New Products Drive Firms Gain
GRAND RAPIDS — New product introductions during 2003 lifted Knape & Vogt Manufacturing Co. to a strong sales increase during the last three months of the year.
The Grand Rapids-based maker of kitchen and bath storage units and office furniture components recently reported second-quarter sales of $34.5 million, up 14.2 percent over the $30.5 million in the same period a year ago.
Net income, boosted by a one-time, after-tax gain of $500,000, grew 92 percent over the second quarter of a year earlier, from $441,904, or 10 cents per share, to $851,628, or 19 cents per share.
Chairman and CEO Bill Dutmers credited the improved performance to new products that accounted for $4.4 million in sales during the quarter and have enabled the company to cultivate new customers. He sees the potential for the trend to continue in the months ahead.
“We have grown sales and gained market share with both existing and new customers,” Dutmers said. “Our ability to bring innovative, value-added products to the markets we serve, combined with our outstanding customer service, have proven to be key reasons for our growth over the past six months.”
Among the products with enhanced features Knape & Vogt rolled out during 2003 are a pocket-drawer slide and a heavy-duty anti-tip and locking system for lateral files, known as Interlok.
Those products are the result of a strategy Knape & Vogt put into place four years ago to put a greater emphasis on research and development. Where the R&D budget was once “pretty bare bones” and just 1 percent or 2 percent of net sales, it’s now at about 5 percent, said Leslie Cummings, Knape & Vogt’s treasurer and vice president of finance.
The company was able to maintain a commitment to R&D during the economic downturn and the depression in the office furniture industry, which accounts for 20 percent of Knape & Vogt’s business. The company chose to maintain higher levels of R&D spending in order to create long-term gains through new product innovations, rather than curtail spending to generate better earnings on a short-term basis.
“The philosophy all through this has been we will weather through but we will not compromise on the engineers and the staff we have in order to make ourselves look better. You look for other areas you can be careful in spending and cutting,” Cummings said. “We’ve made some investments and stuck through this when things were not as good and we’re seeing results.”
Beyond new products, Knape & Vogt’s sales have benefited from an expanded direct sales force that was built as the company moved away from independent representatives, she said.
Midway through the fiscal year, the company’s sales grew 15.4 percent, from $61.2 million to $70.6 million, over the first six months of last year. New products generated $9.8 million in sales for the period, compared with $5.2 million a year ago.
Mid-year net income was $1.1 million, or 25 cents per share, up 10 percent from the $1 million, or 23 cents per shares, from a year ago.
Knape & Vogt employs about 600 people at its corporate offices and manufacturing facility in Grand Rapids, and 100 people at a production plant in Muncie, Ind. The company sells products directly to office furniture manufacturers, as well as to specialty distributors, furniture dealers and on the retail market through national hardware store chains and home-improvement centers.