# 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 April 1, 2006

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)

|Michigan        
 (State of Incorporation) | 38-0722920
(IRS Employer Identification No.)
|------------------------------------------ | --------------------------------------------

|2700 Oak Industrial Drive, NE
          Grand Rapids, Michigan          
 (Address of principal executive offices) | 49505
(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 ______

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

YES _____
             NO    __X__

Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act).

YES _____
             NO    __X__

As
of April 1, 2006, Knape & Vogt Manufacturing Company had 2,607,294 shares of Common
Stock outstanding and 1,904,036 shares of Class B Common Stock outstanding.

---



# Forward-Looking
Statements

The
matters discussed in this Quarterly Report on Form 10-Q include forward-looking statements
about the plans, strategies, objectives, goals, estimates, projections, or expectations of
the industry, economics, or the Company itself. Statements, including without limitation,
those related to: future revenue, earnings, margins, growth, cash flows, operating
measurements, tax rates and tax benefits; expected economic returns; projected operating
results or dividend rates; future strength of the Company; future pension costs; future
new product sales; future marketing investments; and market risk are forward-looking
statements. In addition, forward-looking statements are identifiable by words or phrases
indicating that Knape & Vogt or its management, expects,
anticipates, believes, estimates,
forecasts, intends, is likely, projects,
plans, forecasting, optimistic, confident,
opinion, or has goals, objectives, or
strategies, that a particular occurrence or event will,
may, could, should, or will likely result
in the future, that a trend is toward a particular result or occurrence, or
other stated expectations. These statements are not guarantees of future performance and
involve certain risks, uncertainties, and assumptions that are difficult to predict with
respect to timing, extent, and likelihood. Undue reliance should not be placed on these
forward-looking statements, which speak only as of the date of this Quarterly Report.

Besides
risks and uncertainties described in forward-looking statements contained in this
Quarterly Report on Form 10-Q, Annual Report on Form 10-K for the fiscal year ended July
2, 2005 and other reports filed with the Securities and Exchange Commission, there are
several important factors that may cause actual results to materially differ, including
our ability to:

| | Improve
sales growth;
|- | ---------------------

| | Increase
gross margin;
|- | ----------------------

| | Control
the price of raw materials;
|- | -----------------------------------

| | Reduce
operating costs;
|- | -----------------------

| | Maintain/implement
foreign sourcing;
|- | ------------------------------------

| | Sell
assets classified as held for sale on favorable terms;
|- | -----------------------------------------------------------

| | Continue
to meet the terms of our debt covenants; and
|- | -----------------------------------------------------

| | Achieve
other plans, strategies, objectives, goals, or expectations described in this Quarterly
Report.
|- | -------------------------------------------------------------------------------------------------------

Our
operating expenses may be affected by unexpected costs associated with, among other
factors:

| | Future
business acquisitions;
|- | -----------------------------

| | Business
and asset divestures;
|- | ------------------------------

| | Increased
transportation or fuel costs;
|- | ---------------------------------------

| | Changes
in consumer preferences or spending patterns;
|- | -----------------------------------------------------

| | Losses
or financial difficulties of customers and suppliers;
|- | ------------------------------------------------------------

| | Changes
in accounting policies, practices, or estimates;
|- | --------------------------------------------------------

| | Changes
in federal, state or local tax laws, regulations, and interpretations.
|- | ------------------------------------------------------------------------------

Forecasted
sales are subject to competition from many sources. Competitive pressures may result in
unexpected reductions in sales volumes, product prices or service fees. The future costs
for pension benefit costs may be adversely affected by changes in actuarial assumptions
and methods, investment return and the group of participants covered. Our marking and
merchandising programs may not generate the sales we anticipate. Our asset impairment and
exit cost provisions are estimates and actual costs may be more or less than these
estimates.

This
section is intended to provide meaningful cautionary statements for purposes of the safe
harbor provisions of the Private Securities Litigation Reform Act of 1995. Historical
operating results are not necessarily indicative of the results that may be expected in
the future. New risks emerge from time-to-time, that may cause actual results to differ
materially from those contained in any forward-looking statements. This should not be
construed as a complete list of all factors that could adversely affect our expected
consolidated financial position, results of operations or liquidity. The Company
undertakes no obligation to update or change forward-looking statements, whether as a
result of new information, future events, or other information that we obtain after the
date of this Quarterly Report.

2

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# KNAPE & VOGT
MANUFACTURING COMPANY AND SUBSIDIARIES PART I. FINANCIAL
INFORMATION ITEM 1. FINANCIAL STATEMENTSCONDENSED CONSOLIDATED
BALANCE SHEETS

|                                                          | (Unaudited)
 April 1, 2006 | July 2, 2005  |  
|--------------------------------------------------------- | -------------------------- | ------------- | -
|                                                          |                            |               |  
|Assets                                                    |                            |               |  
|Current assets                                            |                           
|Cash and equivalents                                      |                            | $   9,886,938 |  
|Accounts receivable, net                                  |                            | 20,952,281    |  
|Inventories, including consignment inventory              |                            | 23,212,633    |  
|Prepaid expenses and other current assets                 |                            | 1,637,488     |  
|Assets held for sale                                      |                            | 786,328       |  
|                                                          |                            |               |  
|Total current assets                                      |                            | 56,475,668    |  
|                                                          |                            |               |  
|Property, plant and equipment                             |                            | 83,244,967    |  
|Less accumulated depreciation                             |                            | 62,447,266    |  
|                                                          |                            |               |  
|Net property, plant and equipment                         |                            | 20,797,701    |  
|                                                          |                            |               |  
|Goodwill                                                  |                            | 4,772,837     |  
|Prepaid pension cost                                      |                            | 11,774,946    |  
|Other assets                                              |                            | 624,647       |  
|                                                          |                            |               |  
|                                                          |                            | $ 94,445,799  |  
|                                                          |                            |               |  
|Liabilities and Stockholders' Equity                      |                           
|Current liabilities                                       |                           
|Accounts payable                                          |                            | $   9,682,932 |  
|Accrued income taxes                                      |                            | 559,819       |  
|Accrued compensation                                      |                            | 3,319,453     |  
|Accrued customer rebates and cooperative advertising      |                            | 1,992,277     |  
|Other                                                     |                            | 5,757,010     |  
|                                                          |                            |               |  
|Total current liabilities                                 |                            | 21,311,491    |  
|Other retirement benefits                                 |                            | 3,247,789     |  
|Long-term debt and capital leases                         |                            | 23,013,175    |  
|Deferred income taxes                                     |                            | 5,092,000     |  
|Interest rate swap and other long-term liabilities        |                            | 120,361       |  
|                                                          |                            |               |  
|Total liabilities                                         |                            | 52,784,816    |  
|                                                          |                            |               |  
|Stockholders' Equity                                      |                           
|Common stock (Common - 2,607,294 and 2,482,663            |                           
|shares issued and outstanding, Class B common - 1,904,036 |                           
|and 2,027,842 shares issued and outstanding)              |                            | 9,022,660     |  
|Preferred stock -unissued                                 |                            | -             |  
|Additional paid-in capital                                |                            | 7,481,954     |  
|Accumulated other comprehensive loss                      |                            | (132,492      | )
|Retained earnings                                         |                            | 25,288,861    |  
|                                                          |                            |               |  
|Total stockholders' equity                                |                            | 41,660,983    |  
|                                                          |                            |               |  
|                                                          |                            | $ 94,445,799  |  
|                                                          |                            |               |  

See accompanying notes to
condensed consolidated financial statements.

