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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: August 29, 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 . . . . 6-9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . 10-16
Item 3. Quantitative and Qualitative Disclosure about
Market Risks . . . . . . . . . . . . . . . . . . . . . . . 17
Item 4. Controls and Procedures . . . . . . . . . . . . . . 17
PART II. OTHER INFORMATION
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . 18
Item 2. Changes In Securities . . . . . . . . . . . . . . . 18
Item 3. Defaults Upon Senior Securities . . . . . . . . . . 18
Item 4. Submission of Matters to a Vote of Security Holders 18
Item 5. Other Information . . . . . . . . . . . . . . . . . 18
Item 6. Exhibits and Reports on Form 8-K. . . . . . . . . . 18
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . 19
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)
Third Quarter Ended Nine Months Ended
----------------------- -----------------------
Aug. 29, Aug. 30, Aug. 29, Aug. 30,
2003 2002 2003 2002
---------- ---------- ---------- ----------
Net Sales . . . . . . . . . $ 15,970 $ 17,061 $ 47,800 $ 48,856
---------- ---------- ---------- ----------
Costs and Expenses:
Cost of products sold. . . 13,725 13,335 40,285 37,893
Selling, general and
administrative . . . . 2,775 2,700 8,823 8,616
---------- ---------- ---------- ----------
16,500 16,035 49,108 46,509
---------- ---------- ---------- ----------
Operating income (loss) . . (530) 1,026 (1,308) 2,347
Interest expense. . . . . . (455) (540) (1,338) (1,524)
Other income (expense), net (117) 27 15 199
---------- ---------- ---------- ----------
Income (loss) before taxes (1,102) 513 (2,631) 1,022
Benefit (provision) for
income taxes . . . . . . . (16) (4) (51) 78
---------- ---------- ---------- ----------
Net income (loss) . . . . . (1,118) 509 (2,682) 1,100
Retained earnings (deficit)
at beginning of period. . (5,791) (3,737) (4,227) (4,328)
---------- ---------- ---------- ----------
Retained earnings (deficit)
at end of period. . . . . $ (6,909) $ (3,228) $ (6,909) $ (3,228)
========== ========== ========== ==========
Per Share Data:
Basic Earnings (Loss) Per Share:
Net income (loss) . . . . . $ (0.54) $ 0.25 $ (1.30) $ 0.53
========== ========== ========== ==========
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) . . . . . $ (0.54) $ 0.23 $ (1.30) $ 0.52
========== ========== ========== ==========
Weighted average number of
shares outstanding. . . . 2,058,976 2,207,260 2,058,976 2,104,666
========== ========== ========== ==========
See Accompanying Notes to Condensed Consolidated Financial Statements
2
PLYMOUTH RUBBER COMPANY, INC.
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS)
(In Thousands)
(Unaudited)
Third Quarter Ended Nine Months Ended
----------------------- -----------------------
Aug. 29, Aug. 30, Aug. 29, Aug. 30,
2003 2002 2003 2002
---------- ---------- ---------- ----------
Net income (loss) . . . . . $ (1,118) $ 509 $ (2,682) $ 1,100
Other comprehensive income
(loss), net of tax:
Foreign currency
translation adjustment . (118) 44 97 101
---------- ---------- ---------- ----------
Other comprehensive
income (loss). . . . . . (118) 44 97 101
---------- ---------- ---------- ----------
Comprehensive income (loss) $ (1,236) $ 553 $ (2,585) $ 1,201
========== ========== ========== ==========
See Accompanying Notes to Condensed Consolidated Financial Statements
3
PLYMOUTH RUBBER COMPANY, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(In Thousands)
Aug. 29, Nov. 29,
2003 2002
---------- ----------
(Unaudited)
Assets
Current Assets:
Cash . . . . . . . . . . . . . . . . . . . . . . . $ 7 $ 37
Accounts receivable, less allowance for
doubtful accounts of $344 and $397 at
August 29, 2003 and November 29, 2002. . . . . . 10,997 11,366
Inventories:
Raw materials . . . . . . . . . . . . . . . . . 4,448 3,481
