-----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, Mj2+EwnBW27obYFOlss68is4Dj9hOzA3ZrPa4YvUnkXDAgatlGGkGiSZYzTTu0oL rhfB6y++Pmvt9iviyLDG8A== 0000926044-98-000081.txt : 19980511 0000926044-98-000081.hdr.sgml : 19980511 ACCESSION NUMBER: 0000926044-98-000081 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980508 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: 98614195 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 March 31, 1998 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 ______ 3,502,603 common shares were outstanding as of April 30, 1998. 2,433,022 Class B common shares were outstanding as of April 30, 1998. KNAPE & VOGT MANUFACTURING COMPANY AND SUBSIDIARIES INDEX Page No. PART I. FINANCIAL INFORMATION Item 1 Financial Statements Condensed Consolidated Balance Sheets --March 31, 1998 (Unaudited) and June 30, 1997............................2 Condensed Consolidated Statements of Income (Unaudited) --Nine Months and Three Months Ended March 31, 1998 and 1997..............3 Condensed Consolidated Statements of Cash Flows (Unaudited) --Nine Months Ended March 31, 1998 and 1997...............................4 Notes to Condensed Consolidated Financial Statements (Unaudited)..........5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations....................................6-8 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K....................................9 SIGNATURES....................................................................10 1 KNAPE & VOGT MANUFACTURING COMPANY AND SUBSIDIARIES PART I. FINANCIAL INFORMATION CONDENSED CONSOLIDATED BALANCE SHEETS March 31, 1998 June 30, 1997 --------------- ------------- (Unaudited) Assets Cash and equivalents $ 2,457,213 $ 1,146,546 Accounts receivable - net 27,941,850 24,991,341 Refundable income taxes 200,000 1,578,681 Inventories 18,904,694 18,629,454 Other current assets 4,211,614 3,686,042 Net current assets of discontinued operation 0 1,462,089 ------------- ------------- Total current assets 53,715,371 51,494,153 ------------- ------------- Property, plant and equipment 84,207,825 80,771,246 Less accumulated depreciation 37,026,644 32,184,444 ------------- ------------- Net property, plant and equipment 47,181,181 48,586,802 ------------- ------------- Net property, plant and equipment of discontinued operation 0 1,440,740 Other assets 22,104,480 24,220,003 ------------- ------------- $ 123,001,032 $ 125,741,698 ============= ============= Liabilities and Stockholders' Equity Accounts payable $ 12,693,431 $ 5,976,683 Other accrued liabilities 9,451,408 6,251,436 ------------- ------------- Total current liabilities 22,144,839 12,228,119 Long-term debt 17,400,000 29,000,000 Deferred income taxes and other long-term liabilities 9,003,035 11,053,081 ------------- ------------- Total liabilities 48,547,874 52,281,200 ------------- ------------- Stockholders' equity Common stock 11,865,004 11,807,658 Additional paid-in capital 33,684,865 33,340,541 Foreign currency translation adjustment (1,605,305) (1,345,978) Retained earnings 30,508,594 29,658,277 ------------- ------------- Total stockholders' equity 74,453,158 73,460,498 ------------- ------------- $ 123,001,032 $ 125,741,698 ============= =============
See accompanying notes. 2 KNAPE & VOGT MANUFACTURING COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) Nine Months Ended Three Months Ended Mar. 31, 1998 Mar. 31, 1997 Mar. 31, 1998 Mar. 31, 1997 -------------- ------------- ------------- ------------- Net sales $ 136,805,813 $ 132,675,931 $ 49,469,554 $ 46,072,548 Cost of sales 103,503,505 99,406,928 37,914,628 34,615,069 ------------- ------------- ------------- ------------- Gross profit 33,302,308 33,269,003 11,554,926 11,457,479 Selling and administrative expenses 21,692,956 21,493,160 7,711,214 7,284,146 Restructuring charges 2,386,971 373,235 2,386,971 373,235 ------------- ------------- ------------- ------------- Operating income 9,222,381 11,402,608 1,456,741 3,800,098 Other expenses 1,081,662 1,631,869 335,258 542,679 ------------- ------------- ------------- ------------- Income from continuing operations before income taxes 8,140,719 9,770,739 1,121,483 