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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 March 31, 1997 Commission File Number 1-9897
VALLEY FORGE CORPORATION
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(Exact name of Registrant as specified in its charter)
GEORGIA 58-0833796
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(State of incorporation) (IRS Employer Identification Number)
100 Smith Ranch Road, Suite 326, San Rafael, California 94903-1994
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(Address of principal executive offices) (Zip code)
(415) 492-1500
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(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 5, 1997, was 2,678,983.
The Exhibit Index is located on Page 2.
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Page 1 of 12
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VALLEY FORGE CORPORATION AND SUBSIDIARIES
Form 10-Q
For the Quarter Ended March 31, 1997
INDEX
Page
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PART I: FINANCIAL INFORMATION
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Item 1. Financial Statements
a) Condensed Consolidated Statements of Income for
the Three Months Ended March 31, 1997
and 1996 3
b) Condensed Consolidated Statements of Cash Flows
for the Three Months Ended March 31, 1997
and 1996 4
c) Condensed Consolidated Balance Sheets at
March 31, 1997 and December 31, 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
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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 March 31,
----------------------------
1997 1996
---- ----
<S> <C> <C>
REVENUES $ 22,492 $ 19,022
Costs and expenses:
Cost of goods sold 13,326 11,502
Selling and administrative 6,855 5,914
-------- --------
OPERATING INCOME 2,311 1,606
Other income (expense):
Interest expense (310) (284)
Interest income 17 27
Other, net 34 256
-------- --------
INCOME BEFORE INCOME TAXES
AND MINORITY INTERESTS 2,052 1,605
Income taxes 810 635
Minority interests 32 52
-------- --------
NET INCOME $ 1,210 $ 918
======== ========
NET INCOME PER SHARE $ .44 $ .33
======== ========
Dividends per share $ .06 $ .06
======== ========
Weighted average shares outstanding 2,770 2,743
======== ========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
3
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VALLEY FORGE CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited, in thousands)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------
1997 1996
---- ----
<S> <C> <C>
NET CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES $ 96 $ (610)
INVESTING ACTIVITIES
Additions to property, plant, and equipment (818) (1,300)
Other (141) (28)
------- -------
Net cash used for investing activities (959) (1,328)
------- -------
FINANCING ACTIVITIES
Net borrowings on line of credit agreement 1,506 2,154
Principal payments on long-term debt (115) (100)
Stock options exercised 80 11
Dividends paid (161) (161)
------- -------
Net cash provided by financing activities 1,310 1,904
------- -------
CHANGE IN CASH AND EQUIVALENTS 447 (34)
Cash and equivalents at beginning of year -- 34
------- -------
CASH AND EQUIVALENTS AT END OF PERIOD $ 447 $ --
======= =======
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
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VALLEY FORGE CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In thousands)
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
------- -------
ASSETS (unaudited)
<S> <C> <C>
CURRENT ASSETS
Cash and equivalents $ 447 $ --
Accounts receivable, net 13,911 11,288
Inventories 17,206 17,102
Other current assets 1,532 1,623
------- -------
Total current assets 33,096 30,013
Property, plant, and equipment, net 9,938 9,652
Goodwill, net 12,404 12,601
Investment in and advances to affiliate 2,717 2,721
Other assets 1,342 1,362
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$59,497 $56,349
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Loans and notes payable $ 2,734 $ 1,228
Current portion of long-term debt 1,526 1,433
Accounts payable and accrued expenses 7,257 6,503
------- -------
Total current liabilities 11,517 9,164
Long-term debt 12,460 12,667
Deferred income taxes 806 806
Minority interests 1,386 1,486
Stockholders' equity 33,328 32,226
------- -------
$59,497 $56,349
======= =======
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
5
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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, 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.
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, December 31,
1997 1996
------- -------
<S> <C> <C>
Raw materials $ 8,407 $ 8,673
Work-in-process 3,476 3,069
Finished goods 5,323 5,360
------- -------
$17,206 $17,102
======= =======
</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,
1997 and 1996 was as follows:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Income taxes $339 $25
Interest $307 $275
</TABLE>
6
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VALLEY FORGE CORPORATION AND SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations
March 31, 1997
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.