3

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KNAPE & VOGT
MANUFACTURING COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)

|                                             | Nine Months Ended | Three Months Ended 
|-------------------------------------------- | ----------------- | -------------------
|
|                                             |                   |                    
|Net sales                                    |                   | $ 123,594,698      
|Cost of sales                                |                   | 98,170,473         
|                                             |                   |                    
|Gross profit                                 |                   | 25,424,225         
|Selling, general and administrative expenses |                   | 16,406,712         
|Restructuring and impairment expenses        |                   | 44,477             
|                                             |                   |                    
|Operating income                             |                   | 8,973,036          
|Other income, net                            |                   | (204,119           
|Interest expense                             |                   | 1,248,899          
|                                             |                   |                    
|Income before income taxes                   |                   | 7,928,256          
|Income taxes                                 |                   | 2,867,840          
|                                             |                   |                    
|Net income                                   |                   | $     5,060,416    
|                                             |                   |                    
|Basic earnings per share:                    |                  
|Net income per share                         |                   | $              1.12
|                                             |                   |                    
|Weighted average shares outstanding          |                   | 4,510,700          
|Dilutive earnings per share:                 |                  
|Net income per share                         |                   | $              1.12
|                                             |                   |                    
|Weighted average shares outstanding          |                   | 4,511,175          
|Cash dividend - common stock                 |                   | $              .495
|Cash dividend - Class B common stock         |                   | $               .45

See accompanying notes to
condensed consolidated financial statements.

4

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KNAPE & VOGT
MANUFACTURING COMPANY AND SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY
 (Unaudited)

|                                        | Common  
 stock | Additional 
paid-in
capital | Accumulated
  other
comprehensive
income (loss) | Retained
earnings | Total
|--------------------------------------- | --------------- | --------------------------- | ----------------------------------------------- | ----------------- | -----
|                                        |                
|Balance, July 2, 2005                   |                 | $9,021,010                  |                                                 | $7,471,697        |      
|Comprehensive income                    |                
|Net income                              |                 | -                           |                                                 | -                 |      
|Foreign currency translation adjustment |                 | -                           |                                                 | -                 |      
|Gain on derivative instrument           |                 | -                           |                                                 | -                 |      
|                                        |                
|Other comprehensive income              |                 | -                           |                                                 | -                 |      
|                                        |                
|Comprehensive income                    |                 |                             |                                                 |                   |      
|Stock options exercised                 |                 | 1,650                       |                                                 | 10,257            |      
|Cash dividends                          |                 | -                           |                                                 | -                 |      
|                                        |                
|Balance, April 1, 2006                  |                 | $9,022,660                  |                                                 | $7,481,954        |      
|                                        |                

See accompanying notes to
condensed consolidated financial statements.

5

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KNAPE & VOGT
MANUFACTURING COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Unaudited)

|                                                     | Nine Months Ended
|---------------------------------------------------- | -----------------
|
|                                                     |                  
|Operating Activities:                                |                  
|Net income                                           |                  
|Non-cash items:                                      |                  
|Depreciation and amortization                        |                  
|Deferred income taxes                                |                  
|Change in retirement plan cost                       |                  
|Impairment expenses                                  |                  
|(Gain)/loss on disposal of fixed assets              |                  
|Other                                                |                  
|Changes in operating assets and liabilities:         |                  
|Accounts receivable                                  |                  
|Inventories                                          |                  
|Other current assets                                 |                  
|Accounts payable and accrued expenses                |                  
|                                                     |                  
|Net cash provided by operating activities            |                  
|                                                     |                  
|Investing Activities:                                |                  
|Additions to property, plant and equipment           |                  
|Proceeds from sales of property, plant and equipment |                  
|Other                                                |                  
|                                                     |                  
|Net cash used for investing activities               |                  
|                                                     |                  
|Financing Activities:                                |                  
|Dividends paid                                       |                  
|Stock options exercised                              |                  
|Borrowings on long-term debt                         |                  
|Payments on long-term debt and capital leases        |                  
|                                                     |                  
|Net cash used for financing activities               |                  
|                                                     |                  
|Effect of Exchange Rate Changes on Cash              |                  
|                                                     |                  
|Net Increase in Cash and Equivalents                 |                  
|Cash and equivalents, beginning of year              |                  
|                                                     |                  
|Cash and equivalents, end of period                  |                  
|                                                     |                  
|Cash Paid During the Period:                         |                  
|- interest                                           |                  
|- income taxes                                       |                  

See accompanying notes to
condensed consolidated financial statements.

6

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KNAPE & VOGT
MANUFACTURING COMPANY AND SUBSIDIARIESNOTES 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 or KV), 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-month and three-month periods ended April 1, 2006, are not
necessarily indicative of the results that may be expected for the fiscal year ending July
1, 2006. 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 2, 2005.

Fiscal Year

The
Company utilizes a 52- or 53-week fiscal year, which ends on the Saturday nearest the end
of June. The fiscal year ending July 1, 2006 and July 2, 2005 contain 52 weeks. Both
nine-month periods ended on April 1, 2006 and April 2, 2005 contained 39 weeks.

Foreign Currency

The
functional currency for the Companys foreign subsidiaries is the local currency. The
accounts of the foreign subsidiaries are translated into U.S. dollars in accordance with
Statement of Financial Accounting Standards (SFAS) No. 52. Current assets and liabilities
are translated at end of period exchange rates, while long-term assets and liabilities are
translated at historical month-end rates. Income and expense accounts are translated at
average exchange rates in effect during the year. Translation adjustments resulting from
fluctuations in the exchange rates are recorded in accumulated other comprehensive income,
a separate component of stockholders equity. Gains and losses from foreign currency
transactions, such as those resulting from the settlement of foreign receivables or
payables are included in the consolidated statements of operations. Foreign currency
exchange net losses were $26,719 and $29,144 for the nine months ended April 1, 2006 and
April 2, 2005, respectively. For the three months ended April 1, 2006, foreign currency
exchange net losses were $3,521 compared to net gains of $11,185 for the three months
ended April 2, 2005.

