SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 or 15(d) of
THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended September 1, 1995 Commission File Number 1-5197
Plymouth Rubber Company, Inc.
(Exact name of registrant as specified in its charter)
Massachusetts 04-1733970
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
104 Revere Street, Canton, Massachusetts 02021
(Address of principal executive offices) (Zip Code)
(617) 828-0220
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address, and former fiscal year, if changed since last
report)
Indicate by checkmark 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
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the close of the period covered by this report.
Class A Common Stock, par value $1 - 810,586
Class B Common Stock, par value $1 - 1,054,201
<PAGE>
PLYMOUTH RUBBER COMPANY, INC.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Statement of Operations
Balance Sheet
Statement of Cash Flows
Notes To Financial Statements
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
PART II. OTHER INFORMATION
<PAGE>
PART I. FINANCIAL INFORMATION
Item I. Financial Statements
<TABLE>
PLYMOUTH RUBBER COMPANY, INC.
STATEMENT OF OPERATIONS
(In Thousands Except Share and Per Share Amounts)
(Unaudited)
<CAPTION>
Third Quarter Ended Nine Months Ended
Sept. 1, Aug. 26, Sept. 1, Aug. 26,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Net sales $ 12,730 $ 12,286 $ 39,258 $ 36,786
Cost and Expenses
Cost of products sold 9,669 9,537 29,859 27,925
Selling, general and
administrative 2,315 2,215 6,756 6,578
--------- --------- --------- ---------
11,984 11,752 36,615 34,503
--------- --------- --------- ---------
Operating income 746 534 2,643 2,283
Interest expense (360) (289) (1,053) (778)
Other income, net 16 8 452 46
--------- --------- --------- ---------
Income before taxes 402 253 2,042 1,551
Provision for income taxes (22) ( 31) (190) (199)
--------- --------- --------- ---------
Income before cumulative
effect of changes in
accounting principle 380 222 1,852 1,352
Cumulative effect of changes
in accounting principle, net -- -- -- 1,274
--------- --------- --------- ---------
Net income 380 222 1,852 2,626
Retained earnings (deficit)
at beginning of period (6,228) (7,034) (6,234) (9,438)
Less 10% stock dividend -- -- (1,466) --
--------- --------- --------- ----------
Retained earnings (deficit)
at end of period $ (5,848) $ (6,812) $ (5,848) $ (6,812)
Per Share Data:
Income before cumulative
effect of changes in
accounting principle .18 .11 .88 .65
Cumulative effect of changes
in accounting principle, net -- -- -- .61
--------- --------- --------- ---------
Net income .18 .11 .88 1.26
Weighted average number of
shares outstanding 2,089,623 2,083,213 2,093,013 2,075,680
</TABLE>
See Accompanying Notes To Financial Statements
<PAGE>
<TABLE>
PLYMOUTH RUBBER COMPANY, INC.
BALANCE SHEET
(In Thousands)
<CAPTION>
September 1, December 2,
1995 1994
(Unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash $ -- $ --
Accounts receivable 7,093 7,055
Allowance for doubtful accounts (519) (540)
Inventories:
Raw materials 2,286 2,102
Work in process 2,769 2,468
Finished goods 4,821 3,652
--------- ---------
9,876 8,222
--------- ---------
Prepaid expenses and other current assets 1,984 2,083
--------- ---------
Total current assets 18,434 16,820
--------- ---------
Plant assets 28,778 27,523
Accumulated depreciation (20,899) (20,124)
--------- ---------
Net plant assets 7,879 7,399
--------- ---------
Other assets 4,197 4,179
--------- ---------
TOTAL ASSETS $ 30,510 $ 28,398
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Revolving line of credit $ 6,780 $ 5,979
Trade accounts payable 4,986 4,344
Accrued expenses 3,359 3,649
Current portion of long-term obligations 1,064 1,156
Product warranties 617 616
--------- ---------
Total Current Liabilities 16,806 15,744
--------- ---------
Long-Term Liabilities:
Term debt 3,061 3,752
Pension obligation payable 4,663 4,894
Product warranties 288 384
Other liabilities 2,003 1,905
--------- ---------
Total Long-term Liabilities 10,015 10,935
--------- ---------
Stockholders' Equity
Preferred Stock -- --
Class A voting common stock 810 810
Class B non-voting common stock 1,054 814
Paid in capital 8,303 6,987
Retained earnings (deficit) (5,848) (6,234)
Pension liability adjustment, net of tax (392) (392)
Deferred compensation (238) (266)
--------- ---------
Total Stockholders' Equity 3,689 1,719
--------- ---------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 30,510 $ 28,398
See Accompanying Notes To Financial Statements
</TABLE>
<PAGE>
<TABLE>
PLYMOUTH RUBBER COMPANY, INC.
