U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended: September 30, 2002
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from ____________ to _____________
Commission file number: 0-18434
REINHOLD INDUSTRIES, INC.
- --------------------------------------------------------------------------------
(Exact name of small business issuer as specified in charter)
Delaware 13-2596288
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
12827 East Imperial Hwy, Santa Fe Springs, CA 90670
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code (562) 944-3281
- --------------------------------------------------------------------------------
Check whether the issuer (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 [ ]
Check whether the issuer has filed all documents and reports required to be
filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934
subsequent to distribution of securities under a plan confirmed by the Court.
YES [ X ] NO [ ]
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:
Class A Common Stock, Par Value $.01 - 2,657,655 shares as of November 1, 2002.
REINHOLD INDUSTRIES, INC. AND SUBSIDIARIES
INDEX
PART I - FINANCIAL INFORMATION PAGE
Item 1.
Condensed Consolidated Statements of Operations 3
Condensed Consolidated Balance Sheets 5
Condensed Consolidated Statements of Cash Flows 6
Notes to Condensed Consolidated Financial Statements 7
Item 2.
Management's Discussion and Analysis of Financial
Condition and Results of Operations 15
Item 3.
Quantitative and Qualitative Disclosures About Market Risk 23
Item 4.
Controls and Procedures 23
PART II - OTHER INFORMATION 24
SIGNATURES 26
EXHIBITS 27
REINHOLD INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except per share data)
(Unaudited)
Three Months Ended
September 30,
2002 2001
------ ------
Net sales $13,562 $12,096
Cost of goods sold 9,252 8,813
----- -----
Gross profit 4,310 3,283
Selling, general and administrative expenses 3,182 2,765
Write-down of long-lived assets - 5,351
------ ------
Operating income (loss) 1,128 (4,833)
Interest expense, net 74 113
------ ------
Income (loss) before income taxes 1,054 (4,946)
Income tax expense (benefit) 394 (217)
------ ------
Net income (loss) $ 660 ($ 4,729)
====== ======
Basic earnings (loss) per share $ 0.25 ($ 1.78)
Diluted earnings (loss) per share $ 0.25 ($ 1.78)
Weighted average common shares outstanding - basic 2,658 2,658
Weighted average common shares outstanding - diluted 2,681 2,658
See accompanying notes to condensed consolidated financial statements
REINHOLD INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except per share data)
(Unaudited)
Nine Months Ended
September 30,
2002 2001
------ ------
Net sales $40,823 $37,594
Cost of goods sold 28,309 27,227
------ ------
Gross profit 12,514 10,367
Selling, general and administrative expenses 8,723 7,686
Write-down of long-lived assets - 5,351
------ ------
Operating income (loss) 3,791 (2,670)
Interest expense, net 259 396
------- ------
Income (loss) before income taxes 3,532 (3,066)
Income taxes 1,348 503
------- -------
Net income (loss) $ 2,184 ($ 3,569)
======= =======
Basic earnings (loss) per share $ 0.82 ($ 1.34)
Diluted earnings (loss) per share $ 0.82 ($ 1.34)
Weighted average common shares outstanding - basic 2,658 2,658
Weighted average common shares outstanding - diluted 2,670 2,658
See accompanying notes to condensed consolidated financial statements
REINHOLD INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except per share data)
(Unaudited)
September 30, 2002 December 31, 2001
ASSETS
Current assets:
Cash and cash equivalents $ 2,456 $ 4,105
Accounts receivable 7,588 5,596
Inventories 6,877 6,275
Other current assets 2,332 2,499
------ ------
Total current assets 19,253 18,475
Property, plant and equipment, net 11,149 10,564
Cost in excess of fair value of net assets
of acquired companies - net 3,786 3,786
Other assets 158 204
------ ------
$34,346 $33,029
====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Borrowings under line of credit $ 5,000 $ -
Accounts payable 3,210 2,389
Accrued expenses 3,334 1,687
Current portion - long term debt 140 3,418
------ -----
Total current liabilities 11,684 7,494
Long-term pension liability 3,899 3,899
Long term debt - less current portion 167 6,280
Other long term liabilities 276 279
Commitments and contingencies
Stockholders' equity:
Preferred stock:
Authorized: 250,000 shares
Issued and outstanding: None - -
Common stock, $0.01 par value:
Class A - Authorized: 4,750,000 shares
Issued and outstanding: 2,657,655 shares
and 2,416,722 shares, respectively 27 24
Additional paid-in capital 20,196 17,514
Retained earnings 2,905 2,655
Accumulated other comprehensive loss (4,808) (5,116)
------ ------
Net stockholders' equity 18,320 15,077
------ ------
$34,346 $33,029
====== ======
See accompanying notes to condensed consolidated financial statements
REINHOLD INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(Unaudited)
Nine Months Ended
September 30,
2002 2001
------ ------
Cash flow from operating activities:
Net income (loss) $ 2,184 ($ 3,569)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities (net of
effects of acquisition):
Depreciation and amortization 1,049 1,228
Additions to paid-in capital resulting
from tax benefits 757 813
Write-down of long-lived assets - 5,351
Changes in assets and liabilities:
Accounts receivable (1,992) 423
Inventories (602) (61)
Other current assets 167 (797)
Accounts payable 821 578
Accrued expenses 1,647 (1,392)
Deferred tax asset - (505)
Other, net 46 (11)
------- -------
Net cash provided by operating activities 4,077 2,058
Cash flows used in investing activities:
Acquisitions - (2,654)
Proceeds from sale of assets 105 198
Capital expenditures (1,739) (2,081)
------- -------
Net cash used in investing activities (1,634) (4,537)
Cash flows used in financing activities:
Dividends paid (9) (8)
Borrowings against line of credit 7,221 -
Repayments on line of credit (2,221) -
Repayment of long-term debt (9,391) (1,617)
------- -------
Net cash used in financing activities (4,400) (1,625)
Effect of exchange rate changes on cash 308 (164)
------- -------
Net decrease in cash and cash equivalents (1,649) (4,268)
Cash and cash equivalents, beginning of period 4,105 7,121
----- -------
Cash and cash equivalents, end of period $ 2,456 $ 2,853
====== ======
See accompanying notes to condensed consolidated financial statements
REINHOLD INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2002
(Unaudited)
DESCRIPTION OF BUSINESS
Reinhold Industries, Inc. and subsidiaries ("Reinhold" or the "Company") is a
manufacturer of advanced custom composite components, sheet molding compounds,
and graphic arts and industrial rollers for a variety of applications in the
United States and Europe. Reinhold derives revenues from the defense contract
industry, the aircraft industry, the printing industry and other commercial
industries.
