UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
x ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
- ------ ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
- ------ EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD
FROM TO
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COMMISSION FILE NUMBER 0-18434
REINHOLD INDUSTRIES, INC.
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Delaware 13-2596288
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(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
12827 East Imperial Hwy, Santa Fe Springs, California 90670
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
Registrant's telephone number, including area code (562) 944-3281
CLASS A COMMON STOCK, PAR VALUE $.01 NASDAQ
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(Title of each class) (Name of each exchange on which
registered)
Securities registered under Section 12(g) of the Exchange Act: NONE
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Indicate by check mark whether the registrant (1) filed all reports required to
be filed by section 13 or 15(d) of the exchange act during the past 12 months
(or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days. YES X NO
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in part iii of this Form 10-K
or any amendment to this Form 10-K. X
The aggregate market value of the voting and non-voting stock held by
non-affiliates of the registrant as of March 15, 2002 was $12,688,000.
The number of shares of common stock outstanding as of March 15, 2002 was
2,416,722.
Documents incorporated in part by reference:
Parts I, II and IV incorporate certain information by reference from the
registrant's Annual Report to shareholders for the fiscal year ended December
31, 2001.
Part III incorporates certain information by reference from the registrant's
definitive proxy statement for the annual meeting of shareholders to be held on
May 1, 2002, which proxy statement will be filed no later than 120 days after
the close of the registrant's fiscal year ended December 31, 2001.
From time to time, Reinhold Industries, Inc. ("Reinhold" or the
"Company") makes certain comments and disclosures in reports and statements,
including this report or statements made by its officers or directors which may
be forward-looking in nature. Examples include statements related to Company
growth, the adequacy of funds to service debt and the Company's opinions about
trends and factors which may impact future operating results. These
forward-looking statements could also involve, among other things, statements
regarding the Company's intent, belief or expectation with respect to (i) the
Company's results of operations and financial condition, (ii) the consummation
of acquisition, disposition or financing transactions and the effect thereof on
the Company's business, and (iii) the Company's plans and objectives for future
operations and expansion or consolidation.
Any forward-looking statements are subject to the risks and uncertainties that
could cause actual results of operations, financial condition, cost reductions,
acquisitions, dispositions, financing transactions, operations, expansion,
consolidation and other events to differ materially from those expressed or
implied in such forward-looking statements. Any forward-looking statements are
also subject to a number of assumptions regarding, among other things, future
economic, competitive and market conditions generally. These assumptions would
be based on facts and conditions as they exist at the time such statements are
made as well as predictions as to future facts and conditions, the accurate
prediction of which may be difficult and involve the assessment of events beyond
the Company's control. As a result, the reader is cautioned not to rely on these
forward-looking statements.
The Company wishes to caution readers that forward-looking statements,
including disclosures which use words such as the Company "believes,"
"anticipates," "expects," "estimates" and similar statements, are subject to
certain risks and uncertainties which could cause actual results of operations
to differ materially from expectations. Any forward-looking statements should be
considered in context with the various disclosures made by the Company about its
businesses, including without limitation the risk factors more specifically
described below in Item 1. Business.
PART I
Item 1. BUSINESS
Reinhold Engineered Plastics, the forerunner to today's Reinhold
Industries, Inc., was founded in 1928. The purpose of the business was the
molding of components from Bakelite, the first commercially available polymer
molding material.
In the 1940's, Reinhold was a pioneer in making some of the earliest
fiberglass plastic components for the aircraft industry such as radomes and
antenna covers.
In the early 1950's, with the advent of the missile industry, Reinhold
moved into the newly created field of ablative composites. Ablative composites
are fiber reinforced polymer structures which absorb, as they decay, the
destructive thermal energy generated by burning rocket propellants or hypersonic
re-entry. This field became Reinhold's core business for decades to come.
In the 1970's, the molding of structures from fiberglass polyester
Sheet Molding Compound (SMC) was a new and growing industry in the Eastern U.S.
Reinhold was convinced that the potential of the SMC material was broad enough
that markets in the West could be found and developed. These markets included
swimming pool filter tanks and in-ground lighting housings.
From the 1950's through the early 1980's, Reinhold went through a
number of ownership and name changes. In June 1984, Reinhold was sold to Keene
Corporation, an operating division of Bairnco Corporation. In 1990, following
Bairnco's spin-off of its Keene Corporation subsidiary to Bairnco's
shareholders, Reinhold became an incorporated (Delaware) entity and a direct
wholly-owned subsidiary of Keene Corporation.
On December 3, 1993, Keene Corporation ("Keene") filed a voluntary
petition for relief under Chapter 11 of Title 11 of the United State Code (the
"Bankruptcy Code") in the United States Bankruptcy Court in the Southern
District of New York (the "Bankruptcy Court"), Case No. 93-B-46090 (SMB).
Keene's Chapter 11 filing came as a direct result of tens of thousands of
asbestos-related lawsuits which named Keene as a party. Reinhold did not file
any petitions for relief under the bankruptcy code and continued to operate in
the normal course of business.
Keene's asbestos-related liabilities stem entirely from its 1968
purchase of Baldwin-Ehret-Hill, Inc. ("BEH"), a manufacturer of acoustical
ceilings, ventilation systems, and thermal insulation products. Over the past 20
years, Keene spent over $530 million (approximately 75% of which has been in the
form of insurance proceeds) in connection with Asbestos-Related Claims asserted
against Keene, all stemming from Keene's ownership, for a period of
approximately five years, of BEH.