STATEMENT OF CASH FLOWS
(In Thousands) (Unaudited)
<CAPTION>
Nine Months Ended
September 1, August 26,
1995 1994
<S> <C> <C>
Cash flows from operating activities:
Net Income $ 1,852 $ 2,626
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Depreciation and amortization 775 791
Amortization of deferred compensation 28 28
Change in valuation allowance (612) (420)
Cumulative effect of changes in
accounting principle, net -- (1,274)
Changes in assets and liabilities:
Accounts receivable (59) (377)
Inventory (1,654) (1,053)
Prepaid expenses 99 286
Other assets (7) (102)
Accounts payable 641 (32)
Accrued expenses 413 425
Pension obligation (261) (258)
Product warranties (95) (235)
Other liabilities (54) (98)
--------- ---------
Net cash provided by (used in)
operating activities 1,066 307
--------- ---------
Cash flows from investing activities:
Capital expenditures (1,255) (1,412)
Sale/leaseback of plant assets 223 --
---------- ---------
Net cash provided by (used in)
investing activities (1,032) (1,412)
--------- ---------
Cash flows from financing activities:
Net increase (decrease) in:
Revolving line of credit 801 2,135
Payments of term loan (710) (748)
Payments on capital leases (144) (183)
Proceeds from insurance financing 115 97
Payments on insurance financing (187) (198)
Proceeds from issuance of common stock 91 2
--------- ---------
Net cash provided by (used for)
financing activities (34) 1,105
--------- ---------
Net change in cash -- --
Cash at the beginning of period -- --
--------- ---------
Cash at the end of period $ -- $ --
Supplemental Disclosure of Cash Flow Information
Cash paid for interest $ 959 $ 761
Cash paid for income taxes $ 122 $ 279
Supplemental Disclosure of Non-Cash Activities:
Charge to retained earnings for stock dividend $ 1,465 $ --
See Accompanying Notes To Financial Statements
</TABLE>
<PAGE>
PLYMOUTH RUBBER COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS (Unaudited)
(1) The Company, in its opinion, has included all adjustments (consisting of
normal recurring accruals) necessary for a fair presentation of the
results for the interim periods. The interim financial information is not
necessarily indicative of the results that will occur for the full year.
The financial statements and notes thereto should be read in conjunction
with the financial statements and notes for the years ended December 2,
1994, November 26, 1993, and November 28, 1992, included in the Company's
1994 Annual Report on Form 10-K filed with the Securities and Exchange
Commission.
