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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended September 30, 1995 Commission File Number 1-9897
VALLEY FORGE CORPORATION
------------------------
(Exact name of Registrant as specified in its charter)
GEORGIA 58-0833796
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(State of incorporation) (I.R.S. Employer Identification Number)
100 Smith Ranch Road, Suite 326, San Rafael, California 94903-1994
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(Address of principal executive offices) (Zip code)
(415) 492-1500
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(Registrant's telephone number, including area code)
Indicate by a 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 / /
The number of shares outstanding of Registrant's Common Stock, par value $.50
per share, at November 8, 1995 was 1,777,517.
The Exhibit Index is located on Page 2.
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Page 1 of 13
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VALLEY FORGE CORPORATION AND SUBSIDIARIES
FORM 10-Q
For the Quarter Ended September 30, 1995
INDEX
<TABLE>
<CAPTION>
Page
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<S> <C>
PART I: FINANCIAL INFORMATION
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Item 1. Financial Statements
a) Condensed Consolidated Statements of Income for the
Three and Nine Months Ended September 30, 1995 and 1994 3
b) Condensed Consolidated Statements of Cash Flows
for the Nine Months Ended September 30, 1995 and 1994 4
c) Condensed Consolidated Balance Sheets at
September 30, 1995 and December 31, 1994 5
d) Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
PART II: OTHER INFORMATION
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Item 6. Exhibits and Reports on Form 8-K 11
</TABLE>
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CONDENSED CONSOLIDATED STATEMENTS OF INCOME
VALLEY FORGE CORPORATION AND SUBSIDIARIES
(Unaudited, in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------- -------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUES $18,014 $15,961 $56,758 $49,912
Costs and expenses:
Cost of goods sold 11,114 9,944 34,786 30,181
Selling and administrative 5,501 4,730 16,627 14,964
------- ------- ------- -------
OPERATING INCOME 1,399 1,287 5,345 4,767
Other income (expense):
Interest expense (289) (272) (923) (612)
Interest income 9 - 30 1
Other, net 8 (61) (30) (396)
------- ------- ------- -------
INCOME BEFORE INCOME TAXES 1,127 954 4,422 3,760
Income taxes 395 309 1,680 1,427
Minority interest expense 36 31 60 77
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NET INCOME $ 696 $ 614 $ 2,682 $ 2,256
======= ======= ======= =======
NET INCOME PER SHARE $ .38 $ .34 $ 1.47 $ 1.26
======= ======= ======= =======
Dividends per share $ .085 $ .075 $ .255 $ .225
======= ======= ======= =======
Weighted average shares outstanding 1,828 1,812 1,821 1,790
======= ======= ===== =======
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
VALLEY FORGE CORPORATION AND SUBSIDIARIES
(Unaudited, in thousands)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-------------
1995 1994
---- ----
<S> <C> <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 3,215 $ 2,548
INVESTING ACTIVITIES
Cash paid for business acquisitions (875) (6,592)
Additions to property, plant, and equipment (2,137) (3,509)
Proceeds from sale of constructed facility 2,821 -
Proceeds from sale of building held for sale 242 -
Other, net (17) (87)
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Net cash provided by (used for) investing activities 34 (10,188)
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FINANCING ACTIVITIES
Proceeds from long-term debt 1,505 11,000
Net repayments on line of credit agreement (2,206) (4,290)
Net proceeds (repayments) of construction loans (1,941) 1,219
Net proceeds (repayments) of short-term notes payable (100) 700
Principal payments on long-term debt (153) (1,832)
Stock options exercised 99 936
Dividends paid (453) (394)
Proceeds from issuance of subsidiary stock - 301
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Net cash (used for) provided by financing activities (3,249) 7,640
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CHANGE IN CASH - -
Cash and equivalents at beginning of year - -
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CASH AND EQUIVALENTS AT END OF PERIOD $ - $ -
======= ========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
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CONDENSED CONSOLIDATED BALANCE SHEETS
VALLEY FORGE CORPORATION AND SUBSIDIARIES
(Unaudited, in thousands)
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
---- ----
<S> <C> <C>
ASSETS
CURRENT ASSETS
Accounts receivable, net $ 9,580 $ 9,535
Inventories 16,937 15,653
Other current assets 1,886 3,922
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Total current assets 28,403 29,110
Property, plant, and equipment, net 7,546 6,483
Goodwill, net 13,672 13,851
Building held for sale - 901
Other assets 1,155 600
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$50,776 $50,945
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Loans and notes payable $ 1,336 $ 5,583
Current portion of long-term debt 1,369 143
Accounts payable and accrued expenses 5,786 5,347
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Total current liabilities 8,491 11,073
Long-term debt 11,509 11,383
Deferred income taxes 659 828
Minority interest 1,381 1,322
Stockholders' equity 28,736 26,339
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$50,776 $50,945
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</TABLE>
See Notes to Condensed Consolidated Financial Statements.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
VALLEY FORGE CORPORATION AND SUBSIDIARIES
(Unaudited, in thousands, except per share amounts)
GENERAL
All financial information provided in this Form 10-Q is unaudited.
