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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended May 30, 2003
Commission File Number 1-5197
Plymouth Rubber Company, Inc.
(Exact name of registrant as specified in its charter)
Massachusetts 04-1733970
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
104 Revere Street, Massachusetts 02021
(Address of principal executive offices) (Zip Code)
(781) 828-0220
Registrant's telephone number, including area code
Not Applicable
(Former name, former address, and former fiscal year, if changed
since last report)
Indicate by checkmark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the receding 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 _____
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the close of the period covered by
this report.
Class A common stock, par value $ 0.01 - 810,586
Class B common stock, par value $ 0.01 - 1,248,390
PLYMOUTH RUBBER COMPANY, INC.
PART I. FINANCIAL INFORMATION
Item 1. Condensed Financial Statements: Page No.
Condensed Consolidated Statement of Operations and
Retained Earnings (Deficit) 2
Condensed Consolidated Statement of Comprehensive
Income (Loss) 3
Condensed Consolidated Balance Sheet 4
Condensed Consolidated Statement of Cash Flows 5
Notes to Condensed Consolidated Financial
Statements 6-10
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 11-16
Item 3. Quantitative and Qualitative Disclosure about
Market Risks 18
Item 4. Controls and Procedures 18
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 19
Item 2. Changes In Securities 19
Item 3. Defaults Upon Senior Securities 19
Item 4. Submission of Matters to a Vote of Security
Holders 19
Item 5. Other Information 20
Item 6. Exhibits and Reports on Form 8-K 20
SIGNATURES 21
1
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
PLYMOUTH RUBBER COMPANY, INC.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
AND RETAINED EARNINGS (DEFICIT)
(In Thousands except Share and Per Share Amounts)
(Unaudited)
Second Quarter Ended Six Months Ended
----------------------- -----------------------
May 30, May 31, May 30, May 31,
2003 2002 2003 2002
---------- ---------- ---------- ----------
Net Sales $ 18,287 $ 17,854 $ 31,830 $ 31,795
---------- ---------- ---------- ----------
Costs and Expenses:
Cost of products sold 14,789 13,704 26,560 24,558
Selling, general and
administrative 3,282 3,101 6,048 5,916
---------- ---------- ---------- ----------
18,071 16,805 32,608 30,474
---------- ---------- ---------- ----------
Operating income (loss) 216 1,049 (778) 1,321
Interest expense (466) (489) (883) (984)
Other income 91 53 132 172
---------- ---------- ---------- ----------
Income (loss) before taxes (159) 613 (1,529) 509
Benefit (provision) for
income taxes (25) 105 (35) 82
---------- ---------- ---------- ----------
Net income (loss) (184) 718 (1,564) 591
Retained earnings (deficit)
at beginning of period (5,607) (4,455) (4,227) (4,328)
---------- ---------- ---------- ----------
Retained earnings (deficit)
at end of period $ (5,791) $ (3,737) $ (5,791) $ (3,737)
========== ========== ========== =========
Per Share Data:
Basic Earnings (Loss) Per Share:
Net income (loss) $ (0.09) $ 0.35 $ (0.76) $ 0.29
========== ========== ========== ==========
Weighted average number of
shares outstanding 2,058,976 2,058,976 2,058,976 2,058,976
========== ========== ========== ==========
Diluted Earnings (Loss) Per Share:
Net income (loss) $ (0.09) $ 0.34 $ (0.76) $ 0.29
========== ========== ========== ==========
Weighted average number of
shares outstanding 2,058,976 2,092,026 2,058,976 2,067,307
========== ========== ========== ==========
See Accompanying Notes to Condensed Consolidated Financial Statements
2
PLYMOUTH RUBBER COMPANY, INC.
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE
INCOME (LOSS)
(In Thousands)
(Unaudited)
Second Quarter Ended Six Months Ended
----------------------- -----------------------
May 30, May 31, May 30, May 31,
2003 2002 2003 2002
---------- ---------- ---------- ----------
Net income (loss) $ (184) $ 718 $ (1,564) $ 591
Other comprehensive income,
net of tax:
Foreign currency
translation adjustment 128 72 215 57
---------- ---------- ---------- ----------
Other comprehensive income 128 72 215 57
---------- ---------- ---------- ----------
Comprehensive income (loss) $ (56) $ 790 $ (1,349) $ 648
========== ========== ========== =========
See Accompanying Notes to Condensed Consolidated Financial Statements
3
PLYMOUTH RUBBER COMPANY, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(In Thousands)
May 30, Nov. 29,
2003 2002
---------- ----------
Assets (Unaudited)
Current Assets:
Cash $ 2 $ 37
Accounts receivable, less
allowance for doubtful
accounts of $400 and $397
at May 30, 2003 and
November 29, 2002 12,691 11,366
Inventories:
Raw materials 4,094 3,481
Work in process 2,021 1,799
Finished goods 7,046 6,361
---------- ----------
13,161 11,641
---------- ----------
Prepaid expenses and other
current assets 739 984
---------- ----------
Total current assets 26,593 24,028
---------- ----------
Plant Assets:
Plant assets 48,693 47,627
Less: Accumulated depreciation (28,026) (26,199)
---------- ----------
Total plant assets, net 20,667 21,428
---------- ----------
Other long-term assets 876 790
---------- ----------
$ 48,136 $ 46,246
========== ==========
Liabilities and Stockholders' Equity
Current Liabilities:
Short-term debt $ 15,430 $ 13,314
Accounts payable 8,482 7,035
Accrued expenses 4,245 4,482
Current portion of
long-term obligations 1,959 1,536
---------- ----------
Total current liabilities 30,116 26,367
---------- ----------
Long-Term Liabilities:
Borrowings 8,236 8,972
Pension obligation 5,359 5,115
Deferred tax liability 143 119
Other 2,569 2,611
---------- ----------
Total long-term liabilities 16,307 16,817
---------- ----------
Stockholders' Equity:
Preferred stock, $10 par value,
500,000 shares authorized; no
shares issued and outstanding -- --
Class A voting common stock,
$0.01 par value, 1,500,000
shares authorized, 810,586
shares issued and outstanding 8 8
Class B non-voting common stock,
$0.01 par value, 3,500,000
shares authorized, 1,281,304
shares issued and 1,248,390
shares outstanding 13 13
Paid in capital 11,154 11,154
Retained earnings (deficit) (5,791) (4,227)
Accumulated other
comprehensive loss (3,486) (3,701)
---------- ----------
1,898 3,247
Less: Treasury stock at
cost (32,914 shares) (185) (185)
---------- ----------
Total stockholders' equity 1,713 3,062
---------- ----------
$ 48,136 $ 46,246
========== ==========
See Accompanying Notes to Condensed Consolidated Financial Statements
4
PLYMOUTH RUBBER COMPANY, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(In Thousands)
(Unaudited)
Six Months Ended
-----------------------
May 30, May 31,
2003 2002
---------- ----------
Cash flows relating to
operating activities:
Net income (loss) $ (1,564) $ 591
Adjustments to reconcile net
income (loss) to net cash
provided by operating
activities:
Depreciation and amortization 1,440 1,479
Gain on disposal of plant assets -- (131)
Changes in assets and liabilities:
Accounts receivable (922) (929)
Inventory (1,190) (1,558)
Prepaid expenses and other
current assets 249 398
Other assets 16 (109)
Accounts payable 1,210 (1,449)
Accrued expenses (293) (280)
Pension obligation 244 75
Other liabilities (68) (9)
---------- ----------
Net cash used in operating activities (878) (1,922)
---------- ----------
Cash flows relating to investing
activities:
Capital expenditures (235) (115)
Sale/lease back of plant assets -- 47
Proceeds from sales of plant assets -- 131
---------- ----------
Net cash provided by (used in)
investing activities (235) 63
---------- ----------
Cash flows relating to financing
activities:
Net increase (decrease) in
short-term debt 2,126 2,256
Payments on term debt (774) (241)
Payments on capital leases (145) (114)
---------- ----------
Net cash provided by financing
activities 1,207 1,901
---------- ----------
Effect of exchange rates on cash (129) (24)
---------- ----------
Net change in cash (35) 18
Cash at the beginning of the period 37 7
---------- ----------
Cash at the end of the period $ 2 $ 25
========== ==========
Supplemental Disclosure of Cash Flow Information
Cash paid for interest $ 920 $ 971
========== ==========
Cash paid for income taxes $ 16 $ 26
========== ==========
See Accompanying Notes to Condensed Consolidated Financial Statement
5
PLYMOUTH RUBBER COMPANY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) The Company, in its opinion, has included all adjustments
(consisting of normal recurring adjustments) necessary for
a fair presentation of the results for the interim periods.
