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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, 1998 Commission File Number 1-9897
VALLEY FORGE CORPORATION
(Exact name of Registrant as specified in its charter)
DELAWARE 58-0833796
(State of incorporation) (IRS Employer Identification Number)
100 Smith Ranch Road, Suite 326, San Rafael, California 94903-1994
(Address of principal executive offices) (Zip code)
(415) 492-1500
(Registrant's telephone number, including area code)
Indicate by a check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. YES [ X ] NO [ ]
The number of shares outstanding of Registrant's Common Stock, par value $.50
per share, at May 8, 1998, was 4,126,839.
The Exhibit Index is located on Page 2.
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VALLEY FORGE CORPORATION AND SUBSIDIARIES
Form 10-Q
For the Quarter Ended March 31, 1998
INDEX
<TABLE>
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Page
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<S> <C> <C>
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements
a) Condensed Consolidated Statements of Income for the Three
Months Ended March 31, 1998 and 1997 3
b) Condensed Consolidated Balance Sheets at March 31, 1998,
and December 31, 1997 4
c) Condensed Consolidated Statements of Cash Flows for the
Three Months Ended March 31, 1998 and 1997 5
d) Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 8
Item 3. Quantitative and Qualitative Disclosures About Market Risk 8
PART II: OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 9
</TABLE>
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Part I Financial Information
Item 1. Financial Statements
VALLEY FORGE CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Income
(Unaudited, in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
1998 1997
-------- --------
<S> <C> <C>
REVENUES $ 26,273 $ 22,492
Cost of goods sold 15,649 13,326
-------- --------
GROSS PROFIT 10,624 9,166
Selling and administrative 7,866 6,855
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OPERATING INCOME 2,758 2,311
Other income (expense):
Interest expense (291) (310)
Other, net 53 51
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INCOME BEFORE INCOME TAXES
AND MINORITY INTERESTS 2,520 2,052
Income taxes 983 810
Minority interests 31 32
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NET INCOME $ 1,506 $ 1,210
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BASIC EARNINGS PER SHARE $ .37 $ .30
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DILUTED EARNINGS PER SHARE $ .35 $ .29
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Basic weighted average shares outstanding 4,094 4,012
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Diluted weighted average shares outstanding 4,252 4,155
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</TABLE>
See Notes to Condensed Consolidated Financial Statements.
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VALLEY FORGE CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Unaudited, in thousands)
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
--------- ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Accounts receivable, net $16,853 $13,935
Inventories 20,543 19,121
Other current assets 2,190 2,258
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Total current assets 39,586 35,314
Property, plant, and equipment, net 10,841 10,683
Goodwill, net 11,533 11,762
Investment in and advances to affiliate 3,054 3,054
Other assets 1,056 1,137
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TOTAL ASSETS $66,070 $61,950
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Loans and notes payable $ 3,175 $ 1,065
Current portion of long-term debt 4,404 4,385
Accounts payable and accrued expenses 10,009 9,408
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Total current liabilities 17,588 14,858
Long-term debt 8,131 8,268
Deferred income taxes 815 815
Minority interests 1,273 1,375
Stockholders' equity 38,263 36,634
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $66,070 $61,950
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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>
Three Months Ended March 31,
----------------------------
1998 1997
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<S> <C> <C>
NET CASH USED FOR OPERATING ACTIVITIES $(1,198) $ (302)
INVESTING ACTIVITIES
Additions to property, plant, and equipment (699) (818)
Other, net (42) (141)
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Net cash used for investing activities (741) (959)
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FINANCING ACTIVITIES
Net borrowings on line of credit 2,510 1,904
Principal payments on long-term debt (118) (115)
Net payments on short-term notes (400) --
Stock options exercised 152 80
Dividends paid (205) (161)
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Net cash provided by financing activities 1,939 1,708
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CHANGE IN CASH AND EQUIVALENTS -- 447
Cash and equivalents at beginning of year -- --
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CASH AND EQUIVALENTS AT END OF PERIOD $ -- $ 447
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</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
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 1997 condensed consolidated financial statements to conform to
the 1998 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, 1997.
