-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, R0qeXU5YhP2zFKf4oRuLFjMaInlyH4KTCP0jRsEXig73HrdkEbPpxEV/qf5kGgDf 0VJDKDPGaiAzRr9UGNpwRA== 0000926044-98-000026.txt : 19980212 0000926044-98-000026.hdr.sgml : 19980212 ACCESSION NUMBER: 0000926044-98-000026 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980211 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: KNAPE & VOGT MANUFACTURING CO CENTRAL INDEX KEY: 0000056362 STANDARD INDUSTRIAL CLASSIFICATION: PARTITIONS, SHELVING, LOCKERS & OFFICE AND STORE FIXTURES [2540] IRS NUMBER: 380722920 STATE OF INCORPORATION: MI FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-01859 FILM NUMBER: 98531372 BUSINESS ADDRESS: STREET 1: 2700 OAK INDUSTRIAL DR NE CITY: GRAND RAPIDS STATE: MI ZIP: 49505 BUSINESS PHONE: 6164593311 MAIL ADDRESS: STREET 1: 2700 OAK INDUSTRIAL DRIVE, NE CITY: GRAND RAPIDS STATE: MI ZIP: 49505 10-Q 1 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, 1997 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 ______ 3,485,742 common shares were outstanding as of January 31, 1998. 2,434,134 Class B common shares were outstanding as of January 31, 1998. KNAPE & VOGT MANUFACTURING COMPANY AND SUBSIDIARIES INDEX Page No. PART I. FINANCIAL INFORMATION Item 1 Financial Statements. Condensed Consolidated Balance Sheets --December 31, 1997 (Unaudited) and June 30, 1997...................2 Condensed Consolidated Statements of Income (Unaudited) --Six Months and Three Months Ended December 31, 1997 and 1996......3 Condensed Consolidated Statements of Cash Flows (Unaudited) --Six Months Ended December 31, 1997 and 1996.......................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 1 KNAPE & VOGT MANUFACTURING COMPANY AND SUBSIDIARIES PART I. FINANCIAL INFORMATION CONDENSED CONSOLIDATED BALANCE SHEETS Dec. 31, 1997 June 30, 1997 -------------- ------------- (Unaudited) Assets Cash and equivalents ...................................... $ 224,384 $ 1,146,546 Accounts receivable - net ................................. 24,804,609 24,991,341 Refundable income taxes ................................... 1,855,116 1,578,681 Inventories ............................................... 21,067,666 18,629,454 Other current assets ...................................... 3,675,466 3,686,042 Net current assets of discontinued operation .............. 1,285,404 1,462,089 ------------- ------------- Total current assets ............................. 52,912,645 51,494,153 ------------- ------------- Property, plant and equipment ............................. 83,297,781 80,771,246 Less accumulated depreciation ............................. 35,271,438 32,184,444 ------------- ------------- Net property, plant and equipment ................ 48,026,343 48,586,802 ------------- ------------- Net property, plant and equipment of discontinued operation 1,290,416 1,440,740 Other assets .............................................. 22,716,766 24,220,003 ------------- ------------- $ 124,946,170 $ 125,741,698 ============= ============= Liabilities and Stockholders' Equity Accounts payable .......................................... $ 13,921,753 $ 5,976,683 Other accrued liabilities ................................. 5,420,233 6,251,436 ------------- ------------- Total current liabilities ........................ 19,341,986 12,228,119 Long-term debt ............................................ 18,800,000 29,000,000 Deferred income taxes and other long-term liabilities ..... 10,993,351 11,053,081 ------------- ------------- Total liabilities ................................ 49,135,337 52,281,200 ------------- ------------- Stockholders' equity Common stock .............................................. 11,838,852 11,807,658 Additional paid-in capital ................................ 33,516,118 33,340,541 Foreign currency translation adjustment ................... (1,719,348) (1,345,978) Retained earnings ......................................... 32,175,211 29,658,277 ------------- ------------- Total stockholders' equity ....................... 75,810,833 73,460,498 ------------- ------------- $ 124,946,170 $ 125,741,698 ============= =============
