-----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, VWFa8mNuE+vAuM53cCmyWWbwW9M2HZSGQshrXre21cZX0/mXmeCJsX4hQerS15xK 3dsv2926ARuqj66jHpFS4g== 0000926044-97-000061.txt : 19970505 0000926044-97-000061.hdr.sgml : 19970505 ACCESSION NUMBER: 0000926044-97-000061 CONFORMED SUBMISSION TYPE: 10-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19950630 FILED AS OF DATE: 19970502 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-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-01859 FILM NUMBER: 97594591 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-K/A 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K/A (Mark One) [X] Annual report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934 [Fee Required] for the fiscal year ended June 30, 1995 or [ ] Transition report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934 [No Fee Required] 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 or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 2700 Oak Industrial Drive, N.E., Grand Rapids, MI 49505 (Address of principal executive offices) (Zip Code) (616) 459-3311 (Registrant's telephone number, including area code) Securities registered pursuant to 12(b) of the Act: Title of each class Name of each exchange on which registered None None Securities Registered pursuant to Section 12(g) of the Act: Common Stock, par value $2.00 per share (Title of class) 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 [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] The aggregate market value of voting stock held by nonaffiliates of the registrant was $82,803,515 as of September 8, 1995. Number of shares outstanding of each class of common stock as of September 8, 1995: 3,299,918 shares of Common Stock, par value $2.00 per share, and 2,581,151 shares of Class B Common Stock, par value $2.00 per share. Documents incorporated by reference. Certain portions of the Registrant's Proxy Statement for the Annual Meeting of Shareholders to be held on October 20, 1995, are incorporated by reference into Part III of this Report. Item 1 - BUSINESS SECTION IN 1995 10-K Item 1(a) - General Development of Business The Company is engaged primarily in the design, manufacture, and marketing of storage products, which serve the consumer, contract builder, hardware, and orignal equipment manufacturer markets. The Company was incorporated in Michigan in 1906, reorganized in Delaware in 1961, and reorganized in Michigan in 1985. The Company's main plant and corporate offices are located at 2700 Oak Industrial Drive, N.E., Grand Rapids, Michigan 49505, and its telephone number is (616) 459-3311. Unless otherwise noted or indicated by the context, the term "Company" includes Knape & Vogt Manufacturing Company, its predecessors and it subsidiaries. Item 1(b) - Financial Information About Industry Segments The Company believes that a dominant portion of the Company's operations (more than 95%) is in a single industry segment - the design, manufacture, and marketing of storage products. Accordingly, no separate industry segment information is presented. Item 1(c) -- Narrative Description of Business Products, Services, Markets, and Methods of Distribution. The Company's storage products include a complete line of decorative and utility wall shelving systems (adjustable steel and aluminum standards, brackets, shelf supports, and wood shelves), drawer slides, closet rods, kitchen storage aids, and general hardware items. These products are manufactured by the parent company (except for wood shelving) and a Canadian-based division, Knape & Vogt Canada. A wholly-owned subsidiary, Modar, Inc., supplies wood products to the parent Company, The Hirsh Company and Knape & Vogt Canada, and also manufactures furniture components on a contractual basis. The Hirsh Company, a wholly-owned subsidiary, manufactures free-standing steel shelving systems, worksystem items, closet storage systems, and other storage products. Feeny Manufacturing Company, another wholly-owned subsidiary, manufactures a complete line of kitchen storage products. These divisions serve the consumer market through sales to the contract builder, original equipment manufacturer and commercial retailer markets. Roll-it, a Canadian-based division, manufactures a complete line of commercial store fixture hardware and display equipment. Roll-it's sales are made directly to commercial retailers, and its products are used by retailers in their store operations. The Company's products are sold throughout the United States and Canada, as well as in 50 other countries. During the past fiscal year, the Company estimates that approximately 46% of the Company's sales were to major co-op wholesalers, contract hardware jobbers, specialty wholesalers, independent hardware distributors and commercial retailers. Approximately 53% of sales were to export outlets, various government agencies, original equipment manufacturers, national mass merchants, large home centers, and building supply outlets. The remaining 1% were miscellaneous sales not elsewhere classified. While the Company does not maintain precise sales records by product category, management believes that the approximate sales of the Company's major product groups during the last three fiscal years were as follows: Year ended June 30, ---------------------------------- Class of Products 1995 1994 1993 - ------------------------------------------------ ------------------------------ (dollars in millions) Sales Sales Sales - ------------------------------------------------ ------------------------------ Shelving Systems $ 80.9 $ 65.4 $ 46.4 Drawer Slides 52.0 50.9 44.5 Hardware * 29.7 22.7 15.9 Store Fixtures ** 14.9 14.4 9.4 Furniture Components 5.5 6.5 7.2 - ------------------------------------------------ ------------------------------ Total $ 183.0 $ 159.9 $ 123.4 ================================================ ==============================
