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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, 1997 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 July 31, 1997, was 2,690,233.
The Exhibit Index is located on Page 2.
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VALLEY FORGE CORPORATION AND SUBSIDIARIES
Form 10-Q
For the Quarter Ended June 30, 1997
INDEX
<TABLE>
<CAPTION>
Page
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<S> <C>
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements
a) Condensed Consolidated Statements of Income for the Three and
Six Months Ended June 30, 1997 and 1996 3
b) Condensed Consolidated Balance Sheets at June 30, 1997 and
December 31, 1996 4
c) Condensed Consolidated Statements of Cash Flows for the Six
Months Ended June 30, 1997 and 1996 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
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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,
---------------------- ----------------------
1997 1996 1997 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
REVENUES $ 24,540 $ 22,153 $ 47,032 $ 41,175
Cost of goods sold 14,382 13,436 27,708 24,938
-------- -------- -------- --------
GROSS PROFIT 10,158 8,717 19,324 16,237
Selling and administrative 7,475 6,469 14,330 12,383
-------- -------- -------- --------
OPERATING INCOME 2,683 2,248 4,994 3,854
Other income (expense):
Interest expense (318) (345) (628) (629)
Other, net 93 1 144 284
-------- -------- -------- --------
INCOME BEFORE INCOME TAXES
AND MINORITY INTERESTS 2,458 1,904 4,510 3,509
Income taxes 971 743 1,781 1,378
Minority interests (20) 56 12 108
-------- -------- -------- --------
NET INCOME $ 1,507 $ 1,105 $ 2,717 $ 2,023
======== ======== ======== ========
NET INCOME PER SHARE $ .54 $ .40 $ .98 $ .73
======== ======== ======== ========
Dividends per share $ .06 $ .06 $ .12 $ .12
======== ======== ======== ========
Weighted average shares outstanding 2,792 2,762 2,781 2,753
======== ======== ======== ========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
3
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VALLEY FORGE CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In thousands)
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
------- -------
(unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and equivalents $ -- $ --
Accounts receivable, net 13,015 11,288
Inventories 17,457 17,102
Other current assets 1,611 1,623
------- -------
Total current assets 32,083 30,013
Property, plant, and equipment, net 10,240 9,652
Goodwill, net 12,196 12,601
Investment in and advances to affiliate 3,048 2,721
Other assets 1,295 1,362
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TOTAL ASSETS $58,862 $56,349
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Loans and notes payable $ 1,613 $ 1,228
Current portion of long-term debt 1,505 1,433
Accounts payable and accrued expenses 7,537 6,503
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Total current liabilities 10,655 9,164
Long-term debt 11,375 12,667
Deferred income taxes 806 806
Minority interests 1,370 1,486
Stockholders' equity 34,656 32,226
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $58,862 $56,349
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</TABLE>
See Notes to Condensed Consolidated Financial Statements.
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VALLEY FORGE CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited, in thousands)
<TABLE>
<CAPTION>
Six Months Ended June 30,
--------------------------
1997 1996
------- -------
<S> <C> <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 3,170 $ 3,136
INVESTING ACTIVITIES
Additions to property, plant, and equipment (1,655) (1,996)
Investment in and advances to affiliate (312) (2,555)
Other, net (127) (59)
------- -------
Net cash used for investing activities (2,094) (4,610)
------- -------
FINANCING ACTIVITIES
Proceeds from long-term debt -- 2,678
Net borrowings on line of credit agreement 385 630
Principal payments on long-term debt (1,220) (1,208)
Net payments on short-term notes -- (350)
Stock options exercised 80 11
Dividends paid (321) (321)
------- -------
Net cash (used for) provided by financing activities (1,076) 1,440
------- -------
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.
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VALLEY FORGE CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited, in thousands, except per share amounts)
BASIS OF PRESENTATION
Information with respect to the six months ended June 30, 1997 and 1996 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 1996 condensed consolidated financial statements to conform to
the 1997 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, 1996.
<TABLE>
<CAPTION>
INVENTORIES June 30, 1997 December 31, 1996
------------- -----------------
<S> <C> <C>
Raw materials $ 8,148 $ 8,673
Work-in-process 3,611 3,069
Finished goods 5,698 5,360
------- -------
Total Inventories $17,457 $17,102
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</TABLE>
STOCK DIVIDEND
On June 12, 1997, the Company's Board of Directors authorized a three-for-two
stock split effected in the form of a 50 percent stock dividend. The stock
dividend is payable September 16, 1997, to shareholders of record on September
5, 1997.
