UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended December 31, 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 ______
3,409,454 common shares were outstanding as of January 31, 1997.
2,480,473 Class B common shares were outstanding as of January 31, 1997.
<PAGE>
KNAPE & VOGT MANUFACTURING COMPANY AND SUBSIDIARIES
INDEX
Page No.
PART I FINANCIAL INFORMATION
Item 1. Financial Statements.
Condensed Consolidated Balance Sheets
- --December 31, 1996 (Unaudited) and June 30, 1996.............................2
Condensed Consolidated Statements of Income (Unaudited)
- --Six Months and Three Months Ended December 31, 1996 and 1995................3
Condensed Consolidated Statements of Cash Flows (Unaudited)
- --Six Months Ended December 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 4. Submission of Matters to a vote of Security Holders...................8
Item 6. Exhibits and Reports on Form 8-K......................................8
SIGNATURES ...................................................................9
<PAGE>
KNAPE & VOGT MANUFACTURING COMPANY AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<S> <C> <C>
Dec. 31, 1996 June 30, 1996
-------------- -------------
(Unaudited)
Assets
Cash and equivalents $ 743,329 $ 244,271
Accounts receivable - net 24,822,111 22,763,645
Refundable income taxes 1,000,854 1,860,191
Inventories 23,115,882 23,016,541
Other current assets 2,749,053 3,058,021
Net current assets of discontinued operation 1,516,682 1,790,740
----------------- -----------------
Total current assets 53,947,911 52,733,409
----------------- -----------------
Property, plant and equipment 84,403,916 82,129,435
Less accumulated depreciation 34,710,239 31,747,827
----------------- -----------------
Net property, plant and equipment 49,693,677 50,381,608
----------------- -----------------
Net property, plant and equipment of discontinued operation 1,658,126 1,775,225
Other assets 24,193,279 24,334.917
----------------- -----------------
$ 129,492,993 $ 129,225,159
================= =================
Liabilities and Stockholders' Equity
Accounts payable $ 4,393,876 $ 4,825,372
Other accrued liabilities 6,573,237 8,372,046
----------------- -----------------
Total current liabilities 10,967,113 13,197,418
Long-term debt 35,400,000 35,000,000
Deferred income taxes and other long-term liabilities 11,627,519 11,853,991
----------------- -----------------
Total liabilities 57,994,632 60,051,409
----------------- -----------------
Stockholders' equity
Common stock 11,776,854 11,762,138
Additional paid-in capital 33,154,806 33,080,087
Foreign currency translation adjustment (1,270,843) (1,211,286)
Retained earnings 27,837,544 25,542,811
----------------- -----------------
Total stockholders' equity 71,498,361 69,173,750
----------------- -----------------
$ 129,492,993 $ 129,225,159
================= =================
</TABLE>
See accompanying notes.
<PAGE>
KNAPE & VOGT MANUFACTURING COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<S> <C> <C> <C> <C>
Six Months Ended Six Months Ended Three Months Ended Three Months Ended
Dec. 31, 1996 Dec. 31, 1995 Dec. 31, 1996 Dec. 31, 1995
---------------- ---------------- ------------------ ------------------
Net sales $ 86,603,383 $ 77,926,405 $ 41,755,065 $ 38,122,568
Cost of sales 64,791,859 59,357,810 31,424,900 29,021,440
----------------- ---------------- ---------------- ----------------
Gross profit 21,811,524 18,568,595 10,330,165 9,101,128
Selling and administrative expenses 14,209,014 13,112,013 6,922,933 6,183,098
----------------- ---------------- ---------------- ----------------
Operating income 7,602,510 5,456,582 3,407,232 2,918,030
Other expenses 1,089,190 1,317,541 554,504 663,416
----------------- ---------------- ---------------- ------------------
Income from continuing operations
before income taxes 6,513,320 4,139,041 2,852,728 2,254,614
Income taxes - continuing operations 2,352,000 1,566,000 1,038,000 828,000
----------------- ---------------- ---------------- ------------------
Income from continuing operations 4,161,320 2,573,041 1,814,728 1,426,614
Income (loss) from discontinued
operation, net of taxes 0 (5,583) 0 (366,867)
----------------- ----------------- ---------------- -------------------
Net income $ 4,161,320 $ 2,567,458 $ 1,814,728 $ 1,059,747
================= ================= ================ ===================
Per common share:
Income from continuing operations $ .71 $ .44 $ .31 $ .24
Income from discontinued operation .00 .00 .00 (.06)
-------------- -------------- --------------- ---------------
Net Income $ .71 $ .44 $ .31 $ .18
=============== ============== =============== ===============
Cash Dividend - Common stock $ .33 $ .33 $ .165 $ .165
Cash Dividend - Class B common stock $ .30 $ .30 $ .15 $ .15
Weighted average shares outstanding 5,886,154 5,884,452 5,891,886 5,881,069
</TABLE>
See accompanying notes.