All adjustments, which are in the opinion of management necessary to a fair
presentation of results for the interim periods, have been included herein. All
adjustments are of a normal and recurring nature. Certain reclassifications have
been made to the 1994 condensed consolidated financial statements to conform to
the 1995 presentation. Detailed footnote disclosure required annually has not
been reflected in the accompanying financial statements and, therefore, the
statements do not contain all disclosures required by generally accepted
accounting principles. Reference should be made to the Valley Forge Corporation
Annual Report on Form 10-K for the year ended December 31, 1994.
Due to seasonal variations, the results of operations for the periods reported
are not necessarily indicative of the entire year.
<TABLE>
<CAPTION>
INVENTORIES September 30, 1995 December 31, 1994
------------------ -----------------
<S> <C> <C>
Raw materials $ 8,917 $ 8,292
Work-in-process 2,969 2,274
Finished goods 5,051 5,087
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$ 16,937 $ 15,653
======== ========
</TABLE>
BUSINESS ACQUISITIONS
In June 1995, Marine Industries Company (Marinco), a subsidiary of Valley Forge
Corporation, acquired the ventilation product line of Nicro Marine. This product
line primarily consists of solar powered and passive ventilation products for
use in boats and recreational vehicles.
On June 1, 1994, Atlantic Guest, Inc., a newly formed subsidiary of Valley Forge
Corporation, acquired substantially all of the assets of The Guest Company, Inc.
("Guest") for a purchase price of approximately $6.5 million in cash and the
assumption of certain liabilities totaling $392,000. Guest, located in Meriden,
Connecticut, is a manufacturer of marine products including battery chargers,
battery switches, and lighting products. The Company's results of operations
include the results of Guest since June 1, 1994.
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BUILDING HELD FOR SALE
In 1994, the Company decided to sell a building that was used in operations.
Reserves for the write-down of the building to its estimated net realizable
value have been included in "Other expense, net" in 1994 and 1995. In August
1995, the building was sold and the Company received cash and a $600,000
promissory note.
EARNINGS PER SHARE
Earnings per share are based upon the weighted average number of common shares
and equivalents outstanding during the periods. There was no difference between
primary and fully diluted earnings per share.
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for income taxes and interest during the nine months ended September
30, 1995 and 1994 was as follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Income taxes $2,215 $1,430
Interest $933 $570
</TABLE>
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
VALLEY FORGE CORPORATION AND SUBSIDIARIES
September 30, 1995
FINANCIAL CONDITION
In January 1995, the Company sold a constructed operating facility for $2.8
million and repaid the related construction loan of $1.7 million. In April 1995,
another operating entity completed the construction of a building addition
financed by $655 thousand in long-term debt. The Company also negotiated a term
credit facility due June 30, 1998 for borrowings up to $3.5 million bearing
interest at the prime rate plus 0.5% to fund acquisitions. Through September 30,
1995, $.9 million was borrowed under this facility to fund business
acquisitions.
Cash flow from operations ($3.2 million) and the cash generated from the sale of
the operating facility were sufficient to pay down the bank line of credit ($2.2
million) and invest in property, plant, and equipment ($2.1 million). Management
believes that cash flow from operations and bank borrowings will be adequate to
meet the Company's working capital needs for the remainder of 1995.
RESULTS OF OPERATIONS
Revenues and Related Costs
Consolidated revenues increased $2.1 million (13%) and $6.8 million (14%) for
the quarter and the year to date ended September 30, 1995, respectively, over
the same periods in the prior year. The recreational products segment revenues
increased 19% for the quarter ended September 30, 1995 over the same quarter in
the prior year due to a significant increase in inverter shipments. The
recreational products segment revenues increased 20% for the nine months ended
September 30, 1995 over the prior year period due principally to the revenues of
Guest, acquired June 1, 1994. The industrial products segment revenues increased
7% for the quarter and nine months of 1995, respectively, compared to the same
periods in the prior year.
Consolidated gross profit for the quarter ended September 30, 1995 increased $.9
million (15%) compared to the same quarter in the prior year. Consolidated gross
profit for the nine months ended September 30, 1995 increased $2.2 million (11%)
over 1994.
Recreational segment gross profit for the quarter ended September 30, 1995
increased 27% compared to the same quarter in the prior year. Recreational
segment gross profit for the nine months ended September 30, 1995 increased 19%
compared to the same period in the prior year. Excluding the gross profit of
Guest, the Recreational segment gross profit would have increased 8% for the
nine months ended September 30, 1995 over the comparable prior year period.
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The Industrial products segment gross profit for the quarter and nine months
ended September 30, 1995 increased 4% and 3%, respectively, compared to the
prior year.
The consolidated gross profit margin for the quarter ended September 30, 1995
increased from 37.7% in 1994 to 38.3% in 1995. The consolidated gross profit
margin for the nine months ended September 30, 1995 decreased from 39.5% in 1994
to 38.7% in 1995.
Selling and Administrative Expenses
Consolidated selling and administrative expenses increased $771 thousand (16%)
and increased $1.7 million (11%) for the quarter and nine months ended September
30, 1995, respectively, over the same periods in the prior year. Without the
inclusion of Guest, consolidated selling and administrative expenses would have
increased $625 thousand (4%) for the nine months ended September 30, 1995.
