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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended June 30, 1995 Commission File Number 1-9897
VALLEY FORGE CORPORATION
(Exact name of Registrant as specified in its charter)
GEORGIA 58-0833796
(State of incorporation) (I.R.S. Employer Identification Number)
100 Smith Ranch Road, Suite 326, San Rafael, California 94903-1994
(Address of principal executive offices) (Zip code)
(415) 492-1500
(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 August 8, 1995 was 1,776,767.
The Exhibit Index is located on Page 2.
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VALLEY FORGE CORPORATION AND SUBSIDIARIES
FORM 10-Q
For the Quarter Ended June 30, 1995
INDEX
<TABLE>
<CAPTION>
Page
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<S> <C>
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements
a) Condensed Consolidated Statements of Income for
the Three and Six Months Ended June 30, 1995 and 1994 3
b) Condensed Consolidated Statements of Cash Flows
for the Six Months Ended June 30, 1995 and 1994 4
c) Condensed Consolidated Balance Sheets at
June 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
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 Six Months Ended
June 30, June 30,
--------------------- ---------------------
1995 1994 1995 1994
------- ------- ------- -------
<S> <C> <C> <C> <C>
REVENUES $19,881 $18,156 $38,744 $33,951
Costs and expenses:
Cost of goods sold 12,362 10,676 23,672 20,237
Selling and administrative 5,549 5,671 11,126 10,234
------- ------- ------- -------
OPERATING INCOME 1,970 1,809 3,946 3,480
Other income (expense):
Interest expense (317) (201) (634) (340)
Interest income 9 - 21 1
Other expense, net (60) (102) (77) (405)
------- ------- ------- -------
INCOME BEFORE INCOME TAXES 1,602 1,506 3,256 2,736
Income taxes 624 602 1,270 1,094
------- ------- ------- -------
NET INCOME $ 978 $ 904 $ 1,986 $ 1,642
======= ======= ======= =======
NET INCOME PER SHARE $.54 $.50 $1.09 $.92
==== ==== ===== ====
Dividends per share $.085 $.075 $.17 $.15
===== ===== ==== ====
Weighted average shares outstanding 1,817 1,796 1,818 1,778
===== ===== ===== =====
</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>
Six Months Ended June 30.
-------------------------
1995 1994
------- -------
<S> <C> <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 1,624 $ 1,718
INVESTING ACTIVITIES
Cash paid for business acquisitions (867) (6,631)
Additions to property, plant, and equipment (1,486) (1,782)
Proceeds from sale of constructed facility 2,821 -
Other, net (53) 100
------- -------
Net cash provided by (used for) investing activities 415 (8,313)
------- -------
FINANCING ACTIVITIES
Proceeds from long term debt 655 11,000
Net repayments on line of credit agreement (376) (4,884)
Net repayments on construction loans (1,941) -
Proceeds from short-term notes payable - 700
Principal payments on long-term debt (130) (937)
Stock options exercised 91 676
Dividends paid (301) (261)
Proceeds from issuance of subsidiary stock - 301
------- -------
Net cash (used for) provided by financing activities (2,002) 6,595
------- -------
NET INCREASE IN CASH AND EQUIVALENTS 37 -
Cash and equivalents at beginning of year - -
------- -------
CASH AND EQUIVALENTS AT END OF PERIOD $ 37 $ -
======= =======
</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>
June 30, December 31,
1995 1994
------- ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and equivalents $ 37 $ -
Accounts receivable, net 10,580 9,535
Inventories 16,857 15,653
Other current assets 1,608 3,922
------- -------
Total current assets 29,082 29,110
Property, plant, and equipment, net 7,312 6,483
Goodwill, net 13,865 13,851
Building held for sale 850 901
Other assets 614 600
------- -------
$51,723 $50,945
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Loans and notes payable $ 3,266 $ 5,583
Current portion of long-term debt 167 143
Accounts payable and accrued expenses 6,073 5,347
------- -------
Total current liabilities 9,506 11,073
Long-term debt 11,884 11,383
Deferred income taxes 834 828
Minority interest 1,351 1,322
Stockholders' equity 28,148 26,339
------- -------
$51,723 $50,945
======= =======
</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 June 30, 1995 December 31, 1994
------------- -----------------
<S> <C> <C>
Raw materials $ 8,458 $ 8,292
Work-in-process 3,178 2,274
Finished goods 5,221 5,087
------- -------
$16,857 $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.
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 six months ended June 30,
1995 and 1994 was as follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Income taxes $1,596 $1,326
Interest $636 $268
</TABLE>
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
VALLEY FORGE CORPORATION AND SUBSIDIARIES
June 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 borrowing up to $3.5
million bearing interest at the prime rate plus 0.5%. The credit facility is
expected to be used to fund acquisitions. No amounts were borrowed under this
facility at June 30, 1995.
Cash flow from operations ($1.6 million) and the cash generated from the sale
of the operating facility were sufficient to fund business acquisitions ($.9
million), pay down the bank line of credit ($.4 million) and invest in
property, plant, and equipment ($1.5 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 $1.7 million (10%) and $4.8 million (14%) for
the quarter and the year to date ended June 30, 1995, respectively, over the
same periods in the prior year. The recreational products segment revenues
increased 13% and 20% for the quarter and year to date, respectively, over the
same periods in the prior year due principally to the revenues of Guest,
acquired June 1, 1994. The industrial products segment revenues increased 6%
and 7% for the quarter and six months of 1995, respectively, compared to the
same periods in the prior year.
