<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1995 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
(Address of principal executive offices) (Zip code)
(415) 492-1500
(Registrant's telephone number, including area code)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE
SECURITIES EXCHANGE ACT OF 1934:
NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
Common Stock, Par Value $.50
Per Share American Stock Exchange
Indicate by a check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to the Form 10-K. / X /
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 aggregate market value of the voting stock held by non-affiliates of the
Registrant at March 1, 1996 was approximately $13,718,000.
The number of shares of Registrant's Common Stock outstanding on March 1, 1996
was 2,667,733.
The Exhibit Index is located on page 14.
Page 1 of 42
<PAGE> 2
ITEM 1. BUSINESS
Valley Forge Corporation (the Company), incorporated in 1955, is a Georgia
corporation. The Company conducts its business through its subsidiaries,
Atlantic Guest, Inc., Cruising Equipment Company, Force 10 Marine Ltd., Gits
Manufacturing Company, Inc., Glendinning Marine Products, Inc., Heart Interface
Corporation, Marine Industries Company, Inc., Multiplex Technology, Inc., and
Turner Electric Corporation.
In May 1994, the Company incorporated Atlantic Guest, Inc., which acquired
substantially all of the assets of The Guest Company, Inc. in June 1994 and
concurrently sold a 14% interest to two officers of Atlantic Guest, Inc. The
Company acquired 100% of the stock of Heart Interface Corporation between
February 1988 and June 1992. During 1991, the Company acquired an ownership
interest in Multiplex Technology, Inc. of approximately 66%.
For information concerning the revenues, operating profits, and identifiable
assets by segment, refer to Note O to the Consolidated Financial Statements.
RECREATIONAL GROUP
ATLANTIC GUEST, INC.
Atlantic Guest, Inc. (Guest), located in Meriden, Connecticut, designs,
manufactures, and distributes a broad line of marine accessories including
spotlights, battery switches, battery chargers, cabin lights, and safety
equipment. These products are sold worldwide to distributors, retailers, and
original equipment manufacturers.
Sales are somewhat seasonal in that sales during the third quarter of the year
are lower than the other quarters. Guest has a number of competitors, none of
whom dominate the market. Guest exports approximately 10% of its production,
principally to Europe.
Raw materials are readily available and are purchased from a variety of
worldwide suppliers. Material costs have remained relatively stable during the
year with no substantial increases or decreases anticipated in the near future.
HEART INTERFACE CORPORATION
Heart Interface Corporation (Heart), located in Kent, Washington, manufactures
power inverters which convert DC power stored in batteries into AC power to
operate standard household appliances and tools. In conjunction with Cruising
Equipment Company, Heart also manufactures integrated battery monitors and
inverter remote controls. Heart's products are sold in the marine, recreational
vehicle, industrial, and alternative energy markets. Their products are
primarily sold through independent sales representatives to distributors,
dealers, and manufacturers. Heart has a number of competitors, none of whom
dominate the market.
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<PAGE> 3
Sales and production levels are not seasonal. Raw materials are readily
available from a number of suppliers. Prices of raw materials have remained
relatively stable over the last year and no substantial increases or decreases
are anticipated in the near future.
MARINE INDUSTRIES COMPANY, INC.
Marine Industries Company, Inc. (Marinco), located in Napa, California,
consists of two business units: Marinco/AFI Marine Products and Marinco
Specialty Wiring Devices. Marinco/AFI Marine Products serves the marine
marketplace and manufactures marine electrical shore power connectors under the
"Marinco" brand name and distributes other marine accessories including teak,
horns, windshield wipers, and boarding systems under the "AFI" brand name. In
June 1995, Marinco/AFI Marine Products acquired the Nicro Ventilation Systems
product line and began manufacturing marine solar and passive ventilation
systems under the "Nicro" brand name. Marinco/AFI Marine Products are sold
nationwide to distributors, retailers, and boat builders. Marinco Specialty
Wiring Devices manufactures and distributes a broad line of specialty wiring
devices for industrial applications. These devices are sold directly and
through distributors to original equipment manufacturers.
Marinco's sales and production levels are somewhat seasonal in that sales
during the first six months are generally higher than the last six months of
the year. Marinco competes on the basis of product performance, service, and
price with other manufacturers of varying size, several of whom are larger than
Marinco. Marinco/AFI exports approximately 10% of its production.
Raw materials are readily available from a number of suppliers. Material costs
have remained relatively stable during the year and no substantial increases or
decreases are anticipated in the near future. Marinco/AFI imports a portion of
their products from Thailand, Japan, and Taiwan and product sources are readily
available. Foreign exchange rates and price changes have not had a material
effect since it is Marinco's policy to adjust pricing to current conditions.
OTHER SUBSIDIARIES
Other subsidiaries in the Valley Forge Recreational Group include Cruising
Equipment Company (Cruising), Force 10 Marine Ltd. (Force 10), and Glendinning
Marine Products, Inc. (Glendinning).
INDUSTRIAL GROUP
GITS MANUFACTURING COMPANY, INC.
Gits Manufacturing Company, Inc. (Gits), located in Creston, Iowa, manufactures
turbocharger actuators, lubricating devices, and environmental control vents.
Products marketed under the Gits name are sold through distributors and include
oilers, oil breather mechanisms, and central lubricating devices. Gits
actuators, environmental control vents, and
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other products are sold directly to original equipment manufacturers. Gits
exports approximately 25% of its production, principally to Japan and England.
Two customers accounted for approximately 40% of Gits' 1995 sales. Gits has
several competitors, none of whom dominate the market.
Sales and production levels are relatively constant throughout the year. Raw
materials are readily available and are purchased from a variety of nationwide
suppliers. Prices of raw materials have remained relatively stable over the
last year and no substantial increases or decreases are anticipated in the near
future.
MULTIPLEX TECHNOLOGY, INC.
Multiplex Technology, Inc. (Multiplex), located in Brea, California, is the
developer, manufacturer, and marketer of the ChannelPlus brand of
telecommunications equipment. ChannelPlus products are used primarily in master
antenna television, cable television, satellite master antenna television, and
closed circuit television systems. Principal product lines include RF
modulators, broadband distribution amplifiers, demodulators, message
generators, and solid state video cameras. Applications for these products are
found primarily in residential and commercial video distribution systems.
Multiplex markets its products to video system designers, installation
contractors, and dealers through a worldwide network of distributors. Multiplex
exports approximately 10% of its production, principally to Japan, Canada, and
Europe. Multiplex has many competitors, none of whom competes directly in their
market niche.
Sales and production levels are somewhat seasonal in that sales in the second
six months are generally higher than the first six months. Raw materials are
purchased from a variety of suppliers located in the United States, Europe, and
Asia. Most parts are available from a number of suppliers. Certain other parts
are sole sourced and/or custom tooled and Multiplex maintains several
production cycles of parts on hand as safety stock. Prices for raw materials
have remained stable over the last year and no substantial increases or
decreases are anticipated in the near future.
TURNER ELECTRIC CORPORATION
Turner Electric Corporation (Turner), located in Fairview Heights, Illinois, is
a manufacturer of high voltage switches and other electrical equipment. Turner
markets to investor-owned utility companies, rural electric associations and
cooperatives, and municipal utilities.
Turner conducts business with utilities which depend on regulatory authorities
for capital expenditures. Sales and production levels are relatively constant
throughout the year. Sales are conducted through independent sales
representatives. Turner competes on the basis of price and product performance
with other manufacturers of varying size, none of whom dominate the
marketplace.
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Production materials are purchased mainly from a number of local suppliers and
have been readily available. Material costs have been relatively stable over
the past year and no substantial increases or decreases are anticipated in the
near future.
WORKING CAPITAL
Some of the companies in the recreational segment offer special payment terms
to their marine customers under certain conditions known as "dating" in the
marine industry. The dating programs have various terms but generally have the
effect that sales made during the fourth and first quarter are not collected
until the second calendar quarter. The Company feels that its line of credit is
sufficient to meet the working capital requirements of the dating program.
BACKLOG
The backlogs of the Company's subsidiaries for uncompleted orders and contracts
are presented below by industry segment. Generally, all orders and contracts in
the backlogs at year end are completed during the following year. The backlogs
are calculated based on firm orders and contracts received.