*Hardware includes closet systems, kitchen storage products, and workshop items. **Store Fixtures includes commercial store fixture hardware and display equipment. New Product or Industry Segment Information. The Company has not made any public announcement of, or otherwise made public information about, a new product or industry segment which would require the investment of a material amount of the Company's assets or which would otherwise be material. Sources and Availability of Raw Materials. Most of the Company's storage products are produced primarily from steel or wood. During the past fiscal year, the Company experienced no difficulty in obtaining these raw materials. The Company's results of operations have been affected by significant increases in steel, particle board, plastics and packaging prices. The Company estimates that material price increases impacted fiscal year 1995 net income by $2,215,000. Patents, Licenses, Etc. Patents, trademarks, licenses, franchises, or concessions do not play an important part in the Company's business. Seasonal Nature of Business. The business of the Company is not seasonal with the exception of store fixtures which usually experience lower sales in the second quarter, as retail customers typically do not refixture their stores during the holiday season. Working Capital Practices. The Company does not believe that it, or the industry in general, has any special practices or special conditions affecting working capital items that are significant for an understanding of the Company's business. Importance of Limited Number of Customers. The Company estimates that at present it has over 5,000 active customers with approximately 35,000 outlets, of which the five largest customers account for less than 14% of sales and no one of which accounts for more than 4% of sales. The Company does not believe that its business is dependent upon any single or small number of customers, the loss of which would have a materially adverse effect upon the Company. Backlog of Orders. The Company does not believe that information concerning backlog is material to an understanding of its business. Government contracts. The Company does not believe that any portion of its business is subject to renegotiation of profits or termination of contracts or subcontracts at the election of the government. Competition. All aspects of the business in which the Company is engaged are highly competitive. In the various markets served by the Company, it competes with a number of manufacturers that have significantly greater resources and sales, including several conglomerate corporations, and with numerous smaller companies. While no reliable statistics are available to enable the Company accurately to determine its relative position in the industry, either overall or with respect to any particular product or market, the Company believes that it is one of the three leading manufacturers of its type of shelving systems and that it is one of the four leading manufacturers of drawer slides. The Company's products are widely regarded in the hardware trade as being of the finest available quality and are generally sold at prices higher than competing lines. Research, Design and Development. Approximately $1,508,000 was spent during the last fiscal year in the development of new products and in the improvement of existing products; approximately $1,577,000 was spent in fiscal year 1994 and $1,644,000 in fiscal year 1993 for the same purposes. The amount of research and development expenditures are determined by specific identification of the costs, which are expensed as incurred. Environmental Matters. The Company does not believe that existing environmental regulations will have any material effect upon the capital expenditures, earnings, and competitive position of the Company. Employees. An average of 1,274 persons were employed by the Company during the fiscal year ended June 30, 1995. There were 1,338 persons employed by the Company in July 1994, and 1,336 in June 1995. None of the Company's employees are represented by collective bargaining agents except the hourly employees at Roll-it, who are represented by the United Steelworkers of America, and the hourly employees at The Hirsh Company, who are represented by the International Association of Bridge, Structural and Ornamental Iron Workers. Item 1(d) - Information About Foreign Operations The Company's Canadian operations accounted for approximatley 19% of cosolidated sales and 14% of consolidated net income during fiscal year 1995. Approximately 3.5% of consolidated net sales and 3.5% of consolidated net income were derived from export shipments from the Company's United States operations to customers in other foreign countries. The Company does not know of any particular risks attendant