Work in process . . . . . . . . . . . . . . . . 2,090 1,799
Finished goods. . . . . . . . . . . . . . . . . 6,255 6,361
---------- ----------
12,793 11,641
---------- ----------
Prepaid expenses and other current assets. . . . . 345 984
---------- ----------
Total current assets . . . . . . . . . . . . . 24,142 24,028
---------- ----------
Plant Assets:
Plant assets . . . . . . . . . . . . . . . . . . . 48,364 47,627
Less: Accumulated depreciation. . . . . . . . . . (28,528) (26,199)
---------- ----------
Total plant assets, net . . . . . . . . . . 19,836 21,428
---------- ----------
Other long-term assets. . . . . . . . . . . . . . . . 832 790
---------- ----------
$ 44,810 $ 46,246
========== ==========
Liabilities and Stockholders' Equity
Current Liabilities:
Short-term debt. . . . . . . . . . . . . . . . . . $ 14,801 $ 13,314
Accounts payable . . . . . . . . . . . . . . . . . 8,141 7,035
Accrued expenses . . . . . . . . . . . . . . . . . 4,119 4,482
Current portion of long-term obligations . . . . . 1,804 1,536
---------- ----------
Total current liabilities. . . . . . . . . . . 28,865 26,367
---------- ----------
Long-Term Liabilities:
Borrowings . . . . . . . . . . . . . . . . . . . . 7,870 8,972
Pension obligation . . . . . . . . . . . . . . . . 4,914 5,115
Deferred tax liability . . . . . . . . . . . . . . 131 119
Other. . . . . . . . . . . . . . . . . . . . . . . 2,553 2,611
---------- ----------
Total long-term liabilities. . . . . . . . . . 15,468 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 1,281,390 shares outstanding. . . . . 13 13
Paid in capital. . . . . . . . . . . . . . . . . . 11,154 11,154
Retained earnings (deficit). . . . . . . . . . . . (6,909) (4,227)
Accumulated other comprehensive loss . . . . . . . (3,604) (3,701)
---------- ----------
662 3,247
Less: Treasury stock at cost (32,914 shares) . . . (185) (185)
---------- ----------
Total stockholders' equity . . . . . . . . . . 477 3,062
---------- ----------
$ 44,810 $ 46,246
========== ==========
See Accompanying Notes to Condensed Consolidated Financial Statements
4
PLYMOUTH RUBBER COMPANY, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(In Thousands)
(Unaudited)
Nine Months Ended
-----------------------
Aug. 29, Aug. 30,
2003 2002
---------- ----------
Cash flows relating to operating activities:
Net income (loss). . . . . . . . . . . . . . . . . $ (2,682) $ 1,100
Adjustments to reconcile net income (loss)
to net cash used in operating
activities:
Depreciation and amortization. . . . . . . . . 2,150 2,198
Gain on disposal of plant assets . . . . . . . -- (131)
Changes in assets and liabilities:
Accounts receivable. . . . . . . . . . . . . . 560 185
Inventory. . . . . . . . . . . . . . . . . . . (1,004) (1,009)
Prepaid expenses and other current assets. . . 640 301
Other assets . . . . . . . . . . . . . . . . . (102) (106)
Accounts payable . . . . . . . . . . . . . . . 989 (2,925)
Accrued expenses . . . . . . . . . . . . . . . (57) (179)
Pension obligation . . . . . . . . . . . . . . (531) 110
Other liabilities. . . . . . . . . . . . . . . (71) (77)
---------- ----------
Net cash used in operating activities . . . . . . . . (108) (533)
---------- ----------
Cash flows relating to investing activities:
Capital expenditures . . . . . . . . . . . . . . . (286) (342)
Sale/lease back of plant assets. . . . . . . . . . -- 49
Proceeds from sales of plant assets. . . . . . . . -- 131
---------- ----------
Net cash used in investing activities . . . . . . . . (286) (162)
---------- ----------
Cash flows relating to financing activities:
Net increase in short-term debt. . . . . . . . . . 1,355 1,272
Payments on term debt. . . . . . . . . . . . . . . (788) (395)
Payments on capital leases . . . . . . . . . . . . (266) (147)
---------- ----------
Net cash provided by financing activities . . . . . . 301 730
---------- ----------
Effect of exchange rates on cash. . . . . . . . . . . 63 (42)
