
There were no reports on Form 8-K filed for the three
months ended September 30, 1996.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Knape & Vogt Manufacturing Company
(Registrant)
Date: November 13, 1996 s/Allan E. Perry
-------------------------
Allan E. Perry
President and
Chief Executive Officer
Date: November 13, 1996 s/Richard C. Simkins
-------------------------
Richard C.Simkins
Executive Vice President,
CFO, Secretary, and
Treasurer
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000056362
<NAME> Knape & Vogt Manufacturing Company
<MULTIPLIER> 1
<CURRENCY> US$
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> SEP-30-1996
<EXCHANGE-RATE> 1
<CASH> 215,264
<SECURITIES> 0
<RECEIVABLES> 24,447,723
<ALLOWANCES> 480,000
<INVENTORY> 22,376,299
<CURRENT-ASSETS> 55,617,528
<PP&E> 83,674,083
<DEPRECIATION> 33,307,550
<TOTAL-ASSETS> 131,904,253
<CURRENT-LIABILITIES> 13,359,032
<BONDS> 36,000,000
0
0
<COMMON> 11,765,010
<OTHER-SE> 58,853,132
<TOTAL-LIABILITY-AND-EQUITY> 131,904,253
<SALES> 44,848,318
<TOTAL-REVENUES> 44,848,318
<CGS> 33,366,959
<TOTAL-COSTS> 33,336,959
<OTHER-EXPENSES> 7,286,081
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 503,307
<INCOME-PRETAX> 3,660,592
<INCOME-TAX> 1,314,000
<INCOME-CONTINUING> 2,346,592
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,346,592
<EPS-PRIMARY> 0.40
<EPS-DILUTED> 0.40
</TABLE>
