<PAGE> 1
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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, 1996 Commission File Number 1-9897
VALLEY FORGE CORPORATION
(Exact name of Registrant as specified in its charter)
GEORGIA 58-0833796
(State of incorporation) (IRS 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, July 25, 1996, was 2,667,733.
The Exhibit Index is located on Page 2.
===============================================================================
<PAGE> 2
VALLEY FORGE CORPORATION AND SUBSIDIARIES
Form 10-Q
For the Quarter Ended June 30, 1996
INDEX
<TABLE>
<CAPTION>
PAGE
----
PART I: FINANCIAL INFORMATION
- ------------------------------
<S> <C> <C>
Item 1. Financial Statements
a) Condensed Consolidated Statements of Income for
the Three and Six Months Ended June 30, 1996 and 1995 3
b) Condensed Consolidated Statements of Cash Flows
for the Six Months Ended June 30, 1996 and 1995 4
c) Condensed Consolidated Balance Sheets at
June 30, 1996 and December 31, 1995 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 10
</TABLE>
2
<PAGE> 3
VALLEY FORGE CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Income
(Unaudited, in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUES $ 22,153 $ 19,881 $ 41,175 $ 38,744
Costs and expenses:
Cost of goods sold 13,436 12,217 24,938 23,375
Selling and administrative 6,469 5,694 12,383 11,423
------- -------- -------- -------
OPERATING INCOME 2,248 1,970 3,854 3,946
Other income (expense):
Interest expense (345) (317) (629) (634)
Other, net 1 (58) 284 (17)
-------- -------- -------- -------
INCOME BEFORE INCOME TAXES
AND MINORITY INTERESTS 1,904 1,595 3,509 3,295
Income taxes 743 625 1,378 1,285
Minority interests 56 (8) 108 24
-------- -------- -------- -------
NET INCOME $ 1,105 $ 978 $ 2,023 $ 1,986
======== ======== ======== =======
NET INCOME PER SHARE $.40 $.36 $.73 $.73
======== ======== ======== =======
Dividends per share $.06 $.0567 $.12 $ .1133
======== ======== ======== =======
Weighted average shares outstanding 2,762 2,726 2,753 2,726
======== ======== ======== =======
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
3
<PAGE> 4
VALLEY FORGE CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited, in thousands)
<TABLE>
<CAPTION>
Six Months Ended June 30,
-------------------------
1996 1995
---- ----
<S> <C> <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 3,136 $ 1,624
INVESTING ACTIVITIES
Cash paid for business acquisitions - (867)
Additions to property, plant, and equipment (1,996) (1,486)
Investment in and advances to affiliate (2,555) -
Proceeds from sale of constructed facility - 2,821
Other, net (59) (53)
------- -------
Net cash (used for) provided by investing activities (4,610) 415
------- -------
FINANCING ACTIVITIES
Proceeds from long-term debt 2,678 655
Net borrowings (repayments) on line of credit agreement 630 (376)
Net repayments on construction loans - (1,941)
Net payments on short-term notes (350) -
Principal payments on long-term debt (1,208) (130)
Stock options exercised 11 91
Dividends paid (321) (301)
------- -------
Net cash provided by (used for) financing activities 1,440 (2,002)
------- -------
CHANGE IN CASH AND EQUIVALENTS (34) 37
Cash and equivalents at beginning of year 34 -
------- -------
CASH AND EQUIVALENTS AT END OF PERIOD $ - $ 37
======= =======
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
4
<PAGE> 5
VALLEY FORGE CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In thousands)
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
---- ----
ASSETS (unaudited)
<S> <C> <C>
CURRENT ASSETS
Cash and equivalents $ - $ 34
Accounts receivable, net 11,326 10,349
Inventories 16,957 16,310
Other current assets 1,188 1,605
------- -------
Total current assets 29,471 28,298
Property, plant, and equipment, net 8,895 7,854
Goodwill, net 13,015 13,431
Investment in and advances to affiliate 2,555 -
Other assets 1,157 1,158
------- ------
$55,093 $50,741
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Loans and notes payable $ 1,130 $ 850
Current portion of long-term debt 1,537 1,419
Accounts payable and accrued expenses 6,241 5,476
------- -------
Total current liabilities 8,908 7,745
Long-term debt 12,836 11,484
Deferred income taxes 855 855
Minority interest 1,544 1,423
Stockholders' equity 30,950 29,234
------- -------
$55,093 $50,741
======= =======
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
5
<PAGE> 6
VALLEY FORGE CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited, in thousands, except per share amounts)
GENERAL
Information with respect to the three and six months ended June 30, 1996 and
1995 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 1995 condensed consolidated financial statements to
conform to the 1996 presentation. These financial statements are presented in
accordance with the Securities and Exchange Commission disclosure requirements
for Form 10-Q. Reference should be made to the Valley Forge Corporation Annual
Report on Form 10-K for the year ended December 31, 1995.