See accompanying notes. 2 KNAPE & VOGT MANUFACTURING COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) Six Months Ended Three Months Ended Dec. 31, 1997 Dec. 31, 1996 Dec. 31, 1997 Dec. 31, 1996 -------------- ------------- ------------- ------------- Net sales .......................... $ 87,336,259 $ 86,603,383 $ 42,677,957 $ 41,755,065 Cost of sales ...................... 65,588,877 64,791,859 32,434,480 31,424,900 ------------ ------------ ------------ ------------- Gross profit ....................... 21,747,382 21,811,524 10,243,477 10,330,165 Selling and administrative expenses 13,981,742 14,209,014 6,767,474 6,922,933 ------------ ------------ ------------ ------------ Operating income ................... 7,765,640 7,602,510 3,476,003 3,407,232 Other expenses ..................... 746,404 1,089,190 323,793 554,504 ------------ ------------ ------------ ------------ Income from continuing operations before income taxes ............. 7,019,236 6,513,320 3,152,210 2,852,728 Income taxes - continuing operations 2,532,000 2,352,000 1,135,000 1,038,000 ------------ ------------ ------------ ------------ Income from continuing operations .. 4,487,236 4,161,320 2,017,210 1,814,728 Income (loss) from discontinued operation, net of taxes ......... (93,639) 0 (294,525) 0 ------------ ------------ ------------ ------------ Net income ......................... $ 4,393,597 $ 4,161,320 $ 1,722,685 $ 1,814,728 ============ ============ ============ ============ Per common share: Basic EPS: Income from continuing operations .. $ .76 $ .71 $ .34 $ .31 Income from discontinued operation . (.02) .00 (.05) .00 ------------ ------------ ------------ ------------ Net Income ......................... $ .74 $ .71 $ .29 $ .31 ============ ============ ============ ============ Weighted average shares outstanding 5,915,080 5,886,514 5,915,666 5,887,454 Diluted EPS: Income from continuing operations .. $ .75 $ .71 $ .34 $ .31 Income from discontinued operation . (.01) .00 (.05) .00 ------------ ------------ ------------ ----------- Net Income ......................... $ .74 $ .71 $ .29 $ .31 ============ ============ ============ ============ Weighted average shares outstanding 5,949,990 5,900,739 5,951,026 5,901,388 Cash Dividend - Common stock ....... $ .33 $ .33 $ .165 $ .165 Cash Dividend - Class B common stock $ .30 $ .30 $ .15 $ .15
See accompanying notes. 3 KNAPE & VOGT MANUFACTURING COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Six Months Ended Dec. 31, 1997 Dec. 31, 1996 ------------- ------------- Operating Activities: Net income ................................... $ 4,393,597 $ 4,161,320 Non-cash items: Depreciation and amortization ............ 3,826,709 3,769,141 Deferred income taxes .................... 155,000 (19,000) Other long-term liabilities .............. (210,597) (207,029) Changes in operating assets & liabilities: Accounts receivable ................. 119,686 (2,070,711) Inventories ......................... (2,477,121) (107,778) Net assets of discontinued operation 141,448 367,028 Other current assets ................ (297,528) 1,166,926 Accounts payable & accrued expenses . 7,152,629 (2,223,660) ----------- ------------ Net cash provided by operating activities ......... 12,803,823 4,836,237 ----------- ------------ Investing Activities: Additions to property and equipment .......... (2,673,543) (2,739,039) Sale of property and equipment ............... 1,705 238,183 Payments for other assets .................... 807,138 (453,295) ----------- ------------ Net cash used for investing activities ............ (1,864,700) (2,954,151) ----------- ------------ Financing Activities: Proceeds from issuance of common stock ....... 206,771 89,435 Additions to long-term debt .................. 0 400,000 Payments on long-term debt ................... (10,200,000) 0 Cash dividends declared ...................... (1,876,663) (1,866,587) ------------ ------------ Net cash used for financing activities ............ (11,869,892) (1,377,152) ------------ ------------ Effect of Exchange Rate Changes on Cash ........... 8,607 (5,876) ------------ ------------ Net Increase (Decrease) in Cash & Equivalents ..... (922,162) 499,058 Cash and Equivalents: Beginning of year ........................ 1,146,546 244,271 ------------ ------------ End of period ............................ $ 224,384 $ 743,329 ============ ============ Cash Paid During the Period - interest............ $ 756,628 $ 1,009,927 - income taxes ....... $ 2,091,110 $ 1,511,663
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 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, 1997, 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 1997 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: 3,485,292 of common stock and 2,434,134 of Class B stock at December 31, 1997; and 3,465,664 of common stock and 2,438,165 of Class B common stock at June 30, 1997. 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, 1997 June 30, 1997 ------------- ------------- Finished products $ 11,727,439 $ 11,219,379 Work in process 3,293,480 1,950,391 Raw materials 6,046,747 5,459,684 ---------------- ---------------- Total $ 21,067,666 $ 18,629,454 ============== ==============
