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: March 31, 1998
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from to
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Commission file number: 0-18434
REINHOLD INDUSTRIES, INC.
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(Exact name of small business issuer as specified in charter)
Delaware 13-2596288
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
12827 East Imperial Hwy, Santa Fe Springs, CA 90670
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(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 May 14, 1998.
Class B Common Stock, Par Value $.01 - 1,020,000 shares as of May 14, 1998.
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 Sheets 4
Condensed Statements of Cash Flows 5
Notes to Condensed Financial Statements 6
Item 2.
Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
PART II - OTHER INFORMATION 11
SIGNATURES 12
EXHIBITS 13
<PAGE>
<TABLE>
REINHOLD INDUSTRIES, INC.
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
(Amounts in thousands, except per share data)
<CAPTION>
Three Months Ended
March 31,
----------
1998 1997
---- ----
<S> <C> <C>
Net sales $4,300 $3,261
Cost of goods sold 3,128 2,470
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Gross profit 1,172 791
Selling, general and administrative expenses 742 733
----- -----
Operating income 430 58
Interest income, net 36 25
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Income before income taxes 466 83
Income tax provision 14 9
----- -----
Net income $ 452 $ 74
===== =====
Basic and diluted earnings per shares $ .23 $ .04
Weighted average common shares outstanding 1,999 1,999
<FN>
See accompanying notes to condensed financial statements
</FN>
</TABLE>
<PAGE>
<TABLE>
REINHOLD INDUSTRIES, INC.
CONDENSED BALANCE SHEETS
(Amounts in thousands)
<CAPTION>
March 31, 1998 December 31, 1997
-------------- -----------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 3,216 $ 2,419
Marketable securities 500 750
Accounts receivable 1,846 1,899
Inventories 1,780 1,975
Other current assets 902 708
------ ------
Total current assets 8,244 7,751
Property, plant and equipment, net 4,450 4,526
Other assets 910 938
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TOTAL ASSETS $ 13,604 $ 13,215
====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 808 $ 588
Accrued expenses 569 849
------ ------
Total current liabilities 1,377 1,437
Long term pension liability 592 592
Other long term liabilities 1,843 1,846
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 20
Additional paid-in capital 7,791 7,791
Retained earnings 2,500 2,048
Accumulated other comprehensive income (519) (519)
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Net stockholders' equity 9,792 9,340
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 13,604 $ 13,215
====== ======
<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>
Three Months Ended
March 31,
----------
1998 1997
---- ----
<S> <C> <C>
Cash flow from operating activities:
Net income $ 452 $ 74
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation and amortization 209 218
Changes in assets and liabilities:
Accounts receivable 53 502
Inventories 195 121
Other current assets (194) (167)
Accounts payable 220 12
Accrued expenses (280) (381)
Other, net (3) (5)
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Net cash provided by operating activities $ 652 $ 374
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Cash flow from investing activities:
Investment in marketable securities, net $ 250 $ (197)
Capital expenditures (105) (178)
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Net cash used in investing activities $ 145 $ (375)
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Cash flow from financing activities - cash paid
for acquisition of Reynolds & Taylor $ - $ (246)
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Net increase (decrease) in cash and cash equivalents 797 (247)
Cash and cash equivalents, beginning of period $ 2,419 $ 1,522
------ ------
Cash and cash equivalents, end of period $ 3,216 $ 1,275
====== ======
Cash paid during period for:
Income taxes $ 24 $ 1
<FN>
See accompanying notes to condensed financial statements
</FN>
</TABLE>
<PAGE>
REINHOLD INDUSTRIES, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
March 31, 1998
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 months ended March 31, 1998 and 1997. 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 results of
operations for the three months ended March 31, 1998 and 1997 are not
necessarily indicative of the operating results for the full year. 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, 1997, included in the Company's Form 10-KSB filed with the
Securities and Exchange Commission on March 13, 1998.
REPORTING COMPREHENSIVE INCOME
The Company adopted Statement of Financial Accounting Standard ("SFAS")
No. 130, "Reporting Comprehensive Income," during the quarterly period ended
March 31, 1998. SFAS No. 130 establishes standards for reporting and display of
comprehensive income and its components in a full set of general purpose
financial statements. SFAS No. 130 also permits an entity to report a total for
comprehensive income in the notes to the interim financial statements. There
were no differences between net income and total comprehensive income during the
quarterly periods ended March 31, 1998 and 1997.
