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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 27, 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 October 8, 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. . . . . . . 6-12
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. . . . . . . . . . . 13-25
Item 3. Quantitative and Qualitative Disclosure about Market Risks 26
Item 4. Controls and Procedures. . . . . . . . . . . . . . . . . 26
PART II. OTHER INFORMATION
Item 1. Legal Proceedings. . . . . . . . . . . . . . . . . . . . 27
Item 2. Changes In Securities. . . . . . . . . . . . . . . . . . 27
Item 3. Defaults Upon Senior Securities. . . . . . . . . . . . . 27
Item 4. Submission of Matters to a Vote of Security Holders. . . 27
Item 5. Other Information. . . . . . . . . . . . . . . . . . . . 27
Item 6. Exhibits and Reports on Form 8-K 27
SIGNATURES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
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. 27, Aug. 29, Aug. 27, Aug. 29,
2004 2003 2004 2003
---------- ---------- ---------- ----------
Net Sales . . . . . . . . . $ 18,077 $ 15,970 $ 52,872 $ 47,800
Cost of products sold . . . 14,757 13,725 42,615 40,285
---------- ---------- ---------- ----------
Gross magrin. . . . . . . . 3,320 2,245 10,257 7,515
Selling, general and
administrative expenses. . 3,697 2,775 9,896 8,823
---------- ---------- ---------- ----------
Operating income (loss) . . (377) (530) 361 (1,308)
Interest expense. . . . . . (422) (455) (1,282) (1,338)
Other income (expense), net 55 (117) 55 15
---------- ---------- ---------- ----------
Income (loss) before taxes (744) (1,102) (866) (2,631)
Benefit (provision) for
income taxes . . . . . . . (27) (16) (148) (51)
---------- ---------- ---------- ----------
Net income (loss) . . . . . (771) (1,118) (1,014) (2,682)
Retained earnings (deficit)
at beginning of period. . (6,774) (5,791) (6,531) (4,227)
---------- ---------- ---------- ----------
Retained earnings (deficit)
at end of period. . . . . $ (7,545) $ (6,909) $ (7,545) $ (6,909)
========== ========== ========== ==========
Per Share Data:
Basic Earnings (Loss) Per Share:
Net income (loss) . . . . . $ (0.37) $ (0.54) $ (0.49) $ (1.30)
========== ========== ========== ==========
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) . . . . . $ (0.37) $ (0.54) $ (0.49) $ (1.30)
========== ========== ========== ==========
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)
Third Quarter Ended Nine Months Ended
----------------------- -----------------------
Aug. 27, Aug. 29, Aug. 27, Aug. 29,
2004 2003 2004 2003
---------- ---------- ---------- ----------
Net income (loss) . . . . . $ (771) $ (1,118) $ (1,014) $ (2,682)
Other comprehensive income
(loss), net of tax:
Foreign currency
translation adjustment . (26) (118) 25 97
---------- ---------- ---------- ----------
Other comprehensive
income (loss). . . . . . (26) (118) 25 97
---------- ---------- ---------- ----------
Comprehensive income (loss) $ (797) $ (1,236) $ (9789 $ (2,585)
========== ========== ========== ==========
See Accompanying Notes to Condensed Consolidated Financial Statements
3
PLYMOUTH RUBBER COMPANY, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(In Thousands)
Aug. 27, Nov. 28,
2004 2003
---------- ----------
(Unaudited)
Assets
Current Assets:
Cash . . . . . . . . . . . . . . . . . . . . . . . $ 6 $ 10
Accounts receivable, less allowance for
doubtful accounts of $433 and $447 at
August 27, 2004 and November 28, 2003. . . . . . 12,122 11,776
Inventories:
Raw materials . . . . . . . . . . . . . . . . . 4,890 3,952
Work in process . . . . . . . . . . . . . . . . 2,588 2,472
Finished goods. . . . . . . . . . . . . . . . . 6,503 5,951
---------- ----------
13,981 12,375
---------- ----------
Prepaid expenses and other current assets. . . . . 475 924
---------- ----------
Total current assets . . . . . . . . . . . . . 26,584 25,085
---------- ----------
Plant Assets:
Plant assets . . . . . . . . . . . . . . . . . . . 48,962 48,694
Less: Accumulated depreciation. . . . . . . . . . (31,496) (29,360)
---------- ----------
Total plant assets, net. . . . . . . . . . . . 17,466 19,334
---------- ----------
Other Assets:
Goodwill. . . . . . . . . . . . . . . . . . . . . . . 489 481
Other long-term assets. . . . . . . . . . . . . . . . 350 415
---------- ----------
Total other assets. . . . . . . . . . . . . . . 839 896
---------- ----------
$ 44,889 $ 45,315
========== ==========
Liabilities and Stockholders' Equity
Current Liabilities:
Short-term debt. . . . . . . . . . . . . . . . . . $ 14,775 $ 14,031