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Industrial products $4,757,000 $3,874,000
Recreational products 1,860,000 1,335,000
----------- ----------
$6,617,000 $5,209,000
========== ==========
</TABLE>
PATENTS
The Company's subsidiaries hold various active United States and foreign
patents related to their products, which expire at various times. The Company
views its patents as valuable assets, but believes that its position in the
market is not dependent upon patent protection.
EMPLOYEES
The Company and its subsidiaries had approximately 570 employees at December
31, 1995. The number of employees varies primarily with market conditions.
Approximately 11% of total employees are represented by a labor union under a
contract expiring in 1996. The Company considers its labor relations to be
satisfactory.
ENVIRONMENT
Compliance with Federal, state, and local provisions regulating the discharge
of materials into the environment or otherwise relating to the protection of
the environment is not expected to have a material effect upon the capital
expenditures, earnings, or the competitive position of the Company.
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ITEM 2. PROPERTIES
The following table describes the properties presently operated by the Company
and its subsidiaries.
<TABLE>
<CAPTION>
Square
Company Location Description Footage
- ------- -------- ----------- -------
<S> <C> <C> <C>
Cruising Seattle, WA Plant 4,000
Force 10 Richmond, B.C. Plant 15,000
Gits Creston, IA Plant 61,000
Glendinning Conway, SC Plant 7,000
Guest Meriden, CT Plant 30,000
Heart Kent, WA Plant 73,000
Marinco Napa, CA Plant 68,000
Multiplex Brea, CA Plant 35,000
Turner Fairview Heights, IL Plant 52,000
Corporate San Rafael, CA Office 2,000
</TABLE>
Force 10, Gits, Glendinning, and Turner own their facilities. Cruising, Guest,
Heart, Marinco, Multiplex, and the Company's corporate headquarters lease their
facilities. The Company plans to relocate two subsidiaries to expanded plants
in 1996. The remaining properties are considered adequate and suitable for
their intended use.
ITEM 3. LEGAL PROCEEDINGS
There are no material pending legal actions either for or against the Company
or any of its subsidiaries.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND
RELATED STOCKHOLDER MATTERS
The common stock of the Company is traded on the American Stock Exchange (AMEX)
under the symbol "VF." On December 6, 1995, the Company's Board of Directors
authorized a three-for-two stock split effected in the form of a 50% stock
dividend to be distributed on March 12, 1996, to shareholders of record on
March 1, 1996. Accordingly, all references to numbers of shares, per share
amounts, stock option data, and market prices of the Company's common stock
presented herein have been restated (see Note A to the Consolidated Financial
Statements). The Company had approximately 500 shareholders on March 1, 1996.
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The following table is based on the closing price as published by the AMEX.
<TABLE>
<CAPTION>
1995 1994
--------------------- ---------------------
High Low High Low
<S> <C> <C> <C> <C>
First quarter $13.083 $11.000 $10.250 $ 8.083
Second quarter 12.250 11.250 11.750 9.583
Third quarter 14.250 12.167 12.667 11.000
Fourth quarter 13.833 11.583 12.333 11.217
</TABLE>
During 1995, the Company increased the regular quarterly dividend per share to
$.0567, or $.227 annually, from $.05 or $.20 annually in 1994. In 1996, the
Board of Directors increased the quarterly dividend to $.06 or $.24 annually.
The first quarter cash dividend for 1996 was payable March 12, 1996, to
shareholders of record on March 1, 1996.
ITEM 6. SELECTED FINANCIAL DATA
The response to this Item is addressed in the "Five-Year Summary" which is
included as a supplementary schedule to the Consolidated Financial Statements.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
1995 COMPARED TO 1994
The Company achieved record revenues in 1995 of $75 million, an increase of $9
million (13.8%) over 1994 revenues of $66 million. The recreational group sales
increased 22.0% and the industrial group sales increased 5.6% over the prior
year. The recreational group increase was due principally to the inclusion of
Guest for a full year (acquired in June 1994). Without the inclusion of Guest,
the recreational group revenues increased 13.7%, due principally to unit volume
increases and only minor price increases.
Gross profits rose 12.1% due to the increased volume and the full year
inclusion of Guest. The gross profit margin decreased slightly from 39.0% in
1994 to 38.5% in 1995.
Consolidated selling and administrative expenses rose 12.2% in 1995 over 1994
due to the increased volume and the inclusion of Guest for a full twelve
months.
Interest expense increased 31.8 % due principally to the increase in debt used
to acquire Guest.
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1994 COMPARED TO 1993
1994 revenues of $66 million were up 24.0% over 1993 and were a record for the
Company. The recreational group sales increased 32.9% and the industrial group
sales increased 16.3% over the prior year. The acquisition of Guest contributed
significantly to the 1994 increase in sales for the recreational group. The
balance of the sales increase was due to unit volume increases with only minor
price increases. The sales growth was fueled by new product development
programs and by the continued strength in the marine industry.
Gross profits rose 24.1% due to the volume increases and the acquisition of
Guest. The gross profit margin percentage remained the same from 1993 to 1994
at 39.0%.
Consolidated selling and administrative expenses rose 18.4% to $19.8 million in
1994 over 1993. The increase was principally attributable to the acquisition of
Guest, increases in selling expenses which vary directly with sales, and
increased engineering and research expenditures. In the second quarter of 1994,
the Company recorded a nonrecurring charge of $130 thousand for moving expenses
associated with the relocation of Marinco and AFI to a new facility.
Interest expense increased 70.8% to $914 thousand due principally to the
increase in debt used to acquire Guest.
Other income (expense) includes a $450 thousand charge to write down a building
held for sale to its estimated net realizable value.
LIQUIDITY AND SOURCES OF CAPITAL
Cash provided by operating activities increased from $2.2 million in 1994 to
$4.6 million in 1995. This net $2.4 million increase is primarily due to the
fact that the Company invested an additional $3.3 million in inventories during
1994 compared to $374 thousand in 1995, a difference of $2.9 million. The major
investment in inventories during 1994 was necessitated by the sales growth in
that year over 1993 (24%) and new product introductions.
The Company borrowed $11 million in June 1994 to purchase the assets of Guest
for $6.5 million and to pay down short-term borrowings on the bank line of
credit. This new debt requires annual principal payments of $1 million
beginning in June 1996.
The Company had a bank line of credit of $6 million available and unused at
December 31, 1995. The Company also had an advanceable term loan due June 30,
1998, providing for borrowings up to $3.5 million bearing interest at the prime
rate plus 0.5%. This advanceable term loan is intended to be used to fund
acquisitions. At December 31, 1995, $850 thousand was outstanding on this
advanceable term loan.
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<PAGE> 9
The Company borrowed $850 thousand from certain officers and shareholders
during the year at 1.25% over the current 90 day Treasury bill rate. This
resulted in a savings of approximately 1.5% to 2.0% over comparable borrowings
during the same periods at the prime rate on the bank line of credit.
The Company invested $2.9 million in plant and equipment during 1995, which is
approximately 75% higher than depreciation charges during the year of $1.6
million. Management estimates that 1996 capital expenditures will be
approximately $3.5 million, including approximately $1.25 million in expanded
operating facilities for two subsidiaries.
The Company merged the operations of Marinco and AFI with both companies moving
to a newly constructed facility on November 1, 1994. The facility was sold on
January 18, 1995, to an unrelated party and leased back for a period of 15
years. The facility formerly occupied by AFI was sold in August 1995 for $242
thousand cash and a $600 thousand promissory note.
Approximately $600 thousand was used to pay cash dividends in 1995. On December
6, 1995, the Company's Board of Director's authorized a three-for-two stock
split effected in the form of a 50% stock dividend to be distributed on March
12, 1996, to shareholders of record on March 1, 1996. In conjunction with the
stock split, the Company also adjusted the 1996 cash dividend rate to $.06 per
share (see Note A to the Consolidated Financial Statements). The dividend rate
for 1995 was $.0567 per share. The total dividend payments for 1996 are
expected to be $650 thousand.
Management believes that cash flow from operations, the bank line of credit and
the term credit facility will provide sufficient liquidity to fund working
capital requirements, capital expenditures, potential business acquisitions,
debt repayments, and dividends for the next twelve months.
EFFECTS OF INFLATION AND OTHER MATTERS
Inflation had little effect on revenues and related costs during 1995.
Management anticipates that margins will be maintained at acceptable levels to
minimize the effect of inflation, if any.