Due to seasonal variations, the results of operations for the periods reported
are not necessarily indicative of the entire year.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities and the reported results of operations. Actual results
could differ from these estimates.
<TABLE>
<CAPTION>
INVENTORIES June 30, 1996 December 31, 1995
------------- -----------------
<S> <C> <C>
Raw materials $ 9,740 $ 8,617
Work-in-process 3,065 2,455
Finished goods 4,152 5,238
-------- --------
$ 16,957 $ 16,310
======== ========
</TABLE>
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.
6
<PAGE> 7
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for income taxes and interest during the six months ended June 30,
1996 and 1995 was as follows:
<TABLE>
<CAPTION>
1996 1995
------ -------
<S> <C> <C>
Income taxes $ 792 $ 1,596
Interest $ 605 $ 636
</TABLE>
EQUITY INVESTMENT
To enhance its strategic position in the European marketplace, in April 1996
the Company acquired a 47% interest in a European marine products manufacturer
for approximately $2,350,000 in cash. Concurrently, the Company advanced
approximately $205,000 to the affiliate for working capital. The investment is
being accounted for on the equity method.
7
<PAGE> 8
VALLEY FORGE CORPORATION AND SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations
June 30, 1996
FINANCIAL CONDITION
During the first half of 1996, the Company's cash flow from operations ($3.1
million) and borrowings on its bank line of credit ($.6 million, net) were used
to fund investments in property, plant, and equipment ($2.0 million, including
the purchase of an $800 thousand operating facility) and make principal
payments on long-term debt ($1.2 million). The Company acquired a 47% interest
in a European marine products manufacturer ($2.3 million) and advanced them $.2
million funded by borrowings on its advanceable term loan.
In January 1995, the Company sold a constructed operating facility for $2.8
million and repaid the related construction loan of $1.6 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 1996.
RESULTS OF OPERATIONS
REVENUES AND RELATED COSTS
Consolidated revenues increased $2.3 million (11%) in the quarter ended June
30, 1996 over the same quarter in the prior year, with the recreational
products segment increasing 10% and the industrial products segment increasing
13%. Revenues for the first half of 1996 increased $2.4 million (6%) to $41.2
million, with the recreational products segment up 5% and the industrial
products segment up 7% over the first six months of 1995. The major reason for
the increase in sales in the second quarter 1996 over 1995 was new product
introductions in both segments.
Gross profits for the quarter and six months ended June 30, 1996 increased $1.1
million (14%) and $.9 million (6%), respectively, over the comparable periods
in 1995. The consolidated gross profit margin percentage for the quarter
increased .8% from 38.5% in 1995 to 39.3% in 1996 and for the six-month period
decreased from 39.7% in 1995 to 39.4% in 1996.
8
<PAGE> 9
SELLING AND ADMINISTRATIVE EXPENSES
Consolidated selling and administrative expenses increased $775 thousand (14%)
for the quarter and $960 thousand (8%) for the six months ended June 30, 1996
over the same periods in the prior year. Selling and administrative expenses as
a percentage of sales remained the same at approximately 29% for the second
quarters of 1995 and 1996. Selling and administrative expenses for the six
months ended June 30, 1996 increased to 30.1% of sales from 29.5% of sales in
1995.