---------- ----------
Net change in cash. . . . . . . . . . . . . . . . . . (30) (7)
Cash at the beginning of the period . . . . . . . . . 37 7
---------- ----------
Cash at the end of the period . . . . . . . . . . . . $ 7 $ --
========== ==========
Supplemental Disclosure of Cash Flow Information
Cash paid for interest. . . . . . . . . . . . . . . . $ 1,250 $ 1,371
========== ==========
Cash paid for income taxes. . . . . . . . . . . . . . $ 24 $ 27
========== ==========
See Accompanying Notes to Condensed Consolidated Financial Statements
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
$4,723,000, the lack of sales growth, and the overall risks
associated with the remainder of fiscal 2003 and 2004 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 and/or
additional financing will be sufficient to meet the Company's
liquidity needs during fiscal 2003 and 2004. Management has
also identified a number of additional expense reductions
possible during the fourth quarter of 2003, including wage and
salary reductions, the deferral of certain personnel replacements
or additions, the deferral of certain marketing expenses, reduced
product costs through materials substitutions, and
decreased usage of certain operating supplies and had also obtained
a waiver from the IRS relative to pension contributions. 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 operating as a going concern.
(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 August
29, 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 August 29, 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
6
PLYMOUTH RUBBER COMPANY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) (Continued)
retention of an independent Licensed Site Professional,
investigation, assessment,
containment, and remediation. The Company has accrued
$281,000 as of August 29, 2003 to cover estimated future
environmental cleanup expenditures, which is net of $957,000
payments made to date. Actual future costs may be different
from the amount accrued for as of August 29, 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.
Third Quarter Ended (A) Nine Months Ended (B)
----------------------- -----------------------
Aug. 29, Aug. 30, Aug. 29, Aug. 30,
2003 2002 2003 2002
---------- ---------- ---------- ----------
(In thousands except share and per share data)
Basic earnings (loss) per share
- -------------------------------
Net income (loss) available
to common stockholders . . $ (1,118) $ 509 $ (2,682) $ 1,100
========== ========== ========== ==========
Weighted average shares . . 2,058,976 2,058,976 2,058,976 2,058,976
========== ========== ========== ==========
Net income (loss) per share $ (0.54) $ 0.25 $ (1.30) $ 0.53
========== ========== ========== ==========
Diluted earnings (loss) per share
- ---------------------------------
Net income (loss) available
to common stockholders . . $ (1,118) $ 509 $ (2,682) $ 1,100
========== ========== ========== ==========
Weighted average shares . . 2,058,976 2,058,976 2,058,976 2,058,976
Effect of diluted
stock options. . . . . . -- 148,284 -- 45,690
---------- ---------- ---------- ----------
Diluted weighted average
shares . . . . . . . . . 2,058,976 2,207,260 2,058,976 2,104,666
========== ========== ========== ==========
Net income (loss) per share $ (0.54) $ 0.23 $ (1.30) $ 0.52
========== ========== ========== ==========
(A) Options for 556,998 and 231,246 shares of common stock
were outstanding at August 29, 2003 and August 30, 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.
(B) Options for 469,641 and 444,241 shares of common stock
were outstanding at August 29, 2003 and August 30, 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 102,967 shares of common stock were
outstanding at August 29, 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)
In April 2003, the shareholders approved an 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 for all periods presented.