3,257,419 Income taxes - continuing operations 3,105,000 3,548,000 573,000 1,196,000 ------------- ------------- ------------- ------------- Income from continuing operations 5,035,719 6,222,739 548,483 2,061,419 Loss from discontinued operation, net of taxes (1,368,278) (471,624) (1,274,639) (471,624) ------------- ------------- ------------- ------------- Net income (loss) $ 3,667,441 $ 5,751,115 $ (726,156) $ 1,589,795 ============= ============= ============= ============= Per common share: Basic EPS: Income from continuing operations $ .85 $ 1.06 $ .09 $ .35 Loss from discontinued operation (.23) (.08) (.21) (.08) ------------- ------------- ------------- ------------- Net income $ .62 $ .98 $ (.12) $ .27 ============= ============= ============= ============= Weighted average shares outstanding 5,919,601 5,887,438 5,924,435 5,890,102 Diluted EPS: Income from continuing operations $ .85 $ 1.05 $ .10 $ .34 Loss from discontinued operation (.23) (.08) (.22) (.08) ------------- ------------- ------------- ------------- Net income $ .62 $ .97 $ (.12) $ .26 ============= ============= ============= ============= Weighted average shares outstanding 5,953,418 5,902,206 5,964,794 5,908,438 Cash Dividend - Common stock $ .495 $ .495 $ .165 $ .165 Cash Dividend - Class B common stock $ .45 $ .45 $ .15 $ .15
See accompanying notes. 3 KNAPE & VOGT MANUFACTURING COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Nine Months Ended Mar. 31, 1998 Mar. 31, 1997 ------------- ------------- Operating Activities: Net income $ 3,667,441 $ 5,751,115 Non-cash items: Depreciation and amortization 5,911,058 5,800,839 Deferred income taxes (1,732,000) 10,000 Other long-term liabilities (315,137) (303,220) Loss on sale of the discontinued operation 937,268 0 Changes in operating assets and liabilities: Accounts receivable (3,000,045) (5,331,826) Inventories (297,524) (45,218) Net assets of discontinued operation 0 903,026 Other current assets 610,815 668,977 Accounts payable and accrued expenses 10,100,202 (1,156,226) ------------ ------------ Net cash from operating activities 15,882,078 6,297,467 ------------ ------------ Investing Activities: Additions to property and equipment (3,548,463) (5,044,891) Sale of property and equipment 1,693 3,345,678 Disposition of discontinued operation 1,920,352 0 Payments for other assets 1,078,485 (645,988) ------------ ------------ Net cash for investing activities (547,933) (2,345,201) ------------ ------------ Financing Activities: Proceeds from issuance of common stock 401,670 119,810 Payments on long-term debt (11,600,000) (1,200,000) Cash dividends paid (2,817,124) (2,801,724) ------------ ------------ Net cash for financing activities (14,015,454) (3,881,914) ------------ ------------ Effect of Exchange Rate Changes on Cash (8,024) (10,563) ------------ ------------ Net Increase in Cash & Equivalents 1,310,667 59,789 Cash and Equivalents: Beginning of year 1,146,546 244,271 ------------ ------------ End of period $ 2,457,213 $ 304,060 ============ ============ Cash Paid During the Period - interest $ 1,069,096 $ 1,529,813 - income taxes $ 2,474,702 $ 2,775,148
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: 3,499,480 of common stock and 2,433,022 of Class B stock at March 31, 1998; 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: Mar. 31, 1998 June 30, 1997 ------------- ------------- Finished products $ 11,286,174 $ 11,219,379 Work in process 2,975,257 1,950,391 Raw materials 4,643,263 5,459,684 -------------- -------------- Total $ 18,904,694 $ 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 nine month and three month periods ended March 31, 1998 and 1997: Nine Months ended March 31, Three Months ended March 31, 1998 1997 1998 1997 ---- ---- ---- ---- Shelving systems $ 64.4 47.1% $ 61.8 46.6% $ 23.3 47.1% $ 21.1 45.8% Drawer slides 50.9 37.2% 46.3 34.9% 19.0 38.4% 16.2 35.1% Hardware 21.5 15.7% 21.6 16.3% 7.2 14.5% 7.5 16.3% Furniture components 0.0 0.0% 3.0 2.2% 0.0 0.0% 1.3 2.8% ------- ------ ------- ------ ------- ------ ------- ------ Total $ 136.8 100.0% $ 132.7 100.0% $ 49.5 100.0% $ 46.1 100.0% ======= ====== ======= ====== ======= ====== ======= ======
