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 February 27, 1998 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, Massachusetts 02021
(Address of principal executive offices) (Zip Code)
(781) 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 receding 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 - 1,263,464
=========
<PAGE>
PLYMOUTH RUBBER COMPANY, INC.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements: Page No.
Consolidated Statement of Operations and
Retained Earnings (Deficit) . . . . . . . . 2
Consolidated Balance Sheet . . . . . . . . 3
Consolidated Statement of Cash Flows . . . . 4
Notes To Consolidated Financial Statements. . 5-8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . 9-10
PART II. OTHER INFORMATION 11
1
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
[CAPTION]
PLYMOUTH RUBBER COMPANY, INC.
CONSOLIDATED STATEMENT OF OPERATIONS AND
RETAINED EARNINGS (DEFICIT)
(In Thousands Except Share and Per Share Amounts)
(Unaudited)
First Quarter Ended
Feb. 27, Feb. 28,
1998 1997
<TABLE>
<S> <C> <C>
Net Sales . . . . . . . . . . . .. . . . . . . $ 14,464 $ 15,284
======= =======
Cost and Expenses:
Cost of products sold . . . . . . . . . . . 11,708 11,488
Selling, general and administrative. . . . 3,026 3,139
------- -------
14,734 14,627
------- -------
Operating income (loss). . . . . . . . . . . . (270) 657
Interest expense . . . . . . . . . . . . . . . (398) (336)
Other expense. . . . . . . . . . . . . . . . . (25) (76)
------- -------
Income (loss) before taxes . . . . . . . . . . (693) 245
Benefit (provision) for income taxes . . . . . 270 (104)
------- -------
Net income (loss). . . . . . . . . . . . . . . (423) 141
Retained earnings (deficit) at beginning of
period (2,282) (3,548)
------- -------
Retained earnings (deficit) at end of period . $ (2,705) $ (3,407)
======= =======
Per Share Data:
Basic Earnings Per Share:
Net Income (loss). . . . . . . . . . . . . . . $ (.21) $ .07
====== =====
Weighted average number of shares outstanding 2,054,758 2,004,095
========= =========
Diluted Earnings Per Share:
Net Income (loss). . . . . . . . . . . . . . . $ (.21) $ .06
====== =====
Weighted average number of shares outstanding 2,054,758 2,197,883
========= =========
</TABLE>
See Accompanying Notes To Consolidated Financial Statements
2
<PAGE>
[CAPTION]
PLYMOUTH RUBBER COMPANY, INC.
CONSOLIDATED BALANCE SHEET
(In Thousands)
Feb. 27, Nov. 28,
1998 1997
(Unaudited)
<TABLE>
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash . . . . . . . . . . . . . . . . . . . . . $ 6 $ 12
Accounts receivable. . . . . . . . . . . . . . 10,598 10,347
Allowance for doubtful accounts . . . . . . . (405) (314)
Inventories:
Raw materials. . . . . . . . . . . . . . . 3,371 3,772
Work in process. . . . . . . . . . . . . . 1,493 1,472
Finished goods . . . . . . . . . . . . . . 5,618 5,208
------- -------
10,482 10,452
Deferred tax assets, net . . . . . . . . . . . 1,849 1,689
Prepaid expenses and other current assets . . 814 873
------- -------
Total current assets . . . . . . . . . . . 23,344 23,059
PLANT ASSETS:
Plant assets . . . . . . . . . . . . . . . . . 36,820 35,390
Less: Accumulated depreciation . . . . . . . 18,390 18,049
------- -------
Total plant assets, net. . . . . . . . . . 18,430 17,341
------- -------
OTHER ASSETS:
Deferred tax assets, net . . . . . . . . . . . 2,463 2,346
Other long-term assets . . . . . . . . . . . . 1,281 1,318
------- -------
3,744 3,664
------- -------
Total Assets $ 45,518 $ 44,064
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Revolving line of credit . . . . . . . . . . . $ 10,555 $ 8,221
Trade accounts payable . . . . . . . . . . . . 6,277 6,034
Accrued expenses. . . . . . . . . . . . . . . 3,089 3,212
Current portion of long-term borrowings. . . . 2,262 2,138
Current portion of product warranties. . . . . 160 160
------- -------
Total current liabilities 22,343 19,765
------- -------
LONG-TERM LIABILITIES:
Borrowings . . . . . . . . . . . . . . . . . . 9,274 9,874
Pension obligation . . . . . . . . . . . . . . 3,249 3,358
Product warranties . . . . . . . . . . . . . . 491 516
