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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 28, 2004 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, Canton, 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 by checkmark whether the registrant is an accelerated
filer (as defined in Rule 12b-2 of the Exchange Act)
Yes [ ] No [X]
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of July 9, 2004.
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. . 6-11
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations. 12-24
Item 3. Quantitative and Qualitative Disclosure about
Market Risks. . . . . . . . . . . . . . . . . . 25
Item 4. Controls and Procedures. . . . . . . . . . . . 25
PART II. OTHER INFORMATION
Item 1. Legal Proceedings. . . . . . . . . . . . . . . 26
Item 2. Changes In Securities. . . . . . . . . . . . . 26
Item 3. Defaults Upon Senior Securities. . . . . . . . 26
Item 4. Submission of Matters to a Vote of
Security Holders . . . . . . . . . . . . . . . 26
Item 5. Other Information. . . . . . . . . . . . . . . 26
Item 6. Exhibits and Reports on Form 8-K . . . . . . . 26
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . 27
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 28, May 30, May 28, May 30,
2004 2003 2004 2003
---------- ---------- ---------- ----------
Net Sales . . . . . . . . . $ 19,973 $ 18,287 $ 34,795 $ 31,830
Cost of products sold . . . 15,544 14,789 27,858 26,560
---------- ---------- ---------- ----------
Gross magrin. . . . . . . . 4,429 3,498 6,937 5,270
Selling, general and
administrative . . . . 3,327 3,282 6,199 6,048
---------- ---------- ---------- ----------
Operating income (loss) . . 1,102 216 738 (778)
Interest expense. . . . . . (432) (466) (860) (883)
Other income (expense), net (22) 91 -- 132
---------- ---------- ---------- ----------
Income (loss) before taxes 648 (159) (122) (1,529)
Benefit (provision) for
income taxes . . . . . . . (94) (25) (121) (35)
---------- ---------- ---------- ----------
Net income (loss) . . . . . 554 (184) (243) (1,564)
Retained earnings (deficit)
at beginning of period. . (7,328) (5,607) (6,531) (4,227)
---------- ---------- ---------- ----------
Retained earnings (deficit)
at end of period. . . . . $ (6,774) $ (5,791) $ (6,774) $ (5,791)
========== ========== ========== ==========
Per Share Data:
Basic Earnings (Loss) Per Share:
Net income (loss) . . . . . $ 0.27 $ (0.09) $ (0.12) $ (0.76)
========== ========== ========== ==========
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) . . . . . $ 0.27 $ (0.09) $ (0.12) $ (0.76)
========== ========== ========== ==========
Weighted average number of
shares outstanding. . . . 2,058,976 2,058,976 2,058,976 2,058,976
========== ========== ========== ==========
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 28, May 30, May 28, May 30,
2004 2003 2004 2003
---------- ---------- ---------- ----------
Net income (loss) . . . . . $ 554 $ (184) $ (243) $ (1,564)
Other comprehensive income
(loss), net of tax:
Foreign currency
translation adjustment . (22) 128 51 215
---------- ---------- ---------- ----------
Other comprehensive
income (loss). . . . . . (22) 128 51 215
---------- ---------- ---------- ----------
Comprehensive income (loss) $ 532 $ (56) $ (192) $ (1,349)
========== ========== ========== ==========
See Accompanying Notes to Condensed Consolidated Financial Statements
3
PLYMOUTH RUBBER COMPANY, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(In Thousands)
May 28, Nov. 28,
2004 2003
---------- ----------
(Unaudited)
Assets
Current Assets:
Cash . . . . . . . . . . . . . . . . . . . . . . . $ 2 $ 10
Accounts receivable, less allowance for
doubtful accounts of $445 and $447 at
May 28, 2004 and November 28, 2003 . . . . . . . 13,246 11,776
Inventories:
Raw materials . . . . . . . . . . . . . . . . . 4,600 3,952
Work in process . . . . . . . . . . . . . . . . 2,150 2,472
Finished goods. . . . . . . . . . . . . . . . . 6,974 5,951
---------- ----------
13,724 12,375
---------- ----------
Prepaid expenses and other current assets. . . . . 616 924
---------- ----------
Total current assets . . . . . . . . . . . . . 27,588 25,085
---------- ----------
Plant Assets:
Plant assets . . . . . . . . . . . . . . . . . . . 48,965 48,694
Less: Accumulated depreciation. . . . . . . . . . (30,847) (29,360)
---------- ----------
Total plant assets, net. . . . . . . . . . . . 18,118 19,334
---------- ----------
Other Assets:
Goodwill. . . . . . . . . . . . . . . . . . . . . . . 496 481
Other long-term assets. . . . . . . . . . . . . . . . 366 415
---------- ----------
Total other assets. . . . . . . . . . . . . . . 862 896
---------- ----------
$ 46,568 $ 45,315
========== ==========
Liabilities and Stockholders' Equity
Current Liabilities:
Short-term debt. . . . . . . . . . . . . . . . . . $ 15,629 $ 14,031
Accounts payable . . . . . . . . . . . . . . . . . 9,564 9,098
Accrued expenses . . . . . . . . . . . . . . . . . 4,425 4,538
Current portion of long-term obligations . . . . . 1,582 1,768
---------- ----------
Total current liabilities. . . . . . . . . . . 31,200 29,435
---------- ----------
Long-Term Liabilities:
Borrowings . . . . . . . . . . . . . . . . . . . . 6,911 7,577
Pension obligation . . . . . . . . . . . . . . . . 5,785 5,486
Deferred tax liability . . . . . . . . . . . . . . 147 143
Other. . . . . . . . . . . . . . . . . . . . . . . 2,105 2,062
---------- ----------
Total long-term liabilities. . . . . . . . . . 14,948 15,268
---------- ----------
Committments and Contingencies
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). . . . . . . . . . . . (6,774) (6,531)
Accumulated other comprehensive loss . . . . . . . (3,796) (3,847)
---------- ----------
605 797
Less: Treasury stock at cost (32,914 shares) . . . (185) (185)
---------- ----------
Total stockholders' equity . . . . . . . . . . 420 612
---------- ----------
$ 46,568 $ 45,315
========== ==========
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 28, May 30,
2004 2003
---------- ----------
Cash flows relating to operating activities:
Net income (loss). . . . . . . . . . . . . . . . . $ (243) $ (1,564)
Adjustments to reconcile net income (loss)
to net cash used in operating activities:
Depreciation and amortization. . . . . . . . . 1,414 1,440
Changes in assets and liabilities:
Accounts receivable. . . . . . . . . . . . . . (1,395) (922)
Inventory. . . . . . . . . . . . . . . . . . . (1,293) (1,190)
Prepaid expenses and other current assets. . . 309 249
Other assets . . . . . . . . . . . . . . . . . 55 16
Accounts payable . . . . . . . . . . . . . . . 427 1,210
Accrued expenses . . . . . . . . . . . . . . . (123) (293)
Pension obligation . . . . . . . . . . . . . . 299 244
Other liabilities. . . . . . . . . . . . . . . 39 (68)
---------- ----------
Net used in operating activities. . . . . . . . . . . (511) (878)
---------- ----------
