U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-Q
(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, 2000
[ ] 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
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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
- --------------------------------------------------------------------------------
(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 - 1,998,956 shares as of May 10, 2000.
<PAGE>
REINHOLD INDUSTRIES, INC. AND SUBSIDIARIES
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 12
PART II - OTHER INFORMATION 16
SIGNATURES 18
EXHIBITS 19
<PAGE>
<TABLE>
REINHOLD INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except per share data)
(Unaudited)
<CAPTION>
Three Months Ended
March 31,
2000 1999
---- ----
<S> <C> <C>
Net sales $9,601 $ 8,688
Cost of goods sold 6,864 6,512
----- -----
Gross profit 2,737 2,176
Selling, general and administrative expenses 1,438 929
----- -----
Operating income 1,299 1,247
Interest expense, net (5) (10)
----- -----
Income before income taxes 1,294 1,237
Income taxes 186 128
----- -----
Net income $ 1,108 $ 1,109
===== =====
Basic earnings per share $ 0.55 $ 0.55
Diluted earnings per share $ 0.55 $ 0.55
Weighted average common shares outstanding - basic 1,999 1,999
Weighted average common shares outstanding - diluted 2,032 1,999
<FN>
See accompanying notes to condensed consolidated financial statements
</FN>
</TABLE>
<PAGE>
<TABLE>
REINHOLD INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except share data)
(Unaudited)
<CAPTION>
March 31, 2000 December 31, 1999
-------------- -----------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 5,198 $ 9,419
Accounts receivable 7,561 4,077
Inventories 5,695 4,085
Other current assets 1,871 1,157
------ ------
Total current assets 20,325 18,738
Property, plant and equipment, net 10,114 5,726
Cost in excess of fair value of net assets of acquired
companies - net 7,828 633
Other assets 323 137
------ ------
$38,590 $25,234
====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion - long term debt $ 1,403 $ 503
Accounts payable 3,282 1,825
Accrued expenses 4,753 4,719
------ ------
Total current liabilities 9,438 7,047
Long term debt - less current portion 11,071 1,125
Other long term liabilities 201 204
Stockholders' equity:
Preferred stock
Authorized: 5,000,000 shares
Issued and outstanding: None - -
Common stock
Class A - Authorized: 45,000,000 shares
Issued and outstanding: 1,998,956 shares 20 20
Additional paid-in capital 7,791 7,791
Retained earnings 10,335 9,227
Accumulated comprehensive loss (266) (180)
------ ------
Net stockholders' equity 17,880 16,858
------ ------
$38,590 $25,234
====== ======
<FN>
See accompanying notes to condensed consolidated financial statements
</FN>
</TABLE>
<PAGE>
<TABLE>
REINHOLD INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(Unaudited)
<CAPTION>
Three months Ended
March 31,
2000 1999
---- ----
<S> <C> <C>
Cash flow from operating activities:
Net income $ 1,108 $ 1,109
Adjustments to reconcile net income to net
cash provided by operating activities (net of effects
of acquisition):
Depreciation and amortization 300 253
Foreign currency translation (86) (158)
Changes in assets and liabilities:
Accounts receivable (32) (100)
Inventories 130 (91)
Other current assets (98) (68)
Accounts payable (100) 118
Accrued expenses (512) 934
Other, net 19 (43)
------ ------
Net cash provided by operating activities 729 1,954
------ ------
Cash flow from investing activities:
Acquisitions (15,705) -
Capital expenditures (91) (286)
------ ------
Net cash (used in) investing activities (15,796) (286)
------ ------
Cash flow from financing activities:
Proceeds from long-term debt 11,000 -
Repayment of long term debt (154) (114)
------ ------
Net cash provided by (used in) financing activities 10,846 (114)
------ ------
Net increase (decrease) in cash and cash equivalents (4,221) 1,554
Cash and cash equivalents, beginning of period 9,419 3,622
------ ------
Cash and cash equivalents, end of period $ 5,198 $ 5,176
====== ======
Cash paid during period for:
Income taxes $ 79 $ -
Interest $ 40 $ 47
<FN>
See accompanying notes to condensed consolidated financial statements
</FN>
</TABLE>
<PAGE>
REINHOLD INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2000
(Unaudited)
DESCRIPTION OF BUSINESS
Reinhold Industries, Inc. and subsidiaries ("Reinhold" or the "Company")
is a manufacturer of advanced custom composite components, sheet molding
compounds, and graphic arts and industrial rollers for a variety of applications
in the United States and Europe. Reinhold derives revenues from the defense
contract industry, the aircraft industry, the printing industry and other
commercial industries.
BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements are
those of Reinhold as of March 31, 2000 and December 31, 1999 and for the three
months ended March 31, 2000 and 1999. 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.
Certain prior year amounts have been reclassified to conform to 2000
presentation. The results of operations for the three months ended March 31,
2000 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, 1999, included in the Company's Form 10-KSB filed with the
Securities and Exchange Commission on March 27, 2000.
ACQUIRED BUSINESSES
On March 9, 2000, Reinhold Industries, Inc. (the "Company"),
through its wholly-owned subsidiary, Samuel Bingham Enterprises, Inc., an
Indiana corporation, purchased substantially all of the assets, including real,
personal and intellectual properties, and assumed certain liabilities of Samuel
Bingham Company, an industrial and graphic arts roller manufacturing and
supplying business, headquartered in Bloomingdale, Illinois ("Bingham").
The purchase price paid was $15,505,317, subject to final adjustment. The cost
in excess of fair value of net assets is being amortized over forty years. A
source of funds for the purchase price was a five-year term loan with the Bank
of America for Eleven Million Dollars ($11,000,000) with the balance being paid
from cash on hand.
<PAGE>
Notes to Condensed Consolidated Financial Statements (Continued)
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 acquisitions of Samuel Bingham Company and NP Aerospace have been
accounted for by the purchase method and, accordingly, the results of operations
have been included in the consolidated financial statements from the date of
acquisition.
The excess of the fair value of the net identifiable assets acquired over the
purchase price has been allocated to fixed assets and goodwill as follows (in
thousands):
<TABLE>
<CAPTION>
Samuel Bingham
Company NP Aerospace
------- ------------
<S> <C> <C>
Working capital $ 3,705 $ 3,360
Fixed assets 4,561 -
Severance costs - (403)
----- ------
Net identifiable assets 8,266 2,957
Cash paid 15,505 3,707
Deferred consideration - 227
------ ------
Excess over cost allocated to:
Property, plant and equipment - $ 977
======
Goodwill $7,239 -
======
</TABLE>
The Company is presently gathering information to complete the allocation of the
purchase price to the net assets acquired.
The pro forma unaudited results of operations for the three months ended March
31, 2000 and 1999, assuming consummation of the purchase of Samuel Bingham
Company as of January 1, 1999 are as follows (in thousands, except earnings per
share data):
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
March 31, 2000 March 31, 1999
-------------- --------------
<S> <C> <C>
Net sales $13,927 $15,154
Net income $1,564 $1,656
Basic earnings per share $ 0.78 $0.83
Diluted earnings per share $ 0.77 $0.83
</TABLE>
<PAGE>
Notes to Condensed Consolidated Financial Statements (Continued)
EARNINGS PER COMMON SHARE
The Company presents basic and diluted earnings per share ("EPS"). Basic EPS
includes no dilution and is computed by dividing income available to common
stockholders by the weighted average number of common shares outstanding for the
period. Diluted EPS reflects the potential dilution from securities that could
share in the earnings of the Company.
Options to purchase 163,000 shares of common stock were outstanding during the
three month period ended March 31, 2000. For the three month period ended March
31, 2000, the difference between the weighted average number of shares used in
the basic computation compared to that used in the diluted computation was due
to the dilutive impact of options to purchase common stock.
