SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended March 3, 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
incorporation or organization) Identification No.)
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 - 839,767 (1)
(1) Does not reflect 10% stock dividend declared March 7, 1995.
<PAGE>
PLYMOUTH RUBBER COMPANY, INC.
Plymouth Rubber Company, Inc. hereby amends Part 1, Item 1 on Form 10-Q
for the fiscal quarter ended March 3, 1995.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Statement of Operations
Balance Sheet
Statement of Cash Flows
Notes To Financial Statements
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
PLYMOUTH RUBBER COMPANY, INC.
STATEMENT OF OPERATIONS
(In Thousands Except Share and Per Share Amounts)
(Unaudited)
<CAPTION>
First Quarter Ended
March 3, Feb. 25,
1995 1994
<S> <C> <C>
Net Sales $ 12,580 $ 10,966
Cost and Expenses
Cost of products sold 9,571 8,381
Selling, general and administrative 2,271 1,983
11,842 10,364
Operating income 738 602
Interest expense (339) (241)
Other income (expense) 441 23
Income before taxes 840 384
Provision for income taxes (92) (154)
Income before cumulative effect of
changes in accounting principle 748 230
Cumulative effect of changes in
accounting principles, net -- 1,274
Net income 748 1,504
Retained earnings (deficit) at
beginning of period (6,234) ( 9,438)
Less 10% stock dividend (1,466) --
Retained earnings (deficit) at
end of period $ (6,952) $ ( 7,934)
</TABLE>
See Accompanying Notes To Financial Statements
<PAGE>
<TABLE>
PLYMOUTH RUBBER COMPANY, INC.
STATEMENT OF OPERATIONS
(Unaudited) (Continued)
<CAPTION>
First Quarter Ended
March 3, Feb. 25,
1995 1994
<S> <C> <C>
Per Share Data:
Primary Earnings Per Share:
Income before cumulative effect of
changes in accounting principles .36 .11
Cumulative effect of changes in
accounting principles, net -- .62
Net Income .36 .73
Weighted average number of shares
outstanding 2,094,030 2,065,126
Fully Diluted Earnings Per Share:
Income before cumulative effect of
changes in accounting principles .36 .11
Cumulative effect of changes
in accounting principles, net -- .62
Net Income .36 .73
Weighted average number of shares
outstanding 2,096,280 2,070,203
</TABLE>
See Accompanying Notes To Financial Statements
<PAGE>
<TABLE>
PLYMOUTH RUBBER COMPANY, INC.
BALANCE SHEET
(In Thousands)
<CAPTION>
March 3, Dec. 2,
1995 1994
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ -- $ --
Accounts receivable 6,663 7,055
Allowance for doubtful accounts (521) (540)
Inventories:
Raw materials 2,128 2,102
Work in process 2,556 2,468
Finished goods 4,291 3,652
8,975 8,222
Prepaid expenses and other current assets 2,048 2,083
Total current assets 17,165 16,820
Plant assets 28,010 27,523
Accumulated depreciation (20,409) (20,124)
Net plant assets 7,601 7,399
Other assets 4,157 4,179
TOTAL ASSETS $ 28,923 $ 28,398
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Revolving line of credit $ 6,420 $ 5,979
Trade accounts payable 4,325 4,344
Accrued expenses 3,350 3,649
Current portion of long-term obligations 1,071 1,156
Product warranties 597 616
Total current liabilities 15,763 15,744
Long-Term Liabilities
Term debt 3,562 3,752
Pension obligation payable 4,863 4,894
Product warranties 347 384
Other liabilities 1,869 1,905
Total long-term liabilities 10,641 10,935
STOCKHOLDERS' EQUITY
Preferred Stock -- --
Class A voting common stock 810 810
Class B non-voting common stock 1,005 814
Paid in capital 8,305 6,987
Retained earnings (deficit) (6,952) (6,234)
Pension liability adjustment, net of tax (392) (392)
Deferred compensation (257) (266)
Total stockholders' equity 2,519 1,719
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 28,923 $ 28,398
</TABLE>
See Accompanying Notes To Financial Statements
<PAGE>
<TABLE>
PLYMOUTH RUBBER COMPANY, INC.