The interim financial information is not necessarily
indicative of the results that will occur for the full
year. The condensed consolidated financial statements and
notes thereto should be read in conjunction with the
consolidated financial statements and notes thereto for the
years ended November 29, 2002, November 30, 2001, and
December 1, 2000, included in the Company's 2002 Annual
Report filed with the Securities and Exchange Commission on
Form 10-K.
(2) The consolidated financial statements have been prepared on a
going concern basis, which contemplates the realization of
assets and the satisfaction of liabilities in the normal
course of business. The negative working capital position
of $3,523,000, the funding requirement for the defined
benefit plan of $1,262,000 for the plan year ending
November 30, 2002, the lack of sales growth, and the
overall risks associated with the fiscal 2003 plan may
indicate that the Company will be unable to continue as a
going concern for a reasonable period of time. The
consolidated financial statements do not include any
adjustments that might result from the outcome of this
uncertainty.
It is management's belief that cash flows generated from
operations and available incremental borrowings will be
sufficient to meet the Company's liquidity needs during
fiscal 2003. Management has also identified a number of
additional expense reductions possible in 2003, including
the deferral of certain planned personnel replacements or
additions, the deferral of certain planned marketing
expenses, reduced product costs through materials
substitutions, and decreased usage of certain operating
supplies. Although management expects to be able to
accomplish its business and financing plans, there is no
assurance that it will be able to do so. The Company's
plans depend upon many factors. Failure to accomplish
these plans could have an adverse impact on the Company's
liquidity, financial position, and ability to continue
operations.
(3) Environmental
The Company has been named as a Potentially Responsible
Party by the United States Environmental Protection Agency
in two ongoing claims under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980
("CERCLA"). The Company has also received Notices of
Responsibility under Massachusetts General Laws Chapter 21E
on two sites in Massachusetts. The Company has accrued
$740,000 as of May 30, 2003 to cover future environmental
expenditures related to these claims, which is net of
$505,000 payments made to date. The accrual represents the
Company's estimate of the remaining remediation costs based
upon the best information currently available. Actual
future costs may be different from the amount accrued for
as of May 30, 2003 and may be affected by various factors,
including future testing, the remediation alternatives
taken at the sites, and actual cleanup costs. The final
remediation costs could also be subject to adjustment
because of the long term nature of the cases, legislative
changes, insurance coverage, joint and several liability
provisions of CERCLA, and the Company's ability to
successfully negotiate an outcome similar to its previous
experience in these matters.
The Company has also received Notices of Responsibility
under Massachusetts General Laws Chapter 21E on three sites
at the Company's facilities in Canton, Massachusetts. In
all of these cases, the Company has taken a variety of
actions towards the ultimate cleanup, depending upon the
status of each of the sites. These activities include the
retention of an independent Licensed Site Professional,
investigation, assessment,
6
PLYMOUTH RUBBER COMPANY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) (Continued)
containment, and remediation. The Company has accrued
$290,000 as of May 30, 2003 to cover estimated future
environmental cleanup expenditures, which is net of
$948,000 payments made to date. Actual future costs may be
different from the amount accrued for as of May 30, 2003.
(4) The following table reflects the factors used in computing
earnings (loss) per share and the effect on income (loss)
and the weighted average number of shares of potentially
dilutive securities.
Second Quarter Ended May 30, 2003
----------------------------------------
Loss Shares Per Share
(Numerator) (Denominator) Amount
---------- ---------- ----------
Basic EPS
Loss available to
common stockholders $ (184,000) 2,058,976 $ (0.09)
==========
Effect of dilutive
stock options (A) -- --
---------- ----------
Diluted EPS
Loss available to
common stockholders
and assumed
conversions $ (184,000) 2,058,976 $ (0.09)
========== ========== ==========
Second Quarter Ended May 31, 2002
----------------------------------------
Income Shares Per Share
(Numerator) (Denominator) Amount
---------- ---------- ----------
Basic EPS
Income available to
common stockholders $ 718,000 2,058,976 $ 0.35
==========
Effect of dilutive
stock options (A) -- 33,050
---------- ----------
Diluted EPS
Income available to
common stockholders
and assumed
conversions $ 718,000 2,092,026 $ 0.34
========== ========== ==========
(A) Options for 390,225 and 477,739 shares of common stock
were outstanding at May 30, 2003 and May 31, 2002,
respectively, but were not included in computing
diluted earnings per share in each of the respective
periods because their exercise prices were greater than
the average market price of the Company's common stock
for the period and their effects were anti-dilutive. In
addition, options for 20,260 shares of common stock
were outstanding at May 30, 2003 but were not included
in computing diluted earnings per share because of the
loss.
7
PLYMOUTH RUBBER COMPANY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) (Continued)
Six Months Ended May 30, 2003
----------------------------------------
Loss Shares Per Share
(Numerator) (Denominator) Amount
---------- ---------- ----------
Basic EPS
Loss available to
common stockholders $ (1,564,000) 2,058,976 $ (0.76)
==========
Effect of dilutive
stock options (A) -- --
---------- ----------
Diluted EPS
Loss available to
common stockholders
and assumed
conversions $ (1,564,000) 2,058,976 $ (0.76)
========== ========== ==========
Six Months Ended May 31, 2002
----------------------------------------
Income Shares Per Share
(Numerator) (Denominator) Amount
---------- ---------- ----------
Basic EPS
Income available to
commonstockholders $ 591,000 2,058,976 $ 0.29
==========
Effect of dilutive
stock options (A) -- 8,331
---------- ----------
Diluted EPS
Income available to
common stockholders
and assumed
conversions $ 591,000 2,067,377 $ 0.29
========== ========== ==========
(B) Options for 321,113 and 505,739 shares of common stock
were outstanding at May 30, 2003 and May 31, 2002,
respectively, but were not included in computing
diluted earnings per share in each of the respective
periods because their exercise prices were greater than
the average market price of the Company's common stock
for the period and their effects were anti-dilutive. In
addition, options for 29,001 shares of common stock
were outstanding at May 30, 2003 but were not included
in computing diluted earnings per share because of the
loss.
In April 2003, the shareholders approved the amendment to
the Company's Restated Articles of Organization reducing
the par value for Class A and Class B Common Stock from
$1.00 per share to $0.01 per share. Accordingly, the value
for Class A and Class B Common Stock and Paid in capital on
the Condensed Consolidated Balance Sheet, have been
adjusted for this change in par value.
