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 26, 1999 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 - 1,267,014
PLYMOUTH RUBBER COMPANY, INC.
PART I. FINANCIAL INFORMATION
Item 1. Condensed Financial Statements: Page No.
Condensed Consolidated Statement of
Operations and Retained Earnings (Deficit). . 2
Condensed Consolidated Balance Sheet . . . . . . 3
Condensed Consolidated Statement of Cash Flows. . 4
Notes To Condensed Consolidated Financial
Statements . . . . . . . . . . . . . . . . . . . 5-9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. . . . . . . 10-13
PART II. OTHER INFORMATION 14
1
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
PLYMOUTH RUBBER COMPANY, INC.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
AND RETAINED EARNINGS (DEFICIT)
(In Thousands Except Share and Per Share Amounts)
(Unaudited)
<CAPTION>
First Quarter Ended
-------------------------
Feb. 26, Feb. 27,
1999 1998
---------- ----------
<S> <C> <C>
Revenues:
Net sales. . . . . . . . . . . . . . . . . $ 16,406 $ 14,464
---------- ----------
Cost and expenses:
Cost of products sold . . . . . . . . 12,051 11,708
Selling, general and administrative . . . 3,284 3,026
---------- ----------
15,335 14,734
---------- ----------
Operating income (loss) . . . . . . . . . . . . 1,071 (270)
Interest expense. . . . . . . . . . . . . . . . (485) (398)
Other income (expenses) . . . . . . . . . . . . 13 (25)
---------- ----------
Income (loss) before taxes . . . . . . . . . . 599 (693)
(Provision) benefit for income taxes. . . . . . (240) 270
---------- ----------
Net income (loss). . . . . . . . . . . . . . . 359 (423)
Retained earnings (deficit) at beginning
of period . . . . . . . . . . . . . . . . . (444) (2,282)
---------- ----------
Retained earnings (deficit) at end of period. . $ (85) $ (2,705)
========== ==========
Per Share Data:
Basic Earnings Per Share:
Net income (loss). . . . . . . . . . . . . $ .17 $ (.21)
========== ==========
Weighted average number of
shares outstanding. . . . . . . . . . . 2,081,333 2,054,758
========== ==========
Diluted Earnings Per Share:
Net income (loss). . . . . . . . . . . . . $ .16 $ (.21)
========== ==========
Weighted average number of
shares outstanding. . . . . . . . . . . 2,207,278 2,054,758
========== ==========
</TABLE>
See Accompanying Notes To Condensed Consolidated Financial Statements
2
<TABLE>
PLYMOUTH RUBBER COMPANY, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(In Thousands)
<CAPTION>
Feb 26, Nov. 27,
1999 1998
---------- ----------
(Unaudited)
<S> <C> <C>
Assets
Current Assets:
Cash. . . . . . . . . . . . . . . . . . . $ 49 $ 54
Accounts receivable . . . . . . . . . . . 11,328 13,077
Allowance for doubtful accounts . . . . . (466) (544)
Inventories:
Raw materials . . . . . . . . . . . . 4,021 3,800
Work in process . . . . . . . . . . . 2,667 1,968
Finished goods. . . . . . . . . . . . 6,623 5,202
---------- ----------
13,311 10,970
---------- ----------
Deferred tax assets, net . . . . . . . . . 1,542 1,542
Prepaid expenses and other current assets. 757 908
---------- ----------
Total current assets. . . . . . 26,521 26,007
---------- ----------
Plant Assets:
Plant assets . . . . . . . . . . . . . . . 40,514 39,384
Less: Accumulated depreciation . . . . . 18,334 17,821
---------- ----------
Total plant assets, net . . . . 22,180 21,563
---------- ----------
Other Assets:
Deferred tax assets, net . . . . . . . . . 1,688 1,882
Other long-term assets . . . . . . . . . . 1,190 1,249
---------- ----------
Total other assets . . . . . . . . . 2,878 3,131
---------- ----------
$ 51,579 $ 50,701
========== ==========
Liabilities and Stockholders' Equity
Current Liabilities:
Revolving line of credit . . . . . . . . . $ 10,005 $ 10,117
Trade accounts payable . . . . . . . . . . 5,535 6,090
Accrued expenses. . . . . . . . . . . . . 4,406 4,220
Current portion of long-term borrowings. . 2,787 2,834
---------- ----------
Total current liabilities. . . . 22,733 23,261
---------- ----------
Long-Term Liabilities:
Borrowings . . . . . . . . . . . . . . . . 12,773 11,527
Pension obligation . . . . . . . . . . . . 2,744 2,849
Other . . . . . . . . . . . . . . . . . . 2,510 2,543
---------- ----------
Total long-term liabilities. . . 18,027 16,919
---------- ----------
Stockholders' Equity:
Preferred stock . . . . . . . . . . . . . -- --
Class A voting common stock . . . . . . . 810 810
Class B non-voting common stock . . . . . 1,275 1,275
Paid in capital. . . . . . . . . . . . . . 9,077 9,077
Retained earnings (deficit) . . . . . . . (85) (444)
Accumulated other comprehensive
income (loss). . . . . . . . . . . . . (104) (69)
Deferred compensation. . . . . . . . . . . (104) (114)
---------- ----------
10,869 10,535
Less: Treasury stock at cost. . . . . . . (50) (14)
---------- ----------
Total stockholders' equity. . . 10,819 10,521
---------- ----------
$ 51,579 $ 50,701
========== ==========
</TABLE>
See Accompanying Notes To Condensed Consolidated Financial Statements
3
<TABLE>
PLYMOUTH RUBBER COMPANY, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(In Thousands) (Unaudited)
<CAPTION>
First Quarter Ended
-------------------------
Feb. 26, Feb. 27,
1999 1998
---------- ----------
<S> <C> <C>
Cash flows relating to operating activities:
Net income (loss) . . . . . . . . . . . . . . . $ 359 $ (423)
Adjustments to reconcile net income to
net cash provided by (used in)operating
activities:
Depreciation and amortization . . . . . 607 414
Amortization of deferred compensation . 10 10
Deferred income tax benefit . . . . . . -- (273)
Changes in assets and liabilities:
Accounts receivable . . . . . . . . . . 1,611 (198)
Inventory . . . . . . . . . . . . . . . (2,364) (44)
Prepaid expenses. . . . . . . . . . . . 150 58
Other assets. . . . . . . . . . . . . . (5) (16)
Accounts payable. . . . . . . . . . . . (532) 265
Accrued expenses . . . . . . . . . . . 277 (244)
Pension obligation. . . . . . . . . . . 23 36
Product warranties. . . . . . . . . . . -- (25)
Other liabilities . . . . . . . . . . . (33) 36
---------- ----------
Net cash provided by (used in) operating activities 103 (404)
---------- ----------
Cash flows relating to investing activities:
Capital expenditures. . . . . . . . . . . . . . (1,267) (1,532)
Sale/leaseback of plant assets. . . . . . . . . 93 --
---------- ----------
Net cash used in investing activities (1,174) (1,532)
---------- ----------
Cash flows relating to financing activities:
Net increase in revolving line of credit. . . . (87) 2,333
Proceeds from term debt . . . . . . . . . . . . 1,750 --
Payments of term debt . . . . . . . . . . . . . (435) (325)
Payments on capital leases. . . . . . . . . . . (126) (97)
Payments on treasury stock purchase . . . . . . (36) --
Proceeds from exercise of options . . . . . . . -- 10
---------- ----------
Net cash provided by financing activities 1,066 1,921
---------- ----------
Effect of exchange rates on cash. . . . . . . . . . -- 9
---------- ----------
Net change in cash. . . . . . . . . . . . . . . . . (5) (6)
Cash at the beginning of the period . . . . . . . . 54 12
---------- ----------
Cash at the end of the period . . . . . . . . . . . $ 49 $ 6
========== ==========
Supplemental Disclosure of Cash Flow Information
Cash paid for interest. . . . . . . . . . . . . . . $ 487 $ 480
========== ==========
Cash paid for income taxes. . . . . . . . . . . . . $ 58 $ --
========== ==========
</TABLE>
See Accompanying Notes To Condensed Consolidated Financial Statements
4
PLYMOUTH RUBBER COMPANY, INC.
