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: June 30, 1998
[ ] 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.
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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 August 13, 1998.
Class B Common Stock, Par Value $.01 - 1,020,000 shares as of August 13, 1998.
Transitional Small Business Disclosure Format (Check one):
YES [ ] NO [ X ]
<PAGE>
REINHOLD INDUSTRIES, INC. AND SUBSIDIARY
INDEX
PART I - FINANCIAL INFORMATION PAGE
Item 1.
Condensed Consolidated Statements of Operations 3
Condensed Consolidated Balance Sheets 5
Condensed Consolidated Statements of Cash Flows 6
Notes to Condensed Consolidated Financial Statements 7
Item 2.
Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
PART II - OTHER INFORMATION 14
SIGNATURES 15
EXHIBITS 16
<PAGE>
<TABLE>
REINHOLD INDUSTRIES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Amounts in thousands, except per share data)
<CAPTION>
Three Months Ended
June 30,
--------
1998 1997
---- ----
<S> <C> <C>
Net sales $6,990 $ 4,178
Cost of goods sold 5,291 2,985
------ -----
Gross profit 1,699 1,193
Selling, general and administrative expenses 1,041 772
------ ------
Operating income 658 421
Interest (expense) income, net (24) 20
------ ------
Income before income taxes 634 441
Income tax provision 13 50
------ ------
Net income $ 621 $ 391
====== ======
Basic and diluted earnings per shares $ .31 $ .19
Weighted average common shares outstanding 1,999 1,999
<FN>
See accompanying notes to condensed consolidated financial statements
</FN>
</TABLE>
<PAGE>
<TABLE>
REINHOLD INDUSTRIES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Amounts in thousands, except per share data)
<CAPTION>
Six Months Ended
June 30,
--------
1998 1997
---- ----
<S> <C> <C>
Net sales $11,290 $ 7,439
Cost of goods sold 8,419 5,455
------ ------
Gross profit 2,871 1,984
Selling, general and administrative expenses 1,783 1,505
------ ------
Operating income 1,088 479
Interest income, net 12 45
------ ------
Income before income taxes 1,100 524
Income tax provision 27 59
------ ------
Net income $ 1,073 $ 465
====== ======
Basic and diluted earnings per shares $ .54 $ .23
Weighted average common shares outstanding 1,999 1,999
<FN>
See accompanying notes to condensed consolidated financial statements
</FN>
</TABLE>
<PAGE>
<TABLE>
REINHOLD INDUSTRIES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except share data)
<CAPTION>
June 30, 1998 December 31, 1997
-------------- -----------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 3,350 $ 2,419
Marketable securities - 750
Accounts receivable 3,955 1,899
Inventories 4,441 1,975
Other current assets 950 708
------ -----
Total current assets 12,696 7,751
Property, plant and equipment, net 4,681 4,526
Other assets 1,042 938
------ ------
TOTAL ASSETS $ 18,419 $ 13,215
====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 2,360 $ 588
Current portion - long term debt 454 -
Accrued expenses 1,034 849
------ ------
Total current liabilities 3,848 1,437
Long term pension liability 592 592
Long term debt - less current portion 1,777 -
Other long term liabilities 1,839 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 3,121 2,048
Accumulated other comprehensive loss (569) (519)
------ ------
Net stockholders' equity 10,363 9,340
------ ------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 18,419 $ 13,215
<FN>
====== ======
See accompanying notes to condensed consolidated financial statements
</FN>
</TABLE>
<PAGE>
<TABLE>
REINHOLD INDUSTRIES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Amounts in thousands)
Six Months Ended
June 30,
---------
1998 1997
---- ----
<S> <C> <C>
Cash flow from operating activities:
Net income $ 1,073 $ 465
Adjustments to reconcile net income to net
cash provided by operating activities (net of effects
of acquisition):
Depreciation and amortization 429 444
Changes in assets and liabilities:
Accounts receivable 571 (317)
Inventories 262 (84)
Other current assets (242) 12
Accounts payable 390 108
Accrued expenses (410) (195)
Other, net (219) (173)
------ ------
Net cash provided by operating activities 1,854 260
------ ------
Cash flow from investing activities:
Maturity of marketable securities 750 -
Acquisition by NP Aerospace (3,707) -
Capital expenditures (197) (222)
------ ------
Net cash used in investing activities (3,154) (222)
------ ------
Cash flow from financing activities
Proceeds from long term debt 2,268 -
Repayment of long term debt (37) -
Cash paid for acquisition of Reynolds & Taylor - (246)
------ ------
Net cash provided by (used in) financing activities 2,231 (246)
------ ------
Net increase (decrease) in cash and cash equivalents 931 (208)
Cash and cash equivalents, beginning of period 2,419 1,522
------ ------
Cash and cash equivalents, end of period $ 3,350 $ 1,314
====== ======
Cash paid during period for:
Income taxes $ 24 $ 1
Interest $ 26 $ 6
<FN>
See accompanying notes to condensed consolidated financial statements
</FN>
</TABLE>
<PAGE>
REINHOLD INDUSTRIES, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
June 30, 1998
DESCRIPTION OF BUSINESS
Reinhold Industries, Inc. and subsidiary ("Reinhold" or the "Company") is
a manufacturer of advanced custom composite components and sheet molding
compounds for a variety of applications in the United States and Europe.