The Company has total interest bearing debt of approximately $13.75 million, of
which one obligation of $11 million is long-term and bears interest at a fixed
rate of 8.15%. Management believes that increases in short-term rates should
not have a material adverse effect on the Company's 1996 results since there is
relatively little exposure to short term rates.
Management believes that foreign currency fluctuations should not have a
significant impact on gross margins due to the low volume of business affected
by foreign currencies.
The Company is not aware of any significant environmental loss liabilities.
Management believes product liabilities are adequately covered by general
liability insurance.
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The response to this Item is submitted in a separate section of this report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 10. DIRECTORS AND OFFICERS OF THE REGISTRANT
The following table lists the names and ages of each of the directors and
executive officers of the Company at December 31, 1995.
<TABLE>
<CAPTION>
Year First
All Positions and Offices Elected as
Name Age with the Company Director
---- --- ---------------- --------
<S> <C> <C> <C>
Martin J. Bloom 65 Co-Chairman of the Board 1983
Theodore P. Desloge, Jr. 56 Co-Chairman of the Board 1983
David R. Brining 53 CEO, President, Director 1981
Phillip F. Dressel 59 Director 1985
Dale J. Warner 73 Director 1983
Monica J. Burke 44 Vice President of Finance,
Secretary
</TABLE>
Directors are elected at the annual meeting of the shareholders to serve for
one year and until successors are elected and qualified. Officers are elected
by the Board of Directors immediately following the annual meeting of
shareholders and serve until their successors are elected and qualified.
Mr. Bloom has been a Director of the Company since 1983, Co-Chairman of the
Board since 1984, and is a Director for most of the Company's subsidiaries. He
is a past Director and Chairman of the Board of Park 'N Fly, Inc., an operator
of off-airport parking services.
Mr. Desloge has been a Director of the Company since 1983 and Co-Chairman of
the Board since 1984. He is a past Director and President of Park 'N Fly, Inc.
Mr. Brining has been President, CEO, and a Director of the Company since 1981.
He has served as a Director or Chairman of each of the Company's subsidiaries
since their acquisition.
Mr. Dressel has been a Director of the Company since 1985. He was Chairman of
the Board and President of Consolidated Flavor Corporation, a privately held
flavoring business located in St. Louis, Missouri.
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Mr. Warner has been a Director of the Company since 1983. He was a Director of
Gits Bros. Mfg. Co. for more than six years.
Ms. Burke has served as Vice President of Finance since 1988.
ITEM 11. EXECUTIVE COMPENSATION
The following table shows certain summary information concerning compensation
paid or accrued by the Company to or on behalf of the Company's Chief Executive
Officer and the other executive officer of the Company whose compensation
exceeds $100,000 (Named Executives):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
------------------- ------------
Name and Fiscal Other Annual All Other
Principal Position Year Salary Bonus Compensation(1) Options Compensation(2)
- ------------------ ---- ------ ----- --------------- ------- ---------------
<S> <C> <C> <C> <C> <C> <C>
David R. Brining, 1995 $276,317 $135,725 $6,600 0 $17,073
CEO(3) 1994 254,817 190,500 5,351 75,000 16,489
1993 240,750 63,500 4,563 0 21,005
Monica J. Burke, 1995 109,667 31,500 0 0 13,514
Vice President 1994 105,667 40,800 0 0 11,339
Finance(3) 1993 101,417 20,700 0 0 10,899
</TABLE>
(1) In August, 1987 and incident to the relocation of the corporate
headquarters from St. Louis, Missouri to San Rafael, California, the
Company accepted a $75,000 demand, non-interest bearing note from Mr.
Brining. The amounts included under Other Annual Compensation represent
interest calculated at the prime rate on the demand note.
(2) Represents amounts contributed to the Company's two profit sharing plans.
(3) Mr. Brining and Ms. Burke also serve as officers of each of the Company's
subsidiaries.
There are no employment contracts or termination agreements with Named
Executives.
AGGREGATED OPTION(1) EXERCISES IN 1995 AND YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Value of Unexercised,
Number of Unexercised In the Money
Named Shares Options Held at Year End Options Held at Year End(2)
Acquired On Value ------------------------ ---------------------------
Executives Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
---------- -------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
David R. Brining 0 $ 0 18,750 56,250 $ 9,431 $28,294
Monica J. Burke 4,500 22,110 6,750 0 45,583 0
</TABLE>
(1) The Company has no plans pursuant to which stock appreciation rights (SARs)
may be granted.
(2) Value of unexercised "in the money" options is the difference between
the market price of the Common Stock on December 31, 1995 ($11.583 per
share) and the exercise price of the option, multiplied by the number of
shares subject to the option.
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OPTION GRANTS IN 1995
None to Named Executives.
DIRECTORS' COMPENSATION
The Company entered into consulting agreements with Messrs. Bloom and Desloge
in 1983. Pursuant to the terms of the agreements, Messrs. Bloom and Desloge are
to provide the Company with advice on any corporate acquisitions, retention of
corporate assets, evaluation of key personnel, evaluation of the operations of
subsidiaries, supervision of new product development, and general strategic
planning. The agreements are renewable annually on December 31 with the
consulting fee for the succeeding year set at that time. The Company agreed to
a fee of $81,250 for Mr. Bloom for 1995 due to his increased contributions to
the Company. The Company agreed to a fee of $50,000 for Mr. Desloge for 1995.
The Company has also retained Mr. Warner in a consulting role for a fee of
$8,400 which is renewable each year. In addition, the Company generally pays
directors $500 for each board meeting attended.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth, as of March 1, 1996, the information with
respect to the beneficial ownership of the Company's common stock by each of
the Company's directors and officers and each stockholder known by the Company
to beneficially own more than 5% of the outstanding common stock.
<TABLE>
<CAPTION>
Number of Shares
Beneficial Owner Beneficially Owned(1) Percent
- ---------------- --------------------- -------
<S> <C> <C>
Martin J. Bloom 497,452(2) 18.65%
126,852(3) 4.76%
Theodore P. Desloge, Jr. 538,327 20.18%
126,852(3) 4.76%
David R. Brining 258,975(4) 9.64%
Phillip F. Dressel 79,049(5) 2.96%
All directors and
officers as a group 1,638,007(6) 60.82%
FMR Corporation
82 Devonshire Street
Boston, MA 02109 223,500(7) 8.38%
</TABLE>
(1) Except as otherwise noted, each person has sole voting and investment
power with respect to the shares listed subject to community property
laws where applicable.
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(2) Does not include 15,000 shares (.56%) owned by Mr. Bloom's wife with
respect to which Mr. Bloom disclaims beneficial ownership.
(3) Represents shares owned by Bloom & Desloge Enterprises, Inc., a corporation
in which Messrs. Bloom and Desloge are each 50% stockholders. Bloom &
Desloge Enterprises, Inc. owns a total of 253,704 shares of common stock.
(4) Includes options to purchase 18,750 shares at $11.08 per share. Does not
include 1,425 shares (.05%) owned by Mr. Brining's wife with respect to
which Mr. Brining disclaims beneficial ownership.
(5) Represents shares deposited under trust agreements for the benefit of
Mr. Dressel.
(6) Includes options to purchase 6,750 shares at $4.83 per share purchasable
by an officer. In addition to the disclaimed shares described in (2) and
(4) above, does not include 5,400 shares (.20%) held in trust by Mr.
Warner's wife with respect to which Mr. Warner disclaims beneficial
ownership.
(7) Based solely upon a Schedule 13G dated February 14, 1996. Of the 223,500
shares shown as beneficially owned by FMR Corporation, 223,500 are
beneficially owned by Fidelity Management Research Company ("Fidelity
Research"), a wholly-owned subsidiary of FMR Corporation and investment
advisor of several investment companies. FMR Corporation and its chairman,
Edward C. Johnson 3rd, each has sole power to dispose of the shares owned
by Fidelity Research, but neither FMR Corporation nor Mr. Johnson has the
sole power to vote or to direct the voting of such shares.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In August 1987 and incident to the relocation of the corporate headquarters from
St. Louis, Missouri to San Rafael, California, the Company accepted a $75,000
demand, non-interest bearing note from Mr. Brining, the President and CEO of the
Company.
During 1995, the Company paid consulting and directors' fees to members of its
Board of Directors totaling approximately $142,000.
