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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 Quarter Ended April 2, 2005

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 000-01859

KNAPE & VOGT MANUFACTURING COMPANY
(Exact name of registrant as specified in its charter)

(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 ______

        Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

YES _____ NO __X__

        As of April 2, 2005, Knape & Vogt Manufacturing Company had 2,487,752 shares of Common Stock outstanding and 2,029,353 shares of Class B Common Stock outstanding.

KNAPE & VOGT MANUFACTURING COMPANY AND SUBSIDIARIES

INDEX

1

KNAPE & VOGT MANUFACTURING COMPANY AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
CONDENSED CONSOLIDATED BALANCE SHEETS

See accompanying notes.

2

KNAPE & VOGT MANUFACTURING COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)

See accompanying notes.

3

KNAPE & VOGT MANUFACTURING COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
(Unaudited)

See accompanying notes.

4

KNAPE & VOGT MANUFACTURING COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

See accompanying notes.

5

KNAPE & VOGT MANUFACTURING COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Note 1 – Summary of Significant Accounting Policies

The condensed consolidated financial statements have been prepared by Knape & Vogt Manufacturing Company (the “Company”), without audit, in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. Management believes that the disclosures made in this document are adequate so as not to make the information presented misleading. Operating results for the nine and three month periods ended April 2, 2005, are not necessarily indicative of the results that may be expected for the fiscal year ending July 2, 2005. It is suggested that these condensed financial statements be read in conjunction with the financial statements and notes thereto included in the Company’s Form 10-K for the year ended July 3, 2004.

The Company utilizes a 52- or 53-week fiscal year, which ends on the Saturday nearest the end of June. The fiscal year ended July 3, 2004 contained 53 weeks, while the fiscal year ending July 2, 2005 will contain 52 weeks. Both nine-month periods ended on April 2, 2005 and March 27, 2004 contained 39 weeks.

Revenue Recognition

The Company records revenue when title to the product and risk of ownership passes to the buyer. Sales are shown net of returns, discounts and any other form of sales incentive, including cooperative advertising and rebates. In certain circumstances, the Company does provide buyback programs and markdown allowances to its customers. These amounts are fixed at the start of the contract period with the customer and accounted for in accordance with Statement of Position No. 93-7, “Reporting on Advertising Costs” and Emerging Issues Task Force Issue No. 01-9, “Accounting for Consideration Given by a Vendor to a Customer”. The cost of these programs are either expensed at the time of the initial shipment of the goods or are expensed on a prorated basis over the sales of the contract, if the Company has a written commitment from the customer.

Stock Based Compensation

The Company accounts for its stock option plans in accordance with APB Opinion No.25, Accounting for Stock Issued to Employees. Since the exercise price of the Company’s employee stock options equals or exceeds the market price of the underlying stock on the date of the grant, no compensation cost is recognized under APB Opinion No. 25. In accordance with Statement of Financial Accounting Standards (“SFAS”) No. 123, Accounting for Stock-Based Compensation, the Company is required to provide pro forma information regarding net income and earnings per share as if compensation costs for the Company’s stock option plan had been determined using a fair value based estimate. Had SFAS No. 123 been adopted, there would be no change in either net income or earnings per share as no options have been granted to employees during the past three fiscal years.

Reclassifications

Certain prior year information has been reclassified to conform to the current year presentation.

6

Note 2 – New Accounting Standards

In February 2005, the SEC Office of the Chief Accountant issued a letter to clarify the staff’s interpretation regarding the accounting for operating leases under generally accepted accounting principles. Issues covered in the letter include the amortization of leasehold improvements, rent holidays, and landlord/tenant incentives. The SEC staff believes that its positions are based upon existing accounting literature, and as such, any registrants who determine their accounting for leases in prior periods to be in error should issue a restatement of results from the correction of any such errors, if deemed significant. The Company is and has been in compliance with regard to accounting for its leases and has determined that there is no impact of this clarification on its financial statements in the current quarter or prior periods. Refer to Note 8, Lease Commitments, provided in the Company’s Form 10-K for the year ended July 3, 2004, for further information regarding the company’s leases.