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, rebates and merchandising displays. In certain
circumstances, the Company provides 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.

7

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KNAPE & VOGT
MANUFACTURING COMPANY AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS(Unaudited)

Stock Based Compensation

Effective
July 3, 2005, the Company adopted the provisions of Statement of Financial Accounting
Standards (SFAS) No. 123, Share-Based Payment. The Company measures 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. No options or other share-based payment have been granted this quarter. In
addition, all options issued in prior years are vested. Therefore, the Company has
incurred no expense for share-based payment during the nine-month period ending April 1,
2006. Prior to July 3, 2005, the Company accounted for its stock option plans in
accordance with APB Opinion No. 25, Accounting for Stock Issued to Employees.

# Note 2  New
Accounting Standards

In
March 2005, the Financial Accounting Standards Board (FASB) issued
Interpretation No. 47, Accounting for Conditional Asset Retirement Obligations, an
Interpretation of FASB Statement No. 143 (FIN 47). Under the Interpretation, an
entity is required to recognize a liability for the fair value of a conditional asset
retirement obligation if the fair value of the liability can be reasonably estimated. Any
uncertainty about the amount and/or timing of future liability should be factored into the
calculation of the liability when sufficient information is available. FIN 47 further
clarifies when an entity would have sufficient information to reasonably estimate the fair
value. The Company must be in compliance no later than the end of the fiscal year ending
after December 15, 2005, although early adoption is encouraged. The Company is required to
adopt FIN 47 by the end of fiscal 2006 and is currently evaluating the impact of FIN 47 on
its consolidated financial statements.

In
March 2006, the FASB issued an Exposure Draft (ED), Employers
Accounting for Defined Benefit Pension and Other Postretirement Plans. This ED would
amend the FASB Statements No. 87, 88, 106 and 132(R). The intent of the ED is to require
an employer to recognize in its statement of financial position the overfunded or
underfunded status of its defined benefit plans and to recognize as a component of other
comprehensive income, net of tax, the actuarial gains and losses and prior service costs
and credits that arise during the period. The comment deadline on this ED is May 31, 2006,
with a planned effective date for fiscal years ending after December 31, 2006. The Company
is reviewing the ED and evaluating the impact on its consolidated financial statements.

# Note 3  Derivative
Instrument

The
Company has entered into 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 the interest-rate-swap
counter-party 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 $47,844 at April 1, 2006 and $434,763 at July 2,
2005.

Neither
the Company nor the counter-party, which is a major U.S. bank, is required to
collateralize its obligation under the swap. The Company is exposed to loss if the
counter-party should default. At April 1, 2006, the Company had no exposure to credit loss
on the interest rate swap. The Company does not believe that any reasonably likely change
in interest rates would have a material adverse effect on the financial position, results
of operations or cash flows of the Company.

8

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KNAPE & VOGT
MANUFACTURING COMPANY AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Unaudited)

# 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:

|                             | Nine Months Ended | Three Months Ended
|---------------------------- | ----------------- | ------------------
|
|                             |                   |                   
|Numerator for both basic and |                   |                   
|diluted EPS, net income      |                   | $5,060,416        
|                             |                   |                   
|Denominator for basic EPS,   |                  
|weighted-average             |                  
|common shares outstanding    |                   | 4,510,700         
|                             |                   |                   
|Denominator for diluted EPS, |                  
|weighted-average             |                  
|common shares outstanding    |                   | 4,511,175         
|                             |                   |                   

Diluted
EPS excludes stock options where the exercise price exceeded the average market price of
the Companys common stock, since the effect would be anti-dilutive. The options
shown below for April 1, 2006 were above the average market price and were included in the
calculation of diluted EPS.

|                       | April 1, 2006 | April 2, 2005
|---------------------- | ------------- | -------------
|Exercise Price$     13 | .64           | -            
|$     14               | .09           | 6,325        
|$     18               | .48           | -            

# Note 5  Inventories

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

|                      | April 1, 2006 | July 2, 2005
|--------------------- | ------------- | ------------
|                      |               |             
|Finished products     |               | $14,580,429 
|Consignment inventory |               | 2,941,194   
|Work in process       |               | 1,825,562   
|Raw materials         |               | 3,865,448   
|                      |               |             
|Total                 |               | $23,212,633 
|                      |               |             

9

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KNAPE & VOGT
MANUFACTURING COMPANY AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Unaudited)

# Note 6 
Restructure and Impairment Expenses

During the quarter ended January 1,
2005, the Company recognized asset impairment charges of $115,088 pre-tax and accelerated
depreciation of $304,116 pre-tax on certain manufacturing equipment in accordance with
SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets.

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, fixed assets and manufacturing
equipment located in the Muncie facility to the lower of their carrying values or their
estimated fair values, less the disposition costs. The closure of the facility and
relocation of the operations was completed in June 2005.

In
addition, the Company incurred certain qualifying exit costs in connection with the
closure of the Muncie facility, including severance and the relocation of certain
equipment and inventory. All of the charges were recorded in the Manufacturing division of
the Company and were expensed as incurred.

During
fiscal 2006, the Company determined certain assets previously classified as assets held
for sale would be used in production. Accordingly, the values of these assets were written
up by approximately $90,000 to their original net book value and were reclassified from
assets held for sale to property, plant, and equipment and depreciated. Additionally, the
Company re-listed the building held for sale with a new broker. The new broker
re-evaluated the market conditions and reduced the listing price. KV reduced the assets
held for sale for the building by approximately $90,000. Management believes that the
carrying value of the remaining assets held for sale is representative of the amounts that
will be received upon future sale, based upon currently available information.

The following summarizes the
restructuring expenses that were incurred and paid for the respective periods shown below.
There was no activity for the three months ended April 1, 2006.

|                            | For the Nine Months Ended | For the Three Months Ended
|--------------------------- | ------------------------- | --------------------------
|
|                            |                           |                           
|Severance & stay-on bonuses |                           |                           
|                            |                           | $  6,817                  
|Facility exit costs & other |                           | 37,660                    
|Asset impairment            |                           | -                         
|                            |                           |                           
|Total                       |                           | $44,477                   
|                            |                           |                           

The
following summarizes the restructuring accrual activity for the period ended April 1,
2006.

|                              | Severance &
stay-on bonuses
|----------------------------- | ---------------------------
|                              |                            
|Accrual balance, July 2, 2005 |                            
|Cash payments                 |                            
|                              |                            
|Accrual balance April 1, 2006 |                            
|                              |                            

10

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KNAPE & VOGT
MANUFACTURING COMPANY AND SUBSIDIARIESNOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Unaudited)