NOTES TO CONDENSED CONSOLIDATED 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 27, 1998, November 28, 1997,
and November 29, 1995, included in the Company's 1998 Annual Report to the
Securities and Exchange Commission on Form 10-K.
(2) The Company has been named as a Potentially Responsible Party ("PRP") by the
United States Environmental Protection Agency ("EPA") in two ongoing claims
under the Comprehensive Environmental Response, Compensation and Liability Act
("CERCLA"). These CERCLA claims involve attempts by the EPA to recover the
costs associated with the cleanup of two Superfund Sites in Southington,
Connecticut--the Solvent Recovery Service of New England Superfund Site
("SRS Site") and the Old Southington Landfill Superfund Site ("OSL Site").
SRS was an independent and licensed solvent recycler/disposal company. The EPA
asserts that SRS, after receiving and processing various hazardous substances
from PRP's, shipped some resultant sludges and wastewater from the SRS Site
to the OSL Site.
The Company received a PRP notification regarding the SRS Site in June, 1992.
The EPA originally attributed a 1.74% share of the aggregate waste volume at
the SRS Site to the Company. Remedial action is ongoing at the Site, and the
Company is a participant in the performing PRP group. Largely because of
"orphaned shares," the Company recently has been contributing approximately
2.05% toward the performing PRP group's expenses. Based upon the investigations
and remedial actions conducted at the Site to date, including the recently
completed phytoremediation study, it is presently estimated that the total
cost of the cleanup at the Site will range from approximately $25 million to
$50 million. In the accompanying consolidated financial statements as of
February 26, 1999, management has accrued $484,000 as a reserve in this matter
(which is net of approximately $242,000 in payments made to date by the
Company).
The Company received a PRP notification regarding the OSL Site in January, 1994.
In addition to numerous "SRS transshipper" PRP's (such as the Company), EPA has
named a number of other PRP's who allegedly shipped waste materials directly
to the OSL Site. Based on EPA's asserted volume of shipments to SRS, EPA
originally attributed 4.89% of the "SRS transshipper" PRP's waste volume at
the OSL Site to the Company, which is an undetermined fraction of the total
waste volume at the Site. A Record of Decision ("ROD") was issued in
September, 1994 for the first phase of the cleanup and, in December, 1997,
following mediation, the Company contributed $140,180 (toward a total
contribution by the "SRS transshipper" PRP's of approximately $2.5 million)
in full settlement of the first phase. At present, neither the remedy for the
second phase of the cleanup (groundwater) nor the allocation of the costs
thereof among the PRP's has been determined. It has been estimated that the
total costs of the second phase may range from $10 million to $50 million.
Management has accrued $337,000 in the accompanying consolidated financial
statements as a reserve against the Company's potential future liability in
this matter.
Based on all available information as well as its prior experience, management
believes that its accruals in these two matters are reasonable. However, in
each case the reserved amount is subject to adjustment for future developments
that may arise from one or more of the following--the long range nature of the
case, legislative changes,
5
PLYMOUTH RUBBER COMPANY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) (Continued)
insurance coverage, the joint and several liability provisions of CERCLA, the
uncertainties associated with the ultimate groundwater remedy selected, and the
Company's ability to successfully negotiate an outcome similar to its previous
experience in these matters.
Claims under Massachusetts General Laws, Chapter 21E
While in the process of eliminating the use of underground storage tanks at the
Company's facility in Canton, Massachusetts, the Company arranged for the
testing of the areas adjacent to the tanks in question--a set of five tanks in
1994 and a set of three tanks in 1997. The tests indicated that some localized
soil contamination had occurred. The Company duly reported these findings
regarding each location to the Massachusetts Department of Environmental
Protection ("DEP") in 1994 and 1997 respectively, and DEP issued Notices of
Responsibility under Massachusetts General Laws Chapter 21E to the Company
for each location (RTN No. 3-11520 and RTN No. 3-15347, respectively). The
Company has retained an independent Licensed Site Professional ("LSP") to
perform assessment and remediation work at the two locations. With regard to
the first matter (involving the set of five tanks), the LSP has determined that
the soil contamination appears to be confined to a small area and does not pose
an environmental risk to surrounding property or community. With regard to the
second matter (involving the set of three tanks), a limited amount of solvent
has been found in the soil in the vicinity of the tanks; however, additional
sampling is required. It presently is estimated that the combined future costs
to complete the assessment and remediation actions at the two locations will
total approximately $325,000, and that amount has been accrued in the
accompanying financial statements.
In January, 1997 the Company received a Chapter 21E Notice of Responsibility
from DEP concerning two sites located in Dartmouth, Massachusetts (RTN No.
4-0234) and Freetown, Massachusetts (RTN No. 4-0086), respectively. According
to DEP, drums containing oil and/or hazardous materials were discovered at the
two sites in 1979, which led to some cleanup actions by the DEP. DEP contends
that an independent disposal firm allegedly hired by the Company and other
PRP's, H & M Drum Company, was responsible for disposing of drums at the two
sites. To date, the DEP has issued Notices of Responsibility to approximately
100 PRP's. A group of PRP's, including the Company, has retained an LSP to
conduct groundwater investigations at both sites. Those investigations are
still in progress, and until additional data is gathered, it is not possible
to reasonably estimate the extent of the problem, the costs of any cleanup
that may be required at either or both sites, or the Company's potential share
of liability or responsibility therefor. Accordingly, no reserve has been
accrued in the accompanying financial statements with respect to these two
sites.
6
PLYMOUTH RUBBER COMPANY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) (Continued)
(3) 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 potentially dilutive common stock.
First Quarter Ended February 26, 1999
------------------------------------------
Income Shares Per Share
(Numerator) (Denominator) Amount
---------- ----------- ---------
Basic EPS
Income available to common
stockholders $ 359,000 2,081,333 $ .17
=========
Effect of Dilutive Security (A)
options -- 125,945
---------- ----------
Diluted EPS
Income available to common
stockholders and assumed
conversions $ 359,000 2,207,278 $ .16
========== ========== =========
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)
========= ========== ========
(A) Options for 195,900 and 154,160 shares of common stock were outstanding at
February 26, 1999 and February 27, 1998, respectively, but were not
included in computing diluted earnings per share in each of the respective
periods because their effects were anti-dilutive. Options for 233,642
shares of common stock were outstanding at February 27, 1998, but were not
included in computing diluted earnings per share because of the loss.
7
PLYMOUTH RUBBER COMPANY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) (Continued)
(4) During the first quarter of fiscal 1999 the Company adopted Statement
of Financial Accounting Standards No. 130 - Reporting Comprehensive
Income. FAS 130 requires that certain financial activity typically
disclosed in stockholders' equity be reported in the financial
statements as an adjustment to net income in determining comprehensive
income.