Cash flows relating to investing activities:
Capital expenditures . . . . . . . . . . . . . . . (67) (235)
---------- ----------
Net cash used in investing activities . . . . . . . . (67) (235)
---------- ----------
Cash flows relating to financing activities:
Net increase in short-term debt. . . . . . . . . . 1,535 2,126
Payments on term debt. . . . . . . . . . . . . . . (733) (774)
Payments on capital leases . . . . . . . . . . . . (220) (145)
---------- ----------
Net cash provided by (used in) financing activities . 582 1,207
---------- ----------
Effect of exchange rates on cash. . . . . . . . . . . (12) (129)
---------- ----------
Net change in cash. . . . . . . . . . . . . . . . . . (8) (35)
Cash at the beginning of the period . . . . . . . . . 10 37
---------- ----------
Cash at the end of the period . . . . . . . . . . . . $ 2 $ 2
========== ==========
Supplemental Disclosure of Cash Flow Information
Cash paid for interest. . . . . . . . . . . . . . . . $ 826 $ 920
========== ==========
Cash paid for income taxes. . . . . . . . . . . . . . $ 27 $ 16
========== ==========
See Accompanying Notes to Condensed Consolidated Financial Statements
5
PLYMOUTH RUBBER COMPANY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1. Basis of Presentation
Plymouth Rubber Company, Inc. (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 28, 2003, November 29, 2002, and November 30, 2001,
included in the Company's 2003 Annual Report filed with the
Securities and Exchange Commission on Form 10-K.
Note 2. Going Concern
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 Company's limited liquidity under existing debt
arrangements, its working capital deficit, the recent history of
losses, the pension payment due August 2004, and the overall
risks associated with achieving the 2004 plan indicates that
substantial doubt exists as to whether the Company will be able
to operate as a going concern. The consolidated financial
statements do not include any adjustments that might result from
the outcome of this uncertainty.
As of May 28, 2004, the Company had approximately $470,000 of
unused borrowing capacity under its revolving line of credit with
its primary working capital lender, after consideration of
applicable lending formulas. The Company is in compliance with
its debt covenants as of May 28, 2004.
The Company received pension funding waivers from the Internal
Revenue Service (the "IRS") for $855,000 in 2002 and $1,030,000
(of the $1,262,000 due) in 2003. These were waivers for plan
years ending November 30, 2001 and November 30, 2002, and were
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 Pension Benefit Guaranty
Corporation (the "PBGC") by September 10, 2004. The minimum
funding payment due in August 2004 is $1,533,000. Of this
amount, approximately $1,048,000 is the current year requirement
and $485,000 is a result of previous funding waivers. Management
has begun negotiations with the PBGC to reschedule future minimum
pension payments, including the 2004 minimum pension payment of
$1,533,000, in order to provide working capital needed to operate
profitability into future years and ultimately meet all of its
pension obligations. Management believes that the Company may
not be able to make the entire 2004 minimum funding payment in
August, 2004. In conjunction with the above negotiations, the
Company also plans to work with the PBGC to secure the 2003
waiver of $1,030,000 in a manner acceptable to the PBGC, by
September 10, 2004. Should the PBGC not reschedule payments and
should the Company not be able to make all of the August 2004
minimum funding payment, the Company would be required to notify
the IRS, the Pension Benefit Guaranty Corporation, and the
Pension Plan participants. An excise tax of 10% on the amount of
the payment shortfall would be currently payable. The PBGC could
impose a tax lien on the Company for the amount of payment
shortfall, and the $855,000 and $1,030,000 waiver amounts from
2002 and 2003 would also become due. The PBGC could choose to
take one or more additional actions, which could have an adverse
impact on the Company's liquidity, financial position, and
ability to continue operations.
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
6
PLYMOUTH RUBBER COMPANY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) (Continued)
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. The Company is not currently in compliance
with this listing standard.
On December 31, 2003, the Company received notification from AMEX
that the Company's Class A Common Stock and Class B Common Stock
are each subject to delisting for having aggregate publicly held
market values of less than $1,000,000 for more than 90
consecutive days. In order for the Company to maintain the
listings of its Common Stock, it was to submit a plan, subject to
acceptance by AMEX, by January 26, 2004 advising the AMEX of
actions to bring it into compliance with continued listing
standards by March 10, 2004. The Company had been considering the
feasibility of such a plan of compliance and had asked AMEX for
an extension of time to submit a compliance plan or pursue
alternatives to continued AMEX listing. The Company is not
currently in compliance with this listing standard. On May 10,
2004, the Company submitted a letter, which described the program
by which the Company will be brought back into compliance with
AMEX's listing standards by the end of fiscal 2004. The Company
is awaiting further communications form Amex
Failure to make progress consistent with these listing standards
could result in the Company's shares being delisted from AMEX.
Should this occur, the Company would consider several options,
including having its common shares traded over the counter.
For fiscal 2004, management plans to increase sales as a result
of the additional marketing investments that have been made in
the wholesale and retail markets, and continues to control
expenses to improve profitability and control capital spending,
to provide additional cash from operating activities. In
addition, the Company is pursuing a variety of financing options
which, depending on their structure, might (1) require
discussion with the lenders to modify existing loan agreements,
including future payment schedules, and release part of their
collateral (2) eliminate the balloon payments and extend the
maturity dates as described above, or (3) remove the need to
restructure debt. These transactions could increase equity
and/or provide additional working capital needed for operations.
The transactions include but are not limited to refinancing,
partial sale, or sale and leaseback of Company-owned real estate,
a rescheduling of term debt payments and a rearrangement of
associated collateral, and/or the addition of new capital funds.
However, the structure, dollar amount, and likely success of such
transactions are unknown at this time.