Accounts payable . . . . . . . . . . . . . . . . . 9,152 9,098
Accrued expenses . . . . . . . . . . . . . . . . . 6,693 4,538
Current portion of long-term obligations . . . . . 1,660 1,768
---------- ----------
Total current liabilities. . . . . . . . . . . 32,280 29,435
---------- ----------
Long-Term Liabilities:
Borrowings . . . . . . . . . . . . . . . . . . . . 6,574 7,577
Pension obligation . . . . . . . . . . . . . . . . 4,168 5,486
Deferred tax liability . . . . . . . . . . . . . . 145 143
Other. . . . . . . . . . . . . . . . . . . . . . . 2,099 2,062
---------- ----------
Total long-term liabilities. . . . . . . . . . 12,986 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). . . . . . . . . . . . (7,545) (6,531)
Accumulated other comprehensive loss . . . . . . . (3,822) (3,847)
---------- ----------
(192) 797
Less: Treasury stock at cost (32,914 shares) . . . (185) (185)
---------- ----------
Total stockholders' equity . . . . . . . . . . (377) 612
---------- ----------
$ 44,889 $ 45,315
========== ==========
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. 27, Aug. 29,
2004 2003
---------- ----------
Cash flows relating to operating activities:
Net income (loss). . . . . . . . . . . . . . . . . $ (1,014) $ (2,682)
Adjustments to reconcile net income (loss)
to net cash provided by (used in)
operating activities:
Depreciation and amortization. . . . . . . . . 2,096 2,150
Changes in assets and liabilities:
Accounts receivable. . . . . . . . . . . . . . (306) 560
Inventory. . . . . . . . . . . . . . . . . . . (1,578) (1,004)
Prepaid expenses and other current assets. . . 451 640
Other assets . . . . . . . . . . . . . . . . . 71 (102)
Accounts payable . . . . . . . . . . . . . . . 32 989
Accrued expenses . . . . . . . . . . . . . . . 389 (57)
Pension obligation . . . . . . . . . . . . . . 442 (531)
Other liabilities. . . . . . . . . . . . . . . 35 (71)
---------- ----------
Net provided by (used in) operating activities. . . . 618 (108)
---------- ----------
Cash flows relating to investing activities:
Capital expenditures . . . . . . . . . . . . . . . (118) (286)
---------- ----------
Net cash used in investing activities . . . . . . . . (118) (286)
---------- ----------
Cash flows relating to financing activities:
Net increase in short-term debt. . . . . . . . . . 713 1,355
Payments on term debt. . . . . . . . . . . . . . . (919) (788)
Payments on capital leases . . . . . . . . . . . . (289) (266)
---------- ----------
Net cash provided by provided by
(used in) financing activities . . . . . . . . . . (495) 301
---------- ----------
Effect of exchange rates on cash. . . . . . . . . . . (9) 63
---------- ----------
Net change in cash. . . . . . . . . . . . . . . . . . (4) (30)
Cash at the beginning of the period . . . . . . . . . 10 37
---------- ----------
Cash at the end of the period . . . . . . . . . . . . $ 6 $ 7
========== ==========
Supplemental Disclosure of Cash Flow Information
Cash paid for interest. . . . . . . . . . . . . . . . $ 1,182 $ 1,250
========== ==========
Cash paid for income taxes. . . . . . . . . . . . . . $ 60 $ 24
========== ==========
See Accompanying Notes to Condensed Consolidated Financial Statements
5
PLYMOUTH RUBBER COMPANY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) (Continued)
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 missed
pension payment that was 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 August 27, 2004, the Company had approximately $419,000 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
August 27, 2004.
The Company had received waivers from the Internal Revenue Service (the
"IRS") of minimum funding requirements of $855,000 in 2002 and
$1,030,000 (of the $1,262,000 due) in 2003 for a frozen defined benefit
pension plan. These waivers, for plan years ending November 30, 2001
and November 30, 2002, respectively, 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 satisfactorily secured in favor of the Pension Benefit
Guaranty Corporation (the "PBGC") by September 10, 2004. A payment of
the minimum funding requirement of $1,533,000 was due on August 16,
2004. Of the amount due, $1,048,000 is for the plan year ended
November 30, 2003 and $445,000 is the payment for prior years.
The Company has not paid this minimum funding requirement of
$1,533,000. As a result, the Company expects the IRS to impose an
initial excise tax on the Company in the amount of $153,000 for this
year's amount due, plus the possible additional excise tax, interest,
and penalties as described below.