Other . . . . . . . . . . . . . . . . . . . . 2,146 2,110
------- -------
Total long-term liabilities 15,160 15,858
------- -------
STOCKHOLDERS' EQUITY
Preferred stock. . . . . . . . . . . . . . . . -- --
Class A voting common stock . . . . . . . . . 810 810
Class B non-voting common stock. . . . . . . . 1,263 1,234
Paid in capital. . . . . . . . . . . . . . . . 9,048 9,067
Retained earnings (deficit). . . . . . . . . . (2,705) (2,282)
Cumulative translation adjustment. . . . . . . (114) (91)
Pension liability adjustment, net of tax . . . (145) (145)
Deferred compensation. . . . . . . . . . . . . (142) (152)
------- -------
8,015 8,441
------- -------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 45,518 $ 44,064
======= =======
</TABLE>
See Accompanying Notes To Consolidated Financial Statements
3
<PAGE>
[CAPTION]
PLYMOUTH RUBBER COMPANY, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(In Thousands) (Unaudited)
First Quarter Ended
Feb. 27, Feb. 28,
1998 1997
<TABLE>
<S> <C> <C>
Cash flows relating to operating activities:
Net Income (loss). . . . . . . . . . . . . $ (423) $ 141
Adjustments to reconcile net income (loss)
to net cash used in operating activities:
Depreciation and amortization. . . 414 339
Amortization of deferred compensation 10 9
Deferred income tax benefit. . . . (273) --
Changes in assets and liabilities:
Accounts receivable. . . . . . . . (198) 12
Inventory. . . . . . . . . . . . . (44) (129)
Prepaid expenses . . . . . . . . . 58 (25)
Other assets . . . . . . . . . . . (16) (20)
Accounts payable . . . . . . . . . 265 (477)
Accrued expenses . . . . . . . . . (179) (52)
Pension obligation . . . . . . . . 36 (140)
Product warranties . . . . . . . . (25) (25)
Other liabilities. . . . . . . . . 36 (137)
------- -------
Net cash used in operating activities (339) (504)
------- -------
Cash flows relating to investing activities:
Capital expenditures . . . . . . . . . . . (1,532) (1,145)
Acquisition of Cintas Adhesivas Nunez, S.A.,
net of cash acquired of $90. . . . . . . -- (2,235)
Acquisition of certain assets of Brite-Line
Industries, Inc. . . . . . . . . . . . . -- (597)
------- -------
Net cash used in investing activities (1,532) (3,977)
------- -------
Cash flows relating to financing activities:
Net increase in revolving line of credit 2,333 877
Proceeds from term loan. . . . . . . . . . -- 4,050
Payments of term loan. . . . . . . . . . . (325) (313)
Payments on capital leases . . . . . . . . (97) (53)
Payments on insurance financing. . . . . . (65) (66)
Proceeds from issuance of common stock . . 10 23
------- -------
Net cash provided by financing activities 1,856 4,518
------- -------
Effect of exchange rates on cash . . . . . . . 9 (7)
------- -------
Net change in cash . . . . . . . . . . . . . . (6) 30
Cash at the beginning of the period. . . . . . 12 --
------- -------
Cash at the end of the period. . . . . . . . . $ 6 $ 30
======= =======
Supplemental Disclosure of Cash Flow Information
Cash paid for interest. . . . . . . . . . . . $ 480 $ 343
======= =======
Cash paid for income taxes . . . . . . . . . . $ -- $ 1
======= =======
</TABLE>
See Accompanying Notes To Consolidated Financial Statements
4
<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
November 28, 1997, November 29, 1996, and December 1, 1995, included in
the Company's 1997 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 99% of these warranties had expired prior to the end of
1995, and the last of the ten-year warranties expired 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. Some warranty holders have filed claims or brought
suits currently aggregating approximately $721,000 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 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 $651,000 reserve recorded at February 27,
1998 is adequate provision for the Company's remaining warranty
obligations.
The Company is defending other legal matters arising in the normal
course of business. Based upon advice of counsel, management believes
that such legal matters will not have a material adverse effect on the
Company's results of operations or its financial position.