USE OF ESTIMATES
The Company's consolidated financial statements and related public financial
information are based on the application of generally accepted accounting
principles ("GAAP"). GAAP requires the use of estimates, assumptions, judgments
and subjective interpretations of accounting principles that have an impact on
the assets, liabilities, revenue and expense amounts reported. These estimates
can also affect supplemental information contained in the external disclosures
of the Company including information regarding contingencies, risk and financial
condition. The Company believes its use of estimates and underlying accounting
assumptions adhere to generally accepted accounting principles and are
consistently and conservatively applied. Valuations based on estimates are
reviewed for reasonableness and conservatism on a consistent basis throughout
the Company. Primary areas where financial information of the Company is subject
to the use of estimates, assumptions and the application of judgment include
revenues, receivables, inventories, acquisitions, valuation of long-lived and
intangible assets, pension and post-retirement benefits, the realizability of
deferred tax assets, and foreign exchange translation. We base our estimates on
historical experience and on various other assumptions that we believe to be
reasonable under the circumstances. Actual results may differ materially from
these estimates under different assumptions or conditions.
BASIS OF PRESENTATION
The accompanying financial statements of the Company for the three and nine
months ended September 30, 2002 and 2001 are unaudited. The financial statements
consolidate the accounts of the Company and its wholly-owned subsidiaries. All
significant intercompany balances and transactions have been eliminated. In the
opinion of management, all adjustments necessary for a fair presentation of such
financial statements have been included. Such adjustments consisted only of
normal recurring items. Interim results are not necessarily indicative of
results for a full year. The condensed financial statements and notes are
presented as permitted by Form 10-Q and, therefore, should be read in
conjunction with the Company's annual report on Form 10-K for the year ended
December 31, 2001.
Notes to Condensed Consolidated Financial Statements (Continued)
ACQUIRED BUSINESSES
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. The cost in excess of fair value of net assets acquired of
$2.2 million was being amortized over twenty years through December 31, 2001.
Effective January 1, 2002, the cost in excess of fair value of net assets is no
longer amortized but is subject to annual impairment testing in accordance with
SFAS No. 142.
The acquisition of Edler has been accounted for by the purchase method and,
accordingly, the results of operations have been included in the consolidated
financial statements from the date of acquisition.
INVENTORIES
Inventories are stated at the lower of cost or market on a first-in, first-out
(FIFO) basis. Inventoried costs relating to long-term contracts and programs are
stated at the actual production costs, including factory overhead, initial
tooling and other related non-recurring costs incurred to date, reduced by
amounts related to revenue recognized on units delivered. The components of
inventory are as follows (in thousands):
September 30, 2002 December 31, 2001
- --------------------------------------------------------------------------------
Raw material $ 4,723 4,557
Work-in-process 1,287 919
Finished goods 867 799
- --------------------------------------------------------------------------------
Total $ 6,877 6,275
EARNINGS PER COMMON SHARE
The Company presents basic and diluted earnings per share ("EPS"). Basic
earnings per share is computed by dividing income available to common
shareholders by the weighted-average number of common shares outstanding for the
period. Diluted earnings per share reflects the assumed conversion of all
dilutive securities, consisting of employee stock options.
On May 1, 2002, the Board of Directors approved the distribution of a 10% stock
dividend to shareholders of record as of May 31, 2002. As a result, an
additional 240,933 shares were issued on June 21, 2002. All common stock
information and earnings per share computations for all periods presented have
been adjusted for the stock dividend. The number of stock options outstanding
and the exercise price were also adjusted for the impact of the 10% stock
dividend.
Notes to Condensed Consolidated Financial Statements (Continued)
The reconciliations of basic and diluted weighted average shares are as follows
(in thousands, except exercise price data):
Three Months Ended Nine Months Ended
September 30, September 30,
2002 2001 2002 2001
- --------------------------------------------------------------------------------
Net income $660 ($4,729) $2,184 ($3,569)
==== ====== ====== =======
Weighted average shares used
in basic computation 2,658 2,658 2,658 2,658
Dilutive effect of stock
options 23 - 12 -
----- ----- ----- -----
Weighted average shares used
for diluted calculation 2,681 2,658 2,670 2,658
Stock options outstanding 218 225 218 225
Range of exercise price $6.20-$8.06 $6.20-$8.45 $6.20-$8.06 $6.20-$8.45
REPORTING OTHER COMPREHENSIVE INCOME
The Company reports other comprehensive income under Statement of Financial
Accounting Standard ("SFAS") No. 130, "Reporting Comprehensive Income". The
difference between net income and total comprehensive income during the three
months ended September 30, 2002 and 2001 was a gain on foreign currency
translation of $151,000 and $273,000, respectively. The difference between net
income and total comprehensive income during the nine months ended September 30,
2002 and 2001 was a gain on foreign currency translation of $308,000 and a loss
on foreign currency translation of $164,000, respectively.