By the end of 1992, Keene had exhausted substantially all of its
insurance coverage for Asbestos-Related Personal Injury Claims and by 1993,
Keene had exhausted substantially all of its insurance related to Asbestos In
Building Claims. Therefore, Keene had to bear directly the costs of all Claims.
In May 1993, Keene filed a limited fund, mandatory settlement action
("Limited Fund Action"). This Limited Fund Action sought a declaration that
Keene had only limited funds available to resolve the numerous Asbestos-Related
Claims against it, including Asbestos-Related Claims that might be filed in the
future.
In November 1993, Keene reached an agreement in principle with the
lawyers representing each subclass with respect to the allocation of Keene's
remaining assets. However, on December 1, 1993, the Court of Appeals for the
Second Circuit issued a decision dismissing the Limited Fund Action on the
grounds of lack of subject matter jurisdiction.
In light of this decision, on December 3, 1993, Keene filed its
voluntary petition for relief under Chapter 11.
On March 28, 1995, Keene, the Official Committee of Unsecured
Creditors' and the Legal Representative for Future Claimants entered into a
stipulation to file a consensual plan of reorganization that would resolve
Keene's Chapter 11 Case.
On March 11, 1996, the Bankruptcy Court approved the Second Amended
Disclosure Statement regarding Keene's Fourth Amended Plan of Reorganization for
solicitation.
On June 12, 1996, the Bankruptcy Court and the U.S. District Court held
a confirmation hearing on Keene's Fourth Amended Plan of Reorganization, as
modified (the "Plan"). The Plan was confirmed by the U.S. District Court by
order entered on June 14, 1996.
On July 31, 1996, Keene's Fourth Amended Plan of Reorganization, as
modified, became effective (the "Effective Date"). On the Effective Date,
Keene's wholly-owned subsidiary, Reinhold Industries, Inc. ("Reinhold") was
merged into and with Keene, with Keene becoming the surviving entity. Pursuant
to the merger, all the issued and outstanding capital stock of Reinhold was
canceled. Keene, as the surviving corporation of the merger, was renamed
Reinhold. On the Effective Date, Reinhold issued 1,998,956 shares of Common
Stock, of which 1,020,000 shares of Class B Common Stock were issued to the
Trustees of a Creditors' Trust (the "Creditors' Trust") set up to administer
Keene's asbestos claims. The remaining 978,956 shares, identified as Class A
Common Stock, were issued to Keene's former shareholders as of record date, June
30, 1996. All of Keene's previously outstanding Common Stock was canceled.
Today, Reinhold Industries, Inc. is a manufacturer of advanced custom
composite components, sheet molding compounds and rubber rollers for a variety
of applications in the United States and Europe. Reinhold derives revenues from
the defense, aerospace, printing and other commercial industries. Reinhold is
currently organized in six operating segments as follows:
Aerospace - The Aerospace business unit manufactures structural and
ablative composite components mainly for subcontractors of the U.S. defense
industry. These components include rocket nozzles, exit cones, re-entry
heatshields, radomes, and airframe and missile frames. In March 1992, to
strengthen its market position in defense and aerospace markets, Reinhold
acquired 100% of the outstanding common stock of Reynolds & Taylor, Inc. ("R &
T"), a California corporation and manufacturer of structural composite
components serving, primarily, the defense and aerospace markets. R & T's
operations were consolidated into Reinhold's existing facility.
During 2001, Aerospace's sales increased by 13% due mainly to increased
shipments of components related to the Minuteman III Propulsion Replacement
Program. Because a substantial portion of Reinhold's business has been as a
supplier to government contractors, Reinhold has developed a limited number of
customers with which it does significant amounts of business. Sales to two major
customers constituted approximately 65% of this business unit's total sales in
2001. Reinhold's future prospects will depend on the continued business of such
customers and on Reinhold's continued status as a qualified supplier to such
customers.
Due to reduced military spending in recent years, business
consolidations in the markets the Company serves continue to persist. In 2001,
Alliant Techsystems, Inc. ("ATK") acquired Thiokol Propulsion ("Thiokol") from
Alcoa, Inc. Both ATK and Thiokol are major customers of the Company. The impact,
if any, to the Company due to this transaction is indeterminable at this time.
CompositAir - In May 1994, Reinhold acquired CompositAir from SP
Systems, Inc. CompositAir is a niche manufacturer of composite commercial
aircraft seatbacks and other commercial products. CompositAir has been in
continuous production of composite seatback frames since 1980. Composites of
epoxy, phenolic, or other resin systems, reinforced with aramid or other glass
fibers, are laminated into the complex shapes required by today's feature-packed
commercial aircraft seats. The weight of the frames is 30% to 40% less than
equivalent aluminum frames. CompositAir operates in both Camarillo, California
and Santa Fe Springs, California.
Over 90% of CompositAir's sales are from two major customers.
Reinhold's future prospects will depend on the continued business of such
customers and on Reinhold's continued status as a qualified supplier to such
customers. In 2001, sales dropped by 22% compared to 2000. The decline was due
to commercial difficulties at one of CompositAir's main customers as well as a
temporary decline in the general aircraft marketplace.
Commercial - The Commercial business unit manufactures compression
molded "SMC" (Sheet Molding Compound) products for lighting, water filtration
and other various commercial and aerospace applications. SMC formulations
include thermosetting polymer matrix resins, glass fibers and other additives
which provide strength, stiffness, and protection from corrosion, chemical
environments and ultraviolet degradation.
Sales in 2001 were virtually unchanged from 2000 at $3.1 million.
