<PAGE> 1
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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, 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
(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:
<TABLE>
<CAPTION>
Name of Each Exchange on
Title of Each Class Which Registered
------------------- ----------------
<S> <C>
Common Stock, Par Value $.50
Per Share American Stock Exchange
</TABLE>
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. [ ]
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, 1997 was approximately $17,121,000.
The number of shares of Registrant's Common Stock outstanding on March 1, 1997
was 2,675,983.
The Exhibit Index is located on page 10.
===============================================================================
Page 1 of 33
<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 and
affiliates, Atlantic Guest, Inc., Cruising Equipment Company, Force 10 Marine
Ltd., Gits Manufacturing Company, Inc., Glendinning Marine Products, Inc.,
Heart Interface Corporation, Mastervolt B.V., Marine Industries Company, Inc.,
Multiplex Technology, Inc., and Turner Electric Corporation.
In April 1996, the Company acquired a 46% interest in Mastervolt B.V., a Dutch
manufacturer of power inverters and battery chargers for marine and industrial
applications. 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. In July 1996, the Company purchased 7% of the stock of Atlantic
Guest, Inc. from the officers, increasing its ownership interest to 93%. The
Company acquired 100% of the stock of Heart Interface Corporation between
February 1988 and June 1992.
For information concerning the revenues, operating profits, and identifiable
assets by segment, refer to Note K 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 and production levels are relatively constant throughout the year. 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 and modular electrical panels
which provide visual identification and control of electrical systems. In
conjunction with Cruising Equipment Company, Heart also manufactures integrated
battery monitors and inverter remote controls. Heart's products are sold in
the recreational vehicle, marine, alternative energy, and industrial 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.
Sales and production levels are not seasonal. Heart exports approximately 10%
of its production, principally to Europe. 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.
2
<PAGE> 3
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, principally
to Canada and Europe.
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 market
conditions.
OTHER SUBSIDIARIES
Other subsidiaries and affiliates in the Valley Forge Recreational Group
include Cruising Equipment Company (Cruising), Force 10 Marine Ltd. (Force
10), Glendinning Marine Products, Inc. (Glendinning), and Mastervolt B.V.
(Mastervolt).
INDUSTRIAL GROUP
GITS MANUFACTURING COMPANY, INC.
Gits Manufacturing Company, Inc. (Gits), located in Creston, Iowa, manufactures
turbocharger actuators, lubricating devices, environmental control vents, and
chemical tank pressure/relief 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
other products are sold directly to original equipment manufacturers. Gits
exports approximately 20% of its production, principally to Japan and England.
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, cable, satellite master antenna, and closed circuit television
systems. Principal product lines include all-in-one video systems, RF
modulators, broadband distribution amplifiers, 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, only a few of which
compete 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 somewhat seasonal in
that sales in the first quarter are generally lower than the other quarters.
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.
3
<PAGE> 4
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>
1996 1995
---- ----
<S> <C> <C>
Industrial products $4,366,000 $4,757,000
Recreational products 2,866,000 1,860,000
---------- ----------
$7,232,000 $6,617,000
========== ==========
PATENTS
</TABLE>
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 600 employees at December
31, 1996. The number of employees varies primarily with market conditions.
Approximately 8% of total employees are represented by a labor union under a
contract expiring in 1999. 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.
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 12,000
Force 10 Richmond, B.C. Plant 15,000
Gits Creston, IA Plant 61,000
Glendinning Conway, SC Plant 7,000
Guest Meriden, CT Plant 32,400
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
Turner Milstadt, IL Plant/Warehouse 25,000
Corporate San Rafael, CA Office 2,000
</TABLE>
4
<PAGE> 5
Force 10, Gits, Glendinning, and Guest own their facilities. Cruising, Heart,
Marinco, Multiplex, and the Company's corporate headquarters lease their
facilities. Turner owns its facility in Fairview Heights and leases its
facilities located in Milstadt. The Company has begun construction on a new
plant for one subsidiary expected to be completed in 1997. 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 stockholders 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 for periods prior to the split have been restated (see Note A
to the Consolidated Financial Statements). The Company had approximately 475
stockholders on March 1, 1997. The following table is based on the closing
price as published by the AMEX.
<TABLE>
<CAPTION>
1996 1995
--------------------------- ---------------------------
High Low High Low
---- --- ---- ---
<S> <C> <C> <C> <C>
First quarter $14.375 $11.667 $13.083 $11.000
Second quarter 15.250 13.375 12.250 11.250
Third quarter 13.750 11.500 14.250 12.167
Fourth quarter 13.875 12.750 13.833 11.583
</TABLE>
During 1996, the Company increased the regular quarterly dividend per share to
$.06, or $.24 annually, from $.0567 or $.227 annually in 1995. In 1997, the
Board of Directors declared a quarterly dividend of $.06 or $.24 annually,
consistent with the 1996 dividend rate. The first quarter cash dividend for
1997 is payable March 18, 1997, to stockholders of record on March 7, 1997.
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
1996 COMPARED TO 1995
Fiscal 1996 sales were up $6 million (7.9%) to $81 million compared to $75
million for 1995. The industrial group sales increased 8.8% and the
recreational group increased 7.1% over the prior year. Sales increases in both
segments were due principally to volume increases with only minor increases in
price.