(5) Stock Compensation. The Company's stock option plans are
accounted for in accordance with Accounting Principles
Board Opinion No. 25, "Accounting for Stock Issued to
Employees" ("APB No. 25"). The Company uses the disclosure
requirements of Statement of Financial Accounting Standard
No. 123, "Accounting for Stock-Based Compensation" ("FAS
123"). Under APB No. 25, the Company does not recognize
8
PLYMOUTH RUBBER COMPANY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) (Continued)
compensation expense on stock options granted to employees,
because the exercise price of each option is equal to the
market price of the underlying stock on the date of the
grant. If the company had elected to recognize
compensation cost based on the fair value of the options
granted at grant date as prescribed by FAS 123, the
Company's net loss and loss per share would have been
reduced to the following pro forma amounts:
Second Quarter Ended Six Months Ended
----------------------- -----------------------
May 30, May 31, May 30, May 31,
2003 2002 2003 2002
---------- ---------- ---------- ----------
Net income (loss), as
reported: $ (184) $ 718 $ (1,564) $ 591
Deduct: Total stock-based
employee compensation
determined under fair
value method for all
awards, net of related
tax effects (35) (48) (69) (96)
---------- ---------- ---------- ----------
Pro forma net income (loss) $ (219) $ 670 $ (1,633) $ 495
========== ========== ========== ==========
Earnings per share:
Basic, as reported $ (0.09) $ 0.35 $ (0.76) $ 0.29
========== ========== ========== ==========
Basic, pro forma $ (0.11) $ 0.33 $ (0.79) $ 0.24
========== ========== ========== ==========
Diluted, as reported $ (0.09) $ 0.34 $ (0.76) $ 0.29
========== ========== ========== ==========
Diluted, pro forma $ (0.11) $ 0.32 $ (0.79) $ 0.24
========== ========== ========== ==========
(6) Plymouth Rubber Company, Inc. and its subsidiaries primarily
operate through the following two business segments:
Plymouth Tapes and Brite-Line Technologies. Management has
determined these to be the Company's business segments
based upon its process of reviewing and assessing Company
performance and allocating resources. Plymouth Tapes
manufactures plastic and rubber products, including
automotive, electrical, and industrial tapes. Brite-Line
Technologies manufactures and supplies rubber and plastic
highway marking and safety products.
Management evaluates the performance of its segments and
allocates resources to them primarily based upon sales and
operating income. Intersegment sales are at cost and are
eliminated in consolidation. In addition, certain of the
selling, general and administrative expenses recorded in
Plymouth Tapes could be considered as incurred for the
benefit of Brite-Line, but are currently not allocated to
that segment. These expenses include certain management,
accounting, personnel and sales services, and a limited
amount of travel, insurance, directors fees and other
expenses.
The table below presents information related to Plymouth
Rubber's business segments for the second quarter and six
months ended May 30, 2003 and May 31, 2002.
9
PLYMOUTH RUBBER COMPANY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) (Continued)
Second Quarter Ended Six Months Ended
----------------------- -----------------------
May 30, May 31, May 30, May 31,
2003 2002 2003 2002
---------- ---------- ---------- ----------
Segment sales to
unaffiliated ,customers:
Plymouth Tapes $ 15,189 $ 14,432 $ 28,393 $ 28,071
Brite-Line Technologies 3,098 3,422 3,437 3,724
---------- ---------- ---------- ----------
Consolidated net sales $ 18,287 $ 17,854 $ 31,830 $ 31,795
========== ========== ========== =========
Segment operating income
(loss):
Plymouth Tapes $ (250) $ 521 $ (808) $ 1,179
Brite-Line Technologies 466 528 30 142
---------- ---------- ---------- ----------
Consolidated segment
operating income (loss) 216 1,049 (778) 1,321
Interest expense (466) (489) (883) (984)
Other income (expense) 91 53 132 172
---------- ---------- ---------- ----------
Consolidated income (loss)
,before taxes $ (159) $ 613 $ (1,529) $ 509
========== ========== ========== =========
10
Item 2. Management's Discussion and Analysis of Financial Conditions and
Results of Operations
First Six Months, 2003, Compared with First Six Months, 2002
Sales increased 0.1% to $31,830,000 in 2003 from $31,795,000 in
2002. Sales at Plymouth Tapes increased 1.1% to $28,393,000 in
2003 from $28,071,000 in 2002. While sales in the automotive
markets increased approximately 4% compared to 2002, sales in all
other markets, including the electrical and contractor markets,
decreased approximately 3% from 2002, due largely to the economic
slowdown in the industrial markets, partially offset by favorable
exchange rates on foreign denominated sales. Sales at Brite-Line
Technologies decreased 7.7% to $3,437,000 in 2003, from
$3,724,000 in 2002.
Gross margin decreased $1,967,000, or 27.2%, to $5,270,000 in
2003 from $7,237,000 in 2002. Gross margin, as a percentage of
sales, decreased to 16.6% in 2003 from 22.8% in 2002. Plymouth
Tapes' gross margin decreased $1,851,000, or 29.6%, to $4,395,000
in 2003 from $6,246,000 in 2002. Gross margin, as a percentage
of sales, decreased to 15.5% in 2003 from 22.3% in 2002. The
major factors driving this decrease were: higher raw material
purchase prices for 2003, primarily for PVC resins, which
accounted for approximately $600,000 of unfavorable margin, or
2.1% of sales; increased manufacturing overhead costs, which
accounted for $524,000, or 1.8% of sales, due to higher spending
for insurance, pension, utilities, and indirect labor; and
overall production yields, which decreased approximately $300,000
or 1.1% of sales, compared to 2002. At Brite-Line Technologies,
gross margin decreased $116,000, or 11.7%, to $875,000 in 2003
from $991,000 in 2002 and, as a percentage of sales, decreased to
25.5% in 2003 from 26.6% in 2002 due to lower production levels,
which translated into unabsorbed manufacturing cost, partially
offset by a decrease in lower margin sales.
Selling, general and administrative expenses in 2003 increased
$132,000 to $6,048,000 from $5,916,000 in 2002. Selling, general
and administrative expenses, as a percentage of sales, increased
to 19.0% in 2003 from 18.6% in 2002. At Plymouth Tapes, selling,
general and administrative expenses in 2003 increased $136,000 to
$5,203,000 from $5,067,000 in 2002. Selling, general and
administrative expenses, as a percentage of sales, increased
slightly to 18.3% in 2003 from 18.1% in 2002. The major
increases were a $193,000 increase in advertising to support new
sales strategies, a $167,000 increase in professional fees for
legal, audit, and marketing consulting, a $69,000 increase in
salaries and fringe, a $63,000 increase in freight, and a $43,000
increase in travel expenses, mostly offset by a $209,000 absence
of a freight loss which occurred in 2002, a $141,000 reduction in
deferred compensation expense, a $60,000 decrease in foreign
selling costs, and a $40,000 decrease in commissions. At Brite-
Line Technologies, selling, general and administrative expenses
in 2003 decreased slightly by $4,000 to $845,000 from $849,000 in
2002. Selling, general and administrative expenses, as a
percentage of sales, increased to 24.6% from 22.8% in 2002.
Increases in travel, salaries, development expenses, and
customer-supplied equipment were mostly offset by decreases in
bad debt expense and freight.
Interest expense in 2003 decreased 10.3% to $883,000 from
$984,000 in 2002, because of a decrease in fees, as well as lower
average balances and lower interest rates on both the revolving
line of credit and the real estate loan. Other income was
$132,000 in 2003, primarily due to foreign exchange gains,
compared to $172,000 in 2002, which included a $131,000 gain on
the sale of equipment, and $41,000 of miscellaneous income.
The after-tax loss for 2003 was $1,564,000, compared to an after-
tax profit of $591,000 in 2002. In accordance with the Statement
of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" (FAS109), a full valuation allowance was recorded for any
tax benefits generated from the Company's domestic operations in
2003, as they could not be carried back to recover taxes paid and
may not be offset by the reversal of future taxable differences.
The Company's liquidity situation at May 30, 2003 also provides
significant negative evidence regarding its ability to generate
sufficient taxable income in the future to realize any deferred
tax benefit.
11
Item 2. Management's Discussion and Analysis of Financial Conditions and
Results of Operations (Continued)
Second Quarter, 2003, Compared with Second Quarter, 2002
Sales increased 2.4% to $18,287,000 in 2003 from $17,854,000 in
2002. Sales at Plymouth Tapes increased 5.2% to $15,189,000 in
2003 from $14,432,000 in 2002. Sales in the automotive markets
increased 3.6% from last year, and sales in all other markets
increased 7.8% due largely to small increases in industrial
demand. Sales at Brite-Line Technologies decreased 9.5% to
$3,098,000 in 2003, from $3,422,000 in 2002, due to a decrease in
foreign sales.
Gross margin in 2003 decreased $652,000, or 15.7%, to $3,498,000
in 2003 from $4,150,000 in 2002. Gross margin, as a percentage
of sales, decreased to 19.1% in 2003 from 23.2% in 2002.