The Company has submitted three requests to the IRS for additional
relief related to its funding obligations. The first is an elimination
of the condition of the funding waivers for plan years 2001 and 2002
that the Company satisfy its minimum funding requirements due August,
2004. The second is an extension to March, 2005 the date by which the
minimum funding obligation of $1,030,000 be secured in favor of the
PBGC. The Company cannot predict whether the IRS will grant any of
these first two requests. If these requests are not granted, the IRS
would retroactively impose an additional excise tax the amounts covered
by previous two IRS waivers obtained in 2002 and 2003, for each of the
three years totaling approximately $405,000, for a total excise tax due
of approximately $558,000. Including $23,000 of estimated interest,
and $17,000 for the first month of estimated penalties, $598,000 has
been accrued in the Company's financial statements as of August 27,
2004. For each future month the payment is delayed, penalties will
continue to accrue
6
PLYMOUTH RUBBER COMPANY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) (Continued)
at an estimated $17,000 per month up to a maximum of five months, and
interest will continue to accrue at an estimated $7,000 per month. The
Company's third request to the IRS is for a retroactive extension of
the period for the amortization of the amounts due in respect of plan
years 2001 and 2002 from 5 to 15 years, which would somewhat reduce the
minimum funding and excise taxes due.
As required, the Company has notified the IRS, the PBGC, and the
Pension Plan participants that it did not pay the August 2004 minimum
funding requirement, and is required to include such notice in the
Pension Plan Summary Annual Report. The 2004 pension payment and
excise tax as calculated above continues to be due, and the IRS may
impose a tax lien on the Company for the total excise tax amount due.
At this time and depending on the amount, the Company plans to pay some
or all of excise tax due and continue its pursuit of a number of
possible financing options to improve cash availability, although its
likely success is unknown at this time. The PBGC could choose to take
one or more additional actions, which could include asking the Company
for security, taking over the Plan, terminating the Plan, or other
courses of action which could have an adverse impact on the Company's
liquidity, financial position, and/or 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 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.
For the remainder of 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,
7
PLYMOUTH RUBBER COMPANY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) (Continued)
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.
8
PLYMOUTH RUBBER COMPANY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) (Continued)
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:
Third Quarter Ended Nine Months Ended
----------------------- -----------------------
Aug. 27, Aug. 29, Aug. 27, Aug. 29,
2004 2003 2004 2003
---------- ---------- ---------- ----------
Net income (loss)
as reported. . . . . . . . $ (771) $ (1,118) $ (1,014) $ (2,682)
Deduct: Total stock-based
employee compensation
determined under fair
value method for all
awards, net of related
tax effects . . . . . . . (8) (35) (23) (104)
---------- ---------- ---------- ----------
Pro forma net loss. . . . . $ (779) $ (1,153) $ (1,037) $ (2,786)
========== ========== ========== ==========
Earnings per share:
Basic, as reported. . . . $ (0.37) $ (0.54) $ (0.49) $ (1.30)
========== ========== ========== ==========
Basic, pro forma. . . . . $ (0.38) $ (0.56) $ (0.50) $ (1.35)
========== ========== ========== ==========
Diluted, as reported. . . $ (0.37) $ (0.54) $ (0.49) $ (1.30)
========== ========== ========== ==========
Diluted, pro forma. . . . $ (0.38) $ (0.56) $ (0.50) $ (1.35)
========== ========== ========== ==========
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
August 27, 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 August 27,
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,
9
PLYMOUTH RUBBER COMPANY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) (Continued)
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 $279,000 as of August 27, 2004 to cover estimated
future environmental cleanup expenditures, which is net of $975,000
payments made to date. Actual future costs may differ from the amount
accrued as of August 27, 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.
Third Quarter Ended(A) Nine Months Ended(B)
----------------------- -----------------------
Aug. 27, Aug. 29, Aug. 27, Aug. 29,
2004 2003 2004 2003
---------- ---------- ---------- ----------
(In thousands except share and per share data)
Basic earnings (loss) per share
- -------------------------------
Net income (loss) available
to common stockholders . . $ (771) $ (1,118) $ (1,014) $ (2,682)
========== ========== ========== ==========
Weighted average shares . . 2,058,976 2,058,976 2,058,976 2,058,976
========== ========== ========== ==========
Net income (loss) per share $ (0.37) $ (0.54) $ (0.49) $ (1.30)
========== ========== ========== ==========
Diluted earnings (loss) per share
- ---------------------------------
Net income (loss) available
to common stockholders . . $ (771) $ (1,118) $ (1,014) $ (2,682)
========== ========== ========== ==========
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 $ (0.37) $ (0.54) $ (0.49) $ (1.30)
========== ========== ========== ==========
(A) Options for 417,200 and 556,998 shares of common stock were
outstanding at August 27, 2004 and August 29, 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.
10
PLYMOUTH RUBBER COMPANY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) (Continued)
(B) Options for 436,396 and 469,641 shares of common stock were
outstanding at August 27, 2004 and August 29, 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, at August 29, 2003
options for 102,967 shares of common stock were outstanding, with
exercise prices that were less than the average market price of the
Company's common stock for the period, but were not included in
computing diluted earnings per share because of the loss. At August
27, 2004, there we no outstanding options with exercise prices were
less than the average market price of the Company's common stock for
the period.