The reconciliations of basic and diluted weighted average shares are as follows:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
2000 1999
---- ----
<S> <C> <C>
Net income $1,108,000 $1,109,000
========== ==========
Weighted average shares used in basic computation 1,998,956 1,998,956
Dilutive effect of stock options 32,580 -
--------- ---------
Weighted average shares used for diluted
calculation 2,031,536 1,998,956
========= =========
</TABLE>
REPORTING COMPREHENSIVE INCOME
The Company reports comprehensive income under Statement of Financial
Accounting Standard ("SFAS") No. 130, "Reporting Comprehensive Income". The
difference between net income and total comprehensive income during the three
months ended March 31, 2000 and 1999 was a loss on foreign currency translation
of $86,000 and $158,000, respectively.
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 all fiscal quarters of fiscal years beginning after June 15, 1999. In June
1999, the Financial Accounting Standards Board issued SFAS No. 137 "Accounting
for Derivative Instruments and Hedging Activities - Deferral of the Effective
date of FASB Statement No. 133" which defers the effective date of SFAS No. 133
by one year. 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.
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.
<PAGE>
Notes to Condensed Consolidated Financial Statements (Continued)
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) was payable in equal
monthly principal payments of $37,800 plus interest at prime plus 1.75% and was
secured by fixed assets and land. The remainder of the CIT credit facility was a
revolver of One Million Seven Hundred Thirty-Two Thousand Dollars ($1,732,000),
which had not been used as of April 15, 1999.
On April 16, 1999, the Company repaid the outstanding loan with the CIT
Group Credit/Finance through a refinancing with Bank of America National Trust
and Savings Association ("B of A") and cancelled the revolver. The new credit
facility with B of A is a term loan in the amount of $1,861,478 payable in 48
equal monthly principal installments of $38,780 plus interest at a rate which
approximates LIBOR plus 1.75% and is secured by fixed assets.
On March 9, 2000, the Company borrowed $11,000,000 from B of A to fund a portion
of the purchase consideration due to Samuel Bingham Company. The principal
portion of the loan is payable in twenty successive quarterly installments
beginning June 30, 2000. Interest is payable quarterly at a rate which
approximates LIBOR plus 1.75% and is secured by all financial assets of the
Company. The loan agreement is subject to various financial covenants to which
the Company must comply.
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
long-term debt bears interest at a variable market rate, and thus has a carrying
amount that approximates fair value.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with an original
maturity of three months or less to be cash equivalents.
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 subsidiaries 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 mainly from
the valuation rates of the intercompany accounts and are taken directly to
Stockholders' equity.
<PAGE>
Notes to Condensed Consolidated Financial Statements (Continued)
OPERATING SEGMENTS
The Company reports operating segment data under SFAS No. 131 "Disclosures
about Segments of an Enterprise and Related Information".
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 five operating segments: Aerospace,
CompositAir, Commercial, NP Aerospace and Samuel Bingham Company ("SBC").
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, our subsidiary located in Coventry,
England, produces products for law enforcement, lighting, military, automotive
and commercial aircraft. SBC manufactures rubber and urethane rollers for
graphic arts and industrial applications.
The information in the following tables is derived directly from the
segment's internal financial reporting for corporate management purposes (in
thousands).