(2) In connection with its former roofing materials business, the Company
issued extended warranties as to the workmanship and performance of its
products. Over 98% of these warranties had expired prior to the end of
the third quarter of 1995, with the last of the ten year warranties
expiring in 1996. (A small number of certain other, more restrictive,
and limited warranties continue thereafter). The estimated costs of these
warranties were accrued at the time of sale, subject to subsequent
adjustment to reflect actual experience which resulted in additional
charges to operations during 1994 and 1993 of $325,000, and $750,000,
respectively. Certain warranty holders have filed claims or brought suits
currently aggregating approximately $1,183,000 against the Company and
others relating to alleged roof failures. The Company believes, upon
advice of counsel, that its warranty obligation under such warranties is
limited to the cost of the roofing materials and that the amounts of the
claims are significantly in excess of its ultimate liability. The Company
is vigorously defending against these claims and believes that some are
without merit and that the damages claimed in others may not bear any
reasonable relationship to the merits of the claims or the real amount of
damage, if any, sustained by the various claimants. Management believes
that the $905,000 reserve recorded at September 1, 1995 is adequate
provision for the Company's remaining warranty obligations.
The Company was the plaintiff in a legal action against one supplier of
materials previously used in the Company's discontinued roofing systems.
The Company claimed substantial monetary damages based on the failure of
the subject materials to perform as expected. Subsequent to the end of
the third quarter, the legal action was settled for a cash payment of
$825,000 by the defendant. No amount related to this claim or settlement
has been included in the accompanying financial statements.
The Company was also involved in other lawsuits and claims arising in the
normal course of business, including one breach of express and implied
warranty suit claiming damages of up to approximately $600,000 dollars.
The suit, which included a breach of contract and warranty claim against
both a second defendant, (the direct seller of the product) and the
Company, alleged as to the Company, that as a result of the failure of the
Company's tape product, (as to which neither the plaintiff nor its direct
supplier were a direct purchaser from the Company), the plaintiff lost a
contract with its customer and suffered damages to its reputation. On or
about May 26, 1995, the aforementioned breach of express and implied
warranty suit was settled and dismissed with prejudice.
<PAGE>
PLYMOUTH RUBBER COMPANY, INC
NOTES TO FINANCIAL STATEMENTS (Unaudited) Continued
The United States Environmental Protection Agency (EPA) has asserted four
claims against the Company under the Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA"), pursuant to which EPA sought or
is seeking to recover from the Company and other alleged "generators" the
costs associated with the clean-up of certain sites used by licensed
disposal companies hired by the Company as independent contractors for the
disposal and/or reclamation of hazardous waste materials. In one case, in
the United States District Court for the District of Massachusetts, the
EPA began an action on or about March 1, 1990 in respect to the Superfund
site known as Re-Solve, Inc., of Dartmouth, Massachusetts. The Company
has entered into a Consent Decree, (embodied in an order of Judgment
entered October 14, 1992), requiring payment by the Company of $100,000
plus interest over a period of five years in full settlement of the EPA
claim. The Company has paid $52,000 and owes three payments of $16,000 in
each of 1995 through 1997.
On or about March 28, 1986, the Company was notified of potential
liability with respect to the Cannons Engineering Corporation site in
Bridgewater, Massachusetts, and the Cannons Engineering Corporation site
in Plymouth, Massachusetts and of its alleged ranking number 128 of more
than 300 generators. The Company had rejected offers of approximately
$40,000 and approximately $24,000 to settle the matter, since such
settlements would not have released the Company with respect to liability
for any future clean-up at the sites in question. EPA has settled with
a number of the generators who have, in turn threatened legal action
against the Company. A reiteration of a 1991 contribution demand was made
in 1994 by certain settling PRP's in the amount of $175,000. No actions
have been filed by EPA against the Company.
The Company received notification that a lawsuit was filed against it on
June 23, 1995 in the United States District Court for the District of
Massachusetts by Olin Hunt Specialty Products, Inc., ("Olin"). Olin
seeks to recover contribution under Section 113 of the CERCLA, (42 U.S.C.
Section 9613), as a result of a settlement entered into on June 26, 1992
between Olin, et al., and the United States, the State of New Hampshire,
and the Commonwealth of Massachusetts, (the "Governments") for reimburse-
ment of the Governments' response costs in connection with the Cannons
site. The Company intends to vigorously defend this matter; however, it
is impossible to determine the Company's total liability or responsibility
at this time. Based on all available information, as well as its prior
experience, management believes a reasonable estimate of its ultimate
liability is $50,000 and has accrued this amount in Other Liabilities
in the accompanying Balance Sheet as of September 1, 1995.
