U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-QSB
(Mark One)
[X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended : September 30, 1997
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from ____________ to _____________
Commission file number: 0-18434
REINHOLD INDUSTRIES, INC.
- --------------------------------------------------------------------------------
(Exact name of small business issuer as specified in charter)
Delaware 13-2596288
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S.Employer
incorporation or organization) Identification No.)
12827 East Imperial Hwy, Santa Fe Springs, CA 90670
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code (562) 944-3281
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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 [ ]
Check whether the issuer has filed all documents and reports required to be
filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934
subsequent to distribution of securities under a plan confirmed by the Court.
YES [ X ] NO [ ]
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:
Class A Common Stock, Par Value $.01 - 978,956 shares as of October 23, 1997.
Class B Common Stock, Par Value $.01 - 1,020,000 shares as of October 23, 1997.
Transitional Small Business Disclosure Format (Check one):
YES [ ] NO [ X ]
<PAGE>
REINHOLD INDUSTRIES, INC.
INDEX
PART I - FINANCIAL INFORMATION PAGE
Item 1.
Condensed Statements of Operations 3
Condensed Balance Sheet 5
Condensed Statements of Cash Flows 6
Notes to Condensed Financial Statements 7
Item 2.
Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
PART II - OTHER INFORMATION 12
SIGNATURES 13
EXHIBITS 14
<PAGE>
<TABLE>
PART I. - FINANCIAL INFORMATION
REINHOLD INDUSTRIES, INC.
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
(Amounts in thousands, except per share data)
<CAPTION>
Predecessor
Reorganized Company Company
Three Months Two Months One Month
Ended Ended Ended
September 30, September 30, July 31,
1997 1996 1996
------------------ ------------------- ---------------
<S> <C> <C> <C>
Net sales $4,672 $2,083 $1,116
Cost of goods sold 3,211 1,652 852
----- ----- -----
Gross profit 1,461 431 264
Selling, general and administrative expenses 800 520 218
----- ----- -----
Operating income (loss) 661 (89) 46
Interest income, net 27 21 157
----- ----- -----
Income (loss) before reorganization
expenses and income taxes 688 (68) 203
Reorganization expenses - - 352
----- ----- ----
Income (loss) before income taxes 688 (68) (149)
Income tax (benefit) provision (23) (8) 126
----- ----- -----
Net income (loss) $ 711 $ (60) $ (275)
===== ===== =====
Net income (loss) per share $ .36 $ (.03) N.M.*
Weighted average shares outstanding 1,999 1,999 N.M.*
<FN>
*N.M.- Not meaningful - historical per share data for the Predecessor Company is
not meaningful since the Company has been recapitalized and has adopted
fresh-start reporting as of July 31, 1996.
See accompanying notes to condensed financial statements
</FN>
</TABLE>
<PAGE>
<TABLE>
REINHOLD INDUSTRIES, INC.
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
(Amounts in thousands, except per share data)
<CAPTION>
Predecessor
Reorganized Company Company
Nine Months Two Months Seven Months
Ended Ended Ended
September 30, September 30, July 31,
1997 1996 1996
------------------ ------------------- ---------------
<S> <C> <C> <C>
Net sales $12,111 $2,083 $ 6,797
Cost of goods sold 8,666 1,652 5,559
------ ----- -----
Gross profit 3,445 431 1,238
Selling, general and administrative expenses 2,305 520 1,584
------ ----- -----
Operating income (loss) 1,140 (89) (346)
Interest income, net 72 21 1,105
------ ----- -----
Income (loss) before reorganization
expenses and income taxes 1,212 (68) 759
Reorganization expenses - - 3,139
------ ----- -----
Income (loss) before income taxes 1,212 (68) (2,380)
Income tax (benefit) provision 36 (8) 219
------ ----- -----
Net income (loss) $ 1,176 $ (60) $(2,599)
====== ===== =====
Net income per share $ .59 $ (.03) N.M.*
Weighted average shares outstanding 1,999 1,999 N.M.*
<FN>
*N.M.- Not meaningful - historical per share data for the Predecessor Company is
not meaningful since the Company has been recapitalized and has adopted
fresh-start reporting as of July 31, 1996.