In December 2004, the Financial Accounting Standards Board (“FASB”) issued a revision of SFAS No. 123(R), Share-Based Payment, which supersedes APB Opinion No. 25. This statement focuses primarily on transactions in which an entity obtains employee services in exchange for share-based payments. Under SFAS No. 123(R), a public company generally is required to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award, with such cost recognized over the applicable vesting period. In addition, SFAS No. 123(R) requires an entity to provide certain disclosures in order to assist in understanding the nature of share-based payments transactions and the effects of those transactions on the financial statements. The provisions of SFAS No. 123(R) require application as of the beginning of the first fiscal year that begins after June 15, 2005. As such, the Company is required to adopt the provisions of SFAS No. 123(R) at the beginning of fiscal year 2006. The Company has not granted such awards over the past three years. If in the future, the Company should grant any such awards, it will evaluate the impact of SFAS No. 123(R) on its consolidated financial statements.

In December 2004, the FASB issued Staff Position (“FSP”) No. 109-1, Application of FASB Statement No. 109, Accounting for Income Taxes, for the Tax Deduction on Qualified Production Activities Provided by the American Jobs Creation Act (“the Act”) of 2004. The FASB also issued FSP 109-2, Accounting and Disclosure Guidance for the Foreign Earnings Repatriation Provision within the American Jobs Creation Act of 2004. The Company is currently evaluating the impact that the Act will have on its consolidated financial statements and expects to determine such impact prior to issuing its fiscal 2005 annual report.

In November 2004, the FASB issued SFAS No. 151, Inventory Cost. This Statement amends the guidance in Accounting Research Bulletin No. 43, Chapter 4, Inventory Pricing, to clarify the accounting for abnormal amounts of idle facility expense, freight, handling costs, and wasted material (scrap). SFAS No. 151 requires that those items be recognized as current-period charges. In addition, this Statement requires that the allocation of fixed production overheads to the costs of conversion be based on the normal capacity of the production facilities. The provisions of SFAS No. 151 are effective for inventory costs incurred in fiscal years beginning after June 15, 2005. As such, the Company is required to adopt these provisions at the beginning of fiscal year 2006. The Company is currently evaluating the impact of SFAS No. 151 on its consolidated financial statements.

Note 3 – Derivative Instrument

The Company uses an interest rate swap agreement to modify a portion of the variable rate revolving line of credit to a fixed rate obligation, thereby reducing the exposure to market rate fluctuations. The interest rate swap agreement is designated as a hedge, and effectiveness is determined by matching the principal balance and terms with that specific obligation. Amounts currently due to or from interest-rate-swap-counter parties are recorded in interest expense in the period in which they accrue. The derivative, which has a notional amount of $20,000,000, was recognized as a liability on the balance sheet at its fair value of $633,100 at April 2, 2005 and $1,391,133 at July 3, 2004.

7

Note 4 — Common Stock and Per Share Information

The Company has 6,000,000 shares of common stock and 4,000,000 shares of Class B common stock authorized. All of the stock is $2 par/share.

The following are the numerators and denominators used in the calculations of basic and diluted earnings per share (EPS) for each of the periods presented:

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.

Note 5 — Inventories

Inventories are valued at the lower of FIFO (first-in, first-out) cost or market. Inventories are summarized as follows:

8

Note 6 – Impairment Expenses

During the quarter ended January 1, 2005, the Company recognized asset impairment charges and accelerated depreciation of $419,204 pre-tax on certain manufacturing equipment in accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. The equipment has been utilized for backup production of certain precision drawer slide products. Now those products are being partially sourced from a third party rather than manufactured in-house, so the extra capacity is no longer required. Some of the equipment will be abandoned and its useful life was adjusted accordingly for depreciation purposes. The equipment that will be held and used or sold was written-down to its estimated fair values as determined by the Company’s management based on estimated prices of similar assets or proceeds from sale, respectively. The equipment that will be sold has been classified as assets held for sale on the balance sheet and on the condensed balance sheet in this document.