Net sales for the nine months and third quarter of fiscal 1998 increased $4.1 million, or 3.1%, and $3.4 million, or 7.4%, respectively, over the comparable periods of fiscal 1997. Shelving systems sales increased by $2.2 million, or 10.4%, for the quarter due to the addition of two national retail customers for the free-standing shelving products which was previously announced in the second quarter. Drawer slide sales increased by $2.8 million, or 17.3%, for the quarter due to strong sales of precision drawer slides including continued ramp-up in shipments of precision drawer slides to the metal office furniture market. Hardware product line sales decreased during the quarter by $0.3 million from last year despite Feeny's continued increase in the sales of its kitchen and bath storage products. This increase was offset by a decrease in the 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 75.7% of sales for the first nine months and 76.6% of sales for the third quarter of fiscal 1998 compared to 74.9% and 75.1% of sales for the first nine months and third quarter of fiscal 1997, respectively. The increase is due in part to the Company's continued investments in manufacturing and sales to aggressively enter the metal office furniture market. The increase in cost of sales also reflects transition costs that cannot be classified as restructuring related to the reorganization of the Company's Canadian operation near Toronto and continued softness in the Canadian dollar. Selling and administrative expenses for the nine months was 15.9% of sales compared to 16.2% for the same period last year and for the third quarter decreased to 15.6% of sales from 15.8% for the same quarter last year. The reductions are 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. A one-time restructuring charge of $2,386,971 was recorded in the third quarter of fiscal 1998 for Knape & Vogt Canada. Knape & Vogt announced in March 1998 its plans to reorganize its Canadian operation, including the sale of the Company's manufacturing facility and equipment in the Toronto area. The Company will continue to sell and distribute its products in Canada and maintain a sales office in the Toronto area. The after-tax effect of the sale was a loss of $1,786,971 or $.30 per share. 6 KNAPE & VOGT MANUFACTURING COMPANY AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) The fiscal 1997 restructuring charge of $373,235 represents the difference between the original estimate and the actual loss from the decision to sell Modar, Inc. Modar was sold on March 28, 1997, to Preferred Fixture, Inc. located in Glastonbury, Connecticut. The after-tax effect of the sale was a loss of $246,235 or $.04 per share. Other Expenses Interest expense was $298,941 for the quarter ended March 31, 1998, compared to $497,603 for the quarter ended March 31, 1997. The Company has reduced its level of borrowing to $17,400,000 at March 31, 1998, from $33,800,000 at March 31, 1997. Interest expense for the nine months ended March 31, 1998, was $1,016,053 compared to $1,518,791 for the nine months ended March 31, 1997. Income Taxes The effective tax rate for the nine months and quarter ended March 31, 1998, was 38.1% and 51.1% compared to 36.3% and 36.7% for the nine months and quarter ended March 31, 1997. The effective tax rates are higher due to a possible restriction on fully utilizing the net operating losses generated in Canada, thereby reducing the tax benefit recognized on the restructuring loss recorded for Knape & Vogt Canada. Income from Continuing Operations Income from continuing operations was $5,035,719 for the first nine months and $548,483 for the third quarter of fiscal 1998. Diluted earnings per share from continuing operations for the nine months was $.85 compared to $1.05 in fiscal 1997. Diluted earnings per share for the quarter ended March 31, 1998 was $.10 compared to $.34 for the third quarter last year. Excluding the after-tax restructuring charges of $1,786,971 in fiscal 1998 and $246,235 in fiscal 1997, diluted earnings per share would have been $1.15 and $.40 for the nine and three months ended March 31, 1998, respectively, and $1.09 and $.38 for the nine and three months