Gross profits rose approximately $2.5 million (8.4%) due to the increase in
sales. The gross profit margin was relatively the same for both years with
1996 at 39.4% and 1995 at 39.3%.
Selling and administrative expenses rose 9.7% in 1996 over 1995 due to the
increased sales volume and increased research and experimental expenditures.
Other, net includes receipt of $250,000 of proceeds from a life insurance
policy on the former president of Gits.
5
<PAGE> 6
1995 COMPARED TO 1994
Fiscal 1995 revenues were $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 12.5% due to the increased volume and the full year
inclusion of Guest. The gross profit margin decreased slightly from 39.7% in
1994 to 39.3% in 1995.
Selling and administrative expenses rose 12.7% in 1995 over 1994 due to the
increased sales 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.
In 1994, Other, net included 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 $4.6 million in 1995 to
$6.1 million in 1996. This net $1.5 million increase was due to a reduction in
working capital ($.9 million), increased noncash charges ($.3 million) and
increased net income ($.3 million) in 1996 over 1995.
The Company had net borrowings on its revolving bank line of credit of $.7
million at December 31, 1996, and an additional $5.3 million available. 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%.
Draws of $2.7 million on the advanceable term loan were used to fund
acquisitions. At December 31, 1996, $3.2 million was outstanding on this
advanceable term loan. The Company also has another advanceable term loan
facility available and unused of $3 million, due December 31, 1998 bearing
interest at the prime rate. This facility is intended to be used to fund
acquisition and construction of operating facilities.
The Company borrowed $500 thousand from certain officers and stockholders
during 1996 at 1.25% over the current 90 day Treasury bill rate. This resulted
in a savings of approximately .9% to 1.3% over comparable borrowings during the
same periods at the Company's rate on the revolving bank line of credit.
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 debt requires annual principal payments of $1 million which began
in June 1996.
The Company invested approximately $3.7 million in plant and equipment during
1996, including $1.6 million for operating facilities. Management estimates
that 1997 capital expenditures will be approximately $2.9 million, including
approximately $.7 million for a new operating facility.
The Company invested approximately $2.7 million in Mastervolt, a Dutch
manufacturer of power inverters and battery chargers, consisting of a direct
investment of $2.4 million and loans of approximately $.3 million.
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 $640 thousand was used to pay cash dividends in 1996. The annual
dividend rate for 1996 was $.24 per share, and the rate will remain the same
for 1997. The annual dividend rate for 1995 was $.227 per share. The total
dividend payments for 1997 are expected to be $650 thousand.
Management believes that cash flows from operations, the bank line of credit
and the unused advanceable 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.
6
<PAGE> 7
EFFECTS OF INFLATION AND OTHER MATTERS
Inflation had little effect on revenues and related costs during 1996.
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 $15 million, of
which one obligation of $10 million is long-term and bears interest at a fixed
rate of 8.15%. Management believes that increases in short-term rates could
have some adverse effect on the Company's 1997 results, but only with respect
to the approximately $5 million of short term debt outstanding.
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.
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, 1996.
<TABLE>
<CAPTION>
Year First
All Positions and Offices Elected as
Name Age with the Company Director
- ---- ---- ---------------- --------
<S> <C> <C> <C>
Martin J. Bloom 66 Co-Chairman of the Board 1983
Theodore P. Desloge, Jr. 57 Co-Chairman of the Board 1983
David R. Brining 54 CEO, President, Director 1981
Phillip F. Dressel 60 Director 1985
Dale J. Warner 74 Director 1983
Monica J. Burke 45 Vice President of Finance,
Secretary
</TABLE>
Directors are elected at the annual meeting of the stockholders 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
stockholders 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 of 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. Mr. Dressel was delinquent
in filing a Form 4 for one transaction during 1996 required under Item 405 of
Regulation S-K.
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.
7
<PAGE> 8
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>
Annual Compensation
---------------------------------------- Long-Term
Name and Fiscal Other Annual Compensation All Other
Principal Position Year Salary Bonus Compensation(1) Options Compensation(2)
- ------------------- ------ ------ ----- --------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
David R. Brining, 1996 $300,067 $ 77,250 $6,203 0 $17,149
CEO(3) 1995 276,317 135,725 6,600 0 17,073
1994 254,817 190,500 5,351 75,000 16,489
Monica J. Burke, 1996 114,583 19,675 0 3,000 13,256
Vice President 1995 109,667 31,500 0 0 13,514
Finance(3) 1994 105,667 40,800 0 0 11,339
</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 1996 AND YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Value of Unexercised,
Number of Unexercised In the Money
Shares Options Held at Year End Options Held at Year End(2)
Named Acquired On Value ----------------------------- -----------------------------
Executives Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
---------- -------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
David R. Brining 0 $ 0 37,500 37,500 $100,125 $100,125
Monica J. Burke 0 0 6,750 3,000 60,210 375
</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, 1996 ($13.75 per share)
and the exercise price of the option, multiplied by the number of shares
subject to the option.
OPTION GRANTS IN 1996
<TABLE>
<CAPTION>
Potential Realizable Potential Realizable
Value at Assumed Value at Assumed
Annual Rates of Stock Annual Rates of Stock
Price Appreciation for Price Appreciation for
Percent Option Term for Option Term for
of Total Exercise Named Executive All Stockholders
Named Options Options Price Expiration ---------------------- ----------------------
Executive Granted Granted per Share Date 5% 10% 5% 10%
--------- ------- ------- --------- ---- -- --- -- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Monica J.