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 third quarter and nine months ended August
27, 2004 and August 29, 2003.
Third Quarter Ended Nine Months Ended
----------------------- -----------------------
Aug. 27, Aug. 29, Aug. 27, Aug. 29,
2004 2003 2004 2003
---------- ---------- ---------- ----------
Segment sales to
unaffiliated customers:
Plymouth Tapes. . . . . . $ 14,296 $ 12,970 $ 44,631 $ 41,363
Brite-Line Technologies . 3,781 3,000 8,241 6,437
---------- ---------- ---------- ----------
Consolidated net sales. . $ 18,077 $ 15,970 $ 52,872 $ 47,800
========== ========== ========== ==========
Segment operating
income (loss):
Plymouth Tapes. . . . . . $ (1,079) $ (947) $ (609) $ (1,755)
Brite-Line Technologies . 702 417 970 447
---------- ---------- ---------- ----------
Consolidated segment
operating income (loss). . (377) (530) 361 (1,308)
Interest expense. . . . . . (422) (455) (1,282) (1,338)
Other income (expense). . . 55 (117) 55 15
---------- ---------- ---------- ----------
Consolidated income
(loss),before taxes. . . . $ (744) $ (1,102) $ (866) $ (2,631)
========== ========== ========== ==========
11
PLYMOUTH RUBBER COMPANY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) (Continued)
Note 7. Goodwill
As of December 1, 2001 the Company adopted the provisions of 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 August 27, 2004, the Company has goodwill of $489,000 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 third quarter and nine
months is as follows:
Third Quarter Ended Nine Months Ended
----------------------- -----------------------
Aug. 27, Aug. 29, Aug. 27, Aug. 29,
2004 2003 2004 2003
---------- ---------- ---------- ----------
Service cost. . . . . . . . $ -- $ -- $ -- $ --
Interest cost . . . . . . . 161 152 496 469
Expected return on assets . (121) (113) (374) (347)
Amortization of net gain. . 104 78 321 239
---------- ---------- ---------- ----------
Net periodic pension
expense. . . . . . . . . . $ 144 $ 117 $ 443 $ 361
========== ========== ========== ==========
Third Quarter Ended Nine Months Ended
----------------------- -----------------------
Aug. 27, Aug. 29, Aug. 27, Aug. 29,
2004 2003 2004 2003
---------- ---------- ---------- ----------
Service cost. . . . . . . . $ 15 $ 15 $ 47 $ 45
Interest cost . . . . . . . 16 15 47 45
Amortization of net gain. . -- -- -- --
---------- ---------- ---------- ----------
Net periodic postretirement
expense. . . . . . . . . . $ 31 $ 30 $ 94 $ 90
========== ========== ========== ==========
12
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 Nine Months 2004, Compared with First Nine Months, 2003
Overall Summary of First Nine Months, 2004 Financial Results
For the first nine months of 2004, sales increased 11% 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.
Overall costs in the first nine months of 2004 increased compared to
the first nine months of 2003, with a 12% increase in selling, general
and administrative costs, related to an increase in accrued excise tax
and sales volume increases, partially offset by a 2% decrease in fixed
manufacturing costs. Thus the increased sales and its associated
improved variable margin dollars reduced the pre-tax loss to $866,000,
from a loss of $2,631,000 in the first nine months of 2003.
13
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:
Nine Months Sales
(Unaudited) Increase
------------------------- ---------------------
2004 2003 $ %
----------- ----------- ---------- --------
Plymouth Tapes. . . . . . $ 44,631,000 $ 41,363,000 3,268,000 8
Brite-Line Technologies . 8,241,000 6,437,000 1,804,000 28
----------- ----------- ----------
Total . . . . . . . . . . $ 52,872,000 $ 47,800,000 5,072,000 11
=========== =========== ==========
Plymouth Tapes' sales to automotive markets increased 3%, or $810,000,
due to increased demand partially offset by certain price decreases.
International automotive sales increased 49%, while domestic automotive
sales decreased 6%, primarily because of shifts in automotive harness
manufacturing to lower labor cost foreign locations. Sales in all
other markets increased 15%, or $2,458,000, due primarily to increases
in the electrical tapes markets, which contributed $1,901,000 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 sales growth of $557,000,
or 10% was from sales of specialty products to industrial customers,
benefiting from the general economic improvement. The overall sales
growth at Plymouth Tapes was also aided by a favorable Euro/Dollar
exchange rate for those sales originally denominated in Euros, which
accounted for $804,000 of the dollar sales growth described above.
At Brite-Line Technologies, the sales increase was attributable to new
product approvals earlier in the year, as well as a mix shift to higher
priced products and price increases on certain 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 contributes the increased
product demand.