ended March 31, 1997. Loss from Discontinued Operation Loss from discontinued operation was $1,368,278, or $.23 diluted earnings per share, for the first nine months and $1,274,639, or $.22 diluted earnings per share for the three months ended March 31, 1998. The discontinued operation, Roll-it, was sold on March 27, 1998. Included in the fiscal 1998 loss from discontinued operation is a third quarter loss of $937,268, or $.16 per share, which represents the difference between the original estimate and the actual loss from the decision to sell Roll-it. In the third quarter of fiscal 1997 the Company recorded a loss of $471,624, or $.08 diluted earnings per share, from discontinued operation, which was an adjustment to the estimated provision for operating losses of Roll-it through fiscal year 1997. Income or loss attributable to Roll-it's operations beyond fiscal year 1997 were recorded as incurred in each reporting period. Net Income Net income of $3,667,441 for the nine months was 2.7% of sales compared to $5,751,115 for the first nine months last year which was 4.3% of sales. For the quarter ended March 31, 1998, net loss was $726,156 compared to net income of $1,589,795 for the third quarter of last year. 7 KNAPE & VOGT MANUFACTURING COMPANY AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Net income for the third quarter and nine months ended March 31, 1998, includes the after-tax charge of $1,786,971 to record the restructuring of Knape & Vogt Canada and a loss from discontinued operation of $1,368,278 for the nine months and $1,274,639 for the third quarter. Net income for the third quarter and nine months ended March 31, 1997, includes the after-tax charge of $246,235 for restructuring and $471,624 for loss from discontinued operation. Excluding the restructuring charges and loss from discontinued operation charges, net income was $6,822,690 for the nine months, or 5.0% of sales, compared to $6,468,974 for the first nine months last year which was 4.9% of sales. For the quarter ended March 31, 1998, net income would have been $2,335,454 compared to $2,307,654 for the third quarter of last year. Liquidity and Capital Resources Net cash from operating activities for the first nine months of fiscal 1998 provided $15,882,078 as compared to $6,297,467 for the first nine months of fiscal 1997. Accounts payable and accrued expenses increased by $10,100,202 in the first nine months of fiscal 1998 compared to a decrease of $1,156,226 in the first nine months of fiscal 1997. Days sales outstanding at the end of the third quarter of fiscal 1998 were 54 compared to 58 at the end of fiscal 1997. This reduction has resulted in an improvement in our accounts receivable collection of over $2,000,000 compared to the end of the third quarter of fiscal 1997. The overall improvement in liquidity is a direct result of the Company's focus on cash management. Capital expenditures totaled $3,548,463 for the nine months ended March 31, 1998, compared to $5,044,891 for the nine months ended March 31, 1997. Capital expenditures for the fiscal year are anticipated to be between $4,000,000 and $5,000,000. Long-term debt of $17,400,000 at the end of the third quarter has declined $11,600,000 since June 30, 1997, primarily due to 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. 8 KNAPE & VOGT MANUFACTURING COMPANY AND SUBSIDIARIES PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits - None (b) Reports on Form 8-K There were no reports on Form 8-K filed for the three months ended March 31, 1998. 9 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: May 8, 1998 /s/Allan E. Perry Allan E. Perry President and Chief Executive Officer Date: May 8, 1998 /s/ Richard C. Simkins Richard C. Simkins Executive Vice President, CFO, Secretary and Treasurer 10 EX-27 2
5 3-MOS JUN-30-1998 JAN-01-1998 MAR-31-1998 2,457,213 0 28,690,736 748,886 18,904,694 53,715,371 84,207,825 37,026,644 123,001,032 22,144,839 17,400,000 0 0 11,865,004 62,588,154 123,001,032 136,805,813 136,805,813 103,503,505 103,503,505 24,079,927 0 1,016,053 8,140,719 3,105,000 5,035,719 (1,368,278) 0 0 3,667,441 0.62 0.62
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