-----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, TzhaiefvZ/Xn9GJhAJUzyXLkMLQIwAxJe9To5CDg0/BY65D2c1rz5/6x41aNlYS9 ZM8OT8dtTCe9A09DhiVfCw== 0000926044-01-000012.txt : 20010205 0000926044-01-000012.hdr.sgml : 20010205 ACCESSION NUMBER: 0000926044-01-000012 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20001230 FILED AS OF DATE: 20010202 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: 1523657 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 0001.txt 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 30, 2000 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 ______ 2,266,932 common shares were outstanding as of January 26, 2001. 2,350,207 Class B common shares were outstanding as of January 26, 2001. KNAPE & VOGT MANUFACTURING COMPANY AND SUBSIDIARIES INDEX Page No. PART I. FINANCIAL INFORMATION Item 1. Financial Statements. Condensed Consolidated Balance Sheets --December 30, 2000 and July 1, 2000..............................2 Condensed Consolidated Statements of Income --Six Months and Three Months Ended December 30, 2000 and January 1, 2000...............................................3 Condensed Consolidated Statements of Cash Flows --Six Months Ended December 30, 2000 and January 1, 2000..........4 Notes to Condensed Consolidated Financial Statements............5-7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations............................8-10 Item 3. Quantitative and Qualitative Disclosures About Market Risk.......11 PART II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders..............12 Item 6. Exhibits and Reports on Form 8-K.................................12 SIGNATURES....................................................................13 1 KNAPE & VOGT MANUFACTURING COMPANY AND SUBSIDIARIES PART I. FINANCIAL INFORMATION CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Audited) Dec. 30, 2000 July 1, 2000 --------------- -------------- Assets Current assets Cash and equivalents $ 2,496,026 $ 2,351,622 Accounts receivable - net 19,389,316 20,631,951 Inventories 16,063,404 15,092,393 Prepaid expenses and other 3,160,807 3,133,098 -------------- -------------- Total current assets 41,109,553 41,209,064 -------------- -------------- Property, plant and equipment 78,821,261 73,632,488 Less accumulated depreciation 38,056,161 35,270,625 -------------- -------------- Net property, plant and equipment 40,765,100 38,361,863 -------------- -------------- Goodwill 5,320,127 4,978,420 Other assets 3,308,206 3,738,305 -------------- -------------- $ 90,502,986 $ 88,287,652 ============== ============== Liabilities and Stockholders' Equity Current liabilities Accounts payable $ 11,645,678 $ 12,833,665 Other accrued liabilities 9,291,806 11,997,006 -------------- -------------- Total current liabilities 20,937,484 24,830,671 -------------- -------------- Long-term debt 24,130,000 20,050,000 Deferred income taxes and other long-term liabilities 8,614,945 8,700,351 -------------- -------------- Total liabilities 53,682,429 53,581,022 -------------- -------------- Stockholders' Equity Common stock (Common - 2,266,932 and 2,222,852 shares issued, Class B common - 2,350,207 and 2,392,853 shares issued, Preferred - unissued) 9,234,278 9,231,410 Additional paid-in capital 8,493,446 8,482,908 Unearned stock grant (94,500) (94,500) Accumulated other comprehensive income: Foreign currency translation adjustment (65,814) (39,172) Derivative adjustment (217,592) - Minimum supplemental executive retirement plan liability adjustment (1,129,914) (1,130,405) Retained earnings 20,600,653 18,256,389 -------------- -------------- Total stockholders' equity 36,820,557 34,706,630 -------------- -------------- $ 90,502,986 $ 88,287,652 ============== ==============
See accompanying notes. 2 KNAPE & VOGT MANUFACTURING COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) For the Six Months Ended For the Three Months Ended ------------------------ -------------------------- Dec. 30, 2000 Jan. 1, 2000 Dec. 30, 2000 Jan. 1, 2000 --------------- --------------- -------------- -------------- Net sales $ 72,660,202 $ 71,486,514 $ 35,702,652 $ 35,798,890 Cost of sales 52,484,402 52,169,347 26,100,578 25,875,233 -------------- -------------- -------------- -------------- Gross profit 20,175,800 19,317,167 9,602,074 9,923,657 Selling and administrative expenses 13,468,904 12,166,141 6,702,758 6,268,392 -------------- -------------- -------------- -------------- Operating income 6,706,896 7,151,026 2,899,316 3,655,265 Other expenses 855,429 689,871 418,744 371,922 -------------- -------------- -------------- -------------- Income before income taxes 5,851,467 6,461,155 2,480,572 3,283,343 Income taxes 2,055,000 2,286,000 865,000 1,153,000 -------------- -------------- -------------- -------------- Net income $ 3,796,467 $ 4,175,155 $ 1,615,572 $ 2,130,343 ============== ============== ============== ============== Basic earnings per share: Net income per share $ 0.82 $ 0.89 $ 0.35 $ 0.45 ============== ============== ============== ============== Weighted average shares outstanding 4,616,037 4,708,559 4,617,075 4,696,450 Diluted earnings per share: Net income per share $ 0.82 $ 0.89 $ 0.35 $ 0.45 ============== ============== ============== ============== Weighted average shares outstanding 4,618,595 4,713,030 4,618,174 4,699,685 Cash dividend - common stock $ .33 $ .30 $ .165 $ .15 Cash dividend - Class B common stock $ .30 $ .273 $ .15 $ .136