# Note 7  Warranty Disclosure

The
Company provides a limited lifetime warranty on most products sold. Depending on the
product and based on historical experience, 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 provides 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:

|                                              | Nine Months Ended | Three Months Ended
|--------------------------------------------- | ----------------- | ------------------
|
|                                              |                   |                   
|Accrued warranty costs at beginning of period |                   | $ 394,000         
|Payments made for warranty costs              |                   | (312,413          
|Accrual for product warranty                  |                   | 232,013           
|                                              |                   |                   
|Accrued warranty costs at end of period       |                   | $ 313,600         
|                                              |                   |                   

# 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:

|                                         | Nine Months Ended | Three Months Ended
|---------------------------------------- | ----------------- | ------------------
|
|                                         |                   |                   
|Net income                               |                   | $5,060,416        
|Other comprehensive income (net of tax): |                  
|Foreign currency translation adjustment  |                   | 374,060           
|Gain on derivative instrument            |                   | 251,919           
|                                         |                   |                   
|Comprehensive income                     |                   | $5,686,395        
|                                         |                   |                   

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

|                                  | Nine Months Ended | Three Months Ended
|--------------------------------- | ----------------- | ------------------
|                                  |                   |                   
|                                  |                   |                   
|                                  |                   |                   
|                                  |                   |                   
|Change in fair value of  interest |                   |                   
|rate swap                         |                   | $ 719,086         
|Settlement to interest expense    |                   | (332,167          
|                                  |                   |                   
|Other comprehensive income        |                   | $ 386,919         
|                                  |                   |                   

11

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KNAPE & VOGT
MANUFACTURING COMPANY AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Unaudited)

# Note 9  Retirement
Plans

The
Company has several noncontributory defined benefit pension plans and defined contribution
plans covering substantially all of its employees. The defined benefit plans provide
benefits based on the participants years of service. The Companys funding
policy for defined benefit plans is to make annual contributions, which equal or exceed
regulatory requirements.

The
Company also has a nonqualified defined benefit supplemental retirement program
(SERP) for certain designated former officers of the Company and one active
executive in Canada which includes death and disability benefits. The plan is funded from
the general assets of the Company.

Effective
June 30, 2005, the Company established a non-qualified deferred compensation plan for
certain executives. This plan replaced the profit sharing plan contributions for these
individuals. This deferred compensation plan is a defined contribution plan and is
unfunded.

The
Company has a postretirement health-care plan that covers substantially all employees.
During the second quarter of fiscal 2006, the Board of Directors approved a resolution to
eliminate all Company contributions to the retiree healthcare plan. This resulted in
settlement accounting for the Companys outstanding obligation. Accordingly, the
Company recognized a $1.5 million pre-tax gain in the second quarter of fiscal 2006
associated with this settlement. The Company recorded the settlement gain as a reduction
of $1.2 million to cost of sales and $.3 million to operating expenses.

Components of Net
Periodic Benefit Costs:

Three months ended:

|                               | Pension  Benefits | SERP Benefits | PostretirementHealth-Care Benefits
|------------------------------ | ----------------- | ------------- | ----------------------------------
|                               |                  
|
|                               |                  
|Service cost                   |                   | $ 140,073     |                                   
|Interest cost                  |                   | 282,512       |                                   
|Expected return on plan assets |                   | (377,410      | )                                 
|Net amortization               |                   | 294,995       |                                   
|                               |                  
|Net periodic pension cost      |                   | $ 340,170     |                                   
|                               |                  

Nine months ended:

|                               | Pension  Benefits | SERP Benefits | PostretirementHealth-Care Benefits
|------------------------------ | ----------------- | ------------- | ----------------------------------
|                               |                  
|
|                               |                  
|Service cost                   |                   | $    346,911  |                                   
|Interest cost                  |                   | 878,706       |                                   
|Expected return on plan assets |                   | (1,273,851    | )                                 
|Net amortization               |                   | 601,679       |                                   
|                               |                  
|Net periodic pension cost      |                   | $    553,445  |                                   
|                               |                  

Employer Contributions

The Company has contributed $75,189
for the quarter and $340,004 for the nine months ended April 1, 2006 to fund its
retirement plans compared to $166,642 and $505,132 respectively for the same periods in
the prior year. The Company anticipates contributing approximately an additional $77,000
to fund its retirement plans in fiscal 2006 for an estimated total of $417,000.

12

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KNAPE & VOGT
MANUFACTURING COMPANY AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Unaudited)

# Note 10  Income
Taxes

The
American Jobs Creation Act of 2004 provides for a special one-time tax deduction of 85% of
certain foreign earnings that are being repatriated (as defined by the Act) to a U.S.
taxpayer in either the Companys last tax year that began before the enactment date
or the first tax year that begins during the one-year period beginning on the date of
enactment. In order to qualify for the deduction, the earnings must be reinvested in the
United States pursuant to a domestic reinvestment plan established by the Companys
Chief Executive Officer. Certain other criteria in the Act must be satisfied as well. Once
a decision is reached to remit the earnings, the impact must be recorded in the period in
which the decision is made.

On
May 10, 2005, the IRS and Treasury issued guidance concerning the calculation of tax on a
distribution under Section 965 of the Internal Revenue Code. Based on this guidance, the
Company expects to repatriate approximately $6 million of undistributed foreign earnings
under the American Jobs Creation Act of 2004, which is expected to result in related
income tax expense of approximately $340,000 and is reflected in the Companys
financial statements. The Company has not provided for federal income taxes on the
remaining undistributed earnings of its foreign subsidiaries. Recording of deferred income
taxes on these undistributed earnings is not required, because these earnings are expected
to be permanently reinvested. It is not practicable to estimate the amount of additional
taxes in the event that the foreign subsidiaries earnings are distributed.

# Note 11  Segment
Information

The
Company manages the business and reviews financial information by market channels.
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
Business Products division is comprised of two market channels: OEM and Idea. The OEM
market channel sells precision drawer slides, hardware and ergonomic products to original
equipment office furniture manufacturers. The Idea market channel sells ergonomic products
to independent office furniture dealers. These dealers purchase product from office
furniture manufacturers and re-sell the furniture along with design and installation
services to the end customer.

The
Home & Commercial Products division is comprised of 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.

The
Manufacturing division manufactures or sources all products and sells them to the four
market channels. The selling price to the market channels is equal to the standard cost of
the product. Manufacturing cost variances from standard result in an operating profit or
loss for the Manufacturing division.

The
accounting policies of the business segments are the same as those described in the
summary of significant accounting policies in the 2005 Annual Report on Form 10-K.