With respect to the third assertion against the Company under CERCLA, a
General Notice of Potential Liability was sent to 1,659 Potentially
Responsible Parties ("PRP") including the Company, in June, 1992, relative
to a Superfund Site known as Solvent Recovery System of New England
("SRS") at a location in Southington, Connecticut, concerning shipments
to the site which occurred between June 1, 1956, and January 25, 1974.
Revised volumetric assessments were made on or about July 7, 1993. The
EPA has attributed 852,445 gallons of an
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited) Continued
aggregate of 48,953,983 gallons of waste volume to the Company (a 1.74%
share). The Company believes that this attribution may be overstated by
failing to account for the portion of the gross waste volume actually
returned to the Company. This belief is based on the Company's facts and
circumstances related to SRS, which are similar in many respects to those
in the Re-Solve case. An SRS PRP Group, formed to negotiate the clean-up
with EPA, has obtained consent to undertake the first phase of a
remediation program, estimated to cost $3,600,000. Phase II, as proposed
by EPA, is estimated to cost approximately $25,000,000, to be incurred
over approximately a three-year period. The PRP Group opposes the Phase
II proposal. While the Company has declined to participate in the PRP
Group to date, its share (without adjustment for overstated attribution)
of the Phase I
remediation and the Phase II program, if it were adopted, would be a total
of $570,000. The most currently available estimate is that the cost of
the entire clean up will range from approximately $45 million to less than
$70 million. Based on all available information as well as its prior
experience, management believes a reasonable estimate of its ultimate
liability is $400,000 and has accrued this amount in Other Liabilities in
the accompanying Balance Sheet as of December 2, 1994. This amount is
subject to adjustment for future developments that may arise from the
long-range nature of this EPA case, legislative changes, insurance
coverage, the uncertainties associated with the ultimate outcome of the
Record of Decision ("ROD"), the joint and several liability provisions of
CERCLA, and the Company's ability to successfully negotiate an outcome
similar to its previous experience in these matters. No actions have been
currently filed by the EPA or the settling parties against the Company,
and no direct dialogue with the EPA is expected before the end of 1995.
On or about June 19,1995, the Company received an "Invitation to Perform a
Remedial Investigation/Feasibility Study,", ("RI/FS")," and Non-Time
Critical Removal Action", ("NTCRA"), from the EPA in which the EPA invites
all PRP's to perform or finance a RI/FS and a NTCRA. In addition, the EPA
stated its intention to negotiate exclusively with the SRS site PRP Group,
to issue a draft administrative order and statement of work regarding the
RI/FS and NTCRA within thirty (30) days of the letter, and to require
responses thereto within thirty (30) days and to continue negotiation with
the PRP Group for an additional forty-five (45) days. The Company is
currently evaluating its position with regard to this matter. On January
25, 1994, the Company received a notification dated January 21, 1994 of
an additional Superfund Site, Old Southington Landfill, (the "OSL Site")
regarding which the EPA asserts that the Company is a PRP. The OSL Site
is related to the SRS Site in that, the EPA alleges, after receipt and
processing of various hazardous substances from PRP's, the owners and/or
operators of the SRS Site shipped the resultant contaminated soil from the
SRS Site to the OSL Site. Since the Company is alleged to have shipped
materials to the SRS Site between 1956 and 1974, the EPA alleges that the
Company is also a PRP of the OSL Site. In addition, there were three (3)
direct shippers to the site, the Town of Southington, General Electric,
and Pratt & Whitney, as well as other transporters and/or users. Based on
EPA's asserted volume of shipments to SRS during that time period, the EPA
has attributed 380,710 gallons, or 4.89% of waste volume of all SRS
<PAGE>
PLYMOUTH RUBBER COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued)
customers, to the Company; no attempt has been made by EPA to adjust
the waste volume for the distillation done by SRS prior to shipment
to OSL, or to allocate a percentage to the Company in relation to direct
users of the OSL Site, or in relation to a combination of direct and
indirect users of the site. An ROD was issued in September, 1994 for the
first Phase of the clean-up, estimated to cost approximately $16 million
dollars. A PRP Group has been formed; and on or about June 20, 1995, the
Company executed agreements and paid a $3,000 assessment to become a
participant in the Joint Defense Group of OSL/SRS "transshipper" PRPs and
in the Alternative Dispute Resolution Process. All the PRP's have agreed
among themselves to cap the liability of the "SRS Parties", (i.e. the
indirect shippers, and the group to which the Company would belong), for
the first phase of a clean-up at 24.5%; (the amount assessed the direct
shippers and the other OSL Parties will be 51% and 24.5%, respectively).
