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, 2002
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
- ------ EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM
to
--------------- --------------
COMMISSION FILE NUMBER 0-18434
REINHOLD INDUSTRIES, INC.
- --------------------------------------------------------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS 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, California 90670
- --------------------------------------------------------------------------------
(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
- --------------------------------------------------------------------------------
(Title of each class) (Name of each
exchange on which registered)
Securities registered under Section 12(g) of the Exchange Act: NONE
- --------------------------------------------------------------------------------
Indicate by check mark whether the registrant (1) filed all reports required to
be filed by section 13 or 15(d) of the Securities 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-K is not contained herein, and will not 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
---
Indicate by checkmark whether the registrant is an accelerated filer (as defined
in Rule 12b-2 of the Act). ___
The aggregate market value of the voting and non-voting stock held by
non-affiliates of the registrant as of June 28, 2002 was $17,985,000.
The number of shares of common stock outstanding as of March 13, 2003 was
2,659,812.
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, 2002.
Part III incorporates certain information by reference from the registrant's
definitive proxy statement for the annual meeting of shareholders to be held on
April 30, 2003, which proxy statement will be filed no later than 120 days after
the close of the registrant's fiscal year ended December 31, 2002.
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.
Available Information
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934 that require the Company to electronically file
reports, proxy and information statements, and other information with the SEC.
The public may read and copy the Company's filings at the SEC's Public Reference
Room at 450 Fifth Street, N.W., Washington, D.C. 20549. The public can obtain
information on the operation of the Public Reference Room by calling
1-800-SEC-0330. The SEC maintains an Internet site that contains reports, proxy
and information statements and other information regarding issuers that file
electronically with the SEC at www.sec.gov. The Company will provide electronic
or paper copies of such filings free of charge upon request.
REINHOLD INDUSTRIES, INC.
FORM 10-K
INDEX
PART 1 PAGE
Item 1 - Business 4
Item 2 - Properties 11
Item 3 - Legal Proceedings 11
Item 4 - Submission Of Matters To A Vote Of Security Holders 13
PART II
Item 5 - Market For Registrant's Common Equity And Related
Stockholder Matters 14
Item 6 - Selected Financial Data 14
Item 7 - Management's Discussion and Analysis of Financial
Condition and Results of Operations 14
Item 7A - Quantitative And Qualitative Disclosures About
Market Risk 15
Item 8 - Financial Statements And Supplementary Data 15
Item 9 - Changes In And Disagreements With Accountants On
Accounting And Financial Disclosure 16
PART III
Item 10 - Directors And Executive Officers Of The Registrant 17
Item 11 - Executive Compensation 17
Item 12 - Security Ownership Of Certain Beneficial Owners And
Management 17
Item 13 - Certain Relationships And Related Transactions 17
Item 14 - Controls And Procedures 18
PART IV
Item 15 - Exhibits, Financial Statement Schedules And Reports
On Form 8-K 19
SIGNATURES 23
CERTIFICATIONS 25
EXHIBITS 29
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 2002, Aerospace's sales increased by 87% 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 one major
customer constituted approximately 83% of this business unit's total sales in
2002. 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.Additionally, as a supplier to government contractors, nearly all of
Aerospace's backlog is subject to termination. Cancellation of the Minuteman III
Propulsion Replacement Program would have a significant impact on the
profitability of this business unit.
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 Oxnard, California and
Santa Fe Springs, California.
Over 80% 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 2002, sales increased by 11% compared to 2001. However, we expect
that the impact of 9/11/2001 and the recent severe financial difficulties
encountered by the airline industry could negatively impact future operating
results.
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 2002 decreased 6% to $2.9 million from $3.1 million in 2001
due to lower shipments of both in-ground lighting housings and pool filter
tanks.
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.
Sales in 2002 decreased 28% to $1.4 million from $2.0 million in 2001.
Due to the similarity in products and customer base, the Thermal Insulation
division will be combined with the Aerospace division beginning January 1, 2003.
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. NP Aerospace operates in Coventry,
England.
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 unpredictable.