<TABLE>
<CAPTION>
March 31, 2000 March 31, 1999
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net sales
Aerospace $ 1,549 1,247
CompositAir 2,011 3,006
Commercial 591 566
NP Aerospace 3,848 3,869
SBC 1,602 -
- ------------------------------------------------------------------------------------------------------------------------------------
Total sales $ 9,601 8,688
Income before income taxes
Aerospace $ 367 356
CompositAir 268 547
Commercial 92 76
NP Aerospace 614 337
SBC 45 -
Unallocated corporate expenses (92) (79)
- ------------------------------------------------------------------------------------------------------------------------------------
Total income before income taxes $ 1,294 1,237
Depreciation and amortization
Aerospace $ 103 109
CompositAir 68 64
Commercial 38 39
NP Aerospace 43 41
SBC 48 -
- ------------------------------------------------------------------------------------------------------------------------------------
Total depreciation and amortization $ 300 253
Capital expenditures
Aerospace $ 40 52
CompositAir - 179
Commercial (7) 31
NP Aerospace 29 24
SBC 29 -
- ------------------------------------------------------------------------------------------------------------------------------------
Total capital expenditures $ 91 286
</TABLE>
<PAGE>
Notes to Consolidated Financial Statements (cont'd)
The information in the following tables is derived directly from the
segment's internal financial reporting for corporate management purposes (in
thousands).
<TABLE>
<CAPTION>
March 31, 2000 December 31, 1999
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Total assets
Aerospace $ 4,432 4,735
CompositAir 3,033 3,469
Commercial 1,107 1,024
NP Aerospace 9,770 9,455
SBC 17,805 -
Unallocated corporate 2,443 6,551
- ------------------------------------------------------------------------------------------------------------------------------------
Total assets $ 38,590 25,234
</TABLE>
The table below presents information related to geographic areas in which
Reinhold operated in 2000 and 1999 (in thousands):
<TABLE>
<CAPTION>
March 31, 2000 March 31, 1999
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net sales
United States $ 5,386 4,756
United Kingdom 3,433 3,728
Botswana 99 -
Germany 108 35
Switzerland 314 -
Canada 205 -
Other Europe 56 169
- ------------------------------------------------------------------------------------------------------------------------------------
Net sales $ 9,601 8,688
</TABLE>
<PAGE>
REINHOLD INDUSTRIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
March 31, 2000
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, 1999.
Reinhold Industries, Inc. and subsidiaries ("Reinhold" or the "Company")
is a manufacturer of advanced custom composite components, sheet molding
compounds, and graphic arts and industrial rollers for a variety of applications
in the United States and Europe. Reinhold derives revenues from the defense
contract industry, the aircraft industry, the printing industry and other
commercial industries.
Comparison of First Quarter 2000 to 1999
In the first quarter of 2000, net sales increased $0.9 million, or 10.5%,
to $9.6 million, compared to first quarter 1999 sales of $8.7 million. The
acquisition of Samuel Bingham company ("SBC") on March 9, 2000 added $1.6
million to first quarter 2000 sales. Sales decreased by $1.0 million at
CompositAir due to the ongoing commercial difficulties at our main customer, B/E
Aerospace. Sales increased $0.3 million in the Aerospace business unit due to
increased shipments of rocket nozzles. Sales in the Commercial and NP Aerospace
business units were flat.
Excluding the impact of the SBC acquisition, gross profit margin increased
to 29.3% in the first quarter of 2000 compared to 25.0% in the first quarter
1999 primarily due to lower material costs at CompositAir and lower scrap and
other inventory related losses at NP Aerospace.
Selling, general and administrative expenses for the first quarter 2000
were $1.4 million (15.0% of sales) compared to $0.9 million (10.7% of sales) for
the same quarter of 1999. SBC accounted for $0.3 of the increased cost.
Acquisition advisory fees increased by $0.07 during the quarter.
Interest expense in the first quarter of 2000 was $0.1 million compared to
interest expense of $0.05 million in the first quarter of 1999 due to the SBC
acquisition loan. Interest income was $0.06 higher in the first quarter 2000 due
to higher average cash balances.
Income before income taxes increased to $1.3 million (13.5% of sales) in
the first quarter of 2000 from $1.2 million (14.2% of sales) in the same period
of 1999, reflecting higher sales and gross margins. Income before income taxes
at NP Aerospace was $0.6 million (15.9% of sales) in 2000 compared to $0.3
million (8.7% of sales) in 1999 due to better product mix and lower scrap and
other inventory related losses. Income before income taxes expenses for
CompositAir was $0.3 million (13.3% of sales) in 2000 compared with $0.5 million
(18.2% of sales) in 1999 due to lower revenues.