EFFECT OF RECENT ACCOUNTING PRONOUNCEMENTS
In June 2001, the Financial Accounting Standards Board issued
Statements of Financial Accounting Standards ("SFAS") No. 141 "Business
Combinations" and No. 142 "Goodwill and Other Intangible Assets". SFAS No. 141
addresses financial accounting and reporting for business combinations and
requires all business combinations to be accounted for using the purchase
method. SFAS No. 141 is effective for any business combinations initiated after
June 30, 2001. SFAS No. 142, effective for the Company January 1, 2002,
addresses the initial recognition and measurement of goodwill and other
intangible assets acquired in a business combination. Goodwill and other
intangible assets with indefinite lives are no longer amortized, but instead
subject to impairment tests at least annually. The impairment test is comprised
of two parts. The first step compares the fair value of a reporting unit with
its carrying amount, including goodwill. If the carrying amount exceeds the fair
value of the reporting unit, the second step of the goodwill impairment test
must be performed. The second step compares the implied fair value of the
reporting unit's goodwill with the respective carrying amount in order to
determine the amount of impairment loss, if any. In accordance with SFAS No.
142, the Company performed the first part of the two-step goodwill impairment
test. For each of the Company's reporting units for which goodwill was recorded,
the Company determined that the fair value exceeded the carrying amount as of
January 1, 2002.
Notes to Condensed Consolidated Financial Statements (Continued)
As a result, the second step of the impairment test was not required.
Under SFAS No. 142, the Company discontinued amortization of its cost
in excess of fair value of net assets acquired (goodwill) beginning January 1,
2002, which will result in reduced expense of approximately $202,000 (net of
related tax effects) in fiscal 2002.
A reconciliation of net income and earnings per share for periods prior
to the adoption of FAS 142 is as follows (in thousands, except per share data):
Three months ended Nine months ended
September 30, September 30,
2002 2001 2002 2001
----- ----- ----- -----
Net income as reported $ 660 ($4,729) $2,184 ($3,569)
Impact of adoption of FAS 142 (net of
related tax effects) - 57 - 161
------ ------ ------ ------
"Adjusted" net income $ 660 ($4,672) $2,184 ($3,408)
====== ======= ====== ======
Basic earnings per share $0.25 ($ 1.76) $ 0.82 ($ 1.28)
Diluted earnings per share $0.25 ($ 1.76) $ 0.82 ($ 1.28)
The gross amount of goodwill and related accumulated amortization at
September 30, 2002 and 2001 amounted to $8,921,000 and $5,135,000 and $8,891,000
and $5,015,000, respectively.
In August 2001, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards ("SFAS") No. 144 "Accounting for the
Impairment or Disposal of Long-Lived Assets". SFAS 144 supersedes SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of," and the accounting and reporting provisions of APB Opinion No.
30, "Reporting the Results of Operations - Reporting the Effects of Disposal of
a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring
Events and Transactions," for the disposal of a segment of a business (as
previously defined in that opinion). SFAS 144 requires that one accounting model
be used for long-lived assets to be disposed of by sale, whether previously held
and used or newly acquired, and broadens the presentation of discontinued
operations to include more disposal transactions than were included under the
previous standards. Effective January 1, 2002, the Company adopted SFAS 144,
which did not have an effect on its consolidated results of operations.
INCOME TAXES
Income taxes for interim periods are computed using the estimated effective tax
rate to be applicable for the current year. Benefits realized from loss carry
forwards and deductible temporary differences arising prior to July 31, 1996
have been recorded directly to additional paid-in capital. For the nine months
ended September 30, 2002, such benefits amounted to approximately $0.8 million.
Notes to Condensed Consolidated Financial Statements (Continued)
LONG TERM DEBT
On March 9, 2000, the Company borrowed $11,000,000 from B of A to fund a portion
of the purchase consideration due to Samuel Bingham Company ("Bingham"). The
principal portion of the loan is payable in twenty successive quarterly
installments beginning June 30, 2000. Interest is payable quarterly at a rate
which approximates LIBOR plus 1.75% and is secured by all financial assets of
the Company.
On March 20, 2002, the Company entered into a one year $10,000,000 revolving
credit facility with LaSalle Bank National Association ("LaSalle"). Interest is
at a rate which approximates LIBOR plus 2.50% and is secured by all financial
assets of the Company.
On March 21, 2002, the Company received approximately $7,200,000 from LaSalle
against this credit facility. The proceeds from the credit facility and
additional cash on hand were used to extinguish all outstanding debt with B of
A.
The credit agreement with LaSalle is subject to various financial covenants to
which the Company must comply. The covenants require the Company to maintain
certain ratios of profitability, cash flow, outstanding debt, minimum net worth
and limits on capital expenditures. The Company is in compliance with the loan
covenants at September 30, 2002.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of the following financial instruments approximate fair
value because of the short maturity of those instruments: cash and cash
equivalents, accounts receivable, other current assets, other assets, accounts
payable, accrued expenses and current installments of long-term debt. The
long-term debt bears interest at a variable market rate and, thus, has a
carrying amount that approximates fair value.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with an original maturity of
three months or less to be cash equivalents.
FOREIGN CURRENCY
The reporting currency of the Company is the United States dollar. The
functional currency of NP Aerospace is the UK pound sterling. For consolidation
purposes, the assets and liabilities of the Company's subsidiaries are
translated at the exchange rate in effect at the balance sheet date. The
consolidated statement of operations is translated at the average exchange rate
in effect during the period being reported. Exchange differences arise mainly
from the valuation rates of the intercompany accounts and are taken directly to
Stockholders' equity.
Notes to Condensed Consolidated Financial Statements (Continued)
OPERATING SEGMENTS
The Company reports operating segment data under SFAS No. 131 "Disclosures about
Segments of an Enterprise and Related Information".