Plymouth Tapes' gross margin in 2003 decreased $615,000, or
19.8%, to $2,493,000 in 2003 from $3,108,000 in 2002. Plymouth
Tapes' gross margin, as a percentage of sales, decreased to 16.4%
in 2003 from 21.5% in 2002. The major factors driving this
decrease were: higher raw material purchase prices for 2003,
primarily for PVC resins, which accounted for approximately
$340,000 of unfavorable margin, or 2.2% of sales; increased
manufacturing overhead costs, which accounted for $230,000, or
1.5% of sales, due to higher spending for insurance, pension,
utilities, and indirect labor; and overall production yields,
which decreased approximately $180,000, or 0.6% of sales,
compared to 2002. At Brite-Line Technologies, gross margin in
2003 decreased $37,000 to $1,005,000 in 2003 from $1,042,000 in
2002 and, as a percentage of sales, increased to 32.4% in 2003
from 30.5% in 2002 due to a decrease in lower margin sales,
partially offset by lower production levels, which translated
into unabsorbed manufacturing costs.
Selling, general and administrative expenses in 2003 increased
$181,000, or 5.8%, to $3,282,000 from $3,101,000 in 2002.
Selling, general and administrative expenses, as a percentage of
sales, increased to 17.9% in 2003 from 17.4% in 2002. At Plymouth
Tapes, selling, general and administrative expenses in 2003
increased $156,000, or 6.0%, to $2,743,000 from $2,587,000 in
2002. Plymouth Tapes' selling, general and administrative
expenses, as a percentage of sales, increased slightly to 18.1%
in 2003 from 17.9% in 2002. The major increases were a $159,000
increase in advertising to support new sales strategies, a
$63,000 increase in professional fees for legal, audit, and
marketing consulting, a $64,000 increase in freight, and a
$63,000 increase in salaries and fringe, partially offset by a
$141,000 reduction in deferred compensation expense, and a
$42,000 decrease in foreign selling costs. At Brite-Line
Technologies, selling, general and administrative expenses in
2003 increased $25,000, or 4.9%, to $539,000 from $514,000 in
2002. Brite-Line Technologies' selling, general and
administrative expenses, as a percentage of sales, increased to
17.4% in 2003 from 15.0% in 2002. Increases in customer-supplied
equipment and advertising were partially offset by decreases in
bad debt expense and freight.
Interest expense in 2003 decreased 4.7% to $466,000 from $489,000
in 2002, because of lower average balances and lower interest
rates on both the revolving line of credit and the real estate
loan, as well as a decrease in fees. Other income was $91,000 in
2003, including $87,000 of foreign exchange gains, compared to
$53,000 in 2002, which included $32,000 of foreign exchange
gains, and $20,000 of miscellaneous income.
The after-tax loss for 2003 was $184,000, compared to an after-
tax profit of $718,000 in 2002. In accordance with the Statement
of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" (FAS109), a full valuation allowance was recorded for any
tax benefits generated from the Company's domestic operations in
2003, as they could not be carried back to recover taxes paid and
may not be offset by the reversal of future taxable differences.
The Company's liquidity situation at May 30, 2003 also provides
significant negative evidence regarding its ability to generate
sufficient taxable income in the future to realize any deferred
tax benefit.
Liquidity and Capital Resources
Prior to December, 2002, the Company's term debt agreements had
contained various covenants specifying certain financial
requirements, including minimum tangible net worth, fixed charge
and EBITDA coverage ratios, working capital and maximum ratio of
total liabilities to net worth. In
12
Item 2. Management's Discussion and Analysis of Financial Conditions and
Results of Operations (Continued)
addition, the revolving
working capital credit facility and the real estate term loan
contain an acceleration provision, which can be triggered if the
lender determines that an event of default has occurred.
As of each quarter end from September 1, 2000 through August 30,
2002, the Company had been in violation of certain covenants of
its term debt facility and therefore, due to a cross default
provision, the Company had not been in compliance with a covenant
under its revolving working capital credit facility and real
estate term loan. As a result, all of the Company's term loans
(except for that of its Spanish subsidiary) had been classified
as current liabilities on the Company's Consolidated Balance
Sheet at the end of each fiscal quarter end. In addition, during
July 2002, the Company received a demand from its primary term
debt lender for the payment of their outstanding loan balances in
the amount of $8,658,000, which represented the total of all
future payments and accumulated late fees, and a demand letter
from a smaller equipment lender for approximately $69,000 of
payments due.
During 2002, the Company negotiated with these lenders and, in
November 2002, reached formal agreement to obtain relief from
their demands and to restructure existing term debt facilities.
Under the new arrangements, the term debt lenders accepted
significantly reduced principal payments over the next three
years, eliminated financial covenants, waived existing defaults
and rescinded demands for accelerated payment, in return for
enhanced collateral positions.
As of May 30, 2003, the Company had approximately $867,000 of
unused borrowing capacity under its revolving line of credit with
its primary working capital lender, after consideration of
collateral limitations.
The Company's working capital position decreased from a negative
$2,339,000 at November 29, 2002 to a negative $3,523,000 at May
30, 2003, due to a $2,116,000 increase in short term debt, a
$1,447,000 increase in accounts payable, a $423,000 increase in
the current portion of long term borrowings, a $245,000 decrease
in prepaid and other current assets, and a $35,000 decrease in
cash, partially offset by a $1,520,000 increase in inventory, a
$1,325,000 increase in accounts receivable, and a $237,000
decrease in accrued expenses.
During the second quarter of 2002, the Company received a funding
waiver from the Internal Revenue Service ("IRS") for the $855,000
payment due to its defined benefit plan for the year ended
November 30, 2001, conditioned on the Company satisfying the
minimum funding requirements for the plan years ending November
30, 2002 and November 30, 2003. This waiver amount was added in
equal installments as an additional payment due in each the five
succeeding plan years. Also during the second quarter of 2003,
the Company notified the Pension Benefit Guaranty Corporation
that the Company intended to make the $1,262,000 contribution for
the following plan year ending November 30, 2002 by the final due
date of August 15, 2003, instead of on a quarterly basis. During
the first quarter of 2003, the Company requested a partial
funding waiver from the Internal Revenue Service for $1,030,000
of the $1,262,000 payment due for the plan year ending November
30, 2002. During the second and third quarters of 2003, the
Internal Revenue Service and the Pension Benefit Guaranty
Corporation, who is also reviewing the waiver request, have
requested additional information, which the Company has provided.
As of July 14, 2003, the Company had not been notified of the
Internal Revenue Service's decision. Should a waiver not be
granted, and should the Company not be able to make all of the
minimum funding payments due by August 15, 2003, the Company
would be required to notify the IRS, the Pension Benefit Guaranty
Corporation, and the Pension Plan participants. The IRS would
assess an excise tax of 10% on the amount of the payment
shortfall, which would be currently payable, and the Pension
Benefit Guaranty Corporation would impose a tax lien on the
Company for the amount of payment shortfall. The Pension Benefit
Guaranty Corporation could choose to take one or more additional
actions, which could include having the Company continue funding
the plan at some level, asking the Company for additional
security, taking over the Plan, terminating the Plan, or other
possibilities. Some of these possible actions could have an
adverse impact on the Company's liquidity, financial position,
and ability to continue operations.
13
Item 2. Management's Discussion and Analysis of Financial Conditions and
Results of Operations (Continued)
The consolidated financial statements have been prepared on a
going concern basis, which contemplates the realization of assets
and the satisfaction of liabilities in the normal course of
business. The negative working capital position of $3,523,000,
the funding requirement for the defined benefit plan of
$1,262,000 for the plan year ending November 30, 2002, the lack
of sales growth, and the overall risks associated with the fiscal
2003 plan may indicate that the Company will be unable to
continue as a going concern for a reasonable period of time. The
consolidated financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
It is management's belief that cash flows generated from
operations, and available incremental borrowings will be
sufficient to meet the Company's liquidity needs during fiscal
2003. Management has also identified and implemented a number of
additional expense reductions possible in 2003, including the
deferral of certain planned personnel replacements or additions,
the deferral of certain planned marketing expenses, and reduced
product costs through materials substitutions. Although
management expects to be able to accomplish its business and
financing plans, there is no assurance that it will be able to do
so. The Company's plans depend upon many factors. Failure to
accomplish these plans could have an adverse impact on the
Company's liquidity, financial position, and ability to continue
operations.