<PAGE>
Notes to Condensed Financial Statements (Continued)
EFFECT OF RECENT ACCOUNTING PRONOUNCEMENTS
The Company intends to adopt SFAS No. 131, "Disclosure about Segments of
an Enterprise and Related Information" in 1998. SFAS No. 131 will require
additional disclosure, but will not have any effect on the Company's financial
position or results of operations. SFAS No. 131 changes the way companies report
segment information and requires segments to be determined based upon how
management measures performance and makes decisions about allocating resources.
SFAS No. 131 will be reflected in the Company's 1998 Annual Report.
In February 1998, the Financial Accounting Standards Board issued SFAS
No. 132, "Employers' Disclosures about Pensions and Other Postretirement
Benefits." SFAS No. 132 amends the disclosure requirements of SFAS No. 87,
"Employers' Accounting for Pensions," SFAS No. 88, "Employers' Accounting for
Settlements and Curtailments of Defined Benefit Pension Plans and for
Termination Benefits," and SFAS No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions." SFAS No. 132 standardizes the
disclosure requirements of SFAS No.'s 87 and 106 to the extent practicable and
recommends a parallel format for presenting information about pensions and other
postretirement benefits. SFAS No. 132 is applicable to all entities and
addresses disclosure only. SFAS No. 132 does not change any of the measurement
or recognition provisions provided for in SFAS No.'s 87, 88 and 106. SFAS No.
132 is effective for fiscal years beginning after December 15, 1997.
INCOME TAXES
Income taxes for interim periods are computed using the effective tax rate
estimated to be applicable for the full financial year, which is subject to
ongoing review and adjustment.
SUBSEQUENT EVENT
In April 1998, the Company purchased certain assets and assumed certain
liabilities of the Ballistic and Performance Composites Division of Courtaulds
Aerospace Limited, located in Coventry, England, for consideration consisting of
(a) Two Million Two Hundred Thousand pounds sterling (pound sterling 2,200,000)
cash on the Closing Date and (b) within 120 days following the end of each of
the calendar years 1998 through 2001, a cash amount equal to 25% of the Pre-tax
Profit on the light armored vehicle business only, the maximum aggregate amount
of which shall not exceed Twenty Million pounds sterling (pound sterling
20,000,000). This new subsidiary was renamed NP Aerospace Limited. The
acquisition will be accounted for under the purchase method and the results of
operations of the acquired business will be included in the results of the
Company from the date of acquisition. The purchase agreement provides for
additional payments over the next four years contingent on future pre-tax profit
of the light armored vehicle business. The additional payments, if any, will be
accounted for as fixed assets and intangibles as appropriate.
<PAGE>
REINHOLD INDUSTRIES, INC.
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
March 31, 1998
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, 1997.
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 First Quarter 1998 to 1997
In the first quarter of 1998, net sales increased $1.0 million, or 32%, to
$4.3 million, compared to first quarter 1997 sales of $3.3 million. The increase
primarily reflects higher sales of aerospace products and aircraft seatbacks
components.
Gross profit margin increased to 27.3% in the first quarter of 1998
compared to 24.3% in the first quarter 1997, due to higher absorption of
overhead related to increased sales.
Selling, general and administrative expenses for the first quarter 1998
were $0.7 million (17.3% of sales) compared to $0.7 million (22.5% of sales) for
the same quarter of 1997. Although selling, general and administrative expenses
were the same in 1998 as in 1997, these expenses decreased 5.2 % as a percent of
sales in 1998.
Interest income in the first quarter of 1998 increased to $0.04 million
from $0.03 million in the first quarter of 1997 due to the increase in the cash
and cash equivalents.
A tax provision of $0.01 million was recorded in the first quarter of 1998
for the alternative minimum tax for federal and state tax expenses. The Company
intends to use net operating loss carryovers to offset future taxable income
and, accordingly, has an effective tax rate of 3% for alternative minimum taxes.
In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred tax
assets will not be realized. The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income during the periods in
which those temporary differences become deductible. Management considers the
projected future taxable income and tax planning strategies in making this
assessment. Based upon the level of historical taxable income (losses) and
projections for future taxable income over the periods in which the deferred tax
assets are deductible, management believes it is more likely than not the
Company will not realize the benefits of these deductible differences. Income
taxes for interim periods are computed using the effective tax rate estimated to
be applicable for the full financial year, which is subject to ongoing review
and adjustment.