Since March 1994, the Company has borrowed a total of $950,000 from certain
officers, shareholders, and directors. The borrowings are evidenced by
short-term notes that have original maturities of 13 weeks from the date of
issuance and can be renewed. In January 1996, the five notes totaling $850,000
at December 31, 1995, were renewed with interest rates ranging from 6.34% to
6.42% and each matures in April 1996.
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ITEM 14. EXHIBITS, FINANCIAL SCHEDULES, AND REPORTS ON FORM 8-K
FINANCIAL STATEMENTS
Certain documents filed as part of the Form 10-K:
The response to this portion of Item 14 is submitted as a separate section of
this report.
REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the last quarter of the period covered
by this report.
FINANCIAL STATEMENT SCHEDULES
Financial statement schedules required by Regulation S-X:
The response to this portion of Item 14 is submitted in a separate section of
this report.
EXHIBITS
Exhibits required by Item 601 of Regulation S-K:
<TABLE>
<CAPTION>
Exhibit Page Number or Incorporated
Number Description by Reference to
- ------ ----------- ---------------
<S> <C> <C>
3 Articles of Incorporation and By- Exhibit 3 to Report on Form 10-K for
laws the year ended December 31, 1985
10.1 Agreement dated October 15, Exhibit to Report on Form 8-K dated
1984, by and between Concord October 15, 1984
Homes, Inc., Valley Forge
Corporation, and Fischer &
Frichtel, Inc.
10.2 Incentive Stock Option Exhibit 10.6 to Report on Form 10-K
Agreement dated as of April 1, for the year ended December 31, 1984
1982
10.3 Amendment No. 1 to Valley Exhibit 10.6 to Report on Form 10-K
Forge Corporation Incentive for the year ended December 31, 1984
Stock Option Agreement dated
April 1, 1982
</TABLE>
14
<PAGE> 15
<TABLE>
<S> <C> <C>
10.4 Amendment No. 1 to Valley Exhibit 10.6 to Report on Form 10-K
Forge Corporation Incentive for the year ended December 31, 1984
Stock Option Agreement dated
December 30, 1981
10.5 Note Purchase Agreement with Exhibit to Report on Form 8-K, dated
Northwestern National Life September 23, 1986
Insurance Company, The North
Atlantic Life Insurance Company
of America, and CU Life
Insurance Company of New York
10.6 Agreement involving the Exhibit to Report on Form 8-K, dated
acquisition of American Foreign February 23, 1987
Industries, Inc.
10.7 Agreement involving the Exhibit to Report on Form 8-K, dated
divestiture of U.S. Emulsifiers, June 30, 1987
Inc.
10.8 Asset Purchase Agreement Exhibit to Report on Form 8-K dated
involving the sale of the assets of June 22, 1990
Gits Bros. Mfg. Co.
10.9 Agreement for Purchase and Sale Exhibit to Report on the Form 8
of Stock of Multiplex Amendment dated April 19, 1991 to the
Technology, Inc. Form 8-K dated February 4, 1991
10.10 Agreement for Purchase of the Exhibit to Report on the Form 8
Assets of The Guest Company, Amendment dated August 10, 1994 to
Inc. the Form 8-K dated June 1, 1994
11 Computation of Net Income Per Page 17
Share
16.1 Letter regarding change in Exhibit to Report on Form 8-K, dated
certifying accountant November 27, 1989
16.2 Amendment No. 1 to letter Exhibit to Report on Form 8, dated
regarding change in certifying December 15, 1989
accountant
22 Listing of Significant Subsidiaries Page 18
</TABLE>
15
<PAGE> 16
<TABLE>
<S> <C> <C>
24 Consent of Independent Page 19
Accountants
</TABLE>
16
<PAGE> 17
EXHIBIT 11
VALLEY FORGE CORPORATION AND SUBSIDIARIES
COMPUTATION OF NET INCOME PER SHARE
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
1995 1994 1993
----------------------- ----------------------- ---------------------
Fully Fully Fully
Primary Diluted Primary Diluted Primary Diluted
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net income $3,366 $3,366 $2,817 $2,817 $2,115 $2,115
====== ====== ====== ====== ====== ======
Weighted average common shares
outstanding 2,662 2,662 2,615 2,615 2,528 2,528
Common equivalent shares 70 73 78 83 94 104
------ ------ ------ ------ ------ ------
Weighted average common shares
and common equivalent shares
outstanding 2,732 2,735 2,693 2,698 2,622 2,632
====== ====== ====== ====== ====== ======
Net income per share $1.23 $1.23 $1.05 $1.05 $.81 $.81
====== ====== ====== ====== ====== ======
</TABLE>
17
<PAGE> 18
EXHIBIT 22
VALLEY FORGE CORPORATION
LISTING OF SIGNIFICANT SUBSIDIARIES
<TABLE>
<CAPTION>
State or Other Percentage
Jurisdiction of Owned by
Incorporation Registrant
------------- ----------
<S> <C> <C>
Atlantic Guest, Inc. Delaware 86%
Gits Manufacturing Company, Inc. Delaware 100%
Heart Interface Corporation Washington 100%
Marine Industries Company, Inc. California 100%
Multiplex Technology, Inc. California 66%
Turner Electric Corporation Illinois 100%
</TABLE>
18
<PAGE> 19
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statement of
Valley Forge Corporation and Subsidiaries on Form S-8 (File No. 33-50250) of
our reports dated March 1, 1996, on our audits of the consolidated financial
statements and financial statement schedule of Valley Forge Corporation and
Subsidiaries as of December 31, 1995, and 1994, and for the years ended
December 31, 1995, 1994, and 1993, which reports are included in this Annual
Report on Form 10-K.
Coopers & Lybrand LLP
Oakland, California
March 26, 1996
19
<PAGE> 20
VALLEY FORGE CORPORATION AND SUBSIDIARIES
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
FINANCIAL STATEMENTS:
Report of Independent Accountants 21
Consolidated Statements of Income for the three years ended
December 31, 1995 22
Consolidated Balance Sheets at December 31, 1995 and 1994 23
Consolidated Statements of Stockholders' Equity for the three
years ended December 31, 1995 24
Consolidated Statements of Cash Flows for the three years ended
December 31, 1995 25
Notes to Consolidated Financial Statements 26
QUARTERLY FINANCIAL DATA 38
SELECTED FINANCIAL DATA - Five-Year Summary 39
FINANCIAL STATEMENT SCHEDULES:
Report of Independent Accountants 40
Valuation and Qualifying Accounts and Reserves (Schedule II) 41
</TABLE>
20
<PAGE> 21
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Stockholders of Valley Forge Corporation:
We have audited the accompanying consolidated balance sheets of Valley Forge
Corporation and Subsidiaries as of December 31, 1995, and 1994, and the related
consolidated statements of income, stockholders' equity, and cash flows for
each of the three years in the period ended December 31, 1995. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Valley Forge
Corporation and Subsidiaries as of December 31, 1995, and 1994, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1995, in conformity with generally
accepted accounting principles.