Note 4 - New Accounting Standards Not Yet Adopted Effective for periods beginning after December 15, 1997, the Company must adopt Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income" and No. 131, "Disclosures about Segments of an Enterprise and Related Information." No. 130 will require the Company to report comprehensive income as part of the consolidated financial statements. No. 131 will require the Company to report certain information about operating segments in the consolidated financial statements. The Company is currently evaluating the provisions of these statements to determine their impact. Note 5 - Newly Adopted Accounting Standard In February 1997, the Financial Accounting Standards Board (FASB) issued SFAS No. 128, "Earnings Per Share." The statement simplifies the standards for computing earnings per share (EPS), and makes them comparable to international EPS standards. The statement requires the presentation of both "basic" and "diluted" EPS on the face of the income statement with a supplementary reconciliation of numerators and denominators used in the calculations. For the periods presented, the numerators remained the sam in both the basic and diluted EPS calculations. The denominator was increased in the diluted computation due to the recognition of stock options as common stock equivalents. 5 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 including but not limited to economic, competitive, governmental and technological factors affecting Knape & Vogt Manufacturing Company's operations, markets, products, services and prices. 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 six month and three month periods ended December 31, 1997 and 1996: Six Months Ended December 31, Three Months Ended December 31, 1997 1996 1997 1996 ---- ---- ---- ---- Shelving systems $ 41.1 47.1% $ 40.6 46.9% $ 19.4 45.4% $ 18.3 43.7% Drawer slides 31.9 36.5% 30.1 34.8% 16.3 38.2% 15.1 36.1% Hardware 14.3 16.4% 14.1 16.3% 7.0 16.4% 7.5 18.1% Furniture components 0.0 0.0% 1.8 2.0% 0 0.0% 0.9 2.1% ------- ------ ------ ------ ------ ------ ------ ------ Total $ 87.3 100.0% $ 86.6 100.0% $ 42.7 100.0% $ 41.8 100.0% ======= ====== ====== ====== ====== ====== ====== ======
Net sales for the six months and second quarter of fiscal 1998 increased $0.7 million, or 0.8%, and $0.9 million, or 2.2%, respectively, over the comparable periods of fiscal 1997. Shelving systems sales increased by $1.1 million, or 6.0%, for the quarter due to Hirsh's recent addition of two national retail customers for its free-standing shelving products. Drawer slide sales increased by $1.2 million, or 7.9%, for the quarter due to strong sales of precision drawer slides including initial shipments o precision drawer slides to the metal office furniture market. Hardware product line sales decreased during the quarter by $0.5 million from last year despite Feeny's continued increase in the sales of its kitchen and bath products. This increase was offset by a decrease in Hirsh's Iron Horse product line, caused by a reduction in promotions of the product line at major home centers. Furniture component sales were eliminated with the sale of Modar at the end of the third quarter of fiscal 1997. Costs and Expenses Cost of sales was 75.1% of sales for the first six months and 76.0% of sales for the second quarter of fiscal 1998 compared to 74.8% and 75.3% of sales for the first six months and second quarter of fiscal 1997, respectively. The increase is due to higher overtime costs and start-up costs associated with the Company's entry into the metal office furniture market. Selling and administrative expenses for the six months was 16.0% of sales compared to 16.4% for the same period last year and for the second quarter decreased to 15.9% of sales from 16.6% for the same quarter last year. The reduction is due to the Company's ability to keep costs flat on a higher revenue stream, as well as the cost savings from the sale of Modar. Other Expenses Interest expense was $307,921 for the quarter ended December 31, 1997, compared to $517,881 for the quarter ended December 31, 1996. The Company has reduced its level of borrowing to $18,800,000 at December 31, 1997, from $35,400,000 at December 31, 1996. Interest expense for the six months ended December 31, 1997, was $717,112 compared to $1,021,188 for the six months ended December 31, 1996. 6 KNAPE & VOGT MANUFACTURING COMPANY AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Income Taxes The effective tax rates for the six months and quarter ended December 31, 1997, were 36.1% and 36.0% which were relatively consistent with the rates for the six months and quarter ended December 31, 1996, of 36.1% and 36.4%. Income from Continuing Operations Income from continuing operations was at record levels of $4,487,236 for the first six months and $2,017,210 for the second quarter of 1998. Basic earnings per share from continuing operations for the six months increased 7.0% to $.76 compared to $.71 last year and basic and diluted income per share for the quarter rose 9.7% to $.34 compared to $.31 in the second quarter of last year. Diluted earnings per share for the six months