FINANCIAL CONDITION
During the first quarter of 1997, the Company borrowed on its bank line of
credit ($1.5 million, net) to fund its working capital requirements and invest
in property, plant, and equipment ($800 thousand), including payments for the
construction of an operating facility ($400 thousand). 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 $3 million (18%) in the quarter ended March 31,
1997, over the same quarter in the prior year, with the recreational products
segment sales increasing 21% and the industrial products segment increasing 15%.
Gross profits for the quarter increased $1.6 million (22%) from the first
quarter of 1996. The consolidated gross profit margin percentage increased 1.3%
from 39.5% in 1996 to 40.8% in 1997. The increase in sales and related gross
profits for the first quarter of 1997 was due principally to increased unit
volume on existing products. In addition, new product introductions contributed
to the increase sales and gross profits.
SELLING AND ADMINISTRATIVE EXPENSES
Consolidated selling and administrative expenses increased $941 thousand (16%)
for the quarter ended March 31, 1997, over the same quarter in the prior year.
Selling and administrative expenses as a percentage of sales decreased from
31.1% for the first quarter of 1996 to 30.5% for the first quarter of 1997.
OTHER INCOME (EXPENSE)
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.
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QUARTERLY RESULTS
The following table sets forth unaudited consolidated summary financial data for
each quarter of 1995, 1996, and 1997 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>
1995 First Quarter Second Quarter Third Quarter Fourth Quarter
------------- -------------- ------------- --------------
<S> <C> <C> <C> <C>
Revenues $18,863 $19,881 $18,014 $18,370
Gross profit 7,705 7,664 7,046 7,074
Net income 1,008 978 696 684
Net income per share $.37 $.36 $.25 $.25
1996 First Quarter Second Quarter Third Quarter Fourth Quarter
------------- -------------- ------------- --------------
Revenues $19,022 $22,153 $19,361 $20,527
Gross profit 7,520 8,717 7,446 8,294
Net income 918 1,105 709 898
Net income per share $.33 $.40 $.26 $.33
1997 First Quarter
-------------
Revenues $22,492
Gross profit 9,166
Net income 1,210
Net income per share $.44
</TABLE>
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VALLEY FORGE CORPORATION AND SUBSIDIARIES
Part II Other Information
For the Quarter Ended March 31, 1997
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits required by Item 601 of Registration S-K:
Exhibit 11 - Computation of Earnings per Share.
b) Reports on Form 8:
None.
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Exhibit 11
VALLEY FORGE CORPORATION AND SUBSIDIARIES
Computation of Earnings per Share
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
1997 1996
---------- ----------
<S> <C> <C>
PRIMARY:
Weighted average common shares
outstanding 2,674,858 2,667,568
Common equivalent shares 95,010 75,729
---------- ----------
Weighted average common shares and
common equivalent shares outstanding 2,769,868 2,743,297
========== ==========
Net income $1,210,000 $ 918,000
========== ==========
Primary earnings per share $ .44 $ .33
========== ==========
FULLY DILUTED:
Weighted average common shares
outstanding 2,674,858 2,667,568
Common equivalent shares 106,741 91,689
---------- ----------
Weighted average common shares and
common equivalent shares outstanding 2,781,599 2,759,257
========== ==========
Net income $1,210,000 $ 918,000
========== ==========
Fully diluted earnings per share $ .44 $ .33
========== ==========
</TABLE>
10
<PAGE> 11
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 13, 1997 /s/
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Monica J. Burke
Vice President Finance
11
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Exhibit Index
Exhibit 27
Financial Data Schedule
12
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 447
<SECURITIES> 0
<RECEIVABLES> 14,191
<ALLOWANCES> 280
<INVENTORY> 17,206
<CURRENT-ASSETS> 33,096
<PP&E> 23,705
<DEPRECIATION> 13,767
<TOTAL-ASSETS> 59,497
<CURRENT-LIABILITIES> 11,517
<BONDS> 0
0
0
<COMMON> 1,398
<OTHER-SE> 31,930
<TOTAL-LIABILITY-AND-EQUITY> 59,497
<SALES> 22,492
<TOTAL-REVENUES> 22,492
<CGS> 13,326
<TOTAL-COSTS> 13,326
<OTHER-EXPENSES> 6,855
<LOSS-PROVISION> 23
<INTEREST-EXPENSE> 310
<INCOME-PRETAX> 2,052
<INCOME-TAX> 810
<INCOME-CONTINUING> 1,210
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,210
<EPS-PRIMARY> 0.44
<EPS-DILUTED> 0.44
</TABLE>