Reinhold derives revenues from the defense contract industry, the aerospace
industry and other commercial industries.
BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements are
those of Reinhold as of June 30, 1998 and December 31, 1997 and for the six and
three months ended June 30, 1998 and 1997. The unaudited condensed consolidated
financial statements have been prepared by the Company as contemplated by the
Securities and Exchange Commission under Rule 10-01 of Regulation S-X and do not
contain certain information that will be included in the Company's annual
financial statements and notes thereto. 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 six and three months ended June 30, 1998 and
1997 are not necessarily indicative of the operating results for the full year.
The accompanying unaudited condensed consolidated financial statements should be
read in conjunction with the annual report 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.
ACQUIRED BUSINESS
On April 24, 1998 , NP Aerospace Limited ("NP Aerospace"), a wholly owned
subsidiary of 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.
Reinhold, as the Guarantor for NP Aerospace, became obligated to pay to
Courtaulds plc net consideration consisting of (a) Two Million Two Hundred
Thousand pounds sterling ((pound)2,200,000) ($3,706,340 based on an exchange
rate of $1.6847) 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)20,000,000). Additional payments will be capitalized as part of the
purchase price.
The acquisition has been accounted for by the purchase method and,
accordingly, the results of operations of NP Aerospace have been included in the
consolidated financial statements from April 24, 1998.
<PAGE>
Notes to Condensed Consolidated Financial Statements (Continued)
<TABLE>
<CAPTION>
The excess of the fair value of the net identifiable assets acquired over the
purchase price has been preliminarily allocated to fixed assets as follows:
<S> <C>
Working capital $3,781
Severance costs (403)
3,378
Cash paid 3,707
-----
Excess over cost allocated to property,
plant and equipment $ 329
=====
</TABLE>
<TABLE>
The pro forma unaudited results of operations for the three and six months ended
June 30, 1998 and 1997, assuming consummation of the purchase as of January 1,
1997 are as follows (in thousands, except earnings per share data):
<CAPTION>
Three months ended Six months ended
June 30, June 30,
------- -------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $7,698 $8,023 $16,212 $15,285
Net income $687 $315 $1,205 $724
Basic and diluted earnings per share $0.34 $0.16 $0.60 $0.36
</TABLE>
REPORTING COMPREHENSIVE INCOME
The Company adopted Statement of Financial Accounting Standard ("SFAS")
No. 130, "Reporting Comprehensive Income," during the three months 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. The
difference between net income and total comprehensive income during the six
months and three months ended June 30, 1998 was a loss on foreign currency
translation of $50,000. There were no differences between net income and total
comprehensive income during the six months and three months ending June 30,
1997.
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.
<PAGE>
Notes to Condensed Consolidated Financial Statements (Continued)
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.
In June 1998, the Financial Accounting Standards Board issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities". SFAS No.
133 modifies the accounting for derivatives and hedging activities and is
effective for fiscal years beginning after December 15, 1999. At this time, the
Company does not expect the adoption of SFAS No. 133 to have a significant
impact on its financial position or results of operations.
In March 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-1 ("SOP 98-1"), "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use". The Company will
adopt SOP 98-1 effective in 1999. The adoption of SOP 98-1 will require the
Company to modify its method of accounting for software. Based upon information
currently available, the Company does not expect the adoption of SOP 98-1 to
have a significant impact on its financial position or results of operations.
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 evaluation by management.
LONG TERM DEBT
On April 22, 1998, the company borrowed $2,268,000 from The CIT Group
Credit/Finance ("CIT") to fund a portion of the purchase consideration due to
Courtaulds Aerospace. The company had previously entered into a Five Year Loan
and Security Agreement with CIT in the amount of Four Million Dollars
($4,000,000). The term portion of the loan ($2,268,000) is payable in equal
monthly principal payments of $37,800 plus interest at prime plus 1.75% and is
secured by fixed assets and land. 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.
<PAGE>
REINHOLD INDUSTRIES, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
June 30, 1998
The following discussion should be read in conjunction with the condensed
consolidated 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 in the United States and
Europe. Reinhold derives revenues from the defense contract industry, the
aerospace industry and other commercial industries.