Reinhold is a manufacturer of advanced custom composite components, sheet
molding compounds, and graphic arts and industrial rollers for a variety of
applications primarily in the United States and Europe. The Company generates
revenues from six operating segments: Aerospace, CompositAir, Commercial,
Thermal Insulation, NP Aerospace and Bingham. Management has determined these to
be Reinhold's operating segments based upon the nature of their products.
Aerospace produces a variety of products for the U.S. military and space
programs. CompositAir produces components for the commercial aircraft seating
industry. The Commercial segment produces lighting housings and pool filters.
Thermal Insulation produces composite components mainly for subcontractors of
the U.S. defense industry. NP Aerospace, our subsidiary located in Coventry,
England, produces products for law enforcement, lighting, military, automotive
and commercial aircraft. Bingham manufactures rubber and urethane rollers for
graphic arts and industrial applications.
The information in the following tables is derived directly from the segment's
internal financial reporting for corporate management purposes (in thousands).
Three Months Ended Nine Months Ended
September 30, September 30,
2002 2001 2002 2001
- ------------------------------------------------------------------------------------------------------------------------------------
Net sales
Aerospace $ 4,485 $ 2,886 $12,052 $ 7,210
CompositAir 1,685 1,478 4,966 4,712
Commercial 779 716 2,036 2,320
Thermal Insulation 206 466 839 1,342
NP Aerospace 2,654 2,342 8,301 7,386
Bingham 3,753 4,208 12,629 14,624
- ------------------------------------------------------------------------------------------------------------------------------------
Total sales $13,562 $12,096 $40,823 $37,594
- ------------------------------------------------------------------------------------------------------------------------------------
Income before income taxes
Aerospace $ 1,767 $ 942 $ 4,515 $ 2,248
CompositAir 133 12 158 264
Commercial 44 46 135 250
Thermal Insulation (115) 30 (206) 313
NP Aerospace 276 233 860 472
Bingham (317) (5,970) (431) (6,079)
Unallocated corporate expenses (734) (239) (1,499) (534)
- ------------------------------------------------------------------------------------------------------------------------------------
Total income before income taxes $ 1,054 ($ 4,946) $ 3,532 ($ 3,066)
Notes to Condensed Consolidated Financial Statements (Continued)
September 30, 2002 December 31, 2001
- --------------------------------------------------------------------------------
Total assets
Aerospace $ 7,507 $ 5,026
CompositAir 2,879 2,453
Commercial 1,234 914
Thermal Insulation 3,090 3,431
NP Aerospace 6,972 6,023
Bingham 9,798 10,947
Unallocated corporate 2,866 4,235
- --------------------------------------------------------------------------------
Total assets $ 34,346 $33,029
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.
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 a claim for future response
costs. The Company understands that, currently, the Commonwealth of Pennsylvania
is conducting a remedial investigation/feasibility study for the potential
remediation of the Valley Forge Site. The Commonwealth, which once owned a
portion of the site, and the NPS, which is the current site owner, are also PRPs
potentially liable for the remediation costs at the site.
On March 1, 2001, the Company commenced an action against the 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
Notes to Condensed Consolidated Financial Statements (cont'd)
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 April 22, 2002, the Court directed that the government be permitted to
conduct limited deposition and document discovery until August 30, 2002 on the
issue of whether the NPS was a "known creditor" to Keene Corporation at the time
of Keene's bankruptcy filing. The Court gave the government until October 11,
2002 to submit any response based on such discovery, with the Company's reply
due by October 25, 2002.
On October 11, 2002, a Notice of Lodging of a proposed consent decree was filed
with the Court. The proposed consent decree was negotiated with the NPS in good
faith to avoid prolonged and complicated litigation. A notice of lodging of the
proposed consent decree will be published in the Federal Register, following
which the U.S. Department of Justice will receive public comments on the
proposed consent decree for a period of 30 days. At the conclusion of the
comment period, the United States will file with the Court any comments
received, as well as responses to the comments and, if appropriate, will request
the Court to approve and enter the proposed consent decree.
During the three month period ended September 30, 2002, in accordance with SFAS
No. 5, Accounting for Contingencies, the Company has recorded a reserve of
$500,000 for the estimated cost to conclude this matter.
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.
As of September 30, 2002, it is uncertain if any material negative determination
will be made against the Company in either of these matters. The Company has
evaluated 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. With respect to the
Valley Forge Site, if a court were to determine that the Company was liable for
recoverable costs under CERCLA, the resulting liability could have a material
adverse impact on the Company's consolidated financial position and results of
operations. Future developments in the Company's pending lawsuit will require
the Company to continually reassess the expected impact of this matter.
Further details are available on Form 8-K filed with the Securities and Exchange
Commission on November 1, 2000.
The Company is involved in various other claims and legal actions arising in the
ordinary course of business. In the opinion of management, the ultimate
disposition of these matters will not have a material effect on the Company's
financial position, results of operations, or liquidity.
REINHOLD INDUSTRIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
September 30, 2002
The following discussion should be read in conjunction with the condensed
consolidated financial statements and notes thereto included in Item 1 of this
filing and the financial statements and notes thereto and Management's
Discussion and Analysis of Financial Condition and Results of Operations
contained in the Company's Annual Report on Form 10-K for the year ended
December 31, 2001.
Reinhold Industries, Inc. and subsidiaries ("Reinhold" or the "Company")
is a manufacturer of advanced custom composite components, sheet molding
compounds, and graphic arts and industrial rollers for a variety of applications
in the United States and Europe. Reinhold derives revenues from the defense
contract industry, the aircraft industry, the printing industry and other
commercial industries.