If the above transactions were unsuccessful, the Company would
attempt another restructuring of its long-term debt, including,
in particular, the balloon payment. The Company believes this
option is possible, should it be necessary, but its likely
success is unknown at this time.
Management believes these plans are possible to achieve but the
process is in its early stages. It is management's belief that
cash flows generated from operations, and/or additional financing
accompanied by a restructuring of existing loan agreements,
and/or a rescheduling of pension obligations will be sufficient
to meet the Company's liquidity needs during fiscal 2004.
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
7
PLYMOUTH RUBBER COMPANY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) (Continued)
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.
Note 3. 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, the Company's net loss and net loss per share would have
been reduced to the following pro forma amounts:
Second Quarter Ended Six Months Ended
----------------------- -----------------------
May 28, May 30, May 28, May 30,
2004 2003 2004 2003
---------- ---------- ---------- ----------
Net income (loss)
as reported. . . . . . . . $ 554 $ (184) $ (243) $ (1,564)
Deduct: Total stock-based
employee compensation
determined under fair
value method for all
awards, net of related
tax effects . . . . . . . (8) (35) (17) (69)
---------- ---------- ---------- ----------
Pro forma net loss. . . . . $ 546 $ (219) $ (260) $ (1,633)
========== ========== ========== ==========
Earnings per share:
Basic, as reported. . . . $ 0.27 $ (0.09) $ (0.12) $ (0.76)
========== ========== ========== ==========
Basic, pro forma. . . . . $ 0.27 $ (0.11) $ (0.13) $ (0.79)
========== ========== ========== ==========
Diluted, as reported. . . $ 0.27 $ (0.09) $ (0.12) $ (0.76)
========== ========== ========== ==========
Diluted, pro forma. . . . $ 0.27 $ (0.11) $ (0.13) $ (0.79)
========== ========== ========== ==========
Note 4. Commitments and Contingencies
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 $725,000 as of May 28, 2004 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 differ from the amount accrued for as of May 28, 2004 and may
be affected by various factors, including future testing, the
remediation alternatives taken at the sites, and actual cleanup
costs. The final remediation
8
PLYMOUTH RUBBER COMPANY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) (Continued)
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 investigation, assessment, containment,
and remediation. The Company has accrued $283,000 as of May 28,
2004 to cover estimated future environmental cleanup
expenditures, which is net of $971,000 payments made to date.
Actual future costs may differ from the amount accrued as of May
28, 2004, because of changes in estimates for the time required
to complete the cleanup.
Note 5. Earnings (Loss) Per Share
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(A) Six Months Ended(B)
----------------------- -----------------------
May 28, May 30, May 28, May 30,
2004 2003 2004 2003
---------- ---------- ---------- ----------
(In thousands except share and per share data)
Basic earnings (loss) per share
- -------------------------------
Net income (loss) available
to common stockholders . . $ 554 $ (184) $ (243) $ (1,564)
========== ========== ========== ==========
Weighted average shares . . 2,058,976 2,058,976 2,058,976 2,058,976
========== ========== ========== ==========
Net income (loss) per share $ 0.27 $ (0.09) $ (0.12) $ (0.76)
========== ========== ========== ==========
Diluted earnings (loss) per share
- ---------------------------------
Net income (loss) available
to common stockholders . . $ 554 $ (184) $ (243) $ (1,564)
========== ========== ========== ==========
Weighted average shares . . 2,058,976 2,058,976 2,058,976 2,058,976
Effect of diluted
stock options. . . . . . -- -- -- --
---------- ---------- ---------- ----------
Diluted weighted average
shares . . . . . . . . . 2,058,976 2,058,976 2,058,976 2,058,976
========== ========== ========== ==========
Net income (loss) per share $ 0.27 $ (0.09) $ (0.12) $ (0.76)
========== ========== ========== ==========
(A) Options for 429,200 and 390,225 shares of common stock were
outstanding at May 28, 2004 and May 30, 2003, respectively, but
were not included in computing diluted earnings per
9
PLYMOUTH RUBBER COMPANY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) (Continued)
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.
(B) Options for 445,995 and 321,113 shares of common stock were
outstanding at May 28, 2004 and May 30, 2003, 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.
Note 6. Segment Information
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.
The table below presents information related to Plymouth Rubber's
business segments for the second quarter and six months ended May
28, 2004 and May 30, 2003.
Second Quarter Ended Six Months Ended
----------------------- -----------------------
May 28, May 30, May 28, May 30,
2004 2003 2004 2003
---------- ---------- ---------- ----------
Segment sales to
unaffiliated customers:
Plymouth Tapes. . . . . . $ 16,118 $ 15,189 $ 30,335 $ 28,393
Brite-Line Technologies . 3,855 3,098 4,460 3,437
---------- ---------- ---------- ----------
Consolidated net sales. . $ 19,973 $ 18,287 $ 34,795 $ 31,830
========== ========== ========== ==========
Segment operating
income (loss):
Plymouth Tapes. . . . . . $ 549 $ (250) $ 470 $ (808)
Brite-Line Technologies . 553 466 268 30
---------- ---------- ---------- ----------
Consolidated segment
operating income (loss). . 1,102 216 738 (778)
Interest expense. . . . . . (432) (466) (860) (883)
Other income (expense). . . (22) 91 -- 132
---------- ---------- ---------- ----------
Consolidated income
(loss),before taxes. . . . $ 648 $ (159) $ (122) $ (1,529)
========== ========== ========== ==========
10
PLYMOUTH RUBBER COMPANY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) (Continued)
Note 7. Goodwill
As of December 1, 2001 the Company adopted the SFAS No. 142,
"Goodwill and Other Intangible Assets". In accordance with the
guidelines of this accounting principle, goodwill and indefinite
lived intangible assets are no longer amortized but will be
assessed for impairment on at least on annual basis. The Company
has elected to test annually for goodwill impairment at the end
of each fiscal year. Goodwill will also be tested for impairment
between annual tests if a triggering event occurs, as defined by
SFAS No. 142, that could potentially reduce the fair value of the
reporting unit below its carrying value. Through fiscal 2001 the
Company amortized goodwill over a period of five years. Since
the adoption of the provisions of SFAS No. 142, there have been
no impairment charges recognized by the Company as the fair value
of the reporting unit to which the goodwill relates has exceeded
book value.
At May 28, 2004, the Company has goodwill of $496,000 relating to
the purchase of Plymouth Rubber Eurpoa, S.A The change in
goodwill from period to period is a result of currency rate
changes.