Thermal Insulation - On April 20, 2001, Reinhold, purchased certain
assets and assumed certain liabilities of Edler Industries, Inc. ("Edler").
Edler is a manufacturer of structural and ablative composite components mainly
for subcontractors of the U.S. defense industry. The operation has been renamed
the "Thermal Insulation" division of Reinhold. The purchase price was $2.6
million consisting of $1.6 million cash paid at closing and a $1.0 million, 8%
interest bearing note paid in September 2001.
Sales were $2.0 million in 2001.
NP Aerospace - On April 24, 1998, NP Aerospace Limited ("NP
Aerospace"), a wholly-owned subsidiary of Reinhold, purchased from Courtaulds
Aerospace Limited ("CAL"), a U.K. Corporation, which is a wholly-owned
subsidiary of Courtaulds plc, a U.K. Corporation, certain assets (consisting of
Accounts Receivable, Inventory, Machinery and Equipment, Land and Intellectual
Property and Patents) and assumed certain liabilities of the Ballistic and
Performance Composites Division of CAL. Reinhold, as the Guarantor for NP
Aerospace, became obligated to pay to Courtaulds plc net consideration
consisting of (a) Two Million Two Hundred Thousand pounds sterling
((pound)2,200,000) ($3,706,340 based on an exchange rate of $1.6847) cash on the
Closing Date and (b) within 120 days following the end of each of the calendar
years 1998 through 2001, a cash amount equal to 25% of the Pre-tax Profit on the
light armored vehicle business only, the maximum aggregate amount of which shall
not exceed Twenty Million pounds sterling ((pound)20,000,000). Additional
payments of (pound)0 and (pound)140,000 ($227,000) were capitalized in 2000 and
1999, respectively, as part of the purchase price.
NP Aerospace operates in Coventry, England.
Additional information on the NP Aerospace acquisition is set forth in
Note 2 to the Consolidated Financial Statements on page 30 and "Management
Discussion and Analysis of Financial Condition and Results of Operations " on
page 17 of Reinhold's 2001 Annual Report to Stockholders, which is incorporated
herein by reference.
NP Aerospace manufactures a wide variety of composite products
including compression molded canopies for street lights, commercial aircraft
seatback frames, aramid composite combat helmets, protective personal body
armor, carbon composite radiography support couches and light-armored composite
vehicle structures.
NP Aerospace operates in niche marketplaces for the sale of commercial
aircraft seatbacks, helmets and light armored vehicles. Due to the limited
marketplaces for these products, sales from year-to-year are very uncertain. Due
to the high selling price of armored vehicles, large annual swings in revenue
are possible. Overall sales in 2001 were 22% lower than in 2000 reflecting
general weakness across all product segments.
Samuel Bingham Enterprises, Inc. - On March 9, 2000, Samuel Bingham
Enterprises, Inc., a newly formed wholly-owned subsidiary of Reinhold
Industries, Inc., purchased certain assets and assumed certain liabilities of
Samuel Bingham Company for $15.1 million in cash. A majority of the purchase
price was financed through a five-year term loan with the Bank of America for
$11.0 million with the balance being paid from cash on hand.
Samuel Bingham Company ("Bingham") is a manufacturer and supplier of
graphic arts and industrial rollers for a variety of applications. Samuel
Bingham was born in 1789 and began manufacturing rollers for the printing
industry in 1848. The Company has been in continuous existence since that date.
In addition to serving the graphic arts marketplace, the Company also serves
other industries such as steel mills, paper mills, converters, metal coaters,
textile mills and plastic processors. Products are manufactured from various
elastomers including SBR, silicones, EPDM's, Hypalons, Buna N, Neoprenes,
natural rubber, vinyl-nitriles, fluoroelastomers, polyether urethanes and
polyester urethanes.
Bingham manufactures at various locations throughout the United States
and sells through a direct sales force to approximately 3,000 customers. Due to
the existence of many other manufacturers in this marketplace, the Company is
forced to be highly competitive.
In 2001, the Company recorded a charge of approximately $5.4
million to write-down long-lived assets associated with the Bingham operating
segment. Included in the $5.4 million charge was approximately $1.3 million
write-down of fixed assets related to the seven manufacturing and administrative
locations of Bingham that were closed or were in the process of being closed.
The fixed assets were written down to their estimated fair value which was
determined based on the proceeds received and estimated to be received from the
sales of the respective facilities. The Company then determined that the
estimated future undiscounted operating cash flows of the remaining Bingham
operations were less than the carrying amount of Bingham's remaining long-lived
assets. Based on its evaluation, the Company determined Bingham's long-lived
assets, with a carrying value of $10.7 million, were impaired and wrote them
down by approximately $4.0 million to their estimated fair value. This
write-down was charged against goodwill. Fair value was based on estimated
discounted future operating cash flows of the Bingham operations.
Additional information on the Bingham acquisition is set forth in Note
2 to the Consolidated Financial Statements on page 30 and "Management Discussion
and Analysis of Financial Condition and Results of Operations " on page 17 of
Reinhold's 2001 Annual Report to Stockholders, which is incorporated herein by
reference.
Additional information on operating segments is set forth in Note 8 to
the Consolidated Financial Statements on pages 39 through 41 and "Management
Discussion and Analysis of Financial Condition and Results of Operations " on
pages 14 through 16 of Reinhold's 2001 Annual Report to Stockholders, which is
incorporated herein by reference.