Other income (expense)
Interest expense for the quarter and nine months ended September 30, 1995
increased $17 thousand and $311 thousand, respectively, due to the increase in
debt used to acquire Guest.
"Other expense, net" for the quarter ended September 30, 1994 and the nine
months ended September 30, 1994 and 1995 primarily consists of charges to write
down a building held for sale to its estimated net realizable value.
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QUARTERLY RESULTS
The following table sets forth unaudited consolidated summary financial data for
each quarter of 1993, 1994, and 1995 to date. This quarterly information has
been prepared on the same basis as the annual consolidated financial statements
and, in the opinion of management, reflects all adjustments, consisting only of
normal recurring adjustments, necessary to state fairly the information set
forth herein. The operating results for any quarter are not necessarily
indicative of results for any future period. Dollars in thousands, except per
share amounts:
<TABLE>
<CAPTION>
1993 First Quarter Second Quarter Third Quarter Fourth Quarter
- ---- ------------- -------------- ------------- --------------
<S> <C> <C> <C> <C>
Revenues $12,004 $13,874 $13,246 $14,132
Gross profit 4,798 5,480 5,167 5,324
Net income 464 606 467 578
Net income per share $ .27 $ .34 $ .27 $ .33
<CAPTION>
1994 First Quarter Second Quarter Third Quarter Fourth Quarter
- ---- ------------- -------------- ------------- --------------
<S> <C> <C> <C> <C>
Revenues $15,795 $18,156 $15,961 $16,124
Gross profit 6,234 7,480 6,017 6,044
Net income 738 904 614 561
Net income per share $ .42 $ .50 $ .34 $ .31
<CAPTION>
1995 First Quarter Second Quarter Third Quarter
- ---- ------------- -------------- -------------
<S> <C> <C> <C>
Revenues $18,863 $19,881 $18,014
Gross profit 7,553 7,519 6,900
Net income 1,008 978 696
Net income per share $ .55 $ .54 $ .38
</TABLE>
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PART II OTHER INFORMATION
VALLEY FORGE CORPORATION AND SUBSIDIARIES
For the Quarter Ended September 30, 1995
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits required by Item 601 of Registration S-K:
Exhibit 11 - Computation of Earnings per Share.
b) Reports on Form 8:
None.
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Exhibit 11
COMPUTATION OF EARNINGS PER SHARE
VALLEY FORGE CORPORATION AND SUBSIDIARIES
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------- -------------------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
PRIMARY:
Weighted average common shares
outstanding 1,777,093 1,759,650 1,773,853 1,734,819
Common equivalent shares 50,601 51,915 47,102 54,548
---------- ---------- ---------- ----------
Weighted average common shares and
common equivalent shares outstanding 1,827,694 1,811,565 1,820,955 1,789,367
========== ========== ========== ==========
Net income $ 696,000 $ 614,000 $2,682,000 $2,256,000
========== ========== ========== ==========
Primary earnings per share $ .38 $ .34 $ 1.47 $ 1.26
========== ========== ========== ==========
FULLY DILUTED:
Weighted average common shares
outstanding 1,777,093 1,759,650 1,773,853 1,734,819
Common equivalent shares 55,088 51,915 50,018 57,871
---------- ---------- ---------- ----------
Weighted average common shares and
common equivalent shares outstanding 1,832,181 1,811,565 1,823,871 1,792,690
========== ========== ========== ==========
Net income $ 696,000 $ 614,000 $2,682,000 $2,256,000
========== ========== ========== ==========
Fully diluted earnings per share $ .38 $ .34 $ 1.47 $ 1.26
========== ========== ========== ==========
</TABLE>
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VALLEY FORGE CORPORATION AND SUBSIDIARIES
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.
VALLEY FORGE CORPORATION
Registrant
Date: November 13, 1995 /s/
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Monica J. Burke
Vice President Finance
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Exhibit Index
Exhibit 27
Financial Data Schedule
14
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EXHIBIT EXHIBIT DESCRIPTION
NO.
Ex-27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 9,801
<ALLOWANCES> 221
<INVENTORY> 16,937
<CURRENT-ASSETS> 1,886
<PP&E> 18,917
<DEPRECIATION> 11,371
<TOTAL-ASSETS> 50,776
<CURRENT-LIABILITIES> 8,491
<BONDS> 11,509
<COMMON> 954
0
0
<OTHER-SE> 27,782
<TOTAL-LIABILITY-AND-EQUITY> 50,776
<SALES> 56,758
<TOTAL-REVENUES> 56,758
<CGS> 34,786
<TOTAL-COSTS> 34,786
<OTHER-EXPENSES> 16,627
<LOSS-PROVISION> 70
<INTEREST-EXPENSE> 923
<INCOME-PRETAX> 4,422
<INCOME-TAX> 1,680
<INCOME-CONTINUING> 2,682
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,682
<EPS-PRIMARY> 1.47
<EPS-DILUTED> 1.47
</TABLE>