See accompanying notes. 3 KNAPE & VOGT MANUFACTURING COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Six Months Ended ---------------- Dec. 30, 2000 Jan. 1, 2000 --------------- -------------- Operating Activities: Net income $ 3,796,467 $ 4,175,155 Non-cash items: Depreciation and amortization 3,077,111 2,909,397 Deferred income taxes (168,000) (177,000) Other long-term liabilities 196,818 232,024 Loss on disposal of fixed assets 114,821 3,947 Changes in operating assets and liabilities: Accounts receivable 1,222,982 (385,370) Inventories (971,011) (294,933) Other current assets (29,532) (35,660) Accounts payable and accrued expenses (5,122,829) 1,317,205 -------------- -------------- Net cash provided by operating activities 2,116,827 7,744,765 -------------- -------------- Investing Activities: Additions to property, plant and equipment (4,563,460) (3,522,911) Net cash paid for acquisition - (5,267,877) Changes in other non-current assets (19,414) 107,366 -------------- -------------- Net cash used for investing activities (4,582,874) (8,683,422) -------------- -------------- Financing Activities: Cash dividends paid (1,452,203) (1,343,915) Proceeds from issuance of common stock 15,922 184,741 Repurchase and retirement of common stock (20,537) (1,000,258) Borrowings on long-term debt 4,080,000 3,070,000 -------------- -------------- Net cash provided by financing activities 2,623,182 910,568 -------------- -------------- Effect of Exchange Rate Changes on Cash (12,731) 17,849 -------------- -------------- Net Increase (Decrease) in Cash and Equivalents 144,404 (10,240) Cash and equivalents, beginning of year 2,351,622 1,621,002 -------------- -------------- Cash and equivalents, end of period $ 2,496,026 $ 1,610,762 ============== ============== Cash Paid During the Period - interest $ 749,970 $ 664,351 - income taxes $ 2,530,000 $ 2,440,000 Non-Cash Activities: Accrual of purchase price earn-out $ 505,745 $ - Accrual of capital expenditures $ 752,696 $ 135,674
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 July 1, 2000, 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 2000 annual report. Effective July 1, 1999, the Company adopted a 52- or 53-week fiscal year, changing the year-end date from June 30 to the Saturday nearest the end of June. Certain prior year information has been reclassified to conform to the current year presentation. Note 2 - Common Stock and Per Share Information Common stock is $2 par - shares authorized 6,000,000 of common stock and 4,000,000 of Class B common stock. The following table reconciles the numerators and denominators used in the calculations of basic and diluted EPS for each of the periods presented: For the six months ended For the three months ended ------------------------ -------------------------- Dec. 30, 2000 Jan. 1, 2000 Dec. 30, 2000 Jan. 1, 2000 -------------- -------------- -------------- -------------- Numerators: Numerator for both basic and diluted EPS, net income $3,796,467 $4,175,155 $1,615,572 $2,130,343 ============== ============== ============== ============== Denominators: Denominator for basic EPS, weighted-average common shares outstanding 4,616,037 4,708,559 4,617,075 4,696,450 Potentially dilutive shares resulting from stock option plans 2,558 4,471 1,099 3,235 -------------- -------------- -------------- -------------- Denominator for diluted EPS 4,618,595 4,713,030 4,618,174 4,699,685 ============== ============== ============== ==============
The following exercisable stock options were not included in the computation of diluted EPS because the option prices were greater than average quarterly market prices. Dec. 30, 2000 Jan. 1, 2000 --------------- ------------- Exercise Price $13.64 - 22,688 $14.09 21,450 22,000 $16.74 11,192 11,495 $18.18 10,450 11,000
5 Note 3 - Inventories Inventories are valued at the lower of FIFO (first-in, first-out) cost or market. Inventories are summarized as follows: Dec. 30, 2000 July 1, 2000 ------------- ------------ Finished products $ 10,533,291 $ 8,778,556 Work in process 2,057,096 2,339,958 Raw materials 3,473,017 3,973,879 ------------- ------------- Total $ 16,063,404 $ 15,092,393 ============= =============