Significant Customers
Information about significant customers is set forth in Note 10 to the
Consolidated Financial Statements on page 44 of Reinhold's 2001 Annual Report to
Stockholders, which is incorporated herein by reference.
Distribution
Products are marketed by company sales personnel and sales
representatives in the United States and Europe.
Competition
Reinhold competes with many companies in the sale of ablative and
structural composite products. The markets served by Reinhold are specialized
and competitive. Several of its competitors have greater financial, technical
and operating resources than Reinhold. Although Reinhold has competed
successfully in the critical areas of price, product performance and engineering
support services, there is no assurance that Reinhold will be able to continue
to manufacture and sell its products profitably in competitive markets.
Because a substantial portion of Reinhold's business has been as a
supplier to government contractors, Reinhold has developed a limited number of
customers with which it does significant amounts of business. Reinhold's future
prospects will depend on the continued business of such customers and on
Reinhold's continued status as a qualified supplier to such customers.
Reinhold's success also depends on developing additional commercial composite
products to replace heavier and shape restrictive metals-based products.
Raw Materials and Purchased Components
The principal raw materials for composite fabrication include
pre-impregnated fiber cloth (made of carbon, graphite, aramid or fiberglass
fibers which have been heat-treated), molding compounds, resins (phenolic and
epoxy), hardware, adhesives and solvents. Occasionally, certain raw materials
and parts are supplied by customers for incorporation into the finished product.
Reinhold's principal suppliers of raw materials are Cytec Fiberite, Inc. and
Newport Adhesives and Composites, Inc.
No significant supply problems have been encountered in recent years.
Reinhold uses PAN (polyacrylonitrile) and rayon in the manufacture of
composites. However, the supply of rayon used to make carbon fiber cloth
typically used in ablative composites is highly dependent upon the qualification
of the rayon supplier by the United States Department of Defense. North American
Rayon has ceased production of the rayon used in Reinhold's ablative products.
This could have an effect on the rayon supply in the coming years. Also, a
European company has become the world's sole supplier of graphite and carbon,
which is used in Reinhold's ablative applications. At this time, Reinhold can
not determine if there will be any significant impact on price or supply.
Environmental Matters
Reinhold's manufacturing facilities are subject to regulation by
federal, state and local environmental agencies. Management believes all
facilities meet or exceed all applicable environmental requirements in all
material respects and believes that continued compliance will not materially
affect capital expenditures, earnings or competitive position.
Refer to Item 3 for additional environmental legal proceedings.
Patents and Trademarks
Reinhold, through its wholly-owned subsidiary, Samuel Bingham
Enterprises, Inc., owns one patent registered with the United States Patent and
Trademark Office for the "Method of Making Roll for Use in Printing" (U.S.
Patent No. 4,492,012). The patent expires in January 2002. Samuel Bingham
Enterprises, Inc. holds ten registered trademarks with expiration dates ranging
from February 2002 through August 2009.
Research and Development
Research and development expenditures were approximately $348,000,
$327,000 and $155,000 for the years ended December 31, 2001, 2000 and 1999,
respectively.
Employees
At December 31, 2001, Reinhold had 368 full-time employees and 13
part-time employees. Of these employees, 291 (278 full-time and 13 part-time)
were employed in manufacturing and 90 (all full-time) in administration, product
development and sales. Approximately 26% of the personnel are based at
Reinhold's Santa Fe Springs, California facility, approximately 6% are based in
Camarillo, California, approximately 22% are based at NP Aerospace located in
Coventry, England and approximately 46% are based at the various manufacturing
and administration facilities of Samuel Bingham. Approximately 55 of the
employees in Coventry, England are represented by a labor union. Certain Samuel
Bingham employees, approximately 40, located in San Leandro, California, Searcy,
Arkansas and Blacklick, Pennsylvania are also represented by a labor union.
Reinhold believes its workforce to be relatively stable and considers its
employee relations to be excellent.
Item 2. PROPERTIES
The following chart lists the principal locations and size of
Reinhold's facilities and indicates whether the property is owned or leased and,
if leased, the lease expiration.
LEASED OR OWNED
LOCATION USE SIZE LEASE EXPIRATION
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Santa Fe Springs, CA Administration and 130,000 sq. ft. Leased (Expires 2014)
Manufacturing
Camarillo, CA Manufacturing 18,000 sq. ft. Leased (Expires 2002)
Coventry, England Administration and 80,000 sq. ft Own
Manufacturing
Samuel Bingham Properties
Portland, OR Manufacturing 14,000 sq. ft. Leased (Expires 2006)
San Leandro, CA Manufacturing 21,000 sq. ft. Own
Kansas City, MO Manufacturing 10,000 sq. ft. Own
Kansas City, MO Manufacturing 19,000 sq. ft. Leased (Expires 2003)
Searcy, AK Manufacturing 38,000 sq. ft. Own
College Park, GA Manufacturing 16,000 sq. ft. Leased (Expires 2002)
Forney, TX Manufacturing 5,000 sq. ft. Leased (Expires 2004)
Houston, TX Manufacturing 9,000 sq. ft. Own
Blacklick, PA Manufacturing 22,000 sq. ft. Own
Palmyra, NY Manufacturing 17,000 sq. ft. Leased (Expires 2003)
Franklin Park, IL Manufacturing 13,000 sq. ft. Leased (Expires 2003)
Montreal, Quebec, Canada Manufacturing 23,000 sq. ft. Own
Bloomingdale, IL Administration 4,000 sq. ft. Leased (Expires 2004)
Construction of a new building and additional improvements at the Santa
Fe Springs location were substantially completed in 2001. Reinhold believes its
facilities are utilized consistent with economic conditions and the requirements
of its operations.