There is no publicly available information yet concerning Phase II ground
water remediation costs; however, such costs are likely to be significant.
Based on all available information as well as its prior experience,
management believes a reasonable estimate of its ultimate liability for
Phase I costs is $100,000 and has accrued this amount in Other Liabilities
in the accompanying Balance Sheet as of December 2, 1994. This amount is
subject to adjustment for future developments that may arise from the
long-range nature of this EPA case, legislative changes, insurance
coverage, the uncertainties associated with the ultimate outcome of the
ROD and the joint and several liability provisions of CERCLA, and the
Company's ability to successfully negotiate an outcome similar to its
previous experience in these matters. No actions have been currently
filed by the EPA or the settling parties against the Company, and no
direct dialogue with the EPA is expected before the end of 1995.
(3) Checks outstanding in excess of certain cash balances totaling $590,000
and $769,000 at September 1, 1995, and December 2, 1994, have been
included in accounts payable.
(4) On March 7, 1995, the Company declared a 10% stock dividend on both Class
A (voting) and Class B (non-voting) common stock. The dividend was paid
in Class B shares on May 23, 1995 to shareholders of record as of March
24, 1995. Retained earnings has been charged for $1,466,000 based on a
dividend value of $8.875 per share. Cash was paid in lieu of fractional
shares using the closing price of Class B common stock on March 6, 1995,
and was less than $1,000. Earnings per share was adjusted to reflect the
stock dividend paid. The common shares outstanding, and the common stock
equivalents, are shown below.
Common and Common Equivalent Shares:
Third Quarter Ended Nine Months Ended
Sept. 1, Aug. 26, Sept. 1, Aug. 26,
1995 1994 1995 1994
Average shares outstanding 1,864,787 1,786,898 1,836,378 1,786,311
Adjustments thereto (A) 224,836 296,315 256,635 289,369
--------- --------- --------- ---------
Weighted average shares
outstanding 2,089,623 2,083,213 2,093,013 2,075,680
<PAGE>
PLYMOUTH RUBBER COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued)
(A) Adjusted for options and warrants under the treasury stock method using
average market value during the period.
(5) A deferred tax asset and a related valuation allowance was established at
$6,069,000 and $3,475,000, respectively, at December 2, 1994 based upon
estimates of future taxable income through fiscal 1997. The valuation
allowance has been reduced by $612,000 to $2,863,000 at September 1, 1995
based upon estimates of future taxable income through the third quarter of
fiscal 1998.
(6) Certain reclassifications of prior year balances have been made to conform
to the current presentation.
Subsequent Events
(7) Reference is made to that certain suit brought by the Company against
Mallyclad Corporation, of Madison Heights, Michigan ( Mallyclad ) on
December 4, 1984 and the information contained in Item 3 of the Company's
Annual Report on Form 10-K for its fiscal year ended December 4, 1984. On
or about September 11, 1995, the Company and Mallyclad agreed to a
settlement and dismissal with prejudice in consideration for the payment
of $825,000 by Mallyclad.
