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, 1999
[ ] 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 May 14, 1999.
Class B Common Stock, Par Value $.01 - 1,020,000 shares as of May 14, 1999.
Transitional Small Business Disclosure Format (Check one):
YES [ ] NO [ X ]
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REINHOLD INDUSTRIES, INC. AND SUBSIDIARY
INDEX
PART I - FINANCIAL INFORMATION PAGE
Item 1.
Condensed Consolidated Statements of Operations 3
Condensed Consolidated Balance Sheets 4
Condensed Consolidated Statements of Cash Flows 5
Notes to Condensed Consolidated Financial Statements 6
Item 2.
Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
PART II - OTHER INFORMATION 15
SIGNATURES 16
EXHIBITS 17
2
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<TABLE>
<CAPTION>
REINHOLD INDUSTRIES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except per share data)
(Unaudited)
Three Months Ended
March 31,
---------
1999 1998
---- ----
<S> <C> <C>
Net sales $8,688 $4,300
Cost of goods sold 6,512 3,128
----- -----
Gross profit 2,176 1,172
Selling, general and administrative expenses 929 742
----- -----
Operating income 1,247 430
Interest (expense) income, net (10) 36
----- -----
Income before income taxes 1,237 466
Income tax provision (benefit) 128 14
----- -----
Net income $1,109 $ 452
===== =====
Basic and diluted earnings per shares $ 0.55 $ 0.23
Weighted average common shares outstanding 1,999 1,999
<FN>
See accompanying notes to condensed consolidated financial statements
</FN>
</TABLE>
3
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<TABLE>
<CAPTION>
REINHOLD INDUSTRIES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except share data)
(Unaudited)
March 31, 1999 December 31, 1998
-------------- -----------------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 5,176 $ 3,622
Accounts receivable 4,969 4,869
Inventories 4,476 4,385
Other current assets 996 928
------ ------
Total current assets 15,617 13,804
Property, plant and equipment, net 5,516 5,476
Other assets 934 935
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TOTAL ASSETS $ 22,067 $ 20,215
====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 3,094 $ 2,976
Current portion - long term debt 454 454
Accrued expenses 2,347 1,413
------ ------
Total current liabilities 5,895 4,843
Long term pension liability 2,290 2,290
Long term debt - less current portion 1,436 1,550
Other long term liabilities 1,797 1,834
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 5,295 4,186
Accumulated comprehensive loss (2,457) (2,299)
------ ------
Net stockholders' equity 10,649 9,698
------ ------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 22,067 $ 20,215
====== ======
<FN>
See accompanying notes to condensed consolidated financial statements
</FN>
</TABLE>
4
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<TABLE>
<CAPTION>
REINHOLD INDUSTRIES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(Unaudited)
Three months Ended
March 31,
---------
1999 1998
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<S> <C> <C>
Cash flow from operating activities:
Net income $ 1,109 $ 452
Adjustments to reconcile net income to net
cash provided by operating activities (net of effects
of acquisition):
Depreciation and amortization 253 209
Foreign currency translation (158) -
Changes in assets and liabilities:
Accounts receivable (100) 53
Inventories (91) 195
Other current assets (68) (194)
Accounts payable 118 220
Accrued expenses 934 (280)
Other, net (43) (3)
----- -----
Net cash provided by operating activities 1,954 652
----- -----
Cash flow from investing activities:
Maturity of marketable securities - 250
Capital expenditures (286) (105)
----- -----
Net cash used in (provided by) investing activities (286) 145
----- -----
Cash flow from financing activities:
Repayment of long term debt (114) -
----- -----
Net cash used in financing activities (114) -
----- -----
Net increase in cash and cash equivalents 1,554 797
Cash and cash equivalents, beginning of period 3,622 2,419
----- -----
Cash and cash equivalents, end of period $ 5,176 $ 3,216
===== =====
Cash paid during period for:
Income taxes $ - $ 24
Interest $ 47 $ -
<FN>
See accompanying notes to condensed consolidated financial statements
</FN>
</TABLE>
5
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REINHOLD INDUSTRIES, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1999
(Unaudited)
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 March 31, 1999 and December 31, 1998 and for the three
months ended March 31, 1999 and 1998. 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 three months ended March 31, 1999 and 1998 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, 1998, included in the Company's Form 10-KSB filed with the
Securities and Exchange Commission on March 26, 1999.
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, when and if earned.
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 the date of acquisition.