Coopers & Lybrand LLP
Oakland, California
March 1, 1996
21
<PAGE> 22
VALLEY FORGE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Years ended December 31, 1995, 1994, and 1993
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
REVENUES $75,128 $66,036 $53,256
Costs and expenses:
Cost of goods sold 46,225 40,261 32,487
Selling and administrative 22,164 19,754 16,690
------- ------- -------
OPERATING INCOME 6,739 6,021 4,079
Other income (expense):
Interest expense (1,205) (914) (535)
Interest income 54 14 11
Other, net (3) (427) 179
------- ------- -------
INCOME BEFORE INCOME TAXES
AND MINORITY INTERESTS 5,585 4,694 3,734
Income taxes 2,111 1,762 1,456
Minority interests 108 115 163
------- ------- -------
NET INCOME $ 3,366 $ 2,817 $ 2,115
======= ======= =======
NET INCOME PER SHARE $ 1.23 $ 1.05 $ .81
======= ======= =======
Weighted average shares outstanding 2,732 2,693 2,622
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
22
<PAGE> 23
VALLEY FORGE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 1995 and 1994
(in thousands, except share amounts)
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and equivalents $ 34 $ --
Accounts receivable, less allowance of $211 in 1995 and $151
in 1994 10,349 9,535
Inventories, less allowance of $533 in 1995 and $373 in 1994 16,310 15,653
Other current assets 1,605 3,922
-------- --------
Total current assets 28,298 29,110
Property, plant, and equipment, net 7,854 6,483
Goodwill, net of accumulated amortization of $4,353 in 1995
and $3,533 in 1994 13,431 13,851
Building held for sale -- 901
Other assets 1,158 600
-------- --------
$ 50,741 $ 50,945
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Loans and notes payable $ 850 $ 5,583
Current portion of long-term debt 1,419 143
Accounts payable and accrued expenses 5,476 5,347
-------- --------
Total current liabilities 7,745 11,073
Long-term debt 11,484 11,383
Deferred income taxes 855 828
-------- --------
Total liabilities 20,084 23,284
-------- --------
Minority interests 1,423 1,322
-------- --------
Commitments and contingencies
STOCKHOLDERS' EQUITY
Common stock, $.50 par value, authorized 15,000,000 shares,
issued 2,795,940 shares in 1995 and 1994 1,398 1,398
Capital in excess of par value 8,443 8,403
Cumulative foreign currency translation adjustment (156) (192)
Retained earnings 20,476 17,714
Less treasury stock, at cost, 129,707 shares in 1995 and
141,707 shares in 1994 (927) (984)
-------- --------
29,234 26,339
-------- --------
$ 50,741 $ 50,945
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
23
<PAGE> 24
VALLEY FORGE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Years ended December 31, 1995, 1994, and 1993
(in thousands, except share amounts)
<TABLE>
<CAPTION>
Common Stock
--------------------------
Shares Capital in Cumulative
Issued and Excess of Translation Retained Treasury
Outstanding(a) Amount Par Value Adjustment Earnings Stock
-------------- ------ --------- ---------- -------- -----
<S> <C> <C> <C> <C> <C> <C>
Balances at December 31, 1992 2,490,358 $1,398 $8,006 $ (57) $13,814 $(1,690)
Net income -- -- -- -- 2,115 --
Cash dividends, $.20 per share -- -- -- -- (506) --
Foreign currency translation
adjustment -- -- -- (55) -- --
Purchase of treasury stock (31,500) -- -- -- -- (200)
Exercise of stock options 55,500 -- 101 -- -- 237
Other -- -- 39 -- -- --
--------- ------ ------ ----- ------- -------
Balances at December 31, 1993 2,514,358 1,398 8,146 (112) 15,423 (1,653)
Net income -- -- -- -- 2,817 --
Cash dividends, $.20 per share -- -- -- -- (526) --
Foreign currency translation
adjustment -- -- -- (80) -- --
Exercise of stock options 139,875 -- 250 -- -- 669
Other -- -- 7 -- -- --
--------- ------ ------ ----- ------- -------
Balances at December 31, 1994 2,654,233 1,398 8,403 (192) 17,714 (984)
Net income -- -- -- -- 3,366 --
Cash dividends, $.227 per share -- -- -- -- (604) --
Foreign currency translation
adjustment -- -- -- 36 -- --
Exercise of stock options 12,000 -- 40 -- -- 57
--------- ------ ------ ----- ------- -------
Balances at December 31, 1995 2,666,233 $1,398 $8,443 $(156) $20,476 $ (927)
========= ====== ====== ===== ======= =======
</TABLE>
(a)Restated to reflect stock split (see Note A).
The accompanying notes are an integral part of these financial statements.
24
<PAGE> 25
VALLEY FORGE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31, 1995, 1994, and 1993
(in thousands)
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 3,366 $ 2,817 $ 2,115
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation 1,644 1,427 1,162
Amortization 914 837 598
Loss on building held for sale 77 450 --
Deferred taxes (31) (182) (39)
Minority interests 108 115 163
Other (62) (9) 9
Changes in assets and liabilities, net of
businesses acquired:
Accounts receivable (814) (847) (2,358)
Inventories (374) (3,276) (2,343)
Other current assets (386) 92 49
Accounts payable and accrued expenses 185 792 833
-------- -------- --------
Net cash provided by operating activities 4,627 2,216 189
-------- -------- --------
INVESTING ACTIVITIES
Additions to property, plant, and equipment (2,878) (2,363) (1,908)
Constructed facility (46) (2,715) --
Proceeds from sale of constructed facility 2,821 -- --
Proceeds from building held for sale 242 -- --
Businesses acquired in purchase transactions,
net of cash acquired (876) (6,574) (249)
Other 7 20 7
-------- -------- --------
Net cash used for investing activities (730) (11,632) (2,150)
-------- -------- --------
FINANCING ACTIVITIES
Net borrowings (repayments) on line of credit agreement (2,942) (3,058) 3,672
Principal payments on long-term debt (188) (1,871) (1,832)
Proceeds from long-term debt 1,565 11,000 430
Net proceeds (repayments) of construction loans (1,941) 1,941 --
Net proceeds from short-term notes payable 150 700 --
Dividends paid (604) (526) (506)
Stock options exercised 97 919 338
Other -- 311 (141)
-------- -------- --------
Net cash provided by (used for) financing activities (3,863) 9,416 1,961
-------- -------- --------
INCREASE IN CASH AND EQUIVALENTS 34 -- --
Cash and equivalents at beginning of year -- -- --
-------- -------- --------
Cash and equivalents at end of year $ 34 $ -- $ --
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
25
<PAGE> 26
VALLEY FORGE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Valley Forge
Corporation and all its majority-owned subsidiaries (the Company). All
significant intercompany balances and transactions have been eliminated. 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.
STOCK SPLIT
On December 6, 1995, the Company's Board of Directors authorized a
three-for-two stock split effected in the form of a 50 percent stock dividend
distributed on March 12, 1996, to stockholders of record on March 1, 1996.
Accordingly, all references in the financial statements to numbers of shares,
per share amounts, stock option data, and market prices of the Company's common
stock have been retroactively restated. In addition, $444,000 representing the
par value of the additional shares issued has been reclassified from Capital in
Excess of Par Value to Common Stock.
CASH EQUIVALENTS
The Company considers all highly liquid investments with original maturities of
three months or less to be cash equivalents.
INVENTORIES
Inventories are stated at the lower of cost or market. Cost for certain
inventories in the industrial group segment is determined using the last-in,
first-out (LIFO) method. The cost of all other inventories is determined using
the first-in, first-out (FIFO) method.
PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment is stated at cost. Depreciation is primarily
provided by the straight-line method over the estimated useful lives of the
various assets. When assets are sold or retired, the cost and accumulated
depreciation are removed from the accounts and any gain or loss is included in
income.
GOODWILL
Goodwill is stated at cost and is amortized on a straight-line basis over
various periods ranging from fifteen to forty years. The Company periodically
evaluates the recoverability of its goodwill by comparing the aggregate
estimated future cash flows generated by those assets with their carrying
value. If the carrying value exceeds the aggregate cash flow amount, goodwill
would be reduced accordingly.
26
<PAGE> 27
FOREIGN CURRENCY TRANSLATION
Assets and liabilities of the Company's foreign operation are translated at
year end exchange rates while the income statement accounts are translated
using an average exchange rate for the year. Translation adjustments arising
from the translation of foreign assets and liabilities into U.S. dollars are
recorded as a separate component of stockholders' equity.
INCOME TAXES
The Company accounts for income taxes using the liability method. Deferred
income tax assets and liabilities are computed annually for differences between
the financial statement and tax bases of assets and liabilities that will
result in taxable or deductible amounts in the future based on enacted tax laws
and rates applicable to the periods in which the differences are expected to
affect taxable income. Valuation allowances are established when necessary to
reduce deferred tax assets to the amount expected to be realized.
NET INCOME PER SHARE
Net income per share is based on the weighted average number of common shares
and equivalents outstanding during the year. There is no difference between
primary and fully diluted net income per share for the years presented.
CONCENTRATION OF CREDIT RISK
The Company sells its recreational and industrial products to original
equipment manufacturers, dealers, and distributors located in the United States
and throughout the world. The Company performs ongoing credit evaluations of
its customers and generally does not require collateral. The Company maintains
reserves for potential credit losses.
FINANCIAL STATEMENT RECLASSIFICATION AND PRESENTATION
Certain reclassifications have been made to prior years' financial statements
to conform to the 1995 presentation.