See accompanying notes to condensed financial statements
</FN>
</TABLE>
<PAGE>
<TABLE>
REINHOLD INDUSTRIES, INC.
CONDENSED BALANCE SHEET
(Unaudited)
(Amounts in thousands, except per share data)
<CAPTION>
September 30, 1997
<S> <C>
ASSETS
Current assets
Cash and cash equivalents $ 1,656
Marketable securities 250
Accounts receivable 2,151
Inventories 1,981
Other current assets 614
------
Total current assets 6,652
Property, plant and equipment, net 4,658
Marketable securities 750
Other assets 994
------
TOTAL ASSETS $ 13,054
======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 1,028
Accrued expenses 690
------
Total current liabilities 1,718
Long term pension liability 2,591
Other long term liabilities 1,850
Stockholders' equity
Common stock authorized- 1,480,000 Class A shares and 1,020,000 Class B shares
Issued and outstanding - 978,956 Class A shares and 1,020,000 Class B shares 20
Additional paid-in capital 7,791
Additional pension liability in excess of unrecognized prior service cost (2,493)
Retained earnings 1,577
------
Net stockholders' equity 6,895
------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 13,054
======
<FN>
See accompanying notes to condensed financial statements
</FN>
</TABLE>
<PAGE>
<TABLE>
REINHOLD INDUSTRIES, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(Amounts in thousands)
<CAPTION>
Predecessor
Reorganized Company Company
Nine Months Two Months Seven Months
Ended Ended Ended
September 30, September 30, July 31,
1997 1996 1996
------------------ ------------------- ---------------
<S> <C> <C> <C>
Cash flow from operating activities:
Income (loss) from operations $ 1,176 $ (60) $ (2,599)
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation 546 111 455
Obligations subject to Chapter 11 proceedings,
including reorganization costs - - (15,131)
Assets transferred to Creditors' Trust - - 42,561
Charges due to reorganization activities - - (34,118)
Changes in assets and liabilities:
Accounts receivable (328) 149 (497)
Inventories (490) (222) -
Other current assets (156) 27 1,654
Other assets 94 (59) (155)
Accounts payable 270 (114) 123
Accrued expenses (4) 43 (379)
Other, net (420) (5) 263
----- ------ ------
Net cash provided by (used in) operating activities $ 688 $ (130) $ (7,823)
----- ------ ------
Cash flow from investing activities:
Investment in marketable securities, net $ - $ 2 $ 12,457
Proceeds from sale of equipment - - 10
Capital expenditures (308) (132) (153)
----- ------ ------
Net cash used in investing activities $ (308) $ (130) $ 12,314
----- ------ ------
Cash flow from financing activities:
Repayment of notes payable $ - $ - $ (475)
Cash paid for acquisition of Reynolds & Taylor (246) - (206)
Cash distributions at date of consummation - - (23,393)
----- ------ ------
Net cash used in financing activities $ (246) $ - $(24,074)
----- ------ ------
Net increase (decrease) in cash and cash equivalents 134 (260) (19,583)
Cash and cash equivalents, beginning of period $ 1,522 $ 1,269 $ 20,852
----- ------ ------
Cash and cash equivalents, end of period $ 1,656 $ 1,009 $ 1,269
===== ====== ======
Cash paid during period for:
Income taxes $ 12 $ - $ 194
Interest $ 6 $ - $ 45
<FN>
See accompanying notes to condensed financial statements
</FN>
</TABLE>
<PAGE>
REINHOLD INDUSTRIES, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
September 30, 1997
DESCRIPTION OF BUSINESS
Reinhold Industries, Inc. ("Reinhold" or the "Company") is a manufacturer
of advanced custom composite components and sheet molding compounds for a
variety of applications. Reinhold derives revenues from the United States
defense contract industry, the aerospace industry and other commercial
industries.