<PAGE>
Liquidity and Capital Resources
As of March 31, 1998, working capital was $6.9 million, up $0.6 million
from December 31, 1997. Cash and cash equivalents of $3.2 million held at March
31, 1998 were $0.8 million higher than cash and cash equivalents held at
December 31, 1997 primarily due to $0.7 million of net cash provided by
operating activities. Marketable securities of $0.5 million held at March 31,
1998 were $0.2 million less than at December 31, 1997.
Net cash provided by operations amounted to $0.7 million for the three
months ended March 31, 1998. Net cash provided by operations amounted to $0.4
million for the comparable period in 1997. The increase over the prior period
relates to the increased profitability of the Company.
Net cash provided by investing activities for the three months ended March
31, 1998 consisted of the maturity of $0.2 million of marketable securities
offset by property and equipment expenditures totaling $0.1 million. Net cash
used in investing activities for the three months ended March 31, 1997 consisted
of purchases of marketable securities totaling $0.2 million and property and
equipment expenditures totaling $0.2 million.
Net cash used in financing activities for the three months ended March 31,
1997 totaled $0.2 million relating to the payment made for the acquisition of
Reynolds & Taylor.
Expenditures in 1998 and 1997 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 March 31, 1998.
On April 24, 1998 (the "Closing Date"), NP Aerospace Limited ("NP
Aerospace"), a wholly owned subsidiary of Reinhold Industries, Inc.
("Reinhold"), purchased from Courtaulds Aerospace Limited ("CAL"), a U.K.
Corporation, which is a wholly owned subsidiary of Courtaulds plc, a U.K.
Corporation, certain assets (consisting of Accounts Receivable, Inventory,
Machinery and Equipment, Land and Intellectual Property and Patents) and assumed
certain liabilities of the Ballistic and Performance Composites Division of CAL.
On the Closing Date, Reinhold, as the Guarantor for NP Aerospace, became
obligated to pay to Courtaulds plc net consideration (the "Purchase
Consideration") consisting of (a) Two Million Two Hundred Thousand pounds
sterling (pound sterling 2,200,000) cash on the Closing Date and (b) within 120
days following the end of each of the calendar years 1998 through 2001, a cash
amount equal to 25% of the Pre-tax Profit on the light armored vehicle business
only, the maximum aggregate amount of which shall not exceed Twenty Million
pounds sterling (pound sterling 20,000,000).
On the Closing Date, Reinhold paid to Courtaulds plc the Two Million Two
Hundred Thousand pounds sterling (pound sterling 2,200,000) ($3,706,340 based on
an exchange rate of $1.6847) cash due on the Closing Date and will make
additional payments in the future as required by the Agreement.
The source of the funds for a portion of the Purchase Consideration due on
the Closing Date was a Five Year Loan and Security Agreement with The CIT Group
Credit/Finance ("CIT") in the amount of Four Million Dollars ($4,000,000) at an
interest rate of prime plus 1.75%. The term portion of the loan in the amount of
Two Million Two Hundred Sixty-Eight Thousand Dollars ($2,268,000) was received
from CIT. The remainder of the CIT credit facility is a revolver of One Million
Seven Hundred Thirty-Two Thousand Dollars ($1,732,000), which has not been used
at this time. The remaining portion of the purchase consideration not funded by
the CIT loan was funded by Reinhold's cash on hand. Future payments required by
the Agreement are expected to be financed from operating cash flows.
<PAGE>
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, cash flows from operations
and the amounts available under both Credit Facilities, described above, will be
sufficient to fund the Company's operating and capital expenditure requirements.
<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: May 14, 1998
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 4 OF THE COMPANY'S 10-QSB.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> Dec-31-1998
<PERIOD-START> Jan-01-1998
<PERIOD-END> Mar-31-1998
<CASH> 3216
<SECURITIES> 500
<RECEIVABLES> 2190
<ALLOWANCES> 344
<INVENTORY> 1780
<CURRENT-ASSETS> 8244
<PP&E> 7931
<DEPRECIATION> 3481
<TOTAL-ASSETS> 13604
<CURRENT-LIABILITIES> 1377
<BONDS> 0
0
0
<COMMON> 20
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<TOTAL-LIABILITY-AND-EQUITY> 13604
<SALES> 4300
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<CGS> 3128
<TOTAL-COSTS> 3128
<OTHER-EXPENSES> 0
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</TABLE>