6
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Notes to Condensed Consolidated Financial Statements (Continued)
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 (in
thousands):
Working capital $3,360
Severance costs (403)
2,957
Cash paid 3,707
-----
Excess over cost allocated to property,
plant and equipment $ 750
======
The pro forma unaudited results of operations for the three months ended March
31, 1998, assuming consummation of the purchase as of January 1, 1998 are as
follows (in thousands, except earnings per share data):
Net sales $8,514
Net income $518
Basic and diluted earnings per share $0.26
REPORTING COMPREHENSIVE INCOME
The Company adopted Statement of Financial Accounting Standard ("SFAS")
No. 130, "Reporting Comprehensive Income," effective January 1, 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 three months ended March 31, 1999 was a
loss on foreign currency translation of $158,000. There was no difference
between net income and total comprehensive income during the three months ending
March 31, 1998.
COMPUTER SOFTWARE COSTS
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 adopted
SOP 98-1 effective January 1, 1999. The adoption of SOP 98-1 did not have a
significant impact on the Company's operating results.
EFFECT OF RECENT ACCOUNTING PRONOUNCEMENTS
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.
7
<PAGE>
Notes to Condensed Consolidated Financial Statements (Continued)
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 as of May 14, 1999.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of the following financial instruments approximate
fair value because of the short maturity of those instruments: cash and cash
equivalents, accounts receivable, other current assets, other assets, accounts
payable, accrued expenses and current installments of long term debt. The fair
values of marketable securities are based on the quoted market prices at the
reporting date for those investments. The long term debt bears interest at a
variable market rate, and thus has a carrying amount that approximates fair
value.
FOREIGN CURRENCY
The reporting currency of the Company is the United States dollar. The
functional currency of NP Aerospace is the UK pound sterling. For consolidation
purposes, the assets and liabilities of the Company's subsidiary are translated
at the exchange rate in effect at the balance sheet date. The consolidated
statement of income is translated at the average exchange rate in effect during
the period being reported. Exchange differences arise from the valuation rates
of the intercompany accounts and are taken directly to Stockholders' equity. The
exchange rate at March 31, 1999 was $1.61 and $1.62 for the condensed
consolidated balance sheet and the condensed consolidated statement of income,
respectively.
OPERATING SEGMENTS
The Company adopted SFAS No. 131 "Disclosures about Segments of an
Enterprise and Related Information" as of December 31, 1998. SFAS No. 131
established new standards for reporting information about operating segments and
related disclosures about products and services, geographic areas and major
customers.
8
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Notes to Consolidated Financial Statements (cont'd)
Reinhold is a manufacturer of advanced custom composite components and
sheet molding compounds for a variety of applications in the United States and
Europe. The Company generates revenues from four operating segments: Aerospace,
CompositAir, Commercial and NP Aerospace. Management has determined these to be
Reinhold's operating segments based upon the nature of their products. Aerospace
produces a variety of products for the U.S. military and space programs.
CompositAir produces components for the commercial aircraft seating industry.
The Commercial segment produces lighting housings and pool filters. NP Aerospace
is our subsidiary located in Coventry, England and produces products for law
enforcement, lighting, military, automotive and commercial aircraft.
<TABLE>
<CAPTION>
The information in the following tables is derived directly from the
segment's internal financial reporting for corporate management purposes (in
thousands).
March 31, 1999 March 31, 1998
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<S> <C> <C>
Net sales
Aerospace $ 1,247 1,721
CompositAir 3,006 2,140
Commercial 566 439
NP Aerospace 3,869 -
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Total sales $ 8,688 4,300
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Income before income taxes
Aerospace $ 356 496
CompositAir 547 28
Commercial 76 (9)
NP Aerospace 366 -
Unallocated corporate expenses (108) (49)
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Total income before income taxes $ 1,237 466
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Depreciation and amortization
Aerospace $ 109 119
CompositAir 64 54
Commercial 39 36
NP Aerospace 41 -
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Total depreciation and amortization $ 253 209
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Capital expenditures
Aerospace $ 52 75
CompositAir 179 16
Commercial 31 14
NP Aerospace 24 -
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Total capital expenditures $ 286 105
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Total assets
Aerospace $ 4,632 5,074
CompositAir 4,028 2,645
Commercial 1,228 1,195
NP Aerospace 9,215 -
Unallocated corporate 2,964 4,690
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Total assets $ 22,067 13,604
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</TABLE>
9
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Notes to Consolidated Financial Statements (cont'd)
<TABLE>
<CAPTION>
The table below presents information related to geographic areas in which
Reinhold operated in 1999 and 1998 (in thousands):
March 31, 1999 March 31, 1998
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<S> <C> <C>
Net sales
United States $ 4,756 4,190
United Kingdom 3,728 110
Switzerland 113 -
Germany 35 -
Other 56 -
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Net sales $ 8,688 4,300
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Total assets
United States $ 12,852 13,604
United Kingdom 9,215 -
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Total assets $ 22,067 13,604
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</TABLE>
10
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REINHOLD INDUSTRIES, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
March 31, 1999
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, 1998.