<PAGE>
Item 2. Management's Discussion & Analysis of Financial Condition and
Results of Operations.
FIRST NINE MONTHS, 1995 COMPARED WITH FIRST NINE MONTHS, 1994
Net Sales, at $39,258,000 were up 7% from the prior year, which exceeded 1993
net sales by 4%. Significant sales increases were achieved for Domestic
Automotive and Export markets, offset in part by shortfalls in other markets,
with the exception of the Contractor Industrial market which increased 6%. Sales
to the Domestic Automotive and Export markets increased 17% and 40%,
respectively, over the prior year s first nine months, and now represent 45% and
12% of the period s sales. In addition to increasing sales in the first nine
months, the Company increased finished goods inventories by approximately
$1,000,000, both to service current demand, and to support the global contract
with the Delphi Packard Electric Division of General Motors in Europe, North
Africa, and the Middle East.
Operating income at $2,643,000, was up 16% ($360,000) from the corresponding
period of 1994 (which was down $814,000 from 1993), and reflects a 6% increase
in gross profit (up $538,000), offset in part by a 3% increase in Selling and
General and Administrative expenses (up $ 178,000). Gross margin was unchanged
on the higher sales volume, due primarily to significantly higher raw material
costs, only a part of which have been passed through in product pricing. In
addition, reserves pertaining to the removal of certain storage tanks at the
Canton facility were increased by $75,000.
Selling expenses increased 13% over the first nine months of 1994, which
increased 7% over 1993, reflecting increases in advertising, freight, salaries
and fringe benefits, and travel expenses of $128,000, $106,000, $118,000, and
$47,000, respectively. General and Administrative expenses, exclusive of a
$250,000 recovery from an insurance settlement, decreased 1% from the prior
year s first nine months, on reduced incentive compensation and professional
fees, offset in part by increases in supplies and computer equipment rentals.
In addition, the prior year s period included charges approximating $275,000,
inclusive of legal costs, for a settlement of litigation arising from the
Company s previously discontinued coated fabrics business, and included a
partial recapture of a provision for doubtful accounts.
Income before taxes at $2,042,000 was up 32% ($491,000) from the prior year s
first nine months, reflecting the 16% increase in operating income noted above,
and a $406,000 increase in other income offset in part by a $275,000 increase in
interest expense. Other income reflects a $395,000 favorable settlement of
litigation related to the Company s previously discontinued Consumer Products
Division. The increased interest expense is the result of increased loan volume
and an increased rate of approximately 150 basis points (as a result of
increases in the prime rate) on monies borrowed on the Company's line of credit
with its primary lender.
Net income was up 500,000 (37%) from the first nine months of the prior year,
exclusive of the $1,274,000 net benefit from the cumulative effect of accounting
changes from the Company's simultaneous adoption of Financial Accounting
Standards #109 (FAS 109 - Accounting for Income Taxes) and #106 (FAS 106 -
Employer Accounting for Postretirement Benefits Other Than Pensions). The
current year net income includes a $612,000 recapture of a deferred tax
valuation allowance which results in an effective income tax rate of
approximately 9%. The prior year s first nine months tax rate approximated 13%,
which resulted from a $420,000 deferred tax allowance recapture.
<PAGE>
FIRST NINE MONTHS, 1995 COMPARED WITH FIRST NINE MONTHS, 1994
(Continued)
The deferred tax valuation allowance was established at $3,475,000 as of
December 2, 1994 based upon estimates of foreseeable future taxable income
through fiscal 1997. The valuation reserve has been reduced by $612,000 to
$2,863,000 as of September 1, 1995, based upon estimates of future taxable
income through the third quarter of fiscal 1998, and the incremental taxable
income of $645,000 from the favorable litigation and insurance settlements
outlined above.