The following table presents comprehensive income for the quarters
ended February 26, 1999 and February 27, 1998.
Feb. 26, Feb. 27,
1999 1998
-------- --------
Net income (loss) . . . . . . . . . . . . . . . . . $ 359 $ (423)
Other comprehensive income (loss):
Foreign currency translation adjustments . . . (35) (23)
------- -------
Comprehensive income (loss) $ 324 $ (446)
======= =======
(5) On February 19, 1999 the Company amended its revolving line of credit and
real estate term loan agreement with its primary lender. The loan amendment
increases the maximum borrowing amount from $15 million to $18 million,
increases the real estate term loan from $1.25 million to $3.0 million,
and lowers the borrowing rate from prime plus 1/4% to prime. In addition,
the Company has the option to convert part or all of its loan balances at
variable rates to 30, 60, 90 or 180 day contracts at a fixed rate of LIBOR
plus 2%. The amendment is effective June 2, 1999 (except for the real
estate loan increase which was effective February 26, 1999) and extends the
agreement by three years to June 2, 2002. The term loan calls for monthly
interest only payments through June, 1999, and interest plus monthly
principal payments of $50,000, beginning July, 1999.
(6) Impact of New Accounting Pronouncements
In June, 1997, the Financial Accounting Standards Board issued FAS 131 -
Disclosures about Segments of an Enterprise and Related Information. FAS
131 requires the reporting of selected segment information in quarterly
and annual reports. Information from operating segments is derived from
methods used by the Company's management to allocate resources and measure
performance. The Company is required to disclose profit/loss, revenues and
assets for each segment identified, including reconciliations of these
items to consolidated totals. The Company is also required to disclose the
basis for identifying the segments and the types of products and services
within each segment. FAS 131 is effective for the Company for the fiscal
year ended December 3, 1999, and quarterly beginning in fiscal 2000,
including the restatement of prior periods reported consistent with this
pronouncement, if practicable. The Company expects to have two reportable
segments, the tape business and the highway marking tape business.
In February, 1998, the Financial Accounting Standards Board issued FAS 132-
Employer's Disclosure About Pensions and Other Postretirement Benefits.
FAS 132 revises employers' disclosures about pension and other postretire-
ment benefit plans. The Company will adopt the provisions of FAS 132 in
fiscal 1999, and does not anticipate any significant impact on its
Financial Statements from this adoption.
8
PLYMOUTH RUBBER COMPANY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) (Continued)
In June, 1998, the Financial Accounting Standards Board issued FAS 133 -
Accounting for Derivative and Similar Financial Instruments and for
Hedging Activities. FAS 133 will require the Company to record derivative
instruments, such as foreign currency hedges, on the Consolidated Balance
Sheet as assets or liabilities, measured at fair value. Currently, the
Company treats such instruments as off-balance-sheet items. Gains or losses
resulting from changes in the values of those derivatives would be accounted
for depending on the specific use of each derivative instrument and whether
it qualifies for hedge accounting treatment as stated in the standard. FAS
133 will be effective for the Company on December 4, 1999, the beginning of
fiscal year 2000. The Company currently does not expect the impact of
adopting FAS 133 to be material.
9
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Sales increased in the first quarter of 1999 by 13% to $16,406,000 from
$14,464,000 in the same quarter in the prior year. The increased capacity
resulting from the new calender and coating line allowed the Company to better
meet customer demand for its products, particularly in the tape business,
where sales increased $1,744,000 from the prior year. Sales to the domestic
automotive market, which increased approximately $1,500,000 from last year,
was the major contributor. Export and the domestic OEM markets comprised
most of the remaining increase over the prior year. Sales in the highway
marking products business increased $198,000 or 40% over last year.
Gross margin increased to 26.5% from 19.1% last year. The major factor in the
improvement was higher production volume in the Canton operations. The higher
production levels were required to meet the increased sales demand and to build
inventories for the automotive and other markets. Inventory levels were
increased during the quarter in order to better respond to customer needs.
In addition, the inventory of certain rubber products was increased to allow
for a major refurbishment of the rubber calender, which was completed in March,
1999. The highway marking products business, which was in a seasonably slow
quarter, had approximately the same negative gross margin as last year.
Selling, general and administrative expenses, as a percentage of sales,
decreased to 20.0% from 20.9% last year. The major factors in Plymouth's tape
business were lower expenses as a percentage of sales in professional fees,
bad debt expense, and warehouse charges, partially offset by higher salaries
and benefits, freight, commissions, and foreign selling expenses. The
pavement marking business had lower salaries as a percentage of sales.
Interest expense increased $87,000 from the prior year. The major factor
was interest on long term borrowings (ending balance of $15,560,000 in 1999
compared to $11,536,000 in 1998), largely to finance the capital expansion
program in Plymouth's tape business during 1998. This was partially offset
by lower interest as a percentage of sales on the revolving line of credit,
due to a less than proportionate increase in the average borrowing balance,
and a slightly lower borrowing rate.
As a result of the above factors, income before tax increased to $599,000 from
a loss of $693,000 last year, and net income increased to $359,000 from a loss
of $423,000 last year.
Liquidity
On February 19, 1999 the Company amended its revolving line of credit and real
estate term loan agreement with its primary lender. The loan amendment
increases the maximum borrowing amount from $15 million to $18 million,
increases the real estate term loan from $1.25 million to $3.0 million, and
lowers the borrowing rate from prime plus 1/4% to prime. In addition, the
Company has the option to convert part or all of its loan balances at variable
rates to 30, 60, 90 or 180 day contracts at a fixed rate of LIBOR plus 2%.
The amendment is effective June 2, 1999 (except for the real estate loan
increase which was effective February 26, 1999) and extends the
agreement by three years to June 2, 2002. The term loan calls for monthly
interest only payments through June, 1999, and interest plus monthly principal
payments of $50,000, beginning July, 1999.
The Company generated $103,000 of operating cash flows in the first quarter of
1999, which primarily comprised net income of $359,000, a reduction in accounts
receivable of $1,611,000 and other operating cash inflows, which were largely
offset by an increase in inventory of $2,364,000. This operating cash flow,
in conjunction with cash provided by additional term borrowings of $1,750,000,
was used to finance capital expenditures of $1,267,000 and payments of term
debt and capital leases totaling $561,000.
10
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
(Continued)
As of February 26, 1999, the Company had approximately $1,900,000 of unused
borrowing capacity under its $15,000,000 line of credit with its primary lender
after consideration of collated limitations and a letter of credit related to
a guarantee of 80 million pesetas (approximately $0.6 million) on a term loan
agreement with a Spanish Bank syndicate.
In the opinion of management, anticipated cash flow from operations, unused
capacity under existing borrowing agreements, and additional funds generated
from the sale/leaseback of capital equipment, will provide sufficient funds
to meet expected needs during fiscal 1999, including necessary working capital
expansion to support anticipated revenue growth and investments in capital
equipment, and to service its indebtedness. Although management expects to be
able to accomplish its plans there is no assurance that it will be able to do
so. Failure to accomplish these plans could have an adverse impact on the
Company's liquidity and financial position.
Year 2000
Computers, software and other equipment utilizing microprocessors that use only
two digits to identify a year in a data field may be unable to process
accurately certain date-based information at or after the year 2000. This is
commonly referred to as the "Year 2000 issue," and the Company has assembled
a task force to oversee the entire Year 2000 project, which includes the
Company's domestic and foreign tape business and Brite-Line, for both
information technology ("IT") and non-IT systems. The Company believes that
its greatest potential risks are associated with its IT systems and non-IT
systems embedded in its operations and infrastructure. The task force has
identified five phases of the Year 2000 compliance process for the Company's
IT and non-IT systems. These phases are 1) issue identification, 2) assessment,
3) development of remediation plans, 4) implementation and testing and
5) contingency planning. The first two phases have been completed as planned.
