<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 March 31, 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, at May 1, 1996, was 2,667,733.
The Exhibit Index is located on Page 2.
Page 1 of 12
<PAGE> 2
VALLEY FORGE CORPORATION AND SUBSIDIARIES
Form 10-Q
For the Quarter Ended March 31, 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 Months Ended March 31, 1996
and 1995 3
b) Condensed Consolidated Statements of Cash Flows
for the Three Months Ended March 31, 1996
and 1995 4
c) Condensed Consolidated Balance Sheets at
March 31, 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 7
PART II: OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 9
</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 March 31,
----------------------------
1996 1995
---- -----
<S> <C> <C>
REVENUES $19,022 $18,863
Costs and expenses:
Cost of goods sold 11,552 11,310
Selling and administrative 5,864 5,577
------- -------
OPERATING INCOME 1,606 1,976
Other income (expense):
Interest expense (284) (317)
Interest income 27 12
Other, net 256 29
------- -------
INCOME BEFORE INCOME TAXES
AND MINORITY INTERESTS 1,605 1,700
Income taxes 635 660
Minority interests 52 32
------- -------
NET INCOME $ 918 $ 1,008
======= =======
NET INCOME PER SHARE $.33 $.37
==== ====
Dividends per share $.06 $.0567
==== ======
Weighted average shares outstanding 2,743 2,727
===== =====
</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>
Three Months Ended March 31,
----------------------------
1996 1995
---- ----
<S> <C> <C>
NET CASH USED FOR OPERATING ACTIVITIES $ (610) $(1,106)
INVESTING ACTIVITIES
Additions to property, plant, and equipment (1,300) (843)
Proceeds from sale of constructed facility - 2,821
Other (28) (35)
------- -------
Net cash (used for) provided by investing activities (1,328) 1,943
------- -------
FINANCING ACTIVITIES
Net borrowings on line of credit agreement 2,154 1,048
Net repayments of construction loan - (1,644)
Principal payments on long-term debt (100) (125)
Stock options exercised 11 35
Dividends paid (161) (151)
------- -------
Net cash provided by (used for) financing activities 1,904 (837)
------- -------
CHANGE IN CASH AND EQUIVALENTS (34) -
Cash and equivalents at beginning of year 34 -
------- -------
CASH AND EQUIVALENTS AT END OF PERIOD $ - $ -
======= =======
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
4
<PAGE> 5
VALLEY FORGE CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In thousands)
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
---- ----
ASSETS (unaudited)
<S> <C> <C>
CURRENT ASSETS
Cash and equivalents $ - $ 34
Accounts receivable, net 12,338 10,349
Inventories 17,657 16,310
Other current assets 1,335 1,605
------- -------
Total current assets 31,330 28,298
Property, plant, and equipment, net 8,698 7,854
Goodwill, net 13,224 13,431
Other assets 1,161 1,158
------- -------
$54,413 $50,741
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Loans and notes payable $ 3,004 $ 850
Current portion of long-term debt 1,427 1,419
Accounts payable and accrued expenses 6,270 5,476
------- -------
Total current liabilities 10,701 7,745
Long-term debt 11,376 11,484
Deferred income taxes 855 855
Minority interest 1,469 1,423
Stockholders' equity 30,012 29,234
------- -------
$54,413 $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 months ended March 31, 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.
<TABLE>
<CAPTION>
INVENTORIES March 31, 1996 December 31, 1995
-------------- -----------------
<S> <C> <C>
Raw materials $ 9,769 $ 8,617
Work-in-process 2,862 2,455
Finished goods 5,026 5,238
------- -------
$17,657 $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.
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for income taxes and interest during the three months ended March 31,
1996 and 1995 was as follows:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Income taxes $ 25 $148
Interest $275 $302
</TABLE>
SUBSEQUENT EVENT
In April 1996, the Company acquired a 45% equity interest in a European
marine products manufacturer for approximately $2,350,000 in cash to enhance
its strategic position in the European marketplace.