CRITICAL ACCOUNTING POLICIES
The Company's consolidated financial statements and related public financial
information are based on the application of generally accepted accounting
principles ("GAAP"). GAAP requires the use of estimates, assumptions, judgments
and subjective interpretations of accounting principles that have an impact on
the assets, liabilities, revenue and expense amounts reported. These estimates
can also affect supplemental information contained in the external disclosures
of the Company including information regarding contingencies, risk and financial
condition. The Company believes its use of estimates and underlying accounting
assumptions adhere to generally accepted accounting principles and are
consistently and conservatively applied. Valuations based on estimates are
reviewed for reasonableness and conservatism on a consistent basis throughout
the Company. Primary areas where financial information of the Company is subject
to the use of estimates, assumptions and the application of judgment include
revenues, receivables, inventories, acquisitions, valuation of long-lived and
intangible assets, pension and post-retirement benefits, the realizability of
deferred tax assets, and foreign exchange translation. We base our estimates on
historical experience and on various other assumptions that we believe to be
reasonable under the circumstances. Actual results may differ materially from
these estimates under different assumptions or conditions.
Revenue Recognition And Allowances For Doubtful Accounts
The Company recognizes revenue when title and risk of ownership have passed to
the buyer. Allowances for doubtful accounts are estimated based on estimates of
losses related to customer receivable balances. Estimates are developed by using
standard quantitative measures based on historical losses, adjusting for current
economic conditions and, in some cases, evaluating specific customer accounts
for risk of loss. The establishment of reserves requires the use of judgment and
assumptions regarding the potential for losses on receivable balances. Though
the Company considers these balances adequate and proper, changes in economic
conditions in specific markets in which the Company operates could have a
material effect on reserve balances required.
Inventories
We value our inventories at lower of cost or market. Cost is determined by the
first-in, first-out (FIFO) method, including material, labor and factory
overhead. The Company writes down its inventory for estimated obsolescence equal
to the cost of the inventory. Product obsolescence may be caused by shelf-life
expiration, discontinuance of a product line, replacement products in the
marketplace or other competitive situations.
Management's Discussion and Analysis (cont'd)
Fair Value Of Assets Acquired And Liabilities Assumed In Purchase Combinations
The purchase combinations carried out by us require management to estimate the
fair value of the assets acquired and liabilities assumed in the combinations.
These estimates of fair value are based on our business plan for the entities
acquired including planned redundancies, restructuring, use of assets acquired
and assumptions as to the ultimate resolution of obligations assumed for which
no future benefit will be received. Should actual use of assets or resolution of
obligations differ from our estimates, revisions to the estimated fair values
would be required. If a change in estimate occurs after one year of the
acquisition, the change would be recorded in our statement of operations.
Pensions And Post Retirement Benefits
The valuation of the Company's pension and other post-retirement plans requires
the use of assumptions and estimates that are used to develop actuarial
valuations of expenses and assets/liabilities. These assumptions include
discount rates, investment returns, projected salary increases and benefits, and
mortality rates. The actuarial assumptions used in the Company's pension
reporting are reviewed annually and compared with external benchmarks to assure
that they accurately account for our future pension obligations. Changes in
assumptions and future investment returns could potentially have a material
impact on the Company's pension expenses and related funding requirements.
Valuation Of Long-Lived Assets
We assess the fair value and recoverability of our long-lived assets whenever
events and circumstances indicate the carrying value of an asset may not be
recoverable from estimated future cash flows expected to result from their use
and eventual disposition. In doing so, we make assumptions and estimates
regarding future cash flows and other factors to make our determination. The
fair value of our long-lived assets is dependent upon the forecasted performance
of our business and the overall economic environment. When we determine that the
carrying value of our long-lived assets may not be recoverable, we measure any
impairment based upon a forecasted discounted cash flow method. If these
forecasts are not met, we may have to record additional impairment charges not
previously recognized.
During 2001, we performed an assessment of the goodwill related to our
acquisition of Samuel Bingham Company ("Bingham"), pursuant to SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of." As a result, we recorded a charge of $4.0 million during the
third quarter of 2001 to reduce goodwill associated with the purchase of
Bingham. The charge was based on the amount by which the carrying amount of
these assets exceeded their estimated fair value.
Income Taxes
We recognize deferred tax assets and liabilities based on the differences
between the financial statement carrying amounts and the tax bases of assets and
liabilities. We regularly review our deferred tax assets for recoverability and
establish a valuation allowance based upon historical losses, projected future
taxable income and the expected timing of the reversals of existing temporary
differences.
Cumulative Foreign Exchange Translation Accounting
In preparing our consolidated financial statements, we are required to translate
the financial statements of NP Aerospace from the currency in which they keep
their accounting records, the British Pound Sterling, into United States
dollars. This process results in exchange gains and losses which are either
included within the statement of operations or as a separate part of our net
equity under the caption "accumulated other comprehensive loss."
Management's Discussion and Analysis (cont'd)
Under the relevant accounting guidance, the treatment of these translation gains
or losses is dependent upon management's determination of the functional
currency of NP Aerospace. Generally, the currency in which the subsidiary
transacts a majority of its transactions, including billings, financing, payroll
and other expenditures would be considered the functional currency but any
dependency upon the parent and the nature of the subsidiary's operations must
also be considered.
If any subsidiary's functional currency is deemed to be the local currency, then
any gain or loss associated with the translation of that subsidiary's financial
statements is included in cumulative translation adjustments. However, if the
functional currency is deemed to be the United States dollar then any gain or
loss associated with the translation of these financial statements would be
included within our statement of operations.
Based on our assessment of the factors discussed above, we consider NP
Aerospace's local currency to be the functional currency. Accordingly, we had
cumulative foreign currency translation losses of approximately $129,000 and
$437,000 that were included as part of "accumulated other comprehensive loss"
within our balance sheet at September 30, 2002 and December 31, 2001,
respectively.