Cash used in operating activities was $878,000 in 2003, as
compared to $1,922,000 in 2002. The major factors contributing
to cash used in operating activities were net loss of $1,564,000,
an increase in inventory of $1,190,000, an increase in accounts
receivable of $922,000, a decrease in accrued expenses of
$293,000, and a decrease in other liabilities of $68,000,
partially offset by depreciation and amortization of $1,440,000,
an increase in accounts payable of $1,210,000, a decrease in
prepaid expenses of $249,000, an increase in pension obligation
of $244,000, and a $16,000 decrease in other assets. Additional
short-term borrowings of $2,126,000 were used to provide this
operating cash, pay off term debt and capital leases of $919,000,
and for capital expenditures of $235,000.
On May 23, 2003, the Company received notification from the
American Stock Exchange (the "AMEX") that, as of the first
quarter of fiscal 2003, the Company was not in compliance with
AMEX listing requirements, due to shareholders' equity being less
than $2,000,000 and losses from continuing operations and/or net
losses in two of its three most recent fiscal years. In order to
maintain the listing of its common stock on AMEX, Plymouth was
required to submit a plan by June 23, 2003, subject to acceptance
by AMEX, describing actions to be taken to bring it into
compliance with listing requirements within 18 months. On June
23, 2003 the Company submitted to the American Stock Exchange a
plan describing the program by which the Company will be brought
back into compliance with AMEX's listing requirements by the end
of November 2004. The filing of the Plan is subject to
acceptance by AMEX and may result in an extension of time, up to
18 months, for the Company to regain compliance with AMEX listing
standards.
A summary of the Company's cash requirements related to its
outstanding long term debt and future minimum lease payments is
as follows:
Fiscal Year: Long Term Debt Operating Lease Total
Commitments
----------- ----------- ------------
2003 $ 617,000 $ 278,000 $ 895,000
2004 1,630,000 535,000 2,165,000
2005 5,771,000 296,000 6,067,000
2006 606,000 95,000 701,000
2007 663,000 -- 663,000
Thereafter 302,000 -- 302,000
----------- ----------- ------------
Total $ 9,589,000 $ 1,204,000 $ 10,793,000
=========== =========== ============
14
Item 2. Management's Discussion and Analysis of Financial Conditions and
Results of Operations (Continued)
Critical Accounting Policies
The Company's significant accounting policies are discussed in
Note 1 to the Consolidated Financial Statements on the Company's
2002 Annual Report filed with the Securities and Exchange
Commission on Form 10-K. Certain accounting policies are
important to the portrayal of the Company's financial condition
and results of operations, and require management's subjective
judgments. These policies relate to the deferred tax asset
valuation allowance, inventory reserves, provision for doubtful
accounts receivable and impairment of long lived assets.
Recognition of a deferred tax asset is dependent on generating
sufficient future taxable income prior to the expiration of the
tax loss or credit carryforward. The Company has taken a full
valuation allowance for this tax benefit in accordance with the
Statement of Financial Accounting Standards No. 109 "Accounting
for Income Taxes". Should the Company's liquidity situation
improve, the amount of the deferred tax asset considered
realizable could be increased and could result in a credit to
income tax expense in the period such determination was made.
The Company writes down its inventory for estimated obsolescence
or unmarketable inventory based upon the difference between the
cost of the inventory and the estimated net realizable value,
based upon assumptions about future demand and market pricing.
If actual market conditions are less favorable than those
projected by management, additional inventory write-downs may be
required.
The Company periodically reviews the aging of accounts receivable
to identify potentially uncollectible accounts and establishes a
reserve based on experience and discussion with customers.
Actual write-offs could differ from bad debt reserves.
The Company reviews long-lived assets annually or whenever events
of circumstances indicate that the carrying amounts of the asset
may not be recoverable in accordance with SFAS No. 144. Impaired
assets are written down to their estimated fair value based on
the best information available to the Company.
Impact of New Accounting Pronouncements
In April 2002, the Financial Accounting Standards Board ("FASB")
issued Statement No. 145 (FAS 145), Rescission of FASB Statements
No. 4, 44, and 64, Amendment of FASB Statement No. 13, and
Technical Corrections. FAS 145 rescinds FAS 4, Reporting Gains
and Losses from Extinguishment of Debt, FAS 44, accounting for
Intangible Assets of Motor Carriers, and FAS 64 (an amendment of
FAS 4), Extinguishments of Debt Made to Satisfy Sinking-Fund
Requirements. FAS 145 eliminates the requirement that gains and
losses from the extinguishment of debt be aggregated and, if
material, classified as an extraordinary item, net of the related
income tax effect. However, an entity would not be prohibited
from classifying such gains and losses as extraordinary items so
long as they are both unusual in nature and infrequent in
occurrence. This provision will be effective for fiscal years
beginning after December 15, 2002. FAS 145 also amends FAS 13,
Accounting for Leases, to eliminate an inconsistency between the
required accounting for sale-leaseback transactions and the
required accounting for certain lease modifications that have
economic effects that are similar to sale-leaseback transactions.
The amendment to FAS 13 and other technical amendments will be
effective for all transactions occurring and financial statements
issued after May 15, 2002. The Company is in the process of
assessing the impact of the adoption of FAS 145.
In June 2002, the FASB issued Statement No. 146 (FAS 146),
Accounting for Costs Associated with Exit or Disposal Activities,
which eliminates Emerging Issues Task Force (EITF) Issue No. 94-
3, Liability Recognition for Certain Employee Termination
Benefits and Other Costs to Exit an
15
Item 2. Management's Discussion and Analysis of Financial Conditions and
Results of Operations (Continued)
Activity (including Certain
Costs Incurred in a Restructuring). FAS 146 applies to costs
associated with an exit activity including: (a) termination
benefits provided to current employees that are involuntarily
terminated under the terms of a benefit arrangement that is not
an ongoing benefit arrangement or an individual deferred
compensation contract (one-time termination benefit); (b) costs
to terminate a contract that is not a capital lease; and (c)
costs to consolidate facilities or relocate employees. FAS 146
requires that these liabilities be recognized and measured
initially at fair value in the period in which the liability is
incurred. If fair value cannot be reasonably estimated, the
liability shall be recognized initially in the period in which
fair value can be reasonably estimated. The provisions on FAS 146
are effective for the Company for exit or disposal activities
initiated after December 31, 2002. The Company does not believe
that the adoption of this pronouncement will have a material
effect on its financial results.
In November 2002, the FASB issued Interpretation No. 45 ("FIN
45"), Guarantor's Accounting and Disclosure Requirements for
Guarantees, Including Indirect Guarantees of Indebtedness of
Others (an interpretation of FASB Statements No. 5, 57, and 107
and rescission of FASB Interpretation No. 34). FIN 45 clarifies
the requirements of the FASB Statement No. 5 (FAS 5), Accounting
for Contingencies, relating to a guarantor's accounting for, and
disclosure of, the issuance of certain types of guarantees. FIN
45 requires that upon issuance of a guarantee, the guarantor must
recognize a liability for the fair value of the obligation it
assumes under that guarantee. Many guarantees are embedded in
purchase or sales agreements, service contracts, joint venture
agreements, or other commercial agreements and the guarantor in
many of those arrangements does not receive separately
identifiable up-front payment (e.g., a premium) for issuing the
guarantee. Prior to FIN 45, many guarantors did not recognize an
initial liability for such embedded guarantees. Now, however,
they are required to recognize a liability at fair value upon
issuance of the guarantees, regardless of whether they receive a
separate premium for doing so. The Interpretation is intended to
improve the comparability of financial reporting by requiring
identical accounting for guarantees issued with a separately
identified premium and guarantees issued without a separately
identified premium. For guarantees issued or modified after
December 31, 2002, significant new disclosure requirements are
effective beginning with 2002 calendar year-end financial
statements, including a requirement to disclose the maximum
amount of future payments that an entity might need to make under
a guarantee and a reconciliation of during the period in their
product warranty liabilities. The Company is in the process of
assessing the impact of the adoption of FIN 45.