Item 3. LEGAL PROCEEDINGS
The Company has been informed that it may be a potentially
responsible party ("PRP") under the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended ("CERCLA"), with respect to
certain environmental liabilities arising at the Valley Forge National
Historical Park Site ("Valley Forge Site") located in Montgomery County,
Pennsylvania and at a site formerly known as the Casmalia Resources Hazardous
Waste Management Facility, located in Santa Barbara County, California
("Casmalia Site"). CERCLA imposes liability for the costs of responding to a
release or threatened release of "hazardous substances" into the environment.
CERCLA liability is imposed without regard to fault. PRPs under CERCLA include
current owners and operators of the site, owners and operators at the time of
disposal, as well as persons who arranged for disposal or treatment of hazardous
substances sent to the site, or persons who accepted hazardous substances for
transport to the site. Because PRPs' CERCLA liability to the government is joint
and several, a PRP may be required to pay more than its proportional share of
such costs. Liability among PRPs, however, is subject to equitable allocation
through contribution actions.
On June 16, 2000 the U.S. Department of Justice notified the Company
that it may be a PRP with respect to the Valley Forge Site and demanded payment
for past costs incurred by the United States in connection with the site, which
the Department of Justice estimated at $1,753,726 incurred by the National Park
Service ("NPS") as of May 31, 2000 and $616,878 incurred by the United States
Environmental Protection Agency ("EPA") as of November 30, 1999. Payment of
these past costs would not release the Company from liability for future
response costs.
Management believes that in or about 1977, the Company's
predecessor, Keene Corporation ("Keene"), sold to the U.S. Department of
Interior certain real property and improvements now located within the Valley
Forge Site. Prior to the sale, Keene operated a manufacturing facility on the
real property and may have used friable asbestos, the substance which gives rise
to the claim at the Valley Forge Site. The Company is in the process of
analyzing the legal foundations of the Department of Justice claim in light of
the bankruptcy proceeding described below. The Company believes that two
injunctions issued in 1996 in connection with Keene's bankruptcy proceeding
under chapter 11 of Title 11 of the United States Code ("Bankruptcy Code") are
relevant to the Justice Department's claim.
As previously reported, Keene acquired Reinhold in 1984. On December
3, 1993, Keene filed a voluntary petition for relief under chapter 11 of the
Bankruptcy Code in the United States Bankruptcy Court. Keene's chapter 11 filing
came as a direct result of the demands on Keene of thousands of asbestos-related
lawsuits that named Keene as a party. On July 31, 1996 (the "Effective Date"),
Keene consummated its Fourth Amended Plan of Reorganization, as modified, under
the Bankruptcy Code (the "Plan"). On the Effective Date, Reinhold was merged
into and with Keene, with Keene becoming the surviving corporation. Keene, as
the surviving corporation of the merger, was renamed Reinhold Industries, Inc.
On the Effective Date, pursuant to the Plan the Company issued its Class B
Common Stock to the Trustees of a Creditors' Trust, which was established under
the Plan to administer Keene's asbestos liabilities. The Creditors' Trust has
since sold most of its Class B Common Stock.
The general bankruptcy injunction issued in the chapter 11
proceeding generally prohibits any entity from commencing or continuing any
action, employment of process or act to collect, offset, affect or recover any
claim, demand, interest or cause of action satisfied, released or discharged
under the Plan. Such claims, demands, interests and causes of action include,
whether known or unknown, all claims against Keene or the Company or their
assets and all related causes of action, regardless of whether a proof of claim
or interest was filed or allowed, and whether or not the holder of such claim or
interest has voted on the Plan, or any causes of action based on any act or
omission of any kind occurring prior to the Effective Date. In addition to this
general bankruptcy injunction, the Company received the benefit of a
supplemental "Permanent Channeling Injunction" as part of the Plan.
The Permanent Channeling Injunction bars "Asbestos-Related Claims"
and "Demands," as defined in the Plan, against the Company and channels those
Claims and Demands to the Creditors' Trust. Pursuant to the Permanent Channeling
Injunction, on or after the Effective Date of the Plan, any person or entity who
holds or may hold an Asbestos-Related Claim or Demand against Keene will be
forever stayed, restrained, and enjoined from taking certain actions for the
purpose of, directly or indirectly, collecting, recovering, or receiving payment
of, on, or with respect to such Asbestos-Related Claims or Demands against the
Company.
On March 1, 2001, the Company commenced an action against EPA and the
NPS in the United States District Court for the Southern District of New York
seeking a declaratory judgment that any claims asserted against it in connection
with the Valley Forge site were barred as a matter of law due to two injunctions
issued in 1996 in the bankruptcy case against its predecessor, Keene
Corporation. On July 20, 2001, the United States served its answer and
counterclaim to the Company's complaint on behalf of the NPS. In its answer, the
government withdrew its request for reimbursement of the EPA's CERCLA response
costs ($616,878) and objected to the relief sought by the Company. Its
counterclaim seeks the recovery of past and present CERCLA response costs
incurred by the NPS at the Valley Forge site and a declaratory judgment on
liability that will be binding in future actions to recover future response
costs.
On August 3, 2001, the Company served a motion for summary judgment
requesting judgment in its favor on its complaint and dismissal of the
counterclaim.