Note 8. Retirement and Other Benefit Plans
The of net periodic pension expense for the second quarter and
six months is as follows:
Second Quarter Ended Six Months Ended
----------------------- -----------------------
May 28, May 30, May 28, May 30,
2004 2003 2004 2003
---------- ---------- ---------- ----------
Service cost. . . . . . . . $ -- $ -- $ -- $ --
Interest cost . . . . . . . 190 165 335 317
Expected return on assets . (143) (122) (252) (235)
Amortization of net gain. . 123 84 216 162
---------- ---------- ---------- ----------
Net periodic pension
expense. . . . . . . . . . $ 170 $ 127 $ 299 $ 244
========== ========== ========== ==========
The components of net postretirement expense for the second
quarter and six months are as follows:
Second Quarter Ended Six Months Ended
----------------------- -----------------------
May 28, May 30, May 28, May 30,
2004 2003 2004 2003
---------- ---------- ---------- ----------
Service cost. . . . . . . . $ 16 $ 15 $ 32 $ 30
Interest cost . . . . . . . 15 15 30 30
Amortization of net gain. . -- -- -- --
---------- ---------- ---------- ----------
Net periodic postretirement
expense. . . . . . . . . . $ 31 $ 30 $ 62 $ 60
========== ========== ========== ==========
11
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following analysis of Plymouth Rubber Company Inc. (the
"Company") consolidated financial condition and results of
operations should be read in conjunction with the audited
Consolidated Financial Statements included in the Company's
Annual Report on Form 10-K for the fiscal year ended November 28,
2003, and Unaudited Interim Consolidated Financial Statements
included elsewhere in this Quarterly Report on Form 10-Q.
Company Overview
The Company and its subsidiaries primarily operate through two
business segments: Plymouth Tapes and Brite-Line Technologies.
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.
Key factors, which management believes have the largest impact on
the overall profit and loss of the Company, include:
(1) the level of sales has a large impact on profits. Since most
of the Company's costs (except for raw materials) are largely
fixed in the short/medium term, an increase or decrease in sales
affects profit significantly.
(2) the variable margin on sales, which is determined by selling
prices and the cost of manufacturing and raw materials, has a
large effect on profit. This margin is, in turn, affected by a
number of factors, which include purchase prices of raw material,
especially PVC resin, competition, both domestic and
international, competitive pricing, direct labor costs, internal
production methods and efficiencies, among others.
(3) given the magnitude of the Company's fixed cost structure,
increases or decreases in these costs have a large impact on
profits. There are a number of large fixed or semi-fixed cost
components, which include salaries, indirect labor, and benefits,
utilities, equipment maintenance and repair, insurance, and
depreciation. Thus changes in rates or usage of these cost
components can have a large effect on profit.
First Six Months 2004, Compared with First Six Months, 2003
Overall Summary of First Six Months, 2004 Financial Results
For the first six months of 2004, sales increased 9% from last
year, with increases at both Plymouth Tapes and Brite-Line.
Management believes that increased sales levels are a critical
component of improved profitability.
Despite the increase in sales, overall costs in the first half of
2004 were relatively level with the first half of 2003, with a
decrease in fixed manufacturing costs and a relatively small
increase in selling, general and administrative costs, mostly
related to sales volume increases. The increased sales and its
associated improved variable margin dollars reduced the pre-tax
loss to $122,000, from a loss of $1,529,000 in the first six
months of 2003.
12
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Continued)
Sales and Margins
Sales increased at both Plymouth Tapes and Brite-Line as
described below:
Six Months Sales
(Unaudited) Increase
------------------------- ---------------------
2004 2003 $ %
----------- ----------- ---------- --------
Plymouth Tapes. . . . . . $ 30,335,000 $ 28,393,000 1,942,000 6.8
Brite-Line Technologies . 4,460,000 3,437,000 1,023,000 29.8
----------- ----------- ----------
Total . . . . . . . . . . $ 34,795,000 $ 31,830,000 2,965,000 9.3
=========== =========== ==========
Plymouth Tapes sales to automotive markets increased 2%, or
$278,000, due to increased business partially offset by some
price decreases. International automotive sales increased 56%
while domestic automotive sales decreased 9%, primarily because
of a shift in automotive harness manufacturing to lower labor
cost foreign locations. Sales in all other markets increased
15%, or $1,664,000, due primarily to increases in the
Contractor/Industrial market group (Contractor Industrial,
Utility, Telecommunication, Retail, and Mining), which
contributed $1,595,000 of sales growth, and resulted from the
marketing and sales investments made during the last two years,
as well as from incremental demand from the general economic
improvement. The remaining non-automotive sales growth of
$388,000, or 26% was from sales of specialty product to
industrial customers, benefiting from the general economic
improvement, partially offset by a decrease of $184,000 in the
Vinyl Films market less freight and discounts of $135,000. The
overall sales growth at Plymouth Tapes, both automotive and non-
automotive, was aided by a favorable Euro/Dollar exchange rate
for those sales originally denominated in Euros, which accounted
for $611,000 of the dollar sales growth described above.
At Brite-Line Technologies, the sales increase was attributable
to gains in Europe, due to some new European product approvals,
as well as a mix shift to higher priced products and price
increases on some products.
In addition, favorable US foreign exchange rates made both
Plymouth Tapes' and Brite-Line's domestically manufactured
products more competitive in international markets, which
accounts for some of the increased product demand.
Gross margin, as a percentage of sales, increased at both
Plymouth Tapes and at Brite-Line as described below:
Six Months Gross Margin
(Unaudited) Increase
------------------------- ---------------------
2004 2003 $ %
----------- ----------- ---------- --------
Plymouth Tapes. . . . . . $ 5,819,000 $ 4,395,000 1,424,000 32.4
% sales. . . . . . . . . 19.2 15.5
Brite-Line Technologies . 1,118,000 875,000 243,000 27.8
% sales. . . . . . . . . 25.1 25.5
Total . . . . . . . . . . $ 6,937,000 $ 5,270,000 1,667,000 31.6
% sales. . . . . . . . . 19.9 16.6
Of the $1,424,000 Plymouth Tapes increase, $1,182,000 was largely
due to sales increases described above. In addition and despite
the higher sales, lower spending on manufacturing
13
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Continued)
overhead, due
largely to continued tight spending controls, contributed
approximately $473,000 of increased margin. This consisted of
$344,000 of lower indirect manufacturing labor, $176,000 of lower
fringe expense, $72,000 of decreased taxes and insurance costs,
and a decrease in depreciation of $58,000, partially offset by
$147,000 of increased purchases of indirect materials and other
purchases, and $30,000 of other costs. In addition, there was
$299,000 of improved overhead absorption due to the increased
plant activity. Offsetting factors were $466,000 of unfavorable
production yields and other inventory variances, due largely to
increased activity levels and some unfavorable product yield
percentages, and $62,000 of direct labor variance to support the
higher sales.