Consolidated gross profit for the quarter ended June 30, 1995 was relatively
unchanged compared to the same quarter in the prior year. Consolidated gross
profit for the six months ended June 30, 1995 increased $1.4 million (10%) over
1994.
Recreational segment gross profit for the quarter June 30, 1995 was unchanged
compared to the prior year. Recreational segment gross profit for the six
months ended June 30, 1995 increased 16% compared to the same period in the
prior year. Excluding the gross profit of Guest, the Recreational segment
gross profit would have decreased 8% for the quarter and increased 2% for the
six months ended June 30, 1995 over the comparable prior year periods.
The Industrial products segment gross profit for the quarter ended June 30,
1995 was unchanged compared to the prior year. The Industrial products segment
gross profit for the six months ended June 30, 1995 increased 2%, compared to
the same period in the prior year.
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The consolidated gross profit margin for the quarter ended June 30, 1995
decreased from 41.2% in 1994 to 37.8% in 1995. Similarly, the consolidated
gross profit margin for the six months ended June 30, 1995 decreased from 40.4%
in 1994 to 38.9% in 1995.
During the second quarter of 1995, gross profit margins in both segments were
negatively impacted by increased raw materials and overhead costs, inventory
adjustments, and to a much lesser degree by reductions in sales prices due to
competitive pricing pressures in the marketplace.
Selling and Administrative Expenses
Consolidated selling and administrative expenses decreased $122 thousand (2%)
and increased $892 thousand (9%) for the quarter and six months ended June 30,
1995, respectively, over the same periods in the prior year. Without the
inclusion of Guest, consolidated selling and administrative expenses would have
decreased $516 thousand (9%) for the quarter and $23 thousand (0%) for the six
months ended June 30, 1995. Selling and administrative expenses as a
percentage of sales decreased from 31% for the second quarter of 1994 to 28%
for the second quarter of 1995, primarily due to decreases in 1995 incentive
compensation accruals and due to nonrecurring charges relating to the
restructuring of AFI and Marinco taken in the second quarter of 1994.
Other income (expense)
Interest expense for the quarter and six months ended June 30, 1995 increased
$116 thousand and $294 thousand, respectively, due to the increase in debt used
to acquire Guest.
"Other expense, net" for the quarter and six months ended June 30, 1995 and
1994 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
</TABLE>
<TABLE>
<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
</TABLE>
<TABLE>
<CAPTION>
1995 First Quarter Second Quarter
- ---- ------------- --------------
<S> <C> <C>
Revenues $18,863 $19,881
Gross profit 7,553 7,519
Net income 1,008 978
Net income per share $.55 $.54
</TABLE>
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PART II OTHER INFORMATION
VALLEY FORGE CORPORATION AND SUBSIDIARIES
For the Quarter Ended June 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.
11
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Exhibit 11
COMPUTATION OF EARNINGS PER SHARE
VALLEY FORGE CORPORATION AND SUBSIDIARIES
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------------ -------------------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
PRIMARY:
Weighted average common shares
outstanding 1,773,783 1,745,652 1,772,234 1,722,404
Common equivalent shares 43,531 49,919 45,352 55,864
--------- --------- ---------- ----------
Weighted average common shares and
common equivalent shares outstanding 1,817,314 1,795,571 1,817,586 1,778,268
========= ========= ========== ==========
Net income $978,000 $904,000 $1,986,000 $1,642,000
======== ======== ========== ==========
Primary earnings per share $.54 $.50 $1.09 $.92
==== ==== ===== ====
FULLY DILUTED:
Weighted average common shares
outstanding 1,773,783 1,745,652 1,772,234 1,722,404
Common equivalent shares 45,755 53,239 47,483 60,850
--------- --------- ---------- ----------
Weighted average common shares and
common equivalent shares outstanding 1,819,538 1,798,891 1,819,717 1,783,254
========= ========= ========== ==========
Net income $978,000 $904,000 $1,986,000 $1,642,000
======== ======== ========== ==========
Fully diluted earnings per share $.54 $.50 $1.09 $.92
==== ==== ===== ====
</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: August 11, 1995 ------------------------
Monica J. Burke
Vice President Finance
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EXHIBIT INDEX
Exhibit 27 Financial Data Schedule
14
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<CASH> 37
<SECURITIES> 0
<RECEIVABLES> 10,775
<ALLOWANCES> 195
<INVENTORY> 16,857
<CURRENT-ASSETS> 29,082
<PP&E> 18,383
<DEPRECIATION> 11,071
<TOTAL-ASSETS> 51,723
<CURRENT-LIABILITIES> 9,506
<BONDS> 11,884
<COMMON> 954
0
0
<OTHER-SE> 27,194
<TOTAL-LIABILITY-AND-EQUITY> 51,723
<SALES> 38,744
<TOTAL-REVENUES> 38,744
<CGS> 23,672
<TOTAL-COSTS> 23,672
<OTHER-EXPENSES> 11,126
<LOSS-PROVISION> 44
<INTEREST-EXPENSE> 634
<INCOME-PRETAX> 3,256
<INCOME-TAX> 1,270
<INCOME-CONTINUING> 1,986
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,986
<EPS-PRIMARY> 1.09
<EPS-DILUTED> 1.09
</TABLE>