(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 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 148, which the Company adopted during the first quarter of
fiscal 2003, the Company's net loss and loss per share would
have been reduced to the following pro forma amounts:
Third Quarter Ended Nine Months Ended
----------------------- -----------------------
Aug. 29, Aug. 30, Aug. 29, Aug. 30,
2003 2002 2003 2002
---------- ---------- ---------- ----------
Net income (loss)
as reported. . . . . . . . $ (1,118) $ 509 $ (2,682) $ 1,100
Deduct: Total stock-based
employee compensation
determined under fair
value method for all
awards, net of related
tax effects . . . . . . . (35) (48) (104) (144)
---------- ---------- ---------- ----------
Pro forma net loss. . . . . $ (1,153) $ 461 $ (2,786) $ 956
========== ========== ========== ==========
Earnings per share:
Basic, as reported. . . . $ (0.54) $ 0.25 $ (1.30) $ 0.53
========== ========== ========== ==========
Basic, pro forma. . . . . $ (0.56) $ 0.22 $ (1.35) $ 0.46
========== ========== ========== ==========
Diluted, as reported. . . $ (0.54) $ 0.23 $ (1.30) $ 0.52
========== ========== ========== ==========
Diluted, pro forma. . . . $ (0.56) $ 0.21 $ (1.35) $ 0.45
========== ========== ========== ==========
(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.
8
PLYMOUTH RUBBER COMPANY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) (Continued)
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 August 29, 2003 and August 30, 2002.
Third Quarter Ended Nine Months Ended
----------------------- -----------------------
Aug. 29, Aug. 30, Aug. 29, Aug. 30,
2003 2002 2003 2002
---------- ---------- ---------- ----------
Segment sales to
unaffiliated customers:
Plymouth Tapes. . . . . . $ 12,970 $ 13,361 $ 41,363 $ 41,432
Brite-Line Technologies . 3,000 3,700 6,437 7,424
---------- ---------- ---------- ----------
Consolidated net sales. . $ 15,970 $ 17,061 $ 47,800 $ 48,856
========== ========== ========== ==========
Segment operating
income (loss):
Plymouth Tapes. . . . . . $ (947) $ 153 $ (1,755) $ 1,332
Brite-Line Technologies . 417 873 447 1,015
---------- ---------- ---------- ----------
Consolidated segment
operating income (loss). . (530) 1,026 (1,308) 2,347
Interest expense. . . . . . (455) (540) (1,338) (1,524)
Other income (expense). . . (117) 27 15 199
---------- ---------- ---------- ----------
Consolidated income
(loss),before taxes. . . . $ (1,102) $ 513 $ (2,631) $ 1,022
========== ========== ========== ==========
9
Item 2. Management's Discussion and Analysis of Financial Conditions and
Results of Operations
First Nine Months, 2003, Compared with First Nine Months, 2002
Sales decreased 2.2% to $47,800,000 in 2003 from $48,856,000 in
2002. Sales at Plymouth Tapes decreased 0.2% to $41,363,000 in 2003
from $41,432,000 in 2002. Sales in the automotive markets decreased
approximately 1% compared to 2002, due to lower demand in the third
quarter, while sales in all other markets increased approximately 1%
from 2002, due to increases in the retail market, partially offset
by decreases in other markets. Sales at Brite-Line Technologies
decreased 13.3% to $6,437,000 in 2003, from $7,424,000 in 2002, due
to delays in highway construction spending.
Gross margin decreased $3,448,000, or 31.5%, to $7,515,000 in 2003
from $10,963,000 in 2002. Gross margin, as a percentage of sales,
decreased to 15.7% in 2003 from 22.4% in 2002. Plymouth Tapes'
gross margin decreased $2,799,000, or 32.4%, to $5,830,000 in 2003
from $8,629,000 in 2002. Gross margin, as a percentage of sales,
decreased to 14.1% in 2003 from 20.8% in 2002. The two major
factors driving this decrease were: higher raw material purchase
prices for 2003, primarily for PVC resins, which accounted for
approximately $950,000 of unfavorable margin, or 2.3% of sales; and
increased manufacturing overhead costs, which accounted for over
$900,000, or 2.2% of sales, due to higher spending for health and
business insurance, utilities, pension, indirect labor, and
equipment maintenance. Other contributing factors to the reduction
in gross margin were lower production yields and decreased
production levels, which translated into additional unabsorbed
manufacturing costs. At Brite-Line Technologies, gross margin
decreased $649,000, or 27.8%, to $1,685,000 in 2003 from $2,334,000
in 2002 and, as a percentage of sales, decreased to 26.2% in 2003
from 31.4% in 2002. The two major factors driving this decrease
were lower production levels, which translated into higher
unabsorbed manufacturing cost, and higher purchase prices for raw
materials.