The major factor driving the gross margin increase at Brite-Line
was also the increased sales, which accounted for $263,000 of
additional standard margin. This was partially offset by
slightly higher manufacturing expenses of $42,000, as a result of
increased labor, materials, and reserves to support the higher
sales, and $22,000 of other operating improvements.
Expenses
Selling, general and administrative expenses (SG&A) at both
Plymouth Tapes and Brite-Line increased in dollars, but decreased
as a percentage of sales, as described below:
Six Months SG&A
(Unaudited) Increase
------------------------- ---------------------
2004 2003 $ %
----------- ----------- ---------- --------
Plymouth Tapes. . . . . . $ 5,349,000 $ 5,203,000 146,000 2.8
% sales. . . . . . . . . 17.6 18.3
Brite-Line Technologies . 850,000 845,000 5,000 0.6
% sales. . . . . . . . . 19.1 24.6
Total . . . . . . . . . . $ 6,199,000 $ 6,048,000 151,000 2.5
% sales. . . . . . . . . 17.8 19.0
At Plymouth Tapes, the major dollar increases in selling, general
and administrative expenses were related largely to sales volume
increases, and included higher freight costs of $142,000 to ship
and distribute higher product volumes, a $64,000 increase in
salaries and fringe benefits, all related to selling, a $54,000
increase in commissions for the higher sales, $34,000 in
increased travel expenses, $33,000 of higher bank fees, $23,000
of increased warehouse costs related to the increased sales,
supplies increases of $15,000, and an additional $12,000 of sales
samples. These increases were partially offset by a $91,000
reduction in advertising, as a large portion of
Contractor/Industrial marketing investments were made during
2003, a $70,000 decrease in professional fees, because of
decreased legal fees, a $37,000 decrease in insurance costs, and
a $28,000 decrease in directors' fees.
At Brite-Line Technologies, expenses were held relatively flat
despite the large increase in sales. The major dollar increases
in selling, general and administrative expenses were, as in
Plymouth Tapes, largely related to sales volume increases, and
included a $67,000 increase in testing expenses for the new
products referenced above, $42,000 of higher freight to support
the higher sales activity, a $16,000 increase in bad debt reserve
to support the higher sales, partially offset by a $55,000
decrease in salaries and fringe, resulting from reduced staff, a
$17,000 decrease in advertising, a $22,000 reduction in travel
costs, $13,000 of decreased field equipment purchases, and a
$10,000 decrease in professional fees.
Interest expense remained relatively stable in 2004 compared to
2003, decreasing 2.6% to $860,000 from $883,000 in 2003. Other
income decreased to zero in 2004 compared to $132,000 in 2003,
which included high foreign exchange gains.
14
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Continued)
Resulting Profit/Loss
The pre-tax and net losses are described below:
Six Months
(Unaudited)
-------------------------
2004 2003
----------- -----------
Pre tax loss . . . . . . $ (122,000) $ (1,529,000)
Tax provision . . . . . . (121,000) (35,000)
----------- -----------
Net loss. . . . . . . . . $ (243,000) $ (1,564,000)
=========== ===========
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 2004 and 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 28, 2004 also provides
significant negative evidence regarding its ability to generate
sufficient taxable income in the future to realize any deferred
tax benefit. The 2004 tax expense and the 2003 tax expense were
recorded for the Company's Spanish subsidiary.
Second Quarter, 2004, Compared with Second Quarter, 2003
Overall Summary of Second Quarter 2004 Financial Results
For the second quarter of 2004, sales increased 9% from last
year, with increases at both Plymouth Tapes and Brite-Line.
Management believes that increased sales levels are a critical
component of improved profitability.
Despite the increase in sales, overall costs in the second
quarter of 2004 were relatively level with the second quarter of
2003, with a decrease in fixed manufacturing costs and a
relatively small increase in selling, general and administrative
costs (largely due to the sales volume increases). Therefore, as
a result of the Company's cost structure, the increased sales,
improved variable margin, and small increase in expenses improved
the income before tax from a loss of $159,000 in 2003 to a profit
of $648,000 in 2004.
Sales and Margins
Sales increased at both Plymouth Tapes and Brite-Line as
described below:
Second Quarter Sales
(Unaudited) Increase
------------------------- ---------------------
2004 2003 $ %
----------- ----------- ---------- --------
Plymouth Tapes. . . . . . $ 16,118,000 $ 15,189,000 929,000 6.1
Brite-Line Technologies . 3,855,000 3,098,000 757,000 24.4
----------- ----------- ----------
Total . . . . . . . . . . $ 19,973,000 $ 18,287,000 1,686,000 9.2
=========== =========== ==========
Plymouth Tapes sales to automotive markets increased 3%, or
$233,000, due to increased business partially offset by some
price decreases. International automotive sales increased 43%
while domestic automotive sales decreased 6%, primarily because
of a shift in automotive harness manufacturing to lower labor
cost foreign locations. Sales in all other markets increased
11%, or $696,000, due primarily to increases in the
Contractor/Industrial market group (Contractor Industrial,
Utility, Telecommunication, Retail, and Mining), which
contributed $640,000 of sales growth, and resulted from the
marketing and sales investments made during
15
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Continued)
the last two years,
as well as from incremental demand from the general economic
improvement. The remaining non-automotive sales growth of
$236,000, or 29% was from sales of specialty products to
industrial customers, benefiting from the general economic
improvement, partially offset by a decrease of $124,000 in the
Vinyl Films market less freight and discounts of $56,000.
Domestic and international non-automotive sales increased. The
overall sales growth at Plymouth Tapes, both automotive and non-
automotive, was aided by a favorable Euro/Dollar exchange rate
for those sales originally denominated in Euros, which accounted
for $611,000 of the dollar sales growth described above.
At Brite-Line Technologies, the sales increase was attributable
to gains in Europe, due to some new European product approvals,
as well as a mix shift to higher priced products, and price
increases on some products.