On September 10, 2001, the United States served its response in
opposition to the Company's summary judgment motion. In its response, the
government submitted that (i) the NPS's claim for recovery of past and present
CERCLA response costs at the Valley Forge Site does not constitute an
Asbestos-Related Claim; and (ii) neither the Plan nor the Confirmation Order
govern its claim because Keene failed to give the NPS actual notice of the
bankruptcy proceeding. The government sought a denial of the summary judgment
motion or a continuance to allow discovery on its defense of actual notice.
On September 26, 2001, the Company served its reply to the
government's response and asserted, among other things, that summary judgement
was not premature as the undisputed facts establish that the NPS was an "unknown
creditor" at the time of the Keene bankruptcy case such that publication notice
- - which indisputably was given - was legally sufficient to subject the NPS to
the terms of the two injunctions issued under the Plan. The Company also
reiterated that the plain meaning and purpose of the Plan and Confirmation Order
compel the conclusion that the NPS claim was an Asbestos-Related Claim.
As of December 31, 2001, the summary judgment motion is pending
before the Court.
It is difficult to estimate the timing and ultimate costs to be
incurred by the Company in connection with environmental liability claims in the
future due to uncertainties about the status of laws and regulations, the
adequacy of information available for individual sites and the extended time
periods over which site remediation occurs. However, based on currently
available information, if the environmental liability claims relating to the
Valley Forge Site arose prior to the filing of Keene's bankruptcy case or if
these claims were deemed to be Asbestos-Related Claims or Demands within the
meaning of the Plan, then the Company does not believe that environmental
liabilities associated with the Valley Forge Site should result in a material
adverse impact on the Company's consolidated financial position or results of
operation. However, if these claims are deemed to have arisen subsequent to the
filing of Keene's bankruptcy case -- i.e the "release" or "threatened release,"
within the meaning of CERCLA, is deemed to have occurred after Keene filed its
chapter 11 petition with the Bankruptcy Court or the claims are held to have
arisen when the response costs were incurred -- and these claims are not deemed
to be Asbestos-Related Claims or Demands as defined under the Plan, then the
Company could incur liability for the claims. If a court were to determine that
the Company was liable for recoverable costs associated with the Valley Forge
Site under CERCLA, the resulting liability could have a material adverse impact
on the Company's consolidated financial position and results of operations.
With respect to the Casmalia Site, on August 11, 2000, the EPA
notified the Company that it is a PRP by virtue of waste materials deposited at
the site. The EPA has designated the Company as a "de minimis" waste generator
at this site, based on the amount of waste at the Casmalia Site attributed to
the Company. The Company is in the process of evaluating its potential
environmental liability exposure at the Casmalia Site, and based on currently
available data, the Company believes that the Casmalia Site is not likely to
have a material adverse impact on the Company's consolidated financial position
or results of operations.
Reinhold is a defendant in a number of other legal actions arising from
the normal course of business. Management believes that these actions are not
meritorious and will not have a material adverse effect on the financial
position of Reinhold.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
----------------------------------------------------
The Company did not submit any matters to a vote of security holders
during the fourth quarter of 2001.
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
-------------------------------------------------
STOCKHOLDER MATTERS
a. Data regarding the market price of Reinhold's common stock is
included in the "Selected Financial Data" on page 1 and under Stockholder
Information on page 47 of Reinhold's 2001 Annual Report to Stockholders, which
is incorporated herein by reference. Reinhold's common stock is traded on the
NASDAQ National Market under the symbol RNHDA. The stock price quotations
incorporated herein reflect inter-dealer prices, without retail mark-up,
mark-down or commission, and may not represent actual transactions.
b. The approximate number of common equity security holders is as
follows:
Approximate Number
of Holders of Record
Title of Class as of March 15, 2002
-------------- --------------------
Class A Common Stock,
par value $.01 per share 1,486
c. A 10% stock dividend was declared on May 8, 2001 payable to
shareholders of record as of July 13, 2001. The dividend was payable on or about
July 31, 2001. Fractional shares were paid in cash. Fractional share cash
payments totaled $8,278.05.
Item 6. SELECTED FINANCIAL DATA
Reference is made to the "Selected Financial Data" on page 1 of
Reinhold's 2001 Annual Report to Stockholders, which is incorporated herein by
reference.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Reference is made to the "Management Discussion and Analysis of
Financial Condition and Results of Operations" on page 13 of Reinhold's 2001
Annual Report to Stockholders, which is incorporated herein by reference.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company has two main areas of market risk; interest rates on
outstanding debt and fluctuations in the value of the British Pound Sterling to
the United States Dollar.
All of the Company's debt at December 31, 2001 is at variable interest
rates based on LIBOR plus 1.75%. A hypothetical 10% change in interest rates
would have had a $0.1 million impact on interest expense for the years ended
December 31, 2001 and 2000, respectively.
The functional currency of the Company's wholly-owned subsidiary, NP
Aerospace, is the British Pound Sterling (the "Pound"). The exchange rate of the
Pound to the Dollar from April 28, 1998 to December 31, 2001 has fluctuated from
1.68 to 1.39, a range of 17%. A hypothetical 15% change in exchange rate would
have had a $0.02 million and $0.1 million impact on net income for the year
ended December 31, 2001 and 2000, respectively.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
--------------------------------------------
Information for Item 8 is included in Reinhold's consolidated
financial statements as of December 31, 2001 and 2000 and for each of the three
years in the period ended December 31, 2001 and Reinhold's unaudited quarterly
financial data for the two year period ended December 31, 2001, in the
Consolidated Financial Statements (including the Consolidated Balance Sheet,
Consolidated Statement of Operations, Consolidated Statement of Cash Flows,
Consolidated Statement of Stockholders' Equity and Comprehensive Income (Loss)
and Notes to Consolidated Financial Statements) and unaudited Quarterly
Financial Data sections of Reinhold's 2001 Annual Report to shareholders, which
are incorporated herein by reference. The report of independent auditors on
Reinhold's consolidated financial statements is in the Management's and
Independent Auditors' Reports section of Reinhold's 2001 Annual Report to
shareholders and is also incorporated herein by reference.