<PAGE>
Management's Discussion and Analysis (cont'd)
A tax provision of $0.2 million was recorded in the first quarter of 2000.
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, 2000, working capital was $10.9 million, down $0.8 million
from December 31, 1999. Cash and cash equivalents of $5.2 million held at March
31, 2000 were $4.2 million lower than cash and cash equivalents held at December
31, 1999 primarily due to $4.7 million of net cash used for the SBC acquisition.
Net cash provided by operating activities to $0.7 million for the three
months ended March 31, 2000. Net cash provided by operating activities to $2.0
million for the comparable period in 1999. The decrease over the prior period
relates to the increased payout of cash bonuses in the first quarter of 2000
relating to 1999 and a $1.0 million customer prepayment received in 1999.
Net cash used in investing activities for the three months ended March 31,
2000 totaled $15.8 million and consisted primarily of the acquisition of SBC for
$15.7 million. Net cash used in investing activities for the three months ended
March 31, 1999 consisted of property and equipment expenditures totaling $0.3
million.
Net cash provided by financing activities for the three months ended March
31, 2000 totaled $10.8 million and consisted of the proceeds of the SBC
acquisition loan from B of A of $11.0 million less repayment of other long-term
debt. Net cash used in financing activities for the three months ended March 31,
1999 totaled $0.1 million and consisted of repayment of long-term debt.
Expenditures in 2000 and 1999 related to investing and financing
activities were financed by existing cash and cash equivalents and proceeds from
the B of A loans.
The Company does not have any current material commitments of capital
expenditures at March 31, 2000.
<PAGE>
Management's Discussion and Analysis (cont'd)
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. In the year ended December 31, 1999,
additional payments earned totaled (pound)140,000 ($227,000).
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 was a revolver of One Million
Seven Hundred Thirty-Two Thousand Dollars ($1,732,000). 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.
On April 16, 1999, the Company repaid the outstanding loan with the CIT Group
Credit/Finance through a refinancing with Bank of America National Trust and
Savings Association ("B of A") and cancelled the revolver. The new credit
facility with B of A is a term loan in the amount of $1,861,478 payable in 48
equal monthly principal installments of $38,780 plus interest at a rate which
approximates LIBOR plus 1.75% and is secured by fixed assets.
On March 9, 2000, the Company borrowed $11,000,000 from B of A to fund a
portion of the purchase consideration due to Samuel Bingham Company. The
principal portion of the loan is payable in twenty successive quarterly
installments beginning June 30, 2000. Interest is payable quarterly at a rate
which approximates LIBOR plus 1.75% and is secured by all financial assets of
the Company. The loan agreement is subject to various financial covenants to
which the Company must comply.
Management believes that the available cash and cash flows from operations
will be sufficient to fund the Company's operating and capital expenditure
requirements.
Forward Looking Statements
This Form 10-Q 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-Q. 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-Q, 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.
<PAGE>
Management's Discussion and Analysis (cont'd)
2000 Outlook
We expect mixed results in 2000. Our new acquisition, Samuel Bingham
company, should contribute positively to shareholder value in 2000, but not
until later in the year. Our CompositAir business unit has not seen the increase
in demand from its major customer that was expected to occur at the end of the
first quarter. Sales are forecasted to be off 20% from 1999. NP Aerospace sold
approximately 40 armored vehicles during 1999 which represented nearly $4.0
million in sales. The probability of this happening again is difficult to
predict. Our Aerospace business, however, is expected to substantially increase
sales and profits due to expanded marketing efforts, aggressive pricing and high
quality manufacturing. Our Commercial business unit should exceed 1999 volumes
and profitability. We are also in the process of selling an unneeded parcel of
land for a significant profit. Our expectation is that 2000 results will be
better than 1999.