Environmental Liabilities
With respect to outstanding actions that are in preliminary procedural stages,
as well as any actions that may be filed in the future, insufficient information
exists upon which judgments can be made as to the validity or ultimate
disposition of such actions, thereby making it difficult to reasonably estimate
what, if any, potential liability or costs may be incurred. Accordingly, no
estimate of future liability has been included for such claims.
During the three month period ended September 30, 2002, in accordance with SFAS
No. 5, Accounting for Contingencies, the Company has recorded a reserve of
$500,000 for the estimated cost to conclude the Valley Forge litigation. A
further explanation can be found in the preceding Notes to Condensed
Consolidated Financial Statements.
Comparison of Third Quarter 2002 to 2001
In the third quarter of 2002, net sales increased $1.5 million (12%) to
$13.6 million, compared to third quarter 2001 sales of $12.1 million. Sales in
the Aerospace business unit increased by $1.6 million (55%) to $4.5 million due
mainly to increased shipments of components related to the Minuteman III
Propulsion Replacement Program. Sales increased by $0.2 million (14%) in the
CompositAir business unit to $1.7 million. Sales increased $0.1 million (9%) to
$0.8 million in the Commercial business unit due to higher shipments of pool
filter tanks, in-ground lighting housings and production tooling. Sales for the
Thermal Insulation business unit decreased by $0.3 million (56%) to $0.2 million
due to reduced shipments across all product segments. Sales at NP Aerospace
increased by $0.3 million (13%) to $2.7 million due primarily to additional
sales of ballistic personal protection products. Sales for the Bingham business
unit decreased by $0.5 million (11%) to $3.8 million due to continuing soft
market conditions.
Gross profit margin in the second quarter increased from 27.1% in 2001 to
31.8% in 2002. Gross profit margin for Aerospace increased from 43.3% to 49.3%
due to increased sales and the resulting absorption of fixed overhead expenses,
as well as improved product mix. Gross profit margin for CompositAir increased
from 14.1% to 19.6% due to lower material costs. Gross profit margin for
Commercial remained unchanged. Gross profit margin for Thermal Insulation
decreased from 38.6% to a loss of (26.7%) due to lower sales. Gross profit
margin for NP Aerospace increased from 27.0% to 27.9% due to better product mix.
Gross profit margin for Bingham increased from 20.6% to 24.7% due to better
product mix and lower overhead costs.
Selling, general and administrative expenses for the third quarter 2002
were $3.2 million (23.5% of sales) compared to $2.8 million (22.9% of sales) for
the same quarter of 2001. The increase is due primarily to legal and other fees
to establish our credit facility with LaSalle Bank, legal defense costs related
to the Valley Forge litigation, higher audit fees, and guaranteed payments made
to the Keene Creditors Trust. In addition, $0.5 million in estimated costs to
settle the Valley Forge litigation were recorded.
In the third quarter of 2001, the Company recorded a charge of
approximately $5.3 million to write-down long-lived assets associated with the
Bingham operating segment. Included in the $5.3 million charge was $1.3 million
write-down of fixed assets related to the seven manufacturing and administrative
locations of Bingham that were closed or are 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.
Interest expense, net in the third quarter of 2002 decreased slightly due
to lower outstanding debt.
Income before income taxes increased to $1.1 million (7.8% of sales) in
the third quarter of 2002 from a loss before income taxes of ($4.9) million
(-40.9% of sales) in the same period of 2001. Income before income taxes for
Aerospace was $1.8 million (39.4% of sales) in 2002 compared to $0.9 million
(32.6% of sales) in 2001 due to increased shipments of components related to the
Minuteman III Propulsion Replacement Program and better product mix. Income
before income taxes for CompositAir increased to $0.1 million (7.9% of sales)
from break-even in 2001 due to higher sales. Income before income taxes for
Commercial was flat at $0.044 million (5.6% of sales). A loss before income
taxes for Thermal Insulation of $0.1 million was realized in the third quarter
of 2002 compared to a profit of $0.03 million in the third quarter of 2001 due
to the 56% reduction in sales. Income before income taxes for NP Aerospace
increased to $0.3 million (10.4% of sales) from $0.2 million (9.9% of sales) due
to higher sales. A loss before income taxes for Bingham of $0.3 million (-8.4%
of sales) was realized in the third quarter of 2002 compared to a loss before
income taxes (excluding the write-down of long-lived assets of $5.4 million) of
$0.6 million (-14.7% of sales) in the third quarter of 2001 due to better
product mix and lower overhead costs.
A tax provision of $394,000 was recorded in the third quarter of 2002 as
compared to a tax benefit of ($217,000) in the third quarter of 2001. Income
taxes for interim periods are computed using the effective tax rate estimated to
be applicable for the full fiscal year, which is subject to ongoing review and
evaluation by management.
Comparison of Nine Months 2002 to 2001
In the first nine months of 2002, net sales increased $3.2 million, or 9%,
to $40.8 million, compared to 2001 sales of $37.6 million. Sales in the
Aerospace business unit increased by $4.8 million (67%) to $12.1 million due to
increased shipments of components related to the Minuteman III Propulsion
Replacement Program. Sales in the CompositAir business unit increased $0.3
million (5%) to $5.0 million. Sales decreased $0.3 million (12%) to $2.0 million
in the Commercial business unit due to decreased shipments of pool filter tanks
and in-ground lighting housings. Sales for the Thermal Insulation business unit
decreased by $0.5 million (37%) to $0.8 million due to reduced shipments across
all product segments. The Thermal Insulation business unit was acquired on April
20, 2001. Sales at NP Aerospace increased $0.9 million
Management's Discussion and Analysis (cont'd)
(12%) to $8.3 million due to increased shipments of body armor and other
personal protection products. Sales for the Bingham business unit decreased by
$2.0 million (14%) to $12.6 million due to continuing soft market conditions.