Due to the high selling price of armored vehicles, large annual swings in
revenue are possible. Sales in 2002 increased 43% to $13.3 million from $9.3
million in 2001 due to higher shipments of body armor and military helmets.
Additional information on NP Aerospace is set forth in "Management Discussion
and Analysis of Financial Condition and Results of Operations " on page 16 of
Reinhold's 2002 Annual Report to Stockholders, which is incorporated herein by
reference.
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.
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 16 of
Reinhold's 2002 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 42 through 43 and "Management
Discussion and Analysis of Financial Condition and Results of Operations " on
pages 16 through 18 of Reinhold's 2002 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 45 of Reinhold's 2002 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 cannot 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 expired in January 2002. Samuel
Bingham Enterprises, Inc. holds nine registered trademarks with
expiration dates ranging from February 2004 through August 2009.
Research and Development
Research and development expenditures were approximately $314,000,
$348,000 and $327,000 for the years ended December 31, 2002, 2001 and 2000,
respectively.
Employees
At December 31, 2002, Reinhold had 360 full-time employees and 19
part-time employees. Of these employees, 288 (269 full-time and 19 part-time)
were employed in manufacturing and 91 (all full-time) in administration, product
development and sales. Approximately 34% of the personnel are based at
Reinhold's Santa Fe Springs, California facility, approximately 22% are based at
NP Aerospace located in Coventry, England and approximately 44% are based at the
various manufacturing and administration facilities of Samuel Bingham.
Approximately 56 of the employees in Coventry, England are represented by a
labor union. Certain Samuel Bingham employees, approximately 32, 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
Santa Fe Springs, CA Administration and 130,000 sq. ft. Leased (Expires 2014)
Manufacturing
Oxnard, CA R&D 3,600 sq. ft. Leased (Expires 2005)
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
Jonesboro, GA Manufacturing 9,000 sq. ft. Leased (Expires 2004)
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)
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.
On December 30, 2002, the United States District Court for the
Southern District of New York approved and entered a Consent Decree agreed upon
by the United States and the Company settling the claims asserted by the
National Park Service against the Company. The United States and the Company
stipulated that the EPA will not seek reimbursement of its response costs with
respect to the Valley Forge Site and that the Company's claim for a declaratory
judgment with respect to those costs may be dismissed with prejudice.
Under the terms of the Consent Decree, the Company was obligated to
pay $500,000 to the Department of the Interior. In return, the Company has
received from the United States a covenant not to sue, subject to certain
limited exceptions, for claims under CERCLA Sections 106, 107 and 113 and RCRA
Section 7003 relating to the Site. The payment to the Department of the Interior
was made on January 23, 2003.
In September 2002, in accordance with SFAS No. 5, Accounting for
Contingencies, the Company recorded a reserve of $500,000 for the estimated cost
to conclude this matter. These costs are included in the December 31, 2002
balance sheet as a component of "Accrued Expenses."
Pursuant to the Consent Decree and CERCLA Section 113(f)(2), the
Company's settlement with the United States bars any other party from asserting
claims for contribution for any response costs incurred with respect to the
Valley Forge Site by the United States, any State or other governmental entity,
or any other party.
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 not currently a party to any litigation concerning
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.
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.
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 2002.
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 49 of Reinhold's 2002 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 5, 2003
-------------- -------------------
Class A Common Stock,
par value $.01 per share 1,443
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.
A 10% stock dividend was declared on May 1, 2002 payable to shareholders
of record as of May 31, 2002. The dividend was paid on June 21, 2002.
Fractional shares were paid in cash. Fractional share cash payments totaled
$5,913.60.
Item 6. SELECTED FINANCIAL DATA
Reference is made to the "Selected Financial Data" on page 1 of
Reinhold's 2002 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's Discussion and Analysis of
Financial Condition and Results of Operations" on page 15 of Reinhold's 2002
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, 2002 is at variable interest
rates based on LIBOR plus 2.50%. A hypothetical 10% change in interest rates
would have had a $0.04 million and $0.08 million impact on interest expense for
the years ended December 31, 2002 and 2001, 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, 2002 has fluctuated from
1.68 to 1.39, a range of 17%. A hypothetical 10% change in exchange rate would
have had a $0.1 million and $0.02 million impact on net income for the years
ended December 31, 2002 and 2001, respectively.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Information for Item 8 is included in Reinhold's consolidated
financial statements as of December 31, 2002 and 2001 and for each of the three
years in the period ended December 31, 2002 and Reinhold's unaudited quarterly
financial data for the two year period ended December 31, 2002, 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 2002 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 2002 Annual Report to
shareholders and is also incorporated herein by reference.