Gross margin, as a percentage of sales increased at both Plymouth Tapes
and at Brite-Line as described below:
Nine Months Gross Margin
(Unaudited) Increase
------------------------- ---------------------
2004 2003 $ %
----------- ----------- ---------- --------
Plymouth Tapes. . . . . . $ 7,972,000 $ 5,830,000 2,142,000 37
% sales. . . . . . . . . 18 14
Brite-Line Technologies . 2,285,000 1,685,000 600,000 36
% sales. . . . . . . . . 28 26
Total . . . . . . . . . . $ 10,257,000 $ 7,515,000 2,742,000 36
% sales. . . . . . . . . 19 16
The major factors in the $2,142,000 Plymouth Tapes gross margin
increase were the higher sales described above, which accounted for an
additional margin of approximately $1,358,000, and $424,000 of improved
overhead absorption due to the increased plant activity. In addition,
(and despite the higher sales), lower spending on manufacturing
overhead, due largely to continued tight spending controls, contributed
approximately $360,000 of increased margin. This consisted of $440,000
of lower indirect manufacturing labor, $95,000 of decreased taxes and
insurance, a
14
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Continued)
decrease in depreciation of $86,000, $65,000 of lower
fringe expense, and $52,000 of decreased utilities and rent, partially
offset by $286,000 of increased purchases of indirect materials and
other purchases, $31,000 of increased temporary help to support the
increased volumes, increased environmental disposal costs of $27,000,
$22,000 of increased manufacturing professional fees, and $12,000 of
other cost increases.
The major factor driving the gross margin increase at Brite-Line was
also increased sales, which accounted for $696,000 of additional gross
margin. The primary offsetting factors were (1) $64,000 of unfavorable
manufacturing yields and (2) manufacturing expense increases of
$32,000, due mostly to $38,000 of increased temporary help to support
the higher sales, $22,000 of increased professional fees to support new
product development, $13,000 of increased outside testing services,
primarily for the new European product approvals, and higher rent and
utility costs of $9,000, partially offset by decreased labor and fringe
of $25,000, $15,000 of decreased indirect materials, and $8,000
decreased outside services.
Expenses
Selling, general and administrative expenses (SG&A) at both Plymouth
Tapes and Brite-Line increased in dollars, as described below:
Nine Months SG&A
(Unaudited) Increase
------------------------- ---------------------
2004 2003 $ %
----------- ----------- ---------- --------
Plymouth Tapes. . . . . . $ 8,581,000 $ 7,585,000 996,000 13
% sales. . . . . . . . . 19 18
Brite-Line Technologies . 1,315,000 1,238,000 77,000 6
% sales. . . . . . . . . 16 19
Total . . . . . . . . . . $ 9,896,000 $ 8,823,000 1,073,000 12
% sales. . . . . . . . . 19 18
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 $199,000 to ship and distribute
higher product volumes, an $83,000 increase in salaries and fringe
benefits, all related to selling, a $72,000 increase in commissions for
the higher sales, $25,000 in increased travel expenses, $20,000 of
increased warehouse costs related to the increased sales, supplies
increases of $24,000, also to support higher sales volumes, and a
$66,000 increase in professional fees to support of variety of business
activities. The largest increase was a $598,000 increase in accrued
excise tax as a result of the non-payment of the minimum pension
funding payment due in August 2004. Partially offsetting decreases
were a $54,000 reduction in advertising, as a large portion of
Contractor/Industrial marketing investments were made during 2003, a
$49,000 decrease in insurance, and a $36,000 decrease in directors'
fees.
At Brite-Line Technologies, expenses were held relatively flat despite
the larger percentage 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 $92,000
of additional freight expenses to support the higher sales activity, a
$71,000 increase in testing expenses for the new product approvals
referenced above, and a $30,000 increase in royalties and license fees
related to higher sales. Partially offsetting decreases were a $46,000
decrease in bad debt reserve, a $16,000 of decreased field equipment
purchases, and a $13,000 decrease in advertising.
15
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Continued)
Interest expense in 2004 decreased slightly by 4% to $1,282,000
compared to $1,338,000 in 2003. Other income increased to $55,000 in
2004 due largely to a gain on an insurance claim, compared to $15,000
in 2003.
Resulting Profit/Loss
The pre-tax and net losses are described below:
Nine Months
(Unaudited)
-------------------------
2004 2003
----------- -----------
Pre tax loss . . . . . . $ (866,000) $ (2,631,000)
Tax provision . . . . . . (148,000) (51,000)
----------- -----------
Net loss. . . . . . . . . $ (1,014,000) $ (2,682,000)
=========== ===========
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 August 27,
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 and 2003 tax expense were recorded
for the Company's Spanish subsidiary.
Third Quarter, 2004, Compared with Third Quarter, 2003
Overall Summary of Third Quarter 2004 Financial Results
For the third quarter of 2004, sales increased 13% 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.