Burke 3,000 8% $13.625 March 15, 2003 $17,000 $39,000 $14,797,000 $34,484,000
</TABLE>
8
<PAGE> 9
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 $75,000 for Mr. Bloom and $50,000 for Mr. Desloge for 1996. 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, 1997, 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) 18.59%
126,852(3) 4.74%
Theodore P. Desloge, Jr. 538,327 20.12%
126,852(3) 4.74%
David R. Brining 262,725(4) 9.68%
Phillip F. Dressel 79,049(5) 2.95%
All directors and
officers as a group 1,642,507(6) 60.36%
FMR Corporation
82 Devonshire Street
Boston, MA 02109 229,200(7) 8.57%
</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.
(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 37,500 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 and 750
shares at $13.625 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.
9
<PAGE> 10
(7) Based solely upon a Schedule 13G dated February 14, 1997. Of the 229,200
shares shown as beneficially owned by FMR Corporation, 229,200 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 1996, the Company paid consulting and directors' fees to members of its
Board of Directors totaling approximately $135,000.
Since March 1994, the Company has borrowed a total of $950,000 from certain
officers, stockholders, 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 1997, two notes totaling $500,000 at
December 31, 1996, were renewed with interest rates ranging from 6.39% to 6.44%
and each matures in April 1997.
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-laws Exhibit 3 to Report on Form 10-K for the year
ended December 31, 1985
10.1 Valley Forge Corporation Amended and Exhibit to Registration Statement Filed on
Restated 1987 Stock Option Plan Form S-8, dated July 2, 1996
11 Computation of Net Income Per Share Page 11
22 Listing of Significant Subsidiaries Page 12
24 Consent of Independent Accountants Page 13
</TABLE>
10
<PAGE> 11
EXHIBIT 11
VALLEY FORGE CORPORATION AND SUBSIDIARIES
COMPUTATION OF NET INCOME PER SHARE
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
1996 1995 1994
-------------------- -------------------- -------------------
Fully Fully Fully
Primary Diluted Primary Diluted Primary Diluted
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net income $3,630 $3,630 $3,366 $3,366 $2,817 $2,817
====== ====== ====== ====== ====== ======
Weighted average common shares
outstanding 2,668 2,668 2,662 2,662 2,615 2,615
Common equivalent shares 79 86 70 73 78 83
------ ------ ------ ------ ------ ------
Weighted average common shares and
common equivalent shares
outstanding 2,747 2,754 2,732 2,735 2,693 2,698
===== ===== ===== ===== ===== =====
Net income per share $1.32 $1.32 $1.23 $1.23 $1.05 $1.05
===== ===== ===== ===== ===== =====
</TABLE>
11
<PAGE> 12
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 93%
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>
12
<PAGE> 13
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. 333-07475) of
our reports dated February 19, 1997, on our audits of the consolidated
financial statements and financial statement schedule of Valley Forge
Corporation and Subsidiaries as of December 31, 1996, and 1995, and for the
years ended December 31, 1996, 1995, and 1994, which reports are included in
this Annual Report on Form 10-K.
Coopers & Lybrand, L.L.P.
San Francisco, California
March 13, 1997
13
<PAGE> 14
VALLEY FORGE CORPORATION AND SUBSIDIARIES
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
FINANCIAL STATEMENTS:
Report of Independent Accountants 15
Consolidated Statements of Income for the three years ended
December 31,1996 16
Consolidated Balance Sheets at December 31, 1996 and 1995 17
Consolidated Statements of Stockholders' Equity for the three
years ended December 31,1996 18
Consolidated Statements of Cash Flows for the three years ended
December 31,1996 19
Notes to Consolidated Financial Statements 20
QUARTERLY FINANCIAL DATA - unaudited 29
SELECTED FINANCIAL DATA - Five-Year Summary 30
FINANCIAL STATEMENT SCHEDULE:
Report of Independent Accountants 31
Valuation and Qualifying Accounts and Reserves (Schedule II) 32
</TABLE>
14
<PAGE> 15
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, 1996, and 1995, and the related
consolidated statements of income, stockholders' equity, and cash flows for
each of the three years in the period ended December 31, 1996. 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, 1996, and 1995, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1996, in conformity with generally
accepted accounting principles.
Coopers & Lybrand, L.L.P.