Independent Auditors' Report on Schedules
The Board of Directors
Reinhold Industries, Inc.
We have audited the consolidated financial statements of Reinhold Industries,
Inc. as of December 31, 2001, and for the year ended, and have issued our report
thereon dated February 19, 2002 (except for Note 4, as to which the date is
March 27, 2002) (incorporated by reference into this Registration Statement).
Our audit also included the financial statement schedules listed in Item 14(a)
of this Registration Statement. These schedules are the responsibility of the
Company's management. Our responsibility is to express an opinion based on our
audit.
In our opinion, the financial statement schedules referred to above, when
considered in relation to the basic financial statements taken as a whole,
present fairly in all material respects the information set forth therein.
/s/ Ernst & Young LLP
Orange County, California
February 19, 2002
Schedule II-A - Valuation and Qualifying Accounts
Allowance for Doubtful Accounts Receivable (in thousands)
Additions Charged to
Balance at -------------------------- Balance at
Beginning of Costs and End of
Period Expenses Other Deductions Period
- -------------------------------------------------------------------------------------------------------------
December 31, 1999 287 227 60
- -------------------------------------------------------------------------------------------------------------
December 31, 2000 60 105 165
- -------------------------------------------------------------------------------------------------------------
December 31, 2001 165 105 104 166
- -------------------------------------------------------------------------------------------------------------
Schedule II-B - Valuation and Qualifying Accounts
Inventory Reserves (in thousands)
Additions Charged to
Balance at -------------------------- Balance at
Beginning of Costs and End of
Period Expenses Other Deductions Period
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
December 31, 2001 1,183 56 1,127
- -------------------------------------------------------------------------------------------------------------
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
On May 1, 2001, by written consent of the Board of Directors, KPMG LLP
was dismissed as the Registrant's certifying accountant. Ernst & Young LLP was
engaged as the Registrant's new certifying accountant.
During 2000 and 1999, there have been no disagreements with KPMG LLP on any
matter of accounting principles or practices, financial statement disclosure, or
auditing scope or procedure or any reportable events.
KPMG LLP's report on the financial statements for fiscal 2000 and 1999 contained
no adverse opinion or disclaimer of opinion and was not qualified or modified as
to uncertainty, audit scope or accounting principles.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
--------------------------------------------------
The information required with respect to directors and officers of
Reinhold is included in the definitive Proxy Statement for the 2002 Annual
Meeting of Stockholders of Reinhold, to be filed with the Securities and
Exchange Commission not later than 120 days after the end of the fiscal year and
is incorporated herein by reference.
Item 11. EXECUTIVE COMPENSATION
The information required by Item 11 is included in the definitive Proxy
Statement for the 2002 Annual Meeting of Stockholders of Reinhold, to be filed
with the Securities and Exchange Commission not later than 120 days after the
end of the fiscal year and is incorporated herein by reference.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by Item 12 is included in the definitive Proxy
Statement for the 2002 Annual Meeting of Stockholders of Reinhold, to be filed
with the Securities and Exchange Commission not later than 120 days after the
end of the fiscal year and is incorporated herein by reference.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by Item 13 is included in the definitive Proxy
Statement for the 2002 Annual Meeting of Stockholders of Reinhold, to be filed
with the Securities and Exchange Commission not later than 120 days after the
end of the fiscal year and is incorporated herein by reference.
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Documents filed as part of this report:
1. Financial Statements: The following financial statements are contained in
the Company's 2001 Annual Report to shareholders:
Report of Independent Auditors
Consolidated Statement of Operations for the years ended December 31, 2001,
2000 and 1999
Consolidated Balance Sheet at December 31, 2001 and 2000
Consolidated Statement of Cash Flows for the years ended December 31, 2001,
2000 and 1999
Consolidated Statement of Shareholders' Equity and Comprehensive Income
(Loss) for the years ended December 31, 2001, 2000 and 1999
Notes to Consolidated Financial Statements
See Part II, Item 8 of this report for information regarding the
incorporation by reference herein of such financial statements.
2. Financial Statement Schedules: Certain schedules have been omitted since the
required information is not present or not present in amounts sufficient to
require submission of the schedule, or because the information required is
included in the consolidated financial statements and notes thereto.
Schedule II -A - Valuation and Qualifying Accounts
Schedule II - B - Valuation and Qualifying Accounts
Report of Independent Auditors on Financial Statement Schedules
3) EXHIBITS
2.1 Keene Corporation's Fourth Amended Plan of Reorganization Under
Chapter 11 of the Bankruptcy Code dated March 11, 1996, incorporated
herein by reference to Exhibit 99(a) to Keene Corporation's Form 8-K
filed with the Commission on June 28, 1996.
2.2 Motion to Approve Modifications to the Keene Corporation Fourth
Amended Plan of Reorganization Under Chapter 11 of the Bankruptcy
Code dated June 12, 1996, incorporated herein by reference to Exhibit
99(b) to Keene Corporation's Form 8-K filed with the Commission on
June 28, 1996.