In January 2005, the Board of Directors approved a restructuring plan to close its Muncie, Indiana facility and relocate its operations into existing available space in the Grand Rapids, Michigan facility. In accordance with SFAS No. 144, the Company recorded pre-tax impairment charges of $1,663,359, in the second quarter of fiscal 2005, consisting of the write down of the long-lived assets; including real estate and manufacturing equipment located in Muncie facility, to the lower of their carrying value or their estimated fair values, less the disposition costs. Fair value estimates were determined by the Company’s management, with the assistance of independent appraisers, and were based on estimated proceeds from sale. The fair value of the real estate was determined to be $1.0 million and the equipment was adjusted to a fair value of $220,000. Management anticipates that the closure of the facility and the relocation of the operations will be completed prior to the end of its fiscal year.

The Company will also incur certain qualifying exit costs in connection with the closure of the Muncie facility, including severance and the relocation of certain equipment and inventory. The severance/stay on bonus costs and the facility exit and other costs, estimated to be approximately $650,000 pre-tax, are being expensed as they are incurred. All of the charges are being recorded in the Manufacturing division of the Company. The exit costs incurred and expensed during the third quarter of fiscal 2005 totaled approximately $204,000 pre-tax.

The following is a summary of the impairment/restructuring activities for the nine months ended April 2, 2005. The following table presents the pre-tax restructuring charges, by category,

The following summarizes the restructuring accrual activity since the beginning of fiscal 2005. Facility exit costs associated with the movement of equipment and inventory, as well as facility preparation and training related to the relocation, are recognized as incurred and are not included in the ending restructuring accrual balance.

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Note 7 – Warranty Disclosure

The Company provides a limited lifetime warranty on most products sold. Depending on the product, the lifetime warranty is generally defined in a range of three to fifteen years. The Company does not sell or otherwise issue warranties or warranty extensions as stand alone products. The warranty issues replacement of the product as the resolution for any warranty claims. Reserves have been established for the various costs associated with the Company’s warranty program. General warranty reserves are based on historical claims experience and other currently available information and are periodically adjusted for business levels and other factors. Specific reserves are established if an issue is identified with the amounts for such reserves based on the estimated cost to correct the problem. The actual warranty expense could differ from the estimates made by the Company based on product performance. The following table presents the changes in the Company’s product warranty liability:

Note 8 — Comprehensive Income

Comprehensive income represents net income and other revenues, expenses, gains and losses that are excluded from net income and recognized directly as a component of stockholders’ equity.

Comprehensive income and its components consist of the following:

Other comprehensive income related to the interest rate swap agreement consisted of the following components:

Note 9 — Retirement Plans

The Company has several noncontributory defined benefit pension plans that provide benefits based on the participants’ years of service. The Company also has a nonqualified supplemental retirement program for designated officers of the Company, which includes death and disability benefits. The postretirement health-care plan covers substantially all employees. The plan is unfunded and contributory.

10

Components of Net Periodic Benefit Costs:

For the three months ended:

For the nine months ended:

Employer Contributions

The Company has contributed $166,642 for the quarter and $505,132 for the nine months ended April 2, 2005 to fund its retirement plans compared to $171,906 and $515,088, respectively for the same periods in the prior year. The Company anticipates contributing approximately an additional $167,000 to fund its retirement plans in fiscal 2005 for an estimated total of $672,000.

Note 10 – Income Taxes

During the third quarter of fiscal 2005, the Company recognized one-time tax benefits of $594,000. Of this total, $372,000 related to the expiration of a certain statutory period and the related reversal of the associated tax contingencies. The remaining $222,000 of tax benefits was related to amended filings for prior year research and development credits.