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, 2000 60 105 165
- -------------------------------------------------------------------------------------------------------------
December 31, 2001 165 105 104 166
- -------------------------------------------------------------------------------------------------------------
December 31, 2002 166 179 272 73
- -------------------------------------------------------------------------------------------------------------
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
- -------------------------------------------------------------------------------------------------------------
December 31, 2002 1,127 38 443 722
- -------------------------------------------------------------------------------------------------------------
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, there were 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 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 2003 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 2003 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 2003 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 2003 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 14. CONTROLS AND PROCEDURES
(a)Evaluation of Disclosure Controls and Procedures
As of December 31, 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 and 15d-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 annual report has been made known to them in a
timely fashion.
(b)Changes in Internal Controls
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 IV
Item 15. 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 2002 Annual Report to shareholders:
Report of Independent Auditors
Consolidated Statements of Operations for the years ended December 31, 2002,
2001 and 2000
Consolidated Balance Sheets at December 31, 2002 and 2001
Consolidated Statements of Cash Flows for the years ended December 31, 2002,
2001 and 2000
Consolidated Statement of Stockholders' Equity and Comprehensive Income
(Loss) for the years ended December 31, 2002, 2001 and 2000
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.
10.9 Amended and Restated Reinhold Industries, Inc. Stock Incentive Plan,
on Form S-8, filed with the Commission on December 1, 2002.
10.10 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.
10.11 Directors' Deferred Stock Plan
13 Certain portions of 2002 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 2002 Annual Report
to shareholders is not deemed to be filed as a part of this report)
16 Letter Regarding Change in Independent Accountants
21 Subsidiaries of the registrant
1) Samuel Bingham Enterprises, Inc. (incorporated in Indiana)
2) NP Aerospace Limited (organized under the laws of the United
Kingdom)
23.1 Consent of Ernst & Young LLP, Independent Auditors
23.2 Consent of Independent Auditors and Report on Schedule - KPMG LLP
99.1 Certification Pursuant to 18 U.S.C. Section 1350, as added by Section
906 of the Sarbanes-Oxley Act of 2002.
(b) REPORTS ON FORM 8-K
NONE
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant 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, 2003 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 has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated.
/s/ Michael T. Furry March 28, 2003
--------------------------------------
Michael T. Furry- President and Director
(Principal Executive Officer)
/s/ Ralph R. Whitney, Jr. March 28, 2003
---------------------------------------
Ralph R. Whitney, Jr.- Chairman
/s/ Andrew McNally, IV March 28, 2003
-------------------------------------
Andrew McNally, IV- Director
/s/ Glenn Scolnik March 28, 2003
-------------------------------------------
Glenn Scolnik- Director
/s/ Thomas A. Brand March 28, 2003
-----------------------------------------
Thomas A. Brand- Director
/s/ Richard A. Place March 28, 2003
-------------------------------------------
Richard A. Place- Director
CERTIFICATIONS
I, Michael T. Furry, certify that:
1. I have reviewed this annual report on Form 10-K of Reinhold Industries,
Inc.;
2. Based on my knowledge, this annual 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 annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual 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 annual 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 annual 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 annual report (the "Evaluation Date");
and
c) presented in this annual 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
annual 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
March 28, 2003
CERTIFICATIONS
I, Brett R. Meinsen, certify that:
1. I have reviewed this annual report on Form 10-K of Reinhold Industries,
Inc.;
2. Based on my knowledge, this annual 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 annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual 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 annual 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 annual 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 annual report (the "Evaluation Date");
and
c) presented in this annual 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
annual 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
March 28, 2003