The Company's Year 2000 project is currently in the remediation phase and, with
respect to its main information systems hardware and software, in the
implementation and testing phase, which is 40% complete. With respect to IT
systems, the Company's strategy is to upgrade some of the existing systems and
replace others. Correction and testing of mission critical systems are
targeted for completion by the end of the second quarter of fiscal 1999.
With respect to non-IT systems, the implementation phase is 90% complete. Large
and critical suppliers were selected for compliance confirmation; to date 90%
of the responses have been received and no critical problems have been
identified. The Company is following up with vendors yet to respond
satisfactorily or at all to its inquiries. Separately, the Company also is
actively seeking information and assurances of a more technical nature from
certain vendors regarding the compliance status of specific manufacturing and
information processing equipment. In addition to confirming compliance
directly with suppliers and vendors, the Company expects to perform its own
testing of certain purchased equipment and IT systems for compliance. The
Company is monitoring the status of Year 2000 compliance of its most
significant customer by reviewing publicly available information. Compliance
for all other customers is being determined through direct contact and
written confirmation. The Company cannot provide assurance that the Year
2000 compliance plans of its vendors and customers will be successfully
completed in a timely manner.
The Company has begun contingency planning and plans to complete its
contingency planning for both IT and non-IT systems, as appropriate, by the
end of the second quarter of fiscal 1999. Possible contingency plans include
building additional safety inventories in case of vendor supply or power
interruptions, using alternate suppliers, outsourcing to third parties,
utilizing alternative software, and reverting to manual processing of
information. Once developed, contingency plans will continue to be
reassessed and refined as additional information becomes available.
11
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
(Continued)
Costs incurred to date for Year 2000 have totaled approximately $200,000 and
have been expensed as incurred. The Company currently estimates that total
costs will approximate $400,000, including internal employee costs and costs
of external consultants, and it currently plans to be able to fund the costs
through operating cash flows. The Company does not expect a material adverse
impact of such costs on its long-term results of operations, liquidity or
financial position.
Cost estimates may be refined as remediation, testing and contingency planning
continue and as compliance status information becomes available from third
parties.
If the Company were not taking any of the remedial steps detailed above, Year
2000 issues would possibly cause significant technological problems for the
Company, disrupting business and resulting in a decline in earnings. At this
time, however, management does not believe that this will happen.
The most reasonably likely worst case scenario should the Company, its customers
or suppliers be unable to adequately resolve Year 2000 issues, would include a
temporary slowdown or abrupt stoppage of operations at one or more of the
Company's facilities due to the failure of one or more critical processes or
business systems. Such failures could result in interruptions in manufacturing,
safety and/or environmental systems; and/or a temporary inability to receive raw
materials, ship finished products and process orders and invoices. Although not
anticipated at this time, if such or similar scenarios were to occur, they
could, depending on their duration, have a material impact on the Company's
results of operations and financial position. Such theoretical consequences
are of a kind and magnitude generally shared with other manufacturing
companies. Assuming the successful completion of its Year 2000 program in a
timely manner, the company expects that any Year 2000 disruptions which occur,
should there be any, will be minor and not material to its business.
Estimates and conclusions herein contain forward-looking statements and are
based on management's best estimates of future events.
Impact of Accounting Pronouncements
In June, 1997, the Financial Accounting Standards Board issued FAS 131 -
Disclosures about Segments of an Enterprise and Related Information. FAS 131
requires the reporting of selected segment information in quarterly and annual
reports. Information from operating segments is derived from methods used by
the Company's management to allocate resources and measure performance. The
Company is required to disclose profit/loss, revenues and assets for each
segment identified, including reconciliations of these items to consolidated
totals. The Company is also required to disclose the basis for identifying the
segments and the types of products and services within each segment. FAS 131
is effective for the Company for the fiscal year ended December 3, 1999, and
quarterly beginning in fiscal 2000, including the restatement of prior periods
reported consistent with this pronouncement, if practicable. The Company
expects to have two reportable segments, the tape business and the highway
marking tape business.
In February, 1998, the Financial Accounting Standards Board issued FAS 132 -
Employer's Disclosure About Pensions and Other Postretirement Benefits. FAS
132 revises employers' disclosures about pension and other postretirement
benefit plans. The Company will adopt the provisions of FAS 132 in fiscal
1999, and does not anticipate any significant impact on its Financial
Statements from this adoption.
12
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
(Continued)
In June, 1998, the Financial Accounting Standards Board issued FAS 133 -
Accounting for Derivative and Similar Financial Instruments and for Hedging
Activities. FAS 133 will require the Company to record derivative
instruments, such as foreign currency hedges, on the Consolidated Balance
Sheet as assets or liabilities, measured at fair value. Currently, the Company
treats such instruments as off-balance-sheet items. Gains or losses
resulting from changes in the values of those derivatives would be accounted
for depending on the specific use of each derivative instrument and whether
it qualifies for hedge accounting treatment as stated in the standard. FAS
133 will be effective for the Company on December 4, 1999, the beginning of
fiscal year 2000. The Company currently does not expect the impact of adopting
FAS 133 to be material.
13
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 27, 1998, 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
14
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)
/s/ Joseph J. Berns
Joseph J. Berns
Vice President - Finance
Date: April 9, 1999
15
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) 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 Quarterly Report on Form
10-Q for the Quarter ended March 1, 1996.
(4)(ii) 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 Quarterly
Report on Form 10-Q for the quarter ended March 1, 1996.
(4)(iii) 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)(iv) 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)(v) 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
Quarterly Report on Form 10-Q for the quarter ended February 25, 1997.
(4)(vi) 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
Quarterly Report on Form 10-Q for the quarter ended February 25,
1997.
(4)(vii) 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 Quarterly Report on Form 10-Q for the
quarter ended May 30, 1997.
(4)(viii) 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 Quarterly Report on
Form 10-Q for the quarter ended May 30, 1997.
(4)(ix) 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 Quarterly Report on
Form 10-Q for the quarter ended May 30, 1997.
(4)(x) Amendment to Loan and Security Agreement between Plymouth Rubber
Company, Inc. and LaSalleNational Bank dated May 7, 1997 --
incorporated by reference to Exhibit (4)(xvi) to the Company's
Quarterly Report on Form 10-Q for the quarter ended May 30, 1997.
16
PLYMOUTH RUBBER COMPANY, INC.
INDEX TO EXHIBITS
(Continued)
Exhibit
No. Description
- -------- -----------
(4)(xi) 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 Quarterly Report
on Form 10-Q or the quarter ended May 30, 1997.
(4)(xii) 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 Quarterly Report on Form 10-Q for the quarter ended May
30, 1997.
(4)(xiii) 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 Quarterly Report on Form 10-Q for the
quarter ended May 30, 1997.
(4)(xiv) Promissory Note between Plymouth Rubber Company, Inc. and General
Electric Capital Corporation dated December 3, 1997 - incorporated
by reference to Exhibit (4)(xiv) to the Company's Annual Report on
Form 10-K for the year ended November 27, 1998.