The United States Environmental Protection Agency (EPA) has asserted
three (3) outstanding 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, 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 Recover Service of
New England ("SRS") at a location in Southington, Connecticut, concern-
ing shipments to the site which occurred between June 1, 1956, and
January 25, 1974. The EPA has attributed a 1.74% share of the aggregate
waste volume to the Company. The Company is a participant in the
performing PRP group. The first phase of a remediation program is
estimated to cost $3.6 million. The Administrative Order on Consent for
Removal Action and Remedial/Feasibility study was entered on or about
February 6, 1997. Phase II of the clean-up and the Remedial
Investigation/Feasibility Study ("RI/FS"), is projected to cost $2.1
million. The most currently available estimate is that the total cost
of the clean-up for the PRP's will range from approximately $38 million
to $48 million. Based on all available information as well as its
prior experience, management believes the amount accrued of $511,000,
which is
5
<PAGE>
PLYMOUTH RUBBER COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued)
net of approximately $215,000 in total payments made by the Company, in
the accompanying consolidated financial statements as of February 27,
1998, is reasonable in relation to the Company's attributed share of
total estimated aggregate cost. 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.
On January 25, 1994, the Company received a notification 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, the EPA alleges that the Company is
also a PRP of the OSL Site. In addition, there were direct shippers to
the site, among them 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 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. An ROD was
issued in September, 1994 for the first Phase of the clean-up. On or
about December 20, 1997, the Company executed the Consent Decree and
paid $140,180 in full settlement of the first phase of the clean up.
The allocation among the parties and scope of the remedy for the second
phase has not been agreed upon; total costs are estimated at between
$10 and $50 million. The Company has been notified that 21 parties of
which the Company is one will likely be precluded from participating
in an early mediated settlement for the second phase on a "de minimis"
basis. Therefore, should the Company choose to continue to participate
in the PRP Group for the second phase, it is probable its payment to
obtain a complete release will be greater than a de minimis parties'
settlement. Based on all available information as well as its prior
experience, management believes a reasonable estimate of its remaining
liability is $337,000 and has accrued this amount in the accompanying
consolidated financial statements as of February 27, 1998. This amount
is subject to 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 second
remedial phase, if any, and the joint and several liability provisions
of CERCLA, and the Company's ability to successfully negotiate an
outcome similar to it previous experience in these matters.
In addition, in the process of preparing to eliminate the use of certain
underground storage tanks located at the Company's manufacturing
facility, the Company determined that some soil contamination had
occurred in a small localized area near the tanks in question. In
accordance with Massachusetts requirements, the Company notified the
Massachusetts Department of Environmental Protection ("DEP") of the
foregoing and on or about September 9, 1994, the DEP issued a Notice
of Responsibility, RTN No. 3-11520, pursuant to M.G.L. c. 21E. Accord-
ing to the preliminary information obtained by an independent Licensed
Site Professional, the contamination of the soil appears to be confined
to a small area and does not pose an environmental risk to the surround-
ing property or community. Remediation action is in process. It is
expected that such assessment and remediation will take up to two years
to complete and that the remaining costs for same will not exceed the
additional sum of $267,000, which has been provided for in the
accompanying financial statements.
6
<PAGE>
PLYMOUTH RUBBER COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued)
On or about January 21, 1997, the Company received a Notice of
Responsibility from the DEP pursuant to M.G.L. c. 21E concerning the
certain sites identified as The Ledge, 757-782 State Road, Dartmouth:
RTN No. 4-0234; and Ridge Hill Road, Freetown: RTN No. 4-0086. The
letter indicates that drums containing hazardous materials, some of
which may have contained the Company's wastes, were discovered at both
sites in April, 1997, and that response actions were undertaken at both
sites between 1979 and 1981 by the DEP. On information and belief, the
company which disposed of these drums is H&M Drum to whom the Company
shipped wastes between 1977 to 1979. The DEP has now issued more than
twenty notices to other PRP's. In compliance with DEP requests and
statutory requirements, the Company has hired an LSP to perform certain
technical services at the sites. Recent sampling of existing wells at
the Freetown site contained no finding of any volatile organic chemicals
("VOC's"). Sampling at the Dartmouth site is in process. Until
additional data is gathered, the extent of the problem and or remedial
action required, if any, cannot be determined. Further, the total
number of PRP's is not yet known. Accordingly, at the current time,
the Company is not able to estimate its portion of any liability
ultimately arising from the site. Therefore, as of February 27, 1998,
no reserves have been provided in the accompanying financial statements.