6
<PAGE> 7
VALLEY FORGE CORPORATION AND SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations
March 31, 1996
FINANCIAL CONDITION
During the first quarter of 1996, the Company borrowed on its bank line of
credit ($2.2 million, net) to fund its working capital requirements and invest
in property, plant, and equipment ($1.3 million), including the purchase of an
operating facility ($700 thousand). 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 $159 thousand (1%) in the quarter ended March
31, 1996 over the same quarter in the prior year, reflecting comparable sales
in both the recreational and industrial segments. Gross profits for the
quarter decreased $83 thousand (1%) from 1995. The consolidated gross profit
margin percentage decreased 0.7% from 40.0% in 1995 to 39.3% in 1996. Sales
increased only slightly in the recreational products segment in part because of
orders being booked and shipped in the fourth quarter of 1995 which would
traditionally have been shipped in the first quarter of 1996. In addition,
there was some slowness in the recreational marine industry noted during the
early part of the quarter. Similarly, sales in the industrial products segment
were up only slightly due to a slowdown in demand for turbocharger products.
SELLING AND ADMINISTRATIVE EXPENSES
Consolidated selling and administrative expenses increased $287 thousand (5%)
for the quarter ended March 31, 1996, over the same quarter in the prior year.
Selling and administrative expenses as a percentage of sales increased from 30%
for the first quarter of 1995 to 31% for the first quarter of 1996.
OTHER INCOME (EXPENSE)
Interest expense for the quarter ended March 31, 1996 decreased $33 thousand
(10%) from the same quarter in the prior year due principally to the decrease
in average borrowings on the bank line of credit.
Other, net for the quarter ended March 31, 1996 includes $250,000 of proceeds
from a life insurance policy on the former president of Gits Manufacturing.
7
<PAGE> 8
INCOME TAXES
The effective tax rate increased from 39% for the first quarter of 1995 to
40% for the first quarter of 1996.
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 6,234 7,480 6,017 6,044
Net income 738 904 614 561
Net income per share $.28 $.33 $.23 $.21
</TABLE>
<TABLE>
<CAPTION>
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 7,553 7,519 6,900 6,931
Net income 1,008 978 696 684
Net income per share $.37 $.36 $.25 $.25
</TABLE>
<TABLE>
<CAPTION>
1996 First Quarter
---- -------------
<S> <C>
Revenues $19,022
Gross profit 7,470
Net income 918
Net income per share $.33
</TABLE>
8
<PAGE> 9
VALLEY FORGE CORPORATION AND SUBSIDIARIES
Part II Other Information
For the Quarter Ended March 31, 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.
Exhibit 27 - Financial Data Schedule.
b) Reports on Form 8:
None.
9
<PAGE> 10
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: May 10, 1996 /s/
-----------------------------------
Monica J. Burke
Vice President Finance
10
<PAGE> 11
EXHIBIT INDEX
Exhibits and Reports on Form 8-K
a) Exhibits required by Item 601 of Registration S-K:
Exhibit 11 - Computation of Earnings per Share.
Exhibit 27 - Financial Data Schedule.
b) Reports on Form 8:
None.
<PAGE> 1
Exhibit 11
VALLEY FORGE CORPORATION AND SUBSIDIARIES
Computation of Earnings per Share
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
1996 1995
---- ----
<S> <C> <C>
PRIMARY:
Weighted average common shares
outstanding 2,667,568 2,656,026
Common equivalent shares 75,729 70,760
---------- ----------
Weighted average common shares and
common equivalent shares outstanding 2,743,297 2,726,786
========== ==========
Net income $ 918,000 $1,008,000
========== ==========
Primary earnings per share $.33 $.37
==== ====
FULLY DILUTED:
Weighted average common shares
outstanding 2,667,568 2,656,026
Common equivalent shares 91,689 73,787
---------- ----------
Weighted average common shares and
common equivalent shares outstanding 2,759,257 2,729,813
========== ==========
Net income $ 918,000 $1,008,000
========== ==========
Fully diluted earnings per share $.33 $.37
==== ====
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 12,555
<ALLOWANCES> 217
<INVENTORY> 17,657
<CURRENT-ASSETS> 31,330
<PP&E> 20,694
<DEPRECIATION> 11,996
<TOTAL-ASSETS> 54,413
<CURRENT-LIABILITIES> 10,701
<BONDS> 0
0
0
<COMMON> 1,398
<OTHER-SE> 28,614
<TOTAL-LIABILITY-AND-EQUITY> 54,413
<SALES> 19,022
<TOTAL-REVENUES> 19,022
<CGS> 11,552
<TOTAL-COSTS> 11,552
<OTHER-EXPENSES> 5,864
<LOSS-PROVISION> 6
<INTEREST-EXPENSE> 284
<INCOME-PRETAX> 1,605
<INCOME-TAX> 635
<INCOME-CONTINUING> 918
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 918
<EPS-PRIMARY> .33
<EPS-DILUTED> .33
</TABLE>