REORGANIZATION AND BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements are those of
Reinhold for the three and nine months ended September 30, 1997. The
accompanying unaudited condensed financial statements for the three and nine
months ended September 30, 1996 include the accounts of Keene Corporation and
subsidiary ("Predecessor Company") through July 31, 1996. From August 1, 1996
through September 30, 1996, the accounts are those of Reinhold ("Reorganized
Company"). The condensed financial statements are unaudited and have been
prepared by the Company in accordance with generally accepted accounting
principles for interim financial information. Accordingly, they do not include
all the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of the Company, all
material adjustments and disclosures necessary for a fair presentation have been
made. The accompanying unaudited condensed financial statements should be read
in conjunction with the audited financial statements and notes thereto for the
year ended December 31, 1996, included in the Company's Form 10-KSB filed with
the Securities and Exchange Commission on March 17, 1997. The financial
statements should also be read in conjunction with the Form 8-K dated June 14,
1996, filed by Keene Corporation, ("Keene") with the Securities and Exchange
Commission on June 28, 1996, relating to the confirmation of Keene's Fourth
Amended Plan of Reorganization (the "Plan").
Reinhold was acquired by Keene in 1984 and operated as a division of Keene
until 1990, when Reinhold was incorporated in Delaware as a wholly owned
subsidiary of Keene. On July 31, 1996 (the "Effective Date"), Keene consummated
its plan of reorganization under Chapter 11 of the United States Bankruptcy Code
and emerged from bankruptcy. On the Effective date, Reinhold was merged into and
with Keene, with Keene becoming the surviving corporation. Keene, as the
surviving corporation of the merger, was renamed Reinhold.
<PAGE>
Notes to Condensed Financial Statements (Continued)
INCOME PER SHARE
Computation of income per share was based on the weighted average number
of shares outstanding for the three and nine months ended September 30, 1997
plus common stock equivalents arising from outstanding options using the
treasury stock method.
COMMITMENTS AND CONTINGENCIES
Reinhold is involved in certain legal actions and claims arising in the
ordinary course of business. Management believes that such litigation and claims
will be resolved without material effect on the Company's financial position or
results of operations.
EFFECT OF RECENT ACCOUNTING CHANGES
In February 1997, the Financial Standards Board issued SFAS No. 128,
"Earnings Per Share". SFAS No. 128 specifies new standards designed to improve
the earnings per share ("EPS") information provided in financial statements by
simplifying the existing computational guidelines, revising the disclosure
requirements and increasing the comparability of EPS data on an international
basis. Some of the changes made to simplify the EPS computations include: (a)
eliminating the presentation of primary EPS and replacing it with basic EPS,
with the principal difference being that common stock equivalents are not
considered in computing basic EPS, (b) eliminating the modified treasury stock
method and the three percent materiality provision and (c) revising the
contingent share provision and the supplemental EPS data requirements. SFAS No.
128 is effective for financial statements issued for periods ending December 15,
1997, including interim periods. The Company has not determined the impact of
the implementation of SFAS No. 128.
<PAGE>
REINHOLD INDUSTRIES, INC.
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
September 30, 1997
The following discussion should be read in conjunction with the condensed
financial statements and notes thereto included in Item 1 of this filing, the
financial statements and notes thereto and Management's Discussion and Analysis
of Financial Condition and Results of Operations contained in the Company's
Annual Report on Form 10-KSB for the year ended December 31, 1996 and the Form
8-K dated June 14, 1996, filed with the Securities and Exchange Commission on
June 28, 1996 relating to the confirmation of Keene's Fourth Amended Plan of
Reorganization.
Reinhold is a manufacturer of advanced custom composite components and
sheet molding compounds for a variety of applications. Reinhold derives revenues
from the United States defense contract industry, the aerospace industry and
other commercial industries.