Comparison of Second Quarter 1998 to 1997
In the second quarter of 1998, net sales increased $2.8 million, or 67%,
to $7.0 million, compared to second quarter 1997 sales of $4.2 million. The
increase primarily reflects sales of $2.5 million related to the NP Aerospace
acquisition in April of 1998. Sales also increased $0.2 million for both
CompositAir and Commercial products. However, there was a $0.1 million decrease
in Aerospace product sales.
Gross profit margin decreased to 24.3% in the second quarter of 1998
compared to 28.6% in the second quarter 1997, primarily due to lower absorption
of overhead related to NP Aerospace's high compensation costs (headcount
reductions not completed until the end of May) and CompositAir's increased
tooling and plant maintenance costs. There were also lower positive material
variances for Aerospace products in 1998 compared to 1997. Gross profit margin
for Aerospace products decreased to 40.4% in 1998 from 49.2% in 1997. Gross
profit margin for CompositAir products increased to 20.0% in 1998 from 18.8% in
1997. Gross profit margin for Commercial products increased to 21.1% in 1998
from a gross margin loss of 3.6% in 1997. Gross profit margin for NP Aerospace
products was 19.9% for the period from acquisition (April 24, 1998) through June
30, 1998.
Selling, general and administrative expenses for the second quarter 1998
were $1.0 million (14.9% of sales) compared to $0.8 million (18.5% of sales) for
the same quarter of 1997. Although selling, general and administrative expenses
were higher in 1998, these expenses decreased 3.6 % as a percent of sales. S,G &
A increases are associated with the costs of the new foreign subsidiary.
Interest expense, net, in the second quarter of 1998 was $0.02 million
compared to interest income of $0.02 million in the second quarter of 1997 due
to the interest expense related to the CIT loan.
A tax provision of $0.01 million was recorded in the second 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 determining the recognition 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 not utilized in 1998 is dependent upon the generation of future
taxable income during the periods in which the net operating losses are
deductible. Management considers the projected future taxable income and tax
planning strategies in making this assessment. Based upon the level of
<PAGE>
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.
Comparison of First Six Months 1998 to 1997
In the first six months of 1998, net sales increased $3.9 million, or 52%,
to $11.3 million, compared to first six months 1997 sales of $7.4 million. The
increase primarily reflects sales of $2.5 million related to the NP Aerospace
acquisition in April of 1998. There was also an increase in Aerospace product
sales of $0.6 million, CompositAir sales of $0.4 million and Commercial product
sales of $0.3 million.
Gross profit margin decreased to 25.4% in the first six months of 1998
compared to 26.7% in the first six months 1997, due to lower absorption of
overhead related to NP Aerospace's high compensation costs (headcount reductions
not completed until the end of May) and CompositAir's increased tooling and
plant maintenance costs. There were also lower positive material variances for
Aerospace products in 1998 compared to 1997. Gross profit margin for Aerospace
products decreased to 41.9% in 1998 from 44.6% in 1997. Gross profit margin for
CompositAir products decreased to 18.6% in 1998 from 19.7% in 1997. Gross profit
margin for Commercial products increased to 18.4% in 1998 from 0.9% in 1997.
Gross profit margin for NP Aerospace products was 19.9% for the period from
acquisition (April 24, 1998) through June 30, 1998.
Selling, general and administrative expenses for the first six months 1998
were $1.8 million (15.8% of sales) compared to $1.5 million (20.2% of sales) for
the same period of 1997. Although selling, general and administrative expenses
were higher in 1998, these expenses decreased 4.4 % as a percent of sales. S,G &
A increases are associated with the costs of the new foreign subsidiary.
Interest income, net, in the first six months of 1998 decreased to $0.01
million from $0.05 million in the first six months of 1997 due to the interest
expense related to the CIT loan.
A tax provision of $0.02 million was recorded in the first six months 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 not utilized in 1998 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 June 30, 1998, working capital was $8.8 million, up $2.5 million
from December 31, 1997. Cash and cash equivalents of $3.3 million held at June
30, 1998 were $0.9 million higher than cash and cash equivalents held at
December 31, 1997 primarily due to $1.9 million of net cash provided by
operating activities and the $0.7 million of marketable securities which matured
offset by the net cash outlay of $1.4 million by the Company for the NP
Aerospace acquisition (Cash paid $3.7 million less proceeds from CIT of $2.3
million) and $0.2 million spent on capital expenditures. There were no
marketable securities held at June 30, 1998.
Net cash provided by operations amounted to $1.9 million for the six
months ended June 30, 1998. Net cash provided by operations amounted to $0.3
million for the comparable period in 1997. The increase over the prior period
relates to the increased profitability of the Company.