ended December 31, 1997, increased to $.75 from $.71 for the six months ended December 31, 1996. Income from Discontinued Operation Loss from discontinued operation was $93,639, or $.02 basic earnings per share and $.01 diluted earnings per share, for the first six months and $294,525, or $.05 basic and diluted earnings per share, for the second quarter of fiscal 1998. The six months and quarter ended December 31, 1996, did not include any income, or loss, recorded on the discontinued operation as the estimated loss on discontinued operation recorded at June 30, 1996, included a provision for fiscal 1997 anticipated operating losses. In accordance with Generally Accepted Accounting Principles, income or loss attributable to the discontinued operation subsequent to June 30, 1997, is reflected as incurred. The Company has been seeking a buyer for Roll-it and has engaged the firm of J.J.B. Hilliard, W.L. Lyons, Inc. to assist in the sale. Several interested buyers have signed confidentiality agreements with the Company. Although it is difficult to predict, the Company expects to sell Roll-it during fiscal 1998. Net Income Net income of $4,393,597 for the six months was 5.0% of sales compared to $4,161,320, for the first six months last year which was 4.8% of sales. For the quarter ended December 31, 1997, net income was $1,722,685 which was 4.0% of sales compared to $1,814,728 which was 4.3% of sales for the second quarter of last year. Liquidity and Capital Resources Net cash from operating activities for the first six months provided $12,803,823 as compared to $4,836,237 for the first six months of fiscal 1997. Accounts payable & accrued expenses increased by $7,152,629 in the first six months of fiscal 1998 compared to a decrease of $2,223,660 in the first six months of fiscal 1997. Also, accounts receivable decreased $119,686 in the first six months of fiscal 1998 compared to an increase of $2,070,711 in the first six months of fiscal 1997. Net cash from operating activities was negatively impacted by an increase in inventories which is attributable to the increase in sales and sales backlog. The overall improvement in liquidity is a direct result of the Company's focus on cash management. Capital expenditures totaled $2,673,543 for the six months ended December 31, 1997, compared to $2,739,039 for the six months ended December 31, 1996. Capital expenditures for the fiscal year are expected to be at approximately the same levels as last year. Long-term debt decreased $10,200,000 due to the cash provided from operating activities. In the remainder of the year, the Company will continue to aggressively attempt to generate cash using the newly adopted Economic Value Added, or EVA, philosophy. Anticipated cash flow from operations will substantially fund working capital, capital expenditures and dividend payments. 7 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 17, 1997. (b) Proxies were distributed by Knape & Vogt Manufacturing Company pursuant to Regulation 14A under the Securities Exchange Act of 1934. There was no opposition to management's nominees as listed in the proxy statement, and all nominees were elected. The vote on the nominees was: For Withheld John E. Fallon (1) (2) 23,064,719 1,104,917 Allan E. Perry (1) (3) 2,455,075 344,602 (1) Term expires in 2000. (2) Elected by vote of holders of Common stock and Class B Common stock voting as a class. (3) Elected by vote of holders of Common stock voting as a class. Members of the board of directors whose terms have not yet expired are William R. Dutmers, term expiring in 1999, Richard S. Knape, term expiring in 1999, Michael J. Kregor, term expiring in 1999, Mary Rita Cuddohy, term expiring in 1999, Raymond E. Knape, term expiring in 1998, Herbert F. Knape, term expiring in 1998, and Richard C. Simkins, term expiring in 1998. (c) The following proposal was adopted by a vote of the majority of the outstanding shares of Knape & Vogt Common Stock and Class B Common Stock as follows: A proposal to approve the Company's 1997 Stock Incentive Plan. The vote on the proposal above was: For 22,075,703 Against 1,366,185 Abstain 242,676 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, 1997. 8 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 10, 1998 /s/ Allan E. Perry Allan E. Perry President and Chief Executive Officer Date: February 10, 1998 /s/ Richard C. Simkins Richard C. Simkins Executive Vice President, CFO, Secretary and Treasurer 9 EX-27 2
5 3-MOS JUN-30-1998 OCT-01-1997 DEC-31-1997 224,384 0 25,510,956 706,347 21,067,666 52,912,645 83,297,781 35,271,438 124,946,170 19,341,986 18,800,000 0 0 11,838,852 63,971,981 124,946,170 87,336,259 87,336,259 65,588,877 65,588,877 13,981,742 0 717,112 7,019,236 2,532,000 4,487,236 (93,639) 0 0 4,393,597 0.74 0.74
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