<PAGE>
KNAPE & VOGT MANUFACTURING COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<S> <C> <C>
Six Months Ended Six Months Ended
Dec. 31, 1996 Dec. 31, 1995
----------------- ----------------
Operating Activities:
Net income $ 4,161,320 $ 2,567,458
Non-cash items:
Depreciation and amortization 3,769,141 3,563,828
Deferred income taxes (19,000) 31,000
Other long-term liabilities (207,029) (208,336)
Changes in operating assets & liabilities:
Accounts receivable (2,070,711) 2,303,143
Inventories (107,778) (1,163,385)
Net assets of discontinued operation 367,028 337,714
Other current assets 1,166,926 (162,387)
Accounts payable & accrued expenses (2,223,660) (1,554,156)
-------------- -----------------
Net cash from operating activities 4,836,237 5,714,879
-------------- -----------------
Investing Activities:
Additions to property and equipment (2,739,039) (2,864,397)
Sale of property and equipment 238,183 93,756
Payments for other assets (453,295) (754,532)
-------------- -----------------
Net cash for investing activities (2,954,151) (3,525,173)
-------------- -----------------
Financing Activities:
Proceeds from issuance of common stock 89,435 16,624
Additions to long-term debt 400,000 0
Payments on long-term debt 0 (800,000)
Cash dividends paid (1,866,587) (1,863,490)
-------------- -----------------
Net cash for financing activities (1,377,152) (2,646,866)
-------------- -----------------
Effect of Exchange Rate Changes on Cash (5,876) 10,386
-------------- -----------------
Net Decrease in Cash & Equivalents 499,058 (446,774)
Cash and Equivalents:
Beginning of year 244,271 534,280
-------------- -----------------
End of period $ 743,329 $ 87,506
============== =================
Cash Paid During the Period - interest $ 1,009,927 $ 1,183,989
- income taxes $ 1,511,663 $ 1,310,585
</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
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, 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: 3,407,954 of common stock;
2,480,473 of Class B stock at December 31, 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:
Dec. 31, 1996 June 30, 1996
------------- -------------
Finished products $ 12,908,401 $ 13,189,032
Work in process 1,711,536 2,665,754
Raw materials 8,495,945 7,161,755
-------------- --------------
Total $ 23,115,882 $ 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 six month and three month periods
ended December 31, 1996 and 1995:
<TABLE>
<S> <C> <C> <C> <C>
Six Months ended Six Months Ended Three Months ended Three Months ended
December 31, 1996 December 31, 1995 December 31, 1996 December 31, 1995
----------------------- -------------------- --------------------- ---------------------
Shelving systems $ 40.6 46.9% $ 39.7 50.9% $ 18.3 43.7% $ 18.3 48.0%
Drawer slides 30.1 34.8% 23.2 29.8% 15.1 36.1% 11.9 31.3%
Hardware 14.1 16.3% 13.5 17.3% 7.5 18.1% 7.2 18.9%
Furniture components 1.8 2.0% 1.5 2.0% 0.9 2.1% 0.7 1.8%
----------- --------- --------- -------- --------- ------- --------- --------
Total $ 86.6 100.0% $ 77.9 100.0% $ 41.8 100.0% $ 38.1 100.0%
=========== ====== ========= ======== ========= ======= ========= ========
</TABLE>
Net sales for the six months and second quarter of fiscal year 1997 increased
$8.7 million, or 11.1%, and $3.7 million, or 9.5%, respectively, over the
comparable periods of fiscal year 1996. Shelving sales were flat for the
quarter. Drawer slide sales increased by $3.2 million for the quarter. The
increased sales is due to the Company's expanding share of the precision,
Euro-style and utility drawer slide markets. Hardware product line sales
increased during the quarter by $.3 million from last year, due to more sales of
kitchen and bath products manufactured by Feeny. Furniture component sales
increased during the quarter by $.2 million compared to last year.
Costs and Expenses
Cost of sales was 74.8% of sales for the first six months and 75.3% of sales for
the second quarter of fiscal year 1997 compared to 76.2% and 76.1% of sales for
the first six months and second quarter of fiscal year 1996, respectively.
Decreases in raw material prices and larger sales volumes absorbing fixed
overhead costs accounted for the majority of the improvement.
Selling and administrative expenses for the six months was 16.4% of sales
compared to 16.8% for the same period last year and for the second quarter
increased to 16.6% of sales from 16.2% for the same quarter last year. The
increase as a percentage of sales for the quarter was mainly due to increases in
administrative expenses such as the Michigan single business tax.
Other Expenses
Interest expense was $517,881 for the quarter ended December 31, 1996 compared
to $594,740 for the quarter ended December 31, 1995. The decrease was due to
lower borrowing levels and lower interest rates. Interest expense for the six
months ended December 31, 1996 was $1,021,188 compared to $1,182,296 last year.