13

---



KNAPE & VOGT
MANUFACTURING COMPANY AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Unaudited)

|Three Months Ended:                       | Business
 Products
   OEM | Business
Products 
  Idea | Consumer | Distribution
 and Other | Manu-facturing | Corporate  
 and Other | Consolidated
    Total
|----------------------------------------- | ------------------------- | ------------------------- | -------- | ----------------------- | -------------- | ---------------------- | ----------------------
|                                          |                           |                          
|April 1, 2006:                            |                           |                           |          |                         |                |                        |                       
|Net sales to external                     |                          
|customers                                 |                           | $12,297,780               |          | $1,904,178              |                | $9,469,470             |                       
|Operating profit (loss)                   |                          
|before administrative                     |                          
|costs, other expenses and                 |                          
|income taxes                              |                           | $  1,056,236              |          | $   141,253             |                | $1,298,022             |                       
|Administrative costs,                     |                          
|other expenses                            |                           | -                         |          | -                       |                | -                      |                       
|Income tax expense                        |                           | -                         |          | -                       |                | -                      |                       
|Net income (loss)                         |                           | $  1,056,236              |          | $   141,253             |                | $1,298,022             |                       
|April 2, 2005:                            |                          
|Net sales to external                     |                          
|customers                                 |                           | $10,547,547               |          | $2,177,152              |                | $8,958,172             |                       
|Operating profit (loss)                   |                          
|before administrative                     |                          
|costs, other expenses and                 |                          
|income taxes                              |                           | $     866,250             |          | $   297,450             |                | $   657,811            |                       
|Administrative costs,                     |                          
|Restructure/impairment     other expenses |                           | -                         |          | -                       |                | -                      |                       
|Income tax expense                        |                           | -                         |          | -                       |                | -                      |                       
|Net income (loss)                         |                           | $     866,250             |          | $   297,450             |                | $   657,811            |                       

14

---



KNAPE & VOGT
MANUFACTURING COMPANY AND SUBSIDIARIES  NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Unaudited)

|Three Months Ended:                                                  | Business
 Products
   OEM | Business
Products 
  Idea | Consumer | Distribution
 and Other | Manu-facturing | Corporate  
 and Other | Consolidated
    Total
|-------------------------------------------------------------------- | ------------------------- | ------------------------- | -------- | ----------------------- | -------------- | ---------------------- | ----------------------
|                                                                     |                           |                          
|April 1, 2006:                                                       |                           |                           |          |                         |                |                        |                       
|Net sales to external                                                |                          
|customers                                                            |                           | $37,049,251               |          | $6,559,857              |                | $24,376,821            |                       
|Operating profit (loss)                                              |                          
|before administrative                                                |                          
|costs, other expenses and                                            |                          
|income taxes                                                         |                           | $  2,815,911              |          | $   592,198             |                | $  2,616,840           |                       
|Administrative costs,
     restructure/impairment     other expenses |                           | -                         |          | -                       |                | -                      |                       
|Income tax expense                                                   |                           | -                         |          | -                       |                | -                      |                       
|Net income (loss)                                                    |                           | $  2,815,911              |          | $   592,198             |                | $  2,616,840           |                       
|April 2, 2005:                                                       |                          
|Net sales to external                                                |                           |                          
|customers                                                            |                           | $30,973,309               |          | $6,958,019              |                | $24,398,328            |                       
|Operating profit (loss)                                              |                          
|before administrative                                                |                          
|costs, other expenses and                                            |                          
|income taxes                                                         |                           | $  2,059,446              |          | $   981,203             |                | $     648,721          |                       
|Administrative costs,                                                |                          
|Restructure/impairment     other expenses                            |                           | -                         |          | -                       |                | -                      |                       
|Income tax expense                                                   |                           | -                         |          | -                       |                | -                      |                       
|Net income (loss)                                                    |                           | $  2,059,446              |          | $   981,203             |                | $     648,721          |                       

# Note 12  Legal
Contingencies

Two
pending legal matters are described in Note 15  Legal Contingencies in the 2005
Annual Report on Form 10-K.

The
Canada Customs and Revenue Agency (CCRA) had performed an audit of KVs
sales to its wholly-owned subsidiary, Knape & Vogt Canada. The CCRA had questioned
whether it was appropriate to consider Knape & Vogt Canada as the importer of record
for all Knape & Vogt goods shipped into Canada. The Company defended its position that
it was appropriate for Knape & Vogt Canada to be the importer of record. In February
2006, the Company received a decision from the Canada Border Services Agency that it had
determined that Knape & Vogt Canada was a valid purchaser for purposes of subsection
48(1) of the Customs Act and subsection 2.1(b) of the Valuation for Duty Regulations.

In
the February 2006 notice, the Canada Border Services Agency stated that it would perform a
review of the transfer price between KV and Knape & Vogt Canada. KV has provided the
Agency with the transfer price studies that have been performed and believes that review
will not result in any changes that would have a material adverse effect on KVs
earnings.

15

---



KNAPE & VOGT
MANUFACTURING COMPANY AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Unaudited)

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 was seeking monetary damages and injunctive
relief. The Company received an opinion from its outside patent counsel that the
Companys products do not infringe the competitors patents. The Company denied
any liability. However, in an effort to resolve this matter, the Company agreed to a
settlement with the plaintiff. The settlement includes an amount payable for past sales of
the product and a royalty of 5% on all future sales of this product until the product is
redesigned.

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

In
the opinion of management, based on the information presently known and taking into
account established accruals of approximately $372,000 at April 1, 2006, the ultimate
liability for these matters will not have a material adverse effect on KVs financial
position or the results of its operations.

# Note 13  Potential
Transaction

The
Company announced on October 13, 2005, that it had retained the investment-banking firm
W.Y. Campbell & Company to act as a financial advisor in evaluating strategic
alternatives, including a possible sale.

On
February 10, 2006, the Company issued a joint press release with Wind Point Partners
announcing the execution of a Merger Agreement. Consummation of the Merger was subject to
the satisfactory completion of the Wind Point due diligence process, Wind Point
Partners ability to secure adequate financing commitments from its lenders, approval
by Knape & Vogts shareholders and approval from any appropriate governmental
agency.

On
April 5, 2006, the Company issued a press release announcing that Wind Point Partners had
completed its due diligence process.

On
April 13, 2006, the Company filed a draft of its proxy statement concerning its
shareholders meeting to approve the merger with the Securities and Exchange Commission for
review and if applicable, comment. On this same date, Wind Point Partners
acknowledged that they had been successful in securing adequate financing commitments with
their lenders.