Note 4 - Adoption of New Accounting Standard The Company adopted Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities," on July 2, 2000. The Company uses an interest-rate swap to convert a portion of its variable-rate revolver to a fixed rate. The resulting cost of funds is lower than it would have been had fixed-rate borrowings been issued directly. The level of fixed-rate debt, after the effects of interest-rate swaps have been considered, is between 85 and 95 percent of the Company's total outstanding debt of $24,130,000 at December 30, 2000 and $20,050,000 at July 1, 2000. In accordance with the transition provisions of FAS 133, the Company recorded a net-of-tax cumulative-effect-type adjustment in accumulated other comprehensive income to recognize the fair value of the interest-rate swap designated as a cash-flow hedging instrument. The derivative was also recognized as a liability on the balance sheet at its fair value of $334,592. The Company has formally documented the relationship between the interest-rate swap and the revolver, as well as its risk-management objective and strategy for undertaking the hedge transaction. This process includes linking the derivative that has been designated as a cash-flow hedge to the specific liability on the balance sheet. The Company also formally assesses, both at the hedge's inception and on an ongoing basis, whether the derivative used in the hedging transaction is highly effective in offsetting changes in the cash flows of the hedged item. If it is determined that the derivative is not highly effective as a hedge or that it has ceased to be a highly effective hedge, the Company will discontinue hedge accounting prospectively. Note 5 - Comprehensive Income 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: For the Six Months Ended For the Three Months Ended ------------------------ -------------------------- Dec. 30, 2000 Jan. 1, 2000 Dec. 30, 2000 Jan. 1, 2000 --------------- -------------- --------------- ------------- Net income $ 3,796,467 $ 4,175,155 $ 1,615,572 $ 2,130,343 Other comprehensive income: Foreign currency translation adjustment (26,642) 37,336 6,645 38,352 Derivative adjustment (217,592) - (461,611) - Minimum SERP liability adjustment 491 (762) (266) (830) ------------ ------------ ------------ ------------ Comprehensive income $ 3,552,724 $ 4,211,729 $ 1,160,340 $ 2,167,865 ============ ============ ============ ============
6 Note 6 - Assets Held for Sale During fiscal 2000, the Company offered its former powder coat facility for sale. As a result of this decision, the related assets of $1,779,405 were transferred to the category "Net Assets Held for Sale" and a loss of $105,000 was recorded in the fourth quarter of fiscal 2000. In July 2000, management entered into a Buy/Sell agreement for the facility, however, the purchaser was unable to close the transaction and the building remains listed with a real estate broker. The loss was determined based upon this Buy/Sell agreement. Note 7 - Acquisition On October 1, 1999, the Company acquired substantially all of the assets of Idea Industries, Inc. (Idea). Idea designed, manufactured and marketed ergonomic products, including adjustable keyboard mechanisms, keyboard and computer mouse platforms, wrist rests and CPU holders. The acquisition was recorded using the purchase method of accounting. Accordingly, the purchase price was allocated to the assets acquired and liabilities assumed, based on the estimated fair values at the date of the acquisition. The cost of the acquisition in excess of net identifiable assets acquired has been recorded as goodwill and is being amortized on a straight-line basis over 15 years. The terms of the Idea acquisition agreement provide for additional consideration to be paid if Idea's sales exceed certain targeted levels. The maximum amount of contingent consideration was $550,000 payable through 2001. In calendar year 1999, the additional consideration payment was $44,255 and in calendar year 2000 the remaining contingent consideration was earned. All additional consideration paid was recorded as goodwill. The results of the acquisition were not material to the Company's consolidated operating results, therefore pro forma financial statements have not been prepared. Note 8 - Restricted Stock and Performance-Option Plan On February 1, 2000, William Dutmers, Chairman of the Board, President and Chief Executive Officer of Knape & Vogt, was granted 6,600 shares of restricted common stock and the option to purchase an additional 27,500 shares of the Company's common stock at a price of $14.43 per share. The grant and the options will vest if the Company achieves specific financial objectives within a five-year performance period. During the performance period, the grantee may vote and receive dividends on the restricted shares, but the shares are subject to transfer restrictions and are forfeited if the grantee terminates employment or the Company does not achieve its financial objectives. Note 9 - Stock Repurchase On September 1, 1998, the Company announced its intention to purchase up to 1,320,000 shares of the Company's common stock pursuant to a Dutch Auction self-tender offer at a price range of $17.27 to $20 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 1,485,000. The Dutch Auction was concluded on October 7, 1998, with the purchase of 1,353,862 shares at a price of $19.09 per share. At each of the January 22, 1999, and the August 20, 1999, Board of Directors meetings, the Board approved an additional 440,000 shares for the stock repurchase program. Utilizing these Board authorizations, the Company has purchased 635,150 shares through the second quarter of fiscal 2001 for approximately $9.3 million with the price per share ranging from approximately $12 to $17. 