During the first nine months, net cash generated from operating activities was
$1,066,000 compared to $307,000 during the first nine months of the prior year.
Cash provided by net income, exclusive of the deferred tax asset valuation
allowance recapture ($1,240,000), depreciation ($775,000), the increases to
accounts payable ($641,000), and accrued expenses ($413,000), exceeded the cash
used to increase inventory ($1,654,000), and to reduce pension obligations
($261,000). In accordance with the Company's agreement with its primary lender,
all cash receipts were applied against the revolving loan. The $1,066,000
generated from operating activities, the $801,000 increase in the revolving line
of credit, and the $223,000 sale and lease back of new production equipment,
were used to finance capital investment ($1,255,000) and to pay down term debt
and capital leases.
In the remaining months of fiscal 1995, management intends to make additional
capital investments of an estimated $800,000. As of September 1, 1995, the
Company had effectively utilized all of its borrowing capacity because of
collateral limitations under its $9 million revolving line of credit. In the
opinion of management, anticipated profits, as well as unused capacity under its
existing borrowing arrangements, will provide sufficient funds to meet expected
needs during 1995, including working capital expansion to support Export sales
growth, and investment in improved technology and capital equipment.
<PAGE>
THIRD QUARTER, 1995 COMPARED WITH THIRD QUARTER, 1994
Net sales at $12,730,000 were up 4% from the prior year s third quarter, which
exceeded the 1993 third quarter by 4%. Sales increases were achieved for the
Domestic Automotive and Export markets (up 8% and 96%, respectively), which were
partially offset by shortfalls in the Original Equipment Manufactures and
Utility markets.
Operating income at $746,000 was up 40% ($212,000) from the prior year s third
quarter, and reflects a 312,000 increase in gross profit, offset by a $100,000
increase in Selling, General and Administrative expenses. The prior year s
gross profit included a $125,000 charge to increase reserves pertaining to the
removal of certain underground tanks no longer in use.
Selling expenses increased 9% over the prior year s third quarter, on increased
advertising, and salaries and fringe benefits - up $58,000 and $34,000,
respectively. General and Administrative expenses were unchanged from the prior
year s third quarter.
Income before taxes at $402,000 was up $149,000 from the prior year s third
quarter, reflecting the $212,000 increase in operating income offset in part by
a $71,000 increase in interest expense. The increased interest expense is the
result of increased loan volume and an increased interest rate of 224 basis
points (as a result of increases in the prime rate) on monies borrowed on the
Company s line of credit and term loan with its primary lender.
Net income at $380,000 was up $158,000 from the prior year s third quarter,
reflecting the increased income before taxes and a reduced tax rate. The
current year s net income includes a $136,000 recapture of a deferred tax
valuation reserve allowance, which resulted in an effective tax rate of 5%
compared with the prior year s third quarter, which benefited from a 12% rate
generated by a $70,000 benefit from the recapture of deferred tax valuation
allowance.
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities
Not Applicable
Item 3. Defaults upon Senior Securities
Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders
Not Applicable
Item 5. Other Information
Not Applicable
Item 6. Exhibits and Reports on Form 10-K
(a) Exhibits: See INDEX TO EXHIBITS
(b) Not Applicable
<PAGE>
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 thereto duly authorized.
Plymouth Rubber Company, Inc.
(Registrant)
D. E. Wheeler
D. E. Wheeler
Vice President - Finance
Date: October 11, 1995
<PAGE>
PLYMOUTH RUBBER COMPANY, INC.
INDEX TO EXHIBITS
(a) Exhibits:
Exhibit No. Description
(2) Not Applicable.
(4)(I) Promissory Note between Plymouth Rubber Company, Inc., and
Mortgage Investors Corporation dated November 10, 1987 --
incorporated by reference to Exhibit (4)(I) of the Company's
Annual Report on Form 10-K for the year ended November 28,
1992.