On December 31, 2002, the FASB issued Statement of Financial
Accounting Standards No. 148, Accounting for Stock-Based
Compensation -- Transition and Disclosure -- an amendment of FAS
123 (FAS 148). As the title of the standard implies, it is
fairly limited in its scope, however it will have implications
for all entities that issue stock-based compensation to their
employees. This Statement amends FASB Statement No. 123,
Accounting for Stock-Based Compensation, to provide alternative
methods of transition for a voluntary change to the fair value
based method of accounting for stock-based employee compensation.
In addition, this Statement amends the disclosure requirements of
Statement 123 to require prominent disclosures in both annual and
interim financial statements about the method of accounting for
stock-based employee compensation and the effect of the method
used on reported results. This Statement permits two additional
transition methods for entities that adopt the preferable method
of accounting for stock-based employee compensation. Both of
those methods avoid the ramp-up effect arising from prospective
application of the fair value based method. In addition, to
address concerns raised by some constituents about the lack of
comparability caused by multiple transition methods, this
Statement does not permit the use of the original Statement 123
prospective method of transition for changes to the fair value
based method made in fiscal years beginning after December 15,
2003. During the first quarter of fiscal 2003 the Company
adopted the provisions of FAS 148.
In January 2003, the FASB issued FASB Interpretation No. (FIN)
46, Consolidation of Variable Interest Entities. This
interpretation of Accounting Research Bulletin No. 51,
Consolidated Financial Statements, addresses consolidation by
business enterprises of variable interest entities, which possess
certain characteristics. The Interpretation requires that if a
16
Item 2. Management's Discussion and Analysis of Financial Conditions and
Results of Operations (Continued)
business enterprise has a controlling financial interest in a
variable interest entity, the assets, liabilities, and results of
the activities of the variable interest entity must be included
in the consolidated financial statements with those of the
business enterprise. This Interpretation applies immediately to
variable interest entities created after January 31, 2003 and to
variable interest entities in which an enterprise obtains an
interest after that date. The Company does not have any
ownership in any variable interest entities as of February 28,
2003. The Company will apply the consolidation requirement of
FIN 46 in future periods if it should own any interest in any
variable interest entity.
In April 2003, the FASB issued Statement of Financial Accounting
Standard No. 149, "Amendment of Statement 133 on Derivative
Instruments and Hedging Activities," ("FAS 149") which amends and
clarifies financial accounting and reporting for derivative
instruments, including certain derivative instruments embedded in
other contracts and for hedging activities under FAS 133. FAS
149 is effective for contracts entered into or modified after
June 30, 2003 except for the provisions that were cleared by the
FASB in prior pronouncements. The Company is currently assessing
the financial impact of adopting FAS 149 in fiscal year 2003.
In May 2003, the FASB issued Statement of Financial Accounting
Standards No. 150, Accounting for Certain Financial Instruments
with Characteristics of both Liabilities and Equity, ("FAS 150").
This statement establishes standards for how an issuer classifies
and measures in its statement of financial position certain
financial instruments with characteristics of both liabilities
and equity. In accordance with the standard, financial
instruments that embody obligations for the issuer are required
to be classified as liabilities. This Statement shall be
effective for financial instruments entered into or modified
after May 31, 2003, and otherwise shall be effective at the
beginning of the first interim period beginning after June 15,
2003. The Company does not expect the provision of this
statement to have a significant impact on the statement of
financial position.
Safe Harbor Statement
Certain statements in this report, in the Company's press
releases and in oral statements made by or with the approval of
an authorized executive officer of the Company may constitute
"forward-looking statements" as that term is defined under the
Private Securities Litigation Reform Act of 1995. These may
include statements projecting, forecasting or estimating Company
performance and industry trends. The achievement of the
projections, forecasts or estimates is subject to certain risks
and uncertainties. Actual results may differ materially from
those projected, forecast or estimated. The applicable risks and
uncertainties include general economic and industry conditions
that affect all international businesses, as well as matters that
are specific to the Company and the markets it serves. General
risks that may impact the achievement of such forecast include:
compliance with new laws and regulations, significant raw
material price fluctuations, changes in interest rates, currency
exchange rate fluctuations, limits on the repatriation of funds
and political uncertainty. Specific risks to the Company
include: risk of recession in the economies and /or markets in
which its products are sold, risk of the Company's working
capital lender and real estate lender demanding payment of
outstanding balances, risk of not receiving waiver from the
government on the required contribution into the pension plan,
the concentration of a substantial percentage of the Company's
sales with a few major automotive customers, cost of raw
materials, and pricing pressures from competitors and customers.
17
PLYMOUTH RUBBER COMPANY, INC.
Item 3. Quantitative and Qualitative Disclosure about Market
Risks
At May 30, 2003, the carrying value of Company's debt totaled
$25.6 million, which approximated its fair value. This debt
includes amounts at both fixed and variable interest rates. For
fixed rate debt, interest rate changes affect the fair market
value but do not impact earnings or cash flows. Conversely, for
floating rate debt, interest rate changes generally do not affect
the fair market value but do impact earnings and cash flows,
assuming other factors are held constant.
At May 30, 2003, the Company had fixed rate debt of $9.5 million
and variable rate debt of $16.1 million. Holding other variables
constant (such as foreign exchange rates and debt levels) a one-
percentage point decrease in interest rates would increase the
unrealized fair market value of fixed rate debt by approximately
$183,000. The earnings and cash flows impact for the next year
resulting from a one percentage point increase in interest rates
would be approximately $161,000, holding other variables
constant.
Item 4. Controls and Procedures
(a) Disclosure controls and procedures. Within 90 days before
filing this report, we evaluated the effectiveness of the design
and operation of our disclosure controls and procedures. Our
disclosure controls and procedures are the controls and other
procedures that we designed to ensure that we record, process,
summarize and report in a timely manner the information we must
disclose in reports that we file with or submit to the SEC. Our
disclosure controls and procedures include our internal controls.
Maurice J. Hamilburg, President and Co-Chief Executive Officer,
Joseph D. Hamilburg, Chairman and Co-Chief Executive Officer, and
Joseph J. Berns, Vice President of Finance and Chief Financial
Officer supervised and participated in this evaluation. Based on
this evaluation, Maurice J. Hamilburg, Joseph D. Hamilburg, and
Joseph J. Berns, concluded that, as of the date of their
evaluation, our disclosure controls and procedures were
effective.
(b) Internal controls. Since the date of the evaluation
described above, there have not been any significant changes in
our internal controls or in other factors that could
significantly affect those controls.
18
PLYMOUTH RUBBER COMPANY, INC.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Reference is made to the information contained in
Item 3 of the Company's Annual Report on Form 10-K
for its fiscal year ended November 29, 2002, and in
Note 11 of the Notes To Consolidated Financial
Statements contained in said report.
Item 2. Changes in Securities
None
Item 3. Defaults upon Senior Securities
Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders
The Company's Annual Meeting was held on April 25,
2003.
The following members were elected to the Company's
Board of Directors to hold office for the ensuing
three-year term:
Nominees In Favor Opposed
Maurice J. Hamilburg,
Sumner Kaufman and
Duane E. Wheeler 674,105 220
The results on the voting of the following additional
item were as follows:
Approval of the amendment to the Company's Restated
Articles of Organization reducing the par value for
Class A and Class B Common Stock from $1.00 per share
to $0.01 per share.
In Favor Opposed Abstain
671,495 280 2,550
Approval of the adoption of 2002 Non-Employee
Director Stock Option Plan
In Favor Opposed Abstain
551,330 2,432 1,363
The ratification of the appointment of
PricewaterhouseCoopers LLP as independent auditors of
the Company for the next fiscal year:
In Favor Opposed Abstain
645,967 2 1,353
19
PLYMOUTH RUBBER COMPANY, INC.
PART II. OTHER INFORMATION - Continued
Item 5. Other Information
Certification Under Sarbanes-Oxley Act
Our co- chief executive officers and chief financial officer
have furnished to the SEC the certification with
respect to this Report that is required by Section
906 of the Sarbanes-Oxley Act of 2002.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits: See Index to Exhibits
(b) Not Applicable
20
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereto duly authorized.