Selling, general and administrative expenses in 2003 increased
$207,000 to $8,823,000 from $8,616,000 in 2002. Selling, general
and administrative expenses, as a percentage of sales, increased to
18.5% in 2003 from 17.6% in 2002. At Plymouth Tapes, selling,
general and administrative expenses in 2003 increased $288,000 to
$7,585,000 from $7,297,000 in 2002. Selling, general and
administrative expenses, as a percentage of sales, increased
slightly to 18.3% in 2003 from 17.6% in 2002. The major increases
were a $208,000 increase in advertising to support new sales
strategies, a $242,000 increase in professional fees for legal,
audit, and marketing consulting, a $146,000 increase in salaries and
fringe benefits, a $120,000 increase in freight, and a $47,000
increase in travel expenses, partially offset by a $186,000 absence
of a freight loss which occurred in 2002, a $141,000 reduction in
deferred compensation expense, a $84,000 decrease in foreign selling
costs, and a $33,000 decrease in commissions. At Brite-Line
Technologies, selling, general and administrative expenses in 2003
decreased $81,000 to $1,238,000 from $1,319,000 in 2002. Selling,
general and administrative expenses, as a percentage of sales,
increased to 19.2% from 17.8% in 2002, because of the lower sales.
Decreases in freight ($40,000) and professional fees ($44,000) were
partially offset by an increase in travel expense $(42,000).
Interest expense in 2003 decreased 12.2% to $1,338,000 from
$1,524,000 in 2002, because of lower average balances and lower
interest rates on the revolving line of credit, lower average
balances on term debt, and lower fees. Other income was $15,000 in
2003, primarily due to foreign exchange gains, compared to $199,000
in 2002, which included a $131,000 gain on the sale of equipment,
$42,000 of miscellaneous income, and $23,000 of foreign exchange
gains.
The after-tax loss for 2003 was $2,682,000, compared to an after-tax
profit of $1,100,000 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 August 29, 2003 also provides
significant negative evidence regarding its ability to generate
sufficient taxable income in the future to realize any deferred tax
benefit.
10
Item 2. Management's Discussion and Analysis of Financial Conditions
and Results of Operations (Continued)
Third Quarter, 2003, Compared with Third Quarter, 2002
Sales decreased 6.4% to $15,970,000 in 2003 from $17,061,000 in
2002. Sales at Plymouth Tapes decreased 2.9% to $12,970,000 in 2003
from $13,361,000 in 2002. Sales in the automotive markets decreased
11.4% from last year, and sales in all other markets increased 9.9%
due largely to increases in the contractor/industrial and retail
markets. Sales at Brite-Line Technologies decreased 18.9% to
$3,000,000 in 2003, from $3,700,000 in 2002, due to delays in
highway construction spending.
Gross margin in 2003 decreased $1,481,000, or 39.7%, to $2,245,000
in 2003 from $3,726,000 in 2002. Gross margin, as a percentage of
sales, decreased to 14.1% in 2003 from 21.8% in 2002. Plymouth
Tapes' gross margin in 2003 decreased $948,000, or 39.8%, to
$1,435,000 in 2003 from $2,383,000 in 2002. Plymouth Tapes' gross
margin, as a percentage of sales, decreased to 11.1% in 2003 from
17.8% in 2002. The two major factors driving this decrease were
higher raw material purchase prices for 2003, primarily for PVC
resins, which accounted for approximately $350,000 of unfavorable
margin, or 2.7% of sales; and increased manufacturing overhead
costs, which accounted for $390,000, or 3.0% of sales, due to higher
spending for health and business insurance, utilities, and pension.