7 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 and net income growth. 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 that speak only as of the date of this report. RESULTS OF OPERATIONS Net Sales The following table indicates the Company's net sales (in millions) and percentage of total sales by product category for the six-month and three-month periods ended December 30, 2000 and January 1, 2000: Six Months Ended Three Months Ended ---------------- ------------------ Dec. 30, Jan. 1, Dec. 30, Jan. 1, 2000 % 2000 % 2000 % 2000 % ------------------------ ------------------------- ------------------------ ------------------------- Shelving systems $20.1 27.6% $24.6 34.4% $9.4 26.3% $12.3 34.3% Drawer slides 33.8 46.5% 33.6 47.0% 16.7 46.8% 16.7 46.7% Hardware/ Other 18.8 25.9% 13.3 18.6% 9.6 26.9% 6.8 19.0% ------------------------ ------------------------- ------------------------ ------------------------- Total $72.7 100.0% $71.5 100.0% $35.7 100.0% $35.8 100.0% ======================== ========================= ======================== =========================
Net sales for the second quarter and the first six months of fiscal 2001 were relatively flat compared to the prior fiscal year. This was in large part attributable to the soft economic conditions in the market. During the second quarter, many of the Company's distribution and retail customers reduced their purchase levels and lowered the inventory levels that they were carrying. The Company did, however, realize growth in the office furniture market with sales of its precision drawer slides and ergonomic products. Gross Profit Gross profit, as a percentage of net sales, was 26.9% for the second quarter and 27.8% for the first six months of fiscal 2001 compared to 27.7% and 27.0%, respectively, for the same periods in the prior year. The lower sales volumes during the second quarter of fiscal 2001 made it difficult for the Company to effectively leverage its fixed overhead costs. In addition, the disruption associated with the consolidation of operations at the Muncie, Indiana facility resulted in lower margins during the quarter. Operating Expenses Selling and administrative expenses, as a percentage of net sales, were 18.8% for the second quarter and 18.5% for the first six months of fiscal 2001 compared to 17.5% and 17.0%, respectively, for the same periods in the prior year. The increase was primarily attributable to the fact that the ergonomic product line has a higher level of selling costs associated with it than the Company's other product lines. In addition, the Company has continued to incur higher selling costs to ready its new products for launch into the market. 8 KNAPE & VOGT MANUFACTURING COMPANY AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Other Expenses Interest expense was $407,534 for the quarter and $788,927 for the six months ended December 30, 2000, compared with $362,513 and $688,861, respectively, for the same periods in the prior year. The increase in interest expense was attributable to the higher level of borrowings during fiscal 2001. Other net miscellaneous expense was $11,210 for the second quarter and $66,502 for the first six months of fiscal 2001. This compares to $9,409 and $1,010, respectively, for fiscal 2000. Income Taxes The effective tax rates for the quarter and six months ended December 30, 2000, were 34.9% and 35.1% compared with the rates of 35.1% and 35.4%, respectively, for the same periods in the prior year. Net Income For the quarter ended December 30, 2000, net income was $1,615,572 or $0.35 per diluted share compared to $2,130,343 or $0.45 per diluted share for the second quarter of last year. Net income of $3,796,467, or $0.82 per diluted share was recorded for the first six months of fiscal 2001 compared with $4,175,155, or $0.89 per diluted share for the same period in the prior year. Liquidity and Capital Resources Net cash from operating activities for the first six months of fiscal 2001 provided $2,116,827 compared with $7,744,765 for the first six months of fi scal 2000. The decrease was primarily attributable to higher inventory levels of imported product and a decrease in accounts payable and other accrued liabilities. Accounts payable decreased due to lower purchasing levels and the cutoff of payments made at quarter-end as a result of the 52/53 week fiscal year. The decrease in other accrued liabilities reflects the payment of certain wage related accruals, specifically EVA bonuses and profit sharing. Capital expenditures totaled $4,563,460 for the six months ended December 30, 2000, compared to $3,522,911 for the six months ended January 1, 2000. The increased capital spending reflected investments in manufacturing technology, the completion of the new facility at the Indiana subsidiary and tooling for new products. There were no significant capital expenditure commitments at December 30, 2000. Quarterly capital expenditures during the second half of fiscal 2001 are anticipated to be lower than the levels incurred during the first two quarters of the fiscal year. 9 KNAPE & VOGT MANUFACTURING COMPANY AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) On October 1, 1999, the Company acquired substantially all of the assets of Idea Industries, Inc. (Idea). Idea designed, manufactured and marketed ergonomic products, including adjustable keyboard mechanisms, keyboard and computer mouse platforms, wrist rests and CPU holders. The acquisition was recorded using the purchase method of accounting. Accordingly, the purchase price was allocated to the assets acquired and liabilities assumed, based on the estimated fair values at the date of the acquisition. The cost of the acquisition in excess of net identifiable assets acquired has been recorded as goodwill and is being amortized on a straight-line basis over 15 years. The terms of the Idea acquisition agreement provide for additional consideration to be paid if Idea's sales exceed certain targeted levels. The maximum amount of contingent consideration was $550,000 payable through 2001. In calendar year 1999, the additional consideration payment was $44,255 and in calendar year 2000 the remaining contingent consideration was earned. All additional consideration paid was recorded as goodwill. On September 1, 1998, the Company announced its intention to purchase up to 1,320,000 shares of the Company's common stock pursuant to a Dutch Auction self-tender offer at a price range of $17.27 to $20 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 1,485,000. The Dutch Auction was concluded on October 7, 1998, with the purchase of 1,353,862 shares at a price of $19.09 per share. At each of the January 22, 1999, and the August 20, 1999, Board of Directors meetings, the Board approved an additional 440,000 shares for the stock repurchase program. Utilizing these Board authorizations, the Company has purchased 635,150 shares through the second quarter of fiscal 2001 for approximately $9.3 million with the price per share ranging from approximately $12 to $17. Since the beginning of the stock repurchase program in fiscal 1999, the Company has purchased 1,989,012 shares for approximately $35.7 million. The long-term debt balance increased to $24,130,000 at December 30, 2000 compared with $20,050,000 at July 1, 2000, and $20,770,000 at January 1, 2000. The increase reflects funds utilized for capital expenditures. Anticipated cash flows from operations and available balances on the revolving credit line are expected to be adequate to fund working capital, capital expenditures and dividend payments. 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 the foreign currency exchange rate as measured against the U.S. dollar and changes in U.S. interest rates. The Company holds a derivative instrument in the form of an interest rate swap, which is viewed as a risk management tool and is not used for trading or speculative purposes. The intent of the interest rate swap is to effectively fix the interest rate on part of the borrowings under the Company's variable rate revolving credit agreement. Quantitative disclosures relating to financial instruments and debt are included in the tables below. The following table provides information on the Company's fixed maturity investments as of December 30, 2000, that are sensitive to changes in interest rates. The table also presents the corresponding interest rate swap on this debt. Since the interest rate swap effectively fixes the interest rate on the notional amount of debt, changes in interest rates have no current effect on the interest expense recorded by the Company on the portion of the debt covered by the interest rate swap. Liability Amount Maturity Date - --------- ------ ------------- Variable rate revolving credit agreement $45 million November 1, 2004 First $20,000,000 at an interest rate of 6.715% plus weighted average credit spread of .4% Amounts in excess of $20,000,000 have an interest rate of approximately 7.0% Interest Rate Swap - ------------------ Notional amount $20 million June 1, 2006 Pay fixed/Receive variable - 6.73625% Pay fixed interest rate - 6.25%
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 through working capital management. The Company does not hedge its exposure to translation gains and losses relating to foreign currency net asset exposures. 11 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 13, 2000. (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) 20,508,164 168,681 Gregory Lambert (1) (3) 1,931,337 45,939 (1) Term expires in 2003. (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 Thomas A. Hilborn, Raymond E. Knape and Robert J. Knape, terms expiring in 2001; and William R. Dutmers, Richard S. Knape and Michael J. Kregor, terms expiring in 2002. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits There were no exhibits for the three months ended December 30, 2000. (b) Reports on Form 8-K There were no reports on Form 8-K filed for the three months ended December 30, 2000. 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: February 2, 2001 /s/ William R. Dutmers William R. Dutmers Chairman, President and Chief Executive Officer /s/ Leslie J. Cummings Leslie J. Cummings Vice President of Finance and Treasurer 13 -----END PRIVACY-ENHANCED MESSAGE-----