(4)(xv) Promissory Note between Plymouth Rubber Company, Inc. and General
Electric Capital Corporation dated April 13, 1998 - incorporated by
reference to Exhibit (4)(xv) to the Company's Annual Report on Form
10-K for the year ended November 27, 1998.
(4)(xvi) Promissory Note between Plymouth Rubber Company, Inc. and General
Electric Capital Corporation dated November 12, 1998 - incorporated
by reference to Exhibit (4)(xvi) to the Company's report on Form
10-K for the year ended November 27, 1998.
(4)(xvii) Promissory Note between Plymouth Rubber Company, Inc. and General
Electric Capital Corporation dated November 25, 1998 - incorporated
by reference to Exhibit (4)(xvii) to the Company's report on Form
10-K for the year ended November 27, 1998.
(4)(xviii)Amendments to Loan and Security Agreement between Plymouth Rubber
Company, Inc., and LaSalle National Bank dated July 15, 1998 and
February 18, 1999.
(4)(xix) Amendment to Loan and Security Agreement between Brite-Line
Technologies, Inc., and LaSalle National Bank dated February 18, 1999.
(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.
17
PLYMOUTH RUBBER COMPANY, INC.
INDEX TO EXHIBITS
(Continued)
Exhibit
No. Description
- -------- -----------
(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.
(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) Not Applicable.
(24) Not Applicable.
(27) Financial data schedule for the nine months ended February 26, 1999.
(28) Not Applicable.
(29) Not Applicable.
18
EXHIBIT (4)(xviii)
July 15, 1998
Plymouth Rubber Company, Inc.
104 Revere Street
Canton, Massachusetts 02021
Re: Eighth Amendment
Gentlemen:
Plymouth Rubber Company, Inc., a Massachusetts corporation
("Borrower") and LaSalle National Bank, a national banking association
("Bank") have entered into that certain Loan and Security Agreement
dated June 6, 1996 (the "Security Agreement"). From time to time
thereafter, Borrower and Bank may have executed various amendments
(each an "Amendment" and collectively the "Amendments") to the
Security Agreement (the Security Agreement and the Amendments
hereinafter are referred to, collectively, as the "Agreement"). Borrower
and Bank now desire to further amend the Agreement as provided
herein, subject to the terms and conditions herein set forth.
NOW, THEREFORE, in consideration of the foregoing recitals,
the mutual covenants and agreements set forth herein and other good
and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto hereby agree as follows:
1. The Agreement hereby is amended as follows:
(a) Paragraph (10) of Exhibit A of the Agreement is amended
to add the following provision:
(10).(1 ) REDEMPTION OF STOCK: Notwithstanding the
provisions of subparagraph 11(k) of the Agreement;
and provided, that (I) such redemption is permitted
under all applicable laws; and (ii) no Event of Default
shall have occurred prior to the time of, or would occur
as a result of such redemption, Borrower may redeem
the existing shares of its common or preferred stock in
an amount not to exceed One Hundred Thousand and
No/100 Dollars ($100,000.00) in the aggregate over
the term of the Loans during the Original Term or
Renewal Term.
(10).(2) YEAR 2000: Borrower and its Subsidiaries have
reviewed the areas within their business and
operations which could be adversely affected by, and
have developed or are developing a program to
address on a timely basis, the "Year 2000 Problem"
(that is, the risk that computer applications used by
Borrower and its Subsidiaries may be unable to
recognize and perform properly date-sensitive
functions involving certain dates prior to and any date
on or after December 30, 1999), and have made
related appropriate inquiry of material suppliers and
vendors. Based on such review and program,
Borrower believes that the "Year 2000 Problem" will
not have a material adverse effect on its business,
assets or condition, financial or otherwise. From time
to time, at the request of Bank, Borrower and its
Subsidiaries shall provide to Bank such updated
information or documentation as is requested
regarding the status of their efforts to address the
"Year 2000 Problem."
2. This amendment shall not become effective until fully executed by all
parties hereto.
3. Except as expressly amended hereby and by any other supplemental
documents or instruments executed by either party hereto in order to
effectuate the transactions contemplated hereby, the Agreement and
Exhibit A thereto hereby are ratified and confirmed by the parties hereto
and remain in full force and effect in accordance with the terms thereof.
LASALLE NATIONAL BANK
a national banking association
By: /s/ John Mostofi
Title: VP
Accepted and agreed to this
30th day of July , 1998.
PLYMOUTH RUBBER COMPANY, INC.
By:/s/ Joseph J. Berns
Title: VP Finance
Consented and agreed to by the following
Guarantor of the obligations of PLYMOUTH
RUBBER COMPANY, INC. to LASALLE
NATIONAL BANK.
BRITE-LINE TECHNOLOGIES, INC.
By: /s/ Joseph J. Berns
Title: VP Finance
Date: July 30 , 1998
==============================================================================
February 18, 1999
Plymouth Rubber Company, Inc.
104 Revere Street
Canton, Massachusetts 02021
Re: Ninth Amendment
Gentlemen:
Plymouth Rubber Company, Inc., a Massachusetts corporation
("Borrower") and LaSalle National Bank, a national banking association
("Bank") have entered into that certain Loan and Security Agreement
dated June 6, 1996 (the "Security Agreement"). From time to time
thereafter, Borrower and Bank may have executed various amendments
(each an "Amendment" and collectively the "Amendments") to the Security
Agreement (the Security Agreement and the Amendments hereinafter are
referred to, collectively, as the "Agreement"). Borrower and Bank now
desire to further amend the Agreement as provided herein, subject to the
terms and conditions herein set forth.
NOW, THEREFORE, in consideration of the foregoing recitals, the
mutual covenants and agreements set forth herein and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
1. The Agreement hereby is amended as follows:
(a) Paragraph (1) of the Agreement is amended to add the
following provision:
(a)(a) "LIBOR Rate" shall mean with respect to any LIBOR Rate
Loan for any Interest Period (as defined in subparagraph
(5)(b) of Exhibit A of the Agreement), a rate per annum
equal to the offered rate for deposits in United States
dollars for a period equal to such Interest Period as it
appears on Telerate page 3750 as of 11:00 a.m. (London
time) two Business Days prior to the first day of such
Interest Period. "Telerate page 3750" means the display
designated as "Page 3750" on the Telerate Service (or
such other page as may replace page 3750 of that service
or such other service as may be nominated by the British
Bankers' Association as the vendor for the purpose of
displaying British Bankers' Association interest settlement
rates for United States dollar deposits).
(b) Subparagraph (7)(c) of the Agreement is deleted in its entirety
and the following is substituted in its place:
(c) Bank shall, within two (2) business days after receipt by Bank
at its office in Chicago, Illinois of cash or other immediately
available funds from collections of items of payment and
proceeds of any Collateral, apply the whole or any part of
such collections or proceeds against the Liabilities in such
order as Bank shall determine in its sole discretion.