Another contributing factor to the reduction in gross margin was
decreased production levels, which translated into additional
unabsorbed manufacturing costs. At Brite-Line Technologies, gross
margin in 2003 decreased $533,000 to $810,000 in 2003 from
$1,343,000 in 2002 and, as a percentage of sales, decreased to 27.0%
in 2003 from 36.3% in 2002. The major factors causing this decrease
were lower sales, which contributed a lower level of gross margin,
reduced production activity, which translated into unabsorbed
manufacturing costs, and higher prices for raw materials.
Selling, general and administrative expenses in 2003 increased
$75,000, or 2.8%, to $2,775,000 from $2,700,000 in 2002. Selling,
general and administrative expenses, as a percentage of sales,
increased to 17.4% in 2003 from 15.8% in 2002. At Plymouth Tapes,
selling, general and administrative expenses in 2003 increased
$152,000, or 6.8%, to $2,382,000 from $2,230,000 in 2002. Plymouth
Tapes' selling, general and administrative expenses, as a percentage
of sales, increased to 18.4% in 2003 from 16.7% in 2002. Increases
included a $77,000 increase in salaries and fringe benefits and a
$57,000 increase in freight; partially offsetting decreases
including a $35,000 reduction in bad debt expense and a $24,000
decrease in foreign selling costs. At Brite-Line Technologies,
selling, general and administrative expenses in 2003 decreased
$77,000, or 16.4%, to $393,000 from $470,000 in 2002. Brite-Line
Technologies' selling, general and administrative expenses, as a
percentage of sales, increased to 13.1% in 2003 from 12.7% in 2002.
A decrease of $59,000 in salaries and fringe benefits and a $36,000
reduction in professional fees were partially offset by an increase
of $68,000 in bad debt expense.
Interest expense in 2003 decreased 15.7% to $455,000 from $540,000
in 2002, because of lower average balances and lower interest rates
on both the revolving line of credit and the real estate loan, lower
average balance on term debt, and lower fees. Other expense was
$117,000 in 2003, due to foreign exchange losses, compared to
$27,000 of other income in 2002, due to foreign exchange gains.
The after-tax loss for 2003 was $1,118,000, compared to an after-tax
profit of $509,000 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 August 29, 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)
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 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 August 29, 2003, the Company had approximately $70,000 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 $4,723,000 at August
29, 2003, due to a $1,487,000 increase in short term debt, a
$1,106,000 increase in accounts payable, a $639,000 decrease in
prepaid and other current assets, a $369,000 decrease in accounts
receivable, a $268,000 increase in the current portion of long term
borrowings, and a $30,000 decrease in cash, partially offset by a
$1,152,000 increase in inventory, and a $363,000 decrease in accrued
expenses.
During the second quarter of 2002, the Company received a funding
waiver from the Internal Revenue Service (the "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 (the
"PBGC") 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 IRS for $1,030,000 of the $1,262,000
payment due for the plan year ending November 30, 2002. On August
15, 2003 the Company made a $232,000 payment to satisfy part of the
minimum funding requirement for the plan year ending November 30,
2002. During the fourth quarter of 2003, the Company received a
funding waiver from the IRS for the $1,030,000 remaining payment
due, conditioned on the Company satisfying the minimum funding
requirements for the plan years ending November 30, 2003 and
November 30, 2004, and on the waiver amount of $1,030,000 being
secured, in a manner acceptable to the PBGC, by September 10, 2004.
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
12
Item 2. Management's Discussion and Analysis of Financial Conditions
and Results of Operations (Continued)
business. The negative working capital position of $4,723,000, the lack of
sales growth, and the overall risks associated with the remainder of
fiscal 2003 and 2004 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 and /or additional financing
will be sufficient to meet the Company's liquidity needs during
fiscal 2003 and 2004. Management has also identified and implemented
a number of additional expense reductions during the fourth quarter
of 2003, including wage and salary reductions, the deferral of certain
personnel replacements or additions, the deferral of certain
marketing expenses, and reduced product costs through materials
substitutions, and decreased usage of certain operating supplies and
has also obtained a waiver from the IRS relative to pension contributions.