Comparison of Third Quarter 1997 to 1996
In the third quarter of 1997, net sales increased $1.5 million, or 46%, to
$4.7 million, compared to third quarter 1996 sales of $3.2 million. The increase
primarily reflects higher sales of aerospace products and aircraft seatbacks
components.
Gross profit margin increased to 31.3% in the third quarter of 1997
compared to 21.7% in the third quarter 1996, due to higher absorption of
overhead related to increased sales volume and favorable material usage
variances.
Selling, general and administrative expenses for the third quarter 1997
were $0.8 million (17.1% of sales) compared to $0.7 million (23.1% of sales) for
the same quarter of 1996. The increase was primarily due to higher public
compliance costs. Although, public compliance costs were higher in 1997,
selling, general and administrative expenses as a percent of sales were lower in
1997 due to increased revenues.
Interest income in the third quarter of 1997 declined to $0.03 million
from $0.2 million in the third quarter of 1996 due to the transfer of most of
the investment portfolio to the Creditors' Trust on the Effective Date of the
Plan of Reorganization.
In the third quarter of 1997, there were no reorganization expenses.
During the third quarter of 1996, $0.4 million was incurred for reorganization
expenses.
<PAGE>
Comparison of First Nine Months 1997 to 1996
For the first nine months of 1997, net sales increased $3.2 million, or
36%, to $12.1 million, compared to $8.9 million for the first nine months of
1996. The increase primarily reflects higher sales of aerospace products and
aircraft seatbacks components.
Gross profit margin increased to 28.4% in the first nine months of 1997
compared to 18.8% in the first nine months of 1996, largely due to greater
absorption of overhead resulting from higher sales volume and more favorable
material usage variances.
Selling, general and administrative expenses for the first nine months of
1997 were $2.3 million (19.0% of sales) compared to $2.1 million (23.7% of
sales) for the comparable period of 1996. The increase was primarily due to
higher public compliance costs. Although, public compliance costs were higher in
1997, selling, general and administrative expenses as a percent of sales were
lower in 1997 due to increased revenues.
Interest income in the first nine months of 1997 declined to $0.07 million
from $1.1 million in the first nine months of 1996 due to the transfer of most
of the investment portfolio to the Creditors' Trust on the Effective Date of the
Plan of Reorganization.
In the first nine months of 1997, there were no reorganization expenses.
During the first nine months of 1996, $3.1 million was incurred for
reorganization expenses.
Liquidity and Capital Resources
As of September 30, 1997, working capital was $4.9 million, up $1.3
million from December 31, 1996. Cash and cash equivalents of $1.7 million held
at September 30, 1997 were $0.2 million higher than cash and cash equivalents
held at December 31, 1996 primarily due to $0.7 million of net cash provided by
operating activities offset by the $0.2 million final payment to Furon for the
Reynold's & Taylor acquisition and $0.3 million in capital expenditures.
Marketable securities of $1.0 million held at September 30, 1997 were unchanged
from December 31, 1996.
Net cash provided by operations amounted to $0.7 million for the nine
months ended September 30, 1997. Net cash used in operations amounted to $8.0
million for the comparable period in 1996. The increase over the prior period
relates to $6.7 million of lower bankruptcy related activities and the increased
profitability of the Company. Cash consumed to fund the Reinhold pension plan
amounted to $0.3 million in the first nine months of 1997.
Net cash used in investing activities for the nine months ended September
30, 1997 consisted of purchases of property and equipment expenditures totaling
$0.3 million. Net cash used in investing activities for the nine months ended
September 30, 1996 consisted primarily of purchases of marketable securities
totaling $12.5 million.
Net cash used in financing activities for the nine months ended September
30, 1997 totaled $0.2 million relating to the payment made for the acquisition
of Reynolds & Taylor. Net cash used in financing activities for the nine months
ended September 30, 1996 totaled $24.1 million primarily relating to the cash
distributions made at consummation of the Keene bankruptcy.