Overall costs in the third quarter of 2004 increased significantly with
the third quarter of 2003, with a 33% increase in selling, general and
administrative costs, related primarily to the accrued excise tax
matter previously discussed and certain sales volume increases, and a
2% increase in fixed manufacturing costs. However the increased sales
and improved variable margin more than offset the increase in expenses
and improved the income before tax from a loss of $1,102,000 in 2003 to
a loss of $744,000 in 2004.
Sales and Margins
Sales increased at both Plymouth Tapes and Brite-Line as described
below:
Third Quarter Sales
(Unaudited) Increase
------------------------- ---------------------
2004 2003 $ %
----------- ----------- ---------- --------
Plymouth Tapes. . . . . . $ 14,296,000 $ 12,970,000 1,326,000 10
Brite-Line Technologies . 3,781,000 3,000,000 781,000 26
----------- ----------- ----------
Total . . . . . . . . . . $ 18,077,000 $ 15,970,000 2,107,000 13
=========== =========== ==========
Plymouth Tapes' sales to automotive markets increased 7%, or $532,000,
due to increased demand partially offset by certain price decreases.
International automotive sales increased 33%, while domestic automotive
sales increased 2%, primarily because of shifts in automotive harness
manufacturing to lower labor cost foreign locations. Sales in all
other markets increased
16
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Continued)
14%, or $794,000, due primarily to increases in
the electrical tapes markets, which contributed $447,000 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 sales growth of $347,000,
or 20% was from sales of specialty products to industrial customers,
benefiting from the general economic improvement. The overall sales
growth at Plymouth Tapes was also aided by a favorable Euro/Dollar
exchange rate for those sales originally denominated in Euros, which
accounted for $199,000 of the dollar sales growth described above.
At Brite-Line Technologies, the sales increase was attributable to
certain new product approvals earlier in the year, as well as a mix
shift to higher priced products, and price increases on certain 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 contributes to the
increased product demand.
Gross margin as a percentage of sales increased at both Plymouth Tapes
and Brite-Line as described below:
Third Quarter Gross Margin
(Unaudited) Increase
------------------------- ---------------------
2004 2003 $ %
----------- ----------- ---------- --------
Plymouth Tapes. . . . . . $ 2,153,000 $ 1,435,000 718,000 50
% sales. . . . . . . . . 15 11
Brite-Line Technologies . 1,167,000 810,000 357,000 44
% sales. . . . . . . . . 31 27
Total . . . . . . . . . . $ 3,320,000 $ 2,245,000 1,075,000 48
% sales. . . . . . . . . 18 14
The major factors in the $718,000 Plymouth Tapes gross margin increase
were the higher sales described above, which accounted for an
additional margin of approximately $597,000, despite $114,000 of higher
spending on manufacturing overhead. The major spending items included
$135,000 of increased purchases of indirect materials and other
purchases, $111,000 of higher fringe expense, due largely to last
year's third quarter reduction in employee benefits, $8,000 of
increased temporary help to support the increased volumes, and $7,000
of increased professional fees, partially offset by $96,000 of lower
indirect manufacturing labor, $23,000 of decreased taxes and insurance,
a decrease in depreciation of $28,000, and $58,000 of decreased
utilities and rent. There was also $121,000 of improved overhead
absorption due to the increased plant activity.
The major factor driving the gross margin increase at Brite-Line was
also increased sales, which accounted for $402,000 of additional gross
margin and $34,000 of higher manufacturing overhead absorption due to
increased plant activity compared to last year. The primary offsetting
factors were (1) $69,000 of unfavorable manufacturing yields and (2)
manufacturing expense increases of $10,000, due mostly to $14,000 of
increased indirect materials and $10,000 of increased outside testing
services, primarily for the new European product approvals, partially
offset by decreased labor and fringe of $12,000.
Expenses
Selling, general and administrative expenses (SG&A) at both Plymouth
Tapes and Brite-Line is described below:
17
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Continued)
Third Quarter SG&A
(Unaudited) Increase
------------------------- ---------------------
2004 2003 $ %
----------- ----------- ---------- --------
Plymouth Tapes. . . . . . $ 3,232,000 $ 2,382,000 850,000 36
% sales. . . . . . . . . 23 18
Brite-Line Technologies . 465,000 393,000 72,000 18
% sales. . . . . . . . . 12 13
Total . . . . . . . . . . $ 3,697,000 $ 2,775,000 9227,000 33
% sales. . . . . . . . . 20 17
At Plymouth Tapes, the largest dollar increases in selling, general and
administrative expenses was a $598,000 increase in accrued excise tax
as a result of the non-payment of the minimum pension funding payment
due in August 2004. Other increases were related largely to sales
volume increases, and included higher freight costs of $57,000 to ship
and distribute higher product volumes, a $37,000 increase in marketing
expenses to continue sales support in the electrical tape markets, a
$30,000 increase in bad debt expense, primarily to support a higher
accrual for the accounts receivable balances, supplies increases of
$9,000, an $18,000 increase in commissions for the higher sales
volumes, an $19,000 increase in salaries and fringe benefits, and a
$122,000 increase in professional fees to support of variety of
business activities. The remaining expense categories were largely even
with last year, with the only decrease of significance a $12,000 of
lower insurance costs.