(c) Paragraph (1) of Exhibit A of the Agreement is deleted in its entirety
and the following is substituted in its place:
(1) LOAN LIMIT: Bank may, in its sole discretion, advance an
amount up to the sum of the following sublimits (the "Loan
Limit"):
(a) Subject to Paragraph (4) of this Exhibit A, up to eighty-
five percent (85%) of the face amount (less maximum
discounts, credits and allowances which may be taken
by or granted to Account Debtors in connection
therewith) of Borrower's Eligible Accounts; provided,
that with respect to Eligible Accounts which are payable
in currencies other than U.S. Dollars, the face amount
and all discounts, credits and allowances shall be
determined using the U.S. Dollar equivalent thereof at
such time, determined with such frequency as Bank
shall require, but not less than weekly, based on the
exchange rates published in the Wall Street Journal on
the date of determination; plus
(b) Up to fifty-five percent (55%) of the lower of the cost or
market value of Borrower's Eligible Inventory or Six
Million and No/100 Dollars ($6,000,000.00), whichever
is less; plus
(c) Subject to subparagraph (3)(a) of this Exhibit A, Three
Million and No/100 Dollars ($3,000,000.00) against that
certain real property described in subparagraph (13)(a)
of this Exhibit A ; minus
(d) Such reserves as Bank elects, in its sole discretion, to
establish from time to time;
provided, that the aggregate amount of Loans made
pursuant to (i) subparagraph (b) above; and (ii) Loans,
as such term is defined in that certain Loan and Security
Agreement entered into by and between Brite-Line
Technologies, Inc. ("Brite-Line") and Bank dated
February 25, 1997 (the "Brite-Line Agreement"), made
pursuant to subparagraph (1)(b) of Exhibit A of the Brite-
Line Agreement shall in no event exceed Seven Million
Two Hundred Fifty Thousand and No/100 Dollars
($7,250,000.00);
further provided, that the aggregate Loan Limit shall in
no event exceed Eighteen Million and No/100 Dollars
($18,000,000.00), except as such amount may be
increased or decreased by Bank, in its sole discretion,
from time to time; and
further provided, that the aggregate amount of Loans to
(i) Borrower under this Agreement; and (ii) the
aggregate amount of Loans to Brite-Line under the
Brite-Line Agreement, shall in no event exceed
Eighteen Million and No/100 Dollars ($18,000,000.00).
(d) Subparagraph (3)(a) of Exhibit A of the Agreement is deleted in
its entirety and the following is substituted in its place:
(a) The availability described in subparagraph (1)(c) of this
Exhibit A shall be automatically curtailed by Fifty
Thousand and No/100 Dollars ($50,000.00) per month,
commencing on July 2, 1999 and continuing on the
corresponding day of each month thereafter until the
earliest to occur of (i) the date on which said
availability shall be reduced in full; (ii) the date upon
which demand for repayment of the Loans is made by
Bank, on which date said availability shall be reduced
in full; and (iii) the date upon which this Agreement
terminates pursuant to the provisions of Paragraph 9 of
the Agreement, on which date said availability shall be
reduced in full.
(e) Paragraph (5) of Exhibit A of the Agreement (but excluding
Paragraph (5).(1) of Exhibit A of the Agreement) is deleted in its entirety
and the following is substituted in its place:
(5) INTEREST RATE: Subject to the terms and conditions set forth
below, the Loans shall bear interest at the per annum rate of
interest set forth in subsection (a) or (b) below:
(a) Bank's publicly announced prime rate per annum
(which is not intended to be Bank's lowest or most favorable
rate in effect at any time) (the "Prime Rate") in effect
from time to time, payable on the last Business Day of
each month in arrears. Said rate of interest shall
increase or decrease by an amount equal to each
increase or decrease in the Prime Rate effective on the
effective date of each such change in the Prime Rate.
(b) Two percent (2%) per annum in excess of the LIBOR
Rate for the applicable Interest Period, such rate to
remain fixed for such Interest Period. "Interest Period"
shall mean any continuous period of thirty (30), sixty
(60), ninety (90) or one hundred eighty (180) days, as
selected from time to time by Borrower by irrevocable
notice (in writing, by telex, telegram or cable) given to
Bank not less than three (3) Business Days prior to
the first day of each respective Interest Period)
commencing on the date hereof; provided that: (i)
each such period occurring after such initial period
shall commence on the day on which the immediately
preceding period expires; (ii) the final Interest Period
shall be such that its expiration occurs on or before
the end of the Original Term or any Renewal Term;
and (iii) if for any reason Borrower shall fail to timely
select a period, then such Loans shall continue as, or
revert to, Prime Rate Loans. Interest shall be
payable on the last Business Day of each month, at
maturity, and on the date of any payment hereon by
Borrower.
Upon the occurrence of an Event of Default and the
continuance thereof, the Loans shall bear interest at the
rate of two percent (2.0%) per annum in excess of the
interest rate otherwise payable thereon, which interest
shall be payable on demand. All interest shall be
calculated on the basis of a 360-day year.
(f) Subparagraph (5).(1)(f) of Exhibit A of the Agreement is
deleted in its entirety and the following is substituted in its place:
(f) Each request for LIBOR Rate Loans shall be in an amount not
less than One Million and No/100 Dollars ($1,000,000.00), and in
integral multiples of Two Hundred Thousand and No/100 Dollars
($200,000.00).
(g) Subparagraph (6)(a) of Exhibit A of the Agreement is deleted
in its entirety and the following is substituted in its place:
(a) Unused Line Fee: Borrower and Brite-Line shall jointly pay to
Bank an unused line fee of one-half of one percent (1/2 of
1%) of the average aggregate monthly loan balance of
Borrower and Brite-Line, which fee shall be fully earned by
Bank and payable monthly in arrears on each day that interest
is payable hereunder. Said fee shall be calculated on the
basis of a 360 day year.
(h) Subparagraph (6)(b) of Exhibit A of the Agreement is deleted
in its entirety and the following is substituted in its place:
(b) Prepayment Fee: If Borrower and Brite-Line elect to
terminate this Agreement and the Brite-Line Agreement
prior to the termination dates thereof, Borrower and
Brite-Line shall jointly pay to Bank a prepayment fee in
the aggregate equal to (i) Three Hundred Thousand and
No/100 Dollars ($300,000.00) if this Agreement and the
Brite-Line Agreement are terminated on or before June
2, 2000; (ii) Two Hundred Thousand and No/100 Dollars
($200,000.00) if this Agreement and the Britle-Line
Agreement are terminated after June 2, 2000 and prior to
June 2, 2001; and (iii) One Hundred Thousand and
No/100 Dollars ($100,000.00) if this Agreement and the
Brite-Line Agreement are terminated after June 2, 2001
but prior to the end of the Original Term or any Renewal
Term; provided that if Borrower and Brite-Line sell all or
substantially all of their assets or stock to a Person other
than an Affiliate and such sale is consented to by Bank
and the Liabilities are prepaid and this Agreement and
the Brite-Line Agreement are terminated as a result
thereof, then Borrower and Brite-Line shall be required
to jointly pay a prepayment fee of one percent (1%) of
the aggregate Loan Limit under this Agreement and the
Brite-Line Agreement.
(i) Paragraph (6) of Exhibit A of the Agreement is amended to
add the following provision:
(6).(1) ORIGINAL TERM: The date of the Original Term set
forth in Paragraph 9 of the Agreement is deleted and
the date of June 2, 2002 is substituted in its place.