<TABLE>
<CAPTION>
MARCH 31, 1998 DECEMBER 31, 1997
INVENTORIES
<S> <C> <C>
Raw materials $10,091 $ 9,395
Work-in-process 3,736 2,815
Finished goods 6,716 6,911
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Total Inventories $20,543 $19,121
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</TABLE>
EARNINGS PER SHARE
Basic and diluted earnings per share are calculated as follows (in thousands,
except per share amounts):
<TABLE>
<CAPTION>
FOR THE THREE-MONTH PERIODS
ENDED MARCH 31,
1998 1997
------------------- -------------------
BASIC DILUTED BASIC DILUTED
<S> <C> <C> <C> <C>
Net income $1,506 $1,506 $1,210 $1,210
====== ====== ====== ======
Weighted average shares outstanding 4,094 4,094 4,012 4,012
Common equivalent shares -- 158 -- 143
------ ------ ------ ------
Total shares 4,094 4,252 4,012 4,155
====== ====== ====== ======
Earnings per share $ .37 $ .35 $ .30 $ .29
====== ====== ====== ======
</TABLE>
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CHANGE IN ACCOUNTING PRINCIPLE
Effective January 1, 1998, the Company adopted Statement of Financial Accounting
Standards No. 130 "Reporting Comprehensive Income" which requires that all items
required to be recognized under accounting standards as components of
comprehensive income be reported in the financial statements. Prior periods will
be reclassified, as required. The Company's total comprehensive income was as
follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
1998 1997
<S> <C> <C>
Net income $ 1,506 $ 1,210
Other comprehensive loss - foreign
currency translation adjustments (7) (27)
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Comprehensive income $ 1,499 $ 1,183
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</TABLE>
SUBSEQUENT EVENT
In April 1998, the Company arranged for long-term financing at 7.66% on
borrowings totaling $1,755,000 secured by two operating facilities. The two
mortgages will require monthly payments, are due in 2008, and require balloon
payments upon maturity. The proceeds from the loans were used to pay down a term
loan due in June 1998 that bears interest at 8.15%.
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Item 2. Mangagement's Discussion and Analysis of Financial Condition and
Results of Operations
Valley Forge Corporation and Subsidiaries
March 31, 1998
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
The Company used its bank line of credit ($2.5 million, net), to fund operating
activities, principally the increase in inventory during the quarter of $1.3
million, to invest in property, plant and equipment ($0.7 million) and make
payments on its short-and long-term obligations ($0.5 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 1998.
RESULTS OF OPERATIONS
REVENUES AND RELATED COSTS
Consolidated revenues increased $3.8 million (17%) in the quarter ended March
31, 1998, over the same quarter in the prior year, with recreational products
segment sales increasing 13% and the industrial products segment increasing 22%.
Gross profits for the quarter ended March 31, 1998 increased $1.5 million (16%)
over the comparable period in 1997. The consolidated gross profit margin
percentage for the quarter decreased slightly from 40.8% in 1997 to 40.4% in
1998. The increase in sales and related gross profits for the quarter ended
March 31, 1998 was due principally to increased unit volume on existing
products. New product introductions also contributed to the increased sales and
gross profits.
SELLING AND ADMINISTRATIVE EXPENSES
Consolidated selling and administrative expenses increased $1 million (15%) for
the quarter over the same period in the prior year primarily as a result of
increased sales. Selling and administrative expenses as a percentage of sales
decreased from 30.5% for the first quarter of 1997 to 29.9% for the first
quarter of 1998.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not applicable.
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VALLEY FORGE CORPORATION AND SUBSIDIARIES
Part II Other Information
For the Quarter Ended March 31, 1998
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:
None
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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: May 13, 1998 /s/
--------------------------------------------
Monica J. Burke
CFO and Vice President Finance
10
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<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 17,124
<ALLOWANCES> 271
<INVENTORY> 20,543
<CURRENT-ASSETS> 39,586
<PP&E> 26,144
<DEPRECIATION> 15,303
<TOTAL-ASSETS> 66,070
<CURRENT-LIABILITIES> 17,588
<BONDS> 0
0
0
<COMMON> 2,073
<OTHER-SE> 36,190
<TOTAL-LIABILITY-AND-EQUITY> 66,070
<SALES> 26,273
<TOTAL-REVENUES> 26,273
<CGS> 15,649
<TOTAL-COSTS> 15,649
<OTHER-EXPENSES> 7,866
<LOSS-PROVISION> 16
<INTEREST-EXPENSE> 291
<INCOME-PRETAX> 2,520
<INCOME-TAX> 983
<INCOME-CONTINUING> 1,506
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,506
<EPS-PRIMARY> 0.37
<EPS-DILUTED> 0.35
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