Plymouth Rubber Company, Inc.
(Registrant)
/s/ Joseph J. Berns
Joseph J. Berns
Vice President - Finance
Date: July 14, 2003
21
SECTION 302 CERTIFICATIONS
I, Maurice J. Hamilburg, President and Co- Chief Executive
Officer of Plymouth Rubber Company, Inc., certify that:
1. I have reviewed this quarterly report on Form 10-Q of
Plymouth Rubber Company, Inc.;
2. Based on my knowledge, this quarterly report does not
contain any untrue statement of a material fact or omit to state
a material fact necessary to make the statements made, in light
of the circumstances under which such statements were made, not
misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and
other financial information included in this quarterly report,
fairly present in all material respects the financial condition,
results of operations and cash flows of the registrant as of, and
for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are
responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-14 and 15d-
14) for the registrant and we have:
a) designed such disclosure controls and procedures
to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is
made known to us by others within those entities,
particularly during the period in which this quarterly
report is being prepared;
b) evaluated the effectiveness of the registrant's
disclosure controls and procedures as of a date within 90
days prior to the filing date of this quarterly report (the
"Evaluation Date"); and
c) presented in this quarterly report our conclusions
about the effectiveness of the disclosure controls and
procedures based on our evaluation as of the Evaluation
Date;
5. The registrant's other certifying officers and I have
disclosed, based on our most recent evaluation, to the
registrant's auditors and the audit committee of registrant's
board of directors (or persons performing the equivalent
function):
a) all significant deficiencies in the design or
operation of internal controls which could adversely affect
the registrant's ability to record, process, summarize and
report financial data and have identified for the
registrant's auditors any material weaknesses in internal
controls; and
b) any fraud, whether or not material, that involves
management or other employees who have a significant role
in the registrant's internal controls; and
6. The registrant's other certifying officers and I have
indicated in this quarterly report whether or not there were
significant changes in internal controls or in other factors that
could significantly affect internal controls subsequent to the
date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material
weaknesses.
Date: July 14, 2003 /s/ Maurice J Hamilburg
Maurice J. Hamilburg
President and Co-Chief
Executive Office
22
SECTION 302 CERTIFICATIONS - Continued
I, Joseph D. Hamilburg, Chairman and Co- Chief Executive
Officer of Plymouth Rubber Company, Inc., certify that:
1. I have reviewed this quarterly report on Form 10-Q of
Plymouth Rubber Company, Inc.;
2. Based on my knowledge, this quarterly report does not
contain any untrue statement of a material fact or omit to state
a material fact necessary to make the statements made, in light
of the circumstances under which such statements were made, not
misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and
other financial information included in this quarterly report,
fairly present in all material respects the financial condition,
results of operations and cash flows of the registrant as of, and
for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are
responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-14 and 15d-
14) for the registrant and we have:
a) designed such disclosure controls and procedures
to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is
made known to us by others within those entities,
particularly during the period in which this quarterly
report is being prepared;
b) evaluated the effectiveness of the registrant's
disclosure controls and procedures as of a date within 90
days prior to the filing date of this quarterly report (the
"Evaluation Date"); and
c) presented in this quarterly report our conclusions
about the effectiveness of the disclosure controls and
procedures based on our evaluation as of the Evaluation
Date;
5. The registrant's other certifying officers and I have
disclosed, based on our most recent evaluation, to the
registrant's auditors and the audit committee of registrant's
board of directors (or persons performing the equivalent
function):
a) all significant deficiencies in the design or
operation of internal controls which could adversely affect
the registrant's ability to record, process, summarize and
report financial data and have identified for the
registrant's auditors any material weaknesses in internal
controls; and
b) any fraud, whether or not material, that involves
management or other employees who have a significant role
in the registrant's internal controls; and
6. The registrant's other certifying officers and I have
indicated in this quarterly report whether or not there were
significant changes in internal controls or in other factors that
could significantly affect internal controls subsequent to the
date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material
weaknesses.
Date: July 14, 2003 /s/ Joseph D. Hamilburg
Joseph D. Hamilburg
Chairman and Co-Chief
Executive Officer
23
I, Joseph Berns, Vice President-Finance and Chief Financial
Officer of Plymouth Rubber Company, Inc., certify that:
1. I have reviewed this quarterly report on Form 10-Q of
Plymouth Rubber Company, Inc.;
2. Based on my knowledge, this quarterly report does not
contain any untrue statement of a material fact or omit to state
a material fact necessary to make the statements made, in light
of the circumstances under which such statements were made, not
misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and
other financial information included in this quarterly report,
fairly present in all material respects the financial condition,
results of operations and cash flows of the registrant as of, and
for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are
responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-14 and 15d-
14) for the registrant and we have:
a) designed such disclosure controls and procedures
to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is
made known to us by others within those entities,
particularly during the period in which this quarterly
report is being prepared;
b) evaluated the effectiveness of the registrant's
disclosure controls and procedures as of a date within 90
days prior to the filing date of this quarterly report (the
"Evaluation Date"); and
c) presented in this quarterly report our conclusions
about the effectiveness of the disclosure controls and
procedures based on our evaluation as of the Evaluation
Date;
5. The registrant's other certifying officers and I have
disclosed, based on our most recent evaluation, to the
registrant's auditors and the audit committee of registrant's
board of directors (or persons performing the equivalent
function):
a) all significant deficiencies in the design or
operation of internal controls which could adversely affect
the registrant's ability to record, process, summarize and
report financial data and have identified for the
registrant's auditors any material weaknesses in internal
controls; and
b) any fraud, whether or not material, that involves
management or other employees who have a significant role
in the registrant's internal controls; and
6. The registrant's other certifying officers and I have
indicated in this quarterly report whether or not there were
significant changes in internal controls or in other factors that
could significantly affect internal controls subsequent to the
date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material
weaknesses.
Date: July 14, 2003 /s/ Joseph J. Berns
Joseph Berns, Vice
President-Finance and
Chief Financial Office
24
PLYMOUTH RUBBER COMPANY, INC.
INDEX TO EXHIBITS
Exhibit
No. Description
2 Not Applicable.
3.1 Restated Articles of Organization -- incorporated by
reference to Exhibit 3.1 of the Company's Annual Report on
Form 10-K for the year ended December 2, 1994.
3.2 By Laws, as amended -- incorporated by reference to Exhibit
3.2 of the Company's Annual Report on Form 10-K for the
year ended November 26, 1993.
4.1 Promissory Note between Plymouth Rubber Company, Inc. and
General Electric Capital Corporation dated December 29,
1995 -- incorporated by reference to Exhibit 4.8 to the
Quarterly Report on Form 10-Q for the Quarter ended March
1, 1996.
4.2 Master Security Agreement between Plymouth Rubber Company,
Inc. and General Electric Capital Corporation dated
December 29, 1995 -- incorporated by reference to Exhibit
4.8 to the Quarterly Report on Form 10-Q for the quarter
ended March 1, 1996.
4.3 Demand Note between Plymouth Rubber Company, Inc. and LaSalle
National Bank dated June 6, 1996 -- incorporated by
reference to Exhibit 2.1 to the report on Form 8-K with
cover page dated June 6, 1996.
4.4 Loan and Security Agreement between Plymouth Rubber Company,
Inc. and LaSalle National Bank dated June 6, 1996 --
incorporated by reference to Exhibit 2.2 to the report on
Form 8-K with cover page dated June 6, 1996.
4.5 Amendment to Master Security Agreement between Plymouth
Rubber Company, Inc. and General Electric Capital
Corporation dated February 19, 1997 -- incorporated by
reference to Exhibit 4.10 to the Quarterly Report on Form
10-Q for the quarter ended February 25, 1997.
4.6 Master Security Agreement between Plymouth Rubber Company,
Inc. and General Electric Capital Corporation dated
January 29, 1997 -- incorporated by reference to Exhibit
4.12 to the Company's Quarterly Report on Form 10-Q for
the quarter ended February 25, 1997.