Gross profit margin in the first nine months increased from 27.6% in 2001
to 30.7% in 2002. Gross profit margin for Aerospace increased from 42.1% to
47.8% due to increased sales and the resulting absorption of fixed overhead
expenses, as well as improved product mix. Gross profit margin for CompositAir
decreased from 18.0% to 15.4% due to product mix and labor inefficiencies
related to the consolidation of production facilities in Santa Fe Springs,
California. Gross profit margin for Commercial decreased from 23.2% to 21.5% due
to lower sales and the resulting underabsorption of fixed overhead expenses.
Gross profit margin for Thermal Insulation decreased from 39.6% to zero due to
lower sales. Gross profit margin for NP Aerospace increased from 24.0% to 27.5%
due to increased sales and the resulting absorption of fixed overhead expenses.
Gross profit margin for Bingham increased from 24.9% to 25.9% due to better
product mix and lower overhead costs.
Selling, general and administrative expenses for the first nine months of
2002 were $8.7 million (21.4% of sales) compared to $7.7 million (20.4% of
sales) for the first nine months of 2001. The increase is due primarily to legal
and other fees to establish our credit facility with LaSalle Bank, legal defense
costs related to the Valley Forge litigation, higher audit fees, guaranteed
payments made to the Keene Creditors Trust, and estimated year-end management
incentive compensation. In addition, $0.5 million in estimated costs to settle
the Valley Forge litigation were recorded.
In the third quarter of 2001, the Company recorded a charge of
approximately $5.3 million to write-down long-lived assets associated with the
Bingham operating segment. Included in the $5.3 million charge was $1.3 million
write-down of fixed assets related to the seven manufacturing and administrative
locations of Bingham that were closed or are 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.
Interest expense, net, in the first nine months of 2002 decreased by $0.1
million due to lower outstanding debt.
Income before income taxes increased to $3.5 million (8.7% of sales) in
the first nine months of 2002 from a loss before income taxes of ($3.1) million
(-8.2% of sales) in the same period of 2001. Income before income taxes for
Aerospace was $4.5 million (37.5% of sales) in 2002 compared to $2.2 million
(31.2% of sales) in 2001 due to increased shipments of components related to the
Minuteman III Propulsion Replacement Program and better product mix. Income
before income taxes for CompositAir was $0.2 million (3.2% of sales) in 2002
compared to $0.3 million in 2001 due to labor inefficiencies related to the
consolidation of production facilities in Santa Fe Springs, California. Income
before income taxes for Commercial decreased to $0.1 million (6.6% of sales)
from $0.3 million (10.8% of sales) due to lower sales and the resulting
underabsorption of fixed overhead expenses. A loss before income taxes for
Thermal Insulation of $0.2 million was realized in 2002 compared to a profit of
$0.3 million in 2001. The decrease was due to the reduction in sales. Income
before income taxes for NP Aerospace increased to $0.9 million (10.4% of sales)
from $0.5 million (6.4% of sales) due to increased sales. A loss before income
taxes for Bingham of $0.4 million (-3.4% of sales) was realized in the first
nine months of 2002 compared to a loss before income taxes (excluding the
write-down of long-lived assets of $5.4 million) of $0.7 million (-5.0% of
sales) in 2001 due to better product mix, lower overhead costs and lower
interest expense.
Management's Discussion and Analysis (cont'd)
A tax provision of $1.3 million was recorded in the first nine months of
2002 as compared to $0.5 million in the first nine months of 2001. Income taxes
for interim periods are computed using the effective tax rate estimated to be
applicable for the full fiscal year, which is subject to ongoing review and
evaluation by management.
At December 31, 2001, the Company had net operating loss carryforwards for
Federal income tax purposes of approximately $25,628,000. The Company may
utilize the Federal net operating losses by carrying them forward to offset
future Federal taxable income, if any, through 2011. As more fully described in
Note 3 to the 2001 consolidated financial statements filed on Form 10-K,
benefits realized from loss carryforwards arising prior to the reorganization
have been recorded directly to additional paid-in capital.
Liquidity and Capital Resources
As of September 30, 2002, working capital was $7.6 million, down $3.4
million from December 31, 2001. Cash and cash equivalents of $2.5 million held
at September 30, 2002 were $1.6 million lower than cash and cash equivalents
held at December 31, 2001 primarily due to the $4.4 reduction of outstanding
borrowings and $1.7 million of capital expenditures offset by cash generated by
operating activities of $4.1 million.
Net cash provided by operating activities totaled $4.1 million for the
nine months ended September 30, 2002. Net cash provided by operating activities
totaled $2.1 million for the comparable period in 2001. The increase over the
prior period relates to improved working capital management and increased
profitability of the Company.
Net cash used in investing activities for the nine months ended September
30, 2002 totaled $1.6 million and consisted of capital expenditures and proceeds
from sale of assets. Net cash used in investing activities for the nine months
ended September 30, 2001 totaled $4.5 million and consisted of the acquisition
of Edler Industries, Inc. and capital expenditures.
Net cash used in financing activities for the nine months ended September
30, 2002 totaled $4.4 million and consisted of borrowings against the line of
credit of $7.2 million less subsequent repayments of $2.2 million and repayments
of long-term debt of $9.4 million. Net cash provided by financing activities for
the nine months ended September 30, 2001 totaled $1.6 million and consisted of
repayment of long-term debt.
Expenditures in 2002 and 2001 related to investing and financing
activities were financed by existing cash and cash equivalents and proceeds from
the LaSalle line of credit.