<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 six months and quarter ended December 31, 1996,
was 36.1% and 36.4% compared to 37.8% and 36.7% for the six months and quarter
ended December 31, 1995. The effective tax rates are slightly lower in fiscal
year 1997 due to foreign and state tax rates.
Income from Continuing Operations
Income from continuing operations were at record levels of $4,161,320 for the
first six months and $1,814,728 for the second quarter of 1997. Earnings per
share from continuing operations for the six months increased 61.4% to $.71
compared to $.44 last year and income per share for the quarter rose 29.2% to
$.31 compared to $.24 in the second quarter of last year. The Company is
continuing to pursue the sale of this operation.
The Company announced on December 18, 1996 that the intended buyer for Modar
withdrew it's offer. Modar will continue to operate at low levels until the end
of the third quarter or a new buyer is secured. The Company is not anticipating
a material impact due to the intended buyer of Modar withdrawing its offer, but
there may be additional costs incurred in concluding an eventual sale or phasing
out of the operation.
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 December 31, 1996. For the second quarter of last year the discontinued
operation lost $366,867, or $0.06 per share.
Net Income
Net income of $4,161,320 for the six months was 4.8% of sales compared to
$2,567,458, for the first six months last year which was 3.3% of sales. For the
quarter ended December 31, 1996 net income was $1,814,728 which was 4.3% of
sales compared to $1,059,747 which was 2.8% of sales for the second quarter of
last year.
Liquidity and Capital Resources
The Company's net cash position increased during the first six months to
$743,329 from $499,058 at June 30, 1996. Net cash from operating activities of
$4,836,237 was positively affected by the increased net income and depreciation
expense but negatively affected by the impact on accounts receivable of sales
terms offered to customers and higher sales.
The decrease in accrued restructuring costs is due mainly to the payment of
severance.
Capital expenditures were $2,739,039 for the six months ended December 31, 1996.
The Company is currently forecasting capital expenditures to be approximately $8
million for the fiscal year. The Company had total debt of $35,400,000 at
December 31, 1996, an increase of $400,000 from total debt of $35,000,000 at
June 30, 1996. It is estimated that debt levels will decrease in the second half
of the fiscal year. 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 4. Submission of Matters to a Vote of Security Holders
(a) Knape & Vogt Manufacturing Company's Annual Meeting of
Shareholders was held on October 18, 1996.
(b) Proxies were distributed by Knape & Vogt Manufacturing Company
pursuant to Regulation 14A under the Securities Exchange Act
of 1934. There was no opposition to management's nominees as
listed in the proxy statement, and all nominees were elected.
The vote on the nominees was:
<TABLE>
<S> <C> <C> <C> <C> <C>
For Against Abstain Non-vote
William R. Dutmers (1) (2) 26,356,056 -- 11,151 --
Richard S. Knape (1) (2) 26,257,724 -- 109,483 --
Michael J. Kregor (1) (2) 26,367,207 -- 10,351 --
Mary Rita Cuddohy (1) (3) 2,833,442 -- 14,555 --
</TABLE>
(1) Term expires in 1999.
(2) Elected by vote of holders of Common stock and Class B
common stock voting as a class. (3) Elected by vote of holders
of Common stock voting as a class.
Members of the board of directors whose terms have not yetexpired are
Raymond E. Knape, term expiring in 1998, Herbert F. Knape, term
expiring in 1998, Richard C. Simkins, term expiring in 1998, Allen E. Perry,
term expiring in 1997, John E. Fallon, term expiring in 1997, and Robert T.
Kroon, term expiring in 1997.
Item 6. Exhibits and reports on Form 8-K
(a) Exhibits - None
(b) Reports on Form 8-K
There were no reports on Form 8-K filed for the three months
ended December 31, 1996.
<PAGE>
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: February 7, 1997
s/Allan E. Perry
-----------------------
Allan E. Perry
President and
Chief Executive Officer
Date: February 7, 1997
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> SEP-01-1996
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> 1
<CASH> 743,329
<SECURITIES> 0
<RECEIVABLES> 25,429,111
<ALLOWANCES> 607,000
<INVENTORY> 23,115,882
<CURRENT-ASSETS> 53,947,911
<PP&E> 84,403,916
<DEPRECIATION> 34,710,239
<TOTAL-ASSETS> 129,492,993
<CURRENT-LIABILITIES> 10,967,113
<BONDS> 35,400,000
0
0
<COMMON> 11,766,854
<OTHER-SE> 59,721,507
<TOTAL-LIABILITY-AND-EQUITY> 129,492,993
<SALES> 41,755,065
<TOTAL-REVENUES> 41,755,065
<CGS> 31,424,900
<TOTAL-COSTS> 31,424,900
<OTHER-EXPENSES> 6,922,933
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 517,881
<INCOME-PRETAX> 2,852,728
<INCOME-TAX> 1,038,000
<INCOME-CONTINUING> 1,814,728
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,814,728
<EPS-PRIMARY> 0.31
<EPS-DILUTED> 0.31
</TABLE>