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 First Quarter 1999 to 1998
In the first quarter of 1999, net sales increased $4.4 million, or 102%,
to $8.7 million, compared to first quarter 1998 sales of $4.3 million. The
increase primarily reflects sales of $3.9 million related to the NP Aerospace
acquisition in April of 1998. Sales also increased $0.9 million for CompositAir
and $0.1 million for Commercial products. However, there was a decrease of $0.5
million in Aerospace product sales.
Gross profit margin decreased to 25.1% in the first quarter of 1999
compared to 27.3% in the first quarter 1998, primarily due to lower Aerospace
sales, whose products have comparatively higher gross margins and the inclusion
of NP Aerospace activities (a lower total margin business), partially offset by
better production efficiencies at CompositAir. Gross profit margin for Aerospace
products decreased to 37.9% in 1999 from 43.3% in 1998. Gross profit margin for
CompositAir products increased to 26.1% in 1999 from 17.1% in 1998. Gross profit
margin for Commercial products increased to 24.9% in 1999 from 15.0% in 1998.
Gross profit margin for NP Aerospace products was 20.0% for the first quarter
1999.
Selling, general and administrative expenses for the first quarter 1999
were $0.9 million (10.7% of sales) compared to $0.7 million (17.3% of sales) for
the same quarter of 1998. S, G & A increases are primarily associated with the
costs of the new foreign subsidiary.
Interest expense, net, in the first quarter of 1999 was $0.01 million
compared to interest income of $0.04 million in the first quarter of 1998 due to
the interest expense related to the CIT loan.
Income before income taxes increased to $1.2 million (14.2% of sales) in
the first quarter of 1999 from $0.5 million (10.8% of sales) in the same period
of 1998, reflecting higher gross margins and lower interest income. Income
before income taxes for Aerospace was $0.4 million (28.5% of sales) in 1999
compared to $0.5 million (28.8% of sales) in 1998. Income before income taxes
for CompositAir was $0.5 million (18.2% of sales) in 1999 compared with $0.03
million (1.3% of sales) in 1998. Income before income taxes for Commercial was
$0.1 million (13.4% of sales) in 1999 compared with a loss in 1998 of $0.01
million. NP Aerospace contributed income before income taxes of $0.4 million, or
9.5% of sales in 1999.
11
<PAGE>
Management's Discussion and Analysis (cont'd)
A tax provision of $0.1 million was recorded in the first quarter of 1999.
The effective tax rate for the United Kingdom is approximately 30%. In the
United States, 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 1999 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 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.
Liquidity and Capital Resources
As of March 31, 1999, working capital was $9.7 million, up $0.8 million
from December 31, 1998. Cash and cash equivalents of $5.2 million held at March
31, 1999 were $1.6 million higher than cash and cash equivalents held at
December 31, 1998 primarily due to $2.0 million of net cash provided by
operating activities offset by $0.3 million spent on capital expenditures. There
were no marketable securities held at March 31, 1999.
Net cash provided by operations amounted to $2.0 million for the three
months ended March 31, 1999. Net cash provided by operations amounted to $0.7
million for the comparable period in 1998. The increase over the prior period
relates to the increased profitability of the Company.
Net cash used in investing activities for the three months ended March 31,
1999 totaled $0.3 million and consisted of property and equipment expenditures
totaling $0.3 million. Net cash provided by investing activities for the three
months ended March 31, 1998 consisted of the maturity of $0.3 million of
marketable securities partially offset by property and equipment expenditures
totaling $0.1 million.
Net cash used in financing activities for the three months ended March 31,
1999 totaled $0.1 million and consisted of the payments made on the CIT loan.
There were no cash expenditures for financing for the three months ended March
31, 1998.
Expenditures in 1999 and 1998 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 March 31, 1999.
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.
12
<PAGE>
Management's Discussion and Analysis (cont'd)
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.
Management believes that the available cash, cash flows from operations
and the amounts available under the Credit Facility described above, will be
sufficient to fund the Company's operating and capital expenditure requirements.