(j) Paragraph (8) of Exhibit A of the Agreement is deleted in its
entirety and the following is substituted in its place:
(8) TANGIBLE NET WORTH: Notwithstanding the provisions of
subparagraph 11(o) of the Agreement, Borrower's and Brite-
Line's consolidated tangible net worth in the aggregate shall
not, on the last day of each fiscal quarter, be less than the
Minimum Tangible Net Worth, as hereinafter defined. On the
last day of the first, second and third fiscal quarters of
Borrower's 1999 fiscal year, "Minimum Tangible Net Worth"
shall equal One Million Eight Hundred Nineteen Thousand
and No/100 Dollars ($1,819,000.00). On the last day of
Borrower's1999 fiscal year end and on the last day of the first,
second and third fiscal quarters of Borrower's 2000 fiscal
year, Minimum Tangible Net Worth shall equal One Million
Nine Hundred Nineteen Thousand and No/100 Dollars
($1,919,000.00). Thereafter, on the last day of each of
Borrower's fiscal quarters, Minimum Tangible Net Worth shall
be equal to Minimum Tangible Net Worth on the last day of
the immediately preceding fiscal year plus One Hundred
Thousand and No/100 Dollars ($100,000.00). "Tangible Net
Worth" being defined for purposes of this subparagraph as
Borrower's and Brite-Line's shareholders' equity (including
retained earnings) less the book value of all intangible assets
as determined solely by Bank on a consistent basis plus the
amount of any LIFO reserve plus the amount of any debt
subordinated to Bank, all as determined under generally
accepted accounting principles applied on a basis consistent
with the financial statement dated October 30, 1998 except as
set forth herein. For purposes of this subparagraph, (a)
intangible assets are: (i) intangible asset-FAS #87, (ii)
deferred tax asset, net of the valuation reserve-FAS #109,
and (iii) trade names; and (b) pension liability adjustments are
excluded.
2. This amendment shall not become effective until (a) fully
executed by all parties hereto and (b) June 3, 1999.
3. Except as expressly amended hereby and by any other
supplemental documents or instruments executed by either party hereto in
order to effectuate the transactions contemplated hereby, the Agreement
and Exhibit A thereto hereby are ratified and confirmed by the parties
hereto and remain in full force and effect in accordance with the terms
thereof.
LASALLE NATIONAL BANK
a national banking association
By: /s/ John Mostofi
Title: VP
Accepted and agreed to this
19th day of February,1999.
PLYMOUTH RUBBER COMPANY, INC.
By: /s/ Joseph J. Berns
Title: VP Finance
Consented and agreed to by the following
Guarantor of the obligations of PLYMOUTH
RUBBER COMPANY, INC. to LASALLE
NATIONAL BANK.
BRITE-LINE TECHNOLOGIES, INC.
By: /s/ Joseph J. Berns
Title: VP Finance
Date: February 19, 1999
M:dept\abllegal\plymouth\lrtmend9
4/9/99 2:09:05 PM
EXHIBIT (4)(vix)
February 18, 1999
Brite-Line Technologies, Inc.
10660 East 51st Avenue
Denver, CO 80239
Re: Second Amendment
Gentlemen:
Brite-Line Technologies, Inc., a Massachusetts corporation
("Borrower") and LaSalle National Bank, a national banking association
("Bank") have entered into that certain Loan and Security Agreement
dated February 25, 1997 (the "Security Agreement"). From time to time
thereafter, Borrower and Bank may have executed various amendments
(each an "Amendment" and collectively the "Amendments") to the Security
Agreement (the Security Agreement and the Amendments hereinafter are
referred to, collectively, as the "Agreement"). Borrower and Bank now
desire to further amend the Agreement as provided herein, subject to the
terms and conditions herein set forth.
NOW, THEREFORE, in consideration of the foregoing recitals, the
mutual covenants and agreements set forth herein and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
1. The Agreement hereby is amended as follows:
(a) Paragraph (1) of the Agreement is amended to add the
following provision:
(a)(a) "LIBOR Rate" shall mean with respect to any LIBOR Rate
Loan for any Interest Period (as defined in subparagraph
(3)(b) of Exhibit A of the Agreement), a rate per annum
equal to the offered rate for deposits in United States
dollars for a period equal to such Interest Period as it
appears on Telerate page 3750 as of 11:00 a.m. (London
time) two Business Days prior to the first day of such
Interest Period. "Telerate page 3750" means the display
designated as "Page 3750" on the Telerate Service (or such
other page as may replace page 3750 of that service or
such other service as may be nominated by the British
Bankers' Association as the vendor for the purpose of
displaying British Bankers' Association interest settlement
rates for United States dollar deposits).
(b) Subparagraph (7)(c) of the Agreement is deleted in its entirety
and the following is substituted in its place:
(c) Bank shall, within two (2) business days after receipt by Bank
at its office in Chicago, Illinois of cash or other immediately
available funds from collections of items of payment and
proceeds of any Collateral, apply the whole or any part of such
collections or proceeds against the Liabilities in such order as
Bank shall determine in its sole discretion.
(c) Paragraph (1) of Exhibit A of the Agreement is deleted in its entirety
and the following is substituted in its place:
(1) LOAN LIMIT: Bank may, in its sole discretion, advance
an amount up to the sum of the following sublimits (the "Loan Limit"):
(a) Subject to Paragraph (2) of this Exhibit A, up to eighty-
five percent (85%) of the face amount (less maximum
discounts, credits and allowances which may be taken
by or granted to Account Debtors in connection
therewith) of Borrower's Eligible Accounts; provided,
that with respect to Eligible Accounts which are payable
in currencies other than U.S. Dollars, the face amount
and all discounts, credits and allowances shall be
determined using the U.S. Dollar equivalent thereof at
such time, determined with such frequency as Bank
shall require, but not less than weekly, based on the
exchange rates published in the Wall Street Journal on
the date of determination; plus
(b) Up to fifty-five percent (55%) of the lower of
the cost or market value of Borrower's Eligible Inventory or One
Million Two Hundred Fifty Thousand and No/100
Dollars ($1,250,000.00), whichever is less; minus
(c) Such reserves as Bank elects, in its sole discretion, to
establish from time to time;
provided, that the aggregate amount of Loans made
pursuant to (i) subparagraph (b) above; and (ii) Loans,
as such term is defined in that certain Loan and
Security Agreement entered into by and between
Plymouth Rubber Company, Inc. ("Plymouth") and
Bank dated June 6, 1996, as it may be amended from
time to time (the "Plymouth Rubber Agreement"), made
pursuant to subparagraph (1)(b) of Exhibit A of the
Plymouth Rubber Agreement shall in no event exceed
Seven Million Two Hundred Fifty Thousand and
No/Dollars ($7,250,000);
further provided, that the aggregate Loan Limit shall in
no event exceed Four Million and No/100 Dollars
($4,000,000.00), except as such amount may be
increased or decreased by Bank, in its sole discretion,
from time to time; and
further provided, that the aggregate amount of Loans to
(i) Borrower under this Agreement; and (ii) the
aggregate amount of Loans to Plymouth under the
Plymouth Agreement shall in no event exceed Eighteen
Million and No/100 Dollars ($18,000,000.00).
(d) Subparagraph (3)(a) of Exhibit A of the Agreement (but excluding
Paragraph (3).(1) of Exhibit A of the Agreement) is deleted in its entirety
and the following is substituted in its place:
(3) INTEREST RATE: Subject to the terms and conditions set
forth below, the Loans shall bear interest at the per annum
rate of interest set forth in subsection (a) or (b) below:
(a) Bank's publicly announced prime rate per annum
(which is not intended to be Bank's lowest or most
favorable rate in effect at any time) (the "Prime Rate")
in effect from time to time, payable on the last Business
Day of each month in arrears. Said rate of interest
shall increase or decrease by an amount equal to each
increase or decrease in the Prime Rate effective on the
effective date of each such change in the Prime Rate.