Recent Accounting Pronouncements
The effective recent accounting pronouncements are included in the notes
to the condensed consolidated financial statements included herein.
<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.
4.1 Share Authorization Agreement, incorporated herein by reference to
Exhibit 99(a), Exhibit H to the Plan, to Keene Corporation's Form 8-K
filed with the Commission on June 28, 1996.
4.2 Registration Rights Agreement, incorporated herein by reference
to Exhibit 99(a), Exhibit G to the Plan, to Keene Corporation's
Form 8-K filed with the Commission on June 28, 1996.
9.1 Creditors' Trust Agreement, incorporated herein by reference to
Exhibit 99(a), Exhibit D to the Plan, to Keene Corporation's Form
8-K filed with the Commission on June 28, 1996.
10.1 Reinhold Industries, Inc. Stock Incentive Plan, on Form S-8, filed
with the Commission on November 10, 1997.
10.2 Reinhold Management Incentive Compensation Plan, incorporated by
reference to Page 34 to Keene's (Predecessor Co.) Form 10, dated
April 4, 1990, as amended by Form 8, Exhibit 10(e), dated July 19,
1990.
10.3 Lease, dated January 4, 1990, by and between Imperial Industrial
Properties, Inc. and Reinhold Industries, incorporated by reference
to Exhibit 10(b) to Keene's Form 10 dated April 4, 1990, as amended
by Form 8, dated July 19, 1990.
10.4 Reinhold Industries, Inc. Retirement Plan (formerly Keene Retirement
Plan), incorporated by reference to Exhibit 10(i) to Keene's Form 10
dated April 4, 1990, as amended by Form 8, dated July 19, 1990.
10.5 Management Agreement between Reinhold Industries, Inc. and Hammond,
Kennedy, Whitney & Company, Inc. dated May 31, 1999 on Form 10-QSB
filed with the Commission on August 16, 1999.
10.6 Stock Option Agreement between Reinhold Industries, Inc. and Michael
T. Furry dated June 3, 1999 on Form 10-QSB filed with the Commission
on August 16, 1999.
10.7 Stock Price Deficiency Payment Agreement between Reinhold Industries,
Inc. and various stockholders dated June 16, 1999 on Form 10-QSB
filed with the Commission on August 16, 1999.
20.1 New Keene Credit Facility, incorporated herein by reference to
Exhibit 99(a), Exhibit F 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
Purchase of certain assets and assumption of certain liabilities of
Samuel Bingham Company for $15,505,317.03 as filed with the Commission
on March 23, 2000.
<PAGE>
REINHOLD INDUSTRIES, INC. AND SUBSIDIARIES
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 12, 2000
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 AND 4 OF THE COMPANY'S 10-Q.
AMOUNTS IN THOUSANDS
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> Dec-31-2000
<PERIOD-START> Jan-01-2000
<PERIOD-END> Mar-31-2000
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<SECURITIES> 0
<RECEIVABLES> 7651
<ALLOWANCES> 90
<INVENTORY> 5695
<CURRENT-ASSETS> 1871
<PP&E> 20762
<DEPRECIATION> 10648
<TOTAL-ASSETS> 38590
<CURRENT-LIABILITIES> 9438
<BONDS> 0
0
0
<COMMON> 20
<OTHER-SE> 17860
<TOTAL-LIABILITY-AND-EQUITY> 38590
<SALES> 9601
<TOTAL-REVENUES> 9601
<CGS> 6864
<TOTAL-COSTS> 1438
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5
<INCOME-PRETAX> 1294
<INCOME-TAX> 186
<INCOME-CONTINUING> 1108
<DISCONTINUED> 0
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<NET-INCOME> 1108
<EPS-BASIC> .55
<EPS-DILUTED> .55
</TABLE>