Pursuant to the Company's compliance with EPA and Massachusetts
regulations concerning the upgrade or replacement of underground storage
tanks by December 22, 1998, the Company arranged for the testing of the
area adjacent to three underground storage tanks. A limited amount of
solvent was found in the soil in the vicinity of the tanks; however,
additional sampling is required. The Company notified DEP of its test
results, and on November 19, 1997, the DEP issued a written response,
notifying the Company of its responsibility, RTN No. 3-15347, under
M.G.L. c. 21E as an unclassified site for response and remedial action.
The Company has several options under the law to protect, remove or
replace the tanks and plans to take whatever remedial action is deemed
appropriate. The Company is in the process of determining the costs
associated with each of these alternatives and has hired an LSP to
perform initial site investigation activities.
7
<PAGE>
PLYMOUTH RUBBER COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued)
(3) During the first quarter of fiscal 1998, the Company adopted Statement
of Financial Accounting Standards No. 128, Earnings Per Share. Primary
and fully diluted earning per share have been replaced with basic and
diluted earnings per share. All prior year earnings per share amounts
have been restated to conform with the requirements of SFAS No. 128.
The following table reflects the factors used in computing earnings per
share and the effect on income and the weighted average number of shares
of dilutive potential common stock.
First Quarter Ended February 27, 1998
-------------------------------------
Income Shares Per Share
(Numerator) (Denominator) Amount
Basic EPS
Loss available to common
stockholders $ (423,000) 2,054,758 $ (.21)
=======
Effect of Dilutive Security (A)
options -- --
--------- ---------
Diluted EPS
Loss available to common
stockholders and assumed
conversions $ (423,000) 2,054,758 $ (.21)
========= ========= =======
First Quarter Ended February 28, 1997
-------------------------------------
Income Shares Per Share
(Numerator) (Denominator) Amount
Basic EPS
Income available to common
stockholders $ 141,000 2,004,095 $ .07
=======
Effect of Dilutive Security (A)
options -- 193,788
--------- ---------
Diluted EPS
Income available to common
stockholders and assumed
conversions $ 141,000 2,197,883 $ .06
======== ========= =======
(A) Options for 154,160 and 86,425 shares of common stock were outstanding at
February 27, 1998 and February 28, 1997, respectively, but were not included
in computing diluted earnings (loss) per share in each of the respective
periods because their effects were antidilutive.
8
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Consolidated net sales decreased 5% to $14,464,000 from $15,284,000 for the same
period in 1997. Sales in Plymouth's core business decreased 10%, primarily
because of the production of automotive tapes which, because of capacity
limitations, displaced the sale of other products which have higher sales
dollars per machine hour. In addition, some of the automotive production
replenished inventories, which did not generate sales during the time period.
Compared to the first quarter of 1997, sales to the domestic automotive market
were up 2%, and sales to most of the other markets were down. The Company
anticipates that the installation of new equipment will gradually increase
capacity throughout fiscal 1998. Partially offsetting the core business sales
decrease, Brite-Line Technologies, Inc. sales were up 11% from the first quarter
of 1997, and Plymouth Europa, S.A. sales were up from the first quarter of 1997,
as this subsidiary generated sales for only part of the prior year's quarter.
Cost of products sold as a percentage of consolidated sales increased from
75.2% in the first quarter of 1997 to 80.9% in the first quarter of 1998.
Plymouth's core business was the primary contributor as cost of products sold
increased from 75.0% in 1997 to 79.8% in 1998, reflecting the lower sales and
production volumes, which resulted in production volume variances and higher
product costs on a percentage basis. Brite-Line also contributed to the
increase in cost of products sold as production volumes decreased from 1997
to 1998, despite an increase in sales, and some higher cost inventory was sold.
Plymouth Europa also contributed to the increase in cost of products sold as a
percentage of sales as some lower margin products were sold in the first quarter
of 1998.
Selling, general and administrative expenses decreased from $3,139,000 in 1997
to $3,026,000 in 1998. The primary contributor to the reduction was Plymouth's
core business where first quarter 1998 selling salaries, commissions, freight,
and advertising expenses decreased from the prior year. Brite-Line also
contributed to the reduction, while Plymouth Europa's selling, general and
administrative expenses for the first quarter of 1998 increased from the prior
year, reflecting a full quarter of operations.