thereto, except that fluctuating exchange rates between the United States and Canadian currencies and other factors beyond the control of the Company, such as tariff and foreign economic policies, may affect future results of such business. Reference is made to Note 14 of the Notes to the Company's Consolidated Financial Statements contained herein for the fiscal year ended June 30, 1995, for a presentation of additional information concerning the Company's foreign operations. KNAPE & VOGT MANUFACTURING COMPANY AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The Company achieved record sales and operating earnings in 1995. A full year of sales following the acquisition of The Hirsh Company helped to increase net sales to a record high of $183,042,266, an increase of 14.5 percent over last year. Operating income increased 5.1 percent to $15,122,231 and net income of $8,245,138 was up 1.1 percent over the prior year. The Company's balance sheet remained strong with working capital increasing 15.7 percent to $45,796,753 and book value per share increasing 6.7 percent to $12.34. Management believes that the Company is well positioned to achieve its future business goals and objectives. RESULTS OF OPERATIONS Net Sales Net sales in 1995 increased $23,166,779 to a record $183,042,266, or 14.5 percent, over 1994 sales of $159,875,487. The full year of sales from Hirsh contributed $14.8 million to the increase in sales. Shelving system sales increased $15.5 million or 23.7 percent, due to $12.8 million of Hirsh shelving sales in this product line. Hardware sales increased $7.0 million or 30.8 percent, with $3.1 million of the increase due to KV Canada's contract painting customer increased their volumes and $2.0 million of the increase due to Hirsh sales of worksystem products. Drawer slide sales increased $1.1 million or 2.2 percent, primarily due to the continuing demand for precision drawer slides since the Company introduced the 8400 line of precision drawer slides in fiscal 1994. Furniture component sales decreased $1.0 million or 15.4 percent. During the year the Company consolidated its wood lamination operations at Modar and the subsidiary concentrated its efforts on intercompany production of wood products to Hirsh and shelves to Knape & Vogt and Knape & Vogt Canada, which resulted in lower sales volumes with furniture component customers. Based on the increasing demand for drawer slides and shelving, as well as the introduction of new products in these categories, management believes that sales volume increases in drawer slides and shelving will continue in fiscal 1996. Hardware sales in 1996 are expected to increase at Feeny and KV Canada. Modar is continuing to produce more intercompany products and sales of furniture components are expected to decrease slightly. Store fixture sales to Roll-it's major customer were flat as compared to 1994. Store fixture sales in 1996 are expected to increase at Roll-it based on the major customer's plans to refixture more stores than in 1995. Net sales in 1994 increased $36,468,976 to a record $159,875,487, or 29.6 percent, over 1993 sales of $123,406,511. The acquisition of The Hirsh Company on November 30, 1993, contributed $23.1 million to the increase in sales. Shelving system sales increased $19.0 million or 40.9 percent, due to adding $19.3 million of Hirsh shelving sales to this product line. Hardware sales increased $6.8 million or 42.8 percent, with $3.8 million of the increase due to Hirsh sales of worksystem products, a $1.3 million increase in Feeny hardware sales due to additional OEM customers, and the remaining hardware sales increase due to greater sales of KV hardware products to existing customers. Store fixture sales increased $5.0 million or 53.2% mainly due to strong sales to a major customer of Roll-it. The major customer refixtured a substantially higher portion of its total stores than in fiscal year 1993. Drawer slide sales increased $6.4 million or 14.4 percent, primarily due to sales of 8400 precision drawer slides and other precision drawer slides. The Company was able to increase its share of the drawer slide market by the successful introduction of the 8400 precision drawer slide which increased sales of other precision drawer slides. Furniture component sales decreased $.7 million or 9.7 percent, as the Modar subsidiary concentrated its efforts on intercompany production of shelves and had lower sales volumes with furniture component customers. Cost and Expenses Cost of sales as a percentage of sales was 75.5 percent in 1995 compared to 73.6 percent in 1994 and 71.9 percent in 1993. Price increases in steel, particleboard, plastic and packaging added 1.9 percent and 1.1 percent to the cost of sales in 1995 and 1994, respectively. Sales price decreases to obtain new business and maintain existing relationships also contributed to the decrease in margins in 1995. The impact of the Hirsh acquisition increased cost of sales in 1995 and 1994, as these products have lower margins. Production improvement savings in 1995 and 1994 at the Grand Rapids location helped offset some of these increases to cost of sales. Selling expenses in 1995 decreased to 12.1 percent of sales from 13.2 percent in 1994 and 13.8 percent in 1993. Hirsh contributed to the decrease in selling expense as a percentage of sales in 1995 and 1994 due to