Net cash used in investing activities for the six months ended June 30,
1998 totaled $3.2 million and consisted of the acquisition by NP Aerospace of
$3.7 million and property and equipment expenditures totaling $0.2 million
offset by the maturity of $0.7 million of marketable securities. Net cash used
in investing activities for the six months ended June 30, 1997 consisted of
property and equipment expenditures totaling $0.2 million.
Net cash provided by financing activities for the six months ended June
30, 1998 totaled $2.2 million and consisted primarily of $2.3 million of
proceeds from the CIT loan. Net cash used in financing activities for the six
months ended June 30, 1997 totaled $0.2 million relating to the payment made for
the acquisition of Reynolds & Taylor.
Expenditures in 1998 related to investing and financing activities were
financed by existing cash and cash equivalents and proceeds from the CIT loan.
Expenditures in 1997 related to investing and financing activities were financed
by existing cash and cash equivalents.
The Company does not have any current material commitments of capital
expenditures at June 30, 1998.
As discussed in the notes to the unaudited condensed consolidated
financial statements, the Company acquired certain assets and assumed certain
liabilities of the Ballistic and Performance Composites Division of Courtaulds
Aerospace Ltd on April 24, 1998 (the "Closing Date"). On the Closing Date,
Reinhold paid to Courtaulds plc the Two Million Two Hundred Thousand pounds
sterling ((pound)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 Asset Sale 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 Keene 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.
1998 Outlook
Although the results of the second quarter were good, management expects
third quarter 1998 net income to be significantly lower than the first two
quarters of 1998 and the third quarter of 1997. Merger costs related to the
acquisition and the shift of some large value aerospace sales into the fourth
quarter of 1998 will cause financial performance to be lower than historical
results in recent quarters. However, the Company expects full year results to be
satisfactory.
Recent Accounting Pronouncements
The effective recent accounting pronouncements are included in the notes
to the condensed consolidated financial statements included herein.
Year 2000
Many existing computer programs use only two digits to identify a year in a
date. If not corrected, many computer applications and systems could fail
or create erroneous results before or after the year 2000. The Company is in
the process of identifying and remediating or replacing computer systems
and software that may not function correctly in the year 2000. Additionally,
the Company is planning a program of communications with its significant
suppliers, customers and affiliated companies to determine the readiness of
these third parties and the impact on the Company as a consequence of their own
year 2000 issues. The Company's manual assessment of the impact of the year 2000
date change should be complete by mid-1999. The Company believes that it will
be able to identify, and, if necessary, modify or replace such systems and
software before any year 2000 associated problems. No assurances can be given
that such modification and replacement will be completed before any year 2000
associated problems arise or that costs arising from unanticipated problems will
not have a material adverse effect on the Company. As of June 30, 1998, amounts
expensed on the Company's year 2000 problem have not been material.
<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
A Current Report on Form 8-K, dated April 17, 1998, was filed by the
Company with the Securities and Exchange Commission on May 1, 1998. The Form 8-K
reported the asset purchase of the Ballistic and Performance Composites Division
of Courtaulds Aerospace Ltd. by Reinhold's wholly owned subsidiary NP Aerospace.
On June 30, 1998, the Company filed Amendment No. 1 to such Report, which
included audited financial statements of the Ballistic and Performance
Composites Division of Courtaulds Aerospace Ltd. for the years ended March 31,
1998 and 1997, pro forma unaudited combined balance sheet as of March 31, 1998
and pro forma unaudited combined statements of operations for the three months
ended March 31, 1998 and the year ended December 31, 1997, which gave effect to
said acquisition as of the date and for the periods indicated therein.
<PAGE>
REINHOLD INDUSTRIES, INC. AND SUBSIDIARY
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: August 13, 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 5 OF THE COMPANY'S 10-QSB.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> Dec-31-1998
<PERIOD-START> Jan-01-1998
<PERIOD-END> Jun-30-1998
<CASH> 3350
<SECURITIES> 0
<RECEIVABLES> 4334
<ALLOWANCES> 379
<INVENTORY> 4441
<CURRENT-ASSETS> 12696
<PP&E> 8352
<DEPRECIATION> 3671
<TOTAL-ASSETS> 18419
<CURRENT-LIABILITIES> 3848
<BONDS> 0
0
0
<COMMON> 20
<OTHER-SE> 10343
<TOTAL-LIABILITY-AND-EQUITY> 18419
<SALES> 11290
<TOTAL-REVENUES> 11290
<CGS> 8419
<TOTAL-COSTS> 8419
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 46
<INCOME-PRETAX> 1100
<INCOME-TAX> 27
<INCOME-CONTINUING> 1073
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1073
<EPS-PRIMARY> .54
<EPS-DILUTED> .54
</TABLE>