Keene Creditors' Trust Schedule 13D Amendment Filing
On July 27, 1998 The Keene Creditors' Trust, owner of 100% of the Class B
Common Stock, filed an amendment, dated July 16, 1998, to their previously filed
Schedule 13D, dated August 12, 1996, with the Securities and Exchange
Commission. The purpose of this filing was to announce the retention of HT
Capital Advisors, LLC to assist the Trust in determining the value of its shares
and the feasibility of a disposition of 100% of those shares for cash. The
process to sell has been initiated and several entities have shown interest in
the company. Formal due diligence proceedings have begun by one of the
prospective purchasers.
Forward Looking Statements
This Form 10-QSB contains statements which, to the extent that they are
not recitations of historical fact, constitute "forward looking statements"
within the meaning of Section 27A of the Securities Act of 1933, as amended (the
"Securities Act") and Section 21E of the Securities Exchange Act of 1934 (the
"Exchange Act"). The words "estimate", "anticipate", "project", "intend",
"expect", and similar expressions are intended to identify forward looking
statements. All forward looking statements involve risks and uncertainties,
including, without limitation, statements and assumptions with respect to future
revenues, program performance and cash flow. Readers are cautioned not to place
undue reliance on these forward looking statements which speak only as of the
date of this 10-QSB. The Company does not undertake any obligation to publicly
release any revisions to these forward looking statements to reflect events,
circumstances or changes in expectations after the date of this Form 10-QSB, or
to reflect the occurrence of unanticipated events. The forward looking
statements in this document are intended to be subject to safe harbor protection
provided by Sections 27A of the Securities Act and 21E of the Exchange Act.
1999 Outlook
We expect improved financial results for 1999. Our Aerospace business unit
revenue should be higher than our initial pessimistic forecast. CompositAir,
which reported record shipments in the first quarter 1999, should continue to
excel in the second quarter. The Commercial business unit should report slightly
higher sales in 1999. We will also record twelve months of activity for NP
Aerospace in 1999 vs. only eight months in 1998. We expect performance in this
business unit to exceed our pre-acquisition forecasts.
13
<PAGE>
Management's Discussion and Analysis (cont'd)
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. In The United States,
the Company had anticipated the year 2000 problem in the mid-1980's and
therefore created compliant systems. The internal computer systems in the United
States are Year 2000 compliant. In the United Kingdom, the Company is in the
process of identifying and remediating or replacing any other 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. The Company's most likely potential risk
is a temporary inability of some customers to order and pay on a timely basis,
and for the company to receive purchases from their vendors on time. The
Company's year 2000 efforts are ongoing and its overall plan will continue to
evolve as new information becomes available.
While the Company anticipates no major interruption in its business
activities, it will be dependent, in part, on the ability of third parties to be
year 2000 compliant. As of March 31, 1999, amounts spent on the Company's year
2000 program were less than $25,000. The Company currently estimates the cost to
remediate both its year 2000 hardware and software issues to be less than
$30,000.
The Company is in the process of assessing the year 2000 readiness of its
critical suppliers. We expect this assessment to be completed by the end of the
second quarter 1999. At this time, we have not formulated a contingency plan,
but expect to have specific contingency plans in place by the end of the third
quarter 1999.
14
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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
None
15
<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: May 14, 1999
By: /S/ Brett R. Meinsen
Brett R. Meinsen
Vice President - Finance and Administration,
Treasurer and Secretary
(Principal Financial Officer)
16
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AND STATEMENTS OF OPERATIONS ON PAGES 3 AND 4 OF THE COMPANY'S 10-QSB.
AMOUNTS IN THOUSANDS
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> Dec-31-1999
<PERIOD-START> Jan-01-1999
<PERIOD-END> Mar-31-1999
<CASH> 5176
<SECURITIES> 0
<RECEIVABLES> 5191
<ALLOWANCES> 222
<INVENTORY> 4476
<CURRENT-ASSETS> 996
<PP&E> 9786
<DEPRECIATION> 4270
<TOTAL-ASSETS> 22067
<CURRENT-LIABILITIES> 5895
<BONDS> 0
0
0
<COMMON> 20
<OTHER-SE> 10629
<TOTAL-LIABILITY-AND-EQUITY> 22067
<SALES> 8688
<TOTAL-REVENUES> 8688
<CGS> 6512
<TOTAL-COSTS> 929
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 45
<INCOME-PRETAX> 1237
<INCOME-TAX> 128
<INCOME-CONTINUING> 1109
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1109
<EPS-PRIMARY> .55
<EPS-DILUTED> .55
</TABLE>