Note 11 – Segment Information

During the fourth quarter of fiscal 2004, management began managing the business and reviewing financial information by market channel rather than by the previous Home & Commercial Products and Office Products divisions.

The Office Products division was segregated into two market channels: OEM and dealer. The OEM market channel sells precision drawer slides, hardware and ergonomic products to original equipment office furniture manufacturers. The dealer market channel sells ergonomic products to independent office furniture dealers. These dealers purchase product from office furniture manufacturers and resell the furniture along with design and installation services to the end customer.

The Home & Commercial Products division was segregated into two market channels: consumer and distribution/other. The consumer market channel sells a majority of the Company’s product lines to retailers. The distribution/other market channel sells many of the Company’s product lines to kitchen and bath OEM manufacturers and full line woodworking distributors.

11

Management has limited its review of the channels to net sales to external customers and operating profit before administrative costs as shown below. In accordance with SFAS No. 131, “Disclosures about Segments of an Enterprise and Related Information”, only those measures prepared on an ongoing basis and reviewed by the chief operating decision maker are disclosed.

The accounting policies of the business segments are the same as those described in the summary of significant accounting policies in the 2004 Annual Report on Form 10-K.

12

		Office Products OEM		Office Products Dealer		Consumer		Distribution and Other		Manu- facturing		Corporate and Other		Consolidated Total
For the Nine Months Ended: April 2, 2005:
Net sales to external
customers		$ 30,973,309		$6,958,019		$21,371,416		$56,906,360		($ 135,278	)	$               -		$116,073,826
Operating profit (loss)
before administrative
costs, other expenses and
income taxes		2,224,473		981,203		214,651		8,793,537		(4,199,150	)	-		8,014,714
Administrative costs,
impairment charges and
other expenses		-		-		-		-		1,982,474		4,409,567		6,392,041
Income tax expense		-		-		-		-		-		63,364		63,364
Net income (loss)		2,224,473		981,203		214,651		8,793,537		(6,181,624	)	(4,472,931	)	1,559,309
March 27, 2004:
Net sales to external
customers		26,049,798		6,761,462		22,347,618		52,056,758		$               -		$               -		107,215,636
Operating profit (loss)
before administrative
costs, other expenses and
income taxes		(2,031,346	)	819,369		207,309		8,928,677		(87,609	)	-		7,836,400
Administrative costs,
other expenses		-		-		-		-		-		4,330,207		4,330,207
Income tax expense		-		-		-		-		-		1,256,073		1,256,073
Net income (loss)		(2,031,346	)	819,369		207,309		8,928,677		(87,609	)	(5,586,280	)	2,250,120

Note 12 – Legal Contingencies

Two pending legal matters are described in Note 10 – Legal Contingencies in the 2004 Annual Report on Form 10-K. There has been no change in the Canada Customs and Revenue Agency matter. In the case involving the former employee’s claim for additional benefits under an executive retirement plan, the Sixth Circuit Court of Appeals, in January 2005, denied the plaintiff’s appeal of the dismissal.

During the second quarter of fiscal 2005, a competitor filed a suit in the U.S. District Court of the Central District of California alleging that the Company infringes two of the competitor’s U.S. patents. The competitor is seeking monetary damages and injunctive relief. The Company has received an opinion from its outside patent counsel that the Company’s products do not infringe the competitor’s patents. The Company has answered that it denies any liability and will vigorously defend the suit.

The Company is also subject to other legal proceedings and claims, which arise in the ordinary course of business.

13

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,” “may,” and similar expressions identify forward-looking statements. Forward-looking statements include, but are not limited to, statements concerning future revenue, net income growth, cash flows and capital expenditures. 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. Readers are cautioned not to place undue reliance on these forward-looking statements that speak only as of the date of this report.