San Francisco, California
February 19, 1997
15
<PAGE> 16
VALLEY FORGE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Years ended December 31, 1996, 1995, and 1994
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
REVENUES $81,063 $75,128 $66,036
Costs and expenses:
Cost of goods sold 49,086 45,639 39,835
Selling and administrative 24,953 22,750 20,180
--------- --------- ---------
OPERATING INCOME 7,024 6,739 6,021
Other income (expense):
Interest expense (1,234) (1,205) (914)
Interest income 49 54 14
Other, net 361 (3) (427)
--------- --------- ---------
INCOME BEFORE INCOME TAXES
AND MINORITY INTERESTS 6,200 5,585 4,694
Income taxes 2,363 2,111 1,762
Minority interests 207 108 115
--------- --------- ---------
NET INCOME $ 3,630 $ 3,366 $ 2,817
========= ========= =========
NET INCOME PER SHARE $ 1.32 $ 1.23 $ 1.05
========= ========= =========
Weighted average shares outstanding 2,747 2,732 2,693
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
16
<PAGE> 17
VALLEY FORGE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 1996 and 1995
(in thousands, except share amounts)
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and equivalents $ - $ 34
Accounts receivable, less allowance of $257 in 1996 and
$211 in 1995
11,288 10,349
Inventories, less allowance of $734 in 1996 and $533 in 1995 17,102 16,310
Other current assets 1,623 1,605
--------- ---------
Total current assets 30,013 28,298
Property, plant and equipment, net 9,652 7,854
Goodwill, net of accumulated amortization of $5,181 in 1996
and $4,353 in 1995 12,601 13,431
Investment in and advances to affiliate 2,721 -
Other assets 1,362 1,158
--------- ---------
$ 56,349 $ 50,741
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Loans and notes payable $ 1,228 $ 850
Current portion of long-term debt 1,433 1,419
Accounts payable and accrued expenses 6,503 5,476
--------- ---------
Total current liabilities 9,164 7,745
Long-term debt 12,667 11,484
Deferred income taxes 806 855
--------- ---------
Total liabilities 22,637 20,084
--------- ---------
Minority interests 1,486 1,423
--------- ---------
Commitments and contingencies
STOCKHOLDERS' EQUITY
Common stock, $.50 par value, authorized 15,000,000 shares,
issued 2,795,940 shares in 1996 and 1995 1,398 1,398
Capital in excess of par value 8,450 8,443
Cumulative foreign currency translation adjustment (167) (156)
Retained earnings 23,465 20,476
Less treasury stock, at cost, 128,207 shares in 1996 and
129,707 shares in 1995 (920) (927)
--------- ---------
32,226 29,234
--------- ---------
$ 56,349 $ 50,741
========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
17
<PAGE> 18
VALLEY FORGE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Years ended December 31, 1996, 1995, and 1994
(in thousands, except share amounts)
<TABLE>
<CAPTION>
Common Stock
---------------------------
Shares Capital in Cumulative
Issued and Issued Excess of Translation Retained Treasury
Outstanding Amount Par Value Adjustment Earnings Stock
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
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)
Net income - - - - 3,630 -
Cash dividends, $.24 per share - - - - (641) -
Foreign currency translation
adjustment - - - (11) - -
Exercise of stock options 1,500 - 7 - - 7
----------- ----------- ----------- ----------- ----------- -----------
Balances at December 31, 1996 2,667,733 $1,398 $8,450 $(167) $23,465 $ (920)
=========== =========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
18
<PAGE> 19
VALLEY FORGE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31, 1996, 1995, and 1994
(in thousands)
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 3,630 $ 3,366 $ 2,817
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation 1,923 1,644 1,427
Amortization 926 914 837
Loss on building held for sale - 77 450
Minority interests 207 108 115
Other (84) (93) (191)
Changes in assets and liabilities, net of
businesses acquired:
Accounts receivable (939) (814) (847)
Inventories (582) (374) (3,276)
Other current assets (14) (386) 92
Accounts payable and accrued expenses 1,036 185 792
--------- --------- ---------
Net cash provided by operating activities 6,103 4,627 2,216
--------- --------- ---------
INVESTING ACTIVITIES
Additions to property, plant and equipment (3,653) (2,878) (2,363)
Constructed facility - (46) (2,715)
Proceeds from sale of constructed facility - 2,821 -
Investment in and advances to affiliate (2,693) - -
Businesses acquired in purchase transactions,
net of cash acquired (700) (876) (6,574)
Other (39) 249 20
--------- --------- ---------
Net cash used for investing activities (7,085) (730) (11,632)
--------- --------- ---------
FINANCING ACTIVITIES
Net borrowings (repayments) on line of credit agreement 728 (2,942) (3,058)
Principal payments on long-term debt (1,481) (188) (1,871)
Proceeds from long-term debt 2,678 1,565 11,000
Net proceeds (repayments) of construction loans - (1,941) 1,941
Net proceeds (repayments) of short-term notes payable (350) 150 700
Dividends paid (641) (604) (526)
Stock options exercised 14 97 919
Other - - 311
--------- --------- ---------
Net cash provided by (used for) financing activities 948 (3,863) 9,416
--------- --------- ---------
CHANGE IN CASH AND EQUIVALENTS (34) 34 -
Cash and equivalents at beginning of year 34 - -
--------- --------- ---------
Cash and equivalents at end of year $ - $ 34 $ -
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
19
<PAGE> 20
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.
Investments in which the Company has a 20% to 50% interest are accounted for
using the equity method.
USE OF ESTIMATES
The financial statements have been prepared in conformity with generally
accepted accounting principles and, as such, include amounts based on informed
estimates and judgments of management with consideration given to materiality.
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 prior to the date of the split have been retroactively restated.
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, generally using the
first-in, first-out (FIFO) method. Cost for certain inventories in the
industrial group is determined using the last-in, first-out (LIFO) 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 the 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 should exceed the aggregate cash flow amount,
goodwill would be reduced accordingly.
FOREIGN CURRENCY TRANSLATION
Assets and liabilities of the Company's Canadian subsidiary and the equity
investment in the foreign affiliate are translated at year-end exchange rates
while the income statement amounts are translated using an average exchange
rate for the year. Translation adjustments 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.