<PAGE>
Expenditures in 1997 and 1996 related to investing and financing
activities were financed by existing cash and cash equivalents.
The Company does not have any material commitments of capital expenditures
at September 30, 1997.
The Company has a credit facility with the Creditors' Trust whereby the
Company has the ability to draw on a $1.5 million line of credit through July
31, 1998. All amounts borrowed under this line of credit will become due and
payable by July 31, 1999. No amounts have been used under this facility.
Management believes that the available cash and the amount available under
the Credit Facility, described above, will be sufficient to fund the Company's
operating and capital expenditure requirements.
Inflation
General economic inflation has not had a significant impact on the
Company's operations during the nine months ended September 30, 1997 and 1996.
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
2.1 Keene Corporation's Fourth Amended Plan of Reorganization Under
Chapter 11 of the Bankruptcy Code dated March 11, 1996, incorporated
herein by reference to Exhibit 99(a) to Keene Corporation's Form 8-K
filed with the Commission on June 28, 1996.
2.2 Motion to Approve Modifications to the Keene Corporation Fourth
Amended Plan of Reorganization Under Chapter 11 of the Bankruptcy
Code dated June 12, 1996, incorporated herein by reference to Exhibit
99(b) to Keene Corporation's Form 8-K filed with the Commission on
June 28, 1996.
2.3 Finding of Fact, Conclusions of Law and Order Confirming Keene's
Fourth Amended Plan of Reorganization Under Chapter 11 of the
Bankruptcy Code, as modified, entered June 14, 1996, incorporated
herein by reference to Exhibit 99(c) to Keene Corporation's Form 8-K
filed with the Commission on June 28, 1996.
3.1 Amended and restated Certificate of Incorporation of Reinhold
Industries, Inc., incorporated herein by reference to Exhibit 99(a),
Exhibit A to the Plan, to Keene Corporation's Form 8-K filed with the
Commission on June 28, 1996.
3.2 Amended and restated By-laws of Reinhold Industries, Inc. (Formerly
Keene Corporation), incorporated herein by reference to Exhibit
99(a), Exhibit B to the Plan, to Keene Corporation's Form 8-K filed
with the Commission on June 28, 1996.
3.3 Certificate of Merger of Reinhold Industries, Inc. into Keene
Corporation, incorporated herein by reference to Exhibit 99(a),
Exhibit C to the Plan, to Keene Corporation's Form 8-K filed with the
Commission on June 28, 1996.
27 Financial Data Schedule
b. Reports on Form 8-K
No Reports on Form 8-K were filed during the period covered by this
report.
<PAGE>
REINHOLD INDUSTRIES, INC.
SIGNATURES
Pursuant to the requirement of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
REINHOLD INDUSTRIES, INC.
Registrant
DATE: October 23, 1997
By: /S/ Brett R. Meinsen
Brett R. Meinsen
Vice President - Finance and Administration,
Treasurer and Secretary
(Principal Financial Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AND STATEMENTS OF OPERATIONS ON PAGES 3 THRU 5 OF THE COMPANY'S 10-QSB.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> Dec-31-1997
<PERIOD-START> Jan-01-1997
<PERIOD-END> Sep-30-1997
<CASH> 1656
<SECURITIES> 1000
<RECEIVABLES> 2672
<ALLOWANCES> 521
<INVENTORY> 1981
<CURRENT-ASSETS> 6652
<PP&E> 7784
<DEPRECIATION> 3126
<TOTAL-ASSETS> 13054
<CURRENT-LIABILITIES> 1718
<BONDS> 0
0
0
<COMMON> 20
<OTHER-SE> 6875
<TOTAL-LIABILITY-AND-EQUITY> 13054
<SALES> 12111
<TOTAL-REVENUES> 12111
<CGS> 8666
<TOTAL-COSTS> 8666
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1212
<INCOME-TAX> 36
<INCOME-CONTINUING> 1176
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1176
<EPS-PRIMARY> .59
<EPS-DILUTED> .59
</TABLE>