RESULTS OF OPERATIONS

Net Sales

Net sales for the third quarter of fiscal 2005 were $40.2 million compared to $36.9 million for the same period in the prior year. This was the seventh consecutive quarter of revenue growth for the Company. Net sales for the first nine months of fiscal 2005 were $116.1 million compared to $107.2 million for the same period in the prior year. In total, the Company had new product sales of $6.5 million and $19.3 million for the quarter and nine months ended April 2, 2005. This compared to new product sales of $5.9 million and $16.3 million for the same periods respectively in fiscal 2004. The Company consistently defines new product sales, including product extensions, as those products sold within a three-year period from the date of introduction.

The Distribution and Other segment net sales of $19.6 million for the third quarter and $56.9 million for the first nine months of fiscal 2005 represented growth of 6.4% and 9.3%, respectively, over the same periods in the prior year. The growth resulted primarily from the addition of several new products. These include the Virtu™ line of upscale kitchen and bath accessories, several new wood and wire storage accessory products and the expanded line of precision ball bearing drawer slides, including the Precision Built™ family of slides. The Company continues to identify new product solutions for this key market channel.

The Consumer segment net sales of $8.0 million for the third quarter and $21.4 million for the first nine months of fiscal 2005 represented a decline of 4.2% and 4.4%, respectively, over the same periods in the prior year. Last year, the Company launched a number of new products to several key customers during the first nine months and filled the initial stocking orders during this same period resulting in higher than normal sales. While this segment of the business continues to market its new products to both its existing and potential customers, the Company has been focusing on improving the profitability of this channel, particularly in the U.S. portion of the market. This focus on improved profitability has limited the number of promotional programs that the Company has participated in with its customers and has reduced the overall gross sales.

The Office Products Original Equipment Manufacturer (“OEM”) segment net sales of $10.5 million for the third quarter and $31.0 million for the first nine months of fiscal 2005 represented growth of 30.5% and 18.9%, respectively, over the same periods in the prior year. The Business and Institutional Furniture Manufacturers’ Association (BIFMA) results for the eight months ended February 2005, reported increased shipments of 8.4% compared to the same period in the prior year. The Company’s ability to provide customer specific versions of KV’s precision ball bearing drawer slides at competitive prices has been the primary reason for its ability to outperform the overall market in this channel. In addition, the Company is beginning to see more sales revenue generated from its line of height adjustable tables in this market.

The Office Products Dealer segment net sales increased slightly to $2.2 million for the third quarter and $7.0 million for the first nine months of fiscal 2005. The Company expects new products to help it continue to record sales growth as it enters into the last three months of the fiscal year. These products include the ProLiftix™ line of height adjustable tables, the Polaris™ lever free adjustable keyboard system and the Proxi™ line of office organization tools.

14

KNAPE & VOGT MANUFACTURING COMPANY AND SUBSIDIARIES

MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)

Gross Profit

Gross profit, as a percentage of net sales, was 19.3% for the third quarter and 18.5% for the first nine months of fiscal 2005 compared to 21.6% and 20.7%, respectively, for the same periods in the prior year. The gross profit was negatively impacted by the increased cost of steel. Since the beginning of the calendar year 2004, the average price of steel has increased over 70%. The increased steel costs resulted in the Company paying approximately $2.3 million during the third quarter and $6.9 million for the nine months ended April 2, 2005 more for steel if compared to steel pricing at the beginning of the calendar year 2004. During the third quarter of fiscal 2005, the Company was able to pass along most of the increased steel cost to its customers. The additional revenue generated from passing along the higher steel costs had no gross margin associated with it and effectively lowered the gross margin by approximately 1.1% for the quarter and 2.1% for the first nine months.

While it is difficult to predict the cost of steel, market pricing appears to have stabilized or slightly declined during the third quarter of fiscal 2005.

During the second quarter of fiscal 2005, the Company recorded additional depreciation expense of $304,115 in cost of goods sold related to certain equipment that it had been utilizing for backup production of precision drawer slide products. Those products are now being partially sourced from overseas rather than manufactured in house, so the extra capacity is no longer required. The useful life of the equipment identified for disposal was adjusted accordingly for depreciation purposes.