NOTE B - INVENTORIES
Inventories consist of the following at December 31 (in thousands):
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Raw materials $ 8,617 $ 8,292
Work-in-process 2,455 2,274
Finished goods 5,238 5,087
-------- -------
$16,310 $15,653
======== =======
</TABLE>
27
<PAGE> 28
At December 31, 1995 and 1994, inventories of approximately $13,715,000 and
$13,004,000, respectively, were valued using the FIFO method. Inventories of
approximately $2,595,000 and $2,649,000 were valued using the LIFO method at
December 31, 1995 and 1994, respectively. The replacement cost of LIFO
inventories exceeds the LIFO value by approximately $333,000 and $151,000 at
December 31, 1995 and 1994, respectively.
NOTE C - PROPERTY, PLANT, AND EQUIPMENT
At December 31, 1995 and 1994, property, plant, and equipment consist of the
following (in thousands):
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Land $ 495 $ 329
Buildings 2,506 1,972
Machinery and equipment 13,276 11,786
Furniture and fixtures 2,814 2,303
Leasehold improvements 303 184
Construction in progress -- 234
-------- --------
19,394 16,808
Less accumulated depreciation
and amortization (11,540) (10,325)
-------- --------
$ 7,854 $ 6,483
======== ========
</TABLE>
NOTE D - BUILDING HELD FOR SALE
In 1994, the Company decided to sell a building that was used in its
operations. In 1994, a reserve of $450,000 for the write-down of the building
to its estimated net realizable value was included in "Other expense, net." In
August 1995, the building was sold for $242,000 cash and a $600,000 promissory
note.
NOTE E - ACCOUNTS PAYABLE AND ACCRUED EXPENSES
At December 31, 1995 and 1994, accounts payable and accrued expenses consist of
the following (in thousands):
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Accounts payable $2,265 $2,182
Wages, salaries, and benefits 1,426 1,417
Other accrued expenses 1,785 1,732
Federal and state taxes payable -- 16
------ ------
$5,476 $5,347
====== ======
</TABLE>
28
<PAGE> 29
NOTE F - LONG-TERM DEBT
At December 31, 1995 and 1994, long-term debt consists of the following (in
thousands):
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Notespayable to financial institutions, 8.15%, annual
principal payments of $1,000 from June 1996
through June 2006 $ 11,000 $ 11,000
Advanceable term loan, quarterly payments of $75
(see Note G) through June 1998 850 --
Mortgages 835 389
Other 218 137
-------- --------
12,903 11,526
Less current maturities (1,419) (143)
-------- --------
$ 11,484 $ 11,383
======== ========
</TABLE>
Annual maturities of long-term debt are: $1,419,000 in 1996; $1,433,000 in
1997; $1,726,000 in 1998; $1,138,000 in 1999; $1,062,000 in 2000; and
$6,125,000 thereafter.
The Company's notes payable to financial institutions agreement contains
covenants which require the maintenance of certain financial ratios and
maintenance of consolidated net worth, as defined, at $18,000,000.
The Company has two mortgage loans collateralized by operating facilities. The
mortgages require monthly payments of principal and interest totaling $14,000
and bear interest of 7% and 9%.
At December 31, 1995, the carrying value of long-term debt approximates fair
value based on rates currently available to the Company for debt with similar
characteristics.
NOTE G - LOANS AND NOTES PAYABLE
On June 15, 1995, the Company entered into a bank credit agreement for an
advanceable term loan with borrowings up to $3,500,000 and a revolving credit
note with borrowings up to $6,000,000. The revolving credit note bears interest
at 0.5% under the bank's prime rate and the advanceable term loan bears
interest at 0.5% above the bank's prime rate. At December 31, 1995, the balance
outstanding under the revolving credit note was zero and the balance
outstanding under the advanceable term loan was $850,000 (see Note F). The
bank's prime rate was 8.5% at December 31, 1995. This bank credit agreement
requires the maintenance of certain financial ratios, as well as minimum
capital requirements, at specified levels.
29
<PAGE> 30
Since March 1994, the Company has borrowed a total of $950,000 from certain
officers, shareholders, and directors. The borrowings are evidenced by
short-term notes that have original maturities of 13 weeks from the date of
issuance and can be renewed. At December 31, 1995, the borrowings outstanding
under the notes totaled $850,000 at interest rates ranging from 6.63% to 6.7%.
The weighted average interest rate on the above revolving credit note and
short-term notes during 1995 was 8.30%.
In January 1995, the Company repaid a construction loan of $1,728,000 using the
proceeds from the sale of the constructed facility. A subsidiary has leased
back the facility for a 15-year period.
In 1994, a construction loan was obtained to fund expansion of an existing
facility. The construction loan was repaid using the proceeds from a mortgage
loan obtained in May 1995.
NOTE H - COMMITMENTS AND CONTINGENCIES
The Company is self-insured for medical claims up to $40,000 per claim and
dental claims up to $1,000 per claim. At December 31, 1995 and 1994, accrued
medical and dental expenses were $55,000 and $90,000, respectively.
Commitments under non-cancelable operating leases are $742,000 in 1996,
$722,000 in 1997, $734,000 in 1998, $741,000 in 1999, $433,000 in 2000, and
$2,558,000 thereafter. Rental expense for operating leases for the years ended
December 31, 1995, 1994, and 1993 was $843,000, $633,000, and $424,000,
respectively.
NOTE I - RETIREMENT PLANS
The Company sponsors a profit sharing plan for all non-union employees at
several subsidiaries. Under this plan, contributions are discretionary and
limited to a percentage of eligible employees' compensation. Profit sharing
expense for this plan for 1995, 1994, and 1993 was approximately $ 180,000,
$175,000, and $167,000, respectively.
The Company has a 401(k) plan which covers all employees at domestic locations
in which the Company has an ownership interest in excess of 80%. Employee
contributions of up to 3% of each covered employee's compensation are matched
100% by the Company. Employer contributions to the plan were approximately
$273,000, $211,000, and $196,000, in 1995, 1994, and 1993, respectively.
In May 1993, Multiplex Technology, Inc. (Multiplex) adopted a 401(k) plan which
covers all of their employees. Multiplex's contributions to the plan are
discretionary and totaled approximately $19,000, $12,000, and $18,000 in 1995,
1994, and 1993, respectively.
30
<PAGE> 31
Gits Manufacturing Corporation (Gits) has a noncontributory defined benefit
pension plan (the "Plan") covering its union employees retiring after August 1,
1993. Pension benefits are based on a multiple of a fixed amount per month and
years of service, as defined in the union agreement. Benefits generally vest
over a seven-year period. Gits funds the Plan under the minimum funding
requirements of the Employee Retirement Income Security Act ("ERISA") of 1974.
The assets of the Plan are managed and invested by an insurance company.
The funded status of the Plan and the components of net periodic defined
benefit pension cost are set forth in the following table. The rates used in
determining the actuarial present value of the benefit obligations at December
31 were (i) discount rate - 6.0% in 1995 and 7.75% in 1994, and (ii) the
expected long-term rate of return on assets - 8.75% in both 1995 and 1994.
Benefit obligations are sensitive to changes in these estimated rates and
actual results may differ from the estimated obligations below (in thousands).
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefits $(784) $(581)
Nonvested benefits (67) (91)
----- -----
Accumulated and projected
benefit obligations (ABO and PBO) (851) (672)
Plan assets at fair value 929 734
----- -----
Plan assets in excess of ABO and PBO 78 62
Prior service cost not yet recognized
in net periodic pension cost 47 51
Unrecognized net loss (98) (88)
Unrecognized net asset being
amortized over 13.7 years (28) (30)
----- -----
Accrued pension cost $ (1) $ (5)
===== =====
Net pension cost included the following components:
Service cost $ 27 $ 31
Interest 51 43
Actual return on plan assets (204) 6
Net amortization and deferral 141 (75)
----- -----
Net pension cost $ 15 $ 5
===== =====
</TABLE>
31
<PAGE> 32
NOTE J - STOCK OPTION PLAN
The Company has a nonqualified stock option plan for key employees. Under the
plan, options are granted at prices not less than the fair market value of the
stock on the date of grant. The options expire not more than seven years from
the date of grant and generally vest over four years.