(b) Two percent (2%) per annum in excess of the LIBOR
Rate for the applicable Interest Period, such rate to
remain fixed for such Interest Period. "Interest Period"
shall mean any continuous period of thirty (30), sixty
(60), ninety (90) or one hundred eighty (180) days, as
selected from time to time by Borrower by irrevocable
notice (in writing, by telex, telegram or cable) given to
Bank not less than three (3) Business Days prior to
the first day of each respective Interest Period
commencing on the date hereof; provided that: (i)
each such period occurring after such initial period
shall commence on the day on which the immediately
preceding period expires; (ii) the final Interest Period
shall be such that its expiration occurs on or before
the end of the Original Term or any Renewal Term;
and (iii) if for any reason Borrower shall fail to timely
select a period, then such Loans shall continue as, or
revert to, Prime Rate Loans. Interest shall be payable
on the last Business Day of each month, at maturity,
and on the date of any payment hereon by Borrower.
Upon the occurrence of an Event of Default and the
continuance thereof, the Loans shall bear interest at the
rate of two percent (2.0%) per annum in excess of the
interest rate otherwise payable thereon, which interest
shall be payable on demand. All interest shall be
calculated on the basis of a 360-day year.
(e) Subparagraph (3).(1)(f) of Exhibit A of the Agreement is
deleted in its entirety and the following is substituted in its place:
(f) Each request for LIBOR Rate Loans shall be in an amount not
less than One Million and No/100 Dollars ($1,000,000.00), and in
integral multiples of Two Hundred Thousand and No/100 Dollars
($200,000.00).
(f) Subparagraph (4)(a) of Exhibit A of the Agreement is deleted
in its entirety and the following is substituted in its place:
(a) Unused Line Fee: Borrower and Plymouth shall jointly pay to
Bank an unused line fee of one-half of one percent (1/2 of 1%)
of the average aggregate monthly loan balance of Borrower
and Plymouth, which fee shall be fully earned by Bank and
payable monthly in arrears on each day that interest is
payable hereunder. Said fee shall be calculated on the basis
of a 360-day year.
(g) Subparagraph (4)(b) of Exhibit A of the Agreement is deleted
in its entirety and the following is substituted in its place:
(b) Prepayment Fee: If Borrower and Plymouth elect to
terminate this Agreement and the Plymouth Rubber
Agreement prior to the termination dates thereof,
Borrower and Plymouth shall jointly pay to Bank a
prepayment fee in the aggregate equal to (i) Three
Hundred Thousand and No/100 Dollars ($300,000.00) if
this Agreement and the Plymouth Rubber Agreement are
terminated on or before June 2, 2000; (ii) Two Hundred
Thousand and No/100 Dollars ($200,000.00) if this
Agreement and the Plymouth Rubber Agreement are
terminated after June 2, 2000 and prior to June 2, 2001;
and (iii) One Hundred Thousand and No/100 Dollars
($100,000.00) if this Agreement and the Plymouth
Rubber Agreement are terminated after June 2, 2001 but
prior to the end of the Original Term or any Renewal
Term; provided that if Borrower and Plymouth sell all or
substantially all of their assets or stock to a Person other
than an Affiliate and such sale is consented to by Bank
and the Liabilities are prepaid and this Agreement and
the Plymouth Rubber Agreement are terminated as a
result thereof, then Borrower and Plymouth shall be
required to jointly pay a prepayment fee of one percent
(1%) of the aggregate Loan Limit of Borrower under this
Agreement and the Plymouth Rubber Agreement.
(h) Paragraph (4) of Exhibit A of the Agreement is amended to
add the following provision:
(4).(1) ORIGINAL TERM: The date of the Original Term set
forth in Paragraph 9 of the Agreement is deleted and
the date of June 2, 2002 is substituted in its place.
(i) Paragraph (6) of Exhibit A of the Agreement is deleted in its
entirety and the following is substituted in its place:
(6) TANGIBLE NET WORTH: Notwithstanding the provisions of
subparagraph 11(o) of the Agreement, Borrower's and
Plymouth's consolidated tangible net worth in the aggregate
shall not, on the last day of each fiscal quarter, be less than
the Minimum Tangible Net Worth, as hereinafter defined. On
the last day of the first, second and third fiscal quarters of
Borrower's 1999 fiscal year, "Minimum Tangible Net Worth"
shall equal One Million Eight Hundred Nineteen Thousand and
No/100 Dollars ($1,819,000.00). On the last day of
Borrower's1999 fiscal year end and on the last day of the first,
second and third fiscal quarters of Borrower's 2000 fiscal year,
Minimum Tangible Net Worth shall equal One Million Nine
Hundred Nineteen Thousand and No/100 Dollars
($1,919,000.00). Thereafter, on the last day of each of
Borrower's fiscal quarters, Minimum Tangible Net Worth shall
be equal to Minimum Tangible Net Worth on the last day of the
immediately preceding fiscal year plus One Hundred
Thousand and No/100 Dollars ($100,000.00). "Tangible Net
Worth" being defined for purposes of this subparagraph as
Borrower's and Plymouth's shareholders' equity (including
retained earnings) less the book value of all intangible assets
as determined solely by Bank on a consistent basis plus the
amount of any LIFO reserve plus the amount of any debt
subordinated to Bank, all as determined under generally
accepted accounting principles applied on a basis consistent
with the financial statement dated October 30, 1998 except as
set forth herein. For purposes of this subparagraph, (a)
intangible assets are: (i) intangible asset-FAS #87, (ii) deferred
tax asset, net of the valuation reserve-FAS #109, and (iii)
trade names; and (b) pension liability adjustments are
excluded.
(b) Exhibit B of the Agreement is amended as attached
hereto and made a part hereof.
2. This amendment shall not become effective until (a) fully
executed by all parties hereto and (b) June 3, 1999.
3. Except as expressly amended hereby and by any other
supplemental documents or instruments executed by either party hereto in
order to effectuate the transactions contemplated hereby, the Agreement
and Exhibit A thereto hereby are ratified and confirmed by the parties
hereto and remain in full force and effect in accordance with the terms
thereof.
LASALLE NATIONAL BANK
a national banking association
By: /s/ John Mostofi
Title: VP
Accepted and agreed to this
19th day of February, 1999.
BRITE-LINE TECHNOLOGIES, INC.
By: /s/ Joseph J. Berns
Title: VP Finance
Consented and agreed to by the following
Guarantor of the obligations of BRITE-LINE
TECHNOLOGIES, INC. to LASALLE
NATIONAL BANK.
PLYMOUTH RUBBER COMPANY, INC.
By:/s/ Joseph J. Berns
Title: VP Finance
Date: February 19 , 1999
M:dept\abllegal\plymouth\lrtmend9
4/9/99 2:08:25 PM
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-03-1999
<PERIOD-END> FEB-26-1999
<CASH> 49
<SECURITIES> 0
<RECEIVABLES> 11,328
<ALLOWANCES> 466
<INVENTORY> 13,311
<CURRENT-ASSETS> 26,521
<PP&E> 40,514
<DEPRECIATION> 18,334
<TOTAL-ASSETS> 51,579
<CURRENT-LIABILITIES> 22,733
<BONDS> 0
0
0
<COMMON> 2,085
<OTHER-SE> 8,734
<TOTAL-LIABILITY-AND-EQUITY> 51,579
<SALES> 16,406
<TOTAL-REVENUES> 16,406
<CGS> 12,051
<TOTAL-COSTS> 15,335
<OTHER-EXPENSES> (13)
<LOSS-PROVISION> (61)
<INTEREST-EXPENSE> 485
<INCOME-PRETAX> 599
<INCOME-TAX> 240
<INCOME-CONTINUING> 359
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 359
<EPS-PRIMARY> .17
<EPS-DILUTED> .16
</TABLE>