In addition, favorable US foreign exchange rates made both
Plymouth Tapes' and Brite-Line's domestically manufactured
products more competitive in international markets, which
accounts for some of the increased product demand.
Gross margin as a percentage of sales, increased at both Plymouth
Tapes and Brite-Line as described below:
Second Quarter Gross Margin
(Unaudited) Increase
------------------------- ---------------------
2004 2003 $ %
----------- ----------- ---------- --------
Plymouth Tapes. . . . . . $ 3,301,000 $ 2,493,000 808,000 32.4
% sales. . . . . . . . . 20.5 16.4
Brite-Line Technologies . 1,128,000 1,005,000 123,000 12.2
% sales. . . . . . . . . 29.3 32.4
Total . . . . . . . . . . $ 4,429,000 $ 3,498,000 931,000 26.6
% sales. . . . . . . . . 22.2 19.1
Of the $808,000 Plymouth Tapes increase, $742,000 was largely due
to sales increases described above. In addition and despite the
higher sales, lower spending on manufacturing overhead, due
largely to continued tight spending controls, contributed
approximately $220,000 of increased margin. This consisted of
$344,000 of lower indirect manufacturing labor, $176,000 of lower
fringe expense, $72,000 of decreased taxes and insurance costs,
and a decrease in depreciation of $58,000, partially offset by
$147,000 of increased purchases of indirect materials and other
purchases, and $30,000 of other costs. There was also $115,000
of unfavorable overhead absorption.
The major factor driving the gross margin increase at Brite-Line
was also the increased sales, which accounted for $263,000 of
additional standard margin. This was partially offset by
slightly higher manufacturing expenses of $42,000, as a result of
increased labor, materials, and reserves to support the higher
sales, and $22,000 of other operating improvements.
Expenses
Selling, general and administrative expenses (SG&A) at both
Plymouth Tapes and Brite-Line is described below:
16
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Continued)
Second Quarter SG&A
(Unaudited) Increase
------------------------- ---------------------
2004 2003 $ %
----------- ----------- ---------- --------
Plymouth Tapes. . . . . . $ 2,752,000 $ 2,743,000 9,000 0.3
% sales. . . . . . . . . 17.1 18.1
Brite-Line Technologies . 575,000 539,000 36,000 6.7
% sales. . . . . . . . . 14.9 17.4
Total . . . . . . . . . . $ 3,327,000 $ 3,282,000 45,000 1.4
% sales. . . . . . . . . 16.7 17.9
At Plymouth Tapes, selling, general and administrative expenses
were held relatively level, despite the sales increase. The
major increases included higher freight costs of $58,000 to ship
and distribute higher product volumes, a $35,000 increase in
commissions for the higher sales, $18,000 of higher supplies
purchases, an increase in registration fees of $15,000, a $13,000
increase in salaries and fringe benefits, to support product
selling efforts, a $8,000 increase in bank fees, and $10,000 of
increased warehouse costs related to the increased sales. The
major decreases were a $115,000 reduction in advertising, as a
large portion of Contractor/Industrial marketing investments were
made during 2003, a $26,000 decrease in professional fees,
because of decreased legal fees, and a $18,000 decrease in
insurance costs.
At Brite-Line Technologies, expenses increased, but less than the
larger increase in sales. The major dollar increases in selling,
general and administrative expenses were largely related to sales
volume increases, and included a $65,000 increase in testing of
the new products referenced above, a $27,000 increase in freight
to support the higher sales activity, a $16,000 in bad debt
reserve to support the higher sales, partially offset by a
$10,000 decrease in salaries and fringe, resulting from reduced
staff, a $27,000 decrease in advertising, a $8,000 reduction in
travel costs, $13,000 of decreased field equipment purchases, and
a $11,000 decrease in professional fees.
Interest expense decreased 7.3% to $432,000 from $466,000 in
2003, largely from lower balances on equipment loans. Other
expense in 2004 was $22,000, primarily due to foreign exchange
losses, compared to income of $91,000 in 2003, which included
high foreign exchange gains.
Resulting Profit/Loss
The pre-tax and net losses are described below:
Second Quarter
(Unaudited)
-------------------------
2004 2003
----------- -----------
Pre tax income (loss) . . $ 648,000 $ (159,000)
Tax provision . . . . . . (94,000) (25,000)
----------- -----------
Net income (loss) . . . . $ 554,000 $ (184,000)
=========== ===========
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 2004 and 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 28, 2004 also provides
significant negative evidence
17
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Continued)
regarding its ability to generate
sufficient taxable income in the future to realize any deferred
tax benefit. The 2004 tax expense and the 2003 tax expense were
recorded for the Company's Spanish subsidiary.
Liquidity and Capital Resources
Management believes that cash flows generated from operations,
and/or additional financing accompanied by a restructuring of
existing loan agreements, and/or a rescheduling of pension
obligations will be sufficient to meet the Company's liquidity
needs during fiscal 2004.
Overall Cash Position
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 Company's limited liquidity under existing debt
arrangements, its working capital deficit, the recent history of
losses, the pension payment due August 2004, and the overall
risks associated with achieving the 2004 plan indicates that
substantial doubt exists as to whether the Company will be able
to operate as a going concern. The consolidated financial
statements do not include any adjustments that might result from
the outcome of this uncertainty.
As of May 28, 2004, the Company had approximately $470,000 of
unused borrowing capacity under its revolving line of credit with
its primary working capital lender, after consideration of
applicable lending formulas. The Company is in compliance with
its debt covenants as of May 28, 2004.
Debt Arrangements
Prior to December, 2002, the Company's domestic 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.
Based upon the new arrangements, future principal and interest
payments due on domestic term debt are as follows:
18
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Continued)
Fiscal 2004
Third Quarter $ 601,000
Fourth Quarter 602,000
Fiscal 2005
First Quarter 448,000
Second Quarter 444,000
Third Quarter 445,000
Fourth Quarter 4,802,000
Fiscal 2006 565,000
Fiscal 2007 650,000
Fiscal 2008 309,000
According to the revised loan agreements, approximately
$4,565,000 of the fourth quarter amount due in fiscal 2005 of
$4,802,000 will have extended maturity dates from April 1, 2006
to April 1, 2011 if the following conditions are met: (1) the
senior lien on the Company's real property is limited to $2.0
million and (2) the appraised fair market value of the real
property subject to the mortgage is not less than $2.5 million.