On March 9, 2000, the Company borrowed $11,000,000 from B of A to fund
a portion of the purchase consideration due to Samuel Bingham Company. The
principal portion of the loan was payable in twenty successive quarterly
installments beginning June 30, 2000. Interest was payable quarterly at a rate
which approximated LIBOR plus 1.75% and was secured by all financial assets of
the Company.
On March 20, 2002, the Company entered into a one year $10,000,000
revolving credit facility with LaSalle Bank National Association ("LaSalle").
Interest is at a rate which approximates LIBOR plus 2.50% and is secured by all
financial assets of the Company.
Management's Discussion and Analysis (cont'd)
On March 21, 2002, the Company received approximately $7,200,000 from
LaSalle against this credit facility. The proceeds from the credit facility and
additional cash on hand were used to extinguish all outstanding debt with B of
A.
The credit agreement with LaSalle is subject to various financial
covenants to which the Company must comply. The covenants require the Company to
maintain certain ratios of profitability, cash flow, outstanding debt, minimum
net worth and limits on capital expenditures. The Company is in compliance with
the loan covenants at September 30, 2002.
Management believes that the available cash, cash flows from operations and cash
available under the line of credit will be sufficient to fund the Company's
operating and capital expenditure requirements through at least September 30,
2003.
Stock Dividend
On May 1, 2002, the Board of Directors approved the distribution of a 10%
stock dividend to shareholders of record as of May 31, 2002. As a result, an
additional 240,933 shares were issued on June 21, 2002. All common stock
information and earnings per share computations for all periods presented have
been adjusted for the stock dividend. The number of stock options outstanding
and the exercise price were also adjusted for the impact of the 10% stock
dividend.
Forward Looking Statements
This Form 10-Q contains statements which, to the extent that they are not
recitations of historical fact, constitute "forward looking statements" within
the meaning of Section 27A of the Securities Act of 1933, as amended (the
"Securities Act") and Section 21E of the Securities Exchange Act of 1934 (the
"Exchange Act"). The words "estimate", "anticipate", "project", "intend",
"expect", and similar expressions are intended to identify forward looking
statements. All forward looking statements involve risks and uncertainties,
including, without limitation, statements and assumptions with respect to future
revenues, program performance and cash flow. Readers are cautioned not to place
undue reliance on these forward looking statements which speak only as of the
date of this 10-Q. The Company does not undertake any obligation to publicly
release any revisions to these forward looking statements to reflect events,
circumstances or changes in expectations after the date of this Form 10-Q or to
reflect the occurrence of unanticipated events. The forward looking statements
in this document are intended to be subject to safe harbor protection provided
by Sections 27A of the Securities Act and 21E of the Exchange Act.
2002 Outlook
The Aerospace business unit should continue to substantially outperform
2001 results due mainly to Minuteman III PRP component shipments. The
CompositAir and Commercial business units should generate financial results
comparable to 2001. Due to lower sales and unfavorable product mix, the Thermal
Insulation business unit will not achieve 2001 profitability. NP Aerospace
should exceed 2001 results. At Bingham, year-to-date 2002 sales are 14% lower
than 2001. However, due to cost reduction efforts and lower interest expense,
our comparative financial results, excluding the write-down of long-lived assets
Management's Discussion and Analysis (cont'd)
recorded in 2001, should remain virtually unchanged. This business unit
continues to receive the highest level of management focus.
Recent Accounting Pronouncements
The effective recent accounting pronouncements are included in the notes
to the condensed consolidated financial statements included herein.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
There are no material changes to the disclosures made in the Annual
Report on Form 10-K for the year ended December 31, 2001.
Item 4. Controls and Procedures
As of September 30, 2002, an evaluation was performed by the Chief
Executive Officer and Chief Financial Officer of the effectiveness
of the design and operation of the Company's disclosure controls and
procedures pursuant to Exchange Act Rule 13a-14. Based on that
evaluation, the Chief Executive Officer and Chief Financial Officer
concluded that the disclosure controls and procedures were effective
in ensuring that all material information required to be filed in this
quarterly report has been made known to them in a timely fashion.
There have been no significant changes in internal controls, or in
factors that could significantly affect internal controls subsequent
to the date the Chief Executive Officer and Chief Financial Officer
completed their evaluation.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The information required in this section is included in Part I under
the heading "LEGAL PROCEEDINGS".
Item 6. Exhibits and Reports on Form 8-K
a. 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.
10.9 Credit Agreement between Reinhold Industries, Inc., Samuel Bingham
Enterprises, Inc., NP Aerospace Limited (the "Borrowers") and LaSalle
Bank National Association dated March 21, 2002 on Form 10-Q filed
with the Commission on May 9, 2002.
20.1 New Keene Credit Facility, incorporated herein by reference to
Exhibit 99(a), Exhibit F to the Plan, to Keene Corporation's Form 8-K
filed with the Commission on June 28, 1996.
b. Reports on Form 8-K
None.
REINHOLD INDUSTRIES, INC. AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirement of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
REINHOLD INDUSTRIES, INC.
Registrant
DATE: November 6, 2002
By: /S/ Brett R. Meinsen
Brett R. Meinsen
Vice President - Finance and Administration,
Treasurer and Secretary
(Principal Financial Officer)
Exhibit 99.2
CERTIFICATIONS
I, Michael T. Furry, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Reinhold
Industries, Inc.;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a - 14 and 15d - 14) for the registrant
and we have:
a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the "Evaluation
Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent function):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
/s/ MICHAEL T. FURRY
Michael T. Furry
President and Chief Executive Officer
November 6, 2002
Exhibit 99.2
CERTIFICATIONS
I, Brett R. Meinsen, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Reinhold
Industries, Inc.;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a - 14 and 15d - 14) for the registrant
and we have:
a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the "Evaluation
Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent function):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
/s/ BRETT R. MEINSEN
Brett R. Meinsen
Vice President - Finance and Administration
November 6, 2002