During the first nine months of fiscal 2005, the Office Products OEM segment has recorded their cost for certain precision slides partially sourced from Asia and partially produced domestically at the Asian cost regardless of where the slides were produced. This resulted in improved profitability for this segment of the business and correspondingly reduced the profitability of the Manufacturing segment.

Operating Expenses

Selling and administrative expenses, as a percentage of net sales, were 13.5% for the third quarter and 14.5% for the first nine months of fiscal 2005 compared to 15.6% and 16.3%, respectively, for the same periods in the prior year. The decrease in selling and administrative expense, as a percentage of sales, reflects the fact that the Company has been successful in its ability to leverage the fixed portion of its selling and administrative expenses while sales have grown. Ongoing investments are being made in those products and markets where it believes that such investments will generate future growth.

Impairment Expenses

During the second quarter of fiscal 2005, the Company recorded a pre-tax impairment charge of $115,089 related to the precision drawer slide equipment discussed above that will be held and used or held for sale.

In January 2005, the Board of Directors approved a restructuring plan to close its Muncie, Indiana facility and relocate its operations into existing available space in the Grand Rapids, Michigan facility. KV recorded pre-tax impairment charges of $1,663,359, in the second quarter of fiscal 2005, consisting of the write down of the long-lived assets; including real estate and manufacturing equipment located in the Muncie facility, to the lower of their carrying value or their estimated fair values, less the disposition costs. Fair value estimates were determined by the Company’s management, with the assistance of independent appraisers, and were based on estimated proceeds from sale. The fair value of the real estate was determined to be $1.0 million and the equipment was adjusted to a fair value of $220,000. Management anticipates that the closure of the facility and the relocation of the operations will be completed prior to the end of its fiscal year.

15

KNAPE & VOGT MANUFACTURING COMPANY AND SUBSIDIARIES

MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)

The Company will also incur certain qualifying exit costs in connection with the closure of the Muncie facility, including severance and the relocation of certain equipment and inventory. The severance/stay on bonus costs and the facility exit and other costs, estimated to be approximately $650,000 pre-tax, are being expensed as they are incurred. All of the charges are being recorded in the Manufacturing division of the Company. The exit costs incurred and expensed during the third quarter of fiscal 2005 totaled approximately $204,000 pre-tax.

Management believes that the decision to relocate the Muncie operations will lower the Company’s overall manufacturing costs. The Company will be able to utilize the pool of stable skilled employees at its Grand Rapids manufacturing facility, including the existing manufacturing expertise of its in-house kaizen staff and industrial engineers. In addition, management believes that the consolidation of operations will improve the Company’s speed to market on its kitchen and bath accessories, as the new product engineers and the test lab are located in Grand Rapids.

Management has estimated the payback period for the closing of the Muncie facility will be approximately a year and a half from the closure date.

Interest and Other Expenses, net

Interest expense was $411,560 and $1,207,684 for the quarter and nine months ended April 2, 2005, compared to $412,760 and $1,202,698 for the same periods in the prior year, respectively.

Other income was $38,828 for the third quarter of fiscal 2005 compared to $36,344 for the same quarter in the prior year. For the first nine months of fiscal 2005, other income was $116,607 compared to other expenses of $13,345 for the same period in the prior year. The other income for the first nine months of fiscal 2005 reflects a settlement payment received in connection with one of the Company’s patents, along with favorable exchange rate gains. The other expense shown in the prior year resulted from exchange rate losses recorded on certain Canadian sales.

Income Taxes

The effective tax rate was 36.3% for the third quarter of fiscal 2005, excluding the one-time tax benefits of $594,000 related to the expiration of a certain tax statutory period and the related reversal of tax contingencies and the amended filings for research credits. This compared to 37.7% for the same period in the prior year. The effective tax rate for the first nine months of fiscal 2005 was 3.9% compared to 35.8% for the same period in fiscal 2004. The tax rate for the first nine months of fiscal 2005 was lower due to the one-time tax benefits recorded in the third quarter.

