KNAP Knape & Vogt Manufacturing (MM)

Knape & Vogt Reports Second Quarter Results and Relocation of Muncie, Indiana Operations GRAND RAPIDS, Mich., Jan. 24 /PRNewswire-FirstCall/ -- Knape & Vogt Manufacturing Co. (NASDAQ:KNAP) today announced results for the second quarter ended January 1, 2005, marked by sales growth and continued new product introductions. The Grand Rapids, Mich.-based manufacturer and distributor of drawer slides, shelving, storage and ergonomic office products reported that net sales increased 9.2% percent to $37.5 million for the second quarter of fiscal 2005, compared with net sales of $34.3 million during the same period a year ago. KV reported its sales growth continued to be led by new products, which represented $4.9 million for the second quarter of fiscal 2005 compared with $4.4 million in the second quarter of the prior year. "Our sales growth is being driven by new products including the Polaris(TM) adjustable keyboard arm, our line of height-adjustable tables and the Virtu(TM) line of kitchen and closet products," said Bill Dutmers, chairman and CEO. "These products continue to demonstrate our ability to bring innovative, upscale solutions to the marketplace." "In addition, we are introducing our products and our strong KV(R) brand name through new vehicles. In November 2004, we opened the KV Product Gallery showroom in the LuxeHome(TM) Boutique in the Chicago Merchandise Mart. This is our first showroom, and we believe that having KV products installed in actual vignettes will open new channels and generate new interest for our products." KV reported a net loss of $522,815, or $0.12 per diluted share, for the current quarter, compared with net income of $441,904, or $0.10 per diluted share, during the same period in fiscal 2004. The results include approximately $2.1 million in pre-tax impairment charges and additional depreciation, or $0.29 per share net of tax. Excluding these charges, KV would have posted improved net income for the second quarter of fiscal 2005. The impairment charges and additional depreciation are related to certain idle manufacturing equipment and KV's decision to close its Muncie, Indiana facility. Operations from the Muncie facility will be relocated to available space in the Grand Rapids, Michigan facility. The Company estimates the cost of closing this facility will have a payback period of approximately 1.5 years. "Despite the high cost of steel, we have been successful in improving our operating profitability," stated Dutmers. "We have worked closely with our customers through this period and focused on ways to reduce our manufacturing costs. One of the outcomes of this company-wide initiative was the careful review of our manufacturing capabilities, which led us to the decision to close our Muncie facility." "While a decision to close a facility is always difficult, this move will lower our overall manufacturing costs," continued Dutmers. "Maintaining a small workforce in Muncie has been challenging. Fortunately, we have a deep pool of stable, skilled employees at our Grand Rapids facility and will be able to utilize their talents to absorb the Muncie operations and improve our wire forming capabilities. We will also be able to leverage our existing manufacturing expertise in our Grand Rapids facility, including our in-house kaizen staff and industrial engineers. We believe the consolidation of our operations will improve our speed to market on our kitchen and bath organization accessories with production in the same location as our new product engineers and our test lab. "We estimate that the cost of closing this operation has a short payback period, and more importantly, we expect this move to improve our performance to our customers." For the first six months of fiscal 2005, KV reported a 7.9 percent increase in net sales to $75.9 million, compared with net sales of $70.4 million in the prior year period. New products accounted for $11.0 million in sales for the first six months of fiscal 2005, compared with $9.8 million in the year-ago period, led by several of KV's new precision drawer slides, upscale wood and glass shelving kits and kitchen and bath storage products. KV posted a net loss of $132,304, or $0.03 per diluted share, compared with net income of $1.1 million, or $0.25 per diluted share, for the first six months of fiscal 2004. Excluding the restructuring charge in the second quarter, KV would have posted slightly improved net income results for the six month period of fiscal 2005. "Looking forward, we believe that we are positioning KV as a low-cost producer, while still providing unparalleled service to our customers through innovative products and operational excellence," concluded Dutmers. About Knape & Vogt Knape & Vogt Manufacturing Co. brings more than a century of experience to the design, manufacture and distribution of kitchen and bath storage solutions and office products for original equipment manufacturers, specialty distributors, office furniture dealers, hardware chains and major home centers throughout the country. Additional information on KV's product lines is available on http://www.knapeandvogt.com/ . Cautionary Statement: This press release contains certain forward-looking statements that involve risks and uncertainties. When used in this release, the words "believe," "anticipates," "think," "intend," "optimistic," "forecast," "looking forward," "expect," "potential" and similar expressions identify forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include, but are not limited to, statements concerning future improvements in net sales, margins and profitability. Such statements are subject to certain risks and uncertainties which could cause actual results to differ materially from those expressed or implied by such forward-looking statements, including, but not limited to, economic, competitive, governmental and technological factors affecting the Company's operations, markets, products, services and prices. Readers are cautioned not to place undue reliance on these forward- looking statements, which speak only as of the date of this press release. Knape & Vogt Manufacturing Company and Subsidiaries Condensed Consolidated Statements of Income (Unaudited) Six Months Ended Three Months Ended Jan. 1, 2005 Dec. 27, 2003 Jan. 1, 2005 Dec. 27, 2003 Net sales $75,894,375 $70,355,998 $37,508,605 $34,342,986 Cost of sales 62,130,518 56,143,077 30,549,524 27,182,375 Gross margin 13,763,857 14,212,921 6,959,081 7,160,611 Selling and administrative expenses 11,367,449 11,695,019 5,532,198 5,906,795 Impairment expenses 1,778,447 - 1,778,447 - Operating income (loss) 617,961 2,517,902 (351,564) 1,253,816 Interest and other expenses, net 718,345 839,627 411,187 446,698 Income (loss) before income taxes (100,384) 1,678,275 (762,751) 807,118 Income taxes 31,920 566,497 (239,936) 365,214 Net income (loss) $(132,304) $1,111,778 $(522,815) $441,904 Earnings per common share - basic and diluted: Weighted average shares outstanding 4,516,893 4,516,137 4,517,105 4,516,349 Net income (loss) per share $(0.03) $0.25 $(0.12) $0.10 Cash dividend - Common stock $0.33 $0.33 $0.165 $0.165 Cash dividend - Class B common stock $0.30 $0.30 $0.15 $0.15 Knape & Vogt Manufacturing Company and Subsidiaries Condensed Consolidated Balance Sheets Jan. 1, 2005 July 3, 2004 (Unaudited) (Audited) Assets Current Assets: Cash and equivalents $6,456,845 $5,278,869 Accounts receivable, net 19,282,799 19,959,442 Inventories 24,151,737 23,955,271 Prepaid expenses and other 831,556 950,911 Total current assets 50,722,937 50,144,493 Property, plant and equipment, net 25,114,752 28,683,714 Other assets 17,215,120 17,423,119 $93,052,809 $96,251,326 Liabilities and Equity Current liabilities $21,922,429 $22,805,708 Long-term debt and capital leases 24,532,113 24,538,864 Deferred income taxes & other long-term liabilities 10,526,020 12,082,536 Stockholders' equity 36,072,247 36,824,218 $93,052,809 $96,251,326 Knape & Vogt Manufacturing Company and Subsidiaries Condensed Consolidated Statements of Cash Flows (Unaudited) Six Months Ended Jan. 1, 2005 Dec. 27, 2003 From Operating Activities: Net income (loss) $(132,304) $1,111,778 Depreciation and amortization 3,327,143 3,278,015 Change in retirement plan cost 132,373 172,784 Deferred income taxes (1,204,142) 205,319 Impairment expenses 1,778,447 - Loss (gain) on disposal of fixed assets (1,103) (4,349) Changes in operating assets & liabilities (140,079) (1,931,557) Other, net 13,496 - Net cash provided by operating activities 3,773,831 2,831,990 From Investing Activities: Additions to property, plant & equipment net (1,578,918) (764,415) Proceeds from sales of property, plant & equipment 1,750 800 Other, net (13,367) (21,962) Net cash used for investing activities (1,590,535) (785,577) From Financing Activities: Cash dividends paid (1,426,156) (1,424,363) Net change in long-term debt/capital leases (6,751) (6,295) Net cash used for financing activities (1,432,907) (1,430,658) Effect of Exchange Rates on Cash 427,587 120,805 Net increase in cash and equivalents $1,177,976 $736,560 DATASOURCE: Knape & Vogt Manufacturing Co. CONTACT: Leslie Cummings, Vice President of Finance and Treasurer of Knape & Vogt Manufacturing Company, +1-616-459-3311, Ext. 225; Jeff Lambert or Eric Lubbers of Lambert, Edwards & Associates, Inc., +1-616-233-0500, , for Knape & Vogt Manufacturing Co. Web site: http://www.knapeandvogt.com/

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