At Brite-Line Technologies, expenses increased 18%, compared to the
larger 26% percentage increase in sales. The major dollar increases in
selling, general and administrative expenses included a $53,000
increase in salaries and fringe, mostly related to sales, $50,000 of
additional freight expenses to support the higher sales activity, a
$13,000 increase in royalties and license fees related to higher sales,
and a $11,000 increase in professional fees. Partially offsetting
decrease was a $62,000 decrease in bad debt reserve, due to a one-time
increase in the reserve in the third quarter of 2003, a 2004 reduction
in reserves for specific customers, and a higher accounts receivable
balance in 2004.
Interest expense in 2004 decreased $33,000 or 7%, to $422,000 compared
to $455,000 in 2003. Other income increased to $55,000 in 2004 due
largely to a gain on an insurance claim, compared to a $117,000 loss in
2003, which was attributable to foreign exchange losses.
Resulting Profit/Loss
The pre-tax and net losses are described below:
Third Quarter
(Unaudited)
-------------------------
2004 2003
----------- -----------
Pre tax income (loss) . . $ (744,000) $ (1,102,000)
Tax provision . . . . . . (27,000) (16,000)
----------- -----------
Net income (loss) . . . . $ (771,000) $ (1,118,000)
=========== ===========
18
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Continued)
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 August 27,
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 and 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 missed
pension payment that was 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 August 27, 2004, the Company had approximately $419,000 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
August 27, 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.
19
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Continued)
Based upon the new arrangements, future principal and interest payments
due on domestic term debt are as follows:
Fiscal 2004
Fourth Quarter . . . . . $ 754,000
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. The Company's plans to address the fourth quarter 2005
payments due are discussed below.
Cash Pension Contributions for Defined Benefit Plan
The Company had received waivers from the Internal Revenue Service (the
"IRS") of minimum funding requirements of $855,000 in 2002 and
$1,030,000 (of the $1,262,000 due) in 2003 for a frozen defined benefit
pension plan. These waivers, for plan years ending November 30, 2001
and November 30, 2002, respectively, 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 satisfactorily secured in favor of the Pension Benefit
Guaranty Corporation (the "PBGC") by September 10, 2004. A payment of
the minimum funding requirement of $1,533,000 was due on August 16,
2004. Of the amount due, $1,048,000 is for the plan year ended
November 30, 2003 and $445,000 is the payment for prior years.
The Company has not paid this minimum funding requirement of
$1,533,000. As a result, the Company expects the IRS to impose an
initial excise tax on the Company in the amount of $153,000 for this
year's amount due, plus the possible additional excise tax, interest,
and penalties as described below.
The Company has submitted three requests to the IRS for additional
relief related to its funding obligations. The first is an elimination
of the condition of the funding waivers for plan years 2001 and 2002
that the Company satisfy its minimum funding requirements due August,
2004. The second is an extension to March, 2005 the date by which the
minimum funding obligation of $1,030,000 be secured in favor of the
PBGC. The Company cannot predict whether the IRS will grant any of
these first two requests. If these requests are not granted, the IRS
would retroactively impose an additional excise tax on the amounts
covered by the previous two IRS waivers obtained in 2002 and 2003,
for each of the three years totaling approximately $405,000, for a
total excise tax due of approximately $558,000. Including $23,000 of
estimated interest, and $17,000 for the first month of estimated
penalties, $598,000 has been accrued in the Company's financial
statements as of August 27, 2004. For each future month the payment
is delayed, penalties will continue to accrue at an estimated $17,000
per month up to a maximum of five months, and interest will continue
to accrue at an estimated $7,000 per month. The Company's third
request to the IRS is for a retroactive extension of the period for
the amortization of the amounts due in respect of plan
20
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Continued)
years 2001 and 2002 from 5 to 15 years, which would somewhat reduce the
minimum funding and excise taxes due.
As required, the Company has notified the IRS, the PBGC, and the
Pension Plan participants that it did not pay the August 2004 minimum
funding requirement, and is required to include such notice in the
Pension Plan Summary Annual Report. The 2004 pension payment and
excise tax as calculated above continues to be due, and the IRS may
impose a tax lien on the Company for the total excise tax amount due.
At this time and depending on the amount, the Company plans to pay some
or all of excise tax due and continue its pursuit of a number of
possible financing options to improve cash availability, although its
likely success is unknown at this time. The PBGC could choose to take
one or more additional actions, which could include asking the Company
for security, taking over the Plan, terminating the Plan, or other
courses of action which could have an adverse impact on the Company's
liquidity, financial position, and/or ability to continue operations.