4.7 Demand Note between Brite-Line Technologies, Inc. and LaSalle
National Bank dated February 28, 1997 -- incorporated by
reference to Exhibit 4.13 to the Company's Quarterly
Report on Form 10-Q for the quarter ended May 30, 1997.
4.8 Loan and Security Agreement between Brite-Line Technologies,
Inc. and LaSalle National Bank dated February 25, 1997 --
incorporated by reference to Exhibit 4.14 to the Company's
Quarterly Report on Form 10-Q for the quarter ended May
30, 1997.
4.9 Continuing Unconditional Guaranty between Brite-Line
Technologies, Inc. LaSalle National Bank dated February
25, 1997 -- incorporated by reference to Exhibit 4.15 to
the Company's Quarterly Report on Form 10-Q for the
quarter ended May 30, 1997.
4.10 Amendment to Loan and Security Agreement between Plymouth
Rubber Company, Inc. and LaSalle National Bank dated May
7, 1997 -- incorporated by reference to Exhibit 4.11 to
the Company's Quarterly Report on Form 10-Q for the
quarter ended May 30, 1997.
25
PLYMOUTH RUBBER COMPANY, INC.
INDEX TO EXHIBITS
Exhibit
No. Description
4.11 Continuing Unconditional Guaranty between Plymouth Rubber
Company, Inc. and LaSalle National Bank dated March 20,
1997 -- incorporated by reference to Exhibit 4.12 to the
Company's Quarterly Report on Form 10-Q or the quarter
ended May 30, 1997.
4.12 Public Deed which contains the loan guaranteed by mortgage
and granted between Plymouth Rubber Europa, S.A. and Caja
de Ahorros Municipal de Vigo, Banco de Bilbao, and Vizcaya
y Banco de Comercio dated April 11, 1997 -- incorporated
by reference to Exhibit 4.13 to the Company's Quarterly
Report on Form 10-Q for the quarter ended May 30, 1997.
4.13 Corporate Guaranty between Plymouth Rubber Company, Inc. and
Caja de Ahorros Municipal de Vigo, Banco de Bilbao, and
Vizcaya y Banco de Comercio dated April 11, 1997 --
incorporated by reference to Exhibit 4.14 to the Company's
Quarterly Report on Form 10-Q for the quarter ended May
30, 1997.
4.14 Promissory Note between Plymouth Rubber Company, Inc. and
General Electric Capital Corporation dated December 3,
1997 - incorporated by reference to Exhibit 4.14 to the
Company's Annual Report on Form 10-K for the year ended
November 27, 1998.
4.15 Promissory Note between Plymouth Rubber Company, Inc. and
General Electric Capital Corporation dated April 13, 1998
- - incorporated by reference to Exhibit 4.15 to the
Company's Annual Report on Form 10-K for the year ended
November 27, 1998.
4.16 Promissory Note between Plymouth Rubber Company, Inc. and
General Electric Capital Corporation dated November 12,
1998 - incorporated by reference to Exhibit 4.16 to the
Company's report on Form 10-K for the year ended November
27, 1998.
4.17 Promissory Note between Plymouth Rubber Company, Inc. and
General Electric Capital Corporation dated November 25,
1998 - incorporated by reference to Exhibit 4.17 to the
Company's report on Form 10-K for the year ended November
27, 1998.
4.18 Amendments to Loan and Security Agreement between Plymouth
Rubber Company, Inc., and LaSalle National Bank dated July
15, 1998 and February 18, 1999 - incorporated by reference
to Exhibit 4.18 to the Company's report on Form 10-Q for
the quarter ended February 26, 1999.
4.19 Amendment to Loan and Security Agreement between Brite-Line
Technologies, Inc., and LaSalle National Bank dated
February 18, 1999 - incorporated by reference to Exhibit
4.19 to the Company's report on Form 10-Q for the quarter
ended February 26, 1999.
4.20 Promissory Note between Plymouth Rubber Company, Inc. and
General Electric Capital Corporation dated June 29, 1999 -
incorporated by reference to Exhibit 4.20 to the Company's
report on Form 10-Q for the quarter ended August 26, 1999.
4.21 First Amended and Restated Schedule A - Special Provisions
to Loan and Security Agreement between Plymouth Rubber
Company, Inc., and LaSalle National Bank dated June 16,
1999 - incorporated by reference to Exhibit 4.21 to the
Company's report on Form 10-Q for the quarter ended March
3, 2000.
26
PLYMOUTH RUBBER COMPANY, INC.
INDEX TO EXHIBITS
Exhibit
No. Description
4.22 Promissory Note between Plymouth Rubber Company, Inc. and
General Electric Capital Corporation dated December 29,
1999 - incorporated by reference to Exhibit 4.22 to the
Company's report on Form 10-Q for the quarter ended March
3, 2000.
10.1 1982 Employee Incentive Stock Option Plan -- incorporated by
reference to Exhibit 10.1 of the Company's Annual Report
on Form 10-K for the year ended November 26, 1993.
10.2 General Form of Deferred Compensation Agreement entered into
between the Company and certain officers -- incorporated
by reference to Exhibit 10.2 of the Company's Annual
Report on Form 10-K for the year ended November 26, 1993.
10.3 1992 Employee Incentive Stock Option Plan -- incorporated by
reference to Exhibit 10.4 of the Company's Annual Report
on Form 10-K for the year ended November 26, 1993.
10.4 1995 Non-Employee Director Stock Option Plan -- incorporated
by reference to Exhibit (4.3) of the Company's
Registration Statement on Form S-8 dated May 4, 1995.
10.5 1995 Employee Incentive Stock Option Plan -- incorporated
by reference to Exhibit (4.4) of the Company's
Registration Statement on Form S-8 dated May 4, 1995.
10.6 Second Modification Agreement between Plymouth Rubber
Company, Inc. and General Electric Capital Corporation --
incorporated by reference to Exhibit 99.2 of the Company's
Current Report on Form 8-K dated December 16, 2003
10.8 Security Agreement by and between Plymouth Rubber Company,
Inc., General Electric Capital Corporation, The CIT
Group/Equipment Financing, Inc. and Banknorth, N.A.
Corporation --incorporated by reference to Exhibit 99.3 of
the Company's Current Report on Form 8-K dated December
16, 2003.
10.9 Patent Security Agreement by and between Plymouth Rubber
Company, Inc., General Electric Capital Corporation, The
CIT Group/Equipment Financing, Inc. and Banknorth, N.A. --
incorporated by reference to Exhibit 99.4 of the Company's
Current Report on Form 8-K dated December 16, 2003.
10.10 Trademark Security Agreement by and between Plymouth Rubber
Company, Inc., General Electric Capital Corporation, The
CIT Group/Equipment Financing, Inc. and Banknorth, N.A. --
incorporated by reference to Exhibit 99.5 of the Company's
Current Report on Form 8-K dated December 16, 2003.
10.11 Modification Agreement between Plymouth Rubber Company,
Inc. and Banknorth Leasing Corporation --incorporated by
reference to Exhibit 99.6 of the Company's Current Report
on Form 8-K dated December 16, 2003.
10.12 Mortgage and Assignment of Leases and Rents by Plymouth
Rubber Company, Inc. to and for the benefit of General
Electric Capital Corporation, The CIT Group/Equipment
Financing, Inc. and Banknorth, N.A. --incorporated by
reference to Exhibit 99.7 of the Company's Current Report
on Form 8-K dated December 16, 2003.
27
PLYMOUTH RUBBER COMPANY, INC.
INDEX TO EXHIBITS
Exhibit
No. Description
10.13 First Modification to Mortgage and Assignments of Leases
and Rents to and for the benefit of General Electric
Capital Corporation, The CIT Group/Equipment Financing,
Inc. and Banknorth, N.A. --incorporated by reference to
Exhibit 99.8 of the Company's Current Report on Form 8-K
dated December 16, 2003
11 Not Applicable.
15 Not Applicable
18 Not Applicable.
19 Not Applicable.
22 Not Applicable.
23 Not Applicable.
24 Not Applicable.
27 Not Applicable.
28