Cash Pension Contributions for Defined Benefit Plan
The Company received pension funding waivers from the Internal
Revenue Service (the "IRS") for $855,000 in 2002 and $1,030,000
(of the $1,262,000 due) in 2003. These were waivers for plan
years ending November 30, 2001 and November 30, 2002, and were
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 Pension Benefit Guaranty
Corporations (the "PBGC") by September 10, 2004. The minimum
funding payment due in August 2004 is $1,533,000. Of this
amount, approximately $1,048,000 is the current year requirement
and $485,000 is a result of previous funding waivers. Management
has begun negotiations with the PBGC to reschedule future minimum
pension payments, including the 2004 minimum pension payment of
$1,533,000, in order to provide working capital needed to operate
profitability into future years and ultimately meet all of its
pension obligations. Management believes that the Company may
not be able to make the entire 2004 minimum funding payment in
August, 2004. In conjunction with the above negotiations, the
Company also plans to work with the PBGC to secure the 2003
waiver of $1,030,000 in a manner acceptable to the PBGC, by
September 10, 2004. Should the PBGC not agree to rescheduled
payments and should the Company not be able to make the funding
payment due in August 2004, the Company would be required to
notify the IRS, the Pension Benefit Guaranty Corporation, and the
Pension Plan participants. An excise tax of 10% on the amount of
the payment shortfall would be assessed and would be currently
payable. The PBGC could impose a tax lien on the Company for the
amount of payment shortfall, and the $855,000 and $1,030,000
waiver amounts from 2002 and 2003 would also become due. The
PBGC could choose to take one or more additional actions, which
could have an adverse impact on the Company's liquidity,
financial position, and ability to continue operations.
Working Capital
The Company's working capital position increased from a negative
$4,350,000 at November 28, 2003 to a negative $3,612,000 at May
28, 2004, due to a $1,470,000 increase in accounts receivable,
$1,349,000 increase in inventory, a $186,000 decrease in the
current portion of long term borrowings, a $113,000 decrease in
accrued expenses. The $1,470,000 increase in accounts receivable
results from a $1,741,000 increase in sales for the last two
months of the second quarter of 2004, compared to the last two
months of the fourth quarter of 2003. The accounts receivable
increase is also comparable to a $1,325,000 increase in the
second quarter of 2003 compared to the fourth quarter of 2002.
The $1,349,000 increase in inventory is
19
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Continued)
comparable to an increase
of $1,520,000 in the second quarter of 2003 compared to the
fourth quarter of 2002. Inventory is normally increased in the
second quarter to support the seasonally normal increase in
second quarter sales compared to fourth quarter sales.
The above decreases in working capital were partially offset by a
$1,598,000 increase in short term debt, a $466,000 increase in
accounts payable, a $308,000 decrease in prepaid and other
current assets, and a $8,000 decrease in cash. The $1,598,000
increase in short term debt is comparable to a $2,116,000
increase in the second quarter of 2003 compared to the fourth
quarter of 2002. Short term debt is normally increased in the
second quarter to support the seasonally normal increase in
second quarter sales compared to fourth quarter sales. The
$466,000 increase in accounts payable compares to an increase of
$1,447,000 in the second quarter of 2003 compared to 2002, and is
due to higher raw material purchases to support an inventory
build of $1,349,000 to support seasonally normal higher second
quarter sales. Although the Company's second quarter 2004
payments to suppliers were slower than the stated terms, as has
been normal, the Company continues to receive open payment terms
from most of its suppliers, largely net 30 days, net 60 days,
with some dollar credit lines. There are some suppliers that
require advance payment, including some foreign suppliers and
some suppliers that provide the Company with custom manufactured
raw materials and equipment. Discontinuance of open terms from
suppliers would have a material adverse effect on the Company.
The Company improved its payments to suppliers in the second
quarter of 2004 compared to the first quarter of 2004, as in past
years, as accounts payable decreased $199,000, despite much
higher raw material purchases.
Company Plans
For fiscal 2004, management plans to increase sales as a result
of the additional marketing investments that have been made in
the wholesale and retail markets, and continues to control
expenses to improve profitability and control capital spending,
to provide additional cash from operating activities. In
addition, the Company is pursuing a variety of financing options
which, depending on their structure, might (1) require
discussion with the lenders to modify existing loan agreements,
including future payment schedules, and release part of their
collateral (2) eliminate the balloon payments and extend the
maturity dates as described above, or (3) remove the need to
restructure debt. These transactions could increase equity
and/or provide additional working capital needed for operations.
The transactions include but are not limited to refinancing,
partial sale, or sale and leaseback of Company-owned real estate,
a rescheduling of term debt payments and a rearrangement of
associated collateral, and/or the addition of new capital funds.
However, the structure, dollar amount, and likely success of such
transactions are unknown at this time.
If the above transactions were unsuccessful, the Company would
attempt another restructuring of its long-term debt, including,
in particular, the balloon payment. The Company believes this
option is possible, should it be necessary, but its likely
success is unknown at this time.
Management believes these plans are possible to achieve but the
process is in its early stages. It is management's belief that
cash flows generated from operations, and/or additional financing
accompanied by a restructuring of existing loan agreements,
and/or a rescheduling of pension obligations will be sufficient
to meet the Company's liquidity needs during fiscal 2004.
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 Flows
Cash used in operating activities was $511,000 in the second
quarter of 2004, compared to $878,000 in 2003. The major factors
contributing to cash used in operating activities were a
20
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Continued)
$1,395,000 increase in accounts receivable, an increase in
inventory of $1,293,000, a net loss of $243,000, and a decrease
in accrued expenses of $123,000, partially offset by depreciation
and amortization of $1,414,000, an increase in accounts payable
of $427,000, a decrease in prepaid expenses of $309,000, a
$299,000 increase in pension obligation, a $55,000 decrease in
other assets, and an increase in other liabilities of $39,000.
This cash provided by operating activities and additional short-
term borrowings of $1,535,000 were used to pay off term debt and
capital leases of $953,000, and for capital expenditures of
$67,000.
Delphi Automotive
Since 1988, Plymouth Rubber has been the primary source of PVC
(vinyl) harness tapes for the North American wire harness
operations of Delphi Automotive Systems Corporation ("Delphi"),
formerly Packard Electric Division of General Motors, and the
current contract extends to 2005. Delphi accounted for
approximately 28% of the Company's net sales for the six month
period ended May 28, 2004. Delphi accounted for approximately
32% of the Company's net sales in fiscal 2003. The Company has
had an over 30-year relationship with Delphi, has extended its
contracts with Delphi a number of times over the years, and
expects that the current one will be extended as well. However,
Delphi constitutes a significant percentage of the Company's
sales and the loss of any major portion of its business would
have a material adverse effect on the Company.