16

---



# KNAPE & VOGT
MANUFACTURING COMPANY AND SUBSIDIARIES

# ITEM 2.
MANAGEMENTS DISCUSSION AND ANALYSIS OFFINANCIAL CONDITION
AND RESULTS OF OPERATIONS

# RESULTS OF OPERATIONS

# Net Sales

Net
sales for the third quarter of fiscal 2006 were $41.9 million compared to $40.2 million
for the same period in the prior year. Net sales for the first nine months of fiscal 2006
were $123.6 million compared to $116.0 million for the same period in the prior year. In
total, the Company had new product sales of $8.0 million and $24.4 million for the quarter
and nine months ended April 1, 2006. This compared to new product sales of $7.6 million
and $22.9 million for the same periods respectively in fiscal 2005. New product
introductions have allowed the Company to expand its product offering and successfully
target new markets, including the automotive industry and the medical field. 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 were $18.4 million for the third quarter and
$55.9 million for the first nine months of fiscal 2006, compared with $18.6 million and
$53.9 million, respectively for the same periods in the prior year. Orders and shipments
were strong in the second quarter of fiscal 2006 as the distribution customers purchased
sufficient quantities to earn their calendar year rebates. As a result, orders and
shipments to these customers were slightly lower in the third quarter of fiscal 2006. As
the Company enters its fourth fiscal quarter, order activity is also increasing from this
key market. On a year to date basis, the growth resulted primarily from the addition of
several new products. These include the Virtu line of upscale kitchen, bath, and
closet 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
Consumer segment net sales were $9.5 million for the third quarter and $24.4 million for
the first nine months of fiscal 2006, compared with $9.0 million and $24.4 million,
respectively, for the same periods in the prior year. The Company continues to focus on
improving the profitability of this segment. The revenue growth during the third quarter
of fiscal 2006 is the result of new products and development of successful programs with
existing customers.

The
Business Products Original Equipment Manufacturer (OEM) segment net sales of
$12.3 million for the third quarter and $37.0 million for the first nine months of fiscal
2006 represented growth of 16.6% and 19.5%, respectively, over the same periods in the
prior year. The Business and Institutional Furniture Manufacturers Association
(BIFMA) results for the eight months ended February 2006, reported increased shipments of
10.3% for the industry compared to the same period in the prior year. The Companys
success in sales growth to the Business Product OEMs was attributable to the
addition of new products, in particular the addition of a number of customer specific
versions of KVs precision ball bearing slides and several new ergonomic accessory
products, including the updated line of height adjustable tables. Further, sales have
grown as a result of the addition of new customers in both existing markets and in new
markets to the Company, such as the automotive industry.

The
Business Products Idea segment net sales were $1.9 million for the third quarter and $6.6
million for the first nine months of fiscal 2006.Net sales decreased 12.5% for the
third quarter and 5.7% for the nine months ended April 1, 2006. Late in fiscal 2005,
management began converting to a direct sales force to call on the customers served in
this market. While this change created some disruption in the segment, management believes
it is now better positioned for future sales growth. There are a number of new products in
this channel and utilizing a direct sales force will promote sales growth in this
important channel of the business. 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.

17

---



# KNAPE & VOGT
MANUFACTURING COMPANY AND SUBSIDIARIES

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

The
Company offers a consignment inventory program for certain customers. Under this program,
the customers are not invoiced for product until the Company receives notice that the
customer has utilized the inventory at their location. At April 1, 2006 and July 2, 2005,
the inventory program totaled $2.9 million and $3.5 million at cost, respectively.

# Gross Profit

Gross
profit, as a percentage of net sales, was 19.9% for the third quarter and 20.6% for the
first nine months of fiscal 2006 compared to 19.3% and 18.5%, respectively, for the same
periods in the prior year. The improvement in the third quarter of fiscal 2006 compared
with the third quarter of the prior year represented cost savings resulting from the
consolidation of the wire operation, which was partially offset by the start up costs
associated with the plant in Vietnam. During the second quarter of fiscal 2006, KV
recorded a gain of $1.2 million pre-tax in cost of sales for the settlement of its retiree
health plan. See note 9 for more information on the settlement. Excluding this gain, gross
profit, as a percentage of net sales, was 19.6% for the first nine months of fiscal 2006.
Year-to-date fiscal 2006 gross profit increased due to lower steel costs and reduced costs
as a result of the consolidation of the wire operations. This was partially offset by
higher labor costs incurred during the first quarter of fiscal 2006, due to certain drawer
slides being manufactured in the United States instead of being sourced from overseas and
the continued integration of wire production into the Grand Rapids facility.

Asian
producers of both utility and precision drawer slides continue to pose a competitive
threat, particularly from a pricing perspective. In response, KV has established solid
vendor relationships with three key producers of these slides in Asia and has been
utilizing product sourced from these manufacturers to successfully address pricing
pressures. In addition, KV is establishing its own manufacturing entity in Vietnam. It has
received the business license for this entity, leased a facility, purchased manufacturing
equipment, and anticipates the startup of production during calendar 2006. The total
initial investment is anticipated to be approximately $1.0 million. Management believes
that utilizing these low-cost production resources will help KV remain competitive in the
U.S. marketplace and will allow it to improve the profitability and competitiveness of its
OEM market.

To
date, all of the slides produced in Asia have represented incremental sales to KV and have
not reduced volume being produced in the United States. KVs domestic production
capabilities are being focused on manufacturing new, more complex products, which
typically represent higher margin products.

# Operating Expenses

Operating
expenses, as a percentage of net sales, were 13.5% for the third quarter and 13.3% for the
first nine months of fiscal 2006 compared to 14.0% and 16.2%, respectively, for the same
periods in the prior year. The operating expenses for the third quarter of fiscal 2006
included approximately .5% of costs associated with the potential sale of the Company.
During the second quarter of fiscal 2006, KV recorded a pre-tax gain of approximately
$324,000 in operating expense for the settlement of its retiree health plan. See note 9
for more information on the settlement. Excluding this gain, operating expenses, as a
percentage of net sales, were 13.6% for the first nine months of fiscal 2006. KV continues
to be successful in leveraging its operating expense as sales increase, while still having
sufficient spending to ensure its ongoing ability to develop and introduce new products to
the market and have the appropriate advertising materials available to introduce those
products.

18

---



# KNAPE & VOGT
MANUFACTURING COMPANY AND SUBSIDIARIES

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

# Restructuring and
Impairment Expenses

During
the quarter ended January 1, 2005, the Company recognized asset impairment charges of
$115,088 pre-tax and accelerated depreciation of $304,116 pre-tax on certain manufacturing
equipment in accordance with SFAS No. 144, Accounting for the Impairment or Disposal of
Long-Lived Assets.

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, fixed assets and manufacturing
equipment located in the Muncie facility to the lower of their carrying values or their
estimated fair values, less the disposition costs. The closure of the facility and
relocation of the operations was completed in June 2005.

In
addition, the Company incurred certain qualifying exit costs in connection with the
closure of the Muncie facility, including severance and the relocation of certain
equipment and inventory. All of the charges were recorded in the Manufacturing division of
the Company and were expensed as incurred.