the combining of sales forces after the acquisition. In 1995 all locations showed a decrease in selling expense as a percentage of sales. In 1994 decreases in selling expense as a percentage of sales were due to Roll-it maintaining selling expenses at the same level as 1993 while experiencing an increase in sales. Administrative expenses as a percentage of sales were 4.1 percent of sales in 1995, down from 4.2 percent in 1994 and 5.3 percent in 1993. Administrative expense in 1995 and 1994 decreased due to Hirsh having lower administrative expense as a percentage of sales. The decrease in 1995 and 1994 is also due to the continued reduction in bad debt expense as collections of accounts receivable have improved. Restructuring Expense During the third quarter of 1993 the Company instituted a restructuring program designed to reduce costs and improve operating efficiencies at the Roll-it operation. The program included closing the Vancouver, British Columbia, warehouse, a write down of inventory, severance payments that were part of the downsizing and costs incurred in hiring a new general manager, sales manager and controller. The restructuring program totaled $1,529,000 and resulted in an after tax charge of $963,000, or $0.16 per share. Other Income (Expense) The acquisition of Hirsh increased the Company's long-term debt in November 1994 and was the main factor in the higher interest expense in 1995 and 1994 compared to 1993. An increase in interest rates in 1995 offset the lower debt levels that were maintained in the second half of fiscal 1995. Income Taxes The effective tax rate was 33.9 percent in 1995 compared to 35.5 percent in 1994 and 1993. The reduction in the effective tax rate in 1995 is due to the use of research and development and foreign tax credits. The effective tax rate is composed of federal, foreign, state and local tax rates. Net Income Net income in 1995 was $8,245,138 or 4.5 percent of sales, compared to $8,156,276 or 5.1 percent of sales in 1994. Net income in 1993 of $5,518,132 was reduced by $963,000 due to the restructuring of the Roll-it operation. Net income excluding the restructuring charge was $6,481,132 or 5.3 percent of sales. FINANCIAL POSITION Liquidity and Capital Resources The Company's financial position at June 30, 1995, continues to be strong. Corporate liquidity as measured by the current ratio remains solid at 4.4-to-1 compared to 3.0-to-1 at June 30, 1994, the difference mainly being a decrease in the current portion of long-term debt. Financial resources, including borrowing capacity and anticipated funds from operations, are adequate to satisfy all short-term obligations and the internal growth objectives of the Company. CASH FLOW Operating Activities Operating activities generated $13,381,587 in 1995 compared to $10,228,962 in 1994. Depreciation and amortization increased mainly due to the increase in capital expenditures and the amortization of goodwill related to the Hirsh acquisition. Accounts receivable decreased due to improved collections on past due accounts. Inventories decreased during the year mainly in the finished goods area after rising in 1994 due to new product introductions. Prepaid expense increased mainly due to the Company implementing improved internal control procedures relating to tooling and repair supplies, which resulted in a prepaid supplies asset of $697,000. Certain sales expenditures relating to future periods also increased prepaid expenses. Decreases in accounts payable and accrued expenses were primarily caused by the timing of when payments for the liabilities were due. Reduction of certain accrued selling expenses in association with the combining of sales forces also reduced accrued expenses by $637,000. Investing Activities Investing activities used $5,603,294 in 1995 compared to $34,301,408 in 1994 when the Hirsh Company was purchased for $29,270,859. In 1995 capital expenditures were $4,709,920 which is comparable to the $4,331,554 in 1994, and expenditures during 1996 are expected to remain at lower levels than in 1993 when the Company completed many large projects and purchased a facility for powder coat painting. Financing Activities Financing activities used $7,817,582 in 1995, compared to generating $24,119,054 in 1994, when the Company increased long-term debt by $27,250,000 to help finance the acquisition of Hirsh. The Company reduced debt by $4,200,000 in 1995, causing the total debt to ending equity ratio to be 49 percent compared to 59 percent last year. The Company received $115,780 from the issuance of common stock to employees exercising options issued under the Company's stock option plan, compared to $242,547 in 1994. Cash dividend payments totaled $0.66 per share on common stock and $0.60 on Class B common stock. At June 30, 1995 the Company had $35,800,000 outstanding on the $47,500,000 long-term revolving credit agreement. The Company will use long-term debt to the point where financial flexibility is preserved and undue financial risk is not incurred. SIGNATURE Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this amended report to be signed on its behalf by the undersigned, thereunto duly authorized. KNAPE & VOGT MANUFACTURING COMPANY By /s/ Richard C. Simkims Richard C. Simkins Executive Vice President, CFO Secretary & Treasurer Date: May 1, 1997 -----END PRIVACY-ENHANCED MESSAGE-----