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 operating as a going concern.
Cash used in operating activities was $108,000 in 2003, as compared
to $533,000 in 2002. The major factors contributing to cash used in
operating activities were a net loss of $2,682,000, an increase in
inventory of $1,004,000, a decrease in pension obligation of
$531,000, a $102,000 increase in other assets, a decrease in other
liabilities of $71,000, and a decrease in accrued expenses of
$57,000, partially offset by depreciation and amortization of
$2,150,000, an increase in accounts payable of $989,000, a decrease
in prepaid expenses of $640,000, and a decrease in accounts
receivable of $560,000. Additional short-term borrowings of
$1,355,000 was used to provide operating cash, pay off term debt and
capital leases of $1,054,000, and for capital expenditures of
$286,000.
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 standards,
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 standards
by the end of November 2004. On August 25, 2003, AMEX accepted this
plan of compliance and granted an extension of time through November
2004 to regain compliance, subject to periodic review by AMEX during
the extension period. Failure to make progress consistent with
these listing standards could result in the Company's shares being
delisted from AMEX.
A summary of the Company's cash requirements related to its
outstanding long term debt, future minimum lease payments, and
estimated pension funding requirements are as follows:
Estimated
Operating Pension
Long Term Lease Funding
Fiscal Year: Debt Commitments Requirments Total
------------ ----------- ----------- -----------
2003. . . . . . . . . $ 482,000 $ 139,000 $ -- $ 621,000
2004. . . . . . . . . 1,630,000 535,000 1,580,000 3,745,000
2005. . . . . . . . . 5,771,000 296,000 1,500,000 7,567,000
2006. . . . . . . . . 606,000 95,000 1,500,000 2,201,000
2007. . . . . . . . . 663,000 -- 1,820,000 2,483,000
Thereafter. . . . . . 302,000 -- 1,130,000 1,432,000
------------ ----------- ----------- -----------
Total . . . . . . . . $ 9,454,000 $ 1,065,000 $ 7,530,000 $18,049,000
============ =========== =========== ===========
13
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 does not
believe that the adoption of this pronouncement will have a material
effect on its financial results.
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 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
14
Item 2. Management's Discussion and Analysis of Financial Conditions
and Results of Operations (Continued)
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 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
15
Item 2. Management's Discussion and Analysis of Financial Conditions
and Results of Operations (Continued)
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 August 29, 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 does not expect the provision of
this statement to have a significant impact on the statement of
financial position.
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.
16
PLYMOUTH RUBBER COMPANY, INC.
Item 3. Quantitative and Qualitative Disclosure about Market Risks
At August 29, 2003, the carrying value of Company's debt totaled
$24.5 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 August 29, 2003, the Company had fixed rate debt of $9.0 million
and variable rate debt of $16.5 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
$163,000. The earnings and cash flows impact for the next year
resulting from a one percentage point increase in interest rates
would be approximately $155,000, holding other variables constant.
Item 4. Controls and Procedures
(a) Disclosure controls and procedures. As of the end of the period
covered by 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. There has been no change in our internal
controls over financial reporting during our most recent fiscal quarter
that has materially affected, or is reasonable likely to materially
affect those controls.
17
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
Not Applicable
Item 5. Other Information
Not Applicable
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits: See Index to Exhibits
(b) Not Applicable
18
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: October 14, 2003
19
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.
20
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.
21
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.
22
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
31.1 Certification of President and Co-Chief Operating Officer
Pursuant to Rule 13a-14(a) to Section 302 of the Sarbanes-
Oxley Act of 2002.
31.2 Certification of Chairman and Co-Chief Operating Officer
Pursuant to Rule 13a-14(a) to Section 302 of the Sarbanes-
Oxley Act of 2002.
31.3 Certification of Vice President - Finance and Chief
Financial Officer Pursuant to Rule 13a-14(a) to Section 302
of the Sarbanes-Oxley Act of 2002.
32 Certifications Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
23