During
fiscal 2006, the Company determined certain assets previously classified as assets held
for sale would be used in production. Accordingly, the values of these assets were written
up by approximately $90,000 to their original net book value and were reclassified from
assets held for sale to property, plant, and equipment and depreciated. Additionally, the
Company re-listed the building held for sale with a new broker. The new broker
re-evaluated the market conditions and reduced the listing price. KV reduced the assets
held for sale for the building by approximately $90,000. Management believes that the
carrying value of the remaining assets held for sale is representative of the amounts that
will be received upon future sale, based upon currently available information.

# Interest and Other
Expenses, net

Interest
expense has remained relatively stable at $402,499 and $1.2 million for the quarter and
nine months ended April 1, 2006, compared to $411,560 and $1.2 million for the same
periods in the prior year, respectively.

Other
income was $45,177 for the third quarter of fiscal 2006 compared to $38,828 for the same
quarter in the prior year. For the first nine months of fiscal 2006, other income was
$204,119 compared to income of $116,607 for the same period in the prior year. The other
income for the first nine months of fiscal 2006 reflects interest received on previously
filed amended tax returns and investments in Canada. The other income shown in the prior
year reflects a legal settlement received in connection with one of the Companys
patents, along with favorable exchange rate gains.

# Income Taxes

The
effective tax rate was 40.3% for the third quarter of fiscal 2006 and 36.2% for the first
nine months of fiscal 2006. During the second quarter of fiscal 2006, the Company
received a final settlement of certain Federal and provincial audits performed in Canada
and recognized $221,000 in refunds. During the third quarter of fiscal 2006, the Company
incurred losses in Vietnam related to the startup of its new facility, which were not tax
affected. The Vietnamese facility will benefit from a four-year tax holiday starting with
its first profitable year.

19

---



# KNAPE & VOGT
MANUFACTURING COMPANY AND SUBSIDIARIES

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

On
May 10, 2005, the IRS and Treasury issued guidance concerning the calculation of tax on a
distribution under Section 965 of the Internal Revenue Code. Based on this guidance, the
Company expects to repatriate approximately $6 million of undistributed foreign earnings
under the American Jobs Creation Act of 2004, which is expected to result in related
income tax expense of approximately $340,000 and is reflected in the Companys
financial statements. This additional income tax expense was offset by the true-up of
federal permanent items and state income taxes to the prior year income tax returns filed
in March 2006.

The
effective tax rate was 36.3% for the third quarter of fiscal 2005 and 40.5% for the first
nine months of fiscal 2005, excluding the one-time benefit of $594,000 related to the
expiration of certain tax statutory periods and the related reversal of tax contingencies
and the amended filings for research credits. The higher effective rate for the first nine
months of fiscal 2005 was due to the impairment loss related to the relocation of the wire
operations that resulted in state income taxes being owed by the Company on a book basis
loss that is not expected to be realized for state tax purposes.

# Net Income

Net
income was $1.4 million or $0.31 per diluted share for third quarter of fiscal 2006 and
$5.1 million or $1.12 per diluted share for the nine months ended April 1, 2006. This
compared to net income of $1.7 million or $0.37 per diluted share for the third quarter of
the prior year and $1.6 million or $0.35 per diluted share for the first nine months of
the prior year. During the second quarter of fiscal 2006, the Board of Directors approved
a resolution to eliminate all Company contributions to its retiree health plan. This
resulted in settlement accounting for the Companys outstanding obligation.
Accordingly, the Company recognized a gain of approximately $952,000 after-tax in the
second quarter of fiscal 2006 associated with this settlement. In the third quarter of
fiscal 2005, the Company recognized $594,000 of one-time tax benefits. In addition during
the second quarter of fiscal 2005, the Company recognized impairment charges and
additional depreciation of approximately $1.3 million after-tax related to the relocation
of the Companys wire production. The Companys sales volume growth, improved
gross profits and better leveraging of operating expenses, were the primary contributors
to the net income improvement.

# Liquidity and Capital
Resources

Net
cash provided by operating activities for the first nine months of fiscal 2006 was $6.9
million compared to $5.0 million for the first nine months of fiscal 2005. Higher net
income in fiscal 2006 was offset by lower depreciation and amortization expense, the
decrease in retirement plan liability and lower accounts payable. Remaining working
capital requirements were relatively constant between the two periods.

Cash
used for investing activities was $2.0 million for the first nine months of fiscal 2006,
compared to $2.1 million used in the same period in the prior year. Capital expenditures
totaled $2.2 million for the nine months ended April 1, 2006, compared to $2.1 million for
the first nine months of the prior year. The capital expenditures for the first nine
months of fiscal 2006 represented investments in tooling for new products and the set up
of the Vietnam facility.

There
were capital expenditure commitments of approximately $729,639 for new product tooling and
Asian production equipment at April 1, 2006. Capital expenditures for the fiscal year are
anticipated to be approximately $3.0 million. The investments will be focused on bringing
new products and product improvements to our customers, along with our investment in Asia.

Cash
used for financing activities was $1.6 million for the first nine months of fiscal 2006 as
compared to $2.2 million in fiscal 2005. The expenditures represent the Companys
dividend payments to its shareholders.

20

---



# KNAPE & VOGT
MANUFACTURING COMPANY AND SUBSIDIARIES

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

Anticipated
cash flows from operations and available balances on the revolving credit line are
expected to be adequate to fund working capital, and capital expenditures for the next
year and the foreseeable future.

# Legal Proceedings

Two
pending legal matters are described in Note 15  Legal Contingencies in the 2005
Annual Report on Form 10-K.

The
Canada Customs and Revenue Agency (CCRA) had performed an audit of KVs
sales to its wholly-owned subsidiary, Knape & Vogt Canada. The CCRA had questioned
whether it was appropriate to consider Knape & Vogt Canada as the importer of record
for all Knape & Vogt goods shipped into Canada. The Company defended its position that
it was appropriate for Knape & Vogt Canada to be the importer of record. In February
2006, the Company received a decision from the Canada Border Services Agency that it had
determined that Knape & Vogt Canada was a valid purchaser for purposes of subsection
48(1) of the Customs Act and subsection 2.1(b) of the Valuation for Duty Regulations.

In
the February 2006 notice, the Canada Border Services Agency stated that it would perform a
review of the transfer price between KV and Knape & Vogt Canada. KV has provided the
Agency with the transfer price studies that have been performed and believes that review
will not result in any changes that would have a material adverse effect on KVs
earnings.

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 was seeking monetary damages and injunctive
relief. The Company received an opinion from its outside patent counsel that the
Companys products do not infringe the competitors patents. The Company denied
any liability. However, in an effort to resolve this matter, the Company agreed to a
settlement with the plaintiff. The settlement includes an amount payable for past sales of
the product and a royalty of 5% on all future sales of this product until the product is
redesigned.