2.3 Finding of Fact, Conclusions of Law and Order Confirming Keene's
Fourth Amended Plan of Reorganization Under Chapter 11 of the
Bankruptcy Code, as modified, entered June 14, 1996, incorporated
herein by reference to Exhibit 99(c) to Keene Corporation's Form 8-K
filed with the Commission on June 28, 1996.
3.1 Amended and restated Certificate of Incorporation of Reinhold
Industries, Inc., incorporated herein by reference to Exhibit 99(a),
Exhibit A to the Plan, to Keene Corporation's Form 8-K filed with the
Commission on June 28, 1996.
3.2 Amended and restated By-laws of Reinhold Industries, Inc. (Formerly
Keene Corporation), incorporated herein by reference to Exhibit
99(a), Exhibit B to the Plan, to Keene Corporation's Form 8-K filed
with the Commission on June 28, 1996.
3.3 Certificate of Merger of Reinhold Industries, Inc. into Keene
Corporation, incorporated herein by reference to Exhibit 99(a),
Exhibit C to the Plan, to Keene Corporation's Form 8-K filed
with the Commission on June 28, 1996.
3.4 Second amended and restated Certificate of Incorporation and amended
By-laws of Reinhold Industries, Inc., on Form DEFS14A filed with the
Commission on September 24, 1999.
3.5 Third amended and restated Certificate of Incorporation of Reinhold
Industries, Inc., on Form DEF14C filed with the Commission on October
10, 2000.
4.1 Share Authorization Agreement, incorporated herein by reference
to Exhibit 99(a), Exhibit H to the Plan, to Keene Corporation's
Form 8-K filed with the Commission on June 28, 1996.
4.2 Registration Rights Agreement, incorporated herein by reference
to Exhibit 99(a), Exhibit G to the Plan, to Keene Corporation's
Form 8-K filed with the Commission on June 28,1996.
9.1 Creditors' Trust Agreement, incorporated herein by reference to
Exhibit 99(a), Exhibit D to the Plan, to Keene Corporation's Form
8-K filed with the Commission on June 28, 1996.
10.1 Reinhold Industries, Inc. Stock Incentive Plan, on Form S-8, filed
with the Commission on November 10, 1997.
10.2 Reinhold Management Incentive Compensation Plan, incorporated by
reference to Page 34 to Keene's (Predecessor Co.) Form 10, dated
April 4, 1990, as amended by Form 8, Exhibit 10(e), dated July
19, 1990.
10.3 Lease, dated January 4, 1990, by and between Imperial Industrial
Properties, Inc. and Reinhold Industries, incorporated by
reference to Exhibit 10(b) to Keene's Form 10 dated April 4,
1990, as amended by Form 8, dated July 19, 1990.
10.4 Reinhold Industries, Inc. Retirement Plan (formerly Keene Retirement
Plan), incorporated by reference to Exhibit 10(i) to Keene's Form 10
dated April 4, 1990, as amended by Form 8, dated July 19, 1990.
10.5 Management Agreement between Reinhold Industries, Inc. and Hammond,
Kennedy, Whitney & Company, Inc. dated May 31, 1999 on Form 10-QSB
filed with the Commission on August 16, 1999.
10.6 Stock Option Agreement between Reinhold Industries, Inc. and Michael
T. Furry dated June 3, 1999 on Form 10-QSB filed with the Commission
on August 16, 1999.
10.7 Stock Price Deficiency Payment Agreement between Reinhold Industries,
Inc. and various Stockholders dated June 16, 1999 on Form 10-QSB
filed with the Commission on August 16, 1999.
10.8 Asset Purchase Agreement by and between Samuel Bingham Company, a
Delaware corporation, and Samuel Bingham Enterprises, Inc. dated
February 3, 2000 on Form 8-K/A filed with the Commission on May 23,
2000.
13 Certain portions of 2001 Annual Report to shareholders (with the
exception of the information incorporated by reference into Items
1, 5, 6, 7, 7A and 8 of this report, Reinhold's 2001 Annual Report
to shareholders is not deemed to be filed as a part of this report)
16 Letter Regarding Change in Independent Accountants
23.1 Consent of Ernst & Young LLP, Independent Auditors
23.2 Consent of Independent Auditors and Report on Schedule - KPMG LLP
b) REPORTS ON FORM 8-K
NONE
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
Reinhold has duly caused this Annual Report to be signed on its behalf by the
undersigned thereunto duly authorized.
REINHOLD INDUSTRIES, INC.
---------------------------
Registrant
Date: March 28, 2002 By:/s/ Brett R. Meinsen
-------------------- --------------------
Brett R. Meinsen
Vice President -
Finance & Administration
(Principal Financial and
Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report is signed below by the following persons on behalf of Reinhold and
in the capacities and on the date indicated.
/s/ Michael T. Furry March 28, 2002
--------------------------------------
Michael T. Furry- President and Director
(Principal Executive Officer)
/s/ Ralph R. Whitney, Jr. March 28, 2002
---------------------------------------
Ralph R. Whitney, Jr.- Chairman
/s/ Andrew McNally, IV March 28, 2002
-------------------------------------
Andrew McNally, IV- Director
/s/ Glenn Scolnik March 28, 2002
-------------------------------------------
Glenn Scolnik- Director
/s/ Thomas A. Brand March 28, 2002
-----------------------------------------
Thomas A. Brand- Director
/s/ Richard A. Place March 28, 2002
-------------------------------------------
Richard A. Place- Director