STATEMENT OF CASH FLOWS
(In Thousands) (Unaudited)
<CAPTION>
First Quarter Ended
March 3, Feb. 25,
1995 1994
<S> <C> <C>
Cash flows from operating activities:
Net Income $ 748 $ 1,504
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Depreciation and amortization 285 256
Amortization of deferred compensation 9 9
Change in valuation allowance (238) --
Cumulative effect of changes in
accounting principles, net -- (1,274)
Changes in assets and liabilities:
Accounts receivable 373 1,090
Inventory (753) (102)
Prepaid expenses 35 108
Other assets 12 5
Accounts payable (20) (945)
Accrued expenses (6) (57)
Pension obligation 17 35
Product warranties (56) (92)
Other liabilities (29) (51)
Net cash provided by (used in)
operating activities 377 486
Cash flows from investing activities:
Capital expenditures (487) (490)
Net cash provided by (used in)
investing activities (487) (490)
Cash flows from financing activities:
Net increase (decrease) in revolving
line of credit 441 412
Payments of term loan (209) (249)
Payments on capital leases (73) (60)
Payments on insurance financing (93) (99)
Proceeds from issuance of common stock 44 --
Net cash provided by (used for)
financing activities 110 4
Net change in cash -- --
Cash at the beginning of the period -- --
Cash at the end of the period $ -- $ --
Supplemental Disclosure of Cash Flow Information
Cash paid for interest $ 242 $ 246
Cash paid for income taxes $ 2 $ 91
Supplemental Disclosure of Non-Cash Activities
Charge to retained earnings for stock dividend $1,466 $ --
</TABLE>
See Accompanying Notes To Financial Statements
<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 to the
Securities and Exchange Commission on Form 10-K.
(2) In connection with its former roofing materials business, the Company
issued extended warranties as to the workmanship and performance of
its products. Over 95% of these warranties had expired prior to the
end of 1994, 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. Some 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 $1 million reserve recorded at December
2, 1994 is adequate provision for the Company's remaining warranty
obligations.
The Company is the plaintiff in a legal action against one supplier
of materials previously used in the Company's discontinued roofing
systems. The Company has claimed substantial monetary damages based
on the failure of the subject materials to perform as expected. No
amount related to these claims has been included in the accompanying
financial statements.
The Company is 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 includes a breach of contract and
warranty claim against both a second defendant, (the direct seller of
the product) and the Company, alleges 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. Management believes such
claim is without merit and will vigorously defend against it. While
the final outcome of this and other proceedings is uncertain, it is
management's opinion that the ultimate liability, if any, for these
matters should not have a material impact on the results of
operations and the financial condition of the Company.
The United States Environmental Protection Agency (EPA) has asserted
four (4) claims against the Company under the Comprehensive
Environmental Response, Compensation and Liability Act ("CERCLA"),
pursuant to which EPA is seeking to recover from the Company and
other "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
<PAGE>
PLYMOUTH RUBBER COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS (Unaudited) Continued
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
or the settling parties against the Company. 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
December 2, 1994.
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 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 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
<PAGE>
PLYMOUTH RUBBER COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS (Unaudited) Continued
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
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; however, the Company has, to date, declined to
participate in the PRP Group. The Company has learned that the PRP's have
agreed among themselves to cap the liability of the "SRS Parties", (i.e.
theindirect 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
$733,000 and $769,000 at March 3, 1995, and December 2, 1994, have
been included in accounts payable.
<PAGE>
(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
will be 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 bases on the dividend value of $8.875 per share. Cash
will be paid in lieu of fractional shares using the closing price of
Class B common stock on March 6, 1995, which is expected to be less
than $1,000. Earnings per share have been adjusted to reflect the
stock dividend declared. The common shares outstanding, and the
common stock equivalents, are shown below
Common and Common Equivalent Shares (Primary Basis):
First Quarter Ended
March 3, Feb. 25,
1995 1994
Average shares outstanding 1,796,688 1,786,018
Adjustments thereto (1) 297,342 279,108
2,094,030 2,065,126
Common and Common Equivalent Shares (Fully Diluted Basis):
Average shares outstanding 1,796,688 1,786,018
Adjustments thereto (2) 299,592 284,185
2,096,280 2,070,203
(1) Adjust for options and warrants under the treasury stock method
using average market value during the period.
(2) Same as (1) except using market value at the end of the period,
if greater than the average market value during the period.
<PAGE>
(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 $238,000 to
$3,237,000 at March 3, 1995 based upon estimates of future taxable
income through the first quarter of fiscal 1998.
(6) Certain reclassifications of prior year balances have been made to
conform to the current presentation.
<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 April 18, 1995