Net Income

Net income for the third quarter of fiscal 2005 was $1.7 million or $0.37 per diluted share compared to net income of $1.1 million, or $0.25 per diluted share for the same quarter of last year. Net income for the first nine months of fiscal 2005 was $1.6 million or $0.34 per diluted share compared with $2.3 million or $0.50 per diluted share in the first nine months of fiscal 2004. The first nine months of fiscal 2005 included the pre-tax impairment/restructuring charges and additional depreciation of $2.3 million associated with the relocation of the wire operation, along with higher steel costs, partially offset by the one-time tax benefits.

Liquidity and Capital Resources

Net cash provided by operating activities for the first nine months of fiscal 2005 was $5.0 million compared to $2.6 million for the first nine months of fiscal 2004. In fiscal 2005, the Company has been successful in reducing its days outstanding in accounts receivable and improving its inventory turns.

16

KNAPE & VOGT MANUFACTURING COMPANY AND SUBSIDIARIES

MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)

Cash used for investing activities was $2.1 million for the first nine months of fiscal 2005, compared to $929,731 used in the same period in the prior year. Capital expenditures totaled $2.1 for the nine months ended April 2, 2005, compared to $959,030 for the first nine months of the prior year. The capital expenditures for the first nine months of fiscal 2005 represented investments in tooling for new products, a new showroom in Chicago and equipment for Asian production.

There were capital expenditure commitments of approximately $1,245,000 for new product tooling and Asian production equipment at April 2, 2005. Capital expenditures for the fiscal year are anticipated to be approximately $3.0 million.

Cash used for financing activities was $2.2 million for the first nine months of fiscal 2005, compared to $1.1 million used in the same period in the prior year. The expenditures represent the Company’s dividend payments to its shareholders.

Anticipated cash flows from operations and available balances on the revolving credit line are expected to be adequate to fund working capital, capital expenditures, stock repurchases and dividend payments.

Legal Proceedings

Two pending legal matters are described in Note 10 – Legal Contingencies in the 2004 Annual Report on Form 10-K. There has been no change in the Canada Customs and Revenue Agency matter. In the case involving the former employee’s claim for additional benefits under an executive retirement plan, the Sixth Circuit Court of Appeals, in January 2005, denied the plaintiff’s appeal of the dismissal.

During the second quarter of fiscal 2005, a competitor filed a suit in the U.S. District Court of the Central District of California alleging that the Company infringes two of the competitor’s U.S. patents. The competitor is seeking monetary damages and injunctive relief. The Company has received an opinion from its outside patent counsel that the Company’s products do not infringe the competitor’s patents. The Company has answered that it denies any liability and will vigorously defend the suit.

The Company is also subject to other legal proceedings and claims, which arise in the ordinary course of business.

New Accounting Standards

In February 2005, the SEC Office of the Chief Accountant issued a letter to clarify the staff’s interpretation regarding the accounting for operating leases under generally accepted accounting principles. Issues covered in the letter include the amortization of leasehold improvements, rent holidays, and landlord/tenant incentives. The SEC staff believes that its positions are based upon existing accounting literature, and as such, any registrants who determine their accounting for leases in prior periods to be in error should issue a restatement of results from the correction of any such errors, if deemed significant. The Company is and has been in compliance with regard to accounting for its leases and has determined that there is no impact of this clarification on its financial statements in the current quarter or prior periods. Refer to Note 8, Lease Commitments, provided in the Company’s Form 10-K for the year ended July 3, 2004, for further information regarding the company’s leases.