Activity under the stock option plan follows:
<TABLE>
<CAPTION>
Optioned Shares
Options ---------------------------
Available Number Price per
for Grant of Options Share
--------- ---------- ---------
<S> <C> <C> <C>
Balances, December 31, 1992 89,250 360,000 $4.79-$7.75
Options granted (58,500) 58,500 7.83- 8.00
Options lapsed 14,250 (14,250) 4.83
Options expired 75,000 (75,000) (a)
Options exercised -- (55,500) 4.79- 4.83
------- -------- -----------
Balances, December 31, 1993 120,000 273,750 4.79- 8.00
Options granted (90,000) 90,000 11.08
Options exercised -- (139,875) 4.79- 7.75
------- -------- -----------
Balances, December 31, 1994 30,000 223,875 4.79-11.08
Options granted (30,000) 30,000 12.00
Options exercised -- (12,000) 4.83- 7.75
------- -------- -----------
Balances, December 31, 1995 -- 241,875 $4.79-12.00
======= ======== ===========
</TABLE>
(a) The options that expired during 1993 were exercisable at fair market
value at the date of exercise.
At December 31, 1995, there were 115,125 options exercisable.
NOTE K - RESEARCH AND DEVELOPMENT EXPENSE
Research and development expense for the years ended December 31, 1995, 1994,
and 1993 was approximately $1,731,000, $1,424,000, and $1,101,000,
respectively.
32
<PAGE> 33
NOTE L - ACQUISITIONS
On June 1, 1994, Atlantic Guest, Inc. (Guest), a newly formed subsidiary of
Valley Forge Corporation, acquired substantially all of the assets of The Guest
Company, Inc. 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 purchase price in excess
of net tangible assets acquired, approximately $4.6 million, has been recorded
as goodwill and is being amortized over 15 years.
Guest is owned 86% by the Company and 7% each by two officers of the
subsidiary. In connection with the formation of Guest, each officer issued a
note due to the Company for $150,500 which bears interest at 8.15% and is due
May 31, 1997. The notes and accrued interest totaling approximately $315,000
are secured by Guest stock and are therefore recorded as a reduction of
minority interest. The Company entered into an agreement with the officers
whereby the officers may require the Company to purchase their shares of stock
at book value. The Company's total purchase obligation shall not exceed $75,000
in any twelve-month period. The Company also has right of first refusal to buy
the officers' stock.
The Company's results of operations include the results of Guest since June 1,
1994. The unaudited pro forma results of operations had this acquisition
occurred on January 1, 1993, are as follows (in thousands, except per share
amounts).
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Revenues $68,259 $58,019
Net income 2,738 1,973
Per share net income 1.02 .75
</TABLE>
The pro forma financial data reflects adjustments for amortization of goodwill
and the additional interest expense that would have been incurred on the
related increase in debt.
In connection with the Company's acquisition of a 66% ownership interest in
Multiplex in 1991, the Company entered into an agreement with all Multiplex
common stock and option holders whereby they may require the Company to
purchase their shares of Multiplex up to a maximum of $200,000 a year. Under
certain circumstances, the Company may have an obligation to purchase all of
the then outstanding common stock of Multiplex. The Multiplex stock is valued
at the time of purchase based on an earnings formula. As of December 31, 1995,
the total purchase obligation would be approximately $1,800,000. Under these
agreements the Company has purchased a total of 11,168 shares for approximately
$162,000.
Since 1993, the Company has invested $1,087,000 in product line and other
business acquisitions.
33
<PAGE> 34
NOTE M - INCOME TAXES
The components of provision for income taxes for the years ended December 31,
1995, 1994, and 1993 are as follows (in thousands):
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Federal
Current $ 1,923 $ 1,653 $ 1,269
Deferred (65) (126) (31)
------- ------- -------
1,858 1,527 1,238
------- ------- -------
State
Current 213 279 251
Deferred 34 (56) (8)
------- ------- -------
247 223 243
------- ------- -------
Foreign
Current 6 12 --
Deferred -- -- (25)
------- ------- -------
6 12 (25)
------- ------- -------
$ 2,111 $ 1,762 $ 1,456
======= ======= =======
</TABLE>
The components of deferred income taxes as of December 31, 1995 and 1994 are as
follows (in thousands):
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Deferred income tax liabilities:
Property, plant, and equipment $ 750 $ 832
LIFO reserve 242 242
Other 168 187
------- -------
1,160 1,261
------- -------
Deferred income tax assets:
Tax net operating loss and credit
carryforwards (237) (260)
Inventory basis differences (277) (275)
Accrued expenses (396) (442)
Other (150) (138)
------- -------
(1,060) (1,115)
Valuation allowance 237 224
------- -------
(823) (891)
------- -------
Net deferred income tax liability 337 370
Deferred income taxes included in other
current assets 518 458
------- -------
Long-term deferred income tax liability $ 855 $ 828
======= =======
</TABLE>
34
<PAGE> 35
The Company has Canadian tax net operating loss carryforwards of approximately
$207,000 and Canadian research and development expense carryforwards of
approximately $265,000 available to offset future Canadian taxable income. The
net operating loss carryforwards will expire in the years 2000 and 2002. The
research and development expense carryforwards have no expiration period. The
Company also has Canadian research and development credit carryforwards
totaling approximately $53,000 available to offset future Canadian taxable
income. These credits expire in various years from 2000 through 2005.
The valuation allowance for deferred income tax assets relates to the
realizability of tax net operating loss, research and development expense, and
tax credit carryforwards by the Company's Canadian subsidiary. The net change
in the valuation allowance during 1995 was $13,000.
For the year ended December 31, 1995, the Company utilized pre-acquisition net
operating loss and general business credit carryforwards. The associated
benefits of $25,000 were reflected as a reduction of goodwill. For the year
ended December 31, 1994, there was no utilization of pre-acquisition net
operating loss or general business credit carryforwards.
The differences between the statutory and effective tax rates on income are as
follows:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
U.S. Federal statutory rate 34.0% 34.0% 34.0%
Nondeductible items, primarily goodwill
amortization 2.9 3.1 3.6
State income taxes, less Federal benefit 2.4 2.9 4.5
Utilization of net operating losses and credits (1.8) (2.1) (3.2)
Other, net 0.3 (0.4) 0.1
---- ---- ----
37.8% 37.5% 39.0%
==== ==== ====
</TABLE>
NOTE N - RELATED PARTY TRANSACTIONS
The Company pays consulting and director fees to its Board of Directors. These
fees amounted to $142,000 in 1995, $160,000 in 1994, and $110,000 in 1993.
At both December 31, 1995 and 1994, there was a non-interest bearing demand
note due from an officer of $75,000. This note arose due to relocation and is
classified as a noncurrent other asset.
35
<PAGE> 36
NOTE O - SEGMENT INFORMATION
The Company operates in two business segments: the industrial group, which
includes the manufacture and sale of turbo-charger actuators, lubricating
devices for machinery and equipment, high performance video signal distribution
equipment, specialty wiring device products, and high voltage switches; and the
recreational group, which includes the manufacture and sale of marine and
recreational accessories.
Revenues consist of sales to unaffiliated customers. No general corporate
expenses, interest expense, interest income, or other income, net, have been
allocated to the operating income of either industry segment. Financial
information by industry segment for each of the three years in the period ended
December 31, 1995 follows (in thousands):
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
REVENUES
Industrial group $ 35,142 $ 33,266 $ 28,595
Recreational group 39,986 32,770 24,661
-------- -------- --------
Total $ 75,128 $ 66,036 $ 53,256
======== ======== ========
OPERATING INCOME
Industrial group $ 5,493 $ 5,784 $ 4,642
Recreational group 2,699 1,809 700
General corporate (1,453) (1,572) (1,263)
-------- -------- --------
Total $ 6,739 $ 6,021 $ 4,079
======== ======== ========
IDENTIFIABLE ASSETS
Industrial group $ 18,648 $ 19,312 $ 16,315
Recreational group 29,856 28,017 20,568
General corporate 2,237 3,616 785
-------- -------- --------
Total $ 50,741 $ 50,945 $ 37,668
======== ======== ========
CAPITAL EXPENDITURES
Industrial group $ 1,582 $ 1,209 $ 864
Recreational group 1,273 1,137 1,028
General corporate 23 17 16
-------- -------- --------
Total $ 2,878 $ 2,363 $ 1,908
======== ======== ========
DEPRECIATION AND AMORTIZATION
Industrial group $ 1,009 $ 965 $ 791
Recreational group 1,426 1,248 944
General corporate 123 51 25
-------- -------- --------
Total $ 2,558 $ 2,264 $ 1,760
======== ======== ========
</TABLE>
Export revenues to unaffiliated customers accounted for approximately 11% of
total revenues in 1995, 1994, and 1993.