Working Capital
The Company's working capital position decreased from a negative
$4,350,000 at November 28, 2003 to a negative $5,696,000 at August 27,
2004, due to a $2,138,000 increase in accrued expenses, a $744,000
increase in short term debt, a $449,000 decrease in prepaid and other
current assets, a $54,000 increase in accounts payable, and a $4,000
decrease in cash. The $2,155,000 increase in accrued expenses was due
to a $1,760,000 increase in the current portion of the pension
obligation and a $598,000 increase in pension excise tax, as the
minimum funding payment due in August 2005 became current, in addition
to the 2004 payment due and its associated excise tax. The $744,000
increase in short term debt is comparable to a $1,487,000 increase in
the third quarter of 2003, and is due largely to finance the $1,952,000
increase in accounts receivable and inventory. The accounts payable
increased $54,000, due in part to an increase in certain raw material
prices compared to the beginning of the year. Although the Company's
third 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, net 45 days with some total 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 $449,000 decrease in prepaid expenses is largely due to the
reduction in the prepaid insurance, as most insurances were renewed in
September after the end of the quarter.
These decreases were partially offset by a $346,000 increase in
accounts receivable, a $1,606,000 increase in inventory, and a $108,000
decrease in the current portion of long term borrowings. The $346,000
increase in accounts receivable results from a $413,000 increase in
sales for the last two months of the third quarter of 2004, compared to
the last two months of the fourth quarter of 2003. The $1,606,000
increase in inventory is comparable to an increase of $1,152,000 in the
third quarter of 2003 compared to the fourth quarter of 2002.
Inventory is normally increased in the third quarter to support the
seasonally normal increase in third quarter sales compared to the
previous fourth quarter sales.
Company Plans
For the reminder of 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
21
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Continued)
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 provided by operating activities was $618,000 in the third quarter
of 2004, compared to cash used of $108,000 in 2003. The major factors
contributing to cash provided by operating activities were depreciation
and amortization of $2,096,000, an decrease in prepaid expenses of
$451,000, a $442,000 increase in pension obligation, an increase in
accrued expenses of $389,000, a $71,000 decrease in other assets, an
increase in other liabilities of $35,000, and an increase in accounts
payable of $32,000, partially offset by an increase in inventory of
$1,578,000, a net loss of $1,014,000, and a $306,000 increase in
accounts receivable. This cash provided by operating activities and
additional short-term borrowings of $713,000 were used to pay off term
debt and capital leases of $1,208,000, and for capital expenditures of
$118,000.
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 26% of the Company's net sales for
the nine month period ended August 27, 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
22
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Continued)
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:
Estimated
Operating Pension
Long Term Lease Funding
Fiscal Year: Debt Commitments Requirements Total
------------ ----------- ----------- -----------
2004. . . . . . . . . $ 579,000 $ 144,000 $ -- $ 723,000
2005. . . . . . . . . 5,900,000 463,000 3,340,000 9,703,000
2006. . . . . . . . . 710,000 262,000 960,000 1,932,000
2007. . . . . . . . . 724,000 -- 1,030,000 1,754,000
2008. . . . . . . . . 319,000 -- 1,310,000 1,629,000
Thereafter. . . . . . 2,000 -- 230,000 232,000
------------ ----------- ----------- -----------
Total . . . . . . . . $ 8,234,000 $ 869,000 $ 6,870,000 $15,973,000
============ =========== =========== ===========
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.
23
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Continued)
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.
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
August 27, 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 August 27,
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 $279,000 as of August 27, 2004 to cover estimated
future environmental cleanup expenditures, which is net of $975,000
payments made to date. Actual future costs may differ from the amount
accrued as of August 27, 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
24
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Continued)
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 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.
25
PLYMOUTH RUBBER COMPANY, INC.
Item 3. Quantitative and Qualitative Disclosure about Market Risks
At August 27, 2004, the carrying value of Company's debt totaled $23.0
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 27, 2004, the Company had fixed rate debt of $7.7 million and
variable rate debt of $15.3 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 $92,000. The earnings and
cash flows impact for the next year resulting from a one percentage
point increase in interest rates would be approximately $153,000,
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.
26
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
Not Applicable
Item 5. Other Information
Not Applicable
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits: See Index to Exhibits
(b) Reports on Form 8K:
July 8, 2004 - The Company furnished a current report on Form 8-K with
its amended code of conduct and ethics (Item 10).
July 12, 2004 - The Company furnished a current report on Form 8-K with
the results of operations and financial condition for the second
quarter and six months ended May 28, 2004 (Item 12).
August 26, 2004 - The Company furnished a current report on Form 8-K to
report that the Company did not pay its minimum pension contribution
(Item 5).
27
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 12, 2004
28
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.
29
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.
30
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.
31
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.
32