17

KNAPE & VOGT MANUFACTURING COMPANY AND SUBSIDIARIES

MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)

In December 2004, the Financial Accounting Standards Board (“FASB”) issued a revision of SFAS No. 123(R), Share-Based Payment, which supersedes APB Opinion No. 25. This statement focuses primarily on transactions in which an entity obtains employee services in exchange for share-based payments. Under SFAS No. 123(R), a public company generally is required to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award, with such cost recognized over the applicable vesting period. In addition, SFAS No. 123(R) requires an entity to provide certain disclosures in order to assist in understanding the nature of share-based payments transactions and the effects of those transactions on the financial statements. The provisions of SFAS No. 123(R) require application as of the beginning of the first fiscal year that begins after June 15, 2005. As such, the Company is required to adopt the provisions of SFAS No. 123(R) at the beginning of fiscal year 2006. The Company has not granted such awards over the past three years. If in the future, the Company should grant any such awards it will evaluate the impact of SFAS No. 123(R) on its consolidated financial statements.

In December 2004, the FASB issued Staff Position (“FSP”) No. 109-1, Application of FASB Statement No. 109, Accounting for Income Taxes, for the Tax Deduction Provided to U.S. Based Manufacturers by the American Jobs Creation Act of 2004 (“the Act”). The FASB also issued FSP 109-2, Accounting and Disclosure Guidance for the Foreign Earnings Repatriation Provision within the American Jobs Creation Act of 2004. The Company is currently evaluating the impact that the Act will have on its consolidated financial statements and expects to determine such impact prior to issuing its fiscal 2005 annual report.

In November 2004, the FASB issued SFAS No. 151, Inventory Cost. This Statement amends the guidance in Accounting Research Bulletin No. 43, Chapter 4, Inventory Pricing, to clarify the accounting for abnormal amounts of idle facility expense, freight, handling costs, and wasted material (scrap). SFAS No. 151 requires that those items be recognized as current-period charges. In addition, this Statement requires that the allocation of fixed production overheads to the costs of conversion be based on the normal capacity of the production facilities. The provisions of SFAS No. 151 are effective for inventory costs incurred in fiscal years beginning after June 15, 2005. As such, the Company is required to adopt these provisions at the beginning of fiscal year 2006. The Company is currently evaluating the impact of SFAS No. 151 on its consolidated statements.

Critical Accounting Policies

This discussion and analysis of the Company’s financial condition and results of its operations is based upon its consolidated financial statements. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts. On an ongoing basis, management evaluates the estimates, including those related to bad debts, inventories, long-lived assets, income taxes, self-insurance reserves, retirement benefits and contingencies and litigation. Management bases the estimates on historical experience and on various other assumptions and factors that they believe to be reasonable under the circumstances. Based on management’s ongoing review, adjustments are made that are considered appropriate under the facts and circumstances. The accompanying condensed consolidated financial statements are prepared using the same critical accounting policies discussed in the 2004 Annual Report on Form 10-K.

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KNAPE & VOGT MANUFACTURING COMPANY AND SUBSIDIARIES
QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The Company is exposed to market risks, which include changes in the Canadian dollar 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. The derivative was recognized as a liability on the balance sheet at its fair value of $633,100 at April 2, 2005 and $1,391,133 at July 3, 2004.

The following table provides information on the Company’s fixed maturity investments as of April 2, 2005 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.

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.

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KNAPE & VOGT MANUFACTURING COMPANY AND SUBSIDIARIES
CONTROLS AND PROCEDURES

Item 4. Controls and Procedures

     (a) Evaluation of Disclosure Controls and Procedures

     (b) Changes in Internal Controls

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KNAPE & VOGT MANUFACTURING COMPANY AND SUBSIDIARIES

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

Item 6. Exhibits and Reports on Form 8-K

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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.

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EXHIBIT INDEX

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EXHIBIT 31.1

I, William R. Dutmers, certify that:

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EXHIBIT 31.2

I, Leslie J. Cummings, certify that:

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EXHIBIT 32.1

I, William R. Dutmers, Chairman of the Board and Chief Executive Officer of Knape & Vogt Manufacturing Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

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EXHIBIT 32.2

I, Leslie J. Cummings, Vice President of Finance and Treasurer of Knape & Vogt Manufacturing Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

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