Interest expense increased from $336,000 in 1997 to $398,000 in 1998, primarily
because of higher loan activity to support capital expenditures and operating
activities. As a result of the above factors, profit before tax decreased from
$245,000 in 1997 to a loss of $693,000 in 1998. After a tax benefit of $270,000
in 1998, the net loss was $423,000, as compared to a profit of $141,000 in 1997.
Cash used in operations was $339,000 in the first quarter of 1998 as compared
to $504,000 used in 1997. The main contributors to the use of cash were the net
loss of $423,000, an increase in the deferred income tax benefit of $273,000,
an increase of accounts receivable of $198,000, and a reduction of accrued
expenses of $179,000, offset by depreciation and amortization of $414,000 and
an increase of $265,000 in accounts payable. Cash flows for investing and
financing for the first quarter of 1998 included the use of $2,333,000 from
the revolving line of credit to finance capital expenditures of $1,532,000, and
pay down term debt of $325,000. The revolving line of credit was used to
finance the capital expenditures on an interim basis until the refinance of
existing equipment and the capital expenditure line of credit is completed.
As of February 27, 1998, because of collateral limitations and after consider-
ation of a letter of credit related to the final payment on the purchase of the
new vinyl calender and auxiliary equipment and to a guarantee of 80,000,000
pesetas (approximately $577,000) on a term-loan agreement with a Spanish Bank
syndicate, the Company had fully utilized its current borrowing capacity, under
its $15 million line of credit with its primary lender. In the opinion of
management, anticipated cash flow from operations, and additional funds
generated from anticipated financing arrangements will provide sufficient funds
to meet expected needs during fiscal 1998, including necessary working capital
expansion to support anticipated revenue growth. The Company is
9
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
(Continued)
currently in the final stages of refinancing both its existing equipment and a
capital expenditure line of credit with one of its lenders, and anticipates
completion by the end of April, 1998. The Company has also successfully
negotiated revised financial covenants with one of its lenders and is in com-
pliance with these covenants as of the end of the first quarter of 1998. Based
upon current projections, the Company expects to be in compliance with these
covenants for the remainder of the year.
Certain statements in this report, in the Company's press releases and in oral
statements made by or with the approval of an authorized executive officer of
the Company may constitute "forward-looking statements" as that term is defined
under the Private Securities Litigation reform Act of 1995. These may include
statements projecting, forecasting or estimating Company performance and
industry trends. The achievement of the projections, forecasts or estimates is
subject to certain risks and uncertainties. Actual results may differ
materially from those projected, forecasted or estimated. The applicable risks
and uncertainties include general economic and industry conditions that affect
all international businesses, as well as matters that are specific to the
Company and the markets it serves. General risks that may impact the achievement
of such forecast include: compliance with new laws and regulations, significant
raw material price fluctuations, currency exchange rate fluctuations, limits on
the repatriation of funds and political uncertainty. Specific risks to the
Company, include: risk of recession in the economies in which its products are
sold, the concentration of a substantial percentage of the Company's sales with
a few major automotive customers, competition in pricing and continued globali-
zation of the automotive supply base resulting in new competition in certain
locations.
10
<PAGE>
PLYMOUTH RUBBER COMPANY, INC.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Reference is made to the information contained in Item 3 of the
Company's Annual Report on Form 10-K for its fiscal year ended
November 28, 1997, and in Note 12 of the Notes To Consolidated
Financial Statements contained in said report.
Item 2. Changes in Securities
None
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
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits: See Index to Exhibits
(b) Not Applicable
11
<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)
Joseph J. Berns
Joseph J. Berns
Vice President - Finance
Date: April 13, 1998
12
<PAGE>
PLYMOUTH RUBBER COMPANY, INC.
INDEX TO EXHIBITS
Exhibit
No. Description
(2) Not Applicable.
(3)(i) Restated Articles of Organization -- incorporated by reference to
Exhibit 3(i) of the Company's Annual Report on Form 10-K for the year
ended December 2, 1994.
(3)(ii) By Laws, as amended -- incorporated by reference to Exhibit (3)(ii)
of the Company's Annual Report on Form 10-K for the year ended
November 26, 1993.
(4)(i) 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 the report on Form
10-Q for the Quarter Ended May 30, 1992.