20
<PAGE> 21
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.
STOCK-BASED COMPENSATION
Statement of Financial Accounting Standards No. 123 (SFAS 123), "Accounting for
Stock-Based Compensation," encourages, but does not require companies to record
compensation expense for stock-based employee compensation plans based on the
fair value of the stock options issued. The Company has chosen to continue to
account for stock-based employee compensation using the intrinsic value method
prescribed in Accounting Principles Board (APB) Opinion No. 25, "Accounting for
Stock Issued to Employees," and related Interpretations. APB No. 25 requires
no recognition of compensation expense for the Company's stock-based
compensation plan.
NEW PRONOUNCEMENTS
In February of 1997, Statement of Financial Accounting Standards No. 128 (SFAS
128), Earnings Per Share was issued and is effective for financial statements
issued for periods ending after December 15, 1997. SFAS 128 supersedes APB No.
15 Earnings Per Shares, and simplifies the computation of earnings per share
(EPS) by replacing the "primary" EPS requirements of APB No. 15 with a "basic"
EPS computation based upon weighted-average shares outstanding. The Company
believes that the implementation of this new pronouncement will not have a
material impact on the amounts calculated under the current EPS methodology.
FINANCIAL STATEMENT RECLASSIFICATION
Certain reclassifications have been made to prior years' financial statements
to conform to the 1996 presentation with no impact on previously reported net
income or stockholders' equity.
NOTE B - INVENTORIES
At December 31, 1996 and 1995, inventories consist of the following (in
thousands):
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Raw materials $ 8,673 $ 8,617
Work-in-process 3,069 2,455
Finished goods 5,360 5,238
--------- ---------
$17,102 $16,310
========= =========
</TABLE>
At December 31, 1996 and 1995, inventories of approximately $14,867,000 and
$13,715,000, respectively, were valued using the FIFO method. Inventories of
approximately $2,235,000 and $2,595,000 were valued using the LIFO method at
December 31, 1996 and 1995, respectively. The replacement cost of LIFO
inventories exceeds the LIFO value by approximately $275,000 and $333,000 at
December 31, 1996 and 1995, respectively.
NOTE C - PROPERTY, PLANT AND EQUIPMENT
At December 31, 1996 and 1995, property, plant and equipment consist of the
following (in thousands):
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Land $ 820 $ 495
---------- ----------
Buildings 3,449 2,506
Machinery and equipment 14,684 13,276
Furniture and fixtures 3,240 2,814
Leasehold improvements 339 303
Construction in progress 376 -
---------- ----------
22,908 19,394
Less accumulated depreciation
and amortization (13,256) (11,540)
---------- ----------
$ 9,652 $ 7,854
========== ==========
</TABLE>
21
<PAGE> 22
NOTE D - INVESTMENT IN AND ADVANCES TO AFFILIATE
To enhance its strategic position in the European marketplace, in April 1996
the Company acquired a 46% interest in Mastervolt, B. V., a Dutch manufacturer
of power inverters and battery chargers for the marine and industrial markets,
for $2,364,000 in cash. The purchase price in excess of net tangible assets
acquired, approximately $2,100,000, is being amortized over 25 years. The
Company has advanced $329,000 to this affiliate for working capital. The
investment is being accounted for using the equity method.
NOTE E - ACCOUNTS PAYABLE AND ACCRUED EXPENSES
At December 31, 1996 and 1995, accounts payable and accrued expenses consist of
the following (in thousands):
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Accounts payable $2,114 $2,265
Wages, salaries, and benefits 1,630 1,426
Other accrued expenses 2,528 1,785
Income taxes payable 231 -
-------- --------
$ 6,503 $ 5,476
======== ========
</TABLE>
NOTE F - LONG-TERM DEBT
At December 31, 1996 and 1995, long-term debt consists of the following (in
thousands):
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Notes payable to financial institutions, 8.15%, annual
principal payments of $1,000 through June 2006 $ 10,000 $ 11,000
Advanceable term loan, quarterly payments of $75
(see Note G) through June 1998 3,200 850
Mortgages 726 835
Other 174 218
---------- ----------
14,100 12,903
Less current maturities (1,433) (1,419)
---------- ----------
$ 12,667 $ 11,484
========== ==========
</TABLE>
Annual maturities of long-term debt are: $1,433,000 in 1997; $4,379,000 in
1998; $1,141,000 in 1999; $1,062,000 in 2000; $1,015,000 in 2001, and
$5,070,000 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, 1996, 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 August 31, 1996, 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 1% under the bank's prime rate and expires June 30, 1997. The
advanceable term loan bears interest at 0.5% above the bank's prime rate. At
December 31, 1996, the balance outstanding under the revolving credit note was
$728,000 and the balance outstanding under the advanceable term loan was
$3,200,000 (see Note F). The bank's prime rate was 8.25% at December 31, 1996.
This bank credit agreement requires the maintenance of certain financial
ratios, as well as minimum capital requirements, at specified levels.
Included in the bank credit agreement described above is a second advanceable
term loan with borrowings up to $3,000,000 at the bank's prime rate and due
December 31, 1998. No amounts were drawn under this facility during 1996.
22
<PAGE> 23
Since March 1994, the Company has borrowed a total of $950,000 from certain
officers, stockholders, 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, 1996, the borrowings outstanding
under the notes totaled $500,000 and bore interest of 6.5%.