American Stock Exchange Compliance
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. The Company is not currently in compliance
with this listing standard.
On December 31, 2003, the Company received notification from the
AMEX that the Company's Class A Common Stock and Class B Common
Stock are each subject to delisting for having aggregate publicly
held market values of less than $1,000,000 for more than 90
consecutive days. In order for the Company to maintain the
listings of its Common Stock, it was to submit a plan, subject to
acceptance by AMEX, by January 26, 2004 advising the AMEX of
actions to bring it into compliance with continued listing
standards by March 10, 2004. The Company had been considering the
feasibility of such a plan of compliance and had asked AMEX for
an extension of time to submit a compliance plan or pursue
alternatives to continued AMEX listing. The Company is not
currently in compliance with this listing standard. On May 10,
2004, the Company submitted a letter, which described the program
by which the Company will be brought back into compliance with
AMEX's listing standards by the end of fiscal 2004. The Company
is awaiting further communications from Amex.
Failure to make progress consistent with these listing standards
could result in the Company's shares being delisted from AMEX.
Should this occur, the Company would consider several options,
including having its common shares traded over the counter.
A summary of the Company's cash requirements related to its
remaining outstanding long term debt, future minimum lease
payments, and estimated pension funding requirements are as
follows:
21
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Continued)
Estimated
Operating Pension
Long Term Lease Funding
Fiscal Year: Debt Commitments Requirements Total
------------ ----------- ----------- -----------
2004. . . . . . . . . $ 835,000 $ 289,000 $ 1,580,000 $ 2,704,000
2005. . . . . . . . . 5,900,000 463,000 1,500,000 7,863,000
2006. . . . . . . . . 711,000 262,000 1,500,000 2,473,000
2007. . . . . . . . . 726,000 -- 1,820,000 2,546,000
2008. . . . . . . . . 320,000 -- 1,130,000 1,450,000
Thereafter. . . . . . 2,000 -- -- 2,000
------------ ----------- ----------- -----------
Total . . . . . . . . $ 8,494,000 $ 1,014,000 $ 7,530,000 $17,038,000
============ =========== =========== ===========
Critical Accounting Policies
The preparation of the Company's financial statements and related
disclosures in conformity with accounting principles generally
accepted in the United States of America requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities, and the disclosure of contingent
assets and liabilities as of the date of the financial statements
and revenues and expenses during the periods reported. The
Company bases its estimates on historical experience, where
applicable, and other assumptions that it believes are reasonable
under the circumstances. Actual results may differ from the
Company's estimates under different assumptions or conditions.
The section below present information about the nature of and
rationale for the Company's critical accounting policies.
The Company's significant accounting policies are discussed in
Note 1 to the Consolidated Financial Statements in the Company's
annual report on Form 10-K for the fiscal year ended November 28,
2003. 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.
22
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Continued)
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 $725,000 as of May 28, 2004 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 differ from the amount accrued for as of May 28, 2004 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 investigation, assessment, containment,
and remediation. The Company has accrued $283,000 as of May 28,
2004 to cover estimated future environmental cleanup
expenditures, which is net of $971,000 payments made to date.
Actual future costs may differ from the amount accrued as of May
28, 2004, because of changes in estimates for the time required
to complete the cleanup.
Impact of New Accounting Pronouncements
In December 2003, the FASB issued Statement of Financial
Accounting Standards No. 132 (revised 2003), Employers'
Disclosures about Pensions and Other Postretirement Benefits. The
provisions of that Statement do not change the measurement and
recognition provisions of FASB Statements No. 87, Employers'
Accounting for Pensions, No. 88, Employers' Accounting for
Settlements and Curtailments of Defined Benefit Pension Plans and
for Termination Benefits, and No. 106, Employers' Accounting for
Postretirement Benefits Other Than Pensions. Statement 132(R)
replaces FASB Statement No. 132, Employers' Disclosures about
Pensions and Other Postretirement Benefits, and adds among other
things additional disclosure pertaining to plan assets, benefit
obligations, key assumptions and measurement dates. The Company
adopted the provisions of Statement 132(R) on February 28, 2004,
disclosing the individual elements of net periodic benefit costs,
such as service cost, interest cost, expected return on assets,
amortization of prior service costs and the Company's
contribution paid and expected to be paid during the current
fiscal year.
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
23
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Continued)
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
24
PLYMOUTH RUBBER COMPANY, INC.
Item 3. Quantitative and Qualitative Disclosure about Market
Risks
At May 28, 2004, the carrying value of Company's debt totaled
$24.1 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 28, 2004, the Company had fixed rate debt of $7.9 million
and variable rate debt of $16.2 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
$105,000. The earnings and cash flows impact for the next year
resulting from a one percentage point increase in interest rates
would be approximately $162,000, holding other variables
constant.
The U.S. dollar is the functional currency for the Company's U.S.
operations. For these operations, all gains and losses from
foreign currency transactions are included in income currently.
The Company operates a wholly owned subsidiary in Spain, which
accounted for 13.8% of the Company's revenues in fiscal 2003.
The functional currency of this subsidiary was the Peseta and is
the Euro in 2003. Because 100% of the subsidiary's domestic and
export sales are denominated in Euros, changes in the Euro
exchange rate relative to other currencies does not materially
affect the subsidiary's earnings. However changes in the
Euro/Dollar exchange rate could affect the reporting of the
subsidiary's earnings in the Consolidated Statement of
Operations. The Company occasionally enters into purchase or
sales contracts in currencies other than the functional currency,
and hedges only those transactions that are of significant size.
The Company did not enter into any foreign currency forward
contracts in 2003 and 2002 and did not have any forward contracts
outstanding at the end of 2003 and 2002.
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.
25
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 28, 2003, 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 30,
2004.
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
Joseph. D. Hamilburg, and
C. Gerald Goldsmith 702,957 7,414
The results on the voting of the following additional
item were as follows:
The ratification of the appointment of
PricewaterhouseCoopers LLP as independent auditors of
the Company for the next fiscal year:
In Favor Opposed Abstain
709,382 689 300
Item 5. Other Information
Not Applicable
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits: See Index to Exhibits
(b) Not Applicable
26
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 12, 2004
27
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
orm 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.
28
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.
29
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.
30
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.
31