(4)(ii) 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)(iii) 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)(iv) Promissory Note between Plymouth Rubber Company, Inc. and General
Electric Capital Corporation dated December 29, 1995 -- incorporated
by reference to Exhibit (4)(viii) to the report on Form 10-Q for the
Quarter ended March 1, 1996.
(4)(v) Master Security Agreement between Plymouth Rubber Company, Inc. and
General Electric Capital Corporation dated December 29, 1995 --
incorporated by reference to Exhibit (4)(viii) to the report on Form
10-Q for the quarter ended March 1, 1996.
(4)(vi) Demand Note between Plymouth Rubber Company, Inc. and LaSalle National
Bank dated June 6, 1996 -- incorporated by reference to Exhibit (2)(i)
to the report on Form 8-K with cover page dated June 6, 1996.
(4)(vii) Loan and Security Agreement between Plymouth Rubber Company, Inc. and
LaSalle National Bank dated June 6, 1996 -- incorporated by reference
to Exhibit (2)(ii) to the report on Form 8-K with cover page dated
June 6, 1996.
(4)(viii) Amendment to Master Security Agreement between Plymouth Rubber
Company, Inc. and General Electric Capital Corporation dated February
19, 1997 -- incorporated by reference to Exhibit (4)(xi) to the report
on Form 10-Q for the quarter ended February 25, 1997.
(4)(ix) Master Security Agreement between Plymouth Rubber Company, Inc. and
General Electric Capital Corporation dated January 29, 1997 --
incorporated by reference to Exhibit (4)(xii) to the Company's
report on Form 10-Q for the quarter ended February 25, 1997.
(4)(x) Demand Note between Brite-Line Technologies, Inc. and LaSalle National
Bank dated February 28, 1997 -- incorporated by reference to Exhibit
(4)(xiii) to the Company's report on Form 10-Q for the quarter ended
May 30, 1997.
13
<PAGE>
PLYMOUTH RUBBER COMPANY, INC.
INDEX TO EXHIBITS
(Continued)
Exhibit
No. Description
(4)(xi) Loan and Security Agreement between Brite-Line Technologies, Inc. and
LaSalle National Bank dated February 25, 1997 -- incorporated by
reference to Exhibit (4)(xiv) to the Company's report on Form 10-Q for
the quarter ended May 30, 1997.
(4)(xii) Continuing Unconditional Guaranty between Brite-Line Technologies,
Inc. LaSalle National Bank dated February 25, 1997 -- incorporated
by reference to Exhibit (4)(xv) to the Company's report on Form 10-Q
for the quarter ended May 30, 1997.
(4)(xiii) Amendment to Loan and Security Agreement between Plymouth Rubber
Company, Inc. and LaSalle National Bank dated May 7, 1997 --
incorporated by reference to Exhibit (4)(xvi) to the Company's
report on Form 10-Q for the quarter ended May 30, 1997.
(4)(xiv) Continuing Unconditional Guaranty between Plymouth Rubber Company,
Inc. and LaSalle National Bank dated March 20, 1997 -- incorporated
by reference to Exhibit (4)(xvii) to the Company's report on Form
10-Q for the quarter ended May 30, 1997.
(4)(xv) Public Deed which contains the loan guaranteed by mortgage and granted
between Plymouth Rubber Europa, S.A. and Caja de Ahorros Municipal
de Vigo, Banco de Bilbao, and Vizcaya y Banco de Comercio dated April
11, 1997 -- incorporated by reference to Exhibit (4)(xviii) to the
Company's report on Form 10-Q for the quarter ended May 30, 1997.
(4)(xvi) Corporate Guaranty between Plymouth Rubber Company, Inc. and Caja de
Ahorros Municipal de Vigo, Banco de Bilbao, and Vizcaya y Banco de
Comercio dated April 11, 1997 -- incorporated by reference to Exhibit
(4)(xix) to the Company's report on Form 10-Q for the quarter ended
May 30, 1997.
(4)(xvii) Amendment to Master Security Agreements between Plymouth Rubber
Company, Inc. and General Electric Capital Corporation dated December
29, 1995 and January 27, 1997.
(9)(i) Voting Trust Agreement, as amended, relating to certain shares of
Company's common stock -- incorporated by reference to Exhibit (9) of
the Company's Annual Report on Form 10-K for the year ended November
26, 1993.