36
<PAGE> 37
NOTE P - SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for income taxes and interest during 1995, 1994, and 1993 was as
follows (in thousands):
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Income taxes $2,419 $1,689 $1,038
Interest 1,216 899 522
</TABLE>
During 1994, the Company capitalized approximately $60,000 of interest costs
associated with facility construction. In connection with the acquisition of
the assets of The Guest Company, Inc. in June 1994, the Company assumed
liabilities of $392,000. Immediately following the acquisition, $96,000 due to
the former owner was repaid. In May 1993, the Company assumed liabilities of
approximately $175,000 in connection with the acquisition of Cruising Equipment
Company. Following the acquisition, the Company paid off the acquired bank
debt totaling approximately $53,000.
37
<PAGE> 38
VALLEY FORGE CORPORATION AND SUBSIDIARIES
QUARTERLY FINANCIAL DATA
(unaudited, in thousands, except per share amounts)
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
------- ------- ------- -------
<S> <C> <C> <C> <C>
1995
- ----
Revenues $18,863 $19,881 $18,014 $18,370
Gross profit 7,553 7,519 6,900 6,931
Net income 1,008 978 696 684
Net income per share $ .37 $ .36 $ .25 $ .25
1994
- ----
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 $ .28 $ .33 $ .23 $ .21
</TABLE>
38
<PAGE> 39
VALLEY FORGE CORPORATION AND SUBSIDIARIES
FIVE-YEAR SUMMARY
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Years ended December 31, 1995 1994 1993 1992 1991
- ------------------------ ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Revenues $75,128 $66,036 $53,256 $44,060 $38,711
Net income 3,366 2,817 2,115 1,859 1,386
Total assets 50,741 50,945 37,668 32,536 30,506
Long-term obligations 11,484 11,383 1,437 2,389 4,238
PER SHARE
Net income $1.23 $1.05 $.81 $.70 $.54
Cash dividends .227 .20 .20 .20 .20
</TABLE>
39
<PAGE> 40
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Stockholders of Valley Forge Corporation:
Our report on the consolidated financial statements of Valley Forge Corporation
and Subsidiaries is included on page 21 of this Form 10-K. In connection with
our audits of such financial statements, we have also audited the related
financial statement schedule listed in the index on page 20 of this Form 10-K.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.
Coopers & Lybrand LLP
Oakland, California
March 1, 1996
40
<PAGE> 41
VALLEY FORGE CORPORATION AND SUBSIDIARIES
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
Years ended December 31, 1995, 1994, and 1993
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
-------- -------- -------- -------- --------
Additions
-------------------------------
Beginning
Balance at balance of Charged to Balance
beginning consolidated costs and at end of
Description of period subsidiary(1) expenses Deductions period
<S> <C> <C> <C> <C> <C>
ALLOWANCE FOR DOUBTFUL ACCOUNTS
Year ended December 31, 1995 $151,000 $ -- $ 96,000 $ 36,000 $211,000
Year ended December 31, 1994 179,000 -- 72,000 100,000 151,000
Year ended December 31, 1993 184,000 3,000 93,000 101,000 179,000
ALLOWANCE FOR EXCESS AND OBSOLETE INVENTORY
Year ended December 31, 1995 $373,000 $ -- $171,000 $ 11,000 $533,000
Year ended December 31, 1994 286,000 -- 130,000 43,000 373,000
Year ended December 31, 1993 177,000 2,000 145,000 38,000 286,000
ACCRUED WARRANTY EXPENSE
Year ended December 31, 1995 $258,000 $ -- $ -- $ -- $258,000
Year ended December 31, 1994 193,000 -- 93,000 28,000 258,000
Year ended December 31, 1993 173,000 -- 28,000 8,000 193,000
ACCRUED MEDICAL AND DENTAL EXPENSE
Year ended December 31, 1995 $ 90,000 $ -- $ -- $ 35,000 $ 55,000
Year ended December 31, 1994 69,000 -- 21,000 -- 90,000
Year ended December 31, 1993 75,000 -- -- 6,000 69,000
</TABLE>
(1) VFC acquired all of the outstanding stock of Cruising Equipment Company in
1993. Accordingly, the beginning balances of this company were consolidated.
41
<PAGE> 42
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities 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
Dated: 3/13/96 /s/
------------------------------
By: David R. Brining
President, Director, and Chief
Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<S> <C>
Dated: 3/13/96 /s/ Dated: 3/14/96 /s/
------------------------ ------------------------
Martin J. Bloom Theodore P. Desloge, Jr.
Co-Chairman of the Board Co-Chairman of the Board
Dated: 3/13/96 /s/ Dated: 3/14/96 /s/
------------------------ ------------------------
David R. Brining Phillip F. Dressel
President, Director, and Director
Chief Executive Officer
Dated: 3/14/96 /s/ Dated: 3/13/96 /s/
------------------------ ------------------------
Dale J. Warner Monica J. Burke
Director Vice President Finance
Dated: 3/13/96 /s/
------------------------
Sherilyn L. Dacquisto
Corporate Controller
</TABLE>
42
<PAGE> 43
EXHIBIT INDEX
Ex. 11 Computation of Net Income Per Share
Ex. 22 Listing of Significant Subsidiaries
Ex. 24 Consent of Independent Accountants
Ex. 27 Financial Data Schedule
<PAGE> 1
EXHIBIT 11
VALLEY FORGE CORPORATION AND SUBSIDIARIES
COMPUTATION OF NET INCOME PER SHARE
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
1995 1994 1993
----------------------- ----------------------- ---------------------
Fully Fully Fully
Primary Diluted Primary Diluted Primary Diluted
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net income $3,366 $3,366 $2,817 $2,817 $2,115 $2,115
====== ====== ====== ====== ====== ======
Weighted average common shares
outstanding 2,662 2,662 2,615 2,615 2,528 2,528
Common equivalent shares 70 73 78 83 94 104
------ ------ ------ ------ ------ ------
Weighted average common shares
and common equivalent shares
outstanding 2,732 2,735 2,693 2,698 2,622 2,632
====== ====== ====== ====== ====== ======
Net income per share $1.23 $1.23 $1.05 $1.05 $.81 $.81
====== ====== ====== ====== ====== ======
</TABLE>
17
<PAGE> 1
EXHIBIT 22
VALLEY FORGE CORPORATION
LISTING OF SIGNIFICANT SUBSIDIARIES
<TABLE>
<CAPTION>
State or Other Percentage
Jurisdiction of Owned by
Incorporation Registrant
------------- ----------
<S> <C> <C>
Atlantic Guest, Inc. Delaware 86%
Gits Manufacturing Company, Inc. Delaware 100%
Heart Interface Corporation Washington 100%
Marine Industries Company, Inc. California 100%
Multiplex Technology, Inc. California 66%
Turner Electric Corporation Illinois 100%
</TABLE>
18
<PAGE> 1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statement of
Valley Forge Corporation and Subsidiaries on Form S-8 (File No. 33-50250) of
our reports dated March 1, 1996, on our audits of the consolidated financial
statements and financial statement schedule of Valley Forge Corporation and
Subsidiaries as of December 31, 1995, and 1994, and for the years ended
December 31, 1995, 1994, and 1993, which reports are included in this Annual
Report on Form 10-K.
Coopers & Lybrand LLP
Oakland, California
March 26, 1996
19
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 34
<SECURITIES> 0
<RECEIVABLES> 10560
<ALLOWANCES> 211
<INVENTORY> 16310
<CURRENT-ASSETS> 28298
<PP&E> 19394
<DEPRECIATION> 11540
<TOTAL-ASSETS> 50741
<CURRENT-LIABILITIES> 7745
<BONDS> 11484
0
0
<COMMON> 1398
<OTHER-SE> 27836
<TOTAL-LIABILITY-AND-EQUITY> 50741
<SALES> 75128
<TOTAL-REVENUES> 75128
<CGS> 46225
<TOTAL-COSTS> 46225
<OTHER-EXPENSES> 22164
<LOSS-PROVISION> 96
<INTEREST-EXPENSE> 1205
<INCOME-PRETAX> 5585
<INCOME-TAX> 2111
<INCOME-CONTINUING> 3366
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3366
<EPS-PRIMARY> 1.23
<EPS-DILUTED> 1.23
</TABLE>