The weighted average interest rate on the above revolving credit note and
short-term notes was 7.55% during 1996 and 8.30% during 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, 1996 and 1995, accrued
medical and dental expenses were $57,000 and $55,000, respectively.
Commitments under non-cancelable operating leases are $813,000 in 1997,
$821,000 in 1998, $828,000 in 1999, $520,000 in 2000, $368,000 in 2001, and
$2,341,000 thereafter. Rental expense for operating leases for the years ended
December 31, 1996, 1995, and 1994 was $1,028,000, $843,000, and $633,000,
respectively.
NOTE I - RELATED PARTY TRANSACTIONS
The Company pays consulting and director fees to members of its Board of
Directors. These fees amounted to approximately $135,000 in 1996, $142,000 in
1995, and $160,000 in 1994.
At December 31, 1996, 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.
NOTE J - 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, was
recorded as goodwill and is being amortized over 15 years.
In connection with the formation of Guest, the Company sold a 14% interest in
the subsidiary, 7% each to two officers of the subsidiary. Each officer paid
cash of $150,500 and issued a note due to the Company for $150,500 for their
minority interest. The Company and officers also entered into agreements
whereby the officers may require the Company to purchase their shares at book
value. The Company's total purchase obligation shall not exceed $75,000 in any
twelve-month period, and it has right of first refusal to purchase the
officers' stock. Under this agreement, in July 1996, the Company purchased a
7% interest from the officers (3.5% from each) increasing its ownership
interest to 93%. The Company paid $75,250 to each officer and reissued the
notes due in the amount of $75,250 each. The reissued notes bear interest at
8.15% and are due December 31, 1999. The notes are collateralized by Guest
stock and, accordingly, the notes and accrued interest of approximately
$158,000 at December 31, 1996, are recorded as a reduction of minority
interests.
In connection with the Company's acquisition of a 66% ownership interest in
Multiplex Technology, Inc. (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 this agreement, the Company may have an obligation to
purchase all of the then outstanding common stock of Multiplex if there is a
specified change in control of the Company. The Multiplex stock is revalued
each quarter based on an earnings formula. As of December 31, 1996, the total
purchase obligation would be approximately $2,425,000. Since 1991, the Company
has purchased a total of 11,168 shares for approximately $162,000.
In addition to the above, since 1994, the Company has invested $1,451,000 in
product line and other business acquisitions.
23
<PAGE> 24
NOTE K - 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 principally of sales to unaffiliated customers; sales to
affiliated customers are not material. No general corporate expenses, interest
expense, interest income, or other income (expense) 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, 1996
follows (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
REVENUES
Industrial group $38,220 $35,142 $33,266
Recreational group 42,843 39,986 32,770
-------- -------- --------
Total $81,063 $75,128 $66,036
======== ======== ========
OPERATING INCOME
Industrial group $ 6,596 $ 5,493 $ 5,784
Recreational group 1,877 2,699 1,809
General corporate (1,449) (1,453) (1,572)
-------- -------- --------
Total $ 7,024 $ 6,739 $ 6,021
======== ======== ========
IDENTIFIABLE ASSETS
Industrial group $19,551 $18,648 $19,312
Recreational group 35,246 29,856 28,017
General corporate 1,552 2,237 3,616
-------- -------- --------
Total $ 56,349 $ 50,741 $ 50,945
======== ======== ========
CAPITAL EXPENDITURES
Industrial group $ 1,102 $ 1,582 $ 1,209
Recreational group 2,543 1,273 1,137
General corporate 8 23 17
-------- -------- --------
Total $ 3,653 $ 2,878 $ 2,363
======== ======== ========
DEPRECIATION AND AMORTIZATION
Industrial group $ 1,274 $ 1,111 $ 965
Recreational group 1,553 1,426 1,248
General corporate 22 21 51
-------- -------- --------
Total $ 2,849 $ 2,558 $ 2,264
======== ======== ========
</TABLE>
The recreational group's revenues include sales to one customer of
approximately $8,100,000 in 1996. Sales to this customer in 1995 and 1994 were
less than 10% of total revenues. Export revenues from unaffiliated customers
accounted for approximately 11% of total revenues in 1996, 1995, and 1994.
NOTE L - RESEARCH AND DEVELOPMENT EXPENSE
Research and development expense for the years ended December 31, 1996, 1995,
and 1994 was approximately $2,262,000, $1,805,000, and $1,425,000,
respectively.
NOTE M - BUILDING 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.