(4)(ii) Mortgage and Security Agreement between Plymouth Rubber
Company, Inc., and Mortgage Investors Corporation dated
November 10, 1987 -- incorporated by reference to Exhibit
(4)(ii) of the Company's Annual Report on Form 10-K for the
year ended November 28, 1992.
(4)(iii) Promissory Note between Plymouth Rubber Company, Inc. and
Thrift Institution Fund For Economic Development dated June
14, 1989 -- incorporated by reference to Exhibit (4)(iii) to
report on Form 10-Q for the quarter ended May 27, 1994.
(4)(iv) Loan and Security Agreement between Plymouth Rubber Company,
Inc., and Thrift Institution Fund For Economic Development
dated June 14, 1989 -- incorporated by reference to Exhibit
(4)(iv) to report on Form 10-Q for the quarter ended May 27,
1994.
(4)(v) Mortgage Note between Plymouth Rubber Company, Inc., and the
Board of Education of Charles County, Maryland, dated November
1, 1991 -- incorporated by reference to Exhibit (2)(xiii) to
Report on Form 10-Q for the Quarter ended May 30, 1992.
(4)(vi) Amendment to Promissory Note and Security Documents between
Plymouth Rubber Company, Inc., and SL Mortgage Company,
Limited Partnership, assignee to Mortgage Investors
Corporation, dated April 6, 1992 -- incorporated by reference
to Exhibit (4)(xv) of the Company's Annual Report on Form 10-K
for the year ended November 28, 1992.
(4)(vii) Second Amendment to Promissory Note and Security Documents
between Plymouth Rubber Company, Inc., and SL Mortgage
Company, Limited Partnership, assignee to Mortgage Investors
Corporation, dated February 9, 1993 -- incorporated by
reference to the Report on Form 8-K with cover page dated
February 9, 1993.
<PAGE>
PLYMOUTH RUBBER COMPANY, INC.
INDEX TO EXHIBITS
(Continued)
(a) Exhibits:
Exhibit No. Description
(4)(viii) Promissory Note between Plymouth Rubber Company, Inc., and
Foothill Capital Corporation dated October 1, 1993 --
incorporated by reference to Exhibit (2)(I) to the Report on
Form 8-K with cover page dated October 1, 1993.
(4)(ix) Loan and Security Agreement between Plymouth Rubber Company,
Inc., and Foothill Capital Corporation dated October 1, 1993
-- incorporated by reference to Exhibit (2)(ii) to the Report
on Form 8-K with cover page dated October 1, 1993.
(4)(x) Amendment to Promissory Note between Plymouth Rubber Company,
Inc., and Thrift Institutions Fund For Economic Development
dated November 30, 1993 -- incorporated by reference to
Exhibit (4)(x) to Report on 10-K for the year ended November
26, 1993.
(10)(I) 1982 Employee Incentive Stock Option Plan -- incorporated by
reference to Exhibit (10)(I) of the Company's Annual Report on
Form 10-K for the year ended November 26, 1993.
(10)(ii) General Form of Deferred Compensation Agreement entered into
between the Company and certain officers -- incorporated by
reference to Exhibit (10)(ii) of the Company's Annual Report
on Form 10-K for the year ended November 26, 1993.
(10)(iii) Option Agreement between Plymouth Rubber Company, Inc., and SL
Mortgage Company, Limited Partnership -- incorporated by
reference to Exhibit (10)(iii) of the Company's Annual Report
on Form 10-K for the year ended November 28, 1992.
(10)(iv) 1992 Employee Incentive Stock Option Plan -incorporated by
reference to Exhibit (10)(iv) of the Company's Annual Report
on Form 10-K for the year ended November 26, 1993.
(11) Not applicable
(15) Not applicable
(18) Not applicable
(19) Not applicable
(22) Not applicable
(23) Not applicable
(24) Not applicable
(27) Financial data schedule nine months ended September 1, 1995.
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