(9)(ii) Voting Trust Amendment Number 6 -- incorporated by reference to
Exhibit 9(ii) of the Company's Annual Report on Form 10-K for the
year ended December 2, 1994.
(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) 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.
14
<PAGE>
PLYMOUTH RUBBER COMPANY, INC.
INDEX TO EXHIBITS
(Continued)
Exhibit
No. Description
(10)(iv) 1995 Non-Employee Director Stock Option Plan -- incorporated by
reference to Exhibit (4.3) of the Company's Registration Statement on
Form S-8 dated May 4, 1995.
(10)(v) 1995 Employee Incentive Stock Option Plan -- incorporated by reference
to Exhibit (4.4) of the Company's Registration Statement on Form S-8
dated May 4, 1995.
(10)(vi) Sales contract entered into between the Company and Kleinewefers
Kunststoffanlagen GmbH -- incorporated by reference to Exhibit (10)
(vi) of the Company's report on Form 10-Q for the quarter ended
February 28, 1997.
(11) Not Applicable.
(12) Not Applicable.
(13) Not Applicable.
(15) Not Applicable
(16) Not Applicable.
(18) Not Applicable.
(19) Not Applicable
(21) Brite-Line Technologies, Inc. (incorporated in Massachusetts) and
Plymouth Rubber Europa, S.A. (organized under the laws of Spain).
(22) Not Applicable.
(23) Consent of Independent Accountants.
(23) Not Applicable.
(24) Not Applicable.
(27) Financial data schedule for the quarter ended February 27, 1998.
(28) Not Applicable.
(29) Not Applicable.
15
Exhibit (4)(xvii)
April 2, 1998
Mr. Joseph J. Berns
Vice President - Finance
Plymouth Rubber Company, Inc.
104 Revere Street
Canton, MA 02021
Dear Joe:
This letter will serve to amend the Master Security Agreements dated as of
December 29, 1995 and January 27, 1997, respectively, by and between General
Electric Capital Corporation ("Secured Party") and Plymouth Rubber Company,
Inc. ("Debtor") as follows:
1. Section 10(a) is hereby amended to read as follows:
(a) At all times during the term of the Security Agreement, Debtor
shall maintain: (i) Minimum Working Capital, per the attached schedule,
(ii) Minimum Fixed Charge Coverage ratio, per the attached schedule.
All other terms and conditions will remain in full force and effect. This
Amendment is effective beginning February 27, 1998.
This amendment is subject to the receipt of a $33,750 amendment fee.
Sincerely,
Robert R. Blee
Senior Risk Analyst
AGREED AND ACKNOWLEDGED:
PLYMOUTH RUBBER COMPANY, INC.
By:______________________________
Name:____________________________
Title:___________________________
Date:____________________________
SCHEDULE A
1st qtr 98 2nd qtr 98 3rd qtr 98 4th qtr 98
Working Capital 1,000,000 1,105,000 245,000 630,000
Fixed Charge Coverage 1.24X 1.0X 1.0X 1.0X
1st qtr 99 2nd qtr 99 3rd qtr 99 4th qtr 99
Working Capital 1,000,000 1,375,000 1,750,000 2,500,000
Fixed Charge Coverage 1.25X 1.50X thereafter
1st qtr 20 2nd qtr 20 3rd qtr 20
Working Capital 3,000,000 3,500,000 3,750,000 thereafter
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<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> NOV-27-1998
<PERIOD-END> FEB-27-1998
<CASH> 6
<SECURITIES> 0
<RECEIVABLES> 10,598
<ALLOWANCES> 405
<INVENTORY> 10,482
<CURRENT-ASSETS> 23,344
<PP&E> 36,820
<DEPRECIATION> 18,390
<TOTAL-ASSETS> 45,518
<CURRENT-LIABILITIES> 22,343
<BONDS> 0
0
0
<COMMON> 2,073
<OTHER-SE> 5,942
<TOTAL-LIABILITY-AND-EQUITY> 45,518
<SALES> 14,464
<TOTAL-REVENUES> 14,464
<CGS> 11,708
<TOTAL-COSTS> 14,734
<OTHER-EXPENSES> 25
<LOSS-PROVISION> 11
<INTEREST-EXPENSE> 398
<INCOME-PRETAX> (693)
<INCOME-TAX> (270)
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<DISCONTINUED> 0
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<NET-INCOME> (423)
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