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VALLEY FORGE CORPORATION AND SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations
June 30, 1997
(in thousands)
Any forward-looking statements contained in the following discussion or
elsewhere in this document involve risks and uncertainties which may cause
actual results to differ materially from those discussed. A wide range of
factors could contribute to those differences, including but not limited to
general business conditions; actions of competitors; changes in laws and
regulations, including changes in accounting standards; inventory risks due to
shifts in market demand and/or product mix; price volatility in the cost of
purchased components; and the risk factors listed from time to time in the
Company's SEC reports.
Due to seasonal variations, the results of operations for the periods reported
are not necessarily indicative of the entire year.
FINANCIAL CONDITION
In addition to generating cash flow from operations ($3.2 million), the Company
borrowed on its bank line of credit ($400 thousand, net) to fund its working
capital requirements, invested in property, plant, and equipment ($1.7 million),
including payments for the construction of an operating facility ($700
thousand), and made payments on its long-term obligations ($1.2 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 1997.
RESULTS OF OPERATIONS
REVENUES AND RELATED COSTS
Consolidated revenues increased $2.4 million (11%) in the quarter ended June 30,
1997, over the same quarter in the prior year, with the recreational products
segment sales increasing 14% and the industrial products segment increasing 7%.
Revenues for the first half of 1997 increased $5.9 million (14%) to $47 million,
with the recreational products segment up 17% and the industrial products
segment up 11% over the first six months of 1996.
Gross profits for the quarter and six months ended June 30, 1997 increased $1.4
million (17%) and $3.1 million (19%), respectively, over the comparable periods
in 1996. The consolidated gross profit margin percentage for the quarter
increased 2.1% from 39.3% in 1996 to 41.4% in 1997 and for the six-month period
increased from 39.4% in 1996 to 41.1% in 1997. The increase in sales and related
gross profits for the first half and second quarter of 1997 was due principally
to increased unit volume on existing products. New product introductions also
contributed to the increased sales and gross profits, particularly in the second
quarter.
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VALLEY FORGE CORPORATION AND SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations
June 30, 1997
(in thousands)
SELLING AND ADMINISTRATIVE EXPENSES
Consolidated selling and administrative expenses increased $1.0 million (16%)
for the quarter and $1.9 million for the six months ended June 30, 1997, over
the same periods in the prior year. Selling and administrative expenses as a
percentage of sales increased from 29.2% for the second quarter of 1996 to 30.5%
for the second quarter of 1997. For the six months ended June 30, 1997, selling
and administrative expenses as a percentage of sales increased to 30.5% from
30.1% for the same period in the prior year.
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.
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VALLEY FORGE CORPORATION AND SUBSIDIARIES
Part II Other Information
For the Quarter Ended June 30, 1997
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits required by Item 601 of Registration S-K:
None
b) Reports on Form 8-K:
Form 8-K dated June 6, 1997
Item 4. Changes to Registrant's Certifying Accountant
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VALLEY FORGE CORPORATION AND SUBSIDIARIES
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
VALLEY FORGE CORPORATION
Registrant
Date: July 31, 1997 /s/ MONICA J. BURKE
---------------------------------------
Monica J. Burke
Vice President Finance
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EXHIBIT INDEX
Exhibit 27.1 Financial Data Schedule
11
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 13,346
<ALLOWANCES> 331
<INVENTORY> 17,457
<CURRENT-ASSETS> 32,083
<PP&E> 24,479
<DEPRECIATION> 14,239
<TOTAL-ASSETS> 58,862
<CURRENT-LIABILITIES> 10,655
<BONDS> 0
0
0
<COMMON> 1,398
<OTHER-SE> 33,258
<TOTAL-LIABILITY-AND-EQUITY> 58,862
<SALES> 47,032
<TOTAL-REVENUES> 47,032
<CGS> 27,708
<TOTAL-COSTS> 27,708
<OTHER-EXPENSES> 14,330
<LOSS-PROVISION> 74
<INTEREST-EXPENSE> 628
<INCOME-PRETAX> 4,510
<INCOME-TAX> 1,781
<INCOME-CONTINUING> 2,717
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,717
<EPS-PRIMARY> 0.98
<EPS-DILUTED> 0.98
</TABLE>