24
<PAGE> 25
NOTE N - INCOME TAXES
The components of provision for income taxes for the years ended December 31,
1996, 1995, and 1994 are as follows (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Federal
Current $2,175 $1,923 $1,653
Deferred (45) (65) (126)
-------- -------- --------
2,130 1,858 1,527
-------- -------- --------
State
Current 238 213 279
Deferred (13) 34 (56)
-------- -------- --------
225 247 223
-------- -------- --------
Foreign - current 8 6 12
-------- -------- --------
$ 2,363 $ 2,111 $ 1,762
======== ======== ========
</TABLE>
The components of deferred income taxes as of December 31, 1996 and 1995 are as
follows (in thousands):
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Deferred income tax liabilities:
Property, plant and equipment $ 807 $ 750
LIFO reserve 242 242
Other 148 168
-------- --------
1,197 1,160
-------- --------
Deferred income tax assets:
Tax net operating loss, expense, and
credit carryforwards (228) (237)
Inventory basis differences (364) (277)
Accrued expenses (467) (396)
Other (98) (150)
-------- --------
(1,157) (1,060)
Valuation allowance 228 237
-------- --------
(929) (823)
-------- --------
Net deferred income tax liability 268 337
Deferred income taxes included in other
current assets 538 518
-------- --------
Long-term deferred income tax liability $ 806 $ 855
======== ========
</TABLE>
The Company has Canadian tax net operating loss carryforwards of approximately
$150,000 and Canadian research and development expense carryforwards of
approximately $285,000 available to offset future Canadian taxable income. The
net operating loss carryforwards will expire in various years from 1999 through
2003. The research and development expense carryforwards have no expiration
period. The Company also has Canadian research and development credit
carryforwards totaling approximately $58,000 available to offset future
Canadian taxable income. These credits expire in the years 2000 through 2006.
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 1996 was a reduction of $9,000 due to the
utilization of net operating losses during the year.
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.
25
<PAGE> 26
The differences between the statutory and effective tax rates on income are as
follows:
<TABLE>
<CAPTION>
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
U.S. Federal statutory rate 34.0% 34.0% 34.0%
Nondeductible items, primarily goodwill
amortization 1.21 2.9 3.1
State income taxes, less Federal benefit 2.4 2.4 2.9
Utilization of net operating losses and credits (.5) (1.8) (2.1)
Other, net 1.0 0.3 (0.4)
------- ------- -------
38.1% 37.8% 37.5%
======= ======= =======
</TABLE>
No provision was made in 1996 for U. S. income taxes on the undistributed
earnings of the Canadian subsidiary or foreign affiliate as it is the Company's
intention to utilize those earnings in the foreign operations for an indefinite
period of time. At December 31, 1996 undistributed earnings of these foreign
entities amount to approximately $90,000. It is not practicable to determine
the amount of income or withholding tax that would be payable upon the
remittance of those earnings.
NOTE O - SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for income taxes and interest during 1996, 1995, and 1994 was as
follows (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Income taxes $1,942 $2,419 $1,689
Interest 1,225 1,216 899
</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 Guest in June 1994, the Company assumed liabilities of $392,000.
Immediately following the acquisition, $96,000 due to the former owner was
repaid.
NOTE P - 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 1996, 1995, and 1994 was approximately $171,000,
$180,000, and $175,000, 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
$298,000, $273,000, and $211,000 in 1996, 1995, and 1994, respectively.
Multiplex has a 401(k) plan which covers all of their employees. Multiplex's
contributions to the plan are discretionary and totaled approximately $26,000,
$19,000, and $12,000 in 1996, 1995, and 1994, respectively.
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 - 6.5% in 1996 and 6.0% in 1995, and (ii) the
expected long-term rate of return on assets - 8.75% in 1996 and 1995. Benefit
obligations are sensitive to changes in these estimated rates and actual
results may differ from the estimated obligations in the following table (in
thousands).
26
<PAGE> 27
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefits $ (790) $ (784)
Nonvested benefits (70) (67)
--------- --------
Accumulated and projected
benefit obligations (ABO and PBO) (860) (851)
Plan assets at fair value 1,077 929
-------- --------
Plan assets in excess of ABO and PBO 217 78
Prior service cost not yet recognized
in net periodic pension cost 43 47
Unrecognized net gain (216) (98)
Unrecognized net asset being
amortized over 13.7 years (26) (28)
--------- ---------
Prepaid (accrued) pension cost $ 18 $ (1)
========= =========
Net pension cost included the
following components:
Service cost $ 40 $ 27
Interest cost 50 51
Actual return on plan assets (156) (204)
Net amortization and deferral 77 141
--------- --------
Net pension cost $ 11 $ 15
========= =========
</TABLE>
NOTE Q - STOCK OPTION PLAN
The Company has a nonqualified stock option plan for key employees. In 1996
the stockholders approved an amendment to the plan to increase the number of
shares available for option grants by 300,000 to a total of 750,000 shares
authorized. 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 grant date 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, 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
Options authorized 300,000 -
Options granted (43,500) 43,500 11.75 - 13.625
Options exercised - (1,500) 7.75
Options canceled 15,750 (15,750) 7.83 - 12.00
------- ------- --------------
Balances, December 31, 1996 272,250 268,125 $4.79 - 13.625
======= ======= ==============
</TABLE>
27
<PAGE> 28
The following table summarizes information about vested options:
<TABLE>
<CAPTION>
Number of
Options Price Per Share
------- ---------------
<S> <C> <C>
December 31, 1996 $4.79 - $12.00
152,250
December 31, 1995 $4.79 - $11.08
115,125
December 31, 1994 $4.79 - $8.00
77,625
</TABLE>
The Company applies APB No. 25 and related Interpretations in accounting for
grants to employees under its stock-based compensation plan, described above.