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

In
the opinion of management, based on the information presently known and taking into
account established accruals of approximately $372,000 at April 1, 2006, the ultimate
liability for these matters will not have a material adverse effect on KVs financial
position or the results of its operations.

# New Accounting Standards

See
Note 2 to the Condensed Consolidated Financial 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 2005 Annual Report on Form
10-K.

21

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# KNAPE & VOGT
MANUFACTURING COMPANY AND SUBSIDIARIES

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

# Trends and Developments

The
Company announced on October 13, 2005, that it had retained the investment-banking firm
W.Y. Campbell & Company to act as a financial advisor in evaluating strategic
alternatives, including a possible sale.

On
February 10, 2006, the Company issued a joint press release with Wind Point Partners
announcing the execution of a Merger Agreement. Consummation of the Merger was subject to
the satisfactory completion of the Wind Point due diligence process, Wind Point
Partners ability to secure adequate financing commitments from its lenders, approval
by Knape & Vogts shareholders and approval from any appropriate governmental
agency.

On
April 5, 2006, the Company issued a press release announcing that Wind Point Partners had
completed its due diligence process.

On
April 13, 2006, the Company filed a draft of its proxy statement concerning its
shareholder meeting to approve the merger with the Securities and Exchange Commission for
review and if applicable, comment. On this same date, Wind Point Partners
acknowledged that they had been successful in securing adequate financing commitments with
their lenders.

22

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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 and the Vietnamese Dong foreign
currency exchange rates 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
$47,844 at April 1, 2006 and $434,763 at July 2, 2005.

The
following table provides information on the Companys fixed maturity investments as
of April 1, 2006 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.

|Liability                               
Variable rate revolving credit
  agreement                             
First $20,000,000 at an interest rate
  of 4.83% (3 month LIBOR)
  plus weighted average
  credit spread of .60%;
Next $3,000,000 at an interest rate of
  4.64% (1 month LIBOR)
  plus weighted average
  credit spread of .60%;Interest Rate Swap
Notional amount                         
  Receive variable
     at 3 month LIBOR - 4.82%
  Pay fixed interest rate - 6.25% | Amount  
$23,000,000      
$20,000,000 | Maturity Date
  November 1, 2009
  June 1, 2006
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | -------------------------------------- | -----------------------------------------------

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 is in the process of establishing a manufacturing facility in Vietnam. Purchasing
and selling activities of this entity will be denominated in the Vietnamese Dong, which
will create exchange rate exposure.

The
Company does not hedge its exposure to translation gains and losses relating to foreign
currency.

23

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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 The Companys Chief Executive Officer and the
Vice President of Finance, after evaluating the effectiveness of the Companys
disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
15(d)-15(e)) as of the end of the period covered by this Form 10-Q Quarterly Report have
concluded that the Companys disclosure controls and procedures were adequate and
effective to ensure that material information relating to the Company would be made known
to them by others within the Company, particularly during the period in which this Form
10-Q Quarterly Report was being prepared.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (b) | Changes
in Internal Controls                       During the period covered by this report,
there have been no changes in the Company's          internal control over financial
reporting that have materially affected or are reasonably likely to materially   affect
the Companys internal control over financial reporting.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

24

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# KNAPE & VOGT
MANUFACTURING COMPANY AND SUBSIDIARIES

# PART II. OTHER
INFORMATION

Item 1. Legal Proceedings

Two
pending legal matters are described in Note 15  Legal Contingencies in the 2005
Annual Report on Form 10-K.

The
Canada Customs and Revenue Agency (CCRA) had performed an audit of KVs
sales to its wholly-owned subsidiary, Knape & Vogt Canada. The CCRA had questioned
whether it was appropriate to consider Knape & Vogt Canada as the importer of record
for all Knape & Vogt goods shipped into Canada. The Company defended its position that
it was appropriate for Knape & Vogt Canada to be the importer of record. In February
2006, the Company received a decision from the Canada Border Services Agency that it had
determined that Knape & Vogt Canada was a valid purchaser for purposes of subsection
48(1) of the Customs Act and subsection 2.1(b) of the Valuation for Duty Regulations.

In
the February 2006 notice, the Canada Border Services Agency stated that it would perform a
review of the transfer price between KV and Knape & Vogt Canada. KV has provided the
Agency with the transfer price studies that have been performed and believes that review
will not result in any changes that would have a material adverse effect on KVs
earnings.

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 was seeking monetary damages and injunctive
relief. The Company received an opinion from its outside patent counsel that the
Companys products do not infringe the competitors patents. The Company denied
any liability. However, in an effort to resolve this matter, the Company agreed to a
settlement with the plaintiff. The settlement includes an amount payable for past sales of
the product and a royalty of 5% on all future sales of this product until the product is
redesigned.

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

In
the opinion of management, based on the information presently known and taking into
account established accruals of approximately $372,000 at April 1, 2006, the ultimate
liability for these matters will not have a material adverse effect on KVs financial
position or the results of its operations.

Item 6. Exhibits

| | 31.1 | Certificate
of the Chief Executive Officer of Knape & Vogt Manufacturing Company pursuant to 15
U.S.C. Section 7241, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
| | ---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 31.2 | Certificate
of the Vice President of Finance of Knape & Vogt Manufacturing Company pursuant to 15
U.S.C. Section 7241, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
| | ---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 32.1 | Certificate
of the Chief Executive Officer of Knape & Vogt Manufacturing Company pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
| | ---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 32.2 | Certificate
of the Vice President of Finance of Knape & Vogt Manufacturing Company pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes- Oxley Act of
2002.
| | ---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

25

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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.

|Date:       April 20, 2006  
Date:        April 20, 2006 | Knape & Vogt Manufacturing Company
             (Registrant)/s/ William R. Dutmers              
William R. Dutmers
Chairman of the Board and
Chief Executive Officer/s/ Leslie J. Cummings              
Leslie J. Cummings
Vice President of Finance and
Treasurer
|-------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

26

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EXHIBIT INDEX

| | Exhibit | Description
| | ------- | -----------

| | 31.1 | Certificate
of the Chief Executive Officer of Knape & Vogt Manufacturing Company pursuant to 15
U.S.C. Section 7241, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
| | ---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 31.2 | Certificate
of the Vice President of Finance of Knape & Vogt Manufacturing Company pursuant to 15
U.S.C. Section 7241, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
| | ---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 32.1 | Certificate
of the Chief Executive Officer of Knape & Vogt Manufacturing Company pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
| | ---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 32.2 | Certificate
of the Vice President of Finance of Knape & Vogt Manufacturing Company pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes- Oxley Act of
2002.
| | ---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

27