OTHER INCOME (EXPENSE)
Other, net for the six months ended June 30, 1996 includes $250,000 of proceeds
from a life insurance policy on the former president of Gits Manufacturing.
QUARTERLY RESULTS
The following table sets forth unaudited consolidated summary financial data
for each quarter of 1994, 1995, and 1996 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>
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 6,335 7,584 6,123 6,159
Net income 738 904 614 561
Net income per share $.28 $.33 $.23 $.21
1995 First Quarter Second Quarter Third Quarter Fourth Quarter
------------- -------------- ------------- --------------
<S> <C> <C> <C> <C>
Revenues $18,863 $19,881 $18,014 $18,370
Gross profit 7,705 7,664 7,046 7,074
Net income 1,008 978 696 684
Net income per share $.37 $.36 $.25 $.25
1996 First Quarter Second Quarter
------------- --------------
<S> <C> <C>
Revenues $19,022 $22,153
Gross profit 7,520 8,717
Net income 918 1,105
Net income per share $.33 $.40
</TABLE>
9
<PAGE> 10
VALLEY FORGE CORPORATION AND SUBSIDIARIES
Part II Other Information
For the Quarter Ended June 30, 1996
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.
10
<PAGE> 11
EXHIBIT 11
VALLEY FORGE CORPORATION AND SUBSIDIARIES
Computation of Earnings per Share
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------- -----------------
June 30, June 30,
-------- --------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
PRIMARY:
Weighted average common shares
outstanding 2,667,733 2,660,675 2,667,651 2,658,351
Common equivalent shares 94,035 65,297 84,882 68,028
---------- ---------- ---------- ----------
Weighted average common shares and
common equivalent shares outstanding 2,761,768 2,725,972 2,752,533 2,726,379
========== ========== ========== ==========
Net income $1,105,000 $ 978,000 $2,023,000 $1,986,000
========== ========== ========== ==========
Primary earnings per share $ .40 $ .36 $ .73 $ .73
========== ========== ========== ==========
FULLY DILUTED:
Weighted average common shares
outstanding 2,667,733 2,660,675 2,667,651 2,658,351
Common equivalent shares 94,035 68,663 92,862 71,224
---------- ---------- ---------- ----------
Weighted average common shares and
common equivalent shares outstanding 2,761,768 2,729,338 2,760,513 2,729,575
========== ========== ========== ==========
Net income $1,105,000 $ 978,000 $2,023,000 $1,986,000
========== ========== ========== ==========
Fully diluted earnings per share $ .40 $ .36 $ .73 $ .73
========== ========== ========== ==========
</TABLE>
11
<PAGE> 12
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 8, 1996 /s/
----------------------------------
Monica J. Burke
Vice President Finance
12
<PAGE> 13
Exhibit Index
Exhibit 27
Financial Data Schedule
13
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 11,553
<ALLOWANCES> 227
<INVENTORY> 16,957
<CURRENT-ASSETS> 29,471
<PP&E> 21,327
<DEPRECIATION> 12,432
<TOTAL-ASSETS> 55,093
<CURRENT-LIABILITIES> 8,908
<BONDS> 0
0
0
<COMMON> 1,398
<OTHER-SE> 29,552
<TOTAL-LIABILITY-AND-EQUITY> 55,093
<SALES> 41,175
<TOTAL-REVENUES> 41,175
<CGS> 24,938
<TOTAL-COSTS> 24,938
<OTHER-EXPENSES> 12,383
<LOSS-PROVISION> 16
<INTEREST-EXPENSE> 629
<INCOME-PRETAX> 3,509
<INCOME-TAX> 1,378
<INCOME-CONTINUING> 2,023
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,023
<EPS-PRIMARY> .73
<EPS-DILUTED> .73
</TABLE>