Accordingly, no compensation expense has been recognized for grants to
employees under its fixed stock option plan. Had compensation expense been
charged to net income for grants to employees under the Company's fixed stock
option plans based on fair value at the grant dates for awards under the plan,
consistent with the method encouraged by SFAS 123, the Company's net income and
net income per share would have been decreased to the pro forma amounts
indicated below (in thousands, except per share amounts):
<TABLE>
<CAPTION>
1996 1995
---------------------- ---------------------
As As
Reported Proforma Reported Proforma
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net income $3,630 $3,589 $3,366 $3,356
Net income per share $1.32 $1.31 $1.23 $1.23
</TABLE>
The fair value of each option grant is estimated as of the date of the grant
using the Black-Scholes option-pricing model with the following
weighted-average assumptions:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Expected dividend yield 1.85% 1.85%
Expected volatility 23.10% 26.00%
Risk-free interest rate 6.30% 5.98%
Expected lives (years) 3.50 3.50
</TABLE>
The weighted-average grant-date fair value of options granted during 1996 and
1995 was $2.97 and $2.81, respectively.
The following table summarizes information about fixed stock options
outstanding at December 31, 1996:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
-------------------------------------------------- --------------------------------
Weighted Average
Range of Prices Number Remaining Life Weighted Average Number of Weighted Average
per Share Price of Options (in years) Price per Share Options Price per Share
--------------- ---------- ---------------- --------------- -------- ----- ----------
<S> <C> <C> <C> <C> <C>
$4.79 - $4.92 61,875 1.30 $4.82 61,875 $4.82
$7.83 - $8.00 50,250 3.67 $7.94 39,750 $7.94
$11.08 - $13.625 156,000 5.13 $11.83 50,625 $11.18
------- -------
$4.79 - $13.625 268,125 152,250
======= =======
</TABLE>
28
<PAGE> 29
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>
1996
----
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
1995
----
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
</TABLE>
29
<PAGE> 30
VALLEY FORGE CORPORATION AND SUBSIDIARIES
FIVE-YEAR SUMMARY
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Years ended December 31, 1996 1995 1994 1993 1992
------------------------ ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Revenues $81,063 $75,128 $66,036 $53,256 $44,060
Net income 3,630 3,366 2,817 2,115 1,859
Total assets 56,349 50,741 50,945 37,668 32,536
Long-term obligations 12,667 11,484 11,383 1,437 2,389
PER SHARE
Net income $1.32 $1.23 $1.05 $.81 $.70
Cash dividends .24 .227 .20 .20 .20
</TABLE>
30
<PAGE> 31
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 15 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 14 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, L.L.P.
San Francisco, California
February 19, 1997
31
<PAGE> 32
VALLEY FORGE CORPORATION AND SUBSIDIARIES
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
Years ended December 31, 1996, 1995, and 1994
<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 expenses Deductions period
----------- --------- ---------- -------- ---------- ------
<S> <C> <C> <C> <C> <C>
ALLOWANCE FOR DOUBTFUL ACCOUNTS
Year ended December 31, 1996 $211,000 $ - $182,000 $136,000 $257,000
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
ALLOWANCE FOR EXCESS AND
OBSOLETE INVENTORY
Year ended December 31, 1996 $533,000 $ - $248,000 $ 47,000 $734,000
Year ended December 31, 1995 373,000 30,000 141,000 11,000 533,000
Year ended December 31, 1994 286,000 - 130,000 43,000 373,000
ACCRUED WARRANTY EXPENSE
Year ended December 31, 1996 $258,000 $ - $151,000 $ - $409,000
Year ended December 31, 1995 258,000 - - - 258,000
Year ended December 31, 1994 193,000 - 93,000 28,000 258,000
ACCRUED MEDICAL AND DENTAL EXPENSE
Year ended December 31, 1996 $ 55,000 $ - $ 2,000 $ - $ 57,000
Year ended December 31, 1995 90,000 - - 35,000 55,000
Year ended December 31, 1994 69,000 - 21,000 - 90,000
</TABLE>
32
<PAGE> 33
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: 3/14/97 /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.
Dated: 3/14/97 /s/ Dated: 3/14/97 /s/
------------------------ ------------------------
Martin J. Bloom Theodore P. Desloge, Jr.
Co-Chairman of the Board Co-Chairman of the Board
Dated: 3/14/97 /s/ Dated:
------------------------ ------------------------
David R. Brining Phillip F. Dressel
President, Director, and Director
Chief Executive Officer
Dated: 3/14/97 /s/ Dated: 3/14/97 /s/
------------------------ ------------------------
Dale J. Warner Monica J. Burke
Director Vice President Finance
Dated: 3/14/97 /s/
------------------------
Sherilyn L. Dacquisto
Corporate Controller
33
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 11,545
<ALLOWANCES> 257
<INVENTORY> 17,102
<CURRENT-ASSETS> 30,013
<PP&E> 22,908
<DEPRECIATION> 13,256
<TOTAL-ASSETS> 56,349
<CURRENT-LIABILITIES> 9,164
<BONDS> 0
0
0
<COMMON> 1,398
<OTHER-SE> 30,828
<TOTAL-LIABILITY-AND-EQUITY> 56,349
<SALES> 81,063
<TOTAL-REVENUES> 81,063
<CGS> 49,086
<TOTAL-COSTS> 49,086
<OTHER-EXPENSES> 24,953
<LOSS-PROVISION> 182
<INTEREST-EXPENSE> 1,234
<INCOME-PRETAX> 6,200
<INCOME-TAX> 2,363
<INCOME-CONTINUING> 3,630
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,630
<EPS-PRIMARY> 1.32
<EPS-DILUTED> 1.32
</TABLE>
